Clean Harbors Inc (CLH) 2013 Q4 法說會逐字稿

Greetings and welcome to the welcome to the Clean Harbors Incorporated fourth-quarter 2013 conference call.

(Operator Instructions)

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Michael McDonald, Assistant General Counsel for Clean Harbors Incorporated. Thank you, Mr. McDonald you may now begin.

Thank you, Rob. Good morning, everyone. Thank you for joining us today.

On the call with me today are Chairman and Chief Executive Officer, Alan S. McKim; Vice Chairman, President, and Chief Financial Officer, Jim Rutledge; and our SVP of Investor Relations and Corporate Communications, Jim Buckley.

This quarter, we have posted some slides to Clean Harbors' website that we will be reviewing during today's call. These slides can be found in the Investor Relations section of our website. We invite you to take a moment to open the file and follow the presentation along with us.

Matters we are discussing today that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect Management's opinions only as of this date, February 26, 2014.

Information on the potential factors and risks that could affect the Company's actual results of operations is included in our 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 call other than through SEC filings that will be made concerning this reporting period.

In addition, I'd like to remind you that today's discussion will include references to non-GAAP measures. Clean Harbors believes that such information provides an additional measurement in consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to the most directly comparable GAAP measures is available in today's news release, which can be found on our website, cleanharbors.com, as well as in the appendix of today's presentation.

Now I would like to turn the call over to our CEO, Alan McKim. Alan?

Thanks, Michael, and good morning, everyone. Starting here on Slide 3, if you read through this morning's news release, you know that we are extremely disappointed with our Q4 results. While revenue and adjusted EBITDA each increased by more than 50%, we expected to deliver an even higher level of profitable growth but encountered several headwinds late in the quarter.

When Jim and I spoke with you on our Q3 call in early November, the fourth quarter was off to a fast start. In fact, October saw the highest single monthly revenue in the Company's history. Over the subsequent weeks, however, several factors caused us to miss our 2013 EBITDA guidance and let me summarize these briefly.

Overall we were hit with adverse weather coupled with the timing of holidays in December. In our Industrial and Field Service segment, occupancy in our lodging business was off by over 10%, as customers in the oil sands delayed some projects and we saw a drop in occupancy around the holidays.

In Tech Services, we saw a slowdown in some high-end waste streams late in the year. Historically, just the opposite occurs. Typically, waste volumes surge at the final two weeks of the year, as customers clear out inventory.

The third factor was that base and blended products sales suddenly and rapidly dropped in mid-December. A number of customers and buyers in the spot market obviously were anticipating the January price [decline], which was just ultimately announced by Motiva and others in mid-January.

Fourth, our Oil and Gas business, which experienced a surprisingly strong Q3, underperformed in the fourth quarter. A combination of program cancellations and reduced expiration budgets from our customers led to fewer land exploration opportunities. Finally, Safety-Kleen branch business rebounded from a soft Q3 with a solid fourth quarter.

If we turn to Slide 4, before I discuss each of our segments in more detail, I thought it was important to look at our 2013 results in total and recap how we arrived where we are today versus our expectations when the year began. The chart outlines our initial assumptions as we entered 2013, when we forecasted adjusted EBITDA in the range of $605 million to $620 million. The slide walks through how we got from point A to point B.

We closed 2012 with approximately $375 million of adjusted EBITDA. To that amount, we expected to add approximately $15 million from tuck-in acquisitions that were made in 2012 but not fully realized. $188 million was added from Safety-Kleen, including about $30 million in synergies that we had anticipated as part of that acquisition. Ruth Lake, which was originally slated to open in July of 2013, was going to add $7 million and a combination of organic growth in pricing would add another $35 million.

So if we turn to Slide 5, we missed our original EBITDA guidance by $110 million. How did we get here? The largest item on the list was the decline in the price of base oil in our blended products, which accounted for more than 50% of the shortfall. Other factors included a customer cancellation after our Fort McMurray field organization unionized, that we discussed earlier; delays in turnarounds by some of our refinery customers; and certainly, the historic flooding in Western Canada.

Compounding these external challenges, we went through an entire year with no major emergency response events for the first time really in several years. Fortunately, the additional synergies we generated during the year offset some of the shortfalls that are listed here on this slide. If we turn to Slide 6, how are we responding to this environment?

First of all, we're launching a broad strategic review of our operating structure, with a focus on how to better drive organic growth and improve our return on invested capital. We also have initiated a cost reduction program and are taking $75 million in additional costs out of the Business and bringing our cost structure more in line with our current revenue profile. We are targeting areas ranging from our non-billable headcount, office consolidation, maintenance and logistics, with the goal of significantly reducing our overall expenses.

In addition to pure cost reductions, we are launching a number of margin improving initiatives, including moving to a regional sales organizational structure to drive organic growth and foster more cross-selling at the local level. We are also targeting margin enhancements in areas such as our pay-for-oil program, optimizing our disposal and terminal network, and building a third blending facility. Collectively, these programs will help us address the margin pressures we are currently experiencing.

Starting here on Slide 7, I would like to take you through our Q4 performance from a segment perspective. I won't spend much time focusing on the individual segment financials, but as you can see, we included financial charts in each slide as a reference point. For Tech Services, as you can see, revenue grew 18% and EBITDA 26%.

The growth in revenues is really -- on the Tech Services side -- demonstrates really the benefit of adding the Safety-Kleen waste streams to our network. Our incineration utilization in the quarter was good, led by strong combinations of both the US and Canada locations.

Our landfill business saw a drop off in volumes, mostly due to the typical quarterly variability and the conclusion of a large project. Overall, tech had a solid quarter, with decent margin performance, but the mix of business with less favorable than expected, primarily due to the year-end slowdown that I mentioned.

We turn to our Oil Re-refining and Recycling segment on Slide 8. This segment had a challenging quarter. Revenues on a sequential basis were only slightly down, but that is a bit misleading, as we had a full quarter's contribution from Evergreen Oil that we acquired in mid-September. The revenue we added from Evergreen was at a lower margin than we produced at our two Safety-Kleen plants in Q3.

We are in the process of bringing the Evergreen plant up to the levels of safety, efficiency, and productivity that are more in line with our other two re-refineries. In fact, we invested more in Evergreen in Q4 than we originally anticipated, and for the quarter, Evergreen generated an adjusted EBITDA loss of about $5 million, which drove down our segment profitability. ¶ In terms of our key metrics in that segment, we slightly lowered our PFO costs by another $0.01 in the quarter and our blended products accounted for 33% of our volumes in Q4, slightly below the full year, which averaged about 37%.

Safety-Kleen Environmental Services, on page 9, delivered a strong sequential increase in profitability. We generated a better product mix than we did in Q3 and also moved past some one-off expenses we had in Q3 like healthcare. In order to give investors a better sense of how this particular segment is performing, we intend to provide two key metrics going forward that we have not shared previously -- the number of parts washer services we conducted in the quarter and how much waste oil we collected.

