Back to GetFilings.com
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED DECEMBER 31, 1999 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 NO.)
805 W. IDAHO, SUITE #200, BOISE, IDAHO 83702-8916
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (208) 331-8400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At March 27, 2000, Registrant had outstanding 13,704,050 shares of its Common
Stock. The aggregate market value of the Registrant's voting stock held by
non-affiliates at this date was approximately $20,546,092 based on the closing
price of $2.56 per share as reported on the NASDAQ Stock Market, Inc.'s National
Market System. For purposes of the foregoing calculation, all directors and
officers of the Registrant have been deemed to be affiliates, but the Registrant
disclaims that any of such directors or officers is an affiliate.
Documents Incorporated by Reference
Portions of the Proxy Statement for 1999
Annual Meeting of Stockholders. Part III
2
TABLE OF CONTENTS
PART I
Item 1. Business................................................................................ 3
Item 2. Properties.............................................................................. 10
Item 3. Legal Proceedings....................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders..................................... 13
PART II
Item 5. Market of Registrants Common Equity and Related Stockholders Matters.................... 14
Item 6. Selected Financial Data................................................................. 15
Item 7. Management's Discussion and Analysis.................................................... 16
Item 8. Financial Statements and Supplementary Data............................................. 26
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.................................................................... 45
PART III
Items 10, 11, 12 and 13 are incorporated by reference with the definitive
proxy statement ........................................................................ 46
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K........................ 48
2
3
PART I
ITEM 1. BUSINESS
American Ecology Corporation, through its subsidiaries (collectively "the
Company" or "AEC") provides radioactive and hazardous materials management
services to commercial and government entities, such as nuclear power plants,
medical and academic institutions, and petro-chemical facilities. Headquartered
in Boise, Idaho, the Company is the one of the nation's oldest radioactive and
hazardous chemical waste companies. The Company and its predecessor companies
have been in business for 48 years and was incorporated in 1952. The Company
currently operates in multiple states and employs approximately 230 persons.
The Company operates through its wholly owned subsidiaries. The Company's
principal subsidiaries are: US Ecology, Inc., a California corporation ("US
Ecology"), Texas Ecologists, Inc., a Texas corporation wholly owned by US
Ecology ("Texas Ecologists"); American Ecology Recycle Center, Inc., a Delaware
corporation ("AERC"), American Ecology Environmental Services Corporation, a
Texas corporation ("AEESC"), Nuclear Equipment Services Center, Inc., a Delaware
corporation ("NESC"), and American Liability and Excess Insurance Company, a
Vermont corporation ("ALEX").
The Company was originally incorporated in California in October 1983. In May
1987, the Company was reincorporated as a Delaware corporation by merger into a
newly formed wholly owned subsidiary incorporated in Delaware for that purpose.
AEC operates two market-focused business segments. These are the Chemical
Services and the Low- Level Radioactive Waste ("LLRW") Services segments. In
1999, 34% of the Company's revenues were derived from Chemical Services and 66%
from LLRW Services.
Chemical Services provides hazardous and non-hazardous waste treatment, storage,
transportation, disposal, and brokerage services. Principal Chemical Services
customers are in the chemical, petroleum, pharmaceutical, manufacturing,
electronics and transportation industries. Hazardous waste consists primarily of
industrial waste regulated under the Resource Conservation and Recovery Act of
1976 ("RCRA"), and the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA" or "Superfund"), as amended. Polychlorinated
biphenyls ("PCBs") are regulated under the Toxic Substance Control Act of 1976
("TSCA").
The LLRW Services offers disposal, recycling, waste compaction/volume reduction,
decontamination, brokerage and other services for managing low-level radioactive
waste ("LLRW") and Naturally Occurring Radioactive Material ("NORM"). LLRW and
NORM consist primarily of solid material containing radioactive contamination,
generally decaying to safe levels within several years to approximately 500
years. Examples include contaminated equipment, discarded glassware, tools,
gloves and protective clothing, and hospital and laboratory waste. LLRW Services
customers include electric utilities, pharmaceutical companies and other
commercial businesses, universities and hospitals. The LLRW Services also
provides motor decontamination and rebuilding services to electric utilities
through NESC.
3
4
The following table identifies sites currently operated by each segment of the
Company:
SUBSIDIARY LOCATION SERVICE
CHEMICAL SERVICES
-----------------
Texas Ecologists Robstown, Texas Hazardous Waste Treatment and Disposal Site
Texas Ecologists Robstown, Texas Municipal Solid Waste Disposal Site
US Ecology Beatty, Nevada Hazardous Waste and PCB Treatment and Disposal Site
LLRW SERVICES
-------------
US Ecology Richland, Washington LLRW and Norm Disposal Site
AERC Oakridge, Tennessee LLRW Processing Site
CHEMICAL AND HAZARDOUS WASTE SERVICES
Robstown, Texas Facility. The Company owns 440 acres of land near Robstown,
Texas about 15 miles west of Corpus Christi, and operates a hazardous waste
disposal site on 240 acres. In December 1999, the Company permitted a municipal
waste disposal facility on 160 acres and has 40 acres for future expansion. The
municipal waste disposal facility is named El Centro, for its central location
in the Gulf Coast area. The site is operated under regulations and permits
issued by the Texas Natural Resource Conservation Commission ("TNRCC"). The site
is also subject to EPA regulations.
Prior to 1999 the Company applied for a permit modification from the TNRCC to
vertically stack waste on existing permitted cells. The Company received this
permit modification in February 2000 and will continue to invest in the proper
construction of vertical expansion into early 2000. Texas Ecologists also
operates a permitted deep injection well to dispose of contaminated groundwater
and leachate in compliance with ground water remediation requirements.
In May of 1999, the Company sold its Houston-based hazardous and non hazardous
waste transportation service provider (formerly WPI) and Surecycle(R) (a
business division that operated a containerized hazardous waste collection
service in the Gulf coast market) to Clean Harbors Environmental Services, Inc.
The sale of the two operations and related facilities produced working capital
of $1,900,000 and a gain on the sale over remaining book value of $843,000
before sales commissions.
Beatty, Nevada Facility. US Ecology leases approximately 80 acres from the State
of Nevada pursuant to a 1977 20 year lease, with a ten-year renewal option that
was exercised in 1997. The site is located approximately 100 miles northwest of
Las Vegas, Nevada and 8 miles northeast of Death Valley near the California
border. The hazardous waste site was opened in 1970 and operates under authority
of the Nevada Department of Conservation and Natural Resources and the
Environmental Protection Agency ("EPA"). An application for renewal of the EPA
PCB disposal permit, which expires in January 2001, will be submitted in 2000.
In 1999, US Ecology was successful in obtaining a permit for vertical expansion
from the State of Nevada, similar to that of Texas Ecologists. This permit will
allow for vertical stacking of waste on existing permitted cells.
LOW-LEVEL RADIOACTIVE WASTE SERVICES
Richland, Washington Facility. This US Ecology facility is located on 100 acres
of the Department of Energy's Hanford Reservation ("Hanford") approximately 35
miles north of Richland, Washington. The State of Washington leases the land
from the federal government and the Company subleases the land from the State.
The lease between the State and the Federal government terminates in 2061. The
Company intends to seek renewal of its sublease with the State, which expires in
2005. Under the terms of the sublease the facility is to be used for LLRW burial
and related activities.
4
5
The facility is licensed by the Washington Department of Health and operates
under the regulations of the Washington Utilities and Transportation Commission
(WUTC) which has regulated the disposal rates charges at the Richland facility
since 1993. The disposal rates are set by the WUTC at an amount sufficient to
cover the costs of operations and provide the Company with a reasonable profit
margin. The State of Washington charges fees for burial, site surveillance,
local economic development, rate regulation and site use from generators using
the Richland facility. Revenues are also collected from generators to fund a
dedicated trust account for long term care and maintenance of the Richland site
after it closes.
The Richland facility is also permitted to accept naturally occurring and
accelerator produced radioactive materials (NARM) waste and exempt quantity
radioactive waste from throughout the nation.
Oak Ridge, Tennessee Facility. This facility is used for commercial processing
and volume reduction of LLRW. The facility is situated on 16 acres of Company
owned property. The Company acquired the Recycle Center from Quadrex Corp. in
September 1994. The facility provides services primarily to the commercial
nuclear power industry.
LLRW Brokerage Services. The Company packages and transports small
quantities of LLRW from laboratories, hospitals, universities and other
facilities for processing and disposal. The waste is either shipped by the
Company or is shipped by common carriers under subcontract. The Company supplies
many of these customers with equipment and material for the packaging, labeling,
and transportation of the LLRW material.
Metal Waste Decontamination. Radioactive contaminated metals exist
primarily in the form of large components such as pumps, valves, fuel racks, and
larger items such as condensers, heat exchangers and other large components. The
Recycle Center can decontaminate these metals through various techniques.
Dry Active Waste ("DAW") Processing. DAW processing services include volume
reduction and free release programs. This waste is primarily in the form of
plastics, clothing, and paper products. The Recycle Center uses its
super-compactor to reduce the volume of this waste before it is shipped for
disposal. The Recycle Center also sorts and segregates waste prior to
super-compaction.
Remedial Services. The Field Services Division of the Recycle Center offers
a range of services including site characterization, verification, on-site
volume reduction, license termination, decontamination and decommissioning. The
Recycle Center's staff has been involved in conducting radiological
decontamination projects for over 20 years.
Scaffolding and Lead Management Services. Management eliminated this
service during 1999 as an under performing asset.
Nuclear Equipment Service Center (NESC) (NESC provides refurbishment and repair
services for high value nuclear power plant electric motors and other high value
equipment. These services include decontamination, disassembly, modifications,
reassembly and testing to meet stringent client requirements for safety and
reliability. Additionally, the Company provides field services to nuclear power
plants for removal, inspection, maintenance and reinstallation of high value
equipment.
Proposed Ward Valley, CA and Butte, NE Facilities. The Company has been licensed
to construct and operate the low-level radioactive waste ("LLRW") facility, for
the Southwestern Compact ("Ward Valley facility"), and been selected to obtain a
license to develop and operate the Central Interstate Compact LLRW facility
("Butte facility").
The State of California, where the Ward Valley Site is located, has not obtained
the project property from the U.S. Department of the Interior. For the Company
to realize its investment, the US Government will need to transfer the land to
the State of California, or the Company will need to recover monetary damages
from the U.S. Government, the State of California or both. The Company has taken
steps to protect its investment in Ward Valley and will continue to do so.
In the first quarter of 1997, the Company filed two lawsuits against the United
States. The first was filed in the Court of Federal Claims, seeking monetary
damages in excess of $73 million. The court dismissed this case on March 27,
2000. The Company intends to appeal. The second case was filed in the Federal
District Court in Washington D.C. seeking injunctive relief and a writ of
mandamus ordering the land transfer to
5
6
California. The trial court rendered an adverse judgment in the mandamus action
on March 31, 1999, which the Company has appealed.
The Company expects all costs that it has incurred for this facility, and
project interest costs, to be included in the rate-base. However, there can be
no assurance that California will complete the land transfer, that all of these
costs will be approved by the DHS, or that the facility will be constructed. To
further protect its investment in Ward Valley and to help ensure the State of
California meets its obligations, the Company filed a claim with the California
State Board of Control on February 25, 2000.
The Company has incurred reimbursable costs and received revenues for the
development of the Butte, Nebraska facility under a contract with the Central
Interstate LLRW Compact Commission ("CIC"). Major generators of waste within the
CIC's five-state region have provided over 90% of the funding to develop the
Butte facility. In December 1998, the State of Nebraska denied US Ecology's
license application to build and operate the facility. The CIC directed US
Ecology to pursue a Petition for a Contested Case challenging the State's
denial. US Ecology filed its Petition pursuant to Nebraska law on January 15,
1999.
The Major Generators funding the development project 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 to protect the Company's interest and is seeking relief. The contested
case is stayed by a preliminary injunction issued by the presiding federal
judge. The Company believes the case will go to trial in 2001. In the meantime,
the major generators have only been willing to fund the minimum amounts
necessary to maintain the project. Consequently, the Company's revenue from this
project has declined substantially since April 1999.
The timing and outcome of the above matters are unknown. The Company continues
to pursue the conveyance of the land from the federal government to California
as well as its remedies in federal court to cure alleged defects in the State of
Nebraska's licensing process for the Butte, Nebraska facility. The Company
believes that the deferred site development costs for both facilities will be
realized. In the event the Butte facility license is not granted, operations of
either facility do not commence or the Company is unable to recoup its
investments through legal recourse, it may have an adverse effect on its
financial position. See Item 3. Legal Proceedings.
BACKGROUND
During the 1990s, the environmental services and hazardous waste industries
underwent significant changes that fundamentally altered the economics and
structure of the business. In the 1970s and 1980s, new environmental laws and
regulations were introduced and aggressively enforced by federal and state
agencies. Regulatory compliance at existing waste generation facilities and
clean up of former disposal areas under federal Superfund law were the primary
market drivers. By the early 1990s, many generators of hazardous waste had
realized that improved waste management practices offered significant economic
and risk management benefits. To protect assets, reduce liabilities, and reduce
increased waste handling costs, many generators instituted industrial process
changes and other methods to minimize waste production.
The volume of waste shipped for disposal from Superfund and other clean-up sites
also diminished as the worst sites were addressed and on-site remedies were
increasingly approved. Improved waste management by generators coupled with a
maturing federal Superfund program has resulted in a major industry
consolidation. Management believes that the hazardous waste management business
is continuing to mature and consolidate, but that opportunities to grow AEC's
business exist.
Previous management did not fully understand and respond to this fundamental
change in the industry. This was exacerbated by several poorly executed
acquisitions that caused large operational losses in 1995 and 1996. Management
believes it is now well positioned to take advantage of the current market
environment (See "Strategy" in Item 7. Management Discussion and Analysis).
The commercial LLRW business is also experiencing market changes, including
increased disposal prices, due to delays in implementing the LLRW Policy Act of
1980 ("Policy Act") and interstate disposal Compacts envisioned by
6
7
that law. Since the Policy Act's passage, no new full-service LLRW disposal site
has been established and prices have risen substantially. AEC's Richland,
Washington disposal facility, which accepts LLRW from eleven western states, is
the nation's only operating Compact disposal facility. Beginning in 1993 when
Compact waste import restrictions took effect, the Company lost substantial
market share for disposal services at its Richland, Washington facility.
In addition to significantly altering the disposal marketplace, Policy Act
delays have created significant opportunities for economical LLRW volume
reduction services. AEC's purchase of the Oak Ridge Recycle Center in 1994 and
expansion of the Company's brokerage business were undertaken to participate in
this expanding volume reduction market.
