UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 _______________________________
 
 FORM
10-Q
 _______________________________




xQUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the Quarterly Period Ended:  September 30,
  2009oro TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from________________________________________ to
      ________________________________________Commission
      File Number:  0-11688AMERICAN
      ECOLOGY CORPORATION(Exact
      Name of Registrant as Specified in Its Charter)Delaware
            
            
            95-3889638(State
      of Incorporation)
            
            
            (I.R.S.
      Employer Identification Number)Lakepointe
      Centre I,
              300
      E. Mallard, Suite 300
              Boise,
      Idaho
            
            
            83706(Address
      of Principal Executive Offices)
            
            
            (Zip
      Code)(208)
      331-8400(Registrant’s
      Telephone Number, Including Area Code)




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by 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 xNoo
  Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
  Yes o    
No o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
 
 Large accelerated
      filer o
                Accelerated
      filer xNon-accelerated
      filer o(Do not check if smaller reporting
      company)
                Smaller Reporting
      Company o
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 
 Yes oNox
 
 The
number of shares of the registrant’s common stock, $0.01 par value, outstanding
as of October 27, 2009 was 18,305,614.
 
 
  AMERICAN
ECOLOGY CORPORATION
 
 TABLE
OF CONTENTS
  PART
      I.
                
                FINANCIAL
      INFORMATIONItem
      1.
                
                Financial
      Statements (Unaudited)Consolidated
      Balance Sheets as of September 30, 2009 and December 31,
    2008
                
                1Consolidated
      Statements of Operations for the three and nine months endedSeptember
      30, 2009 and 2008
                
                2Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2009 and
      2008
                
                3Notes
      to Consolidated Financial Statements
                
                4Item
      2.
                
                Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
                
                12Item
      3.
                
                Quantitative and Qualitative
      Disclosures About Market Risk
                
                20Item
      4.
                
                Controls and
      Procedures
                
                20PART
      II.
                
                OTHER
      INFORMATIONCautionary
      Statement
                
                20Item
      1.
                
                Legal
      Proceedings
                
                21Item
      1A.
                
                Risk
      Factors
                
                21Item
      2.
                
                Unregistered
      Sales of Equity Securities and Use of Proceeds
                
                22Item
      3.
                
                Defaults
      Upon Senior Securities
                
                22Item
      4.
                
                Submission
      of Matters to a Vote of Security Holders
                
                22Item
      5.
                
                Other
      Information
                
                22Item
      6.
                
                Exhibits
                
                22SIGNATURE
                
                23











PART
I. FINANCIAL INFORMATION
 
 Item
1.  Financial Statements
 AMERICAN
ECOLOGY CORPORATION
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands, except per share data)
 (unaudited)
 
 September
      30, 2009
                
                
                December
      31, 2008AssetsCurrent
      Assets:Cash
      and cash equivalents
                
                $
                18,757
                
                
                $
                18,473Short-term
      investments
                
                
                1,407
                
                
                
                -Receivables,
      net
                
                
                29,105
                
                
                
                30,737Prepaid
      expenses and other current assets
                
                
                1,846
                
                
                
                2,281Income
      tax receivable
                
                
                -
                
                
                
                2,834Deferred
      income taxes
                
                
                1,141
                
                
                
                684Total
      current assets
                
                
                52,256
                
                
                
                55,009Property
      and equipment, net
                
                
                69,699
                
                
                
                67,987Restricted
      cash
                
                
                4,800
                
                
                
                4,716Total
      assets
                
                $
                126,755
                
                
                $
                127,712Liabilities
      and Stockholders’ EquityCurrent
      Liabilities:Accounts
      payable
                
                $
                3,498
                
                
                $
                5,400Deferred
      revenue
                
                
                2,052
                
                
                
                4,657Accrued
      liabilities
                
                
                4,000
                
                
                
                4,398Accrued
      salaries and benefits
                
                
                1,895
                
                
                
                2,895Income
      taxes payable
                
                
                539
                
                
                
                -Current
      portion of closure and post-closure obligations
                
                
                2,051
                
                
                
                490Current
      portion of capital lease obligations
                
                
                11
                
                
                
                10Total
      current liabilities
                
                
                14,046
                
                
                
                17,850Long-term
      closure and post-closure obligations
                
                
                12,864
                
                
                
                13,972Long-term
      capital lease obligations
                
                
                12
                
                
                
                21Deferred
      income taxes
                
                
                5,849
                
                
                
                3,927Total
      liabilities
                
                
                32,771
                
                
                
                35,770Contingencies
      and commitmentsStockholders’
      EquityCommon
      stock $0.01 par value, 50,000 authorized; 18,306 and18,304 shares
      issued, respectively
                
                
                183
                
                
                
                183Additional
      paid-in capital
                
                
                61,322
                
                
                
                60,803Retained
      earnings
                
                
                35,069
                
                
                
                33,544Common
      stock held in treasury, at cost, 155 and 155 shares,
      respectively
                
                
                (2,590
                )
                
                
                (2,588
                )Total
      stockholders’ equity
                
                
                93,984
                
                
                
                91,942Total
      liabilities and stockholders’ equity
                
                $
                126,755
                
                
                $
                127,712
  See Notes
to Consolidated Financial Statements.
   1
 
 AMERICAN
ECOLOGY CORPORATION
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 (in
thousands, except per share data)
 (unaudited)
 
 Three
      Months Ended
                
                
                Nine
      Months EndedSeptember
      30,
                
                
                September
      30,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenue
                
                $
                37,529
                
                
                $
                41,051
                
                
                $
                108,871
                
                
                $
                131,786Transportation
      costs
                
                
                16,694
                
                
                
                20,477
                
                
                
                46,131
                
                
                
                61,786Other
      direct operating costs
                
                
                10,852
                
                
                
                10,553
                
                
                
                34,099
                
                
                
                32,957Gross
      profit
                
                
                9,983
                
                
                
                10,021
                
                
                
                28,641
                
                
                
                37,043Selling,
      general and administrative expenses
                
                
                3,206
                
                
                
                3,209
                
                
                
                10,175
                
                
                
                10,860Operating
      income
                
                
                6,777
                
                
                
                6,812
                
                
                
                18,466
                
                
                
                26,183Other
      income (expense):Interest
      income
                
                
                18
                
                
                
                138
                
                
                
                103
                
                
                
                312Interest
      expense
                
                
                (1
                )
                
                
                (2
                )
                
                
                (2
                )
                
                
                (6
                )Other
                
                
                101
                
                
                
                78
                
                
                
                225
                
                
                
                237Total
      other income
                
                
                118
                
                
                
                214
                
                
                
                326
                
                
                
                543Income
      before income taxes
                
                
                6,895
                
                
                
                7,026
                
                
                
                18,792
                
                
                
                26,726Income
      taxes
                
                
                2,731
                
                
                
                2,755
                
                
                
                7,466
                
                
                
                10,477Net
      income
                
                $
                4,164
                
                
                $
                4,271
                
                
                $
                11,326
                
                
                $
                16,249Earnings
      per share:Basic
                
                $
                0.23
                
                
                $
                0.23
                
                
                $
                0.62
                
                
                $
                0.89Dilutive
                
                $
                0.23
                
                
                $
                0.23
                
                
                $
                0.62
                
                
                $
                0.89Shares
      used in earnings per share calculation:Basic
                
                
                18,148
                
                
                
                18,261
                
                
                
                18,145
                
                
                
                18,241Dilutive
                
                
                18,170
                
                
                
                18,330
                
                
                
                18,173
                
                
                
                18,301Dividends
      paid per share
                
                $
                0.18
                
                
                $
                0.18
                
                
                $
                0.54
                
                
                $
                0.48
 See Notes
to Consolidated Financial Statements.
  
 2
 
 AMERICAN
ECOLOGY CORPORATION
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 (in
thousands)
 (unaudited)
  Nine
      Months Ended September 30,2009
                
                
                2008Cash
      Flows From Operating Activities:Net
      income
                
                $
                11,326
                
                
                $
                16,249Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation,
      amortization and accretion
                
                
                6,937
                
                
                
                8,195Deferred
      income taxes
                
                
                1,465
                
                
                
                1,068Stock-based
      compensation expense
                
                
                539
                
                
                
                629Net
      loss on sale of property and equipment
                
                
                38
                
                
                
                19Accretion
      of interest income
                
                
                -
                
                
                
                (15
                )Changes
      in assets and liabilities:Receivables
                
                
                1,632
                
                
                
                (308
                )Income
      tax receivable
                
                
                2,834
                
                
                
                627Other
      assets
                
                
                435
                
                
                
                195Accounts
      payable and accrued liabilities
                
                
                (1,448
                )
                
                
                (2,128
                )Deferred
      revenue
                
                
                (2,605
                )
                
                
                404Accrued
      salaries and benefits
                
                
                (1,000
                )
                
                
                (417
                )Income
      tax payable
                
                
                539
                
                
                
                -Closure
      and post-closure obligations
                
                
                (423
                )
                
                
                (1,546
                )Other
                
                
                (19
                )
                
                
                -Net
      cash provided by operating activities
                
                
                20,250
                
                
                
                22,972Cash
      Flows From Investing Activities:Purchases
      of property and equipment
                
                
                (8,725
                )
                
                
                (11,055
                )Proceeds
      from sale of property and equipment
                
                
                62
                
                
                
                11Restricted
      cash
                
                
                (84
                )
                
                
                8Purchases
      of short-term investments
                
                
                (1,409
                )
                
                
                (992
                )Maturities
      of short-term investments
                
                
                -
                
                
                
                3,216Net
      cash used in investing activities
                
                
                (10,156
                )
                
                
                (8,812
                )Cash
      Flows From Financing Activities:Dividends
      paid
                
                
                (9,801
                )
                
