United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________ 
FORM 10-Q
 ______________________________________  
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
¨
TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37822
______________________________________  
Advanced Emissions Solutions, Inc.
(Exact name of registrant as specified in its charter)
______________________________________   
Delaware
 
27-5472457
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
8051 E. Maplewood Ave, Suite 210, Greenwood Village, CO
 
80111
(Address of principal executive offices)
 
(Zip Code)
(720) 598-3500
(Registrant’s telephone number, including area code)
640 Plaza Drive, Suite 270, Highlands Ranch, CO 80129
(Former name, former address and former fiscal year, if changed since last report)
______________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x   No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
o
  
Accelerated filer
 
o
 
 
 
 
Non-accelerated filer
 
x
  
Smaller reporting company
 
x
 
 
 
 
 
 
 
 
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. ¨ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  ¨    No  x
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
As of May 1, 2020, there were 18,493,048 outstanding shares of Advanced Emissions Solutions, Inc. common stock, par value $0.001 per share.





INDEX
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 





Part I. – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
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 (Note 8)
 

 

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


See Notes to the Condensed Consolidated Financial Statements.

1

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

(Loss) earnings per common share (Note 1):

 
 
 
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


See Notes to the Condensed Consolidated Financial Statements.



2

Advanced Emissions Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)


 
 
Common Stock
 
Treasury Stock
 
 
 
 
 
 
(Amounts in thousands, except share data)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Total Stockholders’
Equity
Balances, January 1, 2020
 
22,960,157

 
$
23

 
(4,597,533
)
 
$
(47,533
)
 
$
98,466

 
$
57,336

 
$
108,292

Stock-based compensation
 
218,259

 

 

 

 
506

 

 
506

Repurchase of common shares to satisfy minimum tax withholdings
 
(64,198
)
 

 

 

 
(376
)
 

 
(376
)
Cash dividends declared on common stock
 

 

 

 

 

 
(4,590
)
 
(4,590
)
Repurchase of common shares
 

 

 
(20,613
)
 
(159
)
 

 

 
(159
)
Net loss
 

 

 

 

 

 
(1,893
)
 
(1,893
)
Balances, March 31, 2020
 
23,114,218

 
$
23

 
(4,618,146
)
 
$
(47,692
)
 
$
98,596

 
$
50,853

 
$
101,780



 
 
Common Stock
 
Treasury Stock
 
 
 
 
 
 
(Amounts in thousands, except share data)
 
Shares
 
Amount
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Total Stockholders’
Equity
Balances, January 1, 2019
 
22,640,677

 
$
23

 
(4,064,188
)
 
$
(41,740
)
 
$
96,750

 
$
12,914

 
$
67,947

Cumulative effect of change in accounting principle (Note 1)
 

 

 

 

 

 
28,817

 
28,817

Stock-based compensation
 
218,465

 

 

 

 
317

 

 
317

Repurchase of common shares to satisfy minimum tax withholdings
 
(22,707
)
 

 

 

 
(245
)
 

 
(245
)
Cash dividends declared on common stock
 

 

 

 

 

 
(4,629
)
 
(4,629
)
Repurchase of common shares
 

 

 
(63,876
)
 
(693
)
 

 

 
(693
)
Net income
 

 

 

 

 

 
14,402

 
14,402

Balances, March 31, 2019
 
22,836,435

 
$
23

 
(4,128,064
)
 
$
(42,433
)
 
$
96,822

 
$
51,504

 
$
105,916


See Notes to the Condensed Consolidated Financial Statements.


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

See Notes to the Condensed Consolidated Financial Statements.

4

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Note 1 - Basis of Presentation
Nature of Operations
Advanced Emissions Solutions, Inc. ("ADES" or the "Company") is a Delaware corporation with its principal office located in Greenwood Village, Colorado and operations located in Louisiana. The Company is principally engaged in consumable mercury control options including powdered activated carbon ("PAC") and chemical technologies. The Company's proprietary environmental technologies in the power generation and industrial ("PGI") market enable customers to reduce emissions of mercury and other pollutants, maximize utilization levels and improve operating efficiencies to meet the challenges of existing and pending emission control regulations. Through its wholly-owned subsidiary, ADA Carbon Solutions, LLC ("Carbon Solutions"), which the Company acquired on December 7, 2018 (the "Acquisition Date"), the Company manufactures and sells activated carbon ("AC") used in mercury capture for the coal-fired power plant, industrial and water treatment markets. Carbon Solutions also owns an associated lignite mine that supplies the primary raw material for manufacturing PAC.
Through its equity ownership in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), both of which are unconsolidated entities, the Company generates substantial earnings. Tinuum Group provides reduction of mercury and nitrogen oxide ("NOx") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") that qualifies for tax credits under the Internal Revenue Code ("IRC") Section 45 - Production Tax Credit ("Section 45 tax credits"). The Company also earns royalties for technologies that are licensed to Tinuum Group and used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operates and maintains the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities.
The Company’s sales occur principally throughout the United States. See Note 13 for additional information regarding the Company's operating segments.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of ADES are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The unaudited Condensed Consolidated Financial Statements of ADES in this quarterly report ("Quarterly Report") are presented on a consolidated basis and include ADES and its wholly-owned subsidiaries (collectively, the "Company"). Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments: Tinuum Group, Tinuum Services and GWN Manager, LLC ("GWN Manager"), which are accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.
Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.
In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements of ADES should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K"). Significant accounting policies disclosed therein have not changed, except as described later in Note 1.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the two-class method, which is an earnings allocation formula that determines earnings (loss) per share for common stock and any participating securities according to dividend and participating rights in undistributed earnings (losses). The Company's restricted stock awards ("RSA's") granted prior to December 31, 2016 contain non-forfeitable rights to dividends or dividend equivalents and are deemed to be participating securities. RSA's granted subsequent to December 31, 2016 do not contain non-forfeitable rights to dividends and are not deemed to be participating securities.
Under the two-class method, net income for the period is allocated between common stockholders and the holders of the participating securities based on the weighted-average number of common shares outstanding during the period, excluding

5

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

participating, unvested RSA's ("common shares"), and the weighted-average number of participating, unvested RSA's outstanding during the period, respectively. The allocated, undistributed income for the period is then divided by the weighted-average number of common shares and participating, unvested RSA's outstanding during the period to arrive at basic earnings per common share and participating security for the period, respectively. Pursuant to U.S. GAAP, the Company has elected not to separately present basic or diluted earnings per share attributable to participating securities in the Condensed Consolidated Statements of Operations.
Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities. Potentially dilutive securities consist of both unvested, participating and non-participating RSA's, as well as outstanding options to purchase common stock ("Stock Options") and contingent performance stock units ("PSU's") (collectively, "Potential dilutive shares"). The dilutive effect, if any, for non-participating RSA's, Stock Options and PSU's is determined using the greater of dilution as calculated under the treasury stock method or the two-class method. Potential dilutive shares are excluded from diluted earnings per share when their effect is anti-dilutive. When there is a net loss for a period, all Potential dilutive shares are anti-dilutive and are excluded from the calculation of diluted loss per share for that period.
The following table sets forth the calculations of basic and diluted earnings (loss) per share:
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2020
 
2019
Net (loss) income
 
$
(1,893
)
 
$
14,402

Less: Dividends and undistributed income (loss) allocated to participating securities
 
(2
)
 
20

(Loss) income attributable to common stockholders
 
$
(1,891
)
 
$
14,382

 
 
 
 
 
Basic weighted-average common shares outstanding
 
17,932

 
18,268

Add: dilutive effect of equity instruments
 

 
165

Diluted weighted-average shares outstanding
 
17,932

 
18,433

(Loss) earnings per share - basic
 
$
(0.11
)
 
$
0.79

(Loss) earnings per share - diluted
 
$
(0.11
)
 
$
0.78

For the three months ended March 31, 2020 and 2019, RSA's and Stock Options convertible to 0.7 million and 0.3 million shares of common stock, respectively, were outstanding but were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company’s critical accounting estimates from those that were disclosed in the 2019 Form 10-K. Actual results could differ from these estimates.
Due to the coronavirus (COVID-19) pandemic, there has been uncertainty and disruption in the global economy and financial markets. Additionally, due to COVID-19, overall power generation and coal-fired power demand may change, which could also have a material adverse effect on the Company. The Company is not aware of any specific event or circumstance that would require an update to its estimate or judgments or a revision of the carrying values of its assets or liabilities through the date of this Quarterly Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Risks and Uncertainties
The Company’s earnings are significantly affected by equity earnings it receives from Tinuum Group. As of March 31, 2020, Tinuum Group has 20 invested RC facilities of which 8 are leased to a single customer. A majority of these leases are periodically renewed. Further, the ability to generate Section 45 tax credits related to Tinuum's RC facilities expires in 2021. The loss of the single customer by Tinuum Group or the expiration of Section 45 tax credits would have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn would have a material adverse impact on the Company’s financial position, results of operations and cash flows.

6

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The Company's revenues, sales volumes, earnings and cash flows are significantly affected by prices of competing power generation sources such as natural gas and renewable energy. Low natural gas prices make it a competitive alternative to coal-fired power generation and therefore, coal consumption may be reduced, which reduces the demand for our products. In addition, coal consumption and demand for our products is also affected by the demand for electricity, which is higher in the warmer and colder months of the year. Abnormal temperatures during the summer and winter months may significantly reduce coal consumption and thus the demand for the Company's products.
Reclassifications
Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.
New Accounting Standards
Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission) for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in ASU 2019-12 simplify various aspects related to accounting for income taxes by removing certain exceptions contained in Topic 740 and also clarifies and amends existing guidance in Topic 740 to improve consistent application. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, including interim periods within those years, and early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

Note 2 - Acquisition
As described in Note 1, on the Acquisition Date, the Company completed the acquisition of Carbon Solutions (the "Carbon Solutions Acquisition") for a total purchase price of $75.0 million (the "Purchase Price"). The fair value of the purchase consideration totaled $66.5 million, less cash acquired of $3.3 million, and the assumption of debt and contractual commitments of $11.8 million. The Company also paid $4.5 million in acquisition-related costs (or transaction costs). The Company funded the cash consideration from cash on hand and the proceeds from the Term Loan and Security Agreement (the "Senior Term Loan") in the principal amount of $70.0 million, as more fully described in Note 5.

7

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table summarizes the final purchase price allocation. Subsequent to the Acquisition Date, the Company completed additional analysis and adjustments were made to the preliminary purchase price allocations as noted in the table below:
Fair value of assets acquired:
 
As Originally Reported
 
Adjustments
 
As Adjusted
Cash
 
$
3,284

 
$

 
$
3,284

Receivables
 
6,409

 

 
6,409

Inventories
 
22,100

 
(356
)
 
21,744

Prepaid expenses and other current assets
 
2,992

 
61

 
3,053

Spare parts
 
3,359

 

 
3,359

Property, plant and equipment
 
43,033

 
(377
)
 
42,656

Mine leases and development
 
2,500

 
200

 
2,700

Mine reclamation asset
 

 
2,402

 
2,402

Intangible assets
 
4,000

 
100

 
4,100

Other assets
 
168

 

 
168

Amount attributable to assets acquired
 
87,845

 
2,030

 
89,875

 
 
 
 
 
 
 
Fair value of liabilities assumed:
 
 
 
 
 
 
Accounts payable
 
4,771

 

 
4,771

Accrued liabilities
 
7,354

 
254

 
7,608

Equipment lease liabilities
 
8,211

 

 
8,211

Mine reclamation liability
 
626

 
1,776

 
2,402

Other liabilities
 
437

 

 
437

Amount attributable to liabilities assumed
 
21,399

 
2,030

 
23,429

 
 
 
 
 
 
 
Net assets acquired
 
$
66,446

 
$

 
$
66,446

Adjustments to the preliminary purchase price allocation primarily related to changes in fair values assigned to property, plant and equipment, intangible assets, mine reclamation liability and the related mine reclamation asset as a result of the final valuation report from the Company's third-party valuation firm issued in May 2019. During the three months ended June 30, 2019 based on new information of facts and circumstances that existed as of the Acquisition Date, the Company revised its estimates used as of the Acquisition Date related to the net realizable value of certain finished goods inventory items as well as values assigned to certain prepaid and accrued expense items.
The following table represents the intangible assets, as adjusted for purchase price adjustments noted above, identified as part of the Carbon Solutions Acquisition:
(in thousands)
 
Amount
 
Weighted Average Useful Life (years)
Customer relationships
 
$
2,200

 
5
Developed technology
 
1,600

 
5
Trade name
 
300

 
2
Total intangibles acquired
 
$
4,100

 
 


8

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 3 - Inventories, net
The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of March 31, 2020 and December 31, 2019:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Product inventory
 
$
11,492

 
$
13,515

Raw material inventory
 
2,103

 
1,945

 
 
$
13,595

 
$
15,460



Note 4 - Equity Method Investments
Tinuum Group, LLC
The Company's ownership interest in Tinuum Group was 42.5% as of March 31, 2020 and December 31, 2019. Tinuum Group supplies technology equipment and technical services at select coal-fired generators, but its primary purpose is to put into operation facilities that produce and sell RC that lower emissions and also qualify for Section 45 tax credits. Tinuum Group has been determined to be a variable interest entity ("VIE"); however, the Company does not have the power to direct the activities that most significantly impact Tinuum Group's economic performance and has therefore accounted for the investment under the equity method of accounting. The Company determined that the voting partners of Tinuum Group have identical voting rights, equity control interests and board control interests, and therefore, concluded that the power to direct the activities that most significantly impact Tinuum Group's economic performance was shared.
The following table summarizes the results of operations of Tinuum Group:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross profit
 
$
5,010

 
$
41,200

Operating, selling, general and administrative expenses
 
12,776

 
6,582

Loss (income) from operations
 
(7,766
)
 
34,618

Other income
 
3,643

 
51

Loss attributable to noncontrolling interest
 
19,271

 
15,776

Net income available to members
 
$
15,148

 
$
50,445

ADES equity earnings from Tinuum Group
 
$
6,438

 
$
19,767

For the three months ended March 31, 2020, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the respective period. For the three months ended March 31, 2019, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the period, less the amount necessary to recover the cumulative earnings short-fall balance as of the end of the immediately preceding period, which was December 31, 2018. For the three months ended March 31, 2019, the difference between the Company's proportionate share of Tinuum Group's net income available to members (at its equity interest of 42.5%) and the Company's earnings from its Tinuum Group equity method investment as reported in the Condensed Consolidated Statements of Operations relates to the Company receiving distributions in excess of the carrying value of the equity investment, and therefore recognizing such excess distributions as equity method earnings in the period the distributions occur.
For the three months ended March 31, 2020, the Company recognized equity earnings from Tinuum Group of $6.4 million. For the three months ended March 31, 2019, the Company recognized equity earnings from Tinuum Group of $19.8 million.

9

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three months ended March 31, 2020 and 2019 (in thousands):
Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2019
 
$
32,280

 
$

 
$

 
$

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
6,438

 
6,438

 

 

Cash distributions from Tinuum Group
 
First Quarter
 
(13,764
)
 

 
13,764

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2020
 
$
24,954

 
$
6,438

 
$
13,764

 
$

Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2018
 
$

 
$

 
$

 
$
(1,672
)
Impact of adoption of accounting standards (1)
 
First Quarter
 
37,232

 

 

 

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
21,439

 
21,439

 

 

Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)
 
First Quarter
 
(1,672
)
 
(1,672
)
 

 
1,672

Cash distributions from Tinuum Group
 
First Quarter
 
(16,788
)
 

 
16,788

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2019
 
$
40,211

 
$
19,767

 
$
16,788

 
$

(1) Tinuum Group adopted Accounting Standards Codification Topic ("ASC") 606 - Revenue from Contracts with Customers and ASC 842 - Leases as of January 1, 2019. As a result of Tinuum Group’s adoption of these standards, the Company recorded a cumulative adjustment of $27.4 million, net of the impact of income taxes, related to the Company's percentage of Tinuum Group's cumulative effect adjustment that increased the Company's Retained earnings as of January 1, 2019.
Tinuum Services, LLC
The Company has a 50% voting and economic interest in Tinuum Services. The Company has determined that Tinuum Services is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Tinuum Services under the equity method of accounting. The Company’s investment in Tinuum Services as of March 31, 2020 and December 31, 2019 was $5.3 million and $6.8 million, respectively.

