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, 2002 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.)

300 E. MALLARD, SUITE 300, BOISE, IDAHO 83706
(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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes [ ] No [X]

At February 10, 2003, Registrant had outstanding 14,546,764 shares of its Common
Stock and the aggregate market value of the Registrant's voting stock held by
non-affiliates was approximately $25,448,000 based on the closing price of $3.00
per share. The aggregate market value of the Registrant's voting stock held by
non-affiliates on June 28, 2002 was approximately $48,748,000 based on the
closing price of $4.55 per share as reported on the NASDAQ Stock Market, Inc.'s
National Market System. For purposes of the foregoing calculation, all
directors and executive officers of the Registrant have been deemed to be
affiliates, but the Registrant disclaims that any of such directors or executive
officers is an affiliate.

Documents Incorporated by Reference
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held May 29, 2003. Part III

TABLE OF CONTENTS

Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART I

Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Submission of Matters to a Vote of Security Holders. . . . . . . .
PART II
Item 5. Market for Registrants Common Equity and Related
Stockholders Matters . . . . . . . . . . . . . . . . . . . . . . .
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . .
Management's Discussion and Analysis of
Financial Condition and Results. . . . . . . . . . . . . . . . . .
Item 7. of Operation . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . .
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . .
Changes in and Disagreements with Accountants on Accounting and. .
Item 9. Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . .
PART III
Items 10, 11, 12 and 13 are incorporated by reference from the
definitive proxy statement . . . . . . . . . . . . . . . . . . . .
Item 14. Controls and Procedures. . . . . . . . . . . . . . . . . . . . . .
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

DEFINITIIONS

TERM MEANING
---- -------

AEC or the Company. . . . . . American Ecology Corporation and its subsidiaries

CERCLA or "Superfund" . . . . Comprehensive Environmental Response,
Compensation and Liability Act of 1980

FUSRAP. . . . . . . . . . . . U.S. Army Corps of Engineers Formerly Utilized Site
Remedial Action Program

LLRW. . . . . . . . . . . . . Low-level radioactive waste processing.

NORM/NARM . . . . . . . . . . Naturally occuring and accelerator produced
radioactive material

NRC . . . . . . . . . . . . . U.S. Nuclear Regulatory Commission

PCBs. . . . . . . . . . . . . Polychlorinated biphenyls

RCRA. . . . . . . . . . . . . Resource Conservation and Recovery Act of 1976

SEC . . . . . . . . . . . . . Securities and Exchange Commission

TCEQ. . . . . . . . . . . . . Texas Commission on Environmental Quality

TSCA. . . . . . . . . . . . . Toxic Substance Control Act of 1976

USACE . . . . . . . . . . . . U.S. Army Corps of Engineers

US EPA. . . . . . . . . . . . U.S. Environmental Protection Agency

WUTC. . . . . . . . . . . . . Washington Utilities and Transportation Commission

PART I

ITEM 1. BUSINESS

The Company provides radioactive, hazardous and industrial waste management
services to commercial and government entities, such as nuclear power plants,
medical and academic institutions, steel mills and petro-chemical facilities.
Headquartered in Boise, Idaho, the Company is one of the nation's oldest
providers of radioactive and hazardous waste services. AEC and its predecessor
companies have been in business for more than 50 years. AEC operates nationally
and currently employs 199 people.

The Company's official website can be found at www.americanecology.com. Company
filings with the SEC are posted on the website subsequent to the official
filing.

AEC was most recently incorporated as a Delaware corporation in May 1987. The
Company's wholly owned 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"); and US Ecology Idaho, Inc., a
Delaware corporation ("USEI") wholly owned by AEESC.

The Company operates within two business segments: Operating Disposal
Facilities and Non-Operating Disposal Facilities. These segments reflect AEC's
internal reporting structure and the nature of services offered by each. The
Operating Disposal Facilities are currently accepting hazardous and low-level
radioactive waste and include the Company's hazardous waste treatment and
disposal facilities in Beatty, Nevada; Grand View, Idaho; and Robstown, Texas;
and its LLRW and NORM/NARM disposal facility in Richland, Washington. The
Non-Operating Disposal Facilities segment includes non-operating disposal
facilities in Sheffield, Illinois; Beatty, Nevada; and Bruneau, Idaho; a closed
hazardous waste processing and deep-well injection facility in Winona, Texas;
and two proposed new disposal facilities. Income taxes are assigned to
Corporate, but all other items are included in the segment where they
originated. Inter-company transactions have been eliminated from the segment
information and are not significant between segments. See Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation for
information concerning the revenues, income (loss) from operations and total
assets attributable to the Company's operating segments.

On December 27, 2002, the Company announced its LLRW Processing and Field
Services business was eliminated as an operating segment, at which time
employees were notified that processing operations had been discontinued. The
Company is marketing the Oak Ridge, Tennessee LLRW processing facility for sale
to qualified buyers. The Processing and Field Services operations have been
reported as discontinued operations. See DISCONTINUED OPERATIONS and Item 8.
Financial Statements and Supplemental Data, Note 19 for information concerning
discontinued operations.

In mid-2002 the Company entered into discussions regarding the potential sale of
the Company's El Centro solid waste landfill located in Robstown, Texas. On
February 13, 2003, the Company announced the sale of the El Centro municipal and
industrial waste landfill to a wholly-owned subsidiary of Allied Waste
Industries, Inc. ("Allied") for $10 million cash at closing and future
volume-based royalty payments. The El Centro landfill is located adjacent to
Company subsidiary Texas Ecologists' hazardous and industrial waste treatment
and disposal facility. Under the Agreement, Allied will pay American Ecology
minimum royalties of at least $215,000 annually. Once Allied has paid the
Company $14,000,000 it no longer has an obligation to pay annual minimum
royalties but will still be required to pay royalties based on waste volumes
received at El Centro. The Purchase Agreement also provides incentives for
Allied to bring certain industrial waste to the Texas Ecologists hazardous waste
facility, and for the Company to utilize the El Centro landfill. Opened in July
2000, the El Centro solid waste landfill was carried on the Company's books at
approximately $7 million prior to sale. When combined with reductions in
liabilities and the recognition of certain future minimum royalties, the sale
should result in a gain of approximately $5 million, which will be recognized
during the first quarter of 2003.

The following table summarizes each segment:

SUBSIDIARY LOCATION SERVICES
- ---------- -------- --------

OPERATING DISPOSAL FACILITIES
-----------------------------

USEI Grand View, Idaho Hazardous, PCB and NRC-exempt radioactive and mixed
waste treatment and disposal, rail transfer station
Texas Ecologists Robstown, Texas Hazardous, non-hazardous industrial and NRC-exempt
radioactive and mixed waste treatment and disposal
US Ecology Beatty, Nevada Hazardous, Thermal, and PCB waste treatment and disposal

US Ecology Richland, Washington Low-Level Radioactive and NORM/NARM waste disposal

NON-OPERATING DISPOSAL FACILITIES
---------------------------------
US Ecology Beatty, Nevada Closed LLRW disposal facility: State of Nevada is licensee

US Ecology Sheffield, Illinois Closed LLRW disposal facility: State of Illinois is licensee

US Ecology Sheffield, Illinois Non-operating hazardous waste disposal facility: US
Ecology is permittee
AEESC Winona, Texas Non-operating hazardous waste treatment and deep well
facility: AEESC is permittee
USEI Bruneau, Idaho Closed hazardous waste disposal facility: US Ecology Idaho
is permittee
US Ecology Ward Valley, California Proposed LLRW disposal facility: in litigation

US Ecology Butte, Nebraska Proposed LLRW disposal facility: in litigation

DISCONTINUED OPERATIONS
-----------------------

AERC Oak Ridge, Tennessee Idle low-level radioactive waste volume reduction and
processing and related Field Services
Texas Ecologists Robstown, Texas Municipal and industrial solid waste sold February 13, 2003

OPERATING DISPOSAL FACILITIES

A significant portion of the Company's revenue from operating disposal
facilities is attributable to discrete, one-time clean-up projects ("Event
Business"). The project-specific nature of the Event Business necessarily
creates variability in revenue and earnings. This can produce large quarter to
quarter swings, depending on the relative contribution from single Event
Business projects. Management's strategy is to expand its recurring business
("Base Business"), while opportunistically and simultaneously securing both
large and small Event Business opportunities. Management believes that by
controlling and structuring its operating costs so that the Company's Base
Business covers fixed costs, an increased amount of the Event Business revenue
will fall through to the bottom line. This strategy takes advantage of the
inherently high fixed cost nature of waste disposal operations.

Grand View, Idaho Facility. Located on 1,760 acres of Company-owned land about
60 miles southeast of Boise, Idaho in the Owyhee Desert, this operation was
acquired in February 2001. During 2001, the new subsidiary's name was changed
from Envirosafe Services of Idaho to US Ecology Idaho. The acquired assets
included a rail transfer station located approximately 30 miles northeast of the
disposal site. As part of the acquisition, the Company also obtained rights to
a patented, U.S. Environmental Protection Agency ("US EPA") approved technology
to stabilize and delist certain steel mill hazardous wastes, allowing more
economical disposal as non-hazardous waste. The facility is also permitted to
accept certain naturally occurring and accelerator produced radioactive
material, source material, and certain mixed wastes from commercial and
government customers, including materials received under a contract with the
U.S. Army Corps of Engineers. The facility is regulated under a joint permit
issued by the Idaho

Department of Environmental Quality and the US EPA, and State law and
regulations governing NRC-exempt radioactive materials.

Robstown, Texas Facility. Texas Ecologists operates on 240 acres of land near
Robstown, Texas about 10 miles west of Corpus Christi. The facility, opened to
accept waste in 1973, is regulated under a permit issued by the Texas Commission
on Environmental Quality ("TCEQ") and has been in operation for 30 years. The
site is also subject to US EPA regulations and is permitted to accept certain
radioactive materials and mixed wastes pursuant to its TCEQ permit.

Beatty, Nevada Facility. US Ecology leases approximately 80 acres from the
State of Nevada on which operations are conducted. The Company's lease was
renewed for ten years in 1997. Opened to receive hazardous waste in 1970, the
site is located in the Amargosa Desert approximately 100 miles northwest of Las
Vegas, Nevada and 30 miles east of Death Valley, California. The facility is
regulated under permits issued by the Nevada Department of Conservation and
Natural Resources and the US EPA.

Richland, Washington Facility. In operation since 1965, this US Ecology
facility is located on 100 acres of leased land on the U.S. Department of Energy
Hanford Reservation approximately 35 miles west of Richland, Washington. The
lease between the State of Washington and the Federal government expires in
2061. The Company intends to renew its sublease with the State, which expires in
2005. The facility is licensed by the Washington Department of Health for
health and safety purposes, and is also regulated by the Washington Utilities
and Transportation Commission ("WUTC"), which sets disposal rates for low-level
radioactive wastes. Rates are set at an amount sufficient to cover the costs of
operations and provide the Company with a reasonable profit. A new rate
agreement was established in 2001 and expires January 1, 2008. The State also
assesses facility user fees for local economic development, State regulatory
agency expenses, and a dedicated trust account to pay for long-term care and
maintenance after the facility closes.

NORM/NARM Services: The US Ecology NORM/NARM Services group capabilities have
been expanded to offer additional site characterization, contamination studies,
decontamination, waste removal and off-site shipment services. These services
are similar to, but distinctly different from, services previously provided by
the Company's Oak Ridge Field Services group, which primarily involved LLRW
fixed facility processing at AERC's Oak Ridge facility. During 2003, Norm/Narm
Services employees will reposition the business to focus on remediation projects
involving wastes accepted at the Company's operating disposal facilities.

NON-OPERATING DISPOSAL FACILITIES

Beatty, Nevada Facility. Operated by the Company from 1962 to 1993, the Beatty
site was the nation's first commercial facility licensed to dispose of LLRW. In
1997, it became the first LLRW disposal facility to successfully complete
closure and post-closure stabilization and to transfer its license to the
government for long-term institutional control. Since that time, the Company
has performed maintenance and surveillance under a contract with the State of
Nevada, drawing on a State-controlled fund contributed during facility
operations.

Bruneau, Idaho Facility. This remote 88 acre desert site, acquired along with
the Grand View, Idaho disposal operation in February 2001, was closed under an
approved RCRA plan. Post closure monitoring will continue for approximately 25
years in accordance with permit and regulatory requirements.

Sheffield, Illinois Facility. The Company previously operated this LLRW disposal
facility on a 5-acre, State-owned site from 1968 to 1978. After performing
closure work under a 1988 Settlement Agreement with the State of Illinois, the
Company monitored and maintained the site until mid-2001, when the LLRW license
was transferred to the State. Like Beatty, the Company has a contract with the
State to perform long-term monitoring and maintenance.

Sheffield, Illinois Facility. The Company previously operated two hazardous
waste disposal facilities adjacent to the Sheffield LLRW disposal area. One
hazardous waste site was opened in 1974 and ceased accepting waste in 1983. The
second accepted hazardous waste from 1968 through 1974. In January 2003, the
Company renegotiated its corrective measures agreement, allowing the Company to
reduce its financial assurance requirement to $800,000. The Company continues
to perform remediation activities at the facility under regulation by the US
EPA.

Winona, Texas Facility. From 1980 to 1994, Gibraltar Chemical Resources
operated the Winona hazardous waste processing and deep well facility, at which
time AEC purchased the facility. Solvent recovery, deep well injection and
waste brokerage operations were conducted on an eight acre site until March
1997, when the Company ceased operations. The Company is proceeding with an
Agreed Order entered with the State of Texas for closure, including posting a
$1,300,000 financial assurance. State action is pending on a Closure
Certification Report submitted in 1999. The Company owns an additional 587 acres
contiguous to the permitted site. Efforts are underway to sell the excess
property.

Ward Valley, California Proposed Facility. In 1993, the Company received a
State of California license to construct and operate a LLRW disposal facility in
a remote, Mojave Desert location to serve the Southwestern LLRW Compact. The
license remains valid. The Company alleges the State of California has abandoned
its duty to acquire the project property from the U.S. Department of the
Interior. The Company filed suit against the State to recover monetary damages
in excess of $162 million. The matter is scheduled for trial in February 2003.
Additional discussion of this litigation is presented under Item 3. Legal
Proceedings of this Form 10-K.

Butte, Nebraska, Proposed Facility. The Company submitted an application to the
State of Nebraska to construct and operate this facility, developed under
contract to the Central Interstate LLRW Compact Commission ("CIC"). Following
proposed license denial by the State of Nebraska, the CIC, the Company and a
number of nuclear power utilities funding the project sued the State of Nebraska
alleging bad faith in the license review process. A federal court order was
issued enjoining the State license review process. On September 30, 2002, the
federal district court awarded plaintiffs $153 million in damages, including
approximately $12 million based on the Company's contributions to the project.
The State's appeal of this ruling is pending. Additional discussion of this
litigation is presented under Item 3. Legal Proceedings of this Form 10-K.

DISCONTINUED OPERATIONS

Oak Ridge, Tennessee Facility. AERC, acquired from Quadrex Corp. in 1994,
processed LLRW to reduce the volume of waste requiring disposal at licensed
radioactive waste facilities. On December 27, 2002, the Company announced the
cessation of LLRW services and operations. The plant, situated on 16 acres of
Company property in Oak Ridge, Tennessee, primarily served the commercial
nuclear power industry, but also accepted brokered waste from biomedical,
academic and non-utility industry customers. On October 18, 2002, the Company
announced its intent to actively market the facility and exit the LLRW
processing business. While a number of potential buyers were identified, no
acceptable offers were received to acquire the facility. After concluding it
would not be possible to sell the business as a going concern, management
discontinued AERC's commercial services. AERC's processing services had never
been successfully integrated with the Company's core disposal business, and
management was unable to identify a viable business strategy to reverse the
recurring losses that have occurred at the facility since its acquisition in
1994. The discontinuance of commercial operations resulted in the dismissal of
63 employees. Seventeen employees are presently engaged in removal of LLRW from
the facility, maintaining the facility's radioactive materials licenses and
preparing the facility for sale. It is expected that removal of waste will take
most of 2003, although staffing requirements will diminish over time. The
Company intends to maintain the facility's existing radioactive materials
operating licenses pending a possible sale.

Robstown, Texas Municipal Solid Waste Landfill. In July 2000, the Company began
operation of a municipal and industrial waste landfill on 160 acres of land
immediately adjacent to its hazardous waste facility. On February 13, 2003, the
Company announced the sale of the El Centro municipal and industrial waste
landfill to a subsidiary of Allied Waste Industries, Inc. ("Allied") for $10
million cash at closing and future volume-based royalty payments. The El Centro
landfill is located adjacent to Company subsidiary Texas Ecologists' hazardous
and industrial waste treatment and disposal facility. Under the Agreement,
Allied will pay American Ecology minimum royalties of at least $215,000
annually. Once Allied has paid the Company $14,000,000 it no longer has an
obligation to pay annual minimum royalties, but will still be required to pay
royalties based on waste volumes received at El Centro. The Purchase Agreement
also provides incentives for Allied to bring certain industrial waste to the
Texas Ecologists hazardous waste facility, and for the Company to utilize the El
Centro landfill. Opened in July 2000, the El Centro solid waste landfill was
carried on the Company's books at approximately $7 million prior to sale and,
when combined with reductions in liabilities and the recognition of certain
future minimum royalties, should result in a gain on sale of approximately $5
million, which will be recognized during the first quarter of 2003.

INDUSTRY

In 2002, the hazardous waste industry trend of reduced waste volumes and
consolidation and restructuring underway since the mid-1990s continued. This
maturation period followed rapid expansion in the 1970s and 1980s driven by new
environmental laws and actions by federal and state agencies to regulate
existing hazardous waste management facilities and to direct the clean up of
contaminated sites under the federal Superfund law.

By the early 1990s, excess hazardous waste management capacity had been
constructed and permitted by the waste services industry. At the same time, to
better manage risk and reduce expenses, many waste generators also instituted
industrial process changes and other methods to minimize their waste production.
The volume of waste shipped for disposal from Superfund and other properties
also diminished as the many contaminated sites were cleaned up. Improved waste
management by generators coupled with excess commercial disposal capacity and a
maturing federal Superfund program created highly competitive market conditions
that still apply today.

Management believes that the hazardous waste business will continue to
consolidate, but that a baseline demand for services will remain. Management
further believes that the ability to deliver specialized services, while
aggressively competing for non-specialized, commodity business, will set apart
successful from unsuccessful companies going forward. The Company's 2001
acquisition of Envirosafe Services of Idaho and its patented hazardous steel
mill waste treatment technology, the expanded handling capabilities for certain
radioactive and mixed waste materials at its Idaho and Texas hazardous waste
facilities, and the installation of patented thermal treatment units at its
Beatty, Nevada hazardous waste facility reflect successful initiatives by the
Company to increase market share profitability under present market conditions.

The commercial LLRW business is also experiencing significant change. This is
primarily due to the failure of the LLRW Policy Act of 1980 ("Policy Act") and
interstate Compacts encouraged by the Policy Act to provide any new disposal
sites and a series of market responses to that failure. The Company's efforts to
site new disposal facilities in Ward Valley, California and Butte, Nebraska have
been delayed by litigation. Management believes that both of these proposed
facilities are safe and environmentally sound, and that the States of California
and Nebraska have abandoned their duties under existing law. Management
believes the Company is entitled to substantial compensation for its past
investments in these statutorily-required site development processes. See Item
3. Legal Proceedings of this Form 10-K.

The Company's Richland, Washington disposal facility, serving the Northwest and
Rocky Mountain Compacts, is one of only two operating Compact disposal
facilities in the nation. Both were in full operation for many years before
passage of the LLRW Policy Act. While the Richland site has substantial unused
capacity, it can only accept LLRW from the eleven western states comprising the
two Compacts served. The Barnwell, South Carolina site, owned by a competitor,
is located in the Atlantic Compact. The Barnwell site is open to the entire
nation but has limited remaining service capacity (in terms of space and years
of availability) and imposes much higher state fees.

Restricted access to the Company's Richland, Washington facility, Barnwell's
limited capacity and high state fees and the failure of the Compacts to
establish new disposal facilities created a market opportunity for a privately
held Utah disposal company. The Utah facility is licensed to accept a
substantial subset of the LLRW, which Congress assigned as a state
responsibility under the Policy Act. Increased disposal prices also induced a
number of businesses to offer LLRW processing and volume reduction services. The
Company purchased its Oak Ridge facility in 1994 to participate in this market,
along with other new market entrants. The LLRW volume reduction business has
experienced heavy price competition and a number of companies have ceased
operations and/or declared bankruptcy. This heavy competition and the Oak Ridge
facility's reliance on disposal facilities operated by competitors to ship
processed waste produced substantial losses leading to the Company's decision to
discontinue commercial LLRW processing operations in December 2002.

The significant increase in radioactive waste disposal prices has also
encouraged a search for more cost-effective disposal methods for soil, debris,
consumer products, industrial wastes and other materials containing very low
concentrations of radioactive contamination, and mixed wastes exhibiting both
hazardous and radioactive properties. Management believes the expanded use of
permitted hazardous waste disposal facilities to dispose of such these materials
is a safe, environmentally sound market response. The Company's Grand View,
Idaho facility has

significantly increased waste volume throughput in both 2001 and 2002 based in
large part on this growing demand. The Company's Texas Ecologists disposal
facility is positioned to serve a more limited portion of this demand.

PERMITS, LICENSES AND REGULATORY REQUIREMENTS

The Company's hazardous, industrial, non-hazardous, and radioactive materials
business is subject to extensive environmental, health, safety, and
transportation laws, regulations, permits and licenses. These requirements are
administered by federal, state and local agencies. The responsible agencies
regularly inspect the Company's operations to monitor compliance. They have
authority to enforce compliance through the suspension of operating licenses and
permits and the imposition of civil or criminal penalties in case of violations.
This body of law and regulations contribute to the demand for Company services
and represent a significant obstacle to new market entrants.

RCRA provides a comprehensive framework for regulating hazardous waste handling,
transportation, treatment, storage, and disposal. RCRA regulation and permitting
is the responsibility of the US EPA and state agencies delegated such authority.
Listed chemical compounds and residues derived from listed industrial processes
are subject to RCRA standards unless they are delisted through a formal
rulemaking process such as the patented steel mill treatment employed at the
Company's Grand View, Idaho facility. RCRA liability may be imposed for improper
waste management or for failure to take corrective action to address releases of
hazardous substances. To the extent waste can be recycled or beneficially
reused, regulatory controls under RCRA diminish.

CERCLA and its amendments ("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 released
at such facilities, and on parties who arranged for the transportation of
hazardous substances. Liability under Superfund may be imposed if releases of
hazardous substances occur at treatment, storage, or disposal sites used or
operated by the Company. Since customers of the Company face the same
liabilities, Superfund incentivizes potential Company customers to minimize the
number of commercial disposal sites utilized and to manage their own wastes when
feasible. Commercial disposal facilities require authorization from the US EPA
to receive Superfund clean-up wastes. The Company's three hazardous waste
disposal facilities each have this authorization.

TSCA establishes a comprehensive regulatory program for treatment, storage and
disposal of PCBs. Regulation and licensing of PCB wastes is the responsibility
of the US EPA. The Company's Grand View, Idaho and Beatty, Nevada disposal
facilities have TSCA permits.

