Clean Harbors, Inc. (CLH) Q1 2012 Earnings Report, Transcript and Summary

Greetings, and welcome to the Clean Harbors, Inc. First Quarter 2012 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Musselman, General Counsel for Clean Harbors, Inc. Thank you. Mr. Musselman, you may begin.

Thank you, Melissa, and good morning, everyone. Thank you for joining us today. On the call with me are Chairman and Chief Executive Officer, Alan S. McKim; and Vice Chairman and Chief Financial Officer, Jim Rutledge. Matters we are discussing today that are not historical facts are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Participants are cautioned not to place undue reliance on these statements, which reflect managements opinions only as of this date, May 2, 2012. Information on the potential factors and risks which 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 would 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 the most directly comparable GAAP measures is available in today's news release, which can be found on our website, cleanharbors.com. And now I'd like to turn the call over to our Chairman and CEO, Alan McKim. Alan?

Thanks, David, and good morning, everyone. And in Q1, we saw a continuation of many of the same trends we've experienced in recent quarters. It was another solid quarter for the company and a good start to the year. Our revenue increased 32% due to a combination of the acquisitions we completed in 2011 and steady organic growth across nearly all of our segments. The quarter's results also continue to reflect the leverage in our business model, with both net income and EBITDA growth outpacing revenue. Q1 was historically a lower revenue and margin quarter for us as it is a seasonally slower period for our environmental business. However, with our expansion in the energy and industrial space, we've offset much of that seasonality and adopted more of a balance for Q1, in terms of both revenue and margin. This year, we delivered an EBITDA margin of 17.6%, which was -- we are very pleased about. We saw a good mix of business in this quarter, but our results were largely driven by our Energy and Industrial business. Geographically, as expected the West and Canadian region was extremely busy this quarter, but we also experienced healthy levels of activity throughout much of the U.S. and Canada. Unseasonably warm weather in the quarter benefited our environmental business, which led to increased volumes and an early start for some client projects scheduled for the second quarter. Turning to our segments. The Technical Services segment had a strong Q1 in what can typically be a weaker quarter. Incineration utilization was 90% with both our U.S. and Canadian locations performing well. This rate is up from 85% in Q1 a year ago and consistent with Q4. Our landfill business had a very good Q1, increasing volumes by 19% from a year ago, as we benefited from activities in the oil patch in Western Canada and particularly the Bakken oilfield. Our Field Services segment had a steady quarter in Q1. In what is frequently a weaker quarter for this segment, we did not generate any year-over-year growth. We did see a consistent stream of routine maintenance and project-related work, however, there was no emergency response revenue related to major events this quarter. Our Industrial Services segment grew nearly 40% from Q1 a year ago. While some of that growth was acquisition-related, we did generate some nice momentum in the business. Heightened activity in the Oil Sands region was a significant contributor to this segment in Q1. Demand for our broad array of Specialty Services also remained high in the quarter. And lastly, we had another strong quarter in Lodging, particularly our camps business. The acquisitions and internal investments we've made in lodging continue to benefit us, both from a customer demands perspective, as well as managing our own workforce needs. While discussing the Industrial Services segment, I did want to point out that we recently divested our catalyst business outside of North America. It was a very small line of business for us in the neighborhood of only about $10 million to $11 million in annual revenues, and the business did not fit our long-term strategic plan. In addition, it would have required significant investment in order to properly scale it, so we sold it to the current management team. Turning back to our segments. Oil & Gas Field Services achieved significant year-over-year growth, nearly doubling from Q1 a year ago. While acquisitions played a large role in that growth, our core Oil & Gas Field Service business had a great quarter. Activity in Western Canada was at a consistently high levels, as investments by major energy companies continues unabated. This segment also benefited from shale play related work throughout the U.S. Here's a quick snapshot of how our key vertical markets performed in Q1. Not surprisingly, oil and gas production remained at our largest vertical this quarter at 21% of revenue. This was driven by the seasonal Q1 activity and our legacy transport downhole and exploration services, combined with our Peak acquisition. Oil and gas exploration essentially tripled from a year ago to account for 16% of revenue. This increase reflects the addition of Destiny, along with solid growth in our legacy exploration and directional drilling business. Refineries and upgraders with our third largest vertical at 12%, down slightly year-over-year due to one large project that we did, a onetime project we did back in 2011. Chemicals vertical was also at 12% of revenue as we saw our activity rebound from a soft Q4. Other significant contributors in Q1 included our general manufacturing at 6%, our broker business at 5%, as well as utilities, government and several others that were at 3%. Looking ahead, we remain encouraged about our prospects for profitable growth in 2012. From a margin perspective, we intend to drive increased efficiencies and capitalized economies of scale across the organization as we continue to grow. We're seeing further anecdotal evidence that a general economic recovery is ongoing in North America. We see positive industry trends supporting our growth, particularly in the Energy and Industrial areas of our business. Rig counts continue to rise and levels of investment by energy companies in liquid-rich plays are showing no signs of slowing down. We have a variety of internal growth initiatives under way to extend our top line momentum, including cross-selling programs, marketing outreach and growth-orientated capital investments. In addition, as we did throughout 2011, we intend to remain active on the acquisition front. We have several smaller strategic opportunities in our pipeline, and we also continue to evaluate more sizable opportunities across all 4 of our operating segments. Even with the acquisitions we completed in 2011 and the levels of capital we are investing internally, we concluded the quarter with more than $247 million in cash and equivalents, which we plan to put to work in the near term. With that, I will turn it over to Jim for the financial review and guidance. Jim?

