US Ecology, Inc.
Annual Report 2012

Plain-text annual report

Use these links to rapidly review the documentTABLE OF CONTENTS Item 8. Financial Statements and Supplementary DataTable of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 10-KCommission file number: 0000-11688US ECOLOGY, INC.(Exact name of registrant as specified in its charter)Delaware(State or other jurisdiction ofincorporation or organization) 95-3889638(I.R.S. EmployerIdentification No.)300 E. Mallard Dr., Suite 300 Boise, Idaho 83706(Address of principal executiveoffices) (Zip Code)Registrant's telephone number, including area code: (208) 331-8400Securities registered pursuant to Section 12(b) of the Act: NoneSecurities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 parvalue (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No 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 ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2012ORo TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to .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 filingrequirements for the past 90 days. Yes  No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired 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 suchshorter period that the registrant was required to submit and post such files). Yes  No oIndicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No The aggregate market value of the registrant's voting stock held by non-affiliates on June 30, 2012 was approximately $320.6 million based on theclosing price of $17.74 per share as reported on the NASDAQ Global Market System.At February 27, 2013, there were 18,398,970 shares of the registrant's Common Stock outstanding.Documents Incorporated by ReferenceListed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10-K into which such portions areincorporated:1.The registrant's definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on or aboutMay 30, 2013 to be filed within 120 days after the registrant's fiscal year ended December 31, 2012, portions of which are incorporatedby reference into Part III of this Form 10-K. Large accelerated filer o Accelerated filer  Non-accelerated filer o(Do not check if asmaller reporting company) Smaller reporting company oTable of ContentsUS ECOLOGY, INC. FORM 10-K TABLE OF CONTENTS 2Item PagePART I Cautionary Statement 31. Business 41A. Risk Factors 161B. Unresolved Staff Comments 242. Properties 243. Legal Proceedings 254. Mine Safety Disclosures 25PART II 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities 266. Selected Financial Data 287. Management's Discussion and Analysis of Financial Condition and Results of Operations 287A. Quantitative and Qualitative Disclosures About Market Risk 478. Financial Statements and Supplementary Data 499. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 849A. Controls and Procedures 849B. Other Information 84PART III 10. Directors, Executive Officers and Corporate Governance 8511. Executive Compensation 8512. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 8513. Certain Relationships and Related Transactions and Director Independence 8614. Principal Accounting Fees and Services 86PART IV 15. Exhibits and Financial Statement Schedules 86SIGNATURES 87Table of ContentsPART I Cautionary Statement for Purposes of Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Statements that are nothistorical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statementsinclude 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 andoperating results, strategic objectives and means to achieve those objectives, the amount and timing of capital expenditures, repurchases of its stockunder approved stock repurchase plans, the amount and timing of interest expense, the likelihood of our success in expanding our business, financingplans, 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 andassumptions, which in turn are based on currently available information. Important assumptions include, among others, those regarding demand forCompany services, expansion of service offerings geographically or through new or expanded service lines, the timing and cost of planned capitalexpenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements alsoinvolve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-lookingstatement. Many of these factors are beyond our ability to control or predict. Such factors include the replacement of non-recurring event clean-upprojects, a loss of a major customer, our ability to permit and contract for timely construction of new or expanded disposal cells, our ability to renewour operating permits or lease agreements with regulatory bodies, loss of key personnel, compliance with and changes to applicable laws, rules, orregulations, fluctuations in foreign currency markets, access to insurance, surety bonds and other financial assurances, a deterioration in our laborrelations or labor disputes, our ability to perform under required contracts, failure to realize anticipated benefits and operational performance fromacquired operations, adverse economic conditions, government funding or competitive pressures, incidents or adverse weather conditions that couldlimit or suspend specific operations, access to cost effective transportation services, lawsuits, market conditions, our willingness or ability to paydividends, 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 ExchangeCommission (the "SEC"), we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that theexpectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance. Before you invest in ourcommon 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 themany material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree withany statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing orconfirming 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.3Table of ContentsItem 1. BusinessGeneralThe table below contains definitions that are used throughout this Annual Report on Form 10-K.US Ecology, through our subsidiaries, provides radioactive, hazardous, PCB and non-hazardous industrial waste management and recycling services tocommercial and government entities, such as refineries and chemical production facilities, manufacturers, electric utilities, steel mills, medical andacademic institutions and waste brokers/aggregators. Headquartered in Boise, Idaho, we are one of the oldest providers of such services in NorthAmerica. US Ecology and its predecessor companies have been in business for 60 years. We operate within North America and employed 425 peopleas of December 31, 2012.Term MeaningUS Ecology, the Company, "we," "our," "us" US Ecology, Inc., and its subsidiariesAEA Atomic Energy Act of 1954 as amendedCEPA Canadian Environmental Protection Act (1999)CERCLA or "Superfund" Comprehensive Environmental Response, Compensationand Liability Act of 1980FUSRAP U.S. Army Corps of Engineers Formerly Utilized SiteRemedial Action ProgramLARM Low-activity radioactive material exempt from federalAtomic Energy Act regulation for disposalLLRW Low-level radioactive waste regulated under the federalAtomic Energy Act for disposalNORM/NARM Naturally occurring and accelerator produced radioactivematerialNRC U.S. Nuclear Regulatory CommissionPCBs Polychlorinated biphenylsQEQA Québec Environmental Quality ActRCRA Resource Conservation and Recovery Act of 1976SEC U. S. Securities and Exchange CommissionTSCA Toxic Substances Control Act of 1976USACE U.S. Army Corps of EngineersUSEPA U.S. Environmental Protection AgencyWUTC Washington Utilities and Transportation CommissionOur filings with the SEC are posted on our website at www.usecology.com. The information found on our website is not part of this or any other reportwe file with or furnish to the SEC. The public can also obtain copies of these filings by visiting the SEC's Public Reference Room at 100 F Street NE,Washington DC 20549, or by calling the SEC at 1-800-SEC-0330 or by accessing the SEC's website at www.sec.gov .4Table of ContentsUS Ecology was most recently incorporated as a Delaware corporation in May 1987 as American Ecology Corporation. On February 22, 2010, theCompany changed its name from American Ecology Corporation to US Ecology, Inc. Our wholly-owned primary operating subsidiaries are USEcology Nevada, Inc., a Delaware corporation ("USEN"); US Ecology Washington, Inc., a Delaware corporation ("USEW"); US Ecology Texas, Inc.,a Delaware corporation ("USET"); US Ecology Idaho, Inc., a Delaware corporation ("USEI"); US Ecology Michigan, Inc., a Michigan corporation("USEM"); US Ecology Field Services, Inc., a Delaware corporation ("USEFS"); US Ecology Stablex Holdings, Inc., a Delaware corporation("USESH"); and Stablex Canada Inc., a Canadian Federal Corporation ("Stablex"). US Ecology Illinois, Inc., a California corporation ("USE"),operates our closed property in Sheffield, Illinois. American Ecology Environmental Services Corporation, a Texas corporation ("AEESC"), operatesour closed property in Winona, Texas.We operate within two business segments: Operating Disposal Facilities and Non-Operating Disposal Facilities. These segments reflect our currentoperational status and internal reporting structure. Operating Disposal Facilities accept hazardous waste, non-hazardous waste, LARM and LLRW andinclude our RCRA permitted waste treatment and disposal facilities near Beatty, Nevada; Grand View, Idaho; Detroit, Michigan; and Robstown, Texas,our AEA permitted disposal facility near Richland, Washington and our Blainville, Québec, Canada facility. Our Washington, Idaho and (to a lesserdegree) Texas and Nevada facilities also accept certain NORM/NARM waste and LARM. Non-Operating Disposal Facilities include our formerdisposal facilities in Sheffield, Illinois; Beatty, Nevada; and Bruneau, Idaho and a former hazardous waste processing and deep-well injection operationin Winona, Texas. All other items are included in the segment where they originated. Inter-company transactions have been eliminated from the segmentinformation and are not significant between segments. Financial information with respect to each segment is further discussed in Note 17 to theconsolidated financial statements located in Item 8—Financial Statements and Supplementary Data to this Form 10-K.5Table of ContentsThe following table summarizes our subsidiaries, locations and services of each segment:Operating Disposal FacilitiesWe derive revenue from treating and disposing of hazardous, non-hazardous industrial and radioactive waste in government permitted facilities. We alsoderive revenue from transportation services generally to get material from the customer location to one of our facilities. Treatment and disposal ("T&D")revenue can be broken down into two categories: "Base Business" and "Event Business." Base Business tends to be waste streams generated throughon-going industrial process that is recurring in nature. Event Business is waste generated from a discrete waste clean-up project that is one-time innature. The duration of Event Business projects can last from a one-week clean-up of a small contaminated site to a multiple year clean-up project.A significant portion of our disposal revenue is attributable to discrete Event Business projects which vary widely in size, duration and unit pricing. Forthe year ended December 31, 2012, approximately 35% of our T&D revenue (excluding US Ecology Michigan, Inc., which was acquired on May 31,2012) was derived from Event Business projects. The one-time nature of Event Business, diverse spectrum of waste types received and widely varyingunit pricing necessarily creates variability in revenue and earnings. This variability may be influenced by general economic conditions, fundingavailability, changes in laws and regulations, government enforcement actions or court orders, public controversies, litigation, weather, real estateredevelopment project timing, government appropriation and funding commitment cycles and other6Subsidiary Location Services Operating Disposal Facilities USEN Beatty, Nevada Hazardous, non-hazardous industrial, NORM and PCB wastetreatment and disposalUSEW Richland, Washington LLRW, NORM/NARM and LARM waste disposalUSET Robstown, Texas Hazardous, non-hazardous industrial, LARM and NORM/NARMwaste treatment and disposal, recycling services, rail transfer stationUSEI Grand View, Idaho Hazardous, non-hazardous industrial, PCB, NORM/NARM, LARMand mixed waste treatment and disposal, rail transfer stationUSEM Detroit, Michigan Hazardous and non-hazardous waste water treatment and disposal,hazardous and non-hazardous waste treatment and disposalStablex Blainville, Québec, Canada Hazardous waste treatment and disposal Non-Operating Disposal Facilities USE Sheffield, Illinois Closed LLRW disposal facility under long-term care: State of Illinoisis licenseeUSE Sheffield, Illinois Non-operating hazardous waste disposal facility: USE is permitteeAEESC Winona, Texas Non-operating hazardous waste processing and deep well facility:AEESC is permitteeUSEI Bruneau, Idaho Closed hazardous waste disposal facility: USEI is permitteeTable of Contentsfactors. The types and amounts of waste received from recurring customers ("Base Business") also vary quarter to quarter, sometimes significantly, butare generally more predictable than Event Business.Depending on project-specific customer needs and competitive economics, transportation services may be offered at or near our cost to help secure newbusiness. Transportation-related revenue can account for as much as three-fourths (75%) of total project revenue for waste transported by rail from theeastern United States and other locations distant to our Grand View, Idaho or Robstown, Texas facilities.The types of waste received, also referred to as "service mix," can produce significant quarter-to-quarter and year-to-year variations in revenue, averageselling price, gross profit, gross margin, operating profit and net income for both Base Business and Event Business. Event Business contributedapproximately 35% and 39% of disposal revenue (excluding transportation and US Ecology Michigan, Inc. revenue) for the years ended December 31,2012 and 2011, respectively. Base Business represented approximately 65% and 61% of disposal revenue (excluding transportation and US EcologyMichigan, Inc. revenue) for the years ended December 31, 2012 and 2011, respectively. Our strategy is to expand our Base Business while securingboth short-term and extended-duration Event Business. When Base Business covers our fixed overhead costs, a significant portion of disposal revenuegenerated from Event Business is generally realized as operating income and net income. This strategy takes advantage of the favorable operatingleverage inherent to the largely fixed-cost nature of the waste disposal business. Contribution margin is influenced by whether the waste is directlydisposed ("direct disposal") or requires the application of chemical reagents, absorbents and other additives (variable costs) to treat the waste prior todisposal.To maximize utilization of our railcar fleet, we occasionally deploy available railcars to transport waste from clean-up sites to disposal facilities operatedby other companies. Such transportation services may also be bundled with for-profit logistics and field services support work.Beatty, Nevada RCRA/TSCA Facility. Our Beatty, Nevada facility, which began receiving hazardous waste in 1970, is located in the Amargosa Desertapproximately 120 miles northwest of Las Vegas, Nevada and approximately 30 miles east of Death Valley, California. USEN subleases 80 acres fromthe State of Nevada located within a 400 acre buffer zone leased by the State of Nevada from the federal government. The Company believes thisdedicated buffer zone is a viable location for expansion to accommodate future disposal operations. In April 2007, we renewed our lease with the Stateof Nevada as a year-to-year periodic tenancy until (i) that area reaches full capacity and can no longer accept waste (estimated life using 2012 volume of6-7 years); (ii) the lease is terminated by us at our option; or (iii) the State terminates the lease due to our breach of the lease terms. The facility is ahazardous waste treatment, storage and disposal facility permitted under Subtitle C of RCRA and TSCA and is permitted to treat and dispose of RCRA,TSCA and certain NRC-exempt radioactive waste. The facility was the first hazardous waste site in the nation to receive authorization to receive TSCAregulated materials, and remains a national outlet for TSCA regulated waste. The facility provides full RCRA treatment and solidification services forindustrial and government customers. The facility also provides chemical oxidation for organic contaminated wastes and oil refinery catalysts, providinga cost-effective alternative to incineration. Certain low-activity radioactive wastes which are exempt from NRC regulation may also be accepted fordisposal. The facility is regulated under permits issued by the Nevada Department of Environmental Protection and the USEPA. The State of Nevadaassesses disposal fees to fund a dedicated trust account to pay for closure and post-closure costs.Richland, Washington LLRW Facility. Our Richland, Washington LLRW facility has been in operation since 1965 and is located on 100 acres of landleased by the State of Washington on the U.S. Department of Energy Hanford Reservation approximately 35 miles west of Richland, Washington.USEW subleases this property from the State of Washington. The lease between the State of Washington and the federal government expires in 2063.We renewed our sublease with the State in 2005 for ten years with four ten-year renewal options. The facility is a low-level radioactive waste disposalfacility serving the Northwest and Rocky Mountain Compacts. The facility accepts Class A, B, and C commercial low-level radioactive7Table of Contentswaste from within the Northwest and Rocky Mountain Compacts, and NORM/NARM waste including radium sources produced by customersnationwide. The facility is one of only three full-service Class A, B, and C disposal facilities in the nation. The facility's personnel have extensiveexperience safely managing reactor internals and other high dose rate radioactive waste through the use of shielding and remote handling devices. Thefacility is licensed by the Washington Department of Health for health and safety purposes. The WUTC sets disposal rates for LLRW. Rates are set atan amount sufficient to cover operating costs and provide us with a reasonable profit. The current rate agreement with the WUTC is effective fromJanuary 1, 2008 to January 1, 2014. The WUTC process to establish rates for the succeeding rate period is underway. The State assesses user fees forlocal economic development, state regulatory agency expenses and a dedicated trust account to pay for long-term care after the facility closes. The Statemaintains separate dedicated trust funds for future closure and post-closure costs.Robstown, Texas RCRA Facility. Our Robstown, Texas facility began operations in 1973. It is located on 240 acres owned by the Companyapproximately 10 miles west of Corpus Christi, Texas. We own 200 acres of adjacent land for future expansion. We also own 174 acres of land fivemiles from the facility adjacent to a rail line where we have operated a rail transfer station since 2006. The facility is a hazardous waste treatment, storageand disposal facility permitted under Subtitle C of RCRA. The facility is permitted to store PCB waste for off-site shipment and treat and dispose ofRCRA, and PCB remediation waste. Specializing in serving the petrochemical industry of the Gulf Coast region, the facility provides stabilization,solidification, chemical oxidation, and waste brokerage services for its industrial and government customers. A low temperature thermal desorption unitwas added in 2008 for recycling of petroleum wastes and refinery cracking catalysts. This facility provides a recycling alternative for oil-bearinghazardous waste from petroleum refineries and produces recycled products for energy recovery, re-refining, and metals recovery. The facility alsoaccepts low-concentration NRC-exempt radioactive waste which is also exempted under Texas regulations with concurrence from the TexasCommission on Environmental Quality.Grand View, Idaho RCRA/TSCA Facility. Our Grand View, Idaho facility was purchased in 2001. It is located on 1,252 acres of Company-ownedland approximately 60 miles southeast of Boise, Idaho in the Owyhee Desert. We own an additional 159 acres approximately two miles east of thefacility, which is used as a clay source for site operations (liner construction and reagent). We also own 189 acres where our rail transfer station islocated approximately 30 miles northeast of the disposal facility. This site has two enclosed rail-to-truck waste transfer facilities located adjacent to themain line of the Union Pacific Railroad. The facility is a hazardous waste treatment, storage and disposal facility permitted under Subtitle C of RCRAand the TSCA. The facility is permitted to treat and dispose of RCRA and TSCA wastes, as well as a wide range of low-activity radioactive wastes andNORM/NARM, Technologically Enhanced NORM (TENORM) and other wastes exempted from federal regulation by the NRC. The facility providestreatment and disposal services to both government and private industry waste generators, and is a major recipient of U.S. Army Corps of EngineersFUSRAP waste. In 2004, the facility's permit was modified to allow receipt of NRC-exempt low activity fission and activation products. In 2008 thislist was expanded to include special nuclear materials exempt from NRC regulation. The facility also serves the steel industry and a wide range ofbroker-served and other hazardous waste producers.Detroit, Michigan RCRA Facility. Our Detroit, Michigan facility, acquired in 2012, has been serving the mid-western and eastern U.S. industrialmarkets for nearly 40 years. The facility is located on 6 acres of Company-owned land in a heavily-industrialized section of Detroit, Michigan. Thefacility is permitted to accept non-hazardous and hazardous materials and to treat non-hazardous solids and non-hazardous waste water regulated underRCRA. The facility is regulated under permits issued by the Michigan Department of Environmental Quality and the Detroit Sewer and WaterDepartment.Blainville, Québec, Canada Facility ("Stablex"). Our Stablex facility, acquired in October 2010, has been in operation since 1983 and is locatedapproximately 30 miles northwest of Montreal, Québec, Canada. The8Table of Contentsfacility owns and operates a treatment facility located on 25 acres adjacent to a 325 acre disposal site that is leased from the Province of Québec. Thelease with the Province expires in 2018 and has one five-year renewal term. The facility uses the "Stablex" process to treat and stabilize inorganichazardous wastes and contaminated soils to produce a non-leachable concrete-like material. We accept a wide range of inorganic wastes andcontaminated soils at the facility and specialize in processing hard-to-treat materials, such as cyanides, mercury compounds, strong acids/oxidizers, labpacks, contaminated debris and batteries. The facility is permitted by the Canadian Ministry of Environment and is authorized under the EnvironmentalQuality Act by Order-in-Council for use exclusively for products treated and disposed by Stablex as the lessee. The facility is a truck and rail-servedhazardous waste treatment storage and disposal facility. The Province assesses fees to fund a dedicated government trust account to pay for post-closurecosts at the disposal site. Stablex is responsible for closing each landfill prior to final closure of the facility. The site is permitted to accept up to 875,000metric tons (962,500 U.S. tons) over the five-year permit period. Of this amount, up to 350,000 metric tons (385,000 U.S. tons) can be accepted as soil.While there are no specific restrictions on waste soils received from the U.S., non-soil waste received from the U.S. is limited to 350,000 metric tons(385,000 U.S. tons) over the five-year permit period.Non-Operating Disposal FacilitiesBruneau, Idaho RCRA Site. This remote 83 acre desert site, acquired in conjunction with the Grand View, Idaho disposal operation in 2001, wasclosed by the prior owner under an approved RCRA plan. Post-closure monitoring is expected to continue for approximately 17 years, or 2029, inaccordance with permit and regulatory requirements.Sheffield, Illinois RCRA Site. We previously operated two hazardous waste disposal areas next to the Sheffield LLRW disposal area. The first openedin 1968 and ceased operations in 1974. The second accepted waste from 1974 through 1983. We expect to perform groundwater remediation andmonitoring at the site for approximately 13 more years through 2025.Winona, Texas Site. From 1980 to 1994, Gibraltar Chemical Resources operated the Winona hazardous waste processing and deep well facility. In1994, we purchased the facility. Solvent recovery, deep well injection and waste brokering operations were conducted on a nine acre site until 1997when we ceased operations. We are proceeding under a post-closure order with the State of Texas and expect to perform groundwater remediation andmonitoring at the site for approximately 27 more years through 2039. We own a 297 acre buffer zone adjacent to the permitted area.INDUSTRYDuring the 1970s and 1980s, waste services industry growth in the United States was driven by new environmental laws and actions by federal andstate agencies to regulate existing hazardous waste management facilities and direct the clean-up of contaminated sites under the federal Superfund law.By the early 1990s, excess hazardous waste management capacity had been constructed by the industry. Over this same period, to better manage riskand reduce expenses, many waste generators instituted industrial process changes and other methods to reduce waste production. Waste volumesshipped for disposal from Superfund and other properties also diminished as contaminated sites were cleaned up. These factors led to highlycompetitive market conditions that still apply today.We believe that a baseline demand for hazardous waste services will continue into the future with fluctuations driven by general and industry-specificeconomic conditions, identification of new clean-up needs, clean-up project schedules, funding availability and other public policy decisions. We furtherbelieve that the ability to deliver specialized niche services while aggressively competing for large volume clean-up projects and non-niche commoditybusiness opportunities differentiates successful from less successful companies. We seek to control variable costs, expand service lines, increase wastethroughput efficiency, employ innovative treatment techniques, build market share and increase profitability. Past initiatives that have successfullycontributed to our increased operating income include, but are not limited to:•acquiring our Grand View, Idaho treatment and disposal facility and rail transfer station in 2001;9Table of Contents•expanding our radioactive material and hazardous waste permits to manage additional types of waste; •expanding our rail transportation services and logistical capabilities through a fleet of Company-owned and leased railcars; •adding track, a second main line switch and constructing a second rail-to-truck transload building in Idaho; •acquiring property and developing a rail transfer station in Texas; •constructing new, high-capacity waste treatment and storage buildings in Texas and Nevada; •expanding our organic chemical waste treatment laboratory in Texas to improve treatment "recipes" and reduce costs at all three of ourRCRA facilities; •establishing a thermal recycling service at our Robstown, Texas site which allows the facility to accept recyclable hydrocarbon-oil-bearing hazardous waste and cracking catalyst from petroleum refining; •constructing a specialized handling system for packaging thermally treated cracking catalyst at our Robstown, Texas facility in 2011; •acquiring our Blainville, Québec, Canada treatment and disposal facility and rail transfer station in 2010; and •acquiring our Detroit, Michigan chemical and industrial byproducts treatment and reuse facility in 2012.Our Richland, Washington disposal facility, serving the Northwest and Rocky Mountain LLRW Compacts, is one of three operating Compact disposalfacilities in the nation. While our Washington disposal facility has substantial unused capacity, it can only accept LLRW from the 11 western statescomprising the two Compacts served. The Barnwell, South Carolina site, operated by Energy Solutions, Inc. ("Energy Solutions"), exclusively servesthe three-state Atlantic Compact. A third LLRW disposal facility, licensed by Waste Control Specialists, LLC and located near Andrews, Texas servesthe two-state Texas Compact and approved out-of-compact generators. Class A LLRW from states outside the Northwest Compact region may also bedisposed at a non-compact, commercial disposal site in Clive, Utah, also operated by Energy Solutions.Pricing at AEA licensed LLRW disposal facilities heightened demand for more cost-effective disposal options for soil, debris, consumer products,industrial wastes and other materials containing LARM, including "mixed wastes," exhibiting both hazardous and radioactive properties. In addition tocommercial demand, a substantial amount of LARM is generated by government clean-up projects. The NRC, USEPA and USACE have authorized theuse of hazardous waste disposal facilities to dispose of certain LARM, encouraging expansion of this compliant, cost-effective alternative. Our GrandView, Idaho RCRA hazardous waste facility has significantly increased waste throughput based on a series of permit modifications and project-specificapprovals allowing expanded LARM acceptance. Our Robstown, Texas and Beatty, Nevada disposal facilities are also permitted to accept LARM on amore limited basis. We believe we are well positioned to continue growing our LARM business based on our:•longstanding disposal industry reputation and commercial branding dating from the early 1960s; •environmental conditions and containment designs favoring permanent waste isolation; •existing permits, including recent modifications allowing additional waste types; •safety and regulatory compliance record; •decades of experience safely handling radioactive materials at multiple facilities;10Table of Contents•high volume waste throughput capabilities, including rail transportation and field services support; •competitive pricing; and •regulatory policies and precedents allowing disposal of LLRW at authorized hazardous waste disposal facilities.Permits, Licenses and Regulatory RequirementsObtaining authorization to construct and operate new radioactive or hazardous waste facilities is a lengthy and complex process. We believe we havedemonstrated significant expertise in this area over multiple decades. We also believe we possess all permits, licenses and regulatory approvals requiredto maintain regulatory compliance and operate our facilities and have the specialized expertise required to obtain additional approvals to continuegrowing our business in the future.We incur costs and make capital investments to comply with environmental regulations. These regulations require that we operate our facilities inaccordance with permit-specific requirements. Our Idaho, Texas and Michigan facilities are also required to provide financial assurance for closure andpost-closure obligations should our facilities cease operations. Our Blainville, Québec operation is required to post commercial surety bonds to coverclosure obligations. Both human resource and capital investments are required to maintain compliance with these requirements.United States Hazardous Waste RegulationOur hazardous, industrial, non-hazardous and radioactive materials business is subject to extensive federal and state environmental, health, safety, andtransportation laws, regulations, permits and licenses. Local government controls may also apply. The responsible government regulatory agenciesregularly inspect our operations to monitor compliance. They have authority to enforce compliance through the suspension or revocation of operatinglicenses and permits and the imposition of civil or criminal penalties in case of violations. We believe that these laws and regulations, as well as thespecialized services we provide, contribute to demand and create barriers to new competitors entering the markets we serve.RCRA provides a comprehensive framework for regulating hazardous waste transportation, treatment, storage and disposal. RCRA regulation is theresponsibility of the USEPA, which may delegate authority to state agencies. Chemical compounds and residues derived from USEPA-listed industrialprocesses are subject to RCRA standards unless they are delisted through rulemaking such as the steel mill waste treatment process employed at ourGrand View, Idaho facility. RCRA liability may be imposed for improper waste management or failure to take corrective action for releases ofhazardous substances. To the extent wastes are recycled or beneficially reused, regulatory controls and permitting requirements under RCRA diminish.LARM and NORM/NARM may also be managed to varying degrees under RCRA permits, as is authorized for our facilities in Grand View, Idaho;Beatty, Nevada; and Robstown, Texas.CERCLA and its amendments impose strict, joint and several liability on owners or operators of facilities where a release of hazardous substances hasoccurred, on parties who generated hazardous substances released at such facilities and on parties who arranged for the transportation of hazardoussubstances. Liability under CERCLA may be imposed if releases of hazardous substances occur at treatment, storage or disposal sites. Since wastegenerators, transporters and those who arrange transportation are subject to the same liabilities, we believe they are motivated to minimize the number ofdisposal sites used. In addition, hazardous waste generated during the remediation of CERCLA cleanup projects and transferred offsite must bemanaged by a treatment and disposal facility authorized by EPA to manage CERCLA waste. Our Grand View, Idaho; Beatty, Nevada; Robstown,Texas; and Detroit, Michigan facilities have this authorization.TSCA regulates the treatment, storage and disposal of PCBs. U.S. regulation and licensing of PCB wastes is the responsibility of the USEPA. OurGrand View, Idaho and Beatty, Nevada disposal facilities have11Table of ContentsTSCA treatment, storage and disposal permits. Our Robstown, Texas facility has a TSCA storage permit and may dispose of PCB-contaminated wastein limited concentrations not requiring a TSCA disposal permit.The AEA, as amended, assigns the NRC regulatory authority over receipt, possession, use and transfer of certain radioactive materials, includingdisposal. The NRC has adopted regulations for licensing commercial LLRW disposal and has delegated regulatory authority to certain states includingWashington, where our Richland facility is located. The NRC and U.S. Department of Transportation regulate the transport of radioactive materials.Shippers must comply with both the general requirements for hazardous materials transportation and specific requirements for transporting radioactivematerials.The Energy Policy Act of 2005 amended the AEA to classify discrete (i.e. concentrated versus diffuse) NORM/NARM as byproduct material. The lawdoes not apply to interstate Compacts ratified by Congress pursuant to the LLRW Policy Act.Canadian Hazardous Waste RegulationThe Canadian federal government regulates issues of national scope where activities cross provincial boundaries and affect Canada's relations with othernations. The Provinces retain control over environmental matters within their boundaries including primary responsibility for regulation andmanagement of hazardous waste.The main federal laws governing hazardous waste management are the CEPA and the Transportation of Dangerous Goods Act. Environment Canada isthe federal agency with responsibility for environmental matters. CEPA charges Environment Canada and Health Canada with the protection of humanhealth and the environment and seeks to control the production, importation and use of substances in Canada and their impact on the environment. TheExport and Import of Hazardous Waste Regulations under CEPA govern trans-border movement of hazardous waste and hazardous recyclablematerials. These regulations require that anyone proposing to export or import hazardous waste or hazardous recyclable materials or transport themthrough Canada notify the Minister of the Environment and obtain a permit to do so.Our Stablex facility operates in the Province of Québec and is subject to the QEQA. This Act, independently developed by the Province, regulates thegeneration, characterization, transport, treatment and disposal of hazardous wastes. QEQA also provides for the establishment of waste managementfacilities which are controlled by the provincial statutes and regulations governing releases to air, groundwater and surface water.Under QEQA, waste can be defined as hazardous based on origin or characteristic in a manner that is very similar to regulations in effect in the UnitedStates. A major difference between the United States regulatory regime and that in Canada relates to ownership and liability. Under Canadian federalregulation, ownership changes when waste is transferred to a properly permitted third-party carrier and subsequently to an approved treatment anddisposal facility. As a result, the generator