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US Ecology Inc  (NASDAQ:ECOL)
Q4 2018 Earnings Conference Call
Feb. 22, 2019, 10:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Please standby. Good day, and welcome to the Fourth Quarter 2018 US Ecology Earnings Call. Today's conference is being recorded. After today's presentation, there will be an opportunity to ask questions. (Operator Instructions)

I would now like to turn the conference over to Eric Gerratt. Please go ahead.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Good morning, and thank you for joining us today.

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

Before we begin, please note that certain statements contained in this conference call that do not describe historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Since forward-looking statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Factors that could cause results to differ materially from those expressed include, but are not limited to, those discussed in the Company's filings with the Securities and Exchange Commission. Management cannot control or predict many factors that determine future results. Listeners should not place undue reliance on forward-looking statements, which reflect management's views only on the date such statements are made. We undertake no obligation to revise or update any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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

Throughout yesterday's earnings release and our call and presentation today, we refer to adjusted EBITDA, pro forma adjusted EBITDA and adjusted earnings per share. These metrics are not determined in accordance with generally accepted accounting principles and therefore are susceptible to varying calculations. A definition, calculation and reconciliation to the financial statements of adjusted earnings per share, adjusted EBITDA and pro forma adjusted EBITDA can be found in Exhibit A of our earnings release. We believe these non-GAAP metrics are useful in evaluating our reported results and our 2018 guidance.

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

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thank you, Eric, and good morning, everyone.

I'll start this morning's call with a few summary comments on our fourth quarter results released yesterday before turning the call back to Eric for some additional details on our financial results. I'll then close out the call with an overview of our outlook for 2019, before opening it up for questions. Yesterday we ***Part 01******Part 02*** Yesterday we've reported a strong fourth quarter, closing out a very strong year for US Ecology in 2018. Our results yesterday were in line with our expectations, taking into consideration that our Idaho operations was down for half the quarter.

Before I jump into the quarterly results, I'd like to provide some background and cover the status of our Idaho facility, as it had an impact on our fourth quarter results and will impact our 2019 results as well.

For those following the webcast presentation, please direct your attention to Slide 5. On November 17, 2018, a team at our Idaho facility was processing what we believed to be magnesium metal fines when an unexpected reaction occurred, resulting in an explosion that destroyed our treatment facility and damaged several surrounding buildings. The explosion had no impact on our landfills. The incident resulted in non-life threatening injuries to several of our team members who were working on the site that day and we are deeply saddened to report that it also resulted in a fatality of one of our team members. This was the first fatality at one of US Ecology's operating facilities in our 66-year history and has deeply shaken every team member here.

Our first priority was helping our Idaho team out during this crisis by providing access to grief the crisis counseling and offering ongoing compensation and benefits through the subsequent facility closure. We continue to put their well-being as our top priority. We continue to work with our regulators supporting their independent investigations. Regulatory investigations are under way by the Idaho Department of Environmental Quality, the Environmental Protection Agency and the Occupational Safety and Health Administration.

Further, we have independently hired several nationally recognized experts that are in the process of conducting our own investigation in an effort to identify the root cause. Given the complexities in performing chemical sampling analysis and exposure modeling, the process is tedious and must be completed with caution. Our primary focus is making sure we fully understand what happened, so we can ensure that it never happens again. The investigative teams are making great progress and their understanding of the event continues to grow. But we are not specifying a schedule in order to protect the integrity of the investigative process.

As a result of the incident, our Idaho facility, which offers several services including landfill disposal, waste storage and transfer services and waste treatment services, has been non-operational since November 17. As of February 7th of 2019, we received a temporary authorization from the Idaho Department of Environmental Quality to resume our direct landfill services, which represents approximately half of the facility's revenue in each of the last two years. We continue to work with Idaho Department of Environmental Quality and we'll be resuming additional services the site performs in phases throughout 2019.

In the meantime, we are leveraging our geographic region and working with our customers to reroute certain waste streams to other facilities in our network ensuring no disruption of service. Our facilities are covered by insurance and we expect that most, if not all, rebuild efforts will be reimbursed through these policies. In addition, we expect recoveries for lost business and incremental costs through our business interruption policies.