                
                (8,760
                )Common
      stock repurchases
                
                
                (2
                )
                
                
                -Other
                
                
                (7
                )
                
                
                (8
                )Tax
      benefit of common stock options
                
                
                -
                
                
                
                215Proceeds
      from stock option exercises
                
                
                -
                
                
                
                1,049Net
      cash used in financing activities
                
                
                (9,810
                )
                
                
                (7,504
                )Increase
      in cash and cash equivalents
                
                
                284
                
                
                
                6,656Cash
      and cash equivalents at beginning of period
                
                
                18,473
                
                
                
                12,563Cash
      and cash equivalents at end of period
                
                $
                18,757
                
                
                $
                19,219Supplemental
      DisclosuresIncome
      taxes paid, net of receipts
                
                $
                2,649
                
                
                $
                8,569Interest
      paid
                
                
                2
                
                
                
                2Non-cash
      investing and financing activities:Capital
      expenditures in accounts payable
                
                
                44
                
                
                
                541Acquisition
      of equipment with capital leases
                
                
                -
                
                
                
                6
 See Notes
to Consolidated Financial Statements.
  
 3
 
 AMERICAN
ECOLOGY CORPORATION
 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 American Ecology Corporation
and its wholly-owned subsidiaries (collectively, “AEC” or “the Company”). All
material intercompany balances have been eliminated. We have evaluated
subsequent events through the date and time the financial statements were issued
on October 29, 2009.
  In the
opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments necessary to present fairly, in all material
respects, the results of the Company for the periods presented. These
consolidated financial statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States 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 2008 Annual Report on Form 10-K filed with the SEC on February 25,
2009. The results of operations for the three and nine months ended September
30, 2009 are not necessarily indicative of results to be expected for the entire
fiscal year.
  The
Company’s Consolidated Balance Sheet as of December 31, 2008 has been derived
from the Company’s audited Consolidated Balance Sheet as of that
date.
  Use of
Estimates
 The
preparation of the Company’s consolidated financial statements, in conformity
with accounting principles generally accepted in the United States, requires
management to make estimates and assumptions. Some of these estimates require
difficult, subjective or complex judgments about matters that are inherently
uncertain. As a result, actual results could differ from these estimates, in
some cases materially. These estimates and assumptions affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting
period.
 
 NOTE
2 – REVENUE RECOGNITION
 
 We
recognize revenue when persuasive evidence of an arrangement exists, delivery
and disposal have occurred or services have been rendered, the price is fixed or
determinable and collection is reasonably assured. We recognize revenue from two
primary sources: 1) waste treatment, recycling and disposal and 2) waste
transportation services.
 
 Waste
treatment and disposal revenue results primarily from fees charged to customers
for treatment and/or disposal or recycling of specified wastes. Waste treatment
and disposal revenue is generally charged on a per-ton or per-yard basis based
on contracted prices and is recognized when services are complete and the waste
is disposed of in our landfill.
 
 Transportation
revenue results from delivering customer waste to a disposal facility for
treatment and/or disposal or recycling. Transportation 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 wastes from cleanup sites to disposal facilities
operated by other companies. We account for our bundled arrangements as multiple
deliverable arrangements and determine the amount of revenue recognized for each
deliverable (unit of accounting) using the relative fair value method.
Transportation revenue is recognized when the transported waste is received at
the disposal facility. Waste treatment and disposal revenue under bundled
arrangements is recognized when services are complete and the waste is disposed
in the landfill, which is generally the same day as receipt of the waste at the
disposal site.
 
 Burial
fees collected from customers for each ton or cubic yard of waste disposed in
our landfills are paid to the respective local and/or state government entity
and are not included in revenue. Revenue and associated cost from waste that has
been received but not yet treated and disposed of in our landfills are deferred
until disposal occurs.
   4
 
 Our
Richland, Washington disposal facility is regulated by the Washington Utilities
and Transportation Commission (“WUTC”), which approves our rates for disposal of
low-level radioactive waste regulated under the federal Atomic Energy Act
(“LLRW”). Annual revenue levels are established based on a rate agreement with
the WUTC at amounts sufficient to cover the costs of operation and provide us
with a reasonable profit. Per-unit rates charged to LLRW customers during the
year are based on our evaluation of disposal volume and radioactivity
projections submitted to us by waste generators. Our proposed rates are then
reviewed and approved by the WUTC. If annual revenue exceeds the approved levels
set by the WUTC, we are required to refund excess collections to facility users
on a pro-rata basis. The rate agreement in effect for 2009 began on January 1,
2008 and expires on January 1, 2014.
 
 NOTE
3 – EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
  In
September 2006, the Financial Accounting Standards Board (“FASB”) issued a new
statement regarding fair value measurements located under the FASB Accounting
Standards CodificationTM
(“ASC”) Topic 820 Fair Value
Measurements and Disclosures (formerly Statement of Financial Accounting
Standard (“SFAS”) 157, Fair
Value Measurements). ASC 820 defines fair value, establishes a framework
for measuring fair value under generally accepted accounting principles and
expands disclosures about fair value measurements. ASC 820 applies to other
existing accounting pronouncements that require or permit fair value
measurements, the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute. While the
new statement does not require any new fair value measurements, its application
may change the current practice for fair value measurements. The new statement
was effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In February
2008, the FASB delayed the effective date of the new statement for nonfinancial
assets and liabilities to fiscal years beginning after November 15, 2008. The
adoption of the new statement for nonfinancial assets and liabilities in the
first quarter of 2009 had no significant impact on our consolidated financial
statements.
  In
December 2007, the FASB issued a new statement regarding business
combinations located under ASC Topic 805 Business Combinations
(formerly SFAS 141(revised 2007), Business Combinations ),
which establishes principles and requirements for how an acquirer recognizes and
measures the identifiable assets acquired, the liabilities assumed and any
non-controlling interest in the acquiree in a business combination. The new
statement requires that assets and liabilities, including contingencies, be
recorded at the fair value determined on the acquisition date with changes
thereafter reflected in results of operations, as opposed to goodwill.
Additionally, the new statement modifies the treatment of restructuring costs
associated with a business combination and requires acquisition costs to be
expensed as incurred. The new statement also provides guidance on disclosures
related to the nature and financial impact of the business combination and is
effective for transactions closing after December 15, 2008 and for fiscal years
beginning after December 15, 2008. The new statement will be adopted for
business combinations, if any, entered into by the Company after December 31,
2008. The impact of this new standard will be dependent on the nature of
acquisitions completed after adoption. Any impact will be evaluated as part of
the economic evaluation of such a business combination.
  In
December 2007, the FASB issued a new statement establishing accounting and
reporting standards for the non-controlling interest in a subsidiary and for the
deconsolidation of a subsidiary located under ASC Topic 810 Consolidation (formerly SFAS
160, Noncontrolling Interests
in Consolidated Financial Statements – an amendment of ARB No. 51). This
statement is effective prospectively, except for certain retrospective
disclosure requirements, for fiscal years beginning after December 15,
2008. This statement was effective for the Company at the beginning of the first
quarter of 2009 and had no impact on our consolidated financial statements since
we have no non-controlling interests in any subsidiaries and have had no
subsidiary deconsolidation.
  In March
2008, the FASB issued a new statement which expands quarterly disclosure
requirements regarding an entity’s derivative instruments and hedging
activities. The new statement is located under ASC Topic 815-10 Derivatives and Hedging(formerly SFAS 161, Disclosures About Derivative
Instruments and Hedging Activities – an amendment of FASB Statement No.
133). This statement was effective for the Company at the beginning of
the first quarter of 2009 and had no impact on our consolidated financial
statements since we currently do not have any derivative instruments or hedging
activities.
  In June
2008, the FASB issued guidance, located in ASC Topic 260-10 Earnings Per Share(formerly
FSP EITF 03-6-1, Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities),that addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in computing
earnings per share under the two-class method. This new guidance requires
companies to treat unvested share-based payment awards that have non-forfeitable
rights to dividend or dividend equivalents as a separate class of securities in
calculating earnings per share. The new guidance was effective for the Company
beginning January 1, 2009 and did not have a material impact on our
consolidated financial statements.
   5
  In May
2009, the FASB issued a new statement that establishes general standards of
accounting for, and disclosure of events that occur after the balance sheet date
but before the financial statements are issued or are available to be issued.
The new statement, located in ASC Topic 855 Subsequent Events (formerly
SFAS 165, Subsequent
Events) requires entities to disclose the date through which subsequent
events were evaluated as well as the rationale for why that date was selected,
that is, whether that date represents the date the financial statements were
issued or were available to be issued. The new statement is effective for
interim or annual periods ending after June 15, 2009, which was the quarter
ending June 30, 2009 for the Company.  The adoption of this new
statement did not have a material impact on our consolidated financial
statements.
 
 In June
2009, the FASB issued a new statement that provides for the FASB ASC (the
“Codification”) to become the single official source of authoritative,
nongovernmental U.S. generally accepted accounting principles (GAAP). The
new statement, located in ASC Topic 105-10 Generally Accepted Accounting
Principles (formerly SFAS 168, The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles – a
replacement of FASB Statement No. 162) is effective for interim and
annual periods ending after September 15, 2009, which was the quarter ending
September 30, 2009 for the Company.  The adoption of this statement
did not have a material impact on our consolidated financial
statements.
 
 In
October 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-13
Revenue Recognition (ASC Topic
605) - Multiple-Deliverable Revenue Arrangements, a consensus of the FASB
Emerging Issues Task Force which provides authoritative guidance on
revenue arrangements with multiple deliverables that are outside the scope of
the software revenue recognition guidance. Under the new guidance, when vendor
specific objective evidence or third party evidence for deliverables in an
arrangement cannot be determined, a best estimate of the selling price is
required to separate deliverables and allocate arrangement consideration using
the relative selling price method.  ASU No. 2009-13 is effective for
revenue arrangements entered into or modified in fiscal years after June 15,
2010.   We do not believe that the adoption of this new guidance
will have a material impact on our financial statements.
 
