Form 8-K Advanced Emissions Solut For: Aug 09
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E-mailU.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 9, 2016
ADVANCED EMISSIONS SOLUTIONS, INC.
(Name of registrant as specified in its charter)
(Name of registrant as specified in its charter)
Delaware | 000-54992 | 27-5472457 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
9135 South Ridgeline Boulevard, Suite 200, Highlands Ranch CO, | 80129 | |
(Address of principal executive offices) | (Zip Code) | |
Registrant's telephone number, including area code: (720) 598-3500
Not Applicable
(Former name or former address, if changed since last report)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02 | Results of Operations and Financial Condition | |
On August 9, 2016, Advanced Emissions Solutions Inc. ("ADES") issued a press release related to the filing of ADES's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2016, and posted to its website an investor presentation related to ADES's financial results for the three and six months ended June 30, 2016.
A copy of the press release and investor presentation are furnished as Exhibit 99.1 and Exhibit 99.2, respectively, to this report. The information furnished pursuant to this Item 2.02, including the attached exhibits, shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section, nor shall such information or exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. The press release and investor presentation contain forward-looking statements that involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary notes at the end of the press release and on Slide 2 of the investor presentation regarding these forward-looking statements.
Item 9.01 | Financial Statements and Exhibits. | |
(d) | Exhibits | |
Exhibit No. | Description | |
99.1 | Press Release dated August 9, 2016 | |
99.2 | Investor Presentation dated August 10, 2016 | |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: August 10, 2016
Advanced Emissions Solutions, Inc. | |
Registrant | |
/s/ L. Heath Sampson | |
L. Heath Sampson | |
President, Chief Executive Officer and Treasurer | |
EXHIBIT INDEX
Exhibit No. | Description | |
99.1 | Press Release dated August 9, 2016 | |
99.2 | Investor Presentation dated August 10, 2016 | |
3
Advanced Emissions Solutions Reports Second Quarter 2016 Results
Improved Cost Structure and Solid Refined Coal Distributions Drive Quarterly Net Income of $7.9 Million
HIGHLANDS RANCH, Colorado, August 9, 2016 - GlobeNewswire - Advanced Emissions Solutions, Inc. (NASDAQ: ADES) (the "Company" or "ADES") today filed its Quarterly Report on Form 10-Q and reported financial results for the second quarter ended June 30, 2016, including information about its joint-venture partnerships, Clean Coal Solutions, LLC (“CCS”) and Clean Coal Solutions Services, LLC (“CCSS”), of which ADES owns 42.5% and 50%, respectively.
CCS & Refined Coal (“RC”) Highlights
• | CCS & CCSS distributions to ADES were $15.9 million during the second quarter of 2016, an increase of $11.2 million from the comparable period in 2015 |
• | Royalty earnings from CCS were $0.7 million |
• | CCS invested tonnage was 9.4 million |
• | RC Segment operating income was $14.2 million, including a $2.1 million gain on sale of RCM6 |
• | Completed the transition of one investor from a lower tonnage, non-royalty producing RC facility to a higher tonnage, royalty producing facility, which resulted in a $7.0 million payment to ADES during the period |
• | Future expected aggregated rent payments to CCS updated to $639 million through the end of 2021 |
ADES Consolidated Highlights
• | Recognized consolidated revenue of $9.0 million |
• | Reduced general and administrative operating costs to $7.8 million, a decrease of 58% compared to the second quarter of 2015 |
• | Achieved consolidated net income of $7.9 million |
• | Recently announced continued execution against cost containment strategy, resulting in expected annualized expense savings of approximately $2.1 million - $2.4 million |
• | Reached an agreement in principle with the SEC Staff to settle the SEC Inquiry, subject to final approval by the SEC, for $0.5 million |
• | Reached agreements to settle ongoing shareholder and derivative lawsuits, subject to final approval by applicable courts, for $4.0 million and $0.6 million, respectively, all of which are expected to be paid by the Company’s insurers |
• | Listing of common stock on the NASDAQ Global Market |
• | Completed goal to eliminate debt through the payment and subsequent termination of the credit agreement |
• | Continued to validate and expand the pipeline for M-Prove™ chemicals business |
L. Heath Sampson, President and CEO of ADES commented, “We’ve spent the last year transforming our business and we began to see the impact of our cost containment efforts this quarter as we delivered consolidated net income of $7.9 million compared to a loss of $12.4 million in last year’s second quarter. Our recent announcement of further headcount and cost reductions was the next planned step in aligning our cost structure and we remain on track with our goal to lower our go forward operating cost basis to between $12 to $14 million, once our cost containment plan
is fully executed. While we aren’t satisfied with our success in converting new refined coal tax equity investors, we are pleased with our progress internally and believe that we are positioning the Company for long-term success.”
Second quarter revenues and costs of revenues were $9.0 million and $5.8 million, a decrease of 40% and 59%, respectively, compared with $14.9 million and $14.0 million in the second quarter of 2015. The decreases were primarily the result of the completion of several large equipment related contracts. Second quarter other operating expenses were $7.8 million, a decrease of 58% compared to $18.7 million in the second quarter of 2015. The decreases were primarily the result of ongoing cost containment initiatives and reduced restatement costs. Moving forward, restatement costs are not expected to be material.
Second quarter earnings from equity method investments were $13.8 million, compared to $4.9 million for the second quarter of 2015. Second quarter royalty earnings from CCS were $0.7 million, a decrease of 71% compared to $2.3 million in the second quarter of 2015, due to reduced refined coal tonnage and the increase in operating expenses of CCS. The increase in operating expenses of CCS was the result of a payment made that was necessary to secure the transition of an existing tax equity investor to a higher tonnage RC facility. Second quarter expenses related to the RC business were $0.4 million, a decrease of 76% compared to $1.7 million in the second quarter of 2015 due to no longer incurring interest expense related to RCM6 as it was sold in the first quarter of 2016, and a decrease in 453A interest expense. RC segment operating income was $14.2 million, which included a $2.1 million gain on sale of RCM6, compared to segment operating income of $5.2 million in the second quarter of 2015.