PERMITS, LICENSES, REGULATORY APPROVALS AND PUBLIC POLICY
The hazardous waste management industry is subject to extensive and evolving
environmental laws and regulations, largely administered by the Environmental
Protection Agency ("EPA"). State regulatory authorities also exercise regulatory
oversight in the states in which the Company does business. These laws
contribute to demand for Company services. They also represent significant
obstacles for new market entrants.
RCRA provides a comprehensive framework for regulating hazardous waste handling,
transportation, treatment, storage and disposal. Listed chemical compounds and
residues derived from listed industrial processes are subject to RCRA standards
unless they are delisted through a formal rulemaking process. RCRA liability may
be imposed for improper waste management or for failure to take corrective
action to address releases of hazardous wastes.
CERCLA and subsequent amendments (collectively the "Superfund") impose strict,
joint and several liability on owners or operators of facilities where a release
of hazardous substances has occurred, on parties who generated hazardous
substances that were released at such facilities, and on parties who arranged
for the transportation of hazardous substances to such facilities. Liability
under Superfund may be imposed if releases of hazardous substances occur at
treatment, storage, or disposal sites used or operated by the Company. Because
customers of the Company face the same liabilities, Superfund creates incentives
for potential customers to minimize the number of commercial disposal sites
utilized and to manage their own wastes when feasible. To the extent waste can
be recycled or beneficially reused, regulatory controls diminish.
TSCA establishes a comprehensive regulatory program for PCBs. Other federal,
state, and local environmental, health and safety requirements may also be
applicable to the Company's business. The Company has adopted practices to
minimize its risk through employee training, operational controls and careful
management of its relationships with contractors.
The Atomic Energy Act of 1954 ("AEA") and the Energy Reorganization Act of 1974
give the Nuclear Regulatory Commission ("NRC") regulatory authority for the
receipt, possession, use and transfer of radioactive materials. The NRC has
adopted regulations for licensing commercial LLRW treatment and disposal sites.
The U.S. Department of Transportation regulates transport of radioactive
materials. Shippers and carriers of radioactive materials must comply with both
the general requirements for hazardous materials transportation and with
specific requirements for radioactive materials. The States, rather than the NRC
regulate NORM.
The process of applying for and obtaining licenses and permits to operate a
radioactive or hazardous waste facility is lengthy and complex. Management
believes it has significant knowledge and expertise regarding environmental
laws, regulations and related public policy. The Company believes it possesses
all applicable permits, licenses, and regulatory approvals necessary to operate
its facilities and maintains the special expertise needed to secure additional
approvals to build its business.
7
8
INSURANCE AND RISK MANAGEMENT
While the Company believes it operates professionally and prudently, the
environmental business exposes the Company to risks, including potential
releases of harmful substances that may cause damage or injury. Primary casualty
insurance programs do not generally cover accidental environmental contamination
losses. To provide insurance protection for such environmental claims, the
Company has obtained environmental impairment liability insurance and
professional environmental consultants liability insurance for non-nuclear
occurrences. For the latter, the Company has purchased nuclear liability
insurance covering the operations of its facilities, suppliers and transporters.
The Company has also purchased primary property, casualty and excess liability
policies through traditional third party insurance.
In September 1998, the Company elected to discontinue providing financial
assurance for its closure and post-closure responsibilities through its wholly
owned subsidiary, American Liability and Excess Insurance Company ("ALEX"). The
Company was able to secure economically more advantageous and favorable terms
from traditional insurance sources for its facilities and operations, subject to
site-specific deductibles for which the Company maintains a cash reserve.
Coverage has been written on a five-year pre-paid policy. ALEX is currently an
inactive captive insurance company and maintains an investment portfolio that
may be used for insurance deductibles, in the event management decides to
reactivate it.
CLOSED FACILITIES
The Company has made substantial progress in recent years to resolve legal
disputes and fulfill its obligations to properly close and maintain formerly
operating facilities. While work remains, the Company believes this progress has
significantly reduced its environmental liability exposure.
Beatty, Nevada LLRW Site. The Beatty site, operated by the Company from 1962 to
1993, was the nation's first commercial facility licensed to dispose of LLRW. In
1997 it became the first and only commercial LLRW disposal facility to
successfully complete closure and site stabilization activities and transfer its
license to the State for institutional control. Since that time, Nevada has
performed long-term maintenance and surveillance using a State-controlled fund
contributed during facility operations. The Company has a contract with the
State to perform long-term maintenance.
Sheffield, Illinois LLRW and Hazardous Waste Site. The Company previously
operated two hazardous waste disposal facilities and a 20-acre, state-owned LLRW
disposal site. One hazardous waste site was opened in 1974 and ceased accepting
waste in 1983. The second site occupied less than five acres, and accepted
hazardous waste from 1968 through 1974. The LLRW site operated from 1968 to
1978. During 1999, the Company renegotiated its corrective measures
implementation plan agreement for groundwater remedial design monitoring and
extraction programs, which allowed the Company's financial assurance requirement
to be reduced from a $2.5 million to $1.5 million.
The LLRW disposal facility is maintained under a 1988 Settlement Agreement with
the state. The Company anticipates that its remaining financial requirements and
related obligations will be resolved during 2000 and that the LLRW license will
then be transferred to the State.
Winona, Texas, Hazardous Waste Facility. From 1980 to 1994 Gibraltor Chemical
Resources operated the facility. In 1994, American Ecology Corporation purchased
the Winona facility. The facility provided solvent recovery, deep well injection
and waste brokerage services at an 8 acre permitted site. The Company owns an
additional 597 acres contiguous to the permitted site. In March 1997, the
Company announced closure of the facility. The Company has complied with all of
the requirements of the Agreed Order signed with the TNRCC for closure of the
facility. A Closure Certification Report was submitted in November 1999, and
comments from the Texas Natural Resource Conservation Commission are pending.
The Order required financial assurances in the amount of $1,318,478. The Company
is also in compliance with this requirement.
8
9
CUSTOMERS
In 1999, no single customer accounted for 10% or more of the company's
consolidated revenues. In 1998 and 1997, consolidated revenues from a cost
reimbursement contract with the Central Interstate LLRW Commission were
approximately $6,808,000 or 18% and $7,579,000 or 18%, respectively. No other
single customer accounted for 10% or more of consolidated revenues in 1998 or
1997. Central Interstate Compact revenues have been reduced to a minimum project
maintenance level approved by the Compact Commission pending the outcome of
litigation. Due to the relatively small margins involved, this had a minimal
effect on the Company's profitability.
MARKETS
Chemical Services
The hazardous waste treatment and disposal business is highly competitive and
sensitive to transportation costs. The Company's Texas facility is
geographically well positioned to serve petro-chemical companies and other
industries concentrated along the Gulf coast. The Beatty, Nevada facility
primarily competes for business in the California and Nevada markets. Due to the
site's superior geologic and climate conditions in the Amargosa Desert, the
Nevada facility also competes successfully for wastes shipped from more distant
locations. The Nevada facility also competes over a broader geographic area for
PCB waste due to a limited number of TSCA facilities nationwide.
Waste stabilization and other treatment technologies are employed at both Nevada
and Texas facilities to meet federal land disposal restrictions. This allows the
sites to manage a significantly broader spectrum of wastes than if treatment was
not offered. The Company's new El Centro municipal waste landfill, located
adjacent to the Texas facility, will compete in a local south Texas market in
the vicinity of Corpus Christi. Future landfill capacity shortfalls are
projected in this market area. Management believes the El Centro landfill will
receive sufficient market share to sustain profitable operations.
LLRW Services
The Richland, Washington disposal facility exclusively serves LLRW producers in
the eight state Northwest Compact region. As a monopoly service provider,
Washington State approves the facility's rates. The Richland site accepts
naturally occurring and accelerator produced wastes (NORM / NARM) from customers
across the country and, in limited cases, internationally. Richland is most
competitive for NORM /NARM shipments requiring special packaging or protective
shielding.
The Oak Ridge LLRW volume reduction facility, motor rebuilding center, field
services business and brokerage group compete primarily for business in the
eastern United States. Through cross-selling and expanded marketing, the Company
intends to compete nationally.
COMPETITION
The Company competes with both large and small companies in each of the markets
or segments in which it operates. The radioactive, hazardous and non-hazardous
waste management industry is highly competitive. This applies to both current
and planned business lines. The Company believes that its principal hazardous
and non-hazardous waste business competitors are Waste Management, Waste
Masters, Safety-Kleen, Envirosafe, Allied Waste, and municipal landfills. Its
principal radioactive waste business competitors are Envirocare of Utah and
Chem-Nuclear Systems, Inc. for disposal and GTS Duratek, Chem-Nuclear, ATG, and
Permafix for waste processing.
The Company believes that the principal competitive factors applicable to all
areas of its business are:
o Price
o Breadth of services offered and environmental licenses and permits held
o Customer service reputation
o Dependability, technical proficiency and environmental integrity
9
10
o Operational experience
o Quality of working relations with federal and state regulators and
o Proximity to customers
Management believes that the Company is, and will continue to be, competitive
based on these factors. The Company further believes that it possesses a number
of competitive advantages which distinguish it from its competitors including
its broad range of services and capabilities, the extensive portfolio of
licenses and permits it holds, operational cost-efficiencies, and established
relationships with its customers, federal and state regulators, and neighboring
communities. The Company also believes its reputation as a provider of
environmentally sound solutions contributes to its competitive advantage.
PERSONNEL
As of March 13, 2000, the Company had 232 employees, of which 64 were members of
the Paper, Allied-Industrial, Chemical and Energy Workers International Union
AFL-CIO-CLC ("PACE").
In March 1998, the Company ended discussions on a new labor agreement and
implemented its final offer. PACE subsequently charged the Company with unfair
labor practices. The National Labor Relations Board ("NLRB") hearing officer
ruled against the Company, which has appealed to the full NLRB. The matter is
pending. In the event the Company is unsuccessful in its appeal, it may be
required to retroactively apply the prior labor agreement and bargain with PACE.
10
11
ITEM 2. PROPERTIES
The Company believes that its property and equipment are well maintained, in
good operating condition and suitable for the Company's current and projected
needs. Company headquarters are located in Boise, Idaho in leased office space.
AEC also leases sales and administrative offices in Washington, Illinois,
Nevada, Texas, and Kentucky. The following table sets forth certain information
regarding the principal operating, treatment, processing and disposal facilities
owned or leased by the Company.
LOCATION FUNCTION ACREAGE OWN/LEASE UTILIZATION
- -------- -------- ------- --------- -----------
Boise, Idaho Corporate Office 3,000 sq. ft. Lease 100%
CHEMICAL SERVICES
Beatty, Nevada Hazardous Waste Disposal Facility 80 acre(s) Lease 100%
Sheffield, Illinois Closed Facility 204 acre(s) Own 100%
Robstown, Texas Waste Disposal Facility 400 acre(s) Own 100%
Robstown, Texas Possible Expansion Area 40 acre(s) Own 100%
Winona, Texas Closed Facility 620 acre(s) Own* 10%
LLRW SERVICES
Oak Ridge, Tennessee LLRW Processing Facility 16 acre(s) Own 100%
Sheffield, Illinois Closed Facility 170 acre(s) Own 100%
Richland, Washington LLRW Disposal Facility 100 acre(s) Lease 100%
* Property is subject to a security interest agreement.
The principal properties of the Company make up less than 10% of the total
assets. The assets that are utilized are sufficient and suitable to the
Company's needs.
11
12
ITEM 3. LEGAL PROCEEDINGS
The Company's business inherently involves the potential risk of unintended
release of hazardous materials. In the ordinary course of conducting business,
the Company also becomes involved in routine judicial and administrative
proceedings incidental to its business. These proceedings may involve federal,
state and local governmental authorities, groups or individuals in connection
with facility permitting actions, alleged permit violations, or claims for
damages suffered from alleged exposure to hazardous substances purportedly
released from Company operated sites, and other litigation. The Company
maintains insurance intended to cover property, environmental and personal
injury claims asserted as a result of its operations (See Item 1. Insurance).
Management periodically reviews and establishes reserves for legal and
administrative matters, or fees expected to be incurred in connection with such
matters. 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.
The Company and its subsidiaries are also parties to various other matters or
proceedings, including permit application and renewal proceedings in connection
with its operations, closure and post-closure activities, and other
circumstances that could result in further proceedings or litigation.
GENERAL LITIGATION
In August 1999, a previously reported case, TANGEE E. DANIELS, ET AL V. ATRIUM
DOORS AND WINDOWS, INC., ET AL, DISTRICT COURT OF DALLAS COUNTY, TEXAS, CIVIL
ACTION NO. 95-091459-L., was settled. The settlement did not have a material
adverse impact on the Company's financial position, results of operations, or
cash flows.
ERIN L. DALTON V. BROWN DISTRIBUTING CO. ET AL., DEFENDANTS/THIRD-PARTY
PLAINTIFFS V SAM TARLTON, JR. AND AMERICAN ECOLOGY SERVICES CORPORATION D/B/A
AMERICAN ECOLOGY TRANS., INC. THIRD PARTY DEFENDANTS, CASE NO. 99-06725, 250TH
JUDICIAL DISTRICT COURT, TRAVIS COUNTY, TEXAS
On July 12, 1999, Defendants in the underlying case, Brown Distributing, filed a
Third-Party Complaint against a former subsidiary of the Company and the
subsidiary's truck driver, Tarlton Sam, Jr., individually, in connection with a
vehicular accident in which Brown Distributing's vehicle collided with
Plaintiff's vehicle. The Third-Party Complaint is based on allegations of
negligence, contribution, and common law indemnity relating to allegations that
the subsidiary's driver had parked his vehicle partially on the roadway and
contributed to the accident caused by the Brown Distributing driver. The Third
Party Plaintiff seeks contribution and indemnity from the Company in the event
of a finding of liability against Third Party Plaintiff in the underlying case.
In January 2000, the Company received a settlement demand. Limited discovery has
taken place at this time. The Company does not believe it was negligent and is
vigorously defending the case.
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
In an action filed October 12, 1999, Plaintiff Zurich American Insurance Co.
("Zurich"), seeks declaratory and other relief against National Union Fire
Insurance Company of Pittsburgh ("National Union"), AEC and named subsidiaries
("AEC Defendants") and Doe Insurers 1-50 ("Doe Defendants") with respect to
Zurich's defense coverage in the Virgie Adams action, which was disclosed in a
prior filing. National Union is named as a defendant because it allegedly
provided insurance coverage to Gibraltar Chemical Resources (predecessor to an
AEC subsidiary) during the coverage period in question. Doe Insurers 1-50 are
included in the action to preserve any claims Zurich may have against other
insurers, yet unknown, who may have provided coverage during the same time.
