ADA-ES, Inc. (ADA-ES), a US-based provider of specialty chemicals, has reported total revenues of $4.9 million for the first quarter of 2009, up 22%, compared with the total revenues of $4 million in the year-ago quarter. It has also reported a net loss of $543,000, or $0.08 loss per share, for the first quarter of 2009, compared with the net loss of $168,000, or $0.03 loss per share, in the year-ago quarter.
For the first quarter, total revenues increased primarily due to gains in the company’s Mercury Emission Control (MEC) segment. In the current first quarter, Activated Carbon Injection (ACI) system sales rose 19% from the year-ago quarter and accounted for 60% of MEC revenues; Department of Energy (DOE) and industry-supported contracts fell 34% from the year-ago quarter and accounted for 20% of MEC revenues; consulting services accounted for 12% of MEC revenues; and activated carbon (AC) sales rose to $390,000 compared to zero in the year-ago quarter and accounted for 8% of MEC revenues. Gross margin for MEC increased to 42%, compared to 33% in the prior year period, primarily due to our recently improved design of ADA’s ACI equipment that simplifies field installation and reduces system costs. For the near term, the company expects the sales of ACI systems and AC to continue to represent an increasing source of revenues and as a result, the company expects the gross margin for fiscal year 2009 to be comparable to the margin realized in fiscal year 2008.
The company reported an operating loss of $1.5 million compared to $521,000 in the first quarter of 2008.
The greater operating and net losses were attributable to a $1.7 million increase in general and administrative expenses relating to higher costs associated with ADA-ES’ joint venture, ADA Carbon Solutions, as well as legal expenses relating to ongoing litigation.
Michael D. Durham, president and chief executive officer of ADA-ES said, “Thus far in 2009, we have been awarded six ACI system contracts; the uncompleted portion of all outstanding contracts as of March 31, 2009 totaled $6.0 million, of which we expect to recognize $4.4 million during the remainder of 2009 and the remaining revenues in 2010. We expect to be awarded numerous ACI systems in 2009 and 2010.”
Moving on to AC production and sales activities, Durham stated, “Although not meaningful in terms of dollars, the first quarter of 2009 marks our initial sales of AC. We expect AC sales to build as the year progresses now that our interim AC processing and treatment facility in Natchitoches Parish, Louisiana is about to start up. Just this month, we shipped initial loads to certain AC utility customers. In the first quarter, we signed a multi-year contract to supply AC to a major Midwestern utility for two of its coal-fired boilers. To date, we have signed $160 million in multi-year, off-take AC contracts, which represents approximately a third of the plant’s first five years of production capacity, and we currently have bids out on $500 million in RFP’s for AC contracts. We expect to recognize $10 to $15 million in AC sales in 2009 assuming continued consolidation of the results of operations of ADA Carbon Solutions, our joint venture with Energy Capital Partners I, LP and its affiliated funds (ECP).”
Durham continued, “ADA Carbon Solutions is on schedule with the construction of the AC manufacturing facility and is continuing the process of specifying and sourcing key capital equipment, negotiating agreements to support facility operations, including feedstock supply, hiring key management and operating personnel, and negotiating long-term customer off-take contracts to satisfy future project financing requirements. Due to the global credit crisis, we have postponed debt financing until market conditions improve, which now appears may happen later in the year. The equity that we have raised so far continues to fund the construction of the facility, and our partnership with a well-capitalized company like ECP has allowed us to stay on schedule while we await the right time to complete the debt financing.”
Durham stated, “Our work with the DOE on our clean coal technology project to capture carbon dioxide from coal-fired power plants continues and remains a key component of our growth strategy. At March 31, 2009, we had DOE contracts in progress totaling $2.7 million and expect to recognize approximately $1.2 million during the remainder of 2009 and the balance in 2010. The $3.4 billion allocated in the economic stimulus plan for the development of clean coal technologies is also expected to provide funding for the types of projects in which we are involved.”
Durham added, “We are extremely encouraged by all of the activity on the regulatory front. There are bills addressing mercury control from coal-fired power plants being discussed in both the House and the Senate. In addition, the Environmental Protection Agency (“EPA”) is moving forward on mercury regulations involving stringent maximum achievable control technology for both power plants and cement kilns. The cement kilns are the fourth largest source of mercury emissions in the U.S. Since the size of cement kilns is very similar to power plants, we believe that our ACI equipment and AC could be sold to cement kiln operators. Finally, in April, the EPA issued a proposed finding that CO2 and five other industrial emissions endanger the health and welfare of current and future generations, which we believe will lead to additional regulations addressing clean coal and other emissions control matters.”
Durham concluded, “With our interim AC facility near start up and the construction of our AC manufacturing facility moving forward on schedule, we remain extremely enthusiastic about our market position and our prospects for recurring revenues along with substantial growth beginning mid-year 2010.”