US Ecology Announces Second Quarter 2020 Results
US Ecology reported its Q2 2020 results, revealing total revenue of $213.9 million, a 37% increase year-over-year. However, the Legacy US Ecology segment witnessed an 8% decline in revenue, with a 10% drop in Base Business revenue, partly offset by a 12% rise in Event Business revenue. The net loss was $5.2 million, translating to $0.17 per diluted share, a decline from a profit of $15.5 million in Q2 2019. The acquisition of NRC contributed significantly, yet the company anticipates ongoing challenges due to COVID-19. Strong free cash flow increased by 190% to $18.7 million.
- Total revenue of $213.9 million, up 37% year-over-year.
- Strong free cash flow generation increased by 190% to $18.7 million.
- Adjusted EBITDA of $38.7 million, up 2% from Q2 2019.
- Event Business revenue grew 12%, indicating resilience in certain sectors.
- Net loss of $5.2 million or $0.17 per diluted share compared to net income of $15.5 million in Q2 2019.
- Legacy US Ecology revenue declined 8%, with Base Business revenue down 10%.
- Adjusted earnings per diluted share decreased to $0.04, down from $0.88 in the first half of 2019.
- Overall decline in transportation revenue by 25% in Environmental Services segment.
SECOND QUARTER HIGHLIGHTS COMPARED TO PRIOR YEAR:
- Revenue of
$213.9 million , up37% , including$70.4 million from NRC - Legacy US Ecology revenue declined
8% - Base Business revenue decline of
10% ; Event Business revenue growth of12% , excluding NRC - Field and Industrial Services revenue down
6% , excluding NRC - Net loss of
$5.2 million , or$0.17 per diluted share - Adjusted loss per diluted share of
$0.08 - Adjusted EBITDA of
$38.7 million , up2% including NRC; Legacy US Ecology business declined12% - NRC contributed adjusted EBITDA of approximately
$5.2 million - Strong free cash flow generation, up
190%
BOISE, Idaho, Aug. 06, 2020 (GLOBE NEWSWIRE) -- US Ecology, Inc. (NASDAQ-GS: ECOL) (“US Ecology” or “the Company”) today reported second quarter financial results that reflect the impacts from the COVID-19 pandemic. US Ecology reported second quarter 2020 total revenue of
“Despite the headwinds in our business due to the COVID-19 pandemic, our proactive and prudent capital preservation initiatives and the relative resiliency of our core environmental services-based businesses allowed us to generate strong cash flow and strengthen our balance sheet during these unprecedented times,” commented Chairman and Chief Executive Officer, Jeff Feeler.
“Our legacy US Ecology Environmental Service segment revenue declined
Revenue for the Environmental Services1 (“ES”) segment was
Revenue for the Field and Industrial Services2 (“FIS”) segment was
Gross profit for the second quarter of 2020 was
Gross profit for the FIS segment in the second quarter of 2020 was
Selling, general and administrative (“SG&A”) expense for the second quarter of 2020 was
Net interest expense for the second quarter of 2020 was
The Company’s consolidated effective income tax rate for the second quarter of 2020 was negative
Net loss for the second quarter of 2020 was
Cash earnings per diluted share was
Adjusted EBITDA for the second quarter of 2020 was
Adjusted free cash flow was
Reconciliations of earnings per diluted share to adjusted earnings (loss) per diluted share, earnings per diluted share to cash earnings per diluted share, net income to adjusted EBITDA and net cash from operating activities to adjusted free cash flow are attached as Exhibit A to this release.
YEAR-TO-DATE RESULTS
Total revenue for first six months of 2020 grew
ES segment revenue was
FIS segment revenue was
Net loss was
Cash earnings per diluted share was
Adjusted free cash flow was
Reconciliations of earnings per diluted share to adjusted earnings (loss) per diluted share, earnings per diluted share to cash earnings per diluted share, net income to adjusted EBITDA and net cash from operating activities to adjusted free cash flow are attached as Exhibit A to this release.
