US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”)
today reported total revenue of $240.7 million and a net loss of
$298.1 million, or $9.52 per diluted share, for the quarter ended
March 31, 2020 after recognizing goodwill impairment charges of
$300.3 million related to its energy waste disposal and
international businesses. Adjusted earnings per diluted
share, as defined in Exhibit A of this release, was $0.12 per
diluted share in the first quarter of 2020 compared with $0.22 in
the quarter ended March 31, 2019. On November 1, 2019, US Ecology
completed its acquisition of NRC Group Holdings Corp. (“NRC”) and
first quarter 2020 results presented include three months of NRC
operations.
“The COVID-19 pandemic has and continues to
affect everyone, and US Ecology is no exception,” commented
Chairman and Chief Executive Officer, Jeff Feeler. “Our heart goes
out to all of those impacted. We also want to offer a special
thank you to all the essential service providers that are keeping
us safe in this time of need, and this includes US Ecology’s over
3,500 team members that have not missed a beat, despite the rapidly
changing, unparalleled and stressful conditions.”
“US Ecology’s first quarter financial results
were not significantly impacted by of the ongoing pandemic with the
exception of our energy waste disposal services business that was
already operating in a challenging environment prior to the
COVID-19 pandemic and the oil production war. Legacy US
Ecology revenue grew 18% as a direct result of our Event business
increasing by 102% and our Base Business growing 5% over the first
quarter last year. This reflects the strong business environment we
were experiencing prior to the pandemic. Our legacy US Ecology
field services business also experienced strong double-digit growth
in small quantity generation services led by our retail, lab pack
and LTL services, with segment margin expansion of over 200 basis
points. Together, our legacy US Ecology business delivered a 31%
increase in adjusted EBITDA in the first quarter of 2020 compared
to the first quarter of 2019. The acquired NRC business contributed
$12.2 million of adjusted EBITDA in the first quarter, with solid
results from the field and industrial services business.
While the energy waste disposal services business underperformed
due to the extremely challenging environment, overall, I am
extremely pleased with our execution in the first quarter.”
Total revenue for the first quarter of 2020 of
$240.7 million was up 84% from $131.0 million in the same quarter
last year. Revenue for the first quarter of 2020 includes
$86.6 million from NRC.
Revenue for the Environmental Services1 (“ES”)
segment was $126.7 million for the first quarter of 2020, up 37%
from $92.3 million in the first quarter of 2019. NRC contributed
$16.8 million to ES segment revenue in the first quarter of 2020.
Excluding the NRC contribution, ES segment revenue increased 19%,
attributable to 17% growth in treatment and disposal (“T&D”)
revenue and 32% growth in in transportation revenue compared to the
first quarter of 2019.
Revenue for the Field and Industrial Services2
(“FIS”) segment was $114.0 million for the first quarter of 2020,
up 194% from $38.7 million in the first quarter of 2019. FIS
segment revenue benefitted from a $69.8 million contribution from
NRC in the first quarter of 2020. Excluding NRC, FIS segment
revenue increased 14% in the first quarter of 2020 compared to the
first quarter of 2019. The increase was primarily the result of
higher revenue in our remediation and small quantity generation
service lines.
Gross profit for the first quarter of 2020 was
$61.1 million, up 73% from $35.2 million in the same quarter last
year. Gross profit for the ES segment was $44.1 million in
the first quarter of 2020 and included $4.7 million from NRC, up
from $31.6 million in the first quarter of 2019. T&D
gross margin for the ES segment was 39% for the first quarter of
2020. Excluding NRC, T&D gross margin for the ES segment
was 42% in the first quarter of 2020 compared with 39% in the first
quarter of 2019. The increase was primarily attributable to a more
favorable service mix and the recovery of our Grand View, Idaho
operations in the first quarter of 2020 compared to the first
quarter of 2019. Gross profit for the FIS segment in the first
quarter of 2020 was $17.0 million and included $11.7 million from
NRC. Excluding NRC, our FIS segment gross profit grew 44% over the
$3.7 million of gross profit in the first quarter of 2019. FIS
segment gross margin for the first quarter of 2020 was 15%, 12%
excluding NRC. This compares to 10% in the first quarter of
2019 with the improvement driven primarily by a more favorable
service mix.
