UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Form 8-K
_____________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event Reported): November 1, 2018
US Ecology, Inc.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 0-11688 | 95-3889638 |
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) |
| 101 S. Capitol Blvd., Suite 1000, Boise, Idaho 83702 |
| (Address of Principal Executive Offices) (Zip Code) |
(208) 331-8400
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | ||
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [ ]
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]
Item 2.02. Results of Operations and Financial Condition.
On November 1, 2018, US Ecology, Inc. issued a press release reporting its results for the quarter ended September 30, 2018. 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.
The following exhibits relating to Item 2.02 shall be deemed to be furnished, and not filed: (d) Exhibits
SIGNATURES
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.
| US Ecology, Inc. | ||
| Date: November 1, 2018 | By: | /s/ Eric L. Gerratt |
| Eric L. Gerratt | ||
| Executive Vice President and Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit No. | Description | |
| 99.1 | Press Release of US Ecology, Inc. dated November 1, 2018 |
EXHIBIT 99.1
US Ecology Announces Third Quarter 2018 Results; Increases Guidance for 2018
THIRD QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:
BUSINESS OUTLOOK:
BOISE, Idaho , Nov. 01, 2018 (GLOBE NEWSWIRE) -- US Ecology, Inc. (NASDAQ: ECOL) (“the Company”) today reported total revenue of $151.4 million and net income of $13.4 million, or $0.61 per diluted share, for the quarter-ended September 30, 2018. Adjusted earnings per share, which excludes impairment charges, discrete income tax adjustments, foreign currency translation gains and losses and business development expenses, was $0.70 per diluted share in the third quarter of 2018, up 89% from the third quarter of 2017.
“Underlying strength in the industrial economy and in many of our customers’ operations drove our solid performance in the third quarter,” commented Chairman and Chief Executive Officer, Jeff Feeler. “Our Base Business was very strong, growing 9% over the third quarter last year. When factoring in the hurricane impact on the Gulf region in the third quarter last year, Base Business still increased approximately 5% year-over-year. Event Business declined 8% in the third quarter of 2018, primarily due to timing of shipments on a large multi-year project. Our Field and Industrial Services segment saw strength across its service lines, posting 22% revenue growth and a more than doubling of segment operating income over the same quarter last year.”
For the third quarter of 2018, Environmental Services (“ES”) segment revenue was $107.2 million, up 10% from $97.7 million in the third quarter of 2017. This increase consisted of 8% growth in treatment and disposal (“T&D”) revenue and 18% growth in transportation revenue compared to the third quarter of 2017. Field and Industrial Services (“FIS”) segment revenue was $44.2 million for the third quarter of 2018, up 22% from $36.4 million in the same period of 2017, reflecting growth in our Remediation, Small Quantity Generation and Total Waste Management business lines. Also contributing to this growth was revenue associated with our recently acquired field and industrial services group based out of Dallas, Texas.
Gross profit for the third quarter of 2018 was $47.3 million, up 25% from $37.7 million in the same quarter last year. ES segment gross profit was $39.9 million in the third quarter of 2018, up from $33.1 million in the same quarter of 2017. T&D gross margin for the ES segment was 43% for the third quarter of 2018, up from 38% for the third quarter of 2017. Gross profit for the FIS segment in the third quarter of 2018 was $7.4 million, up from $4.6 million in the third quarter of 2017. Gross margin for the FIS segment was 17% in third quarter of 2018, compared to 13% in the third quarter last year. The increase was due to a more favorable service mix, particularly for the recently acquired field and industrial services group based out of Dallas, Texas.
Selling, general and administrative (“SG&A”) expense for the third quarter of 2018 was $23.6 million, compared with $22.4 million in the same quarter last year. The increase in SG&A expense was primarily due to higher labor and incentive compensation and higher professional and consulting services, partially offset by lower property taxes. In the third quarter of 2017, we recorded a charge of approximately $1.1 million related to a property tax assessment for tax years 2015-2017 associated with our 2014 acquisition of EQ Holdings, Inc. SG&A expense as a percentage of revenue was down slightly in the third quarter of 2018 compared to the same period of 2017.
