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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐ TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 001-39120
US ECOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
84-2421185
(I.R.S. Employer
Identification No.)
101 S. Capitol Blvd., Suite 1000
Boise, Idaho
(Address of principal executive offices)
83702
(Zip Code)
Registrant’s telephone number, including area code: (208) 331-8400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
ECOL
Nasdaq Global Select Market
Warrants to Purchase Common Stock
ECOLW
Nasdaq Capital Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ⌧ 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 ◻ 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 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large
accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ⌧
Accelerated Filer ◻
Non-Accelerated Filer ◻
Smaller Reporting Company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the
Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ⌧
The aggregate market value of the registrant’s voting stock held by non-affiliates on June 30, 2021 was approximately $1.17 billion based on the closing price of $37.52 per share as reported on the Nasdaq Global
Select Market System.
At February 22, 2022, there were 31,512,324 shares of the registrant’s Common Stock outstanding.
Documents Incorporated by Reference
Listed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10-K into which such portions are incorporated:
1.
The registrant’s definitive proxy statement for use in connection with the Annual Meeting of Stockholders to be held on or about May 23, 2022 to be filed within 120 days after the registrant’s fiscal year ended December 31,
2021, portions of which are incorporated by reference into Part III of this Form 10-K.
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US ECOLOGY, INC.
FORM 10-K
TABLE OF CONTENTS
Item
Page
PART I
Cautionary Statement
3
1.
Business
4
1A.
Risk Factors
22
1B.
Unresolved Staff Comments
42
2.
Properties
43
3.
Legal Proceedings
45
4.
Mine Safety Disclosures
45
PART II
5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
46
6.
Reserved
48
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
48
7A.
Quantitative and Qualitative Disclosures About Market Risk
71
8.
Financial Statements and Supplementary Data
73
9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
124
9A.
Controls and Procedures
124
9B.
Other Information
125
PART III
10.
Directors, Executive Officers and Corporate Governance
126
11.
Executive Compensation
126
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
126
13.
Certain Relationships and Related Transactions, and Director Independence
127
14.
Principal Accounting Fees and Services
127
PART IV
15.
Exhibits, Financial Statement Schedules
127
16.
Form 10-K Summary
127
SIGNATURES
132
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PART I
Cautionary Statement for Purposes of Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws.
Statements that are not historical facts, including statements about the beliefs and expectations of US Ecology, Inc. (the
“Company,” “US Ecology,” “we” or “us), are forward-looking statements. Forward-looking statements include statements
preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,”
“plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements
regarding our financial and operating results, strategic objectives and means to achieve those objectives, the amount and timing
of capital expenditures, repurchases of its stock under approved stock repurchase plans, the amount and timing of interest
expense, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of
liquidity.
Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on
management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions
include, among others, those regarding demand for the Company’s services, the impact on our business of the proposed merger
with Republic Services, Inc. and our ability to complete the proposed merger in a timely manner, expansion of service offerings
geographically or through new or expanded service lines, the timing and cost of planned capital expenditures, competitive
conditions, and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also
involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in
any forward-looking statement. Many of these factors are beyond our ability to control or predict. Such factors include
developments related to the COVID-19 pandemic, fluctuations in commodity markets related to our business, the loss or failure
to renew significant contracts, competition in our markets, adverse economic conditions, our compliance with applicable laws
and regulations, potential liability in connection with providing oil spill response services and waste disposal services, the effect
of existing or future laws and regulations related to greenhouse gases and climate change, the effect of our failure to comply with
U.S. or foreign anti-bribery laws, the effect of compliance with laws and regulations, an accident at one of our facilities,
incidents arising out of the handling of dangerous substances, our failure to maintain an acceptable safety record, our ability to
perform under required contracts, limitations on our available cash flow as a result of our indebtedness, liabilities arising from
our participation in multi-employer pension plans, the effect of changes in the method of determining the London Interbank
Offered Rate (“LIBOR”) or the replacement thereto, risks associated with our international operations, the impact of changes to
U.S. tariff and import and export regulations, a change in our classification as an Oil Spill Removal Organization, cyber security
threats, unanticipated changes in tax rules and regulations, loss of key personnel, a deterioration in our labor relations or labor
disputes, our reliance on contractors to provide emergency response services, our access to insurance, surety bonds and other
financial assurances, our litigation risk not covered by insurance, the replacement of non-recurring event projects, our ability to
permit and contract for timely construction of new or expanded disposal space, renewals of our operating permits or lease
agreements with regulatory bodies, our access to cost-effective transportation services, lawsuits, our implementation of new
technologies, fluctuations in foreign currency markets and foreign affairs, our integration of acquired businesses, our ability to
pay dividends or repurchase stock, anti-takeover regulations, stock market volatility, the failure of the warrants to be in the
money or their expiration worthless and risks related to our compliance with maritime regulations (including the Jones Act).
Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the
Securities and Exchange Commission (the “SEC”), we undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on our
forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable,
we cannot guarantee future results or performance. Before you invest in our common stock, you should be aware that the
occurrence of the events described in the “Risk Factors” section in this report could harm our business, prospects, operating
results and financial condition.
Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy
to disclose to them any material non-public information or other confidential commercial information. Accordingly,
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stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the
statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by
others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports
are not the responsibility of US Ecology, Inc.
ITEM 1. BUSINESS
General
The table below contains definitions that are used throughout this Annual Report on Form 10-K.
Term
Meaning
US Ecology, the Company, “we,” “our,” “us”
US Ecology, Inc., and its subsidiaries
AEA
Atomic Energy Act of 1954, as amended
CEPA
Canadian Environmental Protection Act (1999)
CERCLA or “Superfund”
Comprehensive Environmental Response, Compensation and
Liability Act of 1980
CWA
Clean Water Act of 1977
LARM
Low-activity radioactive material exempt from federal Atomic
Energy Act regulation for disposal
LLRW
Low-level radioactive waste regulated under the federal
Atomic Energy Act for disposal
NORM/NARM
Naturally occurring and accelerator produced radioactive
material
NPDES
National Pollutant Discharge Elimination System
OPA-90
The Oil Pollution Act of 1990
OSRO
Oil Spill Removal Organization
PCBs
Polychlorinated biphenyls
Predecessor US Ecology
US Ecology Holdings, Inc. (f/k/a US Ecology, Inc.), the
predecessor to US Ecology
QEQA
Québec Environmental Quality Act
RCRA
Resource Conservation and Recovery Act of 1976
Republic
Republic Services, Inc.
RRC
Railroad Commission of Texas
TSCA
Toxic Substances Control Act of 1976
TSDF
Treatment, Storage and Disposal Facility
USACE
U.S. Army Corps of Engineers
USCG
U.S. Coast Guard
USEPA
U.S. Environmental Protection Agency
USNRC
U.S. Nuclear Regulatory Commission
WUTC
Washington Utilities and Transportation Commission
US Ecology is a leading provider of environmental services to commercial and governmental entities. The Company addresses
the complex waste management and response needs of its customers, offering treatment, disposal and recycling of hazardous,
non-hazardous and radioactive waste, leading emergency response and standby services, and a wide range of complementary
field services. US Ecology’s focus on safety, environmental compliance and best-in-class customer service enables us to
effectively meet the needs of our customers and to build long-lasting relationships. US Ecology and its predecessor companies
have been in business for more than 65 years. As of December 31, 2021, we employed approximately 3,600 people.
Predecessor US Ecology was incorporated as a Delaware corporation in March 1987 as American Ecology Corporation. On
February 22, 2010, Predecessor US Ecology changed its name from American Ecology Corporation to US Ecology, Inc. On
November 1, 2019, in connection with the Company’s acquisition of NRC (the “NRC Merger”) pursuant to that certain
Agreement and Plan of Merger, dated June 23, 2019 (the “NRC Merger Agreement”), by and among the
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Company, NRC, Predecessor US Ecology, Rooster Merger Sub, Inc. and ECOL Merger Sub, Inc., a new parent entity of US
Ecology completed a merger transaction with Predecessor US Ecology, became the successor to Predecessor US Ecology and
changed its name to “US Ecology, Inc.” In connection with the closing of the NRC Merger, Predecessor US Ecology changed its
name to “US Ecology Holdings, Inc.,” and remains a wholly-owned subsidiary of US Ecology. Our filings with the SEC are
posted on our website at www.usecology.com or can be obtained by accessing the SEC’s website at www.sec.gov. The
information found on our website is not part of this or any other report we file with or furnish to the SEC.
We have a network of fixed facilities and service centers operating primarily in the United States, Canada, the United Kingdom
and Mexico. Our fixed facilities include five RCRA subtitle C hazardous waste landfills, three landfills serving waste streams
regulated by the RRC and one LLRW landfill. We also have various other TSDF facilities located throughout the United States.
These facilities generate revenue from fees charged to transport, recycle, treat and dispose of waste and to perform various field
services for our customers.
Effective in the fourth quarter of 2020, we made changes to the manner in which we manage our business, make operating
decisions and assess our performance. The energy waste business that was acquired through the NRC Merger now comprises our
Energy Waste segment. Prior to this change, the energy waste business was included in the Waste Solutions segment (formerly
“Environmental Services”). Throughout this Annual Report on Form 10-K, all periods presented have been recast to reflect these
changes. Under our new structure our operations are managed in three reportable segments reflecting our internal management
reporting structure and nature of services offered as follows:
Waste Solutions (formerly “Environmental Services”)—This segment provides safe and compliant specialty
waste management services including treatment, disposal, beneficial re-use, and recycling of hazardous, non-
hazardous, and other specialty waste at Company-owned treatment, storage, and disposal facilities, excluding
the services within our Energy Waste segment.
Field Services (formerly “Field & Industrial Services”)—This segment provides safe and compliant
logistics and response solutions focusing on “in-field’ service offerings through our network of 10-day transfer
facilities. Our logistics solutions include specialty waste packaging, collection, transportation, and total waste
management. Our response solutions include land and marine based emergency response, OSRO standby
compliance, remediation, and industrial services. The Field Services segment completes our vertically
integrated model and serves to increase waste volumes into our Waste Solutions segment.
Energy Waste—This segment provides safe and compliant energy waste management and critical support
services to up-stream oil and gas customers in the Permian and Eagle Ford basins primarily operating in Texas.
Services include spill containment and site remediation, equipment cleaning and maintenance services,
specialty equipment rental, including tanks, pumps and containment, safety monitoring and management and
transportation and disposal. This segment includes all of the energy waste business of the legacy NRC
operations and none of the legacy US Ecology operations.
Effective in the first quarter of 2021, we changed our management structure resulting in the reclassification of certain overhead
expenses from our Waste Solutions, Field Services and Energy Waste reportable segments to Corporate. As a result, certain
regional overhead costs historically presented within our reportable segments as Direct operating costs were further reclassified
to Corporate as Selling, general and administrative expenses to conform to the current period’s presentation. Throughout this
Annual Report on Form 10-K, all periods presented have been recast to reflect these changes.
Waste Solutions Segment
Our Waste Solutions involve the transportation, treatment, recycling and disposal of hazardous, non-hazardous and radioactive
wastes, and include physical treatment, recycling, landfill and deep-well injection disposal and wastewater treatment services.
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Waste Treatment & Disposal
We recycle, treat and dispose of hazardous and non-hazardous industrial wastes. The wastes handled include substances which
are classified as “hazardous” because of their corrosive, ignitable, reactive or toxic properties, and other wastes subject to federal,
state and provincial environmental regulation. The wastes we handle come in solid, liquid and sludge form and can be received in
a variety of containerized and bulk forms and transported to our facilities by truck and rail.
We operate five permitted hazardous waste treatment, storage and disposal facilities with landfills in Beatty, Nevada; Robstown,
Texas; Grand View, Idaho; Belleville, Michigan and Blainville, Québec, Canada. These facilities are used primarily for the
disposal of wastes treated at Company-owned onsite and offsite treatment facilities. The United States landfills are regulated
under RCRA by the respective states in which they are located and the USEPA. Our onsite treatment facilities specialize in the
treatment and disposal of RCRA, TSCA, PCB remediation and certain USNRC-exempt (NORM/NARM, Technologically
Enhanced NORM (TENORM)) radioactive waste. Our Canadian landfill is regulated by the Québec Ministry of Environment and
authorized under the QEQA to treat and stabilize inorganic hazardous liquid and solid waste and contaminated soils to produce a
non-leachable concrete-like material for disposal in the onsite landfill, specializing in processing hard to treat materials, such as
cyanides, mercury compounds, strong acids, non-organic oxidizers, lab packs, contaminated debris and batteries.
We operate a commercial LLRW landfill in Richland, Washington that is licensed by the Washington Department of Health
through delegated authority of the USNRC. The WUTC sets disposal rates for LLRW. Rates are set at an amount sufficient to
cover operating costs and provide us with a reasonable profit. The current rate agreement with the WUTC was extended in 2019
and is effective until December 31, 2025.
As of December 31, 2021, the capacity used in the calculation of the useful economic lives of our six Waste Solutions landfills
includes approximately 45.1 million cubic yards of remaining permitted airspace capacity and approximately 18.1 million cubic
yards of additional unpermitted airspace capacity included in the footprints of these landfills. We believe it is probable that this
unpermitted airspace capacity will be permitted in the future based on our analysis of site conditions, past regulatory approvals on
adjacent property, and our interactions with regulators on applicable regulations, although there can be no assurance that any
additional unpermitted airspace capacity will be permitted in the future.
We also operate a caprock injection well in Winnie, Texas with full Class 1 and 2 non-hazardous industrial waste disposal
capabilities. Utilizing proprietary low-pressure injection technology, the deep-well asset provides the unique ability to efficiently
dispose of difficult to treat non-hazardous industrial waste streams, including high metals, high ammonia, high solids, flammable
exempt, and leachate. Based on an independent determination of the injection capacity of the caprock formation in which we
inject waste and our own estimates of projected injection volumes, we believe the remaining disposal capacity of the formation
will be sufficient to meet our disposal needs for the foreseeable future.
We operate seven wastewater treatment facilities located in Detroit, Michigan; Canton, Ohio; Harvey, Illinois; York,
Pennsylvania; Tulsa, Oklahoma and Vernon, California that offer a range of wastewater treatment technologies. These facilities
also have RCRA-permitted storage capabilities where waste may be stored prior to treatment onsite or transfer to another RCRA
facility for treatment and disposal. We also operate a hazardous and non-hazardous industrial waste treatment, storage, and
disposal facility in Tilbury, Ontario, Canada. The facility is permitted by the Ontario Ministry of Environment and specializes in
the treatment of non- hazardous hydrocarbon contaminated solids to industrial re-use standards.
We break our Waste Solutions segment treatment and disposal (“T&D”) revenue into two categories, based on the underlying
nature of the revenue source: “Base Business” and “Event Business.”
Base Business consists of waste streams from ongoing industrial activities and tends to be reoccurring in nature. Our strategy is to
expand our Base Business while securing both short-term and extended-duration Event Business. We define Event Business as
non-recurring projects that are expected to equal or exceed 1,000 tons, with Base Business defined as all other business not
meeting the definition of Event Business. The duration of Event Business projects can last from a several-week cleanup of a
contaminated site to a multiple year cleanup project.
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Base Business represented approximately 76% and 73% of disposal revenue (excluding transportation) for the years ended
December 31, 2021 and 2020, respectively. Event Business contributed approximately 24% and 27% of disposal revenue
(excluding transportation) for the years ended December 31, 2021 and 2020, respectively.
When Base Business covers our fixed overhead costs, a significant portion of disposal revenue generated from Event Business is
generally realized as operating income and net income. This strategy takes advantage of the operating leverage inherent to the
largely fixed-cost nature of the waste disposal business. Contribution margin is influenced by whether the waste is directly
disposed (“direct disposal”) or requires the application of chemical reagents, absorbents or other additives (variable costs) to treat
the waste prior to disposal.
A significant portion of our T&D revenue is attributable to discrete Event Business projects which vary widely in size, duration
and unit pricing. For the year ended December 31, 2021, approximately 24% of our T&D revenue was derived from Event
Business projects. The one-time nature of Event Business, diverse spectrum of waste types received and widely varying unit
pricing necessarily creates variability in revenue and earnings. This variability may be influenced by general and industry-
specific economic conditions, funding availability, changes in laws and regulations, government enforcement actions or court
orders, public controversy, litigation, weather, commercial real estate, closed military bases and other project timing, government
appropriation and funding cycles and other factors. The types and amounts of Base Business waste received also vary quarter to
quarter, sometimes significantly, but are generally more predictable than Event Business.
The types of waste received, also referred to as “service mix,” can produce significant quarter-to-quarter and year-to-year
variations in revenue, average selling price, gross profit, gross margin, operating profit and net income for both Base Business
and Event Business.
Recycling Services
We operate recycling technologies designed to reclaim valuable commodities from hazardous waste, including oil-bearing waste,
metal-bearing waste, batteries, electronics, airport deicing fluid and other solvent-based wastes for industrial clients. The
recycling and reclamation process involves the treatment of wastes using various recovery methods to effectively remove
contaminants from the original material to restore its usefulness and to reduce the volume of waste requiring disposal.
We offer full-service storm water management and propylene glycol recovery at major airports. Recovered fluids are transported
to our RCRA Part B and CWT permitted chemical recycling facility where they are recycled into a greater than 99% pure
material that is sold to industrial users.
We also operate a thermal desorption unit at our Robstown, Texas facility that recovers oil and metal bearing catalyst from
refinery and other organic and oil-based waste. The recycled oil and recycled catalyst are sold to third parties.
Transportation
For waste transported by rail from locations distant from our facilities, transportation-related revenue can vary significantly and
can account for as significant portion of total project revenue. While bundling transportation and disposal services may reduce
overall gross profit as a percentage of total revenue (“gross margin”), this value-added service has allowed us to win multiple
projects that we believe we could not have otherwise competed for successfully. Our Company-owned fleet of gondola railcars,
which is periodically supplemented with railcars obtained under operating leases, has reduced our transportation expenses by
largely eliminating reliance on more costly short-term rentals. These Company-owned railcars also help us to win business during
times of demand-driven railcar scarcity. We also utilize a variety of specially designed and constructed Company-owned tanker
trucks and trailers as well as various third-party transporters to support this activity. Further, to maximize utilization of our railcar
fleet, we periodically deploy available railcars to transport waste from cleanup sites to disposal facilities operated by other
companies. Such transportation services may also be bundled with logistics and field services support work.
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Field Services Segment
Our Field Services include a wide range of specialty and total waste management services provided to refineries, chemical plants,
steel and automotive plants, and other government, commercial and industrial facilities either on-site or at our network of
facilities located throughout the United States. Specialty services include industrial cleaning and maintenance, retail services,
remediation, lab pack, transportation and emergency response. Our specialty and total waste management services are organized
into service lines including Emergency Response, Standby Services, Small Quantity Generation, Remediation Services, Total
Waste Management, Transfer and Processing, and Industrial Services.
Emergency Response
Our primary emergency response offerings include spill response, waste analysis and treatment and disposal planning. We also
offer remediation, product transfers, spill contingency planning and yearly service agreements with first responder status.
Trained, experienced professionals operate the Global Response Operations Center to coordinate the Company’s emergency
response services 24 hours per day, seven days per week. The Company may self-perform or utilize its independent contractor
network to provide emergency response services.
Standby Services
We provide government-mandated, commercial standby oil spill compliance solutions to companies that store, transport, produce
or handle petroleum and certain nonpetroleum oils on or near U.S. waters. Our standby services customers pay annual retainer
fees under long-term or evergreen contracts for access to our regulatory certifications, specialized assets and highly trained
personnel, who are on call 24 hours per day, seven days per week to respond to marine-based oil spill and hazardous materials
emergencies.
Small Quantity Generation
Our small quantity generation service offerings consist of retail services, laboratory packing, less than truckload (“LTL”), and
household hazardous waste (“HHW”) collection. Retail services, laboratory packing, LTL and HHW are full-service waste
characterization, packaging, collection and transportation programs. Services are provided to small, medium and large industrial
and commercial customers. These programs are built on our network of service centers, employ highly trained staff and provide a
high level of service to the customer. As an integral part of our services, we operate a network of service centers that characterize,
package and collect hazardous and non-hazardous wastes from customers and transport such wastes to and between our facilities
for treatment or bulking for shipment to final disposal locations. Customers typically accumulate wastes in containers, such as 55
gallon drums, bulk storage tanks or 20 cubic yard roll-off containers. We utilize a variety of specially designed and constructed
tank trucks and semi-trailers as well as third-party transporters, including railroads. Depending on customer needs and
competitive economics, transportation services may be offered at or near our cost to help secure new business.
Remediation Services
Our remediation service offerings include project management, RCRA and TSCA closures, excavations, wastewater
management, building decontamination, demolition, landfill capping and site reclamation.
Total Waste Management (“TWM”)
Through our TWM programs, customers outsource a portion of their sustainability programs to us, allowing us to perform,
organize and coordinate their field services activities, waste services needs and environmental compliance.
Transfer and Processing
Our transfer and processing stations stage and consolidate non-bulk loads of hazardous, non-hazardous and universal waste into
full loads for more efficient shipment to Company-owned or third-party treatment and disposal facilities. This allows
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us to offer a broader geographic presence without having a dedicated, Company-owned treatment or disposal facility in the
region.
Industrial Services
Our primary industrial service offerings include industrial cleaning and maintenance for refineries, chemical plants, steel and
automotive plants, as well as tank cleaning and temporary storage.
Energy Waste Segment
We own and operate three landfills located in Karnes County, Texas; Pecos County, Texas and Reagan County, Texas that
specialize in the disposal of drill cuttings, drilling muds and other oil field related waste streams regulated by the RRC. In
addition, we own property in Andrews County, Texas, that is permitted for development as a waste disposal site for similar waste
streams. These facilities are supported by a network of related oil field services capabilities including transportation, equipment
rental, emergency response and other oil field services work.
As of December 31, 2021, the capacity used in the calculation of the useful economic lives of our three Energy Waste landfills
includes approximately 27.2 million cubic yards of remaining permitted airspace capacity.
We also operate five additional domestic biosolid wastewater treatment facilities in Texas. These domestic wastewater treatment
operations involve processing domestic wastewater through the use of physical, biological and chemical treatment methods. Our
domestic wastewater treatment facilities treat a broad range of domestic wastewaters. Following treatment, the clean water is
discharged under a NPDES permit while residual solids are transported to an offsite landfill.
Services include spill containment and site remediation, equipment cleaning & maintenance services, specialty equipment rental,
including tanks, pumps and containment, safety monitoring and management and transportation and disposal.
Waste Services Industry
During the 1970s and 1980s, waste services industry growth in the United States was driven by new environmental laws and
actions by federal and state agencies to regulate existing hazardous waste management facilities and direct the cleanup 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, in order to better manage risk and reduce expenses, many waste generators
instituted industrial process changes and other methods to reduce waste production. These factors led to highly competitive
market conditions that still apply today.
In the United States, hazardous waste is regulated under the RCRA, which created a cradle-to-grave system governing defined
hazardous waste from the point of generation to ultimate disposal. RCRA requires waste generators to distinguish between
“hazardous” and “non-hazardous” wastes, and to treat, store and dispose of hazardous waste in accordance with specific
regulations. Generally, entities that treat, store, or dispose of hazardous waste must obtain a permit, either from the USEPA or
from a state agency to which the USEPA has delegated such authority. Similar regulations and management methods apply to
hazardous waste generation in Canada, which is regulated by the Canada Ministry of Environment and delegated to provincial
agencies.
Disposal facilities are typically designed to permanently contain the waste and prevent the release of harmful pollutants into the
environment. The most common hazardous waste disposal practice is placement in an engineered disposal unit such as a landfill,
surface impoundment or deep-well injection. RCRA’s hazardous waste permitting program establishes specific requirements that
must be followed when managing those wastes.
In the United States, waste intrinsically derived from primary field operations associated with the exploration, development, or
production of crude oil and natural gas are exempt from regulation under RCRA Subtitle C. The RCRA Subtitle C exemption,
however, does not preclude these wastes from control under state regulations, under the less stringent RCRA Subtitle D solid
waste regulations, or under other federal regulations. Our landfills that support this industry are regulated by the RRC. Similar to
RCRA-regulated landfills, our RRC-regulated landfills are engineered using state of the
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art design and constructed to permanently contain the waste and prevent the release of harmful pollutants into the environment.
OPA-90, a regulatory framework for the protection of the environment from oil spills following the 1989 Exxon Valdez spill,
also imposes obligations on operators and owners of facilities, such as refineries, pipelines and E&P platforms and requires them
to have a USCG compliant spill response plan.
We believe that a baseline demand for hazardous and non-hazardous waste services will continue into the future with fluctuations
driven by general and industry-specific economic conditions, identification and prioritization of new cleanup needs, cleanup
project schedules, funding availability, regulatory changes and other public policy decisions. We will also continue to advance
plans and business lines that promote sustainable recycling technologies and expect the recycling portion of our business to
displace some of our base disposal services over time. We further believe that the ability to deliver specialized niche services
while aggressively competing for large volume cleanup projects and non-niche commodity business opportunities differentiates
successful from less successful companies. We seek to control variable costs, expand service lines, increase waste throughput
efficiency, employ innovative treatment techniques, provide complementary transportation and logistics services, build market
share and increase profitability.
Our Richland, Washington disposal facility, serving the Northwest and Rocky Mountain LLRW Compacts, is one of three
operating Compact disposal facilities in the United States. While our Washington disposal facility has substantial unused
capacity, it can only accept LLRW from the 11 western states comprising the two Compacts served. The Barnwell, South
Carolina site, operated by Energy Solutions, Inc. (“Energy Solutions”), exclusively serves the three-state Atlantic Compact. A
third LLRW disposal facility, licensed by Waste Control Specialists, LLC and located near Andrews, Texas serves the two-state
Texas Compact and approved out-of-compact waste generators. Class A LLRW from states outside the Northwest Compact
region may also be disposed at the commercial disposal site in Clive, Utah, also operated by Energy Solutions.
Increases in 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 to commercial demand, a substantial amount of LARM is generated by
government cleanup projects. The USNRC, USEPA and USACE have authorized the use of hazardous waste disposal facilities to
dispose of certain LARM, encouraging expansion of this compliant, cost-effective alternative. We have been successful at
expanding our permits at four of our RCRA hazardous waste facilities to allow acceptance of additional LARM wastes.
Industrial Services Industry
The industrial services industry is highly fragmented with thousands of small companies performing a variety of cleaning,
maintenance and other services to industrial based companies such as refineries, chemical plants and steel and automotive plants.
We believe customers increasingly desire to shift high fixed costs to lower variable costs by outsourcing waste management and
industrial services. Some companies, such as power generation plants, petroleum refineries and chemical processors, are required
to perform specialized “turnaround” maintenance only once or twice per year, making it impractical and cost-prohibitive to
purchase expensive, specialized equipment, comply with complex permits and employ full-time specialized technicians required
to perform those services. Similarly, the regulatory requirements of characterizing, manifesting, transporting and properly
disposing of waste has led many companies to outsource this function to specialists. Our network of service centers and
treatment, recycling and storage facilities provides a national footprint allowing us to serve these customers, while at the same
time internalizing the waste to our own facilities.
Industrial services generally have low barriers to entry and customers are frequently won based on quality of service, reputation,
health and safety record, logistics and price. This low barrier to entry has fostered a fragmented and competitive marketplace.
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Emergency Response and Standby Services Industry
We provide emergency spill response services and marine-based standby oil spill compliance (the “standby services”) in the
United States, Mexico, the United Kingdom and other international locations.
Our emergency spill response services are designed to address both large-scale and small-scale response events. Large-scale
response services typically result from natural disasters such as hurricanes, fires, floods and earthquakes as well as large
industrial accidents such as pipeline spills, industrial fires, rail car derailments and marine vessel accidents. These large
emergency response events are inherently difficult to predict, and when they occur can result in a significant revenue opportunity.
Our small-scale emergency response services address smaller recurring industrial and transportation accidents or discharges.
With the combination of our nationwide footprint, our vast service capabilities and specialized asset base, we believe the demand
for these emergency response services will increase in line with overall industrial activity. We respond to multiple small-scale
spill events per day, every day, across the United States.
Our standby services customers pay annual retainer fees under long-term or evergreen contracts for access to regulatory
certifications, specialized assets and highly trained personnel, who are on call 24 hours per day, seven days per week to respond
to an oil spill or other hazardous materials emergency response events.
OPA-90 mandates certain oil spill response coverage for companies that store, transport, produce or handle petroleum and certain
non-petroleum oils on or near U.S. ports, harbors and other waters.
Our standby services business is the only national commercial OSRO in the United States and the only commercial provider of
standby services that satisfies the requirements of both OPA-90 and other federal, state and municipal requirements. In addition,
we hold the highest oil spill contractor classification offered by the USCG. We maintain an installed base of specialized oil spill
response equipment and highly trained personnel around the United States to ensure rapid response capabilities. We provide
government-mandated standby compliance solutions to more than 2,000 customers that cover approximately 20,000 assets,
including tank and non-tank vessels, barges, petrochemical facilities, pipelines, refineries and other assets.
Additionally, our internal standby services business is augmented by our network of over 200 independent contractors throughout
the United States to ensure expedient response times in any location. These independent contractors provide both personnel and,
if required, equipment, to meet the immediate needs of our customers. Contractors must meet stringent requirements to become
part of our network. Our contractors are paid when an event occurs for work that is actually completed and, as such, do not
receive any of our annual standby retainer payments.
Our standby services business is a recurring, retainer-based business model that provides opportunity for incremental marine spill
response revenue. To the extent a standby services retainer customer has a spill incident, we coordinate and manage the spill
response by leveraging both internal resources and our independent contractor network. We generate incremental revenue with
respect to services provided through internal resources and independent contractors on all response events, in addition to the
annual retainer payments we collect each year.
Our standby services contribution margin is very high in light of the expansive infrastructure that is already in place. These
services are government-mandated for our customers and serve as a low-cost yet invaluable “insurance policy” in the event of an
incident. High barriers to entry, driven by the high cost of infrastructure necessary to achieve economies of scale, the high cost of
failure, and regulatory certification requirements, have resulted in minimal new market competitors since market inception.
Mexico represents a growth opportunity for us. The recently privatized Mexican oil and gas market has resulted in the Mexican
government actively auctioning off blocks for offshore exploration to leading global oil companies. Although OPA-90 only
applies to United States territories, the Mexican government and many leading global and U.S.-based companies seek OSRO-
type coverage similar to that required in the United States and other countries. Our primary standby services competitor is
currently unable to operate outside of U.S. waters, which leaves us well-positioned to be the provider of choice for these services
internationally. This advantage has helped us become a leading OSRO in Mexico.
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Strategy
Our strategy is to capitalize on our difficult-to-replicate combination of treatment, recycling and disposal assets and
complementary service lines to provide a full service offering to customers and increase market share in the diverse markets we
serve. We believe our focus on sustainability, workforce safety and protecting the environment, as well as our passionate
commitment to customer service, provides for a long-term sustainable business model. In addition to organic growth initiatives,
we may from time to time pursue acquisition opportunities to expand our geographic reach, service lines and customer base. The
principal elements of our business strategy are to:
Execute Best-in-Class Sustainability and Environmental Compliance Programs.
The cornerstone of our business is providing solutions that help us and our customers protect human health and the environment.
In doing so, we pursue best-in-class safety and environmental compliance at US Ecology. Our customers and regulators rely on
our expertise when they select us as a vendor or grant us permits and licenses. We deploy significant resources in terms of human
capital, information technology, programs and facility investments to achieve safe and compliant operations that protect the
environment and all stakeholders. The Company has dedicated professionals who oversee and manage safety and environmental
programs including, but not limited to, employee training, internal and independent external audits, incentive programs and the
Safety & Health Achievement Recognition Program. Various US Ecology facilities have obtained third-party verification of
Environmental Health and Safety programs through the Occupational Safety and Health Administration’s (“OSHA”) Voluntary
Protection Program (“VPP”) or ISO 45001 and ISO 14001 accreditation. Senior managers regularly review and discuss
environmental and safety results and performance with operational staff, management and the Company’s Board of Directors to
improve our safety results and focus on regulatory compliance. Sustainability targets are also an important component of our
company-wide incentive programs.
Leverage Regulatory Expertise to Expand Permit Capabilities and Broaden Cost-Effective Service Offerings. We have a proven
track record of leveraging more than six decades of regulatory experience to broaden our service offerings. Working with
customers, we assess market opportunities in relation to existing laws, regulations and permit conditions. Our engineering,
operational and regulatory affairs personnel then seek authority to implement innovative processes and technologies and accept
additional types of waste by modifying our existing permits or obtaining new permits.
Continue to Build on Our Robust Waste Handling Infrastructure to Increase Revenue from Existing Assets. We believe we have a
difficult to replicate set of treatment, recycling and disposal assets in the highly regulated hazardous, non-hazardous and
radioactive waste industry. We aim to enhance treatment capabilities at our existing facilities to handle additional waste streams
and increase throughput. We also continue to invest in equipment and infrastructure to ensure that we have ample throughput
capacity to expand our Event Business while continuing to support our Base Business customers.
Execute on Marketing Initiatives to Grow Organically. Our sales team is focused on high margin, niche wastes that our
competitors may not be able to obtain the necessary regulatory authorizations for or handle cost-effectively. We seek to expand
into new markets and offer new services allowing us to cross-sell or bundle services and ultimately drive incremental volume into
our existing disposal facilities. In our Waste Solutions segment, our strategy is to achieve Base Business at a level that covers our
fixed overhead costs and delivers a reasonable profit, which allows the majority of our Event Business revenue to be realized as
operating profit. We aim to continue building our Base Business while remaining flexible enough to handle large cleanup events.
In our Field Services segment, our strategy is to provide value-added services that generate downstream waste treatment and
disposal opportunities for our Waste Solutions segment while expanding service offerings to existing customers.
Deliver Innovative Technological Solutions. We challenge ourselves to identify innovative and technology-driven solutions to
solve our customers’ waste management challenges. Past examples include leveraging our expertise in developing waste
treatment recipes for organic and metals-bearing wastes, utilizing waste as a reagent to treat other wastes, beneficial reuse of
select wastes, partnering with an innovative technology provider to deploy thermal desorption technology to recover and recycle
oil and metal catalyst from refinery waste, and stabilizing mercury laden waste and other wastes using a patented treatment
process.
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Pursue a Disciplined Acquisition Strategy to Add Complementary Capabilities. We pursue selective acquisitions to expand our
disposal network, customer base and geographic footprint. We have had success achieving this in recent years through our
targeted acquisition strategy, acquiring EQ Holdings, Inc. (“EQ”) in 2014, Environmental Services Inc. (“ESI”) and the Vernon,
California based RCRA Part B, liquids and solids waste treatment and storage facility of Evoqua Water Technologies LLC in
2016, ES&H of Dallas, LLC (“ES&H Dallas”) and Ecoserv Industrial Disposal, LLC (“Winnie”) in 2018, NRC and W.I.S.E.
Environmental Solutions Inc. (“US Ecology Sarnia”) in 2019 and Impact Environmental Services, Inc. in 2020. The acquisition
of NRC allowed us to expand our operations as a leading provider of emergency response and standby services while also
providing a network of over 50 locations to leverage our field service capabilities, industrial services and total waste management
programs. In addition, the NRC Merger provided us an entry into specialty landfill and waste services supporting upstream oil
and gas exploration. We may from time to time seek acquisition opportunities to further expand our service offerings across the
environmental services value chain while maintaining our commitment to compliance, safety and customer service excellence.
Competitive Strengths
Difficult-to-Replicate Infrastructure. We consider our disposal facilities to be difficult to replicate due to the longstanding
regulatory and public policy environment for hazardous waste processing facilities, which includes the generally high cost of
obtaining permits, multi-year permitting timeframes, uncertainty of outcome, high initial capital expenditures and the potential
for both broad-based and local community opposition to the development of new facilities. We operate five of 20 landfills in the
United States and Canada that are permitted to accept RCRA wastes. Our Richland, Washington LLRW facility is one of only
three full-service Class A, B, and C disposal facilities in the United States. We also operate three landfills in Texas supporting the
oil and gas exploration industry that are constructed to specifications set forth under Subtitle D of RCRA and the RRC, with a
fourth location also owned by us and permitted by the RRC, but not yet constructed. Additionally, our marine resource network
provides us with priority access to an extensive network of marine assets, and our aerial resource network enables us to
coordinate cargo logistics and dispersant services, with priority access to a significant number of helicopters and fixed-wing
planes. Our rapid response capabilities and strategically-located facilities enable us to rapidly deploy assets and personnel within
24 hours depending on the proximity of necessary equipment. Replacing or replicating our fleet of vessels and barges utilized by
our standby services business would be difficult and costly for potential competitors because our vessels are customized with oil
spill recovery equipment and other vessel modifications specifically designed to enhance our effectiveness.
Specialized Asset Base and Essential Regulatory Certifications. We maintain a specialized asset base and essential regulatory
certifications to respond to environmental events throughout the globe whenever such events occur. We have a broad fleet of
vessels, marine equipment, vehicles, rolling stock and other equipment that requires extensive training and expertise to operate.
Replacing or replicating our fleet of vessels and barges utilized by our Field Services segment would be difficult and costly for
potential competitors because our vessels are customized with oil spill recovery equipment and other vessel modifications
specifically designed to enhance our effectiveness. Federal, state and local legislation and other environmental agencies require
numerous certifications and accreditations. These certifications are often cost and time prohibitive to obtain and require
expensive multi-step, complex permitting processes. We have decades of experience successfully permitting and maintaining
regulatory compliance. Certain of our barges have also been grandfathered into certain regulatory requirements. Certain of our
vessels, because they are used exclusively as oil spill response vessels, are exempt from certain regulatory requirements. For
example, regulations requiring barges carrying oil to have double hulls generally do not impact our current fleet. Our specialized
asset base, essential regulatory certifications and entrenched market position pose a barrier to entry for potential competitors.
Significant Regulatory and Operating Expertise. We operate in a highly regulated marketplace. The permitting process for
operating disposal assets in our industry is lengthy and complex, requiring a deep understanding of federal and state hazardous
and radioactive waste laws and regulations. We maintain a regulatory compliance and permitting program at our disposal
facilities that has allowed us to obtain approvals to expand our service offering in terms of the types, amounts and concentrations
of wastes that we are authorized to accept. Our track record of successfully navigating government regulatory and permitting
processes has been a consistent competitive advantage.
A Market Leader in Hazardous & Non-Hazardous Waste Treatment and Disposal. We are a leader in the hazardous waste
services sector with more than six decades of experience. Our collection of disposal assets and proprietary treatment
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technologies, combined with our transportation network, provides us with coast-to-coast treatment and disposal capabilities,
allowing us to serve a diverse mix of customers and industries.
Comprehensive Waste Services. Our comprehensive waste service offerings allow us to act as a full-service provider to our
customers. Our full-service orientation creates incremental revenue growth as customers seek to minimize the number of outside
vendors through “one-stop” service providers.
Diverse Markets and Customer Base. In 2021, we serviced more than 8,000 commercial and governmental entities, such as
refineries, chemical production facilities, heavy manufacturers, steel mills, oil and gas exploration companies, waste brokers and
medical and academic institutions. Our broad range of end-markets gives us exposure to a variety of industrial cycles, lessening
the impact of market volatility.
Solid Safety and Compliance Record. Safety and environmental compliance is a cornerstone of US Ecology’s business. The
Company has dedicated professionals who oversee and manage safety and environmental programs including, but not limited to,
employee training, internal and independent external audits, incentive programs and the Safety & Health Achievement
Recognition Program. Various US Ecology facilities have obtained third-party verification of Environmental Health and Safety
programs through OSHA’s VPP or ISO 45001 and ISO 14001 accreditation. Senior managers regularly review and discuss
environmental and safety results and performance with operational staff, management and the Company’s Board of Directors to
improve our safety results and focus on regulatory compliance.
Competition
Our Waste Solutions segment competes with large and small companies in each of the commercial markets we serve. While
niche services apply, the radioactive, hazardous and non-hazardous industrial waste management industry is generally very
competitive. We believe that our primary hazardous waste and PCB disposal competitors are Clean Harbors, Inc., Heritage
Environmental Services and Waste Management, Inc. Other hazardous waste disposal competitors include, but are not limited to,
Tradebe, Ross Environmental, Harsco Corporation and Veolia Environmental Services. Our waste disposal competitors serving
the Permian and Eagle Ford oil fields include Waste Management, Waste Connections, Milestone Environmental, Republic
Services and Buchanan Disposal Solutions. In addition, we face competition from reserve pit disposal, slurry wells, thermal
recycling, saltwater caverns and land farming. We believe that our primary radioactive material disposal competitors are Energy
Solutions, Inc. and Waste Control Specialists, Inc. We believe the principal competitive factors applicable to these businesses are:
●
price;
●
specialized permits and “niche” service offerings;
●
customer service;
●
operational efficiency and technical expertise;
●
comprehensive and bundled services;
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regulatory compliance and worker safety;
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industry reputation and brand name recognition;
●
transportation distance; and
●
state or province and local community support.
Competition within our Field Services segment varies by locality and type of service rendered, with competition coming from
large national and regional service providers and hundreds of privately-owned firms that offer field or industrial services. We
believe that our primary field services competitors are Clean Harbors, Inc., Harsco Corporation, Heritage Environmental
Services, Tradebe, Veolia Environmental Services and Waste Management, Inc. Each of these competitors is able to provide
most if not all of the field services we offer. We believe that our primary standby services competitor is Marine Spill Response
Corporation, a not-for-profit USCG-classified OSRO.
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 that favorably distinguish us from competitors. We also believe that our strong brand name recognition
from six decades of experience, compliance and safety record, customer service reputation and positive relations with regulators
and local communities enhance our competitive position. Advantages exist for competitors that
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(1) are larger in scale, (2) have technology, permits or equipment to handle a broader range of waste, (3) operate in jurisdictions
imposing lower disposal fees and/or (4) are located closer to where wastes are generated.
Permits, Licenses and Regulatory Requirements
Obtaining authorization to construct and operate new waste disposal facilities is a lengthy and complex process. We believe we
have demonstrated significant expertise in this area over multiple decades. We also believe we possess all permits, licenses and
regulatory approvals required to maintain regulatory compliance and operate our facilities and have the specialized expertise
required to obtain additional approvals to continue growing 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 in accordance with permit-specific requirements. Most of our facilities are also required to provide financial
assurance for closure and post-closure obligations should our facilities cease operations. Both human resource and capital
investments are required to maintain compliance with these requirements.
United States Hazardous Waste Regulation
Our hazardous, industrial, non-hazardous and radioactive waste treatment, disposal and handling business is subject to extensive
federal and state environmental, health, safety, and transportation laws, regulations, permits and licenses. Local government
controls and regulations may also apply. The applicable government regulatory agencies regularly inspect our operations to
monitor compliance. Such agencies have authority to enforce compliance through the suspension or revocation of operating
licenses and permits and the imposition of civil or criminal penalties in case of violations. We believe that these laws and
regulations, as well as the specialized services we provide, contribute to demand and create barriers to new competitors seeking
to enter the markets we serve.
RCRA provides a comprehensive framework for regulating hazardous waste transportation, treatment, storage and disposal.
RCRA regulation is the responsibility of the USEPA, which may delegate authority to state agencies. Chemical compounds and
residues derived from USEPA-listed industrial processes are subject to RCRA standards unless they are delisted through
rulemaking. RCRA liability may be imposed for improper waste management or failure to take corrective action for releases of
hazardous 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, Belleville, Michigan and Robstown, Texas.
CWA legislation prohibits discharge of pollutants into the waters of the United States without governmental authorization and
regulates the discharge of pollutants into surface waters and sewers from a variety of sources, including disposal sites and
treatment facilities. The USEPA has promulgated “pretreatment” regulations under the CWA, which establish pretreatment
standards for introduction of pollutants into publicly-owned treatment works. In the course of the treatment process, our
wastewater treatment facilities generate wastewater that we discharge to publicly-owned treatment works pursuant to permits
issued by the appropriate governmental authority. We are required to obtain discharge permits and conduct sampling and
monitoring programs.
CERCLA and its amendments impose strict, joint and several liability on owners or operators of facilities where a release of
hazardous substances has occurred, on parties who generated hazardous substances released at such facilities and on parties who
arranged for the transportation of hazardous substances. Liability under CERCLA may be imposed if improper releases of
hazardous substances occur at treatment, storage or disposal sites. Since waste generators, transporters and those who arrange
transportation are subject to the same liabilities, we believe these parties are motivated to minimize the number of disposal sites
used. In addition, hazardous waste generated during the remediation of CERCLA cleanup projects and transferred offsite must be
managed by a treatment and disposal facility authorized by the USEPA to manage CERCLA waste.
TSCA regulates the treatment, storage and disposal of PCBs. U.S. regulation and licensing of PCB wastes is the responsibility of
the USEPA. Our Grand View, Idaho and Beatty, Nevada facilities have TSCA treatment, storage and disposal permits. Our
Belleville, Michigan facility has a TSCA disposal permit. Our Robstown, Texas facility has a TSCA
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storage permit and may dispose of PCB-contaminated waste in limited concentrations not requiring a TSCA disposal permit.
The AEA assigns the USNRC regulatory authority over receipt, possession, use and transfer of certain radioactive materials,
including disposal. The USNRC has adopted regulations for licensing commercial LLRW disposal and has delegated regulatory
authority to certain states including Washington, where our Richland facility is located. The USNRC 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 radioactive materials.
Waste intrinsically derived from primary field operations associated with the exploration, development, or production of crude oil
and natural gas is exempt from regulation under RCRA Subtitle C. The RCRA Subtitle C exemption, however, does not preclude
these wastes from control under state regulations, under the less stringent RCRA Subtitle D solid waste regulations, or under
other federal regulations. Our landfills that support this industry are regulated by the RRC. Similar to RCRA-regulated landfills,
our RRC-regulated landfills are engineered using state of the art design and constructed to permanently contain the waste and
prevent the release of harmful pollutants into the environment.
The Energy Policy Act of 2005 amended the AEA to classify discrete (i.e. concentrated versus diffuse) NORM/NARM as
byproduct material. The law does not apply to interstate Compacts ratified by Congress pursuant to the LLRW Policy Act.
Our transportation operations are regulated by the U.S. Department of Transportation, the Federal Railroad Administration, the
Federal Aviation Administration and the USCG, as well as by the regulatory agencies of each state in which we operate or
through which our vehicles pass, including but not limited to the RRC.
OPA-90 establishes a regulatory and liability regime for the protection of the environment from oil spills. Enacted by Congress in
1990 after the Exxon Valdez tanker oil spill in Alaska, OPA-90 (1) consolidated the existing federal oil spill laws under one
program, (2) expanded the existing liability provisions within the CWA and (3) established new freestanding requirements
regarding marine oil spill prevention and response. Under its provisions, all U.S. tank vessels, offshore facilities and certain
onshore facilities (including pipelines, refineries and terminals) are required to prepare and submit oil spill response plans to the
relevant federal agency. In general, these vessels and facilities are prohibited from handling, storing and transporting oil if they
do not have a plan approved by (or submitted to) the appropriate agency. The plans must provide, among other things, details of
how the owner or operator of a vessel or facility would respond to a “worst case” scenario spill. While every vessel or facility is
not required to have all of the personnel and equipment needed to respond to a “worst case” spill, they each must have a plan and
procedures to call upon (typically through a contractual relationship with an OSRO), the necessary equipment and personnel for
responding to such a spill within a prescribed timeframe.
In 2004, Congress amended OPA-90 to require that all vessels over 400 gross tons (not just tankers) prepare and submit a vessel
response plan, as many non-tank vessels pose the same oil spill risk as small tank vessels due to the comparable volume of oil
they have onboard for fuel. In 2013, regulations for non-tank vessels were further tightened, and OPA-90 compliance now
requires that non-tank vessel operators contract directly with an OSRO.
The OSRO classification process was developed to facilitate the preparation and review of facility and vessel response plans. The
OSRO classification process represents standard guidelines by which the USCG and plan developers can evaluate an OSRO’s
potential to respond to and recover oil spills of various sizes. OSROs are classified based on the location of response resources
and an assessment of the ability to mobilize those resources to the Captain of the Port (“COTP”) city or alternate classification
city. There are equipment standards and response times specific to each operating area within a COTP zone. Customers that
arrange for the services of a USCG-classified OSRO do not have to list their response resources in their response plans. In
addition to potential liability under the federal OPA-90, vessel owners may in some instances incur liability on an even more
stringent basis under state law in the particular state where the spillage occurred.
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Canadian Hazardous Waste Regulation
The Canadian federal government regulates issues of national scope where activities cross provincial boundaries and affect
Canada’s relations with other nations. The Canadian provinces retain control over environmental matters within their respective
boundaries, including primary responsibility for regulation and management of hazardous waste.
The main federal laws governing hazardous waste management are CEPA and the Transportation of Dangerous Goods Act.
Environment and Climate Change Canada is the federal agency with responsibility for environmental matters. CEPA charges
Environment and Climate Change Canada and Health Canada with the protection of human health and the environment and seeks
to control the production, importation and use of substances in Canada and their impact on the environment. The Export and
Import of Hazardous Waste Regulations under CEPA govern trans-border movement of hazardous waste and hazardous
recyclable materials. These regulations require that anyone proposing to export or import hazardous waste or hazardous
recyclable materials or transport them through Canada notify the Minister of the Environment and obtain a permit to do so.
Our Stablex facility is located in Blainville, Québec, Canada and is subject to QEQA. This Act, independently developed by the
Province, regulates the generation, characterization, transport, treatment and disposal of hazardous wastes. QEQA also provides
for the establishment of waste management facilities which are controlled by the provincial statutes and regulations governing
releases to air, groundwater and surface water.
Our Tilbury, Ontario, Canada facility is subject to Regulation 347 of the Ontario Environmental Protection Act (“Regulation
347”). Regulation 347, independently developed by the Province, regulates the collection, storage, transportation, treatment,
recovery and disposal of hazardous wastes.
Waste transporters are required to hold a permit to operate under the provincial regulations and are also subject to the
requirements of the Federal Transportation of Dangerous Goods law, which requires reporting of quantities and disposition of
materials shipped.
A major difference between the United States regulatory regime and that of Canada relates to ownership and liability. Under
Canadian federal regulation, ownership changes when waste is transferred to a properly permitted third-party carrier and
subsequently to an approved treatment and disposal facility. As a result, the generator is no longer liable for proper handling,
treatment or disposal once the waste is transferred. In the United States, joint and several liability is retained by the waste
generator as well as the transporter and the treatment and disposal facility.
Maritime Regulations
We own and use in our operations 37 vessels registered under the U.S. flag. Accordingly, we are subject to various U.S. federal,
state and local statutes and regulations governing the ownership, operation and maintenance of our vessels. Our U.S.-flag vessels
are subject to the jurisdiction of the USCG, the United States Customs and Border Protection and the United States Maritime
Administration. We are also subject to international laws and conventions and the local laws of foreign jurisdictions where we
operate.
A portion of the operations of our standby services business is conducted in the U.S. coastwise trade. This is a protected market
that is subject to U.S. cabotage laws that impose certain restrictions on the ownership and operation of vessels in the U.S.
coastwise trade. These laws are principally contained in 46 U.S.C. Chapters 121, 505 and 551 and the related regulations, which
are commonly referred to collectively as the “Jones Act.” The Jones Act restricts transportation of merchandise by water or by
land and water, either directly or via a foreign port, between points in the United States and certain of its island territories.
Subject to limited exceptions, the Jones Act requires that vessels engaged in U.S. coastwise trade be owned and operated by U.S.
citizens within the meaning of the Jones Act (“U.S. Citizens”), be built in and registered under the laws of the United States and
manned by predominantly U.S. Citizen crews.
Under the citizenship provisions of the Jones Act, we would not be permitted to engage in U.S. coastwise trade if more than 25%
of any class or series of our outstanding equity was owned by non-U.S. Citizens (within the meaning of the Jones Act). For a
corporation engaged in the U.S. coastwise trade to be deemed a U.S. Citizen: (1) the corporation must
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be organized under the laws of the United States or of a state, territory or possession thereof, (2) each of the chief executive
officer, by whatever title, and the chairman of the board of directors of such corporation must be a U.S. Citizen, (3) no more than
a minority of the number of directors of such corporation necessary to constitute a quorum for the transaction of business can be
non-U.S. Citizens, (4) at least 75% of the ownership and voting power of each class or series of the shares of the capital stock of
such corporation must be owned and controlled by U.S. Citizens, free from any trust or fiduciary obligations in favor of non-U.S.
Citizens and (5) there must be no contract or understanding or other means by which more than 25% of the voting power or
control of such corporation may be exercised directly or indirectly by or on behalf of non-U.S. Citizens.
