American Ecology Corp. Reports Operating Results (10-Q)
American Ecology Corp. has a market cap of $286.6 million; its shares were traded at around $15.65 with a P/E ratio of 21.2 and P/S ratio of 2.2. The dividend yield of American Ecology Corp. stocks is 4.6%. American Ecology Corp. had an annual average earning growth of 39% over the past 10 years. GuruFocus rated American Ecology Corp. the business predictability rank of 2-star.ECOL is in the portfolios of John Buckingham of Al Frank Asset Management, Inc., Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:In 2005, we entered into a contract with Honeywell to transport, treat and dispose approximately 1.3 million tons of chromite ore processing residue. We believe this project was one of, if not the largest, private hazardous waste cleanup projects in our industry. The project was for the treatment of commoditized metals-bearing waste. We believe we earned this business through a combination of our high volume waste throughput capability, the superior environmental conditions present at our site in the Owyhee Desert of southwestern Idaho and competitive pricing for bundled transportation and disposal services. The project was completed in October 2009. This project represented 44% , or $15.4 million, of our total revenues in the three months ended March 31, 2009 and we believe generated approximately 28% of our operating income, or approximately $0.06 diluted earnings per share. The completion of this large Event Business project will impact the comparability of our financial results in 2010 when comparing to 2009 or previous period that the Honeywell project was shipping to our facility. 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 the completion of the Honeywell project.
Revenue - Revenue decreased 44% to $19.5 million for the first quarter of 2010, down from $35.0 million in the first quarter of 2009. This reflects lower transportation revenue and lower treatment and disposal revenue in the first quarter of 2010 as compared to the first quarter of 2009 primarily due to the completion of the four year Honeywell International Jersey City (“Honeywell Jersey City”) project in early October of 2009. In the first quarter of 2010, we disposed of 119,000 tons of waste, down 44% from 213,000 tons disposed in the first quarter of 2009, of which 87,000 tons was from the Honeywell Jersey City project. This volume decline was partially offset by a 42% increase in average selling price for treatment and disposal services (excluding transportation) in the first quarter of 2010 compared to the first quarter of 2009. This increase primarily reflects changes in service mix in the first quarter of 2010 as compared to the first quarter of 2009.
Government clean-up business revenue decreased 9% in the first quarter of 2010 compared to the first quarter of 2009. This decline reflects lower shipment volumes from two Department of Defense clean-up projects in the first quarter of 2010 compared to the first quarter of 2009. This decline was partially offset by increased revenue from USACE project sites. Event Business under our contract with USACE contributed $3.7 million or 19% of total revenue in the first quarter of 2010, compared to $2.2 million or 6% of total revenue in the first quarter of 2009. This increase was due to the addition of transportation and logistic services being offered on one of the USACE project sites and to an approximate 14% increase in treatment and disposal revenue. 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.
Gross Profit. Gross profit for the first quarter of 2010 decreased by 31% to $6.6 million, down from $9.5 million in the first quarter of 2009. This decrease primarily reflects lower volumes of waste disposed in the first quarter of 2010 compared to the same period in 2009.
Interest income. During the first quarter of 2010, we earned $14,000 of interest income, down from $48,000 in the first quarter of 2009. 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 quarter of 2010, we recognized $41,000 in other income. This reflects royalty income from a previously sold municipal waste landfill in Texas partially offset by foreign currency transaction losses. Other income in the first quarter of 2009 was $33,000, primarily from royalty income partially offset by foreign currency transaction losses.
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