CLEAN HARBORS INC CLH
December 01, 2014 - 5:43pm EST by
martin92
2014 2015
Price: 45.57 EPS n/a n/a
Shares Out. (in M): 60 P/E n/a n/a
Market Cap (in $M): 2,750 P/FCF n/a 11x
Net Debt (in $M): 1,350 EBIT 350 380
TEV ($): 4,100 TEV/EBIT 11.5 10.6

Sign up for free guest access to view investment idea with a 45 days delay.

  • Sum Of The Parts (SOTP)
 

Description

Recommendation

Long Clean Harbors, ticker: CLH; an attractive SOTP investment with limited downside.

 

Clean Harbors is North America’s largest provider of commercial hazardous waste collection and disposal. Its incineration assets are particularly valuable with nearly 70% share, high barriers to entry, attractive margins and consistent pricing.

 

The thesis here is relatively simple: CLH owns a collection of “good” and “bad” assets. The good assets (core waste collection and disposal) are worth more than the current enterprise value and will continue to grow in value. The bad, cyclical assets (oil & gas, Canadian lodging, and motor oil re-refining) have performed poorly over the past several quarters but represent only 20% of EBITDA. At the current price, investors are getting these businesses for “free” with the upside case that they see a cyclical rebound or are divested to unlock the discount.

 

Background

Norwell, MA-based CLH was founded in 1980 by Alan McKim. He started the business at age 25 as a four-person tank cleaning operation, growing CLH into a leading commercial waste business and taking sales from $50m to $3.5b. McKim remains Chairman and CEO and is also the third largest shareholder with >$200m in stock.

 

Be warned: CLH is fairly complex. It operates 55 lines of business across 6 segments (as described below). This scares some investors off but is also what likely creates the opportunity. This is especially true as CLH takes steps to simplify the business going forward. The crown jewel is the “technical services” segment, which is undoubtedly a good business. These moat-like assets have seen consistent growth and would be highly valued on a stand-alone basis.

 

The knock on CLH is that it has been a classic case of “diworsification.” The company has moved away from its high quality legacy business (waste disposal) and into more commoditized, cyclical areas that have subsequently performed poorly. This started about 5 years ago when CLH entered the oil & gas business through the acquisition of Eveready and later Peak Energy. The diworsification was further accelerated by the acquisition of Safety-Kleen for $1.25b in October 2012, introducing yet another unfamiliar and cyclical business: motor oil re-refining.

 

There was a brief glimmer of hope this past April when Relational announced that they had accumulated a 9% stake and CLH welcomed their input. This has since morphed into an overhang as Relational is now reported to be liquidating. Another recent overhang has been the sharp decline in oil prices. While only 15-20% of sales are related to oil & gas (including lodging and oil sands work), investors appear to have thrown CLH out with all of the oil services stocks. You can see this quite clearly by graphing CLH vs. OIH (the oil services ETF).

 

As a result, shorts in the name have had success: the stock has done absolutely nothing since 2011 and is down 24% YTD.

 

Though, to steal a line from Buffett/Gretzky: “skate to where the puck is going to be, not to where it has been.” The key today is that the good assets cover the entire EV and will continue to grow in value. The technical overhang from Relational has surely hurt the stock but is by definition temporary. More important is that CLH has continued its strategic review undeterred and has a buyback authorization in place to take advantage of the weakness. Finally, management will likely take steps to divest the cyclical segments (the “bad” assets). While these businesses have been a doozy of a black eye, they still have significant asset value and such an action could serve as a catalyst to reverse the SOTP discount.

 

Good assets (78% of sales / 80% of EBITDA)

The good assets consist of the core waste disposal and collection assets plus the industrial business.

 

Technical services (37% of sales / 50% of EBITDA)

Technical is a very attractive business. This is the core waste disposal segment. Commercial customers (think chemical and general manufacturing co’s) accumulate waste in drums and CLH collects, transports, treats and ultimately disposes of this hazardous material. It does so at a number of different facilities, the largest of which are in Nebraska, Arkansas and Texas. CLH is the dominant player in this niche business with nearly 70% share in incineration (9 of 13 facilities in North America), 24% in landfills (7 of 20) and 35% in TSDFs (Treatment, Storage and Disposal Facilities). This is a very good business for several striking reasons. First, this is close to an annuity revenue stream with increasing demand (commercial hazardous waste) and fixed supply (disposal assets). Second, there are large barriers to entry (a new incinerator hasn’t been built or permitted in 16 years, and a new landfill hasn’t been permitted in 18 years). CLH’s permits are nearly impossible to duplicate. Third, switching costs are highly prohibitive (a result of the lengthy government documentation required). Fourth, CLH has demonstrated pricing power, having taken 4-8% annual price hikes on the incinerator side (equating to ~$20m in EBITDA per year). And, fifth, it’s a very profitable business with EBITDA margins in the mid-to-high 20s. As a result, technical has seen consistent growth and margin expansion. EBITDA has grown at a 14.5% CAGR since 2005 with only 1 down year (-5% in 2009). With utilization in the mid 90s, CLH should be able to continue to take pricing and expand margins going forward. The general drivers are: overall GDP growth/continued industrial output, increased regulation and enhanced cross-selling. In addition, new capacity is set to come on in late FY16 (at CLH’s El Dorado facility). This will provide room for continued growth. I value technical at 8-10x EBITDA and think these assets should trade at a premium to the Waste Managements and Republics of the world given the barriers to entry, superior pricing power and irreplaceable assets.

 

S-K Environmental Services (23% of sales / 18% of EBITDA)

S-K ES is also a good business – it is a lower growth, lower margin segment (vs. technical) but it has #1 market position across all three of its main businesses (small quantity containerized waste, parts washers and vacuum services). This is a business that came from the Saftey-Kleen acquisition and deals with waste collection and services for a large number of small commercial customers (the main segment being automotive). It operates through >150 local branches. CLH has an opportunity here to recapture share that S-K lost due to years of mismanagement (CEO turnover, PE ownership, bankruptcy and underinvestment). The company also has a much stronger pitch now as a “one stop shop” for waste. The closest competitor, HCCI, is twice as profitable and there should be an opportunity for CLH to increase EBITDA margins over time. This year, EBITDA will likely be flat as it was hard hit by weather in Q1’14 (absent that it would be +10-12%). Going forward, this segment should see HSD growth. I value environmental services at 7-9x EBITDA. The closet comp, HCCI, has historically traded at 7-9x forward EBITDA and that includes its lower multiple used oil business. CLH has a superior small generator waste business that should trade at a premium, not a discount to HCCI.

