UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K CURRENT REPORT
Pursuant to Section 13 or 15(d) of the |
Date of Report: February 16, 2012
(Date of earliest event reported)
US Ecology, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction
of incorporation)
0-11688
(Commission File Number)
95-3889638
(IRS Employer
Identification Number)
300 E. Mallard Dr., Suite 300, Boise, ID
(Address of principal executive offices)
83706
(Zip Code)
208-331-8400
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if changed since last report)
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Item 2.02. Results of Operations and Financial Condition On February 16, 2012, US Ecology, Inc., issued a press release reporting its results for the quarter ended December 31, 2011. A copy of the press release is attached as Exhibit 99.1 to this report. The information in this report (including Exhibit 99.1) is being furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.
Item 9.01. Financial Statements and Exhibits
(a) Financial statements:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Dated: February 16, 2012 |
US ECOLOGY, INC.
By: /s/ Jeffrey R. Feeler |
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| Exhibit No. | Description |
| 99.1 | Press Release of US Ecology, Inc. dated February 16, 2012 |
BOISE, ID -- (Marketwire - February 16, 2012) - US Ecology, Inc. (NASDAQ: ECOL)
Fourth Quarter 2011
Full Year 2011
US Ecology, Inc. (NASDAQ: ECOL) ("the Company") today reported financial results for the quarter and full year ended December 31, 2011.
Fourth Quarter 2011 Results
Net income for the fourth quarter of 2011 reached $6.7 million, or $0.37 per diluted share, compared to net income of $4.5 million, or $0.25 per diluted share, in the fourth quarter of 2010. Net income in the fourth quarter of 2011 included $908,000 pretax, non-cash gains on foreign currency translation. Excluding the non-cash foreign currency gains, adjusted earnings for the fourth quarter of 2011 was $0.34 per diluted share. Net income in the fourth quarter of 2010 also included pretax, non-cash gains along with pretax business development expenses. Excluding these items, fourth quarter 2010 adjusted earnings was $0.29 per diluted share. A reconciliation of net income to adjusted earnings per diluted share is attached as Exhibit A to this release.
Operating income for the fourth quarter of 2011 reached a record $10.4 million, up 46% from $7.1 million in the fourth quarter of 2010. Adjusted EBITDA (Defined in Exhibit A) of $15.3 million for the fourth quarter of 2011 also reached a new record, increasing 42% above the $10.8 million reported in the same period last year. A reconciliation of net income to adjusted EBITDA is attached as Exhibit A to this release.
Total revenue for the fourth quarter of 2011 increased 5% to $41.6 million, up from $39.5 million in the same quarter last year. This revenue increase was attributable to a 15% increase in treatment and disposal ("T&D") revenue partially offset by a 26% decline in transportation revenue. Stablex Canada Inc. ("Stablex"), which was acquired on October 31, 2010, contributed $8.3 million of total revenue in the fourth quarter of 2011, up from $5.7 million of total revenue in the fourth quarter of 2010. Excluding Stablex, total revenue during the fourth quarter of 2011 decreased 1%, T&D revenue increased 8% and transportation service revenue declined 30% over the same quarter last year.
The growth in T&D revenue during the fourth quarter of 2011 reflects strength in both Base Business (recurring waste streams) and Event Business (discrete cleanup projects) revenue. Base Business revenue increased 23% and Event Business revenue increased 12% in the fourth quarter of 2011 over the same quarter last year. Excluding Stablex, Base Business revenue increased 16% and Event Business increased 10% year over year. These increases reflect improved industrial and economic conditions compared with the same period last year.
Total quarterly volume disposed or processed at our Idaho, Nevada, Texas and Quebec waste facilities was a record 398,000 tons in the fourth quarter of 2011, up 63% from the 244,000 tons disposed or processed in the fourth quarter of 2010. Excluding Stablex, total volumes disposed at our U.S. hazardous waste facilities increased 62%. Average selling price ("ASP") for the fourth quarter 2011 decreased 30% as compared to fourth quarter 2010 due to increased shipments from a large, low ASP direct disposal job and general service mix.
