US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”)
today reported total revenue of $231.3 million and a net loss of
$3.5 million, or $0.12 per diluted share, for the quarter ended
December 31, 2019. Adjusted earnings per diluted share, as
defined in Exhibit A of this release, was $0.38 per diluted share
in the fourth quarter of 2019, down 37% from the quarter ended
December 31, 2018. On November 1, 2019, US Ecology completed
its acquisition of NRC Group Holdings, Inc. (“NRC”) and fourth
quarter 2019 and full year results presented include two months of
NRC operations.
“The legacy US Ecology business ended the year
on a strong note, showing growth across multiple verticals and
business lines,” commented Chairman and Chief Executive Officer,
Jeff Feeler. “Our base business grew 5% during the quarter,
in line with our expectations, while our Event Business increased
by 12% over the fourth quarter last year. Revenue for the FIS
business, excluding NRC, was down 3% in the fourth quarter driven
by continued softness in the total waste management and industrial
services business lines. Margin expansion, however, more than
offset these headwinds. Results for NRC during our first two months
of ownership came in below our expectations driven by continued
softness in the energy waste disposal services business and a
slower than expected fourth quarter.”
As a result of our acquisition of NRC on
November 1, 2019, we have updated our two business segments to
reflect the addition of NRC as follows:
Environmental 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. It 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.
Field & 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. It
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.
Total revenue for the fourth quarter of 2019 of
$231.3 million was up 47% from $157.5 million in the same quarter
last year. Revenue for the fourth quarter of 2019 includes
$70.2 million from NRC for our two months of ownership. Revenue for
the ES segment was $125.7 million for the fourth quarter of 2019,
up 16% from $108.1 million in the fourth quarter of 2018. Revenue
for the FIS segment was $105.5 million for the fourth quarter of
2019, up 113% from $49.5 million in the same period of 2018.
NRC contributed $12.5 million to ES segment
revenue in 2019 for our two months of ownership. Excluding the NRC
contribution, ES segment revenue increased 5%, attributable to 8%
growth in treatment and disposal (“T&D”) revenue, partially
offset by a 5% decrease in transportation revenue compared to the
fourth quarter of 2018.
FIS segment revenue benefitted from a $57.7
million contribution from NRC. Excluding NRC, FIS segment
revenue declined approximately 3% in the fourth quarter of 2019
compared to the fourth quarter of 2018. The decrease was
primarily the result of lower industrial services and total waste
management service revenue, partially offset by increased revenue
in our remediation, small quantity generation and emergency
response service lines.
Gross profit for the fourth quarter of 2019 was
$68.5 million, up 50% from $45.7 million in the same quarter last
year. Gross profit for the ES segment was $50.8 million in
the fourth quarter of 2019 and included $3.8 million from NRC, up
from $39.2 million in the same quarter of 2018. T&D gross
margin for the ES segment was 45% for the fourth quarter of
2019. Excluding NRC, T&D gross margin for the ES segment
was 47% in the fourth quarter of 2019 compared with 43% in the
fourth quarter of 2018. The increase was partially attributable to
$2.1 million in business interruption insurance recoveries recorded
in the fourth quarter of 2019 related to the incident at our Grand
View, Idaho facility in the fourth quarter of 2018. Gross profit
for the FIS segment in the fourth quarter of 2019 was $17.6 million
and included $10.2 million from NRC. Excluding NRC, our FIS segment
gross profit grew 15% over the $6.5 million of gross profit in the
fourth quarter of 2018. FIS segment gross margin for the fourth
quarter of 2019 was 17%, 16% excluding NRC, compared to 13% in the
fourth quarter of 2018 driven primarily by a more favorable service
mix.
Selling, general and administrative (“SG&A”)
expense for the fourth quarter of 2019 was $63.4 million compared
with $25.3 million in the same quarter last year. The increase was
primarily due to $19.5 million in business development and
integration expenses, the majority of which related to the NRC
acquisition, and $15.6 million of NRC SG&A for the two months
of ownership. The remaining increase is primarily due to higher
incentive compensation and labor costs in the fourth quarter of
2019 compared to the fourth quarter of 2018.
Operating income for the fourth quarter of 2019
was $5.0 million compared to $20.4 million in the fourth quarter of
2018. The operating income decline reflects the $19.5 million of
business development and integration costs as well as operating
losses from NRC in the two months of our ownership.
Net interest expense for the fourth quarter of
2019 was $7.7 million, up from $3.2 million in the fourth quarter
of 2018 primarily resulting from the NRC acquisition, which
resulted in increased debt levels.
