US Ecology Announces Fourth Quarter and Full Year 2021 Results
US Ecology reported its fourth-quarter and full-year 2021 results with total revenue increasing by 8% to $261.4 million. The Waste Solutions Base Business grew by 9%, while the Event Business rebounded with a 15% increase. Although the Field Services segment saw a 4% decline due to challenging comparisons, the Energy Waste segment’s revenue more than doubled to $12.2 million. Net income rose to $3.6 million, with adjusted EBITDA at $42.1 million. The company announced its acquisition by Republic Services for $48 per share, with a total enterprise value of approximately $2.2 billion, expected to close by Q2 2022.
- Total revenue increased by 8% to $261.4 million.
- Waste Solutions Base Business grew 9%, with a 15% increase in Event Business.
- Energy Waste revenue doubled to $12.2 million, with a 35% adjusted EBITDA margin.
- Net income improved to $3.6 million, up from a loss of $92.4 million year-over-year.
- Acquisition by Republic Services at $48 per share, valuing the firm at $2.2 billion.
- Field Services revenue declined by 4%, impacted by lower COVID decontamination work.
- Adjusted earnings per diluted share decreased to $0.13 from $0.19 a year ago.
- Adjusted free cash flow fell to $56.7 million from $68.8 million in 2020.
BOISE, Idaho, Feb. 25, 2022 (GLOBE NEWSWIRE) -- US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”) today reported results for the fourth quarter and year ended December 31, 2021.
FOURTH QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:
- Total revenue increases
8% to$261.4 million - Waste Solutions Base Business grows
9% on improving underlying fundamentals - Waste Solutions Event Business rebounds with
15% growth - Field Services segment revenue declines
4% due to difficult comparison to prior year - Energy Waste recovery continues; revenue more than doubles and adjusted EBITDA margin improves to
35% - Net Income of
$3.6 million , earnings per diluted share of$0.11 - Adjusted EBITDA of
$42.1 million - Adjusted free cash flow of
$16.5 million
“We are encouraged by the improvement in our underlying business activity, which drove sequential improvement in revenue in the fourth quarter despite continued supply chain and pandemic-related issues,” commented Chairman and Chief Executive Officer, Jeff Feeler. “Our Waste Solutions segment saw another quarter of solid growth in Base Business, which was up
Feeler continued, “We are pleased with the continued momentum in our Energy Waste segment, which led to revenue for the fourth quarter more than doubling from a year ago to over
FOURTH QUARTER 2021 RESULTS
Revenue was
Revenue for the Waste Solutions segment was
Revenue for the Field Services segment was
Revenue for the Energy Waste segment increased to
Net income was
Cash earnings per diluted share was
Definitions and reconciliations of net income (loss) to adjusted EBITDA, earnings (loss) per diluted share to adjusted earnings per diluted share, earnings (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.
YEAR-TO-DATE RESULTS
Revenue for 2021 grew
Net income was
Cash earnings per diluted share was
Adjusted free cash flow was
Definitions and reconciliations of net income (loss) to adjusted EBITDA, earnings (loss) per diluted share to adjusted earnings per diluted share, earnings (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.
REPUBLIC SERVICES TRANSACTION
On February 9, 2022, the Company announced a definitive agreement to be acquired by Republic Services, Inc., for consideration to common stockholders of
CANCELLATION OF EARNINGS CONFERENCE CALLS AND SUSPENSION OF GUIDANCE
In light of the pending transaction with Republic Services, Inc., the Company has cancelled its quarterly earnings conference calls. The Company will not be providing financial guidance for the full year 2022 while the transaction is pending.
