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US Ecology Inc (ECOL) Q2 2019 Earnings Call Transcript

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US Ecology Inc  (NASDAQ: ECOL)
Q2 2019 Earnings Call
Aug. 02, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Second Quarter 2019 US Ecology, Inc. Earnings Conference Call. Today's conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Mr. Eric Gerratt. Please go ahead, sir.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Good morning, and thank you for joining us today. Joining me on the call this morning our Chairman and Chief Executive Officer, Jeff Feeler; Executive Vice President and Chief Operating Officer, Simon Bell; and Executive Vice President of Sales and Marketing, Steve Welling.

Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include but are not limited to, those discussed in the Company's filings with the Securities and Exchange Commission. Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflects management's views only on the date such statements are made.

We undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.usecology.com.

Throughout yesterday's earnings release and our call and presentation today, we refer to adjusted EBITDA, pro forma adjusted EBITDA and adjusted earnings per share. These metrics are not determined in accordance with generally accepted accounting principles and are, therefore, susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of adjusted earnings per share, adjusted EBITDA and pro forma adjusted EBITDA can be found in Exhibit A of our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results and our 2019 guidance.

With that, I'd like to turn the call over to Jeff.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Thank you, Eric, and good morning, everyone. I'll start this morning's call with a few summary comments on our second quarter results that we released yesterday, before turning it back to Eric for some more details on our financials. I'll then close up the call with an update on our outlook for the remainder of 2019, before opening up the call for questions and comments.

Yesterday, we reported strong second quarter results that delivered $155.8 million in revenue, a 14% increase over the second quarter last year, driven by 9% organic growth and 5% from 2018 acquisitions. This strong performance resulted from 14% growth in our Environmental Services segment and 13% growth in our Field and Industrial Services segment.

Organically, our Environmental Services segment saw 11% growth driven by increases in our Base Business of 7% and Event Business of 34%. Our Field and Industrial Services segment saw growth over -- quarter-over-quarter, reflecting our acquisition of the US Ecology Dallas and Midland operations and organic growth of approximately 2%. We saw organic growth in our transportation and logistics services and in our Industrial Services, helping offset some softness we saw in total waste management and remediation business lines, which were impacted by cycling of projects and timing.

The increased business activity that we saw in the second quarter drove strong pro forma quarter -- adjusted EBITDA growth of 20% over the same quarter last year. We recognized approximately $1.5 million of business interruption recoveries associated with our Idaho facility during the quarter, representing a portion of the expected recoveries for the period from November 17, 2018 to March 31, 2019.

We expect we will recognize another $2.5 million to $3.5 million in the third quarter of 2019 and additional amounts for the periods after March 31, 2019. In June, our Idaho operations regained a substantial -- substantially all of its treatment capabilities. We are currently putting in additional infrastructure, hiring and training staff and redirecting volumes back to Idaho. This process will take time and is expected to ramp throughout the balance of the year. Despite our Idaho facility not operating at full capacity, strength in other areas of our business have been enough to overcome this headwind. Overall, I am extremely pleased with our second quarter results and the trends that we are seeing in the business.

With that, I'll turn it back to Eric.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Jeff. As shown on Slide 7, revenue for the second quarter of 2019 was $155.8 million, up 14% from $136.9 million in the second quarter of 2018. Revenue for the Environmental Services segment for the second quarter was $112.8 million compared to $99 million in the second quarter last year. This growth was driven by a 16% increase in treatment and disposal revenue and a 9% increase in Transportation service revenue. As Jeff mentioned, Base Business for the Environmental Services segment was up 7% compared to the second quarter last year and represented 77% of treatment and disposal revenue.

Event Business for the Environmental Services segment increased 34% from the second quarter last year and represented 23% of treatment and disposal revenue. Excluding our Idaho facility, Base Business increased approximately 10% and Event Business was up approximately 47% in the second quarter of 2019 compared to the second quarter of 2018.

The Field and Industrial Services segment delivered revenue of $43 million in the second quarter of 2019, up 13% from $38 million in the second quarter of 2018. This increase primarily reflects our Field and Industrial Services group based out of Dallas and Midland, Texas that was acquired in the third quarter of 2018. The increase was also due to growth in our transportation and logistics and our Industrial Services businesses, partially offsetting project-driven softness in total Waste Management and Remediation business lines.

