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, 2003 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]

The aggregate market value of the Registrant's voting stock held by
non-affiliates on June 30, 2003 was approximately $24,200,000 based on the
closing price of $2.75 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.

At March 12, 2004, Registrant had outstanding 17,161,418 shares of its Common
Stock.

Documents Incorporated by Reference
Portions of the Proxy Statement for the Annual Meeting of Stockholders to be
held May 20, 2004. Part III

TABLE OF CONTENTS

Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

PART I

Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . 14

PART II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters. . . 15
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . 32
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . 34
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 61

PART III

Items 10 through 15 are incorporated by reference from the definitive proxy
statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

PART IV

Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . 63

DEFINITIONS

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

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

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

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

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

SEC . . . . . . . . . U. S. 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 182 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 operating subsidiaries are US Ecology, Inc., a California
corporation ("US Ecology"); US Ecology Texas, L.P., a Texas Limited Partnership
("USET"); 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").

The Company operates within two business segments: Operating Disposal
Facilities and Non-Operating Disposal Facilities. These segments reflect AEC's
internal reporting structure and current operational status. The Operating
Disposal Facilities currently accept hazardous and low-level radioactive waste
and include the Company's RCRA 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 in Butte, Nebraska and Ward Valley, California which are
involved in litigation. 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.

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 are reported
as discontinued operations.

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
subsidiary US Ecology Texas' 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 will no longer have an obligation to pay annual minimum royalties
but will still be required to pay royalties based on waste volumes received at
El Centro. 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 resulted in a gain of approximately $4.9 million. This gain
was 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
USET 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 LLRW volume reduction and processing facility 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 and year to year changes in earnings, 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 pursuing 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 predominantly fixed cost nature of waste disposal operations.

Grand View, Idaho Facility. USEI is located on 1,760 acres of Company-owned
land about 60 miles southeast of Boise, Idaho in the Owyhee Desert. This
operation, acquired in February 2001, includes 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. Delisted waste is subject to the lower
State fees applicable to non-hazardous waste. The facility is also permitted to
accept certain naturally occurring and accelerator produced radioactive
material, low activity radioactive material, and 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 is
subject to applicable State law and regulations governing radioactive materials
exempt from regulation under the federal Atomic Energy Act as amended.

Robstown, Texas Facility. USET 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"). The site is also subject to US EPA regulations
and is permitted to accept certain low activity radioactive materials and mixed
wastes under its TCEQ permit.

Beatty, Nevada Facility. US Ecology leases approximately 80 acres from the
State of Nevada on which treatment and disposal 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 State 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 expects to renew its sublease with the State, which expires in
2005, based on a February 2004 decision by the State of Washington not to
compete this sublease. 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
operating costs and provide the Company with a reasonable profit. A new rate
agreement was entered in 2001 and expires January 1, 2008. The State also
assesses 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.

Also managed out of the Richland Facility, the US Ecology NORM/NARM Services
group offers site characterization, decontamination, waste removal and off-site
shipment in addition to disposal services.

NON-OPERATING DISPOSAL FACILITIES

Beatty, Nevada LLRW Facility. Operated by the Company from 1962 to 1993, the
Beatty LLRW disposal site was the nation's first commercial facility licensed to
dispose of LLRW. In 1997, it became the first such 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, and is paid from 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
more years in accordance with permit and regulatory requirements.

Sheffield Illinois LLRW 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. In 2003, the Company received $39,000
of the $59,000 remaining in a site construction escrow account established with
the Illinois Department of Nuclear Security. As at Beatty, the Company has a
contract with the State to perform long-term inspection and maintenance with
funds from a State-controlled account.

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 1968 and ceased accepting waste in 1974. The
second accepted hazardous waste from 1974 through 1983. In November 2003 the
Company renegotiated its closure/post-closure obligations allowing the Company
to reduce its financial assurance requirement from $3,181,000 to $1,497,000.
The Company also reduced its corrective action financial assurance requirements
from $1,500,000 to $800,000. In addition, the Company received all of the
$74,000 remaining in a site investigation escrow account established with U.S.
EPA. The company continues to perform corrective measures 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 under an
Agreed Order entered with the State of Texas for closure, and maintains a
$1,300,000 financial assurance. State action is pending on a Closure
Certification Report submitted in 1999 and resubmitted with additional
information in 2003. The Company owns an additional 540 acres contiguous to the
permitted site. Efforts are underway to sell certain excess property while
retaining an adequate buffer zone.

Ward Valley, California Proposed Disposal Facility. In 1993, the Company
received a State of California license to construct and operate a LLRW disposal
facility in the Mojave Desert to serve the Southwestern LLRW Compact. The
Company has alleged that the State of California abandoned its duty to acquire
the project property from the U.S. Department of the Interior in a suit filed in
State court seeking recovery of monetary damages in excess of $162 million. The
trial court ruled against the Company on March 26, 2003. The Company has
appealed this ruling. Briefing on the appeal is expected to be complete in
mid-2004, after which oral arguments will be scheduled.

Butte, Nebraska, Proposed Disposal 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 to the Company based on its contributions to
the project and pre-judgment interest. On February 18, 2004, the Eighth U.S.
Circuit Court of Appeals affirmed the district court ruling in its entirety. On
March 3, 2004, the State of Nebraska filed a petition for rehearing en banc by
the full Eighth U.S. Circuit Court of Appeals.

DISCONTINUED OPERATIONS

Oak Ridge, Tennessee Facility. AERC, acquired in 1994, processed LLRW to reduce
the volume of waste requiring disposal at licensed radioactive waste facilities.
AERC's processing services were never 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 occurred at the facility since its
acquisition in 1994. On December 27, 2002, the Company announced cessation of
commercial 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. In October 2002, the Company announced its intent to
actively market the business for sale, however, no acceptable offers were
received to acquire the operation as a going concern. The Company focused its
efforts in 2003 on removal of customer waste from the facility and post-waste
removal radiation surveys. Two employees presently maintain the facility's
radioactive materials licenses and assist with efforts to market the facility
for sale. The Company has paid the required fees and intends to maintain the
facility's existing radioactive materials operating license through the existing
term 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 subsidiary US Ecology Texas' hazardous and industrial
waste treatment and disposal 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. 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. 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 resulted in a gain on sale of
approximately $4.9 million which was recognized in the first quarter of 2003.

INDUSTRY

During 2003, the hazardous waste industry trends of reduced disposal waste
volumes and restructuring continued. This industry 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 instituted
industrial process changes and other methods to minimize waste production. The
volume of waste shipped for disposal from Superfund and other properties also
diminished as 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
restructure and possibly 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 differentiate successful from unsuccessful companies going forward. The
Company's 2001 acquisition of Envirosafe Services of Idaho and access to its
patented steel mill waste delisting technology, expanded approvals to manage
certain radioactive and mixed waste volumes materials at its Idaho and Texas
hazardous waste facilities, installation of patented thermal treatment units at
its Beatty, Nevada hazardous waste facility, and development of more
cost-effective treatment processes for specific customer wastes reflect
successful initiatives by the Company to increase market share and profitability
under present market conditions.

The commercial LLRW business has also experienced significant change. This is
primarily due to failure of the LLRW Policy Act of 1980 ("Policy Act") and
interstate Compacts encouraged to be formed under the Policy Act to provide any
new disposal sites and market responses to that failure. Company efforts to site
new disposal facilities in Ward Valley, California and Butte, Nebraska have been
frustrated and delayed by litigation. Management believes that both of these
proposed facilities would be safe and environmentally sound if constructed. The
Company has alleged, in separate litigation, that both California and Nebraska
have abandoned their duties under existing law. Management believes the Company
is entitled to compensation for its past investments in these
statutorily-required site development projects. This litigation is now well
advanced. 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 state fee status, 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 made a state responsibility under
the Policy Act. Increased disposal prices have 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 Oak Ridge commercial LLRW processing operations in December 2002.

The significant rise in radioactive waste disposal prices at traditional LLRW
facilities has also created a demand for more cost-effective disposal services
for soil, debris, consumer products, industrial wastes and other materials
containing low activity radioactive material, as well as mixed wastes exhibiting
both hazardous and radioactive properties. In addition to commercial demand, a
substantial amount of low activity radioactive materials is generated by U.S.
Department of Defense remediation activities. Management believes the expanded
use of permitted hazardous waste disposal facilities to dispose of such
materials is a safe, environmentally sound market response. The Company's Grand
View, Idaho RCRA hazardous waste facility has significantly increased waste
volume throughput since 2001 based largely on permit modifications and contracts
secured to serve this growing demand. The Company's US Ecology Texas disposal
facility is also positioned to accept, on a more limited basis, this type of
waste.

On November 18, 2003, the USEPA published an Advance Notice of Proposed
Rulemaking titled "Approaches to an Integrated Framework for Management and
Disposal of Low-Activity Radioactive Waste: Request for Comment" focusing on use
of RCRA Subtitle C hazardous waste disposal technology for disposal of such
waste. Management believes the Company is well positioned to grow its low
activity radioactive material business based on its reputation in the industry,
its existing Idaho and Texas facility permits, its substantial experience
handling

radioactive materials at its Subtitle C facilities, its high volume waste
throughput capabilities, and its competitive cost structure.

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 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.

The Resource Conservation and Recovery Act of 1976 ("RCRA") provides a
comprehensive framework for regulating hazardous waste handling, transportation,
treatment, storage, and disposal. Certain radioactive materials may also be
managed under RCRA permits, as specifically authorized for the Company's
facilities in Grand View, Idaho and Robstown, Texas. 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 wastes are 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. Since
customers of the Company face the same liabilities, waste producers are
motivated 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 maintain this
authorization.

The Toxic Substances Control Act ("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 over 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
NRC and U.S. Department of Transportation regulate 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 assert 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 facilities accepting radioactive, hazardous and industrial waste is
lengthy and complex. Management believes it has significant knowledge and
expertise regarding environmental laws, regulations, and permit processes. 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. The Company does not expect the impact
of any known casualty, property, environmental 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. Alternatively,
facilities may be required to fund State-controlled escrow type or trust
accounts during the operating life of the facility.

Through December 31, 2003, the Company has been able to maintain all required
insurance and financial assurance coverage. The Company's insurer for its
closure and post-closure financial assurance obligations had previously notified
the Company to expect increased premiums and collateral requirements at renewal
of its current financial assurance policies. The Company's current closure and
post-closure policies became effective December 19, 2003 and have a term of one
year. The Company expects to continue renewing 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. Failure to maintain adequate financial assurance could
also result in regulatory action being taken against the Company that could
include the early closure of affected facilities.

As of December 31, 2003, the Company provided letters of credit of $3,258,000 as
collateral for financial assurance insurance policies of approximately
$32,000,000 ensuring performance of facility final closure and post-closure
requirements. Management believes the Company will be able to maintain the
requisite financial assurance policies throughout 2004. While the Company has
been able to obtain financial assurance for its current operations, the cost of
maintaining surety bonds, letters of credit and insurance policies in sufficient
amounts may continue to increase.

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 purchases primary property, casualty and
excess liability policies through traditional third party insurance.

CUSTOMERS

The Company disposes of CERCLA, low activity radioactive material and hazardous
environmental remediation waste under a contract with the U.S. Army Corps of
Engineers Formerly Utilized Site Remedial Action Program ("FUSRAP"), and steel
mill air pollution control dust (KO61 waste) under individual steel mill
contracts. The Company also periodically manages the transportation of wastes to
its disposal facilities. These projects may periodically contribute significant
revenue. The following customers accounted for more than 10% of the Company's
revenue in 2003, 2002 and 2001:

% OF REVENUE FOR YEAR ENDING
CUSTOMER 2003 2002 2001
-------- --------- --------

U.S. Army Corps of Engineers 27 27 15
Nucor Steel Company 7 13 11
Shaw Environmental & Infrastructure, Inc. 18 - -

MARKETS

Disposal Services. The hazardous waste treatment and disposal business is
generally highly competitive and sensitive to transportation costs. NRC-exempt
radioactive material and other specialized niche services offerings are

less sensitive to these factors. Waste transported by rail is less expensive, on
a per mile basis, than waste transported by truck.

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

The Company's Beatty, Nevada facility primarily competes for business in the
California, Arizona, Utah 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, primarily 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 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 the Air Force and other federal agencies. Management expects to
renew this contract, which expires in the second quarter of 2004. Permit
modifications have expanded disposal capabilities at the Idaho facility. Waste
throughput in 2003 was significantly enhanced by the addition of 3,000 feet of
track and another rail switch at the Company's Idaho rail transfer station in
late 2002.

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
member States 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 under the Northwest Compact, 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 primary
disposal competitors are Waste Management, The EQ Company, 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 permits and "niche" service offerings
- - Customer service
- - Operational efficiency and technical expertise
- - Environmental compliance and credibility with regulatory agencies
- - Industry reputation and brand name recognition

Management believes the Company is competitive based on each of these factors.
Management further believes that it offers a nationally unique mix of services,
including specialized patent rights, permits and "niche" services which
favorably distinguish it from competitors. Management further believes that its
understanding of the industry, strong "brand" name recognition from more than 50
years of experience in the business, excellent compliance record and customer
service reputation, and positive relationships with customers, regulators, and
the local communities enhance these advantages.

While the Company is competitive, advantages exist for certain competitors that
have technology, permits, and equipment enabling them to accept additional
wastes streams, that have greater resources, that operate in jurisdictions that
impose lower disposal taxes, and/or are located closer to where various wastes
are generated.

PERSONNEL

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

On February 10, 2004, the Company had 182 full time employees, of which 11 were
members of the PACE union at its Richland, Washington facility.

