SOURCE: US Ecology, Inc.

US Ecology, Inc.

March 04, 2010 06:00 ET

US Ecology, Inc. Announces Fourth Quarter and Full Year 2009 Results

Provides Business Outlook for 2010

BOISE, ID--(Marketwire - March 4, 2010) - US Ecology, Inc. (formerly known as American Ecology Corporation) (NASDAQ: ECOL) ("the Company") today reported results for the fourth quarter and year ended December 31, 2009. Net income was $2.6 million, or $0.15 per diluted share, for the fourth quarter of 2009, down from net income of $5.2 million, or $0.29 per diluted share, in the fourth quarter last year. Operating income for the fourth quarter of 2009 was $4.6 million compared to $8.3 million for the fourth quarter of 2008. All four of the Company's disposal facilities remained profitable.

Revenue for the fourth quarter of 2009 was $23.6 million, down from $44.0 million in the same quarter last year. This reflects declines in both transportation revenue and treatment and disposal revenue primarily due to the completion of the four year Honeywell International ("Honeywell Jersey City") project in early October of 2009 and the Molycorp/Chevron Pennsylvania ("Molycorp") project which shipped waste in the fourth quarter of 2008 and was completed in early 2009. "Base" business revenue (revenue from recurring waste streams) declined 10% in the fourth quarter of 2009 compared to the same quarter last year on decreased shipments from other industry, waste broker and refinery customers. "Event" remediation revenue (revenue from discrete projects) declined 43% in the fourth quarter of 2009 over the same quarter last year primarily due to the completion of the Honeywell Jersey City and Molycorp projects earlier in 2009. Our Texas thermal desorption recycling service contributed $1.7 million in revenue from a combination of Base and Event business in the fourth quarter of 2009, down 15% from the $2.0 million of revenue generated in the fourth quarter of 2008. Total volumes disposed at our Idaho, Nevada and Texas waste facilities were 132,000 tons in the fourth quarter of 2009, down 49% from the fourth quarter of 2008.

Gross profit was $7.6 million in the fourth quarter of 2009, down from $12.4 million reported in the fourth quarter of 2008. Net reductions in closure and post-closure obligations increased gross profit by $331,000 in the fourth quarter of 2009 and $230,000 in the fourth quarter of 2008.

Selling, general and administrative ("SG&A") expense for the fourth quarter of 2009 was $3.7 million, or 15% of revenue, as compared to $4.1 million, or 9% of revenue, in the same quarter last year. The $400,000 decrease in SG&A expense reflects lower compensation costs, bad debt expense and professional service fees, partially offset by a $244,000 thermal equipment impairment charge related to the discontinuation of thermal services at our Beatty, Nevada facility.

During the quarter we collected $661,000 in net proceeds for claims filed under our insurance policies.

Other income, primarily interest and royalty income, was $55,000 for the fourth quarter of 2009, down from $169,000 in the fourth quarter of 2008, largely due to lower interest rates earned.

Our effective income tax rate for the fourth quarter of 2009 was 43.6% as compared with 38.3% in the fourth quarter of 2008. This increase is primarily due to lower pre-tax earnings in the current year, which increases the impact of non-tax-deductible expenses on our effective tax rate, higher estimated state income taxes and year-end adjustments to our deferred taxes.

At December 31, 2009, we had $32.7 million of cash, cash equivalents and short-term investments on hand, with $11.0 million of our $15.0 million line of credit unused. The $4.0 million balance covers a standby letter of credit providing collateral for financial assurance for future closure and post-closure obligations. We had no borrowed debt at quarter end.

"The completion of the Honeywell Jersey City project combined with continued softness in the industrial markets and few Event projects pushed revenue lower in the fourth quarter," commented Chief Financial Officer, Jeff Feeler. "These revenue decreases were partially offset by continued decreases in operating expenses, net reductions in landfill closure obligations and recognition of an insurance settlement."

2009 Full Year Results

Operating income for the year ended December 31, 2009 was $23.1 million as compared with $34.5 million in 2008. Net income for the full year 2009 was $14.0 million, or $0.77 per diluted share, as compared with net income of $21.5 million, or $1.18 per diluted share, in 2008.

