Q1 2020 Earnings Call
And ladies and gentlemen, thank standby.
But they had to look into the first quarter 2020.
<unk>, Okay I'm conference call. These comments if being recorded.
After today's presentation they'll be an opportunity to ask questions ask a question. When they press are then one on your telephone keypad.
All your question. Please press are then too.
Oh I like to turn the <unk>. Please go ahead Sir.
Good morning, and thank you for joining us today.
Joining me on the call. This morning, your <unk>, Chairman and Chief Executive Officer, Jeff dealer.
<unk> again, please note that certain statements contained in this conference call that do not described historical facts or forward looking statements are defined in the private security British humor for Mac of 1995.
Since forward looking statements include risks and uncertainties actual results me different materially from those expressed or implied by such statements.
Factors that could cause results to defer materially from those expressed include but are not limited to vote disclosing the company's violins Securities and Exchange Commission.
These risks and uncertainties also include but are not limited to statements regarding the continued impacted the covert 19 pandemic on our business the micro economic impact of specific specific and markets in which we operate and our expectation for for results for 2020.
That's right cannot controller predict many factors that determine future results listeners should not place onto reliance on forward looking statements, which reflect management's we use only on the big 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 other.
Her wise.
For those journey by web casts you can follow along with today's presentation for those listening by phone you can access to these presentation on our website W.W.W. dot U.S. ecology dot com.
Throughout yesterday's earnings release and are calling presentation today, we refer to adjust it <unk> adjusted earnings per diluted share cash earnings pretty with the chair and adjusted free cash flow.
These metrics or not determined in accordance with generally accepted accounting principles and are therefore susceptible to varying calculation.
Condition calculation and reconciliation to the financial statements of adjusted earnings per diluted chair cash earnings per diluted chair adjusted <unk> and adjusted free cash flow can be found on flights 20 to 32 through 28 of today's presentation.
<unk> metrics or use born evaluating are reported results.
We would also like to point out that our first quarter results include contribution for the N.R.C. Group Holdings acquisition. The closed on November 1st 2019.
Throughout this presentation, we often refer to NRC group holdings as an R.C.
Will also provide a data on Standalone us ecology, which is referred to as legacy U.S. ecology.
Similarly for Standalone in R.C. data, we refer to that group as legacy N.R.C.
This desegregation is an attempt to provide increased transparency and understand understanding of the underlying business.
<unk> I'd like to call over to Jeff.
Thank you work and good morning, everyone I Hope you and your families are staying stage safe during these difficult times.
Before I have Eric review, the first quarter results I like to address the current a virus pandemic in how you at the ecology is responding to it for those that are following the web cast presentation. Please direct your attention despite five.
We are an unprecedented times, but the <unk> team pandemic affected all humanity and U.S. ecology is no exception our hearts go out to all those impacted.
You are in our thoughts and prayers.
I want to offer special Thank you to all essential service providers that are keeping us safe in this time of need and this includes U.S. Ecologies 3500 team members that have not missed a beat despite the rapidly changing unparalleled and stressful conditions.
He is unprecedented times focusing on our core foundation and upholding our values has never been more important in fact, our mission has always been to provide safe in compliance solutions to protect human helping the environment, which is exactly what is needed today.
Moving on to flights six safety is our number one priority ended they core part of our D.N.A.U.S. psychology. It applies to our team members our customers and the communities in which we lip and operate.
At the started this crisis, we immediately mobilized coping 19 crisis management task force swiftly take action to addressed matters of importance throughout this process, we deployed safety protocols throughout or organization based off our extensive experience, but the bullet Sars and H., one and one.
Mobile like 30% of our workforce to work from home and extended special Cobot 19 time off benefits to our team members. We have been in constant communication throughout the organization, providing critical information to our team members.
<unk> use that personally and professionally to protect themselves and others.
Mobilized and secured valued P.P.E. using our establish sourcing networks and expanded our source the message. During this crisis to ensure teams and customers were properly protected at all times.
With our services deemed essential by Homeland security, we implemented our business continuity plans to ensure we were remade operational while we deployed feel teams to perform decontamination cleaning projects where needed.
All of this was done while running the day to day business.
