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Form 10-Q
US ECOLOGY, INC. - ECOL
Filed: August 01, 2013 (period: June 30, 2013)
Quarterly report with a continuing view of a company's financial position
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user
assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be
limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
10-Q - 10-Q
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
FINANCIAL STATEMENTS
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
CONTROLS AND PROCEDURES
PART II
ITEM 1.
LEGAL PROCEEDINGS
ITEM 1A. RISK FACTORS
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
ITEM 4.
MINE SAFETY DISCLOSURES
ITEM 5.
OTHER INFORMATION
ITEM 6.
EXHIBITS
SIGNATURE
EX-10.63 (EX-10.63)
EX-10.64 (EX-10.64)
EX-15 (EX-15)
EX-31.1 (EX-31.1)
EX-31.2 (EX-31.2)
EX-32 (EX-32)
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
 QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
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: 0000-11688
US ECOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
95-3889638
(I.R.S. Employer Identification No.)
251 E. Front St., Suite 400
Boise, Idaho
(Address of principal executive offices)
83702
(Zip Code)
Registrant’s telephone number, including area code: (208) 331-8400
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
At July 26, 2013, there were 18,530,085 shares of the registrant’s Common Stock outstanding.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
US ECOLOGY, INC.
FORM 10-Q
TABLE OF CONTENTS
Item
Page
PART I — FINANCIAL INFORMATION
1.
3
Financial Statements (Unaudited)
3
Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012
3
Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012
4
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2013 and
2012
5
Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012
6
Notes to Consolidated Financial Statements
7
Report of Independent Registered Public Accounting Firm
2.
3.
4.
1.
1A.
2.
3.
4.
5.
6.
16
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Controls and Procedures
17
25
26
PART II — OTHER INFORMATION
27
Cautionary Statement
Legal Proceedings
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Other Information
Exhibits
SIGNATURE
27
27
27
27
28
28
28
28
29
2
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
PART I - FINANCIAL INFORMATION
ITEM 1.
FINANCIAL STATEMENTS
US ECOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except par value amount)
June 30, 2013
December 31, 2012
Assets
Current Assets:
Cash and cash equivalents
Receivables, net
Prepaid expenses and other current assets
Income taxes receivable
Deferred income taxes
Total current assets
Property and equipment, net
Restricted cash
Intangible assets, net
Goodwill
Other assets
Total assets
$
$
3,982 $
34,235
3,847
787
799
43,650
2,120
33,947
3,161
—
1,276
40,504
113,294
4,111
37,945
21,917
426
221,343 $
109,792
4,111
40,771
23,105
411
218,694
4,484 $
5,381
7,506
5,040
972
937
24,320
6,333
3,919
7,322
7,570
426
1,913
27,483
Liabilities And Stockholders’ Equity
Current Liabilities:
Accounts payable
Deferred revenue
Accrued liabilities
Accrued salaries and benefits
Income taxes payable
Current portion of closure and post-closure obligations
Total current liabilities
$
Long-term closure and post-closure obligations
Reducing revolving line of credit
Other long-term liabilities
Unrecognized tax benefits
Deferred income taxes
Total liabilities
16,315
43,000
88
474
15,338
99,535
15,449
45,000
114
467
18,159
106,672
Commitments and contingencies
Stockholders’ Equity:
Common stock $0.01 par value, 50,000 authorized; 18,530 and 18,385 shares
issued, respectively
Additional paid-in capital
Retained earnings
Treasury stock, at cost, 24 and 71 shares, respectively
Accumulated other comprehensive income (loss)
Total stockholders’ equity
Total liabilities and stockholders’ equity
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
$
185
65,603
57,725
(404)
(1,301)
121,808
221,343 $
184
63,969
48,424
(1,183)
628
112,022
218,694
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
The accompanying notes are an integral part of these financial statements.
3
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended June 30,
2013
2012
Revenue
Direct operating costs
Transportation costs
Gross profit
Selling, general and administrative expenses
Operating income
$
45,777
19,759
7,090
18,928
6,519
12,409
Other income (expense):
Interest income
Interest expense
Foreign currency gain (loss)
Other
Total other income (expense)
Income before income taxes
Income tax expense
Net income
$
Earnings per share:
Basic
Diluted
$
$
0.39
0.39
$
18,401
18,483
0.18
Shares used in earnings per share calculation:
Basic
Diluted
Dividends paid per share
2
(222)
(1,193)
94
(1,319)
11,090
3,880
7,210
$
Six Months Ended June 30,
2013
2012
39,980 $
18,633
4,021
17,326
6,366
10,960
88,676
40,843
13,523
34,310
12,245
22,065
$
4
(204)
(921)
522
(599)
10,361
3,999
6,362 $
7
(443)
(2,131)
191
(2,376)
19,689
7,073
12,616
$
$
0.35 $
0.35 $
0.69
0.68
$
18,228
18,264
0.18 $
18,362
18,446
0.18
$
$
72,993
36,271
7,320
29,402
11,971
17,431
9
(428)
170
602
353
17,784
6,899
10,885
$
$
0.60
0.60
$
18,223
18,259
0.36
The accompanying notes are an integral part of these financial statements.
4
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
Three Months Ended June 30,
2013
2012
Net income
Other comprehensive income (loss):
Foreign currency translation gain (loss)
$
Comprehensive income
$
7,210
$
(1,179)
6,031
Six Months Ended June 30,
2013
2012
6,362 $
12,616
(500)
$
$
(1,929)
5,862 $
10,687
10,885
135
$
11,020
The accompanying notes are an integral part of these financial statements.
5
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended June 30,
2013
2012
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property and equipment
Amortization of intangible assets
Accretion of closure and post-closure obligations
Unrealized foreign currency (gain) loss
Deferred income taxes
Share-based compensation expense
Unrecognized tax benefits
Net (gain) loss on sale of property and equipment
Changes in assets and liabilities:
Receivables
Income tax receivable
Other assets
Accounts payable and accrued liabilities
Deferred revenue
Accrued salaries and benefits
Income tax payable
Closure and post-closure obligations
Net cash provided by operating activities
$
12,616
$
10,885
7,071
729
613
2,400
(1,665)
363
7
10
6,794
724
670
(250)
(1,218)
383
7
(20)
(682)
(787)
(563)
(1,583)
1,594
(2,386)
582
(621)
17,698
839
191
(390)
(3,699)
412
(307)
761
(186)
15,596
Cash flows from investing activities:
Purchases of property and equipment
Business acquisition, net of cash acquired
Proceeds from sale of property and equipment
Restricted cash
Net cash used in investing activities
(12,530)
—
52
—
(12,478)
(5,743)
(11,228)
169
5
(16,797)
Cash flows from financing activities:
Payments on reducing revolving line of credit
Proceeds from reducing revolving line of credit
Proceeds from exercise of stock options
Deferred financing costs paid
Dividends paid
Other
Net cash (used in) provided by financing activities
(10,000)
8,000
2,110
(185)
(3,314)
261
(3,128)
(12,500)
22,000
—
—
(6,565)
(258)
2,677
Effect of foreign exchange rate changes on cash
(230)
140
Increase in cash and cash equivalents
1,862
1,616
Cash and cash equivalents at beginning of period
2,120
4,289
Cash and cash equivalents at end of period
$
3,982
$
5,905
Supplemental Disclosures
Income taxes paid, net of receipts
Interest paid
Non-cash investing and financing activities:
$
$
8,677
367
$
$
7,148
418
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Capital expenditures in accounts payable
Restricted stock issued from treasury shares
$
$
504
779
$
$
2,446
372
The accompanying notes are an integral part of these financial statements.
6
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any
use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
US ECOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1.
GENERAL
Basis of Presentation
The accompanying unaudited consolidated financial statements include the results of operations, financial position and cash flows of
US Ecology, Inc. and its wholly-owned subsidiaries. All significant intercompany balances have been eliminated. Throughout these
financial statements words such as “we,” “us,” “our,” “US Ecology” and the “Company” refer to US Ecology, Inc. and its subsidiaries.
In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments necessary to
present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements
have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”) have been omitted pursuant to the rules and regulations of the SEC.
These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying
notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The results of operations
and cash flows for the six months ended June 30, 2013 are not necessarily indicative of results to be expected for the entire fiscal year.
The Company’s Consolidated Balance Sheet as of December 31, 2012 has been derived from the Company’s audited Consolidated
Balance Sheet as of that date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during
the reporting period. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our
financial statements. As it relates to estimates and assumptions in amortization rates and environmental obligations, significant
engineering, operations and accounting judgments are required. We review these estimates and assumptions no less than annually. In
many circumstances, the ultimate outcome of these estimates and assumptions will not be known for decades into the future. Actual
results could differ materially from these estimates and assumptions due to changes in applicable regulations, changes in future
operational plans and inherent imprecision associated with estimating environmental impacts far into the future.
Financial Instruments
Cash on deposit, accounts receivable, short-term borrowings, accounts payable and accrued liabilities as presented in the consolidated
financial statements approximate fair value because of the short-term nature of these instruments. The carrying amount of our
long-term debt approximates fair value because interest rates are variable and, accordingly, approximate current market rates for
instruments with similar risk and maturities. Restricted cash balances represent funds held in third-party managed trust accounts as
collateral for our financial assurance obligations for post-closure activities at our non-operating facilities. Restricted cash balances are
maintained by third-party trustees and are invested in money market accounts. The balances are adjusted monthly to fair market value
based on quoted prices in active markets for identical assets.
7
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
NOTE 2.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss), comprised entirely of foreign currency translation adjustments, consisted
of the following:
Three Months Ended June 30,
2013
2012
$s in thousands
Balance, beginning of period
Foreign currency translation gain (loss)
in other comprehensive income
$
(122)
Balance, end of period
$
(1,179)
(1,301)
NOTE 3.
Six Months Ended June 30,
2013
2012
$
518 $
$
(500)
18 $
628
(1,929)
(1,301)
$
(117)
$
135
18
CONCENTRATIONS AND CREDIT RISK
Major Customers
No customer accounted for more than 10% of total revenue for the three and six months ended June 30, 2013 or 2012. No customer
accounted for more than 10% of total trade receivables as of June 30, 2013 or December 31, 2012.
Credit Risk Concentration
We maintain most of our cash with nationally recognized financial institutions like Wells Fargo Bank, National Association (“Wells
Fargo”). Substantially all balances are uninsured and are not used as collateral for other obligations. Concentrations of credit risk on
accounts receivable are believed to be limited due to the number, diversification and character of the obligors and our credit evaluation
process.
NOTE 4.
RECEIVABLES
Receivables consisted of the following:
June 30,
2013
$s in thousands
Trade
Unbilled revenue
Other
Total receivables
Allowance for doubtful accounts
Receivables, net
NOTE 5.
$
33,014 $
1,396
289
34,699
(464)
34,235 $
$
December 31,
2012
32,787
1,529
99
34,415
(468)
33,947
PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30,
2013
$s in thousands
Cell development costs
Land and improvements
Buildings and improvements
Railcars
Vehicles and other equipment
Construction in progress
Total property and equipment
Accumulated depreciation and amortization
Property and equipment, net
$
$
65,239 $
18,090
55,949
17,375
42,235
14,985
213,873
(100,579)
113,294 $
December 31,
2012
64,994
14,920
55,177
17,375
39,689
12,454
204,609
(94,817)
109,792
8
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
Depreciation and amortization expense for each of the three months ended June 30, 2013 and 2012 was $3.6 million. Depreciation and
amortization expense for the six months ended June 30, 2013 and 2012 was $7.1 million and $6.8 million, respectively.
NOTE 6.
