Clean Harbors, Inc. (CLH) Earnings Call Transcript & Summary

All right. Let's go ahead and get started with the next presentation. So this afternoon, I am very pleased to have Clean Harbors with us. Presenting today is the company's CFO, Mike Battles; as well as Eric Gerstenberg, the company's COO. And I believe Jim Buckley, VP of Investor Relations, is maybe off to the side. So for those who may not know me, I'm Tyler Brown, Senior Analyst here at Ray Jay. I cover the environmental services space. I also do the transports, seemingly just do quite a bit. So like I said, Mike, I'm excited that you're here joining us today. As you know, I wish we could do this in person. I wish I was in Orlando as much as I'm sure you do as well. But I was hoping that you could give just a couple of minutes -- let's just talk a little bit about Clean Harbors for those generalists out there who may not be familiar with the story. What do you do? What's your business all about? Where do you kind of fit in the broader cleanup space? And then maybe just kind of the strategy. We do have about 40 minutes. We will do some Q&A after your opening remarks. [Operator Instructions] So with that, Mike, I'm going to turn it over to you.

Thanks, Tyler and the team at Raymond James, for having Eric and I here and Jim as well. I appreciate all of the support over the years. And certainly, you're right, wish we were all together in Orlando like we were last year. Actually, the last time Eric and I got in an airplane was this time last year. So anyway, thanks again for having us. Clean Harbors is an interesting company. It's been around for 41 years. It was started by a gentleman named Alan McKim. Alan is still the CEO and Chairman of the Board today, owns about 7% -- still about 7% of the company, very actively involved in day-to-day operations in the business. The company is about $3.1 billion in revenue, most -- large majority, about 87%, is in the U.S., about 13% in Canada. And the business model is relatively straightforward. We take hazardous waste and recycle what we can and what we can't, just recycle and extract all value out of what we dispose of in our highly permitted, hard-to-replicate facilities, whether that be in landfills or incinerators or wastewater treatment facilities or re-refining when it comes to motor oil. And we have a diverse network across North America, and we're the only national organization that does both incineration, landfills, wastewater treatment and re-refining. So we really are like the go-to call when there's an emergency response, whether it be the avian flu outbreak, whether it be the anthrax or the BP oil spill and now the decontamination work that's happening across North America. Clean Harbors as a company, you call -- and it's been around for a long time, industry leading in safety, industry leading in compliance and really proud of the organization and really a great company to work for. And really -- what I really like about it, it's a great sustainability story, and it really is something that we're all really proud of and I'm sure we'll get into over the course of the next 40 minutes.

Yes. And I'll just -- this is Eric Gerstenberg, Chief Operating Officer. Thanks again, Tyler, for having us. I've been with the company for 31 years at this point and really seeing some tremendous growth. We've done over 50 acquisitions. Where we sit today, we have over 14,000 employees to build a little bit on the business model that Mike was talking about. We have over 450 branch locations located throughout North America. We gather and collect waste from our customers through our Safety-Kleen segment, our Technical Services segment, our Field Service and Industrial segments. That waste collection, ultimately, we transport to our final disposal and recycling facilities. We have a fleet that's over 10,000 vehicles strong so we can collect the waste, transport it, recycle it, which feeds our over 100 disposal facilities that we have, consisting of incinerators. That is -- our incineration network is over 65% of the incineration capacity throughout North America. We have recycling plants where we recycle solvents. We have wastewater treatment plants that we remove metals and contaminants from wastewater prior to discharge. We have Subtitle C landfills that take hazardous materials regulated throughout the states, EPA and provinces in Canada. And all of that is really expanding on 50 different lines of business that we service for our customers. And our growth model is not only small quantity generators but large quantity generators of hazardous waste and really leveraging those permitted facilities across our network.

Perfect. Very good rundown of Clean Harbors in a nutshell. So I think if everybody is listening closely, it sounds like there's quite a bit of a tieback to the industrial markets. And obviously, 2020 was a difficult year in many respects. And if we think about -- there's many ways that kind of impacted your business. I want to talk a little bit about -- the industrial market obviously took a big dive as we kind of shut down. There was a lot of decontamination work, and maybe we can talk about that. But at a very high level, as you kind of look through 2020, what were some of the high points and the low points, some of the things to think about as we think about 2020 in regards to Clean Harbors?