Our charter includes provisions (1) limiting the ownership of any class or series of our capital stock by non-U.S. Citizens to 24%
(so as to allow a margin of safety under the statutory maximum of 25%), (2) prohibiting the transfer of shares of our capital stock
if doing so would cause us to exceed the 24% non-U.S. Citizen ownership threshold (any such shares, the “Excess Shares”), (3)
authorizing the redemption of Excess Shares by the Company, (4) suspending the right to vote and to receive dividends and
distributions for such Excess Shares, (5) establishing procedures for the redemption of Excess Shares including providing notice
and setting the redemption price, (6) authorizing us to make citizenship determinations with respect to the holders of our capital
stock, (7) requiring holders (including beneficial holders) of our capital stock to submit information to establish the citizenship of
such holder and (8) generally authorizing our Board of Directors to take appropriate action to monitor and maintain compliance
with the ownership requirements of the Jones Act.
All of our offshore vessels are subject to either U.S. or international safety and classification standards, and sometimes both.
U.S.-flag vessels, barges and crew boats are required to undergo periodic inspections pursuant to USCG regulations.
We are in compliance with the International Ship and Port Facility Security Code (the “ISPFS Code”), an amendment to the
International Convention for the Safety of Life at Sea (“SOLAS”) as implemented in the Maritime Transportation and Security
Act of 2002 to align United States regulations with those of SOLAS and the ISPS Code. The ISPS Code provides that owners or
operators of certain vessels and facilities must provide security and security plans for their vessels and facilities and obtain
appropriate certification of compliance. Under the ISPS Code, we perform worldwide security assessments, risk analyses and
develop vessel and required port facility security plans to enhance safe and secure vessel and facility operations. Additionally, we
have developed security annexes for those U.S.-flag vessels that transit or work in waters designated as high risk by the USCG
pursuant to the latest revision of Marsec Directive 104-6.
Insurance, Financial Assurance and Risk Management
We are required by law, license, permit and prudence to maintain various insurance instruments and financial assurances. We
carry a broad range of insurance coverage including general liability, automobile liability, real and personal property, business
interruption, workers compensation, directors and officers liability, environmental impairment liability, international and marine
coverages in addition to other coverage customary for a company of our size in our industry. We purchase primary property,
casualty and excess liability policies through traditional third-party insurance carriers. We are self-insured for employee
healthcare coverage with stop-loss insurance covering excess liabilities.
Our domestic casualty insurance program provides coverage for commercial general liability, employer’s liability and automobile
liability in the aggregate amount of $35.0 million each, per year, subject to a $250,000 retention per occurrence for our
commercial general liability; a $350,000 deductible per occurrence for workers’ compensation and employer’s liability and a
$500,000 deductible per occurrence for our automobile liability. Our workers compensation insurance limits are established by
state statutes. Our Canadian casualty insurance program provides primary coverage for commercial general liability and
automobile liability in the aggregate amount of $35.0 million each, per year, subject to a 50,000 Canadian dollars retention for
general liability and deductibles starting from 500 Canadian dollars for automobile liability depending on applicable policy.
Our domestic property program provides coverage for real and personal property, business interruption and contractors’
equipment with a loss limit of $35.0 million, subject to a $2.5 million deductible per occurrence for property and business
interruption and a $500,000 deductible per occurrence for contractors’ equipment. The program also includes flood, earthquake
and wind coverage within the loss limit subject to applicable deductibles. For our Vernon, California facility, we maintain an
additional $10.0 million of coverage for earthquakes subject to a $25,000 deductible per occurrence. A
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separate boiler and machinery program with a loss limit of $100.0 million for property damage and business interruption is also
maintained. Our Canadian property program provides coverage for real and personal property, business interruption and
contractors’ equipment with a loss limit of 93.0 million Canadian dollars, subject to applicable per-occurrence deductibles. This
program includes flood, wind and earth-movement coverage within the stated loss limits. A separate Canadian boiler and
machinery program with a loss limit of 93.0 million Canadian dollars is also maintained.
On November 17, 2018, an explosion occurred at our Grand View, Idaho facility. The incident severely damaged the facility’s
primary waste-treatment building as well as surrounding waste handling, waste storage, maintenance and administrative support
structures, resulting in the closure of the entire facility that remained in effect through January 2019. We completed the
construction of a new treatment building and supporting infrastructure with resumption of full capabilities in 2021. We maintain
workers’ compensation insurance, business interruption insurance and liability insurance for personal injury, property and
casualty damage. We believe that any potential third-party claims associated with the explosion, in excess of our deductibles, are
expected to be resolved primarily through our insurance policies.
Federal, state and provincial regulations require financial assurance to cover the cost of final closure and post closure obligations
at certain operating and non-operating disposal facilities. Acceptable forms of financial assurance include third-party standby
letters of credit, surety bonds and insurance. Alternatively, we may be required to collect fees from waste generators to fund
dedicated, state-controlled escrow or trust accounts during the operating life of the facility. Through December 31, 2021, we have
met our financial assurance requirements through insurance, surety bonds, standby letters of credit and self-funded restricted
trusts. As of December 31, 2021, we have provided collateral of $721,000 in funded trust agreements, $13.8 million in surety
bonds, issued $2.8 million in letters of credit for financial assurance and have insurance policies of approximately $120.5 million
for closure and post closure obligations (dedicated state-controlled closure and post closure funds provide financial assurance for
our Washington and Nevada facilities). We use commercial surety bonds for our Canadian operations and for our Texas Energy
Waste landfills. Our lease agreement with the Province of Québec requires that the surety bond be maintained for 25 years after
the lease expires. As of December 31, 2021, we had $873,000 in commercial surety bonds dedicated for closure obligations at our
Blainville, Québec, Canada facility.
Primary casualty insurance programs generally do not cover accidental environmental contamination losses. Our domestic and
Canadian pollution liability programs provide coverage for these types of losses in the aggregate amount of $50.0 million and
25.0 million Canadian dollars per year, respectively, each subject to a $250,000 retention per occurrence. We also carry domestic
and Canadian contractors professional environmental liability insurance in the aggregate amount of $25.0 million and 5.0 million
Canadian dollars per year, respectively. The domestic program is subject to a $250,000 retention per occurrence and the Canadian
program is subject to a 25,000 Canadian dollars deductible per incident. We also have a combination of standalone RCRA site
specific policies with total aggregate limit of $68.0 million subject to a $250,000 retention.
For nuclear liability coverage, we maintain Facility Form and Workers’ Form nuclear liability insurance provided under the
federal Price Anderson Act. This insurance covers the operations of our facilities, suppliers and transporters.
Duplicative NRC insurance policies and/or programs were absorbed or combined throughout 2020, except for a separate and
standalone property insurance program insuring the legacy NRC properties. This separate property policy provides blanket
coverage limits of approximately $53.0 million for real and personal property, business interruption and equipment, up to $5.0
million annual aggregate for earthquake, flood, windstorm or hail and deductibles from $10,000 to $500,000 depending on peril
and location.
Marine exposures are addressed through a robust marine insurance package including hull and machinery, protection and
indemnity, vessel pollution and other liability and excess insurance coverages with total loss limits of $150.0 million.
International operations exposures are addressed under locally placed insurance policies compulsory in the specific countries of
operation and benefit from excess and difference in condition coverages with total loss limits of $35.0 million.
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Significant Customers
No customer accounted for more than 10% of total revenue for the years ended December 31, 2021, 2020, or 2019.
Seasonal Effects
Seasonal fluctuations due to weather and budgetary cycles can influence the timing of customer spending for our services.
Typically, in the first quarter of each calendar year there is less demand for our services due to weather-related reduced
construction activities. While large, multi-year cleanup projects may continue in winter months, the pace of waste shipments may
be slower, or stop temporarily, due to weather. Market conditions and federal funding decisions generally have a greater
influence on the business than seasonality.
Human Capital Resources
On December 31, 2021, we had approximately 3,600 employees, of which approximately 300 in the United States and 200
outside of the United States were represented by various labor unions.
Our employees are our most valued asset at US Ecology. We believe that inclusion, equity, and diversity is essential to providing
the best service to our customers. Through our Diversity and Inclusion Program, our team is focused on identifying our greatest
opportunities to attract and develop diverse and high-performing talent. US Ecology pays our employees what we believe are
market competitive wages, which include company-wide incentive programs and generous benefits to enable us to retain and
develop employees into the future leaders of our industry.
We care about our employees’ experience and continuously measure and improve employment practices. Through annual
surveys, town-hall meetings, and an open-door policy, employees influence and affect change in our policies, programs, and
practices. Our annual engagement survey measures our progress while collecting anonymous feedback to provide perspective on
what matters most to our people. This leads to better decisions about resource deployment, benefit programs, leader effectiveness,
and the overall employment experience. These continuous improvements attempt to ensure we provide best-in-class services to
our customers while enabling our business units to achieve their goals.
During 2021, the COVID-19 pandemic continued to impact our operations. To protect our employees, subcontractors and
customers, we maintained our safety protocols and COVID-19 prevention procedures. These protocols include complying with
social distancing and other health and safety standards as required by federal, state and local government agencies, taking into
consideration guidelines of the Centers for Disease Control and Prevention and other public health authorities. In addition, we
continued our 80 hours of incremental COVID-19 paid time off in 2021, which allowed each team member to take time off to
take care of themselves or their family when COVID-19 impacted their health, daycare or schooling. Finally, we formalized long-
term remote and hybrid work programs.
Executive Officers of Registrant
The following table sets forth the names, ages and titles, as well as a brief account of the business experience of each person who
was an executive officer of US Ecology as of December 31, 2021:
Name
Age
Title
Jeffrey R. Feeler
52
President and Chief Executive Officer
Simon G. Bell
51
Executive Vice President and Chief Operating Officer
Eric L. Gerratt
51
Executive Vice President, Chief Financial Officer and Treasurer
Steven D. Welling
63
Executive Vice President of Sales and Marketing
Andrew P. Marshall
55
Executive Vice President of Regulatory Compliance & Safety
Jeffrey R. Feeler was appointed President and Chief Executive Officer in May 2013. Mr. Feeler was previously the Company’s
senior executive as President and Chief Operating Officer from October 2012 to May 2013 and as the Company’s Vice President
and 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
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accounting management positions with MWI Veterinary Supply, Inc., Albertson’s, Inc. and Hewlett-Packard Company. From
1993 to 2002, he held various accounting and auditing positions for PricewaterhouseCoopers LLP. Mr. Feeler is a Certified
Public Accountant and holds a BBA of Accounting and a BBA of Finance from Boise State University.
Simon G. Bell was appointed Executive Vice President and Chief Operating Officer in November 2016. Mr. Bell previously
served as the Company’s Executive Vice President of Operations, Environmental Services from June 2014 to November 2016.
From May 2013 to June 2014, he was Executive Vice President of Operations and Technology Development. From August 2007
to May 2013, he was Vice President of Operations. From 2005 to August 2007, he was Vice President of Hazardous Waste
Operations. From 2002 to 2005, he was our Idaho facility General Manager and Environmental Manager. His 20 years of
industry experience includes service as general manager of a competitor disposal facility and mining industry experience in
Idaho, Nevada and South Dakota. He holds a BS in Geology from Colorado State University.
Eric L. Gerratt was appointed Executive Vice President, Chief Financial Officer and Treasurer in May 2013. Mr. Gerratt
previously served as the Company’s Vice President, Chief Financial Officer, Treasurer and Chief Accounting Officer from
October 2012 to May 2013. He joined US Ecology in August 2007 as Vice President and Controller. He previously held various
financial and accounting management positions at SUPERVALU, Inc. and Albertson’s, Inc. From 1997 to 2003, he held various
accounting and auditing positions for PricewaterhouseCoopers LLP. Mr. Gerratt is a Certified Public Accountant and holds a BS
in Accounting from the University of Idaho.
Steven D. Welling was appointed Executive Vice President of Sales and Marketing in May 2013. Mr. Welling previously served
as the Company’s Senior Vice President, Sales and Marketing from January 2010 to May 2013. He joined US Ecology in 2001
through the Envirosafe Services of Idaho acquisition. He previously served as National Accounts Manager for Envirosource
Technologies and Western Sales Manager for Envirosafe Services of Idaho and before that managed new market development
and sales for a national bulk chemical transportation company. Mr. Welling holds a BS from California State University-
Stanislaus.
Andrew P. Marshall was appointed Executive Vice President of Regulatory Compliance and Safety in May 2017. Mr. Marshall
previously served as the Company’s Senior Vice President, Regulatory Compliance and Safety from December 2014 to May
2017. He joined US Ecology in 2010 as Director of Environmental Compliance. He is a Professional Engineer with over 30 years
of experience assisting companies comply with environmental regulations, including past positions with Kleinfelder, a national
environmental consulting firm, and Boise Cascade Corporation. Mr. Marshall holds a BS in Civil Engineering from Seattle
University, an MS in Environmental Engineering from Oregon State University, and an MBA from Northwest Nazarene
University.
Recent Developments
On February 8, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Republic and Bronco
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Republic (“Merger Sub”). The Merger Agreement
provides that, upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and
into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly-owned subsidiary
of Republic.
At the effective time of the Merger, each share of our common stock issued and outstanding immediately prior to the effective
time (other than shares of our common stock owned by Republic or the Company (as treasury stock or otherwise) or any of their
respective direct or indirect wholly-owned subsidiaries as of immediately prior to the effective time or for which appraisal rights
have been demanded properly in accordance with Section 262 of the General Corporation Law of the State of Delaware), will be
converted into the right to receive $48.00 per share in cash, without interest.
The consummation of the Merger is subject to certain conditions, including (i) the affirmative vote of the holders of a majority of
the outstanding shares of our common stock, (ii) (a) the expiration or termination of any waiting period (or any extension thereof)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder, (b) receipt of other required regulatory approvals, and (iii) the absence of any law or order restraining, enjoining or
otherwise prohibiting the Merger. Each of Republic’s, Merger Sub’s, and our obligation to
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consummate the Merger is also subject to additional customary conditions, including (x) subject to specific standards, the
accuracy of the representations and warranties of the other party, and (y) performance in all material respects by the other party
of its obligations under the Merger Agreement.
The Merger Agreement also includes customary termination provisions for both the Company and Republic and provides that, in
connection with the termination of the Merger Agreement, under specified circumstances, we will be required to pay Republic a
termination fee of $46.3 million, including if (i) Republic terminates the Merger Agreement because the Company’s Board of
Directors changes its recommendation regarding the Merger Agreement, (ii) the Company terminates the Merger Agreement
prior to the receipt of the Company stockholder approval to enter into an acquisition agreement with a third-party with respect to
a superior proposal or (iii) Republic or the Company terminates the Merger Agreement in certain circumstances and, in any such
case, prior to such termination, a takeover proposal by a third-party shall have been publicly disclosed and not publicly
withdrawn and within 12 months following the date of termination, the Company shall have entered into an alternative
transaction agreement (whether or not relating to a takeover proposal made, communication or publicly disclosed prior to the
termination of the Merger Agreement).
The Merger Agreement also provides that if the Merger Agreement is terminated because (i) of the issuance of a nonappealable
court order or legal restraint prohibiting the transaction for antitrust reasons or (ii) the transactions have not been consummated
by August 8, 2023, and at such time, antitrust approval for the transaction has not been obtained but the other conditions to
Closing have been satisfied, then Republic will be required to reimburse the Company for 50% of its reasonable and documented
out-of-pocket expenses incurred in connection with the Merger up to $5.0 million (i.e., Republic’s reimbursement shall not
exceed $2.5 million).
The foregoing description of the Merger Agreement is a summary only and is qualified in its entirety by reference to the complete
text of the Merger Agreement filed herewith as Exhibit 2.1
ITEM 1A. RISK FACTORS
Summary of Risk Factors
Below is a summary of the principal factors that could adversely affect our business, operations and financial results. This
summary does not address all of the risks that we face. Additional discussion of the risks summarized in this summary, and other
risks that we face (including general risk factors), can be found below following this summary.
Risks Affecting All of Our Business
●
The COVID-19 pandemic and resulting adverse economic conditions has had and may continue to have a negative
impact on our business, financial condition and results of operations.
●
The impact on our business of the proposed Merger and our ability to complete the proposed Merger in a timely manner.
●
We may be unable to renew key contracts or perform under our contracts which could impact our profitability.
●
Adverse economic conditions, as well as fluctuations in the commodity market related to the demand and production of
energy-related commodities, may harm our business.
●
Failure to comply with applicable U.S. or foreign laws, including environmental laws and regulations, could negatively
impact our business and result in us incurring material liability.
●
Existing and future regulations related to climate change could negatively impact our business and impose additional
compliance requirements on us and our customers.
●
Any accident at one of our facilities may result in significant litigation or the imposition of significant fines.
●
We handle dangerous substances and failure to handle such substances properly or maintain an acceptable safety record
may have an adverse impact on our business.
●
Our participation in multi-employer pension plans may subject us to liabilities that could materially adversely affect our
results of operations.
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●
We may experience risks from our international operations, including the risk that we may not be able to enforce
contracts in non-U.S. countries, we may be subject to restrictive activities by U.S. or foreign governments which could
limit our business activities and foreign exchange rates may fluctuate.
●
Changes to U.S. tariff and import/export regulations may negatively affect the markets we serve and ultimately harm us.
●
A change in, or revocation of, our classification as an OSRO could result in a loss of business.
●
A cybersecurity incident could negatively impact our business and our relationships with customers.
●
Loss of key employees, as well as a change or deterioration in our labor relations, could harm our business.
●
We may be unable to enter into arrangements with independent contractors who provide important emergency response
services to our customers on financially acceptable terms.
Additional Risks of Our Waste Solutions and Energy Waste Businesses
●
Our energy waste business could be adversely affected by changes in laws regulating energy waste.
●
Lower crude oil prices may adversely affect the level of development and production activity of energy companies,
which could decrease the demand for our energy waste business.
●
If we are unable to obtain the necessary levels of insurance and financial assurances required for our operations, our
business would be adversely affected.
●
We are subject to operating and litigation risks that may not be covered by insurance.
●
A significant portion of our business depends upon non-recurring event cleanup projects over which we have no control.
●
If we are unable to obtain regulatory approvals and contracts for construction of additional disposal space by the time
our current disposal capacity is exhausted, our business would be adversely affected.
●
If we are unable to renew our operating permits or lease agreements with regulatory bodies, our business would be
adversely affected.
●
We may not be able to obtain timely or cost-effective transportation services which could adversely affect our
profitability, and an increase in transportation costs may reduce our earnings.
●
The hazardous and radioactive waste industries in which we operate are subject to litigation risk, which could result in
significant liability.
Additional Risks of Our Field Services Business
●
A significant portion of our Field Services segment depends upon the demand for cleanup of spills and other remedial
projects and regulatory developments over which we have no control.
Additional Risks of Completed and Potential Acquisitions
●
Acquisitions that we undertake could be difficult to integrate or disrupt our business, which would ultimately disrupt our
results of operations.
●
In the event that we undertake future acquisitions, we may not be able to successfully execute our acquisition strategy,
and the timing and number of acquisitions we pursue may cause volatility in our financial results.
Risks Relating to Our Capital Structure
●
We may not be able or willing to pay future dividends.
●
Future stock issuances may adversely affect common stock ownership interest and rights in comparison with those of
other security holders.
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●
The price of our common stock has fluctuated in the past and this may make it difficult for stockholders to resell shares
of common stock at times or may make it difficult for stockholders to sell shares of common stock at prices they find
attractive.
●
Anti-takeover provisions in our organizational documents and under Delaware law may impede or discourage a
takeover, which could cause the market price of our common stock to decline.
●
The sale of a substantial number of shares of our common stock into the public market by certain stockholders may
result in significant downward pressure on the price of our common stock and could affect your ability to realize the
current trading price of our common stock.
●
Fluctuations in price of our common stock may make it difficult for stockholders to resell shares of common stock or
may make it difficult for stockholders to sell shares of common stock at prices they find attractive.
●
There is no guarantee that our warrants will ever be in the money and they may expire worthless.
●
Our indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business, and our
credit agreement restricts our ability to engage in certain corporate and financial transactions.
●
Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may
adversely affect interest expense related to our debt.
Risks Related to the Jones Act
●
Our business would be adversely affected if we failed to comply with the Jones Act.
●
Repeal, amendment, suspension or non-enforcement of the Jones Act would result in additional competition for a
substantial portion of our services and could have a material adverse effect on our business.
●
Our common stock is subject to restrictions on ownership by non-U.S. Citizens, which could require divestiture by non-
U.S. Citizen stockholders and could have a negative impact on its value.
Risks Affecting All of Our Businesses
The COVID-19 pandemic and resulting adverse economic conditions has had and may continue to have a negative impact on
our business, financial condition and results of operations.
The COVID-19 pandemic has created significant uncertainties. These uncertainties include, but are not limited to, the potential
adverse effect of the pandemic on the economy, our customers, our suppliers and our employees. As a result of the COVID-19
pandemic, we have experienced cost and inflationary pressures in areas such as labor, transportation and supplies. We have also
experienced delays and deferments of some of our waste solutions and field services business based on our customers’ own
responses to the pandemic including, but not limited to, delaying services they deem noncritical and limiting on-site visitation.
Despite our efforts to manage the effects of the COVID-19 pandemic, their ultimate impact is highly uncertain and subject to
change, and also depends on factors beyond our knowledge or control, including the duration and severity of any future outbreaks
as well as actions taken by governments and private parties to contain the spread and mitigate the public health effects of
COVID-19 and its variants. Depending on the extent and duration of all of the above-described effects on our business and
operations and the business and operations of our suppliers, our costs could continue to increase, including our costs to address
the health and safety of personnel, and our ability to obtain certain supplies or services could be curtailed. The impact of the
COVID-19 pandemic may also aggravate other risks described herein, which could materially adversely affect our business,
financial condition, results of operations (including revenues and profitability). In addition, the COVID-19 pandemic may also
affect our operating or financial results in a manner that is not presently known to us or that we do not consider to present
significant risks to operations.
The pendency of the proposed Merger may cause disruption in our business.
On February 8, 2022, we entered into the Merger Agreement with Republic and Merger Sub, pursuant to which and subject to the
terms and conditions therein, Merger Sub will merge with and into the Company, with the Company continuing as the surviving
entity.
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The Merger Agreement restricts us from taking specified actions without Republic’s consent until the Merger is completed or the
Merger Agreement is terminated, including (subject to certain exceptions) amending our governing documents, adjusting,
splitting, combining, subdividing or reclassifying of our common stock, issuing shares of our common stock, increasing
executive compensation or adopting new employee benefit plans, incurring certain capital expenditures and engaging in mergers
and acquisitions. These restrictions and others more fully described in the Merger Agreement may affect our ability to execute
our business strategies and attain our financial and other goals and may impact our business, results of operations and financial
condition.
The pendency of the proposed Merger could also cause disruptions to our business or business relationships, which could have an
adverse impact on our results of operations. Parties with which we have business relationships may be uncertain as to the future
of such relationships and may delay or defer certain business decisions, seek alternative relationships with third parties or seek to
alter their present business relationships with us. Parties with whom we otherwise may have sought to establish business
relationships may seek alternative relationships with third parties.
The pursuit of the Merger and the preparation for our integration with Republic’s business is expected to place a significant
burden on our management and internal resources. The diversion of management’s attention away from day-to-day business
concerns and any difficulties encountered in the transition and integration process could adversely affect our business, results of
operations and financial condition.
We have incurred and will continue to incur significant costs, expenses and fees for professional services and other transaction
costs in connection with the Merger. We may also incur unanticipated costs in connection with our integration with Republic’s
business. The substantial majority of these costs will be non-recurring expenses relating to the Merger, and many of these costs
are payable regardless of whether or not the Merger is consummated. We also could be subject to litigation related to the
proposed Merger, which could prevent or delay the consummation of the Merger and result in significant costs and expenses.
Failure to complete the Merger in a timely manner or at all could negatively impact the market price of our common stock, as
well as our future business and our results of operations and financial condition.
The Merger cannot be completed until conditions to closing are satisfied or (if permissible under applicable law) waived. The
Merger is subject to numerous closing conditions, including among other things, (i) the affirmative vote of the holders of a
majority of the outstanding shares of our common stock, (ii) (a) the expiration or termination of any waiting period (or any
extension thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder, (b) receipt of other required regulatory approvals, and (iii) the absence of any law or order restraining,
enjoining or otherwise prohibiting the Merger. Each of Republic’s, Merger Sub’s, and our obligation to consummate the Merger
is also subject to additional customary conditions, including (x) subject to specific standards, the accuracy of the representations
and warranties of the other party, and (y) performance in all material respects by the other party of its obligations under the
Merger Agreement.
The satisfaction of the required conditions could delay the completion of the Merger for a significant period of time or prevent it
from occurring. Further, there can be no assurance that the conditions to the closing of the Merger will be satisfied or waived or
that the Merger will be completed.
If the Merger is not completed in a timely manner or at all, our ongoing business may be adversely affected as follows:
●
We may experience negative reactions from the financial markets, and our stock price could decline to the extent that
the current market price reflects an assumption that the Merger will be completed, we may experience negative reactions
from customers, suppliers, employees or other third parties;
●
we may be subject to litigation relating to the Merger, which could result in significant costs and expenses;
●
management’s focus may have been diverted from day-to-day business operations and pursuing other opportunities that
could have been beneficial to the Company; and
●
our costs of pursuing the Merger may be higher than anticipated.
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In addition to the above risks, we may be required, under certain circumstances, to pay Republic a termination fee equal to $46.3
million. If the proposed Merger is not consummated, there can be no assurance that these risks will not materialize and will not
materially adversely affect our stock price, business, results of operations and financial condition.
In order to complete the Merger, the Company and Republic must obtain certain governmental approvals, and if such
approvals are not granted or are granted with conditions, completion of the Merger may be jeopardized or the anticipated
benefits of the Merger could be reduced.
Although the Company and Republic have agreed to use reasonable best efforts, subject to certain limitations, to make certain
governmental filings and obtain the required governmental approvals, or expiration or earlier termination of relevant waiting
periods, as the case may be, there can be no assurance that the relevant waiting periods will expire or be terminated or that the
relevant approvals will be obtained. As a condition to approving the Merger, these governmental authorities may impose
conditions, terms, obligations or restrictions or require divestitures or place restrictions on the conduct of our business after
completion of the Merger. There can be no assurance that regulators will not impose conditions, terms, obligations or restrictions
and that such conditions, terms, obligations or restrictions will not have the effect of delaying or preventing completion of the
Merger or imposing additional material costs on or materially limiting the revenues of the combined company following the
Merger, or otherwise adversely affecting, including to a material extent, our business, results of operations and financial
condition after completion of the Merger. In addition, the Merger Agreement provides that Republic is not required to propose,
negotiate, commit to or effect (i) any sale, divestiture or disposal of all or any part of any Subtitle C (Hazardous Waste) landfill
or any landfill regulated by the Quebec Ministry of Environment or the Providence of Quebec of Republic or the Company or (ii)
actions that would reasonably be expected to, individually or in the aggregate, reduce the aggregate annual revenue of Republic
and its subsidiaries after giving effect to closing by more than $60 million in total sales (based on total sales for the year ended
December 31, 2021) (a “Burdensome Condition”). If Republic is required to divest assets or businesses, there can be no
assurance that Republic will be able to negotiate such divestitures expeditiously or on favorable terms or that the governmental
authorities will approve the terms of such divestitures. In addition, if a governmental authority conditions its approval of the
Merger on a Burdensome Condition, there is a risk the Merger will not close. We can provide no assurance that these conditions,
terms, obligations or restrictions will not result in the abandonment of the Merger.
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 projects (non-recurring project-based
work) which vary widely in size, duration and unit pricing. Some of these multi-year projects can account for a significant
portion of our revenue and profit. The replacement of Event Business revenue and earnings depends on multiple factors, many of
which are outside of our control including, but not limited to, general and industry-specific economic conditions, capital in the
commercial credit markets, general level of government funding on environmental matters, real estate development and other
industrial investment opportunities. Our inability to replace the revenue from Event Business projects with new business could
result in a material adverse effect on 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 we or our subcontractors are unable to perform as required, we could be subject to substantial monetary
penalties and/or loss of the affected contracts which may adversely affect our business.
Fluctuations in the commodity market related to the demand and production of oil, gas and other energy-related commodities
may affect our business, financial position, results of operations and cash flows.
Declines in the production level of oil, gas and other energy-related commodities could have significant adverse effects on us.
Commodity demand fluctuates for several reasons, including, but not limited to, changes in market and economic conditions, the
impact of weather, levels of domestic and international production, domestic and foreign governmental regulation, national
protectionism policies and trade disputes. Volatility of commodity demand, which may lead to a reduction in production or
supply of the commodity, may negatively impact the demand for our services. A decline in the
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demand for these services may have a material adverse effect on our business, financial position, results of operations and cash
flows.
We could incur liability, including under environmental laws, rules and regulations, in connection with providing spill
response services.
We may incur increased legal fees and costs in connection with providing spill response services. Although the services provided
by us are generally exempt in the United States from liability under the CWA, this exemption might not apply to our own actions
and omissions in providing spill response services if we are found to have been grossly negligent or to have engaged in willful
misconduct, or if we have failed to provide these services consistent with applicable regulations and directives under the CWA.
In addition, the exemption under the federal CWA would not protect a company against liability for personal injury or wrongful
death, or against prosecution under other federal or state laws. Although most of the states within the United States in which we
provide services have adopted similar exemptions, several states have not. If a court or other applicable authority were to
determine that we do not benefit from federal or state exemptions from liability in providing emergency response services, we
could be liable, together with the local contractor and the responsible party, for any resulting damages, including damages caused
by others. In the international market, we do not benefit from the spill response liability protection provided by the CWA and
therefore are subject to the liability terms and conditions negotiated with our international clients.
If Congress repeals the exemption to liability for responders that is discussed above, or otherwise scales back the protections
afforded to contractors thereunder, there may be increased exposure for remediation work and the cost for securing insurance for
such work may become prohibitively expensive. In addition, more generally Congress could increase or remove the limits of
liability currently in place under OPA 90 for facilities and vessels. Without affordable insurance and appropriate legislative
regulation limiting liability, drilling, exploration, remediation and further investment in oil and gas exploration in the U.S. Gulf
of Mexico may be discouraged and thus reduce the demand for our services.
We could incur liability under environmental laws, rules and regulations in connection with providing waste disposal services.
Environmental laws and regulations impose liability and responsibility on present and former owners, operators or users of
facilities and sites for contamination at such facilities and sites without regard to fault or knowledge of contamination. In the past,
practices have resulted in releases of regulated materials at and from certain of our facilities, or the disposal of regulated
materials at third-party sites, which require investigation and remediation and may potentially result in claims of personal injury,
property damage and damages to natural resources. In addition, we occasionally evaluate various alternatives with respect to our
facilities, including possible dispositions or closures. Investigations undertaken in connection with these activities may lead to
discoveries of contamination that must be remediated, and closures of facilities might trigger compliance requirements that are
not applicable to operating facilities. We are currently conducting remedial activities at certain of our facilities and paying a
portion of the remediation costs at certain sites owned by third parties. Based on available information, we believe these remedial
activities will not result in a material adverse effect on our business, financial position, result of operations and cash flows.
However, these activities or the discovery of previously unknown conditions could result in material costs.
In addition, we are required to obtain governmental permits to provide our services, operate our facilities, including all of our
landfills, and expand our operations. Although we are committed to compliance and safety, we may not, either now or in the
future, be in full compliance at all times with such laws, rules and regulatory requirements or be able to renew or procure
governmental permits. As a result, we could be required to incur significant costs to maintain or improve our compliance with
such requirements. Moreover, failure to comply with applicable laws, rules and regulations may also result in administrative and
civil penalties, criminal sanctions or the suspension or termination of our operations.
From time to time, we have paid fines or penalties in governmental environmental enforcement proceedings, usually involving
our waste treatment, storage and disposal facilities. Although none of these fines or penalties has had a material adverse effect
upon us, we might in the future be required to make substantial expenditures as a result of governmental proceedings which
would have a negative impact on our earnings. Furthermore, regulators have the power to suspend or revoke permits or licenses
needed for operation of our plants, equipment and vehicles based on, among other factors, our
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compliance record. Suspension or revocation of permits or licenses would impact our operations and could have a material
impact on our financial results.
Existing or future laws and regulations related to greenhouse gases and climate change could have an impact on our business
and may result in additional compliance obligations on us and our customers.
Changes in environmental requirements related to greenhouse gases and climate change may impact demand for our services. For
example, oil and natural gas exploration and production may decline as a result of environmental requirements, including land
use policies responsive to environmental concerns. However, increased environmental requirements could also increase demand
for our services. Local, state and federal agencies have been evaluating climate-related legislation and other regulatory initiatives
that would restrict emissions of greenhouse gases in areas in which we conduct business. To a certain extent our business depends
on the level of activity in the oil and natural gas industry, existing or future laws and regulations related to greenhouse gases and
climate change, including incentives to conserve energy or use alternative energy sources, could have an impact on our business
if such laws or regulations reduce demand for oil and natural gas.
An accident at any one of our facilities may result in significant litigation or the imposition of fines as a result of regulatory
investigations, as well as the loss of business, profits or customers, which may not be fully covered by our insurance policies.
On November 17, 2018, an explosion occurred at our Grand View, Idaho facility. The incident severely damaged the facility’s
primary waste-treatment building as well as surrounding waste handling, waste storage, maintenance and administrative support
structures, resulting in the closure of the entire facility that remained in effect through January 2019. We completed the
construction of a new treatment building and supporting infrastructure with resumption of full capabilities in 2021. On January
10, 2020, we entered into a settlement agreement with OSHA settling a complaint made by OSHA relating to the incident for
$50,000. On January 28, 2020, the Occupational Safety and Health Review Commission issued an order terminating the
proceeding relating to such OSHA complaint. We have not otherwise been named as a defendant in any third-party action
relating to the incident. We maintain workers’ compensation insurance, business interruption insurance and liability insurance for
personal injury, property and casualty damage. We believe that any potential third-party claims associated with the explosion, in
excess of our deductibles, are expected to be resolved primarily through our insurance policies. Although we carry business
interruption insurance, a disruption of our business caused by a casualty event, including the full and partial closure of our Grand
View, Idaho facility, may result in the loss of business, profits or customers during the time of such closure. Accordingly, our
insurance policies may not fully compensate us for these losses. In November 2020, we commenced a lawsuit against the
generator and broker of the waste, the treatment of which we believe contributed to the Grand View explosion, seeking damages
in connection with the losses suffered as a result of the incident.
Our business requires the handling of dangerous substances. Improper handling of such substances could result in an
adverse impact on our financial 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 the ability of one or more facilities to continue to perform normal operations, which could have a material
adverse impact on our financial condition and results of operations. Improper handling of these substances could also violate laws
and regulations resulting in fines and/or suspension of operations.
Failure to maintain an acceptable safety record may have an adverse impact on our ability to retain and acquire customers.
Our current and prospective customers consider safety and reliability a primary concern in selecting a service provider. We must
maintain a record of safety and reliability that is acceptable to our customers. Should this not be achieved, our ability to retain
current customers and attract new customers may be adversely affected.
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We may experience risks from our international operations.
Our ability to compete in the international market may be adversely affected by foreign government regulations that favor or
require the awarding of contracts to local competitors, or that require non-U.S. Citizens to employ citizens of, or purchase
supplies from, a particular jurisdiction. Further, our foreign subsidiaries may face governmentally imposed restrictions on their
ability to transfer funds to their parent company. Activity outside the United States involves additional risks, including the
possibility of:
●
United States embargoes or restrictive actions by U.S. and foreign governments that could limit our ability to provide
services in foreign countries;
●
a change in, or the imposition of, withholding or other taxes on foreign income, tariffs or restrictions on foreign trade
and investment;
●
limitations on the repatriation of earnings or currency exchange controls and import/export quotas;
●
local cabotage and local ownership laws and requirements;
●
nationalization, expropriation, asset seizure, blockades and blacklisting;
●
limitations in the availability, amount or terms of insurance coverage;
●
loss of contract rights and inability to enforce contracts;
●
political instability, war and civil disturbances or other risks that may limit or disrupt markets, such as terrorist attacks,
piracy and kidnapping;
●
the impact of public health epidemics like the coronavirus which originated in the Wuhan region of China;
●
fluctuations in currency exchange rates, hard currency shortages and controls on currency exchange that affect demand
for our services and profitability;
●
potential noncompliance with a wide variety of laws and regulations, such as the FCPA, and similar non-U.S. laws and
regulations, including the U.K. Bribery Act 2010;
●
labor strikes and volatility in labor costs;
●
changes in general economic and political conditions; and
●
difficulty in staffing and managing widespread operations.
In addition, to the extent that we use a non-U.S. currency as a functional currency in a particular territory, we are exposed to
fluctuations in the value of such currency. In addition, risks related to our activities outside of the United States include the
repatriation of cash to the United States and the imposition of additional taxes on our foreign income.
Moreover, our business is also impacted by the negotiation and implementation of free trade agreements between the United
States and other countries. Such agreements can reduce barriers to international trade and thus the cost of conducting business
overseas. For instance, the United States reached a new trilateral trade agreement with the governments of Canada and Mexico –
the United States-Mexico-Canada Agreement (“USMCA”) – to replace the North American Free Trade Agreement (“NAFTA”).
The USMCA came into effect on July 1, 2020. If any of the countries withdraws from USMCA, our cost of doing business within
the three countries could increase.
Any of the foregoing or other factors associated with doing business abroad could adversely affect our business, financial
condition and results of operations.
Our financial results could be adversely affected by foreign exchange fluctuations.
We operate in the United States, Canada, the United Kingdom, Mexico, Europe, the Middle East, and Africa but report revenue,
costs and earnings in U.S. dollars. In fiscal 2021, we recorded approximately 13% of our revenues outside of the United States.
Exchange rates between the U.S. dollar and local currencies are likely to fluctuate from period to period. Because our financial
results are reported in U.S. dollars, we are subject to the risk of non-cash translation losses for reporting purposes. If we continue
to expand our international operations, we will conduct more transactions in currencies other than 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 the risk of
transaction losses. We have not entered into derivative instruments to offset the impact of foreign exchange fluctuations.
Fluctuations in foreign currency exchange rates could have a material adverse effect on our financial condition and results of
operations.
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Changes to U.S. tariff and import/export regulations may have a negative effect on the markets and industries we serve and,
in turn, harm us.
Recently, there have been significant changes to U.S. trade policies, treaties and tariffs, which have resulted in uncertain
economic and political conditions that have made it difficult for us and our customers to accurately forecast and plan future
business activities. For example, the U.S. has imposed tariffs on certain products imported into the U.S. from China, the
European Union and other countries, and could impose additional tariffs or trade restrictions. Such changes to U.S. policies
related to global trade and tariffs have resulted in uncertainty surrounding the future of the global economy and have resulted in
certain retaliatory trade measures and tariffs implemented by other countries. These developments, or the perception that any of
them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets,
and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of
these factors could depress economic activity and have a material adverse effect on the business and financial condition of our
customers, which in turn could negatively impact us.
A change in, or revocation of, our classification as an OSRO could result in a loss of business.
NRC, a wholly owned subsidiary of the Company, is classified by the USCG as an OSRO. The USCG classifies OSROs based on
their overall ability to respond to various types and sizes of oil spills. USCG-classified OSROs have a competitive advantage
over non-classified service providers because customers of a classified OSRO may cite classified OSROs in their response plans
in lieu of listing their oil spill response resources in filings with the USCG. A loss of our classification or changes in the
requirements for classification could eliminate or diminish our ability to provide customers with this exemption. If this happens,
our Field Services segment could lose customers.
A change or deterioration in labor relations could disrupt our business or increase costs, which could have a material adverse
effect on our business, financial condition and results of operations.
The Company is a party to collective bargaining agreements covering approximately 500, or approximately 13%, of our
employees. While we believe the Company will maintain good working relations with its employees on acceptable terms, there
can be no assurance that we will be able to negotiate the terms of future agreements in a manner acceptable to the Company.
Potential work disruptions from labor disputes may disrupt our businesses and adversely affect our financial condition and results
of operations.
We rely on third-party contractors to provide important emergency response services to our customers.
We rely on independent contractors to provide services and support to our customers. While the use of independent contractors
expands the reach and customer base for our services, the maintenance and administration of these relationships is costly and
time consuming. If we do not enter into arrangements with these independent contractors on financially acceptable terms, these
relationships may have a material adverse effect on our business, financial position, results of operations and cash flows.
Additional Risks of Our Waste Solutions and Energy Waste Business
Our energy waste business could be adversely affected by changes in laws regulating energy waste.
We believe that the demand for our energy waste services is directly related to the regulation of energy waste. In particular,
RCRA, which governs the disposal of solid and hazardous waste, currently exempts certain energy wastes from classification as
hazardous wastes. In recent years, proposals have been made to rescind this exemption from RCRA. If the exemption covering
energy wastes is repealed or modified, or if the regulations interpreting the rules regarding the treatment or disposal of this type
of waste were changed, our operations could face significantly more stringent regulations, permitting requirements, and other
restrictions, which could have a material adverse effect on our business.
In addition, if new federal, state, provincial or local laws or regulations that significantly restrict hydraulic fracturing are adopted,
such legal requirements could result in delays, eliminate certain drilling and injection activities and make it more difficult or
costly for our customers to perform fracturing. Any such regulations limiting or prohibiting hydraulic fracturing could reduce our
customers’ oil and natural gas exploration and production activities and, therefore, adversely affect our business. Such laws or
regulations could also materially increase our costs of compliance and doing business by more
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strictly regulating how hydraulic fracturing wastes are handled or disposed. Conversely, any loosening of existing federal, state,
provincial or local laws or regulations regarding how such wastes are handled or disposed could adversely impact demand for our
services.
Lower crude oil prices may adversely affect the level of exploration, development and production activity of energy companies
and the demand for our energy waste services.
Lower crude oil prices and the volatility of such prices may affect the level of investment and the amount of linear feet drilled in
the basins where we operate, as it may impact the ability of energy companies to access capital on economically advantageous
terms or at all. In addition, energy companies may elect to decrease investment in basins where the returns on investment are
inadequate or uncertain due to lower crude oil prices or volatility in crude oil prices. Such reductions in capital spending would
negatively impact energy waste generation and therefore the demand for our services. Further, we cannot provide assurances that
higher crude oil prices will result in increased capital spending and linear feet drilled by our customers in the basins where we
operate.
If we are unable to obtain at a reasonable cost or under reasonable terms and conditions the necessary levels of insurance and
financial assurances 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 of insurance coverage, including general liability, automobile liability, real and personal property, workers
compensation, directors and officers liability, environmental impairment liability, business interruption and other coverage
customary for a company of our size in our business. We purchase primary property, casualty and excess liability policies
through traditional third-party insurance carriers to mitigate risk of loss. We are self-insured for employee healthcare coverage.
Stop loss insurance is carried covering liability on claims in excess of $300,000 per individual. Accrued costs related to the self-
insured healthcare coverage were $3.4 million and $3.3 million at December 31, 2021 and 2020, respectively. If our insurers
were unable to meet their obligations, or our own obligations for claims were more than expected, there could be a material
adverse effect to our financial condition and results of operation.
Through December 31, 2021, we have met our financial assurance requirements through a combination of insurance policies,
commercial surety bonds and trust funds. We continue to use self-funded trust accounts for our post closure obligations at our
U.S. non-operating sites and utilize closure and post-closure insurance to address any balance deficits in these accounts. We use
commercial surety bonds for our Canadian operations and for our Texas energy waste landfills. We currently have in place all
financial assurance instruments necessary for our operations. While we 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 a material
adverse effect on our results of operations and cash flows. Additionally, continued access to casualty and pollution legal liability
insurance with sufficient limits, at acceptable terms, is important to obtaining new business. Failure to maintain adequate
financial assurance could also result in regulatory action including early closure of facilities. As of December 31, 2021, we had
provided collateral of $721,000 in funded trust agreements, $13.8 million in surety bonds, issued $2.8 million in letters of credit
for financial assurance and have insurance policies of approximately $120.5 million for closure and post closure obligations at
covered U.S. operating facilities. As of December 31, 2021, we have $873,000 in commercial surety bonds dedicated for closure
obligations at our Blainville, Québec, Canada facility.
While we believe we will be able to renew and maintain all our insurance and requisite financial assurance policies at a
reasonable cost, premium and collateral requirements may materially increase. Such increases could have a material adverse
effect on our financial condition and results of operations.
We are subject to operating and litigation risks that may not be covered by insurance.
Our business operations are subject to all of the operating hazards and risks normally incidental to the handling, storage and
disposal of combustible and other hazardous products. These risks could result in substantial losses due to personal injury and/or
loss of life, and severe damage and destruction of property and equipment arising from explosions or other
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catastrophic events. As a result, we may become a defendant in legal proceedings and litigation arising in the ordinary course of
business. Additionally, environmental contamination could result in future legal proceedings. There can be no assurance that our
insurance coverage will be adequate to protect us from all material expenses related to pending and future claims or that such
levels of insurance would be available in the future at economical prices, as described above.
Although we carry business interruption insurance, a disruption of our business caused by a casualty event, including the full and
partial closure of our Grand View, Idaho facility (as described herein), may result in the loss of business, profits or customers
during the time of such closure. As such, our insurance policies may not fully compensate us for these losses.
A significant portion of our business depends upon non-recurring event cleanup 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 the year ended December 31, 2021, approximately 24% of our T&D revenue was derived from Event Business
projects. The one-time nature of Event Business, diverse spectrum of waste types received and widely varying unit pricing
necessarily creates variability in revenue and earnings. This variability may be influenced by general and industry-specific
economic conditions, funding availability, changes in laws and regulations, government enforcement actions or court orders,
public controversy, litigation, weather, commercial real estate, closed military bases and other project timing, government
appropriation and funding cycles and other factors. This variability can cause significant quarter-to-quarter and year-to-year
differences in revenue, gross profit, gross margin, operating income and net income. Also, while we pursue many large projects
months or years in advance of work performance, both large and small cleanup project opportunities routinely arise with little or
no prior notice. These market dynamics are inherent to the waste disposal business and are factored into our projections and
externally communicated business outlook statements. Our projections combine historical experience with identified sales
pipeline opportunities, new or expanded service line projections and prevailing market conditions. A reduction in the number and
size of new cleanup projects won to replace completed work could have a material adverse effect on our financial condition and
results of operations.
If we are unable to obtain regulatory approvals and contracts for construction of additional disposal space by the time our
current disposal capacity 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 regulatory agency approvals. Administrative processes for such approval reviews vary. There can be no assurance that
we will be successful in obtaining future expansion approvals in a timely manner or at all. If we are not successful in receiving
these approvals, our disposal capacity could eventually be exhausted, preventing 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. In addition, three of our facilities operate on land that is leased from government agencies. Failure to renew
our permits and licenses necessary to operate our facilities or failure to renew or maintain compliance with our site lease
agreements would have a material adverse effect on our business. There can be no assurance we will continue to be successful in
obtaining timely permit applications approval, maintaining compliance with our lease agreements and obtaining timely lease
renewals.
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 our facilities. Increases in fuel or labor costs, shortages of qualified drivers and unforeseen events such as labor
disputes, public health pandemics, severe weather, natural disasters and other acts of God, war or terror could prevent or delay
shipments and reduce both volumes and revenue. Our rail transportation service agreements with our customers generally allow
us to pass on fuel surcharges assessed by the railroads to such customers. This may decrease or
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eliminate our exposure to fuel cost increases. Transportation services may be limited by economic conditions, including increased
demand for rail or trucking services, resulting in periods of slower service to the point that individual customer needs cannot be
met. No assurance can be given that we can procure transportation services in a timely manner at competitive rates or pass
through fuel cost increases in all cases. Such factors could also limit our ability to achieve revenue and earnings objectives.
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 be able to maintain adequate insurance in the future. Adverse rulings in judicial or
administrative proceedings could also have a material adverse effect on our financial condition and results of operations.
Additional Risks of Our Field Services Business
A significant portion of our Field Services segment depends upon the demand for cleanup of spills and other remedial projects
and regulatory developments over which we have no control.
A significant portion of our Field Services segment consists of remediation, recycling, industrial cleaning and maintenance,
transportation, total waste management, technical services, and emergency response services. Demand for these services can be
affected by the commencement and completion of cleanup of major spills and other events, customers’ decisions to undertake
remedial projects, seasonal fluctuations due to weather and budgetary cycles influencing the timing of customers’ spending for
remedial activities, the timing of regulatory decisions relating to hazardous waste management projects, changes in regulations
governing the management of hazardous waste, changes in the waste processing industry towards waste minimization and the
propensity for delays in the demand for remedial services, and changes in governmental regulations relevant to our diverse
operations. We do not control such factors and, as a result, our revenue and income can vary from quarter to quarter or year to
year, and past financial performance may not be a reliable indicator of future performance.
Additional Risks of Completed and Potential Acquisitions
Acquisitions that we undertake could be difficult to integrate, disrupt our business, dilute stockholder value and adversely
affect our results of operations.
Acquisitions involve multiple risks. Our inability to successfully integrate an acquired business could have a material adverse
effect on our financial condition and results of operations. These risks include but are not limited to:
●
failure of the acquired company to achieve anticipated revenues, earnings or cash flows;
●
assumption of liabilities, including those related to environmental matters, that were not disclosed to us or that exceed
our estimates;
●
problems integrating the purchased operations with our own, which could result in substantial costs and delays or other
operational, technical or financial problems;
●
potential compliance issues relating to the protection of health and the environment, compliance with securities laws and
regulations, adequacy of internal controls and other matters;
●
diversion of management’s attention or other resources from our existing business;
●
risks associated with entering markets or product/service areas in which we have limited prior experience;
●
increases in working capital investment to fund the growth of acquired operations;
●
unexpected capital expenditures to upgrade waste handling or other infrastructure or replace equipment to operate safely
and efficiently;
●
potential loss of key employees and customers of the acquired company; and
●
future write-offs of intangible and other assets, including goodwill, if the acquired operations fail to generate sufficient
cash flows.
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If we are not able to achieve these objectives, the anticipated benefits of an acquisition may not be realized fully, if at all, or may
take longer to realize than expected. It is possible that the integration process could result in the loss of key employees, the
disruption of our ongoing business, failure to implement the business plan for the combined businesses, unanticipated issues in
integrating service offerings, logistics information, communications and other systems or other unanticipated issues, expenses
and liabilities, any or all of which could adversely affect our ability to maintain relationships with customers and employees or to
achieve the anticipated benefits of the acquisition.
In the event that we undertake future acquisitions, we may not be able to successfully execute our acquisition strategy.
We may experience delays in making acquisitions or be unable to make the acquisitions we desire for a number of reasons.
Suitable acquisition candidates may not be available at purchase prices that are attractive to us or on terms that are acceptable to
us. In pursuing acquisition opportunities, we typically compete with other companies, some of which have greater financial and
other resources than we do. We may not have available funds or common stock with a sufficient market price to complete an
acquisition. If we are unable to secure sufficient funding for potential acquisitions, we may not be able to complete acquisitions
that we otherwise find advantageous.
The timing and number of acquisitions we pursue may cause volatility in our financial results.
We are unable to predict the size, timing and number of acquisitions we may complete, if any. In addition, we may incur
expenses associated with sourcing, evaluating and negotiating acquisitions (including those that are not completed), and we also
may pay fees and expenses associated with financing acquisitions to investment banks and others. Any of these amounts may be
substantial, and together with the size, timing and number of acquisitions we pursue, may negatively impact and cause significant
volatility in our financial results and the price of our common stock.
Failure to realize the anticipated benefits and operational performance from previously acquired operations could lead to an
impairment of goodwill or other intangible assets.
As a result of acquisitions since 2010, including our acquisition of NRC in 2019, we have goodwill of $413.1 million, non-
amortizing intangible assets of $82.9 million and amortizing intangible assets of $406.7 million at December 31, 2021. We are
required to test goodwill and non-amortizing intangible assets at least annually to determine if impairment has occurred. We are
also required to test goodwill and intangible assets if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit or intangible asset below its carrying amount. The testing of goodwill and other
intangible assets for impairment requires us to make significant estimates about future performance and cash flows, as well as
other assumptions. These estimates can be affected by numerous factors, including potential changes in economic, industry or
market conditions, changes in laws or regulations, changes in business operations, changes in competition or changes in our stock
price and market capitalization. Changes in these factors, or changes in actual performance compared with estimates of our future
performance, may affect the fair value of goodwill or other intangible assets, which may result in an impairment charge.
Estimates of the future performance of our reporting units assume a certain level of revenue and earnings growth over the
projection period. The projected revenue and earnings growth is based on various factors and assumptions that we consider to be
reasonable, including, but not limited to, growth in the industries served by the Field Services reporting unit, successful
implementation of our business and marketing strategies for this reporting unit and continuing favorable market conditions for
the customers we serve. Should any of these assumptions turn out to be false and the projected growth not occur for these or other
reasons, the reporting units otherwise fail to meet their current financial plans or there are changes to any other key assumptions
used in the estimates, the financial performance of these reporting units could result in a future goodwill impairment.
We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible
assets become impaired as a result of a failure to realize the anticipated benefits and operational performance of acquired
operations, our financial condition and results of operations could be adversely impacted.
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Risks Relating to our Capital Structure
We may not be able or willing to pay future dividends.
