FOURTH QUARTER HIGHLIGHTS COMPARED TO PRIOR
YEAR:
US Ecology, Inc. (NASDAQ: ECOL) (“the Company”) today reported
total revenue of $157.5 million and net income of $13.7 million, or
$0.62 per diluted share for the quarter ended December 31,
2018. Adjusted earnings per share, which also excludes
discrete income tax adjustments, foreign currency translation gains
and losses and business development expenses, was $0.65 per diluted
share in the fourth quarter of 2018, down 11% from the quarter
ended December 31, 2017.
“Our fourth quarter ended on an up note, topping
off a strong year, especially given the difficult comparison to the
fourth quarter in 2017 and the headwinds faced at our Idaho
facility which was non-operational for half of the quarter,”
commented Chairman and Chief Executive Officer, Jeff Feeler.
“Our base business grew 5% during the quarter which was stronger
than anticipated, and we also saw growth in our Event Business
despite a challenging comparison to the fourth quarter of 2017. Our
Field and Industrial Services segment saw continued strength across
its service lines, posting 38% revenue growth over the same quarter
last year.”
Total revenue for the fourth quarter of 2018 of
$157.5 million was up 18% from $133.7 million in the same quarter
last year. Revenue for the Environmental Services (“ES”) segment
was $108.1 million for the fourth quarter of 2018, up from $97.8
million in the fourth quarter of 2017. This increase consisted of
6% growth in treatment and disposal (“T&D”) revenue and 30%
growth in transportation revenue compared to the fourth quarter of
2017. Revenue for the Field and Industrial Services (“FIS”) segment
was $49.5 million for the fourth quarter of 2018, up 38% from $35.9
million in the same period of 2017, reflecting our acquisition of
the Dallas, TX and Midland, TX locations as well as stronger
overall market conditions.
Gross profit for the fourth quarter of 2018 was
$45.7 million, down 4% from $47.6 million in the same quarter last
year. Gross profit for the ES segment was $39.2 million in the
fourth quarter of 2018, down from $42.5 million in the same quarter
of 2017. T&D gross margin for the ES segment was 43% for the
fourth quarter of 2018, compared to 47% for the fourth quarter of
2017. The decrease was partially attributable to our Idaho facility
being non-operational for a portion of the quarter as well as $2.6
million in business interruption insurance proceeds recognized in
the fourth quarter of 2017. Gross profit for the FIS segment in the
fourth quarter of 2018 was $6.5 million. This compares to gross
profit of $5.2 million in the fourth quarter of 2017, representing
year-over-year improvement of 26%. FIS gross margin for the fourth
quarter of 2018 was 13% compared to 14% in the fourth quarter of
2017 driven primarily by a less favorable service mix in our
industrial services business.
Selling, general and administrative (“SG&A”)
expense for the fourth quarter of 2018 was $25.3 million compared
with $22.3 million in the same quarter last year. The increase was
due to higher labor and incentive compensation costs, consulting
and professional services fees and higher bad debt expense in the
fourth quarter of 2018 compared to the fourth quarter of 2017.
Operating income for the fourth quarter of 2018
was $20.4 million compared to $16.4 million in the fourth quarter
of 2017, which included an $8.9 million impairment charge on the
airport recovery business within the Environmental Services segment
as a result of continued unfavorable winter weather conditions
resulting in reduced collection of deicing fluid and depressed
commodity prices for recovered solvent.
Net interest expense for the fourth quarter of
2018 was $3.2 million, up from $2.8 million in the fourth quarter
of 2017. The increase was the result of higher outstanding debt
levels in the fourth quarter of 2018 compared to the fourth quarter
of 2017 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 fourth quarter of 2018 was 23.0% compared to 36.0% in
the fourth quarter of 2017, when excluding the non-deductible
impairment charge and adjustments related to income tax reform
passed in the fourth quarter of 2017. The decrease was
primarily due to the reduction in the U.S. corporate tax rate from
35% to 21% at the end of 2017. Also contributing to the lower
effective rate was the implementation of tax planning strategies
that resulted in one-time favorable adjustments to prior year
income tax returns.