Slide 9 breaks down our Environmental Services segment and disposal revenue -- our Environmental Services treatment and disposal revenue for both Base and Event Business by industry vertical. Base Business increased primarily in the general manufacturing, refining and other industry verticals. The increase in Event Business was primarily driven by increases in the government, chemical manufacturing and metal manufacturing industry verticals.

Turning to Slide 10. Gross profit was $49.6 million in the second quarter of 2019, up 20% from $41.4 million in the same quarter last year. Our Environmental Services segment contributed gross profit of $43.1 million in the second quarter compared to $35.9 million in the second quarter last year. Environmental Services segment gross profit for the second quarter of 2019 benefited from approximately $2.2 million in business interruption insurance recoveries related to hurricane losses we experienced at our Texas facility in 2017 as well as business interruption insurance related to the Idaho facility. Treatment and disposal margins were 45% in the second quarter 2019 compared to 42% in the second quarter of 2018.

Gross profit for the Field and Industrial Services segment was $6.5 million, up from $5.5 million in the second quarter last year. Gross margin was 15% for both the second quarter of 2019 and 2018. Selling, general and administrative spending, or SG&A, was $24 million in the second quarter compared to $21.2 million in the second quarter last year. The increase was due to $2.5 million in business development expenses, primarily associated with the pending merger with NRCG as well as increased labor and incentive compensation, increased property taxes and higher intangible asset amortization. Partially offsetting these cost increases were $4.5 million in property insurance recoveries recognized in the second quarter of 2019 related to the Idaho facility.

Operating income was $25.5 million, which included the $4.5 million in property insurance recoveries in the second quarter 2019 compared to $20.3 million in the same quarter last year. Net interest expense for the second quarter was $3.4 million compared to $2.9 million in the same quarter last year. The increase was the result of higher outstanding debt levels in the second quarter this year due to the acquisitions completed in 2018 as well as higher interest rates on the variable portion of our outstanding debt. The Company's effective income tax rate for the second quarter of 2019 was 29.2%, up from 24.4% in the second quarter last year. This increase is primarily the result of business development expenses in the second quarter of 2019 that are not deductible for income tax purposes as well as a higher overall effective state income tax rate.

We reported net income of $15.5 million and diluted earnings per share of $0.70 in the second quarter of 2019 compared to net income of $13.2 million and diluted earnings per share of $0.60 in the second quarter last year. Adjusted earnings per diluted share was $0.66 in the second quarter 2019 compared to $0.61 in the second quarter of 2018. Pro forma adjusted EBITDA, which excludes business development expenses, was $37.9 million in the second quarter of 2019, up 20% from $31.7 million in the second quarter last year.

Turning to results for the first six months of 2019 on Slide 11. Total revenue was $286.8 million compared to $257 million in the first six months of 2018. Revenue for the Environmental Services segment for the first six months was $205.2 million, up 11% compared to $185.4 million in the first six months of last year. The Field and Industrial Services segment delivered revenue of $81.7 million in the first six months of 2019, which was up 14% compared to $71.5 million in the same period last year. Net income for the first six months of 2019 was $23.5 million or $1.06 per diluted share compared to $22.5 million or $1.02 per diluted share for the first six months of 2018. Adjusted earnings per share was $0.88 for the first six months this year compared to $0.96 for the first six months of last year. Pro forma adjusted EBITDA was $61.7 million for the first six months of 2019 compared to $56.2 million in the first six months of 2018.

Our free cash flow was $23.7 million for the first six months of 2019 and includes $9.5 million of property insurance recoveries and approximately $1.2 million in capital expenditures related to the Idaho facility rebuild. Our balance sheet remains strong with net borrowings of $316 million at June 30, 2019, and a leverage ratio of approximately 2.3 times based on the low end of our 2019 EBITDA guidance range.

With that, I'll turn the call back to Jeff.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Thank you, Eric. As we look to the second half of 2019, we continue to see positive momentum in the underlying business. As you can see on Slide 14, we reaffirmed our previously issued revenue, adjusted earnings per share and pro forma adjusted EBITDA guidance, initiated this past February. We still expect our revenue for the full year to range between $583 million and $627 million. Our Environmental Services Base Business revenue growth, which has outpaced our expectations for the second quarter in a row, is now expected to grow between 5% and 7% for the full year of 2019.