Revenue for the year ended December 31, 2009 was $132.5 million compared with revenue of $175.8 million for the year ended December 31, 2008. Base business revenue declined 6% in 2009 compared to last year on decreased shipments from other industry and waste broker customers. Event remediation revenue declined 24% in 2009 over last year primarily due to fewer government and private industry cleanup projects.

Disposal volumes for 2009 declined 35% to 774,000 tons from 1,192,000 tons in 2008. Gross profit was $36.3 million in 2009 compared with $49.4 million in 2008. Direct operating expenses for 2009 were $96.2 million, down from $126.4 million in 2008. This reflects lower rail and truck transportation expenses, variable costs for waste treatment additives, disposal cell amortization expense on reduced waste volumes and reduced labor and benefits expenses. Favorable adjustments to our closure and post-closure obligations benefited our gross profit by $331,000 in 2009 and $923,000 in 2008.

In October 2009, we received our final shipments from the Honeywell Jersey City project. This project shipped approximately 1.3 million tons of material from 2005 to 2009 making it one of the largest private cleanups in history. 2009 total revenue, including pass-through revenue for transportation services, from Honeywell was $50.6 million. During 2009 the Honeywell project became increasingly more profitable as a result of lower additive costs and a reduction in personnel as we prepared for the end of the project. At the same time, economic conditions significantly impacted our non-Honeywell business resulting in the Honeywell project becoming a more significant portion of our total business. We estimate that the Honeywell Jersey City project contributed approximately 30% of total operating income in 2009, higher than in any previous year, or $0.23 per diluted share.

SG&A expense for 2009 was $13.8 million, 10% of revenue, as compared to $14.9 million, or 8% of revenue, for the same period last year. The $1.1 million decrease in SG&A reflects reduced compensation expense, sales commissions and professional fees and services, but was partially offset by a $244,000 thermal equipment impairment charge related to the discontinuation of thermal treatment services at our Beatty, Nevada facility at the end of the year.

During the fourth quarter of 2009 we collected $661,000 in net proceeds for claims filed under our insurance policies.

Other income, primarily interest and royalty income, was $381,000 for 2009, down from $712,000 in 2008. This reduction reflects lower prevailing interest rates and related interest income earned on investments.

Our effective income tax rate for 2009 was 40.5% as compared with 39.0% in 2008. This increase is primarily due to lower pre-tax earnings in the current year, which increases the impact of non-tax-deductible expenses on our effective tax rate and higher estimated state income taxes.

"2009 was significantly impacted by the lower Event Business, including lower waste volumes under our Army Corps contract," commented Feeler. "Fewer opportunities were available as private cleanup projects were deferred and government projects were hampered by the additional administrative requirements of The American Recovery and Reinvestment Act of 2009. Despite these difficult economic conditions we were successful at expanding our customer portfolio and maintaining existing customer relationships with our Base Business customers, positioning us well for future growth."

2010 Earnings and Capital Expenditure Outlook

Management currently projects 2010 earnings to range between $0.57 and $0.67 per diluted share. While this is an absolute decrease in year-over-year earnings per share, it represents a 10% to 29% growth in core earnings over 2009 levels after excluding the earnings impact of the Honeywell Jersey City project and insurance proceeds.

"2009 was a challenging year for our Company as revenue and earnings declined from our record performance in 2008," stated President and Chief Executive Officer, Jim Baumgardner. "In response, we moved quickly to reduce costs and recalibrate the business to a changing market environment. As a result we entered 2010 with a leaner cost structure, broader customer base, focused service offering, and powerful waste handling infrastructure."

The Company expects much of the economic weakness experienced in 2009 to persist in 2010 with slow improvement over the course of the year. Base business is expected to strengthen in 2010 as national and regional industrial production increases. We forecast that our Event business will return in 2010, albeit slowly. We also predict that volumes under our US Army Corps of Engineers contract will return to more historic levels after the softness seen in 2009. Pricing for treatment and landfill services are projected to be relatively flat in 2010 compared to 2009. While we generally believe that pricing pressure on our thermal services will persist throughout much of 2010, higher waste volumes and corresponding improvements in utilization could lead to improved pricing for thermal services later in the year.

