FIRST QUARTER HIGHLIGHTS COMPARED TO PRIOR
YEAR:
US Ecology, Inc. (NASDAQ: ECOL) (“the Company”) today reported
total revenue of $131.0 million and net income of $8.0 million, or
$0.36 per diluted share, for the quarter ended March 31,
2019. Adjusted earnings per diluted share, which excludes
property insurance recoveries, property and equipment impairment
charges, business development expenses, gain on the issuance of a
property easement and foreign currency gains and losses, was $0.22
per diluted share in the first quarter of 2019, down from $0.35 per
diluted share in the first quarter of 2018. While the Company
recognized $4.7 million of property insurance recoveries in the
first quarter of 2019, no business interruption insurance
recoveries associated with our Grand View, Idaho facility were
recognized in the first quarter of 2019.
“Revenue growth across our services lines was
strong during the quarter, up 9% overall compared to the first
quarter last year,” commented Chairman and Chief Executive Officer,
Jeff Feeler. “This revenue growth was attributable to
approximately 4% organic growth and incremental revenue from our
strategic 2018 acquisitions. This solid revenue growth was achieved
despite our Idaho facility operating at less than full
capacity. Adjusted EBITDA was down 4% for the first quarter
of 2019 compared to the first quarter of 2018, which was primarily
attributable to our Idaho operations. When excluding our
Idaho operations from both the first quarter of 2019 and 2018, our
adjusted EBITDA would have grown in the first quarter of 2019
compared to the first quarter last year, at a similar level to
total revenue growth.”
“Strong positive trends in our underlying
business and industrial economy led to the continued growth
trajectory in our Environmental Services segment Base Business,
which increased 8% over the first quarter of 2018, outpacing our
expectations. The Event Business for the Environmental
Services segment declined 1% in the first quarter as several large
projects that were shipping in the first quarter of 2018 have since
completed and weather conditions in the eastern portion of North
America and other project timing shifted some volume into the
second and third quarters of 2019. Our Field and Industrial
Services segment had another strong quarter, up 15% with 3% organic
revenue growth compared to the first quarter of 2018,” Feeler
concluded.
Total revenue for the first quarter of 2019 of
$131.0 million was up 9% from $120.1 million in the same quarter
last year. Revenue for the Environmental Services (“ES”) segment
was $92.3 million for the first quarter of 2019, up from $86.5
million in the first quarter of 2018. This increase consisted of 7%
growth in treatment and disposal (“T&D”) revenue and 6% growth
in transportation revenue compared to the first quarter of 2018.
Revenue for the Field and Industrial Services (“FIS”) segment was
$38.7 million for the first quarter of 2019, up 15% from $33.6
million in the same quarter last year, reflecting our acquisition
of the Dallas, Texas and Midland, Texas locations in the third
quarter of 2018 as well as stronger overall market conditions.
Gross profit for the first quarter of 2019 was
$35.2 million, down 1% from $35.7 million in the same quarter last
year. Gross profit for the ES segment was $31.6 million in the
first quarter of 2019, down from $32.5 million in the same quarter
of 2018. T&D gross margin for the ES segment was 39% for both
the first quarter of 2019 and 2018. Gross profit for the FIS
segment in the first quarter of 2019 was $3.7 million. This
compares to gross profit of $3.2 million in the first quarter of
2018, representing year-over-year improvement of 14%. FIS gross
margin for both the first quarter of 2019 and 2018 was 10%.
Selling, general and administrative (“SG&A”)
expense for the first quarter of 2019 was $20.3 million compared
with $22.2 million in the same quarter last year. The decrease was
primarily due to property insurance recoveries of approximately
$4.7 million recognized in the first quarter of 2019 related to the
Idaho facility accident. Excluding this property insurance
recovery, our SG&A expense would have increased as compared to
the same quarter last year by $2.7 million, or 12%, as a result of
higher labor costs and higher intangible asset amortization.
