BUSINESS COMBINATION

9 Months Ended

Sep. 30, 2012

BUSINESS COMBINATION

BUSINESS COMBINATION

NOTE 6.BUSINESS COMBINATION

On May 31, 2012, the Company acquired 100% of the outstanding shares of Dynecol, Inc. (“Dynecol”), a chemical and industrial byproducts treatment and reuse facility located in Detroit, Michigan and renamed the facility US Ecology Michigan, Inc. (“US Ecology Michigan”). The total purchase price consisted of $10.8 million in cash, after giving effect to working capital adjustments, and was funded through borrowings under the Reducing Revolving Line of Credit (as defined in Note 8 below).

The following table summarizes the consideration paid for US Ecology Michigan and the preliminary fair value of assets acquired and liabilities assumed at the acquisition date.

$s in thousands	Initial Purchase Price Allocation			Working Capital Adjustments			Purchase Price Allocation at September 30, 2012
Current assets	$	2,281		$	(67	)	$	2,214
Property and equipment	6,552			—			6,552
Identifiable intangible assets	1,940			—			1,940
Current liabilities	(1,268		)	—			(1,268		)
Total identifiable net assets	9,505			(67		)	9,438
Goodwill	1,745			(418		)	1,327
Total purchase price	$	11,250		$	(485	)	$	10,765

Goodwill of $1.3 million arising from the acquisition is the result of several factors. US Ecology Michigan has a talented assembled workforce of approximately 40 employees principally serving the mid-western and eastern U.S. industrial markets for nearly 40 years. The acquisition of US Ecology Michigan strengthens our mid-western and eastern U.S. presence to better serve key North American hazardous waste markets. In addition, US Ecology Michigan provides us with an opportunity to win more discrete waste clean-up project “Event Business” work; expand penetration with national accounts; improve and enhance transportation, logistics, and service offerings with existing customers; and attract new customers. All of the goodwill recognized was assigned to our Operating Disposal Facilities segment and is expected to be deductible for income tax purposes over a fifteen-year amortization period.

The following unaudited pro forma financial information presents the combined results of operations as if US Ecology Michigan had been combined with us beginning on January 1, 2011. The pro forma financial information includes the accounting impact of the business combination, including the amortization of intangible assets, depreciation of property, plant and equipment and interest expense.  The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the period presented, nor should it be taken as an indication of our future consolidated results of operations.

	(unaudited)				(unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
$s in thousands, except per share amounts	2012		2011		2012		2011
Pro forma combined:
Revenue	$	45,739	$	43,982	$	124,233	$	124,863
Net income	$	8,662	$	4,050	$	19,402	$	12,681
Earnings per share
Basic	$	0.48	$	0.22	$	1.06	$	0.70
Diluted	$	0.47	$	0.22	$	1.06	$	0.70

Revenue from US Ecology Michigan included in US Ecology’s consolidated statements of operations was $2.9 million and $4.0 million, respectively, for the three month and nine months ended September 30, 2012. Operating income from US Ecology Michigan included in US Ecology’s consolidated statements of operations was $1,000 and $74,000, respectively, for the three month and nine months ended September 30, 2012. Acquisition-related costs of $125,000 and $262,000 were included in selling, general and administrative expenses in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2012, respectively.