1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): November 13, 1998
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
Ste. 200
Boise, Idaho 83702-1779
- ------------------------------------------ ----------------------------------
(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 [ ]
1
2
AMERICAN ECOLOGY CORPORATION FORM 8-K
SEC File Number 00-11688
Item 2. Acquisition or Disposition of Assets.
On November 13, 1998, American Ecology Corporation (the "Company") closed a
multi-part transaction with its bank, Chase Bank of Texas (the "Bank"),
eliminating substantially all of the Company's long-term debt and all of its
$41.9 million debt to the Bank. The essential terms of the transaction included:
(1) the payment of approximately $4.2 million of cash to the Bank; (2) the sale
and assignment of an interest in the Company's Ward Valley, California project
and related litigation against the U.S. Department of Interior; and (3) warrants
to purchase common stock of the Company equal to 10% of the number of common
shares outstanding. The maximum amount the Bank can earn from its interest in
the Ward Valley project or from the litigation (or a combination of both) is
$29.6 million, and is subject to reduction by as much as $1.0 million for
attorneys' fees incurred in respect of the litigation after November 13, 1998.
The Company will account for the transaction on its balance sheet by reducing
the capitalized asset for its Ward Valley project from $55.1 million to $17.3
million, which is the difference between the $41.9 million debt owed and $4.2
million cash payment, resulting in the removal of the Company's $41.9 million
bank debt from its balance sheet. Although there is no longer any debt owed the
Bank, other long-term debt and capital lease obligations totaling approximately
$1.0 million will remain on the Company's balance sheet. Previously, the Company
assigned with recourse a federal income tax refund claim to the Bank for a
$740,000 advance on its revolving line of credit. The Company has collateralized
the recourse contingency with real property located in Smith County, Texas and
is purchasing 25% of the refund claim from the Bank in reduction of the
contingency.
The transaction reduces the balance sheet from $99.9 million to approximately
$58 million. Incorporated below under Item 7(b) is an unaudited comparative pro
forma balance sheet as of November 13, 1998.
The Warrant replaces an earlier warrant granted to the Bank and permits the Bank
to purchase up to 1,349,843 shares of the Company's common stock at $1.50 per
share. The Warrant is effective immediately and, unless earlier exercised,
terminates June 30, 2010. The Warrant will be adjusted pursuant to anti-dilution
provisions if the Company issues common stock or other securities convertible or
exercisable for common stock at a price less than the equivalent of $1.50 per
share of common stock. If the Bank receives a total of $35.0 million from its
interest in the litigation and Ward Valley project, the cash payment made
November 13, 1998, and a partial exercise of the Warrant, the Bank will have
thirty days to exercise the unexercised part of the Warrant or it expires.
The Ward Valley Interest Agreement and Assignment ("WV Agreement") assigns the
Bank an 85% interest in the cash generated by two of the five rate-base
components set by California regulatory authorities and charged to generators of
waste to be disposed at the Company's licensed Ward Valley low-level radioactive
waste disposal site. The two components are an annual amortization of 1/20 of
capital investment in the project prior to November 13, 1998 and the return
factor specified by the Company in the license application. The Bank will not
share in the depreciation, interest reimbursement or annual operating cost
rate-base components. As stated in the Company's annual reports, the project has
been effectively stalled by the Clinton administration's refusal to convey the
land on which the project is to be sited to the state of California. California
and the Company are engaged in two lawsuits against the United States and the
U.S. Department of Interior. The Company is claiming damages in excess of $70.0
million and suing for an order that the land be conveyed to California. If the
Company recovers damages from the United States, the damages, reduced by up to
$1.0 million of attorneys' fees, will be paid to the Bank under the WV Agreement
until it has received from the litigation and the Ward Valley project a maximum
amount of $29.6 million.
2
3
Copies of the Settlement Agreement, the WV Agreement and the Warrant are
attached hereto and incorporated herein as exhibits.
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information.
A compressed pro forma balance sheet including changes to both asset and
liability accounts is presented below and reflects the Company's accounting for
the reported transactions.
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED AND COMPRESSED BALANCE SHEETS
(UNAUDITED)
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
Pro Forma Actual Actual
November 13, September 30, December 31,
1998 1998 1997
---------- ---------- ----------
ASSETS
Total current assets $ 11,541 $ 10,141 $ 9,912
Cash and investment securities, pledged 6,851 12,411 14,287
Deferred site development costs 25,229 63,016 58,890
Other assets 14,349 14,349 15,342
---------- ---------- ----------
Total assets $ 57,970 $ 99,917 $ 98,431
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current liabilities $ 24,963 $ 24,963 $ 26,842
Long term debt, excluding current portion 787 42,734 39,872
Deferred site maintenance, excluding current portion 18,081 18,081 18,337
Commitments and contingencies
Shareholders' equity:
Series D cumulative convertible preferred stock, $.01 par value,
105,264 authorized, 105,264 shares issued and outstanding 1 1 1
Series E redeemable convertible preferred stock, $10.00 par value,
300,000 authorized, 300,000 shares converted and retired -- -- 3,000
Common stock, $.01 par value, 25,000,000 authorized, 13,498,429
and 8,462,533 shares issued and outstanding, respectively 135 135 85
Additional paid-in capital 52,647 52,647 47,701
Unrealized gain (loss) on securities available-for-sale -- -- --
Retained earnings (deficit) (38,644) (38,644) (37,407)
---------- ---------- ----------
Total shareholders' equity 14,139 14,139 13,380
---------- ---------- ----------
Total Liabilities and Shareholders' Equity $ 57,970 $ 99,917 $ 98,431
========== ========== ==========
The reported transaction did not affect the Company's earnings or cash flow.
Other than normal and regular business activity since September 30, 1998 the
Statement of Operations and Cash Flows is the same as disclosed in the Company's
Form 10-Q for the period ending September 30, 1998.
3
4
(c) Exhibits.
99.8 Settlement Agreement
99.9 Ward Valley Interest Agreement and Assignment
99.10 Warrant
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: November 19, 1998 By: /s/ JACK K. LEMLEY
-------------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 19, 1998 By: /s/ R. S. THORN
-------------------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
4
5
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
99.8 Settlement Agreement
99.9 Ward Valley Interest Agreement and Assignment
99.10 Warrant