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.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This communication contains “forward-looking statements” within the meaning of the U.S. federal securities laws. Such statements include statements concerning anticipated future events and expectations that are not historical facts. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “target,” “estimate,” “continue,” “positions,” “plan,” “predict,” “project,” “forecast,” “guidance,” “goal,” “objective,” “prospects,” “possible” or “potential,” by future conditional verbs such as “assume,” “will,” “would,” “should,” “could” or “may,” or by variations of such words or by similar expressions or the negative thereof. Actual results may vary materially from those expressed or implied by forward-looking statements based on a number of factors, including, without limitation: (1) risks related to the consummation of the merger, including the risks that (a) the merger with Republic Services, Inc. may not be consummated within the anticipated time period, or at all, (b) the parties may fail to obtain shareholder approval of the merger agreement, (c) the parties to the merger agreement with Republic Services, Inc. may fail to secure the termination or expiration of any waiting period applicable under the HSR Act, and (d) other conditions to the consummation of the merger under the merger agreement may not be satisfied; (2) the effects that any termination of the merger agreement with Republic Services, Inc. may have on US Ecology or its business, including the risks that (a) US Ecology’s stock price may decline significantly if the merger is not completed, (b) the merger agreement may be terminated in circumstances requiring US Ecology to pay Republic Services, Inc. a termination fee, or (c) the circumstances of the termination, including the possible imposition of a 12-month tail period during which the termination fee could be payable upon certain subsequent transactions, may have a chilling effect on alternatives to the merger; (3) the effects that the announcement or pendency of the merger may have on US Ecology and its business, including the risks that as a result (a) US Ecology’s business, operating results or stock price may suffer, (b) US Ecology’s current plans and operations may be disrupted, (c) US Ecology’s ability to retain or recruit key employees may be adversely affected, (d) US Ecology’s business relationships (including, customers and suppliers) may be adversely affected, or (e) US Ecology’s management’s or employees’ attention may be diverted from other important matters; (4) the effect of limitations that the merger agreement places on US Ecology’s ability to operate its business, return capital to shareholders or engage in alternative transactions; (5) the nature, cost and outcome of pending and future litigation and other legal proceedings, including any such proceedings related to the merger and instituted against US Ecology and others; (6) the risk that the merger and related transactions may involve unexpected costs, liabilities or delays; (7) other economic, business, competitive, legal, regulatory, and/or tax factors; and (8) other factors described under the heading “Risk Factors” in Part I, Item 1A of US Ecology’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as updated or supplemented by subsequent reports that US Ecology has filed or files with the U.S. Securities and Exchange Commission (“SEC”). Potential investors, shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. Neither US Ecology nor Republic Services, Inc. assumes any obligation to publicly update any forward-looking statement after it is made, whether as a result of new information, future events or otherwise, except as required by law.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
This communication may be deemed to be solicitation material in respect of the proposed merger between a subsidiary of Republic Services, Inc. and US Ecology. US Ecology intends to file with the SEC a proxy statement in connection with the contemplated transaction. The definitive proxy statement will be sent or given to US Ecology stockholders and will contain important information about the contemplated transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE. Investors and security holders may obtain a free copy of the proxy statement (when it is available) and other documents filed with the SEC at the SEC’s website at www.sec.gov, or without charge, contacting US Ecology’s Investor Relations, Alison Ziegler at aziegler@darrowir.com.
CERTAIN INFORMATION CONCERNING PARTICIPANTS
U.S. Ecology and its directors and executive officers may be deemed to be participants in the solicitation of proxies from US Ecology’s stockholders in connection with the contemplated transaction. Information about US Ecology’s directors and executive officers is set forth in its proxy statement for its 2021 Annual Meeting of Stockholders, which may be obtained for free at the SEC’s website at www.sec.gov. Additional information regarding the interests of participants in the solicitation of proxies in connection with the contemplated transactions will be included in the proxy statement that US Ecology intends to file with the SEC.
