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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

or

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

For the transition period from                        to                       .

Commission file number: 001-39120

US ECOLOGY, INC.

(Exact name of registrant as specified in its charter)

Delaware

84-2421185

(State or other jurisdiction of incorporation or

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

organization)

101 S. Capitol Blvd., Suite 1000

BoiseIdaho

83702

(Address of principal executive offices)

(Zip Code)

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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

ECOL

Nasdaq Global Select Market

Warrants to Purchase Common Stock

ECOLW

Nasdaq Capital Market

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

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

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

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company

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

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

At April 27, 2021, there were 31,512,324 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 March 31, 2021 and December 31, 2020

3

Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

4

Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020

5

Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

6

Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

7

Notes to Consolidated Financial Statements

8

Report of Independent Registered Public Accounting Firm

30

2.

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

31

3.

Quantitative and Qualitative Disclosures About Market Risk

42

4.

Controls and Procedures

43

PART II — OTHER INFORMATION

Cautionary Statement

44

1.

Legal Proceedings

45

1A.

Risk Factors

46

2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

3.

Defaults Upon Senior Securities

46

4.

Mine Safety Disclosures

46

5.

Other Information

46

6.

Exhibits

47

SIGNATURE

48

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)

    

March 31, 2021

    

December 31, 2020

Assets

Current Assets:

Cash and cash equivalents

$

82,354

$

73,848

Receivables, net

 

242,854

 

241,978

Prepaid expenses and other current assets

 

25,709

 

28,379

Income taxes receivable

17,006

18,279

Total current assets

 

367,923

 

362,484

Property and equipment, net

 

448,248

 

456,637

Operating lease assets

48,824

51,474

Restricted cash and investments

 

5,784

 

5,598

Intangible assets, net

 

515,208

 

523,988

Goodwill

 

413,346

 

413,037

Other assets

 

23,819

 

18,065

Total assets

$

1,823,152

$

1,831,283

Liabilities and Stockholders’ Equity

Current Liabilities:

Accounts payable

$

44,773

$

35,881

Deferred revenue

 

17,524

 

15,267

Accrued liabilities

 

47,300

 

59,296

Accrued salaries and benefits

 

27,913

 

30,918

Income taxes payable

 

888

 

977

Short-term borrowings

277

Current portion of long-term debt

3,358

3,359

Current portion of closure and post-closure obligations

 

7,119

 

6,471

Current portion of operating lease liabilities

16,208

17,048

Total current liabilities

 

165,360

 

169,217

Long-term debt

 

781,644

 

782,484

Long-term closure and post-closure obligations

 

89,615

 

89,398

Long-term operating lease liabilities

33,362

35,069

Other long-term liabilities

 

20,767

 

32,201

Deferred income taxes, net

 

119,701

 

120,983

Total liabilities

 

1,210,449

 

1,229,352

Commitments and contingencies (See Note 16)

Stockholders’ Equity:

Common stock $0.01 par value per share, 50,000 authorized; 31,512 shares issued and outstanding

 

315

 

315

Additional paid-in capital

 

817,818

 

820,567

Retained deficit

 

(189,249)

 

(188,452)

Treasury stock, at cost, 277 and 358 shares, respectively

 

(12,179)

 

(15,841)

Accumulated other comprehensive loss

 

(4,002)

 

(14,658)

Total stockholders’ equity

 

612,703

 

601,931

Total liabilities and stockholders’ equity

$

1,823,152

$

1,831,283

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

3

Table of Contents

US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended March 31, 

    

2021

    

2020

Revenue

$

228,619

$

240,720

Direct operating costs

 

175,746

 

178,279

Gross profit

 

52,873

 

62,441

Selling, general and administrative expenses

 

51,368

 

52,377

Goodwill impairment charges

300,300

Operating income (loss)

 

1,505

 

(290,236)

Other income (expense):

Interest income

 

273

 

89

Interest expense

 

(7,357)

 

(9,310)

Foreign currency (loss) gain

 

(371)

 

937

Other

 

3,710

 

171

Total other expense

 

(3,745)

 

(8,113)

Loss before income taxes

 

(2,240)

 

(298,349)

Income tax benefit

 

(1,444)

 

(263)

Net loss

$

(796)

$

(298,086)

Loss per share:

Basic

$

(0.03)

$

(9.52)

Diluted

$

(0.03)

$

(9.52)

Shares used in loss per share calculation:

Basic

 

31,104

 

31,305

Diluted

 

31,104

 

31,305

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

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

Net loss

$

(796)

$

(298,086)

Other comprehensive income (loss):

Foreign currency translation gain (loss)

 

1,439

 

(8,259)

