Attached files

file filename
EX-31.1 - EX-31.1 - US ECOLOGY, INC.a14-19614_1ex31d1.htm
EX-31.2 - EX-31.2 - US ECOLOGY, INC.a14-19614_1ex31d2.htm
EX-15 - EX-15 - US ECOLOGY, INC.a14-19614_1ex15.htm
EX-32 - EX-32 - US ECOLOGY, INC.a14-19614_1ex32.htm
EXCEL - IDEA: XBRL DOCUMENT - US ECOLOGY, INC.Financial_Report.xls

Table of Contents

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x

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

 

For the quarterly period ended September 30, 2014

 

or

 

o

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: 0000-11688

 

US ECOLOGY, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

95-3889638

(State or other jurisdiction of incorporation or
organization)

 

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

 

 

 

251 E. Front St., Suite 400

 

 

Boise, Idaho

 

83702

(Address of principal executive offices)

 

(Zip Code)

 

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

 

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 x   No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).   Yes x   No o

 

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

 

Large accelerated filer o

 

Accelerated filer x

 

 

 

Non-accelerated filer o

 

Smaller reporting company o

(Do not check if a smaller reporting company)

 

 

 

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

 

At November 5, 2014, there were 21,626,571 shares of the registrant’s Common Stock outstanding.

 

 

 



Table of Contents

 

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, 2014 and December 31, 2013

 

3

 

 

 

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and 2013

 

4

 

 

 

 

 

Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2014 and 2013

 

5

 

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2014 and 2013

 

6

 

 

 

 

 

Notes to Consolidated Financial Statements

 

7

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

22

 

 

 

 

2.

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

 

23

3.

Quantitative and Qualitative Disclosures About Market Risk

 

33

4.

Controls and Procedures

 

34

 

 

 

 

PART II — OTHER INFORMATION

 

 

 

 

 

Cautionary Statement

 

35

1.

Legal Proceedings

 

35

1A.

Risk Factors

 

36

2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

36

3.

Defaults Upon Senior Securities

 

36

4.

Mine Safety Disclosures

 

36

5.

Other Information

 

36

6.

Exhibits

 

36

 

SIGNATURE

 

37

 

2



Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1.                      FINANCIAL STATEMENTS

 

US ECOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)

 

 

 

September 30, 2014

 

December 31, 2013

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

10,921

 

$

73,940

 

Receivables, net

 

152,212

 

43,636

 

Prepaid expenses and other current assets

 

14,734

 

3,612

 

Income taxes receivable

 

3,784

 

 

Deferred income taxes

 

3,386

 

1,340

 

Total current assets

 

185,037

 

122,528

 

 

 

 

 

 

 

Property and equipment, net

 

220,318

 

114,859

 

Restricted cash and investments

 

5,724

 

4,097

 

Intangible assets, net

 

280,858

 

36,832

 

Goodwill

 

213,359

 

21,693

 

Other assets

 

11,853

 

547

 

Total assets

 

$

917,149

 

$

300,556

 

 

 

 

 

 

 

Liabilities And Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

26,026

 

$

7,277

 

Deferred revenue

 

11,968

 

8,870

 

Accrued liabilities

 

35,331

 

8,691

 

Accrued salaries and benefits

 

10,911

 

6,957

 

Income taxes payable

 

2,153

 

4,428

 

Current portion of closure and post-closure obligations

 

5,424

 

949

 

Current portion of long-term debt

 

4,002

 

 

Total current liabilities

 

95,815

 

37,172

 

 

 

 

 

 

 

Long-term closure and post-closure obligations

 

53,524

 

16,519

 

Long-term debt

 

408,960

 

 

Other long-term liabilities

 

1,246

 

69

 

Unrecognized tax benefits

 

57

 

480

 

Deferred income taxes

 

107,651

 

14,778

 

Total liabilities

 

667,253

 

69,018

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Common stock $0.01 par value, 50,000 authorized; 21,627 and 21,538 shares issued, respectively

 

216

 

215

 

Additional paid-in capital

 

165,027

 

162,830

 

Retained earnings

 

88,516

 

70,597

 

Treasury stock, at cost, 0 and 19 shares, respectively

 

 

(319

)

Accumulated other comprehensive income (loss)

 

(3,863

)

(1,785

)

Total stockholders’ equity

 

249,896

 

231,538

 

Total liabilities and stockholders’ equity

 

$

917,149

 

$

300,556

 

 

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

 

3



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

170,894

 

$

53,090

 

$

290,272

 

$

141,766

 

Direct operating costs

 

91,939

 

20,902

 

145,938

 

61,745

 

Transportation costs

 

26,292

 

10,568

 

44,282

 

24,091

 

Gross profit

 

52,663

 

21,620

 

100,052

 

55,930

 

Selling, general and administrative expenses

 

25,829

 

6,108

 

46,713

 

18,353

 

Operating income

 

26,834

 

15,512

 

53,339

 

37,577

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

11

 

4

 

94

 

11

 

Interest expense

 

(4,544

)

(208

)

(5,488

)

(651

)

Foreign currency gain (loss)

 

(830

)

683

 

(1,027

)

(1,448

)

Other

 

268

 

77

 

520

 

268

 

Total other income (expense)

 

(5,095

)

556

 

(5,901

)

(1,820

)

Income before income taxes

 

21,739

 

16,068

 

47,438

 

35,757

 

Income tax expense

 

8,406

 

5,740

 

17,880

 

12,813

 

Net income

 

$

13,333

 

$

10,328

 

$

29,558

 

$

22,944

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.62

 

$

0.56

 

$

1.37

 

$

1.25

 

Diluted

 

$

0.61

 

$

0.56

 

$

1.37

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

Shares used in earnings per share calculation:

 

 

 

 

 

 

 

 

 

Basic

 

21,570

 

18,459

 

21,526

 

18,395

 

Diluted

 

21,680

 

18,533

 

21,649

 

18,475

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.18

 

$

0.18

 

$

0.54

 

$

0.36

 

 

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

 

4



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

 

