Progressive Waste Solutions Management Discusses Q4 2013 Results - Earnings Call Transcript

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Progressive Waste Solutions (BIN) Q4 2013 Earnings Call February 13, 2014 8:30 AM ET

Executives

Chaya M. Cooperberg - Vice President of Investor Relations and Corporate Communications

Joseph D. Quarin - Vice Chairman, Chief Executive Officer, President and Member of Environmental Health & Safety Committee

Ian M. Kidson - Chief Financial Officer and Executive Vice President

Analysts

Flavio S. Campos - Crédit Suisse AG, Research Division

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Scott Justin Levine - Imperial Capital, LLC, Research Division

Derek Sbrogna - Macquarie Research

Derek Spronck - RBC Capital Markets, LLC, Research Division

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Rupert M. Merer - National Bank Financial, Inc., Research Division

Bert Powell - BMO Capital Markets Canada

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Chris Bowes - Canaccord Genuity, Research Division

Joe Box - KeyBanc Capital Markets Inc., Research Division

Operator

Good morning, everyone. My name is Sarah, and I'll be your conference operator today. At this time, I'd like to welcome you all to the Progressive Waste Solutions 2013 Fourth Quarter and Year End Earnings Results Conference Call. [Operator Instructions] .

I'd now like to turn the call over to our host, Ms. Chaya Cooperberg, Vice President, Investor Relations and Corporate Communications. You may begin your conference.

Chaya M. Cooperberg

Thank you, and good morning, everyone. With me on the call are Joe Quarin, President and Chief Executive Officer; and Ian Kidson, Executive Vice President and Chief Financial Officer. We're going to be providing our comments on the results of our 3 and 12 months ended December 31, 2013, and then we'll open up the call for Q&A. [Operator Instructions] There is a slide deck that we will reference during the call and the presentation is available on our website at www.progressivewaste.com.

Before we get started this morning, I'm going to read out our Safe Harbor statement. It's on Slide 2 of the presentation. 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 any 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 events or results to differ materially, and please refer to the bottom of our news release that we've put out this morning for further information, as well as to our previous filings 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. And 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 will be a telephone replay of this conference call available until midnight on February 27, and you can find all of the details in the news release.

With that, I'll turn the call over to Joe.

Joseph D. Quarin

Good morning, everyone. We closed the year on solid footing with fourth quarter results that were in line with our guidance. Some measures, such as free cash flow and adjusted net income, were beyond the high end of our expectations. We achieved these results despite unusually challenging winter weather conditions in December. We've set records for cold temperature and snowfall throughout the U.S. and Canada. Our reported operating performance also overcame a decline in the Canadian dollar for throughout the quarter, which affected our U.S. dollar denominated reportable results.

Our consolidated revenues in the quarter increased $6.2 million or 1.2% to approximately $502 million. And this includes a comparative negative $11.3 million impact for foreign currency translation. Our positive organic growth in the quarter was driven by higher core pricing in every service line in both our U.S. and Canadian operations. In fact, at positive 1.6%, it was our strongest quarterly price performance since the third quarter of 2012. We saw the most price improvement in our commercial collection business, followed by our industrial collection service line. The effort we put into sales training and building highly targeted pricing programs in 2013 is showing results.

Although still early, we are seeing a more supportive pricing environment in many of our markets as the recovery in waste volumes is taking hold. The improving price and volume environment, combined with our new organizational structure and leadership group, gives us confidence and a strong sense of momentum as we enter 2014. We are looking forward to a year of solid improvement in revenue, adjusted EBITDA and margins, all expressed in a constant currency.

Ian will speak in detail to the Q4 financial results and our outlook for fiscal 2014. But first, let me provide my views on some of the opportunities ahead of us and why we believe we are so well positioned to create meaningful value for our shareholders.

In a business that is so fundamentally labor- and capital-intensive, we believe that value is created through a commitment to improving operating metrics and a strict discipline around all capital allocation. Therefore, the critical focus for our team in 2014 is operational execution and the optimal deployment of every dollar we earn, in effect continuing our playbook from 2013. Here's what operational execution looks like for us next year.

It involves driving best practices throughout our organization and establishing precise standards for how we operate in our field.

I'm going to give a few examples of what I mean. We decided in 2013 that our repairs and maintenance programs needed significant upgrading. After many years of growing by way of acquisition, we brought in new leadership to oversee fleet maintenance and establish a consistent company-wide program. In fact, in many districts, we also brought in new maintenance managers to support this initiative. We believe this will result in us getting more out of the assets we already own, which in turn will help us to reduce our annual replacement capital requirement.

At the same time, we are standardizing many of our purchasing practices across all of our districts, particularly in areas where we can obtain significant benefits through our scale, such as parts and maintenance components. We've already reached the size where we can leverage the collective purchasing power of our regional operations. With new leadership added, we are confident that we will achieve the operating cost efficiencies that we have identified.

Safety is a key priority for us as we service millions of customers on our roads, and it is also an operational opportunity for us as well. For instance, beginning this year, we are proactively seeking to reduce the usage of railroad vehicles, which requires helpers to work in often busy traffic conditions in favor of automated side-load or front-load vehicles, which have been shown to increase productivity and reduce direct labor costs.

Operational execution for us does not just mean a focus on operating expense management. It is also about sales productivity and performance. As you can see in our fourth quarter results, we are fully committed to pricing discipline and are investing in sales leadership, training and programs. This focus will continue in 2014.

These are just a few of the examples of how best practices in the areas of sales, productivity and costs will deliver better execution and higher revenue, adjusted EBITDA and margins in 2014. With the new organizational structure we introduced last year, we are very well positioned to achieve our goals.

In 2013, we completed a review of our operating structure and as a result, we introduced a group of area managers who report directly to our regional vice presidents and provide more support for our front-line operators. We will run a lean organizational structure going forward as we remain committed to maintaining our field-oriented, bottom-up style of management. However, we believe our district managers will benefit from this team of experienced operators, many of whom are former district managers as we focus on sharing our best practices throughout our organization.

Our Regional Vice Presidents report to Kevin, whose role as Executive Vice President, Chief Operating Officer, became effective January 1 of this year. Under his leadership, we're looking forward to a year of progress in the areas of asset utilization, operating cost efficiency, sales execution and equally important, the safety of our operations in the communities that we service.

