US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”)
today reported third quarter 2020 total revenue of $238.1 million
(including $80.9 million contribution from NRC) and net income of
$6.3 million, or $0.20 per diluted share. Adjusted earnings per
diluted share, as defined in Exhibit A of this release, was $0.25
per diluted share in the third quarter of 2020 and includes $0.14
per share of non-cash intangible asset amortization related to the
NRC acquisition. This compares to adjusted earnings per diluted
share of $0.75 in the third quarter of 2019. On November 1, 2019,
US Ecology completed its acquisition of NRC Group Holdings Corp.
(“NRC”) and third quarter 2020 results presented include a full
three months of NRC operations.
“Despite headwinds related to the COVID-19
pandemic, the resilience of our overall business compounded by the
capital preservation initiatives implemented earlier this year
allowed us to generate strong year-over-year free cash flow
growth, strengthening our balance sheet during these
unprecedented times,” commented Chairman and Chief Executive
Officer, Jeff Feeler.
“Strong execution in small quantity generation,
emergency response and total waste management services drove 10%
growth in our legacy US Ecology Field and Industrial Services
segment compared to the third quarter last year, driving 15% growth
in EBITDA. Our legacy US Ecology Environmental Service segment
revenue declined 12% during the quarter compared to the third
quarter last year, reflecting a 15% decline in Base Business
revenue, partially offset by 8% growth in Event Business revenue as
project-based shipments remained strong throughout the
quarter. The legacy NRC business contributed $9.7
million of adjusted EBITDA in the third quarter. NRC’s domestic
environmental services business saw strong growth both sequentially
compared with the second quarter of 2020 and compared to the third
quarter last year on increased COVID-19 decontamination, emergency
response services and synergies which helped partially offset the
challenges we continue to face in the energy exposed end markets. I
am very proud of the entire US Ecology team as we work together
across regions and service lines to move ahead with the integration
process and position the business to perform in the face of these
difficult times.”
Revenue for the Environmental Services1 (“ES”)
segment was $112.4 million for the third quarter of 2020, down 8%
from $122.2 million in the third quarter of 2019. NRC contributed
$5.1 million to ES segment revenue in the third quarter of 2020.
Excluding the NRC contribution, ES segment revenue decreased 12%,
attributable to a 10% decline in treatment and disposal (“T&D”)
revenue and a 24% decline in transportation revenue compared to the
third quarter of 2019.
Revenue for the Field and Industrial Services2
(“FIS”) segment was $125.7 million for the third quarter of 2020,
compared to $45.2 million in the third quarter of 2019. FIS segment
revenue benefitted from a $75.8 million contribution from NRC in
the third quarter of 2020. Excluding NRC, FIS segment revenue
increased 10% in the third quarter of 2020 compared to the third
quarter of 2019.
Gross profit for the third quarter of 2020 was
$63.0 million, up 12% from $56.5 million in the same quarter last
year. Gross profit for the ES segment was $39.3 million in the
third quarter of 2020 and included a loss of $2.2 million from
NRC’s energy disposal and services business. This compared to $49.4
million in the third quarter of 2019. T&D gross margin for the
ES segment was 38% for the third quarter of 2020. Excluding NRC,
T&D gross margin for the ES segment was 43% in the third
quarter of 2020 compared to 47% in the third quarter of 2019 which
included $2.6 million of business interruption insurance proceeds
that related to previous quarters.
Gross profit for the FIS segment in the third
quarter of 2020 was $23.7 million and included $15.8 million from
NRC. Gross margin for the FIS segment improved to 19% in the third
quarter of 2020 compared to 16% in the third quarter of 2019.
Excluding NRC, FIS segment gross profit grew 11% to $7.9 million
compared to $7.2 million in the third quarter of 2019, primarily
reflecting higher revenue in the third quarter of 2020 compared to
the third quarter last year.
Selling, general and administrative (“SG&A”)
expense for the third quarter of 2020 was $49.9 million and
included $19.3 million of NRC SG&A and $1.6 million in business
development and integration expenses. Excluding NRC and business
development and integration expenses, SG&A expense was $29.0
million for the third quarter of 2020. This compares to $28.8
million in the third quarter of 2019 when excluding a $498,000
property insurance recovery and $4.0 million of business
development expenses. The third quarter of 2020 saw lower incentive
compensation costs partially offset by higher labor and benefits
costs and higher insurance costs compared to the third quarter of
2019.