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

13,333

 

$

10,328

 

$

29,558

 

$

22,944

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

Foreign currency translation gain (loss)

 

(2,156

)

782

 

(2,078

)

(1,147

)

Comprehensive income

 

$

11,177

 

$

11,110

 

$

27,480

 

$

21,797

 

 

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

 

5



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2014

 

2013

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

29,558

 

$

22,944

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization of property and equipment

 

16,773

 

10,792

 

Amortization of intangible assets

 

5,233

 

1,092

 

Accretion of closure and post-closure obligations

 

1,675

 

927

 

Unrealized foreign currency loss

 

1,453

 

1,706

 

Deferred income taxes

 

2,407

 

(1,646

)

Share-based compensation expense

 

869

 

601

 

Unrecognized tax benefits

 

(424

)

10

 

Net loss on sale of property and equipment

 

43

 

12

 

Amortization of debt discount

 

37

 

 

Changes in assets and liabilities (net of effect of business acquisition):

 

 

 

 

 

Receivables

 

(20,938

)

(7,218

)

Income taxes receivable

 

(17

)

 

Other assets

 

(3,219

)

(833

)

Accounts payable and accrued liabilities

 

2,449

 

1,004

 

Deferred revenue

 

391

 

2,564

 

Accrued salaries and benefits

 

(1,949

)

(1,541

)

Income taxes payable

 

(2,281

)

2,752

 

Closure and post-closure obligations

 

(879

)

(989

)

Net cash provided by operating activities

 

31,181

 

32,177

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Business acquisition (net of cash acquired)

 

(465,895

)

 

Purchases of property and equipment

 

(17,910

)

(15,590

)

Proceeds from sale of short term investments

 

654

 

 

Proceeds from sale of property and equipment

 

120

 

64

 

Proceeds from sale of restricted cash and investments

 

8

 

 

Purchases of restricted cash and investments

 

(40

)

 

Net cash used in investing activities

 

(483,063

)

(15,526

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from issuance of long-term debt

 

413,962

 

9,500

 

Deferred financing costs paid

 

(14,001

)

(185

)

Dividends paid

 

(11,640

)

(6,645

)

Payments on long-term debt

 

(1,038

)

(19,000

)

Proceeds from exercise of stock options

 

1,445

 

2,192

 

Other

 

204

 

(58

)

Net cash provided by (used in) financing activities

 

388,932

 

(14,196

)

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

(69

)

(197

)

 

 

 

 

 

 

Increase (decrease) in cash and cash equivalents

 

(63,019

)

2,258

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

73,940

 

2,120

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

10,921

 

$

4,378

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

Income taxes paid, net of receipts

 

$

17,494

 

$

11,467

 

Interest paid

 

$

4,145

 

$

547

 

Non-cash investing and financing activities:

 

 

 

 

 

Closure and post-closure retirement asset

 

$

2,863

 

$

550

 

Capital expenditures in accounts payable

 

$

2,378

 

$

2,526

 

Restricted stock issued from treasury shares

 

$

546

 

$

864

 

 

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

 

6



Table of Contents

 

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 significant intercompany balances have been eliminated.  Throughout these 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 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, 2013. The results of operations and cash flows for the nine months ended September 30, 2014 are not necessarily indicative of results to be expected for the entire fiscal year.

 

The Company’s Consolidated Balance Sheet as of December 31, 2013 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 accounting principles generally accepted in the United States 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 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.

 

Restricted Cash and Investments

 

Restricted cash and investments represent funds held in third-party managed trust accounts as collateral for our financial assurance obligations for post-closure activities at our non-operating facilities.  These funds are invested in fixed-income U.S. Treasury and government agency securities and money market accounts.  The balances are adjusted monthly to fair market value based on quoted prices in active markets for identical or similar assets.

 

NOTE 2.                    BUSINESS COMBINATION

 

On June 17, 2014, the Company acquired 100% of the outstanding shares of EQ Holdings, Inc. and its wholly-owned subsidiaries (collectively “EQ”).  EQ is a fully integrated environmental services company providing waste treatment and disposal, wastewater treatment, remediation, recycling, industrial cleaning and maintenance, transportation, total waste management, technical services, and emergency response services to a variety of industries and customers in North America. The total purchase price was $465.9 million, net of cash acquired, and was funded through a combination of cash on hand and borrowings under a new $415.0 million term loan. The purchase price is subject to post-closing adjustments including agreed upon working capital requirements.

 

We have recognized the assets and liabilities of EQ based on our preliminary estimates of their acquisition date fair values. The determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment. As such, we have not completed our valuation analysis and calculations in sufficient detail necessary to arrive at the final estimates of the fair market value of the assets acquired and liabilities assumed, along with the related allocations to goodwill and intangible assets. All information presented is preliminary and

 

7



Table of Contents

 

subject to revision pending finalization of our fair market valuation analysis. Our final fair value determinations may be significantly different than those reflected in our consolidated financial statements as of September 30, 2014.

 

The following table summarizes the consideration paid for EQ and the preliminary fair value estimates of assets acquired and liabilities assumed recognized at the acquisition date, with purchase price allocation adjustments since the preliminary purchase price allocation as previously disclosed as of June 30, 2014:

 

 

 

Purchase Price Allocation

 

$s in thousands

 

June 30, 2014

 

Adjustments

 

September 30, 2014

 

Current assets

 

$

114,227

 

$

(1,028

)

$

113,199

 

Property and equipment

 

103,532

 

 

103,532

 

Identifiable intangible assets

 

250,900

 

 

250,900

 

Current liabilities

 

(56,550

)

(888

)

(57,438

)

Other liabilities

 

(131,336

)

177

 

(131,159

)

Total identifiable net assets

 

280,773

 

(1,739

)

279,034

 

Goodwill

 

190,894

 

1,739

 

192,633

 

Total purchase price

 

$

471,667

 

$

 

$

471,667

 

 

Purchase price allocation adjustments relate primarily to the receipt of additional information regarding the fair values of accounts receivable, prepaid expenses, accounts payable and accrued expenses, deferred income taxes and residual goodwill.

