0001558370-20-013144.txt : 20201106 0001558370-20-013144.hdr.sgml : 20201106 20201106154508 ACCESSION NUMBER: 0001558370-20-013144 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 97 CONFORMED PERIOD OF REPORT: 20200930 FILED AS OF DATE: 20201106 DATE AS OF CHANGE: 20201106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: US Ecology, Inc. CENTRAL INDEX KEY: 0001783400 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-39120 FILM NUMBER: 201294236 BUSINESS ADDRESS: STREET 1: 101 S. CAPITOL BLVD. STREET 2: SUITE 1000 CITY: BOISE STATE: ID ZIP: 83702 BUSINESS PHONE: (208) 331-8400 MAIL ADDRESS: STREET 1: 101 S. CAPITOL BLVD. STREET 2: SUITE 1000 CITY: BOISE STATE: ID ZIP: 83702 FORMER COMPANY: FORMER CONFORMED NAME: US Ecology Parent, Inc. DATE OF NAME CHANGE: 20190723 10-Q 1 ecol-20200930x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

or

TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                        to                       .

Commission file number: 001-39120

US ECOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

84-2421185

(State or other jurisdiction of incorporation or

(I.R.S. Employer Identification No.)

organization)

101 S. Capitol Blvd., Suite 1000

BoiseIdaho

83702

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (208) 331-8400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ECOL

Nasdaq Global Select Market

Warrants to Purchase Common Stock

ECOLW

Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes       No  

At November 3, 2020, there were 31,512,324 shares of the registrant’s Common Stock outstanding.

US ECOLOGY, INC.

FORM 10-Q

TABLE OF CONTENTS

Item

    

Page

PART I — FINANCIAL INFORMATION

1.

Financial Statements (Unaudited)

3

Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

3

Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019

4

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019

5

Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

6

Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2020 and 2019

7

Notes to Consolidated Financial Statements

8

Report of Independent Registered Public Accounting Firm

36

2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

37

3.

Quantitative and Qualitative Disclosures About Market Risk

58

4.

Controls and Procedures

59

PART II — OTHER INFORMATION

Cautionary Statement

61

1.

Legal Proceedings

62

1A.

Risk Factors

63

2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

3.

Defaults Upon Senior Securities

64

4.

Mine Safety Disclosures

64

5.

Other Information

64

6.

Exhibits

65

SIGNATURE

66

2

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

US ECOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)

    

September 30, 2020

    

December 31, 2019

Assets

Current Assets:

Cash and cash equivalents

$

102,038

$

41,281

Receivables, net

 

227,602

 

255,310

Prepaid expenses and other current assets

 

30,739

 

25,136

Income taxes receivable

17,476

11,244

Total current assets

 

377,855

 

332,971

Property and equipment, net

 

475,038

 

478,768

Operating lease assets

50,977

57,396

Restricted cash and investments

 

5,451

 

5,069

Intangible assets, net

 

547,385

 

574,902

Goodwill

 

471,523

 

766,980

Other assets

 

18,066

 

15,158

Total assets

$

1,946,295

$

2,231,244

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

$

39,966

$

46,906

Deferred revenue

 

17,545

 

14,788

Accrued liabilities

 

49,047

 

65,869

Accrued salaries and benefits

 

26,463

 

29,653

Income taxes payable

 

1,015

 

726

Current portion of long-term debt

3,359

3,359

Current portion of closure and post-closure obligations

 

4,019

 

2,152

Current portion of operating lease liabilities

17,175

17,317

Total current liabilities

 

158,589

 

180,770

Long-term debt

 

823,323

 

765,842

Long-term closure and post-closure obligations

 

84,797

 

84,231

Long-term operating lease liabilities

34,181

39,954

Other long-term liabilities

 

36,482

 

20,722

Deferred income taxes, net

 

125,134

 

128,345

Total liabilities

 

1,262,506

 

1,219,864

Commitments and contingencies (See Note 16)

Stockholders’ Equity:

Common stock $0.01 par value per share, 50,000 authorized; 31,144 and 31,461 shares issued and outstanding, respectively

 

315

 

315

Additional paid-in capital

 

819,344

 

816,345

Retained (deficit) earnings

 

(96,044)

 

206,574

Treasury stock, at cost, 369 and 0 shares, respectively

 

(16,291)

 

Accumulated other comprehensive loss

 

(23,535)

 

(11,854)

Total stockholders’ equity

 

683,789

 

1,011,380

Total liabilities and stockholders’ equity

$

1,946,295

$

2,231,244

The accompanying notes are an integral part of these consolidated financial statements.