Among other relief, Zurich seeks a declaratory ruling from the court that
National Union and the Doe Defendants have a duty to participate in the
Company's defense in the Adams suit. In addition, Zurich seeks reimbursement,
contribution and/or allocation of litigation fees and costs from the AEC
Defendants, National Union and the Doe Defendants for alleged defense costs of
the Complaint. Zurich also seeks a declaratory ruling from the court stating
that prospectively Zurich has no duty to defend or indemnify the AEC Defendants
in the Adams suit. Finally, Zurich asserts a claim for indemnity against
12
13
all defendants as to costs, and includes a claim for unspecified damages as well
as costs of suit. The Company filed an answer to the Complaint on December 15,
1999, including various counter claims against Zurich and cross claims against
National Union and the Doe Defendants. On December 10, 1999, Zurich filed an
amended Complaint adding General Motors as a defendant, seeking declaratory and
injunctive relief regarding Zurich's duty to defend and/or indemnify the Company
and/or General Motors in the General Motors case discussed below. An amended
answer to the amended Complaint was filed in February 2000. The Company intends
to vigorously defend this action.
GENERAL MOTORS CORPORATION V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORP., ET
AL., CASE NO. 3-99CV2626-L, U.S. DISTRICT COURT, NORTHERN DISTRICT OF TEXAS.
The Complaint names the Company and certain named subsidiaries, as well as the
former owner of the Winona Facility and its associated business entities, all of
which are defendants in the Virgie Adams case.. General Motors seeks
contribution and indemnity, including reimbursement of defense costs and
attorneys' fees, incurred by GM in the Adams case and this case. The underlying
claims are based on the terms and conditions of a waste disposal contract
between GM and the Winona Facility dating to 1989 and continuing through the
time the facility closed in 1997. The allegations in the Complaint are based on
breach of contract, contribution, and common law indemnity grounds. Included
within the indemnity claims is a claim for a settlement payment by GM plus court
costs. The Company does not believe it breached the contract or was negligent,
and intends to vigorously defend the case.
ENVIRONMENTAL MATTERS
The EPA has requested information regarding waste the Company may have shipped
to a former LLRW storage facility near Denver, Colorado, which is now a
Superfund site. The EPA has subsequently informed the Company it may be liable
for approximately $29,000 for clean-up costs as a potentially responsible party.
The Company does not believe these amounts are material.
IN THE MATTER OF AMERICAN ECOLOGY RECYCLE CENTER, INC., RCRA DOCKET NO.:
RCRA-4-99-0020
On September 30, 1999, USEPA Region 4 issued an Administrative Complaint to AERC
alleging violations of RCRA requirements including storage over one year of
hazardous waste subject to land disposal restrictions, failure to make hazardous
waste determinations, and storage of hazardous wastes without a permit. This
civil administrative enforcement action seeks a $533,759 civil penalty. An
answer to the complaint, received on October 4, 1999, was filed by the Company
on November 2, 1999. The Company believes it has conducted its operations in
compliance with the applicable regulations, has fully reserved on the books for
any potential penalty, and intends to vigorously contest this action.
FEDERAL RCRA INVESTIGATION AT THE OAK RIDGE, TENNESSEE FACILITY
On September 29, 1999, investigators associated with the Federal Bureau of
Investigation, EPA, and Tennessee Valley Authority arrived at the Oak Ridge
Facility to investigate the site in connection with a search warrant issued by
the U.S. District Court, Eastern District of Tennessee. The Company fully
cooperated with the investigators and provided requested information. Since the
initial visit, the Company has not been asked to provide additional information
and has no information regarding outcome at this time. The Company currently is
conducting an internal investigation as a precautionary measure, believes it has
conducted its operations in compliance with the applicable statutes and
regulations, and intends to vigorously contest any allegations arising from the
investigation.
OTHER MATERIAL LITIGATION
One of the Company's principal subsidiaries is a plaintiff in two related cases
against the United States in which one or more outcomes may have a potentially
significant favorable future impact on the Company. In the first case, US
Ecology is suing to recover approximately $73.1 million for development costs,
as well as lost profits and lost opportunity costs related to development of the
Southwestern LLRW Compact disposal facility in Ward Valley,
13
14
California. The court dismissed this case on March 27, 2000. The Company
intends to appeal. In the second case, US Ecology is seeking an order (writ of
mandamus) from a federal court to compel completion of the federal land transfer
required for construction of the state-licensed facility to proceed. The trial
court rendered an adverse judgment in this case on March 31, 1999, which the
Company has appealed. In a further effort to protect its investment in the Ward
Valley project, the Company filed a claim against California with the State
Board of Control in February 2000.
The Company has intervened in a lawsuit against the state of Nebraska seeking
recovery of damages regarding its $6.5 million investment and future lost
profits related to development of the proposed Central Interstate Compact LLRW
disposal facility near Butte, Nebraska. The court has ruled on several
preliminary matters that are now under appeal by the State of Nebraska. The
court has not yet ruled on whether the Company may be awarded money damages. The
case is expected to go to trial in 2001. See Item 1. Low-level Radioactive
Waste Services, "Proposed Ward Valley, CA and Butte, NE facilities."
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. On November 29, 1999 the Company protested
this denial which is currently pending with the IRS. The Company believes that
this claim was improperly denied and intends to continue its efforts to receive
the refund claim. In the event the Company is not successful, it will be
required to pay its prior bank 75% of $736,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the Company's security holders during the fourth
quarter of 1999.
14
15
PART II
ITEM 5. MARKET FOR AMERICAN ECOLOGY CORPORATION COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
American Ecology Corporation common stock is currently listed on the NASDAQ
National Market System under the symbol ECOL. As of March 23, 2000, there were
approximately 7,000 record holders of common stock. The high and low sales
prices for the common stock on the NASDAQ and the dividends paid per common
share for each quarter in the last two years are shown below:
1999 1998 Dividends Per Share
---- ---- -------------------
PERIOD High Low High Low 1999 1998
------- ------ ----- ----- ---- ----
1st Quarter 3 1/4 1 7/32 2 1 $ -- $ --
2nd Quarter 3 1/8 1 3/4 1 7/8 1 -- --
3rd Quarter 2 13/16 1 3/4 1 3/4 1 5/16 -- --
4th Quarter 2 1/4 2 9/32 1 1/2 3/4 -- --
The Company's bank credit facility prohibited cash dividends on any of the
Company's outstanding stock until the fourth quarter of 1998, when the Company
settled its debt with the bank. In the first quarter of 1999, the Company
borrowed approximately $1.3 million. The terms of the $1.3 million note payable
from shareholders prohibit the payment of any cash dividends until the note is
retired.
15
16
ITEM 6. SELECTED FINANCIAL DATA
AMERICAN ECOLOGY CORPORATION
This summary should be read in conjunction with the consolidated financial
statements and related notes.
(Dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995
- ----------------------- ---- ---- ---- ---- ----
Revenues $ 34,352 $ 38,960 $ 41,522 $ 49,972 $ 67,895
% Increase (decrease) in revenues from prior year (11.8)% (6.2)% (16.9)% (26.4)% (5.6)%
Net income (loss) (1) $ 4,409 $ 762 $ (676) $ (11,407) $ (48,903)
Basic earnings per share (2) $ .30 $ .03 $ (.17) $ (1.47) $ (6.12)
Shares used to compute income (loss) per share (000's) 13,585 12,772 8,163 7,907 7,826
Working capital (deficit) $ (2,309) $ (7,567) $ (16,930) $ (16,693) $ (16,115)
Total assets $ 58,459 $ 61,800 $ 98,431 $ 99,027 $ 114,125
Long-term debt, net of current portion $ 3,569 $ 2,223 $ 39,872 $ 36,202 $ 28,357
Shareholders' equity $ 21,582 $ 17,460 $ 13,380 $ 13,604 $ 22,024
Long-term debt to total capitalization as a percentage 14.2% 11.3% 74.9% 72.7% 56.3%
Current ratio (current assets divided by current liabilities)
0.9:1 0.7:1 0.4:1 0.4:1 0.6:1
Return on average equity 22.6% 4.9% (5.0)% (64.0)% (109.8)%
Dividends declared per common share $ -- $ -- $ -- $ -- $ .025
Capital spending, including capital expenditures and site
development costs $ 3,740 $ 2,128 $ 3,442 $ 5,659 $ 8,445
Depletion, depreciation and amortization expense $ 2,054 $ 3,152 $ 3,106 $ 5,383 $ 7,319
(1) 1996 expenses include $7,451 in impairment losses on long-lived assets for
the Winona facility. 1995 includes $33,048 in impairment losses on long-lived
assets for the Oak Ridge Recycle Center, WPI Waste Processors and the Winona
facility. (2) Per SFAS 128, basic earnings per share was restated for 1997.
16
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains trend information and other forward-looking
statements that involve a number of risks and uncertainties. Whether the
Company's actual results prove accurate with these forecasts depends on a
variety of factors, and could differ materially from the Company's historical
results of operations. Factors that could cause actual results to differ
materially include, but are not limited to, those identified in the related
Notes to the Consolidated Financial Statements, Part I, Item 3., Legal
Proceedings, and the discussion below. This discussion and analysis should be
read in conjunction with the Financial Statements and Notes, included elsewhere
in this Form 10-K.
The Company has been in business for more than 47 years and has two main
business operations: hazardous waste services and low-level radioactive waste
services. The Company experienced significant growth until 1994, when it
acquired three businesses that became significant encumbrances. In 1995, the
Board of Directors installed a new management team led by Chairman, CEO, and
President Jack Lemley. Challenges inherited by new management combined with
changing market conditions resulted in restructuring and impaired asset charges
of approximately $40 million in 1996 and 1995. Revenues declined from $67.8
million in 1995 to $34.3 million in 1999 or a 49% decrease. The declining
revenue reflects continuing changes in market conditions and the sale of
under-performing assets.
Despite this reduction in revenue, gross margin has improved. This reflects a
renewed focus on higher margin business, improved efficiencies, improved cost
controls, and the sale of several low margin and under-performing operations.
Operating costs have also decreased, demonstrating management's stringent cost
and spending controls. While the turn-around has taken several years, the
combination of improved gross margin and lower operating costs has returned the
Company to profitability. For the year ended December 1999, the Company posted a
net profit (before dividends) of $4.4 million compared to a net loss of $48.9
million in 1995.
Through the first two months of 2000, the Company has maintained profitability
and anticipates this trend to continue. The Company currently has no bank debt
and is making a strong effort to attract new clients and regain market share.
The Company's revenues are mainly derived from fees charged for the processing
and disposal of hazardous, PCB and radioactive wastes. Other revenues are
derived from rebuilding and decontaminating large electric motors from nuclear
power plants, providing field remediation services, and brokering the
transportation and disposal of radioactive and hazardous material.
Operating expenses include direct and indirect costs for labor, maintenance and
repairs, subcontracted costs and equipment, insurance, taxes, appropriate
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. The Company successfully permitted a new municipal solid waste
landfill in south Texas and accounted for those costs through proper accruals
and capitalization methods allowed under generally accepted accounting
principles.
Selling, general & administrative costs include management salaries, sales and
marketing efforts, clerical and administrative costs, legal fees, office
rentals, insurance, and other administrative costs included under general
corporate overhead.
17
18
STRATEGY
Management continues to evaluate the Company's position in the marketplace.
Unprofitable operations have been sold, eliminated or reorganized. The
environmental services industry is dynamic and highly competitive. To improve
operations, the Company annually develops a strategic plan that promotes recent
market changes as well as good business practices, flexibility, and regulatory
compliance.
Management believes it has eliminated under-performing operations and is now
focused on opportunities to improve profitability. At the regularly scheduled
Board of Directors meeting on February 17, 2000, the Board approved a new
strategic plan, operating plan and capital budget. Capital expenditures are
planned for at all sites to meet customer needs, improve the economics of
operations and meet regulatory obligations. The Company's strategic plan focuses
on five key areas.
1. Emphasize Business Fundamentals and Cost Control
As it has since new management assumed control in 1995, the Company continues to
stress business fundamentals and cost control. Management remains committed to
improving core business operations at each of its sites by increasing revenue,
profitability and cash flow. The Company continues to implement and enforce new
policies, procedures, and systems to ensure that appropriate business controls
are in place.
2. Expand Services and Increase Utilization of Assets at Existing Facilities
El Centro, the Company's municipal solid waste landfill located at Robstown,
Texas is expected to open in mid-2000. This successful development project
demonstrates the Company's ability to expand the breadth of its services
utilizing existing assets and carefully expanding its core competencies.
Successful permitting of vertical stacking expansions at its Nevada and Texas
disposal sites further demonstrates this capability. The Company continues to
work with its regulators to expand service capabilities at its existing sites.
3. Increase Emphasis on E-Business and Automation
The Company recognizes the value of a comprehensive electronic business strategy
and has committed significant resources to improving its electronic business
capabilities. This includes but is not limited to improving the Company's
website, hiring additional staff, automating customer forms and government
approval documents, posting facility waste acceptance criteria on its website,
and providing customers with on-line access to information regarding their
wastes. The Company is also using the internet to find new customers, improve
sales force integration, speed waste processing and reduce costs. The Company
believes that its electronic business capabilities will allow it to better serve
existing customers and develop new business.
4. Cross Sell Services
In the past the Company has not taken full advantage of the complimentary
capabilities offered by its multiple sites and operations. The Company is
committed to cross-selling this integrated array of services to both customers
and prospects. To achieve this goal the Company is updating marketing and sales
materials, arming sales personnel with updated information on Company
capabilities and services, and cross training key personnel.
5. Pursue Well Conceived Mergers, Acquisitions, or Partnerships
The Company will evaluate and pursue strategic mergers or acquisitions of
companies or assets that fit the Company's core competencies. Management
believes that well-conceived mergers or acquisitions could significantly enhance
the Company's market position and value. While careful due diligence will be of
paramount importance, the Company believes there may be opportunities to
capitalize on the current industry consolidation. The Company may also consider
strategic alliances, joint ventures or partnerships.
18
19
RECENT DEVELOPMENTS AND FUTURE CONSIDERATIONS
In late 1999, the Richland, Washington LLRW-facility successfully disposed of a
1000-ton Trojan reactor vessel. The vessel was transported by barge up the
Columbia River to the Port of Benton, Washington, where it was offloaded and
disposed at the Company's Richland facility.
In December 1999, the TNRCC granted a ten-year renewal of the Robstown, Texas
facility's RCRA Part B operating permit. During 1999 and early 2000, both the
Beatty, Nevada and Robstown facilities received expansion permits for vertical
stacking of hazardous and non-hazardous waste above existing disposal cells.
Vertical stacking provides economically efficient disposal capacity.
Construction of this newly permitted disposal capacity is complete at Beatty.
The Robstown facility received its vertical stacking permit in February 2000.
The TNRCC issued the Company a permit for the Company's El Centro municipal
solid waste landfill in December 1999. Construction of the facility, located on
a 160-acre tract owned by the Company adjacent to its existing hazardous waste
facility in Robstown, is also underway. The Company expects to receive waste by
mid-2000.
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. On November 29, 1999 the Company protested
this denial which is currently pending with the IRS. The Company cannot predict
the eventual outcome, but believes that this claim was improperly denied.
