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Edited Transcript of ECOL earnings conference call or presentation 28-Apr-17 2:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 US Ecology Inc Earnings Call

BOISE May 1, 2017 (Thomson StreetEvents) -- Edited Transcript of US Ecology Inc earnings conference call or presentation Friday, April 28, 2017 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Eric L. Gerratt

US Ecology, Inc. - CFO, EVP and Treasurer

* Jeffrey R. Feeler

US Ecology, Inc. - Chairman of the Board, CEO and President

* Steven D. Welling

US Ecology, Inc. - EVP of Sales and Marketing

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Conference Call Participants

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* Barbara Margaret Noverini

Morningstar Inc., Research Division - Equity Analyst

* Charlie Wohlhuter

* Joe Gregory Box

KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst

* Michael Edward Hoffman

Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst

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Presentation

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Operator [1]

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Good morning, and welcome to the First Quarter 2017 US Ecology, Inc. Earnings Conference Call. (Operator Instructions) Please note that this event is being recorded.

I would like to now turn the conference over to Eric Gerratt, Chief Financial Officer. Please go ahead.

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [2]

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

Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements.

Factors that could cause results to differ materially from those expressed include, but are not limited to, those discussed in the company's filings with the Securities and Exchange Commission.

Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only on the date such statements are made. We undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

For those joining by webcast, you can follow along with today's presentation. For those listening by phone, you can access today's presentation on our website at www.usecology.com.

Throughout yesterday's earnings release and our call and presentation today, we refer to adjusted EBITDA, pro forma adjusted EBITDA and adjusted earnings per share. These metrics are not determined in accordance with generally accepted accounting principles and are therefore susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of adjusted earnings per share, adjusted EBITDA and pro forma adjusted EBITDA can be found in Exhibit A of our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results and our 2017 guidance.

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

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [3]

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Thank you, Eric, and good morning, everyone. I start off this morning's call with a few summary comments on our first quarter results that we released yesterday before turning the call back over to Eric for some additional details on the financial results. I'll then close out the call with an update on our 2017 business outlook before opening up the call for questions and comments.

For those that are following the webcast presentation, please direct your attention to Slide 5. Yesterday, US Ecology reported first quarter results that were in line or slightly better than our own expectations. As we discussed back in February, we projected this year's first quarter results to be down from the same period last year. This is due to project deferrals from 2016 that are not expected to benefit 2017 results until the summertime construction season as well as headwinds in our field services group resulting from a contract that was not renewed in -- last year.

This comes on top of normal seasonality and seasonal softness that typically affects our first quarter results. Our Environmental Services segment was in line with overall expectations. We saw positive momentum in our Base Business with growth of 3% over the same period last year and sequential growth of 2% over the fourth quarter of 2016.

Our year-over-year growth in Base Business was impressive when considering that it came on top of the strong growth that we saw in last year's first quarter. The positive trends in the Base Business continue to support our view of an improving industrial economy. The strength in the Base Business helped offset the weakness in our Event Business, which was down 9% over the same period last year. Project deferrals that we experienced last year resulted in less year-end carryover volume into the first quarter that we would normally anticipate.

Additionally, the majority of the deferred projects are likely to begin shipping in 2017 in the second and third quarters, consistent with the construction season. Finally, the large multiyear clean-up project that has been experiencing delays has started excavation in areas that will require shipments to our facilities, and we expect these shipments to begin sometime in the second quarter.

Our in-line Environmental Services also came in line, despite some significant wind damage from a winter storm that has temporarily closed one of our larger treatment facilities. Fortunately, our strong treatment and disposal network has allowed us to continue servicing customers with minimal interruption. This is a benefit of having built such a large substantial network. We continue -- we are currently in process of repairing the treatment facility and should resume full operations by the end of the second quarter. While this setback did hamper our financial results in the first quarter, we are pleased with that our team's response to the challenge and anticipate receiving business interruption insurance proceeds later this year.

