ARQ 8-K
Arq, Inc. (ARQ)
8-K
2020-05-11
For: 2020-05-06
View Original
Added on
April 10, 2026
U.S. SECURITIES AND EXCHANGE COMMISSION
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): May 6, 2020
ADVANCED EMISSIONS SOLUTIONS, INC.
(Name of registrant as specified in its charter)
Delaware | 001-37822 | 27-5472457 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification Number) | ||
8051 E. Maplewood Avenue, Suite 210, Greenwood Village, CO | 80111 | |
(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)
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)) | |
Securities registered pursuant to Section 12(b) of the Act:
Class | Trading Symbol | Name of each exchange on which registered | ||
Common stock, par value $0.001 per share | ADES | NASDAQ Global Market | ||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ¨ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ¨ | |
Item 1.01 | Entry into a Material Definitive Agreement. | |
See the disclosure in Item 5.02 below.
Item 2.02 | Results of Operations and Financial Condition. | |
On May 11, 2020, Advanced Emissions Solutions, Inc. ("ADES" or the "Company") issued a press release related to the filing of ADES's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, and posted to its website an investor presentation related to ADES's financial results for the three months ended March 31, 2020.
A copy of the press release is furnished as Exhibit 99.1 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 the 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 contains 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 regarding these forward-looking statements.
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. | |
(c) On May 6, 2020, the Company's board of directors (the "Board") approved the creation of the Chief Accounting Officer position and appointment of Christine Bellino to such position effective May 7, 2020. Effective July 1, 2020, Ms. Bellino will assume the role of principal financial officer while Greg Marken, currently the Company's Chief Financial Officer, will assume the role of principal executive officer.
In connection with her appointment as Chief Accounting Officer, on May 7, 2020 Ms. Bellino and the Company entered into a six-month employment agreement (the “Agreement”). Pursuant to the Agreement, Ms. Bellino is paid a salary of $260,000, per annum, and is guaranteed a bonus under the Company’s short-term Incentive Plan of 40% of her base salary, prorated to match her time with the Company. The Agreement may be terminated by the Company for cause or by Ms. Bellino upon 30 days’ written notice to the Company. There will be no severance pay obligation upon termination of the Agreement.
Ms. Bellino possesses more than 40 years of business and consulting experience with companies of all sizes and complexity from pre-IPO to fortune 100 companies. Ms. Bellino has served as ADES’ VP Risk Process and Controls, Lead Integrator of the acquisition of Carbon Solutions and most recently the SVP of Finance, Accounting and Information Technology responsible for the development and execution of ADES’ internal control over financial reporting framework, enterprise risk management program, process improvement, ERP implementations and finance, accounting and information technology management. Prior to ADES, Ms. Bellino's career included successfully managing accounting, finance and technical accounting functions for multiple publicly traded and private organizations. She has led organizations through complex transformations to support the enhancement of processes and controls and ERP implementations. Ms. Bellino also served as Co-Chair of the 2005/2006 COSO Task Force on Small Business and was responsible for the issuance of Internal Control over Financial Reporting - Guidance for Smaller Public Companies.
Additionally, the Board approved the appointment of Ted Sanders, ADES’ current General Counsel, as Secretary effective on May 6, 2020. This position was previously held by Mr. Marken.
Item 8.01 | Other Events. | |
As disclosed in the Company’s press release included as Exhibit 99.1, the Board has determined to suspend the Company's quarterly dividend.
Item 9.01 | Financial Statements and Exhibits. | |
(d) | Exhibits | |
2
Exhibit No. | Description | |
10.1 | ||
99.1 | ||
3
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: May 11, 2020
Advanced Emissions Solutions, Inc. | |
Registrant | |
/s/ Greg Marken | |
Greg Marken | |
Chief Financial Officer | |
4
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETED ASTERISKS [*], HAS BEEN OMITTED PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BECAUSE IT IS BOTH (I) NOT MATERIAL and (II) WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED
May 7, 2020
Christine Bellino
[*]
Dear Chris:
This will confirm that, effective May 1, you have agreed to occupy the position of SVP of Finance and Accounting for Advanced Emissions Solutions, Inc. ("Company"). You will subsequently be appointed Chief Accounting Officer ("CAO") on May 7, 2020. You will occupy the CAO position for a period of up to six (6) months and will report to the Interim President and CEO.
