-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GQt14nMubCibGMtRo3YDDMMJx2By11H+H7NH0jt3W3EV30M50dlIoQ3UGCQ/kN3s T3/0ypERwSA0r8s5OIEiiw== 0000950129-01-504088.txt : 20020410 0000950129-01-504088.hdr.sgml : 20020410 ACCESSION NUMBER: 0000950129-01-504088 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20011114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN ECOLOGY CORP CENTRAL INDEX KEY: 0000742126 STANDARD INDUSTRIAL CLASSIFICATION: REFUSE SYSTEMS [4953] IRS NUMBER: 953889638 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11688 FILM NUMBER: 1789592 BUSINESS ADDRESS: STREET 1: 805 W IDAHO STREET 2: STE 200 CITY: BOSIE STATE: ID ZIP: 83702 BUSINESS PHONE: 2083318400 MAIL ADDRESS: STREET 1: 805 W IDAHO STREET 2: STE 200 CITY: BOISE STATE: ID ZIP: 83702 10-Q 1 h92202e10-q.txt AMERICAN ECOLOGY CORPORATION - 9/30/2001 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 2001 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 0-11688 AMERICAN ECOLOGY CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 95-3889638 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 805 W. Idaho Suite #200 Boise, Idaho 83702-8916 ------------ ---------- (Address of principal executive offices) (Zip Code) (208) 331-8400 --------------- (Registrants telephone number, including area code) Indicate by a check mark whether Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES |X| NO [ ] At November 13, 2001, Registrant had outstanding 13,720,622 shares of its Common Stock. AMERICAN ECOLOGY CORPORATION QUARTERLY REPORT FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION
PAGE Item 1. Consolidated Financial Statements Consolidated Balance Sheet (Unaudited) 4 Consolidated Statements of Operations (Unaudited) 5 Consolidated Statements of Cash Flows (Unaudited) 6 Consolidated Statements of Shareholders' Equity (Unaudited) 7 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16
PART II. OTHER INFORMATION Item 1. Legal Proceedings 26 Item 2. Changes in Securities 27 Item 3. Defaults upon Senior Securities 27 Item 4. Submission of Matters to a Vote of Security Holders 27 Item 5. Other Information 27 Item 6. Exhibits and Reports on Form 8-K 27 Signatures 30
2 OFFICERS Stephen A. Romano President and Chief Operating Officer James R. Baumgardner Senior Vice President, Chief Financial Officer Treasurer and Secretary L. Gary Davis Vice President and Controller DIRECTORS Rotchford L. Barker Independent Businessman Paul C. Bergson Principal Bergson & Company Keith D. Bronstein President Tradelink, LLC Edward F. Heil Chairman of the Board American Environmental Construction Company Dan Rostenkowski President DanRoss &Associates, Inc. Paul F. Schutt Chief Executive Officer Nuclear Fuel Services, Inc. Thomas A. Volini Chairman, CEO and President Town & Country Utilities, Inc. CORPORATE OFFICE American Ecology Corporation 805 W. Idaho, Suite 200 Boise, Idaho 83702 (208) 331-8400 (208) 331-7900 (fax) www.americanecology.com COMMON STOCK American Ecology Corporation's common stock trades on the NASDAQ Stock Market under the symbol ECOL. FINANCIAL REPORTS A copy of American Ecology Corporation Financial Reports, filed with the Securities and Exchange Commission, may be obtained by writing to: 805 W. Idaho, Suite 200 Boise, Idaho 83702 or at www.americanecology.com TRANSFER AGENT Mellon Investor Services LLC Overpeck Centre 85 Challenger Road Ridgefield Park, New Jersey 07660 (201) 296-4000 www.mellon-investor.com AUDITOR Balukoff, Lindstrom & Co., P.A. 877 West Main Street, Suite 805 Boise, Idaho 83702 208-344-7150 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. AMERICAN ECOLOGY CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) ($ IN 000'S EXCEPT PER SHARE AMOUNTS)
September 30, December 31, 2001 2000 ---- ---- ASSETS Current Assets: Cash and cash equivalents $ 1,460 $ 4,122 Receivables (trade and other), net of allowance for Doubtful accounts of $1,490 and $568 respectively 11,299 9,839 Income tax receivable 740 740 Prepayments and other 2,205 1,316 -------- -------- Total current assets 15,704 16,017 Cash and investment securities, pledged 242 235 Property and equipment, net 34,296 18,488 Facility development projects 27,289 27,430 Intangible assets relating to acquired businesses, net 348 366 Other assets 4,708 3,214 -------- -------- Total assets $ 82,587 $ 65,750 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 1,231 $ 1,094 Accounts payable 3,983 2,680 Accrued liabilities 6,936 9,149 Current portion of accrued closure and post closure obligations 700 700 Income taxes payable 320 115 -------- -------- Total current liabilities 13,170 13,738 Long term debt, excluding current portion 17,809 10,775 Closure and post closure obligation, excluding current portion 25,434 15,253 -------- -------- Total liabilities 56,413 39,766 Commitments and Contingencies Shareholders' equity: Convertible preferred stock, $.01 par value, 1,000,000 shares authorized, none issued -- -- Series D cumulative convertible preferred stock, $.01 par value, 100,001 authorized and issued, 5,263 shares converted and retired 1 1 Series E redeemable convertible preferred stock, $10.00 par value, 300,000 authorized and issued, 300,000 shares converted and retired -- -- Common stock, $.01 par value, 50,000,000 authorized, 13,720,622 and 13,704,050 shares issued and outstanding respectively 138 137 Additional paid-in capital 54,500 54,610 Retained earnings (deficit) (28,465) (28,764) -------- -------- Total shareholders' equity 26,174 25,984 -------- -------- Total Liabilities and Shareholders' Equity $ 82,587 $ 65,750 ======== ========
See notes to consolidated financial statements. 4 AMERICAN ECOLOGY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) ($ IN 000'S EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ------------------ ------------------ Revenue $ 13,896 $ 11,796 $ 40,493 $ 31,600 Direct operating costs 8,498 6,555 23,572 17,327 -------- -------- -------- -------- Gross profit 5,398 5,241 16,921 14,273 Selling, general and administrative expenses 6,326 4,228 16,697 11,672 -------- -------- -------- -------- Income (loss) from operations (928) 1,013 224 2,601 Investment income (loss) 24 (95) 231 143 Interest income (expense) (294) (175) (898) (249) Gain on sale of assets 50 45 162 44 Other income (loss) (34) 320 990 775 -------- -------- -------- -------- Net income (loss) before income taxes (1,182) 1,108 709 3,314 Income tax expense (benefit) 30 8 114 69 -------- -------- -------- -------- Net income (loss) (1,212) 1,100 595 3,245 Preferred stock dividends 99 100 295 299 -------- -------- -------- -------- Net income (loss) available to common shareholders $ (1,311) $ 1,000 $ 300 $ 2,946 ======== ======== ======== ======== Basic earnings per share $ (.10) $ .07 $ .02 $ .22 ======== ======== ======== ======== Diluted earnings per share $ (.10) $ .06 $ .02 $ .18 ======== ======== ======== ======== Dividends paid per common share $ -- $ -- $ -- $ -- ======== ======== ======== ========
See notes to consolidated financial statements. 5 AMERICAN ECOLOGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) ($ in 000's)
Nine Months Ended September 30, 2001 2000 ---- ---- Cash flows from operating activities: Net income $ 595 3,245 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,953 1,647 (Gain) on sale of assets (162) (1,098) Changes in assets and liabilities: Receivables (1,461) (2,983) Investment securities classified as trading (6) (7) Other assets 1,337 (146) Accounts payable and accrued liabilities (1,236) (324) Income tax payable (204) (40) Facility closure and post closure obligations (391) (371) -------- -------- Total adjustments 1,830 (3,322) -------- -------- Net cash provided by (used in) operating activities 2,425 (77) Cash flows from investing activities: Capital expenditures (8,439) (7,959) Proceeds from sales of property and equipment -- 2,000 -------- -------- Net cash used in investing activities (8,439) (5,959) Cash flows from financing activities: Proceeds from issuance of indebtedness 4,005 4,032 Stock options exercised -- 57 Repayments of indebtedness (653) (599) -------- -------- Net cash provided by financing activities 3,352 3,490 Increase (decrease) in cash and cash equivalents (2,662) (2,546) Cash and cash equivalents at beginning of period 4,122 4,771 -------- -------- Cash and cash equivalents at end of period $ 1,460 $ 2,225 ======== ======== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest paid $ 898 $ 249 Income taxes 160 130 Acquisition of equipment with capital leases 2,280 3,006 Acquisition through assumption of debt 20,400 --
See notes to consolidated financial statements. 6 AMERICAN ECOLOGY CORPORATION CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) ($ in 000's)