The Company suspended its quarterly dividend, commencing with the second quarter of 2020, to preserve free cash flow and
enhance liquidity in response to the COVID-19 pandemic. Our ability to pay dividends is subject to our future financial condition
and certain conditions such as continued compliance with covenants contained in the Credit Agreement. Our Board of Directors
must also approve any dividends at their sole discretion. Pursuant to the Credit Agreement, we may only declare quarterly or
annual dividends if on the date of declaration, no event of default has occurred and no other event or condition has occurred that
would constitute an event of default due to the payment of the dividend. Unforeseen events or situations could cause non-
compliance with these covenants, or cause the Board of Directors to discontinue or reduce the amount of any future dividend
payment.
Future stock issuances could adversely affect common stock ownership interest and rights in comparison with those of other
security holders.
Our Board of Directors has the authority to issue additional shares of common stock or preferred stock without stockholder
approval. If additional funds are raised through the issuance of equity or securities convertible into common stock, or we use
shares of our common stock to pay a portion of the purchase price in any future acquisition, the percentage of ownership of our
existing stockholders would be reduced, and these newly issued securities may have rights, preferences or privileges senior to
those of existing stockholders. If we issue additional common stock or securities convertible into common stock, such issuance
would reduce the proportionate ownership and voting power of each other stockholder. In addition, such stock issuances might
result in a reduction of the book value of our common stock.
Anti-takeover provisions in our organizational documents and under Delaware law may impede or discourage a takeover,
which could cause the market price of our common stock to decline.
We are a Delaware corporation, and the anti-takeover provisions of Delaware law impose various impediments to the ability of a
third-party to acquire control of us, even if a change in control would be beneficial to our existing stockholders, which, under
certain circumstances, could reduce the market price of our common stock. In addition, protective provisions in our Amended and
Restated Certificate of Incorporation (the “charter”) and Amended and Restated Bylaws or the implementation by our Board of
Directors of a stockholder rights plan could prevent a takeover, which could harm our stockholders.
The price of our common stock has fluctuated in the past and this may make it difficult for stockholders to resell shares of
common stock at times or may make it difficult for stockholders to sell shares of common stock at prices they find attractive.
The trading price of our common stock may fluctuate widely as a result of a number of factors, many of which are outside our
control. In addition, the stock market is subject to fluctuations in share prices and trading volumes that affect the market prices of
the shares of many companies. These broad market fluctuations have adversely affected, and may in the future adversely affect,
the market price of our common stock. Among the factors that could affect our stock price are:
●
changes in financial estimates and buy/sell recommendations by securities analysts or our failure to meet analysts’
revenue or earnings estimates;
●
actual or anticipated variations in our operating results;
●
our earnings releases and financial performance;
●
market conditions in our industry and the general state of the securities markets;
●
fluctuations in the stock price and operating results of our competitors;
●
actions by institutional stockholders;
●
investor perception of us and the industry and markets in which we operate;
●
general economic conditions in the United States and Canada;
●
international disorder and instability in foreign financial markets, including but not limited to potential sovereign
defaults; and
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●
other factors described in “Risk Factors.”
There is no guarantee that our warrants will ever be in the money and they may expire worthless.
The exercise price for our warrants is $58.67 per share of common stock, subject to certain restrictions set forth in the Warrant
Agreement (as defined below). There is no guarantee that the warrants will ever be in the money prior to their expiration, and as
such, the warrants may expire worthless. In addition, our warrants were issued to holders of warrants of NRC prior to the NRC
Merger in registered form under that certain Assignment, Assumption and Amendment to the Warrant Agreement, dated as of
November 1, 2019, by and between US Ecology, Inc., American Stock Transfer & Trust Company, LLC, NRC and Continental
Stock Transfer & Trust Company (the “Warrant Agreement”). The Warrant Agreement provides that the terms of the warrants
may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the
approval by the holders of at least 65% of the then-outstanding warrants to make any change that adversely affects the interests of
the registered holders.
Following the Merger, holders of warrants will have the right to exercise their warrants for cash. If a holder exercises such
warrant within 30 days following the Company’s public disclosure of the consummation of the Merger, the exercise price of the
warrant will be reduced by an amount equal to the exercise price then in effect minus the difference of $48 per share (or the price
per share being paid in the Merger) and the Black-Scholes Warrant Value. Under the Warrant Agreement, the Black-Scholes
Warrant Value of a warrant immediately prior to the closing of the Merger is based on the Black-Scholes Warrant Model for a
Capped American Call on Bloomberg.
Our indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business, and our credit
agreement restricts our ability to engage in certain corporate and financial transactions.
On April 18, 2017, Predecessor US Ecology entered into a new senior secured credit agreement (as amended, restated,
supplemented or otherwise modified through the date hereof, the “Credit Agreement”) with Wells Fargo Bank, National
Association (“Wells Fargo”), as administrative agent for the lenders, swingline lender and issuing lender, and Bank of America,
N.A., as an issuing lender, that provides for a $500.0 million revolving credit facility (the “Revolving Credit Facility”), including
a $75.0 million sublimit for the issuance of standby letters of credit and a $40.0 million sublimit for the issuance of swingline
loans used to fund short-term working capital requirements. The Credit Agreement also contains an accordion feature whereby
Predecessor US Ecology may request up to $200.0 million of additional funds through an increase to the Revolving Credit
Facility, through incremental term loans, or some combination thereof. On August 6, 2019 and November 1, 2019, the Credit
Agreement was amended to permit and provide for Wells Fargo to lend $450.0 million in incremental terms loans to pay off the
existing debt of NRC in connection with the NRC Merger, to pay the fees, costs and expenses in connection with the NRC
Merger and to pay down outstanding revolving credit loans under the Revolving Credit Facility. As of December 31, 2021, we
had total indebtedness of $744.0 million, comprised of $441.0 million of term loans and $303.0 million of revolving credit loans
out of a $500.0 million revolving credit commitment under the Revolving Credit Facility. On June 29, 2021, the Credit
Agreement was amended to extend the maturity date of these revolving credit loans to June 29, 2026 (or such earlier date as the
revolving credit facility may otherwise terminate pursuant to the terms of the Credit Agreement). The maturity date of the term
loan is the earliest to occur of (i) November 1, 2026 (or, with respect to any lender, such later date as requested by us and
accepted by such lender) and (ii) termination of the Credit Agreement. The Credit Agreement makes us vulnerable to adverse
general economic or industry conditions and increases in interest rates, as borrowings under our senior secured credit facilities are
at variable-rates, and limits our ability to obtain additional financing in the future for working capital or other purposes.
In addition, the Credit Agreement and related ancillary agreements with our lenders contain certain covenants that, among other
things, restrict our ability to incur additional indebtedness, pay dividends and make other restricted payments, repurchase shares
of outstanding stock, create certain liens and engage in certain types of transactions. Our ability to borrow under the Credit
Agreement depends upon our compliance with the restrictions contained in the Credit Agreement and events beyond our control
could affect our ability to comply with these covenants.
The Credit Agreement also contains certain financial covenants requiring us to maintain a minimum consolidated interest
coverage ratio of 3.00 to 1.00 and a maximum consolidated total net leverage ratio. On June 26, 2020, Predecessor US Ecology
entered into the third amendment (the “Third Amendment”) to the Credit Agreement, and on June 29, 2021,
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Predecessor US Ecology entered into the fourth amendment (the “Fourth Amendment”) to the Credit Agreement. Among other
things, taken together, the Third Amendment and the Fourth Amendment amended the Credit Agreement (i) to create and extend
a covenant relief period to end on the earlier of December 31, 2022 and the date Predecessor US Ecology elects to end such
covenant relief period pursuant to the terms therein and (ii) to permanently increase Predecessor US Ecology’s consolidated total
net leverage ratio requirement as of the end of each fiscal quarter ending on and after December 31, 2022 to 4.50 to 1.00. During
the covenant relief period until the fiscal quarter ending December 31, 2022, the Third Amendment and the Fourth Amendment
taken together increased Predecessor US Ecology’s consolidated total net leverage ratio requirement as of the end of each fiscal
quarter to certain ratios above the 4.50 to 1.00 ratio otherwise in effect, subject to compliance with certain restrictions on
restricted payments and permitted acquisitions during such covenant relief period. At December 31, 2021, we were in compliance
with all of the financial covenants in the Credit Agreement, taking account of the covenant relief provided by the Fourth
Amendment.
As of December 31, 2021, we would not have been in compliance with the total net leverage ratio financial covenant in the Credit
Agreement had the covenant relief period under the Third and Fourth Amendment not been in effect. A breach of either of the
financial covenants would constitute an event of default as defined in the Credit Agreement and, if we are unable to obtain or
extend a waiver from our lenders, could result in the acceleration of all borrowings then outstanding. An amendment to the Credit
Agreement to decrease the consolidated interest coverage ratio, increase the total net leverage ratio, or both, may result in higher
interest rates on outstanding borrowings and therefore higher interest expense, and may not be achievable on terms acceptable to
us or at all. We may be unable to satisfy our obligations upon an event of default and we may not be able to refinance our
borrowings under the Credit Facility on commercially reasonable terms or at all.
Changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, may
adversely affect interest expense related to our debt.
Amounts drawn under our credit facilities bear interest rates at the election of the borrower, in relation to LIBOR or an alternate
base rate. On July 27, 2017, the Financial Conduct Authority in the United Kingdom announced that it would phase out LIBOR
as a benchmark by the end of 2021. The U.S. Federal Reserve is considering replacing U.S. dollar LIBOR with a newly created
index called the Secured Overnight Financing Rate, calculated with a broad set of short-term repurchase agreements backed by
treasury securities. Our credit facilities contain certain provisions concerning the possibility that LIBOR may cease to exist, and
that an alternative reference rate may be chosen. However, if LIBOR in fact ceases to exist, and no alternative rate is acceptable
to the Company or its lenders, amounts drawn under our credit facilities would be subject to the alternate base rate, which may be
a higher interest rate than LIBOR which would increase our interest expense. As a result, we may need to renegotiate our credit
facilities and may not be able to do so with terms that are favorable to us. The overall financial market may be disrupted as a
result of the phase-out or replacement of LIBOR. Disruption in the financial market or the inability to renegotiate the credit
facility with favorable terms could have a material adverse effect on our business, financial position, and operating results. We
currently do not expect to be required to transition from LIBOR as the benchmark for interest rates under the Credit Agreement to
an alternative reference rate before 2023.
Risks Related to the Jones Act
Our business would be adversely affected if we failed to comply with the Jones Act’s restrictions on ownership of our capital
stock by non-U.S. Citizens.
A substantial portion of our operations is conducted in the U.S. coastwise trade and is subject to the requirements of the Jones
Act. The Jones Act restricts waterborne transportation of merchandise and passengers for hire by water or by land and water,
either directly or via a foreign port, between points in the United States and certain of its island territories and possessions to
U.S.-flag vessels meeting certain requirements, including ownership and control by U.S. Citizens (within the meaning of the
Jones Act). We are responsible for monitoring the non-U.S. Citizen ownership of our common stock and other equity interests to
ensure compliance with the Jones Act. We could lose the privilege of owning and operating vessels in the U.S. coastwise trade if
non-U.S. Citizens were to own or control, in the aggregate, more than 25% of our common stock or other equity interests in us.
Such a loss would have a material adverse effect on our business and results of operations. Violations of the Jones Act would
result in us losing eligibility to engage in the U.S. coastwise trade, the imposition of substantial penalties against us, including
fines and seizure and forfeiture of our vessels, and/or the temporary
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or permanent inability to document our vessels in the United States with coastwise endorsements, any of which could have a
material adverse effect on our financial condition and results of operations. Although we currently believe we meet the
requirements to engage in the U.S. coastwise trade, and there are provisions in the charter that were designed to assist us in
complying with these requirements, there can be no assurance that we will be in compliance with the Jones Act in the future.
Repeal, amendment, suspension or non-enforcement of the Jones Act would result in additional competition for a substantial
portion of our services and could have a material adverse effect on our business.
We are subject to the Jones Act, which restricts the transportation of merchandise and passengers for hire by water or by land and
water, either directly or via a foreign port, between points in the United States and certain of its island territories and possessions
to U.S.-flag vessels that meet certain requirements, including that they are built in the United States and owned by U.S. Citizens
(within the meaning of the Jones Act), and manned by predominantly U.S. citizen crews. During the past several years, interest
groups have lobbied the U.S. Congress, and legislation has been introduced, to repeal certain provisions of the Jones Act to
facilitate foreign-flag vessel competition for trades and cargoes currently reserved for U.S.-flag vessels under the Jones Act. We
expect that continued efforts will be made to modify or repeal the Jones Act. In addition, the Secretary of the Department of
Homeland Security may waive the requirement for using U.S.-flag vessels with coastwise endorsements in the U.S. coastwise
trade in the interest of national defense. In addition, our advantage as a U.S. Citizen operator of Jones Act vessels could be
eroded by periodic efforts and attempts by foreign interests to circumvent certain aspects of the Jones Act. In addition, maritime
transportation services are currently excluded from the General Agreement on Trade in Services (“GATS”) and are the subject of
reservations by the United States in NAFTA, the United States-Mexico-Canada Agreement (“USMCA”) and other international
free trade agreements. If maritime cabotage services were included in the GATS, NAFTA, USMCA or other international trade
agreements, or if the restrictions contained in the Jones Act were otherwise repealed, altered or waived, the transportation of
cargo and passengers between U.S. ports could be opened to foreign-flag, foreign-built vessels or foreign-owned vessels. To the
extent such foreign competition is permitted from vessels built in lower-cost shipyards with promotional foreign tax incentives or
favorable tax regimes and crewed by non-U.S. Citizens with lower wages and benefits than U.S. citizens, such competition could
have a material adverse effect on our business, financial position, results of operations and cash flows.
Our common stock is subject to restrictions on ownership by non-U.S. Citizens, which could require divestiture by non-U.S.
Citizen stockholders and could have a negative impact on the transferability of our common stock, its liquidity and market
value, and upon a change of control of the Company.
Certain of our operations are conducted in the U.S. coastwise trade and are governed by U.S. federal laws commonly known as
the Jones Act. The Jones Act restricts the transportation of merchandise and passengers for hire by water or by land and water,
either directly or via a foreign port, between points in the United States and certain of its island territories and possessions, to
U.S.-flag vessels that meet certain requirements, including that they are built in the United States, owned and operated by U.S.
Citizens (within the meaning of the Jones Act), and manned by predominantly U.S. Citizen crews. We could lose the privilege of
owning and operating vessels in the U.S. coastwise trade and may become subject to penalties and risk seizure and forfeiture of
our U.S.-flag vessels if non-U.S. Citizens were to own or control, in the aggregate, more than 25% of any class or series of our
capital stock. Such loss would have a material adverse effect on our results of operations.
Our charter authorizes, with respect to any class or series of our capital stock, certain rules, policies and procedures, including
procedures with respect to transfer of shares, to assist in monitoring and maintaining compliance with the Jones Act’s U.S.
citizenship requirements, which may have an adverse effect on holders of shares of our common stock.
In order to provide a reasonable margin for compliance with the Jones Act, the charter contains provisions that limit the aggregate
percentage beneficial ownership by non-U.S. Citizens of any class or series of our capital stock (including the common stock) to
24% of the outstanding shares of each such class or series to ensure that ownership by non-U.S. Citizens will not exceed the
maximum percentage permitted by the Jones Act (presently 25%).
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The aggregate percentage of non-U.S. Citizen ownership of our outstanding common stock is expected to fluctuate based on daily
trading and may increase above the 24% maximum permitted percentage. At and during such times that the 24% permitted
percentage of shares of common stock held by non-U.S. Citizens is reached, we will be unable to issue any further shares of
common stock to non-U.S. Citizens (including any shares issuable upon exercise of the warrants) or permit transfers of common
stock to non-U.S. Citizens. Any issuance or transfer of shares in excess of such permitted percentage shall be ineffective against
us, and neither we nor our transfer agent are required to register such purported issuance or transfer of shares or be required to
recognize the purported transferee or owner as our stockholder for any purpose whatsoever except to exercise our remedies. Any
such excess shares in the hands of a non-U.S. Citizen shall not have any voting or dividend rights. In addition, we, in our
discretion, are entitled to redeem all or any portion of such shares most recently acquired (as determined by our Board of
Directors in accordance with guidelines that are set forth in the charter), by non-U.S. Citizens, in excess of such maximum
permitted percentage for such class or series at a redemption price based on a fair market value formula that is set forth in the
charter, which is to be paid by the issuance of redemption warrants (the “Redemption Warrants”) permitting the holders to
receive shares of common stock in the future when the receipt thereof would not violate the charter at an exercise price of $0.01
per share. In the event that we determine that Redemption Warrants would be treated by the USCG as capital stock, or if we are
unable to issue the Redemption Warrants for any other reason, we may redeem the excess shares with cash, promissory notes or a
combination of both at the discretion of our board of directors.
As a result of these provisions, a purported stockholder who is a non-U.S. Citizen may not receive any return on its investment in
any such excess shares it purportedly purchases or owns, as the case may be, and it may sustain a loss. Further, we may have to
incur additional indebtedness, or use available cash (if any), to fund all or a portion of such redemption, in which case our
financial condition may be materially weakened. The existence and enforcement of these requirements could have an adverse
impact on the liquidity or market value of our equity securities in the event that U.S. Citizens were unable to transfer shares in the
Company to non-U.S. Citizens. Furthermore, under certain circumstances, this ownership restriction could discourage, delay or
prevent a change of control of the Company. So that we may monitor and maintain our compliance with the Jones Act, provisions
in the charter permit us to require that owners of any shares of our capital stock provide confirmation of their citizenship. In the
event that a person does not submit such documentation to us, those provisions provide us with certain remedies, including the
suspension of voting, dividend and distribution rights and treatment of such person as a non-U.S. Citizen unless and until we
receive the requested documentation confirming that such person is a U.S. Citizen. As a result of non-compliance with these
provisions, an owner of the shares of our common stock may lose significant rights associated with those shares.
If, for any reason, we are unable to effect such a redemption when such ownership of shares by non-U.S. Citizens is in excess of
25% of the common stock, or otherwise prevent non-U.S. Citizens in the aggregate from owning shares in excess of 25% of any
class or series of our capital stock, or we fail to exercise our redemption rights because we are unaware that such ownership
exceeds such percentage, we will likely be unable to comply with the Jones Act and will likely be required by the applicable
governmental authorities to suspend our operations in the U.S. coastwise trade. Any such actions by governmental authorities
would have a material adverse effect on our business, financial position, results of operations and cash flows.
General Risk Factors
Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business,
financial condition and results of operations.
We face competition from companies with greater resources than us, companies with closer geographic proximity to waste sites,
service offerings we do not provide and that can provide lower pricing than we can in certain instances. An increase in the
number or location of commercial treatment or disposal facilities for hazardous or radioactive waste, significant expansion of
existing competitor permitted capabilities, acquisitions by competitors or a decrease in the treatment or disposal fees charged by
competitors could materially and adversely affect our results of operations. Our business is also heavily affected by waste
disposal fees imposed by government agencies. These fees, which vary from state to state and are periodically adjusted, may
adversely impact the competitive environment in which we operate.
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Adverse economic conditions, government funding or competitive pressures affecting our customers could harm our business.
We serve oil refineries, chemical production plants, steel mills, real estate developers, waste brokers/aggregators serving small
manufacturers and other industrial customers that are, or may be, affected by changing economic conditions and competition.
These customers may be significantly impacted by deterioration in the general economy and may curtail waste production and/or
delay spending on plant maintenance, waste cleanup projects and other discretionary work. Spending by government customers
may also be reduced or temporarily suspended due to declining tax revenues that may result from a general deterioration in
economic conditions or other federal or state fiscal policy. Factors that can impact general economic conditions and the level of
spending by customers include the general level of consumer and industrial spending, increases in fuel and energy costs,
residential and commercial real estate and mortgage market conditions, labor and healthcare costs, access to credit, consumer
confidence and other macroeconomic factors affecting spending behavior. Market forces may also compel customers to cease or
reduce operations, declare bankruptcy, liquidate or relocate to other countries, any of which could adversely affect our business.
Our operations are significantly affected by the commencement and completion of large and small cleanup projects, potential
seasonal fluctuations due to weather, budgetary decisions and cash flow limitations 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 cleanup projects. We do not control such
factors, which can cause our revenue and income to vary significantly from quarter to quarter and year to year.
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 of air, groundwater or soil or expose our employees or the public to contamination. Under current law, we
may be held liable for damage caused by conditions that existed before we acquired the assets or operations involved. Also, we
may be liable if we arrange for the transportation, disposal or treatment of hazardous substances that cause environmental
contamination at facilities operated by others, or if a predecessor made such arrangements and we are a successor. Liability for
environmental damage could have a material adverse effect on our financial condition, results of operations and cash 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 governmental regulations, 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 or other
expenditures, or limit operations. Changes in laws or regulations or changes in the enforcement or interpretation of existing laws,
regulations or permitted activities may require us to modify existing operating licenses or permits, or obtain additional approvals
or limit operations. New governmental requirements that raise compliance standards or require changes in operating practices or
technology may impose significant costs and/or limit operations.
Our revenue is primarily generated as a result of requirements imposed on our customers under federal, state, and provincial laws
and regulations to protect public health and the environment. If requirements to comply with laws and regulations governing
management of PCB, hazardous or radioactive waste were relaxed or less vigorously enforced, demand for our services could
materially decrease and our revenues and earnings could be significantly reduced.
We could be subject to significant fines and penalties, and our reputation could be adversely affected, if our businesses, or
third parties with whom we have a relationship, were to fail to comply with U.S. or foreign laws or regulations.
Some of our projects and business may be conducted in countries where corruption has historically been prevalent. It is our
policy to comply with all applicable anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act (the “FCPA”),
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and with applicable local laws of the foreign countries in which we operate, and we monitor our local partners’ compliance with
such laws as well. Our reputation may be adversely affected if we were reported to be associated with corrupt practices or if we
failed to comply with such laws. Such damage to our reputation could adversely affect our ability to grow our business.
Additionally, violations of such laws could subject us to significant fines and penalties.
Our participation in multi-employer pension plans may subject us to liabilities that could materially adversely affect our
liquidity, cash flows and results of operations.
Certain of the Company’s wholly-owned subsidiaries participate in multi-employer defined benefit pension plans under the terms
of collective bargaining agreements covering most of the subsidiaries’ union employees. To the extent that those plans are
underfunded, the Employee Retirement Income Security Act of 1974, as amended by the Multi-Employer Pension Plan
Amendments Act of 1980 (“ERISA”), may subject us to substantial liabilities if we withdraw from such multi-employer plans or
if they are terminated. Under current law regarding multi-employer defined benefit plans, a plan’s termination, an employer’s
voluntary partial or complete withdrawal from or the mass withdrawal of all contributing employers from, an underfunded multi-
employer defined benefit plan requires participating employers to make payments to the plan for their proportionate share of the
multi-employer plan’s unfunded vested liabilities. Furthermore, the Pension Protection Act of 2006 added new funding rules
generally applicable to plan years beginning after 2007 for multi-employer plans that are classified as “endangered,” “seriously
endangered,” or “critical” status. If plans in which we participate are in critical status, benefit reductions may apply and/or we
could be required to make additional contributions. Contributions to these funds could also increase as a result of future collective
bargaining with the unions, a shrinking contribution base as a result of the insolvency of other companies who currently
contribute to these funds, failure of the plan to meet ERISA’s minimum funding requirements, lower than expected returns on
pension fund assets, or other funding deficiencies. Any of the foregoing events could materially adversely affect our liquidity,
cash flows and results of operations.
Based upon the information available to us from plan administrators as of April 30, 2021, certain of the multi-employer pension
plans in which we participate are underfunded. The Pension Protection Act requires that underfunded pension plans improve their
funding ratios within prescribed intervals based on the level of their underfunding. In addition, if a multi-employer defined
benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible
excise tax of 5% on the amount of the accumulated funding deficiency for those employers contributing to the fund. We have
been notified that certain plans to which our subsidiaries contribute are in “critical” status and these plans may require additional
contributions in the form of a surcharge on future benefit contributions required for future work performed by union employees
covered by these plans. As a result, we expect our required contributions to these plans to increase in the future. The amount of
additional funds we may be obligated to contribute in the future cannot be estimated, as such amounts will be based on future
levels of work that require the specific use of the union employees covered by these plans, investment returns and the level of
underfunding of such plans.
A cybersecurity incident could negatively impact our business and our relationships with customers.
We use computers in substantially all aspects of our business operations. We also use mobile devices and other online activities
to connect with our employees and our customers. Such uses of technology give rise to cybersecurity risks, including security
breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and
transmission of numerous classes of sensitive and/or confidential information and intellectual property, including customers’
personal information, private information about employees, and financial and strategic information about the Company and its
business partners. Further, if the Company in the future pursues acquisitions or new initiatives that require expanding or
improving our information technologies, this may result in a larger technological presence and corresponding exposure to
cybersecurity risk. If we fail to assess and identify cybersecurity risks associated with acquisitions and new initiatives, we may
become increasingly vulnerable to such risks. Further, despite these security measures, the Company’s computer systems and
infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions.
Additionally, while we have implemented measures to prevent security breaches and cyber incidents, our preventative measures
and incident response efforts may not be entirely effective, and our implementation of various procedures and controls to monitor
and mitigate security threats and to increase security for our information, facilities and infrastructure may result in increased
capital and operating costs. Costs for insurance may also increase as a result of security threats, and some insurance coverage
may become more difficult to obtain, if available at all.
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Cybersecurity attacks in particular are becoming more sophisticated. We rely extensively on information technology systems,
including internet sites, computer software, data hosting facilities and other hardware and platforms, some of which are hosted by
third parties, to assist in conducting our business. Our technologies systems may become the target of cybersecurity attacks,
including without limitation malicious software, attempts to gain unauthorized access to data and systems, and other electronic
security breaches that could lead to disruptions in critical systems and materially and adversely affect us in a variety of ways: the
theft, destruction, loss, misappropriation or release of sensitive and/or confidential information or intellectual property, or
interference with our information technology systems or the technology systems of third parties on which we rely, could result in
business disruption, negative publicity, brand damage, violation of privacy laws, loss of customers, potential liability and
competitive disadvantage.
Unanticipated changes in our tax provisions or adverse outcomes resulting from examination of our income tax returns could
adversely affect our results of operations.
We are subject to income taxes in the United States and various foreign jurisdictions. Our effective income tax rate could be
adversely affected by changes in tax laws or interpretations of those tax laws, or by changes in the valuation of our deferred tax
assets and liabilities. Additionally, our effective tax rate may be affected by the tax effects of acquisitions or restructuring
activities we may undertake, changes in share-based compensation, newly enacted tax legislation and uncertain tax positions we
may take in the short term in response to such legislation. Finally, we are subject to the examination of our income tax returns by
the Internal Revenue Service in the United States and other tax authorities in the various countries in which we operate, which
may result in the assessment of additional income taxes. We regularly assess the likelihood of adverse outcomes resulting from
these examinations to determine the adequacy of our provision for income taxes. However, unanticipated outcomes from
examinations could have a material adverse effect on our business, financial condition and results of operations.
Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied. The
U.S. recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. In addition,
governmental tax authorities are increasingly scrutinizing the tax positions of companies. If the U.S. or foreign tax authorities of
jurisdictions within which we operate change applicable tax laws, our overall taxes could increase, and our business, financial
condition or results of operations may be adversely impacted.
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 senior managers to achieve our objectives. Our objective is to retain our present management and sales teams and
identify, hire, train, motivate and retain other highly skilled personnel. The loss of any key management employee or sales
personnel could adversely affect our business and results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
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ITEM 2. PROPERTIES
The following table describes our principal physical properties and facilities at December 31, 2021 owned or leased by us. We
believe that our existing properties are in good condition and suitable for conducting our business.
Location
Segment
Function
Own/Lease
Beatty, Nevada
Waste Solutions
Waste treatment and landfill disposal
Lease
Robstown, Texas
Waste Solutions
Waste treatment, landfill disposal and
recycling
Own
Grand View, Idaho
Waste Solutions
Waste treatment and landfill disposal
Own
Belleville, Michigan
Waste Solutions
Waste treatment and landfill disposal
Own
Blainville, Québec, Canada
Waste Solutions
Waste treatment and landfill disposal
Own/Lease
Richland, Washington
Waste Solutions
Landfill disposal
Sublease
Winnie, Texas
Waste Solutions
Waste processing and deep-well disposal
Own
Detroit, Michigan
Waste Solutions
Waste treatment
Own
Canton, Ohio
Waste Solutions
Waste treatment and recycling
Own
Harvey, Illinois
Waste Solutions
Waste treatment
Own
York, Pennsylvania
Waste Solutions
Waste treatment
Own
Tulsa, Oklahoma
Waste Solutions
Waste treatment
Own
Romulus, Michigan
Waste Solutions
Recycling
Own
Mt. Airy, North Carolina
Waste Solutions
Waste treatment
Own
Tilbury, Ontario, Canada
Waste Solutions
Waste treatment
Own
Vernon, California
Waste Solutions
Waste treatment
Own
Sulligent, Alabama
Field Services
Field and industrial waste management
Own
Tampa, Florida
Field Services
Field and industrial waste management
Own
Taylor, Michigan
Field Services
Field and industrial waste management
Own
Bayonne, New Jersey
Field Services
Field and industrial waste management
Lease
Atlanta, Georgia
Field Services
Field and industrial waste management
Lease
Wrentham, Massachusetts
Field Services
Field and industrial waste management
Own
Dallas, Texas
Field Services
Field and industrial waste management
Own
Midland, Texas
Field Services
Field and industrial waste management
Own
Kenai, Alaska
Field Services
Field and industrial waste management
Lease
Anchorage, Alaska
Field Services
Field and industrial waste management
Lease
Williston, Vermont
Field Services
Field and industrial waste management
Lease
Portland, Maine
Field Services
Field and industrial waste management
Lease
Kennedy, Texas
Energy Waste
Landfill disposal
Own
Pecos County, Texas
Energy Waste
Landfill disposal
Own
Reagan County, Texas
Energy Waste
Landfill disposal
Own
Boise, Idaho
Corporate
Corporate Headquarters
Lease
In addition to the principal physical properties detailed in the table above, the Company owns or leases a number of smaller (less
than 20,000 sq. ft.) properties supporting our Field Services segment.
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44
The following table provides additional information for our facilities with onsite landfills including total acreage owned or
controlled by us at each facility, estimated amount of permitted airspace available at each facility, the estimated amount of non-
permitted airspace and the estimated life at each facility. All estimates are as of December 31, 2021.
Permitted
Non‑Permitted Estimated
Total
Airspace
Airspace
Life
Location
Segment
Acreage (Cubic Yards) (Cubic Yards) (Years)
Beatty, Nevada (1)
Waste Solutions
480
7,499,391
—
36
Robstown, Texas (2)
Waste Solutions
1,425
9,671,107
—
43
Grand View, Idaho (3)
Waste Solutions
1,411
9,914,010
18,100,000
224
Belleville, Michigan (4)
Waste Solutions
455
13,032,718
—
35
Blainville, Québec, Canada (5)
Waste Solutions
350
4,987,483
—
17
Richland, Washington (6)
Waste Solutions
100
18,375
—
34
Karnes County, Texas (7)
Energy Waste
382
4,371,154
—
25
Reagan County, Texas (8)
Energy Waste
645
11,649,923
—
151
Pecos County, Texas (9)
Energy Waste
207
11,142,085
—
198
Total
72,286,246
18,100,000
(1) Our Beatty, Nevada facility, which began receiving hazardous waste in 1970, is located in the Amargosa Desert
approximately 120 miles northwest of Las Vegas, Nevada and approximately 30 miles east of Death Valley, California. The
facility operates on 480 acres owned by the state of Nevada. Our operations are governed by an operating agreement with the
state of Nevada, executed in April 2016, with an initial term of 20 years (and an optional 20-year extension), and a year-to-
year periodic tenancy lease with the State, last amended in April 2007. In 2016, the facility secured permit modifications
from the Nevada Division of Environmental Protection and the USEPA authorizing the construction of a new landfill unit at
the facility. The first phase of this new landfill was completed in 2017. The state of Nevada assesses disposal fees to fund a
dedicated trust account to pay for future closure and post-closure costs.
(2) Our Robstown, Texas facility began operations in 1973. It is located on 240 acres owned by the Company approximately 10
miles west of Corpus Christi, Texas. We own an additional 1,185 acres of adjacent land for future expansion. We also own
240 acres of land five miles west of the facility adjacent to a rail line where we have operated a rail transfer station since
2006. In January 2018, the Texas Commission of Environmental Quality approved our permit for landfill expansion onto 180
acres of our adjacent land, adding approximately 10 million cubic yards, or 30 years, of future airspace.
(3) Our Grand View, Idaho facility, purchased in 2001, is located on 1,252 acres of Company-owned land approximately 60
miles southeast of Boise, Idaho in the Owyhee Desert. We own an additional 159 acres approximately two miles east of the
facility that provides a clay source for site operations (liner construction and waste treatment). We also own 189 acres where
our rail transfer station is located approximately 30 miles northeast of the disposal facility. This site has two enclosed rail-to-
truck waste transfer facilities located adjacent to the main line of the Union Pacific Railroad.
(4) Our Belleville, Michigan facility began operations in 1957 and began disposing of waste in the onsite landfill in 1969. The
facility is located on 455 acres owned by the Company approximately 30 miles from Detroit, Michigan. We also own 12
acres of land nine miles from the facility adjacent to a rail line where we have operated a rail transfer station since 1998.
(5) Our Blainville, Québec, Canada facility has been in operation since 1983 and is located approximately 30 miles northwest of
Montreal, Québec, Canada. The facility includes an indoor hazardous and industrial waste treatment and storage facility and
a rail transfer station located on 25 acres adjacent to a 325 acre disposal site. The treatment processing facility is on land
owned by the Company. The disposal site which is adjacent to the owned treatment processing facility is leased from the
Province of Québec with a term through 2023. The site is permitted to accept up to 1,125,000 metric tons (1,237,500 U.S.
tons) over the five-year permit period ending in May 2023. 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
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45
soils received from the U.S., waste received from the U.S. is limited to 506,250 metric tons (556,875 U.S. tons) over the
five-year permit period. The Province assesses fees to fund a dedicated government trust account to pay for post-closure
costs at the disposal site.
(6) Our Richland, Washington LLRW facility has been in operation since 1965 and is located on 100 acres of land leased by the
State of Washington from the federal government on the U.S. Department of Energy Hanford Reservation approximately 35
miles west of Richland, Washington. We sublease 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, giving us control of the property until the year 2055 provided that we meet our obligations
and operate in a compliant manner. The facility’s intended operating life is equal to the period of the sublease. The State
assesses user fees for local economic development, state regulatory agency expenses and a dedicated trust account to pay for
long-term care after the facility closes. The State maintains separate, dedicated trust funds for future closure and post-closure
costs.
(7) Our Karnes County, Texas facility, located in the Permian Basin on 135 acres owned by the Company approximately six
miles southwest of Kennedy, Texas, began operations in February 2016. We own an additional 247 acres of adjacent land for
future expansion if needed. The commercial disposal facility accepts energy-related waste only and is regulated by the RRC
under a five-year permit cycle with renewal issued upon request provided no outstanding operational issues.
(8) Our Reagan County, Texas facility, located in the Permian Basin on 645 acres owned by the Company approximately 30
miles northwest of Big Lake, Texas, began operations in July 2019. The commercial disposal facility accepts energy-related
waste only and is regulated by the RRC under a five-year permit cycle with renewal issued upon request provided no
outstanding operational issues.
(9) Our Pecos County, Texas facility, located in the Permian Basin on 207 acres owned by the Company approximately 28 miles
north of Fort Stockton, Texas, began operations in June 2019. The commercial disposal facility accepts energy-related waste
only and is regulated by the RRC under a five-year permit cycle with renewal issued upon request provided no outstanding
operational issues.
We also own 640 acres in Andrews County, Texas, located in the Permian Basin approximately 25 miles west of Andrews,
Texas. The site is permitted for approximately 11.5 million cubic yards of energy-related waste disposal, however, we have not
constructed any landfill capacity at the site as of December 31, 2021. The site is regulated by the RRC under a five-year permit
cycle with renewal issued upon request provided no outstanding operational issues.
ITEM 3. LEGAL PROCEEDINGS
Information with respect to this item may be found in Note 18 to the Consolidated Financial Statements included in “Part II, Item
8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, under the caption “Litigation and
Regulatory Proceedings” which information is incorporated herein by reference.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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46
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Common Stock
Our common stock is listed on the Nasdaq Global Select Market under the symbol ECOL and our warrants are listed on the
Nasdaq Capital Market under the symbol ECOLW. As of February 14, 2022, there were approximately 22,094 beneficial owners
of our common stock and one holder of record of our warrants.
Stock Performance Graph
The following graph compares the five-year cumulative total return on our common stock with the comparable five-year
cumulative total returns of the Nasdaq Composite Index and Dow Jones Waste & Disposal Services Index for the period from the
end of fiscal 2016 to the end of fiscal 2021. The stock price performance shown below is not necessarily indicative of future
performance.
Comparison of Cumulative Total Stockholder Return(1) Among
US Ecology, Inc., Nasdaq Composite Index and
Dow Jones Waste & Disposal Services Index
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47
Dow Jones
US Waste &
Nasdaq
Disposal
Date
US Ecology, Inc. Composite Services Index
December 31, 2016
$
100.00
$ 100.00
$
100.00
December 31, 2017
$
105.25
$ 129.64
$
117.08
December 31, 2018
$
131.54
$ 125.96
$
117.21
December 31, 2019
$
122.36
$ 172.17
$
158.35
December 31, 2020
$
77.01
$ 249.51
$
168.74
December 31, 2021
$
67.71
$ 304.85
$
235.89
(1) Total return assuming $100 invested on December 31, 2016 and reinvestment of dividends on the day they were paid.
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, is not 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 made before or after the date hereof, regardless of any general incorporation
language in such filing.
Securities Authorized for Issuance under Equity Compensation Plans
Information with respect to compensation plans under which our equity securities are authorized for issuance is discussed in
Item 12 of Part III of this Annual Report on Form 10-K.
Issuer Purchases of Equity Securities
On June 6, 2020, the Company’s Board of Directors’ authorization to repurchase the Company’s outstanding shares of common
stock and warrants under the share repurchase program expired. In the future, the Board of Directors may consider reauthorizing
the repurchase program at any time, and the timing of any future repurchases of common stock or warrants will be based upon
prevailing market conditions and other factors. The Company may from time to time also consider other options for repurchasing
some or all of its warrants, including but not limited to a tender offer for all of the outstanding warrants. The Company
repurchased 397,600 shares of common stock in an aggregate amount of $17.3 million under the repurchase program during the
year ended December 31, 2020.
The following table summarizes the purchases of shares of our common stock during the year ended December 31, 2021:
Total Number of
Approximate Dollar
Shares Purchased as
Value of Shares that
Part of Publicly
May Yet be Purchased
Total Number of
Average Price
Announced Plan or
Under the Plans or
Period
Shares Purchased Paid per Share
Program
Programs
January 1 to 31, 2021 (1)
12,788
$
36.33
—
$
—
February 1 to 28, 2021
—
—
—
—
March 1 to 31, 2021
—
—
—
—
April 1 to 30, 2021
—
—
—
—
May 1 to 31, 2021
—
—
—
—
June 1 to 30, 2021
—
—
—
—
July 1 to 31, 2021
—
—
—
—
August 1 to 31, 2021
—
—
—
—
September 1 to 30, 2021
—
—
—
—
October 1 to 31, 2021
—
—
—
—
November 1 to 30, 2021
—
—
—
—
December 1 to 31, 2021
—
—
—
—
Total
12,788
$
36.33
—
$
—
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48
(1) Represents shares surrendered or forfeited in connection with certain employees’ tax withholding obligations related to the
vesting of shares of restricted stock.
Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities
We did not engage in any unregistered sales of our securities during the years ended December 31, 2021, 2020 and 2019.
ITEM 6. SELECTED FINANCIAL DATA
Reserved
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
General
US Ecology is a leading provider of environmental services to commercial and governmental entities. The Company addresses
the complex waste management and response needs of its customers, offering treatment, disposal and recycling of hazardous,
non-hazardous and radioactive waste, leading emergency response and standby services, and a wide range of complementary
field services. US Ecology’s focus on safety, environmental compliance and best-in-class customer service enables us to
effectively meet the needs of our customers and to build long-lasting relationships.
We have a network of fixed facilities and service centers operating primarily in the United States, Canada, the United Kingdom
and Mexico. Our fixed facilities include five RCRA subtitle C hazardous waste landfills, three landfills serving waste streams
regulated by the RRC and one LLRW landfill. We also have various other TSDF facilities located throughout the United States.
These facilities generate revenue from fees charged to transport, recycle, treat and dispose of waste and to perform various field
services for our customers.
Effective in the fourth quarter of 2020, we made changes to the manner in which we manage our business, make operating
decisions and assess our performance. The energy waste business that was acquired through the NRC Merger now comprises our
Energy Waste segment. Prior to this change, the energy waste business was included in the Waste Solutions segment (formerly
“Environmental Services”). Throughout this Annual Report on Form 10-K, all periods presented have been recast to reflect these
changes. Under our new structure our operations are managed in three reportable segments reflecting our internal management
reporting structure and nature of services offered as follows:
Waste Solutions (formerly “Environmental Services”)—This segment provides safe and compliant specialty
waste management services including treatment, disposal, beneficial re-use, and recycling of hazardous, non-
hazardous, and other specialty waste at Company-owned treatment, storage, and disposal facilities, excluding
the services within our Energy Waste segment.
Field Services (formerly “Field & Industrial Services”)—This segment provides safe and compliant
logistics and response solutions focusing on “in-field’ service offerings through our network of 10-day transfer
facilities. Our logistics solutions include specialty waste packaging, collection, transportation, and total waste
management. Our response solutions include land and marine based emergency response, OSRO standby
compliance, remediation, and industrial services. The Field Services segment completes our vertically
integrated model and serves to increase waste volumes into our Waste Solutions segment.
Energy Waste—This segment provides safe and compliant energy waste management and critical support
services to up-stream oil and gas customers in the Permian and Eagle Ford basins primarily operating in Texas.
Services include spill containment and site remediation, equipment cleaning and maintenance services,
specialty equipment rental, including tanks, pumps and containment, safety monitoring and management and
transportation and disposal. This segment includes all of the energy waste business of the legacy NRC
operations and none of the legacy US Ecology operations.
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49
The operations not managed through our three reportable segments are recorded as “Corporate.” Corporate selling, general and
administrative expenses include typical corporate items of a general nature such as certain labor, information technology, legal,
accounting and other expenses not associated with a specific reportable segment. Income taxes are assigned to Corporate, but all
other items are included in the segment where they originated. Inter-company transactions have been eliminated from the
segment information and are not significant between segments.
Effective in the first quarter of 2021, we changed our management structure resulting in the reclassification of certain overhead
expenses from our Waste Solutions, Field Services and Energy Waste reportable segments to Corporate. As a result, certain
regional overhead costs historically presented within our reportable segments as Direct operating costs were further reclassified
to Corporate as Selling, general and administrative expenses to conform to the current period’s presentation. Throughout this
Annual Report on Form 10-K, all periods presented have been recast to reflect these changes.
In order to provide insight into the underlying drivers of our waste volumes and related T&D revenues, we evaluate period-to-
period changes in our T&D revenue for our Waste Solutions segment based on the industry of the waste generator, based on
North American Industry Classification System codes.
The composition of the Waste Solutions segment T&D revenues by waste generator industry for the years ended December 31,
2021 and 2020 were as follows:
% of Treatment and Disposal Revenue (1) for the
Years Ended December 31,
Generator Industry
2021
2020
Chemical Manufacturing
17%
19%
Metal Manufacturing
16%
16%
Broker / TSDF
12%
12%
General Manufacturing
12%
11%
Government
8%
8%
Refining
6%
6%
Waste Management & Remediation
5%
3%
Utilities
4%
6%
Transportation
3%
4%
Mining, Exploration and Production
3%
2%
Other (2)
14%
13%
(1) Excludes all transportation service revenue.
(2) Includes retail and wholesale trade, rate regulated, construction and other industries.
We also categorize our Waste Solutions T&D revenue as either “Base Business” or “Event Business” based on the underlying
nature of the revenue source.
Base Business consists of waste streams from ongoing industrial activities and tends to be reoccurring in nature. We define Event
Business as non-recurring projects that are expected to equal or exceed 1,000 tons, with Base Business defined as all other
business not meeting the definition of Event Business. The duration of Event Business projects can last from a several-week
cleanup of a contaminated site to a multiple year cleanup project.
During 2021, Base Business revenue increased 6% compared to 2020. Base Business revenue was approximately 76% of total
2021 T&D revenue, up from 73% in 2020. Our business is highly competitive and no assurance can be given that we will
maintain these revenue levels or increase our market share.
A significant portion of our disposal revenue is attributable to discrete Event Business projects which vary widely in size,
duration and unit pricing. For the year ended December 31, 2021, approximately 24% of our T&D revenue was derived from
Event Business projects. The one-time nature of Event Business, diverse spectrum of waste types received and widely varying
unit pricing necessarily creates variability in revenue and earnings. This variability may be influenced by general
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50
and industry-specific economic conditions, funding availability, changes in laws and regulations, government enforcement
actions or court orders, public controversy, litigation, weather, commercial real estate, closed military bases and other project
timing, government appropriation and funding cycles and other factors. The types and amounts of waste received from Base
Business also vary from quarter to quarter.
This variability can also cause significant quarter-to-quarter and year-to-year differences in revenue, gross profit, gross margin,
operating income and net income. While we pursue many projects months or years in advance of work performance, cleanup
project opportunities routinely arise with little or no prior notice. These market dynamics are inherent to the waste disposal
business and are factored into our projections and externally communicated business outlook statements. Our projections
combine historical experience with identified sales pipeline opportunities, new or expanded service line projections and
prevailing market conditions.
We serve oil refineries, chemical production plants, steel mills, waste brokers/aggregators serving small manufacturers and other
industrial customers that are generally affected by the prevailing economic conditions and credit environment. Adverse
conditions may cause our customers as well as those they serve to curtail operations, resulting in lower waste production and/or
delayed spending on off-site waste shipments, maintenance, waste cleanup projects and other work. Factors that can impact
general economic conditions and the level of spending by customers include, but are not limited to, consumer and industrial
spending, increases in fuel and energy costs, conditions in the real estate and mortgage markets, labor and healthcare costs, access
to credit, consumer confidence and other global economic factors affecting spending behavior. Market forces may also induce
customers to reduce or cease operations, declare bankruptcy, liquidate or relocate to other countries, any of which could
adversely affect our business. To the extent business is either government funded or driven by government regulations or
enforcement actions, we believe it is less susceptible to general economic conditions. Spending by government agencies may be
reduced due to declining tax revenues resulting from a weak economy or changes in policy. Disbursement of funds appropriated
by Congress may also be delayed for various reasons.
Geographical Information
For the year ended December 31, 2021, we derived $861.3 million, or 87%, of our revenue in the United States, $80.6 million, or
8%, of our revenue in Canada, $41.2 million, or 4%, of our revenue in the Europe, Middle East and Africa (“EMEA”) region, and
less than 1% of our revenue from other international regions. For the year ended December 31, 2020, we derived $835.3 million,
or 89%, of our revenue in the United States, $73.3 million, or 8%, of our revenue in Canada, $19.9 million, or 2%, of our revenue
in the EMEA region, and less than 1% of our revenue from other international regions.
Additional information about the geographical areas in which our revenues are derived and in which our assets are located is
presented in Note 4 and Note 21 to the Consolidated Financial Statements in “Part II, Item 8. Financial Statements and
Supplementary Data” of this Annual Report on Form 10-K.
Significant Events
Our results of operations have been affected by certain significant events during the past two fiscal years including, but not
limited to:
2021 Events
COVID-19 Pandemic Update: The COVID-19 pandemic continued to affect our business in 2021. The impact of temporary
closures and staff reductions by industrial facilities has resulted in delays in mobilization and in regulatory approvals at our
customers’ sites. Although we have seen evidence of volume recovery in 2021 as the economy continues to rebound and
industrial facilities return to pre-pandemic levels of production, we have experienced cost and inflationary pressures in areas such
as labor and supplies. We have also experienced delays and deferments of some of our waste solutions and field services business
based on our customers’ own responses to the pandemic including, but not limited to, delaying services they deem noncritical and
limiting on-site visitation. While uncertainty caused by the COVID-19 pandemic remains, including the spread of new variants of
the virus and government and private sector responses to prevent
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51
and manage the disease, we expect to continue to see improvements in our business as vaccines become more widely available
and vaccination rates increase.
The impact of the COVID-19 pandemic will continue to affect our results of operations for the foreseeable future. See “Part I,
Item 1A – Risk Factors” in this Annual Report on Form 10-K.
2020 Events
Impact of the COVID-19 Pandemic: The COVID-19 pandemic affected our business through the fourth quarter of 2020. We
experienced lower waste volumes resulting from temporary closures and staff reductions by industrial facilities. We also
experienced delays and deferments of industrial cleaning services and some of our field services as our customers limited on site
visitation and delayed noncritical services based on business conditions. However, the Company’s services-based business
remained stable as we experienced growth in our small quantity generation services and our emergency response business saw an
increase in COVID-19 decontamination projects.
Our Energy Waste segment was adversely impacted as energy companies reduce capital expenditures as a result of downward
pressure on oil, natural gas and natural gas liquid (“NGL”) prices, which were exacerbated during the COVID-19 pandemic. In
the first half of 2020, oil prices moved downward to historic lows due in part to concerns about the COVID-19 pandemic and its
impact on near-term worldwide oil demand and due to the increase in oil production by certain members of the Organization of
Petroleum Exporting Countries (“OPEC”). As a result, customers in the upstream oil and gas exploration industry and some
downstream refineries in the energy sector have reduced capital expenditures, which has adversely affected the demand for our
energy waste services.
The Company’s ability to weather the negative impacts of the COVID-19 pandemic was bolstered by the Company’s cost-saving
measures implemented during the 2020 fiscal year, including cost control initiatives, a reduction to planned 2020 capital spending
of approximately 35% compared to the budgeted capital spending levels and suspension of the Company’s quarterly dividend,
commencing with the second quarter of 2020 to preserve free cash flow and enhance liquidity. The Company has also taken
advantage of the provision of the Coronavirus Aid, Relief and Economic Security Act, which was signed into law on March 27,
2020, to defer of the payment of the employer portion of payroll tax withholdings, which yielded approximately $7.5 million of
additional cash savings in 2020.
Goodwill and Intangible Asset Impairment Charges: During the year ended December 31, 2020 the Company recorded goodwill
impairment charges of $363.9 million related to its Energy Waste reporting unit, $14.4 million related to its Field Services
reporting unit, $5.5 million related to its International reporting unit and intangible asset impairment charges of $21.1 million on
certain Field Services segment operating permit intangible assets. See Note 13 to the Consolidated Financial Statements in “Part
II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional information.
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52
Results of Operations
This section of this Form 10-K generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020.
Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 that are not included in this Form 10-K can be
found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Our operating results and percentage of revenues for the years ended December 31, 2021 and 2020 were as follows:
Year Ended December 31,
2021 vs. 2020
$s in thousands
2021
%
2020
% $ Change % Change
Revenue
Waste Solutions
$ 451,249
46 % $ 425,413
46 % $ 25,836
6 %
Field Services
500,187
50 % 473,754
50 % 26,433
6 %
Energy Waste
36,565
4 %
34,687
4 %
1,878
5 %
Total
$ 988,001
100 % $ 933,854
100 % $ 54,147
6 %
Gross Profit
Waste Solutions
$ 154,223
34 % $ 161,341
38 % $ (7,118)
(4)%
Field Services
74,087
15 %
87,151
18 % (13,064)
(15)%
Energy Waste
4,768
13 %
1,659
5 %
3,109
187 %
Total
$ 233,078
24 % $ 250,151
27 % $ (17,073)
(7)%
Selling, General & Administrative Expenses
Waste Solutions
$ 27,262
6 % $ 26,475
6 % $
787
3 %
Field Services
48,210
10 %
50,572
11 %
(2,362)
(5)%
Energy Waste
13,040
36 %
19,722
57 %
(6,682)
(34)%
Corporate
111,220
n/m
109,400
n/m
1,820
2 %
Total
$ 199,732
20 % $ 206,169
22 % $ (6,437)
(3)%
Adjusted EBITDA
Waste Solutions
$ 170,953
38 % $ 176,702
42 % $ (5,749)
(3)%
Field Services
70,578
14 %
81,770
17 % (11,192)
(14)%
Energy Waste
11,321
31 %
4,982
14 %
6,339
127 %
Corporate
(97,978)
n/m
(93,295)
n/m
(4,683)
5 %
Total
$ 154,874
16 % $ 170,159
18 % $ (15,285)
(9)%
Management uses Adjusted EBITDA as a financial measure to assess segment performance. Adjusted EBITDA is defined as net
income (loss) before interest expense, interest income, income tax expense, depreciation, amortization, share-based
compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss, non-cash goodwill and intangible asset
impairment charges, business development and integration expenses and other income/expense. The reconciliation of Net income
(loss) to Adjusted EBITDA for the years ended December 31, 2021 and 2020 is as follows:
Year Ended December 31,
2021 vs. 2020
$s in thousands
2021
2020
$ Change % Change
Net income (loss)
$
5,337
$
(389,359)
$ 394,696
(101)%
Income tax expense (benefit)
4,765
(4,242)
9,007
(212)%
Interest expense
28,966
32,595
(3,629)
(11)%
Interest income
(1,417)
(258)
(1,159)
449 %
Foreign currency loss
171
1,134
(963)
(85)%
Other income
(4,476)
(788)
(3,688)
468 %
Goodwill and intangible asset impairment charges
—
404,900
(404,900)
(100)%
Depreciation and amortization of plant and equipment
70,799
66,561
4,238
6 %
Amortization of intangible assets
34,614
37,344
(2,730)
(7)%
Share-based compensation
7,478
6,651
827
12 %
Accretion and non-cash adjustment of closure & post-closure liabilities
5,363
4,000
1,363
34 %
Business development and integration expenses
3,274
11,621
(8,347)
(72)%
Adjusted EBITDA
$
154,874
$
170,159
$ (15,285)
(9)%
Adjusted EBITDA is a complement to results provided in accordance with accounting principles generally accepted in the United
States (“GAAP”) and we believe that such information provides additional useful information to analysts, stockholders and other
users to understand the Company’s operating performance. Since Adjusted EBITDA is not a measurement determined in
accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to
other similarly titled measures of other companies. Items excluded from Adjusted
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EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be
considered in isolation or as an alternative to, or substitute for, net income (loss), cash flows generated by operations, investing or
financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial
performance or liquidity.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our
results as reported under GAAP. Some of the limitations are:
●
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
●
Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal
payments on our debt;
●
Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;
●
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual
commitments;
●
Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will
often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such
replacements; and
●
Adjusted EBITDA does not reflect our business development and integration expenses.