2020 BUSINESS OUTLOOK
While US Ecology’s outlook has improved across the company, business continues to be negatively impacted by the COVID-19 pandemic. Given the continued unpredictability pertaining to the pandemic’s impact on the general industrial economy and customer behavior, the range of feasible financial outcomes remains too wide to warrant the reinstatement of formal 2020 guidance.
We believe that the second quarter of 2020 will be the lowest quarter of the year in terms of total revenue, adjusted EBITDA and adjusted earnings (loss) per share. While we are seeing positive signs of recovery in our core waste and services business, we expect continued headwinds in our energy waste disposal services business. However, through our decisive actions and business plan adjustments, we expect to operate that business unit at breakeven levels on an adjusted EBITDA basis for the full year of 2020.
The Company continues to monitor current business levels, prudently adjusting spending and cost control actions to mitigate the impact the COVID-19 pandemic has on our business activities. This includes continuing to adjust capital spending plans, cost control initiatives such as hiring practices and other work force actions. As a result, we expect to generate positive free cash flow for 2020 at or above 2019 levels.
CONFERENCE CALL
US Ecology, Inc. will hold an investor conference call on Friday, August 7, 2020 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 August 14, 2020 by calling 877-344-7529 or 412-317-0088 and using the passcode 10146352. 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 and recycling of hazardous, non-hazardous and radioactive waste, leading emergency response and standby services, and 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 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 (“LIBOR”) 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 third-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 (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” section in this report 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 June 30, | Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Revenue | ||||||||||||||||
| Environmental Services | $ | 110,409 | $ | 112,844 | $ | 237,154 | $ | 205,177 | ||||||||
| Field & Industrial Services | 103,509 | 42,958 | 217,484 | 81,662 | ||||||||||||
| Total | 213,918 | 155,802 | 454,638 | 286,839 | ||||||||||||
| Gross profit | ||||||||||||||||
| Environmental Services | 40,206 | 43,081 | 84,312 | 74,637 | ||||||||||||
| Field & Industrial Services | 13,605 | 6,502 | 30,621 | 10,187 | ||||||||||||
| Total | 53,811 | 49,583 | 114,933 | 84,824 | ||||||||||||
| Selling, general & administrative expenses | ||||||||||||||||
| Environmental Services | 13,506 | 2,010 | 27,740 | 3,415 | ||||||||||||
| Field & Industrial Services | 13,116 | 3,739 | 27,800 | 7,123 | ||||||||||||
| Corporate | 21,865 | 18,300 | 44,005 | 33,816 | ||||||||||||
| Total | 48,487 | 24,049 | 99,545 | 44,354 | ||||||||||||
| Goodwill impairment charges | ||||||||||||||||
| Environmental Services | - | - | 283,600 | - | ||||||||||||
| Field & Industrial Services | - | - | 16,700 | - | ||||||||||||
| Operating income (loss) | 5,324 | 25,534 | (284,912 | ) | 40,470 | |||||||||||
| Other income (expense): | ||||||||||||||||
| Interest income | 153 | 202 | 242 | 409 | ||||||||||||
| Interest expense | (7,853 | ) | (3,588 | ) | (17,163 | ) | (7,618 | ) | ||||||||
| Foreign currency (loss) gain | (671 | ) | (384 | ) | 266 | (523 | ) | |||||||||
| Other | 125 | 122 | 296 | 232 | ||||||||||||
| Total other expense | (8,246 | ) | (3,648 | ) | (16,359 | ) | (7,500 | ) | ||||||||