In Q4, more than 150 Safety-Kleen branches completed 220,000 parts washers services, meaning they visited a customer to pick up or drop off solvents or service the machines themselves. For the year, we conducted approximately 900,000 parts washer services on the nearly 200,000 parts washers that we handle for customers.

Our branch has also collected 51 million gallons of waste oil in Q4, which includes a small contribution from Evergreen. For the year, Safety-Kleen gathered just over 200 million gallons of oil, the vast majority of which went into our plants to be re-refined.

Turning to Slide 10, in Industrial and Field Services, revenues were down slightly, as the growth we achieved in certain lines of business were offset by some softness in the oil sand region, as well as the fact that Q4 of 2012 had a $12 million event in regard to Hurricane Sandy revenue. For the fourth straight quarter, we have had no major events in Q4 2013, as well.

Profitability and margins were down primarily due to the mix of business. Two new metrics that we want to share with investors in this segment to better convey our performance going forward is utilization rates of our billable personnel and outside room utilization at our major fixed lodges.

During Q4, the utilization of our billable personnel in this segment was 80%, with a slightly higher performance in our Field Service group versus our Industrial group. For the full year of 2013, the segment's billable personnel average utilization of 82% for the year.

In terms of room utilization at our major fixed lodges, our target for full utilization would be in that 85% plus range since we typically reserve 10% to 15% for our own use. In Q4, outside room utilization was 72%, while the full-year average was 81%. The decline in Q4 was attributed to the competition, as well as renovations underway at one of our larger facilities. Ruth Lake was not included in Q4 calculation, as it was still coming online.

Overall Ruth Lake continues to be slow to fill up. As of today we are at about 50% capacity. While we have been signing up customers at good rates, we haven't seen any large blocks of room booked yet, as it has been mostly smaller customer commitments.

The facility remains a showcase location for us and we still have high long-term expectations for Ruth Lake, but the larger multi-year contracts have been slow in coming as customers' project delays in that particular area of the oil sands have impacted the accommodations market.

Turning to Slide 11, Oil and Gas Field Services. This segment underperformed in the quarter as a result of the exploration slowdown I touched on earlier. Despite the shortfall in that area, overall revenue and profits were up slightly from the same quarter a year ago based on expansion in our Surface Rental Group.

We continue to focus our efforts on growing our presence in the US shale plays. In Q4, we continue to build our presence in the Rockies and we work on rigs within several basins in that region. More recently, we planted our flag in Texas and Oklahoma region, with equipment placed on four rigs in the Permian basin. Following spring break up in Canada this year, we anticipate sending more assets to that region and expanding our Southern US footprint.

This quarter, we are introducing two key metrics for this segment -- average rig service and utilization of our key rental equipment, primarily centrifuges. Our goal is to provide you with a greater ability to gauge the performance of our Oil and Gas Field Services.

In Q4, our equipment was involved on an average of 195 rigs. That level of involvement could range from some individual pieces, such as a single centrifuge, to a full package of centrifuges, control tanks, trailers, and various other rental equipment. Going forward, we want to not only grow that number but expand our service intensity on the sites we are already on.

In terms of key equipment utilization, we're still utilized at 46% in Q4. Full utilization for this equipment would be in the 75%, if you allow for maintenance and travel in new locations.

Let me turn to the outlook on Slide 12. We have a range of initiatives underway aimed at revitalizing our revenue growth, including driving more volumes into our disposal network, opening new Safety-Kleen branches, and cross-selling Field Services to Safety-Kleen's 200,000 customers.

With an eye towards long-term growth in our Tech Service business, we are moving forward with the development of a new incinerator at our El Dorado facility. We now have the permit in hand and the local community is firmly behind our expansion there. It will continue to be a multi-year build out with construction expected to kick off in [earnest] this year.

We expect this facility to cost us approximately $80 million in total. While this represents our largest individual investment, we believe the returns will be attractive. The facility is being designed to handle the maximum amount of high-end waste streams, such as ozone depleting chemicals, and we anticipate it will be a strong contributor when it comes online, most likely in early 2016, as we expect the build-out phase to be finished in late 2015 and final testing thereafter.

Our focus going forward will be on creating sustained profitable growth by significantly reducing our cost and improving our returns on invested capital. We know that our returns in recent years have been lackluster and we're focused on changing that, even in the face of some challenging market conditions. In fact, when we publish our proxy in a few months, you will see that ROIC has been added as a key metric to not only the executive compensation plan in 2014, but to the next layer down in the Organization.

We intend to evaluate the performance of the larger Management team on revenue, EBITDA margin, and safety, as we have in the past, and we are including return on invested capital as a fourth metric. We believe driving ROIC further down into the Company will be important in generating more meaningful results.

Before turning the call over to Jim, I would like to conclude by saying that we appreciate the fact that our results have been a disappointment for our investors in recent quarters including today. The Board is supporting our shareholders with our first buyback program in our history.

At the same time, the Management team is taking specific steps to deal with the challenges in our markets. As we discussed in this morning's news release, a number of the headwinds we encountered at the end of 2013 have continued into the first quarter, prompting the Company to lower our full-year revenue and adjusted EBITDA expectations.

Jim will discuss this with you in more detail. Let me reiterate, however, that our long-term vision for the Company and growth strategy remains intact. The Safety-Kleen acquisition and the Company's expansion into new growth markets over the past five years has established scale and a solid platform to now grow from.

With that, let me turn it over to Jim for the financial review. Jim?

Thank you, Alan, and good morning, everyone. As I do each quarter, let me kick off my remarks with some brief additional perspectives on how our verticals performed this quarter. Looking at Slide 14, general manufacturing was again our largest vertical in the quarter, accounting for 18% of total revenue.

Base business continues to be stable. We saw some delays in cleaning projects as customers scaled back on year-end spending and the cold weather also caused some delays. Our head of this vertical is optimistic about growth opportunities for us in 2014.

Refineries and oil sands customers accounted for 14% of Q4 revenue. Organic growth in this vertical from Q4 a year ago was about 5% despite the loss of a major contract we referenced earlier in the year in the oil sands. Organic growth in this vertical was supported by strong cross-selling activity with Safety-Kleen and our securing two major contracts at a US refinery.

Automotive accounted for 11% of Q4 revenue, but could have been slightly higher had blended lubricant sales been somewhat stronger in the quarter. Containerized waste collections in this vertical were slower in this quarter, as well.

The chemical vertical represented 10% of Q4 revenue. Similar to the past few quarters, we are seeing a solid base business, driven by the low cost of natural gas. Base business was solid in the quarter but remedial and industrial projects were again light, as some were pushed off to 2014. Incineration volumes were strong, but with some drop-off in several key customers toward year-end. Volumes resumed after the start of the year.

Oil and gas production accounted for 8% of revenue, with our expansion in the US surface rentals market driving the bulk of the 8% year-over-year growth we saw in this vertical. As you can see from the rest of the slide, we have a highly diversified mix of industries and verticals that we serve.