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 1,760 acres Own

Elmore County, Idaho Rail transfer station 140 acres Own

Robstown, Texas Treatment and disposal facility 240 acres Own

Richland, Washington Disposal facility 100 acres Sublease

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 540 acres Own
well facility

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

Oak Ridge, Tennessee Processing facility 16 acres Own

Robstown, Texas Municipal landfill 200 acres Sold

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

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, subsidiary US Ecology, Inc., sued the State of California, et. al.
("the State") for monetary damages exceeding $162 million. The suit stems from
the State's alleged abandonment of the Ward Valley low-level radioactive waste
("LLRW") disposal project. State and federal law requires the State to build a
disposal site for LLRW produced in California, Arizona, North Dakota and South
Dakota; member states of the Southwestern Compact. US Ecology was selected in
1985 to locate and license the site using its own funds on a reimbursable basis.
The case was tried in Superior Court for the County of San Diego during February
and March 2003.

On March 26, 2003, the Superior Court issued a decision finding that the Company
failed to establish causation and that its claim is further barred by the
doctrine of unclean hands. The latter finding was based on actions the Court
concluded had created obstacles to an agreement between the federal government
and the State to convey the site. However, the Court did find that key elements
of the Company's promissory estoppel claim had been proven at trial.
Specifically, the Court ruled that the State made a clear and unambiguous
promise to US Ecology in 1988 to use its best efforts to acquire the site, that
the State had abandoned this promise, and that the Company's reliance on the
State's promise was foreseeable. However, the Court found that the State's
breach of its promise was not a substantial factor in causing damages to US
Ecology since the federal government had continued to resist the land transfer.

Based on the uncertainty of recovery following the trial court's adverse
decision, the Company wrote off the $20,951,000 deferred site development asset
on March 31, 2003.

On June 26, 2003, the Company filed a notice of appeal with the California
Fourth Appellate District Court.

The Company's financial interest in the pending claim against the State was
improved by an amendment to the November 13, 1998 Ward Valley Interest Agreement
and Assignment entered into by American Ecology and its former primary lender.
This June 27, 2003 amendment, entered into with the former lender's successor,
provides that any monetary damages obtained shall first be allocated to the
Company to recover past and future litigation fees and related legal expenses
relating to the case. Any remaining amount recovered shall be divided equally
between the Company and the former lender. The 1998 agreement had provided that
the first $29.6 million less up to $1.0 million in legal fees and expenses would
be owed to the former lender, with any remaining recovery reserved to the
Company.

In early July of 2003, the Company engaged the law firm of Cooley Godward on a
fixed price plus contingency basis to pursue the appeal, paying and expensing
the fixed fee at the time of engagement. Briefing is underway. No assurance can
be given that the Company will prevail on appeal or reach a settlement to
recover any portion of its investment or legal expenses.

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 denial of US Ecology's application to site, construct and operate
a LLRW disposal facility near Butte, Nebraska. US Ecology is the CIC's
contractor and intervened as a plaintiff.

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 where it was argued in June
2003.

On February 18, 2004, the Eighth U.S. Circuit Court of Appeals affirmed the
District Court ruling in its entirety. On March 3, 2004, the State of Nebraska
filed a petition for rehearing en banc by the full Eighth U.S. Circuit Court of
Appeals. No assurance can be given that the trial and appellate court judgments
will be affirmed on appeal or that US Ecology will recover its contributions or
interest thereon.

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

MANCHAK V. US ECOLOGY, INC., U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA,
- --------------------------------
CASE NO. CV-S-97-0655.

In March 1996, Frank Manchak, Jr. ("Manchak") filed suit against subsidiary US
Ecology, Inc., alleging infringement of a sludge treatment patent to stabilize
hazardous waste at the Company's Beatty, Nevada hazardous waste disposal
facility. Manchak sought unspecified damages for infringement, treble damages,
interest, costs and attorney fees. In October 2002, the United States District
Court for the District of Nevada entered a summary judgment in favor of the
Company. Manchak filed a motion for reconsideration that was denied on January
8, 2003. Manchak appealed, but failed to timely file his opening brief and the
Company moved to dismiss the appeal. On July 2, 2003, the United States Court of
Appeals for the Federal Circuit granted the Company's motion to dismiss
Manchak's appeal. Manchak's requests for reconsideration and en banc review were
rejected by the Federal Circuit on October 6, 2003 and again on October 20,
2003. On January 8, 2004, Manchak filed a Rule 60(b) motion in the Nevada
District Court seeking relief from that Court's orders granting summary judgment
of non-infringement and denying reconsideration. On March 9, 2004, the District
Court rejected Manchak's Rule 60(b) motion, prohibited further filings with the
Court on the matter and imposed sanctions on Manchak. The matter is now closed.

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 former customers of its
Winona, Texas facility. Plaintiffs sought recovery for personal injuries,
property damages and exemplary damages based on negligence, gross negligence,
nuisance and trespass. The Company sought a motion for summary judgment in July
2002 based on lack of evidence. In November 2002, the trial court dismissed
certain causes of action and reduced the number of plaintiffs, but preserved
other causes of action. The Company subsequently sought a motion for summary
judgment seeking dismissal against all of the adult plaintiffs on statute of
limitations grounds. On March 26, 2003, the court granted this motion and
dismissed the adult plaintiffs, leaving seven minors and one intervenor party to
the lawsuit. The Company and its insurance provider subsequently settled the
matter for $37,000 of which $27,000 will be paid by the Company. Because the
deductible had been fully reserved, there was no impact to the income statement.
The matter is now closed.

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 2003.

PART II

ITEM 5. MARKET FOR AMERICAN ECOLOGY CORPORATION COMMON STOCK AND RELATED
STOCKHOLDER MATTERS

American Ecology Corporation common stock is listed on the NASDAQ National
Market System under the symbol ECOL. As of March 12, 2004, there were
approximately 3,200 common stockholders. High and low sales prices for the
common stock for each quarter in the last two years are shown below:

2003 2002
---- ----

PERIOD High Low High Low
-------- -------- -------- --------

1st Quarter $ 3.42 $ 2.69 $ 1.98 $ 1.25
2nd Quarter 3.15 2.60 4.85 1.66
3rd Quarter 3.80 2.80 4.50 2.10
4th Quarter 8.26 3.59 3.23 2.31

The Company has not paid dividends on common stock during the last two years.

In August 2000, the Company established a credit facility with Wells Fargo Bank
that prohibits cash dividends on any of the Company's outstanding capital stock
without Bank approval. This credit facility, which has been amended several
times, currently provides the Company with $8.0 million of borrowing capacity
and matures on June 15, 2005.

In January 2003, the Company offered to repurchase all outstanding Series D
Preferred Stock for the original sales price plus accrued but unpaid dividends.
The offer was accepted by all Series D holders and approved, as required, by the
Board of Directors and Wells Fargo Bank. On February 28, 2003, the Company
repurchased the remaining 100,001 shares of Series D Preferred Stock for $47.50
a share plus accrued but unpaid dividends of $16.56 a share, for a total payment
of $6,406,000.

On February 18, 2004, the Company redeemed a warrant to purchase 1,349,843
shares of common stock for $5,500,000. The warrant was issued in 1998 as part
of the settlement with the Company's prior bank, and enabled the bank to acquire
1,349,843 common shares for $1.50 each. After paying the $5,500,000 for
redemption of the warrant, the Company had in excess of $7,000,000 in cash on
hand without borrowing any funds on the line of credit.

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, 2003 2002 2001 2000 1999
- ------------------------ --------- --------- -------- -------- --------

Revenue $ 57,047 $ 46,789 $40,175 $27,054 $20,830
Loss on write off of Ward Valley development costs $(20,951) $ -- $ -- $ -- $ --
Income tax benefit from reversal of valuation allowance $ -- $ 8,284 $ -- $ -- $ --
Income (loss) from continuing operations $(11,069) $ 16,094 $ 2,991 $ 5,510 $ 4,301
Cumulative effect of change in accounting principle $ -- $ 13,141 $ -- $ -- $ --
Income (loss) from discontinued operations $ 2,477 $(10,464) $(2,189) $ (813) $ 108
Net Income $ (8,592) $ 18,771 $ 802 $ 4,697 $ 4,409
Preferred stock dividends accrued $ 64 $ 398 $ 398 $ 398 $ 398

Shares used to compute income (loss) per share (000's) 16,604 14,311 13,738 13,711 13,585

Total assets $ 66,626 $ 87,125 $86,824 $65,750 $58,459

Long-term debt, net of current portion $ 4,200 $ 8,344 $ 4,436 $10,775 $ 3,569

Shareholders' equity $ 36,351 $ 45,948 $26,416 $25,984 $21,582

Current ratio (current assets divided by current liabilities)
2.10:1 1.47:1 0.65:1 1.17:1 0.9:1

Return on average equity (net income divided by
average equity) (20.9)% 51.9% 3.1% 19.7% 22.6%

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

Capital expenditures $ 6,270 $ 2,737 $ 4,009 $ 3,267 $ 3,740
Depreciation, amortization and accretion expense $ 6,973 $ 6,604 $ 4,076 $ 1,899 $ 1,498

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 and patent rights,
- - competitive environment,
- - general economic conditions,
- - potential loss of major contracts, and
- - costs to maintain or close the Oak Ridge facility.

When the Company uses words like "may," "believes," "expects," "anticipates,"
"should," "estimates," "projects," "plan," their opposites and similar
expressions, it is making forward-looking statements. These expressions are most
often used in statements relating to business plans, strategies, anticipated
benefits or projections about anticipated revenues, earnings or other aspects of
Company operating results. The Company makes these statements in an effort to
keep stockholders 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 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 accurate. 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, 2003, included elsewhere in this Form 10-K.

General
- -------

The Company is a hazardous, non-hazardous, industrial, and radioactive waste
management company providing treatment and disposal service to commercial and
government entities, including but not limited to, nuclear power plants,
refineries, chemical manufacturing plants, steel mills, the U.S. Department of
Defense, biomedical facilities, universities and research institutions. The
majority of revenues are derived from fees charged for waste treated and
disposed at Company-owned facilities. The Company periodically manages the
transportation of wastes to its disposal facilities. These projects may
periodically contribute significant revenue. Fees are also charged for waste
packaging, brokering, waste removal, and transportation to facilities operated
by other service providers. 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, increased waste handling efficiencies, 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 Oak Ridge, Tennessee LLRW processing operations
have allowed the Company to improve the performance of its profitable hazardous
and radioactive waste treatment and disposal business.

Overall Company Performance
- -----------------------------
On a consolidated basis, the Company's financial performance for the
twelve-months ended December 31, 2003, showed material improvement over 2002 and
2001 as measured by income from operations. Management believes this improvement
is due to strong performance of its Grand View, Idaho operation acquired in
early 2001, execution of new management's turn around plan and related
restructuring actions implemented beginning later that year, and increased
attention to efficient waste handling operations and business systems. These
actions focused on improving waste treatment and disposal throughput at the
Company's operating facilities, securing permit modifications required to expand
higher margin "niche" services, reducing head count and other costs,
streamlining reporting, implementing centralized information and accounting
systems, reducing use of external consultants, and restructuring the sales
function to increase revenue and earnings.

Management believes 2002 and 2003 operating performance, as well as future
operating performance, is driven by the Company's core disposal business. A
significant portion of the Company's revenue is derived from government
remediation projects, which are driven by availability of state and federal
appropriations, and the requirement to remove contamination from contaminated
sites. During 2003 and 2002, the Army Corps of Engineers (USACE) and federal
contractors, such as Shaw E&I, represented significant amounts of the Company's
revenue.

Funding for the USACE FUSRAP program, which presently contracts with the Company
for disposal, has remained generally constant and management expects this to
continue. US EPA and other federal agencies have also used the Company's USACE
contract to dispose of CERCLA and other federal remediation project waste.

Remediation projects under "Superfund" depend on site-specific fund
availability. Funding levels have generally decreased since the early 1990s,
however, major projects continue. The Company is currently accepting waste from
several large multi-year federal Superfund projects. States also fund
remediation projects. The majority of the 2003 Shaw E&I revenue derived from a
remediation project funded by the State of New Jersey.

Non-government remediation project opportunities are driven by regulatory agency
enforcement actions and settlements, litigation, local community controversy,
availability of private funds and other factors. To the extent privately funded
remediation projects are discretionary, management believes a healthy national
economy generally favors increased project availability. Management further
believes that bid activity for such projects increased in the second half of
2003 and that this higher level of bid activity will continue during 2004.

The Company's largest base business customer is Nucor Corporation, which
operates electric arc furnace steel mills. The Company disposes of air pollution
control dust (KO61) from Nucor steel mills in several states and other steel
mills at its Grand View, Idaho facility, however, aggressive price competition
from KO61 recyclers resulted in a loss of market share and revenue during 2003.
In February 2004, the Company entered into an agreement with Envirosafe Services
of Ohio, Inc. ("ESOI") to provide ESOI's USEPA-approved KO61 "delisting"
technology at the Company's Robstown, Texas and Beatty, Nevada facilities to
extend the regulatory fee advantages enjoyed by its Idaho operation to these
other two facilities. No assurance can be given, however, that this strategy
will result in new KO61 business.

Other than Nucor, no other base business customer contributed more than 5% of
the Company's revenue in 2003. The Company was successful in securing new base
business contracts from other hazardous waste customers in 2003 and employs a
sales incentive plan that is weighted to rewarding new base business revenue.
The hazardous waste business is highly competitive. No assurance can be given
that the Company will retain its present base business customers or increase its
market share for steel mill air pollution control dust or other hazardous waste.

The Company has not historically performed well outside its core treatment and
disposal business and will continue to attempt to limit the negative impact of
previous growth initiatives outside of its core business. Year to year
comparisons are made difficult by a series of material, independent events in
both 2002 and 2003. These included:
- - a large single event clean-up project undertaken in early 2002 by the
Company's Richland, Washington facility,
- - a large single event project undertaken in the second half of 2003 at the
Company's Grand View, Idaho facility,
- - unusually high litigation expenses in early 2003 and write off of the Ward
Valley, California litigation,
- - costs to discontinue the Company's Oak Ridge, Tennessee low-level
radioactive waste processing businesses and remove customer and Company
waste from the premises,
- - a gain on sale of the El Centro landfill assets in early 2003, and
- - the adoption of a new accounting standard ("FAS 143") which resulted in a
large gain.