| (Loss) income before income taxes | (2,922 | ) | 21,886 | (301,271 | ) | 32,970 | ||||||||||
| Income tax expense | 2,261 | 6,395 | 1,998 | 9,436 | ||||||||||||
| Net (loss) income | $ | (5,183 | ) | $ | 15,491 | $ | (303,269 | ) | $ | 23,534 | ||||||
| (Loss) earnings per share: | ||||||||||||||||
| Basic | $ | (0.17 | ) | $ | 0.70 | $ | (9.73 | ) | $ | 1.07 | ||||||
| Diluted | $ | (0.17 | ) | $ | 0.70 | $ | (9.73 | ) | $ | 1.06 | ||||||
| Shares used in (loss) earnings | ||||||||||||||||
| per share calculation: | ||||||||||||||||
| Basic | 31,054 | 22,006 | 31,179 | 21,997 | ||||||||||||
| Diluted | 31,054 | 22,208 | 31,179 | 22,203 | ||||||||||||
| Dividends paid per share | $ | - | $ | 0.18 | $ | 0.18 | $ | 0.36 | ||||||||
| US ECOLOGY, INC. | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| June 30, 2020 | December 31, 2019 | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | 122,521 | $ | 41,281 | ||||
| Receivables, net | 211,181 | 255,310 | ||||||
| Prepaid expenses and other current assets | 30,524 | 25,136 | ||||||
| Income tax receivable | 10,842 | 11,244 | ||||||
| Total current assets | 375,068 | 332,971 | ||||||
| Property and equipment, net | 483,578 | 478,768 | ||||||
| Operating lease assets | 52,202 | 57,396 | ||||||
| Restricted cash and investments | 5,172 | 5,069 | ||||||
| Intangible assets, net | 555,973 | 574,902 | ||||||
| Goodwill | 469,278 | 766,980 | ||||||
| Other assets | 14,878 | 15,158 | ||||||
| Total assets | $ | 1,956,149 | $ | 2,231,244 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | 38,048 | $ | 46,906 | ||||
| Deferred revenue | 19,258 | 14,788 | ||||||
| Accrued liabilities | 38,759 | 65,869 | ||||||
| Accrued salaries and benefits | 24,786 | 29,653 | ||||||
| Income tax payable | 2,572 | 726 | ||||||
| Short-term borrowings | 3,978 | - | ||||||
| Current portion of long-term debt | 3,359 | 3,359 | ||||||
| Current portion of closure and post-closure obligations | 3,374 | 2,152 | ||||||
| Current portion of operating lease liabilities | 17,312 | 17,317 | ||||||
| Total current liabilities | 151,446 | 180,770 | ||||||
| Long-term debt | 854,163 | 765,842 | ||||||
| Long-term closure and post-closure obligations | 84,672 | 84,231 | ||||||
| Long-term operating lease liabilities | 35,121 | 39,954 | ||||||
| Other long-term liabilities | 35,164 | 20,722 | ||||||
| Deferred income taxes, net | 122,636 | 128,345 | ||||||
| Total liabilities | 1,283,202 | 1,219,864 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ Equity | ||||||||
| Common stock | 315 | 315 | ||||||
| Additional paid-in capital | 817,557 | 816,345 | ||||||
| Retained (deficit) earnings | (102,362 | ) | 206,574 | |||||
| Treasury stock | (16,366 | ) | - | |||||
| Accumulated other comprehensive loss | (26,197 | ) | (11,854 | ) | ||||
| Total stockholders’ equity | 672,947 | 1,011,380 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,956,149 | $ | 2,231,244 | ||||
| US ECOLOGY, INC. | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (in thousands) | ||||||||
| (unaudited) | ||||||||
| For the Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net (loss) income | $ | (303,269 | ) | $ | 23,534 | |||
| Adjustments to reconcile net (loss) income to net cash provided by | ||||||||
| operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 36,396 | 17,254 | ||||||
| Amortization of intangible assets | 18,634 | 5,674 | ||||||
| Accretion of closure and post-closure obligations | 2,533 | 2,258 | ||||||
| Property and equipment impairment charges | - | 25 | ||||||
| Goodwill impairment charges | 300,300 | - | ||||||
| Unrealized foreign currency loss (gain) | 1,020 | (502 | ) | |||||
| Deferred income taxes | (2,093 | ) | 3,690 | |||||