On Slide 15, here is a quick snapshot of our Q4 direct revenue from our five segments ranging from Oil Re-refining accounting for 10% of the total to Technical Services at 34% of total revenue for the quarter. This revenue split is similar to what we experienced throughout 2013.

Turning to the income statement on Slide 16. Gross profit for the fourth quarter was $234.3 million or a gross margin of 26.6% compared with a gross margin of 28.5% in the same period last year. While this year-over-year margin decline was largely anticipated, we forecasted a slightly better performance.

Our cost of revenues were somewhat higher than expected in Q4. On a sequential basis, our gross margin percentage declined 200 basis points from the seasonally stronger third quarter.

Turning to expenses on this slide. SG&A this quarter totaled $104.9 million or 11.9% of revenues. This compares with 13.5% in Q4 a year ago. This reduction in SG&A percentage is primarily due to the decline in compensation expense as a result of our 2013 performance and the effect of cost synergies with Safety-Kleen.

Excluding integration and severance costs of about $1.8 million that were recorded in SG&A in Q4, our SG&A percentage was actually closer to 11.7%, which is below our target range of 12.5% to 13% of revenues. For the full-year 2013, our SG&A percentage was 13.4%. Looking ahead to the current year, we are projecting our SG&A percentage to be in the low to mid 12% range.

In Q4, depreciation and amortization increased 51% to $67.5 million. This is slightly below the $69.4 million we reported in Q3. For the full year, D&A rose 64% to $264.4 million due to the addition of Safety-Kleen and Evergreen. Looking ahead to 2014, we are currently projecting D&A to be in the range of $275 million to $280 million.

Income from operations for Q4 was $58.9 million, or 6.7% of revenues, compared with 6.5% of revenues in Q4 a year ago. Our operating margin improved slightly, as the reductions we made in our SG&A offset the lower gross margin we generated in the quarter.

Our Q4 adjusted EBITDA was $129.3 million, or a margin of 14.7%. While this represents a 55% increase from a year ago, it is below our target range. If you adjust for the $2.1 million of total integration and severance cost this quarter, our margin was still below 15% for the quarter. For the full-year, our adjusted EBITDA margin percentage was 14.5%, and if you add back the $17.5 million in integration and severance costs in 2013, our full-year adjusted EBITDA margin was 15%.

Turning to our taxes. Our effective tax rate for Q4 came in lower than expected at 31.2%. This compares with 34.7% in Q3. For the full year, we had an effective tax rate of 33.6%, and looking ahead to 2014, we expect our effective tax rate for the full year to be approximately 36.5%.

Turning to Slide 17, we thought it would be helpful to provide you with a visual bridge to the $15 million shortfall in adjusted EBITDA in the fourth quarter. Clearly a large factor in the decline was in the Re-refining business where base blended sales essentially dried up in the final two weeks of the year and Evergreen was a larger drag on the quarter than originally expected. Another large contributing factor was in the Industrial and Field Services business where our lodging occupancy was less in the final weeks of the year, as Alan alluded to earlier.

Turning to Slide 18, we continue to maintain a strong and healthy balance sheet. Our cash and marketable securities as of December 31 were $322.5 million. This is a sizable increase from the $260.4 million we reported at the end of Q3, as our Business continues to generate a strong cash flow.

I would like to note here that you can see our 2012 balance sheet has been labeled as adjusted. This is due to some minor adjustments that were made for purchase price measurement period adjustments related to the Safety-Kleen acquisition. There were no changes of significance in this regard.

Total accounts receivables decreased to $606 million at year-end from $645.2 million at the end of Q3. However, days sales outstanding increased to 69 days compared with 66 days in Q3. The main reasons were a full quarter of Evergreen receivables that were included, as well as a project customer with extended terms.

We are continuing to focus on collections and improving our billing processes to reduce DSO, although it will likely take us a quarters few words to bring our DSO down to our targeted level of 60 days or fewer.

Environmental liabilities at year-end were $219.6 million, which is flat compared to Q3 and down from where we were a year ago, despite adding Evergreen during the year. CapEx for Q4 was $72.6 million, slightly above the $66.2 million we spent in Q3. For 2013, we concluded the year at our expected target level of $280 million, and net of equipment sales during the year, we are closer to $276 million.

This included maintenance CapEx of approximately $130 million and growth CapEx of nearly $150 million. Looking ahead to 2014, we are currently targeting CapEx of approximately $200 million exclusive of the incineration project in El Dorado, which will likely at $25 million to $30 million, depending on the pace of construction.

Our cash flow from operations was again strong, at approximately $136 million in Q4, just slightly below Q3's level. For the year, we generated nearly $416 million in cash flow from operations.

Moving to guidance on Slide 19, which we outlined in our press release this morning, we downwardly revised the 2014 guidance we provided in early November on our Q3 call. We lowered our original revenue guidance, which was preliminary at that time -- which was originally at $3.7 billion to $3.8 billion to a range of $3.5 billion to $3.6 billion. We've reduced our 2014 adjusted EBITDA guidance of $610 million to $640 million to $525 billion to $555 million.

In addition, because the factors that caused us to bring down our guidance are weighted so heavily to the start of the year, we are providing quarterly guidance for Q1 to help investors better understand the seasonality of our revenue and profitability in 2014. The first quarter has historically been one of our seasonally weakest quarters and that will be exacerbated this year. For the first quarter, we are expecting revenue in the range of $820 million to $840 million with corresponding adjusted EBITDA in the range of $100 million to $105 million.

Turning to Slide 20, I will briefly touch on the headwinds that we are experiencing in 2014 which caused us to reduce our guidance for the year. In mid-January, the refining majors, led by Motiva, dropped their posted Group 2 lubricant pricing by $0.25 to $0.30. This pricing affected our own contracted base oil volumes, which are directly tied to these posted prices, as well as what we sell in the spot market.

Also, very early in the year, we experienced a rapid decline in the value of the Canadian dollar. When we held our call with investors in November, the Canadian dollar was at about $0.97. Today it is it is just a little bit above $0.90 and there is little indication that it will be increasing much at all this year.

From a translation perspective, each CAD0.01 decline translates to roughly $2 million to $2.5 million in adjusted EBITDA for us. We are looking at ways to take advantage of that currency swing from a transactional perspective, such as buying more waste oil in Canada and bringing it into the US.

The third factor is within our Oil and Gas business, particularly in seismic. The first quarter typically represents the seasonally strongest quarter for that business due to the exploration opportunities in the far northern areas in Alberta and in Alaska. We are seeing a sizable slowdown in the exploration business in Q1 with fewer multi-million dollar projects given the existing backlog of drilling opportunities in the region.

The fourth factor is that the winter weather has affected our Q1 performance to date, from severe cold temperatures in Western Canada driving up our fuel and maintenance costs to a high number of branch office closings across the US. We have offices in places like Houston and Atlanta that rarely see a single day of weather-related closures suddenly closing for multiple days at a time.

