Chaya Cooperberg - Vice President, Investor Relations and Corporate Communications Joe Quarin - President and Chief Executive Officer Ian Kidson - Executive Vice President and Chief Financial Officer.

Scott Levine - Imperial Capital Michael Hoffman - Wunderlich Derek Spronck - RBC Capital Markets Flavio Campos - Credit Suisse Derek Sbrogna - Macquarie Rupert Merer - National Bank Bert Powell - BMO Capital Markets Charles Redding - BB&T Capital Markets Chris Bowes - Canaccord Genuity Joe Box - KeyBanc Capital Markets Tony Bancroft - Gabelli.

Good morning, ladies and gentlemen. My name is Ryan, and I will be your conference operator today. At this time, I would like to welcome everyone to the Progressive Waste Solutions’ First Quarter 2014 Earnings Conference Call. All lines have been placed on mute in order to prevent any background noise.

After the speakers’ remarks, there will be question-and-answer session. I would now like to turn our call over to Chaya Cooperberg, Vice President, Investor Relations and Corporate Communications. You may begin..

Thank you and thank you everyone for joining us today. With me on the call I have Joe Quarin, President and Chief Executive Officer and Ian Kidson, Executive Vice President and Chief Financial Officer. We will be providing our comments on the results of the three months ended March 31, 2014 and then we will open up the call for Q&A.

There is a slide deck that we will reference during the call and is available on our website at www.progressivewaste.com. Before we get started, I am going to read out our Safe Harbor statement and you can find it on Slide 2 of our slide deck.

Our remarks and answers to your questions today may contain forward-looking information about future events or the company’s future performance.

Although forward-looking statements are based on what management believes to be reasonable assumptions, the company cannot assure shareholders that actual results will be consistent with these forward-looking statements.

The company disclaims any intention or obligation to update or revise forward-looking statements resulting from new information, future events or otherwise. We also do not commit to continue reporting on items or issues that arise, either during our presentation or in the discussion that will follow, except as required by applicable securities laws.

This information, by its nature, is subject to risks and uncertainties that may cause actual results or events to differ materially and please refer to the bottom of our news release this morning for further information, as for first quarter MD&A and annual information form for a more complete description of the risks affecting our business and our industry.

On this call, we will discuss non-GAAP measures, such as adjusted operating income or adjusted operating EBIT, adjusted EBITDA, adjusted net income and free cash flow. Please refer to our news release for our definitions of these non-GAAP measures.

Management uses non-GAAP measures to evaluate and monitor the ongoing performance of its operations and other companies may calculate these non-GAAP measures differently. There is going to be a telephone replay of this call. It’s available until midnight on May 9 and you can find the details for that in our news release.

With that, I will turn the call over to Joe..

Thanks, Chaya. Good morning, everyone and thank you for joining us. In the first quarter of 2014, we continued to make progress on all of our operational plans. Revenues of nearly $470 million were in line with our expectations for the quarter due in part to our best price performance since 2010.

Our consolidated price increased 1.9%, reflecting the success of our focused sales programs as well as some strengthening in underlying market conditions, even as the challenging weather in the quarter affected disposal volumes. Pricing was strong throughout our operations with an increase of 1.5% in the U.S. and a 2.5% increase in Canada.

The strongest pricing gains were in our commercial service line, a business which represented nearly 37% of consolidated gross revenues in the quarter. This performance is due largely to the execution of our sales organization.

Over the past year, we have invested in our regional sales leadership and introduced new training programs and tools for our sales reps. Our sales organization is now well-equipped to run highly targeted local market strategies and it is delivering results. The price increases helped offset our consolidated volume decline of 2.1%.

Most of the decline, about 165 basis points relates to the Superstorm Sandy volumes we had in the first quarter last year. The challenging weather conditions in the first quarter also delayed disposal volumes into our sites. Given the climate in which we operate through Canada and in the Northern U.S.

states of New York, Pennsylvania and Maryland, we always have a more pronounced sensitivity to seasonal conditions than others in our sector.

And we have a lot of experience managing through winter weather, not the first winter that’s affected us, but we faced unusually harsh and prolonged weather conditions throughout the quarter as some of our facilities we had as many as eight business closure or interruption days.

With extreme cold, MSW was also in very high demand at the weaker energy plants in the U.S. Northeast region, which affected some of the volumes we expected to receive. The result was lower MSW and special waste volumes in our U.S. Northeast landfills and at certain Canadian landfill sites. These volume declines are the highest margin revenue.

So, even as we added more revenue in other service lines, the revenue mix compressed margins. It’s largely a timing issue and we expect to recover much of the volumes. This month as the weather improved we are seeing MSW volumes resume more typical levels and special waste projects are once again flowing.

We remain confident that we will reach our volume caps at our Canadian sites this year and that the volumes will be available for us to maintain disciplined pricing at our U.S. Northeast landfills.

Weather also affected us on the cost side as diesel fuel prices increased relative to the prior year period and vehicle maintenance expense was up slightly as well.

Aside from the issue of weather which we estimate reduced our reported revenue and adjusted EBITDA by more than $5 million and $3 million respectively, our operating performance in the quarter was absolutely in line with our plans. In particular, we are encouraged by the progress in our U.S. Northeast region.

Thanks to the strategic improvement plan our team has been implementing. The EBITDA margins in our commercial, industrial and residential collection operations improved significantly in the quarter and we expect that trend to continue.

For the third quarter of this year, as disposal volumes recover and we see further contributions from our improvement plan, we expect margins in our U.S. Northeast operations to improve to around 23% and we still expect to achieve full year margins of around 21% in this segment.

We are very confident in our outlook for the balance of the year and are reaffirming our outlook on all measures that we provided for 2014. Ian will speak in detail to the Q1 financial results in a moment, but I will first give a brief update on our areas of focus for the year.