Net income for the fourth quarter of 2018 was
$13.7 million, or $0.62 per diluted share, compared to net income
of $30.8 million, or $1.40 per diluted share, in the fourth quarter
of 2017. A significant portion of the decrease in net income and
diluted earnings per share compared to the fourth quarter of 2017
relates to adjustments to income tax expense associated with
changes in our deferred tax liabilities as a result of tax reform
at the end of 2017. Tax reform favorably impacted net income by
approximately $23.8 million and diluted earnings per share by
approximately $1.08 in the fourth quarter of 2017. Adjusted
earnings per share was $0.65 per diluted share in the fourth
quarter of 2018 compared to $0.73 per diluted share in the fourth
quarter of 2017.
Adjusted EBITDA for the fourth quarter of 2018
was $32.9 million, down 8% from $35.7 million in the same period
last year. Pro Forma adjusted EBITDA, which excludes business
development expenses, was $33.4 million in the fourth quarter of
2018 compared to $35.8 million in the fourth quarter of
2017.
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.
2018 RESULTS
Total revenue for 2018 grew 12% to $565.9
million compared to $504.0 million in 2017. ES segment revenue was
$400.7 million for 2018, up from $366.3 million in 2017. This
consisted of a 7% increase in T&D revenue and an 18% increase
in transportation revenue compared to last year. Revenue for the
FIS segment was $165.3 million in 2018 compared to $137.7 million
in 2017, reflecting our acquisition of the Dallas and Midland
locations as well as stronger overall market conditions.
Gross profit for 2018 was $170.1 million, up
from $153.1 million in 2017. Gross profit for the ES segment was
$147.5 million in 2018, up from $135.0 million in 2017. T&D
gross margin for the ES segment was 42% in 2018, up from 40% in
2017. Gross profit for the FIS segment in 2018 was $22.6
million compared with $18.2 million in 2017. Gross margin for
the FIS segment was 14% in 2018 compared to 13% in 2017. The
increase was due to additional contract wins and associated revenue
in our small quantity generation services and total waste
management businesses, stronger market conditions in our
remediation business and the acquisition of our Dallas and Midland
locations.
SG&A expense for 2018 was $92.3 million
compared with $84.5 million in 2017. The increase in SG&A
expense was primarily due to higher labor and incentive
compensation, higher professional and consulting services and
higher bad debt expense in 2018 compared to 2017.
During the third quarter of 2018, the Company
recognized a $3.7 million non-cash goodwill and intangible asset
impairment charge on its mobile solvent recycling business within
our Environmental Services segment as a result of declining
business and cash flows. The fourth quarter of 2017 includes
an $8.9 million non-cash goodwill and intangible asset impairment
charge on the airport recovery business.
Operating income was $74.1 million for 2018, up
24% from $59.8 million in 2017. Excluding the non-cash goodwill and
intangible asset impairment charges of $3.7 million and $8.9
million taken in 2018 and 2017, respectively, operating income
increased 13% compared to 2017.
Net interest expense for 2018 was $11.9 million,
down from $18.1 million in 2017. Interest expense for 2017 included
a non-cash charge of $5.5 million associated with the write-off of
deferred financing fees related to a former credit facility that
was refinanced in April 2017. Excluding the non-cash deferred
financing fees charge, interest expense decreased primarily from
the lower interest rate on our new credit facility.
The Company’s consolidated effective income tax
rate for 2018 was 23.5% compared to 36.0% in 2017 when excluding
the non-deductible impairment charge and the impact of income tax
reform passed in 2017. The decrease was primarily due to the
reduction in the U.S. corporate tax rate from 35% to 21% at the end
of 2017. Also contributing to the lower effective rate was
the implementation of tax planning strategies that resulted in
one-time favorable adjustments to prior year income tax
returns.
Net income was $49.6 million, or $2.25 per
diluted share, in 2018 compared to $49.4 million, or $2.25 per
diluted share, in 2017. Adjusted earnings per share was $2.32 per
diluted share for 2018 compared to $1.72 per diluted share for
2017. Adjusted EBITDA was $124.7 million in 2018, up 10% from
$113.8 million in 2017. Pro Forma adjusted EBITDA, which excludes
business development expenses, was $125.4 million in 2018 compared
to $114.3 million in 2017.
