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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, 2011

 

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:  0-11688

 

US ECOLOGY, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

Delaware

 

95-3889638

(State of Incorporation)

 

(I.R.S. Employer Identification Number)

 

Lakepointe Centre I,

300 E. Mallard, Suite 300

Boise, Idaho

 

83706

(Address of Principal Executive Offices)

 

(Zip Code)

 

(208) 331-8400

(Registrant’s Telephone Number, Including Area Code)

 

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 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 smaller reporting company)

 

 

 

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

 

The number of shares of the registrant’s common stock, $0.01 par value, outstanding as of November 4, 2011 was 18,317,514.

 

 

 



Table of Contents

 

US ECOLOGY, INC.

 

TABLE OF CONTENTS

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

 

 

Item 1.

Financial Statements (Unaudited)

 

 

 

 

 

 

 

Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010

 

1

 

 

 

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010

 

2

 

 

 

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010

 

3

 

 

 

 

 

Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2011 and 2010

 

4

 

 

 

 

 

Notes to Consolidated Financial Statements

 

5

 

 

 

 

 

Report of Independent Registered Public Accounting Firm

 

14

 

 

 

 

Item 2.

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

 

15

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

24

 

 

 

 

Item 4.

Controls and Procedures

 

25

 

 

 

 

PART II.

OTHER INFORMATION

 

 

 

 

 

 

Cautionary Statement

 

25

 

 

 

 

Item 1.

Legal Proceedings

 

26

 

 

 

 

Item 1A.

Risk Factors

 

26

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

26

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

26

 

 

 

 

Item 4.

Removed and Reserved

 

26

 

 

 

 

Item 5.

Other Information

 

26

 

 

 

 

Item 6.

Exhibits

 

27

 

 

 

 

SIGNATURE

 

28

 


 


Table of Contents

 

PART I. FINANCIAL INFORMATION

 

Item 1.    Financial Statements

 

US ECOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

(unaudited)

 

 

 

September 30, 2011

 

December 31, 2010

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

6,059

 

$

6,342

 

Receivables, net

 

28,708

 

33,553

 

Prepaid expenses and other current assets

 

2,709

 

2,635

 

Income taxes receivable

 

29

 

 

Deferred income taxes

 

872

 

455

 

Total current assets

 

38,377

 

42,985

 

 

 

 

 

 

 

Property and equipment, net

 

101,038

 

105,822

 

Restricted cash

 

4,115

 

4,115

 

Intangible assets, net

 

38,863

 

41,740

 

Goodwill

 

20,815

 

21,790

 

Other assets

 

721

 

897

 

Total assets

 

$

203,929

 

$

217,349

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Accounts payable

 

$

5,516

 

$

5,033

 

Deferred revenue

 

4,076

 

3,620

 

Accrued liabilities

 

9,031

 

8,188

 

Accrued salaries and benefits

 

4,459

 

4,051

 

Income taxes payable

 

971

 

2,615

 

Current portion of closure and post-closure obligations

 

2,462

 

778

 

Current portion of capital lease obligations

 

3

 

7

 

Total current liabilities

 

26,518

 

24,292

 

 

 

 

 

 

 

Long-term closure and post-closure obligations

 

14,788

 

15,995

 

Long-term capital lease obligations

 

1

 

3

 

Reducing revolving line of credit

 

48,000

 

63,000

 

Other long-term liabilities

 

157

 

201

 

Unrecognized tax benefits

 

429

 

 

Deferred income taxes

 

18,068

 

19,146

 

Total liabilities

 

107,961

 

122,637

 

 

 

 

 

 

 

Contingencies and commitments

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

Common stock $0.01 par value, 50,000 authorized; 18,318 and 18,311 shares issued, respectively

 

183

 

183

 

Additional paid-in capital

 

62,188

 

61,892

 

Retained earnings

 

35,779

 

33,940

 

Treasury stock, at cost, 93 and 119 shares, respectively

 

(1,555

)

(1,979

)

Accumulated other comprehensive (loss) income

 

(627

)

676

 

Total stockholders’ equity

 

95,968

 

94,712

 

Total liabilities and stockholders’ equity

 

$

203,929

 

$

217,349

 

 

See Notes to Consolidated Financial Statements.

 

1



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)
(unaudited)

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2011

 

2010

 

2011

 

2010

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

39,670

 

$

25,984

 

$

113,350

 

$

65,356

 

Other direct operating costs

 

18,810

 

10,229

 

54,825

 

30,239

 

Transportation costs

 

5,571

 

5,383

 

20,689

 

11,027

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

15,289

 

10,372

 

37,836

 

24,090

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

5,722

 

3,929

 

15,874

 

10,839

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

9,567

 

6,443

 

21,962

 

13,251

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

Interest income

 

6

 

16

 

21

 

47

 

Interest expense

 

(395

)

 

(1,277

)

(1

)

Foreign currency loss

 

(3,661

)

(35

)

(2,193

)

(59

)

Other

 

73

 

65

 

245

 

179

 

 

 

 

 

 

 

 

 

 

 

Total other income (expense)

 

(3,977

)

46

 

(3,204

)

166

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

5,590

 

6,489

 

18,758

 

13,417

 

Income tax expense

 

1,864

 

2,551

 

7,087

 

5,366

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

3,726

 

$

3,938

 

$

11,671

 

$

8,051

 

 

 

 

 

 

 

 

 

 

 

Earnings per share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.20

 

$

0.22

 

$

0.64

 

$

0.44

 

Diluted

 

$

0.20

 

$

0.22

 

$

0.64

 

$

0.44

 

 

 

 

 

 

 

 

 

 

 

Shares used in earnings per share calculation:

 

 

 

 

 

 

 

 

 

Basic

 

18,202

 

18,172

 

18,194

 

18,167

 

Diluted

 

18,227

 

18,186

 

18,219

 

18,186

 

 

 

 

 

 

 

 

 

 

 

Dividends paid per share

 

$

0.18

 

$

0.18

 

$

0.54

 

$

0.54

 

 

See Notes to Consolidated Financial Statements.