The priorities for our team in 2014 remain twofold, one is operational execution and two is disciplined use of our free cash. On the operational front, we are advancing several initiatives to improve organic growth and efficiency.

I already reviewed the results of our pricing programs and I can tell you that we are maintaining the same strategic pricing discipline on all municipal contract bids, where capital is high and contract terms are finite. In February, we were awarded a new collection contract for the City of Frisco, Texas.

We begin service to 40,000 homes for waste and recycling collection this August. It’s a great contract win for us, since Frisco is a fast growing city adjacent to our operations in the Dallas/Fort Worth area and more importantly allows us to leverage our existing infrastructure.

This year, we are also looking forward to starting other municipal contracts that were awarded in 2013, such as a new waste in organics collection contract in a city near Vancouver, British Columbia. These contracts amongst others give us confidence on our outlook for the year and help set the stage for strong start in 2015.

Both of these collection contracts by the way will employ an automated card system. And automation is a critical operational focus for us. Curbside collection with automated collection vehicles will reduce our labor costs and contribute to the safety culture we are committed to in our company.

In addition to fleet automation, we are very focused on converting our diesel fleet to compressed natural gas vehicles in key markets, where it makes sense and ultimately reducing our fuel costs. We now have PNG fueling infrastructure in 11 markets, where we have the fleet size to generate the requisite returns.

Combining the two initiatives, in Louisiana, we extended an existing municipal contract for several more years by offering to serve the community with a new automated fleet powered by CNG. We will redeploy the existing diesel fuel trucks to other markets in order to replace older fully depreciated vehicles.

This is now indicative of how we are spending capital in our field operations to achieve operational improvements and generate the best returns. It’s about getting better, not necessarily newer.

Our management team is aligned to make the best decisions each day for replacement and build capital with a view towards the long-term impact on our return profile. We are evaluating the returns on capital in our existing assets as well.

We identified several assets for sale this year, which were either redundant or where we could not generate an attractive return. For example, in early April, we sold some surplus land in Canada for about $20 million, which helps to offset our capital spending budget for the year. This was an item included in our guidance provided in February.

This rigor around returns applies equally to acquisition opportunities, both large and small and in new and existing markets. Our M&A pipeline is still active and we are looking to grow through acquisitions across our footprint.

We closed two transactions in the quarter, including the purchase of the remaining 50% ownership interest in the compactor rental company, but we remained disciplined on valuations and did not complete several other deals we looked at. Our use of the free cash flow we generate is the key to value creation and we understand that.

And I will reinforce our commitment to repurchasing our shares in the absence of deals that meet our return requirements. As many of you know, we are holding an Investor and Analyst Day in May. We look forward to updating you on our progress then and providing a more complete view into our strategy for creating long-term shareholder value.

And now, I will turn the call over to Ian to comment further on the first quarter..

Thank you, Joe and good morning everyone. I am going to begin today with review of our revenue performance in the quarter. And as usual, throughout my comments, I will be referencing the slide presentation available on our website.

I am going to start on Slide 6, where you can see total current period revenue was down $16.8 million or 3.5% to $469.8 million versus the same period last year. Foreign currency translation had the biggest impact representing $15.7 million or 3.2% of the 3.5% decline in consolidated revenue.

Aside from FX the decline in revenue also reflects contributions from Superstorm Sandy last year of about $8 million and the sale of some assets. All of these impacts were included in our outlook for 2014 and in the commentary we provided for the first quarter in mid-February.

We also noted in February that we were dealing with some challenging winter conditions which would impact on our first quarter’s operating performance.

As you are all aware and as Joe noted the harsh weather continued into March resulting in lower MSW volumes and delayed waste – special waste projects at two of our larger landfills Lachenaie and Seneca Meadows.

The essence of our message today is that but for some – but for this relatively minor consequences of the weather, our core business performed well in the first quarter and we achieved solid revenue growth in our base operations compared to the same quarter a year ago.

Reviewing revenue by segment and starting with Canada revenue grew $4 million or 2.2% excluding the impact of foreign exchange. Higher price of 2.5% and stronger commodity pricing of 0.9% were the primary contributors to revenue growth, which helped to mitigate the impact weather had on the revenues.

The higher price reflects improvements in each of our service lines. From a volume perspective we achieved higher collection and transfer volumes which partially offset lower landfill revenue in the quarter. We saw higher commercial collection volumes in Western Canada and there was some volume strength in Southern Ontario as well. Our U.S.

South segment which was relatively unscathed from a weather disruption perspective has solid growth with revenue up $10.3 million or 4.9% to nearly $222 million.

This segment’s revenue growth is largely the result of higher volumes and while we had some volume improvements in our collection operations, the most significant volume gains were at our landfill and transfer station particularly in Texas and Florida. In our Texas operation more construction and demolition loads continued to come through.

In Florida construction and demolition disposal volumes gained momentum in the quarter. New contract wins we secured in Florida last year also contributed to our MRF transfer station and landfill revenues. At our J.E.D. landfill outside of Orlando, we had the additional benefit of higher gas revenues from our gas to energy plant.

And in Louisiana landfill revenues were higher as well. Thanks to the Jefferson Parish landfill which we started operating late in the first quarter last year. Looking at the U.S. Northeast, revenue declined about $15.3 million compared with the year ago quarter. As mentioned about $8 million of the decline is the Sandy comp to last year.

Also we estimate that the impact of weather reduced our U.S. Northeast revenues alone by about $3.3 million. The balance of the revenue decline was due to the asset sales last year in Long Island, the purposeful reduction of less profitable collection volume and lower commodity pricing in this region.

Net of these items, we are pleased with the price improvements achieved in our U.S. Northeast operations, which in total contributed $3.7 million to revenues over the period. Landfill pricing in the segment was flat with the prior year in spite of the challenges we had with volumes this quarter.

And we have recognized some pricing improvements at our transfer stations and collection operations. These improvements give us confidence as we look ahead at to how the U.S. Northeast region will contribute to our results over the balance of the year.