Net changes in interest rate hedge, net of taxes of $2,450 and $(1,621), respectively

9,217

(6,098)

Comprehensive income (loss), net of tax

$

9,860

$

(312,443)

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

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

Cash flows from operating activities:

Net loss

$

(796)

$

(298,086)

Depreciation and amortization of property and equipment

 

18,234

 

17,978

Amortization of intangible assets

 

9,135

 

9,441

Accretion of closure and post-closure obligations

 

1,182

 

1,266

Goodwill impairment charges

300,300

Unrealized foreign currency (gain) loss

 

(315)

 

2,703

Deferred income taxes

 

(3,781)

 

(3,320)

Share-based compensation expense

 

1,928

 

1,564

Share-based payments of business development and integration expenses

 

163

 

181

Unrecognized tax benefits

 

12

52

Net (gain) loss on disposition of assets

 

(221)

 

184

Amortization and write-off of debt issuance costs

577

298

Amortization and write-off of debt discount

40

245

Change in fair value of contingent consideration

 

 

(1,127)

Change in fair value of minority interest investment

(3,509)

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

Receivables

 

(680)

 

13,467

Income taxes receivable

 

1,276

 

893

Other assets

 

1,114

 

(2,957)

Accounts payable and accrued liabilities

 

(3,647)

 

(13,618)

Deferred revenue

 

2,214

 

7,083

Accrued salaries and benefits

 

(3,028)

 

(7,446)

Income taxes payable

 

(98)

 

662

Closure and post-closure obligations

 

(337)

 

(417)

Net cash provided by operating activities

 

19,463

 

29,346

Cash flows from investing activities:

Business acquisitions (net of cash acquired)

(3,309)

Purchases of property and equipment

 

(9,614)

 

(19,131)

Minority interest investment

(712)

Proceeds from sale of property and equipment

 

1,623

 

781

Purchases of restricted investments

 

(913)

 

(56)

Proceeds from sale of restricted investments

 

934

 

Net cash used in investing activities

 

(8,682)

 

(21,715)

Cash flows from financing activities:

Proceeds from long-term debt

90,000

Payments on long-term debt

(1,125)

(1,125)

Payments on short-term borrowings

(2,950)

(49,871)

Proceeds from short-term borrowings

3,227

50,267

Repurchase of common stock

 

(465)

 

(18,332)

Dividends paid

 

 

(5,667)

Payment of equipment financing obligations

(1,461)

(1,525)

Net cash (used in) provided by financing activities

 

(2,774)

 

63,747

Effect of foreign exchange rate changes on cash

 

708

 

(2,825)

Increase in Cash and cash equivalents and restricted cash

 

8,715

 

68,553

Cash and cash equivalents and restricted cash at beginning of period

 

75,104

 

42,140

Cash and cash equivalents and restricted cash at end of period

$

83,819

$

110,693

Reconciliation of Cash and cash equivalents and restricted cash

Cash and cash equivalents at beginning of period

73,848

41,281

Restricted cash at beginning of period

1,256

859

Cash and cash equivalents and restricted cash at beginning of period

$

75,104

$

42,140

Cash and cash equivalents at end of period

82,354

109,790

Restricted cash at end of period

1,465

903

Cash and cash equivalents and restricted cash at end of period

$

83,819

$

110,693

Supplemental Disclosures:

Income taxes paid, net of receipts

$

1,270

$

1,241

Interest paid

$

6,404

$

7,642

Non-cash investing and financing activities:

Capital expenditures in accounts payable

$

4,569

$

3,531

Restricted stock issued from treasury shares

$

4,127

$

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

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

Total stockholders' equity, beginning balances

$

601,931

$

1,011,380

Common stock:

Beginning balances

$

315

$

315

Ending balances

$

315

$

315

Additional paid-in capital:

Beginning balances

$

820,567

$

816,345

Share-based compensation

 

1,928

1,564

Share-based payments of business development and integration expenses

161

181

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

(360)

Issuance of restricted common stock and common stock from treasury shares

(4,838)

Ending balances

$

817,818

$

817,730

Retained (deficit) earnings:

Beginning balances

$

(188,452)

$

206,574

Net loss

 

(796)

(298,086)

Dividends paid

(5,667)

Other

(1)

Ending balances

$

(189,249)

$

(97,179)

Treasury stock:

Beginning balances

$

(15,841)

$

Repurchase of common stock

 

(465)

(18,332)

Issuance of restricted common stock and common stock from treasury shares

4,127

Ending balances

$

(12,179)

$

(18,332)

Accumulated other comprehensive loss:

Beginning balances

$

(14,658)

$

(11,854)

Other comprehensive income (loss)

 

10,656

(14,357)

Ending balances

$

(4,002)

$

(26,211)

Total stockholders' equity, ending balances

$

612,703

$

676,323

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

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US ECOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.     GENERAL

Basis of Presentation

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

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2021.