 

Industrial and Field Services (19% of sales / 12% of EBITDA)

In the past, investors have looked favorably upon this segment (industrial cleaning, refinery turnarounds, and emergency response work) given the multi-year contracts and strong DD growth. However, today the jury is out given the segment’s exposure to the Canadian oil sands. EBITDA in this segment will likely be down 10% this year due to the lower oil sands activity in conjunction with a weaker CAD and the lapping of a customer loss from Q3’13. Going forward though, it’s important to consider that the majority of the business here is non-oil sands. The segment should do $620m in sales this year and only 30% or $180m is from Canada. The US business is humming along and should see strong growth next year as many US refiners have pushed out turnaround work to the limit (because they’ve been making such good yields). As such, 2015 is setting up for very strong growth in the North America turnaround group. I value industrial and field at 7-9x EBITDA, similar to environmental.

 

The takeaway here: the “good” assets are worth more than the current EV by my estimation, have a long history of growth and should continue to expand in value.

 

Bad assets (22% of sales / 20% of EBITDA)

The “bad” assets consist of three segments that are largely unrelated to CLH’s core waste disposal and collection business: lodging (8% of EBITDA); oil & gas (4% of EBITDA); and, re-refining (8% of EBITDA). I could spend a lot of time here but I’ll try to keep it short (and answer questions in the thread) given that these businesses represent a small portion of the value. I’ll start with the bad and end with the ugly.

 

Lodging Services (4% of sales / 8% of EBITDA)

CLH owns 9 fixed lodges in western Canada that provides accommodation for workers in the oil sands, including its own workers. This business does ~$200m in sales with nearly 40% margins. In addition, >60% of the sales are LT in nature via “take or pay” contracts (a 2-3 year contract where a company guarantees to take x% of the rooms or they pay the whole amount). The problem here is the obvious near-term concern about the oil related slowdown in Western Canada. See charts for CVEO, HNL CN or BDI CN. CLH’s lodging business is higher quality but it still isn’t immune to the risk of lower occupancy.

 

Oil Re-refining & Recycling (10% of sales / 8% of EBITDA)

Re-refining is a legacy S-K business that operates large plants that turn used motor oil into base oil. CLH is the largest player with more capacity than any other company in the US. Historically, this has been an okay business and S-K used to make a spread between what they bought motor oil at (the price of crude) and what they sold the recycled end product at (the price of base oil). This equation has been turned upside down over the past two years as base oil prices have collapsed (down 38% from June 2012) as the result of additional capacity coming online (new Chevron plant). CLH has the opportunity to fix this by going out to its customers and reducing its PFO (“pay for oil”) price. This will happen but it’s a slow process (the drop in crude could help). Re-refining will likely earn $60m in EBITDA this year vs. what would be something like $120m in a normalized scenario.

 

Oil and Gas Field Services (7% of sales / 4% of EBITDA)

Finally, there’s Oil & Gas services , which consists of seismic, surface rentals, fluid handling, etc. This is a very competitive business with low barriers and little relation to CLH’s waste operations. It’s been a disaster and the outlook is bleak with crude plummeting. To put this into perspective, I think O&G will do ~$25m in EBITDA next year vs. $77m in 2012.

 

The takeaway here: The bad, cyclical assets have performed poorly over the past several quarters. This has garnered most of the sell side headlines and is well reflected in estimates at this point. These segments, however, represent only 20% of EBITDA and an even smaller percentage of value given that they are inherently lower multiple businesses. While they may not be at rock bottom, the operating results are getting close… I think the “bad” assets have more upside than downside going forward. At the current valuation, investors are getting these segments “for free” with the potential (like any cyclical business) that they might turn around. In addition, I would not be surprised if management acted to divest one or more of these businesses in the near future. All three of these segments have significant asset value, which could be valuable to a strategic buyer.

 

In summary, the hair created by CLH’s bad assets has created an opportunity to own the good waste disposal assets at a reasonable price with “free” upside should the cyclical business turn around or get sold. I also like the fact that CLH is run by an owner operator. While he has had his missteps in recent years, McKim has a long history of creating value for shareholders and remains heavily invested.

 

Capital Expenditures

One of the consequences of CLH’s push into more cyclical segments is that the overall business has become increasingly capital intensive. Prior to the Eveready acquisition (from 1992-2008), CapEx as a % of sales averaged just 3.7%. Since then capital expenditures have ballooned, totaling 7-9% of sales over the past 3 years (see below). This has had the further consequence of dragging down ROIC. However, what you can also see below is total CapEx has far exceeded what management classifies as “maintenance” capital. If you’re skeptical, I understand. I too generally find such classifications as bogus / “fun with numbers.” Though, in this case, you can point to clear projects that are non-recurring, namely: Ruth Lake (a lodge that CLH completed in 2013) and El Dorado (an incinerator expansion that will be completed in 2016). I expect that CLH will spend CapEx of $260m next year and $200-$220m in FY16. That includes El Dorado spend of $60m next year and $10-20m in FY16. As such, if you back out El Dorado, total CapEx would be close to $200m for each of the next two years (5.5%-6% of sales). Management claims that MCX is $140m. I use $170m below in my valuation.

 

 

The point is this: the capital intensity of the business is currently elevated and should decline going forward. You have a spurt of growth projects rolling-off, in addition to CLH managers being newly incentivized to reduce unnecessary CapEx. Finally, should CLH’s ongoing strategic review result in a sale of its oil & gas or lodging segment (which I think is likely), CapEx would take another step down as these are much more capital intensive segments despite comprising only a small piece of overall value.

 

Valuation

I estimate that CLH will earn $550m in EBITDA in FY15. That presumes continued weakness across all of its more cyclical segments. After beating up my estimates, I think this is a realistic target (a far cry from the 3-5 year target of $1b in EBITDA that management laid out at their September 2013 Analyst Day). As such, at the current price of $45.57, CLH trades at the following multiples on FY15:

 

EV/ EBITDA: 7.3x

EV/EBITDA-MCX: 10.6x

P/FCF (using MCX): 11.0x

 

It’s worth noting that P/E can be a bit deceiving for CLH because D&A exceeds CapEx, distorting the “economic” EPS. As mentioned above, part of this is due to elevated levels of growth CapEx and part of this is due to amortization from Safety-Kleen.

