Heritage-Crystal Clean, Inc
Q1 2015 Earnings Call Transcript

Published: 9 May 2015

[Operator:]

Good morning, ladies and gentlemen, and welcome to the Heritage-Crystal Clean, Incorporated First Quarter 2015 Earnings Conference Call. Today's call is being recorded. At this time, all callers' microphones are muted, and you will have an opportunity at the end of the presentation to ask questions. Instructions will be provided at that time for you to queue up your question. We ask that all callers limit themselves to one or two questions. Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would, and similar expressions identify forward-looking statements. These statements involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call. Please refer to our SEC filings, including our Annual Report on Form 10-K, as well as our earnings release posted on our website for a more detailed description of the risk factors that may affect our results. Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our Web site. Also, please note that certain financial measures we may use on this call such as earnings before interest, taxes, depreciation and amortization or EBITDA are non-GAAP measures. Please see our website for reconciliations of these non-GAAP financial measures to GAAP. For more information about our company, please visit our Web site at www.crystal-clean.com. With us today from the company are the Founder, President and Chief Executive Officer, Mr. Joseph Chalhoub; the Chief Operating Officer, Mr. Greg Ray; and the Chief Financial Officer, Mr. Mark DeVita. At this time, I would like to turn the call over to Joe Chalhoub. Please go ahead, sir.

[Joseph Chalhoub:]

Thank you. And welcome to our conference call. Last night, we issued our first quarter 2015 press release and posted it on the Investor Relations page of our Web site for your review. This morning, we will discuss the financial statements and our operations in the first quarter and we will respond to questions you may have relating to our business. Our first quarter revenues were $84 million compared to $66 million in the first quarter of 2014, an increase of 27.4%, mostly as a result of our FCC Environmental or FCCE acquisition. Revenues increased significantly in all of our traditional lines of business. During the first quarter of 2015, we worked diligently to integrate the legacy FCC Environmental business into Heritage-Crystal Clean. We are pleased to announce that the integration is substantially complete and that we have already started to realize some of the benefits of this acquisition. We expect that we will generate annualized synergies at or above our original target of $20 million starting in the second quarter of 2015. In our environmental services segment, revenue increased 35.9% compared to the first quarter of 2014, primarily from additional sales to legacy FCCE customers in all of our environmental services lines of business. Revenues in our vacuum services line of business doubled from the first quarter of 2014 to the first quarter 2015 primarily due to volume added FCCE acquisition. In addition, we realized revenues from our new field services line of business. We estimate the revenue increase from legacy HCC customers, during the first quarter of 2015, to be 13.7%. Revenues also grew in our oil business due in large pipe to our sales of recycled fuel oil or RFO. In addition we increased throughput of the refinery compared to the first quarter of 2015 and produced this oil at an annualized rate of approximately 100% of our capacity. However, revenues continued to be pressured by lower pricing of our oil product. In response to these market conditions, we continue to reduce the price we pay to generators for their used oil, we were able to decrease the weighted average price paid to generator for their used oil from the fourth quarter of fiscal 2014 to the first quarter of fiscal 2015 by over $0.45 per gallon. The price we paid for used oil at the end of the first quarter was $0.047 per gallon lower than the price we paid at the end of the fourth quarter of 2014. Based on our oil route consolidation efforts, we substantially increased the efficiency of our oil production route and as result decreased our collection cost on a per gallon basis, as of the end of the first quarter. We’re pleased with these and other efforts to reduce cost and we were able to reduce the loss before corporate SG&A in this segment compared the first quarter of 2014 despite working within a much lower pricing environment. Our ability to achieve these cost reduction is a testament of the quality of our service and to the good customer relationships that our employees have developed with tens of thousands of individual accounts. Why we are pleased with our results in the first quarter given the inventory write-down and integration cost incurred were even more optimistic about our opportunities for the remainder of 2016. In addition, we continue to see great potential in the environmental services business we acquired from FCCE. During the first quarter, our environmental services segment generated approximately two third of the company total revenue while the oil business segment generated approximately one third of the total revenue. With the recent increase in crude prices, we’re seeing increase RFO and re-refinery byproduct pricing and we see the potential for future increases in base oil prices. Finally, we are exploring either other cost savings opportunities beyond acquisition synergies which could generate measurable benefits during 2015. As you can tell, we’re very excited about the remainder of 2015. Our Chief Financial Officer, Mr. Mark DeVita who will now further discuss the financial results and then we will open the call for your questions.