These events are discussed in detail below.

2003 EVENTS
- ------------

Oak Ridge Disposal Plan: During 2003, the Company accrued an additional
- ---------------------------
$2,517,000 in costs to remove waste from the facility and prepare the facility
for sale. This primarily reflects actual expenses, above estimates, incurred to
dispose of specific wastes which were identified when the wastes were shipped to
off-site service providers. $442,000 of these additional costs were accrued for
expenses expected to be paid during 2004 in accordance with the provisions of
EITF 94-3.

In June 2003, the Company entered into a non-binding letter of intent with a
potential buyer of the Company's Oak Ridge facility assets, including certain
licenses, buildings and equipment, for a nominal sales price along with buyer
assumption of specified liabilities. This potential buyer later notified the
Company that its board of directors was not prepared to proceed with the
purchase transaction as contemplated and the letter of intent expired without

being exercised on December 5, 2003. The Company is in continuing discussions
with other potentially qualified buyers; however, no assurance can be given that
an asset sale will be consummated.

Ward Valley Litigation and Expenses: Due to the adverse California state trial
- --------------------------------------
court decision on March 26, 2003, the Company wrote off $20,951,000 of facility
development costs for the Ward Valley project. This is reported as Loss on write
off of Ward Valley facility development costs in the Consolidated Statement of
Operations. Litigation and related costs totaling $1,786,000 were incurred and
included in SG&A during 2003. The Company has appealed the Ward Valley ruling.
Briefing in that appeal is underway. Minimal out-of-pocket costs for this appeal
are expected in 2004 based on a fixed price legal representation agreement
entered into and paid for in July 2003.

Sale of El Centro: On February 13, 2003, the Company sold the El Centro
- ---------------------
municipal waste landfill to Allied Waste and recognized a $4,909,000 gain on
sale. This gain was included in discontinued operations during the quarter ended
March 31, 2003.

New Jersey PCB Clean-up Project: The Company's Grand View, Idaho facility
- ------------------------------------
performed a $10,053,000 transportation and disposal project in the third and
fourth quarters of 2003. This project represented 18% of 2003 revenues.

2002 EVENTS
- ------------

Financial Accounting Standard No. 143 ("FAS 143"): The Company implemented FAS
- ----------------------------------------------------
143 on January 1, 2002. FAS 143 requires a liability to be recognized as part of
the fair value of future asset retirement obligations. It also requires an
associated asset to be recognized as part of the carrying amount of the
underlying asset. The implementation of FAS 143 resulted in a $13,141,000
cumulative effect of change in accounting principle gain during the quarter
ended March 31, 2002.

Army Corps of Engineers Fort Greely, Alaska Project: The Company performed a
- -------------------------------------------------------
$3,850,000 waste packaging and disposal project at its Richland, Washington
facility during the first quarter of 2002. This project represented 8% of 2002
revenues and produced significantly higher margin and earnings than other
projects typically handled by the Richland facility.

Oak Ridge Disposal Plan: On December 27, 2002, the Company discontinued
- ---------------------------
operations at the Oak Ridge facility and recognized $7,018,000 of additional
estimated costs to implement its asset and liability disposal plan.

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 comply with
applicable federal, state and local governmental licenses, permits or approvals
for its waste treatment and disposal facilities could prevent or inhibit the
Company from operating its facilities and providing services, resulting in a
potentially 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.

The Company's revenues are primarily generated as a result of requirements
arising under federal and state laws, regulations, and programs to protect the
environment. Management believes the nation's basic framework of environmental
laws and regulations is broadly accepted as sound public policy. If requirements
to comply with these environmental laws and regulations, particularly those
relating to the treatment, storage or disposal of PCB, hazardous, NORM/NARM and
low-level radioactive waste were substantially relaxed in the future or were

less vigorously enforced, the demand for the Company's services could materially
decrease and revenues could be significantly reduced.

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

Since Company personnel routinely handle radioactive, PCB 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 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 delay or scale back planned
infrastructure improvements or future disposal capacity expansions. This could
negatively impact the Company's ability to generate earnings. The Company
currently has cash on hand to fund its budgeted 2004 capital projects, and
expects to maintain access to cost-effective capital in the event borrowings are
required. Additionally, the Company has constructed sufficient disposal capacity
to meet foreseeable near-term needs. No assurance can be given, however, that
the Company will continue to have cash on hand for these purposes or maintain
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, a
tightening in the insurance markets has decreased access to cost-effective
insurance. This was exacerbated by the terrorist attacks against the United
States on September 11, 2001 and 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. On December 19, 2003, insurance for the Company's primary financial
assurance for its hazardous waste disposal facilities was renewed for one year.
Although the Company expects 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 introduce new technologies at its facilities from time to
time. The Company has experienced difficulties implementing new technologies in
the past. The Company's future growth at its Beatty, Nevada facility is
partially tied to its ability to cost effectively provide thermal treatment
services using patented equipment. If the Company cannot cost-effectively deploy
this and other commercially viable treatment technologies in response to market
conditions and customer requirements, the Company's 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. The Company's
business is heavily affected by waste tipping fees assessed by state regulatory
entities. These fees, which vary from State to State, are periodically adjusted.
Such adjustments may significantly affect the competitive environment in which
the Company conducts business either positively or negatively.

General Economic Conditions
- -----------------------------
The Company's hazardous waste facilities serve steel mills, refineries, chemical
manufacturing plants and other basic industries that are, or may be affected by,
general economic conditions. During periods of economic weakness, these
industries may curtail production activities producing waste and/or delay
spending on plant maintenance, waste clean-up work and other discretionary
projects. Management believes the Company's business has been adversely affected
by generally weaker economic conditions since 2002. While management believes
that bid activity for the services it offers has recently increased, the Company
makes no predictions that general economic conditions will positively impact its
business in 2004.

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

A loss on one or more of the Company's largest contracts could significantly
reduce Company revenues and negatively impact earnings. Its contract with the US
Army Corps of Engineers (USACE) expires during the second quarter of 2004 unless
renewed for an additional 5 years at the option of the USACE. While the Company
believes that the USACE will exercise its option and renew the contract on
substantially the same terms, there is no assurance that the contract will be
renewed or the terms of the contract will be materially changed. Discontinuation
of this contract could have a material adverse impact on the Company.

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. When
making these decisions, the Company has made assumptions about future costs. If
the facility cannot be sold, the Company may be required to initiate closure
activities during 2004, for which the Company has accrued costs totaling
$4,621,000. Developing these estimates required numerous subjective and complex
judgments, estimates, and assumptions that may or may not ultimately prove
accurate. While management believes this amount is sufficient to meet the
Company's closure obligations, no assurance can be given that additional closure
reserves will not be required.

RESULTS OF OPERATIONS

Operating Disposal Facilities, Non-operating Disposal Facilities, the
discontinued Processing and Field Services operations and Corporate are combined
to arrive at consolidated income. Continuing Operations is comprised of
Operating Disposal Facilities, Non-operating Disposal Facilities, and Corporate.
Only the Operating Disposal Facility segment reports 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

effect
Income tax expense -- -- -- 72 72
------------ --------------- ---------------- ----------- ---------
Income (loss) before discontinued 17,419 (23,490) -- (4,998) (11,069)
operations and cumulative effect
Gain (loss) from discontinued operations 4,994 -- (2,517) -- 2,477
------------ --------------- ---------------- ----------- ---------
Net income (loss) $ 22,413 $ (23,490) $ (2,517) $ (4,998) $ (8,592)
============ =============== ================ =========== =========
Depreciation and accretion $ 6,515 $ 400 $ -- $ 81 $ 6,996
Capital Expenditures $ 6,582 $ 35 $ 451 $ -- $ 7,068
Total Assets $ 40,377 $ 6,550 $ 2,495 $ 17,204 $ 66,626
- ------------------------------------------------------------------------------------------------------------------
2002
- ------------------------------------------------------------------------------------------------------------------
Revenue $ 46,494 $ 295 $ -- $ -- $ 46,789
Direct operating cost 23,436 1,787 -- -- 25,223
------------ --------------- ---------------- ----------- ---------
Gross profit (loss) 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 (loss) before income tax, 14,418 (1,980) -- (4,849) 7,589
discontinued operations and cumulative
effect
Income tax benefit -- -- -- 8,505 8,505
------------ --------------- ---------------- ----------- ---------
Income (loss) 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 (loss) 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 (loss) $ 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 (loss) 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 (loss) before income tax and
discontinued operations effect 10,048 (1,896) -- (4,975) 3,177
Income tax benefit (expense) -- -- -- (186) (186)
------------ --------------- ---------------- ----------- ---------
Income (loss) before discontinued
operations 10,048 (1,896) -- (5,161) 2,991
Gain (loss) from discontinued operations 378 -- (2,567) -- (2,189)
------------ --------------- ---------------- ----------- ---------
Net Income (loss) $ 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

The following table sets forth items in the Statements of Operations for
Continuing Operations the three years ended December 31, 2003, as a percentage
of revenue:

Percentage of Revenues for the
Year Ended December 31,
-----------------------
2003 2002 2001
--------- --------- ---------

Revenue 100.0% 100.0% 100.0%
Operating costs 58.7 53.9 56.7
--------- --------- ---------

Gross profit 41.3 46.1 43.3
--------- --------- ---------
Selling, general and administrative expenses 24.2 27.0 35.5
--------- --------- ---------

Income from operations 17.1 19.1 7.8
Other income (expense), net (36.4) (2.9) 0.1
--------- --------- ---------

Income from continuing operations before income taxes (19.3) 16.2 7.9
Income tax expense (benefit) 0.1 (18.2) 0.5
--------- --------- ---------

Income from continuing operations (19.4) 34.4 7.4
========= ========= =========

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, 2003,
2002 and 2001.

Revenue
- -------

During the 12 months ended December 31, 2003, revenue from Operating Disposal
facilities totaled $56,973,000. This was 22% higher than the $46,494,000 posted
in 2002, and 42% higher than the $40,088,000 reported in 2001. Of the
$10,455,000 increase in Operating Disposal facility revenue from 2002 to 2003,
$10,053,000 reflects a single transportation and disposal project performed in
the second half of 2003 by the Idaho operation. In addition, the Company secured
several other significant projects and base business customers in 2003 and 2002,
allowing it to grow its market share despite the loss of certain steel mill
customers. Increases in volume and revenue at the Idaho facility offset
decreases in volume and revenue at the Company's three other disposal
facilities.

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

Direct operating costs represent costs at Company disposal facilities that are
directly related to waste treatment and disposal. They include transportation,
labor, equipment depreciation, fuel, treatment, waste treatment additives,
testing, analysis, and amortization of disposal cell "airspace" costs. Except
for transportation, airspace and treatment additives, most of the Company's
direct costs are fixed and do not materially vary with changes in waste volume.
In 2003, direct operating costs from continuing operations increased 39%,
reaching $32,571,000, up from $23,436,000 in 2002. The $9,135,000 increase in
direct operating costs partially reflects a strategic decision to 'bundle'
transportation and disposal costs for certain projects shipped to the Idaho
site. Management believes that the bundling of transportation services with
disposal allows the Company to offer potential customers both lower overall
pricing and value-added service. It is recognized that this bundling increases
the Company's direct operating costs and reduces gross margin relative to
revenue. Bundling of services for certain customers will continue to be pursued
in 2004 as a key element of the Company's business development strategy to grow
revenue and earnings. In 2003, direct operating costs were $10,934,000 higher
than the $21,637,000 of direct costs incurred in 2001.

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

In late 2001, management began a concerted effort 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% in 2002 and 13% in 2003.
All facilities decreased their respective SG&A costs. Decreases in overhead
spending were accomplished through improved procurement of goods and services,
decreased reliance on external consultants and other cost control measures.
During 2003, the Company installed new centralized information and accounting
systems that have increased the availability and timeliness of business
information.

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

For the 12 months ended December 31, 2003, operating income from continuing
operations totaled $9,749,000 or 17.1% of revenue, compared to $8,935,000 (19.1%
of revenue) posted in 2002 and $3,123,000 (7.8% of revenue) recorded in 2001.
Operating income from the Operating Disposal facility segment totaled
$17,420,000, or a 16% increase from the $15,059,000 posted for 2002, and 49%
higher than the $10,099,000 recorded in 2001. Higher revenues combined with the
relatively lower direct costs and SG&A were partially offset by low
transportation margins in 2003. The Company generated an operating margin from
the Operating Disposal segment of 31% in 2003, compared to the 32% operating
margin posted in 2002 and the 25% recorded in 2001.

RESULTS FROM NON-OPERATING DISPOSAL FACILITIES

Revenue
- -------

Revenue generated by Non-Operating Disposal facilities represents amounts
billable to third parties for services performed by the Company's non-operating
segment. In Nebraska, the Company is reimbursed by the Central Interstate
Compact ("Compact") for specified costs the Company incurs to provide technical
support to the Compact and maintain the proposed Butte, Nebraska disposal site
for future use. In Illinois and Nevada, the Company is paid by those States to
maintain and monitor closed low-level radioactive waste sites that were returned
to the states for perpetual care and maintenance. Generally speaking, this
revenue is immaterial. For the 12 months ended December 31, 2003, revenue
generated from closed sites was $74,000, which was a $221,000 and $13,000
decrease over revenue generated in 2002 and 2001, respectively. In 2002, the
Company was reimbursed for litigation support expenses incurred on the Butte,
Nebraska project, resulting in the greater 2002 revenue compared to 2003 and
2001.

