ADA-ES: Advanced Emissions Solutions Reports Quarter Results

The following excerpt is from the company's SEC filing.

Refined Coal Distributions and Minimized Costs Yield Quarterly Net Income of

Million

HIGHLANDS RANCH, Colorado,

November 8, 2016

GlobeNewswire - Advanced Emissions Solutions, Inc. (NASDAQ: ADES) (the "Company" or "ADES") today filed its Quarterly Report on Form 10-Q and reported financial results for the

quarter ended

September 30, 2016

, including information about its joint-venture partnerships, Tinuum Group, LLC ("Tinuum Group," formerly Clean Coal Solutions, LLC) and Tinuum Services, LLC ("Tinuum Services," formerly Clean Coal Solutions Services, LLC) (col lectively "Tinuum"), of which ADES owns

, respectively.

Tinuum & Refined Coal (“RC”) Highlights

Tinuum distributions to ADES were

$10.7 million

during the

quarter of 2016, an increase of

$8.2 million

from the comparable period in 2015

Royalty earnings from Tinuum were

$2.1 million

Tinuum invested tonnage was

13.3 million

RC Segment operating income was

$11.9 million

Completed the lease of a RC facility in late August to an existing investor at a coal plant that has historically burned in excess of 3.0 million tons of coal per year and is royalty bearing, which replaced a previously announced investor cancellation

Future expected aggregated rent payments to Tinuum updated to

$648 million

through the end of 2021

ADES Consolidated Highlights

Recognized consolidated revenue of

$15.7 million

Reduced general and administrative operating costs (i.e., non-cost of revenue expenses) by

year over year to

$5.4 million

Achieved consolidated net income of

$9.6 million

Increased cash balance by

since June 30, 2016

Continued to validate and expand the M-Prove™ chemicals business

Progressed to the next stage of strategic review process for Emissions Control ("EC") business and remain on track for a final decision by the fourth quarter 2016 earnings release date

Continued efforts as previously discussed to market remaining RC facilities

L. Heath Sampson, President and CEO of ADES commented, “The third quarter results reflect a much improved cost structure and our focus on maximizing cash received in the form of Refined Coal distributions, with the end result being realized as

in consolidated net income. Furthermore, we continue to execute against our cost reduction initiatives and are tracking successfully towards our goal of lowering our go forward operating cost basis to between $12 to $14 million.”

Sampson concluded,

“Tinuum remains diligent in monetizing its remaining RC facilities, and despite closing only one RC deal in the third quarter, I want to reiterate that there is positive momentum in our efforts to maximize the present value of Tinuum cash flows. Further, our strategic review process for our EC business is still very much underway, and we will continue to evaluate each and every option from the perspective of the stockholders.”

quarter revenues and costs of revenues were

$13.3 million

, respectively, compared with

$12.9 million

$10.6 million

. The increases in revenues were primarily due to equipment sales and were also impacted by chemical sales, which increased over 400% compared to the

quarter other operating expenses were

, a decrease of

$12.3 million

. The decreases were primarily the result of cost containment initiatives and reduced restatement costs. Moving forward, restatement costs are not expected to be material.

quarter earnings from equity method investments were

, compared to

$0.0 million

quarter royalty earnings from Tinuum were

$3.3 million

, due to reduced RC tonnage and royalty earnings per ton.

quarter expenses related to the RC business were

$0.9 million

, a decrease of 50% compared to

$1.8 million

quarter of 2015 due to no longer incurring interest expense related to RCM6 as it was sold in the first quarter of 2016, and a decrease in 453A interest expense. RC segment operating income was

$1.4 million

quarter consolidated interest expense was

$1.0 million

quarter of 2015.

Consolidated net income for the

quarter was

, compared to a net loss of

$8.7 million

quarter of 2015, primarily driven by equity income from the RC business and significantly reduced operating expenses in the EC business as well as corporate expenses.

