<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, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-11688
AMERICAN ECOLOGY CORPORATION
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3889638
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
805 W. Idaho
Suite #200
Boise, Idaho 83702-8916
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(Address of principal executive offices) (Zip Code)
(208) 331-8400
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(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, 1998 Registrant had outstanding 13,498,429 shares
of its Common Stock.
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AMERICAN ECOLOGY CORPORATION
QUARTERLY REPORT FORM 10-Q FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION> PART I. FINANCIAL INFORMATION 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 and Results of
Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 17
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 18
Signature 21
</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AMERICAN ECOLOGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
($ IN 000'S EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 164 $ 366
Receivables (trade and other), net of allowance for
doubtful accounts of $758 and $1,440, respectively 7,739 7,929
Income tax receivable 740 740
Prepayments and other 1,498 877
----------- -----------
Total current assets 10,141 9,912
Cash and investment securities, pledged 12,411 14,287
Property and equipment, net 11,665 13,004
Deferred site development costs 63,016 58,890
Intangible assets relating to acquired businesses, net 420 438
Other assets 2,264 1,900
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Total assets $ 99,917 $ 98,431
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 233 $ --
Accounts payable 8,599 8,997
Accrued liabilities 14,372 14,801
Deferred site maintenance, current portion 1,524 2,842
Income taxes payable 235 91
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Total current liabilities 24,963 26,842
Long term debt, excluding current portion 42,734 39,872
Deferred site maintenance, excluding current portion 18,081 18,337
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, $.01 par value,
1,000,000 shares authorized, 405,264 issued and outstanding -- --
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 converted and retired -- 3,000
Common stock, $.01 par value, 25,000,000 authorized, 13,498,429
and 8,462,533 shares issued and outstanding, respectively 135 85
Additional paid-in capital 52,647 47,701
Unrealized gain (loss) on securities available-for-sale -- --
Retained earnings (deficit) (38,644) (37,407)
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Total shareholders' equity 14,139 13,380
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Total Liabilities and Shareholders' Equity $ 99,917 $ 98,431
=========== ===========
</TABLE>
See notes to consolidated financial statements.
3
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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,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 8,855 $ 11,002 $ 28,729 $ 31,333
Operating costs 5,703 5,715 17,570 19,023
--------- --------- --------- ---------
Gross profit 3,152 5,287 11,159 12,310
Selling, general and administrative expenses 4,354 5,856 13,198 13,785
Income (loss) from operations (1,202) (569) (2,039) (1,475)
Investment (income) 185 (380) (209) (704)
Gain on sale of assets -- (27) (72) (134)
Other income (263) (308) (961) (1,316)
--------- --------- --------- ---------
Net income before income taxes (1,124) 146 (797) 679
Income tax expense (35) (111) 146 9
--------- --------- --------- ---------
Net income (loss) (1,089) 257 (943) 670
Preferred stock dividends 103 194 315 569
--------- --------- --------- ---------
Net income (loss) available to common
shareholders $ (1,192) $ 63 $ (1,258) $ 101
========= ========= ========= =========
Basic earnings per share $ (.09) $ .01 $ (.10) $ .01
========= ========= ========= =========
Diluted earnings per share $ (.09) $ .01 $ (.10) $ .01
========= ========= ========= =========
Dividends paid per common share $ -- $ -- $ -- $ --
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
4
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AMERICAN ECOLOGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ IN 000'S)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (943) $ 670
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,367 2,768
Stock Compensation -- 178
Deferred income tax provision -- (21)
Gain on sale of assets -- (134)
Loss on sale of securities -- 59
Changes in assets and liabilities:
Receivables 190 1,658
Investment securities classified as trading (1,126) 43
Other assets (1,172) (266)
Accounts payable and accrued liabilities (1,296) (4,514)
Deferred site maintenance (309) (563)
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Total adjustments (1,346) (792)
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Net cash provided by (used in) operating activities (2,289) (122)
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Cash flows from investing activities:
Capital expenditures (84) (979)
Site development costs, including capitalized interest (4,126) (1,918)
Proceeds from sales of property and equipment -- --
Proceeds from sales of investment securities 2,973 1,660
Transfers from cash and investment securities, pledged -- 1370
Net cash used in investing activities (1,237) 133
-------- --------
Cash flows from financing activities:
Proceeds from issuance of indebtedness 15,131 18,305
Proceeds from rights offering 1,996 152
Repayments of indebtedness (13,803) (18,439)
-------- --------
Net cash provided by (used in) financing activities 3,324 18
Increase (decrease) in cash and cash equivalents (202) 29
Cash and cash equivalents at beginning of period 366 185
-------- --------
Cash and cash equivalents at end of period $ 164 $ 214
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest, net of amounts capitalized $ 164 $ 95
Income taxes 137 112
</TABLE>
See notes to consolidated financial statements.
5
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AMERICAN ECOLOGY CORPORATION
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 1997 Annual
Report on Form 10-K for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission.
Certain reclassifications and other corrections for rounding have been made in
prior period financial statements to conform to the current period presentation.
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant inter-company transactions and
balances have been eliminated in consolidation.