[Mark DeVita:]

Thanks Joe. I appreciate the opportunity to discuss HCCI’s first quarter 2015 results with our investors today. In the Environmental Services segment, sales grew 14 million compared to the first quarter of 2014. Of the 72 branches that were in operation throughout both the first quarter of 2015 and 2014, the growth in same branch sales was 23.9%. If you exclude revenues generated from legacy FCCE customers, the growth in same branch sales was approximately 12% during the quarter. Our average sales per working day in the environmental services segment increased to approximately 880,000 compared to 840,000 in the fourth quarter of 2014. In the oil business segment, sales for the first quarter were up 4.1 million from the first quarter of 2014, mostly as a result of RFO sales. We are pleased that our margin in our environmental services segment improved compared to the first quarter of 2014. Even considering the impact of adding FCCE volume which was traditionally lower margin than our legacy business our profit before corporate SG&A in this segment increased to 23.5 during the first quarter of 2015 compared to 22.6% in the first quarter of 2014. This result was achieved despite the requirement to write-down ourselves in inventory by 1.7 million due to the continued decline in solvent prices which is related to the decline in crude oil price. If you exclude the impact of the inventory write-down, our profit before corporate SG&A in the environmental services segment would have been 26.7% for the first quarter. In the first quarter, our oil business experienced a loss before corporate SG&A of 1.7 million or negative 5.5% compared to a loss before corporate SG&A of 2.3 million or negative 8.6% in the first quarter of 2014. On a percentage basis, this represents an improvement in operating margin of 3.1%. The operating margin in our oil business was negatively impacted by the continued low prices for oil products. As Joe mentioned earlier, low product pricing has forced us to continue to drive the price we pay for used oil lower in the first quarter. Lower used oil cost was one of the main reasons we were forced to write down our oil inventory by approximately 0.9 million during the quarter. Corporate SG&A was 13.2% of revenues, down from 13.4% in the year ago quarter. We believe that as we finish up the integration of FCCE and realize increase synergies, we will continue to see a decline in SG&A as a percentage of revenues even after considering the steep decline in revenue from lower oil product prices compared to a year earlier. During the first quarter, we estimate that we realized approximately 2.9 million in synergies and incurred 1.4 million in cost to achieve synergies including severance obligations for FCCE resulting in net synergies of 1.5 million. At the end of the quarter, we had 79.1 million of total debt and 20.3 million of cash on hand. We incurred 554,000 of interest expense for the first quarter of 2015, compared to interest expense of 53,000 in the year ago quarter. For the first quarter we experienced a net loss of 0.9 million compared to a net loss 1.6 million in the first quarter of 2014. Our basic and fully diluted loss per share for the quarter was $0.04 compared to $0.09 in the year ago quarter. Thank you for your continuing interest in Heritage-Crystal Clean. At this time, I will turn control of the call over to our operator and she will advise you of the procedure to submit your questions.

[Operator:]

Thank you. [Operator Instructions] And our first question comes from David Mandell of William Blair. Your line is open.

[David Mandell:]

Good morning, guys. Do you care to update the prior guidance ranges you provided?

[Mark DeVita:]

We still feel that those ranges are appropriate at this time, so there is no change, I will affirm that right now.

[David Mandell:]

And then on the environmental services side, how is pricing going there? Are you guys still remaining focused on that even with the integration.

[Mark DeVita:]

Yes. We’re very happy, we’re experiencing at least a traditional success in some of the some of the businesses like parts cleaning that we typically have had. That’s been our leaders prior this price increase realization over the years and that continues to be the same case and were taking that methodology to some of the other businesses that in recent years we’ve had more success with, back in service business and drum business as well. That’s muted somewhat on an overall basis but a fact that we have a lower starting point and a different customer set that we’re integrating with FCCE. But overall we like this early success we’ve seen. I don’t know if Joe or Greg want to add?

[Joseph Chalhoub:]

Well, in addition to what we’ve actually done with some of this as we were integrating into company's pricing aspect, but there is plenty of opportunities to continue to improve the pricing. We have to be sensitive. We don’t want to lose customers, and the process of adjusting the service fees. But we’ve done some of it and we’re happy with the results. Greg?

[Gregory Ray:]

I agree with that. I think the part of David’s question was where we so busy with the integration that we lost sight of pricing. And that’s not the way we think. We are always thinking about how to manage the pricing of the business to get the margin improvement that we’re used to on an annual basis and I think we’re keeping that on the forefront of our thinking. From our economic perspective that’s one of the most important things we do. So, we make sure that that doesn’t ever fall off the plate.