is no longer liable for proper handling, treatment or disposal. In the United States, joint and several liability isretained by the waste generator as well as the transporter and the treatment and disposal facility.Waste transporters require a permit to operate under Québec's regulations and are also subject to the requirements of the Federal Transportation ofDangerous Goods law which requires reporting of quantities and disposition of materials shipped.Insurance, Financial Assurance and Risk ManagementWe carry a broad range of insurance coverage, including general liability, automobile liability, real and personal property, workers compensation,directors and officers liability, environmental impairment liability and other coverage customary to the industry. We do not expect the impact of anyknown casualty,12Table of Contentsproperty, environmental or other contingency to be material to our financial condition, results of operations or cash flows.As noted above, applicable regulations require financial assurance to cover the cost of final closure and post-closure obligations at certain of ouroperating and non-operating disposal facilities. Acceptable forms of financial assurance include third-party standby letters of credit, surety bonds andinsurance. Alternatively, we may be required to collect fees from waste generators to fund dedicated, state-controlled escrow or trust accounts during theoperating life of the facility. Through December 31, 2012, we have met our financial assurance requirements through insurance, surety bonds, standbyletters of credit and self-funded restricted trusts.Insurance policies covering U.S. closure and post-closure obligations expire in December 2013.We are required by our insurer to maintain collateral atagreed upon levels to support our aggregate financial assurance insurance policies for our operating sites through the policy term. While we expect totimely renew these policies as we have in the past, if we are unable to obtain adequate closure, post-closure or environmental insurance, any partial orcompletely uninsured claim against us, if successful, could have a material adverse effect on our financial condition, results of operations and cashflows. Failure to maintain adequate financial assurance could also result in regulatory action including early closure of facilities. For our non-operatingfacilities, we established an interest bearing trust account to guarantee our post-closure liability, subject to regulatory approval. As of December 31,2012, we have provided collateral of $4.1 million in funded trust agreements, issued $4.0 million in letters of credit for financial assurance and haveinsurance policies of approximately $43.0 million for closure and post-closure obligations. Financial assurance, premium and collateral costrequirements increases have an adverse impact on our results of operations.We maintain a surety bond for closure costs associated with the Stablex facility. Our lease agreement with the Province of Québec requires that thesurety bond be maintained for 25 years after the lease expires. At December 31, 2012 we had $897,000 in commercial surety bonds dedicated forclosure obligations.Primary casualty insurance programs generally do not cover accidental environmental contamination losses. To provide insurance protection forpotential claims, we maintain pollution legal liability insurance and professional environmental consultant's liability insurance for non-nuclearoccurrences. For nuclear liability coverage, we maintain Facility Form and Workers' Form nuclear liability insurance provided under the federal PriceAnderson Act. This insurance covers the operations of our facilities, suppliers and transporters. We purchase primary property, casualty and excessliability policies through traditional third-party insurance carriers.Significant CustomersWe dispose of LARM and hazardous waste under a contract with the USACE. We also arrange transportation of waste to our disposal facilities forboth government and industry customers which contributes significant revenue. USACE accounted for 6%, 7% and 17% of our revenue in 2012, 2011and 2010, respectively. No other customer accounted for more than 10% of our revenue for 2012, 2011 or 2010.MarketsDisposal Services. Waste containing heavy metals or hazardous waste that does not require treatment prior to disposal is generally subject to highlycompetitive pricing. These commoditized services are also sensitive to transportation distance and related costs. Waste transported by rail is typicallyless expensive, on a per-mile basis, than waste transported by truck. Hazardous waste containing organic chemical compounds or mercury and LARMare less commoditized services.Our Robstown, Texas facility is well positioned to serve refineries, chemical production plants and other industries concentrated near the Texas Gulfcoast. The facility also accepts certain NORM and LARM. In13Table of Contents2006, we constructed a rail transfer station approximately five miles from this facility that extends the facility's geographic reach. In 2007, our Texasfacility expanded its laboratory to include analysis of organic chemical compounds, which are contained in many of the wastes produced by customers.In June 2008, we began operating a high-throughput thermal desorption unit at the facility which allows us to accept recyclable, hydrocarbon-basedmaterials.Our Beatty, Nevada facility primarily competes for business in California, Arizona, Utah and Nevada. Due to the site's superior geologic and climateconditions in the Amargosa Desert, the Beatty, Nevada facility also competes for wastes from more distant locations. The Beatty, Nevada facilitycompetes over a larger geographic area for PCB waste due to the more limited number of TSCA disposal facilities nationwide. The facility also acceptssmall amounts of NORM.Our Grand View, Idaho facility accepts waste from across the U.S. and, on a more limited basis, Canada shipped through our rail transfer stationlocated adjacent to a main east-west rail line. Waste throughput has been significantly enhanced by rail track expansions in 2006, 2008 and 2011 and theconstruction of a second rail-to-truck indoor transfer building in 2006. The Grand View facility's primary markets are RCRA, LARM and mixed wasteclean-up projects, and brokered waste. Permit modifications have expanded LARM services. The infrastructure at our Grand View, Idaho facility iscapable of handling large volumes of waste from large clean-up projects. For example, between 2005 and 2009 the facility disposed of approximately1.3 million tons of waste shipped from a Honeywell project in Jersey City, New Jersey. We also accept significant volumes from the USACE. In 2010,we entered into a new contract with the USACE, on essentially the same terms and conditions as the previous contract, which expires in 2013. TheUSACE may extend the contract to 2015 at their sole option. Multi-year USACE projects initiated before the expiration date may continue for five yearsbeyond 2013, or 2015 if the option term is exercised under the same terms. Based on public statements, we believe that the USACE expects to contractfor disposal of FUSRAP wastes through approximately 2033.To meet USEPA land disposal restrictions ("LDRs"), waste stabilization, encapsulation, chemical oxidation and other treatment technologies are used atour Grand View, Idaho; Beatty, Nevada; and Robstown, Texas facilities. These capabilities allow all three sites to manage a much broader spectrum ofwastes than if LDR treatment was not offered. Our Robstown, Texas facility also offers thermal desorption treatment and recycling services.Our Blainville, Québec, Canada facility, Stablex, primarily accepts waste from the Eastern Canadian and Northeastern U.S. industrial markets. TheStablex facility accepts inorganic and certain organic hazardous waste in liquid, semi-solid (sludge) or solid form and treats the waste using acementitious stabilization process to immobilize the hazardous constituents rendering the homogenized waste product non-hazardous in accordance withQuébec treatment regulations. The waste is then disposed in a secure disposal cell. Stablex accepts waste delivered by truck or by rail.Our Richland, Washington facility serves LLRW producers in the eight states of the Northwest Compact. The three Rocky Mountain Compact statesmay also use our facility. Since we are a designated monopoly LLRW service provider in the Northwest Compact, the State of Washington approvesour disposal rates. Since NORM/NARM is not subject to Compact restrictions, we may accept this waste from all 50 states. Rate regulation does notapply to NORM/NARM pricing since monopoly conditions do not apply.Our Detroit, Michigan facility primarily competes for business in the Midwestern U.S. and Ontario, Canada markets. The facility also competes forcertain high concentration liquid caustic acid wastes in the Northeastern and Southeastern United States. The primary industries served includeautomotive and related suppliers and other industrial facilities.Geographical Information. For the year ended December 31, 2012, we derived $130.9 million or 77% of our revenue in the United States and$38.2 million or 23% of our revenue in Canada. For the year ended December 31, 2011, we derived $118.4 million or 76% of our revenue in the UnitedStates and14Table of Contents$36.5 million or 24% of our revenue in Canada. For the year ended December 31, 2010, we derived $99.1 million or 95% of our revenue in the UnitedStates and $5.7 million or 5% of our revenue in Canada.CompetitionWe compete with large and small companies in each of the commercial markets we serve. While niche services apply, the radioactive, hazardous andnon-hazardous industrial waste management industry is generally very competitive. We believe that our primary hazardous waste and PCB disposalcompetitors are Clean Harbors, Inc.; The Environmental Quality Company; Heritage Environmental; Waste Control Specialists, LLC; and WasteManagement, Inc. We believe that our primary radioactive material disposal competitors are Energy Solutions, Inc. and Waste Control Specialists, LLC.The principal competitive factors applicable to both of these business areas are:•price; •specialized permits and "niche" service offerings; •customer service; •operational efficiency and technical expertise; •regulatory compliance and worker safety; •industry reputation and brand name recognition; •transportation distance; and •State or Province and local community support.We believe that we are competitive in all markets we serve and that we offer a unique mix of services, including niche technologies and services thatfavorably distinguish us from competitors. We also believe that our strong brand name recognition from six decades of experience, compliance andsafety record, customer service reputation and positive relations with regulators and local communities enhance our competitive position. Advantagesexist for competitors that have technology, permits or equipment to handle a broader range of waste, that operate in jurisdictions imposing lowerdisposal fees and/or are located closer to where wastes are generated.We do not compete with companies seeking federal government contracts to manage or operate radioactive waste treatment and disposal facilities ownedby the U.S. Department of Energy ("USDOE"). We accept minor amounts of remediation waste from USDOE facilities at our disposal facilities fromtime to time; however, this is not a material part of our business.Seasonal EffectsSeasonal fluctuations due to weather and budgetary cycles can influence the timing of customer spending for our services. Typically, in the first quarterof each calendar year there is less demand for Event Business due to reduced construction activities related to weather. While large, multi-year clean-upprojects may continue in winter months, the pace of waste shipments may be slower, or stop temporarily, due to weather. Market conditions and federalfunding decisions generally have a greater influence on the business than seasonality.PersonnelOn December 31, 2012, we had 425 employees, of which 11 were members of the Paper, Allied-Industrial Chemical & Energy Workers InternationalUnion, AFL-CIO and CLC (PACE) at our Richland, Washington facility and 97 were members of the Communications, Energy and PaperworkersUnion of Canada at our Blainville, Québec, Canada facility.15Table of ContentsExecutive Officers of RegistrantThe following table sets forth the names, ages and titles, as well as a brief account of the business experience of each person who is an executive officerof US Ecology:Jeffrey R. Feeler was appointed President and Chief Operating Officer in October 2012. Mr. Feeler previously served as the Company's Vice Presidentand Chief Financial Officer from May 2007 to October 2012. He joined US Ecology in 2006 as Vice President, Controller, Chief Accounting Officer,Treasurer and Secretary. He previously held financial and accounting management positions with MWI Veterinary Supply, Inc. (2005-2006),Albertson's, Inc. (2003-2005) and Hewlett-Packard Company (2002-2003). From 1993 to 2002, he held various accounting and auditing positions forPricewaterhouseCoopers LLP. Mr. Feeler is a Certified Public Accountant and holds a BBA of Accounting and a BBA of Finance from Boise StateUniversity.Simon G. Bell was appointed Vice President of Operations in August of 2007 and is responsible for managing both operating and closed facilities.From 2005 to August 2007, he was Vice President of Hazardous Waste Operations. From 2002 to 2005, he was our Idaho facility General Managerand Environmental Manager. His 20 years of industry experience includes service as general manager of a competitor disposal facility and miningindustry experience in Idaho, Nevada and South Dakota. He holds a BS in Geology from Colorado State University.John M. Cooper joined us in July 2002 and is Vice President and Chief Information Officer. Previously, he served as Vice President, InformationSystems for BMC West Corporation and was Director of Business Development for the High Tech Industry at Oracle Corporation. Mr. Cooper offersmore than 20 years of computer industry experience. He holds a BS in Physics from Utah State University.Eric L. Gerratt was appointed Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer in October 2012. He joined USEcology in August 2007 as Vice President and Controller. He previously held various financial and accounting management positions atSUPERVALU, Inc. (2006-2007) and Albertson's, Inc. (2003-2006). From 1997 to 2003, he held various accounting and auditing positions forPricewaterhouseCoopers LLP. Mr. Gerratt is a Certified Public Accountant and holds a BS in Accounting from the University of Idaho.Steven D. Welling was appointed Senior Vice President, Sales and Marketing in January 2010. He joined US Ecology in 2001 through the EnvirosafeServices of Idaho (now US Ecology Idaho) acquisition. He previously served as National Accounts Manager for Envirosource Technologies andWestern Sales Manager for Envirosafe Services of Idaho and before that managed new market development and sales for a national bulk chemicaltransportation company. Mr. Welling holds a BS from California State University-Stanislaus.Item 1A. Risk Factors In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause actual results or events todiffer materially from those contained in any forward-looking statements made by or on behalf of us.16Name Age TitleJeffrey R. Feeler 43 President and Chief Operating OfficerSimon G. Bell 42 Vice President of OperationsJohn M. Cooper 58 Vice President and Chief Information OfficerEric L. Gerratt 42 Vice President, Chief Financial Officer, Treasurer and ChiefAccounting OfficerSteven D. Welling 54 Senior Vice President, Sales and MarketingTable of ContentsA significant portion of our business depends upon non-recurring event clean-up projects over which we have no control.A significant portion of our disposal revenue is attributable to discrete Event Business which varies widely in size, duration and unit pricing. For theyear ended December 31, 2012, approximately 35% of our treatment and disposal revenue (excluding US Ecology Michigan, Inc.) was derived fromEvent Business projects. The one-time nature of Event Business necessarily creates variability in revenue and earnings. This variability is furtherinfluenced by service mix, general and industry-specific economic conditions, funding availability, changes in laws and regulations, governmentenforcement actions, public controversies, litigation, weather, property redevelopment plans and other factors. As a result of this variability, we canexperience significant quarter-to-quarter and year-to-year volatility in revenue, gross profit, gross margin, operating income and net income. Also, whilemany large project opportunities are identifiable years in advance, both large and small project opportunities also routinely arise with little prior notice.This uncertainty, which is inherent to the hazardous and radioactive waste disposal industry, is factored into our budgeting and externally communicatedbusiness projections. Our projections combine historical experience with identified sales pipeline opportunities and planned initiatives for new orexpanded service lines. A reduction in the number and size of new clean-up projects won to replace completed work could have a material adverse effecton our financial condition and results of operations.The completion of, loss of or failure to renew one or more significant contracts could adversely affect our profitability.We provide disposal and transportation services to customers on discrete Event Business (non-recurring project based work) which varies widely insize, duration and unit pricing. Some of these multi-year projects can account for a significant portion of our revenue and profit. However, thereplacement of 2012 Event Business revenue and earnings depends on multiple factors, many of which are outside of our control including, but notlimited to, general and industry-specific economic conditions, capital in the commercial credit markets, general level of government funding onenvironmental matters, real estate development and other industrial investment opportunities. Our inability to replace the contribution from 2012 EventBusiness projects with new business could result in a material adverse effect on our financial condition and results of operations.We also have a multi-year contract with USACE, expiring in 2013. The USACE may extend the contract to 2015 at their sole option. USACEaccounted for approximately 6% of our total revenue for the year ended December 31, 2012. This multi-year contract does not, however, guaranteefuture work or volumes. Reduced appropriations for the USACE and/or other government clean-up work, a reduction in project-specific task orders,and/or the loss of or failure to renew this or other large contracts and task orders combined with failure to replace their contribution with new projectscould result in a material adverse effect on our business. Annual FUSRAP funding has remained generally constant ranging from $109.0 million to$140.0 million each fiscal year over the last several years but is at risk for future funding cuts. In February 2012, President Obama released theproposed fiscal 2013 budget reflecting FUSRAP funding at $104.0 million. There can be no assurance that the USACE will contract for disposalservices for the estimated duration of the FUSRAP through 2033 or beyond.If we are unable to obtain regulatory approvals and contracts for construction of additional disposal space by the time our current disposalcapacity is exhausted, our business would be adversely affected.Construction of new disposal capacity at our operating disposal facilities beyond currently permitted capacity requires state and provincial regulatoryagency approvals. Administrative processes for such approval reviews vary. The State of Texas, which regulates our Robstown facility, provides for anadjudicatory hearing process administered by a hearing officer appointed by the State. There can be no assurance that we will be successful in obtainingfuture expansion approvals in a timely manner or at all. If we are not successful in receiving these approvals, our disposal capacity could eventually beexhausted,17Table of Contentspreventing us from accepting additional waste at an affected facility. This would have a material adverse effect on our business.If we are unable to renew our operating permits or lease agreements with regulatory bodies, our business would be adversely affected.Our facilities operate using permits and licenses issued by various regulatory bodies at various state, provincial and federal government levels. Inaddition, three of our facilities operate on land leased from government agencies. Failure to renew our permits and licenses necessary to operate ourfacilities or failure to renew or maintain compliance with our site lease agreements would have a material adverse effect on our business. There can beno assurance we will continue to be successful in obtaining timely permit applications approval, maintaining compliance with our lease agreements andobtaining timely lease renewals.Loss of key management or sales personnel could harm our business.We have an experienced management team including general managers at our operating facilities and rely on the continued service of these seniormanagers to achieve our objectives. We also have a senior sales team with industry experience averaging more than 15 years. Our objective is to retainour present management and sales teams and identify, hire, train, motivate and retain other highly skilled personnel. The loss of any key managementemployee or sales personnel could adversely affect our business and results of operations.If we fail to comply with applicable laws and regulations our business could be adversely affected.The changing regulatory framework governing our business creates significant risks. We could be held liable if our operations cause contamination ofair, groundwater or soil or expose our employees or the public to contamination. Under current law, we may be held liable for damage caused byconditions that existed before we acquired the assets or operations involved. Also, we may be liable if we arrange for the transportation, disposal ortreatment of hazardous substances that cause environmental contamination at facilities operated by others, or if a predecessor made such arrangementsand we are a successor. Liability for environmental damage could have a material adverse effect on our financial condition, results of operations andcash flows.Stringent regulations of federal, state or provincial governments have a substantial impact on our business. Local government controls may also apply.Many complex laws, rules, orders and regulatory interpretations govern environmental protection, health, safety, noise, visual impact, odor, land use,zoning, transportation and related matters. Failure to obtain on a timely basis or comply with applicable federal, state, provincial and local governmentalregulations, licenses, permits or approvals for our waste treatment and disposal facilities could prevent or restrict our ability to provide certain services,resulting in a potentially significant loss of revenue and earnings. Changes in environmental regulations may require us to make significant capital orother expenditures, or limit operations. Changes in laws or regulations or changes in the enforcement or interpretation of existing laws, regulations orpermitted activities may require us to modify existing operating licenses or permits, or obtain additional approvals or limit operations. Newgovernmental requirements that raise compliance standards or require changes in operating practices or technology may impose significant costs and/orlimit operations.Our revenue is primarily generated as a result of requirements imposed on our customers under federal, state, and provincial laws and regulations toprotect public health and the environment. If requirements to comply with laws and regulations governing management of PCB, hazardous orradioactive waste were relaxed or less vigorously enforced, demand for our services could materially decrease and our revenues and earnings could besignificantly reduced.18Table of ContentsOur financial results could be adversely affected by foreign exchange fluctuations.We operate in the United States and Canada but report revenue, costs and earnings in U.S. dollars. Exchange rates between the U.S. dollar and theCanadian dollar are likely to fluctuate from period to period. Because our financial results are reported in U.S. dollars, we are subject to the risk oftranslation losses for reporting purposes. If we continue to expand our international operations, we will conduct more transactions in currencies otherthan the U.S. dollar. To the extent that foreign revenue and expense transactions are not denominated in the local currency, we are further subject to therisk of transaction losses. We have not entered into derivative instruments to offset the impact of foreign exchange fluctuations. Fluctuations in foreigncurrency exchange rates could have a material adverse effect on our financial condition and results of operations.If we are unable to obtain at a reasonable cost or under reasonable terms and conditions the necessary levels of insurance and financialassurances required for operations, our business and results of operations would be adversely affected.We are required by law, license, permit and prudence to maintain various insurance instruments and financial assurances. We carry a broad range ofinsurance coverages that we believe are customary for a company of our size in our business. We obtain these coverages to mitigate risk of loss,allowing us to manage our self-insured exposure from potential claims. We are self-insured for employee health-care coverage. Stop-loss insurance iscarried covering liability on claims in excess of $150,000 per individual or on an aggregate basis for the monthly population. Accrued costs related tothe self-insured health care coverage were $483,000 and $212,000 at December 31, 2012 and 2011, respectively. We also maintain a Pollution andRemediation Legal Liability Policy pursuant to RCRA regulations subject to a $250,000 self-insured retention. In addition, we are insured forconsultant's environmental liability subject to a $100,000 self-insured retention. We are also insured for losses or damage to third party property orpeople subject to a $50,000 self-insured retention. If our insurers were unable to meet their obligations, or our own obligations for claims were morethan expected, there could be a material adverse effect to our financial condition and results of operation.Through December 31, 2012, we have met our financial assurance requirements through a combination of insurance policies, commercial surety bondsand trust funds. Our insurance policies covering closure and post-closure activities expire in December 2013 for our U.S. operating facilities. Wecontinue to use self-funded trust accounts for our post-closure obligations at our U.S. non-operating sites. We use commercial surety bonds for ourCanadian operation that expire in November 2013. We currently have in place all financial assurance instruments necessary for our operations. Whilewe expect to continue renewing these policies and surety bonds, if we were unable to obtain adequate closure, post-closure or environmental insurance,bonds or other instruments in the future, any partially or completely uninsured claim against us, if successful and of sufficient magnitude, could have amaterial adverse effect on our results of operations and cash flows. Additionally, continued access to casualty and pollution legal liability insurance withsufficient limits, at acceptable terms, is important to obtaining new business. Failure to maintain adequate financial assurance could also result inregulatory action including early closure of facilities. As of December 31, 2012, we have $4.1 million in funded trust agreements for post closureobligations at our non-operating properties. We have provided our insurance provider a $4.0 million letter of credit through our primary bank ascollateral for our financial assurance insurance policies that have a limit of $43.0 million for closure and post-closure obligations at our U.S. operatingfacilities. We have $897,000 in commercial surety bonds dedicated for closure obligations at our Canadian operating facility. While we believe we willbe able to maintain the requisite financial assurance policies at a reasonable cost, premium and collateral requirements may materially increase. Suchincreases could have a material adverse effect on our financial condition and results of operations.19Table of ContentsA change or deterioration in labor relations could disrupt our business or increase costs, which could have a material adverse effect on ourbusiness, financial condition and results of operations.The Company is a party to two collective bargaining agreements covering 108, or approximately 25%, of our employees. On December 31, 2011, theagreement covering 97 of our employees at our Blainville, Québec, Canada facility expired. While renewal negotiations are ongoing, there can be noassurance that we will be able to negotiate the terms of expired or expiring agreements in a manner acceptable to the Company. In this event, potentialwork disruptions may adversely affect our financial condition and results of operations.Failure to perform under our contracts may adversely harm our business.Certain contracts require us to meet specified performance criteria. Our ability to meet these criteria requires that we expend significant resources. If weor our subcontractors are unable to perform as required, we could be subject to substantial monetary penalties and/or loss of the affected contracts whichmay adversely affect our business.Failure to realize the anticipated benefits and operational performance of acquired operations could lead to an impairment of goodwill or otherintangible assets.We are required to test goodwill and intangible assets with indefinite useful lives at least annually to determine if impairment has occurred. The testingof goodwill and other intangible assets for impairment requires us to make significant estimates about future performance and cash flows, as well asother assumptions. These estimates can be affected by numerous factors, including potential changes in economic, industry or market conditions,changes in business operations, changes in competition or changes in our stock price and market capitalization. Changes in these factors, or changes inactual performance compared with estimates of our future performance, may affect the fair value of goodwill or other intangible assets, which may resultin an impairment charge. As a result of acquisitions in 2010 and 2012, we have goodwill of $23.1 million and net intangible assets of $40.8 million atDecember 31, 2012 that must be assessed at least annually for impairment.We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible assets becomeimpaired, our financial condition and results of operations could be adversely impacted.Adverse economic conditions, government funding or competitive pressures affecting our customers could harm our business.We serve oil refineries, chemical production plants, steel mills, electric utilities, real estate developers, waste brokers/aggregators serving smallmanufacturers and other industrial customers that are, or may be, affected by changing economic conditions and competition. These customers may besignificantly impacted by deterioration in the general economy and may curtail waste production and/or delay spending on plant maintenance, wasteclean-up projects and other discretionary work. Spending by government customers may also be reduced due to declining tax revenues that may resultfrom a general deterioration in economic conditions or other federal or state fiscal policy. Factors that can impact general economic conditions and thelevel of spending by customers include the general level of consumer and industrial spending, increases in fuel and energy costs, residential andcommercial real estate and mortgage market conditions, labor and healthcare costs, access to credit, consumer confidence and other macroeconomicfactors affecting spending behavior. Market forces may also compel customers to cease or reduce operations, declare bankruptcy, liquidate or relocate toother countries, any of which could adversely affect our business.Our operations are significantly affected by the commencement and completion of large and small clean-up projects; potential seasonal fluctuations dueto weather; budgetary decisions and cash flow20Table of Contentslimitations influencing the timing of customer spending for remedial activities; the timing of regulatory agency decisions and judicial proceedings;changes in government regulations and enforcement policies and other factors that may delay or cause the cancellation of clean-up projects. We do notcontrol such factors, which can cause our revenue and income to vary significantly from quarter to quarter and year to year.Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business, financial condition andresults of operations.We face competition from companies with greater resources, closer geographic proximity, service offerings we do not provide and lower pricing incertain instances. An increase in the number or location of commercial treatment or disposal facilities for hazardous or radioactive waste, significantexpansion of existing competitor permitted capabilities, increased industry consolidation by our competitors or a decrease in the treatment or disposalfees charged by competitors could materially and adversely affect our results of operations. Our business is also heavily affected by waste disposal feesimposed by government agencies. These fees, which vary from state to state and are periodically adjusted, may adversely impact the competitiveenvironment in which we conduct our business.Our business requires the handling of dangerous substances. Improper handling of such substances could result in an adverse impact on ourfinancial condition and results of operations.We are subject to unexpected occurrences related, or unrelated, to the routine handling of dangerous substances. A fire or other incident could impair theability of one or more facilities to continue to perform normal operations. This could have a material adverse impact on our financial condition andresults of operations. Improper handling of these substances could also violate laws and regulations resulting in fines and/or suspension of operations.We may not be able to obtain timely or cost effective transportation services which could adversely affect our profitability.Revenue at each of our facilities is subject to potential risks from disruptions in rail or truck transportation services relied upon to deliver waste to ourfacilities. Increases in fuel costs and unforeseen events such as labor disputes, public health pandemics, natural disasters and other acts of God, war orterror could prevent or delay shipments and reduce both volumes and revenue. Our rail transportation service agreements with our customers generallyallow us to pass on fuel surcharges assessed by the railroads. This may decrease or eliminate our exposure to fuel cost increases. Transportationservices may be limited by economic conditions, including increased demand for rail or trucking services, resulting in periods of slower service to thepoint that individual customer needs cannot be met. No assurance can be given that we can procure transportation services in a timely manner atcompetitive rates or pass through fuel cost increases in all cases. Such factors could also limit our ability to achieve revenue and earnings objectives.We are subject to risks associated with operating in a foreign country.On October 31, 2010, we acquired Stablex. Stablex is based in Québec, Canada and uses the Canadian dollar as its functional currency. Internationaloperations are subject to risks that may have material adverse effects on our financial condition and results of operations. The risks that our internationaloperations are subject to include, among other things:•difficulties and costs relating to staffing and managing foreign operations; •foreign labor union relations; •fluctuations in the value of the Canadian dollar; •repatriation of cash from Stablex to the United States;21Table of Contents•imposition of additional taxes on our foreign income; and •unexpected regulatory, economic and public policy changes.The hazardous and radioactive waste industries in which we operate are subject to litigation risk.The handling of radioactive, PCBs and hazardous material subjects us to potential liability claims by employees, contractors, property owners,neighbors and others. There can be no assurance that our existing liability insurance is adequate to cover claims asserted against us or that we will beable to maintain adequate insurance in the future. Adverse rulings in legal matters could also have a material adverse effect on our financial conditionand results of operations.Our levels of outstanding debt and letters of credit could adversely affect our financial condition and ability to fulfill our obligations under ourCredit Agreements.As of December 31, 2012, we had $45.0 million of borrowings and $4.0 million issued in letters of credit on our $95.0 million revolving line of creditagreement (the "Credit Agreement") with Wells Fargo National Association ("Wells Fargo"). This level of outstanding debt and letters of credit may:•adversely impact our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions or tocontinue paying dividends to our stockholders; •require us to dedicate a substantial portion of our cash flow to the payment of interest on our debt and fees on our letters of credit, whichreduces the availability of our cash flow to fund working capital, capital expenditures, acquisitions, dividends or other general corporatepurposes; •subject us to the risk of increased sensitivity to interest rate increases based upon variable interest rates; and •limit our ability to adjust to rapidly changing market conditions, reduce our ability to withstand competitive pressures and make us morevulnerable to a downturn in general economic conditions of our business than competitors with less debt.If we are unable to generate sufficient cash flow from operations in the future to service our debt and letter of credit fee obligations, we may be requiredto refinance all or a portion of our existing debt and letter of credit facilities, or to obtain new or additional facilities. We may not be able to obtain suchnew or additional facilities on favorable terms or at all.Servicing our debt, including any revolving loans and capital leases, and paying our letter of credit fee obligations will require a significantamount of cash, and our ability to generate cash depends on many factors beyond our control.Our ability to make scheduled payments of principal or interest with respect to borrowings under our Credit Agreement and to pay fee obligations underour letters of credit will depend on our ability to generate cash from future operations. Our ability to generate cash depends on, among other factors, thedemand for our services, which is subject to general and industry-specific market conditions, changes in government environmental regulation, andfinancial, competitive, regulatory and other factors affecting our operations, many of which are beyond our control. Our operations may not generatesufficient cash flow in an amount necessary to enable us to pay our debt and the fee obligations arising from our letters of credit, or to fund our otherliquidity needs.We may not be able or willing to pay future dividends.Our ability to pay dividends is subject to our future financial condition and certain conditions such as continued compliance with bank covenantscontained in our Credit Agreement. Our Board of Directors must also approve any dividends at their sole discretion. Pursuant to our Credit Agreement,we may only22Table of Contentsdeclare and pay quarterly or annual dividends if on the date of declaration no event of default has occurred, no other event or condition that upon noticeor continuation would constitute a default, and payment of the dividend will not result in a default. Unforeseen events or situations could cause non-compliance with these bank covenants, or cause the Board of Directors to discontinue or reduce the amount of any future dividend payment.We may not be able to effectively adopt or adapt to new or improved technologies.We expect to continue implementing new or improved technologies at our facilities to meet customer service demands and facilitate growth in ourbusiness. If we are unable to identify and implement new technologies in response to market conditions and customer requirements in a timely, costeffective manner, our financial condition and results of operations could be adversely impacted.If we are unable to successfully complete the integration of US Ecology Michigan, Inc. or future acquisitions into our business and achieveanticipated synergies in the expected time frame, our future results could be adversely affected.Acquisitions involve multiple risks. Our inability to successfully integrate the operations of an acquired business into our operations could have amaterial adverse effect on our business. These risks include but are not limited to:•changing market conditions; •increased competition; •inability to expand existing regulatory permits; •the need to spend substantial operational, financial and management resources integrating new businesses, technologies and processesand related difficulties integrating them into operations, personnel or systems; •retention of key personnel and customers; •impairments of goodwill and other intangible assets; and •environmental and other liabilities associated with past operations.We acquired US Ecology Michigan, Inc. on May 31, 2012. As part of the acquisition we recorded at fair value $1.3 million of goodwill and$1.9 million of identifiable intangible assets. Our integration of US Ecology Michigan, Inc.'s operations into our operations has required and willcontinue to require implementation of appropriate operations, management and financial reporting systems and controls. The integration of US EcologyMichigan, Inc. has required and will continue to require the focused attention of our management teams, including a significant commitment of time andresources. The success of the acquisition will depend, in part, on the combined company's ability to realize the anticipated benefits from combining therespective businesses and operations of US Ecology, Inc. and US Ecology Michigan, Inc. through greater efficiencies, increased utilization of supportfacilities and the adoption of mutual best practices. To realize these anticipated benefits, however, the business and operations of US Ecology, Inc. andUS Ecology Michigan, Inc. must continue to be successfully combined.If we are not able to achieve these objectives, the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realizethan expected. It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing business, failure toimplement the business plan for the combined businesses, unanticipated issues in integrating services offerings, logistics information, communicationsand other systems or other unanticipated issues, expenses and liabilities, any or all of which could adversely affect our ability to maintain relationshipswith customers and employees to achieve the anticipated benefits of the acquisition. It is possible that failure to realize the anticipated23Table of Contentsbenefits and operational performance of US Ecology Michigan, Inc. could lead to an impairment of goodwill or other intangible assets and suchimpairment may be material to our financial condition or results of operations.Our financial condition and results of operations could be materially affected by changes in accounting standards.Accounting principles generally accepted in the Unites States of America ("accounting standards") and interpretations by various governing bodies,including the SEC, for many aspects of our business, such as accounting for asset retirement obligations, goodwill and intangible assets, income taxesand share-based compensation, are complex and involve subjective judgments. Changes in these rules or their interpretation may significantly change oradd significant volatility to our reported earnings without a comparable underlying change in cash flow from operations. As a result, changes inaccounting standards could materially impact our financial condition and results of operations.Item 1B. Unresolved Staff Comments None.Item 2. Properties The following table describes our non-disposal related properties and facilities at December 31, 2012 owned or leased by us.The following table describes our treatment and disposal properties owned or leased by us, total acreage owned or controlled by us at the facility,estimated amount of permitted airspace available at each facility, the estimated amount of non-permitted airspace and the estimated life at each facility.We believe that our existing properties are in good condition and are suitable for the conduct of our business. All estimates are as of December 31,2012.Location Segment Function Size Own/LeaseBoise, Idaho Corporate Corporateoffice 14,037 sq. ft. LeaseElmoreCounty,Idaho Operating DisposalFacility Rail transferstation 189 acres OwnRobstown,Texas Operating DisposalFacility Rail transferstation 174 acres OwnBruneau,Idaho Non-OperatingDisposal Facility Formerdisposal facility 83 acres OwnSheffield,Illinois Non-OperatingDisposal Facility Formerdisposal facility 374 acres OwnWinona,Texas Non-OperatingDisposal Facility Former deepwell facility 297 acres OwnLocation Own/Lease TotalAcreage PermittedAirspace(Cubic Yards) Non-PermittedAirspace(Cubic Yards) Estimated Life(in years) Beatty, Nevada Lease 80 974,120 — 6 Richland, Washington(1) Sublease 100 654,857 — 43 Robstown, Texas Own 440 2,010,488 — 9 Grand View, Idaho Own 1,411 10,890,258 18,100,000 88 Detroit, Michigan Own 6 n/a n/a n/a Blainville, Quebec,Canada(2) Own/Lease 350 7,252,474 — 28 (1)The Richland, Washington facility is on land subleased from the State of Washington. Our sublease has four years remaining onthe base term with four ten-year renewal options, giving us control of the property until the year 2055 provided that we meet ourobligations and operate in a compliant manner. The facility's intended operating life is equal to the period of the sublease. (2)The treatment processing facility at our Blainville, Québec facility in Canada is on owned land. The disposal site which isadjacent to the owned treatment processing facility is leased from the Province of Québec with a term through 2018 and one five-year renewal option.24Table of ContentsItem 3. Legal Proceedings In the ordinary course of conducting business, we are involved in judicial and administrative proceedings involving federal, state or local governmentalauthorities, including regulatory agencies that oversee our permits and compliance with those permits. Fines or penalties may be assessed by ourregulators as a result of review or inspection of our operating practices. Actions may also be brought by individuals or groups in connection withpermitting of planned facilities, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedlyreleased from our operated sites, as well as other litigation. We maintain insurance intended to cover property and damage claims asserted as a result ofour operations. Periodically, management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred inconnection therewith. We are not currently a party to any material pending legal proceedings and, other than the matter discussed below, are not awareof any other claims that could have a materially adverse effect on our financial position, results of operations or cash flows.In April 2012, we received a confidential settlement communication from the United States Environment Protection Agency ("U.S. EPA") alleging thatthe thermal recycling operation at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conversation andRecovery Act of 1976 ("RCRA"). The communication included a draft Consent Agreement and Final Order ("CAFO") directed to the Company andthe thermal recycling unit's owner-operator. The CAFO asserted various technical compliance and permitting violations and proposed corrective actionsto resolve the matter as well as proposed monetary penalties against both the Company and the thermal recycling unit's owner-operator. In October2012, the Company and the thermal recycling unit's owner-operator entered into a final CAFO with the U.S. EPA. As part of the settlement, we agreedto pay a civil penalty of $166,000 and to submit an application to the State of Texas for a RCRA Subpart X permit. The Company and the thermalrecycling unit's owner-operating also agreed to a set of interim operating conditions that allow the facility to continue providing recycling services tocustomers until the RCRA Subpart X permit is issued. Based on the CAFO, we recorded a charge of $166,000 during 2012 in Selling, general andadministrative expenses in the Consolidated Statement of Operations.In connection with the above matter, the U.S. EPA has also raised concerns regarding potential violations of the Clean Air Act of 1970 ("CAA") at ourTexas thermal recycling operation. However, neither the Company nor the thermal recycling unit's owner-operator has received a formal notice ofviolation from the U.S. EPA. We cannot presently estimate the potential additional liability, if any, related to these potential violations of the CAA andtherefore no additional amounts have been recorded in our financial statements related to this matter.Item 4. Mine Safety Disclosures Not applicable.25Table of ContentsPART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity SecuritiesCommon Stock PriceOur common stock is listed on the NASDAQ Global Select Market under the symbol ECOL. As of February 19, 2013 there were approximately12,378 beneficial owners of our common stock. High and low sales prices for the common stock for each quarter in the last two years are shownbelow:Dividend HistoryWe have paid the following dividends on our common stock ($s in thousands except per share amounts):On October 29, 2010, we entered into the Credit Agreement with Wells Fargo, as amended, which provides for an aggregate commitment from WellsFargo of $95.0 million. Pursuant to our Credit Agreement, we may only declare quarterly or annual dividends if on the date of declaration, no event ofdefault has occurred, or no other event or condition has occurred that would constitute an event of default after giving effect to the payment of thedividend. No events of default under the Credit Agreement have occurred to date.26 2012 2011 High Low High Low First Quarter $21.77 $17.63 $18.21 $15.20 Second Quarter $22.71 $16.52 $18.50 $15.42 Third Quarter $21.81 $17.25 $18.85 $15.00 Fourth Quarter $25.05 $21.00 $19.00 $14.82 2012 2011 Per share Dollars Per share Dollars First Quarter $0.18 $3,281 $0.18 $3,275 Second Quarter 0.18 3,284 0.18 3,278 Third Quarter 0.18 3,285 0.18 3,279 Fourth Quarter(1) 0.36 6,582 0.18 3,281 Total $0.90 $16,432 $0.72 $13,113 (1)On December 12, 2012 the Company announced that it had accelerated the record and payment date of the Company'sregular quarterly dividend scheduled for the first quarter of fiscal 2013. The accelerated dividend of $0.18 per share waspayable on December 27, 2012, rather than January 25, 2013, to stockholders of record at the close of business onDecember 20, 2012.Table of ContentsStock Performance GraphThe following graph compares the five-year cumulative total return on our common stock with the comparable five-year cumulative total returns of theNASDAQ Composite Index and a waste industry peer group of publicly traded companies for the period from the end of fiscal 2007 to the end of fiscal2012. The stock price performance shown below is not necessarily indicative of future performance.Comparison of Cumulative Total Shareholder Return AmongUS Ecology, Inc., NASDAQ Composite Index and Peer Group(1) The performance graph above is being furnished solely to accompany this Annual Report on Form 10-K pursuant to Item 201(e) of Regulation S-K, isnot being filed for purposes of Section 18 of the Exchange Act, and is not to be incorporated by reference into any filing of the Company, whether madebefore or after the date hereof, regardless of any general incorporation language in such filing.27Date US Ecology, Inc. Nasdaq Composite Peer Group(2) December 31, 2007 $100.00 $100.00 $100.00 December 31, 2008 $88.49 $60.07 $105.46 December 31, 2009 $77.61 $86.43 $111.32 December 31, 2010 $82.80 $101.05 $128.37 December 31, 2011 $93.25 $99.23 $127.01 December 31, 2012 $122.17 $115.02 $131.38 (1)Total return assuming $100 invested on December 31, 2007 and reinvestment of dividends on the day they were paid. (2)The peer group consists of Clean Harbors, Inc., Perma-Fix Environmental Services, Inc. and Waste Management Inc.Table of ContentsItem 6. Selected Financial DataThis summary should be read in conjunction with the consolidated financial statements and related notes.Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsGeneralUS Ecology is a hazardous, polychlorinated biphenyls ("PCB"), 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, military installations, waste brokers/aggregators and medical and academicinstitutions. The majority of the waste received at our facilities is produced in the United States.On October 31, 2010, the Company acquired Stablex Canada Inc. ("Stablex"). Stablex is a provider of hazardous waste services that operates apermitted hazardous waste processing and disposal facility in Blainville, Québec, Canada about 30 miles northwest of Montreal, Québec, Canada.On May 31, 2012, the Company acquired 100% of the outstanding shares of Dynecol, Inc. ("Dynecol"), a chemical and industrial byproducts treatmentand reuse facility located in Detroit, Michigan, for a total purchase price of $10.8 million, including net working capital adjustments. The acquisition ofDynecol, subsequently renamed US Ecology Michigan, Inc., strengthens our mid-western and eastern U.S. and Ontario, Canada presence to betterserve key North American hazardous waste markets. In addition, US Ecology Michigan, Inc. provides us with an opportunity to win more EventBusiness (as defined below)28$s in thousands, except per share amounts 2012 2011 2010 2009 2008 Revenue $169,138 $154,917 $104,836 $132,519 $175,827 Insurance proceeds(1) — — — 661 — Operating income 40,638 32,365 20,377 23,102 34,521 Foreign currency gain (loss) 1,213 (1,321) 1,819 (37) 3 Income tax expense 16,059 11,437 9,602 9,513 13,735 Net income 25,659 18,370 12,584 13,970 21,498 Earnings per share—basic: $1.41 $1.01 $0.69 $0.77 $1.18 Earnings per share—diluted: $1.40 $1.01 $0.69 $0.77 $1.18 Shares used in earnings per sharecalculation: Basic 18,238 18,198 18,170 18,146 18,236 Diluted 18,281 18,223 18,189 18,173 18,290 Dividends paid per share $0.90 $0.72 $0.72 $0.72 $0.66 Total assets $218,694 $202,588 $217,349 $123,662 $127,445 Working capital(2) 13,021 8,772 18,693 38,830 36,892 Long-term debt 45,000 40,500 63,003 10 21 Stockholders' equity 112,022 100,163 94,712 93,498 91,942 Return on invested capital(3) 14.6% 12.0% 12.7% 14.3% 18.7%(1)Relates to insurance recoveries from an employee dishonesty claim in 2009. (2)Calculated as current assets minus current liabilities. (3)Calculated as operating income less applicable taxes divided by the sum of stockholders' equity, long-term debt, closure and post-closure obligations and monetized operating leases, less cash and short-term investments.Table of Contentswork; expand penetration with national accounts; improve and enhance transportation, logistics, and service offerings with existing customers; andattract new customers. Management also believes that the acquisition offers meaningful synergies in combination with our Stablex facility. Revenuefrom US Ecology Michigan, Inc. after the date of acquisition included in US Ecology's consolidated statements of operations was $6.7 million for theyear ended December 31, 2012.We generate revenue from fees charged to treat and dispose of waste at our six fixed facilities located near Beatty, Nevada; Richland, Washington;Robstown, Texas; Grand View, Idaho; Detroit, Michigan and Blainville, Québec, Canada. We manage a dedicated fleet of railcars and arrange for thetransportation of waste to our facilities. Transportation services contributed significant revenue in recent years. We also utilize this railcar fleet to providetransportation services for disposal at facilities operated by other companies on a less frequent basis. We or our predecessor companies have been in thewaste business since 1952.Our customers may be divided into categories to better evaluate period-to-period changes in our treatment and disposal ("T&D") revenue based onservice mix and type of business (recurring customer "Base Business" or discrete waste clean-up project "Event Business"). Each of these categories isdescribed in the table below with information on the percentage of total T&D revenues for each category for the years ended December 31, 2012 and2011.A significant portion of our disposal revenue is attributable to discrete Event Business projects which vary widely in size, duration and unit pricing. Forthe year ended December 31, 2012, approximately 35% of our T&D revenue, excluding US Ecology Michigan, Inc., was derived from Event Businessprojects. The one-time nature of Event Business, diverse spectrum of waste types received and widely varying unit pricing necessarily creates variabilityin revenue and earnings. This variability may be influenced by general and industry-specific economic conditions, funding availability, changes in lawsand regulations,29 % of T&DRevenue(1)(2)for the YearsEndedDecember 31, Customer Category Description 2012 2011 Broker Companies that collect and aggregate waste from their direct customers,generally comprised of Base Business with periodic Event Business for largerprojects. 51% 49%Other industry Electric utilities, chemical manufacturers, steel mill and other industrialcustomers not included in other categories, comprised of both recurring Baseand Event Business. 18% 15%Government Federal and State government clean-up project waste, comprised of both Baseand Event Business. 12% 9%Refinery Petroleum refinery customers, comprised of both Base and Event Business. 9% 11%Private Clean-up Private sector clean-up project waste, typically Event Business. 6% 12%Rate regulated Northwest and Rocky Mountain Compact customers paying rate-regulateddisposal 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Table of Contentsgovernment enforcement actions or court orders, public controversies, litigation, weather, real estate redevelopment project timing, governmentappropriation and funding cycles and other factors. The types and amounts of waste received from Base Business also vary from quarter to quarter. Asa result of this variability we can experience significant quarter-to-quarter and year-to-year differences in revenue, gross profit, gross margin, operatingincome and net income. Also, while many large projects are pursued months or years in advance of work performance, both large and small clean-upproject opportunities routinely arise with little prior notice. This uncertainty, which is inherent to the hazardous and radioactive waste disposal business,is factored into our projections and externally communicated business outlook statements. Our projections combine historical experience with identifiedsales 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 newbusiness. For waste transported by rail from the eastern United States and other locations distant from our Grand View, Idaho and Robstown, Texasfacilities, transportation-related revenue can account for as much as three-fourths (75%) of total project revenue. While bundling transportation anddisposal services reduces overall gross profit as a percentage of total revenue ("gross margin"), this value-added service has allowed us to win multipleprojects that management believes we could not have otherwise competed for successfully. Our Company-owned fleet of 234 gondola railcars, whichsupplements railcars obtained under operating leases, has reduced our reliance on more costly short-term rentals and ultimately has reducedtransportation expenses. These Company-owned railcars also afford us with availability to serve customers during times of high demand.The increased waste volumes resulting from projects won through this bundled service strategy drive operating leverage and increase profitability.While waste treatment and other variable costs are project-specific, the earnings contribution from individual projects generally increases as overalldisposal volumes increase. Management believes that maximizing operating income, net income and earnings per share is a higher priority thanmaintaining or increasing gross margin. We plan to continue aggressively bidding bundled transportation and disposal services based on this strategy.To maximize utilization of our railcar fleet, we periodically deploy available railcars to transport waste from clean-up sites to disposal facilities operatedby other companies. Such transportation services may also 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 customersthat are generally affected by adverse economic conditions and a tight credit environment. Such conditions may cause our customers as well as thosethey serve to curtail operations, resulting in lower waste production and/or delayed spending on off-site waste shipments, maintenance, waste clean-upprojects 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 toreduce or cease operations, declare bankruptcy, liquidate or relocate to other countries, any of which could adversely affect our business. To the extentour business is either government funded or driven by government regulations or enforcement actions, we believe it is less susceptible to generaleconomic conditions. Spending by government agencies may also be reduced due to declining tax revenues resulting from a weak economy or changesin policy. Disbursement of funds appropriated by Congress may also be delayed for various reasons.Overall PerformanceOn a consolidated basis, our financial performance for the year ended December 31, 2012 ("2012") improved compared to the years endedDecember 31, 2011 ("2011") and December 31, 2010 ("2010"). A30Table of Contentsportion of our disposal revenue is derived from government Event Business clean-up projects which are primarily driven by federal, state/provincial and(to a lesser extent) local government appropriations. Government Event Business projects include federal and state Superfund projects which, like otherremediation work, depend on project-specific funding.We have a contract with the USACE to provide disposal services for the USACE FUSRAP clean-up program that expires in 2013, with an optionperiod for the USACE to extend until 2015. The USACE expects the federal clean-up program, which funds the contract, to continue throughapproximately 2033. From time to time the USEPA and other federal agencies use our USACE contract to dispose of Superfund and other federalclean-up waste. Annual FUSRAP funding has remained generally constant ranging from $109.0 million to $140.0 million each fiscal year over the lastseveral years but is at risk for future funding cuts. In February 2012, President Obama proposed a fiscal 2013 budget reflecting FUSRAP funding at$104.0 million. In 2012, USACE revenue was approximately 6% of our total revenue or $10.3 million as compared to 7% or $10.5 million and 17% or$17.6 million of our total revenue in 2011 and 2010, respectively. During 2009, we began providing transportation services to the USACE on variousprojects. T&D revenue from the USACE increased 22% in 2012 as compared with 2011. T&D revenue from the USACE decreased 26% in 2011 ascompared with 2010.We believe that private sector remediation projects are driven by economic conditions, regulatory agency enforcement actions and settlements includingregulatory enforcement actions, judicial proceedings, availability of private funds, post-remediation real estate redevelopment plans and other factors.During economic downturns, management believes that privately-funded remediation projects that are not driven by enforcement actions are more likelyto be delayed than when the economy is strong. The economic condition of a specific industry (e.g. refinery or steel mill production) is also relevant asis the financial condition of specific customers. We serve multiple private clean-up efforts on an ongoing basis. The revenue and gross margin forindividual projects vary considerably depending on the amount of waste shipped to our disposal sites, the rate at which the waste is received and unitpricing.During 2012, Base Business revenue, excluding US Ecology Michigan, Inc., increased 17% compared to 201. Base Business revenue, excluding USEcology Michigan, Inc., was approximately 65% of total 2012 T&D revenue, up from 61% in 2011. Our business is highly competitive and noassurance can be given that we will maintain these revenue levels or increase our market share.2012 to 2010 year-to-year comparisons are affected by multiple significant events including, but not limited to:2012 EventsAcquisition of Dynecol, Inc.: On May 31, 2012, the Company acquired 100% of the outstanding shares of Dynecol, Inc. ("Dynecol"), a chemical andindustrial byproducts treatment and reuse facility located in Detroit, Michigan, for a total purchase price of $10.8 million. Dynecol was subsequentlyrenamed US Ecology Michigan, Inc. The acquisition impacts the comparability of 2012 with previous years as follows:•The amounts of revenue and operating loss from US Ecology Michigan, Inc. included in the Company's consolidated statements ofoperations for the seven months of ownership in 2012 were $6.7 million and $161,000, respectively. •We incurred $348,000 of business development activities in connection with the US Ecology Michigan, Inc. acquisition primarily fordue diligence and business integration purposes. •We recorded $1.9 million of intangible assets and $1.3 million of goodwill on the Consolidated Balance Sheet as a result of theacquisition. Definite-lived intangibles will be amortized over their estimated useful life ranging from 1 to 15 years. Goodwill andindefinite-lived intangibles are tested for impairment at least annually.31Table of ContentsUnrealized Foreign Currency Loss: In conjunction with our acquisition of Stablex in 2010, we established intercompany loans between Stablex andUS Ecology as part of our tax and treasury management strategy. These intercompany loans are payable using Canadian dollars ("CAD") and aresubject to mark-to-market adjustments with movements in the CAD relative to the U.S. dollar ("USD"). At December 31, 2012 these intercompanyloans totaled $46.7 million. During 2012 the CAD strengthened relative to the USD producing a $1.2 million non-cash foreign currency translation gainin the Company's Consolidated Statement of Operations.Closure Post Closure Trust Fund Reimbursement: In 2012, the Company received a $638,000 refund from the State of Nevada closure and post-closure trust fund, which is maintained by the State and funded by the Company to cover closure and post-closure obligations of the Beatty, Nevadafacility. Any excess in the trust fund over the estimated costs to complete closure and post-closure obligations is returned to the Company and includedas Revenue in the Consolidated Statement of Operations.2011 EventsUnrealized Foreign Currency Loss: In conjunction with our acquisition of Stablex in 2010, we established intercompany loans between Stablex andUS Ecology as part of our tax and treasury management strategy. These intercompany loans are payable using Canadian dollars ("CAD") and aresubject to mark-to-market adjustments with movements in the CAD relative to the U.S. dollar ("USD"). At December 31, 2011 these intercompanyloans totaled $51.7 million. During 2011, the CAD weakened relative to the USD resulting in a $1.3 million non-cash foreign currency translation lossin the Company's Consolidated Statement of Operations.Closure Post Closure Trust Fund Reimbursement: In 2011, the Company received a $1.3 million refund from the State of Nevada closure and post-closure trust fund, which is maintained by the State of Nevada and funded by the Company to cover closure and post-closure obligations of the Beatty,Nevada facility. Any excess in the trust fund over the estimated costs to complete closure and post-closure obligations are returned to the Company. Therefund is included as Revenue in the Consolidated Statement of Operations.Full year of Stablex Operations: 2011 includes a full year of operating results for Stablex which was acquired on October 31, 2010. 2010 includesonly two months of Stablex operations.2010 EventsAcquisition of Stablex: On October 31, 2010, we completed the acquisition of Stablex for $77.5 million. The purchase was completed using$19.7 million of cash and $57.8 million of debt. The acquisition impacts the comparability of 2010 with subsequent years as follows:•Stablex operations added $5.7 million of total revenue for the two months we owned the operation in 2010. •We incurred $2.6 million of business development activities in connection with the Stablex acquisition primarily for investment bankingfees, due diligence and business integration. Of the $2.6 million in business development costs, only $548,000 was deductible forincome tax purposes contributing to an overall 43.3% effective tax rate for 2010. •We realized $1.2 million of non-cash foreign currency translation gains on intercompany loans between Stablex and its parent company,US Ecology. These intercompany loans are payable using CAD and are subject to mark-to-market adjustments with movements in theCAD relative to the USD. •We entered into a forward contract to purchase $80.0 million CAD to complete the purchase of Stablex. Favorable currency movementsin the CAD relative to the USD between the date of the32Table of Contentsforward contract and the date of the ultimate purchase of Stablex resulted in foreign currency gains of approximately $728,000 that arerecognized in the Company's Consolidated Statement of Operations from intercompany loans.