UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
10-Q
x QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
Quarterly Period Ended June 30, 2006
OR
* TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For
the
transition period from
____________________________to____________________________
Commission
File Number 0-11688
AMERICAN
ECOLOGY CORPORATION
(Exact
name of registrant as specified in its charter)
DELAWARE
|
95-3889638
|
(State
or other jurisdiction of
incorporation
or organization)
|
(I.R.S.
Employer
Identification
Number)
|
|
|
Lakepointe
Centre I,
300
E. Mallard, Suite 300
Boise,
Idaho
(Address
of principal executive offices)
|
83706
(Zip
Code)
|
(208)
331-8400
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the Registrant (1) has filed all reports required to
be
filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days. Yes x
No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one): Large accelerated filer o
Accelerated filer x
Non-accelerated filer o
Indicate
by check mark if the Registrant is a shell company (as defined in Rule 12b-2
of
the Act). Yes o
No x
At
July
28, 2006 Registrant had outstanding 18,134,678 shares of its Common
Stock.
AMERICAN
ECOLOGY CORPORATION
Quarterly
Report on Form 10-Q for the
Six
Months Ended June 30, 2006
TABLE
OF CONTENTS
Part
I. Financial Information
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PAGE
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4
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5
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6
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7
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14
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23
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23
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Part
II. Other Information
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23
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23
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23
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23
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24
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24
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24
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OFFICERS
|
|
CORPORATE
OFFICE
|
Stephen
A. Romano
|
|
Lakepointe
Centre I
|
Chief
Executive Officer, President and Chief
|
|
American
Ecology Corporation
|
Operating
Officer
|
|
300
East Mallard Drive, Suite 300
|
|
|
Boise,
Idaho 83706
|
Simon
G. Bell
|
|
(208)
331-8400
|
Vice
President and Director of Hazardous Waste
|
|
(208)
331-7900 (fax)
|
Operations
|
|
www.americanecology.com
|
|
|
|
John
M. Cooper
|
|
|
Vice
President and Chief Information Officer
|
|
|
|
|
|
Jeffrey
R. Feeler (Effective July 28, 2006)
|
|
COMMON
STOCK
|
Vice
President and Controller, Chief Accounting
|
|
American
Ecology Corporation's common stock
|
Officer,
Treasurer
|
|
trades
on the Nasdaq National Market
|
|
|
under
the symbol ECOL.
|
Michael
J. Gilberg (Through July 28, 2006)
|
|
|
Vice
President and Controller, Chief Accounting
|
|
|
Officer,
Secretary and Treasurer
|
|
|
|
|
|
Michael
G. Hannon
|
|
|
Vice
President of Corporate Development
|
|
FINANCIAL
REPORTS
|
|
|
A
copy of American Ecology Corporation
|
Wayne
R. Ipsen
|
|
Annual
and Quarterly Reports, as filed on Form
|
Assistant
Secretary
|
|
10-K
and 10-Q with the Securities and Exchange
|
|
|
Commission,
may be obtained by writing:
|
Steven
D. Welling
|
|
Lakepointe
Centre I
|
Vice
President of Sales & Marketing
|
|
300
E. Mallard, Suite 300
|
|
|
Boise,
Idaho 83706
|
DIRECTORS
|
|
or
at www.americanecology.com
|
Kenneth
C. Leung, Chairman
|
|
|
Managing
Director, Sanders Morris Harris
|
|
|
|
|
|
Roy
C. Eliff
|
|
|
Independent
Businessman
|
|
|
|
|
|
Edward
F. Heil, Chairman
|
|
|
Independent
Businessman
|
|
TRANSFER
AGENT
|
|
|
American
Stock Transfer & Trust Company
|
John
W. Poling Executive
Vice President, Corporate
|
|
59
Maiden Lane
|
Development,
The Tube Media Corp.
|
|
New
York, New York 10038
|
|
|
(718)
921-8289
|
Richard
Riazzi
|
|
or
at www.amstock.com
|
General
Manager, Chelan County PUD
|
|
|
|
|
|
Stephen
A. Romano
|
|
|
Chief
Executive Officer, President and Chief
|
|
|
Operating
Officer
|
|
|
|
|
|
General
Jimmy D. Ross
|
|
|
U.S.
Army, Retired
|
|
AUDITOR
|
|
|
Moss
Adams LLP
|
General
Richard T. Swope
|
|
1001
Fourth Avenue, Suite 2900
|
U.S.
Air Force, Retired
|
|
Seattle,
WA 98154
|
Item
1.
Financial Statements.
AMERICAN
ECOLOGY CORPORATION
($
in 000’s except per share amounts)
|
|
June
30, 2006
|
|
December
31, 2005
|
|
ASSETS
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,612
|
|
$
|
3,641
|
|
Short-term
investments
|
|
|
9,205
|
|
|
16,214
|
|
Receivables,
net
|
|
|
21,845
|
|
|
13,573
|
|
Insurance
receivable
|
|
|
157
|
|
|
157
|
|
Prepayments
and other
|
|
|
3,727
|
|
|
3,183
|
|
Income
tax receivable
|
|
|
1,351
|
|
|
1,248
|
|
Deferred
income taxes
|
|
|
1,848
|
|
|
6,714
|
|
Total
current assets
|
|
|
39,745
|
|
|
44,730
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
48,700
|
|
|
40,896
|
|
Restricted
cash
|
|
|
4,622
|
|
|
84
|
|
Other
assets
|
|
|
501
|
|
|
738
|
|
Deferred
income taxes
|
|
|
3,021
|
|
|
3,021
|
|
Total
assets
|
|
$
|
96,589
|
|
$
|
89,469
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
Current
portion of long-term debt
|
|
$
|
6
|
|
$
|
--
|
|
Accounts
payable
|
|
|
3,270
|
|
|
3,665
|
|
Deferred
revenue
|
|
|
3,360
|
|
|
1,261
|
|
State
burial fees payable
|
|
|
1,635
|
|
|
1,454
|
|
Management
incentive plan payable
|
|
|
870
|
|
|
1,272
|
|
Customer
advances
|
|
|
1,912
|
|
|
1,535
|
|
Customer
refunds
|
|
|
413
|
|
|
1,062
|
|
Accrued
liabilities
|
|
|
1,807
|
|
|
1,337
|
|
Accrued
closure and post closure obligation, current portion
|
|
|
999
|
|
|
1,127
|
|
Total
current liabilities
|
|
|
14,272
|
|
|
12,713
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
27
|
|
|
--
|
|
Long-term
accrued liabilities
|
|
|
549
|
|
|
485
|
|
Long-term
customer advances
|
|
|
1,006
|
|
|
1,752
|
|
Accrued
closure and post closure obligation, excluding current
portion
|
|
|
10,496
|
|
|
10,560
|
|
Total
liabilities
|
|
|
26,350
|
|
|
25,510
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
Shareholders’
equity:
|
|
|
|
|
|
|
|
Convertible
preferred stock, 1,000,000 shares authorized,
|
|
|
|
|
|
|
|
Common
stock, $.01 par value, 50,000,000 authorized, 18,134,678 and 17,742,420
shares issued and outstanding
|
|
|
181
|
|
|
177
|
|
Additional
paid-in capital
|
|
|
55,758
|
|
|
53,213
|
|
Retained
earnings
|
|
|
14,300
|
|
|
10,569
|
|
Total
shareholders’ equity
|
|
|
70,239
|
|
|
63,959
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Shareholders’ Equity
|
|
$
|
96,589
|
|
$
|
89,469
|
|
See
notes
to consolidated financial statements.
AMERICAN
ECOLOGY CORPORATION
(Unaudited)
($
in 000’s except per share amounts)
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
29,924
|
|
$
|
18,779
|
|
$
|
51,446
|
|
$
|
31,333
|
|
Transportation
costs
|
|
|
11,459
|
|
|
3,823
|
|
|
16,516
|
|
|
7,036
|
|
Other
direct operating costs
|
|
|
7,940
|
|
|
5,736
|
|
|
14,695
|
|
|
11,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
10,525
|
|
|
9,220
|
|
|
20,235
|
|
|
13,061
|
|
Selling,
general and administrative expenses
|
|
|
3,061
|
|
|
3,358
|
|
|
6,544
|
|
|
5,872
|
|
Business
interruption insurance claims
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
(41
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
7,464
|
|
|
5,862
|
|
|
13,691
|
|
|
7,230
|
|
Interest
income
|
|
|
205
|
|
|
93
|
|
|
393
|
|
|
178
|
|
Interest
expense
|
|
|
1
|
|
|
48
|
|
|
2
|
|
|
95
|
|
Other
income
|
|
|
174
|
|
|
22
|
|
|
458
|
|
|
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income tax
|
|
|
7,842
|
|
|
5,929
|
|
|
14,540
|
|
|
7,352
|
|
Income
tax expense
|
|
|
2,915
|
|
|
2,223
|
|
|
5,434
|
|
|
2,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
4,927
|
|
$
|
3,706
|
|
$
|
9,106
|
|
$
|
4,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
.27
|
|
$
|
.21
|
|
$
|
.51
|
|
$
|
.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
.27
|
|
$
|
.21
|
|
$
|
.50
|
|
$
|
.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
paid per common share
|
|
$
|
.15
|
|
$
|
--
|
|
$
|
.30
|
|
$
|
--
|
|
See
notes
to consolidated financial statements.
