The following excerpt is from the company's SEC filing.
Refined Coal Distributions, Strong Chemicals Growth and Leaner Cost Structure Drive Quarterly Net Income of
per diluted share
HIGHLANDS RANCH, Colorado,
May 8, 2017
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
March 31, 2017
, including information about its joint-venture partnerships, Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services") (collectively "Tinuum"), of whic h ADES owns
Tinuum & Refined Coal (“RC”) Highlights
Tinuum distributions to ADES were
, an increase of
from the comparable quarter in
Royalty earnings from Tinuum were
increase from the same quarter in
Tinuum invested tonnage was 9.8 million during the
compared to 8.9 million tons during the
Completed the lease of an RC facility in late March to an existing investor at a coal plant that has historically burned in excess of 5.5 million tons of coal per year and is royalty bearing, increasing the number of invested facilities to 14 as of the end of the first quarter of 2017
Based on closure of this new facility, future projected RC cash flows to ADES are between $275 million to $300 million through the end of 2021
ADES Consolidated Highlights
Recognized consolidated revenue of
Reduced general and administrative operating costs (i.e., indirect operating costs) for the quarter by
for the comparable quarter in
Continued to validate and expand the chemicals business, which had
in revenue during the quarter, an increase of
Achieved consolidated net income of
Increased non-restricted cash balance by
December 31, 2016
Took initial steps in returning value to stockholders through balanced capital allocation approach, including recently announced tender offer for up to $10 million and expected June declaration of Company’s first ever recurring quarterly dividend of $0.25 per share
L. Heath Sampson, President and CEO of ADES commented, “The results of our first quarter of the new year reflect significant progress in executing our reinvigorated business model, exemplified by our strong financial performance with
in consolidated net income. In addition to strong growth in our chemicals business, the first quarter was also highlighted by a large increase in our cash position, which now is at
at the end of 2016."
“Our team and Tinuum remain focused on identifying additional tax equity investors to invest in the remaining RC facilities. We believe the political environment is becoming more favorable and expect to leverage that environment to accelerate investment in Tinuum's remaining projects. We are engaged in discussions with multiple investor prospects and hope to gain additional momentum as the year progresses. Our confidence in both the foundation and additional potential of the RC business, as well as the exciting growth of our chemicals business, has allowed us to start the process of returning capital to stockholders through what we expect will be a balanced approach to capital allocation moving forward. Today, we commenced a tender offer to repurchase a significant number of shares and we expect to solidify our quarterly dividend program within the next several months.”
quarter revenues and costs of revenues were
, respectively, compared with
. The decrease in revenues was primarily due to the decrease in equipment sales, partially offset by stronger chemical sales.
quarter other operating expenses were
, a decrease of
. The decreases were largely driven by significantly lower equipment sales cost of revenue as well as substantially lower legal and professional fees. Depreciation and amortization more than doubled from the comparable period in 2016, driven by the Company’s recent headquarters move, which led to accelerated depreciation. Moving forward, the Company expects depreciation and amortization to return to previously observed lower levels. Additionally, the Company expects to save approximately $0.4 million in rent payments over the life of the lease.
quarter earnings from equity method investments were
, compared to
quarter royalty earnings from Tinuum were
, due to increased earnings from the respective RC facilities.
quarter expenses related to the RC business were
, a decrease of 44% compared quarter over quarter primarily due to lower interest expense. RC segment operating income was
. Revenues from the chemicals business were
during the first quarter, a
increase compared to
for the comparable quarter in the prior year.
quarter consolidated interest expense was
quarter income tax expense was
Consolidated net income for the
, primarily driven by equity earnings from the RC business and significantly reduced operating expenses in the EC business, as well as corporate expenses.
, the Company had cash and cash equivalents of
, due primarily to positive operating and investing cash flows. The Company also had
in restricted cash released during the quarter.
The Company today commenced a tender offer to acquire up to
shares of its common stock for up to
. The tender offer is described in the Company's Offer to Purchase, dated May 8, 2017, and the associated Letter of Transmittal and other materials relating to the tender offer that are being filed today with the Securities and Exchange Commission are being distributed to stockholders. A separate press release was issued by the Company today.
Tax Asset Protection Plan
May 5, 2017
, Board of Directors unanimously adopted a Tax Asset Protection Plan designed to protect the Company’s ability to utilize its net operating losses and tax credits, which totaled approximately $113 million as of December 31, 2016.
United States federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and other tax assets if ADES experiences an “ownership change” (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of ADES by “5 percent stockholders” that exceeds 50 percentage points over a rolling three-year period.
The Company noted the Tax Asset Protection Plan serves the interests of all stockholders by protecting the Company’s ability to use its deferred tax assets to offset tax liabilities in the future.
Under the terms of the Tax Asset Protection Plan, the Company will distribute to its stockholders a non-taxable dividend distribution of one preferred stock purchase right for each share of common stock of the Company outstanding as of the close of business on
May 22, 2017
. The Tax Asset Protection Plan is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock (an “
”). Stockholders who beneficially owned 4.99% or more of the Company’s outstanding common stock as of the close of business on
will not become an Acquiring Person so long as they do not acquire additional shares of common stock while they still beneficially own 4.99% or more of the Company’s outstanding common stock.