NOTE 2. TERM LOAN AND LONG-TERM DEBT
Long term debt at September 30, 1998 and June 30, 1998 consisted of the
following (in thousands):
<TABLE>
<CAPTION>
September 30, June 30,
1998 1998
--------- ---------
<S> <C> <C>
Secured bank credit facility $ 41,947 $ 40,701
Capital lease obligations and other 1,020 673
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42,967 41,374
Less: Current maturities (233) (86)
--------- ---------
Long-term debt $ 42,734 $ 41,288
</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> <C>
1998 $ 233
1999 5,000
2000 37,734
-------
Total $42,967
</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"). On August
21, 1998 the Company signed a Demand Promissory Note and an amendment and waiver
to the Credit Agreement with its bank for $160,000 and made an assignment of the
Company's federal income tax refund in the amount of $735,000. This arrangement
was needed for the Company to have available cash to settle a $900,000 court
judgment with Houston 88 as described in the Part II Item 1, Legal Proceedings.
At September 30, 1998, the outstanding balance of the Company's total bank debt
was $41,947,086. Since October 31, 1996, total interest accrued at 7% in the
amount of $5,033,654 has been capitalized into the Term Loan. Prior to
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October 31, 1996, interest accrued at 7% in the amount of $1,244,019 and
professional fees amounted to $289,724, has been capitalized into the Term Loan.
Additionally, interest accrued at an incremental rate of 3% on the entire amount
of the bank debt outstanding since October 31, 1996 amounted to $2,157,673 at
September 30, 1998.
The new term loans, subject to satisfaction of certain conditions, extend the
maturity of the Company's existing bank debt to December 31, 2000 (the maturity
date). Interest on this debt will accrue at a rate of 7% through 1998.
Thereafter, interest is to be paid quarterly at the rate of 10% or prime,
whichever is greater. Principal repayments will commence with $5,000,000 due on
December 31, 1999, and quarterly payments of $250,000 thereafter. The total debt
balance remaining at the maturity date will be due and payable on that date. The
secured debt now consists solely of a Term Loan and a Revolving Credit Loan.
Subject to the terms and conditions of the Credit Agreement, the Company's bank
agrees to lend the Company an advancing term loan, in a series of advances, up
to a maximum of $38,000,000. The Revolving Credit Loan portion of this loan is
represented by a single revolving promissory note in the original principal sum
of $5,000,000 (the Revolver). No further advances of any Revolving Credit Loans
shall occur after the Maturity Date. The agreement to lend the Company up to a
maximum of $38,000,000 does not constitute new debt, but is a restructuring of
existing debt plus some additional availability solely for the capitalization of
accrued interest and certain fees.
At September 30, 1998, the Company had issued letters of credit and a
performance bond with an outstanding face value of $4,174,575 including
$674,575 issued under the bank credit facility, of which the most significant
relate to site operating permits for the Company's sites. The issued letters of
credit and performance bond are secured by cash and investment securities. The
Company is required to pay fees ranging from 1/2 of one percent to one percent
on letters of credit drawn. The letters of credit and performance bond expire no
more than one year after December 31, 1998.
Based on the final financial results at September 30, 1998, the Company was in
default of certain bank covenants. These defaults were as follows:
Section 8.08 Minimum EBITDA: To Maintain Consolidated EBITDA on the last day of
each calendar quarter in 1998, to be $1,000,000 or more, and on the last day of
each month in 1998, to be $250,000 or more.
On the following monthly and quarter end, default resulted from the shortfall
amounts of:
<TABLE>
<CAPTION>
<S> <C>
July 31, 1998 $ 546,000
August 31, 1998 $ 175,000
September 30, 1998 $ 180,000
Third Quarter, 1998 $1,150,000
</TABLE>
The Company received a waiver from its bank for all of the defaults in covenant
provisions through November 13, 1998. At the date of filing this Form 10-Q, the
Company had reached and signed an agreement including the settlement on the
balance of the long-term debt with its bank, Chase Bank of Texas. As a result of
that agreement, the Company has no long-term bank debt. Furthermore, no waiver
is necessary for those defaults that occurred during the third quarter of 1998.
See Note 8. Subsequent Event.
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 in California
("Ward Valley facility") and the Central Interstate Compact in Nebraska ("Butte
facility"). The license for the Southwestern Compact disposal facility at Ward
Valley was issued 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, 1998, the
Company had deferred pre-operational facility development costs totaling
$55,119,000, (55% of total assets). Of this cost $12,601,000 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 20 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 rate
setting process is expected to include an independent state prudence review of
pre-operational costs incurred by the Company prior to inclusion in the
rate-base. The Company expects all of the costs that it has
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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.
