SOURCE: US Ecology, Inc.

US Ecology, Inc.

February 12, 2014 16:30 ET

US Ecology Announces Record Full Year 2013 Results

Record Operating Income of $52.9 Million; Record Adjusted EBITDA of $71.2 Million

BOISE, ID--(Marketwired - Feb 12, 2014) - US Ecology, Inc. (NASDAQ: ECOL) ("the Company") today reported financial results for the quarter and full year ended December 31, 2013.

Net income for the fourth quarter of 2013 was $9.2 million, or $0.48 per diluted share, up from $6.1 million, or $0.33 per diluted share, in the fourth quarter of 2012. Excluding foreign currency translation losses and business development expenses, adjusted earnings per diluted share grew 44% to $0.52 in the fourth quarter of 2013, up from $0.36 in the fourth quarter of 2012. Operating income for the fourth quarter of 2013 was $15.4 million, up 42% from $10.8 million in the fourth quarter last year. Adjusted EBITDA for the fourth quarter of 2013 was a record $20.2 million, up 29% from $15.6 million in the same period last year. A reconciliation of earnings per diluted share to adjusted earnings per diluted share and net income to adjusted EBITDA is attached as Exhibit A to this release. 

Total revenue for the fourth quarter of 2013 was $59.4 million, up 18% from $50.4 million in the same quarter last year. Treatment and disposal ("T&D") revenue increased 15% and transportation revenue increased 28% quarter over quarter. T&D revenue growth in the quarter reflected a 32% increase in project-based Event Business. Recurring Base Business revenue for the fourth quarter of 2013 increased 4% compared to the fourth quarter of 2012.

Total quarterly waste volume disposed or processed at our Idaho, Michigan, Nevada, Texas and Quebec facilities was 308,000 tons in the fourth quarter of 2013, up 6% from 291,000 tons in the fourth quarter of 2012. Average selling price ("ASP") for the fourth quarter of 2013 increased 9% compared to the same quarter last year primarily due to a more favorable service mix. 

For the fourth quarter of 2013, gross profit was $23.1 million, up 26% from $18.3 million in the fourth quarter of 2012. Total gross margin was 39% in the fourth quarter of 2013, up from 36% in the same quarter last year. T&D gross margin for the fourth quarter of 2013 was 48%, up from 44% in the fourth quarter of 2012 reflecting higher volumes and ASPs. 

Selling, general and administrative ("SG&A") expense for the fourth quarter of 2013 was $7.7 million, or 13% of revenue, compared with $7.5 million, or 15% of revenue, in the same quarter last year. 

The Company's effective income tax rate for the fourth quarter of 2013 was 36.0%, down from 39.4% for the fourth quarter of 2012. This decrease reflects a higher proportion of earnings from our Canadian operations, which are taxed at a lower corporate tax rate, partially offset by higher U.S. state income taxes.

At December 31, 2013, cash on hand was $73.9 million with no outstanding borrowings on our lines of credit, compared with $2.1 million of cash on hand and borrowings of $45.0 million at December 31, 2012. The increase in cash and corresponding decrease in borrowings primarily reflects the net $96.4 million raised in our common stock offering in December 2013. At December 31, 2013, $79.9 million was available for future borrowings, and total shares outstanding were 21.5 million. 

"We are very pleased with our strong fourth quarter operating performance," commented Executive Vice President and Chief Financial Officer, Eric Gerratt. "Continued treatment and disposal revenue growth reflected another quarter of strong private event business, which more than offset expected softness in our government business. Treatment and disposal margins increased on a more favorable service mix and continued operational efficiencies across our facilities."

Full Year Results

Total revenue for the year ending December 31, 2013 was a record $201.1 million, up 19% from $169.1 million for the year ended December 31, 2012. T&D revenue increased 13% in 2013 compared to 2012. Transportation revenue increased 54% in 2013 compared to 2012. Excluding US Ecology Michigan, T&D revenue growth in 2013 reflected a 27% increase in Event Business revenue and a 2% increase in recurring Base Business revenue compared to 2012. 