3

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

Revenue

$

238,142

$

167,402

$

692,780

$

454,241

Direct operating costs

 

175,099

 

110,862

 

514,804

 

312,877

Gross profit

 

63,043

 

56,540

 

177,976

 

141,364

Selling, general and administrative expenses

 

49,890

 

33,329

 

149,435

 

77,683

Goodwill impairment charges

300,300

Operating income (loss)

 

13,153

 

23,211

 

(271,759)

 

63,681

Other income (expense):

Interest income

 

9

 

158

 

251

 

567

Interest expense

 

(7,964)

 

(3,891)

 

(25,127)

 

(11,509)

Foreign currency loss

 

(421)

 

(90)

 

(155)

 

(613)

Other

 

86

 

110

 

382

 

342

Total other expense

 

(8,290)

 

(3,713)

 

(24,649)

 

(11,213)

Income (loss) before income taxes

 

4,863

 

19,498

 

(296,408)

 

52,468

Income tax (benefit) expense

 

(1,456)

 

6,428

 

542

 

15,864

Net Income (loss)

$

6,319

$

13,070

$

(296,950)

$

36,604

Earnings (loss) per share:

Basic

$

0.20

$

0.59

$

(9.54)

$

1.66

Diluted

$

0.20

$

0.59

$

(9.54)

$

1.65

Shares used in earnings (loss) per share calculation:

Basic

 

31,069

 

22,013

 

31,142

 

22,002

Diluted

 

31,324

 

22,231

 

31,142

 

22,212

The accompanying notes are an integral part of these consolidated financial statements.

4

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

Net income (loss)

$

6,319

$

13,070

$

(296,950)

$

36,604

Other comprehensive income (loss):

Foreign currency translation gain (loss)

 

1,923

 

(995)

 

(3,328)

 

2,374

Net changes in interest rate hedge, net of taxes of $196, $(40), $(2,220) and ($537), respectively

739

(150)

(8,353)

(2,018)

Comprehensive income (loss), net of tax

$

8,981

$

11,925

$

(308,631)

$

36,960

The accompanying notes are an integral part of these consolidated financial statements.

5

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended September 30, 

    

2020

    

2019

Cash flows from operating activities:

Net (loss) income

$

(296,950)

$

36,604

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Depreciation and amortization of property and equipment

 

54,831

 

26,656

Amortization of intangible assets

 

27,812

 

8,600

Accretion of closure and post-closure obligations

 

3,812

 

3,397

Property and equipment impairment charges

25

Goodwill impairment charges

300,300

Unrealized foreign currency loss (gain)

 

87

 

(361)

Deferred income taxes

 

79

 

3,873

Share-based compensation expense

 

4,861

 

3,713

Share-based payments of business development and integration expenses

 

1,142

 

Unrecognized tax benefits

 

(8)

(238)

Net loss on disposition of assets

 

1,817

 

665

Gain on insurance proceeds from damaged property and equipment

(9,651)

Amortization and write-off of debt issuance costs

1,640

613

Amortization and write-off of debt discount

121

Change in fair value of contingent consideration

 

(3,207)

 

Changes in assets and liabilities (net of effects of business acquisitions):

Receivables

 

25,297

 

(9,449)

Income taxes receivable

 

(6,250)

 

2,292

Other assets

 

(8,345)

 

(7,206)

Accounts payable and accrued liabilities

 

(19,177)

 