10

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table summarizes the results of operations of Tinuum Services:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross loss
 
$
(22,259
)
 
$
(24,735
)
Operating, selling, general and administrative expenses
 
45,753

 
49,450

Loss from operations
 
(68,012
)
 
(74,185
)
Other expenses
 
(285
)
 
(242
)
Loss attributable to noncontrolling interest
 
71,972

 
78,270

Net income
 
$
3,675

 
$
3,843

ADES equity earnings from Tinuum Services
 
$
1,838

 
$
1,922

Included within the Consolidated Statements of Operations of Tinuum Services for the three months ended March 31, 2020 and 2019, respectively, were losses related to VIE's of Tinuum Services. These losses do not impact the Company's equity earnings from Tinuum Services as 100% of those losses are attributable to a noncontrolling interest and eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.
The following table details the components of the Company's respective equity method investments included within the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Earnings from Tinuum Group
 
$
6,438


$
19,767

Earnings from Tinuum Services
 
1,838


1,922

(Loss) earnings from other
 
(3
)

1

Earnings from equity method investments
 
$
8,273

 
$
21,690

The following table details the components of the cash distributions from the Company's respective equity method investments included in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows.
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Distributions from equity method investees, return on investment
 
 
 
 
Tinuum Group
 
$
13,764

 
$
16,788

Tinuum Services
 
3,352

 
2,700

 
 
$
17,116

 
$
19,488


11

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Note 5 - Debt Obligations
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Senior Term Loan due December 2021, related party
 
$
34,000

 
$
40,000

Less: net unamortized debt issuance costs
 
(989
)
 
(1,163
)
Less: net unamortized debt discount
 
(1,020
)
 
(1,200
)
Senior Term Loan due December 2021, net
 
31,991

 
37,637

Finance lease obligations
 
6,390

 
6,729

 
 
38,381

 
44,366

Less: Current maturities
 
(24,192
)
 
(23,932
)
Total long-term debt
 
$
14,189

 
$
20,434

Senior Term Loan
On December 7, 2018, the Company, and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo"), affiliates of a beneficial owner of greater than five percent of the Company's common stock and a related party, entered into the Senior Term Loan in the amount of $70.0 million less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the Carbon Solutions Acquisition as disclosed in Note 2. The Company also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan has a term of 36 months and bears interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which is adjusted quarterly to the current 3-month LIBOR rate, and interest is payable quarterly in arrears. Quarterly principal payments of $6.0 million were required beginning in March 2019, and the Company may prepay the Senior Term Loan at any time without penalty. The Senior Term Loan is secured by substantially all of the assets of the Company, including the cash flows from Tinuum Group and Tinuum Services (collectively, the "Tinuum Entities"), but excluding the Company's equity interests in the Tinuum entities.
The Senior Term Loan includes, among others, the following covenants: (1) Beginning December 31, 2018 and as of the end of each fiscal quarter thereafter, the Company must maintain a minimum cash balance of $5.0 million and shall not permit "expected future net cash flows from the refined coal business" (as defined in the Senior Term Loan) to be less than 1.75 times the outstanding principal amount of the Senior Term Loan; (2) Beginning in January 2019, annual collective dividends and buybacks of Company shares in an aggregate amount, not to exceed $30.0 million, is permitted so long as (a) no default or event of default exists under the Senior Term Loan and (b) expected future net cash flows from the refined coal business as of the end of the most recent fiscal quarter exceed $100.0 million.
Line of Credit
On December 7, 2018, ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary of the Company, as borrower, the Company, as guarantor, and a bank (the "Lender") entered into an amendment to the 2013 Loan and Security Agreement (the "Line of Credit"). This amendment provided, among other things, for ADA to be able to enter into the Senior Term Loan as a guarantor so long as the principal amount of the Senior Term Loan did not exceed $70.0 million. Additionally, the financial covenants in the Line of Credit were amended and restated to be consistent with the Senior Term Loan covenants, including maintaining a minimum cash balance of $5.0 million.
As of March 31, 2020, there were no outstanding borrowings under the Line of Credit.

Note 6 - Leases
As of March 31, 2020, the Company has obligations under finance and operating leases in the amounts of $6.4 million and $4.6 million, respectively. As of March 31, 2020, the Company has right of use ("ROU") assets, net of accumulated amortization, under finance leases and operating leases of $5.4 million and $4.4 million, respectively.

12

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Finance leases
ROU assets under finance leases and finance lease liabilities are included in Property, plant and equipment and Current portion and Long-term portion of borrowings, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020. Interest expense related to finance lease liabilities and amortization of ROU assets under finance leases are included in Interest expense and Depreciation, amortization, depletion and accretion, respectively, in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2020.
Operating leases
ROU assets under operating leases and operating lease liabilities are included in Other long-term assets and Other liabilities and Other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020.
Lease expense for operating leases for the three months ended March 31, 2020 and 2019 was $1.2 million and $1.2 million, respectively, of which $1.0 million and $1.1 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.1 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations.
Lease financial information as of and for the three months ended March 31, 2020 and 2019 is provided in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Finance lease cost:
 
 
 
 
Amortization of right-of-use assets
 
$
514

 
$
536

Interest on lease liabilities
 
94

 
131

Operating lease cost
 
853

 
929

Short-term lease cost
 
282

 
171

Variable lease cost (1)
 
93

 
82

Total lease cost
 
$
1,836

 
$
1,849

 
 
 
 
 
Other Information:
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows from finance leases
 
$
94

 
$
131

Operating cash flows from operating leases
 
$
634

 
$
949

Financing cash flows from finance leases
 
$
340

 
$
344

Right-of-use assets obtained in exchange for new operating lease liabilities
 
$
60

 
$
49

Weighted-average remaining lease term - finance leases
 
4.1 years

 
4.9 years

Weighted-average remaining lease term - operating leases
 
2.3 years

 
2.5 years

Weighted-average discount rate - finance leases
 
6.1
%
 
6.1
%
Weighted-average discount rate - operating leases
 
8.5
%
 
8.6
%
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
Note 7 - Revenues
Trade receivables represent an unconditional right to consideration in exchange for goods or services transferred to a customer. The Company invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is generally not significant. The Company records allowances for doubtful trade receivables when it is probable that the balances will not be collected.

13

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Trade receivables, net
The following table shows the components of Trade receivables, net:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Trade receivables
 
$
6,265

 
$
8,057

Less: Allowance for doubtful accounts
 
(624
)
 
(627
)
Trade receivables, net
 
$
5,641

 
$
7,430

For the three months ended March 31, 2020 and 2019, the Company recognized zero and zero of bad debt expense, respectively.
Disaggregation of Revenue and Earnings from Equity Method Investments
During the three months ended March 31, 2020 and 2019, all performance obligations related to revenues recognized were satisfied at a point in time. The Company disaggregates its revenues by major components as well as between its two reportable segments, which are further discussed in Note 13 to the Condensed Consolidated Financial Statements. The following tables disaggregate revenues by major component for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31, 2020
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
8,475

 
$

 
$
742

 
$
9,217

License royalties, related party
 

 
3,046

 

 
3,046

Revenues from customers
 
8,475

 
3,046

 
742

 
12,263

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
8,273

 

 
8,273

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
8,475

 
$
11,319

 
$
742

 
$
20,536

 
 
Three Months Ended March 31, 2019
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
14,553

 
$

 
$
556

 
$
15,109

License royalties, related party
 

 
4,220

 

 
4,220

Revenues from customers
 
14,553

 
4,220

 
556

 
19,329

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
21,690

 

 
21,690

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
14,553

 
$
25,910

 
$
556

 
$
41,019

Note 8 - Commitments and Contingencies
Legal Proceedings
The Company is from time to time subject to, and is presently involved in, various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes, the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments where management has assessed that a loss is probable and an amount can be reasonably estimated. There were no significant legal proceedings as of March 31, 2020.

14

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Restricted Cash
As of March 31, 2020 and December 31, 2019, the Company had long-term restricted cash of $5.0 million and $5.0 million, respectively, which primarily consisted of minimum cash balance requirements under the Senior Term Loan.
Other Commitments and Contingencies
The Company has certain limited obligations contingent upon future events in connection with the activities of Tinuum Group. The Company, NexGen Refined Coal, LLC ("NexGen") and two entities affiliated with NexGen have provided an affiliate of the Goldman Sachs Group, Inc. with limited guaranties (the "Tinuum Group Party Guaranties") related to certain losses it may suffer as a result of inaccuracies or breach of representations and covenants. The Company also is a party to a contribution agreement with NexGen under which any party called upon to pay on a Tinuum Group Party Guaranty is entitled to receive contributions from the other party equal to 50% of the amount paid. The Company has not recorded a liability or expense provision related to this contingent obligation as it believes that it is not probable that a loss will occur with respect to Tinuum Group Party Guaranties.
Note 9 - Stockholders' Equity
Stock Repurchase Programs
In November 2018, the Company's Board of Directors (the "Board") authorized the Company to purchase up to $20.0 million of its outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program. In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.
For the three months ended March 31, 2020, under the Stock Repurchase Program, the Company purchased 20,613 shares of its common stock for cash of $0.2 million, inclusive of commissions and fees. For the three months ended March 31, 2019, under the Stock Repurchase Program, the Company purchased 63,876 shares of its common stock for cash of $0.7 million, inclusive of commissions and fees. As of March 31, 2020, the Company had $7.0 million remaining under the Stock Repurchase Program.
Quarterly Cash Dividend
Dividends declared and paid quarterly on all outstanding shares of common stock during the three months ended March 31, 2020 and 2019 were as follows:
 
 
2020
 
2019
 
 
Per share
 
Date paid
 
Per share
 
Date paid
Dividends declared during quarter ended:
 
 
 
 
 
 
 
 
March 31
 
$
0.25

 
March 10, 2020
 
$
0.25

 
March 7, 2019
 
 
$
0.25

 
 
 
$
0.25

 
 
A portion of the dividends declared remains accrued subsequent to the payment dates and represents dividends accumulated on nonvested shares of common stock held by employees and directors of the Company that contain forfeitable dividend rights that are not payable until the underlying shares of common stock vest. These amounts are included in both Other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheet as of March 31, 2020.
Tax Asset Protection Plan
U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and other tax assets if the Company experiences an "ownership change" (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.
On May 5, 2017, the Board approved the declaration of a dividend of rights to purchase Series B Junior Participating Preferred Stock for each outstanding share of common stock as part of a tax asset protection plan (the "TAPP") designed to protect the Company’s ability to utilize its net operating losses and tax credits. The TAPP is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock.

15

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

On April 9, 2020, the Board approved the Third Amendment to the TAPP ("Third Amendment") that amends the TAPP, as previously amended by the First and Second Amendments that were approved the Board on April 6, 2018 and April 5, 2019, respectively. The Third Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. Pursuant to the Third Amendment, the Final Expiration Date shall be the close of business on the earlier of (i) December 31, 2021 or (ii) December 31, 2020 if stockholder approval of the Third Amendment has not been obtained prior to such date.
Note 10 - Stock-Based Compensation
The Company grants equity-based awards to employees, non-employee directors, and consultants that may include, but are not limited to, RSA's, restricted stock units ("RSU's"), performance stock units ("PSU's") and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included within the Cost of goods sold and Payroll and benefits line items, respectively, in the Condensed Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors and consultants is included within the General and administrative line item in the Condensed Consolidated Statements of Operations.
Total stock-based compensation expense for the three months ended March 31, 2020 and 2019 was as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
RSA expense
 
$
506

 
$
317

Total stock-based compensation expense
 
$
506

 
$
317

The amount of unrecognized compensation cost as of March 31, 2020, and the expected weighted-average period over which the cost will be recognized is as follows:
 
 
As of March 31, 2020
(in thousands)
 
Unrecognized Compensation Cost
 
Expected Weighted-
Average Period of
Recognition (in years)
RSA expense
 
$
3,178

 
2.23
PSU expense
 
309

 
2.94
Total unrecognized stock-based compensation expense
 
$
3,487

 
2.29
Restricted Stock
Restricted stock is typically granted with vesting terms of three years. The fair value of RSA's and RSU's is determined based on the closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSA's is generally recognized on a straight-line basis over the entire vesting period. Compensation expense for RSU's is generally recognized on a straight-line basis over the service period of the award.
A summary of RSA activity under the Company's various stock compensation plans for the three months ended March 31, 2020 is presented below:
 
 
Restricted Stock
 
Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020
 
451,344

 
$
10.65

Granted
 
218,524

 
$
5.34

Vested
 
(184,023
)
 
$
10.39

Forfeited
 
(265
)
 
$
10.84

Non-vested at March 31, 2020
 
485,580

 
$
8.36

Stock Options
Stock options generally vest over three years or upon satisfaction of performance-based conditions and have a contractual limit of five years from the date of grant to exercise. The fair value of stock options granted is determined on the date of grant using

16

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

the Black-Scholes option pricing model and the related expense is recognized on a straight-line basis over the entire vesting period.
A summary of stock option activity for the three months ended March 31, 2020 is presented below:
 
 
Number of Options
Outstanding and
Exercisable
 
Weighted-Average
Exercise Price
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining Contractual
Term (in years)
Options outstanding, January 1, 2020
 
300,000

 
$
13.87

 
 
 

Options granted
 

 

 
 
 
 
Options exercised
 

 

 
 
 
 
Options expired / forfeited
 

 

 
 
 
 
Options outstanding, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18
Options vested and exercisable, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18
Performance Share Units
Compensation expense is recognized for PSU awards on a straight-line basis over the applicable service period, which is generally three years, based on the estimated fair value at the date of grant using a Monte Carlo simulation model. A summary of PSU activity for the three months ended March 31, 2020 is presented below:
 
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining
Contractual
Term (in years)
PSU's outstanding, January 1, 2020
 

 
$

 
 
 
 
Granted
 
50,127

 
6.17

 
 
 
 
Vested / Settled
 

 

 
 
 
 
Forfeited / Canceled
 

 

 
 
 
 
PSU's outstanding, March 31, 2020
 
50,127

 
$
6.17

 
$
329

 
2.94


17

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)


Note 11 - Supplemental Financial Information
Supplemental Balance Sheet Information
The following table summarizes the components of Prepaid expenses and other assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
March 31,
2020
 
December 31,
2019
Prepaid expenses and other assets:
 
 
 
 
Prepaid expenses
 
$
1,592

 
$
1,708

Prepaid income taxes
 
4,772

 
4,228

Other
 
1,241

 
1,896

 
 
$
7,605

 
$
7,832

Other long-term assets, net:
 
 
 
 
Right of use assets, operating leases, net
 
$
4,358

 
$
5,073

Spare parts, net
 
3,360

 
3,453

Mine development costs, net
 
7,457

 
7,084

Mine reclamation asset, net
 
2,423

 
2,451

Highview Investment
 
552

 
552

Other long-term assets
 
1,842

 
1,718

 
 
$
19,992

 
$
20,331

Spare parts include critical spares required to support plant operations. Parts and supply costs are determined using the lower of cost or estimated replacement cost. Parts are recorded as maintenance expenses in the period in which they are consumed.
Mine development costs include acquisition costs, the cost of other development work and mitigation costs related to the Company's mining operations and are depleted over the estimated life of the related mine reserves, which is 21 years. The Company performs an evaluation of the recoverability of the carrying value of mine development costs to determine if facts and circumstances indicate that their carrying value may be impaired and if any adjustment is warranted. There were no indicators of impairment as of March 31, 2020. Mine reclamation asset, net represents an asset retirement obligation asset and is depreciated over the estimated life of the mine.
The Company holds a long-term investment (the "Highview Investment") in Highview Enterprises Limited ("Highview"), a London, England based developmental stage company specializing in power storage. In November 2014, the Company acquired an 8% ownership interest in the common stock of Highview for $2.8 million in cash. The Company accounts for the Highview Investment as an investment recorded at cost, less impairment, plus or minus observable changes in price for identical or similar investments of the same issuer.
The Highview Investment is evaluated for indicators of impairment such as an event or change in circumstances that may have a significant adverse effect on the fair value of the investment. There were no changes to the carrying value of the Highview Investment for the three months ended March 31, 2020 as there were no indicators of impairment or observable price changes for identical or similar investments.

18

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Other current liabilities:
 
 
 
 
Current portion of operating lease obligations
 
$
2,142

 
$
2,382

Accrued interest
 
298

 
213

Income and other taxes payable
 
805

 
678

Other
 
1,030

 
1,038

 
 
$
4,275

 
$
4,311

Other long-term liabilities:
 
 
 
 
Operating lease obligations, long-term
 
$
2,415

 
$
2,810

Mine reclamation liability
 
2,752

 
2,721

Other
 
71

 
229

 
 
$
5,238

 
$
5,760

Supplemental Condensed Consolidated Statements of Operations Information
The following table details the components of Interest expense in the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Interest on Senior Term Loan
 
$
630

 
$
1,270

Debt discount and debt issuance costs
 
354

 
381

453A interest
 
132

 
322

Other
 
94

 
131

 
 
$
1,210

 
$
2,104

Note 12 - Income Taxes
For the three months ended March 31, 2020 and 2019, the Company's income tax expense and effective tax rates based on forecasted pretax income were:
 
 
Three Months Ended March 31,
(in thousands, except for rate)
 
2020
 
2019
Income tax expense
 
$
358

 
$
1,699

Effective tax rate
 
(23
)%
 
11
%
For the three months ended March 31, 2020, the Company reported a loss before income tax of $1.5 million and income tax expense of $0.4 million which resulted in a negative effective tax rate for the quarter. Income tax expense for three months ended March 31, 2020 was due to federal and state income tax expense of $0.4 million, primarily from an increase in the valuation allowance on deferred tax assets of $0.9 million. The increase in the valuation allowance was a result of a reduction in forecasts as of March 31, 2020 of current and future years' taxable income.
The Company assesses the valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial, and regulatory guidance.