Baumgardner continued, "While we continue to face economic uncertainties, our Company is financially stronger and better positioned in the marketplace than at any time in our history. We have a solid book of Base business, a very competitive cost structure, a robust infrastructure, a terrific workforce, and a solid balance sheet."

Concluding, Baumgardner said, "Despite the continuing difficult economic environment, we will diligently execute our business strategy and expect our business, excluding Honeywell, to grow organically in 2010. In addition to organically growing our business, we are also focused on acquiring strategically aligned assets."

Capital spending is estimated to range from $13 to $14 million for 2010, up from $9.4 million in 2009. Capital spending in 2010 will be devoted primarily to the construction of additional disposal space and expanded treatment capacity at our Texas facility and ongoing equipment replacement company-wide.

Dividend

On January 4, 2010 the Company declared a quarterly dividend of $0.18 per common share for stockholders of record on January 15, 2010. This $3.3 million dividend was paid on January 22, 2010 using cash on hand.

Conference Call

US Ecology, Inc. will hold an investor conference call on Thursday, March 4, 2010 at 10 a.m. Eastern Standard Time (8:00 a.m. Mountain Standard Time) to discuss these results, its current financial position and its 2010 business outlook. Questions will be invited after management's presentation. Interested parties can join the conference call by dialing (866) 700-6293 or (617) 213-8835 and using the passcode 20083109. The conference call will also be broadcast live on our website at www.usecology.com. An audio replay will be available through March 11, 2010 by calling (888) 286-8010 or (617) 801-6888 and using the passcode 99785873. The replay will also be accessible on our website at www.usecology.com.

About US Ecology, Inc.

US Ecology, Inc. (formerly known as American Ecology Corporation), through its subsidiaries, provides radioactive, PCB, hazardous, and non-hazardous waste services to commercial and government customers throughout the United States, such as steel mills, medical and academic institutions, refineries, chemical manufacturing facilities and the nuclear power industry. Headquartered in Boise, Idaho, the Company is the oldest radioactive and hazardous waste services company in the United States.

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 2010 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, 2008 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, compliance with and changes to applicable laws and regulations, market conditions and production rates for the thermal recycling service at our Texas facility, our ability to replace business from completed Honeywell Jersey City project, access to cost effective transportation services, access to insurance and other financial assurances, loss of key personnel, lawsuits, adverse economic conditions including a tightened credit market, the timing or level of government funding or competitive conditions, incidents that could limit or suspend specific operations, our ability to perform under required contracts, our willingness or ability to pay dividends and our ability to integrate any potential 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 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.
             (formerly known as American Ecology Corporation)
                    CONSOLIDATED STATEMENTS OF INCOME
                  (in thousands, except per share data)
                                (unaudited)



                                 Three Months Ended    For the Year Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------

Revenue                         $  23,648  $  44,041  $ 132,519  $ 175,827
Transportation costs                6,577     20,278     52,708     82,064
Other direct operating costs        9,436     11,365     43,535     44,322
                                ---------  ---------  ---------  ---------

Gross profit                        7,635     12,398     36,276     49,441

Selling, general and
 administrative expenses            3,660      4,060     13,835     14,920
Insurance claim                      (661)         -       (661)         -
                                ---------  ---------  ---------  ---------
Operating income                    4,636      8,338     23,102     34,521

Other income (expense):
  Interest income                      13        101        116        413
  Interest expense                      -         (1)        (2)        (7)
  Other                                42         69        267        306
                                ---------  ---------  ---------  ---------
    Total other income                 55        169        381        712

Income before income taxes          4,691      8,507     23,483     35,233
Income tax expense                  2,047      3,258      9,513     13,735
                                ---------  ---------  ---------  ---------
Net income                      $   2,644  $   5,249  $  13,970  $  21,498
                                ---------  ---------  ---------  ---------

Earnings per share:
    Basic                       $    0.15  $    0.29  $    0.77  $    1.18
    Diluted                     $    0.15  $    0.29  $    0.77  $    1.18

Shares used in earnings
 per share calculation:
    Basic                          18,149     18,222     18,146     18,236
    Diluted                        18,172     18,258     18,173     18,290