For the fourth quarter of 2011, gross profit reached a record of $16.0 million, up 7% from $14.9 million in the fourth quarter of 2010. Total gross margin was 39% for the fourth quarter of 2011, up from 38% in the same quarter last year and even with the third quarter of 2011. T&D gross margin for the fourth quarter of 2011 was 46%, down from 50% in the fourth quarter of 2010 and even with the third quarter of 2011. The year-over-year decrease in T&D gross margin reflects larger contributions from our lower margin Stablex and Texas thermal recycling operations.
Selling, general and administrative ("SG&A") expense for the fourth quarter of 2011 was $5.6 million, or 14% of revenue, compared to $7.8 million, or 20% of revenue, in the same quarter last year. The $2.2 million decrease primarily reflects $2.0 million in Stablex acquisition costs and other business development activity in the fourth quarter of 2010.
The Company's effective income tax rate for the fourth quarter of 2011 was 39.4%, down from 48.3% in the fourth quarter of 2010. This decrease reflects business development costs in the fourth quarter of 2010 that were not deductible for income tax purposes.
At December 31, 2011, we had $4.3 million of cash on hand. Total borrowings on our lines of credit were $40.6 million, down from the $63.0 million at December 31, 2010. A total of $42.1 million is available for future borrowings.
"A record level of waste receipts drove T&D revenue, operating income and adjusted EBITDA to record levels in the quarter," commented Vice President and Chief Financial Officer Jeff Feeler. "This quarter demonstrates that a combination of high waste volume and favorable service mix amplifies the inherent operating leverage in the business driving operating income and EBITDA higher."
Full Year 2011 Results
Net income for 2011 reached $18.4 million, or $1.01 per diluted share, compared to $12.6 million, or $0.69 per diluted share, for 2010. Excluding a $0.04 per share non-cash foreign currency loss and $0.01 per share of business development expenses, adjusted earnings per diluted share for 2011 were up 39% to $1.06 from adjusted earnings per diluted share for 2010 of $0.76. In 2010 the company reported a $0.06 per share non-cash foreign currency gain and $0.13 per share of business development expenses. A reconciliation of net income to adjusted earnings per diluted share is attached as Exhibit A to this release.
Total revenue for the year ending December 31, 2011 reached $154.9 million, up 48% from $104.8 million for the year ended December 31, 2010. Excluding Stablex, 2011 total revenue was 19% higher than in 2010. T&D revenue reached $129.1 million, up 51% and transportation revenue was up 34% for the year. Disposal volumes surged to 1.1 million tons in 2011, up 52% from 2010 levels. Excluding Stablex, 2011 volume increased 31% over 2010.
Gross profit was $53.9 million for 2011, up from $39.0 million in 2010. Total gross margin was 35% for 2011 as compared with 37% in 2010. T&D gross margin for 2011 was 43% compared with 47% in 2010. This decline reflects the lower gross margins at our Stablex facility and year-over-year growth at our lower margin Texas thermal recycling operations.
SG&A expenses for 2011 were $21.5 million, or 14% of revenue, as compared to $18.6 million, or 18% of revenue, for the same period last year. This increase over 2010 was attributable the full year inclusion of Stablex, higher incentive based compensation and increased business activity in 2011.
Operating income for 2011 was $32.4 million, up 59% from $20.4 million for 2010.
Adjusted EBITDA for 2011 reached a record $49.8 million, 63% above the $30.6 million in 2010. A reconciliation of net income to Adjusted EBITDA is attached as Exhibit A to this release.
Our effective income tax rate for 2011 was 38.4%, down from 43.3% in the same period last year. This decrease reflects lower non tax deductible business development expenses and other non-deductible expenses in 2011 than 2010. The decrease is also partially attributable to favorable adjustments associated with our 2010 income tax filings.
"2011 was a pivotal year for US Ecology as we successfully executed on our strategic growth initiatives to drive disposal volume and revenue, both organically and through acquisition," stated President and Chief Executive Officer, Jim Baumgardner. "We also demonstrated our unequaled ability to handle surges in waste and drive incremental earnings to the bottom line. In addition, 2011 results were derived from a larger and more diverse service offering and asset base making us less dependent on large single projects," Baumgardner added. "By strengthening our market position as a trusted provider of environmental services we were able to post record adjusted EBITDA and have enhanced our ability to generate future profitability and increase shareholder value."
