UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _________________
Commission File Number 0-11688
AMERICAN ECOLOGY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3889638
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
805 W. Idaho
Suite #200
Boise, Idaho 83702-8916
------------ ----------
(Address of principal executive offices) (Zip Code)
(208) 331-8400
--------------
(Registrants telephone number, including area code)
Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
At December 13, 2001, Registrant had outstanding 13,742,322 shares of its Common
Stock.
EXPLANATION OF AMENDMENT
The Registrant, American Ecology Corporation (the "Company"), received a letter
from the Securities and Exchange Commission dated November 1, 2001. The
Commission made comments and requested clarification of certain items in the
Notes to the financial statements, Item 1., and Management Discussion and
Analysis, Item 2. Based on these comments, the Company amended Part I, Items 1
and 2 of its Form 10-Q to include clarifications of those items in conjunction
with a response letter filed with the Commission on November 13, 2001.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
<Table>
<Caption>
March 31, December 31,
2001 2000
--------- ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,059 $ 4,122
Receivables, net of allowance for doubtful
accounts of $1,184 and $568 respectively 11,979 9,839
Income taxes receivable 740 740
Prepayments and other 2,073 1,316
-------- --------
Total current assets 17,851 16,017
Cash and investment securities, pledged 237 235
Property and equipment, net 30,943 18,488
Facility development costs 27,430 27,430
Intangible assets relating to acquired businesses, net 360 366
Other assets 6,359 3,214
-------- --------
Total Assets $ 83,180 $ 65,750
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 1,241 $ 1,094
Accounts payable 1,940 2,680
Accrued liabilities 8,086 9,149
Accrued closure and post closure obligation, current portion 700 700
Income taxes payable 110 115
-------- --------
Total current liabilities 12,077 13,738
Long term debt 18,312 10,775
Accrued closure and post closure obligation, excluding current portion 25,390 15,253
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, 5,263 shares 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, 13,755,282
and 13,704,050 shares issued and outstanding, respectively 139 137
Additional paid-in capital 54,640 54,610
Retained earnings (deficit) (27,379) (28,764)
-------- --------
Total shareholders' equity 27,401 25,984
-------- --------
Total Liabilities and Shareholders' Equity $ 83,180 $ 65,750
======== ========
</Table>
The accompanying notes are an integral part of these financial statements.
2
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in 000's except per share amounts)
<Table>
<Caption>
Three Months Ended
March 31,
2001 2000
-------- -------
Revenue $ 12,866 $ 9,319
Direct Operating Costs 6,733 4,875
-------- -------
Gross profit 6,133 4,444
Selling, general and administrative expenses 4,803 3,263
-------- -------
Income from operations 1,330 1,181
Investment income 174 177
Gain on sale of assets 46 1
Interest expense (258) (60)
Other income 236 184
-------- -------
Net income before income taxes 1,528 1,483
Provision for income taxes 46 101
-------- -------
Net income 1,482 1,382
Preferred stock dividends 97 100
-------- -------
Net income available to common
shareholders $ 1,385 $ 1,282
======== =======
Basic earnings per share $ .10 $ .09
======== =======
Diluted earnings per share $ .08 .08
======== =======
Dividends paid per common share -- --
======== =======
</Table>
See notes to consolidated financial statements.
3
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in 000's)
<Table>
<Caption>
Three Months Ended
March 31,
2001 2000
---- ----
Cash flows from operating activities:
Net income $ 1,482 $ 1,382
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,256 626
Income taxes payable 41 63
Changes in assets and liabilities:
Receivables (2,140) 727
Investment securities classified as trading (2) (3)
Other assets (2,295) 960
Accounts payable and accrued liabilities (1,849) (2,625)
Facility development 105 (106)
------- --------
Total adjustments (4,884) (358)
------- --------
Net cash provided by (used in) operating activities (3,402) 1,023
------- --------
Cash flows from investing activities:
Capital expenditures (1,192) (1,696)
Transfers from cash & investment securities pledged -- (250)
Purchase of subsidiary 1 --
------- --------
Net cash used in investing activities (1,191) (1,946)
Cash flows from financing activities:
Proceeds from issuances of indebtedness 3,000 --
Repayments of indebtedness 499 18
------- --------
Payment of cash dividends -- --
Stock options exercised 31 --
------- --------
Net cash provided by (used in) financing activities 3,530 18
Decrease in cash and cash equivalents (1,063) (905)
Cash and cash equivalents at beginning of period 4,122 4,771
------- --------
Cash and cash equivalents at end of period $ 3,059 $ 3,866
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 258 $ 60
Acquisition of subsidiary in exchange for liabilities 20,400 --
Income taxes 46 114
Acquisitions of equipment with capital leases 743 40
</Table>
See notes to consolidated financial statements.
4
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
($ in 000's)
<Table>
<Caption>
ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT)
--------- ------- ---------- ----------
Balance, December 31, 2000 $ 1 $ 137 $ 54,610 $ (28,764)
Net Income -- -- -- 1,482
Common stock issuance -- 2 30 --
Dividends of preferred stock -- -- -- (97)
Preferred stock-retired -- -- -- --
Paid in capital-warrants -- -- -- --
------ ------- --------- ----------
Balance, March 31, 2001 $ 1 $ 139 $ 54,640 $ (27,379)
====== ======= ========= ==========
</Table>
The accompanying notes are an integral part of these financial statements
5
AMERICAN ECOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION.
Pursuant to the rules and regulations of the Securities and Exchange Commission,
the Company has prepared the accompanying unaudited financial statements.