Please review, sign, and return a copy of this letter via email to Lorraine Lang, Vice President of Human Resources, at [*].
The specific terms of your position:
1.Compensation and Benefits
1.1 | Your salary will be $260,000 annualized and payable in accordance with the Company's normal payroll procedures and subject to applicable withholdings ("Base Salary"). You will participate in any benefit plans and programs offered by the Company to similarly situated employees subject to eligibility requirements under such plans and programs. The Company retains the right to modify benefits and salary from time to time, as it deems necessary. |
1.2 | You will receive the Company's ADP Safe Harbor contribution of 3% of your eligible earnings to your 401(k) account, generally made during the first quarter following the close of the plan year (Jan. 1, 2020- Dec. 31, 2020). |
1.3 | You will be guaranteed a bonus under the Company's Short-Term Incentive Plan. The bonus will be 40% of your Base Salary and will be prorated to match your time employed with the Company. You must be actively employed in the CAO position until being released by the Company without cause in order to be eligible for the bonus. |
2.Termination
2.1 | For Cause. The Company may terminate your employment at any time for "cause," effective immediately upon written notice to you. As used in this Section 2, "cause" shall be limited to; |
a.Any act of fraud, dishonesty or embezzlement against the Company or any customer, employee or vendor;
b.Refusal or failure by Employee to satisfactorily perform those duties which have been reasonably requested or assigned; and/or
c.Any conduct which violates federal, state or local law or the Company's policies and procedures.
2.2 | Termination by Employee. You may, at your option, terminate employment upon providing 30 days written notice to the Company. You agree to faithfully perform your duties during the 30-day period, and further agree that you will only leave during the notice period if the Company mutually consents to your departure. Should you cease work at any time during the 30-day period, you will only be paid through your last date of service. Should the Company, at its discretion, waive any portion of the 30-day notice period and ask you to leave employment, it will pay your salary through the end of the 30-day period and related prorated portion of your short-Term Incentive Plan. Otherwise, there will be no severance payment obligations with any termination initiated by you. |
2.3 | There will be no severance payment obligation upon termination of your employment. |
3.Protection of Confidential Information
In the course of providing services to the Company, you have and will continue to come into contact with many confidential affairs of the Company, its affiliates, clients and partners, including without limitation information relating to the Company's services, business plans, business acquisitions, processes, research and development methods or techniques, training methods and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, future product concepts, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants' reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the foregoing (collectively,"Confidential Information"). During your employment and subsequent to its termination for any reason, you agree you will keep secret all Confidential Information, and not disclose same to anyone outside of Company, either during or after your employment with Company, except with Company's written consent; and you will not use such Confidential information or materials containing or relating to Confidential Information, or any Company matters, except during your employment, on the Company's behalf, as directed by the Company. You further agree to deliver promptly to Company on the date of termination of your employment, or at any time Company may so request, all memoranda, notes, records, reports, and other documents (and all copies thereof) relating to Company's and its affiliates' businesses which you may then possess or have under your control.
3.1 | You may have certain rights under the Defend Trade Secrets Act of 2016, Pub. L. 114-153. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (A) is made |
(i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual: (X) files any document containing the trade secret under seal; and (Y) does not disclose the trade secret, except pursuant to court order.
If you have any questions, feel free to contact me, Lorrie Lang, at [*]. We look forward to you assisting the Company during this time period.
Sincerely,
/s/ Lorraine Lang | ||||
Lorraine Lang | ||||
Vice President of Human Resources | AGREED TO AND ACCEPTED: | |||
By: | /s/ Christine Bellino | |||
Christine Bellino | ||||
Date May 7, 2020 | ||||
Advanced Emissions Solutions Reports First Quarter 2020 Results
Distributions from Tinuum total $17.1 million; Prioritizing cash and liquidity to navigate pandemic related business impacts
GREENWOOD VILLAGE, Colorado, May 11, 2020 - 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 first quarter ended March 31, 2020, including information about its equity investments in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services") (collectively "Tinuum"), of which ADES owns 42.5% and 50%, respectively.
