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.
- 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.
- 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.
He continued, “Our core RC technology is complemented by a broad portfolio of effective, low-cap-ex solutions that allow utilities to reduce mercury and other toxic pollutants. For the 2011 quarter, revenues from Emission Control (EC) rose to $3.1 million and revenues from the Carbon Capture segment of our business increased to $1.2 million.”Refined Coal Dr. Durham continued, “In 2011, we exceeded all of our expectations by designing/fabricating/installing and operating 26 new RC facilities to meet “placed-in-service” requirements. We are now moving forward on a number of parallel paths to achieve full-time operational status for each of these facilities. The complexity of this process is demonstrated by the fact that each facility represents a completely separate set of negotiations and contracts involving a number of different parties and plant specific details. In spite of the difficulty we are very comfortable that by the end of 2012, the operating RC facilities will be generating pre-tax income at a run rate of approximately $50 million per year. Beyond 2012, there is the potential for additional upside as we get the remaining units up and running in 2013. By doing so, we could double the expected levels for RC revenues and cash flows by the end of 2013.” Emission Control EC revenues increased by 20% to $3.1 million in the fourth quarter of 2011 from $2.6 million in the fourth quarter of 2010, primarily due to increased consulting and equipment sales. Dr. Durham noted, “The Mercury and Air Toxics Standards proposal (“MATS”) has been published in the Federal Register and will be considered final on April 16 th of this year. This legislation is expected to expand the market opportunity for ACI systems to approximately $500-600 million, or 400-600 new systems over the next three years. We believe that we are well positioned to capitalize on this opportunity, given our 35% market share of installed / installation-in-progress ACI systems at coal-fired power plants across the country and the network of industry contacts we have developed. “As of December 31, 2011, ADA had contracts in progress for work related to the EC segment totaling approximately $736,000 compared to $3.5 million at September 30, 2011. ACI system revenues totaled $1.3 million in the fourth quarter of 2011 compared to $791,000 in the comparable period of 2010. In the near term, we expect ACI and DSI Systems sales to grow, as utilities and other potential customers formulate and act on their approach in response to the new Federal MATS regulation. To date, ADA has installed or is in the process of installing ACI systems controlling mercury emissions from 55 coal-fired electric generated unit boilers.
“Regarding our exclusive licensing agreement with Arch Coal which provides ADA with royalties of up to $1 per ton for the premium Arch receives from sales of the enhanced coal, we recognized $333,000 of the $2.0 million license fee in the fourth quarter.”CO 2 Capture CO 2 Capture revenues increased by 158% to $1.2 million in the fourth quarter of 2011 from $466,000 in the comparable prior year period, due primarily to an increase in activities associated with the previously announced DOE contract. As of December 31, 2011, ADA had outstanding DOE contracts, including anticipated industry cost share in progress, of approximately $15.7 million. The Company expects to recognize approximately $5.6 million from these contracts in 2012 with the balance through 2014. Dr. Durham went on to say, “ADA’s work continues on our $19 million phase II project to develop clean coal technology to capture CO 2 from coal-fired power plants and industrial sources. We completed the design of the plant and expect to hear from the DOE shortly regarding funding to commence construction. Our recent tests have shown that this solid-sorbent technology offers the potential to significantly reduce the amount of energy required to capture CO 2 when compared to competing technologies. ” BALANCE SHEET HIGHLIGHTS As of December 31, 2011, ADA had cash and cash equivalents totaling $40.9 million compared to $9.7 million at year-end 2010. This increase reflected the $28.4 million in net proceeds generated by the public sale of two million shares of ADA common stock in October 2011 and the November 2011 sale of an additional 300,000 shares of ADA common stock, pursuant to the underwriters’ over-allotment option, that generated additional net proceeds of approximately $4.3 million. Working capital was $3.8 million compared to working capital of $10.1 million at December 31, 2010. This decline was primarily due to payments made related to the Norit matter, partially offset by proceeds from the sale of an effective 15% interest in the equity of Clean Coal to an affiliate of The Goldman Sachs Group, Inc. At December 31, 2011, $14.5 million had been drawn on Clean Coal’s $15 million line of credit and stockholders’ equity was $49.2 million.