Operating income for the first quarter of 2019
was $14.9 million compared with $13.4 million in the first quarter
of 2018.
Net interest expense for the first quarter of
2019 was $3.8 million, up from $2.8 million in the first quarter of
2018. The increase was the result of higher outstanding debt levels
in the first quarter of 2019 due to the acquisition of US Ecology
Winnie in November of 2018 as well as a higher interest rate on the
variable portion of our outstanding debt.
The Company’s consolidated effective income tax
rate for the first quarter of 2019 was 27.4% compared with 27.6% in
the first quarter of 2018.
Net income for the first quarter of 2019 was
$8.0 million, or $0.36 per diluted share, compared with net income
of $9.2 million, or $0.42 per diluted share, in the first quarter
of 2018. Adjusted earnings per diluted share was $0.22 per diluted
share in the first quarter of 2019 compared with $0.35 per diluted
share in the first quarter of 2018.
Adjusted EBITDA for the first quarter of 2019
was $23.6 million, down 4% from $24.5 million in the same quarter
last year. Pro Forma adjusted EBITDA, which excludes business
development expenses, was $23.7 million in the first quarter of
2019 compared with $24.5 million in the first quarter of
2018.
Reconciliations of earnings per diluted share to
adjusted earnings per diluted share and net income to adjusted
EBITDA and Pro Forma adjusted EBITDA are attached as Exhibit A to
this release.
2019 OUTLOOK
“Business conditions and trends in our Base
Business remain favorable as we look out to the balance of 2019
and, as a result, we expect full year Base Business revenue growth
near the top of our 3-5% guidance range,” added Feeler. “The
Event pipeline continues to be one of the better pipelines we have
seen in recent years, supporting our expectation that we will see
strong growth in our Event Business in 2019. Our Field and
Industrial Services segment continues to see strong business
fundamentals, with the execution of our 2018 contract wins and our
recent acquisitions driving additional growth. With each passing
month, our Idaho operation is regaining functionality and is on
track to resume substantially full operations by the third quarter
of this year. Further contributing to our results, business
interruption insurance recoveries related to our Idaho facility are
expected to begin to be recognized in the second quarter and
throughout the balance of the year.”
Based on results through the first quarter of
2019 and our current expectations for the rest of the year, the
Company reaffirms its previously issued 2019 Adjusted EBITDA
guidance range of $135 million to $145 million and its diluted
earnings per share guidance of $2.09 to $2.41. The Company’s
earnings guidance excludes property and equipment impairment
charges, property insurance recoveries, business development
expenses and foreign currency gains and losses.
The Company also reaffirms it previously issued
total company revenue guidance of $583 million to $627 million. Our
ES segment revenue is expected to range between $408 million and
$438 million and our FIS segment revenue is expected to range
between $175 million and $189 million.