19

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Note 13 - Business Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of March 31, 2020, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are identified by products and services provided.
As of March 31, 2020, the Company has two reportable segments: (1) Refined Coal ("RC"); and (2) Power Generation and Industrials ("PGI").
The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below:
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.
Segment revenues include equity method earnings and losses from the Company's equity method investments.
Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Legal and professional fees and General and administrative.
RC segment operating income includes interest expense directly attributable to the RC segment.
As of March 31, 2020 and December 31, 2019, substantially all of the Company's material assets are located in the U.S. and substantially all of significant customers are U.S. companies. The following table presents the Company's operating segment results for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Revenues:
 
 
 
 
Refined Coal:
 
 
 
 
Earnings in equity method investments
 
$
8,273

 
$
21,690

License royalties, related party
 
3,046

 
4,220

 
 
11,319

 
25,910

Power Generation and Industrials:
 
 
 
 
Consumables
 
8,475


14,553

 
 
8,475

 
14,553

Total segment reporting revenues
 
19,794

 
40,463

 
 
 
 
 
Adjustments to reconcile to reported revenues:
 
 
 
 
Earnings in equity method investments
 
(8,273
)
 
(21,690
)
Corporate and other
 
742

 
556

Total reported revenues
 
$
12,263

 
$
19,329

 
 
 
 
 
Segment operating income (loss):
 
 
 
 
Refined Coal (1)
 
$
10,860

 
$
25,233

Power Generation and Industrials (2)
 
(6,577
)
 
(3,462
)
Total segment operating income
 
$
4,283

 
$
21,771

(1) Included in RC segment operating income for the three months ended March 31, 2020 and 2019 is 453A interest expense of $0.1 million and $0.3 million, respectively.
(2) Included in PGI segment operating loss for the three months ended March 31, 2020 and 2019 was $2.0 million and $2.0 million, respectively, of depreciation, amortization, and depletion expense on mine and plant long-lived assets. Included in PGI segment operating loss for the three months ended March 31, 2019 was $3.4 million of costs recognized as a result of the step-up in inventory fair value recorded from the Carbon Solutions Acquisition.

20

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

A reconciliation of reportable segment operating income to the Company's consolidated income before income tax expense is as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Total reported segment operating income
 
$
4,283

 
$
21,771

Other operating loss
 
(793
)
 
(398
)
 
 
3,490

 
21,373

Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:
 
 
 
 
Corporate payroll and benefits
 
(709
)
 
(432
)
Corporate legal and professional fees
 
(1,749
)
 
(1,811
)
Corporate general and administrative
 
(1,599
)
 
(1,434
)
Corporate depreciation and amortization
 
(26
)
 
(13
)
Corporate interest (expense) income, net
 
(942
)
 
(1,582
)
(Loss) income before income tax expense
 
$
(1,535
)
 
$
16,101

Corporate general and administrative expenses include certain costs that benefit the business as a whole but are not directly related to one of the Company's segments. Such costs include, but are not limited to, accounting and human resources staff, information systems costs, legal fees, facility costs, audit fees and corporate governance expenses. 
A reconciliation of reportable segment assets to the Company's consolidated assets is as follows:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Assets:
 
 
 
 
Refined Coal (1)
 
$
33,940

 
$
43,953

Power Generation and Industrials
 
78,539

 
80,912

Total segment assets
 
112,479

 
124,865

All Other and Corporate (2)
 
47,704

 
48,934

Consolidated
 
$
160,183

 
$
173,799

(1) Includes $30.3 million and $39.2 million of investments in equity method investees, respectively.
(2) Includes the Company's deferred tax assets.
Note 14 - Fair Value Measurements
Fair value of financial instruments
The carrying amounts of financial instruments, including cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments. Accordingly, these instruments are not presented in the table below. The following table provides the estimated fair values of the remaining financial instruments:
 
 
As of March 31, 2020
 
As of December 31, 2019
(in thousands)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Financial Instruments:
 
 
 
 
 
 
 
 
Highview Investment
 
$
552

 
$
552

 
$
552

 
$
552

Highview Obligation
 
$
208

 
$
208

 
$
220

 
$
220

Concentration of credit risk
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds cash and cash equivalents at three financial institutions as of March 31, 2020. If an institution was unable to perform its obligations, the Company would be at risk regarding the amount of cash and investments in excess of the Federal Deposit Insurance Corporation limits (currently $250 thousand) that would be returned to the Company.

21

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of March 31, 2020 and December 31, 2019, the Company had no financial instruments carried and measured at fair value on a recurring basis.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As disclosed in Note 2, the Company completed the Carbon Solutions Acquisition for purchase consideration of $66.5 million. The estimated fair values of the assets acquired and liabilities assumed were determined based on Level 3 inputs.
The Company has applied the measurement alternative for investments without readily determinable fair values under ASC Topic 321 - Investments in Equity Securities ("ASC 321") for the Highview Investment. Fair value measurements, if any, resulting from the Company's application of the guidance in ASC 321 represent either Level 2 or Level 3 measurements. There were no changes to the carrying value of the Highview Investment for the three months ended March 31, 2020 and 2019 as there were no indicators of impairment or observable price changes for identical or similar investments.
Note 15 - Restructuring
In December 2018, the Company recorded restructuring charges in connection with the departures of certain executives of Carbon Solutions in conjunction with the Carbon Solutions Acquisition. As part of the Carbon Solutions Acquisition, the Company also assumed a salary severance liability for an additional executive of Carbon Solutions in the amount of $0.6 million. There were no material restructuring activities during the three months ended March 31, 2020.
The following table summarizes the Company's change in restructuring accruals for the three months ended March 31, 2020:
(in thousands)
 
Employee Severance
Remaining accrual as of December 31, 2019
 
$
254

Expense provision
 

Cash payments and other
 
(122
)
Change in estimates
 
(7
)
Remaining accrual as of March 31, 2020
 
$
125

Restructuring accruals are included within the Accrued payroll and related liabilities line item in the Condensed Consolidated Balance Sheets. Restructuring expenses are included within the Payroll and benefits line item in the Condensed Consolidated Statements of Operations.
Note 16 - Subsequent Events
Unless disclosed elsewhere within the notes to the Condensed Consolidated Financial Statements, the following are the significant matters that occurred subsequent to March 31, 2020.
Paycheck Protection Program Loan
On April 20, 2020, the Company entered into a loan (the "PPP Loan") evidenced by a promissory note (the "Promissory Note"), under the Paycheck Protection Program sponsored by the U.S. Small Business Administration ("SBA") through BOK, NA dba Bank of Oklahoma ("BOK") providing for $3.3 million in proceeds, which amount was funded to the Company on April 21, 2020. The PPP Loan was made pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the SBA.
The Promissory Note matures April 21, 2022 and provides for 18 monthly payments of principal and interest commencing on November 21, 2020. The interest rate on the PPP Loan is 1.00%. The Promissory Note is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or BOK, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. The Promissory Note principal may be forgiven subject to the terms of the Paycheck Protection Program.

22

Advanced Emissions Solutions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)

Waiver on Senior Term Loan
Pursuant to entering into the PPP Loan, on April 20, 2020, the Company and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively, "Apollo"), affiliates of a beneficial owner of greater than five percent of the Company's common stock, executed the First Amendment (the "First Amendment") to the Senior Term Loan, which permitted the Company to enter into the PPP Loan.

23




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of our operations should be read together with the unaudited Condensed Consolidated Financial Statements and notes of Advanced Emissions Solutions, Inc. ("ADES" or the "Company") included elsewhere in Item 1 of Part I of this Quarterly Report and with the audited consolidated financial statements and the related notes of ADES included in the 2019 Form 10-K.
Overview
We are a leader in emissions reductions technologies through consumables that utilize powdered activated carbon (“PAC”) and chemical based technologies, primarily serving the coal-fired power generation and industrial boiler industries. Our proprietary environmental technologies and specialty chemicals enable our customers to reduce emissions of mercury and other pollutants, maximize utilization levels and improve operating efficiencies to meet the challenges of existing and potential emissions control regulations. Our products are also used for the purification of water.
Through our wholly-owned subsidiary, ADA Carbon Solutions, LLC ("Carbon Solutions"), which we acquired on December 7, 2018 (the "Acquisition Date"), we manufacture and sell activated carbon ("AC") used in mercury capture for the coal-fired power plant, industrial and water treatment markets. Carbon Solutions also owns an associated lignite mine that supplies the primary raw material for manufacturing our products.
We operate two segments: Refined Coal ("RC") and Power Generation and Industrials ("PGI"). Our RC segment is comprised of our equity ownership in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), both unconsolidated entities in which we generate substantial earnings. Tinuum Group provides reduction of mercury and nitrogen oxide ("NOX") emissions at select coal-fired power generators through the production and sale of RC that qualifies for tax credits ("Section 45 tax credits") under the Internal Revenue Code Section 45 - Production Tax Credit ("IRC Section 45"). We benefit from Tinuum Group's production and sale of RC, which generates tax credits, as well as its revenue from selling or leasing RC facilities to tax equity investors. We also earn royalties for technologies that are licensed to Tinuum Group and used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operates and maintains the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities.
Our PGI segment includes the sale of products that provide mercury control and other air and water contaminants control to coal-fired power generators and other industrial companies. Our primary products are produced from lignite coal, which creates AC. From AC, we manufacture various forms of AC that include PAC and granular activated carbon ("GAC"). There are three primary consumable products that work in conjunction with the installed equipment at coal-fired utilities to control mercury: PAC, coal additives and scrubber additives. In many cases these three consumable products can be used together or in many circumstances substituted for each other. However, AC is typically the most efficient and effective way to capture mercury and currently accounts for over 50% of the mercury control consumables North American market.
Drivers of Demand and Key Factors Affecting Profitability
Drivers of demand and key factors affecting our profitability differ by segment. In the RC segment, demand is driven primarily by IRC Section 45, which is expected to expire no later than December 31, 2021. Operating results in RC have been influenced by: (1) the ability to sell, lease or operate RC facilities; (2) lease renegotiation or termination; and (3) changes in tonnage of RC due to changing coal-fired dispatch and electricity power generation sources. In the PGI segment, demand is driven primarily by consumables-based solutions for coal-fired power generation and other industrials. Operating results in PGI have been influenced by: (1) changes in our sales volumes; (2) changes in price and product mix; and (3) changes in coal-fired dispatch and electricity power generation sources.
Impact of COVID-19
In March 2020, the World Health Organization ("WHO") declared the novel strain of coronavirus ("COVID-19") a global pandemic. We are designated by the Cybersecurity and Infrastructure Security Agency ("CISA") of the Department of Homeland Security as a critical infrastructure supplier to the energy sector. Our operations have been deemed essential and, therefore, our facilities remain open and our employees employed. We follow the COVID-19 guidelines from the Centers for Disease Control concerning the health and safety of our personnel, including remote working for those that have the ability to do so, sequestered employees at our plant and other heath safety measures. These measures have resulted in an increase in our personnel costs, operational inefficiencies and the incurrence of incremental costs to allow manufacturing operations to continue; while at the same time we have faced a general downturn in our sales and marketing efforts. The duration of these measures is unknown, may be extended and additional measures may be imposed.

24



Both of our business segments have continued to operate during the pandemic, and we have taken certain proactive and precautionary steps to ensure the safety of our employees, customers and suppliers, including frequent cleaning and disinfection of workspaces, property, plant and equipment, instituting social distancing measures and mandating remote working environments for certain employees. We cannot, however, predict the long-term effects on our business, including our financial position or results of operations, if governmental restrictions such as "stay-at-home orders" or other such directives continue for a prolonged period of time and cause a material negative change in power generation demand, materially disrupt our supply chain, substantially increase our operating costs or limit our ability to serve existing customers and seek new customers.
Our customers may also be impacted by COVID-19 pandemic as the utilization of energy has declined during “stay-at-home” orders. We cannot predict the long-term impact on our customers and the subsequent impact on our business.
Results of Operations
For the three months ended March 31, 2020, we recognized net loss of $1.9 million compared to net income of $14.4 million for the three months ended March 31, 2019.
The operating results for the three months ended March 31, 2020 are primarily attributable to a combination of factors, including:
Continued performance in our RC business segment, principally related to equity earnings and license royalties;
Performance in our PGI business segment, principally related to Carbon Solutions;
Impacts related to changes in income tax expense.
The following sections provide additional information regarding these comparative periods. For comparability purposes, the following tables set forth our results of operations for the periods presented in the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report. The period-to-period comparison of financial results may not be indicative of financial results to be achieved in future periods.
Comparison of the Three Months Ended March 31, 2020 and 2019
Total Revenue and Cost of Revenue
A summary of the components of our revenues and cost of revenue for the three months ended March 31, 2020 and 2019 is as follows:
 
 
Three Months Ended March 31,
 
Change
(in thousands, except percentages)
 
2020
 
2019
 
($)
 
(%)
Revenues:
 
 
 
 
 
 
 
 
Consumables
 
$
9,217

 
$
15,109

 
$
(5,892
)
 
(39
)%
License royalties, related party
 
3,046

 
4,220

 
(1,174
)
 
(28
)%
Total revenues
 
$
12,263

 
$
19,329

 
$
(7,066
)
 
(37
)%
Operating expenses:
 
 
 
 
 
 
 
 
Consumables cost of revenue, exclusive of depreciation and amortization
 
$
11,491

 
$
14,108

 
$
(2,617
)
 
(19
)%
Consumables and consumables cost of revenue
For the three months ended March 31, 2020, consumables revenues decreased from the comparable period in 2019 primarily due to lower volumes, which were negatively impacted by low coal-fired power dispatch driven by power generation from sources other than coal. Our gross margin, exclusive of depreciation and amortization, was negative for the three months ended March 31, 2020 as compared to the corresponding quarter in 2019 primarily due to the impact of lower sales volumes and the high fixed cost operating structure. Consumables revenue is affected by electricity demand driven by seasonal weather and related power generation needs, as well as competitor prices related to alternative power generation sources such as natural gas. According to data provided by the U.S. Energy Information Administration ("EIA"), for the three months ended March 31, 2020, power generation from coal-fired power dispatch was down approximately 33% compared to the corresponding quarter in 2019. Due to safety actions taken by the Company to provide for continued operation of our manufacturing facilities, we expect that cost of revenue will increase as a result of COVID-19 during the three months ended June 30, 2020.

25



License royalties, related party
For the three months ended March 31, 2020 and 2019, there were 11.9 million tons and 10.9 million tons, respectively, of RC produced using M-45TM and M-45-PCTM technologies ("M-45 Technology"), which Tinuum Group licenses from us ("M-45 License"). This decrease combined with a lower royalty rate per ton resulted in a decrease in license royalties quarter over quarter. The reduction in the royalty rate per ton was primarily attributable to higher depreciation recognized of approximately $0.8 million on all royalty bearing RC facilities as a result of a reduction in their estimated useful lives as determined by Tinuum Group. Further reducing the rate per ton was a decrease in net lease payments of approximately $0.4 million as a result of Tinuum Group restructuring RC facility contracted leases with its largest customer. As a result of higher depreciation and lower lease payments, we expect that the lower royalty rate per ton will continue in 2020 and 2021.
Additional information related to revenue concentrations and contributions by class and reportable segment can be found within the Business Segments discussion and in Note 13 to the Condensed Consolidated Financial Statements.
Other Operating Expenses
A summary of the components of our operating expenses, exclusive of cost of revenue items (presented above), for the three months ended March 31, 2020 and 2019 is as follows:
 
 
Three Months Ended March 31,
 
Change
(in thousands, except percentages)
 
2020
 
2019
 
($)
 
(%)
Operating expenses:
 
 
 
 
 
 
 
 
Payroll and benefits
 
$
2,742

 
$
2,556

 
$
186

 
7
 %
Legal and professional fees
 
2,043

 
2,204

 
(161
)
 
(7
)%
General and administrative
 
2,331

 
1,914

 
417

 
22
 %
Depreciation, amortization, depletion and accretion
 
2,297

 
2,102

 
195

 
9
 %
 
 
$
9,413

 
$
8,776

 
$
637

 
7
 %
Payroll and benefits
Payroll and benefits expenses, which represent costs related to selling, general and administrative personnel, increased during the three months ended March 31, 2020 compared to the corresponding quarter in 2019 primarily due to an increase in headcount of personnel and payroll-related expenses.
Legal and professional fees
Legal and professional fees decreased during the three months ended March 31, 2020 compared to the corresponding quarter in 2019 as a result of costs associated with the integration of the Carbon Solutions that were incurred during the three months ended March 31, 2019 of $0.4 million. These costs were partially offset by costs incurred related to professional fees; primarily outsourced IT cost specific to the completion of the integration of Carbon Solutions of $0.3 million.
General and administrative
General and administrative expenses increased during the three months ended March 31, 2020 compared to the corresponding quarter in 2019 most significantly due to an increase in product development of approximately $0.4 million.
Depreciation, amortization, depletion and accretion
Depreciation and amortization expense increased during the three months ended March 31, 2020 compared to the corresponding quarter in 2019 due to the addition of long-lived assets at our manufacturing plant in Louisiana, which contributed approximately $0.3 million of depreciation expense for the three months ended March 31, 2020.