 

2



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)
(unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2011

 

2010

 

Cash Flows From Operating Activities:

 

 

 

 

 

Net income

 

$

11,671

 

$

8,051

 

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

 

 

 

 

 

Depreciation and amortization of property and equipment

 

9,911

 

5,011

 

Amortization of intangible assets

 

1,076

 

 

Accretion of closure and post-closure obligations

 

970

 

830

 

Unrealized foreign currency loss

 

2,217

 

 

Deferred income taxes

 

(904

)

117

 

Stock-based compensation expense

 

623

 

789

 

Unrecognized tax benefits

 

429

 

 

Net loss on sale of property and equipment

 

99

 

167

 

Changes in assets and liabilities:

 

 

 

 

 

Receivables

 

4,585

 

(1,456

)

Income tax receivable

 

(31

)

 

Other assets

 

80

 

(646

)

Accounts payable and accrued liabilities

 

2,392

 

1,884

 

Deferred revenue

 

516

 

483

 

Accrued salaries and benefits

 

483

 

(78

)

Income tax payable

 

(1,646

)

861

 

Closure and post-closure obligations

 

(437

)

(215

)

Other

 

 

18

 

Net cash provided by operating activities

 

32,034

 

15,816

 

 

 

 

 

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

Purchases of property and equipment

 

(7,493

)

(9,023

)

Proceeds from sale of property and equipment

 

57

 

61

 

Purchases of short-term investments

 

 

(4,998

)

Maturities of short-term investments

 

 

6,375

 

Restricted cash

 

 

686

 

Net cash used in investing activities

 

(7,436

)

(6,899

)

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

Payments on reducing revolving line of credit

 

(29,400

)

 

Proceeds from reducing revolving line of credit

 

14,400

 

 

Dividends paid

 

(9,832

)

(9,816

)

Proceeds from stock option exercises

 

97

 

 

Payment of capital lease obligations

 

(6

)

(9

)

Net cash used in financing activities

 

(24,741

)

(9,825

)

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash

 

(140

)

 

 

 

 

 

 

 

Decrease in cash and cash equivalents

 

(283

)

(908

)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

6,342

 

31,347

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

6,059

 

$

30,439

 

 

 

 

 

 

 

Supplemental Disclosures

 

 

 

 

 

Income taxes paid, net of receipts

 

$

9,233

 

$

4,387

 

Interest paid

 

986

 

 

Non-cash investing and financing activities:

 

 

 

 

 

Capital expenditures in accounts payable

 

868

 

868

 

Closure/Post-closure retirement asset

 

 

1,257

 

Restricted stock issued from treasury shares

 

$

424

 

$

611

 

 

See Notes to Consolidated Financial Statements.

 

3



Table of Contents

 

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

($s in thousands)
(unaudited)

 

 

 

Common
Shares
Issued

 

Par Value
Common
Stock

 

Additional
Paid-In
Capital

 

Comprehensive
Income

 

Accumulated
Other
Comprehensive
Income (Loss)

 

Retained
Earnings

 

Treasury
Stock

 

Total

 

Balance 12-31-2009

 

18,305,614

 

$

183

 

$

61,459

 

 

 

$

 

$

34,446

 

$

(2,590

)

$

93,498

 

Net income

 

 

 

 

$

8,051

 

 

8,051

 

 

8,051

 

Comprehensive income

 

 

 

 

$

8,051

 

 

 

 

 

Dividend paid

 

 

 

 

 

 

 

(9,816

)

 

(9,816

)

Stock-based compensation

 

 

 

789

 

 

 

 

 

 

789

 

Issuance of restricted common stock from treasury shares

 

 

 

(611

)

 

 

 

 

611

 

 

Balance 9-30-2010

 

18,305,614

 

$

183

 

$

61,637

 

 

 

$

 

$

32,681

 

$

(1,979

)

$

92,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance 12-31-2010

 

18,310,614

 

$

183

 

$

61,892

 

 

 

$

676

 

$

33,940

 

$

(1,979

)

$

94,712

 

Net income

 

 

 

 

$

11,671

 

 

11,671

 

 

11,671

 

Foreign currency translation

 

 

 

 

(1,303

)

(1,303

)

 

 

(1,303

)

Comprehensive income

 

 

 

 

$

10,368

 

 

 

 

 

Dividend paid

 

 

 

 

 

 

 

(9,832

)

 

(9,832

)

Stock option exercises

 

6,900

 

 

97

 

 

 

 

 

 

97

 

Stock-based compensation

 

 

 

623

 

 

 

 

 

 

623

 

Issuance of restricted common stock from treasury shares

 

 

 

(424

)

 

 

 

 

424

 

 

Balance 9-30-2011

 

18,317,514

 

$

183

 

$

62,188

 

 

 

$

(627

)

$

35,779

 

$

(1,555

)

$

95,968

 

 

See Notes to Consolidated Financial Statements.