FACTORS THAT MAY AFFECT FUTURE RESULTS
ACCESS TO ADDITIONAL CAPITAL
The Company believes that it will need additional capital to fully implement its
growth and expansion strategy. There can be no assurance that the Company will
be successful in raising the desired financing in timely fashion or if
successful, that the terms of such financing will be favorable. If the Company
is not successful in raising additional capital, it will reassess its planned
expansions and growth initiatives. This could adversely affect the Company's
business, financial condition and results of future operations.
CHANGES IN REGULATION
The changing regulatory framework governing the Company's business creates
significant risks, including potential liabilities from violations of
environmental statutes and regulations and liabilities to customers and third
parties for damages arising from services performed. The Company's failure to
comply with such statutes and regulations may result in the imposition of
substantial fines and penalties and could adversely affect the Company's ability
to carry on its business as presently constituted.
EXPOSURE TO LITIGATION AND INSURANCE
Since Company personnel routinely handle radioactive and hazardous materials,
the Company may be subject to liability claims by employees, customers and third
parties. There can be no assurance that the Company's existing liability
insurance is adequate to cover claims asserted against the Company or that the
Company will be able to maintain such insurance in the future. The Company has
adopted risk management programs designed to reduce these risks and potential
liabilities, however, there can be no assurance that such programs will fully
protect the Company.
RESULTS OF OPERATIONS
The Company, as a whole, has continued to show improved operations since 1994,
especially in 1999 and 1998. In 1999 and 1998 respectively, the Company reported
net income of $4,409,000 and $762,000, achieving profitability for the first
time since 1994. This performance compares to losses of $676,000 and $11,407,000
for 1997 and 1996. The following table compares the Company's two operating
segments without inter-company, consolidated corporate costs and the captive
insurance company ALEX.
19
20
CONDENSED STATEMENT OF OPERATIONS
Reported in $000 December 31, 1999 December 31, 1998
Chemical LLRW Chemical LLRW
-------- -------- -------- --------
Revenue $ 11,554 $ 22,798 $ 16,030 $ 22,930
Operating costs 7,482 9,740 9,488 14,057
-------- -------- -------- --------
Gross Profit $ 4,072 $ 13,058 $ 6,542 $ 8,873
Selling, G & A 3,218 6,192 6,544 6,272
-------- -------- -------- --------
Income (loss) from
operations $ 854 $ 6,866 $ (2) $ 2,601
Other income (expense) $ 448 $ (2,195) $ (1,312) $ (2,258)
-------- -------- -------- --------
Net Income (loss) $ 1,302 $ 4,671 $ (1,314) $ 343
======== ======== ======== ========
20
21
The following table sets forth items in the Statements of Operations for the
three years ended December 31, 1999, as a percentage of revenue:
Percentage of Revenues for the
Year Ended December 31,
------------------------------
1999 1998 1997
----- ----- -----
Revenue 100.0% 100.0% 100.0%
Operating costs 48.3 60.4 55.9
----- ----- -----
Gross profit 51.7 39.6 44.1
Selling, general and administrative expenses 43.0 40.3 52.8
----- ----- -----
Income (loss) from operations 8.7 (.7) (8.7)
Other (income) expense, net .7 2.8 7.4
----- ----- -----
Income (loss) before income taxes 13.4 2.1 (1.3)
Income tax expense (benefit) .6 .1 .3
Preferred stock dividends 1.1 1.1 1.8
----- ----- -----
Net income (loss) to common shareholders 11.7% .9% (3.4)%
===== ===== =====
REVENUE
Revenue for 1999 declined to $34,352,000, an 11.8% decrease from 1998 revenue of
$38,960,000. 1998 revenue decreased 6.2% from 1997 revenue of $41,522,000. The
continuing consolidation of the hazardous waste industry and reduced volumes
continued to affect Chemical Services revenue. Despite reduced disposal volumes,
Chemical Services was able to increase profitability in each of the last
three years. This was mainly due to the sale of the transportation services and
the addition of new projects. The Company permitted the new El Centro municipal
solid waste landfill project, and vertical expansion at the Beatty, Nevada
facility. These efforts for permitting and engineering new air space was a focus
of operations and reduced revenues in 1999, but management believes that
permitting costs, and new developments are important for the future growth of
the Company.
In addition, The Chemical Services's transportation business was sold in May
1999. This business produced $562,000 of revenue in 1999 compared to $2,118,000
and $3,035,000 (before inter-company eliminations) in 1999, 1998 and 1997,
respectively. The Robstown, Texas hazardous and non-hazardous facility conserved
its limited remaining disposal capacity for higher margin business while
awaiting its permit for vertical stacking. Management expects revenue to
increase in 2000 as the newly constructed vertical expansion space is put to
use.
The LLRW services revenue was unchanged at approximately $23 million in both
1999 and 1998 but decreased slightly from $26 million in 1997. Increased
production and increased sales contracts at the Oak Ridge, Tennessee LLRW
operation raised revenues to a three-year high of $13,575,000 in 1999. This
compares to 1998 revenues of $9,129,000, and $11,830,000 in 1997. The slightly
higher revenue from Oak Ridge operations was offset by a reduction in revenue
from the Central Interstate Compact disposal project, which is on hold pending
litigation. Revenue remained approximately constant at $7,500,000 in 1999 at the
Company's Richland, Washington rate regulated LLRW facility.
The closure and reorganization of certain under-performing operations reduced
revenue, but contributed to improved overall profitability.
OPERATING COSTS
Operating costs for 1999 totaled $16,609,000, a decrease of $6,936,000 or 29%
from the prior year. Operating costs were $23,545,000 in 1998, and $23,219,000
in 1997.
21
22
Reported in $000 December 31, 1999 December 31, 1998 December 31, 1997
Chemical LLRW Chemical LLRW Chemical LLRW
-------- ------ --------- ------- -------- -------
Operating Costs $7,482 $9,740 $9,488 $14,057 $9,320 $13,899
In 1999, Chemical Services operating costs decreased $2,006,000 or 21% from the
prior year. The reduction in operating costs was primarily the result of the
capitalization of site costs into new disposal capacity. The Company capitalized
approximately $1,822,000 of costs for the development of additional disposal
capacity at the Nevada and Texas facilities. Management believes that these
capitalized costs, that included equipment, labor, engineering, and materials,
are investments that will generate new revenue and profits in the future.
In 1999, LLRW Services operating costs decreased $4,317,000 or 31% from the
prior year. This decrease reflects the reduced Central Interstate Compact
contract costs for the proposed Butte, Nebraska facility and a $2,100,000
reduction of closure and post-closure reserves for the Sheffield facility.
Consolidated Results of Operations (in thousands):
1999 1998 1997
---- ---- ----
Revenue $34,352 $38,960 $41,522
Operating costs 16,609 48.3% 23,545 60.4% 23,219 55.9%
------- ------- -------
Gross profit (loss) $17,743 51.7% $15,415 39.6% $18,303 44.1%
For the year ended 1999, operating costs were 48.3% of revenue compared to 60.4%
in 1998 and 55.9% in 1997. While there has been some fluctuation in operating
costs, the downward trend in percentage of revenue demonstrates improved control
over operating costs consistent with the decrease in revenues for the same
periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for 1999 totaled
$14,762,000, a decrease of 6% from the prior year. SG&A were $15,702,000 and
$21,909,000 in 1998 and 1997, respectively. The current year decrease of
$940,000 or 6% in SG&A costs demonstrates the Company's emphasis on controlling
costs.
Consolidated Results of Operations (in thousands):
1999 1998 1997
---- ---- ----
Revenue $34,352 $38,960 $41,522
Selling, G&A expenses 14,762 43% 15,702 40.3% 21,909 52.8%
------- ------- -------
The following table includes SG&A for the Chemical and LLRW Services, but
excludes corporate consolidated adjustments and eliminations.
Reported in $000 December 31, 1999 December 31, 1998
Chemical LLRW Chemical LLRW
-------- ------ -------- ------
SG&A $3,219 $6,192 $6,544 $6,272
In 1999, Chemical Service's SG&A decreased 50.8%. The main reason for the
decrease is the capitalization of costs described earlier. Chemical Services
also reduced costs as a result of selling the transportation operations. LLRW
Services SG&A decreased by 1.2% from 1998. The decrease for LLRW is the result
of better cost management at the Oak Ridge Facility.
22
23
INVESTMENT INCOME
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 stock portfolio classified
as trading securities. As of December 31, 1999 the Company reported investment
income of $225,000 compared to $618,000 and $1,203,000 1998 and 1997,
respectively. The main reason for this decrease is the withdrawal of
approximately $6,000,000 and $1,000,000 from the ALEX stock portfolio in 1998
and 1999, respectively. The ALEX stock portfolio was used as collateral for
insurance in the event there was a claim at certain closed sites. The Company
has secured alternate financial assurance to provide the same protection.
GAIN ON SALE OF FIXED ASSETS
In May of 1999, the Company sold its Houston-based hazardous and non hazardous
waste transportation service provider (formerly WPI) and Surecycle(R) (a
business division that operated a containerized hazardous waste collection
service in the Gulf coast market) to Clean Harbors Environmental Services, Inc.
The sale of the two operations and related facilities produced working capital
of $1.9 million and a gain on the sale over remaining book value of $843,000
before sales commissions.
INTEREST EXPENSE
The Company incurred interest expense of $208,000, $3,441,000, and $3,708,000 in
1999, 1998 and 1997, respectively. The majority of this interest expense was
capitalized for the development of the Company's LLRW facilities in California
and Nebraska in accordance with Statement of Financial Accounting Standards No.
34, Capitalization of Interest Cost. The Company ceased capitalization of any
interest costs in 1999. Substantially all of the interest cost incurred for 1998
and 1997 related to borrowings under the Company's Credit Agreement with its
former commercial bank lender.
INCOME TAXES
The Company's effective income tax (benefit) rates were 6%, 0%, and 0% for the
fiscal years 1999, 1998, and 1997, respectively. The effective rate of 6% in
1999 does not reflect any recognition of future tax benefits on timing
differences or net operating loss carry forwards. The income tax expense of
$195,000, $55,000 and $132,000 for the three years reported is for payments on
different state and local taxes including franchise taxes. The Company has a
valuation allowance of approximately $20.6 million for deferred tax assets with
more than $2.7 million of limited loss carry-forwards and $31 million of
unlimited net operating loss carry-forwards. See Item 8. Note 11. Income Taxes.
PREFERRED STOCK
On September 12, 1999 warrants on the 8 3/8% Preferred Stock expired except for
those belonging to one Series D holder. The Company extended an offer to all
Series D holders that their warrants would be extended until September 13, 2002
if they converted their Series D to common stock. One holder converted 5,263.2
preferred shares for 83,580 common shares and extended 64,211 warrants. All
other Series D holder warrants have expired.
CAPITAL RESOURCES AND LIQUIDITY
As of December 31, 1999 the Company had a working capital deficit of $2,309,000.
This compares favorably to the working capital deficits of $7,567,000 and
$16,930,000 reported for 1998 and 1997, respectively. This significant reduction
reflects the sale of non-performing assets, the full settlement with its former
bank, the termination of a re-insurance program, more aggressive collection of
accounts receivable and other measures. During 1999, the Company also met
certain obligations allowing a cash secured $2.5 million dollar letter of credit
to be replaced with a $1.5 million performance bond. Also, cash assets
previously pledged were released allowing for reclassification of assets from
long term to short term.
23
24
The Company's current ratio improved to 0.9:1.0 in 1999 compared with 0.7:1.0
and 0.4:1.0 for the years ending December 31, 1998 and 1997. Liquidity, as
measured by days receivables outstanding ("DRO") also showed improvement in
1999. Average DRO for 1999 dropped to 69 days from an average of 89 days in
1998. The overall improvement in the Company's liquidity allowed the Company to
pay down accounts payable.
The Company's leverage has decreased since 1997, as evidenced by a long-term
debt (excluding the current portion) to equity ratio of 0.17:1.0 at December 31,
1999 compared to 0.13:1.0 and 2.9:1.0 for the same period ending 1998 and 1997.
The settlement of the Chase Bank of Texas debt and the reduction of accounts
payable resulted in significantly lower liabilities. The slight increase in 1999
resulted from an increase in capital lease obligations and in notes payable for
two of the Company's board members. The notes payable from the board members was
used to pay preferred stock dividends.
As of March 27, 2000, the Company has maintained a business banking relationship
with First Security Bank, Boise, Idaho. First Security Bank provides a $500,000
line of credit that remained unused at December 31, 1999 and was not used at
anytime during the year.
OTHER MATTERS
ENVIRONMENTAL MATTERS
The Company has reserves and insurance policies for costs associated with future
closure and post-closure obligations for both current and formerly operated
disposal facilities. The Company has established reserves and insurance policies
for these commitments based on professional engineering studies and
interpretations of current regulatory requirements and potential regulatory
changes performed at least annually. Accounting for closure and post-closure
costs includes final disposal unit capping for the site, gas emission control,
subsurface soil and groundwater monitoring, and other monitoring and routine
maintenance costs expected after a site stops accepting waste. The Company
believes it has made adequate accounting through reserves and the insurance
policy for closure and post-closure obligations.
The Company estimates that the aggregate final closure and post-closure costs
for all insured facilities owned or operated was approximately $17,285,000 as of
December 31, 1999. This compares to recorded closure and post-closure
liabilities of $19,539,000 and $21,179,000, for 1998 and 1997 respectively. As
described in Item 1, Insurance, the Company has a five-year prepaid insurance
policy for closure and post closure of these facilities. The Company also set
aside investment securities to pay certain deductible limits.
Management believes that disposition of these environmental matters will not
have a material, adverse effect on the financial condition of the Company. The
Company's 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 or legislation
enacted, or other future events affecting these facilities.
FINANCIAL ASSURANCE AND SITE MAINTENANCE
When the Company's disposal facilities reach capacity or upon lease or license
termination dates, they must be closed and maintained for a prescribed period.
In the case of the hazardous sites, federal regulation requires that operators
demonstrate the financial capability to close sites on an immediate, unscheduled
(worst-case) basis. The estimated costs of such a closure are set forth in the
operator's RCRA closure/post-closure plan.
The Company has provided letters of credit, certificates of insurance, and
corporate guarantees as financial assurance to meet closure and post closure
obligations at its hazardous waste facilities. Cash and investment securities
totaling $226,000, $5,405,000 and $14,287,000 at December 31, 1999, 1998 and
1997, respectively, have been pledged as collateral for these obligations.