A person who becomes an Acquiring Person may be subject to significant dilution in its holdings. The Board of Directors may, in its sole discretion, exempt any person from being deemed an Acquiring Person for purposes of the Tax Asset Protection Plan.
A copy of the Tax Asset Protection Plan will be contained in a Form 8-K to be filed with the Securities and Exchange Commission.
Conference Call and Webcast Information
The Company has scheduled a conference call to begin at 9:00 a.m. Eastern Time on Tuesday,
May 9, 2017
. The conference call will be webcast live via the Investor section of ADES's website at
. Interested parties may also participate in the call by dialing (877) 201-0168 (Domestic) or (647) 788-4901 (International) conference ID 7055719. 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 CyClean™ technology to enhance combustion of and reduce emissions of NOx and mercury from coal in cyclone boilers and ADA’s patented M-45™ and patent pending M-45-PC™ technologies for Circulating Fluidized boilers and Pulverized Coal boilers respectively. www.tinuumgroup.com
Caution on Forward-Looking Statements
This press 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 included in this press release involve 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, timing of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the US government’s failure to promulgate regulations or appropriate funds that benefit our business; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; impact of competition; availability, cost of and demand for alternative energy sources and other technologies; technical, start up and operational difficulties; failure of the RC facilities to produce RC; termination of or amendments to the contracts for sale or lease of RC facilities; decreases in the production of RC; inability to commercialize our technologies on favorable terms; our inability to ramp up our operations to effectively address recent and expected growth in our business; loss of key personnel; potential claims from any terminated employees, customers or vendors; failure to satisfy performance guarantees; availability of materials and equipment for our businesses; intellectual property infringement claims from third parties; pending litigation; identification of additional material weaknesses or significant deficiencies; whether the Tax Asset Protection Plan will have its intended effects and the estimate of Tax Benefits for federal income tax purposes; as well as other factors relating to our business, as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings. You are cautioned not to place undue reliance on the forward-looking statements and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. The forward-looking statements speak only as to the date of this press release.
Source: Advanced Emissions Solutions, Inc.
Alpha IR Group
Chris Hodges or Ryan Coleman
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data)
Cash and cash equivalents
Receivables, related parties, net
Costs in excess of billings on uncompleted contracts
Prepaid expenses and other assets
Total current assets
Property and equipment, net of accumulated depreciation of $1,476 and $2,920, respectively
Cost method investment
Equity method investments
Deferred tax assets
Other long-term assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accrued payroll and related liabilities
Billings in excess of costs on uncompleted contracts
Legal settlements and accruals
Other current liabilities
Total current liabilities
Legal settlements and accruals, long-term
Other long-term liabilities
Commitments and contingencies (Note 6)
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none outstanding
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 22,478,711 and 22,322,022 shares issued, and 22,072,056 and 22,024,675 shares outstanding at March 31, 2017 and December 31, 2016, respectively
Additional paid-in capital
Total stockholders’ equity
Total Liabilities and Stockholders’ Equity
Condensed Consolidated Statements of Operations
Three Months Ended March 31,
(in thousands, except per share data)
Consulting services and other
Equipment sales cost of revenue, exclusive of depreciation and amortization
Chemicals cost of revenue, exclusive of depreciation and amortization
Consulting services cost of revenue, exclusive of depreciation and amortization
Payroll and benefits
Rent and occupancy
Legal and professional fees
General and administrative
Research and development, net
Total operating expenses
Other income (expense):
Earnings from equity method investments
Royalties, related party
Revision in estimated royalty indemnity liability
Total other income
Income before income tax expense
Income tax expense
Earnings per common share (Note 1):
Weighted-average number of common shares outstanding:
Condensed Consolidated Statements of Cash Flows
Cash flows from operating activities
Adjustments to reconcile net income to net cash used in operating activities:
Stock-based compensation expense
Gain on sale of equity method investment
Gain on settlement of note payable
Other non-cash items, net
Changes in operating assets and liabilities:
Related party receivables
Costs incurred on uncompleted contracts
Deferred tax asset, net
Billings on uncompleted contracts
Advance deposit, related party
Distributions from equity method investees, return on investment
Net cash used in operating activities
Cash flows from investing activities
Distributions from equity method investees in excess of cumulative earnings
Maturity of investment securities, restricted
Acquisition of property and equipment, net
Contributions to equity method investees
Proceeds from sale of equity method investment
Net cash provided by investing activities
Cash flows from financing activities
Borrowings on Line of Credit
Repayments on Line of Credit
Repayments on short-term borrowings and notes payable, related party
Short-term borrowing loan costs
Repurchase of shares to satisfy tax withholdings
Net cash used in financing activities
Increase (decrease) in Cash and Cash Equivalents and Restricted Cash
Cash and Cash Equivalents and Restricted Cash, beginning of period
Cash and Cash Equivalents and Restricted Cash, end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid (refunded) for income taxes
Supplemental disclosure of non-cash investing and financing activities:
Settlement of RCM6 note payable
Non-cash reduction of equity method investment
The above information was disclosed in a filing to the SEC. To see the filing, click here.
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