 

4


 


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 (collectively, “US Ecology” or “the Company”). All significant intercompany balances have been eliminated.

 

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 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 2010 Annual Report on Form 10-K filed with the SEC on March 15, 2011. The results of operations and cash flows for the three and nine months ended September 30, 2011 are not necessarily indicative of results to be expected for the entire fiscal year.

 

The Company’s Consolidated Balance Sheet as of December 31, 2010 has been derived from the Company’s audited Consolidated Balance Sheet as of that date.

 

Use of Estimates

 

The preparation of the Company’s consolidated financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions. Some of these estimates require difficult, subjective or complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these estimates, in some cases materially. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period.

 

Financial Instruments. Cash and cash equivalents, accounts receivable, short-term borrowings, restricted cash, accounts payable and accrued liabilities as presented in the consolidated financial statements approximate fair value because of the short-term nature of these instruments.

 

NOTE 2 — ACCUMULATED OTHER COMPREHENSIVE INCOME/(LOSS)

 

The components of accumulated other comprehensive income/(loss) were as follows (in thousands):

 

 

 

September 30,

 

December 31,

 

 

 

2011

 

2010

 

Cumulative adjustment of foreign currency statements

 

$

(627

)

$

676

 

Accumulated other comprehensive (loss) income

 

$

(627

)

$

676

 

 

NOTE 3 CONCENTRATION AND CREDIT RISK

 

Major Customers. No customer represented more than 10% of total revenue for the three and nine months ended September 30, 2011.  Revenue under the Company’s multiple year disposal contract with the U.S. Army Corps of Engineers (“USACE”) represented 19% and 18% of total revenue for the three and nine months ended September 30, 2010, respectively. Revenue from General Electric, Inc. (“GE”) represented 11% of total revenue for the three months ended September 30, 2010.  No other customer represented more than 10% of total revenue for the three and nine months ended September 30, 2010.

 

5



Table of Contents

 

No customers accounted for more than 10% of total trade receivables as of September 30, 2011.  The following customers accounted for more than 10% of total trade receivables as of December 31, 2010:

 

 

 

Percent of Receivables

 

 

 

December 31,

 

Customer

 

2010

 

 

 

 

 

U.S. Army Corps of Engineers

 

12

%

Honeywell International, Inc.

 

10

%

General Electric, Inc.

 

10

%

 

Credit Risk Concentration. We maintain most of our cash and short-term investments with nationally recognized financial institutions like Wells Fargo National Association (“Wells Fargo”). Substantially all of our 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.

 

NOTE 4 — RECEIVABLES

 

Receivables were as follows:

 

 

 

September 30,

 

December 31,

 

(in thousands)

 

2011

 

2010

 

 

 

 

 

 

 

Trade

 

$

26,699

 

$

32,221

 

Unbilled revenue

 

1,434

 

1,463

 

Other

 

1,083

 

207

 

 

 

29,216

 

33,891

 

Allowance for doubtful accounts

 

(508

)

(338

)

 

 

$

28,708

 

$

33,553

 

 

NOTE 5 PROPERTY AND EQUIPMENT

 

 

 

September 30,

 

December 31,

 

(in thousands)

 

2011

 

2010

 

 

 

 

 

 

 

Cell development costs

 

$

61,510

 

$

58,944

 

Land and improvements

 

13,083

 

13,016

 

Buildings and improvements

 

51,017

 

44,228

 

Railcars

 

17,375

 

17,375

 

Vehicles and other equipment

 

33,051

 

31,252

 

Construction in progress

 

3,331

 

10,556

 

 

 

179,367

 

175,371

 

Accumulated depreciation and amortization

 

(78,329

)

(69,549

)

 

 

$

101,038

 

$

105,822

 

 

Depreciation expense for the three months ended September 30, 2011 and 2010 was $3.6 million and $1.9 million, respectively. Depreciation expense for the nine months ended September 30, 2011 and 2010 was $9.9 million and $5.0 million, respectively.

 

6



Table of Contents

 

NOTE 6 — BUSINESS COMBINATION

 

On October 31, 2010, the Company, through a wholly-owned subsidiary, acquired 100% of the outstanding shares of Seaway TLC Inc. and its wholly-owned subsidiaries Stablex Canada Inc. and Gulfstream TLC, Inc. (collectively “Stablex”). The following unaudited pro forma financial information presents the combined results of operations as if Stablex had been combined with us beginning on January 1, 2010. The pro forma financial information includes the accounting impact 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.  It is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented, nor should it be taken as an indication of our future consolidated results of operations.