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
"The strong performance we experienced in the
fourth quarter and for the full year of 2018 is expected to
continue in 2019,” commented Feeler. “Underlying business
conditions remain solid across our segments, various service lines
and geographies. Acquisitions completed in 2018 are
performing well and will be additive to our base line growth in
2019. We enter 2019 facing a strong headwind with our Grand View,
Idaho facility. Though our Grand View facility resumed
landfill operations in February 2019, we do not anticipate
treatment operations to resume until the second half of the year.
Plans to re-route materials as necessary to other US Ecology
facilities continue while we work through the rebuilding process.
While recoveries from insurance for property damage and from
business interruption are anticipated, timing and amounts are
difficult to estimate. Despite this headwind, we are seeing
tremendous opportunities and growth elsewhere in our business to
generate double digit adjusted EBITDA growth in 2019.”
Based on current business conditions, management
is projecting 2019 earnings per diluted share between $2.09 and
$2.41. We expect that our adjusted EBITDA will range from $135
million to $145 million, reflecting growth of up to 16%, compared
to 2018 Pro Forma adjusted EBITDA of $125.4 million.
2019 revenue is anticipated to range from $583
million to $627 million, compared to $565.9 million in 2018. This
is expected to be comprised of ES segment revenue between $408
million and $483 million and FIS segment revenue between $175
million and $189 million. ES segment Base Business is
expected to grow in the range of 3-5% over 2018 and we continue to
see a healthy Event Business pipeline giving us confidence we
should see double digit growth over 2018. Our Field and
Industrial Services segment is expected to see strong growth in
small quantity generation, managed services and industrial and
emergency response services.
We anticipate our consolidated effective tax
rate for 2019 to be approximately 27%.
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 |
|
$ |
46,505 |
|
$ |
53,510 |
| Income
tax expense |
|
17,045 |
|
19,740 |
| Interest
expense |
|
15,590 |
|
15,590 |
| Interest
income |
|
(10) |
|
(10) |
| Other
income |
|
(360) |
|
(360) |
|
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 |
| Adjusted
EBITDA |
|
$ |
135,000 |
|
$ |
145,000 |
| |
|
|
|
|
Projections exclude any foreign currency
translation gains or losses, business development expenses or other
unusual transactions. Our earnings guidance also contemplates
our current assumptions on the timing of resumption of treatment
activities at our Idaho facility in 2019.
2019 capital spending is estimated to range from
$55 million to $60 million. This amount excludes approximately $8
million of capital spending we plan to incur in rebuilding the
damaged infrastructure at our Idaho facility that we expect will be
fully recovered through insurance. Approximately 40% of our 2019
capital expenditures will focus on constructing additional landfill
disposal space. Approximately 25% will be focused on high
return-on-investment growth projects with the balance targeted to
improving infrastructure, replacing equipment at our operating
facilities and continuing our information system
investment.
Factoring in the above guidance, we anticipate strong free cash
flow generation in 2019, approximating $45 million to $50 million
compared to $40.7 million in 2018. The 2019 free cash flow guidance
range does not include approximately $8 million of capital spending
related to rebuild our Idaho facility’s indoor treatment facility
that we expect will be fully recovered through insurance. Free cash
flow is defined as net cash provided by operating activities less
purchases of property and equipment (capital expenditures), net of
insurance proceeds received from damaged property and
equipment.