Total waste volume disposed or processed at our Idaho, Michigan, Nevada, Texas and Quebec facilities was 1.1 million tons in 2013 compared to 1.0 million tons in 2012. ASP for 2013 increased 11% compared to 2012, reflecting a more favorable service mix in 2013. 

Gross profit for 2013 was $79.0 million, up 19% from $66.3 million in 2012. Total gross margin was 39% in 2013 and 2012. T&D gross margin for 2013 was 48%, up from 46% in 2012. 

SG&A expense for 2013 was $26.1 million, or 13% of revenue compared with $25.7 million, or 15% of revenue, for 2012.

Operating income increased 30% in 2013 to a record $52.9 million from $40.6 million for 2012. 

Adjusted EBITDA for 2013 was a record $71.2 million, 22% above the $58.4 million for the same period last year. A reconciliation of net income to adjusted EBITDA is attached as Exhibit A to this release. 

Our effective income tax rate for 2013 was 35.9%, down from 38.5% for 2012. This decrease reflects a higher proportion of earnings from our Canadian operations, which are taxed at a lower corporate tax rate, partially offset by higher U.S. state income taxes.

Net income for 2013 was a record $32.2 million, or $1.72 per diluted share, up from $25.7 million, or $1.40 per diluted share, for 2012. Excluding foreign currency translation gains and losses and business development expenses, 2013 adjusted earnings per diluted share grew 31% to $1.82, up from $1.39 for 2012. A reconciliation of earnings per diluted share to adjusted earnings per diluted share is attached as Exhibit A to this release. 

"Double digit organic growth in our treatment and disposal revenue, related margin expansion by more than two full percentage points and continued SG&A expense control drove operating income, earnings and Adjusted EBITDA to new record levels," commented Jeff Feeler, President and CEO. "Delivering these record results on the heels of what had been the Company's strongest year in 2012 is a testament to the value of US Ecology's fixed facility assets, broad permits and operational expertise. Our Event Business continued to strengthen throughout 2013 and into 2014 on robust shipments from commercial customers and included approximately $0.13 of earnings per diluted share from project acceleration that had previously been expected to benefit 2014. Base business growth was solid and in line with our expectations. I could not be more pleased with the performance of our entire team in 2013."

2014 Outlook

"Moving into 2014, market conditions and demand for our sevices continues to be strong," commented Feeler. "Our Event Business pipeline has strengthened over the last two months as we gain visibility into the summer clean-up season. While it will be a challenge to fully replace our 2013 Event Business results, our pipeline is filling out nicely with new opportunities."

Based on current estimates, management is projecting 2014 adjusted EBITDA of between $70 and $74 million and adjusted earnings per diluted share between $1.50 and $1.60, which excludes any foreign currency gains or losses and business development expenses. Estimated earnings per share amounts are based on the Company's new share count which includes 2,990,000 shares issued in December of 2013.

"We look forward to executing our long-term growth strategy with what we believe are best-in-class assets and permits," Feeler added. "With our successful equity raise in December 2013, we are focused on executing on our organic growth plan while actively seeking high quality assets and service platforms to extend our geographic reach and enhance our competitive position."

In 2013 the Company invested $21.4 million in capital projects. Capital spending for 2014 is estimated to range from $20 to $21 million, including approximately $2.3 million of carryover from 2013 projects that are ongoing. Capital expenditures for 2014 will be devoted primarily to constructing additional disposal space, ongoing infrastructure upgrades and equipment replacement at our operating facilities. 

Dividend

On January 2, 2014, the Company declared a quarterly dividend of $0.18 per common share for stockholders of record on January 20, 2014. The $3.9 million dividend was paid on January 28, 2014.

Conference Call

US Ecology, Inc. will hold an investor conference call on Thursday, February 13, 2014 at 10 a.m. Eastern Standard Time (8:00 a.m. Mountain Standard Time) to discuss these results and its current financial position and business outlook. Questions will be invited after management's presentation. Interested parties can join the conference call by dialing 866-825-1709 or 617-213-8060 and using the passcode 41867498. The conference call will also be broadcast live on our website at www.usecology.com. An audio replay will be available through February 20, 2014 by calling 888-286-8010 or 617-801-6888 and using the passcode 33269019. The replay will also be accessible on our website at www.usecology.com.