 

On a SOTP basis, I value CLH at $64 today and $43 in a downside scenario. You can see my assumptions below and I’m happy to answer questions in the thread about comp multiples, CapEx, etc. In short, this presumes that the consolidated business trades at 7.2x - 9.2x EBITDA. Over the past four years, CLH has traded between 6.5x - 9.5x forward EBITDA and this seems within reason. Most importantly, you get the vast majority of the value from the “good” assets, which I’m happy to own given their strong market share, defensible position and continued growth. These good assets should put a floor on the price and limit the downside.

 

In 1 year from now, I would expect the fair value to be ~10% higher as the waste assets continue to grow (i.e, I’m basing my PT below on FY15 estimates, not FY16). That gets me to a PT in 1 year of $70 with downside of $47.

 

 

I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.

Catalyst

Sale of oil & gas or lodging segment

New activist involvement

Continued cost cutting that could drive upside to estimates

Continued growth in technical

    sort by    

    Description

    Recommendation

    Long Clean Harbors, ticker: CLH; an attractive SOTP investment with limited downside.

     

    Clean Harbors is North America’s largest provider of commercial hazardous waste collection and disposal. Its incineration assets are particularly valuable with nearly 70% share, high barriers to entry, attractive margins and consistent pricing.

     

    The thesis here is relatively simple: CLH owns a collection of “good” and “bad” assets. The good assets (core waste collection and disposal) are worth more than the current enterprise value and will continue to grow in value. The bad, cyclical assets (oil & gas, Canadian lodging, and motor oil re-refining) have performed poorly over the past several quarters but represent only 20% of EBITDA. At the current price, investors are getting these businesses for “free” with the upside case that they see a cyclical rebound or are divested to unlock the discount.

     

    Background

    Norwell, MA-based CLH was founded in 1980 by Alan McKim. He started the business at age 25 as a four-person tank cleaning operation, growing CLH into a leading commercial waste business and taking sales from $50m to $3.5b. McKim remains Chairman and CEO and is also the third largest shareholder with >$200m in stock.

     

    Be warned: CLH is fairly complex. It operates 55 lines of business across 6 segments (as described below). This scares some investors off but is also what likely creates the opportunity. This is especially true as CLH takes steps to simplify the business going forward. The crown jewel is the “technical services” segment, which is undoubtedly a good business. These moat-like assets have seen consistent growth and would be highly valued on a stand-alone basis.

     

    The knock on CLH is that it has been a classic case of “diworsification.” The company has moved away from its high quality legacy business (waste disposal) and into more commoditized, cyclical areas that have subsequently performed poorly. This started about 5 years ago when CLH entered the oil & gas business through the acquisition of Eveready and later Peak Energy. The diworsification was further accelerated by the acquisition of Safety-Kleen for $1.25b in October 2012, introducing yet another unfamiliar and cyclical business: motor oil re-refining.

     

    There was a brief glimmer of hope this past April when Relational announced that they had accumulated a 9% stake and CLH welcomed their input. This has since morphed into an overhang as Relational is now reported to be liquidating. Another recent overhang has been the sharp decline in oil prices. While only 15-20% of sales are related to oil & gas (including lodging and oil sands work), investors appear to have thrown CLH out with all of the oil services stocks. You can see this quite clearly by graphing CLH vs. OIH (the oil services ETF).

     

    As a result, shorts in the name have had success: the stock has done absolutely nothing since 2011 and is down 24% YTD.

     

    Though, to steal a line from Buffett/Gretzky: “skate to where the puck is going to be, not to where it has been.” The key today is that the good assets cover the entire EV and will continue to grow in value. The technical overhang from Relational has surely hurt the stock but is by definition temporary. More important is that CLH has continued its strategic review undeterred and has a buyback authorization in place to take advantage of the weakness. Finally, management will likely take steps to divest the cyclical segments (the “bad” assets). While these businesses have been a doozy of a black eye, they still have significant asset value and such an action could serve as a catalyst to reverse the SOTP discount.

     

    Good assets (78% of sales / 80% of EBITDA)

    The good assets consist of the core waste disposal and collection assets plus the industrial business.

     

    Technical services (37% of sales / 50% of EBITDA)

    Technical is a very attractive business. This is the core waste disposal segment. Commercial customers (think chemical and general manufacturing co’s) accumulate waste in drums and CLH collects, transports, treats and ultimately disposes of this hazardous material. It does so at a number of different facilities, the largest of which are in Nebraska, Arkansas and Texas. CLH is the dominant player in this niche business with nearly 70% share in incineration (9 of 13 facilities in North America), 24% in landfills (7 of 20) and 35% in TSDFs (Treatment, Storage and Disposal Facilities). This is a very good business for several striking reasons. First, this is close to an annuity revenue stream with increasing demand (commercial hazardous waste) and fixed supply (disposal assets). Second, there are large barriers to entry (a new incinerator hasn’t been built or permitted in 16 years, and a new landfill hasn’t been permitted in 18 years). CLH’s permits are nearly impossible to duplicate. Third, switching costs are highly prohibitive (a result of the lengthy government documentation required). Fourth, CLH has demonstrated pricing power, having taken 4-8% annual price hikes on the incinerator side (equating to ~$20m in EBITDA per year). And, fifth, it’s a very profitable business with EBITDA margins in the mid-to-high 20s. As a result, technical has seen consistent growth and margin expansion. EBITDA has grown at a 14.5% CAGR since 2005 with only 1 down year (-5% in 2009). With utilization in the mid 90s, CLH should be able to continue to take pricing and expand margins going forward. The general drivers are: overall GDP growth/continued industrial output, increased regulation and enhanced cross-selling. In addition, new capacity is set to come on in late FY16 (at CLH’s El Dorado facility). This will provide room for continued growth. I value technical at 8-10x EBITDA and think these assets should trade at a premium to the Waste Managements and Republics of the world given the barriers to entry, superior pricing power and irreplaceable assets.