Net interest expense for the third quarter of
2020 was $8.0 million, up from $3.7 million in the third 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 third quarter of 2020 compared to the same
quarter in 2019.
The Company’s consolidated effective income tax rate for the
third quarter of 2020 was negative 29.9% compared to 33.0% in the
third quarter of 2019. The decrease was primarily due to an income
tax benefit upon the issuance of final regulations by the United
States Treasury regarding taxation on foreign earnings, partially
offset by higher state income taxes and higher income tax expense
on foreign earnings in the third quarter of 2020.
Net income for the third quarter of 2020 was
$6.3 million, or $0.20 per diluted share, compared to net income of
$13.1 million, or $0.59 per diluted share, in the third quarter of
2019. Adjusted earnings per diluted share was $0.25 in the third
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 $0.75 in the third quarter of 2019.
Cash earnings per diluted share was $0.46 for
the third quarter of 2020 compared to $0.84 for the third quarter
of 2019.
Adjusted EBITDA for the third quarter of 2020
increased 10% to $45.4 million compared to $41.5 million in the
same quarter last year. Excluding the $9.7 million of adjusted
EBITDA contributed by NRC in the third quarter of 2020, legacy US
Ecology’s third quarter adjusted EBITDA declined 14% to $35.7
million compared to $41.5 million in the same quarter last year.
The third quarter of 2019 included $2.6 million of business
interruption insurance proceeds related to previous quarter
business activity.
Adjusted free cash flow was $16.8 million in the
third quarter of 2020 up 8% from $15.7 million in the third quarter
of 2019.
Definitions and reconciliations of net income to
adjusted EBITDA, earnings per diluted share to adjusted earnings
per diluted share, earnings per diluted share to cash earnings per
diluted share, and net cash provided by operating activities to
adjusted free cash flow are attached as Exhibit A to this
release.
YEAR-TO-DATE RESULTS
Total revenue for first nine months of 2020 grew
53% to $692.8 million compared to $454.2 million in first nine
months of 2019. Revenue for first nine months of 2020 includes
$238.0 million from NRC.
ES segment revenue was $349.6 million for first
nine months of 2020 compared with $327.4 million in first nine
months of 2019. The increase in ES segment revenue includes $29.3
million of revenue from NRC operations for the first nine months of
2020. Excluding NRC operations, ES revenues decreased 2% in the
first nine months of 2020 compared to the same period last
year.
FIS segment revenue was $343.2 million in first
nine months of 2020, up from $126.9 million in first nine months of
2019. The increase in FIS segment revenue includes $208.7 million
from NRC. Excluding NRC, FIS segment revenue increased 6% in the
first nine months of 2020 compared to first nine months of 2019
driven by higher revenues in our small quantity generation,
remediation, and emergency response business lines.
Net loss was $297.0 million, or $9.54 per
diluted share, in the first nine months of 2020 compared to net
income of $36.6 million, or $1.65 per diluted share, in the first
nine 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 for first nine months of 2020 was $0.29
compared to $1.64 for first nine months of 2019. Adjusted earnings
per diluted share for first nine months of 2020 includes
approximately $0.44 per diluted share ($13.6 million, after tax) of
non-cash intangible asset amortization related to the NRC
acquisition. Adjusted EBITDA was $127.4 million in the first nine
months of 2020, up from $103.1 million in the first nine months of
2019.
Cash earnings per diluted share was $0.93 for
the first nine months of 2020 compared to $1.91 for the first nine
months of 2019.
Adjusted free cash flow was $51.5 million for
the first nine months of 2020, up 50% from $34.2 million in the
first nine months of 2019.
Definitions and reconciliations of net income to
adjusted EBITDA, earnings per diluted share to adjusted earnings
per diluted share, earnings per diluted share to cash earnings per
diluted share, and net cash provided by operating activities to
adjusted free cash flow are attached as Exhibit A to this
release.