Thank you, Alan, and good morning, everyone. We delivered another excellent quarterly performance, achieving Q1 revenues of $572 million, which reflected strong results across the board. As Alan outlined, the 32% increase in revenue was driven by internal growth, as well as the contributions of our 2011 acquisitions. While we are not able to provide a precise percentage of organic growth due to the full integration of the acquired companies into our organization, we estimate it to be nearly 10%. Gross profit for the quarter was $171.7 million or a gross margin of 30%, which is up 190 basis points from 28.1% in the same period last year. This improvement is due to the higher revenues, as well as our cost control programs and comprehensive margin improvement initiatives. Turning to expenses. SG&A in Q1 was $70.8 million or 12.4% of revenue, compared with 12.6% a year ago. Our SG&A percentage this quarter was just below our target range of 12.5% to 13% of revenues going forward. We are seeing the benefit of our ongoing cost reduction efforts and the additional economies of scale we are gaining from our recent acquisitions. On our Q4 call, I discussed our ongoing cost reductions initiatives, such as internalizing vehicle and equipment maintenance costs, lowering recruitment costs, reducing procurement costs and decreasing turnover. For 2012, we are continuing to target $30 million in overall cost reductions, which includes some remaining synergies from the Peak acquisition. We believe these reductions will offset increases we expect in labor, commodity and healthcare costs. Depreciation and amortization increased 45% year-over-year to $36.8 million, primarily reflecting our acquisitions, in particular Peak, which added more than 4,000 pieces of equipment. We expect our 2012 depreciation and amortization to be in the $145 million to $150 million range, excluding any additional acquisitions we might complete. Income from operations was $61.7 million or 10.8% of revenues, compared with $39.7 million or 9.1% of revenues in Q1 2011. We generated EBITDA growth of 49%, surpassing the $100 million mark for the second time in our history. We came in at $100.9 million or a margin of 17.6%, compared with $67.6 million or a margin of 15.5% in Q1 of last year. This 210 basis point improvement reflects economies of scale resulting from our revenue growth, the success of our pricing initiatives, productivity gains across the organization and ongoing cost control initiatives. Our effective tax rate for the quarter was 36.1% compared with 37.1% in Q1 of last year. This reflects the strong contribution in the quarter from our Canadian businesses, where the effective tax rate is marginally lower. For the full year, we are estimating our effective tax rate to be in the range of 36.5% to 37%, which is lower than our previous estimate by 50 basis points. As a result of our strong revenue growth in the quarter and the leverage in our business model, Q1 net income increased to $32 million or $0.60 per diluted share from $22.7 million or $0.43 per diluted share last year. We continue to maintain a healthy and clean balance sheet. Cash and marketable securities were $246.5 million as of March 31, down from $260.8 million at year end. This sequential decrease was largely expected as the first quarter is generally a cash-intensive period due to the payment of annual employee bonuses and commissions, and the timing of our interest payments. Our cash position has already begun to increase moving into the second quarter. And as of today, it is approximately $260 million. Total accounts receivable increased to $493 million at quarter end from $479 million at year end. On the Q4 call, I spent some time discussing a spike we experienced in our day sales outstanding in Q4 related to customer arrangements having longer payment terms in some of the acquired businesses, and many of these new customers being on a month-end billing cycle. In Q1, we decreased DSO to 80 days from 82 days we recorded in Q4. However, we continue to believe it will take us several more quarters to work our way to our target DSO level of 70 days or less. We are still working through the existing contract cycles we inherited through our acquisitions. CapEx for Q1 was approximately $28 million, down from the $35 million we spent in Q4. We are continuing to estimate CapEx for 2012 in the $180 million range. And of that total, approximately $70 million would be designated as maintenance CapEx. The remaining $110 million would be targeted toward the numerous high-return opportunities we believe we have available to us across our segments. Moving now to our guidance. Our first quarter was stronger than we expected and some of that was at the expense of Q2. As Alan mentioned, with the warmer weather, we saw some pull forward in activity as some Q2 projects got an early start in Q2. Conversely, due to the warmer weather in Western Canada, we also experienced an early and rapid breakup season, which will reduce some of our Q2 activity up there. We are maintaining our previously announced annual guidance. We continue to expect 2012 revenues in the range of $2.2 billion to $2.25 billion. We continue to expect EBITDA in the range of $400 million to $410 million, which implies an EBITDA margin greater than 18% for the full year. I should point out that this guidance is exclusive of any potential acquisitions. With that, Melissa, could you please open up the call for questions?