DIVIDEND
On January 2, 2019, the Company declared a
quarterly dividend of $0.18 per common share for stockholders of
record on January 18, 2019. The $4.0 million dividend was paid on
January 25, 2019.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, February 22, 2019 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
888-204-4368 or 786-789-4783. The conference call will also be
broadcast live on our website at www.usecology.com. An audio replay
will be available through March 1, 2019 by calling 888-203-1112 or
719-457-0820 and using the passcode 5310005. 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 December 31, |
|
Year Ended December 31, |
| |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
| Environmental
Services |
|
$ |
108,050 |
|
$ |
97,753 |
|
$ |
400,678 |
|
$ |
366,308 |
| Field
& Industrial Services |
|
49,491 |
|
35,944 |
|
165,250 |
|
137,734 |
| |
|
|
|
|
|
|
|
|
|
Total |
|
157,541 |
|
133,697 |
|
565,928 |
|
504,042 |
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
|
|
|
Environmental Services |
|
39,194 |
|
42,463 |
|
147,475 |
|
134,968 |
| Field
& Industrial Services |
|
6,481 |
|
5,162 |
|
22,619 |
|
18,159 |
| |
|
|
|
|
|
|
|
|
|
Total |
|
45,675 |
|
47,625 |
|
170,094 |
|
153,127 |
|
|
|
|
|
|
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
|
|
|
|
|
|
Environmental Services |
|
5,616 |
|
6,120 |
|
22,542 |
|
24,185 |
| Field
& Industrial Services |
|
3,272 |
|
1,692 |
|
10,742 |
|
9,278 |
|
Corporate |
|
16,415 |
|
14,496 |
|
59,056 |
|
51,003 |
| |
|
|
|
|
|
|
|
|
|
Total |
|
25,303 |
|
22,308 |
|
92,340 |
|
84,466 |
|
|
|
|
|
|
|
|
|
|
|
Impairment Charges |
|
|
|
|
|
|
|
|
|
Environmental Services |
|
- |
|
8,903 |
|
3,666 |
|
8,903 |
|
|
|
|
|
|
|
|
|
|
| Operating
income |
|
20,372 |
|
16,414 |
|
74,088 |
|
59,758 |
| |
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
| Interest
income |
|
118 |
|
13 |
|
215 |
|
62 |
| Interest
expense |
|
(3,348) |
|
(2,770) |
|
(12,130) |
|
(18,157) |
| Foreign
currency gain (loss) |
|
511 |
|
(5) |
|
55 |
|
516 |
|
Other |
|
137 |
|
254 |
|
2,630 |
|
791 |
|
|
|
|
|
|
|
|
|
|
| Total
other expense |
|
(2,582) |
|
(2,508) |
|
(9,230) |
|
(16,788) |
| |
|
|
|
|
|
|
|
|
|
Income before income taxes |
|
17,790 |
|
13,906 |
|
64,858 |
|
42,970 |
|
Income tax expense (benefit) |
|
4,085 |
|
(16,860) |
|
15,263 |
|
(6,395) |
|
Net income |
|
$ |
13,705 |
|
$ |
30,766 |
|
$ |
49,595 |
|
$ |
49,365 |
|
|
|
|
|
|
|
|
|
|
| Earnings per
share: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.64 |
|
$ |
1.42 |
|
$ |
2.27 |
|
$ |
2.27 |
|
Diluted |
|
$ |
0.62 |
|
$ |
1.40 |
|
$ |
2.25 |
|
$ |
2.25 |
| |
|
|
|
|
|
|
|
|
| Shares used in
earnings |
|
|
|
|
|
|
|
|
|
per share calculation: |
|
|
|
|
|
|
|
|
|
Basic |
|
21,957 |
|
21,780 |
|
21,888 |
|
21,758 |
|
Diluted |
|
22,109 |
|
21,927 |
|
22,047 |
|
21,902 |
| |
|
|
|
|
|
|
|
|
| Dividends paid
per share |
|
$ |
0.18 |
|
$ |
0.18 |
|
$ |
0.72 |
|
$ |
0.72 |
|
|
|
|
|
|
|
|
|
|
| US ECOLOGY, INC. |
| CONSOLIDATED BALANCE SHEETS |
| (in thousands) |
| (unaudited) |
|
|
|
|
|
|
| |
|
December 31, 2018 |
|
December 31, 2017 |
|
Assets |
|
|
|
|
| |
|
|
|
|
| Current Assets: |
|
|
|
|
| Cash and cash
equivalents |
|
$ |
31,969 |
|
$ |
27,042 |
|
Receivables, net |
|
144,690 |
|
110,777 |
| Prepaid
expenses and other current assets |
|
10,938 |
|
9,138 |
| Income
tax receivable |
|
7,071 |