In looking at the fourth quarter and 2018 results, we estimate that the financial impact of our Idaho facility being non-operational for six weeks is approximately $2 million to $3 million of adjusted EBITDA. Some of which will be recaptured in 2019 from waste that has been received previously and will be disposed in the current year as well as business interruption proceeds.

Turning to our reported fourth quarter results on Slide 6. We delivered 18% growth in revenue to $157.5 million and adjusted earnings per share of $0.65. Pro forma adjusted EBITDA was $33.4 million compared to $35.8 million in the fourth quarter of 2017. Our fourth quarter 2017 adjusted EBITDA included $2.6 million of business interruption insurance recoveries for a treatment facility damaged in a March 2017 weather event. Fourth quarter 2017 results also reflect the business rebound from the 2017 hurricanes.

Our Environmental Services Segments saw revenue growth of 11% led by strength of our base business, which increased 5% during the quarter. This strong base business growth was impressive, given the headwinds from our non-operating Idaho facility and also considering it was on top of a difficult compare period in the same quarter last year as we recovered from the 2017 hurricanes.

Our base business also showed a 1% growth in the fourth quarter on higher shipments from two multi-year cleanup projects. Our Field and Industrial Services business continued its growth momentum during the quarter, up 38% from a combination of organic growth and recently acquired operations. Organic growth was up 18% above the same quarter last year, as a result of solid execution in our transportation, small quantity generation and total waste management service lines.

As previously announced, back in November of last year, we closed the purchase of a non-hazardous industrial waste water disposal facility from Ecoserv. This facility, now called US Ecology Winnie, utilizes deep well injection technology and is strategically positioned within the reach of key markets such as Houston and Beaumont, Texas and Lake Charles, Louisiana, servicing refinery, petrochemical and environmental services customers and further strengthening our presence in the Texas industrial marketplace.

Overall, I'm pleased with the strong performance in our fourth quarter, particularly in light of Idaho non-operating for a substantial portion of the quarter. As I reflect on the full year of 2018, we saw strong execution throughout the organization. We delivered 12% revenue growth and pro forma adjusted EBITDA growth of 10%. Our team completed two strategic acquisitions that strengthened our presence and enhanced our service offering in the Gulf Coast, in the end undertook a whole list of initiatives that will position us for growth in 2019 and beyond.

Looking at the macro picture, our underlying business activity remains healthy and growing and we believe will support continued momentum in 2019.

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

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Jeff. As shown on Slide 8, revenue for the fourth quarter of 2018 was $157.5 million, up 18% from $133.7 million in the fourth quarter last year. Revenue for the Environmental Services segment for the fourth quarter was $108.1 million compared to $97.8 million in the fourth quarter of 2017. This increase was driven by a 6% increase in treatment and disposal revenue and a 30% increase in transportation service revenue.

As Jeff mentioned, base business for the Environmental Services segment was up 5% to the fourth quarter last year and represented 78% of treatment and disposal revenue. Event Business for the Environmental Services segment increased 1% from the fourth quarter last year and represented 22% of treatment and disposal revenue. Excluding our Idaho facility, base business increased approximately 8% and event business was up approximately 7% in the fourth quarter of 2018 compared to the fourth quarter of 2017.

The field and industrial services segment delivered revenue of $49.5 million in the fourth quarter of 2018, up 38% from $35.9 million in the fourth quarter of 2017. This increase reflects our recently acquired field and industrial services group based out of Dallas and Midland, Texas. Excluding the recently acquired group, FIS revenues increased approximately 18% in the fourth quarter of 2018 compared to the same period in 2017, driven by growth in our transportation services, small quantity generation and total waste management business lines.

Slide 9 breaks down our environmental services treatment and disposal revenue for both base and event Business by (Technical Difficulty) verticals. Base Business increased primarily in the metals manufacturing, general manufacturing and Broker/TSDF industry verticals. The increase in event business was driven primarily by increases in the chemical manufacturing vertical, resulting from higher shipments from two multiyear cleanup projects and increases in our government and refining verticals. These increases were partially offset by decreases in the metals manufacturing and other industry verticals.

