ADA-ES Reports 2012 Fourth Quarter and Year End Results Business Wire HIGHLANDS RANCH, Colo. -- March 14, 2013 ADA-ES, Inc. (NASDAQ:ADES) (“ADA”) today announced financial results for the fourth quarter and year ended December 31, 2012. OVERVIEW OF 2012 FOURTH QUARTER RESULTS *Threefold increase in revenues from lease payments related to our Refined Coal (“RC”) facilities. In the quarter, RC facilities operated by ADA’s Clean Coal Solutions, LLC (“Clean Coal”) generated $13.3 million in credits to be used to offset future taxes. *A 40% increase in Emission Control (“EC”) revenues. EC backlog as of December 31, 2012 increased to $25.3 million, up from $4.5 million at June 30, 2012 and $736,000 at December 31, 2011. *Consolidated gross margin of $4.6 million, or 7% of revenues compared to $4.7 million or 19% of revenue in 2011. The lower margin percentage in 2012 is due to inclusion of coal purchases and sales and operating costs associated with RC facilities operated for Clean Coal’s own account (“retained tons”). 2012 fourth quarter gross margin excluding coal sales and purchases and operating costs for retained tons was 69%. *For the 4th quarter, our net loss was $5.4 million or $0.54 per diluted share as compared to a net income of $17.2 million or $1.90 per diluted share for 2011 which included a non-cash $20.0 million gain for the settlement of an indemnity claim. OVERVIEW OF 2012 RESULTS *An 83% increase in revenues from lease payments related to our RC facilities. In 2012, RC facilities operated by Clean Coal generated $38.6 million in credits to be used to offset future taxes. *Gross margin of $20 million or 9% of revenues compared to $24.4 million or 46% of revenues in 2011. The 2012 gross margin excluding coal sales and purchases and operating costs for retained tons was 74%. *For the year, our net loss was $13.1 million or $1.31 per diluted share as compared to a net loss of $22.8 million or $2.85 per diluted share for 2011. 2012 OPERATIONAL ACHIEVEMENTS, OVERVIEW OF SEGMENTS & OUTLOOK Dr. Michael D. Durham, President and CEO of ADA stated, “In 2012, we achieved a number of important milestones that will serve as the foundation for our growth in 2013 and beyond. Clean Coal, ADA’s joint venture with NexGen Resources Corporation and an affiliate of The Goldman Sachs Group, Inc., began operating six additional RC facilities and leased two of these facilities to two different refined coal investors. We also achieved qualifying emissions for our new M-45-PC^TM technology for pulverized coal (PC) boilers, which greatly expands the market for several remaining RC facilities to include many larger power plants. In the Emission Control segment, we acquired the assets of Bulk Conveyor Specialist Inc. and Bulk Conveyor Services, Inc. (collectively “Bulk Conveyor”) through our wholly owned subsidiary BCSI, LLC, which has expanded our Dry Sorbent Injection (“DSI”) capabilities and created opportunities to win fleet-wide orders from major utilities for both our DSI and Activated Carbon Injection (“ACI”) equipment. Dr. Durham continued, “Each of our segments reported quarter-over-quarter improvements in the fourth quarter of 2012. Thus far in 2013, we are continuing to see very good progress in our two major business areas, Refined Coal and Emission Control. We will maintain focus on executing on opportunities that we expect will create significant revenue growth and cash flows for the Company over the coming years. We are positioning ourselves for continued long-term success and are developing technologies for expected future markets. Refined Coal Total RC revenues in the 4th quarter were $61.2 million consisting of $9.8 million in revenues from leasing four RC facilities and $51.4 million related to the resale of coal for RC facilities operated by Clean Coal. Gross profit for the segment was $3.2 million or 5% of total revenues compared to $4.1 million and 20% in 4Q11 reflecting the higher tonnage treated by RC facilities retained by Clean Coal. Commenting on the outlook for Refined Coal Dr. Durham noted, “With the recent restructuring of the agreements with an affiliate of Goldman Sachs for our two longest operating RC facilities and the February 2013 closing of the sale of an RC facility to a third financial investor, our RC business is back on track with expected growth plans after several months of delays. We expect that the recent resumption of the issuance of Private Letter Rulings for Section 45 RC requests should assist with timely closing of contracts for a number of additional RC facilities throughout this year and into 2014." Emission Control EC revenues in the fourth quarter of 2012 were $4.4 million, up 40% from the same period in 2011 due mainly to increased equipment and consulting revenues as the power industry is reacting to finalization of the MATS rule. Dr. Durham noted, “Finalization of the Mercury and Air Toxics Standards (“MATS”) rule in April 2012, is creating significant market opportunities for the low-CAPEX technologies that ADA provides. We are expecting that the MATS could generate market opportunities in excess of $1 billion for ACI and DSI systems, of which we expect to maintain a combined market share of 35%. This would generate over $300 million