During the third quarter of 2018, the Company recognized a $3.7 million 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.
Operating income for the third quarter of 2018 was $20.0 million, an increase of 31% from $15.3 million in the third quarter of 2017.
Net interest expense for the third quarter of 2018 was $3.0 million, up slightly from $2.8 million in the third quarter of 2017. The increase was the result of higher interest rates on the variable portion of our credit facility in the third quarter of 2018 compared to the third quarter of 2017.
The Company’s consolidated effective income tax rate for the third quarter of 2018 was 20.2%, down from 35.8% for the third quarter of 2017. The decrease was primarily due to tax reform passed in the fourth quarter of 2017, which reduced the U.S. corporate tax rate from 35% to 21%. 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 third quarter of 2018 was $13.4 million, or $0.61 per diluted share, compared to net income of $8.4 million, or $0.38 per diluted share, in the third quarter of 2017. Tax reform favorably impacted net income by approximately $0.12 per diluted share compared to the third quarter of 2017. Adjusted earnings per share was $0.70 per diluted share in the third quarter of 2018 compared to $0.37 per diluted share in the third quarter of 2017.
Adjusted EBITDA for the third quarter of 2018 was $35.6 million, up 32% from $27.1 million in the same period last year.
Reconciliations of earnings per diluted share to adjusted earnings per diluted share and net income to adjusted EBITDA are attached as Exhibit A to this release.
Year-To-Date Results
Total revenue for the first nine months of 2018 was $408.4 million, up 10% from $370.3 million in the first nine months of 2017. Revenue for the ES segment was $292.6 million for the first nine months of 2018, up from $268.6 million in the same period of 2017. This consisted of a 7% increase in T&D revenue and a 15% increase in transportation revenue compared to the first nine months of 2017. Revenue for the FIS segment was $115.8 million for the first nine months of 2018, up 14% from $101.8 million in the same period of 2017, reflecting continued growth in our Total Waste Management and Small Quantity Generation business lines as well as stronger overall market conditions.
Gross profit for the first nine months of 2018 was $124.4 million, up 18% from $105.5 million in the same period last year. Gross profit for the ES segment was $108.3 million in the first nine months of 2018, up from $92.5 million in the first nine months of 2017. T&D gross margin for the ES segment was 42% for the first nine months of 2018 compared to 38% for the prior year, reflecting the March 2017 shutdown of one of our large treatment facilities due to severe wind damage. Gross profit for the FIS segment in the first nine months of 2018 was $16.1 million, up from $13.0 million in the first nine months of 2017. Gross margin for the FIS segment was 14% in the first nine months of 2018, compared to 13% in the first nine months of 2017.
SG&A expense for the first nine months of 2018 was $67.0 million, compared with $62.2 million in the same period last year. The increase in SG&A expense was primarily due to higher labor and incentive compensation and higher professional consulting services, partially offset by lower property taxes.
Operating income for the first nine months of 2018 was $53.7 million, up 24% from $43.3 million in the first nine months of 2017. Excluding the non-cash goodwill and intangible asset impairment charge of $3.7 million taken in the third quarter of 2018 associated with our mobile solvent recycling business, operating income increased 32% over the first nine months of 2017.
Net interest expense for the first nine months of 2018 was $8.7 million, down from $15.3 million in the first nine months of 2017. Interest expense for the first nine months of 2017 included the non-cash charge of $5.5 million associated with the write-off of deferred financing fees related to the refinancing of our former credit facility in April 2017. Excluding the non-cash deferred financing fees charge, interest expense decreased compared to the first nine months of 2017 as a result of a lower interest rate on our new credit facility.