AMERICAN
ECOLOGY CORPORATION
(Unaudited,
$ in 000’s)
|
|
Six
Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
Net
income
|
|
$
|
9,106
|
|
$
|
4,562
|
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
Depreciation,
amortization, and accretion
|
|
|
3,846
|
|
|
3,066
|
|
Deferred
tax asset
|
|
|
4,866
|
|
|
2,135
|
|
Stock
compensation
|
|
|
222
|
|
|
180
|
|
Changes
in assets and liabilities:
|
|
|
|
|
|
|
|
Receivables
|
|
|
(8,272
|
)
|
|
(4,673
|
)
|
Other
assets
|
|
|
(225
|
)
|
|
(1,874
|
)
|
Closure
and post closure obligation
|
|
|
(729
|
)
|
|
(460
|
)
|
Income
taxes payable/receivable
|
|
|
(103
|
)
|
|
--
|
|
Accounts
payable and accrued liabilities
|
|
|
999
|
|
|
2,256
|
|
Net
cash provided by operating activities
|
|
|
9,710
|
|
|
5,192
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(11,081
|
)
|
|
(7,217
|
)
|
Proceeds
from sale of property and equipment
|
|
|
4
|
|
|
749
|
|
Transfers
from cash to restricted cash
|
|
|
(4,622
|
)
|
|
--
|
|
Transfers
to cash from short term investments, net
|
|
|
7,009
|
|
|
7
|
|
Net
cash used by investing activities
|
|
|
(8,690
|
)
|
|
(6,461
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Dividends
paid
|
|
|
(5,375
|
)
|
|
--
|
|
Payments
of indebtedness
|
|
|
(1
|
)
|
|
(728
|
)
|
Income
tax benefit on exercise of stock options
|
|
|
551
|
|
|
652
|
|
Stock
options exercised
|
|
|
1,776
|
|
|
870
|
|
Net
cash (used) provided by financing activities
|
|
|
(3,049
|
)
|
|
794
|
|
|
|
|
|
|
|
|
|
Decrease
in cash and cash equivalents
|
|
|
(2,029
|
)
|
|
(475
|
)
|
Cash
and cash equivalents at beginning of period
|
|
|
3,641
|
|
|
2,160
|
|
Cash
and cash equivalents at end of period
|
|
$
|
1,612
|
|
$
|
1,685
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the year for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2
|
|
$
|
95
|
|
Income
taxes paid
|
|
|
103
|
|
|
4
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
Acquisition
of equipment with notes/capital leases
|
|
|
34
|
|
|
--
|
|
Common
stock dividends accrued
|
|
|
--
|
|
|
2,645
|
|
Common
stock issued for director and employee compensation
|
|
|
222
|
|
|
180
|
|
See
notes
to consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note
1.
|
Basis
of Presentation
|
In
the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments and disclosures necessary to present fairly
the financial position, results of operations, and cash flows of American
Ecology Corporation and its wholly-owned subsidiaries (the “Company”). These
financial statements and notes should be read in conjunction with the financial
statements and notes included in the Company’s 2005 Annual Report on Form 10-K
for the year ended December 31, 2005, filed with the Securities and Exchange
Commission.
Certain
reclassifications of prior quarter amounts have been made to conform to current
quarter presentation, none of which affect previously recorded net
income.
Note
2.
|
Earnings
Per Share
|
Basic
earnings per share are computed based on net income available to common
shareholders and the weighted average number of common shares outstanding during
the quarter. Diluted earnings per share reflect the assumed issuance of common
shares for outstanding options and conversion of warrants. The computation
of
diluted earnings per share does not assume exercise or conversion of securities
whose exercise price is greater than the average common share market price
as
the assumed conversion of these securities would increase earnings per
share.
|
|
Three
Months Ended
June
30,
|
|
Six
Months Ended
June
30,
|
|
($
in thousands except per share amounts)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Net
income available to common shareholders
|
|
$
|
4,927
|
|
$
|
3,706
|
|
$
|
9,106
|
|
$
|
4,562
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
shares
|
|
|
18,116
|
|
|
17,509
|
|
|
17,997
|
|
|
17,460
|
|
Effect
of dilutive stock options
|
|
|
141
|
|
|
436
|
|
|
135
|
|
|
421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
shares
|
|
|
18,257
|
|
|
17,945
|
|
|
18,132
|
|
|
17,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$
|
.27
|
|
$
|
.21
|
|
$
|
.51
|
|
$
|
.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share
|
|
$
|
.27
|
|
$
|
.21
|
|
$
|
.50
|
|
$
|
.26
|
|
On
January 2, April 3, and July 3, 2006, the Company declared dividends of $0.15
per common share to stockholders of record on January 2, April 14, and July
14,
2006, respectively. Each of the dividends was paid out of cash on hand on
January 13, April 21, and July 21, 2006 in the amounts of $2,661,000, $2,714,000
and $2,720,000, respectively. The Company also intends that shareholders of
record on October 13, 2006 will receive a $0.15 per share dividend, subject
to
certain conditions such as continued compliance with bank
covenants.
At
June
30, 2006 and 2005, the outstanding balance on the revolving line of credit
was
$0 and the availability under the line of credit was $10,000,000 and $3,000,000,
respectively, with $5,000,000 of the line of credit availability restricted
for
the outstanding standby letters of credit utilized as collateral for the
Company’s financial assurance policies. The Company has continued to borrow on,
and repay the line of credit according to business demands and availability
of
cash.
Note
5.
|
Operating
Segments
|
The
Company operates within two segments, Operating Disposal Facilities and
Non-Operating Disposal Facilities, based on its internal reporting structure
and
nature of services offered. The Operating Disposal Facility segment represents
facilities accepting hazardous and radioactive waste. The Non-Operating Disposal
Facility segment represents facilities that are no longer accepting hazardous
and/or radioactive waste or formerly proposed new disposal facilities.
Income
taxes are assigned to Corporate, but all other items are included in the segment
where they originated. Inter-company transactions have been eliminated from
the
segment information and are not significant between segments.
Summarized
financial information concerning the Company’s reportable segments is shown in
the following table:
($
in thousands)
|
|
Operating
Disposal
Facilities
|
|
Non-Operating
Disposal
Facilities
|
|
Corporate
|
|
Total
|
|
Three
months ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
29,918
|
|
$
|
6
|
|
$
|
--
|
|
$
|
29,924
|
|
Transportation
cost
|
|
|
11,459
|
|
|
--
|
|
|
--
|
|
|
11,459
|
|
Other
direct operating cost
|
|
|
7,847
|
|
|
93
|
|
|
--
|
|
|
7,940
|
|
Gross
profit (loss)
|
|
|
10,612
|
|
|
(87
|
)
|
|
--
|
|
|
10,525
|
|
SG&A
|
|
|
1,283
|
|
|
1
|
|
|
1,777
|
|
|
3,061
|
|
Operating
income (loss)
|
|
|
9,329
|
|
|
(88
|
)
|
|
(1,777
|
)
|
|
7,464
|
|
Interest
income, net
|
|
|
7
|
|
|
--
|
|
|
197
|
|
|
204
|
|
Other
income
|
|
|
1
|
|
|
173
|
|
|
--
|
|
|
174
|
|
Income
(loss) before income tax
|
|
|
9,337
|
|
|
85
|
|
|
(1,580
|
)
|
|
7,842
|
|
Income
tax expense
|
|
|
--
|
|
|
--
|
|
|
2,915
|
|
|
2,915
|
|
Net
income (loss)
|
|
$
|
9,337
|
|
$
|
85
|
|
$
|
(4,495
|
)
|
$
|
4,927
|
|
Depreciation,
amortization, and accretion
|
|
$
|
1,896
|
|
$
|
90
|
|
$
|
6
|
|
$
|
1,992
|
|
Capital
expenditures
|
|
$
|
2,371
|
|
$
|
4
|
|
$
|
54
|
|
$
|
2,429
|
|
Total
assets
|
|
$
|
70,904
|
|
$
|
83
|
|
$
|
25,602
|
|
$
|
96,589
|
|
Three
months ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
18,762
|
|
$
|
17
|
|
$
|
--
|
|
$
|
18,779
|
|
Transportation
cost
|
|
|