2012 Outlook
Based on strengthening market conditions, management is projecting 2012 adjusted EBITDA of between $50 and $53 million and earnings per diluted share to range between $1.07 and $1.17, excluding any foreign currency gains or losses.
Management expects North American economic and industrial market conditions to continue to improve in 2012. As a result, Base Business is expected to strengthen in line with national and regional industrial production increases. The Company exited 2011 with a healthy pipeline of Event Business opportunities and also projects increased private cleanup activity and commercial opportunities in 2012.
"While mindful of worldwide economic risks, we remain confident in our ability to continue to drive growth and increase profitability," said Baumgardner. "In 2011, in addition to outstanding operational execution, we benefited from our increased scale, geographic presence and service offering, which we will continue to leverage in 2012. We also remain committed to adding new assets and capabilities through acquisition in 2012."
Capital spending for 2012 is estimated to range from $18.5 to $19.5 million and includes approximately $1.4 million of 2011 carryover from projects not yet complete. Capital expenditures for 2012 will be devoted primarily to the construction of additional disposal space in Idaho and Québec, and building, replacing and maintaining equipment and infrastructure at our operating facilities. In 2011 the Company invested $10.1 million in capital projects.
Dividend
On January 3, 2012, the Company declared a quarterly dividend of $0.18 per common share for stockholders of record on January 13, 2012. The $3.3 million dividend was paid on January 20, 2012.
Conference Call
US Ecology, Inc. will hold an investor conference call on Thursday, February 16, 2012 at 10 a.m. Eastern Time (8:00 a.m. Mountain Time) to discuss these results and its current financial position and business outlook. Questions will be invited after management's presentation. Interested parties can join the conference call by dialing 866-700-6293 or 617-213-8835 and using the passcode 20083109. The conference call will also be broadcast live on our website at www.usecology.com. An audio replay will be available through February 23, 2012 by calling 888-286-8010 or 617-801-6888 and using the passcode 56656346. The replay will also be accessible on our website at www.usecology.com.
About US Ecology, Inc.
US Ecology, Inc., through its subsidiaries, provides radioactive, hazardous, PCB and non-hazardous industrial waste management and recycling services to commercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, medical and academic institutions and waste brokers. Headquartered in Boise, Idaho, the Company is one of the oldest radioactive and hazardous waste services companies in the North America.
This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, beliefs and assumptions about the industry and markets in which US Ecology, Inc. and its subsidiaries operate. Because such statements include risks and uncertainties, actual results may differ materially from what is expressed herein and no assurance can be given that the Company will achieve its 2012 earnings estimates, successfully execute its growth strategy, increase market share, or declare or pay future dividends. For information on other factors that could cause actual results to differ materially from expectations, please refer to US Ecology, Inc.'s December 31, 2010 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date such statements are made. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include a loss of a major customer or contract, compliance with and changes to applicable laws, rules, or regulations, access to cost effective transportation services, access to insurance, surety bonds and other financial assurances, loss of key personnel, lawsuits, labor disputes, adverse economic conditions, government funding or competitive pressures, incidents or adverse weather conditions that could limit or suspend specific operations, implementation of new technologies, market conditions, average selling prices for recycled materials, our ability to replace business from recently completed large projects, our ability to perform under required contracts, our ability to permit and contract for timely construction of new or expanded disposal cells, our willingness or ability to pay dividends and our ability to effectively close and integrate future acquisitions.
Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of US Ecology, Inc.