| US ECOLOGY, INC. | ||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | ||||||||||||||||
| Waste Solutions | $ | 123,542 | $ | 105,729 | $ | 451,249 | $ | 425,413 | ||||||||
| Field Services | 125,693 | 130,536 | 500,187 | 473,754 | ||||||||||||
| Energy Waste | 12,192 | 4,809 | 36,565 | 34,687 | ||||||||||||
| Total | 261,427 | 241,074 | 988,001 | 933,854 | ||||||||||||
| Gross profit | ||||||||||||||||
| Waste Solutions | 44,058 | 38,299 | 154,223 | 161,341 | ||||||||||||
| Field Services | 15,538 | 29,178 | 74,087 | 87,151 | ||||||||||||
| Energy Waste | 2,902 | 922 | 4,768 | 1,659 | ||||||||||||
| Total | 62,498 | 68,399 | 233,078 | 250,151 | ||||||||||||
| Selling, general & administrative expenses | ||||||||||||||||
| Waste Solutions | 7,520 | 6,633 | 27,262 | 26,475 | ||||||||||||
| Field Services | 11,390 | 12,704 | 48,210 | 50,572 | ||||||||||||
| Energy Waste | 3,065 | 6,265 | 13,040 | 19,722 | ||||||||||||
| Corporate | 27,537 | 27,356 | 111,220 | 109,400 | ||||||||||||
| Total | 49,512 | 52,958 | 199,732 | 206,169 | ||||||||||||
| Goodwill and intangible asset impairment charges | ||||||||||||||||
| Field Services | - | 24,300 | - | 41,000 | ||||||||||||
| Energy Waste | - | 80,300 | - | 363,900 | ||||||||||||
| Operating income (loss) | 12,986 | (89,159 | ) | 33,346 | (360,918 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 269 | 7 | 1,417 | 258 | ||||||||||||
| Interest expense | (6,944 | ) | (7,468 | ) | (28,966 | ) | (32,595 | ) | ||||||||
| Foreign currency gain (loss) | 214 | (979 | ) | (171 | ) | (1,134 | ) | |||||||||
| Other | 456 | 406 | 4,476 | 788 | ||||||||||||
| Total other expense | (6,005 | ) | (8,034 | ) | (23,244 | ) | (32,683 | ) | ||||||||
| Income (loss) before income taxes | 6,981 | (97,193 | ) | 10,102 | (393,601 | ) | ||||||||||
| Income tax expense (benefit) | 3,417 | (4,784 | ) | 4,765 | (4,242 | ) | ||||||||||
| Net income (loss) | $ | 3,564 | $ | (92,409 | ) | $ | 5,337 | $ | (389,359 | ) | ||||||
| Earnings (loss) per share: | ||||||||||||||||
| Basic | $ | 0.11 | $ | (2.97 | ) | $ | 0.17 | $ | (12.51 | ) | ||||||
| Diluted | $ | 0.11 | $ | (2.97 | ) | $ | 0.17 | $ | (12.51 | ) | ||||||
| Shares used in earnings (loss) per share calculation: | ||||||||||||||||
| Basic | 31,158 | 31,078 | 31,138 | 31,126 | ||||||||||||
| Diluted | 31,359 | 31,078 | 31,373 | 31,126 | ||||||||||||
| Dividends paid per share | $ | - | $ | - | $ | - | $ | 0.18 | ||||||||
| US ECOLOGY, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 67,487 | $ | 73,848 | ||||
| Receivables, net | 250,154 | 241,978 | ||||||
| Prepaid expenses and other current assets | 32,136 | 28,379 | ||||||
| Income tax receivable | 14,441 | 18,279 | ||||||
| Total current assets | 364,218 | 362,484 | ||||||
| Property and equipment, net | 456,384 | 456,637 | ||||||
| Operating lease assets | 43,607 | 51,474 | ||||||
| Restricted cash and investments | 1,567 | 5,598 | ||||||
| Intangible assets, net | 489,573 | 523,988 | ||||||
| Goodwill | 413,126 | 413,037 | ||||||
| Other assets | 36,923 | 18,065 | ||||||
| Total assets | $ | 1,805,398 | $ | 1,831,283 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 64,793 | $ | 35,881 | ||||
| Deferred revenue | 15,950 | 15,267 | ||||||
| Accrued liabilities | 51,265 | 59,296 | ||||||
| Accrued salaries and benefits | 29,438 | 30,918 | ||||||
| Income tax payable | 559 | 977 | ||||||
| Current portion of long-term debt | 3,359 | 3,359 | ||||||
| Current portion of closure and post-closure obligations | 5,771 | 6,471 | ||||||
| Current portion of operating lease liabilities | 15,799 | 17,048 | ||||||
| Total current liabilities | 186,934 | 169,217 | ||||||
| Long-term debt | 735,125 | 782,484 | ||||||
| Long-term closure and post-closure obligations | 93,149 | 89,398 | ||||||
| Long-term operating lease liabilities | 28,477 | 35,069 | ||||||