1,873

Deferred revenue

 

930

 

1,770

Accrued salaries and benefits

 

(4,494)

 

2,665

Income taxes payable

 

287

 

(425)

Closure and post-closure obligations

 

(1,341)

 

(1,414)

Net cash provided by operating activities

 

83,244

 

64,002

Cash flows from investing activities:

Business acquisitions (net of cash acquired)

(3,309)

(17,851)

Purchases of property and equipment

 

(45,124)

 

(38,443)

Insurance proceeds from damaged property and equipment

1,131

10,000

Minority interest investment

(7,870)

Proceeds from sale of property and equipment

 

1,079

 

549

Purchases of restricted investments

 

(1,113)

 

(798)

Proceeds from sale of restricted investments

 

970

 

751

Net cash used in investing activities

 

(46,366)

 

(53,662)

Cash flows from financing activities:

Proceeds from long-term debt

90,000

20,000

Payments on long-term debt

(33,375)

(30,000)

Payments on short-term borrowings

(72,353)

(51,018)

Proceeds from short-term borrowings

72,353

52,553

Repurchase of common stock

 

(18,332)

 

Dividends paid

 

(5,667)

 

(11,915)

Payment of acquired contingent consideration liabilities

(2,085)

Deferred financing costs paid

 

(1,144)

 

Payment of equipment financing obligations

(4,827)

(619)

Other

28

(852)

Net cash provided by (used in) financing activities

 

24,598

 

(21,851)

Effect of foreign exchange rate changes on cash

 

(480)

 

673

Increase (decrease) in Cash and cash equivalents and restricted cash

 

60,996

 

(10,838)

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

$

103,136

$

21,915

Reconciliation of Cash and cash equivalents and restricted cash

Cash and cash equivalents at beginning of period

41,281

31,969

Restricted cash at beginning of period

859

784

Cash and cash equivalents and restricted cash at beginning of period

$

42,140

$

32,753

Cash and cash equivalents at end of period

102,038

21,074

Restricted cash at end of period

1,098

841

Cash and cash equivalents and restricted cash at end of period

$

103,136

$

21,915

Supplemental Disclosures:

Income taxes paid, net of receipts

$

6,385

$

10,422

Interest paid

$

21,773

$

10,340

Non-cash investing and financing activities:

Capital expenditures in accounts payable

$

883

$

558

Restricted stock issued from treasury shares

$

2,041

$

514

The accompanying notes are an integral part of these consolidated financial statements.

6

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2020

    

2019

    

2020

    

2019

Total stockholders' equity, beginning balances

$

672,947

$

376,759

$

1,011,380

$

359,217

Common stock:

Beginning balances

$

315

$

221

$

315

$

220

Stock option exercises and issuance of common stock and restricted common stock

 

 

 

1

Ending balances

$

315

$

221

$

315

$

221

Additional paid-in capital:

Beginning balances

$

817,557

$

184,747

$

816,345

$

183,834

Share-based compensation

 

1,773

1,246

 

4,861

 

3,713

Share-based payments of business development and integration expenses

170

1,143

Stock option exercises and issuance of common stock and restricted common stock

(31)

10

(468)

(1,093)

Issuance of restricted common stock from treasury shares

(125)

(63)

(2,537)

(514)

Ending balances

$

819,344

$

185,940

$

819,344

$

185,940

Retained (deficit) earnings:

Beginning balances

$

(102,362)

$

204,916

$

206,574

$

189,324

Net income (loss)

 

6,319

13,070

 

(296,950)

 

36,604

Dividends paid

(3,973)

(5,667)

(11,915)

Other

(1)

(1)

Ending balances

$

(96,044)

$

214,013

$

(96,044)

$

214,013

Treasury stock:

Beginning balances

$

(16,366)

$

(835)

$

$

(370)

Repurchase of common stock

 

 

(18,332)

 

(916)

Issuance of restricted common stock from treasury shares

75

63

2,041

514

Ending balances

$

(16,291)

$

(772)

$

(16,291)

$

(772)

Accumulated other comprehensive income (loss):

Beginning balances

$

(26,197)

$

(12,290)

$

(11,854)

$

(13,791)

Other comprehensive income (loss)

 

2,662

(1,145)

 

(11,681)

 

356

Ending balances

$

(23,535)

$

(13,435)

$

(23,535)

$

(13,435)

Total stockholders' equity, ending balances

$

683,789

$

385,967

$

683,789

$

385,967

The accompanying notes are an integral part of these consolidated financial statements.