[Operator Instructions] Our first question comes from the line of Al Kaschalk with Wedbush Securities.

I guess, Alan, if you could add a little bit more color on the last comment that Jim was making on the rapid breakup at the end of March or early March, and that transition into Q2? Does that necessarily changed your expectations from a revenue perspective? And then also -- and maybe you could add some color as to the specific segments that you're going to see, the pushes and the pulls and the drags, but also the rate of intensity on the business for the balance of 2012.

Okay. Certainly, with the business now being more balanced particularly in the first quarter, April tended to be more of a transitional month for the company. You tend to bring a lot of assets back in from the field. You tend to have more maintenance turnaround of that equipment and sort of readying that -- those assets to be redeployed back for the spring and summer work as well as, particularly, the heavy shutdown part of our business. You do have -- not only the road bends that impact our business out in the field as far as accessing to do maintenance work, particularly out in the oil fields. And quite frankly, even our own plants, we wait until after the first quarter to do shutdown work at our incinerators, to do turnaround work at our incinerators. So there is -- April is always going to have that transitional piece to it. And I think, what also is certainly true in our businesses moving more from gas, the gas-focused work, to more liquid-rich or the oil drilling and the oil activities, particularly, out in North Dakota. So we -- as the price of natural gas shifted and deteriorated below $2, we saw a shift of our customers into newer areas and so we're transitioning our equipment to meet those needs. So you have a little bit of that activity going on. And this year, as you know, we had just a very mild winter and across all of North America. And that really benefited our work force, it helped us be much more productive, I think, and completed a lot of work in the field even sooner than expected. So I don't think we missed out on anything like we typically would have done in the past where you have major storms that shut us down for literally days on the East Coast type of thing, we didn't have any of that this year. So that, I hope, gives you a little color about what's happening, Al, in the business out there.

Did that imply that your -- or suggest maybe your utilization rates was something you had to deal with but given perhaps some of the adjustments you made in prior periods plus working with your customer base, you were able to shift equipment at a sort of as expected given the events, namely weather, that broke up the season early, and maybe pulled forward some other turnaround on the refining work?

Yes. I don't necessarily think the turnaround work had pull forward, but certainly some of the environmental projects, we were able to get shovels in the ground earlier this year because you didn't have that significant frost and snow and we didn't have the floods like we did last year, it's been real dry across the network here. So weather certainly impacts our business. And I think each year, we'll probably have a little different story as the impact to our businesses is somewhat driven by weather. But I think, all in all, we're really pleased with the first quarter. We are ahead of plan and feeling really good about the year. But it's still early in the year and so we felt leaving our guidance where it is for the full year was appropriate since it's just the first quarter. But the business, very strong. The team did a great job executing. The issues of filling the roles, the key positions that we had over the last couple of years I think has improved. So we're able to bring on more seasonal workers and have more staff that we needed. And I think that each year, we're just going to get better and better at doing that.

Okay. And then Jim, I'm sure you can get ready for the revenue and EBITDA by segment. But my question is, is there any change in the allocation of capital of the $180 million for 2012? Or maybe you could just refresh, and I probably asked the question last quarter, but can you refresh where that spending is going for 2012?

Maybe I'll just make a quick comment and then Jim could certainly chime in. But absolutely, we have curtailed some of our CapEx spending for the gas side of our business. We were expecting to expend more capital, expend more capital on that. And we pulled back some of that capital. And knowing where that side of the business is going with some of our key customers curtailing some of their CapEx spending. But I think redeploying that capital into other areas. So we don't have a limitation on investments that our team is looking to make. The question is what gives us the best return on our investment and their whole issue of resiliency in some of these assets. But Jim, maybe I'll let you follow up with that.