About US Ecology, Inc.

US Ecology, Inc., through its subsidiaries, provides radioactive, hazardous, PCB and non-hazardous industrial waste management and recycling services to commercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, medical and academic institutions and waste brokers. Headquartered in Boise, Idaho, the Company is one of the oldest radioactive and hazardous waste services companies in North America.

This press release contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, beliefs and assumptions about the industry and markets in which US Ecology, Inc. and its subsidiaries operate. Because such statements include risks and uncertainties, actual results may differ materially from what is expressed herein and no assurance can be given that the Company will achieve its 2014 earnings estimates, successfully execute its growth strategy, increase market share, or declare or pay future dividends. For information on other factors that could cause actual results to differ materially from expectations, please refer to US Ecology, Inc.'s December 31, 2012 Annual Report on Form 10-K and other reports filed with the Securities and Exchange Commission. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date such statements are made. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. Important assumptions and other important factors that could cause actual results to differ materially from those set forth in the forward-looking information include a loss of a major customer or contract, compliance with and changes to applicable laws, rules, or regulations, access to cost effective transportation services, access to insurance, surety bonds and other financial assurances, loss of key personnel, lawsuits, labor disputes, adverse economic conditions, government funding or competitive pressures, incidents or adverse weather conditions that could limit or suspend specific operations, implementation of new technologies, market conditions, average selling prices for recycled materials, our ability to replace business from recently completed large projects, our ability to perform under required contracts, our ability to permit and contract for timely construction of new or expanded disposal cells, our willingness or ability to pay dividends and our ability to effectively close and integrate future acquisitions.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of US Ecology, Inc.

   
US ECOLOGY, INC.  
CONSOLIDATED STATEMENTS OF INCOME  
(in thousands, except per share data)  
(unaudited)  
                         
                         
    Three Months Ended
December 31,
    For the Year Ended
December 31,
 
    2013     2012     2013     2012  
                                 
Revenue   $ 59,360     $ 50,406     $ 201,126     $ 169,138  
Direct operating costs     24,493       23,013       86,238       79,177  
Transportation costs     11,811       9,087       35,902       23,664  
                                 
Gross profit     23,056       18,306       78,986       66,297  
                                 
Selling, general and administrative expenses     7,702       7,492       26,055       25,659  
Operating income     15,354       10,814       52,931       40,638  
                                 
Other income (expense):                                
  Interest income     8       4       19       17  
  Interest expense     (177 )     (219 )     (828 )     (878 )
  Foreign currency gain (loss)     (879 )     (562 )     (2,327 )     1,213  
  Other     84       56       352       728  
    Total other income (expense)     (964 )     (721 )     (2,784 )     1,080  
                                 
Income before income taxes     14,390       10,093       50,147       41,718  
Income tax expense     5,183       3,981       17,996       16,059  
Net income   $ 9,207     $ 6,112     $ 32,151     $ 25,659  
                                 
Earnings per share:                                
    Basic   $ 0.48     $ 0.33     $ 1.73     $ 1.41  
    Diluted   $ 0.48     $ 0.33     $ 1.72     $ 1.40  
                                 
Shares used in earnings per share calculation:                                
    Basic     19,171       18,269       18,592       18,238  
    Diluted     19,281       18,332       18,676       18,281  
                                 
Dividends paid per share   $ 0.18     $ 0.36     $ 0.54     $ 0.90  
                                 
   
US ECOLOGY, INC.  
CONSOLIDATED BALANCE SHEETS  
(in thousands)  
(unaudited)  
             
    December 31, 2013     December 31, 2012  
Assets                
                 
Current Assets:                
  Cash and cash equivalents   $ 73,940     $ 2,120  
  Receivables, net     43,636       33,947  
  Prepaid expenses and other current assets     3,612       3,161  
  Deferred income taxes     1,340       1,276  
    Total current assets     122,528       40,504  
                 