•We recorded $41.0 million of intangibles and $21.3 million of goodwill on the Consolidated Balance Sheet as a result of the acquisition.Intangibles will be amortized over their estimated useful life ranging from 5 to 33 years. Goodwill is tested for impairment at leastannually.Closure Post Closure Trust Fund Reimbursement: During the fourth quarter of 2010 the Company received a $1.3 million refund from the State ofNevada closure and post-closure trust fund, which is maintained by the State and funded by the Company to cover closure and post-closure obligationsof the Beatty, Nevada facility. Any excess in the trust fund over the estimated costs to complete closure and post-closure obligations is returned to theCompany and included as Revenue in the Consolidated Statement of Operations.USEPA Regulatory Settlement: In March 2010, the Company received a proposed settlement offer from the USEPA relating to alleged non-compliance with certain regulations at our Beatty, Nevada facility dating back to 2005. In response to the USEPA's proposal, the Company and theUSEPA agreed to settle the matter for $497,000 which was recorded as a charge to Selling, general and administrative expenses in the ConsolidatedStatement of Operations.Operating and Non-operating facility closure expenses: In 2010, we recognized net charges of $149,000 related to changes in cost estimates to closeour operating and non-operating sites and perform post-closure monitoring. The charge is included in Direct operating costs in the ConsolidatedStatement of Operations.Results of OperationsThe table below summarizes our operating results and percentage of revenues for the years ended December 31, 2012, 2011 and 2010.33$s in thousands 2012 % 2011 % 2010 % Revenue $169,138 100.0%$154,917 100.0%$104,836 100.0%Direct operating costs 79,177 46.8% 73,758 47.6% 45,391 43.3%Transportation costs 23,664 14.0% 27,292 17.6% 20,434 19.5% Gross profit 66,297 39.2% 53,867 34.8% 39,011 37.2%Selling, general and administrativeexpenses 25,659 15.2% 21,502 13.9% 18,634 17.8% Operating income 40,638 24.0% 32,365 20.9% 20,377 19.4%Other income (expense) Interest income 17 26 51 Interest expense (878) -0.5% (1,604) -1.0% (320) -0.2%Foreign currency gain (loss) 1,213 0.7% (1,321) -0.9% 1,819 1.8%Other 728 0.4% 341 0.2% 259 0.2% Total other income (expense) 1,080 0.6% (2,558) -1.7% 1,809 1.8%Income before income tax 41,718 24.7% 29,807 19.2% 22,186 21.2%Income tax expense 16,059 9.5% 11,437 7.4% 9,602 9.2% Net income $25,659 15.2%$18,370 11.9%$12,584 12.0% Table of ContentsSegmentsWe operate within two segments, Operating Disposal Facilities and Non-Operating Disposal Facilities, which are combined with Corporate to arrive atconsolidated income. Only the Operating Disposal Facilities segment reports significant revenue and profits. Non-Operating Disposal Facilities generatevirtually no revenue and no profit. Corporate generates no revenue and provides administrative, management and support services to the other segments.Income taxes are assigned to Corporate. All other items are included in the segment where they originated. Inter-company transactions have beeneliminated from the segment information and are not significant between segments. Detailed financial information for our reportable segments can befound in Note 17 to the consolidated financial statements under Item 8—Financial Statements and Supplementary Data to this Form 10-K.2012 Compared to 2011Revenue. Revenue increased 9% to $169.1 million in 2012, up from $154.9 million in 2011. This increase reflects a 13% increase in T&D revenueand a 9% decrease in transportation service revenue in 2012 compared to 2011. The decrease in transportation service revenue was due to fewer EventBusiness projects utilizing the Company's transportation and logistics services.US Ecology Michigan, Inc., acquired May 31, 2012, contributed $6.7 million of total revenue during the seven months we owned the operation in2012. Revenue from US Ecology Michigan, Inc. is excluded from quarterly percentages of Base and Event Business and customer category informationin the following paragraphs.During 2012, the Company recorded revenue of $638,000 related to refunds from the State of Nevada closure and post-closure trust fund maintained bythe State to cover closure and post-closure obligations of the Beatty, Nevada facility. Any excess in the trust fund over the estimated costs is refunded tothe Company. In 2011, the Company received $1.3 million in refunds from the State of Nevada post-closure trust fund.During 2012, we disposed of 1.0 million tons of hazardous and radioactive waste, down 6% from 1.1 million tons disposed in 2011. Our averageselling price for treatment and disposal services (excluding transportation) in 2012 was 21% higher than our average selling price in 2011. The declinein volume and pricing improvement primarily reflects the high-volume low unit price waste received in 2011 from the GE Hudson River cleanupproject.During 2012, T&D revenue from recurring Base Business customers was 17% higher than 2011 and comprised 65% of T&D revenue. This comparedto 61% of T&D revenue in 2011. As discussed further below, this increase primarily reflects higher broker and other industry Base Business T&Drevenue, partially offset by lower refinery Base Business T&D revenue.Event Business revenue in 2012 decreased 2% compared to 2011 and was 35% of T&D revenue in 2012. This compares to 39% of T&D revenue in2011. As discussed further below, this decrease primarily reflects lower private clean-up and broker Event Business T&D revenue, partially offset byhigher government Event Business T&D revenue.34Table of ContentsThe following table summarizes revenue growth (both Base Business and Event Business) by industry customer type for 2012 as compared to 2011.Government clean-up business revenue increased 59% in 2012 compared to 2011 due to higher shipments from the USACE and a new military baseclean-up project in 2012. Event Business under our USACE contract contributed $10.3 million, or 6%, of total revenue in 2012 compared to$10.5 million, or 7%, of total revenue in 2011. USACE T&D revenue increased 22% in 2012 compared with 2011 due to project-specific timing atmultiple USACE clean-up sites. The increase in USACE T&D revenue was more than offset by a 48% decrease in USACE transportation revenue in2012 compared with 2011. This was due to project-specific transportation arrangements at multiple USACE clean-up sites. No USACE projects servedby the Company were cancelled or, to our knowledge, awarded to competitors during the year.Our other industry revenue category increased 28% in the 2012 compared to 2011 on strong shipments from the broadly diversified group of industrialcustomers we serve.Our broker business increased 13% in the 2012 compared to 2011. This increase was the result of shipments across our broad range of government andindustry waste generators directly served by our multiple broker customers including higher volumes of brokered thermal recycling projects.T&D revenue from our refinery customers decreased 5% in 2012 compared to 2011. This decrease primarily reflects lower volumes partially offset byimproved pricing on thermal recycling projects.T&D revenue from private clean-up customers decreased 46% in 2012 compared to 2011. This decrease primarily reflects shipments from the GEHudson River project in 2011 that were not fully replaced in 2012.Gross Profit. In 2012, gross profit increased 23% to $66.3 million, up from $53.9 million in 2011. This increase primarily reflects higher averageselling prices offsetting lower volumes of waste disposed in 2012 compared to 2011. Gross margin was 39% in 2012, up from 35% in 2011. T&Dgross margin was 46% in 2012, up from 43% in 2011. The increase in gross margin and T&D gross margin primarily reflects increased average sellingprices on lower volumes resulting in a more favorable service mix. The increase was also partially attributable to lower costs for chemical reagents usedto treat waste prior to disposal in 2012 compared to 2011.Selling, General and Administrative ("SG&A"). As a percentage of total revenue, SG&A expenses increased to 15% in 2012 compared to 14% in2011. SG&A expenses for 2012 were $25.7 million, up from $21.5 million in 2011. The increase is primarily attributable to higher payroll-relatedcosts, including variable incentive compensation resulting from stronger financial performance, higher business development costs, severance costsrelated to a senior management reorganization in October 2012 and higher other general administrative costs associated with increased levels of businessactivity in 2012 compared to 2011.Interest expense. Interest expense for 2012 was $878,000, down from $1.6 million for 2011, primarily reflecting lower debt levels and lower interestrates in 2012.35 T&D Revenue Growth2012 vs. 2011 Government 59%Other industry 28%Broker 13%Rate regulated 0%Refinery -5%Private -46%Table of ContentsForeign Currency Gain (Loss). We recognized a $1.2 million non-cash foreign currency gain in 2012 compared with a $1.3 million non-cashforeign currency loss in 2011. Foreign currency gains and losses reflect changes in business activity conducted in a currency other than the USD, ourfunctional currency. Our Stablex facility is owned by our Canadian subsidiary, whose functional currency is the CAD. As part of our treasurymanagement strategy we established intercompany loans between our parent company, US Ecology, and Stablex. These intercompany loans are payableby Stablex to US Ecology in CAD requiring us to revalue the outstanding loan balance through our statements of operations based on USD/CADcurrency movements from period to period. At December 31, 2012, we had $46.7 million of intercompany loans subject to currency revaluation.Other income. Other income includes non-operating business activities and unusual revenue and expenses. Other income for 2012 was $728,000compared with $341,000 for 2011. The increase primarily reflects $474,000 of other income recorded in connection with the sale of an excess waterright at our Grand View, Idaho property during 2012.Income tax expense. Our effective income tax rate for 2012 was 38.5% compared to 38.4% in 2011. As of December 31, 2012, we hadapproximately $109.8 million in state net operating loss carry forwards ("NOLs") for which we maintain nearly a full valuation allowance. These stateNOLs are located in states where we currently do little or no business or where we do not expect to generate future taxable income. We consider itunlikely that we will utilize these NOLs in the future. As of December 31, 2012 we had unrecognized tax benefits of $438,000 that, if recognized,would favorably affect the effective tax rate. As of December 31, 2012, we have recorded $29,000 of interest expense associated with this unrecognizedtax benefit.2011 Compared to 2010Revenue. Revenue increased 48% to $154.9 million in 2011, up from $104.8 million in 2010. This increase reflects a 51% increase in T&D revenueand a 34% increase in transportation service revenue compared to 2010. Total revenue growth in 2011 reflects $36.5 million from Stablex, which wasacquired on October 31, 2010. Excluding Stablex, 2011 T&D revenue grew 21% as compared to 2010. Transportation service revenue grew 13% ascompared to 2010.During 2011 the Company recorded revenue of $1.3 million related to refunds from the State of Nevada closure and post-closure trust fund maintainedby the State to cover closure and post-closure obligations of the Beatty, Nevada facility. Any excess in the trust fund over the estimated costs isrefunded to the Company. In 2010, the Company also recorded $1.3 million in refunds from the State of Nevada post-closure trust fund.During 2011, we disposed of 1.1 million tons of hazardous and radioactive waste, up 52% from 723,000 tons disposed in 2010. Excluding Stablex,volumes increased 31% in 2011 compared to 2010. Our average selling price for treatment and disposal services (excluding transportation) in 2011 was1% higher than our average selling price in 2010. This increase reflects a slightly more favorable service mix across all operations.During 2011, T&D revenue from recurring Base Business customers was 55% higher than 2010 and comprised 61% of T&D revenue. This comparedto 59% of T&D revenue in 2010. Excluding Stablex, T&D revenue from recurring Base Business was 21% higher than 2010. This increase primarilyreflects higher revenue from broker, refinery and other industry customers.Event Business revenue in 2011 increased 44% compared to 2010 and was 39% of T&D revenue in 2011. This compares to 41% of T&D revenue in2010. Excluding Stablex, T&D revenue from Event Business increased 19% in 2011 compared to 2010. As discussed further below, this reflectsincreased T&D revenue from private clean-up, broker and refinery customer categories.36Table of ContentsThe following table summarizes revenue growth (both Base Business and Event Business) by industry customer type for 2011 compared to 2010.Including Stablex, T&D revenue from private clean-up customers for 2011 increased 114% compared to 2010. Excluding Stablex, revenue from privateclean-up customers increased 94% in 2011 compared to 2010. This increase is due to increased waste volumes from private remediation projects in2011 that did not ship in 2010.Including Stablex, our other industry revenue category increased 89% in 2011 compared to 2010. Excluding Stablex, other industry revenue increased25% in 2011 compared to 2010.Including Stablex, broker business increased 79% in 2011 compared to 2010. Excluding Stablex, broker business increased 32% in 2011 compared to2010. This reflects shipments from a brokered chemical demilitarization project and higher shipments across a broad range of customers and industries.Including Stablex, T&D revenue from our refinery customers increased 38% in 2011 compared to 2010. Excluding Stablex, T&D revenue from ourrefinery customers increased 31% in 2011 on higher volumes and improved pricing on thermal recycling projects.Growth in our rate-regulated business at our Richland, Washington low-level radioactive waste facility was flat in 2011 compared to 2010 consistentwith our current State-approved revenue requirement.Government clean-up business revenue decreased 35% in 2011 compared to 2010. This decrease primarily reflects a 2010 field services contract wherewe provided logistics and brokered disposal services to an alternative disposal facility, and lower USACE shipments in 2011. Event Business under ourUSACE contract contributed $10.5 million, or 7% of total revenue in 2011 compared to $17.6 million, or 17%, of total revenue in 2010. Excludingtransportation revenue, T&D revenue from the USACE decreased 26% in 2011 compared to 2010. Project-specific timing at multiple USACE clean-upsites caused this decrease. Each USACE site typically is remediated over multiple years in discretely funded project phases that may involve differenttypes of waste being shipped to one or more disposal companies. These phases vary by type and amount of waste shipped and duration. No USACEprojects served by the Company were cancelled or, to our knowledge, awarded to competitors during 2011.Gross Profit. In 2011, gross profit increased 38% to $53.9 million, up from $39.0 million in 2010. Gross margin was 35% in 2011, down from 37%in 2010. T&D gross margin was 43% in 2011, down from 47% in 2010. This decrease primarily reflects the addition of Stablex and growth in ourthermal recycling business, both of which have lower gross margins than our other operations. Excluding Stablex, T&D gross margin was 50% in2011, up slightly from 49% in 2010.Selling, General and Administrative ("SG&A"). SG&A expenses for 2011 were $21.5 million, up from $18.6 million in 2010. As a percentage oftotal revenue, SG&A decreased to 14% in 2011 compared to 18% in 2010. In total dollars, SG&A expense increased $2.9 million in 2011 compared to2010. This increase reflects $4.4 million of SG&A expenses related to Stablex operations in 2011 compared to $746,000 in 2010. This increase waspartially offset by $2.6 million in business development costs, including transaction expenses associated with the acquisition of Stablex and otherbusiness development activities in 2010 that did not recur in 2011.37 T&D Revenue Growth2011 vs. 2010 Private 114%Other industry 89%Broker 79%Refinery 38%Rate regulated 0%Government -35%Table of ContentsInterest expense. Interest expense is incurred on borrowings under our Credit Agreement. Interest expense in 2011 was $1.6 million compared to$320,000 in 2010. On October 29, 2010, we borrowed $57.8 million under our Credit Agreement to partially finance the acquisition of Stablex. As ofDecember 31, 2011, we had approximately $40.6 million of borrowings under our Credit Agreement. Interest rates charged under our CreditAgreement are variable and are priced at LIBOR plus a margin. Interest rates charged, including amortization of deferred financing costs and unusedline fees, on outstanding borrowings in 2011 approximated 3.1%. See Liquidity and Capital Resources for more information on our Credit Agreement.Foreign Currency Gain (Loss). In 2011 we recognized a $1.3 million non-cash foreign currency loss compared to a non-cash foreign currency gainof $1.8 million in 2010. Foreign currency gain (loss) reflects changes in business activity conducted in a currency other than the USD, our functionalcurrency. In 2010, we acquired Stablex, a Canadian company, whose functional currency is the CAD. As part of a tax and treasury managementstrategy we established intercompany loans of $49.4 million between our parent company, US Ecology and Stablex. These intercompany loans arepayable by Stablex to US Ecology in CAD. This requires us to revalue the outstanding loan balance through our statement of operations based onUSD/CAD currency movements from period to period. During 2011, the CAD weakened relative to the USD, resulting in a $1.3 million non-cashforeign currency translation loss in the Company's Consolidated Statement of Operations. During 2010 the CAD strengthened relative to the USD,resulting in a non-cash foreign currency translation gain. In 2010, in preparation for the purchase of Stablex, we also entered into a forward contract topurchase $80.0 million CAD to fund the purchase. Favorable currency movements in the CAD relative to the USD between the date we locked in theforward contract rate and the date of the Stablex acquisition resulted in foreign currency gains of approximately $728,000 that were recognized in theCompany's Consolidated Statement of Operations for 2010.Other income (expense). Other income (expense) includes business activities not included in ordinary and usual revenue and expenses. In 2011 and2010, we recognized $341,000 and $259,000, respectively, in other income primarily for royalty income from a previously sold municipal waste landfillin Texas.Income tax expense. Our effective income tax rate for 2011 was 38.4% compared to 43.3% in 2010. The decrease in our effective tax rate is primarilydue to business development costs incurred in connection with the Stablex acquisition which were not deductible for income tax purposes in 2010.During 2011, the Company recorded unrecognized tax benefits of $438,000 and accrued interest of $16,000 related to filing positions taken on our2010 U.S. income tax returns. The unrecognized tax benefits of $438,000 at December 31, 2011 would favorably affect the effective tax rate, ifrecognized. We had no unrecognized tax benefits as of December 31, 2010. We recognize interest assessed by taxing authorities or interest associatedwith uncertain tax positions as a component of interest expense. We recognize any penalties assessed by taxing authorities or penalties associated withuncertain tax positions as a component of selling, general and administrative expenses. Penalties for 2011 were not material. Interest and penalties for2010 were not material.Liquidity and Capital ResourcesOur primary sources of liquidity are cash and cash equivalents, cash generated from operations and borrowings under the Credit Agreement. AtDecember 31, 2012, we had $2.1 million in cash and cash equivalents immediately available for operations. We assess our liquidity in terms of ourability to generate cash to fund our operating, investing and financing activities. Our primary ongoing cash requirements will be to fund operations,capital expenditures, interest, and principal payments and continue paying dividends pursuant to our dividend policy. We believe future operating cashflows will be sufficient to meet our future operating and investing cash needs for the foreseeable future. Furthermore, existing cash balances andavailability of additional borrowings under our Credit Agreement provide additional sources of liquidity should they be required.38Table of ContentsOperating Activities. In 2012, net cash provided by operating activities was $35.2 million. This primarily reflects net income of $25.7 million, non-cash depreciation, amortization and accretion of $16.8 million and an increase in accrued salaries and benefits of $1.9 million, partially offset by adecrease in accrued closure and post-closure obligations of $2.3 million, a decrease in accounts payable and accrued liabilities of $2.2 million, anincrease in receivables of $1.9 million and unrealized non-cash foreign currency gains of $1.4 million. Impacts on 2012 net income are due to the factorsdiscussed above under Results of Operations. The increase in accrued salaries and benefits is primarily attributable to an increase in incentivecompensation. The decrease in accrued closure and post-closure liabilities is primarily attributable to cash payments during 2012 for disposal cellcapping at our Robstown, Texas and Blainville, Québec, Canada facilities. The decrease in accrued liabilities is primarily attributable to the payment offiscal year 2011 accrued customer refunds related to our rate-regulated business in Richland, Washington. The increase in receivables is primarilyattributable to the timing of customer payments. Days sales outstanding was 61 days as of December 31, 2012, compared to 66 days as ofDecember 31, 2011. The non-cash foreign currency gain reflects a stronger CAD relative to the USD in 2012.In 2011, net cash provided by operating activities was $43.2 million. This primarily reflects net income of $18.4 million, non-cash depreciation,amortization and accretion of $16.6 million, decreases in receivables and other working capital assets of $4.1 million, increases in certain workingcapital liabilities such as accounts payable, accrued liabilities and accrued salaries and benefits of $4.3 million, unrealized non-cash foreign currencylosses of $1.3 million and non-cash stock based equity awards of $837,000. Partially offsetting these sources of cash were decreases in our incometaxes payable of $1.1 million and decreases in other working capital liabilities of $813,000. Impacts on net income are due to the factors discussedabove for 2011 under Results of Operations. The decrease in receivables is primarily attributable to timing of significant customer payments for 2010received in 2011. Days sales outstanding was 66 days as of December 31, 2011, compared to 65 days as of December 31, 2010. The non-cash foreigncurrency loss reflects a weakened CAD relative to the USD in 2011. The increase in accounts payable, accrued liabilities and accrued salaries andbenefits is primarily attributable to a higher level of business activity in the fourth quarter of 2011 along with an increase in incentive compensation as aresult of achieving internal performance metrics.In 2010, net cash provided by operating activities was $14.9 million. This reflects net income of $12.6 million, non-cash depreciation, amortization andaccretion of $9.1 million, increases in our income taxes payable of $2.4 million, increases in our working capital liabilities such as accounts payable,accrued liabilities, accrued salaries and benefits totaling $2.3 million and non-cash stock based equity awards of $988,000. Partially offsetting thesesources of cash were increases in accounts receivable of $11.3 million and unrealized non-cash foreign currency gains of $1.2 million. Impacts on netincome are due to the factors discussed above for 2010 under Results of Operations. The increase in income taxes payable reflects improved fourthquarter pre-tax results in 2010. The increase in our working capital liability accounts also reflects the higher level of business activity in the fourthquarter of 2010 along with higher incentive compensation. The increase in receivables is primarily attributable to increased business activity inNovember and December of 2010. Days sales outstanding improved to 65 days at December 31, 2010, down from 68 days at December 31, 2009. Thenon-cash foreign currency gain reflects a strengthening CAD relative to the USD on intercompany notes established as part of the Stablex acquisition.Investing Activities. In 2012, net cash used in investing activities was $26.3 million, primarily attributable to capital expenditures of $15.8 million andthe acquisition of US Ecology Michigan, Inc. for $10.7 million, net of cash acquired. Significant capital projects included construction of additionaldisposal capacity at our Grand View, Idaho and Blainville, Québec, Canada locations and equipment purchases and infrastructure upgrades at all of ouroperating disposal facilities.In 2011, net cash used in investing activities was $10.0 million, primarily attributable to capital expenditures. Capital expenditures in 2011 reflect$1.8 million in infrastructure investments and facility upgrades at our Robstown, Texas, Grand View, Idaho and Beatty, Nevada facilities and$1.4 million to39Table of Contentsconstruct additional disposal capacity at our Beatty, Nevada and Stablex facilities. Other capital projects included equipment purchases and infrastructureupgrades at all of our operating disposal facilities.In 2010, net cash used in investing activities was $89.5 million. Significant transactions affecting cash used in investing activities during 2010 includeour purchase of Stablex for $77.4 million net of cash acquired, and capital expenditures of $14.2 million. Partially offsetting these uses of cash were netmaturities of short-term investments of $1.4 million and $685,000 in cash received from our restricted cash trust funds. Capital expenditures in 2010included additional infrastructure investments of $6.0 million to construct a new treatment and storage facility in Robstown, Texas, $2.9 million toconstruct additional disposal capacity at our Robstown, Texas, and Beatty, Nevada facilities and $859,000 to complete construction of a new storageand processing facility at Stablex. Other capital projects included equipment purchases and infrastructure upgrades at all of our operating disposalfacilities.Financing Activities. For 2012, net cash used in financing activities was $11.2 million, consisting primarily of $16.4 million of dividends paid to ourstockholders (including a one-time accelerated quarterly dividend payment in December 2012), partially offset by net borrowings under the CreditAgreement of $4.5 million incurred primarily to finance the US Ecology Michigan, Inc. acquisition and fund working capital requirements.For 2011, net cash used in financing activities was $35.2 million, primarily reflecting $39.4 million of payments under our Credit Agreement and$13.1 million of dividend payments to our stockholders, partially offset by $16.9 million of new borrowings under our Credit Agreement usedprimarily to fund working capital requirements.For 2010, net cash provided by financing activities was $49.6 million and included $63.0 million of borrowings under our Credit Agreement incurredprimarily to finance the Stablex acquisition. These cash inflows were partially offset by $13.1 million of dividend payments to our stockholders and$373,000 in deferred financing costs paid.On October 29, 2010, we entered into a credit agreement with Wells Fargo which provided 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 June 15, 2013 and a $75.0 million reducing revolving line of credit (the "Reducing Revolving Line of Credit") with a maturitydate 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 capitalneeds (the "Commitment Amount"). Under the Revolving Line of Credit, revolving loans are available based on the Prime Rate or LIBOR, at theCompany's option, plus an applicable margin, which is determined according to a pricing grid under which the interest rate decreases or increases basedon our ratio of funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"). At December 31, 2012, the effective interestrate on the Revolving Line of Credit was 1.46%. Interest only payments are due either monthly or on the last day of any interest period, as applicable.At December 31, 2012 there were no borrowings outstanding under the Revolving Line of Credit. The availability under the Revolving Line of Creditwas $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-closurefinancial assurance.Reducing Revolving Line of Credit. The Reducing Revolving Line of Credit provided an initial commitment amount of $75.0 million (the "ReducingRevolving Commitment Amount"). Proceeds from the Reducing Revolving Line of Credit were used to acquire all of the shares of Stablex in 2010 andto acquire Dynecol in 2012, with the remaining borrowings available under the Reducing Revolving Line of Credit used to provide financing forworking capital needs. The initial Reducing Revolving Commitment Amount is reduced by $2.8 million on the last day of each June, September,December and March beginning June 30, 2011, continuing through November 1, 2015. Under the Reducing Revolving Line of Credit revolving loans40Table of Contentsare available based on the Prime Rate or LIBOR, at the Company's option, plus an applicable margin, which is determined according to a pricing gridunder which the interest rate decreases or increases based on our ratio of funded debt to EBITDA. At December 31, 2012, the effective interest rate ofthe Reducing Revolving Line of Credit was 1.46%. Interest only payments are due either monthly or on the last day of any interest period, as applicable.At December 31, 2012, there was $45.0 million outstanding on the Reducing Revolving Line of Credit with availability for additional borrowings of$10.5 million.On January 30, 2013, the Credit Agreement with Wells Fargo was amended to extend the maturity date of the Revolving Line of Credit and increase theReducing Revolving Commitment Amount. Under terms of the amended Credit Agreement, the maturity date of the Revolving Line of Credit wasextended from June 15, 2013 to November 1, 2015 and the Reducing Revolving Commitment Amount was increased to $75.0 million throughMarch 30, 2013, reducing by $2.8 million on the last day of each June, September, December and March beginning March 31, 2013, continuingthrough November 1, 2015.In addition to standard fees, there are origination fees and commitment fees based on the average daily unused portion of the Commitment Amount andthe Reducing Revolving Commitment Amount. The Credit Agreement contains certain quarterly financial covenants, including a maximum funded debtratio, a maximum fixed charge coverage ratio, a minimum required tangible net worth and a minimum current ratio. In addition, we may only declarequarterly or annual dividends if on the date of declaration, no event of default has occurred, or no other event or condition has occurred that wouldconstitute an event of default after giving effect to the payment of the dividend. Obligations under the Credit Agreement are guaranteed by US Ecologyand all of its subsidiaries.At December 31, 2012, we were in compliance with all of the financial covenants in the Credit Agreement.Contractual Obligations and GuaranteesContractual ObligationsUS Ecology's contractual obligations at December 31, 2012 mature as follows:41 Payments Due by Period $s in thousands Total 2013 2014 - 2015 2016 - 2017 Thereafter Closure and post-closure obligations(1) $107,931 $2,028 $743 $7,113 $98,047 Operating lease commitments 972 523 385 55 9 Reducing revolving credit facility(2) 45,000 580 44,420 — — Interest expense(3) 1,608 656 952 — — Total contractual obligations(4) $155,511 $3,787 $46,500 $7,168 $98,056 (1)For the purposes of the table above, our closure and post-closure obligations are shown on an undiscounted basis and inflatedusing an estimated annual inflation rate of 2.6%. Cash payments for closure and post-closure obligation extend to the year 2105. (2)Under the terms of the Credit Agreement, the original $75.0 million reducing revolving credit facility commitment amountreduces by $2.8 million per quarter on the last day of June, September, December and March commencing on June 30, 2011. Forthe purposes of the table above, principal repayments begin when the commitment amount is lower than the $45.0 millionoutstanding at December 31, 2012 and reduce $2.8 million per quarter thereafter until the agreement expires on November 1,2015. On January 30, 2013, the Credit Agreement with Wells Fargo was amended to increase the reducing revolving creditfacility commitment amount to $75.0 million through March 30, 2013, reducing by $2.8 million on the last day of each June,September, December and March beginning March 31, 2013, continuing through November 1, 2015. As a result of theamendment, payments due in 2013 per the table above that would have been classified as current under terms ofTable of ContentsGuaranteesWe enter into a wide range of indemnification arrangements, guarantees and assurances in the ordinary course of business and have evaluatedagreements that contain guarantees and indemnification clauses. These include tort indemnities, tax indemnities, indemnities against third-party claimsarising out of arrangements to provide services to us and indemnities related to the sale of our securities. We also indemnify individuals made party toany suit or proceeding if that individual was acting as an officer or director of US Ecology or was serving at the request of US Ecology or any of itssubsidiaries during their tenure as a director or officer. We also provide guarantees and indemnifications for the benefit of our wholly-ownedsubsidiaries to satisfy performance obligations, including closure and post-closure financial assurances. It is difficult to quantify the maximum potentialliability under these indemnification arrangements; however, we are not currently aware of any material liabilities to the Company or any of itssubsidiaries arising from these arrangements.Environmental MattersWe maintain funded trusts agreements, surety bonds and insurance policies for future closure and post-closure obligations at both current and formerlyoperated disposal facilities. These funded trust agreements, surety bonds and insurance policies are based on management estimates of future closureand post-closure monitoring using engineering evaluations and interpretations of regulatory requirements which are periodically updated. Accountingfor closure and post-closure costs includes final disposal cell capping, soil and groundwater monitoring and routine maintenance and surveillancerequired after a site is closed.We estimate that our undiscounted future closure and post-closure costs for all facilities was approximately $107.9 million at December 31, 2012, with amedian payment year of 2057. Our future closure and post-closure estimates are our best estimate of current costs and are updated periodically to reflectcurrent technology, cost of materials and services, applicable laws, regulations and permit conditions or orders and other factors. These current costs areadjusted for anticipated annual inflation, which we assumed to be 2.6% as of December 31, 2012. These future closure and post-closure estimates arediscounted to their present value for financial reporting purposes using our credit-adjusted risk-free interest rate, which approximates our incrementallong-term borrowing rate in effect at the time the obligation is established or when there are upward revisions to our estimated closure and post-closurecosts. At December 31, 2012, our weighted-average credit-adjusted risk-free interest rate was 7.7%. For financial reporting purposes, our recordedclosure and post-closure obligations were $17.4 million and $17.3 million as of December 31, 2012 and 2011, respectively.Through December 31, 2012, we have met our financial assurance requirements through a combination of insurance policies, commercial surety bondsand trust funds. Our insurance policies covering closure and post-closure activities were renewed in December 2012 and expire in December 2013 forour U.S. operating facilities. We continue to use self-funded trust accounts for our closure and post-closure42the original agreement prior to the amendment have been reclassified to long-term in the Consolidated Balance Sheet as ofDecember 31, 2012.