Finally, as Alan mentioned, our lodging business is under some pressure, with the current project environment in the oil sands region and Ruth Lake has clearly been slower to fill to capacity that we originally expected. The combination of these factors is contributing to a very slow start to the year.

On Slide 21, we again thought it would be helpful to provide investors with a visual bridge of these factors contributing to our lower adjusted EBITDA guidance from our preliminary figures.

On slide 22, the other major news we are announcing today, as Alan alluded to, is that our Board has authorized $150 million share repurchase program. This transaction will be funded out of our cash balance, as we certainly have the financial flexibility to support this shareholder-friendly initiative while continuing to execute on our growth plans. This program reflects the Board's confidence in our growth strategy and our long-term vision for Clean Harbors.

With that, Rob, could we please open up the call for questions?

(Operator Instructions)

Al Kaschalk, Wedbush.

I'm going to focus on Tech Services real quick. Could you talk about -- strong margin performance there but could you talk about the pricing environment? I know you had some mix issues in the back half of the fourth quarter, but if you can talk about how you for the full-year realized on your pricing goals and what do you expect in 2014?

Tech Service clearly with some of the technologies that we use in that segment, as you know, are highly utilized and there we have gotten price increases that range from 2% or 3% up to 6%, 7% depending upon the waste streams that we take in. If you look across the total business, though, given the fact that we are growing in certain areas -- and for example, in rental services, in the oil and gas business where we are growing in the US, we have done some discounting. That offsets some of it, but I would say overall for the Company, we probably had about a 1% price increase overall, I would say.

Yes and the mix in Tech services should improve here as a lot of rail shipments that were delayed into some of our facilities, which tend to be some of the higher hazard materials, which tend to carry a higher price, so that mix should get back to normalized after the first quarter here, Al.

And my follow-up, one of your large competitors has talked about lowering their cost for the PFO. You mentioned a $0.01 in improvement here recently, but are you -- what can you share on your efforts there in terms of 2014? And if there is a way to quantify it or directionally how you're thinking about that, that would be great? I realize there is the both the spot market and contracted business.

We continue to fight the challenge of having such a high crude oil price that has basically decoupled our base oil price and that's really been there biggest challenge that this business has had since we've owned it now for the past 12, 13 months. As you know, like our competitors, a lot of our pricing is indexed off of Gulf Coast Number 6 and most of that pricing, obviously, is impacted by crude oil pricing.

As crude continues to be at $100 a barrel and we continue to be indexed -- as much as we have been aggressive in lowering our overall PFO pricing and we have seen that for the whole year, we've seen improvements, it certainly has not been fast enough, considering how crude has moved this year. As we have said all along, it has really been unprecedented to see that decline in on the price of our recycled products being where it's at compared to where crude is.

We were significantly -- very much surprised in January to see a price decline, and in turn, saw a significant amount of volume decline in December, with probably more knowledge of that price decline being out there in the market than we certainly had heard. Our hope is that, that will improve, because it absolutely is at bare-bone margin at this point and we have to have a cost structure in place to operate at this level at pricing. We are going to do all we can to improve our margins, both on what we pay for our oil, as well as what it costs us to manufacture our recycled products.

Thank you.

Yes.

Michael Hoffman, Wunderlich Securities.

Can you help us, Jim, Alan, on your thoughts about those five segment margins; the directions that they take based on what your guidance is? You have an overall 15.2% for the year, it's up 70 basis points, but what's up, what's down? And even if it's just talking about who is up and who is down as opposed to how much, but if you can give how much, great.

Jim?

Sure. Absolutely. Starting with Tech Services, we do see some improvement in the margin there as we progress through the year. As you know, it is seasonal so the earlier the first quarter, you will see it comparable with last year and you know that we're seasonally weaker then, but as you have certainly gone to Q2 and Q3, you will see a nice improvement year-over-year, as well as over Q1.

Then when you look at the Industrial and Field Services area, there the margin will be flattish against last year and one of the issues that's driving that a little bit is the currency effect that we talked about before. In fact, the overall tempo of the business, even though it will be up in the low single-digits, if you just looked at it on a Canadian dollar basis, when you take into account that we have -- that business is probably in the 60%, 70% range in Canada, you see an effect of the margin that we talked -- effect on our EBITDA when you translate it into US dollars and there is a little bit of a margin impact on that as well.

In the Oil and Gas Field Services, with the challenge of Q1 in the winter drilling programs and the seismic activity up in Western Canada not being as strong in Q1, you're not going to get the operating leverage that we saw last year when it was more robust in the first quarter there. So you will see some downward pressure on the margin in the Oil and Gas side. Then you also compound that with the fact that you probably have about 60% of that business that is in Canada as well so there's some impact of margin as well there.

I do believe in the S-K environmental business, that being very related to our legacy Clean Harbors environmental business as we -- now that we have that business on our systems platform and we embark on a lot of those margin improvements and cost reductions that Alan referred to, we're expecting a margin improvement in the S-K environmental area.

Then in the S-K facilities, with the price decline clearly that had an effect of $20 million, $25 million on both revenues and EBITDA, so it will be a challenge. But I would say probably flattish in terms of margin impact, because we're not anticipating -- clearly, not in our guidance, any kind of a price increase, certainly, and we are trying to risk adjust as much as we can by keeping it flat and risk adjusting other areas of the business not to be too overly generous on the margin in the S-K refinery area. So that's basically a quick walk-through.

Okay. And then on that used oil business, the Re-refining business, and I'm not trying to be unkind, but it seems as if the Company's reaction to pressure on base lube, and consequently what it meant to the economics of that business, it feels like it's slow. Why can't you go faster and be more aggressive on taking $0.87 and getting it into the [70s]?

Why aren't we thinking out-of-the-box by -- and I don't know if it's even practical, but do you furlough part of your production for some window of time, narrow the volume you're collecting to the remaining plants, and then get a heck of a lot more aggressive on the price? Why aren't things like that happening?

Michael, we're looking at all options to address the margin squeeze that we are encountering. There isn't anything that's off the table, and so the Management team, who has been through difficult times in the past, is going to get through this and going to resolve the problem that we currently have and we are not going to wait for market pricing to fix that, so just stay tuned on that. I would just tell you that there isn't anything that we aren't looking at as a way of countering the margin squeeze that we are dealing with right now.

Okay and one housekeeping thing. The $75 million, where is that coming out of and are there some charges related to headcount and what have you that we should be thinking about?

You are going to have some headcount reductions there, certainly, and there will be some severances that will flow through, but I don't think any particular charges are contemplated at this time. One of the things, now having the Business on one platform and operating on one information management system that we completed in November, getting off of the old SAP system that Safety-Kleen has, we have a tremendous opportunity now to really do some things with the Business.

To make some changes to the Organization, to drive more costs now that we have all the information available, and to mine more data and to do better things like strategic sourcing and to manage billable hours and manage equipment utilization. All the things that Clean Harbors historically has done very well at managing its assets.