2020 BUSINESS OUTLOOK
Despite ongoing uncertainty and COVID-19
impacted business headwinds, we are re-establishing guidance for
the full year of 2020 after withdrawing guidance back on March 31,
2020. Our current outlook is predicated on continued business
recovery and assumes that there are no additional major COVID-19
shut downs similar to what we experienced in the second quarter of
2020 and no economic unrest stemming from the U.S. elections. Based
on current conditions, we expect that 2020 full-year revenue will
range from $911 million to $931 million. Adjusted earnings per
share for the full year is expected to range between $0.36 per
share to $0.50 per share and adjusted EBITDA for the full year is
estimated to range between $168 million to $175 million. This
outlook range translates into adjusted EBITDA of $41 million to $48
million for the fourth quarter of 2020 with the variability in the
range primarily predicated on the level of Base Business recovery
and Event Business shipment schedules. We anticipate strong
adjusted free cash flow generation of $61 million to $65 million in
2020 which represents growth of 29% to 37% over 2019 adjusted free
cash flow.
“Business conditions have improved from the
second quarter led by our service-based business which we believe
are the first indications of an industrial recovery”, commented
Feeler. “This is further supported by strong industrial production
metrics being reported throughout the third quarter of 2020 and
continuing in the fourth quarter which we expect will translate
into increased Base Business volumes as production waste moves for
disposal. Our Event Business pipeline and shipment schedules
continue to be strong, despite experiencing several projects shift
from 2020 into 2021 as we enter the final quarter of the year.
Collectively, we believe we are back on the path to recovery,
setting us up for a better 2021.”
The following table reconciles our projected net income to our
projected adjusted EBITDA guidance range:
|
For the Year Ending December 31, 2020 |
|
(in thousands) |
Low |
|
|
High |
|
|
|
|
|
|
|
Projected Net Income |
$ |
(294,641 |
) |
|
$ |
(290,079 |
) |
Income tax expense |
|
1,575 |
|
|
3,624 |
|
Interest expense |
|
32,494 |
|
|
32,492 |
|
Interest income |
|
(527 |
) |
|
|
(527 |
) |
Foreign currency loss |
|
155 |
|
|
155 |
|
Other income |
|
(467 |
) |
|
|
(467 |
) |
Goodwill impairment charges |
|
300,300 |
|
|
300,300 |
|
Depreciation and amortization of plant and equipment |
|
73,028 |
|
|
73,419 |
|
Amortization of intangible assets |
|
37,253 |
|
|
37,253 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
4,879 |
|
|
4,879 |
|
Business Development & Integration Expense |
|
7,507 |
|
|
7,507 |
|
Stock-based compensation |
|
6,444 |
|
|
6,444 |
|
Projected Adjusted
EBITDA |
$ |
168,000 |
|
|
$ |
175,000 |
|
|
|
|
|
|
|
The following table reconciles our projected loss per diluted
share to our projected adjusted earnings per diluted share and to
our projected cash earnings per diluted share:
|
|
|
|
|
|
|
For the Year Ending December 31, 2020 |
|
|
Low |
|
|
High |
|
|
|
|
|
|
|
Projected loss per diluted share |
$ |
(9.41 |
) |
|
$ |
(9.27 |
) |
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
Plus: Goodwill and intangible asset impairment charges |
$ |
9.59 |
|
|
$ |
9.59 |
|
Plus: Business development and integration expenses |
$ |
0.17 |
|
|
$ |
0.17 |
|
Foreign currency loss |
0.01 |
|
|
0.01 |
|
|
|
|
|
|
|
Projected adjusted
earnings per diluted share |
$ |
0.36 |
|
|
$ |
0.50 |
|
|
|
|
|
|
|
Plus: projected amortization of Intangible assets |
0.86 |
|
|
0.86 |
|
|
|
|
|
|
|
Projected cash
earnings per diluted share |
$ |
1.22 |
|
|
$ |
1.36 |
|
|
|
|
|
|
|
Shares used in earnings per diluted share calculation |
31,300 |
|
|
31,300 |
|
|
|
|
|
|
|
The following table reconciles our projected net
cash provided by operating activities to projected adjusted free
cash flow:
|
Year Ended December 31, 2020 |
(in thousands) |
Low End of Guidance |
|
High End of Guidance |
Projected net cash provided by operating
activities |
$ |
106,578 |
|
|
$ |
106,578 |
|
Less: Purchases of property and equipment |
|
(64,000 |
) |
|
|
(60,000 |
) |
Plus: Business development and integration expenses, net of
tax |
5,443 |
|
|
5,443 |
|
Plus: Purchases of property and equipment for the Idaho
facility rebuild |
5,204 |
|
|
5,204 |
|
Plus: Payment of deferred/contingent purchase
consideration |
6,696 |
|
|
6,696 |
|
Plus: Proceeds from sale of property and equipment |
1,079 |
|
|
1,079 |
|
|
|
|
|
Projected Adjusted
Free Cash Flow |
$ |
61,000 |
|
|
$ |
65,000 |
|
|
|
|
|
Our adjusted EBITDA and earnings per share
guidance excludes goodwill impairment charges, business development
expenses and foreign currency translation gains or losses.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, November 6, 2020 at 11:00 a.m. Eastern
Standard Time (9:00 a.m. Mountain Standard 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 November 13, 2020 by calling 877-344-7529
or 412-317-0088 and using the passcode 10149209. 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.