The Company’s consolidated balance sheet as of December 31, 2020 has been derived from the Company’s audited consolidated balance sheet as of that date.

Reclassifications

Effective in the first quarter of 2021, we changed our management structure resulting in the reclassification of certain overhead expenses from our Waste Solutions, Field Services and Energy Waste reportable segments to Corporate. As a result, certain regional overhead costs historically presented within our reportable segments as Direct operating costs were further reclassified to Corporate as Selling, general and administrative expenses to conform to the current period’s presentation. Throughout this Quarterly Report on Form 10-Q, all periods presented have been recast to reflect these changes.

Use of Estimates

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

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Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). The ASU provides optional expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated financial statements.

Effective January 1, 2021, the Company adopted ASU No. 2019-12, “Income Taxes - Simplifying the Accounting for Income Taxes.” This ASU is intended to simplify various aspects of accounting for income taxes by eliminating certain exceptions within Accounting Standards Codification Topic 740, “Income Taxes” and to clarify certain aspects of the current accounting guidance. Adoption of this standard did not materially impact our consolidated statements of financial position, results of operations, or cash flows.

NOTE 2.     REVENUES

Effective in the fourth quarter of 2020, we have made changes to the manner in which we manage our business, make operating decisions and assess our performance. Throughout this Quarterly Report on Form 10-Q, all periods presented have been recast to reflect these changes. Our operations are managed in three reportable segments, Waste Solutions, Field Services and Energy Waste, reflecting our internal reporting structure and nature of services offered. See Note 17 for additional information on our operating segments.

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

Three Months Ended March 31, 2021

Waste

Field

Energy

$s in thousands

    

Solutions

    

Services

Waste

    

Total

Treatment & Disposal Revenue (1)

$

88,060

$

9,977

$

3,783

$

101,820

Services Revenue:

Transportation and Logistics (2)

16,082

6,329

1,401

23,812

Industrial Services (3)

26,256

409

26,665

Small Quantity Generation (4)

13,052

13,052

Total Waste Management (5)

9,882

9,882

Remediation (6)

9,827

9,827

Emergency Response (7)

31,623

31,623

Domestic Standby Services (8)

7,880

7,880

Other (9)

3,423

635

4,058

Revenue

$

104,142

$

118,249

$

6,228

$

228,619

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Three Months Ended March 31, 2020

Waste

Field

Energy

$s in thousands

    

Solutions

    

Services

Waste

    

Total

Treatment & Disposal Revenue (1)

$

90,717

$

9,918

$

9,332

$

109,967

Services Revenue:

Transportation and Logistics (2)

18,675

6,127

3,266

28,068

Industrial Services (3)

28,498

1,966

30,464

Small Quantity Generation (4)

11,077

11,077

Total Waste Management (5)

8,469

8,469

Remediation (6)

10,441

10,441

Emergency Response (7)

25,026

25,026

Domestic Standby Services (8)

9,467

9,467

Other (9)

4,971

2,770

7,741

Revenue

$

109,392

$

113,994

$

17,334

$

240,720

(1)We categorize our treatment and disposal revenue as either “Base Business” or “Event Business” based on the underlying nature of the revenue source. We define Event Business as non-recurring projects that are expected to equal or exceed 1,000 tons, with Base Business defined as all other business not meeting the definition of Event Business. For the three months ended March 31, 2021 and 2020, 24% and 25%, respectively, of our treatment and disposal revenue was derived from Event Business projects. Base Business revenue accounted for 76% and 75% of our treatment and disposal revenue for the three months ended March 31, 2021 and 2020, respectively.
(2)Includes collection and transportation of non-hazardous and hazardous waste.
(3)Includes industrial cleaning and maintenance for refineries, chemical plants, steel and automotive plants, marine terminals and refinery services such as tank cleaning and temporary storage.
(4)Includes retail services, laboratory packing, less-than-truck-load service and household hazardous waste collection. Contracts for Small Quantity Generation may extend beyond one year and a portion of the transaction price can be fixed.
(5)Through our total waste management (“TWM”) program, customers outsource the management of their waste compliance program to us, allowing us to organize and coordinate their waste management disposal activities and environmental compliance. TWM contracts may extend beyond one year and a portion of the transaction price can be fixed.
(6)Includes site assessment, onsite treatment, project management and remedial action planning and execution. Contracts for Remediation may extend beyond one year and a portion of the transaction price can be fixed.
(7)Includes spill response, waste analysis and treatment and disposal planning.
(8)We provide government-mandated, commercial standby oil spill compliance solutions to companies that store, transport, produce or handle petroleum and certain nonpetroleum oils on or near U.S. waters. Our standby services customers pay annual retainer fees under long-term or evergreen contracts for access to our regulatory certifications, specialized assets and highly trained personnel. When a customer with a retainer contract experiences a spill incident, we coordinate and manage the spill response, which results in incremental revenue for the services provided, in addition to the retainer fees.
(9)Includes equipment rental and other miscellaneous services.