Turning to Slide 10. Gross profit was $45.7 million in the fourth quarter of 2018, down 4% from $47.6 million in the same quarter last year. Our environmental services segment contributed gross profit of $39.2 million in the fourth quarter of 2018 compared to $42.5 million in the same quarter last year. Treatment and disposal margins were 43% in the fourth quarter of 2018 compared to 47% in the fourth quarter of 2017. This decrease was partially attributable to our Idaho facility being non-operational for a portion of the quarter as well as $2.6 million in business interruption insurance proceeds that we recognized in the fourth quarter of 2017.

Gross profit for the industrial services segment was $6.5 million, up from $5.2 million in the fourth quarter of 2017. Gross margin was 13% in the fourth quarter, down from 14% on a less favorable service mix, primarily in our industrial services business. Gross margins were unfavorably impacted by an unexpected $500,000 ratification bonus we recorded in the fourth quarter of 2018 associated with the renewal of two five-year collective bargaining agreements.

Selling, general and administrative spending or SG&A was $25.3 million in the fourth quarter of 2018. This was up 13% from $22.3 million in the fourth quarter last year. The increase was primarily due to higher labor and incentive compensation, higher professional and consulting services and higher bad debt expenses. As a percent of revenue, SG&A declined to 16.1% from 16.7% in the fourth quarter of 2017. Operating income was $20.4 million in the fourth quarter of 2018 compared to $25.3 million in the same quarter last year, excluding the goodwill and intangible asset impairment charge we recorded in the fourth quarter of 2017.

Net interest expense for the fourth quarter was $3.2 million compared to $2.8 million in the same quarter last year. The increase was the result of higher outstanding debt levels in the fourth quarter of 2018 due to the acquisition of US Ecology Winnie location in November of 2018, as well as higher interest rates on the variable portion of our outstanding debt.

The Company's effective income tax rate for the fourth quarter of 2018 was 23%, down from 36% in the fourth quarter last year. The decrease was primarily due to tax reform passed at the end of the fourth quarter in 2017, which reduced the U.S. corporate tax rate from 35% to 21%. The decrease is also attributable to the implementation of tax planning strategies that resulted in one-time favorable adjustments to prior year income tax returns.

We reported net income of $13.7 million and diluted earnings per share of $0.62 in the fourth quarter of 2018 compared to net income of $30.8 million and diluted earnings per share of $1.40 in the fourth quarter last year. Adjusted earnings per share, which was 65% in the fourth quarter of 2018 compared to $0.73 in the fourth quarter of 2017. Pro forma adjusted EBITDA, which excludes business development expenses was $33.4 million in the fourth quarter, down 7% from $35.8 million in the fourth quarter last year.

Turning to results for the full year on Slide 11. Total revenue for 2018 was $565.9 million compared to $504 million in 2017. Revenue for the environmental services segment for 2018 was $400.7 million, up 9% compared to $366.3 million in 2017. Our field and industrial services segment delivered revenue of $165.3 million in 2018, which was up 20% compared to $137.7 million in 2017.

Net income for 2018 was $49.6 million or $2.25 per diluted share compared to $49.4 million or $2.25 per diluted share for 2017. Adjusted earnings per share was $2.32 for 2018 compared to $1.72 for 2017. Pro forma adjusted EBITDA was $125.4 million compared to $114.3 million in 2017.

Turning to Slide 12. We generated $81.5 million of cash from operations in 2018. We also invested $40.8 million in capital projects and paid out $15.8 million in dividends to our stockholders.

Our free cash flow, which we now define as net cash provided by operating activities less capital expenditures, net of insurance proceeds received from damaged property and equipment was $40.7 million. This was lower than we anticipated as as a result of increased working capital, offset by lower than projected capital expenditures. Our working capital growth was due primarily to the strong finish of the year as well as our DSO and DPOs remained fairly consistent with those of 2017.

Our balance sheet remains strong with net borrowings of $332 million as of December 31, 2018 and a leverage ratio of approximately 2.6 times.

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

Unidentified Speaker --

Thank you, Eric. I'd like to turn your attention to Slide 13 and I'll say a few words about 2019. Underlying business conditions remain strong across the various segments, service offerings and geographies in which we operate. On top of our expectations for strong organic growth, our 2018 acquisition should enable us to report another year of double-digit growth. Though our Idaho facility resumed limited operations in February, this will remain a headwind for us until full operations recommence, estimated in the back half of 2019.