The following table reconciles our projected net
income to our adjusted EBITDA guidance range:
|
|
For the Year Ending December 31,
2019 |
(in thousands) |
|
Low |
|
High |
|
|
|
|
|
Net
Income |
|
$ |
49,552 |
|
|
$ |
56,557 |
|
Income
tax expense |
|
|
18,487 |
|
|
|
21,182 |
|
Interest
expense |
|
|
15,590 |
|
|
|
15,590 |
|
Interest
income |
|
|
(10 |
) |
|
|
(10 |
) |
Foreign
currency loss |
|
|
139 |
|
|
|
139 |
|
Other
income |
|
|
(360 |
) |
|
|
(360 |
) |
Property
and equipment impairment charges |
|
|
25 |
|
|
|
25 |
|
Depreciation and amortization of plant and equipment |
|
|
34,820 |
|
|
|
35,120 |
|
Amortization of intangible assets |
|
|
12,115 |
|
|
|
12,115 |
|
Accretion
and non-cash adjustments of closure & post-closure
obligations |
|
|
4,380 |
|
|
|
4,380 |
|
Stock-based compensation |
|
|
4,915 |
|
|
|
4,915 |
|
Property
insurance recoveries |
|
|
(4,653 |
) |
|
|
(4,653 |
) |
Adjusted
EBITDA |
|
$ |
135,000 |
|
|
$ |
145,000 |
|
|
|
|
|
|
The following table reconciles our projected
diluted earnings per share to our projected adjusted diluted
earnings per share range:
|
|
For the Year Ending December 31,
2019 |
|
|
Low |
|
High |
|
|
|
|
|
Earnings per diluted
share |
|
$ |
2.23 |
|
|
$ |
2.55 |
|
|
|
|
|
|
Adjustments: |
|
|
|
|
Plus: Property and equipment impairment charges |
|
|
- |
|
|
|
- |
|
Less: Property insurance recoveries |
|
|
(0.15 |
) |
|
|
(0.15 |
) |
Plus: Business development expenses |
|
|
- |
|
|
|
- |
|
Foreign
currency loss |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
|
|
|
As Adjusted |
|
$ |
2.09 |
|
|
$ |
2.41 |
|
|
|
|
|
|
DIVIDEND
On April 1, 2019, the Company declared a
quarterly dividend of $0.18 per common share for stockholders of
record on April 19, 2019. The $4.0 million dividend was paid on
April 26, 2019.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, May 3, 2019 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
800-458-4148 or 786-789-4772. The conference call will also be
broadcast live on our website at www.usecology.com. An audio replay
will be available through May 10, 2019 by calling 888-203-1112 or
719-457-0820 and using the passcode 1768676. The replay will
also be accessible on our website at www.usecology.com.
ABOUT US ECOLOGY, INC.
US Ecology, Inc. is a leading North American
provider of environmental services to commercial and government
entities. The Company addresses the complex waste management needs
of its customers, offering treatment, disposal and recycling of
hazardous, non-hazardous and radioactive waste, as well as a wide
range of complementary field and industrial services. US Ecology’s
comprehensive knowledge of the waste business, its collection of
waste management facilities and focus on safety, environmental
compliance, and customer service enables us to effectively meet the
needs of our customers and to build long lasting relationships. US
Ecology and its predecessor companies have been in business for
more than 65 years and has operations in the United States, Canada
and Mexico. 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 Company 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 an accident at one of our facilities,
incidents resulting from the handling of dangerous substances, the
loss or failure to renew significant contracts, competition in our
markets, adverse economic conditions, our compliance with
applicable laws and regulations, the realization of anticipated
benefits from acquired operations, 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, cyber security
threats, unanticipated changes in tax rules and regulations, loss
of key personnel, a deterioration in our labor relations or labor
disputes, our ability to pay dividends or repurchase stock,
anti-takeover regulations, stock market volatility, 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 ability or the timing of reconstructing and receiving
regulatory approvals for the reopening of the Grand View, Idaho
treatment facility, the timing or amount of insurance recoveries
associated with the reconstruction and business interruption losses
for the Grand View, Idaho treatment facility, our access to
cost-effective transportation services, lawsuits, our
implementation of new technologies, fluctuations in foreign
currency markets and foreign affairs.
