US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”)
today reported results for the first quarter ended March 31, 2021.
“The solid momentum that began to build toward
the end of 2020 has continued into the first quarter of 2021, led
by our field services business which generated 4% organic revenue
growth over the first quarter last year,” commented Chairman and
Chief Executive Officer, Jeff Feeler. “On a consolidated basis,
performance was slightly better than our expectations, with our
team demonstrating strong execution in servicing our customers,
delivering solid financial results, and generating strong free cash
flow during the quarter. All of this was accomplished while
navigating the ongoing pandemic, supply chain disruptions and
extreme weather events. We continue to see benefits through the
execution of our strategy amid signs of recovery across our service
lines. We expect this positive momentum to continue, and we
anticipate sequential improvement as we move into the seasonally
stronger second and third quarters, putting us on track to achieve
our full-year 2021 guidance.”
FIRST QUARTER 2021 RESULTS
Revenue was $228.6 million in the first quarter
of 2021, down 5% compared to $240.7 million in the first quarter of
2020.
Revenue for our Waste Solutions segment was
$104.1 million compared to $109.4 million in the first quarter of
2020 and was impacted by a Base Business decline of 3% reflecting
lower revenues from our manufacturing verticals, a 9% decline in
Event Business and a 17% decline in transportation revenue compared
to the same period in 2020.
Revenue for our Field Services segment was
$118.2 million, up 4% from $114.0 million in the first quarter of
2020 and benefitted from increases in our Emergency Response, Small
Quantity Generation and Total Waste Management service lines
compared to the first quarter of 2020. Emergency Response benefited
early in the quarter from COVID-19 decontamination services of
$12.5 million, and improvement in other response services.
Revenue for the Energy Waste segment was $6.2
million compared to $17.3 million in the first quarter of 2020
resulting from the severe declines in the energy markets
intensified by the COVID-19 pandemic. Revenue for
Energy Waste increased sequentially from $4.8 million in the fourth
quarter of 2020, and we continue to see sequential improvement and
incremental customer investment in the Texas oil fields.
Net loss was $796,000, or $0.03 per diluted
share, compared to a net loss of $298.1 million, or $9.52 per
diluted share, in the first quarter of 2020. Adjusted loss per
diluted share was $0.07 and compares to adjusted earnings per
diluted share of $0.12 in the first quarter of 2020.
Net loss in the first quarter of 2020 included pretax non-cash
goodwill and intangible asset impairment charges totaling $300.3
million.
Cash earnings per diluted share was $0.14
compared to $0.33 for the first quarter of 2020. Adjusted EBITDA
was $33.2 million compared to $43.2 million in the same quarter
last year.
Definitions and reconciliations of net loss to
adjusted EBITDA, loss per diluted share to adjusted earnings (loss)
per diluted share, loss per diluted share to cash earnings per
diluted share, and net cash provided by operating activities to
adjusted free cash flow are attached as Exhibit A to this
release.
Environmental, Social & Governance
(“ESG”)
We continued to make significant progress on our
ESG priorities in the first quarter of 2021 and are on track to
advance programs and investments in our sustainability initiatives.
Our primary ESG goals for 2021 center around gathering data and
setting targets, specifically on greenhouse gas emissions,
advancing our capital investment in beneficial reuse technology for
aerosols and advancing our diversity, equity, and inclusion
programs.
2021 BUSINESS OUTLOOK
“With first quarter results slightly ahead of
our expectations, improving business conditions, positive
industrial trends and ongoing benefits from integration, we expect
this momentum to continue driving growth across all our business
units in 2021, and therefore we are reaffirming our 2021 business
outlook” added Feeler.