(3)Interest expense has been calculated using the effective interest rate of 1.46% in effect at December 31, 2012 in accordance withthe Credit Agreement. This rate is assumed throughout the duration of the term of the Credit Agreement and reflects assumedprincipal reductions consistent with disclosures in footnote (2) above. (4)As we are not able to reasonably estimate when we would make any cash payments to settle unrecognized tax benefits of$438,000, such amounts have not been included in the table above. In addition, we have recorded a liability for interest of$29,000 relating to such unrecognized tax benefits but have not included such amounts in the table above.Table of Contentsobligations at our non-operating sites. We use commercial surety bonds for our Stablex operation that were renewed in November 2012 and expire inNovember 2013.US Operating and Non-Operating FacilitiesWe cover our closure and post-closure obligations for our U.S. operating facilities located in Grand View, Idaho; Robstown, Texas; and to a limiteddegree our Beatty, Nevada facility through the use of third-party insurance policies. These policies expire in December 2013. The insurance policiesrequire that we provide collateral of $4.0 million (adjusted based on policy levels) through the policy term. As of December 31, 2012, we have satisfiedthis requirement through the issuance of a $4.0 million letter of credit under our Credit Agreement. Our total policy limits are approximately$43.0 million.All closure and post-closure funding obligations for our Beatty, Nevada and Richland, Washington facilities revert to the state. Volume based fees arecollected from our customers and remitted to state controlled trust funds to cover the estimated cost of closure and post-closure obligations.We continue to use self-funded trust accounts for our post-closure obligations at our non-operating sites located in Sheffield, Illinois and Winona,Texas. At December 31, 2012 our trust accounts had $4.1 million for our closure and post-closure obligations and are identified as "Restricted Cash" onour consolidated balance sheet.StablexWe use commercial surety bonds to cover our closure obligations for our Stablex facility located in Blainville, Québec, Canada. Our lease agreementwith the Province of Québec requires that the surety bond be maintained for 25 years after the lease expires in 2023. At December 31, 2012 we had$897,000 in commercial surety bonds dedicated for closure obligations. These bonds were renewed in November 2012 and expire November 2013.Post-closure funding obligations for the Stablex landfill revert back to the Province of Québec through a dedicated trust account that is funded based ona per-metric-ton disposed fee by Stablex.We expect to renew insurance policies and commercial surety bonds in the future. If we are unable to obtain adequate closure, post-closure orenvironmental liability insurance and/or commercial surety bonds in future years, any partial or completely uninsured claim against us, if successful andof sufficient magnitude, could have a material adverse effect on our financial condition, results of operations or cash flows. Additionally, continuedaccess to casualty and pollution legal liability insurance with sufficient limits, at acceptable terms, is important to obtaining new business. Failure tomaintain adequate financial assurance could also result in regulatory action including early closure of facilities. While we believe we will be able tomaintain the requisite financial assurance policies at a reasonable cost, premium and collateral requirements may materially increase.Operation of disposal facilities creates operational, closure and post-closure obligations that could result in unplanned monitoring and corrective actioncosts. We cannot predict the likelihood or effect of all such costs, new laws or regulations, litigation or other future events affecting our facilities. We donot believe that continuing to satisfy our environmental obligations will have a material adverse effect on our financial condition or results of operations.Seasonal EffectsMarket conditions and federal funding decisions generally have a larger effect on revenue than does seasonality. Operating revenue is generally lower inthe winter months, however, and increases when short-term, weather-influenced clean-up projects are more frequently undertaken. While large, multi-year clean-up projects tend to continue in winter months, the pace of waste shipments may be slowed or temporarily delayed due to weather.43Table of ContentsCritical Accounting PoliciesOur discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require us tomake estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assetsand liabilities. On an ongoing basis, we evaluate our estimates included in our critical accounting policies discussed below and those accounting policiesand use of estimates discussed in Notes 2 and 3 to our consolidated financial statements. We base our estimates on historical experience and on variousassumptions and other factors we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assetsand liabilities that are not readily apparent from other sources. We make adjustments to judgments and estimates based on current facts andcircumstances on an ongoing basis. Historically, actual results have not deviated significantly from those determined using the estimates describedbelow or in Notes 2 and 3 to the consolidated financial statements. However, actual amounts could differ materially from those estimated at the time theconsolidated financial statements are prepared.We believe the following critical accounting policies are important to understand our financial condition and results of operations and requiremanagement's most difficult, subjective or complex judgments, often as a result of the need to estimate the effect of matters that are inherently uncertain.Revenue RecognitionWe recognize revenue when persuasive evidence of an arrangement exists, delivery and disposal have occurred or services have been rendered, the priceis fixed or determinable and collection is reasonably assured. We recognize revenue from two primary sources: 1) waste treatment, recycling anddisposal and 2) waste transportation services.Waste treatment and disposal revenue results primarily from fees charged to customers for treatment and/or disposal or recycling of specified wastes.Waste treatment and disposal revenue is generally charged on a per-ton or per-yard basis based on contracted prices and is recognized when services arecomplete and the waste is disposed of in our landfill.Transportation revenue results from delivering customer waste to a disposal facility for treatment and/or disposal or recycling. Transportation servicesare generally not provided on a stand-alone basis and instead are bundled with other Company services. However, in some instances we providetransportation and logistics services for shipment of waste from clean-up sites to disposal facilities operated by other companies. We account for ourbundled arrangements as multiple deliverable arrangements and determine the amount of revenue recognized for each deliverable (unit of accounting)using the relative fair value method. Transportation revenue is recognized when the transported waste is received at the disposal facility. Waste treatmentand disposal revenue under bundled arrangements is recognized when services are complete and the waste is disposed in the landfill.Burial fees collected from customers for each ton or cubic yard of waste disposed in our landfills are paid to the respective local and/or state governmententity and are not included in revenue. Revenue and associated costs from waste that has been received but not yet treated and disposed of in ourlandfills are deferred until disposal occurs.Our Richland, Washington disposal facility is regulated by the WUTC, which approves our rates for disposal of LLRW. Annual revenue levels areestablished based on a six-year rate agreement with the WUTC at amounts sufficient to cover the costs of operation and provide us with a reasonableprofit. Per-unit rates charged to LLRW customers during the year are based on our evaluation of disposal volume and radioactivity projectionssubmitted to us by waste generators. Our proposed rates are then reviewed and approved by the WUTC. If annual revenue exceeds the approved levelsset by the WUTC, we are44Table of Contentsrequired to refund excess collections to facility users on a pro-rata basis. The rate agreement in effect for 2012 began on January 1, 2008, and expires onJanuary 1, 2014.Disposal Facility AccountingIn general, a disposal cell development asset exists for the cost of building new disposal space and a closure liability exists for closing, maintaining andmonitoring the disposal unit once this space is filled. Major assumptions and judgments used to calculate cell development assets and closure liabilitiesare as follows:•Personnel and equipment costs incurred to construct new disposal cells are identified and capitalized as a cell development asset. •The cell development asset is amortized as each available cubic yard, or cubic meter in the case of Stablex, of disposal space is filled.Periodic independent engineering surveys and inspection reports are used to determine the remaining volume available. These reportstake into account volume, compaction rates and space reserved for capping filled disposal cells. •We record the fair value of an Asset Retirement Obligation ("ARO") as a liability in the period in which we incur a legal obligationassociated with the retirement of tangible long-lived assets. We are also required to record a corresponding asset that is amortized overthe life of the underlying tangible asset. After the initial measurement, the ARO is adjusted at the end of each period to reflect the passageof time and changes in the estimated future cash flows underlying the obligation.The closure liability (obligation) represents the present value of current cost estimates to close, maintain and monitor disposal cells and support facilities.Cost estimates are developed using input from our technical and accounting personnel as well as independent engineers and our interpretation of currentrequirements, and are intended to approximate fair value. We estimate the timing of future payments based on expected annual disposal airspaceconsumption and then accrete the current cost estimate by an inflation rate, estimated at December 31, 2012 to be 2.6%. Inflated current costs are thendiscounted using our credit-adjusted risk-free interest rate, which approximates our incremental borrowing rate in effect at the time the obligation isestablished or when there are upward revisions to our estimated closure and post-closure costs. Our weighted-average credit-adjusted risk-free interestrate at December 31, 2012 approximated 7.7%. Final closure and post-closure monitoring obligations are currently estimated as being paid through theyear 2105. During 2012, we updated several assumptions. This included the estimated cost of closing disposal cells. These updates resulted in a netincrease to our closure post-closure obligation of $1.0 million, an increase of $921,000 in retirement assets and $115,000 recorded as a charge to otherdirect costs.Changes in inflation rates or the estimated costs, timing or extent of the required future activities to close, maintain and monitor disposal cells andfacilities result in both: (i) a current adjustment to the recorded liability and related asset and (ii) a change in the liability and asset amounts to be recordedprospectively over the remaining life of the asset in accordance with our depreciation policy. A hypothetical 1% increase in the inflation rate wouldincrease our closure/post-closure obligation by $4.1 million. A hypothetical 10% increase in our cost estimates would increase our closure/post-closureobligation by $1.9 million.Goodwill and Intangible AssetsWe assess goodwill for impairment during the fourth quarter of each year, and also if an event occurs or circumstances change that would more likelythan not reduce the fair value of a reporting unit below its carrying amount. Some of the factors that could indicate impairment include a significantadverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, or operating losses at the reporting unit. Theassessment consists of comparing the fair value of the reporting unit to the carrying value of the net assets assigned to the reporting unit, includinggoodwill. Our reporting units are our six Operating Disposal Facilities located in Beatty, Nevada; Richland, Washington; Robstown, Texas;45Table of ContentsGrand View, Idaho; Detroit, Michigan and Blainville, Québec, Canada. As of December 31, 2012, the Company's goodwill balance is comprised of$21.8 million recorded within our Blainville, Québec, Canada reporting unit and $1.3 million within in our Detroit, Michigan reporting unit.Fair values are determined by using both the market approach, applying a multiple of earnings based on guideline for publicly traded companies, and theincome approach, discounting projected future cash flows based on our expectations of the current and future operating environment. The rates used todiscount projected future cash flows reflect a weighted average cost of capital based on our industry, capital structure and risk premiums including thosereflected in the current market capitalization. In the event the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit isconsidered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill test would be performed tomeasure the amount of impairment loss. In the event that we determine that the value of goodwill has become impaired, we will incur an accountingcharge for the amount of impairment during the period in which the determination has been made.The result of the annual assessment of goodwill undertaken in the fourth quarter of 2012 indicated no goodwill impairment charges were required forour Blainville, Québec, Canada facility or our Detroit, Michigan facility. The estimated fair value of our Blainville, Québec facility exceeded the carryingvalue by more than 30% and the estimated fair value of our Detroit, Michigan facility was not below the carrying value.We review intangible assets with indefinite useful lives for impairment during the fourth quarter of each year. We also review both indefinite-lived anddefinite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an intangible asset maynot be recoverable. In order to assess whether a potential impairment exists, the assets' carrying values are compared with their undiscounted expectedfuture cash flows. Estimating future cash flows requires significant judgment about factors such as general economic conditions and projected growthrates, and our estimates often vary from the cash flows eventually realized. Impairments are measured by comparing the fair value of the asset to itscarrying value. Fair value is generally determined by considering: (i) the internally developed discounted projected cash flow analysis of the asset;(ii) actual third-party valuations; and/or (iii) information available regarding the current market environment for similar assets. If the fair value of anasset is determined to be less than the carrying amount of the asset, an impairment in the amount of the difference is recorded in the period in which theevents or changes in circumstances that indicated the carrying value of the assets may not be recoverable occurred.No events or circumstances occurred during 2012 that would indicate that our intangible assets may be impaired, therefore no impairment tests wereperformed during 2012 other than the annual assessment conducted in the fourth quarter of every year.Share Based PaymentsThe Company's Board of Directors granted stock options to purchase our common stock to certain employees and Directors under our previous 1992Employee Stock Option Plan and our 2008 Stock Option Incentive Plan. The Company has also granted directors and certain employees restricted stockawards under the 2005 Director Stock Plan and the 2006 Employee Stock Plan. Additionally, outstanding options have been granted under a 1992Director Plan option plan that was cancelled in 2005.The determination of fair value of stock option awards on the date of grant using the Black-Scholes model is affected by our stock price and subjectiveassumptions. These assumptions include, but are not limited to, the expected term of stock options and expected stock price volatility over the term ofthe awards. Refer to Note 15 to the consolidated financial statements included in this Form 10-K for a summary of the assumptions utilized in 2012,2011 and 2010. Our stock options have characteristics significantly different from those of traded options, and changes in the assumptions canmaterially affect the fair value estimates.46Table of ContentsForfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Whenactual forfeitures vary from our estimates, we recognize the difference in compensation expense in the period the actual forfeitures occur or whenoptions vest.Income TaxesIncome taxes are accounted for using an asset and liability approach whereby we recognize deferred tax assets and liabilities for the expected future taxconsequences of temporary differences between the financial statement and tax basis of assets and liabilities at the applicable tax rates. The effect of achange in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date. Deferred tax assets are evaluated forthe likelihood of use in future periods. A valuation allowance is recorded against deferred tax assets if, based on the weight of the available evidence, itis more likely than not that some or all of the deferred tax assets will not be realized. The determination of the need for a valuation allowance, if any,requires our judgment and the use of estimates. If we determine that we would be able to realize our deferred tax assets in the future in excess of theirnet recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.As of December 31, 2012, we have deferred tax assets totaling approximately $7.6 million, a valuation allowance of $5.5 million and deferred taxliabilities totaling approximately $19.0 million.The application of income tax law is inherently complex. Tax laws and regulations are voluminous and at times ambiguous and interpretations ofguidance regarding such tax laws and regulations change over time. This requires us to make many subjective assumptions and judgments regarding thetiming and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. A liability for uncertain tax positions isrecorded in our financial statements on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positiontaken will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely than not recognitionthreshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxauthority. As facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. Changesin our assumptions and judgments can materially affect our financial position, results of operations and cash flows. We recognize interest assessed bytaxing authorities or interest associated with uncertain tax positions as a component of interest expense. We recognize any penalties assessed by taxingauthorities or penalties associated with uncertain tax positions as a component of selling, general and administrative expenses.LitigationWe have, in the past, been involved in litigation requiring estimates of timing and loss potential whose timing and ultimate disposition is controlled bythe judicial process. As of December 31, 2012, we did not have any ongoing, pending or threatened legal action that management believes would have amaterial adverse effect on our financial position, results of operations or cash flows. The decision to accrue costs or write off assets is based on thepertinent facts and our evaluation of present circumstances.Off Balance Sheet ArrangementsWe do not have any off balance sheet arrangements or interests in variable interest entities that would require consolidation. US Ecology operatesthrough wholly-owned subsidiaries.Item 7A. 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, which is determined according toa pricing47Table of Contentsgrid under which the interest rate decreases or increases based on our ratio of funded debt to EBITDA. At December 31, 2012, we had $45.0 million ofborrowings on the Reducing Revolving Line of Credit bearing an interest rate of 1.46%. If interest rates were to rise we would be subject to higherinterest payments if outstanding balances remain unchanged. Based on the outstanding indebtedness of $45.0 million under our Credit Agreement atDecember 31, 2012, if market rates used to calculate interest expense were to average 1% higher in the next twelve months, our interest expense wouldincrease by approximately $450,000.Foreign Currency RiskWe are subject to currency exposures and volatility because of currency fluctuations. The majority of our transactions are in USD; however, our Stablexsubsidiary conducts business in both Canada and the United States. In addition, contracts for services Stablex provides to U.S. customers are generallydenominated in USD. During 2012, Stablex transacted approximately 39% of its revenue in USD and at any time has cash on deposit in USD andoutstanding USD trade receivables and payables related to these transactions. These USD cash, receivable and payable accounts are vulnerable toforeign currency translation gains or losses. Exchange rate movements also affect the translation of Canadian generated profits and losses into USD.We established intercompany loans between Stablex and US Ecology, Inc. as part of a tax and treasury management strategy allowing for repayment ofthird-party bank debt used to complete the acquisition. These intercompany loans are payable using CAD and are subject to mark-to-market adjustmentswith movements in the CAD. At December 31, 2012 we had $46.7 million of intercompany loans outstanding between Stablex and US Ecology.During 2012 the CAD strengthened as compared to the USD resulting in a $1.2 million foreign currency translation gain recognized in the Company'sConsolidated Statement of Operations related to the intercompany loans. Based on intercompany balances as of December 31, 2012 a $0.01 CADincrease or decrease in currency rate compared to the USD at December 31, 2012 would have generated a gain or loss of approximately $467,000 forthe year ended December 31, 2012.We had a total pre-tax foreign currency gain of $1.2 million for the year ended December 31, 2012. 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 determinewhether foreign exchange hedging strategies should be employed.48Table of ContentsItem 8. Financial Statements and Supplementary Data 49 PageNumberReport of Independent Registered Public Accounting Firm 50Consolidated Balance Sheets as of December 31, 2012 and 2011 52Consolidated Statements of Operations for the years ended December 31, 2012, 2011 and 2010 53Consolidated Statements of Comprehensive Income for the years ended December 31, 2012, 2011 and 2010 54Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011 and 2010 55Consolidated Statements of Stockholders' Equity for the years ended December 31, 2012, 2011 and 2010 56Notes to Consolidated Financial Statements 57Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofUS Ecology, Inc.Boise, IdahoWe have audited the accompanying consolidated balance sheets of US Ecology, Inc. and subsidiaries (the "Company") as of December 31, 2012 and2011, and the related consolidated statements of operations, comprehensive income, cash flows, and stockholders' equity for each of the three years inthe period ended December 31, 2012. We also have audited the Company's internal control over financial reporting as of December 31, 2012, based oncriteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for itsassessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on InternalControls over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internalcontrol over financial reporting based on our audits.As described in Management's Annual Report on Internal Controls over Financial Reporting, management excluded from its assessment the internalcontrol over financial reporting at US Ecology Michigan, Inc., which was acquired on May 31, 2012 and whose financial statements constituteapproximately 5% of total assets and 4% of revenues of the consolidated financial statement amounts as of and for the year ended December 31, 2012.Accordingly, our audit did not include the internal control over financial reporting at US Ecology Michigan, Inc.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement andwhether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements includedexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financialreporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testingand evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such otherprocedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive andprincipal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnelto provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and proceduresthat (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance withgenerally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use, or disposition of the company's assets that could have a material effect on the financial statements.Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override ofcontrols, material misstatements due to error or fraud may50Table of Contentsnot be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting tofuture periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of US Ecology, Inc.and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the periodended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, theCompany maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on the criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of presenting comprehensive income in 2012 dueto the adoption of FASB Accounting Standards update No 2011-05, Comprehensive Income, Topic 220: Presentation of Comprehensive Income./s/ DELOITTE & TOUCHE LLPBoise, IdahoMarch 1, 201351Table of ContentsUS ECOLOGY, INC.CONSOLIDATED BALANCE SHEETS(In thousands, except per share amounts) As of December 31, 2012 2011 Assets Current Assets: Cash and cash equivalents $2,120 $4,289 Receivables, net 33,947 29,818 Prepaid expenses and other current assets 3,161 2,185 Income taxes receivable — 181 Deferred income taxes 1,276 964 Total current assets 40,504 37,437 Property and equipment, net 109,792 99,975 Restricted cash 4,111 4,115 Intangible assets, net 40,771 39,238 Goodwill 23,105 21,200 Other assets 411 623 Total assets $218,694 $202,588 Liabilities And Stockholders' Equity Current Liabilities: Accounts payable $6,333 $4,669 Deferred revenue 3,919 3,574 Accrued liabilities 7,322 10,569 Accrued salaries and benefits 7,570 5,382 Income taxes payable 426 1,510 Current portion of closure and post-closure obligations 1,913 2,890 Current portion of long-term debt — 71 Total current liabilities 27,483 28,665 Long-term closure and post-closure obligations 15,449 14,448 Reducing revolving line of credit 45,000 40,500 Other long-term liabilities 114 150 Unrecognized tax benefits 467 454 Deferred income taxes 18,159 18,208 Total liabilities 106,672 102,425 Commitments and contingencies Stockholders' Equity: Common stock $0.01 par value, 50,000 authorized; 18,385 and 18,320 shares issued,respectively 184 183 Additional paid-in capital 63,969 62,455 Retained earnings 48,424 39,197 Treasury stock, at cost, 71 and 93 shares, respectively (1,183) (1,555)Accumulated other comprehensive income (loss) 628 (117) Total stockholders' equity 112,022 100,163  The accompanying notes are an integral part of these financial statements.52Total liabilities and stockholders' equity $218,694 $202,588 Table of ContentsUS ECOLOGY, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(In thousands, except per share amounts) The accompanying notes are an integral part of these financial statements.53 For the Year Ended December 31, 2012 2011 2010 Revenue $169,138 $154,917 $104,836 Direct operating costs 79,177 73,758 45,391 Transportation costs 23,664 27,292 20,434 Gross profit 66,297 53,867 39,011 Selling, general and administrative expenses 25,659 21,502 18,634 Operating income 40,638 32,365 20,377 Other income (expense): Interest income 17 26 51 Interest expense (878) (1,604) (320)Foreign currency gain (loss) 1,213 (1,321) 1,819 Other 728 341 259 Total other income (expense) 1,080 (2,558) 1,809 Income before income taxes 41,718 29,807 22,186 Income tax expense 16,059 11,437 9,602 Net income $25,659 $18,370 $12,584 Earnings per share: Basic $1.41 $1.01 $0.69 Diluted $1.40 $1.01 $0.69 Shares used in earnings per share calculation: Basic 18,238 18,198 18,170 Diluted 18,281 18,223 18,189 Dividends paid per share $0.90 $0.72 $0.72 Table of ContentsUS ECOLOGY, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME(In thousands) The accompanying notes are an integral part of these financial statements.54 For the Year Ended December 31, 2012 2011 2010 Net income $25,659 $18,370 $12,584 Other comprehensive income (loss): Foreign currency translation gain (loss) 745 (793) 676 Comprehensive income $26,404 $17,577 $13,260 Table of ContentsUS ECOLOGY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands) For the Year Ended December 31, 2012 2011 2010 Cash flows from operating activities: Net income $25,659 $18,370 $12,584 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 13,916 13,933 7,750 Amortization of intangible assets 1,469 1,419 231 Accretion of closure and post-closure obligations 1,367 1,292 1,137 Unrealized foreign currency loss (gain) (1,400) 1,324 (1,205)Deferred income taxes (711) (1,095) (286)Share-based compensation expense 846 837 988 Unrecognized tax benefits 13 454 — Net loss on sale of property and equipment 13 187 171 Investment premium amortization — — 20 Accretion of interest income — — (2)Changes in assets and liabilities (net of effect of business acquisitions): Receivables (1,850) 3,593 (11,278)Income taxes receivable 187 (188) — Other assets (677) 715 (618)Accounts payable and accrued liabilities (2,172) 2,880 1,702 Deferred revenue (50) (21) 339 Accrued salaries and benefits 1,929 1,389 1,141 Income taxes payable (1,083) (1,106) 2,413 Closure and post-closure obligations (2,282) (792) (158) Net cash provided by operating activities 35,174 43,191 14,929 Cash flows from investing activities: Purchases of property and equipment (15,766) (10,096) (14,190)Business acquisitions (net of cash acquired) (10,743) — (77,427)Proceeds from sale of property and equipment 198 98 58 Purchases of short-term investments — — (4,998)Maturities of short-term investments — — 6,375 Restricted cash 5 — 685 Net cash used in investing activities (26,306) (9,998) (89,497)Cash flows from financing activities: Payments on reducing revolving line of credit (21,500) (39,400) — Proceeds from reducing revolving line of credit 26,000 16,900 63,000 Dividends paid (16,432) (13,113) (13,090)Proceeds from exercise of stock options 1,035 142 46 Other (303) 307 (1)Deferred financing costs paid — — (373) Net cash (used in) provided by financing activities (11,200) (35,164) 49,582 Effect of foreign exchange rate changes on cash 163 (82) (19)Decrease in cash and cash equivalents (2,169) (2,053) (25,005)Cash and cash equivalents at beginning of year 4,289 6,342 31,347 Cash and cash equivalents at end of year $2,120 $4,289 $6,342 The accompanying notes are an integral part of these financial statements.55Table of ContentsUS ECOLOGY, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(In thousands, except share amounts) CommonSharesIssued CommonStock AdditionalPaid-InCapital RetainedEarnings TreasuryStock AccumulatedOtherComprehensiveIncome (Loss) Total Balance atDecember 31,2009 18,305,614 183 61,459 34,446 (2,590) — 93,498 Net income — — — 12,584 — — 12,584 Foreign currencytranslation — — — — — 676 676 Dividend paid — — — (13,090) — — (13,090)Tax benefit ofequity basedawards — — 10 — — — 10 Share-basedcompensation — — 988 — — — 988 Stock optionexercises 5,000 — 46 — — — 46 Issuance ofrestrictedcommon stockfrom treasuryshares — — (611) — 611 — — Balance atDecember 31,2010 18,310,614 183 61,892 33,940 (1,979) 676 94,712 Net income — — — 18,370 — — 18,370 Foreign currencytranslation — — — — — (793) (793)Dividend paid — — — (13,113) — — (13,113)Tax benefit ofequity basedawards — — 8 — — — 8 Share-basedcompensation — — 837 — — — 837 Stock optionexercises 9,600 — 142 — — — 142 Issuance ofrestrictedcommon stockfrom treasuryshares — — (424) — 424 — — Balance atDecember 31,2011 18,320,214 183 62,455 39,197 (1,555) (117) 100,163 Net income — — — 25,659 — — 25,659 Foreign currencytranslation — — — — — 745 745  The accompanying notes are an integral part of these financial statements.56Dividend paid — — — (16,432) — — (16,432)Tax benefit ofequity basedawards — — 6 — — — 6 Share-basedcompensation — — 846 — — — 846 Stock optionexercises 65,048 1 1,034 — — — 1,035 Issuance ofrestrictedcommon stockfrom treasuryshares — — (372) — 372 — — Balance atDecember 31,2012 18,385,262 $184 $63,969 $48,424 $(1,183)$628 $112,022 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNOTE 1. DESCRIPTION OF BUSINESSUS Ecology, Inc. was most recently incorporated as a Delaware corporation in May 1987 as American Ecology Corporation. On February 22, 2010 theCompany changed its name from American Ecology Corporation to US Ecology, Inc. US Ecology, Inc., through its subsidiaries, provides radioactive,Polychlorinated biphenyl ("PCB"), hazardous and industrial waste management services to commercial and government entities such as refineries andchemical production facilities, electric utilities, manufacturers, steel mills and medical and academic institutions. We are headquartered in Boise, Idaho.Throughout these financial statements words such as "we," "us," "our," "US Ecology" and the "Company" refer to US Ecology, Inc. and itssubsidiaries.Our principal operating subsidiaries are US Ecology Nevada, Inc., a Delaware corporation; US Ecology Texas, Inc., a Delaware corporation; USEcology Washington, Inc., a Delaware corporation; US Ecology Idaho, Inc., a Delaware corporation; US Ecology Michigan, Inc., a Michigancorporation and Stablex Canada, Inc., a Canadian corporation.We operate within two segments: Operating Disposal Facilities and Non-Operating Disposal Facilities. The Operating Disposal Facilities are currentlyaccepting hazardous, PCB, industrial and low-level radioactive waste regulated under the federal Atomic Energy Act ("LLRW"), naturally occurring andaccelerator produced radioactive materials ("NORM/NARM") and low-activity radioactive material ("LARM"). The Operating Disposal Facilitiessegment includes our Resource Conservation and Recovery Act of 1976 ("RCRA") permitted waste treatment and disposal facilities near Beatty,Nevada; Grand View, Idaho; Detroit, Michigan; and Robstown, Texas, our Atomic Energy Act of 1954 as amended ("AEA") permitted disposalfacility near Richland, Washington and our Blainville, Québec, Canada facility ("Stablex").The Non-Operating Disposal Facilities segment includes our closed hazardous waste disposal, processing, and deep-well injection facilities located inSheffield, Illinois; Bruneau, Idaho; and Winona, Texas. We currently incur costs for remediation and long-term monitoring and maintenance obligationsat our closed facilities.NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESPrinciples of ConsolidationThe accompanying financial statements are prepared on a consolidated basis. All significant inter-company balances and transactions have beeneliminated in consolidation. Our year-end is December 31.Cash and Cash EquivalentsCash and cash equivalents consist primarily of cash on deposit, money market accounts and short-term investments with remaining maturities of90 days or less at the date of acquisition.Financial InstrumentsCash on deposit, short-term investments, accounts receivable, accounts payable and accrued liabilities as presented in the consolidated financialstatements approximate fair value because of the short-term nature of these instruments. The carrying amount of our long-term debt approximates fairvalue because interest rates are variable and, accordingly, approximate current market rates for instruments with similar risk and maturities.57Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)ReceivablesReceivables are stated at an amount management expects to collect. Based on management's assessment of the credit history of the customers havingoutstanding balances and factoring in current economic conditions, management has concluded that potential unidentified losses on balances outstandingat year-end will not be material.Restricted CashRestricted cash balances of $4.1 million at December 31, 2012 and 2011 represent funds held in third- party managed trust accounts as collateral for ourfinancial assurance obligations for post-closure activities at our non-operating facilities. Restricted cash balances are maintained by third-party trusteesand are invested in money market accounts. The balances are adjusted monthly to fair market value based on quoted prices in active markets for identicalassets.Revenue RecognitionWe recognize revenue when persuasive evidence of an arrangement exists, delivery and disposal have occurred or services have been rendered, the priceis fixed or determinable and collection is reasonably assured. We recognize revenue from two primary sources: 1) waste treatment, recycling anddisposal and 2) waste transportation services.Waste treatment and disposal revenue results primarily from fees charged to customers for treatment and/or disposal or recycling of specified wastes.Waste treatment and disposal revenue is generally charged on a per-ton or per-yard basis based on contracted prices and is recognized when services arecomplete and the waste is disposed of in our landfill.Transportation revenue results from delivering customer waste to a disposal facility for treatment and/or disposal or recycling. Transportation servicesare generally not provided on a stand-alone basis and instead are bundled with other Company services. However, in some instances we providetransportation and logistics services for shipment of waste from clean-up sites to disposal facilities operated by other companies. We account for ourbundled arrangements as multiple deliverable arrangements and determine the amount of revenue recognized for each deliverable (unit of accounting)using the relative fair value method. Transportation revenue is recognized when the transported waste is received at the disposal facility. Waste treatmentand disposal revenue under bundled arrangements is recognized when services are complete and the waste is disposed in the landfill.Burial fees collected from customers for each ton or cubic yard of waste disposed in our landfills are paid to the respective local and/or state governmententity and are not included in revenue. Revenue and associated cost from waste that has been received but not yet treated and disposed of in our landfillsare deferred until disposal occurs.Our Richland, Washington disposal facility is regulated by the Washington Utilities and Transportation Commission ("WUTC"), which approves ourrates for disposal of LLRW. Annual revenue levels are established based on a rate agreement with the WUTC at amounts sufficient to cover the costs ofoperation, including facility maintenance, equipment replacement and related costs, and provide us with a reasonable profit. Per-unit rates charged toLLRW customers during the year are based on our evaluation of disposal volume and radioactivity projections submitted to us by waste generators. Ourproposed rates are then reviewed and approved by the WUTC. If annual revenue exceeds the approved levels set by the58Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)WUTC, we are required to refund excess collections to facility users on a pro-rata basis. The rate agreement in effect for 2011 began on January 1, 2008and expires on January 1, 2014. The WUTC process to establish rates for the succeeding rate period is underway.Unbilled ReceivablesUnbilled receivables are recorded for work performed under contracts that have not yet been invoiced to customers and arise due to the timing ofbillings. Substantially all unbilled receivables at December 31, 2012, were billed in the following month.Deferred RevenueRevenue from waste that has been received but not yet treated and disposed of in our landfill or advance billings prior to treatment and disposal servicesare deferred until such services are completed.Property and EquipmentProperty and equipment are recorded at cost and depreciated on the straight-line method over estimated useful lives. Replacements and major repairs ofproperty and equipment are capitalized and retirements are made when assets are disposed of or when the useful life has been exhausted. Minorcomponents and parts are expensed as incurred. Repair and maintenance expenses were $4.6 million, $3.7 million and $1.8 million for the years endedDecember 31, 2012, 2011 and 2010, respectively.We assume no salvage value for our depreciable fixed assets. The estimated useful lives for significant property and equipment categories are asfollows:Disposal Cell AccountingQualified disposal cell development costs such as personnel and equipment costs incurred to construct new disposal cells are recorded and capitalized atcost. Capitalized cell development costs, net of recorded amortization, are added to estimated future costs of the permitted disposal cell to be incurredover the remaining construction of the cell, to determine the amount to be amortized over the remaining estimated cell life. Estimates of future costs aredeveloped using input from independent engineers and internal technical and accounting managers. We review these estimates at least annually.Amortization is recorded on a unit of consumption basis, typically applying cost as a rate per cubic yard disposed. Disposal facility costs are expected tobe fully amortized upon final closure of the facility, as no salvage value applies. Costs associated with ongoing disposal operations are charged toexpense as incurred.We have material financial commitments for closure and post-closure obligations for certain facilities we own or operate. We estimate future costrequirements for closure and post-closure monitoring based on RCRA and conforming state requirements and facility permits. RCRA requires thatcompanies provide the responsible regulatory agency acceptable financial assurance for closure work and subsequent post-closure59 Useful LivesVehicles and other equipment 3 to 10 yearsDisposal facility and equipment 3 to 20 yearsBuildings and improvements 5 to 40 yearsRailcars 40 yearsTable of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)monitoring of each facility for 30 years following closure. Estimates for final closure and post-closure costs are