Attractive growth in other areas of our business is helping offset this (inaudible) challenge and is expected to translate into as much as 16% growth in adjusted EBITDA in 2019 for a range of $135 million to $145 million. We estimate that as a result of our Idaho facility not operating at full capacity in 2019, that this impacted our guidance range by as much as $3 to $5 million. Adjusted earnings per share is expected to approximate $2.09 to $2.41 per share. Total revenue is expected to range from $583 million to $627 million.

Breaking this revenue down by segment, environmental services revenue is expected to range from $408 million to $483 million driven by a 3% to 5% increase in base business and a double-digit increase in our event business.

our event business is difficult to predict this early in the year. However, the pipeline looks strong, with a combination of already contracted projects and other projects likely to be signed in 2019. It's one of the more healthy pipelines we've seen this time of the year for some time.

Our field and industrial services segment revenue is expected to range from $175 million to $189 million. This segment continues to see strong growth opportunities in our small quantity generation services, total waste management services and industrial and emergency response services as we execute on service-based contracts awarded in 2018.

Finally, we will benefit from eight additional months of our acquired US Ecology Dallas and Midland operations in 2019. As we previously announced, we expect this acquisition to deliver $20 million of revenue and $4 million of adjusted EBITDA in 2019. The acquired US Ecology Winnie facility should also contribute approximately $9 million of adjusted EBITDA for 2019.

As in our prior guidance, we exclude foreign currency translation gains and losses, business development costs and other unusual or non-recurring transactions from our adjusted EBITDA and earnings per share guidance. Additionally, this year, we expect additional gains associated with the Idaho rebuild as we recover amounts through insurance. These gains associated with the property recoveries will also be excluded from our reported results and are not factored into our guidance.

Turning to capital expenditures. As discussed on our last earnings conference call, we expect to see our capital expenditures rise in 2019. This is primarily due to an increase in spending on our landfills in 2019 compared with additional growth opportunities for our existing and newly acquired facilities. For 2019, we estimate that our capital spending will range between $55 million and $60 million. Approximately 40% of this spending will be on new landfill construction, 25% on high ROIC capital projects and the remaining 35% on maintenance capital.

In addition, we expect we will be able to -- we will be spending approximately $8 million for the rebuild of our Idaho facility in 2019, which we expect will be recovered through insurance proceeds and therefore is not factored in the above guidance or the previously mentioned guidance on capital expenditures.

We anticipate that our free cash flow to increase to $45 million to $50 million in 2019 representing a growth of 10% to 23% despite approximately $15 million to $20 million of additional capital spend expenditures. From an income tax perspective, we anticipate that our tax rate in 2019 will approximate 27%.

Before I open up the call for questions, I'd like to conclude my prepared remarks with a few comments on what I believe makes US Ecology different. I'm often asked this question in my travels, and why we have many unique differentiators, after the events over the last few months, which have been the most difficult in my entire working career, I can now say with conviction that it's our people that are at the top of this list. Yes, I believe we have best-in-class assets that are difficult, if not impossible, to replicate, some may argue they may be irreplaceable. Our network continues to be one of the best in the industry. So this may create a mode that some investors look for in their investments. It's not really what sets US Ecology apart.

In reflecting on the tragedy of losing a beloved team member and seen the extreme emotions throughout the organization from fear to sadness to uncertainty. One differentiator consistently rose to the top during this dramatic time and that key differentiator is our people at US Ecology. I am truly humbled and amazed to have the opportunity to work alongside the caliber people that work here at US Ecology. Even in a time of tragedy, the leadership and selflessness of all the team members shown. Our team put aside titles, tenure and experience and displayed a can-do attitude doing the right thing at rolling up their sleeves to help pull the organization through this difficult period.

To be able to deliver the results we did, while taking care of our most important assets, our people, and getting our Idaho facility back on track, is a true accomplishment that will not be reflected in any financial statement, press release, analysts or industry report. It's the culture at US Ecology, this intangible asset we built together that sets us apart and enables us to attract team members that are humble, driven and demonstrate emotional intelligence.

To all the US Ecology team members listening, I want to personally thank you for everything that you do for our people, our organization, our shareholders.

And with that operator, can you please open up the call for questions?

Questions and Answers:

Operator

We will now begin the question-and-answer session. (Operator Instructions)

And we will go first to Tyler Brown with Raymond James.