Dividends paid per share        $    0.18  $    0.18  $    0.72  $    0.66
                                ---------  ---------  ---------  ---------




                             US ECOLOGY, INC.
             (formerly known as American Ecology Corporation)
                        CONSOLIDATED BALANCE SHEETS
                              (in thousands)
                                (unaudited)


                                                  December 31, December 31,
                                                     2009         2008
                                                  -----------  -----------
Assets

Current Assets:
  Cash and cash equivalents                       $    31,347  $    18,473
  Short-term investments                                1,395            -
  Receivables, net                                     16,302       30,737
  Prepaid expenses and other current assets             1,752        2,281
  Income tax receivable                                     -        2,834
  Deferred income taxes                                    41          417
                                                  -----------  -----------
    Total current assets                               50,837       54,742

Property and equipment, net                            67,485       67,987
Restricted cash                                         4,800        4,716
Other assets                                              540            -
                                                  -----------  -----------
Total assets                                      $   123,662  $   127,445
                                                  -----------  -----------

Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable                                $     4,264  $     5,400
  Deferred revenue                                      1,353        4,657
  Accrued liabilities                                   4,150        4,398
  Accrued salaries and benefits                         1,735        2,895
  Income tax payable                                      201            -
  Current portion of closure and post-closure
   obligations                                            293          490
  Current portion of capital lease obligations             11           10
                                                  -----------  -----------
    Total current liabilities                          12,007       17,850

Long-term closure and post-closure obligations         13,070       13,972
Long-term capital lease obligations                        10           21
Deferred income taxes                                   5,077        3,660
                                                  -----------  -----------
  Total liabilities                                    30,164       35,503

Contingencies and commitments

Stockholders' Equity
  Common stock                                            183          183
  Additional paid-in capital                           61,459       60,803
  Retained earnings                                    34,446       33,544
  Treasury stock                                       (2,590)      (2,588)
                                                  -----------  ----------- 
    Total stockholders' equity                         93,498       91,942
                                                  -----------  -----------
Total liabilities and stockholders' equity        $   123,662  $   127,445
                                                  -----------  -----------




                             US ECOLOGY, INC.
             (formerly known as American Ecology Corporation)
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)
                                (unaudited)



                                                     For the Year Ended
                                                        December 31,
                                                  ------------------------
                                                      2009         2008
                                                  -----------  -----------
Cash Flows From Operating Activities:
  Net income                                       $    13,970  $    21,498
  Adjustments to reconcile net income to net cash
   provided by operating activities:
    Depreciation, amortization and accretion            9,046       10,641
    Deferred income taxes                               1,793        3,333
    Stock-based compensation expense                      655          820
    Net loss on sale of property and equipment            296           34
    Accretion of interest income                            -          (15)
    Changes in assets and liabilities:
      Receivables, net                                 14,435       (1,315)
      Income tax receivable                             2,834       (1,840)
      Other assets                                        (11)         753
      Accounts payable and accrued liabilities         (1,054)      (1,815)
      Deferred revenue                                 (3,304)         166
      Accrued salaries and benefits                    (1,160)         282
      Income tax payable                                  201            -
      Closure and post-closure obligations               (928)      (1,934)
      Other                                                14            -
                                                  -----------  -----------
        Net cash provided by operating activities      36,787       30,608

Cash Flows From Investing Activities:
    Purchases of property and equipment                (9,405)     (13,617)
    Purchases of short-term investments                (1,409)        (992)
    Restricted cash                                       (84)         165
    Proceeds from sale of property and equipment           64           14
    Maturities of short-term investments                    -        3,216
                                                  -----------  -----------
        Net cash used in investing activities         (10,834)     (11,214)

Cash Flows From Financing Activities:
    Dividends paid                                    (13,068)     (12,054)
    Stock repurchases                                      (2)      (2,588)
    Other                                                  (9)         (10)
    Tax benefit of common stock options                     -           73
    Proceeds from stock option exercises                    -        1,095
                                                  -----------  -----------
        Net cash used in financing activities         (13,079)     (13,484)

Increase in cash and cash equivalents                  12,874        5,910

Cash and cash equivalents at beginning of period       18,473       12,563
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    31,347  $    18,473
                                                  ===========  ===========

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