26



Other Income (Expense), net
A summary of the components of other income (expense), net for the three months ended March 31, 2020 and 2019 is as follows:
 
 
Three Months Ended March 31,
 
Change
(in thousands, except percentages)
 
2020
 
2019
 
($)
 
(%)
Other income (expense):
 
 
 
 
 
 
 
 
Earnings from equity method investments
 
$
8,273

 
$
21,690

 
$
(13,417
)
 
(62
)%
Interest expense
 
(1,210
)
 
(2,104
)
 
894

 
(42
)%
Other
 
43

 
70

 
(27
)
 
(39
)%
Total other income
 
$
7,106

 
$
19,656

 
$
(12,550
)
 
(64
)%
Earnings from equity method investments
The following table details the components of our respective equity method investments included within the Earnings from equity method investments line item in the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Earnings from Tinuum Group
 
$
6,438

 
$
19,767

Earnings from Tinuum Services
 
1,838

 
1,922

(Loss) earnings from other
 
(3
)
 
1

Earnings from equity method investments
 
$
8,273

 
$
21,690

Earnings from equity method investments, and changes related thereto, are impacted by our significant equity method investees: Tinuum Group and Tinuum Services.
For the three months ended March 31, 2020, we recognized $6.4 million in equity earnings from Tinuum Group, which was equal to our proportionate share of Tinuum Group's net income for the quarter. For the three months ended March 31, 2019, we recognized $19.8 million in equity earnings from Tinuum Group, which was equal to our proportionate share of Tinuum Group's net income of $21.4 million for the quarter less the recovery of the cash distributions in excess of cumulative earnings as of December 31, 2018. The difference between our pro-rata share of Tinuum Group's net income and our earnings from our Tinuum Group equity method investment as reported on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 was the result of cumulative distributions received from Tinuum Group being in excess of the carrying value of the investment, and therefore we recognized such excess distributions as equity method earnings in the period the distributions occurred.
For the three months ended March 31, 2020, equity earnings from our interest in Tinuum Group were positively impacted by the addition of two new RC facilities during the second half of 2019. However, equity earnings from Tinuum Group for the three months ended March 31, 2020 decreased from the comparable quarter in 2019 primarily from a new RC facility in the first quarter of 2019 that was recognized as a point-in-time sale and higher depreciation recognized of approximately $2.4 million for the three months ended March 31, 2020 on all Tinuum Group RC facilities as a result of a reduction in RC facilities estimated useful lives as determined by Tinuum Group during the second half of 2019. Further contributing to the decrease in equity earnings quarter over quarter was the restructuring of RC facility leases with Tinuum Group's largest customer, which decreased lease payments and equity earnings beginning in the three months ended September 30, 2019. We believe the increase in depreciation and decrease in lease payments will negatively impact equity earnings for the remainder of 2020 as well as 2021.
Further, two coal-fired utilities in which Tinuum Group has invested RC facilities announced expected closures in the fourth quarter of 2019 and the associated leases of those facilities terminated during this period. As a result of higher depreciation, reduced lease payments and closures of two utilities, we expect our pro-rata share of Tinuum Group’s earnings and distributions to be lower in future periods.
Equity earnings from our interest in Tinuum Services decreased by $0.1 million for the three months ended March 31, 2020 compared to the three months ended March 31, 2019, and for those quarters, Tinuum Services provided operating and maintenance services to 19 operating RC facilities. Tinuum Services derives earnings under fixed-fee arrangements as well as fee arrangements that are based on actual RC production, depending upon the specific RC facility operating and maintenance agreement.

27




Tax Credits and Obligations
Historically, we have earned Section 45 tax credits related to the production of RC, most significantly due to our direct and indirect ownership, through Tinuum Group, in the GWN REF RC facility ("GWN REF"). However, based on an agreement effective January 1, 2019 with Tinuum Group's largest customer, which also has an ownership interest in Tinuum Group, substantially all of the tax credits earned from GWN REF were allocated to this customer. As a result, our earned Section 45 tax credits for three months ended March 31, 2020 and 2019 were minimal and will likely to continue to be for the remainder of 2020 and 2021.
Interest expense
For the three months ended March 31, 2020, interest expense decreased $0.9 million compared to the three months ended March 31, 2019 primarily due to a reduction in interest expense related to a senior term loan (the "Senior Term Loan") as the principal balance was reduced from payments of $30.0 million quarter over quarter. This remaining decrease related to a reduction in the deferred balance related to Internal Revenue Code section 453A ("453A"), which requires taxpayers to pay an interest charge on the portion of the tax liability that is deferred under the installment method for tax purposes. 
Income tax expense
For the three months ended March 31, 2020, we recorded income tax expense of $0.4 million compared to income tax expense of $1.7 million for the three months ended March 31, 2019. The income tax expense recorded for the three months ended March 31, 2020 was comprised of estimated federal income tax expense of $0.3 million and estimated state income tax expense of $0.1 million. The income tax expense recorded for the three months ended March 31, 2019 was comprised of estimated federal income tax expense of $0.8 million and estimated state income tax expense of $0.9 million.
The decrease in income tax expense quarter over quarter was primarily due to the pretax loss for the three months ended March 31, 2020 of $1.5 million compared to pretax income of $16.1 million for the three months ended March 31, 2019 as well as an increase in the valuation allowance on deferred tax assets of $0.9 million for the three months ended March 31, 2020 compared to a decrease in the valuation allowance on deferred tax assets of $4.0 million for the three months ended March 31, 2019. For both quarters, the adjustments to the valuation allowance were based on changes in forecasts as of March 31, 2020 and March 31, 2019, respectively, of future years' taxable income. In addition, income tax expense quarter over quarter was lower from a decrease in state income tax expense of $0.8 million primarily due to lower forecasted pretax income for 2020 compared to 2019.
Non-GAAP Financial Measures
To supplement our financial information presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"), we are providing non-GAAP measures of certain financial performance. These non-GAAP measures include Consolidated Adjusted EBITDA, Segment EBITDA and RC Segment Adjusted EBITDA. We have included non-GAAP measures because management believes that they help to facilitate comparison of operating results between periods. We believe the non-GAAP measures provide useful information to both management and users of the financial statements by excluding certain expenses and gains and losses 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 our results of operations in conjunction with the corresponding GAAP measures.
We define Consolidated Adjusted EBITDA as net income, adjusted for the impact of the following items that are either non-cash or that we do not consider representative of our 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. Because Consolidated Adjusted EBITDA omits certain non-cash items, we believe that the measure is less susceptible to variances that affect our operating performance.
We define Segment EBITDA as Segment operating income (loss) adjusted for the impact of the following items that are either non-cash or that we do 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 for each of our PGI and RC segment's performance relative to the performance of competitors as well as performance period over period. Additionally, we believe the measure is less susceptible to variances that affect its operating performance results.

28



We define 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.
We present these non-GAAP measures because we believe they are useful as supplemental measures in evaluating the performance of our operating performance and provide greater transparency into the results of operations. Management uses these non-GAAP measures in evaluating the performance of our business.
The adjustments to Consolidated Adjusted EBITDA, Segment EBITDA and RC Segment Adjusted EBITDA in future periods are generally expected to be similar. These non-GAAP measures have limitations as analytical tools and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP.
Consolidated Adjusted EBITDA
 
 
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 included 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.
Business Segments
As of March 31, 2020, we have two reportable segments: (1) RC and (2) PGI. The business segment measurements provided to and evaluated by our chief operating decision maker are computed in accordance with the principles listed below:
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.
Segment revenues include equity method earnings and losses from our equity method investments.
Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Rent and occupancy, Legal and professional fees, and General and administrative.
RC segment operating income includes interest expense directly attributable to the RC segment.
The principal products and services of our segments are:
1.
RC - Our RC segment derives its earnings from equity method investments as well as royalty payment streams and other revenues related to enhanced combustion of and reduced emissions of both NOX and mercury from the burning of coal. Our equity method investments related to the RC segment include Tinuum Group, Tinuum Services and other immaterial equity method investments. Segment revenues include our equity method earnings (losses) from our equity method investments and royalty earnings from Tinuum Group. These earnings are included within the Earnings from equity method investments and License royalties, related party line items in the Condensed Consolidated Statements of Operations. Key drivers to the RC segment performance are the produced and sold RC from both operating and retained RC facilities, royalty-bearing tonnage and the number of operating (leased or sold) and retained RC facilities. These key drivers impact our earnings and cash distributions from equity method investments.
2.
PGI - Our PGI segment includes revenues and related expenses from the sale of consumable products that utilize PAC and chemical technologies. These options provide coal-powered utilities and industrial boilers with mercury control solutions working in conjunction with pollution control equipment systems, generally without the requirement for significant ongoing capital outlays. These amounts are included within the respective revenues and cost of revenue line items in the Condensed Consolidated Statements of Operations.

29



Management uses segment operating income (loss) to measure profitability and performance at the segment level. Management believes segment operating income (loss) provides investors with a useful measure of our operating performance and underlying trends of the businesses. Segment operating income (loss) may not be indicative of our overall consolidated performance and therefore, should be read in conjunction with our Condensed Consolidated Statements of Operations.
The following table presents our operating segment results for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Revenues:
 
 
 
 
Refined Coal:
 
 
 
 
Earnings in equity method investments
 
$
8,273

 
$
21,690

License royalties, related party
 
3,046

 
4,220

 
 
11,319

 
25,910

Power Generation and Industrials:
 
 
 
 
Consumables
 
8,475

 
14,553

 
 
8,475

 
14,553

Total segment reporting revenues
 
19,794

 
40,463

 
 
 
 
 
Adjustments to reconcile to reported revenues:
 
 
 
 
Earnings in equity method investments
 
(8,273
)
 
(21,690
)
Corporate and other
 
742

 
556

Total reported revenues
 
$
12,263

 
$
19,329

 
 
 
 
 
Segment operating income (loss):
 
 
 
 
Refined Coal (1)
 
$
10,860

 
$
25,233

Power Generation and Industrials (2)
 
(6,577
)
 
(3,462
)
Total segment operating income
 
$
4,283

 
$
21,771

(1) Included in RC segment operating income for the three months ended March 31, 2020 and 2019 is 453A interest expense of $0.1 million and $0.3 million, respectively.
(2) Included in PGI segment operating loss for the three months ended March 31, 2020 and 2019 is $2.0 million and $2.0 million, respectively, of depreciation, amortization, and depletion expense on mine- and plant-related long-lived assets. Included in PGI segment operating loss for the three months ended March 31, 2019 was approximately $3.4 million of costs recognized as a result of the step-up in inventory fair value recorded from the acquisition of Carbon Solutions.

RC
The following table details the segment revenues of our respective equity method investments:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Earnings from Tinuum Group
 
$
6,438

 
$
19,767

Earnings from Tinuum Services
 
1,838

 
1,922

(Loss) earnings from other
 
(3
)
 
1

Earnings from equity method investments
 
$
8,273

 
$
21,690


For the three months ended March 31, 2020 and March 31, 2019
RC earnings decreased primarily due to a decrease in equity earnings in Tinuum Group during the three months ended March 31, 2020 compared to the corresponding quarter in 2019, as presented above.
For the three months ended March 31, 2020, equity earnings from our interest in Tinuum Group were positively impacted by the addition of two new RC facilities during the second half of 2019. However, equity earnings from Tinuum Group for the

30



three months ended March 31, 2020 decreased from the comparable quarter in 2019 primarily from a new RC facility in the first quarter of 2019 that was recognized as a point-in-time sale and higher depreciation recognized of approximately $2.4 million for the three months ended March 31, 2020 on all Tinuum Group RC facilities as described above. Further contributing to the decrease in equity earnings quarter over quarter was the restructuring of RC facility leases with Tinuum Group's largest customer, which decreased lease payments and equity earnings beginning in the three months ended September 30, 2019. We believe the increase in depreciation and decrease in lease payments will negatively impact equity earnings for the remainder of 2020 as well as 2021.
For the three months ended March 31, 2020, we recognized $6.4 million in equity earnings from Tinuum Group, which was equal to our proportionate share of Tinuum Group's net income for the quarter. For the three months ended March 31, 2019, we recognized $19.8 million in equity earnings from Tinuum Group compared to our proportionate share of Tinuum Group's net income of $21.4 million for the quarter less the recovery of the cash distributions in excess of cumulative earnings as of December 31, 2018. The difference between our pro-rata share of Tinuum Group's net income and our earnings from our Tinuum Group equity method investment as reported on the Condensed Consolidated Statements of Operations for the three months ended March 31, 2019 was the result of cumulative distributions received from Tinuum Group being in excess of the carrying value of the investment, and therefore we recognized such excess distributions as equity method earnings in the period the distributions occurred.
For the three months ended March 31, 2020, earnings from Tinuum Services remained relatively flat compared to the same quarter in 2019 primarily due to no change quarter over quarter in the number of operating RC facilities in which Tinuum Services provides operating and maintenance services.
As noted above, for the three months ended March 31, 2020, RC earnings were impacted by a decrease in license royalties earned from Tinuum Group's use of our M-45 License. For the three months ended March 31, 2020 and 2019, there were 11.9 million tons and 10.9 million tons, respectively, of RC produced using the M-45 Technology. This decrease combined with a lower royalty rate per ton resulted in a decrease in license royalties quarter over quarter. The reduction in the royalty rate per ton was primarily attributable to higher depreciation recognized on all royalty bearing RC facilities as a result of a reduction in their estimated useful lives as determined by Tinuum Group. Further reducing the rate per ton was a decrease in net lease payments as a result of Tinuum Group restructuring RC facility contracted leases with its largest customer.
Future earnings and growth in the RC segment will continue to be impacted by coal-fired electricity generation dispatch and invested facilities with leases subject to periodic renewals being terminated, repriced, or otherwise subject to renegotiated terms.
Additional discussion of our equity method investments is included above within our consolidated results and in Note 4 of the Condensed Consolidated Financial Statements.
RC Segment Adjusted EBITDA
 
 
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

PGI
Discussion of revenues derived from our PGI segment and costs related thereto are included above within our consolidated results.
For the three months ended March 31, 2020 and March 31, 2019
PGI segment operating loss increased for the three months ended March 31, 2020 compared to the three months ended March 31, 2019 primarily due to a reduction in consumable revenue and associated margins. For the three months ended March 31, 2020, consumables revenue and margins also continued to be negatively impacted by low coal-fired power dispatch driven by power generation from sources other than coal. According to data provided by the U.S. Energy Information Administration

31



("EIA"), for the three months ended March 31, 2020, power generation from coal-fired power dispatch was down approximately 33% compared to the comparable quarter in 2019.
PGI Segment EBITDA
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Segment operating loss
 
$
(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) Included in segment operating loss for the three months ended March 31, 2019 was approximately $3.4 million of costs recognized as a result of the step-up in inventory fair value recorded from the acquisition of Carbon Solutions.