Tyler Brown -- Raymond James -- Analyst

Hey, good morning, guys.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Good morning, Tyler.

Tyler Brown -- Raymond James -- Analyst

Hey. So, there seems to be quite a few moving pieces here in 2019, you definitely gave us some help in the slides and in your remarks. But just to make sure that I have it all straight, so is the kind of the idea we start with 125 (ph) we add M&A, maybe take out for Grand View and then add back for core operations, is that the basic gist of it?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Yeah, Tyler, this is Jeff. I mean, the way I look at it is I take what we delivered in 2018, add what we think that we can delever from an organic perspective and then add M&A on top of that and subtract (multiple speakers) so I look out a little bit differently.

Tyler Brown -- Raymond James -- Analyst

Okay. So, I'm a little confused with the Grand View, so is the $3 million to $5 million incremental to the $2 million to $3 million you saw in Q4, or is that not the way to look at it and it's something more like a $1 million to $2 million incremental?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Yeah, Tyler, this is Jeff again. The range of the $3 million to $5 million impact is if the incident in Grand View did not happen, the way we'd look at it is you could see that our range would be incrementally up $3 million to $5 million in that range.

Tyler Brown -- Raymond James -- Analyst

Okay. And that doesn't include business interruption recovery or does it?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

it would not. Our guidance includes what we think we will recover from it, but the $3 million to $5 million that we've referenced and therefore actually your and the analyst benefits is assuming that this event did not happen.

Tyler Brown -- Raymond James -- Analyst

Okay. And then Eric, I'm having a little disconnect on the model between EBITDA and EPS. I've got a feeling there some things moving underneath the EBITDA, specifically amortization of intangibles. Can you give maybe some color on D&A amortization, maybe even interest expense?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, I think -- Tyler, this is Eric. I think one of the biggest drivers is interest expense. So when we acquired the Winnie facility in November, we acquired that through pull-downs on our revolver. So it was about $87 million. So those incremental borrowings are driving and we expect those to drive interest expense up in the $4 million-ish range over 2018 and 2019. So I think that's one of your biggest drivers. We do expect depreciation and amortization to be up based on the acquisitions that we did. So obviously, the fixed assets are higher with bringing those assets on and then as well as the intangible asset amortization.

And so there is a table in the release that kind of shows you the breakdown of EBITDA, that shows you those D&A numbers relative to what they were for 2018, but you're talking total D&A including amortization of intangibles of about $47 million in 2019 is what's built into our guidance versus about $39 million in 2018. So there is incremental growth in those numbers primarily due to those acquisitions.

Tyler Brown -- Raymond James -- Analyst

Yeah. Okay, perfect. That's very, very helpful. And then on the CapEx side, so you're obviously spending a lot on cell development. I'm just curious how we should think about CapEx in maybe 2020 and beyond? So is '19 an exceptionally heavy year from cell development? Would you expect to see CapEx step down in 2020? Or how should we think about that?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yeah, this is Simon speaking here. Yeah, 2019, certainly what we're seeing is we went through a redesign of our landfill in Michigan, I'll avoid the technical nuances, but essentially what it did it pushed a lot of the landfill construction forward. So I expect 2020 will come back to more normal levels, but we'll also have some, I think a heavy year in 2021, followed by more normal levels thereafter, in fact maybe even decreasing. Because what we will be doing in the Michigan landfill is building a larger inventory than we might normally have done and that was just a sequencing and the design changes that kind of precipitated these changes.

Tyler Brown -- Raymond James -- Analyst

Okay, that's very helpful. And then on the 30% of the CapEx budget that is allocated toward the high ROIC projects, can you guys give just maybe some examples of what that might be?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, I certainly can. So there is multiple things we're doing on the -- both the -- on the organic fronts, we are expanding current technologies, maybe expanding capabilities, we can do more of the same. We're introducing expansion of our metals recycling facilities, we're introducing new technologies such as potentially looking at different markets from fuels blending and different areas. So at all of our facilities, we're evaluating additional service and additional demands that our existing customer base has a need for and so I would think of it as a lot of small organic multiple capabilities been introduced at the facilities combined with some larger technologies that we'll be evaluating that should be come into market here in 2019.