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

Non-Operating Disposal Facilities incur primarily legal and consulting costs
required to maintain or license the facilities for initial use, and labor costs
required to properly maintain and close facilities subsequent to use. For the
years ended 2003, 2002 and 2001, the Company reported $2,628,000, $1,595,000 and
$1,610,000, respectively, in operating losses for the two proposed disposal site
development projects and to close and maintain facilities subsequent to
operational use. Legal expenses of $1,919,000, $1,383,000 and $570,000 were
incurred in 2003, 2002, and 2001, respectively, related to the proposed Ward
Valley, California and Butte, Nebraska disposal sites. The Ward Valley,
California litigation experienced an adverse trial court ruling in 2003 which is
being appealed. Significant legal expenses are not expected in 2004 unless the
appeals courts remand the case for further trial proceedings. The Company's
expenses in the Nebraska lawsuit are not significant based on the support role
assumed by the Company in this litigation relative to the other plaintiffs.

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

SG&A
- ----

Beginning in late 2001, new management undertook concerted efforts to control
and reduce SG&A across the Company, particularly at its corporate office in
Boise, Idaho, where spending has declined by $323,000 or 6% since 2001. The
Company also consolidated accounting, information, and certain operational
functions in the Boise office. Centralized information systems implemented in
2002 have increased the availability and timeliness of operating information and
reduced invoicing time for customers. The Company has also resolved multiple
longstanding lawsuits, thereby reducing legal fees and freeing up management
time and resources to focus on the business.

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 discontinued LLRW
processing business in Tennessee. Accordingly, the Company 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
- -----------------------------------------------------

On February 13, 2003, the Company announced the sale of its El Centro municipal
and industrial waste landfill to a wholly-owned subsidiary of Allied Waste
Industries, Inc. ("Allied"). The Company sold Prepaid Assets of $117,000 and
Property, Plant, and Equipment of $6,930,000 which was subject to Closure/Post
Closure Obligations of $1,098,000 for $10,000,000 cash and future royalty
payments valued at $858,000. A $4,909,000 gain on sale was recognized in
discontinued operations during the first quarter of 2003.

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 will
no longer have an obligation to pay annual minimum royalties but will still be
required to pay royalties based on waste volumes received at El Centro. The
Royalty Asset, valued at $858,000 as of February 13, 2003, represents the
present value of 5 years of minimum royalty payments. Royalties of $237,000 were
paid by Allied in 2003, resulting in Other Income included in Discontinued
Operations of $22,000. As of December 31, 2003, the Royalty Asset was
reclassified from Discontinued Operations to the Operating Disposal Facility
Segment due to the ongoing nature of the expected payments. Effective January 1,
2004, annual payments in excess of $215,000, or payments subsequent to 2007,
would be included in Other Income at the time of receipt.

The table below provides financial information on the operations of the El
Centro landfill included in Discontinued Operations as of December 31, 2003:

$ in Thousands Year Ended December 31,
2003 2002 2001
------ ------- -------

Revenue $ 462 $2,563 $2,450
Direct Operating costs 244 1,351 1,480
------ ------- -------

Gross profit 218 1,212 970
Selling, general and administrative expenses 155 705 538
------ ------- -------

Income (loss) from operations 63 507 432
Other income (expenses) 4,931 (41) (54)
------ ------- -------
Gain (loss) from discontinued operations $4,994 $ 466 $ 378
====== ======= =======

Despite the Company's disposal expertise, the proven business model for solid
waste services based on integrated local transportation assets is significantly
different from the Company's core hazardous and radioactive waste business. By
exiting this business and monetizing its investment in the solid waste landfill,
the Company obtained resources to support growth of its core business, improve
its capital structure, and meet its obligations in Oak Ridge, Tennessee.

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. In December 2002, the Company announced the
cessation of commercial 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. In October 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 an operating business, management
discontinued AERC's commercial services. This resulted in the dismissal of
approximately 85 employees in 2003. The Company continues to employ two workers
to maintain the facility's radioactive materials licenses and help market the
facility. The Company has paid the required fees and intends to maintain the
facility's existing radioactive materials operating license through its current
term, pending a possible sale.

Since purchasing AERC in 1994, the subsidiary has lost $58 million, including
substantial operating and net losses in 2001 and 2002. Management concluded that
a lack of core business integration with the Company's disposal facilities and
the highly competitive nature of the LLRW processing business 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, 2003:

$ in thousands Year Ended December 31,
2003 2002 2001
-------- --------- --------

Revenue $ 1,941 $ 17,018 $13,391
Direct Operating costs 2,038 16,687 12,086
-------- --------- --------

Gross profit (loss) (97) 331 1,305
Selling, general and administrative expenses 1,939 3,627 4,465
-------- --------- --------

(Loss) from operations (2,036) (3,296) (3,160)
Other expenses (gains) 39 616 (593)
Accrued charges 442 7,018 --
-------- --------- --------
(Loss) from discontinued operations $(2,517) $(10,930) $(2,567)
======== ========= ========

Management considers the timely and orderly disposition of the Oak Ridge
facility a high priority.

RESULTS OF CONSOLIDATED OPERATIONS

Selling, General & Administrative Expenses
- ----------------------------------------------

In 2003, overall SG&A increased $1,118,000 to $13,819,000 due to legal expenses
for the Ward Valley, California lawsuit and trial. In 2003, the Company spent
$1,794,000 on Ward Valley legal expenses. Despite this increase in legal
expense, SG&A relative to revenue continued dropping, decreasing to 24.2% of
revenue in 2003, compared to 27% of revenue and 35.5% of revenue in 2002 and
2001, respectively.

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

Interest income represents earnings on cash balances, restricted investments,
and notes receivable, of which the Company has traditionally maintained minimal
amounts. While 2003 Interest income was $347,000, $302,000 of this amount was
earned on the 1996 Federal Income Tax refund received during the third quarter
of 2003. Interest income in 2002 was $31,000. The $246,000 of interest income in
2001 was primarily earnings on investments acquired in February 2001 with the
Envirosafe Services of Idaho acquisition. These investments were subsequently
converted to cash and used in operations. The Company does not anticipate
significant interest income in the future, as available cash balances are not
held for investment purposes, and accordingly earn interest at low, short term
rates.

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

Interest expense was $266,000, $820,000, and $1,011,000 in 2003, 2002 and 2001,
respectively. On October 28, 2002, the Company refinanced an 8.25%, $8,500,000
industrial revenue bond with a variable rate $7,000,000, 5-year fully amortizing
term loan. As of December 31, 2003, the interest rate on the term loan was 3.5%.
Also contributing to the lower interest expense in 2003 and 2002 was the
retirement of additional debt of $1,062,000 in 2003 and $6,628,000 in 2002 as
part of management initiatives to more efficiently utilize cash, improve the
Company's

balance sheet and reduce higher cost debt obligations. Interest expense is
expected to decrease in 2004 due to the scheduled repayment of the term loan and
other debt.

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

Other income (expense) was $124,000, ($557,000), and $819,000 for 2003, 2002 and
2001, 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 2003 2002 2001
- ------------ ----------- ------------- -------------

State tax adjustments $ -- $ -- $ 106
Correction of expensed debt payments -- -- 177
Insurance claim refunds -- 31 172
Adjustment of prior years accrued burial fee -- -- 500
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 --
Other miscellaneous income (expense), net 8 (12) (1)
Cash receipts for sale and rent of property rights 108 117 5
Data services sold 8 55 --
----------- ------------- -------------
Total Other Income (Expense) $ 124 $ (557) $ 819
=========== ============= =============

During 2002 and 2003 the Company sought to resolve pending litigation to better
focus resources and energies on its core treatment and disposal business. The
large increase in Other Expense during 2002 reflects the resolution of 7 of 11
pending lawsuits in 2002, and resolution two others in 2003.

The Company sold certain water rights in Idaho for approximately $100,000 during
2004, and is marketing excess property in Winona, Texas during 2004 for
approximately $300,000. Sale of property rights results in a lump sum payment
at the time of sale, and a small decrease in future other income for the
previously leased water rights.

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

Effective income tax rates were (1)%, (112)%, and 17% for the fiscal years 2003,
2002 and 2001 respectively.

The Company has approximately $24,000,000 in net deferred tax assets for federal
income tax purposes, of which a $8,284,000 reduction in the valuation allowance
was recorded at December 31, 2002. This reflected 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. The certainty with which management
can project taxable income decreases over time. Consequently, management
believes three years is the longest period that the Company can project with
confidence. Moreover, uncertainties about future disposition of AERC assets in
Oak Ridge limit the reliability of estimates of 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 due for the foreseeable future.
However, federal alternative minimum tax of approximately 2% of income is
expected to be paid starting in 2004.

The Company paid $72,000, $6,000, and $51,000 in state and local income and
franchise taxes for fiscal years 2003, 2002 and 2001, 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 Note 8 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 had the following effects upon the Company:

- A stronger balance sheet through a reduction in liabilities and
increase in the Company's 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
an industrial revenue bond in October 2002.

- Improved comparability of results with competitors is provided by
uniform application of the FAS 143 standard in place of 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 on 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, 2003, the Company's working capital position had materially
improved, increasing to $12,805,000, compared to working capital of $8,087,000
at December 31, 2002, and a working capital deficit of $10,568,000 at December
31, 2001. This significant improvement was primarily due to the sale of the El
Centro municipal landfill for $10,000,000 in cash, earnings from operations, and
refinancing of the $8,500,000 Idaho Industrial Revenue Bond which had been
classified as a current liability at December 31, 2001.

The Company's current ratio improved to 2.1:1.0 in 2003 compared with 1.5:1.0
and .7:1.0 for 2002 and 2001, respectively. Liquidity, as measured by day's
receivables outstanding ("DRO"), was constant at 77 days in 2003 and 2002.
Management will continue to focus on improving DRO in 2004 with implementation
of a new credit and collections policy and appointment of a new credit and
collections manager.

In addition to improving liquidity, the Company's leverage has markedly improved
as measured by its debt to equity ratio. At December 31, 2003, the Company's
debt to equity ratio had decreased to 0.8 to 1 from 0.9 to 1 and 2.3 to 1 at
December 31, 2002 and 2001, respectively. This decrease in leverage reflects
retention of earnings, and the net retirement or reduction of $30,313,000 of
liabilities since 2001. This reduction in liabilities was primarily the result
of reduced closure and post-closure obligations from the implementation of FAS
143, as well as paying off the Company's $5,000,000 outstanding balance on its
line of credit and other debt.

SOURCES OF CASH

On December 16, 2003, the Company amended its existing line of credit agreement
with Wells Fargo Bank, increasing the maximum credit available from $6,000,000
to $8,000,000 and extended the maturity date to June 15, 2005. The line of
credit is secured by the Company's accounts receivable. At December 31, 2003 and
2002, the outstanding balance on the revolving line of credit was $0 and
$603,000, respectively. The Company borrows and repays according to business
demands and availability of cash.

On October 28, 2002, the Company refinanced its $8,500,000 Idaho Industrial
Revenue Bond with a $7.0 million fully amortizing five year term loan from Wells
Fargo Bank. The remaining $1,500,000 was funded with cash on hand. At December
31, 2003, $4,083,000 was reported as long term debt (since it is not scheduled
to be repaid within a year), with $1,400,000 reported within the current portion
of long term debt. The term loan agreement permits debt prepayment without
penalty and allows the Company to borrow at a floating rate of interest based on
the Company's Funded Debt ratio. Depending upon this ratio, the Company can
borrow either at an interest rate range based on the bank's prime rate to prime
rate plus 1%, or at a range of 2% to 3.25% over an offshore interest rate. At
December 31, 2003 the interest rate on the term loan was 3.5%. 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.

On February 13, 2003, the Company announced the sale of its El Centro municipal
and industrial waste landfill located near Corpus Christi, Texas to a
wholly-owned subsidiary of Allied Waste Industries, Inc. ("Allied") for
$10,000,000 cash at closing and future volume-based royalty payments. 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 will no
longer have an obligation to pay annual minimum royalties, but will still be
required to pay royalties based on waste volumes received at El Centro.

The Company had 2,350,000 series E Warrants due to expire July 1, 2003 with an
exercise price of $1.50 a share. In February 2003, the warrant holders of all
2,350,000 warrants exercised the warrants and were issued 2,350,000 shares of
stock in exchange for their warrants and $3,525,000 in cash.

The Company's operations have produced an average of almost $10,000,000 a year
in cash flow over the past three years. Management expects cash flow from
operations in 2004 to match or exceed this performance. Additionally, the
$6,674,000 in cash on hand at December 31, 2003 was comprised of short term
investments which were not currently required for operations of $7,373,000, and
a net checks outstanding amount of ($699,000).

USES OF CASH

Management expects its capital spending needs of approximately $5,500,000 in
2004. It is expected that $3.7 million or 67% of 2004 capital spending will be
allocated to the Texas hazardous waste facility for treatment capacity
expansion, disposal cell construction, future disposal cell engineering,
equipment, and development of a rail transfer facility. During 2003 capital
spending totaled $6,270,000, primarily for design and construction of a
$4,300,000 disposal cell at the Idaho hazardous waste facility opened to accept
waste in the fourth quarter of 2003.

On February 28, 2003, the Company repurchased all 100,001 shares of Series D
Preferred Stock outstanding for a total purchase price of $6,406,000. Repurchase
of the Series D Preferred Stock eliminated an 8 3/8% debt instrument due to the
preferred stockholders, and eliminated the potential dilution that conversion of
these shares would have had on common stockholders.

On March 28, 2003 the Company exercised an early buyout of an operating lease
for $1,159,000 and recorded equipment purchases with a book value of $702,000
along with a reduction in deferred gain of $457,000. The Company recorded an
impairment charge of $225,000 on certain equipment utilized at the discontinued
Oak Ridge operation which was included in the early lease buyout. The early
lease buyout allowed the Company to meet a condition to repay $500,000 to Wells
Fargo Bank required by the Bank as a condition of approving repurchase of the
Series D Preferred Stock. In addition, the Company cleared title to certain
leased equipment at the Oak Ridge facility to simplify ongoing efforts to sell
the facility. Lastly, buyout of the operating lease eliminated an expensive
source of capital, improving the Company's overall cost of capital.