Certain information and footnote disclosures have been condensed or omitted
pursuant to Generally Accepted Accounting Principles ("GAAP"). In the opinion of
management, all adjustments and disclosures necessary for a fair presentation of
these financial statements have been included. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's 2000 Annual Report on Form 10-K for the year ended December 31,
2000, as filed with the Securities and Exchange Commission.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
NOTE 2. ACQUISITION.
On February 1, 2001, the Company acquired Envirosafe Services of Idaho, Inc. a
Delaware corporation ("ESII"), pursuant to a Stock Purchase Agreement ("the
Agreement") from Envirosource Technologies Inc., a Delaware corporation and
parent corporation Envirosource, Inc., also a Delaware corporation.
The Company paid one thousand dollars in cash for all of the outstanding shares
of ESII, subject to approximately $34.9 million in liabilities, which was
reduced to $20.7 million when offset by $14.2 million of intercompany charges.
The intercompany accounts were eliminated after the acquisition using the
purchase method of accounting. This information was filed with the Securities
and Exchange Commission on Form 8-K on April 16, 2001. This purchase would have
increased the Company's asset base by approximately 25% from $65,750,000 to
$87,163,000 at December 31, 2000, the date of the auditors report on this
acquisition.
Pursuant to the Agreement, the Company acquired all of the authorized and issued
stock of ESII, thereby obtaining ownership of all ESII assets and liabilities.
The principal assets are a permitted hazardous and PCB waste treatment, storage
and disposal facility and nearby railcar unloading facility in southwestern
Idaho, a hazardous waste treatment facility operating under contract at an
Illinois steel mill site, and exclusive rights to use a patented hazardous waste
treatment process for steel mill electric arc furnace waste within a defined
service territory in the western United States. ESII also had entered into
contracts, including a renewable five-year contract with the U.S. Army Corps of
Engineers, to dispose of wastes generated under the federal Formerly Utilized
Site Remedial Action Program ("FUSRAP").
On May 1, 2001, ESII's name was changed to US Ecology Idaho, Inc ("USEI"). The
newly acquired subsidiary intends to increase its business through continued
marketing of the hazardous and PCB waste treatment, storage and disposal
services at the facilities noted above.
The purchase price of $20.7 million for the USEI purchase was allocated to the
following assets: $1,500 in cash, $1,998,000 in accounts receivable offset by
$25,000 allowance for doubtful accounts and $150,000 of prepaid assets for a
subtotal of $2,125,000 of current assets. Other assets consisted of gross
property plant and equipment of $19,600,000 offset by $9,154,000 of accumulated
depreciation, $3,063,000 of capitalized permitting, $2,573,000 in a post closure
trust fund, $2,486,000 for debt issuance costs, and $105,000 of other assets.
6
Unaudited pro forma statement of operations data--
The following table compares, for the three months ended March 31, 2001 and
2000, reported consolidated results of operations including USEI actual
operations from the acquisition date of February 1, 2001, to unaudited pro forma
consolidated data as if the acquisition occurred at the beginning of the year:
(in thousands, except per share data)
<Table>
<Caption>
2001 2000
Pro Pro
Reported Forma Reported Forma
-------- ------ -------- -------
Revenue $12,866 $14,361 $ 9,319 $13,804
Net income 1,482 1,740 1,382 2,157
Preferred stock dividends 97 97 100 100
------- ------- ------- -------
Net income available to common shareholders $ 1,385 $ 1,643 $ 1,282 $ 2,057
======= ======= ======= =======
Basic earnings per share $ .10 $ .12 $ .09 $ .15
------- ------- ------- -------
Diluted earnings per share $ .08 $ .10 $ .08 $ .13
------- ------- ------- -------
</Table>
This data does not purport to be indicative of the Company's results of
operations that might have occurred, nor which might occur in the future.
NOTE 3. LONG-TERM DEBT.
Long-term debt at March 31, 2001 and December 31, 2000 consisted of the
following (in thousands):
<Table>
<Caption>
MARCH 31, 2001 December 31, 2000
-------------- -----------------
Notes payable capital leases $ 1,349 $ 792
Credit facility loan 3,000 4,093
Industrial Revenue Bond 8,500 --
Other long term obligations 6,704 6,984
------- ------
19,553 11,869
Current maturities (1,241) (1,094)
------- ------
Long term debt $ 18,312 $ 10,775
======== ========
</Table>
The Company has several long-term capital leases. The carrying amount of these
leases is approximately $1.3 million. These leases are for assets acquired at
Oak Ridge, Tennessee with 10% interest, at Beatty, Nevada at 5.8% and 8.9%,
Richland, Washington with 5.25% through 6.14% and at Robstown, Texas at rates
between 6% and 14% interest expiring over the next 5 years.
On August 17, 2000, the Company entered into a 2-year revolving line of credit
with a local bank. The line of credit is secured by the Company's accounts
receivable and is governed by a Credit Agreement. Under the terms of the Credit
Agreement, borrowings on the line of credit cannot exceed 80% of eligible
accounts receivable or $5.0 million, whichever is less. On February 1, 2001, the
Credit Agreement was modified to increase the line of credit to $8.0 million,
change certain financial covenants to reflect the acquisition of ESII, and
modify the pricing. Interest on borrowings under the Credit Agreement are based
on a 'pricing grid,' whereby after the first 6 months, the interest rate
decreases or increases based on the Company's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). The Company
can elect to borrow monies utilizing the Prime Rate or the offshore London
Inter-Bank Offering Rate ("LIBOR") plus an applicable spread. During the first
six months of the credit facility, borrowings are Prime plus 0.75% or LIBOR plus
3.25%, at the election of the Company, subject
7
to certain conditions. As part of the February 1, 2001 Amendment, this initial
pricing was extended for another six months. The Credit Agreement contains
certain financial covenants that the Company must adhere to quarterly, including
a maximum leverage ratio, a minimum current ratio, and a debt service coverage
ratio. At March 31, 2001, the Company was in compliance with all applicable bank
financial covenants.