We have established a direct connection between operational execution in our front-line operations and disciplined capital allocation. We've mentioned many times in our calls last year that we have aligned our managers' compensation with EBIT as opposed to EBITDA, which creates accountability for every dollar of capital spent. Making the best decisions for capital in our field operations will have a long-term impact on our return profile. We will be just as disciplined and critical when we assess other opportunities for growth such as M&A and other strategic avenues to deploy our capital.

We know that not all waste assets can be valued equally. We will rigorously evaluate every opportunity on the basis of return on expectations and accretion to value, and we're confident that we have the free cash flow and balance sheet capacity to accommodate an active acquisition program going forward. With the consolidation of our credit facilities late in 2012 and the repricing of this facility in Q4 2013, along with the establishment of our new long-term financing structure, we are well positioned to pursue these growth opportunities.

That said, if acquisitions are not available at the price we are willing to pay, we will look to return capital to our shareholders through our share repurchase program, as well as through dividends. Our success on both operational execution and capital allocation will be measured by the improvements we make to return uninvested capital over time and total shareholder returns. We believe we have all the components in place to deliver these results.

We are holding an Investor and Analyst Day in May this year and at that time, we look forward to the opportunity to provide more detail around our strategic plans for generating future growth and returns. We will also take the opportunity to allow everybody to meet our management team.

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

Ian M. Kidson

Thank you, Joe, and good morning, everyone. I'm going to start this morning with a review of our performance by segment in the quarter and then turn to our guidance in 2014. As usual, I will be referencing the slide presentation available on our website throughout my comment.

Beginning on Slide 5, you can see that we had solid revenue growth for the quarter, up more than $6 million or 1.2% over a year ago at $502 million and in line with our guidance.

This quarter, compared to a year ago, the Canadian dollar was markedly weaker against the U.S. dollar. And to help people understand the fundamental strength of our underlying core business, I will be calling out material foreign exchange impacts during the course of my comments. The first of these is the highlight that the 1.2% increase of consolidated revenue was able to be achieved notwithstanding a foreign exchange drag of approximately $11.3 million.

Q4 revenue contains contributions from acquisitions that we completed late in 2012, along with organic improvements in 2013. Overall, we are pleased with the revenue performance in all 3 of our reporting segments in the quarter.

Starting with Canada, this segment delivered revenue of $192 million, a decline of 3.5% over last year. However, holding foreign exchange constant with the prior period, Canadian revenue would have actually improved 2.1%. Keep in mind that our performance in Canada also reflects the full quarter's impact of the Calgary landfill closure, which was a headwind of about $2.5 million.

In our U.S. South segment, revenue was up 9.5% to $221 million. In the U.S. Northeast, revenue was $89 million, which represented a decline of about $6 million compared with the year ago. But recall that the fourth quarter of 2012 reflected approximately $8 million contribution related to Superstorm Sandy cleanup. The impact of Sandy will also be a headwind to comp in the first part of 2014.

Moving to Slide 6, which shows the components of our consolidated revenue growth in the quarter. You can see that acquisitions contributed 2.5% to our overall revenue improvement. Fuel surcharges were down slightly at minus 0.2% as the comparative of cost of diesel declined in the quarter. Recycled commodities contributed 0.7% to revenue growth of the same quarter and consolidated revenue growth was positive about 1%. By country, the U.S. had positive organic growth of 0.3% and Canada was up 2.0%.

Our organic growth was driven by higher core price in every line of business, resulting in consolidated core price being up 1.6% quarter-over-quarter. And as Joe mentioned, this was our best price improvement since the third quarter of 2012, with the strongest pricing coming from our commercial and industrial service lines.

Consolidated volume in Q4 declined 1.1%. However, I'll note 3 specific items that dragged volume lower and that have skewered the strong volume performance of our base business in the quarter.

As you can see on Slide 7, overall, we are showing a 1.1% volume decline in the fourth quarter for the total company. However, Superstorm Sandy, the closure of the Calgary landfill and the lost municipal contracts in Canada collectively had a negative volume contribution of approximately 260 basis points. So excluding these 3 events, our consolidated volumes were actually up 1.5% in the quarter. And I'll also note that this is the last quarter that the municipal contracts -- the Canadian municipal contracts will be reflected as a volume headwind.

In Canada, our volume gains were driven by higher commercial and industrial collection volumes, which offset a softer disposal environment in Central and Eastern Canada, coupled with the harsh weather conditions that we faced in December.

Looking across the border, much of the volume growth in the U.S. was driven by our U.S. South segment, where we had higher volume in every business line. In the U.S. Northeast, the strong volume start for the fourth quarter ended up being muted by harsh weather in December. Overall, our organic growth outlook for 2014 is between 1.5% and 2%. We expect to continue to see a supportive pricing environment for our strategic sales programs, and our comparative volume will strengthen in the second half of the year as we lap the Sandy volume contributions and the Calgary landfill closure, which together represent a 60-basis-point headwind to reportable volume in 2014.

Now turning to operating and adjusted SG&A expenses in the quarter, beginning on Slide 8. For the fourth quarter, total operating expenses increased from $305 million in 2012 to $310 million in 2013. As a percentage of revenue, operating costs were largely flat at 61.8%, which we are relatively pleased with, given that the Calgary landfill closure alone had a negative 60-basis-point impact on operating costs relative to revenues.

Slide 9 sets out SG&A for Q4 of 2012 and 2013. And you can see that adjusted SG&A increased $3 million to nearly $60 million, primarily due to acquisitions, but also due to a slightly higher bonus and long-term incentive planned expense. As a percentage of revenue, adjusted SG&A was 11.9%, only slightly above the year-ago quarter's level.

On Slide 10, we have presented the geographic buildup of adjusted EBITDA. In Q4, total company adjusted EBITDA was $131.9 million, which was in line with our guidance. This represented a decline of 1.4% or $1.8 million as compared with the same period in 2012, but again reflects a drag of $3.5 million related to foreign exchange. On a consolidated basis, adjusted EBITDA margins in the fourth quarter were 26.3%.

In Canada, EBITDA margins were 34.9%, slightly off the same period a year ago, which primarily reflects the impact of the Calgary landfill closure, offset by solid margins in our underlying base businesses. For 2014, the Calgary landfill closure, combined with startup costs at our Lachenaie landfill gas plant, which was slated to commence operations in the third quarter, will be a slight drag on margins in Canada in the first half. However, Canadian margins will start to improve in the second half as we lap the landfill closure and the gas plant comes online.