developed using input from ourtechnical and accounting managers as well as independent engineers and are reviewed by management at least annually. These estimates involveprojections of costs that will be incurred after the disposal facility ceases operations, through the required post-closure care period. The present value ofthe estimated closure and post-closure costs are accreted using the interest method of allocation to direct costs in our consolidated statement ofoperations so that 100% of the future cost has been incurred at the time of payment.Business CombinationsWe account for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned to the tangible andidentifiable intangible assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of purchaseprice over the fair value of net tangible and intangible assets acquired is assigned to goodwill. The transaction costs associated with businesscombinations are expensed as they are incurred.GoodwillGoodwill represents the excess of the fair value of the consideration transferred over the fair value of the underlying identifiable assets and liabilitiesacquired. Goodwill is not amortized, but instead is assessed for impairment annually in the fourth quarter and also if an event occurs or circumstanceschange that may indicate a possible impairment. In the event that we determine that the value of goodwill has become impaired, we will incur anaccounting charge for the amount of impairment during the period in which the determination has been made. Goodwill was recognized in connectionwith our May 31, 2012 acquisition of Dynecol and our October 31, 2010 acquisition of Stablex (See Note 8).Intangible AssetsIntangible assets are stated at the fair value assigned in a business combination net of amortization. We amortize our definite-lived intangible assetsusing the straight-line method over their estimated economic lives ranging from 1 to 33 years. We review intangible assets with indefinite useful livesfor impairment during the fourth quarter of each year. We also review both indefinite-lived and definite-lived intangible assets for impairment wheneverevents or changes in circumstances indicate that the carrying value of an intangible asset may not be recoverable.Impairment of Long-Lived AssetsLong-lived assets consist primarily of property and equipment facility development costs and definite-lived intangible assets. The recoverability of long-lived assets is evaluated periodically through analysis of operating results and consideration of other significant events or changes in the businessenvironment. If an operating unit had indications of possible impairment, such as current operating losses, we would evaluate whether impairment existson the basis of undiscounted expected future cash flows from operations over the remaining amortization period. If an impairment loss were to exist, thecarrying amount of the related long-lived assets would be reduced to their estimated fair value based upon discounted cash flows from operations.60Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Deferred Financing CostsDeferred financing costs are amortized over the life of our Credit Agreement. Amortization of deferred financing costs is included as a component ofinterest expense in the consolidated statements of operations. We had deferred financing costs of $203,000 and $235,000, net of amortization in Prepaidexpenses and other current assets and Other assets on the consolidated balance sheets as of December 31, 2012 and 2011, respectively.Foreign CurrencyWe have operations in Canada. The functional currency of our Canadian operations is the Canadian dollar ("CAD"). Assets and liabilities are translatedto U.S. dollars ("USD") at the exchange rate in effect at the balance sheet date and revenue and expenses at the average exchange rate for the period.Gains and losses from the translation of the consolidated financial statements of our Canadian subsidiary into USD are included in stockholders' equityas a component of Accumulated other comprehensive income. Gains and losses resulting from foreign currency transactions are recognized in theconsolidated statements of operations. Recorded balances that are denominated in a currency other than the functional currency are re-measured to thefunctional currency using the exchange rate at the balance sheet date and gains or losses are recorded in the statements of operations.Income TaxesIncome taxes are accounted for using an asset and liability approach. This requires the recognition of deferred tax assets and liabilities for the expectedfuture tax consequences of temporary differences between the financial statement and tax basis of assets and liabilities at the applicable tax rates. Theeffect of a change in tax rates on deferred tax assets and liabilities is recognized in the period that includes the enactment date.We recognize net deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, weconsider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxableincome, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future inexcess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision forincome taxes.The application of income tax law is inherently complex. Tax laws and regulations are voluminous and at times ambiguous and interpretations ofguidance regarding such tax laws and regulations change over time. This requires us to make many subjective assumptions and judgments regarding thetiming and amounts of deductible and taxable items and the probability of sustaining uncertain tax positions. A liability for uncertain tax positions isrecorded in our financial statements on the basis of a two-step process whereby (1) we determine whether it is more likely than not that the tax positiontaken will be sustained based on the technical merits of the position and (2) for those tax positions that meet the more likely than not recognitionthreshold, we recognize the largest amount of tax benefit that is greater than 50 percent likely to be realized upon ultimate settlement with the related taxauthority. As facts and circumstances change, we reassess these probabilities and record any changes in the financial statements as appropriate. Our taxreturns are subject to audit by the Internal Revenue Service ("IRS"), various states in the U.S., and by the Canadian Revenue Agency.61Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)InsuranceAccrued costs for our self-insured health care coverage were $483,000 and $212,000 at December 31, 2012 and 2011, respectively.Earnings Per ShareBasic earnings per share is calculated based on the weighted-average number of outstanding common shares during the applicable period. Dilutedearnings per share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential outstandingcommon shares. Potential common shares that would increase earnings per share or decrease loss per share are anti-dilutive and are excluded fromearnings per share computations. Earnings per share is computed separately for each period presented.Treasury StockShares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of stockholders' equity in our consolidatedbalance sheets. Treasury shares are reissued using the weighted average cost method for determining the cost of the shares reissued. The differencebetween the cost of the shares reissued and the issuance price is added or deducted from additional paid-in capital.Recently Issued Accounting PronouncementsIn June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-05, ComprehensiveIncome (Topic 220): Presentation of Comprehensive Income, requiring an entity to present components of net income and other comprehensive incomein one continuous statement, referred to as the statement of comprehensive income, or in two separate but consecutive statements. The new guidanceeliminates the option to report other comprehensive income and its components in the statement of changes in equity. While the new guidance changesthe presentation of comprehensive income, there are no changes to the components that are recognized in net income or other comprehensive incomeunder current accounting guidance. The Company adopted this ASU in fiscal year 2012 and elected to present the components of net income and othercomprehensive income in two separate but consecutive statements.NOTE 3. USE OF ESTIMATESThe preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of thefinancial statements, as well as the reported amounts of revenue and expenses during the reporting period. Listed below are the estimates andassumptions that we consider to be significant in the preparation of our financial statements.•Allowance for Doubtful Accounts—We estimate losses for uncollectible accounts based on the aging of the accounts receivable and anevaluation of the likelihood of success in collecting the receivable. •Recovery of Long-Lived Assets—We evaluate the recovery of our long-lived assets periodically by analyzing our operating results andconsidering significant events or changes in the business environment.62Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 3. USE OF ESTIMATES (Continued)•Income Taxes—We assume the deductibility of certain costs in our income tax filings, estimate our income tax rate and estimate thefuture recovery of deferred tax assets. •Legal and Environmental Accruals—We estimate the amount of potential exposure we may have with respect to litigation andenvironmental claims and assessments. •Disposal Cell Development and Final Closure/Post-Closure Amortization—We expense amounts for disposal cell usage and closureand post-closure costs for each cubic yard of waste disposed of at our operating facilities. In determining the amount to expense for eachcubic yard of waste disposed, we estimate the cost to develop each disposal cell and the closure and post-closure costs for each disposalcell and facility. The expense for each cubic yard is then calculated based on the remaining permitted capacity and total permittedcapacity. Estimates for closure and post-closure costs are developed using input from third-party engineering consultants, and ourinternal technical and accounting personnel. Management reviews estimates at least annually. Estimates for final disposal cell closure andpost-closure consider when the costs would actually be paid and, where appropriate, inflation and discount rates. •Business Acquisitions—The Company records assets and liabilities of the acquired business, including goodwill, generally at their fairvalues. Acquisition-related transaction and restructuring costs are expensed rather than treated as part of the cost of the acquisition. •Goodwill—We assess goodwill for impairment during the fourth quarter of each year, and also if an event occurs or circumstanceschange that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The assessment consists ofcomparing the estimated fair value of the reporting unit to the carrying value of the net assets assigned to the reporting unit, includinggoodwill. Fair values are determined by using both the market approach, applying a multiple of earnings based on guideline for publiclytraded companies, and the income approach, discounting projected future cash flows based on our expectations of the current and futureoperating environment. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on ourindustry, capital structure and risk premiums including those reflected in the current market capitalization. •Intangible Assets—We review intangible assets with indefinite useful lives for impairment during the fourth quarter of each year. Wealso review both indefinite-lived and definite-lived intangible assets for impairment whenever events or changes in circumstancesindicate that the carrying value of an intangible asset may not be recoverable. In order to assess whether a potential impairment exists, theassets' carrying values are compared with their undiscounted expected future cash flows. Estimating future cash flows requiressignificant judgment about factors such as general economic conditions and projected growth rates, and our estimates often vary from thecash flows eventually realized. Impairments are measured by comparing the fair value of the asset to its carrying value. Fair value isgenerally determined by considering: (i) the internally developed discounted projected cash flow analysis of the asset; (ii) actual third-party valuations; and/or (iii) information available regarding the current market environment for similar assets.Actual results could differ materially from the estimates and assumptions that we use in the preparation of our financial statements. As it relates toestimates and assumptions in amortization rates and environmental obligations, significant engineering, operations and accounting judgments arerequired. We review these estimates and assumptions no less than annually. In many circumstances, the ultimate63Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 3. USE OF ESTIMATES (Continued)outcome of these estimates and assumptions will not be known for decades into the future. Actual results could differ materially from these estimatesand assumptions due to changes in applicable regulations, changes in future operational plans and inherent imprecision associated with estimatingenvironmental impacts far into the future.NOTE 4. DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATIONThe Company acquired Dynecol on May 31, 2012 for $10.8 million. The allocation of the purchase price to the fair value of assets acquired andliabilities assumed was as follows:The Company acquired Stablex on October 31, 2010 for $77.5 million. The allocation of the purchase price to the fair value of assets acquired andliabilities assumed was as follows:64 For the Year EndedDecember 31, $s in thousands 2012 2011 2010 Income taxes and interest paid: Income taxes paid, net of receipts $17,676 $13,360 $7,419 Interest paid 791 1,277 178 Non-cash investing and financing activities: Closure/Post-closure retirement asset 921 93 957 Capital expenditures in accounts payable 762 776 1,805 Restricted stock issuances from treasury shares 372 424 611 $s in thousands PurchasePriceAllocation Assets acquired $10,706 Liabilities assumed (1,268) Total identifiable net assets 9,438 Goodwill 1,327 Total purchase price $10,765 $s in thousands PurchasePriceAllocation Assets acquired $77,594 Liabilities assumed (21,372) Total identifiable net assets 56,222 Goodwill 21,272 Total purchase price $77,494 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 5. CONCENTRATIONS AND CREDIT RISKMajor CustomersNo customer accounted for more than 10% of total revenue for the years ended December 31, 2012 or 2011. For the year ended December 31, 2010,the U.S. Army Corps of Engineers accounted for 17% of total revenue. No other customer accounted for more than 10% of total revenue for the yearended December 31, 2010.No customer accounted for more than 10% of total trade receivables as of December 31, 2012. General Electric, Inc. accounted for approximately 18%of total trade receivables as of December 31, 2011. No other customers accounted for more than 10% of total trade receivables as of December 31,2011.Credit Risk ConcentrationWe maintain most of our cash with nationally recognized financial institutions like Wells Fargo Bank, National Association ("Wells Fargo").Substantially all balances are uninsured and are not used as collateral for other obligations. Concentrations of credit risk on accounts receivable arebelieved to be limited due to the number, diversification and character of the obligors and our credit evaluation process.Labor ConcentrationsAs of December 31, 2012, the Paper, Allied-Industrial Chemical & Energy Workers International Union, AFL-CIO, CLC (PACE), represented 11employees at our Richland facility and the Communications, Energy and Paperworkers Union of Canada represented 97 employees at our Blainville,Québec, Canada facility. As of December 31, 2012, our 317 other employees did not belong to a union.NOTE 6. RECEIVABLESReceivables as of December 31, 2012 and 2011 consisted of the following:The allowance for doubtful accounts is a provision for uncollectible accounts receivable and unbilled receivables. The allowance is evaluated andadjusted to reflect our collection history and an analysis of the accounts receivables aging. The allowance is decreased by accounts receivable as they arewritten off. The65$s in thousands 2012 2011 Trade $32,787 $27,229 Unbilled revenue 1,529 1,500 Other 99 1,400 Total receivables 34,415 30,129 Allowance for doubtful accounts (468) (311) Receivables, net $33,947 $29,818 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 6. RECEIVABLES (Continued)allowance is adjusted periodically to reflect actual experience. The change in the allowance during 2012, 2011 and 2010 was as follows:NOTE 7. PROPERTY AND EQUIPMENTProperty and equipment as of December 31, 2012 and 2011 consisted of the following:Depreciation and amortization expense was $13.9 million, $13.9 million and $7.7 million for the years ended December 31, 2012, 2011 and 2010,respectively.NOTE 8. BUSINESS ACQUISITIONSDynecolOn May 31, 2012, the Company acquired 100% of the outstanding shares of Dynecol, Inc. ("Dynecol"), a chemical and industrial byproducts treatmentand reuse facility located in Detroit, Michigan. The total purchase price was $10.8 million in cash and was funded through borrowings under theReducing Revolving Line of Credit facility.66$s in thousands Balance atBeginning ofPeriod Charged(Credited) toCosts andExpenses Recoveries(Deductions/Write-offs) Adjustments Balance atEnd of Period Year endedDecember 31, 2012 $311 $137 $17 $3 $468 Year endedDecember 31, 2011 $338 $153 $(179)$(1)$311 Year endedDecember 31, 2010 $121 $168 $(24)$73 $338 $s in thousands 2012 2011 Cell development costs $64,994 $61,749 Land and improvements 14,920 13,929 Buildings and improvements 55,177 51,409 Railcars 17,375 17,375 Vehicles and other equipment 39,689 33,594 Construction in progress 12,454 4,031 Total property and equipment 204,609 182,087 Accumulated depreciation and amortization (94,817) (82,112) Property and equipment, net $109,792 $99,975 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8. BUSINESS ACQUISITIONS (Continued)The following table summarizes the consideration paid for Dynecol and the fair value of assets acquired and liabilities assumed at the acquisition date.Goodwill of $1.3 million arising from the acquisition is the result of several factors. Dynecol has a talented assembled workforce of approximately 40employees principally serving the Mid-Western and Eastern United States and Ontario, Canada industrial markets for nearly 40 years. The acquisitionof Dynecol strengthens our mid-western and eastern U.S. presence to better serve key North American hazardous waste markets. In addition, Dynecolprovides us with an opportunity to win more Event Business work; expand penetration with national accounts; improve and enhance transportation,logistics, and service offerings with existing customers; and attract new customers. All of the goodwill recognized was assigned to our OperatingDisposal Facilities segment and is expected to be deductible for income tax purposes over a fifteen-year amortization period.The following unaudited pro forma financial information presents the combined results of operations as if Dynecol had been combined with usbeginning on January 1, 2011. The pro forma financial information includes the accounting impact of the business combination, including theamortization of intangible assets, depreciation of property, plant and equipment and interest expense. The unaudited pro forma financial information ispresented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had takenplace at the beginning of the period presented, nor should it be taken as an indication of our future consolidated results of operations.The amounts of revenue and operating loss from Dynecol included in US Ecology's consolidated statements of operations for the year endedDecember 31, 2012 were $6.7 million and $161,000, respectively. Acquisition-related costs of $348,000 were included in Selling, general andadministrative expenses in the Company's consolidated statement of operations for the year ended December 31, 2012.67$s in thousands 2012 Current assets $2,214 Property and equipment 6,552 Identifiable intangible assets 1,940 Current liabilities (1,268) Total identifiable net assets 9,438 Goodwill 1,327 Total purchase price $10,765 (unaudited) $s in thousands, except per share amounts 2012 2011 Pro forma combined: Revenue $174,639 $169,884 Net income $25,513 $19,339 Earnings per share Basic $1.40 $1.06 Diluted $1.40 $1.06 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8. BUSINESS ACQUISITIONS (Continued)StablexOn October 31, 2010, the Company through a wholly-owned subsidiary acquired 100% of the outstanding shares of Seaway TLC Inc. and its wholly-owned subsidiaries Stablex Canada Inc. and Gulfstream TLC, Inc. (collectively "Stablex"). Stablex is a provider of hazardous waste services thatoperates a permitted hazardous waste processing and disposal facility in Blainville, Québec, Canada about 30 miles northwest of Montreal, Canada. Thepurchase price was $79.0 million CAD, net of post-closing adjustments. The purchase price was funded through a combination of cash on hand andborrowings under our Reducing Revolving Line of Credit (as more fully described in Note 12). The purchase price was subject to post-closingadjustments based on the amount of working capital at closing and the amount of capital expenditures made by Stablex prior to closing. Total post-closing adjustments resulted in $1.0 million CAD being refunded to US Ecology. The net purchase price of $79.0 million CAD totaled $77.5 millionUSD after consideration of the post-closing adjustments and currency translation.The following table summarizes the consideration paid for Stablex and the fair value of assets acquired and liabilities assumed recognized at theacquisition date.Goodwill of $21.3 million arising from the acquisition is the result of several factors. Stablex has a talented assembled workforce that principally servesthe eastern Canadian and northeastern U.S. industrial markets utilizing proprietary state-of-the-art technology to treat a wide range of hazardous waste.The acquisition of Stablex increases our geographic base providing a northeastern presence and an exceptional service platform to better serve keyNorth American hazardous waste markets. In addition, Stablex provides us with an opportunity to win more U.S. Event Business work; expandpenetration with national accounts; improve and enhance transportation, logistics, and service offerings with existing customers and attract newcustomers. All of the goodwill recognized was assigned to our Operating Disposal Facilities segment. None of the goodwill recognized is expected tobe deductible for income tax purposes.The following unaudited pro forma financial information presents the combined results of operations as if Stablex had been combined with us at thebeginning of 2010. The pro forma financial information includes the accounting effects of the business combination, including the amortization ofintangible assets, depreciation of property, plant and equipment, and interest expense. The unaudited pro forma financial information is presented forinformational purposes only and is not indicative of the results of operations68$s in thousands 2010 Current assets $6,146 Property and equipment 30,470 Identifiable intangible assets 40,978 Current liabilities (6,533)Other liabilities (14,839) Total identifiable net assets 56,222 Goodwill 21,272 Total purchase price $77,494 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 8. BUSINESS ACQUISITIONS (Continued)that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of ourfuture consolidated results of operations.The amounts of revenue and operating income from Stablex included in US Ecology's consolidated statement of operations for the year endedDecember 31, 2010 were $5.7 million and $145,000, respectively. Acquisition-related costs of $2.6 million were included in Selling, general andadministrative expenses in the Company's consolidated statement of operations for the year ended December 31, 2010.NOTE 9. GOODWILL AND INTANGIBLE ASSETSGoodwill and intangible assets as of December 31, 2012, were the result of our acquisitions of Dynecol on May 31, 2012 and Stablex on October 31,2010 (see Note 8). Prior to the acquisition of Stablex, the Company had no goodwill and intangible assets. All goodwill has been assigned to theOperating Disposal Facilities reporting segment. Changes in goodwill for the years ended December 31, 2012 and 2011 consisted of the following:69$s in thousands, except per share amounts (unaudited)2010 Pro forma combined: Revenue $133,779 Net income $13,547 Earnings per share Basic $0.75 Diluted $0.74 $s in thousands 2012 2011 Balance, beginning of year $21,200 $21,790 Dynecol acquisition 1,327 — Foreign currency translation 578 (590) Balance, end of year $23,105 $21,200 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 9. GOODWILL AND INTANGIBLE ASSETS (Continued)Intangible assets as of December 31, 2012 and 2011 consisted of the following:Amortization expense of amortizing intangible assets was $1.5 million, $1.4 million and $231,000 for the years ended December 31, 2012, 2011 and2010, respectively. Future amortization expense of amortizing intangible assets is expected to be approximately $1.5 million per year for each of the nextfive years.NOTE 10. EMPLOYEE BENEFIT PLANSWe maintain the US Ecology, Inc., 401(k) Savings and Retirement Plan ("the Plan") for employees who voluntarily contribute a portion of theircompensation, thereby deferring income for federal income tax purposes. The Plan covers substantially all of our employees in the United States.Participants may contribute a percentage of salary up to the IRS limitations. The Company contributes a matching contribution equal to 55% ofparticipant contributions up to 6% of compensation. The Company contributed matching contributions to the Plan of $364,000, $354,000 and $273,000in 2012, 2011 and 2010, respectively.We also maintain the Stablex Canada Inc. Simplified Pension Plan ("the SPP"). This defined contribution plan covers substantially all of our employeesat our Blainville, Québec facility in Canada. Participants receive a company contribution equal to 5% of their annual salary. The Company contributed 2012 2011 $s in thousands Cost AccumulatedAmortization Net Cost AccumulatedAmortization Net Amortizingintangibleassets: Developedsoftware $352 $(135)$217 $342 $(71)$271 Database 100 (31) 69 98 (16) 82 Customerrelationships 5,269 (490) 4,779 3,991 (232) 3,759 Technology—Formulaeandprocesses 9,144 (600) 8,544 8,902 (315) 8,587 Permits,licenses andlease 28,085 (1,844) 26,241 27,340 (967) 26,373 Non-competeagreements 20 (20) — — — — Totalamortizingintangibleassets 42,970 (3,120) 39,850 40,673 (1,601) 39,072 Nonamortizingintangibleassets: Permits andlicenses 750 — 750 — — — Tradename 171 — 171 166 — 166 Total intangibleassets $43,891 $(3,120)$40,771 $40,839 $(1,601)$39,238 $365,000 and $354,000 in 2012 and 2011, respectively, and $56,000 for the two months of ownership in 2010 to the SPP.NOTE 11. CLOSURE AND POST-CLOSURE OBLIGATIONSOur accrued closure and post-closure liability represents the expected future costs, including corrective actions, associated with closure and post-closureof our operating and non-operating disposal facilities. Liabilities are recorded when work is probable and the costs can be reasonably estimated. Weperform periodic reviews of both non-operating and operating facilities and revise accruals for estimated closure and post-closure, remediation or othercosts as necessary. Recorded liabilities are based on our best70Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 11. CLOSURE AND POST-CLOSURE OBLIGATIONS (Continued)estimates of current costs and are updated periodically to include the effects of existing technology, presently enacted laws and regulations, inflation andother economic factors.We do not presently bear significant financial responsibility for closure and/or post-closure care of the disposal facilities located on state-owned land atour Beatty, Nevada site; Provincial-owned land in Blainville, Québec; or state-leased federal land on the Department of Energy Hanford Reservationnear Richland, Washington. The States of Nevada and Washington and the Provence of Québec collect fees from us based on the waste received on aquarterly or annual basis. Such fees are deposited in dedicated, government-controlled funds to cover the future costs of closure and post-closure careand maintenance. Such fees are periodically reviewed for adequacy by the governmental authorities. We also maintain a surety bond for closure costsassociated with the Stablex facility. Our lease agreement with the Province of Québec requires that the surety bond be maintained for 25 years after thelease expires. At December 31, 2012 we had $897,000 in commercial surety bonds dedicated for closure obligations.In accounting for our asset retirement obligations we recognize a liability as part of the fair value of future asset retirement obligations and an associatedasset as part of the carrying amount of the underlying asset. This obligation is valued based on our best estimates of current costs and current estimatedclosure cost taking into account current technology, material and service costs, laws and regulations. These cost estimates are increased by an estimatedinflation rate, estimated to be 2.6% at December 31, 2012. Inflated current costs are then discounted using our credit-adjusted risk-free interest rate,which approximates our incremental borrowing rate, in effect at the time the obligation is established or when there are upward revisions to ourestimated closure and post-closure costs. Our weighted-average credit-adjusted risk-free interest rate at December 31, 2012 approximated 7.7%. Weperform periodic reviews of both non-operating and operating sites and revise the accruals as necessary.Changes to reported closure and post-closure obligations for the years ended December 31, 2012 and 2011, consisted of the following:The adjustment to the obligation is a change in the expected timing or amount of cash expenditures based upon actual and estimated cash expenditures.The adjustments in 2012 were: (1) a $964,000 increase to the obligation for our Grand View, Idaho; Robstown, Texas; and Blainville, Québec, Canadaoperating facilities, primarily due to increases in our estimated closure costs for newly constructed disposal cells and (2) a $72,000 increase inobligations for our non-operating facilities due to changes in estimated post-closure costs.71$s in thousands 2012 2011 Closure and post-closure obligations, beginning of year $17,338 $16,773 Accretion expense 1,367 1,292 Payments (2,398) (784)Adjustments 1,036 96 Foreign currency translation 19 (39) Closure and post-closure obligations, end of year 17,362 17,338 Less current portion (1,913) (2,890) Long-term portion $15,449 $14,448 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 11. CLOSURE AND POST-CLOSURE OBLIGATIONS (Continued)The adjustments in 2011 were: (1) a $22,000 increase to the obligation for our Grand View, Idaho; Robstown, Texas; and Blainville, Québec, Canadaoperating facilities, primarily due to increases in our estimated closure and post-closure costs for active disposal cells and (2) a $74,000 increase inobligations for our non-operating facilities due to changes in estimated post-closure costs.The reported closure and post-closure asset is recorded as a component of Property and equipment, net, in the consolidated balance sheet for the yearsended December 31, 2012 and 2011 as follows:NOTE 12. DEBTOn October 29, 2010, we entered into a credit agreement with Wells Fargo which provided 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 June 15, 2013 and a $75.0 million reducing revolving line of credit (the "Reducing Revolving Line of Credit") with a maturitydate of November 1, 2015.Revolving Line of CreditThe Revolving Line of Credit provides up to $20.0 million in revolving credit loans or letters of credit for working capital needs (the "CommitmentAmount"). Under the Revolving Line of Credit, revolving loans are available based on the Prime Rate or LIBOR, at the Company's option, plus anapplicable margin, which is determined according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debtto earnings before interest, taxes, depreciation and amortization ("EBITDA"). At December 31, 2012, the effective interest rate on the Revolving Line ofCredit was 1.46%. Interest only payments are due either monthly or on the last day of any interest period, as applicable. At December 31, 2012 therewere 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 CreditThe Reducing Revolving Line of Credit provided 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 Dynecol in 2012, with theremaining borrowings available under the Reducing Revolving Line of Credit used to provide financing for working capital needs. The initial ReducingRevolving Commitment Amount is reduced by $2.8 million on the last day of each June, September, December and March beginning June 30, 2011,continuing through November 1, 2015. Under the Reducing Revolving Line of Credit revolving loans are available based on the Prime Rate or LIBOR,at the Company's option, plus an applicable margin, which is determined72$s in thousands 2012 2011 Net closure and post-closure asset, beginning of year $1,280 $1,802 Additions or adjustments to closure and post-closure asset 921 93 Amortization of closure and post-closure asset (584) (589)Foreign currency translation 12 (26) Net closure and post-closure asset, end of year $1,629 $1,280 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 12. DEBT (Continued)according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debt to EBITDA. At December 31, 2012,the effective interest rate of the Reducing Revolving Line of Credit was 1.46%. Interest only payments are due either monthly or on the last day of anyinterest period, as applicable. At December 31, 2012, there was $45.0 million outstanding on the Reducing Revolving Line of Credit with availabilityfor additional borrowings of $10.5 million.On January 30, 2013, the Credit Agreement with Wells Fargo was amended to extend the maturity date of the Revolving Line of Credit and increase theReducing Revolving Commitment Amount. Under terms of the amended Credit Agreement, the maturity date of the Revolving Line of Credit wasextended from June 15, 2013 to November 1, 2015 and the Reducing Revolving Commitment Amount was increased to $75.0 million throughMarch 30, 2013, reducing by $2.8 million on the last day of each June, September, December and March beginning March 31, 2013, continuingthrough November 1, 2015. As a result of the amendment, $580,000 of borrowings on the Reducing Revolving Line of Credit that would have beenclassified as current under terms of the original agreement prior to the amendment have been reclassified to long-term in the accompanying ConsolidatedBalance Sheet.In addition to standard fees, there are origination fees and commitment fees based on the average daily unused portion of the Commitment Amount andthe Reducing Revolving Commitment Amount. The Credit Agreement contains certain quarterly financial covenants, including a maximum funded debtratio, a maximum fixed charge coverage ratio, a minimum required tangible net worth and a minimum current ratio. In addition, we may only declarequarterly or annual dividends if on the date of declaration, no event of default has occurred, or no other event or condition has occurred that wouldconstitute an event of default after giving effect to the payment of the dividend. Obligations under the Credit Agreement are guaranteed by US Ecologyand all of its subsidiaries.At December 31, 2012, we were in compliance with all of the financial covenants in the Credit Agreement.NOTE 13. INCOME TAXESThe components of the income tax expense consisted of the following:73$s in thousands 2012 2011 2010 Current: U.S. Federal $13,989 $10,662 $8,618 State 1,905 1,237 1,136 Foreign 873 632 133 Total current 16,767 12,531 9,887 Deferred: U.S. Federal (270) (396) (29)State 79 (85) (71)Foreign (517) (613) (185) Total deferred (708) (1,094) (285) Income tax expense $16,059 $11,437 $9,602 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 13. INCOME TAXES (Continued)The following table reconciles between the effective income tax rate and the applicable statutory federal and state income tax rate:The components of the total net deferred tax assets and liabilities as of December 31, 2012 and 2011 consisted of the following:We do not accrue U.S. tax for foreign earnings that we consider to be permanently reinvested outside the United States. As of December 31, 2012, therewere no unremitted earnings for the Company's foreign subsidiary, Stablex. The Company had no foreign subsidiaries prior to 2010. We also do notprovide for deferred taxes on the excess of the tax basis over the financial reporting basis in our investment in Stablex that is essentially permanent induration. The excess totaled $2.0 million as of December 31, 2012.We have historically recorded a valuation allowance for certain deferred tax assets due to uncertainties regarding future operating results and limitationson utilization of net operating loss carry forwards ("NOLs") for tax purposes. State NOLs expire between 2013 and 2022.The realization of asignificant portion of net deferred tax assets is based in part on our estimates of the timing of reversals of certain temporary differences and on thegeneration of taxable income