Our Event Business rebounded nicely in the second quarter and the pipeline remains very healthy, supporting our expectations for double-digit Event Business growth in 2019. Our Field and Industrial Services segment continues to see positive momentum in our transportation and logistics service lines and our Industrial Services group with good underlying growth in many of our small quantity generation services, such as retail, lab pack and LTL services. This momentum has more than offset some of the softness in our total waste management service lines, remediation services and start-up expenses of our new -- with our newer service centers.

Taking everything into account, we expect improving strength in our core business to continue in offsetting areas where we see some softness or where we're making some organic investments. We continue to expect to deliver pro forma adjusted EBITDA ranging from $135 million to $145 million and adjusted earnings per share ranging from $2.09 to $2.41 per share.

Our landfill capital expenditures remain unchanged, and we still expect total capital expenditures, excluding the Idaho rebuild, will range between $55 million and $60 million for 2019. All the useful data points have been highlighted on Slide 14 for those that are building models. Finally, we continue to expect our free cash flow to range between $45 million and $50 million for 2019.

Strategically, we continue to execute on our plan. We completed a small acquisition yesterday with the purchase of W.I.S. E. Environmental Solutions based out of Sarnia, Ontario, Canada, where they are a leader in, especially equipment rental and provide related transportation services, 24-hour emergency response and light industrial services. This acquisition builds on our broader Canadian strategy, complementing our Tilbury and Stablex operations by enhancing our customer-reaching capabilities. W.I.S. E. underscores our commitment to the Canadian market with the investment to provide additional levers for growth over the coming years.

Our pending merger with NRC Group Holdings company announced on June 24 continues at peace and is on track. On July 16, the U.S. Federal Trade Commission granted early termination of the final waiting period under HSR, and yesterday, we filed our preliminary registration statement on Form S-4 with the Securities and Exchange Commission. As we see it right now, everything is tracking to a fourth quarter close once stockholders approve the merger.

With that, operator, will you please open up the call for questions and comments?

Questions and Answers:

Operator

[Operator Instructions] We'll take our first question from Michael Hoffman with Stifel. Please go ahead

Michael Hoffman -- Stifel -- Analyst

Hey, Jeff, Eric, comments -- your -- that's risky. You don't want me to comment. I'll just ask questions. I suspect that you're being conservative and not doing an adjusted-for-deal-related cost. And if you did do an adjustment for deal-related costs, you would have been at least walked us up in the upper half of your guidance on the EBITDA.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Well, actually, Michael, we strip out our deal-related costs so that doesn't have an impact on our outlook right now, and that's what the pro forma adjusted EBITDA comes into play. So what the reality is, we're seeing a lot of real positive trends in the business. And second quarter was a really strong quarter, part of that was a catch up from the softer start to the year. But as we look into the outlook periods, we're seeing strength in the Base Business. We're seeing real strength in the project-related work. There's a lot of real positives that are out there. The reality is we've completed half the year.

So there is a lot still to deliver in the second half. Our second half is geared up to be stronger than our first half, but we got to deliver upon that. And so our normal course is not to raise guidance until we have a little bit more clarity of runway, especially when there are some uncertainties in place. But the underlying trends are definitely there. We see a lot of positivity. We're not seeing any impacts to some of the negative trends we're seeing in, I'll call it, macro conditions that are out there. And we feel really good about this year's outlook.

Michael Hoffman -- Stifel -- Analyst

So the return on that is, a bunch of that outlook is based on the Event Business having an uptick, and that's always uncertain, whether somebody late in the decision process says, OK, maybe we don't do it and that's some of the conservatism as opposed to raising guidance?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

That would be part of it, Michael. The reality is if you kind of look at our third quarter and fourth quarter, third quarter will be our strongest. Fourth quarter is very healthy. It doesn't take much from some of those projects, whether you call it deferred or people are getting antsy or just timing slips. And so some of that fourth quarter could shift into first quarter of next year. That's inherent. That's natural in our business. We've experienced it before. So when all of those factors are taken into place, including the strength that we've seen in our Base Business and in our Field and Industrial Services, we feel very confident with the guidance range that we have at this point in the year.