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" sections
of our annual and quarterly reports 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 March 31, |
|
|
|
2019 |
|
|
|
2018 |
|
Revenue |
|
|
|
|
Environmental Services |
|
$ |
92,332 |
|
|
$ |
86,471 |
|
Field
& Industrial Services |
|
|
38,705 |
|
|
|
33,588 |
|
|
|
|
|
|
Total |
|
|
131,037 |
|
|
|
120,059 |
|
|
|
|
|
|
Gross profit |
|
|
|
|
Environmental Services |
|
|
31,556 |
|
|
|
32,452 |
|
Field
& Industrial Services |
|
|
3,685 |
|
|
|
3,219 |
|
|
|
|
|
|
Total |
|
|
35,241 |
|
|
|
35,671 |
|
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
|
Environmental Services |
|
|
1,406 |
|
|
|
6,376 |
|
Field
& Industrial Services |
|
|
3,385 |
|
|
|
2,257 |
|
Corporate |
|
|
15,514 |
|
|
|
13,599 |
|
|
|
|
|
|
Total |
|
|
20,305 |
|
|
|
22,232 |
|
|
|
|
|
|
Operating
income |
|
|
14,936 |
|
|
|
13,439 |
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
Interest
income |
|
|
207 |
|
|
|
24 |
|
Interest
expense |
|
|
(4,030 |
) |
|
|
(2,809 |
) |
Foreign
currency loss |
|
|
(139 |
) |
|
|
(14 |
) |
Other |
|
|
110 |
|
|
|
2,123 |
|
|
|
|
|
|
Total
other expense |
|
|
(3,852 |
) |
|
|
(676 |
) |
|
|
|
|
|
Income before income taxes |
|
|
11,084 |
|
|
|
12,763 |
|
Income tax expense |
|
|
3,041 |
|
|
|
3,520 |
|
|
|
|
|
|
Net income |
|
$ |
8,043 |
|
|
$ |
9,243 |
|
|
|
|
|
|
Earnings per
share: |
|
|
|
|
Basic |
|
$ |
0.37 |
|
|
$ |
0.42 |
|
Diluted |
|
$ |
0.36 |
|
|
$ |
0.42 |
|
|
|
|
|
|
Shares used in
earnings |
|
|
|
|
per share calculation: |
|
|
|
|
Basic |
|
|
21,987 |
|
|
|
21,801 |
|
Diluted |
|
|
22,197 |
|
|
|
21,957 |
|
|
|
|
|
|
Dividends paid
per share |
|
$ |
0.18 |
|
|
$ |
0.18 |
|
|
|
|
|
|
US ECOLOGY, INC. |
CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
March 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
16,120 |
|
|
$ |
31,969 |
|
Receivables, net |
|
|
127,970 |
|
|
|
144,690 |
|
Prepaid
expenses and other current assets |
|
|
11,121 |
|
|
|
10,938 |
|
Income
tax receivable |
|
|
8,559 |
|
|
|
7,071 |
|
Total current assets |
|
|
163,770 |
|
|
|
194,668 |
|
|
|
|
|
|
Property and equipment,
net |
|
|
256,902 |
|
|
|
258,443 |
|
Operating lease
assets |
|
|
18,270 |
|
|
|
- |
|
Restricted cash and
investments |
|
|
4,977 |
|
|
|
4,941 |
|
Intangible assets,
net |
|
|
277,263 |
|
|
|
279,666 |
|
Goodwill |
|
|
210,126 |
|
|
|
207,177 |
|
Other assets |
|
|
2,024 |
|
|
|
3,003 |
|
Total
assets |
|
$ |
933,332 |
|
|
$ |
947,898 |
|
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
Accounts
payable |
|
$ |
16,408 |
|
|
$ |
17,754 |
|
Deferred
revenue |
|
|
10,441 |
|
|
|
10,451 |
|
Accrued
liabilities |
|
|
27,133 |
|
|
|
35,524 |
|
Accrued
salaries and benefits |
|
|
13,367 |
|
|
|
16,732 |
|
Income
tax payable |
|
|
- |
|
|
|
505 |
|
Short-term borrowings |
|
|
2,118 |
|
|
|
- |
|
Current
portion of closure and post-closure obligations |
|
|
2,214 |
|
|
|
2,266 |
|
Current
portion of operating lease liabilities |
|
|
5,358 |
|
|
|
- |
|
Total current liabilities |
|
|
77,039 |
|
|
|
83,232 |
|
|
|
|
|
|
Long-term debt |
|
|
334,000 |
|
|
|
364,000 |
|
Long-term closure and
post-closure obligations |
|
|
76,842 |
|
|
|
76,097 |
|
Long-term operating
lease liabilities |
|
|
12,769 |
|
|
|
- |
|
Other long-term
liabilities |
|
|
3,098 |
|
|
|
2,146 |
|
Deferred income taxes,
net |
|
|
66,092 |
|
|
|
63,206 |
|
Total liabilities |
|
|
569,840 |
