<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from____________________to____________________
Commission File Number 0-11688
AMERICAN ECOLOGY CORPORATION
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3889638
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
805 W. Idaho
Suite #200
Boise, Idaho 83702-8916
------------ ----------
(Address of principal executive offices) (Zip Code)
(208) 331-8400
--------------
(Registrants telephone number, including area code)
Indicate by a check mark whether Registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
At November 13, 1997 Registrant had outstanding
8,379,813 shares of its Common Stock.
<PAGE> 2
AMERICAN ECOLOGY CORPORATION
QUARTERLY REPORT FORM 10-Q FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet 3
(Unaudited)
Consolidated Statements of Operations 4
(Unaudited)
Consolidated Statements of Cash Flows 5
(Unaudited)
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 17
Item 6. Exhibits and Reports on Form 8-K 17
Signature 19
</TABLE>
2
<PAGE> 3
PART 1 FINANCIAL INFORMATION
ITEM 1 Financial Statements
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($ in 000's)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 214 $ 185
Investment securities -- 410
Receivables - trade and other, net of allowance for
doubtful accounts of $1,339 and $1,155 respectively 8,738 10,396
Income tax receivable 740 740
Prepayments and other 1,008 949
-------- --------
Total current assets 10,700 12,680
Cash and investment securities, pledged 14,149 16,394
Property and equipment, net 12,861 14,255
Deferred site development costs 56,948 53,030
Intangible assets relating to acquired businesses, net` 444 462
Other assets 2,063 2,206
-------- --------
Total assets $ 97,165 $ 99,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ -- $ 503
Accounts payable 7,280 10,470
Accrued liabilities 15,758 16,876
Deferred site maintenance, current portion 1,524 1,524
Income taxes payable 117 --
-------- --------
Total current liabilities 24,679 29,373
Long term debt, excluding current portion 38,391 36,202
Deferred site maintenance, excluding current portion 19,285 19,848
Commitments and contingencies (Note 6)
Shareholders' equity:
Convertible preferred stock, $.01 par value,
1,000,000 shares authorized, none issued $ -- $ --
Series D cumulative convertible preferred stock, $.01 par value,
105,264 authorized, 105,264 shares issued and outstanding 1 1
Series E redeemable convertible preferred stock, $10.00 par value,
300,000 authorized, 300,000 shares issued and outstanding 3,000 3,000
Common stock, $.01 par value, 20,000,000 authorized, 8,370,669
and 8,010,017 shares issued and outstanding, respectively 84 80
Additional paid-in capital 47,597 46,971
Unrealized gain (loss) on securities available-for-sale -- (477)
Retained earnings (deficit) (35,872) (35,971)
-------- --------
Total shareholders' equity 14,810 13,604
-------- --------
Total Liabilities and Shareholders' Equity $ 97,165 $ 99,027
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in 000's except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Revenues $ 11,002 $ 13,315 $ 31,333 $ 39,503
Operating Costs 5,715 10,568 19,023 34,893
-------- -------- -------- --------
Gross profit (loss) 5,287 2,747 12,310 4,610
Selling, general and administrative expenses 5,856 2,838 13,785 9,258
Income (Loss) from operations (569) (91) (1,475) (4,648)
Investment Income (380) (248) (704) (275)
Gain on sale of assets (27) (42) (134) (118)
Other (Income) expense (308) (261) (1,316) (375)
(Gain) Loss - security sales -- -- -- (350)
-------- -------- -------- --------
Net Income (Loss) before income taxes 146 460 679 (3,530)
Income tax expense (benefit) (111) 75 9 (1,270)
-------- -------- -------- --------
Net Income (Loss) 257 385 670 (2,260)
Preferred stock dividends 194 105 569 314
-------- -------- -------- --------
Net income (Loss) available to common
shareholders $ 63 $ 280 $ 101 $ (2,574)
======== ======== ======== ========
Net Earnings (Loss) per share, primary $ .01 $ .04 $ .01 $ (.32)
======== ======== ======== ========
Net Earnings (Loss) per share, fully diluted $ .01 $ .03 $ .01 $ (.32)
======== ======== ======== ========
Dividends paid per common share $ -- $ -- $ -- $ --
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in 000's)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 670 $ (2,260)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,768 3,752
Stock compensation 178 --
Deferred income tax provision (21) 158
Gain on sale of assets (134) (118)
Loss on sale of securities 59 --
Changes in assets and liabilities:
Receivables 1,658 5,018
Income tax refund -- 4,519
Proceeds from insurance claim -- 1,811
Investment securities classified as trading 43 --
Other assets (266) (1,250)
Accounts payable and accrued liabilities (4,514) (5,017)
Deferred site maintenance (563) (629)
-------- --------
Total adjustments (792) 8,244
-------- --------
Net cash provided by (used in) operating activities (122) 5,984
-------- --------
Cash flows from investing activities:
Capital expenditures (979) (1,121)
Site development costs, including capitalized interest (1,918) (3,923)
Proceeds from sales of property and equipment -- 158
Proceeds from sales of investment securities 1,660 (399)
Transfers from cash and investment securities, pledged 1,370 119
-------- --------
Net cash used in investing activities 133 (5,166)
-------- --------
Cash flows from financing activities:
Proceeds from issuances of indebtedness 18,305 23,739
Repayments of indebtedness (18,439) (24,618)
Stock options exercised 152 --
-------- --------
Net cash provided by (used in) financing activities 18 (879)
-------- --------
Increase (decrease) in cash and cash equivalents 29 (61)
Cash and cash equivalents at beginning of period 185 229
-------- --------
Cash and cash equivalents at end of period $ 214 $ 168
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ -- $ --
Income taxes -- --
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
AMERICAN ECOLOGY CORPORATION5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. In the opinion of management, all adjustments and disclosures
necessary to a fair presentation of these financial statements have been
included. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's 1996 Annual
Report on Form 10-K for the year ended December 31, 1996, as filed with the
Securities and Exchange Commission.
Certain reclassifications have been made in prior period financial statements to
conform to the current period presentation.
NOTE 2. TERM LOAN AND LONG-TERM DEBT
Long term debt at September 30, 1997 and June 30, 1997 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
---- ----
<S> <C> <C>
Secured bank credit facility $37,611 $36,390
Capital lease obligations and other 780 270
------- -------
38,391 36,660
Less: Current maturities -- --
------- -------
Long-term debt $38,391 $36,660
</TABLE>
Aggregate maturities of long-term debt and the future minimum payments under
capital leases are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
------------
<S> <C>
1997 $ 0
1998 86
1999 5,466
2000 32,839
-------
Total $38,391
</TABLE>
On October 31, 1996 the Company renegotiated its prior bank debt under the terms
of a Third Amended and Restated Credit Agreement ("Credit Agreement"). No
amendments to this Credit Agreement have been made since that time.
At September 30, 1997 the outstanding balance of the Term Loan was $37,610,860.
Interest accrued at 7% in the amount of $3,619,448 was capitalized into the Term
Loan. Additionally, interest accrued at an incremental rate of 3% on the entire
amount of the debt outstanding since October 31, 1996 amounted to $1,007,488 at
September 30, 1997.