In the U.S. South, adjusted EBITDA margins were relatively flat at 26.7% for the quarter. In 2014, we don't see much margin variability by quarter in this segment. However, we do expect to see a full-year improvement over 2013.

In the U.S. Northeast, adjusted EBITDA margins in the fourth quarter were 19.7%, which reflects the $2.5 million EBITDA decline related to Sandy Superstorm -- excuse me, Superstorm Sandy, in the year-ago period. In 2014, in the U.S. Northeast segment, we expect first quarter margins to be flat compared with the year-ago quarter as we don't have the contribution of Sandy-related volumes and weather conditions have been harsh. However, we do expect our U.S. Northeast margins to show sequential and quarter-over-quarter improvements for the balance of the year

For 2014 on a consolidated basis, we expect margin expansion with adjusted EBITDA margins of between 26.5% and 26.8% for the company. Margins will be weaker in the first half and strengthen in the second, reflecting the items already mentioned above, along with the increment weather conditions that have persisted in January, and as a lot of our listeners in the U.S. are well aware, today through into February.

Now turning to Slide 11, I'll speak to amortization on the full year. 2013 intangible, capital and landfill amortization increased $22.4 million due to acquisitions, a permit ratification and the purchase of CNG vehicles, which cost roughly 10% more than their traditional diesel counterparts. As a percentage of our revenues, amortization increased 10 basis points to 14.6%, which was in line with our guidance. For 2014, we are forecasting amortization to come in at about 14.2% of revenues.

Interest expense in the fourth quarter was $15.5 million, which was in line with our expectations. In 2012, we've put in place a single consolidated credit facility. And in the fourth quarter of 2013, we were able to take advantage of our improving credit quality and some favorable market conditions and repriced the deal. Our intention is to effectively offset these interest savings from the lower-priced facility with additional interest rate swaps, resulting in a more predictable cost of debt.

Based on this and our current debt outstanding, we are forecasting interest expense in 2014 in the range of $64 million to $66 million. At the end of the year, we had approximately $983 million drawn on our revolving credit facility. Total funded debt-to-EBITDA was 2.88x at December 31, versus 3x, 3.0x at September 30, 2013.

Moving to taxes on Slide 13, you can see our effective tax rate for the year was slightly lower than expected at approximately 33%. In the fourth quarter, cash taxes were $6.4 million, just below our guidance range of $7 million to $9 million. For the full year, cash taxes were $29.5 million, again slightly below our guidance range of $30 million to $32 million.

For 2014, we expect cash taxes to be between $35 million and $37 million and our effective tax rate to range between 30% and 32%. The expected year-over-year increase in cash taxes relates to a one-time tax credit in 2013, as well as a nonrecurring use of tax loss carry-forwards at the parent company level in 2013.

At this time, we are anticipating our net operating loss carry-forwards in the U.S. to continue to shield income through to the fourth quarter of 2015.

Net income is shown on Slide 14. On an adjusted basis, net income for the quarter was $33.4 million or $0.29 per diluted share versus $28.2 million or $0.24 per diluted share in the comparative period.

On Slide 15, we provide a breakdown of our capital expenditures, and I'll focus on the results for the full fiscal year. Total replacement capital in 2013 was $168 million, offset by $21 million in proceeds from the sale of certain redundant assets.

Total growth capital of $106 million reflects nearly $39 million of spending related to the infrastructure projects we identified earlier in the year. Excluding these projects, total capital expenditures were $214 million, which again was in line with our guidance.

In 2014, we expect total capital expenditures, net of proceeds from asset sales and excluding the natural gas plant project, to be between $212 million and $216 million, or about 10.7% of revenues at the midpoint of our range. Of this amount, replacement capital represents roughly 9.1% of revenues. It's a slightly higher replacement capital year for us by about $15 million as we complete some development at Seneca Meadows Landfill in anticipation of the long-term contract with -- in New York City. After this year, we expect replacement capital to normalize at 8.5% to 9% of revenues.

On the growth capital side, there is roughly $20 million carryover on infrastructure project capital, with the completion of the natural gas plant in Québec. Importantly, this project is not over budget. The timing has been extended slightly by some short delays in equipment deliveries. The balance of our growth capital spend, about 1.6% of revenues at the midpoint of our range, is in support of the renewal of some municipal contracts and also organic growth.

Turning to free cash flow on Slide 16. In the quarter, we exceeded the upper end of our guidance range, generating approximately $62 million of free cash flow, excluding $4.6 million related to infrastructure projects.

For the full year, free cash flow totaled roughly $230 million, representing 11.3% of revenues, excluding spending on infrastructure projects. And in 2014, we expect to achieve free cash flow of between $210 million and $225 million, excluding again, the gas plant. This includes a $6.3 million headwind related to foreign exchange.

As our business continues to generate strong free cash flow, our priority is to deploy our capital efficiently to fund growth opportunities such as acquisitions that meet our return on capital thresholds.

In the essence of those growth opportunities, we remain committed to returning capital to shareholders through the repurchase of our common shares and the ongoing payment of our dividend.

I'll now review our outlook for the full year of 2014, and I'll start with a discussion of the impact that we expect foreign exchange to have on our reported results.

There is a general view that the Canadian dollar is going to remain weak against the U.S. dollar in 2014, with the current Bloomberg consensus outlook calling for an average exchange rate of $0.90 for the year. Nearly 40% of our revenues and 50% of EBITDA are generated in Canada. We have a natural foreign currency hedge, as we use our Canadian revenues to cover Canadian costs, and our dividends are paid in Canadian dollars. We do not have an operational exposure to a lower Canadian currency.

In addition, about half of our revolving credit facility is in Canadian-denominated currency, so a lower Canadian dollar actually has the effect of reducing our total reported debt outstanding. However, there is foreign currency sensitivity when we translate our Canadian results for reporting purposes. For the past 3 years, the Canadian dollar and U.S. dollar have been trading close to parity. So any impact that foreign exchange has had on our financial statements has been essentially invisible. The current environment is obviously different, so I'm going to spend a minute talking about foreign exchange.

On Slide 17, you can see that for every $0.01 change between the Canadian and U.S. currencies, it impacts revenues by approximately $8.2 million, adjusted EBITDA by $2.5 million and net income changes by approximately $1.1 million. The foreign exchange impact on our free cash flow is smaller due to interest expense and cash taxes. It also fluctuates based upon whether our capital spending is in Canada or the U.S.