Michael Hoffman -- Stifel -- Analyst

When you look at the... go ahead, sorry.

Steve Welling -- Executive Vice President of Sales and Marketing

Michael, this is Steve Welling.

Michael Hoffman -- Stifel -- Analyst

Hi, Steve.

Steve Welling -- Executive Vice President of Sales and Marketing

Part of it too is, we've got multiple projects that are multi-year, that are just kicking off. One started 3 weeks ago. The other one starts in two to three weeks. And it's going to be very good for the next couple of years, but we're in the first 2 weeks of a major project. We're not exactly sure on the volume for this year. We know the total volume on both projects. But in terms of how much actually comes in, it will really depend on how the project moves in the first few weeks and how the operational issues are resolved.

Michael Hoffman -- Stifel -- Analyst

Well, that helps. On Base, what -- can you desegregate a little bit of what's price mix volume so we understand? We've heard from others, both customers and competitors, the customers saw lots of cost increase so that would be price, and the competitors are saying they're able to price. So I was just curious what your experience has been.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Yes. We've been able to push along pricing increases where the markets allow. And so that's been part of our guidance for all of this year. When you look at the second quarter, on Base Business, volumes, actually were up about 7%. The difference is going to be mix. And so even though we're passing on pricing, we're receiving different waste streams in each and every quarter based off what generators are shipping.

Michael Hoffman -- Stifel -- Analyst

Okay. So just -- you're making the point of clarity that the 7% is volume, it's not -- but you did get price but you've offset it with different mix so the average selling price year-over-year is still flat?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Exactly.

Michael Hoffman -- Stifel -- Analyst

Right. Okay. And then when you do you think the shareholder vote occurs?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

At this time, we really don't know at this stage. We haven't set that. We got to go through the SEC review process, which could be quick or it could be longer, depending on what comments come back in that. So right now, it most likely will be set sometime in October.

Michael Hoffman -- Stifel -- Analyst

Okay, all right. Great. That's all for me.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

All right. Thanks, Michael.

Operator

Thank you. We will now take our next question from Tyler Brown with Raymond James.

Tyler Brown -- Raymond James -- Analyst

Hey, good morning, guys.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Hey, Tyler, good morning.

Tyler Brown -- Raymond James -- Analyst

Hey, Eric, sorry. I'm little mixed up on the BI. So I thought that the BI benefit was $2.2 million from Texas and Idaho. Is that right?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

That's correct. That's correct. About $1.5 million of it was related to Idaho. The other $700,000 and change was related to some recoveries we got for the Texas facility for the hurricanes back in Q3 of '17.

Tyler Brown -- Raymond James -- Analyst

Okay. So is all of that in EBITDA?

Erica Gerratt -- Chief Financial Officer

Yes. Yes.

Tyler Brown -- Raymond James -- Analyst

Okay. Is the Texas recovery a bit of a surprise?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

No, it's something that -- it's been a very long process that the team spent a lot of time trying to get everything together and get through the claim with the insurance carriers. I guess the surprise has been that it's taken us quite a while, but it is something we've been working on for months.

Tyler Brown -- Raymond James -- Analyst

Okay. So year-to-date, your BIs hit a limit that's too much. But you've received $2.2 million year-to-date in BI. You're expecting another, call it midpoint $3 million. That whole $5 million will all be in EBITDA, but doesn't -- that feels like it's a bit more than you were originally expecting. We were thinking BI was maybe $2 million to $3 million benefit for the full year.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yes. I don't -- I think we said BI was probably $3 million to $5 million for the year. And -- so yes, I think that's -- it's probably up a bit, but I think that's part of the fact that we've gone through the process now of one of the claims. It's not complete, the claim for -- particularly for Idaho that takes us through March. And so I think we're feeling more confident about the process and going through that claim's process and getting our recoveries.

Tyler Brown -- Raymond James -- Analyst

Okay. I don't recall that. I just -- was just wanted some clarification there. So maybe, Jeff or Steve, so the ES Base Business was up 10% ex-Idaho. If my notes are correct, that's off a 13% comp. So the industrial economy isn't up 10%. It's certainly not off a 13% comp. So what do you think is really driving this strength? I mean are you taking share? Is it just that you're the right end markets? Or maybe what do you think is driving it?