ADDITIONAL RETAINED PREFERRED STOCK COMMON STOCK PAID-IN CAPITAL EARNINGS (DEFICIT) --------------- ------------ ---------------- ------------------ Balance, December 31, 2000 $ 1 $ 137 $ 54,610 $ (28,764) Net income -- -- -- 1,482 Common stock issuance -- 2 32 -- Dividends for preferred stock -- -- -- (97) -- -- -- -- ----------- ---------- ----------- ------------ Balance March 31, 2001 1 139 54,642 (27,379) Net income -- -- -- 326 Common stock issuance -- -- 5 -- Dividends for preferred stock -- -- -- (99) Other adjustment -- -- -- (1) ----------- ---------- ----------- ------------ -- -- -- --- Balance June 30, 2001 $ 1 $ 139 $ 54,647 $ (27,153) =========== ========== =========== =========== Net income -- -- -- (1,212) Reverse/forward stock split -- (1) (148) -- Dividends for preferred stock -- -- -- (99) Other adjustments -- -- 1 (1) ----------- ---------- ----------- ------------ -- -- - --- Balance September 30, 2001 $ 1 $ 138 $ 54,500 $ (28,465) =========== ========== =========== ===========
The accompanying notes are an integral part of these financial statements 7 AMERICAN ECOLOGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION. Pursuant to the rules and regulations of the Securities and Exchange Commission, the Company has prepared the accompanying unaudited financial statements. Certain information and footnote disclosures have been condensed or omitted consistent with Generally Accepted Accounting Principles ("GAAP"). In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these financial statements have been included. These financial statements and notes should be read in conjunction with the financial statements and notes included in the Company's 2000 Annual Report on Form 10-K for the year ended December 31, 2000, filed with the Securities and Exchange Commission. The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation. NOTE 2. OTHER ASSETS. Other assets totaled $4,708,000 and $3,214,000 at September 30, 2001 and December 31, 2000 respectively. The other asset category includes the following accounts (in thousands):
September 30, 2001 December 31, 2000 ------------------ ----------------- Long term notes receivable $ 77 $ 68 Security deposits 21 34 Thermal processing construction in progress 163 31 Permits 4,363 3,008 Other assets deferred 84 73 -- -- ----------- ------------ Total other assets $ 4,708 $ 3,214 =========== ============
NOTE 3. LONG-TERM DEBT. Long-term debt at September 30, 2001 and December 31, 2000 consisted of the following (in thousands):
September 30, 2001 December 31, 2000 ------------------ ----------------- Notes payable $ 986 $ 792 Line of credit 4,850 4,093 Industrial revenue bond 8,500 -- Capital lease obligations and other 4,704 6,984 ------------ ------------ 19,040 11,869 Less: Current maturities (1,231) (1,094) ------------ ------------ Long term debt $ 17,809 $ 10,775 ============ ============
8 Aggregate maturity of future minimum payments under long term debt and capital leases is as follows (in thousands):
September 30, 2001 December 31, 2000 ------------------ ----------------- 2001 $ 548 $ 1,094 2002 14,576 8,586 2003 2,373 1,549 2004 1,356 621 2005 143 19 2006 44 -- -- -- --------------- ------------- TOTAL $ 19,040 $ 11,869 =============== =============
The Company has several long-term capital leases and notes payable that total approximately $4.8 million. These leases and notes payable are principally for assets acquired at Oak Ridge, Tennessee that bear a 10% interest rate, at Beatty, Nevada, that bear an interest rate between 5.8% and 8.9%, at Richland, Washington bearing interest rates of 5.25% through 6.14% and at Robstown, Texas bearing interest rates between 6% and 14% expiring over the next 5 years. On August 17, 2000, the Company entered into a 2-year Credit Agreement with a local bank that provides a revolving line of credit. The line of credit is secured by the Company's accounts receivable. Under the terms of the Credit Agreement, borrowing under the line of credit cannot exceed 80% of eligible accounts receivable or $8.0 million, whichever is less. After September 30, 2001 interest on borrowings is based on a 'pricing grid,' whereby the interest rate decreases or increases based on the Company's ratio of funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Company can elect to borrow utilizing the Prime Rate or the offshore London Inter-Bank Offering Rate ("LIBOR") plus an applicable spread. Through September 30, 2001, borrowings are Prime plus 0.75% or LIBOR plus 3.25%, at the election of the Company, subject to certain conditions. The Credit Agreement contains certain financial covenants that the Company must adhere to quarterly, including a maximum leverage ratio, a minimum current ratio, and a debt service coverage ratio. At September 30, the Company was in compliance with all applicable financial covenants. The Credit Agreement matures on October 15, 2002. The Company is currently updating its business plan for use in negotiating the extension of maturity date and certain other conditions. There can be no assurance that the Company will be successful in its negotiations with its Bank. If the Company is unsuccessful and is unable to extend the maturity of the credit facility past December 31, 2002, the Company will reclassify the line of credit borrowings as short-term consistent with GAAP. Reclassifying the line of credit borrowings as short-term debt would have a material, adverse affect on the Company's working capital position and would, under certain conditions, trigger Bank liquidity covenants. At September 30, 2001, the outstanding balance on the revolving line of credit was $4,850,000. The Company is required to reserve for a $1,150,000 standby letter of credit under the line of credit. At September 30, 2001, the Company had $442,000 available for additional borrowing under the line of credit. During the third quarter of 2001, the interest rate on the line of credit borrowings ranged from 7.08% to 8.10%. The Company has continued to borrow and repay according to business demands and availability of cash. The Company anticipates that borrowings will continue to fluctuate, and that additional borrowing capacity likely will be required to accommodate planned expansion and growth. There can be no assurance that the Company can raise additional financing beyond the $8.0 million line of credit. The Company has an $8.5 million Industrial Revenue Bond ("IRB") associated with the Grand View, Idaho facility. The proceeds from the IRB were used to make capital additions and improvements to the Grand View facility prior to the Company's acquisition of the facility. The IRB bears interest of 8.25%. The IRB matures November 1, 2002. The Company is currently discussing potential extension of the maturity date with the Bondholders. If the Company is unable to extend the maturity of the Bonds past December 31, 2002 on reasonable terms, it will reclassify the IRB borrowings as short-term to be consistent with GAAP. Reclassifying the IRB as short-term would have a material, 9 adverse affect on the Company's working capital position and require the Company to renegotiate the Bank liquidity covenants. On April 4, 2001, the Company entered into a $1,113,930 long-term financing agreement with AFCO Finance to finance 2001-2002 insurance premiums. The loan bears an annual interest rate of 5.59%. Final payment is due February 2002. The Company has consistently financed its insurance premiums through AFCO Finance in the ordinary course of business. The Company has several other long-term obligations that mature at different times. These obligations include accrued dividends payable on Series D Preferred Stock totaling $1,093,000, reserve for special waste at the Oak Ridge, Tennessee facility for $350,000, a long-term payable to Boston Edison for $230,000, lease payments of $1,623,000, and the above-mentioned industrial revenue bond for the Idaho facility for $8,500,000. These long-term obligations total $11,796,000. NOTE 4. EARNINGS PER SHARE. Basic earnings per share are computed based on net income and the weighted average number of common shares outstanding. Diluted earnings per share reflect the assumed issuance of common shares under long-term incentive, stock option and stock purchase plans pursuant to terms of the Company's 1992 Stock Option Plans. The computation of diluted earnings per share does not assume conversion or exercise of securities that would have an anti-dilutive effect on earnings per share. The following table shows the weighted average number of common shares outstanding and the potential dilutive effect of outstanding options, warrants, and convertible preferred shares.