 In June
2009, the FASB issued a new statement that provides authoritative guidance on
the consolidation of variable interest entities. The new guidance located in ASC
Topic 810-10 Consolidation(formerly SFAS 167, Amendments to FASB Interpretation
No. 46(R)) requires revised evaluations of whether entities represent
variable interest entities, ongoing assessments of control over such entities
and additional disclosures for variable interests.  The new statement
will be effective for the Company at the start of the first quarter of 2010. We
do not believe that the adoption of this new statement will have a material
impact on our financial statements since we have no variable interest
entities.
 
 NOTE 4–CONCENTRATION AND CREDIT
RISK
 
 Major
Customers. The Company has a contract with Honeywell International, Inc.
(“Honeywell”) for transportation, treatment and disposal of hazardous waste from
a multi-year clean-up site and other, smaller sites in New Jersey. Our services
for the primary clean-up site were completed in early October 2009. Revenue
under this bundled service contract represented 43% and 52% of our total revenue
for the three months ended September 30, 2009 and 2008, respectively, and 46%
and 43% of our total revenue for the nine months ended September 30, 2009 and
2008, respectively. No other customer represented more than 10% of total revenue
for the three or nine months ended September 30, 2009 and 2008, respectively.
Receivables from Honeywell represented 48% of our total trade receivables at
September 30, 2009 and 43% of total trade receivables at December 31, 2008.
Receivables from one other customer represented 13% of our total trade
receivables at September 30, 2009 and none of our total trade receivables at
December 31, 2008. No other customer’s receivable balances exceeded 10% of our
total trade receivables at September 30, 2009 or December 31, 2008.
 
 Credit
Risk Concentration. We maintain most of our cash with Wells Fargo Bank.
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, except for receivables from
Honeywell for which significant credit risk exists. We believe that credit risk
on Honeywell receivables is partially mitigated by federal court orders
requiring that Honeywell perform activities performed under our contract and
Honeywell’s compliant payment history over the contract’s multi-year period.
Typically, we have not required customers to provide collateral for such
obligations.
   6
  NOTE 5–CASH AND CASH
EQUIVALENTS
  Cash and
cash equivalents include funds held in managed money market funds with Wells
Fargo & Company and Fidelity Investments. The fair value of these money
market funds, using Level 1 inputs consistent with ASC Topic 820 Fair Value Measurements and
Disclosures was $15.2 million at September 30, 2009.
 
 NOTE
6 – SHORT-TERM INVESTMENTS
 
 Short-term
investments of $1.4 million are comprised of high investment grade commercial
paper that are accounted for as available-for-sale securities and recorded at
their fair value using Level 1 inputs consistent with ASC Topic 820Fair Value Measurements and
Disclosures.
 
 NOTE
7 - RECEIVABLES
 
 Receivables
were as follows:
  September
      30,
                
                
                December
      31,(in
      thousands)
                
                2009
                
                
                2008Trade
                
                $
                28,942
                
                
                $
                27,324Unbilled
      revenue
                
                
                132
                
                
                
                3,536Other
                
                
                142
                
                
                
                22629,216
                
                
                
                31,086Allowance
      for doubtful accounts
                
                
                (111
                )
                
                
                (349
                )$
                29,105
                
                
                $
                30,737
 
 NOTE 8–PROPERTY AND
EQUIPMENT
  September
      30,
                
                
                December
      31,(in
      thousands)
                
                2009
                
                
                2008Cell
      development costs
                
                $
                45,377
                
                
                $
                42,432Land
      and improvements
                
                
                9,206
                
                
                
                9,158Buildings
      and improvements
                
                
                29,108
                
                
                
                29,721Railcars
                
                
                17,375
                
                
                
                17,375Vehicles
      and other equipment
                
                
                24,153
                
                
                
                22,065Construction
      in progress
                
                
                7,156
                
                
                
                4,473132,375
                
                
                
                125,224Accumulated
      depreciation and amortization
                
                
                (62,676
                )
                
                
                (57,237
                )$
                69,699
                
                
                $
                67,987
  Depreciation
expense for the three months ended September 30, 2009 and 2008 was $2.0 million
and $2.2 million, respectively. Depreciation expense for the nine months ended
September 30, 2009 and 2008 was $6.1 million and $7.3 million,
respectively.
 
 NOTE
9 – RESTRICTED CASH
 
 Restricted
cash balances of $4.8 million at September 30, 2009 and $4.7 million at
December 31, 2008 are held in third-party managed trust accounts as
collateral for our financial assurance policies for closure and post-closure
obligations. These restricted cash balances are maintained by third-party
trustees and are invested in money market accounts.
   7
 
 NOTE 10–LINE OF CREDIT
 
 We have a
$15.0 million unsecured revolving line of credit (the “Revolving Credit
Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”). This
Revolving Credit Agreement expires on June 15, 2010. Monthly interest-only
payments are paid based on a pricing grid under which the interest rate
decreases or increases based on our ratio of funded debt to earnings before
interest, taxes, depreciation and amortization. We can elect to borrow utilizing
the offshore London Inter-Bank Offering Rate (“LIBOR”) plus an applicable spread
or the prime rate. The Revolving Credit Agreement contains quarterly financial
covenants including a maximum leverage ratio, a maximum funded debt ratio and a
minimum required tangible net worth. Pursuant to our Revolving Credit Agreement,
we may only declare quarterly or annual dividends if on the date of declaration,
no event of default has occurred, or no other event or condition has occurred
that would constitute an event of default after giving effect to the payment of
the dividend. At September 30, 2009, we were in compliance with all of the
financial covenants in the Revolving Credit Agreement.
 
 At
September 30, 2009 and December 31, 2008, we had no amounts outstanding on the
revolving line of credit. At September 30, 2009 and December 31, 2008, the
availability under the line of credit was $11.0 million. An additional $4.0
million of the line of credit has been issued in the form of a standby letter of
credit that provides collateral for closure and post-closure financial
assurance.
 
 NOTE
11 – CLOSURE AND POST-CLOSURE OBLIGATIONS
 
 Closure
and post-closure obligations are recorded when environmental assessments and/or
remedial efforts are probable and the costs can be reasonably estimated. We
perform periodic reviews of both non-operating and operating facilities and
revise accruals for estimated post-closure, remediation and other costs when
necessary. Our recorded liabilities are based on estimates of future costs and
are updated periodically to reflect existing environmental conditions, current
technology, laws and regulations, permit conditions, inflation and other
factors.
 
 Changes
to reported closure and post-closure obligations were as follows:
 
 (in
      thousands)
                
                Three
      Months Ended
                  September
      30, 2009
                
                
                Nine
      Months Ended
                  September
      30, 2009Beginning
      obligation
                
                $
                14,758
                
                
                $
                14,462Accretion
      expense
                
                
                292
                
                
                
                876Payments
                
                
                (135
                )
                
                
                (423
                )Adjustments
                
                
                -
                
                
                
                -Ending
      obligation
                
                
                14,915
                
                
                
                14,915Less
      current portion
                
                
                (2,051
                )
                
                
                (2,051
                )Long-term
      portion
                
                $
                12,864
                
                
                $
                12,864
  
 NOTE 12–INCOME TAXES
 
 As of
September 30, 2009 and December 31, 2008, we had no significant unrecognized tax
benefits. We recognize interest assessed by taxing authorities as a component of
interest expense. We recognize any penalties assessed by taxing authorities as a
component of selling, general and administrative expenses.Interest and penalties for
the three and nine months ended September 30, 2009 and 2008 were not
material.
 
 Our
effective tax rate for the three and nine months ended September 30, 2009 was
39.6% and 39.7%, respectively compared to 39.2% for each of the three and nine
months ended September 30, 2008. This increase is primarily due to lower pre-tax
earnings in the current year which increased the impact that non-tax-deductible
expenses had on the effective tax rate.
  We file
U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as
well as income tax returns in various states. We may be subject to examination
by the IRS for tax years 2005 through 2008. Additionally, we may be subject to
examinations by various state taxing jurisdictions for tax years 2004 through
2008. We are not currently under examination by the IRS or any state taxing
jurisdictions.
   8
 
 NOTE 13–COMMITMENTS AND
CONTINGENCIES
 
 In the
ordinary course of business, we are periodically involved in judicial and
administrative proceedings involving federal, state or local governmental
authorities. Actions may also be brought by individuals or groups in connection
with permit modifications at existing facilities, proposed new facilities,
alleged violations of existing permits, or alleged damages suffered from
exposure to hazardous substances purportedly released from our operating sites
or non-operating sites, as well as other litigation. We maintain insurance
intended to cover property and damage claims asserted as a result of our
operation. Periodically, management reviews and may establish reserves for legal
and administrative matters, or fees expected to be incurred in connection
therewith. As of September 30, 2009, we did not have any ongoing, pending or
threatened legal action that management believes would have a material adverse
effect on our financial position, results of operations or cash
flows.
 