Sure. Absolutely. And besides what Alan had talked about where our changing the timing of some of the centrifuge equipment and equipment that supports the gas side of the business, as that shifts over to the liquid rich and oil gas plays, clearly, the need for some of that CapEx will fall into the later part of the year. And that's why you kind of see it light in the first year, it's less than $30 million, but yet we're still sticking with the $180 million. But aside from that, there is still the -- we're doing some landfill expansions, that's probably about $15 million. We're doing rollings, buying rolling stock that supports a lot of the cross-selling and the growth of the business, that's probably in the $60 million range. We're investing in our containers, that's probably in the $10 million to $15 million range. We're expanding some of our lodging and drill camps as well. That we're looking at right now. But right now, presently maybe somewhere in the mid-teens. So it's those kind of projects and the continuous facility improvements and typical improvements that we make across our business. But really no substantial change in what we're looking at. But to Alan's point, we're doing a lot more in terms of ROIC and looking at our projects and really getting our business folks to compete for capital expenditure dollars because clearly, there's a lot of areas we can invest in but we want to make sure we maintain our hurdle rates and really have those growth projects pay for themselves quickly. So hopefully that helps, Al.

[Operator Instructions] Our next question comes from the line of Rodney Clayton with JPMorgan Chase.

So first, I want to ask about pricing. You've mentioned, I guess, in the last couple of calls, that you're targeting about 3% of price initiative across the business. Just looking to get some color on how that's progressing? I would imagine just given the strength that you're citing across the business that you've got some pretty good traction there. So just some color on how that's going.

Sure, Rodney. This is Jim. We definitely have good traction here. I talked in the earlier call about our VPs of Commercial Operations that are completely engaged in the various parts of our business to look at pricing and do what's fair out there. And as I've mentioned before, we look at our businesses in 3 major components, the volume-related businesses, which is pretty much the way streams that we take in, the services side that includes the Field Service and the industrial services that we do at our clients, which is obviously time, equipment and materials pricing. And then in the spread businesses, which is mostly recycling, that what we're bringing in, that we make a good margin when we sell recycled products. So that's moving right along. I had -- we had talked about back in Q4 that we estimated 3-plus percent, which is about what we achieved last year, about 3% going forward this year. And we still stick with that, we think we're going to be fine.

Okay. Good. Secondly, I just want to cross check a couple of things with you relative to what we've heard from some other companies this week. Were there any -- have you seen any deferrals in your refinery turnaround business? And then secondly, one of your competitors mentioned the EPA was reviewing their thermal desorption business with respect to, I guess, the agreement they have set up with the city, or with the state there in Texas. Have you seen anything similar to that? I'm just trying to get a sense for, if that's a one-off or if this is part of a broader EPA crackdown?

No. This is Alan. We haven't seen any change. I mean the EPA has certainly been very active in inspections and regulatory oversight over the last several years. And we continue to see a lot of activity regarding visits and audits of our sites. But it's nothing unusual for us. And that's true in both U.S. and Canada. And we're excited to hear some of the activity going on in the East regarding the refinery business, we know that we've had a lot of shutdowns. There's been some recent activity going on in the last week or so here. But overall, our refinery business was roughly flat with a year ago, but we had about a $20 million large event in the first quarter of last year that was due to a fire and a major issue at one of our clients. So putting that aside, our refinery business grew and we've got a strong turnaround schedule in front of us.

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

Just a question on the outlook. If we take the -- if we just annualized the first quarter EBITDA or sort of at the midpoint of the range, and you typically get higher margins as you go throughout the year, are we looking at the usual conservatism that you account for? And maybe you can just comment on the level of seasonality that you have now for the overall business with the current mix?

Sure, Jamie. First of all, there is conservativism built into this. And as I probably described before that we try to, when we look forward for the year, to try to estimate that business that we know we can get to that we see a clear path to getting there. And certainly anything like emergency response or anything of significance beyond that would be upside. So definitely, there's an element of conservativism in here. The seasonality question is a great one. And as Alan alluded to, it is interesting when prior to 2009, when we were only in the environmental side of the business, there was that strong seasonality factor in Q1 where the winter months affect the business in a negative way and then really pick up in the spring. Now with the Western Canadian piece of the Energy and Industrial side of the business, you see the opposite impact, where winter is very good up there in the oil fields and with the work that's done up in the Oil Sands. So you do have the opposite impact there. And it does kind of level us out. So to your point, it is somewhat leveling. But it makes Q2 to be more of a transition quarter, as Alan alluded to with April, because you have one set of businesses working its way down, and the other set working its way up. I mean not material either way, even what we talked about before any potential pull through, that's probably $10 million. We're not talking about big numbers here that we're pulling from Q2 even in that sense. But you do -- Q2 becomes more of a transition and Q3 should be very, very strong, followed by Q4. So it has changed the seasonality a little bit, but I would say that the difference now is immaterial from quarter-to-quarter because there is that balancing. Hopefully that color helps, Jamie.