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We provide services primarily in the United States, Canada and the Europe, Middle East, and Africa (“EMEA”) region. The following table presents our revenue disaggregated by our reportable segments and geographic location where the underlying services were performed:

    

Three Months Ended March 31, 2021

Three Months Ended March 31, 2020

Waste

Field

Energy

Waste

Field

Energy

$s in thousands

    

Solutions

    

Services

    

Waste

    

Total

    

Solutions

    

Services

    

Waste

    

Total

United States

$

84,474

$

106,051

$

6,228

$

196,753

$

90,473

$

105,565

$

17,334

$

213,372

Canada

19,668

579

20,247

18,919

1,077

19,996

EMEA

10,018

10,018

5,239

5,239

Other (1)

 

 

1,601

 

 

1,601

 

 

2,113

 

 

2,113

Total revenue

$

104,142

$

118,249

$

6,228

$

228,619

$

109,392

$

113,994

$

17,334

$

240,720

(1)Includes Mexico, Asia Pacific, and Latin America and Caribbean geographical regions.

Deferred Revenue

We record deferred revenue when cash payments are received, or advance billings are charged, prior to performance of services, such as waste that has been received but not yet treated or disposed. Revenue is recognized when these services are performed. During the three months ended March 31, 2021 and 2020, we recognized $10.7 million and $8.4 million of revenue that was included in the deferred revenue balance at the beginning of each year, respectively.

Receivables

Our receivables include invoiced and unbilled amounts where the Company has an unconditional right to payment.

Principal versus Agent Considerations

The Company commonly contracts with third-parties to perform certain waste-related services that we have promised in our customer contracts. We consider ourselves the principal in these arrangements as we direct the timing, nature and pricing of the services ultimately provided by the third-party to the customer.

Costs to obtain a contract

The Company pays sales commissions to employees, which qualify as costs to obtain a contract. Sales commissions are expensed as incurred as the commissions are earned by the employee and paid by the Company over time as the related revenue is recognized. Other commissions and incremental costs to obtain a contract are not material.

Practical Expedients and Optional Exemptions

Our payment terms may vary based on type of service or customer; however, we do not adjust the promised amount of consideration in our contracts for the time value of money as payment terms extended to our customers do not exceed one year and are not considered a significant financing component in our contracts.

We do not disclose the value of unsatisfied performance obligations as contracts with an original expected length of more than one year and contracts for which we do not recognize revenue at the amount to which we have the right to invoice for services performed is insignificant and the aggregate amount of fixed consideration allocated to unsatisfied performance obligations is not material.

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NOTE 3.     BUSINESS COMBINATIONS

Acquisition of Impact Environmental Services, Inc.

On January 28, 2020, we acquired Impact Environmental Services, Inc., an industrial cleaning and environmental services company based in Romulus, Michigan for $3.3 million. The acquired operations are reported as part of our Field Services segment, however, revenues, net income, earnings per share and total assets are not material to our consolidated financial position or results of operations.

We allocated the purchase price to the assets acquired and liabilities assumed based on estimates of the fair value at the date of the acquisition, resulting in $300,000 allocated to goodwill and $900,000 allocated to amortizing intangible assets (primarily customer relationships) to be amortized over a weighted average life of approximately 12 years. All of the goodwill recognized was assigned to our Field Services segment and is expected to be deductible for income tax purposes over a 15-year amortization period.