We now have all that on one platform. So whether it's maintenance or it's internalizing transportation or it's internalizing disposal, there is just a tremendous opportunity here for the Company. That $75 million, we really have felt very confident about as we have been peeling back the information now since November.

Okay. Thank you.

Okay. Thanks, Michael.

David Manthey, Robert W. Baird.

First off, Alan, how far are you willing to go with the strategic review. Are you open to divesting parts of your Business or are you just trying to fix everything you currently have? The reason I'm asking is when you look at 2013 EBITDA, looks like more than 80% of it is coming from Tech Services, S-K Environmental, and then Industrial and Field Services, so when you think about the volatility that's been created in your Business, it would seem that it is mainly in these other areas. Is it possible to strip those out and divest them and focus your strategy?

Our strategy, as you know, has really been to expand our footprint geographically, as well as with some lines of business that will drive more waste volumes into our disposal networks. You clearly can see that in our Tech Services business. We are expanding our incineration capacity; we are rationalizing some of the Safety-Kleen facilities as part of that review, as you know.

The Company really has a leading market share position in the waste management side of the Business but it isn't all derived just from Tech. Some of our expansion into the Western Canada area or into the oil and gas space has really helped us drive some waste volumes.

With that being said, some of the acquisitions we have made also were of companies that also had done acquisitions and had done some roll-up deals. So there may continuously be a review of some lines of business that we're in or some businesses that we're in today that don't fit well with our long-term strategy. We're certainly going to take a look at all of those businesses and work with the Management team to make the best decision, both short-term as well as long-term from a returns standpoint.

Right, okay. I hope that you'll take a clean sheet of paper to this because, at least from a Wall Street perspective, bringing clarity to your Business once again would go a long way.

With that, the second question, could you tell us what portion of the $75 million in cost reductions you're expecting in 2014 and when will the run rate fully be realized? And then, as an add-on for that, to understand what the year-to-year impact is here, can you estimate what you think weather impact was on revenues and EBITDA in the first quarter?

I will just make one comment and maybe Jim might want to chime in here. But if you look at our overhead and if you look at the run rate in January this year compared to January of last year, our Corporate overhead and subsequent all of the combined Corporate costs are down about $40 million annualized.

So when we look at the success that we had in getting rid of IT systems, for example, saving $15 million just a information management systems, those synergies are clearly showing up in our financial statements. So we feel very strongly that last year's efforts are going to show up this year and people will appreciate all the hard work that was in getting those costs out of the Business.

As it relates to the additional rounds of cost, this is -- we are a service business. This first quarter we've had a tremendous winter to deal with -- our field people are dealing in the most extreme temperatures. We've got rail cars held up by the railroads, we have got barges stuck in ice; we've had people significantly impacted in their ability to perform services in the field.

First I want to say we've got a great Organization, but one of the problems we have is we are getting squeezed in some of our business and we need to address that. We're going to be doing the right thing for the Business but the Business isn't broken. We've got a great customer base that we are going to continue to service.

We are just going to fix the Business so that the Business is going to be at the level of profitability that we know that people like you expect and our Board expects. Between the Board and the Management team, we are reviewing our Business, we are reviewing our portfolio, and we are going to make sure that we are making the right decisions here in growing and running this Business profitably.

That's right and the only point I would add to Alan's comment and it's related to the more direct question that you had there about the weather-related issues in Q1. I would say in the $15 million-plus area, could be as high as $20 million. I would say in January itself it was probably $10 million. Tough, tough month given (technical difficulty) that I talked about in my comments with branch closings and so forth. And that's in EBITDA, that I was just talking.

Hopefully that gives you some color.

Yes.

Larry Solow, CJS Securities.

Wondering if you could parcel out, in your base oil pricing assumptions, are you assuming flat rates, current pricings going forward? I know we're entering a seasonal -- generally it's a little bit of a seasonally strong period in the year -- that's somewhat offset by Chevron coming online and maybe or maybe not that already priced in. Just what your assumptions are going forward and are you assuming also that you are able to reduce your pay for oil at all this year or are you basing your guidance on $0.87 average price?

From a pricing standpoint of lubricant sales, we have kept it flat. The guidance that we put out, including the January price decline that we saw, so we kept it flat for the rest of the year. That seems to be what others seem to think out there. Clearly, we're all waiting to see Pascagoula come online and see if there's any impact, but most people think this was in anticipation of that, so we kept it flat. On the PFO side, just mild $0.01 or $0.02 is what we included here of a decline.

And just following up -- I know Michael asked the same question earlier -- but is there a reason why you can't get a fast reduction, just because crude is remaining so high? Why can't you just become more aggressive and just literally say we are not paying XYZ when prices have -- and markets have come down so much?

We have -- I would tell you that we have reduced the volume of oil that we collected last year because of that attitude that we have taken. There are a number of accounts that we have walked away from that were priced significantly above even the RFO market, the recycled fuel oil market. So our recycled fuel oil sales, which is essentially the surplus volume that we handle, is down about $30 million, Jim, is that directionally right?

That's about right.

That gives you an idea of the volume decline that we chose to take because we cannot continue to pay some of the rates that we are paying.

Right and what is your outlook for blended sales in 2014? As a percentage?

Blended, we're certainly shooting to get that over 40% and we are implying in the high 30% range. That's what we have implied in the guidance, but our target is to drive that as high as we can.

So that is still relatively flat year-over-year. Right? Not much of -- a modest increase? Is that --?

What we've implied. That's correct, Larry.

And is the delay just related to the overall market weakness? What's driving that delay in getting this higher?

Certainly pricing. We are looking very closely to see how the base price decline, what affect that has in the blended side, and we are assessing that, but I want to stress that our objective is to drive blended higher. And especially in EcoPower, our own brand, we are really pushing that heavily.

And just lastly, just on the Evergreen assumptions built into the whole base oil area, what do you think? Do you assume that you can get up to full capacity by year-end? How does that -- is this accretive in 2014?

I would tell you that we have been very successful, very pleased with the entrance that we've had into California. We've got our own equipment out there now.

We've got our own drivers collecting oil and directly servicing a lot of our customers, as well as working with a couple of partners. I would anticipate in the first or second quarter that we will actually be an exporter out of California because we wanted to get into the California market to access a low-cost market to drive volumes back into our core plant.

That strategy has really paid off. I also think the team has done a nice job of getting the facility up and running from a safety standpoint, certainly, to Clean Harbors' standard and we will then continue to improve the throughput of that facility. That facility has a lot of upside to it. There is no reason why we can't get to that 20 million to 24 million gallon level. It's a relatively brand-new facility, it has some choke points that need to be addressed, we are putting in some capital, and in that plant, we expect it to be a real winner for us.

Okay. If I can just add one more quick question, just on the reduction or reduced outlook for oil and gas exploration and slowness in filling Ruth Lake. Curious if it's just related to just weakness in activity in oil sands and general slowdown there.

What -- I know the long-term growth trajectories from oil sands activity obviously takes it up much higher, but in the short term or even over the next couple of years, what is going to get this to rebound? Are you going to need a reduction in the discrepancy between Western crude and Canadian crude or what is going to get this going again, if you will?

