Clean Harbors Inc (CLH) 2014 Q4 法說會逐字稿

Greetings, and welcome to the Clean Harbors Incorporated fourth quarter 2014 conference call.

(Operator Instructions)

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

Thank you, Robin, good morning, everyone. Thank you for joining us today. On the call with me are our Chairman and Chief Executive Officer, Alan S. McKim; Vice Chairman, President and Chief Financial Officer, Jim Rutledge; and our SVP of Investor Relations, Jim Buckley. We have posted our slides for today's call to the Investor Relations section of our website. We invite you to open the file and follow the presentation along with us.

Matters we are discussing today that our 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 25, 2015. 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 and consistent historical comparison of its performance. A reconciliation of the non-GAAP measures to most readily comparable GAAP measures is available in today's news release which can be found on our website, cleanharbors.com, as well is in the appendix of today's presentation.

And now, I'd like to turn the call over to our CEO, Alan McKim. Alan?

Thanks, Michael. Good morning, everyone. Thank you for joining us today. Turning to slide 3, we produced a solid fourth quarter, particularly in light of the numerous headwinds affecting the energy markets. Revenue, while slightly lower due to the effect of currency translation, was in line with our expectations. Q4 adjusted EBITDA was ahead of last year's pace. From a margin perspective, cost reduction initiatives and a stronger business mix drove an 80 basis point improvement from the fourth quarter of 2013.

It was a similar story for the full year. In the face of difficult market conditions, including a drop in the Canadian currency, a slowdown in the Oil Sands, a significant decline in base oil pricing, and turbulent energy markets, our team responded with decisive steps that enabled us to increase our Adjusted EBITDA from the prior year. During 2014, we implemented a major cost reduction plan, conducted a detailed strategic review of our portfolio, we shifted resources from underperforming markets to stronger areas of the business, and created a regional sales structure that is enabling us to be more responsive and opportunistic. In addition, the Board authorized the Company's first stock buyback program.

Certain segments and business lines drove our results in 2014. In Technical Services, we processed over 10,000 more tons of incineration waste than in 2013 while growing landfill volumes by approximately 170,000 tons. Safety-Kleen contributed significantly to a record year for disposal, generating approximately $120 million in inter-company disposal revenue for Tech Services. This result is nearly 40% higher than the approximate $85 million in inter-company disposal revenue captured in 2013. We also benefited from robust cross-selling of Field Services to our Safety-Kleen customers during the year. In all, our team has a lot to be proud of in 2014. We capped the year with a strong Q4 that enabled us to exceed our guidance.

Now let's move to slide 4 and a review our segment performance. Tech Services revenue increased 7% in Q4, but more importantly, achieved nearly $100 million in Adjusted EBITDA for the first time. You may remember that we had accelerated maintenance shutdowns at two of our largest incinerators from Q4 to Q3. That shift in the maintenance schedule combined with a healthy backlog heading into the quarter, and really a terrific performance by our team, led to record volumes in our facilities.

Tech Services incineration achieve 96% utilization in Q4, one of the best quarters in our history. One factor in that performance was our Canadian incineration facility. We made several upgrades and enhancements in 2014, and due to these investments, we increased its practical capacity by approximately 12,000 tons to nearly 106,000 tons annually, which would increase our entire network to about 492,000 tons of annual capacity.

Our landfill business also set a record in Q4 handling the largest single quarterly volume in our history, an increase of nearly 40% from a year ago. It also capped the best year in landfill in our history with volumes up nearly 10% in 2014 versus 2013. Our focus and expansion into many oil and gas plays has really paid off with the increased volume into our landfills. The result of these record volumes in Q4 was a 23% increase in our Adjusted EBITDA and nearly a 400 basis point improvement in margin. So really, congratulations to our entire Tech Services team on delivering these strong results for both the quarter and the year.

Turning to slide 5, Industrial and Field Services reversed several quarters of declines by posting 4% top line growth driven primarily by our US business. This increase is particularly noteworthy considering the lower Canadian dollar and weaker Oil Sands environment in Q4 compared with a year ago. We concluded 2014 with our second straight year of no major emergency response events, although we did respond to a few small spills in Q4. Profitability and margins were lower in the quarter as result of the mix of work and pricing pressures we are facing from some energy clients. Overall utilization for our billable personnel was 81% which is consistent with Q4 of 2013.

Moving to slide 6, our results in Oil Re-refining and Recycling reflect a decline in base oil pricing that culminated with a $0.50 drop in early December. The posted price of our Group 2 base oil fell from $3.45 in August to $2.45 in December. This decline in base oil started at the time of the Safety-Kleen acquisition in late 2012 when base oil was closer to $4 a gallon. To address this major decline and margin squeeze, we announced our Zero-Pay and Charge-for-Oil initiative in mid-December.

We needed to realign our price structure and manage our spread. And we believe our customers and our partners will continue to work with us through these very difficult times. Adjusted EBITDA in the segment was down significantly from a year ago. We continue to focus on increasing the percent of blended oil that we sell. Our blended percentage increased to 38% in the fourth quarter, from 34% in Q3 and from 33% a year ago.

Turning to slide 7, revenue in Safety-Kleen Environmental Services was down 6% in the quarter, but most of that decline was due to -- related to the business mix, as well as lower inter-segment contribution from S-K Oil as a result of the lower year-over-year PFO. Parts washer services increased 12% from a year ago which is really encouraging. 2014 represented the first time in four years that Safety-Kleen expanded the net number of total parts washers in service which was a notable accomplishment. Really, kudos to the Safety-Kleen team in regaining some market share this year.

We plan to continue to be aggressive and regain more market share this year and have approximately $12 million of capital budgeted this year for this business. We collected 49 million gallons of waste oil in Q4. For the year, we gathered close to 205 million gallons which was flat with 2013. That is impressive given how hard we've been pushing to reduce our Pay-for-Oil and walking away from some business. Even prior to our announcement of our Zero-Pay, we were driving down our PFO and seeking new sources of cheaper oil, and as result, we lowered our average PFO in the quarter by $0.10 and $0.16 for the year.

On slide 8, the performance of the Lodging Services was similar to Q3. Revenue was down year-over-year due to currency translation, manufacturing weakness and lower activity in our drill camps business. Our fixed lodges continue to perform reasonably well in a challenging market in terms of occupancy. We were at 73% occupancy of our outside rooms in the quarter versus 72% a year ago, but down from 76% in Q3. We've certainly seen some room rate pressure in recent months, but our margins were still up by 170 basis points from a year ago as we continue to drive more of our revenue from our fixed lodges.