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
|
|
2019 |
|
|
|
2020 |
|
|
|
2019 |
|
Revenue |
|
|
|
|
|
|
|
Environmental Services |
$ |
112,427 |
|
|
$ |
122,212 |
|
|
$ |
349,582 |
|
|
$ |
327,389 |
|
Field & Industrial Services |
|
125,715 |
|
|
|
45,190 |
|
|
|
343,198 |
|
|
|
126,852 |
|
|
|
|
|
|
|
|
|
Total |
|
238,142 |
|
|
|
167,402 |
|
|
|
692,780 |
|
|
|
454,241 |
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
Environmental Services |
|
39,300 |
|
|
|
49,363 |
|
|
|
123,612 |
|
|
|
123,999 |
|
Field & Industrial Services |
|
23,743 |
|
|
|
7,177 |
|
|
|
54,364 |
|
|
|
17,365 |
|
Total |
|
63,043 |
|
|
|
56,540 |
|
|
|
177,976 |
|
|
|
141,364 |
|
|
|
|
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
|
|
|
Environmental Services |
|
11,071 |
|
|
|
8,333 |
|
|
|
38,812 |
|
|
|
11,748 |
|
Field & Industrial Services |
|
15,575 |
|
|
|
3,756 |
|
|
|
43,374 |
|
|
|
10,880 |
|
Corporate |
|
23,244 |
|
|
|
21,240 |
|
|
|
67,249 |
|
|
|
55,055 |
|
Total |
|
49,890 |
|
|
|
33,329 |
|
|
|
149,435 |
|
|
|
77,683 |
|
|
|
|
|
|
|
|
|
Goodwill impairment charges |
|
|
|
|
|
|
|
Environmental Services |
|
- |
|
|
|
- |
|
|
|
283,600 |
|
|
|
- |
|
Field & Industrial Services |
|
- |
|
|
|
- |
|
|
|
16,700 |
|
|
|
- |
|
Operating income (loss) |
|
13,153 |
|
|
|
23,211 |
|
|
|
(271,759 |
) |
|
|
63,681 |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
Interest income |
|
9 |
|
|
|
158 |
|
|
|
251 |
|
|
|
567 |
|
Interest expense |
|
(7,964 |
) |
|
|
(3,891 |
) |
|
|
(25,127 |
) |
|
|
(11,509 |
) |
Foreign currency loss |
|
(421 |
) |
|
|
(90 |
) |
|
|
(155 |
) |
|
|
(613 |
) |
Other |
|
86 |
|
|
|
110 |
|
|
|
382 |
|
|
|
342 |
|
Total other expense |
|
(8,290 |
) |
|
|
(3,713 |
) |
|
|
(24,649 |
) |
|
|
(11,213 |
) |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
4,863 |
|
|
|
19,498 |
|
|
|
(296,408 |
) |
|
|
52,468 |
|
Income tax (benefit) expense |
|
(1,456 |
) |
|
|
6,428 |
|
|
|
542 |
|
|
|
15,864 |
|
Net
income (loss) |
$ |
6,319 |
|
|
$ |
13,070 |
|
|
$ |
(296,950 |
) |
|
$ |
36,604 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.20 |
|
|
$ |
0.59 |
|
|
$ |
(9.54 |
) |
|
$ |
1.66 |
|
Diluted |
$ |
0.20 |
|
|
$ |
0.59 |
|
|
$ |
(9.54 |
) |
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
Shares used in earnings (loss) |
|
|
|
|
|
|
|
per share calculation: |
|
|
|
|
|
|
|
Basic |
|
31,069 |
|
|
|
22,013 |
|
|
|
31,142 |
|
|
|
22,002 |
|
Diluted |
|
31,324 |
|
|
|
22,231 |
|
|
|
31,142 |
|
|
|
22,212 |
|
|
|
|
|
|
|
|
|
Dividends paid per share |
$ |
- |
|
|
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(unaudited) |
|
|
|
|
|
September 30, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
Cash and cash equivalents |
$ |
102,038 |
|
|
$ |
41,281 |
|
Receivables, net |
|
227,602 |
|
|
|
255,310 |
|
Prepaid expenses and other current assets |
|
30,739 |
|
|
|
25,136 |
|
Income tax receivable |
|
17,476 |
|
|
|
11,244 |
|
Total current assets |
|
377,855 |
|
|
|
332,971 |
|
|
|
|
|
Property and
equipment, net |
|
475,038 |
|
|
|