People have announced a number of projects -- pipelines as well as rail -- irregardless of Keystone that's going to, we believe, open up the bottleneck and drive renewed growth. There are still $15 billion to $17 billion a year of capital being spent so everybody has scaled back somewhat, but there is still a lot of money being invested in the ground and a lot of maintenance that needs to take place.

So there is still an estimate off over 10,000 room shortage in the market up there. We anticipate -- we're well-positioned there, we've got a beautiful facility, we've got a great brand. We think we missed the winter, with the delay as we've talked about, Larry, but there is no question that we will be able to get 100% utilization up on that site.

Okay, that's something you're targeting for as by the end of the year so by 2015, that's well-positioned for --?

Absolutely. Absolutely.

Thank you. I appreciate it.

Jamie Sullivan, RBC Capital Markets.

Your question, just following the analyst day in September, it seems like a lot of the guidance reduction from the November report is due to things like weather, translation, and some of the volatility in re-refining. I'm just wondering what's come to light over the last few months that caused the rethinking of how the Business is structured? Is that what you feel you can control in a difficult market or are there other learnings about the business that have come about?

Jamie, as we've said, October, we had a record revenue month and so we felt that we were really starting to see an uptick in the top line. When we started experiencing the slowdown between Thanksgiving and the holidays, this year, particularly, maybe just because of the way the holidays fell, it just seemed like business in general across our entire Business for the last two weeks of the year really significantly slowed down and so that was one issue.

The second issue, particularly to do with the first quarter this year, we've had upwards of 150 of our rail cars stuck. We've got 1,000 rail cars -- tankers -- moving product in and out of our facilities. What that did -- with the bitter cold and the railroads being delayed -- it really not only delayed sales and built inventory, but we had to start hauling a lot of our deliveries by truck, which significantly increased our costs.

So lessons learned -- we need to reposition inventory into our other terminals during the winter months so that we don't delay customer service, we don't increase these increasing costs. This -- there are some lessons learned here on how to deal with two re-refineries that are in East Chicago and in Ontario. The bitter cold has had a huge impact on the operations of our facilities.

We've got over 5,000 equipment operators and drivers out hauling waste, responding to spills, doing work inside these facilities, that are working in bitter cold temperatures. We can't predict that, but we can tell you that the folks in the Organization here working extremely hard in a very difficult environment and that just was not predicted in the first quarter like we've experienced this year. I hope people can appreciate what our team is going through.

Sure.

And the only thing I would add is that, clearly, when market trends, whether it's translation or in the case of the price of lubricants, clearly we see opportunities for cost to offset a lot of that. Now that, particularly after the huge acquisition of Safety-Kleen and now integrating them on our systems, is where Alan is talking about a lot of the opportunities that we have now as a combined organization to look at our branches, to optimize our Business, to be able to produce higher margins.

It's both reacting to the market and taking advantage of cost reduction. But it's also taking advantage of our combined team to really leverage that team to be more profitable and run the Business together more smartly than we would as separate organizations.

Sure, that's helpful. And then maybe, Alan, you can give a bit more details on the ROIC focus that you talked about? What are the Corporate targets and is there an expiration date with businesses that are not meeting a threshold by a certain point, that may not necessarily be broken, but also not necessarily fit with your Corporate targets get reconsidered?

Jamie, this is Jim. I will just start it and then turn it over to Alan, because I just wanted -- you asked about targets. This year, if you look at our ROIC, we were probably in the high 5% range, getting close to 6%. We want to improve that by at least 100 basis points this year and that is what our short-term target is. So--

If you look at our historical returns, I was more in the double-digit [price] and we realized that we are substantially below. Again, when you look at the return on the capital that we have invested in some of the acquisitions, particularly the Safety-Kleen acquisition, it's just not acceptable of where we are at. So we know we need to address that. But our historical levels have been in the double digits.

Yes, low teens.

Low teens. So there's no reason why we can't get back on track here and get through this difficult time.

But is there a time at which you say it's just not happening to the pace that you want and so that causes you to reconsider the portfolio structure?

I don't know if there's any particular -- we have been clear in regard to looking at the Business strategically and structurally and making sure that we are looking at -- we look at making capital investments by unit number. We are looking for projects that are giving us one- and two-year return on investment.

There are some longer-term projects, obviously, like Ruth Lake, where we invested close to $50 million over the last two years that we haven't yet begun getting that kind of return that we had expected. Certainly with the Safety-Kleen acquisition, paying $1.2 billion for that business, we haven't gotten the return that we should be getting. Some of these things take a little bit of time; I hate to say put a timeline on it and say, by then we're going to do this, but we all are focused on what we need to do to improve the returns here.

Okay. Thanks for the candor, guys.

Thank you, Jamie.

Sean Hannan, Needham and Company

Good morning. Wanted to see if maybe when we talk about the dislocation of costs and revenues, and at least as we can perhaps think about that for that, the movement with the Canadian dollar and how it is impacting us. Can you maybe elaborate for us on the supporting costs that are causing a little bit more of that EBITDA dislocation?

Sean, I would characterize it to say, clearly, our revenues in the region are translated over, but we do have plants and a lot of equipment working and people in Canada. It is really the EBITDA translation, but it does have some effect on the margin. It's not -- the overall effect on EBITDA dollars clearly is large and we said that we estimated that that's in the $15 million range roughly, and on revenue is $100 million, that that's affecting our Business, just with the change in guidance that we had, so it was a significant piece. But there's also a little bit of margin pressure because of it.

Because we're over $1 billion in revenue in Canada, across all four of our businesses.

Absolutely.

Okay, so it's purely translation. We don't have other disconnects in terms of US-based costs or US dollar costs moving in? Okay.

No. It's pretty much translation.

All right. Then in terms of the two contracts, you had mentioned two major contracts, with one at US refineries -- can you elaborate on those a little bit?

We've been expanding our services at many of the refineries and we were able, in the Midwest, to be able to garner a couple of contracts there at a refinery where prior to that we only did a minor amount of business.

Yes, our acquisition of Sierra, which was a West Coast-based industrial services business and they had about 10 InSite programs, basically putting centrifuges and other waste processing equipment on refinery sites. That has allowed us to take some of our centrifuge equipment, particularly like what we have in Oil and Gas, and leverage our assets, and move those permanently on to refinery locations as part of our InSite program.

We have probably over 1,300 people today that are in our InSite program, basically showing up on our customers' sites every day as part of their workforce. That's been a very successful program; we're going to continue to grow that. So the Sierra acquisition really has helped us penetrate more.

Our refinery business was about $400 million-plus in revenue. The team now has been in place there for about three, four years and really feels pretty confident that we can grow our refinery business north of $500 million. So we're making some good investments and making some good inroads with some of the key customers there.

Okay, and then last, the Technical Services side, I know that we've touched on this a little bit during the Q&A, but the lack of that seasonal uptick, is there any more color that you can provide on why that mix may have been so unfavorable? Why we didn't get that demand that you would've otherwise anticipated?