BUSINESS COMBINATION
On May 31, 2012, the Company acquired 100% of the outstanding shares of US Ecology Michigan, Inc. (“US Ecology Michigan”),
formerly Dynecol, Inc., a chemical and industrial byproducts treatment and reuse facility located in Detroit, Michigan. The following
unaudited pro forma financial information presents the combined results of operations as if US Ecology Michigan had been combined
with us beginning on January 1, 2012. The pro forma financial information includes the accounting impact of the business
combination, including the amortization of intangible assets, depreciation of property, plant and equipment and interest expense. The
unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of
operations that would have been achieved if the acquisition had taken place at the beginning of the period presented, nor should it be
taken as an indication of our future consolidated results of operations.
(unaudited)
Three Months Ended
June 30, 2012
$s in thousands, except per share amounts
Pro forma combined:
Revenue
Net income
Earnings per share
Basic
Diluted
(unaudited)
Six Months Ended
June 30, 2012
$
$
42,011 $
6,248 $
78,494
10,739
$
$
0.34 $
0.34 $
0.59
0.59
The amounts of revenue and operating income from US Ecology Michigan included in US Ecology’s consolidated statements of
operations for the three months ended June 30, 2013 were $3.4 million and $288,000, respectively. The amounts of revenue and
operating income from US Ecology Michigan included in US Ecology’s consolidated statements of operations for the six months
ended June 30, 2013 were $6.2 million and $193,000, respectively.
NOTE 7.
GOODWILL AND INTANGIBLE ASSETS
The Company’s entire goodwill balance has been assigned to the Operating Disposal Facilities reporting segment. Changes in
goodwill for the six months ended June 30, 2013 consisted of the following:
$s in thousands
Balance at December 31, 2012
Foreign currency translation
Balance at June 30, 2013
Goodwill
$
23,105
(1,188)
21,917
$
Intangible assets consisted of the following:
June 30,
2013
$s in thousands
Amortizing intangible assets:
Developed software
Database
Customer relationships
Technology - Formulae and processes
Permits, licenses and lease
Non-compete agreements
Total amortizing intangible assets
Accumulated amortization
Nonamortizing intangible assets:
Permits and licenses
Tradename
Total intangible assets, net
$
$
December 31,
2012
333 $
95
5,046
8,645
26,553
20
40,692
(3,659)
352
100
5,269
9,144
28,085
20
42,970
(3,120)
750
162
37,945 $
750
171
40,771
9
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents
Amortization expense for the three months ended June 30, 2013 and 2012 was $362,000 and $374,000, respectively. Amortization
expense for the six months ended June 30, 2013 and 2012 was $729,000 and $724,000, respectively.
NOTE 8.
DEBT
On October 29, 2010, we entered a credit agreement with Wells Fargo which, as amended, provides for an aggregate commitment
from Wells Fargo of $95.0 million (the “Credit Agreement”). The Credit Agreement provides for a $20.0 million revolving line of
credit (the “Revolving Line of Credit”) with a maturity date of November 1, 2015 and a $75.0 million reducing revolving line of credit
(the “Reducing Revolving Line of Credit”) with a maturity date of November 1, 2015.
Revolving Line of Credit
The Revolving Line of Credit provides up to $20.0 million in revolving credit loans or letters of credit for working capital needs (the
“Commitment Amount”). Under the Revolving Line of Credit, revolving loans are available based on the Prime Rate or the LIBOR,
at the Company’s option, plus an applicable margin which is determined according to a pricing grid under which the interest rate
decreases or increases based on our ratio of funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”).
At June 30, 2013, the effective interest rate on the Revolving Line of Credit was 1.44%. Interest only payments are due either monthly
or on the last day of any interest period, as applicable. At June 30, 2013, there were no borrowings outstanding under the Revolving
Line of Credit. The availability under the Revolving Line of Credit was $16.0 million, with $4.0 million of the line of credit issued in
the form of a standby letter of credit utilized as collateral for closure and post-closure financial assurance.
Reducing Revolving Line of Credit
The Reducing Revolving Line of Credit provides an initial commitment amount of $75.0 million (the “Reducing Revolving
Commitment Amount”). Proceeds from the Reducing Revolving Line of Credit were used to acquire all of the shares of Stablex in
2010 and to acquire US Ecology Michigan in 2012. Remaining borrowings are available for working capital needs. The Reducing
Revolving Commitment Amount is reduced by $2.8 million on the last day of each March, June, September and December beginning
March 31, 2013, continuing through November 1, 2015. Under the Reducing Revolving Line of Credit revolving loans are available
based on the Prime Rate or LIBOR, at the Company’s option, plus an applicable margin, which is determined according to a pricing
grid under which the interest rate decreases or increases based on our ratio of funded debt to EBITDA. At June 30, 2013, the effective
interest rate of the Reducing Revolving Line of Credit was 1.44%. Interest only payments are due either monthly or on the last day of
any interest period, as applicable. At June 30, 2013, $43.0 million was outstanding on the Reducing Revolving Line of Credit with
$26.4 million available for additional borrowings.
In addition to standard fees, origination fees and commitment fees apply to the average daily unused portion of the Commitment
Amount and the Reducing Revolving Commitment Amount. The Credit Agreement contains certain quarterly financial covenants,
including a maximum funded debt ratio, a maximum fixed charge coverage ratio, a minimum required tangible net worth and a
minimum current ratio. We may only declare quarterly or annual dividends if on the date of declaration, no event of default has
occurred and no other event or condition has occurred that would constitute default due to the payment of the dividend. Obligations
under the Credit Agreement are guaranteed by US Ecology and all of its subsidiaries.
At June 30, 2013, we were in compliance with all of the financial covenants in the Credit Agreement.
NOTE 9.
CLOSURE AND POST-CLOSURE OBLIGATIONS
Our accrued closure and post-closure obligations represent the expected future costs, including corrective actions, associated with
closure and post-closure of our operating and non-operating disposal facilities. Liabilities are recorded when work is probable and the
costs can be reasonably estimated. We perform periodic reviews of both non-operating and operating facilities and revise accruals for
estimated closure and post-closure, remediation or other costs as necessary. Recorded liabilities are based on our best estimates of
current costs and are updated periodically to include the effects of existing technology, presently enacted laws and regulations,
inflation and other economic factors.
10
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
Changes in closure and post-closure obligations consisted of the following:
Three Months Ended
June 30, 2013
$s in thousands
Closure and post-closure obligations, beginning of period
Accretion expense
Payments
Adjustments
Currency translation
Closure and post-closure obligations, end of period
Less current portion
Long-term portion
$
16,586 $
306
(128)
550
(62)
17,252
(937)
16,315 $
$
Six Months Ended
June 30, 2013
17,362
613
(1,171)
550
(102)
17,252
(937)
16,315
NOTE 10. INCOME TAXES
During the six months ended June 30, 2013, there were no material changes to our unrecognized tax benefits disclosed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2012. We do not anticipate our total unrecognized tax benefits to
increase or decrease materially within the next twelve months.
Our effective tax rate for the three months ended June 30, 2013 was 35.0%, down from 38.6% for the three months ended June 30,
2012. Our effective tax rate for the six months ended June 30, 2013 was 35.9%, down from 38.8% for the six months ended June 30,
2012. The decrease for both the three and six months ended June 30, 2013 reflects a higher proportion of earnings from our Canadian
operations, which are taxed at a lower corporate tax rate, partially offset by higher U.S. state income taxes.
We file a consolidated U.S. federal income tax return with the Internal Revenue Service as well as income tax returns in various states
and Canada. We may be subject to examination by taxing authorities in the U.S. and Canada for tax years 2009 through 2012.
Additionally, we may be subject to examinations by various state and local taxing jurisdictions for tax years 2008 through 2012.
NOTE 11. COMMITMENTS AND CONTINGENCIES
Litigation and Regulatory Proceedings
In the ordinary course of business, we are involved in judicial and administrative proceedings involving federal, state, provincial or
local governmental authorities, including regulatory agencies that oversee and enforce compliance with permits. Fines or penalties
may be assessed by our regulators for non-compliance. Actions may also be brought by individuals or groups in connection with
permitting of planned facilities, modification or alleged violations of existing permits, or alleged damages suffered from exposure to
hazardous substances purportedly released from our operated sites, as well as other litigation. We maintain insurance intended to cover
property and damage claims asserted as a result of our operations. Periodically, management reviews and may establish reserves for
legal and administrative matters, or other fees expected to be incurred in relation to these matters.
In 2012, we settled allegations by the United States Environment Protection Agency (“U.S. EPA”) that the thermal recycling operation
at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conservation and Recovery Act of
1976 (“RCRA”). As part of the settlement, we agreed to pay a civil penalty and to submit an application to the State of Texas for a
RCRA Subpart X permit. The Company and the thermal recycling unit’s owner-operator also agreed to a set of interim operating
conditions that allow the facility to continue providing recycling services to customers until the RCRA Subpart X permit is issued.
In connection with this matter, in June 2013 the U.S. EPA asserted various related technical compliance and permitting violations of
the Clean Air Act of 1970. Negotiations on the merits of a proposed settlement are ongoing with the U.S. EPA. We recognized a
charge of $238,000 during the second quarter of 2013 in Selling, general and administrative expenses in the Consolidated Statement of
Operations related to this enforcement matter.
Other than as disclosed above, we are not currently a party to any material pending legal proceedings and are not aware of any other
claims that could have a materially adverse effect on our financial position, results of operations or cash flows.
11
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
Operating Leases
In May 2013, we executed a new lease for corporate office space in Boise, Idaho. Future minimum lease payments on this
non-cancelable operating lease as of June 30, 2013 consisted of the following:
$s in thousands
2013
2014
2015
2016
2017
Thereafter
Payments
$
$
34
245
301
310
318
382
1,590
NOTE 12. EARNINGS PER SHARE
Three Months Ended June 30,
$s and shares in thousands, except per share
amounts
2013
Basic
Net income
Weighted average basic shares outstanding
7,210
18,401
$
Dilutive effect of stock options and restricted stock
Weighted average diluted shares outstanding
Earnings per share
Anti-dilutive shares excluded from calculation
2012
Diluted
Basic
7,210
18,401
$
6,362
18,228
Diluted
$
82
18,483
$
0.39
$
0.39
196
6,362
18,228
36
18,264
$
0.35
$
0.35
331
Six Months Ended June 30,
$s and shares in thousands, except per share
amounts
Net income
Weighted average basic shares outstanding
2013
Basic
$
12,616 $
18,362
Dilutive effect of stock options and restricted stock
Weighted average diluted shares outstanding
Earnings per share
Anti-dilutive shares excluded from calculation
2012
Diluted
12,616 $
18,362
Basic
Diluted
10,885 $
18,223
84
18,446
$
0.69 $
0.68 $
208
10,885
18,223
36
18,259
0.60 $
0.60
324
NOTE 13. EQUITY
During the six months ended June 30, 2013, option holders exercised 238,345 options, respectively, with a weighted-average exercise
price of $18.95 per option. During the six months ended June 30, 2013, the Company issued 46,700 shares of restricted stock from our
treasury stock at an average cost of $16.68 per share.
12
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
NOTE 14.
OPERATING SEGMENTS
We operate within two segments, Operating Disposal Facilities and Non-Operating Disposal Facilities. These segments reflect our
internal reporting structure and nature of services offered. The Operating Disposal Facility segment represents disposal facilities
accepting hazardous and radioactive waste. The Non-Operating Disposal Facility segment represents facilities which are not accepting
hazardous and/or radioactive waste or formerly proposed new facilities.
Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Inter-company
transactions have been eliminated from the segment information and are not significant between segments.
Summarized financial information concerning our reportable segments is shown in the following tables:
Three Months Ended June 30, 2013 (in thousands)
Revenue - Treatment and disposal
Revenue - Transportation services
Total revenue
Direct operating costs
Transportation costs
Gross profit (loss)
Selling, general & administrative expense
Operating income (loss)
Interest income (expense), net
Foreign currency gain (loss)
Other income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Depreciation, amortization & accretion
Capital expenditures
Total assets
$
$
$
$
$
38,724
7,047
45,771
19,705
7,090
18,976
3,267
15,709
2
320
91
16,122
—
16,122
4,051
5,689
213,197
$
$
$
$
$
$
$
$
$
$
35,963
4,010
39,973
18,576
4,020
17,377
2,921
14,456
4
17
521
14,998
—
14,998
4,215
3,350
206,652
Corporate
6
—
6
54
—
(48)
—
(48)
—
—
3
(45)
—
(45)
52
—
88
$
7
—
7
57
1
(51)
—
(51)
—
—
1
(50)
—
(50)
54
—
103
$
$
$
$
$
NonOperating
Disposal
Facilities
Operating
Disposal
Facilities
Three Months Ended June 30, 2012 (in thousands)
Revenue - Treatment and disposal
Revenue - Transportation services
Total revenue
Direct operating costs
Transportation costs
Gross profit (loss)
Selling, general & administrative expense
Operating income (loss)
Interest income (expense), net
Foreign currency gain (loss)
Other income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Depreciation, amortization & accretion
Capital expenditures
Total assets
NonOperating
Disposal
Facilities
Operating
Disposal
Facilities
$
$
$
$
$
—
—
—
—
—
—
3,252
(3,252)
(222)
(1,513)
—
(4,987)
3,880
(8,867)
10
89
8,058
Total
$
$
$
$
$
Corporate
$
$
$
$
—
—
—
—
—
—
3,445
(3,445)
(204)
(938)
—
(4,587)
3,999
(8,586)
11
7
9,370
38,730
7,047
45,777
19,759
7,090
18,928
6,519
12,409
(220)
(1,193)
94
11,090
3,880
7,210
4,113
5,778
221,343
Total
$
$
$
$
$
35,970
4,010
39,980
18,633
4,021
17,326
6,366
10,960
(200)
(921)
522
10,361
3,999
6,362
4,280
3,357
216,125
13
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
NonOperating
Disposal
Facilities
Operating
Disposal
Facilities
Six Months Ended June 30, 2013 (in thousands)
Revenue - Treatment and disposal
Revenue - Transportation services
Total revenue
Direct operating costs
Transportation costs
Gross profit (loss)
Selling, general & administrative expense
Operating income (loss)
Interest income (expense), net
Foreign currency gain (loss)
Other income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Depreciation, amortization & accretion
Capital expenditures
Total assets
$
$
$
$
$
75,064
13,602
88,666
40,736
13,523
34,407
5,913
28,494
6
432
186
29,118
—
29,118
8,291
12,415
213,197
$
Revenue - Treatment and disposal
Revenue - Transportation services
Total revenue
Direct operating costs
Transportation costs
Gross profit (loss)
Selling, general & administrative expense
Operating income (loss)
Interest income (expense), net
Foreign currency gain (loss)
Other income
Income (loss) before income taxes
Income tax expense
Net income (loss)
Depreciation, amortization & accretion
Capital expenditures
Total assets
$
$
$
$
$
65,908
7,074
72,982
36,159
7,319
29,504
5,442
24,062
9
(82)
601
24,590
—
24,590
8,059
5,710
206,652
$
11
—
11
112
1
(102)
—
(102)
—
—
1
(101)
—
(101)
108
17
103
$
$
$
$
$
$
$
$
$
NonOperating
Disposal
Facilities
Operating
Disposal
Facilities
Six Months Ended June 30, 2012 (in thousands)
Corporate
10
—
10
107
—
(97)
—
(97)
—
—
5
(92)
—
(92)
104
—
88
$
$
$
$
$
—
—
—
—
—
—
6,332
(6,332)
(442)
(2,563)
—
(9,337)
7,073
(16,410)
18
115
8,058
Total
$
$
$
$
$
Corporate
$
$
$
$
—
—
—
—
—
—
6,529
(6,529)
(428)
252
—
(6,705)
6,899
(13,604)
21
16
9,370
75,074
13,602
88,676
40,843
13,523
34,310
12,245
22,065
(436)
(2,131)
191
19,689
7,073
12,616
8,413
12,530
221,343
Total
$
$
$
$
$
65,919
7,074
72,993
36,271
7,320
29,402
11,971
17,431
(419)
170
602
17,784
6,899
10,885
8,188
5,743
216,125
Revenue, Property and Equipment and Intangible Assets Outside of the United States
We provide services in the United States and Canada. Revenues by geographic location where the underlying services were performed
consisted of the following:
Geographic disclosure
Three Months Ended June 30,
2013
2012
$s in thousands
United States
Canada
Total revenue
$
$
32,620
13,157
45,777
$
30,939 $
9,041
39,980 $
$
Six Months Ended June 30,
2013
2012
64,019
24,657
88,676
$
$
55,538
17,455
72,993
14
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
Long-lived assets, comprised of property and equipment and intangible assets net of accumulated depreciation and amortization, by
geographic location consisted of the following:
June 30,
2013
$s in thousands
United States
Canada
Total long-lived assets
$
$
December 31,
2012
85,875 $
65,364
151,239 $
81,605
68,958
150,563
NOTE 15. SUBSEQUENT EVENT
On July 1, 2013, we declared a quarterly dividend of $0.18 per common share to stockholders of record on July 17, 2013. The
dividend was paid using cash on hand on July 25, 2013 in an aggregate amount of $3.3 million.
15
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
US Ecology, Inc.
Boise, Idaho
We have reviewed the accompanying consolidated balance sheet of US Ecology, Inc. and subsidiaries (the “Company”) as of June 30,
2013, and the related consolidated statements of operations and comprehensive income for the three-month and six-month periods
ended June 30, 2013 and 2012, and the consolidated statements of cash flows for the six-month periods ended June 30, 2013 and 2012.
These interim financial statements are the responsibility of the Company’s management.
We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial
statements for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated balance sheet of US Ecology, Inc. and subsidiaries as of December 31, 2012, and the related consolidated statements
of operations, comprehensive income, cash flows, and stockholders’ equity for the year then ended (not presented herein); and in our
report dated March 1, 2013, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated balance sheet as of December 31, 2012 is fairly stated, in all material respects,
in relation to the consolidated balance sheet from which it has been derived.
/s/ Deloitte & Touche LLP
Boise, Idaho
August 1, 2013
16
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and
related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report words such as “we,” “us,” “our,” “US
Ecology” and the “Company” refer to US Ecology, Inc. and its subsidiaries.
OVERVIEW
US Ecology is a hazardous, polychlorinated biphenyls (“PCBs”), non-hazardous and radioactive waste services company providing
treatment, disposal, recycling and transportation services to commercial and government entities including, but not limited to, oil
refineries, chemical production facilities, manufacturers, electric utilities, steel mills, biotechnology companies, operating and closed
military installations, waste brokers/aggregators and medical and academic institutions. The majority of the waste received at our
facilities is produced in the United States.
On May 31, 2012, the Company acquired 100% of the outstanding shares of US Ecology Michigan, Inc. (“US Ecology Michigan”),
formerly Dynecol, Inc., a chemical and industrial byproducts treatment and reuse facility located in Detroit, Michigan, for a total
purchase price of $10.8 million, including net working capital adjustments. The acquisition strengthens our presence in key
mid-western and eastern U.S. and Canadian markets. In addition, US Ecology Michigan provides us with an opportunity to win more
Event Business (as defined below) work; increase service delivery to existing customers including national accounts; expand our
transportation logistics services; and attract new customers. Management also believes that the acquisition offers meaningful
synergies in combination with our Stablex facility. Revenue from US Ecology Michigan included in US Ecology’s consolidated
statements of operations was $6.2 million for the six months ended June 30, 2013.
We generate revenue from fees charged to treat and dispose of waste at our six fixed disposal facilities located near Grand
View, Idaho; Richland, Washington; Beatty, Nevada; Robstown, Texas; Detroit, Michigan and Blainville, Québec, Canada. We own
and manage a dedicated fleet of gondola railcars and arrange for the transportation of waste to our facilities. Transportation services
have contributed significant revenue since acquisition of our railcar fleet. We also utilize our railcar fleet to transport waste disposed
at facilities operated by other companies on a less frequent basis. We or our predecessor companies have been in the waste business
since 1952.
Our customers may be divided into categories to better evaluate period-to-period changes in treatment and disposal (“T&D”) revenue
based on service mix and type of business (recurring customer “Base Business” or discrete “clean-up” project “Event
Business”). Each of these categories is described in the table below, along with information on the percentage of total treatment and
disposal revenues by category for the three and six months ended June 30, 2013 and 2012.
17
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
Customer
Category
Broker
Other industry
Refinery
Private Clean-up
Government
Rate regulated
Description
% of Treatment and Disposal Revenue (1),(2) for the
Three Months Ended June 30,
2013
2012
Companies that collect and aggregate waste
from their direct customers, generally
comprised of Base Business with periodic
Event Business for larger projects.
50%
52%
Electric utilities, chemical manufacturers, steel
mill and other industrial customers not
included in other categories, comprised of both
Base and Event Business.
15%
17%
Petroleum refinery customers, comprised of
both Base and Event Business.
13%
8%
Private sector clean-up project waste, typically
Event Business.
12%
6%
Federal and State government clean-up project
waste, comprised of both Base and Event
Business.
6%
13%
Northwest and Rocky Mountain Compact
customers paying rate-regulated disposal fees
set by the State of Washington, predominantly
Base Business.
4%
4%
(1) Excludes all transportation service revenue
(2) Excludes US Ecology Michigan which was acquired on May 31, 2012
Customer
Category
Broker
Other industry
Refinery
Private Clean-up
Government
Description
% of Treatment and Disposal Revenue (1),(2) for the
Six Months Ended June 30,
2013
2012
Companies that collect and aggregate waste
from their direct customers, generally
comprised of Base Business with periodic
Event Business for larger projects.
51%
53%
Electric utilities, chemical manufacturers, steel
mill and other industrial customers not
included in other categories, comprised of both
Base and Event Business.
15%
18%
Petroleum refinery customers, comprised of
both Base and Event Business.
12%
9%
Private sector clean-up project waste, typically
Event Business.
11%
5%
Federal and State government clean-up project
waste, comprised of both Base and Event
Business.
7%
11%
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Rate regulated
Northwest and Rocky Mountain Compact
customers paying rate-regulated disposal fees
set by the State of Washington, predominantly
Base Business.
4%
4%
(1) Excludes all transportation service revenue
(2) Excludes US Ecology Michigan which was acquired on May 31, 2012
18
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
A significant portion of our disposal revenue is attributable to discrete Event Business projects which vary widely in size, duration and
unit pricing. For each of the three and six month periods ended June 30, 2013, approximately 37% of our T&D revenue was derived
from Event Business projects (excluding US Ecology Michigan). The one-time nature of Event Business, diverse spectrum of waste
types received and widely varying unit pricing necessarily creates variability in revenue and earnings. This variability may be
influenced by general and industry-specific economic conditions, funding availability, changes in laws and regulations, government
enforcement actions or court orders, public controversies, litigation, weather, commercial real estate, closed military bases and other
redevelopment project timing, government appropriation and funding cycles and other factors. The types and amounts of waste
received from Base Business also vary from quarter to quarter. This variability can cause significant quarter-to-quarter and
year-to-year differences in revenue, gross profit, gross margin, operating income and net income. Also, while we pursue many large
projects months or years in advance of work performance, both large and small clean-up project opportunities routinely arise with
little or no prior notice. These market dynamics are inherent to the hazardous and radioactive waste disposal business and are factored
into our projections and externally communicated business outlook statements. Our projections combine historical experience with
identified sales pipeline opportunities, new or expanded service line projections and prevailing market conditions.