 

Goodwill of $192.6 million arising from the acquisition is the result of several factors. EQ has an assembled workforce that serves the U.S. industrial market utilizing state-of-the-art technology to treat a wide range of industrial and hazardous waste. The acquisition of EQ increases our geographic base providing a coast-to-coast presence and an expanded service platform to better serve key North American hazardous waste markets. In addition, the acquisition of EQ provides us with an opportunity to compete for additional waste clean-up project work; expand penetration with national accounts; improve and enhance transportation, logistics, and service offerings with existing customers and attract new customers. All of the goodwill recognized was assigned to our EQ Operations reporting segment. None of the goodwill recognized is expected to be deductible for income tax purposes.

 

The preliminary fair value estimate of identifiable intangible assets by major intangible asset class and related weighted average amortization period are as follows:

 

$s in thousands

 

June 17, 2014

 

Weighted Average
Amortization Period
(Years)

 

Permits and licenses

 

$

119,500

 

45

 

Customer relationships

 

115,000

 

15

 

Tradename

 

9,900

 

4

 

Customer backlog

 

3,600

 

10

 

Non-compete agreements

 

1,400

 

1

 

Internet domain and website

 

900

 

19

 

Database

 

600

 

15

 

Total identifiable intangible assets

 

$

250,900

 

29

 

 

8



Table of Contents

 

The following unaudited pro forma financial information presents the combined results of operations as if EQ had been combined with us at the beginning of each of the periods presented. The pro forma financial information includes the accounting effects of the business combination, including the amortization of intangible assets, depreciation of property, plant and equipment, and interest expense.   The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of our future consolidated results of operations.

 

 

 

(unaudited)

 

(unaudited)

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

$s in thousands, except per share amounts

 

2014

 

2013

 

2014

 

2013

 

Pro forma combined:

 

 

 

 

 

 

 

 

 

Revenue

 

$

170,894

 

$

148,704

 

$

458,091

 

$

381,159

 

Net income

 

$

13,333

 

$

9,606

 

$

24,835

 

$

19,246

 

Earnings per share

 

 

 

 

 

 

 

 

 

Basic

 

$

0.62

 

$

0.52

 

$

1.15

 

$

1.05

 

Diluted

 

$

0.61

 

$

0.52

 

$

1.15

 

$

1.04

 

 

Revenue from EQ included in US Ecology’s consolidated statement of operations since the closing of the acquisition on June 17, 2014 was $111.3 million and $125.9 million, respectively, for the three and nine month periods ended September 30, 2014.  Operating income from EQ included in US Ecology’s consolidated statement of operations since the closing of the acquisition on June 17, 2014 was $10.5 million and $12.0 million, respectively, for the three and nine month periods ended September 30, 2014. Acquisition-related costs of $307,000 and $5.6 million were included in Selling, general and administrative expenses in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2014, respectively.

 

NOTE 3.                  ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

Changes in accumulated other comprehensive income (loss), comprised entirely of foreign currency translation adjustments, consisted of the following:

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

$s in thousands

 

2014

 

2013

 

2014

 

2013

 

Balance, beginning of period

 

$

(1,707

)

$

(1,301

)

$

(1,785

)

$

628

 

Foreign currency translation gain (loss) in other comprehensive income

 

(2,156

)

782

 

(2,078

)

(1,147

)

Balance, end of period

 

$

(3,863

)

$

(519

)

$

(3,863

)

$

(519

)

 

NOTE 4.                    CONCENTRATIONS AND CREDIT RISK

 

Major Customers

 

Revenue from a single customer accounted for approximately 12% and 10% of total revenue for the three and nine months ended September 30, 2014, respectively.  Revenue from a single customer accounted for 14% of total revenue for the three months ended September 30, 2013. No customer accounted for more than 10% of total revenue for the nine months ended September 30, 2013.

 

Receivables from a single customer accounted for approximately 14% of total trade receivables as of September 30, 2014. Receivables from a single customer accounted for approximately 16% of total trade receivables as of December 31, 2013.

 

Credit Risk Concentration

 

We maintain most of our cash with nationally recognized financial institutions like Wells Fargo Bank, National Association (“Wells Fargo”). Substantially all balances are uninsured and are not used as collateral for other obligations. Concentrations of credit risk on accounts receivable are believed to be limited due to the number, diversification and character of the obligors and our credit evaluation process.

 

9



Table of Contents

 

NOTE 5.                    RECEIVABLES

 

Receivables consisted of the following:

 

 

 

September 30,

 

December 31,

 

$s in thousands

 

2014

 

2013

 

 

 

 

 

 

 

Trade

 

$

130,017

 

$

42,055

 

Unbilled revenue

 

23,709

 

1,296

 

Other

 

2,652

 

810

 

Total receivables

 

156,378

 

44,161

 

Allowance for doubtful accounts

 

(4,166

)

(525

)

Receivables, net

 

$

152,212

 

$

43,636

 

 

NOTE 6.                    FAIR VALUE MEASUREMENTS

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  Assets and liabilities recorded at fair value are categorized using defined hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows:

 

Level 1 - Quoted prices in active markets for identical assets or liabilities;

 

Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;

 

Level 3 - Unobservable inputs in which little or no market activity exists, requiring an entity to develop its own assumptions that market participants would use to value the asset or liability.

 

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash and investments, accounts payable, accrued liabilities and long-term debt. The estimated fair value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying value due to the short-term nature of these instruments. The carrying amount of our long-term debt approximates fair value due to the absence of any significant changes in interest rates or the Company’s credit risk profile since the execution of the Company’s Credit Agreement (as defined below) on June 17, 2014.