[David Mandell:]

And then last question, regarding the re-refinery expansion, any update on timing there?

[Joseph Chalhoub:]

Well, we’re still looking towards the end of the year to get the full 75 million gallon capacity. We are doing some work prior to the end of the year. This quarter in particular we’re adding the new hydrotreater reactor and in the third quarter, we will also do some work and have it prepped up towards the end of the year.

[Operator:]

Thank you and our next question comes from the line of Sean Hannan of Needham & Co. your line is now open.

[Sean Hannan:]

First, just a comment, great job on the integration efforts. It's substantially more cost taken out early on than I had anticipated. And just want to make sure if I do some math correctly, if I were to back out the write downs here, it looks like I’d come out with a non-GAAP earnings number of about $0,06. Is that is that fair?

[Mark DeVita:]

Yes. I’d emailed you back. It's pretty short before this call. But yes, you're correct with that math.

[Sean Hannan:]

And then in terms of looking at next quarter, based on the expectation we're going to realize the 20 million in synergies, kind of annually starting next quarter. So we're going to get about another 2 million incremental that'll be associated with maybe nominal charges within the quarter. But it's 2 million incremental savings that we'll see now in 2Q. Correct?

[Mark DeVita:]

Yes. We might not get. We'll definitely be at the run rate in the quarter. We might not have it all day one. But that’s good.

[Sean Hannan:]

What were the RFO sales during the quarter?

[Mark DeVita:]

I'll get that to you, before we hang up, hold on or you have another call.

[Sean Hannan:]

Yes. And just a couple of housekeeping scenario, RFO sales -- the specific gallon sold, I'm not sure if I'd heard that, and then the utilization, so just a couple of quick stats there that I’m looking to tie down.

[Mark DeVita:]

We've got it real quick. It was about a little more than $6 million as far as revenue in Q1 for RFO.

[Sean Hannan:]

And then in terms of the re-refined gallon sold and how the facility operated from a utilization standpoint?

[Mark DeVita:]

Yes. It was 100% utilization as far as the volume. Production was over 9 million gallons about 9.5 million, our net production sales, where production was a little less than that but they're usually close to in balance.

[Sean Hannan:]

And then topically on the environmental services organic growth you had 12%, pretty good number there. This is a recurring question, I'm sure probably still will be for a period time. What are you seeing within that space competitively -- obviously there will be, in some manner a stepped up effort that we’d see from the safety clean business over there at Clean Harbor as they try to recapture some share. So I do realize that you're not necessarily head-to-head in all localized markets, but if you could provide any update around how you're viewing the competitive environment, the ability to retain share and grow on a more sustainable basis; because this 12% number was a pretty good number coming back here into double digits.

[Joseph Chalhoub:]

Yes. I’m going to take this one. We haven't seen much in the field here in the last few quarters coming from the different other competitors, different than what we’ve had. We compete fiercely in the market space. We’re proud of our team. Year-after-year under different conditions we have been able grow business. And we don't really see that change. And really dealing with total of a 100,000 customers, so an organization like ours, we don’t feel vulnerable at all by any effort put in the market place. We do not focus on the large Fortune500, in that area because historically we found the margin is not as attractive and we felt that there were a lot more competitive pressures for these accounts. So we've focused on these smaller customers and it's pretty hard to change the needle of the trend when you’re dealing with such a large number of customers.

[Sean Hannan:]

Okay, that's helpful. And then last question here, when you think about the environmental services business and the revenue synergies that you would get through the FCC transaction, can you elaborate a little bit more perhaps on the metrics that you're using as you evaluate the progress on that front and how you expect that to materialize, and perhaps even you know what may be surprising you on that front as you gain traction there?

[Gregory Ray:]

Sure, Sean. This is Greg speaking. As part of our integrated sales and service approach every one of our people and all of our branches have always had an interest in crop selling as a way to further enhance the service delivery to customers and to grow our revenue base. But it's always been somewhat informal and as a result of the work we've done around the FCC integration we've begun to put in place some more systematic approaches. We are measuring cross selling penetration and we’re in the early stages of figuring out how to incent our guys to do a better job of cross selling. Certainly the opportunity is very right for us if we can figure out good ways to expand or enhance cross selling. We know that our typical customer does not use very many of the services that we have available and that we can substantially increase that number in the installed customer base. And in future quarters if we're able to do what we're hoping we may start reporting on some of the specific statistics ensuring a little more visibility on that with you. But clearly with FCCE we picked up a company which was pretty heavily focused on the used oil business and had not cross penetrated particularly well in the other environmental services that we offer. And so we see that as a great opportunity for us to enhance our penetration and grow the business. And you saw with the numbers Mark had reported earlier that we get some incremental revenue to our environmental services from FCCE. But that’s sort of the revenue from the most part they were already doing, not new stuff that we’re beginning to sell to those accounts. So your question is a little bit early in terms of our giving you any quantification of that, but we're working on that and we think that that will be helpful to keep our people focused on further delivering on that great opportunity. With more than 100,000 accounts many-many of which could use several more services of the type that Heritage-Crystal Clean offers than they currently do.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from Michael Hoffman of Stifel. Your line is now opened.