Second quarter consolidated interest expense was $1.6 million, compared to $1.8 million in the second quarter of 2015.
Consolidated net income for the second quarter was $7.9 million, compared to a net loss of $12.4 million in the second quarter of 2015, primarily driven by equity income from the RC business and significantly reduced operating expenses in the Emissions Control business as well as corporate expenses.
As of June 30, 2016, the Company had cash and cash equivalents of $2.2 million, a decrease of 76% compared to $9.3 million as of December 31, 2015, due primarily to the repayment and termination of the Company’s credit agreement in its entirety, including debt principal payments of $13.3 million. The Company also had $11.2 million in current and long-term restricted cash as of June 30, 2016, compared to $11.7 million as of December 31, 2015. In July 2016, $2.4 million of restricted cash was released to the Company as it met all performance testing requirements on certain equipment projects during the second quarter of 2016. Upon release, the cash was included in the cash and cash equivalents line item on the Condensed Consolidated Balance Sheets.
Sampson concluded, “As we review our progress over the first six months of the year, exclusive of the performance of increasing invested RC facilities at CCS, I’m very proud of our accomplishments. We have made tremendous progress on multiple fronts, including becoming current on our financials, nearing settlement of the shareholder and derivative litigation and SEC inquiry, and relisting on the NASDAQ. We’ve also continued to validate the market for our Emissions Controls business and now believe that the opportunities for our chemicals business are even larger than we initially expected. We’ve done that while simultaneously reducing our general and administrative operating costs by 58 percent this quarter and 49 percent over the last six months. Lastly, we’ve enhanced our financial profile through the elimination of debt. We remain diligently focused on obtaining new refined coal tax equity investors and believe that the recent increase in natural gas prices should help us execute against our sales pipeline.”
Conference Call and Webcast Information
The Company has scheduled a conference call to begin at 9:00 a.m. Eastern Time on Wednesday, August 10, 2016. The conference call will be webcast live via the Investor Information section of ADES's website at www.advancedemissionssolutions.com. Interested parties may also participate in the call by dialing (877) 201-0168 (Domestic) or (647) 788-4901 (International) conference ID 52464588. A supplemental investor presentation will be available on the Company's investor relations website prior to the start of the conference call.
About Advanced Emissions Solutions, Inc.
Advanced Emissions Solutions, Inc. serves as the holding entity for a family of companies that provide emissions solutions to customers in the power generation and other industries.
 | ADA-ES, Inc. (“ADA”) is a wholly-owned subsidiary of Advanced Emissions Solutions, Inc. (“ADES”) that provides emissions control solutions for coal-fired power generation and industrial boiler industries. With more than 25 years of experience developing advanced mercury control solutions, ADA delivers proprietary environmental technologies, equipment and specialty chemicals that enable coal-fueled boilers to meet emissions regulations. These solutions enhance existing air pollution control equipment, maximizing capacity and improving operating efficiencies. Our track record includes securing more than 30 US patents for emissions control technology and systems and selling the most activated carbon injection systems for power plant mercury control in North America. For more information on ADA, its products and services, visit www.adaes.com or the ADA Blog (http://blog.adaes.com/). |
 | Clean Coal Solutions, LLC (“CCS”) is a 42.5% owned joint venture by ADA that provides ADA’s patented Refined Coal (“RC”) CyClean™ technology to enhance combustion of and reduce emissions of NOx and mercury from coals in cyclone boilers and ADA’s patent pending M-45™ and M-45-PC™ technologies for Circulating Fluidized boilers and Pulverized Coal boilers respectively. |
Caution on Forward-Looking Statements
This press release contains 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 rent payments to CCS, execution against our pipeline of tax-equity investors, expectations of the size of the chemicals market, our sales pipeline and ability to sell products and increase revenue in the Emissions Control business, the expected results and timing of our cost containment initiatives and restructuring efforts, and payments of litigation settlement amounts by our insurers. 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; economic conditions and market demand; failure of the RC facilities to produce coal that qualifies for tax credits; decreases in the production of RC; availability, cost of and demand for alternative tax credit vehicles and other technologies; seasonality; customer expectations; the value of our products, technologies and intellectual property to customers and strategic investors; non-approval of our litigation settlements by the courts or SEC; significant opt-outs by class members in our stockholders class action lawsuit; and other factors discussed in greater detail in our filings with the 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.
Source: Advanced Emissions Solutions, Inc.
