US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”)
today reported second quarter financial results that reflect the
impacts from the COVID-19 pandemic. US Ecology reported
second quarter 2020 total revenue of $213.9 million (including
$70.4 million contribution from NRC) and a net loss of $5.2
million, or $0.17 per diluted share. Adjusted loss per
diluted share, as defined in Exhibit A of this release, was $0.08
per diluted share in the second quarter of 2020 and includes $0.14
per share of non-cash intangible asset amortization related to the
NRC acquisition. This compared with adjusted earnings per diluted
share of $0.66 in the quarter ended June 30, 2019. On November 1,
2019, US Ecology completed its acquisition of NRC Group Holdings
Corp. (“NRC”) and second quarter 2020 results presented include a
full three months of NRC operations.
“Despite the headwinds in our business due to
the COVID-19 pandemic, our proactive and prudent capital
preservation initiatives and the relative resiliency of our core
environmental services-based businesses allowed us to generate
strong cash flow and strengthen our balance sheet during these
unprecedented times,” commented Chairman and Chief Executive
Officer, Jeff Feeler.
“Our legacy US Ecology Environmental Service
segment revenue declined 9% during the quarter compared to the
second quarter last year, reflecting a 10% decline in Base
Business, partially offset by 12% growth in Event Business revenue
as shipments remained consistent during the quarter. Base
Business declined sequentially through May, rebounding in June as
businesses resumed operating activities. Our legacy US Ecology
Field and Industrial Services segment saw growth in both small
quantity generation and emergency response services; however
declines in other services lines more than offset these growth
areas leading to an overall 6% decline in revenue compared to the
second quarter last year. The legacy NRC business contributed $5.2
million of adjusted EBITDA in the second quarter. NRC’s domestic
environmental services business saw increased COVID-19
decontamination services, however it was not enough to offset the
challenges facing our energy waste disposal services business in
Texas, or softness in the FIS business, particularly our Alaska and
International businesses. More encouraging was how the US
Ecology team responded to rapidly changing events, mitigating the
difficult economic conditions through reducing costs and capital
spending, while deploying resources for critically needed emergency
response services.”
Revenue for the Environmental Services1 (“ES”)
segment was $110.4 million for the second quarter of 2020, down 2%
from $112.8 million in the second quarter of 2019. NRC contributed
$7.3 million to ES segment revenue in the second quarter of 2020.
Excluding the NRC contribution, ES segment revenue decreased 9%,
attributable to a 4% decline in treatment and disposal (“T&D”)
revenue and a 25% decline in transportation revenue compared to the
second quarter of 2019.
Revenue for the Field and Industrial Services2
(“FIS”) segment was $103.5 million for the second quarter of 2020,
up 141% from $43.0 million in the second quarter of 2019. FIS
segment revenue benefitted from a $63.1 million contribution from
NRC in the second quarter of 2020. Excluding NRC, FIS segment
revenue decreased 6% in the second quarter of 2020 compared to the
second quarter of 2019. This decrease was primarily the result of
lower revenue in our transportation and logistics and industrial
services businesses, partially offset by increases in our emergency
response, and small quantity generation service lines.
Gross profit for the second quarter of 2020 was
$53.8 million, up 9% from $49.6 million in the same quarter last
year. Gross profit for the ES segment was $40.2 million in
the second quarter of 2020 and reflected a loss of $2.0 million
from NRC’s energy disposal and services business. This was
down from $43.1 million in the second quarter of 2019.
T&D gross margin for the ES segment was 39% for the
second quarter of 2020. Excluding NRC, T&D gross margin
for the ES segment was 45% in both the second quarter of 2020 and
2019.
Gross profit for the FIS segment in the second
quarter of 2020 was $13.6 million and included $9.2 million from
NRC. Excluding NRC, FIS segment gross profit declined 32% from the
$6.5 million of gross profit in the second quarter of 2019 on lower
margins reflecting reduced revenue and a less favorable service
mix.
Selling, general and administrative (“SG&A”)
expense for the second quarter of 2020 was $48.5 million and
included $17.5 million of NRC SG&A and $3.0 million in business
development and integration expenses. Excluding NRC and business
development and integration expenses, SG&A expense was $28.0
million for the second quarter of 2020. This compares to $26.0
million in the second quarter of 2019 when excluding a $4.5 million
of property insurance recovery and $2.5 million of business
development expenses recognized in the second quarter last year.
The second quarter of 2020 saw higher insurance costs and higher
labor and benefits related costs compared to the second quarter of
2019.
Net interest expense for the second quarter of
2020 was $7.7 million, up from $3.4 million in the second quarter
of 2019. This increase was due to higher debt levels primarily
resulting from the NRC acquisition, partially offset by lower
interest rates in the second quarter of 2020 compared to the same
quarter in 2019.
The Company’s consolidated effective income tax
rate for the second quarter of 2020 was negative 77.4%, compared to
29.2% in the second quarter of 2019. The decrease was due to
negative domestic U.S. earnings in the second quarter of 2020,
resulting in a domestic income tax benefit offset by income tax
expenses on foreign earnings in the second quarter of 2020.