 NOTE
14 – COMPUTATION OF EARNINGS PER SHARE
  (in
      thousands, except per share data)
                  
                  Three
      Months Ended September 30,2009
                  
                  
                  2008Basic
                  
                  
                  Diluted
                  
                  
                  Basic
                  
                  
                  DilutedNet
      income
                  
                  $
                  4,164
                  
                  
                  $
                  4,164
                  
                  
                  $
                  4,271
                  
                  
                  $
                  4,271Weighted
      average commonshares outstanding
                  
                  
                  18,148
                  
                  
                  
                  18,148
                  
                  
                  
                  18,261
                  
                  
                  
                  18,261Dilutive
      effect of stock options and restricted stock
                  
                  
                  
                  
                  
                  
                  22
                  
                  
                  
                  
                  
                  
                  
                  69Weighted
      averageshares outstanding
                  
                  
                  
                  
                  
                  
                  18,170
                  
                  
                  
                  
                  
                  
                  
                  18,330Earnings
      per share
                  
                  $
                  0.23
                  
                  
                  $
                  0.23
                  
                  
                  $
                  0.23
                  
                  
                  $
                  0.23Anti-dilutive
      shares excluded from calculation
                  
                  
                  
                  
                  
                  
                  280
                  
                  
                  
                  
                  
                  
                  
                  8
  (in
      thousands, except per share data)
                  
                  Nine
      Months Ended September 30,2009
                  
                  
                  2008Basic
                  
                  
                  Diluted
                  
                  
                  Basic
                  
                  
                  DilutedNet
      income
                  
                  $
                  11,326
                  
                  
                  $
                  11,326
                  
                  
                  $
                  16,249
                  
                  
                  $
                  16,249Weighted
      average commonshares outstanding
                  
                  
                  18,145
                  
                  
                  
                  18,145
                  
                  
                  
                  18,241
                  
                  
                  
                  18,241Dilutive
      effect of stock options andrestricted stock
                  
                  
                  
                  
                  
                  
                  28
                  
                  
                  
                  
                  
                  
                  
                  60Weighted
      averageshares outstanding
                  
                  
                  
                  
                  
                  
                  18,173
                  
                  
                  
                  
                  
                  
                  
                  18,301Earnings
      per share
                  
                  $
                  0.62
                  
                  
                  $
                  0.62
                  
                  
                  $
                  0.89
                  
                  
                  $
                  0.89Anti-dilutive
      sharesexcluded from calculation
                  
                  
                  
                  
                  
                  
                  276
                  
                  
                  
                  
                  
                  
                  
                  61
 
 NOTE
15 – OPERATING SEGMENTS
 
 We
operate within two segments, Operating Disposal Facilities and Non-Operating
Disposal Facilities. The Operating Disposal Facilities segment represents
facilities currently accepting waste. The Non-Operating Disposal Facilities
segment represents facilities that are no longer accepting waste.
 
 Income
taxes are assigned to Corporate. All other items are included in the segment of
origin. Intercompany transactions have been eliminated from the segment
information and are not significant between segments.
   9
 
 Summarized
financial information concerning our reportable segments is shown in the
following tables:
 
 (in
      thousands)
                
                Operating
                  Disposal
                  Facilities
                
                
                Non-
                  Operating
                  Disposal
                  Facilities
                
                
                Corporate
                
                
                TotalThree months ended
      September 30, 2009Revenue
      - Treatment and disposal
                
                $
                20,258
                
                
                $
                10
                
                
                $
                -
                
                
                $
                20,268Revenue
      - Transportation services
                
                
                17,261
                
                
                
                -
                
                
                
                -
                
                
                
                17,261Total
      revenue
                
                
                37,519
                
                
                
                10
                
                
                
                -
                
                
                
                37,529Transportation
      costs
                
                
                16,694
                
                
                
                -
                
                
                
                -
                
                
                
                16,694Other
      direct operating costs
                
                
                10,790
                
                
                
                62
                
                
                
                -
                
                
                
                10,852Gross
      profit
                
                
                10,035
                
                
                
                (52
                )
                
                
                -
                
                
                
                9,983Selling,
      general& administration
                
                
                1,043
                
                
                
                -
                
                
                
                2,163
                
                
                
                3,206Operating
      income (loss)
                
                
                8,992
                
                
                
                (52
                )
                
                
                (2,163
                )
                
                
                6,777Interest,
      net
                
                
                (1
                )
                
                
                -
                
                
                
                18
                
                
                
                17Other
      income
                
                
                61
                
                
                
                40
                
                
                
                -
                
                
                
                101Income
      (loss) before income taxes
                
                
                9,052
                
                
                
                (12
                )
                
                
                (2,145
                )
                
                
                6,895Income
      taxes
                
                
                -
                
                
                
                -
                
                
                
                2,731
                
                
                
                2,731Net
      income (loss)
                
                $
                9,052
                
                
                $
                (12
                )
                
                $
                (4,876
                )
                
                $
                4,164Depreciation,
      amortization & accretion
                
                $
                2,229
                
                
                $
                54
                
                
                $
                12
                
                
                $
                2,295Capital
      expenditures
                
                $
                3,950
                
                
                $
                -
                
                
                $
                7
                
                
                $
                3,957Total
      assets
                
                $
                98,803
                
                
                $
                54
                
                
                $
                27,898
                
                
                $
                126,755
  (in
      thousands)
                
                Operating
                  Disposal
                  Facilities
                
                
                Non-
                  Operating
                  Disposal
                  Facilities
                
                
                Corporate
                
                
                TotalThree months ended
      September 30, 2008Revenue
      - Treatment and disposal
                
                $
                20,779
                
                
                $
                9
                
                
                $
                -
                
                
                $
                20,788Revenue
      - Transportation services
                
                
                20,263
                
                
                
                -
                
                
                
                -
                
                
                
                20,263Total
      revenue
                
                
                41,042
                
                
                
                9
                
                
                
                -
                
                
                
                41,051Transportation
      costs
                
                
                20,477
                
                
                
                -
                
                
                
                -
                
                
                
                20,477Other
      direct operating costs
                
                
                10,458
                
                
                
                95
                
                
                
                -
                
                
                
                10,553Gross
      profit
                
                
                10,107
                
                
                
                (86
                )
                
                
                -
                
                
                
                10,021Selling,
      general& administration
                
                
                1,086
                
                
                
                -
                
                
                
                2,123
                
                
                
                3,209Operating
      income (loss)
                
                
                9,021
                
                
                
                (86
                )
                
                
                (2,123
                )
                
                
                6,812Interest,
      net
                
                
                (2
                )
                
                
                -
                
                
                
                138
                
                
                
                136Other
      income
                
                
                78
                
                
                
                -
                
                
                
                -
                
                
                
                78Income
      (loss) before income taxes
                
                
                9,097
                
                
                
                (86
                )
                
                
                (1,985
                )
                
                
                7,026Income
      taxes
                
                
                -
                
                
                
                -
                
                
                
                2,755
                
                
                
                2,755Net
      income (loss)
                
                $
                9,097
                
                
                $
                (86
                )
                
                $
                (4,740
                )
                
                $
                4,271Depreciation,
      amortization & accretion
                
                $
                2,439
                
                
                $
                72
                
                
                $
                13
                
                
                $
                2,524Capital
      expenditures
                
                $
                3,720
                
                
                $
                -
                
                
                $
                -
                
                
                $
                3,720Total
      assets
                
                $
                97,981
                
                
                $
                62
                
                
                $
                27,495
                
                
                $
                125,538
 
 10
  (in
      thousands)
                
                Operating
                  Disposal
                  Facilities
                
                
                Non-
                  Operating
                  Disposal
                  Facilities
                
                
                Corporate
                
                
                TotalNine months ended
      September 30, 2009Revenue
      - Treatment and disposal
                
                $
                62,316
                
                
                $
                17
                
                
                $
                -
                
                
                $
                62,333Revenue
      - Transportation services
                
                
                46,538
                
                
                
                -
                
                
                
                -
                
                
                
                46,538Total
      revenue
                
                
                108,854
                
                
                
                17
                
                
                
                -
                
                
                
                108,871Transportation
      costs
                
                
                46,131
                
                
                
                -
                
                
                
                -
                
                
                
                46,131Other
      direct operating costs
                
                
                33,926
                
                
                
                173
                
                
                
                -
                
                
                
                34,099Gross
      profit
                
                
                28,797
                
                
                
                (156
                )
                
                
                -
                
                
                
                28,641Selling,
      general& administration
                
                
                3,279
                
                
                
                -
                
                
                
                6,896
                
                
                
                10,175Operating
      income (loss)
                
                
                25,518
                
                
                
                (156
                )
                
                
                (6,896
                )
                
                
                18,466Interest
      income, net
                
                
                (1
                )
                
                
                -
                
                
                
                102
                
                
                
                101Other
      income
                
                
                147
                
                
                
                78
                
                
                
                -
                
                
                
                225Income
      (loss) before tax
                
                
                25,664
                
                
                
                (78
                )
                
                
                (6,794
                )
                
                
                18,792Tax
      expense
                
                
                -
                
                
                
                -
                
                
                
                7,466
                
                
                
                7,466Net
      income (loss)
                
                $
                25,664
                
                
                $
                (78
                )
                
                $
                (14,260
                )
                
                $
                11,326Depreciation,
      amortization & accretion
                
                $
                6,740
                
                
                $
                164
                
                
                $
                33
                
                
                $
                6,937Capital
      expenditures
                
                $
                8,707
                
                
                $
                -
                
                
                $
                18
                
                
                $
                8,725Total
      assets
                
                $
                98,803
                
                
                $
                54
                
                
                $
                27,898
                
                
                $
                126,755
  (in
      thousands)
                
                Operating
                  Disposal
                  Facilities
                
                
                Non-
                  Operating
                  Disposal
                  Facilities
                
                
                Corporate
                
                
                TotalNine months ended
      September 30, 2008Revenue
      - Treatment and disposal
                
                $
                69,906
                
                
                $
                19
                
                
                $
                -
                
                
                $
                69,925Revenue
      - Transportation services
                
                
                61,861
                
                
                
                -
                
                
                
                -
                
                
                
                61,861Total
      revenue
                
                
                131,767
                
                
                
                19
                
                
                
                -
                
                
                
                131,786Transportation
      costs
                
                
                61,786
                
                
                
                -
                
                
                
                -
                
                
                
