Clean Harbors Inc (CLH) 2010 Q1 法說會逐字稿

Good day, everyone, and welcome to Clean Harbors' first quarter 2010 conference call. (Operator Instructions.) At this time for opening remarks and introductions, I would like to turn the call over to Mr. Bill Geary, Corporate Counsel for Public Affairs. Please go ahead, sir.

Thank you, operator, and good morning, everyone. Thank you for joining us today. On the call with me today are Chairman and Chief Executive Officer, Alan S. McKim, and Executive Vice President and Chief Financial Officer, Jim Rutledge. Before we get started, I would like to remind everyone that matters we are discussing this morning and the information contained in the press release issued by the Company today announcing our first quarter 2010 financial results that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements including predictions, estimates, expectations and other forward-looking statements generally identifiable by the use of the words believes, hopes, expects, anticipates, estimates, projects or similar expressions are subject to risks and uncertainties that could cause actual results to differ materially. Accordingly participants in today's call are cautioned not to place undue reliance on these forward-looking statements which reflect management's opinions only as of this date, May 5, 2010. Information on the potential factors and detailed risks, that could affect the Company's actual results of operations, is included in the Company's filings with the SEC, including but not limited to our Form 10-K for the year ended December 31, 2009, and subsequent periodic filings with the SEC.

The Company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's press release or this morning's conference call, other than through the filings that will be made be the SEC concerning this reporting period.

In addition, I would like to remind you that today's discussion will include references to the acronym EBITDA, which is earnings before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial measure and is intended to serve as a complement to results provided in accordance with the accounting principals generally accepted in the United States. Clean Harbors believes that such information provides an additional measurement of and consistent historical comparison of the Company's performance.

A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is available in today's year-end news release, a copy of which can be found on our website, cleanharbors.com. A copy has been furnished as an 8-K with the Securities & Exchange Commission.

And now I would like to turn the call over to our Chairman and CEO, Alan McKim. Alan?

Thanks, Bill, and good morning, everyone. We delivered a solid financial performance in Q1 with record revenues of approximately $355 million. Our results were driven by a stronger than expected contribution from our Eveready Energy and Industrial Services business, which is primarily made up of the businesses that we acquired in 2009. Our environmental service business, which primarily consists of our legacy Clean Harbors business also generated some incremental year-over-year growth. In total, our revenue increased by 72% from the same period in 2009. We were very pleased with our revenue results in Q1, especially when you consider the effect weather had on our business throughout the quarter.

On our Q4 conference call in February, I talked about how the unseasonably warm weather in Canada was disrupting some of our Eveready business early in the quarter. And the cold weather throughout much of the US was hurting our environmental business. And even though the weather didn't improve much late in the quarter with wide-spread flooding in the Northeast and an early start to the mud season in the Alberta region, our business came on strong in March, and we ended Q1 with a significant momentum.

Turning to our profitability, we grew our EBITDA in Q1 even faster than revenue, as we capitalized on the economies of scale afforded to us by Eveready, and began to benefit from some of the cost-cutting initiatives that we put in place in the past 12 months. We still have a ways to go on a number of fronts, but we have made considerable progress in bringing down the Company-wide cost structure, while also integrating the Eveready assets. For example, our non-billable head count at the end of Q1 was about 200 folks below where we were in August of last year.

We remain on track to achieve our previously announced targets of $15 million in Eveready synergies in 2010, and $20 million in additional Company-wide expense reductions. In terms of Eveready, we are behind our original integration plan, but we achieved some good progress during Q1. We have implemented a number of system changes that will continue to enhance the operational efficiencies going forward.

Other than the lettering on some of the trucks and signs, our rebranding to the Clean Harbors name is complete which will benefit to our cross-selling efforts. There is a lot underway at Eveready and we have been encouraged by the business performance in Q1, but we still have a lot of work to do to completely meld our two Companies together.

And as we noted in today's press release, we recently divested two components of Eveready. We sold the Pembina Area Landfill in late April for $11.7 million. Canada regulators had requested we divest our interest in this landfill due to its proximity to our existing landfill in the Alberta region. We also recently sold Eveready's Mobile Industrial Health business for $2.4 million, and we viewed this business as a non-core asset, but will certainly continue to utilize the services as a partner going forward.

Now I would like to briefly take you through how our four segments performed in Q1, beginning with Technical Services. This segment accounted for 45% of our total revenues in Q1. Year-over-year this segment grew just 1.5%, as we saw some initial signs of recovery within some of our business lines. Margins within this segment were down year-over-year, largely due to the weather, which drove up our cost of revenues.

Utilization at our incinerators was relatively strong for Q1, when we typically have a lot of maintenance shutdowns scheduled. In fact this year, our El Dorado facility was down for nearly a three-week period. For the quarter our utilization was 86% compared to 84% in Q1 of 2009. Similar to the fourth quarter, we saw a much higher utilization level at our Canadian facilities versus our US locations. Our TSDFs and water treatment plants were essentially flat in Q1 on a year-over-year basis.

Within our landfill business volumes were up 2% year over year, and on a sequential basis volumes were down 4%, due primarily to new Canadian regulations that commenced at the start of 2010 requiring some additional treatment of materials.

In terms of landfill pricing, we continue to see some market-specific pricing gains, but overall pricing remains highly competitive. And going forward, we are continuing to pursue additional permitting at some of our sites to help capture more volumes and new waste streams.

Our Field Service segment accounted for 13% of our revenues in Q1, and had an excellent quarter in comparison to a year ago. Revenue in this segment grew by 16% and its EBITDA contribution in the quarter more than doubled from the same period in 2009. As in Q4, we saw a number of delayed projects get the green light and some routine maintenance from remedial work that customers had been putting off begin to come back. We also benefited in the quarter from the emergency response in January, which was an oil spill off of Port Arthur, Texas, in the Gulf.

More recently we have all seen the intense media coverage of the oil spill in the Gulf that resulted from the oil rig that exploded and sank last month. As of today, the undersea well from that rig continues to leak a significant amount of oil into the ocean, and in the past several days, we have received a fair share of investor calls and media inquiries regarding the spill. What we can say at this time is that we are participating in the cleanup, but the extent of our involvement has yet to be determined.

Because of our emergency response work in the aftermath of Hurricane Katrina, and other oil spills in that region, we have established an excellent track record in the Gulf working with the Coast Guard and other emergency response agencies. However, it would be premature for us to speculate on the revenue potential of this event. Our role is certainly going to evolve as conditions change. And the full scale of this event will likely still be playing out over the next several weeks and months.