Yes, sure. I'll start, and Eric, kind of feel free. So I'd say that at the end of the day, the pandemic was, at one point, very disarming for our Safety-Kleen business, but at other points, it's kind of a great catalyst for our decontamination work. We did generate about $120 million in revenue from decontamination work. We just kind of -- it was just in emergency response. We saw a market opportunity and took advantage of it. We also did receive about 40 plus -- $42 million of government funding, especially -- mostly in Canada, given the big decline that happened in that business. And so -- and we did have to shut down our re-refineries, 5 in 6 re-refineries shut down for a few months over the summer. So again, a lot of moving pieces. We also, Tyler, took out a lot of costs. We ended up using this opportunity -- instead of just doing temporary like wage rollbacks, we went deeper. We cut into the organization. We've cut about 8% of our SG&A out, and I don't think that's coming back on anytime soon. And I do think that's going to be a catalyst going forward as the economy recovers for us to be able to drive incremental profitability within the organization. But certainly, a very busy year, a lot of moving parts. This time last year, the world was kind of tipping over, and we were doing -- we're getting questions on leverage and -- covenants and leverage ratios and liquidity. And we kind of -- it kind of feels like a far cry from there, but it was only a year ago.

Yes. So I'll add a little bit more to Mike -- what Mike said when you think about high and low points. We started out 2020 on a real high point. Our first quarter last year was really a record-setting first quarter for us as a company. We were hitting on all cylinders, and we were seeing consistent growth across all of our lines of business. So it was great. And then obviously, we all know the pandemic hit. And when we -- our low point was what Mike said about shutting down our refineries. When we had to shut down some of our plants, that affected our people, it affected really what was going on within the business. That was one of the lower points. And then really coming out of that, we saw a really outstanding recovery I think, as we began to go into Q3, in many different areas. Our Safety-Kleen business -- branch business was starting to accelerate and come back. Our traditional Environmental Services business, Clean Harbors Environmental Services, accelerated really well through the third quarter and into the fourth quarter. We ended Q4 2020 with record-setting drum collection volumes into our network, which was a high point for us. So overall, our employees just did a phenomenal job for us, a lot of teamwork and the resiliency of us being able to pivot and being able to help our customers with the COVID decon work. I think that shows the power that we have as an organization, of being able to really respond to market conditions, take out cost, to be able to adjust our workforce and really capitalize on it.

So moving pieces, without a doubt, there are a lot of those. And Mike, I don't necessarily want to lead with the financial question, but I think it's important just optically as people think about -- they may kind of look at the guidance for 2021 and you look at 2020. Because the idea would be we're kind of supposedly coming out of all of this, but the fact is, is you're looking optically at relatively flat EBITDA. Now you know as well -- well, you know that I love bridges, particularly EBITDA bridges, but...

I love your bridges. They're good.

Yes. Well, we love to look at the world that way. And so -- and I'm not asking to go through the detailed bridge, but just a couple of maybe just helping people understand and set the stage about why maybe EBITDA might look flat, but maybe that's not so bad once you can start to unpack that a little bit.

Yes. So the 2 big things, Tyler, you're referencing are -- so as I mentioned earlier, we did about $120 million of decontamination work. And we're of the view, and we gave guidance last week, that we'll do maybe $30 million at the midpoint in 2020 -- 2021 because we're assuming we'll get a couple of shots in our arms relatively soon and we won't need that. Wouldn't that be great? And so that's like $90 million of lost revenue. That's really high-margin revenue, right? Because we're doing an emergency response, because we're doing it at night, because it's -- and it usually kind of needs to kind of get done immediately, the margins are in the 30%, 35%-plus range, if not higher. And so that profitability, that $90 million of kind of high-margin work and maybe another $30 million or so of lost EBITDA there, that -- we need to find that someplace else. In addition to that, as I just mentioned, we did get about $42 million of government funding, mostly in Canada. The Canadian wage subsidy act was a huge winner for all the Canadian companies, but we were beneficiary of that as well, along with the retention credit around the CARES Act. So those 2 combined was about $42 million in government funding that we don't need to pay back, and as such, that needs to be replaced. We only forecast -- we only guided to a couple of million bucks maybe here in Q1 under the Canadian subsidy act, nothing under the CARES Act. And so I'm of the view that we've got to go find that $40 million or $39 million anyways. And so that is something that we're going to have to go replace of EBITDA, and that's through growth in the base business and the SK business coming back and SK Oil coming back and areas like household hazardous waste days and Industrial Services and Field Services. I mean we need all that to come back and with the idea being flattish, to your point, because we had to go replace that lost revenue and EBITDA from both the decon work as well as the government funding.