On December 19, 2003, the Company agreed to an extension of its financial
assurance insurance policies. As a condition of the extension, the Company was
required to maintain $3,258,000 in collateral through a standby letter of credit
and to accept a premium increase. The extent to which the Company's cost and
collateral required to renew this insurance will continue to increase is
unknown, and could have a material, adverse impact on the Company's available
cash and earnings.

The Company's Oak Ridge facility continues to require cash. Usage of cash at Oak
Ridge is expected to decrease since waste shipped off site has largely been
processed and disposed, however, if the Company is unable to sell the facility
and is required to commence closure activities, cash usage could increase later
in 2004. At December 31, 2003, the Company's Oak Ridge facility had liabilities
(excluding the estimated cost to close the facility) expected to be paid in 2004
of $1,727,000. Partially offsetting this cash outflow for Oak Ridge is the
expected collection of approximately $500,000 in accounts receivable from prior
customers of the facility. The Company is attempting to sell the Oak Ridge
facility, but would expect to spend the estimated $4,621,000 accrued in long
term liabilities to close the facility over time if a sale is not completed.

As of December 31, 2003, the Company expects to pay the following contractual
obligations and commitments:

Payments due by Year ($ in thousands)
2004 2005-2006 2007-2008 Beyond 2008 Total
------ ---------- ---------- ------------ -------

RECORDED LIABILITIES
--------------------
Long Term Debt $1,475 $ 2,917 $ 1,283 $ -- $ 5,675
Closure and Post Closure Liabilities 1,828 7,118 3,074 36,857 48,877
COMMITMENTS
-----------
Operating Lease Commitments 281 415 79 -- 775
Insurance Commitments 230 -- -- -- 230
------ ---------- ---------- ------------ -------

Total Contractual Obligations $3,814 $ 10,450 $ 4,436 $ 36,857 $55,557
====== ========== ========== ============ =======
<FN>

NOTE: Closure and Post Closure Liabilities are shown in the above table at their expected
payment amount rather than the discounted liability amount shown on the balance sheet.

During 2003 and 2002, significant cash was generated through earnings and the
sale of assets. These proceeds were used primarily to construct a new disposal
cell in Idaho, improve the Company's capital structure and meet obligations at
Oak Ridge. The Company expects to continue to generate cash in excess of its
operating and capital investment needs and is evaluating alternatives for
optimal deployment of its excess cash that include, but are not limited to
acquisitions, dividends and, or stock buybacks.

The Company believes that cash on hand, cash flow from operations and borrowings
under the line of credit will be sufficient to meet the Company's projected 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
independent engineering evaluations and interpretations of current regulatory
requirements which are updated annually. Accounting for closure and post-closure
costs includes final disposal unit capping, soil and groundwater monitoring, and
other monitoring and routine maintenance costs required after a site stops
accepting waste. The Company believes it has made adequate provisions through
reserves and the insurance policies for these obligations.

The Company estimates that its future closure and post-closure costs for all
insured facilities included in Continuing Operations were approximately
$44,000,000 at December 31, 2003, with a median payment year of 2027. This
compares to recorded closure and post-closure costs for facilities in Continuing
Operations of $11,023,000, $10,200,000 and $25,654,000 for 2003, 2002 and 2001,
respectively. An additional $4,621,000 of future closure and post-closure costs
for Discontinued Operations was estimated as of December 31, 2003. The Company's
financial assurance insurance policy for closure and post closure obligations
expires in December 2004.

Management believes that undertaking its environmental obligations will not have
a material adverse effect on the financial condition of the Company. Operation
of disposal facilities creates operational, monitoring, maintenance, closure and
post-closure obligations that could result in unforeseen monitoring and
corrective action costs. The Company cannot predict the likelihood or effect of
all such costs, new laws or regulations, or other future events affecting its
facilities.

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

The Company's operating revenue is generally lower in the winter months and
increases in the summer months, when weather-influenced cleanup projects are
most frequently undertaken. While hazardous waste volumes tend to decrease in
winter months, market conditions generally have a larger effect on revenue than
seasonality.

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

In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 requires that certain financial
instruments, which under previous guidance could be accounted for as equity, be
classified as liabilities in financial statements. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003, and is
otherwise effective for the Company as of January 1, 2004. The Company does not
expect the Statement to result in a material impact on its financial position or
results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities-an interpretation of ARB No. 51," which provides
guidance on the identification of, and reporting for, variable interest
entities. Interpretation No. 46 expands the criteria for consideration in
determining whether a variable interest entity should be consolidated.
Interpretation No. 46 is effective immediately for variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. Interpretation No. 46 is
effective for the Company in the first quarter of 2004 for variable interest
entities acquired before February 1, 2003. The Company does not have variable
interest entities and therefore does not expect the Statement to result in a
material impact on its financial position or results of operations.

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, and Income Taxes 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 accounting policies is set forth in Note 2 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 new disposal cells are
identified 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 of 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
increase (1.5%), and then discounts (at 9.3%) the accreted current cost
estimate back to its present value. Final closure liability obligations are
currently estimated as being paid through 2056.

On January 1, 2002, the Company early adopted FAS 143 Accounting for Asset
Retirement Obligations. This change is more fully described in Note 8 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 operations at its former
Processing and Field Services segment in Oak Ridge, Tennessee. 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 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). The
latter standard requires a liability to be recognized at the time 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,
and an additional $442,000 was recognized as of December 31, 2003 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 discontinuance of the Oak Ridge operation. The Company
initially assumed that the Oak Ridge facility would be cleared of waste and sold
in 2003. During 2003, the Company expected to spend $1,800,000 to maintain
compliance with conditions of its existing licenses and permits. An additional
$1,227,000 was 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. During 2003, the facility was prepared for sale, however,
a sale did not occur. The facility is being remarketed to interested parties in
2004. Due to the inherent uncertainties in the sale process, it is expected
that the cost estimate for exiting 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. During 2003, the Company recorded a loss of $20,951,000 due to an
adverse trial court ruling in California that, while appealed, nonetheless cast
significant doubt on the Company's ability to recover its investment in the
proposed Ward Valley LLRW disposal site. The Company continues to hold a
$6,478,000 deferred site development asset which may not be realized if the
Company does not recover monetary damages from the State of Nebraska or the
disposal project does not become operational. The decision to accrue costs or
write off assets is based on 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, previously weak financial condition and the highly competitive nature of
its business, it was then considered more likely than not that the Company would
be unable to utilize portions of the deferred tax assets prior to their
expiration. The Company expected to report taxable income in 2003, and would
have except for the $20,951,000 write-off of the Ward Valley deferred site
development asset following the adverse trial court ruling. The determination of
whether a valuation allowance is appropriate, and the amount of the valuation
allowance, is based on management's present judgment and evaluation of whether
it is more likely than not that the Company will utilize some, or all of the
deferred tax assets. The Company has assessed the valuation allowance and
currently estimates that $8,284,000 of the valuation allowance will be utilized
by the Company through 2006.

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, derivatives, 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 due to
the Company's preservation of capital approach to investments. At December 31,
2003, $171,000 was held in short term pledged investment accounts and
approximately $8,000,000 was held in investments whose terms ranged from
overnight to one week. Together, these items earned interest at approximately 1%
and comprised 12% of assets.

The Company has interest rate risk on debt instruments due to the $7,000,000
five year amortizing term loan due Wells Fargo Bank. At December 31, 2003,
$5,483,000 of variable rate debt was owed under the term loan, accruing interest
at the rate of 3.5%. A hypothetical change of 1% in interest rates would change
annual interest expense paid by the Company by approximately $48,000.

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 sheets of American Ecology
Corporation and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of operations, shareholders' equity and cash flows for
the years 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 audits.

We conducted our audits 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
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, 2003 and 2002, and the results
of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.

Moss Adams, LLP

Los Angeles, California
February 11, 2004

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors
American Ecology Corporation

We have audited the accompanying consolidated statements of operations,
shareholders' equity and cash flows of American Ecology Corporation and
subsidiaries for the year ended December 31, 2001. 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 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 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 results of operations and cash flows of
American Ecology Corporation and subsidiaries for the year ended December 31,
2001, 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,
-------------------
2003 2002
--------- --------

ASSETS
Current Assets:
Cash and cash equivalents $ 6,674 $ 135
Receivables, net 12,596 10,460
Income taxes receivable 2 740
Prepayments and other 1,049 498
Deferred income taxes 3,222 2,745
Assets held for sale or closure 938 10,722
--------- --------
Total current assets 24,481 25,300

Cash and investment securities, pledged 170 244
Property and equipment, net 28,317 26,998
Facility development costs 6,478 27,430
Other assets 561 129
Deferred income taxes 5,062 5,539
Assets held for sale or closure 1,557 1,485
--------- --------
Total Assets $ 66,626 $87,125
========= ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long term debt $ 1,475 $ 1,985
Accounts payable 1,678 2,192
Accrued liabilities 4,788 4,166
Accrued closure and post closure obligation, current portion 1,828 882
Income taxes payable -- 23
Current liabilities of assets held for sale or closure 1,907 7,965
--------- --------
Total current liabilities 11,676 17,213

Long term debt 4,200 5,972
Long term accrued liabilities 454 2,372
Revolving line of credit -- 603
Accrued closure and post closure obligation, excluding current portion 9,296 9,318
Liabilities of assets held for sale or closure, excluding current portion 4,649 5,699
--------- --------
Total liabilities 30,275 41,177
--------- --------

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,
0 and 100,001 shares issued and outstanding; -- 1
Common stock, $.01 par value, 50,000,000 authorized, 17,033,118
and 14,539,264 shares issued and outstanding 170 145
Additional paid-in capital 54,824 55,789
Accumulated deficit (18,643) (9,987)
--------- --------
Total shareholders' equity 36,351 45,948
--------- --------

Total Liabilities and Shareholders' Equity $ 66,626 $87,125
========= ========
<FN>
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,
------------------------------
2003 2002 2001
--------- --------- --------

Revenue $ 57,047 $ 46,789 $40,175
Direct operating costs 33,479 25,223 22,778
--------- --------- --------

Gross profit 23,568 21,566 17,397
Selling, general and administrative expenses 13,819 12,631 14,274
--------- --------- --------

Income from operations 9,749 8,935 3,123
Interest income 347 31 246
Interest expense 266 820 1,011
Loss on write off of Ward Valley facility development costs 20,951 -- --
Other income (expense) 124 (557) 819
--------- --------- --------

Income (loss) before income tax, discontinued operations and cumulative
effect of change in accounting principle (10,997) 7,589 3,177
Income tax expense (benefit) 72 (8,505) 186
--------- --------- --------

Income (loss) before discontinued operations and cumulative effect of
change in accounting principle (11,069) 16,094 2,991
Income (loss) from discontinued operations (net of tax of $0) 2,477 (10,464) (2,189)
--------- --------- --------

Income (loss) before cumulative effect of change in accounting principle (8,592) 5,630 802
Cumulative effect of change in accounting principle (net of tax of $0) -- 13,141 --
--------- --------- --------

Net income (loss) (8,592) 18,771 802
Preferred stock dividends 64 398 398
--------- --------- --------

Net income (loss) available to common shareholders $ (8,656) $ 18,373 $ 404
========= ========= ========

Basic earnings (loss) per share $ (.52) $ 1.28 $ .03
========= ========= ========

Diluted earnings (loss) per share $ (.52) $ 1.15 $ .03
========= ========= ========

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

PRO FORMA RESULTS AS IF FAS 143 WAS IMPLEMENTED JANUARY 1, 2001

Net income before discontinued operations and cumulative effect of
change in accounting principle $ 2,991
Less pro forma accretion of closure and post closure liability (876)
Less pro forma amortization of closure asset (198)
Plus previous closure and post closure expenses 131
--------
Pro forma net income before discontinued operations and cumulative
effect of change in accounting principle $ 2,048
========
Basic earnings per share from income before discontinued operations and
cumulative effect of change in accounting principle- pro forma $ .15
========
Diluted earnings per share from income before discontinued operations
and cumulative effect of change in accounting principle-pro forma $ .13
========
<FN>
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,
-------------------------------
2003 2002 2001
-------- --------- --------

Cash flows from operating activities:
Net income (loss) $(8,592) $ 18,771 $ 802
Adjustments to reconcile net income (loss)to net
cash provided by operating activities:
Depreciation, amortization, and accretion 6,973 6,604 4,076
(Income) loss from discontinued operations (2,477) 10,464 2,189
Loss on write off of Ward Valley facility development costs 20,951 -- --
Cumulative effect of change in accounting principle -- (13,141) --
Reversal of deferred income tax allowance -- (8,284) --
Stock compensation 38 68 82
Changes in assets and liabilities:
Receivables (2,078) (2,517) (827)
Other assets (280) 553 (115)
Closure and post closure obligation (537) (1,598) (386)
Income taxes payable/receivable 715 (227) 135
Accounts payable and accrued liabilities (218) (3,063) 1,236
-------- --------- --------
Net cash provided by operating activities 14,495 7,630 7,192

Cash flows from investing activities:
Capital expenditures (6,270) (2,737) (4,009)
Acquisition of Envirosafe Services of Idaho, Inc. -- -- 2,575
Transfers from cash and investment securities, pledged 74 -- 434
-------- --------- --------
Net cash used by investing activities (6,196) (2,737) (1,000)

Cash flows from financing activities:
Proceeds from issuances and indebtedness -- 7,615 907
Payments of indebtedness (3,053) (15,128) (4,035)
Stock purchased and canceled (231) -- (149)
Retirement of Series D Preferred Stock (6,406) -- --
Stock options and warrants exercised 4,002 1,091 95
-------- --------- --------
Net cash used by financing activities (5,688) (6,422) (3,182)
-------- --------- --------

Increase (decrease) in cash and cash equivalents 2,611 (1,529) 3,010
Net cash provided (used) by discontinued operations 3,928 (2,812) (2,656)
Cash and cash equivalents at beginning of year 135 4,476 4,122
-------- --------- --------
Cash and cash equivalents at end of year $ 6,674 $ 135 $ 4,476
======== ========= ========

Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest expense $ 266 $ 820 $ 1,011
Income taxes paid 93 6 51
Non-cash investing and financing activities:
Purchase of Envirosafe Services of Idaho, Inc. -- -- 18,541
Preferred stock dividends accrued -- 398 398
Acquisition of equipment with notes/capital leases 168 -- 1,557

<FN>
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, 2001 $ 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)
=========== ======== ============ ==========

NET LOSS -- -- -- (8,592)
COMMON STOCK ISSUANCE -- 25 4,015 --
DIVIDENDS ON PREFERRED STOCK -- -- -- (64)
RETIREMENT OF PREFERRED STOCK (1) -- (4,749) --
COMMON STOCK CANCELLED -- -- (231) --
----------- -------- ------------ ----------
BALANCE, DECEMBER 31, 2003 $ -- $ 170 $ 54,824 $ (18,643)
=========== ======== ============ ==========
<FN>

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, refineries and chemical
manufacturing plants. 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"); US Ecology Texas, a Texas Limited
Partnership; 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.