6
<PAGE> 7
NOTE 3. DEFERRED SITE DEVELOPMENT COSTS
The Company has been selected to locate, develop and operate the low-level
radioactive waste ("LLRW") facilities for the Southwestern Compact ("Ward Valley
facility") and the Central Interstate Compact ("Butte facility"). The license
application for the Southwestern Compact was approved by the California
Department of Health Services ("DHS") in September 1993. All costs related to
the development of the Ward Valley facility have been paid and capitalized by
the Company. As of September 30, 1997, the Company had deferred $56,948,000 (59%
of total assets), of pre-operational facility development costs of which
$10,570,000 was capitalized interest. These deferred costs relating to the
development of the Ward Valley facility are expected to be recovered during the
facility's first 30 years of operating from future waste disposal revenues based
upon disposal fees approved by the DHS in accordance with existing state
rate-base regulations. The disposal fee approval process is expected to include
an independent prudency review of all the pre-operational costs incurred by the
Company prior to their inclusion in the rate-base. The Company expects all of
the costs that it has deferred for this facility, plus additional, unrecognized
project interest costs to be included as a component of the rate-base; however,
there can be no assurance that any or all of the costs will be recovered.
The deferred site developments costs for both the Ward Valley and Butte
facilities will be recoverable providing that the following activities take
place on each site:
Ward Valley, California Facility: The Company currently holds the license and
permits from the State of California to operate this LLRW facility. However,
neither the Company nor the State of California have the land to operate this
facility at the proposed site in Ward Valley. The US Government will need to
transfer the land to the State of California, or the Company will need to
recover monetary damages from the lawsuit that it has filed against the US
Government. In the first quarter of 1997, the Company filed two lawsuits against
the United States. The first was filed in the US Court of Claims, seeking
monetary damages in excess of $73 million. The second case was filed in the
Federal District Court in Washington D.C. seeking injunctive relief and a writ
of mandamus ordering the land transfer to California. Both cases are pending.
The Company has deferred $49,468,000 (51% of total assets) of which
$9,182,000 is capitalized interest.
Butte, Nebraska Facility:
Allowable costs incurred by the Company for the development of the Butte
facility are reimbursed under a contract with the Central Interstate LLRW
Compact Commission ("CIC") and are recognized as revenues. Substantially all
funding to develop the Butte facility is being provided by the major generators
of the waste in the CIC. As of September 30, 1997, the Company has contributed
and deferred approximately $7,480,000 (8% of total assets) of which $1,388,000
was capitalized interest, toward the development of the Butte facility and no
additional capital investment is expected to be required from the Company prior
to granting of the license. The Company expects all of the costs which it has
deferred for this facility plus additional, unrecognized project interest costs
to be included as a component of the rate-base; however, there can be no
assurance that any or all of these costs will be recovered. The agreed contract
interest cost reimbursement as part of the rate-base may yield $15 million in
revenue. However, there can be no assurance that all of these amounts will be
approved. In addition, the CIC has the option to terminate the contract, upon
ten (10) days written notice, in the event it has expended the additional funds
provided under contract amendment No. 3, and the State of Nebraska's licensing
decision has not been made, and the major generators in the compact region have
either ceased funding the project or thereafter notified the CIC, that the major
generators intend to cease funding of the project. Contract amendment No. 4 was
signed between the Company and the CIC on October 29, 1997. As of September 30,
1997, approximately $29.5 million had been expended under contract amendment No.
3. If the CIC elects to terminate the contract, then the Company has no further
claim or right to reimbursement of its contributions or accrued interest unless
the CIC and the Company agree to go forward with the facility, in which event
the Company retains its rights to recover its contribution together with any
accrued interest.
The construction and operation of the Ward Valley and Butte facilities are
currently being delayed by various political and environmental opposition toward
the development of the sites. These issues were discussed in detail in the 1996
Form 10-K under Part I, Item I, "Business - Low-Level Radioactive Waste Services
- - Disposal Services - Proposed Ward Valley, California Facility" and "-Proposed
Butte, Nebraska Facility". At this time, it is not possible to assess the length
of these delays or when, or if, the Butte facility license will be granted, and
when, or if, the land for the Ward Valley facility will be obtained. Although
the timing and outcome of the matters referred to above are not presently
determinable, the Company continues to actively urge the conveyance of the land
7
<PAGE> 8
from the federal government to the State of California so that construction may
begin, and to actively pursue licensing of the Butte facility. The Company
believes that the Butte facility license will be granted, operations of both
facilities will commence and that the deferred site development costs for both
facilities will be realized. In the event the Butte facility license is not
granted, operations of either facility do not commence or the Company is unable
to recoup its investments through legal recourse, the Company would suffer
losses that would have a material adverse effect on its financial position and
results of operations.
In 1994, the Company began to capitalize interest in accordance with Statement
of Financial Accounting Standards No. 34, Capitalization of Interest Cost, on
the site development projects while the facilities being developed are
undergoing activities to ready them for their intended use. Interest capitalized
during the nine month periods ended September 30, 1997 and 1996 was $2,763,000
and $2,613,000, respectively.
NOTE 4. STOCK OPTIONS
During the third quarter ended September 30, 1997 the Company granted stock
options for 170,000 shares of common stock at exercise prices ranging from $1.81
to $2.00 per share pursuant to its amended 1992 stock option plan for employees.
The options were priced at the market value on the date of grant.
8
<PAGE> 9
NOTE 5. EARNINGS PER SHARE
The calculation of earnings per share for the three and nine months ended
September 30, 1997 and 1996, respectively, is as follows:
<TABLE>
<CAPTION>
(000'S EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY
Net earnings (loss) available to common shareholders $ 63 $ 280 $ 101 $ (2,574)
======== ======== ======== ========
Weighted average shares outstanding:
Common shares outstanding at end of period 8,371 7,857 8,371 7,857
Effect of using weighted average common and
common equivalent shares outstanding (276) -- (276) --
-------- -------- -------- --------
Shares used in computing earnings (loss) per share 8,095 7,857 8,095 7,857
======== ======== ======== ========
Net earnings (loss) per common and common
equivalent share, primary $ .01 $ .04 $ .01 $ (.32)
======== ======== ======== ========
FULLY DILUTED
Weighted average shares outstanding:
Common shares outstanding at end of period 8,371 7,857 8,371 7,857
Effect of shares issuable under stock option plans
based on the treasury stock method 3,583 444 3,583 --
Shares used in computing earnings (loss) per share 11,954 8,301 11,954 7,857
======== ======== ======== ========
Net earnings (loss) per common and common
equivalent share, fully diluted $ .01 $ .03 $ .01 $ (.32)
======== ======== ======== ========
</TABLE>
In February 1997, the Financial Accounting Standards Board issued Standard No.
128 Earnings Per Share, effective December 15, 1997, and earlier application is
not permitted. After the effective date, all prior period earnings per share
data shall be restated to conform with the provisions of FAS 128. The adoption
of FAS 128 is not expected to have a material impact on the Company's earnings
per share data.
NOTE 6. COMMITMENTS AND CONTINGENCIES
Other than the information set forth in Part II, Item I, herein, there have been
no other significant changes to any commitments and contingencies as described
in Note 13 to the financial statements included in the Company's 1996 Annual
Report on Form 10-K.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion contains trend information and other forward looking
statements that involve a number of risks and uncertainties. The Company's
actual results could differ materially from the Company's historical results of
operations and those discussed in the forward looking comments. Factors that
could cause actual results to differ materially are included, but are not
limited to, those identified in Notes 3 and 5 to the Consolidated Financial
Statements herein, Part II, Item 1. Legal Proceedings, and the discussion below.
The following discussion and analysis should be read in conjunction with the
Financial Statements and Notes thereto included elsewhere in this Form 10-Q.