Our field and -- field services segment performed as expected for the quarter with reduced business activity due to a contract that was not renewed in the prior year. The negative impact of the operating leverage as well as the equipment lease termination charges put pressure on our margins for the quarter. We do, however, continue to see positive momentum in this business segment with increased business activity and bidding activity that puts us in a position to replace lost revenue during the year.

Our industrial services business delivered lower-than-expected results in the quarter on softness in industrial maintenance and cleaning services. Timing also impacted this business as certain projects did not start as planned. When looking at the business overall, I continue to be pleased with our progress. I continue to see positive indications of a stronger industrial economy and increased bidding activity consistent with our 2017 outlook.

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

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [4]

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Thanks, Jeff. As shown on Slide 8, revenue for the first quarter of 2017 was $110.2 million, down from $113.3 million in the first quarter of 2016. Revenue for the Environmental Services segment for the first quarter was $81.3 million compared to $81.5 million in the first quarter last year.

The small decrease was driven by a 17% decline in transportation service revenue, mostly offset by a 3% increase in treatment and disposal revenue. Base Business for the Environmental Services segment was up 3% compared to the first quarter last year and represented 84% of treatment and disposal revenue. Event Business for the Environmental Services segment decreased 9% from the first quarter last year and represented 16% of treatment and disposal revenue. The Field and Industrial Services segment delivered revenue of $28.9 million in the first quarter of 2017. This was down from $31.8 million in the first quarter of 2016, primarily reflecting the expiration of a contract that was not renewed and softer overall market conditions.

Slide 9 breaks down our Environmental Services treatment and disposal revenue for both Base and Event Business by industry verticals. Base Business increased primarily in the refining, general manufacturing and other industry verticals. These increases were partially offset by decreases in the transportation and metal manufacturing verticals during the quarter.

The decline in Event Business was primarily driven by decreases in the chemicals manufacturing and utilities verticals.

Turning to Slide 10. Gross profit was $31.9 million in the first quarter of 2017, down from $35.2 million in the same quarter last year. Our Environmental Services segment contributed gross profit of $28.7 million in the first quarter of 2017 compared to $30.5 million in the same quarter last year. This decrease was primarily due to a less favorable service mix and lower landfill treatment and disposal volumes.

Treatment and disposal margins were 38% in the first quarter of 2017 compared to 41% in the first quarter last year. Gross profit for the Field and Industrial Services segment was $3.2 million in the first quarter of 2017 compared to $4.8 million in the first quarter of 2016.

The decline was due to the reduced revenue as well as onetime charges in the first quarter of 2017. Selling, general and administrative spending or SG&A was $19.7 million in the first quarter of 2017, up 1% from $19.4 million in the first quarter last year. The increase was due primarily to higher labor, professional and consulting as well as higher insurance costs, which were partially offset by lower bad debt expenses in the first quarter this year.

Operating income was $12.2 million in the first quarter of 2017, down 23% from operating income of $15.8 million in the same quarter last year. Net interest expense for the first quarter decreased to $4.1 million compared to $4.5 million in the same quarter last year. The decrease was primarily the result of lower overall debt levels in the first quarter of 2017.

Turning to Slide 11. The company's effective income tax rate for the first quarter was 37.3%, down from 38.4% in the first quarter last year. The decrease reflects a higher proportion of earnings from our Canadian operations, which are taxed at a lower corporate tax rate, which was partially offset by a higher U.S. effective state income tax rate.

We reported net income of $5.2 million and diluted earnings per share of $0.24 in the first quarter of 2017 compared to net income of $7.5 million and diluted earnings per share of $0.35 in the first quarter last year.

Adjusted earnings per share was $0.23 in the first quarter of 2017 compared to $0.32 in the first quarter of 2016. Adjusted EBITDA for the first quarter was $23.5 million, down 10% from $26.1 million in the first quarter last year.

Turning to Slide 12. We generated $20.9 million of cash from operations in the first quarter of 2017. We also invested $7.2 million in capital projects, paid down $6.9 million on our long-term debt and paid out $3.9 million in dividends to our stockholders.

