UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019

☐TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 0000-11688

US ECOLOGY, INC.

(Exact name of registrant as specified in its charter)


Delaware		95-3889638
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

101 S. Capitol Blvd., Suite 1000
Boise, Idaho		83702
(Address of principal executive offices)		(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

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, a 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

At ~~October 31, 2018,~~April 30, 2019, there were ~~22,039,794~~22,089,018 shares of the registrant’s Common Stock outstanding.

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US ECOLOGY, INC.

FORM 10-Q

TABLE OF CONTENTS


Item		Page		Page

	PART I — FINANCIAL INFORMATION		PART I — FINANCIAL INFORMATION

1.	Financial Statements (Unaudited)	3	Financial Statements (Unaudited)	3

			Consolidated Balance Sheets as of March 31, 2019 and December 31, 2018	3

	Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	3	Consolidated Statements of Operations for the three months ended March 31, 2019 and 2018	4

	Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	4	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2019 and 2018	5

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017	5	Consolidated Statements of Cash Flows for the three months ended March 31, 2019 and 2018	6

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	6	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2019 and 2018	7

	Notes to Consolidated Financial Statements	7	Notes to Consolidated Financial Statements	8

	Report of Independent Registered Public Accounting Firm	26	Report of Independent Registered Public Accounting Firm	26

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
3.	Quantitative and Qualitative Disclosures About Market Risk	42	Quantitative and Qualitative Disclosures About Market Risk	36
4.	Controls and Procedures	43	Controls and Procedures	37

	PART II — OTHER INFORMATION		PART II — OTHER INFORMATION

	Cautionary Statement	44	Cautionary Statement	38
1.	Legal Proceedings	44	Legal Proceedings	39
1A.	Risk Factors	45	Risk Factors	39
2.	Unregistered Sales of Equity Securities and Use of Proceeds	45	Unregistered Sales of Equity Securities and Use of Proceeds	39
3.	Defaults Upon Senior Securities	45	Defaults Upon Senior Securities	40
4.	Mine Safety Disclosures	45	Mine Safety Disclosures	40
5.	Other Information	45	Other Information	40
6.	Exhibits	46	Exhibits	40
	SIGNATURE	47	SIGNATURE	41

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

US ECOLOGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except par value amount)


	September 30, 2018		December 31, 2017		March 31, 2019		December 31, 2018
Assets
Current Assets:
Cash and cash equivalents	$	26,076	$	27,042	$	16,120	$	31,969
Receivables, net		137,956		110,777		127,970		144,690
Prepaid expenses and other current assets		11,834		9,138		11,121		10,938
Income taxes receivable		7,883		—		8,559		7,071
Total current assets		183,749		146,957		163,770		194,668

Property and equipment, net		246,637		234,432		256,902		258,443
Operating lease assets						18,270		—
Restricted cash and investments		4,897		5,802		4,977		4,941
Intangible assets, net		216,754		222,812		277,263		279,666
Goodwill		196,379		189,373		210,126		207,177
Other assets		4,758		2,700		2,024		3,003
Total assets	$	853,174	$	802,076	$	933,332	$	947,898

Liabilities And Stockholders’ Equity
Liabilities and Stockholders’ Equity

Current Liabilities:
Accounts payable	$	15,006	$	14,868	$	16,408	$	17,754
Deferred revenue		12,072		8,532		10,441		10,451
Accrued liabilities		37,168		22,888		27,133		35,524
Accrued salaries and benefits		15,757		14,242		13,367		16,732
Income taxes payable		—		2,970		—		505
Short-term borrowings						2,118		—
Current portion of closure and post-closure obligations		2,401		2,330		2,214		2,266
Current portion of operating lease liabilities						5,358		—
Total current liabilities		82,404		65,830		77,039		83,232

Long-term debt						334,000		364,000
Long-term closure and post-closure obligations		75,847		73,758		76,842		76,097
Long-term debt		277,000		277,000
Long-term operating lease liabilities						12,769		—
Other long-term liabilities		1,292		3,828		3,098		2,146
Deferred income taxes, net		62,790		57,583		66,092		63,206
Total liabilities		499,333		477,999		569,840		588,681

Commitments and contingencies

Stockholders’ Equity:
Common stock $0.01 par value, 50,000 authorized; 22,040 and 21,849 shares issued, respectively		220		218
Common stock $0.01 par value, 50,000 authorized; 22,089 and 22,040 shares issued, respectively						221		220
Additional paid-in capital		182,737		177,498		183,953		183,834
Retained earnings		179,585		155,533		193,397		189,324
Treasury stock, at cost, 8 and 3 shares, respectively		(370)		(68)
Treasury stock, at cost, 22 and 8 shares, respectively						(1,286)		(370)
Accumulated other comprehensive loss		(8,331)		(9,104)		(12,793)		(13,791)
Total stockholders’ equity		353,841		324,077		363,492		359,217
Total liabilities and stockholders’ equity	$	853,174	$	802,076	$	933,332	$	947,898

The accompanying notes are an integral part of these financial statements.

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Revenue	$	151,416	$	134,054	$	408,387	$	370,345	$	131,037	$	120,059
Direct operating costs		104,116		96,321		283,968		264,843		95,796		84,388
Gross profit		47,300		37,733		124,419		105,502		35,241		35,671
Selling, general and administrative expenses		23,649		22,444		67,037		62,158		20,305		22,232
Impairment charges		3,666		—		3,666		—
Operating income		19,985		15,289		53,716		43,344		14,936		13,439
Other income (expense):
Interest income		34		18		97		49		207		24
Interest expense		(3,066)		(2,783)		(8,782)		(15,387)		(4,030)		(2,809)
Foreign currency gain (loss)		(303)		275		(456)		521
Foreign currency loss										(139)		(14)
Other		177		234		2,493		537		110		2,123
Total other expense		(3,158)		(2,256)		(6,648)		(14,280)		(3,852)		(676)

Income before income taxes		16,827		13,033		47,068		29,064		11,084		12,763
Income tax expense		3,400		4,668		11,178		10,465		3,041		3,520
Net income	$	13,427	$	8,365	$	35,890	$	18,599	$	8,043	$	9,243

Earnings per share:
Basic	$	0.61	$	0.38	$	1.64	$	0.86	$	0.37	$	0.42
Diluted	$	0.61	$	0.38	$	1.63	$	0.85	$	0.36	$	0.42

Shares used in earnings per share calculation:
Basic		21,928		21,774		21,866		21,750		21,987		21,801
Diluted		22,099		21,931		22,027		21,893		22,197		21,957

The accompanying notes are an integral part of these financial statements.

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2018		2017		2019		2018
Net income	$	13,427	$	8,365	$	35,890	$	18,599	$	8,043	$	9,243
Other comprehensive income (loss):
Foreign currency translation gain (loss)		1,590		2,436		(1,878)		4,427		1,689		(1,871)
Net changes in interest rate hedge, net of taxes of $114, $134, $706 and $317, respectively		428		249		2,651		588
Net changes in interest rate hedge, net of taxes of ($184) and $425, respectively										(691)		1,595
Comprehensive income, net of tax	$	15,445	$	11,050	$	36,663	$	23,614	$	9,041	$	8,967

The accompanying notes are an integral part of these financial statements.

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended September 30,				Three Months Ended March 31,
	2018		2017		2019		2018
Cash flows from operating activities:
Net income	$	35,890	$	18,599	$	8,043	$	9,243
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment charges		3,666		—
Depreciation and amortization of property and equipment		20,991		21,007		8,125		6,605
Amortization of intangible assets		6,925		7,586		2,811		2,302
Accretion of closure and post-closure obligations		3,242		3,245		1,125		1,074
Property and equipment impairment charges						25		—
Unrealized foreign currency loss (gain)		899		(1,500)		(371)		654
Deferred income taxes		4,730		(1,011)		2,905		450
Share-based compensation expense		3,272		2,954		1,222		1,068
Unrecognized tax benefits		674		—		131		—
Net (gain) loss on disposition of assets		(57)		287
Amortization and write-off of debt issuance costs		607		5,806
Amortization and write-off of debt discount		—		667
Changes in assets and liabilities (net of effects of business acquisition):
Net loss (gain) on disposition of assets						(272)		17
Gain on insurance proceeds from damaged property and equipment						(4,653)		—
Amortization of debt issuance costs						204		202
Changes in assets and liabilities:
Receivables		(27,573)		(20,142)		16,577		14,947
Income taxes receivable		(7,878)		1,592		(1,487)		(573)
Other assets		(2,355)		(2,638)		525		(792)
Accounts payable and accrued liabilities		11,218		6,174		(11,935)		(4,163)
Deferred revenue		3,579		4,228		(47)		301
Accrued salaries and benefits		1,576		2,676		(3,417)		(2,432)
Income taxes payable		(2,884)		1,112		(517)		215
Closure and post-closure obligations		(1,026)		(1,277)		(470)		(288)
Net cash provided by operating activities		55,496		49,365		18,524		28,830

Cash flows from investing activities:
Purchases of property and equipment		(25,791)		(26,354)		(7,223)		(7,558)
Insurance proceeds from damaged property and equipment						5,000		—
Proceeds from sale of property and equipment						459		42
Purchases of restricted investments		(673)		(400)		(23)		(498)
Proceeds from sale of restricted investments		583		402		—		417
Proceeds from sale of property and equipment		307		957
Business acquisition		(21,253)
Net cash used in investing activities		(46,827)		(25,395)		(1,787)		(7,597)

Cash flows from financing activities:
Payments on long-term debt		—		(287,040)		(30,000)		—
Proceeds from long-term debt		—		281,000
Payments on short-term borrowings		—		(13,438)		(4,331)		—
Proceeds from short-term borrowings		—		11,260		6,449		—
Dividends paid		(11,839)		(11,778)		(3,970)		(3,938)
Payment of equipment financing obligations						(199)		(108)
Proceeds from exercise of stock options		2,427		1,050		—		731
Deferred financing costs paid		—		(2,967)
Payment of equipment financing obligations		(326)		(268)
Other		(313)		(121)		(915)		(312)
Net cash used in financing activities		(10,051)		(22,302)		(32,966)		(3,627)

Effect of foreign exchange rate changes on cash		(578)		588		393		(488)

Increase (decrease) in Cash and cash equivalents and restricted cash		(1,960)		2,256		(15,836)		17,118
Cash and cash equivalents and restricted cash at beginning of period		28,799		8,722		32,753		28,799
Cash and cash equivalents and restricted cash at end of period	$	26,839	$	10,978	$	16,917	$	45,917

Reconciliation of Cash and cash equivalents and restricted cash
Cash and cash equivalents at beginning of period		27,042		7,015		31,969		27,042
Restricted cash at beginning of period		1,757		1,707		784		1,757
Cash and cash equivalents and restricted cash at beginning of period	$	28,799	$	8,722	$	32,753	$	28,799
Cash and cash equivalents at end of period		26,076		9,244		16,120		44,251
Restricted cash at end of period		763		1,734		797		1,666
Cash and cash equivalents and restricted cash at end of period	$	26,839	$	10,978	$	16,917	$	45,917
Supplemental Disclosures:
Income taxes paid, net of receipts	$	17,842	$	9,274	$	2,085	$	3,429
Interest paid	$	8,001	$	8,981	$	3,462	$	2,554
Non-cash investing and financing activities:
Capital expenditures in accounts payable	$	2,684	$	1,044	$	912	$	245
Restricted stock issued from treasury shares	$	11	$	113	$	—	$	11

The accompanying notes are an integral part of these financial statements.

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US ECOLOGY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(In thousands)


	Three Months Ended March 31,
	2019		2018
Total stockholders' equity, beginning balances	$	359,217	$	324,077

Common stock:
Beginning balances	$	220	$	218
Stock option exercises and issuance of common stock and restricted common stock		1		1
Ending balances	$	221	$	219

Additional paid-in capital:
Beginning balances	$	183,834	$	177,498
Share-based compensation		1,222		1,068
Stock option exercises and issuance of common stock and restricted common stock		(1,103)		285
Issuance of restricted common stock from treasury shares		—		(11)
Ending balances	$	183,953	$	178,840

Retained earnings:
Beginning balances	$	189,324	$	155,533
Net income		8,043		9,243
Dividend paid		(3,970)		(3,938)
Ending balances	$	193,397	$	160,838

Treasury stock:
Beginning balances	$	(370)	$	(68)
Repurchase of common stock		(916)		(313)
Issuance of restricted common stock from treasury shares		—		11
Ending balances	$	(1,286)	$	(370)

Accumulated other comprehensive income (loss):
Beginning balances	$	(13,791)	$	(9,104)
Other comprehensive income (loss)		998		(276)
Ending balances	$	(12,793)	$	(9,380)

Total stockholders' equity, ending balances	$	363,492	$	330,147

The accompanying notes are an integral part of these financial statements.

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US ECOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. GENERAL

Basis of Presentation

The accompanying unaudited consolidated financial statements include the results of operations, financial position and cash flows of US Ecology, Inc. and its wholly-owned subsidiaries. All inter-company balances have been eliminated. Throughout these financial statements words such as “we,” “us,” “our,” “US Ecology” and “the Company” refer to US Ecology, Inc. and its subsidiaries.

In the opinion of management, the accompanying unaudited consolidated financial statements include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly, in all material respects, the results of the Company for the periods presented. These consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted pursuant to the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018. The results of operations for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 are not necessarily indicative of the results to be expected for the entire year ending December 31, ~~2018.~~2019.

The Company’s consolidated balance sheet as of December 31, ~~2017~~2018 has been derived from the Company’s audited consolidated balance sheet as of that date.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from the estimates and assumptions that we use in the preparation of our 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 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.

Recently Issued Accounting Pronouncements

In ~~February~~August 2018, the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards~~SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update ~~(“ASU”) No. 2018-02,~~ ~~Income Statement-Reporting Comprehensive Income (Topic 220). This ASU allows~~and Simplification,” adopting amendments to certain disclosure rules that were redundant, duplicative, overlapping, outdated, or superseded, in light of other SEC disclosure requirements, GAAP or changes in the information environment. In addition, the amendments expanded the disclosure requirements relating to the analysis of equity for interim financial statements. Under the amendments, an ~~optional one-time reclassification from accumulated other comprehensive income (loss) to retained earnings for~~analysis of the ~~stranded tax effects resulting from~~changes in each caption of shareholders’ equity and noncontrolling interests presented in the ~~new corporate tax rate under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”).~~balance sheet must be provided in a note or separate statement. The new guidance requires additional disclosures, regardless of whether the optional reclassification is elected. This ASU is effective for fiscal years and interim periods beginning after December 15, 2018, with early adoption permitted, and may be applied retrospectively or asanalysis must present a reconciliation of the beginning ~~of the period of adoption. The Company has elected not to make this optional reclassification.~~

~~On December 22, 2017, the Tax Act was signed into law making significant changes~~balance to the ~~Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition~~ending balance of ~~U.S. international taxation from a worldwide tax system to a territorial system,~~

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~~and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.~~

~~On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement~~each period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under Accounting Standards Codification (“ASC”) 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which ~~the accounting under ASC 740~~a statement of earnings is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimaterequired to be ~~included in the financial statements, it should continue to apply ASC 740~~filed. The final rule was effective on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. Where the Company was able to make reasonable estimates of the effects of elements for which the analysis is not yet complete, the Company has recorded provisional amounts. We were able to reasonably estimate the transition tax and record an initial provisional tax obligation of $1.4 million at December 31, 2017. Adjusted for information available and guidance provided through September 30, 2018, we have now recorded a provisional transition tax obligation totaling $3.3 million. We will continue to consider new guidance related to our provisional amounts and will complete our accounting during the fourth quarter of 2018.

