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
OVERVIEW OF 2011 RESULTS
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:
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.”
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.”
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.”
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 16th 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.”
CO2 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 CO2 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 CO2 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.
Management 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.
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, CO2 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:
In addition, we are developing CO2 emissions technologies under projects funded by the U.S. Department of Energy (“DOE”) and industry participants.
This press release contains and the conference call referenced in this press release will include 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, but will not necessarily be limited to, statements or expectations regarding future contracts, projects, demonstrations and technologies; amount and timing of RC production, revenues, earnings, operating income, cash flows and other financial measures; our ability to capitalize on and expand our business to meet opportunities in our target markets and profit from our proprietary technologies; scope, timing and impact of current and anticipated regulations and legislation; future supply and demand; the ability of our technologies to assist our customers in complying with government regulations; and related matters. These statements are based on current expectations, estimates, projections, beliefs and assumptions of our 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 in laws and regulations, government funding, prices, economic conditions and market demand; timing of regulations and any legal challenges to them; impact of competition; availability, cost of and demand for alternative energy sources and other technologies; technical, start-up and operational difficulties; inability to commercialize our technologies on favorable terms; our inability to ramp up operations to effectively address expected growth in our target markets; failure of CCS’ leased facilities to continue to produce coal which qualifies for IRS Section 45 tax credits; termination of the leases for such facilities; decreases in the production of RC by the lessee; seasonality; failure to monetize the new CyClean and M-45 facilities; issues arising out of our inability to negotiate, execute and close on definitive agreements for the license of the M-45 technology to CCS; availability of raw materials and equipment for our businesses; loss of key personnel; intellectual property infringement claims from third parties; and other factors discussed in greater detail in our filings with the Securities and Exchange Commission (SEC). You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may apply to our business and the ownership of our securities. Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so.
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
|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
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.