Net loss for the second quarter of 2020 was $5.2
million, or $0.17 per diluted share, compared to net income of
$15.5 million, or $0.70 per diluted share, in the second quarter of
2019. Adjusted loss per diluted share was $0.08 per diluted share
in the second quarter of 2020 and reflects the dilutive effect of
the additional shares issued in conjunction with the NRC
acquisition on November 1, 2019 and includes approximately $0.14
per diluted share ($4.5 million, after tax) for non-cash intangible
asset amortization related to the NRC acquisition. This compares to
adjusted earnings per share of $0.66 in the second quarter of
2019.
Cash earnings per diluted share was $0.13 for
the second quarter of 2020 compared to $0.75 for the second quarter
of 2019.
Adjusted EBITDA for the second quarter of 2020
was $38.7 million, up 2% from $37.9 million in the same period last
year. Excluding the $5.2 million of adjusted EBITDA contributed by
NRC in the second quarter of 2020, legacy US Ecology second quarter
adjusted EBITDA declined 12% to $33.5 million as compared with
$37.9 million in the same period last year.
Adjusted free cash flow was $18.7 million in the
second quarter of 2020 up 190% compared to $6.5 million in the
second quarter of 2019.
Reconciliations of earnings per diluted share to
adjusted earnings (loss) per diluted share, earnings per diluted
share to cash earnings per diluted share, net income to adjusted
EBITDA and net cash from operating activities to adjusted free cash
flow are attached as Exhibit A to this release.
YEAR-TO-DATE RESULTS
Total revenue for first six months of 2020 grew
58% to $454.6 million compared to $286.8 million in first six
months of 2019. Revenue for first six months of 2020 includes
$157.0 million from NRC.
ES segment revenue was $237.2 million for first
six months of 2020 compared to $205.2 million in first six months
of 2019. The increase in ES segment revenue includes $24.1
million of revenue from NRC operations for the first six months of
2020. Excluding NRC operations, ES revenues increased 4% in
the first six months of 2020 driven by a 6% increase in treatment
and disposal (“T&D”) revenue, partially offset by a 3% decrease
in transportation revenue compared to first six months of 2019.
FIS segment revenue was $217.5 million in first
six months of 2020, up from $81.7 million in first six months of
2019. The increase in FIS segment revenue includes $132.9
million from the NRC acquisition. Excluding NRC, FIS segment
revenue increased 4% in the first six months of 2020 compared to
first six months of 2019 driven by higher revenues in our
remediation, small quantity generation and emergency response
business lines. These increases were partially offset by lower
revenue from our transportation and logistics, industrial services
and total waste management business lines.
Net loss was $303.3 million, or $9.73 per
diluted share, in the first six months of 2020 compared to $23.5
million, or $1.06 per diluted share, in the first six months of
2019. The Company recognized a $300.3 million goodwill
impairment charge related to its energy waste disposal and
international business units in the first quarter of 2020. Adjusted
earnings per diluted share was $0.04 for first six months of 2020
compared to $0.88 for first six months of 2019. Adjusted earnings
per diluted share for first six months of 2020 includes
approximately $0.29 per diluted share or ($9.2 million, after tax)
for non-cash intangible asset amortization related to the NRC
acquisition. Adjusted EBITDA was $81.9 million in first six months
of 2020, up 33% from $61.7 million in first six months of
2019.
Cash earnings per diluted share was $0.47 for
the first six months of 2020 compared to $1.07 for the first six
months of 2019.
Adjusted free cash flow was $34.6 million for
the first six months of 2020 up 86% compared to $18.6 million in
the first six months of 2019.
Reconciliations of earnings per diluted share to
adjusted earnings (loss) per diluted share, earnings per diluted
share to cash earnings per diluted share, net income to adjusted
EBITDA and net cash from operating activities to adjusted free cash
flow are attached as Exhibit A to this release.
2020 BUSINESS OUTLOOK
While US Ecology’s outlook has improved across
the company, business continues to be negatively impacted by the
COVID-19 pandemic. Given the continued unpredictability pertaining
to the pandemic’s impact on the general industrial economy and
customer behavior, the range of feasible financial outcomes remains
too wide to warrant the reinstatement of formal 2020 guidance.
We believe that the second quarter of 2020 will
be the lowest quarter of the year in terms of total revenue,
adjusted EBITDA and adjusted earnings (loss) per share. While
we are seeing positive signs of recovery in our core waste and
services business, we expect continued headwinds in our energy
waste disposal services business. However, through our decisive
actions and business plan adjustments, we expect to operate that
business unit at breakeven levels on an adjusted EBITDA basis for
the full year of 2020.
The Company continues to monitor current
business levels, prudently adjusting spending and cost control
actions to mitigate the impact the COVID-19 pandemic has on our
business activities. This includes continuing to adjust
capital spending plans, cost control initiatives such as hiring
practices and other work force actions. As a result, we
expect to generate positive free cash flow for 2020 at or above
2019 levels.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, August 7, 2020 at 10:00 a.m. Eastern
Daylight Time (8:00 a.m. Mountain Daylight Time) to discuss these
results and its current financial position and business outlook.