Our balance sheet continues to improve with net borrowings of $267.4 million at March 31, 2017. Additionally, on April 18, 2017, we entered into a new $500 million, 5-year senior revolving credit facility with a syndicate of banks to refinance the company's former credit facility.

The interest rate under the new credit agreement is initially set at LIBOR plus 1.5%, which represents a 150 basis point improvement over the interest rate from our previous credit facility. Additional details and terms, including a copy of the new credit agreement, can be found in the Form 8-K filed by the company on April 20, 2017.

The reduced interest rates and fees on the new credit agreement are expected to generate cash interest savings of approximately $15 million over the 5-year term. Additionally, in connection with the termination of the former credit agreement, the company expects to write off approximately $5.4 million of unamortized deferred financing costs related to fees paid on the former credit facility. This noncash charge will be recognized as additional interest expense in our second quarter 2017 results.

We also expect estimated annual interest savings under the new credit agreement of approximately $0.08 per diluted share in 2017. Return on invested capital for the 12 months ended March 31, 2017, was 5.7%. Return on assets was 4.2% and return on equity for the same period was 11.7%.

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

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [5]

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Thank you, Eric. As we look to the balance of 2017, we remain confident in our ability to deliver growth over 2016 results. We continue to see positive trends in the industrial sector that should benefit our Base Business. Additionally, we see emerging opportunities on the Event Business side that should contribute to increased volumes in coming quarters. Our first quarter performance has served to reinforce these views.

Turning to Slide 14, we are reaffirming our guidance issued this past February. We still expect that our adjusted EBITDA will range from $120 million to $130 million for 2017. We are also reaffirming our adjusted earnings per share guidance of $1.69 to $1.93 per share. This reaffirmation includes the impacts of our recent debt refinancing that Eric talked about earlier. As a result of the refinancing, we anticipate taking an approximate $0.15 per share charge in the second quarter for the noncash write-off of deferred financing fees, and expect to realize an approximate $0.08 per share favorable impact as a result of lower cash interest expense recognized for the balance of the year.

We still are expecting that our Base Business will grow 3% to 5% for the full year. Event Business is expected to return to growth as we see emerging and deferred projects starting in coming quarters.

We still expect to see normal seasonality in our business with sequential improvement from the first quarter through the third quarter of the year, with the third quarter likely being the strongest of the year. As is typical at this stage, Event Business start days are skewing to our third quarter, which is the peak of the construction season. Capital expenditures are on track to range between $34 million to $37 million in 2017, and at this point will likely be on the high side of that range.

With that, operator, I'd like to open up the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from Michael Hoffman with Stifel.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [2]

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Remind me on Page 9, where would you look for your turnaround activities to show up in any of those customer -- industry groups, particularly? So if things start to come back, which groups are particularly going to reflect that? And it will be Base or Event, is how you account it at this point?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [3]

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So Michael, what exactly are you referring to a turnaround? Are you just talking about project-based work? Are you talking about industrial maintenance-type activities?

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [4]

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I'm assuming that's what you meant when you said turnarounds were light, meaning the normal maintenance cycles -- that's certainly what we heard, is refining turnarounds, some of those didn't happen as planned in the first quarter.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [5]

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Yes, our refinery business has been very solid, and we're not seeing that. Where we saw softness on the industrial services side was just industrial maintenance-type activities. And in all fairness, we're concentrated in the Michigan-type areas for our industrial service activities, and so not necessarily indicative of what may be in other geographies.

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [6]

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Gulf area work was strong in the first quarter.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [7]

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Say that again, Steve.