                61,786Other
      direct operating costs
                
                
                32,579
                
                
                
                346
                
                
                
                32
                
                
                
                32,957Gross
      profit
                
                
                37,402
                
                
                
                (327
                )
                
                
                (32
                )
                
                
                37,043Selling,
      general& administration
                
                
                3,661
                
                
                
                -
                
                
                
                7,199
                
                
                
                10,860Operating
      income (loss)
                
                
                33,741
                
                
                
                (327
                )
                
                
                (7,231
                )
                
                
                26,183Interest
      income, net
                
                
                (3
                )
                
                
                -
                
                
                
                309
                
                
                
                306Other
      income
                
                
                236
                
                
                
                -
                
                
                
                1
                
                
                
                237Income
      (loss) before tax
                
                
                33,974
                
                
                
                (327
                )
                
                
                (6,921
                )
                
                
                26,726Tax
      expense
                
                
                -
                
                
                
                -
                
                
                
                10,477
                
                
                
                10,477Net
      income (loss)
                
                $
                33,974
                
                
                $
                (327
                )
                
                $
                (17,398
                )
                
                $
                16,249Depreciation,
      amortization & accretion
                
                $
                7,943
                
                
                $
                215
                
                
                $
                37
                
                
                $
                8,195Capital
      expenditures
                
                $
                10,996
                
                
                $
                9
                
                
                $
                50
                
                
                $
                11,055Total
      assets
                
                $
                97,981
                
                
                $
                62
                
                
                $
                27,495
                
                
                $
                125,538
  NOTE 16–SUBSEQUENT EVENT
 
 On
October 1, 2009, we declared a quarterly dividend of $0.18 per common share to
stockholders of record on October 16, 2009. The dividend was paid using cash on
hand on October 23, 2009 in an aggregate amount of $3.3 million.
 11
 AMERICAN
ECOLOGY CORPORATION
 MANAGEMENT'S
DISCUSSION AND ANALYSIS OF
 FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
 
 Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
 
 Overview
 
 American
Ecology Corporation, through its subsidiaries, is a hazardous, Polychlorinated
biphenyl (“PCB”), non-hazardous and radioactive waste services company providing
treatment, disposal, recycling and transportation services to commercial and
government entities including but not limited to oil refineries, chemical
production facilities, manufacturers, electric utilities, steel mills,
biotechnology companies, military installations, waste broker aggregators and
medical and academic institutions. The majority of the waste received at our
facilities is produced in the United States. We generate revenue from fees
charged to treat and dispose of waste at our four fixed disposal facilities
located near Grand View, Idaho; Richland, Washington; Beatty, Nevada; and
Robstown, Texas. We manage a dedicated fleet of railcars and arrange for the
transportation of waste to our facilities. Transportation services have
contributed significant revenue in recent years. We also utilize this railcar
fleet to provide transportation services for disposal at facilities operated by
other companies on a less frequent basis. We or our predecessor companies have
been in the waste business since 1952.
 
 Our
customers may be divided into categories to better evaluate period-to-period
changes in our treatment and disposal revenue based on service mix and type of
business (recurring “Base” or “Event” clean-up business).  Each of
these categories is described in the table below with information on the
percentage of total treatment and disposal revenues for each category for the
three and nine months ended September 30, 2009.
  Customer
                  Category
                
                Description
                
                
                %
      of Treatment and Disposal Revenue (1)
      for the Three Months ended September 30, 2009
                
                %
      of Treatment and Disposal Revenue (1)
      for the Nine Months ended September 30, 2009Broker
                
                Companies
      that collect and aggregate waste from their direct customers, comprised of
      both Base and Event clean-up business.
                
                36%
                
                34%Private
      Clean-up
                
                Private
      sector clean-up project waste, typically Event business.
                
                23%
                
                24%Government
                
                Federal
      and State government clean-up project waste, comprised of both Base
      business and Event clean-up business.
                
                14%
                
                14%Refinery
                
                Petroleum
      refinery customers, comprised of both Base and Event clean-up
      business.
                
                11%
                
                12%Other
      industry
                
                Electric
      utilities, chemical manufacturers and other industrial customers not
      included in other categories, comprised of both recurring Base business
      and Event clean-up business.
                
                8%
                
                9%Rate
      regulated
                
                Northwest
      and Rocky Mountain Compact customers paying rate-regulated disposal fees
      set by the State of Washington, predominantly Base
    business.
                
                7%
                
                6%Steel
                
                Steel
      mill customers, comprised of both Base and Event clean-up
      business.
                
                1%
                
                1%(1)
      Excludes all transportation service revenue
  A
significant portion of our disposal revenue is attributable to discrete Event
Business projects which vary widely in size, duration and unit pricing.
Approximately 46% and 48% of our treatment and disposal revenue was derived from
Event Business for the three and nine months ended September 30, 2009,
respectively. 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 funding
availability, changes in laws and regulations, government enforcement actions or
court orders, public controversy, litigation, weather, real estate redevelopment
project timing, government appropriation and funding commitment cycles and other
factors. The types and amounts of waste received from Base Business also vary
from quarter to quarter. As a result of this variability, we can experience
significant quarter-to-quarter and year-to-year differences in revenue, gross
profit, gross margin, operating income and net income. Also, while many large
projects are pursued months or years in advance of work performance, both large
and small clean-up project opportunities routinely arise with little prior
notice. This uncertainty, which is inherent to the hazardous and radioactive
waste disposal business, is factored into our projections and externally
communicated business outlook statements. Our projections combine historical
experience with identified sales pipeline opportunities, new or expanded service
line projections and prevailing market conditions. Management believes that the
significant adverse economic conditions emerging in late 2008 and continuing in
2009 exacerbate the uncertainty inherent in projecting future
results.
  
 12
 
 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 (e.g. Honeywell Jersey
City contract work) and other locations distant from our Grand View, Idaho
facility, transportation-related revenue can account for as much as
three-fourths (75%) of total project revenue. While bundling transportation and
disposal services reduces overall gross profit as a percent of total revenue
(“gross margin”), this value-added service has allowed us to win multiple
projects that management believes we could not otherwise have competed for
successfully. Our acquisition of a Company-owned railcar fleet to supplement
railcars obtained under operating leases has reduced our reliance on short-term
rentals and ultimately has reduced transportation expenses.
 
 The
increased waste volumes resulting from projects won through this bundling
strategy have driven operating leverage benefits and increased profitability.
While waste treatment and other variable costs are project-specific, the
earnings contribution from the individual projects generally increases as
overall disposal volumes increase. Management believes that maximizing operating
income and earnings per share is a higher priority than maintaining or
increasing gross margin.  We plan to continue aggressively bidding
bundled transportation and disposal services based on this
strategy.
 
 To
maximize utilization of our railcar fleet, we periodically deploy available
railcars to transport waste from clean-up sites to disposal facilities operated
by other companies.  Such transportation services may be bundled with
for-profit logistics and field services support work.
 
 We serve
oil refineries, chemical production plants, steel mills, waste
broker-aggregators serving small manufacturers and other industrial customers
that are, or may be, affected by adverse economic conditions and a tight credit
environment. Such conditions may cause our customers to curtail operations
resulting in lower waste production and/or delayed spending on off-site waste
shipments, maintenance, waste clean-up projects and other work. Factors that can
impact general economic conditions and the level of spending by our customers
include, but are not limited to, consumer and industrial spending, increases in
fuel and energy costs, conditions in the real estate and mortgage markets, labor
and healthcare costs, access to credit, consumer confidence and other economic
factors affecting spending behavior. Market forces may also induce customers to
reduce or cease operations, declare bankruptcy, liquidate or relocate to other
countries, any of which could adversely affect our business. To the extent our
business is either government funded or driven by government regulations or
enforcement actions, we believe it is less susceptible to general economic
conditions. However, spending by government agencies may also be reduced due to
declining tax revenues resulting from a weak economy or changes in policy.
Disbursement of funds appropriated by Congress may also be delayed for
administrative or other reasons.
 
 Adverse
economic trends arising in the second half of 2008 and continuing in 2009 have
resulted in a decrease in near-term demand for our services from industrial
production, manufacturing activities and waste-generating businesses that
support them. These conditions also adversely impact spending on market-driven
real estate “brownfield” redevelopment projects and other discretionary industry
clean-up projects. We have tightened our credit standards in response to these
trends.  Demand for our services may benefit over time from greater
emphasis on enforcement by the current federal administration as well as
increased federal funding for environmental remediation, including funds
specifically appropriated for remediation by the American Recovery and
Reinvestment Act of 2009 (“ARRA”). While we have received ARRA funding
commitments on certain projects served by the Company and believe additional
opportunities exist, this process has been slower than initially anticipated and
we are not in a position to estimate the overall opportunity to the Company
represented by the ARRA.
  