Our 2021 Business outlook initially provided in
February 2021, and reaffirmed today, is summarized in the table
below:
|
|
|
|
|
|
|
|
|
(in
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waste Solutions |
|
Field Services |
|
Energy Waste |
|
Total Company |
Revenue |
|
$430 -
$450 |
|
$485 -
$510 |
|
$25 -
$30 |
|
$940 -
$990 |
Adjusted
EBITDA |
|
$185 -
$189 |
|
$84 -
$88 |
|
$1 -
$4 |
|
$175 -
$185 |
Adjusted
earnings per diluted share |
|
n/a |
|
n/a |
|
n/a |
|
$0.65 -
$0.88 |
Cash
earnings per share |
|
n/a |
|
n/a |
|
n/a |
|
$1.46 -
$1.69 |
Adjusted
free cashflow |
|
n/a |
|
n/a |
|
n/a |
|
$60 -
$77 |
Capital
Expenditures |
|
$53
-$55 |
|
$13 -
$15 |
|
$7 -
$9 |
|
$85 -
$90 |
|
|
|
|
|
|
|
|
|
The following table reconciles our projected net income to our
projected adjusted EBITDA guidance range:
|
|
For the Year Ending December 31, 2021 |
(in
thousands) |
|
Low |
|
High |
|
|
|
|
|
Projected Net Income |
|
$ |
21,558 |
|
|
$ |
28,919 |
|
Income tax expense |
|
|
7,952 |
|
|
|
10,656 |
|
Interest expense, net |
|
|
27,312 |
|
|
|
27,312 |
|
Foreign currency loss (gain) |
|
|
371 |
|
|
|
371 |
|
Other income |
|
|
(3,710 |
) |
|
|
(3,710 |
) |
Depreciation and amortization of plant and equipment |
|
|
72,362 |
|
|
|
72,362 |
|
Amortization of intangible assets |
|
|
34,580 |
|
|
|
34,580 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
|
5,354 |
|
|
|
5,354 |
|
Business Development & Integration Expense |
|
|
1,220 |
|
|
|
1,155 |
|
Share-based compensation |
|
|
8,001 |
|
|
|
8,001 |
|
Projected Adjusted EBITDA |
|
$ |
175,000 |
|
|
$ |
185,000 |
|
|
|
|
|
|
|
|
|
|
|
The following table reconciles our projected
earnings per diluted share to our projected adjusted earnings per
diluted share and to our projected cash earnings per diluted
share:
|
|
For the Year Ending December 31, 2021 |
|
|
Low |
|
High |
|
|
|
|
|
Projected earnings per diluted share |
|
$ |
0.69 |
|
|
$ |
0.92 |
|
|
|
|
|
|
Adjustments: |
|
|
|
|
Plus: Business development and integration expenses |
|
$ |
0.03 |
|
|
$ |
0.03 |
|
Less: Gain on minority interest investment |
|
$ |
(0.08 |
) |
|
$ |
(0.08 |
) |
Foreign currency loss (gain) |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
|
|
|
|
|
Projected adjusted earnings per diluted share |
|
$ |
0.65 |
|
|
$ |
0.88 |
|
|
|
|
|
|
Plus: projected amortization of Intangible assets |
|
|
0.81 |
|
|
|
0.81 |
|
|
|
|
|
|
Projected cash earnings per diluted share |
|
$ |
1.46 |
|
|
$ |
1.69 |
|
|
|
|
|
|
Shares used
in earnings per diluted share calculation (in thousands) |
|
|
31,376 |
|
|
|
31,376 |
|
|
|
|
|
|
The following table reconciles our projected net
cash provided by operating activities to projected adjusted free
cash flow:
|
Year Ended December 31, 2021 |
|
(in
thousands) |
Low End of Guidance |
|
High End of Guidance |
|
Projected net cash provided by operating
activities |
$ |
143,000 |
|
|
$ |
155,000 |
|
|
Less: Purchases of property and equipment |
|
(90,000 |
) |
|
|
(85,000 |
) |
|
Plus: Business development and integration expenses, net of
tax |
|
1,000 |
|
|
|
1,000 |
|
|
Plus: Purchases of property and equipment for the Idaho facility
rebuild |
|
4,000 |
|
|
|
4,000 |
|
|
Plus: Payment of deferred/contingent purchase consideration |
|
2,000 |
|
|
|
2,000 |
|
|
|
|
|
|
|
Projected Adjusted Free Cash Flow |
$ |
60,000 |
|
|
$ |
77,000 |
|
|
|
|
|
|
|
Our adjusted EBITDA and adjusted earnings per
diluted share guidance exclude gains on minority interest
investments, business development and integration expenses and
foreign currency translation gains or losses.