The Atomic Energy Act of 1954 ("AEA") and the Energy Reorganization Act of 1974
assign the NRC regulatory authority for the receipt, possession, use and
transfer of specified radioactive materials including disposal. The NRC has
adopted regulations for licensing commercial LLRW processing and disposal sites,
and may delegate regulatory and licensing authority to individual states. The
U.S. Department of Transportation regulates the 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 AEA does not authorize the NRC to regulate NORM/NARM; however, individual
states may assume regulatory jurisdiction. Many states, including Idaho and
Texas, where the Company operates facilities, have chosen to do so.

The process of applying for and obtaining licenses and permits to construct and
operate a radioactive, hazardous or industrial waste facility is lengthy and
complex. Management believes it has significant knowledge and expertise
regarding environmental laws and regulations. The Company also believes it
possesses all permits, licenses and regulatory approvals currently required to
maintain regulatory compliance and safely operate its facilities, and has the
specialized expertise required to secure additional approvals to grow its
business in the future.

INSURANCE, FINANCIAL ASSURANCE AND RISK MANAGEMENT

The Company carries a broad range of insurance coverage, including general
liability, automobile liability, real and personal property, workers'
compensation, directors' and officers' liability, environmental impairment
liability, and other coverage customary to the industry. Except as discussed in
Item 3. "Legal Proceedings" section of this report, the Company does not expect
the impact of any known casualty, property, environmental insurance or other
contingency to be material to its financial condition, results of operations or
cash flows.

Existing regulations require financial assurance to cover the cost of final
closure and/or post-closure obligations at the Company's processing and disposal
facilities. Acceptable forms of financial assurance include escrow-type
accounts funded by revenue during the operational life of a facility, letters of
credit from third parties, surety bonds, and traditional insurance. States may
also require facilities to fund escrow type or trust accounts during the
operating life of the facility.

Through December 31, 2002, the Company had not experienced significant
difficulty obtaining insurance. However, the Company's insurer for its closure
and post-closure financial assurance obligations has notified the Company to
expect significantly increased premiums and collateral requirements at renewal
of its current financial assurance policies on September 27, 2003. Although the
Company expects to renew these insurance policies, if the Company were unable to
obtain adequate closure, post-closure or environmental insurance in the future,
any partially or completely uninsured claim against the Company, if successful
and of sufficient magnitude, could have a material adverse effect on the
Company's financial condition, results of operations and cash flows.
Additionally, continued access to casualty and pollution legal liability
insurance with sufficient limits, at acceptable terms, is important to obtaining
new business and revenue-producing waste service contracts. Failure to maintain
adequate financial assurance could also result in regulatory action being taken
against the Company that could include the unplanned closing of certain
facilities.

As of December 31, 2002, the Company provided letters of credit of $1,150,000 as
collateral for insurance policies of approximately $50,231,000 for performance
of facility final closure and post-closure requirements. Management believes
the Company will be able to maintain the requisite financial assurance policies,
though at an increased cost. Management believes that increased premiums and
cash collateral requirements to meet financial assurance obligations could
create a significant impediment to new market entrants. These conditions also
present an added challenge for financially struggling competitors. While the
Company has not experienced difficulty in obtaining financial assurance for its
current operations, the cost of maintaining surety bonds, letters of credit and
insurance policies in sufficient amounts will be more expensive in the future
than in the recent past.

Primary casualty insurance programs do not generally cover accidental
environmental contamination losses. To provide insurance protection for such
environmental claims, the Company maintains environmental impairment liability
insurance and professional environmental consultants liability insurance for
non-nuclear occurrences. For nuclear liability coverage, the Company maintains
so-called Facility Form nuclear liability insurance provided under the federal
Price Anderson Act. This insurance covers 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.

CUSTOMERS

The Company manages the disposal of CERCLA and other environmental remediation
waste under a contract with the U.S. Army Corps of Engineers Formerly Utilized
Site Remedial Action Program ("FUSRAP"), and the disposal of steel mill air
pollution control dust (KO61) under various contracts. The following customers
accounted for more than 10% of the Company's revenue during 2002, 2001 and 2000:

% OF REVENUE FOR YEAR ENDING
CUSTOMER 2002 2001 2000
---- ---- ----
U.S. Army Corps of Engineers 27 15 -
Nucor Steel Company 13 11 -
Tamco Steel Company - - 20

MARKETS

Disposal Services. The hazardous waste treatment and disposal business is
generally highly competitive and sensitive to transportation costs. Specialized
niche service offerings are less sensitive to these factors. Wastes transported
by rail is less expensive, on a per mile basis, than wastes transported by
truck.

The Company's Robstown, Texas hazardous waste facility is geographically well
positioned to serve petro-chemical plants and other industries concentrated
along the Texas Gulf coast. The facility is also permitted to accept limited
concentrations of certain NRC-exempt radioactive materials and mixed wastes, and
can compete over a much larger area for these wastes.

The Company's Beatty, Nevada facility primarily competes for business in the
California, Arizona and Nevada markets. Due to the site's superior geologic and
climate conditions in the Amargosa Desert, the Nevada facility can compete for
wastes shipped from more distant locations. The Nevada facility also competes
over a broader geographic area for PCB waste due to the more limited number of
TSCA disposal facilities nationwide. The Beatty facility also offers thermal
treatment services to customers in its western service region.

The Company's Grand View, Idaho facility accepts wastes from across the United
States and operates a Company-owned rail transfer station located adjacent to a
main east-west rail line, generally allowing much lower cost transportation than
by truck. The Idaho facility's two primary markets are for steel mill air
pollution control dust, and NRC-exempt radioactive materials and mixed wastes in
concentrations specified by permit. Substantial waste volumes are received under
a five-year, renewable contract with the U.S. Army Corps of Engineers that is
also utilized by other federal agencies. Recent permit modifications have
expanded disposal capabilities at the Idaho facility. In late 2002, the site's
rail transfer station throughput capabilities were more than doubled by the
addition of 3,000 feet of track and another switch on Company property.

Waste stabilization, encapsulation, chemical oxidation and other treatment
technologies are available at the Company's Idaho, Nevada and Texas facilities
to meet US EPA land disposal restrictions. This capability allows all three
sites to manage a significantly broader spectrum of wastes than if pre-disposal
treatment was not offered.

The Richland, Washington disposal facility serves LLRW producers in the eight
States that are members of the Northwest Compact. The three Rocky Mountain
Compact States are also eligible to use the facility subject to annual volume
limits. Since US Ecology is a monopoly LLRW service provider, the State of
Washington approves the facility's LLRW disposal rates. The site competes for
NORM/NARM from customers across the country. These NORM/NARM rates are not
regulated, since a monopoly does not exist.

COMPETITION

The Company competes with large and small companies in each of the markets in
which it operates. The radioactive, hazardous and non-hazardous industrial waste
management industry is highly competitive. Management believes that its
principal disposal competitors are Chemical Waste Management, The EQ Company,
Heritage, Clean Harbors, Envirocare of Utah, and Waste Control Specialists.

Management believes that the principal competitive factors applicable to its
radioactive and hazardous waste management business are:

- - Price
- - Specialized "niche" service offerings
- - Customer service reputation
- - Five decades of experience and technical proficiency
- - Compliance and positive working relations with regulatory agencies
- - Brand name recognition

Management believes the Company is competitive based on these factors. The
Company further believes that it offers a nationally unique mix of services,
including specialized "niche" services, which distinguish it from

competitors. The Company's understanding of the industry, strong "brand" name
recognition from 50 years of industry experience in the business, excellent
compliance record and customer service reputation, and long established
relationships with customers, regulators, and the local communities bolster
these advantages.

While the Company is competitive, advantages exist for certain competitors with
technology, permits, and equipment enabling them to accept additional wastes
streams, who have greater resources, who are sited in jurisdictions that impose
lower disposal taxes, or are sited closer to waste generating customers.

PERSONNEL

Since October, 2001, a new executive management team has implemented fundamental
changes to the Company's organizational structure and management, including a
large reduction in force following a December 2002 decision to exit the LLRW
processing business.

On February 4, 2002, the Company's Board of Directors appointed Michael J.
Gilberg as Vice President and Controller.

On March 15, 2002, the Company's Board of Directors appointed Stephen A. Romano
as Chief Executive Officer in addition to his duties as President and Chief
Operating Officer.

On December 27, 2002, the Company notified the majority of its workforce in Oak
Ridge, Tennessee of the Company's intent to discontinue operations and terminate
their employment effective January 1, 2003. Severance was paid, consistent with
Company policy, to non-union employees. Severance was not specified in the
collective bargaining agreement previously entered into with the Paper,
Allied-Industrial, Chemical and Energy Workers International Union AFL-CIO-CLC
("PACE" or the "Union"). The Company has met on two occasions with the Union to
negotiate severance; however, no agreement has been reached, despite the
Company's best efforts to reach a mutually acceptable separation package. On
February 3, 2003 the Company extended another severance package to Union
employees, which was not accepted. The declined offer would have resulted in a
charge of approximately $168,000 in 2003 to discontinued operations. If the
former Union employees and the Company do not reach a mutually agreeable
settlement, these employees or the Union may take legal action to secure greater
severance.

On February 10, 2003, the Company had 199 full time employees, of which 11 were
members of PACE at its Richland, Washington site.

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 and Kentucky. The
following table describes the principal properties and facilities owned or
leased by the Company.

CORPORATE FUNCTION ACREAGE OWN/LEASE
- --------- -------- ------- ---------

Boise, Idaho Corporate office 8,572 sq. ft. Lease

OPERATING DISPOSAL FACILITIES
- -----------------------------

Beatty, Nevada Treatment and disposal facility 80 acres Lease

Grand View, Idaho Treatment and disposal facility,
and approved expansion area 1,760 acres Own

Elmore County, Idaho Rail transfer station 110 acres Own

Robstown, Texas Treatment and disposal facility 240 acres Own

Richland, Washington Disposal facility 100 acres Lease

NON-OPERATING DISPOSAL FACILITIES
- ---------------------------------

Bruneau, Idaho Closed disposal facility 88 acres Own

Sheffield, Illinois Closed disposal facility 204 acres Own

Sheffield, Illinois Closed disposal facility 170 acres Own

Winona, Texas Non-operating treatment and deep
well facility 620 acres Own

DISCONTINUED OPERATIONS
- -----------------------

Oak Ridge, Tennessee Processing facility 16 acres Own

Robstown, Texas Municipal landfill 200 acres Own

The principal properties of the Company make up less than 10% of the total
assets. The properties utilized are sufficient and suitable for the Company's
needs.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------

ONGOING LITIGATION
- ------------------

MANCHAK V. US ECOLOGY, INC., U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA,
- ------------------------------
CIVIL ACTION NO. 96-494.

In March 1996, Frank Manchak, Jr. ("Plaintiff" or "Manchak") filed suit alleging
infringement of a sludge treatment patent to stabilize hazardous waste at the
Company's Beatty, Nevada hazardous waste disposal facility. Plaintiff seeks
unspecified damages for infringement, treble damages, interest, costs and
attorney fees. In August 2001, the trial court disqualified the Company's
original counsel based on failure to identify a conflict. The Company engaged
new counsel and obtained a fee disgorgement and settlement of $155,000 from the
previous counsel on July 3, 2002. On October 17, 2002, the US District Court for
the District of Nevada granted the Company's motion for summary judgment to
dismiss the suit. Manchak's motion for reconsideration was denied on January 8,
2003. Previous to the court's denial of reconsideration, Manchak filed an
appeal. The Company does not believe it infringed any Manchak patent, will
continue to vigorously defend the case, and has filed a claim to recover
attorney fees and costs.

ENTERGY ARKANSAS, INC., ET AL, CENTRAL INTERSTATE LOW-LEVEL RADIOACTIVE WASTE
- --------------------------------------------------------------------------------
COMMISSION AND US ECOLOGY, INC. ("PLAINTIFFS") V. STATE OF NEBRASKA, ET AL.,
- ------------------------------------------------------------------------------
CASE NO. 4:98CV3411, U.S. DISTRICT COURT, DISTRICT OF NEBRASKA

This action was brought in federal court in December of 1999 by electric
utilities that generate low-level radioactive waste ("LLRW") within the Central
Interstate Low-Level Radioactive Waste Compact (CIC). CIC member states are
Nebraska, Kansas, Oklahoma, Arkansas, and Louisiana. The action seeks
declaratory relief and damages for bad faith in the State of Nebraska's
processing and ultimate denial of US Ecology's application to site, develop and
operate a LLRW disposal facility near Butte, Nebraska. US Ecology is the CIC's
contractor and developer. The CIC was originally named as a defendant and
subsequently realigned as a plaintiff. US Ecology intervened as a plaintiff.

The CIC sought to recover contributions made by the utilities and US Ecology to
the CIC for pre-licensing project costs in the approximate amounts of $95
million and $6.2 million, respectively, and removal of the State of Nebraska
from the licensing process. The Eighth Circuit Court of Appeals subsequently
dismissed the utilities' and US Ecology's independent claims against Nebraska
for breach of the good faith provision of the Compact, and for denial of due
process based on sovereign immunity. The utilities and US Ecology subsequently
filed cross claims against the CIC for breach of contract and the imposition of
a constructive trust.

In June 2002, a 42 day bench trial began. On September 30, 2002, the US District
Court for the District of Nebraska entered judgment against Nebraska in favor of
the CIC for $153 million, including approximately $50 million for prejudgment
interest. Of this amount, US Ecology's share was for a $6.2 million
contribution and $6.1 for prejudgment interest. The Court also dismissed the
utilities' and US Ecology's cross claims for breach of contract and imposition
of a constructive trust, finding that it was premature to decide the merits of
these claims and leaving the question open for future resolution if necessary.
The State appealed the judgment to the Eighth Circuit Court of Appeals. It is
expected that the case will be argued in the fall of 2003 with a decision around
the end of 2003. Among the issues raised by the State on appeal are the trial
court's failure to grant the State a jury trial and its failure to dismiss the
CIC's claim on sovereign immunity grounds. If the Eighth Circuit affirms the
trial court's decision, Nebraska may seek review by the US Supreme Court.
Management believes the Company is entitled to any money that the CIC recovers
based on US Ecology contributions. No assurance can be given that the trial
court's decision will be affirmed on appeal or that US Ecology will recover its
contributions or interest thereon.

US ECOLOGY, INC. V. THE STATE OF CALIFORNIA, ET AL., CASE NO.GIC747562, SUPERIOR
- ---------------------------------------------------
COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO

In May 2000, the Company's subsidiary, US Ecology, Inc., sued the State of
California, its Governor, Gray Davis, and the Director of its Department of
Health Services (DHS) and other State agencies ("the State") for monetary
damages exceeding $162 million. The suit stems from the State's abandonment of
the Ward Valley low-level radioactive waste ("LLRW") disposal project. Laws on
the books since the 1980s require the state to build a disposal site for LLRW
produced in California, Arizona, North Dakota and South Dakota; member states of
the Southwestern Compact. In keeping with these laws, US Ecology was selected
in 1985 to locate and license the site using its own funds on a reimbursable
basis. In 1993, US Ecology obtained a license from the DHS that it continues to

hold and entered a ground lease.

The State successfully defended the license against court challenges and, until
Governor Davis took office, actively pursued conveyance of the site from the
federal government as required by law and its contractual obligations to US
Ecology. In September 2000, the Superior Court granted California's motion to
dismiss all causes of action. The Company appealed this decision to the
California Court of Appeal Fourth Appellate District in November 2000. In
September 2001, the Appellate Court upheld the trial court's decision in part
and denied it in part, remanding the case for trial based on the Company's
promissory estoppel claim. In December 2001, the California Supreme Court denied
review. Counsel for the Company filed a peremptory writ seeking appointment of a
new trial court judge to hear the case, which was granted. On November 20, 2002,
the Superior Court denied the State's motions for summary judgment as well as a
protective order seeking to prevent production of certain documents and
deposition of persons most knowledgeable in the Governor's staff. A settlement
conference was held without result on December 9, 2002. Discovery is complete
and the trial is scheduled to begin on February 24, 2003. The Company intends to
continue prosecuting this claim vigorously; however, no assurance can be given
that the Company will recover any damages.

MATTIE CUBA, ET AL. V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORPORATION, ET
- --------------------------------------------------------------------------------
AL.,CAUSE NO. 2000-092, 4TH JUDICIAL DISTRICT COURT, RUSK COUNTY, TEXAS
- ---

This suit was brought in November 2000 by 28 named plaintiffs against the
Company and named subsidiaries, the former owners and approximately 60 former
customers of its Winona, Texas facility. Plaintiffs seek recovery for personal
injuries, property damages and exemplary damages based on negligence, gross
negligence, nuisance and trespass. The Company filed a motion for summary
judgment in July 2002 based on lack of evidence. On November 27, 2002, the trial
court granted partial summary judgment, dismissing certain causes of action and
reducing the number of plaintiffs, but preserving other causes of action.
Counsel for the Company subsequently filed a motion for summary judgment seeking
dismissal against all of the adult plaintiffs on statute of limitations grounds.
At a February 6, 2003 hearing, the court took the motion under advisement. If
the Company's motion is granted, six plaintiffs will remain. The Company
believes plaintiffs' remaining case is without merit and will continue to
vigorously defend the matter. No assurance can be given that the Company will
prevail or that the matter can be favorably resolved. The Company's current
insurance carrier is paying for defense of this matter, subject to the Company's
$250,000 deductible which has been fully accrued.

RESOLVED LITIGATION
- --------------------

DAVID DUPUY AND RICHARD HAMMOND V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES
- --------------------------------------------------------------------------------
CORPORATION, ET AL., CAUSE NO. 98-1304-C, 241ST JUDICIAL DISTRICT COURT, SMITH
- ---------------------
COUNTY, TEXAS

Plaintiffs sought unspecified damages, alleging personal injury as the result of
negligence by the Company for failure to warn and protect plaintiffs from
alleged hazardous conditions while plaintiffs were performing work at the
Winona, Texas facility. The Company's insurance carrier assumed defense costs
subject to the Company's $250,000 deductible. In June 2000, the Company's
attorneys filed a motion for costs due to lack of diligence by plaintiffs'
attorneys in pursuing the case. The court awarded costs in accordance with the
motion and plaintiffs paid $4,000. On January 31, 2001, the court granted the
Company's summary judgment motion and dismissed the case with prejudice. In May
of 2002, this dismissal ruling was sustained on appeal. This matter is now fully
resolved.

FEDERAL RCRA INVESTIGATION AT THE AMERICAN ECOLOGY RECYCLE CENTER, INC. OAK
- --------------------------------------------------------------------------------
RIDGE, TENNESSEE FACILITY
- ---------------------------

In September 1999, investigators associated with the FBI, US EPA and the
Tennessee Valley Authority initiated an investigation and obtained records at
the Company's Oak Ridge, Tennessee subsidiary under a search warrant issued by
the U.S. District Court, Eastern District of Tennessee. In October 2001, the
Company responded to a subpoena for additional records through September 2001.
On August 8, 2002, counsel for the Company's wholly-owned subsidiary, American
Ecology Recycle Center, Inc., entered a guilty plea in US District Court for the
Eastern District of Tennessee to a single felony count of storing hazardous
waste without the necessary permit at AERC from 1997 to 2000, and paid a $10,000
fine. The plea agreement recognized the subsidiary's voluntary contributions of

$12,500 to the Tennessee Wildlife Resources Agency and $12,500 to the Tennessee
Valley Authority Police to support environmental training and enforcement. The
matter is now fully resolved.

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 October 1999, plaintiff Zurich American Insurance Co. (Zurich) filed suit
seeking declaratory and other relief against National Union Fire Insurance
Company of Pittsburgh (National Union), the Company and subsidiaries AEESC, AESC
and AEMC (AEC Defendants) and Doe Insurers 1-50 relating to Zurich's defense
coverage in the Virgie Adams matter. In October 2001, the Company received a
payment of $250,000 from Zurich finalizing settlement of Zurich's claims. By
this settlement, the Company relinquished future rights to seek defense and
indemnity from Zurich for the following Adams, Cuba, Dupuy, and GM matters. The
----- ---- ----- --
Company also agreed to assume defense costs as of April 2001. Settlement with
the Mobley entities was reached on February 12, 2002, resolving the matter with
Zurich and National Union. On March 15, 2002, the Company received $250,000 from
the Mobley Entities based on dismissal of all claims by the Company against
National Union and Mobley, and vice versa. This matter is now fully resolved.

GENERAL MOTORS CORPORATION V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORP., ET
- --------------------------------------------------------------------------------
AL., CASE NO. 3-99CV2626-L, U.S. DISTRICT COURT, NORTHERN DISTRICT OF TEXAS.
- ---

General Motors ("GM") filed suit naming the Company, its subsidiaries, the
former owner of the Winona Facility and its associated business entities seeking
contribution and indemnity, including reimbursement of defense costs and
attorneys' fees, incurred by GM in the Virgie Adams matter and this case. The
claims, based on a waste disposal contract between GM and the Winona Facility
from 1989 to 1997, were brought on breach of contract, contribution, and common
law indemnity grounds. Claims included a demand for reimbursement of a
$1,500,000 third party settlement paid by GM plus legal fees. In August 2001,
the Court found that the Company owed GM a defense and indemnity under GM's
contract with the Winona Facility's former owner. After settling with the Mobley
entities, GM made a settlement demand to the Company for $1,400,000 based in
part on GM's receipt of $960,000 from the Mobley entities. Without admitting
fault or wrongdoing, the Company paid GM $1,040,000 on May 16, 2002 of which
$740,000 had not been previously accrued. This matter is now fully resolved.

U.S. ECOLOGY CORPORATION [SIC] AND OIL, CHEMICAL & ATOMIC WORKERS INTERNATIONAL
- --------------------------------------------------------------------------------
UNION, AFL-CIO, CASES 10-CA-30847 AND 10-CA-31149
- ---------------

This matter, filed by Oil, Chemical & Atomic Workers International Union,
AFL-CIO (the "Union") in March 1998 and amended in May 1998, alleged unfair
labor practices. In May 1999, an administrative law judge ("ALJ") ruled against
the Company. In May 2000, the National Labor Relations Board (NLRB) affirmed
this decision. The Company appealed to the US Sixth Circuit Court of Appeals in
May 2000. The Court of Appeals affirmed the NLRB ruling in December 2001. In
June 2002, the Company reached settlement with the Union for $1,027,000 for back
wages and benefits of which $156,000 had not been previously accrued. This
matter is now fully resolved.

US ECOLOGY, INC. V. DAMES & MOORE, INC., CASE NO. CV OC 0101396D, FOURTH
- -----------------------------------------------------
JUDICIAL DISTRICT COURT, ADA COUNTY, IDAHO

DAMES & MOORE, INC. V. US ECOLOGY, INC., ET AL.,INDEX NO. 602567-01, SUPREME
- ----------------------------------------------------
COURT OF NEW YORK, NEW YORK COUNTY, NEW YORK

These two cases relate to a project for work performed in 2000-01 and the
failure to be paid under a subcontract to Dames & Moore, a wholly-owned
subsidiary of URS Corporation and prime contractor to Brookhaven Science
Associates, LLC. The project involved removal, decontamination and disposal of
above-ground cement ducts at Brookhaven National Laboratory ("BNL") in Upton,
New York. In February 2001, subsidiary US Ecology filed a breach of contract
suit in Idaho state court seeking (1) damages and reformation of the contract
between US Ecology and Dames & Moore; (2) indemnification from Dames & Moore for
negligence; and (3) a declaratory judgment declaring the "pay-if-paid" clause in
the contract void and unenforceable. Dames & Moore filed a motion to dismiss the

Idaho action, and a counter claim in New York state trial court. The New York
action alleged, among other things, negligence by US Ecology and certain crane
companies providing services at the job site.