Tinuum & Refined Coal (“RC”) Highlights
• | Tinuum distributions to ADES for the first quarter were $17.1 million compared to $19.5 million in the prior year, a decrease of 12% |
• | Royalty earnings from Tinuum Group in the first quarter were $3.0 million compared to $4.2 million in the prior year, a decrease of 28% |
• | RC Segment operating income in the first quarter was $10.9 million compared to $25.2 million in the prior year |
• | RC Segment Adjusted EBITDA in the first quarter was $19.9 million compared to $23.4 million in the prior year |
• | Based on 20 invested RC facilities as of March 31, 2020, expected future net RC cash flows to ADES are projected to be between $125 million and $150 million through year end 2021 |
Power Generation and Industrials ("PGI") Highlights
• | Recognized first quarter segment revenue of $8.5 million, compared to $14.6 million in the prior year |
• | Segment operating loss in the first quarter was $6.6 million compared to an operating loss of $3.5 million in the prior year |
• | Segment EBITDA loss in the first quarter was $4.4 million, compared to a segment EBITDA loss of $1.4 million in the prior year |
ADES Consolidated Highlights
• | Consolidated revenue was $12.3 million during the first quarter compared to $19.3 million in the prior year, driven by the decrease in consumables and royalty revenues |
• | Consolidated net loss was $1.9 million for the first quarter compared to a net profit of $14.4 million in 2019; pretax loss was $1.5 million for the first quarter compared to a pretax profit of $16.1 million in 2019 |
• | Consolidated Adjusted EBITDA was $10.8 million, a decrease from $18.0 million over prior year |
• | Made quarterly principal payment of $6.0 million on the Company's term loan, and reduced the principal balance to $34.0 million |
• | Ended the first quarter 2020 with a cash balance, inclusive of restricted cash, of $17.2 million, an increase of $0.1 million since December 31, 2019 |
• | Paid first quarter dividend of $0.25 per share on March 10, 2020 |
• | Took proactive steps in response to the COVID-19 pandemic in order to: |
◦ | Protect employee health and safety, including updating safe workplace protocols and offering work-from-home where possible; |
◦ | Ensure business continuity as an essential service provider, which involved taking actions to continue to operate the Company's activated carbon manufacturing facility, engaging customers on how to best respond to changing market dynamics and protecting ADES' integrated supply chain; and |
◦ | Bolster financial flexibility and preserve near-term available cash and liquidity, by evaluating non-core spending and adjusting capital allocation plans, prioritizing prudent organic investments to ensure continued manufacturing capabilities, and suspending the Company's quarterly cash dividend on its common stock |
“As the world continues to navigate the disruptions related to the COVID-19 pandemic, we are doing everything we can to ensure our employees are safe and healthy," said L. Heath Sampson, President and CEO of ADES. “We’re offering our team work-from-home options and implementing enhanced sanitizing measures and social distancing protocols at our office and worksites. From an operations perspective, we engaged each of our customers to ensure we adapt to changing market dynamics and continue to serve them in the best way possible. Finally, we took actions to protect our financial position and maintain liquidity including the suspension of our quarterly dividend."
Sampson continued, “In terms of our first quarter performance, lower aggregate coal dispatch continued to put pressure on both of our segments, driven by mild temperatures, cheap alternative fuel sources and reduced energy demand brought about by pandemic-related business shutdowns. Data provided by the EIA indicates that coal-fired power dispatch in the first quarter was down approximately 33% compared to the first three months of 2019. These market dynamics continue to impact our PGI segment, but we are making encouraging strides in our product diversification efforts away from coal-based solutions toward Industrial, Water and other non-coal markets. We continue to be confident that our activated carbon manufacturing plant will remain the cornerstone asset to growth in this fragmented market. The team has been building exciting new products and capabilities for the last 12 months and we are well positioned to capture new sustainable volume across diverse end-markets in the future. Our pipeline includes the potential to bring on significant capacity and once captured, the asset will be back in a position of strength and able to pursue incremental strategic options."
Greg Marken, CFO of ADES, concluded, “Looking out to the rest of 2020, we expect to continue to execute and maintain high renewal rates with our current activated carbon customers. We also expect that the initiatives enacted throughout 2019 to solidify the sales infrastructure and diversity of our activated carbon product portfolio will allow us to achieve improved commercial results in non-power generation markets. We are placing an additional emphasis on our liquidity position to ensure that we possess the balance sheet strength to weather COVID-19 related business impacts, which includes the suspension of our quarterly dividend. Reduction of our Senior Term Loan remains a priority, and we are evaluating all discretionary and non-core capital spending initiatives to control our cost structure and drive cash flows.”