 

10



Table of Contents

 

The Company’s assets measured at fair value on a recurring basis consisted of our Restricted cash and investments as follows:

 

 

 

September 30, 2014

 

 

 

Quoted Prices in
Active Markets

 

Other Observable
Inputs

 

Unobservable
Inputs

 

 

 

$s in thousands

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Fixed-income securities (1)

 

$

400

 

$

3,598

 

$

 

$

3,998

 

Money market funds (2)

 

$

1,726

 

$

 

$

 

$

1,726

 

Total

 

$

2,126

 

$

3,598

 

$

 

$

5,724

 

 

 

 

December 31, 2013

 

 

 

Quoted Prices in
Active Markets

 

Other Observable
Inputs

 

Unobservable
Inputs

 

 

 

$s in thousands

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

Total

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

Fixed-income securities (1)

 

$

399

 

$

3,607

 

$

 

$

4,006

 

Money market funds (2)

 

$

91

 

$

 

$

 

$

91

 

Total

 

$

490

 

$

3,607

 

$

 

$

4,097

 

 


(1) We invest a portion of our Restricted cash and investments in fixed-income securities, including U.S. Treasury and U.S. agency securities. We measure the fair value of U.S. Treasury securities using quoted prices for identical assets in active markets. We measure the fair value of U.S. agency securities using observable market activity for similar assets. The fair value of our fixed-income securities approximates our cost basis in the investments.

(2) We invest a portion of our Restricted cash and investments in money market funds. We measure the fair value of these money market fund investments using quoted prices for identical assets in active markets.

 

NOTE 7.                    PROPERTY AND EQUIPMENT

 

Property and equipment consisted of the following:

 

 

 

September 30,

 

December 31,

 

$s in thousands

 

2014

 

2013

 

 

 

 

 

 

 

Cell development costs

 

$

93,402

 

$

77,348

 

Land and improvements

 

35,359

 

18,073

 

Buildings and improvements

 

78,955

 

59,101

 

Railcars

 

17,375

 

17,375

 

Vehicles and other equipment

 

96,119

 

42,859

 

Construction in progress

 

20,667

 

6,784

 

Total property and equipment

 

341,877

 

221,540

 

Accumulated depreciation and amortization

 

(121,559

)

(106,681

)

Property and equipment, net

 

$

220,318

 

$

114,859

 

 

Depreciation and amortization expense for the three months ended September 30, 2014 and 2013 was $8.4 million and $3.7 million, respectively. Depreciation and amortization expense for the nine months ended September 30, 2014 and 2013 was $16.8 million and $10.8 million, respectively.

 

11



Table of Contents

 

NOTE 8.       GOODWILL AND INTANGIBLE ASSETS

 

Changes in goodwill for the nine months ended September 30, 2014 consisted of the following:

 

$s in thousands

 

December 31,
2013

 

Additions

 

Foreign
Currency
Translation

 

September 30,
2014

 

Goodwill:

 

 

 

 

 

 

 

 

 

Operating Disposal Facilities

 

$

21,693

 

$

 

$

(967

)

$

20,726

 

EQ Operations

 

 

192,633

 

 

192,633

 

Total goodwill

 

$

21,693

 

$

192,633

 

$

(967

)

$

213,359

 

 

Intangible assets consisted of the following:

 

$s in thousands

 

September 30,
2014

 

December 31,
2013

 

Amortizing intangible assets:

 

 

 

 

 

Customer relationships

 

$

119,823

 

$

5,005

 

Permits, licenses and lease

 

144,518

 

26,264

 

Technology - Formulae and processes

 

8,145

 

8,551

 

Tradename

 

9,900

 

 

Customer backlog

 

3,600

 

 

Non-compete agreements

 

1,420

 

20

 

Internet domain and website

 

900

 

 

Database

 

690

 

94

 

Developed software

 

313

 

329

 

Total amortizing intangible assets

 

289,309

 

40,263

 

Accumulated amortization

 

(9,353

)

(4,341

)

 

 

 

 

 

 

Nonamortizing intangible assets:

 

 

 

 

 

Permits and licenses

 

750

 

750

 

Tradename

 

152

 

160

 

Total intangible assets, net

 

$

280,858

 

$

36,832

 

 

At September 30, 2014, the net carrying amounts of goodwill and amortizing intangible assets include preliminary estimates of $192.6 million and $250.9 million, respectively, as a result of our acquisition of EQ.

 

12



Table of Contents

 

Amortization expense for the three months ended September 30, 2014 and 2013 was $4.0 million and $362,000, respectively. Amortization expense for the nine months ended September 30, 2014 and 2013 was $5.2 million and $1.1 million, respectively. Future amortization expense of amortizing intangible assets, including the amortization of the preliminary values assigned to EQ amortizing intangible assets, is as follows:

 

$s in thousands

 

Total

 

Remainder of 2014

 

$

4,000

 

2015

 

15,222

 

2016

 

14,541

 

2017

 

14,536

 

2018

 

$

13,183

 

 

NOTE 9.                    DEBT

 

Long-term debt consisted of the following:

 

 

 

September 30,

 

December 31,

 

$s in thousands

 

2014

 

2013

 

 

 

 

 

 

 

Term loan

 

$

413,962

 

$

 

Net discount on term loan

 

$

(1,000

)

 

Total debt

 

412,962

 

 

Current portion of long-term debt

 

(4,002

)

 

Long-term debt

 

$

408,960

 

$

 

 

Future maturities of long-term debt, excluding the net discount, as of September 30, 2014 consist of the following:

 

$s in thousands

 

Maturities

 

 

 

 

 

2014

 

$

1,037

 

2015

 

4,150

 

2016

 

4,150

 

2017

 

4,150

 

2018

 

4,150

 

Thereafter

 

396,325

 

 

 

$

413,962

 

 

On June 17, 2014, in connection with the acquisition of EQ, the Company entered into a new $540.0 million senior secured credit agreement (the “Credit Agreement”) with a syndicate of banks comprised of a $415.0 million term loan (the “Term Loan”) with a maturity date of June 17, 2021 and a $125.0 million revolving line of credit (the “Revolving Credit Facility”) with a maturity date of June 17, 2019. Upon entering into the Credit Agreement, the Company terminated its existing credit agreement with Wells Fargo, dated October, 29, 2010, as amended (the “Former Agreement”). Immediately prior to the termination of the Former Agreement, there were no outstanding borrowings under the Former Agreement.  No early termination penalties were incurred as a result of the termination of the Former Agreement.