The Tax Act also includes provisions to tax Global Intangible Low-Taxed Income (“GILTI”) of foreign subsidiaries in excess of a deemed return on their tangible assets. Due to the complexities of the new provisions, the Company is continuing to evaluate how the provisions will be accounted for under U.S. GAAP. Pursuant to the Tax Act, corporations are allowed to make an accounting policy election to either (1) account for GILTI as a component of income tax expense in the period in which the corporation is subject to the rules (the “period cost method”), or (2) account for GILTI in the corporation's measurement of deferred taxes (the “deferred method”). The Company has not currently elected a method and will do so after completing its analysis of the GILTI provisions of the Tax Act depending on the analysis of the Company’s global income. Therefore, the Company has not recorded any potential deferred tax effects related to the GILTI in its financial statements and has no policy election regarding whether to record deferred taxes on GILTI or use the period cost method. The Company has, however, included an estimate of the current GILTI impact in its annual effective tax rate forNovember 5, 2018. The Company ~~expects to complete~~adopted the ~~accounting during~~final rule effective for the ~~measurement period.~~first quarter of 2019. The adoption of the final rule did not have an impact on the Company’s consolidated financial position or results of operations.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This ASU amends the guidance in ASC 815 to better align an entity’s risk management activities and financial reporting for hedging relationships

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through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018, with early adoption permitted. The Company ~~is currently evaluating the impact~~adopted ASU 2017-12 ~~will~~on January 1, 2019 and the standard did not have a material impact on its consolidated financial statements.

~~In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash (Topic 230)~~. This ASU amends the guidance in ASC 230 to add or clarify guidance on the classification and presentation of restricted cash in the statement of cash flows. ASU 2016-18 is based on the Emerging Issues Task Force’s consensuses reached on Issue 16-A. The guidance is effective for annual and interim periods beginning after December 15, 2017. The Company adopted ASU 2016-18 as of January 1, 2018 using the retrospective adoption method. The impact of retrospective application of ASU 2016-18 is not material, as restricted cash activity for the nine months ended September 30, 2017 was not deemed to be significant. Restricted cash is now included with Cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts presented in the Company’s consolidated statements of cash flows.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~Statements of Cash Flows (Topic 230)~~. This ASU amends the guidance in ASC 230 on the classification of certain cash receipts and payments in the statement of cash flows. The primary purpose of the ASU is to reduce the diversity in practice that has resulted from the lack of consistent principles on this topic. The guidance is effective for annual and interim periods beginning after December 15, 2017. The Company adopted ASU 2016-15 as of January 1, 2018 using the retrospective adoption method. The only provision applicable to the Company relates to the treatment of proceeds from the settlement of insurance claims in connection with damaged property and equipment. There was no related impact on the classification of insurance settlement proceeds in the Company’s consolidated statements of cash flows for the nine months ended September 30, 2018 and 2017.

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In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The ASU significantly changes the accounting model used by lessees to account for leases, requiring that all material leases be presented on the balance sheet. Lessees will recognize substantially all leases on the balance sheet as a right-of-use asset and a corresponding lease liability. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. The guidance is effective for annual and interim periods beginning after December 15, 2018. Early adoption is permitted. In July 2018, the FASB issued ASU No. 2018-11 which provides a practical expedient that allows companies to use an optional transition method. Under the optional transition method, a cumulative adjustment to retained earnings during the period of adoption is recorded and prior periods would not require restatement. The Company ~~plans to elect and use this optional transitional method. We are currently assessing the impact the adoption of~~adopted ASU 2016-02 ~~may have~~ on ~~our consolidated financial position. We do not expect the adoption of the standards to have a material impact on our results of operations or cash flows and plan to adopt this guidance effective~~ January 1, ~~2019.~~

~~In May 2014, the FASB issued ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, which provides guidance for revenue recognition. The ASU’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The Company adopted Topic 606 as of January 1, 2018 using2019 utilizing the modified retrospective transition ~~method.~~method and elected not to recast comparative periods. We elected the package of practical expedients, which allows the Company not to reassess (1) whether any expired or existing contracts as of the adoption date are or contain a lease, (2) lease classification for any expired or existing leases as of the adoption date and (3) initial direct costs for any existing leases as of the adoption date. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. The Company did not elect to apply the hindsight practical expedient when determining lease term and assessing impairment of right-of-use assets.

Adoption of ASU 2016-02 resulted in the recognition of right-of-use assets and lease liabilities for operating leases of $18.1 million on its consolidated balance sheet as of March 31, 2019, with no material impact on its consolidated statement of stockholders’ equity or consolidated statements of operations. See Note 29 for additional ~~information.~~information and disclosure on our leases.

NOTE 2. REVENUES

~~Adoption of ASC Topic 606, “Revenue from Contracts with Customers”~~

As of January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Revenue Recognition (Topic 605).

~~Adoption of the guidance did not materially affect the timing or amount of revenue recognized, and no cumulative effect adjustment was recognized as a result of initially applying Topic 606.~~

~~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.~~

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 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

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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. Revenue is recognized on contracts with retainage when services have been 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 operations are managed in two reportable segments, Environmental Services and Field & Industrial Services, reflecting our internal reporting structure and nature of services offered. ~~The operations not managed through our two reportable segments are recorded as Corporate.~~ See Note 1617 for additional ~~information.~~information on our operating segments.

Effective December 31, 2018, we changed our presentation of disaggregated revenues to align with changes in how we manage our service lines within our Field & Industrial Services segment. Revenues previously combined and reported as Technical Services are now disaggregated into two service lines, Small Quantity Generation (“SQG”) and Total Waste Management (“TWM”) and certain revenues formerly classified as Technical Services are now included in Remediation. Also, marine terminal services revenues, formerly classified as Other, are now included in Industrial Services. Effective January 1, 2019, Emergency Response revenues, formerly classified as Other, are now presented as a discrete service line. We also conformed the allocation of intercompany revenues between Treatment & Disposal Revenue and Services Revenue to be consistent across both segments. Throughout this Quarterly Report on Form 10-Q, 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:

Three Months Ended September 30, 2018

Field &

Environmental

Industrial

$s in thousands

Services

Services

Total
Treatment & Disposal Revenue (1)

$
82,663

$
3,556

$
86,219
Services Revenue:

Transportation and Logistics (2)

24,534

9,345

33,879
Industrial Cleaning (3)

—

5,691

5,691
Technical Services (4)

—

14,185

14,185
Remediation (5)

—

6,776

6,776
Other (6)

—

4,666

4,666
Revenue

$
107,197

$
44,219

$
151,416


	Three Months Ended September 30, 2017						Three Months Ended March 31, 2019
			Field &						Field &
	Environmental		Industrial				Environmental		Industrial
$s in thousands	Services		Services		Total		Services		Services		Total
Treatment & Disposal Revenue (1)	$	77,071	$	2,595	$	79,666	$	77,713	$	2,796	$	80,509
Services Revenue:
Transportation and Logistics (2)		20,590		4,955		25,545		14,619		7,093		21,712
Industrial Cleaning (3)		—		4,328		4,328
Technical Services (4)		—		20,314		20,314
Remediation (5)		—		2,672		2,672
Other (6)		—		1,529		1,529
Industrial Services (3)								—		6,016		6,016
Small Quantity Generation (4)								—		8,189		8,189
Total Waste Management (5)								—		8,714		8,714
Remediation (6)								—		1,726		1,726
Emergency Response (7)								—		3,046		3,046
Other (8)								—		1,125		1,125
Revenue	$	97,661	$	36,393	$	134,054	$	92,332	$	38,705	$	131,037

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	Nine Months Ended September 30, 2018						Three Months Ended March 31, 2018
			Field &						Field &
	Environmental		Industrial				Environmental		Industrial
$s in thousands	Services		Services		Total		Services		Services		Total
Treatment & Disposal Revenue (1)	$	232,942	$	9,459	$	242,401	$	72,710	$	2,646	$	75,356
Services Revenue:
Transportation and Logistics (2)		59,686		22,593		82,279		13,761		5,651		19,412
Industrial Cleaning (3)		—		13,353		13,353
Technical Services (4)		—		55,370		55,370
Remediation (5)		—		8,454		8,454
Other (6)		—		6,530		6,530
Industrial Services (3)								—		3,879		3,879
Small Quantity Generation (4)								—		8,327		8,327
Total Waste Management (5)								—		10,222		10,222
Remediation (6)								—		2,190		2,190
Emergency Response (7)								—		642		642
Other (8)								—		31		31
Revenue	$	292,628	$	115,759	$	408,387	$	86,471	$	33,588	$	120,059

Nine Months Ended September 30, 2017

Field &

Environmental

Industrial

$s in thousands

Services

Services

Total
Treatment & Disposal Revenue (1)

$
217,012

$
8,133

$
225,145
Services Revenue:

Transportation and Logistics (2)

51,543

15,218

66,761
Industrial Cleaning (3)

—

13,252

13,252
Technical Services (4)

—

55,778

55,778
Remediation (5)

—

6,495

6,495
Other (6)

—

2,914

2,914
Revenue

$
268,555

$
101,790

$
370,345

(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 three months ended ~~September 30,~~March 31, 2019 and 2018, 16% and ~~2017, 22% and 26%~~17%, respectively, of our treatment and disposal revenue was derived from Event Business projects. Base Business revenue accounted for ~~78%~~84% and ~~74%~~83% of our treatment and disposal revenue for the three months ended ~~September 30,~~March 31, 2019 and 2018, and 2017, respectively. For the nine months ended September 30, 2018 and 2017, 20% and 22%, respectively, of our treatment and disposal revenue was derived from Event Business projects. Base Business revenue accounted for 80% and 78% of our treatment and disposal revenue for the nine months ended September 30, 2018 and 2017, respectively.

(2)

Includes ~~such services as~~ collection and transportation of non-hazardous and hazardous waste.

(3)

Includes ~~such services as~~ 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 ~~such services as total waste management programs,~~ retail services, laboratory packing, less-than-truck-load service and household hazardous waste collection. Contracts for ~~Technical Services~~Small Quantity Generation may extend beyond one year and a portion of the ~~transactions~~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 ~~such services as~~ 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.

~~(6)~~(7)

Includes ~~such services as emergency~~spill response, waste analysis and ~~marine.~~treatment and disposal planning.

(8)

Includes equipment rental and other miscellaneous services.

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We provide services in the United States and Canada. The following table presents our revenue disaggregated by our reportable segments and geographic location where the underlying services were performed:


	Three Months Ended September 30, 2018						Three Months Ended September 30, 2017						Three Months Ended March 31, 2019						Three Months Ended March 31, 2018
			Field &						Field &						Field &						Field &
	Environmental		Industrial				Environmental		Industrial				Environmental		Industrial				Environmental		Industrial
$s in thousands	Services		Services		Total		Services		Services		Total		Services		Services		Total		Services		Services		Total
United States	$	85,183	$	44,219	$	129,402	$	76,428	$	36,393	$	112,821	$	77,359	$	38,705	$	116,064	$	74,986	$	33,588	$	108,574
Canada		22,014		—		22,014		21,233		—		21,233		14,973		—		14,973		11,485		—		11,485
Total revenue	$	107,197	$	44,219	$	151,416	$	97,661	$	36,393	$	134,054	$	92,332	$	38,705	$	131,037	$	86,471	$	33,588	$	120,059

Nine Months Ended September 30, 2018

Nine Months Ended September 30, 2017

Field &

Field &

Environmental

Industrial

Environmental

Industrial

$s in thousands

Services

Services

Total

Services

Services

Total
United States

$
245,086

$
115,759

$
360,845

$
217,986

$
101,790

$
319,776
Canada

47,542

—

47,542

50,569

—

50,569
Total revenue

$
292,628

$
115,759

$
408,387

$
268,555

$
101,790

$
370,345

Deferred Revenue

We record deferred revenue when cash payments are received, or advance billings are charged, prior to performance of services. Deferred revenue includes waste that has been received but not yet treated or disposed, and is recognized when services are performed. During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, we recognized ~~$496,000~~$7.5 million and ~~$8.3~~$6.3 million of revenue, respectively, that was included in the deferred revenue balance at the beginning of ~~the~~each year.

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Receivables

Our receivables include invoiced and unbilled amounts where the Company has an unconditional right to payment.

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.

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 3. BUSINESS COMBINATION

Ecoserv Industrial Disposal, LLC

On ~~August 31,~~November 14, 2018, the Company acquired ~~ES&H of Dallas,~~Ecoserv Industrial Disposal, LLC (“~~ES&H Dallas”~~Winnie”), which provides ~~emergency~~non-hazardous industrial wastewater disposal solutions and ~~spill response, light industrial services and transportation and logistics for waste disposal and recycling from locations~~employs deep-well injection technology in Dallas and Midland, Texas. The total purchase price was $21.3 million and was funded with cash on hand. The ES&H Dallas facilities are reported as part of our Field and Industrial Services segment. The Company believes that revenues, net income, earnings per share and total assets of ES&H Dallas are not significant and thus, pro forma financial information has not been provided.the southern United States.

~~We allocated~~The following table summarizes the ~~purchase price to the assets acquired based on preliminary estimates of~~consideration paid for Winnie and the fair value estimates of assets acquired and liabilities assumed, recognized at the acquisition date, with purchase price allocation adjustments since the preliminary purchase price allocation as previously disclosed as of ~~acquisition, resulting in $8.5 million allocated~~December 31, 2018:


	Purchase Price Allocation
	December 31,				March 31,
$s in thousands	2018		Adjustments		2019
Current assets	$	1,923	$	(63)	$	1,860
Property and equipment		6,300		(2,324)		3,976
Identifiable intangible assets		66,600		(100)		66,500
Current liabilities		(755)		—		(755)
Other liabilities		(512)		—		(512)
Total identifiable net assets		73,556		(2,487)		71,069
Goodwill		13,573		2,586		16,159
Total purchase price	$	87,129	$	99	$	87,228

Purchase price allocation adjustments relate primarily to the receipt of additional information regarding the fair values of property and equipment, a post-closing price adjustment based on working capital requirements and other current assets, $8.9 million allocated to goodwill (which is deductible for tax purposes) and $3.9 million allocated to intangible assets (consisting primarily of customer relationships) to be amortized over a weighted average life of approximately 14 years. The purchase price allocation is preliminary, as estimates and assumptions are subject to change as more information becomes available.residual goodwill.

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NOTE 4. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Changes in accumulated other comprehensive income (loss) (“AOCI”) consisted of the following:


	Foreign		Unrealized Gain				Foreign		Unrealized Gain
	Currency		(Loss) on Interest				Currency		(Loss) on Interest
$s in thousands	Translation		Rate Hedge		Total		Translation		Rate Hedge		Total
Balance at December 31, 2017	$	(8,603)	$	(501)	$	(9,104)
Other comprehensive income before reclassifications, net of tax		(1,878)		2,310		432
Balance at December 31, 2018							$	(14,697)	$	906	$	(13,791)
Other comprehensive income (loss) before reclassifications, net of tax								1,689		(581)		1,108
Amounts reclassified out of AOCI, net of tax (1)		—		341		341		—		(110)		(110)
Other comprehensive income, net		(1,878)		2,651		773		1,689		(691)		998
Balance at September 30, 2018	$	(10,481)	$	2,150	$	(8,331)
Balance at March 31, 2019							$	(13,008)	$	215	$	(12,793)

(1)

Before-tax reclassifications of $~~40,000~~139,000 ($~~31,000 after-tax) and $432,000~~ (~~$341,000~~110,000 after-tax) for the three ~~and nine~~ months ended ~~September 30, 2018,~~ ~~respectively, and before-tax reclassifications of $474,000 ($308,000 after-tax) and $1.8 million ($1.2 a million after-tax) for the three and nine months ended September 30, 2017,~~March 31, 2019, were included inas a reduction of Interest expense in the Company’s consolidated statements of ~~operations.~~operations. Amounts relate 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. Amounts in AOCI expected to be recognized inas a reduction of interest expense over the next 12 months total approximately $~~159,000~~557,000 ($~~126,000~~440,000 after-tax).