So turning to Oil and Gas Field Services on slide 9, Q4 revenue declined 19% from our prior year. This result reflected the overall downturn in the energy market compounded by the effects of currency translation. Reduced exploration budgets continued to impact our seismic support business. At the same time, our service rental business is performing well in the face of the challenging market. Our average number of rigs serviced in the quarter was 173, up sequentially from the Q3, but down from a year ago.

We gained market share in Q4, and as a number of smaller competitors struggled as customers eliminated vendors and gravitated towards larger quality operators like Clean Harbors. Average utilization of our key equipment, centrifuges for processing waste, increased to 57%. The team really has done a good job of eliminating costs and getting underutilized equipment in the field which really enabled them to deliver the margin levels with a year ago.

Moving to slide 10, and our corporate initiatives, we achieved our targeted $75 million of annualized cost reductions in 2014 capturing a net benefit of approximately $40 million. In January, we announced the completion of our strategic review which produced several important outcomes. First, we are planning to carve out our Oil and Gas Field Services segment as a stand-alone public entity, along with some drilling-related mobile lodging assets. Second, we intend to maintain the majority of our Lodging segment because our fixed lodges are an integral part of our industrial service footprint in the Oil Sands.

Third, we determined that there are higher returns to be gained from the Re-refinery business and that we are the best owners of that business. And toward that end, we are intensifying our focus on blended oil opportunities through a dedicated lubricants business to be led by Jerry Correll. We believe that with the implementation of our Zero-Pay and Charge-for-Oil program, our highest margin routing initiatives, and the goal of becoming a majority blended business in the coming years that we will see significant long-term upside in Safety-Kleen oil regardless of what is happening in base oil pricing.

Overall, the strategic review was designed to determine the optimal mix of business to achieve our EBITDA margins and improve our return on invested capital. In conjunction with this strategic review, Eric Gerstenberg was named Clean Harbors Chief Operating Officer. He will oversee all of our environmental operations including Safety-Kleen's Environmental business. Eric has a long track record of success here and has demonstrated an ability to consistently deliver growth and drive change. And we are confident that rolling up all our environmental and industrial operations under Eric will increase efficiencies and generate margin enhancements.

Moving to our outlook, starting on slide 11, within Tech Services we will seek to build momentum off our record finish in 2014. We look to further drive volumes from waste projects and to expand penetration of our InSite program across a number of verticals. As we've stated previously, we believe that our planned startup of our new El Dorado incinerator in late 2016 will be timed well given where the overall incineration market is today. Within Industrial and Field, cross-selling our services to Safety-Kleen customers remains a primary focus and we intend to co-locate some new offices going forward to more tightly integrate those businesses. In the near term, our Industrial Services group is carefully managing resources to maximize our opportunities for turnaround work in the US and Canada.

Within our Refining segment, we are focused on increasing our blended product sales and continuing to build a pipeline of opportunities. We believe that creating a direct sales channel where we sell our blended products back to the Safety-Kleen customer base is the most rapid path to significantly raising our percentage of blended products and moving away from base oil.

Turning to slide 12, on the Safety-Kleen branch side, we are committed to lowering our PFO through the full implementation of our Zero-Pay and Charge-for-Oil program. For Lodging, we continue to seek opportunities for additional occupancy at reasonable rates at our fixed locations. For our mobile camps, we've maintained a dialogue with several pipeline companies, and there are plans for major pipeline projects in several regions including British Columbia where we see the potential to deploy some assets.

Within Oil and Gas Field Services, our strategy going forward is to take additional market share. Our sales pipeline, particularly on the solids control portion of this segment, is fairly strong but margins have remained under pressure. For example, we are currently still at close to 50 packages in the US today despite the fact that the US rig count has come down by more than 500 in the past few months. We have carefully managed our costs and resources in this business as we navigate this dynamic environment.

So with that, let me turn it over to Jim for his financial review. Jim?

Thank you, Alan, and good morning, everyone.

To start, on slide 14, here's a snapshot of how our verticals performed in Q4. Refineries and Oil Sands customers were our largest vertical in the quarter accounting for 13% of Q4 revenue. This vertical was down about 2% from a year ago as increased US industrial activity, particularly at refinery customers, was offset by lower Oil Sands revenue. Chemical represented 11% of Q4 revenue and was up 5% from a year ago. As we've mentioned on the past several calls, the low cost of natural gas continues to underpin strong growth in this vertical.

General manufacturing was also 11% of total revenue in the quarter. The combination of a stable base business and good project flow drove 17% growth in this vertical from Q4 a year ago. Automotive has been our largest vertical the past several quarters. However, beginning in Q4, we created a new category called base oil blenders and packagers in order to better represent sales of our re-refined products. This vertical, which is a subset of what we formerly called automotive, accounted for 10% of our revenue in Q4. Base oil blenders and packagers was down about 25% from the prior year due to the decline in base oil pricing.

Automotive represented 7% of our revenue in Q4. We continue to cross-sell disposal and other services to Safety-Kleen's legacy customers which drove a 16% increase in this vertical from the prior year. Looking at our smaller verticals, we saw great success in the fourth quarter in both terminals and pipelines and utilities which grew by 24% and 16%, respectively. We've seen a strong flow of waste projects in both those verticals, while utility customers continue to step up their project spending.

On slide 15, here's how our Q4 direct revenue breaks out among our six reporting segments. You can see where the trends in the energy markets that Alan discussed have affected some of our business such as Lodging and Oil and Gas. Meanwhile, our Environmental businesses, which include Tech Services, SK Environmental Services, and Field Services portion of our Industrial and Field Services segment, continue to grow.

Turning to slide 16, and the income statement, we recorded Q4 revenue of $845 million, down approximately $34 million from a year ago. As Alan mentioned, the bulk of this decline was related to the foreign currency translation impact. Gross profit, defined as revenue less cost of revenue, for Q4 was $234 million for a gross margin of 27.7%. This represents a 110 basis point improvement from the prior year driven by our success in lowering our cost structure.

