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ADA-ES, Inc. (NASDAQ:ADES) (“ADA”) today announced financial results for the fourth quarter and year ended December 31, 2011.
OVERVIEW OF 2011 FOURTH QUARTER RESULTS
Total revenues increased 174% to $24.6 million from $9.0 million in the fourth quarter of 2010, primarily due to recognition of Refined Coal (“RC”) revenues, including coal sales of $17.4 million recognized during demonstration of new placed-in-service facilities.
Gross margin was $4.7 million, or 19% of revenue, compared to $6.5 million, or 72% of revenues. Lower margin in 2011 is due to inclusion of coal purchases and sales associated with RC activities. 2011 fourth quarter gross margin excluding coal sales and purchases was 64%.
Net income of $13.8 million, or $1.53 per diluted share, compared to a net loss of $3.1 million, or $0.42 per diluted share, in the fourth quarter of 2010. The 2011 period included a non-cash $20.0 million gain recognized in settlement of an indemnity claim. The 2010 period included $8.3 million of non-routine legal expenses and a $6.1 million gain from settlement of litigation.
OVERVIEW OF 2011 RESULTS
Total revenues increased 139% to $53.3 million.
Gross margin of $24.4 million, or 46% of revenues, compared to $13.7 million, or 61% of revenues. 2011 gross margin excluding coal sales and purchases was 73%.
Net loss of $19.9 million, or $2.48 per diluted share, compared to a net loss of $15.5 million, or $2.09 per diluted share in 2010.
2011 AND 2012 YTD OPERATIONAL ACHIEVEMENTS
Dr. Michael D. Durham, President and CEO of ADA stated, “In 2011, we achieved a number of important milestones that we believe will serve as the foundation for our growth in 2012:
Clean Coal Solutions, LLC (“Clean Coal”), ADA’s joint venture with NexGen Resources Corporation (“NexGen”) and an affiliate of The Goldman Sachs Group, Inc., successfully installed and operated 26 new RC facilities in 2011, satisfying the “placed-in-service” requirements that qualify these facilities to produce RC and generate IRS Section 45 tax credits of $6.33 per ton for the next 10 years.
15 of these 26 RC facilities have been installed at plants where we believe they will reside for the remaining life of the tax credits. Although permitting and contract negotiations on many of these 15 units are still in progress, we expect several will be operational by the end of the 2012 second quarter.
In that regard, based upon our progress-to-date, we continue to believe that by the end of 2012 the RC facilities we expect to put into operation will generate annualized revenues and pre-tax income for ADA of approximately $100 million and $50 million per year, respectively, after payments to minority partners for the remaining life of the tax credits.
We ended 2011 with no significant debt and nearly $41 million in cash.
We settled various litigation and arbitration matters, allowing us to devote our energies to expanding our business and building long-term value for our shareholders.
OVERVIEW OF SEGMENTS & OUTLOOK
Dr. Durham continued, “Each of our three segments reported quarter-over-quarter improvements in revenues. In the RC segment, we benefited from the continuing contributions of the two RC facilities placed in operation in the second quarter of 2010. These facilities qualify for the Section 45 tax credits of $6.33 per ton of RC available over the next ten years. For 2011, of the $40.3 million in revenues from the RC segment, these two RC facilities contributed $20.1 million in revenues and $14.7 million in income from operations, respectively, compared to revenues of $10.1 million and income from operations of $7.3 million in 2010 from their 6-months of operations that year. Higher total RC revenues also reflect raw coal purchases in the amount of $20.0 million and subsequent RC sales made during the demonstration periods of the new placed-in-service facilities. Although these coal purchases and sales do not generate any margin, they provide Clean Coal with tax credits and benefits that can be used to lower and offset federal tax obligations.”