The Company’s consolidated effective income tax
rate for the fourth quarter of 2019 was approximately 27.3% when
excluding the impact of business development and integration
expenses associated with the NRC acquisition that are partially
non-deductible, compared to 23.0% in the fourth quarter of
2018. Additionally, in the fourth quarter of 2018 our
effective income tax rate was lower as a result of the
implementation of tax planning strategies and associated one-time
tax benefits.
Net loss for the fourth quarter of 2019 was $3.5
million, or $0.12 per diluted share, compared to net income of
$13.7 million, or $0.62 per diluted share, in the fourth quarter of
2018. A significant portion of the decrease in net income and
diluted earnings per share compared to the fourth quarter of 2018
relates to increased business development and integration expenses.
Adjusted earnings per diluted share was $0.38 per diluted share in
the fourth quarter of 2019 and reflects the dilutive effect of the
additional shares issued in conjunction with the NRC acquisition on
November 1, 2019. This compares to $0.60 per diluted share in
the fourth quarter of 2018.
Adjusted EBITDA for the fourth quarter of 2019
was $46.2 million, up 40% from $33.1 million in the same period
last year.
Reconciliations of earnings per diluted share to
adjusted earnings per diluted share and net income to adjusted
EBITDA are attached as Exhibit A to this release.
2019 RESULTS
Total revenue for 2019 grew 21% to $685.5
million compared to $565.9 million in 2018. Revenue for 2019
includes $70.2 million from NRC for our two months of ownership. ES
segment revenue was $453.1 million for 2019 compared to $400.7
million in 2018. The increase in ES segment revenue includes
$12.5 million of revenue from NRC operations for our two months of
ownership in 2019. Excluding NRC operations, ES revenues
increased 10% in 2019 driven by a 12% increase in treatment and
disposal (“T&D”) revenue as well as a 1% increase in
transportation revenue compared to 2018.
FIS segment revenue was $232.4 million in 2019,
up from $165.3 million in 2018. The increase in FIS segment
revenue includes $57.7 million from the NRC acquisition.
Excluding NRC, FIS segment revenue increased 6% in 2019 compared to
2018 driven by higher transportation and logistics revenues, growth
in our emergency response business line and higher revenue from our
Small Quantity Generation business line. These increases were
partially offset by lower revenue from our total waste management
and industrial services business lines.
Gross profit for 2019 was $209.8 million, up 23%
from $170.1 million last year. Gross profit for the ES segment was
$174.8 million and included $3.8 million from NRC, up from $147.5
million in 2018. T&D gross margin for the ES segment was 44%
for 2019 compared to 42% in 2018. Excluding NRC, T&D
gross margin for the ES segment was 45% in 2019. ES gross
profit for 2019 includes $7.0 million in business interruption
insurance recoveries for lost profits related to hurricane damage
at our Robstown, Texas facility in 2017 and the incident at our
Grand View, Idaho facility in the fourth quarter of 2018.
FIS segment gross profit was $35.0 million in
2019 and included $10.2 million from NRC. This compares to gross
profit of $22.6 million in 2018, representing year-over-year
improvement of 10% when excluding NRC. FIS segment gross margin was
14% in both 2019 and 2018, excluding NRC.
SG&A expense for 2019 was $141.1 million
compared with $92.3 million in 2018. The increase was primarily due
to $26.2 million in business development and integration expenses,
the majority of which related to the NRC acquisition, and $15.6
million of NRC SG&A expenses for our ownership period. The
remaining increase related to higher incentive compensation and
labor costs in 2019 compared to 2018.
Operating income was $68.7 million for 2019,
down 7% from $74.1 million in 2018. Operating income was
negatively impacted by business development and integration costs
from the NRC acquisition in 2019. Operating income for 2018
was unfavorably impacted by a $3.7 million non-cash goodwill and
intangible asset impairment charge.
Net interest expense for 2019 was $18.6 million,
up from $11.9 million in 2018 reflecting higher debt levels
primarily resulting from the NRC acquisition.
The Company’s consolidated effective income tax
rate for 2019 was approximately 27.3% when excluding the impact of
business development and integration expenses that are partially
non-deductible, compared to 23.5% in 2018,. Additionally, in
2018 our effective income tax rate was lower resulting from the
implementation of tax planning strategies and associated one-time
tax benefits.
Net income was $33.1 million, or $1.40 per
diluted share, in 2019 compared to $49.6 million, or $2.25 per
diluted share, in 2018. Adjusted earnings per diluted share was
$1.96 for 2019 compared to $2.27 for 2018. Adjusted EBITDA was
$149.4 million in 2019, up 19% from $125.1 million in 2018.
Adjusted earnings per diluted share for 2019 includes
approximately $0.12 per diluted share or ($2.8 million, after tax)
for intangible asset amortization related to the NRC
acquisition.