We reduced SG&A for the fourth quarter to $103.5 million from $104.9 million. For the full year, our SG&A percentage of revenues was 12.9%. Looking ahead to 2015, our cost savings programs will enable us to hold the line on our total SG&A expense despite the increasing costs we typically see for labor, healthcare, and the like. Depreciation and amortization at $70.6 million was essentially unchanged from the third quarter. For the full year, our D&A was approximately $276 million, and looking ahead to 2015, we expect full-year D&A of approximately $270 million.

Income from operations in the quarter was essentially flat at 6.8% of revenues versus 6.7% of revenues in Q4 a year ago. Adjusted EBITDA was $130.8 million or 15.5% of revenues, up 80 basis points from Q4 2013. That is consistent with the level of improvement we saw in our full year 2014 performance as we generated Adjusted EBITDA of $521.9 million, or 15.3% of revenues, compared with $510.1 million or 14.5% of revenues in 2013.

The effective tax rate for Q4 was 29% which compares with 31.2% in Q4 last year reflecting a favorable year-end tax adjustments. Our full year 2014 effective tax rate, excluding a charge to deferred tax assets and the effect of the third quarter goodwill impairment on pre-tax income, was approximately 40.6% compared with 33.6% in 2013. The higher full-year tax rate is due to reduced profits in Canada which is subject to lower tax rates than the US. For the full year of 2015, we expect our effective tax rate to be in the 39% to 40% range given our current mix of relative profitability between the US and Canada.

On an EPS basis, we generated $0.46 per share in Q4 compared with $0.44 in the year-ago quarter. In addition to slightly higher net income, we also benefited from a lower share count resulting from our share buyback program. The number of shares issued and outstanding as of the end of the year was 58.9 million shares.

Turning to slide 17, our balance sheet remains strong. As of December 31, cash and marketable securities totaled $246.9 million compared with $258 million at the end of Q3. We generated strong positive cash flow in Q4 and invested $50.5 million in share repurchases during the quarter. In all of 2014, we purchased nearly 2 million shares at a total cost of $104.3 million. We have about $46 million currently authorized under our existing share repurchase plan.

Total accounts receivable were down nearly $28 million since the end of Q3, however, DSO increased by one day during Q4 to 71 days. We believe the changes we've made to the Safety-Kleen billing process in previous quarters are now resulting in more accurate billing. This improved accuracy should capture additional revenue opportunities. As we move into 2015, our focus will shift more toward collections and gradually bringing DSO down into the mid-60-day range.

Environmental liabilities at quarter end were $205.8 million, down more than $7 million from the end of Q3, as we took advantage of an opportunity to remediate a liability at one of our sites in Q4. For the year, our environmental liabilities decreased by nearly $14 million. I should point out that nearly $3 million of that decline is related to foreign exchange.

CapEx was $58.7 million, down from $60.7 million in Q3 of this year, and $72.6 million in Q4 a year ago. For 2014, our capital expenditures were $257.6 million which included approximately $10 million for the new incinerator in El Dorado. We also sold $8.2 million of assets in 2014, so our net CapEx for the year was $249.4 million. For 2015, we are targeting CapEx of approximately $200 million. This excludes the construction of the incinerator which will likely add approximately $50 million in 2015. We also intend to sell approximately $25 million to $50 million of non-essential assets, so that our net CapEx in 2015 will be approximately $200 million to $225 million.

Cash flow from operations was $101.3 million which was $34 million below Q4 a year ago, but $20 million above the $81.1 million we reported in Q3 of this year. For the full year, our cash flow from operations was $297.4 million, down from 2013. The primary factors behind that reduction were an increase in our inventory working capital and a decrease in accounts payable. For 2015, we expect working capital to be a positive for us with cash flow from operations north of $400 million.

Moving to guidance on slide 18, we are confirming the full year 2015 Adjusted EBITDA guidance we gave as part of our strategic review announcement back in January. Given that our revenue is subject to variability based on a number of external factors, such as Canadian dollar currency fluctuations and base oil pricing, we are not providing specific revenue guidance for 2015. We will continue providing quarterly guidance this year in order to help the Street better understand the seasonality of our business.

Looking at the first quarter, we currently expect Adjusted EBITDA in the range of $83 million to $90 million. We anticipate some headwinds in the first quarter primarily related to working through two months of higher cost waste oil in the inventory of our S-K Oil business. We will benefit going forward from the considerably lower Pay-for-Oil costs after we turn over that existing inventory. In addition, in our Oil and Gas business, winter breakup in Canada is happening in February this year rather than its typical late March to early April timeframe. The seasonality in Technical Services where Q1 is typically our weakest quarter also has been exacerbated this year by the inordinate number of blizzards and snowstorms across the northeastern US.

Looking at our full year 2015 Adjusted EBITDA guidance from a segment perspective, we expect Tech Services to grow in that mid-single-digit range. We expect SK Environmental to expand its Adjusted EBITDA contribution at a similar pace. At the same time, we expect our Industrial and Field Services segment to increase its Adjusted EBITDA contribution at a double-digit pace, say in the low-teens, during 2015. We have experienced major project wins in turnaround opportunities on the industrial side of that segment, as well as continued cross-selling opportunities and expansion of our Field Services organization.

For S-K Oil, despite the slow start to the year, we expect a flattish overall performance in 2015 as we reap the benefits of lower PFO and transportation costs. In our Lodging segment, we project Adjusted EBITDA will decline at a double-digit pace from 2014 based on the current Oil Sands environment. And lastly, our Oil and Gas segment is likely to see a meaningful decline in profitability from the prior year. In areas where we face market challenges, however, such as in Western Canada, we are taking cost actions to mitigate the effects on our profitability.

Another metric we'd like to highlight today is ROIC, Return on Invested Capital. We've talked on several calls now about how we have become more return focused as an organization. In fact, in 2014, we even incorporated ROIC into both our annual and long-term incentive plans for the extended Senior Management team. In the interest of transparency, we wanted to share with you our long-term ROIC target. Based on our five-year plan, we intend to increase ROIC to the 13% level and beyond.

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

Thank you. (Operator Instructions) Al Kaschalk with Wedbush Securities.

Good morning, guys.

Good morning, Al.

I want to focus on, first of all, excellent job on Tech Services side, but my questions, I want to focus on PFO and the Re-refining side. First, could you give us a little more color or detail on the receptivity on the PFO universal no pay, and in particular, what type of push back or volume loss are you anticipating in 2015 relative to 2014?

Yes, Al, I think when you look at the history of the waste oil business, and even thinking back over the last 20 years, customers have routinely gone from being charged for collecting oil to being paid for their oil depending on the values of 6 oil and 2 oil, and subsequently base oil, and so this isn't really anything new to customers.