Investor Contact:
Alpha IR Group
Nick Hughes or Chris Hodges
312-445-2870
TABLE 1
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of | ||||||||
(in thousands, except share data) | June 30, 2016 | December 31, 2015 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,221 | $ | 9,265 | ||||
Receivables, net | 8,950 | 8,361 | ||||||
Receivables, related parties, net | 444 | 1,918 | ||||||
Restricted cash | 4,469 | 728 | ||||||
Costs in excess of billings on uncompleted contracts | 1,254 | 2,137 | ||||||
Prepaid expenses and other assets | 1,781 | 2,306 | ||||||
Total current assets | 19,119 | 24,715 | ||||||
Restricted cash, long-term | 6,700 | 10,980 | ||||||
Property and equipment, net of accumulated depreciation of $2,528 and $4,557, respectively | 1,218 | 2,040 | ||||||
Investment securities, restricted, long-term | — | 336 | ||||||
Cost method investment | 2,776 | 2,776 | ||||||
Equity method investments | 3,081 | 17,232 | ||||||
Other assets | 3,714 | 2,696 | ||||||
Total Assets | $ | 36,608 | $ | 60,775 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 3,263 | $ | 6,174 | ||||
Accrued payroll and related liabilities | 3,413 | 5,800 | ||||||
Current portion of notes payable, related parties | — | 1,837 | ||||||
Billings in excess of costs on uncompleted contracts | 5,112 | 9,708 | ||||||
Short-term borrowings, net of discount and deferred loan costs, related party | — | 12,676 | ||||||
Legal settlements and accruals | 11,470 | 6,502 | ||||||
Other current liabilities | 7,012 | 7,395 | ||||||
Total current liabilities | 30,270 | 50,092 | ||||||
Long-term portion of notes payable, related party | — | 13,512 | ||||||
Legal settlements and accruals, long-term | 11,596 | 13,797 | ||||||
Advance deposit, related party | 2,362 | 2,980 | ||||||
Other long-term liabilities | 2,871 | 5,372 | ||||||
Total Liabilities | 47,099 | 85,753 | ||||||
Commitments and contingencies (Note 8) | ||||||||
Stockholders’ deficit: | ||||||||
Preferred stock: par value of $.001 and no par value per share, respectively, 50,000,000 shares authorized, none outstanding | — | — | ||||||
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 22,241,474 and 21,943,872 shares issued, and 21,967,969 and 21,809,164 shares outstanding at June 30, 2016 and December 31, 2015, respectively | 22 | 22 | ||||||
Additional paid-in capital | 118,280 | 116,029 | ||||||
Accumulated deficit | (128,793 | ) | (141,029 | ) | ||||
Total stockholders’ deficit | (10,491 | ) | (24,978 | ) | ||||
Total Liabilities and Stockholders’ Deficit | $ | 36,608 | $ | 60,775 | ||||
TABLE 2
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
(in thousands, except per share data and percentages) | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues: | ||||||||||||||||
Equipment sales | $ | 8,213 | $ | 14,236 | $ | 29,919 | $ | 35,351 | ||||||||
Chemicals | 613 | 343 | 1,047 | 617 | ||||||||||||
Consulting services and other | 125 | 316 | 320 | 684 | ||||||||||||
Total revenues | 8,951 | 14,895 | 31,286 | 36,652 | ||||||||||||
Operating expenses: | ||||||||||||||||
Equipment sales cost of revenue, exclusive of depreciation and amortization | 5,437 | 13,698 | 22,470 | 28,749 | ||||||||||||
Chemicals cost of revenue, exclusive of depreciation and amortization | 255 | 41 | 396 | 278 | ||||||||||||
Consulting services cost of revenue, exclusive of depreciation and amortization | 77 | 264 | 212 | 690 | ||||||||||||
Payroll and benefits | 3,956 | 9,746 | 7,759 | 14,657 | ||||||||||||
Rent and occupancy | 632 | 601 | 1,026 | 1,232 | ||||||||||||
Legal and professional fees | 1,982 | 4,387 | 4,965 | 8,122 | ||||||||||||
General and administrative | 1,346 | 1,503 | 2,092 | 3,385 | ||||||||||||
Research and development, net | (345 | ) | 1,860 | (143 | ) | 3,110 | ||||||||||
Depreciation and amortization | 223 | 573 | 454 | 1,104 | ||||||||||||
Total operating expenses | 13,563 | 32,673 | 39,231 | 61,327 | ||||||||||||
Operating loss | (4,612 | ) | (17,778 | ) | (7,945 | ) | (24,675 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Earnings from equity method investments | 13,754 | 4,860 | 19,331 | 5,174 | ||||||||||||
Royalties, related party | 669 | 2,299 | 1,859 | 4,493 | ||||||||||||
Interest income | 95 | 6 | 118 | 18 | ||||||||||||
Interest expense | (1,573 | ) | (1,794 | ) | (3,537 | ) | (3,569 | ) | ||||||||
Gain on sale of equity method investment | — | — | 2,078 | — | ||||||||||||
Gain on settlement of note payable and licensed technology | 151 | — | 1,019 | — | ||||||||||||
Other | (525 | ) | 23 | (535 | ) | 87 | ||||||||||
Total other income | 12,571 | 5,394 | 20,333 | 6,203 | ||||||||||||
Income (loss) before income tax expense | 7,959 | (12,384 | ) | 12,388 | (18,472 | ) | ||||||||||
Income tax expense | 99 | 63 | 152 | 107 | ||||||||||||
Net income (loss) | $ | 7,860 | $ | (12,447 | ) | $ | 12,236 | $ | (18,579 | ) | ||||||
Earnings (loss) per common share (Note 1): | ||||||||||||||||
Basic | $ | 0.36 | $ | (0.57 | ) | $ | 0.55 | $ | (0.85 | ) | ||||||
Diluted | $ | 0.35 | $ | (0.57 | ) | $ | 0.55 | $ | (0.85 | ) | ||||||
Weighted-average number of common shares outstanding: | ||||||||||||||||
Basic | 21,875 | 21,715 | 21,895 | 21,728 | ||||||||||||
Diluted | 22,187 | 21,715 | 22,204 | 21,728 | ||||||||||||
TABLE 3
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30, | ||||||||
(in thousands) | 2016 | 2015 | ||||||
Cash flows from operating activities | ||||||||
Net income (loss) | $ | 12,236 | $ | (18,579 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 454 | 1,104 | ||||||
Amortization of debt issuance costs | 1,152 | 50 | ||||||
Impairment of property and equipment and inventory | 517 | 46 | ||||||
Interest costs added to principal balance of notes payable | — | 432 | ||||||
Share-based compensation expense | 1,543 | 5,459 | ||||||
Earnings from equity method investments | (19,331 | ) | (5,174 | ) | ||||