Reconciliations of earnings per diluted share to
adjusted earnings per diluted share and net income to adjusted
EBITDA are attached as Exhibit A to this release.
2020 OUTLOOK “2019 saw
continued momentum in our business fundamentals and strong
execution on our short and long-term initiatives, leading to solid
financial results and operational performance,” commented
Feeler. “Our success came on the heels of the challenges our
organization faced as we entered 2019 with our Grand View facility
nonoperational after the tragic event at the end of
2018.”
“Looking out to 2020, we see continued momentum
in our core legacy US Ecology business contributing to strong
expected financial performance and growth in revenue and adjusted
EBITDA. In our Environmental Services segment, we look for
continued Base Business growth in a range of 3 - 5 percent.
Our Event Business pipeline also looks strong, with solid projects
that we expect will replace completed 2019 projects and lead to
single-digit growth in this revenue stream. Our Field and
Industrial services segment is expected to produce solid growth,
driven by our Small Quantity Generation service line where we will
be implementing new contracts that were secured in 2019 in our
retail and lab pack business.”
“Further, we expect to benefit from additional
growth opportunities from the NRC acquisition as a result of NRC’s
leading emergency and spill response, standby response, industrial
services and waste management services and providing key landfill
disposal, wastewater treatment services and other field services to
the upstream energy markets. We continue to be excited about
the synergistic opportunities of bringing these two great companies
together and the ability to generate accretive adjusted free cash
flow in 2020,” Feeler concluded.
Based on current business conditions, management
expects 2020 revenue to range from $1.05 billion to $1.15
billion. The NRC business is expected to contribute
approximately $445 million of revenue at the midpoint of our
revenue range. Revenue for the ES segment is expected to be
between $537 million and $588 million and FIS segment revenue is
expected to be between $513 million and $562 million.
Management expects adjusted EBITDA to range from
$230 million to $250 million in 2020, with NRC expected to
contribute $91.0 million of adjusted EBITDA at the midpoint of our
guidance range and including approximately $7.2 million of net
synergies. Adjusted earnings per diluted share is expected to range
from $1.65 to $2.12 and reflects approximately $0.53 per diluted
share (approximately $16.7 million, net of tax) of amortization of
intangible assets related to the NRC acquisition. Cash
earnings per diluted share is expected to range from $2.45 to $2.92
in 2020.
We anticipate our consolidated effective tax
rate for 2019 to be between 27% and 28%.
The following table reconciles our projected net income to our
adjusted EBITDA guidance range:
|
For the Year Ending December 31, 2020 |
(in thousands) |
Low |
|
High |
|
|
|
|
Net Income |
$ |
48,597 |
|
|
$ |
63,283 |
|
Income tax expense |
|
17,586 |
|
|
|
22,900 |
|
Interest expense |
|
33,600 |
|
|
|
33,600 |
|
Interest income |
|
(2 |
) |
|
|
(2 |
) |
Other income |
|
(342 |
) |
|
|
(342 |
) |
Depreciation and amortization of plant and equipment |
|
80,155 |
|
|
|
80,155 |
|
Amortization of intangible assets |
|
34,420 |
|
|
|
34,420 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
4,279 |
|
|
|
4,279 |
|
Business Development & Integration Expense |
|
5,500 |
|
|
|
5,500 |
|
Stock-based compensation |
|
6,207 |
|
|
|
6,207 |
|
Adjusted
EBITDA |
$ |
230,000 |
|
|
$ |
250,000 |
|
|
|
|
|
The following table reconciles our projected earnings per
diluted share to projected adjusted earnings per diluted share and
to cash earnings per diluted share:
|
|
|
|
|
For the Year Ending December 31, 2020 |
|
Low |
|
High |
|
|
|
|
Earnings per diluted share |
$ |
1.53 |
|
$ |
2.00 |
|
|
|
|
Adjustments: |
|
|
|
Plus: Business development & integration expenses |
|
0.12 |
|
|
0.12 |
|
|
|
|
As
Adjusted |
$ |
1.65 |
|
$ |
2.12 |
|
|
|
|
Plus: projected amortization of Intangible assets |
|
0.80 |
|
|
0.80 |
|
|
|
|
Projected cash
earnings per diluted share |
$ |
2.45 |
|
$ |
2.92 |
|
|
|
|
Shares used in earnings per
diluted share calculation |
|
31,700 |
|
|
31,700 |
|
|
|
|
|
|
|
|
Our adjusted EBITDA and earnings per share guidance excludes
foreign currency translation gains or losses.