In 2014, our sensitivity on free cash flow for every $0.01 change in the exchange rate is anticipated to be $900,000.

So with that in mind, on Slide 18, we have presented a bridge to our guidance for 2014, which is based on a CAD 0.90. We have specifically isolated the impact of currency translation on our fourth quarter -- on our forecast performance so you can more easily see the underlying real operating strength in our business. The midpoint of our guidance range for 2014 contemplates top line organic growth of 1.6% when exchanged at 2013 levels, with contributions from infrastructure projects we have completed, as well as price, volume and productivity improvement.

Our adjusted EBITDA performance likewise demonstrates organic strength with growth of 3.8% at the midpoint of the range before the effect of currency translation.

In summary, Slide 19 provides our guidance on all measures, assuming the full impact of a CAD 0.90 on our reportable results. We expect consolidated revenue of between $1.99 billion and $2.01 billion; organic growth of 1.5% to 2%, represented by higher-core price with positive volume; EBITDA to be $528 million to $538 million; and amortization expense as a percentage of revenue is estimated to be approximately 14.2%.

Therefore, adjusted operating EBIT comes out to be $245 million to $253 million. Interest expense is expected to be $64 million to $66 million, with an effective tax rate of 30% to 32% of income before income tax expense.

Cash taxes are shown at $35 million to $37 million, with adjusted net income per diluted share of between $1.06 and $1.15. Our replacement in growth capital expenditures, including proceeds from asset sales are estimated to be $212 million to $216 million, plus an additional $20 million of rollover spending from the Lachenaie gas plant. Free cash flow is estimated at $210 million to $225 million, again, not including project capital.

And lastly, we do expect and anticipate continuing to pay our dividend currently at $0.60 per share.

That brings me to the end of my comments, and I'll now turn the call over to the operator to start the Q&A.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Hamzah Mazari, Crédit Suisse.

Flavio S. Campos - Crédit Suisse AG, Research Division

This is Flavio, standing in for Hamzah today. I wanted to just start with the commercial business. You guys have posted some -- have commented on some strong pricing in that business. Can you comment as well on volumes, and if you're seeing any difference between the U.S. side and the Canadian side of the commercial?

Joseph D. Quarin

Sure. It's -- generally, across the board, we're actually seeing, at least our own results, positive volumes, volumes just measured based on units. We're up about 1% in the quarter. It was pretty broad. If anywhere, where we're seeing -- again, this, I would say, is just our own results, where we're having a little bit of a negative volume that will be happening in the [ph] Northeast region, and that's really driven by ourselves by making sure that we're executing our pricing programs there. And then that result is, we do have some volume adjustments that take place. But overall, we're actually seeing continued strength down south. And aside from our own execution, and making sure that we're driving better returns, we're actually seeing it -- it's definitely flattened or stopped, deteriorating and we're starting to see some green shoots out there.

Flavio S. Campos - Crédit Suisse AG, Research Division

That's very helpful. And within commercial collection itself, is there any regional difference?

Joseph D. Quarin

So in Canada -- actually, I'd say both Canada and U.S., our Western regions are the strongest, so it would be Western Canada and certainly, down in Texas, Louisiana. Weather had a little bit of an impact in a couple of areas, so it kind of mutes the effect a little. But the East Coast is really -- again, not deteriorating anymore and it's really, I'd say, a progressive-centric execution that's, if anything, affecting our results. That's where we've been the most active in terms of acquisitions, and you just have to work the portfolio to make sure that you're actually starting to see profitable business.

Flavio S. Campos - Crédit Suisse AG, Research Division

Very helpful. And you mentioned acquisitions and you had some good contribution in the U.S. this quarter. How is the pipeline looking like? And what kind of multiples are you guys looking at the market right now?

Ian M. Kidson

Pipeline is very active. Pretty full, having discussions with lots of attractive opportunities out there. The biggest issue, quite honestly, remains valuation. I don't know if it's just vendor expectations based on what other deals trade at, or if it's really a reflection of expectations where vendors are thinking the growth is going to be much higher than what we're willing to really assume at this point. We're feeling a little bit better about it. But I think there's a lot of opportunities out there. I think as the year progresses, this year, my own bias is that you will see more deals take place. I think we're going to start to meet in the middle in terms of reasonable valuation. And so in terms of multiples, it really depends on the line of business. I can show you a business that's worth 4x EBITDA and I can show you one that's worth 8. You just -- I need to understand exactly what the profile of that business is. If there's businesses out there that are heavily leaned towards municipal contracts with terms on them, and so the evaluations out there, that's a DCF. On the flip side, you get a more perpetual type business, such as commercial, long-lived landfills and all of a sudden, we can get comfortable at the higher end. So I'm not going to give you a multiple because that's the last thing that we back into. We calculate value and then we'll back into what's the result in multiples.

Operator

Your next question comes from Michael Hoffman of Wunderlich.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

So Joe and Ian, the capital spending seems high even when you adjust for -- that you've got a Seneca Meadows self-development issue, with moving the power lines and what have you. And I get that. But if I look across the industry over many, many, many years, growth and maintenance tends to be about 9%. And when we do growth and maintenance here, and if I adjust for the $13 million, you're still scratching up against 10%, and then there's the infrastructure on top. So I thought that management incentive plan change that was done last year in February in Florida, that the operators would've found ways to spend less money, and it doesn't feel like that's happening. Can you talk about how you get your capital spending down to a level that seems to fit into an industry overall sort of perspective? Or maybe you can't, and then why not?

Ian M. Kidson

Sure, Michale. I'll take a stab at this, and then Joe can kick in. I mean, I don't think, honestly, if you strip out Seneca, we have made some improvements. There are always -- particularly in a company our size, there are always some slight variations that you're going to get in maintenance CapEx as you replace municipal fleets, just because the municipal fleet can be 50 trucks. So I don't think we're that far away right now. There is still room to go, don't misunderstand me, and we are going to get better. One important comment that I will make is -- and this is why some of the historic data is useful but not totally relevant, and that is we're now paying more than 10% more for a truck than we've paid in the past. Because wherever we can, we are trying to grow a new CNG to take advantage of the operating cost. And the CNG truck is anywhere from $25,000 to $40,000 more expensive than its diesel counterpart. So I understand that not all of our capital expense is fleet spend. But to the extent that a good chunk of it is, you're looking at somewhere between 30 -- maybe as much as 70 basis points tick up in your CapEx as a consequence.