On May 3, 2002, the Company entered into a Settlement Agreement with Dames &
Moore, Inc.\URS and received cash of $700,000. On March 20, 2002, BNL entered an
agreement to pay the Company $86,000. The Idaho suit has been dismissed. Dames
& Moore has been requested to dismiss the New York case based on the terms of
the Settlement Agreement. If this is not forthcoming, a dismissal motion will
be filed.

INTERNAL REVENUE SERVICE DISPUTE
- -----------------------------------

In 1996, the Company filed an amended federal income tax return claiming a
refund of approximately $740,000. In September 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
Company net operating loss carry forwards. In November 1999, the Company
protested this denial. The Company tentatively settled this claim in 2000;
however, settlement was rejected by the Congressional Joint Committee on
Taxation pending US Supreme Court consideration of a germane issue. This issue
was later resolved in favor of the Company's position. On December 4, 2002, the
IRS approved a settlement to pay the Company $605,000 plus interest and
confirmed the Company's net operating loss carry forward after 1995. Payment is
pending.

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 2002.

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 February 10, 2003, there
were approximately 639 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:

2002 2001 Dividends Per Share
---- ---- -------------------

PERIOD High Low High Low 2002 2001
----- ----- ----- ----- ----- -----
1st Quarter $1.98 $1.25 $3.00 $2.06 $ -- $ --
2nd Quarter 4.85 1.66 2.70 2.20 -- --
3rd Quarter 4.50 2.10 2.95 1.84 -- --
4th Quarter 3.23 2.31 2.25 1.50 -- --

In August of 2000, the Company established a credit facility with Wells Fargo
Bank. This credit facility currently provides the Company with $6.0 million of
borrowing capacity, but prohibits cash dividends on any of the Company's
outstanding capital stock while the credit facility is in place. The credit
facility matures on June 15, 2004.

On January 14, 2003, the Company extended an offer to the holders of the
Company's Series D Cumulative Convertible Preferred Stock to repurchase their
stock for the original sales price of $47.50 a share plus accrued but unpaid
dividends. The offer was subject to approval of the Company's Board of
Directors, Wells Fargo Bank, and requires a minimum of 67% of the Series D stock
to be tendered by the stockholders. All Series D stockholders have accepted the
offer granting the Company the right to repurchase their Series D. If the
Company does not repurchase the offered shares prior to July 31, 2003 the
Company's right to repurchase will expire.

ITEM 6 SELECTED FINANCIAL DATA

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, 2002 2001 2000 1999 1998
- ------------------------ --------- -------- -------- -------- --------

Revenue $ 46,789 $40,175 $27,054 $20,830 $29,877

Income tax benefit from reversal of valuation allowance $ 8,284 $ -- $ -- $ -- $ --
Income from continuing operations $ 16,094 $ 2,991 $ 5,510 $ 4,301 $ 2,853
Cumulative effect of change in accounting principal $ 13,141 $ -- $ -- $ -- $ --
(Loss) from discontinued operations $(10,464) $(2,189) $ (813) $ 108 $(2,091)
Net Income $ 18,771 $ 802 $ 4,697 $ 4,409 $ 762
Preferred stock dividends accrued $ 398 $ 398 $ 398 $ 398 $ 398
Basic earnings per share from continuing operations $ 1.09 $ .19 $ .37 $ .29 $ .19

Shares used to compute income (loss) per share (000's) 14,311 13,738 13,711 13,585 12,772

Total assets $ 87,125 $86,824 $65,750 $58,459 $61,800

Long-term debt, net of current portion $ 8,344 $ 4,436 $10,775 $ 3,569 $ 2,223

Shareholders' equity $ 45,948 $26,416 $25,984 $21,582 $17,460

Current ratio (current assets divided by current liabilities) 1.47:1 0.65:1 1.17:1 0.9:1 0.7:1

Return on average equity (net income divided by average
equity) 51.9% 3.1% 19.7% 22.6% 4.9%

Dividends declared per common share $ -- $ -- $ -- $ -- $ --

Capital expenditures $ 2,737 $ 4,009 $ 3,267 $ 3,740 $ 2,128
Depletion, depreciation and amortization expense $ 6,604 $ 4,076 $ 1,899 $ 1,498 $ 2,565

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Forward-Looking Statements
- ---------------------------

This document contains forward-looking statements that involve known and unknown
risks and uncertainties which may cause actual results in future periods to
differ materially from those indicated herein. These risks include, but are not
limited to:

- - compliance with and changes in applicable laws and regulations
- - exposure to litigation,
- - access to capital,
- - access to insurance and financial assurances,
- - new technologies,
- - competitive environment,
- - general economic conditions
- - potential loss of major contracts, and
- - costs of discontinuing operations at the Oak Ridge facility.

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. The Company makes these statements in an
effort to keep shareholders and the public informed about its business based on
its current expectations about future events. Such statements should be viewed
with caution and are not guarantees of future performance or events.

As noted elsewhere in this report, the Company's business is subject to
uncertainties, risks and other influences, many of which are not within the its
control. Additionally, 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 proves to be true. The Company undertakes
no obligation to publicly release updates or revisions to these statements. The
following discussion should be read in conjunction with audited consolidated
financial statements and the notes thereto for the year ending December 31,
2002, included elsewhere in this Form 10-K.

General
- -------

The Company is a hazardous, industrial, non-hazardous, and radioactive waste
management company providing treatment and disposal service to commercial and
government entities, including but not limited to nuclear power plants,
petro-chemical refineries, steel mills, the U.S. Department of Defense,
biomedical facilities, universities and research institutions. The majority of
revenues are derived from fees charged for use of the Company's waste disposal
facilities. Fees are also charged for field investigations, waste removal and
transportation to fixed facilities operated by others. The Company and its
predecessors have been in business for more than 50 years.

In late 2001, the Board of Directors appointed a new executive team that
reorganized the Company with the objectives of optimizing performance of its
core waste treatment and disposal assets and exiting non-core businesses.
Management believes that this restructuring has yielded benefits, including
improved market penetration, clearer organizational accountability, cost
savings, and improved utilization of operating assets. Management further
believes that actions to resolve a number of long-standing lawsuits, sell its El
Centro municipal solid waste landfill, and discontinue its unprofitable LLRW
processing operations provide a solid foundation to expand the Company's
profitable hazardous and low-level radioactive waste disposal business.

On July 1, 2002, the Company moved into a new corporate headquarters located at
300 E. Mallard Drive, Suite 300, Lakepointe Centre I, Boise, ID 83706.

Overall Company Performance
- -----------------------------
On a consolidated basis, the Company's financial performance for the
twelve-months ended December 31, 2002, as measured by income from continuing
operations, showed material improvement over 2001. Management believes this
improvement is due to the turn-around plan and restructuring actions implemented
since late 2001. These actions have focused on increasing waste throughput at
the Company's disposal facilities, expanding higher margin "niche" services,
controlling costs, streamlining reporting, implementing new information systems,
and restructuring the sales function to increase revenue and earnings. The
improvements resulting from the execution of management's plan in 2002 were
offset, in part, by continued losses from the Company's Oak Ridge, Tennessee
based subsidiary, AERC.

On December 27, 2002, the Company announced the discontinuance of LLRW
processing services and operations at AERC, resulting in a $7,000,000
restructuring charge. Management believes the cessation of LLRW processing
operations and timely removal of waste will reduce liabilities and improve the
Company's opportunity to sell AERC or its assets. However, uncertainties exist
regarding the cost required to remove remaining waste from the premises. The
Company has accounted for these expected costs consistent with Statement of
Financial Accounting Standard ("FAS") No. 144 and Emerging Issues Task Force
Issue No. 94-3, which are discussed and included elsewhere in this Form 10-K.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Compliance and Changes with Applicable Laws and Regulations
- -----------------------------------------------------------

The changing regulatory framework governing the Company's business creates
significant risks, including potential liabilities from violations of
environmental statutes and regulations. Failure to timely obtain, or to comply
with the conditions of applicable federal, state and local governmental
licenses, permits or approvals for our waste treatment and disposal facilities
could prevent or inhibit the Company from operating its facilities and providing
services, resulting in a significant loss of revenue and earnings. Changes in
laws or regulations or changes in the enforcement or interpretation of existing
laws and regulations may require the Company to modify existing operating
licenses or permits, or obtain additional approvals if new environmental
legislation or regulations are enacted or existing legislation or regulations
are amended, reinterpreted or enforced differently than in the past. Any new
governmental requirements that raise compliance standards or require changes in
operating practices or technology requirements may impose significant costs upon
the Company. The Company's failure to comply with applicable statutes, and
regulations, licenses and permits 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.

While management believes the nation's basic framework of environmental laws and
regulations are broadly accepted as a matter of sound public policy, a
substantial relaxation of these requirements or a substantial reduction of
enforcement activities by governmental agencies could materially reduce the
demand for the Company's services. Large portions of the Company's revenues are
generated as a result of requirements arising under federal and state laws,
regulations and programs to protect the environment. If requirements to comply
with environmental laws and regulations were substantially relaxed in the future
or were less vigorously enforced, particularly those relating to the treatment,
storage or disposal of hazardous and low-level radioactive waste, the demand for
the Company's services could decrease and revenues could be significantly
reduced.

Exposure to Litigation
- ------------------------

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. Management
believes the Company has adopted prudent risk management programs to reduce
these risks and potential liabilities; however, there can be no assurance that
such programs will fully protect the Company. Adverse rulings in ongoing legal
matters, including but not limited to litigation brought to protect the
Company's investment in the proposed Ward Valley, California disposal project,
Butte, Nebraska disposal project and other matters could have a material adverse
effect on the Company. See Item 3. Legal Proceedings of this Form 10-K.

Access to Capital
- -------------------

The Company requires cost effective access to capital to implement its strategic
and financial plan. If the Company cannot maintain access to capital or raise
additional capital, the Company may need to curtail or scale back planned
infrastructure improvements and disposal capacity expansions, which could
negatively impact the Company's ability to generate earnings. Although the
Company expects to maintain access to cost effective capital, no assurance can
be given that the Company will continue to have cost-effective access to the
capital markets.

Access to Insurance and Financial Assurances
- --------------------------------------------

The Company is required by license, permit and prudence to maintain a variety of
insurance instruments and financial assurances. Since early 2001, there has been
a tightening in the insurance markets, decreasing access to cost-effective
insurance. This market tightness was exacerbated by the terrorist attacks
against the United States on September 11, 2001 and the claims resulting from
those attacks. Without cost effective access to insurance and/or financial
assurance markets, the Company's ability to operate its facilities would be
materially and adversely affected. In September of 2003, the Company's primary
financial assurance insurance for its hazardous waste disposal facilities
expires. The Company has been and continues to be in negotiations with the

insurance provider, but it is likely that the cost and cash collateral
requirements of this insurance will increase. Although the Company expects to be
able to renew these policies, no guarantee can be given that the Company will be
able to renew or procure new financial assurance insurance on terms favorable to
the Company. Inability to obtain cost effective insurance and/or financial
assurance could have a material adverse effect on the Company

New Technologies
- -----------------

The Company expects to increase its utilization of thermal treatment and to
adopt other technologies from time to time. The Company has experienced
difficulties implementing new technologies in the past. The Company's future
growth, particularly at its Beatty, Nevada facility, is partially tied to its
ability to improve its knowledge and implementation of treatment technologies.
If the Company cannot successfully implement commercially viable treatment
technologies in response to market conditions in a manner that is responsive to
the clients' requirements, the business could be adversely affected.

Competitive Environment
- ------------------------

The Company faces competition from companies with much greater resources and
potentially more cost-effective waste treatment and disposal services. An
increase in the number of commercial treatment or disposal facilities for
hazardous or radioactive waste in the United States, or a decrease in the
treatment or disposal fees charged by competitors could reduce or eliminate the
competitive advantage of the Company's facilities and services.

General Economic Conditions
- -----------------------------
The Company's hazardous waste facilities serve steel mills, petro-chemical
plants and other basic industries that are, or may be affected by general
economic conditions. During periods of economic weakness, these industries may
cut back production activities producing waste and/or delay spending on plant
maintenance, waste clean-ups and other discretionary projects. Management
believes the Company's business was adversely affected by the general economic
conditions in 2002 and that these conditions will exist through 2003.

Potential Loss of Major Contracts
- -------------------------------------

A loss on one or more of the Company's larger contracts could significantly
reduce the Company's revenues and negatively impact earnings. Discontinuation of
the Grand View, Idaho site's contract with the Army Corps of Engineers, for
example, could have a material adverse impact on Company operations given the
significant revenue from that contract.

Cost of Discontinuing Operations at Oak Ridge
- ---------------------------------------------

On December 27, 2002, the Company announced the discontinuance of LLRW
processing services and operations at its wholly-owned subsidiary, AERC.
Associated with these decisions, the Company has made assumptions about future
costs. Developing these estimates required numerous subjective and complex
judgments, estimates, and assumptions that may or may not ultimately prove
accurate. No assurance can be given that the Company's estimates are accurate
or complete.

RESULTS OF OPERATIONS

Operating Disposal Facilities, Non-operating Disposal Facilities, the
discontinued Processing and Field Services operations and Corporate must be
included in order to arrive at consolidated income. The Operating Disposal
Facility segment is the only segment to report revenue and profits. Revenue,
costs and profits or losses in the discontinued Processing and Field Services
segment are reflected in the consolidated financial statements in a single line
item. The Non-operating Disposal Facility segment generates minimal revenues and
does not generate profits. The Corporate segment generates no revenue and
provides administrative, managerial and support services for the other segments.

Summarized financial information concerning the Company's reportable segments is shown in the following
table.

Operating Non-Operating Discontinued
Disposal Disposal Processing and
Facilities Facilities Field Services Corporate Total

2002
- ----
Revenue $ 46,494 $ 295 $ -- $ -- $ 46,789
Direct operating cost 23,436 1,787 -- -- 25,223
------------ --------------- ---------------- ----------- ---------
Gross profit 23,058 (1,492) -- 21,566
S,G&A 8,000 103 -- 4,528 12,631
------------ --------------- ---------------- ----------- ---------
Income (loss) from operations 15,058 (1,595) -- (4,528) 8,935
Investment income 13 -- -- 18 31
Gain (loss) on sale of assets (20) 4 -- 1 (15)
Interest expense 711 -- -- 109 820
Other income (expense) 78 (389) -- (231) (542)
------------ --------------- ---------------- ----------- ---------
Income before income tax,
discontinued operations and
cumulative effect 14,418 (1,980) -- (4,849) 7,589
Income tax benefit -- -- -- 8,505 8,505
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations and cumulative effect 14,418 (1,980) -- 3,656 16,094
Gain (loss) from discontinued
operations 466 -- (10,930) -- (10,464)
------------ --------------- ---------------- ----------- ---------
Income before cumulative effect 14,884 (1,980) (10,930) 3,656 5,630
Cumulative effect of change in
accounting principle 14,983 1,548 (3,390) -- 13,141
------------ --------------- ---------------- ----------- ---------
Net income $ 29,867 $ (432) $ (14,320) $ 3,656 $ 18,771
============ =============== ================ =========== =========
Depreciation and accretion $ 6,443 $ 458 $ 518 $ 361 $ 7,780
Capital Expenditures $ 3,010 $ 6 $ 300 $ 30 $ 3,346
Total Assets $ 44,832 $ 27,467 $ 4,649 $ 10,177 $ 87,125

2001
- ----
Revenue $ $40,088 $ 87 $ -- $ -- $ 40,175
Direct operating cost 21,637 1,141 -- -- 22,778
------------ --------------- ---------------- ----------- ---------
Gross profit 18,451 (1,054) -- -- 17,397
S,G&A 8,287 556 -- 5,431 14,274
------------ --------------- ---------------- ----------- ---------
Income from operations 10,164 (1,610) -- (5,431) 3,123
Investment income 188 -- -- 58 246
Gain (loss) on sale of assets (8) -- -- -- (8)
Interest expense 746 -- -- 265 1,011
Other income (expense) 450 (286) -- 663 827
------------ --------------- ---------------- ----------- ---------
Income before income tax and
discontinued operations effect 10,048 (1,896) -- (4,975) 3,177
Income tax benefit (expense) -- -- -- (186) (186)
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations 10,048 (1,896) -- (5,161) 2,991
Gain (loss) from discontinued
operations 378 -- (2,567) -- (2,189)
------------ --------------- ---------------- ----------- ---------
Net Income $ 10,426 $ (1,896) $ (2,567) $ (5,161) $ 802
============ =============== ================ =========== =========
Depreciation Expense $ 4,285 $ 2 $ 684 $ 59 $ 5,030
Capital Expenditures $ 2,865 $ 3 $ 557 $ 31 $ 3,456
Total Assets $ 43,371 $ 27,482 $ 9,892 $ 6,079 $ 86,824

2000
- ----
Revenue $ 27,013 $ 41 $ -- $ -- $ 27,054
Direct operating cost 11,507 916 -- -- 12,423
------------ --------------- ---------------- ----------- ---------

Gross profit 15,506 (875) -- -- 14,631
S,G&A 4,691 (119) -- 5,812 10,384
------------ --------------- ---------------- ----------- ---------
Income (loss) from operations 10,815 (756) -- (5,812) 4,247
Investment income 53 293 -- 89 435
Gain on sale of assets 11 -- -- -- 11
Interest expense 77 -- -- 183 260
Other income 472 -- -- 593 1,065
------------ --------------- ---------------- ----------- ---------
Income before income tax and
discontinued operations 11,274 (463) -- (5,313) 5,498
Income tax benefit (expense) -- -- -- 12 12
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations 11,274 (463) -- (5,301) 5,510
Discontinued operations (641) -- (172) -- (813)
------------ --------------- ---------------- ----------- ---------
Net Income $ 10,633 $ (463) $ (172) $ (5,301) $ 4,697
============ =============== ================ =========== =========
Depreciation Expense $ 1,397 $ 2 $ 571 $ 58 $ 2,028
Capital Expenditures $ 5,469 $ -- $ 904 $ 69 $ 6,442
Total Assets $ 23,119 $ 27,442 $ 9,034 $ 6,155 $ 65,750

The following table sets forth items in the Statements of Operations for
Continuing Operations the three years ended December 31, 2002, as a percentage
of revenue:

Percentage of Revenues for the
Year Ended December 31,
----------------------
2002 2001 2000
------ ------ ------

Revenue 100.0% 100.0% 100.0%
Operating costs 53.9 56.7 45.9
------ ------ ------

Gross profit 46.1 43.3 54.1
------ ------
Selling, general and administrative expenses 27.0 35.5 38.4
------ ------ ------

Income from operations 19.1 7.8 15.7
Other income (expense), net (2.9) 0.1 3.9
------ ------ ------

Income from continuing operations before income taxes 16.2 7.9 19.6
Income tax benefit (expense) 18.2 (0.5) --
------ ------ ------

Income from continuing operations 34.4 7.4 19.6
====== ====== ======

RESULTS OF OPERATING DISPOSAL FACILITY SEGMENT OPERATIONS

The following discussion and analysis reflects the Company's Operating Disposal
facility operations and does not include the results of Discontinued Operations,
Non-Operating Facilities or Corporate for the 12 months ended December 31, 2000,
2001 and 2002.

Revenue
- -------

During the 12 months ended December 31, 2002, revenue from Operating Disposal
Facilities reached $46,494,000 or 16% higher than the $40,088,000 posted in
2001, and 72% higher than the $27,013,000 in 2000 revenue. The $6,406,000
increase in Operating Disposal Facility revenue from 2001 to 2002 was driven by
higher waste volumes at the Company's Texas, Washington and Idaho disposal
facilities. Revenue and volume growth in Texas during 2002 was the result of
winning two large Event Business contracts with waste shipped from Florida. In
Washington, a large packaging and disposal project for the USACE accounted for
almost 50% of the 2002 site revenue. Revenue and volume growth at the Company's
Idaho facility increased 26% and 29%, respectively. Growth at the Idaho facility
was principally the result of increased utilization of a contract with USACE for
disposal services provided to the USACE and other federal agencies. Revenue at
the Company's Nevada facility slipped by nearly 9% during the year as the
Company replaced site management, upgraded compliance and worked to resolve a
large thermal treatment backlog. Overall, the significant growth in revenue from
2000 to 2002 was principally the result of the February 2001 acquisition of the
Idaho hazardous waste disposal facility.

Direct Operating Costs
- ------------------------

Direct operating costs represent costs at the disposal facilities that are
directly involved in the disposal of waste. They include transportation, labor,
equipment depreciation, fuel, re-agents, testing and analysis, and amortization
of disposal cell "airspace" costs. Most of these costs are fixed and do not
materially vary with changes in volume. From 2001 to 2002, direct operating
costs from continuing operations increased 8%, reaching $23,436,000, up from the
$21,637,000 in 2001. Since 2000, direct operating costs from continuing
operations have increased by over 100%, principally as the result of the
acquisition of the Idaho facility acquisition in early 2001. In 2002, the higher
direct operating cost reflected higher aggregate waste volumes at the disposal
facilities. Relative to revenue, direct cost decreased from 54% of revenue in
2001 to 50% in 2002 resulting in a 4% increase in gross margin and a $4,607,000
increase in gross profit from Operating Disposal facility operations in 2002.

Selling, General and Administrative Expenses ("SG&A")
- -----------------------------------------------------

During late 2001, management began concerted efforts to control and reduce SG&A.
As a result of management's cost control initiatives, SG&A associated with
Operating Disposal facility operations declined by 4%, dropping to $8,000,000 in
2002 from $8,287,000 in 2001. SG&A decreases occurred at the Texas and Grand
View facilities. However, these decreases in SG&A were offset by increases in
SG&A in Nevada and Washington. The increased SG&A in Nevada was principally the
result of higher costs associated with upgraded regulatory compliance and a
mid-2002 restructuring of management at the site. In Washington, the higher SG&A
was the direct result of higher State usage and volume taxes. SG&A in 2002 was
$3,309,000 higher than in 2000. The majority of the increase ($2,521,000) over
2000 is attributable to the acquisition of the Idaho facility in 2001. Relative
to revenue, SG&A decreased in 2002, dropping to 17% of revenue, from 21% in 2001
and 17% in 2000.

Operating Income
- -----------------

For the 12 months ended December 31, 2002, operating income from the Operating
Disposal facility segment reached $15,058,000 or a 48% increase from the
$10,164,000 posted during 2001 and 39% higher than the $10,815,000 of operating
income in 2000. The higher revenue combined with the relatively lower direct
costs and lower SG&A allowed the Company to generate an operating margin of 32%
in 2002. This compared favorably to the 25% operating margin posted in 2001, but
was lower than the 40% operating margin from continuing operations in 2000.

RESULTS FROM NON-OPERATING DISPOSAL FACILITIES

Revenue
- -------

Revenue generated by Non-Operating Disposal facilities represents amounts that
are billable to third parties for services performed by the Company's
non-operating sites. In Nebraska, the Company is paid by the Central Interstate
Compact ("Compact") for certain specified costs the Company incurs for providing
technical support to the Compact and maintaining the proposed Butte, Nebraska
disposal site for potential use. In Illinois, the Company is paid by the State
for maintenance and monitoring associated with a closed low-level radioactive
waste site that was returned to the state for perpetual care and maintenance.
Generally speaking, these revenue amounts are immaterial. For the 12 months
ended December 31, 2002, revenue generated from closed sites reached $295,000,
which was a $208,000 and $254,000 increase over revenue generated in 2001 and
2000, respectively.