CONFERENCE CALL
US Ecology, Inc. will hold an investor
conference call on Friday, April 30, 2021 at 11:00 a.m. Eastern
Daylight Time (9:00 a.m. Mountain Daylight Time) to discuss these
results and its current financial position and business outlook.
Questions will be invited after management’s presentation.
Interested parties can access the conference call by dialing
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 May 7, 2021 by calling 877-344-7529 or
412-317-0088 and using the passcode 10155079. The replay will also
be accessible on our website at www.usecology.com.
ABOUT US ECOLOGY, INC.
US Ecology, Inc. is a leading provider of
environmental services to commercial and government entities. The
company addresses the complex waste management and response needs
of its customers offering treatment, disposal, beneficial re-use,
and recycling of hazardous, non-hazardous, radioactive and other
specialty waste. US Ecology also provides a variety of vertically
integrated field services including logistics and response at its
customers in-field locations and through its network of 10-day
transfer facilities. Logistics solutions include specialty waste
packaging, collection lab pack, transportation, and total waste
management. Response solutions include emergency response, oil
spill response standby services, spill clean-up services,
remediation, and industrial services. US Ecology’s focus on safety,
environmental compliance, and best-in-class customer service
enables us to effectively meet the needs of US Ecology’s customers
and to build long lasting relationships. US Ecology has been
protecting the environment since 1952. For more information, visit
www.usecology.com.
Forward looking statements are only predictions
and are not guarantees of performance. These statements are based
on management’s beliefs and assumptions, which in turn are based on
currently available information. Important assumptions include,
among others, those regarding demand for the Company’s services,
expansion of service offerings geographically or through new or
expanded service lines, the timing and cost of planned capital
expenditures, competitive conditions, and general economic
conditions. These assumptions could prove inaccurate. Forward
looking statements also involve known and unknown risks and
uncertainties, which could cause actual results to differ
materially from those contained in any forward-looking statement.
Many of these factors are beyond our ability to control or predict.
Such factors include developments related to the COVID-19 pandemic,
fluctuations in commodity markets related to our business, the
integration of NRC’s operations, the loss or failure to renew
significant contracts, competition in our markets, adverse economic
conditions, our compliance with applicable laws and regulations,
potential liability in connection with providing oil spill response
services and waste disposal services, the effect of existing or
future laws and regulations related to greenhouse gases and climate
change, the effect of our failure to comply with U.S. or foreign
anti-bribery laws, the effect of compliance with laws and
regulations, an accident at one of our facilities, incidents
arising out of the handling of dangerous substances, our failure to
maintain an acceptable safety record, our ability to perform under
required contracts, limitations on our available cash flow as a
result of our indebtedness, liabilities arising from our
participation in multi-employer pension plans, the effect of
changes in the method of determining the London Interbank Offered
Rate or the replacement thereto, risks associated with our
international operations, the impact of changes to U.S. tariff and
import and export regulations, a change in NRC’s classification as
an Oil Spill Removal Organization, cyber security threats,
unanticipated changes in tax rules and regulations, loss of key
personnel, a deterioration in our labor relations or labor
disputes, our reliance on first-party contractors to provide
emergency response services, our access to insurance, surety bonds
and other financial assurances, our litigation risk not covered by
insurance, the replacement of non-recurring event projects, our
ability to permit and contract for timely construction of new or
expanded disposal space, renewals of our operating permits or lease
agreements with regulatory bodies, our access to cost-effective
transportation services, lawsuits, our implementation of new
technologies, fluctuations in foreign currency markets and foreign
affairs, our integration of acquired businesses, our ability to pay
dividends or repurchase stock, anti-takeover regulations, stock
market volatility, the failure of the warrants to be in the money
or their expiration worthless and risks related to our compliance
with maritime regulations (including the Jones Act).