Right. So a little bit more than meets the eye, so to speak.

That's right, that's right.

Now I wanted -- so -- right. So I want to talk a little bit about as well kind of the reopening and maybe what's kind of implied. So if I looked at just your -- I think it was your '19 to '20 revenue declines, I think it fell by, call it, $260 million or so of revenue. I'm probably rounding. But you also added $120 million of decon work. So in theory, I suppose your revenue was down, let's just call it, high $300 million on a "organic type level." So what I'm curious about is when we do look and we start to unpack and we start to think about the business, how much of that is implicitly implied that you kind of get back this year? And my working assumption is it's not all of it, it's a part of it but probably not all of it.

Yes. So as Eric said, we had a record Q1 last year, and we're not going to have a record Q1 this year because the turn of the calendar did not make the pandemic go away and Q1 was still pretty slow, especially with the bad weather we had in Texas in February. So we are going to have a good quarter but not a record-setting quarter like we had last year. And so I don't anticipate us kind of having all of that $400 million or high $300 million coming back. Some of it comes back. It's hard to put an exact number on it because it's really based on the price of base oil, as you know. It's based on kind of how fast the economy opens around driving and miles driven. And we do have, I'd say, a relatively modest view, Tyler, just because our goal is to exceed Street expectations, and we've done that 13 straight quarters. We're going to continue to do that. And so we try to set ourselves up for another win, but that's a modest kind of back half recovery when you think about the overall business from a revenue standpoint. But we do need to recover it, and we do need that to come back. And we do think it's going to come back.

Okay. And then you guys talked a little bit about the Texas weather. Let's just call it the Mid-South, that entire middle part of the U.S. I think you made an interesting comment, and I've actually heard some chatter around this with some of my transports, about -- I think you made an offhand comment on the call about bursting pipes. But I am curious. When there is events like this, whether it's a hurricane or a polar vortex in a part of the country that's not prepared for it, is there actually any work that you end up seeing as a result of something like that? I know there's probably some costs, but maybe is there also a revenue opportunity on the other side?

Yes, there certainly is, Tyler, right? As we've entered here March, our Industrial Services segment supporting those big plants, they're -- all of our employees are out to work for them today, and that came back quick over the past week or 2 as the weather moved through. So there is certainly some boost in the industrial part of the business, not as much to make up for what we've lost in just route collection and our own plants, but really we've hit the ground running here with March with getting all of our employees back out there with our big customers.

And Tyler, when we gave guidance last week, which is just a few days ago, we did consider a modest amount of cleanup work but not much. We just assumed the bad news.

Okay. Perfect. And since -- Eric, since we've got you, might as well ask you a little bit. I would like to talk about ES -- the ES side a little bit. And I want to talk about those gems, the diamonds, if you will, which are those collect -- or those post-collection disposal assets. You talked a little bit about your incinerator market share. If you could maybe kind of go back over that. And then also talk about your landfill positioning as well in the hazardous waste markets. We'll start there, and then we'll kind of build on that.

Yes. So our incineration position, we have -- we manage over 65% of the commercial hazardous waste incineration capacity throughout North America, so really strong position there. Back 5 years ago, we won -- we've built and brought online another incinerator down at our El Dorado footprint, adding another rotary kiln, which opened up an additional 70,000 tons of capacity. We've been successful in being able to fill up that capacity. This past quarter, we were operating at about 85% utilization. And when we feed those units, we're really focused these days on capturing unique type of waste streams: number one, container volumes; number two, what we call direct burn waste streams, which are -- which we hook up, connect to our kilns and immediately fire into the incinerator. And those are really driven a lot by the chemical renaissance going down in the Gulf. That really spun off a lot of volumes, and we're strategically positioned with our biggest kilns in Houston and El Dorado, Arkansas. So that's worked out well. We did see throughout the course of 2020 lower project volumes. Because of COVID, a lot of the Superfund remediation type work was put on hold. We're starting to see a stronger pipeline as we get into 2020 here. So that's good. That project business you alluded to -- our landfills and our position there, as we exited 2020, we saw that our base business remained consistent into our landfills. The project business was off. We saw higher price per pound because of that. We really -- with those assets and going back in and seeing our project pipeline today, we feel as though we're well positioned here to get that project business flowing again into our landfills and excited to see that growth in those permits beginning to be issued, to really get that underway here. So...