Gain on sale of equity method investment | (2,078 | ) | — | |||||
Gain on settlement of note payable and licensed technology | (1,019 | ) | — | |||||
Other non-cash items, net | 34 | 688 | ||||||
Changes in operating assets and liabilities, net of effects of acquired businesses: | ||||||||
Receivables | (627 | ) | 7,625 | |||||
Related party receivables | 1,473 | (226 | ) | |||||
Prepaid expenses and other assets | 806 | (460 | ) | |||||
Costs incurred on uncompleted contracts | 17,201 | 2,363 | ||||||
Restricted cash | 1,089 | (709 | ) | |||||
Other long-term assets | (2,630 | ) | 231 | |||||
Accounts payable | (2,910 | ) | 2,713 | |||||
Accrued payroll and related liabilities | (1,596 | ) | 1,651 | |||||
Other current liabilities | (101 | ) | 1,348 | |||||
Billings on uncompleted contracts | (20,910 | ) | (9,420 | ) | ||||
Advance deposit, related party | (618 | ) | (1,496 | ) | ||||
Other long-term liabilities | (1,336 | ) | 19 | |||||
Legal settlements and accruals | 2,767 | (1,472 | ) | |||||
Distributions from equity method investees, return on investment | 5,900 | 19 | ||||||
Net cash used in operating activities | (7,984 | ) | (13,788 | ) | ||||
Six Months Ended June 30, | ||||||||
(in thousands) | 2016 | 2015 | ||||||
Cash flows from investing activities | ||||||||
Maturity of investment securities, restricted | 336 | — | ||||||
Increase in restricted cash | (550 | ) | (1,200 | ) | ||||
Acquisition of property and equipment, net | (111 | ) | (380 | ) | ||||
Advance on note receivable | — | (500 | ) | |||||
Acquisition of business | — | (2,124 | ) | |||||
Purchase of and contributions to equity method investees | (223 | ) | (230 | ) | ||||
Proceeds from sale of equity method investment | 1,773 | — | ||||||
Distributions from equity method investees in excess of cumulative earnings | 14,875 | 4,730 | ||||||
Net cash provided by investing activities | 16,100 | 296 | ||||||
Cash flows from financing activities | ||||||||
Repayments on short-term borrowings, related party | (13,250 | ) | — | |||||
Repayments on notes payable, related party | (1,246 | ) | (1,014 | ) | ||||
Short-term borrowing loan costs | (579 | ) | — | |||||
Repurchase of shares to satisfy tax withholdings | (85 | ) | (262 | ) | ||||
Net cash used in financing activities | (15,160 | ) | (1,276 | ) | ||||
Decrease in Cash and Cash Equivalents | (7,044 | ) | (14,768 | ) | ||||
Cash and Cash Equivalents, beginning of period | 9,265 | 25,181 | ||||||
Cash and Cash Equivalents, end of period | $ | 2,221 | $ | 10,413 | ||||
Supplemental disclosures of cash information: | ||||||||
Cash paid for interest | $ | 1,436 | $ | 2,993 | ||||
Cash paid (refunded) for income taxes | $ | (72 | ) | $ | 146 | |||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Restricted stock award reclassification (liability to equity) | $ | 899 | $ | — | ||||
Settlement of RCM6 note payable | $ | 13,234 | $ | — | ||||
Non-cash reduction of equity method investment | $ | 11,156 | $ | — | ||||
EVENT TITLE
Q2’16 Earnings Call
© 2016 Advanced Emissions Solutions, Inc.
All rights reserved. Confidential and Proprietary.August 10, 2016
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary.
Safe Harbor
This presentation includes 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 growth, strategic review of alternatives for our EC business, amount and timing of production of RC,
CCS and CCSS cash flow and ability to make distributions; future revenues, expenses, cash flow, liquidity, and other financial and accounting measures; timing and outcome of our restructuring and cost
containment efforts; expectation regarding settlement of litigation and associated costs; 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 and timing in laws, regulations, IRS interpretations or guidance, accounting rules and any pending court decisions, legal challenges to or
repeal of them; changes in prices, economic conditions and market demand; the ability of the RC facilities to produce coal that qualifies for tax credits; the timing, terms and changes in contracts for RC
facilities, or failure to lease or sell RC facilities; 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; loss of key personnel; reductions in operating costs may be less than expected; inability to comply with the terms of loan agreements; intellectual property
infringement claims from third parties; the outcome of pending litigation; seasonality and other factors discussed in greater detail in our filings with the 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.
-2-
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -3-
Second Quarter & Recent Highlights
▪ Solid execution against strategic goals
▪ Distributions from the Refined Coal (“RC”) business increased year-over-year and were in-line with
expectations
▪ Transitioned an existing investor from a lower tonnage, non-royalty producing RC facility
to a higher tonnage, royalty producing RC facility, resulting in an anticipated increase of
4.1 million tons per year of RC produced compared to the previous RC facility
▪ Expect to close on a new royalty bearing RC facility with a tax equity investor during the
current month, which will replace the previously announced investor cancellation
▪ Emissions Control (“EC”) business momentum is improving with sales of M-ProveTM Technology
and continued completion and delivery of equipment
▪ EC business continued to reduce expenses and drove higher positive operating income
during the period
▪ Review of strategic alternatives for EC business remains ongoing
▪ Paid off short-term borrowing and have eliminated all debt from the Company's balance sheet
▪ Completed listing on NASDAQ Reached agreements in principle to settle the SEC Inquiry and the
shareholder and derivative lawsuits
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary.