478,768 |
|
Operating
lease assets |
|
50,977 |
|
|
|
57,396 |
|
Restricted
cash and investments |
|
5,451 |
|
|
|
5,069 |
|
Intangible
assets, net |
|
547,385 |
|
|
|
574,902 |
|
Goodwill |
|
471,523 |
|
|
|
766,980 |
|
Other
assets |
|
18,066 |
|
|
|
15,158 |
|
Total assets |
$ |
1,946,295 |
|
|
$ |
2,231,244 |
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
Accounts payable |
$ |
39,966 |
|
|
$ |
46,906 |
|
Deferred revenue |
|
17,545 |
|
|
|
14,788 |
|
Accrued liabilities |
|
49,047 |
|
|
|
65,869 |
|
Accrued salaries and benefits |
|
26,463 |
|
|
|
29,653 |
|
Income tax payable |
|
1,015 |
|
|
|
726 |
|
Current portion of long-term debt |
|
3,359 |
|
|
|
3,359 |
|
Current portion of closure and post-closure obligations |
|
4,019 |
|
|
|
2,152 |
|
Current portion of operating lease liabilities |
|
17,175 |
|
|
|
17,317 |
|
Total current liabilities |
|
158,589 |
|
|
|
180,770 |
|
|
|
|
|
Long-term
debt |
|
823,323 |
|
|
|
765,842 |
|
Long-term
closure and post-closure obligations |
|
84,797 |
|
|
|
84,231 |
|
Long-term
operating lease liabilities |
|
34,181 |
|
|
|
39,954 |
|
Other
long-term liabilities |
|
36,482 |
|
|
|
20,722 |
|
Deferred
income taxes, net |
|
125,134 |
|
|
|
128,345 |
|
Total liabilities |
|
1,262,506 |
|
|
|
1,219,864 |
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
Common stock |
|
315 |
|
|
|
315 |
|
Additional paid-in capital |
|
819,344 |
|
|
|
816,345 |
|
Retained (deficit) earnings |
|
(96,044 |
) |
|
|
206,574 |
|
Treasury stock |
|
(16,291 |
) |
|
|
- |
|
Accumulated other comprehensive loss |
|
(23,535 |
) |
|
|
(11,854 |
) |
Total stockholders’ equity |
|
683,789 |
|
|
|
1,011,380 |
|
Total liabilities and stockholders’ equity |
$ |
1,946,295 |
|
|
$ |
2,231,244 |
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(unaudited) |
|
For the Nine Months Ended September 30, |
|
|
2020 |
|
|
|
2019 |
|
Cash
Flows From Operating Activities: |
|
|
|
Net (loss) income |
$ |
(296,950 |
) |
|
$ |
36,604 |
|
Adjustments to reconcile net (loss) income to net cash provided
by |
|
|
|
operating activities: |
|
|
|
Depreciation and amortization of property and equipment |
|
54,831 |
|
|
|
26,656 |
|
Amortization of intangible assets |
|
27,812 |
|
|
|
8,600 |
|
Accretion of closure and post-closure obligations |
|
3,812 |
|
|
|
3,397 |
|
Property and equipment impairment charges |
|
- |
|
|
|
25 |
|
Goodwill impairment charges |
|
300,300 |
|
|
|
- |
|
Unrealized foreign currency loss (gain) |
|
87 |
|
|
|
(361 |
) |
Deferred income taxes |
|
79 |
|
|
|
3,873 |
|
Share-based compensation expense |
|
4,861 |
|
|
|
3,713 |
|
Share-based payment of business development and integration
expenses |
|
1,142 |
|
|
|
- |
|
Unrecognized tax benefits |
|
(8 |
) |
|
|
(238 |
) |
Net loss on disposition of assets |
|
1,817 |
|
|
|
665 |
|
Gain on insurance proceeds from damaged property and equipment |
|
- |
|
|
|
(9,651 |
) |
Change in fair value of contingent consideration |
|
(3,207 |
) |
|
|
- |
|
Amortization of debt discount |
|
121 |
|
|
|
- |
|