| Share-based compensation expense | 3,088 | 2,467 | ||||||
| Share-based payment of business development and integration expenses | 973 | - | ||||||
| Unrecognized tax benefits | 52 | 131 | ||||||
| Net loss (gain) on disposition of assets | 188 | (142 | ) | |||||
| Gain on insurance proceeds from damaged property and equipment | - | (9,153 | ) | |||||
| Change in fair value of contingent consideration | (3,282 | ) | - | |||||
| Amortization of debt discount | 490 | - | ||||||
| Amortization of debt issuance costs | 679 | 409 | ||||||
| Changes in assets and liabilities (net of effects of business acquisition): | ||||||||
| Receivables | 43,619 | (5,346 | ) | |||||
| Income tax receivable | 380 | 452 | ||||||
| Other assets | (5,235 | ) | (1,384 | ) | ||||
| Accounts payable and accrued liabilities | (32,218 | ) | 404 | |||||
| Deferred revenue | 2,702 | 2,418 | ||||||
| Accrued salaries and benefits | (6,481 | ) | (2,025 | ) | ||||
| Income tax payable | 1,848 | (515 | ) | |||||
| Closure and post-closure obligations | (798 | ) | (775 | ) | ||||
| Net cash provided by operating activities | 59,526 | 38,874 | ||||||
| Cash Flows From Investing Activities: | ||||||||
| Purchases of property and equipment | (35,957 | ) | (24,657 | ) | ||||
| Business acquisitions, net of cash acquired | (3,309 | ) | - | |||||
| Proceeds from sale of property and equipment | 788 | 512 | ||||||
| Purchases of restricted investments | (902 | ) | (400 | ) | ||||
| Proceeds from sale of restricted investments | 752 | 354 | ||||||
| Insurance proceeds from damaged property and equipment | - | 9,500 | ||||||
| Net cash used in investing activities | (38,628 | ) | (14,691 | ) | ||||
| Cash Flows From Financing Activities: | ||||||||
| Proceeds from long-term debt | 90,000 | - | ||||||
| Payments on long-term debt | (2,250 | ) | (30,000 | ) | ||||
| Proceeds from short-term borrowings | 72,353 | 14,384 | ||||||
| Payments on short-term borrowings | (68,375 | ) | (14,384 | ) | ||||
| Repurchases of common stock | (18,332 | ) | - | |||||
| Dividends paid | (5,667 | ) | (7,942 | ) | ||||
| Deferred financing costs paid | (1,026 | ) | - | |||||
| Payment of contingent consideration liabilities | (2,085 | ) | - | |||||
| Payment of equipment financing obligations | (3,046 | ) | (408 | ) | ||||
| Other | 27 | (914 | ) | |||||
| Net cash provided by (used in) financing activities | 61,599 | (39,264 | ) | |||||
| Effect of foreign exchange rate changes on cash | (1,303 | ) | 836 | |||||
| Increase (decrease) in cash and cash equivalents and restricted cash | 81,194 | (14,245 | ) | |||||
| Cash and cash equivalents and restricted cash at beginning of period | 42,140 | 32,753 | ||||||
| Cash and cash equivalents and restricted cash at end of period | $ | 123,334 | $ | 18,508 | ||||
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 earnings (loss) per diluted share does not reflect property insurance recoveries;
- Adjusted free cash flow does not reflect business development and integration expenses, which may vary significantly quarter to quarter;
- Adjusted free cash flow does not reflect capital expenditures associated with the rebuild of our Grand View, Idaho facility which are expected to be recovered through insurance proceeds;
- Adjusted free cash flow does not reflect capital expenditures associated with synergy driven initiatives;
- Adjusted free cash flow does not reflect capital expenditures associated with discretionary growth projects; and
- Adjusted free cash flow does not reflect payments of deferred/contingent purchase consideration.
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, property insurance recoveries, business development and integration expenses and other income/expense.