And I will add that looking further out, we remain optimistic that the New York City long-term plan is an opportunity for us to add to the stability of our disposal volumes into our Seneca site. On Slide 7, you can see the components of consolidated revenue in the quarter. By country Canada had positive organic growth of 2%. In the U.S.

organic revenues were negative 1.1% but would have been positive 1.6% excluding the impact of Sandy. On a consolidated basis, we achieved higher pricing in virtually every line of business resulting in consolidated pricing up 1.9% quarter-over-quarter.

Turning to operating and adjusted SG&A expenses in the quarter on Slide 8, for the first quarter, total operating expenses declined slightly from $296.9 million in Q1 2013 to $293.2 million in Q1 2014. Approximately $8.8 million of the decline is attributable to the change in foreign exchange.

As a percentage of revenue, operating cost increased 140 basis points to 62.4%. This increase is the result of significantly higher transportation and disposal costs compared to the prior year primarily due to the closure of our Calgary landfill to MSW.

However, higher fuel prices due to the harsh weather also had a negative influence on the relationship between operating cost and revenues in the first quarter 2014 compared to the same period last year.

Fuel costs came in about $1.2 million above our plant, but we do expect to be able to recover a good portion of this amount to our surcharge and pricing programs over the remainder of this year. We also had slightly higher repair and maintenance cost in the quarter compared with the year ago period, some of which was due to the harsh weather as well.

Repairs and maintenance was about $1 million above our plan for the quarter. Contract wins as well as higher safety, insurance and claims cost in the U.S. South segment also contributed to the increase in operating costs relative to revenues. Although well below plan, our U.S.

Northeast segment experienced little change in operating costs relative to revenues between periods, which we view as a significant success in light of the harsh operating environment that we encountered this quarter.

On Slide 9, you can see adjusted SG&A increase just over $3 million to $63.7 million primarily due to higher professional fees and compensation costs, professional fees in the quarter related to the New York City long-term plan as well as strategic initiatives. As a result, adjusted SG&A increased to 13.6% as a percentage of revenues.

Turning to Slide 10, we note that in the first quarter consolidated adjusted EBITDA declined 12.5% to $112.9 million and the decline reflects a currency translation drag of $4.3 million. Adjusted EBITDA margins were 24.0% in the quarter with the weather impact representing roughly negative 40 basis points of this change.

Our 2014 plan contemplated a first quarter margin of 24.6%.

At 24%, we are essentially on plan as we expect to recover a good amount of the weather delayed earnings over the rest of year, the differential between the 24.6% that we planned for in the first quarter 2014 compared with the 26.5% last year was almost wholly attributable to our Canadian operations.

In Canada, adjusted EBITDA margins were 33.5%, 270 basis points lower than the same period a year ago primarily reflecting the impact of the Calgary landfill closure and the weather impact at our Lachenaie and Ottawa landfills partially offset by solid margins in our underlying base business.

Some additional factors affecting margins included higher cost for fuel and the delay in opening up some of our CNG stations. As we laid out in the guidance we provided for 2014, we expect comparative margins in Canada to improve in the second half of the year as we lapse the Calgary landfill closure and the gas plant comes online at Lachenaie.

In the U.S. South, adjusted EBITDA margins were 26.9%, a sequential improvement both lower than the year ago period due to the composition of some new revenue and higher claims costs. We are encouraged by the activity we are seeing throughout the U.S. South and expect to see a full year improvement in margins in 2013. In the U.S.

Northeast, adjusted EBITDA margins in the first quarter were 16% reflecting the Sandy impact as well as lower MSW and special waste volumes that were delayed due to weather. We estimate that weather was a drag of about 160 basis points on margins. As Joe said earlier, we remained confident that our U.S.

Northeast segment margins will deliver the 21% that we projected in our 2014 full year plan. And we are reaffirming our outlook for 2014, which includes consolidated adjusted EBITDA margins of between 26.5% and 26.8%. Margins will strengthen in the second quarter as normal seasonality resumes and we benefit from the delayed special waste volumes.

Now turning to amortization on Slide 11, first quarter intangible, capital and landfill amortization decreased $4 million from the prior year to $67.2 million due to foreign exchange and lower landfill amortization expense reflecting lower disposal volumes received.

As a percentage of revenues amortization was 14.3% which was in line with our expectations for the quarter. Interest expense in the first quarter was $14.9 million, which was also in line with expectations. We benefited from lower interest expense due in part to the repricing of our credit facility in the late November last year.

In the second quarter we entered into interest rate swaps on an additional $270 million of notional borrowing, all of which had an effective start date of March 31. With interest rate swaps having terms between 3 to 10 years on notional borrowing of $805 million, we gained more predictability in our go forward costs of debt.

We continued to expect interest expense in 2014 to be in the range of $64 million to $66 million. At the end of the first quarter we had approximately $975 million drawn on our revolving credit facility. Total funded debt to EBITDA was 2.91 times at March 31, 2014 versus 2.88 times at December 31, 2013.

In addition, I will note that Standard & Poor’s raised our corporate credit rating in the quarter to BBB low from BB high. Taxes are laid out on Slide 13 and you can see in the first quarter our cash taxes were $2.1 million resulting in a lower than expected effective tax rate of 7%.

This was an unusually low rate for the quarter and there are a number reasons for it. However, we continue to expect our effective tax rate for the year to be between 30% and 32%.

As you can see on Slide 14, net income benefited from the lower than forecast tax rate in the quarter and on an adjusted basis net income in the quarter was $24.8 million or $0.21 per diluted share versus $27 million or $0.24 per diluted share in the comparative period. I will turn now to capital expenditures on Slide 15.

Total replacement capital in the first quarter was $27 million and total growth capital was nearly $17 million which included $6 million of spending related primarily to the building of a gas plant at our Lachenaie landfill. Excluding spending on the gas plant total capital expenditures were $38 million.