Questions will be invited after management’s presentation.
Interested parties can access the conference call by dialing
877-512-4138 or 412-317-5478. The conference call will also be
broadcast live on our website at www.usecology.com. An audio replay
will be available through August 14, 2020 by calling 877-344-7529
or 412-317-0088 and using the passcode 10146352. The replay
will also be accessible on our website at www.usecology.com.
ABOUT US ECOLOGY, INC.
US Ecology, Inc. is a leading provider of
environmental services to commercial and government entities. The
company addresses the complex waste management and response needs
of its customers offering treatment, disposal and recycling of
hazardous, non-hazardous and radioactive waste, leading emergency
response and standby services, and a wide range of complementary
field and industrial services. US Ecology’s focus on safety,
environmental compliance, and best-in-class customer service
enables us to effectively meet the needs of US Ecology’s customers
and to build long lasting relationships. US Ecology has been
protecting the environment since 1952. For more information, visit
www.usecology.com.
Forward looking statements are only predictions
and are not guarantees of performance. These statements are based
on management’s beliefs and assumptions, which in turn are based on
currently available information. Important assumptions include,
among others, those regarding demand for the Company’s services,
expansion of service offerings geographically or through new or
expanded service lines, the timing and cost of planned capital
expenditures, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. Forward
looking statements also involve known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those contained in any forward looking statement.
Many of these factors are beyond our ability to control or predict.
Such factors include developments related to the COVID-19 pandemic,
fluctuations in commodity markets related to our business, the
integration of NRC’s operations, the loss or failure to renew
significant contracts, competition in our markets, adverse economic
conditions, our compliance with applicable laws and regulations,
potential liability in connection with providing oil spill response
services and waste disposal services, the effect of existing or
future laws and regulations related to greenhouse gases and climate
change, the effect of our failure to comply with U.S. or foreign
anti-bribery laws, the effect of compliance with laws and
regulations, an accident at one of our facilities, incidents
arising out of the handling of dangerous substances, our failure to
maintain an acceptable safety record, our ability to perform under
required contracts, limitations on our available cash flow as a
result of our indebtedness, liabilities arising from our
participation in multi-employer pension plans, the effect of
changes in the method of determining the London Interbank Offered
Rate (“LIBOR”) or the replacement thereto, risks associated with
our international operations, the impact of changes to U.S. tariff
and import and export regulations, a change in NRC’s classification
as an Oil Spill Removal Organization, cyber security threats,
unanticipated changes in tax rules and regulations, loss of key
personnel, a deterioration in our labor relations or labor
disputes, our reliance on third-party contractors to provide
emergency response services, our access to insurance, surety bonds
and other financial assurances, our litigation risk not covered by
insurance, the replacement of non-recurring event projects, our
ability to permit and contract for timely construction of new or
expanded disposal space, renewals of our operating permits or lease
agreements with regulatory bodies, our access to cost-effective
transportation services, lawsuits, our implementation of new
technologies, fluctuations in foreign currency markets and foreign
affairs, our integration of acquired businesses, our ability to pay
dividends or repurchase stock, anti-takeover regulations, stock
market volatility, the failure of the warrants to be in the money
or their expiration worthless and risks related to our compliance
with maritime regulations (including the Jones Act).
Except as required by applicable law, including
the securities laws of the United States and the rules and
regulations of the Securities and Exchange Commission (the “SEC”),
we are under no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future
events or otherwise. You should not place undue reliance on our
forward-looking statements. Although we believe that the
expectations reflected in forward looking statements are
reasonable, we cannot guarantee future results or performance.
Before you invest in our common stock, you should be aware that the
occurrence of the events described in the “Risk Factors” section in
this report could harm our business, prospects, operating results
and financial condition.