As you can see our results on flights seven.
Operationally, we saw a little impact from coping 19 during our first quarter other than our energy services business.
Total company revenue grew the $248.7 million adjusted to you, but dog was $43.2 million and we saw it 32% growth in our adjusted free cash flow to 50 at $15.9 million.
Looking at flight eight our legacy U.S. ecology business had an outstanding quarter.
Environmental our environmental services segment grew 19% with based business growth of 5% any vent business growth of 102% our field and industrial services business was up 14% driven by solid execution of our strategy to grow our small quantity generation business.
Led by our success of our retail program implementation of our National laptop program.
Factoring in March and expansion in both segments adjusted <unk>, 31% over Q. why in 2019 $31 million.
Has shown on flight nine.
And our C. contributed $86.6 million and revenue during the first quarter.
Domestic environmental services performed well in most markets and experienced and Upticking cope with 19 decontamination surfaces in March.
Standby retainer based business was not impacted by <unk> by the Kobe 19 pandemic during the first core and solid solid performance between our own expectations.
Weakness in the upstream energy services first sent it during the quarter with the direct impact of the coping 19 pandemic compounded by the production war that drove oil prices to historic lows. These truly black Swan advance resulted in has taken a 300 million dollar noncash goodwill impairment charge.
Pipe discharge, we have a strong belief in the value of the underlying assets.
Markets, we serve and believe the growth opportunities will be there just over a longer time horizon.
Overall, and R.C. deliver $12.2 million, but just it during the quarter.
Despite the strong results be evolving health crisis, and its impact on the global economy is creating uncertainty and many of our markets and we'll negatively impact our second quarter.
As a result at the end up March we announced a proactive and we <unk> imprudent measures to adjust or operating plan to reduce costs and capital spending in order to safeguard the financial strength of the company has outlined on flight 10.
Our capital preservation initiatives included a reduction of approximately 30% to our plant 2020 capital expenditures expected to save up to $30 million a cash.
Additionally, the suspension of our quarterly cash dividend will preserve approximately $18 million dollars for the balance of the year.
Cost controls, including the department of Noncritical activities elimination of discretionary spending reductions in travel hiring and variable compensation will save an additional $15 million to $20 million.
Furthermore, we are taking advantage of that for all of withholding taxes expected to generate approximately $8 million of additional cash savings in 2020.
And we drew $60 million off our line of credit, adding additional cash to the balance sheet, while leaving $76 million of additional capacity.
These actions are anticipated degenerate more than $70 million up cash savings, providing it's flexibility to preserve our talented workforce by limiting furloughs and staff reductions while positioning as to take advantage of those opportunities when the market rebounds. These actions also supplement our strong operational.
Cash flow generation, providing further financial flexibility as we navigate these unprecedented times.
As covered on slide 11, due to dance certainty surrounding the magnitude and duration of the cold, but 19 pandemic in late March we did <unk> withdraw guidance for the full year 2020.
Looking further into 2020, we expect that our environmental services business will whether the current market conditions due to the <unk> irreplaceable permitted facilities and resilient business model.
Further many of the field service offerings we.
Field service offered see operations are seen continued growth and opportunities during this time.
Execution on our retail program and strengthen our emergency response spots business.
Has benefited from increased call that 19, decontamination work should help offset some of the industrial softness.
Energy waste disposal services business.
<unk> operating an extremely challenging conditions will be negatively impacted for the ballots of 2020.
We are hopeful that when states begin to reopen our customers will restart their businesses. We are already seen positive signs of increased activities.
Especially in those markets, where there either where either reopening has commenced or as planned to in the near term.
We also expect that will be a.
A gradual phased in approach starting in may leading to strengthening overall industrial activity towards the end of the second quarter through the second half of the year.
As a result, we believe it at this time that the second quarter will be the low point of the year.
Looking at the most recent data we started seeing a reduction of waste volumes entering network starting at the end of March and accelerating into April.
April based business volumes were down both sequentially from March and year over year by approximately 15% to 20% which is in line with what we had expected.
Are you bet business with hot sequentially, 6% from March 2020, however, down slightly when compared to April 2019.