3,823
|
|
|
--
|
|
|
--
|
|
|
3,823
|
|
Other
direct operating cost
|
|
|
5,633
|
|
|
103
|
|
|
--
|
|
|
5,736
|
|
Gross
profit (loss)
|
|
|
9,306
|
|
|
(86
|
)
|
|
--
|
|
|
9,220
|
|
SG&A
|
|
|
1,257
|
|
|
2
|
|
|
2,099
|
|
|
3,358
|
|
Operating
income (loss)
|
|
|
8,049
|
|
|
(88
|
)
|
|
(2,099
|
)
|
|
5,862
|
|
Interest
income, net
|
|
|
10
|
|
|
--
|
|
|
35
|
|
|
45
|
|
Other
income
|
|
|
22
|
|
|
--
|
|
|
--
|
|
|
22
|
|
Income
(loss) before income tax
|
|
|
8,081
|
|
|
(88
|
)
|
|
(2,064
|
)
|
|
5,929
|
|
Income
tax expense
|
|
|
--
|
|
|
--
|
|
|
2,223
|
|
|
2,223
|
|
Net
income (loss)
|
|
$
|
8,081
|
|
$
|
(88
|
)
|
$
|
(4,287
|
)
|
$
|
3,706
|
|
Depreciation,
amortization, and accretion
|
|
$
|
1,588
|
|
$
|
95
|
|
$
|
7
|
|
$
|
1,690
|
|
Capital
expenditures
|
|
$
|
4,685
|
|
$
|
3
|
|
$
|
--
|
|
$
|
4,688
|
|
Total
assets
|
|
$
|
46,702
|
|
$
|
6,545
|
|
$
|
31,859
|
|
$
|
85,106
|
|
($
in thousands)
|
|
Operating
Disposal
Facilities
|
|
Non-Operating
Disposal
Facilities
|
|
Corporate
|
|
Total
|
|
Six
months ended June 30, 2006
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
51,436
|
|
$
|
10
|
|
$
|
--
|
|
$
|
51,446
|
|
Transportation
cost
|
|
|
16,516
|
|
|
--
|
|
|
--
|
|
|
16,516
|
|
Other
direct operating cost
|
|
|
14,511
|
|
|
184
|
|
|
--
|
|
|
14,695
|
|
Gross
profit (loss)
|
|
|
20,409
|
|
|
(174
|
)
|
|
--
|
|
|
20,235
|
|
SG&A
|
|
|
2,613
|
|
|
1
|
|
|
3,930
|
|
|
6,544
|
|
Operating
income (loss)
|
|
|
17,796
|
|
|
(175
|
)
|
|
(3,930
|
)
|
|
13,691
|
|
Interest
income, net
|
|
|
17
|
|
|
--
|
|
|
374
|
|
|
391
|
|
Other
income/(expense)
|
|
|
(14
|
)
|
|
173
|
|
|
299
|
|
|
458
|
|
Income
(loss) before income tax
|
|
|
17,799
|
|
|
(2
|
)
|
|
(3,257
|
)
|
|
14,540
|
|
Income
tax expense
|
|
|
--
|
|
|
--
|
|
|
5,434
|
|
|
5,434
|
|
Net
income (loss)
|
|
$
|
17,799
|
|
$
|
(2
|
)
|
$
|
(8,691
|
)
|
$
|
9,106
|
|
Depreciation,
amortization, and accretion
|
|
$
|
3,654
|
|
$
|
180
|
|
$
|
12
|
|
$
|
3,846
|
|
Capital
expenditures
|
|
$
|
10,974
|
|
$
|
53
|
|
$
|
54
|
|
$
|
11,081
|
|
Total
assets
|
|
$
|
70,904
|
|
$
|
83
|
|
$
|
25,602
|
|
$
|
96,589
|
|
Six
months ended June 30, 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
31,299
|
|
$
|
34
|
|
$
|
--
|
|
$
|
31,333
|
|
Transportation
cost
|
|
|
7,036
|
|
|
--
|
|
|
--
|
|
|
7,036
|
|
Other
direct operating cost
|
|
|
11,027
|
|
|
209
|
|
|
--
|
|
|
11,236
|
|
Gross
profit (loss)
|
|
|
13,236
|
|
|
(175
|
)
|
|
--
|
|
|
13,061
|
|
SG&A
|
|
|
2,364
|
|
|
7
|
|
|
3,501
|
|
|
5,872
|
|
BI
claim
|
|
|
(41
|
)
|
|
--
|
|
|
--
|
|
|
(41
|
)
|
Operating
income (loss)
|
|
|
10,913
|
|
|
(182
|
)
|
|
(3,501
|
)
|
|
7,230
|
|
Interest
income, net
|
|
|
20
|
|
|
--
|
|
|
63
|
|
|
83
|
|
Other
income
|
|
|
39
|
|
|
--
|
|
|
--
|
|
|
39
|
|
Income
(loss) before income tax
|
|
|
10,972
|
|
|
(182
|
)
|
|
(3,438
|
)
|
|
7,352
|
|
Income
tax expense
|
|
|
--
|
|
|
--
|
|
|
2,790
|
|
|
2,790
|
|
Net
income (loss)
|
|
$
|
10,972
|
|
$
|
(182
|
)
|
$
|
(6,228
|
)
|
$
|
4,562
|
|
Depreciation,
amortization, and accretion
|
|
$
|
2,861
|
|
$
|
190
|
|
$
|
15
|
|
$
|
3,066
|
|
Capital
expenditures
|
|
$
|
7,214
|
|
$
|
3
|
|
$
|
--
|
|
$
|
7,217
|
|
Total
assets
|
|
$
|
46,702
|
|
$
|
6,545
|
|
$
|
31,859
|
|
$
|
85,106
|
|
Note
6.
|
Stock
Option Plans
|
The
Company has two stock-based compensation plans, which are accounted for under
the recognition and measurement principles of APB Opinion No. 25, Accounting
for Stock Issued to Employees
and
related Interpretations through December 31, 2005, and under SFAS No. 123R,
“Share Based Payment” as of January 1, 2006. Under SFAS 123R, the Company has
recognized the following compensation expense for options vesting in the quarter
ended March 31, 2006, at which time all issued options had vested.
($
in thousands)
|
Compensation
Expense
|
|
|
Fair
value of options earned during the first quarter of 2006
|
$
47
|
As
of
March 31, 2006, all outstanding options were vested and no further option
compensation expense will be recognized unless additional options are
issued.
The
following table illustrates the effect on net income and earnings per share
by
applying the fair value recognition provisions of FASB Statement No. 123R,
Share
Based Payment,
to
stock-based compensation for the three and six months ended June 30,
2005:
|
|
Three
Months Ended
June
30, 2005
|
|
Six
Months Ended
June
30, 2005
|
|
Net
income, as reported
|
|
$
|
3,706
|
|
$
|
4,562
|
|
Deduct:
Total stock-based employee compensation expense determined under
fair
value based method for all awards, net of related tax
effects
|
|
|
(94
|
)
|
|
(227
|
)
|
Pro
forma net income
|
|
$
|
3,612
|
|
$
|
4,335
|
|
|
|
|
|
|
|
|
|
Earnings
per share:
|
|
|
|
|
|
|
|
Basic
- as reported
|
|
$
|
.21
|
|
$
|
.26
|
|
Basic
- pro forma
|
|
$
|
.21
|
|
$
|
.25
|
|
Diluted
- as reported
|
|
$
|
.21
|
|
$
|
.26
|
|
Diluted
- pro forma
|
|
$
|
.20
|
|
$
|
.24
|
|
The
stock
option plan summary and changes during the three and six months ended June
30
are as follows:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
Options
outstanding, beginning of period
|
|
|
245,624
|
|
|
878,408
|
|
|
567,320
|
|
|
913,708
|
|
Granted
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
7,500
|
|
Exercised
|
|
|
(64,728
|
)
|
|
(179,377
|
)
|
|
(386,424
|
)
|
|
(222,177
|
)
|
Canceled
|
|
|
--
|
|
|
(25,000
|
)
|
|
--
|
|
|
(25,000
|
)
|
Options
outstanding, end of period
|
|
|
180,896
|
|
|
674,031
|
|
|
180,896
|
|
|
674,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average exercise price of options, beginning of period
|
|
$
|
5.17
|
|
$
|
4.50
|
|
$
|
4.84
|
|
$
|
4.40
|
|
Weighted
average exercise price of options granted
|
|
$
|
--
|
|
$
|
--
|
|
$
|
--
|
|
$
|
11.53
|
|
Weighted
average exercise price of options exercised
|
|
$
|
4.60
|
|
$
|
4.01
|
|
$
|
4.60
|
|
$
|
3.92
|
|
Weighted
average exercise price of options canceled
|
|
$
|
--
|
|
$
|
4.00
|
|
$
|
--
|
|
$
|
4.00
|
|
Weighted
average exercise price of options, end of period
|
|
$
|
5.37
|
|
$
|
4.65
|
|
$
|
5.37
|
|
$
|
4.65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable at end of period
|
|
|
180,896
|
|
|
521,361
|
|
|
180,896
|
|
|
521,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
available for future grant at end of period
|
|
|
188,976
|
|
|
188,976
|
|
|
188,976
|
|
|
188,976
|
|
The
following table summarizes information about the stock options outstanding
under
the Company’s option plans as of June 30, 2006:
Range
of exercise
price
per share
|
|
Weighted
average
Remaining
contractual
life
(years)
|
|
Number
outstanding
|
|
Weighted
average
exercise
price
per share
|
|
Number
exercisable
|
|
Weighted
average
exercise
price
per share
|
|
$
|
1.00
- $1.47
|
|
|
1.2
|
|
|
27,500
|
|
$
|
1.26
|
|
|
27,500
|
|
$
|
1.26
|
|
$
|
2.13
|
|
|
2.9
|
|
|
10,000
|
|
$
|
2.13
|
|
|
10,000
|
|
$
|
2.13
|
|
$
|
2.42
- $3.50
|
|
|
5.0
|
|
|
11,800
|
|
$
|
2.58
|
|
|
11,800
|
|
$
|
2.58
|
|
$
|
3.75
- $4.50
|
|
|
4.6
|
|
|
22,200
|
|
$
|
3.81
|
|
|
22,200
|
|
$
|
3.81
|
|
$
|
6.50
|
|
|
6.6
|
|
|
84,396
|
|
$
|
6.50
|
|
|
84,396
|
|
$
|
6.50
|
|
$
|
9.20
- $12.15
|
|
|
8.1
|
|
|
25,000
|
|
$
|
10.09
|
|
|
25,000
|
|
$
|
10.09
|
|
|
|
|
|
|
|
|
180,896
|
|
|
|
|
|
180,896
|
|
|
|
|
As
of
June 30, 2006, the 1992 Stock Option Plan for Employees had options outstanding
to purchase 86,196 common shares with 188,976 shares remaining available for
issuance under option grants.