|
- |
|
Total current assets |
|
194,668 |
|
146,957 |
|
|
|
|
|
|
| Property and equipment,
net |
|
258,443 |
|
234,432 |
| Restricted cash and
investments |
|
4,941 |
|
5,802 |
| Intangible assets,
net |
|
279,666 |
|
222,812 |
| Goodwill |
|
207,177 |
|
189,373 |
| Other assets |
|
3,003 |
|
2,700 |
| Total
assets |
|
$ |
947,898 |
|
$ |
802,076 |
| |
|
|
|
|
| Liabilities and
Stockholders’ Equity |
|
|
|
|
| |
|
|
|
|
| Current
Liabilities: |
|
|
|
|
| Accounts
payable |
|
$ |
17,754 |
|
$ |
14,868 |
| Deferred
revenue |
|
10,451 |
|
8,532 |
| Accrued
liabilities |
|
35,524 |
|
22,888 |
| Accrued
salaries and benefits |
|
16,732 |
|
14,242 |
| Income
tax payable |
|
505 |
|
2,970 |
| Current
portion of closure and post-closure obligations |
|
2,266 |
|
2,330 |
|
Total current liabilities |
|
83,232 |
|
65,830 |
|
|
|
|
|
|
| Long-term closure and
post-closure obligations |
|
76,097 |
|
73,758 |
| Long-term debt |
|
364,000 |
|
277,000 |
| Other long-term
liabilities |
|
2,146 |
|
3,828 |
| Deferred income taxes,
net |
|
63,206 |
|
57,583 |
|
Total liabilities |
|
588,681 |
|
477,999 |
| |
|
|
|
|
| Commitments and
contingencies |
|
|
|
|
| |
|
|
|
|
| Stockholders’
Equity |
|
|
|
|
| |
|
|
|
|
| Common
stock |
|
220 |
|
218 |
|
Additional paid-in capital |
|
183,834 |
|
177,498 |
| Retained
earnings |
|
189,324 |
|
155,533 |
| Treasury
stock |
|
(370) |
|
(68) |
|
Accumulated other comprehensive loss |
|
(13,791) |
|
(9,104) |
|
Total stockholders’ equity |
|
359,217 |
|
324,077 |
| Total
liabilities and stockholders’ equity |
|
$ |
947,898 |
|
$ |
802,076 |
|
|
|
|
|
|
| US ECOLOGY, INC. |
| CONSOLIDATED STATEMENTS OF CASH
FLOWS |
| (in thousands) |
| (unaudited) |
| |
|
|
|
|
| |
|
For the Year Ended December
31, |
| |
|
2018 |
|
2017 |
|
Cash Flows From Operating Activities: |
|
|
|
|
| Net income |
|
$ |
49,595 |
|
$ |
49,365 |
| Adjustments
to reconcile net income to net cash provided by operating
activities: |
|
|
|
|
| Depreciation
and amortization of property and equipment |
|
29,207 |
|
28,302 |
| Amortization
of intangible assets |
|
9,645 |
|
9,888 |
| Accretion of
closure and post-closure obligations |
|
3,707 |
|
3,026 |
| Impairment
charges |
|
3,666 |
|
8,903 |
| Unrealized
foreign currency loss (gain) |
|
1,211 |
|
(1,283) |
| Deferred
income taxes |
|
5,906 |
|
(25,309) |
| Share-based
compensation expense |
|
4,366 |
|
3,933 |
| Net loss on
disposition of assets |
|
370 |
|
408 |
| Gain on
insurance proceeds from damaged property and equipment |
|
(347) |
|
(1,313) |
| Unrecognized
tax benefits |
|
485 |
|
- |
| Amortization
and write-off of debt issuance costs |
|
810 |
|
6,009 |
| Amortization
and write-off of debt discount |
|
- |
|
667 |
| Changes in
assets and liabilities (net of effects of business
acquisition): |
|
|
|
|
|
Receivables |
|
(32,301) |
|
(13,861) |
| Income tax
receivable |
|
(7,072) |
|
4,121 |
| Other
assets |
|
(1,187) |
|
(1,328) |
| Accounts
payable and accrued liabilities |
|
14,301 |
|
2,012 |
| Deferred
revenue |
|
2,059 |
|
617 |
| Accrued
salaries and benefits |
|
2,476 |
|
3,420 |
| Income tax
payable |
|
(3,512) |
|
3,921 |
| Closure and
post-closure obligations |
|
(1,900) |
|
(1,795) |
| Net
cash provided by operating
activities |
|
81,485 |
|
79,703 |
| |
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
| Business
acquisitions |
|
(108,382) |
|
- |
| Purchases of