2019 capital spending is estimated to range from
$90 million to $95 million. This amount includes approximately $7.4
million of capital spending we plan to incur in rebuilding the
treatment building at our Grand View location, much of which has
already been recovered through insurance in 2019.
Factoring in the above guidance, we anticipate
strong adjusted free cash flow generation of approximately $81
million to $106 million in 2020 compared to $47.5 million in 2019.
Adjusted free cash flow excludes business development and
integration expenses, capital spending for the Grand View, Idaho
facility rebuild and synergy related capital expenditures. The
definition of adjusted free cash flow and a reconciliation of net
cash provided by operating activities to adjusted free cash flow is
included in Exhibit A of this release.
DIVIDEND
On January 2, 2020, the Company declared a
quarterly dividend of $0.18 per common share for stockholders of
record on January 17, 2020. The $5.7 million dividend was paid on
January 24, 2020.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Thursday, February 27, 2020 at 10:00 a.m.
Eastern Standard Time (8:00 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
800-353-6461 or 334-323-05013. The conference call will also be
broadcast live on our website at www.usecology.com. An audio replay
will be available through March 5, 2020 by calling 888-203-1112 or
719-457-0820 and using the passcode 3087722. 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 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, fluctuations in commodity markets related to
our business, 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 December 31, |
|
Year Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
Revenue |
|
|
|
|
|
|
|
Environmental Services |
$ |
125,719 |
|
|
$ |
108,050 |
|
|
$ |
453,107 |
|
|
$ |
400,678 |
|
Field & Industrial Services |
|
105,549 |
|
|
|
49,491 |
|
|
|
232,402 |
|
|
|
165,250 |
|
|
|
|
|
|
|
|
|
Total |
|
231,268 |
|
|
|
157,541 |
|
|
|
685,509 |
|
|
|
565,928 |
|
|
|
|
|
|
|
|
|
Gross
profit |
|
|
|
|
|
|
|
Environmental Services |
|
50,828 |
|
|
|
39,194 |
|
|
|
174,827 |
|
|
|
147,475 |
|
Field & Industrial Services |
|
17,642 |
|
|
|
6,481 |
|
|
|
35,007 |
|
|
|
22,619 |
|
|
|
|
|
|
|
|
|
Total |
|
68,470 |
|
|
|
45,675 |
|
|
|
209,834 |
|
|
|
170,094 |
|
|
|
|
|
|
|
|
|
Selling, general &
administrative expenses |
|
|
|
|
|
|
|
Environmental Services |
|
7,923 |
|
|
|
5,616 |
|
|
|
19,671 |
|
|
|
22,542 |
|
Field & Industrial Services |
|
12,895 |
|
|
|
3,272 |
|
|
|
23,774 |
|
|
|
10,742 |
|
Corporate |
|
42,622 |
|
|
|
16,415 |
|
|
|
97,678 |
|
|
|
59,056 |
|
|
|
|
|
|
|
|
|
Total |
|
63,440 |
|
|
|
25,303 |
|
|
|
141,123 |
|
|
|
92,340 |
|
|
|
|
|
|
|
|
|
Goodwill and
intangible asset impairment charges |
|
|
|
|
|
|
|
Environmental Services |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,666 |
|
|
|
|
|
|
|
|
|
Operating
income |
|
5,030 |
|
|
|
20,372 |
|
|
|
68,711 |
|
|
|
74,088 |
|
|
|
|
|
|
|
|
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest income |
|
38 |
|
|
|
118 |
|
|
|
605 |
|
|
|
215 |
|
Interest expense |
|
(7,730 |
) |
|
|
(3,348 |
) |
|
|
(19,239 |
) |
|
|
(12,130 |
) |
Foreign currency gain (loss) |
|
(120 |
) |
|
|
511 |
|
|
|
(733 |
) |
|
|
55 |
|
Other |
|
113 |
|
|
|
137 |
|
|
|
455 |
|
|
|
2,630 |
|
|
|
|
|
|
|
|
|
Total other expense |
|
(7,699 |
) |
|
|
(2,582 |
) |
|
|
(18,912 |
) |
|
|
(9,230 |
) |
|
|
|
|
|
|
|
|
Income (loss) before
income taxes |
|
(2,669 |
) |
|
|
17,790 |
|
|
|
49,799 |
|
|
|
64,858 |
|
Income tax
expense |
|
795 |
|
|
|
4,085 |
|
|
|
16,659 |
|
|
|
15,263 |
|