Financial data highlights: (in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Revenues $ 8,951 $ 14,895 $ 31,286 $ 36,652
Cost of revenues, exclusive of depreciation and
amortization $ 5,769 $ 14,003 $ 23,078 $ 29,717
Other operating expenses $ 7,794 $ 18,670 $ 16,153 $ 31,610
Earnings from equity method investments $ 13,754 $ 4,860 $ 19,331 $ 5,174
Royalties, related party $ 669 $ 2,299 $ 1,859 $ 4,493
Net income (loss) $ 7,860 $ (12,447) $ 12,236 $ (18,579)
Financial data highlights: (in thousands)
As of
June 30, 2016 December 31, 2015
Cash and cash equivalents $ 2,221 $ 9,265
Restricted cash, current and long-term $ 11,169 $ 11,708
Short-term borrowings and notes payable, related
party, current and long-term $ — $ 28,025
-4-
Second Quarter Financial Review
▪ Revenues during the second quarter of 2016 were primarily due to completion of EC equipment contracts but also benefited from the growth in
chemical sales
▪ Other Operating expenses ("G&A"), declined by 58% and 49% during the three and six months ended June 30, 2016 and 2015, respectively
▪ Earnings from RC equity investments increased during the three and six months ended months ended June 30, 2016 and 2015
▪ Royalties from CCS were down primarily as a result of the suspension of operations for certain retained RC facilities and the impact of a payment
made to a utility to secure the site prior to the invested facility transaction being completed
▪ Net income increased, primarily driven by equity income recognition from the RC business (see footnote 4 of the June 30, 2016 Quarterly Report
on Form 10-Q), and expense reductions due primarily to restructuring and business alignment activities
▪ Cash declined principally as a result of principal and interest payments on debt
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -5-
Select Components of Net Income (Loss)
Select Components of Net Income (Loss)
(In millions)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Consolidated Net Income (Loss) $ 7,860 $ (12,447) $ 12,236 $ (18,579)
RC Segment Operating income (loss) $ 14,199 $ 5,175 $ 22,061 $ 5,835
EC Segment Operating income (loss) 2,118 (5,458) 6,700 (4,909)
Segment income (loss) 16,317 (283) 28,761 926
Corporate and other adjustments to reconcile to net income (loss)
attributable to ADES (8,457) (12,164) (16,525) (19,505)
Consolidated Net Income (Loss) $ 7,860 $ (12,447) $ 12,236 $ (18,579)
▪ Overview of components of three and six months ended June 30, 2016 and 2015 consolidated net
income (loss)
Select Components of Net Income (Loss) (1)
(In millions)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
Non-cash items, as disclosed (or derived) on the Consolidated
Statement of Cash Flows $ (2,133) $ (5,753) $ (2,681) $ (7,779)
Restructuring expense, exclusive of stock-based compensation,
included in non-cash item, above $ (694) $ (2,608) $ (850) $ (2,971)
Research and development expense, net $ 345 $ (1,860) $ 143 $ (3,110)
Restatement expense $ (300) $ (2,700) $ (1,700) $ (5,300)
Corporate interest (expense) income, net (2) $ (1,214) $ 6 $ (2,121) $ 18
SEC Inquiry expense $ (500) $ — $ (500) $ —
▪ Select components impacting the three and six months ended June 30, 2016 and 2015 consolidated
results
(1) See Appendix A for additional details
(2) See slide 17 for additional details
Refined Coal
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -7-
RC Facilities Today and Tomorrow
POTENTIAL
28 RC facilities
(~100 MT/year)
9 RC facilities - installed
(31.0 MT/year)
2016 2021RC Facility information as of June 30, 2016
13 RC facilities leased/sold
(39.9 MT/year)
Operating (1)
Not Operating(2)
3 RC facilities - identified
(12.4 MT/year)
Full-time Operations Roadmap
(1) All tonnage based on trailing 12 months (TTM) as of June 30, 2016 based on actual tonnage burned
(2) Non operating tonnage is per US Energy Information Administration – TTM ended May 31, 2016
3 RC facilities - unidentified
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -8-
Current RC Environment
▪ Refined Coal has been around for many years and many large corporations have benefited; such
as Goldman Sachs, WW Grainer, Waste Management, DTE Energy, Arthur Gallagher, Capital
One, Fidelity Investments and many others publicly and not publicly disclosed
▪ Although the benefits are significant to companies (primarily large corporations), many companies
do not clear one or more of the hurdles
▪ Relatively recent sales approach at CCS has helped clear the hurdles
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -9-
Refined Coal: Components of Earnings
Components of RC Segment Earnings
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
RC Segment Revenue
CCS $ 12,832 $ 4,630 $ 18,275 $ 4,730
CCSS 922 1,150 1,613 2,172
RCM6 — (920) (557) (1,728)
Total equity method revenue 13,754 4,860 19,331 5,174
Consulting — 34 — 55
Royalties, related party 669 2,299 1,859 4,493
Total RC Revenue $ 14,423 $ 7,193 $ 21,190 $ 9,722
Segment Operating Income $ 14,199 $ 5,175 $ 22,061 $ 5,835
Significant components of RC segment
expenses and other income:
RCM6 note payable interest expense $ — $ 609 $ 263 $ 1,214
453A interest expense $ 354 $ 1,116 $ 1,145 $ 2,272
RCM6 gain on sale $ — $ — $ 2,078 $ —
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -10-
Operating Tons: Invested vs. Retained
Note: Numbers within bar graph and the "Count" row within the tables represent the number of facilities per category as of the end of each quarter presented.
(1) Tonnage information is based upon RC production for the three and six months ended June 30, 2016 (in thousands)
16
14
12
10
8
6
4
2
0
To
nn
ag
e(
MM
)
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Three Months
Ended June 30,
2016
Invested Retained QTD - Total
Six Months
Ended June 30,
2016
Invested Retained YTD - Total
Tonnage (1) 9,352 40 9,392 Tonnage (1) 18,300 843 19,143
Count (#) 13 — 13 Count (#) 13 — 13
3
3
9 9
10
12 11 12
12
12 13
13
4
6
5 7 5
5
5
0
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -11-
Operating Tons: Royalty vs. Non-Royalty
Note: Numbers within bar graph and the "Count" row within the tables represent the number of facilities per category as of the end of each quarter presented.
(1) Tonnage information is based upon RC production for the three and six months ended June 30, 2016 (in thousands)
(2) Counts are based upon the number of facilities of which a royalty has been earned during the period
16
14
12
10
8
6
4
2
0
To
nn
ag
e(
MM
)
Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Three Months
Ended June 30,
2016
Operating Tons
QTD - Total
Six Months
Ended June 30,
2016
Operating Tons
YTD - Total
Royalty Non-Royalty Royalty Non-Royalty
Tonnage(1) 2,932 6,461 9,393 Tonnage(1) 6,262 12,882 19,144
Count (#) (2) 7 6 13 Count (#) (2) 7 6 13
3
9
9
10 11
8
6
8
7
5 6
4
6
6
10 11
9
10
8 7
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -12-
Future Rent Payments – CCS Invested
Facilities
▪ As of June 30, 2016, remaining payments to all
CCS members from CCS’s current RC facilities
leased or sold to tax equity investors are
projected to be an aggregate of ~$639 million
from Q3, 2016 through 2021; assuming no
modifications of contracts, non-renewals or
early terminations
▪ Remaining payments to all CCS
members were $626 million as of March
31, 2016. During Q2 2016, cash
collections of $37 million were offset by
additional future cash flows from the
addition of new facilities and/or
modifications to existing lease provisions
CCS Expected Payments
as of June 30, 2016
(in millions)
2016 (Q3 through Q4) $ 57
2017 121
2018 128
2019 125
2020 123
2021 85
$ 639
Note: ADES receives 42.5% of these amounts, after
applicable deductions related to CCS operating and
general and administrative expenses
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -13-
Non-Operating Tons(5)
Note: Numbers within bar graph and the "Count" row within the tables represent the number of facilities per category as of the end of each quarter presented.