Amortization of debt issuance costs |
|
1,640 |
|
|
|
613 |
|
Changes in assets and liabilities (net of effects of business
acquisition): |
|
|
|
Receivables |
|
25,297 |
|
|
|
(9,449 |
) |
Income tax receivable |
|
(6,250 |
) |
|
|
2,292 |
|
Other assets |
|
(8,345 |
) |
|
|
(7,206 |
) |
Accounts payable and accrued liabilities |
|
(19,177 |
) |
|
|
1,873 |
|
Deferred revenue |
|
930 |
|
|
|
1,770 |
|
Accrued salaries and benefits |
|
(4,494 |
) |
|
|
2,665 |
|
Income tax payable |
|
287 |
|
|
|
(425 |
) |
Closure and post-closure obligations |
|
(1,341 |
) |
|
|
(1,414 |
) |
Net cash provided by operating activities |
|
83,244 |
|
|
|
64,002 |
|
|
|
|
|
Cash
Flows From Investing Activities: |
|
|
|
Purchases of property and equipment |
|
(45,124 |
) |
|
|
(38,443 |
) |
Business acquisitions, net of cash acquired |
|
(3,309 |
) |
|
|
(17,851 |
) |
Minority interest investment |
|
- |
|
|
|
(7,870 |
) |
Proceeds from sale of property and equipment |
|
1,079 |
|
|
|
549 |
|
Purchases of restricted investments |
|
(1,113 |
) |
|
|
(798 |
) |
Proceeds from sale of restricted investments |
|
970 |
|
|
|
751 |
|
Insurance proceeds from damaged property and equipment |
|
1,131 |
|
|
|
10,000 |
|
Net cash used in investing activities |
|
(46,366 |
) |
|
|
(53,662 |
) |
|
|
|
|
Cash
Flows From Financing Activities: |
|
|
|
Proceeds from long-term debt |
|
90,000 |
|
|
|
20,000 |
|
Payments on long-term debt |
|
(33,375 |
) |
|
|
(30,000 |
) |
Proceeds from short-term borrowings |
|
72,353 |
|
|
|
52,553 |
|
Payments on short-term borrowings |
|
(72,353 |
) |
|
|
(51,018 |
) |
Repurchases of common stock |
|
(18,332 |
) |
|
|
- |
|
Dividends paid |
|
(5,667 |
) |
|
|
(11,915 |
) |
Deferred financing costs paid |
|
(1,144 |
) |
|
|
- |
|
Payment of contingent consideration liabilities |
|
(2,085 |
) |
|
|
- |
|
Payment of equipment financing obligations |
|
(4,827 |
) |
|
|
(619 |
) |
Other |
|
28 |
|
|
|
(852 |
) |
Net cash provided by (used in) financing
activities |
|
24,598 |
|
|
|
(21,851 |
) |
|
|
|
|
Effect of
foreign exchange rate changes on cash |
|
(480 |
) |
|
|
673 |
|
Increase (decrease) in cash and cash equivalents and
restricted cash |
|
60,996 |
|
|
|
(10,838 |
) |
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 |
$ |
103,136 |
|
|
$ |
21,915 |
|
|
|
|
|
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 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 nine months ended September 30, 2020 and 2019:
(in thousands) |
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
6,319 |
|
|
$ |
13,070 |
|
|
$ |
(296,950 |
) |
|
$ |
36,604 |
|
Income tax (benefit) expense |
(1,456 |
) |
|
6,428 |
|
|
542 |
|
|
15,864 |
|
Interest expense |
7,964 |
|
|
3,891 |
|
|
25,127 |
|
|
11,509 |
|
Interest income |
(9 |
) |
|
(158 |
) |
|
(251 |
) |
|
(567 |
) |
Foreign currency loss |
421 |
|
|
90 |
|
|
155 |
|
|
613 |
|
Other income |
(86 |
) |
|
(110 |
) |
|
(382 |
) |
|
(342 |
) |
Property and equipment impairment charges |
- |
|
|
- |
|
|
- |
|
|
25 |
|
Goodwill impairment charges |
- |
|
|