|
|
|
|
|
|
|
|
Net income
(loss) |
$ |
(3,464 |
) |
|
$ |
13,705 |
|
|
$ |
33,140 |
|
|
$ |
49,595 |
|
|
|
|
|
|
|
|
|
Earnings (loss) per
share: |
|
|
|
|
|
|
|
Basic |
$ |
(0.12 |
) |
|
$ |
0.64 |
|
|
$ |
1.41 |
|
|
$ |
2.27 |
|
Diluted |
$ |
(0.12 |
) |
|
$ |
0.62 |
|
|
$ |
1.40 |
|
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
Shares used in
earnings (loss) |
|
|
|
|
|
|
|
per share calculation: |
|
|
|
|
|
|
|
Basic |
|
27,916 |
|
|
|
21,957 |
|
|
|
23,521 |
|
|
|
21,888 |
|
Diluted |
|
27,916 |
|
|
|
22,109 |
|
|
|
23,749 |
|
|
|
22,047 |
|
|
|
|
|
|
|
|
|
Dividends paid per
share |
$ |
0.18 |
|
|
$ |
0.18 |
|
|
$ |
0.72 |
|
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
US ECOLOGY, INC. |
CONSOLIDATED BALANCE SHEETS |
(in thousands) |
(unaudited) |
|
|
|
|
|
December 31, 2019 |
|
December 31, 2018 |
Assets |
|
|
|
|
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents |
$ |
41,281 |
|
|
$ |
31,969 |
|
Receivables, net |
|
255,310 |
|
|
|
144,690 |
|
Prepaid expenses and other current assets |
|
25,136 |
|
|
|
10,938 |
|
Income tax receivable |
|
11,244 |
|
|
|
7,071 |
|
Total current assets |
|
332,971 |
|
|
|
194,668 |
|
|
|
|
|
Property and equipment,
net |
|
478,768 |
|
|
|
258,443 |
|
Operating lease assets |
|
57,396 |
|
|
|
- |
|
Restricted cash and
investments |
|
5,069 |
|
|
|
4,941 |
|
Intangible assets, net |
|
574,902 |
|
|
|
279,666 |
|
Goodwill |
|
766,980 |
|
|
|
207,177 |
|
Other assets |
|
15,158 |
|
|
|
3,003 |
|
Total
assets |
$ |
2,231,244 |
|
|
$ |
947,898 |
|
|
|
|
|
Liabilities and
Stockholders’ Equity |
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
Accounts payable |
$ |
46,906 |
|
|
$ |
17,754 |
|
Deferred revenue |
|
14,788 |
|
|
|
10,451 |
|
Accrued liabilities |
|
65,869 |
|
|
|
35,524 |
|
Accrued salaries and benefits |
|
29,653 |
|
|
|
16,732 |
|
Income tax payable |
|
726 |
|
|
|
505 |
|
Current portion of long-term debt |
|
3,359 |
|
|
|
- |
|
Current portion of closure and post-closure obligations |
|
2,152 |
|
|
|
2,266 |
|
Current portion of operating lease liabilities |
|
17,317 |
|
|
|
- |
|
Total current liabilities |
|
180,770 |
|
|
|
83,232 |
|
|
|
|
|
Long-term debt |
|
765,842 |
|
|
|
364,000 |
|
Long-term closure and
post-closure obligations |
|
84,231 |
|
|
|
76,097 |
|
Long-term operating lease
liabilities |
|
39,954 |
|
|
|
- |
|
Other long-term
liabilities |
|
20,722 |
|
|
|
2,146 |
|
Deferred income taxes,
net |
|
128,345 |
|
|
|
63,206 |
|
Total liabilities |
|
1,219,864 |
|
|
|
588,681 |
|
|
|
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Stockholders’
Equity |
|
|
|
|
|
|
|
Common stock |
|
315 |
|
|
|
220 |
|
Additional paid-in capital |
|
816,345 |
|
|
|
183,834 |
|
Retained earnings |
|
206,574 |
|
|
|
189,324 |
|
Treasury stock |
|
- |
|
|
|
(370 |
) |
Accumulated other comprehensive loss |
|
(11,854 |
) |
|
|
(13,791 |
) |
Total stockholders’ equity |
|
1,011,380 |
|
|
|
359,217 |
|
Total liabilities and
stockholders’ equity |
$ |
2,231,244 |
|
|
$ |
947,898 |
|
|
|
|
|
US ECOLOGY, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(in thousands) |
(unaudited) |
|
|
|
|
|
For the Year Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
Cash Flows From Operating
Activities: |
|
|
|
Net income |
$ |
33,140 |
|
|
$ |
49,595 |
|
Adjustments to reconcile net income to net cash provided
by operating activities: |
|
|
|
Depreciation and amortization of property and equipment |
|
41,423 |
|
|
|
29,207 |
|
Amortization of intangible assets |
|
15,491 |
|
|
|
9,645 |
|
Accretion of closure and post-closure obligations |
|
4,388 |
|
|
|
3,707 |
|
Property and equipment impairment charges |