CAPITAL RESOURCES AND LIQUIDITY
The Company has incurred recurring losses from operations. However, the efforts
of management have resulted in an improvement in the working capital deficit of
$13,979,000 as of September 30, 1997 from $16,693,000 at December 31, 1996. The
Company feels confident that for the balance of 1997, the required obligations
will be met as they become due.
In both the first quarter and the third quarter of 1997, operating costs
exceeded revenues. The Company has been fortunate during 1997, to profit from
non-recurring events. These events have included unexpected insurance proceeds,
not previously recognized, and a non-cash reduction of commitment for deferred
income taxes, due to recurring losses and net operating loss carryforwards.
Management's actions and plans to reduce the working capital deficit as follows:
CREDIT AGREEMENT
On October 31, 1996 the Company signed a letter of intent setting forth the
negotiated terms of its secured debt with its bank. The Third Amended and
Restated Credit Agreement was filed as Exhibit 10.45 with the Securities
Exchange Commission on February 18, 1997.
The bank loan can now only be increased by adding interest on all the
outstanding loans, accrued on a monthly basis. Repayment of both interest and
principal has been suspended by the agreement until December 31, 1999.
INCREASED WORKING CAPITAL
On September 9, 1997 the Company filed Form S-3 for a Rights Offering with the
Securities and Exchange Commission. On October 10, 1997 the Company received
comments from the Securities and Exchange Commission. The Company will now make
its best effort to respond to the Commission and complete the registration for
this Rights Offering within the fourth quarter of 1997. This offering will
provide each holder of the Company's common stock the opportunity to buy an
additional share of stock for each one owned, for one dollar. This will make
available, by full subscription, the possibility to raise an additional
$5,323,081 of capital.
MEASURES TO REDUCE COSTS
Management is continuing to implement a very aggressive financial and operating
plan. The Company has evaluated its position in the market, has measured
customer potentials, and actions have been taken to improve overall performance.
One unprofitable division was eliminated and others were reorganized to be
efficient and effective. The reorganized divisions have been dissected and
analyzed to measure break-even points, then analyzed further to determine
optimum operating levels for maximum profitability. These variables of operation
for the Company have been adjusted and measured to fit the changing times of the
environmental industry. Now, waste generators are either generating less waste,
or requesting reclassification of their waste streams under lower rate
calculations.
The Company continues to evaluate the viability of certain operations, and their
current potential to perform at an acceptable level of profitability.
10
<PAGE> 11
In the plan, capital expenditures for 1997 are limited to the development of the
Ward Valley Project and certain regulatory obligations, and the Company has
adhered to that for the nine months ended, September 30, 1997.
The Company believes its plan has improved both cost structure and operating
results. However, considering the Company's recent losses and cash flow from
operations, there can be no assurance that this plan will resolve the Company's
liquidity problem in a timely fashion. The Company intends to raise additional
capital through a rights offering to its shareholders in 1997. There can be no
assurance, however, that any such rights offering will provide sufficient
capital to support operations. In any event, the Company may experience
increasing cash flow problems that could cause the Company to materially reduce
the current level of its operating activities.
FUTURE CONSIDERATIONS
As previously reported in the December 31, 1996 Form 10-K, the Company continues
to have discussion with the Tennessee Department of Environment and Conservation
division of Radiological Health for an extension of time beyond December 31,
1997 to complete the disposal of the legacy waste at the Oak Ridge, Tennessee
facility. The cost for this disposal is estimated at $6.2 million.
Texas Ecologists is currently permitting a Type I landfill which will be for the
disposal of household and commercial waste generated within a 12 county area
under the jurisdiction of the Coastal Bend Council of Governments. The Company
has obtained endorsement from the Coastal Bend Council of Governments for the
project and has subsequently submitted the permit application to the Texas
Natural Resource Conservation Commission (TNRCC).
The permitting process in Texas extends over a 24 to 36 month time frame which
includes technical review by the agency staff followed by a public hearing
process. If the application is not contested by opposing parties the process is
quick and a permit is issued in a shorter time frame. However, in this case the
permit application will be contested and likely will take the full 36 months.
The proposed El Centro project is located immediately south of the Company's
currently operating hazardous waste disposal facility, just outside Robstown,
Texas. The project will encompass 160 acres of land presently owned by the
Company. The design for the landfill includes all of the requirements of RCRA
Subtitle D, and will be designed with state of the art liner and leachate
collection systems. The proposed landfill will have a gross disposal capacity of
187,600,000 cubic yards or approximately 10,000,000 tons of in place capacity.
The design includes the construction of 12 groundwater monitor wells, and
leachate from the landfill will be disposed onsite at the currently operating
deep well permitted by the TNRCC.
The Coastal Bend area generates approximately 552,000 tons of waste per year or
approximately 1,500 tons per day. Presently, the entire waste is being disposed
at the City of Corpus Christi landfill which is designated to close within the
next three years. A majority of the waste generated in the Coastal Bend area is
managed by independent haulers and will continue to be disposed of by them at
the cheapest and most convenient landfill location.
On the basis of a detailed market study, the Company expects the proposed El
Centro landfill to provide an alternative waste disposal facility in the 12
county Coastal Bend area. The Company expects to capture approximately half of
the waste stream generated in the area or approximately 800 tons per day
initially. This volume estimate will likely grow to a larger figure when the
City of Corpus Christi landfill closes.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The Company reported net income of $257,000 for the three months ended September
30, 1997, compared to a net income of $385,000 for the three months ended
September 30, 1996, a 33% decrease. During this period the Company made a
profit, but mainly as a result of several non-recurring events, not previously
recognized. The Company made the following adjustments: a non-cash reduction of
commitment for deferred income taxes, due to recurring losses and net operating
loss carry forwards, an adjustment for outside accounting fees for $200,000,
legal fee accrual for $155,000 and reduced reserve for the Winona RCRA closure
of $146,000. These adjustments increased the third quarter income by $734,000.
11
<PAGE> 12
In the third quarter, 1997, US Ecology, Inc. officially closed the Low Level
Radioactive Waste Disposal facility it had operated at Beatty, Nevada in accord
with the September 24, 1993 Settlement Agreement between the Company and the
State of Nevada, and in full compliance with provisions of the May 15, 1977
lease as amended between the Company and the State and all applicable provisions
of Nevada Administrative Code. Having fulfilled its obligations, US Ecology,
Inc. no longer bears responsibility for any LLRW materials buried at the site.
As provided in the May 15, 1977 lease as amended, "...all materials buried at
the Site prior to and subsequent to ... termination shall be the sole and
exclusive responsibility of lessor," the State of Nevada.
REVENUES
Revenues for the three months ended September 30, 1997 decreased $2,313,000, a
17% decline, compared to the same three months of 1996. Revenues have continued
to decline in every quarter of 1997, compared to each quarter of 1996. The main
reasons are those emphasized by Federal and State agencies promoting "Waste
Minimization Programs." These programs are regulatory and awareness type
programs, aimed at regulating the environment and enforcing conservation of our
natural resources. The result of the programs have been successful in that there
is now less waste being generated, than in previous years. There has also been
an increase in market pricing pressure whereby, strict competition has made it
more difficult to capture and keep certain areas of the waste disposal market.
State fees in Nevada have made it difficult for the Company's Beatty, Nevada
operation to maintain competition with the nearby California disposal sites,
that operate on a lower fee structure. Waste generators are also taking an
active stance to seek approval of different state regulatory agencies for the
reclassification of waste. In this manner, some waste generators have been
successful in having their hazardous waste, bearing high disposal fees,
reclassified to non-hazardous Class 1 waste, bearing a lower disposal fee.