Steve Welling -- Executive Vice President of Sales and Marketing

It's a combination of things. You're talking specifically, Base Business, is that your question?

Tyler Brown -- Raymond James -- Analyst

Yes. Correct.

Steve Welling -- Executive Vice President of Sales and Marketing

So some of it is share. We've had some pretty strong go-to-market strategies to pick up share, which we had success with. Some of it's pricing. But I can't point to any one specific area. I think it's a combination of things.

Tyler Brown -- Raymond James -- Analyst

Okay.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Tyler, this is Eric. To your point, that is off a really strong comp because we were up about 13% Q2 last year. And to just earlier point, yes, it's certainly some share but volumes were up pretty significantly this year in the second quarter on a tough comp in the second quarter last year. So volumes were pretty significant.

Tyler Brown -- Raymond James -- Analyst

Yes. So do you think there's been any sort of structural uplift in that base growth? I mean for a long time you've talked about 3% to 5%. Is that still the right way to think about it? As we -- maybe not '19, but as we think about a longer term?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

I think longer term still 3% to 5% is a good target to have. I think right now and in part of our comments is, we're seeing a lot of positives in the business. And when we look at these types of data and seen the volumes come in, though we don't have crystal clarity on what's happening at the generators locations and in all instances, our customers and our generators are seeing healthy conditions out there. And so there's a little bit of a mix message when you look at some of the industry trends you see out there that are more broad and macro-based. We're just not seeing those headwinds right now.

Steve Welling -- Executive Vice President of Sales and Marketing

Yes. No. Also our base growth in a number of different geographies so we're not being carried by any one part of the country or any one industry. So overall, it's good. We're diversified throughout the country.

Tyler Brown -- Raymond James -- Analyst

Okay. And then Eric, of the $55 million to $60 million in CapEx, how much of that is growth versus maintenance?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes. This is Simon here. So I believe the -- let me grab the CapEx. We're projecting about $14 million for the full year on growth, and I think maintenance we're projecting just shy of about $29 million.

Tyler Brown -- Raymond James -- Analyst

Okay. So let's talk about the $14 million on the growth side. So can you talk about some of the investments that you are making maybe the aerosol and filter cake processing units you're bringing on? Will those investments have a measurable EBITDA benefit into 2020?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes. There's a number -- this is Simon again. There's a number of projects we're looking at. Some of the more significant ones include internalization of some reagents. We're developing some of our own mining capabilities. I definitely expect some contributions from that in 2020. Similarly, with the aerosol system, we expect that should be 2020 fully functional and contributing. Another major one we did is we've added a drum -- a full-sized drum warehouse at the Chicago facility, which should give us some momentum.

The newer offices in Houston and Tacoma also provide some additional catalysts. I expect all those to see the improvements as we get past some of the start-up costs that Jeff mentioned. We should see some contributions in 2020 in those projects. And there's a number of other smaller projects. I won't go through in all detail, but as Steve said, it's pretty diverse group.

Tyler Brown -- Raymond James -- Analyst

Yes, and a good pipeline...

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Go ahead, finish your thought there, Tyler.

Tyler Brown -- Raymond James -- Analyst

Well, I was just going to say, this was a good pipeline of those maybe, call them 1V, 2V, small kind of organic growth projects.

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes. I mean one of the things that we've done, it's been a big focus on the growth side. We've got a dedicated team, a talented experienced team that are providing the kind of the resources to advance maybe this project. There's a lot of great ideas out there and it's just as a matter of having the resources and prioritizing. But we've got some focus team working on it and they continue stuffing that pipe for sure.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

And I'll just add to that piece of it, Tyler, is that's one of the areas that we've invested over the last couple of years as we pulled together a key group of people that runs a technical services group for us, that's really there, their objective is to go on out and working with our great team members to identify growth opportunities and make investments in these organic initiatives. And so there is a big pipeline there and it's a matter of capital allocation and prioritization and getting those that yield the highest returns.

Simon Bell -- Executive Vice President and Chief Operating Officer

And organic is always the cheapest way to grow. So something we remain very focused on.

Tyler Brown -- Raymond James -- Analyst

Right. Okay.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

The other thing I was going to interject just to get the finer point in there is, on our capex, it's $55 million to $60 million, excluding Idaho; $15 million is growth; about $25 million of that is landfill; and about $20 million maintenance in there. This excludes anything we're investing in Idaho because all of that is coming back now in insurance recoveries.