| Other long-term liabilities | 13,907 | 32,201 | ||||||
| Deferred income taxes, net | 123,482 | 120,983 | ||||||
| Total liabilities | 1,181,074 | 1,229,352 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock | 315 | 315 | ||||||
| Additional paid-in capital | 821,970 | 820,567 | ||||||
| Retained deficit | (183,115 | ) | (188,452 | ) | ||||
| Treasury stock | (10,652 | ) | (15,841 | ) | ||||
| Accumulated other comprehensive loss | (4,194 | ) | (14,658 | ) | ||||
| Total stockholders’ equity | 624,324 | 601,931 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,805,398 | $ | 1,831,283 | ||||
| US ECOLOGY, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| For the Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | 5,337 | $ | (389,359 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 70,799 | 66,561 | ||||||
| Amortization of intangible assets | 34,614 | 37,344 | ||||||
| Accretion of closure and post-closure obligations | 5,363 | 4,000 | ||||||
| Change in fair value of minority interest investment | (3,509 | ) | - | |||||
| Unrealized foreign currency gain | (1,647 | ) | (1,472 | ) | ||||
| Deferred income taxes | (635 | ) | (4,148 | ) | ||||
| Share-based compensation expense | 7,478 | 6,651 | ||||||
| Share-based payment of business development and integration expenses | 411 | 1,182 | ||||||
| Unrecognized tax benefits | 16 | (8 | ) | |||||
| Net (gain) loss on disposition of assets | (116 | ) | 1,504 | |||||
| Amortization of debt discount | 161 | 161 | ||||||
| Amortization of debt issuance costs | 2,440 | 2,217 | ||||||
| Integration-related property and equipment charges | - | 3,067 | ||||||
| Goodwill impairment charges | - | 404,900 | ||||||
| Change in fair value of contingent consideration | 282 | (3,682 | ) | |||||
| Changes in assets and liabilities (net of effects of business acquisitions): | ||||||||
| Receivables | (14,685 | ) | 8,381 | |||||
| Income tax receivable | 3,830 | (7,049 | ) | |||||
| Other assets | (5,271 | ) | (5,443 | ) | ||||
| Accounts payable and accrued liabilities | 15,985 | (13,628 | ) | |||||
| Deferred revenue | 658 | (1,619 | ) | |||||
| Accrued salaries and benefits | (1,483 | ) | (121 | ) | ||||
| Income tax payable | (430 | ) | (549 | ) | ||||
| Closure and post-closure obligations | (3,279 | ) | (1,744 | ) | ||||
| Net cash provided by operating activities | 116,319 | 107,146 | ||||||
| Cash Flows From Investing Activities: | ||||||||
| Purchases of property and equipment | (68,666 | ) | (57,399 | ) | ||||
| Proceeds from sale of property and equipment | 2,431 | 1,897 | ||||||
| Proceeds from sale of restricted investments | 1,267 | 1,483 | ||||||
| Purchases of restricted investments | (1,017 | ) | (1,615 | ) | ||||
| Proceeds from sale of short-term investments | 2,142 | - | ||||||
| Minority interest investment | (712 | ) | - | |||||
| Insurance proceeds from damaged property and equipment | - | 1,305 | ||||||
| Business acquisitions, net of cash acquired | - | (3,309 | ) | |||||
| Net cash used in investing activities | (64,555 | ) | (57,638 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from short-term borrowings | 61,326 | 72,353 | ||||||
| Payments on short-term borrowings | (61,326 | ) | (72,353 | ) | ||||
| Payments on long-term debt | (48,500 | ) | (74,500 | ) | ||||
| Payment of equipment financing obligations | (5,616 | ) | (6,327 | ) | ||||
| Payment of contingent consideration liabilities | (2,553 | ) | (2,517 | ) | ||||
| Deferred financing costs paid | (957 | ) | (1,144 | ) | ||||
| Repurchases of common stock | (465 | ) | (18,332 | ) | ||||
| Proceeds from long-term debt | - | 90,000 | ||||||
| Dividends paid | - | (5,667 | ) | |||||
| Other | - | 28 | ||||||
| Net cash used in financing activities | (58,091 | ) | (18,459 | ) | ||||
| Effect of foreign exchange rate changes on cash | 277 | 1,915 | ||||||