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Revenue |
|
|
|
|
|
|
|
|
Environmental Services |
|
$ |
110,409 |
|
|
$ |
112,844 |
|
|
$ |
237,154 |
|
|
$ |
205,177 |
|
Field & Industrial Services |
|
|
103,509 |
|
|
|
42,958 |
|
|
|
217,484 |
|
|
|
81,662 |
|
Total |
|
|
213,918 |
|
|
|
155,802 |
|
|
|
454,638 |
|
|
|
286,839 |
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
Environmental Services |
|
|
40,206 |
|
|
|
43,081 |
|
|
|
84,312 |
|
|
|
74,637 |
|
Field & Industrial Services |
|
|
13,605 |
|
|
|
6,502 |
|
|
|
30,621 |
|
|
|
10,187 |
|
Total |
|
|
53,811 |
|
|
|
49,583 |
|
|
|
114,933 |
|
|
|
84,824 |
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
|
|
|
|
|
Environmental Services |
|
|
13,506 |
|
|
|
2,010 |
|
|
|
27,740 |
|
|
|
3,415 |
|
Field & Industrial Services |
|
|
13,116 |
|
|
|
3,739 |
|
|
|
27,800 |
|
|
|
7,123 |
|
Corporate |
|
|
21,865 |
|
|
|
18,300 |
|
|
|
44,005 |
|
|
|
33,816 |
|
Total |
|
|
48,487 |
|
|
|
24,049 |
|
|
|
99,545 |
|
|
|
44,354 |
|
|
|
|
|
|
|
|
|
|
Goodwill impairment charges |
|
|
|
|
|
|
|
|
Environmental Services |
|
|
- |
|
|
|
- |
|
|
|
283,600 |
|
|
|
- |
|
Field & Industrial Services |
|
|
- |
|
|
|
- |
|
|
|
16,700 |
|
|
|
- |
|
Operating income (loss) |
|
|
5,324 |
|
|
|
25,534 |
|
|
|
(284,912 |
) |
|
|
40,470 |
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Interest income |
|
|
153 |
|
|
|
202 |
|
|
|
242 |
|
|
|
409 |
|
Interest expense |
|
|
(7,853 |
) |
|
|
(3,588 |
) |
|
|
(17,163 |
) |
|
|
(7,618 |
) |
Foreign currency (loss) gain |
|
|
(671 |
) |
|
|
(384 |
) |
|
|
266 |
|
|
|
(523 |
) |
Other |
|
|
125 |
|
|
|
122 |
|
|
|
296 |
|
|
|
232 |
|
Total other expense |
|
|
(8,246 |
) |
|
|
(3,648 |
) |
|
|
(16,359 |
) |
|
|
(7,500 |
) |
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(2,922 |
) |
|
|
21,886 |
|
|
|
(301,271 |
) |
|
|
32,970 |
|
Income tax expense |
|
|
2,261 |
|
|
|
6,395 |
|
|
|
1,998 |
|
|
|
9,436 |
|
Net
(loss) income |
|
$ |
(5,183 |
) |
|
$ |
15,491 |
|
|
$ |
(303,269 |
) |
|
$ |
23,534 |
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.17 |
) |
|
$ |
0.70 |
|
|
$ |
(9.73 |
) |
|
$ |
1.07 |
|
Diluted |
|
$ |
(0.17 |
) |
|
$ |
0.70 |
|
|
$ |
(9.73 |
) |
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
Shares used in (loss) earnings |
|
|
|
|
|
|
|
|
per share calculation: |
|
|
|
|
|
|
|
|
Basic |
|
|
31,054 |
|
|
|
22,006 |
|
|
|
31,179 |
|
|
|
21,997 |
|
Diluted |
|
|
31,054 |
|
|
|
22,208 |
|
|
|
31,179 |
|
|
|
22,203 |
|
|
|
|
|
|
|
|
|
|
Dividends paid per share |
|
$ |
- |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
June 30, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
122,521 |
|
|
$ |
41,281 |
|
Receivables, net |
|
|
211,181 |
|
|
|
255,310 |
|
Prepaid expenses and other current assets |
|
|
30,524 |
|
|
|
25,136 |
|
Income tax receivable |
|
|
10,842 |
|
|
|
11,244 |
|
Total current assets |
|
|
375,068 |
|
|
|
332,971 |
|
|
|
|
|
|
Property and
equipment, net |
|
|
483,578 |
|
|
|
478,768 |
|
Operating
lease assets |
|
|
52,202 |
|
|
|
57,396 |
|
Restricted
cash and investments |
|
|
5,172 |
|
|
|
5,069 |
|
Intangible
assets, net |
|
|
555,973 |
|
|
|
574,902 |
|
Goodwill |
|
|
469,278 |
|
|
|
766,980 |
|
Other
assets |
|
|
14,878 |
|
|
|
15,158 |
|
Total assets |
|
$ |
1,956,149 |
|
|
$ |
2,231,244 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
Accounts payable |
|
$ |
38,048 |
|
|
$ |
46,906 |
|
Deferred revenue |
|
|
19,258 |
|
|
|
14,788 |
|
Accrued liabilities |
|
|
38,759 |
|
|
|
65,869 |
|
Accrued salaries and benefits |
|
|
24,786 |
|
|
|
29,653 |
|
Income tax payable |
|
|
2,572 |
|
|
|
726 |
|
Short-term borrowings |
|
|
3,978 |
|
|
|
- |
|
Current portion of long-term debt |
|
|
3,359 |
|
|
|
3,359 |
|
Current portion of closure and post-closure obligations |
|
|
3,374 |
|
|
|
2,152 |
|
Current portion of operating lease liabilities |
|
|
17,312 |
|
|
|
17,317 |
|
Total current liabilities |
|
|
151,446 |
|
|
|
180,770 |
|
|
|
|
|
|
Long-term
debt |
|
|
854,163 |
|
|
|
765,842 |
|
Long-term