(in thousands except per share) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 ---- ---- ---- ---- BASIC Net Income (loss) $ (1,212) $ 1,100 $ 595 $ 3,245 ======== ======= ======= ======== Weighted average common shares 13,721 13,709 13,721 13,709 Net income (loss) per share, basic $ (.10) $ .07 $ .02 $ .22 -------- ------- ------- -------- DILUTED Weighted average of common shares 13,721 13,709 13,721 13,709 Dilutive effect of common stock options and warrants 3,696 2,653 3,696 2,653 -------- ------- ------- -------- Total weighted average common and dilutive shares Outstanding 17,417 16,362 17,417 16,362 Net income (loss) per share, diluted $ (.10) $ .06 $ .02 $ .18 -------- ------- ------- --------
NOTE 5. FACILITY DEVELOPMENT PROJECTS. The Company has been licensed to construct and operate the low-level radioactive waste ("LLRW") facility for the Southwestern Compact ("Ward Valley facility") in California, and has been selected to obtain a license to develop and operate the Central Interstate Compact LLRW facility ("Butte facility") in Nebraska. The State of California has discontinued its efforts to obtain the Ward Valley property from the U.S. Department of the Interior. For the Company to realize its investment, the federal government must transfer the land to California, or the Company must recover monetary damages from the State of California. In 1997, the Company filed two lawsuits against the United States. In the first case, US Ecology sued to recover monetary damages. In the second federal court action, US Ecology sought an order to compel the transfer of the 10 Ward Valley site. Both actions were dismissed, due in part to the State of California's decision to discontinue their participation as co-plaintiff with the company. No further appeals are pending. In May 2000, the Company filed a lawsuit against the State of California in Superior Court for the County of San Diego seeking to compel California to acquire the property to build the Ward Valley project or pay monetary damages in excess of $162 million. In October 2000, the California trial court granted the State's motion to dismiss the case. The Company appealed this ruling to the California Court of Appeals, Fourth Appellate District. On September 5, 2001 the California Court of Appeals reversed key portions of the lower court's ruling. The Appeals Court ruling held that California's Radiation Control Law granted the Department of Health Services the authority to enter into contracts regarding establishment of the Ward Valley facility. The court further held that the Company adequately alleged that California had induced it to spend money based on promises that were later broken. The Court wrote in its finding that "In this case, Ecology alleged facts that fit within the classic model of a promissory estoppel claim." The three-judge panel also vacated the lower court's order permitting intervention in the case by several Ward Valley opposition groups and remanded the case for trial. On October 15, 2001 both the State of California and the Company filed petitions for review with the California Supreme Court. Each party seeks review of those portions of the Court of Appeals ruling adverse to its interests. Briefing on the matter is to be completed by November 15, 2001. The Supreme Court is expected to decide whether to grant review no later than January 15, 2002. If review is not granted, the case will proceed to trial in State Superior Court. All costs through July 31, 1999 for development of the Ward Valley facility were capitalized, and since then have been expensed as incurred. As of September 30, 2001, the Company had deferred $20,952,000 (25% of total assets) of pre-operational facility development costs, of which $895,000 represents capitalized interest. If the facility were to become operational, these costs would be recovered during the facility's first 20 years of operation from disposal fees approved by the California Department of Health Services (DHS). Beginning in 2000, the Company is no longer required to pay the $250,000 annual license fee to the Department of Health Services pending further notice by the state. While the Company's 1993 license to construct and operate the Ward Valley facility remains valid, there can be no assurance that the Company will prevail in Court, that California will complete the land transfer, or that the Company will recover its investment through facility construction and operation. The Company has incurred reimbursable costs and received revenue for the development of the Butte, Nebraska facility under a contract with the Central Interstate LLRW Compact Commission ("CIC"). US Ecology has a $6.5 equity position in the Butte, Nebraska project, but has acted principally as a contractor to the Central Interstate Low-Level Radioactive Waste Commission. Electric utility companies generating waste within the CIC's five-state region (the "Major Generators") have provided the balance of the CIC's funding to develop the Butte facility. As of September 30, 2001, the Company has contributed and capitalized approximately $6,478,000 of costs (7.8% of total assets), $386,000 of which is capitalized interest, toward development of the Butte facility. In 1998, the State of Nebraska denied US Ecology's license application to build and operate the facility. The CIC directed US Ecology to petition for a contested case challenging the State's denial, which US Ecology filed in early 1999. The Major Generators filed suit in the Federal District Court for Nebraska on December 30, 1998, seeking to recover certain costs expended on the Nebraska licensing process and prevent the State of Nebraska from proceeding with the contested case. US Ecology intervened as a plaintiff, also seeking relief. The contested case is stayed by a preliminary injunction issued by the presiding federal judge. The court has issued a scheduling order setting trial for June 2002. Discovery in the case is underway. The timing and outcome of the above matters are unknown. The Company continues to pursue completion of the California project or recovery of money damages from California in state court, and will continue its participation in 11 federal court litigation to protect its investment in the proposed Butte, Nebraska facility. The Company believes that the deferred site development costs for both facilities will be realized. In the event operations of either facility do not commence, or the Company is unable to recoup its investments through legal recourse, it would have a material adverse effect on the Company's financial position. The following table shows the ending capitalized balances for facility development costs for the periods ended September 30, 2001 and December 31, 2000 (in thousands):
Capitalized Costs Capitalized Interest Total ----------------- -------------------- ----- Ward Valley, CA Project $ 20,057 $ 895 $ 20,952 Butte, Nebraska Project 6,092 386 6,478 ----------- ----------- ---------- Total $ 26,149 $ 1,281 $ 27,430 =========== =========== ==========
NOTE 6. INCOME TAXES. The Company had an effective federal tax rate of 0% on September 30, 2001 and December 31, 2000 respectively. The Company has established a valuation allowance for certain deferred tax assets due to realization uncertainties inherent to the long-term nature of facility closure and post closure costs, uncertainties regarding future operating results, and limitations on utilization of acquired net operating loss carryforwards for tax purposes. The realization of a significant portion of net deferred tax assets is based in part on the Company's estimates of the timing of reversals of certain temporary differences and on the generation of taxable income before such reversals. The net operating loss carryforward of approximately $33,643,000 at September 30, 2001, begins to expire in the year 2006. Of this carryforward, $2,745,000 is limited pursuant to the net operating loss limitation rules of Internal Revenue Code Section 382. The amount of the Company's net operating loss carryforwards could be reduced if the Company is ultimately unsuccessful in pursuing a pending refund claim but no material change is expected based on the current status of this claim. The portion of the unrestricted net operating losses and limited carryforward under Internal Revenue Code expires as follows:
Limited Unrestricted Carryforward Carryforward Year Amount Amount ---- ------ ------ 2006 $793,000 2007 1,080,000 2008 872,000 2010 4,280,000 2011 8,657,000 2012 7,828,000 2018 6,105,000 2019 3,574,000 2020 454,000
The Company filed an amended federal income tax refund claim in 1996 for approximately $740,000. On September 29, 1999, the Internal Revenue Service ("IRS") proposed to deny this claim, sought to recover portions of tentative refunds previously received by the Company and proposed to reduce the Company's net operating loss carryforwards. On November 29, 1999, the Company protested this denial which is currently pending with the IRS. The Company has tentatively settled this claim in 2000 but this settlement was rejected by the Congressional Joint Committee on Taxation because the main issue was then pending before the United States Supreme Court in a case involving another taxpayer. This issue was subsequently resolved in a favor of the Company's position by the Supreme Court. As a result, the IRS Appellate Office has conceded this issue. The forwarding of this claim to the Joint Committee for approval is currently being held up while the Appellate Office re-examines two issues it 12 previously conceded. These issues effect only loss carryforwards, not the amount of the refund which should be $605,009 plus statutory interest at rates varying from 4.5% to 6.5% from 1995 to the date the refund is paid. NOTE 7. ENVIRONMENTAL LIABILITIES. Environmental Matters The Company maintains reserves and insurance policies for costs associated with future closure and post closure obligations for both currently and formerly operated disposal facilities. These reserves are set based on professional engineering studies and analysis of regulatory requirements performed at least annually. Costs accounted for may include final disposal unit capping, gas emission control, subsurface soil and groundwater monitoring and/or remediation, and other monitoring or routine maintenance costs required after a disposal site stops accepting waste. The total estimated final closure and post closure cost must be fully accrued for each landfill at the time a site stops accepting waste. The Company believes its reserves for this purpose are adequate. The Company estimates that the aggregate final closure and post closure costs for all insured facilities owned or operated was approximately $26,134,000 as of September 30, 2001. The Company has a prepaid insurance policy with 2 years remaining for these facilities and has also set aside investment securities to pay certain deductible limits. Management believes that disposition of these environmental matters in the ordinary course of business will not have a material adverse effect on the financial condition of the Company. Operation of disposal facilities creates operational, monitoring, site maintenance, closure and post closure obligations that could result in unforeseen costs for monitoring and corrective action. The Company cannot predict the likelihood or effect of such costs, regulations, statutes, or other future events affecting its facilities. Financial Assurance and Site Maintenance When disposal facilities reach capacity or upon lease or license termination, they must be closed and then maintained for a prescribed period. In the case of hazardous waste facilities, federal regulation requires that operators demonstrate financial capability to close on an immediate, unscheduled basis. The estimated costs of such a closure are set forth in the operator's closure/post closure plan required by the Resource Conservation and Recovery Act ("RCRA"). The Company has provided letters of credit, trust funds and certificates of insurance as financial assurance to meet closure and post closure obligations at its hazardous waste facilities. Cash and investment securities totaling $242,000 at September 30, 2001 and $235,000 at December 31, 2000 have been pledged as collateral for these obligations. Management believes that $242,000 is an adequate reserve combined with the other financial assurance mechanisms maintained. When the Company acquired Envirosafe Services of Idaho, Inc. on February 1, 2001, the new subsidiary's Grand View, Idaho facility provided the required RCRA financial assurance through a $15 million surety bond held by the State of Idaho, secured by $2.5 million in cash collateral, for closure and post closure obligations. The Company has since replaced the surety bond with an insurance policy, which was accepted by the regulatory agencies. This policy is consistent, in form and substance, with closure and post closure insurance policies the Company maintains for its other facilities. 13 NOTE 8. OPERATING SEGMENTS. The Company operates two primary business segments, Chemical Services and LLRW Services. The Chemical Services division provides hazardous, PCB, non-hazardous, municipal and certain very low level radioactive waste management services. The LLRW Services division processes, packages, and disposes of material contaminated with low levels of radioactivity. The Company evaluates the performance of its operating segments based on gross profit, selling, general and administrative expense, interest expense and income, corporate allocation, and after an apportioned income tax. Segment data includes inter-company transactions at cost, and allocation for certain corporate costs. Select information for the Company's reportable segments is shown in the following table. The "Corporate & Other" column includes corporate-related items not allocated to the reportable segments.