Looking ahead beyond the Gulf event, in Field Services we remain confident that there is still a sizeable backlog of delayed projects. However, customers are still cautious about spending and it may be several quarters before all of that postponed activity moves through the pipeline. With the addition of all of the Eveready locations, we do not anticipate opening up any new Field Service branch locations in the next several quarters, as we continue to rationalize our existing geographic footprint.

Turning to Industrial Services, this segment proved that Q1 is its strongest operating quarter, accounting for 38% of our Q1 revenues, significantly higher than the 28% revenues it generated in Q4. And while we believe there is room for improvement, we are generally pleased with the EBITDA margins it delivered in the quarter. Spending levels in Western Canada were relatively high in the quarter, as projects in the oil sands region continue to move forward at a rapid pace.

And as I mentioned on our Q4 call, we've seen a number of mothballed projects come back to life, and billions of dollars of new spending has been announced in recent months. During the quarter we also benefited from an increase in refinery turn-around work that helped to offset some of the weather-related slowdowns in Canada. While the prime winter season is now over, we still expect to gain a considerable share of work from these new projects in the quarters ahead.

Our Lodging business continued to perform well in Q1, delivering high-margin revenue. The new camps we recently constructed are contributing to that business. And we continue to invest in our lodging business to support both our customers' needs and our own work force in the oil sands region.

Our fourth and smallest segment is Exploration Services, which accounted for 4% of Q1 revenues. Due to the cold weather that is required to reach some of the remote locations where much of the oil and gas exploration work is done, Q1 is typically the strongest operating quarter for Exploration Services. Unfortunately the warmer weather really shortened their prime season in Western Canada, along with the continued depressed price of natural gas. Some projects in the Marcellus gas area made up for the shortfall however.

Even with the lower expected Q1 revenue, this segment still delivered the highest margins in any of our four segments in the quarter. Our strategy is to continue to pursue additional avenues of growth for this segment, including the unconventional gas plays throughout the US.

To provide you with some additional perspective on Q1, I would like to take a minute to discuss how our end markets performed in the quarter. The chemical sector continues to be our largest industry vertical at 18% of total Company revenue in the quarter. We saw a strong year-over-year pickup in that industry vertical within our legacy Clean Harbors business. Other end markets accounting for double digit percentages in the quarter were refineries at 15%, oil and gas production at 14%, and general manufacturing at 10%. The contributions from refineries and oil and gas obviously reflect the Eveready influence on the quarter.

Within General Manufacturing, we experienced a very good start to Q1 across all sub segments of Manufacturing. Similar to our Chemical vertical, we've been seeing positive growth in Manufacturing in both our base business and projects since the November time frame.

Looking at some of the smaller verticals within Pharmaceuticals, which accounted for 5% of our Q1 revenue, we also saw an improvement in our base business and equally as important secured new contracts with several large pharmaceutical clients. Within Utilities, which accounted for 5% of our Q1 revenues, our legacy business is still down substantially from our 2008 levels, but we added some good contracts through Eveready with several large Canadian utilities that have excellent growth prospects.

Beyond our Exploration segment that I discussed earlier, the only vertical that really underperformed in Q1 was Environmental Engineering and Consulting, which accounted for 3% of our Q1 revenue.

While we got off to a slow start in vertical in the first quarter here we have had a lot of bids in the pipeline for Q2 and Q3 as commercial bids are being tended through some of the large E&C firms. Hopefully that segment and end-market discussion gives you some good context for our Q1 performance.

Before turning to our outlook, I wanted to touch upon our announcement today of the acquisition of privately held Sturgeon & Son Transportation located in Bakersfield, California. We purchased the company for $12.5 million in cash, along with 16,000 shares of Clean Harbors stock. We believe this is an excellent tuck-in acquisition for our West Coast operation. Sturgeon & Son Transportation specializes in hazardous waste transportation and refinery services, and the company generated approximately $12.4 million in revenue during 2009, and achieved positive EBITDA.

Sturgeon & Son Transportation is a wholly owned subsidiary of Sturgeon Services International, a family owned and operated business. The company shares Clean Harbors' focus on safety, and has a solid reputation for service and is well-known in the region. In addition to its West Coast locations, we were attracted to the business due to its history of success in a number of attractive vertical markets including oil field and refinery services. It also brings to Clean Harbors an extensive fleet of specialized trucks and equipment that will be a strong addition to our existing network of assets in Western US. We expect the acquisition to be accretive to our earnings in 2010.

With our acquisition of Sturgeon's Transportation subsidiary, Sturgeon Services International will continue to provide construction, paving and grading, and construction material recycling and other special projects to its customer base.

Now let me turn to our outlook. As we stated in our press release this morning, we remain encouraged about our prospects for the full year of 2010. The strong conclusion to our first quarter, particularly in our environmental service business was promising. However, we continue to expect our revenue and EBITDA to be weighted towards the second half of the year as a broader economic recovery prompts customers to move ahead with projects, many of which were unfunded, stalled, shelved during the past 18 months. We see an improving outlook across the majority of our key verticals.

We also will be able to better leverage the Clean Harbors/Eveready combination as the year progresses and pursue more and more cross-selling opportunities. In addition, our strong cash position affords us substantial flexibility to expand our business through both selective acquisitions and some strategic investments.

On the cost side we remain committed to our ongoing expenditure reduction, and margin-improvement initiatives. We are confident that we can capture the $15 million in planned cost synergies for Eveready in 2010, as well as the additional $5 million that we identified in 2011.

In summary, we're pleased with our Q1 results, particularly given the challenging environment in which we continue to operate. Eveready rebounded nicely from a disappointing Q4, and our environmental business exited the quarter with momentum. We're excited about the remainder of the year and the long-term outlook for our Company.

I'll now turn the call over to Jim Rutledge so he can take you through the financials in more detail. Jim?

Thank you, Alan, and good morning, everyone. Our first quarter revenue increased by 72% to $354.9 million, compared with $206.3 million in the year-ago quarter. As Alan pointed out, our year-over-year revenue growth was driven not only by the Eveready acquisition itself but by good performance by those underlying service centers in Q1. I should also point out that our Q1 revenues were favorably affected by the strengthening of the Canadian dollar during this period relative to last year's first quarter, which boosted our Canadian revenue by $4.7 million year-over-year.

Gross profit for the quarter was $94.5 million, translating into a gross margin percentage of 26.6%, which is below last year's margin of 30.4%, and our Q4 margin of 27.1%. Margins in the quarter were lower given the larger contribution from the Industrial Services side of our business, which presently generates lower margins than our legacy environmental business, as well as overall product mix and the continued competitive pricing environment.