 

Term Loan

 

The Term Loan provides an initial commitment amount of $415.0 million, the proceeds of which were used to acquire 100% of the outstanding shares of EQ and pay related transaction fees and expenses. The Term Loan bears interest at a base rate (as defined in the Credit Agreement) plus 2.00% or LIBOR plus 3.00%, at the Company’s option. The Term Loan is subject to amortization in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of the Term Loan. At September 30, 2014, the effective interest rate on the Term Loan was 3.75%. Interest only payments are due either monthly or on the last day of any interest period, as applicable. As set forth in the Credit Agreement, the Company is required to enter into one or more interest rate hedge agreements in amounts sufficient to fix the interest rate on at least 50% of the principal amount of the $415.0 million Term Loan.  In October 2014, the Company entered into an interest rate swap agreement with Wells Fargo, effectively fixing the interest rate on $250.0 million, or 60%, of the Term Loan borrowings outstanding as of September 30, 2014.  Refer to Note 17- Subsequent Events for additional details.

 

Revolving Credit Facility

 

The Revolving Credit Facility provides up to $125.0 million of revolving credit loans or letters of credit with the use of proceeds restricted solely for working capital and other general corporate purposes. Under the Revolving Credit Facility, revolving loans are available based on a base rate (as defined in the Credit Agreement) or LIBOR, at the Company’s option, plus an applicable margin which is determined according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”). The Company is required to pay a commitment fee of 0.50% per annum on the unused portion of the Revolving Credit Facility, with such commitment fee to be reduced based upon the Company’s total leverage ratio as defined in the Credit Agreement.  The maximum letter of credit capacity under the new revolving credit facility is $50.0 million and the Credit Agreement provides for a letter of credit fee equal to the applicable margin for LIBOR

 

13



Table of Contents

 

loans under the Revolving Credit Facility. Interest only payments are due either monthly or on the last day of any interest period, as applicable. At September 30, 2014, there were no borrowings outstanding on the Revolving Credit Facility. The availability under the Revolving Credit Facility was $97.8 million with $27.2 million of the Revolving Credit Facility issued in the form of standby letters of credit utilized as collateral for closure and post-closure financial assurance.

 

Except as set forth below, the Company may prepay the Term Loan or permanently reduce the Revolving Credit Facility commitment under the Credit Agreement at any time without premium or penalty (other than customary “breakage” costs with respect to the early termination of LIBOR loans).  On or prior to nine months after the closing of the Credit Agreement, if we prepay the initial term loans or amend the pricing terms of the initial term loans, in each case in connection with a reduction of the effective yield, we are required to pay a 1% prepayment premium (unless in connection with a change of control, sale or permitted acquisition).  Subject to certain exceptions, the Credit Agreement provides for mandatory prepayment upon certain asset dispositions, casualty events and issuances of indebtedness.  The Credit Agreement is also subject to mandatory annual prepayments commencing in December 2015 if our total leverage (defined as the ratio of our consolidated funded debt as of the last day of the applicable fiscal year to our adjusted EBITDA for such period) exceeds certain ratios as follows: 50% of our adjusted excess cash flow (as defined in the Credit Agreement and which takes into account certain adjustments) if our total leverage ratio is greater than 2.50 to 1.00, with step-downs to 0% if our total leverage ratio is equal to or less than 2.50 to 1.00.

 

Pursuant to (i) an unconditional guarantee agreement (the “Guarantee”) and (ii) a collateral agreement (the “Collateral Agreement”), each entered into by the Company and its domestic subsidiaries on June 17, 2014, the Company’s obligations under the Credit Agreement are jointly and severally and fully and unconditionally guaranteed on a senior basis by all of the Company’s existing and certain future domestic subsidiaries and the Credit Agreement is secured by substantially all of the Company’s and its domestic subsidiaries’ assets except the Company’s and its domestic subsidiaries’ real property.

 

The Credit Agreement contains customary restrictive covenants, subject to certain permitted amounts and exceptions, including covenants limiting the ability of the Company to incur additional indebtedness, pay dividends and make other restricted payments, repurchase shares of our outstanding stock and create certain liens. We may only declare quarterly or annual dividends if on the date of declaration, no event of default has occurred and no other event or condition has occurred that would constitute default due to the payment of the dividend.

 

The Credit Agreement also contains a financial maintenance covenant, which is a maximum Consolidated Senior Secured Leverage Ratio, as defined in the Credit Agreement, and is only applicable to the Revolving Credit Facility.  Our Consolidated Senior Secured Leverage Ratio as of the last day of any fiscal quarter, commencing with June 30, 2014, may not exceed the ratios indicated below:

 

Fiscal Quarters Ending

 

Maximum Ratio

 

June 30, 2014 through September 30, 2015

 

4.00 to 1.00

 

December 31, 2015 through September 30, 2016

 

3.75 to 1.00

 

December 31, 2016 through September 30, 2017

 

3.50 to 1.00

 

December 31, 2017 through September 30, 2018

 

3.25 to 1.00

 

December 31, 2018 and thereafter

 

3.00 to 1.00

 

 

At September 30, 2014, we were in compliance with all of the financial covenants in the Credit Agreement.

 

NOTE 10.             CLOSURE AND POST-CLOSURE OBLIGATIONS

 

Our accrued closure and post-closure obligations represent the expected future costs, including corrective actions, associated with closure and post-closure of our operating and non-operating disposal facilities. Liabilities are recorded when work is probable and the costs can be reasonably estimated. We perform periodic reviews of both non-operating and operating facilities and revise accruals for estimated closure and post-closure, remediation or other costs as necessary. Recorded liabilities are based on our best estimates of current costs and are updated periodically to include the effects of existing technology, presently enacted laws and regulations, inflation and other economic factors.