Depending on project-specific customer needs and competitive economics, transportation services may be offered at or near our cost
to help secure new business. For waste transported by rail from the eastern United States and other locations distant from our Grand
View, Idaho and Robstown, Texas facilities, transportation-related revenue can account for as much as three-fourths (75%) of total
project revenue. While bundling transportation and disposal services reduces overall gross profit as a percentage of total revenue
(“gross margin”), this value-added service has allowed us to win multiple projects that management believes we could not have
otherwise competed for successfully. Our Company-owned fleet of 234 gondola railcars, which may be supplemented with additional
railcars obtained under operating leases, has reduced our transportation expenses by largely eliminating reliance on more costly
short-term rentals. These Company-owned railcars also allow us to win business during times of demand-driven railcar scarcity.
The increased waste volumes resulting from projects won through this bundling strategy further drive the operating leverage inherent
to the disposal business and increase profitability. While waste treatment and other variable costs are project-specific, the incremental
earnings contribution from large and small projects generally increases as overall disposal volumes increase. Based on past
experience, management believes that maximizing operating income, net income and earnings per share is a higher priority than
maintaining or increasing gross margin. We intend to continue aggressively bidding bundled transportation and disposal services
based on this well established strategy.
To maximize utilization of our railcar fleet, we periodically deploy available railcars to transport waste from clean-up sites to disposal
facilities operated by other companies. Such transportation services may be bundled with for-profit logistics and field services
support work.
We serve oil refineries, chemical production plants, steel mills, waste brokers/aggregators serving small manufacturers and other
industrial customers that are generally affected by the prevailing economic conditions and credit environment. Such conditions may
cause our customers as well as those they serve to curtail operations, resulting in lower waste production and/or delayed spending on
off-site waste shipments, maintenance, waste clean-up projects and other work. Factors that can impact general economic conditions
and the level of spending by our customers include, but are not limited to, consumer and industrial spending, increases in fuel and
energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access to credit, consumer confidence and
other global economic factors affecting spending behavior. Market forces may also induce customers to reduce or cease operations,
declare bankruptcy, liquidate or relocate to other countries, any of which could adversely affect our business. To the extent our
business is driven by government regulations or enforcement actions, we believe it is less susceptible to general economic
conditions. Spending by government agencies may also be reduced due to declining tax revenues resulting from a weak economy or
changes in policy. Disbursement of funds appropriated by Congress may also be delayed for administrative or other reasons.
19
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
RESULTS OF OPERATIONS
The following table summarizes our results of operations for the three and six months ended June 30, 2013 and 2012 in dollars and as
a percentage of total revenue.
$s and shares in thousands, except per share amounts
Revenue
Direct operating costs
Transportation costs
2013
Three Months Ended June 30,
%
2012
$ 45,777
19,759
7,090
100.0% $ 39,980
43.2%
18,633
15.5%
4,021
%
2013
Six Months Ended June 30,
%
2012
100.0% $ 88,676
46.6% 40,843
10.1% 13,523
100.0% $ 72,993
46.1%
36,271
15.2%
7,320
%
100.0%
49.7%
10.0%
Gross profit
18,928
41.3%
17,326
43.3%
34,310
38.7%
29,402
40.3%
Selling, general and administrative
expenses
Operating income
6,519
12,409
14.2%
27.1%
6,366
10,960
15.9%
27.4%
12,245
22,065
13.8%
24.9%
11,971
17,431
16.4%
23.9%
Other income (expense):
Interest income
Interest expense
Foreign currency gain (loss)
Other
Total other income (expense)
2
(222)
(1,193)
94
(1,319)
0.0%
-0.5%
-2.6%
0.2%
-2.9%
0.0%
-0.5%
-2.3%
1.3%
-1.5%
7
(443)
(2,131)
191
(2,376)
0.0%
-0.5%
-2.4%
0.2%
-2.7%
Income before income taxes
Income taxes
Net income
11,090
3,880
$ 7,210
Earnings per share:
Basic
Dilutive
$
$
Shares used in earnings per share
calculation:
Basic
Dilutive
0.39
0.39
4
(204)
(921)
522
(599)
24.2%
10,361
8.4%
3,999
15.8% $ 6,362
$
$
18,401
18,483
Dividends paid per share
$
0.18
Other Financial Data:
Adjusted EBITDA (1)
$ 16,927
0.35
0.35
25.9% 19,689
10.0%
7,073
15.9% $ 12,616
$
$
18,228
18,264
$
0.18
$ 15,420
9
(428)
170
602
353
22.2%
17,784
8.0%
6,899
14.2% $ 10,885
0.69
0.68
$
$
18,362
18,446
$
0.0%
-0.6%
0.2%
0.9%
0.5%
24.4%
9.5%
14.9%
0.60
0.60
18,223
18,259
0.18
$
$ 30,841
0.36
$ 26,002
(1) For all periods presented, Adjusted EBITDA is defined as net income before net interest expense, income tax expense,
depreciation, amortization, stock based compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss and
other income/expense, which are not considered part of usual business operations. Adjusted EBITDA is a complement to results
provided in accordance with accounting principles generally accepted in the United States (“GAAP”) and we believe that such
information provides additional useful information to analysts, stockholders and other users to understand the Company’s operating
performance. Since Adjusted EBITDA is not a measurement determined in accordance with GAAP and is thus susceptible to varying
calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Items
excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted
EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by
operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as
indicators of financial performance or liquidity. Adjusted EBITDA has limitations as an analytical tool and should not be considered
in isolation or a substitute for analyzing our results as reported under GAAP. Some of the limitations are:

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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
Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal
payments on our debt;
 Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;
 Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual
commitments; and
 Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often
have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.
20
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
The following reconciliation itemizes the differences between reported Net income and Adjusted EBITDA for the three and six
months ended June 30, 2013 and 2012:
Three Months Ended June 30,
2013
2012
$s in thousands
Net income
Income tax expense
Interest expense
Interest income
Foreign currency (gain) loss
Other income
Depreciation and amortization of plant and
equipment
Amortization of intangibles
Stock-based compensation
Accretion and non-cash adjustment of
closure & post-closure liabilities
Adjusted EBITDA
$
7,210
3,880
222
(2)
1,193
(94)
$
3,632
362
218
$
306
16,927
Six Months Ended June 30,
2013
2012
6,362 $
3,999
204
(4)
921
(522)
3,571
374
180
$
335
15,420 $
12,616
7,073
443
(7)
2,131
(191)
$
10,885
6,899
428
(9)
(170)
(602)
7,071
729
363
6,794
724
383
613
30,841
670
26,002
$
THREE MONTHS ENDED JUNE 30, 2013 COMPARED TO THREE MONTHS ENDED JUNE 30, 2012
Revenue. Revenue increased 15% to $45.8 million for the second quarter of 2013, up from $40.0 million for the second quarter of
2012. This increase reflects an 8% increase in T&D revenue and a 76% increase in transportation service revenue compared to the
second quarter of 2012. The increase in transportation service revenue reflects more Event Business projects utilizing the Company’s
transportation and logistics services.
During the second quarter of 2013, we disposed of 253,000 tons of hazardous and radioactive waste, down 3% from 261,000 tons
disposed in the second quarter of 2012. Average selling price increased 13% during the second quarter of 2013 compared to the same
quarter last year, reflecting a more favorable service mix.
US Ecology Michigan, which was acquired on May 31, 2012, contributed $3.4 million of total revenue during the second quarter of
2013, compared with $1.1 million in the second quarter of 2012. Revenue from US Ecology Michigan is excluded from quarterly
percentages of Base and Event Business and customer category information in the following paragraphs.
During the second quarter of 2013, T&D revenue from recurring Base Business customers increased 5% compared to the second
quarter of 2012 and comprised 63% of T&D revenue. This compared to 64% of T&D revenue in the second quarter of 2012. As
discussed further below, the increase in Base Business T&D revenue compared to the prior year primarily reflects higher T&D
revenue from our broker and refinery Base Business customer categories, partially offset by lower T&D revenue from our “other
industry” Base Business customer category.
Event Business revenue in the second quarter of 2013 increased 7% as compared to the same quarter in 2012 and was 37% of T&D
revenue for the second quarter of 2013. This compared to 36% of T&D revenue in the second quarter of 2012. As discussed further
below, the increase in Event Business T&D revenue compared to the prior year primarily reflects higher T&D revenue from our
private clean-up and refinery Event Business customer categories, partially offset by lower T&D revenue from our government and
broker Event Business customer categories.
The following table summarizes our T&D revenue growth (both Base and Event Business) by customer category for the second
quarter of 2013 compared to the second quarter of 2012.
Treatment and Disposal Revenue Growth
Three Months Ended June 30, 2013 vs.
Three Months Ended June 30, 2012
Private clean-up
Refinery
Rate regulated
Broker
Other industry
Government
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
113%
75%
4%
2%
-7%
-49%
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21
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
T&D revenue from private clean-up projects increased 113% in the second quarter of 2013 compared to the second quarter of
2012. This increase primarily reflects revenue from a closed nuclear fuel fabrication facility decommissioning project and an east
coast clean-up project.
T&D revenue from our refinery customers increased 75% in the second quarter of 2013 compared to the second quarter of 2012. This
increase primarily reflects higher disposal volumes and improved pricing on thermal recycling projects sourced directly from refinery
customers.
Rate-regulated business at our Richland, Washington low-level radioactive waste disposal facility increased 4% in the second quarter
of 2013 compared to the second quarter of 2012. Our Richland facility operates under a State-approved annual revenue requirement.
The increase reflects the timing of revenue recognition for the rate-regulated portion of the business.
Our broker business increased 2% in the second quarter of 2013 compared to the second quarter of 2012. This increase was the result
of shipments across the broad range of government and industry waste generators directly served by multiple broker customers,
partially offset by lower volumes of brokered thermal recycling projects.
Our other industry revenue category decreased 7% in the second quarter of 2013 compared to the second quarter of 2012 as a result of
reduced shipments from this broadly diverse industrial customer category.
Government clean-up business revenue decreased 49% in the second quarter of 2013 compared to the second quarter of 2012 due to
reduced shipments from the U.S. Army Corps of Engineers (“USACE”). Event Business under our USACE contract contributed $1.4
million, or 3%, of total revenue in the second quarter of 2013 compared to $3.6 million, or 9%, of total revenue in the second quarter
of 2012. Excluding transportation service revenue, T&D revenue with the USACE decreased approximately 62% in the second quarter
of 2013 compared with the second quarter of 2012. This decrease was due to project-specific timing at multiple USACE clean-up sites
and ongoing federal spending reductions. No USACE projects served by the Company were cancelled or, to our knowledge, awarded
to competitors during the quarter. In May 2013, the Company received notice from USACE that they intend to exercise the two-year
option on our base contract originally expiring in 2013.