 

 

 

(unaudited)

 

(unaudited)

 

(in thousands, except per share data)

 

Three months ended
September 30, 2010

 

Nine months ended
September 30, 2010

 

Pro forma combined revenues

 

$

29,895

 

$

85,355

 

Pro forma combined net income

 

$

2,922

 

$

6,080

 

Earnings per share

 

 

 

 

 

Basic

 

$

0.16

 

$

0.33

 

Dilutive

 

$

0.16

 

$

0.33

 

 

NOTE 7 — GOODWILL AND INTANGIBLE ASSETS

 

Goodwill and intangible assets as of September 30, 2011 and December 31, 2010 reflect our acquisition of Stablex on October 31, 2010 (see Note 6). Prior to the acquisition of Stablex, the Company had no goodwill or intangible assets. The goodwill has been assigned to the Operating Disposal Facilities reporting segment. Changes in goodwill for the three and nine months ended September 30, 2011 were as follows:

 

(in thousands)

 

Three Months Ended
September 30, 2011

 

Nine Months Ended
September 30, 2011

 

Balance, beginning of period

 

$

22,419

 

$

21,790

 

Foreign currency translation

 

(1,604

)

(975

)

Balance, end of period

 

$

20,815

 

$

20,815

 

 

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Table of Contents

 

Below is a summary of amortizable and other intangible assets:

 

 

 

September 30,

 

December 31,

 

(in thousands)

 

2011

 

2010

 

Amortized intangible assets

 

 

 

 

 

Developed software

 

$

337

 

$

352

 

Database

 

96

 

100

 

Customer relationships

 

3,919

 

4,102

 

Technology - Formulae and processes

 

8,740

 

9,149

 

Permits, licenses and lease

 

26,844

 

28,101

 

 

 

39,936

 

41,804

 

 

 

 

 

 

 

Accumulated amortization

 

(1,236

)

(235

)

 

 

 

 

 

 

Unamortized intangible assets

 

 

 

 

 

Tradename

 

163

 

171

 

 

 

$

38,863

 

$

41,740

 

 

Amortization expense for the three and nine months ended September 30, 2011 was $358,000 and $1.1 million, respectively. There was no amortization of intangibles in the three and nine months ended September 30, 2010.

 

NOTE 8 DEBT

 

We have a credit agreement (the “Credit Agreement”) with Wells Fargo which provides for borrowings in an aggregate of $89.4 million, net of commitment reductions.  The Credit Agreement provides a $20.0 million revolving line of credit (the “Revolving Line of Credit”) with a maturity date of June 15, 2013 and a $69.4 million reducing revolving line of credit (the “Reducing Revolving Line of Credit”), net of commitment reductions with a maturity date of November 1, 2015.

 

Revolving Line of Credit

 

The Revolving Line of Credit provides up to $20 million in revolving credit loans or letters of credit for working capital needs (the “Commitment Amount”).  These revolving loans are available based on the Prime Rate 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”). At September 30, 2011, the effective interest rate of the Revolving Line of Credit was 1.9%. Interest only payments are due either monthly or on the last day of any interest period, as applicable. At September 30, 2011 and December 31, 2010 there were no amounts outstanding under the Revolving Line of Credit. At September 30, 2011, the availability under the Revolving Line of Credit was $16.0 million with $4.0 million of the line of credit issued in the form of a standby letter of credit utilized as collateral for closure and post-closure financial assurance.

 

Reducing Revolving Line of Credit

 

The Reducing Revolving Line of Credit provides an initial commitment amount of $75.0 million, the proceeds of which were used to acquire all of the shares of Stablex, and thereafter will be used to provide financing for working capital needs (the “Reducing Revolving Commitment Amount”). The initial Reducing Revolving Commitment Amount is reduced by $2.8 million on the last day of each June, September, December and March beginning June 30, 2011, and continuing through November 1, 2015. At September 30, 2011, the net commitment amount under the Reducing Revolving Line of Credit after consideration of scheduled commitment reductions was $69.4 million. Under the Reducing Revolving Line of Credit revolving loans are available based on the Prime Rate 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 EBITDA. At September 30, 2011, the effective interest rate of the Reducing Revolving Line of Credit was 2.4%.  Interest only payments are due either monthly or on the last day of any interest period, as applicable. There was $48.0 million and $63.0 million outstanding on the Reducing Revolving Line of Credit at September 30, 2011 and December 31, 2010, respectively.  At September 30, 2011, the availability for additional borrowings under the Reducing Revolving Line of Credit was $21.4 million.

 

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Table of Contents

 

In addition to standard fees, origination and commitment fees apply based on the average daily unused portion of the Commitment Amount and the Reducing Revolving Commitment Amount. The Credit Agreement contains certain quarterly financial covenants, including a maximum funded debt ratio, a maximum fixed charge coverage ratio, a minimum required tangible net worth and a minimum current ratio. In addition, we may only declare quarterly or annual dividends if on the date of declaration, no default has occurred, or no other event or condition has occurred that would constitute an event of default after giving effect to the payment of the dividend. Obligations under the Credit Agreement are guaranteed by US Ecology and all of its subsidiaries.

 

At September 30, 2011, we were in compliance with all of the financial covenants in the Credit Agreement.

 

NOTE 9 — CLOSURE AND POST-CLOSURE OBLIGATIONS

 

Closure and post-closure obligations are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. We perform periodic reviews of both non-operating and operating facilities and revise accruals for estimated post-closure, remediation and other costs when necessary. Our recorded liabilities are based on estimates of future costs and are updated periodically to reflect existing environmental conditions, current technology, laws and regulations, permit conditions, inflation and other factors.