closure and post-closure obligations |
|
|
84,672 |
|
|
|
84,231 |
|
Long-term
operating lease liabilities |
|
|
35,121 |
|
|
|
39,954 |
|
Other
long-term liabilities |
|
|
35,164 |
|
|
|
20,722 |
|
Deferred
income taxes, net |
|
|
122,636 |
|
|
|
128,345 |
|
Total liabilities |
|
|
1,283,202 |
|
|
|
1,219,864 |
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
Common stock |
|
|
315 |
|
|
|
315 |
|
Additional paid-in capital |
|
|
817,557 |
|
|
|
816,345 |
|
Retained (deficit) earnings |
|
|
(102,362 |
) |
|
|
206,574 |
|
Treasury stock |
|
|
(16,366 |
) |
|
|
- |
|
Accumulated other comprehensive loss |
|
|
(26,197 |
) |
|
|
(11,854 |
) |
Total stockholders’ equity |
|
|
672,947 |
|
|
|
1,011,380 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,956,149 |
|
|
$ |
2,231,244 |
|
|
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(unaudited) |
|
|
For the Six Months Ended June 30, |
|
|
|
2020 |
|
|
|
2019 |
|
Cash
Flows From Operating Activities: |
|
|
|
|
Net (loss) income |
|
$ |
(303,269 |
) |
|
$ |
23,534 |
|
Adjustments to reconcile net (loss) income to net cash provided
by |
|
|
|
|
operating activities: |
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
36,396 |
|
|
|
17,254 |
|
Amortization of intangible assets |
|
|
18,634 |
|
|
|
5,674 |
|
Accretion of closure and post-closure obligations |
|
|
2,533 |
|
|
|
2,258 |
|
Property and equipment impairment charges |
|
|
- |
|
|
|
25 |
|
Goodwill impairment charges |
|
|
300,300 |
|
|
|
- |
|
Unrealized foreign currency loss (gain) |
|
|
1,020 |
|
|
|
(502 |
) |
Deferred income taxes |
|
|
(2,093 |
) |
|
|
3,690 |
|
Share-based compensation expense |
|
|
3,088 |
|
|
|
2,467 |
|
Share-based payment of business development and integration
expenses |
|
|
973 |
|
|
|
- |
|
Unrecognized tax benefits |
|
|
52 |
|
|
|
131 |
|
Net loss (gain) on disposition of assets |
|
|
188 |
|
|
|
(142 |
) |
Gain on insurance proceeds from damaged property and equipment |
|
|
- |
|
|
|
(9,153 |
) |
Change in fair value of contingent consideration |
|
|
(3,282 |
) |
|
|
- |
|
Amortization of debt discount |
|
|
490 |
|
|
|
- |
|
Amortization of debt issuance costs |
|
|
679 |
|
|
|
409 |
|
Changes in assets and liabilities (net of effects of business
acquisition): |
|
|
|
|
Receivables |
|
|
43,619 |
|
|
|
(5,346 |
) |
Income tax receivable |
|
|
380 |
|
|
|
452 |
|
Other assets |
|
|
(5,235 |
) |
|
|
(1,384 |
) |
Accounts payable and accrued liabilities |
|
|
(32,218 |
) |
|
|
404 |
|
Deferred revenue |
|
|
2,702 |
|
|
|
2,418 |
|
Accrued salaries and benefits |
|
|
(6,481 |
) |
|
|
(2,025 |
) |
Income tax payable |
|
|
1,848 |
|
|
|
(515 |
) |
Closure and post-closure obligations |
|
|
(798 |
) |
|
|
(775 |
) |
Net cash provided by operating activities |
|
|
59,526 |
|
|
|
38,874 |
|
|
|
|
|
|
Cash
Flows From Investing Activities: |
|
|
|
|
Purchases of property and equipment |
|
|
(35,957 |
) |
|
|
(24,657 |
) |
Business acquisitions, net of cash acquired |
|
|
(3,309 |
) |
|
|
- |
|
Proceeds from sale of property and equipment |
|
|
788 |
|
|
|
512 |
|
Purchases of restricted investments |
|
|
(902 |
) |
|
|
(400 |
) |
Proceeds from sale of restricted investments |
|
|
752 |
|
|
|
354 |
|
Insurance proceeds from damaged property and equipment |
|
|
- |
|
|
|
9,500 |
|
Net cash used in investing activities |
|
|
(38,628 |
) |
|
|
(14,691 |
) |
|
|
|
|
|
Cash
Flows From Financing Activities: |
|
|
|
|
Proceeds from long-term debt |
|
|
90,000 |
|
|
|
- |
|
Payments on long-term debt |
|
|
(2,250 |
) |
|
|
(30,000 |
) |
Proceeds from short-term borrowings |
|
|
72,353 |
|
|
|
14,384 |
|
Payments on short-term borrowings |
|
|
(68,375 |
) |
|
|
(14,384 |
) |
Repurchases of common stock |
|
|
(18,332 |
) |
|
|
- |
|
Dividends paid |
|
|
(5,667 |
) |
|
|
(7,942 |
) |
Deferred financing costs paid |
|
|
(1,026 |
) |
|
|
- |
|
Payment of contingent consideration liabilities |
|
|
(2,085 |
) |
|
|
- |
|
Payment of equipment financing obligations |
|
|
(3,046 |
) |
|
|
(408 |
) |
Other |
|
|
27 |
|
|
|
(914 |
) |
Net cash provided by (used in) financing