Gross Profit. Gross profit for the second quarter of 2013 increased 9% to $18.9 million, up from $17.3 million in the second quarter of
2012. This increase primarily reflects a higher average selling price in the second quarter of 2013 compared to the second quarter of
2012. Gross margin was 41% in the second quarter of 2013, down from 43% in the second quarter of 2012. T&D gross margin was
49% in the second quarter of 2013 compared to 48% in the second quarter of 2012. The increase in T&D gross margin primarily
reflects a more favorable service mix in the second quarter of 2013 compared to the second quarter of 2012.
Selling, General and Administrative (“SG&A”). SG&A expenses increased to $6.5 million, or 14% of total revenue, in the second
quarter of 2013 compared with $6.4 million, or 16% of total revenue, in the second quarter of 2012. The increase primarily reflects
higher payroll expenses, a contingency accrual associated with the U.S. EPA matter at our Robstown, Texas facility (refer to Note 11)
and a full quarter of SG&A expenses related to Michigan operations in 2013, partially offset by lower variable incentive compensation
and business development expenses.
Interest expense. Interest expense in the second quarter of 2013 was $222,000, up from $204,000 in the second quarter of 2012,
primarily reflecting higher average debt levels in the second quarter of 2013.
Foreign Currency Gain (Loss). We recognized a $1.2 million non-cash foreign currency loss in the second quarter of 2013 compared
with a $921,000 non-cash foreign currency loss in the second quarter of 2012. Foreign currency gains and losses reflect changes in
business activity conducted in a currency other than the United States dollar (“USD”), our functional currency. Our Stablex facility is
owned by our Canadian subsidiary, whose functional currency is the Canadian dollar (“CAD”). As part of our treasury management
strategy we established intercompany loans between our parent company, US Ecology, and Stablex. These intercompany loans are
payable by Stablex to US Ecology in CAD requiring us to revalue the outstanding loan balance through our statements of operations
based on USD/CAD currency movements from period to period. At June 30, 2013, we had $42.8 million of intercompany loans
subject to currency revaluation.
Other income. Other income includes non-operating business activities and unusual revenue and expenses. Other income in the
second quarter of 2013 was $94,000, down from $522,000 in the second quarter of 2012. The decrease primarily reflects $474,000 of
other income recorded in connection with the sale of an excess water right at our Grand View, Idaho property during the second
quarter of 2012.
Income tax expense. Our effective tax rate for the second quarter of 2013 was 35.0%, down from 38.6% in the second quarter of
2012. This decrease reflects a higher proportion of earnings from our Canadian operations, which are taxed at a lower corporate tax
rate, partially offset by higher U.S. state income taxes. As of June 30, 2013 we had unrecognized tax benefits of $438,000 that, if
recognized would favorably affect the effective tax rate. As of June 30, 2013, we have recorded $36,000 of cumulative interest
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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expense associated with this unrecognized tax benefit. We expect our full year effective income tax rate to be between 36.0% and
37.0%.
22
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
SIX MONTHS ENDED JUNE 30, 2013 COMPARED TO SIX MONTHS ENDED JUNE 30, 2012
Revenue. Revenue increased 21% to $88.7 million for the first six months of 2013, up from $73.0 million for the first six months of
2012. This increase reflects a 14% increase in T&D revenue and a 92% increase in transportation service revenue compared to the
first six months of 2012. The increase in transportation service revenue reflects more Event Business projects utilizing the Company’s
transportation and logistics services.
We disposed of 476,000 tons of hazardous and radioactive waste during both the first six months of 2013 and 2012. Average selling
price increased 15% during the first six months of 2013 compared to the first six months of 2012, reflecting a higher proportion of
treated waste in the first six months of 2013.
US Ecology Michigan, which was acquired on May 31, 2012, contributed $6.2 million of total revenue during the first six months of
2013, compared with $1.1 million in the second quarter of 2012. Revenue from US Ecology Michigan is excluded from quarterly
percentages of Base and Event Business and customer category information in the following paragraphs.
During the first six months of 2013, T&D revenue from recurring Base Business customers increased 1% compared to the first six
months of 2012 and comprised 63% of T&D revenue. This compared to 68% of T&D revenue in the first six months of 2012. As
discussed further below, the increase in Base Business T&D revenue compared to the prior year primarily reflects higher T&D
revenue from our broker and refinery Base Business customer categories, partially offset by lower T&D revenue from our “other
industry” and governmental Base Business customer categories.
Event Business revenue in the first six months of 2013 increased 25% compared to the first six months in 2012 and was 37% of T&D
revenue for the first six months of 2013. This compared to 32% of T&D revenue in the first six months of 2012. As discussed further
below, the increase in Event Business T&D revenue compared to the prior year primarily reflects higher T&D revenue from our
private clean-up and refinery Event Business customer categories, partially offset by lower T&D revenue from our government Event
Business customer category.
The following table summarizes our T&D revenue growth (both Base and Event Business) by customer category for the first six
months of 2013 compared to the first six months of 2012.
Treatment and Disposal Revenue Growth
Six Months Ended June 30, 2013 vs.
Six Months Ended June 30, 2012
Private clean-up
Refinery
Rate regulated
Broker
Other industry
Government
121%
51%
9%
5%
-9%
-30%
T&D revenue from private clean-up projects increased 121% in the first six months of 2013 compared to the first six months of
2012. This increase primarily reflects revenue from a closed nuclear fuel fabrication facility decommissioning project and an east
coast clean-up project.
T&D revenue from our refinery customers increased 51% in the first six months of 2013 compared to the first six months of 2012.
This increase primarily reflects higher disposal volumes and improved pricing on thermal recycling projects sourced directly from
refinery customers.
Rate-regulated business at our Richland, Washington low-level radioactive waste disposal facility increased 9% in the first six months
of 2013 compared to the first six months of 2012. Our Richland facility operates under a State-approved annual revenue requirement.
The increase reflects the timing of revenue recognition for the rate-regulated portion of the business.
Our broker business increased 5% in the first six months of 2013 compared to the first six months of 2012. This increase was the
result of shipments across the broad range of government and industry waste generators directly served by multiple broker customers,
partially offset by lower volumes of brokered thermal recycling projects.
Our other industry revenue category decreased 9% in the first six months of 2013 compared to the first six months of 2012 as a result
of reduced shipments from this broadly diverse industrial customer category.
Government clean-up business revenue decreased 30% in the first six months of 2013 compared to the first six months of 2012 due to
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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reduced shipments from USACE. Event Business under our USACE contract contributed $3.1 million, or 4%, of total revenue in the
first six months of 2013 compared to $5.2 million, or 7%, of total revenue in the first six months of 2012. Excluding transportation
service revenue, T&D revenue with the USACE decreased approximately 40% in the first six months of 2013 compared with the first
six months of 2012. This decrease was due to project-specific timing at multiple USACE clean-up sites and ongoing federal spending
reductions. No USACE projects served by the Company were cancelled or, to our knowledge, awarded to competitors during the first
six months of 2013.
23
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
Gross Profit. Gross profit for the first six months of 2013 increased 17% to $34.3 million, up from $29.4 million in the first six
months of 2012. This increase primarily reflects a higher average selling price in the first six months of 2013 compared to the first six
months of 2012. Gross margin was 39% in the first six months of 2013, down from 40% in the first six months of 2012. T&D gross
margin was 46% in the first six months of 2013 compared to 45% in the first six months of 2012. The increase in T&D gross margin
primarily reflects a more favorable service mix in the first six months of 2013 compared to the first six months of 2012.
Selling, General and Administrative. SG&A expenses increased to $12.2 million, or 14% of total revenue, in the first six months of
2013, compared with $12.0 million, or 16% of total revenue, in the first six months of 2012. The increase primarily reflects a full six
months of SG&A expenses related to Michigan operations in 2013, higher payroll expenses and a contingency accrual associated with
the U.S. EPA matter at our Robstown, Texas facility (refer to Note 11), partially offset by lower variable incentive compensation and
business development expenses.
Interest expense. Interest expense in the first six months of 2013 was $443,000, up from $428,000 in the first six months of 2012,
primarily reflecting higher average debt levels in the first six months of 2013.
Foreign Currency Gain (Loss). We recognized $2.1 million non-cash foreign currency loss in the first six months of 2013 compared
with a $170,000 non-cash foreign currency gain in the first six months of 2012. Foreign currency gains and losses reflect changes in
business activity conducted in a currency other than the USD, our functional currency. Our Stablex facility is owned by our Canadian
subsidiary, whose functional currency is the CAD. As part of our treasury management strategy we established intercompany loans
between our parent company, US Ecology, and Stablex. These intercompany loans are payable by Stablex to US Ecology in CAD
requiring us to revalue the outstanding loan balance through our statements of operations based on USD/CAD currency movements
from period to period.
Other income. Other income includes non-operating business activities and unusual revenue and expenses. Other income in the first
six months of 2013 was $191,000, down from $602,000 in the first six months of 2012. The decrease primarily reflects $474,000 of
other income recorded in connection with the sale of an excess water right at our Grand View, Idaho property during the second
quarter of 2012.
Income tax expense. Our effective tax rate for the first six months of 2013 was 35.9%, down from 38.8% in the first six months of
2012. This decrease reflects a higher proportion of earnings from our Canadian operations, which are taxed at a lower corporate tax
rate, partially offset by higher U.S. state income taxes. As of June 30, 2013 we had unrecognized tax benefits of $438,000 that, if
recognized would favorably affect the effective tax rate. As of June 30, 2013, we have recorded $36,000 of cumulative interest
expense associated with this unrecognized tax benefit.
CRITICAL ACCOUNTING POLICIES
Financial statement preparation requires management to make estimates and judgments that affect reported assets, liabilities, revenue
and expenses and disclosure of contingent assets and liabilities. The accompanying unaudited consolidated financial statements are
prepared using the same critical accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2012.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity are cash and cash equivalents, cash generated from operations and borrowings under the Credit
Agreement. At June 30, 2013, we had $4.0 million in cash and cash equivalents immediately available for operations. We assess our
liquidity in terms of our ability to generate cash to fund our operating, investing, and financing activities. Our primary ongoing cash
requirements are funding operations, capital expenditures, interest, and principal payments and paying declared dividends pursuant to
our dividend policy. We believe future operating cash flows will be sufficient to meet our future operating, investing and dividend
cash needs for the foreseeable future. Furthermore, existing cash balances and availability of additional borrowings under our Credit
Agreement provide additional sources of liquidity should they be required.
Operating Activities. For the six months ended June 30, 2013, net cash provided by operating activities was $17.7 million. This
primarily reflects net income of $12.6 million, non-cash depreciation, amortization and accretion of $8.4 million and unrealized
non-cash foreign currency losses of $2.4 million, partially offset by a decrease in accrued salaries and benefits of $2.4 million, a
decrease in deferred income taxes of $1.7 million and a decrease in other working capital of $2.1 million. Impacts on net income are
due to the factors discussed above under Results of Operations. The decrease in accrued salaries and benefits is primarily attributable
to cash payments during 2013 for accrued fiscal year 2012 incentive compensation.
Days sales outstanding were 67 days as of June 30, 2013, compared to 61 days at December 31, 2012 and 68 days at June 30, 2012.
24
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
For the six months ended June 30, 2012, net cash provided by operating activities was $15.6 million. This primarily reflects net
income of $10.9 million and depreciation and amortization and accretion of $8.2 million, partially offset by a decrease in accounts
payable and accrued liabilities of $3.7 million. Impacts on net income are due to the factors discussed above under Results of
Operations. The decrease in accounts payable and accrued liabilities is primarily attributable to the payment of fiscal 2011 accrued
customer refunds related to our rate-regulated business in Richland, Washington.