 

Changes to reported closure and post-closure obligations were as follows:

 

(in thousands)

 

Three Months Ended
September 30, 2011

 

Nine Months Ended
September 30, 2011

 

 

 

 

 

 

 

Beginning obligation

 

$

17,314

 

$

16,773

 

Accretion expense

 

323

 

970

 

Payments

 

(281

)

(431

)

Currency translation

 

(106

)

(62

)

Ending obligation

 

17,250

 

17,250

 

Less current portion

 

(2,462

)

(2,462

)

Long-term portion

 

$

14,788

 

$

14,788

 

 

NOTE 10 INCOME TAXES

 

During the three months ended September 30, 2011, the Company recorded unrecognized tax benefits of $420,000 and accrued interest of $9,000 related to filing positions taken on our recently filed 2010 U.S. income tax returns.  As of September 30, 2011, we had unrecognized tax benefits of $429,000 (including interest of $9,000) that, if recognized, would positively affect the effective tax rate.  We had no unrecognized tax benefits as of December 31, 2010. The Company does not anticipate the total unrecognized tax benefits to increase or decrease materially within the next twelve months. We recognize interest assessed by taxing authorities as a component of interest expense. We recognize any penalties assessed by taxing authorities as a component of selling, general and administrative expenses. Interest and penalties for the three and nine months ended September 30, 2011 and 2010 were not material.

 

Our effective tax rate for the three and nine months ended September 30, 2011 was 33.4% and 37.8%, respectively, down from 39.3% and 40.0% for the three and nine months ended September 30, 2010, respectively. The decrease in our effective tax rate reflects a reduction in our estimated state income tax rate, favorable adjustments resulting from filing our 2010 income tax returns and higher earnings levels in 2011 as compared with the same period in 2010.

 

We file a consolidated U.S. federal income tax return with the Internal Revenue Service (“IRS”) 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 2008 through 2010. Additionally, we may be subject to examinations by various state and local taxing jurisdictions for tax years 2006 through 2010. We are currently not aware of any examinations by taxing authorities.

 

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NOTE 11 COMMITMENTS AND CONTINGENCIES

 

In the ordinary course of business, we are periodically involved in judicial and administrative proceedings involving federal, state or local governmental authorities. Actions may also be brought by individuals or groups in connection with permit modifications at existing facilities, proposed new facilities, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedly released from our operating sites or non-operating 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, environmental and administrative matters, or fees expected to be incurred in connection therewith.

 

NOTE 12 — COMPUTATION OF EARNINGS PER SHARE

 

 

 

Three Months Ended September 30,

 

 

 

2011

 

2010

 

(in thousands, except per share data)

 

Basic

 

Diluted

 

Basic

 

Diluted

 

Net income

 

$

3,726

 

$

3,726

 

$

3,938

 

$

3,938

 

Weighted average common shares outstanding

 

18,202

 

18,202

 

18,172

 

18,172

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options and restricted stock

 

 

 

25

 

 

 

14

 

Weighted average shares outstanding

 

 

 

18,227

 

 

 

18,186

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.20

 

$

0.20

 

$

0.22

 

$

0.22

 

Anti-dilutive shares excluded from calculation

 

 

 

308

 

 

 

342

 

 

 

 

Nine Months Ended September 30,

 

 

 

2011

 

2010

 

(in thousands, except per share data)

 

Basic

 

Diluted

 

Basic

 

Diluted

 

Net income

 

$

11,671

 

$

11,671

 

$

8,051

 

$

8,051

 

Weighted average common shares outstanding

 

18,194

 

18,194

 

18,167

 

18,167

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of stock options and restricted stock

 

 

 

25

 

 

 

19

 

Weighted average shares outstanding

 

 

 

18,219

 

 

 

18,186

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

$

0.64

 

$

0.64

 

$

0.44

 

$

0.44

 

Anti-dilutive shares excluded from calculation

 

 

 

327

 

 

 

333

 

 

NOTE 13 — TREASURY STOCK

 

During the nine months ended September 30, 2011, the Company issued 25,400 shares of restricted stock from our treasury stock position at an average cost of $16.68 per share.

 

10


 


Table of Contents

 

NOTE 14 — OPERATING SEGMENTS

 

We operate within two segments, Operating Disposal Facilities and Non-Operating Disposal Facilities. The Operating Disposal Facilities segment represents facilities currently accepting waste. The Non-Operating Disposal Facilities segment represents facilities that are no longer accepting waste.

 

Income taxes are assigned to Corporate. All other items are included in the segment of origin. Intercompany transactions have been eliminated from the segment information and are not significant between segments.

 

Summarized financial information concerning our reportable segments is shown in the following tables:

 

(in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

Total

 

Three months ended September 30, 2011

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

34,558

 

$

6

 

$

 

$

34,564

 

Revenue - Transportation services

 

5,106

 

 

 

5,106

 

Total revenue

 

39,664

 

6

 

 

39,670

 

Other direct operating costs

 

18,752

 

58

 

 

18,810

 

Transportation costs

 

5,571

 

 

 

5,571

 

Gross profit (loss)

 

15,341

 

(52

)

 

15,289

 

Selling, general & administration

 

2,925

 

 

2,797

 

5,722

 

Operating income (loss)

 

12,416

 

(52

)

(2,797

)

9,567

 

Interest income (expense), net

 

6

 

 

(395

)

(389

)

Foreign currency gain (loss)

 

218

 

 

(3,879

)

(3,661

)

Other income

 

73

 

 

 

73

 

Income (loss) before tax

 

12,713

 

(52

)

(7,071

)

5,590

 

Income tax expense

 

 

 

1,864

 

1,864

 

Net income (loss)

 

$

12,713

 

$

(52

)

$

(8,935

)

$

3,726

 

Depreciation, amortization & accretion

 

$

4,217

 

$

55

 

$

13

 