Tyler Brown -- Raymond James -- Analyst

Right. Okay. Okay. I got all that. That was good color. So Eric, you mentioned that the incentive comp is a headwind. I'm just curious where that comp is tracking as a percentage of a full accrual. Like are you tracking over the 100% accrual?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

No. No. We're pretty much on track what we expect for the year.

Tyler Brown -- Raymond James -- Analyst

Okay. Okay. That's helpful. That's helpful. And then how big was the W.I.S. E. deal? If you can provide any color?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Yes. So we purchased W.I.S. E. for about CAD 23 million in Canadian dollars, and it was a pretty small deal at the end of the day.

Tyler Brown -- Raymond James -- Analyst

Okay. Okay. And then maybe my last one here just related to the NRC deal. It's obviously going to be a key piece to 2020, but I want to talk about a mechanical question here. How do you expect to report everything? Are you going to lump everything ex the waste disposal into FIS and then put energy disposal in ES? And I'm assuming, you'll break down the FIS piece like you do now, but would you give any additional details on ES?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yes, Tyler, it's Eric. You're correct. So as we look at it today and we still got work to do to put the finer points on this and nail it down. But as I look at it today I believe that the Sprint piece of the business, the E&P landfills will go into Environmental Services segment and then, the rest of the legacy NRC business will go into our Field and Industrial Services segment. To your second point, we will need to look at that revenue disaggregation that we do for the Field and Industrial Services segment, and you're likely to see some additional items in there for some of the legacy NRC pieces, like standby and some of those other pieces of the business.

Tyler Brown -- Raymond James -- Analyst

Okay. Yes. And any color on the ES piece would be helpful from a modeling perspective, if possible, just my two cents. But anyway, I appreciate it.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Tyler.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Thanks, Tyler.

Tyler Brown -- Raymond James -- Analyst

Thank you.

Operator

[Operator Instructions] We will hear now from Jeff Silber with BMO Capital Markets.

Jeff Silber -- BMO Capital Markets -- Analyst

Thanks so much. I'm sorry to go back to adjusted EBITDA calculation. I just want to make sure we're all on the right page. So that includes any business interruption insurance recoveries but it excludes any property with insurance recoveries, correct?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

That is correct, Jeff.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. Great. And are you expecting any more property insurance recoveries over the remainder of the year?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

I would expect that we will get some. I'm not sure to the extent how much we've gotten. The 2 payments we've gotten so far have been advances from the carriers, but we're certainly not done. So I would expect we'll have some more this year and there may even be some that trail into 2020. But we will continue to strip those out and call those out in our EBITDA reconciliation.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. Appreciate it. And those are almost all dealing with Idaho, correct?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

That is correct. The property insurance recoveries are all related to Idaho.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. I appreciate you guys clearing that up. Just going back to the business itself. I think for the past couple of quarters you've talked about some of the weakness in total waste management and the remediation business. Can we get a little bit more color what is going on there? And how you might be able to impact that? Thanks.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Yes. So on the total waste management side of things it is -- you get a base revenue from providing services but then you also get a benefit for providing project-related services. So if they have a cleanup or if they have an event or some form of project there and that's really we're cycling some of those right now. The underlying, the core Base Business in that segment is very strong. We're continuing to win accounts. We're implementing new accounts as we speak.

We just won a $9 million award over three years that we're implementing here in the third quarter. So the outlook of that looks good. It's just when you look at it from a year-over-year comparison or quarter-over-quarter, it shows some softness but it's really project-driven and timing. Same with remediation. It -- that one's almost all project-driven and that's just cycling projects. And we're seeing some better second half than the first half.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. That's helpful. And then on the flip side, if you look at the government business, I mean that's been really strong, especially this quarter. Again, if you could just give us a little bit of color what's going on there that would be great?

Steve Welling -- Executive Vice President of Sales and Marketing

This is Steve Welling. There's a couple of new government cleanup sites that kicked off in the last quarter, but a lot of the -- over half of the revenue is just timing. There's multiple projects that we've been working for a number of years and they go through different cycles or phases where work will stop and then they test another area of the property. And a lot of last quarter, at least half of the revenue increase was just timing versus prior periods.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay. I understand. Finally, one more from me. Just going back to the pending NRC merger. But besides the shareholder vote, is there -- are there any other milestones that we need to look out for?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

It's really the shareholder vote.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, fantastic. All right, great. Thanks so much.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

All right. Thank you.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Jeff.