That is helpful. And then just a quick question about the longer term, Alan, around chemical manufacturing in the U.S., the low nat gas prices, obviously been a lot of discussion around chemical projects, manufacturing expansion as well. Just what you're seeing today relative to those trends and how you see those potentially benefiting Clean Harbors over time?

Well, we had a national sales meeting over the last couple of weeks and the feedback is absolutely positive in regard to the impact that the natural gas has had on manufacturing and chemicals. It is driving volumes, which is in turn driving the utilization of our incinerators. We saw some price improvements in our incineration business and so all of that is absolutely behind that. And we expect that to last and continue to drive both the productivity improvements, as well as new plant construction.

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

Jim, related to the discussion of cost inflation in labor and commodities, I'm wondering if you have an estimate of the percentage inflation you're facing, absent any cost increase from volume?

Well, it depends upon the area of cost. But clearly, I'll just take a shot at some of the areas. I mean if you take healthcare, for example, that's definitely in the 10% range, I would say, the increases that we've seen. And then clearly, on the commodity side, clearly, the cost of diesel and any oil-related products that we use, clearly, has gone up substantially. We do have that fuel surcharge that we put on our invoices, so we do cover ourselves that way. But you also have commodities such as the PPE that we use that has its roots in some of the commodities like oil, plastics and so forth that comes into the business that we use at our sites. That has all seen inflation. So there, you're probably in the mid-single digits growth year-over-year. But that's why it's so important that we have our cost reduction plan and that $30 million that I talked about, which includes some of the Peak synergies, probably $6 million or $7 million of Peak synergies. But we need to have those cost reduction programs in place to offset a lot these other cost increases. And I would estimate though that probably half is eaten up by other increases in our business as you were alluding to and probably half falls to our EBITDA line. The other big area, just to mention it because it's so important, I mean, at the end of today, we're a service company. And our labor costs -- if you add all of our labor and labor-related costs, you're probably $700 million or $800 million. So even a modest increase, let's say, 3% is a lot of money. So there's a lot to cover there and that's why it's so important to have these cost reduction plans in place. So does that give you a sense of that there, Rich?

Gives me an excellent sense. Is the 3% labor on the $700 million, $800 million is that about what you're facing right now?

Roughly. And yes, if you include turnover and so forth, then the whole thing it probably averages somewhere around there.

Okay. And then secondly, it seems there's now a wider opening to go after 2012 volume from the GE Hudson River project, is the company still vying for work there and do you have any idea if the field of potential disposal providers has widened from the 3 companies that were sanctioned for bidding in 2011?

We typically wouldn't comment on a particular contract like that, but we're certainly a national provider for landfill waste. And we expect to continue to be in that business for a long time.

Right. Last quick one. Just broadly, encapsulating all of the discussion of the pull forward and the spring breakup, et cetera. Is it reasonable to assume your Q2 is going to be similar to your Q1?

Well I think there's probably that pull through that I mentioned before of $10 million. So without giving exact figures on Q2 because we clearly only do the annual guidance, but probably somewhere around there is the $10 million difference, I would say.

Our next question comes from the line of David Manthey with Robert W. Baird.

First off, I was wondering if you could discuss the future impact of the energy production shift from dry to wet plays. It sounds like you're in the midst of that, if I'm hearing you correctly, it seems like that's been going on for a while, the natural gas price has been falling for a while. Could you tell us, are you in the 8th inning of that or are we in the middle of it right now?

I think in Western Canada, that's long behind us. I mean that's been impacting the conventional gas up there for a long time. And in the U.S., we're certainly seeing a shift from the Marcellus' area, let's say, for example to moving more over to Utica or another -- other place. So in the U.S., I would say we're sort up midway through that transition. But that being said, we're moving with the rigs. We're moving with the crews. Our asset utilization continues to be very good in that business. The expected growth, I think, is where we would do some of the capital this year in anticipation of expected slowdown in the Pennsylvania area particularly. But I think we are doing very, very well. Our team is extremely focused on driving the high levels of utilization for all of our assets in the field.

Okay. And I think you're quoted as saying, less than $100 million of your revenues are related to natural gas end markets, is that still the case? Is that number bottoming out or does it go lower from here?