     

    S-K Environmental Services (23% of sales / 18% of EBITDA)

    S-K ES is also a good business – it is a lower growth, lower margin segment (vs. technical) but it has #1 market position across all three of its main businesses (small quantity containerized waste, parts washers and vacuum services). This is a business that came from the Saftey-Kleen acquisition and deals with waste collection and services for a large number of small commercial customers (the main segment being automotive). It operates through >150 local branches. CLH has an opportunity here to recapture share that S-K lost due to years of mismanagement (CEO turnover, PE ownership, bankruptcy and underinvestment). The company also has a much stronger pitch now as a “one stop shop” for waste. The closest competitor, HCCI, is twice as profitable and there should be an opportunity for CLH to increase EBITDA margins over time. This year, EBITDA will likely be flat as it was hard hit by weather in Q1’14 (absent that it would be +10-12%). Going forward, this segment should see HSD growth. I value environmental services at 7-9x EBITDA. The closet comp, HCCI, has historically traded at 7-9x forward EBITDA and that includes its lower multiple used oil business. CLH has a superior small generator waste business that should trade at a premium, not a discount to HCCI.

     

    Industrial and Field Services (19% of sales / 12% of EBITDA)

    In the past, investors have looked favorably upon this segment (industrial cleaning, refinery turnarounds, and emergency response work) given the multi-year contracts and strong DD growth. However, today the jury is out given the segment’s exposure to the Canadian oil sands. EBITDA in this segment will likely be down 10% this year due to the lower oil sands activity in conjunction with a weaker CAD and the lapping of a customer loss from Q3’13. Going forward though, it’s important to consider that the majority of the business here is non-oil sands. The segment should do $620m in sales this year and only 30% or $180m is from Canada. The US business is humming along and should see strong growth next year as many US refiners have pushed out turnaround work to the limit (because they’ve been making such good yields). As such, 2015 is setting up for very strong growth in the North America turnaround group. I value industrial and field at 7-9x EBITDA, similar to environmental.

     

    The takeaway here: the “good” assets are worth more than the current EV by my estimation, have a long history of growth and should continue to expand in value.

     

    Bad assets (22% of sales / 20% of EBITDA)

    The “bad” assets consist of three segments that are largely unrelated to CLH’s core waste disposal and collection business: lodging (8% of EBITDA); oil & gas (4% of EBITDA); and, re-refining (8% of EBITDA). I could spend a lot of time here but I’ll try to keep it short (and answer questions in the thread) given that these businesses represent a small portion of the value. I’ll start with the bad and end with the ugly.

     

    Lodging Services (4% of sales / 8% of EBITDA)

    CLH owns 9 fixed lodges in western Canada that provides accommodation for workers in the oil sands, including its own workers. This business does ~$200m in sales with nearly 40% margins. In addition, >60% of the sales are LT in nature via “take or pay” contracts (a 2-3 year contract where a company guarantees to take x% of the rooms or they pay the whole amount). The problem here is the obvious near-term concern about the oil related slowdown in Western Canada. See charts for CVEO, HNL CN or BDI CN. CLH’s lodging business is higher quality but it still isn’t immune to the risk of lower occupancy.

     

    Oil Re-refining & Recycling (10% of sales / 8% of EBITDA)

    Re-refining is a legacy S-K business that operates large plants that turn used motor oil into base oil. CLH is the largest player with more capacity than any other company in the US. Historically, this has been an okay business and S-K used to make a spread between what they bought motor oil at (the price of crude) and what they sold the recycled end product at (the price of base oil). This equation has been turned upside down over the past two years as base oil prices have collapsed (down 38% from June 2012) as the result of additional capacity coming online (new Chevron plant). CLH has the opportunity to fix this by going out to its customers and reducing its PFO (“pay for oil”) price. This will happen but it’s a slow process (the drop in crude could help). Re-refining will likely earn $60m in EBITDA this year vs. what would be something like $120m in a normalized scenario.

     

    Oil and Gas Field Services (7% of sales / 4% of EBITDA)

    Finally, there’s Oil & Gas services , which consists of seismic, surface rentals, fluid handling, etc. This is a very competitive business with low barriers and little relation to CLH’s waste operations. It’s been a disaster and the outlook is bleak with crude plummeting. To put this into perspective, I think O&G will do ~$25m in EBITDA next year vs. $77m in 2012.

     

    The takeaway here: The bad, cyclical assets have performed poorly over the past several quarters. This has garnered most of the sell side headlines and is well reflected in estimates at this point. These segments, however, represent only 20% of EBITDA and an even smaller percentage of value given that they are inherently lower multiple businesses. While they may not be at rock bottom, the operating results are getting close… I think the “bad” assets have more upside than downside going forward. At the current valuation, investors are getting these segments “for free” with the potential (like any cyclical business) that they might turn around. In addition, I would not be surprised if management acted to divest one or more of these businesses in the near future. All three of these segments have significant asset value, which could be valuable to a strategic buyer.

     

    In summary, the hair created by CLH’s bad assets has created an opportunity to own the good waste disposal assets at a reasonable price with “free” upside should the cyclical business turn around or get sold. I also like the fact that CLH is run by an owner operator. While he has had his missteps in recent years, McKim has a long history of creating value for shareholders and remains heavily invested.

     

    Capital Expenditures

    One of the consequences of CLH’s push into more cyclical segments is that the overall business has become increasingly capital intensive. Prior to the Eveready acquisition (from 1992-2008), CapEx as a % of sales averaged just 3.7%. Since then capital expenditures have ballooned, totaling 7-9% of sales over the past 3 years (see below). This has had the further consequence of dragging down ROIC. However, what you can also see below is total CapEx has far exceeded what management classifies as “maintenance” capital. If you’re skeptical, I understand. I too generally find such classifications as bogus / “fun with numbers.” Though, in this case, you can point to clear projects that are non-recurring, namely: Ruth Lake (a lodge that CLH completed in 2013) and El Dorado (an incinerator expansion that will be completed in 2016). I expect that CLH will spend CapEx of $260m next year and $200-$220m in FY16. That includes El Dorado spend of $60m next year and $10-20m in FY16. As such, if you back out El Dorado, total CapEx would be close to $200m for each of the next two years (5.5%-6% of sales). Management claims that MCX is $140m. I use $170m below in my valuation.

     

     

    The point is this: the capital intensity of the business is currently elevated and should decline going forward. You have a spurt of growth projects rolling-off, in addition to CLH managers being newly incentivized to reduce unnecessary CapEx. Finally, should CLH’s ongoing strategic review result in a sale of its oil & gas or lodging segment (which I think is likely), CapEx would take another step down as these are much more capital intensive segments despite comprising only a small piece of overall value.