Operator

Thank you. We will hear now from Tyson Bauer with KC Capital.

Tyson Bauer -- KC Capital -- Analyst

Good morning, gentlemen.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Good morning.

Tyson Bauer -- KC Capital -- Analyst

I'm just going to add on the prior question about the government spending or the core business there. Are you -- because the budget's been agreed upon those things. Are we looking for any disruptions in that flow of funding and project timing where we've seen in the past between Q3 and Q4 matching up with federal fiscal year? And are we seeing an increase in spending at the state level also for cleanups or remediations?

Steve Welling -- Executive Vice President of Sales and Marketing

We're not expecting any disruption on the federal level that we know of at this point. Projects that are running right now, we fully expect to continue with what we have in our forecast. On the state level, I'm not sure I haven't seen anything specific, any different than other years in terms of state cleanup.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Yes. There's nothing notable on the stateside.

Tyson Bauer -- KC Capital -- Analyst

So the funding in total, you're expecting to remain consistent, stable?

Steve Welling -- Executive Vice President of Sales and Marketing

Yes.

Tyson Bauer -- KC Capital -- Analyst

Okay. Is it still the anticipation that, as best as we can, we'll be walking into 2020 with a clean slate? Or there are things that are still outstanding that may slip into 2020, whether it's the transaction timing or pending permits and getting ramped up in Idaho? Or are we still on track and is that the goal of management to walk into 2020 as clean as possible with the fewest amount of footnotes?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

That's always...

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

That's always, Tyson, on that. But the reality is, as we look into 2020, 2020 is going to look a lot different than 2019. I mean we're going to hopefully, have the merger of NRC under our belt, which is going to create some noise in our reporting. And then when you look at Idaho, we're going to continue to be in a rebuild there. So we'll be ramping in there. It won't be up to pre-event capacity or capacity and conditions but the reality is we anticipate that. So yes, we're going to have -- we'll have some noise next year but it'll probably less so than what we've seen in 2019.

Tyson Bauer -- KC Capital -- Analyst

Okay. And then regarding the timetable, as we could see the deal get done in October, we could see the deal get done in December as long as things stay on pace, how big of the differences does that really make to you?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

It doesn't make a big difference, right, at this stage. I mean the reality is our focus is to get through shareholder approval and get it closed. And to put a finer point on that is, if we do have a shareholder vote in October, the earliest we would close on November 1 on that. So that would be what the timing would be. And at that point in time, we'll get more clarity on what -- how it impacts 2019.

Tyson Bauer -- KC Capital -- Analyst

And do you have any pending permit submissions that you are waiting a word in the last half of this year, especially for the Idaho site?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes. This is Simon speaking. So a couple of major things we'll be doing. We'll be submitting the permit modification if you will for the replacement stabilization building. So we expect to see approval from that kind of first half of 2020, allowing us to entrance construction. We're also in the process of submitting a revised rate logical model for the Idaho facility, which should broaden our capabilities, provide us more flexibility. And I expect to have that approved by the end of the year, and so allowing for potential contribution into 2020, those are probably the two major ones.

Tyson Bauer -- KC Capital -- Analyst

Okay. And just in general, in the industry we've seen probably more transactions than we have in past years, whether it's Waste Management yourself, whether it's Harsco with Clean Earth. Anything that you saw as a tipping point or that will see more consolidation and more transactions occurring? And if so, why do you believe that's happened this year as opposed to maybe years earlier?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

My belief is, it's really its availability as there's been a lot of opportunities this year with assets in the marketplace that are good assets and it's a lot for an environment to allow for consolidation. And so do I expect more? From our standpoint, we'll continue to execute on our strategy. And if we see high-quality assets, yes, we'll go ahead and continue to put those tuck-ins in place and that type of thing to kind of build out our portfolio and our capabilities. As to others, I really can't speak to that.

Tyson Bauer -- KC Capital -- Analyst

Okay. Thanks a lot, gentlemen.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Thanks, Tyson.