No. I think that's sort of a good directional number, I think, in regard to the exposure that we have in some of those gas plays that I've talked about in the past. And the business obviously doesn't go away overnight. It's just is -- it does get impacted and it does shift. And so it might grow more in some of the other liquid rich areas than it currently is today. But there is still a very high demand for the services that the company offers, and we're moving to meet those demands.

Right. Okay. And then just finally, could you talk about your cross-selling efforts and maybe any estimate for incremental growth this quarter from the effort? I think initially you were targeting chemical and you are talking about utility and ultimately refining. But what are your goals there? What are you targeting? And if there's any metrics you can give us?

Yes. Probably no metrics. Because we are doing a lot of cross-selling across a lot of different industries, as you know. But we used chemical last year as an example, where we saw probably $40 million plus of cross-selling revenues in that vertical alone. But again, thinking about the sales meeting we had and discussing the opportunities that we have in the various markets that we're servicing, there's a lot of cross-selling. And we're really in the early stages there. Some of the acquisitions that we've made have only begun to really see that cross-selling taking place with their customer bases, with environmental, for example. So we're pretty excited about the future there from an organic growth standpoint. I think Jim mentioned probably about 10% organic growth in the quarter, that's going to continue and a lot of that is a result of the cross-selling.

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

Jim, as usual, first question I've got is just a breakdown of sales and EBITDA by segment, if you could give that to us, please?

Absolutely. The Q1 revenues were, of the $572 million: Tech was $219.5 million, Field was $47.5 million, Industrial Services was $152.6 million and Oil & Gas was $152 million. EBITDA in Q1 was -- the total, obviously, was $100.9 million, Tech was $50.8 million, field was $2.3 million, Industrial was $34.7 million, Oil & Gas was 38.4 million and Corporate, obviously, a negative, was $25.2 million. I also wanted to mention that what we had done, there were some branches that we moved from the field -- within the environmental area, we moved from the field to the technical area because it had more to do with waste treatment than Field Services. Probably about -- if you looked at Q1 of 2011 last year, we moved about $9 million of revenues from Field to Environmental. And then within the Energy and in Industrial side of our business, we moved about $4 million from our Oil & Gas segment to our Industrial Services segment because the nature of what they were doing was more turnaround work than Oil & Gas. So I want to just quickly just give the revenues and EBITDA numbers for Q1 of last year, just so that you have these rated, these restructured numbers, if you will, with those changes so you can do your comparisons. So last year's revenues was $435 million: Tech was $199.4 million, Field was $49.5 million, industrial was $109.4 million, Oil & Gas was $77.1 million. And on the EBITDA side, of the $67.6 million total in EBITDA: Tech was $47.7 million, field was $4.0 million, industrial was $24.3 million, and Oil & Gas, $13.7 million, and Corporate was a minus $22.1 million. Thank you, Matt, for asking that there.

That's helpful. So one follow-up I've got with regard to the refinery business, Alan, you mentioned it was down about 1% in terms of the overall mix of the business year-over-year, and that was mostly tied to a large project from last year. Can you remind us how big that large project was last year? And if you exclude that, how did the refinery business grow year-over-year for you guys?

Well, I don't have the specific numbers here, Matt. But our refinery in upgraded business is roughly about $70 million in the quarter, which -- and last year, it was about $74 million. And as I mentioned, I think that big project was close to $20 million, I just don't know if it was all covered in that first quarter or whether some of that went over into the second quarter.

I think, some of it did go over to the second quarter. So there would've been growth and probably to the tune of probably high-single digits if you took that out.

That's helpful. And then the last thing I've got is on the M&A pipeline. Alan, you made reference to it in your prepared comments. But is there any more detail you can give us around sort of what of the focus is for you guys right now or is it really just that your casting a wide net and trying to take whatever the best opportunity is at the time regardless of which segment it's in?

Well, I think, certainly, more strategic than that. We're looking at a lot of deals and we see a lot of deal flow. We have passed on a number of them, some of it has got to do with multiples, others cultural fit. But I think we constantly are looking at ways to continue to expand geographically to drive more waste volumes into our plants. Anything around those 2 areas where we have leverage in the business, we can leverage our systems and our infrastructure, is a real focus of ours. And as you know, we're a $1 billion environmental waste disposal company and we really enjoy some tremendous margins as we drive more volumes into those fixed facilities. And that, I think, from our standpoint is what our effort is and our focus is. But that being said, there are opportunities across all 4 segments, the Field Service segment, we see deal flow in our industrial segment, our Oil & Gas and certainly, in the waste disposal side of the business.

Alan, what kind of M&A multiples are you seeing? And remind us what your target is that you're willing to pay, just to kind of help us get a sense for the ones you're passing on, how high their getting?