At March 31, 2001, the outstanding balance on the revolving line of credit was
$3,000,000, with $4,509,000 available. The balance is due August 30, 2002.
During the first quarter of 2001, the interest rate on borrowings ranged from
9.8% to 10.5%. The Company has continued to borrow and repay according to
business demands and availability of cash. The Company anticipates that with the
new acquisition of US Ecology Idaho, Inc., that borrowings will continue to
fluctuate and with the continued plans for growth that additional borrowing
capacity will be required in the future. There can be no assurance that the
Company can raise additional financing beyond the $8.0 million line of credit,
and if the Company is not successful it will reassess its current plans for
expansion and growth.
When the Company acquired Envirosafe Services of Idaho, Inc. it assumed an $8.5
million Industrial Revenue Bond, and a $15 million surety bond held by the State
of Idaho, secured by $2.5 million in cash collateral, for closure and post
closure obligations. The Company has since replaced the surety bond with an
insurance policy. This freed up the $2.5 million plus $147 thousand in interest
in cash collateral for use by the Company. This insurance policy was accepted by
the regulatory agencies and is consistent, in form and substance, with closure
and post closure insurance policies the Company maintains for its other
facilities. The industrial revenue bond was initially used to make capital
additions and improvements to the site facility. The 8 1/4% bond interest
payments are approximately $58,000 a month and the bond is due November 2002.
On March 1, 2001, the Company completed the payments on its notes payable
obligation to AFCO Finance for a one-year term for $705,000 financing an
insurance premium, with interest rates that ranged from 9% to 10.5%. On April 4,
2001, the Company entered into a new long-term financing agreement with AFCO
Finance to finance the 2001-2002 insurance premiums The loan was for $1,113,930
with an annual interest rate of 5.59%, with the final payment due February 2002.
The Company has consistently financed its insurance premiums through AFCO
Finance in the ordinary course of business.
The Company has several other long-term obligations that mature at different
times. The Company will rebate $2,807,000 in the second quarter of 2001 to
generators who disposed of waste at the Richland, Washington facility in
accordance with the established rate process. This $2,807,000 is payable in the
second quarter of 2001, but has been reclassified to long term debt because the
Company intends to refinance it with the long term revolver. The accrued
dividend payable on the Series D preferred stock totals $893,000. The Company
maintains a long term commitment reserve for aged waste at the Oak Ridge,
Tennessee facility for $750,000, a long term payable to Boston Edison for
$270,000 and lease payments for $1,984,000. The total of these other long-term
obligations is $6,704,000.
NOTE 4. ACCRUED CLOSURE AND POST CLOSURE OBLIGATION.
Closure and post closure obligation accruals at March 31, 2001 and December 31,
2000 were as follows (in thousands):
<Table>
<Caption>
2001 2000
---- ----
Accrued costs associated with open facililties $19,223 $ 8,993
Accrued costs associated with closed facilities 6,867 6,960
------- -------
Sub-total 26,090 15,953
Less: current portion (700) (700)
------- -------
Closure and post closure obligation, excluding
current portion $25,390 $15,253
======= =======
</Table>
8
At the time the Company acquired Envirosafe Services of Idaho, Inc. it assumed
responsibility for closure and post closure obligations for the facilities in
Grand View and Bruneau, Idaho and Sterling, Illinois. The total of this accrued
closure and post closure obligation is approximately $10 million.
These closure and post closure obligation includes the accruals associated with
obligations and liabilities of the Company's operating and closed disposal sites
and for corrective actions and remediation if applicable. The Company generally
provides accruals for the estimated costs of closure and post closure 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. These estimates are made by the
Company and typically confirmed by third party engineering companies.
The Company does not bear direct responsibility for closure and post closure
costs for the government owned land used for waste disposal. The Company leases
two disposal 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 control the
dispensation of those funds. The funds are maintained in segregated accounts for
the future costs of closure and post closure care and maintenance of these
facilities. The Company currently submits waste volume-based fees to the
applicable state maintained funds. Such fees are established by the states.
NOTE 5. EARNINGS PER SHARE.
Basic earnings per share are computed based on net income and the weighted
average number of common shares outstanding. Diluted earnings per share reflect
the assumed issuance of common shares under long term incentive, stock option
and stock purchase plans and pursuant to the terms of the 1992 Stock Option
Plans. The computation of diluted earnings per share does not assume conversion
or exercise of securities that would have an antidilutive effect on earnings per
share. The following table shows the weighted average number of common shares
outstanding and dilutive potential effect of options, warrants, and convertible
preferred shares outstanding for the three months ending:
<Table>
<Caption>
(000's except per share amounts)
Three Months Ended March 31,
2001 2000
---- ----
Net Income $ 1,482 $ 1,382
Preferred stock dividends 97 100
--------- ----------
Net income available to
common shareholders $ 1,385 $ 1,282
Weighted average shares outstanding-
Common shares outstanding at quarter end 13,746 13,704
Effect of dilutive shares 3,483 1,930
--------- ----------
Adjusted shares 17,230 15,634
Basic earnings per share $ .10 $ .09
========= ==========
Diluted earnings per share $ .08 $ .08
========= ==========
</Table>
NOTE 6. FACILITY 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 has been selected to obtain a license to develop and operate the Central
Interstate Compact LLRW facility ("Butte facility").
9
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 federal government must transfer the land to the
State of California, or the Company must recover monetary damages from the
federal government, the State of California or both.