---------------------------------------------------------------------------- CHEMICAL LLRW CORPORATE SERVICES SERVICES & OTHER TOTAL ---------------------------------------------------------------------------- THREE MONTHS ENDING SEPTEMBER 30, 2001 Revenue $ 9,818 $ 4,179 $ (101) $ 13,896 Direct operating cost 5,496 3,042 (40) 8,498 ---------------------------------------------------------------------------- Gross profit $ 4,322 $ 1,137 $ (61) $ 5,398 Selling, general & administrative 2,583 1,730 2,013 6,326 ---------------------------------------------------------------------------- Income (loss) from operations 1,739 (593) (2,074) (928) Investment income 11 3 10 24 Gain on sale of assets 36 14 - 50 Interest expense (215) (18) (61) (294) Corporate allocation & other (1,171) (939) 2,076 (34) ---------------------------------------------------------------------------- Income before taxes 400 (1,533) (49) (1,182) Income taxes 30 30 Net income (loss) $ 400 $ (1,533) $ (79) $ (1,212) NINE MONTHS ENDING SEPTEMBER 30, 2001 Revenue $ 27,619 $ 13,249 $ (375) $ 40,493 Direct operating cost 14,763 8,989 (180) 23,572 ---------------------------------------------------------------------------- Gross profit $ 12,856 $ 4,260 $ (195) $ 16,921 Selling, general & administrative 6,825 5,166 4,706 16,697 ---------------------------------------------------------------------------- Income (loss) from operations 6,031 (906) (4,901) 224 Investment income 178 4 49 231 Gain on sale of assets 121 41 - 162 Interest expense (730) (76) (92) (898) Corporate allocation & other (2,632) (2,198) 5,820 990 ---------------------------------------------------------------------------- Income before taxes 2,968 (3,135) 876 709 Income taxes 114 114 Net income (loss) $ 2,968 $ (3,135) $ 762 $ 595 Total Assets 47,196 36,213 (822) 82,587 THREE MONTHS ENDING SEPTEMBER 30, 2000 Revenue $ 4,244 $ 7,552 $ -- $ 11,796 Direct operating cost 2,385 4,366 (196) 6,555 ---------------------------------------------------------------------------- Gross profit $ 1,859 $ 3,186 $ 196 $ 5,241 Selling, general & administrative 1,146 1,513 1,569 4,228 ---------------------------------------------------------------------------- Income (loss) from operations 713 1,673 (1,373) 1,013 Investment income (9) (6) (80) (95) Gain on sale of assets 33 12 -- 45 Interest expense (37) (57) (81) (175) Corporate allocation & other 717 1,066 (1,463) 320 ----------------------------------------------------------------------------
14
---------------------------------------------------------------------------- CHEMICAL LLRW CORPORATE SERVICES SERVICES & OTHER TOTAL ---------------------------------------------------------------------------- Income before taxes 1,417 2,688 (2,997) 1,108 Income taxes 8 8 ---------------------------------------------------------------------------- Net income $ 1,417 $ 2,688 $ (3,005) $ 1,100 NINE MONTHS ENDING SEPTEMBER 30, 2000 - ------------------------------------- Revenue $ 13,298 $ 18,302 $ -- $ 31,600 ---------------------------------------------------------------------------- Direct operating cost 7,816 9,853 (342) 17,327 Gross profit $ 5,482 $ 8,449 $ 342 $ 14,273 Selling, general & administrative 2,769 5,314 3,589 11,672 ---------------------------------------------------------------------------- Income (loss) from operations 2,713 3,135 (3,247) 2,601 Investment income 37 1 105 143 Gain on sale of assets 32 12 -- 44 Interest expense (33) (82) (134) (249) Corporate allocation & other 1,449 2,161 (2,835) 775 ---------------------------------------------------------------------------- Income before taxes 4,198 5,227 (6,111) 3,314 Income taxes -- -- 69 69 ---------------------------------------------------------------------------- Net income $ 4,198 $ 5,227 $ (6,180) $ 3,245 Total Assets 24,414 39,674 371 64,459 - ----------------------------------------------------------------------------------------------------------------
NOTE 9. CASH AND INVESTMENT SECURITIES. The Company maintains several bank and money market accounts totaling $1,460,000 at September 30, 2001. The Company also had $242,000 of cash and investment securities pledged for closure and post closure obligations. NOTE 10. COMMITMENTS AND CONTINGENCIES. The Company becomes involved in judicial and administrative proceedings involving federal, state, and local governmental authorities in the ordinary course of business. Actions may also be brought by individuals or groups of individuals in connection with the permitting of planned facilities, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedly released from Company operated sites, and other litigation. The Company maintains insurance intended to cover property and damage claims asserted as a result of operations. Insurance: The Company carries a broad range of insurance coverage which management considers prudent to protect the Company's assets and operations. This coverage is subject to varying degrees of risk retention by the Company. Casualty coverage currently includes $1,000,000 primary commercial general liability with a $2,000,000 aggregate and $1,000,000 primary automobile liability. The Company maintains workers' compensation insurance in accordance with laws of the various states in which it is an employer. This coverage is supported by $35,000,000 in umbrella insurance protection. A property policy provides insurance coverage for real and personal property. The Company also maintains an environmental impairment liability ("EIL") insurance policy for certain of its treatment and disposal facilities, transfer stations, and processing facilities. This provides coverage for property damage and/or bodily injury to third parties caused by potential off-site pollution emanating from such disposal facilities, transfer stations, or processing facilities in the amount of $20,000,000 of coverage per loss with a $20,000,000 aggregate limit. Professional environmental consultants liability insurance is carried to cover damages the Company is legally obligated to pay because of an act, error or omission in professional services, or a loss resulting in environmental impairment away from an owned site. This policy is subject to a $10,000,000 per occurrence limit with a $10,000,000 aggregate limit. Nuclear liability insurance is carried to cover bodily injury and property damage claims to third parties caused by the nuclear energy related hazards for which the Company is legally obligated. Certain of the Company's waste disposal 15 and processing facilities are covered for closure and post closure costs through a direct risk transfer insurance policy. Other sites are covered through funds required by various states. Periodically management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred in connection with such matters. At this time, management believes that its reserves and insurance are adequate. There have been no significant changes in commitments and contingencies other than that included in Part II, Item I. of this report, Legal Proceedings. NOTE 11. PREFERRED STOCK. In November 1996, the Company issued 300,000 shares of Series E Redeemable Convertible Preferred Stock ("Series E") in a private offering to four of its directors for $3,000,000 in cash. The Series E stock is now retired but carries 3,000,000 warrants with no assigned value and a $1.50 per share exercise price that expire June 2008. In September 1995, the Board of Directors authorized 105,264 shares of preferred stock designated as 8 3/8% Series D Cumulative Convertible Preferred Stock ("Series D") and warrants to purchase 1,052,640 shares of the Company's common stock. The Company sold 105,264 shares of Series D stock with warrants in a private offering to a group of members or past members of the Board of Directors for $4,759,000. Offering expenses of $101,000 and $140,000 in settlement of liabilities were deducted from the proceeds. At September 30, 2001, each Series D share became convertible at any time at the option of the holder into 15.30 shares of the Company's common stock, equivalent to a conversion price of $5.50 on the $47.50 total per share offering price plus accrued dividends times 1.44 due to dilution by later securities issuance. Dividends on the Series D are cumulative from the date of issuance and payable quarterly commencing on October 15, 1995. Current bank credit facility covenants prohibit the payment of dividends. One holder of Series D stock has claimed the subordination provision in the Series D designation certificate does not apply to the current bank credit facility, and has asserted that quarterly dividends should be paid. The Company disagrees with this interpretation and has so notified the preferred shareholder involved. Accrued dividends at September 30, 2001 totaled $1,093,000. On September 12, 1999, the warrants issued with the Series D expired except for those belonging to one Series D holder. The Company extended an offer to all Series D holders to extend the warrants to September 13, 2002 if they agreed to converted their Series D to common stock. One holder converted 5,263.2 Series D shares for 69,264 common shares and extended 64,211 warrants. Each warrant has an exercise price of $4.75. No value was assigned to the warrants in the accompanying consolidated financial statements as the value is deemed de minimus. 100,001 shares ofSeries D preferred stock remain outstanding. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis contains trend information and other forward-looking statements that involve a number of risks and uncertainties. Actual results could differ materially from the Company's historic results of operations and those discussed in these forward-looking comments. Factors that could cause actual results to differ materially include, but are not limited to, those identified in Notes 5, 6, 7, and 10 to the Consolidated Financial Statements herein, Part II, Item 1, Legal Proceedings and the discussion below. Certain factors that may influence actual operations in the future are discussed in the Company's Form 10-K for the year ended December 31, 2000 in Part I, Item 1. Business. When the Company uses words like "may," "believes," "expects," "anticipates," "should," "estimate," "project," "plan," their opposites and similar expressions, the Company is making forward-looking statements. These expressions are most often used in statements relating to business plans, strategies, anticipated benefits or projections about the anticipated revenues, earnings or other aspects of its operating results. We make these statements in an effort to keep stockholders and the publics informed about our business, and have based them on our current expectations about future events. Such statements should be viewed with caution. These statements are not guarantees of future performance or events. As noted elsewhere in this report, all phases of our business are subject to uncertainties, risks and other influences, many of which the Company has no control over. Additionally, 16 any of these factors, either alone or taken together, could have a material adverse effect on the Company and could change whether any forward-looking statement ultimately turns out to be true. The Company undertakes no obligation to publicly release updates or revisions to these statements, except as required as a publicly