 13
  Results
of Operations
  The
following table summarizes our results of operations for the three and nine
months ended September 30, 2009 and 2008 in dollars and as a percentage of total
revenue.
  (in
      thousands, except per
                
                Three
      Months Ended September 30,
                
                
                Nine
      Months Ended September 30,share
      amounts)
                
                2009
                
                
                %
                
                
                2008
                
                
                %
                
                
                2009
                
                
                %
                
                
                2008
                
                
                %Revenue
                
                $
                37,529
                
                
                
                100.0
                %
                
                $
                41,051
                
                
                
                100.0
                %
                
                $
                108,871
                
                
                
                100.0
                %
                
                $
                131,786
                
                
                
                100.0
                %Transportation
      costs
                
                
                16,694
                
                
                
                44.5
                %
                
                
                20,477
                
                
                
                49.9
                %
                
                
                46,131
                
                
                
                42.4
                %
                
                
                61,786
                
                
                
                46.9
                %Other
      direct operating costs
                
                
                10,852
                
                
                
                28.9
                %
                
                
                10,553
                
                
                
                25.7
                %
                
                
                34,099
                
                
                
                31.3
                %
                
                
                32,957
                
                
                
                25.0
                %Gross
      profit
                
                
                9,983
                
                
                
                26.6
                %
                
                
                10,021
                
                
                
                24.4
                %
                
                
                28,641
                
                
                
                26.3
                %
                
                
                37,043
                
                
                
                28.1
                %Selling,
      general andadministrative expenses
                
                
                3,206
                
                
                
                8.5
                %
                
                
                3,209
                
                
                
                7.8
                %
                
                
                10,175
                
                
                
                9.3
                %
                
                
                10,860
                
                
                
                8.2
                %Operating
      income
                
                
                6,777
                
                
                
                18.1
                %
                
                
                6,812
                
                
                
                16.6
                %
                
                
                18,466
                
                
                
                17.0
                %
                
                
                26,183
                
                
                
                19.9
                %Other
      income (expense):Interest
      income
                
                
                18
                
                
                
                0.0
                %
                
                
                138
                
                
                
                0.3
                %
                
                
                103
                
                
                
                0.1
                %
                
                
                312
                
                
                
                0.2
                %Interest
      expense
                
                
                (1
                )
                
                
                0.0
                %
                
                
                (2
                )
                
                
                0.0
                %
                
                
                (2
                )
                
                
                0.0
                %
                
                
                (6
                )
                
                
                0.0
                %Other
                
                
                101
                
                
                
                0.3
                %
                
                
                78
                
                
                
                0.2
                %
                
                
                225
                
                
                
                0.2
                %
                
                
                237
                
                
                
                0.2
                %Total
      other income
                
                
                118
                
                
                
                0.3
                %
                
                
                214
                
                
                
                0.5
                %
                
                
                326
                
                
                
                0.3
                %
                
                
                543
                
                
                
                0.4
                %Income
      before income taxes
                
                
                6,895
                
                
                
                18.4
                %
                
                
                7,026
                
                
                
                17.1
                %
                
                
                18,792
                
                
                
                17.3
                %
                
                
                26,726
                
                
                
                20.3
                %Income
      taxes
                
                
                2,731
                
                
                
                7.3
                %
                
                
                2,755
                
                
                
                6.7
                %
                
                
                7,466
                
                
                
                6.9
                %
                
                
                10,477
                
                
                
                8.0
                %Net
      income
                
                $
                4,164
                
                
                
                11.1
                %
                
                $
                4,271
                
                
                
                10.4
                %
                
                $
                11,326
                
                
                
                10.4
                %
                
                $
                16,249
                
                
                
                12.3
                %Earnings
      per share:Basic
                
                $
                0.23
                
                
                
                
                
                
                $
                0.23
                
                
                
                
                
                
                $
                0.62
                
                
                
                
                
                
                $
                0.89Dilutive
                
                $
                0.23
                
                
                
                
                
                
                $
                0.23
                
                
                
                
                
                
                $
                0.62
                
                
                
                
                
                
                $
                0.89Shares
      used in earningsper share calculation:Basic
                
                
                18,148
                
                
                
                
                
                
                
                18,261
                
                
                
                
                
                
                
                18,145
                
                
                
                
                
                
                
                18,241Dilutive
                
                
                18,170
                
                
                
                
                
                
                
                18,330
                
                
                
                
                
                
                
                18,173
                
                
                
                
                
                
                
                18,301Dividends
      paid per share
                
                $
                0.18
                
                
                
                
                
                
                $
                0.18
                
                
                
                
                
                
                $
                0.54
                
                
                
                
                
                
                $
                0.48
 Three
Months Ended September 30, 2009 Compared to Three Months Ended September 30,
2008
 
 Revenue -
Revenue decreased 9% to $37.5 million for the third quarter of 2009, down from
$41.1 million in the third quarter of 2008. This reflects lower transportation
revenue and lower treatment and disposal revenue in the third quarter of 2009 as
compared to the third quarter of 2008, which we believe was a result of the
adverse economic conditions initially experienced by the Company in late 2008
and continuing into 2009. In the third quarter of 2009, we disposed of 201,000
tons of waste, down 24% from 263,000 tons disposed in the third quarter of 2008.
This volume decline was partially offset by a 31% increase in average selling
price for treatment and disposal services (excluding transportation) in the
third quarter of 2009 compared to the third quarter of 2008. This increase
primarily reflects pricing on thermal recycling services introduced at our
Robstown, TX facility in the second half of 2008.
 
 During
the third quarter of 2009, treatment and disposal revenue from recurring Base
Business customers was 2% lower than the third quarter of 2008 and comprised 54%
of non-transportation revenue. This compared to 53% of non-transportation Base
Business revenue in the third quarter of 2008. This decrease primarily reflects
declines in our other industry, steel and refinery customer
categories.
 
 Event
Business revenue in the third quarter of 2009 decreased 2% compared to the same
quarter in 2008 and was 46% of non-transportation revenue for the quarter. This
compared to 47% of non-transportation Event Business in the third quarter of
2008. As discussed further below, this reflects decreased treatment and disposal
revenue from private, government and steel customer categories.
 
  
 14
    Treatment
      and Disposal Revenue Growth
                  Three
      Months Ended September 30, 2009 vs.
                  Three
      Months Ended September 30, 2008Refinery
                
                107%Broker
                
                7%Rate
      regulated
                
                6%Government
                
                -5%Private
                
                -17%Other
      industry
                
                -21%Steel
                
                -72%
  Treatment
and disposal revenue from our refinery customers increased 107% in the third
quarter of 2009 compared to the same quarter in 2008. This increase primarily
reflects initial introduction of thermal recycling services at our Robstown,
Texas facility in the third quarter of 2008.
 
 Our
broker business increased 7% in the third quarter of 2009 compared to the same
quarter in 2008. This increase reflects our continued success working with
national and smaller regional waste broker companies that do not compete with us
for disposal business.
 
 Rate-regulated
business at our Richland, Washington low-level radioactive waste facility
increased 6% in the third quarter of 2009 compared to the third quarter of 2008.
Our Richland facility operates under a State-approved revenue requirement. The
increase is due to the timing of revenue recognition for the rate-regulated
portion of the business.
 
 Government
clean-up business revenue decreased 5% in the third quarter of 2009 compared to
the third quarter of 2008. This decline reflects lower shipment volumes from
U.S. Army Corps of Engineers (“USACE”) project sites. Event Business under our
contract with USACE contributed $2.2 million or 6% of total revenue in the third
quarter of 2009, compared to $2.4 million or 6% of total revenue in the third
quarter of 2008. Project-specific timing at the multiple USACE clean-up sites we
serve contributed to this variability. Each such site typically is remediated
over multiple years in discretely funded project phases that may involve
different types of waste being shipped to different disposal companies. These
phases vary by type and amount of waste shipped and duration.  No
USACE projects served by the Company were cancelled or awarded to competitors
during the quarter.  We believe the timing and disbursement of funds
for discrete work phases in the second and third quarters of 2009 were
negatively impacted by competing administrative demands associated with USACE
implementation of the ARRA.
 
 Treatment
and disposal revenue from private clean-up customers decreased 17% in the third
quarter of 2009 as compared to the same quarter last year. This decrease
primarily reflects lower waste shipments from the Honeywell Jersey City Study
Area 7 site, which was essentially completed during the third quarter, and the
Molycorp, Pennsylvania project which was completed in early 2009.  The
Honeywell project contributed 43% of total revenue (including transportation) in
the third quarter of 2009 and 52% of total revenue (including transportation) in
the third quarter of 2008, or $16.0 million and $21.4 million,
respectively.
 
 Our other
industry revenue category decreased 21% in the third quarter of 2009 compared to
the third quarter of 2008. This decrease reflects both Base and Event Business
declines over multiple manufacturing and other industrial customers as a result
of weaker period over period economic conditions for our industry.
 
 Treatment
and disposal revenue from our steel mill customers decreased 72% in the third
quarter of 2009 compared to the third quarter of 2008. This reflects business
lost to zinc recyclers offering a cost-effective alternative to land disposal
combined with substantially reduced steel production in the third quarter of
2009 at mills currently served by the Company.
   15
 
 Gross
Profit. Gross profit for the third quarter of 2009 and 2008 was $10.0
million.  Gross profit in the third quarter of 2008 benefited from a
favorable adjustment of $857,000 to our closure and post-closure obligations.
This favorable adjustment was based on written confirmation from the State of
Nevada that cash contributed by the Company and held in a dedicated state
account maintained to satisfy closure and post-closure obligations at our
Beatty, Nevada hazardous waste disposal facility can be used to fund interim
closure activities.
 
 Gross
margin was 27% in the third quarter of 2009, up from 24% in the third quarter of
2008. This increase includes gross profit resulting from the arrangement of
transportation and logistics services by the Company for waste shipped to a
disposal facility operated by another company during the third quarter of 2009.
This was partially offset by a decrease in treatment and disposal gross profit.
Disposal gross margins (excluding transportation revenue and costs) were 46% in
the third quarter of 2009 compared to 49% in the third quarter of 2008. This decrease reflects
the favorable adjustment to our closure and post-closure obligations recognized
in the third quarter of 2008.
 
 Selling, General
and Administrative (“SG&A”). As a percentage of total
revenue, SG&A expenses for the third quarter of 2009 and 2008 were 9% and
8%, respectively. SG&A expenses were $3.2 million, flat when compared to
$3.2 million for the third quarter of 2008.
 
 Interest
income.During the third
quarter of 2009, we earned $18,000 of interest income, down from $138,000 in the
third quarter of 2008. This decrease reflects a lower average rate of interest
earned on cash and short-term investments.
 