You know, they're somewhat all over the board as you would imagine. Some of the less -- some of the businesses that don't have significant barriers to entry or permits, the multiples are in the 5-plus range times EBITDA. And others that may have a significant permit or technology, you're looking at 8x or 9x expectations out there. And so looking at combining companies, synergies, trying to justify those higher multiples, sometimes is, it's just not possible. Even with the synergies that you think you can gain and so we had to walk away in some of those higher multiple deals out there. But that sort of gives you an idea, that 5x to 8x range is a range that we're seeing in the market today.

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

Can I follow up, if I may, on your [indiscernible] about the transition from 1Q to 2Q? Is it fair to interpret that 17.6 is the margin, slight dip in 2Q, strengthens in 3 and 4 and you exit the year at something greater than the first 2 EBITDA?

Yes, absolutely. That's right, Mike.

And then within the context of the deal market, are you seeing an increased level of seller interest because of the changing tax code coming at us?

Not necessarily. I think, particularly, in the Field Service business where you have a lot of mom-and-pop or $15 million, $20 million size, Field Service companies, you do see it in that space but pretty much not anywhere else than that.

Okay. And then just one last, if I may. You were asked about the cross-selling, but can you talk about it in the context of is there geographic issues? I mean you've had a very good job of developing Field Services operations in the East part of the United States, it's an area you'd like to concentrate sort of the western part of the United States, and how sort of is that happening? And can you talk about the development of that?

Yes. Geographically, I mean, we've got I think over 1,000 people on the West Coast right now and we have been growing significantly there. The California market is a very large market for us. As you know, we've got significant assets there, as well as great staff. So that is part of our growth area for sure in the West Coast. And if you look back probably 5 years ago, it was half that. So that continues to be a nice area for growth for us.

[Operator Instructions] Our next question comes from the line of Larry Solow with CJS Securities.

A lot of my questions have been answered. Just a couple of follow-ups. You spoke about pricing on incinerators, which I imagine is driving a good portion of the increases in price. Can you just maybe discuss the sort of the industry outlook? I don't believe anybody else has added capacity, but where we stand there? And what you're doing in terms of El Dorado, an update on that? And then if there's any updates on possible closures of any captive incinerators?

Sure. As you know, we track closely what our customers are doing on-site with their own incinerators. And we continue to field a lot of inquiries regarding capacity needs that they're going to have as they contemplate shutting down those facilities. And that really hasn't changed that much other than we continue to feel that we will have a need to put additional capacity in place over the next 3 to 4 years, thus the reason for us to build a new plant. We are in the design phase of that. As we've mentioned in the past, we have allocated capital this year for that. And we, over the next 2 or 3 years, will be building out that capacity. And hopefully, timing it at a time when customers will need that extra capacity. We are extremely busy in our incineration business right now and we know that the market is very tight and we anticipate that to continue going forward. And we are doing what we can to make sure that we can meet the needs of our customers.

Okay. Anything sort of the imminent 6- or 12-month outlook in terms of closures that you know of or potentials out there?

It's hard to say. I mean, I think in the past, we've said that there's probably, 3, 4, 5 of these units out there that aren't running very efficiently and we've been able to convince customers that, on a price per pound basis, it's much better to outsource. And so I think there are a number of customers today, both here in the States, as well as in Puerto Rico that are contemplating moving to an outsourced model. And I think it's going to be a cost savings for them and it's just going to be added volume for the market.

Our next question comes from the line of Robert Stephenson with J.P. Marvel.

It's actually Joe Patton asking the question. With that, question, one of the things that was really important when we got in was the leverage in the incinerator business. The question is, what are you doing price per pound now? And Jim, what does that mean for per share? That's the first question. And then the second question is going to be about natural gas, but go ahead and answer the first question.

Absolutely. Our price per pound now is in the $0.31 to $0.32 per pound range. And clearly, as we increase that, that could mean $10 million of EBITDA, each penny that we do there. So it's a nice leverage there.

And then next question is, you have tons of vehicles operating now and have you changed any of those to natural gas to reduce your costs? And is that on the play plan to do that?

It is. And we have purchased natural gas vehicles and we will be continuing to invest in these alternative energy vehicles, particularly, those vehicles that work on our college campuses and a lot of hospitals and universities where they are permanent. Today we have over 1,000 employees throughout U.S. and Canada that report to our customer sites everyday and just work at those sites as an outsourced service company. And a lot of vehicles were at those sites. We're converting those site -- those vehicles -- we would like to convert all of those vehicles over to electric. And particularly the universities and the hospitals are very excited about that because it drives improvements in their sustainability efforts, as well as ours. And so a great partnership. But certainly, this whole issue with battery safety and electric vehicle recharging and what have you, that we're struggling through. So right now, our focus is on natural gas vehicles, but we would very much like to convert most of our vehicles over to a hybrid vehicle in the future.