Our 2014 CapEx guidance of $212 million to $216 million net of proceeds from sales and excluding the gas plant project still stands. Our first quarter spending was lighter than we expected due to the timing of some landfill cell development, which was affected by weather and the timing of some vehicle receipts.

Turning to free cash flow on Slide 16, we generated strong free cash flow of $48.7 million in the first quarter representing 10.4% of revenue. Lower comparative operating results were balanced by lower capital and landfill expenditures comparatively in the period.

We continue to expect free cash flow of between $210 million and $225 million this year excluding spending on the gas plant, which represents a free cash flow yield of 10.9% at the midpoint of our guidance range. That brings me to the end of my comments. I will turn the call over to the operator to start the Q&A..

(Operator Instructions) Your first question comes from the line of Scott Levine from Imperial Capital. Your line is open..

Good morning guys..

Good morning, Scott..

Good morning, Scott..

Starting off on the subject of pricing, it sounds from your commentary like you are strong pretty much system wide with particular strength in the commercial business, I was hoping you might be able to comment, it sounds like a lot of that is a function of internal initiatives, but maybe call some color regarding the pricing environment both internal and external and whether you see opportunities for improvement there in any areas of your business?.

Sure. So, yes, last year we put up a real focus on our pricing programs across the company. We also had new leadership coming to the Northeast region for us, which helps drive the pricing improvement in the U.S. in particular.

I would tell you that our commercial pricing to the customer was quite strong approximately 5% and we have actually had a pretty good stick rate on that. There is still some churn taking place out there. We attribute part of that is just to the economy overall, but we are seeing an improvement generally in the economy.

Where the pricing activity is most challenging is where we are CPI linked, some of our franchises etcetera, where if the CPI is pretty muted, obviously that’s what you are going to get. But what we are finding is that there is probably a stronger acceptance of price increases. I think the economy is picking out. We are seeing some volume uptick.

And it’s – and I think we are executing better as well on our side. So, it just – I don’t think it’s necessarily only us, I think the industry will benefit as well from this improving economy..

Understood, thank you. And as my follow-up maybe on capital deployment, it sounds like there were a couple of deals but generally you are seeing seller expectations higher, you are walking away in some cases.

Maybe a little bit more color we have heard that from a few other companies, what is the general M&A pipeline look like, what do multiples look like for deals, and maybe some thoughts with regard to likely activity for the remainder of the year on the M&A side?.

Sure. We have got a very active pipeline. We have always had an active pipeline as we maintained discussions with a lot of targets out there. What we are hearing from the team is we – there are some sellers or who are circling back around and you are maintaining dialogue with them. They are starting to realize that pricing expectations are down.

I am not sure exactly what to attribute that to, but I can tell you in our own internal models, we are much more conservative on growth outlook just tempering it relative to the economy. Obviously, that’s going to have an impact on overall values. We are much more focused on EBIT as opposed to just EBITDA.

Condition of the assets is critical, because if we have got to deploy the capital that someone has going to pay for that. And so just looking at it holistically, I think there is recognition that it’s not just a multiple of EBITDA. And on the flipside, there is a lot of investors who have actually deployed capital in the sector.

We are having a tough time getting out with any reasonable return. So, part of it is us learning from our past mistakes and we have got a very good operating team that’s heavily engaged in any deals we are doing and making sure that we understand what we can expect. So it all goes to free cash flow and the growth outlook.

And I think you got to temper down the growth. So, our outlook is that we will get some deals done this year. I think there are some motivated sellers. And unfortunately, they don’t have – the other thing we are hearing is they don’t have alternatives to where to invest the money.

So, they are trying to look for us to actually pay them little more did not going to happen. So that’s the discipline..

Got it, thanks. I’ll pass it over. Thanks..

Thanks, Scott..

Your next question comes from the line of Michael Hoffman from Wunderlich. Your line is open..

Good morning and thank you for taking my call..

Good morning, Michael..

Joe, can you help me understand what gives you the confidence or I guess maybe worded slightly different, what are you seeing as the drivers of operating leverage in 2Q, 3Q, 4Q that gives you confidence about sticking to 26.5 to 26.8?.

So few things and obviously number one I’ll address that right off the top, which is the Northeast. And I can tell you that our team has made significant progress on the collection side of the business. We have that’s where our most significant volume decline for us is in that region and that was really purposeful on our part.

We have called some business, which we just weren’t making any money at quite honestly. The team has been very focused on making sure that we are pricing things properly and the margins in fact in our collection line of business are up 6% year-over-year.

So, assuming and this is an assumption, but assuming that there is discipline on the disposal side in the Northeast, because we did see some question of when aggressive pricing take place in the quarter in the Northeast on disposal. We attribute some of that to lower volumes, because of the weather, but we are starting to see it come back to normal.

So, we are pretty confident that we will a) make up a significant portion of the volumes that we were down in the Northeast, up in Canada, it’s a slightly different story, because we do – it’s primarily our two landfills up in the Quebec in Ottawa, which were affected by the weather.

But they do have annual volume caps and we have always hit our volume cap. So, we are reasonably confident that they will hit as well. So, landfill volumes, high margin, expecting those really to just be delayed and pushed forward. We are seeing that return to normal here. On the operating front, some of these contracts coming online.

We have got some other operating initiatives that have been put into place since Kevin took over operations beginning in January, which is going to help us improve our overall labor just the way we deployed our capital plan this year that should be over and above what our own internal plan is.

So, we feel quite comfortable that the outlook that we provided in our guidance will be something that we hit and unfortunately its backend loaded. The last item that is high margin is actually gas plant and that comes online later this year, which will also provide a kick to the Canadian margins..

Okay.

And it’s that same confidence in that then sticking with your capital plan gives you confidence about the free cash flow outlook as well then I guess?.

Absolutely..

Okay.