Investing Activities. For the six months ended June 30, 2013, net cash used in investing activities was $12.5 million, primarily related
to capital expenditures. Significant capital projects included the purchase of land for future site development at our Robstown, Texas
location, relocation of administrative offices at our Beatty, Nevada location to accommodate disposal capacity expansion, construction
of additional disposal capacity at our Blainville, Quebec, Canada location and equipment purchases and infrastructure upgrades at all
of our operating disposal facilities.
For the six months ended June 30, 2012, net cash used in investing activities was $16.8 million, primarily related to our acquisition of
US Ecology Michigan for $11.2 million, net of cash acquired, and capital expenditures of $5.7 million. Significant capital projects
included construction of additional disposal capacity at our Grand View, Idaho and Blainville, Quebec, Canada locations and
equipment purchases at our operating disposal facilities.
Financing Activities. For the six months ended June 30, 2013, net cash used in financing activities was $3.1 million, consisting
primarily of $3.3 million of dividend payments to our stockholders and $2.0 million of net repayments under the Credit Agreement,
partially offset by $2.1 million of proceeds from stock option exercises.
For the six months ended June 30, 2012, net cash provided by financing activities was $2.7 million, consisting primarily of $22.0
million of borrowings under the Credit Agreement incurred primarily to finance the US Ecology Michigan acquisition, partially offset
by repayments under the Credit Agreement of $12.5 million and $6.6 million of dividend payments to our stockholders.
CONTRACTUAL OBLIGATIONS AND GUARANTEES
In May 2013, we executed a new lease for corporate office space in Boise, Idaho. Future minimum lease payments on this
non-cancelable operating lease as of June 30, 2013 consisted of the following:
$s in thousands
Payments
2013
2014
2015
2016
2017
Thereafter
$
$
34
245
301
310
318
382
1,590
There were no other material changes in the amounts of our contractual obligations and guarantees during the six months ended
June 30, 2013. For detailed information on our contractual obligations and guarantees, refer to our Annual Report on Form 10-K for
the fiscal year ended December 31, 2012.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in interest rates as a result of our borrowings under the Credit Agreement with Wells Fargo. Under the
Credit Agreement, revolving loans are available based on the Prime Rate or LIBOR, at the Company’s option, plus an applicable
margin determined according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debt to
EBITDA. At June 30, 2013, we had $43.0 million of borrowings on the Reducing Revolving Line of Credit bearing an interest rate of
1.44%. If interest rates were to rise, we would be subject to higher interest payments if outstanding balances remain unchanged.
Based on the outstanding indebtedness of $43.0 million under our Credit Agreement at June 30, 2013, if market rates used to calculate
interest expense were to average 1% higher in the next twelve months, our interest expense would increase by approximately
$430,000.
Foreign Currency Risk
We are subject to currency exposures and volatility because of currency fluctuations. The majority of our transactions are in USD;
however, our Stablex subsidiary conducts business in both Canada and the United States. In addition, contracts for services Stablex
provides to U.S. customers are generally denominated in USD. During the six months ended June 30, 2013, Stablex transacted
approximately 60% of its revenue in USD and at any time has cash on deposit in USD and outstanding USD trade receivables and
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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payables related to these transactions. These USD cash, receivable and payable accounts are subject to non-cash foreign currency
translation gains or losses. Exchange rate movements also affect the translation of Canadian generated profits and losses into USD.
25
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
We established intercompany loans between Stablex and US Ecology, Inc. as part of a tax and treasury management strategy allowing
for repayment of third-party bank debt used to complete the acquisition. These intercompany loans are payable using CAD and are
subject to mark-to-market adjustments with movements in the CAD. At June 30, 2013, we had $42.8 million of intercompany loans
outstanding between Stablex and US Ecology. During the six months ended June 30, 2013, the CAD weakened as compared to the
USD resulting in a $2.6 million non-cash foreign currency translation loss being recognized in the Company’s Consolidated Statement
of Operations related to the intercompany loans. Based on intercompany balances as of June 30, 2013, a $0.01 CAD increase or
decrease in currency rate compared to the USD at June 30, 2013 would have generated a gain or loss of approximately $428,000 for
the six months ended June 30, 2013.
We had total pre-tax foreign currency losses of $1.2 million and $2.1 million for the three and six months ended June 30, 2013,
respectively. We currently have no foreign exchange contracts, option contracts or other foreign currency hedging arrangements.
Management evaluates the Company’s risk position on an ongoing basis to determine whether foreign exchange hedging strategies
should be employed.
ITEM 4.
CONTROLS AND PROCEDURES
Management of the Company, including the Chief Executive Officer and the Chief Financial Officer of the Company, have evaluated
the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)) as of June 30, 2013. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures, including the accumulation and communication of
disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding
required disclosure, are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the
rules and forms of the SEC.
There were no changes in our internal control over financial reporting that occurred during the most recently completed fiscal quarter
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
26
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
PART II - OTHER INFORMATION
Cautionary Statement for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements
that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements.
Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,”
“should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These
statements include, among others, statements regarding our financial and operating results, strategic objectives and means to achieve
those objectives, the amount and timing of capital expenditures, repurchases of its stock under approved stock repurchase plans, the
amount and timing of interest expense, the likelihood of our success in expanding our business, financing plans, budgets, working
capital needs and sources of liquidity.
Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on
management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions include,
among others, those regarding demand for Company services, expansion of service offerings geographically or through new or
expanded service lines, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions.
These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties,
which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are
beyond our ability to control or predict. Such factors include the replacement of non-recurring event clean-up projects, a loss of a
major customer, our ability to permit and contract for timely construction of new or expanded disposal cells, our ability to renew our
operating permits or lease agreements with regulatory bodies, loss of key personnel, compliance with and changes to applicable laws,
rules, or regulations, fluctuations in foreign currency markets, access to insurance, surety bonds and other financial assurances, a
deterioration in our labor relations or labor disputes, our ability to perform under required contracts, failure to realize anticipated
benefits and operational performance from acquired operations, adverse economic conditions, government funding or competitive
pressures, incidents or adverse weather conditions that could limit or suspend specific operations, access to cost effective
transportation services, lawsuits, market conditions, our willingness or ability to pay dividends, implementation of new technologies
and our ability to effectively close and integrate future acquisitions.
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities
and Exchange Commission (the “SEC”), we are under no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise. You should not place undue reliance on our forward-looking
statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee
future results or performance. Before you invest in our common stock, you should be aware that the occurrence of the events
described in the “Risk Factors” section in this report could harm our business, prospects, operating results, and financial condition.
Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to
disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should
not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report.
Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent
that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of US
Ecology, Inc.
ITEM 1.
LEGAL PROCEEDINGS
In 2012, we settled allegations by the United States Environment Protection Agency (“U.S. EPA”) that the thermal recycling operation
at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conservation and Recovery Act of
1976 (“RCRA”). As part of the settlement, we agreed to pay a civil penalty and to submit an application to the State of Texas for a
RCRA subpart X permit. The Company and the thermal recycling unit’s owner-operator also agreed to a set of interim operating
conditions that allow the facility to continue providing recycling services to customers until the RCRA Subpart X permit is issued.
In connection with this matter, in June 2013 the U.S. EPA asserted various related technical compliance and permitting violations of
the Clean Air Act of 1970. Although negotiations on the merits of a proposed settlement are ongoing with the U.S. EPA, we
recognized a charge of $238,000 during the second quarter of 2013 in Selling, general and administrative expenses in the Consolidated
Statement of Operations related to this matter.
Other than as disclosed above, we are not currently a party to any material pending legal proceedings and are not aware of any other
claims that could have a materially adverse effect on our financial position, results of operations or cash flows.
ITEM 1A.
RISK FACTORS
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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There have been no material changes in our risk factors from those disclosed in Item 1A of Part I of our Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
27
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS
10.63
Management Incentive Plan (Executive) Effective January 1, 2013*
10.64
Executive Sales Incentive Plan Effective January 1, 2013*
15
Letter re: Unaudited Interim Financial Statements
31.1
Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
101
The following materials from the quarterly report on Form 10-Q of US Ecology, Inc. for the quarter ended
June 30, 2013 formatted in Extensible Business Reporting Language (XBRL) include: (i) Unaudited
Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Operations, (iii) Unaudited
Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Cash Flows,
and (v) Notes to the Unaudited Consolidated Financial Statements
* Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.
28
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Table of Contents
SIGNATURE
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.
US Ecology, Inc.
(Registrant)
Date: August 1, 2013
/s/ Eric L. Gerratt
Eric L. Gerratt
Executive Vice President, Chief Financial Officer and Treasurer
29
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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EXHIBIT 10.63
2013 MANAGEMENT INCENTIVE PLAN
(EXECUTIVE)
I.
PURPOSE
The US Ecology, Inc. 2013 Management Incentive Plan (Executive) (“Plan”) provides a variable component of compensation
for US Ecology, Inc. (“ Company ”) executives for achievement of objectives set by the Company’s Board of Directors (“
Board ”) during calendar year 2013 (“ Plan Year ”). The Plan is designed to align the interests of executives with those of
stockholders and attract, motivate and retain management critical to the long-term success of the Company.
II. ADMINISTRATION
The administrator of the Plan shall be the Board’s Compensation Committee (“Administrator”). The Administrator, or its
designee, shall have full power, discretion and authority to, among other things, interpret the Plan, verify all amounts paid
under the Plan, and establish rules and procedures for its administration, as deemed necessary and appropriate. The
Administrator may rely on opinions, reports or statements of the Company’s officers, public accountants and other
professionals. The calculation of any amounts to be paid under the Plan shall be performed by the Company’s Chief Financial
Officer and submitted by the Company’s President to the Administrator for approval. Any interpretation of the Plan or act of
the Administrator, or its designee, in administering the Plan, shall be final and binding.
No member of the Board shall be liable for any action, interpretation or construction made in good faith with respect to the
Plan. The Company shall indemnify, to the fullest extent permitted by law, each member of its Board who may become liable
in any civil action or proceeding with respect to decisions made relating to the Plan.
III. ELIGIBILITY
Eligibility to participate in the Plan is limited to designated executives of the Company (each a “Participant”) as approved by
the Administrator or the Board and shall be evidenced by a letter from the President (“ Participant Letter ”).
To be eligible to receive an award under the Plan, a Participant must have been employed by the Company (i) on a full-time
basis during the Plan Year and (ii) on the date of any payment under the Plan, except as otherwise provided for in this Plan or
when such requirement is waived by the Administrator.
a. New Hire/Rehire — A Participant whose employment with the Company began during the Plan Year shall be eligible for
an award on a pro-rata basis, provided the Administrator has approved participation and other conditions of the Plan are
satisfied. An award will be pro-rated based upon the number of calendar days the Participant was employed in an eligible
position during the Plan Year. In the case of rehires, there shall be no credit for prior service, unless otherwise approved in
writing by the Administrator.
b. Leave of Absence — A Participant who is absent from full-time employment with the Company for more than thirteen
(13) consecutive weeks of the Plan Year shall not be eligible for payment under the Plan, unless the Administrator approves
participation in writing.
c.
Promotion — If a Participant is promoted to an eligible position or from one eligible position to another eligible position
(with a higher award potential) during the Plan Year, a pro-rated award will be calculated by factoring the number of
calendar days in each eligible position and considering the Target Incentive, Plan Objectives, metrics and weights
applicable during the Participant’s tenure in each position.
d. Demotion — If a Participant is demoted from an eligible position during the Plan Year, such Participant shall be deemed
ineligible for receipt of any payments under the Plan, unless otherwise approved in writing by the Administrator.
e.
f.
Removal from Plan — A Participant may be removed from the Plan or an award adjusted, including elimination of any
right to an award under the Plan, for insubordination, misconduct, malfeasance, or any formal disciplinary action taken by
the Company during the Plan Year or prior to payment.
