ADA-ES: Advanced Emissions Solutions Reports Quarter Results

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

Million or

per diluted share


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

quarter ended

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

, respectively.

Tinuum & Refined Coal (“RC”) Highlights

Tinuum distributions to ADES were

$14.7 million

during the

quarter of

, an increase of

$9.8 million

from the comparable quarter in

Royalty earnings from Tinuum were

$1.8 million

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

$7.4 million

Reduced general and administrative operating costs (i.e., indirect operating costs) for the quarter by

$5.2 million

$8.4 million

for the comparable quarter in

Continued to validate and expand the chemicals business, which had

$2.3 million

in revenue during the quarter, an increase of

Achieved consolidated net income of

$8.7 million


Increased non-restricted cash balance by

$15.2 million


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

$28.4 million

$13.2 million

at the end of 2016."

Sampson continued,

“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

$5.9 million

, respectively, compared with

$22.4 million

$17.3 million

. 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

$13.8 million

, compared to

$5.6 million

quarter royalty earnings from Tinuum were

$1.2 million

, due to increased earnings from the respective RC facilities.

quarter expenses related to the RC business were

$0.5 million

, a decrease of 44% compared quarter over quarter primarily due to lower interest expense. RC segment operating income was

$15.0 million

$7.9 million

. 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

$0.7 million

$2.0 million

quarter income tax expense was

$5.4 million

$0.1 million

Consolidated net income for the

$4.4 million

, primarily driven by equity earnings 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

, due primarily to positive operating and investing cash flows. The Company also had

in restricted cash released during the quarter.

Tender Offer

The Company today commenced a tender offer to acquire up to


shares of its common stock for up to

$10.0 million

.  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 “

Acquiring Person

”). 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 or the ADA Blog (

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.

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.

Investor Contact:

Alpha IR Group

Chris Hodges or Ryan Coleman



Advanced Emissions Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


(in thousands, except share data)


Current assets:

Cash and cash equivalents



Restricted cash


Receivables, net

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

Total Assets




Current liabilities:

Accounts payable

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

Total Liabilities



Commitments and contingencies (Note 6)

Stockholders’ equity:

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



Accumulated deficit



Total stockholders’ equity



Total Liabilities and Stockholders’ Equity


Condensed Consolidated Statements of Operations

Three Months Ended March 31,

(in thousands, except per share data)


Equipment sales


Consulting services and other

Total revenues


Operating expenses:

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



Operating loss



Other income (expense):

Earnings from equity method investments


Royalties, related party

Interest expense


Revision in estimated royalty indemnity liability

Total other income


Income before income tax expense


Income tax expense

Net income

Earnings per common share (Note 1):


Weighted-average number of common shares outstanding:






Condensed Consolidated Statements of Cash Flows

in thousands)

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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Other recent filings from the company include the following:

Submission of Matters to a Vote of Security - June 21, 2018
ADA-ES's SVP of Operations of ADA-ES just disposed of 1,228 shares - May 29, 2018

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