ADA-ES Reports 2012 Fourth Quarter and Year End Results

  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[2] 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[2] 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[2] 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
graham.mattison@adaes.com
www.adaes.com