- |
|
|
300,300 |
|
|
- |
|
Depreciation and amortization of plant and equipment |
18,435 |
|
|
9,402 |
|
|
54,831 |
|
|
26,656 |
|
Amortization of intangible assets |
9,178 |
|
|
2,926 |
|
|
27,812 |
|
|
8,600 |
|
Share-based compensation |
1,773 |
|
|
1,246 |
|
|
4,861 |
|
|
3,713 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
1,279 |
|
|
1,139 |
|
|
3,812 |
|
|
3,397 |
|
Property insurance recoveries |
- |
|
|
(498 |
) |
|
- |
|
|
(9,651 |
) |
Business development and integration expenses |
1,627 |
|
|
4,025 |
|
|
7,507 |
|
|
6,696 |
|
Adjusted EBITDA |
$ |
45,445 |
|
|
$ |
41,451 |
|
|
$ |
127,364 |
|
|
$ |
103,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 third quarter of 2020.
Property and equipment impairment charges excluded from the
earnings per diluted share calculation are related to the Company’s
write-off of the net book value of damaged or destroyed property
and equipment as a result of the accident at our Grand View, Idaho
facility in November of 2018 while property insurance recoveries
relate to payments received for the insured value of the damaged or
destroyed property and equipment as a result of the accident.
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 property and equipment impairment charges and property
insurance recoveries related to the accident at our Grand View,
Idaho facility, 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 (loss) and earnings (loss)
per diluted share to adjusted net income and adjusted earnings per
diluted share and cash earnings per diluted share for the three and
nine months ended September 30, 2020 and 2019:
(in thousands, except per
share data) |
Three Months Ended September 30, |
|
2020 |
|
2019 |
|
Income before income taxes |
|
Income tax benefit (expense) |
|
Net income |
|
per share |
|
|
Income before income taxes |
|
Income tax benefit (expense) |
|
Net income |
|
per share |
|
As Reported |
$ |
4,863 |
|
$ |
1,456 |
|
$ |
6,319 |
|
$ |
0.20 |
|
|
$ |
19,498 |
|
$ |
(6,428 |
) |
$ |
13,070 |
|
$ |
0.59 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Business development and integration expenses |
1,627 |
|
(447 |
) |
1,180 |
|
0.04 |
|
|
4,025 |
|
(193 |
) |
3,832 |
|
0.17 |
|
Less: Property insurance recoveries |
- |
|
- |
|
- |
|
- |
|
|
(498 |
) |
164 |
|
(334 |
) |
(0.01 |
) |
Foreign currency loss |
421 |
|
(116 |
) |
305 |
|
0.01 |
|
|
90 |
|
(30 |
) |
60 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted |
$ |
6,911 |
|
$ |
893 |
|
$ |
7,804 |
|
$ |
0.25 |
|
|
$ |
23,115 |
|
$ |
(6,487 |
) |
$ |
16,628 |
|
$ |
0.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Amortization of
intangible assets |
$ |
9,178 |
|
$ |
(2,529 |
) |
6,649 |
|
0.21 |
|
|
$ |
2,926 |
|
$ |
(965 |
) |
1,961 |
|
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash earnings per diluted
share |
$ |
16,089 |
|
$ |
(1,636 |
) |
$ |
14,453 |
|
$ |
0.46 |
|
|
$ |
26,041 |
|
$ |
(7,452 |
) |
$ |
18,589 |
|
$ |
0.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in earnings per
diluted share calculation |