Operating Costs and SG&A
- ---------------------------

Non-Operating Disposal Facilities incur primarily legal and consulting costs
required to protect or license the facilities for initial use, and labor costs
in order to properly maintain the Company's facilities. For the years ended
December 31, 2002, 2001 and 2000, the Company reported $1,595,000, $1,610,000
and $756,000, respectively, of operating losses for the two proposed disposal
site development projects and to closing and maintaining existing facilities
subsequent to use. In 2002, 76% of these costs pertained to legal fees for
lawsuits in Nebraska and California. Refer to Item 3. LEGAL PROCEEDINGS for a
description of these cases. In 2003, it is expected that spending in support of
the Nebraska lawsuit will decrease; however, spending on the California case
could increase over the $1,217,000 spent in 2002, as the trial in the case is
scheduled to begin February 24, 2003. During the 4th quarter of 2002, $652,000
of legal fees were incurred related to the California case.

RESULTS FOR CORPORATE
- -----------------------

SG&A
- ----

During late 2001, management undertook concerted efforts to control and reduce
SG&A across the Company, particularly at its corporate office in Boise, Idaho
where spending declined by $903,000 or 16% in 2002. The majority, or $539,000 of
the decrease in Corporate SG&A was due to the resolution of multiple
longstanding lawsuits and the resulting decreased reliance on law firms
litigating these issues.

RESULTS OF DISCONTINUED OPERATIONS

During 2002, the Company entered into discussions with various parties
potentially interested in purchasing its municipal solid waste landfill in Texas
and with other parties regarding potential sale of its LLRW processing business
in Tennessee. Accordingly, the Company has reclassified these business
operations as discontinued operations consistent with Generally Accepted
Accounting Principles ("GAAP") and specifically, in accordance with FAS No. 144
"Accounting for the Impairment or Disposal of Long Lived Assets" and Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity."

El Centro Solid Waste Landfill, Robstown, Texas
- -----------------------------------------------

In mid-2002 the Company entered into discussions with several parties regarding
the potential sale of the Company's El Centro municipal solid waste disposal
facility near Robstown, Texas. On February 13, 2003, the Company announced the
sale of the El Centro municipal and industrial waste landfill to a wholly-owned
subsidiary of Allied Waste Industries, Inc. ("Allied") for $10 million cash at
closing and future volume-based royalty payments. The El Centro landfill is
located adjacent to Company subsidiary Texas Ecologists' hazardous and
industrial waste treatment and disposal facility. Under the Agreement, Allied
will pay American Ecology minimum royalties of at least $215,000 annually. Once
Allied has paid the Company $14,000,000 it no longer has an obligation to pay
annual minimum royalties but will still be required to pay royalties based on
waste volumes received at El Centro. The Purchase Agreement also provides
incentives for Allied to bring certain industrial waste to the Texas Ecologists
hazardous waste facility, and for the Company to utilize the El Centro landfill.
Opened in July 2000, the El Centro solid waste landfill was carried on the
Company's books at approximately $7 million prior to sale and, when combined
with reductions in liabilities and the recognition of a portion of future

minimum royalties, should result in a gain on sale of approximately $5 million,
which will be recognized during the first quarter of 2003. The table below
provides financial information on the operations of the El Centro landfill
included in discontinued operations as of December 31, 2002:

$ in Thousands
Year Ended December 31,
2002 2001 2000
------ ------ ------

Revenue $2,563 $2,450 $ 398
Direct Operating costs 1,351 1,480 490
------ ------ ------

Gross profit 1,212 970 (92)
Selling, general and administrative expenses 705 538 506
------ ------ ------

Income (loss) from operations 507 432 (598)
Other expenses 41 54 43
------ ------ ------
Gain (loss) from discontinued operations $ 466 $ 378 $(641)
====== ====== ======

Despite the Company's expertise in operating disposal facilities, the business
model and marketplace for solid waste services is significantly different from
that of the Company's core hazardous and radioactive waste business. Management
believes that by exiting this business and monetizing its investment in the
solid landfill, the Company will obtain resources with which the Company will be
able to grow its core business and/or improve its capital structure.

Low-level Radioactive Waste Processing and Field Services, Oak Ridge Tennessee
- ------------------------------------------------------------------------------

Oak Ridge, Tennessee Facility. AERC, acquired from Quadrex Corp. in 1994,
processed LLRW to reduce the volume of waste requiring disposal at licensed
radioactive waste facilities. On December 27, 2002, the Company announced the
cessation of LLRW services and operations. The plant, situated on 16 acres of
Company property in Oak Ridge, Tennessee, primarily served the commercial
nuclear power industry, but also accepted brokered waste from biomedical,
academic and non-utility industry customers. On October 18, 2002, the Company
announced its intent to actively market the facility and exit the LLRW
processing business. While a number of potential buyers were identified, no
acceptable offers were received to acquire the facility. After concluding it
would not be possible to sell the business as a going concern, management
discontinued AERC's commercial services. AERC's processing services had not been
successfully integrated with the Company's core disposal business, and
management was unable to identify a viable business strategy to reverse the
recurring losses that have occurred at the facility since its acquisition in
1994. The discontinuance of commercial operations resulted in the dismissal of
63 employees. Less than 20 employees are presently engaged in removal of LLRW
from the facility, maintaining the facility's radioactive materials licenses and
preparing the facility for sale. It is expected that removal of waste and
related clean-up work will take most of 2003, although staffing requirements
will diminish over time. The Company intends to maintain the facility's existing
radioactive materials and operating license pending a possible sale.

The Company has retained a limited number of AERC employees to oversee the
removal of stored waste from the site, and to maintain compliance with its
radioactive materials license, and prepare the facility for sale. The Company is
also working with certain former competitors to expedite waste removal on
commercially favorable terms. The Company's Field Services division also
suspended operations at this time due to its connection and dependence upon the
LLRW processing facility and focused efforts on prompt completion of existing
projects. These existing AERC Field Services projects are presently at or near
completion.

During 2002, the Company invested substantially in the removal of accumulated
customer and Company waste inventory, non-revenue producing material and
facility upgrades to prepare the Oak Ridge-based subsidiary for sale. Despite
the efforts to improve the facility's appearance, upgrade efficiency and a
decision to increase prices on services, the subsidiary continued to operate
with significant losses. Since purchasing AERC in 1994, the subsidiary has lost
$56 million, including substantial operating and net losses in 2001 and 2002.
Management concluded that a lack of core business integration and AERC's highly

competitive market environment would continue to prevent AERC from achieving
profitability in the foreseeable future. Accordingly, action was taken to
discontinue commercial operations and prepare the facility for sale.

The table below provides financial information on the combined operations of the
LLRW processing facility and Field Services included in discontinued operations
as of December 31, 2002:

$ in thousands Year Ended December 31,
2002 2001 2000
--------- -------- --------

Revenue $ 17,018 $13,391 $14,506
Direct Operating costs 16,687 12,086 10,025
--------- -------- --------

Gross profit 331 1,305 4,481
Selling, general and administrative expenses 3,627 4,465 4,602
--------- -------- --------

(Loss) from operations (3,296) (3,160) (121)
Other expenses (gains) 616 (593) 51
Accrued charges 7,018 -- --
--------- -------- --------
(Loss) from discontinued operations $(10,930) $(2,567) $ (172)
========= ======== ========

Management does not believe that the Oak Ridge processing business is consistent
with the Company's core treatment and disposal business model and has assigned
priority attention to removing accumulated waste and marketing the remaining
assets to potentially interested buyers identified after the Company announced
its intentions to exit the LLRW processing business in October 2002. Management
considers the timely and orderly disposition of that business as critical to the
ability of the Company to meet its future growth objectives.

RESULTS OF CONSOLIDATED OPERATIONS

Revenue
- -------

During the 12 months ended December 31, 2002, consolidated revenue reached
$46,789,000 which was 16% and 73% higher than consolidated revenue achieved
during 2001 and 2000, respectively. The acquisition of the Idaho hazardous waste
facility in 2001 combined with higher waste volumes pushed revenue higher.

Direct Operating Costs
- ------------------------

Consolidated direct operating costs were $25,223,000 in the year ended December
31, 2002. This was $2,445,000 or 11% higher than consolidated direct operating
costs incurred in 2001 and $12,800,000 or 103% higher than direct costs in 2000.
Like revenue, the higher direct costs in 2002 were primarily driven by the
acquisition of the Idaho hazardous waste facility and substantially increasing
waste volumes. Relative to revenue, consolidated direct operating costs were
54%, 57% and 46%. As a result of higher revenue in 2002 and relatively lower
direct operating costs, gross profit reached $21,566,000 or 46% of revenue
compared to gross profit of $17,397,000 or 43% of revenue in 2001 and
$14,631,000 or 54% of revenue in 2000.

SG&A
- ----

During late 2001, management began concerted efforts to control and reduce SG&A
across the Company. As a result of management's cost control initiatives SG&A
spending decreased at each operating segment. Corporate SG&A spending decreased
significantly with the majority of the decrease resulting from the reduction in
litigation. Moderate reductions in SG&A were experienced by the remaining
segments as higher costs associated with upgraded regulatory compliance and
higher state usage and volume taxes limited the net reductions in SG&A spending.
In 2002, consolidated SG&A dropped by 12% to $12.6 million compared to $14.3
million in 2001. Relative to revenue, SG&A showed even greater improvement,
dropping to 27% of revenue compared to 36% of revenue last year. SG&A was 22%
in 2002 than in 2000. The majority of the increase ($2,247,000) over 2000 is
attributable to the acquisition of the Idaho facility in 2001.

Operating Income
- -----------------

Consolidated operating income reached $8,935,000 or a 187% increase from the
$3,123,000 posted during 2001 and 110% higher than operating income of
$4,247,000 posted in 2000. The higher revenue and the relatively lower direct
costs and lower SG&A allowed the Company to generate a consolidated operating
margin of 19%. This compared favorably to the 8% operating margin posted in
2001 and the 16% operating margin posted in 2000.

Interest Income
- ----------------

Interest income represents earnings on cash balances, restricted investments and
notes receivable, as to which the Company currently maintains minimal amounts.
Interest income in 2002 was only $31,000. The $246,000 of interest income in
2001 was primarily earnings on investments acquired on February 1, 2001 as part
of the Envirosource of Idaho acquisition. These investments were subsequently
converted to cash and used in operations. The $435,000 of interest income in
2000 was primarily earnings on investments used as collateral for insurance
policies. The policies were subsequently restructured, which enabled the
Company to convert the investments to cash for use in operations.

Gain on Sale of Fixed Assets
- ----------------------------

The Company has realized minimal gains or losses on the sale of fixed assets.
The Company purchases fixed assets when necessary. Fixed assets are replaced at
the end of their useful life.

Interest Expense
- -----------------

Interest expense was $820,000, $1,011,000 and $260,000 in 2002, 2001 and 2000,
respectively. Interest expense increased substantially in 2001 due to the
assumption of an 8.25%, $8,500,000 industrial revenue bond assumed as part of
the February 2001 acquisition of the Grand View, Idaho facility. On October 28,
2002, the Company refinanced the industrial revenue bond with a variable rate
$7,000,000, 5-year amortizing term loan. As of December 31, 2002, the interest
rate on the new term loan was 3.7%. Also contributing to the lower interest
expense in 2002 was the retirement of additional debt of $6,628,000 as part of
management initiatives to more efficiently utilize cash, improve the Company's
balance sheet and reduce higher cost debt. Interest expense is expected to
decrease further in 2003 due to less debt and lower interest rates.

Other Income (Expense)
- ------------------------

Other income (expense) was $(542,000), $827,000 and $859,000 for 2002, 2001 and
2000, respectively. Other income is the account used to record various business
activities that are not a part of the Company's current year ordinary and usual
revenues and expenses.

The following table summarizes the business transactions from outside the
Company's current year normal business scope.

($ in thousands)
As of December 31,
OTHER INCOME 2002 2001 2000
- --------------------------------------------------------------- ------ ------ ------

State tax adjustments $ -- $ 106 $ 7
Correction of expensed debt payments -- 177 112
Insurance claim refunds 31 172 24
Payment on sales invoices previously written off -- -- 98
Adjust prior years accrued burial fee based on actual payments -- 500 372
Adjust bad debt expense reserve -- (21) 76
Settlement related to GM litigation (740) (300) --
Payment received on National Union litigation 250 -- --
Impairment of equity investment (358) -- --

Reversal of previous professional fee accrual -- 160 --
Other litigation related settlements 100 -- --
Correction of prior year capitalized costs -- -- 132
Other miscellaneous income, net 3 28 28
Cash receipts for sale and rent of property rights 117 5 10
Gain on early extinguishment of debt -- -- 206
Data services sold 55 -- --
------ ------ ------
Total Other Income (Expense) $(542) $ 827 $1,065
====== ====== ======

During 2002 the Company sought to resolve pending litigation in order to focus
its resources and energies on the core disposal business. The large increase in
Other Expense during 2002 is a reflection of this attempt and has resulted in 7
of 11 legal disputes being resolved in 2002.

The 2001 and 2000 accrued burial fee adjustment is the result of correcting the
previous year's accrual of burial fees based on actual burial fees paid. The
Company makes a monthly accrual for burial fees based on actual waste receipts.
However, the actual amount paid may be different, especially given that each
operating facility generally pays in excess of $1,000,000 in burial fees each
year with rates changing periodically.

In December 2000, the Company entered into an agreement with Chase Bank of Texas
for settlement of debt associated with the Company's 1994 federal income tax
claim. The Company had pledged the income tax receivable and a deed of trust on
the Company's Winona, Texas site to Chase Bank in 1998. The settlement, which
was paid in December 2000, allowed the Company to pay $350,000 to Chase Bank and
in return be released and discharged from all obligations of the $556,000 loan.
The result was a gain on early extinguishment of debt of $206,000, and the
release by the bank of its security interest in the Winona property and the
income tax refund claim.

Income Taxes
- -------------

The Company's effective income tax rates were (112)%, 17%, and (.2)% for the
fiscal years 2002, 2001 and 2000 respectively.

The Company has approximately $19,000,000 in net deferred tax assets for federal
income tax purposes, of which a reduction in the valuation allowance of
$8,284,000 was recorded as of December 31, 2002. This reflects management's
belief that it was more likely than not that approximately $8,284,000 of the
deferred tax asset would be utilized in the foreseeable future. Management
believes that the certainty with which it can project taxable income decreases
over time, and consequently a three years projection is the longest period that
the Company can project with confidence. Moreover, uncertainties regarding
future disposition of AERC raise substantial questions about the potential
future use of net operating loss carry forwards applicable to that subsidiary.
The Company will continue to periodically assess the adequacy of the valuation
allowance. Due to the amount of federal deferred tax assets available to the
Company, regular federal income tax is not expected to be paid for the
foreseeable future, although a small amount of federal alternative minimum tax
is expected to be paid starting in 2003.

The Company pays income and franchise taxes to various state and local
jurisdictions. The Company paid $6,000, $51,000 and $75,000 in state and local
taxes for the fiscal years 2002, 2001 and 2000, respectively.

Cumulative Effect of Accounting Change
- --------------------------------------

On January 1, 2002, the Company early adopted FAS 143, "Accounting for Asset
Retirement Obligations." This change is more fully described in Notes 2 and 9 to
the financial statements with a pro-forma effect as shown on the face of the
income statement. Compliance with FAS 143 is mandatory for fiscal years
beginning after June 15, 2002. Implementation is expected to have the following
effects upon the Company:

- A stronger balance sheet through a reduction in liabilities and an increase
in the Company reported book net worth. Management believes the reduction
in liabilities was helpful in renewing the Company's line of credit on more
favorable terms and in successfully refinancing the industrial revenue bond
in October 2002.

- Improved comparability of results with competitors is expected to occur as
uniform application of the FAS 143 standard replaces the varying practices
previously employed in the waste industry.

- Future expenses will increase on a period basis as the $13,141,000
cumulative effect recognized as of January 1, 2002 flows through expenses
over a currently projected 55 years. The current estimated expense increase
is approximately $240,000 per year.

CAPITAL RESOURCES AND LIQUIDITY

As of December 31, 2002, the Company's working capital position had materially
improved, increasing to $8,087,000. This compared to a working capital deficit
of $10,568,000 at December 31, 2001. The significant improvement in the
Company's working capital position principally resulted from the refinancing of
the $8,500,000 Idaho Industrial Revenue Bond, which had been classified as a
current liability at December 31, 2001 and the reclassification of $10,722,000
of long term assets at El Centro and AERC as current assets held for sale.

The Company's current ratio improved to 1.5:1.0 in 2002 compared with 0.7:1.0
and 1.2:1.0 for the years ended December 31, 2001 and 2000. Liquidity, as
measured by day's receivables outstanding ("DRO"), also improved, decreasing to
77 days during 2002, down from 83 days in 2001. Despite a slowing economy and
increasing concern about the creditworthiness of certain customers, the Company
was able to increase revenue and speed collections in 2002. Management will
continue to focus on improving DRO in 2003 through the implementation of new
information systems and the dedication of additional personnel to accounts
receivable collection efforts. As demonstrated by the improvement in working
capital, current ratio and DSO, the Company's liquidity improved during 2002
from 2001.

In addition to improving the Company's liquidity, the Company's leverage has
markedly improved, as measured by the debt to equity ratio. At December 31,
2002, the Company's debt to equity ratio had decreased to 0.9 to 1 from 2.3 to 1
and 1.5 to 1 at December 31, 2001 and 2000, respectively. This decrease in
leverage is the result of the retention of earnings, reduction in long term
closure and post-closure obligations from the implementation of FAS 143, and the
net retirement of $7,513,000 of debt in 2002. The reduction in debt was
accomplished by substantially paying off the Company's $5,000,000 outstanding
balance on its line of credit, a $1,500,000 reduction in the Idaho industrial
revenue bond through a refinancing, and the pay off of $1,431,000 in notes
payable during the year.

On October 15, 2002, the Company and Wells Fargo Bank entered into an amendment
to an existing credit agreement that reduced the interest rate and fee structure
on the Company's line of credit, modified existing financial covenants, reduced
the periodic reporting requirements, reduced the maximum amount available from
$8,000,000 to $6,000,000 and extended the maturity date of the line of credit to
June 15, 2004. The line of credit is secured by the Company's accounts
receivable. At December 31, 2002 and 2001, the outstanding balance on the
revolving line of credit was $603,000 and $5,000,000, respectively. The Company
borrows and repays according to business demands and availability of cash.

On October 28, 2002, the Company refinanced the $8,500,000 Idaho Industrial
Revenue Bond with a $7.0 million term loan from Wells Fargo Bank. The remaining
$1,500,000 was funded with cash on hand. At December 31, 2002, $5,483,000 was
reported as long term debt since it is not scheduled to be repaid within the
next year with $1,392,000 reported within the current portion of long term debt.
The term loan agreement permits prepayment of the debt without penalty and
allows the Company to borrow at a floating interest rates based on the Company's
Funded Debt ratio. Depending upon the Company's Funded Debt ratio, the Company
can borrow either an interest rate range based on the bank's prime rate to prime
rate plus 1% or a range of 2% to 3.25% over an offshore interest rate. At
December 31, 2002 the interest rate on the new term loan was 3.7%. This is
significantly lower than the 8.25% interest rate the Company was paying under
the terms of the refinanced Idaho Industrial Revenue Bond. Assuming the current
interest rate payable on the term loan remains constant, the Company would
expect to save approximately $442,250 annually in interest payments. The Company
has pledged substantially all of its fixed assets at the Grand View, Beatty,
Richland, and Robstown hazardous and radioactive waste disposal facilities as
collateral for the term loan. The term loan is cross-collateralized with the
Company's line of credit.

Management expects its capital spending needs to reach approximately $8 million
in 2003. It is expected that $4.8 million or 56% of 2003 capital spending will
be allocated to the Idaho hazardous waste disposal facility, primarily for new

disposal cell construction. Combined with new cell construction at the Company's
Texas, Nevada, and Washington facilities, landfill development (trench or cell
construction) is expected to account for 72% or $5.8 million of 2003 capital
spending. While this represents a $5.3 million or 200% increase in capital
outlays over 2002, approximately $5.0 million or 60% of the planned 2003 capital
spending is deferred from 2002.

On February 13, 2003, the Company announced the sale of the El Centro municipal
and industrial waste landfill located near Corpus Christi, Texas to a
wholly-owned subsidiary of Allied Waste Industries, Inc. ("Allied") for $10
million cash at closing and future volume-based royalty payments. The El Centro
landfill is located adjacent to Company subsidiary Texas Ecologists' hazardous
and industrial waste treatment and disposal facility. Under the Agreement,
Allied will pay American Ecology minimum royalties of at least $215,000
annually. Once Allied has paid the Company $14,000,000 it no longer has an
obligation to pay annual minimum royalties, but will still be required to pay
royalties based on waste volumes received at El Centro. The Purchase Agreement
also provides incentives for Allied to bring certain industrial waste to the
Texas Ecologists hazardous waste facility, and for the Company to utilize the El
Centro landfill. Opened in July 2000, the El Centro solid waste landfill was
carried on the Company's books at approximately $7 million prior to sale and,
when combined with reduction in liabilities and the recognition of a portion of
future minimum royalties, should result in a gain on sale of approximately $5
million, which will be recognized during the first quarter of 2003.

The Company has 2,350,000 series E Warrants expiring July 1, 2003 with an
exercise price of $1.50 a share. As the market price for Company common shares
is well above $1.50, the Company expects most, if not all, of the Series E
warrants to be exercised as of July 1, 2003. If the Series E warrants are
exercised, the Company will receive a cash infusion of $3,525,000.

On January 14, 2003, the Company extended an offer to the holders of the
Company's Series D Preferred Stock to repurchase their stock for the original
sales price of $47.50 a share plus accrued but unpaid dividends. The offer was
subject to approval of the Company's Board of Directors and Wells Fargo Bank,
and requires a minimum of 67% of the Series D Preferred Stock to be tendered by
the stockholders. All Series D holders have accepted the offer granting the
Company the right to repurchase their Series D. If the Company does not
repurchase the offered shares prior to July 31, 2003, the Company's right to
repurchase will expire. While Wells Fargo Bank has not waived the prohibition on
the payment of dividends, it has agreed to consider waiving the prohibition with
respect to the repurchase of the Series D Preferred Stock and payment of accrued
dividends. Should Wells Fargo Bank allow the Company to repurchase the stock,
approximately $6,500,000 of cash would be required in order to effect the
transaction.

The Company believes that cash flow from operations, proceeds from the sale of
El Centro, the expected conversion of the Series E warrants, and borrowings
under the line of credit will be sufficient to meet the Company's cash needs for
the foreseeable future.

OTHER MATTERS

Environmental Matters
- ----------------------

The Company maintains reserves and insurance policies for costs associated with
future closure and post-closure obligations at both current and formerly
operated disposal facilities. These reserves and insurance policies are based on
professional engineering studies and interpretations of current regulatory
requirements which are updated annually. Accounting for closure and post-closure
costs includes final disposal unit capping for the site, 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
provisions through reserves and the insurance policy for its obligations.

The Company estimates that its future closure and post-closure costs for all
insured facilities included in continuing operations were approximately
$40,000,000 as of December 31, 2002 with a median year for payment of 2025. This
compares to recorded closure and post-closure costs for facilities in continuing
operations of $10,200,000, $25,654,000 and $15,927,000 for 2002, 2001 and 2000,
respectively. An additional $19,000,000 of future closure and post-closure costs
for facilities included in discontinued operations was estimated as of December

31, 2002. As described in Item 1 of this Form 10-K under "Insurance," the
Company has a prepaid insurance policy expiring September 2003 for costs of
closure and post closure of facilities.