During 1999, the total value of pledged securities decreased by $5,179,000. This
decrease reflects the sale of assets previously held by the Company's ALEX
subsidiary and their replacement with an insurance agreement with Reliance
Insurance Company. The Company prepaid a five-year premium, holds pledged
investment securities and
24
25
maintains access to sufficient monies to pay the deductible should the Company
need to exercise these policies. The Company also holds a performance bond for a
Remedial Investigation and Feasibility Study ("RI/FS") and performance of
corrective action at the closed Sheffield, Illinois chemical waste facility and
compliance with the Texas requirements at Robstown, Texas. The closure costs for
its Oak Ridge and Winona, Texas facilities, proposed LLRW sites in Nebraska and
California, and a rate settlement with waste generators using the Richland,
Washington facility are also covered by financial assurance.
The Company is in the remedial phase of the Sheffield program set forth in the
EPA's corrective measures implementation plan. During 1999, the Company spent
approximately $290,000 on remediation at the closed Sheffield hazardous disposal
site, a reduction from $610,000 spent in 1998.
SEASONAL EFFECTS
The Company's operating revenues are generally lower in the winter months, and
increase in the warmer summer months. The volume of both hazardous waste and
LLRW tends to decrease during winter months, however market conditions have a
larger effect on revenues than seasonality.
YEAR 2000 COSTS
The Company had no consequential damages or costs beyond those costs of
preparing for the year 2000 issue. The costs incurred were deemed immaterial in
amount and there were no consequential or related issues with customers or
vendors.
SENIOR MANAGEMENT
In the third quarter of 1999, Joseph J. Nagel, formerly President and Chief
Operating Officer, resigned and entered into a consulting agreement with the
Company for about sixty days. At that time, Jack K. Lemley, Chairman and Chief
Executive Officer also assumed the office of President. Also in the third
quarter of 1999, the Company promoted Zaki K. Naser to Executive Vice-President
and Operations Manager. James R. Baumgardner was hired as Senior Vice-President,
and Chief Financial Officer during the fourth quarter of 1999. The Company views
these changes to be positive for the long-term growth of the Company.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards 137 "Deferral of the Effective Date of FASB
Statement 133." FASB 133 established standards for recognizing all derivative
instruments including those for hedging activities as either assets or
liabilities in the statement of financial position and measuring those
instruments at fair value. FASB No. 133 is deferred until fiscal quarters
beginning after June 15, 2000. Management believes the adoption of this
statement will have no material impact on the Company's financial statements.
25
26
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
American Ecology Corporation
We have audited the accompanying consolidated balance sheets of American Ecology
Corporation and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 1999, 1998 and 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Ecology
Corporation and subsidiaries as of December 31, 1999 and 1998, and the results
of their operations and their cash flows for the years ended December 31, 1999,
1998 and 1997, in conformity with generally accepted accounting principles.
Balukoff, Lindstrom & Co., P.A.
Boise, Idaho
February 18, 2000
26
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
As of December 31,
1999 1998
-------- --------
ASSETS
Current Assets:
Cash and cash equivalents $ 4,771 $ 4,442
Receivables, net of allowance for doubtful
accounts of $619 and $1,047, respectively 7,696 9,506
Income taxes receivable 740 740
Prepayments and other 1,207 1,023
-------- --------
Total current assets 14,414 15,711
Cash and investment securities, pledged 226 5,405
Property and equipment, net 12,818 11,145
Deferred site development costs 27,430 26,909
Intangible assets relating to acquired businesses, net 390 414
Other assets 3,181 2,216
-------- --------
Total Assets $ 58,459 $ 61,800
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt $ 781 $ 119
Accounts payable 2,706 5,101
Accrued liabilities 12,334 17,267
Deferred site maintenance, current portion 700 700
Income taxes payable 202 91
-------- --------
Total current liabilities 16,723 23,278
Long term debt, excluding current portion 3,569 2,223
Deferred site maintenance, excluding current portion 16,585 18,839
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, issued and outstanding; 5,263 converted and retired 1 1
Series E redeemable convertible preferred stock, $10.00 par value,
300,000 authorized, 300,000 shares converted and retired -- --
Common stock, $.01 par value, 50,000,000 authorized, 13,704,050
and 13,557,275 shares issued and outstanding, respectively 137 136
Additional paid-in capital 54,513 54,385
Retained earnings (deficit) (33,069) (37,062)
-------- --------
Total shareholders' equity 21,582 17,460
-------- --------
Total Liabilities and Shareholders' Equity $ 58,459 $ 61,800
======== ========
The accompanying notes are an integral part of these financial statements.
27
28
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
As of December 31,
-------------------------------
1999 1998 1997
-------- -------- --------
Revenues $ 34,352 $ 38,960 $ 41,522
Operating costs 16,609 23,545 23,219
-------- -------- --------
Gross profit 17,743 15,415 18,303
Selling, general and administrative expenses 14,762 15,702 21,909
-------- -------- --------
Income (loss) from operations 2,981 (287) (3,606)
Investment income 225 618 1,203
Gain on sale of assets 826 72 136
Other income 572 414 1,723
-------- -------- --------
Income (loss) before income taxes 4,604 817 (544)
Income tax expense 195 55 132
-------- -------- --------
Net income (loss) 4,409 762 (676)
Preferred stock dividends 397 417 760
-------- -------- --------
Net income (loss) available to common shareholders $ 4,012 $ 345 $ (1,436)
======== ======== ========
Basic earnings per share $ .30 $ .03 $ (.17)
======== ======== ========
Diluted earnings per share $ .27 $ .03 $ (.17)
======== ======== ========
Dividends paid per common share $ -- $ -- $ --
======== ======== ========
The accompanying notes are an integral part of these financial statements.
28
29
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ 000'S)
Year Ended December 31,
--------------------------------
1999 1998 1997
-------- -------- --------
Cash flows from operating activities:
Net income (loss) $ 4,409 $ 762 $ (676)
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depletion, depreciation and amortization 2,054 3,152 3,106
(Gain) loss on sale of assets (826) (72) (136)
Loss on sale of securities -- -- 59
Gain on sale of investments (14) -- --
Deferred Income Taxes 111 -- --
Stock compensation 129 -- 198
Changes in assets and liabilities:
Receivables 1,810 (1,577) 2,467
Investment securities classified as trading 820 1,942 1,953
Other assets (1,415) (1,034) (204)
Deferred site maintenance (2,254) (1,640) (1,693)
Accounts payable and accrued liabilities
(7,328) 169 (2,225)
-------- -------- --------
Total adjustments (6,913) 940 3,525
-------- -------- --------
Net cash provided (used) by operating activities (2,504) 1,702 2,849
Cash flows from investing activities:
Capital expenditures, excluding site development costs (3,219) (697) (1,356)
Site development costs, including capitalized interest (521) (1,431) (2,086)
Proceeds from sales of assets 1,840 72 136
Net proceeds from sales of investment securities 2,497 6,940 1,660
Transfers to (from) cash and investment securities, pledged 1,876 -- (678)
-------- -------- --------
Net cash provided by investing activities 2,473 4,884 (2,324)
Cash flows from financing activities:
Proceeds from issuance's and indebtedness 558 16,096 23,022
Payments of indebtedness (198) (21,519) (23,518)
Proceeds from rights offering -- 2,913 --
Stock options exercised -- -- 152
-------- -------- --------
Net cash provided by (used in) financing activities 360 (2,510) (344)
-------- -------- --------
Increase (decrease) in cash and cash equivalents 329 4,076 181
Cash and cash equivalents at beginning of year 4,442 366 185
-------- -------- --------
Cash and cash equivalents at end of year $ 4,771 $ 4,442 $ 366
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest, net of amounts capitalized $ 208 $ 72 $ 128
Income taxes paid 156 144 88
Non-cash investing and financing activities
Long-term debt exchange for asset interest -- 24,323 --
Long-term offset capitalized interest -- 12,461 --
Warrants issued on exchange for debt -- 1,660 --
Stock issuance--Director's compensation 129 79 --
Acquisition of equipment with capital leases 1,235 -- --
The accompanying notes are an integral part of these financial statements.
29
30
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ IN 000'S)
ACCUMULATED
ADDITIONAL OTHER RETAINED
PREFERRED COMMON PAID-IN COMPREHENSIVE EARNINGS COMPREHENSIVE
STOCK STOCK CAPITAL CAPITAL (DEFICIT) INCOME
-------- -------- ---------- ------------- ----------- -------------
Balance, December 31, 1996 $ 3,001 $ 80 $ 46,971 $ (477) $(35,971) --
Net loss $ -- $ -- $ -- $ -- $ (676) $ (676)
Common stock issuance's -- 5 730 -- -- --
Dividends - preferred stock -- -- -- -- (760) --
Unrealized gain (loss) on
securities available-for-sale
-- -- -- 477 -- 477
--------
Total Comprehensive Income -- -- -- -- -- $ (199)
-------- -------- -------- -------- -------- ========
Balance, December 31, 1997 3,001 85 47,701 -- (37,407)
Net income $ -- $ -- $ -- $ -- $ 762
Common stock issuance -- 51 5,024 -- --
Dividends of preferred stock -- -- -- -- (417)
Preferred stock-retired (3,000) -- -- -- --
-------- -------- -------- -------- --------
Balance, December 31, 1998 1 136 54,385 -- (37,062)
Net income $ -- $ -- $ -- $ -- $ 4,409
Common stock issuance -- 1 109 -- --
Dividends of preferred stock -- -- -- -- (397)
Preferred stock-retired
-- -- 19 -- (19)
-------- -------- -------- -------- --------
Balance, December 31, 1999 $ 1 $ 137 $ 54,513 $ -- $(33,069)
======== ======== ======== ======== ========
Note: Convertible Preferred Stock is not shown above because no shares have been
issued.
The accompanying notes are an integral part of these financial statements
30
31
AMERICAN ECOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS.
American Ecology Corporation (a Delaware Corporation) and its subsidiaries ("the
Company") provide processing, recycling, packaging, transportation, remediation
and disposal services for generators of hazardous waste and low-level
radioactive waste. The Company has one of the largest motor rebuilding
facilities in the United States for large electric motors from nuclear power
plants. The Company recently permitted a municipal landfill in south Texas that
is scheduled to be operational in mid-2000. The Company services the needs of
hazardous waste generators nationally, but the larger market share is in the
Gulf and West Coast regions of the country at its hazardous waste landfill
disposal sites in Robstown, Texas and Beatty, Nevada. The Company services the
needs of low-level radioactive waste (LLRW), generators in the Northwest and
Rocky Mountain Compact regions at its rate regulated LLRW facility located near
Richland, Washington and provides LLRW processing and recycling services to LLRW
waste generators in the Mid-West and East Coast regions at its Oak Ridge,
Tennessee facility.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.
Principles of Consolidation. The accompanying financial statements are prepared
on a consolidated basis. Seven reporting subsidiaries and the parent company
were active in 1999. Three subsidiaries had minimal to no activity in 1999. The
consolidated financial statements include the accounts of the Company and its
subsidiaries after the elimination of all significant inter-company balances and
transactions. Certain estimates and assumptions are made to accurately reflect
the business operations under the accrual basis of accounting. The Company's
year-end is December 31, 1999 and there were fifty-three weeks of reporting
compared to fifty-two weeks of reporting in 1998 and 1997. The Company has made
certain estimates and assumptions for the consolidated financial statements. The
consolidated financial statements are prepared in accordance with generally
accepted accounting principles (GAAP).
Cash and Investment Securities Pledged. Pledged cash and investment securities
totaled $226,000 at December 31, 1999. These consisted of a letter of credit and
money market accounts. The Company maintains these investments to cover
insurance policies commitments.
Revenue Recognition. Generally, revenues are recognized as services are
performed, and as waste materials are buried or processed. Revenue also includes
sales from the Company's subsidiary Nuclear Equipment Services Corporation
("NESC"), which accounts for revenue on a percentage of completion basis. The
Company had both unbilled and deferred revenue at year-end 1999, 1998 and 1997.
Property and Equipment. Property and equipment are recorded at cost and
depreciated on straight-line and declining balance methods over estimated useful
lives. Land is comprised of property owned at the processing and disposal sites.
Land owned and used for disposal is depleted over the estimated useful life of
the disposal site on a straight-line basis. Cell development costs represent
waste disposal facility preparation costs that are capitalized and charged to
operating costs as disposal space is utilized. The Company engaged independent
surveys by certified engineers and surveyors to measure remaining cell volume
for each site for December 31, 1999, 1998 and 1997. The estimated useful lives
of buildings and improvements are fifteen to thirty-one years. The estimated
useful lives of vehicles, decontamination, processing and other equipment is
three to ten years. See Note 4 for major categories of property and equipment.
Expenditures for major renewals and betterment's are capitalized and
expenditures for maintenance and repairs are charged to expense as incurred.
During 1999, 1998, and 1997, maintenance and repair expenses were $241,000,
$209,000 and $521,000, respectively.
31
32
Intangible Assets. Intangible assets relating to acquired businesses consist
primarily of the cost of purchased businesses in excess of fair value of net
assets acquired ("goodwill"). Intangible assets are being amortized on the
straight-line method over periods not exceeding 40 years with the majority being
amortized over 25 years. The accumulated amortization of intangible assets
amounted to $360,000, $336,000, and $312,000, at December 31, 1999, 1998 and
1997, respectively. Amortization of intangible assets was $24,000 for each of
the last three years. On an ongoing basis, the Company measures the value of its
intangible assets. In the event that facts and circumstances indicate intangible
or other assets may be impaired, an evaluation of recoverability would be
performed. If an evaluation was required, the estimated future undiscounted cash
flows associated with the assets would be compared to the asset's carrying
amount to determine if a write-down to market value or discounted cash flow
value was necessary.
Permitting Costs. Permitting costs, included under the caption Other Assets in
the Consolidated Balance Sheets, are primarily comprised of outside engineering
and legal expenses and are capitalized and amortized over the life of the
applicable permits. At December 31, 1999 and 1998, there were $3,001,000 and
$1,955,000, respectively of unamortized costs included in other assets in the
accompanying consolidated balance sheets.
The Company operates its various sites under the regulations of, and permits
issued by, various state and federal agencies. In December 1999, the Robstown,
Texas facility received its permit for a municipal waste landfill and in
February 2000, it received a permit to vertically stack either hazardous or
non-hazardous waste on top of existing cells.
Self-Insurance. The Company has insurance policies that cover any annual losses
exceeding $45,000 per employee for employee health care. The Oak Ridge union
employees are not covered under the self-insured healthcare program, but are
covered by a traditional insurance plan as negotiated under their collective
bargaining agreement. The Company also maintains a Pollution and Remediation
Legal Liability Policy pursuant to RCRA regulations. The policy is subject to a
$250,000 self-insured retention. In addition, the Company is insured for
consultant's environmental liability. The policy is subject to a $100,000
retention.
The Company restructured its closure and post-closure insurance with Reliance
Insurance Company under a five year prepaid premium policy. The Company no
longer is reinsuring financial assurance requirements for closure and
post-closure of its facilities. The Company continues to maintain ALEX as an
inactive captive insurance company.