Joseph D. Quarin

Yes, Michael, the only other thing I would offer, and I alluded to it in my comments, when we look in the mirror, I'd have to say that our maintenance programs were probably more repairs-focused as opposed to maintenance-focused. And that -- a lot of that was just a legacy of acquiring lots of other companies, and we were not as organized as we would've liked to have been. So given that we changed that whole strategy, focused much more on maintenance going forward, 2014 is really going to be where we're going to see the benefit, and that's going to accelerate through the year. And we're expecting that as that program improves, that's going to give us the opportunity then to extend the average age of fleet. But at this juncture, we're not looking to extend any fleet ages. We think we've got a pretty good balance in place out there. Most of our markets are actually fairly automatically organized. We are being much more strategic with the capital, putting into fleets where we can, where we get the highest returns, redeploying other assets. It's just a little bit of a ripple effect. So I think what you're going to see from us, and we're working hard, I can tell you, '14 replacement capital is 9.1%. I think the replacement capital will get down between 8.5% and 9%, add in some growth. And then we do have a couple of contracts that are coming in line this year that we have factored into our growth. So I would expect a little bit more growth out of us if we have a little higher growth spending, and to me, that's fair.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

And then -- fair enough. And on the slide where you show your organic growth, you're showing it as 62% margin, so that's fair enough. So if I -- just on a slight -- not my second question, are we done with the infrastructure this year? We should be modeling before that.

Joseph D. Quarin

Yes. In '14, yes.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Okay. So second question, your Slide 7 or Page 7, thanks for that, I think that's a great set of detail. The line item, it says completed contracts. Isn't there -- or does that reflect some of the items like you picked up some new wins, they just -- they were offset, right? There was a lag between the losses and the wins, but aren't the new wins starting up or haven't they started up? And is that reflected in the 135?

Joseph D. Quarin

Yes. So the only -- the contracts that we in fact picked up were more of a renewal expansion. This is a net number right here. It's what you're saying. It's not a gross number; it's a net number. But it's actually all the contracts that we'd lost in '12, specifically when I think about we had a big residential contract in Ottawa, had another one, Winnipeg, with Edmonton, those big contracts, that's primarily what this reflects. And then we did have a contract over Vancouver that started late in '12 that was partly mitigating this. So this is a net number. But going forward, all of those big losses -- and it took our key margins. We told everyone, we lost those contracts because we couldn't get the returns, in fact, our margins. So those contracts, I'd say 3/4 of those contracts were all acquired from WSI. And they were underperforming contracts, we bid them to actually make money, get the return, we couldn't get the pricing we wanted, and so we walked away. And the margins in Canada remain fairly strong, in the mid-30s.

Operator

Your next question comes from Scott Levine of Imperial Capital.

Scott Justin Levine - Imperial Capital, LLC, Research Division

I was wondering if you could comment maybe a little bit more broadly on the Canadian market. You guys are clear as a bell regarding the impact of FX translationally. But hearing you talk about the underlying trends in that market, would you characterize it as stable, improving or weakening on the margin? And maybe a little bit more color -- I think in the last few quarters, you suggest the middle of the country has been softer, the West has been stronger. A little bit more detail, maybe, regarding your thoughts on the underlying macro environment north of the border.

Joseph D. Quarin

Yes, so a couple of factors that have probably had the most pronounced impact recently. But economically, Western Canada continues to perform relatively strong. Eastern -- Central and Eastern Canada would be flat to a positive bias, more and continued on the back of the U.S. recovery. So while you believe the latter, I think we're going to see -- a lot of people are calling for a second half improvement here in Eastern Canada. And then the other thing that kind of masks some of the economic trends, for example, the winter weather in December was pretty brutal right across the country. And all of a sudden in January, we see weather above freezing in Calgary, and the special wastes are cloned again. I kind of -- Eastern Canada and all of a sudden, everything is frozen, there's nothing moving. So the underlying economy, we actually think Canada is going to do fine, probably not as strong as the U.S., but I think there's a positive bias up here. And our guys are performing quite strongly out there. So we feel quite good about our outlook going into 2014.

Scott Justin Levine - Imperial Capital, LLC, Research Division

Understood, that's good to hear. As my follow-up, maybe a little bit more color on the recycling business, your thoughts there. I know you announced that -- JV recently, your partnership with Stericycle. And it sounded like pricing in the business and the business in general is helping the quarter. But what are your thoughts on the economics of that business and the outlook there as well?

Joseph D. Quarin

So, it's an interesting business for sure. Kevin was actually recently just presenting at an industry conference, and I think the industry right now is evolving. We are generating overall in our portfolio reasonable returns, some of them are more recent investments. The issues that we have encountered have been more kind of startup-oriented. However, what is positive is we are seeing the municipalities be collaborative with us and making sure that we address any deltas between what was thought would be the material scheme and then what you'll actually get. A lot of the issues are pretty consistent across the industry. You start moving in single stream, it starts to affect, all of a sudden, the quality of the material coming in, any contamination, all of that side of it. So the equipment in South actually works well. And most recently, here in February, we started to see a little bit of a pickup in pricing again, especially the export and office paper. So we have just got to figure out and make sure that we price our contracts properly and that we share the downside and upside or the volatility with our customers. But we think more and more, the waste stream is going to flow this way. And as an industry, we just need to figure that out. And the good news is everybody does want to recycle, it's the right thing. So technology has improved. We have improved, and we're going to continue to look for the opportunities where we can invest. We're not going to put a mark on every market because there are a lot of markets that are saturated. But we feel good about the business generally overall. I'm not -- we're not rushing into it. We're not going to spend a whole bunch of money on it. But it's not as dire as some people think.

Operator

Your next question comes from Derek Sbrogna of Macquarie.

Derek Sbrogna - Macquarie Research

Just wanted to dig in a little bit here on the U.S. And I know there's a lot of moving pieces with what happened in 2013. But it seems like core price moved higher, and the adjusted kind of volume number that you guys provided moved down sequentially. Can you talk about whether this is reflecting any commitment to try to drive price potentially at the expense of some volume in some of your markets there?