Liquidity and Capital Resources
Overview of Factors Affecting Our Liquidity
During the three months ended March 31, 2020, our liquidity position was positively affected primarily due to distributions from Tinuum Group and Tinuum Services, royalty payments from Tinuum Group and borrowing availability under our bank ("Lender") line of credit ("Line of Credit").
Our principal sources of cash include:
cash on hand;
distributions from Tinuum Group and Tinuum Services; and
royalty payments from Tinuum Group.
Our principal uses of cash during the three months ended March 31, 2020 included:
repurchases of shares of common stock;
payment of dividends;
payment of debt principal and interest; and
our business operating expenses, including federal and state tax payments and cash severance payments.
Our ability to continue to generate sufficient cash flow required to meet ongoing operational needs and obligations, capital expenditures, future potential dividend payments and potential future share repurchases depends on several factors, including executing on our contracts and initiatives, receiving license royalty payments from Tinuum Group and distributions from Tinuum Group and Tinuum Services, and increasing our share of the market for PGI consumables, including expanding our overall PAC business into additional adjacent markets. Increased distributions from Tinuum Group will likely be dependent upon both preserving existing contractual relationships and securing additional tax equity investors for those Tinuum Group facilities that are currently not operating.
We incur significant recurring capital expenditures for our AC manufacturing facility and for mine development at our lignite mine. For 2020, we anticipate that our capital expenditures will be lower than 2019 as we do not anticipate having significant planned maintenance as we incurred in 2019.
We expect our liquidity will be impacted from COVID-19 due to anticipated increased operating losses in our PGI segment from anticipated higher operating costs as a result of measures taken to support our ability to deliver as a critical infrastructure business, primarily from sequestration efforts and "hazard pay," which is a premium on wages, for a substantial number of our employees, and overall plant operating inefficiencies. In addition, we also anticipate that Tinuum Group's ability to sell or lease additional RC facilities will be delayed as a result of the economic slowdown associated with the COVID-19 pandemic.
In April 2020, we took steps to enhance our short-term liquidity through the Paycheck Protection Program as discussed below.

32



Tinuum Group and Tinuum Services Distributions

The following table summarizes the cash distributions from our equity method investments that most significantly affected
our consolidated cash flow results for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended March 31,
(in thousands)
 
2020

2019
Tinuum Group
 
$
13,764

 
$
16,788

Tinuum Services
 
3,352

 
2,700

Distributions from equity method investees
 
$
17,116

 
$
19,488

Cash distributions from Tinuum Group for the three months ended March 31, 2020 decreased by $3.0 million compared to the three months ended March 31, 2019 primarily due to reductions in lease payments received by Tinuum Group from its largest customer as a result of renegotiations of certain leases, which occurred in 2019 between Tinuum Group and this customer, and the shuttering of two coal-fired utilities in the fourth quarter of 2019 where two invested RC facilities were operating.
Future cash flows from Tinuum through 2021 are expected to range from $125 to $150 million, a decrease from the previously reported range of $150 to $175 million. The key drivers in achieving these future cash flows are based on the following:
20 invested facilities as of March 31, 2020 and inclusive of all net Tinuum cash flows (distributions and license
royalties), offset by estimated federal and state income tax payments and 453A interest payments.
Expected future cash flows from Tinuum Group are based on the following key assumptions:
Tinuum Group continues to not operate retained facilities;
Tinuum Group does not have material unexpected capital expenditures or unusual operating expenses;
Tax equity lease renewals on invested facilities are not terminated or repriced; and
Coal-fired power generation remains consistent with contractual expectations.
Paycheck Protection Program Loan
On April 21, 2020, we entered into a loan (the "PPP Loan") evidenced by a promissory note (the "Promissory Note"), under the Paycheck Protection Program sponsored by the U.S. Small Business Administration ("SBA") through BOK, NA dba Bank of Oklahoma (the "Lender") providing for $3.3 million in proceeds, which amount was funded on April 21, 2020. The PPP Loan was made pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the SBA.
The Promissory Note matures April 21, 2022 and provides for 18 monthly payments of principal and interest commencing on November 21, 2020. The interest rate on the PPP Loan is 1.00%. The Promissory Note is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or the Lender, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from us, or filing suit and obtaining judgment against us. The Promissory Note principal may be forgiven subject to the terms of the Paycheck Protection Program.
Our business has been classified as an essential business and therefore we continue to operate on a modified basis to comply with governmental restrictions and public health authority guidelines. In April 2020, we sequestered approximately 60 employees to continue to run our manufacturing plant and build-up inventory in order to supply our customers. This resulted in additional costs as the sequestered employees received "hazard pay." We used proceeds from the PPP Loan to fund these additional employment expenses.
Senior Term Loan
On December 7, 2018, we and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo”), affiliates of a beneficial owner of greater than five percent of our common stock and a related party, entered into the "Senior Term Loan" in the amount of $70.0 million, less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the acquisition of Carbon Solutions as disclosed in Note 2. We also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan has a term of 36 months and bears interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which is adjusted quarterly to the current 3-month LIBOR rate, and interest is payable quarterly in arrears. Quarterly principal payments of $6.0 million are required and commenced in March 2019, and we may prepay the Senior Term Loan at any time without penalty. The Senior Term Loan is secured by substantially all of our assets, including the cash flows from Tinuum

33



Group and Tinuum Services (collectively, the "Tinuum Entities"), but excluding our equity interests in those Tinuum entities. During the three months ended March 31, 2020, we made principal payments of $6.0 million.
The Senior Term Loan includes, among others, the following covenants: (1) Beginning December 31, 2018 and as of the end of each fiscal quarter thereafter, we must maintain a minimum cash balance of $5.0 million and shall not permit "expected future net cash flows from the refined coal business" (as defined in the Senior Term Loan) to be less than 1.75 times the outstanding principal amount of the Senior Term Loan; (2) Beginning in January 2019, annual collective dividends and buybacks of shares of our common stock in an aggregate amount, not to exceed $30.0 million, is permitted so long as (a) no default or event of default exists under the Senior Term Loan and (b) expected future net cash flows from the refined coal business as of the end of the most recent fiscal quarter exceed $100.0 million.
Pursuant to entering into the PPP Loan, on April 20, 2020, we and Apollo executed the First Amendment (the "First Amendment") to the Senior Term Loan, which permitted us to enter into the PPP Loan.
Stock Repurchases and Dividends
In November 2018, our Board of Directors (the "Board") authorized us to purchase up to $20.0 million of our outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program. In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.
For the three months ended March 31, 2020, under the Stock Repurchase Program, we purchased 20,613 shares of our common stock for cash of $0.2 million, inclusive of commissions and fees. For the three months ended March 31, 2019, under the Stock Repurchase Program, we purchased 63,876 shares of our common stock for cash of $0.7 million, inclusive of commissions and fees. As of March 31, 2020, we had $7.0 million remaining under the Stock Repurchase Program.
For the three months ended March 31, 2020 and 2019, we declared and paid quarterly cash dividends to stockholders of $4.5 million and $4.6 million, respectively.
Line of Credit
On December 7, 2018, ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, as borrower, we, as guarantor, and the Lender entered into an amendment to the Line of Credit. This amendment provided, among other things, for ADA to be able to enter into the Senior Term Loan as a guarantor so long as the principal amount of the Senior Term Loan did not exceed $70.0 million. Additionally, the financial covenants in the Line of Credit were amended and restated to be consistent with the Senior Term Loan covenants, including maintaining a minimum cash balance of $5.0 million.
As of March 31, 2020, we have $5.0 million of borrowing availability and there were no outstanding borrowings under the Line of Credit.
Sources and Uses of Cash
Three Months Ended March 31, 2020 vs. Three Months Ended March 31, 2019
Cash, cash equivalents and restricted cash increased from $17.1 million as of December 31, 2019 to $17.2 million as of March 31, 2020. The following table summarizes our cash flows for the three months ended March 31, 2020 and 2019, respectively:
 
 
Three Months Ended March 31,
 
 
(in thousands)
 
2020
 
2019
 
Change
Cash and cash equivalents and restricted cash provided by (used in):
 
 
 
 
 
 
Operating activities
 
$
13,237

 
$
16,018

 
$
(2,781
)
Investing activities
 
(1,736
)
 
(2,072
)
 
336

Financing activities
 
(11,393
)
 
(11,853
)
 
460

Net change in cash and cash equivalents and restricted cash
 
$
108

 
$
2,093

 
$
(1,985
)
Cash flow from operating activities
Cash flows provided by operating activities for the three months ended March 31, 2020 decreased by $2.8 million compared to the three months ended March 31, 2019. The net decrease was primarily attributable to the net loss for the three months ended March 31, 2020 of $1.9 million compared to net income for the three months ended March 31, 2019 of $14.4 million and a

34



decrease quarter over quarter in distributions from equity method investments, return on investment of $2.4 million. Offsetting this net decrease in cash flows provided by operating activities was a decrease quarter over quarter in earnings from equity method investees of $13.4 million and a decrease of $3.5 million in the net change in accrued payroll and related liabilities for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.
Cash flow from investing activities
Cash flows used in investing activities for the three months ended March 31, 2020 decreased by $0.3 million compared to the three months ended March 31, 2019 primarily from a decrease in cash consideration paid for the three months ended March 31, 2019 of $0.7 million related to the acquisition of Carbon Solutions. Offsetting this decrease in cash flows used in investing activities was an increase quarter over quarter in capital expenditures related to property, plant equipment and intangibles of $0.2 million.
Cash flow from financing activities
Cash flows used in financing activities for the three months ended March 31, 2020 decreased by $0.5 million compared to the three months ended March 31, 2019 primarily from a decrease quarter over quarter in repurchases of common shares.
Contractual Obligations
During the three months ended March 31, 2020, there were no material changes to our contractual obligations outside of the ordinary course of business from those reported as of December 31, 2019.
Off-Balance Sheet Arrangements
During the three months ended March 31, 2020, we did not engage in any off-balance sheet arrangements except those discussed in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2019 10-K.
Critical Accounting Policies and Estimates
Our significant accounting policies and estimates have not changed from those reported in Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2019 10-K.
Recently Issued Accounting Standards
Refer to Note 1 of the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report for new accounting standards applicable to us that were issued during the three months ended March 31, 2020 and subsequent thereto through the date of this Quarterly Report.
Forward-Looking Statements Found in this Report
This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve risks and uncertainties. In particular, such forward-looking statements are found in this Part I, Item 2 above. Words or phrases such as "anticipates," "believes," "expects," "intends," "plans," "estimates," "predicts," the negative expressions of such words, or similar expressions are used in this Quarterly Report to identify forward-looking statements, and such forward-looking statements include, but are not limited to, statements or expectations regarding:
(a)
the scope and impact of mercury and other regulations or pollution control requirements, including the impact of the final MATS;
(b)
the production and sale of RC by RC facilities that will qualify for Section 45 tax credits;
(c)
expected growth or contraction in and potential size of our target markets;
(d)
expected supply and demand for our products and services;
(e)
increasing competition in the PGI market;
(f)
future level of research and development activities;
(g)
the effectiveness of our technologies and the benefits they provide;
(h)
Tinuum Group’s ability to profitably sell and/or lease additional RC facilities and/or RC facilities that may be returned to Tinuum Group, or to recognize the tax benefits from production and sale of RC on retained RC facilities and the effect of these factors on Tinuum Group's future earnings and distributions;
(i)
probability of any loss occurring with respect to certain guarantees made by Tinuum Group ("Party Guarantees");
(j)
the timing of awards of, and work and related testing under, our contracts and agreements and their value;
(k)
the timing and amounts of or changes in future revenues, royalties earned, backlog, funding for our business and projects, margins, expenses, earnings, tax rates, cash flows, royalty payment obligations, working capital, liquidity and other financial and accounting measures;

35



(l)
the outcome of current legal proceedings;
(m)
awards of patents designed to protect our proprietary technologies both in the U.S. and other countries;
(n)
whether any legal challenges or EPA actions will have a material impact on the implementation of the MATS or other regulations and on our ongoing business;
(o)
the evolving impact and duration of the COVID-19 pandemic to our business;
(p)
whether any amounts under the PPP loan will be forgiven; and
(q)
the tax impact of the use of or forgiveness of funds received or forgiven under the PPP loan.

The forward-looking statements included in this Quarterly Report 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, timing of new and pending regulations and any legal challenges to or extensions of compliance dates of them; the U.S. government’s failure to promulgate regulations or appropriate funds that benefit our business; availability, cost of and demand for alternative energy sources and other technologies; changes in laws and regulations, accounting rules, prices, economic conditions and market demand; impact of competition; technical, start up and operational difficulties; failure of the RC facilities to produce RC; termination of or amendments to the contracts for sale or lease of RC facilities or such facilities to qualify for Section 45 tax credits; decreases in the production of RC; our inability to commercialize our technologies on favorable terms; our inability to ramp up our operations to effectively address recent and expected growth in our business; our ability to mitigate or manage disruptions posed by COVID-19; the impact of COVID-19 and changes in U.S. economic conditions that materially impact the demand for our products and services, loss of key personnel; potential claims from any terminated employees, customers or vendors; availability of materials and equipment for our businesses; intellectual property infringement claims from third parties; pending litigation; 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 made in this Quarterly Report 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 contained in this Quarterly Report are presented as of the date hereof, and we disclaim any duty to update such statements unless required by law to do so.


Item 3. Quantitative and Qualitative Disclosures about Market Risk
The information under this Item is not required to be provided by smaller reporting companies.

Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a‑15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we have evaluated, under the supervision of and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a‑15(e) and 15d‑15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2020.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the fiscal quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


36



PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in litigation, claims and other proceedings related to the conduct of our business. Information with respect to this item may be found in Note 8 "Commitments and Contingencies" to the consolidated financial statements included in Item 1 of Part I of this Quarterly Report.

Item 1A. Risk Factors
There are no material updates to our risk factors as disclosed in the 2019 Form 10-K except as set forth below. This risk factor should be read together with the risk factors in the 2019 Form 10-K.
The COVID-19 pandemic and ensuing economic downturn has affected, and is expected to continue to affect and pose risks to our business, results of operations, financial condition and cash flows; and other epidemics or outbreaks of infectious diseases may have a similar impact.
In March 2020, the WHO declared the outbreak of COVID-19 a global pandemic, which continues to spread throughout the United States ("U.S.") and the world and has resulted in authorities implementing numerous measures to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place orders, and business limitations and shutdowns. We have been designated by CISA as a critical infrastructure supplier to the energy sector. This designation provides some latitude in continuing to conduct our business operations compared to companies in other industries and markets. While we are unable to accurately predict the full impact that COVID-19 will have on our results from operations, financial condition, liquidity and cash flows due to numerous uncertainties, including the duration and severity of the pandemic and containment measures, our compliance with these measures has impacted our day-to-day operations and could disrupt our business and operations, as well as that of our key customers, suppliers and other counterparties, for an indefinite period of time. To support the health and well-being of our employees, customers, partners and communities, a vast majority of our employees not directly involved in operating our plant, have been working remotely since March 2020. In addition, many of our customers are working remotely, which may delay the timing of some orders and deliveries expected in the second quarter of 2020 and beyond. The disruptions to our operations caused by COVID-19 may result in inefficiencies, delays and additional costs in our manufacturing, sales, marketing, and customer service efforts that we cannot fully mitigate through remote or other alternative work arrangements. Although such disruptions did not have a material adverse impact on our financial results for the first quarter of fiscal 2020, we currently expect that our operating costs of revenue for the second quarter of fiscal 2020 will be higher than initially anticipated at the beginning of 2020 as a result of reduced plant capacity due to fewer employees physically working at our plant, increased costs associated with those employees continuing to physically work at our plant and disruptions in our supply chain. In addition, for the balance of 2020, we may see reduced demand for our products due to reduced interaction with our customers and our inability to target new customers and markets. Similarly, we anticipate that Tinuum Group's ability to sell or lease additional RC facilities will be delayed due to the economic shutdown.
More generally, the pandemic raises the possibility of an extended global economic downturn and has caused volatility in financial markets, which could affect demand for our products and services and impact our results and financial condition even after the pandemic is contained and the shelter-in-place orders are lifted. For example, we may be unable to collect receivables from those customers significantly impacted by COVID-19. Also, a decrease in orders in a given period could negatively affect our revenues in future periods, particularly if experienced on a sustained basis. We will continue to evaluate the nature and extent of the impact of COVID-19 to our business.
As previously disclosed, in April 2020, we entered into a loan (the "PPP Loan") in the amount of $3.3 million through a bank under the Paycheck Protection Program sponsored by the U.S. Small Business Administration ("SBA"). The PPP loan became available to us pursuant to the Coronavirus Aid, Relief, and Economic Security Act and is administered by the SBA. We entered into the PPP Loan to provide additional liquidity in light of our COVID-19-related higher employee costs. Proceeds from the PPP Loan will be used to cover a portion of our existing payroll and related expenses, including sequestration pay for certain employees, as well as certain other operating costs as permitted under the Paycheck Protection Program. We expect that current cash and cash equivalent balances, inclusive of the PPP Loan, and cash flows that are generated from operations will be sufficient to meet our working capital needs and other capital and liquidity requirements for at least the next 12 months. However, if our business is more adversely impacted by COVID-19 than expected, and our personnel costs remain higher than budgeted, our cash needs could increase.
Further, we have assessed the impact on our existing internal control over financial reporting as of March 31, 2020 and going forward under the current state of COVID-19. We performed procedures to ensure that existing internal control over financial reporting was operating effectively as March 31, 2020 and will continue to operate effectively for the foreseeable future. Such

37



procedures included, but were not limited to, developing a COVID- 19 risk assessment identifying the risks of fraud, changes required in our internal control framework as well as other business information technology and cybersecurity risks. We are implementing necessary remediation plans, including backup planning, documentation and training initiatives.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities
Period
 
(a) Total number of shares purchased
 
(b) Average price paid per share
 
(c) Total number of shares purchased as part of publicly announced programs
 
(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (in thousands)
January 1 to January 31, 2020
 
1,170

 
$
10.51

 
1,170

 
$

February 1 to February 29, 2020
 
1,930

 
9.43

 
1,930

 

March 1 to March 31, 2020
 
17,513

 
7.37

 
17,513

 
6,974

Total
 
20,613

 
$

 
20,613

 
$
6,974

Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
The statement concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95.1 to this Quarterly Report.
Item 5. Other Information
None.