2021 Compared to 2020
Revenue
Total revenue increased 6% to $988.0 million in 2021, compared with $933.9 million in 2020.
Waste Solutions
Waste Solutions segment revenue increased 6% to $451.2 million in 2021, compared to $425.4 million in 2020. T&D revenue
increased 5% in 2021 compared to 2020, primarily as a result of a 6% increase in Base Business revenue, partially offset by an
8% decrease in project-based Event Business revenue. Transportation and logistics service revenue increased 11% in 2021
compared to 2020, reflecting Event Business projects utilizing more of the Company’s transportation and logistics services. Total
tons of waste disposed of or processed across all of our facilities decreased 1% in 2021 compared to 2020. Total tons of waste
disposed of or processed at our landfills increased 5% in 2021 compared to 2020.
T&D revenue from recurring Base Business waste generators increased 6% in 2021 compared to 2020 and comprised 76% of
total T&D revenue. The increase in Base Business T&D revenue compared to the prior year primarily reflects higher T&D
revenue from the metal manufacturing, chemical manufacturing, mining, exploration & production, general manufacturing and
Other industry groups, partially offset by a decrease in Base Business T&D revenue from the utilities industry group.
T&D revenue from Event Business waste generators decreased 8% in 2021 compared to 2020 and comprised 24% of total T&D
revenue. The decrease in Event Business T&D revenue compared to the prior year primarily reflects lower T&D revenue from
the chemical manufacturing, utilities, metal manufacturing and transportation industry groups, partially offset by increases in
Event Business T&D revenue from the waste management & remediation, Other and general manufacturing industry groups.
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The following table summarizes combined Base Business and Event Business T&D revenue growth, within the Waste Solutions
segment, by waste generator industry for 2021 compared to 2020:
T&D Revenue Growth
2021 vs. 2020
Waste Management & Remediation
71%
Mining, Exploration & Production
51%
Other
14%
General Manufacturing
10%
Refining
8%
Broker / TSDF
3%
Metal Manufacturing
1%
Government
-3%
Chemical Manufacturing
-9%
Transportation
-22%
Utilities
-33%
Field Services
Field Services segment revenue increased 6% to $500.2 million in 2021 compared with $473.8 million in 2020. The increase in
Field Services segment revenue is primarily attributable to higher revenues from our Remediation, Small Quantity Generation,
Total Waste Management and Treatment & Disposal business lines, partially offset by lower revenues from our Transportation
and Logistics, Emergency Response and Other business lines.
Energy Waste
Energy Waste segment revenue increased 5% to $36.6 million in 2021 compared with $34.7 million in 2020, primarily
attributable to a partial recovery in energy markets and increases in energy-related exploration and production activities in the
markets we serve.
Gross Profit
Total gross profit decreased 7% to $233.1 million in 2021, down from $250.2 million in 2020. Total gross margin was 24% in
2021 compared with 27% in 2020.
Waste Solutions
Waste Solutions segment gross profit decreased 4% to $154.2 million in 2021, down from $161.3 million in 2020. Total segment
gross margin was 34% in 2021 compared with 38% in 2020. The decrease in segment gross margin was primarily attributable to
a less favorable service mix and higher transportation, supplies and waste handling expenses in 2021 compared to 2020. T&D
gross margin was 39% for 2021 compared with 42% for 2020.
Field Services
Field Services segment gross profit decreased 15% to $74.1 million in 2021, down from $87.2 million in 2020. Total segment
gross margin was 15% in 2021 compared with 18% in 2020. The decrease in segment gross margin was primarily attributable to
a less favorable service mix and higher subcontracted services and supplies expenses in 2021 compared to 2020.
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Energy Waste
Energy Waste segment gross profit increased 187% to $4.8 million in 2021, up from $1.7 million in 2020. Total segment gross
margin was 13% in 2021 compared with 5% in 2020. The increase in segment gross margin was primarily attributable to
improved operating leverage due to our restructuring activities undertaken in 2020 in response to reduced energy-related
exploration and production investments in the markets we serve.
Selling, General and Administrative Expenses (“SG&A”)
Total SG&A decreased 3% to $199.7 million, or 20% of total revenue, in 2021, down from $206.2 million, or 22% of total
revenue, in 2020.
Waste Solutions
Waste Solutions segment SG&A increased 3% to $27.3 million, or 6% of segment revenue, in 2021, compared with
$26.5 million, or 6% of segment revenue, in 2020.
Field Services
Field Services segment SG&A decreased 5% to $48.2 million, or 10% of segment revenue, in 2021, down from $50.6 million, or
11% of segment revenue, in 2020. Field Services segment SG&A in 2020 includes $3.7 million of gains associated with the
settlement and changes in fair value of contingent consideration liabilities. Excluding the impact of these gains, segment SG&A
decreased 11% in 2021 compared with 2020, primarily attributable to lower intangible asset amortization expense, lower
insurance costs, lower business development and integration expenses and lower employee labor and benefits costs.
Energy Waste
Energy Waste segment SG&A decreased 34% to $13.0 million, or 36% of segment revenue, in 2021, down from $19.7 million,
or 57% of segment revenue, in 2020. The decrease in segment SG&A was primarily attributable to lower costs in 2021 due to our
restructuring activities undertaken in 2020 in response to reduced energy-related exploration and production investments in the
markets we serve.
Corporate
Corporate SG&A increased 2% to $111.2 million, or 11% of total revenue, in 2021, compared with $109.4 million, or 12% of
total revenue, in 2020. Corporate SG&A in 2020 includes the recognition of a favorable legal settlement of $2.5 million for the
reimbursement of health insurance related overcharges in prior years. Excluding the impact of this settlement, Corporate SG&A
decreased 1% in 2021 compared with 2020, primarily attributable lower business development and integration expenses, lower
insurance costs and lower equipment and supplies expenses, partially offset by lower bad debt recoveries, higher consulting and
professional services expenses, higher information technology and software expenses and higher employee labor and benefit
costs in 2021 compared to 2020.
Components of Adjusted EBITDA
Income tax expense
Income tax expense in 2021 was $4.8 million, resulting in a consolidated effective income tax rate of 47.2%. Income tax benefit
in 2020 was $4.2 million, resulting in a consolidated effective income tax rate of 1.1%. The increase in our effective tax rate in
2021 compared to 2020 was primarily attributable to foreign rate differential from a higher portion of total earnings from our
Canadian operations which are taxed at a higher rate and enhanced impacts on our effective tax rate of state taxes, share-based
compensation, and other permanent items as a result of lower pre-tax earnings excluding impairments, partially offset by higher
tax credits as a percentage of pre-tax earnings.
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Interest expense
Interest expense was $29.0 million in 2021 compared with $32.6 million in 2020. The decrease is primarily the result of the
impact of lower interest rates on the variable portion of our outstanding debt, lower outstanding debt levels and lower interest
expense amortization related to terminated swap agreements in 2021 compared to 2020.
Interest income
Interest income was $1.4 million in 2021 compared with $258,000 in 2020, primarily reflecting higher interest charged to
customers with extended payment terms.
Foreign currency loss
We recognized a $171,000 non-cash foreign currency loss in 2021 compared with a $1.1 million non-cash foreign currency loss
in 2020. Foreign currency gains and losses reflect changes in business activity conducted in a currency other than the USD, our
functional currency. Additionally, we established intercompany loans with certain of our Canadian subsidiaries, whose functional
currency is the Canadian dollar (“CAD”) as part of a tax and treasury management strategy allowing for repayment of third-party
bank debt. These intercompany loans are payable by our Canadian subsidiaries to US Ecology in CAD requiring us to revalue the
outstanding loan balance through our statements of operations based on USD/CAD currency movements from period to period.
At December 31, 2021, we had $7.6 million of intercompany loans subject to currency revaluation.
Other income
Other income was $4.5 million in 2021 compared with other income of $788,000 in 2020. In the first quarter of 2021, the
company recognized a gain of $3.5 million related to the change in the fair value of a minority interest investment.
Goodwill and intangible asset impairment charges
In 2020, the Company recorded goodwill impairment charges of $363.9 million related to its Energy Waste reporting unit, $14.4
million related to its Field Services reporting unit, $5.5 million related to its International reporting unit and intangible asset
impairment charges of $21.1 million on certain operating permit intangible assets. See Note 13 to the Consolidated Financial
Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for additional
information.
Depreciation and amortization of plant and equipment
Depreciation and amortization expense increased 6% to $70.8 million in 2021 compared with $66.6 million in 2020, primarily
reflecting incremental depreciation expense on plant and equipment assets placed in service in 2021.
Amortization of intangibles
Intangible assets amortization expense decreased 7% to $34.6 million in 2021 compared with $37.3 million in 2020, primarily
reflecting the full amortization of certain intangible asset in 2021.
Share-based compensation
Share-based compensation expense increased 12% to $7.5 million in 2021, compared with $6.7 million 2020, primarily reflecting
an increase in equity-based awards granted to employees.
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Accretion and non-cash adjustment of closure and post-closure liabilities
Accretion and non-cash adjustment of closure and post-closure liabilities increased 34% to $5.4 million in 2021 compared with
$4.0 million in 2020, primarily reflecting unfavorable non-cash adjustments to post-closure liabilities recorded in 2021 due to
changes in cost estimates.
Business development and integration expenses
Business development and integration expenses decreased 72% to $3.3 million in 2021, compared to $11.6 million in 2020,
primarily reflecting lower NRC Merger integration expenses incurred in 2021 compared to 2020.
Liquidity and Capital Resources
We are continually evaluating the impact of the COVID-19 pandemic on our financial condition and liquidity. Although the
situation remains uncertain, we believe that we have sufficient cash flow from operations and available borrowings under the
Revolving Credit Facility to execute our business strategy in the short and longer term. While management continues to closely
monitor the impact of the COVID-19 pandemic, including the spread of new variants of the virus and government and private
sector responses to it in each of the locations and sectors in which the Company does business, we believe that the Company’s
strategy during the pandemic has increased the Company’s resiliency and positioned the Company to take advantage of any post-
pandemic recovery.
Our primary sources of liquidity are cash and cash equivalents, cash generated from operations and borrowings under the Credit
Agreement. At December 31, 2021, we had $67.5 million in unrestricted cash and cash equivalents immediately available and
$71.2 million of borrowing capacity, subject to our leverage covenant limitation, available under our Revolving Credit Facility.
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Our
primary ongoing cash requirements are funding operations, capital expenditures, paying principal and interest on our long-term
debt, and paying declared dividends pursuant to our dividend policy. We believe future operating cash flows will be sufficient to
meet our future operating, investing and dividend cash needs for the foreseeable future. Furthermore, existing cash balances and
availability of additional borrowings under the Credit Agreement provide additional sources of liquidity should they be required.
On June 29, 2021, Predecessor US Ecology amended the Credit Agreement to extend the maturity date for the existing revolving
credit facility to June 29, 2026. The Credit Agreement was also amended to extend the existing covenant relief period to end on
the earlier of December 31, 2022 and the date Predecessor US Ecology elects to end such covenant relief period pursuant to the
terms therein and to permanently increase Predecessor US Ecology’s consolidated total net leverage ratio requirement as of the
end of each fiscal quarter ending on and after December 31, 2022 to 4.50 to 1.00. See additional information on the Fourth
Amendment under “Amendments to the Credit Agreement,” below.
Operating Activities. In 2021, net cash provided by operating activities was $116.3 million. This primarily reflects net income of
$5.3 million, non-cash depreciation, amortization and accretion of $110.8 million, an increase in accounts payable and accrued
liabilities of $16.0 million, share-based compensation expense of $7.5 million, and a decrease in income taxes receivable of $3.8
million, partially offset by an increase in accounts receivable of $14.7 million, an increase in other assets of $5.3 million, a gain
of $3.5 million related to a change in the fair value of a minority interest investment and a decrease in closure and post-closure
obligations of $3.3 million. Impacts on net income are due to the factors discussed above under “Results of Operations.” Changes
in accounts receivable and accounts payable and accrued liabilities are attributable to the timing of payments from customers and
payments to vendors for products and services. The decrease in income taxes receivable is primarily attributable to the timing of
prior year income tax refund claims received and current year income tax payments. The increase in other assets is primarily
attributable to prepaid insurance costs and refundable deposits associated with our annual renewal process. The decrease in
closure and post-closure obligations is primarily attributable to payments for planned landfill cell closure activities primarily at
our Karnes County, Texas and Belleville, Michigan facilities.
We calculate days sales outstanding (“DSO”) as a rolling four quarter average of our net accounts receivable divided by our
quarterly revenue. Our net accounts receivable balance for the DSO calculation includes trade accounts receivable, net
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of allowance for doubtful accounts and unbilled accounts receivable, adjusted for changes in deferred revenue. DSO was 84 days
as of December 31, 2021 and 2020.
In 2020, net cash provided by operating activities was $107.1 million. This primarily reflects net loss of $389.4 million, non-cash
goodwill and intangible asset impairment charges of $404.9 million, non-cash depreciation, amortization and accretion of $107.9
million, a decrease in accounts receivable of $8.4 million and share-based compensation and business development and
integration expenses of $7.8 million, partially offset by a decrease in accounts payable and accrued liabilities of $13.6 million, an
increase in income taxes receivable of $7.0 million and an increase in other assets of $5.4 million. Impacts on net loss are due to
the factors discussed above under “Results of Operations.” Changes in accounts receivable and accounts payable and accrued
liabilities are attributable to the timing of payments from customers and payments to vendors for products and services. The
increase in other assets is primarily attributable to prepaid insurance costs and refundable deposits associated with our annual
renewal process. The increase in income taxes receivable is primarily attributable to net operating losses in 2020 that will be
carried back to prior years with taxable income for a refund of taxes paid in those prior tax years, which were at higher tax rates.
Investing Activities. In 2021, net cash used in investing activities was $64.6 million, primarily related to capital expenditures of
$68.7 million, and a $712,000 investment in the preferred stock of a privately held company, partially offset by $2.4 million in
proceeds from the sale of property and equipment and $2.1 million in proceeds from the sale of short-term investments. Capital
projects consisted primarily of landfill cell development and infrastructure upgrades at our operating facilities.
In 2020, net cash used in investing activities was $57.6 million, primarily related to capital expenditures of $57.4 million and the
acquisition of Impact Environmental, Inc. for $3.3 million in January 2020. Capital projects consisted primarily of equipment
purchases and infrastructure upgrades at our corporate and operating facilities.
Financing Activities. During 2021, net cash used in financing activities was $58.1 million, consisting primarily of $44.0 million
in payments on our revolving credit facility, $5.6 million in payments on our equipment financing obligations, $4.5 million in
quarterly payments on our term loan and $2.6 million in payments to settle acquired contingent consideration liabilities.
During 2020, net cash used in financing activities was $18.5 million, consisting primarily of $90.0 million in borrowings on our
revolving credit facility, partially offset by $74.5 million in payments on our revolving credit facility and term loan, repurchases
of our common stock of $18.3 million, $6.3 million in payments on our equipment financing obligations and dividend payments
to our stockholders of $5.7 million. Quarterly cash dividends were suspended commencing with the second quarter of 2020 and
no dividends have been paid since the first quarter 2020.
Credit Agreement
On April 18, 2017, US Ecology Holdings, Inc. (f/k/a US Ecology, Inc.) (“Predecessor US Ecology”), now a wholly-owned
subsidiary of the Company, entered into the Credit Agreement that provides for a $500.0 million revolving credit facility (the
“Revolving Credit Facility”), including a $75.0 million sublimit for the issuance of standby letters of credit and a $40.0 million
sublimit for the issuance of swingline loans used to fund short-term working capital requirements. The Credit Agreement also
contains an accordion feature whereby Predecessor US Ecology may request up to $200.0 million of additional funds through an
increase to the Revolving Credit Facility, through incremental term loans, or some combination thereof. As described herein, the
Credit Agreement was amended in August and November 2019 in connection with the NRC Merger; and further amended on
June 26, 2020 and June 29, 2021 pursuant to the Third Amendment and Fourth Amendment (each as defined herein),
respectively.
During the year ended December 31, 2021, the effective interest rate on the Revolving Credit Facility, after giving effect to the
impact of our interest rate swap and the amortization of the loan discount and debt issuance costs, was 4.00%. Interest only
payments are due either quarterly or on the last day of any interest period, as applicable. In March 2020, the Company entered
into an interest rate swap agreement, effectively fixing the interest rate on $440.0 million, or approximately 59%, of the
Revolving Credit Facility and term loan borrowings outstanding as of December 31, 2021.
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As modified by the Fourth Amendment as described herein, Predecessor US Ecology is required to pay a commitment fee
ranging from 0.175% to 0.40% on the average daily unused portion of the Revolving Credit Facility, with such commitment fee
to be based upon Predecessor US Ecology’s total net leverage ratio (as defined in the Credit Agreement). The maximum letter of
credit capacity under the Revolving Credit Facility is $75.0 million and the Credit Agreement provides for a letter of credit fee
equal to the applicable margin for LIBOR loans under the Revolving Credit Facility. At December 31, 2021, there were $303.0
million of revolving credit loans outstanding on the Revolving Credit Facility. These revolving credit loans are due on June 29,
2026 (or such earlier date as the revolving credit facility may otherwise terminate pursuant to the terms of the Credit Agreement)
and are presented as long-term debt in the consolidated balance sheets.
Predecessor US Ecology has entered into a sweep arrangement whereby day-to-day cash requirements in excess of available cash
balances are advanced to the Company on an as-needed basis with repayments of these advances automatically made from
subsequent deposits to our cash operating accounts (the “Sweep Arrangement”). Total advances outstanding under the Sweep
Arrangement are subject to the $40.0 million swingline loan sublimit under the Revolving Credit Facility. Predecessor US
Ecology’s revolving credit loans outstanding under the Revolving Credit Facility are not subject to repayment through the Sweep
Arrangement. As of December 31, 2021, there were no borrowings outstanding subject to the Sweep Arrangement.
As of December 31, 2021, the availability under the Revolving Credit Facility was $71.2 million, subject to our leverage
covenant limitation, with $12.2 million of the Revolving Credit Facility issued in the form of standby letters of credit utilized as
collateral for closure and post-closure financial assurance and other assurance obligations.
Amendments to the Credit Agreement
On August 6, 2019, Predecessor US Ecology entered into the First Amendment (as defined herein). Effective November 1, 2019,
the First Amendment, among other things, extended the expiration of the Revolving Credit Facility to November 1, 2024,
permitted the issuance of a $400.0 million incremental term loan to be used to refinance the indebtedness of NRC and pay related
transaction expenses in connection with the NRC Merger, modified the accordion feature allowing Predecessor US Ecology to
request up to the greater of (x) $250.0 million and (y) 100% of Consolidated EBITDA (as defined in the credit agreement) plus
certain additional amounts, increased the sublimit for the issuance of swingline loans to $40.0 million and increased the
maximum consolidated total net leverage ratio to 4.00 to 1.00.
On November 1, 2019, Predecessor US Ecology entered into the Second Amendment (as defined herein). Effective November 1,
2019, the Second Amendment, among other things, amended the Credit Agreement to increase the capacity for incremental term
loans by $50.0 million and provided for Wells Fargo lending $450.0 million in incremental term loans to Predecessor US
Ecology to pay off the existing debt of NRC in connection with the NRC Merger, to pay certain fees, costs and expenses incurred
in connection with the NRC Merger and to repay outstanding borrowings under the Revolving Credit Facility. The seven-year
incremental term loan matures November 1, 2026, requires principal repayment of 1% annually, and bears interest at LIBOR plus
2.25% or a base rate plus 1.25% (with a step-up to LIBOR plus 2.50% or a base rate plus 1.50% in the event that US Ecology
credit ratings are not BB (with a stable or better outlook) or better from S&P and Ba2 (with a stable or better outlook) or better
from Moody’s). During the year ended December 31, 2021, the effective interest rate on the term loan, including the impact of
the amortization of debt issuance costs, was 2.86%.
On June 26, 2020, Predecessor US Ecology entered into the Third Amendment. Among other things, the Third Amendment
amended the Credit Agreement to provide a covenant relief period through the earlier of March 31, 2022 and the date Predecessor
US Ecology elects to end such covenant relief period pursuant to the terms therein. During the covenant relief period, the Third
Amendment increased Predecessor US Ecology’s consolidated total net leverage ratio requirement as of the end of each fiscal
quarter to certain ratios above the 4.00 to 1.00 ratio in effect immediately before giving effect to the Third Amendment, subject to
compliance with certain restrictions on restricted payments and permitted acquisitions during such covenant relief period.
Furthermore, during the covenant relief period, under the Revolving Credit Facility, revolving credit loans are available based on
a base rate (as defined in the Credit Agreement) or LIBOR, at the Company’s option, plus an applicable margin, which is
determined according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debt to
Consolidated EBITDA (as defined in the Credit Agreement).
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On June 29, 2021, Predecessor US Ecology entered into the Fourth Amendment. Among other things, the Fourth Amendment
amends the Credit Agreement to extend the maturity date for the existing revolving credit facility to June 29, 2026 (or such
earlier date as the revolving credit facility may otherwise terminate pursuant to the terms of the Credit Agreement). The Fourth
Amendment also amends the Credit Agreement (i) to extend the existing covenant relief period to end on the earlier of December
31, 2022 and the date Predecessor US Ecology elects to end such covenant relief period pursuant to the terms therein and (ii) to
permanently increase Predecessor US Ecology’s consolidated total net leverage ratio requirement as of the end of each fiscal
quarter ending on and after December 31, 2022 to 4.50 to 1.00. During the covenant relief period until the fiscal quarter ending
December 31, 2022, the Fourth Amendment increases Predecessor US Ecology’s consolidated total net leverage ratio
requirement as of the end of each fiscal quarter to certain ratios above the 4.50 to 1.00 ratio otherwise in effect after giving effect
to the Fourth Amendment, subject to compliance with certain restrictions on restricted payments and permitted acquisitions
during such covenant relief period. Furthermore, after giving effect to the Fourth Amendment and whether or not the covenant
relief period is in effect, (i) if the Borrower’s consolidated total net leverage ratio is equal to or greater than 4.00 to 1.00 but less
than 4.50 to 1.00, the interest rate on all outstanding borrowings of revolving credit loans under the Credit Agreement will step-
up to the LIBOR plus 2.25% or a base rate plus 1.25% and the commitment fee will step-up to 0.375% and (ii) if Predecessor US
Ecology’s consolidated total net leverage ratio is greater than 4.50 to 1.00, the interest rate on all outstanding borrowings of
revolving credit loans under the Credit Agreement will step-up to LIBOR plus 2.50% or a base rate plus 1.50% and the
commitment fee will step-up to 0.40%, in each case, pursuant to the terms of the Credit Agreement. The Fourth Amendment also
reset any outstanding usage of certain negative covenant baskets, including baskets in connection with the indebtedness, liens,
investments, asset dispositions, restricted payments and affiliate transactions negative covenants.
See Note 16 to the Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this
Annual Report on Form 10-K for additional information on the Company’s debt.
Contractual Obligations and Guarantees
Contractual Obligations
US Ecology’s contractual obligations at December 31, 2021 become due as follows:
Payments Due by Period
$s in thousands
Total
2022
2023-2024 2025-2026 Thereafter
Closure and post-closure
obligations (1)
$
393,660
$ 6,004
$ 21,183
$
19,061
$ 347,412
Credit agreement obligations (2)
744,000
4,500
9,000
730,500
—
Interest expense (3)
99,405
22,306
43,373
33,726
—
Total contractual obligations (4)
$ 1,237,065
$ 32,810
$ 73,556
$ 783,287
$ 347,412
(1) For the purposes of the table above, closure and post-closure obligations are shown on an undiscounted basis and inflated
using an estimated annual inflation rate of 2.6%. Cash payments for closure and post-closure obligation extend to the year
2130.
(2) At December 31, 2021, there were $303.0 million of revolving credit loans outstanding on the Revolving Credit Facility.
These revolving credit loans are due on June 29, 2026 (or such earlier date as the revolving credit facility may otherwise
terminate pursuant to the terms of the Credit Agreement). At December 31, 2021 there were $441.0 million of term loan
borrowings outstanding. The term loan matures on November 1, 2026 and requires principal repayment of 1% annually.
(3) Interest expense has been calculated using the interest rate of 2.59% in effect at December 31, 2021 on the unhedged
variable-rate portion of the Revolving Credit Facility borrowings and 3.33% on the fixed rate hedged portion of the
Revolving Credit Facility borrowings. Interest expense has been calculated using the interest rate of 2.59% in effect at
December 31, 2021 on the unhedged variable-rate portion of the term loan borrowings and 3.33% on the fixed rate hedged
portion of the term loan borrowings. The interest expense calculation reflects assumed payments on the Revolving Credit
Facility and the term loan borrowings consistent with the disclosures in footnote (2) above.
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(4) As we are not able to reasonably estimate when we would make any cash payments to settle unrecognized tax benefits of
$256,000, such amounts have not been included in the table above.
Guarantees
We enter into a wide range of indemnification arrangements, guarantees and assurances in the ordinary course of business and
have evaluated agreements that contain guarantees and indemnification clauses. These include tort indemnities, tax indemnities,
indemnities against third-party claims arising out of arrangements to provide services to us and indemnities related to the sale of
our securities. We also indemnify individuals made party to any 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 its subsidiaries during their tenure as a director or
officer. We also provide guarantees and indemnifications for the benefit of our wholly-owned subsidiaries to satisfy performance
obligations, including closure and post-closure financial assurances. It is difficult to quantify the maximum potential liability
under these indemnification arrangements; however, we are not currently aware of any material liabilities to the Company or any
of its subsidiaries arising from these arrangements.
Environmental Matters
We maintain funded trust agreements, surety bonds and insurance policies for future closure and post-closure obligations at both
current and formerly operated disposal facilities. These funded trust agreements, surety bonds and insurance policies are based on
management estimates of future closure and post-closure monitoring using engineering evaluations and interpretations of
regulatory requirements which are periodically updated. Accounting for closure and post-closure costs includes final disposal cell
capping and revegetation, soil and groundwater monitoring and routine maintenance and surveillance required after a site is
closed.
We estimate that our undiscounted future closure and post-closure costs for all facilities was approximately $393.7 million at
December 31, 2021, with a median payment year of 2076. Our future closure and post-closure estimates are our best estimate of
current costs and are updated periodically to reflect current technology, cost of materials and services, applicable laws,
regulations, permit conditions or orders and other factors. These current costs are adjusted for anticipated annual inflation, which
we assumed to be 2.6% as of December 31, 2021. These future closure and post-closure estimates are discounted to their present
value for financial reporting purposes using our credit-adjusted risk-free interest rate, which approximates our incremental long-
term borrowing rate in effect at the time the obligation is established or when there are upward revisions to our estimated closure
and post-closure costs. At December 31, 2021, our weighted-average credit-adjusted risk-free interest rate was 5.3%. For
financial reporting purposes, our recorded closure and post-closure obligations were $98.9 million and $95.9 million as of
December 31, 2021 and 2020, respectively.
Through December 31, 2021, we have met our financial assurance requirements through insurance, surety bonds, standby letters
of credit and self-funded restricted trusts.
U.S. Operating and Non-Operating Facilities
We cover our closure and post-closure obligations for our U.S. operating facilities through the use of third-party insurance
policies, surety bonds and standby letters of credit. As of December 31, 2021, we had provided collateral of $721,000 in funded
trust agreements, $13.8 million in surety bonds, issued $2.8 million in letters of credit for financial assurance and have insurance
policies of approximately $120.5 million for closure and post-closure obligations at covered U.S. operating and non-operating
facilities. Cash held in funded trust agreements for our closure and post-closure obligations is identified as Restricted cash and
investments on our consolidated balance sheets.
All closure and post-closure funding obligations for our Beatty, Nevada and Richland, Washington facilities revert to the
respective state. Volume based fees are collected from our customers and remitted to state-controlled trust funds to cover the
estimated cost of closure and post-closure obligations.
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Stablex
We use commercial surety bonds to cover our closure obligations for our Stablex facility located in Blainville, Québec, Canada.
Our lease agreement with the Province of Québec requires that the surety bond be maintained for 25 years after the lease expires
in 2023. At December 31, 2021 we had $873,000 in commercial surety bonds dedicated for closure obligations. These bonds
were renewed in November and December 2021 and expire in November and December 2022. Post-closure funding obligations
for the Stablex landfill revert back to the Province of Québec through a dedicated trust account that is funded based on a 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 or environmental liability insurance and/or commercial surety bonds in future years, any partial or completely
uninsured claim against us, if successful and of sufficient magnitude, could have a material adverse effect on our financial
condition, results of operations or cash flows. Additionally, continued access to casualty and pollution legal liability insurance
with sufficient limits, at acceptable terms, is important to obtaining new business. Failure to maintain adequate financial
assurance could also result in regulatory action including early closure of facilities. While we believe we will be able to maintain
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 action costs. We cannot predict the likelihood or effect of all such costs, new laws or regulations, litigation or
other future events affecting our facilities. We do not believe that continuing to satisfy our environmental obligations will have a
material adverse effect on our financial condition or results of operations.
Seasonal Effects
Seasonal fluctuations due to weather and budgetary cycles can influence the timing of customer spending for our services.
Typically, in the first quarter of each calendar year there is less demand for our services due to weather-related reduced
construction and business activities while we experience improvement in our second and third quarters of each calendar year as
weather conditions and other business activity improves.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with GAAP. The preparation of these financial statements require us to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure
of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates included in our critical accounting policies
discussed below and those accounting policies and use of estimates discussed in Notes 2 and 3 to the Consolidated Financial
Statements located in “Part II, Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. We
base our estimates on historical experience and on various assumptions and other factors we believe to be reasonable, the results
of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from
other sources. We make adjustments to judgments and estimates based on current facts and circumstances on an ongoing basis.
Historically, actual results have not deviated significantly from those determined using the estimates described below or in
Notes 2 and 3 to the Consolidated Financial Statements located in “Part II, Item 8. Financial Statements and Supplementary
Data” to this Annual Report on Form 10-K. However, actual amounts could differ materially from those estimated at the time the
consolidated financial statements are prepared.
We believe the following critical accounting policies are important to understand our financial condition and results of operations
and require management’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 Recognition
Revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those services.
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We recognize revenue from three primary sources: (1) waste treatment, recycling and disposal services, (2) field and industrial
waste management services and (3) waste transportation services.
Our waste treatment and disposal customers are legally obligated to properly treat and dispose of their waste in accordance with
local, state and federal laws and regulations. As our customers do not possess the resources to properly treat and dispose of their
waste independently, they contract with the Company to perform the services. Waste treatment, recycling, and disposal revenue
results primarily from fixed fees charged to customers for treatment and/or disposal or recycling of specified wastes. Waste
treatment, recycling, and disposal revenue is generally charged on a per-ton or per-yard basis at contracted prices and is
recognized over time as the services are performed. Our treatment and disposal services are generally performed as the waste is
received and considered complete upon final disposal.
Field and industrial waste management services revenue results primarily from specialty onsite services such as high-pressure
cleaning, tank cleaning, decontamination, remediation, transportation, spill cleanup and emergency response at refineries,
chemical plants, steel and automotive plants, and other government, commercial and industrial facilities. We also provide
hazardous waste packaging and collection services and total waste management solutions at customer sites and through our 10-
day transfer facilities. These services are provided based on purchase orders or agreements with the customer and include prices
based upon daily, hourly or job rates for equipment, materials and personnel. Generally, the pricing in these types of contracts is
fixed, but the quantity of services to be provided during the contract term is variable and revenues are recognized over the term of
the agreements or as services are performed. As we have a right to consideration from our customers in an amount that
corresponds directly with the value to the customer of the Company’s performance completed to date, we have applied the
practical expedient to recognize revenue in the amount to which we have the right to invoice. Additionally, we have customers
that pay annual retainer fees, primarily for our standby services, under long-term or evergreen contracts. Such retainer fees are
recognized over time as the services are performed and it is probable that a significant reversal in the amount of cumulative
revenue recognized on the contracts will not occur.
Transportation and logistics revenue results from delivering customer waste to a disposal facility for treatment and/or disposal or
recycling. Transportation services are generally not provided on a stand-alone basis and instead are bundled with other Company
services. However, in some instances we provide transportation and logistics services for shipment of waste from cleanup sites to
disposal facilities operated by other companies. For such arrangements, we allocate revenue to each performance obligation
based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to
customer or using expected cost-plus margin. Transportation revenue is recognized over time as the waste is transported.
Taxes and fees collected from customers concurrent with revenue-producing transactions to be remitted to governmental
authorities are excluded from revenue.
Our Richland, Washington disposal facility is regulated by the WUTC, which approves our rates for disposal of LLRW. Annual
revenue levels are established based on a rate agreement with the WUTC at amounts sufficient to cover our costs of operation,
including facility maintenance, equipment replacement and related costs, and provide us with a reasonable profit. Per-unit rates
charged to LLRW customers during the year are based on our evaluation of disposal volume and radioactivity projections
submitted to us by waste generators. Our proposed rates are then reviewed and approved by the WUTC. If annual revenue
exceeds the approved levels set by the WUTC, we are required to refund excess collections to facility users on a pro-rata basis.
Refundable excess collections, if any, are recorded in Accrued liabilities in the consolidated balance sheets. The current rate
agreement with the WUTC was extended in 2019 and is effective until December 31, 2025.
Disposal Facility Accounting
We amortize landfill and disposal assets and certain related permits over their estimated useful lives. The units-of-consumption
method is used to amortize landfill cell construction and development costs and asset retirement costs. Under the units-of-
consumption method, we include costs incurred to date as well as future estimated construction costs in the amortization base of
the landfill assets. Additionally, where appropriate, as discussed below, we also include probable expansion airspace that has yet
to be permitted in the calculation of the total remaining useful life of the landfill asset. If we determine that expansion capacity
should no longer be considered in calculating the total remaining useful life
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of a landfill asset, we may be required to recognize an asset impairment or incur significantly higher amortization expense over
the remaining estimated useful life of the landfill asset. If at any time we make the decision to abandon the expansion effort, the
capitalized costs related to the expansion effort would be expensed in the period of abandonment.
Our landfill assets and liabilities fall into the following two categories, each of which require accounting judgments and
estimates:
●
Landfill assets comprised of capitalized landfill development costs.
●
Disposal facility retirement obligations relating to our capping, closure and post-closure liabilities that result in
corresponding retirement assets.
Landfill Assets
Landfill assets include the costs of landfill site acquisition, permits and cell design and construction incurred to date. Landfill
cells represent individual disposal areas within the overall treatment and disposal site and may be subject to specific permit
requirements in addition to the general permit requirements associated with the overall site.
To develop, construct and operate a landfill cell, we must obtain permits from various regulatory agencies at the local, state and
federal levels. The permitting process requires an initial site study to determine whether the location is feasible for landfill
operations. The initial studies are reviewed by our environmental management group and then submitted to the regulatory
agencies for approval. During the development stage we capitalize certain costs that we incur after site selection but before the
receipt of all required permits if we believe that it is probable that the landfill cell will be permitted.
Upon receipt of regulatory approval, technical landfill cell designs are prepared. The technical designs, which include the detailed
specifications to develop and construct all components of the landfill cell including the types and quantities of materials that will
be required, are reviewed by our environmental management group. The technical designs are submitted to the regulatory
agencies for approval. Upon approval of the technical designs, the regulatory agencies issue permits to develop and operate the
landfill cell.
The types of costs that are detailed in the technical design specifications generally include excavation, natural and synthetic
liners, construction of leachate collection systems, installation of groundwater monitoring wells, construction of leachate
management facilities and other costs associated with the development of the site. We review the adequacy of our cost estimates
at least annually. These development costs, together with any costs incurred to acquire, design and permit the landfill cell,
including personnel costs of employees directly associated with the landfill cell design, are recorded to the landfill asset on the
balance sheet as incurred.
To match the expense related to the landfill asset with the revenue generated by the landfill operations, we amortize the landfill
asset on a units-of-consumption basis over its operating life, typically on a cubic yard or cubic meter of disposal space consumed.
The landfill asset is fully amortized at the end of a landfill cell’s operating life. The per-unit amortization rate is calculated by
dividing the sum of the landfill asset net book value plus estimated future development costs (as described above) for the landfill
cell, by the landfill cell’s estimated remaining disposal capacity. Amortization rates are influenced by the original cost basis of
the landfill cell, including acquisition costs, which in turn is determined by geographic location and market values. We have
secured significant landfill assets through business acquisitions and valued them at the time of acquisition based on fair value.
Included in the technical designs are factors that determine the ultimate disposal capacity of the landfill cell. These factors
include the area over which the landfill cell will be developed, such as the depth of excavation, the height of the landfill cell
elevation and the angle of the side-slope construction. Landfill cell capacity used in the determination of amortization rates of our
landfill assets includes both permitted and unpermitted disposal capacity. Unpermitted disposal capacity is included when
management believes achieving final regulatory approval is probable based on our analysis of site conditions and interactions
with applicable regulatory agencies.
We review the estimates of future development costs and remaining disposal capacity for each landfill cell at least annually.
These costs and disposal capacity estimates are developed using input from independent engineers and internal technical
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and accounting managers and are reviewed and approved by our environmental management group. Any changes in future
estimated costs or estimated disposal capacity are reflected prospectively in the landfill cell amortization rates.
We assess our long-lived landfill assets for impairment when an event occurs or circumstances change that indicate the carrying
amount may not be recoverable. Examples of events or circumstances that may indicate impairment of any of our landfill assets
include, but are not limited to, the following:
●
Changes in legislative or regulatory requirements impacting the landfill site permitting process making it more difficult
and costly to obtain and/or maintain a landfill permit;
●
Actions by neighboring parties, private citizen groups or others to oppose our efforts to obtain, maintain or expand
permits, which could result in denial, revocation or suspension of a permit and adversely impact the economic viability
of the landfill. As a result of opposition to our obtaining a permit, improved technical information as a project
progresses, or changes in the anticipated economics associated with a project, we may decide to reduce the scope of, or
abandon, a project, which could result in an asset impairment; and
●
Unexpected significant increases in estimated costs, significant reductions in prices we are able to charge our customers
or reductions in disposal capacity that affect the ongoing economic viability of the landfill.
Disposal Facility Retirement Obligations
Disposal facility retirement obligations include the cost to close, maintain and monitor landfill cells and support facilities. As
individual landfill cells reach capacity, we must cap and close the cells in accordance with the landfill cell permits. These capping
and closure requirements are detailed in the technical design of each landfill cell and included as part of our approved regulatory
permit. After the entire landfill cell has reached capacity and is certified closed, we must continue to maintain and monitor the
landfill cell for a post-closure period, which generally extends for 30 years. Costs associated with closure and post-closure
requirements generally include maintenance of the landfill cell and groundwater systems, and other activities that occur after the
landfill cell has ceased accepting waste. Costs associated with post-closure monitoring generally include groundwater sampling,
analysis and statistical reports, transportation and disposal of landfill leachate and erosion control costs related to the final cap.
We have a legally enforceable obligation to operate our landfill cells in accordance with the specific requirements, regulations
and criteria set forth in our permits. This includes executing the approved closure/post-closure plan and closing/capping the entire
landfill cell in accordance with the established requirements, design and criteria contained in the permit. As a result, we record
the fair value of our disposal facility retirement obligations as a liability in the period in which the regulatory obligation to retire a
specific asset is triggered. For our individual landfill cells, the required closure and post-closure obligations under the terms of
our permits and our intended operation of the landfill cell are triggered and recorded when the cell is placed into service and
waste is initially disposed in the landfill cell. The fair value is based on the total estimated costs to close the landfill cell and
perform post-closure activities once the landfill cell has reached capacity and is no longer accepting waste, discounted using a
credit-adjusted risk-free rate. Retirement obligations are increased each year to reflect the passage of time by accreting the
balance at the weighted average credit-adjusted risk-free rate that is used to calculate the recorded liability, with accretion
charged to direct operating costs. Actual cash expenditures to perform closure and post-closure activities reduce the retirement
obligation liabilities as incurred. After initial measurement, asset retirement obligations are adjusted at the end of each period to
reflect changes, if any, in the estimated future cash flows underlying the obligation. Disposal facility retirement assets are
capitalized as the related disposal facility retirement obligations are incurred. Disposal facility retirement assets are amortized on
a units-of-consumption basis as the disposal capacity is consumed.
Our disposal facility retirement obligations represent the present value of current cost estimates to close, maintain and monitor
landfills and support facilities as described above. Cost estimates are developed using input from independent engineers, internal
technical and accounting managers, as well as our environmental management group’s interpretation of current legal and
regulatory requirements, and are intended to approximate fair value. We estimate the timing of future payments based on
expected annual disposal airspace consumption and then inflate the current cost estimate by an inflation rate, estimated at
December 31, 2021 to be 2.6%. 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 our estimated closure and post-closure costs. Our weighted-average credit-adjusted
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risk-free interest rate at December 31, 2021 was approximately 5.3%. Final closure and post-closure obligations are currently
estimated as being paid through the year 2130. During 2021 we updated several assumptions, including estimated costs and
timing of closing our disposal cells. These updates resulted in a net increase to our post-closure obligations of $732,000 in 2021.
We update our estimates of future capping, closure and post-closure costs and of future disposal capacity for each landfill cell on
an annual basis. Changes in inflation rates or the estimated costs, timing or extent of the required future activities to close,
maintain and monitor landfills and facilities result in both: (i) a current adjustment to the recorded liability and related asset and
(ii) a change in accretion and amortization rates which are applied prospectively over the remaining life of the asset. A
hypothetical 1% increase in the inflation rate would increase our closure/post-closure obligation by $24.4 million. A hypothetical
10% increase in our cost estimates would increase our closure/post-closure obligation by $10.5 million.
Goodwill and Intangible Assets
Goodwill
As of December 31, 2021, the Company’s goodwill balance was $413.1 million. We assess goodwill for impairment during the
fourth quarter as of October 1 of each year, and also if an event occurs or circumstances change that would more likely than not
reduce the fair value of a reporting unit below its carrying amount. The assessment consists of comparing the fair value of the
reporting unit to the carrying value of the net assets assigned to the reporting unit, including goodwill. Some of the factors that
could indicate impairment include a significant adverse change in legal factors or in the business climate, an adverse action or
assessment by a regulator, or failure to generate sufficient cash flows at the reporting unit. For example, field services represents
an emerging business for the Company and has been the focus of a shift in strategy since the acquisition of NRC and EQ. Failure
to execute on planned growth initiatives within this business could lead to the impairment of goodwill and intangible assets in
future periods.
We determine our reporting units by identifying the components of each operating segment, and then aggregate components
having similar economic characteristics based on quantitative and/or qualitative factors. At December 31, 2021, we had seven
reporting units, six of which had allocated goodwill.
Fair values are generally determined by an income approach, discounting projected future cash flows based on our expectations
of the current and future operating environment, using a market approach, applying a multiple of earnings based on guideline for
publicly traded companies, or a combination thereof. Estimating future cash flows requires significant judgment about factors
such as general economic conditions and projected growth rates, and our estimates often vary from the cash flows eventually
realized. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on our industry,
capital structure and risk premiums including those reflected in the current market capitalization. In the event the fair value of a
reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a
reporting unit exceeds its fair value, goodwill of the reporting unit is considered impaired, and an impairment charge would be
recognized during the period in which the determination has been made for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized will not exceed the total amount of goodwill allocated to that reporting
unit.
Assessing impairment inherently involves management judgments as to the assumptions used to calculate fair value of the
reporting units and the impact of market conditions on those assumptions. The key inputs that management uses in its
assumptions to estimate the fair value of our reporting units under the income-based approach are as follows:
●
Projected cash flows of the reporting unit, with consideration given to projected revenues, operating margins and the
levels of capital investment required to generate the corresponding revenues; and
●
Weighted average cost of capital (“WACC”), the risk-adjusted rate used to discount the projected cash flows.
To develop the projected cash flows of our reporting units, management considers factors that may impact the revenue streams
within each reporting unit. These factors include, but are not limited to, economic conditions on both a global scale and
specifically in the regions in which the reporting units operate, customer relationships, strategic plans and
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opportunities, required returns on invested capital and competition from other service providers. With regard to operating
margins, management considers its historical reporting unit operating margins on the revenue streams within each reporting unit,
adjusting historical margins for the projected impact of current market trends on both fixed and variable costs.
Expected future after-tax operating cash flows of each reporting unit are discounted to a present value using a risk-adjusted
discount rate. Estimates of future cash flows require management to make significant assumptions regarding future operating
performance including the projected mix of revenue streams within each reporting unit, projected operating margins, the amount
and timing of capital investments and the overall probability of achieving the projected cash flows, as well as future economic
conditions, which may result in actual future cash flows that are different than management’s estimates. The discount rate, which
is intended to reflect the risks inherent in future cash flow projections, used in estimating the present value of future cash flows, is
based on estimates of the WACC of market participants relative to the reporting units. Financial and credit market volatility can
directly impact certain inputs and assumptions used to develop the WACC.
The result of the annual assessment of goodwill undertaken in the fourth quarter of 2021 indicated that the fair value of each of
our reporting units was in excess of its respective carrying value.
In connection with our financial review and forecasting procedures performed during the first quarter of 2020, management
determined that the projected future cash flows of our Energy Waste (“EW”) reporting unit and our International reporting unit
(described below) indicated that the fair value of such reporting units may be below their respective carrying amounts.
Accordingly, we performed an interim assessment of each reporting unit’s fair value as of March 31, 2020 (the “Interim
Assessment”). Based on the results of the Interim Assessment, we recognized goodwill impairment charges of $283.6 million
related to our EW reporting unit and $16.7 million related to our International reporting unit in the first quarter of 2020. During
the fourth quarter of 2020, the Company finalized the purchase price allocation related to the NRC Merger. The finalization of
fair value estimates during the fourth quarter of 2020, and resulting final determination of goodwill by reporting unit, resulted in
an increase in the amount of goodwill assigned to the EW reporting unit and a decrease in the amount of goodwill assigned to the
International reporting unit. $80.3 million of additional goodwill assigned to the EW reporting unit was immediately impaired in
the fourth quarter of 2020 based on the fair value of the reporting unit determined in the Interim Assessment. The decrease in
goodwill assigned to the International reporting unit resulted in the reversal in the fourth quarter of 2020 of $11.2 million of
International reporting unit goodwill impairment charges recorded in the first quarter of 2020.
Our EW reporting unit, the sole component of our Energy Waste segment, provides energy-related services including solid and
liquid waste treatment and disposal, equipment cleaning and maintenance, specialty equipment rental, spill containment and site
remediation for a full complement of oil and gas waste streams, predominately to upstream energy customers currently
concentrated in the Eagle Ford and Permian Basins in Texas. Our International reporting unit, a component of our Field Services
segment, provides industrial and emergency response services to the offshore oil and gas sector in the North Sea and land-based
industries across the EMEA region. Both our EW and International reporting units are dependent on energy-related exploration
and production investments and expenditures by our energy industry customers. Lower crude oil prices and the volatility of such
prices affect the level of investment as it impacts the ability of energy companies to access capital on economically advantageous
terms or at all. In addition, energy companies decrease investments when the projected profits are inadequate or uncertain due to
lower crude oil prices or volatility in crude oil prices. Such reductions in capital spending negatively impact energy waste
generation and therefore the demand for our services.
The principal factors contributing to the goodwill impairment charges for both the EW and International reporting units related to
historically-low energy commodity prices reducing anticipated energy-related exploration and production investments and
expenditures by our energy industry customers, which negatively impacted each reporting unit’s prospective cash flows and each
reporting unit's estimated fair value. A longer-than-expected recovery in crude oil pricing and energy-related exploration and
production investments became evident during the first quarter of 2020 as we assessed the projected impact of the COVID-19
pandemic and foreign oil production increases on the global demand for oil and updated the long-term projections for each
reporting unit which, as a result, decreased each reporting unit’s anticipated future cash flows as compared to those estimated
previously.
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Consistent with our annual impairment testing methodology, we utilized a weighted average of (1) an income approach and (2) a
market approach to determine the fair value of each of the reporting units for the Interim Assessment. The income approach is
based on the estimated present value of future cash flows for each reporting unit. The market approach is based on assumptions
about how market data relates to each reporting unit.
The rapid and sustained decline in the energy markets served by our EW and International reporting units, exacerbated by the
uncertainty surrounding the impact of the COVID-19 pandemic and foreign oil production increases, has inherently increased the
risk associated with the future cash flows of these reporting units. Accordingly, when performing the Interim Assessment, we
increased the discount rates and decreased the projected capital investment for each reporting unit compared to the assumptions
used in the initial fair value assessment in connection with the NRC Merger on November 1, 2019.
We also considered the estimated fair value of our EW and International reporting units under a market-based approach by
applying industry-comparable multiples of revenues and operating earnings to reporting unit revenues and operating earnings.
The lack of a broad base of publicly available market data specific to the industry in which we operate, combined with the
general market volatility attributable to the COVID-19 pandemic, results in a wide range of currently observable market
multiples. Accordingly, we applied less weight to the estimated fair value of our reporting units calculated under the market-
based approach (10%) compared to the income approach (90%) described above.
The result of the annual assessment of goodwill undertaken in the fourth quarter of 2020 indicated that the fair value of each of
our reporting units was in excess of its respective carrying value, with the exception of our Field Services reporting unit.
Our Field Services reporting unit, a component of our Field Services segment, offers specialty field services and total waste
management solutions to commercial and industrial facilities and to government entities through our 10-day transfer facilities and
at customer sites. Consistent with prior assessments, we utilized a weighted average of (1) an income approach and (2) a market
approach to determine the fair value of each of the Field Services reporting unit. The income approach is based on the estimated
present value of future cash flows for the reporting unit. The market approach is based on assumptions about how market data
relates to the reporting unit. The estimated fair value of the Field Services reporting unit was then compared to the reporting
unit’s carrying amount as of October 1, 2020. Based on the results of that comparison, the carrying amount of the Field Services
reporting unit exceeded the estimated fair value of the reporting unit by $14.4 million and, as a result, we recognized a
corresponding goodwill impairment charge in the fourth quarter of 2020. The factors contributing to the $14.4 million goodwill
impairment charge principally related to an increase in the risk-adjusted rate used to discount the projected cash flows of the
reporting unit as a result of the decline in our share price since the last annual assessment as well as a slower than expected
recovery to cash flow levels forecasted prior to the COVID-19 pandemic, which negatively impacted the reporting unit’s
prospective financial information in its discounted cash flow model and the reporting unit’s estimated fair value as compared to
previous estimates.
The result of the annual assessment of goodwill undertaken in the fourth quarter of 2019 indicated that the fair value of each of
our reporting units was in excess of its respective carrying value.
Non-amortizing Intangible Assets
We review non-amortizing intangible assets for impairment during the fourth quarter as of October 1 of each year. Fair value is
generally determined by considering an internally developed discounted projected cash flow analysis. Estimating future cash
flows requires significant judgment about factors such as general economic conditions and projected growth rates, and our
estimates often vary from the cash flows eventually realized. If the fair value of an asset is determined to be less than the carrying
amount of the intangible asset, an impairment in the amount of the difference is recorded in the period in which the annual
assessment occurs.
The results of the annual assessment of non-amortizing intangible assets undertaken in the fourth quarter of 2021 indicated no
impairment charges were required.