It certainly is a significant change that had to take place as a result of the significant decline in the oil markets that has taken place not only in the last six months with the crude oil, but really in the last two, to 2.5 years with the value of our base oil. And so I would say that none of our customers certainly want to see less of a payment for their oils that they're collecting, but on the other hand, I think recognizing that they are seeing the benefits of those lower prices in their products that they are buying from their suppliers. And I would say that for the most part we have not lost customers.

Now that being said, there will be churn, and we're seeing churn on both our own customer base, as well as our competitors, who are doing the same thing we're doing. They are absolutely recognizing that unless they address what they're paying for their oil or charging for their oil, their spread is gone and they won't be in business if they don't make that adjustment. So I don't believe we are going to see a significant decline in volumes this year, and I think customers and our partners are cooperating with us.

Okay. In terms of -- I appreciate the color -- but where, are you now through that customer base in terms of communicating and coming back to them for the next collection efforts such that the price is fully intact here or implemented, such that you're working your way back to either zero or even to the case where they're going to pay you ultimately to take it away?

The transactions that we do, particularly for our branch accounts, they see those immediately on their handhelds, and the folks that are out there in the field every day are talking to our customers every day and we're getting feedback every day. Most of the national accounts have all been converted. There's a couple of ones that are still contractually obligated for some extra time period for us to adjust, but we really have been moving forward and continue to look at pricing by market, and in some cases, have begun charging in certain markets. And so that will continue and I believe that Clean Harbors and Safety-Kleen in 2015 and beyond are going to do a much better job of managing the spread moving forward.

Okay. And then my follow-up is on the Re-refining side you made an acquisition this quarter. You now, I think, are well above your capacity in terms of the volume throughput allowed which would imply a lot more opportunity to be selective on the volume. But also we're heading into the driving season and I would expect that volumes in terms of used oil generation are going to increase. So there is a question here, but the question, I guess, would be we should start to see very good margin performance in SK Environmental and slightly better on the Re-refining side in 2015, I would imagine?

Two things, one is that we have not closed on that acquisition. We did make that announcement and we hope to close on that soon. So that volume isn't necessarily in the network yet. We do expect a seasonal upturn in volume, and we, as you know, we not only take oil and recycle it and re-refine it into various finished products, but we also sell recycled fuel oils to a number of end users in certain markets. And so, as we have in the past, looking at maximizing our routings and providing essentially the best margin outlook for our oils is something that we are doing very, very aggressively and we will do that when we complete that acquisition.

Okay, thank you, Alan.

Yes, thanks.

Larry Solow with CJS Securities.

Hi, it is actually Arnie Ursaner backing up Larry today, good morning.

Good morning, Arnie.

So on behalf of Larry, one of the questions, if you could clarify it is, I believe, Jim Rutledge, in your prepared remarks you indicated SG&A could be flattish, but in your press release you have extensive comments about additional actions that can be taken. I just want to make sure I'm reconciling the two of those?

Absolutely. Clearly, SG&A is impacted by costs, labor costs, healthcare, and so forth. So we, as we have in the past and will continue doing, is to look for cost initiatives to offset that, and perhaps even offset it to the point where we could decrease it. But what we're saying at this point is that our overall SG&A, we are expecting that to be flattish this coming year.

When you consider for our corporation, for example, labor costs, just 2% or 3% has a $30 million impact on our Company. Clearly, there are initiatives that we are undertaking to be able to reduce that effect. Also, with our regional sales program that we put in place last year, that we're seeing the full effect this year, so that has somewhat of an increase, but certainly well worthwhile the penetration that we're making in the regions around North America through our sales efforts.

Is there any way you can quantify what additional cost-cutting actions are embedded in your FY15 guidance?

Absolutely. One of them we've talked about and that is PFO. When we originally talked about our cost savings, we've typically put that in, and as you know, last year we had about a $0.16 decline in PFO with that being one of our cost savings initiatives.

Now, clearly, we're helped by the reduced crude prices, to be able to have a good background, to be able to push that even further, as Alan just talked about. But beyond that, we have procurement costs that affect our Company overall, not just SG&A, where we're consolidating vendors, where we're putting more bids out among our suppliers, and isolating who are the best partners for Clean Harbors on the supply side.

And we're talking savings in the $10 million to $20 million range here in procurement if you look at overall for the Company. I think also consolidating some of our offices where we have Safety-Kleen branches, for example, in the same regions where our field service and industrial service branches are. We are doing some consolidating and sharing offices that you'll see a nice cost savings impact.

And then lastly, another a big one I would mention is in the area of transportation, clearly, with our high-margin routing system that Alan alluded to where we've upgraded our WIN system to be able to handle the Safety-Kleen routing not only of waste, but of waste oil, not only containerized waste, hazardous waste, but also waste oil, that that will yield very significant transportation savings into 2015. So I think those are the major buckets that we're looking at this year.

Thank you very much.

Thank you, Arnie.

Scott Levine with Imperial Capital.

Good morning, guys.

Good morning.

I wanted to ask a little bit on capital deployment. It sounds like you're guiding a free cash flow number in the neighborhood of $200 million. You've got something left there on the buyback, I think you said $46 million. You've been active under the program so far. Maybe a little bit of elaboration on your thoughts on acquisitions versus capital returns, and could we be looking at a new buyback program, or just a little bit more detail on your thoughts there?

Sure. The way we're looking at our capital allocation across the three areas, if you will, our capital spending that we do internally in our businesses, acquisitions and share repurchases. The approach that we've taken there is to look at the relative returns at any point in time as those opportunities are created. So for example in Q4, and we're looking at where the stock price was and the returns that we expect on that over the longer term for our shareholders, we invested over $50 million to share repurchases.

That being said, on the acquisition front, we're very focused on the environmental opportunities out there. And as you know, you have to take advantage of those opportunities when they present themselves and be opportunistic, so we try to also time our, the buying of those opportunities during those times when those opportunities present themselves.

And typically, we don't overpay in acquisitions, we look for returns well in excess of 20% where we can truly add value to the Company that we are acquiring. And then lastly, in CapEx, we are scrutinizing our capital expenditures and trying to bring our overall spend down. Our maintenance CapEx is still in that $140 million or so range, but there are growth projects like, for example the El Dorado incineration project that we're working on that has substantial future benefit to the Company that has very high returns that we are investing in, as well as other projects.