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 all such costs, regulations, legislation
enacted, or other future events affecting these facilities.

Seasonal Effects
- -----------------

The Company's operating revenue is generally lower in the winter months and
increases in the summer months when weather sensitive cleanup projects are
undertaken. While volume of hazardous waste generally tends to decrease during
winter months, market conditions have a larger effect on revenue than
seasonality.

NEW ACCOUNTING PRONOUNCEMENTS
- -------------------------------

In June 2001, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets. Under the new rules, goodwill, as well as
intangible assets deemed to have indefinite lives, will no longer be amortized
but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives. Currently, the Company has no intangible assets that are
categorized as having indefinite lives and does not anticipate any changes in
the estimated useful lives of its intangibles. Consequently, there was no
material financial statement impact upon the adoption of FAS No. 142.

As described in Notes 2, 9, and 19 to the Consolidated Financial Statements
included under Item 8 of this Form 10-K, the Company adopted the provisions of
FAS 143 and FAS 144. The adoption of the provisions of these statements had a
material effect on the Company's financial condition and operating results as of
December 31, 2002.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. FAS No. 145 rescinds or amends
various standards on accounting for debt extinguishments, intangible assets of
motor carriers, and certain lease transactions. Additional technical
corrections and amendments were made to various other existing authoritative
pronouncements. The implementation of this Statement resulted in the
reclassification to other income of an extraordinary gain of $206,000 as the
result of early extinguishments of debt in 2000.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities. FAS No.
146 requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred. Under prior guidance from EITF 94-3, a liability for
such costs could be recognized at the date of commitment to an exit plan. The
provisions of this Statement are to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company does not expect the
Statement to result in a material impact on its financial position or results of
operations except as discussed in Note 19 to the financial statements.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. The Interpretation elaborates on the disclosures to be
made by sellers or guarantors of products and services, as well as those
entities guaranteeing the financial performance of others. The Interpretation
further clarifies that a guarantor is required to recognize, at the inception of
a guarantee, a liability for the obligations it has undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of this
Interpretation are effective on a prospective basis to guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of periods ending after December 15, 2002. The Company
believes that its disclosures with regard to these matters are adequate as of
December 31, 2002.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure an
amendment of FASB Statement No. 123. This Statement amends FASB No. 123 to

provide alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee compensation. In
addition, the Statement amends the disclosure requirements of Statement 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. As of December 31, 2002, the
Company continues to follow the intrinsic value method to account for
stock-based employee compensation. The additional disclosure requirements of
this statement are effective for financial statements for interim periods
beginning after December 15, 2002. Consequently, those disclosures will be
included in the Company's financial statements for the quarter ending March 31,
2003.

CRITICAL ACCOUNTING POLICIES

In preparing the financial statements, management makes many estimates and
assumptions that affect the Company's financial position and results of
operations. It is unlikely that changes in most estimates and assumptions would
materially change the Company's financial position and results of operations.
Disposal Facility Accounting, Accounting for Discontinued Operations,
Litigation, Income Taxes, and Project Accounting involve subjective judgments,
estimates and assumptions that would likely produce a materially different
financial position and result of operation if different judgments, estimates, or
assumptions were used. These matters are discussed below. Additional
information concerning significant account policies is set forth in Note 3 to
the Consolidated Financial Statements.

DISPOSAL FACILITY ACCOUNTING

In general terms, a cell development asset exists for the cost of building
usable disposal space and a closure liability exists for closing, maintaining
and monitoring the disposal unit once this space has been filled. Major
assumptions and judgments used to calculate cell development assets and closure
liabilities are as follows:

- - Personnel and equipment costs incurred to construct disposal cells are
identified by management and capitalized as a cell development asset.

- - The cell development asset is depreciated as each available cubic yard of
disposal space is filled. Periodic independent engineering surveys and
inspection reports are used to determine the remaining volume available.
These reports take into account volume, compaction rates and space reserved
for capping the filled disposal units.

- - The closure liability is the present value based on a current cost estimate
prepared by an independent engineering firm of the costs to close, maintain
and monitor disposal units. Management estimates the timing of payment and
then accretes the current cost estimate by an estimated cost of living
(1.5%), and then discounts (9.3%) the accreted current cost estimate back
to a present value. The final payments of the closure liability are
currently estimated as being paid in 2056.

On January 1, 2002, the Company early adopted FAS 143 Accounting for Asset
Retirement Obligations. This change is more fully described in Notes 2 and 9 to
the financial statements with a pro-forma effect as shown on the face of the
income statement.

Compliance with FAS 143 is mandatory for fiscal years beginning after June 15,
2002. Under FAS 143, future expenses will increase on a period basis as the
$13,141,000 cumulative effect flows through expenses over the currently
projected period of 55 years. The current estimated expense increase is
approximately $240,000 per year.

ACCOUNTING FOR DISCONTINUED OPERATIONS
Accounting for discontinued operations requires numerous subjective and complex
judgments, estimates and assumptions that materially affect financial position
and discontinued operations.

At December 27, 2002, the Company discontinued the operations of the former
Processing and Field Services segment at its Oak Ridge, Tennessee facility. The
discontinued operations were accounted for under Emerging Issues Task Force
Issue No 94-3 Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring), which requires a liability to be recognized at the time that the
decision to exit the segment was made. EITF 94-3 was chosen as the guiding

literature rather than Statement of Financial Accounting Standards No. 146
Accounting for Costs Associated with Exit or Disposal Activities (FAS 146),
which requires a liability to be recognized at the time that the liability is
incurred. FAS 146 is required for exit activities entered into after December
31, 2002 and is optional for exit activities prior to December 31, 2002.
Approximately $1,800,000 of liabilities were recognized as of December 31, 2002
under EITF 94-3 that would not have been recognized until incurred had the
Company adopted FAS 146 prior to December 27, 2002.

As of December 27, 2002, the Company recognized $7,018,000 in incremental
liabilities relating to the discontinuance of the LLRW Processing and Field
Services operations located in Oak Ridge, Tennessee. The Company has assumed
that the Oak Ridge facility will be cleared of remaining material and prepared
for sale during 2003. During 2003, the Company expects to spend $1,800,000 to
maintain compliance with conditions of its existing licenses and permits. An
additional $1,227,000 is expected to be spent removing waste from the facility
and arranging for its disposal. Property and equipment was reduced by $1,593,000
to net realizable value. Due to the preliminary status of the waste removal
effort and related preparation for sale it is expected that the estimate for
exit from the segment will change, potentially by a material amount.

LITIGATION
The Company is involved in litigation requiring estimates of timing and loss
potential whose timing and ultimate disposition is controlled by the judicial
process. Approximately $1,100,000 is included as an Other Expense for litigation
where the Company was the defendant in the year ended December 31 2002. The
Company also has recorded $27,430,000 for future facility development costs,
which may not be realized if the Company does not recover monetary damages from
the State of California and/or the State of Nebraska or the disposal projects in
these states do not become operational. The decision to accrue costs or write
off assets is based upon the specific facts and circumstances pertaining to each
case and management's evaluation of present circumstances.

INCOME TAXES
The Company has historically recorded a valuation allowance against its deferred
tax assets in accordance with FAS 109, Accounting for Income Taxes. This past
valuation allowance reflected management's belief that due to a history of tax
losses and the previously weak financial condition and prospects for the
business, it was more likely than not that the Company would be unable to
utilize portions of the deferred tax assets prior to their expiration. The
Company reported taxable income in 2001 and 2002, and expects to report taxable
income in 2003. The determination of whether a valuation allowance is
appropriate and the valuation allowance amount is based on management's
judgments and evaluation of whether it is more likely than not that the Company
will be able to utilize some, or all of the deferred tax assets. The Company has
assessed the valuation allowance and has reversed approximately $8,284,000 of
the valuation allowance that the Company expects to utilize through 2005.

PROJECT ACCOUNTING
The Company has performed relatively large, fixed fee and long-duration
remediation projects through the Company's discontinued Field Services Division.
Securing contracts to perform work required the Company to make assumptions
regarding job duration, percentage of completion for waste processing, and
disposal costs that would not be known until the actual project is complete.
Differences between estimated and actual cost to remove, process and arrange
final disposal of contaminated material can vary widely, resulting in
potentially significant changes in each individual project's profit or loss. As
of December 31, 2002, one major project is awaiting completion and changes in
the estimated cost to complete are expected to positively or negatively impact
the results of discontinued operations.

OFF BALANCE SHEET ARRANGEMENTS
The Company does not have any off balance sheet arrangements or interests in
variable interest entities that would require consolidation. The Company
operates through wholly owned subsidiaries.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not maintain equities, commodities, derivative, or any other
instruments for trading or any other purposes, and also does not enter into
transactions denominated in currencies other than the U.S. Dollar.

The Company has minimal interest rate risk on investments or other assets as the
amount held is the minimum requirement imposed by insurance or government
agencies. At December 31, 2002, $244,000 was held in short term pledged
investment accounts and approximately $740,000 in tax refunds was due from the
federal government. Together, these items earned interest at approximately 5%
and comprise 1.1% of assets.

The Company has interest rate risk on debt instruments, as the Company repaid an
$8,500,000 fixed interest obligation with a $7,000,000 term loan bearing
interest at variable rates. At December 31, 2002, $603,000 of variable rate
debt was owed under a line of credit and was accruing interest at the rate of
4.4% and $6,884,000 of variable rate debt was owed under the term loan and was
accruing interest at the rate of 3.7%.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
American Ecology Corporation

We have audited the accompanying consolidated balance sheet of American Ecology
Corporation and subsidiaries as of December 31, 2002, and the related
consolidated statement of operations, shareholders' equity and cash flows for
the year then ended. 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. 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
audit provides 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, 2002, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

As described in Notes 2 and 9 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standards No. 143, "Accounting
for Asset Retirement Obligations", effective January 1, 2002.

Moss Adams, LLP

Seattle, Washington
February 11, 2003

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, 2001, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years ended December 31, 2001, and 2000. 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 U.S. 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, 2001, and the results of their
operations and their cash flows for the years ended December 31, 2001, and 2000,
in conformity with U.S. generally accepted accounting principles.

Balukoff, Lindstrom & Co., P.A.

Boise, Idaho
February 15, 2002

AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)

As of December 31,
-------------------
2002 2001
-------- ---------

ASSETS
Current Assets:
Cash and cash equivalents $ 135 $ 4,476
Receivables, net 10,460 12,674
Income taxes receivable 740 740
Prepayments and other 498 1,881
Deferred income taxes 2,745 --
Assets held for sale or closure 10,722 --
-------- ---------
Total current assets 25,300 19,771

Cash and investment securities, pledged 244 243
Property and equipment, net 26,998 38,462
Facility development costs 27,430 27,430
Other assets 129 918
Assets held for sale or closure 1,485 --
Deferred income taxes 5,539 --
-------- ---------
Total Assets $87,125 $ 86,824
======== =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt $ 1,985 $ 9,860
Short term line of credit -- 5,000
Accounts payable 2,192 2,408
Accrued liabilities 4,166 12,121
Accrued closure and post closure obligation, current portion 882 700
Income taxes payable 23 250
Current liabilities of assets held for sale or closure 7,965 --
-------- ---------
Total current liabilities 17,213 30,339

Long term accrued liabilities 2,372 1,843
Long term debt 5,972 2,593
Revolving line of credit 603 --
Liabilities of assets held for sale or closure, excluding current portion 5,699 --
Accrued closure and post closure obligation, excluding current portion 9,318 25,633
-------- ---------
Total liabilities 41,177 60,408
-------- ---------

Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, 1,000,000 shares authorized,
Designated as follows:
Series D cumulative convertible preferred stock, $.01 par value,
100,001 shares issued and outstanding; 1 1
Series E redeemable convertible preferred stock, $10.00 par value,
300,000 shares converted and retired -- --
Common stock, $.01 par value, 50,000,000 authorized, 14,539,264
and 13,766,485 shares issued and outstanding 145 138
Additional paid-in capital 55,789 54,637
Accumulated deficit (9,987) (28,360)
-------- ---------
Total shareholders' equity 45,948 26,416
-------- ---------

Total Liabilities and Shareholders' Equity $87,125 $ 86,824
======== =========

The accompanying notes are an integral part of these financial statements.

AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN 000'S EXCEPT PER SHARE AMOUNTS)

For the Year Ended December 31,
------------------------------
2002 2001 2000
--------- -------- --------

Revenue $ 46,789 $40,175 $27,054
Direct operating costs 25,223 22,778 12,423
--------- -------- --------

Gross profit 21,566 17,397 14,631
Selling, general and administrative expenses 12,631 14,274 10,384
--------- -------- --------

Income from operations 8,935 3,123 4,247
Investment income 31 246 435
Gain/(loss) on sale of assets (15) (8) 11
Interest expense 820 1,011 260
Other income (expense) (542) 827 1,065
--------- -------- --------

Income before income tax, discontinued operations and cumulative
effect of change in accounting principle 7,589 3,177 5,498
Income tax benefit (expense) 8,505 (186) 12
--------- -------- --------

Income before discontinued operations and cumulative effect of change
in accounting principle 16,094 2,991 5,510
(Loss) from discontinued operations (net of tax of $0) (10,464) (2,189) (813)
--------- -------- --------

Income before cumulative effect of change in accounting principle 5,630 802 4,697
Cumulative effect of change in accounting principle (net of tax of $0) 13,141 -- --
--------- -------- --------

Net income 18,771 802 4,697
Preferred stock dividends 398 398 398
--------- -------- --------

Net income available to common shareholders $ 18,373 $ 404 $ 4,299
========= ======== ========

Basic earnings per share $ 1.28 $ .03 $ .31
========= ======== ========

Diluted earnings per share $ 1.15 $ .03 $ .26
========= ======== ========

Dividends paid per common share $ -- $ -- $ --
========= ======== ========

PRO FORMA RESULTS AS IF FAS 143 WAS IMPLEMENTED JANUARY 1, 2000

Net income before discontinued operations and cumulative effect of
change in accounting principle $ 2,991 $ 5,510
Less pro forma accretion of closure and post closure liability (876) (802)
Less pro forma amortization of closure asset (198) (79)
Plus previous closure and post closure expenses 131 101
-------- --------
Pro forma net income before discontinued operations and cumulative
effect of change in accounting principle $ 2,048 $ 4,730
======== ========
Basic earnings per share from income before discontinued operations
and cumulative effect of change in accounting principle- pro forma $ .15 $ .35
======== ========
Diluted earnings per share from income before discontinued operations
and cumulative effect of change in accounting principle-pro forma $ .13 $ .28
======== ========

The accompanying notes are an integral part of these financial statements.

AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ IN 000'S)

For the Year Ended December 31,
-----------------------------
2002 2001 2000
--------- -------- --------

Cash flows from operating activities:
Net income $ 18,771 $ 802 $ 4,697
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, amortization, and accretion 6,604 4,076 1,899
Loss from discontinued operations 10,464 2,189 813
Cumulative effect of change in accounting principle (13,141) -- --
Reversal of deferred income tax allowance (8,284) -- --
(Gain) loss on sale of assets 15 8 (11)
Stock compensation 68 82 79
Changes in assets and liabilities:
Receivables (2,517) (827) (1,678)
Other assets 538 (123) 191
Closure and post closure obligation (1,598) (386) (1,358)
Income taxes payable (227) 135 (87)
Accounts payable and accrued liabilities (3,063) 1,236 (1,158)
--------- -------- --------
Net cash provided by operating activities 7,630 7,192 3,387

Cash flows from investing activities:
Capital expenditures (2,737) (4,009) (3,267)
Proceeds from sales of assets -- -- 11
Acquisition of Envirosafe Services of Idaho, Inc. -- 2,575 --
Transfers from cash and investment securities, pledged -- 434 --
--------- -------- --------
Net cash used by investing activities (2,737) (1,000) (3,256)

Cash flows from financing activities:
Proceeds from issuances and indebtedness 7,615 907 6,058
Payments of indebtedness (15,128) (4,035) (648)
Stock purchased and canceled in forward split -- (149) --
Stock options exercised 1,091 95 18
--------- -------- --------
Net cash provided by (used in) financing activities (6,422) (3,182) 5,428
--------- -------- --------

Increase (decrease) in cash and cash equivalents (1,529) 3,010 5,559
Net cash used by discontinued operations (2,812) (2,656) (6,208)
Cash and cash equivalents at beginning of year 4,476 4,122 4,771
--------- -------- --------
Cash and cash equivalents at end of year $ 135 $ 4,476 $ 4,122
========= ======== ========

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 820 $ 1,011 $ 260
Income taxes paid 6 51 75
Non-cash investing and financing activities:
Purchase of Envirosafe Services of Idaho, Inc. -- 18,541 --
Stock issuance-director's compensation 68 82 79
Preferred stock dividends accrued 398 398 398
Acquisition of equipment with notes/capital leases -- 1,557 211

The accompanying notes are an integral part of these financial statements.

AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ IN 000'S)

ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS
STOCK STOCK CAPITAL (DEFICIT)
---------- -------- ------------ ----------

Balance, January 1, 2000 $ 1 $ 137 $ 54,513 $ (33,069)

Net income -- -- -- 4,697
Common stock issuance -- -- 97 --
Dividends on preferred stock -- -- -- (398)
Other -- -- -- 6
---------- -------- ------------ ----------
Balance, December 31, 2000 $ 1 $ 137 $ 54,610 $ (28,764)

Net income -- -- -- 802
Common stock issuance -- 2 175 --
Dividends on preferred stock -- -- -- (398)
Common stock cancelled -- (1) (148) --
---------- -------- ------------ ----------
Balance, December 31, 2001 $ 1 $ 138 $ 54,637 $ (28,360)
========== ======== ============ ==========

NET INCOME -- -- -- 18,771
COMMON STOCK ISSUANCE -- 7 1,152 --
DIVIDENDS ON PREFERRED STOCK -- -- -- (398)
---------- -------- ------------ ----------
BALANCE, DECEMBER 31, 2002 $ 1 $ 145 $ 55,789 $ (9,987)
========== ======== ============ ==========

The accompanying notes are an integral part of these financial statements

AMERICAN ECOLOGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. DESCRIPTION OF BUSINESS

American Ecology Corporation, through its subsidiaries (collectively, the
"Company" or "AEC"), provides radioactive, hazardous and industrial waste
management services to commercial and government entities, such as nuclear power
plants, medical and academic institutions, steel mills and petro-chemical
facilities. The Company's headquarters are located in Boise, Idaho.

The Company's principal wholly owned 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"); and US
Ecology Idaho, Inc., a Delaware corporation ("USEI") wholly owned by AEESC.

The Company operates within two segments: Operating Disposal Facilities and
Non-Operating Disposal Facilities. Prior to December 27, 2002, the Company
operated a Low-Level Radioactive Waste ("LLRW") Processing and Field Services
business. The Operating Disposal Facilities are currently accepting hazardous,
industrial and low-level radioactive waste. The Non-Operating Disposal
Facilities segment includes non-operating disposal facilities, a closed
hazardous waste processing and deep-well injection facility, and two proposed
new disposal facilities.

The Operating Disposal Facilities segment includes the Company's hazardous waste
treatment and disposal facilities in Beatty, Nevada; Grand View, Idaho, and
Robstown, Texas, and its LLRW and naturally occurring and accelerator produced
radioactive material ("NORM/NARM") disposal facility in Richland, Washington.
On February 13, 2003, the Company sold its El Centro, Texas municipal solid
waste landfill facility, which previously was included in the Operating Disposal
Facilities segment, but has been included in the results of discontinued
operations as of December 31, 2002 due to the anticipated sale. See Note 19.

The Non-Operating Disposal Facilities segment includes the closed hazardous
waste disposal, processing, and deep-well injection facilities located in
Sheffield, Illinois; Bruneau, Idaho; Beatty, Nevada; and Winona, Texas. The
Company is currently incurring costs for remediation and long-term monitoring
and maintenance activities at the closed facilities. The two proposed disposal
facilities are located in Butte, Nebraska, and Ward Valley, California, and are
currently involved in ongoing litigation. See Note 8.

The Processing and Field Services segment previously aggregated, volume-reduced,
and performed remediation and contamination removal services primarily for
radioactive materials. The Processing and Field Services operations have been
included in the results of discontinued operations. See Note 19.

NOTE 2. ACCOUNTING CHANGES AND ADJUSTMENTS

Effective January 1, 2002, the Company implemented Statement of Financial
Accounting Standards No. 143, "Accounting for Asset Retirement Obligations" (FAS
143) under the early adoption provisions. FAS 143 requires a liability to be
recognized as part of the fair value of future asset retirement obligations and
an associated asset to be recognized as part of the carrying amount of the
underlying asset. Previously the Company recorded a Closure and Post Closure
Obligation for the pro-rata amount of space used to the permitted space
available in the facilities. On January 1, 2002, in accordance with FAS 143,
this obligation was valued at the current closure cost, increased by a cost of
living adjustment for the estimated time of payment, and discounted back to its
present value. See Note 9.

In accordance with FAS 143, upon calculation of the asset retirement obligation
the Company also recorded an associated asset related to the retirement
obligation. This asset is amortized to operations over the estimated useful life
of the related long-lived asset. FAS 143 allows for the aggregation of certain
assets in calculating and subsequently amortizing this asset. During the fourth
quarter of 2002 the Company reassessed its methodology of applying FAS 143 and
disaggregated certain facility components. In recalculating the asset under the
revised methodology, the Company recorded a reduction in the asset in the amount
of $3,182,000 with no corresponding change in the recorded liability.
Consequently, the initial gain on implementation of the new accounting standard
recorded in the first quarter of 2002 was reduced by the $3,182,000, and the

amortization associated with the asset was reduced from what was previously
recorded during the first three quarters of 2002. The following restatements
occurred as a result of the change in FAS 143 implementation methodology (in
thousands):

Nine
Three Months Ended Months Ended
------------------------------------------------ ---------------
March 31, 2002 June 30, 2002 Sep. 30, 2002 Sep. 30, 2002
---------------- -------------- -------------- ---------------

Reported Net Income $ 19,077 $ 2,175 $ 1,032 $ 22,284
Effect of Restatement:
Cumulative Effect of Accounting Change $ (3,182) $ -- $ -- $ (3,182)
Amortization $ 24 $ 26 $ 34 $ 84
---------------- -------------- -------------- ---------------
Restated Net Income $ 15,919 $ 2,201 $ 1,066 $ 19,186
================ ============== ============== ===============

Reported Diluted EPS $ 1.33 $ .12 $ .06 $ 1.39
Effect of Restatement:
Cumulative Effect of Accounting Change $ (.22) $ -- $ -- $ (.20)
Amortization $ -- $ -- $ -- $ .01
---------------- -------------- -------------- ---------------
Restated EPS $ 1.11 $ .12 $ .06 $ 1.20
================ ============== ============== ===============

NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The accompanying financial statements are prepared
- ----------------------------
on a consolidated basis. All significant inter-company balances and
transactions have been eliminated in consolidation. The Company's fiscal
year-end is December 31.

Cash and Cash Equivalents. The Company considers cash and cash equivalents to
- ---------------------------
be balances with financial institutions available within 30 days of request.

Cash and Investment Securities Pledged. Pledged cash and investment securities
- ---------------------------------------
of $244,000 and $243,000 at December 31, 2002 and 2001, respectively, shown as a
non current asset in the accompanying consolidated balance sheet consists of
money market accounts. The Company maintains these investments in accordance
with collateral commitments related to the closed facility in Sheffield,
Illinois.