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The results of the annual assessment of non-amortizing intangible assets undertaken in the fourth quarter of 2020 indicated no
impairment charges were required, with the exception of certain non-amortizing permit intangibles within our Field Services
segment.
Our Field Services segment provides government-mandated, commercial standby oil spill compliance solutions to companies that
store, transport, produce or handle petroleum and certain nonpetroleum oils on or near U.S. waters. A company’s ability to
provide these standby services is subject to significant regulatory certification requirements and other high barriers to entry. As
such, the Company assigned $57.1 million of fair value to non-amortizing standby services permit intangible assets upon
finalization of the purchase accounting allocation related to the NRC Merger. In performing the annual indefinite-lived intangible
assets impairment tests, the estimated fair value of the standby services permits was determined under an income approach using
discounted projected future cash flows associated with the permits and then compared to the $57.1 million carrying amount of the
permits as of October 1, 2020. Based on the results of that evaluation, the carrying amount of the permits exceeded the estimated
fair value of the permits and, as a result, we recognized a $21.1 million impairment charge in the fourth quarter of 2020. The
factors contributing to the impairment charge principally related to a less favorable outlook on the potential for both significant
oil spill events and growth opportunities, which negatively impacted the discounted projected cash flows associated with the
standby services permits and their estimated fair value as compared to previous estimates.
The results of the annual assessment of non-amortizing intangible assets undertaken in the fourth quarter of 2019 indicated no
impairment charges were required.
Amortizing Tangible and Intangible Assets
We also review amortizing tangible and intangible assets for impairment whenever events or changes in circumstances indicate
that the carrying value of an asset may not be recoverable. In order to assess whether a potential impairment exists, the assets’
carrying values are compared with their undiscounted expected future cash flows. Estimating future cash flows requires
significant judgment about factors such as general economic conditions and projected growth rates, and our estimates often vary
from the cash flows eventually realized. Impairments are measured by comparing the fair value of the asset to its carrying value.
Fair value is generally determined by considering: (i) the internally developed discounted projected cash flow analysis; (ii) a
third-party valuation; and/or (iii) information available regarding the current market environment for similar assets. If the fair
value of an asset 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 the events or changes in circumstances that indicated the carrying value of the asset may not be
recoverable occurred.
In connection with the interim goodwill impairment assessment of the EW and International reporting units in the first quarter of
2020, and the annual goodwill impairment assessment of the EW and Field Services reporting units in the fourth quarter of 2020,
we also assessed the reporting units’ amortizing tangible and intangible assets for impairment. Based on the results of the
assessment, the carrying amounts of the amortizing tangible and intangible assets did not exceed the estimated undiscounted cash
flows of the asset groups and, as a result, no additional impairment charges were recorded in 2020.
Our acquired permits and licenses generally have renewal terms of approximately 5-10 years. We have a history of renewing
these permits and licenses as demonstrated by the fact that each of the sites’ treatment permits and licenses have been renewed
regularly since the facility began operations. We intend to continue to renew our permits and licenses as they come up for
renewal for the foreseeable future. Costs incurred to renew or extend the term of our permits and licenses are recorded in Selling,
general and administrative expenses in our consolidated statements of operations.
Share-Based Payments
On May 27, 2015, the stockholders of Predecessor US Ecology approved the Omnibus Incentive Plan (as amended, “Pre-Merger
Omnibus Plan”), which was approved by Predecessor US Ecology’s Board of Directors on April 7, 2015. In connection with the
closing of the NRC Merger, the Company assumed the Pre-Merger Omnibus Plan, amended and restated such plan and renamed
it the Amended and Restated US Ecology, Inc. Omnibus Incentive Plan (the “Omnibus
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Plan”) for the purpose of issuing replacement awards to award recipients under the Omnibus Plan pursuant to the NRC Merger
Agreement and for the issuance of additional awards in the future.
The Omnibus Plan was developed to provide additional incentives through equity ownership in US Ecology and, as a result,
encourage employees, consultants and non-employee directors to contribute to our success. The Omnibus Plan provides, among
other things, the ability for the Company to grant restricted stock, performance stock, options, stock appreciation rights, restricted
stock units, performance stock units and other share-based awards or cash awards to employees, consultants and non-employee
directors.
The Omnibus Plan expires on March 31, 2031 and authorizes 3,272,000 shares of common stock for grant over the life of the
Omnibus Plan. As of December 31, 2021, 2,088,750 shares of common stock remain available for grant under the Omnibus Plan.
Subsequent to the approval of the Pre-Merger Omnibus Plan by Predecessor US Ecology in May 2015, we stopped granting
equity awards under the American Ecology Corporation 2008 Stock Option Incentive Plan (“Pre-Merger 2008 Stock Option
Plan”). However, in connection with the closing of the NRC Merger, the Company assumed the Pre-Merger 2008 Stock Option
Plan, amended and restated such plan and renamed it in the Amended and Restated US Ecology, Inc. 2008 Stock Option
Incentive Plan (the “2008 Stock Option Plan”) solely for the purpose of issuing replacement awards to award recipients
thereunder and remains in effect solely for the settlement of awards granted under such plan and no future grants may be made
under such plan. No shares that are reserved but unissued under the 2008 Stock Option Plan or that are outstanding under the
2008 Stock Option Plan and reacquired by the Company for any reason will be available for issuance under the Omnibus Plan.
In addition, in connection with the closing of the NRC Merger, the Company assumed the NRC Group Holdings Corp. 2018
Equity Incentive Plan previously maintained by NRC by adopting the Amended and Restated US Ecology, Inc. 2018 Equity and
Incentive Compensation Plan solely for the purpose of issuing replacement awards to award recipients thereunder pursuant to the
NRC Merger Agreement, and no future grants may be made under such plan.
As of December 31, 2021, we have PSU awards outstanding under the Omnibus Plan. Each PSU represents the right to receive,
on the settlement date, one share of the Company’s common stock. The total number of PSUs each participant is eligible to earn
ranges from 0% to 200% of the target number of PSUs granted. The actual number of PSUs that will vest and be settled in shares
is determined based on total stockholder return relative to a set of peer companies, over a 2.5-year performance period. Refer to
Note 19 to the Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this
Annual Report on Form 10-K for a summary of the assumptions utilized in the Monte Carlo valuation of PSU awards at the date
of grant.
As of December 31, 2021, we have stock option awards outstanding under the 2008 Stock Option Plan and the Omnibus Plan.
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 subjective assumptions. These assumptions include, but are not limited to, the expected term of stock options and
expected stock price volatility over the term of the awards. Refer to Note 19 to the Consolidated Financial Statements in “Part II,
Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K for a summary of the assumptions
utilized in 2021, 2020 and 2019. Our stock options have characteristics significantly different from those of traded options, and
changes in the assumptions can materially affect the fair value estimates.
The Company has elected to account for forfeitures as they occur, rather than estimate expected forfeitures.
Income Taxes
Our income tax expense, deferred tax assets “DTAs” and deferred tax liabilities “DTLs”, and liabilities for uncertain tax benefits
“UTBs” reflect management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United
States and numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the
consolidated income tax expense.
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We account for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable
for the current year and deferred tax assets and liabilities for the expected future tax consequences of temporary differences that
currently exist between the tax basis and the financial reporting basis of our subsidiaries’ assets and liabilities using the enacted
tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax laws and tax rates on
deferred tax assets and liabilities are recognized in operations in the period that includes the enactment date.
We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider
both positive and negative evidence related to the likelihood of realization of the deferred tax assets on a jurisdictional basis to
determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets
will not be realized. Examples of positive and negative evidence include future growth, forecasted earnings, future taxable
income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if
carryback is permitted under the law and prudent, and feasible tax planning strategies.
We apply the provisions of ASC 740 related to income tax uncertainties which clarifies the accounting for income taxes by
prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the consolidated
financial statements. We account for unrecognized tax benefits using a more-likely-than-not threshold for financial statement
recognition and measurement of tax positions taken or expected to be taken in a tax return. We establish reserves for tax-related
uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. We record an income tax
liability, if any, for the difference between the benefit recognized and measured and the tax position taken or expected to be taken
on our tax returns.
As of December 31, 2021, the Company had accumulated undistributed earnings generated by our foreign subsidiaries of
approximately $79.1 million. Any additional taxes due with respect to such earnings or the excess of the amount for financial
reporting over the tax basis of our foreign investments would generally be limited to foreign withholding taxes and state income
taxes. We intend, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet
future U.S. cash needs.
See Note 17 to the Consolidated Financial Statements in “Part II, Item 8. Financial Statements and Supplementary Data” of this
Annual Report on Form 10-K for additional information regarding income taxes.
Litigation
Information with respect to this item may be found in Note 18 to the Consolidated Financial Statements included in “Part II, Item
8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K, under the caption “Litigation and
Regulatory Proceedings” which information is incorporated herein by reference.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or interests in variable interest entities that would require consolidation. US
Ecology operates through its direct and indirect subsidiaries.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We do not maintain equities, commodities, derivatives, or any other similar instruments for trading purposes. We have minimal
interest rate risk on investments or other assets due to our preservation of capital approach to investments. At December 31, 2021,
$3.8 million in restricted cash and investments, cash and cash equivalents and other short-term investments were invested in
fixed-income U.S. Treasury and U.S. government agency securities and money market accounts.
We are exposed to changes in interest rates as a result of our Revolving Credit Facility and term loan borrowings under the Credit
Agreement. Our Revolving Credit Facility borrowings incur interest at a base rate (as defined in the Credit
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72
Agreement) or LIBOR, at the Company’s option, plus an applicable margin which is determined according to a pricing grid under
which the interest rate decreases or increases based on our ratio of funded debt to Consolidated EBITDA (as defined in the Credit
Agreement). Our term loan bears interest at LIBOR plus 2.25% or a base rate plus 1.25% (with a step-up to LIBOR plus 2.50%
or a base rate plus 1.50% in the event that US Ecology credit ratings are not BB (with a stable or better outlook) or better from
S&P and Ba2 (with a stable or better outlook) or better from Moody’s).
In March 2020, the Company entered into an interest rate swap agreement with the intention of hedging the Company’s interest
rate exposure on a portion of the Company’s outstanding LIBOR-based variable-rate debt. Under the terms of the swap, the
Company pays interest at the fixed effective rate of 0.83% and receives interest at the variable one-month LIBOR rate on an
initial notional amount of $500.0 million.
As of December 31, 2021, there were $303.0 million of Revolving Credit Facility loans and $441.0 million of term loans
outstanding under the Credit Agreement. If interest rates were to rise and outstanding balances remain unchanged, we would be
subject to higher interest payments on our outstanding debt. Subsequent to the effective date of the interest rate swap on
March 31, 2020, we are subject to higher interest payments on only the unhedged borrowings under the Credit Agreement and the
term loan.
Based on the outstanding indebtedness under the Credit Agreement on December 31, 2021 and the impact of our interest rate
hedge, if market rates used to calculate interest expense were to average 1% higher in the next twelve months, our interest
expense would increase by approximately $1.3 million for the corresponding period.
Foreign Currency Risk
We are subject to foreign currency exchange risk through our international operations. We operate primarily in the United States
and, accordingly, most of our consolidated revenue and associated expenses are denominated in USD. During 2021 we recorded
approximately $80.6 million, or 8%, of our revenue in Canada, $41.2 million, or 4%, of our revenue in the EMEA region, and
less than 1% of our revenue from other international regions. Revenue and expenses denominated in foreign currencies may be
affected by movements in foreign currency exchange rates.
Our exposure to foreign currency exchange risk in our Consolidated Balance Sheets relates primarily to cash, trade payables and
receivables, and intercompany loans that are denominated in foreign currencies, primarily CAD. Contracts for services that our
foreign subsidiaries provide to customers are often denominated in currencies other than their local functional currency. The
resulting cash, receivable and payable accounts are subject to non-cash foreign currency translation gains or losses.
We established intercompany loans with certain of our Canadian subsidiaries, as part of a tax and treasury management strategy
allowing for repayment of third-party bank debt. These intercompany loans are payable using CAD and are subject to mark-to-
market adjustments with movements in the CAD. At December 31, 2021, we had $7.6 million of intercompany loans outstanding
between our Canadian subsidiaries and US Ecology. During 2021, the CAD strengthened as compared to the USD resulting in a
$153,000 non-cash foreign currency translation gain being recognized in the Company’s consolidated statements of operations
related to the intercompany loans. Based on intercompany balances as of December 31, 2021, a $0.01 CAD increase or decrease
in currency rate compared to the USD at December 31, 2021 would have generated a gain or loss of approximately $76,000 for
the year ended December 31, 2021.
We had a total pre-tax foreign currency loss of $171,000 for the year ended December 31, 2021. We currently have no foreign
exchange contracts, option contracts or other foreign currency hedging arrangements. Management evaluates our risk position on
an ongoing basis to determine whether foreign exchange hedging strategies should be employed.
Commodity Price Risk
We have exposure to commodity pricing for oil and gas. Fluctuations in oil and gas commodity prices may impact business
activity in the industries that we serve, affecting demand for our services and our future earnings and cash flows. We have not
entered into any derivative contracts to hedge our exposure to commodity price risk.
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73
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Number
Report of Independent Registered Public Accounting Firm (PCAOB ID 34)
74
Consolidated Balance Sheets as of December 31, 2021 and 2020
77
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
78
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2021, 2020 and 2019
79
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
80
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2021, 2020 and 2019
81
Notes to Consolidated Financial Statements
82
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74
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of US Ecology, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of US Ecology, Inc. and subsidiaries (the “Company”) as of
December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders’
equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes (collectively
referred to as the “financial statements”). We also have audited the Company’s internal control over financial reporting as of
December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America
(“generally accepted accounting principles”). Also, in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated
Framework (2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Annual Report on Internal Controls over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and
the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding
of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
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75
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and
we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the
accounts or disclosures to which it relates.
Impairment Assessment – Goodwill in the Energy Waste Reporting Unit - Refer to Notes 2, 3, and 13 to the consolidated
financial statements
Critical Audit Matter Description
The Company’s evaluation of goodwill for impairment involves the comparison of the estimated fair value of each of the
Company’s reporting units to their respective carrying value. Determination of the estimated fair value of a reporting unit
requires judgement as to the future operating results of the reporting unit as well as the level of risks inherent in the projections.
The Company estimates the fair value of its reporting units using a weighting of fair values derived from the income and market
approaches.
The determination of fair value using the income approach is based on the present value of estimated future cash flows, which
requires management to make significant estimates and assumptions of revenue growth rates and operating margins, and selection
of the discount rates.
The determination of the fair value using the market approach requires management to make significant assumptions related to
market multiples of revenue and earnings derived from comparable publicly-traded companies with similar operating and
investment characteristics as the reporting unit.
Changes in these estimates and assumptions could have a significant impact on the determination of the estimated fair value, and
any related goodwill asset impairment charge.
The Company evaluates goodwill assets for impairment annually, and more frequently if circumstances indicate the possibility of
impairment.
We identified the evaluation of the Energy Waste reporting unit’s goodwill impairment assessment as a critical audit matter
because small changes to valuation assumptions, specifically the forecasted revenues and the discount rate, could have a
significant impact on the reporting unit fair value.
Auditing these assumptions involved extensive audit effort, including the need to involve our fair value specialists due to the
complexity of these assumptions and a high degree of auditor judgment when performing audit procedures and evaluating the
results of those procedures.
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76
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to the forecasted revenue and the selection of the discount rate for the impairment test included the
following:
●
We tested the effectiveness of controls over the management’s goodwill impairment evaluation, including the controls
related to management’s forecasted revenues and the selection of the discount rate.
●
We evaluated management’s ability to accurately forecast by comparing actual results to management’s historical
forecasts.
●
We performed a sensitivity analysis to evaluate the risk of material misstatement of key business and valuation
assumptions used in the fair value model.
●
We evaluated the reasonableness of management’s revenue forecasts by comparing the forecasts to:
Historical forecasts and results of operations.
Information included in Company press releases as well as in analyst and industry reports for the Company and
certain of its peer companies.
●
With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology used and
evaluated the reasonableness of the discount rate applied by:
Testing the source information underlying the determination of the discount rate and the mathematical accuracy of
the calculation.
Developing a range of independent estimates and comparing those to the discount rate selected by management.
/s/ DELOITTE & TOUCHE LLP
Boise, Idaho
February 28, 2022
We have served as the Company’s auditor since 2009.
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77
US ECOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
As of December 31,
2021
2020
Assets
Current Assets:
Cash and cash equivalents
$
67,487
$
73,848
Receivables, net
250,154
241,978
Prepaid expenses and other current assets
32,136
28,379
Income taxes receivable
14,441
18,279
Total current assets
364,218
362,484
Property and equipment, net
456,384
456,637
Operating lease assets
43,607
51,474
Restricted cash and investments
1,567
5,598
Intangible assets, net
489,573
523,988
Goodwill
413,126
413,037
Other assets
36,923
18,065
Total assets
$
1,805,398
$
1,831,283
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable
$
64,793
$
35,881
Deferred revenue
15,950
15,267
Accrued liabilities
51,265
59,296
Accrued salaries and benefits
29,438
30,918
Income taxes payable
559
977
Current portion of long-term debt
3,359
3,359
Current portion of closure and post-closure obligations
5,771
6,471
Current portion of operating lease liabilities
15,799
17,048
Total current liabilities
186,934
169,217
Long-term debt
735,125
782,484
Long-term closure and post-closure obligations
93,149
89,398
Long-term operating lease liabilities
28,477
35,069
Other long-term liabilities
13,907
32,201
Deferred income taxes, net
123,482
120,983
Total liabilities
1,181,074
1,229,352
Commitments and contingencies (See Note 18)
Stockholders’ Equity:
Common stock $0.01 par value per share, 50,000 authorized; 31,512 shares issued and
outstanding
315
315
Additional paid-in capital
821,970
820,567
Retained deficit
(183,115)
(188,452)
Treasury stock, at cost, 242 and 358 shares, respectively
(10,652)
(15,841)
Accumulated other comprehensive loss
(4,194)
(14,658)
Total stockholders’ equity
624,324
601,931
Total liabilities and stockholders’ equity
$
1,805,398
$
1,831,283
The accompanying notes are an integral part of these consolidated financial statements.
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78
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
For the Year Ended December 31,
2021
2020
2019
Revenue
$ 988,001
$
933,854
$ 685,509
Direct operating costs
754,923
683,703
475,675
Gross profit
233,078
250,151
209,834
Selling, general and administrative expenses
199,732
206,169
141,123
Goodwill and intangible asset impairment charges
—
404,900
—
Operating income (loss)
33,346
(360,918)
68,711
Other income (expense):
Interest income
1,417
258
605
Interest expense
(28,966)
(32,595)
(19,239)
Foreign currency loss
(171)
(1,134)
(733)
Other
4,476
788
455
Total other expense
(23,244)
(32,683)
(18,912)
Income (loss) before income taxes
10,102
(393,601)
49,799
Income tax expense (benefit)
4,765
(4,242)
16,659
Net income (loss)
$
5,337
$ (389,359)
$
33,140
Earnings (loss) per share:
Basic
$
0.17
$
(12.51)
$
1.41
Diluted
$
0.17
$
(12.51)
$
1.40
Shares used in earnings (loss) per share calculation:
Basic
31,138
31,126
23,521
Diluted
31,373
31,126
23,749
The accompanying notes are an integral part of these consolidated financial statements.
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79
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands)
For the Year Ended December 31,
2021
2020
2019
Net income (loss)
$
5,337
$ (389,359)
$ 33,140
Other comprehensive income (loss):
Foreign currency translation (loss) gain
(1,505)
3,055
3,772
Net changes in interest rate hedge, net of taxes of $3,182, $(1,557) and $(488),
respectively
11,969
(5,859)
(1,835)
Comprehensive income (loss), net of tax
$
15,801
$ (392,163)
$ 35,077
The accompanying notes are an integral part of these consolidated financial statements.
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80
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year Ended December 31,
2021
2020
2019
Cash flows from operating activities:
Net income (loss)
$
5,337
$
(389,359)
$
33,140
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization of property and equipment
70,799
66,561
41,423
Amortization of intangible assets
34,614
37,344
15,491
Accretion of closure and post-closure obligations
5,363
4,000
4,388
Goodwill and intangible asset impairment charges
—
404,900
—
Integration-related property and equipment charges
—
3,067
—
Property and equipment impairment charges
—
—
25
Unrealized foreign currency gain
(1,647)
(1,472)
(666)
Deferred income taxes
(635)
(4,148)
6,601
Share-based compensation expense
7,478
6,651
5,544
Share-based payments of business development and integration expenses
411
1,182
3,717
Unrecognized tax benefits
16
(8)
(238)
Net (gain) loss on disposition of assets
(116)
1,504
426
Gain on insurance proceeds from damaged property and equipment
—
—
(12,366)
Amortization and write-off of debt issuance costs
2,440
2,217
1,007
Amortization and write-off of debt discount
161
161
27
Change in fair value of contingent consideration
282
(3,682)
349
Change in fair value of minority interest investment
(3,509)
—
—
Changes in assets and liabilities (net of effects of business acquisitions):
Receivables
(14,685)
8,381
(9,357)
Income taxes receivable
3,830
(7,049)
(4,163)
Other assets
(5,271)
(5,443)
(2,163)
Accounts payable and accrued liabilities
15,985
(13,628)
(10,706)
Deferred revenue
658
(1,619)
967
Accrued salaries and benefits
(1,483)
(121)
8,326
Income taxes payable
(430)
(549)
(244)
Closure and post-closure obligations
(3,279)
(1,744)
(1,912)
Net cash provided by operating activities
116,319
107,146
79,616
Cash flows from investing activities:
Purchases of property and equipment
(68,666)
(57,399)
(58,100)
Proceeds from sale of property and equipment
2,431
1,897
1,182
Minority interest investment
(712)
—
(7,870)
Proceeds from sale of short-term investments
2,142
—
—
Purchases of restricted investments
(1,017)
(1,615)
(1,197)
Proceeds from sale of restricted investments
1,267
1,483
1,145
Business acquisitions (net of cash acquired)
—
(3,309)
(399,599)
Insurance proceeds from damaged property and equipment
—
1,305
12,714
Payment of acquired contingent consideration liabilities
—
—
(4,000)
Net cash used in investing activities
(64,555)
(57,638)
(455,725)
Cash flows from financing activities:
Proceeds from short-term borrowings
61,326
72,353
77,997
Payments on short-term borrowings
(61,326)
(72,353)
(77,997)
Payments on long-term debt
(48,500)
(74,500)
(80,000)
Payment of equipment financing obligations
(5,616)
(6,327)
(1,539)
Payment of acquired contingent consideration liabilities
(2,553)
(2,517)
—
Deferred financing costs paid
(957)
(1,144)
(9,416)
Repurchase of common stock
(465)
(18,332)
(915)
Proceeds from long-term debt
—
90,000
491,875
Dividends paid
—
(5,667)
(15,890)
Other
—
28
319
Net cash (used in) provided by financing activities
(58,091)
(18,459)
384,434
Effect of foreign exchange rate changes on cash
277
1,915
1,062
(Decrease) increase in Cash and cash equivalents and restricted cash
(6,050)
32,964
9,387
Cash and cash equivalents and restricted cash at beginning of year
75,104
42,140
32,753
Cash and cash equivalents and restricted cash at end of year
$
69,054
$
75,104
$
42,140
Reconciliation of Cash and cash equivalents and restricted cash:
Cash and cash equivalents at beginning of year
73,848
41,281
31,969
Restricted cash at beginning of year
1,256
859
784
Cash and cash equivalents and restricted cash at beginning of year
$
75,104
$
42,140
$
32,753
Cash and cash equivalents at end of year
67,487
73,848
41,281
Restricted cash at end of year
1,567
1,256
859
Cash and cash equivalents and restricted cash at end of year
$
69,054
$
75,104
$
42,140
The accompanying notes are an integral part of these consolidated financial statements.
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81
US ECOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share amounts)
Accumulated
Common
Additional
Retained
Other
Shares
Common
Paid-In
Earnings
Treasury
Comprehensive
Issued
Stock
Capital
(Deficit)
Stock
Loss
Total
Balance at December 31, 2018
22,040,144
220
$ 183,834
$
189,324
$
(370)
$
(13,791)
$
359,217
Net income
—
—
—
33,140
—
—
33,140
Other comprehensive income
—
—
—
—
—
1,937
1,937
Common stock issued in NRC Merger
9,337,949
93
581,008
—
—
—
581,101
Replacement warrants, restricted stock and stock options issued in NRC
Merger
—
—
45,359
—
—
—
45,359
Dividends paid
—
—
—
(15,890)
—
—
(15,890)
Share-based compensation
—
—
5,544
—
—
—
5,544
Share-based payments of business development and integration expenses
—
—
3,717
—
—
—
3,717
Stock option exercises
8,235
—
319
—
—
—
319
Repurchase of common stock: 14,462 shares
—
—
—
—
(916)
—
(916)
Issuance of restricted common stock
78,175
2
(1,516)
—
—
—
(1,514)
Issuance of performance common stock
9,540
—
(634)
—
—
—
(634)
Issuance of restricted common stock from treasury shares
—
—
(514)
—
514
—
—
Cancellation of treasury shares
(13,359)
—
(772)
—
772
—
—
Balance at December 31, 2019
31,460,684
315
816,345
206,574
—
(11,854)
1,011,380
Net loss
—
—
—
(389,359)
—
—
(389,359)
Other comprehensive loss
—
—
—
—
—
(2,804)
(2,804)
Dividends paid
—
—
—
(5,667)
—
—
(5,667)
Share-based compensation
—
—
6,651
—
—
—
6,651
Share-based payments of business development and integration expenses
—
—
1,182
—
—
—
1,182
Stock option exercises
3,142
—
28
—
—
—
28
Repurchase of common stock: 414,769 shares
—
—
—
—
(18,332)
—
(18,332)
Issuance of restricted common stock
45,111
—
(286)
—
—
—
(286)
Issuance of performance common stock
3,387
—
(210)
—
—
—
(210)
Issuance of restricted common stock from treasury shares
—
—
(3,143)
—
2,491
—
(652)
Balance at December 31, 2020
31,512,324
315
820,567
(188,452)
(15,841)
(14,658)
601,931
Net income
—
—
—
5,337
—
—
5,337
Other comprehensive income
—
—
—
—
—
10,464
10,464
Share-based compensation
—
—
7,478
—
—
—
7,478
Share-based payments of business development and integration expenses
—
—
411
—
—
—
411
Repurchase of common stock: 12,788 shares
—
—
—
—
(465)
—
(465)
Issuance of restricted common stock and common stock from treasury shares
—
—
(6,486)
—
5,654
—
(832)
Balance at December 31, 2021
31,512,324
315
$ 821,970
$ (183,115)
$ (10,652)
$
(4,194)
$
624,324
The accompanying notes are an integral part of these financial statements.
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82
US ECOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS
US Ecology Holdings, Inc., the predecessor to the Company (“Predecessor US Ecology”), was incorporated as a Delaware
corporation in March 1987 as American Ecology Corporation. On February 22, 2010, Predecessor US Ecology changed its name
from American Ecology Corporation to US Ecology, Inc. On November 1, 2019, in connection with the Company’s acquisition
of NRC Group Holdings Corp. (“NRC”), a new parent entity of US Ecology completed a merger transaction with Predecessor US
Ecology and became the successor to Predecessor US Ecology and changed its name to “US Ecology, Inc.” In connection with
the closing of the NRC Merger (as defined below), Predecessor US Ecology changed its name to “US Ecology Holdings, Inc.”
US Ecology, Inc., through its subsidiaries, is a leading North American provider of environmental services to commercial and
government entities. The Company addresses the complex waste management needs of its customers, offering treatment, disposal
and recycling of hazardous and radioactive waste, as well as a wide range of complementary field services. US Ecology, Inc. and
its predecessors have been protecting the environment since 1952, with operations primarily in the United States, Canada, the
Europe, Middle East, and Africa (“EMEA”) region and Mexico. Throughout these consolidated financial statements words such
as “we,” “us,” “our,” “US Ecology” and the “Company” refer to US Ecology, Inc. and its subsidiaries.
On November 1, 2019, pursuant to and subject to the conditions set forth in the Agreement and Plan of Merger (the “NRC
Merger Agreement”) by and among the Company, NRC, Predecessor US Ecology, Rooster Merger Sub, Inc. (“NRC Merger
Sub”), and ECOL Merger Sub, Inc. (“ECOL Merger Sub”), ECOL Merger Sub merged with and into Predecessor US Ecology,
with Predecessor US Ecology continuing as the surviving company and as a wholly-owned subsidiary of the Company.
Substantially concurrently therewith, NRC Merger Sub merged with and into NRC, with NRC continuing as the surviving
company and as a wholly-owned subsidiary of the Company. Following the completion of the mergers (collectively, the “NRC
Merger”), the Company contributed all of the issued and outstanding equity interests of NRC to Predecessor US Ecology so that,
after such contribution, NRC became a wholly-owned subsidiary of Predecessor US Ecology.
Effective as of November 1, 2019, the Company changed its name from “US Ecology Parent, Inc.” to “US Ecology, Inc.,” the
Company’s common stock and warrants began trading on Nasdaq under the symbol “ECOL” and “ECOLW,” respectively. The
Company identified itself as the successor issuer to Predecessor US Ecology pursuant to Rule 12g-3(c) under the Securities
Exchange Act of 1934, as amended.
Effective in the fourth quarter of 2020, we made changes to the manner in which we manage our business, make operating
decisions and assess our performance. The energy waste business that was acquired through the NRC Merger now comprises our
Energy Waste segment. Prior to this change, the energy waste business was included in the Waste Solutions segment (formerly
“Environmental Services”). Throughout this Annual Report on Form 10-K, all periods presented have been recast to reflect these
changes. Under our new structure our operations are managed in three reportable segments reflecting our internal management
reporting structure and nature of services offered as follows:
Waste Solutions (formerly “Environmental Services”)—This segment provides safe and compliant specialty waste
management services including treatment, disposal, beneficial re-use, and recycling of hazardous, non-hazardous, and
other specialty waste at Company-owned treatment, storage, and disposal facilities, excluding the services within our
Energy Waste segment.
Field Services (formerly “Field & Industrial Services”)—This segment provides safe and compliant logistics and
response solutions focusing on “in-field’ service offerings through our network of 10-day transfer facilities. Our
logistics solutions include specialty waste packaging, collection, transportation, and total waste management. Our
response solutions include land and marine based emergency response, OSRO standby compliance, remediation, and
industrial services. The Field Services segment completes our vertically integrated model and serves to increase waste
volumes into our Waste Solutions segment.
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Energy Waste—This segment provides safe and compliant energy waste management and critical support services to
up-stream oil and gas customers in the Permian and Eagle Ford basins primarily operating in Texas. Services include
spill containment and site remediation, equipment cleaning and maintenance services, specialty equipment rental,
including tanks, pumps and containment, safety monitoring and management and transportation and disposal. This
segment includes all of the energy waste business of the legacy NRC operations and none of the legacy US Ecology
operations.
Effective in the first quarter of 2021, we changed our management structure resulting in the reclassification of certain overhead
expenses from our Waste Solutions, Field Services and Energy Waste reportable segments to Corporate. As a result, certain
regional overhead costs historically presented within our reportable segments as Direct operating costs were further reclassified
to Corporate as Selling, general and administrative expenses to conform to the current period’s presentation. Throughout this
Annual Report on Form 10-K, all periods presented have been recast to reflect these changes.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying financial statements are prepared on a consolidated basis. All inter-company balances and transactions have
been eliminated in consolidation. Our year-end is December 31.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of cash on deposit, money market accounts or short-term investments with original
maturities of 90 days or less at the date of acquisition. Cash and cash equivalents totaled $67.5 million and $73.8 million at
December 31, 2021 and 2020, respectively. At December 31, 2021 and 2020, we had $54.4 million and $59.3 million,
respectively, of cash at our operations outside the United States.
Receivables
Our receivables include invoiced and unbilled amounts where the Company has an unconditional right to payment.
Receivables are stated at an amount management expects to collect. Based on management’s assessment of the credit history of
the customers having outstanding balances and factoring in current economic conditions, management has concluded that
potential unidentified losses on balances outstanding at year-end will not be material.
Unbilled receivables are recorded for work performed under contracts that have not yet been invoiced to customers and arise due
to the timing of billings. Substantially all unbilled receivables at December 31, 2021, were billed in the following month.
Restricted Cash and Investments
Restricted cash and investments of $1.6 million and $5.6 million at December 31, 2021 and 2020, respectively, represent funds
held in third-party managed trust accounts as collateral for our financial assurance obligations for post-closure activities at our
non-operating facilities and other restricted funds related to deferred compensation plans. These funds are primarily invested in
money market accounts.
Revenue Recognition
Revenues are recognized when control of the promised services is transferred to our customers, in an amount that reflects the
consideration we expect to be entitled to in exchange for those services.
We recognize revenue from three primary sources: (1) waste treatment, recycling and disposal services, (2) field and industrial
waste management services, and (3) waste transportation services.
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Our waste treatment and disposal customers are legally obligated to properly treat and dispose of their waste in accordance with
local, state, and federal laws and regulations. As our customers do not possess the resources to properly treat and dispose of their
waste independently, they contract with the Company to perform these services. Waste treatment, recycling, and disposal revenue
results primarily from fixed fees charged to customers for treatment and/or disposal or recycling of specified wastes. Waste
treatment, recycling, and disposal revenue is generally charged on a per-ton or per-yard basis based on contracted prices and is
recognized over time as the services are performed. Our treatment and disposal services are generally performed as the waste is
received and considered complete upon final disposal.
Field and industrial waste management services revenue results primarily from specialty onsite services such as high-pressure
cleaning, tank cleaning, decontamination, remediation, transportation, spill cleanup and emergency response at refineries,
chemical plants, steel and automotive plants, and other government, commercial and industrial facilities. We also provide
hazardous waste packaging and collection services and total waste management solutions at customer sites and through our 10-
day transfer facilities. These services are provided based on purchase orders or agreements with the customer and include prices
based upon daily, hourly or job rates for equipment, materials and personnel. Generally, the pricing in these types of contracts is
fixed, but the quantity of services to be provided during the contract term is variable and revenues are recognized over the term of
the agreements or as services are performed. As we have a right to consideration from our customers in an amount that
corresponds directly with the value to the customer of the Company’s performance completed to date, we have applied the
practical expedient to recognize revenue in the amount to which we have the right to invoice. Additionally, we have customers
that pay annual retainer fees, primarily for our standby services, under long-term or evergreen contracts. Such retainer fees are
recognized over time as the services are performed and it is probable that a significant reversal in the amount of cumulative
revenue recognized on the contracts will not occur.
Transportation and logistics revenue results from delivering customer waste to a disposal facility for treatment and/or disposal or
recycling. Transportation services are generally not provided on a stand-alone basis and instead are bundled with other Company
services. However, in some instances we provide transportation and logistics services for shipment of waste from cleanup sites to
disposal facilities operated by other companies. For such arrangements, we allocate revenue to each performance obligation
based on its relative standalone selling price. We generally determine standalone selling prices based on the prices charged to
customer or using expected cost-plus margin. Transportation revenue is recognized over time as the waste is transported.
Taxes and fees collected from customers concurrent with revenue-producing transactions to be remitted to governmental
authorities are excluded from revenue.
Our Richland, Washington disposal facility is regulated by the Washington Utilities and Transportation Commission (“WUTC”),
which approves our rates for disposal of low-level radioactive waste (“LLRW”). Annual revenue levels are established based on a
rate agreement with the WUTC at amounts sufficient to cover the costs of operation, including facility maintenance, equipment
replacement and related costs, and provide us with a reasonable profit. Per-unit rates charged to LLRW customers during the year
are based on our evaluation of disposal volume and radioactivity projections submitted to us by waste generators. Our proposed
rates are then reviewed and approved by the WUTC. If annual revenue exceeds the approved levels set by the WUTC, we are
required to refund excess collections to facility users on a pro-rata basis. Refundable excess collections, if any, are recorded in
Accrued liabilities in the consolidated balance sheets. The current rate agreement with the WUTC was extended in 2019 and is
effective until December 31, 2025.
Deferred Revenue
We record deferred revenue when cash payments are received, or advance billings are charged, prior to performance of services,
such as waste that has been received but not yet treated or disposed, and is recognized when these services are performed. During
the year ended December 31, 2021 and 2020, we recognized $15.1 million and $14.7 million of revenue that was included in the
deferred revenue balance at the beginning of each year, respectively.
Property and Equipment
Property and equipment are recorded at cost and depreciated on the straight-line method over estimated useful lives.
Replacements and major repairs of property and equipment are capitalized and retirements are made when assets are
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disposed of or when the useful life has been exhausted. Minor components and parts are expensed as incurred. Repair and
maintenance expenses were $29.5 million, $26.9 million and $20.5 million for the years ended December 31, 2021, 2020 and
2019, respectively.
We assume no salvage value for our depreciable fixed assets. The estimated useful lives for significant property and equipment
categories are as follows:
Useful Lives
Vehicles, vessels and other equipment
3 to 10 years
Disposal facility and equipment
3 to 20 years
Buildings and improvements
5 to 40 years
Railcars
40 years
Disposal Cell Accounting
Qualified disposal cell development costs such as personnel and equipment costs incurred to construct new disposal cells are
recorded and capitalized at cost. Capitalized cell development costs, net of recorded amortization, are added to estimated future
costs of the permitted disposal cell to be incurred over the remaining construction of the cell, to determine the amount to be
amortized over the remaining estimated cell life. Estimates of future costs are developed 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 to be fully
amortized upon final closure of the facility, as no salvage value applies. Costs associated with ongoing disposal operations are
charged to expense as incurred.
We have material financial commitments for closure and post-closure obligations for certain facilities we own or operate. We
estimate future cost requirements for closure and post-closure monitoring based on RCRA and conforming state requirements and
facility permits. RCRA requires that companies provide the responsible regulatory agency acceptable financial assurance for
closure work and subsequent post-closure monitoring of each facility for 30 years following closure. Estimates for final closure
and post-closure costs are developed using input from our technical and accounting managers as well as independent engineers
and are reviewed by management at least annually. These estimates involve projections of costs that will be incurred after the
disposal facility ceases operations, through the required post-closure care period. The present value of the estimated closure and
post-closure costs are accreted using the interest method of allocation to direct costs in our consolidated statements of operations
so that 100% of the future cost has been incurred at the time of payment.
Business Combinations
We account for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned
to the tangible and identifiable intangible assets purchased and the liabilities assumed on the basis of their fair values at the date
of acquisition. Any excess of purchase price over the fair value of net tangible and intangible assets acquired is assigned to
goodwill. The transaction costs associated with business combinations are expensed as they are incurred.
Goodwill
Goodwill represents the excess of the fair value of the consideration transferred over the fair value of the underlying identifiable
assets and liabilities acquired. Goodwill is not amortized, but instead is assessed for impairment annually in the fourth quarter as
of October 1 and also if an event occurs or circumstances change that may indicate a possible impairment. In the event that we
determine that the value of goodwill has become impaired, we will incur an accounting charge for the amount of impairment
during the period in which the determination has been made. See Note 3 for additional information related to the use of estimates
in the Company’s goodwill impairment tests and Note 13 for additional information related to our annual assessment of goodwill.
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Intangible Assets
Intangible assets are stated at the fair value assigned in a business combination net of amortization. We amortize our amortizing
intangible assets using the straight-line method over their estimated economic lives ranging from 1 to 60 years. We review
intangible assets with indefinite useful lives for impairment during the fourth quarter as of October 1 of each year. We also
review both non-amortizing and amortizing intangible assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an intangible asset may not be recoverable. See Note 3 for additional information related to the
use of estimates in the Company’s intangible assets impairment tests and Note 13 for additional information related to our annual
assessment of non-amortizing intangible assets.
Our acquired permits and licenses generally have renewal terms of approximately 5-10 years. We have a history of renewing
these permits and licenses as demonstrated by the fact that each of the sites’ treatment permits and licenses have been renewed
regularly since the facility began operations. We intend to continue to renew our permits and licenses as they come up for
renewal for the foreseeable future. Costs incurred to renew or extend the term of our permits and licenses are recorded in Selling,
general and administrative expenses in our consolidated statements of operations.
Impairment of Long-Lived Assets
Long-lived assets consist primarily of property and equipment facility development costs and amortizing 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 business environment. If an operating unit had indications of possible impairment, we would
evaluate whether impairment exists on the basis of undiscounted expected future cash flows from operations over the remaining
amortization period. If an impairment loss were to exist, the carrying amount of the related long-lived assets would be reduced to
their estimated fair value. We did not observe any events or changes in circumstances in 2021 that indicated the carrying value of
our long-lived assets may not be recoverable.
Share-Based Payments
The Company has elected to account for forfeitures of share-based awards as they occur, rather than estimate expected
forfeitures. See Note 19 for additional information related to our accounting policies for share-based payments.
Debt Issuance Costs & Debt Discount
Debt issuance costs and debt discount are amortized over the scheduled maturity of the underlying debt instrument. Amortization
of debt issuance costs and debt discount is included as a component of interest expense in the consolidated statements of
operations. Unamortized debt discount and debt issuance costs associated with our term loan were $5.5 million and $6.7 million
at December 31, 2021 and 2020, respectively, and have been recorded as a reduction of the Current portion of long-term debt and
Long-term debt in the consolidated balance sheets. Unamortized debt issuance costs associated with our Revolving Credit
Facility were $4.8 million and $5.3 million at December 31, 2021 and 2020, respectively, and have been recorded in Prepaid
expenses and other current assets and Other assets in the consolidated balance sheets.
Derivative Instruments
In order to manage interest rate exposure, we entered into an interest rate swap agreement in March 2020 that effectively converts
a portion of our variable-rate debt to a fixed interest rate. Changes in the fair value of the interest rate swap are recorded as a
component of accumulated other comprehensive income within stockholders’ equity, and are recognized in interest expense in
the period in which the payment is settled, or for terminated swap agreements, amortized to interest expense over the period from
termination to original maturity. The interest rate swap has an effective date of March 31, 2020 in an initial notional amount of
$500.0 million. The Company does not hold or issue derivative financial instruments for trading or speculative purposes.
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Foreign Currency
The assets, liabilities and results of operations of certain of our foreign subsidiaries are measured using their functional currency
which is the currency of the primary foreign economic environment in which they operate. Assets and liabilities are translated to
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 foreign subsidiaries into
USD are included in stockholders’ equity as a component of Accumulated other comprehensive loss. Gains and losses resulting
from foreign currency transactions are recognized in the consolidated statements of operations. Recorded balances that are
denominated in a currency other than the functional currency are re-measured to the functional currency using the exchange rate
at the balance sheet date and gains or losses are recorded in the statements of operations.
Income Taxes
We account for income taxes using an asset and liability method, which requires the recognition of taxes payable or refundable
for the current year and deferred tax assets and liabilities for the expected future tax consequences of temporary differences that
currently exist between the tax basis and the financial reporting basis of our taxable subsidiaries’ assets and liabilities using the
enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date. The measurement of
deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected
to be realized. The unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year are
classified as “Other long-term liabilities” in the Consolidated Balance Sheets.
We regularly assess the need for a valuation allowance against our deferred tax assets. In making that assessment, we consider
both positive and negative evidence related to the likelihood of realization of the deferred tax assets on a jurisdictional basis to
determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets
will not be realized. Examples of positive and negative evidence include future growth, forecasted earnings, future taxable
income, the mix of earnings in the jurisdictions in which we operate, historical earnings, taxable income in prior years, if
carryback is permitted under the law and prudent, and feasible tax planning strategies. In the event we were to determine that we
would not be able to realize all or part of our net deferred tax assets in the future, an adjustment to the deferred tax assets
valuation allowance would be charged to earnings in the period in which we make such a determination, or goodwill would be
adjusted at our final determination of the valuation allowance related to an acquisition within the measurement period. If we later
determine that it is more-likely-than-not that the net deferred tax assets would be realized, we would reverse the applicable
portion of the previously-provided valuation allowance as an adjustment to earnings at such time.
We account for unrecognized tax benefits using a more-likely-than-not threshold for financial statement recognition and
measurement of tax positions taken or expected to be taken in a tax return. We establish reserves for tax-related uncertainties
based on estimates of whether, and the extent to which, additional taxes will be due. We record an income tax liability, if any, for
the difference between the benefit recognized and measured and the tax position taken or expected to be taken on our tax returns.
We recognize interest assessed by taxing authorities or interest associated with uncertain tax positions as a component of interest
expense. We recognize any penalties assessed by taxing authorities or penalties associated with uncertain tax positions as a
component of selling, general and administrative expenses.
Our income tax expense, deferred tax assets and deferred tax liabilities, and liabilities for uncertain tax benefits reflect
management’s best estimate of current and future taxes to be paid. We are subject to income taxes in the United States and
numerous foreign jurisdictions. Significant judgments and estimates are required in the determination of the consolidated income
tax expense. See Note 17 for additional information regarding income taxes.
Insurance
Accrued costs for our self-insured healthcare coverage were $3.4 million and $3.3 million at December 31, 2021 and 2020,
respectively.
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88
Earnings (Loss) Per Share
Basic earnings per share is calculated based on the weighted-average number of outstanding common shares during the
applicable period. Diluted earnings per share is based on the weighted-average number of outstanding common shares plus the
weighted-average number of potential outstanding common shares. Potential common shares that would increase earnings per
share or decrease loss per share are anti-dilutive and are excluded from earnings per share computations. Earnings per share is
computed separately for each period presented.
Treasury Stock
Shares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of stockholders’ equity
in our consolidated balance sheets. Treasury shares are reissued using the weighted average cost method for determining the cost
of the shares reissued. The difference between the cost of the shares reissued and the issuance price is added or deducted from
additional paid-in capital.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-
04, “Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (Topic 848). The ASU provides optional
expedients and exceptions for applying GAAP to transactions affected by reference rate (e.g., LIBOR) reform if certain criteria
are met, for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate
reform on financial reporting. The ASU is effective as of March 12, 2020 through December 31, 2022. We will evaluate
transactions or contract modifications occurring as a result of reference rate reform and determine whether to apply the optional
guidance on an ongoing basis. The ASU is currently not expected to have a material impact on our consolidated financial
statements.
Effective January 1, 2021, the Company adopted ASU No. 2019-12, “Income Taxes - Simplifying the Accounting for Income
Taxes.” This ASU is intended to simplify various aspects of accounting for income taxes by eliminating certain exceptions within
Accounting Standards Codification Topic 740, “Income Taxes” and to clarify certain aspects of the current accounting guidance.
Adoption of this standard did not materially impact our consolidated statements of financial position, results of operations, or
cash flows.
NOTE 3. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses
during the reporting period. Listed below are the estimates and assumptions that we consider to be significant in the preparation
of our consolidated financial statements.
●
Allowance for Credit Losses - We estimate losses for uncollectible accounts based on the aging of the accounts
receivable and an evaluation 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 and considering significant events or changes in the business environment.
●
Income Taxes - We assume the deductibility of certain costs in our income tax filings, and estimate our income tax rate
and future recovery of deferred tax assets.
●
Legal and Environmental Accruals - We estimate the amount of potential exposure we may have with respect to
litigation and environmental claims and assessments.
●
Disposal Cell Development and Final Closure/Post-Closure Amortization - We expense amounts for disposal
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cell usage and closure and post-closure costs for each cubic yard of waste disposed of at our operating facilities. In
determining the amount to expense for each cubic yard of waste disposed, we estimate the cost to develop each disposal
cell and the closure and post-closure costs for each disposal cell and facility. The expense for each cubic yard is then
calculated based on the remaining permitted capacity and total permitted capacity. Estimates for closure and post-
closure costs are developed using input from third-party engineering consultants, and our internal technical and
accounting personnel. Management reviews estimates at least annually. Estimates for final disposal cell closure and
post-closure costs 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 at their fair values.
Acquisition-related transaction and restructuring costs are expensed rather than treated as part of the cost of the
acquisition. Goodwill represents the excess of the cost of an acquired business over the fair value of the identifiable
tangible and intangible assets acquired and liabilities assumed in a business acquisition.
●
Contingent Consideration – The Company records liabilities for the estimated fair value of potential future payments the
Company may be required to remit under the terms of historical purchase agreements, entered into by NRC, prior to the
NRC Merger. The payments are contingent on the acquired business’ achievement of annual earnings targets in certain
years and other events considered in the purchase agreement.
●
Goodwill - We assess goodwill for impairment during the fourth quarter as of October 1 of each year or sooner if an
event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying amount. The assessment consists of comparing the estimated fair value of the reporting unit to the carrying
value of the net assets assigned to the reporting unit, including goodwill. Fair values are generally determined by using
both the market approach, applying a multiple of earnings based on guideline for publicly traded companies, and the
income approach, discounting projected future cash flows based on our expectations of the current and future operating
environment. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on
our industry, capital structure and risk premiums including those reflected in the current market capitalization.
Estimating future cash flows requires significant judgment about factors such as general economic conditions and
projected growth rates, and our estimates often vary from the cash flows eventually realized. Failure to execute on
planned growth initiatives within the related reporting units, coupled with the other factors mentioned above, could lead
to the impairment of goodwill and other long-lived assets in future periods.
●
Intangible Assets - We review intangible assets with indefinite useful lives for impairment during the fourth quarter as
of October 1 of each year. Fair value is generally determined by considering a discounted projected cash flow analysis.
If the fair value of an asset is determined to be less than the carrying amount of the intangible asset, an impairment in
the amount of the difference is recorded in the period in which the annual assessment occurs.
We also review amortizing intangible assets for impairment whenever events or changes in circumstances indicate that
the carrying value of an intangible asset may not be recoverable. In order to assess whether a potential impairment
exists, the assets’ carrying values are compared with their undiscounted expected future cash flows. Estimating future
cash flows requires significant judgment about factors such as general economic conditions and projected growth rates,
and our estimates often vary from the cash flows eventually realized. Impairments are measured by comparing the fair
value of the asset to its carrying value. Fair value is generally determined by considering: (i) the discounted projected
cash flow analysis; (ii) a third-party valuation; and/or (iii) information available regarding the current market
environment for similar assets. If the fair value is determined to be less than the carrying amount of the intangible assets,
an impairment in the amount of the difference is recorded in the period in which the events or changes in circumstances
that indicated the carrying value of the intangible assets may not be recoverable occurred.
Actual results could differ materially from the estimates and assumptions that we use in the preparation of our consolidated
financial statements. As it relates to estimates and assumptions in amortization rates and environmental obligations, significant
engineering, operations and accounting judgments are required. We review these estimates and assumptions no
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less than annually. In many circumstances, the ultimate outcome of these estimates and assumptions will not be known for
decades into the future. Actual results could differ materially from these estimates and assumptions due to changes in applicable
regulations, changes in future operational plans and inherent imprecision associated with estimating environmental impacts far
into the future.
NOTE 4. REVENUES
Disaggregation of Revenue
Effective in the fourth quarter of 2020, we made changes to the manner in which we manage our business, make operating
decisions and assess our performance. Throughout this Annual Report on Form 10-K, all periods presented have been recast to
reflect these changes. Our operations are managed in three reportable segments, Waste Solutions, Field Services and Energy
Waste, reflecting our internal reporting structure and nature of services offered. See Note 21 for additional information on our
operating segments.
Effective in the second quarter of 2021, we made changes to the manner in which we evaluate revenues associated with our
various response-based services, including emergency response, standby services and remediation. As a result, revenues from
Emergency Response and Domestic Standby Services, which were formerly presented as discrete service lines, are now
combined and presented as a single “Emergency Response” service line and certain revenues formerly classified as Domestic
Standby Services are now classified as Remediation. Throughout this Annual Report on Form 10-K, our disaggregated revenues
for all periods presented have been recast to reflect these changes.
The following table presents our revenue disaggregated by our reportable segments and service lines:
2021
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
Treatment & Disposal Revenue (1)
$ 372,204
$
50,327
$ 20,997
$ 443,528
Services Revenue:
Transportation and Logistics (2)
79,045
29,096
8,978
117,119
Industrial Services (3)
—
121,357
2,814
124,171
Small Quantity Generation (4)
—
55,158
—
55,158
Total Waste Management (5)
—
39,949
—
39,949
Remediation (6)
—
48,224
—
48,224
Emergency Response (7)
—
138,425
18
138,443
Other (8)
—
17,651
3,758
21,409
Revenue
$ 451,249
$ 500,187
$ 36,565
$ 988,001
2020
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
Treatment & Disposal Revenue (1)
$ 354,055
$
47,781
$ 18,884
$ 420,720
Services Revenue:
Transportation and Logistics (2)
71,358
34,218
7,184
112,760
Industrial Services (3)
—
118,584
4,178
122,762
Small Quantity Generation (4)
—
48,049
—
48,049
Total Waste Management (5)
—
35,401
—
35,401
Remediation (6)
—
30,225
—
30,225
Emergency Response (7)
—
140,253
—
140,253
Other (8)
—
19,243
4,441
23,684
Revenue
$ 425,413
$ 473,754
$ 34,687
$ 933,854
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2019
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
Treatment & Disposal Revenue (1)
$ 359,847
$
18,523
$
6,039
$ 384,409
Services Revenue:
Transportation and Logistics (2)
80,700
40,670
2,877
124,247
Industrial Services (3)
—
38,861
1,200
40,061
Small Quantity Generation (4)
—
37,471
—
37,471
Total Waste Management (5)
—
33,794
—
33,794
Remediation (6)
—
13,307
—
13,307
Emergency Response (7)
—
41,088
—
41,088
Other (8)
—
8,688
2,444
11,132
Revenue
$ 440,547
$ 232,402
$ 12,560
$ 685,509
(1) We categorize our treatment and disposal revenue as either “Base Business” or “Event Business” based on the underlying
nature of the revenue source. We define Event Business as non-recurring projects that are expected to equal or exceed 1,000
tons, with Base Business defined as all other business not meeting the definition of Event Business. For the years ended
December 31, 2021, 2020 and 2019, 24%, 27% and 22%, respectively, of our treatment and disposal revenue was derived
from Event Business projects. Base Business revenue accounted for 76%, 73% and 78% of our treatment and disposal
revenue for the years ended December 31, 2021, 2020 and 2019, respectively.