38



Item 6. Exhibits
 
 
Exhibit No.
 
Description
 
Form
 
File No.
 
Incorporated by Reference
Exhibit
 
Filing Date
4.1
 
 
8-K
 
001-37822
 
4.3
 
April 9, 2020
10.1
 
 
8-K
 
001-37822
 
10.1
 
April 22, 2020
10.2
 
 
8-K
 
001-37822
 
10.2
 
April 22, 2020
31.1
 
 
 
 
 
 
 
 
 
31.2
 
 
 
 
 
 
 
 
 
32.1
 
 
 
 
 
 
 
 
 
95.1
 
 
 
 
 
 
 
 
 
101. INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
101.SCH
 
XBRL Schema Document
 
 
 
 
 
 
 
 
101.CAL
 
XBRL Calculation Linkbase Document
 
 
 
 
 
 
 
 
101.LAB
 
XBRL Label Linkbase Document
 
 
 
 
 
 
 
 
101.PRE
 
XBRL Presentation Linkbase Document
 
 
 
 
 
 
 
 
101.DEF
 
Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 

Notes:
*
– Filed herewith.
**    – Portions of this exhibit have been omitted pursuant to a request for confidential treatment.





39



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Advanced Emissions Solutions, Inc.
 
(Registrant)
 
 
 
 
 
 
May 11, 2020
By:
/s/ L. Heath Sampson
 
 
L. Heath Sampson
 
 
Chief Executive Officer
 
 
(Principal Executive Officer)
 
 
 
 
 
 
May 11, 2020
By:
/s/ Greg P. Marken
 
 
Greg P. Marken
 
 
Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)

 
 


40
Exhibit


Exhibit 31.1
Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended
I, L. Heath Sampson, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Advanced Emissions Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2020

 
/s/ L. Heath Sampson
 
L. Heath Sampson
 
Chief Executive Officer
 
(Principal Executive Officer)
 



Exhibit


Exhibit 31.2
Pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as Amended
I, Greg P. Marken, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Advanced Emissions Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 11, 2020
 

/s/ Greg P. Marken
 
Greg P. Marken
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
 



Exhibit


Exhibit 32.1
Certification
Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-Q of Advanced Emissions Solutions, Inc. (the “Company”) for the quarterly period ended March 31, 2020, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), L. Heath Sampson, as the Principal Executive Officer of the Company, and Greg P. Marken, as the Principal Financial Officer of the Company, each hereby certifies, pursuant to and solely for the purpose of 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, to the best of his knowledge and belief, that:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ L. Heath Sampson
 
L. Heath Sampson
 
Chief Executive Officer
 
 
 
May 11, 2020
 
 
 
 
 
/s/ Greg P. Marken
 
Greg P. Marken
 
Chief Financial Officer
 
 
 
May 11, 2020
 
 
 



Exhibit


EXHIBIT 95.1
Mine Safety and Health Administration Safety Data

We are committed to maintaining a safe work environment and working to ensure environmental compliance across all of our operations. The health and safety of our employees and limiting the impact to communities in which we operate are critical to our long-term success. We employ practices and conduct training to help ensure that our employees work safely. Furthermore, we utilize processes for managing, monitoring and improving safety and environmental performance.

The following disclosures are provided pursuant to Securities and Exchange Commission (SEC) regulations, which require certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate coal mines regulated under the Federal Mine Safety and Health Act of 1977 (the "Mine Act"). The disclosures reflect United States (U.S.) mining operations only.

Mine Safety Information. Whenever the Mine Safety and Health Administration (MSHA) believes that a violation of the Mine Act, any health or safety standard, or any regulation has occurred, it may issue a violation which describes the associated condition or practice and designates a time frame within which the operator must abate the violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order removing miners from the area of the mine affected by the condition until hazards are corrected. Whenever MSHA issues a citation or order, it generally proposes a civil penalty, or fine, as a result of the violation that the operator is ordered to pay. Citations and orders can be contested and appealed and, as part of that process, are often reduced in severity and amount, and are sometimes vacated. The number of citations, orders and proposed assessments vary depending on the size and type (underground or surface) of the company and mine.

We are required to report citations and orders issued to us by MSHA during the three months ended March 31, 2020, as reflected in our systems. Our required disclosure covers only those mines that were issued orders or citations during the period presented and, commensurate with SEC regulations, does not reflect orders or citations issued to independent contractors working at our mines. Due to timing and other factors, our data may not agree with the mine data retrieval system maintained by MSHA. The proposed assessments for the three months ended March 31, 2020 were taken from the MSHA system as of May 5, 2020.

Additional information about MSHA references we are required to report is as follows:
Section 104 S&S Violations: The total number of violations received from MSHA under section 104(a) of the Mine Act that could significantly and substantially contribute to a serious injury if left unabated.
Section 104(b)Orders: The total number of orders issued by MSHA under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated.
Section 104(d) Citations and Orders: The total number of citations and orders issued by MSHA under section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards.
Section 104(e) Notices: The total number of notices issued by MSHA under section 104(e) of the Mine Act for a pattern of violations that could contribute to mine health or safety hazards.
Section 110(b)(2)Violations: The total number of flagrant violations issued by MSHA under section 110(b)(2) of the Mine Act.
Section 107(a) Orders: The total number of orders issued by MSHA under section 107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed.
Proposed MSHA Assessments: The total dollar value of proposed assessments from MSHA.
Fatalities: The total number of mining-related fatalities.

Our mine is located in the Gulf Coast Lignite Region, in Natchitoches Parish, Louisiana ("Five Forks"). For the three months ended March 31, 2020, there were no citations or orders issued.

Pending Legal Actions. The Federal Mine Safety and Health Review Commission (the Commission) is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. These cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under section 105 of the Mine Act. The following is a brief description of the types of legal actions that may be brought before the Commission.
Contests of Citations and Orders: A contest proceeding may be filed with the Commission by operators, miners or miners’ representatives to challenge the issuance of a citation or order issued by MSHA, including citations related to disputed provisions of operators' emergency response plans.





Contests of Proposed Penalties (Petitions for Assessment of Penalties): A contest of a proposed penalty is an administrative proceeding before the Commission challenging a civil penalty that MSHA has proposed for the violation. Such proceedings may also involve appeals of judges' decisions or orders to the Commission on proposed penalties, including petitions for discretionary review and review by the Commission on its own motion.
Complaints for Compensation: A complaint for compensation may be filed with the Commission by miners entitled to compensation when a mine is closed by certain withdrawal orders issued by MSHA. The purpose of the proceeding is to determine the amount of compensation, if any, due miners idled by the orders.
Complaints of Discharge, Discrimination or Interference: A discrimination proceeding is a case that involves a miner’s allegation that he or she has suffered a wrong by the operator because he or she engaged in some type of activity protected under the Mine Act, such as making a safety complaint. This category includes temporary reinstatement proceedings, which involve cases in which a miner has filed a complaint with MSHA stating he or she has suffered discrimination and the miner has lost his or her position.
Applications for Temporary Relief: An application for temporary relief from any modification or termination of any order or from any order issued under certain subparts of section 104 of the Mine Act may be filed with the Commission at any time before such order becomes final.
Appeals of Judges' Decisions or Orders.

For the three months ended March 31, 2020, there were no pending or legal actions before the Commission at our mine, Five Forks.



v3.20.1
Basis of Presentation (Policies)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of ADES are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The unaudited Condensed Consolidated Financial Statements of ADES in this quarterly report ("Quarterly Report") are presented on a consolidated basis and include ADES and its wholly-owned subsidiaries (collectively, the "Company"). Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments: Tinuum Group, Tinuum Services and GWN Manager, LLC ("GWN Manager"), which are accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.
Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.
In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements of ADES should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K").
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the two-class method, which is an earnings allocation formula that determines earnings (loss) per share for common stock and any participating securities according to dividend and participating rights in undistributed earnings (losses). The Company's restricted stock awards ("RSA's") granted prior to December 31, 2016 contain non-forfeitable rights to dividends or dividend equivalents and are deemed to be participating securities. RSA's granted subsequent to December 31, 2016 do not contain non-forfeitable rights to dividends and are not deemed to be participating securities.
Under the two-class method, net income for the period is allocated between common stockholders and the holders of the participating securities based on the weighted-average number of common shares outstanding during the period, excluding participating, unvested RSA's ("common shares"), and the weighted-average number of participating, unvested RSA's outstanding during the period, respectively. The allocated, undistributed income for the period is then divided by the weighted-average number of common shares and participating, unvested RSA's outstanding during the period to arrive at basic earnings per common share and participating security for the period, respectively. Pursuant to U.S. GAAP, the Company has elected not to separately present basic or diluted earnings per share attributable to participating securities in the Condensed Consolidated Statements of Operations.
Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities. Potentially dilutive securities consist of both unvested, participating and non-participating RSA's, as well as outstanding options to purchase common stock ("Stock Options") and contingent performance stock units ("PSU's") (collectively, "Potential dilutive shares"). The dilutive effect, if any, for non-participating RSA's, Stock Options and PSU's is determined using the greater of dilution as calculated under the treasury stock method or the two-class method. Potential dilutive shares are excluded from diluted earnings per share when their effect is anti-dilutive. When there is a net loss for a period, all Potential dilutive shares are anti-dilutive and are excluded from the calculation of diluted loss per share for that period.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company’s critical accounting estimates from those that were disclosed in the 2019 Form 10-K. Actual results could differ from these estimates.
Risks and Uncertainties
The Company’s earnings are significantly affected by equity earnings it receives from Tinuum Group. As of March 31, 2020, Tinuum Group has 20 invested RC facilities of which 8 are leased to a single customer. A majority of these leases are periodically renewed. Further, the ability to generate Section 45 tax credits related to Tinuum's RC facilities expires in 2021. The loss of the single customer by Tinuum Group or the expiration of Section 45 tax credits would have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn would have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company's revenues, sales volumes, earnings and cash flows are significantly affected by prices of competing power generation sources such as natural gas and renewable energy. Low natural gas prices make it a competitive alternative to coal-fired power generation and therefore, coal consumption may be reduced, which reduces the demand for our products. In addition, coal consumption and demand for our products is also affected by the demand for electricity, which is higher in the warmer and colder months of the year. Abnormal temperatures during the summer and winter months may significantly reduce coal consumption and thus the demand for the Company's products.
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds cash and cash equivalents at three financial institutions as of March 31, 2020. If an institution was unable to perform its obligations, the Company would be at risk regarding the amount of cash and investments in excess of the Federal Deposit Insurance Corporation limits (currently $250 thousand) that would be returned to the Company.
Reclassifications
Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.
New Accounting Guidance
Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission) for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in ASU 2019-12 simplify various aspects related to accounting for income taxes by removing certain exceptions contained in Topic 740 and also clarifies and amends existing guidance in Topic 740 to improve consistent application. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, including interim periods within those years, and early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.
Business Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of March 31, 2020, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are identified by products and services provided.
As of March 31, 2020, the Company has two reportable segments: (1) Refined Coal ("RC"); and (2) Power Generation and Industrials ("PGI").
The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below:
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.
Segment revenues include equity method earnings and losses from the Company's equity method investments.
Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Legal and professional fees and General and administrative.
RC segment operating income includes interest expense directly attributable to the RC segment.
Fair Value of Financial Instruments
The carrying amounts of financial instruments, including cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments.
v3.20.1
Equity Method Investments (Tables)
3 Months Ended
Mar. 31, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Schedule of Equity Method Investments
The following table summarizes the results of operations of Tinuum Services:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross loss
 
$
(22,259
)
 
$
(24,735
)
Operating, selling, general and administrative expenses
 
45,753

 
49,450

Loss from operations
 
(68,012
)
 
(74,185
)
Other expenses
 
(285
)
 
(242
)
Loss attributable to noncontrolling interest
 
71,972

 
78,270

Net income
 
$
3,675

 
$
3,843

ADES equity earnings from Tinuum Services
 
$
1,838

 
$
1,922

The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three months ended March 31, 2020 and 2019 (in thousands):
Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2019
 
$
32,280

 
$

 
$

 
$

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
6,438

 
6,438

 

 

Cash distributions from Tinuum Group
 
First Quarter
 
(13,764
)
 

 
13,764

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2020
 
$
24,954

 
$
6,438

 
$
13,764

 
$

Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2018
 
$

 
$

 
$

 
$
(1,672
)
Impact of adoption of accounting standards (1)
 
First Quarter
 
37,232

 

 

 

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
21,439

 
21,439

 

 

Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)
 
First Quarter
 
(1,672
)
 
(1,672
)
 

 
1,672

Cash distributions from Tinuum Group
 
First Quarter
 
(16,788
)
 

 
16,788

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2019
 
$
40,211

 
$
19,767

 
$
16,788

 
$

(1) Tinuum Group adopted Accounting Standards Codification Topic ("ASC") 606 - Revenue from Contracts with Customers and ASC 842 - Leases as of January 1, 2019. As a result of Tinuum Group’s adoption of these standards, the Company recorded a cumulative adjustment of $27.4 million, net of the impact of income taxes, related to the Company's percentage of Tinuum Group's cumulative effect adjustment that increased the Company's Retained earnings as of January 1, 2019.
The following table details the components of the Company's respective equity method investments included within the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Earnings from Tinuum Group
 
$
6,438


$
19,767

Earnings from Tinuum Services
 
1,838


1,922

(Loss) earnings from other
 
(3
)

1

Earnings from equity method investments
 
$
8,273

 
$
21,690

The following table details the components of the cash distributions from the Company's respective equity method investments included in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows.
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Distributions from equity method investees, return on investment
 
 
 
 
Tinuum Group
 
$
13,764

 
$
16,788

Tinuum Services
 
3,352

 
2,700

 
 
$
17,116

 
$
19,488

The following table summarizes the results of operations of Tinuum Group:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross profit
 
$
5,010

 
$
41,200

Operating, selling, general and administrative expenses
 
12,776

 
6,582

Loss (income) from operations
 
(7,766
)
 