[Michael Hoffman:]

Thank you, Joe, Greg and Mark. Some questions around asset utilization. Joe, you've talked about in the past sort of an ideal target as a starting place for truck utilization in the collection sites for of 0.5 million gallons. Where are you in penetrating that number today?

[Mark DeVita:]

We really like our progress. This is Mark by the way Michael. One of our main goals or one of the certainly rationales for the transaction was route consolidation. We could do things better. We had the overlap with FCCE that was pretty much complete with our route. So we've done a lot of that work in the first quarter, although it was through the quarter. So the first quarter numbers really aren't indicative although they're. I guess I'd say they're up almost two thirds versus where they were on a standalone basis last year and gallons per truck for Q1. So that’s obviously great news for us but we think we can go higher. If you look at where we're at, we're in that general ballpark now and I think we think longer term that we can continue in a much more incremental way as opposed to hundreds of thousands of gallons at a time. But a more incremental way to get even beyond those numbers of that range you mentioned.

[Michael Hoffman:]

Okay, so just let me just make sure I understood this. You're at or approaching a 0.5 million gallons per truck through route rationalization on the overlay of the collected gallons from FCC. That's it?

[Mark DeVita:]

Yes.

[Michael Hoffman:]

Okay. And the next leg of that I would assume comes from a part of this perfect storm of crude coming down, lots of independent collectors may not make it and you should be able to pick up incremental volume over time to drive that utilization higher on essentially a flat footprint of trucks. Is that right, what I think about it?

[Joseph Chalhoub:]

Well, Michael, it’s a good question. It’s a question that we have ourselves and we'll be tracking what's happening in the marketplace. And unfortunately we haven't seen the smaller guys weaken to the point of pulling up the white flag. And so would this happen throughout the year, I'm not so sure. The difficult part here was the fourth quarter and the first quarter, and the crude is picking up momentum from the low point in the first quarter. And so RFO is going up and if you are buying used oil from third parties to feed your plant and that price has gone up. So it would be less pressure on these independents to today, but it’s hard to tell. We haven't seen a lot of noises here regarding people pulling out and not servicing the customer.

[Gregory Ray:]

The collection cycle, the calendar throughout the year has some fairly significant seasonality to it. So if during the busy year, kind of mid-year months, you're running at a 0.5 million gallon rate that doesn't translate to averaging a 0.5 million gallons a year for the whole calendar year. So that's one thing to keep in mind. The other thing is when we think about how we were loading the trucks. We really in the first quarter, as Mark said, rationalized our fleet. We were trying very hard to deliver the synergies and make sense of the acquisition and so we made lots of cuts to get the fleet right sized. In the context of doing that we also were adjusting for the fact that we had lost some volume, some seasonal losses, but also some competitive losses to get the fleet down to the right size. And a lot of the competitive losses probably are due to the fact that we were out very early and aggressively with our reduction of PFO well ahead of the rest of the market. And so people were shipping away and taking a little bit of share from us. It's our hope that we get some of that business back over time. We're not sort of changing our pricing philosophy but we think some of the people who were very aggressive about paying significantly more for used oil than we were during the decline, or trying to behave in a more disciplined way and maybe we get back some of our historic customers which will lead us get the route trucks to a little bit higher level of performance or capacity. Does that make sense?

[Michael Hoffman:]

Completely, yes. So just following on to that I guess there are two parts to this. I have this impression that the collector or a generator could store oil for a couple months at a time and now you've got rising crudes. So you’re you finding yourself in this interesting conundrum where there's some pushback coming or if you've been able to switch the mindset from, hey this is a regulated industrial waste, and we've got to treat it like a regulated industrial waste.