So we look at our CapEx program both in terms of the returns, and also their sustainability, which we call resiliency. We have a resiliency score that we give growth projects and we more or less have set up a competition for capital among our businesses to go for the higher return, most resilient projects as far as our growth plan. So, hopefully, that gives you some color in the three areas that we are allocating our capital.

It does. Thanks. And here's my follow-up, I know you gave some good detail with regard to the oil recycling outlook, it sounds like you expect EBITDA to be flat year-on-year. Maybe a little bit more color with regard to, call it the spread within that business. Is your expectation, as well, that you'll be able to hold spread constant and/or a little bit more with regards to the trajectory, do we expect improvement in that off of a weak Q1, or maybe just a little bit more color regarding spreads in that business?

Sure, Scott. This is Jim. I'll start the answer to that and if Alan wants to add anything. First of all, if you look at, you mentioned Q1, and clearly there is spread compression that we will see in Q1 that's caused by the fact that it was only in December when base oil pricing came down $0.50 a gallon. Now clearly, our aggressive PFO plan, and that we're executing and reducing PFO, has a lag of a couple of months because we have generally have about two months worth of PFO in our inventory from the time we bring it into our branches to the point where it's part of a product that we sell as a refined product.

So during Q1, you will essentially see almost like a break-even in SK Oil because you'll see the full impact of revenues being hit on base oils coming down, but not yet seeing all the benefits show through because we are selling the opening inventory, if you will, or what we have an inventory during that quarter. But right after that you will see a huge widening of that spread, and what we're seeing for the remaining three quarters of the year, therefore, is a widening of that spread that will bring it at least to a break-even, not a break-even, but a level of EBITDA to where it was last year.

So we're, clearly, this is a spread business, we think we are managing it well. And I also would add to that, not only PFO, but also in the transportation savings that we're talking about in our better routing is also going to enable us to improve that spread. Alan, I don't know if you wanted to add anything?

No, I think that's great.

Thank you.

Jim Giannakouros with Oppenheimer.

Hi, good morning.

Hi, good morning, Jim.

As far as the $120 million inter-company revenue versus the $85 million that you captured the previous year, that Safety-Kleen to Tech Services, I'd expect the incrementals on that to be pretty healthy. How much did that impact the margin, if you can isolate it, in Tech Services in 2014?

It's hard to isolate it as a single amount, but I will tell you this, that it drove our utilization to a point that we saw that operating leverage in our business. So if you look over, since we acquired Safety-Kleen, in overall Tech Services you're seeing 100- to 150-basis-point improvement in their EBITDA over the last couple of years plus. And I will tell you that that volume coming into our plants is clearly showing that leverage. So how much is it contributing? Maybe 100 basis points of it is clearly from Safety-Kleen adding so much volume in, but it really needs, you can't isolate it as one amount, but hopefully that color is helpful.

It is. And, Jim, just to add on to that, just on a go forward, you're going to lap, I guess, the pretty stellar volume growth in margin benefit that you got from flows from Safety-Kleen in maybe 2Q of this year, how should we be thinking about the margin potential in Tech Services in 2015? I'm assuming that incremental volumes, if there are any, that you can process, are you pretty much running at capacity now? And then, within that, is there still potential for mix benefits? Thanks.

I think there's growth still to be had there, and clearly, with our expansion of El Dorado that is one of the reasons why we're doing it. And a lot of the cross-selling and the deeper penetration into the Safety-Kleen branches, whereby, Clean Harbors standing behind those branches, we can handle almost any kind of hazardous or special waste streams that they have.

So you will see growth as we go forward, and I think if you would ask Eric Gerstenberg he would tell you that in Tech Services we would like to be able to exceed 30% margin over a period of time. And I definitely believe it is doable with the kind of opportunities that we see in our overall network. Alan, I don't know if you wanted to add anything?

Yes, I would just add, Jim, that we've only begun to really benefit from the network that Safety-Kleen has. So much of what we've done over the last couple years is really putting the companies together and building out that network. And as you mentioned, re-looking at the network from a cost standpoint.

But on the revenue side, the real opportunity is how do we grow our business across that network, what new lines of business can we launch that our customers are looking for. For example, on the retail side, we've really taken advantage of opportunities on growing our retail business where the large retail operators out there both on the pharmacy side, as well as on the home supply companies are looking for companies like us to be able to handle all the various stores and locations they have.

So you're going to see Clean Harbors not only continue to get the kind of business that historically Safety-Kleen had, but really grow new volumes from new lines of business.

Got it, that is helpful. One more, actually two more small ones, if I may, accrued expenses, down $40 million quarter-over-quarter. What drove that delta, and, Jim, how much did that influence your 4Q?

Accrued expenses, I think, some of it is just the reduction in PFO, and right in front of me right now, I think it was across the board that we just had a decline there in accrued expenses. I think you had seen some of in the PFO, lesser PFO costs that we have accrued in there.

Could it have been things that moved into CapEx or AP or side, I'm not sure exactly what area.

Yes, I'd have to -- let me take a look quickly here. And if not, we can always follow up with you, Jim, on that we will follow up separately. And actually, PFO would not have gone through there, I apologize on that.

Yes, it just seemed like a low number, and I thought there was some influence there. And two quick ones, one, if, how much is left in your share buyback authorization?

$46 million right now.

Okay. Then FX impact in your 2015 expectations, how should we be thinking about that influence, the stronger US dollar?

Well, what we've done in our projections, clearly, seeing that the rate now is $0.80 per Canadian dollar, that clearly, that being a low rate. We assume that in our guidance of, I think, we have $0.81 or $0.82 in our guidance that we put forth. From most of what I've seen, it seems to have bottomed out there, but I think that crude prices have somewhat of an impact given the crude impact in Western Canada. So I think that is driving some of it, as well as the strength of the US dollar itself. But we didn't want to try to forecast down or up, so we basically went with the current rate there.

The impact that we saw just in Q4 was over $20 million in revenues. Now clearly, we have cost structure in Canada, so there is the opposite effect where the decline in prices have made things cost less in Canada. So the EBITDA impact in Q4 was probably more in the $3 million to $4 million area. So, hopefully, that helps.

It does. Thank you. And just to clarify, TFI is not in your 2015 guidance?

No, it's not, no.

Thank you very much.

Thank you.

Adam Baumgarten with Macquarie.