| (Decrease) increase in cash and cash equivalents and restricted cash | (6,050 | ) | 32,964 | |||||
| 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 | $ | 69,054 | $ | 75,104 | ||||
EXHIBIT A
Non-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 income (loss) and adjusted EBITDA for the three months and year ended December 31, 2021 and 2020:
| (in thousands) | Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income (loss) | $ | 3,564 | $ | (92,409 | ) | $ | 5,337 | $ | (389,359 | ) | ||||||
| Income tax expense (benefit) | 3,417 | (4,784 | ) | 4,765 | (4,242 | ) | ||||||||||
| Interest expense | 6,944 | 7,468 | 28,966 | 32,595 | ||||||||||||
| Interest income | (269 | ) | (7 | ) | (1,417 | ) | (258 | ) | ||||||||
| Foreign currency (gain) loss | (214 | ) | 979 | 171 | 1,134 | |||||||||||
| Other income | (456 | ) | (406 | ) | (4,476 | ) | (788 | ) | ||||||||
| Goodwill and intangible asset impairment charges | - | 104,600 | - | 404,900 | ||||||||||||
| Depreciation and amortization of plant and equipment | 16,704 | 11,730 | 70,799 | 66,561 | ||||||||||||
| Amortization of intangible assets | 8,113 | 9,532 | 34,614 | 37,344 | ||||||||||||
| Share-based compensation | 1,730 | 1,790 | 7,478 | 6,651 | ||||||||||||
| Accretion and non-cash adjustments of closure & post-closure obligations | 1,792 | 188 | 5,363 | 4,000 | ||||||||||||
| Business development and integration expenses | 746 | 4,114 | 3,274 | 11,621 | ||||||||||||
| Adjusted EBITDA | $ | 42,071 | $ | 42,795 | $ | 154,874 | $ | 170,159 | ||||||||
Adjusted Earnings Per Diluted Share
The Company defines adjusted earnings per diluted share as net income (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 impairment charges, the after-tax impact of purchase accounting-related depreciation and amortization true-ups, and non-cash foreign currency translation gains or losses, divided by the number of diluted shares used in the earnings (loss) per diluted share calculation.
The gain on a minority interest investment excluded from the earnings (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 earnings (loss) per diluted share calculation are related to the Company’s assessment of goodwill and intangible assets in 2020. Business development and integration costs excluded from the earnings (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. Purchase accounting-related depreciation and amortization true-ups relate to the retrospective impact of adjustments to the fair values of property, plant and equipment and intangible assets related to the NRC merger. The foreign currency translation gains or losses excluded from the earnings (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, the after-tax impact of purchase accounting-related depreciation and amortization true-ups, and non-cash foreign currency translation gains or losses from the earnings (loss) per diluted share calculation 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 earnings per diluted share (see definition above) plus amortization of intangible assets, net of tax.
The following reconciliation itemizes the differences between reported net income (loss) and earnings (loss) per diluted share to adjusted net income and adjusted earnings per diluted share and cash earnings per diluted share for the three months and year ended December 31, 2021 and 2020:
| (in thousands, except per share data) | Three Months Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||
| Income (loss) before income taxes | Income tax (expense) benefit | Net income (loss) | per share | (Loss) income before income taxes | Income tax benefit (expense) | Net (loss) income | per share | ||||||||||||||||||
| As Reported | $ | 6,981 | $ | (3,417 | ) | $ | 3,564 | $ | 0.11 | $ | (97,193 | ) | $ | 4,784 | $ | (92,409 | ) | $ | (2.97 | ) | |||||