NOTE 4.     ACCUMULATED OTHER COMPREHENSIVE LOSS

Changes in accumulated other comprehensive income (loss) (“AOCI”) consisted of the following:

Foreign

Unrealized Gain

Currency

(Loss) on Interest

$s in thousands

    

Translation

    

Rate Hedge

    

Total

Balance at December 31, 2020

$

(7,870)

$

(6,788)

$

(14,658)

Other comprehensive income before reclassifications, net of tax

 

1,439

 

8,323

 

9,762

Amounts reclassified out of AOCI, net of tax (1)

 

 

894

 

894

Other comprehensive income, net

 

1,439

 

9,217

 

10,656

Balance at March 31, 2021

$

(6,431)

$

2,429

$

(4,002)

(1)Before-tax reclassifications of $1.1 million ($894,000 after-tax) for the three months ended March 31, 2021, were included in Interest expense in the Company’s consolidated statements of operations. Amounts relate to the Company’s interest rate swap which is designated as a cash flow hedge. Changes in fair value of the swap recognized in AOCI are reclassified to interest expense when hedged interest payments on the underlying long-term debt are made or, for terminated swap agreements, amortized to interest expense over the period from termination to original maturity. Amounts in AOCI expected to be reclassified to interest expense over the next 12 months total approximately $3.3 million ($2.6 million after-tax).

Foreign

Unrealized Gain

Currency

(Loss) on Interest

$s in thousands

    

Translation

    

Rate Hedge

    

Total

Balance at December 31, 2019

$

(10,925)

$

(929)

$

(11,854)

Other comprehensive loss before reclassifications, net of tax

 

(8,259)

 

(6,310)

 

(14,569)

Amounts reclassified out of AOCI, net of tax (2)

 

 

212

 

212

Other comprehensive loss, net

 

(8,259)

 

(6,098)

 

(14,357)

Balance at March 31, 2020

$

(19,184)

$

(7,027)

$

(26,211)

(2)Before-tax reclassifications of $268,000 ($212,000 after-tax) for the three months ended March 31, 2020, were included in Interest expense in the Company’s consolidated statements of operations. Amounts relate to the Company’s interest rate swap which is designated as a cash flow hedge. Changes in fair value of the swap recognized in AOCI are reclassified to interest expense when hedged interest payments on the underlying long-term debt are made.

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NOTE 5.     CONCENTRATIONS AND CREDIT RISK

Major Customers

No customer accounted for more than 10% of total revenue for the three months ended March 31, 2021 or 2020, respectively. No customer accounted for more than 10% of total trade receivables as of March 31, 2021 or December 31, 2020.

Credit Risk Concentration

We maintain most of our cash and cash equivalents with nationally recognized financial institutions. 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. Credit risk associated with a portion of the Company’s trade receivables is reduced by our ability to submit claims to the Oil Spill Liability Trust Fund (“OSLTF”) for reimbursement of unpaid customer receivables related to services regulated under the provisions of the Oil Pollution Act of 1990 (“OPA 90”). As of March 31, 2021, the Company did not have any trade receivables that are eligible for submission to the OSLTF for reimbursement.

NOTE 6.     RECEIVABLES

Receivables consisted of the following:

    

March 31, 

December 31, 

$s in thousands

2021

    

2020

Trade

$

189,092

$

186,502

Unbilled revenue

 

52,075

 

52,858

Other

 

5,353

 

5,554

Total receivables

 

246,520

 

244,914

Allowance for credit losses

 

(3,666)

 

(2,936)

Receivables, net

$

242,854

$

241,978

NOTE 7.     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 and accrued liabilities, debt, interest rate swap agreements and contingent consideration. 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.

In September 2019 and March 2021, the Company invested $7.9 million and $712,000, respectively, in the preferred stock of a privately held company. The investment does not have a readily determinable fair value therefore the investment is

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valued at cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer, if any. In March 2021, in connection with our incremental investment of $712,000, we observed that the fair value of our initial investment of $7.9 million increased by $3.5 million and, accordingly, recognized a gain on our minority interest investment of $3.5 million. The fair value of our minority interest investment is included in Other assets in the Company’s consolidated balance sheets. Changes in the fair value of our minority interest investment are included in Other income in the Company’s consolidated statements of operations.  

The Company estimates the fair value of its variable-rate debt using Level 2 inputs, such as interest rates, related terms and maturities of similar obligations. At March 31, 2021, the fair value of the Company’s variable rate term loan was estimated to be $444.7 million, and the carrying value of the Company’s variable-rate revolving credit facility approximates fair value due to the short-term nature of the interest rates.

The Company estimates the fair value of its contingent consideration liabilities using Level 3 inputs, including both observable and unobservable inputs. As a result, unrealized gains and losses may include changes in fair value that are attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

The Company’s assets and liabilities measured at fair value on a recurring basis consisted of the following:

March 31, 2021

Quoted Prices in

Other Observable

Unobservable

Active Markets

Inputs

Inputs

$s in thousands

    

(Level 1)

    

(Level 2)

    

(Level 3)

    

Total

Assets:

Fixed-income securities (1)

$

3,405

$

915

$

$

4,320

Money market funds (2)

1,526

1,526

Interest rate swap agreement (3)

1,619

1,619

Total

$

4,931

$

2,534