Allowable costs incurred by the Company for 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 development
funding is being provided by the major generators of waste-electric utilities in
the five state CIC region. As of September 30, 1998, approximately $85 million
had been expended. In June 1998, the CIC and the major generators approved
Amendment 7 to their contract, committing an additional $6.1 million. The
Company had contributed and deferred, as of September 30, 1998, approximately
$7.9 million, (8% of total assets), including $1.8 million in capitalized
interest cost. No further capital investment is required from the Company prior
to a license decision by the State of Nebraska. The Company expects all deferred
costs for this facility, plus additional unrecognized project interest of
approximately $15 million, to be included as a component of the rate base and is
expected to be recovered during facility operations. The Company, however, would
lose all claims and rights to reimbursement of its contributions and accrued
interest if the CIC chooses not to go forward with the project and exercises its
conditional option to terminate the contract. The CIC may terminate the contract
upon ten (10) days written notice if all project funds are expended prior to a
licensing decision by the State of Nebraska, or if the major generators have
either ceased funding the project or notified the CIC of their intention to
cease funding pursuant to Amendment 7 of their contract.
The Company has received a preliminary "Intent To Deny License" notification by
the directors of two state agencies in Nebraska. Analysis indicates that all
previous state concerns have been resolved and that the prior state technical
review does not support the director's preliminary intent to deny license.
The construction and operation of the Ward Valley and Butte facilities are still
being delayed by efforts to oppose development of the sites that are the subject
of various legal proceedings. These issues were discussed in detail in the 1997
Form 10-K under Part I, Item 1, "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 predict with
certainty the length of these delays and when, or if, the Butte facility license
will be granted, "and" when, or if, the land for the Ward Valley project
property will be obtained. Although the timing and outcome of the legal
proceedings referred to above are not presently determinable, the Company
continues to actively pursue the conveyance of the land 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, the Ward
Valley site land will be transferred, 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 six month periods ended September 30, 1998 and 1997 was $1,910,000
and $1,834,000, respectively.
NOTE 4. EARNINGS PER SHARE
Net Income (Loss) Per Share. In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128 "Earnings Per Share," which supercedes APB
Opinion 15. This statement with new standards became effective for annual
periods ending after December 15, 1997. The adoption of SFAS No. 128 by the
Company did not have a material effect on earnings per share.
SFAS 128 changes the manner in which earnings per share (EPS) amounts are
calculated and presented. Under the new rules, two EPS amounts are required: (1)
basic EPS; and (2) diluted EPS. Basic EPS is simply the per share allocation of
income available to common stockholders based only on the weighted average
number of common shares actually outstanding during the period. Diluted EPS
represents the per share allocation of income attributable to common
stockholders based on the weighted average number of common shares actually
outstanding plus all diluted potential common shares outstanding during the
period.
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The calculation of net loss per common share for the three and nine months ended
September 30, 1998 and 1997, respectively, is as follows:
<TABLE>
<CAPTION>
(000's except per share amounts)
Three months ended Nine months ended
September 30, September 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings (loss) available to common shareholders $ (1,192) $ 63 $ (1,258) $ 101
======== ======== ======== ========
Weighted average shares outstanding:
Common shares outstanding at end of period 13,498 8,113 12,428 8,113
Shares used in computing earnings (loss) per share 13,498 8,113 12,428 8,113
Basic EPS $ (.09) $ .01 $ (.10) $ .01
======== ======== ======== ========
Diluted EPS $ (.09) $ .01 $ (.10) $ .01
======== ======== ======== ========
</TABLE>
NOTE 5. COMMITMENTS AND CONTINGENCIES
Other than the information set forth in Part II, Item 1, 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 1997 Annual
Report on Form 10-K.
Environmental Matters: The Company is subject to extensive and evolving federal,
state and local environmental laws and regulations that have been enacted in
response to technological advances and the public's increased concern over
environmental issues. As a result of changing practices and attitudes,
management believes the Company will modify or replace facilities and alter
methods of operation. The majority of the expenditures necessary to comply with
the environmental laws and regulations are made in the normal course of
business. Management believes the Company is in compliance, for all material
respects, with the laws and regulations affecting its operations, however, there
is no assurance that the Company will not have compliance expenditures in the
future.
Insurance
The Company carries a broad range of insurance coverage, which management
considers prudent for the protection of the Company's assets and operations.
Some of this insurance coverage is subject to a varying degree of risk retention
by the Company.
Casualty coverage currently includes $1,000,000 primary commercial general
liability with a $2,000,000 aggregate and $5,000,000 primary automobile
liability. The Company maintains workers' compensation insurance in accordance
with laws of the various states in which it maintains employees. This coverage
is supported by $25,000,000 in umbrella insurance protection. The property
policy provides insurance coverage for all of the Company's real and personal
property.
The Company also currently has an environmental impairment liability ("EIL")
insurance policy for certain of its non-nuclear landfills, transfer stations,
and recycling facilities that provides coverage for property damage and/or
bodily injury to third parties caused by potential off-site pollution emanation
from such landfills, transfer stations, or recycling facilities. This policy
provides $10,000,000 of coverage per loss with a $10,000,000 aggregate limit.
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Professional Environmental Consultants Liability Insurance is carried to cover
damages the Company is legally obligated to pay because of an act, error or
omission in professional services, or a loss resulting in environmental
impairment away from an owned site. This policy is subject to a $5,000,000 per
occurrence limit, with a $5,000,000 aggregate.
Nuclear Liability Insurance is carried to cover bodily injury and property
damage claims to third parties caused by the nuclear energy hazard for which the
Company is legally obligated.
Certain of the Company's landfills and recycling facilities are covered for
Closure/Post Closure costs through a direct risk transfer insurance policy.