Hi, guys, thanks for taking my question. You had mentioned that oil and gas volumes helped the landfill business in 2014. Have you begun to see any of those volumes start to taper off now that we're into 2015?

Probably more from weather-related slowdown than anything. So I would say that outside of that we would continue to see strong volumes, we believe, in a number of our landfills this year from that oil and gas area.

Okay, great. And then, can you just kind of help us understand the margin tailwind from lower fuel costs in the quarter?

This is on the fuel for purchasing, like our diesel for our trucks?

Correct.

We spend, or we purchase at least 25 million gallons a year of diesel, and we have outside transportation costs of about $175 million. So clearly, there's a benefit, but the only thing, Adam, to recognize is that we do have a fuel surcharge to our customers that is adjusted for that. So I would say probably, maybe about 75%, maybe 80% of that we do pass along to our customers, so there is a net savings. But it's not as big as the gross amount is the main point I wanted to make to you.

Right.

Okay, thanks, guys.

David Manthey with Robert W Baird.

Hey, guys, good morning. Looking at the midpoint of your first quarter EBITDA guidance, it represents about 16% of your full year midpoint EBITDA guidance, and when I look over the past two years, the first quarter has been more like 23% or 24% of full year EBITDA. And most of the companies that we've heard from that have exposure to Canada or energy are expecting conditions to weaken through 2015. And it sounds like you expect things just to get better and to get materially better from the first quarter levels.

And, Jim, you outlined a few of those things, I think you talked about the temporarily higher PFO inventory, the winter breakup coming earlier, and then the weather impact on TS, but if the first quarter was 23% or 24%, that would be a gap of about $40 million. I can't imagine that those three pieces are of that magnitude. Could you just help us understand as we look at the full year, coming off of that first quarter base, how you expect to see that type of acceleration?

Yes, absolutely. And the key thing, Dave, in this whole area is the fact that the environmental business, whether it's our Tech Services, our Field Services and SK Environmental, it is seasonally weak in Q1.

Without the Western Canadian contribution from Oil and Gas Field Services, which we've seen in prior years, takes away that offset, so what you're seeing is more of the seasonality showing through in Q1. That's one major factor. But that does come back, clearly, as you've seen, actually if you went back and looked at just our environmental businesses, you will see that it's a lesser percentage in Q1 than Q3 and Q2. And then Q4 is after that.

The second point, and it is a big point, is what you already did mention, and that is that PFO inventory, because that's an impact of between $10 million and $15 million in one quarter, that compression that reverses itself when you sell off that inventory. So if you take those factors into account in the seasonality of our business, that is what gives you that kind of variation.

For example, our overall corporation in Q1 will probably have an EBITDA margin of, say, in the 12% range. You'll see that grow to 16%, 17%, 18% as you get into the later quarters, particularly with the environmental leverage that you get from their more favorable season. Q1 is their worst. So I think those are the two major factors to think about.

We are not expecting any rebound of oil and gas, or we haven't forecasted any of that kind of stuff in there. This is just really the base business really showing through and this inventory, selling the higher-priced inventory that I just mentioned before out of, in Q1.

It would be important not to reemphasize the impact of weather that's had and the first quarter, as well, which I don't think we've talked enough about. We've had significant plant and branch closures, huge extra costs that we're taking on, having real difficult time moving some of our products around, our waste around, and that has been a big impact on our first quarter here. And let's not forget that. Our people are working in extreme temperatures, and as being a field Company, with a lot of people out in the field, it's very, very difficult environment to work in, and that's clearly showing up in the first quarter guidance we gave.

Got it, okay. And then on the PFO, I may have caught the number, I think you said $0.16 was the improvement you saw in 2014. Could you just tell us where you stand today on PFO, where it was a year ago or a quarter ago just to give us an idea of the trend there?

Well, clearly, as Alan alluded to, many of our branch accounts are at zero PFO cost, and if you look at the national accounts with many of the contracts, they vary in their tenure. So we're working through those and even negotiating those that are longer term to bring those down. So at this point right now it would be difficult for me to give you an average of all of that, but clearly it is tens, multiple of $0.10 reduction, it's a lot.

We just can't give him an exact number.

Yes, I couldn't give you an exact number at this point because we're in the middle of it. We implemented this, by the way, in early January, that was the beginning of our program, it was effective January 1. So we're almost two months into it. Clearly, when we get through the first quarter we'll be able to give more color on how we've done, but it's meaningfully reduced.

Okay. And just that $0.16, did I catch that right, was that what you have improved it?

Exactly, if you look at during 2014 that was how much we reduced it during 2014.

Okay, through year end. Okay.

Through year end.

All right, thank you very much.

Thank you.

Sean Hannan with Needham & Co.

Yes, thanks, folks. Thanks for taking my question here this morning. First, wanted to focus on the Technical Services segment, kind of a two-part question here. Alan, I think I may have heard you earlier on in the prepared remarks mentioning that the incineration tonnage capacity exiting the year, maybe around 492 million tons, and just wanted to get a check on where that tonnage was a year ago?

And then as a follow-up around some of the landfill conversation today, there has been, I think, supportive views from you that we are still going to get some good Bakken in oil and gas volumes in 2015, but what I don't have a sense of is, as you are looking to the growth within landfill, are you expecting growth from that area or is that really all going to be driven by continued routing of Safety-Kleen? Thanks.

Sure, Sean, thanks. 492 million tons is the new annual capacity which we've increased by about 12,000 tons based on the capital investments that we've made and modifications we've made with, particularly with one of our plants. But as you know, every year we spend capital on our facilities to really de-bottleneck and really try to get more throughput.

So we have a lot of deferred revenue tied up in our waste inventory and we're really trying to process more until we get our new plant on. Regarding the landfill volumes, we have nine landfills that not all are taking waste from the oil and gas area, but clearly, there are three or four of them that have really, because of their location and transportation, been able to get some significant volumes. And although the rig count continues to come down in some of the plays, we are not active in those plays with our landfills, so it hasn't had as much of an impact on our landfill business.

But we would expect to continue to benefit from the activities in those areas both on the West Coast, in Canada, in the Bakken and that has been a focus not only for our landfill business, but for a lot of our industrial and our oil and gas business. So I would expect us to see continued volume in that market, Sean.