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,
PCB, industrial and low-level radioactive waste and naturally occurring and
accelerator produced radioactive materials ("NORM/NARM"). 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 NORM/NARM disposal facility in Richland,
Washington. On February 13, 2003, the Company sold its El Centro, Texas
municipal solid waste landfill facility. This facility was previously included
in the Operating Disposal Facilities segment but was classified as a
discontinued operation as of December 31, 2002 due to its pending sale.

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 currently incurs costs for remediation and long-term monitoring and
maintenance at its closed facilities. Two proposed disposal facilities are
located in Butte, Nebraska, and Ward Valley, California, and are involved in
ongoing litigation.

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 are
included in the results of discontinued operations.

NOTE 2. 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 $171,000 and $244,000 at December 31, 2003 and 2002, 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.

Receivables. - Receivables are stated at an amount management expects to
- -----------
collect. Based on management's assessment of the credit history of the
customers having outstanding balances, it has concluded that potential
unreserved future losses on balances outstanding at year-end will be immaterial.

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

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 or per-yard basis based on contracted prices.
Revenues are recognized as services are performed and the waste is buried.

The Richland, Washington disposal facility is regulated by the Washington
Utilities and Transportation Commission ("WUTC"), which sets and regulates rates
for its disposal of low-level radioactive wastes. Annual revenue levels are
established based on an agreement with the WUTC at amounts sufficient to cover
the costs of operation and provide the Company with a reasonable profit.
Per-unit rates charged to LLRW customers during the year are based on disposal
volumes and radioactivity projections submitted by the Company and approved by
the WUTC. If 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, 2003 and 2002, the Company had decreased
revenue by $1,741,000 and $693,200, respectively, for these refunds.

Processing facility revenues resulted primarily from fees charged for waste
disposition at facilities operated by other entities. Fees were 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 services and
recorded as unearned revenue until the related work is performed. Work
performed in excess of preliminary billings was recorded as unbilled revenue and
billed upon disposition of the waste.

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

Unbilled receivables. Unbilled receivables are recorded for work performed under
- --------------------
contracts that have not yet been invoiced to customers, and arise due to the
timing of billings. Substantially all unbilled receivables at December 31, 2003
were to be billed in the following month.

Deferred revenue. Advance billings or collections are recorded as deferred
- -----------------
revenue, and recognized when related services are provided. At December 31, 2003
and 2002, deferred revenue included in accrued liabilities amounted to
approximately $497,000 and $988,000, 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 made 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 on 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.

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 2003, 2002 and 2001, maintenance and repair
expenses charged to continuing operations were $1,053,000, $337,000 and
$348,000, respectively. During 2003, significant expenses were incurred for
repairs and maintenance on buildings and monitoring wells.

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. Qualified cell development costs
- ----------------------------------------------
are recorded and capitalized 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 cell life.
Estimated future costs are developed using input from independent engineers, and
internal technical and accounting managers. 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 applies. Costs associated with 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 applicable permits. RCRA
requires that companies provide the responsible regulatory agency an acceptable
financial assurance for 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 technical and accounting
managers 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 during the 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.

The Company has historically been successful in receiving approvals for proposed
disposal facility expansions; however, there can be no assurance that the
Company will be successful in obtaining future expansion approvals. In some
cases, the Company may be unsuccessful in obtaining an expansion permit
modification or the Company may determine that such a permit modification
previously considered probable is no longer probable. The Company's technical
and accounting managers 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 a denied expansion permit 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. During 2003 the Company constructed additional cell space which
has increased the related asset retirement obligation.

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 through
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 operation of 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
2003 and 2002, the Company recorded impairment charges of $225,000 and
$1,593,000 relating to certain discontinued operations.

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.
Accrued costs related to the self-insured health care coverage amounted to
$138,000 and $150,000 at December 31, 2003 and 2002. 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.
- --------------------------------

In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No.
150, "Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 requires that certain financial
instruments, which under previous guidance could be accounted for as equity, be
classified as liabilities in statements of financial position. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003,
and is otherwise effective for the Company as of January 1, 2004. The Company
does not expect the Statement to result in a material impact on its financial
position or results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities-an interpretation of ARB No. 51," which provides
guidance on the identification of and reporting for variable interest entities.
Interpretation No. 46 expands the criteria for consideration in determining
whether a variable interest entity should be consolidated. Interpretation No. 46
is effective immediately for variable interest entities created after January
31, 2003, and to variable interest entities in which an enterprise obtains an
interest after that date. Interpretation No. 46 is effective for the Company in
the first quarter of 2004 for variable interest entities acquired before
February 1, 2003. The Company does not have variable interest entities and
therefore does not expect the Statement to result in a material impact on its
financial position or results of operations.

Stock Options. At December 31, 2003, the Company has two stock-based employee
- ---------------
compensation plans. These are more fully described in Note 13. 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:

2003 2002 2001
-------- -------- ------

Net income (loss), as reported $(8,592) $18,771 $ 802
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects (980) (283) (111)
-------- -------- ------
Pro forma net income (loss) $(9,572) $18,488 $ 691
======== ======== ======

EARNINGS PER SHARE:
Basic - as reported $ (.52) $ 1.28 $ .03
======== ======== ======
Basic - pro forma $ (.58) $ 1.26 $ .02
======== ======== ======
Diluted - as reported $ (.52) $ 1.15 $ .03
======== ======== ======
Diluted - pro forma $ (.58) $ 1.13 $ .02
======== ======== ======

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 3. EARNINGS PER SHARE
Basic earnings per share is 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) 2003 2002 2001
--------- --------- --------

Income (loss) before discontinued operations and cumulative $(11,069) $ 16,094 $ 2,991
effect of accounting change
Gain (loss) from operations of discontinued segments 2,477 (10,464) (2,189)
Cumulative effect of accounting change -- 13,141 --
--------- --------- --------
Net income (loss) (8,592) 18,771 802
Preferred stock dividends 64 398 398
--------- --------- --------
Net income (loss) available to common shareholders $ (8,656) $ 18,373 $ 404
========= ========= ========

Weighted average shares outstanding-
Common shares 16,604 14,311 13,738
Effect of dilutive shares
Series E Warrants -- 981 1,055
Chase Bank Warrants -- 564 475
Stock Options -- 114 314
--------- --------- --------

Average shares 16,604 15,970 15,582
========= ========= ========

Basic earnings (loss) per share from continuing operations $ (.67) $ 1.09 $ .19
Basic earnings (loss) per share from discontinued operations .15 (.73) (.16)
Basic earnings per share from cumulative effect of accounting change -- .92 --
--------- --------- --------
Basic earnings (loss) per share $ (.52) $ 1.28 $ .03
========= ========= ========

Diluted earnings (loss) per share from continuing operations $ (.67) $ .99 $ .17
Diluted earnings (loss) per share from discontinued operations .15 (.66) (.14)
Diluted earnings per share from cumulative effect of accounting
change -- .82 --
--------- --------- --------
Diluted earnings (loss) per share $ (.52) $ 1.15 $ .03
========= ========= ========

NOTE 4. 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 an
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.

- 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 cell. The expense for
each cubic yard is then calculated based on the remaining permitted capacity and
total permitted capacity. Estimates for final closure and post-closure costs are
developed using input from third party engineering consultants, and Company
technical and accounting managers. Management reviews estimates at least
annually. 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, operations 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 5. 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"), the transportation and disposal of
waste for remediation projects, and the disposal of steel mill dust (KO-61)
under various contracts. The following customers accounted for more than 10% of
revenue during the three years ending 2003:

% OF REVENUE FOR YEAR ENDING
CUSTOMER 2003 2002 2001
------- ------- -------

U.S. Army Corps of Engineers 27 27 15
Nucor Steel Company 7 13 11
Shaw E & I 18 - -

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

CUSTOMER 2003 2002
------ ------

U.S. Army Corps of Engineers $2,916 $1,730
Nucor Steel Company $ 375 $ 408
Shaw E & I $3,598 --

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, 2003, the Paper, Allied-Industrial
- ----------------------
Chemical & Energy Workers International Union, AFL-CIO, CLC (PACE), represents
11 employees at one of the Company's facilities, and 171 other employees did not
belong to a union.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31, 2003 and 2002, were as follows (in
thousands):

2003 2002
--------- ---------

Construction in progress $ 1,381 $ 797
Land and improvements 4,986 4,831
Cell development costs 19,503 14,262

Buildings and improvements 13,535 14,031
Disposal facility equipment 10,392 9,421
Vehicles and other equipment 6,546 6,360
--------- ---------
56,343 49,702
Less: Accumulated depletion, depreciation and amortization
(28,026) (22,704)
--------- ---------
Property, Plant and Equipment $ 28,317 $ 26,998
========= =========

Depreciation expense was $5,995,000, $4,864,000, and $4,076,000 for 2003, 2002
and 2001, respectively.

NOTE 7. FACILITY DEVELOPMENT COSTS

A wholly owned subsidiary of the Company, US Ecology, was licensed in 1993 to
construct and operate the low-level radioactive waste ("LLRW") facility for the
Southwestern Compact ("Ward Valley facility"), and was selected to obtain a
license to develop and operate the Central Interstate Compact LLRW facility
("Butte facility").

Ward Valley Site - 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
Company will need to recover monetary damages from the State of California. The
Company is pursuing litigation in state court to recover its investment in Ward
Valley and will continue to seek recovery.

The Company has alleged that the State of California abandoned its duty to
acquire the project property from the U.S. Department of the Interior in a suit
filed in State court seeking recovery of monetary damages in excess of $162
million. The trial court ruled against the Company on March 26, 2003. Based on
the uncertainty of recovery following the trial court's adverse decision, the
Company wrote off the $20,951,000 deferred site development asset on March 31,
2003. The Company has appealed this ruling. Briefing on the appeal is expected
to be complete in mid-2004, after which oral arguments will be scheduled.

Butte Site - 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
to the Company based on its contributions to the project and pre-judgment
interest. On February 18, 2004, the Eighth U.S. Circuit Court of Appeals
affirmed the district court ruling in its entirety. On March 3, 2004, the State
of Nebraska filed a petition for rehearing en banc by the full Eighth U.S.
Circuit Court of Appeals.

The timing and outcome of the above matters are unknown. The Company has alleged
that the State of California has abandoned the project. 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 will continue
to pursue recovery of damages through its litigation. The Company also
continues to participate in the CIC legal action and believes it is probable
that the deferred site development costs for this facility 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 investment 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 as of December 31, 2003 and 2002 (in thousands):

Capitalized Costs
-------------------
2003 2002
-------- ---------

Ward Valley, CA Project $ -- $ 20,952
Butte, Nebraska Project 6,478 6,478
-------- ---------
Total $ 6,478 $ 27,430
======== =========

NOTE 8. 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 significant 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.

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.

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):

2003 2002
-------- ---------

Obligation, beginning of year $16,760 $ 26,333
January 1, 2002 implementation of FAS 143 -- (11,130)
Accretion of obligation 1,051 1,099
Payment of obligation (1,148) (1,414)
Adjustment of obligation (917) 1,872
-------- ---------
December 31, 2003 obligation $15,745 $ 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
adjustments were a reduction in the obligation of $1,098,000 due to sale of the
El Centro municipal landfill in 2003, and a $2,038,000 increase in the estimated
cost of removing accumulated waste contamination for the discontinued Oak Ridge
processing business in 2002.