Selling, general and administrative (“SG&A”)
expense for the first quarter of 2020 was $51.1 million and
included $19.7 million of NRC SG&A and $2.9 million in business
development and integration expenses. Excluding NRC and business
development and integration expenses, SG&A expense was $28.0
million for the first quarter of 2020. This compares to $20.3
million in the first quarter of 2019 which benefitted from $4.7
million of property insurance recoveries related to the Idaho
facility accident. The first quarter of 2020 also saw higher labor
related expenses and insurance costs compared to the first quarter
of 2019.
During the first quarter of 2020, the Company
recognized a $283.6 million goodwill impairment charge on its
Energy Waste Disposal Services business operating within the
Environmental Services segment. The Company also recognized a $16.7
million goodwill impairment charge in its international business
within the Field and Industrial Services segment. These
non-cash charges were primarily the result of the supply and demand
shock in the global oil market and the associated and expected
impact on long-term cash flows of each business.
Excluding the total goodwill impairment charges
of $300.3 million, operating income was $10.1 million compared with
$14.9 million in the first quarter of 2019. The operating
income decline reflects $2.9 million of business development and
integration costs as well as operating losses from NRC in the first
quarter of 2020.
Net interest expense for the first quarter of
2020 was $9.2 million, up from $3.8 million in the first quarter of
2019. This increase was due to higher debt levels primarily
resulting from the NRC acquisition and share repurchases in the
first quarter of 2020.
The Company’s consolidated effective income tax rate for the
first quarter of 2020 was approximately 13.5% when excluding the
impact of the goodwill asset impairment charges which are not
deductible for income tax purposes. This compares to 27.4% in the
first quarter of 2019. The decrease was primarily due to
lower domestic earnings resulting in a year-to-date tax
benefit. This was partially offset by higher income tax
expenses on foreign earnings during the first quarter of 2020
compared to the first quarter of 2019.
Net loss for the first quarter of 2020 was
$298.1 million, or $9.52 per diluted share, compared to net income
of $8.0 million, or $0.36 per diluted share, in the first quarter
of 2019. Adjusted earnings per diluted share was $0.12 per diluted
share in the first 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 $0.15
per diluted share ($4.7 million, after tax) for intangible asset
amortization related to the NRC acquisition. This compares to
adjusted earnings per share of $0.22 per diluted share in the first
quarter of 2019.
Adjusted EBITDA for the first quarter of 2020
was $43.2 million, up 82% from $23.7 million in the same period
last year. Excluding the $12.2 million of adjusted EBITDA
contributed by NRC in the first quarter of 2020, legacy US Ecology
first quarter adjusted EBITDA grew 31% to $31.0 million as compared
with $23.7 million in the same period last year.
Adjusted free cash flow was $15.9 million in the
first quarter of 2020 compared to $12.1 million in the first
quarter of 2019.
Reconciliations of earnings per diluted share to
adjusted earnings per diluted share, net income to adjusted EBITDA
and net cash from operating activities to adjusted free cash flow
are attached as Exhibit A to this release.
2020 BUSINESS OUTLOOK
On March 31, 2020, we announced certain capital
preservation initiatives as a result of the unprecedented
uncertainty due to the COVID-19 pandemic that included:
- Implementation of cost control initiatives expected to generate
$15 million to $20 million in annual savings
- Reductions to the 2020 capital spending plan by approximately
30%, or $30 million
- The suspension of the quarterly dividend to preserve free cash
flow by approximately $6 million per quarter and enhance
liquidity
We also announced the withdrawal of our 2020 financial guidance
due to the increased uncertainty the COVID-19 pandemic has on the
Company’s business.