First Quarter 2020 Results
First quarter revenues and costs of revenues were $12.3 million and $11.5 million, respectively, compared with $19.3 million and $14.1 million in the first quarter of 2019. The decrease in revenues was primarily the result of lower consumables revenue resulting from lower volumes that were negatively impacted by low coal-fired power dispatch driven reduced demand and by power generation from sources other than coal.
First quarter royalty earnings from Tinuum Group were $3.0 million, compared to $4.2 million for the first quarter of 2019. Royalty income is based upon a percentage of the per-ton, pre-tax margin, inclusive of impacts related to depreciation expense and other allocable expenses. The lower royalty earnings in the first quarter were due to increased depreciation and lower rent payments to Tinuum which also impacted the Company's equity earnings. Royalty earnings are expected to be negatively impacted due to these changes in both 2020 and 2021.
First quarter other operating expenses were $9.4 million compared to $8.8 million in the first quarter of 2019. The increase was primarily driven by an increase in general and administrative costs related to product development and higher depreciation and amortization expense.
First quarter earnings from equity method investments were $8.3 million, compared to $21.7 million for the first quarter of 2019. The decrease in earnings from equity method investments during the first quarter was primarily due to lower earnings from Tinuum Group resulting from higher depreciation on all Tinuum Group RC facilities as a result of a reduction in their estimated useful lives during the third quarter of 2019 and due to Tinuum Group
restructuring RC facility leases with its largest customer, which decreased net lease payments and equity earnings beginning in the three months ended September 30, 2019.
First quarter interest expense was $1.2 million, compared to $2.1 million in the first quarter of 2019. The decrease in interest expense was driven by a lower principal amount outstanding on the term loan used to fund the Carbon Solutions acquisition.
First quarter income tax expense was $0.4 million, compared to $1.7 million in the first quarter of 2019. The effective tax rate for the three months ended March 31, 2020 was different from the federal statutory rate due to increases in the valuation allowance on deferred tax assets.
Net loss was $1.9 million for the first quarter compared to net profit of $14.4 million in 2019. The decrease in net income was primarily driven by lower earnings from equity method investments resulting from higher depreciation on all Tinuum Group RC facilities as a result of a reduction in their estimated useful lives and due to Tinuum Group restructuring RC facility leases with its largest customer, which decreased net lease payments and equity earnings beginning in the three months ended September 30, 2019.
Consolidated Adjusted EBITDA was $10.8 million for the first quarter compared to $18.0 million in 2019. The decrease in Consolidated Adjusted EBITDA was primarily driven by $13.4 million lower earnings from equity method investments, and changes in operating losses related to the activated carbon business.
Long-Term Borrowings
As of March 31, 2020, the outstanding principal balance of the senior term loan was $34.0 million. The senior term loan is subject to customary covenants as well as quarterly principal payments of $6.0 million that began on March 1, 2019.
Conference Call and Webcast Information
The Company has scheduled a conference call to begin at 9:00 a.m. Eastern Time on Tuesday, May 12, 2020. The conference call will be webcast live via the Investor section of ADES's website at www.advancedemissionssolutions.com. Interested parties may also participate in the call by dialing (833) 227-5845 (Domestic) or (647) 689-4072 (International) conference ID 1676176. 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 brings together ADA Carbon Solutions, LLC, a leading provider of powder activated carbon ("PAC") and ADA-ES, Inc., the providers of ADA® M-Prove™ Technology. We provide products and services to control mercury and other contaminants at coal-fired power generators and other industrial companies. Our broad suite of complementary products control contaminants and help our customers meet their compliance objectives consistently and reliably. |
 | CarbPure Technologies LLC, (“CarbPure”), formed in 2015 provides high-quality PAC and granular activated carbon ideally suited for treatment of potable water and wastewater. Our affiliate company, ADA Carbon Solutions, LLC manufactures the products for CarbPure. |
 | Tinuum Group, LLC (“Tinuum Group”) is a 42.5% owned joint venture by ADA that provides patented Refined Coal (“RC”) technologies to enhance combustion of and reduce emissions of NOx and mercury from coal-fired power plants. |
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 projection on future RC cash flows and cash preservation strategies, as well as expectation of growth opportunities in the PGI segment. These forward-looking statements involve 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, the rate of coal-fired power generation in the United States, timing of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the US government’s failure to promulgate regulations that benefit our business; changes in laws and regulations, IRS interpretations or guidance, accounting rules, any pending court decisions, prices, economic conditions and market demand; impact of competition; availability, cost of and demand for alternative energy sources and other technologies; technical, start up and operational difficulties; failure of the RC facilities to produce RC; inability to sell or lease additional RC facilities; termination of or amendments to the contracts for sale or lease of RC facilities; customer demand for mercury removal products; competition within the industries in which we operate; availability or opportunities to scale and further grow our PGI business; decreases in the production of RC; loss of key personnel; ongoing effects of the COVID-19 pandemic and associated economic downturn on our operations and prospects; as well as other factors relating to our business, as described in our filings with the SEC, with particular emphasis on the risk factor disclosures contained in those filings. You are cautioned not to place undue reliance on the forward-looking statements and to consult filings we have made and will make with the SEC for additional discussion concerning risks and uncertainties that may apply to our business and the ownership of our securities. The forward-looking statements speak only as to the date of this press release.