Selling, general, and administrative expenses in the quarter totaled $45.5 million, up 22% from $37.4 million in Q1 2009. This was to be expected given the higher personnel costs related to our larger employee base since the Eveready acquisition, which was compounded by rising health care costs.

However, as a percentage of revenue, our SG&A declined significantly, demonstrating the leverage that we have achieved within SG&A as we acquire businesses and grow. In Q1, 2009, SG&A represented 18.1% of revenue, and in the first quarter of this year, that percentage dropped to 12.8% of revenue. For full-year 2010, we are currently anticipating SG&A as a percentage of revenues to be in the range of 13% to 14%. I should point out that in terms of one time items in Q1, our SG&A included approximately $700,000 in severance costs, but that was offset by an environmental credit of similar value.

Accretion of environmental liabilities was $2.7 million in Q1 of 2010, consistent with the $2.7 million we recorded in Q1 of 2009. Similar to Q4, depreciation and amortization expense rose significantly year-over-year, up 88% to $22.7 million. This increase was entirely due to the addition of Eveready and its vast fleet of vehicles and specialized equipment. The higher US to Canadian exchange rate increased our depreciation expense during the quarter by nearly $400,000. For 2010 we expect our depreciation and amortization expense to be in the $90 million to $92 million range, which reflects a full-year of Eveready's depreciation and amortization at the recent exchange rate.

Q1 operating revenue more than doubled to $23.6 million from $10.7 million in the first quarter of 2009. EBITDA increased by 93% to $49 million. On a percentage basis, this was 13.8% of revenue, a sharp improvement from the 12.3% of revenue we recorded in Q1 2009.

Net interest expense in Q1 was $6.9 million, which increased significantly over the $1.4 million we recorded in Q1 2009. The increase is associated with the $300 million bond offering we completed midyear in 2009 following the Eveready transaction. At the same time the cash and marketable securities on our balance sheet is not doing much to offset our interest expense as we continue to generate nominal interest income in this current interest rate environment.

Our provision for income taxes, including taxes on income from discontinued operations was $7.2 million this quarter, compared with $4.5 million in Q1 2009. Our effective tax rate for the quarter was 41%, non-cash FIN 48 expense was $800,000. For 2010, all of the year, we continue to expect an effective tax rate of about 40%.

For Q1, net income was $10.4 million, or $0.40 per diluted share, based on 26.4 million average common shares outstanding. Net income for Q1 2009 was $5 million or $0.21 per diluted share based on 23.9 million shares. The increase in net income resulted from the strong revenue contribution from our Industrial Services businesses in the quarter. Our -- and as well as our ongoing Company-wide cost-control initiatives, and synergies from the Eveready acquisition. These were more than enough to offset the higher depreciation and amortization expense brought on by Eveready as well as the significantly higher interest expense resulting from our senior notes offering.

Turning to the balance sheet, our cash position remains very strong. Our balance of cash and marketable securities as of March 31, 2010, was $211 million. This compares with $235.6 million at year end. The decline in cash resulted from a combination of factors.

First, the timing of interest payments on our senior notes. Second, the annual payments related to our 2009 incentive compensation and sales commissions were paid during this quarter, and lastly, our investment in accounts receivable increased with the seasonal ramping of our Industrial Services revenues during the quarter.

Looking ahead from a cash perspective, we expect the M&A items that Alan discussed this morning to essentially be a wash in Q2. The Sturgeon & Son Transportation acquisition required $12.5 million in cash, but that was offset by the $11.7 million in proceeds we received from the Pembina Landfill sale and the $2.4 million generated by the divestiture of Eveready's Mobile Industrial Health business. Our total long-term debt balance at the end of Q1 remained relatively unchanged at $293 million during the quarter.

Total accounts receivable at quarter end rose to $318.8 million, from $287.2 million at year end, associated with the increase in our Industrial Services revenues. As a result, DSO also rose to 78 days, compared with 74 days in Q4. We expect this number to improve over the course of the year, and our target DSO remains at 70 days or less. We believe we are still a few quarters away from hitting that target level.

Capital expenditures came in at $16.6 million, compared with $23.9 million for Q1 2009. I should point out, that Q1 2009 was abnormally high as we bought out about $8 million in equipment leases during that period. Our CapEx expectations for the full year 2010 will be in the $65 million to $70 million range, which is only slightly ahead of last year, despite having a full year with Eveready this year. Accounts payable balances decreased to $92.2 million from $97.9 million at year end. Our deferred revenue balance increased slightly to $22.5 million, compared with $21.2 million at year end.

Environmental spending remained consistent at $2.2 million for the quarter, compared with $2.2 million in Q1 2009. Our balance of environmental liabilities at quarter end was $182.5 million, compared with $181.3 million at year end. Approximately $600,000 of this increase is due to currency translation and the balance is due to interest accretion which exceeded spending during the quarter, partly offset by an environmental credit of $770,000.

Moving now to our guidance, based on our Q1 performance, current market conditions, and the trends we are seeing in our business, we are reiterating our 2010 annual guidance for both revenue and EBITDA, exclusive of potential future acquisitions and the impact of the major oil spill in the Gulf. We continue to expect full year 2010 revenue will be in the range of $1.4 billion to $1.45 billion. The strong contribution from Eveready in Q1 got us off to an excellent start for the year. And we expect our environmental business segments to continue that momentum as we head into their busier quarters.

One of the benefits we touted in acquiring Eveready was how its strongest operating quarters, the first and fourth quarters, were in direct contrast to our legacy Clean Harbors business which historically peaks during the second and third quarters. We are already seeing that take shape in 2010.

In terms of our profitability, we are continuing to target EBITDA for 2010 in the $224 million to $232 million range. We are confident that we can generate margins above Q1 levels for the remainder of 2010 as we move into the busy season for our legacy business, capture synergies from Eveready, and achieve Company-wide cost reductions.

With that, Christian, could you please open the call up for questions?

(Operator instructions). Our first question comes from the line of Larry Solow with CJS Securities.

Hi, good morning. Alan, could you maybe discuss a little bit more, and I realize it's still relatively early with the oil spill accident, could you just maybe discuss how many people you have sent down there, and how this kind or how this could compare to what you achieved with Katrina?

Well, it's difficult, certainly, Larry. We currently have approximately 300 people on-site at a variety of different locations, working for both public and private entities. We are certainly providing all of our clients with as much support as they need. We have given a lot of equipment, and staged quite a bit of resources there, skimmers, and booms and boats, and back trucks, and other resources that are being requested, and certainly we're going to continue to support our customers. We also have a network of other contractors that we regularly work with that are working with us so that we can be sure to service our base accounts.