(1) Based on actual tonnage produced
(2) Q2 2016 is estimated based on an average of May QTD actuals
(3) Tonnage information is based upon RC production for the two and five months ended May 31, 2016 (in thousands)
(4) Unidentified facilities potential tonnage is estimated to be 4 million per facility on an annual basis
(5) Non operating tonnage is per US Energy Information Administration - TTM ended May 31, 2016
16
14
12
10
8
6
4
2
0
To
nn
ag
e(
MM
)
Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
Three Months
Ended June 30,
2016
Non-Operating QTD - Total
Identified Unidentified Construction Installed
Tonnage(3) (4) 2,554 3,000 — 6,621 12,175
Count (#) 3 3 — 9 15
9
1
6
5 5
3
3
5
5
1
9
3
10
3
(1)(1)(1) (1)(1) (2)
Six Months
Ended June 30,
2016
Non-Operating YTD - Total
Identified Unidentified Construction Installed
Tonnage(3) (4) 6,014 5,000 — 14,703 25,717
Count (#) 3 3 — 9 15
Emissions Control
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -15-
IP Portfolio
▪ While the target market for M-Prove is larger than originally anticipated, with commercialization
efforts showing results as plant testing increases and the pipeline continues to expand
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -16-
Emissions Control: Components of Earnings
Components of EC Segment Earnings
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
EC Segment Revenues
Equipment sales $ 8,213 $ 14,235 $ 29,919 $ 35,351
Chemicals 613 344 1,047 617
Consulting services 125 282 320 629
Total EC Revenues $ 8,951 $ 14,861 $ 31,286 $ 36,597
Segment Operating Income (Loss) $ 2,118 $ (5,458) $ 6,700 $ (4,909)
Significant components of EC segment expenses
and other income:
Sales cost of revenue, exclusive of D&A $ 5,437 $ 13,698 $ 22,470 $ 28,749
Chemical cost of revenue, exclusive of D&A $ 255 $ 41 $ 396 $ 278
Consulting cost of revenue, exclusive of D&A $ 77 $ 264 $ 212 $ 690
Payroll and benefits $ 1,090 $ 3,105 $ 1,847 $ 5,146
Legal and professional fees $ — $ 331 $ 56 $ 758
Research and development expense, net $ (345) $ 1,860 $ (143) $ 3,110
DSI business owner gain on settlement $ — $ — $ (868) $ —
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -17-
Corporate and Other: Summary
Adjustments to reconcile to net loss attributable to
ADES
(In thousands)
Three Months Ended June 30, Six Months Ended June 30,
2016 2015 2016 2015
RC segment operating income $ 14,199 $ 5,175 $ 22,061 $ 5,835
EC segment operating income (loss) 2,118 (5,458) 6,700 (4,909)
Total segment income (loss) 16,317 (283) 28,761 926
Adjustments to reconcile to net income (loss)
attributable to ADES
Corporate payroll and benefits (2,866) (6,641) (5,912) (9,511)
Corporate rent and occupancy (272) (163) (501) (301)
Corporate legal and professional fees (1,982) (4,056) (4,909) (7,364)
Corporate general and administrative (1,373) (1,085) (2,146) (1,991)
Corporate depreciation and amortization (128) (156) (258) (306)
Corporate interest (expense) income, net (1) (1,214) 6 (2,121) 18
Other (expense) income, net (523) (6) (526) 57
Income tax expense (99) (63) (152) (107)
Net income (loss) $ 7,860 $ (12,447) $ 12,236 $ (18,579)
▪ Reduction in corporate payroll and benefits in connection with restructuring actions taken during the latter half of 2015 and during the second
quarter of 2016; included within these costs are payroll related restructuring charges of $0.3 million and $3.8 million during the three months
ended June 30, 2016 and 2015, respectively and $0.6 million and $4.2 million during the six months ended June 30, 2016 and 2015, respectively
▪ Legal and professional fees decreased, most significantly due to the completion of the most material aspects of the Restatement process during
the first quarter of 2016; Restatement expenses were $0.3 million and $2.7 million during the three months ended June 30, 2016 and 2015,
respectively and $1.7 million and $5.3 million during the six months ended June 30, 2016 and 2015, respectively
▪ During the second quarter of 2016, the Company reached preliminary settlement agreements related to the SEC Inquiry, Shareholder Lawsuit and
Derivative Lawsuit. The Company has recorded an accrual of $0.5 million related to the SEC Inquiry and the Shareholder Lawsuit and Derivative
Lawsuit settlements are expected to be settled within the insurance limits of the Company
(1) The Credit Agreement, discussed in Note 8 of the Condensed Consolidated Financial Statements was paid off on June 30, 2016
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -18-
CCS and ADES: Cash Flow Update
Cash Flow Update
(In thousands)
Six Months Ended June 30,
2016 2015
CCS
Cash and cash equivalents, beginning of year $ 6,182 $ 3,870
Cash provided by (used in):
Operating activities 36,634 21,333
Investing activities (2,474) (9,146)
Financing activities (35,916) (7,746)
Net change in cash and cash equivalents (1,756) 4,441
Cash and cash equivalents, end of period $ 4,426 $ 8,311
Distributions to ADES $ 18,275 $ 4,730
ADES
Cash and cash equivalents, beginning of year $ 9,265 $ 25,181
Cash provided by (used in):
Operating activities (7,984) (13,788)
Investing activities 16,100 296
Financing activities (15,160) (1,276)
Net change in cash and cash equivalents (7,044) (14,768)
Cash and cash equivalents, end of period $ 2,221 $ 10,413
▪ Cash and cash equivalents balance declined from $9.3 million as of December 31, 2015 to $2.2 million as of June 30, 2016
▪ Decrease primarily due to debt service payments on our Credit Agreement and notes payable, fees incurred to extend the maturity of our
Credit Agreement, the payoff of our Credit Agreement on June 30, 2016, delivering on our existing contracts and customer commitments
and continued professional fees related to our Restatement activities and to become current with our 2015 regulatory filings