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [8]

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Gulf area, so Texas business, refinery turnarounds, we had a strong first quarter in that area.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [9]

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Okay. And do you think some of that issue you had was -- I'm assuming that's the plant that had the -- you had really bad weather in March, that mega storm. So it's Michigan and that -- and it's auto related and blah, blah, blah.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [10]

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Yes, no. Actually, no. Our industrial services group in the Michigan area is serving chemical, steel mills, other types of facilities. The facility that went down is actually on the Environmental Services side of the business. And we've been able to redirect the vast majority of those to other treatment facilities within the area and service our customers.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [11]

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Okay. And then last year, the 7% Base Business activity was a pleasant surprise, and it was somewhat offset by 2Q, where you did 0 and you kind of blend for 3.5%. To some degree, we still had a mild winter. So is there activity that might not have come because there were maintenance turnarounds, et cetera, et cetera, that would have disrupted Base that didn't happen, therefore do I repeat last year to some degree? And I'm not necessarily suggesting it's 0, but if it's 3% in 1Q, do I end up with 2% and change in 2Q, and I blend for 2.75% for the first half kind of thing?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [12]

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Michael, we did experience some delays in the Northeast due to rain and snow and -- but I don't -- I can't pinpoint any major projects that were delayed due to weather. It's possible there was Base Business that was impacted slightly, but it doesn't appear we had a major change there from prior years.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [13]

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Yes, Michael, if you're talking about kind of the trend we saw last year in our Base Business with a really strong first quarter, a flat second quarter and a rebound kind of in the third quarter, and if we anticipate that this year? Hard to say. We saw a positive trend in the first quarter, which was a nice surprise. It also supports what we're seeing with regard to just the overall industrial sector health. I would expect that we would continue to see growth at that level kind of gearing towards that 3% to 5% range for the entire year.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [14]

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Okay. And then while the mix comments you made about both ES and field services are understandable just for seasonal issues, is there anything in that mix that would cause you any pause?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [15]

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No. It's typical. I mean, that's the hard part in this business. Different waste streams as well as different service lines generates a different profit profile along with that. As we look out to coming quarters, and especially on some of the deferred projects and the projects to start shipping, we actually seeing more favorable mix on some of those -- that business going into second and third quarter.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [16]

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And last one for me. On the project side, the thing that was clearly evident in '16 as we progress through the year is sort of -- I think of it as an accordion. In your project cycles, the accordion got wider and wider and wider. Have those cycle times or points of conversion from contract to doing work stopped lengthening at least, if not actually started to contract again?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [17]

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Projects from last year that were deferred, we're kicking off a number of those. Some have already completed in the first quarter, but we've got quite a few starting here in the second quarter. And then on top of that, we have new work that we're bidding right now that we're expecting this summer. So we -- one of the reasons we're confident is we see an increasing amount of event work over the next 6 months.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [18]

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Okay. So to summarize that, backlog of deferred is starting to be worked down. And is your sense the new work will go back to normal cycle times, that bid and happen in a normal pattern as opposed to bid and then there is this sort of prolonged wait to it?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [19]

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Yes, whatever normal is in event work. I would say, yes.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [20]

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Last year wasn't normal. Against last year it's -- okay.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [21]

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Last year there was a lot of uncertainty for a variety of different reasons, which we pretty much hashed out earlier in other calls. So that -- we're seeing less uncertainty right now. And if you take uncertainty out of the equation, you would expect to see a more normalcy of the cycle times that you're referring to.

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Michael Edward Hoffman, Stifel, Nicolaus & Company, Incorporated, Research Division - Analyst [22]

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Okay. And then $20 million is still the goal to pay down the debt, Eric?

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [23]

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Yes, that's still what we got built into the guidance.

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Operator [24]

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Our next question comes from Joe Box with KeyBanc.

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Joe Gregory Box, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [25]

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So question on the guidance, I guess just so everybody is on the same page. Are you guys excluding the $0.15 charge for the debt refi from guidance? Or are you including it in interest expense? Because it looks like you're including it.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [26]

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Yes, so, Joe, we are including it. So we looked at the range, and even with these ancillary charges and the positive benefits we're going to see with the debt refi, we still believe that range is still good.