[Joseph Chalhoub:]

Yes, Michael this is what we're hoping to accomplish. Unfortunately it's not what we're seeing. It would have been a lot easier if crude had stayed down to $30 or went down to $30 a barrel and most of the people would have had to pay for substantial fee. Crude moved up and over a period of time we're planning to improve our spread. But it’s very difficult to do it in a quarter or two. And I will tell you right now, as we speak, and crude went up from the low point by -- yesterday it dropped again, but it went about close to $15 a barrel. And we're seeing noises. Some of them are coming from customers and some of it is coming from competitive pressure in the field. And we’re managing this thing very closely and we got systems in place, and gets up with our senior management level of our sales and branch organization. So there is lot of noises, so we’ll have to see how things evolve in this quarter in particular.

[Gregory Ray:]

And Mike we may have talked about it before. I'm sure that you can recognize that there's a sort of psychological discontinuity in pricing that the difference in the customer's mind between getting paid $0.30 or getting paid $0.20 is very different from what the customer thinks as the difference between them getting paid a nickel and getting charged a nickel. And it's the same dollar difference but it's a very different emotional or psychological. And so over the last few months we have taken many customers to a charged mode, but we find that those customers are getting proposals from large competitors who are saying we'll still pay you a little bit and so it's pretty hard to sustain that. And so I would say that we’d probably have a run up -- Joe talked about crude prices being a part of that factor, but we probably by ourselves won't be able to get the mass of the market pushed over that line to a charge.

[Michael Hoffman:]

Okay, fair enough on that. I didn't understand clearly what the comment was made in the opening remarks about where you were at the end of the quarter on PFO. Are you blow a dime?

[Mark DeVita:]

Yes-yes. I'd say we're below the double digit.

[Joseph Chalhoub:]

Well, we're definitely below dime. We’ve kept -- we haven’t really shared our numbers in the best. We’ve given you changes, I guess then, but we’re clearly below the dime.

[Gregory Ray:]

We read all the research reports on our major competitors and our prices. We're paying less for oil than any other reported prices we've seen from our competitors.

[Michael Hoffman:]

All right. Well, the big one says they're at $0.05 to $0.07. So you're telling me you're below $0.05 to $0.07? Hey, you got to try

[Mark DeVita:]

The comment was, stands on his own idea.

[Michael Hoffman:]

Is there -- are all of the inventory adjustments done?

[Mark DeVita:]

Well, you tell me where the crude is going to go. I would say, yes, from a pricing standpoint, I would think that highly likely on oil, solvent I think so as well.

[Joseph Chalhoub:]

Yes. I think.

[Mark DeVita:]

It’s been a much bigger lag or longer lag on solvent as you can tell by the magnitude of the impact in Q1 versus impact in some of our other -- in the oil business segments. But I would be somewhat surprised if we had any measurable write-down in Q2.

[Joseph Chalhoub:]

And we like -- quite frankly, we like reduction on the price of solvent. It has hurt us in the first quarter. But we are -- in the particular business we are a fee-driven organization

[Mark DeVita:]

Not as spread like oil

[Joseph Chalhoub:]

Not as spread like oil and the so we would benefit if that price stays where it is. We’re going to benefit quite a bit for the balance of the year.

[Gregory Ray:]

Mike your question, literally about are all the inventory adjustment done? If oil price doesn't go back down significantly then we wouldn't see more inventory charges. At the kind of the level it's been at recently, we do get the accounting effect that the opposite of that is not an inventory write-up but it's a benefit for holding lower value inventory and then getting to sell it over time at better prices. So that's the kind of inventory effect on the positive side rather than the negative side.

[Michael Hoffman:]

Yes. This is as much about trying to understand any short term headwinds left as you're trying to model. I get the margin benefit of the alternative. And to that end on the environmental services, is the 84 branch number -- that's the integrated, we reduced all of the overlapping, and 84 is sort of a starting number or does it fine tune down from there, as we're sort of modeling branch revenue and average revenues through our model?

[Mark DeVita:]

I would leave it at the 84 model. We still have some sites that we don't designate as full-fledged branch, where we have satellite type operations or just -- maybe just oil collection, this and that which we will save over the longer term, some of those that aren’t in the 84 number will probably go away. We'll have some minor incremental benefit over the rest of the year potentially and into 2016 from that as far as loss facility or operating cost, but all the measurable branches -- established branches so to speak are pretty much done. So 84 would be the number.