Deferred Site Maintenance. Deferred site maintenance includes the accruals
associated with obligations for closure and post-closure of the Company's
operating and closed disposal sites and for corrective actions and remediation.
The Company generally provides accruals for the estimated costs of closures and
post-closure monitoring and maintenance as permitted disposal space is consumed.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated. The Company performs
routine periodic reviews of both closed and operating sites and revises accruals
for estimated post-closure, remediation or other costs related to these
locations as deemed necessary. The Company's recorded liabilities are based on
best estimates of current costs and are updated periodically to include the
effects of existing technology, presently enacted laws and regulations,
inflation and other economic factors. In 1999, the Company completed a review
with an independent engineering firm and determined that one of the site
locations that has been closed will have a reduced cost of closure. The Company
completed a study on ground water contamination and the U.S. EPA concurred that
such remediation will be complete by 2002. The Company had previously reserved
costs that are now estimated to be $2.1 million less than the previous reserve.
The Company estimates its future cost requirements for closure and post-closure
monitoring and maintenance for operating chemical disposal sites based on
Resource Conservation and Recovery Act ("RCRA") and the respective site permits.
RCRA requires that companies provide financial assurance for the closure and
post-closure care and maintenance of their chemical sites for at least thirty
years following closure.
Net Income (Loss) Per Share. Effective December 15, 1997, the Company adopted
Statement of Financial Accounting Standard ("SFAS") No. 128 on Earnings Per
Share, which requires the presentation of basic and fully diluted earnings per
common share for all periods presented.
32
33
Basic EPS is simply the per share allocation of income available to common
stockholders based only on the weighted average number of common shares actually
outstanding during the period. Diluted EPS represents the per share allocation
of income attributable to common stockholders based on the weighted average
number of common shares actually outstanding plus all dilutive potential common
shares outstanding during the period.
(000's except per share amounts)
Year Ended December 31,
--------------------------------
1999 1998 1997
------- ------- -------
Net income (loss) $ 4,409 $ 762 $ (676)
Adjustments to net income (loss):
Preferred stock dividends 397 417 760
------- ------- -------
Adjusted net income (loss) available to
common shareholders $ 4,012 $ 345 $(1,436)
Weighted average shares outstanding-
Common shares outstanding at year end 13,585 12,772 8,163
Effect of dilutive shares 1,475
Adjustment factor for rights offering -- -- 1.022
------- ------- -------
Adjusted shares 15,061 12,772 8,342
Basic EPS $ .30 $ .03 $ (.17)
======= ======= =======
Diluted EPS $ .27 $ .03 $ (.17)
======= ======= =======
Odd Lot Elimination. During 1999, the Company conducted an Odd Lot Elimination.
Under this Elimination, shareholders owning 99 or less shares were offered an
opportunity to sell their shares without a commission or charge for the average
market price at the time of the offer. At the time, the Company had 11,800 total
shareholders with 13,648,000 shares outstanding. Of these 11,800 shareholders
about 6,000 held 99 or less shares. About 1,400 shareholders accepted the Odd
Lot Elimination offer. Other shareholders who have not been responding to
Company mailings and voting their shares, and hold less than 99 shares may be
subject to escheatment. This allows their State of residence to claim their
shares as unclaimed property. The Company expects that this escheatment process
will eliminate a significant number of Odd Lot shareholders over the next two to
three years.
Restated EPS for the Effects of the Rights Offering. On December 30, 1997 the
Company filed its prospectus and Form S-3 for a rights offering. The Company
issued non-transferable rights to subscribe for up to 8,379,813 shares of the
Company's Common Stock $.01 par value per share. Each holder of the Company's
Common Stock was entitled to receive one Right for each share of Common Stock
held on the Record Date of December 8, 1997. Each holder was entitled to
purchase one additional share of Common Stock for each Right held. The Rights
Offering expired on February 10, 1998. A total of 3,912,936 shares were issued
from the Rights Offering.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial
statements as well as the reported amounts of revenue and expenses during the
reporting period. The Company used significant estimates in the accompanying
consolidated financial statements primarily related to recoverability of
deferred site development costs, waste processing and burial costs, and deferred
site maintenance. Actual results could differ from those estimates.
Major Customers. In 1999 no single customer accounted for 10% or more of the
Company's consolidated revenues. Revenues resulting from the cost reimbursement
contract with the Central Interstate Low-Level Radioactive Waste Commission were
approximately $6,808,000, and $7,579,000 in 1998 and 1997, or 18% of the
Company's consolidated revenues each year. No other single customer accounted
for 10% or more of the Company's consolidated revenues for
33
34
1998 or 1997. The Central Interstate Compact Commission has approved a minimal
amount of revenue to maintain the proposed disposal project pending the outcome
of litigation.
Credit Risk Concentration. Concentrations of credit risk with respect to
accounts receivable are believed to be limited due to the number,
diversification and character of the obligors and the Company's credit
evaluation process. Typically, the Company has not required collateral for such
obligations.
Fair Value of Financial Instruments. The book values of investment securities,
excluding investments in common and preferred stocks, receivables, accounts
payable and financial instruments included in other assets and accrued
liabilities approximate their fair values principally because of the short-term
nature of these instruments. Investments in common and preferred stocks are
stated at fair market values. The quoted market price was used to determine the
fair market value of the investments in common and preferred stocks.
Commitment. The Company signed an agreement in January 1999, to dispose of a
minimum of 60,000 cubic feet of waste material stored at the Oak Ridge,
Tennessee facility before December 31, 2001. The Company has been disposing of
this waste on schedule and expects to meet this commitment.
Labor Concentrations. The Paper, Allied-Industrial Chemical & Energy Workers
International Union, AFL-CIO, CLC (PACE), formerly the OCAW, represent 64
employees at two of the Company's facilities. In March 1998, the Company
reached an impasse in negotiations of a new collective bargaining agreement and
implemented its final offer. PACE subsequently charged the Company with unfair
labor practices. The National Labor Relations Board ("NLRB") hearing ruled
against the Company which has appealed to the full NLRB. This matter is
pending. If the Company is unsuccessful in its appeal, it may be required to
retroactively apply the prior labor agreement and bargain with PACE.
34
35
New Accounting Pronouncements.
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards 137 "Deferral of the Effective Date of FASB
Statement 133." FASB 133 established standards for recognizing all derivative
instruments including those for hedging activities as either assets or
liabilities in the statement of financial position and measuring those
instruments at fair value. FASB No. 133 is deferred until fiscal quarters
beginning after June 15, 2000. Management believes the adoption of this
statement will have no material impact on the Company's financial statements.
NOTE 3. CASH AND INVESTMENT SECURITIES.
Merrill Lynch & Company now holds the securities and investment cash of the
Company and the wholly owned subsidiary ALEX. ALEX was holding $1.7 million of
cash and securities classified as trading as of December 31, 1999 which have
increased to $2.1 million in fair market value as of March 27, 2000. ALEX is
currently an inactive captive insurance company and maintains an investment
portfolio that may be used for insurance deductibles, in the event management
decides to reactivate it.
Cash and investment securities at December 31, 1999, and 1998, were as follows
(in thousands):
Market Unrealized
December 31, 1999 Costs Value Gain/(loss)
- ----------------- -------- ------- -----------
Cash and cash equivalents $ 4,452 $ 4,771 $ 319
Securities held-to-maturity 226 226 --
--- --- --
$ 4,678 $ 4,997 $319
======== ======= ====
December 31, 1998
Cash and cash equivalents $ 4,442 $ 4,442 $ --
Trading securities 1,653 1,696 43
Securities held-to-maturity 3,709 3,709 --
----- ----- --
$ 9,804 $ 9,847 $ 43
======== ======= ====
The change in net unrealized gains on trading securities was $276,000,
$(495,000) and $503,000 in 1999, 1998 and 1997, respectively, each of which has
been included in earnings. Investments in securities held-to-maturity mature
over various dates during 1999 and are reported at their amortized cost basis,
which approximates fair value at December 31, 1999. Investments in securities
held-to-maturity at December 31, 1999 and 1998, consisted of the following (in
thousands):
1999 1998
------ ------
Corporate Bonds/Commercial Paper $ 100 $3,169
Certificates of deposit 52 100
Money market accounts and other 74 440
------ ------
$ 226 $3,709
====== ======
Certain cash accounts and substantially all investments in securities
held-to-maturity and trading securities totaling $226,000 and $5,405,000 at
December 31, 1999 and 1998, respectively, have been classified as non-current
assets as cash and investment securities pledged.
In 1999, the Company released $2,500,000 in cash secured letters of credit by
securing a $1,500,000 performance bond. The Company is able to satisfy its
financial assurance obligation with a performance bond by both parties amending
an
35
36
administrative consent order to reduce the financial assurance. The available
cash held to secure the letters of credit was used to pay down outstanding
accounts payable and reduce the working capital deficit.
NOTE 4. PROPERTY AND EQUIPMENT.
Property and equipment at December 31, 1999 and 1998, were as follows (in
thousands):
1999 1998
-------- --------
Construction in progress $ 1,754 $ --
Land 1,537 1,830
Cell development costs 12,289 11,035
Buildings and improvements 5,968 6,211
Decontamination and processing equipment 1,144 1,144
Vehicles and other equipment 16,084 19,627
-------- --------
38,776 39,847
Less: Accumulated depletion, depreciation and amortization (25,958) (28,702)
-------- --------
$ 12,818 $ 11,145
======== ========
Depreciation expense was $1,433,000, $1,958,000 and $2,637,000 for 1999, 1998
and 1997, respectively.
The Company leases equipment under various noncancellable capital leases. The
cost and accumulated depreciation are as follows at December 31, 1999:
Accumulated
Cost Depreciation
------ ------------
Capitalized Cost $1,491,000 $214,000
========== ========
NOTE 5. DEFERRED SITE DEVELOPMENT COSTS.
The Company has been licensed to construct and operate the low-level radioactive
waste ("LLRW") facility for the Southwestern Compact ("Ward Valley facility"),
and been selected to obtain a license to develop and operate the Central
Interstate Compact LLRW facility ("Butte facility").
The State of California, where the Ward Valley Site is located, has not obtained
the project property from the U.S. Department of the Interior. For the Company
to realize its investment, the US Government will need to transfer the land to
the State of California, or the Company will need to recover monetary damages
from the U.S. Government, the State of California or both. The Company has taken
steps to protect its investment in Ward Valley and will continue to do so.
In the first quarter of 1997, the Company filed two lawsuits against the United
States. The first was filed in the Court of Federal Claims, seeking monetary
damages in excess of $73 million. The court dismissed this case on March 27,
2000. The Company intends to appeal. The second case was filed in the Federal
District Court in Washington D.C. seeking injunctive relief and a writ of
mandamus ordering the land transfer to California. The trial court rendered an
adverse judgment in the mandamus action March 31, 1999, which the Company has
appealed.
All costs through July 31, 1999 related to the development of the Ward Valley
facility had been capitalized, and since then have been expensed as incurred.
After adjusting for the bank settlement in November 1998, and as of December 31,
1999, the Company had deferred $20,952,000 (36% of total assets) of
pre-operational facility development costs of which $895,000 represents
capitalized interest. These deferred costs are to be recovered during the
facility's first 20 years of operation from disposal fees approved by the
Department of Health Services (DHS). The approval process is to include a
prudency review of pre-operational costs incurred by the Company. The Company
expects all costs that it has deferred for this facility, and uncapitalized
project interest costs, to be included in the rate-base. However, there can be
no assurance that California will complete the land transfer, that all of these
costs will be approved by the DHS, or that
36
37
the facility will ever be constructed. To further protect its investment in Ward
Valley and to help ensure the State of California meets its obligations, the
Company filed a claim with the California State Board of Control on February 25,
2000.
During the fourth quarter of 1999, the Company requested a refund of $125,000
equal to one-half of the annual license fee to the State of California,
Department of Health Services. The Department reimbursed the $125,000 amount for
1999 and advised the Company that the fee due for calendar year 2000 need not be
paid pending further notice.
The Company has incurred reimbursable costs and received revenues for the
development of the Butte, Nebraska facility under a contract with the Central
Interstate LLRW Compact Commission ("CIC"). While US Ecology has a minor equity
position in the Butte, Nebraska project, it has acted principally as a
contractor to the Central Interstate Low-Level Radioactive Waste Commission.
Major generators of waste within the CIC's five-state region have provided
substantially all funding to develop the Butte facility. As of September 30,
1999, the Company has contributed and capitalized approximately $6,478,000 of
costs (11% of total assets), $386,000 of which is capitalized interest toward
development of the Butte facility. In December 1998, the State of Nebraska
denied US Ecology's license application to build and operate the facility. The
CIC directed US Ecology to pursue a Petition for a Contested Case challenging
the State's denial. US Ecology filed its Petition pursuant to Nebraska law on
January 15, 1999.
The Major Generators funding the development project 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 to protect the Company's interest and is seeking relief. The contested
case is stayed by a preliminary injunction issued by the presiding federal
judge. The Company believes the case will go to trial in 2001. In the meantime,
the major generators have provided funding to maintain the project pending the
outcome of litigation. Consequently, the Company's revenue from this project has
declined substantially since April 1999.
The timing and outcome of the above matters are unknown. The Company continues
to pursue the conveyance of the land from the federal government to California
as well as its remedies in federal court to cure alleged defects in the State of
Nebraska's licensing process for the Butte, Nebraska facility. The Company
believes that the deferred site development costs for both facilities will be
realized. In the event the Butte facility license is not granted, operations of
either facility do not commence or the Company is unable to recoup its
investments through legal recourse, it may have an adverse effect on its
financial position.
37
38
The following table shows the ending capitalized balances for deferred site
development costs for the periods ended December 31, 1999 and December 31, 1998
in thousands of dollars:
December 31, Capitalized Capitalized
1999 Costs 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
December 31,
1998
Ward Valley Project $19,536 $ 895 $20,431
Butte, Nebraska Project 6,092 386 6,478
------- ------- -------
Total $25,628 $ 1,281 $26,909
In July 1999, the Company elected not to capitalize further contributions to
either project until the projects were materially advanced. These costs remain
capitalized on the books of record for the Company while it pursues ongoing
legal actions to protect its investments.
NOTE 6. DEFERRED SITE MAINTENANCE.
Deferred site maintenance accruals at December 31, 1999 and 1998 were as follows
(in thousands):
1999 1998
-------- --------
Accrued costs associated with open facilities $ 10,376 $ 9,903
Accrued costs associated with closed facilities 6,909 9,636
-------- --------
Sub-total 17,285 19,539
Less: current portion (700) (700)
-------- --------
Deferred site maintenance, excluding current portion $ 16,585 $ 18,839
======== ========
Deferred site maintenance includes the accruals associated with obligations for
closure and post-closure of the Company's operating and closed disposal sites
and for corrective actions and remediation. The Company generally provides
accruals for the estimated costs of closures and post-closures monitoring and
maintenance as permitted airspace of such sites is consumed. Liabilities are
recorded when environmental assessments and/or remedial efforts are probable,
and the costs can be reasonably estimated.