Effective
March 28, 2005, the Company’s Board of Directors terminated the 1992 Amended and
Restated Outside Director Stock Option Plan, except for option grants then
outstanding. As of June 30, 2006, the 1992 Outside Director Stock Option Plan
had options outstanding to purchase 94,700 common shares.
No
options were granted during the quarter ended June 30, 2006. For grants during
the six months ended June 30, 2005, the fair value of each option grant is
estimated using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
|
|
Three
Months Ended June 30
|
|
Six
Months Ended June 30
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Expected
volatility
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
50
|
%
|
Risk-free
interest rates
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
4.1
|
%
|
Expected
lives
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
10
years
|
|
Dividend
yield
|
|
|
--
|
|
|
--
|
|
|
--
|
|
|
2.7
|
%
|
Weighted-average
fair value of options granted during the quarter
(Black-Scholes)
|
|
|
--
|
|
|
--
|
|
|
--
|
|
$
|
5.28
|
|
Note
7.
|
2005
Non-Employee Director Compensation
Plan
|
The
2005
Non-Employee Director Compensation Plan (“Director Plan”) was approved by
shareholders at the Company’s May 25, 2005 Annual Meeting. The Director Plan
provides for Non-Employee Directors to be paid an annual retainer of $16,000
in
cash plus $25,000 in restricted stock with a one-year vesting period. The
Director Plan also provides for each Non-Employee Director to be paid a meeting
fee of $750 or $1,000 for each Committee or Board meeting they attend, as well
as an additional payment, when appointed, of $4,000 for each standing committee
chairman and $20,000 to the Chairman of the Board.
As
of
June 30, 2006, 19,600 shares of restricted stock had been issued to the
Non-Employee Directors and 180,400 shares of stock remain available for issuance
under the Director Plan.
Note
8.
|
2006
Restricted Stock Plan
|
The
2006
Restricted Stock Plan (“Employee Plan”) was approved by shareholders at the
Company’s May 25, 2006 Annual Meeting. The Plan provides for Company employees
to be eligible for grants of restricted stock at the discretion of the Company’s
Board of Directors.
As
of
June 30, 2006, 934 shares of restricted stock had been issued to employees
and
199,066 shares of stock remain available for issuance under the
Plan.
There
is
no material litigation outstanding.
Note
10.
|
Commitments
and Contingencies
|
Effective
January 1, 2003, the Company established the American Ecology Corporation
Management Incentive Plan (“2003 MIP”). The Plan provides for specified
participants to receive bonuses based on pre-tax operating income levels. Plan
bonuses are to be paid out over three years with a maximum in any one year
of
$1,125,000 if pre-tax operating income exceeds $12,000,000 including all 2003
MIP costs. As of June 30, 2006, the 2003 MIP has been fully accrued and no
further expense is expected during 2006.
Effective
January 1, 2006, the Company established the 2006 Management Incentive Bonus
Plan (“2006 MIP”), which provides for selected management participants not
included in the 2003 MIP to receive 2006 bonuses if objective performance
criteria are met. Bonuses under the plan are to be paid up to 45% of the
participant’s salary with maximum aggregate payments of approximately $369,000
due if all performance criteria are met during 2006.
The
Company has accrued for the 2003 and 2006 MIPs as follows:
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
($
in thousands)
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
2003
MIP expense included in SG&A
|
|
$
|
196
|
|
$
|
541
|
|
$
|
550
|
|
$
|
541
|
|
2006
MIP expense included in SG&A
|
|
$
|
88
|
|
$
|
--
|
|
$
|
171
|
|
$
|
--
|
|
On
June
23, 2006, the Company committed to purchase up to 84 rail cars for an aggregate
purchase price of $6,400,000.
The
Company intends that shareholders of record on October 13, 2006 will receive
a
$0.15 per share dividend subject to compliance with applicable Bank
covenants.
Note
11.
|
Closure
and Post Closure
Obligations
|
Closure
and post closure obligations are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated
consistent with Statement of Financial Accounting Standards (“SFAS”) No. 5, with
the liability calculated in accordance with SFAS No. 143. The Company performs
periodic reviews of both non-operating and operating facilities and revises
accruals for estimated post-closure, remediation and other costs when necessary.
The Company’s recorded liabilities are based on best estimates of current costs
and are updated periodically to reflect existing environmental conditions,
current technology, laws and regulations, inflation and other economic factors.
Changes
to reported closure and post closure obligations were as follows ($ in
thousands):
|
|
Accrued
Closure and
Post
Closure Obligation
|
|
|
|
|
|
December
31, 2005 obligation
|
|
$
|
11,687
|
|
Accretion
of obligation
|
|
|
537
|
|
Payment
of obligation
|
|
|
(596
|
)
|
Adjustment
of obligation
|
|
|
(133
|
)
|
June
30, 2006 obligation
|
|
$
|
11,495
|
|
On
April
3, 2006, the Company funded $4.5 million in trust accounts using cash on hand
to
guarantee closure and post closure obligations at its non-operating sites in
Texas and Illinois. At June 30, 2006, $4,536,000 of the Company’s assets,
included in Restricted cash on the balance sheet, were legally restricted for
purposes of settling the closure and post closure obligation.
Note
12.
|
Honeywell
International Contract
|
On
June
8, 2005, the Company entered into a contract with Honeywell International,
Inc.
to transport, treat and dispose of an estimated one million tons of chromite
ore
processing residue over an estimated four to five year period. Waste disposal
at
the Company’s Grand View, Idaho facility began in July 2005. A $3,500,000
advance payment was received from, and will be credited back to Honeywell during
the contract term. The contract provides that the Company will receive 99%
of
the material shipped off-site for disposal and provides for deficiency fees
when
Honeywell is unable to provide specified minimum waste volumes to the Company,
or the Company is unable to accept specified waste volumes when offered. Similar
contract terms were entered into by the Company and its primary
subcontractor.
On
October 6, 2005, Honeywell filed a motion in U.S. District Court, District
of
New Jersey to reduce the amount of material removed from the site by 53%. On
January 3, 2006, the U.S. District Court disqualified Honeywell’s expert witness
and certain attorneys supporting this motion. On February 17, 2006, the U.S.
Court of Appeals for the Third Circuit denied Honeywell’s petition for
permission to appeal. The Company is not aware of any other motions to reduce
the scope of the Honeywell project.
On
November 16, 2005, Honeywell notified the Company that it had filed a brief
with
the U.S. District Court to resume waste excavation and offsite shipments in
the
March 2006 timeframe. The Company assessed Honeywell deficiency fees and was
assessed deficiency fees by its subcontractors up to April 3, 2006, when waste
shipments resumed.
During
the three and six months ended June 30, 2006, shipments under the Honeywell
contract represented 43% and 28% of Company revenues. At June 30, 2006,
$8,941,000 of Accounts receivable was due the Company.
Note
13.
|
Partial
Service Interruption at Robstown, Texas
Facility
|
Waste
treatment at the Company’s Robstown Texas facility was suspended following a
July 1, 2004 fire in the facility’s waste treatment building. Prior to the fire,
treatment revenue represented approximately 50% of facility revenue. Direct
disposal operations, which continued without interruption after the fire,
generated the balance of the facility’s revenue. While the Company is insured
for business interruption, operational upgrades and reduced customer business
adversely impacted 2004 and 2005 financial performance. The Texas facility
restored limited treatment services in December 2004 and full treatment services
on August 8, 2005.
As
of
March 31, 2006, the Company had filed approximately $2,200,000 in business
interruption insurance claims with its insurance carrier, of which $1,332,000
has been recognized and $1,175,000 has been received. The Company has a
receivable for $157,000 of incremental costs due to the fire and is working
with
its insurer to resolve its remaining claim. Differences between the costs
incurred and amounts recognized by the Company may adversely impact 2006
financial performance, and no assurance can be given that the Company will
collect additional funds for this claim.
Note
14.
|
Subsequent
Events
|
On
July
3, 2006, the Company declared a dividend of $0.15 per common share to
stockholders of record on July 14, 2006. The dividend was paid out of cash
on
hand on July 21, 2006 in the amount of $2,720,000.