activities |
|
|
61,599 |
|
|
|
(39,264 |
) |
|
|
|
|
|
Effect of
foreign exchange rate changes on cash |
|
|
(1,303 |
) |
|
|
836 |
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents and
restricted cash |
|
|
81,194 |
|
|
|
(14,245 |
) |
|
|
|
|
|
Cash
and cash equivalents and restricted cash at beginning of
period |
|
|
42,140 |
|
|
|
32,753 |
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash at end of
period |
|
$ |
123,334 |
|
|
$ |
18,508 |
|
|
|
|
|
|
EXHIBIT ANon-GAAP
Results and Reconciliations
US Ecology reports adjusted EBITDA, adjusted
earnings (loss) per diluted share, cash earnings per diluted share
results and adjusted free cash flow, which are non-GAAP financial
measures, as a complement to results provided in accordance with
generally accepted accounting principles in the United States
(“GAAP”) and believes that such information provides analysts,
stockholders, and other users information to better understand the
Company’s operating performance. Because adjusted EBITDA, adjusted
earnings (loss) per diluted share and adjusted free cash flow are
not measurements determined in accordance with GAAP and are thus
susceptible to varying calculations they may not be comparable to
similar measures used by other companies. Items excluded from
adjusted EBITDA, adjusted earnings (loss) per diluted share and
adjusted free cash flow are significant components in understanding
and assessing financial performance.
Adjusted EBITDA, adjusted earnings (loss) per
diluted share, cash earnings per diluted share and adjusted free
cash flow should not be considered in isolation or as an
alternative to, or substitute for, net income, cash flows generated
by operations, investing or financing activities, or other
financial statement data presented in the consolidated financial
statements as indicators of financial performance or liquidity.
Adjusted EBITDA, adjusted earnings (loss) per diluted share and
adjusted free cash flow have limitations as analytical tools and
should not be considered in isolation or a substitute for analyzing
our results as reported under GAAP. Some of the limitations
are:
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- Adjusted EBITDA does not reflect our interest expense, or the
requirements necessary to service interest or principal payments on
our debt;
- Adjusted EBITDA does not reflect our income tax expenses or the
cash requirements to pay our taxes;
- Adjusted EBITDA does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- Although depreciation and amortization charges are non-cash
charges, the assets being depreciated and amortized will often have
to be replaced in the future, and adjusted EBITDA does not reflect
cash requirements for such replacements;
- Adjusted EBITDA does not reflect our business development and
integration expenses, which may vary significantly quarter to
quarter;
- Adjusted earnings (loss) per diluted share does not reflect
property insurance recoveries;
- Adjusted free cash flow does not reflect business development
and integration expenses, which may vary significantly quarter to
quarter;
- Adjusted free cash flow does not reflect capital expenditures
associated with the rebuild of our Grand View, Idaho facility which
are expected to be recovered through insurance proceeds;
- Adjusted free cash flow does not reflect capital expenditures
associated with synergy driven initiatives;
- Adjusted free cash flow does not reflect capital expenditures
associated with discretionary growth projects; and
- Adjusted free cash flow does not reflect payments of
deferred/contingent purchase consideration.
Adjusted EBITDA
The Company defines adjusted EBITDA as net
income before interest expense, interest income, income tax
expense/benefit, depreciation, amortization, share-based
compensation, accretion of closure and post-closure liabilities,
foreign currency gain/loss, non-cash impairment charges, property
insurance recoveries, business development and integration expenses
and other income/expense.