property and equipment |
|
(40,757) |
|
(36,240) |
| Insurance
proceeds from damaged property and equipment |
|
- |
|
1,313 |
| Purchases of
restricted investments |
|
(1,023) |
|
(800) |
| Proceeds
from sale of restricted investments |
|
910 |
|
835 |
| Proceeds
from sale of property and equipment |
|
493 |
|
974 |
| Net
cash used in investing
activities |
|
(148,759) |
|
(33,918) |
| |
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
| Proceeds
from long-term debt |
|
87,000 |
|
281,000 |
| Payments on
long-term debt |
|
- |
|
(287,040) |
| Payments on
short-term borrowings |
|
- |
|
(13,438) |
| Proceeds
from short term borrowings |
|
- |
|
11,260 |
| Dividends
paid |
|
(15,804) |
|
(15,711) |
| Proceeds
from exercise of stock options |
|
2,427 |
|
1,050 |
| Payment of
equipment financing obligations |
|
(448) |
|
(377) |
| Deferred
financing costs paid |
|
- |
|
(2,967) |
| Other |
|
(314) |
|
(121) |
| Net
cash provided by (used in) financing
activities |
|
72,861 |
|
(26,344) |
| |
|
|
|
|
| Effect of
foreign exchange rate changes on cash |
|
(1,633) |
|
636 |
| |
|
|
|
|
|
Increase in Cash and cash equivalents and restricted
cash |
|
3,954 |
|
20,077 |
| |
|
|
|
|
|
Cash and cash equivalents and restricted cash at beginning
of period |
|
28,799 |
|
8,722 |
| |
|
|
|
|
|
Cash and cash equivalents and restricted cash at end of
period |
|
$ |
32,753 |
|
$ |
28,799 |
| |
|
|
|
|
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, non-cash 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 and year ended December
31, 2018 and 2017:
| (in thousands) |
|
Three Months Ended December 31, |
|
Year Ended December 31, |
| |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
| |
|
|
|
|
|
|
|
|
| Net
Income |
|
$ |
13,705 |
|
$ |
30,766 |
|
$ |
49,595 |
|
$ |
49,365 |
| Income
tax expense (benefit) |
|
4,085 |
|
(16,860) |
|
15,263 |
|
(6,395) |
| Interest
expense |
|
3,348 |
|
2,770 |
|
12,130 |
|
18,157 |
| Interest
income |
|
(118) |
|
(13) |
|
(215) |
|
(62) |
| Foreign
currency (gain) loss |
|
(511) |
|
5 |
|
(55) |
|
(516) |
| Other
income |
|
(137) |
|
(254) |
|
(2,630) |
|
(791) |
|
Impairment charges |
|
- |
|
8,903 |
|
3,666 |
|
8,903 |
|
Depreciation and amortization of plant and equipment |
|
8,216 |
|
7,295 |
|
29,207 |
|
28,302 |
|
Amortization of intangible assets |
|
2,720 |
|
2,303 |
|
9,645 |
|
9,888 |
|
Share-based compensation |
|
1,094 |
|
978 |
|
4,366 |
|
3,933 |
| Accretion
and non-cash adjustments of closure & post-closure
obligations |
|
465 |
|
(219) |
|
3,707 |
|
3,026 |
| Adjusted
EBITDA |
|
$ |
32,867 |
|
$ |
35,674 |
|
$ |
124,679 |
|
$ |
113,810 |
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Business
development expenses |
|
530 |
|
117 |
|
748 |
|
500 |
| Pro Forma
adjusted EBITDA |
|
$ |
33,397 |
|
$ |
35,791 |
|
$ |
125,427 |
|
$ |
114,310 |
| |
|
|
|
|
|
|
|
|
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 impact of tax reform, the after-tax
impact of non-cash write-off of deferred financing fees related to
our former credit agreement, 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 2018 and airport recovery business in
2017. 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. The non-cash write-off of deferred
financing fees relates to the write-off of the remaining
unamortized fees associated with our former credit agreement which
was refinanced in April 2017. Business development costs relate to