On
July
27, 2006 the Company awarded stock option grants to 21 employees for an
aggregate of 166,000 shares under the Amended and Restated American Ecology
Corporation 1992 Employee Stock Option Plan. The options carry a $21.74
exercise price, vest 1/3rd each on July 27, 2007, 2008, 2009, and will
expire on July 27, 2016 unless exercised or forfeited at an earlier
date. This
action was taken based on the unanimous recommendation of the Board's
Compensation Committee that Stock Option Grants were an important
component of management retention.
The
following highly compensated management employees were included in the July
27, 2006 stock option grant:
Highly
Compensated Management Employee
|
|
Title
|
|
Options
Granted
|
Stephen
A. Romano
|
|
Chief
Executive Officer
|
|
35,000
|
John
M. Cooper
|
|
V.P
and Chief Information Officer
|
|
20,000
|
Steven
D. Welling
|
|
V.P
of Sales and Marketing
|
|
20,000
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
|
Statements
and information included in this Form 10-Q that are not purely historical are
forward-looking statements within the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements include
statements regarding the Company’s expectations, intentions, beliefs and
strategies regarding the future including sales, earnings per share, cost
structure, market position, market growth opportunities and new services. The
Company may make other forward-looking statements from time to time, including,
but not limited to press releases, public conferences, public investor
conference calls and webcasts. All forward-looking statements are based on
information available to the Company at the time the statements are made, and
the Company assumes no obligation to update any forward-looking statements.
Actual results are subject to a number of risks and uncertainties that could
cause actual results to differ materially from those included in the
forward-looking statements. Some of these risks and uncertainties are discussed
below.
The
reader should carefully consider the following risk factors. The risks and
uncertainties described below are not the only ones the Company may face.
Additional risks and uncertainties Not
Known
to us or
that we now think are Immaterial
may also
impair the Company’s business operations. General
risks
that apply to most businesses also apply to the Company such as general economic
conditions, availability of employees or other resources, inflation,
seasonality, access to capital, natural disasters, acts of God, war, or terror.
While not specified below, the Not
Known, Immaterial, or General Risks could
cause actual results to differ materially from those included in the
forward-looking statements just as significantly as the risks specified
below.
If
any of
the following specified risks were to occur, the Company’s business, financial
condition and results of operations could be materially and adversely affected.
If that occurs, the trading price of the Company’s common stock could decline,
and investors may lose all or part of their investment.
Access
to Cost Effective Transportation Services
Revenue
at each of the Company’s facilities is subject to potential risks from
disruptions in rail or truck transportation services which are relied upon
to
deliver waste to these facilities. Events such as increases in fuel costs,
strikes, natural disasters and other acts of God, war, or terror could prevent
or delay shipments and reduce both volumes and revenues. In addition,
transportation services may be limited by economic conditions, including
increased demand for rail or trucking services, resulting in sustained periods
of slower service. No assurance can be given that we can procure transportation
services at historic rates. Such factors could limit the Company’s ability to
implement its growth plan and increase revenues.
Ability
and Willingness to Pay Dividends
The
Company’s ability to pay dividends is subject to certain conditions such as
continued compliance with bank covenants and the Board of Director’s approval of
any such dividend declaration or payment. Numerous events or situations could
cause the Company to no longer be in compliance with bank covenants, or cause
the Board of Directors to no longer approve the payment of
dividends.
Risks
Described in December 31, 2005 Form 10-K
Compliance
and Changes with Applicable Laws and Regulations
Exposure
to Litigation
Access
to
Insurance and Financial Assurances
Implementation
of New Technologies
Competitive
Environment
Economic
Conditions affecting the Company’s Customers
Potential
Loss of Major Contracts
Potential
Fires or Other Incidents Limiting Operations
Access
to
Cost Effective Rail Transportation Service
Utilization
of Net Operating Loss Carryforwards
Ability
to Perform Contracts as Required
Significant
Sales by the Selling Stockholders May Cause the Market Price of the Company’s
Stock to Decline
Introduction
The
Company is a hazardous, PCB, industrial and radioactive waste management company
providing transportation, treatment and disposal services to commercial and
government entities including, but not limited to oil refineries, chemical
manufacturing plants, steel mills, the U.S. Department of Defense, biomedical
facilities, universities and research institutions, and the nuclear power
industry. The majority of its revenues are derived from fees charged at the
Company’s four fixed waste disposal facilities. The Company and its predecessors
have been in business for 53 years.
A
significant portion of the Company’s revenue is attributable to discrete waste
clean-up projects (“Event Business”) which vary substantially in size and
duration. The one-time nature of Event Business necessarily creates variability
in revenue and earnings. Moreover, the types and amounts of waste received
from
recurring (“Base Business”) customers also vary quarter to quarter. These
variations in service mix are difficult to forecast with precision, and can
produce large quarter to quarter swings in revenue, gross profit, gross margin
and operating profit. Management’s strategy is to continue expanding its
recurring customer business while simultaneously securing both short term and
extended duration Event Business projects. When the Company’s Base Business
covers the Company’s fixed costs, a significant portion of the Event Business
revenue generally falls through to the bottom line. This strategy takes
advantage of the operating leverage inherent to the largely fixed cost nature
of
the waste disposal business.
Critical
Accounting Policies
In
preparing the financial statements, management makes many estimates and
assumptions that affect the Company’s financial position and results of
operations. Accounting for the July 1, 2004 Texas Fire, Disposal Facility
Accounting, and Litigation involve subjective judgments, estimates and
assumptions that would likely produce a materially different financial position
and result of operations if different judgments, estimates, or assumptions
were
used. These matters are discussed below.
Accounting
for the July 1, 2004 Texas fire
A
July 1,
2004 fire in the Robstown, Texas facility’s waste treatment building resulted in
an insurance claim for Property
and Equipment damaged in the fire. As of June 30, 2006, the Company had fully
impaired the $679,000 in book value of assets damaged in the fire, and
recognized and received $905,000 of property insurance proceeds. As of June
30, 2006, the Company had filed approximately $2,200,000 in business
interruption insurance claims with its insurance carrier of which $1,332,000
has
been recognized and $1,175,000 has been received. The Company has a receivable
for $157,000 of incremental costs due to the fire and is working with its
insurer to resolve its remaining claim. No assurance can be given that the
Company will collect any additional funds for this claim.
Disposal
Facility Accounting
In
general terms, a disposal cell development asset exists for the cost of building
usable disposal space and a closure liability exists for closing, maintaining
and monitoring the disposal unit once this space has been filled. Major
assumptions and judgments used to calculate cell development assets and closure
liabilities are as follows:
§
|
Personnel
and equipment costs incurred to construct disposal cells are capitalized
as a cell development asset.
|
§
|
The
cell development asset is amortized as each available cubic yard
of
disposal space is filled. Periodic independent engineering survey
and
inspection reports are used to determine the remaining volume available.
These reports take into account waste volume, compaction rates and
space
reserved for capping filled cells. Additionally, changes in the estimated
useful lives of the cells or related expansion plans have a direct
effect
on the amortization expense related to those cells during future
periods.
|
§
|
The
closure liability is the present value based on a current cost estimate
prepared by an independent engineering firm of the costs to close,
maintain and monitor filled disposal units. Management estimates
the
timing of payment, accretes the current cost estimate by an estimated
cost
of living (1.5%), and then discounts (9.3%) the accreted current
cost
estimate back to a present value. The final payments of the closure
liability are estimated as being paid in 2056 based upon current
permitted
capacity and estimated annual usage.
|
Litigation
The
Company is periodically involved in litigation requiring estimates of timing
and
loss potential whose disposition is controlled by the judicial process or other
factors. The Company is not presently involved in any material litigation;
however litigation that we currently believe to be immaterial or are unaware
of
may ultimately prove to be material.
Overall
Company Performance
The
Company’s financial performance for the three and six months ended June 30, 2006
was substantially improved over the first three and six months of 2005. The
quarter to quarter improvements primarily reflect increased volumes as well
as a
more favorable waste service mix during the three and six months ended June
30,
2006, as discussed below.
Outlook
for 2006
The
Company continues to project that net earnings for 2006 will be at the upper
end
of its previously announced guidance range of $0.72 to $0.82 per diluted share.
Management expects softer third quarter financial performance, however, due
to
pending completion of an event project shipping to its Washington facility
as
well as reduced waste shipments under the Company’s multi-year contract with the
U.S. Army Corps of Engineers. This reduction in Army Corps work reflects delays
in shipments from several ongoing remediation projects pending appropriation
of
funds for the next federal fiscal year. Management anticipates shipments from
these ongoing projects to resume during the fourth quarter of 2006.