Other sites are covered through funds as required by the various states.
NOTE 6. PREFERRED STOCK
In November 1996, the Company issued 300,000 shares of Series E Redeemable
Convertible 11.25% Preferred stock for $3,000,000 in cash. On December 30, 1997,
the Company registered with the Securities and Exchange Commission a Shareholder
Rights Offering. The Rights Offering was concluded February 10, 1998. In the
Rights Offering the Company sold 3,912,936 shares of its common stock; 2,912,936
for cash at $1.00 each and 1,000,000 by tender of 100,000 shares of Series E
preferred stock in lieu of cash payment in accordance with the terms of the
Series E. Of the remaining 200,000 shares of Series E preferred, 91,294 were
redeemed at $10.00 each and 108,706 were converted into 1,087,060 shares of
common stock of the Company. The Company had issued 300,000 shares of Series E
Redeemable Convertible 11.25% Preferred Stock for $3,000,000 in cash. The
partial redemption and mandatory conversion of the remaining Series E at the
conclusion of the rights offering was a term of the Series E Designation
Certificate. As a result of the rights offering and Series E conversion, the
Company now has approximately 13,498,429 shares of common stock outstanding at
September 30, 1998.
In September 1995, the Board of Directors of the Company authorized 105,264
shares of preferred stock designated as 8 3/8% Series D Cumulative Convertible
Preferred Stock ("8 3/8% Preferred Stock") and authorized the issuance of
105,264 of such shares and warrants to purchase 1,052,640 shares of the
Company's common stock. During September through December 1995, the Company sold
105,264 shares of 8 3/8% Preferred Stock with warrants in a private offering to
a group comprised principally of members of the company's directors ("the
Investing Group") and received cash proceeds of $4,759,000 which is net of
offering expenses of $101,000 and $140,000 in settlement of liabilities to two
members of the Investing Group. Each 8 3/8% Preferred Stock share is convertible
at any time at the option of the holder into 8.636 shares of the Company's
common stock, equivalent to a conversion price of $5.50 on the $47.50 total per
share offering price. Dividends on the 8 3/8% Preferred Stock are cumulative
from the date of issuance and payable quarterly commencing on October 15, 1995.
Accrued unpaid dividends totaled $1,249,000 and $934,000 at September 30, 1998
and December 31, 1997, respectively. The 8 3/8% Preferred Stock shares are not
redeemable and the liquidation preference is $47.50 per share plus unpaid
dividends. Each share of the 8 3/8% Preferred Stock issued includes ten warrants
to purchase shares of the Company's common stock. Each warrant entitles the
holder to purchase one share of common stock for an exercise price of $4.75. The
$4.75 warrants can be exercised at any time and expire September 12, 1999. No
value was assigned to the warrants in the accompanying consolidated financial
statements as the value is deemed to be de minimis.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS
The International Accounting Standards Committee, IASC, revised IAS No.1,
Presentation of Financial Statements, and No. 14, Segment Reporting, effective
for accounting periods beginning on or after July 1, 1998. Statement No.14
applies only to publicly traded companies and requires that information be
reported for segments of a business along product and service lines and
geographically in addition to consolidated enterprise-wide information in the
basic financial statements. This reporting is in conjunction with the Financial
Accounting Standards Board which issued Standard No. 131, Disclosures about
Segments of an Enterprise and Related Information. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. The Company has reported in
accordance with these standards, financial information as disclosed in Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
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NOTE 8. SUBSEQUENT EVENTS
On November 13, 1998, the Company announced that it had reached an agreement
with its bank, Chase Bank of Texas, for settlement of $41.9 million in long term
debt. The essential terms of the agreement include the payment of $4.2 million,
a sale of net profits interest in the Company's Ward Valley project and
litigation against the U.S. Department of Interior, and warrants to purchase
common stock equal 10% of the Company's outstanding common stock.
The maximum amount Chase Bank can earn from net profits interest agreement is
proceeds from litigation on the stalled project, or a combination of profits and
litigation proceeds up to $29.6 million and is subject to reduction by as much
as $1.0 million for attorney fees incurred in the litigation.
The Company will account for this transaction by reducing on the balance sheet
the value in the asset of Ward Valley project from $55.1 million to $25.5
million. This reduces the capitalized asset value by the amount of the
agreement, $29.6 million, and the Company will then remove the full value of the
bank debt from the balance sheet. The Company will continue with only $1.0
million of other long term and capital lease obligations. This transaction will
result in a reduced balance sheet from $99.9 million to approximately $58
million.
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 the Notes to the Consolidated Financial
Statements herein, Part II, Item 1. Legal Proceedings, and the discussion below.
Certain matters that we discuss in this report are "forward-looking statements"
intended to qualify for the safe harbor from liability. Such statements address
future plans, objectives, expectations, and events or conditions concerning
various matters such as capital expenditures, earnings, litigation, rate and
other regulatory matters, liquidity and capital resources, and accounting
matters. Actual results in each case could differ materially from those
currently anticipated in such statements by reason of factors including, without
limitations, ongoing state and federal activities; future economic conditions;
ongoing litigation; legislation; regulation; competition; and other
circumstances affecting anticipated rates, revenues and costs. Any
forward-looking statement speaks only as of the date on which such statement is
made, and we undertake no obligation to update any forward-looking statement.