Right. So great positioning with those assets. There has always been a talk -- and I'm curious for an update on this. So there -- you made a very clear distinction, 65% market share in the commercial incineration market. Is there -- there has always been a talk about a reduction in some of the captive incinerators. And maybe you can talk a little bit about what a captive incinerator is. And is there -- have you seen some of those captives come down with time? It's a little hard for us to tell. But just any color there would be really interesting.

Yes. So each captive -- and to give a description, to your point about what that is, captives are incinerators that are really owned and managed and operated by our customers. So our customers have their own incineration units for some of the waste that they generate, they feed into their own units. That captive volume is over 700,000 tons in North America that's burned by those captives. Again, I'd reiterate that every one of those is our customers. What we've seen evolve over the past year is that those companies are really evaluating their cost structure. Utilization, we believe, is down in those units. Regulatory pressure is up. And as COVID has caused many different companies to think about their cost structure, we think it continues to present a catalyst or an opportunity for us to be able to help them of the volumes. They also have changed some of the types of material that they can burn. The harder-to-burn waste streams, all those units are not really readily adaptable to handle the complexities that we're seeing come from the chemical market, whether that be highly chlorinated or very toxic type streams. And that -- and our units are really strategically positioned to be able to handle those types of waste streams. So those 3 different factors, we think, have weighed in to create more opportunity as we go forward to build what we're doing for them from a customer side.

Right. Because the captive, the permit is for the owner, there is not an ability to go out and shop their capacity. Would that be a fair characterization?

That's correct, that's correct. It's only for the volumes that they generate. And so M&A, a little -- as some of those companies divest and split off different branches, that volume, depending on where it is, there's some complexity that it may not be able to go into that captive unit that they have.

And then do you think that ESG at all plays into this? This is me just kind of talking off the cuff. But if you were -- if you weren't -- I don't know if those captives are scrubbed as well as maybe your incinerators, so I'm not sure. But I'm just curious if there's an ESG angle to this that maybe they want to offload some of that E part, so to speak.

Yes. I don't think we're seeing that yet. It certainly might be something as we -- as ESG -- obviously, as those efforts accelerate with those companies, we might see that in the future. We're not seeing that as of yet, I don't think. It's more the cost and suite of what they're burning, I would say.

But Tyler, you're right, as the targets get higher and higher and get harder and harder, I mean, they do generate a lot of scope 2 greenhouse gases. And so it'd be important to kind of -- if you're looking for ways to reduce that number, I mean, you're going to run out of good ideas pretty soon. So that would be a great way to do it.

Yes. Okay. Interesting. And so Eric, you talked about the U.S. Gulf Coast chemical renaissance. I think there's been something on the order of $200 billion of investments made down there. My railroads have talked a lot about it. It's a big opportunity, all these new chemical plants. So again, maybe help people understand. Because -- the El Dorado rotary kiln was, I think, probably what, the only kiln that's been put into the market in the last 20 years, but it's really strategically located to capture some of those waste streams because my general take is chemistry yields some stuff that needs to be handled, would be my holistic take.

Yes. And to reiterate what I said earlier, I think what we're seeing out of those chemical plants is more difficult-to-handle waste streams, whether that be very highly chlorinated, highly fluorinated, things that our plants are really built well to be able to handle. And there's a limited capacity to be able to manage those types of materials. So that's more -- when we really were looking at the return of building out an additional plant at El Dorado, we were targeting what we were seeing from the customers we service in the Gulf. And we were seeing that they were really having complex types of waste streams that needed to be handled, managed safely with really tight emissions controls, meeting current regulations. And that's really what we tried to capitalize and build around, along with all the growth of container volumes as well. So it's come to fruition. We've filled up that capacity. Things in -- across the industry are tight today, and we see continued opportunity there.

And then, Mike, I don't know how much you'll indulge me here, but I would think that these assets are fairly valuable from an EBITDA perspective, from a margin perspective. I mean I don't know what you can say exactly, how much you can parse it out, but I would surmise these are fairly healthy returning assets. Would that be a fair characterization?