As Jim mentioned, the second and third quarter are typically our biggest quarters for our environmental business, and so we have a lot of work ongoing for our base accounts that we're not going to -- we don't want to let any of those customers down as well. So I think it's day-to-day at this point. And understanding about where the spill actually will come ashore, and what additional resources may be needed from us, and we're certainly able and willing.

Probably mention just one other thing. Certainly with Eveready's assets both in the US as well as in Canada, it gives us a lot more equipment to draw on, and people, and we'll be leveraging those resources as well as we have to rotate people through over the coming weeks and months.

Okay. Then in terms of -- just switching gears. In terms of the gross margin, I see you cited most of the pressure due to Eveready and pricing issues. Are you seeing some improvement in that, going over the last few months? And secondly, I know last quarter you had thought gross margin for the full year on a consolidated basis could be sort of in the 29% to 30% range. Are you guys still comfortable with that?

Jim you want to take that one?

Absolutely. Yes, we are comfortable with that, Larry, and to the point you made, as we have cost reductions and synergies, clearly the margin that we saw in Q1 will be improved. But also clearly leveraging our incinerators and landfills as we get into the busier quarters of the environmental side of the business, will boost the overall gross margin and EBITDA margin as well.

Okay. Just last question on -- any update on the captive? I think you had cited a couple of pending closures, and is bidding activity still going on for those volumes that may be coming online for the market?

Yes, we have had some serious discussion with two players -- two customers that have really taken a hard look, and we have been having discusses directly with them over the past two weeks, and so we continue to see customers showing a real strong interest, and looking at outsourcing versus handling those waste streams in-house.

Okay. Great. Thank you very much.

Okay.

Thanks, Larry.

Our next question comes from the line of Matt Duncan with Stephens Incorporated.

Good morning, guys. Just getting back to the issue in the Gulf for a minute, can you remind us how much revenue you guys got from emergency response work associated with Katrina, and then what the margins are typically like on that kind of work?

It was approximately about $37-plus million at that time, and it spanned a period of about four to five months.

Okay.

At the end of 2005 and into 2006, and the margins that we were generating there were in that at an EBITDA level, probably at about that 25% range, and perhaps even a little bit higher, because of all of the expediting involved, so clearly we get a better margin than standard Field Service business.

And then in terms of the amount of material that had to be cleaned up, when you look at the size of the spill in the Gulf today versus what you cleaned up in Katrina, can you compare those for us?

Yeah, they are really totally unrelated. The Katrina event was dealing with a wide range of environmental issues there, most of which predominantly weren't oil related. A lot of it had to do with the flooding and contamination issues as a result of that flooding, support for our utility clients at the time and others. We did spend an awful lot of time in rescue efforts down there as well during that early stage of that event. So this is totally different.

Okay. And Alan if you guys were in the Gulf for four to five months this time, would the revenue number look similar to Katrina, or is the makeup of the work so different that it's hard to say?

It would be totally hard to say. We are certainly taking orders from our customers there every day, and this is an evolving issue as everybody knows by watching what is going on in the media. We're certainly going to be there to help our clients in whatever their requests are, but it would be way too early to tell you.

I guess at the end of the day what is really going to drive it is how much of this stuff really kind of makes it to shore, correct?

Absolutely. And we're certainly helping in any way we can to not let that happen. There's a ton of boom down there, and we're buying more to help support the efforts. And I think that's everybody's mission right now is to try to keep the oil from the shore, and collect it and remove it, and that's certainly what we're trying to help with.

And then the number of people that you guys have down there today, have you deployed most of your assets that could be used for this work in terms of people and materials, or is there more left in the tank you can send down there?

We certainly have more resources that are being mobilized as we speak down there. And we are working to replenish those assets to make sure we don't leave ourselves bare in some of the other areas that we need to have those resources at. So that again is just evolving, and we're repositioning equipment to backfill resources that have been mobilized. There's a huge logistics program going on, and that will continue to evolve as well.

Okay. And last thing I have got and I'll hop back in queue, as we look at Eveready, what was Eveready's contribution in terms of both revenues and earnings this quarter?

Yeah, I can actually -- it might be helpful if I went through just the run down on the segments for the quarter so that you can, with Alan's comments on the changes, you can see the context there.

Okay.

So in the Technical Services side there, revenues was $158.5 million.

Okay.

Field Services was $47.4 million. And then to your question, Industrial Services segment was $133.9 million, and Exploration Services was $15.6 million.

Okay. And then those two pieces, those last two is Eveready, right? Is there anything that's legacy Clean Harbors in there?

Yeah, there's a little bit. If you took that total of, what is that, $149 million to $150 million, I would say the legacy Eveready is roughly about $142 million.

Okay. And then the impact on EPS?

Let me give you the EBITDA numbers. The overall $49 million of EBITDA was broken down. Tech Service had $32.6 million, Field Service had $5.1 million, Industrial had $27.7 million, and Exploration had $4.2 million. And of course Corporate was $20.6 million going the other way, that was the corporate expense, so that brings you to the $49 million EBITDA.

Yes.

And these numbers are near final. They will be in the queue and reported.

Thanks, guys. Appreciate the color.

Thank you, Matt.

Thank you. Our next question comes from the line of Al Kaschalk with Wedbush.

Thank you. Good morning, guys.

Good morning.

I want to try to focus on the Eveready and the synergies there, because there's obviously a lot going on both in the core business and other places, but from what I hear, you are comfortable that the new -- I think it's Dave Parry -- is well in place in Eveready and you are seeing the continued operational measurements show further strength into the April time frame. So could you just comment on that, because I have a follow-up as it relates to the acquisitions.

Sure. I think that we have continued to try to be, through a team approach, obviously, integrating the two Companies together, and share common platforms, and cross-sell customers, and cross-train managers, and yes, you are absolutely right, there is a lot going on there, and that continues to progress, and Dave has done a nice job for us in doing that. And I think we're making some good progress.

And then as it relates to the lodging business, did I hear you correctly saying you're making additional investments in there because of the strength of the utilization rates, project activity, just comment a little bit on that, because that certainly should help on the margin profile from what I can gather.

Sure, so that business as you know has predominantly been on a commercial business that supported most of our customers, and as those new projects began to kick back in again, and particularly some of the mothball projects, our utilization rates have been very, very high, and are projected to continue to be high for the future. We continue to get demands for additional support. We're investing into additional expansion of our sites, our existing sites, as well as looking at building an additional new site.

But we're also looking at ways that we could expand our Lodging business to support our own needs for our work force. Because a lot of those larger projects that our customers are expanding also require us to grow, and we need facilities for them, and so Lodging will continue to be a very important part of our growth strategy in the oil sands, and potentially looking at North Dakota as another expansion area for us, because we have gotten a number of inquiries there. As you know, we have a significant landfill in Sawyer, North Dakota, and with the Bakken Shale area, we're getting quite a bit of request for services there. So that business is something we can continue to grow and invest in to help both our customers and our own needs.