Except as required by applicable law, including
the securities laws of the United States and the rules and
regulations of the Securities and Exchange Commission, we undertake
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.
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in
thousands, except per share data) |
(unaudited) |
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Revenue |
|
|
|
|
Waste Solutions |
|
$ |
104,142 |
|
|
$ |
109,392 |
|
Field Services |
|
|
118,249 |
|
|
|
113,994 |
|
Energy Waste |
|
|
6,228 |
|
|
|
17,334 |
|
|
|
|
|
|
Total |
|
|
228,619 |
|
|
|
240,720 |
|
|
|
|
|
|
Gross profit (loss) |
|
|
|
|
Waste Solutions |
|
|
34,950 |
|
|
|
39,309 |
|
Field Services |
|
|
18,306 |
|
|
|
18,276 |
|
Energy Waste |
|
|
(383 |
) |
|
|
4,856 |
|
|
|
|
|
|
Total |
|
|
52,873 |
|
|
|
62,441 |
|
|
|
|
|
|
Selling, general & administrative
expenses |
|
|
|
|
Waste Solutions |
|
|
6,301 |
|
|
|
6,889 |
|
Field Services |
|
|
12,725 |
|
|
|
12,853 |
|
Energy Waste |
|
|
3,343 |
|
|
|
5,288 |
|
Corporate |
|
|
28,999 |
|
|
|
27,347 |
|
|
|
|
|
|
Total |
|
|
51,368 |
|
|
|
52,377 |
|
|
|
|
|
|
Goodwill and intangible asset impairment
charges |
|
|
|
Waste Solutions |
|
|
- |
|
|
|
- |
|
Field Services |
|
|
- |
|
|
|
16,700 |
|
Energy Waste |
|
|
- |
|
|
|
283,600 |
|
|
|
|
|
|
Operating income (loss) |
|
|
1,505 |
|
|
|
(290,236 |
) |
|
|
|
|
|
Other income (expense): |
|
|
|
|
Interest income |
|
|
273 |
|
|
|
89 |
|
Interest expense |
|
|
(7,357 |
) |
|
|
(9,310 |
) |
Foreign currency (loss) gain |
|
|
(371 |
) |
|
|
937 |
|
Other |
|
|
3,710 |
|
|
|
171 |
|
|
|
|
|
|
Total other expense |
|
|
(3,745 |
) |
|
|
(8,113 |
) |
|
|
|
|
|
Loss
before income taxes |
|
|
(2,240 |
) |
|
|
(298,349 |
) |
Income tax benefit |
|
|
(1,444 |
) |
|
|
(263 |
) |
|
|
|
|
|
Net
loss |
|
$ |
(796 |
) |
|
$ |
(298,086 |
) |
|
|
|
|
|
Loss
per share: |
|
|
|
|
Basic |
|
$ |
(0.03 |
) |
|
$ |
(9.52 |
) |
Diluted |
|
$ |
(0.03 |
) |
|
$ |
(9.52 |
) |
|
|
|
|
|
Shares used in loss |
|
|
|
|
per share calculation: |
|
|
|
|
Basic |
|
|
31,104 |
|
|
|
31,305 |
|
Diluted |
|
|
31,104 |
|
|
|
31,305 |
|
|
|
|
|
|
Dividends paid per share |
|
$ |
- |
|
|
$ |
0.18 |
|
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(unaudited) |
|
|
|
|
|
|
|
March 31, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
82,354 |
|
|
$ |
73,848 |
|
Receivables, net |
|
|
242,854 |
|
|
|
241,978 |
|
Prepaid expenses and other current assets |
|
|
25,709 |
|
|
|
28,379 |
|
Income tax receivable |
|
|
17,006 |
|
|
|
18,279 |
|
Total current assets |
|
|
367,923 |
|
|
|
362,484 |
|
|
|
|
|
|
Property and
equipment, net |
|
|
448,248 |
|
|
|
456,637 |
|
Operating
lease assets |
|
|
48,824 |
|
|
|
51,474 |
|
Restricted
cash and investments |
|
|
5,784 |
|
|
|
5,598 |
|
Intangible
assets, net |
|
|
515,208 |
|
|
|
523,988 |
|
Goodwill |
|
|
413,346 |
|
|
|
413,037 |
|
Other
assets |
|
|
23,819 |
|
|
|
18,065 |
|
Total assets |
|
$ |
1,823,152 |
|
|
$ |
1,831,283 |