The following reconciliation itemizes the
differences between reported net income and adjusted EBITDA for the
three and six months ended June 30, 2020 and 2019:
(in
thousands) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
Net
(loss) income |
|
$ |
(5,183 |
) |
|
$ |
15,491 |
|
|
$ |
(303,269 |
) |
|
$ |
23,534 |
|
Income tax expense |
|
|
2,261 |
|
|
|
6,395 |
|
|
|
1,998 |
|
|
|
9,436 |
|
Interest expense |
|
|
7,853 |
|
|
|
3,588 |
|
|
|
17,163 |
|
|
|
7,618 |
|
Interest income |
|
|
(153 |
) |
|
|
(202 |
) |
|
|
(242 |
) |
|
|
(409 |
) |
Foreign currency loss (gain) |
|
|
671 |
|
|
|
384 |
|
|
|
(266 |
) |
|
|
523 |
|
Other income |
|
|
(125 |
) |
|
|
(122 |
) |
|
|
(296 |
) |
|
|
(232 |
) |
Property and equipment impairment charges |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25 |
|
Goodwill impairment charges |
|
|
- |
|
|
|
- |
|
|
|
300,300 |
|
|
|
- |
|
Depreciation and amortization of plant and equipment |
|
|
18,418 |
|
|
|
9,129 |
|
|
|
36,396 |
|
|
|
17,254 |
|
Amortization of intangible assets |
|
|
9,193 |
|
|
|
2,863 |
|
|
|
18,634 |
|
|
|
5,674 |
|
Share-based compensation |
|
|
1,524 |
|
|
|
1,245 |
|
|
|
3,088 |
|
|
|
2,467 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
|
1,267 |
|
|
|
1,133 |
|
|
|
2,533 |
|
|
|
2,258 |
|
Property insurance recoveries |
|
|
- |
|
|
|
(4,500 |
) |
|
|
- |
|
|
|
(9,153 |
) |
Business development and integration expenses |
|
|
2,973 |
|
|
|
2,530 |
|
|
|
5,880 |
|
|
|
2,671 |
|
Adjusted EBITDA |
|
$ |
38,699 |
|
|
$ |
37,934 |
|
|
$ |
81,919 |
|
|
$ |
61,666 |
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings (Loss) Per Diluted
Share
The Company defines adjusted earnings (loss) per
diluted share as net income adjusted for the after-tax impact of
the non-cash impairment charges, the after-tax impact of property
insurance recoveries, the after-tax impact of business development
and integration costs, and non-cash foreign currency translation
gains or losses, divided by the number of diluted shares used in
the earnings per share calculation.
Impairment charges excluded from the earnings
(loss) per diluted share calculation are related to the Company’s
assessment of goodwill associated with its Energy Waste Disposal
Services and international businesses in the second quarter of
2020. Business development and integration costs relate to expenses
incurred to evaluate businesses for potential acquisition or costs
related to closing and integrating successfully acquired businesses
and transaction expenses. The foreign currency translation gains or
losses excluded from the earnings (loss) per diluted share
calculation are related to intercompany loans between our Canadian
subsidiaries and the U.S. parent which have been established as
part of our tax and treasury management strategy. These
intercompany loans are payable in Canadian dollars (“CAD”)
requiring us to revalue the outstanding loan balance through our
consolidated income statement based on the CAD/United States
currency movements from period to period.
We believe excluding the non-cash impairment
charges, the after-tax impact of business development and
integration costs, and non-cash foreign currency translation gains
or losses provides meaningful information to investors regarding
the operational and financial performance of the Company.
Cash Earnings Per Diluted Share
The Company defines cash earnings per diluted share as adjusted
earnings per diluted share (see definition above) plus amortization
of intangible assets, net of tax.
The following reconciliation itemizes the
differences between reported net income and earnings (loss) per
diluted share to adjusted net income and adjusted earnings (loss)
per diluted share and cash earnings per diluted share for the three
and six months ended June 30, 2020 and 2019:
(in
thousands, except per share data) |
Three Months Ended June 30, |
|
|
2020 |
|
|
|
2019 |
|
|
(Loss)
income before income taxes |
Income tax
benefit (expense) |
Net (loss)
income |
per
share |
|
Income
before income taxes |
Income tax
expense |
Net
income |
per
share |
As
Reported |
$ |
(2,922 |
) |
$ |
(2,261 |
) |
$ |
(5,183 |
) |
$ |
(0.17 |
) |
|
$ |
21,886 |
|
$ |
(6,395 |
) |
$ |
15,491 |
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Plus: Business development and integration expenses |
|
2,973 |
|
|
(818 |
) |
|
2,155 |
|
|
0.07 |
|
|
|
2,530 |
|
|
(399 |
) |
|
2,131 |
|
|
0.09 |
|
Less: Property insurance recoveries |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
(4,500 |
) |
|
1,315 |
|
|
(3,185 |
) |
|
(0.14 |
) |
Foreign currency loss |
|
671 |
|
|
(185 |
) |
|
486 |
|
|
0.02 |
|
|
|
384 |
|
|
(112 |
) |
|
272 |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
As
Adjusted |
$ |
722 |
|
$ |
(3,264 |
) |
$ |
(2,542 |
) |
$ |
(0.08 |
) |
|
$ |
20,300 |
|
$ |
(5,591 |
) |
$ |
14,709 |
|
$ |
0.66 |
|
|
|
|
|
|
|
|
|
|
|
Plus:
Amortization of intangible assets |
$ |
9,193 |
|
$ |
(2,535 |
) |
|
6,658 |
|
|
0.21 |
|
|
$ |
2,863 |
|
$ |
(837 |
) |
|
2,026 |
|
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
Cash
earnings per diluted share |
$ |
9,915 |
|
$ |
(5,799 |
) |
$ |
4,116 |