Conference CallManagement will conduct a conference call focusing on the financial results and recent developments at 10:00 AM ET on Tuesday, March 13, 2012. Interested parties may participate in the call by dialing (877) 423-9820 (Domestic) or (201) 493-6749. Please call in 10 minutes before the call is scheduled to begin, and ask for the ADES call. The conference call will also be webcast live via the Investor Information section of ADA’s website at www.adaes.com. To listen to the live call please go the website at least 15 minutes early to register, download and install any necessary audio software. If you are unable to listen live, the conference call will be archived on the website. About ADA ADA is a leader in clean coal technology and the associated specialty chemicals, serving the coal-fueled power plant industry. Our proprietary environmental technologies and specialty chemicals enable power plants to enhance existing air pollution control equipment, minimize mercury, CO 2 and other emissions, maximize capacity, and improve operating efficiencies, to meet the challenges of existing and pending emission control regulations. With respect to mercury emissions:
- Through our consolidated subsidiary, Clean Coal Solutions, LLC (“CCS”), we provide our patented Refined Coal (“RC”) CyClean™ technology to enhance combustion of and reduce emissions from burning Powder River Basin (“PRB”) coals in cyclone boilers and our patent pending M-45™ technology for other types of coal and boilers. Both technologies reduce emissions of NOx and mercury in coal fired boilers.
- We supply Activated Carbon Injection (“ACI”) and Dry Sorbent Injection (“DSI”) systems, mercury measurement instrumentation, and related services.
- Under an exclusive development and licensing agreement with Arch Coal, we are developing and commercializing an enhanced PRB coal with reduced emissions of mercury and other metals.
|ADA-ES, Inc. and Subsidiaries|
|Consolidated Statements of Operations|
|(Amounts in thousands, except per share data)|
|Three Months Ended December 31,||Year Ended December 31,|
|Cost of Revenues:|
|Total cost of revenues||19,935||2,489||28,964||8,613|
|Other Costs and Expenses:|
|General and administrative||2,872||11,565||17,468||32,790|
|Research and development||893||272||2,289||911|
|Depreciation and amortization||960||78||1,568||917|
|Operating Income (Loss)||(69)||(5,436)||3,027||(20,950)|
|Other Income (Expense):|
|Net equity in net income (loss) from unconsolidated entities||(1,206)||(2,899)||(6,967)||(8,037)|
|Other income including interest||57||500||2,218||2,510|
|Settlement of litigation and arbitration award, net||19,752||6,072||(21,932)||6,072|
|Total other income (expense)||17,908||3,657||(28,265)||529|
|Income (Loss) from Continuing Operations Before Income|
|Tax Benefit and Non-controlling Interest||17,839||(1,779)||(25,238)||(20,421)|
|Income Tax (Expense) Benefit||(3,993)||1,375||13,368||8,564|
|Net Income (Loss) Before Non-controlling Interest||13,846||(404)||(11,870)||(11,857)|
|Net Income (Loss) Attributable to ADA-ES, Inc.||$||13,753||(3,117)||$||(19,851)||$||(15,470)|
|Net Income (Loss) Per Common Share – Attributable to ADA-ES, Inc.|
|Weighted Average Common Shares Outstanding||8,831||7,494||8,020||7,393|
|Weighted Average Diluted Common Shares Outstanding||9,015||7,494||8,020||7,393|
|See accompanying notes to Company’s Form 10K.|
|ADA-ES, Inc. and Subsidiaries|
|Consolidated Balance Sheets|
|December 31, 2011 and 2010|
|(Amounts in thousands, except share data)|
|Cash and cash equivalents||$||40,879||$||9,696|
|Receivables, net of allowance for doubtful accounts||5,914||9,066|
|Investment in securities||508||505|
|Prepaid expenses and other assets||3,924||603|
|Total current assets||51,225||21,450|
|Property and Equipment, at cost||41,771||8,041|
|Less accumulated depreciation and amortization||(4,651)||(3,235)|
|Net property and equipment||37,120||4,806|
|Intangible assets, net of amortization||354||260|
|Goodwill, net of amortization||435||435|
|Investment in unconsolidated entities||590||14,021|
|Deferred taxes and other assets||16,375||15,696|
|Total other assets||17,754||30,412|
|LIABILITIES AND STOCKHOLDERS’ EQUITY|
|Accounts payable - related parties||1,209||205|
|Accrued payroll and related liabilities||2,545||1,852|
|Line of credit||10,873||-|
|Deferred revenues and other liabilities||5,105||5,883|
|Settlement awards and related accrued liabilities||3,983||-|
|Total current liabilities||47,464||11,381|
|Line of credit||3,624||-|
|Settlement awards and indemnity liability||5,200||27,411|
|Accrued warranty and other liabilities||632||4,432|
|Total long-term liabilities||9,456||31,843|
|Commitments and Contingencies (Note 9)|
|ADA-ES, Inc. stockholders’ equity|
|Preferred stock: 50,000,000 shares authorized, none outstanding||-||-|
|Common stock: no par value, 50,000,000 shares authorized,|
|9,996,144 and 7,538,861 shares issued and outstanding, respectively||93,184||39,627|
|Total ADA-ES, Inc. stockholders’ equity||45,115||11,409|
|Total Stockholders’ Equity||49,179||13,444|
|Total Liabilities and Stockholders’ Equity||$||106,099||$||56,668|
|See accompanying notes to Company’s Form 10K.|