|
25 |
|
|
|
- |
|
Goodwill and intangible asset impairment charges |
|
- |
|
|
|
3,666 |
|
Unrealized foreign currency (gain) loss |
|
(666 |
) |
|
|
1,211 |
|
Deferred income taxes |
|
6,601 |
|
|
|
5,906 |
|
Share-based compensation expense |
|
5,544 |
|
|
|
4,366 |
|
Share-based payment of business development and integration
expenses |
|
3,717 |
|
|
|
- |
|
Unrecognized tax benefits |
|
(238 |
) |
|
|
485 |
|
Net loss on disposition of assets |
|
426 |
|
|
|
370 |
|
Gain on insurance proceeds from damaged property and equipment |
|
(12,366 |
) |
|
|
(347 |
) |
Change in fair value of contingent consideration |
|
349 |
|
|
|
- |
|
Amortization of debt discount |
|
27 |
|
|
|
- |
|
Amortization of debt issuance costs |
|
1,007 |
|
|
|
810 |
|
Changes in assets and liabilities (net of effects of business
acquisition): |
|
|
|
Receivables |
|
(9,357 |
) |
|
|
(32,301 |
) |
Income tax receivable |
|
(4,163 |
) |
|
|
(7,072 |
) |
Other assets |
|
(2,163 |
) |
|
|
(1,187 |
) |
Accounts payable and accrued liabilities |
|
(10,706 |
) |
|
|
14,301 |
|
Deferred revenue |
|
967 |
|
|
|
2,059 |
|
Accrued salaries and benefits |
|
8,326 |
|
|
|
2,476 |
|
Income tax payable |
|
(244 |
) |
|
|
(3,512 |
) |
Closure and post-closure obligations |
|
(1,912 |
) |
|
|
(1,900 |
) |
Net cash provided by operating activities |
|
79,616 |
|
|
|
81,485 |
|
|
|
|
|
Cash Flows From Investing
Activities: |
|
|
|
Business acquisitions, net of cash acquired |
|
(399,599 |
) |
|
|
(108,382 |
) |
Purchases of property and equipment |
|
(58,100 |
) |
|
|
(40,757 |
) |
Insurance proceeds from damaged property and equipment |
|
12,714 |
|
|
|
- |
|
Minority interest investment |
|
(7,870 |
) |
|
|
- |
|
Proceeds from sale of property and equipment |
|
1,182 |
|
|
|
493 |
|
Payment of acquired contingent consideration liabilities |
|
(4,000 |
) |
|
|
- |
|
Purchases of restricted investments |
|
(1,197 |
) |
|
|
(1,023 |
) |
Proceeds from sale of restricted investments |
|
1,145 |
|
|
|
910 |
|
Net cash used in investing activities |
|
(455,725 |
) |
|
|
(148,759 |
) |
|
|
|
|
Cash Flows From Financing
Activities: |
|
|
|
Proceeds from long-term debt |
|
491,875 |
|
|
|
87,000 |
|
Payments on long-term debt |
|
(80,000 |
) |
|
|
- |
|
Payments on short-term borrowings |
|
(77,997 |
) |
|
|
- |
|
Proceeds from short-term borrowings |
|
77,997 |
|
|
|
- |
|
Dividends paid |
|
(15,890 |
) |
|
|
(15,804 |
) |
Deferred financing costs paid |
|
(9,416 |
) |
|
|
- |
|
Payment of equipment financing obligations |
|
(1,539 |
) |
|
|
(448 |
) |
Proceeds from exercise of stock options |
|
319 |
|
|
|
2,427 |
|
Other |
|
(915 |
) |
|
|
(314 |
) |
Net cash provided by financing activities |
|
384,434 |
|
|
|
72,861 |
|
|
|
|
|
Effect of foreign exchange rate
changes on cash |
|
1,062 |
|
|
|
(1,633 |
) |
|
|
|
|
Increase in cash and cash
equivalents and restricted cash |
|
9,387 |
|
|
|
3,954 |
|
|
|
|
|
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 |
$ |
42,140 |
|
|
$ |
32,753 |
|
|
|
|
|
EXHIBIT ANon-GAAP
Results and Reconciliations
US Ecology reports adjusted EBITDA, adjusted
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 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 per diluted share and adjusted free cash flow are
significant components in understanding and assessing financial
performance.
Adjusted EBITDA, adjusted 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 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 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; and
- Adjusted free cash flow does not reflect capital expenditures
associated with discretionary growth projects.