(2) Includes collection and transportation of non-hazardous and hazardous waste.
(3) Includes industrial cleaning and maintenance for refineries, chemical plants, steel and automotive plants, marine terminals
and refinery services such as tank cleaning and temporary storage.
(4) Includes retail services, laboratory packing, less-then-truck-load service and household hazardous waste collection.
Contracts for Small Quantity Generation may extend beyond one year and a portion of the transaction price can be fixed.
(5) Through our TWM program, customers outsource the management of their waste compliance program to us, allowing us to
organize and coordinate their waste management disposal activities and environmental compliance. TWM contracts may
extend beyond one year and a portion of the transaction price can be fixed.
(6) Includes site assessment, onsite treatment, project management and remedial action planning and execution. Contracts for
Remediation may extend beyond one year and a portion of the transaction price can be fixed.
(7) Includes services such as spill response, waste analysis and treatment and disposal planning as well as government-
mandated, commercial standby oil spill compliance solutions and services that we provide to companies that store, transport,
produce or handle petroleum and certain nonpetroleum oils on or near U.S. waters. Our standby services customers pay
annual retainer fees under long-term or evergreen contracts for access to our regulatory certifications, specialized assets and
highly trained personnel. When a customer with a retainer contract experiences a spill incident, we coordinate and manage
the spill response, which results in incremental revenue for the services provided, in addition to the retainer fees.
(8) Includes equipment rental and other miscellaneous services.
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We provide services primarily in the United States, Canada and the EMEA region. The following table presents our revenue
disaggregated by our reportable segments and geographic location where the underlying services were performed:
2021
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
United States
$ 374,414
$ 450,276
$ 36,565
$ 861,255
Canada
76,835
3,785
—
80,620
EMEA
—
41,218
—
41,218
Other (1)
—
4,908
—
4,908
Total revenue
$ 451,249
$ 500,187
$ 36,565
$ 988,001
2020
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
United States
$ 355,226
$ 445,405
$ 34,687
$ 835,318
Canada
70,187
3,064
—
73,251
EMEA
—
19,947
—
19,947
Other (1)
—
5,338
—
5,338
Total revenue
$ 425,413
$ 473,754
$ 34,687
$ 933,854
2019
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Total
United States
$ 354,625
$ 221,942
$ 12,560
$ 589,127
Canada
85,922
2,577
—
88,499
EMEA
—
5,079
—
5,079
Other (1)
—
2,804
—
2,804
Total revenue
$ 440,547
$ 232,402
$ 12,560
$ 685,509
(1) Includes Mexico, Asia Pacific, and Latin America and Caribbean geographical regions.
Principal versus Agent Considerations
The Company commonly contracts with third-parties to perform certain waste-related services that we have promised in our
customer contracts. We consider ourselves the principal in these arrangements as we direct the timing, nature and pricing of the
services ultimately provided by the third-party to the customer.
Costs to Obtain a Contract
The Company pays sales commissions to employees, which qualify as costs to obtain a contract. Sales commissions are expensed
as incurred as the commissions are earned by the employee and paid by the Company over time as the related revenue is
recognized. Other commissions and incremental costs to obtain a contract are not material.
Practical Expedients and Optional Exemptions
Our payment terms may vary based on type of service or customer; however, we do not adjust the promised amount of
consideration in our contracts for the time value of money as payment terms extended to our customers do not exceed one year
and are not considered a significant financing component in our contracts.
We do not disclose the value of unsatisfied performance obligations as contracts with an original expected length of more than
one year and contracts for which we do not recognize revenue at the amount to which we have the right to invoice for services
performed is insignificant and the aggregate amount of fixed consideration allocated to unsatisfied performance obligations is not
material.
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NOTE 5. BUSINESS COMBINATIONS
NRC Group Holdings Corp.
On November 1, 2019, the Company completed its merger with NRC, a provider of comprehensive environmental, compliance
and waste management services to the marine and rail transportation, general industrial and energy industries. The addition of
NRC’s substantial service network strengthens and expands US Ecology’s suite of environmental services, including new oil and
gas exploration and production landfill disposal capabilities, and provides expanded opportunities to establish US Ecology as a
leader in standby and emergency response services.
The total merger consideration was $1,024.8 million, comprised of the following:
November 1,
$s in thousands
2019
Fair value of US Ecology common stock issued (1)
$
581,101
Fair value of replacement warrants issued (2)
44,858
Fair value of replacement restricted stock units issued (3)
141
Fair value of replacement stock options (4)
360
Repayment of NRC’s term loan and revolving credit facility
398,373
Total merger consideration
$ 1,024,833
(1) The fair value of US Ecology common stock issued was calculated based on 9,337,949 shares of US Ecology common stock
multiplied by the closing price of US Ecology common stock of $62.23 per share on October 31, 2019, the day immediately
preceding the closing of the NRC Merger.
(2) The fair value of replacement warrants issued was calculated based on 3,772,753 replacement warrants multiplied by the fair
value per warrant of $11.89. The fair value per warrant was based on the closing price of the replaced NRC warrants
(NYSE: NRCG.WS) of $2.33 on October 31, 2019, the day immediately preceding the closing of the NRC Merger, divided
by the exchange ratio of 0.196 pursuant to the NRC Merger Agreement.
(3) The fair value of replacement restricted stock units issued was calculated based on 118,239 replacement restricted stock units
multiplied by the closing price of US Ecology common stock of $62.23 per share on October 31, 2019, the day immediately
preceding the closing of the NRC Merger, further multiplied by the ratio of the precombination service period to the
remaining vesting period, or approximately 1.9%.
(4) The fair value of replacement stock options issued was calculated based on 29,400 replacement stock options multiplied by
the fair value per option of $12.26. The fair value per option was calculated using the Black-Scholes option pricing model,
with the following weighted-average assumptions: strike price of $52.30 per option, dividend yield of 1.2%; expected
volatility of 28.9%; average risk-free interest rate of 1.5%; and an expected term of 1 year. The replacement stock options
became fully vested at the merger date therefore the entire fair value is considered merger consideration.
The payment of transaction fees and expenses and repayment of $398.4 million of NRC’s debt were funded using proceeds from
a $450.0 million seven-year term loan. See Note 16 for additional information on the Company’s debt.
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As of October 31, 2020, the Company finalized the purchase accounting for the NRC Merger. The following table summarizes
the final NRC Merger purchase price allocation:
Purchase Price
$s in thousands
Allocation
Current assets
$
130,110
Property and equipment
170,208
Identifiable intangible assets
309,500
Other assets
41,687
Current liabilities
(89,733)
Deferred income tax liabilities
(54,974)
Other liabilities
(59,363)
Total identifiable net assets
447,435
Goodwill
577,398
Total purchase price
$
1,024,833
Goodwill of $577.4 million arising from the acquisition is primarily attributable to the assembled workforce of NRC and
expected synergies from combining operations. $399.5 million of the goodwill recognized was allocated to our Energy Waste
segment and $177.9 million of the goodwill recognized was allocated to our Field Services segment. We expect $33.3 million of
the acquired goodwill to be deductible for income tax purposes.
The fair value of identifiable intangible assets related to the acquisition of NRC by major intangible asset class and corresponding
weighted average amortization period are as follows:
Average
Amortization
$s in thousands
Fair Value Period (Years)
Amortizing intangible assets:
Customer relationships - noncontractual
$ 199,600
14
Customer relationships - contractual
34,400
7
Permits and licenses
8,700
16
Tradenames
6,100
2
Non-compete agreements
3,300
2
Total identified amortizing intangible assets
252,100
Non-amortizing intangible assets:
Permits and licenses
57,400
n/a
Total identified intangible assets
$ 309,500
The following unaudited pro forma financial information presents the combined results of operations as if NRC had been
combined with US Ecology as of January 1, 2019. The pro forma financial information includes the accounting effects of the
business combination, including the amortization of intangible assets, depreciation of property, plant and equipment, and interest
expense. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the
results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented,
nor should it be taken as indication of our future consolidated results of operations.
(unaudited)
$s in thousands
2019
Pro forma combined:
Revenue
$ 1,048,745
Net income (loss)
$
11,775
The amounts of revenue and operating loss from NRC included in the Company’s consolidated statements of operations for the
year ended December 31, 2019 was $70.2 million and $9.1 million, respectively. NRC Merger-related business development and
integration expenses of $2.4 million, $11.5 million and $24.4 million are included in Selling, general
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and administrative expenses in the Company’s consolidated statements of operations for the years ended December 31, 2021,
2020 and 2019, respectively.
Acquisition of Impact Environmental Services, Inc.
On January 28, 2020, we acquired Impact Environmental Services, Inc., an industrial cleaning and environmental services
company based in Romulus, Michigan for $3.3 million. The acquired operations are reported as part of our Field Services
segment, however, revenues, net income, earnings per share and total assets are not material to our consolidated financial position
or results of operations.
We allocated the purchase price to the assets acquired and liabilities assumed based on estimates of the fair value at the date of
the acquisition, resulting in $300,000 allocated to goodwill and $900,000 allocated to amortizing intangible assets (primarily
customer relationships) to be amortized over a weighted average life of approximately 12 years. All of the goodwill recognized
was assigned to our Field Services segment and is expected to be deductible for income tax purposes over a 15-year amortization
period.
W.I.S.E. Environmental Solutions Inc.
On August 1, 2019, we acquired 100% of the outstanding shares of W.I.S.E. Environmental Solutions Inc. (“US Ecology
Sarnia”), an equipment rental and waste services company based in Sarnia, Ontario, Canada for 23.5 million Canadian dollars,
which translated to $17.9 million at the time of transaction and was funded with borrowings under the Credit Agreement. US
Ecology Sarnia is reported as part of our Field Services segment. The Company assessed the revenues, net income, earnings per
share and total assets of US Ecology Sarnia and concluded they are not material to our consolidated financial position or results
of operations. As such, pro forma financial information has not been provided.
We allocated the purchase price to the assets acquired and liabilities assumed based on estimates of the fair value at the date of
the acquisition, resulting in $7.7 million allocated to goodwill and $6.2 million allocated to intangible assets (primarily customer
relationships) to be amortized over a weighted average life of approximately 14 years.
Goodwill of $7.7 million arising from the acquisition is attributable to the assembled workforce and the future economic benefits
of synergies with our other regional facilities and expansion into new markets. All of the goodwill recognized was assigned to our
Field Services segment and is not expected to be deductible for income tax purposes.
NOTE 6. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Changes in accumulated other comprehensive income (loss) (“AOCI”) consisted of the following:
Foreign
Unrealized Gain
Currency
(Loss) on Interest
$s in thousands
Translation
Rate Hedge
Total
Balance at December 31, 2019
$
(10,925)
$
(929)
$
(11,854)
Other comprehensive income (loss) before reclassifications, net of tax
3,055
(8,494)
(5,439)
Amounts reclassified out of AOCI, net of tax (1)
—
2,635
2,635
Other comprehensive income (loss), net
3,055
(5,859)
(2,804)
Balance at December 31, 2020
$
(7,870)
$
(6,788)
$
(14,658)
Other comprehensive (loss) income before reclassifications, net of tax
(1,505)
9,010
7,505
Amounts reclassified out of AOCI, net of tax (2)
—
2,959
2,959
Other comprehensive (loss) income, net
(1,505)
11,969
10,464
Balance at December 31, 2021
$
(9,375)
$
5,181
$
(4,194)
(1) Before-tax reclassifications of $3.3 million ($2.6 million, after-tax) for the year ended December 31, 2020 were included in
Interest expense in the Company’s consolidated statements of operations. Amount relates to the Company’s interest rate
swap which is designated as a cash flow hedge. Changes in fair value of the swap recognized in AOCI are reclassified to
interest expense when hedged interest payments on the underlying long-term debt are
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made or, for terminated swap agreements, amortized to interest expense over the period from termination to original
maturity.
(2) Before-tax reclassifications of $3.7 million ($3.0 million, after-tax) for the year ended December 31, 2021 were included in
Interest expense in the Company’s consolidated statements of operations. Amount relates to the Company’s interest rate
swap which is designated as a cash flow hedge. Changes in fair value of the swap recognized in AOCI are reclassified to
interest expense when hedged interest payments on the underlying long-term debt are made or, for terminated swap
agreements, amortized to interest expense over the period from termination to original maturity. Amounts in AOCI expected
to be recognized as interest expense over the next 12 months total approximately $2.8 million ($2.2 million after tax).
NOTE 7. DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION
For the Year Ended December 31,
$s in thousands
2021
2020
2019
Income taxes and interest paid:
Income taxes paid, net of receipts
$
1,951
$
7,774
$
14,777
Interest paid
25,771
28,433
17,204
Non-cash investing and financing activities:
Fair value of equity issued for acquisition of NRC
$
—
$
—
$ 626,460
Adjustments to closure/post-closure retirement asset
732
5,422
(221)
Capital expenditures in accounts payable
7,702
4,712
2,882
Acquisition of equipment with financing arrangements
—
6,197
2,481
Restricted common stock and common stock issuances
from treasury shares
5,654
2,491
514
NOTE 8. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. Assets and liabilities recorded at fair value are categorized using defined
hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair value measurements, as follows:
●
Level 1 - Quoted prices in active markets for identical assets or liabilities;
●
Level 2 - Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
●
Level 3 - Unobservable inputs in which little or no market activity exists, requiring an entity to develop its own
assumptions that market participants would use to value the asset or liability.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, restricted cash and investments,
accounts payable and accrued liabilities, debt, interest rate swap agreements and contingent consideration. The estimated fair
value of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their carrying value
due to the short-term nature of these instruments.
In each of September 2019 and March 2021, the Company invested $7.9 million and $712,000, respectively, in the preferred
stock of a privately held company. The investment does not have a readily determinable fair value therefore the investment is
valued at cost, less impairment, plus or minus observable price changes of an identical or similar investment of the same issuer, if
any. In March 2021, in connection with our incremental investment of $712,000, we observed that the fair value of our initial
investment of $7.9 million increased by $3.5 million and, accordingly, recognized a gain on our minority interest investment of
$3.5 million. The fair value of our minority interest investment is included in Other assets in the Company’s consolidated balance
sheets. Changes in the fair value of our minority interest investment are included in Other income in the Company’s consolidated
statements of operations. As of December 31, 2021, there have
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been no identified events or changes in circumstances that would indicate the cost method investment should be impaired nor
have there been any observable price changes of an identical or similar investment of the same issuer.
The Company estimates the fair value of its variable-rate debt using Level 2 inputs, such as interest rates, related terms and
maturities of similar obligations. At December 31, 2021, the fair value of the Company’s variable-rate term loan was estimated to
be $442.3 million, and the carrying value of the Company’s variable-rate revolving credit facility approximates fair value due to
the short-term nature of the interest rates.
The Company estimates the fair value of its contingent consideration liabilities using Level 3 inputs, including both observable
and unobservable inputs. As a result, unrealized gains and losses may include changes in fair value that are attributable to both
observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
The Company’s assets and liabilities measured at fair value on a recurring basis at December 31, 2021 and 2020 consisted of the
following:
2021
Quoted Prices in
Other Observable
Unobservable
Active Markets
Inputs
Inputs
$s in thousands
(Level 1)
(Level 2)
(Level 3)
Total
Assets:
Fixed-income securities (1)
$
1,695
$
255
$
—
$ 1,950
Money market funds (2)
1,886
—
—
1,886
Interest rate swap agreement (3)
—
5,022
—
5,022
Total
$
3,581
$
5,277
$
—
$ 8,858
2020
Quoted Prices in
Other Observable
Unobservable
Active Markets
Inputs
Inputs
$s in thousands
(Level 1)
(Level 2)
(Level 3)
Total
Assets:
Fixed-income securities (1)
$
2,914
$
1,427
$
—
$
4,341
Money market funds (2)
1,319
—
—
1,319
Total
$
4,233
$
1,427
$
—
$
5,660
Liabilities:
Interest rate swap agreement (3)
$
—
$
9,744
$
—
$
9,744
Contingent consideration (4)
—
—
2,173
2,173
Total
$
—
$
9,744
$
2,173
$ 11,917
(1) We have short-term investments in fixed-income securities, including U.S. Treasury and U.S. agency securities. We measure
the fair value of U.S. Treasury securities using quoted prices for identical assets in active markets. We measure the fair value
of U.S. agency securities using observable market activity for similar assets. The fair value of our fixed-income securities
approximates our cost basis in the investments.
(2) We invest portions of our Cash and cash equivalents and Restricted cash and investments in money market funds. We
measure the fair value of these money market fund investments using quoted prices for identical assets in active markets.
The portion of Restricted cash and investments that is invested in money market funds is considered restricted cash for
purposes of reconciling the beginning-of-year and end-of-year amounts presented in the Company’s consolidated statements
of cash flows.
(3) In order to manage interest rate exposure, we entered into an interest rate swap agreement in March 2020 and October 2014
that effectively converts a portion of our variable-rate debt to a fixed interest rate. In connection with our entry into the
March 2020 interest rate swap, we terminated the October 2014 interest rate swap prior to its scheduled maturity date of June
2021. The March 2020 interest rate swap is designated as a highly-effective cash flow hedge,
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with gains and losses deferred in other comprehensive income to be recognized as an adjustment to interest expense in the
same period that the hedged interest payments affect earnings. The October 2014 interest rate swap was also designated as a
highly effective cash flow hedge. The March 2020 interest rate swap has an effective date of March 31, 2020 in an initial
notional amount of $500.0 million. The fair value of the interest rate swap agreement represents the difference in the present
value of cash flows calculated (i) at the contracted interest rates and (ii) at current market interest rates at the end of the
period. We calculate the fair value of interest rate swap agreements quarterly based on the quoted market price for the same
or similar financial instruments. The fair value of the interest rate swap agreements are included in Other assets and Other
long-term liabilities in the Company’s consolidated balance sheets as of December 31, 2021 and 2020, respectively.
(4) Our contingent consideration liabilities represent the estimated fair value of potential future payments the Company may be
required to remit under the terms of historical purchase agreements entered into by NRC prior to the NRC Merger. The
payments are contingent on the acquired businesses’ achievement of annual earnings targets in certain years and other events
considered in the purchase agreements. The fair value of our contingent consideration liabilities is calculated using either a
Monte Carlo simulation or modified Black-Scholes analyses based on earnings projections for the respective earn-out
periods, corresponding earnings thresholds, and approximate timing of payments as outlined in the purchase agreements. The
analyses utilize the following assumptions: (i) expected term; (ii) risk-adjusted net sales or earnings; (iii) risk-free interest
rate; and (iv) expected volatility of earnings. Estimated payments, as determined through the respective models, are
discounted by a credit spread assumption to account for credit risk. As of December 30, 2021, we have settled all acquired
contingent consideration liabilities associated with the NRC Merger. The fair value of our contingent consideration liability
as of December 31, 2020 was $2.2 million and is included in Accrued liabilities in the Company’s consolidated balance
sheet. We revalue our contingent consideration payments each period and any increases or decreases to fair value are
included in Selling, general and administrative expenses in our consolidated statements of operations. Fair values may be
impacted by certain unobservable inputs, most significantly with regard to discount rates, expected volatility and historical
and projected performance. Significant changes to these inputs in isolation could result in a significantly different fair value
measurement.
Changes in Level 3 liabilities measured at fair value for the years ended December 31, 2021 and 2020 are as follows:
$s in thousands
2021
2020
Contingent consideration, beginning of year
$
2,173
$
8,283
Change in fair value of contingent consideration
282
(3,682)
Contingent consideration paid
(2,553)
(2,517)
Foreign currency translation
98
89
Contingent consideration, end of year
$
—
$
2,173
NOTE 9. CONCENTRATIONS AND CREDIT RISK
Major Customers
No customer accounted for more than 10% of total revenue for the years ended December 31, 2021, 2020 or 2019.
No customer accounted for more than 10% of total receivables as of December 31, 2021 or 2020.
Credit Risk Concentration
We maintain most of our cash and cash equivalents with nationally recognized financial institutions. Substantially all balances
are uninsured and are not used as collateral for other obligations. Concentrations of credit risk on accounts receivable are
believed to be limited due to the number, diversification and character of the obligors and our credit evaluation process. Credit
risk associated with a portion of the Company’s trade receivables may be reduced by our ability to submit claims to the Oil Spill
Liability Trust Fund (“OSLTF”) for reimbursement of unpaid customer receivables related to services regulated under the
provisions of the Oil Pollution Act of 1990. As of December 31, 2021, the Company did not have any trade receivables that are
eligible for submission to the OSLTF for reimbursement.
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Labor Concentrations
As of December 31, 2021, approximately 500, or approximately 13%, of our employees were covered by collective bargaining
agreements with various labor unions. Approximately 40% of these employees are covered by collective bargaining agreements
that expired and are in negotiation as of December 31, 2021, or expire within one year of December 31, 2021.
NOTE 10. RECEIVABLES
Receivables as of December 31, 2021 and 2020 consisted of the following:
$s in thousands
2021
2020
Trade
$ 183,747
$ 186,502
Unbilled revenue
62,029
52,858
Other
7,421
5,554
Total receivables
253,197
244,914
Allowance for credit losses
(3,043)
(2,936)
Receivables, net
$ 250,154
$ 241,978
The allowance for credit losses is a provision for uncollectible accounts receivable and unbilled receivables. The allowance is
evaluated and adjusted to reflect our expected credit losses based on collection history and an analysis of the accounts receivables
aging. The allowance is decreased by accounts receivable as they are written off. The allowance is adjusted periodically to reflect
actual experience. The change in the allowance during 2021, 2020 and 2019 was as follows:
Charged
Balance at
(Credited) to
Recoveries
Beginning of
Costs and
(Deductions/
Balance at
$s in thousands
Period
Expenses
Write-offs) Adjustments End of Period
Year ended December 31, 2021
$
2,936
$
1,179
$
(1,075)
$
3
$
3,043
Year ended December 31, 2020
$
3,010
$
(412)
$
296
$
42
$
2,936
Year ended December 31, 2019
$
2,998
$
226
$
(439)
$
225
$
3,010
NOTE 11. PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 2021 and 2020 consisted of the following:
$s in thousands
2021
2020
Cell development costs
$
203,217
$
186,170
Land and improvements
74,298
65,953
Buildings and improvements
138,659
128,206
Railcars
17,299
17,299
Vehicles, vessels and other equipment
350,950
331,167
Construction in progress
54,609
44,840
Total property and equipment
839,032
773,635
Accumulated depreciation and amortization
(382,648)
(316,998)
Property and equipment, net
$
456,384
$
456,637
Depreciation and amortization expense was $70.8 million, $66.6 million and $41.4 million for the years ended December 31,
2021, 2020 and 2019, respectively.
NOTE 12. LEASES
We lease certain facilities, office space, land and equipment. Our lease payments are primarily fixed, but also include variable
payments that are based on usage of the leased asset. Initial lease terms range from one to 15 years, and may
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include one or more options to renew, with renewal terms extending a lease up to 40 years. None of our renewal options are
considered reasonably certain to be exercised. Provisions for residual value guarantees exist in some of our equipment leases,
however amounts associated with these provisions are not material. Our leases do not include any material restrictive covenants.
Leases with an initial term of 12 months or less are not recorded on the balance sheet and expense is recognized on a straight-line
basis over the lease term. We combine lease and non-lease components in our leases. We use the rate implicit in the lease, when
available, to discount lease payments to present value. However, many of our leases do not provide a readily determinable
implicit rate and we estimate our incremental borrowing rate to discount payments based on information available at lease
commencement.
Lease assets and liabilities as of December 31, 2021 and 2020 consisted of the following:
$s in thousands
2021
2020
Assets:
Operating right-of-use assets (1)
$
43,607
$
51,474
Finance right-of-use assets (2)
17,290
21,209
Total
$
60,897
$
72,683
Liabilities:
Current:
Operating (3)
$
15,799
$
17,048
Finance (4)
4,969
4,462
Long-term:
Operating (5)
28,477
35,069
Finance (6)
12,108
17,501
Total
$
61,353
$
74,080
(1) Included in Operating lease assets in the Company’s consolidated balance sheets.
(2) Included in Property and equipment, net in the Company’s consolidated balance sheets. Finance right-of-use assets are
recorded net of accumulated amortization of $13.3 million and $8.0 million as of December 31, 2021 and 2020, respectively.
(3) Included in Current portion of operating lease liabilities in the Company’s consolidated balance sheets.
(4) Included in Accrued liabilities in the Company’s consolidated balance sheets.
(5) Included in Long-term operating lease liabilities in the Company’s consolidated balance sheets.
(6) Included in Other long-term liabilities in the Company’s consolidated balance sheets.
Lease expense consisted of the following:
Year Ended December 31,
$s in thousands
2021
2020
Operating lease cost (1)
$
19,950
$
20,880
Finance lease cost:
Amortization of leased assets (2)
5,249
5,312
Interest on lease liabilities (3)
1,012
1,221
Total
$
26,211
$
27,413
(1) Included in Direct operating costs and Selling, general, and administrative expenses in the Company’s consolidated
statements of operations. Operating lease cost includes short-term leases, excluding expenses relating to leases with a
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term of one month or less, which are not material. Operating lease cost excludes variable lease costs which are not material.
(2) Included in Direct operating costs in the Company’s consolidated statements of operations.
(3) Included in Interest expense in the Company’s consolidated statements of operations.
Supplemental cash flow information related to our leases is as follows:
Year Ended December 31,
$s in thousands
2021
2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$
19,687
$
20,297
Operating cash flows from finance leases
$
1,012
$
1,221
Financing cash flows from finance leases
$
4,885
$
4,659
Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities
$
10,010
$
13,576
Right-of-use assets obtained in exchange for new finance lease liabilities
$
—
$
6,197
Other information related to our leases as of December 31, 2021 and 2020 is as follows:
2021
2020
Weighted-average remaining lease term (years):
Operating leases
3.7
4.1
Finance leases
3.2
4.0
Weighted-average discount rate:
Operating leases
3.59 %
3.69 %
Finance leases
5.85 %
5.86 %
The Company’s maturity analysis of its lease liabilities as of December 31, 2021 is as follows:
Operating
Finance
$s in thousands
Leases
Leases
Total
2022
$
17,091
$
5,694
$
22,785
2023
13,617
5,668
19,285
2024
8,510
3,929
12,439
2025
3,366
3,565
6,931
2026
1,557
953
2,510
Thereafter
3,356
264
3,620
Total
$
47,497
$
20,073
$
67,570
Less: Interest
3,221
2,996
6,217
Present value of lease liabilities
$
44,276
$
17,077
$
61,353
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NOTE 13. GOODWILL AND INTANGIBLE ASSETS
Changes in goodwill for the years ended December 31, 2021 and 2020 were as follows:
Waste Solutions
Field Services
Energy Waste
Accumulated
Accumulated
Accumulated
$s in thousands
Gross
Impairment
Gross
Impairment
Gross
Impairment
Total
Balance at
December 31, 2019
$ 166,415
$
(6,870)
$ 298,579
$
—
$ 308,856
$
—
$
766,980
Impairment charges
—
—
—
(19,900)
—
(363,900)
(383,800)
NRC Merger purchase
price allocation adjustment
—
—
(61,735)
—
90,647
—
28,912
Impact Environmental
acquisition
—
—
300
—
—
—
300
Foreign currency
translation
448
—
197
—
—
—
645
Balance at
December 31, 2020
$ 166,863
$
(6,870)
$ 237,341
$
(19,900)
$ 399,503
$ (363,900)
$
413,037
Foreign currency
translation
62
—
27
—
—
—
89
Balance at
December 31, 2021
$ 166,925
$
(6,870)
$ 237,368
$
(19,900)
$ 399,503
$ (363,900)
$
413,126
We assess goodwill for impairment during the fourth quarter as of October 1 of each year, and also if an event occurs or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The
assessment consists of comparing the fair value of the reporting unit to the carrying value of the net assets assigned to the
reporting unit, including goodwill.
Fair values are generally determined by an income approach, discounting projected future cash flows based on our expectations
of the current and future operating environment, using a market approach, applying a multiple of earnings based on guideline for
publicly traded companies, or a combination thereof. Estimating future cash flows requires significant judgment about factors
such as general economic conditions and projected growth rates, and our estimates often vary from the cash flows eventually
realized. The rates used to discount projected future cash flows reflect a weighted average cost of capital based on our industry,
capital structure and risk premiums including those reflected in the current market capitalization. In the event the fair value of a
reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a
reporting unit exceeds its fair value, goodwill of the reporting unit is considered impaired, and an impairment charge would be
recognized during the period in which the determination has been made for the amount by which the carrying amount exceeds the
reporting unit’s fair value; however, the loss recognized will not exceed the total amount of goodwill allocated to that reporting
unit.
Assessing impairment inherently involves management judgments as to the assumptions used to calculate fair value of the
reporting units and the impact of market conditions on those assumptions. The key inputs that management uses in its
assumptions to estimate the fair value of our reporting units under the income-based approach are as follows:
●
Projected cash flows of the reporting unit, with consideration given to projected revenues, operating margins and the
levels of capital investment required to generate the corresponding revenues; and
●
Weighted average cost of capital (“WACC”), the risk-adjusted rate used to discount the projected cash flows.
To develop the projected cash flows of our reporting units, management considers factors that may impact the revenue streams
within each reporting unit. These factors include, but are not limited to, economic conditions on both a global scale and
specifically in the regions in which the reporting units operate, customer relationships, strategic plans and opportunities, required
returns on invested capital and competition from other service providers. With regard to operating margins, management
considers its historical reporting unit operating margins on the revenue streams within each
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reporting unit, adjusting historical margins for the projected impact of current market trends on both fixed and variable costs.
Expected future after-tax operating cash flows of each reporting unit are discounted to a present value using a risk-adjusted
discount rate. Estimates of future cash flows require management to make significant assumptions regarding future operating
performance including the projected mix of revenue streams within each reporting unit, projected operating margins, the amount
and timing of capital investments and the overall probability of achieving the projected cash flows, as well as future economic
conditions, which may result in actual future cash flows that are different than management’s estimates. The discount rate, which
is intended to reflect the risks inherent in future cash flow projections, used in estimating the present value of future cash flows, is
based on estimates of the WACC of market participants relative to the reporting units. Financial and credit market volatility can
directly impact certain inputs and assumptions used to develop the WACC.
The result of the annual assessment of goodwill undertaken in the fourth quarter of 2021 indicated that the fair value of each of
our reporting units was in excess of its respective carrying value.
In connection with our financial review and forecasting procedures performed during the first quarter of 2020, management
determined that the projected future cash flows of our Energy Waste (“EW”) reporting unit and our International reporting unit
(described below) indicated that the fair value of such reporting units may be below their respective carrying amounts.
Accordingly, we performed an interim assessment of each reporting unit’s fair value as of March 31, 2020 (the “Interim
Assessment”). Based on the results of the Interim Assessment, we recognized goodwill impairment charges of $283.6 million
related to our EW reporting unit and $16.7 million related to our International reporting unit in the first quarter of 2020. During
the fourth quarter of 2020, the Company finalized the purchase price allocation related to the NRC Merger. The finalization of
fair value estimates during the fourth quarter of 2020, and resulting final determination of goodwill by reporting unit, resulted in
an increase in the amount of goodwill assigned to the EW reporting unit and a decrease in the amount of goodwill assigned to the
International reporting unit. $80.3 million of additional goodwill assigned to the EW reporting unit was immediately impaired in
the fourth quarter of 2020 based on the fair value of the reporting unit determined in the Interim Assessment. The decrease in
goodwill assigned to the International reporting unit resulted in the reversal in the fourth quarter of 2020 of $11.2 million of
International reporting unit goodwill impairment charges recorded in the first quarter of 2020.
Our EW reporting unit, the sole component of our Energy Waste segment, provides energy-related services including solid and
liquid waste treatment and disposal, equipment cleaning and maintenance, specialty equipment rental, spill containment and site
remediation for a full complement of oil and gas waste streams, predominately to upstream energy customers currently
concentrated in the Eagle Ford and Permian Basins in Texas. Our International reporting unit, a component of our Field Services
segment, provides industrial and emergency response services to the offshore oil and gas sector in the North Sea and land-based
industries across the EMEA region. Both our EW and International reporting units are dependent on energy-related exploration
and production investments and expenditures by our energy industry customers. Lower crude oil prices and the volatility of such
prices affect the level of investment as it impacts the ability of energy companies to access capital on economically advantageous
terms or at all. In addition, energy companies decrease investments when the projected profits are inadequate or uncertain due to
lower crude oil prices or volatility in crude oil prices. Such reductions in capital spending negatively impact energy waste
generation and therefore the demand for our services.
The principal factors contributing to the goodwill impairment charges for both the EW and International reporting units related to
historically-low energy commodity prices reducing anticipated energy-related exploration and production investments and
expenditures by our energy industry customers, which negatively impacted each reporting unit’s prospective cash flows and each
reporting unit's estimated fair value. A longer-than-expected recovery in crude oil pricing and energy-related exploration and
production investments became evident during the first quarter of 2020 as we assessed the projected impact of the COVID-19
pandemic and foreign oil production increases on the global demand for oil and updated the long-term projections for each
reporting unit which, as a result, decreased each reporting unit’s anticipated future cash flows as compared to those estimated
previously.
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Consistent with our annual impairment testing methodology, we utilized a weighted average of (1) an income approach and (2) a
market approach to determine the fair value of each of the reporting units for the Interim Assessment. The income approach is
based on the estimated present value of future cash flows for each reporting unit. The market approach is based on assumptions
about how market data relates to each reporting unit.
The rapid and sustained decline in the energy markets served by our EW and International reporting units, exacerbated by the
uncertainty surrounding the impact of the COVID-19 pandemic and foreign oil production increases, has inherently increased the
risk associated with the future cash flows of these reporting units. Accordingly, when performing the Interim Assessment, we
increased the discount rates and decreased the projected capital investment for each reporting unit compared to the assumptions
used in the initial fair value assessment in connection with the NRC Merger on November 1, 2019.
We also considered the estimated fair value of our EW and International reporting units under a market-based approach by
applying industry-comparable multiples of revenues and operating earnings to reporting unit revenues and operating earnings.
The lack of a broad base of publicly available market data specific to the industry in which we operate, combined with the
general market volatility attributable to the COVID-19 pandemic, results in a wide range of currently observable market
multiples. Accordingly, we applied less weight to the estimated fair value of our reporting units calculated under the market-
based approach (10%) compared to the income approach (90%) described above.
The result of the annual assessment of goodwill undertaken in the fourth quarter of 2020 indicated that the fair value of each of
our reporting units was in excess of its respective carrying value, with the exception of our Field Services reporting unit.
Our Field Services reporting unit, a component of our Field Services segment, offers specialty field services and total waste
management solutions to commercial and industrial facilities and to government entities through our 10-day transfer facilities and
at customer sites. Consistent with prior assessments, we utilized a weighted average of (1) an income approach and (2) a market
approach to determine the fair value of each of the Field Services reporting unit. The income approach is based on the estimated
present value of future cash flows for the reporting unit. The market approach is based on assumptions about how market data
relates to the reporting unit. The estimated fair value of the Field Services reporting unit was then compared to the reporting
unit’s carrying amount as of October 1, 2020. Based on the results of that comparison, the carrying amount of the Field Services
reporting unit exceeded the estimated fair value of the reporting unit by $14.4 million and, as a result, we recognized a
corresponding goodwill impairment charge in the fourth quarter of 2020. The factors contributing to the $14.4 million goodwill
impairment charge principally related to an increase in the risk-adjusted rate used to discount the projected cash flows of the
reporting unit as a result of the decline in our share price since the last annual assessment as well as a slower than expected
recovery to cash flow levels forecasted prior to the COVID-19 pandemic, which negatively impacted the reporting unit’s
prospective financial information in its discounted cash flow model and the reporting unit’s estimated fair value as compared to
previous estimates.
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Intangible assets as of December 31, 2021 and 2020 consisted of the following:
2021
2020
Accumulated
Accumulated
$s in thousands
Cost
Amortization
Net
Cost
Amortization
Net
Amortizing intangible assets:
Permits, licenses and lease
$ 174,959
$
(27,170)
$ 147,789
$ 174,885
$
(23,005)
$ 151,880
Customer relationships
340,065
(87,952)
252,113
340,032
(61,778)
278,254
Technology - formulae and processes
7,166
(2,531)
4,635
7,142
(2,293)
4,849
Customer backlog
3,652
(2,752)
900
3,652
(2,387)
1,265
Tradename
10,390
(10,390)
—
10,390
(8,015)
2,375
Developed software
2,903
(2,475)
428
2,902
(2,182)
720
Non-compete agreements
5,573
(5,211)
362
5,571
(4,318)
1,253
Internet domain and website
536
(213)
323
536
(184)
352
Database
390
(235)
155
389
(214)
175
Total amortizing intangible assets
545,634
(138,929)
406,705
545,499
(104,376)
441,123
Non-amortizing intangible assets:
Permits and licenses
82,734
—
82,734
82,732
—
82,732
Tradename
134
—
134
133
—
133
Total intangible assets
$ 628,502
$ (138,929)
$ 489,573
$ 628,364
$ (104,376)
$ 523,988
We review non-amortizing intangible assets for impairment during the fourth quarter as of October 1 of each year. Fair value is
generally determined by considering an internally developed discounted projected cash flow analysis. Estimating future cash
flows requires significant judgment about factors such as general economic conditions and projected growth rates, and our
estimates often vary from the cash flows eventually realized. If the fair value of an asset is determined to be less than the carrying
amount of the intangible asset, an impairment in the amount of the difference is recorded in the period in which the annual
assessment occurs.
The results of the annual assessment of non-amortizing intangible assets undertaken in the fourth quarter of 2021 indicated no
impairment charges were required.
The results of the annual assessment of non-amortizing intangible assets undertaken in the fourth quarter of 2020 indicated no
impairment charges were required, with the exception of certain non-amortizing permit intangibles within our Field Services
segment.
Our Field Services segment provides government-mandated, commercial standby oil spill compliance solutions to companies that
store, transport, produce or handle petroleum and certain nonpetroleum oils on or near U.S. waters. A company’s ability to
provide these standby services is subject to significant regulatory certification requirements and other high barriers to entry. As
such, the Company assigned $57.1 million of fair value to non-amortizing standby services permit intangible assets upon
finalization of the purchase accounting allocation related to the NRC Merger. In performing the annual indefinite-lived intangible
assets impairment tests, the estimated fair value of the standby services permits was determined under an income approach using
discounted projected future cash flows associated with the permits and then compared to the $57.1 million carrying amount of the
permits as of October 1, 2020. Based on the results of that evaluation, the carrying amount of the permits exceeded the estimated
fair value of the permits and, as a result, we recognized a $21.1 million impairment charge in the fourth quarter of 2020. The
factors contributing to the impairment charge principally related to a less favorable outlook on the potential for both significant
oil spill events and growth opportunities, which negatively impacted the discounted projected cash flows associated with the
standby services permits and their estimated fair value as compared to previous estimates.
On November 1, 2019, the Company completed the NRC Merger and recorded $577.4 million of goodwill, $252.1 million of
amortizing intangible assets (consisting primarily of customer relationships) and $57.4 million of non-amortizing intangible
assets (consisting of permits and licenses) as a result of the acquisition. See Note 5 for additional information.
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On January 28, 2020, the Company acquired Impact Environmental Services, Inc. and recorded $300,000 of goodwill and
$900,000 of amortizing intangible assets (consisting primarily of customer relationships). See Note 5 for additional information.
On August 1, 2019, the Company acquired US Ecology Sarnia and recorded $7.7 million of goodwill and $6.2 million of
amortizing intangible assets (consisting primarily of customer relationships) as a result of the acquisition. See Note 5 for
additional information.
Amortization expense relating to intangible assets was $34.6 million, $37.3 million and $15.5 million for the years ended
December 31, 2021, 2020 and 2019, respectively.
Foreign intangible asset carrying amounts are affected by foreign currency translation. Future amortization expense of amortizing
intangible assets is expected to be as follows:
Expected
$s in thousands
Amortization
2022
$
31,403
2023
31,216
2024
30,830
2025
30,586
2026
29,767
Thereafter
252,903
$
406,705
NOTE 14. EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
We maintain the US Ecology, Inc., 401(k) Savings and Retirement Plan (“the Plan”) for employees who voluntarily contribute a
portion of their compensation, thereby deferring income for federal income tax purposes. Participants may contribute a
percentage of salary up to the IRS limitations. The Company contributes a matching contribution equal to 55% of participant
contributions up to 6% of eligible compensation. The Company contributed matching contributions to the Plan of $6.4 million,
$3.3 million and $3.0 million in 2021, 2020 and 2019, respectively.
The Company maintained 401(k) savings and retirement plans (“the NRC Plans”) for the employees that joined the Company
through the NRC Merger, until the NRC Plans were merged into the Plan on January 1, 2021. The Company contributed
matching contributions to the NRC Plans of $2.3 million and $325,000 in 2020 and 2019, respectively.
We also maintain the Stablex Canada Inc. Simplified Pension Plan (“the SPP”). This defined contribution plan covers
substantially all of our non-union employees at our Blainville, Québec facility in Canada. Employees represented by the Unifor
Section Local 171 receive Company contributions to the Regime de Retraite Par Financement Salarial pension plan and
employees at our other Canadian facilities receive contributions to separate defined contribution plans. The Company contributes
5% to 9.5% of eligible compensation to these plans. The Company contributed $858,000, $782,000 and $719,000 in aggregate to
these plans in 2021, 2020 and 2019, respectively.
Multi-Employer Defined Benefit Pension Plans
Certain of the Company’s wholly-owned subsidiaries participate in a total of four multi-employer defined benefit pension plans
under the terms of collective bargaining agreements covering most of the subsidiaries’ union employees. Contributions are
determined in accordance with the provisions of negotiated labor contracts and are generally based on stipulated rates per hours
worked. Benefits under these plans are generally based on compensation levels and years of service.
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The financial risks of participating in multi-employer plans are different from single employer defined benefit pension plans in
the following respects:
●
Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other
participating employers.
●
If a participating employer discontinues contributions to a plan, the unfunded obligations of the plan may be borne by
the remaining participating employers.
●
If a participating employer chooses to stop participating in a plan, a withdrawal liability may be created based on the
unfunded vested benefits for all employees in the plan.
Information regarding significant multi-employer pension benefit plans in which the Company participates is shown in the
following table:
Pension
Protection Act
Certified
Plan Employer
Plan
Zone Status
Name of Plan
ID Number Number
2021
2020
Operating Engineers Local 324 Pension Fund
38-1900637
001
Red
Red
The Company contributed $1.1 million and $1.0 million to the Operating Engineers Local 324 Pension Fund (the “Local 324
Plan”) in 2021 and 2020, respectively. The Company also contributed $157,000 and $205,000 to other multi-employer plans in
2021 and 2020, respectively, which are excluded from the table above as they are not individually significant.
Based on information as of April 30, 2021 and 2020, the year end of the Local 324 Plan, the Company’s contributions made to
the Local 324 Plan represented less than 5% of total contributions received by the Local 324 Plan during the 2021 and 2020 plan
years.
The certified zone status in the table above is defined by the Department of Labor and the Pension Protection Act of 2006 and
represents the level at which the plan is funded. Plans in the red zone are less than 65% funded; plans in the yellow zone are less
than 80% funded; and plans in the green zone are at least 80% funded. The certified zone status is as of the Local 324 Plan’s
year-end of April 30, 2021 and 2020.
NOTE 15. CLOSURE AND POST-CLOSURE OBLIGATIONS
Our accrued closure and post-closure liability represent the expected future costs, including corrective actions, associated with
closure and post-closure of our operating and non-operating disposal facilities. We record the fair value of our closure and post-
closure obligations as a liability in the period in which the regulatory obligation to retire a specific asset is triggered. For our
individual landfill cells, the required closure and post-closure obligations under the terms of our permits and our intended
operation of the landfill cell are triggered and recorded when the cell is placed into service and waste is initially disposed in the
landfill cell. The fair value is based on the total estimated costs to close the landfill cell and perform post-closure activities once
the landfill cell has reached capacity and is no longer accepting waste. We perform periodic reviews of both non-operating and
operating facilities and revise accruals for estimated closure and post-closure, remediation or other costs as necessary. Recorded
liabilities are based on our best estimates of current costs and are updated periodically to include the effects of existing
technology, presently enacted laws and regulations, inflation and other economic factors.
We do not presently bear significant financial responsibility for closure and/or post-closure care of the disposal facilities located
on state-owned land at our Beatty, Nevada site, provincial-owned land in Blainville, Québec; or state-leased federal land on the
Department of Energy Hanford Reservation near Richland, Washington. The states of Nevada and Washington and the province
of Québec collect fees from us based on the waste received on a quarterly or annual basis. Such fees are deposited in dedicated,
government-controlled funds to cover the future costs of closure and post-closure care and maintenance. Such fees are
periodically reviewed for adequacy by the governmental authorities. We maintain a surety bond for closure costs associated with
the Stablex facility. Our lease agreement with the province of Québec requires that the surety bond be maintained for 25 years
after the lease expires. We also maintain surety bonds for closure costs
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associated with our energy waste landfills in Texas. Under the terms of our waste disposal permits for these landfills, financial
security must be provided to the Railroad Commission of Texas in an amount necessary to close the facility. At December 31,
2021 we had $13.3 million in commercial surety bonds dedicated for closure obligations at our operating and non-operating
disposal facilities.
In accounting for closure and post-closure obligations, which represent our asset retirement obligations, we recognize a liability
as part of the fair value of future asset retirement obligations and an associated asset as part of the carrying amount of the
underlying asset. This obligation is valued based on our best estimates of current costs and current estimated closure and post-
closure costs taking into account current technology, material and service costs, laws and regulations. These cost estimates are
increased by an estimated inflation rate, estimated to be 2.6% at December 31, 2021. 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 our estimated closure and post-closure costs. Our weighted-
average credit-adjusted risk-free interest rate at December 31, 2021 approximated 5.3%.
Changes to reported closure and post-closure obligations for the years ended December 31, 2021 and 2020, were as follows:
$s in thousands
2021
2020
Closure and post-closure obligations, beginning of year
$
95,869
$
86,383
NRC Merger purchase price allocation adjustment
—
1,782
Accretion expense
5,363
4,000
Payments
(3,054)
(1,750)
Adjustments
732
5,422
Foreign currency translation
10
32
Closure and post-closure obligations, end of year
98,920
95,869
Less current portion
(5,771)
(6,471)
Long-term portion
$
93,149
$
89,398
Adjustment to the obligations represents changes in the expected timing or amount of cash expenditures based upon actual and
estimated cash expenditures. The adjustments in 2021 were primarily attributable to a $584,000 increase in closure and post-
closure obligations at our Belleville, Michigan operating facility due to an increase in estimated closure costs. The adjustments in
2020 were primarily attributable to a $5.4 million increase in closure and post-closure obligations at our Robstown, Texas
operating facility due to placing a new landfill cell into service in the fourth quarter of 2020.
Changes in the reported closure and post-closure asset, recorded as a component of Property and equipment, net, in the
consolidated balance sheets, for the years ended December 31, 2021 and 2020 were as follows:
$s in thousands
2021
2020
Net closure and post-closure asset, beginning of year
$ 26,532
$ 22,884
NRC Merger purchase price allocation adjustment
—
(389)
Additions or adjustments to closure and post-closure asset
732
5,422
Amortization of closure and post-closure asset
(1,614)
(1,407)
Foreign currency translation
12
22
Net closure and post-closure asset, end of year
$ 25,662
$ 26,532
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NOTE 16. DEBT
Long-term debt consisted of the following:
December 31,
$s in thousands
2021
2020
Revolving credit facility
$ 303,000
$ 347,000
Term loan
441,000
445,500
Unamortized term loan discount and debt issuance costs
(5,516)
(6,657)
Total debt
738,484
785,843
Current portion of long-term debt
(3,359)
(3,359)
Long-term debt
$ 735,125
$ 782,484
Future maturities of long-term debt, excluding unamortized discount and debt issuance costs, as of December 31, 2021 consisted
of the following:
$s in thousands
Maturities
2022
$
4,500
2023
4,500
2024
4,500
2025
4,500
2026
726,000
Thereafter
—
$ 744,000
Credit Agreement
On April 18, 2017, US Ecology Holdings, Inc. (f/k/a US Ecology, Inc.) (“Predecessor US Ecology”), now a wholly-owned
subsidiary of the Company, entered into a new senior secured credit agreement (as amended, restated, supplemented or otherwise
modified through the date hereof, the “Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”), as
administrative agent for the lenders, swingline lender and issuing lender, and Bank of America, N.A., as an issuing lender, that
initially provided for a $500.0 million, five-year revolving credit facility (the “Revolving Credit Facility”).
On August 6, 2019, Predecessor US Ecology entered into the first amendment (the “First Amendment”) to the Credit Agreement.
Effective November 1, 2019, the First Amendment, among other things, extended the expiration of the Revolving Credit Facility
to November 1, 2024, permitted the issuance of a $400.0 million incremental term loan to be used to refinance the indebtedness
of NRC and pay related transaction expenses in connection with the NRC Merger, modified the accordion feature allowing
Predecessor US Ecology to request up to the greater of (x) $250.0 million and (y) 100% of Consolidated EBITDA (as defined in
the Credit Agreement) plus certain additional amounts, increased the sublimit for the issuance of swingline loans to $40.0 million
and increased the maximum consolidated total net leverage ratio to 4.00 to 1.00.
On November 1, 2019, Predecessor US Ecology entered into the lender joinder agreement and second amendment (the “Second
Amendment”) to the Credit Agreement. Effective November 1, 2019, the Second Amendment, among other things, amended the
Credit Agreement to increase the capacity for incremental term loans by $50.0 million and provided for Wells Fargo lending
$450.0 million in incremental term loans to Predecessor US Ecology to pay off the existing debt of NRC in connection with the
NRC Merger, to pay certain fees, costs and expenses incurred in connection with the NRC Merger and to repay outstanding
borrowings under the Revolving Credit Facility. The seven-year incremental term loan matures November 1, 2026, requires
principal repayment of 1% annually, and bears interest at LIBOR plus 2.25% or a base rate plus 1.25% (with a step-up to LIBOR
plus 2.50% or a base rate plus 1.50% in the event that US Ecology credit ratings are not BB (with a stable or better outlook) or
better from S&P and Ba2 (with a stable or better outlook) or better from Moody’s). During the year ended December 31, 2021,
the effective interest rate on the term loan, including the impact of the amortization of debt issuance costs, was 2.86%.
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On June 26, 2020, Predecessor US Ecology entered into the third amendment (the “Third Amendment”) to the Credit Agreement.
Among other things, the Third Amendment amended the Credit Agreement to provide a covenant relief period through the earlier
of March 31, 2022 and the date Predecessor US Ecology elects to end such covenant relief period pursuant to the terms therein.
During the covenant relief period, the Third Amendment increased Predecessor US Ecology’s consolidated total net leverage
ratio requirement as of the end of each fiscal quarter to certain ratios above the 4.00 to 1.00 ratio in effect immediately before
giving effect to the Third Amendment, subject to compliance with certain restrictions on restricted payments and permitted
acquisitions during such covenant relief period.
On June 29, 2021, Predecessor US Ecology entered into the fourth amendment (the “Fourth Amendment”) to the Credit
Agreement. Among other things, the Fourth Amendment amended the Credit Agreement to extend the maturity date for the
existing revolving credit facility to June 29, 2026 (or such earlier date as the revolving credit facility may otherwise terminate
pursuant to the terms of the Credit Agreement). The Fourth Amendment also amended the Credit Agreement (i) to extend the
existing covenant relief period to end on the earlier of December 31, 2022 and the date Predecessor US Ecology elects to end
such covenant relief period pursuant to the terms therein and (ii) to permanently increase Predecessor US Ecology’s consolidated
total net leverage ratio requirement as of the end of each fiscal quarter ending on and after December 31, 2022 to 4.50 to 1.00.