So collectively I think what it says is that the forward book of business gives -- you have confidence in the forward book of business given these types of strategic initiatives you are undertaking.

Absolutely.

And then just on the acquisition side, it's good to -- I think this parlays into that -- and that is given the confidence on the turn around and the acquisition you have made with Eveready, it gives you confidence to start adding some incremental services, which we should continue to see through some small niche tuck-in acquisitions? Is that fair? Is there anything short-term here that maybe through the acquisition that you could say you are still looking to add that maybe we should see coming down the pipeline?

Well, certainly we are continuing to pursue opportunities both proactively and reactively, but I think our primary focus continues to be integrating Eveready at this point. There's still a lot of work to be done to work together and to not only streamline the operations, but really get the cross-selling going that we really saw as one of the bigger options in merging our two Companies together, and the capabilities that Eveready has certainly servicing the chemical and refinery business is something that we're just starting to see that cross-selling take hold, and it's working pretty well for us.

And my final -- more of a comment or an observation, and I'll hop back in the queue, if I understand correctly, and who knows what cash contribution the oil spill will have. What I think what it does for your business, if I think through this correctly, it really helps you drive not only utilization, but also drives margin profile in the business. Given that you sort of can play maybe one customer off of another, if I may consider it that way.

Well, I think when we think about the spill work, historically the Company had $30 million to $40 million annually of event business, mostly oil spill event type work.

Right.

The last couple of years, it has been relatively soft. In our guidance this year, we had anticipated about $12 million or so of event-related business. We had a smaller, $1 million to $2 million type event in early January in the Gulf. So I look at this opportunity as something that is very consistent with the work that the Company does, although, potentially a much larger single event than we have seen in the past five or 10 years, but this is the business the Company is in, and it's one that we are contracted by our clients to respond to on an ongoing basis.

Thank you.

Yep.

Our next question comes from the line of Jonathan Ellis with Bank of America.

Thank you, and good morning, guys.

Good morning.

First, if we could just talk about the base business. Can you give us a sense for incinerator utilization rates in the first quarter? What was the breakdown for the US and Canada? And if you can also quantify if possible the impact of the maintenance work this quarter on that utilization rate?

On the incineration, we had, let's see it was -- the overall was 86% as we said. And it was about 82% in the US, and about 94% to 95% in Canada. And then what was the last part of your question, Jon, I'm sorry?

Just if it's possible to quantify the impact of maintenance work this quarter on the utilization rate?

Yeah, clearly it was a little bit more than last year, because we were down a larger number of days, but I don't know that I could quantify it in percentage. But I will tell you this, if you compare it to last year, clearly we were ahead by 2% in utilization, and had we not done the expansion that we had done, we would probably be in the 95% range. So that maybe adds a little bit of color, but I don't know that I could give you an exact figure on the percentage related to maintenance.

Okay. That's helpful. As we look forward in terms of maintenance schedule for the rest of the year, any material differences with the schedule last year, and I guess sorted of a tangentially related question to the Gulf work, any sense that your maintenance schedule may be impacted by what is happening in the Gulf?

The El Dorado upgrade that we did, the three week turnaround, was also giving us some expansion at that facility, but that was probably going to be our longest shutdown this year, and so all of the other ones are our typical scheduled shutdowns where we do refractory work, and it's certainly our goal not to impact our ongoing base business as a result of the Gulf work, and to work with our Eveready team as well as with our contractor network to make sure that we meet the customer's needs down there.

Okay. Great. Just in terms of the first quarter, I know this may be a difficult question to answer in quantified terms, but can you try to give us a sense of in terms of the legacy business, what portion was driven by pent-up demand, meaning projects that may have been bid out before, and weren't followed through on, and now are coming back to market versus actually new projects that you hadn't seen before?

It's tough to say, Jon, but I will tell you that the overall legacy business was probably up about 5% over last year, and this is consistent with the gradual improvement and stabilization that we have been seeing in the environmental side of the business, and I think that 5% is noteworthy, because is this our seasonally slow quarter, so we kind of hope that bodes well for the rest of the year, and that's why we have said what we said in terms of guidance.

Okay. Appreciate that. Just on pricing, based on where things stand today, I know normally in the past when you have implemented a blanket price increase across all of your service lines you have usually done it in the spring. Is the intention this year to really refocus on basically getting all of the Eveready customers on the same price schedule as opposed to a blanket price increase across your business lines? Or are you still looking at possibly price increases across the total enterprise?

We have a couple of teams, Jon, working on pricing and looking at margins both in the legacy Eveready business as well as in our own business. For example, there has been a substantial demand for incineration of fuel material because the cement kilns have been offline, and reducing the amount of cement being manufactured with the economic downturn, so we have had substantial increase in volumes, and we have been pricing our services to reflect that, and I think we continue to look at ways to drive some price increases in our business, both in Eveready as well as the legacy Clean Harbors business.

Okay. And is your current pricing still, at least the list price, still around $0.29 per pound?

Yes, it is in that area there. Yes.

Okay. Great. And then just quickly on cost savings, the $20 million targeted in the legacy business, $15 million for Eveready. Can you let us know as of Q1 what is the annualized run rate you have achieved?

In Q1 I would say on the synergies, it's probably lower than one fourth of what we had said. It's probably more in the $1 million to $2 million range. Most of the synergies are in Q2 through Q4. So that $15 million will be spread more over the three quarters there.

Okay. And the legacy business?

I would say in the legacy business, we're probably a little bit short of a quarter of the total $20 million. There's a lot that we have underway right now that will take place and that will be pretty much be spread evenly through the rest of the year. And just to give you a little color on some of this, what we're talking about is continuing our back office leverage, so some reduction in back-office expense. Clearly, with a lot of the systems that we've are in both businesses now, that we have kind of leveraged on a single platform, that will result in some savings for those systems, the running of those systems, et cetera.

And also we have an awful lot going on in terms of procurement, in taking advantage of our national relationships with vendors, and creating new relationships, consolidating vendors and so forth. Everything from fuel cards to office supplies, we're doing an awful lot in procurement, so those are the kinds of initiatives that are going on that support both of those actually. And then of course in the Eveready side, we no longer have the governance costs of there being a separate public company, director meetings and that sort of expense.

Great. Could you just -- in terms of that aggregate $35 million of cost savings that you are targeting this year between the legacy and Eveready businesses, can you help us understand, what is the cost that is going to be required to offset -- to achieve those savings?