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Joe Gregory Box, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [27]

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Okay. So looks like there's a $0.09 net drag if you add back the $0.06 interest tailwind. Obviously, you just said you maintained the guidance. I guess I'm curious why you maintained it then. Was it -- is it a function of 1Q being in line to better? Or you guys just have that much more conviction in the activity that you starting to see pick up?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [28]

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Yes, because we feel like we're going to fall within that range, Joe. I mean, even with the large onetime charge and the favorable benefit, and for us to go out and exclude a onetime charge but include the benefits of the cash savings felt disingenuous. So we basically just left it as is and let you as analysts and other investors do the math to show that we are probably going to be at the lower point of that range, but it's still within the range.

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Joe Gregory Box, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [29]

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Okay. I appreciate that and I do recognize it's only 1Q here. So just a couple of clarifications. I guess, when you look back at 2Q '16, I believe that there was a little bit of Westinghouse that was still in there. Is that accurate? I'm just trying to understand if there is still a little bit of a tough of that comp from the prior year.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [30]

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There was a tiny little bit of Westinghouse as they wrapped up in April of last year. But it's not going to be meaningful. So we cycled the larger projects fully. So as far as a tough comp or not, it's not going to be a tough comp. I want to say that cautiously. But it's one that we expect that we're going to be able to start seeing growth as the project start shipping as we anticipate for this quarter.

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Joe Gregory Box, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [31]

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Okay. And I guess, [beyond that], to that point right there, on your main project, have you guys actually started Phase 2 month-to-date in April and you're actually receiving shipments now in April? Or is it still kind of technically in front of you for the rest of the quarter?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [32]

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No. They are loading material in whatever you want to call Phase 2, I guess. And there are railcars headed towards our Canadian facility today.

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [33]

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(inaudible), Joe. But they're on the track.

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Joe Gregory Box, KeyBanc Capital Markets Inc., Research Division - VP and Senior Equity Research Analyst [34]

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Okay. It's good to hear. And then lastly, I know direct energy for you guys is a pretty small component. When I say direct energy, I mean upstream. But you do have some indirect. I know you do some chemical work that goes into fracking fluids. I'm just curious if you're seeing anything kind of percolate on the energy front?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [35]

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Not materially different. We have seen some growth in certain areas of that, but it's been pretty small. I think the takeaway is it's not contracting any further. With regard to kind of the whole Gulf Coast area that gets benefited from the entire, I'll call it, energy streams, that has been a very, very strong area of the country for us. And so we're seeing that in a number of different areas. Our landfill volumes are up, our thermal volumes are up. What the true cause and effect of all that is? Not entirely sure, but what -- we're starting to see a rebound in some of those areas.

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [36]

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There are some related industries in the Midwest like seamless tubing for wells, where if we see further uptick we'll have increased business in the Midwest also.

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Operator [37]

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(Operator Instructions) Our next question comes from Charlie Wohlhuter with Raymond James.

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Charlie Wohlhuter, [38]

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Jeff, based on the performance of the Base Business in the quarter and then following the kind of the round of price increases you'd mentioned last quarter in the business, can you kind of break down that 3% on kind of price versus what was on volume?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [39]

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Yes, we really don't break down price and volume relationships, because there's -- not all volume is equal type thing. We were successful last year pushing along pricing increases, and we pushed along again selective pricing increases this year that will benefit future quarters on that. Overall, the 3% is predominantly probably going to be more price than it is volume. But we don't have any metrics that break that down specifically.

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Charlie Wohlhuter, [40]

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Okay. All right, great. And then on the event side, you've noted that you expect the majority of the deferrals to come back this year. Can you quantify what kind of the "majority" is with respect to that, call it, $10 million to $15 million deferred from last year? Is it, I don't know, 60% of that or is it closer to like 80%, 85%?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [41]

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Yes. We haven't quantified that. As we look at the project pipeline -- and the best analogy I can give is that when we look at 2016, the total Event Business is around the $48 million to $50 million range. And when we look at what the opportunities are out there, we pretty much have that same deferral amount right in the same range. Now some of those deferrals are going to be deferred into 2018, 2019, depending on the individual projects. But we're seeing a lot of the deferrals that -- a lot are gearing up to start going here in the back half of the year. So still feel pretty confident that -- the wildcard we always have is it comes down to what is normal deferrals that you have just routinely in this business, given that we're dealing with complex waste sites and cleanups. So we're seeing -- continue to see emerging opportunities. We're seeing -- we've seen pipeline and bidding opportunities, and we feel comfortable that we're going to have growth in our Event Business this year.