The Company does not bear responsibility for closure and post-closure costs for
the state owned land used for waste disposal. The Company leases two such
facilities at Beatty, Nevada and Richland Washington. The State of Nevada and
the State of Washington have collected money from a portion of the tipping fees
on disposal for these two facilities and ultimately controls the dispensation of
those funds for proper closure. The funds are maintained in segregated accounts
for the future costs of closure and post-closure care and maintenance of the
Richland, Washington and Beatty, Nevada facilities. The Company currently
submits waste volume-based fees to these states maintained funds. Such fees are
periodically negotiated with, or established by, the States and are based upon
engineering cost estimates provided by the Company and approved by the State.
The TNRCC issued to Texas Ecologists a permit on December 15, 1999 for the El
Centro Municipal Waste Landfill and then on February 9, 2000 a permit for
vertically stacking hazardous and non-hazardous waste on current existing closed
cells. These modifications to the overall site facility will require the Company
to engage an independent engineer to assess the closure and post closure costs
for these facilities.
38
39
NOTE 7. LONG TERM DEBT.
Long term debt at December 31, 1999 and 1998 consisted of the following (in
thousands):
1999 1998
------- -------
Note payables $ 1,847 $ 1,300
Capital lease obligations and other 2,503 1,042
------- -------
4,350 2,342
Less: Current maturities (781) (119)
------- -------
Long term debt $ 3,569 $ 2,223
======= =======
Aggregate maturity of future minimum payments under notes payable and capital
leases is as follows (in thousands):
Year Ended
December 31,
------------
2000 $ 781
2001 1,631
2002 730
2003 520
2004 688
------
TOTAL $4,350
======
The notes payable, issued March 1999, are with two of the Company's board
members, with an eighteen-month term 9% interest, and $1.3 million principal,
and prohibiting the Company from paying dividends on common or preferred shares.
In April 1999, the Company issued a note with AFCO Finance for a two-year term
for financing an insurance premium.
The Company has several long-term capital leases. These leases are at Oak Ridge,
Tennessee with 10% interest, at Beatty, Nevada at 5.8% and 8.9% and at Richland,
Washington with 5.25% through 6.14% interest. These leases expire over the next
5 years.
NOTE 8. 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 bore an 11.25% annual dividend,
paid quarterly in shares of the Company's common stock. The Series E was issued
to fulfill a prior banking requirement. There were no voting rights or powers
attached to this 11.25% Series E Preferred Stock.
There was a partial redemption and mandatory conversion of the remaining Series
E at the conclusion of the rights offering on February 10, 1998 as a term of the
Series E Designation Certificate. 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,
which 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 ("8
3/8% Preferred Stock") and authorized the issuance of 105,264 of such shares and
warrants to purchase 1,052,640 shares of the Company's common stock. The Company
sold 105,264 of 8 3/8% Preferred 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 was
deducted from the proceeds. Each 8 3/8% Preferred Stock share is convertible at
any time at the option of the holder into 13.48 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 sales.
39
40
Dividends on the 8 3/8% Preferred Stock are cumulative from the date of issuance
and payable quarterly commencing on October 15, 1995. Current notes payable
covenants prohibit the payment of dividends. Accrued dividends at December 31,
1999 totaled $397,000.
On September 12, 1999 the warrants on the 8 3/8% Preferred Stock expired except
for those belonging to one Series D holder. The Company extended an offer to all
Series D holders that if they converted their Series D to common stock the
warrants would be extended until September 13, 2002. One holder converted
5,263.2 preferred shares for 83,580 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. The remaining Series D preferred stock outstanding is 100,001
shares.
NOTE 9. STOCK OPTION PLANS.
The Company presently maintains three stock option plans. One, which expired in
1998, afforded employees and outside directors of the Company the right to
purchase shares of its common stock. The exercise price, term and other
conditions applicable to each option granted under the Company's plans are
generally determined by the Compensation Committee of the Board of Directors at
the time of the grant of each option and may vary with each option granted. No
option may be granted at a price less than the fair market value of the shares
when the option is granted, and no options may have a term longer than ten
years.
The first plan is the 1988 plan that provided a 10-year life and all but 260,000
options have expired. In 1992, the Company adopted the second and third plans as
the 1992 Stock Option Plan for Employees and the 1992 Stock Option Plan for
Directors. On May 13, 1999, 500,000 options were added to the Employee's Plan of
1992. Options under the employee plan are designated as incentive or
non-qualified in nature at the discretion of the Compensation Committee, and
only employees will receive options under the 1992 Stock Option Plan for
Employees. Only directors will receive options under the Director's Plan.
As of December 31, 1999, the 1992 Stock Option Plan for Employees had issued
667,000 options with 633,000 remaining available and under the Stock Option Plan
for Directors, 437,000 options had been issued with 212,000 available.
The Company accounts for these plans under APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Under this opinion, the Company has recorded no
compensation cost for 1999, 1998, and 1997. Had compensation cost for the plans
been determined consistent with FASB Statement No. 123, "Accounting for
Stock-Based Compensation", the Company's 1999, 1998, and 1997 net loss would
have been decreased (increased) by $316,000, $661,000, and $494,000,
respectively. Basic income (loss) per share would have decreased (increased)
$.02, $.05, and $.06 for 1999, 1998, and 1997, respectively. Diluted income
(loss) per share would have been decreased (increased) by the same amount per
share as basic income (loss) per share as the common stock equivalents are
anti-dilutive. The pro forma compensation cost may not be representative of that
to be expected in future years.
40
41
The fair value of each option grant is estimated using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1999, 1998, and 1997:
1999 1998 1997
----------- ----------- -----------
Expected volatility 136% 213% 137%
Risk-free interest rates 6.3% 6.0% 6.0%
Expected lives 3 years 3 years 3 years
Dividend yield 0% 0% 0%
Weighted-average fair value of options granted
during the year (Black-Scholes) $ 1.94 $ 1.14 $ 1.38
Under option:
Options outstanding, beginning of year 1,257,572 716,650 542,600
Granted 170,000 571,422 340,000
Exercised (1,200) -- (97,500)
Canceled (60,800) (30,500) (68,450)
----------- ----------- -----------
Options outstanding, end of year 1,365,572 1,257,572 716,650
=========== =========== ===========
Price range per share of outstanding options $ 1.00 $ 1.00 $ 1.00
$ 14.75 $ 14.75 $ 14.75
=========== =========== ===========
Price range per share of options exercised $ 1.25 $ -- $ 1.25
$ 1.25 $ -- $ 2.00
=========== =========== ===========
Price range per share of options canceled $ 1.25 $ 8.58 $ 5.50
$ 7.13 $ 8.58 $ 14.25
=========== =========== ===========
Options exercisable at end of year 1,121,872 1,124,772 609,320
=========== =========== ===========
Options available for future grant at end of year 852,728 461,928 733,350
=========== =========== ===========
NOTE 10. EMPLOYEE'S BENEFIT PLANS.
401(k) Plan. The Company maintains a 401(k) plan for employees who voluntarily
contribute a portion of their compensation, thereby deferring income for federal
income tax purposes. The plan is called The American Ecology Corporation 401(k)
Savings Plan.
The Plan covers substantially all of the Company's employees after one full year
of employment. Participants may contribute a percentage of salary up to the IRS
limits. The Company's contribution matches 55% of participant contributions up
to 6% of deferred compensation.
The Company contributions for the 401(k) plan were $181,000, $119,000, and
$147,000 for 1999, 1998, and 1997 respectively. The Company has no
post-retirement or post-employment benefit plan.
41
42
NOTE 11. INCOME TAXES.
The components of the income tax provision (benefit) were as follows (in
thousands):
Year Ended December 31,
1999 1998 1997
---- ---- ----
Current - Federal $ -- $ -- $ --
- State 195 55 132
---- ---- ----
195 55 132
---- ---- ----
Deferred - Federal -- -- --
---- ---- ----
$195 $ 55 $132
==== ==== ====
The following reconciles between the effective income tax (benefit) rate and the
applicable statutory federal income tax (benefit) rate:
Year Ended December 31,
1999 1998 1997
---- ---- ----
Income tax (benefit) - statutory rate 34.0% 34.0% (34.0)%
Valuation allowance for deferred tax assets (34.6) (40.8) 14.9
Tax refund -- -- 5.7
Other, net .6 6.8 1.4
---- ---- ----
Total effective tax (benefit) rate --% --% (12.0)%
==== ==== ====
The tax effects of temporary differences between income for financial reporting
and taxes that gave rise to significant portions of the deferred tax assets and
liabilities and their changes during the year were as follows (in thousands):
JANUARY 1, 1999 DEFERRED PROVISION DECEMBER 31, 1999
--------------- ------------------ -----------------
DEFERRED TAX ASSETS
Environmental compliance and other site related
costs, principally due to accruals for financial
reporting purposes $ 7,648 $ (1,872) $ 5,776
Depreciation and amortization 4,933 (870) 4,063
Net operating loss carryforward 10,160 1,403 11,563
Other 812 (16) 796
-------- -------- --------
Total gross deferred tax assets 23,553 -- 22,198
Less valuation allowance (22,057) 1,400 (20,657)
-------- -------- --------
Net deferred tax assets 1,496 -- 1,541
DEFERRED TAX LIABILITY
Site development costs (1,127) (45) (1,172)
Capitalized interest (369) -- (369)
Total gross deferred tax liabilities (1,496) -- (1,541)
-------- -------- --------
Net deferred tax assets $ -- $ -- $ --
======== ======== ========
42
43
The Company has established a valuation allowance for certain deferred tax
assets due to realization uncertainties inherent with the long-term nature of
deferred site maintenance costs, uncertainties regarding future operating
results and for limitations on utilization of acquired net operating loss carry
forwards 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 carry forward of
approximately $34,010,000 at December 31, 1999, begins to expire in the year
2006. Of this carry forward, $2,745,000 is limited pursuant to the net operating
loss limitation rules of Internal Revenue Code Section 382. The portion of the
carry forward limited under Internal Revenue Code Section 382 expires $793,000
in 2006, $1,079,000 in 2007 and $872,000 in 2008. The remaining unrestricted net
operating loss carry forward expires $4,280,000 in 2010, $8,657,000 in 2011,
$7,828,000 in 2012, $6,927,000 in 2013 and $3,574,000 in 2014. The amount of
the Company's net operating loss carry forwards could be reduced if the Company
is ultimately unsuccessful in pursuing the refund claim discussed below.
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. On November 29, 1999 the Company protested
this denial which is currently pending with the IRS. The Company believes that
this claim was improperly denied and intends to continue its efforts to receive
the refund claim. However, in the event the Company is unsuccessful the Company
may have an obligation to pay 75% of this $740,000 refund claim to the prior
bank which purchased this claim with recourse. In November 1998, the Company
agreed to a repurchase agreement to the settlement agreement whereby the Company
would buy back 25% of the refund claim for $184,000. The Company has been making
monthly payments to satisfy this obligation which will be complete in October
2000.
NOTE 12. COMMITMENTS AND CONTINGENCIES.
In the ordinary course of conducting business, the Company becomes involved in
judicial and administrative proceedings involving federal, state and local
governmental authorities. There may also be actions brought by individuals or
groups in connection with permitting of planned facilities, alleging violations
of existing permits, or alleging 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 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 these matters will not have
a material adverse effect on the Company's financial position, results of
operations or cash flows.
LITIGATION
One of the Company's principal subsidiaries is a plaintiff in two related cases
against the United States in which one or more favorable outcomes may have a
potentially significant favorable future impact on the Company. In the first
case, US Ecology is suing to recover approximately $73.1 million of Ward Valley
site development costs as well as lost profits and lost opportunity costs. In
the second case US Ecology is seeking an order (writ of mandamus) from a federal
court which may result in the eventual opening of the long delayed Ward Valley
LLRW site. If the Company is unsuccessful in this litigation and in other
avenues available to it for recovery, the Company might be required to
write-off its deferred site development cost. See Note 5 above.
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
In an action filed October 12, 1999, Plaintiff Zurich American Insurance Co.
("Zurich"), seeks declaratory and other relief against National Union Fire
Insurance Company of Pittsburgh ("National Union"), AEC and named subsidiaries
("AEC Defendants") and Doe Insurers 1-50 ("Doe Defendants") with respect to
Zurich's defense coverage in the Virgie Adams action. National Union is named as
a defendant because it allegedly provided insurance coverage to Gibraltar
Chemical Resources (predecessor to an AEC subsidiary) during the coverage period
in question. Doe Insurers 1-50 are included in the action to preserve any claims
Zurich may have against other insurers, yet unknown, who may have provided
coverage during the same time. Among other relief, Zurich seeks a declaratory
ruling from the court that National Union and the Doe Defendants have a duty to
participate in the Company's defense in the Adams suit. In
43
44
addition, Zurich seeks reimbursement, contribution and/or allocation of
litigation fees and costs from the AEC Defendants, National Union and the Doe
Defendants for alleged defense costs of the Complaint. Zurich also seeks a
declaratory ruling from the court stating that prospectively Zurich has no duty
to defend or indemnify the AEC Defendants in the Adams suit. Finally, Zurich
asserts a claim for indemnity against all defendants as to costs, and includes a
claim for unspecified damages as well as costs of suit. The Company filed an
answer to the Complaint on December 15, 1999, including various counter claims
against Zurich and cross claims against National Union and the Doe Defendants.
On December 10, 1999, Zurich filed an amended Complaint adding General Motors as
a defendant, seeking declaratory and injunctive relief regarding Zurich's duty
to defend and/or indemnify the Company and/or General Motors in the General
Motors case discussed below. An amended answer to the amended Complaint was
filed in February 2000. The Company intends to vigorously defend this action.
GENERAL MOTORS CORPORATION V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORP., ET
AL., CASE NO. 3-99CV2626-L, U.S. DISTRICT COURT, NORTHERN DISTRICT OF TEXAS.
The Complaint names the Company and certain named subsidiaries, as well as the
former owner of the Winona Facility and its associated business entities, all of
which are defendants in the Virgie Adams case. General Motors seeks contribution
and indemnity, including reimbursement of defense costs and attorneys' fees,
incurred by GM in the Adams case and this case. The underlying claims are based
on the terms and conditions of a waste disposal contract between GM and the
Winona Facility dating to 1989 and continuing through the time the facility
closed in 1997. The allegations in the Complaint are based on breach of
contract, contribution, and common law indemnity grounds. Included within the
indemnity claims is a claim for settlement payment by GM plus court fees. The
Company does not believe it breached the contract or was negligent, and intends
to vigorously defend the case.