As of

, the Company had cash and cash equivalents of

$7.6 million

$9.3 million

as of

December 31, 2015

, due primarily to the repayment and termination of the Company’s credit agreement in its entirety, including debt principal payments of

in the second quarter of 2016. The Company also had

$8.8 million

in current and long-term restricted cash as of

$11.7 million

Conference Call and Webcast Information

The Company has scheduled a conference call to begin at 9:00 a.m. Eastern Time on Wednesday,

November 9, 2016

. The conference call will be webcast live via the Investor section of ADES's website at

www.advancedemissionssolutions.com

. Interested parties may also participate in the call by dialing (877) 201-0168 (Domestic) or (647) 788-4901 (International) conference ID 86261213. A supplemental investor presentation will be available on the Company's investor relations website prior to the start of the conference call.

About Advanced Emissions Solutions, Inc.

Advanced Emissions Solutions, Inc. serves as the holding entity for a family of companies that provide emissions solutions to customers in the power generation and other industries.

ADA-ES, Inc. (“ADA”) is a wholly-owned subsidiary of Advanced Emissions Solutions, Inc. (“ADES”) that provides emissions control solutions for coal-fired power generation and industrial boiler industries. With more than 25 years of experience developing advanced mercury control solutions, ADA delivers proprietary environmental technologies, equipment and specialty chemicals that enable coal-fueled boilers to meet emissions regulations. These solutions enhance existing air pollution control equipment, maximizing capacity and improving operating efficiencies. Our track record includes securing more than 30 US patents for emissions control technology and systems and selling the most activated carbon injection systems for power plant mercury control in North America. For more information on ADA, and its products and services, visit www.adaes.com or the ADA Blog (http://blog.adaes.com/).

Tinuum Group, LLC is a 42.5% owned joint venture by ADA that provides ADA’s patented Refined Coal (“RC”) CyClean™ technology to enhance combustion of and reduce emissions of NOx and mercury from coals in cyclone boilers and ADA’s patent pending M-45™ and M-45-PC™ technologies for Circulating Fluidized boilers and Pulverized Coal boilers respectively. www.tinuumgroup.com

Caution on Forward-Looking Statements

This release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a "safe harbor" for such statements in certain circumstances. The forward-looking statements include statements or expectations regarding the timing, availability and content of the presentation; strategic review of alternatives for our EC business and timing for a final decision; future expected aggregate rent payments to Tinuum Group and Tinuum’s ability to continue to scale its business; timing and outcome of our restructuring and cost containment efforts; materiality of future restatement costs; and related matters. These statements are based on current expectations, estimates, projections, beliefs and assumptions of the Company’s management. Such statements involve significant risks and uncertainties. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to, changes and timing in laws, regulations, IRS interpretations or guidance, accounting rules and any pending court decisions, legal challenges to or repeal of them; changes in prices, economic conditions and market demand; the ability of the RC facilities to produce coal that qualifies for tax credits; the timing, terms and changes in contracts for RC facilities, or failure to lease or sell RC facilities; impact of competition; availability, cost of and demand for alternative tax credit vehicles and other technologies; technical, start-up and operational difficulties; availability of raw materials; loss of key personnel; reductions in operating costs may be less than expected; the value of our products, technologies and intellectual property to customers and strategic investors; intellectual property infringement claims from third parties; the outcome of pending litigation; seasonality and other factors discussed in greater detail in the Company’s filings with the SEC. You are cautioned not to place undue reliance on such statements and to consult the Company’s SEC filings for additional risks and uncertainties that may apply to our business and the ownership of ADES securities. The Company’s forward-looking statements are presented as of the date made, and the Company disclaims any duty to update such statements unless required by law to do so.

Source: Advanced Emissions Solutions, Inc.

Investor Contact:

Alpha IR Group

Nick Hughes or Chris Hodges

312-445-2870

ADES@alpha-ir.com

TABLE 1

Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

(in thousands, except share data)

ASSETS

Current assets:

Cash and cash equivalents

Receivables, net

12,008

Receivables, related parties, net

Restricted cash

Costs in excess of billings on uncompleted contracts

Prepaid expenses and other assets

Total current assets

27,604

24,715

Restricted cash, long-term

10,980

Property and equipment, net of accumulated depreciation of $2,577 and $4,557, respectively

Investment securities, restricted, long-term

Cost method investment

Equity method investments

17,232

Other assets

Total Assets

40,543

60,775

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:

Accounts payable

Accrued payroll and related liabilities

Current portion of notes payable, related parties

Billings in excess of costs on uncompleted contracts

Short-term borrowings, net of discount and deferred loan costs, related party

12,676

Legal settlements and accruals

12,448

Other current liabilities

Total current liabilities

28,977

50,092

Long-term portion of notes payable, related party

13,512

Legal settlements and accruals, long-term

13,797

Other long-term liabilities

Total Liabilities

40,834

85,753

Commitments and contingencies (Note 8)

Stockholders’ deficit:

Preferred stock: par value of $.001 and no par value per share, respectively, 50,000,000 shares authorized, none outstanding

Common stock: par value of $.001 per share, 100,000,000 shares authorized, 22,271,525 and 21,943,872 shares issued, and 22,001,585 and 21,809,164 shares outstanding at September 30, 2016 and December 31, 2015, respectively

Additional paid-in capital

118,868

116,029

Accumulated deficit

(119,181

(141,029

Total stockholders’ deficit

(24,978

Total Liabilities and Stockholders’ Deficit

TABLE 2

Condensed Consolidated Statements of Operations

Three Months Ended September 30,

Nine Months Ended September 30,

in thousands, except per share data and percentages

Revenues:

Equipment sales

14,869

12,088

44,788

47,439

Chemicals

Consulting services and other

Total revenues

15,710

12,885

46,997

49,537

Operating expenses:

Equipment sales cost of revenue, exclusive of depreciation and amortization

12,704

35,175

38,662

Chemicals cost of revenue, exclusive of depreciation and amortization

Consulting services cost of revenue, exclusive of depreciation and amortization

Payroll and benefits

10,567

19,102

Rent and occupancy

Legal and professional fees

11,545

General and administrative

Research and development, net

Depreciation and amortization

Total operating expenses

18,623

22,874

57,867

84,202

Operating loss

(2,913

(9,989

(10,870

(34,665

Other income (expense):

Earnings (loss) from equity method investments

10,735

30,066

Royalties, related party

Interest income

Interest expense

(1,778

(4,496

(5,347

Gain on sale of equity method investment

Gain on settlement of note payable and licensed technology

Total other income

13,108

33,452

Income (loss) before income tax expense

10,195

(8,610

22,582

(27,082

Income tax expense

Net income (loss)

(8,654

21,848

(27,233

Earnings (loss) per common share (Note 1):

Diluted

Weighted-average number of common shares outstanding:

21,740

21,687

21,926

21,757

22,098

22,209

TABLE 3

Condensed Consolidated Statements of Cash Flows

in thousands)

Cash flows from operating activities

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Amortization of debt issuance costs

Impairment of property, equipment, inventory and intangibles

Interest costs added to principal balance of notes payable

Share-based compensation expense

Earnings from equity method investments

(30,066

(5,133

(2,078

Gain on settlement of note payable, licensed technology, and sales-type lease

(1,910

Other non-cash items, net

Changes in operating assets and liabilities, net of effects of acquired businesses:

(3,677

Related party receivables

(1,134

Costs incurred on uncompleted contracts

28,575

Other long-term assets

(3,837

(2,245

(2,094

Billings on uncompleted contracts

(32,469

(7,256

Advance deposit, related party

(1,306

(2,586

(1,661

(2,528

Distributions from equity method investees, return on investment

Net cash used in operating activities

(12,234

(13,640

Cash flows from investing activities

Maturity of investment securities, restricted

Increase in restricted cash

(2,100

Acquisition of property and equipment, net

Advance on note receivable

Acquisition of business

(2,124

Purchase of and contributions to equity method investees

(1,083

Proceeds from sale of equity method investment

Distributions from equity method investees in excess of cumulative earnings

24,650

Net cash provided by (used in) investing activities

25,839

(1,514

Cash flows from financing activities

Repayments on short-term borrowings, related party

(13,250

Repayments on notes payable, related party

(1,246

(1,166

Short-term borrowing loan costs

Repurchase of shares to satisfy tax withholdings

Net cash used in financing activities

(15,267

(1,442

Decrease in Cash and Cash Equivalents

(1,662

(16,596

Cash and Cash Equivalents, beginning of period

25,181

Cash and Cash Equivalents, end of period

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental disclosure of non-cash investing and financing activities:

Stock award reclassification (liability to equity)

Settlement of RCM6 note payable

13,234

Non-cash reduction of equity method investment

11,156

The above information was disclosed in a filing to the SEC. To see the filing, click here.

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