 

14



Table of Contents

 

Changes to reported closure and post-closure obligations consisted of the following:

 

 

 

Three Months Ended

 

Nine Months Ended

 

$s in thousands

 

September 30, 2014

 

September 30, 2014

 

 

 

 

 

 

 

Closure and post-closure obligations, beginning of period

 

$

58,588

 

$

17,468

 

Liabilities assumed in EQ acquisition

 

 

37,915

 

Accretion expense

 

959

 

1,675

 

Payments

 

(515

)

(879

)

Adjustments

 

 

2,863

 

Currency translation

 

(84

)

(94

)

Closure and post-closure obligations, end of period

 

58,948

 

58,948

 

Less current portion

 

(5,424

)

(5,424

)

Long-term portion

 

$

53,524

 

$

53,524

 

 

Adjustments to the obligation are changes in the expected timing or amount of cash expenditures based upon actual and estimated cash expenditures. The adjustments in 2014 are related to an increase to the obligation for our Grand View, Idaho opening facility, due to increases in our estimated closure costs for a newly constructed disposal cell.

 

NOTE 11.             INCOME TAXES

 

Our effective tax rate for the three months ended September 30, 2014 was 38.7%, up from 35.7% for the three months ended September 30, 2013. Our effective tax rate for the nine months ended September 30, 2014 was 37.7%, up from 35.8% for the nine months ended September 30, 2013. The increases for both the three and nine months ended September 30, 2014 reflect non-deductible business development and transaction expenses associated with the acquisition of EQ.

 

Due to the expiration of certain statutes of limitations, during the third quarter of 2014 we reduced our unrecognized tax benefits by $424,000 which had a favorable impact on our effective tax rate for the quarter. As of September 30, 2014 we have unrecognized tax benefits of $57,000 remaining that, if recognized, would favorably affect the effective tax rate.  As of September 30, 2014, we have recorded $6,000 of cumulative interest expense associated with this unrecognized tax benefit. We anticipate that within the next twelve months the total amount of unrecognized tax benefits will decrease due to the expiration of statutes of limitations.

 

We file a consolidated U.S. federal income tax return with the Internal Revenue Service as well as income tax returns in various states and Canada. We may be subject to examination by taxing authorities in the U.S. and Canada for tax years 2011 through 2013. Additionally, we may be subject to examinations by various state and local taxing jurisdictions for tax years 2009 through 2013.

 

15



Table of Contents

 

NOTE 12.             EARNINGS PER SHARE

 

 

 

Three Months Ended September 30,

 

$s and shares in thousands, except per share

 

2014

 

2013

 

amounts

 

Basic

 

Diluted

 

Basic

 

Diluted

 

Net income

 

13,333

 

$

13,333

 

$

10,328

 

$

10,328

 

Weighted average basic shares outstanding

 

21,570

 

21,570

 

18,459

 

18,459

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options and restricted stock

 

 

 

110

 

 

 

74

 

Weighted average diluted shares outstanding

 

 

 

21,680

 

 

 

18,533

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.62

 

$

0.61

 

$

0.56

 

$

0.56

 

Anti-dilutive shares excluded from calculation

 

 

 

78

 

 

 

174

 

 

 

 

Nine Months Ended September 30,

 

$s and shares in thousands, except per share

 

2014

 

2013

 

amounts

 

Basic

 

Diluted

 

Basic

 

Diluted

 

Net income

 

$

29,558

 

$

29,558

 

$

22,944

 

$

22,944

 

Weighted average basic shares outstanding

 

21,526

 

21,526

 

18,395

 

18,395

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options and restricted stock

 

 

 

123

 

 

 

80

 

Weighted average diluted shares outstanding

 

 

 

21,649

 

 

 

18,475

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

1.37

 

$

1.37

 

$

1.25

 

$

1.24

 

Anti-dilutive shares excluded from calculation

 

 

 

50

 

 

 

197

 

 

NOTE 13.             EQUITY

 

During the nine months ended September 30, 2014, option holders exercised 115,188 options with a weighted-average exercise price of $21.52 per option. Option holders exercised 46,744 of these options via net share settlement. During the nine months ended September 30, 2014, the Company issued 24,038 shares of restricted stock from our treasury stock at an average cost of $21.00 per share.

 

NOTE 14.             COMMITMENTS AND CONTINGENCIES

 

Litigation and Regulatory Proceedings

 

In the ordinary course of business, we are involved in judicial and administrative proceedings involving federal, state, provincial or local governmental authorities, including regulatory agencies that oversee and enforce compliance with permits. Fines or penalties may be assessed by our regulators for non-compliance.  Actions may also be brought by individuals or groups in connection with permitting of planned facilities, modification or alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedly released from our operated sites, as well as other litigation. We maintain insurance intended to cover property and damage claims asserted as a result of our operations. Periodically, management reviews and may establish reserves for legal and administrative matters, or other fees expected to be incurred in relation to these matters.

 

In 2012, we settled allegations by the United States Environment Protection Agency (“U.S. EPA”) that the thermal recycling operation at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conservation and Recovery Act of 1976 (“RCRA”). As part of the settlement, we agreed to pay a civil penalty and to submit an application to the State of Texas for a

 

16



Table of Contents

 

RCRA Subpart X permit.  The Company and the thermal recycling unit’s owner-operator also agreed to a set of interim operating conditions that allow the facility to continue providing recycling services to customers until the RCRA Subpart X permit is issued.

 

In connection with this matter, in June 2013 the U.S. EPA asserted various related technical compliance and permitting violations of the Clean Air Act of 1970. Negotiations on the terms of a proposed settlement are ongoing with the U.S. EPA.  We recognized a charge of $238,000 during the second quarter of 2013 in Selling, general and administrative expenses in the Consolidated Statement of Operations related to the enforcement matter. In July 2014, based on further negotiations with the U.S. EPA, our estimated liability was reduced to $138,000 and, accordingly, we recognized a credit of $100,000 during the third quarter of 2014 in Selling, general and administrative expenses in the Consolidated Statement of Operations.