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 months and year ended December 31, 2019 and 2018:
(in thousands) |
Three Months Ended December 31, |
|
Year Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
Net
Income |
$ |
(3,464 |
) |
|
$ |
13,705 |
|
|
$ |
33,140 |
|
|
$ |
49,595 |
|
Income tax expense |
|
795 |
|
|
|
4,085 |
|
|
|
16,659 |
|
|
|
15,263 |
|
Interest expense |
|
7,730 |
|
|
|
3,348 |
|
|
|
19,239 |
|
|
|
12,130 |
|
Interest income |
|
(38 |
) |
|
|
(118 |
) |
|
|
(605 |
) |
|
|
(215 |
) |
Foreign currency loss (gain) |
|
120 |
|
|
|
(511 |
) |
|
|
733 |
|
|
|
(55 |
) |
Other income |
|
(113 |
) |
|
|
(137 |
) |
|
|
(455 |
) |
|
|
(2,630 |
) |
Property and equipment impairment charges |
|
- |
|
|
|
- |
|
|
|
25 |
|
|
|
- |
|
Goodwill and intangible asset impairment charges |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,666 |
|
Depreciation and amortization of plant and equipment |
|
14,767 |
|
|
|
8,216 |
|
|
|
41,423 |
|
|
|
29,207 |
|
Amortization of intangible assets |
|
6,891 |
|
|
|
2,720 |
|
|
|
15,491 |
|
|
|
9,645 |
|
Share-based compensation |
|
1,831 |
|
|
|
1,094 |
|
|
|
5,544 |
|
|
|
4,366 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
991 |
|
|
|
465 |
|
|
|
4,388 |
|
|
|
3,707 |
|
Property insurance recoveries |
|
(2,715 |
) |
|
|
(347 |
) |
|
|
(12,366 |
) |
|
|
(347 |
) |
Business development and integration expenses(1) |
|
19,454 |
|
|
|
530 |
|
|
|
26,150 |
|
|
|
748 |
|
Adjusted
EBITDA |
$ |
46,249 |
|
|
$ |
33,050 |
|
|
$ |
149,366 |
|
|
$ |
125,080 |
|
|
|
|
|
|
|
|
|
(1) In the fourth quarter of 2019, the Company modified the
calculation of adjusted EBITDA to adjust for business development
and integration expenses. In previous quarters, adjusted
EBITDA did not adjust for business development and integration
expense and the Company disclosed pro forma adjusted EBITDA which
did adjust for business development and integration expenses.
The calculation of adjusted EBITDA has been updated for all periods
presented to adjust for business development and integration
expenses, resulting in a $530,000 increase in adjusted EBITDA from
what was previously reported for the three months ended December
31, 2018 and an increase of $748,000 in adjusted EBITDA from what
was previously reported for the year ended December 31, 2018.
Adjusted Earnings Per Diluted
Share
The Company defines adjusted earnings per
diluted share as net income adjusted for the after-tax impact of
the non-cash impairment charges, the after-tax impact of the gain
on the issuance of a property easement, the impact of discrete
income tax adjustments, the after-tax impact of property insurance
recoveries, the after-tax impact of business development 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
per diluted share calculation are related to the Company’s
assessment of goodwill and intangible assets associated with its
mobile recycling business in 2019 and airport recovery business in
2018. The property 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. The discrete income tax
adjustments relate to the implementation of tax planning strategies
that resulted in one-time favorable adjustments to prior year
income tax returns. Business development 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 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 discrete income tax adjustments, the gain on issuance
of a property easement, the after-tax impact of business
development costs, and non-cash foreign currency translation 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 and year ended December 31, 2019 and
2018:
(in thousands, except per
share data) |
Three Months Ended December 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 |
$ |
(2,669 |
) |
$ |
(795 |
) |
$ |
(3,464 |
) |
$ |
(0.12 |
) |
|
$ |
17,790 |
|
$ |
(4,085 |
) |
$ |
13,705 |
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Plus: Business development and integration expenses |
|
19,454 |
|
|
(3,576 |
) |
|
15,878 |
|
|
0.57 |
|
|
|
530 |
|
|
(143 |
) |
|
387 |
|
|
0.02 |
|
Less: Property insurance recoveries |
|
(2,715 |
) |
|
733 |
|
|
(1,982 |
) |
|
(0.07 |
) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Less: Discrete income tax adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(442 |
) |
|
(442 |
) |
|
(0.02 |
) |