Well, we'll have -- clearly we saw some severance expense, and there might be more of that as we go along strategically. I think that, clearly, the efforts that we have in our corporate groups probably will not add a whole lot of expense to that. So other than I would think severance. Alan, I can't think of --

Buying out some leases maybe.

Yes.

We've been trying to -- there were 175 property leases that came with Eveready.

That's right.

And we have got a lot of opportunity to consolidate those across our Clean Harbors network as well, particularly in the states, and leverage our existing network, and so we do have some lease expenses that might be bought out or let them wind down. Things like that, Jon.

Okay. That's helpful. And then just my final question on the Gulf cleanup, as things stand right now, and I realize we're in preliminary stages, but is your sense that both your cleanup and your disposal capabilities will be utilized or at this point is it really just a cleanup centric effort?

Predominantly cleanup, but certainly we'll work with some of the partners like Waste Management and others on the solid waste side. Because we'll provide a lot of roll-off containers, and handle a lot of oily debris and things like that and work with them, and certainly they with us. So I would expect both sides to be worked on. And on the oil disposal side of it, if there's a sizable quantity of oil removal, we certainly can help in that recycling effort.

Okay. Great. Thanks, guys.

Yeah, thank you.

Our next question comes from the line of Rich Wesolowski with Sidoti & Company.

Good morning. How are you?

Good morning.

Good morning, Rich.

Trying to get a handle on why your SG&A expenses would be high $40s, maybe $49 million a quarter on average at the midpoint of guidance, if as you had just been discussing, a lot of the cost-reduction initiatives that you already have in place are going to flow through as the year moves along.

I think actually some of it is in operations like as we were talking about in the area of procurement, and some of the leases that Alan talked about will also hit cost of revenues, or benefit cost of revenues.

Yes.

I would say it's almost evenly split between SG&A and cost of revenues.

Okay. But $45 million for the March quarter, that will be among the low if not the low of SG&A for the year?

It probably should be, outside of maybe some bonus accruals as the year progresses, that might have an impact on that number, but as a percentage, what is that about 12%?

Yeah. It's almost 13%, that's a lot lower than what it was, 18% last year.

Right.

So it's a nice leveraging that we have been able to do with that.

Okay. The best news of the quarter to me was the notion that remediation projects are coming back off of the shelf. I was always under the impression that those are non-return capital projects for many of your customers. Is that indeed the case? And if so, why would maybe a little bit better economic outlook prompt them to start them again?

Remediation projects are definitely up as we talked about

Yeah, we are seeing opportunities there. We are seeing some projects that are being tendered as a result of the stimulus money out there. We have seen, probably a half dozen of those now from some of the larger engineering consulting firms putting some bids out. The real estate market, particularly on the commercial side certainly is under a lot of stress, and so that probably is going to have a little impact on some of the remediation projects that we have may have experienced in the past. Where brownfield initiatives and other kind of projects might still be under pressure from funding or financing, but I think overall that side of our business is picking up.

Okay. Great. And then lastly, on the subject of incremental EBITDA margin you posted 16% in the March quarter, which is probably not representative of what you would shoot for, or a bogey that we should look at, but even your guidance at the midpoint implies about 23% for the balance of the year, even with the cost reductions in there, so do you still see 30% as a reachable target? And if you do, is there something other than operating leverage on what hopefully is growing demand for your services that can get you there?

Absolutely, we definitely believe that 30% is a good target for us. I think we'll be in that 25% to 30%, and it's leveraging our assets, not only on the environmental side, but clearly all of the good work that's gone on with the teams in leveraging the equipment and so forth that is in the new Industrial Services business. So definitely that's where we are targeting.

Excellent, thank you.

Thank you.

Thank you.

Our next question comes from the line of Jamie Sullivan with RBC Capital Markets.

Good morning, can you hear me?

Yeah, we have got you now.

Hi, Jamie.

Hi, how are you doing? Thanks for taking my question. Just to touch on the Gulf work, again, I want to be clear that as of today you continue to increase the people and assets that you are bringing into the region? Is that what you mentioned earlier in your comments?

Well, as we get orders and mobilize more resources, we're certainly also logistically moving assets around our Company to backfill those needs to continue to support our base accounts. So it's a daily event, so to speak, of what actually is transitioning down there. It's a very fluid situation, and things obviously are being impacted by weather conditions and progress being made on a number of different fronts, so it's day in and day out at this point for us.

Right. Okay. And when you bring people and assets on those events, do you get paid for all of the resources deployed? Or do you need to keep a certain amount of resources waiting on the bench as the situation evolves? Just wondering how that works.

No, we're directed to provide various tasks, and those services are paid for typically on an event like this. Different than Katrina, where we provided a lot of help on the initial catastrophe down there to help people, and do rescue work and things like that, where we weren't getting paid, and if you remember back in that third quarter time frame, we didn't really make any money on any of that work. This is a little different.

Okay. And just to be clear because of the uncertainty, you are not including that in your guidance number, right?

That's correct, Jamie.

Okay. And to touch back on Eveready, some of the extra costs from the fourth quarter. I know that will take some time to unwind. Will a lot of those extra costs be taken out by the second quarter?

Clearly, a lot of the costs that we had, had to do with some of the initiatives around the branches, and not being -- looking for the profitability in terms of shop time, overtime, things like that, in dealing with some of the weather conditions, and leveraging our central systems for seeing productivity data, utilization data. The folks that are working in the branches, and as we pointed out before, with Dave Parry helping lead some of that, that the training that is going on in using the system, and using the tools that we have, the folks are definitely very capable and using it well, and I think that is reducing the cost, and we're becoming more efficient day by day actually with the branches there.

Okay. Great. And then one last one on the captives that you have been talking with, and absent the that maintenance you did in the first quarter and the seasonally weaker quarter, you would probably be close to 90% or north of 90% in utilization. Would you need to expand your incinerator capacity to address some of those opportunities?

Yeah, we continue to look for additional incremental improvements and capabilities in our plants, part of our capital budget this year is to look at that from an engineering and permitting standpoint. But as I think we have said maybe in some of the other calls, there may be a point where we would need to put an additional kiln in, but we currently have not put that on the drawing board at this point.

Okay. Thanks a lot.

Thank you, Jamie.

Our next question comes from the lines of David Manthey with Robert W. Baird and Company.

Good morning, guys. This is actually Luke on for Dave this morning.

Good morning.

Hi, good morning.

Could you just talk a little bit about seasonality of the overall business now that we have Eveready in? I know we have obviously talked in the past about kind of the inverse seasonality between Eveready being stronger on revenues in the fourth and first quarter whereas your legacy environmental business is obviously stronger in the second and third quarters coming up here. Could you just talk about the combined Company both on a revenue basis, and then probably more importantly on a cost basis seasonally through the year.