We expect our base business to recover at the pace at which states in businesses reopened and expect arc arc customers to reopen earlier than other services industries. So far we have seen little department in our eight that business with only a handful of projects.
I've been pushed from April and May interest into the summer, where we already have a healthy pipeline.
As for the pipeline it is healthy and even in this shut down we have seen.
Activity emerge.
As of right now most of the event business impact will be a shift into our third and fourth quarters.
Overall, we believe with the actions we have taken the company will be positioned to continue to generate positive you're over your free cash flow, even at significantly lower lower than expected adjusted levels.
As to guidance.
While we do not have enough clarity to refresh guidance, we expect to reestablish or 2020 guidance at the time of our second quarter earnings release.
In summary, the flexibility of our business model continued free cash flow generation strong financial liquidity provided by cash on hand, and available cat capacity on the company's lines of credit.
<unk> a committed workforce will enable us to navigate these chat challenging times and position the company to quickly capitalized on those opportunities for growth as business conditions begin to recover.
Alternate to Eric.
Thank you, Jeff I would like to actually earlier comments about the outstanding work of our team and everyone on the front lines.
As I go into the detailed financial review I will be discussing consolidated results that include in R.C. before delving into the legacy U.S. ecology scandal owners holds for the corridor.
Starting with consolidated results on slide 13 revenue for the first quarter of 2020 was $240.7 billion up 84% from the same quarter last year.
And included $86.6 million from N.R.C.
Revenue for the environmental services segment increase 37% to $126.7 million, including $16.8 million from N.R.C., which compared to $92.3 million in the first quarter last year.
The film Industrial services segment delivered revenue of $114 million in the first quarter of 2020.
And include $69.8 million from N.R.C.
This was up 194% from $38.7 million in the first quarter of 2019.
Total gross margin was 25% and the first quarter of 2020 down from 27 per cent in the first quarter of 2019 treatment or disposal margin for our environmental services segment was 39% and both the first quarter of 2020, and the first quarter of 2019.
Gross margin far field industrial services segment was 15 per cent in the first quarter of 2020 compared to 10 per cent and the first quarter of 2019.
Selling general administrative spending grass G.N.A., what's $51.1 million and included $19.7 million for N.R.C., as well as $2.9 million and consolidated business development and integration expenses.
Compared to $25 million in the first quarter last year, when excluding the $4.7 million a favorable property insurance recoveries that we're not repeated in the first quarter of 2020.
As jump mentioned, we recorded noncash goodwill impairment Chargers of $300.3 million in the first quarter of 2020.
Added to our energy waste disposal services and or international businesses.
This noncash charge was directly related to the supply and demand shock and the global oil market and the associated negative impact on the expected future cash flows of each business.
Adjusted earnings per share. It was 12 cents in the first quarter of 2020 compared to 22 cents in the same quarter last year.
Earnings per diluted share, which adds back the amortization of a tangible assets to adjusted earnings per diluted share with 33 cents in the first quarter of 2020 compared to 31 sense in the first quarter of 2019, which represented 6% year over year growth.
Consolidated adjusted EBITDA was $43.2 million in the first quarter of 2020 up 82% from the same period last year.
Reflecting strong growth by legacy you'll see ecology as well as the addition of N.R.C.
Shifting to legacy U.S. ecology results on slide 14 revenues were $154.1 million in the first quarter of 2020 up 18% from $131 million in the first quarter last year.
Our environmental services revenues were up 19% to $109.9 million on a 70% increase in treatment or disposal revenue and a 32% increase in transportation revenue.
Based business group, 5% and our event business was up 102% and the first quarter of 2020 compared to the first quarter last year.
Legacy U.S. ecology filled in industrial services revenue was $44.2 million in the first quarter of 2020 up 14% driven primarily by increased revenues in our remediation and small quantity generation service wine.
Gross margin for the legacy U.S. ecology business was 29% and the first quarter of 2020 up from 27 per cent in the first quarter last year.
Our environmental services segment treatment of disposable margin expanded by nearly 300 basis points.
42% and the first quarter of 2020 compared to 39 per cent in the first quarter of 2019 on the increased base and event business along with the Grand view, Idaho recovery.