Therefore, some of the volume of disposal has remained constant but, a lower
revenue is derived from this reclassification.
Low-Level radioactive waste ("LLRW") revenues were $6,511,000 for the three
months ended September 30, 1997, a 15.5% decrease from the same period in 1996.
LLRW project revenues remain fairly strong but, the Chemical division continues
to have difficulties both in operations and administration. The Chemical waste
revenues were $4,491,000 for the three months ended September 30, 1997 compared
to $5,610,000 for the same period in 1996. This is a 20% decline from last year
but, is also reflective on the plant closure at Winona, Texas. The Winona
facility had revenues of $1,435,000 for this period in 1996.
OPERATING COSTS
For the three months ended September 30, 1997 the Company reported total
operating costs of $5,715,000 a 46% decrease from the same period in 1996. Total
operating costs decreased $4,853,000 for the third quarter of 1997 as compared
to the third quarter of 1996 for a variety of reasons. Most of the cost
reduction was from changes in operations of the Chemical division. The Beatty
facility has decreased operations by about 70-75% due to high State of Nevada
disposal fees, AET transportation division decreased by 30-35% when the Winona
facility closed, and the Oak Ridge facility has been faced with several
problems, delays and shortage of working capital to upgrade equipment and
replace or repair other equipment. The many efforts exercised by both Chemical
and LLRW divisions should allow for improved performance in the future, but the
shortage of working capital may impede progress. The Company as a whole is
demonstrating a positive trend in operating results even with decreasing
revenues by recapturing certain portions of the market share. In addition to
regaining some market share, the Company continues to analyze each aspect of the
two operating divisions and determine how they can best maximize operating
performance.
The entire accounting system and operations has been improved as part of the
1995 Management Plan. The accounting system has been decentralized, now
providing more accurate and timely reports. The accounting software was changed
to support this decentralized accounting. In management's review it was
determined that certain costs that were previously accounted for as Selling,
General and Administrative (SG&A), should have been accounted for as Operating
Costs.
12
<PAGE> 13
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
For the third quarter ended September 30, 1997 selling, general and
administrative expenses ("SG&A") increased $3,018,000 as compared to the quarter
ended September 30, 1996, with the major component being legal expenses, and the
Company's correction in classification of costs between operating and SG&A.
Management continues to monitor and reduce overhead costs where ever possible.
INCOME TAXES
For the three months ended September 30, 1996, the Company reported income tax
benefit of 76%, by reversing a non-cash deferred tax liability of $233,000. The
Company has now recorded all realized or expected refunds for loss carrybacks,
and is not recognizing any deferred tax benefits for net operating loss
carryforwards from prior years, due to the Company's full valuation allowance
provided for these deferred taxes.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The Company reported a net income of $101,000, or $.01 per share primary, for
the nine months ended September 30, 1997 compared to a net loss of $2,574,000 or
$.32 per share primary, for the nine months ended September 30, 1996. The 1997
results included non-recurring income from an insurance claim for $795,000, and
$734,000 of non-recurring accounting adjustments.
REVENUES
Revenues for the nine months ended September 30, 1997 decreased $8,170,000, or
21% compared to the nine months ended September 30, 1996. The decline in
revenues is mainly a result of the decline in operations of the Chemical
Division, since revenues of the LLRW division decreased only 3%. The Chemical
Division continues to have difficulty in Texas, with a site closure at Winona,
and pricing competition in Nevada.
During this period Chemical waste revenues declined $7,557,000, or 38%. Revenues
declined at the Beatty, Nevada facility by $1,489,000, at Robstown, Texas by
$1,668,000, and at Winona, Texas which stopped accepting customer waste in March
1997 by $4,655,000. The transportation facility in Pasadena, Texas increased
revenues by $255,000, but continues to have difficulty to be successful. The
Beatty facility has had ongoing difficulties after the elimination of the former
practice of providing transportation services at cost, and reduced disposal
receipts as a result of customers lost to competing landfills which do not have
the high cost burden of the State of Nevada's fees. Management and the staff at
the Beatty site are currently engaged in efforts with the State of Nevada for
reducing some of the fees on different types of waste disposal.
Low-level radioactive waste ("LLRW") revenues decreased to $19,215,000 from
$19,828,000 for the nine months ended September 30, 1997 compared to the same
period in 1996. This is a 3% decrease.
OPERATING COSTS
Total operating costs as a percentage of revenues for the nine months ended
September 30, 1997 and 1996 were 60.7% and 88.3%, respectively. During this nine
month period LLRW experienced a 14% decrease in operating costs while revenues
decreased 3%. Chemical Division operating costs declined $14,155,000, this
decrease is from the closure of the Winona, Texas facility which accounted for
$7,777,000 and another 31% of the decrease occurred in the Beatty operations.
However, other than Winona, Texas facility the remainder of the decrease is from
the accounting costs reclassified from operating to SG&A.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the ninth months ended
September 30, 1997 were $13,785,000 compared to $9,258,000 for the nine months
ended September 30, 1996. In 1997, management continued to cut SG&A costs. Legal
fees continue to be very high in relation to the total of SG&A at 9%.
13
<PAGE> 14
INVESTMENT INCOME
Investment income is comprised principally of interest income earned on various
investments in securities held-to-maturity, and dividend income and capital
gains and losses earned on the Company's stock portfolio classified as trading
securities. As of September 30, 1997, the Company reported interest income of
$380,000 on investments. The realized gains or losses on securities
available-for-sale are included as a component of investment income when
realized. The Company sold certain assets from the closing of the Winona, Texas
facility resulting in a gain on the sale of $27,000.
INCOME TAXES
For the nine months ended September 30, 1997, the Company reported an effective
income tax benefit rate of 1.3%. It is estimated that the Company will not have
a Federal tax liability for 1997. The Company has now recorded all realized or
expected refunds from loss carrybacks, and is unable to recognize deferred tax
benefits for net operating loss carryforwards of prior years, due to the
Company's full valuation allowance provided for these deferred taxes.
IMPACT OF INFLATION
The federal government established a new minimum wage level in the third quarter
of 1997. This change had little to no effect on the wage levels in the Company's
labor costs since the greater majority of the hourly employees are paid above
the minimum wage level.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's businesses involve risk of unintended or unpermitted discharge of
hazardous or low-level radioactive materials into the environment from the
Company's operating (or closed) sites and during transportation to or from such
sites. In the ordinary course of conducting its business activities, the Company
becomes involved in judicial and administrative proceedings involving
governmental authorities at the federal, state and local levels. In the majority
of the situations where regulatory enforcement proceedings are commenced by
governmental authorities, the matters involved relate to alleged technical
violations of licenses or permits pursuant to which the Company operates, or, of
laws or regulations to which its operations are subject, or, are the result of
different interpretations of the applicable requirements.
In addition to the litigation previously reported, the Company and certain of
its subsidiaries are involved in other civil litigation and administrative
matters, including permit application proceedings in connection with the
established operation, closure and post-closure activities of certain sites.
Management establishes reserves for litigation and anticipated legal fees in
respect of any particular matter based on the advice and counsel of its
attorneys. During the course of legal proceedings, management's estimates with
respect to such matters may change. While the outcome of any particular action
or administrative proceeding cannot be predicted with certainty, management is
unable to conclude that the ultimate outcome, if unfavorable, of the litigation
previously reported, will not have a material adverse effect on the operations
or financial condition of the Company.