     

    Valuation

    I estimate that CLH will earn $550m in EBITDA in FY15. That presumes continued weakness across all of its more cyclical segments. After beating up my estimates, I think this is a realistic target (a far cry from the 3-5 year target of $1b in EBITDA that management laid out at their September 2013 Analyst Day). As such, at the current price of $45.57, CLH trades at the following multiples on FY15:

     

    EV/ EBITDA: 7.3x

    EV/EBITDA-MCX: 10.6x

    P/FCF (using MCX): 11.0x

     

    It’s worth noting that P/E can be a bit deceiving for CLH because D&A exceeds CapEx, distorting the “economic” EPS. As mentioned above, part of this is due to elevated levels of growth CapEx and part of this is due to amortization from Safety-Kleen.

     

    On a SOTP basis, I value CLH at $64 today and $43 in a downside scenario. You can see my assumptions below and I’m happy to answer questions in the thread about comp multiples, CapEx, etc. In short, this presumes that the consolidated business trades at 7.2x - 9.2x EBITDA. Over the past four years, CLH has traded between 6.5x - 9.5x forward EBITDA and this seems within reason. Most importantly, you get the vast majority of the value from the “good” assets, which I’m happy to own given their strong market share, defensible position and continued growth. These good assets should put a floor on the price and limit the downside.

     

    In 1 year from now, I would expect the fair value to be ~10% higher as the waste assets continue to grow (i.e, I’m basing my PT below on FY15 estimates, not FY16). That gets me to a PT in 1 year of $70 with downside of $47.

     

     

    I do not hold a position with the issuer such as employment, directorship, or consultancy.
    I and/or others I advise hold a material investment in the issuer's securities.

    Catalyst

    Sale of oil & gas or lodging segment

    New activist involvement

    Continued cost cutting that could drive upside to estimates

    Continued growth in technical

    Messages


    SubjectRe: Mgmt
    Entry12/01/2014 07:44 PM
    Membermartin92

    Why do you think they have gotten into all these ancillary businesses?

    I think that they got into these unrelated businesses because they thought they would drive growth to the core waste segment. They thought that getting into oil & gas was going to give them a leg up for fracking waste. They thought that having lodges in the oil sand would give them a leg up in that area (so they could house their workers in remote locations). They thought that SK was a very valuable asset for the waste collection biz and probably had to take the motor oil recycling biz to get it done. I don't think McKim is an empire builder. I don't know for sure but I've visited them and that's not the sense I get from the culture. I'm sure that having a good biz that spits off cash didn't help (as you said, "too much money and nothing to do"). There's probably some of that. I don't think, however, that there are major risks to the core business. I view that as a very good segment will a soild outlook.

     

    Also, how much capacity do they have in their existing landfills?

    I'm assuming you're talking about the incinerators here (I don't know the exact number on landfills but I know they have room there). The technical segment is mix of incinerators, landfills and TSDFs. Incinerators are the largest segment @ ~35% of revs.

    On the incineration side, utilization is currently in the mid 90s. To be exact, the current capacity is 480k tons and current usage is ~446k tons. That leaves them with about 34k incremental tons and at $750/ton that means they have ~$25m in incremental revs from capacity alone (not pricing). Incineration is ~350m in revs. That's a long way of saying that they can continue to grow MSD for the next 2 years (when you layer in pricing) before El Dorado comes on. El Dorado is an expansion of one of their existing facilities. It adds 70k tons and it'll be at something like $1,400/ton (much more toxic waste capacity). So, if that was live today, they would be at 81% utilized with room to grow for years. For reference, they were in the low 80s back in 2005. So, yes, they are finite assets but they can be expanded every so often. The permitting is very difficult. El Dorado gives them enough capacity to continue growing for another 10 years.

     

    Lastly, has the CEO made any concrete moves to improve capital allocation so far?

    A few things: 1) changed the comp plan earlier this year to be ROIC focused and pushed it down through the organization; 2) initiated the first ever share buy back ($150m authorized and $100m remaining as of Q3); 3) have an on-going strategic review that will likely result in the sale of the o&g and/or lodging; and 4) have laid out some significant cost cuts / layoffs. From my view point, the most important question is whether they can get capex down. The ROIC targets appear to be a step in the right direction. I would like to see core CapEx <$200m (ex El Dorado). It remains to be seen but I'm hopeful. 


    SubjectRe: Strategic alternatives
    Entry12/02/2014 10:18 AM
    Membermartin92

    Thanks.

    Why do you think additional activists and/or strategics have not become involved?

    The relational news came out on 10/1...so it hasn't been that long. Almost all of the "relational names" have been a disaster (partly due to the fact that they owned a lot of oil exposed ideas and, you have to think, partly due to the perceived forced selling aspect). In any event, I would guess the typical activist wouldn't want to get in front of that selling unless they were taking the whole block and it was quite large (9% of the company). Then you also have the perception that CLH is an oil services name which scares ppl away. In short, I wouldn't be surprised at all to see another activist, strategic or PE show up (also, as it relates to Relational - recall that Whitworth was once chairman of WM fwiw). Anway, my guess is that there are some folks sharpening their pencils but this takes some time to diligence given the various lines of business. The other thing though is that CLH is doing the right things. They are moving forward with their strategic review and looking to divest. So, unlike other relational names (like MTW), an activist might look at this and think, "what can i do that they're not already doing?"  

    As the oil re-refining industry consolidates, what do you think it would take for that segment to move from a ‘bad’ to ‘good’ business?

    The biggest thing here is that they simply need to re-price what they buy used motor oil at and restore the spread. If you think about it - it used to be free for SK to go and get this motor oil (because the shops didn't want to pay to dispose it). Then it got really competitive and collectors would pay the price of crude. That was fine and it was still an okay spread biz. But then you had new capacity come on and base oil prices tanked (if you want to look at bberg - check motivia base oil). So the spread was turned upside down. Now, with oil dropping, the price they pay is declining. It remains to be seen if base oil prices drop the same amount. This could help. Ultimately, though, CLH/SK - as the largest player in the market - has to go out to its customer and say we're paying you a price indexed to base oil going forward, not crude. That's happening. HCCI is doing the same thing. It takes time though because some of these contracts renew annually etc. It's a slow process but this biz is close to rock bottom at present. 