	Foreign		Unrealized Gain
	Currency		(Loss) on Interest
$s in thousands	Translation		Rate Hedge		Total
Balance at December 31, 2017	$	(8,603)	$	(501)	$	(9,104)
Other comprehensive income (loss) before reclassifications, net of tax		(1,871)		1,382		(489)
Amounts reclassified out of AOCI, net of tax (2)		—		213		213
Other comprehensive income, net		(1,871)		1,595		(276)
Balance at March 31, 2018	$	(10,474)	$	1,094	$	(9,380)

(2)

Before-tax reclassifications of $273,000 ($213,000 after-tax) for the three months ended March 31, 2018, were included in Interest expense in the Company’s consolidated statements of operations. Amounts relate 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.

NOTE 5. CONCENTRATIONS AND CREDIT RISK

Major Customers

No customer accounted for more than 10% of total revenue for the three ~~or nine~~ months ended ~~September 30,~~March 31, 2019 or 2018, ~~or the three or nine months ended September 30, 2017.~~respectively. No customer accounted for more than 10% of total trade receivables as of ~~September 30, 2018~~March 31, 2019 or December 31, ~~2017.~~2018.

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.

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NOTE 6. RECEIVABLES

Receivables consisted of the following:


	September 30,		December 31,		March 31,		December 31,
$s in thousands	2018		2017		2019		2018
Trade	$	108,260	$	96,760	$	103,118	$	118,909
Unbilled revenue		29,680		16,176		21,848		26,538
Other		3,080		637		5,794		2,241
Total receivables		141,020		113,573		130,760		147,688
Allowance for doubtful accounts		(3,064)		(2,796)		(2,790)		(2,998)
Receivables, net	$	137,956	$	110,777	$	127,970	$	144,690

NOTE 7. 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, accrued liabilities, debt and interest rate swap agreements. 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.

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 ~~September 30, 2018,~~March 31, 2019, the carrying value of the Company’s variable-rate debt approximates fair value due to the short-term nature of the interest rates.

The Company’s assets and liabilities measured at fair value on a recurring basis consisted of the following:


	September 30, 2018								March 31, 2019
	Quoted Prices in		Other Observable		Unobservable				Quoted Prices in		Other Observable		Unobservable
	Active Markets		Inputs		Inputs				Active Markets		Inputs		Inputs
$s in thousands	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Fixed-income securities (1)	$	1,552	$	2,582	$	—	$	4,134	$	1,569	$	2,611	$	—	$	4,180
Money market funds (2)		763		—		—		763		797		—		—		797
Interest rate swap agreement (3)		—		2,722		—		2,722		—		272		—		272
Total	$	2,315	$	5,304	$	—	$	7,619	$	2,366	$	2,883	$	—	$	5,249

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	December 31, 2017								December 31, 2018
	Quoted Prices in		Other Observable		Unobservable				Quoted Prices in		Other Observable		Unobservable
	Active Markets		Inputs		Inputs				Active Markets		Inputs		Inputs
$s in thousands	(Level 1)		(Level 2)		(Level 3)		Total		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Fixed-income securities (1)	$	1,396	$	2,649	$	—	$	4,045	$	1,561	$	2,596	$	—	$	4,157
Money market funds (2)		1,757		—		—		1,757		784		—		—		784
Total	$	3,153	$	2,649	$	—	$	5,802

Liabilities:
Interest rate swap agreement (3)	$	—	$	638	$	—	$	638		—		1,147				1,147
Total	$	—	$	638	$	—	$	638	$	2,345	$	3,743	$	—	$	6,088

(1)

We invest a portion of our Restricted cash and 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 a portion of our 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. Money market funds are considered restricted cash for purposes of reconciling the beginning-of-period and end-of-period 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 October 2014 that effectively converts a portion of our variable-rate debt to a fixed interest rate. The swap is designated as a cash flow hedge, 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 interest rate swap has an effective date of December 31, 2014 with an initial notional amount of $250.0 million. The fair value of the interest rate swap agreement represents the difference in the present value of cash flows calculated at the contracted interest rates and at current market interest rates at the end of the period. We calculate the fair value of the interest rate swap agreement quarterly based on the quoted market price for the same or similar financial instruments. The fair value of the interest rate swap agreement is included in Other assets ~~and Other long-term liabilities~~ in the Company’s consolidated balance sheet as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively.~~2018.

NOTE 8. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:


	September 30,		December 31,		March 31,		December 31,
$s in thousands	2018		2017		2019		2018
Cell development costs	$	145,450	$	142,144	$	146,720	$	146,155
Land and improvements		46,283		36,499		51,580		50,481
Buildings and improvements		89,355		87,034		89,495		91,358
Railcars		17,299		17,299		17,299		17,299
Vehicles and other equipment		141,712		122,697		156,535		154,014
Construction in progress		19,437		23,334		18,415		14,554
Total property and equipment		459,536		429,007		480,044		473,861
Accumulated depreciation and amortization		(212,899)		(194,575)		(223,142)		(215,418)
Property and equipment, net	$	246,637	$	234,432	$	256,902	$	258,443

Depreciation and amortization expense for the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ was ~~$7.3~~$8.1 million and ~~$7.4~~$6.6 million, respectively. ~~Depreciation~~

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NOTE 9. LEASES

We lease certain facilities, office space, land and ~~amortization expense was $21.0 million for each~~equipment. Our lease payments are primarily fixed, but also include variable payments that are based on usage of the ~~nine months ended September 30, 2018~~leased asset. Initial lease terms range from one to 15 years, and ~~2017.~~may 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 nonlease components in our leases, except for equipment leases that include maintenance related services. 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 consisted of the following:


$s in thousands	March 31, 2019
Assets:
Operating right-of-use assets (1)	$	18,270
Finance right-of-use assets (2)		3,277
Total	$	21,547

Liabilities:
Current:
Operating (3)	$	5,358
Finance (4)		859
Long-term:
Operating (5)		12,769
Finance (6)		2,460
Total	$	21,446

(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 $1.3 million as of March 31, 2019.

(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:


	Three Months Ended
$s in thousands	March 31, 2019
Operating lease cost (1)	$	1,742
Finance lease cost:
Amortization of leased assets (2)		228
Interest on lease liabilities (3)		20
Total	$	1,990

(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 term of one month or less, which are not material. Operating lease cost excludes variable lease costs which are not material.

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(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:


	Three Months Ended
$s in thousands	March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	1,615
Operating cash flows from finance leases		20
Financing cash flows from finance leases		199

Non-cash investing and financing activities:
Right-of-use assets obtained in exchange for new operating lease liabilities	$	1,628
Right-of-use assets obtained in exchange for new finance lease liabilities		1,844

Other information related to our leases is as follows:


	March 31, 2019
Weighted-average remaining lease term (years):
Operating leases		5.6
Finance leases		3.9
Weighted-average discount rate:
Operating leases		4.37	%
Finance leases		3.64	%

The Company’s maturity analysis of its lease liabilities as of March 31, 2019 is as follows:


	Operating		Finance
$s in thousands	Leases		Leases		Total
2019 (excluding the three months ended March 31, 2019)	$	4,433	$	726	$	5,159
2020		3,936		792		4,728
2021		3,487		619		4,106
2022		2,199		548		2,747
2023		1,722		612		2,334
Thereafter		5,096		354		5,450
Total	$	20,873	$	3,651	$	24,524
Less: Interest		2,746		332		3,078
Present value of lease liabilities	$	18,127	$	3,319	$	21,446

Future minimum lease payments on non-cancellable operating leases as of December 31, 2018 are as follows:


$s in thousands	Payments
2019	$	5,638
2020		3,644
2021		3,184
2022		1,885
2023		1,457
Thereafter		5,065
	$	20,873

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NOTE 9.10. GOODWILL AND INTANGIBLE ASSETS

Changes in goodwill for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 consisted of the following:

Field &

Environmental

Industrial

Services

Services

Accumulated

Accumulated

$s in thousands

Gross

Impairment

Gross

Impairment

Total
Balance at December 31, 2017

$
150,699

$
(5,457)

$
44,131

$
—

$
189,373
ES&H Dallas acquisition

—

—

8,925

—

8,925
Impairment charges

—

(1,413)

—

—

(1,413)
Foreign currency translation

(506)

—

—

—

(506)
Balance at September 30, 2018

$
150,193

$
(6,870)

$
53,056

$
—

$
196,379


					Field &
	Environmental				Industrial
	Services				Services
			Accumulated				Accumulated
$s in thousands	Gross		Impairment		Gross		Impairment		Total
Balance at December 31, 2018	$	162,816	$	(6,870)	$	51,231	$	—	$	207,177
Winnie purchase price allocation adjustment		2,586		—		—		—		2,586
Foreign currency translation		363		—		—		—		363
Balance at March 31, 2019	$	165,765	$	(6,870)	$	51,231	$	—	$	210,126

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.

In connection with our annual budgeting process commencing in the third quarter and review of the projected future cash flows of our reporting units used in our annual assessment of goodwill, it was determined that the projected future cash flows of our Mobile Recycling reporting unit (described below), which is part of our Environmental Services segment, indicated that the fair value of the reporting unit may be below its carrying amount. Accordingly, we performed an interim assessment of the reporting unit’s goodwill as of September 30, 2018. Based on the results of that assessment, goodwill was deemed impaired and we recognized an impairment charge of $1.4 million in the third quarter of 2018, representing the reporting unit’s entire goodwill balance.

Our Mobile Recycling reporting unit operates a fleet of mobile solvent recycling stills that provide on-site recycling services throughout the Eastern United States. The trailer mounted stills are self-contained units that perform solvent distillation at the point of generation. Waste solvents are processed in 500 to 7,500 gallon batches, and clean solvent is returned for reuse. The factors contributing to the $1.4 million goodwill impairment charge principally related to declining business and cash flows, 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, net consisted of the following:


	September 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
			Accumulated						Accumulated						Accumulated						Accumulated
$s in thousands	Cost		Amortization		Net		Cost		Amortization		Net		Cost		Amortization		Net		Cost		Amortization		Net
Amortizing intangible assets:
Permits, licenses and lease	$	111,200	$	(14,324)	$	96,876	$	111,818	$	(12,459)	$	99,359	$	165,184	$	(15,812)	$	149,372	$	164,840	$	(14,804)	$	150,036
Customer relationships		87,751		(24,158)		63,593		84,977		(20,168)		64,809		99,321		(27,284)		72,037		99,241		(25,676)		73,565
Technology - formulae and processes		7,049		(1,755)		5,294		7,250		(1,630)		5,620		6,816		(1,806)		5,010		6,672		(1,714)		4,958
Customer backlog		3,652		(1,565)		2,087		3,652		(1,291)		2,361		3,652		(1,748)		1,904		3,652		(1,656)		1,996
Tradename		4,290		(4,290)		—		4,318		(4,318)		—
Developed software		2,898		(1,522)		1,376		2,926		(1,319)		1,607		2,889		(1,659)		1,230		2,884		(1,581)		1,303
Non-compete agreements		1,092		(757)		335		748		(748)		—		1,542		(975)		567		1,542		(875)		667
Internet domain and website		536		(121)		415		540		(100)		440		536		(135)		401		536		(128)		408
Database		388		(166)		222		393		(153)		240		386		(174)		212		384		(167)		217
Total amortizing intangible assets		218,856		(48,658)		170,198		216,622		(42,186)		174,436		280,326		(49,593)		230,733		279,751		(46,601)		233,150
Nonamortizing intangible assets:
Non-amortizing intangible assets:
Permits and licenses		46,424		—		46,424		48,241		—		48,241		46,403		—		46,403		46,391		—		46,391
Tradename		132		—		132		135		—		135		127		—		127		125		—		125
Total intangible assets	$	265,412	$	(48,658)	$	216,754	$	264,998	$	(42,186)	$	222,812	$	326,856	$	(49,593)	$	277,263	$	326,267	$	(46,601)	$	279,666

In connection with the interim goodwill impairment assessment of the Mobile Recycling reporting unit, we also assessed the reporting unit’s indefinite-lived permit intangible asset and other finite-lived tangible and intangible assets for impairment as of September 30, 2018. Based on the results of that assessment, the carrying amounts of the indefinite-lived permit intangible asset and other finite-lived intangible assets exceeded their estimated fair values and, as a result, we recognized a $2.3 million impairment charge in the third quarter of 2018. The factors and timing contributing to the indefinite-lived intangible asset and the other finite-lived intangible assets impairment charges were the same as the factors and timing described above with regards to the Mobile Recycling reporting unit goodwill impairment charge.

During the nine months ended September 30, 2018, the Company acquired ES&H Dallas and recorded $8.9 million of goodwill and $3.9 million of amortizing intangible assets (consisting primarily of customer relationships) as a result of the acquisition. See Note 3 for additional information.

Amortization expense ~~was $2.3 million~~ for ~~each of~~ the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017.~~ ~~Amortization expense for the nine months ended September 30, 2018 and 2017~~ was ~~$6.9~~$2.8 million and ~~$7.6~~$2.3 million, respectively.Foreign intangible asset carrying amounts are affected by foreign currency translation.

NOTE ~~10.~~11. DEBT

Long-term debt consisted of the following:


	September 30,		December 31,		March 31,		December 31,
$s in thousands	2018		2017		2019		2018
Revolving credit facility	$	277,000	$	277,000	$	334,000	$	364,000
Long-term debt	$	277,000	$	277,000	$	334,000	$	364,000

2017 Credit Agreement

On April 18, 2017, the Company entered into a senior secured credit agreement (the ~~“Credit~~“2017 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, five-year revolving credit facility (the “Revolving Credit Facility”), including a $75.0 million sublimit for the issuance of standby letters of credit and a $25.0 million sublimit for the issuance of swingline loans used to fund short-term working capital requirements. The

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2017 Credit Agreement also contains an accordion feature whereby the Company may request up to $200.0 million of

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additional funds through an increase to the Revolving Credit Facility, through incremental term loans, or some combination thereof.

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). Under the Revolving Credit Facility, revolving credit loans are available based on a base rate (as defined in the 2017 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 earnings before interest, taxes, depreciation and amortization (as defined in the 2017 Credit Agreement), as set forth in the table below:

Total Net Leverage Ratio	LIBOR Rate Loans Interest Margin	Base Rate Loans Interest Margin
Equal to or greater than 3.25 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%

At ~~September 30, 2018,~~March 31, 2019, the effective interest rate on the Revolving Credit Facility, after giving effect to the impact of our interest rate swap, was ~~3.49%~~3.58%. Interest only payments are due either quarterly or on the last day of any interest period, as applicable.

In October 2014, the Company entered into an interest rate swap agreement, effectively fixing the interest rate on ~~$175.0~~$165.0 million, or ~~63%~~49%, of the Revolving Credit Facility borrowings as of ~~September 30, 2018.~~March 31, 2019.