traded company. INTRODUCTION Incorporated in 1952, American Ecology Corporation and its predecessors have operated commercial low-level radioactive and chemical waste disposal and treatment facilities nationwide longer than any other company in the nation. The Company mainly derives its revenues from fees charged for processing and disposal of hazardous, non-hazardous, naturally occurring and low-level radioactive waste. Revenues are also derived from brokering wastes to other service providers, and environmental remediation work. Disposal fees assessed to customers of the Company's operating facilities may include state and local fees, and are generally based on the volume or weight of waste deposited. The Company may assess fees and incur costs to process waste (e.g. compaction or decontamination), stabilize waste (e.g. mixing with concrete and other reagents), or transport waste. Some of these costs create inter-company charges and revenue, all of which have been eliminated in the consolidated financial statements. Operating expenses include direct and indirect costs for labor, maintenance and repairs, subcontracted costs and equipment, insurance, taxes and accruals for burial fees and other costs. The Company has properly accounted for fees assessed by regulatory authorities for the issuance of permits and licenses. Selling, general & administrative costs include management salaries, sales and marketing efforts, clerical and administrative costs, legal fees, office rentals, corporate insurance, and other administrative costs for general corporate overhead. Revenue for the nine months ended September 30, 2001, was $40,493,000 or 28% higher than the same period in 2000. The growth in revenue was the result of the acquisition of Envirosafe Services of Idaho, Inc. the Grand View, Idaho hazardous waste disposal facility, now named US Ecology Idaho, Inc. ("USEI"), in February 2001. This increase in revenue resulted in a parallel increase of 36% in direct costs and 43% in selling, general and administrative costs over the same period a year ago. USEI is a part of the Chemical Services segment, which had a 131% and 108% growth in revenue for the three and nine month periods ended September 30, 2001, respectively. The LLRW division experienced operational difficulties at the Oak Ridge facility and revenues declined 45% and 28% for the same periods, respectively. Despite the positive and significant contribution that the Idaho facility has made to the Company's revenue and operating profit, it was insufficient to offset the material operating losses incurred at the Company's Oak Ridge facility and higher selling, general, and administrative expenses company wide. The net result was an operating loss of $928,000 for the quarter, although the Company posted an operating profit of $224,000 year-to-date. The calculations to report activities for both the three and nine months ended September 30, 2001 are exclusive of inter-company transactions and corporate eliminating entries. 17 SENIOR MANAGEMENT CHANGES On November 6, 2001 the Company's Board of Directors accepted the resignation of Jack K. Lemley as a Director and Chairman of the Board. On November 6, 2001, the Company's Board of Directors appointed Thomas A. Volini as a new Director. On November 6, 2001, the Company accepted the resignation L. Gary Davis, Vice President and Corporate Controller. On October 12, 2001, the Company eliminated several executive officer positions including Executive Vice President and Operations Manager, a position previously held by Zaki K. Naser, a Vice President position held by Robert S. Thorn, and a Vice President position previously held by Barbara A. Trenary. On October 5, 2001 the Executive Committee of the Board of Directors appointed Stephen A. Romano as Chief Operating Officer of the Company. On October 11, 2001 it appointed Mr. Romano as President. Also at the October 11, 2001 Executive Committee meeting of the Board of Directors, James R. Baumgardner, Senior Vice President and Chief Financial Officer, was appointed Secretary and Treasurer of the Company. Robert M. Trimble remains as the Company's General Counsel. 18 RESULTS OF OPERATIONS THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 The following table presents, for the periods indicated, the percentage of operating line items in the consolidated income statement to operating revenues:
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended September 30, 2001 September 30, 2001 September 30, 2000 September 30, 2000 ------------------ ------------------ ------------------ ------------------ $ % $ % $ % $ % -------- ----- ------ ---- ------ ----- ------- ---- Revenue 13,896 40,493 11,796 31,600 Direct operating costs 8,498 61.2% 23,572 58.2% 6,555 55.6% 17,327 54.8% ------ ------ ------ ------ Gross profits 5,398 38.8% 16,921 41.8% 5,241 44.4% 14,273 45.2% SG&A 6,326 45.5% 16,697 41.2% 4,228 35.8% 11,672 36.9% ------ ------ ------ ------ Income from operations (928) -6.7% 224 0.6% 1,013 8.6% 2,601 8.2% Investment income 24 2.0% 231 0.6% 95 -0.8% 143 0.5% Gain on sale of assets 50 0.4% 162 0.4% 45 0.4% 44 0.1% Interest expense (294) -2.1% (898) -2.2% (175) 1.5% (249) 0.8% Other (income) expense (34) -2.0% 990 2.4% 320 2.7% 775 2.5% ------ ------ ------ ------ Net income before income taxes (1,182) -8.5% 709 1.8% 1,108 9.4% 3,314 10.5% Income tax expense (benefit) 30 0.2% 114 0.3% 8 0.1% 69 0.2% ------ ------ ------ ------ Net income (1,212) -8.7% 595 1.5% 1,100 9.3% 3,245 10.3% Preferred stock dividends 99 0.7% 295 0.7% 100 0.8% 299 0.9% ------ ------ ------ ------ Net income (loss) available to common shareholders (1,311) -9.4% 300 0.7% 1,000 8.5% 2,946 9.3% ====== ====== ====== ======
19 CONDENSED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDING
Reported in $000 September 30, 2001 September 30, 2000 Chemical LLRW Chemical LLRW -------- ---- -------- ---- Revenue $ 27,619 $ 13,249 $ 13,298 $ 18,302 Direct operating costs 14,513 8,989 7,816 9,853 ----------- ------------- ------------- ------------ Gross profit 12,856 4,260 5,482 8,449 SG & A 6,825 5,166 2,769 5,314 ----------- ------------- ------------- ------------ Income (loss) from operations 6,031 (906) 2,713 3,135 Other income (expense) (3,063) (2,229) 1,485 2,092 ----------- ------------- ------------- ------------ Net income (loss) $ 2,968 $ (3,135) $ 4,198 $ 5,227 ----------- ------------- ------------- ------------
REVENUE
Period to Period Change Period to Period Change For the Three Months Ended For the Nine Months Ended September 30, 2001 and 2000 September 30, 2001 and 2000 --------------------------- --------------------------- _______$ _____ % _______$ _____% Statement of Operations Revenue Chemical Division 5,574 131 14,321 107 LLRW Division (3,373) (45) (5,053) (28) Corporate & Other (101) -- (375) --
For the three months ended September 30, 2001, the Company reported consolidated revenue of $13,896,000 or 18% increase compared to the corresponding period in 2000. Chemical Division revenue increased $5,574,000 or 131% over the same period last year primarily due to the revenue contribution provided from US Ecology Idaho, Inc., ("USEI") which was acquired in February 2001. USEI waste volume in the third quarter was driven by continued shipments from steel mills and U.S Army Corps of Engineers environmental remediation projects. Excluding USEI, Chemical Division revenue increased 22% reflecting the stability of its hazardous waste disposal business and continuing contribution from the Company's El Centro municipal waste landfill in south Texas. The LLRW division revenue declined by $3,373,000 or 45% in the third quarter, principally due to production and throughput issues at its Oak Ridge facility. Oak Ridge revenue in the third quarter was negatively impacted by reduced facility throughput caused by equipment maintenance downtime for certain routinely used volume reduction equipment. Lower waste receipts at the Richland, Washington facility, also hurt the LLRW division. Waste receipts at this rate-regulated disposal facility are sporadic over the year and are driven by customer schedules rather than sales efforts. For the nine months ended September 30, 2001 revenue for the Chemical Division increased $14,321,000 or 107% compared to the same period one year ago. Again, the increased revenue in the Chemical division was principally driven by the strong performance of the recently acquired treatment and disposal Idaho facility. However, all of the Company's chemical operations performed well during the first three quarters of the year. Excluding USEI, the Chemical Division posted an 11% increase in revenue year-to-date. 20 The Company's hazardous waste facilities in Robstown, Texas and Beatty, Nevada contributed to third quarter performance due primarily to the thermal treatment and recovery technology introduced at Beatty last year. Demand for the thermal treatment and recovery process is high and the Beatty site has a several month backlog of material to process. For the nine months ended September 30, 2001 the LLRW division revenue declined by $5,053,000 or 28%. In addition to the throughput issues previously discussed, Oak Ridge's revenue in 2001 has been negatively impacted by the Company's actions to concentrate its focus on the successful elimination of all aged waste. During the first half of 2001, the Company allocated significant resources in a successful effort to achieve this objective at the expense of reduced processing of revenue-generating waste. As a part of the USEI acquisition, the Company acquired a contract to operate a steel mill waste treatment plant in Sterling, Illinois on land owned by Northwestern Steel & Wire Company. The plant treats electric arc furnace dust, also known as K061, prior to disposal at an on-site landfill also owned by the steel mill. In December 2000, prior to the acquisition of USEI by the Company, Northwestern Steel & Wire, filed for protection from creditors under Chapter 11 of the federal bankruptcy code. In May 2001, the steel mill ceased operations and laid off most of its workforce. In response to the cessation of mill operations, USEI negotiated a set of final payments with the mill and the bankruptcy trustee, whereby the Company processed material through June with a defined payment schedule and then beginning July 1, continued treatment at a reduced fee for the reduced waste volumes. The Company has reduced headcount and cost at its Sterling operation to compensate for the lower waste volumes and lower processing rates. The Company now believes that it will be finished with all processing operations by the end of November. During November, the Company expects to process remaining waste, secure the facility for final closure by its permittee (Northwestern Steel & Wire) and depart from the facility immediately thereafter. Management does not believe that cessation of operations at Sterling will have a material adverse impact on the Company's future revenue or earnings. On July 24, 2001 the City of Corpus Christi passed a city ordinance establishing a set of fees to be imposed on haulers of solid waste within the city limits. It is the Company's belief that this ordinance is intended to recapture revenue that the City of Corpus Christi has lost since the opening of the Company's El Centro solid waste landfill in July of 2000. While the fee places a burden on waste haulers and eliminates some of the competitive cost advantage that El Centro has maintained over the City's landfill during the last year, the Company believes that it will continue to compete effectively with the City for solid waste within city limits. Moreover, El Centro will continue to have a price advantage on when competing with the City's landfill for solid waste collected outside the city limits. Nonetheless, it is expected that the new ordinance will result in reduced volumes at El Centro the remainder of the year compared to the first half of the year and no assurance can be given that the City will not enact additional ordinances to control the flow of solid waste in the region. The Company's corporate segment does not generate any revenue but the eliminating entries between companies and the closed facilities resulted in a period-to-period change for both the three and nine months ended September 30, 2001. DIRECT OPERATING COSTS The following table indicates the period-to-period change in direct operating costs:
Period to Period Change Period to Period Change For the Three Months Ended For the Nine Months Ended September 30, 2001 and 2000 September 30, 2001 and 2000 --------------------------- --------------------------- _______$ _____% _______$ _____% Statement of Operations-Direct Operating Costs Chemical Division 3,111 130 6,947 89 LLRW Division (1,324) (30) (864) (9) Corporate & Other 156 (80) 162 (48)
21 For the three and nine months ending September 30, 2001 direct operating costs increased for the Chemical Division but decreased in the LLRW Division. Total consolidated direct operating costs for the Company in the third quarter of 2001 were $8,498,000 or 61% of revenue compared to $6,555,000 or 56% of revenue during the same quarter last year. For the nine months, consolidated direct operating costs increased to $23,572,000 or 58% of revenue compared to $17,327,000 or 55% of revenue for the same period in 2000. For the Chemical Division, direct operating expenses increased to $5,496,000 or 54% of revenue in the quarter compared to the $2,385,000 or 56% of revenue during the same 3 months last year. The increase in direct operating costs in the Chemical Division was a result of the operations of the newly acquired USEI Idaho hazardous waste facility. Excluding the impact of USEI, direct operating expenses for the nine months in the Chemical Division dropped 4%, principally due to the lower cost airspace that has been constructed at the Robstown, Texas, and Beatty, Nevada disposal units. The LLRW Division's direct operating costs decreased for both the three and nine months ended September 30, 2001. As previously discussed, the decrease in revenue for LLRW at both Oak Ridge and Richland, Washington resulted in corresponding decreases in direct operating costs of $1,324,000 for the quarter and $864,000 year to date. The Company's corporate segment does not generate any direct operating costs. Certain eliminating entries between companies and the closed facilities resulted in a period-to-period change for both the three and nine months ended September 30, 2001, which was not material in amount. SELLING, GENERAL AND ADMINISTRATIVE COSTS (SG&A)
Period to Period Change Period to Period Change For the Three Months Ended For the Nine Months Ended September 30, 2001 and 2000 September 30, 2001 and 2000 --------------------------- --------------------------- _______$ _____% _______$ _____% Selling, General and Administrative Costs Chemical Division 1,437 125 4,056 146 LLRW Division 217 14 (148) (3) Corporate & Other 444 28 1,117 31
For the three months ending September 30, 2001, SG&A costs increased 50% to $6,326,000 from $4,228,000 over the same period one year ago. Approximately half of the increase was attributable to the USEI acquisition. Excluding USEI, SG&A increased 26% in the third quarter of this year compared to the same quarter in 2000. The increase in SG&A occurred at all sites and in multiple spending categories, e.g. salaries, travel & entertainment, consulting and professional expenses, insurance, legal costs, and selling expense. In addition, the third quarter SG&A figure was increased by a $500,000 accrual to cover an anticipated increase in radioactive waste burial fee costs for waste shipped from the Oak Ridge facility. This accrual covers about 20,000 cubic feet of waste on hand that will be processed then disposed of at an out of state disposal facility. The out of state facility has given notice of a fee increase from 33% to 45%. SG&A also increased for the nine months ending September 30, 2001 to $16,697,000 compared to $11,672,000 for the nine months ending September 30, 2000 or a 43% increase. Again, over half of the year-to-date $5,025,000 increase in SG&A can be ascribed to the USEI acquisition. Non-USEI SG&A increases are attributable to increased spending at all sites in multiple spending categories, e.g. salaries, travel & entertainment, consulting and professional expenses, insurance, legal costs, and selling expense. The LLRW division experienced a 14 percent increase and a 3 percent decreases in SG&A costs for the three and nine months ending September 30, 2001 respectively. The increase in SG&A spending in the LLRW Division 22 during the third quarter of this year was the result of an insurance premium adjustment and an increase in some one time charges for professional and consulting fees paid by the Richland facility. The Company's corporate segment incurs selling, general & administrative costs for legal, consulting, administrative salaries and related expenses of managing the business including certain eliminating entries between companies and the closed facilities. The overall increase of $444,000 for the three months period and $1,117,000 for the nine months was mainly attributed to additional headcount at the corporate office. In addition, spending increased in a number of areas including information systems, quality assurance, document control, and administration. During the first three quarters of the year, management directed the various sites, departments and division heads to reduce costs and expenses voluntarily. These efforts were largely unsuccessful. As previously discussed, the Company's Board of Directors made significant changes in the day-to-day management of the Company in October 2001. New management promptly implemented an aggressive cost cutting plan that included the elimination of several officer positions, other reduced headcount and a series of directives to cancel or postpone spending. This action included a two-phased reduction in force ("RIF") implemented on October 12 and November 9, 2001. This process reduced the number of full-time Company employees by 18 or a 6% reduction in total headcount. Almost all of the RIF occurred in the SG&A or overhead departments. In addition, new management has implemented an aggressive and restrictive plan to reduce travel, entertainment, professional, and consulting expenses. Management believes that its cost control initiatives will significantly reduce SG&A expenses in 2002. During the fourth quarter of 2001,the Company expects to incur approximately $250,000 of one-time, non-recurring charges associated with these staff reductions and reorganization. OTHER COSTS, INCOME AND INVESTMENT INCOME
Period to Period Change Period to Period Change For the Three Months Ended For the Nine Months Ended September 30, 2001 and 2000 September 30, 2001 and 2000 --------------------------- --------------------------- _______$ _____% _______$ _____% Other Costs Chemical Division (1,888) (263) (2,664) (83) LLRW Division (2,005) (188) (2,210) (184) Corporate & Other 3,539 (241) 5,820 --
Investment income is comprised principally of interest income earned on various investments in securities held-to-maturity, dividend income, and realized and unrealized gains and losses earned on the Company's investment portfolio classified as trading securities. The Company earned $24,000 of investment income for the third quarter of 2001, with the majority coming from the Company's Beatty facility for service charges on customer accounts and other miscellaneous investments. For the nine-months ended September 30, 2001, the Company reported investment income of $231,000 compared to $143,000 for the same nine months ending September 30, 2000. The Company closed an investment portfolio during the last twelve months and now maintains its excess cash in money market accounts and certificates of deposit. Included in this section is gain on sale of fixed assets for both 2001 and 2000. The Company arranged a sale and lease back in August of 2000 and each month recognizes a gain of $18,000. For the third quarter of 2001, interest expense increased to $294,000 from $175,000 during the third quarter last year. Likewise, interest expense for the nine months ended September 30, 2001 increased to $898,000 from $249,000 last year. The higher interest expense is the result of increased borrowing on the credit facility and the assumption of the $8.5 million industrial revenue bond obligation for USEI. Other income (loss) for the three and nine months ended September 30, 2001 was a loss of $34,000 and income of $990,000 year to date, compared to other income of $320,000 and $775,000 for the same periods of 2000. The main reason for the increase in other income in 2001, related to burial fee adjustments the Company made for the elimination of aged waste at the Oak Ridge facility. With the exception of one waste stream requiring special processing, the Company successfully eliminated the aged waste backlog from the Oak Ridge facility during the first 23 six months of 2001. This special waste stream required an additional reserve accrual of $100,000 in the current quarter based on bids received to process and a total reserve for special waste of $350,000. Included in the year to date transactions the Company has made reclassification entries for the post-acquisition of USEI bond interest premium for $177,000, restructuring fees of $50,000, $150,000 for prior years accrual of professional fees, $90,000 for the State of Washington business and occupational tax, approximately $500,000 for future burial fees and about $20,000 for cell and other amortization adjustments all totaling approximately $987,000. OPERATING EARNINGS AND NET INCOME
Period to Period Change Period to Period Change For the Three Months Ended For the Nine Months Ended September 30, 2001 and 2000 September 30, 2001 and 2000 --------------------------- --------------------------- _______$ _____% _______$ _____% Income from Operations Chemical Division 1,026 144 3,318 122 LLRW Division (2,266) (135) (4,041) (129) Corporate & Other (701) 51 (1,654) 51 EBINT (1) Chemical Division 3,235 (250) 3,907 146 LLRW Division (2,308) (133) (3,968) (125) Corporate & Other (512) (39) 1,022 (30) Consolidated Net Income (2,311) (231) (2,547) (86) EBITDA (2) (1469) (101) 1,188 (29)
