NOTE 16. OPERATING SEGMENTS

Financial Information by Segment

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.

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 September 30, 2015
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	76,079	$	—	$	—	$	76,079
Services Revenue:
Transportation and Logistics (1)	20,191		5,694		—		25,885
Industrial Cleaning (2)	—		27,532		—		27,532
Technical Services (3)	—		16,584		—		16,584
Remediation (4)	—		1,253		—		1,253
Other (5)	—		1,081		—		1,081

Total Revenue	$	96,270	$	52,144	$	—	$	148,414


Depreciation, amortization and accretion	$	8,664	$	1,885	$	126	$	10,675
Capital expenditures	$	4,480	$	1,401	$	436	$	6,317
Total assets	$	599,136	$	201,627	$	62,613	$	863,376

	Three Months Ended September 30, 2014
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	84,778	$	—	$	—	$	84,778
Services Revenue:
Transportation and Logistics (1)	23,256		11,657		—		34,913
Industrial Cleaning (2)	—		22,142		—		22,142
Technical Services (3)	—		15,985		—		15,985
Remediation (4)	—		11,814		—		11,814
Other (5)	—		1,232		—		1,232

Total Revenue	$	108,034	$	62,830	$	—	$	170,864


Depreciation, amortization and accretion	$	9,748	$	3,271	$	276	$	13,295
Capital expenditures	$	4,924	$	3,822	$	506	$	9,252
Total assets	$	627,340	$	229,971	$	59,838	$	917,149

	Nine Months Ended September 30, 2015
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	224,007	$	—	$	—	$	224,007
Services Revenue:
Transportation and Logistics (1)	54,878		19,986		—		74,864
Industrial Cleaning (2)	—		69,980		—		69,980
Technical Services (3)	—		46,807		—		46,807
Remediation (4)	—		5,492		—		5,492
Other (5)	—		3,647		—		3,647

Total Revenue	$	278,885	$	145,912	$	—	$	424,797


Depreciation, amortization and accretion	$	26,167	$	7,920	$	405	$	34,492
Capital expenditures	$	17,564	$	6,250	$	1,879	$	25,693
Total assets	$	599,136	$	201,627	$	62,613	$	863,376

	Nine Months Ended September 30, 2014
$s in thousands	Environmental Services		Field & Industrial Services		Corporate		Total
Treatment & Disposal Revenue	$	178,254	$	—	$	—	$	178,254
Services Revenue:
Transportation and Logistics (1)	41,012		12,895		—		53,907
Industrial Cleaning (2)	—		25,827		—		25,827
Technical Services (3)	—		17,994		—		17,994
Remediation (4)	—		12,841		—		12,841
Other (5)	—		1,414		—		1,414

Total Revenue	$	219,266	$	70,971	$	—	$	290,237


Depreciation, amortization and accretion	$	19,415	$	3,759	$	464	$	23,638
Capital expenditures	$	12,751	$	4,410	$	749	$	17,910
Total assets	$	627,340	$	229,971	$	59,838	$	917,149

(1)

Includes such services as collection, transportation and disposal of non-hazardous and hazardous waste. Prior to the acquisition of EQ on June 17, 2014, services within Environmental Services included transportation services.

(2)

Includes such services as industrial cleaning and maintenance for utilities, refineries, chemical plants, pulp and paper mills, steel and automotive plants, and refinery services such as tank cleaning, centrifuge and temporary storage.

(3)

Includes such services as Total Waste Management (“TWM”) programs, retail services, laboratory packing, less-than-truck-load (“LTL”) service and Household Hazardous Waste (“HHW”) collection.

(4)

Includes such services as site assessment, onsite treatment, project management and remedial action planning and execution.

(5)

Includes such services as emergency response and marine.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)

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, non-cash impairment charges and other income/expense, which are not considered part of usual business operations. Adjusted EBITDA is a complement to results provided in accordance with 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 September 30,						Nine Months Ended September 30,
$s in thousands	2015			2014			2015			2014
Adjusted EBITDA:
Environmental Services	$	39,244		$	45,483		$	112,859		$	94,966
Field & Industrial Services	5,611			6,136			13,709			7,256
Corporate	(11,101		)	(11,180		)	(34,161		)	(24,413		)

Total	33,754			40,439			92,407			77,809


Reconciliation to Net income:
Income tax expense	(6,858		)	(8,406		)	(14,815		)	(17,880		)
Interest expense	(5,081		)	(4,543		)	(16,208		)	(5,488		)
Interest income	17			11			64			94
Foreign currency loss	(994		)	(830		)	(1,769		)	(1,027		)
Other income	387			301			1,156			557
Impairment charges	—			—			(6,700		)	—
Depreciation and amortization of plant and equipment	(6,591		)	(8,318		)	(21,726		)	(16,730		)
Amortization of intangibles	(2,952		)	(4,018		)	(9,558		)	(5,233		)
Stock-based compensation	(646		)	(344		)	(1,736		)	(869		)
Accretion and non-cash adjustment of closure & post-closure liabilities	(1,132		)	(959		)	(3,208		)	(1,675		)

Net income	$	9,904		$	13,333		$	17,907		$	29,558

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 September 30,				Nine Months Ended September 30,
$s in thousands	2015		2014		2015		2014
United States	$	138,367	$	155,043	$	392,698	$	243,689
Canada	10,047		15,821		32,099		46,548

Total revenue	$	148,414	$	170,864	$	424,797	$	290,237

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

	September 30,		December 31,
$s in thousands	2015		2014
United States	$	396,295	$	446,412
Canada	51,279		59,939

Total long-lived assets	$	447,574	$	506,351