In the first quarter of 1997, the Company filed two lawsuits against the United
States. In the first case, US Ecology sued to recover approximately $73.1
million of Ward Valley site development costs as well as lost profits and lost
opportunity costs. US Ecology lost this case at the trial court level and
appealed to the Federal Circuit Court of Appeals. On March 30, 2001 the Federal
Circuit affirmed the dismissal. The Company is evaluating whether it will
request a re-hearing by the Federal Circuit or petition the Supreme Court for
reversal of this decision. In the second case US Ecology sought an order (writ
of mandamus) from a federal court to compel the transfer of the Ward Valley LLRW
site. Both the trial court and the D.C. Circuit Court of Appeals ruled against
US Ecology in this second case and such rulings are now final. The Company also
filed a lawsuit against the State of California in Superior Court for the County
of San Diego on May 2, 2000, seeking to compel California to acquire the
property to build the Ward Valley project and pay monetary damages in excess of
$162 million. On October 24, 2000, the California trial court granted the
state's motion to dismiss the case on demurrer. The Company has appealed the
trial court's decision.
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 March 31,
2001, the Company had deferred $20,952,000 (25% of total assets) of
pre-operational facility development costs of which $895,000 represents
capitalized interest. These deferred costs are to be recovered during the
facility's first 20 years of operation from disposal fees approved by the
California Department of Health Services (DHS). The approval process includes a
prudency review of pre-operational costs incurred by the Company. While the
Company's 1993 license to construct and operate the Ward Valley facility remains
valid, 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 ever be constructed. Beginning in 2000, the Company is no longer
required to pay the $250,000 annual license fee to the Department of Health
Services pending further notice by the state.
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 March 31, 2001,
the Company has contributed and capitalized approximately $6,478,000 of costs
(7.7% 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 in
January 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 and is seeking relief. The contested case is stayed by a preliminary
injunction issued by the presiding federal judge. The court has issued a
scheduling order setting trial for June 2002.
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
in court, and will continue its participation in litigation to protect its
interest in the proposed 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 the Company's financial position.
The following table shows the ending capitalized balances for facility
development costs for the periods ended March 31, 2001 and December 31, 2000 (in
thousands):
10
<Table>
<Caption>
Capitalized Capitalized
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
========== ========== ==========
</Table>
NOTE 7. INCOME TAXES.
The Company had an effective federal tax rate of 0% on March 31, 2001 and
December 31, 2000 respectively. 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 carryforwards for tax purposes. The
realization of a significant portion of net deferred tax assets is based in part
on the Company's estimates of the timing of reversals of certain temporary
differences and on the generation of taxable income before such reversals. The
net operating loss carryforward of approximately $34,097,000 at March 31, 2001,
begins to expire in the year 2006. Of this carryforward, $2,745,000 is limited
pursuant to the net operating loss limitation rules of Internal Revenue Code
Section 382. The portion of the carryforward 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 carryforward expires in the amount
of $4,280,000 in 2010, $8,657,000 in 2011, $7,828,000 in 2012, $6,927,000 in
2018, $3,574,000 in 2019, and $454,000 in 2020. The amount of the Company's net
operating loss carryforwards could be reduced if the Company is ultimately
unsuccessful in pursuing a pending refund claim.
The Company filed an amended federal income tax refund claim in 1996 for
approximately $740,000. On September 29, 1999, the Internal Revenue Service
("IRS") proposed to deny this claim, sought to recover portions of tentative
refunds previously received by the Company and proposed to reduce the Company's
net operating loss carryforwards. On November 29, 1999, the Company protested
this denial which is currently pending with the IRS. The Company tentatively
settled this claim on a basis which would allow a partial refund, retain a
portion of the tentative refunds already received and retain the net operating
loss carryforwards. This settlement required the approval of the Congressional
Joint Committee on Taxation. The Joint Committee refused to process this
tentative settlement pending a decision, which is likely in 2001, by the United
States Supreme Court in a case which would resolve the refund portion of this
claim in favor of either the Company or the IRS. Once the Supreme Court acts,
the Company expects the portion of this claim dealing with carryforwards to be
processed for approval by the Joint Committee.
NOTE 8. ENVIRONMENTAL LIABILITIES.
Environmental Matters
The Company maintains reserves and insurance policies for costs associated with
future closure and post closure obligations for both current and formerly
operated disposal facilities based on professional engineering studies and
analysis of regulatory requirements performed at least annually. Costs accounted
for may include final disposal unit capping, gas emission control, subsurface
soil and groundwater monitoring and or remediation, and other monitoring or
routine maintenance costs required after a disposal site stops accepting waste.
The total estimated final closure and post closure cost must be fully accrued
for each landfill at the time a site discontinues accepting waste. The Company
believes its reserves are adequate.
The Company estimates that the aggregate final closure and post closure costs
for all insured facilities owned or operated was approximately $25,390,000 as of
March 31, 2001. The Company has remaining a three year prepaid insurance policy
for these facilities, and has also set aside investment securities to pay
certain deductible limits.
Management believes that disposition of these environmental matters in the
ordinary course of business will not have a material, adverse effect on the
financial condition of the Company. Operation of disposal facilities creates
operational, monitoring, site maintenance, closure and post closure obligations
that could result in unforeseen costs
11
for monitoring and corrective action. The Company cannot predict the likelihood
or effect of such costs, regulations, statutes, or other future events affecting
its facilities.
Financial Assurance and Site Maintenance
When disposal facilities reach capacity or upon lease or license termination,
they must be closed and then maintained for a prescribed period. In the case of
hazardous waste facilities, federal regulation requires that operators
demonstrate financial capability to close on an immediate, unscheduled
(worst-case) basis. The estimated costs of such a closure are set forth in the
operator's closure/post closure plan required by the Resource Conservation and
Recovery Act.