(1) EBINT represents earnings from operations before deducting interest and taxes. (2) EBITDA represents earnings from operations before deducting interest and taxes plus depreciation and amortization expense. Neither EBINT or EBITDA are compiled in accordance with GAAP and neither may be compared to other similarly titled measures of other companies due to the lack of GAAP definition. For the three months ending September 30, 2001, the Company's Chemical Division posted income from operations of $1,739,000 or a 144% improvement over the $713,000 reported for the same period of 2000. The Division also posted a strong performance for the nine months ended September 30, 2001 generating $3,318,000 more operating income than one year ago. The principal reason for this improvement is the strong performance of the newly acquired Grand View, Idaho treatment and disposal facility, although the Robstown, Texas and Beatty, Nevada disposal facilities also improved performance over last year. The LLRW Division's operating income was lower by $2,226,000 and $4,041,000 for the three and nine months ended September 30, 2001, respectively, compared to the same periods one year ago. LLRW division revenue declined by 45% for the three months ended September 30, 2001 and 28% for the nine months ended on the same date due primarily to the Oak Ridge facility's focus on eliminating aged waste and the related revenue decrease. Throughput and operational problems have also negatively impacted revenue and costs at the Oak Ridge facility during the first 9 months of 2001. With the aged waste backlog essentially eliminated and recent headcount reductions, and a change in site management, executive management expects improved revenue and earnings. The Richland Washington facility revenue is limited by rate base regulations and experienced lower revenue for the nine months ended September 30, 2001 than for September 30, 2000. Net income is measured at the consolidated level after corporate allocations, taxes and eliminating entries. For the three and nine months ended September 30, 2001 the Company's consolidated results reflected a net loss of $1,212,000 and net income of $595,000 respectively, or a decrease of 231% and 86% compared to the same periods 24 one year ago. The main reason for this decrease in profitability was the significant operating losses at the Oak Ridge facility. Management believes that its cost control initiatives, reduced staff, and reductions in spending will improve the Company's operating performance in future periods. INCOME TAXES The Company's effective income tax (benefit) rates were 10% and 3% for the quarters ending September 30, 2001 and 2000 respectively. The third quarter income tax expense of $30,000 and credit of $8,000 for each of the quarters ending September 30, 2001, and 2000, respectively is for payments on different state, local, and franchise taxes. For the nine months ended September 30, 2001 the Company incurred $114,000 compared to $69,000 one year ago. The Company has a valuation allowance of approximately $19.8 million for deferred federal tax assets with more than $2.7 million of limited loss carry-forwards and $34.4 million of unlimited net operating loss carry-forwards. The Company does not anticipate a federal tax liability for 2001, however, the same credits are not available for state and local taxes and the Company estimates at least $150,000 of tax obligation for 2001. SEASONAL EFFECTS Operating revenues are generally lower in the winter months than the warmer summer months. However, both Chemical and LLRW Services revenue are more affected by market conditions than seasonality. NEW ACCOUNTING PRONOUNCEMENTS The Financial Accounting Standards Board has recently issued Statement of Financial Accounting Standards 143 "Accounting for Asset Retirement Obligations." Management believes the statement will have no material impact on the Company's financial statements. CAPITAL RESOURCES AND LIQUIDITY On September 30, 2001, cash, cash equivalents and short-term investments totaled $1,460,000, a decrease of $2,662,000 from December 31, 2000. The decrease in cash was due to on-going capital expenditures, customer rebates at the rate-regulated facility in Richland, Washington, payments for aged waste disposal, and the funding of operating losses at Oak Ridge. Accounts receivable totaled $11,299,000 at September 30, 2001 or an increase of $1,460,000 from December 31, 2000. The increase in accounts receivable is due to the addition of USEI. The Company's "days sales outstanding" increased in the third quarter to 80 days at September 30, compared to 71 days at June 30, and 73 days at March 31, 2001. As of September 30, 2001 the Company's liquidity, as measured by the current ratio, increased to 1.19:1 compared to 1.17:1 at December 31, 2000. The Company's working capital increased to $2,534,000 from $2,279,000 on December 31, 2000 but decreased from $5,774,000 on March 31, 2001. The main reason for the decrease in working capital in 2001 was because the Company continued to pay vendor obligations and reduced available cash on hand. Overall this is an improvement from one year ago, when the Company had a working capital deficit of $2,885,000 on September 30, 2000. Given this increase in liquidity and availability of capital, management has made it a priority to increase cash flow through improved collections, repay some or all of the line of credit, and extend the current banking arrangement. If the Company is unsuccessful in its negotiations with its bank and it is unable to extend the maturity of the credit facility past December 31, 2002, it will reclassify the line of credit borrowings as short term consistent with GAAP. Reclassifying the line of credit borrowings short term would have a material, adverse affect on the Company's working capital position and possibly trigger bank liquidity covenants. Since December 31, 2000, the Company's leverage has increased, as evidenced by debt to equity ratio of 2.16:1.0 at September 30, 2001, compared to 1.53:1.0 at fiscal year-end 2000. The debt to equity ratio is defined as total debt divided by shareholders equity. This increase in the Company's leverage is principally the result of the assumption of the $8,500,000 industrial revenue bond and $12,000,000 of other USEI liabilities, and a $1.2 million third quarter loss. 25 The Company maintains a banking relationship with Wells Fargo Bank in Boise, Idaho that provides an $8,000,000 line of credit. At quarter-end and on November 12, 2001, the Company had borrowed $4,850,000 not including the $1,150,000 reserved for a standby letter of credit and has $442,000 available for borrowing. SUBSEQUENT EVENTS In October 2001, the Company sold the primary assets of its Nuclear Equipment Service Center assets in Oak Ridge, Tennessee to Alaron Corporation. The Center had provided motor and other large component decontamination and rebuilding services primarily to electric utilities. The Company is exiting this particular market niche with the Alaron asset. The Company expects a gain on the sale but has not completed the accounting for this transaction. The Company expects to net approximately $425,000 after the Company repays Wells Fargo bank for certain assets sold from the 2000 sale and lease back agreement. PART II OTHER INFORMATION. ITEM 1. LEGAL PROCEEDINGS. In the ordinary course of conducting business, the Company becomes involved in judicial and administrative proceedings involving federal, state and local governmental authorities, individuals or groups of individuals in connection with permitting or re-permitting facilities, alleged violations of existing permits, or damages claimed as a result of alleged exposure to hazardous substances purportedly released from Company operated sites, and related litigation. The Company maintains insurance intended to cover property, environmental and personal injury claims asserted as a result of its operations. Periodically management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred in connection therewith. At this time, management believes that resolution of pending matters will not have a material adverse effect on the Company's financial position, results of operations or cash flows. Except as described below, there were no material developments with regard to previously reported legal proceedings: US Ecology, Inc. v. Dames & Moore, Inc., Case No. CV OC 0101396D, Fourth Judicial District Court, Ada County, Idaho and related case Dames & Moore, Inc. v. US Ecology, Inc., et al., Index No. 602567-01, Supreme Court of New York, New York County, New York These combined cases were submitted to mediation at the end of October. As a result of the progress made toward settlement in this first session of mediation, another mediation session has been scheduled to convene around the end of January 2002. U.S. Ecology Corporation and Oil, Chemical & Atomic Workers International Union, AFL-CIO, Cases 10-Ca-30847 and 10-Ca-31149. On May 23, 2000, a three-member panel of the NLRB rendered an adverse ruling against the Company's subsidiary and issued a finding of unfair labor practices. On May 26, 2000, the Company's subsidiary filed with the U.S. Sixth Circuit Court Of Appeals a petition for review of the decision of the NLRB and a motion to stay the order of the NLRB pending review by the court. The Sixth Circuit Court of Appeals heard oral arguments on this matter on October 31, 2001. No ruling has been issued in this matter. General Motors Corporation v. American Ecology Environmental Services Corp., et al., Case No. 3-99CV2626-L, U.S. District Court, Northern District of Texas. On August 30, 2001, the trial court granted partial summary judgment in favor of General Motors, finding that the Company had a contractual obligation to defend and indemnify GM for claims based on the Company's negligence. The trial on the apportionment of liability is currently scheduled for late December 2001. 26 Zurich American Insurance Company v. National Union Fire Insurance Company of Pittsburgh, et al incl. AEC, AEESC, AEMC and AESC; Supreme Court of State of New York, County of New York; Case No. 604662/99 On September 28, 2001 the Company settled this case with the plaintiffs, and have filed a joint motion to dismiss. The settlement did not have a material impact on the Company's financial position, results of operations, or cash flows. One of the Company's principal subsidiaries is a plaintiff in a case against the State of California, seeking to protect its investment in the proposed Ward Valley disposal site. US Ecology did not prevail in two federal lawsuits that had sought to recover development costs, lost profits and lost opportunity costs related to development of the Ward Valley facility. The remaining lawsuit, filed against the State of California on May 2, 2000, seeks (1) a writ of mandate to compel California to acquire the property to build the Ward Valley project, (2) a court declaration of the state's duties to the Company, and (3) damages in excess of $162 million, primarily for costs incurred in developing the project, interest, and future lost profits. On October 24, 2000, the California court granted a State motion to dismiss the case on demurrer. The Company appealed the trial court's decision, and the California appellate court upheld the trial courts decision in part and denied it in part, remanding the case for further proceedings on the Company's promissory estoppel claim. On October 15, 2001, both the Company and the State filed petitions for review with the California Supreme Court. The California Supreme Court should decide whether to grant review of the case by the end of 2001 or early 2002. The Company has intervened in a lawsuit against the State of Nebraska seeking recovery of approximately $6.5 million investment and future lost profits related to development of the proposed Central Interstate Compact LLRW disposal facility near Butte, Nebraska. The trial court has ruled on several preliminary matters that are now under appeal by the State of Nebraska. The trial court has not yet ruled on whether the Company may be awarded money damages. On April 12, 2000, the appeals court upheld the trial court's ruling that Nebraska is not immune to suit in this case by the CIC and also upheld the trial court's preliminary injunction prohibiting Nebraska from taking any further steps in the state license hearing process until the matter is decided. The case was scheduled by the Court to go to trial in 2002. Discovery is now underway. ITEM 2. CHANGES IN SECURITIES. The Company issued a reverse stock split followed immediately by an equal, forward stock split with a record date of June 29, 2001. The Company eliminated 3,842 common shareholders and retired 60,801 common shares at a 10-day average trading price from the record date of $2.43 per common share. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits 27