Financial Instruments. The recorded amounts of cash and cash equivalents,
- ----------------------
accounts receivable, short-term borrowings, accounts payable and accrued
liabilities as presented in the consolidated financial statements approximate
fair value because of the short-term nature of these instruments. The recorded
amount of short and long-term borrowings approximates fair value as the interest
rates approximate current competitive rates.

Revenue Recognition. Revenues are recognized by operating segment, as follows:
- --------------------

Disposal facility revenues - Disposal facility revenues result primarily from
fees charged to customers for waste treatment and/or disposal services. Fees
are generally charged on a per-ton basis based on contract or quoted prices.
Generally, revenues are recognized as services are performed, and as waste is
buried.

The Richland, Washington disposal facility is regulated by the Washington
Utilities and Transportation Commission ("WUTC"), which sets and regulates rates
for the disposal of low-level radioactive wastes. Annual revenue levels are
established in agreement with the WUTC at amounts sufficient to cover the costs
of operation and to provide the Company with a reasonable profit. Per-unit
rates charged during the year are based upon estimated disposal activity and
revenue levels submitted by the Company and approved by the WUTC. In the event
annual revenue exceeds the approved levels set by the WUTC, the Company is
required to refund the excess collections to facility users on a pro-rata basis.
At December 31, 2002 and 2001, the Company had decreased revenue by $693,200 and
$422,000, respectively, for these refunds.

Processing facility revenues result primarily from fees charged for waste
processing and waste treatment. Upon completion the waste is transported and
disposed in third party or company owned disposal facilities. Fees are
generally charged on a per-pound basis depending on the nature and volume of the
waste. Generally, a minimum charge is billed in connection with the preliminary
services and recorded as unearned revenue until the related work is performed.

Work performed in excess of preliminary billings are recorded as unbilled
revenue and billed upon off-site shipment and disposal of the waste.

Field Services Operations and Contracts - Field services revenues result from
land and building contamination studies, waste removal and off-site shipment
services. Fees are generally charged under quoted contractual terms for the
related services. Revenues from contracts are recognized on the
percentage-of-completion method.

Revenue recognition on certain fixed-price contracts begins when progress is
sufficient to estimate the probable outcome, or on the completed contract method
if the probable outcome cannot be reasonably estimated. Change orders are
included in total estimated contract revenue when it is probable that the change
order will result in a bona fide addition to contract value and can be reliably
estimated. Completion on contracts is generally measured based on the
proportion of costs incurred to total estimated contract costs, or for certain
long-term contracts completion is measured on estimated physical completion or
units of disposal.

Revenue producing contracts are reviewed in the ordinary course of business to
determine if the direct costs, exclusive of any non-variable costs, to service
the contractual arrangements exceed the revenues to be produced by the contract.
Any resulting excess direct costs over the life of the contract are expensed at
the time of such determination.

Unbilled receivables. Unbilled receivables are recorded for work performed under
- ---------------------
contracts or services in process that have not yet been invoiced to customers,
and arise from the use of the percentage-of-completion method of accounting, and
the timing of billings. Substantially all unbilled receivables at December 31,
2002 were expected to be billed and collected within one year.

Deferred revenue. Advance billings or collections are recorded as deferred
- ------------------
revenue, and recognized when related services are provided. At December 31, 2002
and 2001, deferred revenue included in accrued liabilities amounted to
approximately $988,000 and $5,349,000, respectively.

Operations held-for-sale. In August 2001, the Financial Accounting Standards
- --------------------------
Board issued Statement of Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets ("FAS No. 144"). The Company
adopted the provision of FAS No. 144 effective January 1, 2002. It is the
Company's policy to classify the businesses the Company is marketing for sale as
operations held-for-sale when; 1. management commits to a plan to sell or
dispose of the operations; 2. the operations are available for immediate sale;
3. an active program to locate a buyer has been initiated and; 4. the sale of
the operations within one year is probable. The sale of certain assets within
one year may be contingent upon regulatory approvals. The carrying values of
these assets are written down to estimated fair value, less estimated costs to
sell. Estimates and certain contingencies exist that could cause actual results
to materially differ from the estimated results for these operations. The
Company discontinues depreciation on fixed assets for businesses that are
classified as held-for-sale. See Note 19.

Property, Plant and Equipment. Property plant and equipment are recorded at
- ---------------------------------
cost and depreciated on the straight-line method over estimated useful lives.
Lease obligations for which the Company assumes or retains substantially all the
property rights and risks of ownership are capitalized. Replacements and major
repairs of property and equipment are capitalized and retirements are made when
the useful life has been exhausted. Minor components and parts are charged to
expense as incurred. During 2002, 2001 and 2000, maintenance and repair
expenses charged to continuing operations were $337,000, $348,000 and $135,000,
respectively.

The Company assumes no salvage value for its depreciable fixed assets. The
estimated useful lives for significant property and equipment categories are as
follows (in years):

Useful Lives
------------
Vehicles and other equipment 3 to 10
Disposal facility and equipment 3 to 20
Buildings and improvement 5 to 40

Cell development costs and landfill accounting. Capitalizable cell development
- ------------------------------------------------
costs are recorded at cost. Capitalized cell development costs, net of recorded
amortization, are added to estimated future costs of the permitted disposal cell
to be incurred over the remaining construction of the cell, to determine the
amount to be amortized over the remaining estimated useful life of a cell.

Estimated future costs are developed using input from external and Company
engineers, and internal accountants. Management reviews these estimates at
least annually. Amortization is recorded on a unit of consumption basis,
typically applying cost as a rate per cubic yard. Disposal facility site costs
are expected to be fully amortized upon final closure of the facility, as no
salvage value is probable. Costs associated with the ongoing operation of the
landfill are charged to expense as incurred.

The Company has material financial commitments for closure and post-closure
obligations for facilities it owns or operates. The Company estimates its future
cost requirements for closure and post-closure monitoring based on Resource
Conservation and Recovery Act ("RCRA") requirements and the respective site
permits. RCRA requires that companies provide the applicable regulatory agency
an acceptable financial assurance for the closure and post-closure monitoring of
each facility for thirty years following closure. Estimates for final closure
and post-closure costs are developed using input from the Company's engineers
and internal accountants and are reviewed by management, typically at least once
per year. These estimates involve projections of costs that will be incurred
after the disposal facility ceases operations and during the legally required
post-closure monitoring period. In August 2001, the Financial Accounting
Standards Board (FASB) issued FAS No. 143, Accounting for Asset Retirement
Obligations (FAS 143), which established standards for accounting for an
obligation associated with the retirement of a long-lived tangible asset. The
Company adopted these standards effective January 1, 2002. In accordance with
FAS 143, the present value of the estimated closure and post-closure costs are
accreted using the interest method of allocation so that 100% of the future cost
has been incurred at the time of payment. See Note 9 for a further explanation
of the early adoption of FAS 143.

The Company has generally been successful in receiving approvals for disposal
facility expansions pursued; however, there can be no assurance that the Company
will be successful in obtaining expansions in the future. In some cases, the
Company may be unsuccessful in obtaining an expansion permit modification or the
Company may determine that such permit modification that the Company previously
thought was probable is no longer probable. The Company's engineers and internal
accountants review the estimates and assumptions used in developing this
information at least annually, and the Company believes them to be reasonable.
If such estimates prove to be incorrect, the costs incurred in the pursuit of
the expansion would be charged against earnings. Additionally, the disposal
facility's future operations would reflect lower profitability due to expenses
relating to the decrease in life, or impairment of the facility.

Impairment of Long-lived assets. Long-lived assets consist primarily of property
- -------------------------------
and equipment, facility development costs and deferred site development costs.
The recoverability of long-lived assets is evaluated periodically at the
operating unit level by an analysis of operating results and consideration of
other significant events or changes in the business environment. If an operating
unit has indications of possible impairment, such as current operating losses,
the Company will evaluate whether impairment exists on the basis of undiscounted
expected future cash flows from operations for the remaining amortization
period. If an impairment loss exists, the carrying amount of the related
long-lived assets is reduced to its estimated fair value based upon discounted
cash flows from operations. During 2002, the Company recorded an impairment
charge of $1,593,000 relating to certain discontinued operations. See Note 19.

Income taxes. Income taxes are accounted for using an asset and liability
- --------------
approach, which requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
financial statement and tax basis of assets and liabilities at the applicable
enacted tax rates. A valuation allowance is recorded against deferred tax
assets, if based on the weight of the available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. Income
tax expense is the income tax payable or refundable for the period plus or minus
the change during the period in deferred income tax assets and liabilities.

Insurance. The Company is self-insured for health-care coverage of employees.
- ---------
Stop-loss insurance is carried, which assumes liability for claims in excess of
$75,000 per individual or on an aggregate basis based on the monthly population.
The Company also maintains a Pollution and Remediation Legal Liability Policy
pursuant to RCRA regulations subject to a $250,000 self-insured retention. In
addition, the Company is insured for consultant's environmental liability
subject to a $100,000 self-insured retention.

New Accounting Pronouncements.
- --------------------------------

but will be subject to annual impairment tests in accordance with the
Statements. Other intangible assets will continue to be amortized over their
useful lives. Currently, the Company has no intangible assets that are
categorized as having indefinite lives and does not anticipate any changes in
the estimated useful lives of its intangibles. Consequently, there was no
material financial statement impact upon the adoption of FAS 142.

As discussed above, the Company adopted the provisions of FAS 143 and FAS 144 in
2002. The adoption of the provisions of these Statements had a material effect
on the Company's financial condition and operating results as of December 31,
2002 as summarized in Note 2.

In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB
Statement No. 13, and Technical Corrections. FAS 145 rescinds or amends various
standards on accounting for debt extinguishments, intangible assets of motor
carriers, and certain lease transactions. Additional technical corrections and
amendments were made to various other existing authoritative pronouncements.
The implementation of this Statement resulted in the reclassification to other
income of an extraordinary gain of $206,000 as the result of early
extinguishments of debt in 2000.

In June 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities. FAS 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized and measured initially at fair value only when the
liability is incurred. Under prior guidance, a liability for such costs could
be recognized at the date of commitment to an exit plan. The provisions of this
Statement are to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company does not expect the Statement to
result in a material impact on its financial position or results of operations
except as discussed in Note 10.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. The Interpretation elaborates on the disclosures to be
made by sellers or guarantors of products and services, as well as those
entities guaranteeing the financial performance of others. The Interpretation
further clarifies that a guarantor is required to recognize, at the inception of
a guarantee, a liability for the obligations it has undertaken in issuing the
guarantee. The initial recognition and initial measurement provisions of this
Interpretation are effective on a prospective basis to guarantees issued or
modified after December 31, 2002, and the disclosure requirements are effective
for financial statements of periods ending after December 15, 2002. The Company
believes that its disclosures with regards to these matters are adequate as of
December 31, 2002.

In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure, an
amendment of FASB Statement No. 123. This Statement amends FAS 123 to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, it
amends the disclosure requirements of Statement 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. As of December 31, 2002, the Company continued to
follow the intrinsic value method to account for stock-based employee
compensation. The additional disclosure requirements of this Statement are
effective for financial statements for interim periods beginning after December
15, 2002.

Stock Options. At December 31, 2002, the Company has two stock-based employee
- ---------------
compensation plans, which are more fully described in Note 14. The Company
accounts for those plans under the recognition and measurement principles of APB
Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. No stock-based employee compensation cost is reflected in net
income. The following table illustrates the effect on net income and earning per
share if the Company had applied the fair value recognition provisions of FASB
Statement No. 123, Accounting for Stock-Based Compensation, to stock-based
employee compensation for the years ended December 31:

2002 2001 2000
-------- ------ -------

Net income, as reported $18,771 $ 802 $4,697
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects (283) (111) (354)
-------- ------ -------
Pro forma net income $18,488 $ 691 $4,343
======== ====== =======

EARNINGS PER SHARE:
Basic - as reported $ 1.28 $ .03 $ .31
======== ====== =======
Basic - pro forma $ 1.26 $ .02 $ .29
======== ====== =======
Diluted - as reported $ 1.15 $ .03 $ .26
======== ====== =======
Diluted - pro forma $ 1.13 $ .02 $ .24
======== ====== =======

Reclassification. Reclassifications have been made to prior year financial
- -----------------
statements to conform to the current year presentation. These reclassifications
have no impact on reported equity or net income available to common
shareholders.

NOTE 4. 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 for outstanding options and conversion of
warrants. The computation of diluted earnings per share does not assume exercise
or conversion of securities that would have an anti-dilutive effect on earnings
per share.

Year Ended December 31,
-----------------------------
($in thousands except per share amounts) 2002 2001 2000
--------- -------- --------

Income before discontinued operations and cumulative
effect of accounting change $ 16,094 $ 2,991 $ 5,510
Loss from operations of discontinued segments (10,464) (2,189) (813)
Cumulative effect of accounting change 13,141 -- --
--------- -------- --------
Net income 18,771 802 4,697
Preferred stock dividends 398 398 398
--------- -------- --------
Net income available to common shareholders $ 18,373 $ 404 $ 4,299
========= ======== ========

Weighted average shares outstanding-
Common shares 14,311 13,738 13,711
Effect of dilutive shares
Series E Warrants 981 1,055 1,113
Chase Bank Warrants 564 475 639
Stock Options 114 314 1,405
--------- -------- --------

Average shares 15,970 15,582 16,868
========= ======== ========

Basic earnings per share from continuing operations $ 1.09 $ .19 $ .37
Basic loss per share from discontinued operations (.73) (.16) (.06)
Basic earnings per share from cumulative effect of accounting change .92 -- --
--------- -------- --------
Basic earnings per share $ 1.28 $ .03 $ .31
========= ======== ========

Diluted earnings per share from continuing operations $ .99 $ .17 $ .31
Diluted loss per share from discontinued operations (.66) (.14) (.05)
Diluted earnings per share from cumulative effect of accounting change .82 -- --
--------- -------- --------
Diluted earnings per share $ 1.15 $ .03 $ .26
========= ======== ========

NOTE 5. USE OF ESTIMATES AND ASSUMPTIONS

Use of Estimates. The preparation of financial statements in conformity with
- ------------------
accounting principles generally accepted in the United States of America
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. Listed below are
the estimates and assumptions that management considers to be significant in the
preparation of its financial statements.

- Allowance for Doubtful Accounts -- The Company estimates losses for
uncollectible accounts based on the aging of the accounts receivable and the
evaluation of the likelihood of success in collecting the receivable.

- Recovery of Long-Lived Assets -- The Company evaluates the recovery of
its long-lived assets periodically by analyzing its operating results and
considering significant events or changes in the business environment.

- Operations Held-for-Sale and Discontinued Operations -- The Company
writes down the carrying value of its held-for-sale operations to the estimate
of the fair value of such operations. Additionally, estimates and accruals are
made related to future operations that could significantly change and result in
increased or decreased charges during future periods.

- Loss Contracts -- The Company evaluates its revenue-producing contracts
to determine whether the projected revenues of such contracts exceed the direct
costs to service such contracts. These evaluations include estimates of future
revenues and expenses. Accruals for loss contracts are adjusted upward or
downward based on these evaluations.

- Acquisition Accounting -- The Company estimates the fair value of assets
and liabilities when allocating the purchase price of an acquisition.

- Income Taxes -- The Company assumes the deductibility of certain costs in
its income tax filings and estimates the future recovery of deferred tax assets.

- Legal Accruals -- The Company estimates the amount of potential exposure
it may have with respect to litigation, claims and assessments.

- Cell Development and Final-Closure/Post-Closure Amortization - The
Company expenses amounts for cell development usage and final closure and
post-closure costs for each cubic yard of waste accepted at its disposal
facilities. In determining the amount to expense for each cubic yard of waste
accepted, the Company estimates the cost to develop each disposal cell and the
final closure and post-closure costs for each disposal facility. The expense for
each cubic yard is then calculated based on the remaining permitted capacity and
the total permitted capacity. Estimates for final closure and post-closure costs
are developed using input from third party engineering consultants, Company
engineers and internal accountants. Management reviews estimates at least
annually. The estimates for landfill final closure and post-closure consider
when the costs would actually be paid and, where appropriate, inflation and
discount rates.

Actual results could differ materially from the estimates and assumptions that
the Company uses in the preparation of its financial statements. As it relates
to estimates and assumptions in amortization rates and environmental remediation
liabilities, significant engineering and accounting input is required. The
Company reviews these estimates and assumptions no less than annually. In many
circumstances, the ultimate outcome of these estimates and assumptions may not
be known for decades into the future. Actual results could differ materially
from these estimates and assumptions due to changes in environmental-related
regulations, changes in future operational plans, and inherent imprecision
associated with estimating environmental matters so far into the future.

NOTE 6. CONCENTRATIONS AND CREDIT RISK

Major Customers. The Company manages the disposal of hazardous and radioactive
- ----------------
waste under a contract with the U.S. Army Corps of Engineers Formerly Utilized
Site Remedial Action Program ("FUSRAP"), and the disposal of steel mill dust
(KO-61) under various contracts. The following customers accounted for more
than 10% of revenue during 2002, 2001 and 2000:

% OF REVENUE FOR YEAR ENDING
CUSTOMER 2002 2001 2000
---- ---- ----
U.S. Army Corps of Engineers 27 15 -
Nucor Steel Company 13 11 -
Tamco Steel Company - - 20

Receivable balances from these customers as of December 31, were as follows ($
in thousands):

CUSTOMER 2002 2001
------ ------
U.S. Army Corps of Engineers $1,730 $2,238
Nucor Steel Company $ 408 $ 309

Credit Risk Concentration. The Company maintains most of its cash with Wells
- ---------------------------
Fargo Bank in Boise, Idaho. Substantially all of the cash balances are
uninsured and are not used as collateral for other obligations. 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
customers to provide collateral for such obligations.

Labor Concentrations. As of December 31, 2002, the Paper, Allied-Industrial
- ----------------------
Chemical & Energy Workers International Union, AFL-CIO, CLC (PACE), represents
11 employees at one of the Company's facilities, and 188 other employees did not
belong to a union.

NOTE 7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2002 and 2001, were as follows (in
thousands):

2002 2001
--------- ---------

Construction in progress $ 797 $ 1,023
Land and improvements 4,831 3,452
Cell development costs 14,262 26,396
Buildings and improvements 14,031 14,424
Disposal facility equipment 9,421 9,424
Vehicles and other equipment 6,360 11,882
--------- ---------
49,702 66,601
Less: Accumulated depletion, depreciation
and amortization (22,704) (28,139)
--------- ---------
Property, Plant and Equipment $ 26,998 $ 38,462
========= =========

Depreciation expense was $4,864,000, $4,076,000 and $1,899,000 for 2002, 2001
and 2000, respectively.

NOTE 8. FACILITY DEVELOPMENT COSTS

A wholly owned subsidiary of the Company, US Ecology, 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 abandoned
efforts to obtain the project property from the U.S. Department of the Interior.
For the Company to realize its investment, the federal government will need to
transfer the land to the State of California, or the Company will need to
recover monetary damages from the State of California. The Company has taken
steps to recover its investment in Ward Valley and will continue to seek
recovery.

In early 1997, the Company filed two lawsuits against the United States. In the
first case, US Ecology sued to recover site development costs as well as lost
profits and lost opportunity costs. US Ecology lost this case at the trial
court level and in the Federal Circuit Court of Appeals, and such rulings are
now final. In the second case, US Ecology sought an order from a federal court

to compel the transfer of the Ward Valley 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 also now final. The Company's appeals in the two federal
lawsuits were dismissed in part based on lack of standing following the State of
California's decision not to appeal.

The Company filed a lawsuit against the State of California on May 2, 2000,
seeking to compel California to acquire the property to build the Ward Valley
project and monetary damages in excess of $162 million. In October 2000, the
California trial court dismissed the case, and the Company appealed. On
September 5, 2001, the California appellate court upheld the trial court's
decision in part and denied it in part, remanding the case for further
proceedings on the Company's promissory estoppel claim. On October 15, 2001,
both the Company and the State filed petitions for review with the California
Supreme Court. On December 5, 2001 the California Supreme Court denied both
requests and the case was remanded back to Superior Court in San Diego,
California. Counsel for the Company subsequently filed a peremptory writ
seeking appointment of a new trial court judge to hear the case. This writ was
granted, followed by a December 2002 ruling declining to grant a summary
judgment filed by the State seeking a scheduling conference in February, 2003.
Trial has been set for February 24, 2003. The Company intends to vigorously
prosecute the case.

In November 1998 the Company finalized a settlement with the bank that provided
the financing for the Ward Valley facility. As part of the settlement, the
Company issued the bank warrants to purchase 1,349,843 shares of common stock at
$1.50 a share expiring June 30, 2010. The Company also committed the first
$29,600,000 of any monetary settlement or judgment with the State of California
to the bank. In return for the warrants and part of any settlement or a share
of future disposal facility revenue, the Company received a $37,700,000
reduction in the amount owed to the bank.

All costs through July 31, 1999 relating 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,
2002, the Company had deferred $20,952,000 of pre-operational facility
development costs of which $895,000 represented capitalized interest. These
deferred costs and additional amounts owed the Company under terms of its
accepted proposal to develop the Ward Valley facility were intended to be
recovered during the facility's first 20 years of operation from disposal fees
approved by the Department of Health Services ("DHS").

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 the
majority of the funding to develop the Butte facility. As of December 31, 2002,
the Company has contributed and capitalized approximately $6,478,000 in costs,
$386,000 which is capitalized interest toward development of the Butte facility.
In December 1998, the State of Nebraska proposed to deny 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 to 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 major generators are providing the majority of funding in the
litigation, and have provided funding to support the minimal level of work
required to maintain the project pending the outcome of the litigation. In
September 2002, the court ruled in favor of the plaintiffs, awarding $153
million, off which the Company was to receive twelve million dollars reflecting
the Company's actual damages and interest. The State of Nebraska has appealed
the judge's ruling.

The timing and outcome of the above matters are unknown. The Company has alleged
that the State of California has abandoned the project. No litigation is
currently pending to compel the state to continue development of the Ward Valley
project and a state law has been enacted effectively precluding disposal
facility development at that site. However, the Company believes that its
damages claim is strong and that a substantial recovery will ultimately be
obtained through its litigation. The Company also continues to participate in
the CIC legal action. 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, operation of that facility does not commence or the
Company is unable to recoup its investments in either or both projects through
legal recourse, it may have a material adverse effect on its financial position.

The following table shows the ending capitalized balances for facility
development costs for the periods ended December 31, 2002 and December 31, 2001
(in thousands):

Capitalized Costs Capitalized 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
================== ===================== =======

NOTE 9. CUMULATIVE EFFECT OF ACCOUNTING CHANGE AND CLOSURE AND POST CLOSURE
OBLIGATION

Accrued closure and post-closure liability represents the expected future costs,
including corrective actions and remediation, associated with closure and
post-closure of the Company's Operating and Non-Operating disposal facilities.
Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated, consistent with
Statement of Financial Accounting Standards No. 5 "Accounting for Contingencies"
("FAS 5"). The Company performs periodic reviews of both non-operating and
operating sites and revises accruals for estimated post-closure, remediation or
other costs as 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.

The Company does not bear financial responsibility for closure and post-closure
of the disposal facilities located on State owned land at Beatty, Nevada and
Richland, Washington. Nevada and Washington collect fees from a portion of the
disposal charges on a quarterly basis from the Company. Such fees are deposited
in dedicated, State controlled funds to cover the future costs of closure and
post-closure care and maintenance. Such fees are periodically reviewed by the
States and are based upon engineering cost estimates provided by the Company and
approved by the States.