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended For the Year Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Revenue $ 41,567 $ 39,480 $ 154,917 $ 104,836
Direct operating costs 18,933 15,152 73,758 45,391
Transportation costs 6,603 9,407 27,292 20,434
---------- ---------- ---------- ----------
Gross profit 16,031 14,921 53,867 39,011
Selling, general and
administrative expenses 5,628 7,795 21,502 18,634
---------- ---------- ---------- ----------
Operating income 10,403 7,126 32,365 20,377
Other income (expense):
Interest income 5 4 26 51
Interest expense (327) (319) (1,604) (320)
Foreign currency gain
(loss) 872 1,878 (1,321) 1,819
Other 96 80 341 259
---------- ---------- ---------- ----------
Total other income
(expense) 646 1,643 (2,558) 1,809
Income before income taxes 11,049 8,769 29,807 22,186
Income tax expense 4,350 4,236 11,437 9,602
---------- ---------- ---------- ----------
Net income $ 6,699 $ 4,533 $ 18,370 $ 12,584
========== ========== ========== ==========
Earnings per share:
Basic $ 0.37 $ 0.25 $ 1.01 $ 0.69
Diluted $ 0.37 $ 0.25 $ 1.01 $ 0.69
Shares used in earnings per
share calculation:
Basic 18,211 18,177 18,198 18,170
Diluted 18,237 18,197 18,223 18,189
Dividends paid per share $ 0.18 $ 0.18 $ 0.72 $ 0.72
========== ========== ========== ==========
US ECOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
December 31, 2011 December 31, 2010
----------------- -----------------
Assets
Current Assets:
Cash and cash equivalents $ 4,289 $ 6,342
Receivables, net 29,818 33,553
Prepaid expenses and other current
assets 2,185 2,635
Income tax receivable 181 -
Deferred income taxes 964 455
----------------- -----------------
Total current assets 37,437 42,985
Property and equipment, net 99,975 105,822
Restricted cash 4,115 4,115
Intangible assets, net 39,238 41,740
Goodwill 21,200 21,790
Other assets 623 897
----------------- -----------------
Total assets $ 202,588 $ 217,349
================= =================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 4,669 $ 5,033
Deferred revenue 3,574 3,620
Accrued liabilities 10,569 8,188
Accrued salaries and benefits 5,382 4,051
Income tax payable 1,510 2,615
Current portion of closure and post-
closure obligations 2,890 778
Current portion of long-term debt 71 7
----------------- -----------------
Total current liabilities 28,665 24,292
Long-term closure and post-closure
obligations 14,448 15,995
Reducing revolving line of credit 40,500 63,000
Long-term capital lease obligations - 3
Other long-term liabilities 150 201
Unrecognized tax benefits 454 -
Deferred income taxes 18,208 19,146
----------------- -----------------
Total liabilities 102,425 122,637
Contingencies and commitments
Stockholders' Equity
Common stock 183 183
Additional paid-in capital 62,455 61,892
Retained earnings 39,197 33,940
Accumulated other comprehensive
income (loss) (117) 676
Treasury stock (1,555) (1,979)
----------------- -----------------
Total stockholders' equity 100,163 94,712
----------------- -----------------
Total liabilities and stockholders'
equity $ 202,588 $ 217,349
================= =================
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
For the Year Ended December 31,
--------------------------------
2011 2010
--------------- ---------------
Cash Flows From Operating Activities:
Net income $ 18,370 $ 12,584
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization of
property and equipment 13,933 7,750
Amortization of intangible assets 1,419 231
Accretion of closure and post-closure
obligations 1,292 1,137
Unrealized foreign currency loss
(gain) 1,324 (1,205)
Deferred income taxes (1,095) (286)
Stock-based compensation expense 837 988
Unrecognized tax benefits 454 -
Net loss on sale of property and
equipment 187 171
Investment premium amortization - 20
Accretion of interest income - (2)
Changes in assets and liabilities:
Receivables, net 3,593 (11,278)
Income tax receivable (188) -
Other assets 715 (618)
Accounts payable and accrued
liabilities 2,880 1,702
Deferred revenue (21) 339
Accrued salaries and benefits 1,389 1,141
Income tax payable (1,106) 2,413
Closure and post-closure obligations (792) (158)
--------------- ---------------
Net cash provided by operating
activities 43,191 14,929
Cash Flows From Investing Activities:
Purchases of property and equipment (10,096) (14,190)
Proceeds from sale of property and
equipment 98 58
Business acquisition (net of cash
acquired) - (77,427)
Purchases of short-term investments - (4,998)
Maturities of short-term investments - 6,375
Restricted cash, net - 685
--------------- ---------------
Net cash used in investing
activities (9,998) (89,497)
Cash Flows From Financing Activities:
Proceeds from reducing revolving line of
credit 16,900 63,000
Payments on reducing revolving line of
credit (39,400) -
Dividends paid (13,113) (13,090)
Deferred financing costs paid - (373)
Other 449 45
--------------- ---------------
Net cash used in financing
activities (35,164) 49,582
Effect of foreign exchange rate changes on
cash (82) (19)
Decrease in cash and cash equivalents (2,053) (25,005)
Cash and cash equivalents at beginning of
year 6,342 31,347
--------------- ---------------
Cash and cash equivalents at end of year $ 4,289 $ 6,342
=============== ===============
EXHIBIT A
Non-GAAP Results and Reconciliation
US Ecology reports 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, shareholders, and other users information to better understand the Company's operating performance. Because 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 and adjusted earnings per diluted share are significant components in understanding and assessing financial performance.