34,618

Other income
 
3,643

 
51

Loss attributable to noncontrolling interest
 
19,271

 
15,776

Net income available to members
 
$
15,148

 
$
50,445

ADES equity earnings from Tinuum Group
 
$
6,438

 
$
19,767

v3.20.1
Business Segment Information - Reconciliation of Reportable Segment Amounts (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Segment Reporting Information [Line Items]    
Consolidated operating income $ (8,641) $ (3,555)
Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:    
Corporate payroll and benefits (2,742) (2,556)
Corporate legal and professional fees (2,043) (2,204)
Corporate general and administrative (2,331) (1,914)
Corporate depreciation and amortization (2,297) (2,102)
Net (loss) income (1,893) 14,402
Operating Segments    
Segment Reporting Information [Line Items]    
Consolidated operating income 4,283 21,771
All Other and Corporate    
Segment Reporting Information [Line Items]    
Consolidated operating income (793) (398)
Segment Reconciling Items    
Segment Reporting Information [Line Items]    
Consolidated operating income 3,490 21,373
Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:    
Corporate payroll and benefits (709) (432)
Corporate legal and professional fees (1,749) (1,811)
Corporate general and administrative (1,599) (1,434)
Corporate depreciation and amortization (26) (13)
Corporate interest (expense) income, net (942) (1,582)
Net (loss) income $ (1,535) $ 16,101
v3.20.1
Stock-Based Compensation - Summary of Option Activity (Details) - Stock options
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Employee and Director Options  
Options outstanding, start of year (in shares) | shares 300,000
Options granted (in shares) | shares 0
Options exercised (in shares) | shares 0
Options expired / forfeited (in shares) | shares 0
Options outstanding, end of year (in shares) | shares 300,000
Options vested and exercisable (in shares) | shares 300,000
Weighted Average Exercise Price  
Options outstanding, start of year (in dollars per share) | $ / shares $ 13.87
Options granted (in dollars per share) | $ / shares 0.00
Options exercised (in dollars per share) | $ / shares 0.00
Options expired / forfeited (in dollars per share) | $ / shares 0.00
Options outstanding, end of year (in dollars per share) | $ / shares 13.87
Options vested and exercisable, weighted average exercise price (in dollars per share) | $ / shares $ 13.87
Options outstanding, intrinsic value | $ $ 0
Options exercisable, intrinsic value | $ $ 0
Options outstanding, weighted average remaining contractual term 2 months 4 days
Options exercisable, weighted average remaining contractual term 2 months 4 days
v3.20.1
Supplemental Financial Information - Other Liabilities (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Other current liabilities:    
Current portion of operating lease obligations $ 2,142 $ 2,382
Accrued interest 298 213
Income and other taxes payable 805 678
Other 1,030 1,038
Other current liabilities 4,275 4,311
Other long-term liabilities:    
Operating lease obligations, long-term 2,415 2,810
Mine reclamation liability 2,752 2,721
Other 71 229
Other long-term liabilities $ 5,238 $ 5,760
v3.20.1
Basis of Presentation
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation
Nature of Operations
Advanced Emissions Solutions, Inc. ("ADES" or the "Company") is a Delaware corporation with its principal office located in Greenwood Village, Colorado and operations located in Louisiana. The Company is principally engaged in consumable mercury control options including powdered activated carbon ("PAC") and chemical technologies. The Company's proprietary environmental technologies in the power generation and industrial ("PGI") market enable customers to reduce emissions of mercury and other pollutants, maximize utilization levels and improve operating efficiencies to meet the challenges of existing and pending emission control regulations. Through its wholly-owned subsidiary, ADA Carbon Solutions, LLC ("Carbon Solutions"), which the Company acquired on December 7, 2018 (the "Acquisition Date"), the Company manufactures and sells activated carbon ("AC") used in mercury capture for the coal-fired power plant, industrial and water treatment markets. Carbon Solutions also owns an associated lignite mine that supplies the primary raw material for manufacturing PAC.
Through its equity ownership in Tinuum Group, LLC ("Tinuum Group") and Tinuum Services, LLC ("Tinuum Services"), both of which are unconsolidated entities, the Company generates substantial earnings. Tinuum Group provides reduction of mercury and nitrogen oxide ("NOx") emissions at select coal-fired power generators through the production and sale of refined coal ("RC") that qualifies for tax credits under the Internal Revenue Code ("IRC") Section 45 - Production Tax Credit ("Section 45 tax credits"). The Company also earns royalties for technologies that are licensed to Tinuum Group and used at certain RC facilities to enhance combustion and reduced emissions of NOx and mercury from coal burned to generate electrical power. Tinuum Services operates and maintains the RC facilities under operating and maintenance agreements with Tinuum Group and owners or lessees of the RC facilities.
The Company’s sales occur principally throughout the United States. See Note 13 for additional information regarding the Company's operating segments.
Basis of Presentation
The accompanying Condensed Consolidated Financial Statements of ADES are unaudited and have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and with Article 10 of Regulation S-X of the Securities and Exchange Commission. In compliance with those instructions, certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
The unaudited Condensed Consolidated Financial Statements of ADES in this quarterly report ("Quarterly Report") are presented on a consolidated basis and include ADES and its wholly-owned subsidiaries (collectively, the "Company"). Also included within the unaudited Condensed Consolidated Financial Statements are the Company's unconsolidated equity investments: Tinuum Group, Tinuum Services and GWN Manager, LLC ("GWN Manager"), which are accounted for under the equity method of accounting, and Highview Enterprises Limited (the "Highview Investment"), which is accounted for in accordance with U.S. GAAP applicable to equity investments that do not qualify for the equity method of accounting.
Results of operations and cash flows for the interim periods are not necessarily indicative of the results that may be expected for the entire year. All significant intercompany transactions and accounts were eliminated in consolidation for all periods presented in this Quarterly Report.
In the opinion of management, these Condensed Consolidated Financial Statements include all normal and recurring adjustments considered necessary for a fair presentation of the results of operations, financial position, stockholders' equity and cash flows for the interim periods presented. These Condensed Consolidated Financial Statements of ADES should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 (the "2019 Form 10-K"). Significant accounting policies disclosed therein have not changed, except as described later in Note 1.
Earnings (Loss) Per Share
Basic earnings (loss) per share is computed using the two-class method, which is an earnings allocation formula that determines earnings (loss) per share for common stock and any participating securities according to dividend and participating rights in undistributed earnings (losses). The Company's restricted stock awards ("RSA's") granted prior to December 31, 2016 contain non-forfeitable rights to dividends or dividend equivalents and are deemed to be participating securities. RSA's granted subsequent to December 31, 2016 do not contain non-forfeitable rights to dividends and are not deemed to be participating securities.
Under the two-class method, net income for the period is allocated between common stockholders and the holders of the participating securities based on the weighted-average number of common shares outstanding during the period, excluding participating, unvested RSA's ("common shares"), and the weighted-average number of participating, unvested RSA's outstanding during the period, respectively. The allocated, undistributed income for the period is then divided by the weighted-average number of common shares and participating, unvested RSA's outstanding during the period to arrive at basic earnings per common share and participating security for the period, respectively. Pursuant to U.S. GAAP, the Company has elected not to separately present basic or diluted earnings per share attributable to participating securities in the Condensed Consolidated Statements of Operations.
Diluted earnings (loss) per share is computed in a manner consistent with that of basic earnings per share, while considering other potentially dilutive securities. Potentially dilutive securities consist of both unvested, participating and non-participating RSA's, as well as outstanding options to purchase common stock ("Stock Options") and contingent performance stock units ("PSU's") (collectively, "Potential dilutive shares"). The dilutive effect, if any, for non-participating RSA's, Stock Options and PSU's is determined using the greater of dilution as calculated under the treasury stock method or the two-class method. Potential dilutive shares are excluded from diluted earnings per share when their effect is anti-dilutive. When there is a net loss for a period, all Potential dilutive shares are anti-dilutive and are excluded from the calculation of diluted loss per share for that period.
The following table sets forth the calculations of basic and diluted earnings (loss) per share:
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2020
 
2019
Net (loss) income
 
$
(1,893
)
 
$
14,402

Less: Dividends and undistributed income (loss) allocated to participating securities
 
(2
)
 
20

(Loss) income attributable to common stockholders
 
$
(1,891
)
 
$
14,382

 
 
 
 
 
Basic weighted-average common shares outstanding
 
17,932

 
18,268

Add: dilutive effect of equity instruments
 

 
165

Diluted weighted-average shares outstanding
 
17,932

 
18,433

(Loss) earnings per share - basic
 
$
(0.11
)
 
$
0.79

(Loss) earnings per share - diluted
 
$
(0.11
)
 
$
0.78


For the three months ended March 31, 2020 and 2019, RSA's and Stock Options convertible to 0.7 million and 0.3 million shares of common stock, respectively, were outstanding but were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. There have been no changes in the Company’s critical accounting estimates from those that were disclosed in the 2019 Form 10-K. Actual results could differ from these estimates.
Due to the coronavirus (COVID-19) pandemic, there has been uncertainty and disruption in the global economy and financial markets. Additionally, due to COVID-19, overall power generation and coal-fired power demand may change, which could also have a material adverse effect on the Company. The Company is not aware of any specific event or circumstance that would require an update to its estimate or judgments or a revision of the carrying values of its assets or liabilities through the date of this Quarterly Report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Risks and Uncertainties
The Company’s earnings are significantly affected by equity earnings it receives from Tinuum Group. As of March 31, 2020, Tinuum Group has 20 invested RC facilities of which 8 are leased to a single customer. A majority of these leases are periodically renewed. Further, the ability to generate Section 45 tax credits related to Tinuum's RC facilities expires in 2021. The loss of the single customer by Tinuum Group or the expiration of Section 45 tax credits would have a significant adverse impact on Tinuum Group's financial position, results of operations and cash flows, which in turn would have a material adverse impact on the Company’s financial position, results of operations and cash flows.
The Company's revenues, sales volumes, earnings and cash flows are significantly affected by prices of competing power generation sources such as natural gas and renewable energy. Low natural gas prices make it a competitive alternative to coal-fired power generation and therefore, coal consumption may be reduced, which reduces the demand for our products. In addition, coal consumption and demand for our products is also affected by the demand for electricity, which is higher in the warmer and colder months of the year. Abnormal temperatures during the summer and winter months may significantly reduce coal consumption and thus the demand for the Company's products.
Reclassifications
Certain balances have been reclassified from the prior year to conform to the current year presentation. Such reclassifications had no effect on the Company’s results of operations or financial position in any of the periods presented.
New Accounting Standards
Not Yet Adopted
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). The main objective of ASU 2016-13 is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in ASU 2016-13 replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for "smaller reporting companies" (as defined by the Securities and Exchange Commission) for fiscal years beginning after December 15, 2022, including interim periods within those years, and must be adopted under a modified retrospective method approach. Entities may adopt ASU 2016-13 earlier as of the fiscal years beginning after December 15, 2018, including interim periods within those years. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes ("ASU 2019-12"). The amendments in ASU 2019-12 simplify various aspects related to accounting for income taxes by removing certain exceptions contained in Topic 740 and also clarifies and amends existing guidance in Topic 740 to improve consistent application. ASU 2019-12 is effective for public business entities beginning after December 15, 2020, including interim periods within those years, and early adoption is permitted. The Company is currently evaluating the provisions of this guidance and assessing its impact on the Company's financial statements and disclosures and does not believe this standard will have a material impact on the Company's financial statements and disclosures.
v3.20.1
Debt Obligations - Schedule of Debt (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Dec. 07, 2018
Debt Instrument [Line Items]      
Finance lease obligations $ 6,390 $ 6,729  
Long-term Debt 38,381 44,366  
Less: Current maturities (24,192) (23,932)  
Total long-term debt 14,189 20,434  
Senior Term Loan due December 2021, net      
Debt Instrument [Line Items]      
Less: net unamortized debt issuance costs (989) (1,163) $ (2,000)
Less: net unamortized debt discount (1,020) (1,200) $ (2,100)
Senior Term Loan due December 2021, net 31,991 37,637  
Senior Term Loan due December 2021, net | Senior Term Loan due December 2021, related party      
Debt Instrument [Line Items]      
Senior Term Loan due December 2021, related party $ 34,000 $ 40,000  
v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Accumulated depreciation and amortization $ 9,039 $ 7,444
Preferred stock par value (in dollars per share) $ 0.001 $ 0.001
Preferred stock, shares authorized (in shares) 50,000,000 50,000,000
Preferred stock, shares outstanding (in shares) 0 0
Common stock par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 100,000,000 100,000,000
Common stock, shares issued (in shares) 23,114,218 22,960,157
Common stock, shares outstanding (in shares) 18,496,072 18,362,624
Treasury stock (in shares) 4,618,146 4,597,533
v3.20.1
Inventories, net (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Inventory Disclosure [Abstract]    
Product inventory $ 11,492 $ 13,515
Raw material inventory 2,103 1,945
Inventories $ 13,595 $ 15,460
v3.20.1
Restructuring - Utilization of Restructuring Accruals (Details) - Employee Severance
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Restructuring Reserve [Roll Forward]  
Remaining accrual as of December 31, 2017 $ 254
Expense provision 0
Cash payments and other (122)
Change in estimates (7)
Remaining accrual as of March 31, 2020 $ 125
v3.20.1
Business Segment Information - Segment Assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Segment Reporting Information [Line Items]    
Assets: $ 160,183 $ 173,799
Equity method investments 30,312 39,155
Operating Segments    
Segment Reporting Information [Line Items]    
Assets: 112,479 124,865
Operating Segments | Refined Coal    
Segment Reporting Information [Line Items]    
Assets: 33,940 43,953
Operating Segments | Power Generation and Industrials    
Segment Reporting Information [Line Items]    
Assets: 78,539 80,912
All Other and Corporate    
Segment Reporting Information [Line Items]    
Assets: $ 47,704 $ 48,934
v3.20.1
Revenues - Disaggregation of Revenue (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Disaggregation of Revenue [Line Items]    
Revenue component $ 12,263 $ 19,329
Earnings from equity method investments 8,273 21,690
Total revenues from customers and earnings from equity method investments 12,263 19,329
Total revenues from customers and earnings from equity method investments 20,536 41,019
Operating Segments    
Disaggregation of Revenue [Line Items]    
Total revenues from customers and earnings from equity method investments 19,794 40,463
Consumables    
Disaggregation of Revenue [Line Items]    
Revenue component 9,217 15,109
License royalties, related party    
Disaggregation of Revenue [Line Items]    
Revenue component 3,046 4,220
Power Generation and Industrials    
Disaggregation of Revenue [Line Items]    
Revenue component 8,475 14,553
Earnings from equity method investments 0 0
Power Generation and Industrials | Operating Segments    
Disaggregation of Revenue [Line Items]    
Total revenues from customers and earnings from equity method investments 8,475 14,553
Power Generation and Industrials | Consumables    
Disaggregation of Revenue [Line Items]    
Revenue component 8,475 14,553
Power Generation and Industrials | Consumables | Operating Segments    
Disaggregation of Revenue [Line Items]    
Revenue component 8,475 14,553
Power Generation and Industrials | License royalties, related party    
Disaggregation of Revenue [Line Items]    
Revenue component 0 0
Refined Coal    
Disaggregation of Revenue [Line Items]    
Revenue component 3,046 4,220
Earnings from equity method investments 8,273 21,690
Refined Coal | Operating Segments    
Disaggregation of Revenue [Line Items]    
Earnings from equity method investments 8,273 21,690
Total revenues from customers and earnings from equity method investments 11,319 25,910
Refined Coal | Consumables    
Disaggregation of Revenue [Line Items]    
Revenue component 0 0
Refined Coal | License royalties, related party    
Disaggregation of Revenue [Line Items]    
Revenue component 3,046 4,220
Other    
Disaggregation of Revenue [Line Items]    
Revenue component 742 556
Earnings from equity method investments 0 0
Other | Operating Segments    
Disaggregation of Revenue [Line Items]    
Total revenues from customers and earnings from equity method investments 742 556
Other | Consumables    
Disaggregation of Revenue [Line Items]    
Revenue component 742 556
Other | License royalties, related party    
Disaggregation of Revenue [Line Items]    
Revenue component $ 0 $ 0
v3.20.1
Stock-Based Compensation - Allocation of Compensation Expense (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total stock-based compensation expense $ 506 $ 317
Restricted stock awards    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total stock-based compensation expense $ 506 $ 317
v3.20.1
Fair Value Measurements (Tables)
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Schedule of Estimated Fair Values of Remaining Financial Instruments
The following table provides the estimated fair values of the remaining financial instruments:
 
 
As of March 31, 2020
 
As of December 31, 2019
(in thousands)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Financial Instruments:
 
 
 
 
 
 
 
 
Highview Investment
 
$
552

 
$
552

 
$
552

 
$
552

Highview Obligation
 
$
208

 
$
208

 
$
220

 
$
220


v3.20.1
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Allocation of Compensation Expense
Total stock-based compensation expense for the three months ended March 31, 2020 and 2019 was as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
RSA expense
 
$
506

 
$
317

Total stock-based compensation expense
 
$
506

 
$
317

Schedule of Unrecognized Compensation Cost
The amount of unrecognized compensation cost as of March 31, 2020, and the expected weighted-average period over which the cost will be recognized is as follows:
 
 
As of March 31, 2020
(in thousands)
 
Unrecognized Compensation Cost
 
Expected Weighted-
Average Period of
Recognition (in years)
RSA expense
 
$
3,178

 
2.23
PSU expense
 
309

 
2.94
Total unrecognized stock-based compensation expense
 
$
3,487

 
2.29
Summary of Restricted Stock Activity
A summary of RSA activity under the Company's various stock compensation plans for the three months ended March 31, 2020 is presented below:
 
 
Restricted Stock
 
Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020
 
451,344

 
$
10.65

Granted
 
218,524

 
$
5.34

Vested
 
(184,023
)
 
$
10.39

Forfeited
 
(265
)
 
$
10.84

Non-vested at March 31, 2020
 
485,580

 
$
8.36

Summary of Option Activity
A summary of stock option activity for the three months ended March 31, 2020 is presented below:
 
 
Number of Options
Outstanding and
Exercisable
 
Weighted-Average
Exercise Price
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining Contractual
Term (in years)
Options outstanding, January 1, 2020
 
300,000

 
$
13.87

 
 
 

Options granted
 

 

 
 
 
 
Options exercised
 

 

 
 
 
 
Options expired / forfeited
 

 

 
 
 
 
Options outstanding, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18
Options vested and exercisable, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18
Summary of Performance Shares Units
A summary of PSU activity for the three months ended March 31, 2020 is presented below:
 
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining
Contractual
Term (in years)
PSU's outstanding, January 1, 2020
 