Gross margin for the legacy called you fill in industrial services segment expanded by 246 basis points to 12% and the first quarter of 2020 compared to 9.5% and the first quarter of 2019.
Margin expansion is attributed to service mix as well as improved route density.
S G.N.A. for the legacy U.S. ecology business was $13.9 million compared to $20.3 million in the first quarter last year. As a reminder, s. do you need for the first quarter of 2019 reflected a favorable 4.7 million dollar property insurance recovery that was not keep it in the first quarter of 2020.
Increase in S.G.N.A. for the first quarter of 2020 was also partially due to $2.4 million of business development in integration expenses as well as increased labor and insurance costs.
S. G.N.A. is a percent of total revenue.
Improved by 43 basis points to 18.5% compared to the first quarter of 2019, when excluding property insurance games and business development integration expenses from both periods.
I guess, you'll see college, you adjusted EBITDA was up 31% to $31 million for the first quarter 2020.
This compares at $23.7 million in the first quarter last year.
Turning to slide 15, we exit the quarter with a solid balance sheet and strong liquidity.
We had cash at $110 million and that borrowings of $749 million that March 31st 2020.
Are operating cash flow was up 58% during the quarter to $29.3 million driving or adjust it free kastl up 32% to $15.9 million compared to $12.1 million in the same quarter last year.
Looking at I'd, our overall deposition March 31st 2020, we have a 500 million dollar revolving line of credit with approximately $76 million available capacity remaining as well as $448.9 million on our term loan.
Matures and 2026.
The overall current average cash interest rate on our debt is approximately 3%.
Are terminal it'd be financing is structured with no financial covenants and low required amortization of only 1% per year or $4.5 million in caffrey payments.
A revolving credit facility is at the syndication of highly capitalized financial institutions, with which we have strong and long term relationships.
Facility has to financial competence.
Leverage ratio limited tough four times, our total outstanding debt in capital leases to our trading 12 month bank calculated adjusted EBITDA.
As well as an interest coverage ratio.
At the end of the first quarter, we were well within our covenants with a leverage ratio of 3.4 times.
Our capital preservation initiatives, just discuss earlier along with expected free cash flow generation is expected to allow us to remain in compliance with our debt covenants for the balance of 2020.
However, we are proactively discussing the current environment and our outlook with the syndications, leading banks and are comfortable with the potential to obtain a covenant waiver or amendment if needed.
Overall, despite current market conditions and the cope with 19 pandemic are solid liquidity and strong balance sheet will allow us to continue to operate the business with a long term focus.
With that altering the call back to Jeff.
<unk> well these are truly impressing at a time or industry, leading position diversity, if customers some business strong balance sheet and liquidity puts us in excellent shape should be able to navigate and continue to generate cash. Despite these challenges.
Having the financial flexibility allows us to be focused on long term initiatives operational improvements and well positioned the company to take advantage of the recovery, while protecting our highly talented team.
The integration with N.R.C. is continuing it pays despite this <unk>. Despite this trying these trying times actually the complimentary service offerings and the diversity of our footprints is in many ways leading to an acceleration up our integration efforts. The teams are coming together and we are seeing synergistic value of the combination.
As we have had to redeploy our worst workforce to best serve our service our customers needs.
This is enabling our emergency response group to leverage the full breadth of our new operations and really work together as a singular unit.
Enclosing I'd like to think our team members throughout the organization and they are extraordinary effort and their unwavering commitment to servicing our customers in the most trying enough times, we were <unk> focus on those things that we can control, including the preservation of our financial strength <unk>.
To sustain excellent stewardship on behalf of all stakeholders and believe we are well positioned.
To benefit from really big recovery happens with that operator will open it up for question.
Maybe the gentleman, we will now be getting our question and answer the question to ask a question you May press start then one on New York touch tone phone.
If you are using a speaker phone. Please pick up the had tried before pressing the keys.
Dragging a question. Please press start then too.
Just a moment to a symbol are roster.
And if it to begin with Michael Hoffman, which people.
[noise], Hey, Jeff Eric. Thank you for all of a commentary details and glad to hear everybody should I can healthy.
Based business the 15 to 20 yeah.
Sure about pay check your industry concentration like you all have an exposure to auto an auto production yeah.