Tyler Brown -- Raymond James -- Analyst

Okay. Helpful. And then maybe this last one for Steve, but just any color on the event side of the world? So it feels like you guys are maybe a bit more optimistic than you were last quarter on event work. And it just kind of goes back to Jeff's questions, but is that based on RFPs that have been awarded or is that more just a general positive feeling, just any big picture kind of thoughts and commentary would be helpful there.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Sure. It's a little bit of both. We have multiple larger projects from 2018 that are continuing in '19. That's the first piece. We have two larger projects that were awarded in '18 that are starting in late Q1, early Q2 on top of that, plus we had a really good start in the Midwest, if you believe that with all the cold weather and everything, but we had a good start in event work which is giving us optimism that will continue on the rest of the year.

Tyler Brown -- Raymond James -- Analyst

Okay. Good. I appreciate it. Thank you for the time, guys.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thank you, Tyler.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you, Tyler.

Operator

(Operator Instructions) We'll go next to Brian Butler with Stifel.

Brian Butler -- Stifel -- Analyst

Good morning, thanks for taking my questions.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Hey, Brian.

Brian Butler -- Stifel -- Analyst

Hey. Just to start, just on the back half of, I guess or maybe the full year with -- when you consider the Grand View, you've kind of highlighted that $3 million to $5 million and I just want to be clear that in your current guidance, that's assuming that the services part of this is phased in gradually in '19 or is this -- this assumes that it's not the current guidance, it assumes that the Grand View is just landfill only?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

So this is -- Brian, this is Jeff. So the current guidance assumes that we have direct landfill to the first half of the year and we resume normal operations in the back half of the year.

Brian Butler -- Stifel -- Analyst

Okay.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

So, Brian, really that we have landfill operations for the majority of the year and then those services, particularly on the treatment side, toward the back half.

Brian Butler -- Stifel -- Analyst

Okay. That makes sense. And then on the project side, I'll follow up with another one, just to be clear, the new -- the work that continued into 2018, specifically when you think about like the main project rolling off, is that then extended out or do you -- have some of those ones that have continued the status on those chains favorably or just how should we think of what's in place and and still running?

Simon Bell -- Executive Vice President and Chief Operating Officer

The project you just mentioned is ongoing, we're just in between phases right now and should be kicking up again strong here in just a month or two. And we started out on this -- the other Northeast project that we have is kicking off strong this quarter. So, there's a couple that are -- that we're moving in '18 that are all scheduled again for '19 plus we have additional contracts awarded that are kicking off in a couple of months. So we feel confident, we have a good pipeline this year and nothing is pointing to a downward trend, it should be an upward trend.

Brian Butler -- Stifel -- Analyst

Okay. Good to hear. And then on the Ecoserv, a little color just on integration and how you view that progressing as well as how should we think about that running through the income statement, both on kind of the event base and -- or is it all going to be in the field services piece?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Yeah. So, this is Jeff. From an integration standpoint, we're continuing to integrate Winnie, we just closed it in middle of November, but we're not anticipating any difficulties on that front as opposed to how it will run through the financial statements. It's in our environmental services segment, it's business, which was something that attract -- we were attracted to is predominantly base business. There are some projects that we'll go through, but it's really there to service industrial base customers there and opens up a lot of opportunities for us to cross sell services, gain access to new customers as well as we expand our wallet share in existing customers as well as sell our complementary services.

So there will be some added benefits from the synergy side of things, in our services side, in our field and industrial services segment, but the vast majority of it will be in our environmental services side.

Brian Butler -- Stifel -- Analyst

And -- so it's -- wait, so that sounds like it's mostly base business and when you think of the base business guidance, is that including -- is that base business guide in organic or is that including the benefit coming from these deal revenues?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

It's organic.

Brian Butler -- Stifel -- Analyst

Yes. And just to be clear, Brian, and for everybody, so that the US Ecology Winnie acquisition will roll up within our environmental services segment, the Dallas and Midland acquisitions we did back in September will roll through the field and industrial services segment.

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes, and just to be clear brand for everybody so that the US Ecology Winnie acquisition is will roll up within our Environmental Services segment, the Dallas and Midland acquisitions we did back in September will roll through the field and industrial services segment.