That would be a fair characterization. So here's how I think about it. So I think about last year, we did -- the ES business did $520 million of EBITDA, right? That's a reported number. So let's say that between the decon work and some government funding, we did maybe $60 million, $70 million of that number. So really, the real number is maybe 2 -- $460 million kind of all in. And then you say of that -- maybe you say looking at the -- between the landfills, the incinerators and all the facilities, maybe we did $600 million in revenue. Of that -- of $2 billion, if you will, of revenue, $600 million related to that. Maybe that's a 40% margin. And then probably $240 million of the $460 million or $250 million of the $460 million, the other piece of it kind of coming from, let's say, the branches, right? But you need -- I'll say that with a caveat. You need both. You can't -- it's not like you can just say, "Hey, this roll -- we're not -- it's not tipping fees. It's not Casella, no tipping fees here. But we want to go get the waste because you need to make sure it's transported safely all the way to the -- to our incinerators. And you need -- this isn't just rubbish, right? So it's really important that -- it's a 2-part harmony is what we're talking about. So although people like to cut it up and break it up and put multiples on it, I love you for it, good stuff, but it's not that simple, not that simple.

Yes. Rubbish, it is not. Okay. So I want to talk about -- we will shift gears here. I want to talk a little bit about the administration change. There's a lot of chatter out there about PFAS. This is something that I get a lot of questions from investors on. So maybe you could talk a little bit just at a high level how you guys think about the change in the administration, what that might mean and maybe specifically on the PFAS type side.

Yes. So we get a lot of questions on PFAS, too. And look, at the end of the day, here's how I think about it, and Alan said it pretty well in the Q3 earnings call, if you want to go back and listen to that. He said, look, it's probably 1 to 2 years kind of post hazardous waste designation because it's tied up in the courts and everything else, but then it has like a 10-year tail. And it's not unlike, guys, for people who have been following us for a long time, like PCBs or other types of waste stream. It takes a long time to get that designation, but then it has a nice long life. And so as PCBs are getting smaller and smaller in the world, well, I think PFAS will be a new thing and we'll deal with it. It depends on -- kind of whether it's landfills, whether it's incinerators, level of concentration, all those things have to kind of work their way out. But make no mistake, it's going to be labeled hazardous. And I think under a Biden White House and a Democratic House and Senate, it probably goes faster than slower. But it's not in our 2021 numbers. Let's be clear about that. But I do believe it's our business model. The business model is that things get labeled hazardous, we and the market clean it up. We get less and less of it, and then something else gets labeled as hazardous because people are creating bad things and don't realize they're creating bad things.

Right. I think -- correct me if I'm wrong, probably out of my skis on this one, but PCBs were designated hazardous, I think, in the late '70s or early '80s and you're still cleaning them up.

That's right.

That's right.

That's right.

So it seems like it's a long tail.

It does. It has a long tail because just like PFAS, PCBs, there's a lot of them, there's a lot of them.

Yes. So -- and then -- but is that hazardous designation really important? And if it's not designated hazardous, does it significantly reduce your ability to play in that market? Any thoughts there?

Yes, it's important.

Yes. And clearly, all the indicators point towards hazardous designation and that we have a lot of tools in our toolbox to be able to help deal with the PFAS situation out there. We have incineration capabilities. We have closed-loop landfills. We have carbon treatment to be able to treat water. So -- we have wastewater treatment plants. We have a lot of opportunity to be able to be a full-service solution provider for that. But make no mistake about it, everything is pointing in that direction. And so that's a real opportunity for us.

It's a good thing, it's a good thing.

Yes. Okay. All right. So I also -- so I want to kind of turn over a little bit to Safety-Kleen just for a moment. I don't want to focus on it too much. But again, maybe just talk about what happened in 2020. So again, people need to kind of understand that in Safety-Kleen, there's kind of 2 businesses. There's the branch business, there's the oil re-refining business. And maybe that branch business, which is really you going out to, say, the Jiffy Lubes and the auto body shops, is a pretty sticky business. It's pretty sticky as long as people are driving, but when people don't drive, it's a problem. And so...

They don't need their oil changed. They don't need their brakes done. It's a problem.

Exactly. So maybe talk about that. And so as it relates to kind of "reopening play," I mean as vehicle miles driven -- I am assuming that's the key KPI that we should be watching on this one.