The Company has provided letters of credit, trust funds and certificates of
insurance, as financial assurance to meet closure and post closure obligations
at it hazardous waste facilities. Cash and investment securities totaling
$237,000 at March 31, 2001 and $235,000 at December 31, 2000 have been pledged
as collateral for these obligations. Management believes that $237,000 is an
adequate reserve combined with the letters of credit, certificates of insurance,
and corporate guarantees maintained as financial assurance.
NOTE 9. OPERATING SEGMENTS.
The Company operates two primary business segments, Chemical Services and LLRW
Services. The Chemical Services division provides toxic substance, hazardous,
non-hazardous and municipal waste management services. The LLRW Services
division processes, packages, and disposes of material contaminated with
low-level radioactivity. The Company evaluates the performance of its operating
segments based on gross profit, selling, general and administrative expense,
interest expense and income, corporate allocation and after an apportioned
income tax. Segment data includes intercompany transactions at cost, as well as
allocation for certain corporate costs.
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.
<Table>
<Caption>
-------------------------------------------------------------------
CHEMICAL LLRW CORPORATE
SERVICES SERVICES & OTHER TOTAL
===================================================================
MARCH 31, 2001
Revenue $ 8,413 $ 4,582 $ (129) $ 12,866
Direct Cost 4,097 2,693 (57) 6,733
-------------------------------------------------------------------
Gross Profit 4,316 1,889 (72) 6,133
S,G&A 1,865 1,654 1,284 4,803
-------------------------------------------------------------------
Income (loss) from operations 2,451 235 (1,356) 1,330
Investment income 158 1 15 174
Gain on sale of assets 33 13 - 46
Interest expense (204) (29) (25) (258)
Other income (658) (627) 1,521 236
-------------------------------------------------------------------
Net income before taxes $ 1,780 $ (407) $ 155 $ 1,528
Total Assets $ 46,075 $ 36,074 $ 1,031 $ 83,180
</Table>
12
<Table>
<Caption>
MARCH 31, 2000
Revenue $ 3,724 $ 5,768 $ (173) $ 9,319
Direct Cost 2,220 2,777 (122) 4,875
-------------------------------------------------------------------
Gross Profit 1,504 2,991 (51) 4,444
S,G&A 734 1,568 961 3,263
-------------------------------------------------------------------
Income (loss) from operations 770 1,423 (1,012) 1,181
Investment income 10 - 34 44
Gain on sale of assets 1 - - 1
Interest expense 3 23 34 60
Other income (373) (661) 1,231 197
-------------------------------------------------------------------
Net income before taxes $ 411 $ 785 $ 286 $ 1,483
Total Assets $ 14,755 $ 37,175 $ 5,867 $ 57,797
</Table>
In the first quarter of 2001 the Company acquired Envirosafe Services of Idaho,
Inc. and on May 1, 2001 renamed it US Ecology Idaho, Inc. The new subsidiary's
permits are similar to those governing operation of the Robstown, Texas and
Beatty, Nevada facilities. However, US Ecology Idaho principally services a
different market segment than the Company's Robstown or Beatty facilities.
Please refer to Item 2. Management Discussion and Analysis for the performance
of the two segments with and without this recently acquired business.
NOTE 10. COMMITMENTS AND CONTINGENCIES.
The Company becomes involved in judicial and administrative proceedings
involving federal, state, and local governmental authorities in the ordinary
course of business. Actions may also be brought by individuals or groups of
individuals in connection with permitting of planned facilities, alleged
violations of existing permits, or alleged damages suffered from exposure to
hazardous substances purportedly released from Company operated sites, and other
litigation. The Company maintains insurance intended to cover property and
damage claims asserted as a result of operations.
Insurance:
The Company carries a broad range of insurance coverage, which management
considers prudent to protect the Company's assets and operations. Some of this
insurance coverage is subject to a varying degree of risk retention by the
Company.
Casualty coverage currently includes $1,000,000 primary commercial general
liability with a $2,000,000 aggregate and $1,000,000 primary automobile
liability. The Company maintains workers' compensation insurance in accordance
with laws of the various states in which it is an employer. This coverage is
supported by $35,000,000 in umbrella insurance protection. A property policy
provides insurance coverage for real and personal property.
The Company also maintains an environmental impairment liability ("EIL")
insurance policy for certain of its non-radioactive landfills, transfer
stations, and recycling facilities. This provides coverage for property damage
and/or bodily injury to third parties caused by potential off-site pollution
emanating from such landfills, transfer stations, or recycling facilities. This
policy provides $20,000,000 of coverage per loss with a $20,000,000 aggregate
limit.
Professional environmental consultants liability insurance is carried to cover
damages the Company is legally obligated to pay because of an act, error or
omission in professional services, or a loss resulting in environmental
impairment away from an owned site. This policy is subject to a $10,000,000 per
occurrence limit with a $10,000,000 aggregate.
Nuclear liability insurance is carried to cover bodily injury and property
damage claims to third parties caused by the nuclear energy related hazards for
which the Company is legally obligated.
13
Certain of the Company's waste disposal and processing facilities are covered
for closure and post closure costs through a direct risk transfer insurance
policy. Other sites are covered through funds required by various states.
Periodically management reviews and may establish reserves for legal and
administrative matters, or fees expected to be incurred in connection with such
matters. At this time, management believes that its reserves and insurance are
adequate.
There have been no significant changes in commitments and contingencies other
than that included in Part II, Item I. of this report, Legal Proceedings.
NOTE 11. PREFERRED STOCK.