in revenues for ADA over the next three years. We are pleased with our wins in the 4^th quarter of 2012 and the recently announced awards for DSI and ACI systems so far in 2013. With these new contracts, ADA has received awards for DSI and ACI systems with a potential total value of over $50 million. In addition to these awards, ADA has active bids totaling over $125 million for ACI systems and over $160 million for DSI systems. The market for equipment to meet the federal MATS rules continues to accelerate and we expect that additional contracts for DSI and ACI systems will be awarded soon.” CO2 Capture CO2 Capture revenues in 4Q12 increased 55% to $1.9 million for the quarter due to timing of scheduled activities. As of December 31, 2012, ADA had DOE contracts in progress, including anticipated industry cost share, totaling approximately $12.7 million as of December 31, 2012. The Company expects to recognize approximately $9.7 million from these contracts in 2013 and the balance through 2014. Dr. Durham went on to say, “ADA’s work continues on a $20.5 million program supporting the development of our re-generable solid-sorbent technology to capture carbon dioxide from coal-fired power plants and industrial sources. We have initiated the fabrication and construction phase of a 1MW Carbon Dioxide (“CO2”) Capture Pilot Plant with testing scheduled for 2014. We are also evaluating alternative applications for the carbon capture technology that could have market potential ahead of regulations on power plants such as enhanced oil recovery and treatment of landfill gas.” BALANCE SHEET HIGHLIGHTS As of December 31, 2012, ADA had cash and cash equivalents totaling $9.7 million compared to $40.9 million at year-end 2011 with cash decreases primarily reflecting capital outlays for leasehold improvements, property and equipment additions, a payment related to a litigation settlement, RC facility related costs, repayment of the line of credit held by Clean Coal, increases in our staff levels to support the anticipated growth, and the acquisition of Bulk Conveyor assets by our subsidiary, BCSI, LLC. Conference Call Management will conduct a conference call focusing on the financial results and recent developments at 10:00 AM ET on Thursday, March 14, 2013. Interested parties may participate in the call by dialing (877) 423-9820 (domestic) or (201) 493-6749 (international). 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 to the website at least 15 minutes early to register and 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 of NOx and mercury from coals in cyclone boilers and our patent pending M-45™ and M-45-PC™ technologies for Circulating Fluidized Boilers and Pulverized Coal boilers respectively. *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. In addition, we are developing CO emissions technologies under projects funded by the U.S. Department of Energy (“DOE”) and industry participants. Use of Non-GAAP Financial Measures by ADA-ES, Inc. This ADA-ES, Inc. news release includes non-GAAP financial measures for adjusted gross margins and adjusted gross margin percentages that exclude certain amounts, as follows: coal sales and costs of raw coal and operating costs related to certain RC facilities operated for Clean Coal’s own account. The most directly comparable GAAP financial measures for these non-GAAP financial measures are gross margins and gross margin percentages. The Company has included below a reconciliation of GAAP to non-GAAP financial measures. The Company uses these non-GAAP financial measures to provide investors with greater transparency with respect to the results of our RC operations. These non-GAAP financial measures should not be considered in isolation, as a substitute for, or as superior to, financial measures calculated in accordance with GAAP, and the Company’s financial results calculated in accordance with GAAP should be carefully evaluated. Cautions Concerning Forward-looking Statements 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 statements or expectations regarding future revenues and cash flows, growth of our RC business, timing of the closing of contracts for the lease or sale of RC facilities, future markets and contracts for ACI and DSI systems, future market share 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, regulations and IRS interpretations or guidance, government funding, economic conditions and market demand; timing of laws, regulations and any legal challenges to or repeal of them; failure of the RC facilities to produce coal that qualifies for tax credits; termination of or amendments to the contracts for RC facilities; decreases in the production of RC; failure to lease or sell the remaining RC facilities on a timely basis; our inability to ramp up operations to effectively address expected growth in our target markets; inability to commercialize our technologies on favorable terms; impact of competition; availability, cost of and demand for alternative tax credit vehicles and other technologies; technical, start-up and operational difficulties; availability of raw materials and equipment; 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 Year Ended December31, December31, 2012 2011 2012 2011 Revenues