 Other
expense/income.Other
expense/income includes business activities not included in current year
ordinary and usual revenue and expenses. In the third quarter of 2009, we
recognized $101,000 in other income. This reflects royalty income from a
previously sold municipal waste landfill in Texas and a gain on the sale of
building and land associated with a non-operating facility in Texas. Other
income in the third quarter of 2008 was $78,000, primarily from royalty
income.
 
 Income tax
expense. Our effective tax rate for the third quarter 2009 was 39.6%
compared to 39.2% in the third quarter of 2008. This increase is primarily due
to lower pre-tax earnings in the current year which increased the impact that
non-tax-deductible expenses had on the effective tax rate.
 
 At
September 30, 2009 and December 31, 2008, we had no unrecognized tax benefits.
We recognize interest assessed by taxing authorities as interest expense. We
recognize any penalties assessed by taxing authorities as SG&A expense.Interest and penalties for
each of the three months ended September 30, 2009 and 2008 were not
material.
 
 Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008
 
 Revenue -
Revenue decreased 17% to $108.9 million for the first nine months of 2009, down
from $131.8 million for the first nine months of 2008. This decrease reflects
lower treatment and disposal revenue and lower revenue on bundled rail
transportation and disposal contracts. In the nine months ended September 30,
2009, we disposed of 642,000 tons of waste, down 31% from 931,000 tons disposed
in the first nine months of 2008. Our average selling price for treatment and
disposal services (excluding transportation) in the first nine months of 2009
was 32% higher than in the first nine months of 2008. This increase primarily
reflects pricing for the thermal recycling service initially introduced at our
Robstown, TX facility in the second half of 2008.
 
 During
the nine months ended September 30, 2009, treatment and disposal revenue from
recurring Base Business customers was 3% lower than the same period of 2008 and
comprised 52% of non-transportation revenue.  This compared to 48% of
non-transportation revenue in the nine months ended September 30, 2008. This
primarily reflects Base Business declines in our steel, broker and other
industry customer categories partially offset by growth in our broker
business.
 
 Event
Business revenue in the nine months ended September 30, 2009 decreased 19%
compared to the first nine months of 2008 and comprised 48% of
non-transportation revenue for the nine months ended September 30, 2009. This
compared to 52% of non-transportation revenue in the nine months ended September
30, 2008. As discussed further below, this reflects decreased treatment and
disposal revenue from government, private and other industry customer
categories.
 
 The
following table summarizes our revenue growth (both Base and Event Business) by
industry customer type for the nine months ended September 30, 2009 as compared
to the nine months ended September 30, 2008.
   16
  Treatment
      and Disposal Revenue Growth
                  Nine
      Months Ended September 30, 2009 vs.
                  Nine
      Months Ended September 30, 2008Refinery
                
                130%Broker
                
                5%Rate
      Regulated
                
                5%Private
                
                -15%Other
      industry
                
                -28%Government
                
                -44%Steel
                
                -74%
  Treatment
and disposal revenue from our refinery customers increased 130% in the nine
months ended September 30, 2009 compared to the same period in 2008. This
increase is primarily due to initial introduction of thermal recycling services
at our Robstown, Texas facility in the second half of 2008.
 
 Broker
business increased 5% in the nine months ended September 30, 2009 compared to
the first nine months of 2008. This increase primarily reflects growth in waste
brokered to us for thermal recycling services at our Robstown, Texas facility in
the second quarter of 2009.
 
 Rate-regulated
business at our Richland, Washington low-level radioactive waste facility
increased 5% for the nine months ended September 30, 2009 compared to the same
period in 2008. Our Richland facility operates under a State-approved revenue
requirement. This increase is due to the timing of revenue recognition for the
rate-regulated portion of the business.
 
 Treatment
and disposal revenue from private clean-up customers for the nine months ended
September 30, 2009 decreased 15% when compared to the nine months ended
September 30, 2008. The decrease is due primarily to decreased shipments on the
Molycorp, Pennsylvania and Honeywell Study Area 7 projects in the first nine
months of 2009 compared to the first nine months of 2008. The Molycorp project,
which ramped down to completion in the second quarter of 2009, contributed 2% of
total revenue (including transportation), or $2.0 million for the nine months
ended September 30, 2009, as compared to 5% of total revenue (including
transportation), or $7.0 million for the nine months ended September 30, 2008.
The Honeywell Study Area 7 site and other much smaller Honeywell Study Area
sites contributed 46% of total revenue (including transportation) for the nine
months ended September 30, 2009, or $49.9 million compared to 43% of total
revenue (including transportation), or $56.7 million, for the same period of
2008.
 
 Other
industry revenue decreased 28% in the first nine months of 2009 compared to the
first nine months of 2008. This reflects a PCB waste clean-up for an electric
utility customer shipped to our Grand View, Idaho facility that was completed in
2008 coupled with a decline in business with electric utility, manufacturing and
other industrial customers as a result of weaker period over period economic
conditions for our industry.
 
 Government clean-up
business revenue decreased 44% in the first nine months of 2009 compared to the
first nine months of 2008. This decrease reflects state-funded clean-up projects
shipped to our Robstown, Texas and Beatty, Nevada facilities, a US Army
remediation project shipped to our Grand View, Idaho facility from an overseas
military baseand a military base clean-up project shipping to our
Beatty, Nevada facility which were all completed in 2008 and not fully replaced
in 2009. Cleanup
work under the USACE contract also declined, contributing 6% of total revenue or
$7.0 million in the first nine months of 2009 compared to 7% of total revenue or
$9.0 million in the first nine months of 2008. Project-specific timing at the
multiple USACE clean-up sites we serve contributed to this variability.Each such site typically is remediated over multiple years in discretely
funded project phases that may involve different types of waste being shipped to
different disposal companies. These phases vary by type and amount of waste
shipped and duration.  No USACE projects served by the Company were
cancelled or awarded to competitors during the previous nine months. We believe
the timing and disbursement of funds for discrete work phases in the second and
third quarters of 2009 were negatively impacted by competing administrative
demands associated with USACE implementation of the ARRA.
 
 Treatment
and disposal revenue from steel mill customers decreased 74% in the first nine
months of 2009 compared to the same period of 2008. This reflects business lost
to zinc recyclers offering a cost-effective alternative to land disposal as well
as substantially reduced steel production levels in the first nine months of
2009 at mills currently served by the Company.
 
 17
  Gross
Profit. Gross
profit for the nine months ended September 30, 2009 decreased 23% to $28.6
million, down from $37.0 million for the same period of 2008. This decrease
reflects lower disposal volumes in the first nine months of 2009 compared to the
same period in 2008. This decrease was also partially attributable to a positive
adjustment of $857,000 to our closure and post-closure obligations in the third
quarter of 2008. This favorable adjustment was based on written confirmation
from the State of Nevada that cash contributed by the Company and held in a
dedicated state account maintained to satisfy closure and post-closure
obligations at our Beatty, Nevada hazardous waste disposal facility can be used
to fund interim closure activities.
 
 Gross
margin was 26% for the nine months ended September 30, 2009, down from 28% for
the nine months ended September 30, 2008.This decrease
reflects lower treatment and disposal waste volumes partially offset by a
decrease in transportation revenue. Disposal gross margins (excluding
transportation revenue and costs) were 45% in the first nine months of 2009 as
compared to 53% in the first nine months of 2008. This decrease reflects
reduced operating leverage caused by significantly lower waste volumes as well
as a greater percentage of waste requiring treatment (and increased variable
costs) prior to disposal.
 
 Selling, General
and Administrative.As a percent
of total revenue, SG&A expenses for the nine months ended September 30, 2009
and 2008 were 9% and 8%, respectively. SG&A expenses decreased 6% to $10.2
million, down from $10.9 million for the nine months ended September 30, 2008.
The decline in SG&A expense was due primarily to lower sales commissions on
reduced revenues, lower incentive compensation on lower revenue and earnings and
lower labor, travel and administrative costs resulting from ongoing 2009 cost
reduction initiatives.
 
 Interest
income.During the first nine
months of 2009, we earned $103,000 of interest income, down from $312,000 in the
same period of 2008. This decrease reflects a lower average rate of interest
earned on cash and short-term investments.
 
 Other
expense/income.Other
expense/income includes business activities not included in current year
ordinary and usual revenue and expenses. In the first nine months of 2009, we
recognized $225,000 in other income. This reflects royalty income from a
previously sold municipal waste landfill in Texas and a gain on the sale of a
parcel of property associated with a non-operating facility in Texas. This
income was partially offset by foreign currency transaction losses. Other income
in the first nine months of 2008 was $237,000, primarily from royalty
income.
 
 Income tax
expense. Our effective tax rate in the first nine months of 2009 was
39.7% compared to 39.2% in the first nine months of 2008. This increase is
primarily due to lower pre-tax earnings in the current year which increased the
impact that non-tax-deductible expenses had on the effective tax
rate.
 
 At
September 30, 2009 and December 31, 2008, we had no unrecognized tax benefits.
We recognize interest assessed by taxing authorities as interest expense. We
recognize any penalties assessed by taxing authorities as SG&A expense.Interest and penalties for
the nine months ended September 30, 2009 and 2008 were not
material.
 
 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 consolidated financial
statements are prepared using the same critical accounting policies discussed in
our Annual Report on Form 10-K for the fiscal year ended December 31,
2008.
 
 Liquidity and Capital
Resources
 
 Our
principal source of cash is from operations. The $18.8 million in cash at
September 30, 2009 was comprised of cash and cash equivalents immediately
available for operations.
 