The Company is required to pay a commitment fee ranging from 0.175% to 0.35% on the average daily unused portion of the Revolving Credit Facility, with such commitment fee to be reduced based upon the Company’s total net leverage ratio (as defined in the 2017 Credit Agreement). The maximum letter of credit capacity under the Revolving Credit Facility is $75.0 million and the 2017 Credit Agreement provides for a letter of credit fee equal to the applicable margin for LIBOR loans under the Revolving Credit Facility. At ~~September 30, 2018,~~March 31, 2019, there were ~~$277.0~~$334.0 million of revolving credit loans outstanding on the Revolving Credit Facility. These revolving credit loans are due upon the earliest to occur of (a) April 18, 2022 (or, with respect to any lender, such later date as requested by us and accepted by such lender), (b) the date of termination of the entire revolving credit commitment (as defined in the 2017 Credit Agreement) by us, and (c) the date of termination of the revolving credit commitment and are presented as long-term debt in the consolidated balance sheets.

The Company 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 $25.0 million swingline loan sublimit under the Revolving Credit Facility. The Company’s revolving credit loans outstanding under the Revolving Credit ~~Agreement~~Facility are not subject to repayment through the Sweep Arrangement. As of ~~September 30, 2018,~~March 31, 2019, there were ~~no amounts~~$2.1 million in borrowings outstanding subject to the Sweep ~~Arrangement.~~Arrangement, which are presented as Short-term borrowings in the consolidated balance sheet.

As of ~~September 30, 2018,~~March 31, 2019, the availability under the Revolving Credit Facility was ~~$217.3~~$158.2 million with $5.7 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.

The Company 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 2017 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 2017 Credit Agreement

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provides for mandatory prepayment at any time if the revolving credit outstanding exceeds the revolving credit commitment (as such terms are defined in the 2017 Credit Agreement), in an amount equal to such excess. Subject to certain exceptions, the 2017 Credit

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Agreement provides for mandatory prepayment upon certain asset dispositions, casualty events and issuances of indebtedness.

Pursuant to (i) an unconditional guarantee agreement and (ii) a collateral agreement, each entered into by the Company and its domestic subsidiaries on April 18, 2017, the Company’s obligations under the 2017 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 the Company 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 2017 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 2017 Credit Agreement), among other things, amounts outstanding under the 2017 Credit Agreement may be accelerated and the commitments may be terminated.

The 2017 Credit Agreement also contains financial maintenance covenants, a maximum consolidated total net leverage ratio and a consolidated interest coverage ratio (as such terms are defined in the 2017 Credit Agreement). Our consolidated total net leverage ratio as of the last day of any fiscal quarter ~~commencing with the fiscal quarter ending June 30, 2017,~~ may not exceed 3.50 to 1.00, subject to certain exceptions. Our consolidated interest coverage ratio as of the last day of any fiscal quarter ~~commencing with the fiscal quarter ending June 30, 2017,~~ may not be less than 3.00 to 1.00.

At ~~September 30, 2018,~~March 31, 2019, we were in compliance with all of the financial covenants in the 2017 Credit Agreement.

NOTE ~~11.~~12. CLOSURE AND POST-CLOSURE OBLIGATIONS

Our accrued closure and post-closure liability represents 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.

Changes to closure and post-closure obligations consisted of the following:


	Three Months Ended		Nine Months Ended		Three Months Ended
$s in thousands	September 30, 2018		September 30, 2018		March 31, 2019
Closure and post-closure obligations, beginning of period	$	77,567	$	76,088	$	78,363
Accretion expense		1,087		3,242		1,125
Payments		(444)		(1,026)		(470)
Foreign currency translation		38		(56)		38
Closure and post-closure obligations, end of period		78,248		78,248		79,056
Less current portion		(2,401)		(2,401)		(2,214)
Long-term portion	$	75,847	$	75,847	$	76,842

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NOTE ~~12.~~13. INCOME TAXES

Our effective tax rate for the three months ended ~~September 30, 2018~~March 31, 2019 was ~~20.2%~~27.4%, down from ~~35.8%~~27.6% for the three months ended ~~September 30, 2017. Our effective tax rate for the nine months ended September 30, 2018 was 23.7%, down from 36.0% for the nine months ended September 30, 2017.~~March 31, 2018. The decrease for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019, compared ~~with~~to the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2018, was primarily ~~the result of the impact of the Tax Act, enacted on December 22, 2017 by the U.S. government which reduced the federal corporate tax rate~~due to ~~21%~~a higher discrete benefit from the existing maximum rate of 35%. In addition, the Company implemented various federal and state tax planning strategies which favorably impacted the effective tax rate, partially offset by the impact of the tax associated with the deemed repatriation of foreign earnings. The decrease in the effective tax rate for the three and nine months ended September 30, 2018 also reflects the impact of discrete events including the recognition of excess tax benefits ~~related to employee stock~~of share-based compensation ~~as a result of the adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718), on January 1, 2017.~~

On December 22, 2017, Staff Accounting Bulletin No. 118 was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income taxand federal research and development credits, partially offset by effects of the ~~Tax Act. We were able to reasonably estimate~~international tax provisions from U.S. tax reform that became effective in 2018. For the ~~transition~~three months ended March 31, 2019 and 2018, the Company recognized a discrete tax and record an initial provisional tax obligation of $1.4 million at December 31, 2017. As adjusted for new information available and guidance provided through September 30, 2018, we have now recorded a provisional transition tax obligation totaling $3.3 million. We will continue to consider new guidancebenefit related to ~~our provisional amounts~~the excess tax benefits from share-based compensation of $304,000 and ~~will complete our accounting during the fourth quarter of 2018.~~$235,000, respectively.

Gross unrecognized tax benefits, ~~were $590,000 as of September 30, 2018 that, if recognized, would favorably affect our effective tax rate. Gross unrecognized tax benefits are~~ included in Other long-term liabilities in the consolidated balance ~~sheet~~sheets, were $616,000 and $555,000 as of ~~September 30, 2018. There were no~~March 31, 2019 and December 31, 2018, respectively. The gross unrecognized tax benefits, asif recognized by the Company, will result in a reduction of ~~December 31, 2017.~~approximately $544,000 to the provision for income taxes thereby favorably impacting the Company’s effective tax rate. We do not anticipate our total unrecognized tax benefits to increase or decrease materially within the next twelve months. 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,~~Selling, general and administrative expenses.

We file a consolidated U.S. federal income tax return with the Internal Revenue Service (“IRS”) as well as tax returns in various states, Canada, and Mexico. The Company is subject to examination by the IRS for tax years 2014 through ~~2017. EQ Holdings, Inc.~~2018. The Company is ~~subject to~~currently under examination by the ~~IRS~~state of Idaho for ~~pre-acquisition tax~~years 2014 through 2018 and the state of Texas for the year 2014. We may be subject to examinations by various state and local taxing jurisdictions for tax years ~~2013~~2014 through ~~2017.~~2018. The Company ~~is not aware of any~~has no significant foreign jurisdiction audits underway. The tax years ~~2013~~2014 through ~~2017~~2018 remain subject to examination by foreign jurisdictions.

NOTE ~~13.~~14. EARNINGS PER SHARE


	Three Months Ended September 30,								Three Months Ended March 31,
	2018				2017				2019				2018
$s and shares in thousands, except per share amounts	Basic		Diluted		Basic		Diluted		Basic		Diluted		Basic		Diluted
Net income	$	13,427	$	13,427	$	8,365	$	8,365	$	8,043	$	8,043	$	9,243	$	9,243
Weighted average basic shares outstanding		21,928		21,928		21,774		21,774		21,987		21,987		21,801		21,801

Dilutive effect of stock-based awards				171				157
Dilutive effect of share-based awards												210				156
Weighted average diluted shares outstanding				22,099				21,931				22,197				21,957

Earnings per share	$	0.61	$	0.61	$	0.38	$	0.38	$	0.37	$	0.36	$	0.42	$	0.42
Anti-dilutive shares excluded from calculation				16				117				79				95

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Nine Months Ended September 30,

2018

2017
$s and shares in thousands, except per share amounts

Basic

Diluted

Basic

Diluted
Net income

$
35,890

$
35,890

$
18,599

$
18,599
Weighted average basic shares outstanding

21,866

21,866

21,750

21,750

Dilutive effect of stock-based awards

161

143
Weighted average diluted shares outstanding

22,027

21,893

Earnings per share

$
1.64

$
1.63

$
0.86

$
0.85
Anti-dilutive shares excluded from calculation

56

115

NOTE ~~14.~~15. EQUITY

Stock Repurchase Program

On June 1, 2016, the Company’s Board of Directors authorized the repurchase of $25.0 million of the Company’s outstanding common stock. Repurchases may be made from time to time in the open market or through privately negotiated transactions. The timing of any repurchases will be based upon prevailing market conditions and other factors. The Company did not repurchase any shares of common stock under the repurchase program during the three ~~or nine~~ months ended ~~September 30, 2018.~~March 31, 2019. On May 29, 2018 the repurchase program was extended and will remain in effect until June 6, 2020, unless further extended by our Board of Directors.

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Omnibus Incentive Plan

On May 27, 2015, our stockholders approved the Omnibus Incentive Plan (“Omnibus Plan”), which was approved by our Board of Directors on April 7, 2015. The Omnibus Plan was developed to provide additional incentives through equity ownership in ~~US Ecology~~the Company and, as a result, encourage employees and 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 (“RSUs”), performance stock units (“PSUs”) and other ~~stock-based~~share-based awards or cash awards to officers, employees, consultants and non-employee directors. Subsequent to the approval of the Omnibus Plan in May 2015, we stopped granting equity awards under our 2008 Stock Option Incentive Plan and our 2006 Restricted Stock Plan (collectively, the “Previous Plans”). The Previous Plans will remain in effect solely for the settlement of awards granted under the Previous Plans. No shares that are reserved but unissued under the Previous Plans or that are outstanding under the Previous Plans and reacquired by the Company for any reason will be available for issuance under the Omnibus Plan. The Omnibus Plan expires on April 7, 2025 and authorizes 1,500,000 shares of common stock for grant over the life of the Omnibus Plan. As of ~~September 30, 2018, 1,017,403~~March 31, 2019, 885,417 shares of common stock remain available for grant under the Omnibus Plan.

PSUs, RSUs and Restricted Stock

On ~~January 2, 2018,~~March 1, 2019, the Company granted ~~14,100~~17,111 PSUs to certain employees. 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%~~300% of the target number of PSUs granted. The actual number of PSUs that will vest and be settled in shares is determined at the end of a three-year performance period beginning January 1, ~~2018,~~2019, based on adjusted earnings per share and return on invested capital relative to established targets with an additional adjustment based on total stockholder return relative to a set of peer companies. The fair value of the PSUs estimated on the grant date using a Monte Carlo simulation was ~~$63.56~~$58.20 per unit. Compensation expense is recorded over the awards’ vesting period.

Assumptions used in the Monte Carlo simulation to calculate the fair value of the PSUs granted in 2019 are as follows:


	2019
Stock price on grant date	$	58.40
Expected term		3.0	years
Expected volatility		30	%
Risk-free interest rate		2.5	%
Expected dividend yield		1.1	%

A summary of our PSU, restricted stock and RSU activity for the three months ended March 31, 2019 is as follows:


	PSUs			Restricted Stock			RSUs
		Weighted			Weighted			Weighted
		Average			Average			Average
		Grant Date			Grant Date			Grant Date
	Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Outstanding as of December 31, 2018	39,200	$	55.48	74,988	$	46.74	66,785	$	53.77
Granted	17,111		58.20	20,000		63.85	33,020		56.21
Vested	(13,600)		41.22	(30,134)		39.14	(26,362)		48.28
Cancelled, expired or forfeited	—		—	—		—	(243)		45.66
Outstanding as of March 31, 2019	42,711	$	61.11	64,854	$	55.55	73,200	$	56.88

During the three months ended March 31, 2019, 13,600 PSUs vested and PSU holders earned 19,414 shares of the Company’s common stock.

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~~Assumptions used in the Monte Carlo simulation to calculate the fair value of the PSUs granted in 2018 are as follows:~~

2018

Stock price on grant date

$
51.00

Expected term

3.0
years
Expected volatility

30
%
Risk-free interest rate

2.0
%
Expected dividend yield

1.4
%

~~A summary of our PSU, restricted stock and RSU activity for the nine months ended September 30, 2018 is as follows:~~

PSUs

Restricted Stock

RSUs

Weighted

Weighted

Weighted

Average

Average

Average

Grant Date

Grant Date

Grant Date


Shares

Fair Value

Shares

Fair Value

Shares

Fair Value
Outstanding as of December 31, 2017

30,963

$
53.76

66,701

$
44.83

47,151

$
45.56
Granted

14,100

63.56

32,700

53.24

39,674

59.19
Vested

(5,863)

65.78

(24,297)

50.23

(17,732)

44.90
Cancelled, expired or forfeited

—

—

(116)

49.97

(1,292)

44.87
Outstanding as of September 30, 2018

39,200

$
55.48

74,988

$
46.74

67,801

$
53.72

~~During the nine months ended September 30, 2018, 5,863 PSUs vested and PSU holders earned 5,996 shares of the Company’s common stock.~~

Stock Options

A summary of our stock option activity for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 is as follows:


					Weighted
		Weighted			Average
		Average			Exercise
		Exercise		Shares	Price
	Shares	Price
Outstanding as of December 31, 2017	429,729	$	38.58
Outstanding as of December 31, 2018				236,503	$	44.93
Granted	40,900		51.00	36,600		63.85
Exercised	(227,313)		34.10	(2,643)		43.01
Cancelled, expired or forfeited	(5,703)		43.15	(1,540)		43.55
Outstanding as of September 30, 2018	237,613	$	44.90
Exercisable as of September 30, 2018	127,495	$	44.38
Outstanding as of March 31, 2019				268,920	$	47.53
Exercisable as of March 31, 2019				192,359	$	43.82

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, option holders tendered ~~84,444~~1,862 options in connection with options exercised via net share settlement.

Treasury Stock

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the Company repurchased ~~5,564~~14,462 shares of the Company’s common stock in connection with the net share settlement of employee equity awards at an average cost of ~~$56.20~~$63.34 per share.

Dividends

The Company paid dividends of $0.18 per common share during each of the three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017 and paid dividends of $0.54 per common share during each of the nine months ended September 30, 2018 and 2017.~~2018.

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NOTE ~~15.~~16. 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.~~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.

On November 17, 2018, an explosion occurred at our Grand View, Idaho facility, resulting in one employee fatality and injuries to other employees. 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 resumed limited operations at our Grand View, Idaho facility in February 2019. In addition to initiating and conducting our own investigation into the incident, we are fully cooperating with Idaho Department of Environmental Quality (“IDEQ”), the U.S. Environmental Protection Agency (“USEPA”) and the Occupational Safety and Health Administration (“OSHA”) to support their comprehensive and independent investigations of the incident. As we continue to investigate the cause of the incident, we are evaluating its impact, but, at this time, we are unable to predict the timing and outcome of the investigation. As such, we cannot presently estimate the potential liability, if any, related to the incident and, therefore, no amounts related to such claims have been recorded in our financial statements as of March 31, 2019. We have not been named as a defendant in any 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

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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.

The Company received $5.0 million of property-related insurance payments in the first quarter of 2019 related to the incident at our Grand View, Idaho facility in the fourth quarter of 2018. The Company recognized $4.7 million of property-related insurance recovery gains in the first quarter of 2019. Although the Company is actively working with its insurance companies on comprehensive property and business interruption insurance claims, as of March 31, 2019, the Company has neither received nor recognized any business interruption insurance recoveries related to the loss of business, profits or customers.