before such reversals. At December 31, 2012 and 2011, we continued to maintain a valuation allowance for approximately$5.5 million and $4.9 million, respectively, of state tax benefits that are not expected to be utilizable prior to expiration.74 2012 2011 2010 Taxes computed at statutory rate 35.0% 35.0% 35.0%State income taxes (net of federal income tax benefit) 3.3 2.5 3.3 Non-deductible acquisition costs — — 3.2 Foreign rate differential (0.3) — 0.1 Other 0.5 0.9 1.7 38.5% 38.4% 43.3% $s in thousands 2012 2011 Deferred tax assets: Net operating loss carry forward $5,555 $4,967 Accruals, allowances and other 2,065 1,579 Total deferred tax assets 7,620 6,546 Less: valuation allowance (5,537) (4,950) Net deferred tax assets 2,083 1,596 Deferred tax liabilities: Environmental compliance and other site related costs (1,228) (1,329)Property and equipment (6,646) (6,886)Intangible assets (10,463) (10,555)Other (629) (70) Total deferred tax liabilities (18,966) (18,840) Net deferred tax liability $(16,883)$(17,244) Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 13. INCOME TAXES (Continued)The domestic and foreign components of Income (loss) before income taxes consisted of the following:The changes to unrecognized tax benefits (excluding related penalties and interest) consisted of the following:As of December 31, 2012, the Company's unrecognized tax benefits represent increases in tax positions in prior periods for new information thatsupported a change in measurement that, if recognized, would favorably affect the effective tax rate. We recognize interest assessed by taxing authoritiesor interest associated with uncertain tax positions as a component of interest expense. We recognize any penalties assessed by taxing authorities orpenalties associated with uncertain tax positions as a component of selling, general and administrative expenses. Interest expense related to unrecognizedtax benefits was $13,000 and $16,000 for the years ended December 31, 2012 and 2011, respectively.We file a consolidated U.S. federal income tax return with the Internal Revenue Service ("IRS") as well as income tax returns in various states andCanada. We may be subject to examination by taxing authorities in the U.S. and Canada for tax years 2009 through 2012. Additionally, we may besubject to examinations by various state and local taxing jurisdictions for tax years 2008 through 2012. We are currently not aware of any examinationsby taxing authorities.We do not anticipate that, within the next twelve months, the total amount of unrecognized tax benefits will significantly change due to the settlement ofexaminations and the expiration of statutes of limitations.NOTE 14. COMMITMENTS AND CONTINGENCIESLitigation and Regulatory ProceedingsIn the ordinary course of conducting business, we are involved in judicial and administrative proceedings involving federal, state or local governmentalauthorities, including regulatory agencies that oversee our permits and compliance with those permits. Fines or penalties may be assessed by ourregulators as a result of review or inspection of our operating practices. Actions may also be brought by individuals or groups in connection withpermitting of planned facilities, alleged violations of existing permits, or alleged damages suffered from exposure to hazardous substances purportedlyreleased from our operated sites, as well as other litigation. We maintain insurance intended to cover property and damage claims asserted as a result75$s in thousands 2012 2011 2010 Domestic 40,425 29,775 22,383 Foreign 1,293 32 (197) Income before income taxes $41,718 $29,807 $22,186 $s in thousands 2012 2011 2010 Unrecognized tax benefits, beginning of year $438 $— $— Gross increases in tax positions in prior periods — 438 — Gross increases during the current period — — — Settlements — — — Lapse of statute of limitations — — — Unrecognized tax benefits, end of year $438 $438 $— Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)of our operations. Periodically, management reviews and may establish reserves for legal and administrative matters, or fees expected to be incurred inconnection therewith. We are not currently a party to any material pending legal proceedings and other than the matter discussed below are not aware ofany other claims that could have a materially adverse effect on our financial position, results of operations or cash flows.In April 2012, we received a confidential settlement communication from the United States Environment Protection Agency ("U.S. EPA") alleging thatthe thermal recycling operation at our Robstown, Texas facility did not comply with certain rules and regulations of the Resource Conversation andRecovery Act of 1976 ("RCRA"). The communication included a draft Consent Agreement and Final Order ("CAFO") directed to the Company andthe thermal recycling unit's owner-operator. The CAFO asserted various technical compliance and permitting violations and proposed corrective actionsto resolve the matter as well as proposed monetary penalties against both the Company and the thermal recycling unit's owner-operator. In October2012, the Company and the thermal recycling unit's owner-operator entered into a final CAFO with the U.S. EPA. As part of the settlement, we agreedto pay a civil penalty of $166,000 and to submit an application to the State of Texas for a RCRA Subpart X permit. The Company and the thermalrecycling unit's owner-operating also agreed to a set of interim operating conditions that allow the facility to continue providing recycling services tocustomers until the RCRA Subpart X permit is issued. Based on the CAFO, we recorded a charge of $166,000 during 2012 in Selling, general andadministrative expenses in the Consolidated Statement of Operations.In connection with the above matter, the U.S. EPA has also raised concerns regarding potential violations of the Clean Air Act of 1970 ("CAA") at ourTexas thermal recycling operation. However, neither the Company nor the thermal recycling unit's owner-operator has received a formal notice ofviolation from the U.S. EPA. We cannot presently estimate the potential additional liability, if any, related to these potential violations of the CAA andtherefore no additional amounts have been recorded in our financial statements related to this matter.Operating LeasesLease agreements primarily cover railcars, the disposal site at our Stablex facility and corporate office space. Future minimum lease payments on non-cancellable operating leases as of December 31, 2012 consisted of the following:Rental expense under operating leases was $495,000, $483,000 and $491,000 for the years ended December 31, 2012, 2011 and 2010, respectively.76$s in thousands Payments 2013 $523 2014 250 2015 135 2016 33 2017 22 Thereafter 9 $972 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 15. EQUITYStock Option PlansWe have three stock option plans, the 1992 Stock Option Plan for Employees ("1992 Employee Plan"), the 1992 Director Stock Option Plan ("1992Director Plan") and the 2008 Stock Option Incentive Plan ("2008 Stock Option Plan"). In March 2005, the Board of Directors cancelled the 1992Director Plan except for options then outstanding. These plans were developed to provide additional incentives through equity ownership in USEcology and, as a result, encourage employees and directors to contribute to our success. Stock options expire ten years from the date of grant and vestover a period ranging from one to three years from the date of grant. Vesting requirements for non-employee directors are contingent on attending aminimum of seventy-five percent of regularly scheduled board meetings during the year. A total of 2,800,000 stock options have been authorized forgrant under the 1992 Employee Plan and the 2008 Stock Option Plan. As of December 31, 2012, 1,146,242 options remained available for future grantunder our stock options plans. Upon the exercise of stock options, common stock is issued from treasury stock or, when depleted, from new stockissuances.The following table summarizes our stock option plan activity:The weighted average grant date fair value of all stock options granted during 2012, 2011 and 2010 was $4.03, $4.04 and $3.91 per share, respectively.The total intrinsic value of stock options exercised during 2012, 2011 and 2010 was $497,000, $39,000 and $38,000, respectively.The fair value of each stock option is estimated as of the date of grant using the Black-Scholes option-pricing model. Expected volatility is estimatedbased on an average of actual historical volatility and implied volatility corresponding to the stock option's estimated expected term. We believe thisapproach to determine volatility is representative of future stock volatility. The expected term of a stock option is estimated based on analysis of stockoptions already exercised and foreseeable trends or changes in behavior. The risk-free interest rates are based on the U.S. Treasury securities maturitiesas of each applicable grant date. The dividend yield is based on analysis of actual historical dividend yield.The significant weighted-average assumptions relating to the valuation of each option grant consisted of the following:77$s in thousands, except per share amounts Shares WeightedAverageExercisePrice AggregateIntrinsicValue WeightedAverageRemainingContractualTerm (Years) Outstanding as of December 31, 2011 428,060 $18.04 Granted 79,000 19.45 Exercised (65,048) 15.91 Cancelled or expired (7,500) 3.92 Outstanding as of December 31, 2012 434,512 $18.93 $2,020 6.5 Exercisable as of December 31, 2012 339,623 $19.16 $1,505 5.9 2012 2011 2010Expected life 3.3 years 3.3 years 3.3 yearsExpected volatility 39% 46% 47%Risk-free interest rate 0.4% 1.2% 1.4%Expected dividend yield 4.1% 4.5% 4.2%Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 15. EQUITY (Continued)Restricted Stock PlansWe have two restricted stock plans: the Amended and Restated 2005 Non-Employee Director Compensation Plan (the "Director Plan") and the 2006Restricted Stock Plan (the "Employee Plan"). The Director Plan provides that each non-employee director receive an annual award of either the numberof shares of restricted stock or options to purchase US Ecology common stock (at each Director's election) with a value equal to $25,000 on the date ofgrant with a one-year vesting period. Vesting is also contingent on the non-employee director attending a minimum of seventy-five percent of regularlyscheduled board meetings during the year. 200,000 shares of common stock have been authorized for grant under the Director Plan. During 2012,7,500 shares were granted to non-employee directors. As of December 31, 2012, 76,200 shares remained available for grant under the Director Plan.The Employee Plan provides that employees are eligible for restricted stock grants at the discretion of the Board of Directors. Generally, awards grantedunder the Employee Plan vest monthly over a twelve-month period. 200,000 shares of common stock have been authorized for grant under theEmployee Plan. During 2012, 14,800 shares were granted to employees. As of December 31, 2012, 114,662 shares remained available for future grantunder the Employee Plan. Upon the vesting of restricted stock awards, common stock is issued from treasury stock or, when depleted, from new stockissuances.The following table summarizes our restricted stock plan activity:The total fair value of restricted stock vested during 2012, 2011 and 2010 was $413,000, $340,000 and $495,000, respectively.Share-Based Compensation ExpenseAll share-based compensation is measured at the grant date based on the fair value of the award, and is recognized as an expense in earnings over therequisite service period. The components of pre-tax78 Shares WeightedAverageGrant DateFair Value Outstanding as of December 31, 2011 11,975 $16.22 Granted 22,300 18.72 Vested (23,075) 17.90 Cancelled or expired — — Outstanding as of December 31, 2012 11,200 $17.73 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 15. EQUITY (Continued)share-based compensation expense (included in Selling, general and administrative expenses in the Consolidated Statements of Earnings) and related taxbenefits were as follows:Unrecognized Share-Based Compensation ExpenseAs of December 31, 2012, there was $329,000 of unrecognized compensation expense related to unvested share-based awards granted under our share-based award plans. The expense is expected to be recognized over a weighted average remaining vesting period of approximately one year.NOTE 16. EARNINGS PER SHARENOTE 17. OPERATING SEGMENTSFinancial Information by Operating SegmentWe operate with two segments, Operating Disposal Facilities, and Non-Operating Disposal Facilities. These segments reflect our internal reportingstructure and nature of services offered. The Operating Disposal Facility segment represents disposal facilities accepting hazardous and radioactivewaste. The Non-Operating Disposal Facility segment represents facilities which are not accepting hazardous and/or radioactive waste or formerlyproposed new facilities.79$s in thousands 2012 2011 2010 Share-based compensation from: Stock options $397 $449 $453 Restrict stock 449 388 535 Total share-based compensation 846 837 988 Income tax benefit (326) (321) (428) Share-based compensation, net of tax $520 $516 $560 2012 2011 2010 $s and shares in thousands, except pershare amounts Basic Diluted Basic Diluted Basic Diluted Net income $25,659 $25,659 $18,370 $18,370 $12,584 $12,584 Weighted average basic sharesoutstanding 18,238 18,238 18,198 18,198 18,170 18,170 Dilutive effect of stock optionsand restricted stock 43 25 19 Weighted average diluted sharesoutstanding 18,281 18,223 18,189 Earnings per share $1.41 $1.40 $1.01 $1.01 $0.69 $0.69 Anti-dilutive shares excluded fromcalculation 266 320 322 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 17. OPERATING SEGMENTS (Continued)Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Inter-company transactions have beeneliminated from the segment information and are not significant between segments.Summarized financial information concerning our reportable segments is shown in the following table:80 Year Ended December 31, 2012 $s in thousands OperatingDisposalFacilities Non-OperatingDisposalFacilities Corporate Total Revenue—Treatment and disposal $145,687 $20 $— $145,707 Revenue—Transportation services 23,431 — — 23,431 Total revenue 169,118 20 — 169,138 Direct operating costs 78,883 294 — 79,177 Transportation costs 23,663 1 — 23,664 Gross profit (loss) 66,572 (275) — 66,297 Selling, general & administrative expenses 11,567 — 14,092 25,659 Operating income (loss) 55,005 (275) (14,092) 40,638 Interest income (expense), net 17 — (878) (861)Foreign currency gain (loss) (169) — 1,382 1,213 Other income 723 5 — 728 Income (loss) before income taxes 55,576 (270) (13,588) 41,718 Income tax expense — — 16,059 16,059 Net income (loss) $55,576 $(270)$(29,647)$25,659 Depreciation, amortization & accretion $16,494 $216 $42 $16,752 Capital expenditures $15,707 $17 $42 $15,766 Total assets $210,984 $93 $7,617 $218,694 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 17. OPERATING SEGMENTS (Continued) 81 Year Ended December 31, 2011 $s in thousands OperatingDisposalFacilities Non-OperatingDisposalFacilities Corporate Total Revenue—Treatment and disposal $129,049 $22 $— $129,071 Revenue—Transportation services 25,846 — — 25,846 Total revenue 154,895 22 — 154,917 Direct operating costs 73,455 303 — 73,758 Transportation costs 27,292 — — 27,292 Gross profit (loss) 54,148 (281) — 53,867 Selling, general & administrative expenses 10,165 — 11,337 21,502 Operating income (loss) 43,983 (281) (11,337) 32,365 Interest income (expense), net 23 — (1,601) (1,578)Foreign currency gain (loss) 26 — (1,347) (1,321)Other income 340 1 — 341 Income (loss) before income taxes 44,372 (280) (14,285) 29,807 Income tax expense — — 11,437 11,437 Net income (loss) $44,372 $(280)$(25,722)$18,370 Depreciation, amortization & accretion $16,375 $218 $51 $16,644 Capital expenditures $9,974 $16 $106 $10,096 Total assets $195,552 $88 $6,948 $202,588 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 17. OPERATING SEGMENTS (Continued) Revenue, Property, Plant and Equipment and Intangible Assets Outside of the United StatesWe provide services in the United States and Canada. The table below summarizes revenues by geographic area where the underlying services wereperformed for the years ended December 31, 2012, 2011 and 2010:Long-lived assets, consisting of property and equipment and intangible assets net of accumulated depreciation and amortization, by geographic locationas of December 31, 2012 and 2011 were as follows:82 Year Ended December 31, 2010 $s in thousands OperatingDisposalFacilities Non-OperatingDisposalFacilities Corporate Total Revenue—Treatment and disposal $85,474 $26 $— $85,500 Revenue—Transportation services 19,336 — — 19,336 Total revenue 104,810 26 — 104,836 Direct operating costs 44,893 498 — 45,391 Transportation costs 20,434 — — 20,434 Gross profit (loss) 39,483 (472) — 39,011 Selling, general & administrative expenses 6,217 — 12,417 18,634 Operating income (loss) 33,266 (472) (12,417) 20,377 Interest income (expense), net 5 — (274) (269)Foreign currency gain (loss) (103) — 1,922 1,819 Other income 249 10 — 259 Income (loss) before income taxes 33,417 (462) (10,769) 22,186 Income tax expense — — 9,602 9,602 Net income (loss) $33,417 $(462)$(20,371)$12,584 Depreciation, amortization & accretion $8,868 $204 $46 $9,118 Capital expenditures $14,137 $50 $3 $14,190 Total assets $204,603 $62 $12,684 $217,349 $s in thousands 2012 2011 2010 United States $130,889 $118,402 $99,129 Canada 38,249 36,515 5,707 $169,138 $154,917 $104,836 $s in thousands 2012 2011 United States $81,605 $71,456 Canada 68,958 67,757 $150,563 $139,213 Table of ContentsUS ECOLOGY, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)NOTE 18. QUARTERLY FINANCIAL DATA (unaudited)The unaudited consolidated quarterly results of operations for 2012 and 2011 were:83 Three-Months Ended $s and shares in thousands, except per share amounts Mar. 31, June 30, Sept. 30, Dec. 31, Year 2012 Revenue $33,013 $39,980 $45,739 $50,406 $169,138 Gross profit 12,076 17,326 18,589 18,306 66,297 Operating income 6,471 10,960 12,393 10,814 40,638 Net income 4,523 6,362 8,662 6,112 25,659 Earnings per share—diluted(1) $0.25 $0.35 $0.47 $0.33 $1.40 Weighted average common shares outstanding used in thediluted earnings per share calculation 18,254 18,264 18,270 18,332 18,281 2011 Revenue $34,143 $39,537 $39,670 $41,567 $154,917 Gross profit 9,469 13,078 15,289 16,031 53,867 Operating income 4,641 7,754 9,567 10,403 32,365 Net income 3,260 4,685 3,726 6,699 18,370 Earnings per share—diluted(1) $0.18 $0.26 $0.20 $0.37 $1.01 Weighted average common shares outstanding used in thediluted earnings per share calculation 18,210 18,219 18,227 18,237 18,223 (1)Diluted earnings per common share for each quarter presented above are based on the respective weighted average number ofcommon shares for the respective quarter. The dilutive potential common shares outstanding for each period and the sum of thequarters may not necessarily be equal to the full year diluted earnings per common share amount.Table of ContentsItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNoneItem 9A. Controls and ProceduresAn evaluation was performed under the supervision and with the participation of the Company's management, including both the President and ChiefFinancial Officer, of the effectiveness of the Company's disclosure controls and procedures, as such term is defined under Rule 13a-15e under theSecurities Exchange Act of 1934, as amended (the "Exchange Act") as of December 31, 2012. Based on that evaluation, the Company's management,including the President and Chief Financial Officer, concluded that the Company's disclosure controls and procedures are effective to providereasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported as specified in SEC rules and forms and that such information is accumulated and communicated to the Company'smanagement, including the President and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisionsregarding required disclosure.There were no changes in the Company's internal control over financial reporting identified in connection with the evaluation of such controls thatoccurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internalcontrol over financial reporting.Management's Annual Report on Internal Controls over Financial Reporting.Management is responsible for and maintains a system of internal controls over financial reporting that is designed to provide reasonable assurance thatits records and filings accurately reflect the transactions engaged in Section 404 of Sarbanes-Oxley Act of 2002 and related rules issued by the SECrequiring management to issue a report on its internal controls over financial reporting.There are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding ofcontrols. Accordingly, even effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further,because of changes in conditions, the effectiveness of internal controls may vary over time.Management has conducted an assessment of its internal controls over financial reporting as of December 31, 2012 utilizing criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations ("COSO") of the Treadway Commission. Based onthis assessment, management concluded that our internal controls over financial reporting, excluding US Ecology Michigan, Inc., were effective toprovide reasonable assurance regarding the reliability of financial reporting. Management determined that it would exclude US Ecology Michigan, Inc.from the scope of its assessment of internal control over financial reporting as of December 31, 2012 because US Ecology Michigan, Inc. was acquiredby the Company in a purchase business combination on May 31, 2012. Total assets for US Ecology Michigan, Inc. constituted approximately 5% of theCompany's total consolidated assets at December 31, 2012. This includes $1.3 million of goodwill and $1.9 million of acquired intangible assets. Totalrevenues of US Ecology Michigan, Inc. constituted 4% of the consolidated financial statement amounts for the year ended December 31, 2012.Our independent registered public accounting firm, Deloitte and Touche LLP, has audited the effectiveness of internal control over financial reporting asof December 31, 2012, as stated in their report, which is included in Part II, Item 8 of this Annual Report on Form 10-K.Item 9B. Other InformationNone84Table of ContentsPART III Item 10. Directors, Executive Officers and Corporate GovernanceThe information regarding directors and nominees for directors of the Company, including identification of the members of the audit committee andaudit committee financial expert, is presented under the headings "Corporate Governance—Committees of the Board of Directors," and "Election ofDirectors—Nominees For Directors" in the Company's definitive proxy statement for use in connection with the 2013 Annual Meeting of Stockholders(the "Proxy Statement") to be filed within 120 days after the end of the Company's fiscal year ended December 31, 2012. The information containedunder these headings is incorporated herein by reference. Information regarding the executive officers of the Company is included in this Annual Reporton Form 10-K under Item 1 of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.We have adopted a code of conduct that applies to our President and Chief Financial Officer. This code of conduct is available on our Web site atwww.usecology.com. If we make any amendments to this code other than technical, administrative or other non-substantive amendments, or grant anywaivers, including implicit waivers, from a provision of this code to our President or Chief Financial Officer, we will disclose the nature of theamendment or waiver, its effective date and to whom it applies in a report filed with the SEC.Item 11. Executive CompensationInformation concerning executive and director compensation is presented under the heading "Compensation Discussion and Analysis" in the ProxyStatement. The information contained under these headings is incorporated herein by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation with respect to security ownership of certain beneficial owners and management is set forth under the heading "Security Ownership ofCertain Beneficial Owners and Directors and Officers" in the Proxy Statement. The information contained under these headings is incorporated hereinby reference.The following table provides information as of December 31, 2012, about the common stock that may be issued under all of our existing equitycompensation plans, including the 1992 Employee Stock Option Plan, 1992 Director Stock Option Plan, 2005 Non-Employee Director CompensationPlan, the 200685Table of ContentsRestricted Stock Plan and the 2008 Stock Option Incentive Plan. All of these plans have been approved by our stockholders.Item 13. Certain Relationships and Related Transactions and Director IndependenceInformation concerning related transactions is presented under the heading "Certain Relationships and Related Transactions" in the Proxy Statement.The information contained under this heading is incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesInformation concerning principal accounting fees and services is presented under the heading "Ratification of Appointment of Independent RegisteredPublic Accounting Firm" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.PART IV Item 15. Exhibits and Financial Statement Schedules(a)The following documents are filed as part of this report: 1)Consolidated Financial Statements: See Index to Consolidated Financial Statements at Item 8 on page 49 of this report. 2)Financial Statement Schedules. Schedules have been omitted because they are not required or because the information is included in thefinancial statements at Item 8 on page 49. 3)Exhibits are incorporated herein by reference or are filed with this report as set forth in the Index to Exhibits on page 88 hereof.86 Number of securitiesto be issued uponexercise ofoutstanding options,warrants and rights(a)(1) Weighted-averageexercise price ofoutstanding options,warrants and rights(b)(2) Number of securitiesremaining available forfuture issuance underequity compensationplans (excludingsecurities reflected incolumn (a))(c) Equity stock option compensation plansapproved by security holders 445,712 $18.93 1,337,104 Equity compensation plans not approvedby security holders — — — Total 445,712 $18.93 1,337,104 (1)Includes 11,200 shares of unvested restricted stock awards outstanding under the 2005 Non-Employee Director CompensationPlan and 2006 Restricted Stock Plan. (2)The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted stockawards, which have no exercise price.Table of ContentsSignatures Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.Date: March 1, 2013Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities indicated as of March 1, 2013.87 US ECOLOGY, INC. By: /s/ ERIC L. GERRATTEric L. Gerratt Vice President, Chief Financial Officer, Treasurer andChief Accounting Officer/s/ JEFFREY R. FEELERJeffrey R. FeelerPresident and Chief Operating Officer /s/ ERIC L. GERRATTEric L. GerrattVice President, Chief Financial Officer, Treasurer andChief Accounting Officer(Principal Financial Officer and PrincipalAccounting Officer)/s/ SIMON G. BELLSimon G. Bell.Vice President of Operations /s/ JOHN M. COOPERJohn M. CooperVice President and Chief Information Officer/s/ STEVEN D. WELLINGSteven D. Welling.Senior Vice President Sales and Marketing /s/ VICTOR J. BARNHARTVictor J. Barnhart(Director)/s/ JOE F. COLVINJoe F. Colvin(Director) /s/ DANIEL FOXDaniel Fox(Director)/s/ JEFFREY S. MERRIFIELDJeffrey S. Merrifield(Director) /s/ JOHN W. POLINGJohn W. Poling(Director)/s/ STEPHEN A. ROMANOStephen A. Romano(Director) Table of ContentsExhibitNo. Description Incorporated by Reference fromRegistrant's 2.1 Share Purchase Agreement dated September 13, 2010 betweenMarsulex Inc. and US Ecology, Inc. 3rd Qtr Form 10-Q filed 10-28-2010 3.1 Restated Certificate of Incorporation 2009 Form 10-K 3.3 Amended and Restated Bylaws Form 8-K filed 12-11-2007 10.1 Sublease dated July 27, 2005, between the State of Washington and USEcology Washington, Inc. Form 8-K filed 7-27-05 10.2 Lease Agreement as amended between American Ecology Corporationand the State of Nevada 2nd Qtr 2007 Form 10-Q filed 8-7-2007 10.3 Credit Agreement Between Wells Fargo Bank National Associationand US Ecology, Inc. dated October 29, 2010 Form 8-K filed 11-1-2010 10.4 First Amendment to the Credit Agreement between Wells Fargo BankNational Association and US Ecology, Inc. 2nd Qtr 2011 Form 10-Q filed 8-5-2011 10.5 Second Amendment to the Credit Agreement between Wells FargoBank National Association and US Ecology, Inc. 1st Qtr 2012 Form 10-Q filed 5-8-2012 10.6 Third Amendment to the Credit Agreement between Wells Fargo BankNational Association and US Ecology, Inc. Form 8-K filed 2-5-13 10.7 *Amended and Restated American Ecology Corporation 1992Employee Stock Option Plan Proxy Statement dated 4-16-03 10.8 *Form of Indemnification Agreement between American EcologyCorporation and each of the Company's Directors and Officers Form 8-K filed 5-26-05 10.9 *Management Incentive Plan Effective January 1, 2012 1st Qtr 2012 Form 10-Q filed 5-8-2012 10.10 *2006 Restricted Stock Plan Proxy Statement dated 3-31-06 10.11 *2008 Stock Option Incentive Plan Proxy Statement dated 4-10-2008 10.12 *Employment Agreement, effective January 1, 2010, between theCompany and Simon G. Bell 1st Qtr Form 10-Q filed 4-30-2010 10.13 *Employment Agreement, effective January 1, 2010, between theCompany and John M. Cooper 1st Qtr Form 10-Q filed 4-30-2010 10.14 *Employment Agreement, effective January 1, 2010, between theCompany and Jeffrey R. Feeler 1st Qtr Form 10-Q filed 4-30-2010 10.15 *Employment Agreement, effective January 1, 2010, between theCompany and Eric L. Gerratt 1st Qtr Form 10-Q filed 4-30-2010 88 10.16 *Employment Agreement, effective January 1, 2010, between theCompany and Steven D. Welling 1st Qtr Form 10-Q filed 4-30-2010 10.17 Amended and Restated 2005 Non-Employee Director CompensationPlan Table of Contents89ExhibitNo. Description Incorporated by Reference fromRegistrant's 14.1 Code of Ethics for Chief Executive, Chief Financial Officer and OtherExecutive Officers 14.2 Code of Ethics for Directors 21 List of Subsidiaries 23.1 Consent of Deloitte and Touche LLP 31.1 Certifications of December 31, 2012 Form 10-K by President datedMarch 1, 2013 31.2 Certifications of December 31, 2012 Form 10-K by Chief FinancialOfficer dated March 1, 2013 32.1 Certifications of December 31, 2012 Form 10-K by President datedMarch 1, 2013 32.2 Certifications of December 31, 2012 Form 10-K by Chief FinancialOfficer dated March 1, 2013 101 The following materials from the Annual Report on Form 10-K of USEcology, Inc. for the fiscal year ended December 31, 2012 formatted inExtensible Business Reporting Language (XBRL): (i) ConsolidatedBalance Sheets, (ii) Consolidated Statements of Operations,(iii) Consolidated Statements of Comprehensive Income,(iv) Consolidated Statements of Cash Flows, (v) ConsolidatedStatements of Stockholders' Equity, and (vi) Notes to the ConsolidatedFinancial Statements *Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.Exhibit 10.17 US ECOLOGY, INC. 2005 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN AMENDED AND RESTATED December 11, 2012 1. PURPOSE. The purpose of this Amended and Restated 2005 Non-Employee Director Compensation Plan (this “Plan”) is to provide acomprehensive revised compensation program which will attract and retain qualified individuals who are not employed by US Ecology, Inc., aDelaware corporation (the “Company”), to serve on the Company’s Board of Directors. In particular, the Plan aligns the interests of such directorswith those of the Company’s shareholders by providing that a significant portion of such compensation is directly linked to the value of theCompany’s Common Stock. 2. DEFINITIONS. Unless otherwise defined in this Plan, as used herein, the following definitions shall apply: 2.1 “Award” means a grant of Restricted Stock under this Plan or a grant of a Stock Option under the Stock Option Plan. 2.2 “Award Date” means the first business day after the date of the Annual Meeting of Shareholders at which Non-Employee Directors shallbe granted shares of Restricted Stock or Stock Options, as provided in Section 5.2 below. 2.3 “Board” or “Board of Directors” means the Board of Directors of the Company. 2.4 “Code” means the Internal Revenue Code of 1986, as amended. 2.5 “Common Stock” means the common stock of the Company, $0.01 par value per share. 2.6 “Director” means a member of the Board. 2.7 “Exchange Act” means the Securities Exchange Act of 1934, as amended. 2.8 “Fair Market Value” or “Fair Value” means the average closing price of the Company’s Common Stock as reported on the NasdaqNational Market or, if the Common Stock is no longer listed thereon, such other principal exchange or market (including the over-the-counter market), during the ten (10) trading days prior to the Award Date. For a Stock Option the fair value means the value determinedusing an option pricing model such as the Black-Scholes option pricing model or some other option pricing model as approved by theBoard. 2.9 “Non-Employee Director” means a director who is not an employee of the Company or any Parent or Subsidiary thereof. The payment ofa director’s fee by the Company shall not be sufficient in and of itself to constitute employment by the Company. 2.10 “Parent” means a parent corporation, whether now or hereafter existing, as defined in Section 425(e) of the Code. 2.11 “Plan” means this Amended and Restated 2005 Non-Employee Director Compensation Plan, as it may be amended and/or restated fromtime to time. 2.12 “Plan Administrator” means the administrator of this Plan as described in Section 4.1. 2.13 “Restricted Stock” means shares of Common Stock granted under this Plan, which are subject to restrictions on transfer and potentialforfeiture during the applicable restricted period. 2.14 “Stock Option” means an option to purchase the Company’s Common Stock pursuant to the terms and conditions of the Stock OptionPlan, which are subject to restrictions on transfer and potential forfeiture during the applicable restricted period. 2.15 “Stock Option Plan” means the Company’s 2008 Stock Option Incentive Plan. 1 2.16 “Standing Committee of the Board” means the Audit Committee, the Compensation Committee and the Corporate GovernanceCommittee of the Board, and any other committee as shall be designated by the Board as a standing committee of the Board of Directorsfrom time to time. 2.17 Subsidiary” means a subsidiary corporation, whether now or hereafter existing, as defined in Section 425(f) of the Code. 3. SHARES SUBJECT TO THE PLAN. Subject to Section 8 of this Plan, the total number of shares of Restricted Stock that may be awarded toNon-Employee Directors under this Plan and/or shares of Common Stock issuable pursuant to Stock Options granted under the Stock Option Planshall not exceed two hundred thousand (200,000) shares. If any shares of Restricted Stock or shares subject to Stock Options awarded under thisPlan or the Stock Option Plan, as applicable, are forfeited pursuant to Section 7.1 or Section 7.2, such shares shall again be available for purposesof this Plan. 4. ADMINISTRATION OF THE PLAN. 4.1 Administration. The Board of Directors of the Company or any committee (the “Committee”) of the Board that will satisfy Rule 16b-3of the Exchange Act, and any regulations promulgated thereunder, as from time to time in effect, including any successor rule (“Rule 16b-3”), shall supervise and administer this Plan (hereinafter referred to as the “Plan Administrator”). If appointed by the Board, theCommittee shall consist solely of two or more Non-Employee Directors; provided, however, that only the full Board of Directors maysuspend, amend or terminate this Plan as provided in Section 10. No Director shall vote on any action with respect to any matter relating toan Award held by such Director. 4.2 Powers of the Plan Administrator. Subject to the specific provisions of the Plan, the Plan Administrator shall have the authority, in itsdiscretion: (i) to determine, on review of relevant information and, in accordance with Section 2.7 of the Plan, the Fair Market Value of theCompany’s Common Stock; (ii) to interpret the Plan; (iii) to prescribe, amend, and rescind rules and regulations relating to the Plan; (iv) toauthorize any person to execute on behalf of the Company any instrument required to effectuate Awards; and (v) to make all otherdeterminations deemed necessary or advisable to administer the Plan. The interpretation and construction by the Plan Administrator of anyterms or provisions of the Plan, any Awards hereunder, or of any rule or regulation promulgated in connection herewith, and all actionstaken by the Plan Administrator, shall be conclusive and binding on all interested parties. 5. ANNUAL RETAINER AND MEETING FEES. 5.1 Annual Retainer. Each Non-Employee Director shall be entitled to receive an annual retainer (“Annual Retainer”) consisting of cashand an Award as determined by the Board of Directors or the Committee. The Annual Retainer shall be determined by the Board or theCommittee and will be effective for the then commencing year of the Non-Employee Director’s term on the Board following their election atthe Annual Meeting, and will remain effective until the next subsequent Annual Meeting of Stockholders. 