The Company’s consolidated effective income tax rate for the first nine months of 2018 was 23.7%, down from 36.0% for the first nine months of 2017. This decrease is primarily due to tax reform passed in the fourth quarter of 2017, which reduced the U.S. corporate tax rate from 35% to 21%. The decrease was also partially due to one-time discrete adjustments related to tax planning resulting in the amendment of prior year income tax returns.
Net income for the first nine months of 2018 was $35.9 million, or $1.63 per diluted share, compared to $18.6 million, or $0.85 per diluted share, in the first nine months of 2017. Adjusted earnings per share was $1.67 per diluted share in the first nine months of 2018, an increase of 69% over the $0.99 per diluted share for the first nine months of 2017. Adjusted EBITDA for the first nine months of 2018 was $91.8 million, up 18% from $78.1 million in the same period last year.
Reconciliations of earnings per diluted share to adjusted earnings per diluted share and net income to adjusted EBITDA are attached as Exhibit A to this release.
2018 OUTLOOK
“Results for the first nine months of 2018 are consistent with our expectations for an improving industrial economy and reflect strong improvement over a challenging first nine months of 2017 due to weather related events,” commented Feeler. “Our Base Business continues to lead the way with strong growth. We have also experienced continued success securing Event Business opportunities to add to our pipeline. This has helped offset lower than anticipated shipments from one of our multi-year cleanup sites in the first nine months of 2018. In our Field and Industrial Services segment, we have seen growth accelerate, particularly in the Total Waste Management and Small Quantity Generation areas. As a result of continued strong results expected in the fourth quarter and the anticipated contribution from our recently acquired field and industrial services business based in Dallas, Texas, we now expect that our 2018 full year adjusted EBITDA will range from $125 million to $130 million. This is an increase from our previous 2018 adjusted EBITDA guidance of $122 million to $128 million. Adjusted earnings per share is now expected to range from $2.28 to $2.44 for the full year 2018 up from our previous guidance of $2.15 to $2.34 per share.”
The following table reconciles our projected net income to our adjusted EBITDA guidance range:
| For the Year Ending December 31, 2018 | |||||||||
| (in thousands) | Low | High | |||||||
| Net Income | $ | 49,400 | $ | 53,050 | |||||
| Income tax expense | 16,174 | 17,224 | |||||||
| Interest expense | 11,766 | 11,766 | |||||||
| Interest income | (109 | ) | (109 | ) | |||||
| Foreign currency (gain) loss | 456 | 456 | |||||||
| Other income | (3,081 | ) | (3,081 | ) | |||||
| Depreciation and amortization of plant and equipment | 27,987 | 28,287 | |||||||
| Amortization of intangible assets | 9,973 | 9,973 | |||||||
| Accretion and non-cash adjustments of closure & post-closure obligations | 4,323 | 4,323 | |||||||
| Stock-based compensation | 4,445 | 4,445 | |||||||
| Impairment charges | 3,666 | 3,666 | |||||||
| Adjusted EBITDA | $ | 125,000 | $ | 130,000 | |||||
The following table reconciles our projected diluted earnings per share to our projected adjusted diluted earnings per share range:
| For the Year Ending December 31, 2018 | |||||||||
| Low | High | ||||||||
| Earnings per diluted share | $ | 2.24 | $ | 2.40 | |||||
| Adjustments: | |||||||||
| Plus: Impairment charges | 0.17 | 0.17 | |||||||
| Less: TX land easement gain | (0.07 | ) | (0.07 | ) | |||||
| Less: Discrete income tax adjustments | (0.08 | ) | (0.08 | ) | |||||
| Plus: Business development costs | 0.01 | 0.01 | |||||||
| Non-cash foreign currency translation (gain) loss | 0.01 | 0.01 | |||||||
| As Adjusted | $ | 2.28 | $ | 2.44 | |||||
DIVIDEND
On October 1, 2018, the Company declared a quarterly dividend of $0.18 per common share for stockholders of record on October 19, 2018. The $4.0 million dividend was paid on October 26, 2018.