Introduction
American Ecology Corporation is the oldest radioactive and hazardous chemical
waste company in the United States. Incorporated in 1952 as Nuclear Engineering
Company, it has operated radioactive and chemical waste disposal and treatment
facilities nationwide longer than any other company.
The Company is organized into two market-focused divisions; the Chemical
Division and the Nuclear LLRW Division. In 1997, and for the first nine months
of 1998, approximately 40% of revenues were derived from the Chemical Division,
while the Nuclear Division generated approximately 60% of revenues.
Several under-performing acquisitions completed in 1994 interrupted the
company's strong financial growth in the early 1990's. This situation was
intensified by a severe unforeseen downturn in the chemical waste disposal
industry. Revenues and earnings peaked in 1994, while write-down of acquired
assets resulted in large losses in 1995 and 1996. Since 1995, both gross profit
and net income has been steadily improving. This can be directly attributable to
the implementation of the strategies developed by the new management team.
11
<PAGE> 12
CAPITAL RESOURCES AND LIQUIDITY
For the nine months ended September 30, 1998 the Company had a working capital
deficit of $14,822,000 compared to $13,979,000 for one year earlier, September
30, 1997. Management has improved the Company's financial performance since 1995
and plans to continue reducing the working capital deficit. The Company intends
to finance the remainder of its 1998 capital expenditures through cash from
operations.
In the last three years the Company has incurred losses from operations. These
losses have been reduced each year and while some areas of business remain
uncertain, management is continuing its efforts to improve the financial
position of the company. The Company has had continuing difficulty in generating
sufficient cash to meet the obligations of doing business. In 1995, and then
again in 1996, the Board of Directors provided a capital infusion in exchange
for preferred stock of American Ecology Corporation. In February 1998, the
Company completed a Rights Offering which generated over $2 million of new
working capital. These capital contributions since 1995 have totaled about $10
million. The Company cannot be certain about its ability to improve short-term
operating results. The Company's financial statements as of September 30, 1998,
contain no adjustments to the asset carrying amounts but, certain reserves have
been made for ongoing litigation issues. Management's actions and plans to
address these issues are as follows:
CREDIT AGREEMENT
In Part I. Item 1. Financial Statements, Note 8. Subsequent Event, hereto,
describes how the Company paid off its lender Chase Bank of Texas through the
sale of an interest in the Ward Valley project, along with cash and warrants for
common stock. The Company will now position itself locally to arrange for a
banking facility for regular checking, savings, and lock-box deposits.
During the third quarter, on August 21, 1998, the Company signed a Demand
Promissory Note with Chase Bank of Texas for $160,000 and made an assignment of
its Federal Income tax refund claim in the amount of $735,000. The proceeds from
the issuance of this indebtedness is included in an amendment and waiver to the
Third Amended and Restated Credit Agreement. The $900,000 was used to settle a
court judgement with Houston 88 as described herein, Part II Item 1, Legal
Proceedings.
MEASURES TO REDUCE COSTS
Management has continued to implement a very aggressive financial and operating
plan since 1995. The Company has evaluated its position to the surrounding
market, measured customer potentials and operating results have improved as a
result. The outcome in many areas is difficult to forecast, but management
continues to modify the strategic plans to include flexibility. The Company
continues to evaluate the viability of certain other operations and their
current potential to perform at an acceptable level of profitability. The
Company will also take measures to minimize future deferred site development
contributions in California.
The Company believes its plan has improved both cost structure and operating
results. However, considering the Company's recent losses and insufficient cash
flow from operations, there can be no assurance that the operating plan will
continue to resolve the Company's liquidity problem in a timely fashion. The
Company is currently reviewing opportunities that may prove invaluable to
improving the liquidity position as well as reducing the working capital
deficit. There can be no assurance, however, that any such effort will provide
an opportunity 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.
CASH FLOW
For the nine months ended September 30, 1998, the Company had a deficit in cash
from operations of $2,289,000. The Company used $1,296,000 of cash in operations
to reduce outstanding accounts payable and for payment of burial fees. The
Company continues to have difficulty meeting its obligations as they become due.
The Company continues to work on a plan to arrange for a new credit facility
but, the outcome can not be accurately predicted and there is no assurance that
a new credit facility will relieve the company of the many credit obligations
that currently exist.
12
<PAGE> 13
During the third quarter ending September 30, 1998, the Company was unable to
collect on certain trade accounts receivable. A total of $881,000 was written
off against a reserve in Allowance for Doubtful Accounts, which had no effect on
income or earnings for the period. After deducting the write-off of $881,000 the
Company continues to maintain an adequate reserve in the Allowance for Doubtful
accounts in the amount of $758,000 or 10% of the total accounts receivable
outstanding.
The Company believes that it now has a plan in place to more closely scrutinize
the credit history of customers before allowing a large trade accounts
receivable to be later discovered as not collectible.