|
|
|
588,681 |
|
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
|
|
Common
stock |
|
|
221 |
|
|
|
220 |
|
Additional paid-in capital |
|
|
183,953 |
|
|
|
183,834 |
|
Retained
earnings |
|
|
193,397 |
|
|
|
189,324 |
|
Treasury
stock |
|
|
(1,286 |
) |
|
|
(370 |
) |
Accumulated other comprehensive loss |
|
|
(12,793 |
) |
|
|
(13,791 |
) |
Total stockholders’ equity |
|
|
363,492 |
|
|
|
359,217 |
|
Total
liabilities and stockholders’ equity |
|
$ |
933,332 |
|
|
$ |
947,898 |
|
|
|
|
|
|
US ECOLOGY, INC. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in thousands) |
(unaudited) |
|
|
|
|
|
|
|
For the Three Months Ended
March 31, |
|
|
|
2019 |
|
|
|
2018 |
|
Cash Flows From Operating Activities: |
|
|
|
|
Net
income |
|
$ |
8,043 |
|
|
$ |
9,243 |
|
Adjustments
to reconcile net income to net cash provided by |
|
|
|
|
operating
activities: |
|
|
|
|
Depreciation
and amortization of property and equipment |
|
|
8,125 |
|
|
|
6,605 |
|
Amortization
of intangible assets |
|
|
2,811 |
|
|
|
2,302 |
|
Accretion of
closure and post-closure obligations |
|
|
1,125 |
|
|
|
1,074 |
|
Property and
equipment impairment charges |
|
|
25 |
|
|
|
- |
|
Unrealized
foreign currency loss (gain) |
|
|
(371 |
) |
|
|
654 |
|
Deferred
income taxes |
|
|
2,905 |
|
|
|
450 |
|
Share-based
compensation expense |
|
|
1,222 |
|
|
|
1,068 |
|
Unrecognized
tax benefits |
|
|
131 |
|
|
|
- |
|
Net loss
(gain) on disposition of assets |
|
|
(272 |
) |
|
|
17 |
|
Gain on
insurance proceeds from damaged property and equipment |
|
|
(4,653 |
) |
|
|
- |
|
Amortization
of debt issuance costs |
|
|
204 |
|
|
|
202 |
|
Changes in
assets and liabilities: |
|
|
|
|
Receivables |
|
|
16,577 |
|
|
|
14,947 |
|
Income
tax receivable |
|
|
(1,487 |
) |
|
|
(573 |
) |
Other
assets |
|
|
525 |
|
|
|
(792 |
) |
Accounts payable and accrued liabilities |
|
|
(11,935 |
) |
|
|
(4,163 |
) |
Deferred revenue |
|
|
(47 |
) |
|
|
301 |
|
Accrued salaries and benefits |
|
|
(3,417 |
) |
|
|
(2,432 |
) |
Income
tax payable |
|
|
(517 |
) |
|
|
215 |
|
Closure and post-closure obligations |
|
|
(470 |
) |
|
|
(288 |
) |
Net cash provided by operating
activities |
|
|
18,524 |
|
|
|
28,830 |
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
Purchases of
property and equipment |
|
|
(7,223 |
) |
|
|
(7,558 |
) |
Insurance
proceeds from damaged property and equipment |
|
|
5,000 |
|
|
|
- |
|
Proceeds
from sale of property and equipment |
|
|
459 |
|
|
|
42 |
|
Purchases of
restricted investments |
|
|
(23 |
) |
|
|
(498 |
) |
Proceeds
from sale of restricted investments |
|
|
- |
|
|
|
417 |
|
Net cash used in investing
activities |
|
|
(1,787 |
) |
|
|
(7,597 |
) |
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
Payments on
long-term debt |
|
|
(30,000 |
) |
|
|
- |
|
Payments on
short-term borrowings |
|
|
(4,331 |
) |
|
|
- |
|
Proceeds
from short-term borrowings |
|
|
6,449 |
|
|
|
- |
|
Dividends
paid |
|
|
(3,970 |
) |
|
|
(3,938 |
) |
Payment of
equipment financing obligations |
|
|
(199 |
) |
|
|
(108 |
) |
Proceeds
from exercise of stock options |
|
|
- |
|
|
|
731 |
|
Other |
|
|
(915 |
) |
|
|
(312 |
) |
Net cash used in financing
activities |
|
|
(32,966 |
) |
|
|
(3,627 |
) |
|
|
|
|
|
Effect of
foreign exchange rate changes on cash |
|
|
393 |
|
|
|
(488 |
) |
|
|
|
|
|
Increase (decrease) in Cash and cash equivalents and
restricted cash |
|
|
(15,836 |
) |
|
|