Sure. It's certainly a very important one. If you think about -- probably the easiest one to kind of get your head around. So it's like as that comes back, people start driving their cars and they end up starting to do -- they need their oil changed and need their brakes done again, that's going to create a need for the auto body shops and so forth to get back to work.

Okay. I want to turn over. So there was a DOE study. And I have to either ask Jim or you to kind of get -- fill us in on the details. I think it was HR 1733, I think, is the official title.

I think it was the bill. The actual study is the DOE -- there's a long technical name on it, but yes.

A long technical name, okay. We'll leave it at that. But I think...

The Department of Energy report to Congress on Used Motor Oil Management and Beneficial Reuse Options to Address Section 1: Energy Savings from Lubricating Oils. That's it.

Better known as HR 1733, right.

Okay. All right. So I think the results of the study came out. Can you maybe just talk a little bit about what that is all about? And why is that important to your Safety-Kleen business?

So what this does really -- when you think about re-refined motor oil, there's always been concerns about its quality and its efficacy. And what this DOE study does is validate what we already knew, that the oil is just as good as oil from crude. It's actually much cheaper to make. It actually obviously allows us to be energy independent. It's really -- it's a greener answer, and it kind of validates everything we already do. But it's just a study. It doesn't say like government should use -- 10% of their oil needs should come from re-refined sources or it doesn't say we're going to give you a tax rebate to use re-refined motor oil. That's kind of on us and on the industry to kind of help drive. And that's really kind of the message we want to send to our investors and to the world, is that we're going to try to make that more of a reality because, at the end of the day, it is a green solution. It is an eco-friendly answer. And I do think the market is coming to us, but there's still some bias against it, right? Because people don't want to use it. And I think that there's -- there's no -- based on the study -- independent study done by the U.S. government, it basically validates what we already knew, that, that oil is as good, if not better than our oil made from crude. So that's the part -- and really, it's up to us to lobby Congress, state governments, local governments and kind of say, "Hey, let's use this oil. It's made in America. It's green, and it works just as well, if not better than conventional motor oil."

Right. So recommendations, not mandates.

That's exactly right. And so really -- and so it's up to us to kind of work with those governments to kind of push over the goal line.

But now -- correct me if I'm wrong, but didn't your re-refined oils maybe won a NASCAR race recently?

It did. Thank you for reminding us about that. Michael McDowell won. And he -- there's a nice picture of him and on his right -- left bicep, a nice big Safety-Kleen logo right there. It's beautiful, it's beautiful. It was used -- so if it won the Daytona 500, it's got to be good for your car, too.

Right, the big pitch. Okay, okay. Perfect. Right, right. Okay. That's helpful. So maybe just turning gears. We've got about 5 minutes, so I want to -- I think 5 minutes. Yes, that's right. I want to hit on ESG quickly. I want to hit on free cash flow. So let's start on free cash just real quick. Because -- Mike, I think on the last call, you talked about -- you threw out kind of a longer-term $300 million target on free cash. I think you guided to somewhere in the, let's call it, $230 million range, $235 million range.

That's right.

So what bridges us to get there. So is this EBITDA? Is it CapEx? Is it lower cash interest, cash taxes? I'm surmising it's mostly EBITDA, but maybe you can help us out kind of bridging long term how you get there.

It's mostly EBITDA. I mean we are going to get -- we have said publicly, trying to get 30 to 50 basis points of margin expansion a year. And if you just kind of do the math on that, over the next 4 or 5 years, you kind of get there pretty easily actually. So it's not -- it's only 6% growth if you're going out a few years. And so my view is that we've had a good trajectory. If you go back and look at our history, I don't know what the CAGR is, but it's dramatic over the past few years as far as our free cash flow generation. And I think that just continues. I think we've just been much more disciplined around working capital, around CapEx, around growing the business, around driving prices, maintaining our cost control. And that all flows into free cash flow. And that's been a great winner for us, and it's allowed us to do a lot of good things, including buying back stock and other types of investments.

And maybe on that, just real quickly, the balance sheet is in probably and arguably some of the best position it's been in some time. I think you're...

Best leverage ratio in over a decade -- that's the best leverage ratio in over a decade, as simple as that.

There you go. So when we think about capital allocation, is that -- are the buybacks something that you're interested in? Is it -- maybe just talk a little bit about the capital allocation policy. I know you've talked a little bit about M&A. Maybe you're kind of building up for that, I'm not sure. But maybe you could just talk broadly about that.