In November 1996, the Company issued 300,000 shares of Series E Redeemable
Convertible Preferred Stock ("Series E") in a private offering to four of its
directors for $3,000,000 in cash. The Series E stock is now retired but carries
3,000,000 warrants with no assigned value and a $1.50 per share exercise price,
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 shares 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. At March 31, 2001, each 8 3/8%
Preferred Stock share is convertible at any time at the option of the holder
into 14.78 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.
Dividends on the 8 3/8% Preferred Stock are cumulative from the date of issuance
and payable quarterly commencing on October 15, 1995. Current bank credit
facility covenants prohibit the payment of dividends. Accrued dividends at
March 31, 2001 totaled $894,000.
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 69,264 common shares and extended 64,211 warrants.
Each warrant has an exercise price of $4.75. No value was assigned to the
warrants in the accompanying consolidated financial statements as the value is
deemed de minimus. The remaining Series D preferred stock outstanding is 100,001
shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis contains trend information and other
forward-looking statements that involve a number of risks and uncertainties.
Actual results could differ materially from the Company's historical results of
operations and those discussed in these forward-looking comments. Factors that
could cause actual results to differ materially include, but are not limited to,
those identified in Notes 2, 4, 6, 7, and 8 to the Consolidated Financial
Statements herein, Part II, Item 1. Legal Proceedings and the discussion below.
Certain factors that may influence actual operations in the future are discussed
in the Company's Form 10-K for the year ended December 31, 2000 in Part I, Item
1. Business. When the Company uses words like "may," "believes," "expects,"
"anticipates," "should," "estimate," "project," "plan," their opposites and
similar expressions, the Company is making forward-looking statements. These
expressions are most often used in statements relating to business plans,
strategies, anticipated benefits or projections about the anticipated revenues,
earnings or other aspects of our operating results. We make these statements in
an effort to keep stockholders and the public informed about our business, and
have based them on our current expectations about future events. Such statements
should be viewed with caution. These statements are not guarantees of future
performance or events. As noted elsewhere in this report, all phases of our
business are subject to uncertainties, risks and other influences, many of which
the Company has no control over. Additionally, any of these factors, either
alone or taken together, could have a material adverse effect on the Company and
could change whether any forward-looking statement ultimately turns out to be
true. The Company undertakes no obligation to publicly release updates or
revisions to these statements.
14
INTRODUCTION
Incorporated in 1952, American Ecology Corporation and its predecessors have
operated commercial radioactive and chemical waste disposal and treatment
facilities nationwide longer than any other company in the U.S. The Company
mainly derives its revenues from fees charged for processing and disposal of
hazardous, non-hazardous, naturally occurring and low-level radioactive waste.
Revenues are also derived from rebuilding electric motors and other large
components from nuclear power plants, brokering wastes to other service
providers, and environmental remediation work.
Disposal fees assessed to customers of the Company's operating facilities may
include state and local fees, and are generally based on the volume or weight of
waste deposited. The Company may assess fees and incur costs to process waste
(e.g. compaction or decontamination), stabilize waste (e.g. mixing with
concrete), or transport waste. Some of these costs create inter-company charges
and revenue, all of which have been eliminated in the consolidated financial
statements.
Operating expenses include direct and indirect costs for labor, maintenance and
repairs, subcontracted costs and equipment, insurance, taxes and accruals for
burial fees and other costs. The Company has properly accounted for fees
assessed by regulatory authorities for the issuance of permits and licenses.
Selling, general & administrative costs include management salaries, sales and
marketing efforts, clerical and administrative costs, legal fees, office
rentals, corporate insurance, and other administrative costs for general
corporate overhead.
Revenue for the three months ended March 31, 2001, reached $12,866,000 or 38%
higher than during the same period in 2000. This growth in revenue was primarily
the result of the Company acquiring Envirosafe Services of of Idaho, Inc., on
February 1, 2001. This acquisition, described in Note 2 to the financial
statements herein, was renamed US Ecology, Idaho, Inc. ("USEI") on May 1, 2001.
USEI currently provides waste treatment, storage and disposal services for
commercial hazardous and PCB waste. USEI currently provides commercial hazardous
and PCB waste treatment, storage and disposal services and similar services for
naturally occurring radioactive materials ("NORM") generated through federal
government remediation efforts. The Company intends to increase its share of the
U.S. market for this business through the acquired assets and continued
operation of its existing waste treatment and disposal facilities. The USEI
permits and licenses are similar to the Robstown, Texas and Beatty, Nevada
facilities and USEI operates within the Chemical Services Division. However,
USEI principally services a different market segment than the Company's Robstown
or Beatty facilities.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2001 AND 2000
The following table sets forth items in the Statements of Operations for the
periods ended March 31, 2001 and March 31, 2000, as a percentage of revenue:
<Table>
<Caption>
Percentage of Revenue for
March 31,
-----------------------------
2001 2000
------ ------
Revenue 100.0% 100.0%
Direct operating costs 52.3 52.3
----- -----
Gross profit 47.7 47.7
Selling, general and administrative expenses 37.3 35.0
Income from operations 10.4 12.7
Other income (expense), net 1.5 3.2
----- -----
Income before income taxes 11.9 15.9
Income tax expense .4 1.1
Preferred stock dividends .8 1.1
----- -----
Net income to common shareholders 10.8% 13.8%
===== =====
</Table>
15
CONDENSED STATEMENT OF OPERATIONS
The following table shows the condensed statements of operations at March 31,
2001 with and without the newly acquired USEI, compared to the baseline
operations for the period ending March 31, 2000.
REVENUE
Revenue for the first quarter of 2001 reached $12,866,000, a 38% increase over
the $9,319,000 posted for the first quarter of 2000.