Property and equipment, net     114,859       109,792  
Restricted cash     4,097       4,111  
Intangible assets, net     36,832       40,771  
Goodwill     21,693       23,105  
Other assets     547       411  
Total assets   $ 300,556     $ 218,694  
                 
Liabilities and Stockholders' Equity                
                 
Current Liabilities:                
  Accounts payable   $ 7,277     $ 6,333  
  Deferred revenue     8,870       3,919  
  Accrued liabilities     8,691       7,322  
  Accrued salaries and benefits     6,957       7,570  
  Income tax payable     4,428       426  
  Current portion of closure and post-closure obligations     949       1,913  
    Total current liabilities     37,172       27,483  
                 
Long-term closure and post-closure obligations     16,519       15,449  
Reducing revolving line of credit     -       45,000  
Other long-term liabilities     69       114  
Unrecognized tax benefits     480       467  
Deferred income taxes     14,778       18,159  
    Total liabilities     69,018       106,672  
                 
Contingencies and commitments                
                 
Stockholders' Equity                
  Common stock     215       184  
  Additional paid-in capital     162,830       63,969  
  Retained earnings     70,597       48,424  
  Treasury stock     (319 )     (1,183 )
  Accumulated other comprehensive income (loss)     (1,785 )     628  
    Total stockholders' equity     231,538       112,022  
Total liabilities and stockholders' equity   $ 300,556     $ 218,694  
                 
   
US ECOLOGY, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(in thousands)  
(unaudited)  
             
    For the Year Ended
December 31,
 
    2013     2012  
Cash Flows From Operating Activities:                
  Net income   $ 32,151     $ 25,659  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization of property and equipment     14,815       13,916  
    Amortization of intangible assets     1,461       1,469  
    Accretion of closure and post-closure obligations     1,114       1,367  
    Unrealized foreign currency loss (gain)     2,789       (1,400 )
    Deferred income taxes     (2,637 )     (711 )
    Stock-based compensation expense     865       846  
    Unrecognized tax benefits     13       13  
    Net (gain) loss on sale of property and equipment     170       13  
    Changes in assets and liabilities (net of effect of business acquisitions):                
      Receivables, net     (10,408 )     (1,850 )
      Income tax receivable     -       187  
      Other assets     (403 )     (677 )
      Accounts payable and accrued liabilities     1,673       (2,172 )
      Deferred revenue     5,197       (50 )
      Accrued salaries and benefits     (424 )     1,929  
      Income tax payable     4,091       (1,083 )
      Closure and post-closure obligations     (828 )     (2,282 )
        Net cash provided by operating activities     49,639       35,174  
                 
Cash Flows From Investing Activities:                
    Purchases of property and equipment     (21,373 )     (15,766 )
    Proceeds from sale of property and equipment     168       198  
    Business acquisition (net of cash acquired)     -       (10,743 )
    Restricted cash     14       5  
        Net cash used in investing activities     (21,191 )     (26,306 )
                 
Cash Flows From Financing Activities:                
    Proceeds from public offering (net of offering costs)     96,431       -  
    Payments on reducing revolving line of credit     (54,500 )     (21,500 )
    Proceeds from reducing revolving line of credit     9,500       26,000  
    Dividends paid     (9,978 )     (16,432 )
    Proceeds from stock option exercises     2,461       1,035  
    Deferred financing costs paid     (235 )     -  
    Other     (1 )     (303 )
        Net cash provided by (used in) financing activities     43,678       (11,200 )
                 
Effect of foreign exchange rate changes on cash     (306 )     163  
                 
Increase (decrease) in cash and cash equivalents     71,820       (2,169 )
                 
Cash and cash equivalents at beginning of period     2,120       4,289  
                 
Cash and cash equivalents at end of period   $ 73,940     $ 2,120  
                 

EXHIBIT A

Non-GAAP Results and Reconciliation

US Ecology reports adjusted EBITDA and adjusted earnings per diluted share results, which are non-GAAP financial measures, as a complement to results provided in accordance with generally accepted accounting principles in the United States (GAAP) and believes that such information provides analysts, shareholders, and other users information to better understand the Company's operating performance. Because adjusted EBITDA and adjusted earnings per diluted share are not measurements determined in accordance with GAAP and are thus susceptible to varying calculations they may not be comparable to similar measures used by other companies. Items excluded from adjusted EBITDA and adjusted earnings per diluted share are significant components in understanding and assessing financial performance. 