[Michael Hoffman:]

Okay. And then in the past the legacy company, when you found yourself in the high 20s margins, you tend to use part of that margin to reinvesting growth and in effect walking back towards 25. That growth leverage is back up towards the 28 and that was sort of the cycle. Are those the sort of same ranges to think about or is the range, maybe move up because there are things coming from FCC that you don’t have at Heritage and vice versa. Once you figure out that cross selling it lifts the overall margin higher?

[Joseph Chalhoub:]

Well Michael, this is our current thinking. Well first of all its in our DNA to keep growing so we’re all be looking at ways to keep growing the business. And as in the past, as we get the margin up, we will look at putting more towards expending either geographically or our lines of businesses; more line of business in certain branch that we didn’t have that coverage. And we are currently in a mode of digesting, cost cutting and improving our margins and our EBITDA. And this is our plan this year. Obviously, once we see what we feel we can deliver we will start thinking about what we need to do to making sure that we continue to keep our 10% to 12% growth on our ES business.

[Michael Hoffman:]

Okay, fair enough on that. And then on oil, given the prudent choice to wait on the expansion and more through the integration, do you think we'll see in the quarter cycles as we work through the year, what I would call approaching a normalized margin for oil? You ran the plant really well in the first quarter. You kind of seen ahead of performance platform, and let's say it's okay, some of the things that have been dogging you a little bit, you got through and had a really very consistent quarter. So are we looking at a pretty healthy margin in left year as we get that sort of recurring pattern?

[Joseph Chalhoub:]

Well, our first quarter is usually, as you know Michael, first quarter is usually poor for our industry, especially if you integrate all of your cost into one line of business. I mean for us, the oil collection is part of the oil business. And in the first quarter, the winter quarter, typically the collection is down. So you got your fleet and branches etcetera, the collection is down. So you have a higher cost to collect the oil. And typically in the winter, if there is a hick-up in the plant, doing maintenance during winter months, are costly and affect the production. But to answer your question about the -- the margin should definitely improve, and we had a loss in the first quarter. But how normalized, I mean our objective is to keep improving that line of business. And maybe we’re repeating ourselves but we have to see the three angles. So, this, we want to improve the efficiency of our routes. And we’re happy of what has been accomplished with FCCE acquisition. That helped us there. We want to maximize the plan throughput and we’ve done that and the expansion would put more through the plant. And the third one which is the most difficult is one to improve the spread between the value of the products. And what we pay or charged the generator. And that unfortunately is market driven as well. But we think we’re -- and I think we’ve demonstrated that that we can stay ahead of the industry. But we can’t go too far off and lose our customer base. We’ve done a little bit of that intentionally when the price of crude collapsed because we just decided to go aggressively with the price reduction. And now we’re looking at holding our base and still wanting to maximize that spread. But it’s definitely market driven.

[Mark DeVita:]

And Michael while I don’t have the guts of your model in front of me but based on where I see what you’ve put forth, I really think the ramp that you must have built in there on oil is pretty reasonable. So, I will expect us to or what we would expect to be -- not changing that based on the first quarter but we think you’re in the ballpark on what you’ve projected.

[Michael Hoffman:]

Okay. That helps. And then lastly in your guidance you talked about 5 million to 6 million of cost for the integration of FCCE, so you’re down a million or so. How do I think about where that 4 to 5 left falls through the rest of the year? Is that heavy into and dribbles off, spread out, how do I think about that?

[Mark DeVita:]

You might have missed some clarification in the last quarter's call. We had said we shifted some of that to Q4. So we did some of that earlier.

[Michael Hoffman:]

Q4 2014.

[Mark DeVita:]

Yes. We’re not expecting that this year. We also, in addition to shifting some of that for 2014, we're not expecting to have quite as much. So that number you just said is definitely high and we would not expect to have that much left to do.

[Michael Hoffman:]

So to stay in the 42 to 53 adjusted means 35 to 45 is better.

[Mark DeVita:]

Yes. The adjusted, last quarter -- again to clarify we'd said, instead of the 5.5 million it was more like 3 million. So we took 2.5 million -- you move, it’s 2.5 million less in this quarter and you're not going to get all that wasn't spent in Q4, you will spot, we’ll spend a little less than that in total. So the number was 3. So you probably have at least 2 million less than you were thinking.

[Michael Hoffman:]

Okay. And mostly that will be in 2Q.

[Mark DeVita:]

Whatever remainder would be, majority of it -- we could have, when we go through some site stuff, lease closure cost or things like, but it should be pretty minor, to be honest.

[Operator:]

Thank you. [Operator Instructions] Thank you for your time and interest. We are grateful for support. We invite you to join us for our next conference call.