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

($in thousands) 2003 2002
------- -------

Accrued closure and post closure obligation, current portion $ 1,828 $ 882
Liabilities related to assets held for sale or closure, current portion -- 1,082
Accrued closure and post closure obligation, non-current portion 9,296 9,318
Liabilities related to assets held for sale or closure, non-current portion 4,621 5,478
------- -------
$15,745 $16,760
======= =======

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

($in thousands) 2003 2002
------- -------

Closure and post closure asset, beginning of year $2,011 $ --
Adjustments to closure and post closure asset (313) 2,011
------- -------
Closure and post closure asset, end of year $1,698 $2,011
Amortization of closure and post closure asset (139) (199)
Prior year accumulated amortization of closure and post closure asset (199) --
------- -------
Net closure and post closure asset, end of year $1,360 $1,812
======= =======

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 2,011
-------
Cumulative effect of implementation of FAS 143 $13,141
=======

NOTE 9. LONG TERM DEBT

On October 28, 2002, the Company entered into a five year, fully amortizing,
$7,000,000 term loan agreement 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, 2003 2003 2002
------------------------------- -------- --------

Term Loan VARIABLE 3.5% $ 5,483 $ 6,883
Notes payable and other FIXED 7.3% AVERAGE 192 1,074
-------- --------
5,675 7,957
Less: Current maturities (1,475) (1,985)
-------- --------
Long term debt $ 4,200 $ 5,972
======== ========

Future minimum payments on long-term debt is as follows (in thousands):

Year Ended December 31,
-----------------------

2004 $1,475
2005 1,466
2006 1,451
2007 1,283
Thereafter --
------
Total Debt $5,675
======

NOTE 10. REVOLVING LINE OF CREDIT

On December 16, 2003, the Company and Wells Fargo Bank entered into an amendment
to the line of credit that increased the maximum amount available from
$6,000,000 to $8,000,000 and extended the maturity date to June 15, 2005. 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, 2003, the applicable interest rate on the
line of credit was 4.125%. The credit agreement contains certain financial
covenants that the Company has adhered to quarterly, including a maximum
leverage ratio, a minimum current ratio and a debt service coverage ratio.

At December 31, 2003 and 2002, the outstanding balance on the revolving line of
credit was $0 and $603,000, respectively. At December 31, 2003 and 2002, the
availability under the line of credit was $4,492,000 and $4,247,000,
respectively, with $3,508,000 and $1,150,000 of line of credit availability
restricted for the outstanding letters of credit utilized as collateral for the
Company's financial assurance policies. The Company has continued to borrow on,
and repay the line of credit according to business demands and availability of
cash.

NOTE 11.OPERATING LEASES

On March 28, 2003 the Company exercised an early buyout of an operating lease
for $1,159,000 and recorded equipment purchases with a book value of $702,000
along with a reduction in the deferred gain of $457,000 recorded in conjunction
with the original sale-lease back transaction. In conjunction with the early
buyout, the Company recorded an impairment charge of $225,000 on certain
equipment at the discontinued Oak Ridge facility.

Other lease agreements primarily cover office equipment and office space.
Future minimum lease payments as of December 31, 2003 were as follows ($ in
thousands):

Minimum Lease Payment

2004 $ 281
2005 232
2006 183
2007 79
Thereafter --
--------
Total Minimum Payments $ 775
========

Rental expense from continuing operations amounted to $621,000, $461,000, and
$983,000 during 2003, 2002 and 2001, respectively.

NOTE 12. PREFERRED STOCK

In 1996, the Company issued 300,000 shares of Series E Redeemable Convertible
Preferred Stock ("Series E Preferred Stock") that were later retired in 1998.
The Series E Preferred Stock carried warrants ("Series E Warrants") to purchase
3,000,000 shares of common stock with a $1.50 per share exercise price. In April
2002 one Series E holder exercised 650,000 warrants. In February 2003, the
remaining 2,350,000 Series E Warrants were exercised and the Company issued
2,350,000 shares of common stock and received $3,525,000 in cash. No Series E
warrants are now outstanding.

In September 1995, the Board of Directors authorized 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 present and past members of the Board of Directors. In 1999, one
Series D holder converted 5,263 preferred shares to 69,264 common shares. Each
of the remaining 100,001 shares of Series D Preferred Stock was convertible at
any time at the option of the holder into 17.09 shares of common stock, which
was equivalent to a conversion price of $3.71 per share due to dilution by
subsequent sales of common stock.

In January 2003, the Company offered to repurchase all outstanding Series D
Preferred Stock for the original sales price of $47.50 a share plus accrued but
unpaid dividends. Repurchase was subject to approval by the Company's Board of
Directors and primary bank. The offer was accepted by all Series D holders and
approved by the Board of Directors and the bank. On February 28, 2003, the
Company repurchased the remaining 100,001 shares of Series D Preferred Stock for
$47.50 a share plus accrued but unpaid dividends of $16.56 a share, for a total
payment of $6,406,000.

NOTE 13. 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 may 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:

2003 2002 2001
----------- ----------- -----------

Options outstanding, beginning of year 753,150 1,128,650 1,448,898
Granted 813,724 147,500 100,000
Exercised (180,043) (108,500) (59,000)
Canceled (120,550) (414,500) (361,248)
----------- ----------- -----------
Options outstanding, end of year 1,266,281 753,150 1,128,650
=========== =========== ===========

Average price of outstanding options $ 3.90 $ 3.42 $ 2.90

Average price of options granted $ 4.30 $ 3.14 $ 2.43

Average price of options exercised $ 2.65 $ 1.29 $ 1.56

Average price of options canceled $ 5.43 $ 2.46 $ 2.79

Options exercisable at end of year 808,271 753,150 1,020,700
=========== =========== ===========

Options available for future grant at end 509,676 1,202,850 1,453,350
=========== =========== ===========
of year

The following table summarizes information about the stock options outstanding
under the Company's option plans as of December 31, 2003:

Weighted
average Weighted Weighted
remaining average average
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 3.4 109,500 $ 1.31 109,500 $ 1.31

$1.60 - $2.25 6.2 119,100 $ 2.01 119,100 $ 2.01

$2.42 - $3.50 8.3 386,082 $ 2.93 222,896 $ 2.89

$3.75 - $5.00 7.1 457,346 $ 4.29 266,962 $ 4.13

$6.50 9.1 139,253 $ 6.50 34,813 $ 6.50

$10.13 1.1 55,000 $ 10.13 55,000 $ 10.13
----------- -----------

1,266,281 808,271
=========== ===========

As of December 31, 2003, the 1992 Stock Option Plan for Employees had options
outstanding for 775,281 shares with 188,976 shares remaining available, and
under the 1992 Stock Option Plan for Directors, options were outstanding for
491,000 shares with 320,700 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 2003, 2002 and 2001:

2003 2002 2001
------------ ----------- ----------

Expected volatility 83% - 105% 49% - 102% 51%
Risk-free interest rates 3.75%-4.25% 4.75% 5.7%
Expected lives 7-10 YEARS 10 years 10 years
Dividend yield 0% 0% 0%
Weighted-average fair value of options granted
during the year (Black-Scholes) $ 2.18 $ 1.92 $ 1.11

On February 11, 2003, the Company offered a significant number of options to
four key employees at the following prices, of which all were above the fair
market value at the date of grant:

Exercise Price of Option Number of Options Issued
------------------------- ------------------------

3.00 270,329
4.50 315,384
6.50 173,011

NOTE 14. 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 compensation.

The Company contributions for the Plan in 2003, 2002 and 2001 were $125,000,
$522,000, and $209,000, respectively. The contributions for 2002 included
$294,000 paid as part of the union settlement at the discontinued Oak Ridge
operations.

NOTE 15. INCOME TAXES

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

Year Ended December 31,
2003 2002 2001
---------- ----------- -----------

Current - State $ 72 $ (221) $ 186
Deferred - Federal -- (8,284) --
---------- ----------- -----------

$ 72 $ (8,505) $ 186
========== =========== ===========

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,
2003 2002 2001
----- ------ -----

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) (34)
State income tax and loss carry forward 1 (3) 17
Other, net -- -- --
----- ------ -----
Total effective tax rate 1% (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):

2003 2002
--------- ---------

CURRENT
- -------
Assets:
Net operating loss carry forward $ 2,242 $ 2,470
Accruals, allowances and other 980 1,362
--------- ---------
Total gross deferred tax assets - current portion 3,222 3,832
Less valuation allowance -- (1,087)
--------- ---------
Net deferred tax asset - current portion $ 3,222 $ 2,745
========= =========

NON-CURRENT
- -----------
Assets:
Environmental compliance and other site related costs,
principally due to accruals for financial reporting purposes $ 4,033 $ 4,054
Depreciation and amortization 1,411 1,236
Net operating loss carry forward 13,100 8,852
Accruals, allowances and other 2,570 2,543
--------- ---------
Total gross deferred tax assets - non-current portion 21,114 16,685
Less valuation allowance (15,921) (10,777)
--------- ---------
Liability:
Capitalized interest (131) (369)
--------- ---------
Net deferred tax assets - non-current portion $ 5,062 $ 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 $45,124,000 at
December 31, 2003 begins to expire in the year 2006. Of this carry forward,
$2,527,000 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 $830,000 in 2008. The remaining unrestricted net operating loss carry
forward expires $2,878,000 in 2010, $8,657,000 in 2011, $7,828,000 in 2012,
$6,927,000 in 2013, $3,208,000 in 2014, $498,000 in 2015, $78,000 in 2016,
$2,257,000 in 2017 and 10,266,000 in 2018.

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. On December 4, 2002, the IRS approved
a settlement of $605,000 plus interest and confirmed the Company's net operating
loss carry forward after 1995. During 2003, the IRS paid the full amount of the
settlement plus interest.

NOTE 16. 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. Actions may also be 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, as well as 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 calculated in
accordance with the plan is in excess of $12,000,000.

In February 2003, the Company entered into employment agreements with four
executive employees. The agreements expire December 31, 2004 and 2005, and
provided for aggregate minimum annual salaries of $639,000. On September 30,
2003, the Company terminated the employment of one of these executives and
recognized $235,000 in expenses for payroll and related benefits through the
December 31, 2004 contract term. At December 31, 2003 the commitment for the
three remaining employment contracts is for aggregate minimum annual salaries of
$484,000.

The Company's contract with the US Army Corps of Engineers (USACE) expires
during the second quarter of 2004 unless extended for an additional 5 years at
the option of the USACE. While the Company believes that the USACE will extend
the contract for an additional 5 years, there is no assurance that the contract
will be extended.

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

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

Based on the uncertainty of recovery following the trial court's adverse
decision, the Company wrote off the $20,951,000 deferred site development asset
on March 31, 2003.

On June 26, 2003, the Company filed a notice of appeal with the California
Fourth Appellate District Court.

The Company's financial interest in the pending claim against the State was
improved by an amendment to the November 13, 1998 Ward Valley Interest Agreement
and Assignment entered into by American Ecology and its former primary lender.
This June 27, 2003 amendment, entered into with the former lenders successor,
provides that any monetary damages obtained shall first be allocated to the
Company to recover past and future litigation fees and related legal expenses
relating to the case. Any remaining amount recovered shall be divided equally
between the Company and the former lender. The 1998 agreement had provided that
the first $29.6 million less up to $1.0 million in legal fees and expenses would
be owed to the former lender, with any remaining recovery reserved to the
Company.

In September 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 $6.2 million plus $6.1 million for prejudgment interest. The Company
carries $6.5 million on its balance sheet for capitalized facility development
costs. 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 where it was argued in June 2003.

MANCHAK V. US ECOLOGY, INC., U.S. DISTRICT COURT FOR THE DISTRICT OF NEVADA,
- --------------------------------
CASE NO. CV-S-97-0655.

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

NOTE 17. RECEIVABLES AND ALLOWANCE FOR DOUBTFUL ACCOUNTS

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

2003 2002
-------- --------

Accounts receivable - trade $13,137 $ 8,049
Unbilled revenue 65 2,818
-------- --------
13,202 10,867
Allowance for uncollectible accounts (606) (407)
-------- --------
$12,596 $10,460
======== ========

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, 2001 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

Plus 2003 provision 427
Less accounts written off 2003 (228)
-------------------
Balance December 31, 2003 $ 606
===================

NOTE 18. 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,
2003 and 2002 are as follows (in thousands):

Processing and Field El Centro Disposal Total Assets Held for
Services Facility Facility Sale or Closure
------------------- ----------------- -----------------
2003 2002 2003 2002 2003 2002

Current assets
- --------------
Current assets $ 386 $ 2,599 $ -- $ 648 $ 386 $ 3,247
Property & equipment, net 552 565 -- 6,910 552 7,475
--------- -------- ------- -------- ------- --------
938 3,164 -- 7,558 938 10,722
========= ======== ======= ======== ======= ========
Non-current assets
- ------------------

Property, plant & equipment, net 1,508 1,436 -- -- 1,508 1,436
Other 49 49 -- -- 49 49
--------- -------- ------- -------- ------- --------
1,557 1,485 -- -- 1,557 1,485
========= ======== ======= ======== ======= ========
Current liabilities
- -------------------
Accounts payable & accruals 1,870 5,416 -- 108 1,870 5,524
Current portion long term debt 37 112 570 37 682
Current portion closure/post closure
obligation -- -- -- 1,082 -- 1,082
Other -- 601 -- 76 37 677
--------- -------- ------- -------- ------- --------
1,907 6,129 -- 1,836 1,907 7,965
========= ======== ======= ======== ======= ========
Non-current liabilities
- -----------------------
Closure/post closure obligations 4,621 5,478 -- -- 4,621 5,478
Long-term debt 23 72 -- 67 23 139
Other 5 77 -- 5 5 82
--------- -------- ------- -------- ------- --------
4,649 5,627 -- 72 4,649 5,699
========= ======== ======= ======== ======= ========

Depreciation and amortization expense relating to assets classified as "Held for
Sale or Closure" amounted to $0, $1,202,000, and $954,000 during 2003, 2002 and
2001, 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
---------------------- ------------------- --------------------

2003
- ----
Revenues, net $ 1,941 $ 462 $ 2,403
Operating income (loss) (2,014) 63 (1,951)
Net income (loss) (2,517) 4,994 2,477
Basic earnings (loss) per share (.15) .30 .15
Diluted earnings (loss) per share (.15) .30 .15

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)

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 removed the accumulated
customer and Company waste to help sell the facility. Shipment of the waste off
site for processing and disposal was completed in 2003. Management attempted to
sell the remaining facility components during 2003, but was unsuccessful. During
2004 Management intends to continue efforts to sell the facility.

In conjunction with the plan to sell the facility, an updated third party
engineering study was performed in December 2002, which resulted in an
additional $2,038,000 estimated liability related to closure and post closure
costs during 2002. This liability pertains to certain materials located on the
premises which were previously received or used in the operation of the
business. During 2003, certain materials covered by the third party engineering
study were disposed of, resulting in a reduction of the estimated closure
liability of $936,000.