Sure, thanks, Alan. Just to clarify, I understand that we should expect good volume there, but I'm trying to understand, as we looking to 2015, the growth across the segment exposure that you would have for those that are providing waste streams into your landfills. I don't know if we necessarily would be getting growth from those areas and whatever growth you would be getting is that primarily going to be driven by Safety-Kleen or can we elaborate on how to think about how that would grow?

There's a lot of different sources of waste that go into our landfills and Safety-Kleen really isn't one of them. Most of the waste that we're collecting is containerized waste from the Safety-Kleen network and that feeds a lot more of our TSDF network and our incineration and recycling operation. But our projects backlog is strong, the remediation business is looking really strong this year. Like I said, the waste coming out of the oil and gas area, we believe we are going to continue to enjoy volumes there. So we had a record year in landfill volumes in 2015. I don't think we typically give out guidance on volumes for our landfills, Jim, but I'm just trying to give you some color, Sean, to kind of help you understand where the business is going in 2015.

Sure, that's helpful. Last question here, in terms of the share gains within oil and gas, can we get a little bit more clarity around the placement of those assets, oil or gas focused, in terms of those packages here in the US? I think that there may have been some commentary supportive of that being more biased toward gas. Just a little bit more color there would be helpful, and the sustainability of being able to effectuate that trend? Thanks.

I can't give you exact customers and locations of where the rigs, the 50 packages are operating at, but I do know that our team has done a really good job as rigs have come down and laid down that they have moved to other customers. We are getting a lot of inquiries.

As you can imagine, with everything that's going on in the oil and gas area, we're getting a lot of inquiries for new business, and customers looking for lower prices, they're trying to address their cost structures as a result of what has happened in the crude oil market. And so the placement of our equipment and where our personnel are really is throughout a number of different oil and gas plays, and I wouldn't be honest with you if I knew exactly where they all were today work versus where they were even two or three weeks ago because things are changing quite quickly in that market.

But our team has done an extremely good job of taking advantage of some of the new opportunities that are coming through as a result of customers looking for better pricing, and we have a lot of equipment to put to work, and we're going to be aggressive in putting that to work in a lot of plays.

And geographically, to Alan's point, we've seen some strength in Pennsylvania and also in the South, are opportunities that we're hearing about just from a geographic standpoint.

Okay, very good. Thank you so much.

Okay, Sean.

Michael Hoffman with Stifel.

Thanks, Alan, and Jim. Nice finish to the year. Jim, a couple of housekeeping questions. What was the cash flow from Ops in 2014?

Cash flow from operations, that was the $297 million, yes.

$297 million. So $297 million is going to greater than $400 million, I just want to make sure I got that message right.

Absolutely.

Okay. And then, second, on the SG&A, when you say flat, that's on dollars, right, so you were roughly $440 million, you expect to be kind of $440 million again?

Yes, we will certainly try to reduce that, but that's what we've implied here, yes.

I just want to make sure it wasn't margin but it was dollars, okay. And then, with regards to the capital spending, help me understand what you're spending $16 million in gross on, and convince me it is not field of dreams stuff, but you've got identified revenues, you've been awarded a contract, you've got to buy equipment, so we're not doing field of dreams capital spending?

No, I think that's right, and I think we have gotten, as I pointed out, a lot more selective about the growth projects. But some of the ones that you see that are clearly worth it and not field of dreams kind of stuff, vac trucks, for example, hydrovacs. We have an investment program that benefits our Field Services business, as well as the business that we do in the industrial side, but clearly a lot of the day lighting and projects like that that are going on out there, that's a very worthwhile and high return investment for us.

Clearly, containers, as we're growing the business and we're servicing more growth in SK Environmental, for example, where we have access to more waste streams that Alan alluded to, we're adding to our containers and our roll-offs, intermodals, we continue to add there. We are also investing some money in technology, things like the high-margin routing and improving on that.

We will be doing some investments there, but they're lower, obviously, than the total. In roll-offs, I'm sorry, in our fleet, also as we expand the overall waste streams that are coming into our network we're adding to tractors and trailers, so we have those kind of spending going on. Beyond that, I think, Alan already alluded to, a little bit in parts washers, we're trying to improve that a little bit.

I can't recall of any field of dreams projects that we do. So I don't know what that means. But I think, we scrutinize our capital spending line by line and have done that on a regular basis, and so I think we continue to try to be prudent with where we're spending money on for capital.

Okay. On corporate overhead, what kind, given the $75 million savings, how do we think about that?

I would probably say, Michael, somewhere in about that $150 million range roughly in corporate.

Okay. And then, when you think about used motor oil and re-refining, a couple items, one, the refinery strikes that are happening, is there any sense that that has tightened up supply headed into the seasonal driving season? And you got lower gas prices, so maybe highway drive miles driven are up. Just any feel for what's coming from the field about the directionality of base lube?

I wouldn't comment, Michael, on it as far as what's going on with workforce issues within the refinery base. The only thing that we would be concerned about is refineries pushing off turnaround work because they don't have the staff to take the plants down and go through the turnarounds, and so we're certainly concerned about that.

On the other hand, when they do have an upset condition, they might go into turnaround faster because they need to take the plant offline, they don't have the people there. So there's a lot of moving parts that are, certainly, we're watching. We think, as evidenced by the price of diesel coming back quite a bit in the last three or four weeks, that there is a tightening in supply in finished product, and we think, even the latest ISIS report this morning on base oil, speaks to that, as well. So we are optimistic about it, but, as you know, we're not betting on that. Our plan is to look at where pricing is today and build our business around that from a margin standpoint and if things improve then that would be great

Okay, so to clarify, the midpoint of guidance assumes 245 as the posted price?

I think that's good.

And then on the, to be flat in used motor oil you absolutely are going to be in that, circling around zero plus a few pennies, you're paying for it, to zero plus a few pennies, you're being paid for it for full-year 2015, otherwise, you've got to take a lot of money out of the transportation side?

I think if you look at 20 years ago, even where Safety-Kleen was, and you look at where crude was back at that point in time, $35, $40, they had upwards of $100 million of revenue for their Charge-for-Oil program, so this oil program is one that really needs to be fixed and the margins need to be, and the spread needs to be fixed in this business, not just for us, but really for all of our competitors because we've all got substantial investment in infrastructure and facilities to manage this hazardous waste. So, yes, you are going to see substantial improvement in that area, and we think history is evidenced by, looking at history is evidence that we can do that as an industry and as a Company.