Results
of Operations
The
following table presents, for the periods indicated, the operating costs as
a
percentage of revenues in the consolidated income statement:
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
($
in 000’s)
|
|
June
30, 2006
|
|
June
30, 2005
|
|
June
30, 2006
|
|
June
30, 2005
|
|
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
$
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
29,924
|
|
|
|
|
|
18,779
|
|
|
|
|
|
51,446
|
|
|
|
|
|
31,333
|
|
|
|
|
Transportation
costs
|
|
|
11,459
|
|
|
38.3
|
%
|
|
3,823
|
|
|
20.4
|
%
|
|
16,516
|
|
|
32.1
|
%
|
|
7,036
|
|
|
22.5
|
%
|
Other
direct operating costs
|
|
|
7,940
|
|
|
26.5
|
%
|
|
5,736
|
|
|
30.5
|
%
|
|
14,695
|
|
|
28.6
|
%
|
|
11,236
|
|
|
35.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
10,525
|
|
|
35.2
|
%
|
|
9,220
|
|
|
49.1
|
%
|
|
20,235
|
|
|
39.3
|
%
|
|
13,061
|
|
|
41.7
|
%
|
SG&A
|
|
|
3,061
|
|
|
10.2
|
%
|
|
3,358
|
|
|
17.9
|
%
|
|
6,544
|
|
|
12.7
|
%
|
|
5,872
|
|
|
18.7
|
%
|
Business
interruption insurance claim
|
|
|
--
|
|
|
0.0
|
%
|
|
--
|
|
|
0.0
|
%
|
|
--
|
|
|
0.0
|
%
|
|
(41
|
)
|
|
-0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
7,464
|
|
|
24.9
|
%
|
|
5,862
|
|
|
31.2
|
%
|
|
13,691
|
|
|
26.6
|
%
|
|
7,230
|
|
|
23.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
205
|
|
|
0.7
|
%
|
|
93
|
|
|
0.5
|
%
|
|
393
|
|
|
0.8
|
%
|
|
178
|
|
|
0.6
|
%
|
Interest
expense
|
|
|
1
|
|
|
0.0
|
%
|
|
48
|
|
|
0.3
|
%
|
|
2
|
|
|
0.0
|
%
|
|
95
|
|
|
0.3
|
%
|
Other
income
|
|
|
174
|
|
|
0.6
|
%
|
|
22
|
|
|
0.1
|
%
|
|
458
|
|
|
0.9
|
%
|
|
39
|
|
|
0.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income before income taxes
|
|
|
7,842
|
|
|
26.2
|
%
|
|
5,929
|
|
|
31.6
|
%
|
|
14,540
|
|
|
28.3
|
%
|
|
7,352
|
|
|
23.5
|
%
|
Income
tax expense
|
|
|
2,915
|
|
|
9.7
|
%
|
|
2,223
|
|
|
11.8
|
%
|
|
5,434
|
|
|
10.6
|
%
|
|
2,790
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
4,927
|
|
|
16.5
|
%
|
|
3,706
|
|
|
19.7
|
%
|
|
9,106
|
|
|
17.7
|
%
|
|
4,562
|
|
|
14.6
|
%
|
Comparison
of Three Months Ended June 30, 2006 and 2005
Revenue
For
the
three months ended June 30, 2006, the Company reported consolidated revenue
of
$29,924,000 a 59% increase over the $18,779,000 reported for the same period
in
2005. All four waste disposal facilities generated higher revenue during the
second quarter of 2006 and volumes increased 2% over the same quarter last
year.
The Company also achieved a 6% increase in average selling price (“ASP”) for its
treatment and disposal services. The increase in waste volume reflected an
increase in both project (or “Event”) work and base business during the quarter.
The increase in ASP reflects an increased percentage of revenue from higher
priced niche and treatment services. Also contributing to the quarterly revenue
growth was a 200% increase in transportation services provided over the same
quarter last year. The following customers represented 10% or more of revenue
during the three months ended June 30:
Customer
|
|
2006
|
|
2005
|
|
Honeywell
International
|
|
|
43
|
%
|
|
--
|
|
U.S.
Army Corps of Engineers
|
|
|
12
|
%
|
|
37
|
|
Management
expects a substantial reduction in Army Corps work during the third quarter
of
2006 on several ongoing remediation projects pending appropriation of funds
for
the next federal fiscal year. Management anticipates shipments from these
ongoing projects to resume during the fourth quarter.
Operating
Disposal Facilities
Revenue
at the Richland, Washington LLRW disposal facility increased 109% for the three
months ended June 30, 2006 from the same period in 2005. This increase was
due
to a large non rate-regulated project which is expected to be completed in
August, 2006. For 2006, the Washington Utilities and Transportation Commission
has approved a revenue requirement of $5,629,000 for the Richland facility’s
rate-regulated low-level radioactive waste interstate compact business, of
which
$1,232,000 was recorded in the three months ended June 30, 2006. Management
currently expects the Richland facility to reach its approved 2006 revenue
requirement.
At
the
Grand View, Idaho disposal facility a 222% increase in transportation services
offset flat volumes and a 4% decrease in ASP to produce a 65% increase in
revenue over the same quarter last year. Management expects the U.S. Army Corps
of Engineers to ship minimal quantities of waste during the third quarter of
2006, and Honeywell International to ship larger quantities of waste to the
facility during the quarter.
At
the
Beatty, Nevada hazardous treatment and disposal facility, revenue increased
37%
for the three months ended June 30, 2006 from the same period in 2005. The
increased revenue reflects flat waste volumes offset by a more favorable service
mix, as evidenced by a 36% increase in ASP. The flat volume was due to decreased
waste shipments from non-hazardous industrial waste projects. Higher ASP
reflected expanded treatment services, including receipt of corrosive wastes,
allowed by the facility’s five year hazardous waste permit renewal which took
effect in April 2005.
At
the
Robstown, Texas hazardous treatment and disposal facility, revenue increased
24%
for the three months ended June 30, 2006 over the same period in 2005. This
increase reflected a 3% ASP reduction for treated wastes offset by a 26%
increase in waste volumes received at the site compared to the second quarter
of
2005.
Direct
Operating Costs
For
the
three months ended June 30, 2006, consolidated direct operating costs increased
103% to $19,399,000 compared to $9,559,000 for the same period in 2005. This
primarily reflects increased transportation costs, which increased $7,636,000
or
80% of the increase in direct operating costs quarter to quarter. Relative
to
revenue, direct operating costs increased to 65% of revenue in the second
quarter of 2006 up from 51% for the same quarter last year.
Operating
Disposal Facilities
Direct
costs at all four of the operating disposal facilities increased from the same
quarter last year. This increase was largely driven by an increase in direct
costs at the Grand View, Idaho facility of $9,018,000 due to increased wages
and
consumption of waste treatment additives as well as increased transportation
costs of $7,447,000 to transport higher waste volumes. Higher fuel charges
continue to push costs higher.
Non
Operating Disposal Facilities
Non
Operating Disposal Facilities incur current period expenses for the accretion
of
engineering, laboratory and other contractor expenses and labor costs required
to meet the Company’s obligations subsequent to operational use. For the three
months ended June 30, 2006 and 2005, the Company reported $1,000 and $12,000
of
expenses on formerly proposed development projects, and $92,000 and $91,000
of
costs in 2006 and 2005 to remediate or close facilities subsequent to
use.
Gross
Profit
Significantly
higher quarterly revenue contributed to a 14% increase in gross profit, which
was $10,525,000 for the quarter compared with a gross profit of $9,220,000
for
the same quarter last year. Increased direct costs at all four disposal
facilities were more than offset by the higher revenue, producing an increased
gross profit but a decreased gross margin. This is consistent with the Company’s
strategy to increase gross profit through the bundling of rail transportation
and disposal services. Gross margin decreased to 35% of revenue compared to
49%
of revenue in 2005. Large remediation projects are expected to increase earnings
while simultaneously decreasing gross margins when low margin transportation
services are bundled with the Company’s core treatment and disposal services.
The Company seeks to maximize contribution margin and gross profit by
controlling direct costs and increasing waste volumes.
Selling,
General and Administrative Costs (SG&A)
For
the
three months ended June 30, 2006, the Company reported SG&A of $3,061,000
(10% of revenue), a 9% decrease from the $3,358,000 (18% of revenue) for the
same three months of 2005.
Operating
Disposal Facilities
During
the quarter ended June 30, 2006, Operating Disposal Facilities SG&A
increased $26,000 from the same three months of 2005.
Corporate
During
the quarter ended June 30, 2006, Corporate SG&A decreased $322,000. This
decrease reflects the reduction in the 2003 Management Incentive Plan second
quarter accrual of $196,000 and $541,000 for 2006 and 2005, respectively. The
Company did not accrue any Management Incentive Plan obligation in the first
quarter of 2005 but caught up the accrual due to above budget second quarter
2005 operating income. As of June 30, 2006 the 2003 MIP has been fully accrued
for 2006.
Non
Operating Disposal Facilities
Non
Operating Disposal Facilities incur primarily legal costs to recover the
Company’s investment in formerly proposed disposal site development projects in
Ward Valley, California and Butte, Nebraska. For the three months ended June
30,
2006 and 2005, the Company reported $1,000 and $2,000 of such SG&A expenses.