Brian Butler -- Stifel -- Analyst

Okay. And then last one for me, have you seen any impact from kind of the automotive slowdown that we've seen kind of more globally, has that had any knock on consequences coming through on any of your industrial production customers or volumes?

Simon Bell -- Executive Vice President and Chief Operating Officer

Nothing we know of, no, we've continued strong in the Midwest last in fourth quarter and we had a good first quarter so far so, don't.

Brian Butler -- Stifel -- Analyst

Okay. Thank you very much for taking the questions.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thanks, Brian.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks, Brian.

Operator

And we'll go next to Tyson Bauer with KC Capital.

Tyler Brown -- Raymond James -- Analyst

Good morning, gentlemen and my condolences to your colleague.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thank you, Tyson.

Analyst -- -- Analyst

The couple of quick questions. What was the decision behind going with straight revolver debt on the M&A, so you think you have that quick of a pay-down and if so, where do you think you'll be after this year, after next year to get that down and is that how you anticipate doing future deals?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Tyson, this is Eric. Yeah, a part of -- our biggest factor we looked at is our credit facility still has really favorable terms. So we're today on the variable portion, we're at about 3.7% is the rate on that portion, the fixed portion, which we have -- we're about 50-50 at this point between fixed versus variable and that's at about 3.8%-ish. So we feel pretty good about that facility and so we chose to draw that down -- that acquisition down because of that favorable facility and it gives us the flexibility to continue to look at M&A, to continue to look at growth capital, potential projects and things of that further the cash.

That being said, in the guidance, we've modeled $20 million of debt pay down in 2019. I would tell you, it could be more or it could be less just based on what we see in the M&A pipeline and how the CapEx flows during the year.

Tyler Brown -- Raymond James -- Analyst

Eric, I thought you're going to take credit for being clairvoyant that the Fed will take a pause on interest rate.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

No, I won't take credit for that.

Tyler Brown -- Raymond James -- Analyst

Okay. The -- you've gone through a process to expand permits in Michigan, is that free and clear it's passed all those hurdles, there's no more appeals processes by the local or the state level there?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yeah, that has completed, we advanced some very important legislation that kind of established in the statute, if you will, our ability to accept and to continue accepting that material. So we were very pleased with the outcome there.

Tyler Brown -- Raymond James -- Analyst

And have you started to accept that material or anticipate doing so in the near term?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yes, we have, we continue to and we will be receiving that material in the future.

Tyler Brown -- Raymond James -- Analyst

Okay. In regards to permits and the types of materials you can treat, when you rebuild the treatment plant there in Grand View, will that allow you -- are you looking to try to expand what you're able to treat in that capacity or what's the plan there with the $8 million to rebuild?

Simon Bell -- Executive Vice President and Chief Operating Officer

Yeah, Tyson, this is Simon again. It's an excellent question. We are certainly going through the scope, probably not in a position to lay out the specific plans. We have such a broad geographic footprint today, we can really be strategic about how we build, what the best way to rebuild, focus on the market today. So certainly we will take the opportunity to optimize the design, certainly this is a tragedy that was felt across the whole Company, but this will provide an opportunity to put some first world-class facilities and efficiencies into our design.

Tyler Brown -- Raymond James -- Analyst

Okay. Eric, what was the decision for not taking any kind of reserves on pending environmental fines, either from (inaudible) or EPA or State of Idaho and also legal liabilities that may come up going forward, is that covered under insurance or is it a wait and see and we may see reserves taken later this year?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Tyson. I would tell you, the biggest reason or the best answer is we don't have any new indication of things like that at this point. And to the second part of your question, we do expect that those kinds of proceedings would fall under our insurance programs.

Tyler Brown -- Raymond James -- Analyst

Okay. Thank you, gentlemen.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thanks, Tyson.

Operator

And we'll go next to Jeff Silber with BMO Capital Markets.