Other than as described above, we are not currently 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.

NOTE ~~16.~~17. OPERATING SEGMENTS

Financial Information by Segment

Our operations are managed in two reportable segments reflecting our internal reporting structure and nature of services offered as follows:

Environmental Services - This segment provides a broad range of hazardous material management services including transportation, recycling, treatment and disposal of hazardous, non-hazardous and ~~non-hazardous~~radioactive waste at Company-owned landfill, wastewater, deep-well injection and other treatment facilities.

Field & Industrial Services - This segment provides packaging and collection of hazardous waste and total waste management solutions at customer sites and through our 10-day transfer facilities. Services include on-site management, waste characterization, transportation and disposal of non-hazardous and hazardous waste. This segment also provides specialty field services such as ~~high-pressure~~industrial cleaning ~~tank cleaning, decontamination,~~and maintenance, remediation, lab packs, retail services, transportation, ~~spill cleanup and~~ emergency response and other services to commercial and industrial facilities and to government entities.

The operations not managed through our two reportable segments are recorded as ~~"Corporate."~~“Corporate.” Corporate selling, general and administrative expenses include typical corporate items such as legal, accounting and other items of a general corporate nature. Income taxes are assigned to Corporate, but all other items are included in the segment where they originated. Inter-company transactions have been eliminated from the segment information and are not significant between segments.

~~Summarized financial information of our reportable segments is as follows:~~

Three Months Ended September 30, 2018

Field &

Environmental

Industrial

$s in thousands

Services

Services

Corporate

Total
Revenue

$
107,197

$
44,219

$
—

$
151,416
Depreciation, amortization and accretion

$
8,903

$
1,537

$
316

$
10,756
Capital expenditures

$
9,878

$
573

$
379

$
10,830
Total assets

$
614,228

$
157,989

$
80,957

$
853,174

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Summarized financial information of our reportable segments is as follows:


	Three Months Ended September 30, 2017								Three Months Ended March 31, 2019
			Field &								Field &
	Environmental		Industrial						Environmental		Industrial
$s in thousands	Services		Services		Corporate		Total		Services		Services		Corporate		Total
Revenue	$	97,661	$	36,393	$	—	$	134,054	$	92,332	$	38,705	$	—	$	131,037
Depreciation, amortization and accretion	$	9,342	$	1,316	$	118	$	10,776	$	9,625	$	2,132	$	304	$	12,061
Capital expenditures	$	7,594	$	561	$	647	$	8,802	$	6,712	$	178	$	333	$	7,223
Total assets	$	619,156	$	124,053	$	59,442	$	802,651	$	703,453	$	161,299	$	68,580	$	933,332

Nine Months Ended September 30, 2018

Field &

Environmental

Industrial

$s in thousands

Services

Services

Corporate

Total
Revenue

$
292,628

$
115,759

$
—

$
408,387
Depreciation, amortization and accretion

$
26,089

$
4,307

$
762

$
31,158
Capital expenditures

$
20,818

$
3,460

$
1,513

$
25,791
Total assets

$
614,228

$
157,989

$
80,957

$
853,174


	Nine Months Ended September 30, 2017								Three Months Ended March 31, 2018
			Field &								Field &
	Environmental		Industrial						Environmental		Industrial
$s in thousands	Services		Services		Corporate		Total		Services		Services		Corporate		Total
Revenue	$	268,555	$	101,790	$	—	$	370,345	$	86,471	$	33,588	$	—	$	120,059
Depreciation, amortization and accretion	$	27,238	$	4,225	$	375	$	31,838	$	8,510	$	1,355	$	116	$	9,981
Capital expenditures	$	21,204	$	2,900	$	2,250	$	26,354	$	6,004	$	1,038	$	516	$	7,558
Total assets	$	619,156	$	124,053	$	59,442	$	802,651	$	595,304	$	124,184	$	81,597	$	801,085

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)

Management uses Adjusted EBITDA as a financial measure to assess segment performance. Adjusted EBITDA is defined as net income before interest expense, interest income, income tax expense, depreciation, amortization, ~~stock-based~~share-based compensation, accretion of closure and post-closure liabilities, foreign currency gain/loss, non-cash property and equipment impairment charges, property insurance recoveries 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, 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; and

Although depreciation and amortization charges are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

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A reconciliation of Net income to Adjusted EBITDA is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
$s in thousands	2018		2017		2018		2017		2019		2018
Net income	$	13,427	$	8,365	$	35,890	$	18,599	$	8,043	$	9,243
Income tax expense		3,400		4,668		11,178		10,465		3,041		3,520
Interest expense		3,066		2,783		8,782		15,387		4,030		2,809
Interest income		(34)		(18)		(97)		(49)		(207)		(24)
Foreign currency (gain) loss		303		(275)		456		(521)
Foreign currency loss										139		14
Other income		(177)		(234)		(2,493)		(537)		(110)		(2,123)
Impairment charges		3,666		—		3,666		—
Property and equipment impairment charges										25		—
Depreciation and amortization of plant and equipment		7,342		7,386		20,991		21,007		8,125		6,605
Amortization of intangibles		2,327		2,300		6,925		7,586
Stock-based compensation		1,193		995		3,272		2,954
Amortization of intangible assets										2,811		2,302
Share-based compensation										1,222		1,068
Accretion and non-cash adjustment of closure & post-closure liabilities		1,087		1,090		3,242		3,245		1,125		1,074
Property insurance recoveries										(4,653)		—
Adjusted EBITDA	$	35,600	$	27,060	$	91,812	$	78,136	$	23,591	$	24,488

Adjusted EBITDA, by operating segment, is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
$s in thousands	2018		2017		2018		2017		2019		2018
Adjusted EBITDA:
Environmental Services	$	43,210	$	35,524	$	117,742	$	102,022	$	35,260	$	34,672
Field & Industrial Services		6,236		3,646		13,143		9,829		2,554		2,345
Corporate		(13,846)		(12,110)		(39,073)		(33,715)		(14,223)		(12,529)
Total	$	35,600	$	27,060	$	91,812	$	78,136	$	23,591	$	24,488

Property and Equipment and Intangible Assets Outside of the United States

We provide services in the United States and Canada. Long-lived assets, comprised of property and equipment and intangible assets net of accumulated depreciation and amortization, by geographic location are as follows:


	September 30,		December 31,		March 31,		December 31,
$s in thousands	2018		2017		2019		2018
United States	$	402,923	$	396,066	$	475,703	$	480,322
Canada		60,468		61,178		58,462		57,787
Total long-lived assets	$	463,391	$	457,244	$	534,165	$	538,109

NOTE ~~17.~~18. SUBSEQUENT EVENTS

Quarterly Dividend

On ~~October~~April 1, ~~2018,~~2019, we declared a quarterly dividend of $0.18 per common share to stockholders of record on ~~October~~April 19, ~~2018.~~2019. The dividend was paid using cash on hand on ~~October~~April 26, ~~2018~~2019 in an aggregate amount of $4.0 million.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of US Ecology, Inc.

Results of Review of Interim Financial Information

We have reviewed the accompanying consolidated balance sheet of US Ecology, Inc. and subsidiaries (the ~~"Company"~~“Company”) as of ~~September 30, 2018,~~March 31, 2019, the related consolidated statements of operations, comprehensive income, ~~and~~ cash flows, and stockholders’ equity for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ and the related notes (collectively referred to as the ~~"interim~~“interim financial ~~information"~~information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2017,~~2018, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year then ended (not presented herein); and in our report dated February ~~26, 2018,~~28, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, ~~2017,~~2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company's management. We are a public accounting firm registered with the 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 reviews in accordance with standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ Deloitte & Touche LLP

Boise, Idaho

~~November 5, 2018~~May 6, 2019

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q. In this report words such as “we,” “us,” “our,” “US Ecology” and “the Company” refer to US Ecology, Inc. and its subsidiaries.

OVERVIEW

US Ecology, Inc. 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, non-hazardous and radioactive waste, as well as a wide range of complementary field and industrial services. US Ecology’s comprehensive knowledge of the waste business, its collection of waste management facilities and focus on safety, environmental compliance, and customer service enables us to effectively meet the needs of our customers and to build long-lasting relationships.

We have fixed facilities and service centers operating in the United States, Canada and Mexico. Our fixed facilities include five Resource Conservation and Recovery Act of 1976, subtitle C, hazardous waste landfills and one low-level radioactive waste landfill located near Beatty, Nevada; Richland, Washington; Robstown, Texas; Grand View, Idaho; Detroit, Michigan and Blainville, Québec, Canada. These facilities generate revenue from fees charged to transport, recycle, treat and dispose of waste and ~~from fees charged~~ to perform various field and industrial services for our customers.

Our operations are managed in two reportable segments reflecting our internal management reporting structure and nature of services offered as follows:

In order to provide insight into the underlying drivers of our waste volumes and related treatment and disposal (“T&D”) revenues, we evaluate period-to-period changes in our T&D revenue for our Environmental Services segment based on the industry of the waste generator, based on North American Industry Classification System (“NAICS”) codes.

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The composition of Environmental Services segment T&D revenues by waste generator industry for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ were as follows:


	% of Treatment and Disposal Revenue (1) for the		% of Treatment and Disposal Revenue (1) for the
	Three Months Ended September 30,		Three Months Ended March 31,
Generator Industry	2018	2017	2019	2018
Metal Manufacturing			16%	14%
Chemical Manufacturing	19%	20%	15%	13%
Metal Manufacturing	17%	15%
Broker / TSDF	12%	12%	15%	13%
General Manufacturing	11%	13%	13%	12%
Refining	10%	10%	10%	11%
Government	7%	6%	7%	5%
Transportation			4%	3%
Utilities	3%	4%	3%	4%
Waste Management & Remediation	2%	3%	2%	4%
Transportation	2%	3%
Mining, Exploration and Production	2%	3%	2%	2%
Other (2)	15%	11%	13%	19%

(1)

Excludes all transportation service ~~revenue~~revenue.

(2)

Includes retail and wholesale trade, rate regulated, construction and other ~~industries~~industries.

% of Treatment and Disposal Revenue (1) for the

Nine Months Ended September 30,
Generator Industry

2018

2017
Metal Manufacturing

16%

16%
Chemical Manufacturing

16%

16%
Broker / TSDF

13%

13%
General Manufacturing

12%

13%
Refining

11%

11%
Government

6%

6%
Utilities

3%

4%
Waste Management & Remediation

3%

3%
Transportation

3%

3%
Mining, Exploration and Production

2%

3%
Other (2)

15%

12%

~~(1)~~

~~Excludes all transportation service revenue~~

~~(2)~~

~~Includes retail and wholesale trade, rate regulated, construction and other industries~~

We also categorize our Environmental Services 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 recurring 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.

For the three months ended ~~September 30, 2018,~~March 31, 2019, Base Business revenue increased 9%8% compared to the three months ended ~~September 30, 2017.~~March 31, 2018. For the three months ended ~~September 30, 2018,~~March 31, 2019, approximately ~~78%~~84% of our total T&D revenue was derived from our Base Business, up from ~~74%~~83% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, Base Business revenue increased 8% compared to the nine months ended September 30, 2017. For the nine months ended September 30, 2018, approximately 80% of our total T&D revenue was derived from our Base Business, up from 78% for the nine months ended September 30, 2017.March 31, 2018. Our business is highly competitive and no assurance can be given that we will maintain these revenue levels or increase our market share.

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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 three months ended ~~September 30, 2018,~~March 31, 2019, approximately ~~22%~~16% of our total T&D revenue was derived from Event Business projects, down from ~~26%~~17% for the three months ended ~~September 30, 2017.~~March 31, 2018. For the three months ended ~~September 30, 2018,~~March 31, 2019, Event Business revenue decreased 8%1% compared to the three months ended September 30, 2017. For the nine months ended September 30, 2018, approximately 20% of our total T&D revenue was derived from Event Business projects, down from 22% for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, Event Business revenue decreased 4% compared to the nine months ended September 30, 2017.March 31, 2018. 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 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.

Depending on project-specific customer needs and competitive economics, transportation services may be offered at or near our cost to help secure new business. For waste transported by rail from the eastern United States and other locations distant from our Grand View, Idaho and Robstown, Texas facilities, transportation-related revenue can account for as

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much as 75% of total project revenue. While bundling transportation and disposal services reduces overall gross profit as a percentage of total revenue (“gross margin”), this value-added service has allowed us to win multiple projects that management believes we could not have otherwise competed for successfully. Our Company-owned fleet of 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.

The increased waste volumes resulting from projects won through this bundled service strategy further drive operating leverage benefits inherent to the disposal business, increasing profitability. While waste treatment and other variable costs are project-specific, the incremental earnings contribution from large and small projects generally increases as overall disposal volumes increase. Based on past experience, management believes that maximizing operating income, net income and earnings per share is a higher priority than maintaining or increasing gross margin. We intend to continue aggressively bidding bundled transportation and disposal services based on this proven strategy.

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.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2019 COMPARED TO THREE MONTHS ENDED MARCH 31, 2018

Operating results and percentage of revenues were as follows:


	Three Months Ended March 31,								2019 vs. 2018
$s in thousands	2019		%		2018		%		$ Change		% Change
Revenue
Environmental Services	$	92,332	70	%	$	86,471	72	%	$	5,861	7	%
Field & Industrial Services		38,705	30	%		33,588	28	%		5,117	15	%
Total		131,037	100	%		120,059	100	%		10,978	9	%
Gross Profit
Environmental Services		31,556	34	%		32,452	38	%		(896)	(3)	%
Field & Industrial Services		3,685	10	%		3,219	10	%		466	14	%
Total		35,241	27	%		35,671	30	%		(430)	(1)	%
Selling, General & Administrative Expenses
Environmental Services		1,406	2	%		6,376	7	%		(4,970)	(78)	%
Field & Industrial Services		3,385	9	%		2,257	7	%		1,128	50	%
Corporate		15,514	n/m			13,599	n/m			1,915	14	%
Total		20,305	15	%		22,232	19	%		(1,927)	(9)	%
Adjusted EBITDA
Environmental Services		35,260	38	%		34,672	40	%		588	2	%
Field & Industrial Services		2,554	7	%		2,345	7	%		209	9	%
Corporate		(14,223)	n/m			(12,529)	n/m			(1,694)	14	%
Total	$	23,591	18	%	$	24,488	20	%	$	(897)	(4)	%

Table of Contents

~~RESULTS OF OPERATIONS~~

~~THREE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2017~~

~~Operating results and percentage of revenues were as follows:~~

Three Months Ended September 30,

2018 vs. 2017

$s in thousands

2018

%

2017

%

$ Change

% Change

Revenue













Environmental Services

$
107,197

71
%
$
97,661

73
%
$
9,536

10
%
Field & Industrial Services

44,219

29
%

36,393

27
%

7,826

22
%
Total

151,416

100
%

134,054

100
%

17,362

13
%
Gross Profit













Environmental Services

39,930

37
%

33,146

34
%

6,784

20
%
Field & Industrial Services

7,370

17
%

4,587

13
%

2,783

61
%
Total

47,300

31
%

37,733

28
%

9,567

25
%
Selling, General & Administrative Expenses













Environmental Services

5,725

5
%

7,074

7
%

(1,349)

(19)
%
Field & Industrial Services

2,759

6
%

2,318

6
%

441

19
%
Corporate

15,165

n/m

13,052

n/m

2,113

16
%
Total

23,649

16
%

22,444

17
%

1,205

5
%
Adjusted EBITDA













Environmental Services

43,210

40
%

35,524

36
%

7,686

22
%
Field & Industrial Services

6,236

14
%

3,646

10
%

2,590

71
%
Corporate

(13,846)

n/m

(12,110)

n/m

(1,736)

14
%
Total

$
35,600

24
%
$
27,060

20
%
$
8,540

32
%

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)


	Three Months Ended September 30,				2018 vs. 2017				Three Months Ended March 31,				2019 vs. 2018
$s in thousands	2018		2017		$ Change		% Change		2019		2018		$ Change		% Change
Net income	$	13,427	$	8,365	$	5,062	61	%	$	8,043	$	9,243	$	(1,200)	(13)	%
Income tax expense		3,400		4,668		(1,268)	(27)	%		3,041		3,520		(479)	(14)	%
Interest expense		3,066		2,783		283	10	%		4,030		2,809		1,221	43	%
Interest income		(34)		(18)		(16)	89	%		(207)		(24)		(183)	763	%
Foreign currency (gain) loss		303		(275)		578	(210)	%
Foreign currency loss										139		14		125	893	%
Other income		(177)		(234)		57	(24)	%		(110)		(2,123)		2,013	(95)	%
Impairment charges		3,666		—		3,666	n/m
Property and equipment impairment charges										25		—		25	n/m
Depreciation and amortization of plant and equipment		7,342		7,386		(44)	(1)	%		8,125		6,605		1,520	23	%
Amortization of intangibles		2,327		2,300		27	1	%
Stock-based compensation		1,193		995		198	20	%
Amortization of intangible assets										2,811		2,302		509	22	%
Share-based compensation										1,222		1,068		154	14	%
Accretion and non-cash adjustment of closure & post-closure liabilities		1,087		1,090		(3)	(0)	%		1,125		1,074		51	5	%
Property insurance recoveries										(4,653)		—		(4,653)	n/m
Adjusted EBITDA	$	35,600	$	27,060	$	8,540	32	%	$	23,591	$	24,488	$	(897)	(4)	%

~~Table of Contents~~

measurement determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as presented may not be comparable to other similarly titled measures of other companies. Items excluded from Adjusted EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.

Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our results as reported under GAAP. Some of the limitations are:

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;

Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; and

Table of Contents

Revenue

Total revenue increased ~~13%~~9% to ~~$151.4~~$131.0 million for the ~~third~~first quarter of ~~2018~~2019 compared with ~~$134.1~~$120.1 million for the ~~third~~first quarter of ~~2017.~~2018.

Environmental Services

Environmental Services segment revenue increased ~~10%~~7% to ~~$107.2~~$92.3 million for the ~~third~~first quarter of ~~2018,~~2019, compared to ~~$97.7~~$86.5 million for the ~~third~~first quarter of ~~2017.~~2018. T&D revenue increased 8%7% compared to the ~~third~~first quarter of ~~2017,~~2018, primarily as a result of ~~a 9%~~an 8% increase in Base Business revenue, partially offset by ~~an 8%~~a 1% decrease in project-based Event Business revenue. Transportation service revenue increased ~~18%~~6% compared to the ~~third~~first quarter of ~~2017,~~2018, reflecting more Event Business projects utilizing the Company’s transportation and logistics services. Total tons of waste disposed of or processed across all of our facilities ~~decreased 1%~~increased 27% for the ~~third~~first quarter of 2019 compared to the first quarter of 2018, ~~compared to~~primarily reflecting incremental volumes disposed at our Winnie, Texas deep-well facility that was acquired in the ~~third~~fourth quarter of ~~2017.~~2018. Tons of waste disposed of or processed at our landfills ~~increased 7%~~decreased 1% for the ~~third~~first quarter of ~~2018~~2019 compared to the ~~third~~first quarter of ~~2017.~~2018.

T&D revenue from recurring Base Business waste generators increased 9%8% for the ~~third~~first quarter of 2019 compared to the first quarter of 2018 ~~compared to the third quarter of 2017~~ and comprised ~~78%~~84% of total T&D revenue for the ~~third~~first quarter of ~~2018.~~2019. During the ~~third~~first quarter of ~~2018,~~2019, increases in Base Business T&D revenue were primarily attributable to the ~~refining,~~ metal manufacturing and ~~“Other”~~broker/TSDF industry groups.

T&D revenue from Event Business waste generators decreased 8%1% for the ~~third~~first quarter of 2019 compared to the first quarter of 2018 ~~compared to the third quarter of 2017~~ and comprised ~~22%~~16% of total T&D revenue for the ~~third~~first quarter of ~~2018.~~2019. During the ~~third~~first quarter of ~~2018,~~2019, decreases in Event Business T&D revenue from the ~~refining, mining, exploration~~“Other” and waste management & ~~production, and general manufacturing~~remediation industry groups were partially offset by an increase in Event Business T&D revenue from the ~~“Other”~~chemical manufacturing and government industry ~~group.~~groups.

~~Table of Contents~~

The following table summarizes combined Base Business and Event Business T&D revenue growth, within the Environmental Services segment, by generator industry for the ~~third~~first quarter of ~~2018~~2019 as compared to the ~~third~~first quarter of ~~2017:~~2018:


		Treatment and Disposal Revenue Growth
		Three Months Ended ~~September 30, 2018~~March 31, 2019 vs.
		Three Months Ended ~~September 30, 2017~~March 31, 2018
~~Other~~Transportation		~~25%~~58%
Government		~~21%~~30%
Chemical Manufacturing		23%
Metal Manufacturing		~~18%~~
~~Refining~~		~~13%~~17%
Broker / TSDF		6%17%
~~Chemical Manufacturing~~Mining, Exploration & Production		0%
~~Transportation~~		~~-1%~~13%
General Manufacturing		~~-12%~~5%
Utilities		-1%
Refining		-8%
Other		-19%
Waste Management & Remediation		~~-13%~~
~~Utilities~~		~~-21%~~
~~Mining, Exploration & Production~~		~~-33%~~-50%

Field & Industrial Services

Field & Industrial Services segment revenue increased ~~22%~~15% to ~~$44.2~~$38.7 million for the ~~third~~first quarter of ~~2018~~2019 compared with ~~$36.4~~$33.6 million for the ~~third~~first quarter of ~~2017.~~2018. The increase in Field & Industrial Services segment revenue is primarily attributable to growth in our ~~Small Quantity Generation, Remediation~~Emergency Response business line as a result of our acquisition of ES&H of Dallas, LLC (“ES&H Dallas”) in the third quarter of 2018 as well as growth in our Industrial Services and Transportation and Logistics business lines, partially offset by lower revenues from our Total Waste Management business ~~lines as well as our recently-acquired ES&H~~line.

Table of ~~Dallas, LLC business.~~Contents

Gross Profit

Total gross profit ~~increased 25%~~decreased 1% to ~~$47.3~~$35.2 million for the ~~third~~first quarter of ~~2018, up~~2019, down from ~~$37.7~~$35.7 million for the ~~third~~first quarter of ~~2017.~~2018. Total gross margin was ~~31%~~27% for the ~~third~~first quarter of ~~2018~~2019 compared with ~~28%~~30% for the ~~third~~first quarter of ~~2017.~~2018.

Environmental Services

Environmental Services segment gross profit ~~increased 20%~~decreased 3% to ~~$39.9~~$31.6 million for the ~~third~~first quarter of ~~2018, up~~2019, down from ~~$33.1~~$32.5 million for the ~~third~~first quarter of ~~2017.~~2018. Total segment gross margin for the ~~third~~first quarter of 2019 was 34% compared with 38% for the first quarter of 2018, ~~was 37% compared with 34% for the third quarter of 2017.~~primarily reflecting a less favorable service mix in segment transportation revenue. T&D gross margin was ~~43%~~39% for both the ~~third~~first quarter of ~~2018 compared with 38% for~~2019 and the ~~third~~first quarter of 2017. The increase in T&D gross margin is primarily attributable to a more favorable service mix in the third quarter of 2018 compared to the third quarter of 2017. T&D gross margin for the third quarter of 2017 also reflects incremental costs associated with a hurricane that impacted our Robstown, Texas facility.2018.

Field & Industrial Services

Field & Industrial Services segment gross profit increased ~~61%~~14% to ~~$7.4~~$3.7 million for the ~~third~~first quarter of 2019, up from $3.2 million for the first quarter of 2018. Total segment gross margin was ~~17%~~10% for both the ~~third~~first quarter of ~~2018 compared with 13% for~~2019 and the ~~third~~first quarter of ~~2017, primarily attributable to a more favorable service mix in the third quarter of 2018 compared to the third quarter of 2017, particularly from the recently-acquired ES&H of Dallas, LLC business.~~2018.

Selling, General and Administrative Expenses (“SG&A”)

Total SG&A was ~~$23.6~~$20.3 million, or ~~16%~~15% of total revenue, for the ~~third~~first quarter of ~~2018 compared with $22.4~~2019, down from $22.2 million, or ~~17%~~19% of total revenue, for the ~~third~~first quarter of ~~2017.~~2018.

~~Table of Contents~~

Environmental Services

Environmental Services segment SG&A decreased ~~19%~~78% to ~~$5.7~~$1.4 million, or 5%2% of segment revenue, for the ~~third~~first quarter of ~~2018~~2019 compared with ~~$7.1~~$6.4 million, or 7% of segment revenue, for the ~~third quarter of 2017, primarily reflecting lower property tax expenses, lower bad debt expenses and lower employee labor costs in the third~~first quarter of 2018, ~~compared~~primarily reflecting property insurance recoveries of $4.7 million recognized in the first quarter of 2019 related to the ~~third~~incident at our Grand View, Idaho facility in the fourth quarter of ~~2017. SG&A for the third quarter of 2017 included a $1.1 million property tax assessment for tax years 2015 through 2017 associated with our 2014 acquisition of EQ Holdings, Inc.~~2018.

Field & Industrial Services

Field & Industrial Services segment SG&A increased ~~19%~~50% to ~~$2.8~~$3.4 million, or 6%9% of segment revenue, for the ~~third~~first quarter of ~~2018~~2019 compared with $2.3 million, or 6%7% of segment revenue, for the ~~third quarter of 2017, primarily reflecting higher employee labor costs, higher rental expenses and higher consulting and professional services expenses in the third~~first quarter of 2018, ~~compared to the third quarter of 2017.~~primarily reflecting incremental costs associated with new facilities.

Corporate

Corporate SG&A was ~~$15.2~~$15.5 million, or ~~10%~~12% of total revenue, for the ~~third~~first quarter of ~~2018~~2019 compared with ~~$13.1~~$13.6 million, or ~~10%~~11% of total revenue, for the ~~third~~first quarter of ~~2017,~~2018, primarily reflecting higher employee labor costs ~~higher consulting and professional services expenses~~ and higher information technology related expenses in the ~~third~~first quarter of ~~2018~~2019 compared with the ~~third~~first quarter of ~~2017.~~2018.

Components of Adjusted EBITDA

Income tax expense

Our effective income tax rate for the ~~third~~first quarter of ~~2018~~2019 was ~~20.2%~~27.4%, compared with ~~35.8%~~27.6% for the ~~third~~first quarter of ~~2017.~~2018. The decrease was primarily the result of the impact of the Tax Act, enacted on December 22, 2017 by the U.S. government which reduced the federal corporate tax rate to 21% from the existing maximum rate of 35%. In addition, the Company implemented various federal and state tax planning strategies which favorably impactedin the effective tax rate was primarily due to a higher discrete benefit from the recognition of excess tax benefits of share-based compensation and federal research and development credits, partially offset by ~~the impact~~effects of the international tax ~~associated with the deemed repatriation of foreign earnings.~~ provisions from U.S. tax reform that became effective in 2018.

Interest expense

Interest expense was ~~$3.1~~$4.0 million for the ~~third~~first quarter of ~~2018~~2019 compared with $2.8 million for the ~~third~~first quarter of ~~2017.~~ 2018.

Table of Contents

The increase ~~was primarily~~is the result of higher outstanding debt levels in the first quarter of 2019 due to the acquisition of Ecoserv Industrial Disposal, LLC (“Winnie”) in November of 2018, as well as higher interest rates on the variable portion of our ~~credit facility in the third quarter of 2018 compared to the third quarter of 2017.~~outstanding debt.

Foreign currency gain (loss)

We recognized a ~~$303,000 non-cash~~$139,000 foreign currency loss for the ~~third~~first quarter of ~~2018~~2019 compared with a ~~$275,000 non-cash~~$14,000 foreign currency ~~gain~~loss for the ~~third~~first quarter of ~~2017.~~2018. Foreign currency gains and losses reflect changes in business activity conducted in a currency other than the United States dollar (“USD”), our functional currency. Additionally, we established intercompany loans between our Canadian subsidiaries, whose functional currency is the Canadian dollar (“CAD”), and our parent company, US Ecology, 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 ~~September 30, 2018,~~March 31, 2019, we had ~~$21.5~~$17.9 million of intercompany loans subject to currency revaluation.

~~Table of Contents~~

Other income

Other income was ~~$177,000~~$110,000 for the ~~third~~first quarter of ~~2018~~2019 compared with other income of ~~$234,000~~$2.1 million for the ~~third quarter of 2017.~~

~~Impairment charges~~

Based on the results of our interim assessment of the goodwill, indefinite-lived intangible assets and finite-lived tangible and intangible assets of our Mobile Recycling reporting unit, which is part of our Environmental Services segment, we recorded impairment charges of $3.7 million in the thirdfirst quarter of 2018. ~~See Note 9~~Other income for the first quarter of 2018 includes a $2.0 million gain on the ~~Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements (Unaudited)”~~issuance of ~~this Quarterly Report~~a property easement on ~~Form 10-Q for additional information.~~a portion of unutilized Company-owned land at one of our operating facilities.

Depreciation and amortization of plant and equipment

Depreciation and amortization expense was ~~$7.3~~$8.1 million for the ~~third~~first quarter of 2019 compared with $6.6 million for the first quarter of 2018, ~~compared~~primarily reflecting additional depreciation expense on assets associated with ~~$7.4 million for~~ES&H Dallas and Winnie that were acquired in the third and fourth quarter of ~~2017.~~2018, respectively.

Amortization of ~~intangibles~~intangible assets

Intangible assets amortization expense was $2.8 million for the first quarter of 2019 compared with $2.3 million for the ~~third~~first quarter of ~~both~~ 2018, primarily reflecting additional amortization of intangible assets recorded as a result of the ES&H Dallas and ~~2017.~~Winnie acquisitions in the third and fourth quarter of 2018, respectively.

~~Stock-based~~Share-based compensation

~~Stock-based~~Share-based compensation expense was $1.2 million for the ~~third~~first quarter of ~~2018~~2019 compared with ~~$1.0~~$1.1 million for the ~~third~~first quarter ~~2017.~~2018.

Accretion and non-cash adjustment of closure and post-closure liabilities

Accretion and non-cash adjustment of closure and post-closure liabilities was $1.1 million for the ~~third~~first quarter of both ~~2018~~2019 and ~~2017.~~2018.