Refined coal $ 61,178 $ 20,259 $ 194,900 $ 40,253 Emission 4,394 3,130 14,603 9,967 control CO capture 1,867 1,202 3,020 3,096 Total revenues 67,439 24,591 212,523 53,316 Cost of Revenues Refined coal 57,984 16,126 179,204 20,201 Emission 3,297 3,086 11,135 6,839 control CO capture 1,573 723 2,216 1,924 Total cost of 62,854 19,935 192,555 28,964 revenues Gross Margin before Depreciation 4,585 4,656 19,968 24,352 and Amortization Other Costs and Expenses General and 7,299 2,872 20,151 17,468 administrative Research and 904 893 2,968 2,289 development Depreciation and 1,833 960 5,277 1,568 amortization Total expenses 10,036 4,725 28,396 21,325 Operating (5,451 ) (69 ) (8,428 ) 3,027 Income (Loss) Other Income (Expense) Net equity in net income (loss) from 360 (1,206 ) 760 (6,967 ) unconsolidated entities Other income including 183 57 305 2,218 interest Interest (416 ) (695 ) (1,461 ) (1,584 ) expense Settlement of litigation and (748 ) 19,752 (2,301 ) (21,932 ) arbitration award, net Total other income (621 ) 17,908 (2,697 ) (28,265 ) (expense) Income (Loss) from Continuing Operations Before Income (6,072 ) 17,839 (11,125 ) (25,238 ) Tax Benefit and Non-controlling Interest Income Tax Benefit - (580 ) - 10,400 (Expense) Net Income (Loss) Before (6,072 ) 17,259 (11,125 ) (14,838 ) Non-controlling Interest Non-controlling 667 (93 ) (1,946 ) (7,981 ) Interest Net Income (Loss) $ (5,405 ) $ 17,166 $ (13,071 ) $ (22,819 ) Attributable to ADA-ES, Inc. Net Income (Loss) Per Basic Common $ (0.54 ) $ 1.94 $ (1.31 ) $ (2.85 ) Share Attributable to ADA-ES, Inc. Net Income (Loss) Per Diluted Common $ (0.54 ) $ 1.90 $ (1.31 ) $ (2.85 ) Share Attributable to ADA-ES, Inc. Weighted Average Basic 10,021 8,832 10,013 8,020 Common Shares Outstanding Weighted Average Diluted 10,021 9,015 10,013 8,020 Common Shares Outstanding See accompanying notes to the Company's Form 10-K. ADA-ES, Inc. and Subsidiaries Consolidated Balance Sheets December 31, 2012 and 2011 (Amounts in thousands, except share data) 2012 2011 ASSETS Current Assets Cash and cash equivalents $ 9,737 $ 40,879 Receivables, net of allowance for doubtful 11,025 5,914 accounts Investment in securities 1,641 508 Prepaid expenses and other assets 2,888 1,532 Total current assets 25,291 48,833 Property and Equipment, at cost 53,542 41,771 Less accumulated depreciation and amortization (8,931 ) (4,651 ) Net property and equipment 44,611 37,120 Investment in unconsolidated entity 1,850 590 Other assets 3,997 931 Total other assets 5,847 1,521 Total Assets $ 75,749 $ 87,474 LIABILITIES, TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT Current Liabilities Accounts payable $ 6,615 $ 8,849 Accounts payable to related parties 5,082 1,209 Accrued payroll and related liabilities 2,569 2,545 Line of credit 3,000 10,873 Current portion of notes payable 559 - Deposits 21,200 14,900 Deferred revenue and other liabilities 6,919 5,105 Settlement awards and related accrued 3,453 3,983 liabilities Total current liabilities 49,397 47,464 Long-term Liabilities Line of credit - 3,624 Long-term portion of notes payable 2,305 - Settlement awards and indemnity liability 2,500 5,200 Deferred revenue 875 - Accrued warranty and other liabilities 809 632 Total long-term liabilities 6,489 9,456 Total Liabilities 55,886 56,920 Commitments and Contingencies (Note 10) Temporary Equity - Non-controlling Interest 60,000 60,000 Subject to Possible Redemption Stockholders’ Deficit ADA-ES, Inc. stockholders’ deficit Preferred stock: 50,000,000 shares authorized, - - none outstanding Common stock: no par value, 50,000,000 shares authorized, 10,028,269 and 9,996,144 shares 63,724 63,184 issued and outstanding at December 31, 2012 and 2011, respectively Accumulated deficit (79,765 ) (66,694 ) Total ADA-ES, Inc. stockholders’ deficit (16,041 ) (3,510 ) Non-controlling interest (24,096 ) (25,936 ) Total Stockholders’ Deficit (40,137 ) (29,446 ) Total Liabilities, Temporary Equity and $ 75,749 $ 87,474 Stockholders’ Deficit See accompanying notes to the Company's Form 10-K. GAAP Financial Measures Consolidated Gross Profit and Gross Profit Margin Percentage For the Three For the Months Ended Year Ended December 31, 2012 December 31, 2012 Consolidated Revenues $ 67,439 $ 212,523 Consolidated Cost of Revenues $ 62,854 $ 192,555 Consolidated Gross Profit $ 4,585 $ 19,968 Consolidated Gross Profit 7 % 9 % Percentage Non-GAAP Financial Measures Consolidated Adjusted Gross Profit and Adjusted Gross Profit Margin Percentage For the Three For the Months Ended Year Ended December 31, 2012 December 31, 2012 Consolidated Revenues $ 67,439 $ 212,523 Less coal sales (51,365 ) (157,898 ) Adjusted Consolidated Revenues $ 16,074 $ 54,625 Consolidated Cost of Revenues $ 62,854 $ 192,555 Less cost of raw coal (51,365 ) (157,898 ) Less operating costs of retained (6,462 ) (20,409 ) tonnage Adjusted Consolidated Cost of $ 5,027 $ 14,248 Revenues Consolidated Adjusted Gross Profit $ 11,047 $ 40,377 Consolidated Adjusted Gross Profit 69 % 74 % Percentage Contact: ADA-ES, Inc. Graham Mattison, Vice President, Investor Relations 646-319-1417 firstname.lastname@example.org www.adaes.com
ADA-ES Reports 2012 Fourth Quarter and Year End Results
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