The following reconciliation itemizes the differences between reported net income and adjusted EBITDA for the three and six months ended June 30, 2020 and 2019:
| (in thousands) | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| Net (loss) income | $ | (5,183 | ) | $ | 15,491 | $ | (303,269 | ) | $ | 23,534 | ||||||
| Income tax expense | 2,261 | 6,395 | 1,998 | 9,436 | ||||||||||||
| Interest expense | 7,853 | 3,588 | 17,163 | 7,618 | ||||||||||||
| Interest income | (153 | ) | (202 | ) | (242 | ) | (409 | ) | ||||||||
| Foreign currency loss (gain) | 671 | 384 | (266 | ) | 523 | |||||||||||
| Other income | (125 | ) | (122 | ) | (296 | ) | (232 | ) | ||||||||
| Property and equipment impairment charges | - | - | - | 25 | ||||||||||||
| Goodwill impairment charges | - | - | 300,300 | - | ||||||||||||
| Depreciation and amortization of plant and equipment | 18,418 | 9,129 | 36,396 | 17,254 | ||||||||||||
| Amortization of intangible assets | 9,193 | 2,863 | 18,634 | 5,674 | ||||||||||||
| Share-based compensation | 1,524 | 1,245 | 3,088 | 2,467 | ||||||||||||
| Accretion and non-cash adjustments of closure & post-closure obligations | 1,267 | 1,133 | 2,533 | 2,258 | ||||||||||||
| Property insurance recoveries | - | (4,500 | ) | - | (9,153 | ) | ||||||||||
| Business development and integration expenses | 2,973 | 2,530 | 5,880 | 2,671 | ||||||||||||
| Adjusted EBITDA | $ | 38,699 | $ | 37,934 | $ | 81,919 | $ | 61,666 | ||||||||
Adjusted Earnings (Loss) Per Diluted Share
The Company defines adjusted earnings (loss) per diluted share as net income adjusted for the after-tax impact of the non-cash impairment charges, the after-tax impact of property insurance recoveries, the after-tax impact of business development and integration 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 (loss) per diluted share calculation are related to the Company’s assessment of goodwill associated with its Energy Waste Disposal Services and international businesses in the second quarter of 2020. Business development and integration costs 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 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 non-cash impairment charges, the after-tax impact of business development and integration costs, 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 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 and earnings (loss) per diluted share to adjusted net income and adjusted earnings (loss) per diluted share and cash earnings per diluted share for the three and six months ended June 30, 2020 and 2019:
| (in thousands, except per share data) | Three Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||
| (Loss) income before income taxes | Income tax benefit (expense) | Net (loss) income | per share | Income before income taxes | Income tax expense | Net income | per share | ||||||||||||||||||
| As Reported | $ | (2,922 | ) | $ | (2,261 | ) | $ | (5,183 | ) | $ | (0.17 | ) | $ | 21,886 | $ | (6,395 | ) | $ | 15,491 | $ | 0.70 | ||||
| Adjustments: | |||||||||||||||||||||||||
| Plus: Business development and integration expenses | 2,973 | (818 | ) | 2,155 | 0.07 | 2,530 | (399 | ) | 2,131 | 0.09 | |||||||||||||||
| Less: Property insurance recoveries | - | - | - | - | (4,500 | ) | 1,315 | (3,185 | ) | (0.14 | ) | ||||||||||||||
| Foreign currency loss | 671 | (185 | ) | 486 | 0.02 | 384 | (112 | ) | 272 | 0.01 | |||||||||||||||
| As Adjusted | $ | 722 | $ | (3,264 | ) | $ | (2,542 | ) | $ | (0.08 | ) | $ | 20,300 | $ | (5,591 | ) | $ | 14,709 | $ | 0.66 | |||||
| Plus: Amortization of intangible assets | $ | 9,193 | $ | (2,535 | ) | 6,658 | 0.21 | $ | 2,863 | $ | (837 | ) | 2,026 | 0.09 | |||||||||||
| Cash earnings per diluted share | $ | 9,915 | $ | (5,799 | ) | $ | 4,116 | $ | 0.13 | $ | 23,163 | $ | (6,428 | ) | $ | 16,735 | $ | 0.75 | |||||||
| Shares used in (loss) earnings per diluted share calculation | 31,054 | 22,208 | |||||||||||||||||||||||