Comparison
of Six Months Ended June 30, 2006 and 2005
Revenue
For
the
six months ended June 30, 2006, the Company reported consolidated revenue of
$51,446,000, a 64% increase over the $31,333,000 reported for the same period
in
2005. All four disposal facilities generated higher revenue during the first
half of 2006. The
higher revenue resulted from both increased waste volumes, and higher average
selling price (“ASP”) for the Company’s treatment and disposal services. At its
three hazardous waste disposal facilities, volumes increased 18% over the same
six months last year. The increase in waste volume reflects an increase in
project (or “Event”) work performed during the period, primarily from the
Honeywell contract. The 7% increase in year-to-date 2006 ASP reflected a more
favorable mix of niche business. The balance of the increase in consolidated
revenue resulted from increased transportation revenue as the Company continued
to employ its strategy of selective bundling of disposal with transportation
services to win targeted contracts.
The
following customers represented 10% or more of revenue during the six months
ended June 30:
Customer
|
|
2006
|
|
2005
|
|
Honeywell
International
|
|
|
28
|
%
|
|
--
|
|
U.S.
Army Corps of Engineers
|
|
|
17
|
%
|
|
30
|
%
|
Management
expects a reduction in Army Corps work during the third quarter of 2006 pending
appropriation of funds for the next federal fiscal year. Management anticipates
shipments from several ongoing Army Corps projects to resume during the fourth
quarter.
Operating
Disposal Facilities
Revenue
at the Richland, Washington LLRW disposal facility increased 117% for the six
months ended June 30, 2006 over the same period in 2005. This increase was
due
to a large non rate-regulated project expected to end in August 2006. The
Washington Utilities and Transportation Commission has approved a 2005 revenue
requirement of $5,629,000 for the Richland facility’s rate-regulated low-level
radioactive waste interstate compact business, of which $2,834,000 was
recognized during the first six months of 2006. Management currently expects
the
Richland facility to reach its approved 2006 revenue requirement.
At
the
Grand View, Idaho facility, 19% higher waste volumes, 5% lower disposal ASPs,
and a 147% increase in transportation services produced a 64% increase in
revenue over the same six months last year.
Revenue
at the Beatty, Nevada hazardous treatment and disposal facility increased 38%
for the six months ended June 30, 2006 from the same period in 2005. This
increased reflects a 33% increase in ASP and a 4% increase in disposal volume.
During the second quarter of 2005, the facility received regulatory approval
to
treat corrosive wastes which has contributed to the increase in
ASP.
Revenue
at the Robstown, Texas hazardous treatment and disposal facility increased
59%
for the six months ended June 30, 2006 over the same period in 2005. This
increased reflects a more favorable mix of wastes received at the site,
resulting in a 20% increase in ASP, and a 32% increase in disposal volume.
A
fire in the permitted containment building on July 1, 2004 continued to limit
the scope of treatment services offered until a new permitted containment
building was placed in service in August 2005.
Direct
Operating Costs
For
the
six months ended June 30, 2006, consolidated direct operating costs increased
71% to $31,211,000 (61% of revenue) compared to $18,272,000 (58% of revenue)
for
the same period in 2005. This primarily reflected increased transportation
costs
and waste volumes. Direct operating costs increased slightly relative to
revenue, reflecting an increase in low margin transportation services that
were
bundled with disposal services. The Company’s transportation assets were fully
utilized at the end of the second quarter of 2005, an improvement over the
first
quarter of 2005 when ongoing project shipment delays led to substantial
underutilization of the Company’s leased railcar fleet. Use of Company-owned
railcars purchased in late 2005 and early 2006 also reduced costs based on
their
lower monthly expense relative to leased railcars.
Operating
Disposal Facilities
Direct
costs at all four disposal facilities increased from the same six months last
year. The increase in consolidated direct operating costs for the Company was
largely driven by an increase in direct costs at the Grand View, Idaho facility
of $11,283,000. This increase was due to increased waste volumes and related
transportation costs. Approximately $10,042,000 or 89% of the increase in direct
operating costs at Grand View was for costs incurred to transport waste to
Idaho
by rail. During the six months ended June 30, 2006, the Company continued to
receive a higher percentage of waste requiring treatment, resulting in higher
additive costs. Higher fuel charges also increased transportation costs over
the
first six months of 2005.
Non
Operating Disposal Facilities
Non
Operating Disposal Facilities incur current period expenses for the accretion
of
engineering, laboratory and other contractor expenses and labor costs required
to meet the Company’s obligations subsequent to operational use. For the six
months ended June 30, 2006 and 2005, the Company reported $10,000 and $26,000
in
expenses on proposed development projects, and $174,000 and $183,000 in costs
to
remediate and/or monitor such facilities.
Gross
Profit
Significantly
higher revenue allowed the Company to generate a 55% increase in gross profit,
pushing gross profit to $20,235,000 compared with a gross profit of $13,061,000
for the first six months last year. Increased disposal revenue at all operating
hazardous waste disposal facilities produced higher earnings due to a more
favorable service mix. This combined with the operating leverage benefits
produced by high volume throughput. Gross margin decreased to 39% of revenue
from 42% of revenue due to increased transportation services provided during
2006.
Selling,
General and Administrative Costs (SG&A)
For
the
six months ended June 30, 2006, the Company reported SG&A of $6,544,000 (13%
of revenue), an 11% increase from the $5,872,000 (19% of revenue) for the same
six months of 2005. The increase in SG&A primarily resulted from increases
in salaries, bonuses and sales commissions as the Company has hired additional
personnel and as sales and as operating income targets were met earlier in
the
year.
Operating
Disposal Facilities
During
the six months ended June 30, 2006, Operating Disposal Facilities SG&A
increased $249,000 to $2,613,000 from $2,364,000 for the six months ended June
30, 2005. The increase in Operating Disposal Facilities SG&A is primarily
due to additional costs for personnel hired to manage increased waste
volumes.
Corporate
During
the six months ended June 30, 2006, Corporate SG&A increased $429,000. The
increase in SG&A is from increases from a variety of expenses, primarily
compensation and director fees, which management expects to decrease in the
second half of 2006.
The
Company first complied with the internal control requirements of Section 404
of
the Corporate Reform Act of 2002 (Sarbanes-Oxley) during the second quarter
of
2005 after investing significant time and resources and retaining independent
contractors to assist. While the Company continues to devote resources to this
effort, the time and cost required to maintain Section 404 compliance is
expected to should decrease from 2005.
Non
Operating Disposal Facilities
Non
Operating Disposal Facilities primarily reflect legal costs on past efforts
to
recover the Company’s investment in the formerly proposed Butte, Nebraska and
Ward Valley, California projects. For the six months ended June 30, 2006 and
2005, the Company reported $1,000 and $7,000 of SG&A expenses, respectively,
at Non Operating Disposal Facilities. With these recovery efforts completed,
any
future expenses are expected to be minimal.
Comparison
of Three and Six Months Ended June 30, 2006 and 2005
Interest
Income
For
the
three and six months ended June 30, 2006, the Company earned $205,000 and
$393,000 of interest income, an increase from $93,000 and $178,000 in the same
periods of 2005 due to higher cash balances and higher interest rates available
on short term investments. Interest income is earnings on cash balances,
short-term investments, and notes receivable for which income is a function
of
prevailing market rates and balances. Based on current interest rates, the
Company anticipates approximately $60,000 a month of interest income during
2006.
Interest
Expense
For
the
three and six months ended June 30, 2006, the Company reported interest expense
of $1,000 and $2,000, a decrease from $48,000 and $95,000 in 2005. The primary
cause of this decrease was the payoff of the term loan with Wells Fargo Bank
during December 2005. At June 30, 2006, the line of credit had a zero balance
and the only interest bearing debt was incurred on a capital lease for office
equipment expected to be retired by year end.
Other
Income (Loss)
Other
Income is composed of the following ($ in thousands):
|
|
Three
Months Ended June 30,
|
|
Six
Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Reimbursed
legal fees
|
|
|
--
|
|
|
--
|
|
|
299
|
|
|
--
|
|
Gain
on sale or rent of property rights
|
|
|
174
|
|
|
22
|
|
|
166
|
|
|
39
|
|
Other
miscellaneous income, net
|
|
|
--
|
|
|
--
|
|
|
(7
|
)
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
$
|
174
|
|
$
|
22
|
|
$
|
458
|
|
$
|
39
|
|
Income
Taxes
The
components of the income tax provision were as follows for the periods ended
June 30 (in thousands):
|
|
Three
Months Ended
|
|
Six
Months Ended
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
State
income tax expense
|
|
$
|
300
|
|
$
|
167
|
|
$
|
409
|
|
$
|
210
|
|
Federal
income tax expense
|
|
|
2,695
|
|
|
2,056
|
|
|
5,025
|
|
|
2,580
|
|
Income
tax expense
|
|
$
|
2,915
|
|
$
|
2,223
|
|
$
|
5,434
|
|
$
|
2,790
|
|
The
tax
effects of temporary differences between income for financial reporting and
income taxes give rise to deferred tax assets and liabilities. The potential
realization of a significant portion of net deferred tax assets is based in
part
on the Company’s estimates of the timing of reversals of certain temporary
differences and on the generation of taxable income before such reversals.
The
net
operating loss carry forward at June 30, 2006 was approximately $5,000,000
and
expires on various dates between 2019 and 2023. Utilization of the net operating
loss carry forwards results in an income tax expense of approximately 6% of
pretax income expected to be paid in cash. The approximately 35% income tax
rate
will be offset against the remaining available net operating loss carry
forwards, which are currently projected to be fully utilized during the third
or
fourth quarter of 2006, at which time the full 37% effective tax rate will
be
paid in cash.