During the covenant relief period until the fiscal quarter ending December 31, 2022, the Fourth Amendment increased
Predecessor US Ecology’s consolidated total net leverage ratio requirement as of the end of each fiscal quarter to certain ratios
above the 4.50 to 1.00 ratio otherwise in effect after giving effect to the Fourth Amendment, subject to compliance with certain
restrictions on restricted payments and permitted acquisitions during such covenant relief period. Furthermore, after giving effect
to the Fourth Amendment and whether or not the covenant relief period is in effect, (i) if the Borrower’s consolidated total net
leverage ratio is equal to or greater than 4.00 to 1.00 but less than 4.50 to 1.00, the interest rate on all outstanding borrowings of
revolving credit loans under the Credit Agreement will step-up to the LIBOR plus 2.25% or a base rate plus 1.25% and the
commitment fee will step-up to 0.375% and (ii) if Predecessor US Ecology’s consolidated total net leverage ratio is greater than
4.50 to 1.00, the interest rate on all outstanding borrowings of revolving credit loans under the Credit Agreement will step-up to
LIBOR plus 2.50% or a base rate plus 1.50% and the commitment fee will step-up to 0.40%, in each case, pursuant to the terms
of the Credit Agreement. The Fourth Amendment also reset any outstanding usage of certain negative covenant baskets,
including baskets in connection with the indebtedness, liens, investments, asset dispositions, restricted payments and affiliate
transactions negative covenants.
The Revolving Credit Facility provides up to $500.0 million of revolving credit loans or letters of credit with the use of proceeds
restricted solely for working capital and other general corporate purposes (including acquisitions and capital expenditures). As
modified by the Fourth Amendment, under the Revolving Credit Facility, revolving credit loans are available based on a base rate
(as defined in the Credit Agreement) or LIBOR, at the Company’s option, plus an applicable margin which is determined
according to a pricing grid under which the interest rate decreases or increases based on our ratio of funded debt to Consolidated
EBITDA (as defined in the Credit Agreement), as set forth in the table below:
Consolidated Total Net Leverage Ratio
LIBOR Rate
Loans Interest
Margin
Base Rate Loans
Interest Margin
Equal to or greater than 4.50 to 1.00
2.50%
1.50%
Equal to or greater than 4.00 to 1.00, but less than 4.50 to 1.00
2.25%
1.25%
Equal to or greater than 3.25 to 1.00, but less than 4.00 to 1.00
2.00%
1.00%
Equal to or greater than 2.50 to 1.00, but less than 3.25 to 1.00
1.75%
0.75%
Equal to or greater than 1.75 to 1.00, but less than 2.50 to 1.00
1.50%
0.50%
Equal to or greater than 1.00 to 1.00, but less than 1.75 to 1.00
1.25%
0.25%
Less than 1.00 to 1.00
1.00%
0.00%
During the year ended December 31, 2021, the effective interest rate on the Revolving Credit Facility, after giving effect to the
impact of our interest rate swap and the amortization of the loan discount and debt issuance costs, was 4.00%. Interest only
payments are due either quarterly or on the last day of any interest period, as applicable.
As modified by the Fourth Amendment, Predecessor US Ecology is required to pay a commitment fee ranging from 0.175% to
0.40% on the average daily unused portion of the Revolving Credit Facility, with such commitment fee to be
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based upon Predecessor US Ecology’s total net leverage ratio (as defined in the Credit Agreement). At December 31, 2021, there
were $303.0 million of revolving credit loans outstanding on the Revolving Credit Facility, which are presented as long-term debt
in the consolidated balance sheets.
Predecessor US Ecology has entered into a sweep arrangement whereby day-to-day cash requirements in excess of available cash
balances are advanced to the Company on an as-needed basis with repayments of these advances automatically made from
subsequent deposits to our cash operating accounts (the “Sweep Arrangement”). Total advances outstanding under the Sweep
Arrangement are subject to the $40.0 million swingline loan sublimit under the Revolving Credit Facility. Predecessor US
Ecology’s revolving credit loans outstanding under the Revolving Credit Facility are not subject to repayment through the Sweep
Arrangement. As of December 31, 2021, there were no borrowings outstanding subject to the Sweep Arrangement.
As of December 31, 2021, the availability under the Revolving Credit Facility was $71.2 million, subject to our leverage
covenant limitation, with $12.2 million of the Revolving Credit Facility issued in the form of standby letters of credit utilized as
collateral for closure and post-closure financial assurance and other assurance obligations.
Predecessor US Ecology may at any time and from time to time prepay revolving credit loans and swingline loans, in whole or in
part, without premium or penalty, subject to the obligation to indemnify each of the lenders against any actual loss or expense
(including any loss or expense arising from the liquidation or reemployment of funds obtained by it to maintain a LIBOR Rate
Loan (as defined in the Credit Agreement) or from fees payable to terminate the deposits from which such funds were obtained)
with respect to the early termination of any LIBOR Rate Loan. The Credit Agreement provides for mandatory prepayment at any
time if the Revolving Credit Outstandings exceed the Revolving Credit Commitment (as such terms are defined in the Credit
Agreement), in an amount equal to such excess. Subject to certain exceptions, the Credit Agreement provides for mandatory
prepayment upon certain asset dispositions, casualty events and issuances of indebtedness.
Predecessor US Ecology’s obligations under the Credit Agreement are (or will be) jointly and severally and fully and
unconditionally guaranteed on a senior basis by all of the Company’s existing and certain future domestic subsidiaries and are
secured by substantially all of the assets of Predecessor US Ecology and the Company’s existing and certain future domestic
subsidiaries (subject to certain exclusions), including 100% of the equity interests of the Company’s domestic subsidiaries and
65% of the voting equity interests of the Company’s directly owned foreign subsidiaries (and 100% of the non-voting equity
interests of the Company’s directly owned foreign subsidiaries).
The Credit Agreement contains customary restrictive covenants, subject to certain permitted amounts and exceptions, including
covenants limiting the ability of the Company to incur additional indebtedness, pay dividends and make other restricted
payments, repurchase shares of our outstanding stock and create certain liens. Upon the occurrence of an Event of Default (as
defined in the Credit Agreement), among other things, amounts outstanding under the Credit Agreement may be accelerated and
the commitments may be terminated.
The Credit Agreement also contains as financial maintenance covenants a maximum consolidated total net leverage ratio and a
consolidated interest coverage ratio. Except as further modified by the Third Amendment and Fourth Amendment as described
above, our consolidated total net leverage ratio as of the last day of each fiscal quarter may not exceed 4.50:1:00. Our
consolidated interest coverage ratio as of the last day of any fiscal quarter may not be less than 3.00 to 1.00. At December 31,
2021, we were in compliance with all of the financial covenants in the Credit Agreement.
Interest Rate Swap
In March 2020, the Company entered into an interest rate swap agreement with Wells Fargo, effectively fixing the interest rate on
$440.0 million, or approximately 59%, of the Revolving Credit Facility and term loan borrowings outstanding as of December
31, 2021. In connection with our entry into the March 2020 interest rate swap, we terminated our existing interest rate swap prior
to its scheduled maturity date of June 2021. As the original hedged forecasted transaction (periodic interest payments on our
variable-rate debt) remained probable, the $1.8 million net loss related to the terminated swap reported in AOCI at the
termination date was amortized as additional interest expense over its original maturity.
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The fair value of the interest rate swap as of December 31, 2021 is an asset of $5.0 million which is included in Other assets with
the offset to Accumulated other comprehensive loss on the Company’s consolidated balance sheet. During the years ended
December 31, 2021, 2020 and 2019, the Company recognized $3.7 million of losses, $3.3 million of losses and $170,000 of
gains, respectively, related to settlements of the interest rate swaps which were recorded as Interest expense on the Company’s
consolidated statements of operations.
NOTE 17. INCOME TAXES
The domestic and foreign components of income (loss) before income taxes consisted of the following:
$s in thousands
2021
2020
2019
Domestic
$ (10,567) $ (403,492) $ 30,706
Foreign
20,669
9,891
19,093
Income (loss) before income taxes
$
10,102
$ (393,601)
$ 49,799
The components of the income tax expense (benefit) consisted of the following:
$s in thousands
2021
2020
2019
Current:
U.S. Federal
$ (1,534)
$ (9,905)
$
3,120
State
68
3,062
1,547
Foreign
6,948
6,768
5,426
Total current
5,482
(75)
10,093
Deferred:
U.S. Federal
(509)
1,384
5,977
State
503
(2,859)
714
Foreign
(711)
(2,692)
(125)
Total deferred
(717)
(4,167)
6,566
Income tax expense (benefit)
$
4,765
$ (4,242)
$ 16,659
A reconciliation between the statutory federal income tax rate and the effective income tax rate is as follows:
2021
2020
2019
Taxes computed at federal statutory rate
21.0 %
21.0 % 21.0 %
Goodwill impairment charges
—
(20.4)
—
State income taxes (net of federal income tax benefit)
9.8
0.3
5.7
Share-based compensation
4.6
(0.1)
(0.4)
Research and development credits
(4.4)
0.1
(0.8)
Non-deductible transaction costs
1.6
—
3.4
Global intangible low taxed income
—
—
1.1
Foreign rate differential
11.0
(0.3)
2.5
Net operating loss reduction
—
(1.7)
—
Change in unrecognized tax benefits
—
1.7
—
State deferred rate differential
—
(0.1)
(1.6)
State credits
(5.1)
—
—
Assumed contingent liability
3.1
—
—
Non-deductible executive compensation
1.5
—
—
Non-deductible foreign expenses
4.3
—
—
Non-deductible political contributions
1.3
—
—
Net operating loss carryback rate differential
(4.6)
—
—
Other
3.1
0.6
2.6
47.2 %
1.1 % 33.5 %
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113
The components of the total net deferred tax assets and liabilities as of December 31, 2021 and 2020 consisted of the following:
$s in thousands
2021
2020
Deferred tax assets:
Net operating losses
$
16,963
$
18,751
Operating leases
10,980
12,875
Foreign tax credit and capital loss carry forwards
5,579
4,928
Accruals, allowances and other
4,963
8,691
Environmental compliance and other site related costs
10,833
10,909
Unrealized foreign exchange gains
819
790
Total deferred tax assets
50,137
56,944
Less: valuation allowance
(4,164)
(4,207)
Net deferred tax assets
45,973
52,737
Deferred tax liabilities:
Property and equipment
(50,601)
(53,838)
Intangible assets
(106,504)
(107,109)
Operating leases
(10,980)
(12,875)
Other
(1,370)
102
Total deferred tax liabilities
(169,455)
(173,720)
Net deferred tax liability
$ (123,482)
$ (120,983)
All deferred tax assets and liabilities are recorded in Deferred income taxes, net on the consolidated balance sheets as of
December 31, 2021 and 2020.
Utilization of the Company’s net operating loss carryforwards are subject to an annual limitation due to the ownership change
limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the
expiration or elimination of the net operating loss carryforwards before utilization. Management believes that the limitation will
not limit utilization of the carryforwards prior to their expiration based on the historic profitability of the Company and certain
favorable adjustments available to the annual limitation calculations.
As of December 31, 2021, we had approximately $58.5 million, $7.2 million, and $52.2 million of federal, foreign, and state and
local net operating losses (“NOLs”), respectively. A portion of the federal NOLs begin to expire in 2029 and the remaining
federal NOLs have no expiration date. Approximately $26.4 million of the US Federal NOLs are indefinite lived and the
remainder expire between 2029 and 2037. Foreign NOLs are indefinite lived and therefore have no expiration date. State and
local NOLs expire between 2022 and 2041. We have historically recorded a valuation allowance for certain deferred tax assets
due to uncertainties regarding future operating results and limitations on utilization of state and local NOLs for tax purposes. At
December 31, 2021 and 2020, we maintained a valuation allowance of approximately $37,000 and $79,000, respectively, for state
and local NOLs that are not expected to be utilizable prior to expiration.
The valuation allowance as of December 31, 2021 and 2020 was primarily related to foreign tax credit that, in the judgment of
management, was not more likely than not to be realized. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization
of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences
are deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available
carryback and carryforward periods), projected taxable income, and tax-planning strategies in making this assessment. The net
valuation allowance decreased $42,000 for the year ended December 31, 2021 compared to December 31, 2020.
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Changes to unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019, were as follows:
$s in thousands
2021
2020
2019
Unrecognized tax benefits, beginning of year
$
239
$
8,335
$
555
Gross increases - tax positions in prior period
9
—
8,088
Gross decreases - tax positions in prior period
—
(8,091)
(9)
Gross increases - tax positions in current period
58
50
52
Settlements
—
—
(284)
Lapse of statute of limitations
(50)
(55)
(67)
Unrecognized tax benefits, end of year
$
256
$
239
$
8,335
As of December 31, 2021, the total amount of unrecognized tax benefits was $256,000, of which $237,000, if recognized, would
favorably impact our future earnings. The $8.1 million decrease in prior period tax positions in 2020 related to the acquired NRC
net operating losses that were recorded as a reduction to our net operating losses deferred tax asset in 2019 for which an election
to treat them as expired was made during 2020. We do not anticipate that the amount of existing unrecognized tax benefits will
significantly increase or decrease within the next 12 months. Accrued interest and penalties related to unrecognized tax benefits
as of December 31, 2021 and December 31, 2020 were not significant. There is no accrual for penalties.
The Company files income tax returns in the U.S. Federal and various state, local and foreign jurisdictions. The Company is
subject to examination by the IRS for tax years 2018 through 2021. The 2017 through 2021 state tax returns are subject to
examination by state tax authorities. Stablex Canada, Inc. is currently under examination by the Canadian Revenue Agency for
years 2018 through 2020. The tax years 2017 through 2021 remain subject to examination in our significant foreign jurisdictions.
The Company does not anticipate any material change as a result of any current examinations in progress.
NOTE 18. COMMITMENTS AND CONTINGENCIES
Litigation and Regulatory Proceedings
In the ordinary course of business, we are involved in judicial and administrative proceedings involving federal, state, provincial
or local governmental authorities, including regulatory agencies that oversee and enforce compliance with permits. Fines or
penalties may be assessed by our regulators for non-compliance. Actions may also be brought by individuals or groups in
connection with permitting of planned facilities, modification or alleged violations of existing permits, or alleged damages
suffered from exposure to hazardous substances purportedly released from our operated sites, as well as other litigation. We
maintain insurance intended to cover property and damage claims asserted as a result of our operations. Periodically,
management reviews and may establish reserves for legal and administrative matters, or other fees expected to be incurred in
relation to these matters.
In December 2010, National Response Corporation, a subsidiary of NRC acquired by the Company in the NRC Merger, was
named as one of many “Dispersant Defendants” in multi-district litigation, arising out of the explosion of the BP Deepwater
Horizon (“BP”) oil rig, filed in the U.S. District Court for the Eastern District of Louisiana (“In re Deepwater Horizon” or the
“MDL”). The claims against National Response Corporation, and other “Dispersant Defendants,” were brought by workers and
others who alleged injury arising from post-explosion clean–up efforts, including particularly the use of certain chemical
dispersants. In January 2013, the Court approved a Medical Benefits Class Action Settlement, which, among other things,
provided for a “class wide” settlement as well as a release of claims against Dispersant Defendants, including National Response
Corporation. Further, National Response Corporation successfully moved the court to dismiss all claims against it based on
derivative immunity, as it was acting at the direction of the U.S. Government. In early 2018, BP began asserting an alleged
contractual right of indemnity against National Response Corporation and others in post-settlement lawsuits brought by persons
who had either chosen not to participate in the class-wide agreement or whose injuries were allegedly manifest after the period
covered by the claim submission process. The Company advised BP that it considers the attempt to bring National Response
Corporation back into previously settled litigation to be improper and moved for a declaratory judgment that it owes no
indemnity or contribution to BP, raising various arguments, including BP’s own actions and conduct over the preceding nine
years with respect to these claims (including its failure to
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seek indemnity) and the resultant prejudice to National Response Corporation, BP’s waiver of any indemnity, and the court’s
prior finding that National Response Corporation is entitled to derivative immunity. In response, BP asserted counterclaims
against National Response Corporation for a declaratory judgment that National Response Corporation must indemnify BP under
certain circumstances and for unjust enrichment. National Response Corporation successfully moved to dismiss the unjust
enrichment claim. The parties filed simultaneous judgment on the pleadings briefs in February 2020, and all oppositions were
filed on March 16, 2020. On May 4, 2020, the court found in favor of National Response Corporation, and held that the Company
is not liable to BP or any back end litigation plaintiffs for any damages related to the Deepwater Horizon oil spill. BP timely
appealed the ruling on June 11, 2020. On January 19, 2022, the U.S. Court of Appeals for the Fifth Circuit held with respect to
NRC that the district court erred in stating that BP was not entitled to indemnity from NRC under any circumstances but
remanded to the district court for a claim-specific factual inquiry. The Court made clear that indemnity was only possible in the
event of gross negligence or willful misconduct by NRC in cases where the claims in question were not otherwise lost under
Texas law. The Company is currently unable to estimate the range of possible losses associated with this proceeding, although the
Company believes that the opinion of the Court of Appeals positions it well on remand. Additionally, the Company believes that
if it were deemed to have liability arising out of or related to BP’s indemnity claims, such liability would be covered by an
indemnity by SEACOR Holdings Inc., the former owner of National Response Corporation, in favor of National Response
Corporation and its affiliates.
On November 17, 2018, an explosion occurred at our Grand View, Idaho facility. The incident severely damaged the facility’s
primary waste-treatment building as well as surrounding waste handling, waste storage, maintenance and administrative support
structures, resulting in the closure of the entire facility that remained in effect through January 2019. In addition to initiating and
conducting our own investigation into the incident, we fully cooperated with the Idaho Department of Environmental Quality, the
U.S. Environmental Protection Agency and the Occupational Safety and Health Administration (“OSHA”) to support their
comprehensive and independent investigations of the incident. On January 10, 2020, we entered into a settlement agreement with
OSHA settling a complaint made by OSHA relating to the incident for $50,000. On January 28, 2020, the Occupational Safety
and Health Review Commission issued an order terminating the proceeding relating to such OSHA complaint. We maintain
workers’ compensation insurance, business interruption insurance and liability insurance for personal injury, property and
casualty damage. We believe that any potential third-party claims associated with the explosion in excess of our deductibles are
expected to be resolved primarily through our insurance policies. Although we carry business interruption insurance, a disruption
of our business caused by a casualty event, including the full and partial closure of our Grand View, Idaho facility, may result in
the loss of business, profits or customers during the time of such closure. Accordingly, our insurance policies may not fully
compensate us for these losses. In November 2020, we commenced a lawsuit against the generator and broker of the waste, the
treatment of which we believe contributed to the Grand View explosion, seeking damages in connection with the losses suffered
as a result of the incident. The Company is actively working with its insurance companies on comprehensive property and
business interruption insurance claims related to the incident at our Grand View, Idaho facility.
In September 2021, Robert Dell, a Marine Technician for NRC from June 2021 to September 2021, filed a class action complaint
against US Ecology in the Alameda Superior Court for the State of California (Robert Dell et. al. v. US Ecology Illinois, Inc., US
Ecology, Inc., and US Ecology Vernon, Inc.) alleging the failure by the defendants to pay wages and/or overtime, failure to
provide accurate itemized wage statements, and failure to provide meal and rest breaks as required by California law. Further,
Mr. Dell has put the Labor & Workforce Development Agency on notice in an effort to exhaust administrative remedies and
enable him to bring an additional claim under the California Labor Code Private Attorneys General Act, which permits an
employee to assert a claim for violations of certain California Labor Code provisions on behalf of all aggrieved employees to
recover statutory penalties. Given the recency of the filing, the Company has not yet filed a response to Mr. Dell’s complaint. The
Company believes that Mr. Dell’s claims lack merit and intends to vigorously defend this action. The Company is currently
unable to estimate the range of possible losses associated with this proceeding.
Other than as described herein, as of December 31, 2021 we were not a party to any material pending legal proceedings and are
not aware of any other claims that could, individually or in the aggregate, have a materially adverse effect on our financial
position, results of operations or cash flows. The decision to accrue costs or write-off assets is based on the pertinent facts and
our evaluation of present circumstances.
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NOTE 19. EQUITY
Equity-Based Purchase Consideration
Pursuant to the NRC Merger Agreement, on November 1, 2019 the Company paid $626.5 million of the purchase price in equity-
based consideration comprising 9,337,949 newly-issued shares of US Ecology common stock, 3,772,753 replacement warrants,
118,239 replacement restricted stock units and 29,400 replacement stock options.
Stock Repurchase Program
On June 6, 2020, the Company’s Board of Directors’ authorization to repurchase the Company’s outstanding shares of common
stock and warrants under the share repurchase program expired. In the future, the Board of Directors may consider reauthorizing
the repurchase program at any time, and the timing of any future repurchases of common stock or warrants will be based upon
prevailing market conditions and other factors. The Company may from time to time also consider other options for repurchasing
some or all of its warrants, including but not limited to a tender offer for all of the outstanding warrants. The Company
repurchased 397,600 shares of common stock in an aggregate amount of $17.3 million under the repurchase program during the
year ended December 31, 2020.
Omnibus Incentive Plan
On May 27, 2015, the stockholders of Predecessor US Ecology approved the Omnibus Incentive Plan (as amended, “Pre-Merger
Omnibus Plan”), which was approved by Predecessor US Ecology’s Board of Directors on April 7, 2015. In connection with the
closing of the NRC Merger, the Company assumed the Pre-Merger Omnibus Plan, amended and restated such plan and renamed
it the Amended and Restated US Ecology, Inc. Omnibus Incentive Plan (the “Omnibus Plan”) for the purpose of issuing
replacement awards to award recipients under the Omnibus Plan pursuant to the NRC Merger Agreement and for the issuance of
additional awards in the future.
The Omnibus Plan was developed to provide additional incentives through equity ownership in US Ecology and, as a result,
encourage employees, consultants and non-employee directors to contribute to our success. The Omnibus Plan provides, among
other things, the ability for the Company to grant restricted stock, performance stock, options, stock appreciation rights, restricted
stock units, performance stock units and other share-based awards or cash awards to employees, consultants and non-employee
directors.
The Omnibus Plan expires on March 31, 2031 and authorizes 3,272,000 shares of common stock for grant over the life of the
Omnibus Plan. As of December 31, 2021, 2,088,750 shares of common stock remain available for grant under the Omnibus Plan.
Subsequent to the approval of the Pre-Merger Omnibus Plan by Predecessor US Ecology in May 2015, we stopped granting
equity awards under the American Ecology Corporation 2008 Stock Option Incentive Plan (“Pre-Merger 2008 Stock Option
Plan”). However, in connection with the closing of the NRC Merger, the Company assumed the Pre-Merger 2008 Stock Option
Plan, amended and restated such plan and renamed it in the Amended and Restated US Ecology, Inc. 2008 Stock Option
Incentive Plan (the “2008 Stock Option Plan”) solely for the purpose of issuing replacement awards to award recipients
thereunder and remains in effect solely for the settlement of awards granted under such plan and no future grants may be made
under such plan. No shares that are reserved but unissued under the 2008 Stock Option Plan or that are outstanding under the
2008 Stock Option Plan and reacquired by the Company for any reason will be available for issuance under the Omnibus Plan.
In addition, in connection with the closing of the NRC Merger, the Company assumed the NRC Group Holdings Corp. 2018
Equity Incentive Plan previously maintained by NRC by adopting the Amended and Restated US Ecology, Inc. 2018 Equity and
Incentive Compensation Plan solely for the purpose of issuing replacement awards to award recipients thereunder pursuant to the
NRC Merger Agreement, and no future grants may be made under such plan.
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117
Performance Stock Units (PSUs)
We have PSU awards outstanding under the Omnibus Plan. Each PSU represents the right to receive, on the settlement date, one
share of the Company’s common stock.
The total number of 2019 PSUs each participant is eligible to earn ranges from 0% to 300% of the target number of PSUs granted
in 2019. The actual number of 2019 PSUs that will vest and be settled in shares is determined based on achievement of certain
Company financial performance metrics and total stockholder return relative to a set of peer companies, over a three-year
performance period. Compensation expense is recorded over the awards’ three-year vesting period.
On January 24, 2020, the Company granted 5,358 PSUs to certain employees. Each January 2020 PSU represents the right to
receive, on the settlement date, one share of the Company’s common stock. The actual number of January 2020 PSUs that will
vest and be settled in shares is determined based on the achievement of certain milestones. The fair value of the January 2020
PSUs estimated on the grant date was $54.55 per unit. Compensation expense is recorded over the awards’ milestone
measurement period.
On July 16, 2020, the Company granted 51,922 PSUs to certain employees. Each July 2020 PSU represents the right to receive,
on the settlement date, one share of the Company’s common stock. The total number of July 2020 PSUs each participant is
eligible to earn ranges from 0% to 200% of the target number of PSUs granted. The actual number of July 2020 PSUs that will
vest and be settled in shares is determined at the end of a 2.5-year performance period beginning July 1, 2020, based on the
Company’s total shareholder return relative to a set of peer companies. Compensation expense is recorded over the awards’ 2.5-
year vesting period.
The Company did not grant any PSUs in 2021.
A summary of our PSU activity is as follows:
Weighted
Average
Grant Date
Units
Fair Value
Outstanding as of December 31, 2020
86,070
$
49.45
Vested
(31,211)
60.62
Cancelled, expired or forfeited
(1,474)
54.55
Outstanding as of December 31, 2021
53,385
$
42.79
The fair value of PSUs granted on July, 16, 2020 and March 1, 2019 was estimated as of the date of grant using a Monte Carlo
simulation model. The grant date fair value of PSUs granted on July 16, 2020 and March 1, 2019 was $42.47 and $58.20 per unit,
respectively. Assumptions used in the Monte Carlo simulation to calculate the fair value of the PSUs granted are as follows:
2020
2019
Stock price on grant date
$ 32.89
$ 58.40
Expected term
2.5 years
3.0 years
Expected volatility
40.6 %
30.0 %
Risk-free interest rate
0.2 %
2.5 %
Expected dividend yield
— %
1.1 %
During 2021, 31,211 PSUs vested and PSU holders earned zero shares of the Company’s common stock.
Stock Options
We have stock option awards outstanding under the 2008 Stock Option Plan and the Omnibus Plan. Stock options expire ten
years from the date of grant and generally vest over a period of three years from the date of grant. Vesting requirements for non-
employee directors are contingent on attending a minimum of 75% of regularly scheduled board meetings during
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the year. Upon the exercise of stock options, common stock is issued from treasury stock or, when depleted, from new stock
issuances.
A summary of our stock option activity is as follows:
Weighted
Weighted
Average
Average
Aggregate
Remaining
Exercise
Intrinsic
Contractual
Shares
Price
Value
Term (Years)
Outstanding as of December 31, 2020
357,033
$ 49.93
Granted
205,800
35.30
Cancelled, expired or forfeited
(16,239)
44.38
Outstanding as of December 31, 2021
546,594
$ 44.59
$
—
6.9
Exercisable as of December 31, 2021
283,329
$ 48.52
$
—
5.3
The weighted average grant date fair value of all stock options granted during 2021, 2020 and 2019 was $9.90, $12.30 and
$14.26 per share, respectively. The total intrinsic value of stock options exercised during 2020 and 2019 was $100,000 and
$152,000, respectively. No stock options were exercised in 2021.
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 estimated based on an average of actual historical volatility and implied volatility corresponding to the stock option’s
estimated expected term. We believe this approach to determine volatility is representative of future stock volatility. The
expected term of a stock option is estimated based on analysis of stock options already exercised and foreseeable trends or
changes in behavior. The risk-free interest rates are based on the U.S. Treasury securities maturities as 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 option grants are as follows:
2021
2020
2019
Expected life
3.8 years 4.0 years 2.7 years
Expected volatility
38 %
30 %
30 %
Risk-free interest rate
0.2 %
1.4 %
2.1 %
Expected dividend yield
0.5 %
1.2 %
1.2 %
Restricted Stock
We have restricted stock awards outstanding under the Omnibus Plan. Generally, restricted stock awards vest annually over a
three-year period. Vesting of restricted stock awards to non-employee directors is contingent on the non-employee director
attending a minimum of 75% of regularly scheduled board meetings and 75% of the meetings of each committee of which the
non‐employee director is a member during the year. Upon the vesting of restricted stock awards, common stock is issued from
treasury stock or, when depleted, from new stock issuances.
A summary of our restricted stock activity is as follows:
Weighted
Average
Grant Date
Shares
Fair Value
Outstanding as of December 31, 2020
72,766
$
51.47
Granted
84,800
36.49
Vested
(47,002)
47.08
Outstanding as of December 31, 2021
110,564
$
41.85
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The total fair value of restricted stock vested during 2021, 2020 and 2019 was $1.8 million, $2.3 million and $2.5 million,
respectively.
Restricted Stock Units
We have restricted stock unit awards outstanding under the Omnibus Plan. Each restricted stock unit represents the right to
receive, on the settlement date, one share of the Company’s common stock. Generally, restricted stock unit awards vest annually
over a three-year period. Upon the vesting of restricted stock unit awards, common stock is issued from treasury stock or, when
depleted, from new stock issuances.
A summary of our restricted stock unit activity is as follows:
Weighted
Average
Grant Date
Units
Fair Value
Outstanding as of December 31, 2020
147,243 $
39.92
Granted
62,759
39.33
Vested
(64,597)
44.75
Cancelled, expired or forfeited
(18,856)
42.51
Outstanding as of December 31, 2021
126,549 $
36.78
The total fair value of restricted stock units vested during 2021, 2020 and 2019 was $2.6 million, $3.0 million and $4.8 million,
respectively.
Treasury Stock
During 2021, the Company repurchased 12,788 shares of the Company’s common stock in connection with the net share
settlement of employee withholding taxes due on vested equity awards at an average cost of $36.33 per share and issued 128,714
shares of common stock from our treasury stock in connection with employee equity awards at an average cost of $43.93 per
share.
During 2020, the Company repurchased 17,169 shares of the Company’s common stock in connection with the net share
settlement of employee withholding taxes due on vested equity awards at an average cost of $57.91 per share, repurchased
397,600 shares of the Company’s common stock under our stock repurchase program at an average cost of $43.61 per share and
issued 56,381 shares of common stock from our treasury stock in connection with employee equity awards at an average cost of
$44.20 per share.
Share-Based Compensation Expense
All 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 the requisite service period. The components of pre-tax share-based compensation expense
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(primarily included in Selling, general and administrative expenses in our consolidated statements of operations) and related tax
benefits were as follows:
$s in thousands
2021
2020
2019
Share-based compensation from:
Stock options
$
1,201
$
725
$
575
Restricted stock
2,719
2,032
1,662
Restricted stock units (1)
2,758
3,810
6,193
Performance stock units (2)
1,211
1,266
831
Total share-based compensation
7,889
7,833
9,261
Income tax benefit
(1,162)
(2,115)
(3,098)
Share-based compensation, net of tax
$
6,727
$
5,718
$
6,163
(1) Share-based compensation from restricted stock units for the years ended December 31, 2020 and
2019 includes $605,000 and $3.7 million, respectively, of compensation expense related to the
accelerated vesting of restricted stock unit awards upon the termination of former employees of NRC
subsequent to the NRC Merger in accordance with change-in-control provisions of their respective
employment agreements. Share-based compensation from restricted stock units for the year ended
December 31, 2021 and 2020 also includes $434,000 and $405,000, respectively, of compensation
expense related restricted stock unit awards granted to certain employees identified as critical to the
successful integration of NRC. Share-based compensation from these awards is attributable entirely
to the NRC Merger therefore the Company has classified this portion of share-based compensation
expense as business development and integration expenses within Selling, general and administrative
expenses in our consolidated statements of operations.
(2) Share-based compensation from performance stock units for the year ended December 31, 2021
includes a benefit of $23,000 to compensation expense related to the expiration of milestone-based
performance stock unit awards granted to certain employees identified as critical to the successful
integration of NRC. Share-based compensation from performance stock units for the year ended
December 31, 2020 includes $173,000 of compensation expense related to achievement of
milestone-based performance stock unit awards granted to certain employees identified as critical to
the successful integration of NRC. Share-based compensation from these awards is attributable
entirely to the NRC Merger therefore the Company has classified this portion of share-based
compensation expense as business development and integration expenses within Selling, general and
administrative expenses in our consolidated statements of operations.
The tax benefits from stock options exercised during 2020 and 2019 were $113,000 and $321,000, respectively. No stock options
were exercised in 2021.
Unrecognized Share-Based Compensation Expense
As of December 31, 2021, there was $7.6 million 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.
Warrants
At December 31, 2021, there were a total of 3,772,753 warrants outstanding. Each warrant entitles the holder thereof to purchase
one share of common stock at a price of $58.67 per share, subject to certain adjustments. The warrants may be exercised only for
a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. The warrants will
expire at 5:00 p.m. New York City time on October 17, 2023, or earlier upon redemption or liquidation. The warrants are listed
on the Nasdaq Capital Market under the symbol “ECOLW”. The Company may call
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121
the warrants for redemption, in whole and not in part, at a price of $0.01 per warrant, upon not less than 30 days’ prior written
notice of redemption to each warrant holder, if, and only if, the reported last sale price of common stock equals or exceeds $91.84
per share on each of 20 trading days within the 30 trading-day period ending on the business day prior to the date on which notice
of the redemption is given and provided that there is an effective registration statement covering the shares of Common Stock
issuable on exercise of the warrants and subject to the satisfaction of certain other requirements. The warrants were determined to
be equity classified in accordance with ASC 815, Derivatives and Hedging.
NOTE 20. EARNINGS (LOSS) PER SHARE
2021
2020
2019
$s and shares in thousands, except per share amounts
Basic
Diluted
Basic
Diluted
Basic
Diluted
Net income (loss)
$
5,337
$
5,337
$ (389,359)
$ (389,359)
$ 33,140
$ 33,140
Weighted average basic shares outstanding
31,138
31,138
31,126
31,126
23,521
23,521
Dilutive effect of share-based awards and warrants
235
—
228
Weighted average diluted shares outstanding
31,373
31,126
23,749
Earnings (loss) per share
$
0.17
$
0.17
$
(12.51)
$
(12.51)
$
1.41
$
1.40
Anti-dilutive shares excluded from calculation
4,359
4,213
90
NOTE 21. SEGMENT REPORTING
Financial Information by Segment
Effective in the fourth quarter of 2020, we made changes to the manner in which we manage our business, make operating
decisions and assess our performance. The energy waste business that was acquired through the NRC Merger now comprises our
Energy Waste segment. Prior to this change, the energy waste business was included in the Waste Solutions segment (formerly
“Environmental Services”). All periods presented below have been recast to reflect these changes. Under our new structure our
operations are managed in three reportable segments reflecting our internal management reporting structure and nature of
services offered as follows:
Waste Solutions (formerly “Environmental Services”)—This segment provides safe and compliant specialty waste
management services including treatment, disposal, beneficial re-use, and recycling of hazardous, non-hazardous, and
other specialty waste at Company-owned treatment, storage, and disposal facilities, excluding the services within our
Energy Waste segment.
Field Services (formerly “Field & Industrial Services”)—This segment provides safe and compliant logistics and
response solutions focusing on “in-field’ service offerings through our network of 10-day transfer facilities. Our
logistics solutions include specialty waste packaging, collection, transportation, and total waste management. Our
response solutions include land and marine based emergency response, OSRO standby compliance, remediation, and
industrial services. The Field Services segment completes our vertically integrated model and serves to increase waste
volumes into our Waste Solutions segment.
Energy Waste— This segment provides safe and compliant energy waste management and critical support services to
up-stream oil and gas customers in the Permian and Eagle Ford basins primarily operating in Texas. Services include
spill containment and site remediation, equipment cleaning and maintenance services, specialty equipment rental,
including tanks, pumps and containment, safety monitoring and management and transportation and disposal. This
segment includes all of the energy waste business of the legacy NRC operations and none of the legacy US Ecology
operations.
The operations not managed through our three reportable segments are recorded as “Corporate.” Corporate selling, general and
administrative expenses include typical corporate items of a general nature such as certain labor, information technology, legal,
accounting and other expenses not associated with a specific reportable segment. Income taxes are
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assigned to Corporate, but all other items are included in the segment where they originated. Inter-company transactions have
been eliminated from the segment information and are not significant between segments.
Effective in the first quarter of 2021, we changed our management structure resulting in the reclassification of certain overhead
expenses from our Waste Solutions, Field Services and Energy Waste reportable segments to Corporate. As a result, certain
regional overhead costs historically presented within our reportable segments as Direct operating costs were further reclassified
to Corporate as Selling, general and administrative expenses to conform to the current period’s presentation. Throughout this
Annual Report on Form 10-K, all periods presented have been recast to reflect these changes.
Summarized financial information of our reportable segments for the years ended December 31, 2021, 2020 and 2019 is as
follows:
2021
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Corporate
Total
Revenue
$ 451,249
$ 500,187
$
36,565
$
—
$
988,001
Depreciation, amortization and accretion
$
43,746
$
44,368
$
19,520
$
3,142
$
110,776
Capital expenditures
$
45,602
$
15,393
$
4,923
$
2,748
$
68,666
Total assets
$ 796,645
$ 733,086
$ 216,292
$ 59,375
$ 1,805,398
2020
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Corporate
Total
Revenue
$ 425,413
$ 473,754
$
34,687
$
—
$
933,854
Depreciation, amortization and accretion
$
41,540
$
43,465
$
19,814
$
3,086
$
107,905
Capital expenditures
$
31,027
$
16,149
$
6,189
$
4,034
$
57,399
Total assets
$ 773,448
$ 762,854
$ 231,475
$ 63,506
$ 1,831,283
2019
Waste
Field
Energy
$s in thousands
Solutions
Services
Waste
Corporate
Total
Revenue
$ 440,547
$ 232,402
$
12,560
$
—
$
685,509
Depreciation, amortization and accretion
$
41,133
$
15,007
$
3,402
$
1,760
$
61,302
Capital expenditures
$
46,202
$
5,986
$
1,391
$
4,521
$
58,100
Total assets
$ 755,566
$ 865,540
$ 534,738
$ 75,400
$ 2,231,244
Management uses Adjusted EBITDA as a financial measure to assess segment performance. Adjusted EBITDA is defined as net
income (loss) before interest expense, interest income, income tax expense, depreciation, amortization, share-based
compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss, non-cash property and equipment
impairment charges, non-cash goodwill and intangible asset impairment charges, gain on property insurance recoveries, business
development and integration expenses and other income/expense. Adjusted EBITDA is a complement to results provided in
accordance with GAAP and we believe that such information provides additional useful information to analysts, stockholders and
other users to understand the Company’s operating performance. Since Adjusted EBITDA is not a measurement determined in
accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to
other similarly titled measures of other companies. Items excluded from Adjusted EBITDA are significant components in
understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an
alternative to, or substitute for, net income (loss), cash flows generated by operations, investing or financing activities, or other
financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our
results as reported under GAAP. Some of the limitations are:
●
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
●
Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal
payments on our debt;
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●
Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;
●
Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual
commitments;
●
Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will
often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such
replacements; and
●
Adjusted EBITDA does not reflect our business development and integration expenses.
A reconciliation of Net income (loss) to Adjusted EBITDA for the years ended December 31, 2021, 2020 and 2019 is as follows:
$s in thousands
2021
2020
2019
Net income (loss)
$
5,337
$ (389,359)
$
33,140
Income tax expense (benefit)
4,765
(4,242)
16,659
Interest expense
28,966
32,595
19,239
Interest income
(1,417)
(258)
(605)
Foreign currency loss
171
1,134
733
Other income
(4,476)
(788)
(455)
Property and equipment impairment charges
—
—
25
Goodwill and intangible asset impairment charges
—
404,900
—
Depreciation and amortization of plant and equipment
70,799
66,561
41,423
Amortization of intangible assets
34,614
37,344
15,491
Share-based compensation
7,478
6,651
5,544
Accretion and non-cash adjustment of closure & post-closure liabilities
5,363
4,000
4,388
Gain on property insurance recoveries
—
—
(12,366)
Business development and integration expenses
3,274
11,621
26,150
Adjusted EBITDA
$ 154,874
$
170,159
$ 149,366
Adjusted EBITDA, by reportable segment, for the years ended December 31, 2021, 2020 and 2019 is as follows:
$s in thousands
2021
2020
2019
Waste Solutions
$ 170,953
$ 176,702
$ 184,133
Field Services
70,578
81,770
26,707
Energy Waste
11,321
4,982
3,626
Corporate
(97,978)
(93,295)
(65,100)
Total
$ 154,874
$ 170,159
$ 149,366
Property and Equipment and Intangible Assets Outside of the United States
We provide services primarily in the United States, Canada and the EMEA region. Long-lived assets, comprised of property and
equipment and intangible assets net of accumulated depreciation and amortization, by geographic location as of December 31,
2021 and 2020 are as follows:
$s in thousands
2021
2020
United States
$ 855,200
$ 882,639
Canada
65,437
68,623
EMEA
15,604
18,042
Other (1)
9,716
11,321
Total long-lived assets, net
$ 945,957
$ 980,625
(1) Includes Mexico, Asia Pacific, and Latin America and Caribbean geographical regions.
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NOTE 22. SUBSEQUENT EVENTS
On February 8, 2022, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Republic Services, Inc.,
a Delaware corporation (“Republic”), and Bronco Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Republic (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth in the
Merger Agreement, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the
surviving corporation and as a wholly-owned subsidiary of Republic.
At the effective time of the Merger, each share of our common stock issued and outstanding immediately prior to the effective
time (other than shares of our common stock owned by Republic or the Company (as treasury stock or otherwise) or any of their
respective direct or indirect wholly-owned subsidiaries as of immediately prior to the effective time or for which appraisal rights
have been demanded properly in accordance with Section 262 of the General Corporation Law of the State of Delaware), will be
converted into the right to receive $48.00 per share in cash, without interest.
The consummation of the Merger is subject to certain conditions, including (i) the affirmative vote of the holders of a majority of
the outstanding shares of our common stock, (ii) (a) the expiration or termination of any waiting period (or any extension thereof)
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder, (b) receipt of other required regulatory approvals, and (iii) the absence of any law or order restraining, enjoining or
otherwise prohibiting the Merger. Each of Republic’s, Merger Sub’s, and our obligation to consummate the Merger is also
subject to additional customary conditions, including (x) subject to specific standards, the accuracy of the representations and
warranties of the other party, and (y) performance in all material respects by the other party of its obligations under the Merger
Agreement.
The Merger Agreement also includes customary termination provisions for both the Company and Republic and provides that, in
connection with the termination of the Merger Agreement, under specified circumstances, we will be required to pay Republic a
termination fee of $46.3 million, including if (i) Republic terminates the Merger Agreement because the Board changes its
recommendation regarding the Merger Agreement, (ii) the Company terminates the Merger Agreement prior to the receipt of the
Company stockholder approval to enter into an acquisition agreement with a third-party with respect to a superior proposal or (iii)
Republic or the Company terminates the Merger Agreement in certain circumstances and, in any such case, prior to such
termination, a takeover proposal by a third-party shall have been publicly disclosed and not publicly withdrawn and within 12
months following the date of termination, the Company shall have entered into an alternative transaction agreement (whether or
not relating to a takeover proposal made, communication or publicly disclosed prior to the termination of the Merger Agreement).
The Merger Agreement also provides that if the Merger Agreement is terminated because (i) of the issuance of a nonappealable
court order or legal restraint prohibiting the transaction for antitrust reasons or (ii) the transactions have not been consummated
by August 8, 2023, and at such time, antitrust approval for the transaction has not been obtained but the other conditions to
Closing have been satisfied, then Republic will be required to reimburse the Company for 50% of its reasonable and documented
out-of-pocket expenses incurred in connection with the Merger up to $5.0 million (i.e., Republic’s reimbursement shall not
exceed $2.5 million).
The foregoing description of the Merger Agreement is a summary only and is qualified in its entirety by reference to the complete
text of the Merger Agreement filed herewith as Exhibit 2.1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of the Company’s management, including both the
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures, as
such term is defined under Rule 13a-15e under the Securities Exchange Act of 1934, as amended (the
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125
“Exchange Act”) as of December 31, 2021. Based on that evaluation, the Company’s management, including the Chief Executive
and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures are effective to provide reasonable
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’s management, including the Chief Executive Officer and Chief Financial Officer, or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation of
such controls that occurred during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control 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 that its records and filings accurately reflect the transactions engaged in Section 404 of Sarbanes-Oxley Act
of 2002 and related rules issued by the SEC requiring 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 of controls. 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, 2021 based on
criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations
(“COSO”) of the Treadway Commission. Based on this assessment, management concluded that our internal controls over
financial reporting were effective to provide reasonable assurance regarding the reliability of financial reporting.
Our independent registered public accounting firm, Deloitte and Touche LLP, has audited the effectiveness of internal control
over financial reporting as of December 31, 2021, as stated in their report, which is included in Part II, Item 8 of this Annual
Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
None
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126
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information regarding directors and nominees for directors of the Company, including identification of the members of the
audit committee and audit committee financial expert, will be included in the Company’s definitive proxy statement for use in
connection with the 2022 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, 2021. The information contained under these headings is incorporated herein by
reference. Information regarding the executive officers of the Company is included in this Annual Report on 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 ethics that applies to our Chief Executive Officer and Chief Financial Officer. This code of ethics is
available on our Web site at www.usecology.com. If we make any amendments to this code other than technical, administrative or
other non-substantive amendments, or grant any waivers, including implicit waivers, from a provision of this code to our Chief
Executive Officer or Chief Financial Officer, we will disclose the nature of the amendment or waiver, its effective date and to
whom it applies in a report filed with the SEC.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive and director compensation is presented under the heading “Compensation Discussion and
Analysis” in the Proxy Statement. The information contained under these headings is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to security ownership of certain beneficial owners and management is set forth under the heading
“Security Ownership of Certain Beneficial Owners and Directors and Officers” in the Proxy Statement. The information
contained under these headings is incorporated herein by reference.
The following table provides information as of December 31, 2021, about the common stock that has been issued under all of our
equity compensation plans, including the Omnibus Plan and the 2008 Stock Option Plan. All of these plans have been approved
by our stockholders. The Omnibus Plan, approved in May 2015, superseded our 2008 Stock Option Plan, and the 2008 Stock
Option Plan remain in effect solely for the settlement of awards granted under the 2008 Stock Option Plan. The number of
securities remaining available for future issuance presented in column (c) in the table below represents securities available under
the Omnibus Plan only. No shares that are reserved but unissued under the 2008 Stock Option Plan or that are outstanding under
the 2008 Stock Option Plan and reacquired by the Company for any reason will be available for issuance under the Omnibus
Plan.
Number of securities
remaining available for
Number of securities
future issuance under
to be issued upon
Weighted‑average
equity compensation
exercise of
exercise price of
plans (excluding
outstanding options,
outstanding options,
securities reflected in
warrants and rights
warrants and rights
column (a))
(a)(1)
(b)(2)
(c)
Equity compensation plans approved by security holders
837,092
$
44.59
2,088,750
Equity compensation plans not approved by security holders
—
—
—
Total
837,092
$
44.59
2,088,750
(1) Includes 237,113 shares of unvested restricted stock and restricted stock unit awards and 53,385 performance stock unit
awards outstanding under the Omnibus Plan.
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127
(2) The weighted-average exercise price does not take into account the shares issuable upon vesting of outstanding restricted
stock, restricted stock unit and performance stock unit awards, which have no exercise price.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information 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 SERVICES
Information concerning principal accounting fees and services is presented under the heading “Ratification of Appointment of
Independent Registered Public Accounting Firm” in the Proxy Statement. The information contained under this heading is
incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENTS AND 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 of this Annual
Report.
2)
Financial Statement Schedules. Schedules have been omitted because they are not required or because the
information is included in the financial statements at Item 8 of this Annual Report.
3)
Exhibits are incorporated herein by reference or are filed with this Annual Report as set forth in the Index to
Exhibits on page 134 hereof.
ITEM 16. FORM 10-K SUMMARY
None
Table of Contents
128
Index to Exhibits
Exhibit
No.
Description
Company Form+
Incorporated by Reference from
Registrant’s
2.1
Agreement and Plan of Merger, dated as of February 8, 2022, by
and among Republic Services, Inc., Bronco Acquisition Corp.
and US Ecology, Inc.
US Ecology, Inc.
Form 8-K filed 2-10-2022
2.2
Agreement and Plan of Merger, dated as of June 23, 2019, by
and among US Ecology, Inc., NRC Group Holdings Corp., US
Ecology Parent, Inc., Rooster Merger Sub, Inc. and ECOL
Merger Sub, Inc.
Predecessor US
Ecology
Form 8-K filed 6-24-2019
3.1
Amended and Restated Certificate of Incorporation of US
Ecology, Inc.
US Ecology, Inc.
Form 8-K filed 11-1-2019
3.2
Amended and Restated Bylaws of US Ecology, Inc.
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
3.3
Certificate of Amendment to Amended and Restated Certificate
of Incorporation of US Ecology, Inc.
US Ecology, Inc.
Form 8-K filed 6-1-2021
3.4
Amendment No. 2 to the Amended and Restated Bylaws of US
Ecology, Inc.
US Ecology, Inc.
Schedule 14A filed 4-13-2021
4.1
Assignment, Assumption and Amendment to the Warrant
Agreement, dated as of November 1, 2019, by and between US
Ecology, Inc., American Stock Transfer & Trust Company,
LLC, NRC Group Holdings Corp. and Continental Stock
Transfer & Trust Company.
US Ecology, Inc.
Form 8-K filed 11-1-2019
4.2
Description of Securities
US Ecology, Inc.
10.1
Investor Agreement, dated June 23, 2019, by and among US
Ecology, Inc., US Ecology Parent, Inc., JFL-NRC-SES Partners,
LLC, JFL-NRC Holdings III, LLC, JFL-NRC Holdings IV, LLC
and solely with respect to Section 4 thereof, NRC Group
Holdings Corp.
Predecessor US
Ecology
Form 8-K filed 6-24-2019
10.2
Registration Rights Agreement, dated June 23, 2019, by and
among US Ecology, Inc., US Ecology Parent, Inc., JFL-NRC-
SES Partners, LLC, JFL-NRC Holdings III, LLC and JFL-NRC
Holdings IV, LLC
Predecessor US
Ecology
Form 8-K filed 6-24-2019
10.3
Sublease, dated July 27, 2005, between the State of Washington
and US Ecology Washington, Inc.
Predecessor US
Ecology
Form 8-K filed 7-27-2005
10.4
Lease Agreement as amended between American Ecology
Corporation and the State of Nevada
Predecessor US
Ecology
2nd Qtr 2007 Form 10-Q filed
8-7-2007
10.5
*Amended and Restated US Ecology, Inc. 2008 Stock Option
Incentive Plan
US Ecology, Inc.
Form S-8 filed 11-1-2019
10.6
*Amended and Restated US Ecology Inc. Omnibus Incentive
Plan
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.7
*US Ecology, Inc. Nonqualified Deferred Compensation Plan
US Ecology, Inc.
Form S-8 filed 1-7-2020
10.8
*Amended and Restated US Ecology, Inc. 2018 Equity and
Incentive Compensation Plan
US Ecology, Inc.
Form S-8 filed 11-1-2019
10.9
*Form of Performance Stock Unit Award Agreement
Predecessor US
Ecology
1st Qtr 2019 Form 10-Q filed 5-
6-2019
10.10
*Form of Restricted Stock Award Agreement
US Ecology, Inc.
1st Qtr 2021 Form 10-Q filed 5-
3-2021
Table of Contents
129
Exhibit
No.
Description
Company Form+
Incorporated by Reference from
Registrant’s
10.11
*Form of Non-Qualified Stock Option Award Agreement
US Ecology, Inc.
1st Qtr 2021 Form 10-Q filed 5-
3-2021
10.12
*Form of Incentive Stock Option Award Agreement
US Ecology, Inc.
1st Qtr 2021 Form 10-Q filed 5-
3-2021
10.13
*Amended and Restated Executive Employment Agreement,
dated December 22, 2020, between the Company and Jeffrey R.
Feeler
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.14
*Amended and Restated Executive Employment Agreement,
effective December 22, 2020, between the Company and Eric L.
Gerratt
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.15
*Amended and Restated Executive Employment Agreement,
effective December 22, 2020, between the Company and Steven
D. Welling
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.16
*Amended and Restated Executive Employment Agreement,
effective December 22, 2020, between the Company and Simon
G. Bell
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.17
*Form of Indemnification Agreement between US Ecology, Inc.
and each of the Company’s Directors and Officers
Predecessor US
Ecology
Form 8-K filed 11-12-2014
10.18
*Amended and Restated Executive Employment Agreement,
effective December 22, 2020, between the Company and
Andrew P. Marshall
US Ecology, Inc.