|
$ |
0.13 |
|
|
$ |
23,163 |
|
$ |
(6,428 |
) |
$ |
16,735 |
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
|
Shares used
in (loss) earnings per diluted share calculation |
|
|
|
31,054 |
|
|
|
|
|
|
22,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands, except per share data) |
Six Months Ended June 30, |
|
|
2020 |
|
|
|
2019 |
|
|
(Loss)
income before income taxes |
Income tax
benefit (expense) |
Net (loss)
income |
per
share |
|
Income
before income taxes |
Income tax
expense |
Net
income |
per
share |
As
Reported |
$ |
(301,271 |
) |
$ |
(1,998 |
) |
$ |
(303,269 |
) |
$ |
(9.73 |
) |
|
$ |
32,970 |
|
$ |
(9,436 |
) |
$ |
23,534 |
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Plus: Goodwill and intangible asset impairment charges |
|
300,300 |
|
|
- |
|
|
300,300 |
|
|
9.63 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Business development and integration expenses |
|
5,880 |
|
|
(1,617 |
) |
|
4,263 |
|
|
0.14 |
|
|
|
2,671 |
|
|
(422 |
) |
|
2,249 |
|
|
0.09 |
|
Plus: Property and equipment impairment charges |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
25 |
|
|
- |
|
|
25 |
|
|
- |
|
Less: Property insurance recoveries |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
(9,153 |
) |
|
2,620 |
|
|
(6,533 |
) |
|
(0.29 |
) |
Foreign currency (gain) loss |
|
(266 |
) |
|
73 |
|
|
(193 |
) |
|
- |
|
|
|
523 |
|
|
(150 |
) |
|
373 |
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
As
Adjusted |
$ |
4,643 |
|
$ |
(3,542 |
) |
$ |
1,101 |
|
$ |
0.04 |
|
|
$ |
27,036 |
|
$ |
(7,388 |
) |
$ |
19,648 |
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
|
Plus:
Amortization of intangible assets |
$ |
18,634 |
|
$ |
(5,114 |
) |
|
13,520 |
|
|
0.43 |
|
|
$ |
5,674 |
|
$ |
(1,624 |
) |
|
4,050 |
|
|
0.19 |
|
|
|
|
|
|
|
|
|
|
|
Cash
earnings per diluted share |
$ |
23,277 |
|
$ |
(8,656 |
) |
$ |
14,621 |
|
$ |
0.47 |
|
|
$ |
32,710 |
|
$ |
(9,012 |
) |
$ |
23,698 |
|
$ |
1.07 |
|
|
|
|
|
|
|
|
|
|
|
Shares used
in earnings per diluted share calculation |
|
|
|
31,179 |
|
|
|
|
|
|
22,203 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
The Company defines adjusted free cash flow as
net cash provided by operating activities less purchases of
property plant and equipment, plus business development and
integration expenses, plus payments of deferred/contingent purchase
consideration, plus purchases of property and equipment for the
Grand View, Idaho facility rebuild, plus synergy related capital
expenditures, plus proceeds from sale of property and
equipment.
The following reconciliation itemizes the
differences between reported net cash from operating activities to
adjusted free cash flow for the three and six months ended June 30,
2020 and 2019:
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
(in
thousands) |
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Adjusted Free Cash Flow Reconciliation |
|
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
30,180 |
|
|
$ |
20,350 |
|
|
$ |
59,526 |
|
|
$ |
38,874 |
|
Less: Purchases of property and equipment |
|
(16,826 |
) |
|
|
(17,434 |
) |
|
|
(35,957 |
) |
|
|
(24,657 |
) |
Plus: Business development and integration expenses, net of
tax |
|
2,155 |
|
|
|
2,131 |
|
|
|
4,263 |
|
|
|
2,249 |
|
Plus: Purchases of property and equipment for the Idaho facility
rebuild |
|
179 |
|
|
|
1,357 |
|
|
|
1,990 |
|
|
|
1,596 |
|
Plus: Payment of deferred/contingent purchase consideration |
|
3,000 |
|
|
|
- |
|
|
|
4,000 |
|
|
|
- |
|
Plus: Proceeds from sale of property and equipment |
|
7 |
|
|
|
53 |
|
|
|
788 |
|
|
|
512 |
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow |
$ |
18,695 |
|
|
$ |
6,457 |
|
|
$ |
34,610 |
|
|
$ |
18,574 |
|
|
|
|
|
|
|
|
|
1Environmental Services (“ES”)
- This segment includes the NRC energy waste disposal services
business (formerly known as Sprint Energy) as well as US Ecology’s
legacy treatment and disposal facilities. Our ES segment provides
diversified waste services including transportation, recycling,
treatment and disposal of hazardous and non-hazardous waste at
Company-owned or operated landfill, wastewater and other treatment
facilities.
2Field & Industrial Services
(“FIS”) - This segment includes the remainder of the NRC
business, excluding the energy waste disposal services as described
above, as well as the legacy US Ecology field and industrial
services business. Our FIS segment provides waste packaging,
collection and total waste management solutions at customer sites
and through our 10-day transfer facilities as well as emergency
response and spill cleanup services, standby services, on-site
management, waste characterization, transportation and disposal of
non-hazardous and hazardous waste. This segment also provides
specialty services such as high-pressure and chemical cleaning,
centrifuge and materials processing, tank cleaning,
decontamination, remediation and other services to commercial and
industrial facilities and government entities.
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com
www.usecology.com
US Ecology (NASDAQ:ECOL)
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