Adjusted EBITDA and adjusted earnings per diluted share should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity. Adjusted EBITDA and adjusted earnings per diluted share have limitations as analytical tools and should not be considered in isolation or a substitute for analyzing our results as reported under GAAP. Some of the limitations are:

  • Adjusted EBITDA 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; and
  • 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
The Company defines adjusted EBITDA as net income before interest expense, interest income, income tax expense, depreciation, amortization, stock based compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss and other income/expense, which are not considered part of usual business operations. The following reconciliation itemizes the differences between reported net income and adjusted EBITDA for the three months and year ended December 31, 2013 and 2012:

             
(in thousands)   Three Months Ended December 31,     For the Year Ended December 31,  
    2013     2012     2013     2012  
                                 
Net Income   $ 9,207     $ 6,112     $ 32,151     $ 25,659  
  Income tax expense     5,183       3,981       17,996       16,059  
  Interest expense     177       219       828       878  
  Interest income     (8 )     (4 )     (19 )     (17 )
  Foreign currency (gain)/loss     879       562       2,327       (1,213 )
  Other income     (84 )     (56 )     (352 )     (728 )
  Depreciation and amortization of plant and equipment     4,023       3,695       14,815       13,916  
  Amortization of intangible assets     369       373       1,461       1,469  
  Stock-based compensation     264       282       865       846  
  Accretion and non-cash adjustments of closure & post-closure obligations     187       464       1,114       1,483  
Adjusted EBITDA   $ 20,197     $ 15,628     $ 71,186     $ 58,352  
                                 

EXHIBIT A

Non-GAAP Results and Reconciliation, continued

Adjusted Earnings Per Diluted Share
The Company defines adjusted earnings per diluted share as net income plus the after tax impact of non-cash, non-operational foreign currency gains or losses ("Foreign Currency Gain/Loss") plus the after tax impact of business development cost divided by the diluted shares used in the earnings per share calculation. The Foreign Currency Gain/Loss excluded from the earnings per diluted share calculation are related to intercompany loans between our Canadian subsidiary and the U.S. parent which have been established as part of our tax and treasury management strategy. These intercompany loans are payable in 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 currency movements for these intercompany financial instruments provides meaningful information to investors regarding the operational and financial performance of the Company.

Business development costs relate to expenses incurred to evaluate businesses for potential acquisition or costs related to closing and integrating successfully acquired businesses. We believe excluding these business development costs provides meaningful information to investors regarding the operational and financial performance of the Company.

The following reconciliation itemizes the differences between reported net income and earnings per diluted share to adjusted net income and adjusted earnings per diluted share for the three months and year ended December 31, 2013 and 2012:

           
(in thousands, except per share data)   Three Months Ended December 31,   For the Year Ended December 31,  
    2013   2012   2013   2012  
                                     
        per share       per share       per share         per share  
Net income / earnings per diluted share   $ 9,207   $ 0.48   $ 6,112   $ 0.33   $ 32,151   $ 1.72   $ 25,659     $ 1.40  
                                                     
Business development costs, net of tax     228     0.01     150     0.01     254     0.01     628       0.03  
Non-cash foreign currency (gain)/loss, net of tax     684     0.03     418     0.02     1,597     0.09     (713 )     (0.04 )
                                                     
Adjusted net income / adjusted earnings per diluted share   $ 10,119   $ 0.52   $ 6,680   $ 0.36   $ 34,002   $ 1.82   $ 25,574     $ 1.39  
                                                     
                                                     
Shares used in earnings per diluted share calculation     19,281           18,332           18,676           18,281          
                                                     

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