Source: Advanced Emissions Solutions, Inc.
Investor Contact:
Alpha IR Group
Chris Hodges or Ryan Coleman
312-445-2870
TABLE 1
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
As of | ||||||||
(in thousands, except share data) | March 31, 2020 | December 31, 2019 | ||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,188 | $ | 12,080 | ||||
Receivables, net | 5,641 | 7,430 | ||||||
Receivables, related parties | 3,045 | 4,246 | ||||||
Inventories, net | 13,595 | 15,460 | ||||||
Prepaid expenses and other assets | 7,605 | 7,832 | ||||||
Total current assets | 42,074 | 47,048 | ||||||
Restricted cash, long-term | 5,000 | 5,000 | ||||||
Property, plant and equipment, net of accumulated depreciation of $9,039 and $7,444, respectively | 45,525 | 44,001 | ||||||
Intangible assets, net | 3,973 | 4,169 | ||||||
Equity method investments | 30,312 | 39,155 | ||||||
Deferred tax assets, net | 13,307 | 14,095 | ||||||
Other long-term assets, net | 19,992 | 20,331 | ||||||
Total Assets | $ | 160,183 | $ | 173,799 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 8,458 | $ | 8,046 | ||||
Accrued payroll and related liabilities | 2,051 | 3,024 | ||||||
Current portion of long-term debt | 24,192 | 23,932 | ||||||
Other current liabilities | 4,275 | 4,311 | ||||||
Total current liabilities | 38,976 | 39,313 | ||||||
Long-term debt, net of current portion | 14,189 | 20,434 | ||||||
Other long-term liabilities | 5,238 | 5,760 | ||||||
Total Liabilities | 58,403 | 65,507 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none outstanding | — | — | ||||||
Common stock: par value of $.001 per share, 100,000,000 shares authorized, 23,114,218 and 22,960,157 shares issued, and 18,496,072 and 18,362,624 shares outstanding at March 31, 2020 and December 31, 2019, respectively | 23 | 23 | ||||||
Treasury stock, at cost: 4,618,146 and 4,597,533 shares as of March 31, 2020 and December 31, 2019, respectively | (47,692 | ) | (47,533 | ) | ||||
Additional paid-in capital | 98,596 | 98,466 | ||||||
Retained earnings | 50,853 | 57,336 | ||||||
Total stockholders’ equity | 101,780 | 108,292 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 160,183 | $ | 173,799 | ||||
TABLE 2
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands, except per share data) | 2020 | 2019 | ||||||
Revenues: | ||||||||
Consumables | $ | 9,217 | $ | 15,109 | ||||
License royalties, related party | 3,046 | 4,220 | ||||||
Total revenues | 12,263 | 19,329 | ||||||
Operating expenses: | ||||||||
Consumables cost of revenue, exclusive of depreciation and amortization | 11,491 | 14,108 | ||||||
Payroll and benefits | 2,742 | 2,556 | ||||||
Legal and professional fees | 2,043 | 2,204 | ||||||
General and administrative | 2,331 | 1,914 | ||||||
Depreciation, amortization, depletion and accretion | 2,297 | 2,102 | ||||||
Total operating expenses | 20,904 | 22,884 | ||||||
Operating loss | (8,641 | ) | (3,555 | ) | ||||
Other income (expense): | ||||||||
Earnings from equity method investments | 8,273 | 21,690 | ||||||
Interest expense | (1,210 | ) | (2,104 | ) | ||||
Other | 43 | 70 | ||||||
Total other income | 7,106 | 19,656 | ||||||
(Loss) income before income tax expense | (1,535 | ) | 16,101 | |||||
Income tax expense | 358 | 1,699 | ||||||
Net (loss) income | $ | (1,893 | ) | $ | 14,402 | |||
Earnings per common share: | ||||||||
Basic | $ | (0.11 | ) | $ | 0.79 | |||
Diluted | $ | (0.11 | ) | $ | 0.78 | |||
Weighted-average number of common shares outstanding: | ||||||||
Basic | 17,932 | 18,268 | ||||||