The Company spent $84,000 for capital expenditures excluding site development
costs and invested $4,126,000 in site development costs for the Ward Valley
facility. For the three months ended September 30, 1998, the Company incurred
capitalized interest of $980,000 related to the Ward Valley and Butte
facilities. The Company raised capital of $1,996,000 through a Rights Offering
which concluded on February 10, 1998. See Note 6. to the financial statements
for more details.
FUTURE CONSIDERATIONS
The Company continues with its primary subcontractor to respond to an, "Intent
to Deny" licensure. This intent to deny license was issued in August by the
directors of two State of Nebraska regulatory agencies. The Company owns the
land for the Central Interstate Compact site at Butte, Nebraska, but, awaits the
license in order to operate the LLRW disposal facility. The directors of the two
state regulatory agencies appear to have ignored or rejected the positive
findings of their own technical review team. The project team will rebut
arguments presented against licensing at public hearings in mid-November.
YEAR 2000 COSTS
The Year 2000 issue is the result of potential problems with computer systems or
any equipment with computer chips that use dates where the year has been stored
as just two characters (e.g. 98 for 1998). These systems may incorrectly
evaluate dates beyond the year 1999, potentially causing system failure and
disruption of operations which could affect our business. The Company believes
that its computer systems are currently in compliance with the Year 2000
requirement for date changes. Our concern is some of the companies we do
business with may not be compliant. The Company has implemented a Year 2000 Plan
that addresses traditional hardware and software systems, embedded systems, and
service providers. The plan includes identification and coordination with
external interfacing systems. The Company expects to be compliant with these
issues by mid-year 1999, and does not expect the expenses associated with
compliance to have a material affect on the financial position of operations or
cash flows.
13
<PAGE> 14
RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
The following table presents, for the periods indicated, the percentage of
operating line items in the consolidated income statement to operating revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Three Months Ended Nine Months Ended
September 30, 1998 September 30, 1998 September 30, 1997 September 30, 1997
------------------ ------------------ ------------------ ------------------
$ % $ % $ % $ %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue 8,855 28,729 11,002 31,333
Operating Costs 5,703 64.4 17,570 61.2 5,715 51.9 19,023 60.7
--------- --------- --------- --------- --------- --------- --------- ---------
Gross Profit 3,152 35.6 11,159 38.8 5,287 48.1 12,310 39.3
Selling, G and A Costs 4,354 49.2 13,198 45.9 5,856 53.2 13,785 44.0
--------- --------- --------- --------- --------- --------- --------- ---------
(Loss) from Operations (1,202) (13.6) (2,039) (7.1) (569) (5.2) (1,475) (4.7)
Investment Income 185 2.1 (209) (.07) (380) (3.5) (704) (2.2)
Gain on sale of assets -- 0.0 (72) (.03) (27) (.02) (134) (0.4)
Other (income) expense (263) (3.0) (961) (3.3) (308) (2.8) (1,316) (4.2)
--------- --------- --------- --------- --------- --------- --------- ---------
Net Income (loss) before (1,124) (12.7) (797) (2.8) 146 1.3 679 2.2
income taxes
Income tax expense (benefit) (35) (0.4) 146 0.5 (111) (1.0) 9 0.0
--------- --------- --------- --------- --------- --------- --------- ---------
Net Income (loss) (1,089) (12.3) (943) (3.3) 257 2.3 670 2.1
Preferred stock dividends 103 1.2 315 1.1 194 1.8 569 1.8
--------- --------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) available
to common shareholders (1,192) (13.5) (1,258) (4.4) 63 .06 101 .03
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
The following table presents the periods indicated in a period to period change
in thousands of dollars and percentage change for operations:
<TABLE>
<CAPTION>
Period to Period Change For Period to Period Change For
the Three Months Ended the Nine Months Ended
September 30, 1998 and 1997 September 30, 1998 and 1997
--------------------------- ---------------------------
$ % $ %
<S> <C> <C> <C> <C>
Statement of Operations
Revenues
Chemical Division 102 2.0 (112) (1.0)
LLRW Division (2,249) (35.0) (2,492) (13.0)
EBINT (1)
Chemical Division 647 12.7 1,182 154.0
LLRW Division (1,563) (135.0) (2,501) (58.0)
Consolidated Net Income (1,346) (524.0) (1,613) (2,41.0)
EBITDA (2)
Consolidated (3,629) (146.4) (3,489) (128.7)
</TABLE>
(1) EBINT represents income from operations before deducting interest and
taxes.
(2) EBITDA represents income from operations plus depreciation and
amortization expense.
14
<PAGE> 15
REVENUES
For the three and nine months ended September 30, 1998, the Company reported
revenue of $8,855,000, or a 19.5% decrease, and $28,729,000, or a 8.3%, decrease
to the corresponding prior year period. The Company is in need of increased
sales from all of the operating facilities. While the industry has yielded
declines to the disposition of chemical and LLRW waste, the Company has
maintained its market share. The decline in revenue is also attributable to lost
time production at the Oak Ridge, Tennessee facility due to a prior labor union
strike. The union strike took place in February 1998, but has had long lasting
effects on operations and production for 1998. There has also been a reduction
in revenue from some of the Chemical division's operations. Texas Ecologists
landfill has suffered declining revenues along with the transportation and
Surecycle(R) operations, some of these declines have been offset by the
increased sales at the Beatty, Nevada landfill. At Richland, Washington, the
Company operates a LLRW site,, charging rates for disposal set by the Washington
Utility and Transportation Commission (WUTC). Generally by the third quarter the
annual fees have been collected and then there is a prorated decline in recorded
revenues for the balance of the year, so as not to exceed the annual allotment
provided for by the WUTC.