 We have a
$15.0 million unsecured revolving line of credit (the “Revolving Credit
Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo”) expiring
on June 15, 2010. This unsecured line-of-credit is available to supplement daily
working capital if needed. Monthly interest-only payments are required on
outstanding debt levels based on a pricing grid, under which the interest rate
decreases or increases based on our ratio of funded debt to earnings before
interest, taxes, depreciation and amortization. We can elect to borrow monies
utilizing LIBOR plus an applicable spread or the prime rate. The Revolving
Credit Agreement contains quarterly financial covenants, including a maximum
leverage ratio, a maximum funded debt ratio and a minimum required tangible net
worth. Pursuant to our Revolving Credit Agreement, we may only declare quarterly
or annual dividends if on the date of declaration, no event of default has
occurred, or no other event or condition has occurred that would constitute an
event of default after giving effect to the payment of the dividend. At
September 30, 2009 we were in compliance with all financial covenants in the
Revolving Credit Agreement. We have a standby letter of credit to support our
closure and post-closure obligation of $4.0 million that expires in December
2010. At September 30, 2009, we had a borrowing capacity of $11.0 million after
deducting the outstanding letter of credit, with no borrowings
outstanding.
  
 18
 
 On
October 28, 2008, our Board of Directors authorized management to repurchase up
to 600,000 shares, or approximately 3%, of our outstanding common stock. On
December 11, 2008, the program was extended to February 28, 2009. On February
23, 2009, the program was again extended through December 31, 2009, unless
extended, canceled or modified by our Board of Directors. This authorization
does not obligate the Company to acquire any particular amount of common stock
and is to be executed at management’s discretion within Board-established stock
price limits. No stock was repurchased during the third quarter of 2009. During
2008 and through September 30, 2009, the Company purchased 155,315 shares under
the plan at an average price of $16.68 per share using cash on hand. We
anticipate that future repurchases, if any, would be funded with cash on
hand.
 
 Work
under our Honeywell contract represented 43% of total revenue for the quarter
ended September 30, 2009. Work on Study Area 7, the primary Honeywell Jersey
site, was completed in early October 2009. While this work represented a
significant portion of the Company’s total revenue, approximately 75% of the
revenue from this contract is for transportation services provided at or near
our cost. The Honeywell contract remains in effect for work at other smaller
Honeywell Study Area sites in the Jersey City area. At September 30, 2009, the
Company had approximately 376 gondola rail cars assigned to the Honeywell
project, of which 234 are owned and 142 were under operating leases expiring in
October 2009. Management intends to return those leased railcars not being
deployed on other projects on or before the date of lease termination. We expect
that our expanded treatment and disposal capabilities, expanded permits, thermal
recycling services, utilization of our railcar fleet on other projects and a
continued strategy of maximizing operating leverage at our disposal sites and
expanding services to waste brokers will generate sufficient cash flows to
continue to fund operations after completion of the Honeywell contract is
completed.
 
 Management
believes that cash on hand and cash flow from operations will be sufficient to
meet all operating cash needs and potential expenditures for the Board-approved
stock repurchase plan, if any, during the next 12 months.
 
 Operating
Activities - For the nine months ended September 30, 2009, net cash
provided by operating activities was $20.3 million. This reflects net income of
$11.3 million, decreases in receivables of $1.6 million, utilization of a $2.8
million income tax receivable and depreciation, amortization and accretion of
$6.9 million. Partially offsetting these sources of cash were decreases in
accounts payable and accrued liabilities of $1.4 million, decreases in deferred
revenue of $2.6 million and decreases in accrued salaries and benefits of $1.0
million. Impacts on net income are due to the factors discussed above under
Results of Operations. The decrease in receivables is primarily attributable to
a decline in revenue in the nine months ended September 30, 2009 compared with
the first nine months of 2008. Day’s sales outstanding were 69 days as of
September 30, 2009, compared to 66 days at December 31, 2008 and 67 days at
September 30, 2008. The decrease in income tax receivable reflects application
of prior year over-payments to current year tax liabilities generated during the
first nine months of 2009. The decrease in accounts payable and accrued
liabilities and deferred revenue is primarily attributable to lower waste
disposal volumes in the first nine months of 2009. The decrease in accrued
salaries and benefits reflects incentive compensation earned for 2008
performance and paid in the first quarter of 2009.
 
 For the
nine months ended September 30, 2008, net cash provided by operating activities
was $23.0 million. This reflects net income of $16.2 million and depreciation,
amortization and accretion of $8.2 million. Partially offsetting these sources
of cash were decreases in accounts payable and accrued liabilities of $2.1
million and decreases in closure and post-closure obligations of $1.5
million.
 
 Investing
Activities- For
the nine months ended September 30, 2009, net cash used in investing activities
was $10.2 million. Significant transactions affecting cash used in investing
activities during the first nine months of 2009 include capital expenditures of
$8.7 million and purchases of short-term investments of $1.4 million.
Significant capital projects included equipment purchases at all four operating
disposal facilities as well as construction of additional disposal capacity at
our Robstown, Texas and Grand View, Idaho sites.
   19
 
 For the
nine months ended September 30, 2008, net cash used in investing activities was
$8.8 million, including capital expenditures of $11.1 million. Partially
offsetting cash outflows for capital expenditures were net maturities of
short-term investments totaling $2.2 million.
 
 Financing
Activities- For
the nine months ended September 30, 2009 and 2008, net cash used in financing
activities was $9.8 million and $7.5 million, respectively. This primarily
reflects payment of dividends.
 
 Contractual
Obligations and Guarantees
 
 For
information on contractual obligations and guarantees, see our Annual Report on
Form 10-K for the fiscal year ended December 31, 2008 filed on February 25,
2009. There were no material changes in the amounts of our contractual
obligations and guarantees during the nine months ended September 30,
2009.
 
 Item
3. Quantitative and Qualitative Disclosures About Market Risk
 
 We do not
maintain equities, commodities, derivatives or any other instruments for trading
or any other purposes. We have
minimal interest rate risk on short-term investments and other assets. At
September 30, 2009, approximately $18.8 million was held in cash and cash
equivalents primarily invested in money market accounts and $1.4 million
invested in high investment grade commercial paper. Interest earned on these
investments is less than 1% per year.
 
 We are
exposed to market risks primarily from changes in interest rates. We do not
engage in financial transactions for trading or speculative
purposes.
 
 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 of September 30, 2009. 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 Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified by the rules and forms
of the SEC.
 
 There
were no changes in our internal control over financial reporting that occurred
during the most recently completed fiscal quarter that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
 
 
 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, but are not limited to, a loss of a
major customer, compliance with and changes to applicable laws and regulations,
access to cost effective transportation services, access to insurance and other
financial assurances, loss of key personnel, lawsuits, labor disputes, adverse
economic conditions including a tightened credit market, government funding or
competitive pressures, incidents or adverse weather conditions that could limit
or suspend specific operations, implementation of new technologies, production
rates for thermal treatment services at our Texas and Nevada facilities, market
conditions and pricing for recycled materials, our ability to perform under
required contracts, our ability to permit and contract for timely construction
of new or expanded disposal cells, our willingness or ability to pay dividends,
our willingness or ability to repurchase our own common stock under approved
stock repurchase plans, and our ability to effectively integrate any potential
acquisitions.
  
 20
 
 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 2008 Annual Report on Form 10-K filed with the SEC on February
25, 2009 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 anyprojections, forecasts or opinions, such reports are not the responsibility of
American Ecology Corporation.
 
 Item
1. Legal Proceedings
 
 We are
not currently a party to any material pending legal proceedings and are not
aware of any claims that could have a materially adverse effect on our financial
position, results of operations or cash flows.
 
 Item
1A. Risk Factors
 
 There
have been no material changes in our risk factors from those disclosed in Item
1A of Part I of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008.
   21
 
 Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
 
 The
following table sets forth the Company’s purchases of American Ecology common
stock made during the three months ended September 30, 2009:
  Period
      (1)
                
                Total
      Number of
                  Shares
      Purchased
                
                
                Average
      Price Paid
                  per
      Share
                
                
                Total
      Number of
                  Shares
      Purchased
                  as
      Part of Publicly Announced
                  Program
                
                
                Maximum
      Number
                  of
      Shares
                  That
      MayYet
                  Be
      Purchased
                  Under
      the
                  Program
      (2)July
      1, 2009  to July 31, 2009
                
                
                -
                
                
                $
                -
                
                
                
                155,315
                
                
                
                444,685August
      1, 2009 to August 31, 2009
                
                
                -
                
                
                $
                -
                
                
                
                155,315
                
                
                
                444,685September
      1, 2009 to September 30, 2009
                
                
                -
                
                
                $
                -
                
                
                
                155,315
                
                
                
                444,685Total
                
                
                -
                
                
                $
                -
                
                
                
                155,315
                
                
                
                444,685
 
 (1)
              The
      reported periods conform to our fiscal calendar. The third quarter of
      fiscal 2009 began on July 1, 2009 and ended on September 30,
      2009.
 (2)
              On
      October 28, 2008, our Board of Directors authorized a program to
      repurchase up to 600,000 shares of the Company’s outstanding common stock
      through December 31, 2008. On December 11, 2008, the program was extended
      from December 31, 2008 to February 28, 2009. On February 23, 2009, the
      program was extended from February 28, 2009 to December 31, 2009. Stock
      repurchases under the program may be made in the open market or through
      privately negotiated transactions at times and in such amounts as the
      Company deems to be appropriate.
 
 Item
3. Defaults Upon Senior Securities
 
 None.
 
 Item
4. Submission of Matters to a Vote of Security Holders
 
 None.
 
 Item
5. Other Information
 
 None.
 
 Item 6. Exhibits
 
 31.1
              Certification
      of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200231.2
              Certification
      of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act of
      200232
              Certification
      Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
      the Sarbanes-Oxley Act of 2002
  22
 
 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.
 
 
 
 American
      Ecology Corporation(Registrant)Date:  October
      29, 2009
              /s/
      Jeffrey R. FeelerJeffrey
      R. Feeler
                Vice
      President and
                Chief
      Financial Officer