$

4,285

 

Capital expenditures

 

$

1,773

 

$

 

$

46

 

$

1,819

 

Total assets

 

$

194,961

 

$

91

 

$

8,877

 

$

203,929

 

 

11



Table of Contents

 

(in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

Total

 

Three months ended September 30, 2010

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

20,662

 

$

9

 

$

 

$

20,671

 

Revenue - Transportation services

 

5,313

 

 

 

5,313

 

Total revenue

 

25,975

 

9

 

 

25,984

 

Other direct operating costs

 

10,171

 

58

 

 

10,229

 

Transportation costs

 

5,383

 

 

 

5,383

 

Gross profit (loss)

 

10,421

 

(49

)

 

10,372

 

Selling, general & administration

 

1,214

 

 

2,715

 

3,929

 

Operating income (loss)

 

9,207

 

(49

)

(2,715

)

6,443

 

Interest income (expense), net

 

3

 

 

13

 

16

 

Foreign currency gain (loss)

 

(35

)

 

 

(35

)

Other income

 

61

 

4

 

 

65

 

Income (loss) before tax

 

9,236

 

(45

)

(2,702

)

6,489

 

Income tax expense

 

 

 

2,551

 

2,551

 

Net income (loss)

 

$

9,236

 

$

(45

)

$

(5,253

)

$

3,938

 

Depreciation, amortization & accretion

 

$

2,142

 

$

51

 

$

11

 

$

2,204

 

Capital expenditures

 

$

4,124

 

$

20

 

$

 

$

4,144

 

Total assets

 

$

92,306

 

$

57

 

$

36,140

 

$

128,503

 

 

(in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

Total

 

Nine months ended September 30, 2011

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

94,113

 

$

17

 

$

 

$

94,130

 

Revenue - Transportation services

 

19,220

 

 

 

19,220

 

Total revenue

 

113,333

 

17

 

 

113,350

 

Other direct operating costs

 

54,653

 

172

 

 

54,825

 

Transportation costs

 

20,689

 

 

 

20,689

 

Gross profit (loss)

 

37,991

 

(155

)

 

37,836

 

Selling, general & administration

 

7,757

 

 

8,117

 

15,874

 

Operating income (loss)

 

30,234

 

(155

)

(8,117

)

21,962

 

Interest income (expense), net

 

19

 

 

(1,275

)

(1,256

)

Foreign currency gain (loss)

 

125

 

 

(2,318

)

(2,193

)

Other income

 

244

 

1

 

 

245

 

Income (loss) before tax

 

30,622

 

(154

)

(11,710

)

18,758

 

Income tax expense

 

 

 

7,087

 

7,087

 

Net income (loss)

 

$

30,622

 

$

(154

)

$

(18,797

)

$

11,671

 

Depreciation, amortization & accretion

 

$

11,757

 

$

164

 

$

36

 

$

11,957

 

Capital expenditures

 

$

7,369

 

$

12

 

$

112

 

$

7,493

 

Total assets

 

$

194,961

 

$

91

 

$

8,877

 

$

203,929

 

 

12



Table of Contents

 

(in thousands)

 

Operating
Disposal
Facilities

 

Non-
Operating
Disposal
Facilities

 

Corporate

 

Total

 

Nine months ended September 30, 2010

 

 

 

 

 

 

 

 

 

Revenue - Treatment and disposal

 

$

55,003

 

$

22

 

$

 

$

55,025

 

Revenue - Transportation services

 

10,331

 

 

 

10,331

 

Total revenue

 

65,334

 

22

 

 

65,356

 

Other direct operating costs

 

30,028

 

211

 

 

30,239

 

Transportation costs

 

11,027

 

 

 

11,027

 

Gross profit (loss)

 

24,279

 

(189

)

 

24,090

 

Selling, general & administration

 

3,957

 

 

6,882

 

10,839

 

Operating income (loss)

 

20,322

 

(189

)

(6,882

)

13,251

 

Interest income (expense), net

 

5

 

 

41

 

46

 

Foreign currency gain (loss)

 

(59

)

 

 

(59

)

Other income

 

171

 

8

 

 

179

 

Income (loss) before tax

 

20,439

 

(181

)

(6,841

)

13,417

 

Income tax expense

 

 

 

5,366

 

5,366

 

Net income (loss)

 

$

20,439

 

$

(181

)

$

(12,207

)

$

8,051

 

Depreciation, amortization & accretion

 

$

5,654

 

$

152

 

$

35

 

$

5,841

 

Capital expenditures

 

$

9,000

 

$

20

 

$

3

 

$

9,023

 

Total assets

 

$

92,306

 

$

57

 

$

36,140

 

$

128,503

 

 

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

 

We provide services in the United States and Canada. The table below summarizes revenues by geographic area where the underlying services were performed for the three and nine months ended September 30, 2011 and 2010:

 

 

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

United States

 

$

30,248

 

$

25,984

 

$

85,100

 

$

65,356

 

Canada

 

9,422

 

 

28,250

 

 

 

 

$

39,670

 

$

25,984

 

$

113,350

 

$

65,356

 

 

Long-lived assets by geographic location, consisting of property and equipment and intangible assets net of accumulated depreciation and amortization as of September 30, 2011 and December 31, 2010 were as follows:

 

 

 

September 30,

 

December 31,

 

(in thousands)

 

2011

 

2010

 

United States

 

$

73,080

 

$

74,734

 

Canada

 

66,821

 

72,828

 

 

 

$

139,901

 

$

147,562

 

 

NOTE 15 — SUBSEQUENT EVENT

 

On October 3, 2011, we declared a quarterly dividend of $0.18 per common share to stockholders of record on October 14, 2011. The dividend was paid using cash on hand on October 21, 2011 in an aggregate amount of $3.3 million.