“Although the impact of the COVID-19 pandemic on
our first quarter 2020 results was fairly limited we currently
expect the second quarter to be adversely impacted as social
distancing measures and shelter in place took effect.” commented
Feeler. “In addition to the capital preservation initiatives
announced earlier this year, the Company continues to evaluate
additional cost saving measures and cash flow enhancements to
strengthen our already strong balance sheet position, particularly
if conditions worsen beyond our current expectations. We
continue to manage US Ecology for the long term and we are
committed to protecting our valuable workforce, managing through
lower business activity with redeployment of team members to other
business lines, reducing hours and taking advantage of furlough
programs to prepare to take advantage of better business
conditions. With approximately $110 million of cash and $76
million of capacity on our revolving line of credit, our liquidity
and balance sheet remain strong and we anticipate that we will
generate strong free cash flow despite results being lower than
initially anticipated coming into the year.”
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, May 8, 2020 at 11:00 a.m. Eastern
Daylight Time (9:00 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
800-347-6311 or 720-543-0197. The conference call will also be
broadcast live on our website at www.usecology.com. An audio replay
will be available through May 15, 2020 by calling 888-203-1112 or
719-457-0820 and using the passcode 2525592. The replay will
also be accessible on our website at www.usecology.com.
ABOUT US ECOLOGY, INC.
US Ecology, Inc. is a leading provider of
environmental services to commercial and government entities. The
company addresses the complex waste management and response needs
of its customers offering treatment, disposal and recycling of
hazardous, non-hazardous and radioactive waste, leading emergency
response and standby services, and a wide range of complementary
field and industrial services. US Ecology’s focus on safety,
environmental compliance, and best-in-class customer service
enables us to effectively meet the needs of US Ecology’s customers
and to build long lasting relationships. US Ecology has been
protecting the environment since 1952. For more information, visit
www.usecology.com.
Forward looking statements are only predictions
and are not guarantees of performance. These statements are based
on management’s beliefs and assumptions, which in turn are based on
currently available information. Important assumptions include,
among others, those regarding demand for the Company’s services,
expansion of service offerings geographically or through new or
expanded service lines, the timing and cost of planned capital
expenditures, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. Forward
looking statements also involve known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those contained in any forward looking statement.
Many of these factors are beyond our ability to control or predict.
Such factors include developments related to the COVID-19 pandemic,
fluctuations in commodity markets related to our business, the
integration of NRC’s operations, the loss or failure to renew
significant contracts, competition in our markets, adverse economic
conditions, our compliance with applicable laws and regulations,
potential liability in connection with providing oil spill response
services and waste disposal services, the effect of existing or
future laws and regulations related to greenhouse gases and climate
change, the effect of our failure to comply with U.S. or foreign
anti-bribery laws, the effect of compliance with laws and
regulations, an accident at one of our facilities, incidents
arising out of the handling of dangerous substances, our failure to
maintain an acceptable safety record, our ability to perform under
required contracts, limitations on our available cash flow as a
result of our indebtedness, liabilities arising from our
participation in multi-employer pension plans, the effect of
changes in the method of determining the London Interbank Offered
Rate (“LIBOR”) or the replacement thereto, risks associated with
our international operations, the impact of changes to U.S. tariff
and import and export regulations, a change in NRC’s classification
as an Oil Spill Removal Organization, cyber security threats,
unanticipated changes in tax rules and regulations, loss of key
personnel, a deterioration in our labor relations or labor
disputes, our reliance on third-party contractors to provide
emergency response services, our access to insurance, surety bonds
and other financial assurances, our litigation risk not covered by
insurance, the replacement of non-recurring event projects, our
ability to permit and contract for timely construction of new or
expanded disposal space, renewals of our operating permits or lease
agreements with regulatory bodies, our access to cost-effective
transportation services, lawsuits, our implementation of new
technologies, fluctuations in foreign currency markets and foreign
affairs, our integration of acquired businesses, our ability to pay
dividends or repurchase stock, anti-takeover regulations, stock
market volatility, the failure of the warrants to be in the money
or their expiration worthless and risks related to our compliance
with maritime regulations (including the Jones Act).
Except as required by applicable law, including
the securities laws of the United States and the rules and
regulations of the Securities and Exchange Commission (the “SEC”),
we are under no obligation to publicly update or revise any forward
looking statements, whether as a result of new information, future
events or otherwise. You should not place undue reliance on our
forward-looking statements. Although we believe that the
expectations reflected in forward looking statements are
reasonable, we cannot guarantee future results or performance.