Okay, and I should think about margins or profitability, if Jim said, approximately break-even in 1Q, $10 million to $15 million in 2Q, $15 million to $20 million in Q3 and kind of $20 million in Q4, that gets you to kind of a flat. That's the way to think about the progression. I'm not asking you to quantify the numbers, but that's the progression?

Yes, it is, that's right. Without giving specific guidance to each quarter, you will see that increase because as you sell the higher priced opening inventory then you get the full benefit of the PFO reduction. And I think overall, if you think about it from a flat, our saying that EBITDA we expect to be flat year-over-year, when you consider that every -- and these are very high level rough figures that I'm talking about here.

If you have a penny drop in our base oil pricing, that's equivalent to about $1 million in EBITDA. But a penny drop in PFO is worth about $2 million of EBITDA just because of the volume that we buy. So clearly, we've seen just since August a $1 drop in base oil pricing, so the objective, clearly, is at a minimum to see PFO pricing come down $0.50. And that gets you to an even spread.

Right. And just so I'm clear, half your volume was spot, and that should be at zero already. The other half is contracts, you've got notification periods. But even if I just took where the 6 oil was, do your discount, we are at a healthy reduction just starting the year even if you did give them notification?

Yes, you, just your indexed accounts, you are right, you're absolutely right.

And then I take the notification and work in some timeframe, and it is not very hard to get to sometime in 2Q you're at zero for everything and the remainder of the year you are zero or plus a little bit?

Yes.

Okay. TFI, things that nobody seems to be asking about, there's like $25 million of like Safety-Kleen Environmental business there. That seems like the hidden jewel in that 50 million gallon used oil collection business. What's the opportunity in that?

We really can't comment on TFI yet. We are going through a government approval and regulatory approval, and we have an agreement and we hope to close on TFI as soon as possible, but we probably really can't -- we'll probably have better color for you, Michael, in the second quarter call once we close and we can talk to it.

Okay, fair enough. And do you expect to get a second review from Hart-Scott or should this just be a normal 30-day cycle?

My attorney is sitting here. Michael, what do you say about that?

Yes, we're going through the process now and there's been no final word yet, but we have no indication, other than they will complete their review in this 30-day period.

Yes, we're going through the review process right now.

Okay. So that would put us in somewhere in the early part of March to do the close?

Approximately, yes.

Okay, fair enough. And then, on the Oil Sands, am I right in thinking that you've taken your hit in 2014, whatever that level of business was exiting 2014 you can probably annualize that for 2015. It's not deteriorating further from that exit point, or do you think it does deteriorate further? I just want to understand your commentary.

No, I think the base business up there, the existing mines, upgraders and refineries are moving right along. So most of the reduction that we saw was in the expansion projects where we do a lot of work as they're doing, adding on to those facilities. So I would say at this point looking out that that's correct, Michael.

And corresponding lodging would -- that would, it corresponds to that same pattern?

Well, in the fixed lodges, but clearly, the camps and the manufacturing, we will continue to see declines there. And perhaps some in the rates, we're getting pricing pressure, as Alan alluded to in his comments, in the lodging side of the business that will affect, even the fixed lodges, will affect some of the revenues going forward. So we expect some decline there and I think I pointed that out in my remarks.

Okay, fair enough. Thanks for taking my questions.

Okay, thanks, Michael. Take care.

Charles Redding with BB&T Capital.

Good morning, gentlemen. A quick follow-up on the Environmental Services side, if I might. Can you just kind of tell us a little more about what's driving the improvement in parts washing from a fundamental perspective? What has been the primary focus here terms of driving growth, and have you seen a material impact on raw material costs within this segment from cheaper crude?

Just on the parts washers side, we implemented some new initiatives almost, over a year ago, where we began performing a lot more of the maintenance and service out on the field rather than the past practice of bringing a lot of the parts washers back to a central depot. We also have invested capital in building our inventory and in building capacity so that as our sales force is out there growing that business, because we have about 135,000 of our own machines and we service another 65,000-plus customer owned machines. So we really changed the business model and that is starting to pay off for the team. Your second question, Charles, was about crude oil, again, could you ask that again?

Sure, just thinking about raw materials costs in Environmental Services, can you just quantify the impact there from cheaper crude, or is that a non-issue to this point?

Pretty small. We spend maybe $15 million to $17 million a year on our mineral spirits, our solvent for our parts washing machines. We have, so I would say we're seeing a little benefit there but not a lot.

Okay, great. And then, on incineration, really quickly, is El Dorado still on track for kind of early 2016 or this more back half event at this point?

Yes, it's late 2016 or early 2017. We're in the ground, we're, a lot of components are being delivered this year and being constructed. So I would say that's the timeframe we're thinking right now.

Okay, thanks a lot.

All right, Charles.

Thank you. Our final question is from the line of Barbara Noverini with Morningstar.

Good morning, everybody.

Good morning.

Can you talk a little bit more about what strategies you've put in place to drive the increase in percentage of blended oil sales? And also, can you remind us of your long-term target percentage mix is, or is it just that you'd like to get it as high as possible because of the price differential in that product?

Sure. As you know, we sell the majority of our products through distributors, but we also have over 200,000 accounts that we service under the Clean Harbors Safety-Kleen customer base that today are not customers of Safety-Kleen Oil. We're not selling oil to the majority of our customer base, so we are rolling out a plan to sell those products, and you'll be hearing more about that in the coming months and quarters here, certainly.

But our goal is to expand the direct sale of our blended products to our Safety-Kleen and Clean Harbors customers and really with the long-term target of 80%-plus of blended products. When you look at what's happened in the base oil market, if we look back into June of 2012 when we, or July of 2012, base oil was about $2 a gallon more than it is today, and making 120 million gallons of base oil and suffering a $2 a gallon decline has had a major impact on us. The blended side of the business has not had that big a change.

And there's a lot more, less price sensitivity to the commodity side of base oil. And for us to be able to continue to manage customers' waste on the waste oil side and give them a consistent service, we need to have a better price on the blended oil side and get away from the commodity side of the base oil business, and that is our number one goal in the oil business right now, and we're executing on that right now.

Got it. That's helpful, thanks.

All right, thank you.

Thank you. I would now like to turn the floor back to management for closing comments.

So thank you, again, for joining us today. We appreciate your questions and, certainly, your comments. Jim Rutledge and Jim Buckley will be at the Raymond James conference early next week and we hope to see many of you there, and at our other upcoming conferences that we are participating in. So thanks, again, everybody.

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