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [42]

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We also had delays in government work waiting for the federal budget, which hopefully, very soon, we'll be able to kick off work that's just kind of awaiting the budget process to be finalized.

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [43]

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Yes. And Charlie, the other thing that I'll note on event in first quarter is, if -- we did have a headwind with cycling Westinghouse, and if you strip that out of the Event Business, the Event Business was only down about 2% Q1 over Q1. So that gives a little more color there.

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Charlie Wohlhuter, [44]

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Okay. That's great. And then actually, Eric, with the recent debt refi, the kind of the interest expense run rate in 3Q, if my math is correct, is it going to be about $3.5 million or so? Just kind of want to understand what that -- kind of the go-forward run rate is going to be on the P&L.

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [45]

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You're talking for the third quarter specifically?

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Charlie Wohlhuter, [46]

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Yes. So after -- post the $5.4 million noncash charge. I guess, just kind of like the general run rate.

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Eric L. Gerratt, US Ecology, Inc. - CFO, EVP and Treasurer [47]

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Yes, that's probably in the range. It's going to be -- it's going to vary based on debt paydown and kind of what we do with free cash flow. But we expect, it's about $0.08, which is around high $2 million to $3 million of savings for a full year.

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Charlie Wohlhuter, [48]

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Okay. And then my last question here, it kind of seemed from the proxy that the organization didn't really meet their goals last year. And can you kind of talk about what the incentive comp accrual differential would be this year if you hit your targets and reached about 100% payout versus what last year's payout was?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [49]

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Yes. Well, so Charlie, you're right on that. We didn't hit our targets last year, or very few of the targets that are part of our short-term incentive plans. And if we hit full target this year, there will probably about $3 million to $4 million of incremental that would be paid out. But that is reflected in our guidance. Our guidance assumes we hit targets.

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Operator [50]

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Our next question comes from Barbara Noverini of Morningstar.

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Barbara Margaret Noverini, Morningstar Inc., Research Division - Equity Analyst [51]

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You mentioned significant bidding activity in FIS. Can you give us any color on the competitive landscape there? How aggressive have players been in the bidding process, now that the industrial economy seems to be strengthening? And are there any particular services in your portfolio that are resonating more with customers at this point?

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Steven D. Welling, US Ecology, Inc. - EVP of Sales and Marketing [52]

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Well, Barbara, in my mind, the Field and Industrial Services is probably most heavily competed part of our business. It's the lowest barriers to entry. And that's -- I haven't seen a real a change from prior years. We're bidding on a number of things in hopes of growing that business segment, but I don't think any change in strategy, or we're not seeing anything different from our competitors that I can see.

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Barbara Margaret Noverini, Morningstar Inc., Research Division - Equity Analyst [53]

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Okay, great. Are there any services in the portfolio that are kind of sticking out as a little bit more in demand at the moment?

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [54]

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Honestly, there tends to be quite a bit of demand in all of the areas. I mean, if you look at first quarter, we were pretty much able to grow all the areas of our field services business with the exception of retail, which is where we had a setback last year with a contract that was not renewed. If you strip that out and looked at retail absent that contract, we were up. So we've been able to grow all of that business. We continue to see opportunities across multiple fronts, across most of those service lines.

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Operator [55]

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(Operator Instructions) At this time, it appears that we have no further questions. So I would like to conclude our question-and-answer session and turn the conference back over to Jeff Feeler for any closing remarks.

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Jeffrey R. Feeler, US Ecology, Inc. - Chairman of the Board, CEO and President [56]

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I want to thank those for joining us today for the first quarter update. Look forward to giving you an update on second quarter towards the end of July. Thank you. Have a great weekend.

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Operator [57]

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The conference has now concluded. Thank you for joining on today's presentation. You may now disconnect.