On
July
20, 2005, a registration statement on Form S-3 was filed with the Securities
and
Exchange Commission allowing for two Directors of the Company to sell their
shares without certain restrictions (one of the two Directors has since left
the
Board). Section 382 of the Internal Revenue Code imposes an annual limitation
on
the amount of net operating loss carryforwards that may be used to offset
taxable income when a corporation has undergone significant changes in its
ownership. Should a change of control occur due to the two Directors selling
their shares, the Company may be subject to an annual limitation upon the usage
of the net operating losses
The
Company will continue to assess the deferred tax asset for utilization as needed
but at least annually.
Seasonal
Effects
Operating
revenues are generally lower in the winter months than warmer months when more
short duration, one-time remediation projects tend to occur. While both disposal
and processing revenue are generally more affected by market conditions than
seasonality, clean-up project weather delays adversely impacted the first
quarter of 2005.
CAPITAL
RESOURCES AND LIQUIDITY
At
June
30, 2006, cash and short term investments totaled $10,817,000, a decrease of
$9,038,000 from December 31, 2005. The decrease in cash reflects the Company’s
capital expenditures, dividend payments, the restriction of cash in trust
accounts, and growth in accounts receivable offset by earnings.
The
Company's days sales outstanding (“DSO”) increased to 67 days at June 30, 2006,
compared to 53 days at December 31, 2005. An increase was expected due to the
60
day payment terms set forth in the Company’s contract with Honeywell
International, Inc.
As
of
June 30, 2006, the Company’s liquidity, as measured by the current ratio, was
2.8 to 1.0. The debt to equity ratio, or total liabilities divided by
stockholders equity, decreased to 0.4:1.0 at June 30, 2006. The Company expects
the current ratio to decrease during 2006 due to additional capital
expenditures, dividend payments, increased accounts payable from the Honeywell
project, and expected usage of the majority of the current portion of its
deferred tax asset.
Sources
of Cash
On
December 13, 2005, the Company increased its line of credit with Wells Fargo
Bank to a maximum amount available of $15,000,000 with a maturity date of June
15, 2008. The line of credit is unsecured. Monthly interest only payments are
required based on a pricing grid, under which the interest rate decreases or
increases based on the Company’s ratio of funded debt to earnings before
interest, taxes, depreciation and amortization. The Company can elect to borrow
monies utilizing the Prime Rate or the offshore London Inter-Bank Offering
Rate
(“LIBOR”) plus an applicable spread.
Company
operations produced an average of almost $5,000,000 a quarter in cash flow
over
the past three years. Management expects 2006 quarterly cash flow from
operations to be higher, on average. The $10,817,000 in cash and short term
investments at June 30, 2006 was comprised of short term investments which
were
not required for operations of $9,205,000, cash immediately available for
operations of $4,157,000, and a net checks outstanding amount of
($2,545,000).
Uses
of Cash
Management
currently expects capital spending of approximately $18,000,000 in 2006. Major
projects include more railcars, new track and rail-to-truck transload facilities
and related heavy equipment in Texas and Idaho, and a new treatment building
in
Nevada. While the majority of 2006 capital expenditures have been completed,
on
June 23, 2006, the Company committed to purchase up to an additional 84 gondola
railcars for approximately $6,400,000 for delivery in the third quarter of
2006.
On
April
3, 2006, the Company deposited $4.5 million into interest bearing trust accounts
to guarantee its non-operating disposal site closure and post-closure
obligations. This replaced the insurance policy which previously provided
financial assurance for those sites. The insurance policy remains in effect
through December 19, 2008, at a reduced premium, for financial assurance
obligations at operating facilities.
The
Company paid $0.15 quarterly dividends on January 13, 2006, April 21, 2006,
and
July 21, 2006 out of cash on hand and currently intends to pay an additional
$0.15 quarterly dividend on October 20, 2006 subject to certain conditions
including continued compliance with bank covenants. The line of credit agreement
allows capital stock dividends as long as an event of default has not occurred,
and will not occur as a result of the dividend.
The
Company believes that cash on hand and cash flow from operations, augmented
if
needed by periodic borrowings under the line of credit, will be sufficient
to
meet the Company’s cash needs for the foreseeable future.
|
Quantitative
and Qualitative Disclosures about Market
Risk.
|
The
Company does not maintain equities, commodities, derivatives, or any other
instruments for trading or any other purposes, and does not enter into
transactions denominated in currencies other than the U.S. Dollar.
The
Company has minimal interest rate risk on investments or other assets due to
the
Company’s preservation of capital approach to investments. At June 30, 2006,
approximately $10,817,000 was held in cash or short term investments at terms
ranging from overnight to six months. Together, these items earned interest
at
approximately 4% and comprised 11% of assets.
(a)
As of
the end of the period covered by this quarterly report, Company management,
under the direction of the Chief Executive Officer and Chief Accounting Officer,
carried out an evaluation of the effectiveness of the design and operation
of
the Company’s disclosure controls and procedures pursuant to Rule 13a-14 of the
Securities Exchange Act of 1934 (Exchange Act). Based upon that evaluation,
the
Chief Executive Officer and Chief Accounting Officer believe that the Company’s
disclosure controls and procedures are effective in timely alerting them to
material information required to be disclosed in the Company’s Exchange Act
filings.
(b)
The
Company maintains a system of internal controls that are designed to provide
reasonable assurance that its records and filings accurately reflect the
transactions engaged in. For the quarter ending June 30, 2006, there were no
changes to internal controls or in other factors that could materially affect
these internal controls.
Part
II OTHER INFORMATION.
The
Company is not presently involved in any material
litigation.
Item
2. |
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
None.
|
Defaults
Upon Senior Securities.
|
None.
|
Submission
of Matters to a Vote of Security
Holders.
|
The
Company held its Annual Meeting of Stockholders on May 25, 2006. On the record
date of March 31, 2006 there were 18,064,116 shares of common stock issued
and
outstanding. At the Annual Meeting the Company’s seven nominees for Director
were all elected to the Board, the selection of Moss Adams LLP as the Company’s
independent auditor was ratified, and the 2006 Restricted Stock Plan was
approved. The voting on the three items was as follows:
Nominee
for Director
|
For
|
Withheld
|
|
|
|
Roy
C. Eliff
|
17,061,942
|
95,612
|
Edward
F. Heil
|
13,443,374
|
3,714,180
|
Kenneth
C. Leung
|
15,727,469
|
1,430,085
|
Richard
Riazzi
|
16,836,056
|
321,498
|
Stephen
A. Romano
|
16,544,358
|
613,196
|
Jimmy
D. Ross
|
16,835,381
|
322,173
|
Richard
T. Swope
|
16,870,658
|
286,896
|
|
|
|
Ratification
of Moss Adams LLP
|
|
|
|
|
|
For
|
17,118,436
|
|
Against
|
5,817
|
|
Abstain
|
33,300
|
|
|
|
|
Approval
of 2006 Restricted Stock Plan
|
|
|
|
|
|
For
|
12,148,545
|
|
Against
|
195,781
|
|
Abstain
|
72,178
|
|
Broker
Non-Vote
|
4,741,050
|
|
Following
its annual meeting of stockholders on May 25, 2006 in Chicago, Illinois,
American Ecology Corporation’s Board of Directors met and elected Kenneth C.
Leung to serve as chairman of the newly elected Board and appointed John W.
Poling to the Board of Directors.
None.
|
(a)
|
The
following exhibits are filed as part of this
report:
|
Exhibit
No.
|
Description
|
31.1
|
Certifications
of June 30, 2006 Form 10-Q by Chief Executive Officer dated July
28,
2006
|
31.2
|
Certifications
of June 30, 2006 Form 10-Q by Chief Accounting Officer dated July
28,
2006
|
32.1
|
Certifications
of June 30, 2006 Form 10-Q by Chief Executive Officer dated July
28,
2006
|
32.2
|
Certifications
of June 30, 2006 Form 10-Q by Chief Accounting Officer dated July
28,
2006
|
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
AMERICAN
ECOLOGY CORPORATION
|
|
(Registrant)
|
|
|
|
Date:
July 28, 2006
|
By:/s/
Stephen A. Romano
|
|
|
Stephen
A. Romano
|
|
President,
Chief Executive Officer and Chief Operating Officer
|
|
|
|
Date:
July 28, 2006
|
By:/s/
Michael J. Gilberg
|
|
|
Michael
J. Gilberg
|
|
Vice
President and Controller, Chief
|
|
Accounting
Officer, Secretary and Treasurer
|
EXHIBIT
INDEX
Exhibit
|
Description
|
|
|
|
Certifications
of June 30, 2006 Form 10-Q by Chief Executive Officer dated July
28,
2006
|
|
Certifications
of June 30, 2006 Form 10-Q by Chief Accounting Officer dated July
28,
2006
|
|
Certifications
of June 30, 2006 Form 10-Q by Chief Executive Officer dated July
28,
2006
|
|
Certifications
of June 30, 2006 Form 10-Q by Chief Accounting Officer dated July
28,
2006
|