Sure, Luke. If you combine the two, clearly what we have seen in Q1, being relatively flat against Q4, it kind of shows that there was a nice offset with the Eveready business, offsetting the seasonally weak environmental business. If we look at the total year, though, I would probably say that the second half of the year will probably be from a revenue standpoint a little higher than the first half because you do have in the environmental business, typically a nice strong Q3 that lasts into the beginning of Q4, and clearly, on the Industrial Services side, it starts getting busier in the latter part of Q4. So it's probably close to 50/50, but I think it's probably more like 55% in the last half of the year, and probably 45% in the front half. Again, that's a very rough estimate.

From a profitability standpoint, the first quarter will be the weakest, and the reason for that is the leveraging of all of our fixed assets that we have in terms of the incinerators, landfills, et cetera, with the seasonally weak environmental business, it really will bring that quarter down. But after that, we should see, like in Q2, margins close to what we're guiding for the year, and maybe even north of that in the third quarter, and into the fourth quarter. So that's generally the way we're looking at it right now. Clearly as we make improvements in the business and have cost synergies, we hope to bring up the Industrial Services margins even higher, but for this year that's kind of the way I see the trend. Does that help what you are after there, Lou?

Yeah, that's very helpful, guys. You mentioned that you are starting to see projects coming off of backlog, just thinking about the timing of things coming back online, whether it's new projects coming in or things that were deferred, is that something that's going to trickle in here and slowly accelerate over time? Or is there some point in the future where things really start to pick up, and maybe over one or two quarters you see a pretty rapid acceleration?

I don't think we're going to see a rapid acceleration. I certainly think things are going to continuously improve from what we can tell now. All of a sudden there may be a big up-tick as a result of a number of key wins, let's say. But nothing huge. No hockey stick at all.

Okay. That's helpful. Thanks, guys.

Thank you.

Our next question comes from the line of Hamzah Mazari with Credit Suisse.

Good morning. This is actually Chris Parkinson on behalf of Hamzah.

Hi, Chris.

Just wanted to circle back to the M&A landscape out there. You mentioned that you wanted to focus on Eveready but as far as looking at some of the more tuck-in acquisitions have you seen valuations come off a little more or are they still fairly elevated?

No, I think they certainly have. I think in the last couple of years, particularly from 2007 to 2008 time frame, to today, I think valuations have certainly become more realistic. Absolutely.

All right. That's basically it.

Okay.

All right. Thank you.

Yep. Thanks, Chris.

Our next question comes from the line of Alex Ovshey with Goldman Sachs.

Good morning, guys.

Good morning.

Can you help us better quantify the impact of weather on the first quarter results, what segments were most impacted, and then just a follow on to that, of the business that was lost or pushed forward, if you will, because of weather, how much of that is pushed forward, and would be seen in the second and third quarters, and how much of that is just lost, and doesn't come back until next year.

Maybe I'll start out. I think the weather had a tremendous impact on our cost in the first quarter. I think if you think about the storms that hit Washington, Baltimore. Our plant in -- we have a very nice plant in Maryland. That plant was shut down for a week. We have a tremendous amount of plant damage and shutdown in the Midwest. Our Cleveland facility, our Hebron, Ohio, facility froze up. Our Chicago plant, the Midwest as you remember had an awful lot of damage, and certainly with the -- winter in general is much more expensive for us to operate in. Whether it's all the plowing, utility costs, labor costs go up. Everything. Our business just naturally has a higher cost during the winter periods, and that impacts our business, and some of that is just lost. I mean that's just the way it is. Some business does get pushed because of weather and we pick it up in the second quarter, but we still bear all of that cost in that period. Jim, is that fair to say?

Yeah, I think that's a great point. You know, we saw some delayed projects that help offset some of that, like the turnaround work at refineries and so forth but still weather had the biggest impact.

Yes. Yes.

Okay. That's helpful. And then I may have missed this, but in terms of the $35 million of cost savings in total that the Company is targeting for this year, how much of that, if any was achieved in the first quarter?

Yeah, we talked about that before. Less than a quarter of that. Probably in the $5 million to $7 million range, roughly, I would say. Those are rough figures.

Okay. And thinking through how the cost savings flow through the model and the balance of the year. Is that run rate of $5 million to $7 million good to use?

Yes a little higher, but the rest evenly spread over the last three quarters.

Okay. That's helpful. Thank you very much.

Okay.

Our next question comes from the line of Ted Kundtz with Needham and Company.

Great. Thanks, hello Alan and Jim.

Good morning.

Hi.

Question for you, and you mentioned Alan, I think it was you, mentioned growth for the legacy Clean Harbors business at about 5% in the quarter. And I just wanted to review that. That sounds like a pretty good growth rate, and I was just wondering if you were turning a little more positive on your growth outlook for the balance of the year. And what kind of growth do you expect out of the legacy Clean Harbors business?

I think it will be there, and maybe implied in our guidance is a little north of that. But generally we see a stabilization going on. It's not a huge ramping, but a nice growth rate coming out of the great recession here.

Yes.

Clearly as Alan pointed out, a lot of our customers are proceeding with their business cautiously in terms of spending, but clearly things do have to get done and there is an easing up going on.

Okay. So you would say -- if you got that in the first quarter, when things were pretty slow, I would think you would see some upward trend to that growth rate?

Yes, that's what we're thinking.

Okay.

That's what we're thinking, Ted.

Okay. Secondly who actually does the contracting down in the Gulf? Who do you sign contracts with? Who pays you?

It's a variety of both public and private organizations. The customers range from state agencies to the Federal government, to private entities. So it's a wide range of customers that put us on contract for those kind of events.

Okay. And it sounds like you ramped that up fairly quickly. I think when we spoke last week, Jim, I thought you were like at 100 people, and now you are talking 300 people. So what do you think that number could go to? Is there like an upside to what you can possibly do down there or -- ?

Well, you really don't know at this point. The government recently has given the states Federal monies to help deal with the potential spills coming ashore, and so we're also getting state agencies calling us and asking for resources to be brought in to help their needs, and being funded by those special emergency funds. So it's changing so quickly. I think we would just be misleading you and giving you bad information if we said one thing, because tomorrow might be totally different.

Right. Can you give us any sense of what you are now billing on a daily basis down there?

We really can't. Yes, not at this point.

Okay.

Yep.

Okay. And when do you think you'll get a little more clarity on this? How fast is this unfolding and --

Certainly if it got to a point where we thought it was going to be material, we would put out a release, I would suspect. But we certainly will update everybody in our second quarter call. But I think this is going to continue to evolve, and again we'll do everything we can to help our customers down there.

