OPERATING SEGMENTS

3 Months Ended

Mar. 31, 2015

OPERATING SEGMENTS

OPERATING SEGMENTS

NOTE 15.   OPERATING SEGMENTS

Financial Information by Segment

Subsequent to our acquisition of EQ on June 17, 2014, we made changes to the manner in which we manage our business, make operating decisions and assess our performance. Under our new structure our operations are managed in two reportable segments reflecting our internal reporting structure and nature of services offered as follows:

Environmental Services - This segment includes all of the legacy US Ecology operations and the legacy EQ treatment and disposal facilities. It provides a broad range of hazardous material management services including transportation, recycling, treatment and disposal of hazardous and non-hazardous waste at Company-owned landfill, wastewater and other treatment facilities.

Field & Industrial Services - This segment includes all of the field and industrial service business of the legacy EQ operation. It provides packaging and collection of hazardous waste and total waste management solutions at customer sites and through our 10-day transfer facilities.  Services include on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste.  This segment also provides specialty services such as high-pressure and chemical cleaning, centrifuge and materials processing, tank cleaning, decontamination, remediation, transportation, spill cleanup and emergency response and other services to commercial and industrial facilities and to government entities.

Prior to the acquisition of EQ, our operations were managed in two reportable segments: Operating Disposal Facilities and Non-Operating Disposal Facilities. The Operating Disposal Facility segment represented disposal facilities accepting hazardous and radioactive waste while the Non-Operating Disposal Facility segment represented facilities not accepting hazardous and/or radioactive waste or formerly proposed new facilities. All operations of both the former Operating Disposal Facilities and the Non-Operating Disposal Facilities segment are now included in the Environmental Services segment. None of the Company’s operations prior to the acquisition of EQ have been assigned to the Field & Industrial Services segment.

The operations not managed through our two reportable segments are recorded as “Corporate.” Corporate selling, general and administrative expenses include typical corporate items such as legal, accounting and other items of a general corporate nature. Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Inter-company transactions have been eliminated from the segment information and are not significant between segments.

Summarized financial information of our reportable segments is as follows:

	Three Months Ended March 31, 2015
$s in thousands	Environmental Services			Field & Industrial Services			Corporate		Total
Revenue by Service Offering:
Treatment & Disposal	$	76,511		$	—		$	—	$	76,511
Services	17,613			45,414			—		63,027
Intersegment	(2,699		)	(188		)	—		(2,887		)
Total Revenue	$	91,425		$	45,226		$	—	$	136,651
Depreciation, amortization and accretion	$	8,671		$	3,010		$	135	$	11,816
Capital expenditures	$	6,935		$	1,754		$	542	$	9,231
Total assets	$	602,647		$	208,733		$	66,448	$	877,828

	Three Months Ended March 31, 2014
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Revenue by Service Offering:
Treatment & Disposal	$	44,947	$	—	$	—	$	44,947
Services	8,407		—		—		8,407
Intersegment	—		—		—		—
Total Revenue	$	53,354	$	—	$	—	$	53,354
Depreciation, amortization and accretion	$	4,507	$	—	$	14	$	4,521
Capital expenditures	$	4,593	$	—	$	182	$	4,775
Total assets	$	155,149	$	—	$	145,007	$	300,156

The primary financial measure used by management to assess segment performance is Adjusted EBITDA.  Adjusted EBITDA is defined as net income before net interest expense, income tax expense, depreciation, amortization, stock based compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss and other income/expense, which are not considered part of usual business operations.  Adjusted EBITDA is a complement to results provided in accordance with accounting principles generally accepted in the United States (“GAAP”) and we believe that such information provides additional useful information to analysts, stockholders and other users to understand the Company’s operating performance. Since Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.  Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our results as reported under GAAP.  Some of the limitations are:

· Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

· Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;

· Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;

· Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; and

· Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

A reconciliation of Adjusted EBITDA to Net Income is as follows:

	Three Months Ended March 31,
$s in thousands	2015			2014
Adjusted EBITDA:
Environmental Services	$	37,129		$	24,044
Field & Industrial Services	3,109			—
Corporate	(13,008		)	(3,769		)
Total	27,230			20,275
Reconciliation to Net income:
Income tax expense	(2,902		)	(5,227		)
Interest expense	(5,694		)	(86		)
Interest income	41			44
Foreign currency loss	(1,067		)	(940		)
Other income	536			86
Depreciation and amortization of plant and equipment	(7,479		)	(3,839		)
Amortization of intangibles	(3,302		)	(352		)
Stock-based compensation	(463		)	(270		)
Accretion and non-cash adjustment of closure & post-closure liabilities	(1,035		)	(330		)
Net income	$	5,865		$	9,361

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

We provide services in the United States and Canada. Revenues by geographic location where the underlying services were performed were as follows:

	Three Months Ended March 31,
$s in thousands	2015		2014
United States	$	124,762	$	37,270
Canada	11,889		16,084
Total revenue	$	136,651	$	53,354

Long-lived assets, comprised of property and equipment and intangible assets net of accumulated depreciation and amortization, by geographic location are as follows:

	March 31,		December 31,
$s in thousands	2015		2014
United States	$	440,421	$	446,412
Canada	54,193		59,939
Total long-lived assets	$	494,614	$	506,351