Before you invest in our common stock, you should be aware that the
occurrence of the events described in the “Risk Factors” section in
this report could harm our business, prospects, operating results
and financial condition.
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
(unaudited) |
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
|
2019 |
|
Revenue |
|
|
|
Environmental Services |
$ |
126,745 |
|
|
$ |
92,332 |
|
Field & Industrial Services |
|
113,975 |
|
|
|
38,705 |
|
|
|
|
|
Total |
|
240,720 |
|
|
|
131,037 |
|
|
|
|
|
Gross profit |
|
|
|
Environmental Services |
|
44,106 |
|
|
|
31,556 |
|
Field & Industrial Services |
|
17,016 |
|
|
|
3,685 |
|
|
|
|
|
Total |
|
61,122 |
|
|
|
35,241 |
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
Environmental Services |
|
14,235 |
|
|
|
1,406 |
|
Field & Industrial Services |
|
14,683 |
|
|
|
3,385 |
|
Corporate |
|
22,140 |
|
|
|
15,514 |
|
|
|
|
|
Total |
|
51,058 |
|
|
|
20,305 |
|
|
|
|
|
Goodwill impairment charges |
|
|
|
Environmental Services |
|
283,600 |
|
|
|
- |
|
Field & Industrial Services |
|
16,700 |
|
|
|
- |
|
|
|
|
|
Operating (loss) income |
|
(290,236 |
) |
|
|
14,936 |
|
|
|
|
|
Other income (expense): |
|
|
|
Interest income |
|
89 |
|
|
|
207 |
|
Interest expense |
|
(9,310 |
) |
|
|
(4,030 |
) |
Foreign currency gain (loss) |
|
937 |
|
|
|
(139 |
) |
Other |
|
171 |
|
|
|
110 |
|
|
|
|
|
Total other expense |
|
(8,113 |
) |
|
|
(3,852 |
) |
|
|
|
|
(Loss) income before income taxes |
|
(298,349 |
) |
|
|
11,084 |
|
Income tax (benefit) expense |
|
(263 |
) |
|
|
3,041 |
|
|
|
|
|
Net
(loss) income |
$ |
(298,086 |
) |
|
$ |
8,043 |
|
|
|
|
|
(Loss) earnings per share: |
|
|
|
Basic |
$ |
(9.52 |
) |
|
$ |
0.37 |
|
Diluted |
$ |
(9.52 |
) |
|
$ |
0.36 |
|
|
|
|
|
Shares used in (loss) earnings |
|
|
|
per share calculation: |
|
|
|
Basic |
|
31,305 |
|
|
|
21,987 |
|
Diluted |
|
31,305 |
|
|
|
22,197 |
|
|
|
|
|
Dividends paid per share |
$ |
0.18 |
|
|
$ |
0.18 |
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(unaudited) |
|
|
|
|
|
March 31, 2020 |
|
December 31, 2019 |
Assets |
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
Cash and cash equivalents |
$ |
109,790 |
|
|
$ |
41,281 |
|
Receivables, net |
|
240,378 |
|
|
|
255,310 |
|
Prepaid expenses and other current assets |
|
27,080 |
|
|
|
25,136 |
|
Income tax receivable |
|
10,332 |
|
|
|
11,244 |
|
Total current assets |
|
387,580 |
|
|
|
332,971 |
|
|
|
|
|
Property and
equipment, net |
|
485,325 |
|
|
|
478,768 |
|
Operating
lease assets |
|
55,843 |
|
|
|
57,396 |
|
Restricted
cash and investments |
|
5,168 |
|
|
|
5,069 |
|
Intangible
assets, net |
|
564,124 |
|
|
|
574,902 |
|
Goodwill |
|
466,031 |
|
|
|
766,980 |
|
Other
assets |
|
14,568 |
|
|
|
15,158 |
|
Total assets |
$ |
1,978,639 |
|
|
$ |
2,231,244 |
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
Accounts payable |
$ |
51,387 |
|
|
$ |
46,906 |
|
Deferred revenue |
|
21,698 |
|
|
|
14,788 |
|
Accrued liabilities |
|
50,245 |
|
|
|
65,869 |
|
Accrued salaries and benefits |
|
22,069 |
|
|
|
29,653 |
|
Income tax payable |
|
1,324 |
|
|
|
726 |
|
Short-term borrowings |
|
396 |
|
|
|
- |
|