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
Accounts payable |
|
$ |
44,773 |
|
|
$ |
35,881 |
|
Deferred revenue |
|
|
17,524 |
|
|
|
15,267 |
|
Accrued liabilities |
|
|
47,300 |
|
|
|
59,296 |
|
Accrued salaries and benefits |
|
|
27,913 |
|
|
|
30,918 |
|
Income tax payable |
|
|
888 |
|
|
|
977 |
|
Short-term borrowings |
|
|
277 |
|
|
|
- |
|
Current portion of long-term debt |
|
|
3,358 |
|
|
|
3,359 |
|
Current portion of closure and post-closure obligations |
|
|
7,119 |
|
|
|
6,471 |
|
Current portion of operating lease liabilities |
|
|
16,208 |
|
|
|
17,048 |
|
Total current liabilities |
|
|
165,360 |
|
|
|
169,217 |
|
|
|
|
|
|
Long-term
debt |
|
|
781,644 |
|
|
|
782,484 |
|
Long-term
closure and post-closure obligations |
|
|
89,615 |
|
|
|
89,398 |
|
Long-term
operating lease liabilities |
|
|
33,362 |
|
|
|
35,069 |
|
Other
long-term liabilities |
|
|
20,767 |
|
|
|
32,201 |
|
Deferred
income taxes, net |
|
|
119,701 |
|
|
|
120,983 |
|
Total liabilities |
|
|
1,210,449 |
|
|
|
1,229,352 |
|
|
|
|
|
|
Commitments
and contingencies |
|
|
|
|
|
|
|
|
|
Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
Common stock |
|
|
315 |
|
|
|
315 |
|
Additional paid-in capital |
|
|
817,818 |
|
|
|
820,567 |
|
Retained deficit |
|
|
(189,249 |
) |
|
|
(188,452 |
) |
Treasury stock |
|
|
(12,179 |
) |
|
|
(15,841 |
) |
Accumulated other comprehensive loss |
|
|
(4,002 |
) |
|
|
(14,658 |
) |
Total stockholders’ equity |
|
|
612,703 |
|
|
|
601,931 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,823,152 |
|
|
$ |
1,831,283 |
|
|
|
|
|
|
US ECOLOGY,
INC. |
CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(unaudited) |
|
|
For the Three Months Ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Cash
Flows From Operating Activities: |
|
|
|
|
Net loss |
|
$ |
(796 |
) |
|
$ |
(298,086 |
) |
Adjustments to reconcile net loss to net cash provided by |
|
|
|
|
operating activities: |
|
|
|
|
Depreciation and amortization of property and equipment |
|
|
18,234 |
|
|
|
17,978 |
|
Amortization of intangible assets |
|
|
9,135 |
|
|
|
9,441 |
|
Accretion of closure and post-closure obligations |
|
|
1,182 |
|
|
|
1,266 |
|
Change in fair value of minority interest investment |
|
|
(3,509 |
) |
|
|
- |
|
Unrealized foreign currency (gain) loss |
|
|
(315 |
) |
|
|
2,703 |
|
Deferred income taxes |
|
|
(3,781 |
) |
|
|
(3,320 |
) |
Share-based compensation expense |
|
|
1,928 |
|
|
|
1,564 |
|
Share-based payment of business development and integration
expenses |
|
|
163 |
|
|
|
181 |
|
Unrecognized tax benefits |
|
|
12 |
|
|
|
52 |
|
Net (gain) loss on disposition of assets |
|
|
(221 |
) |
|
|
184 |
|
Amortization of debt discount |
|
|
40 |
|
|
|
245 |
|
Amortization of debt issuance costs |
|
|
577 |
|
|
|
298 |
|
Goodwill impairment charges |
|
|
- |
|
|
|
300,300 |
|
Change in fair value of contingent consideration |
|
|
- |
|
|
|
(1,127 |
) |
Changes in assets and liabilities (net of effects of business
acquisitions): |
|
|
|
|
Receivables |
|
|
(680 |
) |
|