An example.
Graphic issue.
He got a big land phone Corpus <unk>, it's it's something that you can point to that.
Helps us understand why that that level of steep decline.
Yeah. So a couple things on that Michael first and foremost. This is volume data I want a point that out doesn't necessarily correlate were revenue because it doesn't take into account pricing. It doesn't take into account to mix on there. So not all waste is created equal as you know on there. So we wanted to provide this data to give a stats for it.
When this pandemic really gain traction in March and as we started seeing the severity unfold. This is kind of in our line of expectations. You know a lot of the smaller manufacturers are gonna be the ones that are gonna be forced down to close down in in it definitely had more of a geographic presents.
Then.
Say an industry line presents so for example are Canadian market place a candidate checking more severe approach and we saw a much more to client up in those markets. Then we have in say, our Texas marketplace and so it's all depending on where it's at the auto exposure you know yeah, there's gonna be some impact.
On that in our our great or Michigan area did see some declines in that area, but you know we do expect that to recover whereas those those plants are starting to open up and the the associated services here here had actually this week or next so we're on track in there. So I do a couple of points. There you know that's just kind of what we.
You would have expected to see that decline you know in April and it probably will continue into may until it start for as we start seeing that phase reopening happen.
[noise] and so you're reading that bombing doesn't equal revenue on soon rents are less then move on in the point.
That's right that that would be my expectation.
Okay.
Mm.
Yeah, helpless portion that a little bit.
Yeah, we we don't have revenue numbers for April yet, we haven't worked really into <unk> may. So we were able to give you volume data to give you a sense, but you know we'll be able to report more than that when it comes to the second core.
Okay Fair enough and then.
One of your biggest competitors in the retail.
<unk> got sold them that company, let's call. This morning.
Suggested retail results were next.
Son looks great and some of those terrible I'm curious, what you're experiencing again and that doesn't seem to spend an area of focus.
Yeah for the vast majority of our customer race in the retail sector. They all remained open and so we've actually seen increasing service <unk> service operations volumes, we had very strong growth in one that continued into cute she.
Continued into April from that standpoint, we did have some customers that were shut down if they were tied to say anything from you know apparel or cosmetics or things to that that we're not being distant show they shut down and we didn't get those pickups, but we serve as most of the grocery store chains throughout the.
Throughout the United States.
You know we have some of the larger hardware type stores things like that all those remained open and they saw increased volume transactions. They also put in additional protocols that I think they were being an older sensitive on you know just haven't volumes you know just being.
Being thrown in and treated as opposed to you're trying to figure it out so we thought increases and volumes as well during that time period.
Mhm decontamination work you alluded to kill me frame parts, what you've been doing and I'm, assuming that's all.
Industrial service.
Line of business, let me see it.
Yeah. It is all in the field and industrial services line in the vast majority of that falls in the N.R.C. and R.C.'s cost centers are revenue centres. There. So what we're doing is is we're providing an emergency response services two d. con everything from retailers to commercial buildings to government.
Contracts.
Our government government contracts, where there's been a known contamination and often cases now that it's kinda changing to where people are getting ready to open we're providing preventative and initial d. con services to go in.
To decontaminate Daddy comes with the experience. So we we gained by the acquisition Tibet R.C.
And there are vast experience in a in this area from a framework in the first quarter, we probably did around $3 million in in in work and that's actually grown in April we've done about 900 emergency response or responses through the end of April and so.
That has been a good business and it's one that will probably can change it more as we start seeing reopening thing go to go from from an emergency response perspective to more preventive type reopening options for our teams.
And can be thinking that as a above corporate margins in line with corporate mine, how do we think about margin.
Vast majority when it comes to emergency response as long as we can internalize the talent, we can get above average segment margins on that so yes that is good good business for us and you know that that is something we would expect to continue.
Oh, that's funny.
What about the waiver.
You, all being prudent having one's conversations, but you're not anticipating.
Having challenges on pub and.
<unk>, yeah actions you're taking.
Yeah at this point, we're not but but it is something we we like I'm sure. Most companies are doing all sorts of of scenarios and modeling and things like that and you know depending on how dire and how long did you model you know the the slow down to be the shutdowns to be that kicks you had different scenario.