The Chemical division, for the three and nine months ended September 30, 1998,
reported revenues of $4,593,000, a 2% increase, and $12,006,000, a 1% decrease,
to the corresponding prior year period. The LLRW division for the three and nine
months ended September 30, 1998, reported revenues of $4,262,000, a 35%
decrease, and $16,723,000, a 13% decrease, to the corresponding prior year
period. As explained in the preceding paragraph, the Oak Ridge, Tennessee
facility has undergone a series of events that have had a cumulative negative
impact on operating performance. Those events have included; foremost the labor
union strike, lost work in the motor rebuild facility, some of which was
attributable to the labor union strike, and a downturn in the waste brokerage
business.
OPERATING COSTS
<TABLE>
<CAPTION>
Period to Period Change Period to Period Change
For the Three Months Ended For the Nine Months Ended
September 30, 1998 and 1997 September 30, 1998 and 1997
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Statement of Operations $ % $ %
Direct Operating Costs
Chemical Division (639) (20.2) (1,565) (17.7)
LLRW Division (806) (19.9) 3 (0.0)
Selling, General and Administrative Costs
Chemical Division (55) (3.4) 260 5.8
LLRW Division (23) (1.5) (222) (4.6)
Other Costs
Chemical Division 69 63.3 (90) (29.6)
LLRW Division 204 1.0 229 (81.2)
</TABLE>
Operating costs and expenses have declined overall during 1998. The Company
reported a decrease of $12,000, or less than 1.0%, and a decrease of $1,453,000,
or 7.6%, for the three and nine months ended September 30, 1998, respectively,
compared to the corresponding periods of 1997. As a percentage of operating
revenues, operating costs and expenses increased from 52% to 64% for the three
months ended September 30, 1997 and 1998, respectively, and remained constant at
61% for the nine months ended for both September 30, 1997 and 1998. It appears
that operating costs in total were nearly fixed at $5,715,000 and $5,703,000 for
the three months ended September 30, 1997 and 1998, but only increased as
percentage of revenue due to the decline in third quarter revenues for 1998. As
explained above, this decline was largely due to Oak Ridge, Tennessee facility
operations. Senior management changes were made at this facility as part of
overall efforts to improve revenue performance.
The many efforts to conserve on costs by both Chemical and LLRW divisions should
allow for improved performance in the future, providing there is an increase in
revenues and other items remain constant. The Company as a whole is
demonstrating a positive trend in operating results by recapturing a portion of
the market share. In addition to regaining some market share, the Company has
been making every effort to analyze each aspect of the two operating divisions
to determine how they can best maximize operating performance.
15
<PAGE> 16
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased $1,502,000, or 26%, and
$587,000, or 4%, for the three and nine months ended September 30, 1998,
respectively as compared to the prior year periods. As a percentage of operating
revenues selling, general and administrative expenses decreased to 53% from 49%
for the three months ended September 30, 1997 and 1998, respectively, and
increased from 44% to 46% for the nine months ended September 30, 1997 and 1998.
The majority of the decrease in selling, general and administrative expenses
occurred in the third quarter of 1998. For the nine months ended September 30,
1998, legal expenses at the corporate level decreased from $639,000 in 1997 to
$89,000 in 1998. The remainder of the reduced costs in this category are made up
from lower spending at each of the area locations in both chemical and LLRW
divisions, including the reduction of spending at the closed Winona, Texas
facility.
The Company has attempted to be very conservative in cost saving measures like
travel expense, entertainment, seminars, other employee benefits, and related
activities. Management believes that it has applied, and will continue to apply,
the aggressive cost saving measures and implementation of the recovery plan it
began in 1995.
OTHER INCOME AND INVESTMENT INCOME
Other Income includes income on the sale of investments, income from the sale of
certain resources from land, timber, or gravel from property in Texas, and other
accounting adjustments for prior period reserves. For the three months ended
September 30, 1997, and 1998, other income declined from $308,000 to $263,000,
and for the nine months declined from $1,316,000 to $961,000.
Investment income is comprised principally of interest income earned on various
investments in letters of credit and money market investments, dividend income,
and capital gains and losses earned on the Company's stock portfolio classified
as trading securities. For the nine months ended September 30, 1998, the Company
reported investment income of $209,000 compared to $704,000 for the period of
1997.
The decrease in income producing investments declined by approximately $500,000
for the nine month period ending September 30, 1997 and 1998, mainly due to a
dividend taken from the Company's captive insurance company. During the same
period other investment income and expense declined in comparison to the third
quarter ending 1997, as most of the assets had been sold from the Winona, Texas
facility, and the Company did not incur many asset sales in 1998.