For the period reported herein, there were no material developments with respect
to previously reported legal proceedings, except as described below:
U.S. ECOLOGY, INC. V. BARBARA WAGNER, BENTON COUNTY ASSESSOR, BOARD OF TAX
APPEALS, STATE OF WASHINGTON, DOCKET NOS. 92-63--92-65 AND 95-43--95-45.
US Ecology, Inc. a wholly-owned subsidiary of the Company, and Barbara Wagner,
in her official capacity as the Benton County, Washington Assessor, have entered
into a settlement agreement as of November 4, 1997, resolving the above-entitled
case, wherein US Ecology had challenged certain property tax assessments for the
years 1989 through and including 1997. The disputed assessments involved Benton
County's assessment for property tax
14
<PAGE> 15
purposes of US Ecology's intangible concession right to operate a low-level
radioactive waste disposal facility on the U.S. Department of Energy's Hanford
Reservation located in Benton County, Washington. The settlement agreement sets
specific assessment values for the assessment years involved and provides that
no assessments shall be made with respect to assessment of intangible values for
future years, in accordance with a recently enacted Washington statute. The
settlement agreement is subject to approval of the Washington State Board of Tax
Appeals. The payment of the property taxes which will be due in accordance with
the terms of the settlement agreement will not have a material adverse effect on
the financial condition of the Company or its subsidiary.
IN THE MATTER OF THE APPLICATIONS OF AMERICAN ECOLOGY ENVIRONMENTAL SERVICES
CORP., PERMIT NOS. AQ-9429, HW-50368, WDW-186, AND WDW-229 (SOAH DOCKET
###-##-####).
This matter is a contested proceeding before the Texas State Office of
Administrative Hearings wherein AEESC, a wholly owned subsidiary of American
Ecology, was seeking to renew operation permits for its hazardous waste
treatment, storage, and disposal facility in Winona, Texas. A locally (Winona,
Texas) based organization known as "Mothers Organized to Stop Environmental
Sins" ("MOSES") appeared in the matter seeking to have the permits revoked. As a
result of the activities of MOSES and certain individuals, AEESC determined it
could not continue economic operation of the facility. Accordingly, Permit
Application Nos. AQ-9429 and HW-50368 were withdrawn with prejudice. On November
5, 1997, AEESC and the protestants reached a settlement in the proceeding, and
the protestants withdrew from the case. Accordingly, the contested case was
closed November 6, 1997 and AEESC's permit applications were remanded to the
Executive Director of the TNRCC. Also on November 5, 1997, AEESC and the TNRCC
executed an Agreed Closure Order with respect to the facility, which, if
approved as expected in mid-November, will govern final closure and remediation
of AEESC's Winona site.
ILLINOIS et al v. AMERICAN ECOLOGY CORPORATION, et al, 13th JUDICIAL CIRCUIT,
BUREAU COUNTY, ILLINOIS, CASE NO. 97 MR30.
On November 3, 1997, the State of Illinois sued the Company and US Ecology in
the Circuit Court of Bureau County, Illinois for failing to provide $2.0 million
in letters of credit as a financial assurance bond in regard to the Company's
closed Sheffield, Illinois LLRW facility and to prevent the Company from
transferring the site to the state as scheduled in May 1998. In 1988, the
Company settled long-standing litigation with the State of Illinois regarding
this facility. In accordance with the settlement agreement, the Company has
maintained the facility and paid to Illinois nearly $2.5 million to be used for
the long-term care of the facility after title is transferred to the state in
May 1998. The settlement agreement also obligates the Company to provide a
letter of credit in a decreasing amount, which is presently $123,000, to secure
certain closure if the Company fails to meet certain financial tests relating to
working capital, debt-equity ratio and net worth. The state claims that the
Company has failed to meet some or all of these tests and that this letter of
credit thus is required. The state has also claimed that a second letter of
credit in the amount of $1.9 million is also required because the financial
covenants have not been met and that the provision of both letters of credit is
a precondition to the state's acceptance of the site.
The Company has argued that it should not be required to provide the decreasing
letter of credit since any failure to meet the financial covenants which may
exist is likely to be temporary and the site is scheduled to be transferred to
the state in May 1998 in any event. The Company offered to extent the Company's
maintenance period for a limited time in lieu of providing this letter of
credit, but this offer was rejected. The Company has asserted that the $1.9
million letter of credit is only required when both (i) one or more of the
environmental triggering events listed in the settlement agreement have occurred
and (ii) the financial tests are not met. The state does not allege that any of
these environmental triggering events has occurred, and the Company believes
that the likelihood of such an event ever occurring is remote. Although the
state has taken a contrary position, the Company believes that the settlement
agreement clearly excludes the posting of the letters of credit as a condition
of transfer of the facility and that the Company has performed all the
conditions required for transfer. The Company expects to defend the lawsuit on
the basis of these arguments.
IN THE MATTER OF AMERICAN ECOLOGY RECYCLE CENTER, INC., U.S. ENVIRONMENTAL
PROTECTION AGENCY, REGION 4, DOCKET NO. 96-13-R.
Administrative Complaint issued by the USEPA Region 4, Atlanta, alleges AERC, a
subsidiary of the Company, failed to make a hazardous waste determination as the
generator of hazardous waste, and stored the same for greater
15
<PAGE> 16
than 90 days without a permit. The Complaint seeks civil penalties in the amount
of $96,000, disposal of the "wastes" at a permitted facility, and the immediate
clean-up of the area in which the materials have been stored. The materials were
routinely used in the AERC Chemline Cleaning Process Unit, which was destroyed
by a July 1994 fire at the Oak Ridge facility. The matter was settled through a
Settlement Agreement without a hearing with the Company and EPA agreeing to a
Resolution Plan to allow processing of the Chemline Residues in the Facility
Waste Water Treatment Unit. The Company has started processing the Residues
through the Treatment Unit. The Settlement Agreement also provides that the
Company will pay a civil penalty of $10,000 over the next two (2) years, with
the first payment of $3,333 having been made on August 25, 1997. In addition
to the $10,000 civil penalty payment, an additional civil penalty amount of
$62,000 will be made if AEC receives a pending $740,000 federal income tax
refund within three years.
U.S. ENVIRONMENTAL PROTECTION AGENCY V. US ECOLOGY, INC., RCRA NO. V-W-025-92.
In 1992, the U.S. EPA initiated an administrative enforcement action against
USE, a subsidiary of the Company, alleging that USE had failed to comply with
certain regulatory requirements to provide financial assurance for closure and
post-closure costs as well as liability insurance relating to its hazardous
waste management of its facility in Sheffield, Illinois. The EPA is seeking a
penalty of approximately $1.7 million and ordering compliance. USE ceased
operations at the facility in 1983, which has been undergoing closure and
corrective action pursuant to regulatory requirements and a RCRA Consent Order
since that time. Because the Sheffield facility had not been an interim status
facility under the RCRA regulations since November 1985, the Company responded
that the interim status assurance and liability insurance requirements were
inapplicable and the penalty assessment was unwarranted. The Company appealed
an unfavorable decision to the Environmental Appeals Board and negotiated a
reduction of the penalty with the EPA. The Company and the EPA entered a Consent
Agreement and Final Order in August 1997 resolving this matter by payment of a
$25,000 civil penalty.
IN THE MATTER OF AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORPORATION, SOAH
DOCKET NO. ###-##-####.
In this matter, the Texas Natural Resources Conservation Commission ("TNRCC"),
alleges violations of certain provisions of the Winona Facility's air and
surface facilities hazardous waste permits and relevant statutory provisions.