So in some of those scenarios, we we do get close or trip. The covenant again. These are these are scenarios. So I don't anticipate it an issue at this point, but we are also being pretty proactive and and I think it's it's likely that that we're going to seek to do something in the near term just to to.
Give us that had room and keep that out of away and not have to focus on it.
Yeah, and you hit fairly what you're seeing is kind of like a slush and my keys flushes sharp shallow sharp steep and then a long.
Gradual that's the way to think about it at the moment.
I I would frame it that way I mean, the hard part in this as we don't know first of all the pace of reopening.
You don't know if there's going to be another shut down later on in the year. There's a lot of variables. We just don't know don't have control on but if we see a gradual pace of reopening which is kind of what from our vantage point is kind of looking like throughout the U.S. in particular and even in Canada.
And based off what we've seen in those markets that have opened up we do expect our customers to start bringing their workforce back more quickly start rapid production and starting to see waste volumes and service offerings come into place.
As that phases out yeah, it should gradually improve up through the second quarter and really when you looked at the back half of the year. If it continues at at pace I would expect the exact same thing in the back half of the year.
Okay. Thank you very much.
Alright, Thanks, Michael.
And again, if you have a question. Please press start then one on now moved to a question from Jeff Silver with B.M.O. capital markets.
<unk>. So much check you mentioned this new prepared remarks, and I think that May have just they mentioned in the answer to the previous question that you said something about how you expect your customers to reopen earlier than other service providers can we get a little bit of color on that.
Yeah, and and that comments really made Jeff and thinking when you think about the economy overall, what's really been shut down a lot of its restaurants non essential services, we don't get waste from that.
So when you think about reopening most of the industrial facilities I mean, they kept open if they could and you know and <unk>, especially the smaller ones. They shut down and I would expect them to reopen more quickly than what you're going to see they they're going to have better opportunities to put into the safe practices such a social.
Distance seen putting protocols coming in and they're not haven't customers come on site. So all of that is what I'm trying to elude too is why I think our customer base.
It will open more quickly than a vast majority of the services companies out there.
Got it I I thought you may have been referring to other yeah hazardous waste companies, but I think you require find out there and I I'm just curious I'm, an obviously, there's a lot going on from from a cash flow collection perspective.
Haven't seen any issues with any of your customers.
Yeah adjust this is Eric.
Not all nothing significant yet obviously, it's something that we're monitoring very closely it's something that we monitor pretty closely any way, but we've we've put put some additional procedures in place and process someplace to monitor using more closely to this point no. We're not seeing any any significant issues or any major issues.
But we will continue to monitor it if you look at again through the first quarter. If you look at at our collections R.D.S.L.D.S. those actually improved in the first quarter <unk>, which is a good thing <unk>, but we will continue to monitor it and evaluated as we go.
Okay I thought it was at a all just add when you kind of look to April and you look at our cash but position it's held with what we access to the quarter out which tells me that we're we're still collecting the same rate.
And we're not seeing any initial signs of challenges right now, but it's definitely something that that is being monitored very closely.
Okay, Great and then just one clarification you have that slide I think it's flights and we talked about the potential cap savings and paint it for all of be withholding tax about 8 million a cash. So that's again payroll related pack your deferring now and that you'll be paying the second half way 21, and it's a 2022 is that correct.
That is correct.
Right I think so much.
Thanks, Jeff.
And once again, ladies and gentlemen star one if you have a question about move to Tyson Bauer with Casey capital.
Good morning gentleman in a a appreciate what you've been able to do to protect shareholders and taking a very conservative approach on preserving cash in capital so well down on that side of it.
The I mean events business sense, a lot of it is.
Mandated by either development, a litigation legislation other events that create that clean up or that appetites for cleanup.
Are you somewhat inflator you may have a variation on timetable, but are you still somewhat insulated with the pipeline that should still arise and also getting those jobs completed.
Yeah. So this this this tyson Ah argh types and this choice and this is Jeff Gallery, My mind bumping around so yeah actually for the most part when I look at the event business for all of 2020 right now we entered the year with them fairly large projects that were regulatory enforce that.