|
13,467 |
|
Income tax receivable |
|
|
1,276 |
|
|
|
893 |
|
Other assets |
|
|
1,114 |
|
|
|
(2,957 |
) |
Accounts payable and accrued liabilities |
|
|
(3,647 |
) |
|
|
(13,618 |
) |
Deferred revenue |
|
|
2,214 |
|
|
|
7,083 |
|
Accrued salaries and benefits |
|
|
(3,028 |
) |
|
|
(7,446 |
) |
Income tax payable |
|
|
(98 |
) |
|
|
662 |
|
Closure and post-closure obligations |
|
|
(337 |
) |
|
|
(417 |
) |
Net cash provided by operating
activities |
|
|
19,463 |
|
|
|
29,346 |
|
|
|
|
|
|
Cash
Flows From Investing Activities: |
|
|
|
|
Purchases of property and equipment |
|
|
(9,614 |
) |
|
|
(19,131 |
) |
Proceeds from sale of property and equipment |
|
|
1,623 |
|
|
|
781 |
|
Purchases of restricted investments |
|
|
(913 |
) |
|
|
(56 |
) |
Proceeds from sale of restricted investments |
|
|
934 |
|
|
|
- |
|
Minority interest investment |
|
|
(712 |
) |
|
|
- |
|
Business acquisitions, net of cash acquired |
|
|
- |
|
|
|
(3,309 |
) |
Net cash used in investing activities |
|
|
(8,682 |
) |
|
|
(21,715 |
) |
|
|
|
|
|
Cash
Flows From Financing Activities: |
|
|
|
|
Proceeds from short-term borrowings |
|
|
3,227 |
|
|
|
50,267 |
|
Payments on short-term borrowings |
|
|
(2,950 |
) |
|
|
(49,871 |
) |
Proceeds from long-term debt |
|
|
- |
|
|
|
90,000 |
|
Payments on long-term debt |
|
|
(1,125 |
) |
|
|
(1,125 |
) |
Repurchases of common stock |
|
|
(465 |
) |
|
|
(18,332 |
) |
Payment of equipment financing obligations |
|
|
(1,461 |
) |
|
|
(1,525 |
) |
Dividends paid |
|
|
- |
|
|
|
(5,667 |
) |
Net cash (used in) provided by financing
activities |
|
|
(2,774 |
) |
|
|
63,747 |
|
|
|
|
|
|
Effect of
foreign exchange rate changes on cash |
|
|
708 |
|
|
|
(2,825 |
) |
|
|
|
|
|
Increase in cash and cash equivalents and restricted
cash |
|
|
8,715 |
|
|
|
68,553 |
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash at beginning of
period |
|
|
75,104 |
|
|
|
42,140 |
|
|
|
|
|
|
Cash
and cash equivalents and restricted cash at end of
period |
|
$ |
83,819 |
|
|
$ |
110,693 |
|
|
|
|
|
|
EXHIBIT ANon-GAAP
Results and Reconciliations
US Ecology reports adjusted EBITDA, adjusted
earnings (loss) per diluted share, cash earnings per diluted share
results and adjusted free cash flow, which are non-GAAP financial
measures, as a complement to results provided in accordance with
generally accepted accounting principles in the United States
(“GAAP”) and believes that such information provides analysts,
stockholders, and other users information to better understand the
Company’s operating performance. Because adjusted EBITDA, adjusted
earnings (loss) per diluted share and adjusted free cash flow are
not measurements determined in accordance with GAAP and are thus
susceptible to varying calculations they may not be comparable to
similar measures used by other companies. Items excluded from
adjusted EBITDA, adjusted earnings (loss) per diluted share and
adjusted free cash flow are significant components in understanding
and assessing financial performance.