ENVIRONMENTAL MATTERS
The United States Environmental Protection Agency (EPA) has requested
information regarding waste the Company may have shipped to a former LLRW
storage facility near Denver, Colorado, which is now a Superfund site. The EPA
has subsequently informed the Company it may be liable for approximately $29,000
for clean-up costs as a potentially responsible party. The Company does not
believe these amounts are material.
IN THE MATTER OF AMERICAN ECOLOGY RECYCLE CENTER, INC., RCRA DOCKET NO.:
RCRA-4-99-0020
On September 30, 1999, USEPA Region 4 issued an Administrative Complaint to AERC
alleging violations of RCRA requirements including storage over one year of
hazardous waste subject to land disposal restrictions, failure to make hazardous
waste determinations, and storage of hazardous wastes without a permit. This
civil administrative enforcement action seeks a $533,759 civil penalty. An
answer to the complaint, received on October 4, 1999, was filed by the Company
on November 2, 1999. The Company believes it has conducted its operations in
compliance with the applicable regulations, has fully reserved on the books for
any potential penalty, and intends to vigorously contest any further action that
may result from this investigation.
44
45
NOTE 13. SELECTED QUARTERLY FINANCIAL DATA, UNAUDITED AND NOT REVIEWED.
The unaudited and unreviewed consolidated quarterly results of operations for
1999 and 1998 (in thousands, except per share amounts) were:
TOTAL FOURTH THIRD SECOND FIRST
YEAR QUARTER QUARTER QUARTER QUARTER
Operating revenues:
1999 34,352 10,259 6,007 8,907 9,179
1998 38,960 10,231 8,855 10,230 9,644
Income (loss) from Operations
1999 2,981 2,597 63 338 (16)
1998 (287) 1,752 (1,202) (358) (479)
Income (loss) before income taxes
And extraordinary item:
1999 4,604 3,168 (155) 1,466 125
1998 817 1,615 (1,125) 262 65
Net income (loss):
1999 4,409 2,990 (126) 1,426 119
1998 762 1,705 (1,089) 226 (80)
Basic earnings (loss) per common
Share:
1999 .30 (.02) .10 .001
1998 .12 (.09) .01 (.01)
Diluted earnings (loss) per
common share:
1999 .27 (.02) .08 .001
1998 .11 (.09) .01 (.01)
Basic and diluted earnings per common share for each of the quarters presented
above is based on the respective weighted average number of common shares for
the quarters. The dilutive potential common shares outstanding for each period
and the sum of the quarters may not necessarily be equal to the full year basic
and diluted earnings per common share amounts.
NOTE 14. OPERATING SEGMENTS.
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," which changed the way the Company reports
information about its operating segments. The Company operates with two
segments, Chemical Services and LLRW Services. The Chemical Services division
provides hazardous and non-hazardous waste management services. The LLRW
Services division processes, packages, and disposes of material contaminated
with low-level radioactive material. The accounting policies of the segments are
the same as those described in Note 2, "Summary of Significant Accounting
Policies." 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 intercompany transactions at cost, as well as allocation for
certain corporate costs.
45
46
Summarized financial information concerning the Company's reportable segments
are shown in the following table. The "Corporate & Other" column includes
corporate-related items not allocated to the reportable segments.
Reported in ($000) Chemical Services LLRW Services Corporate & Other Total
- ------------------ ----------------- ------------- ----------------- --------
1999
Sales $ 11,554 $ 22,798 $ -- $ 34,352
Operating Costs 7,482 9,740 (613) 16,609
-------- -------- -------- --------
Gross Profit $ 4,072 $ 13,058 $ (613) $ 17,743
S, G&A Expense 3,218 6,192 5,352 14,762
Other Expense/Income (987) 58 (510) (1,439)
Corporate Allocation 1,057 2,400 (3,641) (184)
Income Taxes -- 10 185 195
-------- -------- -------- --------
Net Income $ 1,302 $ 4,671 $ (1,564) $ 4,409
Total Assets $ 12,346 $ 38,864 $ 7,249 $ 58,459
1998
Sales $ 16,030 $ 22,930 $ -- $ 38,960
Operating Costs 9,488 14,057 -- 23,545
-------- -------- -------- --------
Gross Profit $ 6,542 $ 8,873 $ -- $ 15,415
S, G&A Expense 6,544 6,272 2,886 15,702
Other Expense/Income (453) (70) (581) (1,104)
Corporate Allocation 1,764 2,328 (4,092) --
Income Taxes -- -- 55 55
-------- -------- -------- --------
Net Income $ (1,314) $ 343 $ (1,732) $ 762
Total Assets $ 15,535 $ 38,000 $ 8,265 $ 61,800
1997
Sales $ 15,387 $ 26,135 $ -- $ 41,522
Operating Costs 9,320 13,899 -- 23,219
-------- -------- -------- --------
Gross Profit $ 6,067 $ 12,236 $ -- $ 18,303
S, G&A Expense 7,761 6,141 8,007 21,909
Other Expense/Income (406) (363) (2,293) (3,062)
Corporate Allocation 1,940 2,476 (4,416) --
Income Taxes -- -- 132 132
-------- -------- -------- --------
Net Income $ (3,228) $ 3,982 $ (1,430) $ (676)
Total Assets $ 16,075 $ 57,752 $ 24,604 $ 98,431
46
47
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
Items 10, 11, 12, and 13 of Part III have been omitted from this report because
the Company will file with the Securities and Exchange Commission, no later than
120 days after the close of its fiscal year, a definitive proxy statement. The
information required by Items 10, 11, 12, and 13 of this report, which will
appear in the definitive proxy statement, is incorporated by reference into Part
III of this report.
47
48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
1. Financial statements and report of Balukoff, Lindstrom & Co., P.A.
Independent Auditors' Report
Consolidated Balance Sheets - December 31, 1999 and 1998
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998, and 1997
Consolidated Statements of Shareholders' Equity for the years
ended December 31, 1999, 1998, and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998, and 1997
Notes to Consolidated Financial Statements
2. Financial statement schedules
Other schedules are omitted because they are not required or
because the information is included in the financial
statements or notes thereto
3. Exhibits
Exhibit No. Description Incorporated by Reference from
Registrant's
3.1 Restated Certificate of Incorporation, as amended 1989 Form 10-K
3.2 Certificate of Amendment to Restated Certificate of Incorporation Form S-4 dated 12-24-92
dated 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 Form 10 filed 3-8-84
Washington, the 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 Form 10 filed 3-8-84
Nevada, 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 1989 Form 10-K
to US Ecology, Inc. dated December 29, 1989
10.5 Administrative Order by Consent between the United States 1985 Form 10-K
Environmental Protection Agency and US Ecology, Inc. ("USE")
dated September 30, 1985
10.6 State of Washington Radioactive Materials License issued to US 1986 Form 10-K
Ecology, Inc. dated January 21, 1987
10.11 Agreement between the Central Interstate Low-Level Radioactive 2nd Quarter 1988 10-Q
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")
48
49
10.12 Amendment to Central Interstate Compact Agreement dated May 1, 1994 Form 10-K
1990
10.13 Second Amendment to Central Interstate Compact Agreement dated 1994 Form 10-K
June 24, 1991
10.14 Third Amendment to Central Interstate Compact Agreement dated 1994 Form 10-K
July 1, 1994
10.15 Settlement agreement dated May 25, 1988 among the Illinois Form 8-K dated 6-7-88
Department 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 1988 Form 10-K
Waste 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 1988 Form 10-K
Management Site (Part B) issued to Texas Ecologists, Inc. dated
December 5, 1988
10.18 Memorandum of Understanding between American Ecology Corporation 1989 Form 10-K
and the State of California dated August 15, 1988
10.19 United States Environmental Protection Agency approval to dispose 1989 Form 10-K
of non-liquid polychlorinated biphenyl (PCB) wastes at the
Beatty, Nevada chemical waste disposal facility
10.26 Amended and Restated American Ecology Corporation 1992 Stock Proxy Statement dated 4-26-94
Option Plan *
10.27 Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-26-94
Director Stock Option Plan *
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 Form S-4 filed 12-24-92
1988-1, Ltd. dated October 14, 1992
10.34 Rights Agreement dated as of December 7, 1993 between American Form 8-K dated 12-7-93
Ecology Corporation and Chemical Shareholders Services Group,
Inc. as Rights Agent
10.36 Settlement Agreement dated September 24, 1993 by US Ecology,
Inc., the State of Nevada, the Nevada State Environmental 1993 Form 10-K
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 Form 8-K dated 2-3-94
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 The Jenner & Block Profit Sharing Trust No. 082.
10.50 Increase Additional Number of Share Options to Directors Plan of Form S-8 dated 12-30-98
1992
10.51 Increase Additional Number of Share Options of 1992 Employees Form S-8 dated 12-20-99
Plan
10.52 Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-8-98
Director Stock Option Plan
49
50
10.53 Amended and Restated American Ecology Corporation 1992 Stock Proxy Statement dated 4-12-99
Option Plan
21 List of Subsidiaries 1994 Form 10-K
23.2 Consent of Balukoff, Lindstrom & Co., P.A.
27 Financial Data Schedule
*Management contract or compensatory plan.
(b) REPORTS ON FORM 8-K
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 Judgement Houston 88-January 26, 1998 Form 8-K
10.49 Bank Restructure-Chase Bank of Texas N.A. November 19, 1998 Form 8-K
50
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
Dated: March 30, 2000 By: /s/ Jack K. Lemley
------------------------
Jack K. Lemley
Chairman of the Board, Chief
Executive Officer and President
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Jack K. Lemley Chairman of the Board, Chief March 30, 2000
- --------------------------- Executive Officer and President --------------
JACK K. LEMLEY
/s/ James R. Baumgardner Chief Financial Officer March 30, 2000
- --------------------------- --------------
JAMES R. BAUMGARDNER
/s/ Robert S. Thorn Chief Accounting Officer March 30, 2000
- --------------------------- --------------
ROBERT S. THORN
/s/ Rotchford L. Barker Director March 30, 2000
- --------------------------- --------------
ROTCHFORD L. BARKER
/s/ Paul Bergson Director March 30, 2000
- --------------------------- --------------
PAUL BERGSON
/s/ Patricia M. Eckert Director March 30, 2000
- --------------------------- --------------
PATRICIA M. ECKERT
/s/ Edward F. Heil Director March 30, 2000
- --------------------------- --------------
EDWARD F. HEIL
/s/ Paul F. Schutt Director March 30, 2000
- --------------------------- --------------
2000
- ----
PAUL F. SCHUTT
/s/ John J. Scoville Director March 30, 2000
- --------------------------- --------------
JOHN J. SCOVILLE
/s/ Keith D. Bronstein Director March 30, 2000
- --------------------------- --------------
KEITH D. BRONSTEIN
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this annual report to be signed
on its behalf by the undersigned, thereunto duly authorized
AMERICAN ECOLOGY CORPORATION
Dated: March 30, 2000 By:
---------------------------
Jack K. Lemley
Chairman of the Board, Chief
Executive Officer and President
SIGNATURE TITLE DATE
- --------- ----- ----
Chairman of the Board, Chief March 30, 2000
- -------------------- Executive Officer and President --------------
JACK K. LEMLEY
Chief Financial Officer March 30, 2000
--------------
- --------------------
JAMES R. BAUMGARDNER
ROBERT S. THORN Chief Accounting Officer March 30, 2000
- -------------------- --------------
Director March 30, 2000
- -------------------- --------------
ROTCHFORD L. BARKER
Director March 30, 2000
- -------------------- --------------
PAUL BERGSON
Director March 30, 2000
- -------------------- --------------
PATRICIA M. ECKERT
Director March 30, 2000
- -------------------- --------------
EDWARD F. HEIL
Director March 30, 2000
- -------------------- --------------
PAUL F. SCHUTT
Director March 30, 2000
- -------------------- --------------
JOHN J. SCOVILLE
Director March 30, 2000
- -------------------- --------------
KEITH D. BRONSTEIN
Exhibit 27
52
53
EXHIBIT INDEX
Exhibit No. Description Incorporated by Reference from
Registrant's
3.1 Restated Certificate of Incorporation, as amended 1989 Form 10-K
3.2 Certificate of Amendment to Restated Certificate of Incorporation Form S-4 dated 12-24-92
dated 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 Form 10 filed 3-8-84
Washington, the 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 Form 10 filed 3-8-84
Nevada, 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 1989 Form 10-K
to US Ecology, Inc. dated December 29, 1989
10.5 Administrative Order by Consent between the United States 1985 Form 10-K
Environmental Protection Agency and US Ecology, Inc. ("USE")
dated September 30, 1985
10.6 State of Washington Radioactive Materials License issued to US 1986 Form 10-K
Ecology, Inc. dated January 21, 1987
10.11 Agreement between the Central Interstate Low-Level Radioactive 2nd Quarter 1988 10-Q
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")
10.12 Amendment to Central Interstate Compact Agreement dated May 1, 1994 Form 10-K
1990
10.13 Second Amendment to Central Interstate Compact Agreement dated 1994 Form 10-K
June 24, 1991
10.14 Third Amendment to Central Interstate Compact Agreement dated 1994 Form 10-K
July 1, 1994
10.15 Settlement agreement dated May 25, 1988 among the Illinois Form 8-K dated 6-7-88
Department 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 1988 Form 10-K
Waste 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 1988 Form 10-K
Management Site (Part B) issued to Texas Ecologists, Inc. dated
December 5, 1988
54
10.18 Memorandum of Understanding between American Ecology Corporation 1989 Form 10-K
and the State of California dated August 15, 1988
10.19 United States Environmental Protection Agency approval to dispose 1989 Form 10-K
of non-liquid polychlorinated biphenyl (PCB) wastes at the
Beatty, Nevada chemical waste disposal facility
10.26 Amended and Restated American Ecology Corporation 1992 Stock Proxy Statement dated 4-26-94
Option Plan *
10.27 Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-26-94
Director Stock Option Plan *
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 Form S-4 filed 12-24-92
1988-1, Ltd. dated October 14, 1992
10.34 Rights Agreement dated as of December 7, 1993 between American Form 8-K dated 12-7-93
Ecology Corporation and Chemical Shareholders Services Group,
Inc. as Rights Agent
10.36 Settlement Agreement dated September 24, 1993 by US Ecology,
Inc., the State of Nevada, the Nevada State Environmental 1993 Form 10-K
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 Form 8-K dated 2-3-94
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 The Jenner & Block Profit Sharing Trust No. 082.
10.50 Increase Additional Number of Share Options to Directors Plan of Form S-8 dated 12-30-98
1992
10.51 Increase Additional Number of Share Options of 1992 Employees Form S-8 dated 12-20-99
Plan
10.52 Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-8-98
Director Stock Option Plan
10.53 Amended and Restated American Ecology Corporation 1992 Stock Proxy Statement dated 4-12-99
Option Plan
21 List of Subsidiaries 1994 Form 10-K
23.2 Consent of Balukoff, Lindstrom & Co., P.A.
27 Financial Data Schedule