Joseph D. Quarin

Yes, especially up in the Northeast where we've been very focused to make sure that we're servicing business where we can actually make money out of it, number one. Number two, we've continued to see strength in the industrial line of business in terms of volumes, but we've also held back on investing capital in that line of business. And that also resulted in pushing price. And we haven't seen as much of a volume uptick because a lot of our assets are actually deployed right now. So those are really the only 2...

Ian M. Kidson

And Sandy.

Joseph D. Quarin

And Sandy was -- is in the volume numbers as well, up in the Northeast. It was $8 million. So that was a pretty significant impact, and that was obviously high-margin business as well.

Derek Sbrogna - Macquarie Research

Got it, that's helpful. And just as a follow-up, are there any municipal or other meaningful contracts which are coming up for renewal in 2014?

Joseph D. Quarin

Nothing that I'm aware of that we have of size. I mean, there's always kind of a small franchise agreement that we have in different locations. But there's nothing really, really big. We've recently won, actually, a new contract that -- I forgot the exact number, but it's less than $10 million. But that's one that's going to kick in midyear in Texas that we're happy about. We've really spoken about another one that we won over in Vancouver. That's going to be starting up here. That's a piggyback to the one that we started in 2012 over CNG. So -- but there's nothing material that we see going over bid that we are currently sourcing right now.

Operator

Your next question comes from Derek Spronck of RBC Capital.

Derek Spronck - RBC Capital Markets, LLC, Research Division

With regards to residential collection, there's a commentary that pricing remains challenging. Are you seeing the same thing? And can you comment on residential collection pricing on a regional basis?

Joseph D. Quarin

Sure. I can give you a couple of examples. It really depends on where and who the competitors are. So we've seen markets where the pricing that is put forward is actually pretty tight and reflects, I think, very experienced operators. Everybody is looking to get a return. I've seen scenarios, I'll give you one, there's a recent contract, $5 million of revenue, we were making $40,000 of EBIT. We elected to reprice that, to actually make some money, and somebody won that contract below what we were getting paid earlier. So I don't think we were that bad operationally. So sometimes, people just don't do the work. They look at what the current pricing is. They think that to get the contract, they need to go lower. So Derek, you can't really look at what I'm getting today and if the pricing goes down, there's various reasons that, that could happen. It could be difference of equipment. It could be all of a sudden change in the service that's being requested. Waste/recycling or organics, whatever, is there CNG involved. All of those factors come into play. But generally, if a contract's going to go for bid, there's going to be a competitive process to it. And sometimes, everyone is in the same ballpark and sometimes you'll get some outliers. And we've got a very disciplined process whereby bids that are -- that require capital do require coming all the way up through Kevin and myself, ultimately. So we've got a very disciplined review process, and we make sure that we're not practicing when we put capital out there.

Derek Spronck - RBC Capital Markets, LLC, Research Division

Is there any pushbacks on existing contracts in year-over-year price escalators, or are those...

Joseph D. Quarin

No. I mean, price escalators, they're always tied to an index, a local index. Oftentimes, now they included fuel surcharge. And everybody understands that, you know what, if our cost of servicing is going -- here's the trade-off: If a contract is not going to give me any CPI, I'm going to go in with a higher opening price because ultimately, I got to make my cash somewhere. Otherwise, I'm going to go in with an expectation that I'm going to have some kind of escalator, and that escalator should mirror at least what my cost escalation would be as well. So either way, I've got to get my cash on cash return. And so -- and then part of that is also educating the municipalities as well. They're not doing themselves any favors when they seclude the CPI, because they're going to end up paying a little more on the front end.

Derek Spronck - RBC Capital Markets, LLC, Research Division

If I could quickly, any update or color on the New York City disposal contract?

Joseph D. Quarin

At this point, still nothing. Bridgegate is distracting some of the people involved. So stay tuned.

Operator

Your next question comes from Al Kaschalk of Wedbush.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Just wanted to clarify on the volume headwinds for '14. I believe the 2 items are Sandy and Calgary closures?

Joseph D. Quarin

Yes.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Is that Q1 and Q2? I think you articulated in the additional details, 60 basis points on volumes, but I just wanted to...

Joseph D. Quarin

Sandy is Q1, Al, only. And Calgary disappears June 30.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Okay, okay. And then second thing, just, again, another maintenance item, but can you clarify for me, please, the -- was Sandy a high-margin business or was it theoretically a lower-margin business, given the nature of that work?

Ian M. Kidson

It was about 20% to 25% margin.

Joseph D. Quarin

Yes. I mean, last year -- and you'll actually see it, you'll see 8% and 2% for Q1, that's all Q1. So it's -- I mean, it was landfill. That's low for landfill, but from the Northeast, it's not bad. So it all depends on your perspective.

Ian M. Kidson

Yes, one of the things about the Northeast, Al, Northeast margins -- just to equate Northeast margins to our business relative to anywhere else, you've got a 300 to 500 basis point headwind just because of the inherent transportation. And so a Northeast business that's making low 20s to mid 20s, you're comparable to a lot of markets where the disposal is direct haul and it's high 20s to 30s. So that's a fair comparison out there, and it's just the nature of the distance that needs to be traveled. And that any high-transit market is going to be somewhere between probably 250 and 500 basis points that need to be accounted for. It does not mean the returns are lower; it just means the margins are lower.

Albert Leo Kaschalk - Wedbush Securities Inc., Research Division

Yes, right. Just my final clarification here. It looks like the U.S. South had a fairly strong Q4. And for your business as a whole, it's adding -- and I realize there's an acquisition, maybe, that's helping that. But could you articulate maybe some of the strengths that you're seeing in that region of your business?

Joseph D. Quarin

Sure. We've talked several times in the past on our operations in the Western part of our U.S. South. So Louisiana and Texas. A, economically, it's doing well, but we've also got a very good team out there. We also picked up a landfill operating contract that started last year that contributed. So that's all gone very, very well and happy with the way the team is performing. And same thing with Florida, last year, we bought the Choice assets, so we've got good assets. We've integrated all of those, that there's some rationalization, it's still comparative in Florida. But it looks like the economy is stable to improving, and we're working hard to really drive higher returns to that market. So overall, just the South -- it also was not as significantly impacted by weather. There was certainly weather that came up through Texas, Louisiana, up to Missouri, it was fairly wet out in Florida. But put all that aside, that's where I'd say the strength of the U.S. economy improvement is further south as opposed to north.