So, Ian, a year ago you presented in your big management meeting you do in Florida each year, a renewed look at or a new look at returns and how you are going to do incentive planning, what changed incrementally or was incrementally expanded upon at this year’s and to that end, when does maintenance capital, not the growth but the maintenance capital come back because these operators realize they can turn their capital smarter and maybe not have to spend so much new?.

It’s a great question, Michael. The focus this year in Tampa was it was on lots of stuff, but fundamentally it was on from my perspective two things, one it was on operational execution and repairs and maintenance for a big chunk of that.

And tied to that it was on getting the team work tighter that we happen to feel between the finance folks and the operating folks, so that we are supporting them in understanding early on what’s going on, on the spending front. So, the biggest change that’s being driven right now on the repairs and maintenance side is twofold.

One, we are trying to buy better, which is fairly straightforward. And I know that we have talked before about the global purchasing approach that we are taking that we are forcing a shift from repairs expense to maintenance expense. And over the long-term that’s a much more effective way to run your fleet..

And so when do we see that showing up in less capital spending?.

So 2015 is when you can start to see it. In fact, we have also changed our whole capital planning in terms of the way we are going to do it for next year. As opposed to historically, we have always done our capital planning, where it’s been bottom up and then we ultimately review and scrub it.

This year, we will take a more holistic view top down, which will set a big part of the overall brand and then clearly you have got to reconcile it with the field, but our expectation is for next year any normal environment, normal meaning you don’t have significant large residential contracts which these days we are finding many of them require a $10 million to $20 million of capital.

So excluding those we think that 2015 will be probably replacement capital and the 8.5% to 9% range, overall capital around 10% of revenue, are our internal targets going into ‘15 right now..

And Michael you don’t see it from the outside looking in. We see it from the inside looking out. We haven’t finished it, but we are already working on our ‘15 CapEx plan which is well in advance of any time we have done that internally..

So 8.5% to 9% is a material change?.

That’s maintenance..

That’s maintenance, but that’s you do take away a bunch of spending this year at Seneca which booked $15 million. You also take away the spending on the gas plant. So those two we don’t really count those because we knew that those were just short-term bumps.

But everything out Michael we have been we talked about the contract I referenced in Louisiana that’s indicative of whereby we are deploying a bunch of carts and a bunch of automated trucks.

And then taking trucks that are five years old to replace the 12 year old fleet and so that’s the kind of spending that we are doing as opposed to just upgrading the old trucks. So it’s just much more collaborative effort. We also lost the contract up in Canada in the quarter.

We fixed up the trucks and drove them down South and use them for another startup.

So it’s just a much more unified approach to how we are going to run the company going forward and we are seeing the benefits of having one COO in place and then just to build our team we have got David West, who heads our purchasing fleet and maintenance and it’s starting to come together and we are starting to see the benefits..

Thank you for taking my questions..

Thank you..

Your next question comes from the line of Derek Spronck from RBC Capital Markets. Your line is open..

Good morning guys..

Good morning..

In the U.S.

Northeast outside of the margin outlook, are there any other sort of metrics that you can point to highlight that the turnaround is taking hold?.

There is nothing that we have published. I can tell you that our – so the biggest drag in the quarter in Northeast was landfill volumes. Our landfill pricing, our own, so Progressive, was flat this year versus a year ago.

As I indicated we did see some very aggressive pricing in the Northeast and we are holding the line because we are very much focused on the returns.

The volumes in the Northeast were down partially because we sold an operation a year ago and then also because we have purposely gone in and looked at the business we are servicing with extreme focus to improve.

So the Northeast is probably going to be a region where by we may actually shrink a little bit, but we will ultimately get better in terms of overall margins, profitability and returns. And that’s really what the whole Northeast is about. Like I said our Northeast region really led our pricing growth in the U.S.

that’s where a lot of the price came through, part of that reflects the New York City price increase of 15% back in November or early December. And you don’t put that all-in all at once but it did allow us an opportunity to talk to our customers and adjust pricing in order to make sure that we are also making money on the business.

So it’s having new leadership in place. We did change a couple of more people in the team out in the Northeast at the end of the year. And so far we are seeing improvement year-over-year it’s going to be a trust me at this point, but we feel quite confident.

And then latter on top of that as Ian indicated we continue to work on the near to the long-term plan which the team is also working on quite hard. So you blend it all together our outlook we never said it was going to be quick turnaround.

We will say at least going to be two or three years and we are right in that sweet spot we believe right now we are seeing progress..

That’s great color. Thanks Joe.

Just on the recycling site quickly any progress in mitigating the volatility and are you seeing any sort of demand from your clients on the recycling side?.

Yes, so the quarter was a little volatile on the recycling but weather impacted availability of materials, which kind of swung the pricing month-to-month quite honestly and where we had volumes we are seeing strong pricing in particular down South, whereas there were lot of places that can get the volumes out or just the weather was affecting overall volumes, but here is the issue on these recyclables on the commodity business as we see it.

It’s as we migrate the single stream, single stream is also affecting the collection approach. When you move from curbside or blue box to single stream, clearly there is a lot more material that gets collected, which is a good thing a lot more material gets diverted. That’s definitely a good thing.

We invested capital into these large MRFs, basically mechanically separated it’s all the good thing. As soon as you start missing a bunch of materials, your contamination is going to go up.

And so fundamentally, what we need to do better as an industry is collaborate with the municipalities, collaborate with our customers, so that we all work together to achieve the goal of higher diversion, but there is cost associated with it. It’s really that simple.

We want to get paid enough to get a return on our capital and really the commodity value, we believe go on to more to a customer than to us. So, that’s we haven’t put any hedges in, just to give you a little bit of color year-over-year. Our pricing on OCC Q1 last year is about $99, this year it was $111. So, we are seeing a pickup.

Everything is in line with our 2014 outlook. And we continue to believe it’s going to be an attractive line of business going forward and we are just in the early innings and everyone is trying to make adjustments right now..