Jeff Silber -- BMO Capital Markets -- Analyst

Thank you so much. Wanted to focus back on some of the issues within your guidance. Specifically, you're looking for the base business, I think to grow 3% to 5%, if I remember correctly. That's in line with your longer-term growth and that, I know that excludes some of the acquisitions that you mentioned. You finished the year really strong, especially when we take out Idaho, are you just being overly conservative, are we expecting that number to kind of slow down as the year progresses? Any comments on seasonality would be really helpful. Thanks.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Yeah, Jeff. So, this is Jeff Feeler on here. So with regard to our guidance on base business is, the 3% to 5%, I mean that's really on top of what was better than expected 2018 from a base business perspective. So I don't think there's conservatism built into it, but we're definitely not being overly aggressive on it as well. So I think it's a balanced approach in there. We will see some uptick from some of our -- especially, our US Ecology Winnie facility on the base business, so it's predominantly base business there.

The other comment on -- I'm trying to remember what the other question was.

Jeff Silber -- BMO Capital Markets -- Analyst

Seasonality.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Seasonality. Okay, yeah. So, seasonality, you would -- I would expect it to be very similar to what we've had in the previous years. First quarter will be our lowest quarter of the year with it gradually building and I think it may be a little bit heightened this year with regard to -- with Grand View coming more -- more capabilities in the back half of the year. So with that I would expect the back half to be meaningful and prominent than what we've seen in the past.

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Yeah, Jeff, this is Eric, just to add to that. So as is typical, we expect the first quarter to be our lowest quarter, our seasonally lowest quarter, which we've seen for several years. So we still expect that for this year, but to Jeff's point, we will -- we may see that the second half be even seasonally stronger than usual just as Grand View comes back online.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, great. And forgive me if I missed this, but did you disclose the impact of the two acquisitions you made in the fourth quarter on fourth quarter revenues?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

We did not, we did not. So, we would expect and we're not in a position or not going to be providing revenue guidance for the Winnie acquisition. It's about $9 million of EBITDA, the Midland and Dallas acquisition, it's about $20 million of revenue in our guidance for next year and about $4 million in EBITDA. I would tell you that in 2018, that level of contribution in terms of a revenue perspective was probably between $8 million and $10 million.

Jeff Silber -- BMO Capital Markets -- Analyst

Okay, great, that's helpful. And finally, there was some discussion about CapEx over the longer term and I think the words we used, CapEx to be more normal. Can you remind us what a more normal range is, either as a percentage of revenues or some dollar amount?

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Yeah, so this year is $55 million to $60 million, next year we'll probably be south of $50 million, but probably in that $40 million to $50 million range. And then when we look out to 2021, depending on landfill construction, if we could be back up to a similar range that we saw this year, and then fallen off from there.

Jeff Silber -- BMO Capital Markets -- Analyst

When you say saw this year, saw in 2018 or?

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

I'm sorry, so I'm seeing what we're seeing in '19, good follow up. I think one of the things to keep in mind on this, a lot of attention on capital is, we're spending a lot of our capital on redeploying in growth opportunities. And that's why we've been heightening that out. If you look at our baseline maintenance capital, it's running right around $20 million a year and that's what we need to run the facilities as is. And then you have the landfill that comes in and out depending on timing of construction. Typically, those landfill construction periods build out anywhere from one to three years of airspace that we can do. With five landfills, that causes some volatility from year-to-year.

What Simon was mentioning on the Michigan landfill and I think this is an important comment is the redesign of that landfill is in two major phases. One is in Michigan in 2019 and the other one is in 2021. And what that's going to do is once we get that built because it's built on top of an older landfill, it's going to give us multiple, probably five years of additional airspace or more after that and it's really timing.

And so when we're looking out three years from now, we're going to see our landfills construction, especially at our Michigan landfill, dropped significantly. And so it is a timing area right now.

Jeff Silber -- BMO Capital Markets -- Analyst

All right. That's really helpful. Appreciate the color. Thanks so much.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Thanks, Jeff.

Operator

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Jeff Feeler for any closing remarks.

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

I want to thank those who participated today for interest in the Company and look forward to giving you an update on our first quarter results at the end of April, first part of May. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation.

Duration: 47 minutes

Call participants:

Eric Gerratt -- Executive Vice President, Chief Financial Officer and Treasurer

Jeffrey R. Feeler -- Chairman of the Board, Chief Executive Officer and President

Unidentified Speaker --

Tyler Brown -- Raymond James -- Analyst

Simon Bell -- Executive Vice President and Chief Operating Officer

Brian Butler -- Stifel -- Analyst

Analyst -- -- Analyst

Jeff Silber -- BMO Capital Markets -- Analyst

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