Termination Without Cause by Company/With Good Reason by Participant — In the event a Participant is terminated
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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without cause by the Company or for good reason by the Participant, as defined in the Participant’s employment agreement,
any amount that would have been due the Participant absent his/her termination shall be paid on a pro-rata basis based on
the number of calendar days the Participant was employed during the Plan Year. Payment shall be made according to the
terms of the Plan and the requirement that the Participant be an employee on that date of payment shall be waived.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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IV. INCENTIVE AWARD
The Board shall establish the objectives (each a “Plan Objective”) that must be achieved for a Participant to receive payment of
all or a portion of his/her target incentive amount, which amount is the product of the Participant’s annual salary and an
established percentage (“ Target Incentive ”), also established by the Board.
Payments under the Plan, if any, shall be made to a Participant upon certification by the President that such payments are
authorized by the Administrator and all applicable criteria have been satisfied. Payments shall be made as soon as practicable
after approval and availability of the Company’s final audited Plan Year financial statements, but in any event will be made by
March 15, 2014.
V. PLAN OBJECTIVES
Plan Objectives fall into one of three categories: a) Financial (80% of Target Incentive), b) Health and Safety (10% of Target
Incentive) , and c) Compliance (10% of Target Incentive) . Plan Objectives are independent and mutually exclusive from
each other, so that the applicable percentage of the Target Incentive may be earned if one Plan Objective is met, even if the
threshold performance is not met for another Plan Objective.
a. Financial — The Financial Plan Objective is based on the Plan Year’s actual consolidated operating income before Plan
expenses. The target amount is set and approved by the Board (“ Operating Income Target ”). Achievement will be
determined by comparing the Plan Year’s actual financial results (based on audited financial information) to the Operating
Income Target. Achievement of the Operating Income Target will be weighted at 80% of a Participant’s Target Incentive.
The Administrator, in its sole discretion, may include or exclude certain non-recurring or special transactions from
calculated operating income for purposes of determining the amount of an award under the Plan.
The portion of a Participant’s Target Incentive he or she may receive based on operating income results (“ Finance Target
Incentive ”) is scalable. For every percentage point achievement over 89% of the Operating Income Target, up to and
including 100% (rounded to the nearest percentage), a Participant shall earn 9.09% of the respective Finance Target
Incentive. Upon 100% achievement of the Operating Income Target, 100% of the respective Finance Target Incentive shall
be available to a Participant.
If the Operating Income Target is exceeded, a Participant shall be eligible for an additional amount, calculated by
multiplying the Participant’s annual salary by 1.25% (“ Excess Percentage ”) for every 1%, or fraction thereof, over the
Operating Income Target and the resulting product by the respective Operating Income Target weight (“ Additional Finance
Incentive ”). The Additional Finance Incentive is capped at one times the Participant’s Target Incentive.
By way of example only, a Participant with an annual base salary of $200,000 who has a Target Incentive of 40% would
receive the following amounts based on various levels of achievement.
EXAMPLE
OPERATING INCOME TARGET
(WEIGHTED 80% OF TARGET INCENTIVE)
% of
Award
Achievement
89%
90%
91%
92%
93%
94%
0%
9.09%
9.09%
9.09%
9.09%
9.09%
Cumulative
0% $
9.09% $
18.18% $
27.27% $
36.36% $
45.45% $
Payout
0
5,818
11,635
17,453
23,270
29,088
Achievement
95%
96%
97%
98%
99%
100%
% of
Award
9.09%
9.09%
9.09%
9.09%
9.09%
9.10%
Cumulative
54.54% $
63.63% $
72.72% $
81.81% $
90.90% $
100.00% $
Payout
34,906
40,723
46,541
52,358
58,176
64,000
Assuming 95% achievement of the Operating Income Target, the Participant in this example would be entitled to $34,906, calculated
as follows:
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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OPERATING
INCOME
TARGET
Annual Salary
Target Incentive
Target Incentive Award
Financial Objective Weight
Weighted Target Incentive Award
Cumulative Award Percent Earned
Earned Award
$
200,000
X 40%
80,000
X 80%
64,000
X 54.54%
34,906
$
$
$
Assuming instead a 105% achievement of the Operating Income Target, the Participant would be entitled to $74,000,
calculated as follows:
OPERATING
INCOME
TARGET
Annual Salary
Target Incentive
Target Incentive Award
Financial Objective Weight
Weighted Target Incentive Award
Cumulative Award Percent Earned
Earned Award
$
200,000
X 40%
80,000
X 80%
64,000
X 100%
64,000
$
$
$
ADDITIONAL
FINANCE
INCENTIVE
Annual Salary
Cumulative Excess Percentage (5 X
1.25%)
Additional Finance Incentive Award
Financial Objective Weight
Weighted Additional Finance Incentive
Award
$
Finance Target Incentive
Additional Finance Incentive
Earned Award
200,000
$
X 6.25%
12,500
X 80%
$
10,000
$
$
$
64,000
10,000
74,000
Assuming instead a 145% achievement of the Operating Income Target, the Participant would be entitled to an Additional
Finance Incentive of $80,000 and a total earned amount of $144,000, calculated as follows:
ADDITIONAL
FINANCE
INCENTIVE
Annual Salary
Cumulative Excess Percentage (45 X 1.25%)
Additional Finance Incentive Award
Financial Objective Weight
Weighted Additional Finance Incentive Award
(Before Cap)
Additional Finance Incentive Award Cap (.40 x
$200,000)
Excess Additional Finance Incentive Award
Disallowed
$
Finance Target Incentive
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
$
200,000
X 56.25%
112,500
X 80%
$
90,000
$
(80,000)
$
10,000
$
64,000
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Additional Finance Incentive
Earned Award
$
$
80,000
144,000
b. Health and Safety - The metrics for this Plan Objective are identified below and are weighted cumulatively at 10% of a
Participant’s Target Incentive and individually at 2%. Each metric is independent and mutually exclusive from the
other metrics so that a percentage of the Target Incentive related to Health and Safety may be earned independent of
achievement of any other Health and Safety metric or other Plan Objective.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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i.
Experience Modification Rating(“EMR”) (2.0% Weight) — The Target Incentive related to EMR shall be
earned if the U.S. (1.0% Weight) and Stablex (1.0% Weight) metrics, as set and approved by the Board, are
achieved as determined by the President and reviewed by the Administrator. One-half of the Target Incentive
related to EMR (1.0%) may be earned if the U.S. or Stablex metric is achieved, even if the other is not achieved.
ii. OSHA Designation(2.0% Weight) — The Target Incentive related to OSHA designation shall be earned if each
of the Company’s operating facilities maintains its OSHA designation (e.g. STAR and SHARP) or other
specified designation as determined on December 31, 2012; or takes such action as is required to pursue such a
designation.
iii. Total Case Rate(“TCR”) (2.0% Weight) — The Target Incentive related to TCR shall be earned if the
Company-wide metric, as set and approved by the Board, is achieved as determined by the President and
reviewed by the Administrator.
iv. Days Away Restricted Time(“DART”) (2.0% Weight) — The Target Incentive related to DART shall be earned
if the Company-wide metric, as set and approved by the Board, is achieved as determined by the President and
reviewed by the Administrator.
v. Lost Time Incident (“LTI”) (2.0% Weight) — The Target Incentive related to LTI shall be earned if the
Company-wide metric, as set and approved by the Board, is achieved as determined by the President and
reviewed by the Administrator.
c.
Compliance — The metric for this Plan Objective is the avoidance of Notices of Violation or Enforcement with monetary
penalties during the Plan Year and is weighted at 10% of a Participant’s Target Incentive. The Target Incentive related to
Compliance (“ Compliance Target Incentive ”) shall be earned based on a determination by the Administrator, taking into
consideration, among other things, the dollar amount of a monetary penalty paid (or accrued under generally accepted
accounting principles — “ GAAP ”) in the Plan Year, severity of the Notices of Violation or Enforcement, regulatory basis
for penalty and respective fact patterns. This metric is independent so that a percentage of the Compliance Target Incentive
may be earned independent and mutually exclusive of achievement of any other Plan Objective.
The President will include in each Participant Letter the applicable Target Incentive, Plan Objectives, metrics, weights and such
other information as may be determined.
VI. MISCELLANEOUS
a. Interests Not Transferable — Any interest of a Participant under the Plan may not be voluntarily sold, transferred,
alienated, assigned or encumbered, other than by will or pursuant to the laws of descent and distribution. Notwithstanding
the foregoing, if a Participant dies during the Plan Year, or after the Plan Year and prior to payment of an award, then a
pro-rata portion of the award to which the Participant would have been eligible absent death shall be paid to the deceased’s
beneficiary, as designated in writing by such Participant (attached hereto as Exhibit A ); provided however, that if the
deceased Participant has not designated a beneficiary then such amount shall be payable to the deceased Participant’s
estate. Payment shall be based on the number of calendar days the Participant was employed in an eligible position during
the Plan Year and shall be made at the time other Participants are paid. The requirement that the Participant be an employee
on that date of payment shall be waived.
b. Withholding Taxes — The Company shall withhold from any amounts payable under the Plan applicable withholding
including, but not limited to, federal, state, city and local taxes, FICA and Medicare as shall be legally
required. Additionally, the Company will withhold from any amounts payable under the Plan the applicable contribution
for the Participant’s 401(k) Savings and Retirement Plan as defined in the US Ecology, Inc. 401(K) Plan description
protected under ERISA.
c.
No Right of Employment — Nothing in this Plan will be construed as creating any contract of employment or conferring
upon any Participant any right to continue in the employ or other service of the Company or limit in any way the right of
Company to change such person’s compensation or other benefits or to terminate the employment or other service of such
person with or without cause.
d. No Representations — The Company does not represent or guarantee that any particular federal or state income, payroll,
personal property or other tax consequence will result from participation in the Plan.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
e.
Section Headings — The section headings contained herein are for convenience only and, in the event of any conflict, the
text of the Plan, rather than the section headings, will control.
f.
Severability — In the event any provision of the Plan shall be held to be illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if such illegal or
invalid provisions had never been contained in the Plan.
g.
Invalidity — If any term or provision contained herein is to any extent invalid or unenforceable, such term or provision
shall be reformed so that it is valid, and such invalidity or unenforceability shall not affect any other provision or part
hereof.
h. Amendment, Modification or Termination — The Administrator reserves the right to unilaterally amend, modify or
terminate the Plan at any time as it deems necessary or advisable.
i.
Applicable Law — Except to the extent superseded by the laws of the United States, the laws of the State of Idaho, without
regard to its conflicts of laws principles, shall govern in all matters relating to the Plan.
j.
Effect on Other Plans — Payments or benefits provided to a Participant under any stock, deferred compensation, savings,
retirements or other employee benefit plan are governed solely by the terms of each of such plans.
k. Effective Date — The Plan is effective as of January 1, 2013.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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EXHIBIT A
BENEFICIARY DESIGNATION
I hereby designate the following person or persons as Beneficiary to receive any management incentive payments due under the
attached US Ecology, Inc. 2013 Management Incentive Plan (Executive), effective January 1, 2013, in the event of my death,
reserving the full right to revoke or modify this designation, or any modification thereof, at any time by a further written designation:
Primary Beneficiary
Name of Individual
Relationship to me
Birth Date (if minor)
Address
Name of Trust
Date of Trust
Provided, however, that if such Primary Beneficiary shall not survive me by at least sixty (60) days, the following shall be the
Beneficiary:
Contingent Beneficiary
Name of Individual
Relationship to me
Birth Date (if minor)
Address
Name of Trust
Date of Trust
This Beneficiary Designation shall not affect any other beneficiary designation form that I may have on file with US Ecology, Inc.
regarding benefits other than that referred to above.