As described in Note 2, the Company implemented Statement of Financial
Accounting Standards 143, Accounting for Asset Retirement Obligations (FAS 143),
effective January 1, 2002. FAS 143 requires a liability to be recognized as part
of the fair value of future asset retirement obligations and an associated asset
to be recognized as part of the carrying amount of the underlying asset.
Previously, the Company recorded a Closure and Post Closure Obligation for the
pro-rata amount of disposal space used to the original space available. On
January 1, 2002, in accordance with FAS 143, this obligation was valued at the
current estimated closure cost, increased by a cost of living adjustment for the
estimated time of payment, and discounted back to present value. A previously
unrecognized asset was also recorded. As further described in Note 2, during the
fourth quarter of 2002, the Company reduced the amount of the recorded asset by
$3,182,000. The result was an associated reduction in the cumulative effect
gain as a result of the change in accounting principle from the gain originally
reported in the first quarter of 2002 of $16,323,000 to the restated gain of
$13,141,000.

Liabilities are recorded when environmental assessments and/or remedial efforts
are probable, and the costs can be reasonably estimated consistent with FAS 5.
The Company performs periodic reviews of both non-operating and operating sites
and revises accruals for estimated post-closure, remediation and other costs as
necessary. Recorded liabilities are based on best estimates of current costs and
are updated periodically to reflect current technology, laws and regulations,
inflation and other economic factors.

Changes to reported closure and post closure obligations were as follows (in
thousands):

December 31, 2001 obligation $ 26,333
January 1, 2002 implementation of FAS 143 (restated) (11,130)
Accretion of obligation 1,099
Payment of obligation (1,414)
Adjustment of obligation 1,872
---------
December 31, 2002 obligation $ 16,760
=========

The adjustment of obligation is a change in the expected timing of cash
expenditures based upon actual and estimated cash expenditures. The primary
adjustment was a $2,038,000 increase in the estimated cost of removing
accumulated waste contamination at the discontinued Oak Ridge processing
business and preparing the facility for sale.

The reported closure and post closure obligation is recorded in the consolidated
balance sheet for the years ended December 31 as follows:

($in thousands) 2002 2001
------- -------

Accrued closure and post closure obligation, current portion $ 882 $ 700
Liabilities related to assets held for sale or closure, current portion 1,082 --
Accrued closure and post closure obligation, non-current portion 9,318 25,633
Liabilities related to assets held for sale or closure, non-current portion 5,478 --
------- -------
$16,760 $26,333
======= =======

The closure and post closure asset recognized and allocated as part of the
carrying amount of the underlying assets related to the retirement obligations
amounted to $2,011,000 upon the recalculated implementation described in Note 2.
Amortization expense and accumulated amortization for the year ended December
31, 2002 amounted to $199,000.

Cumulative effect of change in accounting principle as of January 1, 2002
included in the consolidated statement of operations is as follows ($ in
thousands):

Reduction in closure and post closure obligation $11,130
Initial recognition of closure and post closure asset (restated) 2,011
-------
Cumulative effect of implementation of FAS 143 $13,141
=======

NOTE 10. LONG TERM DEBT

On October 24, 2002, the Company announced that it had entered into a five year,
fully amortizing, $7,000,000 term loan agreement, effective October 28, 2002,
with Wells Fargo Bank to substantially refinance its $8,500,000 Idaho industrial
revenue bond obligation. The term loan provides for a variable interest rate
based upon the bank's prime rate or an offshore rate plus an applicable margin
that depends upon the Company's performance. The Company has pledged
substantially all of its fixed assets at the Grand View, Beatty, Richland, and
Robstown hazardous and radioactive waste facilities as collateral. The term
loan is cross-collateralized with the Company's line of credit. The Company
paid the $1,500,000 balance owing on the industrial revenue bond with cash on
hand.

Long-term debt at December 31 consisted of the following (in thousands):

INTEREST RATE AT DEC. 31, 2002 2002 2001
------------------------------- -------- --------

Term Loan VARIABLE 3.7% $ 6,883 $ --
Industrial revenue bond -- 8,500
Notes payable and other FIXED 6.9% AVERAGE 1,074 3,953
-------- --------
7,957 12,453
Less: Current maturities (1,985) (9,860)
-------- --------
Long term debt $ 5,972 $ 2,593
======== ========

Aggregate maturity of future minimum payments on long-term debt is as follows
(in thousands):

Year Ended December 31,
-----------------------
2003 $1,985
2004 1,874
2005 1,409
2006 1,400
2007 1,289
------
TOTAL $7,957
======

NOTE 11. REVOLVING LINE OF CREDIT

On October 15, 2002, the Company and Wells Fargo Bank entered into an amendment
to the line of credit that reduced the interest rate and fee structure, modified
existing financial covenants, reduced the periodic reporting requirements,
reduced the maximum amount available from $8,000,000 to $6,000,000 and extended
the maturity date to June 15, 2004. The amended line of credit is
collateralized by the Company's accounts receivable and is cross-collateralized
with the Company's term loan. Monthly interest only payments are required and
based on a pricing grid, under which the interest rate decreases or increases
based on the Company's ratio of funded debt to earnings before interest, taxes,
depreciation and amortization. The Company can elect to borrow monies utilizing
the Prime Rate or the offshore London Inter-Bank Offering Rate ("LIBOR") plus an
applicable spread. At December 31, 2002, the applicable interest rate on the
outstanding balance was 4.4%. 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 December 31, 2002 and 2001, the outstanding balance on the revolving line of
credit was $603,000 and $5,000,000, respectively. At December 31, 2002 and 2001,
the availability under the line of credit was $4,247,000 and $1,850,000,
respectively, with $1,150,000 of line of credit availability restricted for the
outstanding letter of credit utilized as financial assurance for the Company's
Sheffield, Illinois Non-Operating facility. The Company has continued to borrow
and repay according to business demands and availability of cash.

NOTE 12. OPERATING LEASES

On August 3, 2000, the Company entered into a $2,000,000 equipment sale and
leaseback transaction. The Company sold various Company-owned equipment and
rolling stock to a third party lessor. The Company received $2,000,000 in
proceeds from the asset sale and entered into an operating lease for the use of
the equipment beginning August 8, 2000 with monthly payments through September
8, 2006 and no security deposit. The lease allows for the early buyout of the
equipment at a fixed price after 60 months. The lease requires the Company to
pay customary operating and repair expenses and to observe certain operating
restrictions and covenants.

The Company realized a $1,098,000 gain on the sale of the equipment that will be
amortized over the life of the lease. The gain will be recognized proportionate
to the gross rental charged over the 66-month lease life. Proceeds from this
sale of assets were used to fund expansion of the El Centro facility and other
general business obligations. In November 2001, with the sale of the principal
assets of the Company's Nuclear Equipment Service Center, the Company repaid a
pro-rata portion of the lease. At December 31, 2002 and 2001, the unamortized
balance included in accrued liabilities was $497,000 and $658,000, respectively.

Other lease agreements primarily cover office equipment and office space.
Future minimum lease payments as of December 31, 2002 were as follows ($ in
thousands):

Minimum Lease Payment
2003 $ 645
2004 648
2005 599
2006 213
2007 79
---------------------
Total Minimum Payments $ 2,184
=====================

Rental expense from continuing operations amounted to $461,000, $983,000 and
$769,000 during 2002, 2001 and 2000, respectively.

NOTE 13. PREFERRED STOCK

In November 1996, the Company issued 3,000,000 Series E Warrants to purchase
common stock at $1.50 per share in a private offering to four of its directors
to fulfill a prior banking requirement. On March 29, 2002, a Series E warrant
holder serving on the Board of Directors exercised 650,000 Series E warrants.
At December 31, 2002, there were 2,350,000 Series E warrants outstanding, which
expire July 1, 2003.

In September 1995, the Board of Directors authorized the issuance of 105,264
shares of preferred stock designated as 8 3/8% Series D Cumulative Convertible
Preferred Stock (Series D Preferred Stock), which were sold in a private
offering to a group of members or past members of the Board of Directors for
$4,759,000. At December 31, 2002, each of the 100,001 currently outstanding
shares of Series D Preferred Stock were convertible at any time at the option of
the holder into 17.09 shares of the Company's common stock, equivalent to a
conversion price of $3.71 per share due to dilution by subsequent sales of
common stock.

Dividends on the Series D Preferred Stock are cumulative from the date of
issuance and payable quarterly, although since payment of dividends is
prohibited by the current bank credit facility, dividends in arrears are due for
January 1, 1999 through December 31, 2002. Accrued dividends as of December
31, 2002 totaled $1,591,000 and are included in other long-term liabilities.

On January 14, 2003, the Company extended an offer to the holders of the
Company's Series D Preferred Stock to repurchase their stock for the original
sales price of $47.50 a share plus accrued but unpaid dividends. Repurchase was
subject to approval of the Company's Board of Directors and Wells Fargo Bank,
and required a minimum of 67% of the Series D Preferred Stock to be tendered by
the stockholders. The offer was accepted by all Series D holders and will expire
if the Company does not repurchase offered shares prior to July 31, 2003. While
Wells Fargo Bank has not waived the prohibition on the payment of dividends, it
has agreed to consider waiving the prohibition with respect to the repurchase of
the Series D Preferred Stock and payment of accrued dividends. Should Wells
Fargo Bank allow the Company to repurchase the stock, approximately $6,500,000
of cash would be required in order to effect the transaction.

NOTE 14. STOCK OPTION PLANS

The Company presently maintains two stock option plans. 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 options may have a term longer than ten years.

In 1992, the Company adopted the two plans as the 1992 Stock Option Plan for
Employees and the 1992 Stock Option Plan for Directors. On May 13, 1999, 500,000
shares were added to the Employee's Plan of 1992 for a total of 1,300,000 shares
authorized. 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. On May 24, 2001, 350,000 shares were added to the Directors Plan of
1992 for a total of 1,000,000 shares authorized. Both plans provide for
cancelled options to be returned to the plan for re-issue.

The stock option plan summary and changes during years ended December 31 are as
follows:

2002 2001 2000
--------------- --------------- ---------------

Options outstanding, beginning of year 1,128,650 1,448,898 1,326,572
Granted 147,500 100,000 135,926
Exercised (108,500) (59,000) (13,600)

Canceled (414,500) (361,248) --
--------------- --------------- ---------------
Options outstanding, end of year 753,150 1,128,650 1,448,898
=============== =============== ===============

Price range per share of
outstanding options $1.00 - $10.13 $1.00 - $14.75 $1.00 - $14.75

Price range per share of options exercised $ 1.25 - $3.00 $ 1.25 - $2.00 $ 1.25 - $2.00

Price range per share of options canceled $1.06 - $14.74 $ 1.25 - $5.00 $ --

Options exercisable at end of year 753,150 1,020,700 1,448,898
=============== =============== ===============

Options available for future grant at end
of year 1,202,850 1,453,350 630,002
=============== =============== ===============

The following table summarizes information about the stock options outstanding
under the Company's option plans as of December 31, 2002:

Weighted
average Weighted Weighted a
remaining average verage
Range of exercise contractual life Number exercise price Number exercise price
price per share (years) outstanding per share exercisable per share
- ------------------ ----------------- ----------- --------------- ----------- ---------------

1.00 - $1.47 6.0 152,500 $ 1.32 152,500 $ 1.32
1.60 - $2.25 6.8 154,500 $ 1.96 154,500 $ 1.96
2.42 - $3.50 7.2 155,500 $ 2.93 155,500 $ 2.93
3.75 - $5.00 5.7 217,500 $ 4.00 217,500 $ 4.00
10.13 1.1 73,150 $ 10.13 73,150 $ 10.13
----------- -----------
753,150 753,150
=========== ===========

As of December 31, 2002, the 1992 Stock Option Plan for Employees had options
outstanding for 218,150 shares with 842,150 shares remaining available, and
under the 1992 Stock Option Plan for Directors, options were outstanding for
535,000 shares with 360,700 shares remaining available.

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 2002, 2001 and 2000:

2002 2001 2000
----------- ---------- ---------

Expected volatility 49% - 102% 51% 116%
Risk-free interest rates 4.75% 5.7% 5.01%
Expected lives 10 YEARS 10 years 3 years
Dividend yield 0% 0% 0%
Weighted-average fair value of options granted
during the year (Black-Scholes) $ 1.92 $ 1.11 $ 2.23

On February 11, 2003, the Company offered a significant number of options to
four key employees at the following prices:

Exercise Price of Option Number of Options Issued
- ------------------------- ------------------------
3.00 270,329
4.50 315,384
6.50 173,011

NOTE 15. 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").

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 Plan in 2002, 2001 and 2000 were $522,000,
$209,000 and $176,000, respectively. The contributions for 2002 included
$294,000 paid as part of the union settlement at the discontinued Oak Ridge
operations.

NOTE 16. INCOME TAXES

The components of the income tax provision (benefit) were as follows (in
thousands):

Year Ended December 31,
2002 2001 2000
-------- ----- ------
Current - State $ (221) $ 186 $ (12)
Deferred - Federal (8,284) -- --
-------- ----- ------

$(8,505) $ 186 $ (12)
======== ===== ======

The following table reconciles between the effective income tax (benefit) rate
and the applicable statutory federal and state income tax (benefit) rate:

Year Ended December 31,
2002 2001 2000
------ ----- -----
Income tax statutory rate 34% 34% 34%
Reversal of valuation allowance for deferred tax assets (109) -- --
Timing differences between book and tax basis (34) (34) (21)
State income tax and loss carry forward (3) 17 (12)
Other, net -- -- (1)
------ ----- -----
Total effective tax rate (112)% 17% --%
====== ===== =====

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 as of December 31 were as follows (in thousands):

2002 2001
--------- ---------

CURRENT
- -------
Assets:
Net operating loss carry forward $ 2,470 $ --
Accruals, allowances and other 1,362 --
--------- ---------
Total gross deferred tax assets - current portion 3,832 --
Less valuation allowance (1,087) --
--------- ---------
Net deferred tax asset - current portion 2,745 --
--------- ---------

2002 2001
--------- ---------
NON-CURRENT
- -----------
Assets:
Environmental compliance and other site related costs,
principally due to accruals for financial reporting purposes $ 4,054 $ 5,128
Depreciation and amortization 1,236 2,948
Net operating loss carry forward 8,852 11,137
Accruals, allowances and other 2,543 477
--------- ---------
Total gross deferred tax assets - non-current portion 16,685 19,690
Less valuation allowance (10,777) (19,321)
--------- ---------
Liability:
Capitalized interest (369) (369)
--------- ---------
Net deferred tax assets - non-current portion $ 5,539 $ --
========= =========

The Company has historically recorded a valuation allowance for certain deferred
tax assets due to 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. During 2002, the Company reevaluated the deferred tax asset
valuation allowance and determined it was "more likely than not" that a portion
of the deferred tax asset would be realizable. Consequently, the Company
decreased the portion of the valuation allowance related to its operating
facilities.

The Company's net operating loss carry forward of approximately $30,699,000 at
December 31, 2002, begins to expire in the year 2006. Of this carry forward,
$2,605,000 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, $904,000 in
2007, and $908,000 in 2008. The remaining unrestricted net operating loss carry
forward expires $976,000 in 2010, $8,657,000 in 2011, $7,828,000 in 2012,
$6,927,000 in 2018, $3,208,000 in 2019, and $498,000 in 2020.

In 1996, the Company filed an amended federal income tax return claiming a
refund of approximately $740,000. In September 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
Company net operating loss carry forwards. In November 1999, the Company
protested this denial. The Company tentatively settled this claim in 2000;
however the settlement was rejected by the Congressional Joint Committee on
Taxation pending US Supreme Court consideration of a germane issue. This issue
was later resolved in favor of the Company's position. On December 4, 2002, the
IRS approved a settlement to pay the Company $605,000 plus interest and
confirmed the Company's net operating loss carry forward after 1995. Payment is
pending.

NOTE 17. 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.

Effective January 1, 2003, the Company established the American Ecology
Corporation Management Incentive Plan. The Plan provides for selected
participants to receive bonuses tied to pre-tax operating income levels.
Bonuses under the plan are to be paid out over three years with a maximum in any
one year of $1,125,000 in bonuses if pre-tax operating income is in excess of
$12,000,000.

On February 11, 2003, the Company offered employment agreements to four key
employees. The agreements expire December 31, 2004 and 2005 and provide for
aggregate minimum annual salaries of $639,000.

LITIGATION
MANCHAK V. US ECOLOGY, INC., U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA,
- --------------------------------
CIVIL ACTION NO. 96-494.

US ECOLOGY, INC. V. THE STATE OF CALIFORNIA, ET AL., CASE NO.GIC747562, SUPERIOR
- ---------------------------------------------------
COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO

In May 2000, the Company's subsidiary, US Ecology, Inc., sued the State of
California, its Governor, Gray Davis, and the Director of its Department of
Health Services (DHS) and other State entities ("the State") for monetary
damages exceeding $162 million. The suit stems from the State's abandonment of
the Ward Valley low-level radioactive waste ("LLRW") disposal project. Laws on
the books since the 1980s require the state to build a disposal site for LLRW
produced in California, Arizona, North Dakota and South Dakota; member states of
the Southwestern Compact. In keeping with these laws, US Ecology was selected
in 1985 to locate and license the site using its own funds on a reimbursable
basis. In 1993, US Ecology obtained a license from the DHS that it continues to
hold and entered a ground lease.

The State successfully defended the license against court challenges and, until
Governor Davis took office, actively pursued conveyance of the site from the
federal government as required by law and its contractual obligations to US
Ecology. In September 2000, the Superior Court granted California's motion to
dismiss all causes of action. The Company appealed this decision to the
California Court of Appeal Fourth Appellate District in November 2000. In
September 2001, the Appellate Court upheld the trial court's decision in part
and denied it in part, remanding the case for trial based on the Company's
promissory estoppel claim. In December 2001, the California Supreme Court denied
review. Counsel for the Company filed a peremptory writ seeking appointment of a
new trial court judge to hear the case, which was granted. On November 20, 2002,
the Superior Court denied the State's motions for summary judgment as well as a
protective order seeking to prevent production of certain documents and
deposition of persons most knowledgeable in the Governor's office involved in
the Ward Valley project. A settlement conference was held without result on
December 9, 2002. Discovery is complete and the trial is scheduled to begin on
February 24, 2003. The Company intends to continue prosecuting this claim
vigorously; however, no assurance can be given that the Company will recover any
damages.

MATTIE CUBA, ET AL. V. AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORPORATION, ET
- --------------------------------------------------------------------------------
AL., CAUSE NO. 2000-092, 4TH JUDICIAL DISTRICT COURT, RUSK COUNTY, TEXAS
- ---

RESOLVED LITIGATION
- --------------------

US ECOLOGY, INC. V. DAMES & MOORE, INC., CASE NO. CV OC 0101396D, FOURTH
- -----------------------------------------------------
JUDICIAL DISTRICT COURT, ADA COUNTY, IDAHO

DAMES & MOORE, INC. V. US ECOLOGY, INC., ET AL., INDEX NO. 602567-01, SUPREME
- ---------------------------------------------------
COURT OF NEW YORK, NEW YORK COUNTY, NEW YORK

INTERNAL REVENUE SERVICE DISPUTE
- -----------------------------------

NOTE 18. RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

Receivables for the year ended December 31 consisted of the following (in
thousands):

2002 2001
-------- --------
Accounts receivable - trade $ 8,049 $11,997
Unbilled revenue 2,818 1,825
Other -- 28
-------- --------
10,867 13,850
Allowance for uncollectible accounts (407) (1,176)
-------- --------
$10,460 $12,674
======== ========

The allowance for doubtful accounts is a provision for un-collectible accounts
receivable and unbilled receivables. The allowance, as a general company
policy, is increased by a monthly accrual equal to approximately 1 % of sales.
The allowance is decreased by accounts receivable as they are written off. The
allowance is adjusted periodically to reflect actual experience ($in thousands)

Allowance for
Description doubtful accounts
----------- -------------------

Balance January 1, 2000 $ 619
Plus 2000 provision 966
Less accounts written off 2000 (1,017)
-------------------
Balance December 31, 2000 568

Plus 2001 provision 338
Plus allowance acquired in Envirosafe Services of Idaho acquisition 530
Less accounts written off 2001 (260)
-------------------
Balance December 31, 2001 $ 1,176

Less 2002 benefit (301)
Less allowance for discontinued operations (240)
Less accounts written off 2002 (228)
-------------------
Balance December 31, 2002 $ 407
===================

NOTE 19. ACQUISITIONS, DIVESTITURES AND DISCONTINUED OPERATIONS

As of December 31, 2002, the components of "Assets Held for Sale or Closure"
consisted of certain assets relating to the El Centro municipal waste disposal
facility, which the Company sold to a wholly-owned subsidiary of Allied Waste
Industries, Inc. on February 13, 2003, and the assets and liabilities relating
to the Oak Ridge processing facility and field services operations for which

management has implemented a wind down and disposal plan and have been
classified as "held for sale or closure". Accordingly, the revenue, costs and
expenses and cash flows relating to the El Centro and Oak Ridge facility and
field services operations have been excluded from the results from continuing
operations and have been reported as "Loss from discontinued operations" and as
"Net cash used by discontinued operations". Prior periods have been restated to
reflect the discontinued operations. The assets and liabilities of discontinued
operations included within the consolidated balance sheet as of December 31,
2002 are as follows (in thousands):

Processing and Field El Centro Disposal Total Assets Held for
Services Facility Facility Sale or Closure
--------------------- ------------------- ----------------------

Current assets
- --------------
Current assets $ 2,599 $ 648 $ 3,247
Property & equipment, net 565 6,910 7,475
--------------------- ------------------- ----------------------
3,164 7,558 10,722
===================== =================== ======================
Non-current assets
- ------------------
Property, plant & equipment, net 1,436 -- 1,436
Other 49 -- 49
--------------------- ------------------- ----------------------
1,485 -- 1,485
===================== =================== ======================
Current liabilities
- -------------------
Accounts payable & accruals 5,416 108 5,524
Current portion long term debt 112 570 682
Current portion closure/post
closure obligations -- 1,082 1,082
Other 601 76 677
--------------------- ------------------- ----------------------
6,129 1,836 7,965
===================== =================== ======================
Non-current liabilities
- -----------------------
Closure/post closure obligations 5,478 -- 5,478
Long-term debt 72 67 139
Other 77 5 82
--------------------- ------------------- ----------------------
5,627 72 5,699
===================== =================== ======================

Depreciation and amortization expense relating to assets classified as "Held for
Sale or Closure" amounted to $1,202,000, $954,000 and $129,000 during 2002, 2001
and 2000, respectively.

Operating results for the discontinued operations were as follows for years
ending December 31:

Processing and Field El Centro Disposal Total Discontinued
Services Operations Facility Operations
---------------------- -------------------- --------------------

2002
- ----
Revenues, net $ 17,018 $ 2,563 $ 19,581
Operating income (loss) (3,296) 507 (2,789)
Net income (loss) (10,930) 466 (10,464)
Basic earnings (loss) per share (.76) .03 (.73)
Diluted earnings (loss) per share (.69) .03 (.66)

2001
- ----
Revenues, net $ 13,391 $ 2,450 $ 15,841
Operating income (loss) (3,160) 432 (2,728)
Net income (loss) (2,567) 378 (2,189)
Basic earnings (loss) per share (.19) .03 (.16)
Diluted earnings (loss) per share (.17) .03 (.14)

2000
- ----
Revenues, net $ 14,506 $ 398 $ 14,904
Operating income (loss) (121) (598) (719)
Net loss (172) (641) (813)
Basic loss per share (.01) (.05) (.06)
Diluted earnings loss per share (.01) (.04) (.05)

El Centro Disposal Facility. During 2002, management initiated a plan to
actively market the municipal waste disposal facility located outside Robstown,
Texas, and closed a sale transaction on February 13, 2003 for substantially all
of the assets held at the facility. For segment reporting purposes, the El
Centro municipal waste disposal facility operating results were previously
classified as "Operating Disposal Facilities".