Operator

Your next question comes from Rupert Merer of National Bank.

Rupert M. Merer - National Bank Financial, Inc., Research Division

Can you talk a little about the process of setting guidance, touching on how much of the guidance on growth, in particular, is driven by top-down analysis versus bottoms-up analysis? And what assumptions are you using for economic growth and commodity prices in 2014?

Ian M. Kidson

Sure. Our budget process is almost exclusively a bottom-up process, Rupert, where we -- it literally starts within each district, and we work up through an area up to the region and finally get to the consolidated basis. Our growth assumptions, I mean, it's a bit of a wildcard, obviously, these days. But we were in the order of either side of 2%, 2.5% growth GDP and CPI for North America. And there was one last bit to that question, what was it?

Rupert M. Merer - National Bank Financial, Inc., Research Division

Impact on commodity.

Ian M. Kidson

Yes, commodity, sorry. We have commodities in our plan throughout the year based upon where we were in Q4 2013. So I mean, to all intents and purposes, so far in Q1, we're basically flat.

Rupert M. Merer - National Bank Financial, Inc., Research Division

Okay, great. And then just one final follow-up then. What do you think is the biggest risk or potential upside to your guidance?

Ian M. Kidson

I think that the biggest risk or upside to, not just us, but anyone in this industry, is GDP growth.

Operator

Your next question comes from Bert Powell of BMO.

Bert Powell - BMO Capital Markets Canada

Joe or Ian, just in terms of the volume growth, adjusted last year, it looks like it's 3.1%; expectations, 3.3%. Basically, 2/3 last year was volume in a third price. Is that how you're thinking about this year as well? Is that the growth is going to be skewed to volume versus price? That's on a constant currency basis.

Joseph D. Quarin

Yes, so on a constant currency basis, our actual outlook on this is inclusive of Calgary and Sandy. Our price outlook is actually about 1.25% to 1.75%. Whereas volume, we are 0.25% to 0.75%. So we're still being a little cautious on the volume outlook. What's obviously driving that, the Sandy headwind of -- beyond the Q1 and Calgary, that's about 60 basis points. So you add that back in, you have a point to close to 1.5 points. And then also, the discipline that we are executing on the field around our pricing. So our pricing is not about going out across the board and playing the field through a consistent price increase. It's really about being strategic and making sure that we can service business where we make money out of it. And that's going to result in a little bit of a churn, but so be it, it's all about driving returns. And we can get the growth elsewhere where we can make the money, and that's just how we're thinking about it right now.

Bert Powell - BMO Capital Markets Canada

Okay. And then, Joe, just looking at the, again, on a constant currency basis, your expectations for EBITDA. Can you help us think how much of that is just kind of the volume price component of that versus some of the things you went through in terms of best practices that are going to lead to kind of just all things equal, operational improvement?

Joseph D. Quarin

Yes. So I think it's fair to say that the margin improvement is going to come from the best practices, whereas the overall growth, we've got the Calgary headwind, which was very high-margin, and then we're offsetting that with, obviously, prices, higher margin and volume. So most of the margin improvement I'm going to attribute to really -- and I know when we actually put the plans in place and we've got our maintenance team working hard, it's about more effectively executing on our maintenance programs, moving towards automated equipment as opposed to rail loaders, which gives you productivity improvements, you cut your labor costs, it's going to result in improved safety. So all of that is really going to drive the margin improvement. And -- whereas the organic growth, you have to assume that most of that is going to come in at a pretty consistent margin to what we're doing today.

Operator

The next question comes from Adam Thalhimer of BB&T Capital Markets.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

A quick question about FX sensitivity. You said on Slide 17 that every cent is $1.1 million of net income. But previously, you said $700,000. So I'm just curious what the variance is there.

Ian M. Kidson

Yes, I mean, it's looking at where we're earning our money and...

Joseph D. Quarin

Tax structure.

Ian M. Kidson

And tax structure.

Joseph D. Quarin

We're putting more net income to bottom line out of Canada and a lot that price into the work that's been done here to optimize our capital structure. And the margins up here continue to perform well.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

Okay. And then just in the margins in the Northeast, you said sequential improvement throughout 2014. Where do you think you might end the year in terms of EBITDA margins in the Northeast?

Joseph D. Quarin

Yes. So Q1, we're expecting to be fairly flat with Q4 and then sequentially improving throughout the year. We're going to get sort of 22% to 23% by the end of the year is where we're going to come out. Our highest quarter is also the third quarter. It tapers off a little bit in Q4, but effectively, we're looking to, I think this year, was 20%, so a couple of our basis points year-over-year, net. But we should come out of the year somewhere, 22.5% to 23.5% is what we expect.

Adam R. Thalhimer - BB&T Capital Markets, Research Division

That's great, good number. And then just quickly on pricing for the full year, what are your thoughts on the impact of pricing in 2014?

Joseph D. Quarin

So our constant currency guidance is about 1.25% to 1.75%, and volume is 0.25 points to 0.75 points, and that's after taking the impact of 60 basis points for Sandy and Calgary. So if you add back that 60 basis points, you end up close to 1 point to 1.5 points of volume as well.

Operator

Your next question comes from Chris Bowes of Canaccord Genuity.

Chris Bowes - Canaccord Genuity, Research Division

Just following up on the recycle pricing stuff. It sounds like you've baked in basically a flat number to Q4 for the rest of the year. But Joe, if I understood it correctly, you're saying kind of positive things about the export market and overall, the trend looks positive for OCC. So I'm just wondering, are you being conservative? Or do you think there's room for upside here? Or what are your thoughts on the overall recycled commodity pricing market?

Ian M. Kidson

Chris, it's obviously a bit of a mud scheme, but to try to predict that, I think we're doing the right thing. We're not basing business decisions one way or the other on it. And we're trying to be as transparent as we can in terms of what we are basing our guidance on. I don't know this for sure, but I think that what we are doing is consistent with what the other players in the market are doing, our major competitors. And it's absolutely not something that we control. If you wanted to know our view, our view is that there will not be any major upticks this year. If you put our feet to the fire and asked if we had a bias, we'd probably tell you that there's a slight upward bias in price. But I've been wrong as many times as I've been right on that.