    SubjectRe: Margins in Technical services
    Entry12/02/2014 03:08 PM
    Membermartin92

    Just so that we're looking at the same numbers, below are the historical results for technical:

    Technical Services 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E
    Revenue $516 $558 $694 $735 $673 $763 $946 $992 $1,148 $1,201 $1,250
    Growth % . 8.2% 24.3% 5.9% -8.4% 13.4% 23.9% 4.9% 15.7% 4.6% 4.1%
    Utilization % 83.0% 84.5% 86.0% 87.5% 88.5% 90.0% 92.0% 93.0% 95.0%
    EBITDA $97 $123 $163 $187 $177 $191 $240 $250 $286 $318 $345
    Margin % 18.9% 22.1% 23.5% 25.4% 26.3% 25.0% 25.4% 25.2% 24.9% 26.5% 27.6%
    Growth % 4.4% 26.8% 32.5% 14.2% -5.0% 7.5% 26.2% 3.9% 14.3% 11.5% 8.4%

    Tech is split b/w incineration (~30% of revs), TSDF (15% - sorting facilities), landfills (15%), and transport (40%). The entire segment is collecting hazardous waste and disposing of it but these are the different services/buckets. Within that, incineration is where they see the annual price increases. So, margins have expanded noticeably over time (they were 10% in 2000, 19% in 2005, 25% in 2010, on track to be 26.5-27% this year, and slated to be high 20s by 16/17). There was a step down post-SK as they added some lower margin collection. The reason the margin expansion hasn't been more is that incineration is just 1 part of the larger tech services segment. The other bizs are fine but don't have the same pricing power/mkt share/growth that incineration gets. You can see this below. It might be more info than you want but just focus on the last few lines (chg from incinerator pricing/chg from core). You'll see that the majority of the growth has come from pricing on incineration. These are just my estimates but I've fact checked them and I think they're pretty close. This should help answer your question. In short, incineration is great but it's bogged down by the other, lower margin lines of work.

    If you take this a step further, it becomes clear why CLH is pretty interesting here: incineration is 1/3 of tech services and just 10% of total revs. However, it's very high margin. I don't know the exact number but they have said before that it's much higher than the 25% tech services avg. Let's say 40%. So, using FY16 (in 1 yr from now), I get incineration EBITDA of $146m (366*40%). Per the analyst day, MCX for incineration is $6-$8m. Let's use $8m. That gets me to NOPAT of $90m (146-8*(1-.35)). What would you pay for that segment stand-alone? 65-70% market share, consistent pricing and new capacity coming on-line in 16 at higher margins? Let's say 22x NOPAT or 13.5x EBITDA. Rich multiples but I would argue justified. So that's $2b in value on a current EV of $4b. 50% of the value for a segment that does 10% of the revs. That leaves EBITDA of $400m+ for $2b in remaining value, an implied multiple of 5x or less for the remaining bizs (the majority of which have historically traded at 7-9x - landfills, environmental services, industrial and field services). Hence the SOTP argument.

    In terms of regulatory constraints on pricing, I don't know for sure. However, this is a quote from the Analyst Day that gives some color: "You got to remember now, at the level of utilization that we're operating at, we have been moving pricing up every year, really, except for the great recession year. And we believe, because of the amount of capital that we continue to invest in these businesses, that our customers have really been receptive to that. Now we have to be careful because we're not just providing one thing to our customers, we're doing a lot of things for them. So we're trying to be balanced in our approach to pricing. But when we first took over many of these incinerators back in 2002, pricing was in the high teens. And today, it's in the mid-30s. And we believe that it really should be in the high-30s, low-40s "  

     

    CLH Incinerator Biz 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E
    Capacity (tons) 480 480 480 480 480 480 480 480 480
    LY use 398 406 413 420 425 432 442 446 456
    TY use 406 413 420 425 432 442 446 456 470
    LY use % 83.0% 84.5% 86.0% 87.5% 88.5% 90.0% 92.0% 93.0% 95.0%
    TY use % 84.5% 86.0% 87.5% 88.5% 90.0% 92.0% 93.0% 95.0% 98.0%
    YoY ∆ (tons) 7 7 7 5 7 10 5 10 14
       
    LY Price (per lb) $0.267 $0.280 $0.294 $0.309 $0.324 $0.340 $0.357 $0.375 $0.394
    TY Price (per lb) $0.280 $0.294 $0.309 $0.324 $0.340 $0.357 $0.375 $0.394 $0.413
    LY Price (per ton) $533 $560 $588 $617 $648 $680 $714 $750 $787
    TY Price (per ton) $560 $588 $617 $648 $680 $714 $750 $787 $827
    Chg % 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
       
    Estimated Incinerator Revs $227 $243 $259 $275 $294 $315 $335 $359 $389
    YoY ∆   6.9% 6.8% 6.2% 6.8% 7.3% 6.1% 7.3% 8.3%
    % of Technical Revs   36.0% 33.9% 29.1% 29.6% 27.5% 27.9% 28.7%  
       
    Technical Revs YoY ∆ 41 -62 90 182 46 156 53 49 .
    Incinerator Revs YoY ∆ . 16 17 16 19 22 19 24 30
    Incinerator % of total tech sales ∆ . . 18% 9% 41% 14% 37% 49% .
       
    Incinerator Revenue Breakdown  
    New usage 4 4 4 3 5 7 4 8 12
    Pricing on existing 11 11 12 13 14 15 16 17 18
    Incinerator Revs YoY ∆ 15 16 17 16 19 22 19 24 30
    % from pricing 72% 73% 73% 81% 74% 68% 81% 69% 60%

    Total Tech Services EBITDA

    $187 $177 $191 $240 $250 $286 $318 $345 $366
    ∆ from incinerator pricing . $11 $12 $13 $14 $15 $16 $17 $18
    ∆ from core biz (ex-pricing) . ($21) $1 $37 ($4) $21 $17 $10 $3
    Total YoY chg in EBITDA . ($9) $13 $50 $9 $36 $33 $27 $21

     

     

     

     


    SubjectRe: CEO insider buy
    Entry12/10/2014 01:49 PM
    Membermartin92

    That's correct. It's small in the scheme of things (he owns $210m in stock). I met with him on Monday and can't say that I was expecting this. He acknowledged that the stock was "cheap" but I don't consider him a salesman-like CEO so tough to read. Nevertheless, it's good to see. In addition, I would think it's a good bet that CLH is in the market executing on its repurchase program if Alan is buying personally. 