17,118 |
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at beginning
of period |
|
|
32,753 |
|
|
|
28,799 |
|
|
|
|
|
|
Cash and cash equivalents and restricted cash at end of
period |
|
$ |
16,917 |
|
|
$ |
45,917 |
|
|
|
|
|
|
EXHIBIT ANon-GAAP
Results and Reconciliation
US Ecology reports adjusted EBITDA, Pro Forma
adjusted EBITDA and adjusted earnings per diluted share results,
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, Pro Forma adjusted EBITDA and
adjusted earnings per diluted share 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, Pro Forma
adjusted EBITDA and adjusted earnings per diluted share are
significant components in understanding and assessing financial
performance.
Adjusted EBITDA, Pro Forma adjusted EBITDA and
adjusted earnings per diluted share 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, Pro Forma adjusted
EBITDA and adjusted earnings per diluted share 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; and
- Pro Forma adjusted EBITDA does not reflect our business
development expenses, which may vary significantly quarter to
quarter.
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, property insurance recoveries, non-cash
property and equipment impairment charges and other income/expense,
which are not considered part of usual business operations.
Pro Forma adjusted EBITDA
The Company defines Pro Forma adjusted EBITDA as
adjusted EBITDA (see definition above) plus business development
expenses incurred during the period. We believe Pro Forma adjusted
EBITDA is helpful in understanding our business and how it relates
to our 2019 guidance which does not include business development
expenses.
The following reconciliation itemizes the
differences between reported net income and adjusted EBITDA and Pro
Forma adjusted EBITDA for the three months ended March 31, 2019 and
2018:
(in thousands) |
|
Three Months Ended March 31, |
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
8,043 |
|
|
$ |
9,243 |
|
|
|
Income
tax expense |
|
|
3,041 |
|
|
|
3,520 |
|
|
|
Interest
expense |
|
|
4,030 |
|
|
|
2,809 |
|
|
|
Interest
income |
|
|
(207 |
) |
|
|
(24 |
) |
|
|
Foreign
currency loss |
|
|
139 |
|
|
|
14 |
|
|
|
Other
income |
|
|
(110 |
) |
|
|
(2,123 |
) |
|
|
Property
and equipment impairment charges |
|
|
25 |
|
|
|
- |
|
|
|
Depreciation and amortization of plant and equipment |
|
|
8,125 |
|
|
|
6,605 |
|
|
|
Amortization of intangible assets |
|
|
2,811 |
|
|
|
2,302 |
|
|
|
Share-based compensation |
|
|
1,222 |
|
|
|
1,068 |
|
|
|
Accretion
and non-cash adjustments of closure & post-closure
obligations |
|
|
1,125 |
|
|
|
1,074 |
|
|
|
Property
insurance recoveries |
|
|
(4,653 |
) |
|
|
- |
|
|
|
Adjusted
EBITDA |
|
$ |
23,591 |
|
|
$ |
24,488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
development expenses |
|
|
141 |
|
|
|
11 |
|
|
|
Pro Forma
adjusted EBITDA |
|
$ |
23,732 |
|
|
$ |
24,499 |
|
|
|
|
|
|
|
|
|
|
Adjusted Earnings Per Diluted
Share
The Company defines adjusted earnings per
diluted share as net income adjusted for the after-tax impact of
property insurance recoveries, non-cash property and equipment
impairment charges, the after-tax impact of business development
expenses, the after-tax impact of the gain on the issuance of a
property easement, and foreign currency gains or losses, divided by
the number of diluted shares used in the earnings per share
calculation.