Fantastic, thanks..

Your next question comes from the line of Hamzah Mazari from Credit Suisse. Your line is open..

Hi, guys. This is Flavio. I am standing in for Hamzah today. Thank you for taking my question..

Hi, Flavio..

Hi, there. Most of my questions have been answered, but I just wanted some color on the U.S. South business, it’s a business that hasn’t seen a lot of headwinds Sandy related or weather related and we still saw some margin compression over there.

Just wanted to get some color on what happened and how do you see the margin profile for the rest of the year and going forward?.

Sure. Our U.S. South probably the biggest impact down there is it’s where our pricing was with South is. It’s where a lot more of our revenue is tied to CPI, number one.

Number two, it’s where we are making lot of the capital improvements and we expect to pickup margin as the year progress with the shifts, with the automation changes that are taking place.

We also landed a couple of significant contracts last year in Florida that was on the transfer station side and that volume originating at South Florida that’s going out to our J.E.D.

landfill and because of the higher transportation costs on that, that’s also affecting margins, but we are seeing a significant pickup in the sale in terms of rollout volumes this quarter. More importantly, we are able to internalize it into our own Sandy landfills.

And so I think as that goes through – through the balance of the year, we actually see the U.S. South improving year-over-year in margins. The weather one of the other markets that we do report as part of our U.S. South is our St. Louis market and that was another area that got impacted by weather.

So again, a little bit of a volume impact in the quarter, but looking out we do see the U.S. South continuing to improve this year as the new capital starts to arrive..

That makes sense. That’s very helpful. And just on the U.S. pricing side that you guys posted 1.5%, so if pricing in the South has been soft and on the landfills in the Northeast are flat, what are the bright spots of pricing within the U.S.

business right now?.

Well, actually across the board, our strongest pricing was definitely in our commercial line of business followed by industrial. So those were two that we focused on a lot last year. We talked about last year in terms of seeing demand for industrial. We held back on deploying more capital and trying to move pricing up and in both cases that did work.

Residential is where it was softest. CPI remains low and then there were a couple of contracts last year that we renewed, but had to load back pricing a little bit in order to hold the account, but the returns are still quite strong.

And then on the really across the board other than residential, which was literally flat in terms of pricing, every other line of business was up across the board with the as I said strongest performance being commercial, industrial and then as well our transportation on a business was also up on pricing. So, we feel quite good. U.S.

Northeast was stronger on the price front than the U.S. South. In fact, the U.S. Northeast was up over 3% changed to average price across all lines of business and that was a good strong performance for that region..

That’s a very good color. Thank you for taking my questions..

You are welcome..

Your next question comes from the line of Derek Sbrogna from Macquarie. Your line is open..

Hey, good morning guys.

How are you doing?.

Good morning, Derek..

So, I know you guys walked through the bridge from Q1 ‘13 to this current quarter on the EBITDA margins and I understand there is the 40 basis points of weather, but could you just walk through help us bridge that gap again from almost 200 basis point delta there?.

The biggest move year-to-year that you are seeing Derek is what’s going on in Canada. And the largest component I guess is two things, the largest component of that is the Calgary landfill, which was laid out I think I am pretty sure in fact I know it was in our first quarter call or year end call results.

And on top of that, we had some compensation issues that we also talked about. And then I guess Lachenaie would be the final comment..

Okay.

So, does you guys frame out just remind us maybe how much Sandy contributed to Q1 last year from throughout?.

Sandy was $10 million in the first quarter last year..

Okay, got it.

And just one more follow-up, you guys talked about weather delaying some of those higher margin landfill in the landfill business, just wondering what kind of gives you confidence of that, that volume does in fact come back and maybe trying to triangulate that with some weather impacted quarters in the past? And does that volume generally come back in the next quarter or does it take a couple of quarters before you realize any of that lost volume? Thanks..

Sure. Yes, I know we have experienced the seasonality in the weather most pronounced up in Canada, but also in the Northeast in the past. And a lot of it, the MSW this quarter or part of it was attributable to the demand by the waste energy plants up in the Northeast, number one.

Number two, when the weather is as harsh as it was this year, there is usually less overall waste volume generated, because less people are going out and just less economic activity.

That said, where you get the biggest swings are on the special waste and that’s – and we have seen that quite a bit, whether it’s been Western Canada, Eastern Canada and two things that affected.

Number one, when you start coming out of the winter into spring, we have several of our landfills that get impacted by the, what’s called the half load season. So in an effort to protect the roads, they actually institute payload restrictions.

And the projects will not move until you can get full payloads is just to expense from a transportation component is number one. Number two, we are coming into April, we did see a return to more normal volumes. So that gave us comfort.

And number three up in Canada, where our most impacted landfills are situated those landfills have always hit the volume gaps just relative because of proximity to the market, so pretty confident that they are going to hit their numbers. And in the Northeast, similarly we held the pricing. And we expect most of the volume to return.

There might be a little bit of volume that we don’t get at our Seneca Meadows landfill, but we still – we had not budgeted the year to be at full cap. So we do expect to go to recover. So the blend of that all we have seen that before.

It’s usually a Q2 to Q3 shift, whereas this year it impacted us a lot more in Q1, but talking to our guys out in the field they are seeing the return to more normal activity and that’s what gives us the confidence as well..

And just when you talk about generally shifting from Q2 to Q3, I mean is it generally all of that volume comes back in Q3 or do you find that it is sometimes spread between multiple quarters so you may see some lag in the Q3 and then into Q4 as well?.

Yes, so what we are expecting is the shift from Q1 a lot of it will come in Q2. The Q2 to Q3 is often influence, the biggest influence would be rain. And then last 2 to 3 years the Northeast was impacted, the shift is just the release of government funding because all these projects are government funded.

And in our Calgary landfill in the past they used to be influenced by special waste and really that’s industrial clean up around the city of Calgary. It continues to receive the special waste and that is influenced by weather, half load season and then just the timing of projects.