Okay. Thanks a lot.

Thanks, Ted.

Our next question comes from the line of Mike [Shillski] with RBC Capital Markets.

My questions have been answered. Thank you.

Okay great, you're all set?

Our next question comes from the line of Michael Hoffman with Wunderlich Securities.

Thank you, hi Jim and Alan. If I could follow-up on the last gentlemen's question. How do you define materiality? In order to issue a press release? How big would the business have to be?

I think if you're talking tens of millions, I think if you start getting your arms around an exact -- the figures start shaping up, I think that would be the point. I mean, clearly, this could become material. But as Alan pointed out it is evolving day-to-day. Originally -- and I'm sure you are watching the news, but I'll say it anyway -- going back to late last week, they thought that a lot of the oil would be hitting the shoreline Friday night, and it's only recently hitting some of the outer islands. So it's still evolving, weather and the tides are affecting it. So as we start shaping up numbers, and clearly if they start hitting upwards of tens of millions we'll start talking more about the exact figures, but it really is hard to say at this point.

Okay. Fair enough. And just to help us better understand, your major role will be onshore and sort of immediately around the shore of the marsh areas, streams, rivers, and creeks, as opposed to way out on the water.

No, our people are on the water, we are providing resources on a lot of the large recovery vessels out there that have the ocean-going skimmers and so we're both offshore and in shore at this point, Michael.

Okay. Thank you. Question about predictability. I think it is a reasonable observation that when the recession is occurring, and you start getting a downturn in capacity utilization of your customers, and it's not linear on volume production because it's very hard to predict how that flow is occurring. Where do you feel you are on that predictability issue. Is the visibility improving enough, that things are stable enough, you're that much more comfortable about how the flow is back to you now? It doesn't have to be a hockey stick, just the fact that it's moved more positively. Does that introduce more predictability?

I think that, when you compare where we're at now with just the year-ago, with the credit crunch, and hearing about work stoppages and furloughing, mothballing of plants, a lot that was going on during the credit crunch, that's not the environment we're in now. So clearly the visibility and predictability, knock on wood, and hopefully it will continue, that we' see a more sustainable trend in projects opening up again. Things that companies need to do, and the general base business, so I think that's why we have seen some nice improvements. They are gradual, but they seem sustainable. So definitely our predictability has improved a lot from a year ago.

Okay. So if we could talk a little bit -- I get the weather into January/February -- very disruptive. March ends being better weather. We have got April behind us. Could we talk about sort of the two chunks of revenues in the core business, so the project work that -- was it steadily improving each week, March through April, is it just at a stable level? And on the TSDF side, sort of that volume pattern? What's happening there sequentially?

Yeah, both TSDF volumes are going up, and the pipeline, which is the way we manage our projects, is increasing. So both up.

Okay. And then are you up and stable now on the TSDFs, or is it still continuing to rise?

You always have a tendency to have large swings in volumes at the end of every 90-day generation cycle. Customers can hold on to their waste typically up to 90 days, and it's not untypical for us to have very big peaks at the end of every 90-day generation cycle. We would expect June to be our strongest month in waste volumes coming into our plants, particularly our container quantity waste and that's not untypical as in the last 15 years.

Okay. And if we looked at certain landfill, incineration, your drum processing and kind of other, is there any particular strength you would point to at industry now that seems to be getting better? And others that are just starting to come in?

Well, I mean we mentioned the various industry verticals that we received the majority of our revenues from, and outside of the Consulting Engineering group that I mentioned, most of our customers are doing better, and their manufacturing is improving, the volumes are getting back to a more normalized rate. Restocking the shelves has certainly been something that I think has driven some volume for us. The turnaround work is continuing to unfold and that's something that was delayed. We're completing a couple of major turnarounds right now. And we did a great job in those. So it's really across a lot of the key verticals that we're seeing some nice growth in opportunities, because they really hunkered down there for 12 months.

Okay. And then on Eveready are we on one general ledger, one billing system, one payroll system at this point for the whole corporation?

In Canada. We have a separate payroll system in Canada, but it is one platform in Canada. And then we have one in the US, but there is one billing system and one general ledger.

Okay. That's great. And then on the Marcellus, there was a recent conference in Pittsburgh, and just the euphoria of all of the players there. It seems like a tremendous amount of business. An awful lot of sort of fluids management. I'm assuming you all are participating in that. One, where is it going, are there opportunities to improve efficiencies around that, because that's kind of a new evolving space.

Right. We certainly have people on the ground there providing support on both the fluids handling offsite at a number of our wastewater treatment plants, but also looking at providing those customers with on site pretreatment capabilities and that is certainly a focus of ours on the fluid side. On the Exploration side we had mentioned that we picked up some nice accounts to help support some of the exploratory work that's going on there, and we expect that to continue. It did get a little delayed with some major weather that went through there back in February, but that's certainly picked back up again.

All right. And then last for me, I believe if I remember correctly you have operations in Eastern Tennessee, what is the impact of the floods on you?

You know, certainly, I think everybody is focused more on the emergency at this point. Our business hasn't been significantly impacted other than from our customers being impacted, but at this point, it is not a big event for us on an emergency basis.

Okay. Thank you very much.

Okay. Thank you.

Thank you.

Our last and final question comes from the line of Jamie Sullivan with RBC Capital Markets.

Hi, guys thanks for letting me sneak in one last one real quickly. I just wanted to follow up and get your opinion. It looks like the options the EPA is looking at for regulating coal ash are relatively neutral in terms of your business, just wanted to get your thoughts on the developments there.

Yeah, I think more to do with our in-plant service work, the material processing group would certainly be one that would see some uptick in opportunities there to take some of those wet ponds and help remediate those, as they transition to dry ponds. So I think we just saw those regulations come out yesterday afternoon, and our regulatory folks are going through it, and we hope to get an update on that sometime today, but that's our initial peak at that. We didn't think there would be a huge volume going offsite for landfill disposal simply because the quantity would just be an enormous volume as you know. But we hope to help, and we have been on a couple of those projects already. So we're hoping to participate on that on-site work.

Great. Thanks a lot.

Okay. Thanks.

Thanks.

Thank you. There are no further questions at this time. We have now reached the end of the Q&A session. I would now like to turn the conference back over to Mr. Alan McKim for any closing or additional remarks you may have.

All right. Well thanks, everybody for all the great questions, and we appreciate that. We appreciate you joining us this morning, and we look forward to updating you on our second quarter in the early summer. Have a great day.

Ladies and gentlemen, this does conclude our conference. Thank you for joining us today. You may disconnect your lines at this time.