~~Table of Contents~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2018 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2017~~Property insurance recoveries

~~Operating results and percentage~~The Company recognized property-related insurance recoveries of ~~revenues were as follows:~~

Nine Months Ended September 30,

2018 vs. 2017

$s in thousands

2018

%

2017

%

$ Change

% Change

Revenue













Environmental Services

$
292,628

72
%
$
268,555

73
%
$
24,073

9
%
Field & Industrial Services

115,759

28
%

101,790

27
%

13,969

14
%
Total

408,387

100
%

370,345

100
%

38,042

10
%
Gross Profit













Environmental Services

108,281

37
%

92,506

34
%

15,775

17
%
Field & Industrial Services

16,138

14
%

12,996

13
%

3,142

24
%
Total

124,419

30
%

105,502

28
%

18,917

18
%
Selling, General & Administrative Expenses











Environmental Services

16,926

6
%

18,066

7
%

(1,140)

(6)
%
Field & Industrial Services

7,470

6
%

7,586

7
%

(116)

(2)
%
Corporate

42,641

n/m

36,506

n/m

6,135

17
%
Total

67,037

16
%

62,158

17
%

4,879

8
%
Adjusted EBITDA













Environmental Services

117,742

40
%

102,022

38
%

15,720

15
%
Field & Industrial Services

13,143

11
%

9,829

10
%

3,314

34
%
Corporate

(39,073)

n/m

(33,715)

n/m

(5,358)

16
%
Total

$
91,812

22
%
$
78,136

21
%
$
13,676

18
%

~~Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”)~~

Nine Months Ended September 30,

2018 vs. 2017

$s in thousands

2018

2017

$ Change

% Change

Net income

$
35,890

$
18,599

$
17,291

93
%
Income tax expense

11,178

10,465

713

7
%
Interest expense

8,782

15,387

(6,605)

(43)
%
Interest income

(97)

(49)

(48)

98
%
Foreign currency (gain) loss

456

(521)

977

(188)
%
Other income

(2,493)

(537)

(1,956)

364
%
Impairment charges

3,666

—

3,666

n/m

Depreciation and amortization of plant and equipment

20,991

21,007

(16)

(0)
%
Amortization of intangibles

6,925

7,586

(661)

(9)
%
Stock-based compensation

3,272

2,954

318

11
%
Accretion and non-cash adjustment of closure & post-closure liabilities

3,242

3,245

(3)

(0)
%
Adjusted EBITDA

$
91,812

$
78,136

$
13,676

18
%

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

~~Table of Contents~~

EBITDA are significant components in understanding and assessing our financial performance. Adjusted EBITDA should not be considered in isolation or as an alternative to, or substitute for, net income, cash flows generated by operations, investing or financing activities, or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.

~~Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation or a substitute for analyzing our results as reported under GAAP. Some of the limitations are:~~

~~Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;~~

~~Adjusted EBITDA does not reflect our interest expense, or the requirements necessary to service interest or principal payments on our debt;~~

~~Adjusted EBITDA does not reflect our income tax expenses or the cash requirements to pay our taxes;~~

~~Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; and~~

~~Revenue~~

~~Total revenue increased 10% to $408.4~~$4.7 million ~~for the first nine months of 2018 compared with $370.3 million for the first nine months of 2017.~~

~~Environmental Services~~

Environmental Services segment revenue increased 9% to $292.6 million for the first nine months of 2018, compared to $268.6 million for the first nine months of 2017. T&D revenue increased 7% compared to the first nine months of 2017, primarily as a result of an 8% increase in Base Business revenue, partially offset by a 4% decrease in project-based Event Business revenue. Transportation service revenue increased 15% compared to the first nine months of 2017, reflecting more Event Business projects utilizing the Company’s transportation and logistics services. Total tons of waste disposed of or processed across all of our facilities for the first nine months of 2018 was consistent with the first nine months of 2017. Tons of waste disposed of or processed at our landfills increased 2% for the first nine months of 2018 compared to the first nine months of 2017.

T&D revenue from recurring Base Business waste generators increased 8% for the first nine months of 2018 compared to the first nine months of 2017 and comprised 80% of total T&D revenue for the first nine months of 2018. During the first nine months of 2018, increases in Base Business T&D revenue were primarily attributable to the chemical manufacturing, broker/TSDF, refining and “Other” industry groups.

T&D revenue from Event Business waste generators decreased 4% for the first nine months of 2018 compared to the first nine months of 2017 and comprised 20% of total T&D revenue for the first nine months of 2018. During the first nine months of 2018, decreases in Event Business T&D revenue from the general manufacturing, refining and chemical manufacturing industry groups were partially offset by increases in Event Business T&D revenue from the “Other” and metal manufacturing industry groups.

~~Table of Contents~~

The following table summarizes combined Base Business and Event Business T&D revenue growth, within the Environmental Services segment, by generator industry for the first nine months of 2018 as compared to the first nine months of 2017:


		~~Treatment and Disposal Revenue Growth~~
		~~Nine Months Ended September 30, 2018 vs.~~
		~~Nine Months Ended September 30, 2017~~
~~Waste Management & Remediation~~		~~26%~~
~~Other~~		~~16%~~
~~Government~~		~~11%~~
~~Metal Manufacturing~~		9%
~~Broker / TSDF~~		8%
~~Chemical Manufacturing~~		6%
~~Transportation~~		6%
~~Refining~~		2%
~~General Manufacturing~~		~~-7%~~
~~Mining, Exploration & Production~~		~~-12%~~
~~Utilities~~		~~-13%~~

~~Field & Industrial Services~~

Field & Industrial Services segment revenue increased 14% to $115.8 million for the first nine months of 2018 compared with $101.8 million for the first nine months of 2017. The increase in Field & Industrial Services segment revenue is primarily attributable to growth in our Small Quantity Generation and Total Waste Management business lines as well as stronger overall market conditions.

~~Gross Profit~~

Total gross profit increased 18% to $124.4 million for the first nine months of 2018, up from $105.5 million for the first nine months of 2017. Total gross margin was 30% for the first nine months of 2018 compared with 28% for the first nine months of 2017.

~~Environmental Services~~

Environmental Services segment gross profit increased 17% to $108.3 million for the first nine months of 2018, up from $92.5 million for the first nine months of 2017. Total segment gross margin for the first nine months of 2018 was 37% compared with 34% for the first nine months of 2017. T&D gross margin was 42% for the first nine months of 2018 compared with 38% for the first nine months of 2017. T&D gross margin for the first nine months of 2017 reflects the impact of the temporary closure of one of our treatment facilities due to severe wind damage and incremental costs associated with a hurricane that impacted our Robstown, Texas facility.

~~Field & Industrial Services~~

Field & Industrial Services segment gross profit increased 24% to $16.1 million for the first nine months of 2018. Total segment gross margin was 14% for the first nine months of 2018 compared with 13% for the first nine months of 2017, primarily attributable to a more favorable service mix in the first ~~nine months~~quarter of ~~2018 compared to the first nine months of 2017, particularly from the recently-acquired ES&H of Dallas, LLC business.~~

~~Selling, General and Administrative Expenses (“SG&A”)~~

~~Total SG&A was $67.0 million, or 16% of total revenue, for the first nine months of 2018 compared with $62.2 million, or 17% of total revenue, for the first nine months of 2017.~~

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~~Environmental Services~~

Environmental Services segment SG&A decreased 6% to $16.9 million, or 6% of segment revenue, for the first nine months of 2018 compared with $18.1 million, or 7% of segment revenue, for the first nine months of 2017, primarily reflecting lower property tax expenses, lower amortization expense and lower consulting and professional services expenses, partially offset by lower insurance proceeds recognized in the first nine months of 2018 compared to the first nine months of 2017. The first nine months of 2017 benefitted from the ~~recognition of insurance proceeds~~2019 related to the ~~repair of one of~~incident at our ~~treatment facilities after suffering severe wind damage.~~ ~~The decrease in property tax expense~~Grand View, Idaho facility in the ~~first nine months of 2018 was the result of a settlement in the second~~fourth quarter of ~~2018 on a dispute related to a $1.1 million property tax assessment for tax years 2015 through 2017 associated with our 2014 acquisition of EQ Holdings, Inc. recorded in the third quarter of 2017.~~

~~Field & Industrial Services~~

Field & Industrial Services segment SG&A decreased 2% to $7.5 million, or 6% of segment revenue, for the first nine months of 2018 compared with $7.6 million, or 7% of segment revenue, for the first nine months of 2017, primarily reflecting lower bad debt expense and lower amortization expense, partially offset by higher employee labor costs and lower insurance proceeds recognized in the first nine months of 2018 compared to the first nine months of 2017.

~~Corporate~~

Corporate SG&A was $42.6 million, or 10% of total revenue, for the first nine months of 2018 compared with $36.5 million, or 10% of total revenue, for the first nine months of 2017, primarily reflecting higher employee labor costs and higher consulting and professional services expenses in the first nine months of 2018 compared with the first nine months of 2017.

~~Components of Adjusted EBITDA~~

~~Income tax expense~~

Our effective income tax rate for the first nine months of 2018 was 23.7%, down from 36.0% for the nine months ended September 31, 2017. The decrease was primarily the result of the impact of the Tax Act, enacted on December 22, 2017 by the U.S. government which reduced the federal corporate tax rate to 21% from the existing maximum rate of 35%. In addition, the Company implemented various federal and state tax planning strategies which favorably impacted the effective tax rate, partially offset by the impact of the tax associated with the deemed repatriation of foreign earnings.

~~Interest expense~~

Interest expense was $8.8 million for the first nine months of 2018 compared with $15.4 million for the first nine months of 2017. The decrease in interest expense in the first nine months of 2018 was primarily the result of a one-time non-cash charge of $5.5 million to interest expense in 2017 related to the refinancing of our former credit agreement. The remaining decrease is attributable a lower effective interest rate under our new credit agreement.

~~Foreign currency gain (loss)~~

We recognized a $456,000 non-cash foreign currency loss for the first nine months of 2018 compared with a $521,000 non-cash foreign currency gain for the first nine months of 2017. 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 between our Canadian subsidiaries, whose functional currency is the CAD, and our parent company, US Ecology, 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 September 30, 2018, we had $21.5 million of intercompany loans subject to currency revaluation.

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~~Other income~~

Other income was $2.5 million for the first nine months of 2018 compared with other income of $537,000 for the first nine months of 2017, primarily reflecting a $2.0 million gain in the first nine months of 2018 on the issuance of a property easement on a portion of unutilized Company-owned land at one of our operating facilities.

~~Impairment charges~~

Based on the results of our interim assessment of the goodwill, indefinite-lived intangible assets and finite-lived tangible and intangible assets of our Mobile Recycling reporting unit, which is part of our Environmental Services segment, we recorded impairment charges of $3.7 million in the third quarter of 2018. ~~See Note 9 of the Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q for additional information.~~

~~Depreciation and amortization of plant and equipment~~

~~Depreciation and amortization expense was $21.0 million for the first nine months of both 2018 and 2017.~~

~~Amortization of intangibles~~

Intangible assets amortization expense was $6.9 million for the first nine months of 2018 compared with $7.6 million for the first nine months of 2017, primarily reflecting the full amortization of certain intangible assets in 2017.

~~Stock-based compensation~~

~~Stock-based compensation expense increased to $3.3 million for the first nine months of 2018 compared with $3.0 million for the first nine months of 2017.~~

~~Accretion and non-cash adjustment of closure and post-closure liabilities~~

~~Accretion and non-cash adjustment of closure and post-closure liabilities was $3.2 million for the first nine months of both 2018 and 2017.~~

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CRITICAL ACCOUNTING POLICIES

Financial statement preparation requires management to make estimates and judgments that affect reported assets, liabilities, revenue and expenses and disclosure of contingent assets and liabilities. The accompanying unaudited consolidated financial statements are prepared using the same critical accounting policies disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017,~~2018, other than the adoption of the Accounting Standards Codification Topic ~~606, Revenue from Contracts with Customers,~~842, Leases, described in Note 21 and Note 9 of the Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q.

RECENTLY ISSUED ACCOUNTING STANDARDS

For information about recently issued accounting standards, see Note 1 of the Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash and cash equivalents, cash generated from operations and borrowings under ~~our senior secured~~the 2017 Credit Agreement entered into on April 18, 2017. At ~~September 30, 2018,~~March 31, 2019, we had ~~$26.1~~$16.1 million in cash and cash equivalents immediately available and ~~$217.3~~$158.2 million of borrowing capacity available under ~~our~~the 2017 Credit Agreement. 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 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 ~~our~~the 2017 Credit Agreement provide additional sources of liquidity should they be required.

Operating Activities

For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, net cash provided by operating activities was ~~$55.5~~$18.5 million. This primarily reflects net income of ~~$35.9~~$8.0 million, non-cash depreciation, amortization and accretion of ~~$31.2~~$12.1 million, ~~an increase~~a decrease in accounts receivable of $16.6 million and deferred incomes taxes of $2.9 million, partially offset by a decrease in accounts payable and accrued liabilities of ~~$12.8~~$11.9 million, ~~deferred income taxes of~~a $4.7 million ~~non-cash impairment charges~~gain on insurance proceeds from damaged property and equipment, a decrease in accrued salaries and benefits of ~~$3.7 million, and share-based compensation of $3.3 million, partially offset by an increase in accounts receivable of $27.6~~$3.4 million and an increase in income taxes receivable of ~~$7.9~~$1.5 million. Impacts on net income are due to the factors discussed above under “Results of Operations.” The ~~increase~~decrease in receivables is primarily attributable to the timing of customer payments. Changes in deferred income taxes are primarily attributable to deferred tax gains resulting from involuntary conversions related to the incident at our Grand View, Idaho facility in the fourth quarter of 2018. The decrease in accounts payable and accrued liabilities is primarily attributable to the timing of payments to vendors for products and services. ~~Changes~~We recognized property-related insurance recoveries in ~~deferred income taxes~~the first quarter of 2019 related to the incident at our Grand View, Idaho facility in the fourth quarter of 2018. The decrease in accrued salaries and ~~income taxes receivable are~~benefits is primarily attributable to cash payments during the ~~implementation~~first quarter of ~~various federal and state tax planning strategies, as well as the timing of income tax payments.~~2019 for accrued 2018 incentive compensation. The increase in ~~receivables~~income taxes receivable is primarily attributable to the timing of ~~customer~~income tax payments.

Days sales outstanding were 81 days as of ~~September 30, 2018,~~March 31, 2019, compared to 77 days as of December 31, ~~2017~~2018 and 7976 days as of ~~September 30, 2017.~~March 31, 2018.

For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, net cash provided by operating activities was ~~$49.4~~$28.8 million. This primarily reflects net income of ~~$18.6~~$9.2 million, non-cash depreciation, amortization and accretion of ~~$31.8~~$10.0 million ~~an increase~~and a decrease in accounts receivable of $14.9 million, partially offset by a decrease in accounts payable and accrued liabilities of ~~$6.2 million, amortization and write-off of debt issuance costs of $5.8 million, an increase in deferred revenue of~~ $4.2 million ~~share-based compensation expense of $3.0 million, an increase~~and a decrease in accrued salaries and benefits of ~~$2.7 million and a decrease in income taxes receivable of $1.6 million, partially offset by an increase in accounts receivable of $20.1 million and an increase in other assets of $2.6~~$2.4 million. Impacts on net income are due to the factors discussed above under “Results of Operations.” The ~~increase~~decrease in receivables is primarily attributable to the timing of customer payments. The decrease in accounts payable and accrued liabilities is primarily attributable to the timing of payments to vendors for products and services. The ~~increase~~decrease in ~~deferred revenue~~accrued salaries and benefits is primarily attributable to cash payments during the ~~timing~~first quarter of the treatment and disposal of waste received but not yet processed. The increase in receivables is primarily attributable to the timing of customer payments. The decrease in income taxes receivable is primarily attributable to the timing of income tax payments.

2018 for accrued 2017 incentive compensation.