| (in thousands, except per share data) | Six Months Ended June 30, | ||||||||||||||||||||||||
| 2020 | 2019 | ||||||||||||||||||||||||
| (Loss) income before income taxes | Income tax benefit (expense) | Net (loss) income | per share | Income before income taxes | Income tax expense | Net income | per share | ||||||||||||||||||
| As Reported | $ | (301,271 | ) | $ | (1,998 | ) | $ | (303,269 | ) | $ | (9.73 | ) | $ | 32,970 | $ | (9,436 | ) | $ | 23,534 | $ | 1.06 | ||||
| Adjustments: | |||||||||||||||||||||||||
| Plus: Goodwill and intangible asset impairment charges | 300,300 | - | 300,300 | 9.63 | - | - | - | - | |||||||||||||||||
| Plus: Business development and integration expenses | 5,880 | (1,617 | ) | 4,263 | 0.14 | 2,671 | (422 | ) | 2,249 | 0.09 | |||||||||||||||
| Plus: Property and equipment impairment charges | - | - | - | - | 25 | - | 25 | - | |||||||||||||||||
| Less: Property insurance recoveries | - | - | - | - | (9,153 | ) | 2,620 | (6,533 | ) | (0.29 | ) | ||||||||||||||
| Foreign currency (gain) loss | (266 | ) | 73 | (193 | ) | - | 523 | (150 | ) | 373 | 0.02 | ||||||||||||||
| As Adjusted | $ | 4,643 | $ | (3,542 | ) | $ | 1,101 | $ | 0.04 | $ | 27,036 | $ | (7,388 | ) | $ | 19,648 | $ | 0.88 | |||||||
| Plus: Amortization of intangible assets | $ | 18,634 | $ | (5,114 | ) | 13,520 | 0.43 | $ | 5,674 | $ | (1,624 | ) | 4,050 | 0.19 | |||||||||||
| Cash earnings per diluted share | $ | 23,277 | $ | (8,656 | ) | $ | 14,621 | $ | 0.47 | $ | 32,710 | $ | (9,012 | ) | $ | 23,698 | $ | 1.07 | |||||||
| Shares used in earnings per diluted share calculation | 31,179 | 22,203 | |||||||||||||||||||||||
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 synergy related capital expenditures, 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 and six months ended June 30, 2020 and 2019:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||
| Adjusted Free Cash Flow Reconciliation | |||||||||||||||
| Net cash provided by operating activities | $ | 30,180 | $ | 20,350 | $ | 59,526 | $ | 38,874 | |||||||
| Less: Purchases of property and equipment | (16,826 | ) | (17,434 | ) | (35,957 | ) | (24,657 | ) | |||||||
| Plus: Business development and integration expenses, net of tax | 2,155 | 2,131 | 4,263 | 2,249 | |||||||||||
| Plus: Purchases of property and equipment for the Idaho facility rebuild | 179 | 1,357 | 1,990 | 1,596 | |||||||||||
| Plus: Payment of deferred/contingent purchase consideration | 3,000 | - | 4,000 | - | |||||||||||
| Plus: Proceeds from sale of property and equipment | 7 | 53 | 788 | 512 | |||||||||||
| Adjusted Free Cash Flow | $ | 18,695 | $ | 6,457 | $ | 34,610 | $ | 18,574 | |||||||
1Environmental Services (“ES”) - This segment includes the NRC energy waste disposal services business (formerly known as Sprint Energy) as well as US Ecology’s legacy treatment and disposal facilities. Our ES segment provides diversified waste services including transportation, recycling, treatment and disposal of hazardous and non-hazardous waste at Company-owned or operated landfill, wastewater and other treatment facilities.
2Field & Industrial Services (“FIS”) - This segment includes the remainder of the NRC business, excluding the energy waste disposal services as described above, as well as the legacy US Ecology field and industrial services business. Our FIS segment provides waste packaging, collection and total waste management solutions at customer sites and through our 10-day transfer facilities as well as emergency response and spill cleanup services, standby services, on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste. This segment also provides specialty services such as high-pressure and chemical cleaning, centrifuge and materials processing, tank cleaning, decontamination, remediation and other services to commercial and industrial facilities and government entities.
Alison Ziegler, Darrow Associates (201)220-2678
aziegler@darrowir.com www.usecology.com
FAQ
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