INCOME TAXES
For the three months ended September 30, 1998, the Company reported an effective
income tax benefit rate of 3%. The Company is not recognizing any deferred tax
benefits for net operating loss carry forwards from prior years, due to the
Company's full valuation allowance provided for these deferred taxes.
NEW ACCOUNTING PRONOUNCEMENTS
The International Accounting Standards Committee, IASC, revised IAS No.1,
Presentation of Financial Statements, and No. 14, Segment Reporting, effective
for accounting periods beginning on or after July 1, 1998. Statement No.14
applies only to publicly traded companies and requires that information be
reported for segments of a business along product and service lines and
geographically in addition to consolidated enterprise-wide information in the
basic financial statements. This reporting is in conjunction with the Financial
Accounting Standards Board Standard No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. The adoption of these statements and
standards has not had a material impact on the consolidated financial statements
of the Company. The Company has provided segment information for both the
Chemical and LLRW division in Part I, Item 2.
16
<PAGE> 17
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In addition to previously reported litigation, 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 has established reserves for certain matters previously reported and
for certain anticipated legal fees based on management's estimates of the
outcome. During the course of legal proceedings, those estimates 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 and other matters previously reported
will not have a material adverse effect on the operations or financial condition
of the Company.
Except for the matters discussed below, there were no material developments with
respect to previously reported legal proceedings.
HOUSTON OFFICE 88, INC. V. AMERICAN ECOLOGY CORPORATION V. ALTRA ENERGY
TECHNOLOGIES, L.L.C., DISTRICT COURT OF HARRIS COUNTY, TEXAS, CASE NO. 96-47050.
Plaintiffs filed this case in September 1996 seeking more than $4.1 million in
rent, interest, costs and attorneys fees, alleging the Company breached its
office lease agreement by vacating its former corporate headquarters in Houston,
Texas. The Plaintiffs won summary judgement January 13, 1998 in the amount of
$2,044,346.40 plus interest. A settlement was reached August 14, 1998 and the
Company paid Plaintiffs $900,000 in full satisfaction of the judgment. All
appeals have been dismissed, and the matter is closed.
PHYLLIS GLAZER AND M.O.S.E.S. V. GIBRALTAR CHEMICAL RESOURCES, INC., ET AL, U.S.
DISTRICT COURT, EASTERN DISTRICT COURT, EASTERN DISTRICT TEXAS, CASE NO.
6:94-CV-708.
This citizen suit under the federal Resource Conservation and Recovery Act and
the Clean Air Act, alleged that the Winona facility violated permits and
regulations, endangering health and the environment. The case became moot with
the entry of an agreed closure order by the Texas Natural Resource Conservation
Commission on November 12, 1997. The case was dismissed on August 29, 1998.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
17
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<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
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
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
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
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 19
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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)
- -------------------------------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 20
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- -------------------------------------------------------------------------------------------------------------------
10.46 Rights Offering and Prospectus with American Ecology Corporation and Form S-3 dated 9-9-97
ChaseMellon Shareholder Services as Rights
Agent.
- -------------------------------------------------------------------------------------------------------------------
10.47 Amended Rights Offering and Prospectus with American Ecology Form S-3/A dated 12-30-97
Corporation and ChaseMellon Shareholder Services as Rights Agent.
- -------------------------------------------------------------------------------------------------------------------
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
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
16.1 Change of Auditors Letter - November 25, 1996 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
10.44 Series E Redeemable Convertible Preferred Stock - November 27, 1996 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
10.45 Third Amended & Restated Credit Agreement - February 18, 1997 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 21
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 11, 1998 By:
-------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 11, 1998 By:
-----------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
21
<PAGE> 22
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 11, 1998 By: /s/ Jack L. Lemley
-------------------------------
Jack K. Lemley
Chief Executive Officer
Date: November 11, 1998 By: /s/ R. S. Thorn
-----------------------------
R. S. Thorn
Vice President of Administration
Chief Accounting Officer
22
<PAGE> 23
EXHIBIT INDEX
<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
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
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
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 24
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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)
- -------------------------------------------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 25
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
- -------------------------------------------------------------------------------------------------------------------
10.46 Rights Offering and Prospectus with American Ecology Corporation and Form S-3 dated 9-9-97
ChaseMellon Shareholder Services as Rights Agent.
- -------------------------------------------------------------------------------------------------------------------
10.47 Amended Rights Offering and Prospectus with American Ecology Form S-3/A dated 12-30-97
Corporation and ChaseMellon Shareholder Services as Rights Agent.
- -------------------------------------------------------------------------------------------------------------------
21 List of Subsidiaries 1994 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
23.1 Consent of Arthur Andersen LLP 1997/1996 Form 10-K
- -------------------------------------------------------------------------------------------------------------------
23.2 Consent of Balukoff, Lindstrom & Co., P.A. Form S-3 9-9-97
- -------------------------------------------------------------------------------------------------------------------
27 Financial Data Schedule
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
b. Reports on Form 8-K
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
16.1 Change of Auditors Letter - November 25, 1996 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
10.44 Series E Redeemable Convertible Preferred Stock - November 27, 1996 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
10.45 Third Amended & Restated Credit Agreement - February 18, 1997 Form 8-K
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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