All indications are are not slipping not moving shifting maybe out of a month or two but you know kind of normal course than not pandemic related per se. We also this year expect quite a bit of government work coming in which is continuing to go on and we're we've actually seen most of those.
Government controlled sites not shut down in March and April which is help some of our volumes come through in there when you kind of look at the I'll call. It the unknown.
A filler work that that just happens through through normal poorer so business activity.
Entered the year dot being right around 25% to 30%, which is normal course, we still see that pipeline being strong we see a lot of opportunities our customers are not telling us right now that they're they're they're slip and deferring and it was one of the things as this pandemic started was one of the the areas that I was really monitoring closely with our sales team.
As to what the customers are saying and how they're acting and that has continued to date and most of it is just slipped you know out of April where all most of the country was shut down and now that we're seeing reemergence in may we're starting to see you know those things starting to gear up and ready to go so right now we're cautiously out.
Domestic we're going to see no impact maybe a shifting in there, but it's definitely something that we're going to monitor as we go throughout the year.
Ooh does that also I mean that we should see pricing on hold fairly well as people are treating this as a kind of a wad off or a one time event that the you you you're a bit pricing and the pricing that's out there.
There isn't a big competition necessarily for volume so give them a quicker.
As things ramp up so kind of your outlook on pricing.
Yeah as of right now I'm not seen any any changes in the price seemed dynamic as a result of the pandemic. The great thing about our industry is we have some very rational and disciplined players in the marketplace and so that kind of bodes well for you know just having consistent.
In pricing.
The cuts that you talk about on the cat backs are those relate adjust to the expectations have volume as being pushed to the right.
So there's some are easier decisions for you to make or where exactly can you pinpoint some of those cuts will be.
Allocated to.
Yeah <unk> most of the cats are really across the board and it hits almost every one of our our key areas. So we're going to control and be more discipline on our maintenance spanned we're gonna definitely push some of the growth projects that we were seeking and looking for out probably into 2021, we.
Some capital deployment going out for the Idaho rebuild that was funded through insurance proceeds and there was planned to start at the back half of this year that probably will shift into 2021 type area and some of the landfill as spend especially in the energy services business, we're not expecting the same volume so.
That was an easy move to future future periods and so we're being disciplined we're still keep in our eye on the long term, we're not going to do something that's crazy and and jeopardize the long term benefits and so I, we have a great capital team led by Simon Bell and.
Are all over this really monitoring this throughout the organization and you know where we're going to be very prudent and discipline when it comes to that capital deployment.
Okay.
She just but keeping questions that Eric given the 300 million good well, obviously doesn't the factory, but that but what kind of quarter impact or should we expect from that take that off the battle sheet and then two well, we see any cash taxes impact.
If Canada is may have left volume and so less percentage of overall sales this year or another government programs that may adjust your cash taxes.
[noise], yeah ties and so on the goodwill impairment, yeah, what you really see it doesn't impact or <unk>, but but essentially what it does it it removes that $300 million out of our goodwill asset category, which is in our long term assets.
So that that's how that flows through on the balance sheet on the income statement. It. It flows through operating income on a gap basis, and obviously Gabby P.S. and then if you look at and how we calculate adjust to the P.S. and eat dog, you'll you'll see that that habit back in that peace.
In terms of.
Of the balance you going forward, you know that that will be off our balance sheet going forward and we'll continue that way one thing to note on the goodwill impairment, though since we are still technically in the accounting allocation period or purchase price allocation periods, where the inner see acquisition, we may potentially have some some edition.
We'll true up to that numbers, we finalize the purchase accounting during the year, but again that would that would be be flowing through similar to this if there are any additional true up switch at this point, we're not expecting right now, but we'll finalize that purchase accounting exercise by by November of this year.
And one side.
Gap on the cash earnings as opposed to gap earnings.
Which is what we want people to focus on anybody was the cash earnings.
That's correct.
That's correct.
Tyson remind refreshment round your second question.
If you're going to have any cash tax implications from the various government programs or because you're going to have different allocation of expectations from sales. So you won't have like say the Canadian tax rate, which may be higher than what you have here, what's the implications on.
Taxes.
Yeah in in in terms of our cash taxes.