Diluted | 17,932 | 18,433 | ||||||
TABLE 3
Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2020 | 2019 | ||||||
Cash flows from operating activities | ||||||||
Net (loss) income | $ | (1,893 | ) | $ | 14,402 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Deferred income tax expense (benefit) | 788 | (677 | ) | |||||
Depreciation, amortization, depletion and accretion | 2,297 | 2,102 | ||||||
Operating lease expense | 774 | 775 | ||||||
Amortization of debt discount and debt issuance costs | 354 | 381 | ||||||
Stock-based compensation expense | 506 | 317 | ||||||
Earnings from equity method investments | (8,273 | ) | (21,690 | ) | ||||
Other non-cash items, net | — | 75 | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables and related party receivables | 2,988 | 1,845 | ||||||
Prepaid expenses and other assets | 226 | 80 | ||||||
Inventories, net | 1,572 | 3,262 | ||||||
Other long-term assets, net | (89 | ) | (2 | ) | ||||
Accounts payable | (1,477 | ) | (789 | ) | ||||
Accrued payroll and related liabilities | (973 | ) | (4,500 | ) | ||||
Other current liabilities | (23 | ) | 2,154 | |||||
Operating lease liabilities | (634 | ) | (804 | ) | ||||
Other long-term liabilities | (22 | ) | (401 | ) | ||||
Distributions from equity method investees, return on investment | 17,116 | 19,488 | ||||||
Net cash provided by operating activities | 13,237 | 16,018 | ||||||
Cash flows from investing activities | ||||||||
Acquisition of business | — | (661 | ) | |||||
Acquisition of property, plant, equipment, and intangible assets, net | (1,289 | ) | (1,087 | ) | ||||
Mine development costs | (447 | ) | (324 | ) | ||||
Net cash used in investing activities | (1,736 | ) | (2,072 | ) | ||||
Cash flows from financing activities | ||||||||
Principal payments on term loan | (6,000 | ) | (6,000 | ) | ||||
Principal payments on finance lease obligations | (340 | ) | (344 | ) | ||||
Dividends paid | (4,518 | ) | (4,571 | ) | ||||
Repurchase of common shares | (159 | ) | (693 | ) | ||||
Repurchase of common shares to satisfy tax withholdings | (376 | ) | (245 | ) | ||||
Net cash used in financing activities | (11,393 | ) | (11,853 | ) | ||||
Increase in Cash and Cash Equivalents and Restricted Cash | 108 | 2,093 | ||||||
Cash and Cash Equivalents and Restricted Cash, beginning of period | 17,080 | 23,772 | ||||||
Cash and Cash Equivalents and Restricted Cash, end of period | $ | 17,188 | $ | 25,865 | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Acquisition of property, plant and equipment through accounts payable | $ | 1,890 | $ | — | ||||
Dividends payable | $ | 105 | $ | 58 | ||||
Note on Non-GAAP Financial Measures
To supplement the Company's financial information presented in accordance with U.S. generally accepted accounting principles, or GAAP, the Press Release includes non-GAAP measures of certain financial performance. These non-GAAP measures include Consolidated Adjusted EBITDA, Segment EBITDA and RC Segment Adjusted EBITDA. The Company included non-GAAP measures because management believes that they help to facilitate comparison of operating results between periods. The Company believes the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses that may not be indicative of core operating results and business outlook. These non-GAAP measures are not in accordance with, or an alternative to, measures prepared in accordance with GAAP and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. These measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.