Yes. So Tyler, we have almost $600 million of cash on our balance sheet. Our leverage ratio is the lowest it's been in over a decade. Stock's at an all-time high, and we have all kinds of choices in how to deploy capital. In my view, I feel like we can do it all. We can do some buybacks because I think still -- $85 a share is still pretty cheap. We can invest in M&A that Alan talked about on the call. If my friend Eric Gerstenberg wants to build a new kiln and make some investments, we can do that, too. I don't think we're going to pay down a lot of debt because the high yield that's at 4% or 5% has got prepayment premiums that make it too expensive to do. And the term loan that we could do is so cheap, why would I bother? It's 2% on a pretax basis, which is really like 1.5%. So it really is those 3 items. And I think we can do them all, and I think that we should. And it's all based on ROIC. ROIC is part of our incentive compensation plan. It's been a good driver for us. We've grown that quite a bit. We're going to continue down that path. I think that's what our investors expect out of us.

Okay. So let's finish up with the last couple of minutes on ESG. If I'm not mistaken, I think you guys put out your first sustainability report.

Absolutely the case, absolutely the case. Very excited about our new sustainability report.

Very exciting. Looks very good. So -- well, I want to talk just broadly, and I actually talked to Casella about this too, this whole story about kind of, I'm going to call it, footprints and handprints. I mean the sustainability reports a lot about your footprint, and we can talk about that. But you also serve a bigger purpose, right? You're helping people manage very nasty waste streams that are a byproduct of whatever their process is. So how do you, from an ESG perspective, explain that story? How do you help investors understand that? Because people say, "Oh, you burn trash. Is that -- do you understand what I'm saying? So how do you kind of get over that hurdle?

Yes. So I'd say, Tyler, that it was interesting. So I worked on that quite a bit with Jim and a couple of other people in the group, and it wasn't -- it was really just documenting what we already do. I mean we already do -- we are the sustainability solution for many of our customers as far as like they're creating -- the waste we're dealing with and taking care of is not our waste. It's waste from our customers, and the alternative for that waste is in the groundwater, is in soil. And it really is there's -- ours is the greenest solution you can have. And so again, we're really proud of what we do here. And I think that story -- and the sustainability report gets into that. It talks about kind of net climate benefit, like how much climate that we produce -- how much greenhouse gas we produce versus how much we remove. And us like others in the space, like Casella and Waste Management and others, do the same. And again, it's like a 2:1 ratio, Tyler. It really is. We remove -- we take out much more greenhouse gases than we produce, and that story just needs to be told. Because we've been -- this report -- I've worked on this report for months. And none of it I had to go create, it already existed. I just had to go pull it together and consolidate. It's things that Eric and the team have been doing for 30 years. And really, that's all -- it's lowering our voluntary turnover rates and making investments in diversity and areas like that. It's been making investments in benefits. And those types of things have been -- we've been doing for a while. It's just documenting that in one place, and I think that's been a great story and will continue to be so, right?

Well, right. So there is a lot of E talk, but the S talk -- and one of the things that -- you actually put your safety metrics, I believe, in your long-term incentive compensation plan.

That's right.

That's not particularly usual, so there's obviously a huge focus internally on this. So again, just from an S perspective -- and you've talked about 401(k) over the last couple of years, and we're talking about safety. So it seems like there is an investment, obviously, on the S side as well.

Absolutely, Tyler. Because -- we're really proud of kind of our S, our social scores. Our voluntary turnover has gone down 22 straight months. Our investment in health care, in 401(k) has gone up every year as we continue to make investments in people. And I think that -- I think it's been really -- and to your point, I think that the safety standards are industry-leading safety standards, and it's gone down quite a bit because we're tracking it. It's very dramatic, but it's true. It goes down -- it's down to close to 1 here in 2020. Again, we're really proud of that. Because what we're dealing with is dangerous stuff, so safety has got to be part of everything we do. And no one takes it more seriously than Eric, that's for sure.

Well, Mike, I feel like we're on a roll, but we ran out of time. So that was a pretty quick 40 minutes. So I really appreciate you guys joining us. Hopefully, next year, we do this in person. But with that, thank you so much. And again, we'll talk soon.

Tyler, thanks a lot. We'll talk to you soon.