7

US ECOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.     GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements include the results of operations, financial position and cash flows of US Ecology, Inc. and its wholly-owned subsidiaries. All inter-company balances have been eliminated. Throughout these consolidated financial statements words such as “we,” “us,” “our,” “US Ecology” and “the Company” refer to US Ecology, Inc. and its subsidiaries.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2020.

The Company’s consolidated balance sheet as of December 31, 2019 has been derived from the Company’s audited consolidated balance sheet as of that date.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our consolidated financial statements. As it relates to estimates and assumptions in amortization rates and environmental obligations, significant engineering, operations and accounting judgments are required. We review these estimates and assumptions no less than annually. In many circumstances, the ultimate outcome of these estimates and assumptions will not be known for decades into the future. Actual results could differ materially from these estimates and assumptions due to changes in applicable regulations, changes in future operational plans and inherent imprecision associated with estimating environmental impacts far into the future.

Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes” (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses” (Topic 326), which became effective for reporting periods beginning after December 15, 2019. The standard replaced the incurred loss impairment methodology under current GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss model for accounts receivables, loans, and other financial instruments. The standard requires a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning

8

of the first reporting period in which the guidance is effective. The Company adopted the new credit loss standard effective January 1, 2020 and the impact of the adoption was not material to the Company's consolidated financial statements as credit losses are not expected to be significant based on historical collection trends, the financial condition of payment partners, and external market factors. The Company will continue to actively monitor the impact of the recent coronavirus (“COVID-19”) pandemic on expected credit losses.

NOTE 2.     REVENUES

Our operations are managed in two reportable segments, Environmental Services and Field & Industrial Services, reflecting our internal reporting structure and nature of services offered. See Note 17 for additional information on our operating segments.

The following table presents our revenue disaggregated by our reportable segments and service lines:

Three Months Ended September 30, 2020

Field &

Environmental

Industrial

$s in thousands

    

Services

    

Services

    

Total

Treatment & Disposal Revenue (1)

$

91,226

$

13,861

$

105,087

Services Revenue:

Transportation and Logistics (2)

21,201

11,162

32,363

Industrial Services (3)

28,464

28,464

Small Quantity Generation (4)

13,056

13,056

Total Waste Management (5)

9,998

9,998

Remediation (6)

6,733

6,733

Emergency Response (7)

30,120

30,120

Domestic Standby Services (8)

7,873

7,873

Other (9)

4,448

4,448

Revenue

$

112,427

$

125,715

$

238,142

Three Months Ended September 30, 2019

Field &

Environmental

Industrial

$s in thousands

    

Services

    

Services

    

Total

Treatment & Disposal Revenue (1)

$

98,554

$

3,312

$

101,866

Services Revenue:

Transportation and Logistics (2)

23,658

12,070

35,728

Industrial Services (3)

4,850

4,850

Small Quantity Generation (4)

10,001

10,001

Total Waste Management (5)

8,674

8,674

Remediation (6)

1,388

1,388

Emergency Response (7)

3,294

3,294

Other (9)

1,601

1,601

Revenue

$

122,212

$

45,190

$

167,402

9

Nine Months Ended September 30, 2020

Field &

Environmental

Industrial

$s in thousands

    

Services

    

Services

    

Total

Treatment & Disposal Revenue (1)

$

282,231

$

33,744

$

315,975

Services Revenue:

Transportation and Logistics (2)

67,351

22,577

89,928

Industrial Services (3)

85,528

85,528

Small Quantity Generation (4)