Adjusted EBITDA, adjusted earnings (loss) per
diluted share, cash earnings per diluted share and adjusted free
cash flow should not be considered in isolation or as an
alternative to, or substitute for, net income, cash flows generated
by operations, investing or financing activities, or other
financial statement data presented in the consolidated financial
statements as indicators of financial performance or liquidity.
Adjusted EBITDA, adjusted earnings (loss) per diluted share and
adjusted free cash flow have limitations as analytical tools and
should not be considered in isolation or a substitute for analyzing
our results as reported under GAAP. Some of the limitations
are:
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs;
- Adjusted EBITDA does not reflect our interest expense, or the
requirements necessary to service interest or principal payments on
our debt;
- Adjusted EBITDA does not reflect our income tax expenses or the
cash requirements to pay our taxes;
- Adjusted EBITDA does not reflect
our cash expenditures or future requirements for capital
expenditures or contractual commitments;
- Although depreciation and
amortization charges are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the
future, and adjusted EBITDA does not reflect cash requirements for
such replacements;
- Adjusted EBITDA does not reflect
our business development and integration expenses, which may vary
significantly quarter to quarter;
Adjusted 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, business
development and integration expenses and other income/expense.
The following reconciliation itemizes the
differences between reported net loss and adjusted EBITDA for the
three months ended March 31, 2021 and 2020:
(in
thousands) |
|
Three Months Ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
Net
loss |
|
$ |
(796 |
) |
|
$ |
(298,086 |
) |
Income tax benefit |
|
|
(1,444 |
) |
|
|
(263 |
) |
Interest expense |
|
|
7,357 |
|
|
|
9,310 |
|
Interest income |
|
|
(273 |
) |
|
|
(89 |
) |
Foreign currency loss (gain) |
|
|
371 |
|
|
|
(937 |
) |
Other income |
|
|
(3,710 |
) |
|
|
(171 |
) |
Goodwill impairment charges |
|
|
- |
|
|
|
300,300 |
|
Depreciation and amortization of plant and equipment |
|
|
18,234 |
|
|
|
17,978 |
|
Amortization of intangible assets |
|
|
9,135 |
|
|
|
9,441 |
|
Share-based compensation |
|
|
1,928 |
|
|
|
1,564 |
|
Accretion and non-cash adjustments of closure & post-closure
obligations |
|
|
1,182 |
|
|
|
1,266 |
|
Business development and integration expenses |
|
|
1,220 |
|
|
|
2,907 |
|
Adjusted EBITDA |
|
$ |
33,204 |
|
|
$ |
43,220 |
|
|
|
|
|
|
Adjusted Loss Per Diluted
Share
The Company defines adjusted loss per diluted
share as net loss adjusted for the after-tax impact of the gain on
a minority interest investment, the after-tax impact of business
development and integration costs, the after-tax impact of non-cash
goodwill impairment charges, and non-cash foreign currency
translation gains or losses, divided by the number of diluted
shares used in the loss per diluted share calculation.
The gain on a minority interest investment
excluded from the loss per diluted share calculation represents an
increase in the fair value of our investment based on a recent
observable transaction in the equity of the entity. Impairment
charges excluded from the loss per diluted share calculation are
related to the Company’s assessment of goodwill associated with its
Energy Waste and international businesses in the first quarter of
2020. Business development and integration costs excluded from the
loss per diluted share calculation relate to expenses incurred to
evaluate businesses for potential acquisition or costs related to
closing and integrating successfully acquired businesses and
transaction expenses. The foreign currency translation gains or
losses excluded from the loss 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 gain on minority
interest investment, business development and integration costs,
non-cash impairment charges, and non-cash foreign currency
translation gains or losses provides meaningful information to
investors regarding the operational and financial performance of
the Company.
Cash Earnings Per Diluted
Share
The Company defines cash earnings per diluted share as adjusted
loss per diluted share (see definition above) plus amortization of
intangible assets, net of tax.