And then the follow-on to that, you had commented, incineration volumes in chemicals has come back. It sounds like mix should improve then in this quarter. I'm just trying to get a sense of how much recovery you're seeing here? Thanks.

We saw a lot of companies take extended shutdowns at the end of December. Again, it was more -- not as typical as we normally would see where, because of the way the holidays fell, people just shut down, and with that, shipping and ending -- and cleaning up their waste inventory just did not happen, honestly. We were very surprised by that because, as Jim mentioned earlier, it's typically a big rush to get everything done at the end of the year to start out fresh.

We have seen that business come back. There was a couple of chemical clients of ours that were slow in coming back on in the first or second week in January. Some of it was more weather-related; these are facilities in the Gulf that [even] been impacted by this terrible winter we've had. We just saw a big downturn that we weren't expecting because of the holidays.

Great. Thanks so much.

Thank you, Sean.

Joe Box, KeyBanc

Alan, earlier you alluded to a more regional sales structure. Typically you guys have been pretty good at cross selling, so is a more comprehensive selling structure necessary now that the business is maybe a little bit more complex? I'm curious, will this touch all businesses? Just any color that you can give on the new structure would be helpful.

Sure. With the Safety-Kleen Environmental and Clean Harbors' Technical Services business and its Field Service business, we have seen a nice flow of opportunities over the past year, as we have now joined forces together. Safety-Kleen, historically, as you know, serviced 200,000 small-quantity type accounts. Clean Harbors has tended to have more the full truck load, larger, chemical refinery type of accounts.

Our Field business, which was called Total Project Management by Safety-Kleen, that business has really got a lot of promise. So by aligning our sales organization tighter within the regions to sell each other's services across the various industries that Tech and Safety-Kleen are selling to, is a very good way of us getting back to Clean Harbors' historical organic growth rate. If you look at the last 10 years, Clean Harbors historically grew in that 8% to 10% organically, and then grew north of that through acquisitions.

We are really disappointed with our revenue growth at this stage of the game. We would have expected a much higher revenue growth going into this year, and we've talked about some of the headwinds, but more importantly we have 900 people in sales. We expect a much higher level of revenue growth from them than we're seeing and we need to really take advantage of, again, the scale that we have and the market share that we have and do a better job of cross-selling and it's particularly between our Tech Services and our Safety-Kleen environmental business.

Understood. Thanks for that. Then just a quick follow-up on the Evergreen business. I appreciate the comments earlier on what this business can ultimately do longer-term. I just more curious on the near-term -- have you migrated excess Safety-Kleen oil yet to Evergreen and maybe how should we be thinking about the timing to ramp to more normal margins?

Evergreen is running at its capable capacity, as we speak, but it's not anywhere near where the nameplate of that facility is, so there are some mechanical issues that need to be changed out in that facility. When we do go through our next turnaround, we will be de-bottlenecking more, but they are fully -- they have the volume they need in that facility today. I would say by the middle of this year, we will have addressed a number of those bottlenecks -- not all of them, that we need to build some additional storage -- but all in all, the team has done a really good job in the short period of time since owning them in late September.

I appreciate it. Thanks, guys.

Yes.

Thanks, Joe.

Scott Levine, Imperial Capital.

First question, I know you didn't previously have first quarter guidance in effect for 2014, but would you be willing to give us a sense of the guidance reduction to 2014 as a whole? How much of that, roughly speaking, is Q1 with some of these issues to start the year, weather and otherwise? And maybe, how much of it is a revised view of the remainder of the year -- obviously, translation effects the full year -- but how much of that is the balance of the year, just to assess your thought process in resetting targets here?

I will start that. Scott, this is Jim. Clearly, Q1 in the Environmental business, that encompasses both legacy Clean Harbors and the Safety-Kleen Environmental is seasonally weak in the first quarter, so it's mostly a seasonal story. The disappointment, though, is that the -- when we talked about the Oil and Gas side, and with our seismic activity being slower, that usually helped offset some of that seasonality in Q1. That's why we wanted to make sure that we're giving quarterly guidance and we alerted everyone to that fact because what really shines through now is the normal seasonality of the Environmental business.

If you look in the past, at our trends from Q1 to Q2, and look at years like, maybe 2011 -- I don't have this all in front of me -- but roughly 2010, 2011, when the oil and gas was not a strong as it was in 2012 in the first quarter, we typically have seen at 200 to 300 basis point improvement in margin, when you go to Q2 with the Environmental business, because you're getting all of that operating leverage going into the stronger season.

Then typically, you would see another increase in margin as you go into Q3 because that is the strongest quarter for the Environmental business. Then you go down further, not as low as Q1, but in Q4, you do go down somewhere in between Q3 and Q1, when you hit Q4.

What we intended to do here -- we've certainly -- that piece that we talked about the first quarter is certainly built into the year guidance. But if you look at some of that seasonality that we have seen in the past and tried to set Oil and Gas aside because of the winter drilling programs up in Western Canada, you will see it then. You will see the trend for the year. Does that help, Scott?

It does. It does. So thank you for that. And as a follow-up, maybe on the Re-refining and Recycling business, maybe a little bit more big picture. I can appreciate what's gone on with commodity prices and what have you, but when you set that aside and think about what you can achieve in your pay-for-oil program and your percent of blended as a mix of output, has your view of what you can accomplish with those types of factors changed?

What are your thoughts bigger picture regarding this business? And assuming commodity prices normalize and return to levels, you think are more indicative of a normal environment, what are your thoughts of the attractiveness of this business in general and are you as confident in that going forward as you were maybe a year ago?

This is Alan. We certainly never intended to get ourselves into a business where we're trying to differentiate ourselves with some of the major oil companies out there. We are a hazardous waste management Company that is gathering 200 million gallons of hazardous waste across North America and putting in place a recycling and reuse product that we are trying to sell our customers as a sustainable and green initiative that they should want to be part of.

Whether it's lowering their carbon footprint or just their focus on being green, we have a lot of interest, both across Safety-Kleen, as well as Clean Harbors' customers, with that whole closed-loop approach to handling this hazardous waste. We are excited in the long-term to be able to differentiate ourselves in the market by having a green product that the OEMs would be interested in, that the major fleet operators, that our major customers that are wanting to be part of. We've had some good successes there; it's early, but I truly believe in that strategy and that will allow us to get ourselves away from being swung by what the majors are doing with their Group 2 pricing.

Fair enough. Thanks, guys.

Thank you, Scott.

Charles Redding, BB&T Capital Markets.

I was wondering if you could just give us a little more color on Environmental Services. I know your primary competitor would appear to be getting more aggressive on gaining market share. Do you still feel like you can gain a high teens EBITDA margin in 2014 or should we be paring back expectations there?

On the overall Environmental business, you're saying -- clearly, we believe the margin would be in the higher teens in that business, overall, including Field Service, Tech Services, S-K Environmental, absolutely.