During 2002, the Company 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 ceased as the current recorded
values, net of the impairment charges, represent the net realizable value.

On December 27, 2002, management informed all employees that the Company was
discontinuing commercial processing at the Oak Ridge facility and implemented a
substantial reduction in the facility's labor force. Terminated union employees
were compensated for prior service, provided health coverage through January 31,
2003, and presented with a proposed severance package. Terminated non-union
employees were paid severance in accordance with written Company policy. For
employees covered under the collective bargaining agreement, the Company entered
into good faith severance negotiations with union representatives. Both sides
amended their original proposals during these negotiations. On July 16, 2003, a
final severance agreement was executed with the union providing $152,000 in
severance to the terminated union employees and a release from all claims
related to their employment with the Company. During the third quarter of 2003,
the Company paid and recognized this obligation and associated payroll taxes in
the amount of approximately $175,000.

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 $4,621,000 at December 31, 2003 (see Note 8). In
the event the Company divests of the facility in a sale transaction, the Company
may not incur the entire closure obligation, which may result in a gain being
realized in future periods.

Costs incurred at the Oak Ridge facility to prepare the facility for sale during
the year ended December 31, 2003 are summarized as follows: (in thousands $000)

2003
------

Net operating costs in excess of previous accrual $1,040
Additional impairment of property and equipment 225
Increase in estimated cost for disposal of waste at facility 1,252
------

Disposal costs for the year ended December 31, 2003 $2,517
======

Cost changes for Oak Ridge facility on-site activities and disposal liabilities
for removed wastes are as follows:

($in thousands) December 31, 2002 Cash Payments Adjustments December 31, 2003
----------------- -------------- ----------- -----------------

Waste disposal liability 1,827 (5,003) 3,799 623
On-site discontinued
operation cost liability 1,800 (2,398) 1,040 442

The adjustments represent differences between the estimated costs accrued at
December 31, 2002, actual costs incurred during 2003, and changes in estimated
future costs for planned facility and waste disposition. The adjustment amounts
in the above roll forward analysis do not directly correspond to the Income
statement due to the offsetting impact of revenue recognized from discontinued
operations for customer waste shipments.

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 19. 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 20. 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 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

- ------------------------------------------------------------------------------------------------------------------
2003
- ------------------------------------------------------------------------------------------------------------------
Revenue $ 56,973 $ 74 $ -- $ -- $ 57,047
Direct operating cost 32,571 908 -- -- 33,479
------------ --------------- ---------------- ----------- ---------
Gross profit (loss) 24,402 (834) -- -- 23,568
S,G&A 6,982 1,794 -- 5,043 13,819
------------ --------------- ---------------- ----------- ---------
Income (loss) from operations 17,420 (2.628) -- (5,043) 9,749
Investment income -- -- -- 347 347
Interest expense 36 -- -- 230 266
Loss on writeoff of Ward Valley -- 20,951 -- -- 20,951
Other income 35 89 -- -- 124
------------ --------------- ---------------- ----------- ---------
Income (loss) before income tax,
discontinued operations and cumulative
effect 17,419 (23,490) -- (4,926) (10,997)
Income tax expense -- -- -- 72 72
------------ --------------- ---------------- ----------- ---------
Income(loss) before discontinued
operations and cumulative effect 17,419 (23,490) -- (4,998) (11,069)
Gain (loss) from discontinued operations 4,994 -- (2,517) -- 2,477
------------ --------------- ---------------- ----------- ---------
Net income (loss) $ 22,413 $ (23,490) $ (2,517) $ (4,998) $ (8,592)
============ =============== ================ =========== =========
Depreciation and accretion $ 6,515 $ 400 $ -- $ 81 $ 6,996
Capital Expenditures $ 6,582 $ 35 $ 451 $ -- $ 7,068
Total Assets $ 40,377 $ 6,550 $ 2,495 $ 17,204 $ 66,626
- ------------------------------------------------------------------------------------------------------------------
2002
- ------------------------------------------------------------------------------------------------------------------
Revenue $ 46,494 $ 295 $ -- $ -- $ 46,789
Direct operating cost 23,436 1,787 -- -- 25,223
------------ --------------- ---------------- ----------- ---------
Gross profit (loss) 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 (loss) before income tax,
discontinued operations and cumulative
effect 14,418 (1,980) -- (4,849) 7,589
Income tax benefit -- -- -- 8,505 8,505
------------ --------------- ---------------- ----------- ---------
Income (loss) 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 (loss) 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 (loss) $ 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 (loss) 18,451 (1,054) -- -- 17,397
S,G&A 8,287 556 -- 5,431 14,274
------------ --------------- ---------------- ----------- ---------
Income (loss) 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 (loss) before income tax and
discontinued operations effect 10,048 (1,896) -- (4,975) 3,177
Income tax benefit (expense) -- -- -- (186) (186)
------------ --------------- ---------------- ----------- ---------
Income (loss) before discontinued
operations 10,048 (1,896) -- (5,161) 2,991
Gain (loss) from discontinued operations 378 -- (2,567) -- (2,189)
------------ --------------- ---------------- ----------- ---------
Net Income (loss) $ 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

NOTE 21. SUBSEQUENT EVENTS

On February 17, 2004, the Company redeemed a warrant to purchase 1,349,843
common shares for $5,500,000. The warrants were issued in 1998 as part of a
settlement with a prior bank and were exercisable into common shares at $1.50
each.

On February 18, 2004, the Eighth U.S. Circuit Court of Appeals affirmed in its
entirety a judgment in favor of the Company in 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. The district court judgment awarded plaintiffs $151
million, including $12.3 million for US Ecology contributions and pre-judgment
interest. On March 3, 2004, the State of Nebraska filed a petition for
rehearing en banc by the full Eighth U.S. Circuit Court of Appeals.

On March 9, 2004, the District Court in Manchak v. US Ecology, Inc., U.S.
----------------------------
District Court for the District of Nevada, Case No. CV-S-97-0655. rejected
Manchak's Rule 60(b) motion, prohibited further filings with the Court on the
matter and imposed sanctions on Manchak. The matter is now closed.

NOTE 22. UNAUDITED SELECTED QUARTERLY FINANCIAL DATA

The unaudited consolidated quarterly results of operations for 2003 and 2002
were:

FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
2003 2002 2003 2002 2003 2002 2003 2002
-------- ------- ------- -------- -------- -------- -------- --------

Revenue 10,771 13,424 12,020 10,605 17,324 11,048 16,908 11,712
Gross profit 4,787 7,249 5,964 4,764 6,941 4,631 5,876 4,922
Income (loss) before, discontinued
operations, cumulative effect and
preferred dividends (20,774) 2,989 2,689 2,470 3,893 1,987 3,123 8,648
Discontinued operations 3,607 (211) (676) (269) (415) (921) (39) (9,063)
Cumulative effect -- 13,141 -- -- -- -- -- --
Net income (loss) (17,167) 15,919 2,013 2,201 3,478 1,066 3,084 (415)

EARNINGS PER SHARE - BASIC
Income (loss) before, discontinued
operations, cumulative effect and
preferred dividends (1.34) .22 .16 .16 .23 .12 .18 .60
Discontinued operations .23 (.02) (.04) (.02) (.02) (.06) -- (.63)
Cumulative effect -- .95 -- -- -- -- -- --
Net income (loss) (1.11) 1.15 .12 .14 .21 .06 .18 (.03)

EARNINGS PER SHARE - DILUTED
Income (loss) before, discontinued
operations, cumulative effect and
preferred dividends (1.34) .17 .15 .14 .22 .12 .17 .60
Discontinued operations .23 .02 (.04) (.02) (.02) (.06) -- (.63)
Cumulative effect -- .92 - - - - - -
Net income (loss) (1.11) 1.11 .11 .12 .20 .06 .17 (.03)

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 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 Corporation's 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.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the quarter 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.

The Company maintains a system of internal controls that is designed to provide
reasonable assurance that its records and filings accurately reflect the
transactions engaged in. During the year ending December 31, 2003, there were
improvements to the Company's systems used to record and summarize transactions.
The improvements have enabled the Company to identify and modify internal
controls as well as operational procedures.

PART III

Items 10 through 15 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 through 15 of this report, which will appear in
the definitive proxy statement, is incorporated by reference into Part III of
this report.

PART IV

ITEM 16. 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, 2003 and 2002
Consolidated Statements of Operations for the years ended
December 31, 2003, 2002
and 2001
Consolidated Statements of Shareholders' Equity for the
years ended December 31,
2003, 2002 and 2001
Consolidated Statements of Cash Flows for the years ended
December 31, 2003, 2002
and 2001
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 dated Form S-4 dated 12-24-92
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, the Form 10 filed 3-8-84
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
- ------- ------------------------------------------------------------------------ -------------------------------------
10.50a First Security Bank Credit Agreement 3rd Qtr 2000 Form 10-Q filed 11-13-00
- ------- ------------------------------------------------------------------------ -------------------------------------
10.50c Term Loan Agreement between American Ecology Corporation and Form 8-K filed 10-25-02
Wells Fargo Bank dated October 22, 2002
- ------------------------------------------------------------------------------------------------------------------------

- ------------------------------------------------------------------------------------------------------------------------
10.50d Sixth Amendment to Credit Agreement between American Ecology Form 8-K filed 12-16-03
Corporation and Wells Fargo Bank dated December 16, 2003
- ------- ------------------------------------------------------------------------ -------------------------------------
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 4-16-03
Employee Stock Option Plan
- ------- ------------------------------------------------------------------------ -------------------------------------
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
- ------- ------------------------------------------------------------------------ -------------------------------------
10.70 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 2003 Form 10-K
- ------- ------------------------------------------------------------------------ -------------------------------------
23.1 Consent of Moss Adams LLP
- ------- ------------------------------------------------------------------------ -------------------------------------
23.2 Consent of Balukoff, Lindstrom & Co., P.A.
- ------- ------------------------------------------------------------------------ -------------------------------------
31.1 Certifications of December 31, 2003 Form 10-K by Chief Executive
Officer dated March 12, 2004
- ------- ------------------------------------------------------------------------ -------------------------------------
31.2 Certifications of December 31, 2003 Form 10-K by Chief Financial
Officer dated March 12, 2004
- ------- ------------------------------------------------------------------------ -------------------------------------
32.1 Certifications of December 31, 2003 Form 10-K by Chief Executive
Officer dated March 12, 2004
- ------- ------------------------------------------------------------------------ -------------------------------------
32.2 Certifications of December 31, 2003 Form 10-K by Chief Financial
Officer dated March 12, 2004
- ------------------------------------------------------------------------------------------------------------------------

*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, 2003:

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

Sixth Amendment to Credit Agreement between American Ecology Form 8-K filed 12-16-03
Corporation and Wells Fargo Bank dated December 16, 2003
- ------- ------------------------------------------------------------------------ -----------------------
Disclosure of the pending expiration of non-binding letter of intent for Form 8-K filed 11-24-03
sale of the Company's Oak Ridge Facility
- ------- ------------------------------------------------------------------------ -----------------------
Press Release, dated October 23, 2003, entitled "STRONG Form 8-K filed 10-23-03
OPERATING PERFORMANCE DRIVES AMERICAN ECOLOGY
THIRD QUARTER EARNINGS"
- ----------------------------------------------------------------------------------------------------------

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 March 12, 2004
- -------------------------- --------------
STEPHEN A. ROMANO Chief Operating Officer, Director

/s/ James R. Baumgardner Senior Vice President, Chief Financial March 12, 2004
- -------------------------- --------------
JAMERS R. BAUMGARDNER Officer, Treasurer and Secretary

/s/ Michael J. Gilberg Vice President and Controller March 12, 2004
- -------------------------- --------------
MICHAEL J. GILBERG

/s/ John M. Cooper Vice President and Chief Information March 12, 2004
- -------------------------- --------------
JOHN M. COOPER Officer

/s/ Steven D. Welling Vice President and Director of Sales March 12, 2004
- -------------------------- --------------
STEVEN D. WELLING

/s/ Roger P. Hickey Chairman of the Board of Directors March 12, 2004
- -------------------------- --------------
ROGER P. HICKEY

/s/ David B. Anderson Director March 12, 2004
- -------------------------- --------------
DAVID B. ANDERSON

/s/ Rotchford L. Barker Director March 12, 2004
- -------------------------- --------------
ROTCHFORD L. BARKER

/s/ Roy C. Eliff Director March 12, 2004
- -------------------------- --------------
ROY C. ELIFF

/s/ Edward F. Heil Director March 12, 2004
- -------------------------- --------------
EDWARD F. HEIL

/s/ Stephen M. Schutt Director March 12, 2004
- -------------------------- --------------
Stephen M. SCHUTT

CONSENT OF MOSS ADAMS LLP

We consent to the inclusion in this Annual Report on Form 10-K of American
Ecology Corporation for the year ended December 31, 2003 and to the
incorporation by reference in Registration Statement Numbers 33-55782,
33-58076, 33-11578, 333-69863 and 333-93105 of American Ecology Corporation on
Forms S-8, of our report dated February 11, 2004.

/S/ Moss Adams LLP

Seattle, Washington
March 8, 2004

CONSENT OF BALUKOFF LINDSTROM & CO., P.A.

As independent public accountants, we hereby consent to the inclusion of our
report on the financial statements of American Ecology Corporation and
Subsidiaries dated February 15, 2002, included in this report on Form 10-K, and
the incorporation by reference into American Ecology Corporation and
Subsidiaries' previously filed Registration Statements on Form S-8 File Nos.
33-55782, 33-58076, 33-11578, 333-69863 and 333-93105 each as filed with the
Securities and Exchange Commission.

/S/ Balukoff, Lindstrom & Co., P.A.

Boise, Idaho
March 8, 2004