| Adjustments: | |||||||||||||||||||||||||
| Plus: Business development and integration expenses | 746 | (205 | ) | 541 | 0.02 | 4,114 | (1,131 | ) | 2,983 | 0.09 | |||||||||||||||
| Foreign currency (gain) loss | (214 | ) | 59 | (155 | ) | - | 979 | (269 | ) | 710 | 0.02 | ||||||||||||||
| Less: Purchase accounting depreciation true-up related to prior periods | - | - | - | - | (5,734 | ) | 1,577 | (4,157 | ) | (0.13 | ) | ||||||||||||||
| Plus: Goodwill and intangible asset impairment charges | - | - | - | - | 104,600 | (5,776 | ) | 98,824 | 3.18 | ||||||||||||||||
| As Adjusted | $ | 7,513 | $ | (3,563 | ) | $ | 3,950 | $ | 0.13 | $ | 6,766 | $ | (815 | ) | $ | 5,951 | $ | 0.19 | |||||||
| Plus: Amortization of intangible assets | $ | 8,113 | $ | (2,237 | ) | 5,876 | 0.18 | $ | 9,532 | $ | (2,619 | ) | 6,913 | 0.22 | |||||||||||
| Cash earnings per diluted share | $ | 15,626 | $ | (5,800 | ) | $ | 9,826 | $ | 0.31 | $ | 16,298 | $ | (3,434 | ) | $ | 12,864 | $ | 0.41 | |||||||
| Shares used in earnings (loss) per diluted share calculation | 31,359 | 31,078 | |||||||||||||||||||||||
| (in thousands, except per share data) | Year Ended December 31, | ||||||||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||||||||
| Income (loss) before income taxes | Income tax (expense) benefit | Net income (loss) | per share | (Loss) income before income taxes | Income tax benefit (expense) | Net (loss) income | per share | ||||||||||||||||||
| As Reported | $ | 10,102 | $ | (4,765 | ) | $ | 5,337 | $ | 0.17 | $ | (393,601 | ) | $ | 4,242 | $ | (389,359 | ) | $ | (12.51 | ) | |||||
| Adjustments: | |||||||||||||||||||||||||
| Less: Gain on minority interest investment | (3,509 | ) | 965 | (2,544 | ) | (0.08 | ) | - | - | - | - | ||||||||||||||
| Plus: Business development and integration expenses | 3,274 | (900 | ) | 2,374 | 0.08 | 11,621 | (3,196 | ) | 8,425 | 0.27 | |||||||||||||||
| Foreign currency loss | 171 | (47 | ) | 124 | - | 1,134 | (312 | ) | 822 | 0.03 | |||||||||||||||
| Plus: Goodwill and intangible asset impairment charges | - | - | - | - | 404,900 | (5,776 | ) | 399,124 | 12.82 | ||||||||||||||||
| As Adjusted | $ | 10,038 | $ | (4,747 | ) | $ | 5,291 | $ | 0.17 | $ | 24,054 | $ | (5,042 | ) | $ | 19,012 | $ | 0.61 | |||||||
| Plus: Amortization of intangible assets | $ | 34,614 | $ | (9,514 | ) | 25,100 | 0.80 | $ | 37,344 | $ | (10,275 | ) | 27,069 | 0.87 | |||||||||||
| Cash earnings per diluted share | $ | 44,652 | $ | (14,261 | ) | $ | 30,391 | $ | 0.97 | $ | 61,398 | $ | (15,317 | ) | $ | 46,081 | $ | 1.48 | |||||||
| Shares used in earnings (loss) per diluted share calculation | 31,373 | 31,126 | |||||||||||||||||||||||
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 and year ended December 31, 2021 and 2020:
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||
| (in thousands) | 2021 | 2020 | 2021 | 2020 | |||||||||||
| Adjusted Free Cash Flow Reconciliation | |||||||||||||||
| Net cash provided by operating activities | $ | 39,278 | $ | 23,902 | $ | 116,319 | $ | 107,146 | |||||||
| Less: Purchases of property and equipment | (23,319 | ) | (12,275 | ) | (68,666 | ) | (57,399 | ) | |||||||
| Plus: Business development and integration expenses, net of tax | 541 | 2,983 | 2,374 | 8,425 | |||||||||||
| Plus: Purchases of property and equipment for the Idaho facility rebuild | 17 | 1,469 | 1,653 | 4,284 | |||||||||||
| Plus: Payment of deferred/contingent purchase consideration | - | 432 | 2,553 | 4,432 | |||||||||||
| Plus: Proceeds from sale of property and equipment | - | 818 | 2,431 | 1,897 | |||||||||||
| Adjusted Free Cash Flow | $ | 16,517 | $ | 17,329 | $ | 56,664 | $ | 68,785 | |||||||
Contact: Alison Ziegler, Darrow Associates (201) 220-2678
aziegler@darrowir.com www.usecology.com
FAQ
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