Current portion of long-term debt |
|
3,358 |
|
|
|
3,359 |
|
Current portion of closure and post-closure obligations |
|
2,704 |
|
|
|
2,152 |
|
Current portion of operating lease liabilities |
|
17,813 |
|
|
|
17,317 |
|
Total current liabilities |
|
170,994 |
|
|
|
180,770 |
|
|
|
|
|
Long-term
debt |
|
855,003 |
|
|
|
765,842 |
|
Long-term
closure and post-closure obligations |
|
84,392 |
|
|
|
84,231 |
|
Long-term
operating lease liabilities |
|
38,092 |
|
|
|
39,954 |
|
Other
long-term liabilities |
|
31,439 |
|
|
|
20,722 |
|
Deferred
income taxes, net |
|
122,396 |
|
|
|
128,345 |
|
Total liabilities |
|
1,302,316 |
|
|
|
1,219,864 |
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
Common stock |
|
315 |
|
|
|
315 |
|
Additional paid-in capital |
|
817,730 |
|
|
|
816,345 |
|
Retained (deficit) earnings |
|
(97,179 |
) |
|
|
206,574 |
|
Treasury stock |
|
(18,332 |
) |
|
|
- |
|
Accumulated other comprehensive loss |
|
(26,211 |
) |
|
|
(11,854 |
) |
Total stockholders’ equity |
|
676,323 |
|
|
|
1,011,380 |
|
Total liabilities and stockholders’ equity |
$ |
1,978,639 |
|
|
$ |
2,231,244 |
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(unaudited) |
|
For the Three MonthsEnded March 31, |
|
|
2020 |
|
|
|
2019 |
|
Cash
Flows From Operating Activities: |
|
|
|
Net (loss) income |
$ |
(298,086 |
) |
|
$ |
8,043 |
|
Adjustments to reconcile net (loss) income to net cash provided
by |
|
|
|
operating activities: |
|
|
|
Depreciation and amortization of property and equipment |
|
17,978 |
|
|
|
8,125 |
|
Amortization of intangible assets |
|
9,441 |
|
|
|
2,811 |
|
Accretion of closure and post-closure obligations |
|
1,266 |
|
|
|
1,125 |
|
Property and equipment impairment charges |
|
- |
|
|
|
25 |
|
Goodwill impairment charges |
|
300,300 |
|
|
|
- |
|
Unrealized foreign currency (gain) loss |
|
2,703 |
|
|
|
(371 |
) |
Deferred income taxes |
|
(3,320 |
) |
|
|
2,905 |
|
Share-based compensation expense |
|
1,564 |
|
|
|
1,222 |
|
Share-based payment of business development and integration
expenses |
|
181 |
|
|
|
- |
|
Unrecognized tax benefits |
|
52 |
|
|
|
131 |
|
Net loss (gain) on disposition of assets |
|
184 |
|
|
|
(272 |
) |
Gain on insurance proceeds from damaged property and equipment |
|
- |
|
|
|
(4,653 |
) |
Change in fair value of contingent consideration |
|
(1,127 |
) |
|
|
- |
|
Amortization of debt discount |
|
245 |
|
|
|
- |
|
Amortization of debt issuance costs |
|
298 |
|
|
|
204 |
|
Changes in assets and liabilities (net of effects of business
acquisition): |
|
|
|
Receivables |
|
13,467 |
|
|
|
16,577 |
|
Income tax receivable |
|
893 |
|
|
|
(1,487 |
) |
Other assets |
|
(2,957 |
) |
|
|
525 |
|
Accounts payable and accrued liabilities |
|
(13,618 |
) |
|
|
(11,935 |
) |
Deferred revenue |
|
7,083 |
|
|
|
(47 |
) |
Accrued salaries and benefits |
|
(7,446 |
) |
|
|
(3,417 |
) |
Income tax payable |
|
662 |
|
|
|
(517 |
) |
Closure and post-closure obligations |
|
(417 |
) |
|
|
(470 |
) |
Net cash provided by operating activities |
|
29,346 |
|
|
|
18,524 |
|
|
|
|
|
Cash
Flows From Investing Activities: |
|
|
|
Business acquisitions, net of cash acquired |
|
(3,309 |
) |
|
|
- |
|
Purchases of property and equipment |