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, or other financial statement data presented in the consolidated financial statements.
Adjusted EBITDA
The Company defines Adjusted EBITDA as net income before interest, taxes, foreign currency gain/loss, other income/expense, depreciation, amortization, stock based compensation and accretion of closure and post closure liabilities. The following reconciliation itemizes the differences between reported net income and Adjusted EBITDA for the three months and the year ended December 31, 2011 and 2010:
Three Months Ended For the Year Ended
(in thousands) December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Net Income $ 6,699 $ 4,533 $ 18,370 $ 12,584
Income tax expense 4,350 4,236 11,437 9,602
Interest expense 327 319 1,604 320
Interest income (5) (4) (26) (51)
Foreign currency (gain) loss (872) (1,878) 1,321 (1,819)
Other income (96) (80) (341) (259)
Depreciation and
amortization of plant and
equipment 4,022 2,739 13,933 7,750
Amortization of intangibles 343 231 1,419 231
Stock-based compensation 215 199 837 988
Accretion and non-cash
adjustments of closure &
post-closure liabilities 325 457 1,295 1,288
---------- ---------- ---------- ----------
Adjusted EBITDA $ 15,308 $ 10,752 $ 49,849 $ 30,634
========== ========== ========== ==========
EXHIBIT A
Non-GAAP Results and Reconciliation, continued
Adjusted Earnings Per Diluted Share
The Company defines adjusted earnings per diluted share as net income plus the after tax impact of non-cash, non-operational foreign currency gains or losses ("Foreign Currency Gain/Loss") plus the after tax impact of business development cost divided by the diluted shares used in the earnings per share calculation. The Foreign Currency Gain/Loss excluded from the earnings per diluted share calculation are related to intercompany loans between our Canadian subsidiary and the U.S. parent which have been established as part of our tax and treasury management strategy. These intercompany loans are payable in CAD requiring us to revalue the outstanding loan balance through our consolidated income statement based on the CAD/USD currency movements from period to period. We believe excluding the currency movements for these intercompany financial instruments provides meaningful information to investors regarding the operational and financial performance of the Company.
Business development costs relate to expenses incurred to evaluate businesses for potential acquisition or costs related to closing and integrating successfully acquired businesses. Business development costs in both 2011 and 2010 primarily relate to the acquisition of Stablex that was acquired on October 31, 2010. We believe excluding these business development costs 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, 2011 and 2010:
(in thousands,
except per Three Months Ended For the Year Ended
share data) December 31, December 31,
----------------------------- -----------------------------
2011 2010 2011 2010
-------------- -------------- -------------- --------------
per per per per
share share share share
Net income /
earnings per
diluted share $ 6,699 $ 0.37 $ 4,533 $ 0.25 $18,370 $ 1.01 $12,584 $ 0.69
Business
development
costs, net of
tax - - 1,856 0.10 193 0.01 2,346 0.13
Non-cash
foreign
currency
(gain) loss,
net of tax (568) (0.03) (1,159) (0.06) 846 0.04 (1,159) (0.06)
------- ------ ------- ------ ------- ------ ------- ------
Adjusted net
income /
adjusted
earnings per
diluted share $ 6,131 $ 0.34 $ 5,230 $ 0.29 $19,409 $ 1.06 $13,771 $ 0.76
======= ====== ======= ====== ======= ====== ======= ======
Shares used in
earnings per
diluted share
calculation 18,237 18,197 18,223 18,189
======= ======= ======= =======
Contact: Alison Ziegler Cameron Associates (212) 554-5469 alison@cameronassoc.com www.usecology.com