Oak Ridge Processing Facility and Field Services. During 2002, the Company
offered for sale its Processing Facility and Field Services operations based in
Oak Ridge, TN. On December 27, 2002, the Company announced it was ceasing
revenue-producing operations at this facility and would no longer be accepting
waste. Based upon the amount of waste present at the facility and the
preferences of the potential buyers, the Company plans to remove accumulated
customer and Company waste as needed, to sell the facility. Removal of
accumulated waste is considered necessary by management to maintain a safe and
compliant facility, as well as prepare the facility for sale. Disposal of the
waste at the facility is expected to be completed by July 2003, and a
significant portion is currently being shipped off site for processing and
disposal. Upon completion of the removal of material on hand, management
intends to resume discussions with potential buyers identified during the fourth
quarter of 2002 for the remaining facility components. In connection with the
discontinuance of the processing operations and field services, the Company has
recorded $7,018,000 in pre-tax charges to cover estimated costs associated with
the wind down and asset disposal, which are as follows (in thousands):

ACCRUED COSTS AMOUNT
- ------------------------------------------- -------

Closure, post closure obligation adjustment $ 2,038
Impairment of property, plant and equipment 1,593
Impairment of receivables 360
External waste disposal 1,227
Payroll and related costs 778
Facility operating costs 641
Insurance costs 381
-------
$ 7,018
-------

In conjunction with the plan to sell the facility, an updated third party
engineering study was performed, which resulted in an additional $2,038,000
estimated liability related to closure and post closure costs. This liability
pertains to certain materials located on the premises which were previously
received or used in the operation of the business.

The Company has recorded an impairment charge of $1,593,000 on certain
buildings, improvements and equipment at the facility. The estimated fair value
of the buildings, improvements and equipment was based upon the estimated net
realizable value after substantial facility clean-up activities take place.
Additionally, certain assets expected to be disassembled and disposed were fully
impaired as a result of the wind down and disposal plan. Depreciation on the
long-lived assets at the processing facility will cease as the current recorded
values, net of the impairment charges, represent the net realizable value.

To prepare the facility for sale or possible closure, the Company will be
required to dispose of all waste on site. Management estimates the external
disposal cost of these materials will be $1,227,000 and expects these costs to
be incurred during 2003.

On December 27, 2002, management informed all employees of the intention to
cease operations and specifically identified those employees who would be
involved in the wind down operations. Terminated employees were compensated for
prior service, provided health coverage through January 31, 2003, and notified
of the proposed severance package. Terminated non-union employees were paid
severance consistent with Company policy. For employees covered under the
collective bargaining agreement, the Company entered into good faith severance
negotiations with representatives of the local and international union. The
Company has met on two occasions with the union's representatives to negotiate
severance, however, no agreement has been reached, despite the Company's best
efforts to reach a mutually acceptable separation package. Both sides have
amended their original proposals during these negotiations; however, agreement
has not been reached. On February 3, 2003 the Company extended another severance
package to Union employees, which was not accepted. The declined offer would
have resulted in a charge of approximately $168,000 in 2003 to discontinued
operations. Currently, the Company is open to additional discussions with the
labor union to reach a satisfactory resolution of any severance payment. The
outcome of these discussions or negotiations and any severance or benefits
associated with the terminations cannot reasonably be estimated at this time
and, therefore, no costs relating to these employees have been included in the
above charges. However, management believes any such payment will not be

material. If agreement is not reached, management expects the union to litigate
the matter. Payroll and related costs, facility operating costs and insurance
costs noted above are the anticipated costs to be incurred by the Company during
the wind down phase.

In accordance with FAS 143, the Company has fully accrued for all estimated
closure and post closure obligations related to the Oak Ridge processing
facility, which amounted to $5,478,000 at December 31, 2002 (see Note 9). In
the event the Company divests of the facility in a sale transaction, the Company
may not incur the entire closure, which may result in a gain being realized in
future periods.

For business segment reporting purposes, the processing and field services
operating results were previously classified as "Processing and Field Services".

On October 11, 2001, the Company sold the primary assets of the Nuclear
Equipment Service Center ("NESC") for $800,000. NESC assets with a book value
of $418,000 were sold and a gain on sale of property and equipment was
recognized for $382,000. NESC was reported under the Company's Processing and
Field Services segment and is included in discontinued operations.

On November 11, 2001, the Company sold its brokerage business that collected and
transported small amounts of waste for processing and disposal in larger, more
economical batches (the "Mid West Brokerage"). Other than a fully depreciated
semi-truck and trailer, no tangible property was sold and a gain on sale was
recognized for $100,000. Mid West Brokerage was reported under the Company's
Processing and Field Services segment and is included in discontinued
operations.

ACQUISITION OF ENVIROSAFE SERVICES OF IDAHO, INC.

On February 1, 2001, the Company, by its wholly-owned subsidiary American
Ecology Environmental Services Corporation, a Texas corporation, acquired
Envirosafe Services of Idaho, Inc. a Delaware corporation ("ESII"), pursuant to
a Stock Purchase Agreement from Envirosource Technologies Inc., a Delaware
corporation and Envirosource, Inc., a Delaware corporation, and parent company
of Envirosource Technologies Inc. This acquisition was accounted for as a
purchase and approved by the board of directors of each company.

Under the terms of the agreement, the Company paid $1,000 in cash for all of the
outstanding shares of ESII, a subsidiary of Envirosource Technologies Inc. The
Company acquired all of the authorized and issued stock of ESII, thereby
obtaining ownership of all ESII assets and liabilities. The principal ESII
assets were a RCRA and TSCA permitted hazardous and PCB waste treatment and
disposal facility located in southwestern Idaho, and exclusive rights to use a
patented hazardous waste treatment process for steel mill electric arc furnace
dust within a defined service territory in the western United States.

With the acquisition of ESII, the Company acquired $2,576,000 in cash,
$2,188,000 in accounts receivable, $12,417,000 in property and equipment, and
$3,935,000 in other assets. The Company also assumed $1,660,000 of accounts
payable, an $8,500,000 industrial revenue bond obligation, $10,038,000 of
closure/post-closure liabilities, and $917,000 of other accrued liabilities. No
goodwill was recorded with this acquisition.

NOTE 20. REVERSE AND FORWARD STOCK SPLIT

On June 29, 2001, the Company completed a reverse 1 for 100 stock split with
fractional shareholders receiving cash for their fractional interest. The
Company purchased and cancelled 60,801 common shares for $148,000 and incurred
$28,000 in transaction costs. Later on June 29, 2001 the Company completed a
100 for 1 forward stock split.

The effect of these transactions was to remove approximately 3,000 shareholders
who held, on average, 20 shares each and for whom it was prohibitively expensive
to trade their shares. The Company, in return, was able to lower reporting
costs by removing the 33 percent of shareholders who in total owned less than
..5% of the outstanding common shares.

NOTE 21. OPERATING SEGMENTS

The Company operates with two segments, Operating Disposal Facilities, and
Non-Operating Disposal Facilities. These segments have been determined by
evaluating the Company's internal reporting structure and nature of services
offered. The Operating Disposal Facility segment represents Disposal Facilities

accepting hazardous and radioactive waste. The Non-Operating Disposal Facility
segment represents facilities which are not accepting hazardous and/or
radioactive waste or are awaiting approval to open.

As of December 27, 2002, the Company announced it was discontinuing operations
at the Processing and Field Services segment which aggregated, volume-reduced,
and performed remediation and other services on radioactive material, but
excluded processing performed at the disposal facilities. All prior segment
information has been restated in order to present the operations at the Oak
Ridge facility, including the Field Services division, as discontinued
operations.

Effective December 31, 2002, the Company classified the El Centro municipal
landfill as an asset held for sale due to the expected sale of the facility
which occurred on February 13, 2003. All prior segment information has been
restated in order to present the operations of the El Centro landfill as
discontinued operations.

Income taxes are assigned to Corporate, but all other items are included in the
segment where they originated. Inter-company transactions have been eliminated
from the segment information and are not significant between segments.

Summarized financial information concerning the Company's reportable segments is
shown in the following table (in thousands $(000).

Operating Non-Operating Discontinued
Disposal Disposal Processing and
Facilities Facilities Field Services Corporate Total

2002
- ----
Revenue $ 46,494 $ 295 $ -- $ -- $ 46,789
Direct operating cost 23,436 1,787 -- -- 25,223
------------ --------------- ---------------- ----------- ---------
Gross profit 23,058 (1,492) -- -- 21,566
S,G&A 8,000 103 -- 4,528 12,631
------------ --------------- ---------------- ----------- ---------
Income (loss) from operations 15,058 (1,595) -- (4,528) 8,935
Investment income 13 -- -- 18 31
Gain (loss) on sale of assets (20) 4 -- 1 (15)
Interest expense 711 -- -- 109 820
Other income (expense) 78 (389) -- (231) (542)
------------ --------------- ---------------- ----------- ---------
Income before income tax,
discontinued operations and
cumulative effect 14,418 (1,980) -- (4,849) 7,589
Income tax benefit -- -- -- 8,505 8,505
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations and cumulative effect 14,418 (1,980) -- 3,656 16,094
Gain (loss) from discontinued
operations 466 -- (10,930) -- (10,464)
------------ --------------- ---------------- ----------- ---------
Income before cumulative effect 14,884 (1,980) (10,930) 3,656 5,630
Cumulative effect of change in
accounting principle 14,983 1,548 (3,390) -- 13,141
------------ --------------- ---------------- ----------- ---------
Net income $ 29,867 $ (432) $ (14,320) $ 3,656 $ 18,771
============ =============== ================ =========== =========
Depreciation and accretion $ 6,443 $ 458 $ 518 $ 361 $ 7,780
Capital Expenditures $ 3,010 $ 6 $ 300 $ 30 $ 3,346
Total Assets $ 44,832 $ 27,467 $ 4,649 $ 10,177 $ 87,125
2001
- ----
Revenue $ $40,088 $ 87 $ -- $ -- $ 40,175
Direct operating cost 21,637 1,141 -- -- 22,778
------------ --------------- ---------------- ----------- ---------
Gross profit 18,451 (1,054) -- -- 17,397
S,G&A 8,287 556 -- 5,431 14,274
------------ --------------- ---------------- ----------- ---------
Income from operations 10,164 (1,610) -- (5,431) 3,123
Investment income 188 -- -- 58 246

Gain (loss) on sale of assets (8) -- -- -- (8)
Interest expense 746 -- -- 265 1,011
Other income (expense) 450 (286) -- 663 827
------------ --------------- ---------------- ----------- ---------
Income before income tax and
discontinued operations effect 10,048 (1,896) -- (4,975) 3,177
Income tax benefit (expense) -- -- -- (186) (186)
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations 10,048 (1,896) -- (5,161) 2,991
Gain (loss) from discontinued
operations 378 -- (2,567) -- (2,189)
------------ --------------- ---------------- ----------- ---------
Net Income $ 10,426 $ (1,896) $ (2,567) $ (5,161) $ 802
============ =============== ================ =========== =========
Depreciation Expense $ 4,285 $ 2 $ 684 $ 59 $ 5,030
Capital Expenditures $ 2,865 $ 3 $ 557 $ 31 $ 3,456
Total Assets $ 43,371 $ 27,482 $ 9,892 $ 6,079 $ 86,824
2000
- ----
Revenue $ 27,013 $ 41 $ -- $ -- $ 27,054
Direct operating cost 11,507 916 -- -- 12,423
------------ --------------- ---------------- ----------- ---------
Gross profit 15,506 (875) -- -- 14,631
S,G&A 4,691 (119) -- 5,812 10,384
------------ --------------- ---------------- ----------- ---------
Income (loss) from operations 10,815 (756) -- (5,812) 4,247
Investment income 53 293 -- 89 435
Gain on sale of assets 11 -- -- -- 11
Interest expense 77 -- -- 183 260
Other income 472 -- -- 593 1,065
------------ --------------- ---------------- ----------- ---------
Income before income tax and
discontinued operations 11,274 (463) -- (5,313) 5,498
Income tax benefit (expense) -- -- -- 12 12
------------ --------------- ---------------- ----------- ---------
Income before discontinued
operations 11,274 (463) -- (5,301) 5,510
Discontinued operations (641) -- (172) -- (813)
------------ --------------- ---------------- ----------- ---------
Net Income $ 10,633 $ (463) $ (172) $ (5,301) $ 4,697
============ =============== ================ =========== =========
Depreciation Expense $ 1,397 $ 2 $ 571 $ 58 $ 2,028
Capital Expenditures $ 5,469 $ -- $ 904 $ 69 $ 6,442
Total Assets $ 23,119 $ 27,442 $ 9,034 $ 6,155 $ 65,750

NOTE 22. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

The unaudited consolidated quarterly results of operations for 2002 and 2001
have been restated to reflect the cumulative effect of the change in accounting
principle as discussed in Notes 2 and 9, and the discontinued operations as
discussed in Note 19. ($ in thousands, except per share amounts) were:

FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
RESTATED RESTATED RESTATED RESTATED
2002 2001 2002 2001 2002 2001 2002 2001
------- ------ ------- ------- ------- ------- ------- -------

Revenue 13,424 9,730 10,605 10,193 11,048 9,776 11,712 10,476

Gross profit 7,249 5,014 4,764 3,887 4,631 2,711 4,922 5,785

Income (loss) before,
discontinued operations,
cumulative effect and
preferred dividends 2,989 2,289 2,470 1,312 1,987 (1,063) 8,648 453
Discontinued operations (211) (807) (269) (986) (921) (149) (9,063) (247)

Cumulative effect 13,141 - - - - - - -
Net income (loss) 15,919 1,482 2,201 326 1,066 (1,212) (415) 206

EARNINGS PER SHARE - BASIC
Income (loss) before,
discontinued operations,
cumulative effect and
preferred dividends .22 .16 .16 .09 .12 (.09) .60 .03
Discontinued operations (.02) (.06) (.02) (.07) (.06) (.01) (.63) (.02)
Cumulative effect .95 - - - - - - -
Net income (loss) 1.15 .10 .14 .02 .06 (.10) (.03) .01

EARNINGS PER SHARE - DILUTED
Income (loss) before,
discontinued operations,
cumulative effect and
preferred dividends .17 .13 .14 .07 .12 (.09) .60 .03
Discontinued operations .02 (.05) (.02) (.06) (.06) (.01) (.63) (.02)
Cumulative effect .92 - - - - - - -
Net income (loss) 1.11 .08 .12 .01 .06 (.10) (.03) .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.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On September 16, 2002, American Ecology Corporation's Board of Directors, upon
recommendation of the Audit Committee, engaged Moss Adams LLP as independent
auditor, replacing Balukoff Lindstrom & Co.

Balukoff Lindstrom & Co.'s reports on American Ecology Corporation's financial
statements for the past two years did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles.

During American Ecology Corporations's two most recent fiscal years and through
the date of Balukoff Lindstrom & Co.'s dismissal, there were no disagreements
with Balukoff Lindstrom & Co. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Balukoff Lindstrom & Co's satisfaction, would have caused
Balukoff Lindstrom & Co. to make reference to the subject matter in connection
with its report of the financial statements for such years; and there were no
reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

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.

ITEM 14. CONTROLS AND PROCEDURES

(a) Within the 90 day period prior to the filing of this report, Company
management, under the direction of the Chief Executive Officer and Chief
Financial Officer, carried out an evaluation of the effectiveness of the design
and operation of the Company's disclosure controls and procedures pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934 (Exchange Act). Based upon

that evaluation, the Chief Executive Officer and Chief Financial Officer believe
that the Company's disclosure controls and procedures are effective in timely
alerting them to material information required to be disclosed in the Company's
Exchange Act filings.

(b) The Company maintains a system of internal controls that are designed to
provide reasonable assurance that its records and filings accurately reflect the
transactions in which it has engaged. For the year ending December 31, 2002,
there were no significant changes to our internal controls or in other factors
that could significantly affect the Company's internal controls.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS

1. Financial statements and reports of Independent Auditors
Independent Auditors' Reports
Consolidated Balance Sheets - December 31, 2002 and 2001
Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2002, 2001 and 2000
Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000
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 Description Incorporated by Reference from
No. 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 Washington, Form 10 filed 3-8-84
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 Agreement as amended between American Ecology Corporation 2002 Form 10-K
and the State of Nevada
- ------- -------------------------------------------------------------------- -------------------------------------
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 May 1, 1990 1994 Form 10-K
- ------- -------------------------------------------------------------------- -------------------------------------
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 July 1994 Form 10-K
1, 1994
- ------- -------------------------------------------------------------------- -------------------------------------
10.18 Memorandum of Understanding between American Ecology 1989 Form 10-K
Corporation and the State of California dated August 15, 1988
- ------- -------------------------------------------------------------------- -------------------------------------
10.35 Lease Agreement for Corporate Office Space between American 2nd Qtr 2002 Form 10-Q filed 8-14-02
Ecology Corporation and M&S Prime Properties dated April 18, 2002
- ------- -------------------------------------------------------------------- -------------------------------------
10.49 First Security Bank Master Equipment Lease - Sale Leaseback 3rd Qtr 2000 Form 10-Q filed 11-13-00
- ------- -------------------------------------------------------------------- -------------------------------------
10.50a First Security Bank Credit Agreement 3rd Qtr 2000 Form 10-Q filed 11-13-00
- ------- -------------------------------------------------------------------- -------------------------------------
10.50b Fourth Amendment to Credit Agreement between American Ecology Form 8-K filed 10-25-02
Corporation and Wells Fargo Bank dated October 15, 2002
- ------- -------------------------------------------------------------------- -------------------------------------
10.50c Term Loan Agreement between American Ecology Corporation and Form 8-K filed 10-25-02
Wells Fargo Bank dated October 22, 2002
- ------- -------------------------------------------------------------------- -------------------------------------
10.52 *Amended and Restated American Ecology Corporation 1992 Director Proxy Statement dated 3-28-01
Stock Option Plan
- ------- -------------------------------------------------------------------- -------------------------------------
10.53 *Amended and Restated American Ecology Corporation 1992 Proxy Statement dated 4-12-99
Employee Stock Option Plan
- ------- -------------------------------------------------------------------- -------------------------------------
10.54 *2002 Management Bonus Plan dated July 25, 2002 3rd Qtr 2002 Form 10-Q filed 11-14-02
- ------- -------------------------------------------------------------------- -------------------------------------
10.55 *Management Incentive Plan Effective January 1, 2003 2002 Form 10-K
- ------- -------------------------------------------------------------------- -------------------------------------
10.56 *Form of Management Incentive Plan Participation Agreement Dated 2002 Form 10-K
February 11, 2003
- ------- -------------------------------------------------------------------- -------------------------------------
10.57 *Form of Executive Employment Agreement Dated February 11, 2003 2002 Form 10-K
- ------- -------------------------------------------------------------------- -------------------------------------
10.58 * Form of Stock Option Agreement Dated February 11, 2003 2002 Form 10-K
- ------- -------------------------------------------------------------------- -------------------------------------
10.60 Chase Bank Settlement and Warrant Agreement dated November 12, 2002 Form 10-K
1998
- ------- -------------------------------------------------------------------- -------------------------------------
10.61 Series E Preferred Stock and Warrant Agreement dated November 13, 2002 Form 10-K
1996
- ------- -------------------------------------------------------------------- -------------------------------------
10.62 Series D Cumulative Convertible Preferred Stock Certificate of 2002 Form 10-K
Designation dated September 1995
- ------- -------------------------------------------------------------------- -------------------------------------
10.70 Form of Royalty Agreement for El Centro Landfill Dated February 13, Form 8-K filed 2-13-03
2003
- ------- -------------------------------------------------------------------- -------------------------------------
16 Change of Auditors Letter dated September 18, 2002 Form 8-K filed 9-19-02
- ------- -------------------------------------------------------------------- -------------------------------------
21 List of Subsidiaries 2002 Form 10-K
- ------- -------------------------------------------------------------------- -------------------------------------
23.1 Consent of Moss Adams LLP
- ------- -------------------------------------------------------------------- -------------------------------------
23.2 Consent of Balukoff, Lindstrom & Co., P.A.
- ------- -------------------------------------------------------------------- -------------------------------------
99 Certifications of December 31, 2002 Form 10-K by Chief Executive
Officer and Chief Financial Officer dated February 17, 2003
- ------- -------------------------------------------------------------------- -------------------------------------

*Management contract or compensatory plan.

(b) REPORTS ON FORM 8-K.

THE FOLLOWING REPORTS ON FORM 8-K WERE FILED DURING THE QUARTER ENDED
DECEMBER 31, 2002:

- ---------------------------------------------------------------- -----------------------

Press Release, dated December 27, 2002, entitled "AMERICAN Form 8-K filed 12-27-02
ECOLOGY DISCONTINUES RADIOACTIVE WASTE
PROCESSING BY OAK RIDGE, TENN SUBSIDIARY"
- ---------------------------------------------------------------- -----------------------
Press Release, dated October 22, 2002, entitled "AMERICAN Form 8-K filed 10-25-02
ECOLOGY COMPLETES INDUSTRIAL REVENUE BOND
REFINANCING"
- ---------------------------------------------------------------- -----------------------
Press Release, dated October 1, 2002, entitled "COURT RULES Form 8-K filed 10-2-02

AGAINST NEBRASKA IN RADIOACTIVE WASTE LAWSUIT,
AMERICAN ECOLOGY TO PURSUE $12.2 MILLION IN
DAMAGES; NEBRASKA ORDERED TO PAY TOTAL OF $151
MILLION"
- ---------------------------------------------------------------- -----------------------

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

SIGNATURE TITLE DATE
- ------------------------ -------------------------------------- -----------------

/s/ Stephen A.Romano President, Chief Executive Officer February 17, 2003
- ------------------------ -----------------
STEPHEN A. ROMANO Chief Operating Officer, Director

/s/ James R. Baumgardner Senior Vice President, Chief Financial February 17, 2003
- ------------------------ -----------------
JAMERS R. BAUMGARDNER Officer, Treasurer and Secretary

/s/ Michael J. Gilberg Vice President and Controller February 17, 2003
- ------------------------ -----------------
MICHAEL J. GILBERG

/s/ Roger P. Hickey Chairman of the Board of Directors February 17, 2003
- ------------------------ -----------------
ROGER P. HICKEY

______________________ Director February 17, 2003
-----------------
DAVID B. ANDERSON

/s/ Rotchford L. Barker Director February 17, 2003
- ------------------------ -----------------
ROTCHFORD L. BARKER

/s/ Roy C. Eliff Director February 17, 2003
- ------------------------ -----------------
ROY C. ELIFF

/s/ Edward F. Heil Director February 17, 2003
- ------------------------ -----------------
EDWARD F. HEIL

/s/ Paul F. Schutt Director February 17, 2003
- ------------------------ -----------------
PAUL F. SCHUTT

I, Stephen A. Romano, certify that:

1. I have reviewed this annual report on Form 10-K of American Ecology
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

February 17, 2003

/S/ Stephen A. Romano
_______________________

Chief Executive Officer

I, James R. Baumgardner, certify that:

1. I have reviewed this annual report on Form 10-K of American Ecology
Corporation;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

February 17, 2003

/S/ James R. Baumgardner
________________________

Chief Financial Officer