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. The easement gain relates to the issuance
of an easement on a small portion of owned land at an operating
facility which should not hinder our future use. Business
development expenses relate to costs incurred to evaluate
businesses for potential acquisition or costs related to closing
and integrating successfully acquired businesses. The foreign
currency gains or losses excluded from the earnings per diluted
share calculation are partially related to unrealized gains or
losses primarily associated with 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. Foreign currency gains or
losses also include realized gains and losses associated with the
settlement of transactions denominated in a foreign currency.
We believe excluding the non-cash property and
equipment impairment charges, the property insurance recoveries,
the gain on issuance of a property easement, the after-tax impact
of business development expenses, and foreign currency gains or
losses provides meaningful information to investors regarding the
operational and financial performance of the Company.
The following reconciliation itemizes the
differences between reported net income and earnings per diluted
share to adjusted net income and adjusted earnings per diluted
share for the three months ended March 31, 2019 and 2018:
(in thousands, except
per share data) |
Three Months Ended March 31, |
|
|
2019 |
|
|
|
2018 |
|
|
Income before income taxes |
Income tax
expense |
Net income |
per share |
|
Income before income taxes |
Income tax
expense |
Net income |
per share |
As
Reported |
$ |
11,084 |
|
$ |
(3,041 |
) |
$ |
8,043 |
|
$ |
0.36 |
|
|
$ |
12,763 |
|
$ |
(3,520 |
) |
$ |
9,243 |
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Less: Property insurance recoveries |
|
(4,653 |
) |
|
1,277 |
|
|
(3,376 |
) |
|
(0.15 |
) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Property and equipment impairment charges |
|
25 |
|
|
- |
|
|
25 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Business development expenses |
|
141 |
|
|
(39 |
) |
|
102 |
|
|
- |
|
|
|
11 |
|
|
(3 |
) |
|
8 |
|
|
- |
|
Less: TX land easement gain |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
(1,990 |
) |
|
549 |
|
|
(1,441 |
) |
|
(0.07 |
) |
Foreign
currency loss(1) |
|
139 |
|
|
(38 |
) |
|
101 |
|
|
0.01 |
|
|
|
14 |
|
|
(4 |
) |
|
10 |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
As Adjusted |
$ |
6,736 |
|
$ |
(1,841 |
) |
$ |
4,895 |
|
$ |
0.22 |
|
|
$ |
10,798 |
|
$ |
(2,978 |
) |
$ |
7,820 |
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in earnings
per diluted share calculation |
|
|
|
22,197 |
|
|
|
|
|
|
21,957 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) In the first quarter of 2019, the Company conformed the
amount of the foreign currency gains or losses included in the
calculation of adjusted earnings per diluted share with the amount
of the foreign currency gains or losses included in the calculation
of adjusted EBITDA and Pro forma adjusted EBITDA. In previous
quarters only non-cash translation gains or losses were included in
the calculation of adjusted earnings per diluted share while total
foreign currency gains or losses were included in the calculation
of adjusted EBITDA and Pro forma adjusted EBITDA. The
calculation of adjusted earnings per diluted share for the first
quarter of 2018 has been updated to include total foreign currency
losses resulting in a $0.01 reduction of adjusted earnings per
share from what was previously reported in our earnings release for
the three months ended March 31, 2018.
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com
www.usecology.com
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