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Investing Activities

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019, net cash used in investing activities was $1.8 million, primarily related to capital expenditures of $7.2 million, partially offset by property insurance proceeds of $5.0 million related to the incident at our Grand View, Idaho facility in the fourth quarter of 2018. Significant capital projects included construction of additional disposal capacity at our Blainville, Quebec, Canada and our Robstown, Texas facilities as well as equipment purchases and infrastructure upgrades at our corporate and operating facilities.

For the three months ended March 31, 2018, net cash used in investing activities was ~~$46.8~~$7.6 million, primarily related to capital ~~expenditures of $25.8 million and the acquisition of ES&H of Dallas, LLC for $21.3 million.~~expenditures. Significant capital projects included continuing construction of additional disposal capacity and railway expansion at our Blainville, Quebec, Canada location and equipment purchases and infrastructure upgrades at our corporate and operating facilities.

For the nine months ended September 30, 2017, net cash used in investing activities was $25.4 million, primarily related to capital expenditures. Significant capital projects included construction of additional disposal capacity at our Beatty, Nevada and Blainville, Quebec, Canada locations and equipment purchases and infrastructure upgrades at our corporate and operating facilities.

Financing Activities

For the ~~nine~~three months ended ~~September 30,~~March 31, 2019, net cash used in financing activities was $33.0 million, consisting primarily of $30.0 million in payments on our revolving credit facility, dividend payments to our stockholders of $4.0 million and net short-term borrowings under our sweep arrangement of $2.1 million.

For the three months ended March 31, 2018, net cash used in financing activities was ~~$10.1~~$3.6 million, consisting primarily of dividend payments to our ~~stockholders of $11.8 million, partially offset by $2.4 million in proceeds received from the exercise of stock options.~~stockholders.

~~For the nine months ended September 30,~~ 2017 net cash used in financing activities was $22.3 million, consisting primarily of $283.0 million of repayment of the Company’s long-term debt under our former credit agreement, $281.0 million of initial proceeds from the borrowing of long-term debt under the new credit agreement, $4.0 million of subsequent repayments of long-term debt under the new credit agreement, $11.8 million of dividend payments to our stockholders, $3.0 million of deferred financing costs associated with the new credit agreement and net payment activity on the Company’s short-term borrowings of $2.2 million.

Credit Agreement

The 2017 Credit Agreement ~~(the “new credit agreement” or the “Credit Agreement”)~~ provides for a $500.0 million, five-year revolving credit facility (the “Revolving Credit Facility”), including a $75.0 million sublimit for the issuance of standby letters of credit and a $25.0 million sublimit for the issuance of swingline loans used to fund short-term working capital requirements. The 2017 Credit Agreement also contains an accordion feature whereby the Company 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. Proceeds from the Revolving Credit Facility are restricted solely for working capital and other general corporate purposes (including acquisitions and capital expenditures). Under the Revolving Credit Facility, revolving credit loans are available based on a base rate (as defined in the 2017 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 earnings before interest, taxes, depreciation and amortization (as defined in the 2017 Credit Agreement).

At ~~September 30, 2018,~~March 31, 2019, the effective interest rate on the Revolving Credit Facility, including the impact of our interest rate swap, was ~~3.49%~~3.58%. Interest only payments are due either quarterly or on the last day of any interest period, as applicable. In October 2014, the Company entered into an interest rate swap agreement, effectively fixing the interest rate on ~~$175.0~~$165.0 million, or ~~63%~~49%, of the Revolving Credit Facility borrowings as of ~~September 30, 2018.~~March 31, 2019.

The Company is required to pay a commitment fee ranging from 0.175% to 0.35% on the average daily unused portion of the Revolving Credit Facility, with such commitment fee to be reduced based upon the Company’s total net leverage ratio (as defined in the 2017 Credit Agreement). The maximum letter of credit capacity under the Revolving Credit Facility is $75.0 million and the 2017 Credit Agreement provides for a letter of credit fee equal to the applicable margin for LIBOR loans under the Revolving Credit Facility. At ~~September 30, 2018,~~March 31, 2019, there were ~~$277.0~~$334.0 million of borrowings outstanding on the Revolving Credit Facility. These borrowings are due on the revolving credit maturity date (as defined in the 2017 Credit Agreement) and presented as long-term debt in the consolidated balance sheets.

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subsequent deposits to our cash operating accounts (the “Sweep Arrangement”). Total advances outstanding under the Sweep Arrangement are subject to the $25.0 million swingline loan sublimit under the Revolving Credit Facility. The

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Company’s revolving credit loans outstanding under the Revolving Credit ~~Agreement~~Facility are not subject to repayment through the Sweep Arrangement. As of ~~September 30, 2018,~~March 31, 2019, there were ~~no amounts~~$2.1 million in borrowings outstanding subject to the Sweep ~~Arrangement.~~Arrangement, which are presented as Short-term borrowings in the consolidated balance sheet.

As of ~~September 30, 2018,~~March 31, 2019, the availability under the Revolving Credit Facility was ~~$217.3~~$158.2 million with $5.7 million of the Revolving Credit Facility issued in the form of standby letter of credit utilized as collateral for closure and post-closure financial assurance and other assurance obligations.

For more information about our debt, see Note 1011 of the Notes to Consolidated Financial Statements in “Part I, Item 1. Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q.

CONTRACTUAL OBLIGATIONS AND GUARANTEES

There were no material changes in the amounts of our contractual obligations and guarantees during the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. For further information on our contractual obligations and guarantees, refer to our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017.~~2018.

ITEM 3. 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 ~~September 30, 2018, $4.9~~March 31, 2019, $5.0 million of restricted cash was 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 borrowings under the 2017 Credit Agreement. Under the 2017 Credit Agreement, Revolving Credit Facility borrowings incur interest at a base rate (as defined in the 2017 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 earnings before interest, taxes, depreciation and amortization (as defined in the 2017 Credit Agreement). On October 29, 2014, 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 3.67% and receives interest at the variable one-month LIBOR rate on an initial notional amount of $250.0 million.

As of ~~September 30, 2018,~~March 31, 2019, there were ~~$277.0~~$334.0 million of revolving loans outstanding under the 2017 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 December 31, 2014, we are subject to higher interest payments on only the unhedged borrowings under the 2017 Credit Agreement.

Based on the outstanding indebtedness of ~~$277.0~~$334.0 million under the 2017 Credit Agreement at ~~September 30, 2018~~March 31, 2019 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 ~~$1.1~~$1.8 million for the corresponding period.

Foreign Currency Risk

We are subject to currency exposures and volatility because of currency fluctuations. The majority of our transactions are in USD; however, our Canadian subsidiaries conduct business in both Canada and the United States. In addition, contracts for services that our Canadian subsidiaries provide to U.S. customers are generally denominated in USD. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, our Canadian subsidiaries transacted approximately ~~71%~~59% of their revenue in USD and at any time have cash on deposit in USD and outstanding USD trade receivables and payables related to these transactions.

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These USD cash, receivable and payable accounts are subject to non-cash foreign currency translation gains or losses. Exchange rate movements also affect the translation of Canadian generated profits and losses into USD.

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We established intercompany loans between our Canadian subsidiaries and our parent company, US Ecology, 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 ~~September 30, 2018,~~March 31, 2019, we had ~~$21.5~~$17.9 million of intercompany loans outstanding between our Canadian subsidiaries and US Ecology. During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the CAD ~~weakened~~strengthened as compared to the USD resulting in a ~~$716,000~~$417,000 non-cash foreign currency translation ~~loss~~gain being recognized in the Company’s consolidated statements of operations related to the intercompany loans. Based on intercompany balances as of ~~September 30, 2018,~~March 31, 2019, a $0.01 CAD increase or decrease in currency rate compared to the USD at ~~September 30, 2018~~March 31, 2019 would have generated a gain or loss of approximately ~~$215,000~~$179,000 for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019.

We had a total pre-tax foreign currency loss of ~~$456,000~~$139,000 for the ~~nine~~three months ended ~~September 30, 2018.~~March 31, 2019. We currently have no foreign exchange contracts, option contracts or other foreign currency hedging arrangements. Management evaluates the Company’s risk position on an ongoing basis to determine whether foreign exchange hedging strategies should be employed.

ITEM 4. CONTROLS AND PROCEDURES

Management of the Company, including the Chief Executive Officer and the Chief Financial Officer of the Company, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2018.~~March 31, 2019. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures, including the accumulation and communication of disclosures to the Company’s Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the rules and forms of the Securities and Exchange Commission (“SEC”).

There were no changes in our internal control over financial reporting that occurred during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SEC guidance permits management to omit an assessment of an acquired business’ internal control over financial reporting from management’s assessment of internal control over financial reporting for a period not to exceed one year from the date of acquisition. Accordingly, we have ~~not~~ assessed neither ES&H Dallas’ nor Winnie’s internal control over financial reporting as of ~~September 30, 2018.~~March 31, 2019.

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PART II - OTHER INFORMATION

Cautionary Statement for Purposes of “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of 1995

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws. Statements that are not historical facts, including statements about the Company’s beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions. These statements include, among others, statements regarding our financial and operating results, strategic objectives and means to achieve those objectives, the amount and timing of capital expenditures, repurchases of its stock under approved stock repurchase plans, the amount and timing of interest expense, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on management’s beliefs and assumptions, which in turn are based on currently available information. Important assumptions include, among others, those regarding demand for Company services, expansion of service offerings geographically or through new or expanded service lines, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond our ability to control or predict.Such factors include an accident at one of our facilities, incidents resulting from the handling of dangerous substances, the loss or failure to renew significant contracts, competition in our markets, adverse economic conditions, our compliance with applicable laws and regulations, the realization of anticipated benefits from acquired operations, 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, cyber security threats, unanticipated changes in tax rules and regulations, loss of key personnel, a deterioration in our labor relations or labor disputes, our ability to pay dividends or repurchase stock, anti-takeover regulations, stock market volatility, our access to insurance, surety bonds and other financial assurances, our litigation risk not covered by insurance, the replacement of non-recurring event ~~cleanup~~ projects, ~~a loss of a major customer,~~ our ability to permit and contract for timely construction of new or expanded disposal ~~cells, our ability to renew~~space, renewals of our operating permits or lease agreements with regulatory bodies, ~~loss~~our ability or the timing of ~~key personnel, compliance~~reconstructing and receiving regulatory approvals for the reopening of the Grand View, Idaho treatment facility, the timing or amount of insurance recoveries associated with the reconstruction and ~~changes to applicable laws, rules, or regulations,~~business interruption losses for the Grand View, Idaho treatment facility, our access to ~~insurance, surety bonds and other financial assurances, a deterioration in~~cost-effective transportation services, lawsuits, our labor relations or labor disputes, our ability to perform under required contracts, failure to realize anticipated benefits and operational performance from acquired operations, adverse economic or market conditions, government funding or competitive pressures, incidents or adverse weather conditions that could limit or suspend specific operations, access to cost effective transportation services,implementation of new technologies, fluctuations in foreign currency markets ~~lawsuits, our willingness or ability to repurchase stock or pay dividends, implementation of new technologies, limitations on our available cash flow as a result of our indebtedness~~ and ~~our ability to effectively execute our acquisition strategy and integrate future acquisitions.~~foreign affairs.

Except as required by applicable law, including the securities laws of the United States and the rules and regulations of the SEC, we are under no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on our forward-looking statements. Although we believe that the expectations reflected in forward-looking statements are reasonable, we cannot guarantee future results or performance. Before you invest in our common stock, you should be aware that the occurrence of the events described in the “Risk Factors” section in our Form 10-K for the fiscal year ended December 31, ~~2017~~2018 and in other reports we file with the SEC could harm our business, prospects, operating results, and financial condition.

Investors should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose to them any material non-public information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts contain any projections, forecasts or opinions, such reports are not the responsibility of US Ecology, Inc.

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ITEM 1. LEGAL PROCEEDINGS

On November 17, 2018, an explosion occurred at our Grand View, Idaho facility, resulting in one employee fatality and injuries to other employees. 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 resumed limited operations at our Grand View, Idaho facility in February 2019. In addition to initiating and conducting our own investigation into the incident, we are fully cooperating with IDEQ, the USEPA and OSHA to support their comprehensive and independent investigations of the incident. As we continue to investigate the cause of the incident, we are evaluating its impact, but, at this time, we are unable to predict the timing and outcome of the investigation. As such, we cannot presently estimate the potential liability, if any, related to the incident and, therefore, no amounts related to such claims have been recorded in our financial statements as of March 31, 2019. We have not been named as a defendant in any 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.

Other than described above, we are not currently 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.

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ITEM 1A. RISK FACTORS

The Company is subject to various risks and uncertainties that could have a material impact on our business, financial condition, results of operations and cash flows. The discussion of these risk factors is included in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2017~~2018 and there have been no material changes from the risk factors reported on the Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On June 1, 2016, the Company’s Board of Directors authorized the repurchase of $25.0 million of the Company’s outstanding common stock. Repurchases may be made from time to time in open market or through privately negotiated transactions. The timing of any repurchases will be based upon prevailing market conditions and other factors. The Company did not repurchase any shares of common stock under the repurchase program during the three ~~or nine~~ months ended ~~September 30, 2018.~~March 31, 2019. On May 29, 2018 the repurchase program was extended and will remain in effect until June 6, 2020, unless further extended by our Board of Directors.

The following table summarizes the purchases of shares of our common stock during the ~~nine~~three months ended ~~September 30, 2018:~~March 31, 2019:

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, 2018

—

$
—

—

$
25,000,000
February 1 to 28, 2018

—

—

—

25,000,000
March 1 to 31, 2018 (1)

5,564

56.20

—

25,000,000
April 1 to 30, 2018

—

—

—

25,000,000
May 1 to 31, 2018

—

—

—

25,000,000
June 1 to 30, 2018

—

—

—

25,000,000
July 1 to 31, 2018

—

—

—

25,000,000
August 1 to 31, 2018

—

—

—

25,000,000
September 1 to 30, 2018

—

—

—

25,000,000
Total

5,564

$
56.20

—

$
25,000,000


				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, 2019 (1)	14,462	$	63.34	—	$	25,000,000
February 1 to 28, 2019	—		—	—		25,000,000
March 1 to 31, 2019	—		—	—		25,000,000
Total	14,462	$	63.34	—	$	25,000,000

(1)

Represents shares surrendered or forfeited in connection with certain employees’ tax withholding obligations related to the vesting of shares of restricted ~~stock.~~stock and performance stock units.

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

~~Table of Contents~~

ITEM 6. EXHIBITS


10.1		US Ecology, Inc. 2019 Management Incentive Plan *

10.2		Form of Performance Stock Unit Award Agreement *

10.3		Form of Restricted Stock Award Agreement *

10.4		Form of Incentive Stock Option Award Agreement *

10.5		Form of Non-Statutory Stock Option Award Agreement *

15		Letter re: Unaudited Interim Financial Statements

31.1		Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101		The following materials from the quarterly report on Form 10-Q of US Ecology, Inc. for the quarter ended ~~September 30, 2018~~March 31, 2019 formatted in Extensible Business Reporting Language (XBRL) include: (i) Unaudited Consolidated Balance Sheets, (ii) Unaudited Consolidated Statements of Operations, (iii) Unaudited Consolidated Statements of Comprehensive Income, (iv) Unaudited Consolidated Statements of Cash Flows, and (v) Notes to the Unaudited Consolidated Financial Statements

* Identifies management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto.

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	US Ecology, Inc.
	(Registrant)

Date: ~~November 5, 2018~~May 6, 2019	/s/ Eric L. Gerratt
	Eric L. Gerratt
	Executive Vice President, Chief Financial Officer and Treasurer

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