The Complaint proposed an administrative penalty assessment of $71,700. The
matter has been settled with the TNRCC agreement to withhold the penalty
assessment provided the Company complies with the agreed closure plan with
respect to the Winona facility.
IN RE AMERICAN ECOLOGY ENVIRONMENTAL SERVICES CORPORATION, U.S. ENVIRONMENTAL
PROTECTION AGENCY, DOCKET NO. RCRA-VI-712-H, DALLAS REGION 6.
On March 7, 1997, Company representatives attended a meeting with the EPA
regarding compliance by AEESC with notification requirements of the intention to
import waste from a foreign based waste generator. The meeting allowed the
Company an opportunity to explain its position regarding the matter and to
provide additional relevant information. The alleged violations involve
reporting requirements only, not release of pollutants from the facility. EPA
threatened filing an enforcement action against the Company seeking a penalty
of approximately $67,500. The Company and EPA have agreed to an $8,000
settlement, which was paid on September 30, 1997.
ITEM 2. CHANGES IN SECURITIES
The Third Amended and Restated Credit Agreement provides that the Company shall
not make or declare any dividends or other distribution on any class of stock,
except a dividend payable solely in shares of stocks, warrants, rights, or
options to acquire shares.
As previously reported on Form 8-K November 26, 1996, the Company issued 300,000
shares of Series "E" Redeemable Convertible Preferred Stock ("Series E") to two
of its directors in exchange for $3,000,000.00 in cash. Subsequently, one
director sold a total of 26,000 Series E shares to two other directors at the
original stated value of $10.00 per share. The Series E provides for a mandatory
dividend of 11.25% annually, payable quarterly in common stock of the Company.
Below is a listing of dividends paid with respect to the Series E for the third
quarter of 1997:
16
<PAGE> 17
<TABLE>
<CAPTION>
(1997-Q3)
---------
<S> <C>
Total Shares Issued to Investing Directors 47,588
Calculated Price/Share $1.788
</TABLE>
As previously reported in the Company's proxy statement, outside directors are
paid an annual fee of $16,000, paid on a quarterly basis. As of 1996, each
director is allowed to accept the fee in cash or common stock of the Company. On
September 30, 1997 the Company issued 9,144 shares of its common stock in
payment of the third quarter 1997 directors' fees. The number of shares is based
on the closing market price of the Company's common stock on the last trading
day of the relevant calendar quarter dividend into $4,000.00.
Pursuant to a resolution of the Company's Board of Directors on August 12, 1997
the Company granted Mr. Jack K. Lemley, Chairman and Chief Executive Officer,
25,000 shares of its common stock, in consideration of his past services to the
Company.
In each instance, the Company is relying on Section 4(2) of the Securities Act
and Rule 506 thereunder to qualify for exemption from registration of the common
stock issued.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5 OTHER INFORMATION
None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits (see attached)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Exhibit Description Incorporated by Reference from
No. Registrant's
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Restated Certificate of Incorporation, as amended 1989 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
3.2 Certificate of Amendment to Restated Certificate of Incorporation Form S-4 dated 12-24-92
dated June 4, 1992
- -------------------------------------------------------------------------------------------------------------------
3.3 Amended and Restated Bylaws dated February 28, 1995 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
3.4 Restated Certificate of Incorporation dated June 10, 1997 Third Quarter 1997 Form 10-Q
- -------------------------------------------------------------------------------------------------------------------
10.1 Sublease dated February 26, 1976, between the State of Washington, Form 10 filed 3-8-84
the United States Dept. of Commerce and Economic Development, and
Nuclear Engineering Company with Amendments dated January 11, 1980,
and January 14, 1982.
- -------------------------------------------------------------------------------------------------------------------
10.2 Lease dated May 1, 1977 ("Nevada Lease"), between the state of Form 10 filed 3-8-84
Nevada, Dept. of Human Resources and Nuclear Engineering Company,
with Addendum thereto, dated December 7, 1982
- -------------------------------------------------------------------------------------------------------------------
10.3 Addendum to Nevada Lease dated March 28, 1988 1989 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
10.4 Nevada State Health Division, Radioactive Material License issued to 1989 Form 10-K
US Ecology, Inc. dated December 29, 1989
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
10.5 Administrative Order by Consent between the United States 1985 Form 10-K
Environmental Protection Agency and US Ecology, Inc. ("USE") dated
September 30, 1985
- -------------------------------------------------------------------------------------------------------------------
10.6 State of Washington Radioactive Materials License issued to US 1986 Form 10-K
Ecology, Inc. dated January 21, 1987
- -------------------------------------------------------------------------------------------------------------------
10.11 Agreement between the Central Interstate Low-Level Radioactive Waste 2nd Quarter 1988 10-Q
Compact Commission and US Ecology, Inc. for the development of a
facility for the disposal of low-level radioactive waste dated
January 28, 1988 ("Central Interstate Compact Agreement")
- -------------------------------------------------------------------------------------------------------------------
10.12 Amendment to Central Interstate Compact Agreement dated May 1, 1990 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
10.13 Second Amendment to Central Interstate Compact Agreement dated June 1994 Form 10-K
24, 1991
- -------------------------------------------------------------------------------------------------------------------
10.14 Third Amendment to Central Interstate Compact Agreement dated July 1, 1994 Form 10-K
1994
- -------------------------------------------------------------------------------------------------------------------
10.15 Settlement agreement dated May 25, 1988 among the Illinois Department Form 8-K dated 6-7-88
of Nuclear Safety, US Ecology, Inc. and American Ecology Corporation
of a December 1978 action related to the closure, care and
maintenance of the Sheffield, Illinois LLRW disposal site
- -------------------------------------------------------------------------------------------------------------------
10.16 Nevada Division of Environmental Protection Permit for Hazardous 1988 Form 10-K
Waste Treatment, Storage and Disposal (Part B) issued to US Ecology,
Inc. dated June 24, 1988
- -------------------------------------------------------------------------------------------------------------------
10.17 Texas Water Commission Permit for Industrial Solid Waste Management 1988 Form 10-K
Site (Part B) issued to Texas Ecologists, Inc. dated December 5, 1988
- -------------------------------------------------------------------------------------------------------------------
10.18 Memorandum of Understanding between American Ecology Corporation and 1989 Form 10-K
the State of California dated August 15, 1988
- -------------------------------------------------------------------------------------------------------------------
10.19 United States Environmental Protection Agency approval to dispose of 1989 Form 10-K
non-liquid polychlorinated biphenyl (PCB) wastes at the Beatty,
Nevada chemical waste disposal facility
- -------------------------------------------------------------------------------------------------------------------
10.20 Employment Agreement between American Ecology Corporation and C. 1993 Form 10-K
Clifford Wright, Jr. dated April 1, 1994 * (terminated in 1995)
- -------------------------------------------------------------------------------------------------------------------
10.21 Employment Agreement between American Ecology Corporation and William 1993 Form 10-K
P. McCaughey dated April 1, 1994 * (terminated in 1995)
- -------------------------------------------------------------------------------------------------------------------
10.22 Employment Agreement between American Ecology Corporation and Stephen 1993 Form 10-K
W. Travers dated April 1, 1994 * (terminated in 1995)
- -------------------------------------------------------------------------------------------------------------------
10.23 Employment Agreement between American Ecology Corporation and Harry 1993 Form 10-K
O. Nicodemus, IV dated April 1, 1994 * (terminated in 1995)
- -------------------------------------------------------------------------------------------------------------------
10.24 Employment Agreement between American Ecology Corporation and Ronald 1993 Form 10-K
K. Gaynor dated April 1, 1994 * (terminated in 1995)
- -------------------------------------------------------------------------------------------------------------------
10.26 Amended and Restated American Ecology Corporation 1992 Stock Option Proxy Statement dated 4-26-94
Plan *
- -------------------------------------------------------------------------------------------------------------------
10.27 Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-26-94
Director Stock Option Plan *
- -------------------------------------------------------------------------------------------------------------------
10.28 American Ecology Corporation 401 (k) Savings Plan * 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
10.29 American Ecology Corporation Retirement Plan * 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
10.30 Credit Agreement between American Ecology Corporation, its 1994 Form 10-K
subsidiaries and Texas Commerce Bank National Association dated
December 1, 1994 (terminated by 10.41 below)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
10.31 Security Agreement dated as of December 1, 1994 by American Ecology 1994 Form 10-K
Corporation in favor of Texas Commerce Bank, National Association
(terminated by 10.43 below)
- -------------------------------------------------------------------------------------------------------------------
10.32 Security Agreement by subsidiaries of American Ecology Corporation 1994 Form 10-K
dated as of December 1, 1994 in favor of Texas Commerce Bank,
National Association (terminated by 10.43 below)
- -------------------------------------------------------------------------------------------------------------------
10.33 Lease Agreement between American Ecology Corporation and VPM 1988-1, Form S-4 filed 12-24-92
Ltd. dated October 14, 1992
- -------------------------------------------------------------------------------------------------------------------
10.34 Rights Agreement dated as of December 7, 1993 between American Form 8-K dated 12-7-93
Ecology Corporation and Chemical Shareholders Services Group, Inc.