|
(19,131 |
) |
|
|
(7,223 |
) |
Insurance proceeds from damaged property and equipment |
|
- |
|
|
|
5,000 |
|
Proceeds from sale of property and equipment |
|
781 |
|
|
|
459 |
|
Purchases of restricted investments |
|
(56 |
) |
|
|
(23 |
) |
Net cash used in investing activities |
|
(21,715 |
) |
|
|
(1,787 |
) |
|
|
|
|
Cash
Flows From Financing Activities: |
|
|
|
Proceeds from long-term debt |
|
90,000 |
|
|
|
- |
|
Payments on long-term debt |
|
(1,125 |
) |
|
|
(30,000 |
) |
Payments on short-term borrowings |
|
(49,871 |
) |
|
|
(4,331 |
) |
Proceeds from short-term borrowings |
|
50,267 |
|
|
|
6,449 |
|
Dividends paid |
|
(5,667 |
) |
|
|
(3,970 |
) |
Payment of equipment financing obligations |
|
(1,525 |
) |
|
|
(199 |
) |
Repurchases of common stock |
|
(18,332 |
) |
|
|
(915 |
) |
Net cash provided by (used in) financing
activities |
|
63,747 |
|
|
|
(32,966 |
) |
|
|
|
|
Effect of
foreign exchange rate changes on cash |
|
(2,825 |
) |
|
|
393 |
|
|
|
|
|
Increase (decrease) in cash and cash equivalents and
restricted cash |
|
68,553 |
|
|
|
(15,836 |
) |
|
|
|
|
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 |
$ |
110,693 |
|
|
$ |
16,917 |
|
|
|
|
|
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;
- Adjusted free cash flow does not reflect capital expenditures
associated with discretionary growth projects; and
- Adjusted free cash flow does not reflect payments of
deferred/contingent purchase consideration.
Adjusted EBITDA
The Company defines adjusted EBITDA as net
income before interest expense, interest income, income tax
expense/benefit, depreciation, amortization, share-based
compensation, accretion of closure and post-closure liabilities,
foreign currency gain/loss, non-cash impairment charges, property
insurance recoveries, business development and integration expenses
and other income/expense.
The following reconciliation itemizes the
differences between reported net income and adjusted EBITDA for the
three months ended March 31, 2020 and 2019:
(in
thousands) |
Three Months Ended March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
|
|
|
Net
(loss) income |
$ |
(298,086 |
) |
|
$ |
8,043 |
|
Income tax (benefit) expense |
|
(263 |
) |
|
|
3,041 |
|
Interest expense |
|
9,310 |
|
|
|
4,030 |
|
Interest income |
|
(89 |
) |
|
|
(207 |
) |
Foreign currency (gain) loss |
|
(937 |
) |
|
|
139 |
|
Other income |
|
(171 |
) |
|
|
(110 |
) |
Property and equipment impairment charges |
|
- |
|
|
|
25 |
|
Goodwill impairment charges |
|
300,300 |
|
|
|
- |
|
Depreciation and amortization of plant and equipment |
|
17,978 |
|
|
|
8,125 |
|
Amortization of intangible assets |
|
9,441 |
|
|
|
2,811 |
|
Share-based compensation |
|
1,564 |
|
|
|
1,222 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
1,266 |
|
|
|
1,125 |
|
Property insurance recoveries |
|
- |
|
|
|
(4,653 |
) |
Business development and integration expenses |
|
2,907 |
|
|
|
141 |
|
Adjusted EBITDA |
$ |
43,220 |
|
|
$ |
23,732 |
|
|
|
|
|
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 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
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 first quarter of 2020.