Date
Name
Signature
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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EXHIBIT 10.64
2013 EXECUTIVE SALES INCENTIVE PLAN
I.
PURPOSE
The US Ecology, Inc. 2013 Executive Sales Incentive Plan (“Plan”) provides a variable component of compensation for Senior
Vice President of Sales and Marketing, Steven D. Welling (“ Participant ”), for achievement of objectives set by the US
Ecology, Inc. (“ Company ”) Board of Directors (“ Board ”) during calendar year 2013 (“ Plan Year ”). The Plan is designed
to better align the interests of Participant with those of stockholders, better leverage Participant’s sales and leadership skills to
improve the performance of individual sales team members and encourage greater sales force efficiency.
II. ADMINISTRATION
The administrator of the Plan shall be the Board’s Compensation Committee (“Administrator”). The Administrator, or its
designee, shall have full power, discretion and authority to, among other things, interpret the Plan, verify all amounts paid
under the Plan and establish rules and procedures for its administration, as deemed necessary and appropriate. The
Administrator may rely on opinions, reports or statements of the Company’s officers, public accountants and other
professionals. The calculation of any amounts to be paid under the Plan shall be performed by the Company’s Chief Financial
Officer and submitted by the Company’s President to the Administrator for approval. Any interpretation of the Plan or act of
the Administrator, or its designee, in administering the Plan, shall be final and binding.
No member of the Board shall be liable for any action, interpretation or construction made in good faith with respect to the
Plan. The Company shall indemnify, to the fullest extent permitted by law, each member of its Board who may become liable
in any civil action or proceeding with respect to decisions made relating to the Plan.
III. ELIGIBILITY
To be eligible to receive an award under the Plan, Participant must have been employed by the Company (i) on a full-time basis
during the Plan Year and (ii) on the date of any payment under the Plan, except as otherwise provided for in this Plan or when
such requirement is waived by the Administrator.
a. Removal from Plan — Participant may be removed from the Plan or an award adjusted, including elimination of any right
to an award under the Plan, for insubordination, misconduct, malfeasance, or any formal disciplinary action taken by the
Company during the Plan Year or prior to payment.
b. Termination Without Cause by Company/With Good Reason by Participant — In the event Participant is terminated
without cause by the Company or for good reason by the Participant, as defined in the Participant’s employment agreement,
any amount that would have been due the Participant absent his/her termination shall be paid on a pro-rata basis based on
the number of calendar days the Participant was employed during the Plan Year. Payment shall be made according to the
terms of the Plan and the requirement that the Participant be an employee on that date of payment shall be waived.
IV. INCENTIVE AWARD
The Board shall establish a Plan Year treatment and disposal revenue target (the “Plan Target). The amount to which
Participant may be entitled (“ Incentive Payment ”) is the product of the treatment and disposal revenue accrued in the Plan
Year and a percentage rate(s) established by the Board (“ Incentive Rate ”). Payments under the Plan, if any, shall be made to
Participant upon certification by the President that such payments are authorized by the Administrator and all applicable criteria
have been satisfied. Payments shall be made as soon as practicable after approval and availability of the Company’s final
audited Plan Year financial statements, but in any event will be made by March 15, 2014.
V. INCENTIVE AWARD DETERMINATION
Participant’s Incentive Payment shall be earned, beginning with achievement of 85% of the Plan Target and shall be capped at
the level where Company-wide treatment and disposal revenue is equal to 105% of the Plan Target. The Incentive Rates
applied to actual treatment and disposal revenue will range from .03% to .50%, depending on the level of revenue. The Plan
Target, applicable Incentive Rates and the treatment and disposal revenue amounts to which each Incentive Rate applies shall
be determined by the Board and shall be set forth in a letter from the President to Participant. Treatment and disposal revenue
generated by facilities acquired by the Company during the Plan Year shall be excluded from actual results.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
By way of example only: Assuming a Plan Target of $100,000,000, the minimum amount upon which an Incentive Rate could
be applied would be $85,000,000 ($100,000,000 X .85) and the maximum amount upon which an Incentive Rate could be
applied would be $105,000,000 ($100,000,000 X 1.05). Assuming actual treatment and disposal revenue for the Plan Year of
$97,000,000, Participant, in this example, would be eligible for an Incentive Payment of $38,600.00, calculated from the table
below:
Beginning of
Range
$
$
$
$
$
$
$
$
85,000,000.00
92,000,000.01
95,000,000.01
97,000,000.01
100,000,000.01
101,000,000.01
102,000,000.01
104,000,000.01
% of Plan
Target
85% $
92% $
95% $
97% $
100% $
101% $
102% $
104% $
End of Range
92,000,000.00
95,000,000.00
97,000,000.00
100,000,000.00
101,000,000.00
102,000,000.00
104,000,000.00
105,000,000.00
% of Plan
Target
92%
95%
97%
100%
101%
102%
104%
105%
Incentive
Rate
0.03% $
0.20% $
0.25% $
0.30% $
0.40% $
0.45% $
0.50% $
0.50% $
Incremental
$ Earned
27,600.00 $
6,000.00 $
5,000.00 $
9,000.00 $
4,000.00 $
4,500.00 $
10,000.00 $
5,000.00 $
Cumulative
$ Earned
27,600.00
33,600.00
38,600.00
47,600.00
51,600.00
56,100.00
66,100.00
71,100.00
Assuming instead treatment and disposal revenue for the Plan Year of $110,000,000, the Incentive Payment would be capped at
$71,100 and Participant would not be credited for revenue exceeding the $105,000,000 ceiling.
VI. PLAN INCENTIVE ADJUSTMENTS
Once paid, no Incentive Payment shall be subject to refund or return based on aged accounts receivable or credit
memos. However, in calculating future payments under a similar plan, any receivables written off for which an Incentive
Payment was previously made under the Plan may, at the Administrator’s discretion, be subtracted from revenues on a
dollar-for-dollar basis. Furthermore, the Company reserves the right to request and/or initiate the repayment of any
overpayments at any time, for any reason. Any overpayment must be repaid to the Company within six months of discovery
and notification to Participant.
VII. MISCELLANEOUS
a. Interests Not Transferable — Any interest of Participant under the Plan may not be voluntarily sold, transferred, alienated,
assigned or encumbered, other than by will or pursuant to the laws of descent and distribution. Notwithstanding the
foregoing, if Participant dies during the Plan Year, or after the Plan Year and prior to payment of an award, then a pro-rata
portion of the award to which Participant would have been eligible absent death shall be paid to the deceased’s beneficiary,
as designated in writing by Participant (attached hereto as Exhibit A ); provided however, that if Participant has not
designated a beneficiary then such amount shall be payable to Participant’s estate. Payment shall be based on the number
of calendar days Participant was employed in his position of Senior Vice President of Sales and Marketing during the Plan
Year. The requirement that Participant be an employee on the date of payment shall be waived.
b. Withholding Taxes — The Company shall withhold from any amounts payable under the Plan applicable withholding
including, but not limited to, federal, state, city and local taxes, FICA and Medicare as shall be legally
required. Additionally, the Company will withhold from any amounts payable under the Plan the applicable contribution
for Participant’s 401(k) Savings and Retirement Plan as defined in the US Ecology, Inc. 401(K) Plan description protected
under ERISA.
c.
No Right of Employment — Nothing in this Plan will be construed as creating any contract of employment or conferring
upon Participant any right to continue in the employ or other service of the Company or limit in any way the right of
Company to change Participant’s compensation or other benefits or to terminate his employment with or without cause.
d. No Representations — The Company does not represent or guarantee that any particular federal or state income, payroll,
personal property or other tax consequence will result from participation in the Plan.
e.
Section Headings — The section headings contained herein are for convenience only and, in the event of any conflict, the
text of the Plan, rather than the section headings, will control.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
f.
Severability — In the event any provision of the Plan shall be held to be illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining parts of the Plan and the Plan shall be construed and enforced as if such illegal or
invalid provisions had never been contained in the Plan.
g.
Invalidity — If any term or provision contained herein is to any extent invalid or unenforceable, such term or provision
shall be reformed so that it is valid, and such invalidity or unenforceability shall not affect any other provision or part
hereof
h. Amendment, Modification or Termination — The Administrator reserves the right to unilaterally amend, modify or
terminate the Plan at any time as it deems necessary or advisable.
i.
Applicable Law — Except to the extent superseded by the laws of the United States, the laws of the State of Idaho, without
regard to its conflicts of laws principles, shall govern in all matters relating to the Plan.
j.
Effect on Other Plans — Payments or benefits provided to Participant under any stock, deferred compensation, savings,
retirements or other employee benefit plan are governed solely by the terms of each of such plans.
k. Effective Date — The Plan is effective as of January 1, 2013.
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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use of this information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
EXHIBIT A
BENEFICIARY DESIGNATION
I hereby designate the following person or persons as Beneficiary to receive any management incentive payments due under the
attached US Ecology, Inc. 2013 Executive Sales Incentive Plan effective January 1, 2013, in the event of my death, reserving the full
right to revoke or modify this designation, or any modification thereof, at any time by a further written designation:
Primary Beneficiary
Name of Individual
Relationship to me
Birth Date (if minor)
Address
Name of Trust
Date of Trust
Provided, however, that if such Primary Beneficiary shall not survive me by at least sixty (60) days, the following shall be the
Beneficiary:
Contingent Beneficiary
Name of Individual
Relationship to me
Birth Date (if minor)
Address
Name of Trust
Date of Trust
This Beneficiary Designation shall not affect any other beneficiary designation form that I may have on file with US Ecology, Inc.
regarding benefits other than that referred to above.
Date
Name
Signature
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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EXHIBIT 15
US Ecology, Inc.
Boise, ID
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
unaudited interim financial information of US Ecology, Inc. and subsidiaries for the three-month and six-month periods ended
June 30, 2013, and 2012, as indicated in our report dated August 1, 2013; because we did not perform an audit, we expressed no
opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended
June 30, 2013, is incorporated by reference in Registration Statement Nos. 333-157529, 333-68868, 333-93105, 333-140419, and
333-69863 on Form S-8, Registration Statement No. 333-187001 on Form S-3, and Registration Statement No. 333-187003 on
Form S-4.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of
the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning
of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
Boise, Idaho
August 1, 2013
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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EXHIBIT 31.1
US ECOLOGY, INC.
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Jeffrey R. Feeler, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of US Ecology, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: August 1, 2013
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
/s/ Jeffrey R. Feeler
Jeffrey R. Feeler
President and Chief Executive Officer
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EXHIBIT 31.2
US ECOLOGY, INC.
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Eric L. Gerratt, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of US Ecology, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: August 1, 2013
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
/s/ Eric L. Gerratt
Eric L. Gerratt
Executive Vice President, Chief Financial Officer and
Treasurer
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EXHIBIT 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of US Ecology, Inc., (the “Company”) for the quarterly period ended June 30,
2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Jeffrey R. Feeler and Eric L.
Gerratt, Chief Executive Officer and Chief Financial Officer, respectively, of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to our knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company as of the dates and for the periods expressed in the Report.
Date: August 1, 2013
/s/ Jeffrey R. Feeler
Jeffrey R. Feeler
President and Chief Executive Officer
/s/ Eric L. Gerratt
Eric L. Gerratt
Executive Vice President, Chief Financial Officer and
Treasurer
Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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Source: US ECOLOGY, INC., 10-Q, August 01, 2013
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