 

13



Table of Contents

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of
US Ecology, Inc.
Boise, Idaho

 

We have reviewed the accompanying consolidated balance sheet of US Ecology, Inc. and subsidiaries (the “Company”) as of September 30, 2011, the related consolidated statements of operations for the three-month and nine-month periods ended September 30, 2011 and 2010, and the consolidated statements of cash flows and of stockholders’ equity for the nine-month periods ended September 30, 2011 and 2010. These interim financial statements are the responsibility of the Company’s management.

 

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

 

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

 

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of US Ecology, Inc. and subsidiaries as of December 31, 2010, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated March 15, 2011, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2010 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

 

/s/ Deloitte & Touche LLP

 

Boise, Idaho

November 8, 2011

 

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Table of Contents

 

US ECOLOGY, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

US Ecology, Inc., through its subsidiaries, is a hazardous, Polychlorinated biphenyl (“PCB”), non-hazardous and radioactive waste services company providing treatment, disposal, recycling and transportation services to commercial and government entities including, but not limited to, oil refineries, chemical production facilities, manufacturers, electric utilities, steel mills, biotechnology companies, military installations, waste broker aggregators and medical and academic institutions. We generate revenue from fees charged to treat and dispose of waste at our five fixed disposal facilities located near Beatty, Nevada; Grand View, Idaho; Richland, Washington; Robstown, Texas; and Blainville, Quebec, Canada. We manage a dedicated fleet of railcars and arrange for the transportation of waste to our facilities. We also utilize our railcar fleet to provide transportation services for disposal at facilities operated by other companies on a less frequent basis. Transportation and logistics services are a significant revenue source for us. We, or our predecessor companies, have been in the waste business since 1952.

 

On October 31, 2010, the Company acquired Stablex Canada Inc (“Stablex”). Stablex is a provider of hazardous waste services that operates a permitted hazardous waste processing and disposal facility in Blainville, Québec, Canada about 30 miles northwest of Montreal, Canada. The net purchase price of $77.5 million in U.S. dollars (“USD”) was funded through a combination of cash on hand and borrowings under a $75.0 million Reducing Revolving Line of credit facility.

 

Our customers may be divided into categories to better evaluate period-to-period changes in our treatment and disposal revenue based on service mix and type of business (recurring “Base” or “Event” clean-up business).  Each of these categories is described in the table below with information on the percentage of total treatment and disposal revenues for each category for the three and nine months ended September 30, 2011 and 2010.

 

Customer
Category

 

Description

 

% of Treatment and
Disposal Revenue (1) for
the Three Months ended
September 30, 2011

 

% of Treatment and
Disposal Revenue (1) for
the Three Months ended
September 30, 2010

 

Broker

 

Companies that collect and aggregate waste from their direct customers, comprised of both Base and Event clean-up business.

 

57

%

38

%

 

 

 

 

 

 

 

 

Other industry

 

Electric utilities, chemical manufacturers, steel mill and other industrial customers not included in other categories, comprised of both recurring Base Business and Event clean-up business.

 

14

%

9

%

 

 

 

 

 

 

 

 

Private Clean-up

 

Private sector clean-up project waste, typically Event Business.

 

11

%

15

%

 

 

 

 

 

 

 

 

Refinery

 

Petroleum refinery customers, comprised of both Base and Event clean-up business.

 

8

%

7

%

 

 

 

 

 

 

 

 

Government

 

Federal and State government clean-up project waste, comprised of both Base Business and Event clean-up business.

 

6

%

24

%

 

 

 

 

 

 

 

 

Rate regulated

 

Northwest and Rocky Mountain Compact customers paying rate-regulated disposal fees set by the State of Washington, predominantly Base Business.

 

4

%

7

%

 


(1) Excludes all transportation service revenue

 

15



Table of Contents

 

 

Customer
Category

 

Description

 

% of Treatment and
Disposal Revenue (1) for
the Nine Months ended
September 30, 2011

 

% of Treatment and
Disposal Revenue (1) for
the Nine Months ended
September 30, 2010

 

Broker

 

Companies that collect and aggregate waste from their direct customers, comprised of both Base and Event clean-up business.

 

50

%

42

%

 

 

 

 

 

 

 

 

Other industry

 

Electric utilities, chemical manufacturers, steel mill and other industrial customers not included in other categories, comprised of both recurring Base Business and Event clean-up business.

 

15

%

11

%

 

 

 

 

 

 

 

 

Private Clean-up

 

Private sector clean-up project waste, typically Event Business.

 

11

%

8

%

 

 

 

 

 

 

 

 

Government

 

Federal and State government clean-up project waste, comprised of both Base Business and Event clean-up business.

 

10

%

21

%

 

 

 

 

 

 

 

 

Refinery

 

Petroleum refinery customers, comprised of both Base and Event clean-up business.

 

10

%

11

%

 

 

 

 

 

 

 

 

Rate regulated

 

Northwest and Rocky Mountain Compact customers paying rate-regulated disposal fees set by the State of Washington, predominantly Base Business.