as Rights Agent
- -------------------------------------------------------------------------------------------------------------------
10.35 Agreement and Plan of Merger by and between American Ecology Form S-4 dated 12-24-92
Corporation and Waste Processor Industries, Inc.
- -------------------------------------------------------------------------------------------------------------------
10.36 Settlement Agreement dated September 24, 1993 by US Ecology, Inc., 1993 Form 10-K
the State of Nevada, the Nevada State Environmental Commission, and
the Nevada Dept. of Human Resources
- -------------------------------------------------------------------------------------------------------------------
10.37 Settlement Agreement dated as of January 19, 1994 by and among US 1993 Form 10-K
Ecology, Inc., Staff of the Washington Utilities and Transportation
Commission, Precision Castparts Corp., Teledyne Wah Chang, Portland
General Electric Company, the Washington Public Power Supply System
and Public Service Company of Colorado.
- -------------------------------------------------------------------------------------------------------------------
10.38 Agreement dated January 28, 1994 between American Ecology Form 8-K dated 2-3-94
Corporation, Edward F. Heil, Edward F. Heil as trustee for Edward F.
Heil, Jr., Sandra Heil, and Karen Heil Irrevocable Trust Agreement
#2, Thomas W. McNamara and Thomas W. McNamara as a trustee of
the Jenner & Block Profit Sharing Trust No. 082.
- -------------------------------------------------------------------------------------------------------------------
10.39 Agreement of Purchase and Sale dated as of April 7, 1994 by and among 1st Quarter 1994 Form 10-Q,
American Ecology Corp., American Ecology Recycle Center, Inc., 3rd Quarter 1994 Form 10-Q
Quadrex Environmental Company and Quadrex Corporation, as amended by
Amendments dated June 14, 1994 and August 22, 1994.
- -------------------------------------------------------------------------------------------------------------------
10.40 Stock Purchase Agreement dated as of May 10, 1994 by and between 1st Quarter 1994 Form 10-Q,
American Ecology Corporation and Mobley Environmental Services, Inc., 3rd Quarter 1994 Form 10-Q
as amended by Amendment dated September 21, 1994.
- -------------------------------------------------------------------------------------------------------------------
10.41 Second Amended Restated Credit Agreement between American Ecology 1995 Form 10-K
Corporation, its subsidiaries and Texas Commerce Bank National
Association dated June 30, 1995
- -------------------------------------------------------------------------------------------------------------------
10.42 Security Agreement dated June 30, 1995 by American Ecology 1995 Form 10-K
Corporation in favor of Texas Commerce Bank National Association.
- -------------------------------------------------------------------------------------------------------------------
10.43 Security Agreement dated June 30, 1995 by subsidiaries of American 1995 Form 10-K
Ecology Corporation in favor of Texas Commerce Bank National
Association.
- -------------------------------------------------------------------------------------------------------------------
21 List of Subsidiaries 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
23.1 Consent of Arthur Andersen LLP
- -------------------------------------------------------------------------------------------------------------------
23.2 Consent of Balukoff, Lindstrom & Co., P.A.
- -------------------------------------------------------------------------------------------------------------------
27 Financial Data Schedule
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
b. Reports on Form 8-K
February 18, 1997 Form 8-K filed relating to the Third Amended
and Restated Credit Agreement
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN ECOLOGY CORPORATION
(REGISTRANT)
Date: November 13, 1997 By: /s/ JACK K. LEMLEY
-----------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 13, 1997 By: /s/ R. S. THORN
-----------------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference from
No. Description Registrant's
- ------- ----------- ------------------------------
<S> <C> <C>
3.1 -- Restated Certificate of Incorporation, as amended 1989 Form 10-K
3.2 -- Certificate of Amendment to Restated Certificate of Incorporation Form S-4 dated 12-24-92
dated June 4, 1992
3.3 -- Amended and Restated Bylaws dated February 28, 1995 1994 Form 10-K
3.4 -- Restated Certificate of Incorporation dated June 10, 1997 Third Quarter 1997 Form 10-Q
10.1 -- Sublease dated February 26, 1976, between the State of Washington, Form 10 filed 3-8-84
the United States Dept. of Commerce and Economic Development, and
Nuclear Engineering Company with Amendments dated January 11, 1980,
and January 14, 1982.