 

Other than as disclosed above, we are not currently a party to any material pending legal proceedings and are not aware of any other claims that could, individually or in the aggregate, have a materially adverse effect on our financial position, results of operations or cash flows.

 

Operating Leases

 

In connection with the acquisition of EQ on June 17, 2014, the Company acquired additional operating lease agreements primarily covering facilities, office equipment and machinery. Future minimum lease payments on non-cancellable EQ operating leases as of September 30, 2014 are as follows:

 

$s in thousands

 

Payments

 

2014

 

$

1,346

 

2015

 

5,176

 

2016

 

4,358

 

2017

 

3,370

 

2018

 

1,906

 

Thereafter

 

849

 

 

 

$

17,005

 

 

NOTE 15.             MULTI-EMPLOYER DEFINED BENEFIT PENSION PLANS

 

Certain of the Company’s wholly-owned subsidiaries, acquired with the acquisition of EQ on June 17, 2014, participate in seven multi-employer defined benefit pension plans under the terms of collective bargaining agreements covering most of the subsidiaries’ union employees. Contributions are determined in accordance with the provisions of negotiated labor contracts and are generally based on stipulated rates per hours worked. Benefits under these plans are generally based on compensation levels and years of service.

 

The financial risks of participating in multi-employer plans are different from single employer defined benefit pension plans in the following respects:

 

·                  Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.

 

·                  If a participating employer discontinues contributions to a plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

 

·                  If a participating employer chooses to stop participating in a plan, a withdrawal liability may be created based on the unfunded vested benefits for all employees in the plan.

 

17



Table of Contents

 

Information regarding significant multi-employer pension benefit plans in which the Company participates is shown in the following table:

 

 

 

 

 

 

 

Pension Protection Act

 

Contribution Made by EQ (1)

 

 

 

Plan Employer

 

Plan

 

Certified Zone Status

 

$s in thousands

 

Name of Plan

 

ID Number

 

Number

 

2013

 

2012

 

2013

 

2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Engineers Local 324 Pension Fund

 

38-1900637

 

001

 

Red

 

Red

 

$

1,061

 

$

874

 

Contributions to multi-employer plans not individually significant

 

 

 

 

 

 

 

 

 

320

 

249

 

Total contributions made by EQ (1)

 

 

 

 

 

 

 

 

 

$

1,381

 

$

1,123

 

 


(1)  Represents contributions made prior to the Company’s acquisition of EQ on June 17, 2014.

 

Based on information as of April 30, 2013 and 2012, the year end of the Operating Engineers Local 324 Pension Fund (the “Local 324 Plan”), the Company’s contributions made to the Local 324 Plan represented less than 5 percent of total contributions received by the Local 324 Plan during the 2013 and 2012 plan years.

 

The certified zone status in the table above is defined by the Department of Labor and the Pension Protection Act of 2006 and represents the level at which the plan is funded. Plans in the red zone are less than 65 percent funded; plans in the yellow zone are less

than 80 percent funded; and plans in the green zone are at least 80 percent funded. The certified zone status is as of the Local 324 Plan’s year end of April 30, 2013 and 2012.

 

A financial improvement or rehabilitation plan, as defined under ERISA, was adopted by the Local 324 Plan on March 17, 2011 and the Rehabilitation Period began May 1, 2013.

 

As of September 30, 2014, approximately 30% of the EQ workforce was employed under union collective bargaining agreements with the Local 324 Operating Engineers union. On September 30, 2014, a collective bargaining agreement covering 113 employees at the Taylor, MI facility expired without being renewed, although renewal negotiations are ongoing. The remaining collective bargaining agreements expire on November 30, 2015, and April 30, 2017.

 

NOTE 16.   OPERATING SEGMENTS

 

Prior to June 17, 2014, our operations were reported in two segments, Operating Disposal Facilities and Non-Operating Disposal Facilities, which reflected our internal reporting structure and nature of services offered. The Operating Disposal Facility segment represents disposal facilities accepting hazardous and radioactive waste. The Non-Operating Disposal Facility segment represents facilities which are no longer accepting hazardous and/or radioactive waste. In connection with our acquisition of EQ Holdings, Inc. on June 17, 2014, we added a third segment, EQ Operations, which consists of EQ’s legacy operations. Our chief operating decision maker reviews discrete financial information for each of these segments to evaluate performance and make decisions about allocating resources. As a result of the acquisition of EQ, we plan to continue to refine our segment reporting to reflect ongoing changes in the way we manage our business, and there can be no assurance that we will continue to separately report EQ’s financial results in the future.

 

18



Table of Contents

 

Summarized financial information for our reportable segments is shown in the following tables.  Income taxes and the elimination of intersegment transactions are assigned to Corporate, but all other items are included in the segment in which they originated.

 

Three Months Ended September 30, 2014 (in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

EQ
Operations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

47,182

 

$

10

 

$

(139

)

$

33,154

 

$

80,207

 

Revenue - Transportation and services

 

12,562

 

 

(47

)

78,172

 

90,687

 

Total revenue

 

59,744

 

10

 

(186

)

111,326

 

170,894

 

Direct operating costs

 

23,095

 

55

 

(186

)

68,975

 

91,939

 

Transportation costs

 

12,609

 

 

 

13,683

 

26,292

 

Gross profit (loss)

 

24,040

 

(45

)

 

28,668

 

52,663

 

Selling, general & administrative expense

 

2,972

 

 

4,643

 

18,214

 

25,829

 

Operating income (loss)

 

21,068

 

(45

)

(4,643

)

10,454

 

26,834

 

Interest income (expense), net

 

3

 

 

(4,452

)

(84

)

(4,533

)

Foreign currency gain (loss)

 

410

 

 

(1,240

)

 

(830

)

Other income

 

124

 

2

 

1

 

141

 

268

 

Income (loss) before income taxes

 

21,605

 

(43

)

(10,334

)

10,511

 

21,739

 

Income tax expense

 

 

 

8,406

 

 

8,406

 

Net income (loss)

 

$

21,605

 

$

(43

)

$

(18,740

)