CONFERENCE CALL
US Ecology, Inc. will hold an investor conference call on Friday, November 2, 2018 at 10:00 a.m. Eastern Daylight Time (8:00 a.m. Mountain Daylight Time) to discuss these results and its current financial position and business outlook. Questions will be invited after management’s presentation. Interested parties can access the conference call by dialing 877-512-4138 or 412-317-5478. The conference call will also be broadcast live on our website at www.usecology.com. An audio replay will be available through November 9, 2018 by calling 877-344-7529 or 412-317-0088 and using the passcode 10125411. 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 focus on safety, environmental compliance, and best–in-class customer service enables us to effectively meet the needs of our customers and to build long-lasting relationships. US Ecology has been protecting the environment since 1952 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 the replacement of non-recurring event clean-up projects, a loss of a major customer, our ability to permit and contract for timely construction of new or expanded disposal cells, our ability to renew our operating permits or lease agreements with regulatory bodies, loss of key personnel, compliance with and changes to applicable laws, rules, or regulations, access to insurance, surety bonds and other financial assurances, a deterioration in our labor relations or labor disputes, our ability to perform under required contracts, failure to realize anticipated benefits and operational performance from acquired operations, adverse economic or market conditions, government funding or competitive pressures, incidents or adverse weather conditions that could limit or suspend specific operations, access to cost effective transportation services, fluctuations in foreign currency markets, lawsuits, our willingness or ability to repurchase shares or pay dividends, implementation of new technologies, limitations on our available cash flow as a result of our indebtedness and our ability to effectively execute our acquisition strategy and integrate future acquisitions.
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Revenue | |||||||||||||||||
| Environmental Services | $ | 107,197 | $ | 97,661 | $ | 292,628 | $ | 268,555 | |||||||||
| Field & Industrial Services | 44,219 | 36,393 | 115,759 | 101,790 | |||||||||||||
| Total | 151,416 | 134,054 | 408,387 | 370,345 | |||||||||||||
| Gross profit | |||||||||||||||||
| Environmental Services | 39,930 | 33,146 | 108,281 | 92,506 | |||||||||||||
| Field & Industrial Services | 7,370 | 4,587 | 16,138 | 12,996 | |||||||||||||
| Total | 47,300 | 37,733 | 124,419 | 105,502 | |||||||||||||
| Selling, general & administrative expenses | |||||||||||||||||
| Environmental Services | 5,725 | 7,074 | 16,926 | 18,066 | |||||||||||||
| Field & Industrial Services | 2,759 | 2,318 | 7,470 | 7,586 | |||||||||||||
| Corporate | 15,165 | 13,052 | 42,641 | 36,506 | |||||||||||||
| Total | 23,649 | 22,444 | 67,037 | 62,158 | |||||||||||||
| Impairment Charges | |||||||||||||||||
| Environmental Services | 3,666 | - | 3,666 | - | |||||||||||||
| Operating income | 19,985 | 15,289 | 53,716 | 43,344 | |||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | 34 | 18 | 97 | 49 | |||||||||||||
| Interest expense | (3,066 | ) | (2,783 | ) | (8,782 | ) | (15,387 | ) | |||||||||
| Foreign currency gain (loss) | (303 | ) | 275 | (456 | ) | 521 | |||||||||||