    SubjectRe: CLH re-refining business
    Entry12/19/2014 01:29 PM
    Membermartin92

    Zbeex,

    Thanks for posting the release. To answer your question: yes, it is a relatively significant move and (presumably) it will make the segment a lot more profitable. However, I'll caveat my reply by saying there are a lot of "ifs." I'll also say upfront that the base oil business is not key to my thesis. It would be fantastic if they could turn it around but I don't think that is 100% required to make money here.

    Okay, so with my disclaimers over, I'll try to better answer the question.

    CLH collects ~200m gallons of used motor oil per year. They collect it from "generators" (think Jiffy Lube) and transport it to be re-refined at 1 of 3 owned re-refineries. As mentioned in the write-up, they (being S-K) are the largest player with the most capacity in the industry. From there, 160-180m of that 200m is actually sent to the re-refinery (due to capacity constraints) and their yield on that is ~75% so you're left with ~120m gallons to be sold. So far, so good. Of that number, ~40% is turned into "blended" product (higher value add, more expensive) and ~60% is is sold as run-of-the-mill base oil. All of this is then turned back into motor oil by the "blenders" or "compounders" who buy it from CLH. They sell it to WMT etc. Almost done. So they used to get $5 for base oil and $7ish for blended. Now base oi is at $2.45 (and blended I'm assuming is $4.50). So it's been disastrous and that's obvious. 

    The key is what they pay for the used motor oil - the so-called "pay for oil" price or PFO. Before the announcement, it was ~$0.90. So when base was at $3.35 this summer you had a $2.45 spread. With base oil now at $2.45, the spread has compressed to ~$1.60. Your COGS are ~$1.50 per gallon and SG&A is ~$15m. So, you could get EBITDA anywhere from $15-$80m at base oil prices of $2.45-$3.00 (assuming you are paying 90 cents to collect).

    So the significance of this announcement is that they're trying to restore the spread. If they completely stop paying for used oil today, the spread would go back to $2.45 (where it was this summer). 

    Now here are the "ifs." This could be great if:

    1. Customers sign-up for it

    2. Competitors follow suit (most importantly, does #2 player HCCI follow CLH's lead?)

    3. Base oil prices stabilize or (dare I say it) actually go up in the future

    In the near-term, the trade-off is that volume collected is likely to plunge. That should be okay if they can shutdown some of their capacity in the interim (which I believe they can do). They have alluded to this in the past. 

    The other implication is that Q4 could be bad for used oil. To put it into perspective, I have them doing $9m in used oil EBITDA in Q4 vs. total segment EBITDA of $162m. So small potatoes in the scheme of things but still has the potential to drive a miss.

    So, let me try to summarize what has turned into a very long reply: This used to be an okay spread business where S-K was the dominant market leader. S-K is still the leader but the economics have gotten turned upside down because, among other things, they started paying for their "feedstock." This move is a big step in restoring that spread. It has the potential to cause some near-term pain but could be very significant when you look out 2-3 years. In particular, CLH would get a windfall benefit from any recovery in base oil prices.    


    SubjectRe: Re: CLH re-refining business
    Entry12/19/2014 02:08 PM
    Membermartin92

    Re: #2 in my prior reply....it looks like competitors are already following suit:

    http://finance.yahoo.com/news/vertex-energy-announces-changes-pricing-174400302.html

     


    SubjectRe: Re: Re: CLH re-refining business
    Entry12/19/2014 08:39 PM
    Membermartin92

    zbeex,

    I think I may have mucked up my prior reply and, in the process, understated the potential impact to CLH. Let me try again.

     

    In short, every time PFO drops by a penny, CLH gains $2m in EBITDA. Every time base oil prices drop by a penny, CLH looses $1m in EBITDA. Current PFO is ~80 cents. So, the benefit from no pay (or $0 PFO) is $160m in EBITDA. That's offset by the fact that base oil prices are down 50 cents this month and $1 since this summer. So the net benefit would be something like $60-$110m assuming that a) base oil prices stay where they are and b) the industry follows CLH's lead.

    Management had been talking about that segment doing $50-$60m in EBITDA next year. So (in theory) that could be $110-$170m if this works. Bears probably think it's $25m. It's a huge deal if they're successful. 


    SubjectRe: Re: Re: Re: Re: CLH re-refining business
    Entry01/05/2015 11:36 PM
    Membermartin92

    Hi rii,

    It's an issue of apples and oranges. I made the mistake of citing base oil at $3.35 this summer vs. PFO then. At that time, crude was still >$90 per barrel, or ~$2.25 gallon. PFO is linked to oil prices. So, one way to look at the spread to CLH is to compare the stated base oil price vs. the current price per gallon of gas. The chart below does just that. So back in the summer when base oil was $3.35, (per this method) the spread was ~$1.10. The significance of this announcement is that if PFO went to $0, the current spread would go to ~$2.45 (where base oil is currently quoted). That's the spike in the chart below. Again, there are a lot of ifs in there (do comps follow? how long does it take? do base oil prices stay where they are?) but that's the basic idea.   

    Now, as mentioned, CLH claims that every 1 penny change in PFO benefits them by $2m in EBITDA and every 1 penny change in base oil hurts them by $1m in EBITDA. The reason for this (I believe) is that all 200m gallons of used oil they collect is bought at the PFO price. However, only ~100m is sold as strictly base oil. The other 1/2 is sold as RFO (recycled fuel oil) or blended product, which is less directly tied to base oil moves. I'm doing more work on this latter part so I'll post an update if I have some additional clarity.

    The math would suggest that the decline in base oil prices would hurt CLH by ~$50m in terms of EBITDA ($1m*50 cents). However, the zero pay initiative could be a benefit of as much as $160m ($2m*80 cents). So the net effect would be +$110m in EBITDA. Clearly, a big number. There are, of course, a number of complicating factors but, overall, that's the idea and why this could be a positive. 

    Hope that helps. 