10.2 -- Lease dated May 1, 1977 ("Nevada Lease"), between the state of Form 10 filed 3-8-84
Nevada, Dept. of Human Resources and Nuclear Engineering Company,
with Addendum thereto, dated December 7, 1982
10.3 -- Addendum to Nevada Lease dated March 28, 1988 1989 Form 10-K
10.4 -- Nevada State Health Division, Radioactive Material License issued to 1989 Form 10-K
US Ecology, Inc. dated December 29, 1989
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference from
No. Description Registrant's
- ------- ----------- ------------------------------
<S> <C> <C>
10.5 -- Administrative Order by Consent between the United States 1985 Form 10-K
Environmental Protection Agency and US Ecology, Inc. ("USE") dated
September 30, 1985
10.6 -- State of Washington Radioactive Materials License issued to US 1986 Form 10-K
Ecology, Inc. dated January 21, 1987
10.11 -- Agreement between the Central Interstate Low-Level Radioactive Waste 2nd Quarter 1988 10-Q
Compact Commission and US Ecology, Inc. for the development of a
facility for the disposal of low-level radioactive waste dated
January 28, 1988 ("Central Interstate Compact Agreement")
10.12 -- Amendment to Central Interstate Compact Agreement dated May 1, 1990 1994 Form 10-K
10.13 -- Second Amendment to Central Interstate Compact Agreement dated June 1994 Form 10-K
24, 1991
10.14 -- Third Amendment to Central Interstate Compact Agreement dated July 1, 1994 Form 10-K
1994
10.15 -- Settlement agreement dated May 25, 1988 among the Illinois Department Form 8-K dated 6-7-88
of Nuclear Safety, US Ecology, Inc. and American Ecology Corporation
of a December 1978 action related to the closure, care and
maintenance of the Sheffield, Illinois LLRW disposal site
10.16 -- Nevada Division of Environmental Protection Permit for Hazardous 1988 Form 10-K
Waste Treatment, Storage and Disposal (Part B) issued to US Ecology,
Inc. dated June 24, 1988
10.17 -- Texas Water Commission Permit for Industrial Solid Waste Management 1988 Form 10-K
Site (Part B) issued to Texas Ecologists, Inc. dated December 5, 1988
10.18 -- Memorandum of Understanding between American Ecology Corporation and 1989 Form 10-K
the State of California dated August 15, 1988
10.19 -- United States Environmental Protection Agency approval to dispose of 1989 Form 10-K
non-liquid polychlorinated biphenyl (PCB) wastes at the Beatty,
Nevada chemical waste disposal facility
10.20 -- Employment Agreement between American Ecology Corporation and C. 1993 Form 10-K
Clifford Wright, Jr. dated April 1, 1994 * (terminated in 1995)
10.21 -- Employment Agreement between American Ecology Corporation and William 1993 Form 10-K
P. McCaughey dated April 1, 1994 * (terminated in 1995)
10.22 -- Employment Agreement between American Ecology Corporation and Stephen 1993 Form 10-K
W. Travers dated April 1, 1994 * (terminated in 1995)
10.23 -- Employment Agreement between American Ecology Corporation and Harry 1993 Form 10-K
O. Nicodemus, IV dated April 1, 1994 * (terminated in 1995)
10.24 -- Employment Agreement between American Ecology Corporation and Ronald 1993 Form 10-K
K. Gaynor dated April 1, 1994 * (terminated in 1995)
10.26 -- Amended and Restated American Ecology Corporation 1992 Stock Option Proxy Statement dated 4-26-94
Plan *
10.27 -- Amended and Restated American Ecology Corporation 1992 Outside Proxy Statement dated 4-26-94
Director Stock Option Plan *
10.28 -- American Ecology Corporation 401 (k) Savings Plan * 1994 Form 10-K
10.29 -- American Ecology Corporation Retirement Plan * 1994 Form 10-K
10.30 -- Credit Agreement between American Ecology Corporation, its 1994 Form 10-K
subsidiaries and Texas Commerce Bank National Association dated
December 1, 1994 (terminated by 10.41 below)
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference from
No. Description Registrant's
- ------- ----------- ------------------------------
<S> <C> <C>
10.31 -- Security Agreement dated as of December 1, 1994 by American Ecology 1994 Form 10-K
Corporation in favor of Texas Commerce Bank, National Association
(terminated by 10.43 below)
10.32 -- Security Agreement by subsidiaries of American Ecology Corporation 1994 Form 10-K
dated as of December 1, 1994 in favor of Texas Commerce Bank,
National Association (terminated by 10.43 below)
10.33 -- Lease Agreement between American Ecology Corporation and VPM 1988-1, Form S-4 filed 12-24-92
Ltd. dated October 14, 1992
10.34 -- Rights Agreement dated as of December 7, 1993 between American Form 8-K dated 12-7-93
Ecology Corporation and Chemical Shareholders Services Group, Inc. as
Rights Agent
10.35 -- Agreement and Plan of Merger by and between American Ecology Form S-4 dated 12-24-92
Corporation and Waste Processor Industries, Inc.
10.36 -- Settlement Agreement dated September 24, 1993 by US Ecology, Inc., 1993 Form 10-K
the State of Nevada, the Nevada State Environmental Commission, and
the Nevada Dept. of Human Resources
10.37 -- Settlement Agreement dated as of January 19, 1994 by and among US 1993 Form 10-K
Ecology, Inc., Staff of the Washington Utilities and Transportation
Commission, Precision Castparts Corp., Teledyne Wah Chang, Portland
General Electric Company, the Washington Public Power Supply System
and Public Service Company of Colorado.
10.38 -- Agreement dated January 28, 1994 between American Ecology Form 8-K dated 2-3-94
Corporation, Edward F. Heil, Edward F. Heil as trustee for Edward F.
Heil, Jr., Sandra Heil, and Karen Heil Irrevocable Trust Agreement
#2, Thomas W. McNamara and Thomas W. McNamara as a trustee of
the Jenner & Block Profit Sharing Trust No. 082.
10.39 -- Agreement of Purchase and Sale dated as of April 7, 1994 by and among 1st Quarter 1994 Form 10-Q, 3rd
American Ecology Corp., American Ecology Recycle Center, Inc., Quarter 1994 Form 10-Q
Quadrex Environmental Company and Quadrex Corporation, as amended by
Amendments dated June 14, 1994 and August 22, 1994.
10.40 -- Stock Purchase Agreement dated as of May 10, 1994 by and between 1st Quarter 1994 Form 10-Q, 3rd
American Ecology Corporation and Mobley Environmental Services, Inc., Quarter 1994 Form 10-Q
as amended by Amendment dated September 21,
1994.
10.41 -- Second Amended Restated Credit Agreement between American Ecology 1995 Form 10-K
Corporation, its subsidiaries and Texas Commerce Bank National
Association dated June 30, 1995
10.42 -- Security Agreement dated June 30, 1995 by American Ecology 1995 Form 10-K
Corporation in favor of Texas Commerce Bank National
Association.
10.43 -- Security Agreement dated June 30, 1995 by subsidiaries of American 1995 Form 10-K
Ecology Corporation in favor of Texas Commerce Bank National
Association.
21 -- List of Subsidiaries 1994 Form 10-K
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Balukoff, Lindstrom & Co., P.A.
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.4
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
AMERICAN ECOLOGY CORPORATION
American Ecology Corporation, a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
1. That the first paragraph in Article FOURTH of the Restated
Certificate of Incorporation of this corporation is amended to read in full as
follows:
"FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 25,000,000 shares of common stock, par value
$.01 per share (the "Common Stock") and 1,000,000 shares of preferred
stock, par value $.01 per share (the "Preferred Stock" or "Preferred
Shares").
2. That said amendment has been duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law, by approval
of the Board of Directors of the corporation and by the affirmative vote of the
holders of at least a majority of the outstanding capital stock entitled to
vote.
IN WITNESS WHEREOF, American Ecology Corporation has caused this
Certificate of Amendment to be signed by its Chairman of the Board of Directors
and attested by its Secretary this 10th day of June, 1997.
AMERICAN ECOLOGY CORPORATION
/s/ JACK K. LEMLEY
----------------------------------
Jack K. Lemley, Chairman
ATTEST:
/s/ PHILLIP K. CHATTIN
- ------------------------------
Phillip K. Chattin, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 214
<SECURITIES> 0
<RECEIVABLES> 8,738
<ALLOWANCES> 1,339
<INVENTORY> 0
<CURRENT-ASSETS> 10,700
<PP&E> 113,425
<DEPRECIATION> 26,960
<TOTAL-ASSETS> 97,165
<CURRENT-LIABILITIES> 24,679
<BONDS> 1,500
0
3,001
<COMMON> 84
<OTHER-SE> 14,810
<TOTAL-LIABILITY-AND-EQUITY> 97,165
<SALES> 31,333
<TOTAL-REVENUES> 31,333
<CGS> 19,023
<TOTAL-COSTS> 13,785
<OTHER-EXPENSES> (2,154)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 679
<INCOME-TAX> 9
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 670
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