The following reconciliation itemizes the
differences between reported net loss and loss per diluted share to
adjusted net loss and adjusted loss per diluted share and cash
earnings per diluted share for the three months ended March 31,
2021 and 2020:
(in
thousands, except per share data) |
Three Months Ended March 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
(Loss) income before income taxes |
Income tax benefit (expense) |
Net (loss) income |
per share |
|
(Loss) income before income taxes |
Income tax benefit (expense) |
Net (loss) income |
per share |
|
As Reported |
$ |
(2,240 |
) |
$ |
1,444 |
|
$ |
(796 |
) |
$ |
(0.03 |
) |
|
$ |
(298,349 |
) |
$ |
263 |
|
$ |
(298,086 |
) |
$ |
(9.52 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Less: Gain on minority interest investment |
|
(3,509 |
) |
|
965 |
|
|
(2,544 |
) |
|
(0.08 |
) |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
Plus: Business development and integration expenses |
|
1,220 |
|
|
(335 |
) |
|
885 |
|
|
0.03 |
|
|
|
2,907 |
|
|
(799 |
) |
|
2,108 |
|
|
0.07 |
|
|
Plus: Goodwill impairment charges |
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
300,300 |
|
|
- |
|
|
300,300 |
|
|
9.59 |
|
|
Foreign currency loss (gain) |
|
371 |
|
|
(102 |
) |
|
269 |
|
|
0.01 |
|
|
|
(937 |
) |
|
258 |
|
|
(679 |
) |
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
As
Adjusted |
$ |
(4,158 |
) |
$ |
1,972 |
|
$ |
(2,186 |
) |
$ |
(0.07 |
) |
|
$ |
3,921 |
|
$ |
(278 |
) |
$ |
3,643 |
|
$ |
0.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Plus:
Amortization of intangible assets |
$ |
9,135 |
|
$ |
(2,512 |
) |
|
6,623 |
|
|
0.21 |
|
|
$ |
9,441 |
|
$ |
(2,600 |
) |
|
6,841 |
|
|
0.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
earnings per diluted share |
$ |
4,977 |
|
$ |
(540 |
) |
$ |
4,437 |
|
$ |
0.14 |
|
|
$ |
13,362 |
|
$ |
(2,878 |
) |
$ |
10,484 |
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used
in loss per diluted share calculation |
|
|
|
31,104 |
|
|
|
|
|
|
31,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
The Company defines adjusted free cash flow as
net cash provided by operating activities less purchases of
property plant and equipment, plus business development and
integration expenses, plus payments of deferred/contingent purchase
consideration, plus purchases of property and equipment for the
Grand View, Idaho facility rebuild, plus proceeds from sale of
property and equipment.
The following reconciliation itemizes the
differences between reported net cash from operating activities to
adjusted free cash flow for the three months ended March 31, 2021
and 2020:
|
Three Months Ended March 31, |
(in thousands) |
|
2021 |
|
|
|
2020 |
|
Adjusted Free Cash Flow Reconciliation |
|
|
|
Net cash provided by operating activities |
$ |
19,463 |
|
|
$ |
29,346 |
|
Less: Purchases of property and equipment |
|
(9,614 |
) |
|
|
(19,131 |
) |
Plus: Business development and integration expenses, net of
tax |
|
885 |
|
|
|
2,108 |
|
Plus: Purchases of property and equipment for the Idaho facility
rebuild |
|
1,331 |
|
|
|
1,811 |
|
Plus: Payment of deferred/contingent purchase consideration |
|
- |
|
|
|
1,000 |
|
Plus: Proceeds from sale of property and equipment |
|
1,623 |
|
|
|
781 |
|
|
|
|
|
Adjusted Free Cash Flow |
$ |
13,688 |
|
|
$ |
15,915 |
|
|
|
|
|
Contact: Alison Ziegler, Darrow Associates
(201)220-2678aziegler@darrowir.com
www.usecology.com
US Ecology (NASDAQ:ECOL)
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