Incorporated by Reference from Exhibit No. Description Registrant's - ------------------------------------------------------------------------------------------------------------------- 3.1 Restated Certificate of Incorporation, as amended 1989 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 3.2 Certificate of Amendment to Restated Certificate of Incorporation dated Form S-4 dated 12-24-92 June 4, 1992 - ------------------------------------------------------------------------------------------------------------------------ 3.3 Amended and Restated Bylaws dated February 28, 1995 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.1 Sublease dated February 26, 1976, between the State of Washington, the Form 10 filed 3-8-84 United States Dept. of Commerce and Economic Development, and Nuclear Engineering Company with Amendments dated January 11, 1980, and January 14, 1982. - ------------------------------------------------------------------------------------------------------------------------ 10.2 Lease dated May 1, 1977 ("Nevada Lease"), between the state of Nevada, Form 10 filed 3-8-84 Dept. of Human Resources and Nuclear Engineering Company, with Addendum thereto, dated December 7, 1982 - ------------------------------------------------------------------------------------------------------------------------ 10.3 Addendum to Nevada Lease dated March 28, 1988 1989 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.4 Nevada State Health Division, Radioactive Material License issued to US 1989 Form 10-K Ecology, Inc. dated December 29, 1989 - ------------------------------------------------------------------------------------------------------------------------ 10.5 Administrative Order by Consent between the United States Environmental 1985 Form 10-K Protection Agency and US Ecology, Inc. ("USE") dated September 30, 1985 - ------------------------------------------------------------------------------------------------------------------------ 10.6 State of Washington Radioactive Materials License issued to US Ecology, 1986 Form 10-K Inc. dated January 21, 1987 - ------------------------------------------------------------------------------------------------------------------------ 10.11 Agreement between the Central Interstate Low-Level Radioactive Waste Compact Commission and US Ecology, Inc. for the development of a facility for the disposal of low-level radioactive waste dated January 28, 1988 ("Central Interstate Compact Agreement") 2nd Quarter 1988 10-Q - ------------------------------------------------------------------------------------------------------------------------ 10.12 Amendment to Central Interstate Compact Agreement May 1, 1990 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.13 Second Amendment to Central Interstate Compact Agreement dated June 24, 1994 Form 10-K 1991 - ------------------------------------------------------------------------------------------------------------------------ Third Amendment to Central Interstate Compact Agreement dated July 1, 10.14 1994 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.15 Settlement agreement dated May 25, 1988 among the Illinois Department Form 8-K dated 6-7-88 of Nuclear Safety, US Ecology, Inc. and American Ecology Corporation of a December 1978 action related to the closure, care and maintenance of the Sheffield, Illinois LLRW disposal site - ------------------------------------------------------------------------------------------------------------------------ 10.16 Nevada Division of Environmental Protection Permit for Hazardous Waste 1988 Form 10-K Treatment, Storage and Disposal (Part B) issued to US Ecology, Inc. dated June 24, 1988 - ------------------------------------------------------------------------------------------------------------------------ 10.17 Texas Water Commission Permit for Industrial Solid Waste Management Site (Part B) issued to Texas Ecologists, Inc. dated December 5, 1988 1988 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.18 Memorandum of Understanding between American Ecology Corporation and 1989 Form 10-K the State of California dated August 15, 1988 - ------------------------------------------------------------------------------------------------------------------------ 10.19 United States Environmental Protection Agency approval to dispose of 1989 Form 10-K non-liquid polychlorinated biphenyl (PCB) wastes at the Beatty, Nevada chemical waste disposal facility - ------------------------------------------------------------------------------------------------------------------------ 10.26 Amended and Restated American Ecology Corporation 1992 Stock Option Proxy Statement dated 4-26-94 Plan *
28
Incorporated by Reference from Exhibit No. Description Registrant's - ------------------------------------------------------------------------------------------------------------------- 10.27 Amended and Restated American Ecology Corporation 1992 Outside Director Stock Option Plan * Proxy Statement dated 4-26-94 - ------------------------------------------------------------------------------------------------------------------------ 10.28 American Ecology Corporation 401 (k) Savings Plan * 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.29 American Ecology Corporation Retirement Plan * 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------ 10.33 Lease Agreement between American Ecology Corporation and VPM 1988-1, Form S-4 filed 12-24-92 Ltd. dated October 14, 1992 - ------------------------------------------------------------------------------------------------------------------------ 10.34 Rights Agreement dated as of December 7, 1993 between American Ecology Corporation and Chemical Shareholders Services Group, Inc. as Rights Agent Form 8-K dated 12-7-93 - ------------------------------------------------------------------------------------------------------------------------ 10.36 Settlement Agreement dated September 24, 1993 by US Ecology, Inc., the 1993 Form 10-K State of Nevada, the Nevada State Environmental Commission, and the Nevada Dept. of Human Resources - ------------------------------------------------------------------------------------------------------------------------ 10.37 Settlement Agreement dated as of January 19, 1994 by and among US 1993 Form 10-K Ecology, Inc., Staff of the Washington Utilities and Transportation Commission, Precision Castparts Corp., Teledyne Wah Chang, Portland General Electric Company, the Washington Public Power Supply System and Public Service Company of Colorado. - ------------------------------------------------------------------------------------------------------------------------ 10.38 Agreement dated January 28, 1994 between American Ecology Corporation, Edward F. Heil, Edward F. Heil as trustee for Edward F. Heil, Jr., Sandra Heil, and Karen Heil Irrevocable Trust Agreement #2, Thomas W. McNamara and Thomas W. McNamara as a trustee of Form 8-K dated 2-3-94 The Jenner & Block Profit Sharing Trust No. 082. - ------------------------------------------------------------------------------------------------------------------------ 10.50 Increase Additional Number of Share Options to Directors Plan of 1992 Form S-8 dated 12-30-98 - ------------------------------------------------------------------------------------------------------------------------ 10.51 Increase Additional Number of Share Options of 1992 Employees Plan Form S-8 dated 12-20-99 - ------------------------------------------------------------------------------------------------------------------------ 10.52 Amended and Restated American Ecology Corporation 1992 Outside Director Proxy Statement dated 4-8-98 Stock Option Plan - ------------------------------------------------------------------------------------------------------------------------ 10.53 Amended and Restated American Ecology Corporation 1992 Stock Option Plan Proxy Statement dated 4-12-99 - ------------------------------------------------------------------------------------------------------------------------ 21 List of Subsidiaries 1994 Form 10-K - ------------------------------------------------------------------------------------------------------------------------
*Management contract or compensatory plan. (b) Reports on Form 8-K
Incorporated by Reference from Exhibit No. Description Registrant's - ------------------------------------------------------------------------------------------------------------------- 16.1 Change of Auditors Letter - November 25, 1996 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ 10.44 Series E Redeemable Convertible Preferred Stock - November 27, 1996 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ 10.45 Third Amended & Restated Credit Agreement - February 18, 1997 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ 10.48 Court Judgment Houston 88-January 26, 1998 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ 10.49 Bank Restructure-Chase Bank of Texas N.A. November 19, 1998 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ 10.54 Acquisition of Envirosafe of Idaho on February 2, 2001 Form 8-K - ------------------------------------------------------------------------------------------------------------------------ Amended Item 2 and 7 of the report on Form 8-K for the acquisition 10.55 of Envirosafe of Idaho Form 8-K/A filed April 16, 2001 - ------------------------------------------------------------------------------------------------------------------------ 10.56 Resignation of Director and other officers Form 8-K filed November 8, 2001 - ------------------------------------------------------------------------------------------------------------------------
29 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMERICAN ECOLOGY CORPORATION (Registrant) Date: November 13, 2001 By: ------------------------------------ Stephen A. Romano President and Chief Operating Officer Date: November 13, 2001 By: ------------------------------------ James R. Baumgardner Senior Vice President, Chief Financial Officer, Secretary and Treasurer 30 -----END PRIVACY-ENHANCED MESSAGE-----