American Ecology Posts Solid Third Quarter Revenues But Profits Off

Date: October 17, 2006

Source: American Ecology Corp.

American Ecology Announces Third Quarter 2006 Results, Raises 2006 Earnings Guidance

American Ecology Corporation (NASDAQ: ECOL) today announced financial results for the third quarter and the nine-months ended September 30, 2006.

Third Quarter Results

Revenue for the third quarter of 2006 increased 10.8% to $27.5 million, up from $24.8 million in the year ago period. This increase primarily reflects expanded rail transportation services on the Company's Honeywell International Jersey City project. Waste volumes disposed at the Company's hazardous waste facilities declined approximately 31% during the third quarter of 2006 as compared to the third quarter of 2005. As previously announced, this decline was primarily due to delayed shipments from U.S. Army Corps of Engineers cleanup projects to the Company's Grand View, Idaho disposal site. This timing-related decline was partially offset by an approximately 22% increase in average selling price in the third quarter over the same quarter in 2005. Army Corps of Engineers shipments to the Idaho site resumed as expected in September and October following new government spending authorizations.

Operating income was $4.7 million for the third quarter of 2006, 31.4% lower than operating income of $6.9 million in the third quarter of 2005. Despite reduced government business, all four operating facilities were profitable for the quarter. The Robstown, Texas, Beatty, Nevada and Richland, Washington disposal facilities each delivered significant year-over-year operating income growth.

"We are pleased with the continued strength of our core waste treatment and disposal business and closed the third quarter on a very positive note with a solid pipeline of ongoing work," commented President and Chief Executive Officer Stephen Romano.

Gross profit declined 30.7% to $6.9 million during the third quarter of 2006 as compared to $10.0 million in the third quarter of 2005. This decline primarily reflects reduced disposal volumes from the Army Corps of Engineers. Direct operating costs for the quarter increased to $20.6 million, up from $14.8 million in the third quarter of 2005. This increase reflects higher transportation cost due largely to increased rail car utilization, as well as higher variable costs for waste treatment additives used on multiple projects.

Selling, general & administrative expenses for the third quarter of 2006 declined 6.5% to $2.9 million, or 10.6% of sales, as compared to $3.1 million for the third quarter of 2005, or 12.5% of sales. This decrease is primarily due to higher revenues and lower bonus accruals partially offset by an increase in stock-based incentive compensation.

During the quarter, the Company settled its outstanding business interruption claim related to the July 2004 fire at its Robstown, Texas facility. This resulted in approximately $704,000 in operating income for the quarter beyond the $157,000 previously accrued in prior periods. After giving effect to the settlement, the Company has no outstanding claims against its insurance carrier in relation to the fire.

Other income was approximately $209,000 for the third quarter of 2006. This compares to $5.4 million posted in the third quarter last year, which included a one-time $5.3 million pre-tax gain earned on settlement of a lawsuit with the State of Nebraska over a formerly proposed low-level radioactive waste disposal facility in that state.

Net income was $3.0 million, or $0.16 per diluted share, for the third quarter of 2006. Net income was $7.7 million in the third quarter of 2005, or $0.43 per diluted share, which included an approximately $0.18 per share gain from the Nebraska lawsuit settlement.

At September 30, 2006, the Company had approximately $11 million of cash and short-term investments. The Company's $15 million line of credit was unused at quarter end.

Year-to-Date Results

Revenue for the nine-months ended September 30, 2006 increased 40.6% to $78.9 million compared to $56.1 million for the nine-months ended September 30, 2005. This gain was substantially due to increased rail transportation services provided to Honeywell and other customers. While waste volumes decreased 3% in the first nine-months of 2006 as compared to the same period in 2005, average selling prices were up approximately 12% year-over-year. This reflects increased delivery of higher margin treatment and disposal services.

Operating income rose to $18.4 million, up 30.5% over the $14.1 million posted for the same period in 2005. For the first nine months of 2006, the Company reported net income of $12.1 million or $0.66 per diluted share. This compares to $12.3 million, or $0.68 per diluted share, in the prior year period. As noted above, 2005 net income included a $5.3 million pre-tax gain on the Nebraska lawsuit settlement. During 2006, the Company recognized $458,000 in pre-tax other income primarily from a gain on sale of excess land at a non-operating facility in Texas, and for reimbursement of legal fees.

Management Raises 2006 Earnings Guidance

Based on results to date and our fourth quarter outlook, management is raising its previously issued 2006 earnings guidance of $0.72 to $0.82 per diluted share to $0.85 to $0.90 per share.

"This increase in our earnings estimate for 2006 reflects American Ecology's strong year to date financial performance as well as an improved fourth quarter outlook based on the resumed Army Corps of Engineers shipments, continued execution on the Honeywell contract and expectations of continued strong performance by the Company's Nevada and Texas operations," Romano stated.

"Significant capital spending in 2005 and 2006 positions us for continued growth. The expansion of our rail capabilities in Idaho and Texas led to clean-up project wins on the East Coast while enabling us to compete for other large projects we expect to bid in the future. Our new Texas rail facility will be serving its first rail customer in October, and we are actively marketing our Texas services to an expanded geographic area," Romano concluded.


On October 2, 2006, the Company declared a $0.15 per common share quarterly dividend for stockholders of record on October 13, 2006. This $2.7 million dividend will be paid using cash on hand on October 20, 2006.

Conference Call

The Company will hold an investor conference call on Wednesday, October 18, 2006 at 11:00 a.m. Eastern Daylight Time (9:00 a.m. Mountain Daylight Time) to discuss these results and its updated business outlook.

Participants can access the conference by dialing (866) 261-3296. Participants will by required to register their name and company affiliation for the conference call. The call will also be carried live on the Company's website at
An audio replay will be made available through October 21, 2006 by calling (800) 675-9924 using the pass code 101806 or by visiting the Company's website at

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