| Other | 177 | 234 | 2,493 | 537 | |||||||||||||
| Total other expense | (3,158 | ) | (2,256 | ) | (6,648 | ) | (14,280 | ) | |||||||||
| Income before income taxes | 16,827 | 13,033 | 47,068 | 29,064 | |||||||||||||
| Income tax expense | 3,400 | 4,668 | 11,178 | 10,465 | |||||||||||||
| Net income | $ | 13,427 | $ | 8,365 | $ | 35,890 | $ | 18,599 | |||||||||
| Earnings per share: | |||||||||||||||||
| Basic | $ | 0.61 | $ | 0.38 | $ | 1.64 | $ | 0.86 | |||||||||
| Diluted | $ | 0.61 | $ | 0.38 | $ | 1.63 | $ | 0.85 | |||||||||
| Shares used in earnings | |||||||||||||||||
| per share calculation: | |||||||||||||||||
| Basic | 21,928 | 21,774 | 21,866 | 21,750 | |||||||||||||
| Diluted | 22,099 | 21,931 | 22,027 | 21,893 | |||||||||||||
| Dividends paid per share | $ | 0.18 | $ | 0.18 | $ | 0.54 | $ | 0.54 | |||||||||
| US ECOLOGY, INC. | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| September 30, 2018 | December 31, 2017 | ||||||||
| Assets | |||||||||
| Current Assets: | |||||||||
| Cash and cash equivalents | $ | 26,076 | $ | 27,042 | |||||
| Receivables, net | 137,956 | 110,777 | |||||||
| Prepaid expenses and other current assets | 11,834 | 9,138 | |||||||
| Income tax receivable | 7,883 | - | |||||||
| Total current assets | 183,749 | 146,957 | |||||||
| Property and equipment, net | 246,637 | 234,432 | |||||||
| Restricted cash and investments | 4,897 | 5,802 | |||||||
| Intangible assets, net | 216,754 | 222,812 | |||||||
| Goodwill | 196,379 | 189,373 | |||||||
| Other assets | 4,758 | 2,700 | |||||||
| Total assets | $ | 853,174 | $ | 802,076 | |||||
| Liabilities and Stockholders’ Equity | |||||||||
| Current Liabilities: | |||||||||
| Accounts payable | $ | 15,006 | $ | 14,868 | |||||
| Deferred revenue | 12,072 | 8,532 | |||||||
| Accrued liabilities | 37,168 | 22,888 | |||||||
| Accrued salaries and benefits | 15,757 | 14,242 | |||||||
| Income tax payable | - | 2,970 | |||||||
| Current portion of closure and post-closure obligations | 2,401 | 2,330 | |||||||
| Total current liabilities | 82,404 | 65,830 | |||||||
| Long-term closure and post-closure obligations | 75,847 | 73,758 | |||||||
| Long-term debt | 277,000 | 277,000 | |||||||
| Other long-term liabilities | 1,292 | 3,828 | |||||||
| Deferred income taxes, net | 62,790 | 57,583 | |||||||
| Total liabilities | 499,333 | 477,999 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders’ Equity | |||||||||
| Common stock | 220 | 218 | |||||||
| Additional paid-in capital | 182,737 | 177,498 | |||||||
| Retained earnings | 179,585 | 155,533 | |||||||
| Treasury stock | (370 | ) | (68 | ) | |||||
| Accumulated other comprehensive loss | (8,331 | ) | (9,104 | ) | |||||
| Total stockholders’ equity | 353,841 | 324,077 | |||||||
| Total liabilities and stockholders’ equity | $ | 853,174 | $ | 802,076 | |||||
| US ECOLOGY, INC. | |||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||
| (in thousands) | |||||||||
| (unaudited) | |||||||||
| For the Nine Months Ended September 30, | |||||||||
| 2018 | 2017 | ||||||||
| Cash Flows From Operating Activities: | |||||||||
| Net income | $ | 35,890 | $ | 18,599 | |||||
| Adjustments to reconcile net income to net cash provided by | |||||||||
| operating activities: | |||||||||
| Depreciation and amortization of property and equipment | 20,991 | 21,007 | |||||||
| Amortization of intangible assets | 6,925 | 7,586 | |||||||