I don't I don't think we're expecting any major implication some of the things that we're doing are going to benefit us from a cash tax perspective in 2020 <unk>. Some of the things that that we were able to differ <unk> will help us from that perspective in terms of the overall rate the the effective rate or the cash.
X. rate in Canada for example is.
Not significantly different from from where we're at in the U.S. In fact, given how are some of our state effective rates have increased with the N.R.C. acquisition given a their presence in some of the the higher taxed state in the U.S. The the Canadian overall rate is actually on power maybe.
Even slightly lower than the overall U.S. rate. So all in all I'm I'm not expecting a major change or shift in our cash tax rate due to to events in Canada.
Alright, Thank you gentlemen.
Thanks, Thanks sizes.
Now, we'll take a question from Thailand Brown with Raymond James.
I think I'm one guy.
Good morning.
Hey, Jeff saw appreciate that you gave a base trends in April but you have any color of what event in April.
Yeah. So event business than April was up sequentially for March about 6% and it was down slightly around two per cent you're over here.
Hmm, Okay. That's good and then how do we think about the incremental margins E.S. So is it going to be something like 50% to 75% in that really depends of transportation.
Balls or how do we think about that.
Yeah, I think it as you see and I really think that was one of the the key drivers in our in our treatment and disposal margin improvement in the first quarter. This year was you know when you have a hunter, 2% increase in event business that that event business ball volume with that kind of it.
Increase or as you see an increase definitely comes in at a higher incremental margin and that could be again with strong bayes and then growth in event that incremental margin could be 60, 70%.
Okay. Okay. That's helpful.
Yeah.
That of that grows we would definitely expect that incremental margin flow through now as we go forward the base business depending on on what it does in terms of growth <unk> will obviously, there's operating leverage there that that can cut the other way.
Right right right.
Right. That's that was more my question is how would the <unk> I Should've said Detrimentals look on the base business.
Yeah, I I think I think that detrimentals on the base would be would be smaller than than what you'd see on the event just because again.
Over the years, we built a base up to cover large portion of our fixed costs and and so the the incremental detrimental margins on the event.
Hopefully more more pronounced than they wouldn't be on the base.
Okay. That's that's very helpful. Okay, and then Jeff I think you've said that in E.S.N.R.C. contributed 17 million.
In the quartering Q1, but is there any way to think about what that might step down to and Q. too I mean could we be talking like a low single digit millions.
[noise] [noise], so what particular part of an R.C. are you talking about the energy waste.
Yes.
Yeah. So we're we're not seeing positive trends in energy waste business right. Now so we actually had a fairly strong you know relatively so I should say strong first quarter a lot of positives developed Intel you know really the first part of March and.
You know we definitely are are trendy to wear that business is going to be from a revenue perspective, trendy about 50% from what we thought at the beginning of the year down from and that has some pretty pretty big swings on on the margin profile as well so right now we're look.
At.
Low single digits to almost break even at that business for 2020.
Okay. Okay. That's helpful. In my last one so.
Eric how exactly like bank eat bit die that calculated is it it feels significantly different do they add back something to keep it to our did they not take something they add something back in debt I suppose.
Yeah.
<unk> some of the differences in that calculation are we we get we it it's a rolling for court or <unk> or trailing <unk> and so in terms of how and R.C. rolls into that calculation. Some of it is for the corners prior to the acquisition.
In that calculation include <unk> as N.R.C. calculate it but but also there are there are things in that calculation, where we are able to include some synergies out you know projected synergies into that calculation.
As as well as some cost savings forward looking cost savings in that calculation.
Okay, So very pro forma so to speak correct.
Okay, Alright that yeah that that's very helpful that helps explain some of that okay guys. Thank you.
Alright. Thank you all are.
Needs a gentleman. This concludes our question to ask professional I'd like to turn the call back over to Jeff or any additional remarks, alright, well I'd like to just to conclude by thinking knows the participated and wishing you all well during these challenging times and looking forward to given an update on our our two two results. It's.
It's a august of this year. Thank you so much.
But that ladies and gentleman. This complete your conference. Thank you for attending today's presentation. You mean now disconnect.
[music].
Yeah.