5.2 Annual Award. As part of the Annual Retainer compensation, each Non-Employee Director will receive an Award of shares of RestrictedStock on the Award Date immediately following each Annual Meeting of Shareholders. Alternatively, each Non-Employee Director mayelect to receive, in lieu of Restricted Stock, an equivalent dollar amount of Stock Options to purchase the Company’s Common Stockunder the Stock Option Plan. The equivalent dollar amount of any Stock Option Award will be determined using an option pricing modelsuch as the Black-Scholes option pricing model. All grants of Restricted Stock or Stock Options shall be subject to the terms andconditions set forth in Section 6 below. 5.3 Meeting Fees. Each Non-Employee Director shall receive a fee for each meeting of the full Board that he or she attends. Each Non-Employee Director shall receive a fee for each telephonic meeting of the Board that he or she attends; provided, however, that no fee shall bepayable with respect to any telephonic meeting which lasts less than 30 minutes. In person and telephonic meeting fees will be determinedby the Board of Directors and will be effective for the then commencing year of the Non-Employee Director’s term on the Board followingtheir election at the Annual Meeting and will remain effective until the next subsequent Annual Meeting of Stockholders. All meeting feesearned during a quarter by a Non-Employee Director shall be payable by Company check within 30 days of the end of each such quarter. 2 Each Non-Employee Director shall be eligible to receive a fee for his or her membership on a Standing Committee of the Board, whichamount shall be paid in the form of an annual cash retainer or on a per meeting basis, as determined by the Board of Directors. If paid on aper meeting basis, each Non-Employee Director shall receive a fee for each meeting of a Standing Committee of the Board that he or sheattends; provided, however, that no fee shall be payable with respect to any meeting which lasts less than 30 minutes. The fees, whetheron a per meeting basis or in the form of an annual retainer, will be determined by the Board of Directors and will be effective for the thencommencing year of the Non-Employee Director’s term on the Board following their election at the Annual Meeting and will remain effectiveuntil the next subsequent Annual Meeting of Stockholders. Fees earned during a quarter by a Non-Employee Director shall be payable byCompany check within 30 days of the end of each such quarter. In the event the Board of Directors elects fees to be earned based on a cashretainer, such payment to be made by Company check within 30 days following the effective date of appointment. 5.4 Retainer Fee for Committee Chairs. A Non-Employee Director appointed to chair any Standing Committee of the Board shall be paidan annual retainer, such payment to be made by Company check within 30 days following the effective date of appointment. The annualretainer of each Standing Committee chair shall be determined by the Board or the Committee and will be effective for the then commencingyear of the Standing Committee chair’s term on the Board and will remain effective until the next subsequent Annual Meeting ofStockholders. 5.5 Retainer Fee for Board Chair. A Non-Employee Director appointed to chair the Board of Directors shall be paid an annual retainer asdetermined by the Board of Directors or the Committee. Such payment is to be made by Company check within 30 days following theeffective date of appointment. The annual retainer for the Board chair shall be determined by the Board or the Committee and will beeffective for the then commencing year of the Board chair’s term on the Board and will remain effective until the next subsequent AnnualMeeting of Stockholders. 5.6 Reimbursement of Annual Retainer Fees: A Non-Employee Director who does not complete his or her annual service term, upon whichthe payment of an annual cash retainer was based, must reimburse the Company a pro-rata share of any such retainer fee paid within 10days of the event causing such service term to end. Reimbursement shall not apply in the event of the following: 1) a transaction involvingthe sale, merger, dissolution or similar transaction involving the Company; or 2) the death, disability or other event beyond the control ofthe Director which would prevent the Director from fulfilling their full term. 6. AWARDS OF RESTRICTED STOCK OR STOCK OPTIONS. 6.1 Eligibility. Shares of Restricted Stock may be awarded pursuant to this Plan as part of the Annual Retainer only to Non-EmployeeDirectors. Alternatively, each Non-Employee Directors can elect to receive as part of the Annual Retainer an equivalent amount of StockOptions to purchase the Company’s Common Stock pursuant to the Stock Option Plan. All Awards hereunder shall be made automaticallyin accordance with the terms set forth in this Section 6. No person shall have any discretion to select which Non-Employee Directors shallreceive Awards or to determine the number of shares of Restricted Stock or Stock Options to be awarded. Failure of a Non-EmployeeDirector to achieve and maintain the stock holding, if any, as set by the Board of Directors will result in such director being ineligible foran award until such time that the ownership requirement is satisfied. Notwithstanding, a Non-Employee Director who fails to comply withthe stock holding requirement shall be granted a cure period of sixty (60) days within which to resume compliance. Employee Directorswho cease to be employees of the Company or any Parent or Subsidiary of the Company but who continue as Directors shall becomeeligible for Awards as if they were newly elected Directors, as of the date they cease to be employees. 6.2 Shareholder Approval of Plan. No Awards of Restricted Stock may be made under this Plan and no Awards of Stock Options may bemade unless and until shareholder approval of this Plan and the Stock Option Plan, as applicable, has been obtained in accordance withSection 12 hereof. 6.3 Annual Award. Each Non-Employee Director shall be awarded either shares of Restricted Stock or Stock Options to purchase theCompany’s Common Stock (the “Annual Award”), in an amount determined in accordance with the formula set forth below, on anannual basis, each time he or she is elected to the Board (or, if Directors are elected to serve terms longer than one year, as of the date of eachAnnual Meeting of Shareholders during that term). The number of shares of Restricted Stock awarded shall be equivalent to the result ofthe dollar amount of the Award, divided by the Fair Market Value of a share of the Company’s Common Stock on the Award Date, roundedto the nearest 100 shares. The number of Stock Options to purchase the Company’s Common Stock awarded shall be equivalent to theresult of the dollar amount of the Award, divided by the fair value of a Stock Option as determined using an option pricing model such asthe Black-Scholes option pricing model on the Award Date using an exercise price equal to the Fair Market Value of a share of theCompany’s Common Stock on the Award Date and a maximum term of 10 years, rounded to the nearest 100 stock options.Notwithstanding the foregoing, the Annual 3 Award made to any Non-Employee Director elected or appointed to the Board at any time other than at the Annual Meeting of Shareholdersshall be made on the date of such election or appointment, and shall be equivalent to the product of such result (before rounding) multipliedby a fraction whose numerator is the number of days between the date of election or appointment to the Board and the next Annual Meetingof Shareholders, and whose denominator is 365, which product shall be rounded to the nearest 100 shares or stock options, as applicable. 6.4 Limitations. If any Annual Award granted under this Plan would cause the number of shares of Restricted Stock issued pursuant to thisPlan or shares subject to Stock Options under the Stock Option Plan to exceed the maximum aggregate number permitted hereunder, asprovided in Section 3 above, then each such automatic Award shall be for that number of shares of Restricted Stock or subject to StockOptions determined by dividing the total number of shares remaining available for issuance under this Plan by the number of Non-Employee Directors eligible for grant of an Annual Award on the Award Date. Thereafter, no further Awards shall be made until such time,if any, as additional shares of Restricted Stock or shares subject to Stock Options become available under this Plan through action of theshareholders to increase the number of shares subject to Awards that may be issued under this Plan, through forfeiture of shares previouslyawarded hereunder or under the Stock Option Plan. 7. VESTING AND FORFEITURE. 7.1 Vesting. Shares of Restricted Stock and Stock Options awarded pursuant to an Annual Award shall vest in full on the day prior to thedate of the regular Annual Meeting of Shareholders next following such Annual Award (the “Vesting Date”), if the Non-Employee Directorhas attended at least 75% of the regularly scheduled meetings of the Board, in person or by telephone, during that period. If a Non-Employee Director does not attend at least 75% of the regularly scheduled meetings of the Board between the Award Date and Vesting Date,the shares of Restricted Stock or Stock Options awarded pursuant to that Annual Award shall be forfeited without having vested. Failure ofa Non-Employee Director to achieve and maintain the stock holding requirement, if any, as set by the Board of Directors will result in thecessation of vesting of all unvested shares of Restricted Stock and Stock Options until such time that the ownership requirement issatisfied. Notwithstanding, a Non-Employee Director who fails to comply with the stock holding requirement shall be granted a cure periodof sixty (60) days within which to resume compliance. 7.2 Termination of Status as a Director. If a Director ceases to be a Non-Employee Director for any reason other than death or disabilitybefore his or her last Annual Award vests, the shares of Restricted Stock or Stock Options awarded pursuant to that last Annual Awardshall be forfeited. 7.3 Disability of Director. Notwithstanding Section 7.1 or Section 7.2 above, if a Non-Employee Director is unable to continue his or herservice as a Director as a result of his or her permanent and total disability (as defined in Section 22(e)(3) of the Code), unvested shares ofRestricted Stock or Stock Options awarded pursuant to an Annual Award to such Non-Employee Director shall become immediately vested. 7.4 Death of Director. In the event of the death of a Non-Employee Director, unvested shares of Restricted Stock or Stock Options awardedto such Non-Employee Director shall become vested as of the date of death. Non-Employee Directors may designate a beneficiary to whomshares of Restricted Stock or Stock Options under this Plan may be delivered on his or her death, subject to such forms, requirements andprocedures as the Plan Administrator may establish. 7.5 Effect of Merger, Sale of Assets, Liquidation or Dissolution. In the event of a merger, consolidation or plan of exchange to which theCompany is a party and in which the Company is not the survivor, or a sale of all or substantially all of the Company’s assets, or aliquidation or dissolution of the Company, any unvested shares of Restricted or Stock Options shall vest automatically upon the closing ofsuch transaction or event. 7.6 Certificates. As soon as practicable after each Award Date, the Company shall instruct its stock transfer agent to issue and deliver to thePlan Administrator one or more certificates in the name of each recipient of an Annual Award representing shares of Restricted Stockawarded pursuant thereto on that Award Date, if applicable. Each recipient of an Annual Award comprised of Restricted Stock shalldeposit with the Plan Administrator or its designee blank stock powers, duly executed and otherwise in form satisfactory to the PlanAdministrator, for such Non-Employee Director’s certificate(s). Alternatively, the Plan Administrator may hold all shares of RestrictedStock by means of book-entry registration. The Plan Administrator shall hold any certificates representing unvested shares of RestrictedStock and the stock powers related thereto until the shares of Restricted Stock have been vested in accordance with this Section 7. Anycertificates representing shares of Restricted Stock that fail to vest shall be returned to the Company’s stock transfer agent for cancellation,and the affected recipient of the Award shall execute any documents reasonably necessary to facilitate the cancellation. Any certificatesrepresenting vested 4 shares of Restricted Stock shall be delivered to the relevant Non-Employee Director as soon as practicable after the shares vest. Anycertificates representing shares of Restricted Stock held by the Plan Administrator for a Non-Employee Director who has died shall bedelivered as soon as practicable to the decedent’s beneficiary previously designated to the Plan Administrator in writing by such Non-Employee Director, or if no such designation exists, to his or her estate. 7.7 Status Before Vesting. (a) Each recipient of an Annual Award comprised of Restricted Stock shall be a shareholder of record with respect to all shares ofRestricted Stock awarded, whether or not vested, and shall be entitled to all of the rights of such a holder, except that the sharecertificates for Annual Awards comprised of Restricted Stock shall be held by the Plan Administrator until delivered in accordancewith Section 7.6. (b) Any dividend checks or communications to shareholders received by the Plan Administrator with respect to a certificate held bythe Plan Administrator shall promptly be transmitted to the Non-Employee Director whose name is on the certificate. (c) No Non-Employee Director may transfer any interest in unvested shares of Restricted Stock or in any Stock Options to anyperson other than the Company. (d) Each recipient of an Annual Award comprised of Stock Options shall not be a shareholder of record with respect to the StockOptions awarded, whether or not vested, and shall not be entitled to any of the rights of such a holder until such Stock Optionsare exercised and shares of the Company’s Common Stock are issued pursuant thereto. 8. EFFECT OF MERGER, CONSOLIDATION, REORGANIZATION, ETC.. In the event of any merger, consolidation, reorganization,recapitalization, stock dividend, stock split or other change in the corporate structure or capitalization affecting the Company’s present CommonStock, at the time of such event the Board or the Plan Administrator shall make appropriate adjustments to the number (including the aggregatenumber specified in Section 3) and kind of shares to be issued under this Plan. 9. SECURITIES REGULATIONS. 9.1 Compliance With Applicable Law. Shares of Restricted Stock or Stock Options shall not be issued under this Plan unless theissuance and delivery of such shares pursuant hereto shall comply with all relevant provisions of law, including, without limitation, anyapplicable state securities laws, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgatedthereunder, applicable laws of foreign countries and other jurisdictions and the requirements of any quotation service or stock exchange onwhich the Company’s Common Stock may then be listed, and shall be further subject to the approval of counsel for the Company withrespect to such compliance, including the availability of an exemption from registration for the issuance and sale of any shares of RestrictedStock hereunder or shares of Common Stock issued pursuant to the exercise of Stock Options under the Stock Option Plan. The inabilityof the Company to obtain, from any regulatory body having jurisdiction, the authority deemed by the Company’s counsel to be necessaryfor the lawful issuance and sale of any such shares or the unavailability of an exemption from registration for the issuance and sale of anysuch shares shall relieve the Company of any liability with respect to the non-issuance or sale of such shares as to which such requisiteauthority shall not have been obtained. 9.2 Investment Representations. In connection with the issuance of shares of Restricted Stock under the Plan or pursuant to the exercise ofStock Options under the Stock Option Plan, the Company may require recipients to represent and warrant at the time of issuance that suchshares are being acquired only for investment and without any present intention to sell or distribute such shares if, in the opinion of counselfor the Company, such a representation is required by any relevant provision of the aforementioned laws. The Company may place a stop-transfer order against any such shares on the official stock books and records of the Company, and a legend may be stamped on stockcertificates to the effect that the shares may not be pledged, sold or otherwise transferred unless an opinion of counsel is provided(concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation. The Companyalso may require such other action or agreement by award recipients as may from time to time be necessary to comply with federal and statesecurities laws. NO PROVISION OF THIS PLAN SHALL OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OFSHARES OF RESTRICTED STOCK ISSUED PURSUANT TO THIS PLAN OR SHARES ISSUED PURSUANT TO THEEXERCISE OF STOCK OPTIONS UNDER THE STOCK OPTION PLAN. 5 10. AMENDMENT AND TERMINATION. 10.1 Plan. Subject to applicable limitations set forth in Nasdaq rules, the Code or Rule 16b-3, the Board may at any time suspend, amend orterminate this Plan; provided, however, that the approval of the Company’s shareholders is necessary within twelve (12) months before orafter the adoption by the Board of Directors of any amendment that will: (a) increase the number of shares of Common Stock that are to be reserved for issuance pursuant to Awards under the Plan; (b) permit awards to a class of persons other than those now permitted to receive Awards under the Plan; or (c) require shareholder approval under applicable law, including Section 16(b) of the Exchange Act. 10.2 Limitations. Notwithstanding the foregoing, the provisions set forth in Section 2, Section 5 and Section 6 of this Plan (and anyadditional Sections of the Plan that affect terms required to be specified in the Plan by Rule 16b-3) shall not be amended more than onceevery six (6) months, other than to comport with changes in the Code, the Employee Retirement Income Security Act, or therules thereunder. 10.3 Automatic Termination. Unless sooner terminated by the Board, this Plan shall terminate ten (10) years from the date on which thisPlan is first adopted by the Board. No Award may be made after such termination or during any suspension of the Plan. The amendmentor termination of the Plan shall not, without the consent of any Non-Employee Director who then has unvested shares of Restricted Stock orunvested Stock Options, alter or impair any rights or obligations with respect to such shares theretofore granted under this Plan or issuedunder the Stock Option Plan. 11. MISCELLANEOUS. 11.1 Status as a Director. Nothing in this Plan or in any Award granted pursuant to this Plan shall confer on any person any right tocontinue as a Director of the Company or to interfere in any way with the right of the Company to terminate his or her relationship with theCompany at any time. In addition, nothing in this Plan shall create an obligation on the part of the Board to nominate any Non-EmployeeDirector for re-election by the shareholders. 11.2 Reservation of Shares. The Company shall, during the term of the Plan, reserve and keep available such number of shares subject toAwards as shall be sufficient to satisfy the requirements of this Plan. Shares subject to awards under this Plan may either be authorizedbut unissued shares or previously issued shares that have been reacquired by the Company. 11.3 Plan Expenses. Any expenses of administering this Plan shall be borne by the Company. 11.4 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board of Directors, the membersof the Plan Administrator shall be indemnified by the Company against all costs and expenses reasonably incurred by them in connectionwith any action, suit or proceeding to which they or any of them may be a party by reason of any action taken or failure to act inconnection with the adoption, administration, amendment or termination of this Plan, and against all amounts paid by them in settlementthereof (provided such settlement is approved by independent legal counsel selected by the Company), or paid by them in satisfaction of ajudgment in any such action, suit or proceeding, except a judgment based upon a finding of bad faith; provided, that upon the institutionof any such action, suit or proceeding, a member of the Plan Administrator shall, in writing, give the Company notice thereof and anopportunity, at its own expense, to handle and defend the same before such Plan Administrator member undertakes to handle and defend iton such member’s own behalf. 11.5 Withholding Taxes. The Company may, at its discretion, require a Non-Employee Director to pay to the Company at the time of anAnnual Award under the Plan, the amount that the Company deems necessary to satisfy its obligation to withhold Federal, state or localincome, FICA or other taxes incurred by the reason of such issuance. Upon or prior to the receipt of shares requiring tax withholding, aNon-Employee Director may make a written election to have shares withheld by the Company from the shares otherwise to be received. Thenumber of shares so withheld shall have an aggregate Fair Market Value on the date of issuance sufficient to satisfy the applicablewithholding taxes. The acceptance of any such election by a Non-Employee Director shall be at the sole discretion of the PlanAdministrator. 6 11.6 Governing Law. This Plan and all determinations made and actions taken pursuant hereto shall be governed by the law of the State ofDelaware and construed accordingly. 11.7 No Assignment. The rights and benefits under this Plan may not be assigned except for the designation of a beneficiary as provided inSection 7.4. 11.8 Award Agreements. The Plan Administrator is authorized to establish forms of agreement between the Company and each Non-Employee Director to evidence Awards under this Plan, and to require execution of such agreements as a condition to receipt of an Award. 12. TERM OF THE PLAN. This Plan shall remain in effect until the earlier of: (i) the date that no additional shares are available for issuance underthe Plan; (ii) the date that the Plan has been terminated in accordance with Section 10; or (iii) the close of business on May 25, 2015. Upon thetermination or expiration of this Plan as provided in this Section 12, no Awards shall be granted pursuant to the Plan, but any Award theretoforegranted may extend beyond such termination or expiration. 13. COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT. It is the Company’s intent that this Plan comply in all respects withRule 16b-3. If any provision of this Plan is found not to be in compliance with such rule and regulations, the provisions shall be deemed null andvoid, and the remaining provisions of this Plan shall continue in full force and effect. All transactions under this Plan shall be executed inaccordance with the requirements of Section 16 of the Exchange Act and regulations promulgated thereunder. The Board may, in its sole discretion,modify the terms and conditions of this Plan in response to and consistent with any changes in applicable law, rule or regulation. * * * 7Exhibit 14.1 Code of Ethics for Chief Executive, Chief Financial Officer and Other Executive Officers The Company’s Board of Directors has adopted the following Code of Ethics for its Chief Executive Officer, Chief Financial Officer and other ExecutiveOfficers. (“the Executives”). To the best of their knowledge and ability, the Executives shall: 1. Act with honesty and integrity, including the ethical handling of actual or apparent conflicts of interest between personal and professionalrelationships; 2. Comply with applicable governmental laws, rules and regulations; 3. Promote the prompt internal reporting of violations of this Code of Ethics to the Audit Committee or Chairman of the Board of Directors; 4. Respect the confidentiality of information acquired in the course of employment; 5. Proactively promote ethical and honest behavior within US Ecology and its consolidated subsidiaries. 6. The CEO, CFO and other Senior Financial Officers are responsible for full, fair, accurate, timely and understandable financial disclosure in reportsand documents filed by the Company with the Securities and Exchange Commission and in other public communications made by the Company. TheCompany’s accounting records must be maintained in accordance with all applicable laws and standards, must be proper, supported and classified,and must not contain any false or misleading entries. Other Executives are responsible for reviewing financial disclosures in reports filed with theSecurities and Exchange Commission and reporting to the CFO if such disclosures are not accurate and complete. 7. The CEO, CFO and other Senior Financial Officers are responsible for the Company’s system of internal financial controls. The CEO or CFO shallpromptly bring to the attention of the Audit Committee of the Board of Directors and the other Executives shall bring to the attention of the CEO or CFOany information they may have concerning (a) significant deficiencies in the design or operation of internal controls which could adversely affect theCompany’s ability to record, process, summarize and report financial data, (b) any fraud, whether or not material, that involves management or otheremployees who have a significant role in the Company’s financial reporting, disclosures or internal controls, or (c) any false or misleading accountingentries or evidence of non-compliance with applicable accounting laws and standards. 8. The Executives may not compete with the Company. The Executives shall promptly bring to the attention of the Chairman of the Board and theChairman of the Audit Committee any information they may have concerning any actual or apparent conflicts of interest between personal andprofessional relationships, involving any management or other employees. 9. The Company is committed to complying with both the letter and the spirit of all applicable laws, rules and regulations. The Executives shallpromptly bring to the attention of the Chairman of the Board and the Chairman of the Audit Committee any information the Executives may haveconcerning evidence of a material violation of the securities or other laws, rules or regulations applicable to the Company or its employees or agents. 10. The Executives shall promptly bring to the attention of the Chairman of the Board and the Chairman of the Audit Committee any information theExecutives may have concerning any violation of this Code of Ethics. The Board of Directors may determine, or designate appropriate persons todetermine, appropriate additional disciplinary or other actions to be taken in the event of violations of this Code of Ethics by the Executives. Agreed and Acknowledged Date Exhibit 14.2 Code of Ethics for Directors I. OVERVIEW This Director Code of Ethics sets forth the guiding principles by which Directors of US Ecology, Inc. (“US Ecology” or the “Company”) operate and conductthemselves on behalf of and relative to the Company. These principles apply to all of the Company’s Directors. II. PRINCIPLES Complying with Laws, Regulations, Policies and Procedures All Directors of US Ecology are expected to understand, respect and fully comply with all of the laws, regulations, policies and procedures that apply to themin their service as a Director. Conflicts of Interest All Directors of US Ecology should be scrupulous in avoiding any action or interest that conflicts or gives the appearance of a conflict with US Ecology’sinterests. A “conflict of interest” exists whenever an individual’s private interests, financial or otherwise, interfere or conflict in any way (or even appear tointerfere or conflict) with the interests of US Ecology. A conflict situation can arise when a Director takes actions or has interests that may make it difficult toperform his or her work for US Ecology objectively and effectively. Conflicts of interest may also arise when a Director or a member of his or her familyreceives improper personal benefits as a result of his or her position with US Ecology, whether from a third party or from US Ecology. Conflicts of interest areprohibited as a matter of US Ecology policy. Conflicts of interest may not always be clear-cut, so if a question arises, Directors are expected to consult with theCompany’s Chief Executive Officer (“CEO”), who may then consult with the appropriate outside legal counsel. Any Director who becomes aware of an actualconflict or a significant potential for conflict to exist should bring the matter to the attention of the Company’s CEO as soon as practical. Corporate Opportunity Directors are prohibited from (a) taking for themselves personally opportunities that properly belong to US Ecology or are discovered through the use ofcorporate property, information or position; (b) using corporate property, information or position for personal gain; and (c) competing with the Company.Directors owe a duty to US Ecology to advance the Company’s legitimate interests when the opportunity to do so arises. Confidentiality Directors must maintain the confidentiality of all confidential information entrusted to them by US Ecology, except when disclosure is specifically authorizedby the CEO, Chief Financial Officer (“CFO”) or required by laws, regulations or legal proceedings. Confidential information includes all material non-publicinformation that might be of use to customers, competitors, vendors, investors, analysts, bankers, or potential investors of US Ecology or harmful to USEcology or its customers or employees if disclosed. Fair Dealing US Ecology seeks to outperform its competition fairly and honestly. The Company seeks competitive advantages through superior performance, never throughunethical or illegal business practices. Stealing proprietary information, possessing or utilizing trade secret information that was obtained without the owner’sconsent or inducing such disclosures by past or present employees of other companies is prohibited. Each Director is expected to deal fairly with US Ecology’scustomers, suppliers, competitors, officers and employees. Protection and Proper Use of US Ecology Assets All Directors should protect US Ecology’s assets and ensure their efficient use to the extent that they can. All US Ecology assets should be used for legitimatebusiness purposes. Public Company Reporting As a public company, US Ecology’s filings with the Securities and Exchange Commission must be accurate and timely. Depending on their position on theBoard or its Committees, a Director may be called upon to provide information to assure that the Company’s public reports are complete, fair andunderstandable. The Company expects Directors will take this responsibility very seriously and to provide prompt, accurate answers to inquiries related toUS Ecology’s public disclosure requirements. Records Records or minutes relating to Director meetings are maintained by the Corporate Secretary or by any Director named Secretary in any meeting in which theCorporate Secretary is not in attendance. All official Director meetings must have minutes to be recognized as having occurred. In the event of litigation orgovernmental investigation, Directors should consult with the Company’s CEO or CFO regarding additional record retention obligations. III. REPORTING ILLEGAL OR UNETHICAL BEHAVIOR Reporting Illegal or Unethical Behavior Directors who suspect or know of violations of this Code or any illegal or unethical business conduct by employees, officers or Directors have an obligation tocontact the Chairman of the Audit Committee and the Company’s CEO or CFO. Accounting Complaints If any Director has unresolved concerns or complaints regarding accounting or auditing matters of the Company, then he or she is encouraged to submit thoseconcerns or complaints (anonymously, confidentially or otherwise) to the Chairman of the Audit Committee. Subject to its legal duties, the Audit Committeewill treat such submissions confidentially. Non-Retaliation US Ecology prohibits retaliation of any kind against individuals who have made good faith reports or complaints of violations of this Code, the Company’sStandards of Business Conduct, or other known or suspected illegal or unethical conduct. IV. AMENDMENT, MODIFICATION AND WAIVER This Code may be amended or modified by the Board of Directors of US Ecology. Waivers of this Code may only be granted on the recommendation of theAudit Committee of the Board of Directors. Waivers will be disclosed to shareholders as required by the Securities Exchange Act of 1934 and therules thereunder and the applicable rules of the NASDAQ Stock Exchange. Agreed and Acknowledged Date QuickLinks -- Click here to rapidly navigate through this documentExhibit 21 List of SubsidiariesSubsidiary Name State of FormationAmerican Ecology Environmental Services Corporation Texas CorporationAmerican Ecology Recycle Center, Inc. Delaware CorporationStablex Canada Inc. Canadian Federal CorporationUS Ecology Michigan, Inc. Michigan CorporationUS Ecology Field Services, Inc. Delaware CorporationUS Ecology Idaho, Inc. Delaware CorporationUS Ecology Illinois, Inc. California CorporationUS Ecology Nevada, Inc. Delaware CorporationUS Ecology Stablex Holdings, Inc. Delaware CorporationUS Ecology Texas, Inc. Delaware CorporationUS Ecology Washington, Inc. Delaware CorporationQuickLinksExhibit 21QuickLinks -- Click here to rapidly navigate through this documentExhibit 23.1 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statement Nos. 333-157529, 333-68868, 333-93105, 333-140419, and 333-69863 onForm S-8 of our report dated March 1, 2013, relating to the consolidated financial statements and the effectiveness of US Ecology Inc.'s internal controlover financial reporting, which report expresses an unqualified opinion and includes an emphasis of a matter paragraph relating to a change in method ofpresenting comprehensive income in 2012, appearing in the Annual Report on Form 10-K of US Ecology Inc. for the year ended December 31, 2012./s/ DELOITTE & TOUCHE LLPMarch 1, 2013QuickLinksExhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMQuickLinks -- Click here to rapidly navigate through this documentExhibit 31.1 I, Jeffrey R. Feeler, certify that:1.I have reviewed this annual report on Form 10-K 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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made knownto 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably 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 financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.March 1, 2013/s/ JEFFREY R. FEELERPresident and Chief Operating Officer QuickLinksExhibit 31.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 31.2 I, Eric L. Gerratt, certify that:1.I have reviewed this annual report on Form 10-K 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 tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects 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 (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 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 oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made knownto 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 designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial 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 conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably 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 financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.March 1, 2013/s/ ERIC L. GERRATTVice President, Chief Financial Officer,Treasurer and Chief Accounting Officer QuickLinksExhibit 31.2QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.1 Written Statement of the PresidentPursuant to 18 U.S.C. §1350Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned President of US Ecology, Inc., (the "Company"), hereby certify, that tomy knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2012 (the "Report") fully complies with therequirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in allmaterial respects, the financial condition and results of operations of the Company as of the dates hereof and for the periods expressed in this Report./s/ JEFFREY R. FEELERPresident and Chief Operating Officer March 1, 2013 QuickLinksExhibit 32.1QuickLinks -- Click here to rapidly navigate through this documentExhibit 32.2 Written Statement of the Chief Financial OfficerPursuant to 18 U.S.C. §1350Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Financial Officer of US Ecology, Inc., (the "Company"), herebycertify, that to my knowledge, the Annual Report on Form 10-K of the Company for the period ended December 31, 2012 (the "Report") fully complieswith the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, inall material respects, the financial condition and results of operations of the Company as of the dates hereof and for the periods expressed in this Report./s/ ERIC L. GERRATTVice President, Chief Financial Officer, Treasurer andChief Accounting Officer March 1, 2013 QuickLinksExhibit 32.2

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