|
|
|
|
31,324 |
|
|
|
|
|
|
|
|
22,231 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data) |
Nine Months Ended September
30, |
|
2020 |
|
2019 |
|
(Loss) income before income taxes |
|
Income tax benefit (expense) |
|
Net (loss) income |
|
per share |
|
|
Income before income taxes |
|
Income tax benefit (expense) |
|
Net income |
|
per share |
|
As Reported |
$ |
(296,408 |
) |
$ |
(542 |
) |
$ |
(296,950 |
) |
$ |
(9.54 |
) |
|
$ |
52,468 |
|
$ |
(15,864 |
) |
$ |
36,604 |
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Goodwill and intangible asset impairment charges |
300,300 |
|
- |
|
300,300 |
|
9.64 |
|
|
- |
|
- |
|
- |
|
- |
|
Plus: Business development and integration expenses |
7,507 |
|
(2,064 |
) |
5,443 |
|
0.18 |
|
|
6,696 |
|
(615 |
) |
6,081 |
|
0.27 |
|
Plus: Property and equipment impairment charges |
- |
|
- |
|
- |
|
- |
|
|
25 |
|
- |
|
25 |
|
- |
|
Less: Property insurance recoveries |
- |
|
- |
|
- |
|
- |
|
|
(9,651 |
) |
2,918 |
|
(6,733 |
) |
(0.30 |
) |
Foreign currency loss |
155 |
|
(43 |
) |
112 |
|
0.01 |
|
|
613 |
|
(185 |
) |
428 |
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Adjusted |
$ |
11,554 |
|
$ |
(2,649 |
) |
$ |
8,905 |
|
$ |
0.29 |
|
|
$ |
50,151 |
|
$ |
(13,746 |
) |
$ |
36,405 |
|
$ |
1.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Amortization of
intangible assets |
$ |
27,812 |
|
$ |
(7,716 |
) |
20,096 |
|
0.64 |
|
|
$ |
8,600 |
|
$ |
(2,600 |
) |
6,000 |
|
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash earnings per diluted
share |
$ |
39,366 |
|
$ |
(10,365 |
) |
$ |
29,001 |
|
$ |
0.93 |
|
|
$ |
58,751 |
|
$ |
(16,346 |
) |
$ |
42,405 |
|
$ |
1.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in (loss) earnings
per diluted share calculation |
|
|
|
|
31,142 |
|
|
|
|
|
|
|
|
22,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 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 nine months ended
September 30, 2020 and 2019:
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
(in thousands) |
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
Adjusted Free Cash
Flow Reconciliation |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
$ |
23,718 |
|
|
$ |
25,128 |
|
|
$ |
83,244 |
|
|
$ |
64,002 |
|
Less: Purchases of property and equipment |
(9,167 |
) |
|
(13,786 |
) |
|
(45,124 |
) |
|
(38,443 |
) |
Plus: Business development and integration expenses, net of
tax |
1,180 |
|
|
3,832 |
|
|
5,443 |
|
|
6,081 |
|
Plus: Purchases of property and equipment for the Idaho
facility rebuild |
825 |
|
|
447 |
|
|
2,815 |
|
|
2,043 |
|
Plus: Payment of deferred/contingent purchase
consideration |
- |
|
|
- |
|
|
4,000 |
|
|
- |
|
Plus: Proceeds from sale of property and equipment |
291 |
|
|
37 |
|
|
1,079 |
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash
Flow |
$ |
16,847 |
|
|
$ |
15,658 |
|
|
$ |
51,457 |
|
|
$ |
34,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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
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