<Table>
<Caption>
Reported in $000 MARCH 31, 2001 MARCH 31, 2001 March 31, 2000
WITH USEI WITHOUT USEI
CHEMICAL LLRW CHEMICAL LLRW Chemical LLRW
-------- ---- -------- ---- -------- ----
Revenue $ 8,413 $ 4,582 $ 5,015 $ 4,582 $ 3,724 $ 5,768
</Table>
This growth in revenue primarily came from the Chemical Services operations
with the newly acquired USEI. The baseline business of Chemical Services without
USEI, increased revenue by 35% or 126% with USEI in the quarter ending March 30,
2001 compared to the same period of 2000. Revenue growth in core Chemical
Services (excluding USEI) principally resulted from strong operations at the
Company's Texas hazardous and solid waste facilities. The Texas hazardous waste
facility posted its strongest quarter in over 5 years, as two large clean up
jobs were processed for disposal. The Company's El Centro municipal solid waste
landfill also saw revenue growth as it continued to gain an increasing share of
the regional market for solid waste.
The LLRW Services revenue for the first quarter declined by 20.5% compared to
the same period one year ago. The period to period decrease in LLRW Services
revenue was the result of continued emphasis at the Oak Ridge, Tennessee
facility on processing and off-site shipment of accumulated aged waste. The Oak
Ridge facility's consolidated revenue declined 36% from $3,360,000 to $2,152,000
for the first quarter ending March 31, 2001 compared to the same period one year
ago. The Company has allocated resources to remove all the aged waste by the
close of the second quarter of 2001, although no assurance can be made regarding
this objective. The identification, handling, processing and disposal of this
aged waste has had an ongoing, negative impact on the financial performance of
the Oak Ridge facility. The direct and opportunity cost of eliminating the aged
waste will have a negative impact on the Company's financial performance in the
second quarter of 2001.
DIRECT OPERATING COSTS
The Company's consolidated direct operating costs for the quarter ending March
31, 2001, totaled $6,733,000 compared to $4,875,000 at March 31, 2000. Direct
operating costs increased $1,858,000 of which $1,475,000 was for the newly
acquired USEI. The increase in direct operating costs in baseline business was
proportionate to the first quarter increase in revenue.
<Table>
<Caption>
Reported in $000 MARCH 31, 2001 MARCH 31, 2001 March 31, 2000
WITH USEI WITHOUT USEI
CHEMICAL LLRW CHEMICAL LLRW Chemical LLRW
-------- ---- -------- ---- -------- ----
Direct operating costs $4,097 $2,693 $2,622 $2,693 $2,220 $2,777
</Table>
The acquisition of USEI had a positive impact on Gross Profit increasing to $6.1
million or 37% at March 31, 2001 compared to $4.4 million at March 31, 2000. The
contribution of the USEI gross profit enabled the Company to maintain gross
margin at 47.7% of revenue for both periods.
16
SELLING, GENERAL & ADMINISTRATIVE EXPENSES (S,G&A)
The consolidated total SG&A increased to $4,803,000 during the 3 months ending
March 31, 2001, compared to $3,263,000 for the 3 months ending March 31, 2000.
This 47% increase in S,G&A was partially a result of transition tasks related to
integrating USEI into the Company's operations. Without USEI SG&A increased 71%
for Chemical Services and 5% for LLRW Services.
<Table>
<Caption>
Reported in $000 MARCH 31, 2001 MARCH 31, 2001 March 31, 2000
WITH USEI WITHOUT USEI
CHEMICAL LLRW CHEMICAL LLRW Chemical LLRW
-------- ---- -------- ---- -------- ----
S,G&A costs $1,865 $1,654 $1,257 $1,654 $734 $1,568
</Table>
The higher S,G&A spending (in dollars) was caused by additional investment in
staffing, higher salary and benefits, investment in new information systems,
additional sales personnel, outside consulting expense, and ongoing legal
expenses. Staffing the Company's municipal solid waste landfill, El Centro, in
Texas contributed to increased S,G&A in Chemical Services. While the growth in
S,G&A was high in absolute terms, the increase was less dramatic relative to
sales, as S,G&A for the quarter ending March 31, 2001, was 37% of revenue
compared to 35% of revenue for the same period last year.
The Company plans continued investment in infrastructure and related S,G&A
growth, but at a slower rate than the growth in revenue. S,G&A at the corporate
level increased 34% to $1,284,000 for the quarter ending March 31, 2001,
compared to $961,000 for March 31, 2000. The Company incurred certain S,G&A
costs that were not capitalized for the acquisition of USEI as well as increases
in consulting expense during the first quarter. The addition of a corporate
transportation manager, public affairs director and the impact of annual salary
increases also contributed to the increase in corporate S,G&A.
INVESTMENT INCOME
Investment income is comprised principally of interest income earned on various
investments in securities and certificates of deposit. As of March 31, 2001, the
Company reported investment income of $174,000 compared to $177,000 at March 31,
2000. As part of the USEI transaction, the Company received $147,000 of the
$174,000 from a trust fund in February 2001 previously posted as collateral for
a closure and post closure bond.
INTEREST EXPENSE
The Company incurred interest expense of $258,000 and $60,000 for each of the
quarters ending March 31, 2001 and 2000, respectively. The higher interest
expense reflects the assumption of an $8,500,000 industrial revenue bond
obligation of Envirosafe Services of Idaho, Inc. (now USEI's obligation),
additional borrowings for increased working capital needs, and equipment leases
entered into in the ordinary course of business.
OTHER INCOME
Other income is the account used to record various business activities that are
not a part of the Company's ordinary and usual business line of revenue. Other
income also includes the reversal of expenses charged to reserves for contingent
liabilities from prior periods and miscellaneous cash receipts. The Company
believes it is appropriate to use an account like other income to reflect
accurately in the current period those costs and expenses which were reversed
from accruals in prior periods of estimated operating or selling, general &
administrative expense. As a result, credits from prior periods go to other
income rather than crediting current years expenses or revenue, thus preserving
the true current period results from operations.