Operator

[Operator Instructions] We'll now take a follow-up from Michael Hoffman with Stifel.

Michael Hoffman -- Stifel -- Analyst

Thank you. When you think about all this tariff noise in the media, do you have any particular customer base sensitivity where the customer has tariff sensitivity that you have to kind of keep in mind?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Not that we're aware of, Michael. I'm sure a lot of our larger customers are sending product worldwide and would have some exposure to that. But we're not -- we don't have that visibility to it and we don't know how that would potentially impact it.

Michael Hoffman -- Stifel -- Analyst

And you're certainly not hearing any of them saying anything that would suggest an activity level change, so that's the other side of that?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

No. Not at this stage.

Michael Hoffman -- Stifel -- Analyst

And then within the NRC, I mean I think one of the things that is probably worth talking about, you're getting 50 incremental locations for them. So when you talk about $15 million of gross spending and looking for opportunities to create incremental points to leverage, that's one of the probably the key aspects of NRCG that might be under-discussed is all these physical locations that would allow that opportunity set for you to go in and find things to invest and that would allow you to drive the operating growth -- organic growth.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Absolutely. Just to revisit some of that. I mean what got us interested in NRC, to begin with, was that their domestic Environmental Services group and their network that they have and how it complements what we have. And the services they provide are different services than what US Ecology provides. So there's a true complement there that we can leverage one another's network and really build upon that. That is the most exciting part of the business. All the rest is good and comes along and supports our growth and supports levers to be able to grow the business and provide new opportunities. But it was really the domestic ES business on their side that got us excited and remains probably the biggest excitement that we have.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

And Michael, that -- your point is absolutely true as well that, that -- now that helps us accelerate something that to do organically and get access and get facility. Now that kind of a network of facilities that we can use as leverage points for some of our services that really accelerates something that would've taken us quite some time to do organically.

Michael Hoffman -- Stifel -- Analyst

Right. Okay. And that's kind of where I was trying to tease that out. And then you appropriately gave a conservative view of how to think about the 2020 contribution based on what NRC is in the public market as far as outlook. Part of that I'm presuming is because there was ongoing chatter about what was happening in shale drilling and that's an up -- that's a growth opportunity for them, it may be you tempered the pace. The data so far in 2Q would say that waste side of the business in Texas is pretty good. So would you change your view at this point about that opportunity coming into '20, would it be a little bit more in line with them?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes. Michael, there's a lot of factors that differ from our view versus maybe what NRC has out on The Street. And so it's going to be a different company there and so right now, we're not in a position to change anything that we've stated back on June 24.

Michael Hoffman -- Stifel -- Analyst

Okay. And then lastly, the deal environment has been very active. I'm curious if a chunky transaction showed up now, does be doing NRC prevent you from participating?

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

One of the reasons why we structured the NRC transaction the way we did is leverage profile would be very low in the grand scheme of things, and it gives us opportunities to pursue other assets that come in the marketplace. If they fit with our strategy and if they are good assets that help us build out what we're trying to create here. So no, it doesn't prevent us. I mean the reality is, we're going to be very selective and very disciplined as we move forward. We have a lot to bite off and harvest with NRC and that's really our focus right now.

Michael Hoffman -- Stifel -- Analyst

Fair enough. And then since you opened up the idea of a comment, the comment would be, please separate energy waste or Sprint as the line item even if it's in ES.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Yes. We'll take a look at the reporting structure as we pull that together. Yes.

Michael Hoffman -- Stifel -- Analyst

Yes, thank you.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

All right, thank you.

Operator

Thank you. This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Jeff Feeler for any closing remarks.

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

I want to thank those for your interest in the company today, and we look forward to providing Q3 updates in late October. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 44 minutes

Call participants:

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Jeffrey R. Feeler -- Chairman of the Board, President and Chief Executive Officer

Michael Hoffman -- Stifel -- Analyst

Steve Welling -- Executive Vice President of Sales and Marketing

Tyler Brown -- Raymond James -- Analyst

Erica Gerratt -- Chief Financial Officer

Simon Bell -- Executive Vice President and Chief Operating Officer

Jeff Silber -- BMO Capital Markets -- Analyst

Tyson Bauer -- KC Capital -- Analyst

Michael Hoffman -- Stifel -- Analyst

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