expenses incurred to evaluate businesses for potential acquisition
or costs related to closing and integrating successfully acquired
businesses. 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 impact of tax
reform, the gain on issuance of a property easement, the after-tax
impact of the non-cash write off of deferred financing fees, 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, 2018 and
2017:
| (in thousands, except
per share data) |
Three Months Ended December 31, |
| |
2018 |
|
2017 |
| |
Income before income taxes |
|
Income tax
expense |
|
Net income |
|
per share |
|
Income before income taxes |
|
Income tax
expense |
|
Net income |
|
per share |
| As Reported |
$ |
17,790 |
|
$ |
(4,085) |
|
$ |
13,705 |
|
$ |
0.62 |
|
$ |
13,906 |
|
$ |
16,860 |
|
$ |
30,766 |
|
$ |
1.40 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Impairment charges |
- |
|
- |
|
- |
|
- |
|
8,903 |
|
- |
|
8,903 |
|
0.41 |
|
Less: Impact of tax reform |
- |
|
- |
|
- |
|
- |
|
- |
|
(23,778) |
|
(23,778) |
|
(1.08) |
|
Less: Discrete income tax adjustments |
- |
|
(442) |
|
(442) |
|
(0.02) |
|
- |
|
- |
|
- |
|
- |
|
Plus: Business development costs |
530 |
|
(143) |
|
387 |
|
0.02 |
|
117 |
|
(42) |
|
75 |
|
- |
| Non-cash
foreign currency translation loss |
931 |
|
(251) |
|
680 |
|
0.03 |
|
73 |
|
(26) |
|
47 |
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As Adjusted |
$ |
19,251 |
|
$ |
(4,921) |
|
$ |
14,330 |
|
$ |
0.65 |
|
$ |
22,999 |
|
$ |
(6,986) |
|
$ |
16,013 |
|
$ |
0.73 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in earnings
per diluted share calculation |
|
|
|
|
22,109 |
|
|
|
|
|
|
|
21,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (in thousands, except
per share data) |
Year Ended December 31, |
| |
2018 |
|
2017 |
| |
Income before income taxes |
|
Income tax
expense |
|
Net income |
|
per share |
|
Income before income taxes |
|
Income tax
expense |
|
Net income |
|
per share |
| As
Reported |
$ |
64,858 |
|
$ |
(15,263) |
|
$ |
49,595 |
|
$ |
2.25 |
|
$ |
42,970 |
|
$ |
6,395 |
|
$ |
49,365 |
|
$ |
2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus: Impairment charges |
3,666 |
|
- |
|
3,666 |
|
0.17 |
|
8,903 |
|
- |
|
8,903 |
|
0.41 |
|
Less: TX land easement gain |
(1,990) |
|
512 |
|
(1,478) |
|
(0.07) |
|
- |
|
- |
|
- |
|
- |
|
Less: Discrete income tax adjustments |
- |
|
(2,146) |
|
(2,146) |
|
(0.10) |
|
- |
|
- |
|
- |
|
- |
|
Less: Impact of tax reform |
- |
|
- |
|
- |
|
- |
|
- |
|
(23,778) |
|
(23,778) |
|
(1.08) |
|
Plus: Non-cash write-off of deferred financing fees related
to former credit agreement |
- |
|
- |
|
- |
|
- |
|
5,461 |
|
(1,972) |
|
3,489 |
|
0.16 |
|
Plus: Business development costs |
748 |
|
(202) |
|
546 |
|
0.03 |
|
500 |
|
(181) |
|
319 |
|
0.01 |
| Non-cash
foreign currency translation (gain) loss |
1,301 |
|
(351) |
|
950 |
|
0.04 |
|
(1,124) |
|
406 |
|
(718) |
|
(0.03) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| As Adjusted |
$ |
68,583 |
|
$ |
(17,450) |
|
$ |
51,133 |
|
$ |
2.32 |
|
$ |
56,710 |
|
$ |
(19,130) |
|
$ |
37,580 |
|
$ |
1.72 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Shares used in earnings
per diluted share calculation |
|
|
|
|
22,047 |
|
|
|
|
|
|
|
21,902 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com www.usecology.com
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