2020 Form 10-K filed 3-1-2021
10.19
Credit Agreement, dated April 18, 2017, by and among US
Ecology, Inc., the lenders referred to therein, Wells Fargo
Bank, National Association, as administrative agent, Bank of
America, N.A., as issuing lender, Wells Fargo Securities, LLC
and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint
lead arrangers and joint bookrunners, Bank of America, N.A., as
syndication agent and Bank of Montreal, PNC Bank, National
Association and US Bank National Association, as co-
documentation agents
Predecessor US
Ecology
Form 8-K filed 4-20-2017
10.19
First Amendment, dated as of August 6, 2019, by and among US
Ecology, Inc., certain subsidiary guarantors, each consenting
lender and Wells Fargo Bank, National Association, as lender
and administrative agent, to the Credit Agreement, dated April
18, 2017, by and among US Ecology, Inc., the lenders referred
to therein, Wells Fargo Bank, National Association, as
administrative agent, Bank of America, N.A., as issuing lender,
Wells Fargo Securities, LLC and Merrill Lynch, Pierce, Fenner
& Smith Incorporated, as joint lead arrangers and joint
bookrunners, Bank of America, N.A., as syndication agent and
Bank of Montreal, PNC Bank, National Association and US
Bank National Association, as co-documentation agents
Predecessor US
Ecology
Form 8-K filed 8-9-2019
Table of Contents
130
Exhibit
No.
Description
Company Form+
Incorporated by Reference from
Registrant’s
10.20
Second Amendment, dated as of November 1, 2019, by and
among US Ecology Holdings, Inc., certain subsidiary
guarantors, each consenting lender and Wells Fargo Bank,
National Association, as lender and administrative agent to the
Credit Agreement, dated April 18, 2017, by and among US
Ecology, Inc., the lenders referred to therein, Wells Fargo Bank,
National Association, as administrative agent, Bank of America,
N.A., as issuing lender, Wells Fargo Securities, LLC and Merrill
Lynch, Pierce, Fenner & Smith Incorporated, as joint lead
arrangers and joint bookrunners, Bank of America, N.A., as
syndication agent and Bank of Montreal, PNC Bank, National
Association and US Bank National Association, as co-
documentation agents
US Ecology, Inc.
Form 8-K filed 11-1-2019
10.21
Third Amendment, dated as of June 26, 2020, by and among US
Ecology Holdings, Inc., US Ecology, Inc., certain subsidiary
guarantors, each consenting lender and Wells Fargo Bank,
National Association, as lender and administrative agent
US Ecology, Inc.
Form 8-K filed 6-29-2020
10.22
Fourth Amendment, dated as of June 29, 2021, by and among
US Ecology Holdings, Inc., certain affiliate guarantors, each
consenting lender and Wells Fargo Bank, National Association,
as issuing lender, swingline lender and administrative agent
US Ecology, Inc.
Form 8-K filed 7-21-2021
10.23
*US Ecology, Inc. 2021 Management Incentive Plan
US Ecology, Inc.
1st Qtr 2021 Form 10-Q filed 5-
3-2021
10.24
*Amendment 1 to the Amended and Restated US Ecology, Inc.
Omnibus Incentive Plan
US Ecology, Inc.
Form 8-K filed 6-1-2021
21
List of Subsidiaries
US Ecology, Inc.
23.1
Consent of Deloitte and Touche LLP
US Ecology, Inc.
31.1
Certifications of December 31, 2021 Form 10-K by Chief
Executive Officer, dated February 28, 2022
US Ecology, Inc.
31.2
Certifications of December 31, 2021 Form 10-K by Chief
Financial Officer, dated February 28, 2022
US Ecology, Inc.
Table of Contents
131
Exhibit
No.
Description
Company Form+
Incorporated by Reference from
Registrant’s
32.1
Certifications of December 31, 2021 Form 10-K by Chief
Executive Officer, dated February 28, 2022
US Ecology, Inc.
32.2
Certifications of December 31, 2021 Form 10-K by Chief
Financial Officer, dated February 28, 2022
US Ecology, Inc.
101
The following materials from the Annual Report on Form 10-K
of US Ecology, Inc. for the fiscal year ended December 31, 2021
formatted in Extensible Business Reporting Language (Inline
XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated
Statements of Operations, (iii) Consolidated Statements of
Comprehensive Income, (iv) Consolidated Statements of Cash
Flows, (v) Consolidated Statements of Stockholders’ Equity, and
(vi) Notes to the Consolidated Financial Statements
US Ecology, Inc.
104
The cover page from the Company’s Annual Report on Form
10-K for the year ended December 31, 2021, formatted in Inline
XBRL
US Ecology, Inc.
+
Company Forms include filings by US Ecology, Inc. and US Ecology Holdings, Inc. (f/k/a US Ecology, Inc.) (“Predecessor
US Ecology”).
*
Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.
Table of Contents
132
Signatures
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 its behalf by the undersigned, thereunto duly authorized.
US ECOLOGY, INC.
By:
/s/ ERIC L. GERRATT
Eric L. Gerratt
Executive Vice President, Chief Financial Officer and
Treasurer
Date: February 28, 2022
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated as of February 28, 2022.
/s/ JEFFREY R. FEELER
/s/ ERIC L. GERRATT
Jeffrey R. Feeler
Eric L. Gerratt
(Director) President and Chief Executive Officer
Executive Vice President, Chief Financial Officer and
Treasurer (Principal Financial Officer and Principal
Accounting Officer)
/s/ SIMON G. BELL
/s/ STEVEN D. WELLING
Simon G. Bell
Steven D. Welling
Executive Vice President and Chief Operating Officer
Executive Vice President of Sales and Marketing
/s/ ANDREW P. MARSHALL
/s/ RONALD C. KEATING
Andrew P. Marshall
Ronald C. Keating
Executive Vice President of Regulatory Compliance & Safety
(Director)
/s/ RICHARD BURKE
/s/ RENAE CONLEY
Richard Burke
Renae Conley
(Director)
(Director)
/s/ DANIEL FOX
/s/ KATINA DORTON
Daniel Fox
Katina Dorton
(Director)
(Director)
/s/ JOHN T. SAHLBERG
/s/ GLENN A. EISENBERG
John Sahlberg
Glenn A. Eisenberg
(Director)
(Director)
/s/ MELANIE STEINER
/s/ MACK L. HOGANS
Melanie Steiner
Mack L. Hogans
(Director)
(Director)
Exhibit 4.2
DESCRIPTION OF THE COMPANY’S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED
As of December 31, 2021, US Ecology, Inc. (“we,” “our,” the “Company”) has two classes of securities registered under Section 12 of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (1) common stock of the Company and (2) warrants to acquire shares of
our common stock. The following description is a general summary of the terms of the shares of our common stock and warrants. The
description below does not include all of the terms of the shares of our common stock and warrants and should be read together with our
Amended and Restated Certificate of Incorporation, as amended from time to time (the “Amended Charter”), and our Amended and Restated
Bylaws, as amended from time to time (the “Amended Bylaws”), each of which are incorporated by reference as an exhibit to this Annual
Report on Form 10-K.
Common Stock
General
Under the Amended Charter, we have the authority to issue 75,000,000 shares of common stock, par value $0.01 per share. Each share
of our common stock has the same relative rights and is identical in all respects to each other share of our common stock. The rights,
preferences and privileges of our holders of common stock are subject to the rights, preferences and privileges of the holders of shares of any
series of preferred stock that we have issued or may issue in the future.
Voting Rights
The holders of our common stock are entitled to one vote per share on any matter to be voted upon by our stockholders; provided,
however, that our Amended Charter entitles holders of shares of our common stock have cumulative voting in connection with the election of
directors, which means that holders are entitled to as many votes as shall equal the number of votes which (except for this provision on
cumulative voting) such holder is entitled to cast for the election of directors with respect to such holder’s shares of stock multiplied by the
number of directors to be elected by such holder, and such holder may cast all of such votes for a single director or may distribute them among
the number to be voted for, or for any two or more of them as such holder may see fit.
Dividends
The holders of our common stock are entitled to receive dividends, if any, when, as and if declared by our board of directors out of
funds legally available for payment.
Liquidation Rights
In the event of any liquidation, dissolution or winding up of the affairs of the Company, whether voluntary or involuntary, the holders
of shares of our common stock are entitled to share ratably in all assets remaining after the payment of creditors.
Preemptive Rights
Holders of our common stock will not have preemptive, conversion, redemption or sinking fund rights.
Transfer Restrictions
Our Amended Charter contains transfer restrictions to ensure compliance with the U.S. citizen ownership requirements of the U.S.
coastwise trade laws, which are principally contained in 46 U.S.C. Chapters 121, 505 and 551 and the related regulations (collectively, the
“Jones Act”), as described below under the heading “Restrictions on US Ecology Stock Ownership and Purchase of Capital Stock by Non-U.S.
citizens under our Amended Charter.”
Nasdaq Listing
Our common stock is listed on the Nasdaq Global Select Market System (“Nasdaq”) under the symbol “ECOL.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer and Trust Company, LLC and its address and
telephone number are 6201 15th Avenue, Brooklyn, NY 11219 and (800) 937-5449, respectively.
Delaware Law and Certain Amended Charter and Amended Bylaws Provisions
The provisions of Delaware law and of our Amended Charter and Amended Bylaws discussed below could discourage or make it more
difficult to acquire control of the Company by means of a tender offer, open market purchases, a proxy contest or otherwise. Our board of
directors believes that these charter provisions are appropriate to protect our interests and the interests of our stockholders. A summary of these
provisions is set forth below. This summary does not purport to be complete and is qualified in its entirety by reference to the Delaware General
Corporation Law (the “DGCL”), our Amended Charter and our Amended Bylaws.
Section 203 of the Delaware General Corporation Law
We are subject to the provisions of Section 203 of the DGCL. Section 203 prohibits a publicly held Delaware corporation from
engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the
person became an interested stockholder, unless the business combination is approved in a prescribed manner. A “business combination”
includes mergers, asset sales and other transactions resulting in a financial benefit to the interested stockholder. Subject to specified exceptions,
an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years did own, 15% or more of the
corporation’s voting stock.
Stockholders Rights Plan Policy
Stockholder rights plans can protect stockholders against abusive takeover tactics and ensure that each stockholder is treated fairly in
an acquisition. Such plans have been effective in connection with bids for control of other companies in giving boards of directors’ time to
evaluate offers, investigate alternatives and take steps necessary to maximize value to stockholders. In lieu of adopting a stockholder rights plan,
our board of directors has instead adopted a policy with respect to the adoption of any stockholder rights plan for us in the future. Our policy,
adopted in July 2012, is that we will adopt a stockholder rights plan only if, in the exercise of their fiduciary duties, a majority of the
independent directors conclude that it would be in our best interests and those of the holders of the majority of the shares of our common stock.
Our board believes that this policy addresses the legitimate concerns that stockholders have with the use of stockholder rights plans while
maintaining its ability to act in the stockholders’ best interests and preserving our flexibility to react to unanticipated situations which may arise
without notice.
Number of Directors; Removal; Filling Vacancies
Our Amended Bylaws provide that our board of directors will consist of not less than five and not more than twelve directors, the exact
number to be fixed from time to time by resolution adopted by our directors. Further, subject to the rights of the holders of any series of our
preferred stock, if any, our Amended Bylaws authorize our board of directors to elect additional directors under specified circumstances and fill
any vacancies that occur in our board by reason of death, resignation, removal, or otherwise. A director so elected by our board to fill a vacancy
or a newly created directorship holds office until the next election and until his successor is elected and qualified. Subject to the rights of the
holders of any series of our preferred stock, if any, our Amended Bylaws also provide that directors may be removed with or without cause by
the affirmative vote of holders of a majority of the combined voting power of the then outstanding stock of the Company.
Indemnification
We have included in our Amended Charter and Amended Bylaws provisions to eliminate the personal liability of our directors for
monetary damages resulting from breaches of their fiduciary duty to the extent permitted by the DGCL, and to indemnify our directors and
officers to the fullest extent permitted by Section 145 of the DGCL, including circumstances in which indemnification is otherwise
discretionary. These provisions may have the effect of reducing the likelihood of derivative litigation against our directors and may discourage
or deter stockholders or management from bringing a lawsuit against our directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefited the Company and our stockholders. We believe that these provisions are necessary to attract and
retain qualified persons as directors and officers.
Advance Notice Provision
The Amended Bylaws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of the
Company’s stockholders, including proposed nominations of persons for election to our board of directors. Stockholders at an annual meeting
will only be able to consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of
the board of directors or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the
meeting and who has given the Company timely written notice to the corporate secretary in proper form and consistent with the notice
requirements set forth in the Amended Bylaws. Such notice requirements include, but are not limited to, the stockholder nominee’s name and
address, the class and amount of stock beneficially owned by the stockholder nominee and disclosure of any material agreements or litigation
between the Company and stockholder nominee.
Restrictions on our Stock Ownership and Purchase of Capital Stock by Non-U.S. citizens under our Amended Charter
Certain of our operations are conducted in the U.S. coastwise trade and are governed by the Jones Act, which is principally contained
in 46 U.S.C. Chapters 121, 505 and 551 and the related regulations. The Jones Act restricts the transportation of merchandise and passengers for
hire by water or by land and water, either directly or via a foreign port between points in the United States and certain of its island territories
and possessions, to U.S.-flag vessels that meet certain requirements, including that they are built in the United States, owned and controlled by
U.S. citizens (within the meaning of the Jones Act), and manned by predominantly U.S. citizen crews. Should the Company fail to satisfy the
requirements of the Jones Act to be a U.S. citizen, the Company would be prohibited from operating its vessels in the U.S. coastwise trade
during the period of such non-compliance. In addition, the Company could be subject to substantial fines and its vessels could be subject to
seizure and forfeiture for violations of the Jones Act.
The following is a summary of the restrictions (the “Maritime Restrictions”) in Article Eighth of the Amended Charter. This summary
is qualified in its entirety by reference to the full text of the Amended Charter.
General Restriction on Ownership of Shares by non-U.S. citizens
In order to protect the Company’s eligibility as a U.S. citizen, the Amended Charter restricts the record or beneficial ownership or
control of shares of each class or series of our capital stock, which includes common stock, by non-U.S. citizens to no more than 24% in the
aggregate of the total issued and outstanding shares of such class or series. The Company refers to such percentage restriction on ownership by
non-U.S. citizens of any class or series of shares of the Company’s capital stock as the “Permitted Percentage” and any such shares owned by
non-U.S. citizens in excess of the Permitted Percentage as “Excess Shares.” The Amended Charter provides that a person will not be deemed to
be the beneficial owner of shares of our capital stock, if our board of directors determines that such person is not the beneficial owner of such
shares for the purposes of the Jones Act. All references to beneficial ownership of shares and the derivative phrases thereof in this summary of
the Maritime Restrictions include record ownership of shares and the ability to control shares.
Restriction on Transfers of Excess Shares
The Maritime Restrictions provide that no shares of any class or series of the capital stock of the Company may be transferred to a
non-U.S. citizen or a holder of record that will hold such shares for or on behalf of a non-U.S. citizen if, upon completion of such transfer, the
number of shares of such class or series beneficially owned by all non-U.S. citizens in the aggregate would exceed the Permitted Percentage for
such class or series. Any transfer or purported transfer of beneficial ownership of any shares of any class or series of capital stock of the
Company, the effect of which would be to cause one or more non-U.S. citizens in the aggregate to beneficially own shares of any class or series
of capital stock of the Company in excess of the Permitted Percentage for such class or series, shall, to the fullest extent permitted by law, be
void ab initio and ineffective, and, to the extent that the Company or its transfer agent (if any) knows that such transfer or purported transfer
would, if completed, be in violation of the restrictions on transfers to non-U.S. citizens set forth in the Maritime Restrictions, neither the
Company nor its transfer agent (if any) shall register such transfer or purported transfer on the stock transfer records of the Company and
neither the Company nor its transfer agent (if any) shall recognize the transferee or purported transferee thereof as a stockholder of the
Company for any purpose whatsoever (including for purposes of voting, dividends and other distributions) except to the extent necessary to
effect any remedy available to the Company under the Maritime Restrictions. In no event shall any such registration or recognition make such
transfer or purported transfer effective unless our board of directors (or any duly authorized committee thereof, or any officer of the Company
who shall have been duly authorized by our board of directors or any such committee thereof) shall have expressly and specifically authorized
the same.
In connection with any purported transfer of shares of any class or series of the capital stock of the Company, any transferee or
proposed transferee of shares and, if such transferee or proposed transferee is acting as a fiduciary or nominee for a beneficial owner, such
beneficial owner, may be required by the Company or its transfer agent to deliver (1) certification (which may include as part
thereof a form of affidavit) upon which the Company and its transfer agent shall be entitled to rely conclusively stating whether such transferee
or proposed or purported transferee
or, if such transferee or proposed transferee is acting as custodian, nominee, purchaser representative or in any other capacity for a beneficial
owner, whether such beneficial owner, is a U.S. citizen, and (2) such other documentation and information concerning its citizenship under the
Maritime Restrictions as the Company may request in its sole discretion. Registration and recognition of any transfer of shares may be denied
by the Company upon refusal to furnish any of the foregoing citizenship certifications, documentation or information requested by the
Company. Each proposed transferor of such shares shall reasonably cooperate with any requests from the Company to facilitate the transmission
of requests for such citizenship certifications and such other documentation and information to the proposed transferee and such proposed
transferee’s responses thereto.
Notwithstanding any of the Maritime Restrictions, the Company shall be entitled to rely, without limitation, on the stock transfer and
other stockholder records of the Company (and its transfer agent) for the purposes of preparing lists of stockholders entitled to vote at meetings,
determining the validity and authority of proxies, and otherwise conducting votes of stockholders.
Excess Shares
If on any date, including, without limitation, any record date (each, an “Excess Share Date”), the number of shares of any class or
series of capital stock of the Company beneficially owned by all non-U.S. citizens in the aggregate should exceed the Permitted Percentage with
respect to such class or series of capital stock, irrespective of the date on which such event becomes known to the Company (such shares in
excess of the Permitted Percentage, the “Excess Shares”), then the shares of such class or series of capital stock of the Company that constitute
Excess Shares for purposes of the Maritime Restrictions shall be (1) those shares that have been acquired by or become beneficially owned by
non-U.S. citizens, starting with the most recent acquisition of beneficial ownership of such shares by a non-U.S. citizen and including, in
reverse chronological order of acquisition, all other acquisitions of beneficial ownership of such shares by non-U.S. citizens from and after the
acquisition of beneficial ownership of such shares by a non-U.S. citizen that first caused such Permitted Percentage to be exceeded, or (2) those
shares beneficially owned by non-U.S. citizens that exceed the Permitted Percentage as the result of any repurchase or redemption by the
Company of shares of its capital stock, starting with the most recent acquisition of beneficial ownership of such shares by a non-U.S. citizen and
going in reverse chronological order of acquisition; provided, however, that: (a) the Company shall have the power to determine, in its sole
discretion, those shares of such class or series that constitute Excess Shares in accordance with the provisions of the Maritime Restrictions; (b)
the Company may, in its sole discretion, rely on any documentation provided by non-U.S. citizens with respect to the date and time of their
acquisition of beneficial ownership of Excess Shares; (c) if the acquisition of beneficial ownership of more than one Excess Share occurs on the
same date and the time of acquisition is not definitively established, then the order in which such acquisitions shall be deemed to have occurred
on such date shall be determined by lot or by such other method as the Company may, in its sole discretion, deem appropriate; (d) Excess
Shares that result from a determination that a beneficial owner has ceased to be a U.S. citizen shall be deemed to have been acquired, for
purposes of the Maritime Restrictions, as of the date that such beneficial owner ceased to be a U.S. citizen; and (e) the Company may adjust
upward to the nearest whole share the number of shares of such class or series deemed to be Excess Shares. Any determination made by the
Company pursuant to the Maritime Restrictions as to which shares of any class or series of the Company’s capital stock constitute Excess
Shares of such class or series shall be conclusive and shall be deemed effective as of the applicable Excess Share Date for such class or series.
Redemption of Excess Shares
To the extent that the above ownership and transfer restrictions would be ineffective for any reason, the Maritime Restrictions provide
that, to prevent the percentage of aggregate shares of any class or series of the Company’s capital stock owned by non-U.S. citizens from
exceeding the Permitted Percentage, the Company, by action of our board of directors (or any duly authorized committee thereof), in its sole
discretion, will have the power (but not the obligation) to redeem all or any number of such Excess Shares, unless such redemption is not
permitted under applicable law.
Until such Excess Shares are redeemed or they are no longer Excess Shares, the holders of such shares will not be entitled to any
voting rights with respect to such shares and the Company will pay any dividends or distributions with respect to such shares into a segregated
account. Full voting, distribution and dividend rights will be restored to
such Excess Shares (and any dividends or distributions paid into a segregated account will be paid to holders of record of such shares), promptly
after the time and to the extent that such shares have ceased to be Excess Shares, unless such shares have already been redeemed by the
Company.
If our board of directors (or any duly authorized committee thereof) determines to redeem Excess Shares, the per share redemption
price (the “Redemption Price”) for each Excess Share shall be paid by the issuance of one Redemption Warrant (as defined below) for each
Excess Share; provided, however, that if (1) the Company determines that a Redemption Warrant would be treated as capital stock under the
Jones Act or (2) the Company is prevented from legally issuing Redemption Warrants under applicable law, then the Redemption Price shall be
paid, as determined by our board of directors (or any duly authorized committee thereof) in its sole discretion, (a) in cash (by wire transfer or
bank or cashier’s check), (b) by the issuance of Redemption Notes (as defined below), (c) by any combination of cash and Redemption Notes,
or (d) by any other means authorized or permitted under the DGCL.
·
“Redemption Warrants” means the warrants issued pursuant to that certain Assignment, Assumption and Amendment to the
Warrant Agreement, dated November 1, 2019, among the Company, American Stock Transfer & Trust Company, LLC, NRC
Group Holdings Corp. and Continental Stock Transfer and Trust Company (the “Warrant Agreement”), with respect to the
warrants entitling the holders thereof to purchase shares of our common stock with an exercise price per warrant equal to
$0.01 per share of our common stock. A holder of Redemption Warrants (or its proposed or purported transferee) who cannot
establish to the satisfaction of the Company that it is a U.S. citizen shall not be permitted to exercise its Redemption Warrants
if the shares issuable upon exercise would constitute Excess Shares if they were issued. Redemption Warrants shall not entitle
the holder to have any rights or privileges of stockholders of the Company solely by virtue of such Redemption Warrants,
including, without limitation, any rights to vote, to receive dividends or distributions, to exercise any preemptive rights, or to
receive notices, in each case, as stockholders of the Company, until they exercise their Redemption Warrants and receive
shares of our common stock.
·
“Redemption Notes” means interest-bearing promissory notes of the Company with a maturity of not more than ten years
from the date of issue and bearing interest at a fixed rate equal to the yield on the U.S. Treasury Note having a maturity
comparable to the term of such Redemption Notes as published in The Wall Street Journal or comparable publication at the
time of the issuance of the Redemption Notes. Such notes shall be governed by the terms of an indenture to be entered into by
and between the Company and a trustee, as may be amended from time to time. Redemption Notes shall be redeemable at par
plus accrued but unpaid interest.
With respect to the portion of the Redemption Price being paid in whole or in part by cash and/or by the issuance of Redemption
Notes, such portion of the Redemption Price shall be an amount equal to, in the case of cash, or a principal amount equal to, in the case of
Redemption Notes, the sum of (1) the fair market value of such Excess Share as of the date of redemption of such Excess Share plus (2) an
amount equal to the amount of any dividend or any other distribution (upon liquidation or otherwise) declared in respect of such Excess Share
prior to the date on which such Excess Share is called for redemption and which amount has been paid into a segregated account by the
Company.
Written notice of the redemption of the Excess Shares containing the information set forth in the Maritime Restrictions, together with a
letter of transmittal to accompany certificates, if any, representing the Excess Shares that have been called for redemption, shall be given either
by hand delivery or by overnight courier service or by first-class mail, postage prepaid, to each holder of record of the Excess Shares to be
redeemed, at such holder’s last known address as the same appears on the stock register of the Company (the “Redemption Notice”), unless
such notice is waived in writing by any such holders.
The date on which the Excess Shares shall be redeemed (the “Redemption Date”) shall be the later of (1) the date specified in the
Redemption Notice sent to the record holder of the Excess Shares (which shall not be earlier than the date of such notice), and (2) the date on
which the Company has irrevocably deposited in trust with a paying agent
or set aside for the benefit of such record holder consideration sufficient to pay the Redemption Price to such record holders of such Excess
Shares in Redemption Warrants, cash and/or Redemption Notes.
Each Redemption Notice to each holder of record of the Excess Shares to be redeemed shall specify (1) the Redemption Date (as
determined pursuant to the Maritime Restrictions), (2) the number and the class or series of shares of capital stock to be redeemed from such
holder as Excess Shares (and, to the extent such Excess Shares are certificated, the certificate number(s) representing such Excess Shares), (3)
the Redemption Price and the manner of payment thereof, (4) the place where certificates for such Excess Shares (if such Excess Shares are
certificated) are to be surrendered for cancellation, (5) any instructions as to the endorsement or assignment for transfer of such certificates (if
any) and the completion of the accompanying letter of transmittal, and (6) the fact that all right, title and interest in respect of the Excess Shares
to be redeemed (including, without limitation, voting, dividend and distribution rights) shall cease and terminate on the Redemption Date,
except for the right to receive the Redemption Price, without interest.
On and after the Redemption Date, all right, title and interest in respect of the Excess Shares selected for redemption (including,
without limitation, voting and dividend and distribution rights) shall forthwith cease and terminate, such Excess Shares shall no longer be
deemed to be outstanding shares for any purpose, including, without limitation, for purposes of voting or determining the total number of shares
entitled to vote on any matter properly brought before the stockholders for a vote thereon or receiving any dividends or distributions (and may
be either cancelled or held by the Company as treasury stock), and the holders of record of such Excess Shares shall thereafter be entitled only
to receive the Redemption Price, without interest.
Upon surrender of the certificates (if any) for any Excess Shares so redeemed in accordance with the requirements of the Redemption
Notice and the accompanying letter of transmittal (and otherwise in proper form for transfer as specified in the Redemption Notice), the holder
of record of such Excess Shares shall be entitled to payment of the Redemption Price. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate (or certificates), to the extent such shares were certificated, shall be issued representing the shares not
redeemed, without cost to the holder of record. On the Redemption Date, to the extent that dividends or other distributions (upon liquidation or
otherwise) with respect to the Excess Shares selected for redemption were paid into a segregated account, then, to the fullest extent permitted by
applicable law, such amounts shall be released to the Company upon the completion of such redemption.
Nothing in the Maritime Restrictions will prevent the recipient of a Redemption Notice from transferring its shares before the
Redemption Date if such transfer is otherwise permitted under the Maritime Restrictions and applicable law and the recipient provides notice of
such proposed transfer to the Company along with the documentation and information required under the Maritime Restrictions establishing
that such proposed transferee is a U.S. citizen to the satisfaction of the Company in its sole discretion before the Redemption Date. If such
conditions are met, our board of directors (or any duly authorized committee thereof) will withdraw the Redemption Notice related to such
shares, but otherwise the redemption thereof will proceed on the Redemption Date in accordance with the Maritime Restrictions and the
Redemption Notice.
Permitted Actions by the Company to Enforce the Maritime Restrictions
The Company has the power to determine the citizenship of the beneficial owners and the transferees or proposed transferees (and, if
such transferees or proposed transferees are acting as fiduciaries or nominees for any beneficial owners, the citizenship of such beneficial
owners) of any class or series of the Company’s capital stock and to require confirmation from time to time of the citizenship of the beneficial
owners of any shares of its capital stock. As a condition to acquiring and having beneficial ownership of any shares of its capital stock, every
beneficial owner of the Company’s shares must comply with certain provisions in the Maritime Restrictions concerning citizenship, which are
summarized below. The Company has the right under the Maritime Restrictions to require additional reasonable proof of the citizenship of
beneficial owners, transferees or proposed transferees (and any beneficial owners for whom such transferees or proposed transferees are acting
as fiduciaries or nominees) of any shares of its capital stock, and the determination of the Company at any time as to the citizenship of such
persons is conclusive.
The Maritime Restrictions require that promptly upon a beneficial owner’s acquisition of beneficial ownership of 5% or more of the
outstanding shares of any class or series of capital stock of the Company, and at such other times as the Company may determine by written
notice to such beneficial owner, such beneficial owner must provide to the Company a written statement or an affidavit, as specified by the
Company, stating the name and address of such beneficial owner, the number of shares of each class or series of capital stock of the Company
beneficially owned by such beneficial owner as of a recent date, the legal structure of such beneficial owner, a statement as to whether such
beneficial owner is a U.S. citizen, and such other information and documents required by the U.S. Coast Guard or the U.S. Maritime
Administration under the Jones Act, including 46 C.F.R. part 355. In addition, under the Maritime Restrictions, a beneficial owner is required to
provide such a written statement or affidavit when the Company determines, in its sole discretion, that the citizenship status of such beneficial
owner may have changed or that it is necessary under the Jones Act for the Company to confirm the Company’s citizenship status.
Under the Maritime Restrictions, when a beneficial owner of any shares of the Company’s capital stock ceases to be a U.S. citizen,
such beneficial owner is required to provide to the Company, as promptly as practicable but in no event less than five business days after the
date such beneficial owner becomes aware that it is no longer a U.S. citizen, a written statement, stating the name and address of such beneficial
owner, the number of shares of each class or series of its capital stock beneficially owned by such beneficial owner as of a recent date, the legal
structure of such beneficial owner, and a statement as to such change in status of such beneficial owner to a non-U.S. citizen.
The Maritime Restrictions require that, promptly after becoming a beneficial owner, every beneficial owner must provide, or authorize
such beneficial owner’s broker, dealer, custodian, depositary, nominee or similar agent with respect to the shares of each class or series of the
Company’s capital stock beneficially owned by such beneficial owner to provide, to the Company such beneficial owner’s address. A beneficial
owner of the Company’s capital stock is also required by the Maritime Restrictions to provide promptly upon request the Company with a
written statement or an affidavit, as specified by the Company, stating the name and address of such beneficial owner, together with reasonable
documentation of the date and time of such beneficial owner’s acquisition of beneficial ownership of the shares of any class or series of capital
stock of the Company specified by the Company in its request.
In the event that the Company requests the documentation described above and a beneficial owner fails to provide it by the specified
date, the Maritime Restrictions provide for the suspension of the voting rights of such beneficial owner’s shares of the Company’s capital stock
and for the payment of dividends and distributions (upon liquidation or otherwise) with respect to those shares into a segregated account until
the requested documentation is submitted in form and substance reasonably satisfactory to the Company (subject to the other Maritime
Restrictions). In addition, the Company, upon approval by our board of directors (or any duly authorized committee thereof) in its sole
discretion, has the power to treat such beneficial owner as a non-U.S. citizen unless and until the Company receives the requested
documentation confirming that such beneficial owner is a U.S. citizen.
In the event that the Company requests a transferee or proposed transferee (and, if such transferee or proposed transferee is acting as a
fiduciary or nominee for a beneficial owner, such beneficial owner) of, shares of any class or series of the Company’s capital stock to provide
the documentation described above, and such person fails to submit it in form and substance reasonably satisfactory to the Company by the
specified date, the Company, acting through our board of directors (or any duly authorized committee thereof, or any officer of the Company
who shall have been duly authorized by our board of directors or any such committee thereof), will have the power, in its sole discretion, to
refuse to accept any application to transfer ownership of such shares (if any) or to register such shares on the stock transfer records of the
Company and may prohibit and/or void such transfer, including by placing a stop order with the Company’s transfer agent, until such requested
documentation is submitted and the Company is satisfied that the proposed transfer of shares will not result in Excess Shares.
Certificates representing shares of any class or series of the Company’s capital stock will bear legends concerning the Maritime
Restrictions. Within a reasonable time after the issuance or transfer of uncertificated shares of the Company’s capital stock, the Company will
give notice, in writing or by electronic transmission, of the Maritime Restrictions.
Maritime Restrictions Severable
The Maritime Restrictions are intended to be severable. If any one or more of the Maritime Restrictions is held to be invalid, illegal or
unenforceable, the Amended Charter provides that the validity, legality or enforceability of any other provision will not be affected.
Summary of Requirements to be a U.S. citizen
The following is a summary of the requirements to be a U.S. citizen within the meaning of the Jones Act. Each holder and potential
purchaser of our stock should consult its own counsel as to whether it is a U.S. citizen or a non-U.S. citizen before purchasing our stock. The
Jones Act specifies that ownership of at least 75% of the equity interest by U.S. citizens means ownership free from any trust or fiduciary
obligations in favor of, or any agreement, arrangement or understanding or other means by which more than 25% of the voting power or control
of the corporation may be exercised directly or indirectly by or on behalf of, non-U.S. citizens. In addition, these citizenship requirements apply
at each tier in the Company’s ownership chain, which means that they must be satisfied by each person that contributes to the Company’s
eligibility as a U.S. citizen, and each person that contributes to the eligibility of such other person as a U.S. citizen at each tier of ownership. For
entities of a kind not described below, citizenship requirements may vary.
·
A natural person is a U.S. citizen if he or she was born in the United States, born abroad to U.S. citizen parents, naturalized,
naturalized during minority through the naturalization of a parent, or as otherwise authorized by law.
·
A partnership is deemed a U.S. citizen if such holder is (1) organized under the laws of the United States or a state, (2) each
general partner is a U.S. citizen, and (3) at least 75% of the ownership and voting power of each class or series of the
partnership interests is owned and controlled by U.S. citizens.
·
A member-managed limited liability company is deemed a U.S. citizen if such holder is (1) organized under the laws of the
United States or a state, (2) each member of the limited liability company is a U.S. citizen, and (3) at least 75% of the
ownership and voting power of each class or series of the limited liability company interests is owned and controlled by U.S.
citizens.
·
A manager-managed limited liability company is deemed a U.S. citizen if such holder is (1) organized under the laws of the
United States or a state, (2) each manager is a U.S. citizen within the meaning of the Jones Act, (3) the chief executive
officer, by whatever title, and the chairman of the board of directors (or equivalent body) of the limited liability company are
U.S. citizens, (4) not more than a minority of the number of the directors (or equivalent office) necessary to constitute a
quorum of the board of directors (or equivalent body) of the limited liability company are non-U.S. citizens, and (5) at least
75% of the ownership and voting power of each class or series of the limited liability company interests is owned and
controlled by U.S. citizens.
·
A corporation is deemed a U.S. citizen if such holder is (1) organized under the laws of the United States or a state, (2) the
chief executive officer, by whatever title, and the chairman of the board of directors of the corporation are U.S. citizens, (3)
not more than a minority of the number of the directors necessary to constitute a quorum of the board of directors of the
corporation are non-U.S. citizens, and (4) at least 75% of the ownership and voting power of each class or series of the
corporation’s stock is owned and controlled by U.S. citizens.
·
A trust is deemed to be a U.S. citizen if it (1) is organized under the laws of the United States or a state, (2) each trustee is a
U.S. citizen, (3) each beneficiary with an enforceable interest in the trust is a U.S. citizen, and (4) at least 75% of the equity
interest in the trust is owned and controlled by U.S. citizens.
If the Company should fail to comply with the above described ownership requirements, the Company’s vessels could lose their ability
to engage in U.S. coastwise trade. To assist the Company with compliance with these requirements, the Amended Charter:
·
limits ownership by non-U.S. citizens of any class or series of our capital stock (including our common stock) to 24%;
·
permits the Company to withhold dividends and suspend voting rights with respect to any shares held by non-U.S. citizens
above 24%;
·
permits the Company to establish and maintain a dual share system under which different forms of certificates (in the case of
certificated shares) and different book entries (in the case of uncertificated shares) are used to reflect whether the owner is or
is not a U.S. citizen;
·
permits the Company to redeem any shares held by non-U.S. citizens so that the Company’s non-U.S. citizen ownership is no
greater than 24%; and
·
permits the Company to take measures to ascertain ownership of our stock.
All potential investors will be required to certify to the Company if it is a U.S. citizen before investing in our common stock. If you or
a proposed transferee cannot or do not make such certification, or a sale of stock to you or a transfer of your stock would result in the ownership
by non-U.S. citizens of 24% or more of our common stock, such person may not be allowed to purchase or transfer our common stock, or such
purchase or transfer may be reversed or the shares so purchased or transferred may be redeemed under the Amended Charter. All certificates
representing the shares of our common stock will bear legends referring to the foregoing restrictions. Within a reasonable time after the issuance
or transfer of uncertificated shares of our capital stock, the Company will give notice, in writing or by electronic transmission, of the Maritime
Restrictions.
Exclusive Forum
The Amended Bylaws provide that: (i) unless the Company consents in writing to the selection of an alternative forum, the Court of
Chancery of the State of Delaware (or, if such court does not have subject matter jurisdiction thereof, the federal district court of the State of
Delaware) and any appellate court therefrom shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (a) any derivative
action or proceeding brought on behalf of the Company, (b) any action asserting a claim for or based on a breach of a fiduciary duty owed by
any of the Company’s current or former directors, officers, other employees, agents or stockholders to the Company or the Company’s
stockholders, including without limitation a claim alleging the aiding and abetting of such a breach of fiduciary duty, (c) any action asserting a
claim against the Company or any of the Company’s current or former directors, officers, employees, agents or stockholders arising pursuant to
any provision of the DGCL or the Company’s Amended Charter or Amended Bylaws or as to which the DGCL confers jurisdiction on the Court
of Chancery of the State of Delaware, or (d) any action asserting a claim related to or involving the Company that is governed by the internal
affairs doctrine; (ii) unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United
States will, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action
arising under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder; (iii) any
person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company will be deemed to have
notice of and consented to these provisions; and (iv) failure to enforce the foregoing provisions would cause the Company irreparable harm, and
the Company will be entitled to equitable relief, including injunctive relief and specific performance, to enforce the foregoing provisions.
Warrants to Purchase Common Stock
Each warrant entitles the registered holder thereof to purchase our common stock for $58.67 per share, subject to adjustment as
discussed below, at any time. Warrants are exercisable only for a whole number of shares of our common stock. No fractional shares will be
issued upon exercise of the warrants. The warrants expire upon October 17, 2023, or earlier upon redemption or liquidation. The warrants are
listed on Nasdaq Capital Market under the symbol “ECOLW.”
The Company is not obligated to deliver any shares of common stock pursuant to the exercise of a warrant and has no obligation to
settle a warrant exercise unless a registration statement under the Securities Act with respect to the common stock underlying the warrants is
then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations described below with respect to
registration. No warrants is exercisable for cash or on a cashless basis, and the Company is not obligated to issue any common stock to holders
seeking to exercise their warrants, unless the issuance of the common stock upon such exercise is registered or qualified under the securities
laws of the state of the exercising holder, unless an exemption is available. In the event that the conditions in the two immediately preceding
sentences are not satisfied with respect to a warrant, the holder of such warrant will not be entitled to exercise such warrant and such warrant
may have no value and expire worthless.
In no event is the Company required to issue cash, securities or other compensation in exchange for the warrant in the event that the
Company is unable to register or qualify the shares underlying the warrant under the Securities Act or applicable state securities laws. If the
issuance of the shares upon exercise of the warrant is not so registered or qualified, the holder of such warrant shall not be entitled to exercise
such warrant and such warrant may have no value and expire worthless. In such event, holders who acquired their warrants as part of a purchase
of units will have paid the full unit purchase price solely for the shares of common stock included in the units.
Notwithstanding the above, if common stock is at the time of any exercise of a warrant not listed on a national securities exchange
such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require
holders of warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in
the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement or register or qualify the
shares under blue sky laws.
Once the warrants become exercisable, the Company may call the warrants for redemption:
·
in whole and not in part;
·
at a price of $0.01 per warrant, provided that the last sales price of common stock reported has been at least $91.84 per share
on each of 20 days within the 30 trading-day period ending on the business day prior to the date on which notice of the
redemption is given (the “Redemption Trigger Price”) and provided that there is an effective registration statement covering
the shares of common stock issuable on exercise of the warrants and subject to the satisfaction of certain other requirements;
and
·
upon not less than 30 days’ prior written notice of redemption to each warrant holder.
If and when the warrants become redeemable by the Company, the Company may not exercise its redemption right if the issuance of
shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky laws or
the Company is unable to effect such registration or qualification. The Company will use its best efforts to register or qualify such shares of
common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by the Company.
The last of the redemption criteria discussed above was established to prevent a redemption call unless there is at the time of the call a
significant premium to the warrant exercise price. If the foregoing conditions are satisfied and the Company issues a notice of redemption of the
warrants, each warrant holder will be entitled to exercise his, her or its warrant prior to the scheduled redemption date. However, the price of the
common stock may fall below the Redemption Trigger Price as well as the warrant exercise price.
If the Company calls the warrants for redemption as described above, the Company’s management will have the option to require any
holder that wishes to exercise his, her or its warrants to do so on a “cashless basis.” In determining whether to require all holders to exercise
their warrants on a “cashless basis,” the Company’s management will consider, among other factors, the Company’s cash position, the number
of warrants that are outstanding and the dilutive effect on the Company’s stockholders of issuing the maximum number of shares of common
stock issuable upon the exercise of the warrants. If the Company’s management takes advantage of this option, all holders of warrants would
pay the exercise price by surrendering their warrants for that number of shares of common stock equal to the quotient obtained by dividing (1)
the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the
warrants and the “fair market value” (defined below) by (2) the fair market value. The “fair market value” shall mean the average reported last
sale price of the common stock for the ten trading days ending on the third trading day prior to the date on which the notice of redemption is
sent to the holders of warrants. If the Company’s management takes advantage of this option, the notice of redemption will contain the
information necessary to calculate the number of shares of common stock to be received upon exercise of the warrants, including the fair market
value in such case. Requiring a cashless exercise in this manner will reduce the number of shares to be issued and thereby lessen the dilutive
effect of a warrant redemption. The Company believes this feature is an attractive option to the Company if the Company does not need the cash
from the exercise of the warrants.
A holder of a warrant may notify the Company in writing in the event it elects to be subject to a requirement that such holder will not
have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s
affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.8% (or such other amount as a holder may
specify) of the shares of common stock outstanding immediately after giving effect to such exercise.
If the number of outstanding shares of common stock is increased by a stock dividend payable in shares of common stock, or by a
split-up of shares of common stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the
number of shares of common stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding
shares of common stock. A rights offering to holders of common stock entitling holders to purchase shares of common stock at a price less than
the fair market value will be deemed a stock dividend of a number of shares of common stock equal to the product of (1) the number of shares
of common stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are
convertible into or exercisable for common stock) multiplied by (2) one minus the quotient of (i) the price per share of common stock paid in
such rights offering divided by (ii) the fair market value. For these purposes (1) if the rights offering is for securities convertible into or
exercisable for common stock, in determining the price payable for common stock, there will be taken into account any consideration received
for such rights, as well as any additional amount payable upon exercise or conversion and (2) fair market value means the volume weighted
average price of common stock as reported during the ten trading day period ending on the trading day prior to the first date on which the shares
of common stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the warrants are outstanding and unexpired, pays a dividend or makes a distribution in
cash, securities or other assets to the holders of common stock on account of such shares of common stock (or other shares of the Company’s
capital stock into which the warrants are convertible), other than (1) as described above or (2) certain ordinary cash dividends then the warrant
exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value
of any securities or other assets paid on each share of common stock in respect of such event.
If the number of outstanding shares of common stock is decreased by a consolidation, combination, reverse stock split or
reclassification of shares of common stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock
split, reclassification or similar event, the number of shares of common stock issuable on exercise of each warrant will be decreased in
proportion to such decrease in outstanding shares of common stock.
Whenever the number of shares of common stock purchasable upon the exercise of the warrants is adjusted, as described above, the
warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (1) the
numerator of which will be the number of shares of common stock purchasable upon the exercise of the warrants immediately prior to such
adjustment, and (2) the denominator of which will be the number of shares of common stock so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of common stock (other than those described above or that
solely affects the par value of such shares of common stock), or in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the continuing corporation and that does not result in any
reclassification or reorganization of the Company’s outstanding shares of common stock), or in the case of any sale or conveyance to another
corporation or entity of the assets or other property of the Company as an entirety or substantially as an entirety in connection with which the
Company is dissolved, the holders of the warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and
conditions specified in the warrants and in lieu of the shares of common stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented thereby, the kind and amount of shares of stock or other securities or property (including cash) receivable
upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of
the warrants would have received if such holder had exercised their warrants immediately prior to such event. However, if such holders were
entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger,
then the kind and amount of securities, cash or other assets for which each warrant will become exercisable will be deemed to be the weighted
average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if
a tender, exchange or redemption offer has been made to and accepted by such holders (other than a tender, exchange or redemption offer made
by the Company in connection with redemption rights held by stockholders as provided for in the charter) under circumstances in which, upon
completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1)
under the Exchange Act) of which such
maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any
members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the
Exchange Act) more than 50% of the outstanding shares of common stock, the holder of a warrant will be entitled to receive the highest amount
of cash, securities or other property to which such holder would actually have been entitled as a stockholder if such warrant holder had
exercised the warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the common stock held by such
holder had been purchased pursuant to such tender or exchange offer, subject to adjustments (from and after the consummation of such tender or
exchange offer) as nearly equivalent as possible to the adjustments provided for in the Warrant Agreement. Additionally, if less than 70% of the
consideration receivable by the holders of common stock in such a transaction is payable in the form of common stock in the successor entity
that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading
or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within 30 days following
public disclosure of such transaction, the warrant exercise price will be reduced based on the per share consideration minus the Black-Scholes
warrant value of the warrant in order to determine and realize the option value component of the warrant. This formula is to compensate the
warrant holder for the loss of the option value portion of the warrant due to the requirement that the warrant holder exercise the warrant within
30 days of the event. The Black-Scholes model is an accepted pricing model for estimating fair market value where no quoted market price for
an instrument is available.
The warrants are issued in registered form under the Warrant Agreement. The Warrant Agreement provides that the terms of the
warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but will require the
approval by the holders of at least 65% of the then outstanding warrants to make any change that adversely affects the interests of the registered
holders of warrants.
The warrants are exercisable upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant
agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of
the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the Company, for the number of warrants
being exercised. The warrant holders do not have the rights or privileges of holders of common stock and any voting rights until they exercise
their warrants and receive shares of common stock. After the issuance of shares of common stock upon exercise of the warrants, each holder
will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to
receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number of shares of common stock to
be issued to the warrant holder.
As discussed above, in order to protect the Company’s eligibility as a U.S. citizen in case that ownership of common stock by non-U.S.
citizens exceeds the maximum percentage permitted by the Jones Act (presently 25%), the Amended Charter and the Amended Bylaws contain
provisions that limit the maximum aggregate percentage of ownership by non-U.S. citizens of the common stock to 24% of the outstanding
shares of common stock. At and during such time that the 24% maximum permitted percentage of ownership by non-U.S. citizens is reached
with respect to shares of common stock, the Company will be unable to permit the exercise of any warrants by non-U.S. citizens. If a holder of
the warrants that is a non-U.S. citizen is unable to exercise such warrants, it may have to wait to exercise such warrants until such time that the
24% maximum permitted percentage of ownership by non-U.S. citizens is not reached with respect to shares of common stock or may have to
sell such warrants to a U.S. citizen who is able to exercise the warrants.
Exhibit 21
List of Subsidiaries
Subsidiary Name
State of Formation
American Ecology Environmental Services Corp.
Texas
CRN Denizcliik Anonim Sirketi /aka/ CRN Martime S.A.
Turkey
Eagle Construction and Environmental Services, LLC
Delaware
Envirite of Illinois, Inc.
Delaware
Envirite of Ohio, Inc.
Delaware
Envirite of Pennsylvania, Inc.
Delaware
Envirite Transportation, LLC
Ohio
Environmental Quality Industrial Services de Mexico, S. de R.L.
de C.V.
Mexico
Environmental Services Inc.
Ontario
EQ Detroit, Inc.
Michigan
EQ Holdings, Inc.
Delaware
EQ Industrial Services, Inc.
Michigan
EQ Northeast, Inc.
Massachusetts
EQ Parent Company, Inc.
Delaware
Michigan Disposal, Inc.
Michigan
National Response Corporation
Delaware
National Response Corporation (Angola) LDA
Angola
National Response Corporation (NRC) Environmental Services
UAE L LC
United Arab Emirates
National Response Corp. Aruba N.V.
Aruba
National Response Corporation Mexico NRC
Mexico
Natl Response Corporation of Puerto Rico
Delaware
NRC (Asia Pacific) LTD.
Thailand
NRC (B.V.I.) Ltd.
British Virgin Islands
NRC (East Africa) Limited
Uganda
NRC (Egypt) LLC
Egypt
NRC (Malta) Limited
Marshall Islands
NRC (Trinidad and Tobago) Ltd.
Trinidad
NRC (West Africa) LLC
Marshall Islands
NRC East Environmental Services, Inc.
Massachusetts
NRC Eastern Mediterranean Ltd.
Israel
NRC Environmental of Maine, Inc.
Maine
NRC Environmental Protection Waste Management &
Remediation Services AS
Turkey
NRC Environmental Services (UK) Limited
Scotland
NRC Environmental Services Inc.
Washington
NRC Gulf Environmental Services, Inc.
Delaware
NRC Int. Holding Company, LLC
Marshall Islands
NRC Intermediate Int. Holding Company, LLC
Delaware
NRC International Services, Ltd.
Marshall Islands
NRC Kazakhstan LLP
Kazakhstan
NRC NY Environmental Services, Inc.
Delaware
NRC Payroll Management LLC
Delaware
NRC Servicing Limited
United Kingdom
NRC WWS LTD
United Kingdom
OP-TECH Avix, Inc.
New York
OSRV Holdings, Inc.
Delaware
Quail Run Services, LLC
Texas
RTF Romulus, LLC
Michigan
SES-Haztec Servicos De Reposta A Emrgencias S.A.
Brazil
South Atlantic Response S.A.
Argentina
Exhibit 21
Southern Waste Services, Inc.
Florida
Specialized Response Solutions (Canada) Inc.
Alberta
Specialized Response Solutions, L.P.
Texas
Stablex Canada Inc.
Canada
Sureclean A.S.
Norway
Sureclean Holdco Limited
United Kingdom
TMC Services, Inc.
Massachusetts
US Ecology Alaska, LLC
Delaware
US Ecology Burlington, Inc.
Maine
US Ecology Canada Inc.
Ontario
US Ecology Energy Waste Disposal Services, LLC
Delaware
US Ecology Group Holdings Corp.
Delaware
US Ecology Group Holdings, LLC
Delaware
US Ecology Holdings Group, Inc.
Delaware
US Ecology Holdings, Inc.
Delaware
US Ecology Holdings, LLC
Delaware
US Ecology Houston, Inc.
Delaware
US Ecology Idaho, Inc.
Delaware
US Ecology Illinois, Inc.
California
US Ecology Karnes County Disposal, LLC
Texas
US Ecology Livonia, Inc.
Michigan
US Ecology Michigan, Inc.
Michigan
US Ecology Nevada, Inc.
Delaware
US Ecology Romulus, Inc.
Michigan
US Ecology Stablex Holdings, Inc.
Delaware
US Ecology Sulligent, Inc.
Michigan
US Ecology Tampa, Inc.
Michigan
US Ecology Taylor, Inc.
Michigan
US Ecology Texas, Inc.
Delaware
US Ecology Thermal Services, Inc.
Delaware
US Ecology Transportation Solutions, Inc.
Delaware
US Ecology Tulsa, Inc.
Michigan
US Ecology US Holding Company, LLC
Delaware
US Ecology Vernon, Inc.
Delaware
US Ecology Washington, Inc.
Delaware
US Ecology Winnie, LLC
Delaware
USE Canada Holdings Inc.
Canada
USE EWD Holdco, LLC
Delaware
Venezuelan Response Corporation
Venezuela
Waste Repurposing International, Inc.
Delaware
Wayne Disposal, Inc.
Michigan
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-261704, 333-235835 and 333-234424 on Form
S-8, Registration Statement No. 333-235824 on Form S-3, and Registration Statement No. 333-232930 on Form S-4, of our
report dated February 28, 2022, relating to the consolidated financial statements of US Ecology Inc. and the effectiveness of US
Ecology Inc.’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of US Ecology Inc. for
the year ended December 31, 2021.
/s/ DELOITTE & TOUCHE LLP
Boise, Idaho
February 28, 2022
Exhibit 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 to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred
during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
/s/ JEFFREY R. FEELER
President and Chief Executive Officer
February 28, 2022
Exhibit 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 to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting
to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report
our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred
during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role
in the registrant’s internal control over financial reporting.
/s/ ERIC L. GERRATT
Executive Vice President, Chief Financial Officer
and Treasurer
February 28, 2022
Exhibit 32.1
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Executive Officer of US Ecology, Inc., (the
“Company”), hereby certify, that to my knowledge, the Annual Report on Form 10-K of the Company for the period ended
December 31, 2021 (the “Report”) fully complies with 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, in all 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/ JEFFREY R. FEELER
President and Chief Executive Officer
February 28, 2022
Exhibit 32.2
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. §1350, I, the undersigned Chief Financial Officer of US Ecology, Inc., (the
“Company”), hereby certify, that to my knowledge, the Annual Report on Form 10-K of the Company for the period ended
December 31, 2021 (the “Report”) fully complies with 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, in all 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. GERRATT
Executive Vice President, Chief Financial Officer
and Treasurer
February 28, 2022