 

4

%

7

%

 


(1) Excludes all transportation service revenue

 

A significant portion of our treatment and disposal revenue is attributable to discrete Event Business projects which vary widely in size, duration and unit pricing. Approximately 43% and 39% of this revenue was derived from Event Business projects for the three and nine months ended September 30, 2011, respectively. The one-time nature of Event Business, diverse spectrum of waste types received and widely varying unit pricing necessarily creates variability in revenue and earnings. This variability may be influenced by general economic conditions, funding availability, changes in laws and regulations, government enforcement actions or court orders, public controversy, litigation, weather, real estate redevelopment project timing, government appropriation and funding commitment cycles and other factors. The types and amounts of waste received from Base Business also vary quarter to quarter. As a result of this variability, we can experience significant quarter-to-quarter and year-to-year fluctuations in revenue, gross profit, gross margin, operating income and net income. Also, while many large projects are pursued months or years in advance of work performance, both large and small clean-up project opportunities routinely arise with little prior notice.

 

Depending on project-specific customer needs and competitive economics, transportation services may be offered at or near our cost to help secure additional business. For waste transported by rail from the eastern United States and other locations distant from our Grand View, Idaho facility, transportation-related revenue can account for as much as three-fourths (75%) of total project revenue. While bundling transportation and disposal services reduces overall gross profit as a percentage of total revenue (“gross margin”), this value-added service approach has allowed us to win multiple projects that management believes we could not have otherwise competed for successfully. Our Company-owned railcar fleet has reduced our reliance on short-term rentals reducing transportation expenses and creating competitive advantages on specific projects.

 

The increased waste volumes resulting from projects won through this bundling strategy drive operating leverage and increased profitability. While waste treatment and other variable costs are project-specific, the earnings contribution from the individual projects generally increases as overall disposal volumes increase. Management believes that maximizing cash flow, operating income and earnings per share is a higher priority than maintaining or increasing gross margin. We plan to continue aggressively bidding for bundled transportation and disposal services based on this strategy.

 

To maximize utilization of our railcar fleet, we periodically deploy available railcars to transport waste from clean-up sites to disposal facilities operated by other companies. Such transportation services may be bundled with for-profit logistics and field services support work.

 

We serve oil refineries, chemical production plants, steel mills, waste broker-aggregators serving small manufacturers and other industrial customers that are generally affected by adverse economic conditions and a tight credit environment. Such conditions may cause our customers as well as those they serve to curtail operations,

 

16



Table of Contents

 

resulting in lower waste production and/or delayed spending on off-site waste shipments, maintenance, waste clean-up projects and other work. Factors that can impact general economic conditions and the level of spending by our customers include, but are not limited to, government programs and regulatory changes, consumer and industrial spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and other global economic factors affecting spending behavior. Market forces may also induce customers to reduce or cease operations, declare bankruptcy, liquidate or relocate to other countries, any of which could adversely affect our business. To the extent our business is either government funded or driven by government regulations or enforcement actions, we believe it is less susceptible to general economic conditions. However, spending by government agencies may also be reduced due to declining tax revenue resulting from a weak economy or changes in policy. Disbursement of funds appropriated by Congress may also be delayed for administrative or other reasons.

 

17



Table of Contents

 

Results of Operations

 

The following table summarizes our results of operations for the three and nine months ended September 30, 2011 and 2010 in dollars and as a percentage of total revenue.

 

(in thousands, except per

 

Three Months Ended September 30,

 

Nine Months Ended September 30,

 

share amounts)

 

2011

 

%

 

2010

 

%

 

2011

 

%

 

2010

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

39,670

 

100.0

%

$

25,984

 

100.0

%

$

113,350

 

100.0

%

$

65,356

 

100.0

%

Direct operating costs

 

18,810

 

47.4

%

10,229

 

39.4

%

54,825

 

48.4

%

30,239

 

46.3

%

Transportation costs

 

5,571

 

14.0

%

5,383

 

20.7

%

20,689

 

18.3

%

11,027

 

16.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

15,289

 

38.6

%

10,372

 

39.9

%

37,836

 

33.3

%

24,090

 

36.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

5,722

 

14.4

%

3,929

 

15.1

%

15,874

 

14.0

%

10,839

 

16.6

%

Operating income

 

9,567

 

24.2

%

6,443

 

24.8

%

21,962

 

19.3

%

13,251

 

20.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

6

 

0.0

%

16

 

0.1

%

21

 

0.0

%

47

 

0.1

%

Interest expense

 

(395

)

-1.0

%

 

0.0

%

(1,277

)

-1.1

%

(1

)

0.0

%

Foreign currency loss

 

(3,661

)

-9.2

%

(35

)

-0.2

%

(2,193

)

-1.9

%

(59

)

-0.1

%

Other

 

73

 

0.2

%

65

 

0.3

%

245

 

0.2

%

179

 

0.3

%

Total other income (expense)

 

(3,977

)

-10.0

%

46

 

0.2

%

(3,204

)

-2.8

%

166

 

0.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

5,590

 

14.2

%

6,489

 

25.0

%

18,758

 

16.5

%

13,417

 

20.5

%

Income taxes

 

1,864

 

4.8

%

2,551

 

9.8

%

7,087

 

6.3

%

5,366

 

8.2

%

Net income

 

$

3,726

 

9.4

%

$

3,938

 

15.2

%

$

11,671

 

10.2

%

$

8,051

&