Okay and then I wish you would just talk a little bit about the buyback. How aggressive are you looking to be here? What is your take on repurchases in the next several quarters?

We -- obviously the main point I would make here, Charles, is that this is really no change in strategy for the Company in terms of doing acquisitions and so forth, if they make sense. It's really, having put this now in place, the way we look at it is that we have added another arrow in our quiver; it is a more capital allocation decision.

Our cash flows remain healthy. We think we should have this, we went through the deliberation with the Board, they are in agreement now that this ought to be something that we use. It's a start for us; we're going to monitor it very closely as we go forward; it's new for us. We've done this in a standard open market; we intend to do it in an open market manner and we believe that our stock is undervalued today and so repurchase does make sense.

We intend to be out there, but we're looking at it, along with other things that we do to provide returns to our shareholders, including our capital investment program and our acquisitions. So we will definitely be active out there, but we're going to evaluate it with all those other things and have it be another arrow to be able to give good returns to our shareholders. That's the approach we are taking at the start.

Great. Thanks for the color.

Thank you, Charles.

Barbara Noverini, Morningstar.

Alan, you've often mentioned that Ruth Lake is a beautiful, premium facility and I understand that project delays are contributing to that lower-than-expected utilization, but what can you tell us about price competition in lodging and your ability to command or sustain premium pricing for your premium facilities like a Ruth Lake?

Our Ruth Lake facility was built with the eye towards providing executive rooms, as well as business classrooms, if you would, for Management that is coming into the area, that's either working full-time at the oil sands projects, or are contractors and engineers are coming in and needing facilities as part of construction projects that they are working on, like new construction.

So the amenities that we have brought in, the training facility that we have available, not only for our own employees but for customers, the maintenance facility that we have is really part of the overall complex that really no one else has. When visiting that site, which is a 600-room facility, as customers have come and toured, our differentiation is the fact that people have a private room with great facilities and great food where they can come, where many of them are away from home for two or three months at a time.

Got you. Thank you.

Thank you.

Al Kaschalk, Wedbush.

Can you talk about the 2014 CapEx and the mix between maintenance and growth?

Absolutely, Al. The maintenance portion of that is still in that $130 million-plus range, not too dissimilar from last year. And the rest is clearly growth and the total we expect at $200 million, plus the roughly $30 million on the incineration project.

Incineration spending, you are just not clear as to timing of that, given regulatory or permitting, or what is the hesitancy to include that in CapEx for the year?

Permitting is -- we are beyond that point, but clearly as you build an incineration capacity of the size and all the regulations around testing and so forth, that this is going to take, as Alan described earlier, till late 2015 to finish. We will probably spend $75 million, $80 million, roughly about $80 million on that project. It is just tough to tell how much will be completed this year. We are estimating about $30 million this year and then $50 million roughly next year, but it could be plus or minus $10 million from that.

Okay and follow-up, we've all hammered you on the results and that in the context of lower guidance, but you are growing 2014 EBITDA from 2013. You even provided some bridges from the prior guidance to what you reported, but what about the bridge from 2013 to 2014 and where do you expect that strength to come?

On the Technical Services side, you'll continue to see strength; on the S-K Environmental, you certainly will see growth there, particularly with cross-selling that we will be doing. We have held the S-K Re-Refinery business flattish, although certainly, we will have an uptick from Evergreen, because that was a drag on us in the fourth quarter and that will be positive next year, so that will certainly help.

If you look at Oil and Gas, we talked about that being a relatively flat to down in Industrial and Field Services; although it will grow in Canadian dollars, in US dollar terms it will be flattish. So it does -- the Canadian dollar impact -- that $100 million, when you go from being at $0.97 down to $0.90, it definitely has an impact there.

Right. Is that the segment, Jim, that we are -- the Canadian exposure, the currency exposure is, or is it across --?

It's across. In the Environmental business, I would say we are probably about, if you look at Technical Services and the part of Field Service that is the industrial area, along with all of the S-K, I would say that we are probably in the 10% to 15% range in Canada. Then when you look at Industrial, we are roughly about, I would say, 60% to 70% in Canada, and in Oil and Gas about the same.

Excellent. Thank you. And thanks for all the --

Great. Thank you.

Larry Solow, CJS.

My other follow-ups were answered. Just one quickie. You mentioned average equipment usage or utilization in Oil and Gas Services was 46% in Q4 2013, do have that number for the full year 2013 and then what was in 2012? Maybe for the quarter or the year or both?

I should also mention that in my script, it did not match -- when I was talking through that -- it didn't match the utilization here at 61%, which was on Slide 11. Larry, just to that point, if you were to think about the equipment being at 100% utilization, anticipating that a certain amount of it is racked and being maintained, thinking about that at 100%, we were operating at about 61%. My comments earlier were saying, if the equipment was only going to be at 75%, you're really at 46%, so that's really how we got to that.

Got you. Got that.

But, in general, this business, as you know, tails off in the second quarter and then really comes back on again in the late third quarter and fourth quarter, so I don't have the seasonal number here and I would be guessing, wouldn't you, Jim?

Yes. I would say for the whole year, it was probably slightly higher, because we had a nice -- if you looked at the full year, because in Q1, we were at a higher utilization rate in Q1, so that would have drove it a little bit higher, but I also don't have the exact figure.

We will come back at our next call, Larry, and have some more color on that if you like.

Yes, I'm just curious, do you happen to have what Q4 of last year was just for comparative purposes or --?

Yes. These are some those new metrics that we were trying to put together for investors and so we will follow-up with that as well.

Got it. Okay, great. Thanks.

Thank you, Larry.

Michael Hoffman, Wunderlich Securities.

Two different questions. What is your target percent of revenues for cash flow from operations in 2014?

Our cash flow from operations, Michael, is roughly about $400 million, based upon what we've -- the guidance that we gave here. At least $400 million, I would say.

Okay. And then, at the mid-point there is an $85 million EBITDA adjustment in the guidance. How would you lay that out across the four quarters? Where that's coming out?

Wait, I'm not [tying] to the $85 million of what you mean?

You had $610 million to $640 million. Now the midpoint it is at $530 million-something, that's the -- so your $525 million to $550 million, mid-point to mid-point is about an $85 million difference.

Yes.

So how much of that $85 million -- how does that fall across the four quarters?

You'd have to look at that in margin, and I don't have numbers like that right in front of me. As you know, we don't guide all the quarters, as you know. But I will tell you that I am expecting a margin improvement of a few hundred basis points going from Q1 to Q2 and then probably another, at least, 100 basis points improvement going to Q3 and then coming down probably 100 basis points going into Q4. I just don't have the numbers in front of me, but that's basically the flow it will be for the year.

Okay. That helps too.

All right. Great.

Thanks.

Thank you.

Thank you. I will turn the floor back to Management for closing comments.

Okay, thanks everyone for joining us today. We appreciate your questions and your feedback and we look forward to seeing many of you at some of the upcoming conferences we have in March. So have a great day. Thank you.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.