Business development and integration costs relate to expenses
incurred to evaluate businesses for potential acquisition or costs
related to closing and integrating successfully acquired businesses
and transaction expenses. The foreign currency translation gains or
losses excluded from the earnings per diluted share calculation are
related to intercompany loans between our Canadian subsidiaries and
the U.S. parent which have been established as part of our tax and
treasury management strategy. These intercompany loans are payable
in Canadian dollars (“CAD”) requiring us to revalue the outstanding
loan balance through our consolidated income statement based on the
CAD/United States currency movements from period to period.
We believe excluding the non-cash impairment
charges, the after-tax impact of business development and
integration costs, and non-cash foreign currency translation gains
or losses provides meaningful information to investors regarding
the operational and financial performance of the Company.
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, 2020 and 2019:
|
|
(in
thousands, except per share data) |
Three Months Ended March 31, |
|
|
2020 |
|
|
|
2019 |
|
|
(Loss) incomebeforeincome taxes |
Income taxbenefit(expense) |
Net (loss)income |
per share |
|
Incomebeforeincome taxes |
Income taxexpense |
Net income |
per share |
As Reported |
$ |
(298,349 |
) |
$ |
263 |
|
$ |
(298,086 |
) |
$ |
(9.52 |
) |
|
$ |
11,084 |
|
$ |
(3,041 |
) |
$ |
8,043 |
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Plus: Goodwill impairment charges |
|
300,300 |
|
|
- |
|
|
300,300 |
|
|
9.59 |
|
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
Plus: Property and equipment impairment charges |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
25 |
|
|
- |
|
|
25 |
|
|
- |
|
Plus: Business development and integration expenses |
|
2,907 |
|
|
(799 |
) |
|
2,108 |
|
|
0.07 |
|
|
|
141 |
|
|
(39 |
) |
|
102 |
|
|
- |
|
Less: Property insurance recoveries |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
(4,653 |
) |
|
1,277 |
|
|
(3,376 |
) |
|
(0.15 |
) |
Foreign currency loss (gain) |
|
(937 |
) |
|
258 |
|
|
(679 |
) |
|
(0.02 |
) |
|
|
139 |
|
|
(38 |
) |
|
101 |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
As
Adjusted |
$ |
3,921 |
|
$ |
(278 |
) |
$ |
3,643 |
|
$ |
0.12 |
|
|
$ |
6,736 |
|
$ |
(1,841 |
) |
$ |
4,895 |
|
$ |
0.22 |
|
|
|
|
|
|
|
|
|
|
|
Shares used
in (loss) earnings per diluted share calculation |
|
|
|
31,305 |
|
|
|
|
|
|
22,197 |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
The Company defines adjusted free cash flow as
net cash provided by operating activities less purchases of
property plant and equipment, plus business development and
integration expenses, plus payments of deferred/contingent purchase
consideration, plus purchases of property and equipment for the
Grand View, Idaho facility rebuild, plus synergy related capital
expenditures, plus proceeds from sale of property and
equipment.
The following reconciliation itemizes the
differences between reported net cash from operating activities to
adjusted free cash flow for the three months ended March 31, 2020
and 2019:
|
|
|
Three Months Ended March 31, |
(in thousands) |
|
2020 |
|
|
|
2019 |
|
Adjusted Free Cash Flow Reconciliation |
|
|
|
Net cash provided by operating activities |
$ |
29,346 |
|
|
$ |
18,524 |
|
Less: Purchases of property and equipment |
|
(19,131 |
) |
|
|
(7,223 |
) |
Plus: Business development and integration expenses, net of
tax |
|
2,108 |
|
|
|
102 |
|
Plus: Purchases of property and equipment for the Idaho facility
rebuild |
|
1,811 |
|
|
|
239 |
|
Plus: Payment of deferred/contingent purchase consideration |
|
1,000 |
|
|
|
- |
|
Plus: Proceeds from sale of property and equipment |
|
781 |
|
|
|
459 |
|
|
|
|
|
Adjusted Free Cash Flow |
$ |
15,915 |
|
|
$ |
12,101 |
|
|
|
|
|
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com www.usecology.com
1 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. 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.
2 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. 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.
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