Joseph D. Quarin

Yes, the other thing, we are guiding flat with Q4. The reality is, we actually came out of Q4 in December below the Q4 average. So January was pretty flat, and we just got a small tick-up in February. So at this juncture, as Ian said, we're pretty close to where our guidance is. But last year, Operation Green Fence came out of nowhere, and it totally changed the direction that the current -- that the commodity markets buy and sell. As Ian said, if you can place a bet on this...

Ian M. Kidson

More power to you.

Joseph D. Quarin

Yes, more power to you.

Ian M. Kidson

And just to be absolutely clear and address the question, we do not sit here thinking that we're being conservative and that commodity prices are going up and therefore, we're going to beat. That is absolutely not our perspective.

Chris Bowes - Canaccord Genuity, Research Division

All right. That's really helpful. And then just one last quick follow-up. It looks like the tax rate was pretty low in Q4. I'm just wondering what happened to drive it so low.

Ian M. Kidson

It's a good question that caused some of us a couple of late nights here. The short answer is, I think we're going to end up seeing a little bit more seasonal fluctuation in our tax rates as we go forward. We are very comfortable with our annual guidance. It's just there's going to be a little bit more seasonal variation. So as we get into Q2 and Q3, that rate is going to go up. And in the first and fourth quarters, we would expect it to be a little bit lower. But in terms of on a full year basis, we're comfortable with where we sit.

Operator

[Operator Instructions] Your next question comes from Joe Box with KeyBanc Capital Markets.

Joe Box - KeyBanc Capital Markets Inc., Research Division

You guys started talking about better asset utilization last year when you guys changed your operating structure. But now that Kevin's onboard, can you maybe just frame where you think you're currently underutilized, and where the big opportunities are to redeploy some assets? And then what your longer-term expectations are on cash flow and earnings.

Joseph D. Quarin

Sure. I'd say the biggest opportunity, quite honestly, is twofold. One, in the past, a truck that all of a sudden had aged, we get a request to replace it and we would step out and replace that truck. Now we are actually moving assets around a lot more to -- we're moving assets around a lot more to drive where we can get the best returns. So for example, right now, we are deploying CNG in a lot of places, and we obviously want to put the biggest fleets we can to take advantage of the fuel savings as well and drive returns and then redeploy the diesels elsewhere. So it's really managing the fleet on a more -- on a consolidated basis as opposed to our fleets being resonant only in certain markets. That would be number one. Number two, making sure that we are continually maintaining our containers, more so than replacing containers. That -- we saw, actually, a significant improvement last year. And then just making sure that we're pushing the pricing and the returns before we actually deploy any more assets in our industrial line of business. So it's just having a single point of contract, or for the company, single leader and just being much more strategic with the planning. We are a bottom-up-run organization, we do a lot of our planning from the bottom up. But when it comes to capital, we're going to be much more top-down to make sure that we find a way to hit our goals and hit our targets.

Ian M. Kidson

And Joe, just to add one thing, it's not directly related to the question, but it is sort of indirectly related. One of the focuses that -- that Kevin has been great at bringing is having a hard look at the type of equipment that we use in the contract. And we've been proactively going out to our municipal clients, customers, and working with them to try to get them to agree -- in certain circumstances where we have 2 and 3-man trucks and rail loaders to convert those circumstances or convert those contracts to automated -- whether it's a [indiscernible] on the front door or automatic side loaders. And that doesn't so much drive fleet efficiencies as it does productivity improvements. But obviously, either one is beneficial.

Joe Box - KeyBanc Capital Markets Inc., Research Division

Understood, that's helpful. And we're not going to hold you to this, but is it reasonable to think that there could be some targets or numbers around the opportunity at your Analyst Day?

Joseph D. Quarin

Yes. We will be more forthcoming at Analyst Day and actually show you the kinds of quantums that we're targeting to achieve.

Ian M. Kidson

The situation that Joe mentioned in Texas is a good example of us going in and looking at where we can deploy automatic equipment in circumstances where it wasn't previously.

Operator

And your last question comes from Michael Hoffman of Wunderlich.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

So there were partial answers to some things, I wondered if you could fill in the gaps. You gave the margin outlook for the North, but we do the same thing for the South and Canada. Looking at sort of what you think the pattern is, and then what you think the full year for each of those segments.

Joseph D. Quarin

Okay. I think Canada is going to be, year-over-year, fairly consistent. Down first half, with a headwind from Calgary and some of the startup expenses attached to our Lachenaie gas plant. But once that actually begins operations, we're expecting that to improve in the second half of the year. Down south, we are expecting a positive bias as throughout the year as well. And so it will be less variable by quarter, full year improvement year-over-year. The net, as I said, there's probably a couple of hundred basis points up in the Northeast. For Canada, reasonably flat, net, year-over-year. So a little higher in the second half, a little lower in the first half. And the sales is reasonably flat. That's a variable but positive bias, 20 to 30 basis points down there, you're getting net 30 to 60 basis points overall.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Okay, that's great. And then, can I have your price and volume outlook that you gave in aggregate by country?

Joseph D. Quarin

No, we don't provide that by country. But not unlike this year, as I said, the economy seems to be fairly consistent. So Western Canada has been performing fairly strong, Eastern Canada, more tied to the U.S. And assuming we don't get very many of these weather issues, et cetera, it's that 1.25% to 1.75%. The U.S. has more rate-restricted contracts, especially down in Texas where they franchises. So they're going to be a little bit lower, given where CPI is. And then we'll work to offset that with our open markets. But the 1.25%, 1.75%, overall, 0.25% to 0.75% on the volume side.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

Okay. And then last one, what percentage of your fleet is automated today? So what's the scope of that opportunity?

Joseph D. Quarin

Mike, you had to end with that one? So I mean, most of our new contracts in fact are automated. So all the new ones up here are automated. I'd say 4,000, 2,000 are actually automated, a couple hundred, say 5% right now.

Michael E. Hoffman - Wunderlich Securities Inc., Research Division

So 5% automated, or that's...

Joseph D. Quarin

So the scope is probably another 5% of our fleet -- 5% to 10%.

Operator

There are no further questions in queue at this time. I'll turn the call back to the presenters for closing remarks.

Joseph D. Quarin

Okay. Thanks, everyone, for joining us today. And we look forward to reporting our first quarter result in April and also seeing many of you at our Analyst Day in May of this year. Thank you.

Operator

And this concludes today's conference call. You may now disconnect.

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