Foreign currency loss (gain) (2) |
|
120 |
|
|
(32 |
) |
|
88 |
|
|
- |
|
|
|
(511 |
) |
|
117 |
|
|
(394 |
) |
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
As Adjusted |
$ |
14,190 |
|
$ |
(3,670 |
) |
$ |
10,520 |
|
$ |
0.38 |
|
|
$ |
17,809 |
|
$ |
(4,553 |
) |
$ |
13,256 |
|
$ |
0.60 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in earnings per
diluted share calculation |
|
|
|
27,916 |
|
|
|
|
|
|
22,109 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except per
share data) |
Year Ended December 31, |
|
|
2019 |
|
|
|
2018 |
|
|
Incomebeforeincome taxes |
Income tax expense |
Net income |
per share |
|
Incomebeforeincome taxes |
Income tax expense |
Net income |
per share |
As Reported |
$ |
49,799 |
|
$ |
(16,659 |
) |
$ |
33,140 |
|
$ |
1.40 |
|
|
$ |
64,858 |
|
$ |
(15,263 |
) |
$ |
49,595 |
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Less: Property insurance recoveries |
|
(12,366 |
) |
|
3,339 |
|
|
(9,027 |
) |
|
(0.38 |
) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Business development and integration expenses |
|
26,150 |
|
|
(4,192 |
) |
|
21,958 |
|
|
0.92 |
|
|
|
748 |
|
|
(202 |
) |
|
546 |
|
|
0.03 |
|
Plus: Property and equipment impairment charges |
|
25 |
|
|
- |
|
|
25 |
|
|
- |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Goodwill and intangible asset impairment charges |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
3,666 |
|
|
- |
|
|
3,666 |
|
|
0.17 |
|
Less: TX land easement gain |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
(1,990 |
) |
|
512 |
|
|
(1,478 |
) |
|
(0.07 |
) |
Less: Discrete income tax adjustments |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
- |
|
|
(2,146 |
) |
|
(2,146 |
) |
|
(0.10 |
) |
Foreign currency loss (gain) (2) |
|
733 |
|
|
(198 |
) |
|
535 |
|
|
0.02 |
|
|
|
(55 |
) |
|
13 |
|
|
(42 |
) |
|
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
As Adjusted |
$ |
64,341 |
|
$ |
(17,710 |
) |
$ |
46,631 |
|
$ |
1.96 |
|
|
$ |
67,227 |
|
$ |
(17,086 |
) |
$ |
50,141 |
|
$ |
2.27 |
|
|
|
|
|
|
|
|
|
|
|
Shares used in earnings per
diluted share calculation |
|
|
|
23,749 |
|
|
|
|
|
|
22,047 |
|
|
|
|
|
|
|
|
|
|
|
|
(2) 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. 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. The calculation of adjusted earnings per diluted
share has been updated for all periods presented to include total
foreign currency losses, resulting in a $0.05 decrease in adjusted
earnings per diluted share from what was previously reported for
the three months ended December 31, 2018 and a $0.05 decrease
in adjusted earnings per diluted share from what was previously
reported for the year ended December 31, 2018.
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 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 year ended December 31, 2019 and
2018 and for our guidance range for the year ended December 31,
2020:
|
Year Ended December 31, |
(in
thousands) |
|
2019 |
|
|
|
2018 |
|
Adjusted Free Cash
Flow Reconciliation |
|
|
|
Net cash provided by operating activities |
$ |
79,616 |
|
|
$ |
81,485 |
|
Less: Purchases of property and equipment |
|
(58,100 |
) |
|
|
(40,757 |
) |
Plus: Business development and integration expenses, net of
tax |
|
21,958 |
|
|
|
546 |
|
Plus: Purchases of property and equipment for the Idaho
facility rebuild |
|
2,796 |
|
|
|
- |
|
Plus: Proceeds from sale of property and equipment |
|
1,182 |
|
|
|
493 |
|
|
|
|
|
Adjusted Free Cash
Flow |
$ |
47,452 |
|
|
$ |
41,767 |
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2020 |
(in thousands) |
Low End of Guidance |
|
High End of Guidance |
Adjusted Free Cash
Flow Reconciliation |
|
|
|
Net cash provided by operating activities |
$ |
155,000 |
|
|
$ |
175,000 |
|
Less: Purchases of property and equipment |
|
(95,000 |
) |
|
|
(90,000 |
) |
Plus: Business development and integration expenses, net of
tax |
|
4,050 |
|
|
|
4,050 |
|
Plus: Purchases of property and equipment for the Idaho
facility rebuild |
|
7,400 |
|
|
|
7,400 |
|
Plus: Synergy related capital expenditures |
|
9,500 |
|
|
|
9,500 |
|
|
|
|
|
Adjusted Free Cash
Flow |
$ |
80,950 |
|
|
$ |
105,950 |
|
|
|
|
|
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com www.usecology.com
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