We do have an expectation for special wastes in all of our sites for the year.

Historically we have always seen – had an ability to actually hit those overall goals, and it’s just special waste in this seasonal climate tends to be a little more volatile, but historically we brought in the volumes for the full year and that’s what gives us confidence again this year..

That’s very helpful. Thanks very much..

Thanks..

Your next question comes from the line of Rupert Merer from National Bank. Your line is open..

Good morning everyone..

Good morning Rupert.

Good morning Rupert.

You have talked a lot about pricing already I would like to follow-up with just one more question here. Looking at pricing in the quarter much of the improvements came from Canada, is the step up in pricing in Canada sustainable at this rate and do you think that the pricing in the U.S.

can catch up a bit through the balance of the year?.

Yes, so in Canada I would say definitely strong price performance. I wouldn’t necessarily extrapolate this. I think we are going to see a volume improvement in Canada and as we report change in average price I think it is going to temper down little. Our guidance for the year was (1.25 to 1.75) and we still maintain that.

And in terms of the U.S., I think if fuel prices continue to remain high some of the CPI linked contracts will reflect that later in the year and I don’t see any reason why the U.S. will vary a lot from this 1.5. It’s got lower CPI generally in the U.S. right now. We are seeing stronger economic activity and higher volume upticks especially down South.

And the prices upon which you are bringing on new business is usually a little less, so consequently I have not taken that into the outlook for the U.S..

Thanks, that’s great color. And then secondly on Lachenaie, how much CapEx and expenditures remain on the plant to get it up and running.

And can you remind us the total cost there and is it on budget and then how should we think about its contribution to the second half of the year?.

There is in total about $14 million left to spend on the gas plant and contribution – when it comes on it will be in Q3, we are hoping it comes on early in Q3 it may well be late Q3. So contribution for the year I think we had in our plan of about $2 million..

That was of EBITDA?.

Yes and that’s offset, it’s for offset by $2 million of expenses..

Yes, the timing is going to be influenced. It is on plan, equipment is installed. They are working to initiate some of the startup and testing of the equipment..

As we will start some of that next month..

So they will start next month on the actual commissioning of the plant. The biggest impact on just when we started seeing the revenue is the interconnect approval by TransCanada and that’s just something out of our control. That’s going to happen some time between July and November, is what we have been told..

Okay, very good. Thanks very much..

Your next question comes from the line of Bert Powell from BMO Capital Markets. Your line is open..

I am wondering if you could just gives us a sense in terms of the sales tools training rollout, how far along are you in that just in terms of propagating out through your organization? And then I guess a sense of typically what felt the lag between starting that and seeing the efficacy from that when you roll it out by route or geography or however you think about it?.

Sure. Our sales, the rollout of our sales programs is really twofold. Number one, it was training a lot of our individual reps on just the overall how to be good sales people and the whole process around it. Number two, instituting much more disciplined management of the much more tighter management of the overall sales team.

And then last but not least and what’s helping us roll this out is the fact that we have actually put in regional sales directors. So, we have gained a little bit of better span of control. So, it’s really the blend of all of this. We have seen quite a few sales reps that we have had to replace, upgraded I guess you could say.

And a lot of it is about the team on the ground and their ability to execute. So we are going to take a deeper dive on this at Analyst Day and provide a lot more color at that point. But suffice it to say, there is no magic bullet here. I think a lot of people in the industry kind of do a lot of the same things.

For us, it was in the face of a more difficult economic environment. You have got to make sure that you take care of your existing customers and that’s really what it’s all about, so it’s a lot of corporation between operation, sales, and yes you are starting to see some of the impact of it..

Okay. And then just lastly on the Northeast, your comments around more profitable, but smaller maybe can you just – what’s the probability and magnitude of smaller when you made that statement? I am trying to understand that..

When I say smaller, I am thinking more top line..

Yes..

Number one. Number two we sold an operation last year that didn’t make sense to continue to invest in. We have identified some others that were got plans in place to make improvements to. Otherwise, we always need to evaluate if we are best owner.

So, ultimately, it’s not declining the EBITDA necessarily, but we are focused on how do we get the highest return and the return for us is all about free cash flow. So even if it’s EBITDA down a little bit, if we can say, the cash on the CapEx and drive more free cash, we will make some of those decisions. We are not going to chase volume.

If the whole region has a lot more capacity in it, we just need to make adjustments to drive the returns. And that’s really what it’s all about and that’s what the team that we have in place today is very focused on and very capable of..

Yes, what was the size – what would the comp revenue impact be from the assets you got rid of?.

It was….

Couple of million bucks.

Yes. It was less than – just under $10 million for the year, yes, for the year. In the quarter, it was couple of million bucks and pretty de minimis EBITDA..

Okay, thank you..

Thanks..

Your next question comes from the line of Charles Redding from BB&T Capital Markets. Your line is open..

Hi, guys. Good morning. Thanks for taking my call..

Good morning..

Just a quick follow-up on Scott’s M&A question, given your heavier Canadian concentration, how seriously do you consider acquiring additional E&P assets or is the focus really more likely to remain on operational improvement and core solid waste tuck-ins?.

So, yes, number one focus is operational improvement, that’s where we can get the biggest leverage and where we see the biggest opportunity. Staying close to the core, we still see lots of opportunity to expand our business, tuck-in acquisitions, some new geographies very much interested in that, not chasing E&P at this point.

So, that’s not on the radar. It clearly it’s of interest, haven’t figured it out yet. And not going to chase it as....

And the pricing is probably worse in that business as an acquirer than it is in the traditional solid waste business right now..

Sure, that’s helpful. Thanks.

And then on the landfill side, can you actually apply for additional capacity at those sites where you are running up against volume caps or this is simply a fixed level where you really have no discretion in terms of additional permitting?.