| Accretion of closure and post-closure obligations | 3,242 | 3,245 | |||||||
| Impairment charges | 3,666 | - | |||||||
| Unrealized foreign currency loss (gain) | 899 | (1,500 | ) | ||||||
| Deferred income taxes | 4,730 | (1,011 | ) | ||||||
| Share-based compensation expense | 3,272 | 2,954 | |||||||
| Net loss (gain) on disposition of assets | (57 | ) | 287 | ||||||
| Unrecognized tax benefits | 674 | - | |||||||
| Amortization and write-off of debt issuance costs | 607 | 5,806 | |||||||
| Amortization and write-off of debt discount | - | 667 | |||||||
| Changes in assets and liabilities (net of effects of business acquisition): | |||||||||
| Receivables | (27,573 | ) | (20,142 | ) | |||||
| Income tax receivable | (7,878 | ) | 1,592 | ||||||
| Other assets | (2,355 | ) | (2,638 | ) | |||||
| Accounts payable and accrued liabilities | 11,218 | 6,174 | |||||||
| Deferred revenue | 3,579 | 4,228 | |||||||
| Accrued salaries and benefits | 1,576 | 2,676 | |||||||
| Income tax payable | (2,884 | ) | 1,112 | ||||||
| Closure and post-closure obligations | (1,026 | ) | (1,277 | ) | |||||
| Net cash provided by operating activities | 55,496 | 49,365 | |||||||
| Cash Flows From Investing Activities: | |||||||||
| Purchases of property and equipment | (25,791 | ) | (26,354 | ) | |||||
| Business acquistion | (21,253 | ) | - | ||||||
| Purchases of restricted investments | (673 | ) | (400 | ) | |||||
| Proceeds from sale of restricted investments | 583 | 402 | |||||||
| Proceeds from sale of property and equipment | 307 | 957 | |||||||
| Net cash used in investing activities | (46,827 | ) | (25,395 | ) | |||||
| Cash Flows From Financing Activities: | |||||||||
| Payments on long-term debt | - | (287,040 | ) | ||||||
| Proceeds from long-term debt | - | 281,000 | |||||||
| Payments on short-term borrowings | - | (13,438 | ) | ||||||
| Proceeds from short term borrowings | - | 11,260 | |||||||
| Dividends paid | (11,839 | ) | (11,778 | ) | |||||
| Deferred financing costs paid | - | (2,967 | ) | ||||||
| Proceeds from exercise of stock options | 2,427 | 1,050 | |||||||
| Payment of equipment financing obligations | (326 | ) | (268 | ) | |||||
| Other | (313 | ) | (121 | ) | |||||
| Net cash used in financing activities | (10,051 | ) | (22,302 | ) | |||||
| Effect of foreign exchange rate changes on cash | (578 | ) | 588 | ||||||
| Increase (decrease) in Cash and cash equivalents and restricted cash | (1,960 | ) | 2,256 | ||||||
| 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 | $ | 26,839 | $ | 10,978 | |||||
EXHIBIT A
Non-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
The Company defines adjusted EBITDA as net income before interest expense, interest income, income tax expense/benefit, depreciation, amortization, stock-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 2018 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 and nine months ended September 30, 2018 and 2017:
| (in thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | ||||||||||||||
| Net Income | $ | 13,427 | $ | 8,365 | $ | 35,890 | $ | 18,599 | |||||||||
| Income tax expense | 3,400 | 4,668 | 11,178 | 10,465 | |||||||||||||
| Interest expense | 3,066 | 2,783 | 8,782 | 15,387 | |||||||||||||
| Interest income | (34 | ) | (18 | ) | (97 | ) | (49 | ) | |||||||||
| Foreign currency (gain) loss | 303 | (275 | ) | 456 | (521 | ) | |||||||||||
| Other income | (177 | ) | (234 | ) | (2,493 | ) | (537 | ) | |||||||||