$

10,511

 

$

13,333

 

Depreciation, amortization & accretion

 

$

4,510

 

$

49

 

$

17

 

$

8,757

 

$

13,333

 

Capital expenditures

 

$

2,551

 

$

 

$

71

 

$

6,604

 

$

9,226

 

Total assets

 

$

219,783

 

$

112

 

$

25,101

 

$

672,153

 

$

917,149

 

 

Three Months Ended September 30, 2013 (in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

EQ
Operations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

42,489

 

$

6

 

$

 

$

 

$

42,495

 

Revenue - Transportation and services

 

10,595

 

 

 

 

10,595

 

Total revenue

 

53,084

 

6

 

 

 

53,090

 

Direct operating costs

 

20,847

 

55

 

 

 

20,902

 

Transportation costs

 

10,568

 

 

 

 

10,568

 

Gross profit (loss)

 

21,669

 

(49

)

 

 

21,620

 

Selling, general & administrative expense

 

2,611

 

 

3,497

 

 

6,108

 

Operating income (loss)

 

19,058

 

(49

)

(3,497

)

 

15,512

 

Interest income (expense), net

 

4

 

 

(208

)

 

(204

)

Foreign currency gain (loss)

 

(233

)

 

916

 

 

683

 

Other income

 

75

 

2

 

 

 

77

 

Income (loss) before income taxes

 

18,904

 

(47

)

(2,789

)

 

16,068

 

Income tax expense

 

 

 

5,740

 

 

5,740

 

Net income (loss)

 

$

18,904

 

$

(47

)

$

(8,529

)

$

 

$

10,328

 

Depreciation, amortization & accretion

 

$

4,336

 

$

52

 

$

9

 

$

 

$

4,397

 

Capital expenditures

 

$

2,915

 

$

 

$

145

 

$

 

$

3,060

 

Total assets

 

$

222,503

 

$

87

 

$

8,141

 

$

 

$

230,731

 

 

19



Table of Contents

 

Nine Months Ended September 30, 2014 (in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

EQ
Operations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

135,746

 

$

22

 

$

(169

)

$

37,862

 

$

173,461

 

Revenue - Transportation and services

 

28,835

 

 

(57

)

88,033

 

116,811

 

Total revenue

 

164,581

 

22

 

(226

)

125,895

 

290,272

 

Direct operating costs

 

67,951

 

157

 

(225

)

78,055

 

145,938

 

Transportation costs

 

29,137

 

 

(1

)

15,146

 

44,282

 

Gross profit (loss)

 

67,493

 

(135

)

 

32,694

 

100,052

 

Selling, general & administrative expense

 

8,488

 

 

17,565

 

20,660

 

46,713

 

Operating income (loss)

 

59,005

 

(135

)

(17,565

)

12,034

 

53,339

 

Interest income (expense), net

 

10

 

 

(5,268

)

(136

)

(5,394

)

Foreign currency gain (loss)

 

396

 

 

(1,423

)

 

(1,027

)

Other income

 

355

 

7

 

1

 

157

 

520

 

Income (loss) before income taxes

 

59,766

 

(128

)

(24,255

)

12,055

 

47,438

 

Income tax expense

 

 

 

17,880

 

 

17,880

 

Net income (loss)

 

$

59,766

 

$

(128

)

$

(42,135

)

$

12,055

 

$

29,558

 

Depreciation, amortization & accretion

 

$

13,470

 

$

146

 

$

47

 

$

10,018

 

$

23,681

 

Capital expenditures

 

$

10,102

 

$

43

 

$

312

 

$

7,453

 

$

17,910

 

Total assets

 

$

219,783

 

$

112

 

$

25,101

 

$

672,153

 

$

917,149

 

 

Nine Months Ended September 30, 2013 (in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

EQ
Operations

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

117,553

 

$

16

 

$

 

$

 

$

117,569

 

Revenue - Transportation and services

 

24,197

 

 

 

 

24,197

 

Total revenue

 

141,750

 

16

 

 

 

141,766

 

Direct operating costs

 

61,583

 

162

 

 

 

61,745

 

Transportation costs

 

24,091

 

 

 

 

24,091

 

Gross profit (loss)

 

56,076

 

(146

)

 

 

55,930

 

Selling, general & administrative expense

 

8,524

 

 

9,829

 

 

18,353

 

Operating income (loss)

 

47,552

 

(146

)

(9,829

)

 

37,577

 

Interest income (expense), net

 

10

 

 

(650

)

 

(640

)

Foreign currency gain (loss)

 

199

 

 

(1,647

)

 

(1,448

)

Other income

 

261

 

7

 

 

 

268

 

Income (loss) before income taxes

 

48,022

 

(139

)

(12,126

)

 

35,757

 

Income tax expense

 

 

 

12,813

 

 

12,813

 

Net income (loss)

 

$

48,022

 

$

(139

)

$

(24,939

)

$

 

$

22,944

 

Depreciation, amortization & accretion

 

$

12,628

 

$

156

 

$

27

 

$

 

$

12,811

 

Capital expenditures

 

$

15,330

 

$

 

$

260

 

$

 

$

15,590

 

Total assets

 

$

222,503

 

$

87

 

$

8,141

 

$

 

$

230,731

 

 

20



Table of Contents

 

Revenue, Property and Equipment and Intangible Assets Outside of the United States

 

We provide services in the United States and Canada. Revenues by geographic location where the underlying services were performed consisted of the following:

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

$s in thousands

 

2014

 

2013

 

2014

 

2013

 

United States

 

$

155,073

 

$

37,833

 

$

243,724

 

$

101,852

 

Canada

 

15,821

 

15,257

 

46,548

 

39,914

 

Total revenue

 

$

170,894

 

$

53,090

 

$

290,272

 

$

141,766

 

 

Long-lived assets, comprised of property and equipment and intangible assets net of accumulated depreciation and amortization, by geographic location consisted of the following:

 

 

 

September 30,

 

December 31,

 

$s in thousands

 

2014

 

2013

 

United States

 

$