Now just a follow-up to that. There's comments [indiscernible] is coming with the 15-liter big rig, have you taken that into account as far as the big rigs?

We have. And we've been certainly working with Boone Pickens' group as they build out the infrastructure across the U.S. every 300-mile refueling facilities there, so they can accommodate the refueling that we need. And I think as that infrastructure continues to build out, we'll continue to buy more of those engines and we have hundreds and hundreds of these long-haul tractors out there running and that's a goal of ours.

Our next question comes from the line of Sean Hannan with Needham & Company.

I apologize if this may have already been asked. Alan, I was looking to see if you could perhaps elaborate on where specifically you're seeing signs of recovery in your business that might be a bit more evident than others as we're talking about from a macro standpoint and how it flows through into your specific offerings.

As far as vertical markets go, Sean, is that what you thinking? Well, when we think about manufacturing for example, that's almost entirely all environmental-related work. And we saw that grow for us about 11% in year-over-year. And so I think that's a good snapshot of growth. At least, from our perspective, that represents waste and volumes of waste being generated, there's probably the ongoing manufacturing. Our broker waste, our broker volume is up about 14% year-over-year. And again, most of the work that our brokers do with us is waste-related, driven from small quantity generators and that the overall general market out there, if you would, of waste creation as a result of economic activity. So does that help you a little bit, those 2?

That's very helpful, the second one particularly. And then I think you had also made some comments that the project business is coming through in the first quarter, pulling forward. And some of that appears to continue to be steady and that is your general outlook, I think, at this point. Is there anything at this point in the year that provides perhaps an upside to where that project business could come in for you or is it fairly well bracketed in your minds?

I think we've got a very strong project pipeline and we've been winning some major contracts recently. Certainly, nothing material that we'd be reporting, but just some great contracts out there. But when you look in the first quarter, for example, like our construction industry segment, which is sort of the building-related trades, it's up 46%. But that's only $4 million. So when we think about some of the stuff that gets pushed forward or some of the potential size of it all, we don't want to kind of misinform that some of these projects are not real big projects, but we've seen some early activity. As you would expect, people want to get out and start doing work because the weather was just so great that by the end of February, people are thinking about, let's start digging in March instead of wait until April and May. So it's that kind of mentality that we were just trying to communicate here this morning.

Particularly when you have 85-degree days up there in Boston.

Yes, yes.

Our next question is a follow-up from Rodney Clayton with JPMorgan Chase.

Just a couple of follow-up questions here. First, the free cash flow. Jim, can you tell us where that was in the quarter and remind us what your expectations are for the year?

Sure. Our free cash flow in the quarter was roughly -- almost $10 million, so it was $9 million or so. Cash flow from operations was about $31 million and you'll see that in our cash flow when we file our Q. And for the year, I would say, we expect to exceed $100 million of free cash flow this year. And cash flow from operations probably in the high-200s, maybe $270 million or so.

Okay. That's very helpful. And then lastly, pharmaceutical waste, can you just tell us how that's progressing? Remind us kind of where you think you fit into the competitive landscape in that business? And then to what extent can you utilize existing infrastructure and building that out versus needing new CapEx to that?

There's not a lot of CapEx needed certainly for us to continue to provide pharmaceutical return services. Our healthcare business was up 12%, our educational business up 4%, our pharmaceutical and biotech was up 10%. I think all those numbers sort of speak to expanding more capabilities with those industries. Some to do with returned pharmaceuticals, others to do with medical waste. So I think the company has a great infrastructure from a service standpoint, no plan [ph] generation, handling those small quantity pickups. And we'll continue to leverage that existing infrastructure.

Our next question is another follow-up from Michael Hoffman with Wunderlich Securities.

DuPont was shutting down the deep water facility at the end of March. Can you talk about if you benefited from that? And if so, how that should layer out through the year?

I think, Michael, specifically, we're seeing a lot of request for proposals as it relates to one of those sites closing down. And we, along with the 2 or 3 other companies out there, I think are probably benefiting the most from the change in strategy for them. So I wouldn't say it was material certainly, but at the end of March, I think those operations were finally closed down. So we expect to continue to focus on servicing those customers that are being displaced.

Mr. McKim, there are no further questions at this time. I'd like to turn the floor back over to you for any closing comments.

Well, thanks very much for your questions and we appreciate your interest. And we look forward to updating you on our Q2 conference call. So thank you.

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