If a reserve were established based on a known liability that was reasonably
estimated, and later settled for a lesser amount, that unused portion of the
reserve from a prior period would result in other income. On the other hand if
such contingent liability were resolved within the same year, then the account
that the original expense was charged to would take the resultant credit.
Other income was $236,000 and $184,000 for each of the quarters ending March 31,
2001, and 2000, respectively. In the first quarter of 2001, the Company wrote
down $52,000 of restructuring charges related to the USEI acquisition in
February 2001. The Company also made an adjustment to a legal and professional
fees reserve for
17
$160,000 of estimated attorney fees for a pending lawsuit accrued in 2000, which
was subsequently settled favorably in 2001. The following table shows the items
making up other income:
<Table>
<Caption>
(Reported in thousands of dollars)
MARCH 31, March 31,
2001 2000
--------- ---------
OTHER INCOME FROM GENERAL BUSINESS ITEMS
State tax refunds from prior year $ -- $ 3
Loan repayment to Chase Bank of Texas originally
expensed as bank fees -- 112
Reverse bad debt expense reserve 23 10
Professional fees accrual adjustment 160 --
Reverse USEI restructuring charge 52 --
Correction of prior years expenses that were allowable
as capitalized costs -- 56
---- ----
SUBTOTAL 235 181
OTHER INCOME FROM NON-GENERAL BUSINESS ITEMS
Correction of gain on asset sale (2) --
Cash receipts for property rents 2 2
Vending machine commissions 1 1
---- ----
Total other income $236 $184
---- ----
</Table>
INCOME TAXES
The Company's effective income tax (benefit) rates were 1% for the quarters
ending March 31, 2001 and 2000 respectively. The income tax expense of $46,000
and $101,000 for each of the quarters ending March 31, 2001, and 2000,
respectively, is for payments on different state and local taxes including
franchise taxes. The Company has a valuation allowance of approximately $19.8
million for deferred federal tax assets with more than $2.7 million of limited
loss carryforwards and $34.4 million of unlimited net operating loss
carryforwards. The Company does not anticipate a federal tax liability for 2001.
NET INCOME
Net income for the first quarters ending 2001 and 2000 are shown below with and
without USEI.
<Table>
<Caption>
Reported in $000 MARCH 31, 2001 MARCH 31, 2001 March 31, 2000
WITH USEI WITHOUT USEI
CHEMICAL LLRW CHEMICAL LLRW Chemical LLRW
-------- ---- -------- ---- -------- ----
NET INCOME (LOSS) $1,780 $(407) $645 $(407) $411 $785
</Table>
Consolidated net income and earning per share for the first quarters ending
2001, 2000, and 1999 are shown below with and without USEI.
<Table>
<Caption>
Reported in $000 MARCH 31, 2001 March 31, 2000 March 31, 1999
WITH USEI WITHOUT USEI
CONSOLIDATED CONSOLIDATED Consolidated Consolidated
------------ ------------ ------------ ------------
Net Income $1,482 $381 $1,382 $119
Basic Earnings Per Share .10 .02 .09 .001
Diluted Earnings Per Share .08 .01 .08 .001
</Table>
18
CAPITAL RESOURCES AND LIQUIDITY
As of March 31, 2001, the Company had positive working capital of $5,774,000.
This compares favorably to the positive working capital of $2,279,000 at
December 31, 2000, and the working capital deficit of $2,711,000 at March 31,
2000. This significant improvement in working capital reflects positive earnings
over the past six quarters, financing activities in 2001 and 2000, the receipt
of a $2.7 million refund from the closure and post closure bond from the USEI
acquisition, and a reduction in current liabilities. The Company has judiciously
managed its current liabilities and with the positive impact of the USEI
acquisition anticipates that its working capital position will continue to be
positive.
The Company's current ratio improved to 1.48:1 at March 31, 2001, compared with
0.82:1.0 at March 31, 2000. Liquidity, as measured by days accounts receivables
outstanding ("DRO"), increased from 49 days at March 31, 2000 to 72 days at
March 31, 2001. The Average DRO for the same periods was 63 and 69 days. The
overall change in the Company's liquidity is due to some slower paying accounts
in the baseline business, however, USEI has generated good collections in the
past two months.
The Company's leverage has increased since December 31, 2000, as evidenced by a
.70:1 debt to equity ratio at March 31, 2001, compared to .46:1 at year end and
.17:1 for the same period one year before. This debt to equity ratio is total
debt divided by shareholders equity. This increase is principally the result of
the assumption of the $8,500,000 industrial revenue bond and other USEI
liabilities.
As of March 31, 2001, the Company has maintained a business banking relationship
with Wells Fargo formerly known as First Security Bank, Boise, Idaho that
provides an $8,000,000 line of credit. At this date the Company had $3,000,000
borrowed which does not include $1,150,000 reserved for a standby letter of
credit for the Sheffield, Illinois facility closure and post closure fund. At
April 30, 2001, the Company had borrowed $2,000,000 with $1,150,000 reserved
leaving about $4,509,000 available for the Company to borrow.
Seasonal Effects
Operating revenues are generally lower in the winter months, and increase in the
warmer summer months. However, both Chemical and LLRW Services revenue are more
affected by market condition than seasonality.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
(Registrant)
Date: December 13, 2001 By: /s/ Stephen A. Romano
---------------------------------
Stephen A. Romano
President and Chief Operating Officer
Date: December 13, 2001 By: /s/ James R. Baumgardner
----------------------------------
James R. Baumgardner
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
20