| Impairment charges | 3,666 | - | 3,666 | - | |||||||||||||
| Depreciation and amortization of plant and equipment | 7,342 | 7,386 | 20,991 | 21,007 | |||||||||||||
| Amortization of intangible assets | 2,327 | 2,300 | 6,925 | 7,586 | |||||||||||||
| Stock-based compensation | 1,193 | 995 | 3,272 | 2,954 | |||||||||||||
| Accretion and non-cash adjustments of closure & post-closure obligations | 1,087 | 1,090 | 3,242 | 3,245 | |||||||||||||
| Adjusted EBITDA | $ | 35,600 | $ | 27,060 | $ | 91,812 | $ | 78,136 | |||||||||
| Business development expenses | 189 | 330 | 218 | 383 | |||||||||||||
| Pro Forma adjusted EBITDA | $ | 35,789 | $ | 27,390 | $ | 92,030 | $ | 78,519 | |||||||||
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 impact of discrete income tax adjustments, the after-tax impact of the gain on the issuance of a property easement, 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. 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 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 and nine months ended September 30, 2018 and 2017:
| (in thousands, except per share data) | Three Months Ended September 30, | ||||||||||||||||||||||||
| 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 | $ | 16,827 | $ | (3,400 | ) | $ | 13,427 | $ | 0.61 | $ | 13,033 | $ | (4,668 | ) | $ | 8,365 | $ | 0.38 | |||||||
| Adjustments: | |||||||||||||||||||||||||
| Plus: Impairment charges | 3,666 | - | 3,666 | 0.17 | - | - | - | - | |||||||||||||||||
| Less: Discrete income tax adjustments | - | (1,704 | ) | (1,704 | ) | (0.08 | ) | - | - | - | - | ||||||||||||||
| Plus: Business development costs | 189 | (51 | ) | 138 | - | 330 | (118 | ) | 212 | 0.01 | |||||||||||||||
| Non-cash foreign currency translation gain | (92 | ) | 25 | (67 | ) | - | (682 | ) | 244 | (438 | ) | (0.02 | ) | ||||||||||||
| As Adjusted | $ | 20,590 | $ | (5,130 | ) | $ | 15,460 | $ | 0.70 | $ | 12,681 | $ | (4,542 | ) | $ | 8,139 | $ | 0.37 | |||||||
| Shares used in earnings per diluted share calculation | 22,099 | 21,931 | |||||||||||||||||||||||
| (in thousands, except per share data) | Nine Months Ended September 30, | ||||||||||||||||||||||||
| 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 | $ | 47,068 | $ | (11,178 | ) | $ | 35,890 | $ | 1.63 | $ | 29,064 | $ | (10,465 | ) | $ | 18,599 | $ | 0.85 | |||||||
| Adjustments: | |||||||||||||||||||||||||
| Plus: Impairment charges | 3,666 | - | 3,666 | 0.17 | - | - | - | - | |||||||||||||||||
| Less: TX land easement gain | (1,990 | ) | 512 | (1,478 | ) | (0.07 | ) | - | - | - | - | ||||||||||||||
| Less: Discrete income tax adjustments | - | (1,704 | ) | (1,704 | ) | (0.08 | ) | - | - | - | - | ||||||||||||||
| Plus: Non-cash write-off of deferred financing fees related to former credit agreement | - | - | - | - | 5,461 | (1,966 | ) | 3,495 | 0.16 | ||||||||||||||||
| Plus: Business development costs | 218 | (59 | ) | 159 | 0.01 | 383 | (138 | ) | 245 | 0.01 | |||||||||||||||
| Non-cash foreign currency translation (gain) loss | 370 | (100 | ) | 270 | 0.01 | (1,197 | ) | 431 | (766 | ) | (0.03 | ) | |||||||||||||
| As Adjusted | $ | 49,332 | $ | (12,529 | ) | $ | 36,803 | $ | 1.67 | $ | 33,711 | $ | (12,138 | ) | $ | 21,573 | $ | 0.99 | |||||||
| Shares used in earnings per diluted share calculation | 22,027 | 21,893 | |||||||||||||||||||||||
Contact:
Alison Ziegler, Darrow Associates (201)220-2678
aziegler@darrowir.com www.usecology.com