▪ Offset by distributions from CCS and CCSS of $20.8 million and the release of restricted cash for equipment contracts
▪ Subsequent to June 30, 2016, we reclassified $2.4 million related to the release of restricted cash for an equipment contract
Note: ADES owns 42.5% of CCS and accounts for its investment under the equity method of accounting
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -19-
2016 Strategic Priorities
▪ We have made noticeable progress against many of the strategic priorities that we outlined on the
2015 10-K conference call
▪ Looking ahead, we continue to focus on closing new tax equity investors while further enhancing
the profile of the business through execution on cost reduction initiatives
Appendix
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -21-
Appendix A: Supplemental Disclosure ADES Select Cash and Non-cash
Components of the three and six months ended 2016 and 2015 Net Income
(Loss)
(in thousands) Three Months Ended June 30, Six Months Ended June 30,
Ref. 2016 Ref. 2015 Ref. 2016 Ref. 2015
Net Income (Loss) (1) $ 7,860 (1) $ (12,447) (1) $ 12,236 (1) $ (18,579)
RC segment operating income (loss) (2) 14,199 (2) 5,175 (2) 22,061 (2) 5,835
EC Segment income (loss) (2) 2,118 (2) (5,458) (2) 6,700 (2) (4,909)
(2) 16,317 (2) (283) (2) 28,761 (2) 926
Corporate and other adjustments to reconcile to net income (loss)
attributable to ADES (2) (8,457) (2) (12,164) (2) (16,525) (2) (19,505)
Total of Select Components of Net Income (Loss) (2) 7,860 (2) (12,447) (2) 12,236 (2) (18,579)
Non-Cash Charges:
Depreciation and Amortization (4) (223) (4) (573) (3) (454) (3) (1,104)
Amortization of Debt discount/issuance costs (4) (579) (4) (25) (3) (1,152) (3) (50)
Gain on settlement of note payable and licensed technology (4) 150 (4) — (3) 1,019 (3) —
Impairment of Property, Equipment, Intangibles (4) (517) (4) 2 (3) (517) (3) (46)
Loss on disposal of assets (4) — (4) — (3) — (3) —
Interest Costs Added to Principal Balance of Notes Payable (4) — (4) (432) (3) — (3) (432)
Share Based Compensation Expense (4) (907) (4) (4,505) (3) (1,543) (3) (5,459)
Other (4) (57) (4) (220) (3) (34) (3) (688)
Total Non-Cash Items (2,133) (5,753) (2,681) (7,779)
Significant Cash Items:
Restructuring Expenses (net of non-cash charges) (5) (784) (5) (5,563) (5) (1,067) (5) (6,031)
Less non-cash Share Based Compensation (6) 90 (6) 2,955 (6) 217 (6) 3,060
Restructuring Expenses--Cash (694) (2,608) (850) (2,971)
Research and Development Expenses (excluding non-cash impairment
charges) (1) 345 (1) (1,860) (1) 143 (1) (3,110)
Restatement Expenses (7) (300) (7) (2,700) (7) (1,700) (7) (5,300)
Footnotes :
(1) Agrees to ADES Condensed Consolidated Statement of Operations in the 2016 Q2
Form 10-Q filing
(2) Agrees to ADES Note 12 in the 2016 Q2 Form 10-Q filing
(3) Agrees to ADES Condensed Consolidated Statement of Cash Flows in the 2016 Q2
Form 10-Q filing
(4) Derived from ADES Condensed Consolidated Statement of Cash Flows in the 2016
Q2 Form 10-Q filing
(5) Agrees to ADES Note 2 in the 2016 Q2 Form 10-Q filing
(6) Derived from ADES Note 2 in the 2016 Q2 Form 10-Q filing
(7) Agrees to ADES "Management Discussion and Analysis" in Item 2 in the 2016 Q2
Form 10-Q filing
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -22-
Appendix B: 10-Q Balance Sheet(1)
(1) See complete, unaudited Condensed, Consolidated
Financial Statements and Notes related thereto within
the Quarterly Report on Form 10-Q for the period
ended June 30, 2016.
As of
(in thousands, except share data) June 30, 2016 December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents $ 2,221 $ 9,265
Receivables, net 8,950 8,361
Receivables, related parties, net 444 1,918
Restricted cash 4,469 728
Costs in excess of billings on uncompleted contracts 1,254 2,137
Prepaid expenses and other assets 1,781 2,306
Total current assets 19,119 24,715
Restricted cash, long-term 6,700 10,980
Property and equipment, net of accumulated depreciation of $2,528 and $4,557, respectively 1,218 2,040
Investment securities, restricted, long-term — 336
Cost method investment 2,776 2,776
Equity method investments 3,081 17,232
Other assets 3,714 2,696
Total Assets $ 36,608 $ 60,775
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable $ 3,263 $ 6,174
Accrued payroll and related liabilities 3,413 5,800
Current portion of notes payable, related parties — 1,837
Billings in excess of costs on uncompleted contracts 5,112 9,708
Short-term borrowings, net of discount and deferred loan costs, related party — 12,676
Legal settlements and accruals 11,470 6,502
Other current liabilities 7,012 7,395
Total current liabilities 30,270 50,092
Long-term portion of notes payable, related party — 13,512
Legal settlements and accruals, long-term 11,596 13,797
Advance deposit, related party 2,362 2,980
Other long-term liabilities 2,871 5,372
Total Liabilities 47,099 85,753
Commitments and contingencies (Note 8)
Stockholders’ deficit:
Preferred stock: par value of $.001 and no par value per share, respectively, 50,000,000 shares authorized, none
outstanding — —
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 22,241,474 and 21,943,872 shares
issued, and 21,967,969 and 21,809,164 shares outstanding at June 30, 2016 and December 31, 2015, respectively 22 22
Additional paid-in capital 118,280 116,029
Accumulated deficit (128,793) (141,029)
Total stockholders’ deficit (10,491) (24,978)
Total Liabilities and Stockholders’ Deficit $ 36,608 $ 60,775
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -23-
Appendix C: 10-Q Income Statement(1)
(1) See complete, unaudited
Condensed, Consolidated Financial
Statements and Notes related
thereto within the Quarterly Report
on Form 10-Q for the period ended
June 30, 2016.
Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data and percentages) 2016 2015 2016 2015
Revenues:
Equipment sales 8,213 14,236 29,919 35,351
Chemicals 613 343 1,047 617
Consulting services and other 125 316 320 684
Total revenues 8,951 14,895 31,286 36,652
Operating expenses:
Equipment sales cost of revenue, exclusive of depreciation and amortization 5,437 13,698 22,470 28,749
Chemicals cost of revenue, exclusive of depreciation and amortization 255 41 396 278
Consulting services cost of revenue, exclusive of depreciation and amortization 77 264 212 690
Payroll and benefits 3,956 9,746 7,759 14,657
Rent and occupancy 632 601 1,026 1,232
Legal and professional fees 1,982 4,387 4,965 8,122
General and administrative 1,346 1,503 2,092 3,385
Research and development, net (345) 1,860 (143) 3,110
Depreciation and amortization 223 573 454 1,104
Total operating expenses 13,563 32,673 39,231 61,327
Operating loss (4,612) (17,778) (7,945) (24,675)
Other income (expense):
Earnings from equity method investments 13,754 4,860 19,331 5,174
Royalties, related party 669 2,299 1,859 4,493
Interest income 95 6 118 18
Interest expense (1,573) (1,794) (3,537) (3,569)
Gain on sale of equity method investment — — 2,078 —
Gain on settlement of note payable and licensed technology 151 — 1,019 —
Other (525) 23 (535) 87
Total other income 12,571 5,394 20,333 6,203
Income (loss) before income tax expense 7,959 (12,384) 12,388 (18,472)
Income tax expense 99 63 152 107
Net income (loss) 7,860 (12,447) 12,236 (18,579)
Earnings (loss) per common share (Note 1):
Basic 0.36 (0.57) 0.55 (0.85)
Diluted 0.35 (0.57) 0.55 (0.85)
Weighted-average number of common shares outstanding:
Basic 21,875 21,715 21,895 21,728
Diluted 22,187 21,715 22,204 21,728
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -24-
Appendix D: 10-Q Cash Flow(1)
(1) See complete, unaudited Condensed, Consolidated
Financial Statements and Notes related thereto within
the Quarterly Report on Form 10-Q for the period
ended June 30, 2016.
Six Months Ended June 30,
(in thousands) 2016 2015
Cash flows from operating activities
Net income (loss) $ 12,236 $ (18,579)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization 454 1,104
Amortization of debt issuance costs 1,152 50
Impairment of property and equipment and inventory 517 46
Interest costs added to principal balance of notes payable — 432
Share-based compensation expense 1,543 5,459
Earnings from equity method investments (19,331) (5,174)
Gain on sale of equity method investment (2,078) —
Gain on settlement of note payable and licensed technology (1,019) —
Other non-cash items, net 34 688
Changes in operating assets and liabilities, net of effects of acquired businesses:
Receivables (627) 7,625
Related party receivables 1,473 (226)
Prepaid expenses and other assets 806 (460)
Costs incurred on uncompleted contracts 17,201 2,363
Restricted cash 1,089 (709)
Other long-term assets (2,630) 231
Accounts payable (2,910) 2,713
Accrued payroll and related liabilities (1,596) 1,651
Other current liabilities (101) 1,348
Billings on uncompleted contracts (20,910) (9,420)
Advance deposit, related party (618) (1,496)
Other long-term liabilities (1,336) 19
Legal settlements and accruals 2,767 (1,472)
Distributions from equity method investees, return on investment 5,900 19
Net cash used in operating activities (7,984) (13,788)
© 2016 Advanced Emissions Solutions, Inc. All rights reserved. Confidential and Proprietary. -25-
Appendix D: 10-Q Cash Flow (continued)(1)
(1) See complete, unaudited Condensed, Consolidated
Financial Statements and Notes related thereto within
the Quarterly Report on Form 10-Q for the period
ended June 30, 2016.
Six Months Ended June 30,
(in thousands) 2016 2015
Cash flows from investing activities
Maturity of investment securities, restricted 336 —
Increase in restricted cash (550) (1,200)
Acquisition of property and equipment, net (111) (380)
Advance on note receivable — (500)
Acquisition of business — (2,124)
Purchase of and contributions to equity method investees (223) (230)
Proceeds from sale of equity method investment 1,773 —
Distributions from equity method investees in excess of cumulative earnings 14,875 4,730
Net cash provided by investing activities 16,100 296
Cash flows from financing activities
Repayments on short-term borrowings, related party (13,250) —
Repayments on notes payable, related party (1,246) (1,014)
Short-term borrowing loan costs (579) —
Repurchase of shares to satisfy tax withholdings (85) (262)
Net cash used in financing activities (15,160) (1,276)
Decrease in Cash and Cash Equivalents (7,044) (14,768)
Cash and Cash Equivalents, beginning of period 9,265 25,181
Cash and Cash Equivalents, end of period $ 2,221 $ 10,413
Supplemental disclosures of cash information:
Cash paid for interest $ 1,436 $ 2,993
Cash paid (refunded) for income taxes $ (72) $ 146
Supplemental disclosure of non-cash investing and financing activities:
Restricted stock award reclassification (liability to equity) $ 899 $ —
Settlement of RCM6 note payable $ 13,234 $ —
Non-cash reduction of equity method investment $ 11,156 $ —
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