No we have historically applied for volume cap increases, in fact our Lachenaie landfill I think was $670,000 went to $970,000 and ultimately $1.3 million, the rate was 8.99, went to a $1 million, went to a $1.3 million. So there is if you can prove the need then you can work with the regulators to actually get approvals.

I know Sacromento site as well, just the way the permit worked, we have gotten increases in the past. So there is an ability to actually move those out but regulators are usually looking at the overall need for additional volume as opposed to just giving it to you because you apply..

That’s very helpful. Thanks again..

Thanks..

Your next question will come from the line of Chris Bowes from Canaccord Genuity. Your line is open..

Hi, good morning. I am just starting from a really high level. The real trend if you and your peers appears to be better pricing discipline to actually get returns on capital that exceeds the cost. Joe you mentioned some shaky industry discipline in U.S.

Northeast disposal in the quarter, but can you maybe discuss your experience in the other markets?.

Sure, so in the other markets for the most part we are seeing discipline. Some times you do get the occasional disruption that comes into play whereby you get a new site that comes on. And again they tend to be a little aggressive and you need to just adjust your strategies.

But I think for the most part everyone is trying to show a lot more discipline. We take a balanced approach. We always look to push through price increases and I will make sure that we will cover cost increases, but what we report is change in average price. And so that is reflective of business mix changes, volume changes, etcetera.

The biggest impact this quarter is we did have the volume declines up in the Northeast that we talked about, but overall average price improvement that was quite significant and that was really our own doing just looking at what we are allocating capital to.

When you start looking that a more holistic capital program where am I going to spend the next dollar. If you are not getting returns, you better off to call back some of that business in order to make sure that for instance buying another truck. I am actually going to get a return on that capital.

I think the industry is focused on driving return on capital, to me pretty protracted economic downturn. We are starting to come out of it. It is a capital intensive business when you look at depreciation, amortization, it is 10 plus percent of revenue that is a real cost.

So again it ties into the whole M&A, I am not buying based on multiple EBITDA I am buying it based on multiple free cash flow, multiple EBIT, all those things. So I think you are going to see the industry continue to improve over the next couple of years assuming the economy continues to show the possible momentum..

Great, thanks. And Ian, I think you mentioned you have identified additional assets that you plan to dispose.

Can you talk about where those are and maybe what the medium term looks like asset disposition in the context of improving capital allocation?.

Well, I think the reference to assets that we are going to dispose was a reference as at the end of the first quarter one of the larger of those assets were some buffer lands around our Calgary landfill. That has actually closed and we will be showing those proceeds in Q2. We had another operation in the Northeast that we identified last year.

We have signed a sale agreement with a purchaser and that sale is closed pending the regulatory approval of the transfer of the permit and where we sit today that we also expect to close in the second quarter. Those two transactions are meaningful for us. There are $15 million plus.

And then, yes, you are absolutely right, there was another property in the South where it was a landfill asset that we were operating in conjunction with the municipality and it was an operation that we didn’t like the future of.

It didn’t fit well with our operations and that was another one that we actually closed and disposed of that in the first quarter..

Right.

So just to follow-on, is it reasonable to assume that more dispositions will be coming in the normal course of business?.

I think it’s fair to say that we are in the midst of a corporate wide review. And there is always when you go through that process, there is low hanging fruit. And then there are – you go through as a step function of what are probably more fine tuning adjustments. A good chunk of the low hanging fruit has been identified and dealt with.

We are trying to be as intellectually honest as we can with ourselves and look at each operation on a present value basis. And just as Joe has said repeatedly, if we are not the best owners, find out who is..

Great, thank you..

Your next question comes from the line of Joe Box from KeyBanc Capital Markets. Your line is open..

Good morning everyone..

Good morning..

Just one quick follow-up on the Northeast, I know the call is going long.

I think if I heard you correctly, your margin target for the year is 21%, can you just remind us where you see the longer term EBITDA margins kind of going to?.

Sure. Our goal is to get the U.S. Northeast up into the mid 20s on a full year basis. And just to put that in the context, the current business mix that we had today, our transportation is in that 4% to 5% range. So, a 25% margin in the Northeast is the closure to a 30% everywhere else.

So that’s where we see ourselves getting to over the next probably 24 months and I can just to fill the gap, if we get the New York City long-term plan, there is no change to that target..

Understood.

And then presumably you guys will put some more color on how you get there at the Analyst Day?.

Absolutely..

Okay, great. Thanks, guys..

Your next question comes from the line of Tony Bancroft from Gabelli. Your line is open..

Good morning, Joe and Ian..

Good morning..

Sorry to have it go so long, but just back to Scott’s first question about just the commercial pricing environment, I just want to make sure I am clear, is the pricing that you have shown saying you are looking pretty strong compared – it seems like compared to the rest of the industry where it seems like there is a little bit of weakness there.

Is that from more from just the slack you have taken out with new management and being tough on pricing there or is this a bit more on you are saying, that you are seeing better growth maybe than the rest of the industry.

I just want to make sure I am clear on that?.

No. I think when we look at our pricing across the board really there has been very little change on the Canadian side. What we said in the past is usually the – where you have got the best pricing leverage is always on your commercial business. And for us it’s about 37% of our overall mix.

Last year, we very much focus on the industrial line of business, which is just under 20%. So, when two-thirds of our business – 60% of our business we can push price increases through. That’s going to bode well for the overall experience. We were disciplined on the landfill side as well, especially in the Northeast in terms of our landfills.

And I don’t see us being very different than the rest of the industry. I think everyone is looking to try and push price up right now and the economy is picking up. So when the economy picks up that’s also a more receptive environment for pricing..

Thank you very much. I appreciate it..

We have no further questions in queue. I would now like to turn the call back over to the presenters..

So, thanks everyone for joining us today and we will see many of you either next week in Atlanta at Waste Expo or in New York at our Investor and Analyst Day on May 15. Enjoy your weekend..

This concludes today’s conference call. You may now disconnect..