     

    Note: Spread = (Base Oil Group 2 price) - (Crude price gallon)


    SubjectRe: Re: Re: Re: Re: Re: Re: CLH re-refining business
    Entry01/06/2015 10:15 AM
    Membermartin92

    The reason the initial math was incorrect (I believe) is that crude at that time was higher, meaning PFO should have been higher. I took the base oil price from the summer ($3.35) and compared it to the current PFO of 80-90 cents. I don't think that was the right way to look at it. That's why I included the spread chart in the last post. It looks like it didn't show up? (ugh, can't figure out how to paste charts in!). Anyway, the point of the chart was that the spread this summer was ~$1, $3.35 base oil less $2.35 gas/gallon. This serves as proxy for the spread since PFO should be linked to crude. So, if PFO went to $0 today (and base oil prices stay put), the spread would expand to $2.45, $2.45 base oil less $0 PFO.

    I agree, however, that rfo/blended prices would seemingly being linked to base oil. I'm still trying to vet it out. So if I'm hedging my reply that's why. I'll update when I have some more color to add.    


    SubjectStrategic Review
    Entry01/20/2015 11:51 AM
    Membermartin92

    CLH put out a press releases this morning announcing the results of its long awaited strategic review and, in addition, provided guidance for next year.

    Not wholly unexpected, CLH has decided to carve out its Oil & Gas segment and lump in some of the related assets from its drill camps (via the lodging segment). Some sell-siders had previously speculated this outcome so I wouldn't call it a "surprise" but the timing was certainly unexpected. In addition, they are putting a greater focus on re-refining and improving the profitability of that segment going forward.

    All in all, this is a step in the right direction. My thesis was predicated on the idea that CLH is worth more than its collective sum-of-the-parts and this move forces investors to start doing that math.

    Maybe the more important announcement though was guidance. CLH guided to FY15 EBITDA of $530-$570m. Street is $544m with a big range. I was $550m and bears are likely sub $500m. Given the drop in oil and the related CIVEO news, there was some certainly some concern that CLH's #s could take another step down moving into 2015. This should remove some of that speculation. 

    So, in sum, the carve out is good news though I'm the first to admit that it isn't transforming. The guidance, however, is very positive as I don't think most investors believed the Street numbers. If CLH can hit $550m in EBITDA this year the stock should be a decent long.  


    SubjectAcquistion
    Entry02/05/2015 02:37 PM
    Membermartin92

    CLH announced yesterday that they are acquiring Thermo Fluids ("TF") from NES for $85m in cash. TF is largely a used oil collector with 50m gallons collected (vs. 200m for CLH). NES is a distressed seller with liquidity issues. They bought the TFI assets in 2012 for $245m and inked a deal to then sell the division to Vero Lube for $175m in March of last year. That deal later fell apart and NES had been looking for buyers since. It was surprising to see CLH to step up here given the negative segment around the used motor oil biz and investor desire for them to ditch those assets (not further expand!). That said, I think this might end up being a very good deal. From a financial perspective, I believe it's ~$100m in revs at mid teen margins + $5m in synergies so 4.2x EBITDA if that comes to pass. However, the bigger point is that this marks a further consolidation in the used oil biz, allowing CLH to have great control over their feedstock costs, which drives the margin and profitability of that segment. I had assumed that eventually they would restore profitability in used oil but wasn't holding my breathe that it would happen anytime soon. This marks a pretty clear action that they are intent on restoring the spread. Whereas zero pay was profitability sustaining, I think this could be profit enhancing given the scale advantage. I'm optimistic. 


    SubjectNew activist
    Entry02/18/2015 12:10 PM
    Membermartin92

    Per the latest filings, Starboard is now on the holder list. As mentioned in prior messages, I don't think this should come as a surprise. From here it will be interesting to see if they size the holding up and get more involved. 

    http://www.bloomberg.com/news/articles/2015-02-17/activist-starboard-value-adds-stakes-in-clean-harbors-alibaba

     


    SubjectThey didn't miss!
    Entry02/26/2015 02:12 AM
    Membermartin92

    As Munger would say, the key to life is low expectations....

    After missing on almost every quarter since May of 2012, CLH actually beat....a small victory but an important step in restoring some investor confidence. It's important to note that my estimates have never been that differentiated from Street. My "variant view" if you will is that street numbers are actually ball park. However, investors have refused to believe that after a long and painful string of repeated misses. In addition, no one wants to pencil out a SOTP valuation when a company is repeatedly lowering guidance. As I mentioned when I posted CLH, this is part of the reason why the opportunity exists. 

    In any event, the quarter was strong and guidance was re-affirmed. The "good" assets keep growing and continue to drive a mix shift to higher multiple EBITDA.  

    If you dare to look out 2 years, I think the story will be much cleaner, the good assets with comprise >85% of the the EBITDA, the technical services division will continue to expand in value and there will be the benefit of interim cash build.

    In short, I think CLH is a mid $60 stock in a year and mid $70s in 2 years. Happy to provide some additional color on valuation or otherwise if anyone wants to discuss.

     

    SubjectRe: Starboard
    Entry02/28/2015 08:17 PM
    Membermartin92

    Hi zbeex,

    Yes, Starboard and Blue Harbor are now there and Relational, of course, is on the way out. From what I understand, Blue Harbor has done a lot of work (much more than Relational did) and I wouldn't be surprised to see their stake get larger. I don't believe Starboard has done the same level as diligence so tough to say what their intentions are. As for BH, I think their aim is to hold mgmt's feet to the fire. I think they're likely on-board with the steps taken thus far (O&G carve out, share buyback, ROIC tgts, etc) and I would be surprised if they pushed for something dramatically different in the NT. However, I think they will serve the necessary role of keeping mgmt accountable. If results are mixed, I would think they would advocate for a more aggressive break-up to realize the SOTP value - similar to their involvement with BWC. That's just my opinion. Tough to know of course what anyone is thinking unless you're in their seat. 

     


    SubjectBuy back
    Entry03/13/2015 10:36 AM
    Membermartin92

    CLH upped its share repurchase plan to $300m, meaning it will now have $200m available instead of the $50m currently remaining. This is nice to see as there was likely some concern that the initial buy back was just a token move.


    SubjectRe: Re: Buy back
    Entry03/18/2015 10:26 AM
    Membermartin92

    Zbeex,

    I have not gotten that impression but I don't know. As I said in a prior post, Blue Harbor (from my understanding of the situation) had done the most work of any activist, including Relational, and was seemingly the most committed. I got the impression that Starboard had not actively engaged mgmt. That was 2 weeks ago. Things may have changed since then. I don't disagree that it smells like maybe they were assisted in making this decision but, again, I didn't get that impression from my work. Purely speculation on my part. 

      Back to top