The Company has defined Consolidated Adjusted EBITDA as net income, adjusted for the impact of the following items that are either non-cash or that the Company does not consider representative of its ongoing operating performance: depreciation, amortization, depletion and accretion, interest expense, net, income tax expense, then reduced by the non-cash impact of equity earnings from equity method investments and increased by cash distributions from equity method investments. The Company believes that the Consolidated Adjusted EBITDA measure is less susceptible to variances that affect the Company's operating performance.
Segment EBITDA is calculated as Segment operating income (loss) adjusted for the impact of the following items that are either non-cash or that the Company does not consider representative of its ongoing operating performance: depreciation, amortization, depletion and accretion and interest expense, net. When used in conjunction with GAAP financial measures, Segment EBITDA is a supplemental measure of operating performance that management believes is a useful measure related the Company's PGI segment performance relative to the performance of its competitors as well as performance period over period. Additionally, the Company believes the measure is less susceptible to variances that affect its operating performance results.
The Company defines RC Segment Adjusted EBITDA as RC Segment EBITDA reduced by the non-cash impact of equity earnings from equity method investments and increased by cash distributions from equity method investments.
The Company presents the non-GAAP measures because the Company believes they are useful as supplemental measures in evaluating the performance of the Company's operating performance and provide greater transparency into the results of operations. The Company's management uses Consolidated Adjusted EBITDA, RC Segment Adjusted EBITDA and Segment EBITDA as factors in evaluating the performance of its business.
The adjustments to Consolidated Adjusted EBITDA, RC Segment Adjusted EBITDA and Segment EBITDA in future periods are generally expected to be similar. Consolidated Adjusted EBITDA, RC Segment Adjusted EBITDA and Segment EBITDA have limitations as analytical tools, and you should not consider these measures in isolation or as a substitute for analyzing the Company's results as reported under GAAP.
TABLE 4
Advanced Emissions Solutions, Inc. and Subsidiaries
Consolidated Adjusted EBITDA Reconciliation to Net Income
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2020 | 2019 | ||||||
Net (loss) income (1) | $ | (1,893 | ) | $ | 14,402 | |||
Depreciation, amortization, depletion and accretion | 2,297 | 2,102 | ||||||
Interest expense, net | 1,167 | 2,034 | ||||||
Income tax expense | 358 | 1,699 | ||||||
Consolidated EBITDA | 1,929 | 20,237 | ||||||
Equity earnings | (8,273 | ) | (21,690 | ) | ||||
Cash distributions from equity method investees | 17,116 | 19,488 | ||||||
Consolidated Adjusted EBITDA | $ | 10,772 | $ | 18,035 | ||||
(1) Net income for the three months ended March 31, 2019 was inclusive of a $3.6 million adjustment, which increased cost of revenue due to a step-up in basis of inventory acquired related to the Carbon Solutions Acquisition.
TABLE 5
Advanced Emissions Solutions, Inc. and Subsidiaries
RC Segment Adjusted EBITDA Reconciliation to Segment Operating Income
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2020 | 2019 | ||||||
RC Segment operating income | $ | 10,860 | $ | 25,233 | ||||
Depreciation, amortization, depletion and accretion | 27 | 21 | ||||||
Interest expense | 132 | 322 | ||||||
RC Segment EBITDA | 11,019 | 25,576 | ||||||
Equity earnings | (8,273 | ) | (21,690 | ) | ||||
Cash distributions from equity method investees | 17,116 | 19,488 | ||||||
RC Segment Adjusted EBITDA | $ | 19,862 | $ | 23,374 | ||||
TABLE 6
Advanced Emissions Solutions, Inc. and Subsidiaries
PGI Segment EBITDA Reconciliation to Segment Operating Loss
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
(in thousands) | 2020 | 2019 | ||||||
PGI Segment operating loss (1) | $ | (6,577 | ) | $ | (3,462 | ) | ||
Depreciation, amortization, depletion and accretion | 2,035 | 1,960 | ||||||
Interest expense, net | 94 | 131 | ||||||
PGI Segment EBITDA loss | $ | (4,448 | ) | $ | (1,371 | ) | ||
(1) Segment operating loss for the three months ended March 31, 2019 was inclusive of a $3.4 million adjustment, which increased cost of revenue due to a step-up in basis of inventory acquired related to the Carbon Solutions acquisition.