 
$

 
 
 
 
Granted
 
50,127

 
6.17

 
 
 
 
Vested / Settled
 

 

 
 
 
 
Forfeited / Canceled
 

 

 
 
 
 
PSU's outstanding, March 31, 2020
 
50,127

 
$
6.17

 
$
329

 
2.94
v3.20.1
Business Segment Information
3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Business Segment Information
Business Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision-making group, in deciding how to allocate resources and in assessing financial performance. As of March 31, 2020, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are identified by products and services provided.
As of March 31, 2020, the Company has two reportable segments: (1) Refined Coal ("RC"); and (2) Power Generation and Industrials ("PGI").
The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below:
The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies in the 2019 Form 10-K.
Segment revenues include equity method earnings and losses from the Company's equity method investments.
Segment operating income (loss) includes segment revenues and allocation of certain "Corporate general and administrative expenses," which include Payroll and benefits, Legal and professional fees and General and administrative.
RC segment operating income includes interest expense directly attributable to the RC segment.
As of March 31, 2020 and December 31, 2019, substantially all of the Company's material assets are located in the U.S. and substantially all of significant customers are U.S. companies. The following table presents the Company's operating segment results for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Revenues:
 
 
 
 
Refined Coal:
 
 
 
 
Earnings in equity method investments
 
$
8,273

 
$
21,690

License royalties, related party
 
3,046

 
4,220

 
 
11,319

 
25,910

Power Generation and Industrials:
 
 
 
 
Consumables
 
8,475


14,553

 
 
8,475

 
14,553

Total segment reporting revenues
 
19,794

 
40,463

 
 
 
 
 
Adjustments to reconcile to reported revenues:
 
 
 
 
Earnings in equity method investments
 
(8,273
)
 
(21,690
)
Corporate and other
 
742

 
556

Total reported revenues
 
$
12,263

 
$
19,329

 
 
 
 
 
Segment operating income (loss):
 
 
 
 
Refined Coal (1)
 
$
10,860

 
$
25,233

Power Generation and Industrials (2)
 
(6,577
)
 
(3,462
)
Total segment operating income
 
$
4,283

 
$
21,771


(1) Included in RC segment operating income for the three months ended March 31, 2020 and 2019 is 453A interest expense of $0.1 million and $0.3 million, respectively.
(2) Included in PGI segment operating loss for the three months ended March 31, 2020 and 2019 was $2.0 million and $2.0 million, respectively, of depreciation, amortization, and depletion expense on mine and plant long-lived assets. Included in PGI segment operating loss for the three months ended March 31, 2019 was $3.4 million of costs recognized as a result of the step-up in inventory fair value recorded from the Carbon Solutions Acquisition.
A reconciliation of reportable segment operating income to the Company's consolidated income before income tax expense is as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Total reported segment operating income
 
$
4,283

 
$
21,771

Other operating loss
 
(793
)
 
(398
)
 
 
3,490

 
21,373

Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:
 
 
 
 
Corporate payroll and benefits
 
(709
)
 
(432
)
Corporate legal and professional fees
 
(1,749
)
 
(1,811
)
Corporate general and administrative
 
(1,599
)
 
(1,434
)
Corporate depreciation and amortization
 
(26
)
 
(13
)
Corporate interest (expense) income, net
 
(942
)
 
(1,582
)
(Loss) income before income tax expense
 
$
(1,535
)
 
$
16,101


Corporate general and administrative expenses include certain costs that benefit the business as a whole but are not directly related to one of the Company's segments. Such costs include, but are not limited to, accounting and human resources staff, information systems costs, legal fees, facility costs, audit fees and corporate governance expenses. 
A reconciliation of reportable segment assets to the Company's consolidated assets is as follows:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Assets:
 
 
 
 
Refined Coal (1)
 
$
33,940

 
$
43,953

Power Generation and Industrials
 
78,539

 
80,912

Total segment assets
 
112,479

 
124,865

All Other and Corporate (2)
 
47,704

 
48,934

Consolidated
 
$
160,183

 
$
173,799


(1) Includes $30.3 million and $39.2 million of investments in equity method investees, respectively.
(2) Includes the Company's deferred tax assets.
v3.20.1
Debt Obligations
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Debt Obligations
Debt Obligations
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Senior Term Loan due December 2021, related party
 
$
34,000

 
$
40,000

Less: net unamortized debt issuance costs
 
(989
)
 
(1,163
)
Less: net unamortized debt discount
 
(1,020
)
 
(1,200
)
Senior Term Loan due December 2021, net
 
31,991

 
37,637

Finance lease obligations
 
6,390

 
6,729

 
 
38,381

 
44,366

Less: Current maturities
 
(24,192
)
 
(23,932
)
Total long-term debt
 
$
14,189

 
$
20,434


Senior Term Loan
On December 7, 2018, the Company, and ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary, and certain other subsidiaries of the Company as guarantors, The Bank of New York Mellon as administrative agent, and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively "Apollo"), affiliates of a beneficial owner of greater than five percent of the Company's common stock and a related party, entered into the Senior Term Loan in the amount of $70.0 million less original issue discount of $2.1 million. Proceeds from the Senior Term Loan were used to fund the Carbon Solutions Acquisition as disclosed in Note 2. The Company also paid debt issuance costs of $2.0 million related to the Senior Term Loan. The Senior Term Loan has a term of 36 months and bears interest at a rate equal to 3-month LIBOR (subject to a 1.5% floor) + 4.75% per annum, which is adjusted quarterly to the current 3-month LIBOR rate, and interest is payable quarterly in arrears. Quarterly principal payments of $6.0 million were required beginning in March 2019, and the Company may prepay the Senior Term Loan at any time without penalty. The Senior Term Loan is secured by substantially all of the assets of the Company, including the cash flows from Tinuum Group and Tinuum Services (collectively, the "Tinuum Entities"), but excluding the Company's equity interests in the Tinuum entities.
The Senior Term Loan includes, among others, the following covenants: (1) Beginning December 31, 2018 and as of the end of each fiscal quarter thereafter, the Company must maintain a minimum cash balance of $5.0 million and shall not permit "expected future net cash flows from the refined coal business" (as defined in the Senior Term Loan) to be less than 1.75 times the outstanding principal amount of the Senior Term Loan; (2) Beginning in January 2019, annual collective dividends and buybacks of Company shares in an aggregate amount, not to exceed $30.0 million, is permitted so long as (a) no default or event of default exists under the Senior Term Loan and (b) expected future net cash flows from the refined coal business as of the end of the most recent fiscal quarter exceed $100.0 million.
Line of Credit
On December 7, 2018, ADA-ES, Inc. ("ADA"), a wholly-owned subsidiary of the Company, as borrower, the Company, as guarantor, and a bank (the "Lender") entered into an amendment to the 2013 Loan and Security Agreement (the "Line of Credit"). This amendment provided, among other things, for ADA to be able to enter into the Senior Term Loan as a guarantor so long as the principal amount of the Senior Term Loan did not exceed $70.0 million. Additionally, the financial covenants in the Line of Credit were amended and restated to be consistent with the Senior Term Loan covenants, including maintaining a minimum cash balance of $5.0 million.
As of March 31, 2020, there were no outstanding borrowings under the Line of Credit.
v3.20.1
Stockholders' Equity
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Stockholders' Equity
Stockholders' Equity
Stock Repurchase Programs
In November 2018, the Company's Board of Directors (the "Board") authorized the Company to purchase up to $20.0 million of its outstanding common stock under a stock repurchase program (the "Stock Repurchase Program"), which was to remain in effect until December 31, 2019 unless otherwise modified by the Board. As of November 2019, $2.9 million remained outstanding related to the Stock Repurchase Program. In November 2019, the Board authorized an incremental $7.1 million to the Stock Repurchase Program and provided that it will remain in effect until all amounts are utilized or it is otherwise modified by the Board.
For the three months ended March 31, 2020, under the Stock Repurchase Program, the Company purchased 20,613 shares of its common stock for cash of $0.2 million, inclusive of commissions and fees. For the three months ended March 31, 2019, under the Stock Repurchase Program, the Company purchased 63,876 shares of its common stock for cash of $0.7 million, inclusive of commissions and fees. As of March 31, 2020, the Company had $7.0 million remaining under the Stock Repurchase Program.
Quarterly Cash Dividend
Dividends declared and paid quarterly on all outstanding shares of common stock during the three months ended March 31, 2020 and 2019 were as follows:
 
 
2020
 
2019
 
 
Per share
 
Date paid
 
Per share
 
Date paid
Dividends declared during quarter ended:
 
 
 
 
 
 
 
 
March 31
 
$
0.25

 
March 10, 2020
 
$
0.25

 
March 7, 2019
 
 
$
0.25

 
 
 
$
0.25

 
 

A portion of the dividends declared remains accrued subsequent to the payment dates and represents dividends accumulated on nonvested shares of common stock held by employees and directors of the Company that contain forfeitable dividend rights that are not payable until the underlying shares of common stock vest. These amounts are included in both Other current liabilities and Other long-term liabilities on the Condensed Consolidated Balance Sheet as of March 31, 2020.
Tax Asset Protection Plan
U.S. federal income tax rules, and Section 382 of the Internal Revenue Code in particular, could substantially limit the use of net operating losses and other tax assets if the Company experiences an "ownership change" (as defined in the Internal Revenue Code). In general, an ownership change occurs if there is a cumulative change in the ownership of the Company by "5 percent stockholders" that exceeds 50 percentage points over a rolling three-year period.
On May 5, 2017, the Board approved the declaration of a dividend of rights to purchase Series B Junior Participating Preferred Stock for each outstanding share of common stock as part of a tax asset protection plan (the "TAPP") designed to protect the Company’s ability to utilize its net operating losses and tax credits. The TAPP is intended to act as a deterrent to any person acquiring beneficial ownership of 4.99% or more of the Company’s outstanding common stock.
On April 9, 2020, the Board approved the Third Amendment to the TAPP ("Third Amendment") that amends the TAPP, as previously amended by the First and Second Amendments that were approved the Board on April 6, 2018 and April 5, 2019, respectively. The Third Amendment amends the definition of "Final Expiration Date" under the TAPP to extend the duration of the TAPP and makes associated changes in connection therewith. Pursuant to the Third Amendment, the Final Expiration Date shall be the close of business on the earlier of (i) December 31, 2021 or (ii) December 31, 2020 if stockholder approval of the Third Amendment has not been obtained prior to such date.
v3.20.1
Subsequent Events (Details) - Subsequent Event - Promissory Note - PPP Loan
Apr. 20, 2020
USD ($)
Subsequent Event [Line Items]  
Face amount $ 3,300,000.0
Term 18 months
Interest rate, stated percentage 1.00%
v3.20.1
Fair Value Measurements - Estimated Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Carrying Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Cost method investment $ 552 $ 552
Highview Obligation 208 220
Fair Value    
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]    
Cost method investment 552 552
Highview Obligation $ 208 $ 220
v3.20.1
Revenues - Trade Receivables (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Revenue from Contract with Customer [Abstract]    
Trade receivables $ 6,265 $ 8,057
Less: Allowance for doubtful accounts (624) (627)
Total $ 5,641 $ 7,430
v3.20.1
Stockholders' Equity - Dividends (Details) - $ / shares
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Equity [Abstract]    
Dividends declared (in dollars per share) $ 0.25 $ 0.25
v3.20.1
Restructuring (Tables)
3 Months Ended
Mar. 31, 2020
Restructuring and Related Activities [Abstract]  
Schedule of Restructuring Reserve by Type of Cost
The following table summarizes the Company's change in restructuring accruals for the three months ended March 31, 2020:
(in thousands)
 
Employee Severance
Remaining accrual as of December 31, 2019
 
$
254

Expense provision
 

Cash payments and other
 
(122
)
Change in estimates
 
(7
)
Remaining accrual as of March 31, 2020
 
$
125

v3.20.1
Supplemental Financial Information (Tables)
3 Months Ended
Mar. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Schedule of Prepaid Expenses and Other Assets and Other assets
The following table summarizes the components of Prepaid expenses and other assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
March 31,
2020
 
December 31,
2019
Prepaid expenses and other assets:
 
 
 
 
Prepaid expenses
 
$
1,592

 
$
1,708

Prepaid income taxes
 
4,772

 
4,228

Other
 
1,241

 
1,896

 
 
$
7,605

 
$
7,832

Other long-term assets, net:
 
 
 
 
Right of use assets, operating leases, net
 
$
4,358

 
$
5,073

Spare parts, net
 
3,360

 
3,453

Mine development costs, net
 
7,457

 
7,084

Mine reclamation asset, net
 
2,423

 
2,451

Highview Investment
 
552

 
552

Other long-term assets
 
1,842

 
1,718

 
 
$
19,992

 
$
20,331

Schedule of Other Liabilities
The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Other current liabilities:
 
 
 
 
Current portion of operating lease obligations
 
$
2,142

 
$
2,382

Accrued interest
 
298

 
213

Income and other taxes payable
 
805

 
678

Other
 
1,030

 
1,038

 
 
$
4,275

 
$
4,311

Other long-term liabilities:
 
 
 
 
Operating lease obligations, long-term
 
$
2,415

 
$
2,810

Mine reclamation liability
 
2,752

 
2,721

Other
 
71

 
229

 
 
$
5,238

 
$
5,760

Schedule of Statement of Operations, Supplemental Disclosures
The following table details the components of Interest expense in the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Interest on Senior Term Loan
 
$
630

 
$
1,270

Debt discount and debt issuance costs
 
354

 
381

453A interest
 
132

 
322

Other
 
94

 
131

 
 
$
1,210

 
$
2,104

v3.20.1
Equity Method Investments
3 Months Ended
Mar. 31, 2020
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments
Equity Method Investments
Tinuum Group, LLC
The Company's ownership interest in Tinuum Group was 42.5% as of March 31, 2020 and December 31, 2019. Tinuum Group supplies technology equipment and technical services at select coal-fired generators, but its primary purpose is to put into operation facilities that produce and sell RC that lower emissions and also qualify for Section 45 tax credits. Tinuum Group has been determined to be a variable interest entity ("VIE"); however, the Company does not have the power to direct the activities that most significantly impact Tinuum Group's economic performance and has therefore accounted for the investment under the equity method of accounting. The Company determined that the voting partners of Tinuum Group have identical voting rights, equity control interests and board control interests, and therefore, concluded that the power to direct the activities that most significantly impact Tinuum Group's economic performance was shared.
The following table summarizes the results of operations of Tinuum Group:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross profit
 
$
5,010

 
$
41,200

Operating, selling, general and administrative expenses
 
12,776

 
6,582

Loss (income) from operations
 
(7,766
)
 
34,618

Other income
 
3,643

 
51

Loss attributable to noncontrolling interest
 
19,271

 
15,776

Net income available to members
 
$
15,148

 
$
50,445

ADES equity earnings from Tinuum Group
 
$
6,438

 
$
19,767


For the three months ended March 31, 2020, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the respective period. For the three months ended March 31, 2019, the Company recognized its pro-rata share of Tinuum Group's net income available to its members for the period, less the amount necessary to recover the cumulative earnings short-fall balance as of the end of the immediately preceding period, which was December 31, 2018. For the three months ended March 31, 2019, the difference between the Company's proportionate share of Tinuum Group's net income available to members (at its equity interest of 42.5%) and the Company's earnings from its Tinuum Group equity method investment as reported in the Condensed Consolidated Statements of Operations relates to the Company receiving distributions in excess of the carrying value of the equity investment, and therefore recognizing such excess distributions as equity method earnings in the period the distributions occur.
For the three months ended March 31, 2020, the Company recognized equity earnings from Tinuum Group of $6.4 million. For the three months ended March 31, 2019, the Company recognized equity earnings from Tinuum Group of $19.8 million.
The following tables present the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, if any, for the three months ended March 31, 2020 and 2019 (in thousands):
Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2019
 
$
32,280

 
$

 
$

 
$

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
6,438

 
6,438

 

 

Cash distributions from Tinuum Group
 
First Quarter
 
(13,764
)
 

 
13,764

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2020
 
$
24,954

 
$
6,438

 
$
13,764

 
$

Description
 
Date(s)
 
Investment balance
 
ADES equity earnings (loss)
 
Cash distributions
 
Memorandum Account: Cash distributions and equity earnings in (excess) of investment balance
Beginning balance
 
12/31/2018
 
$

 
$

 
$

 
$
(1,672
)
Impact of adoption of accounting standards (1)
 
First Quarter
 
37,232

 

 

 

ADES proportionate share of income from Tinuum Group
 
First Quarter
 
21,439

 
21,439

 

 

Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)
 
First Quarter
 
(1,672
)
 
(1,672
)
 

 
1,672

Cash distributions from Tinuum Group
 
First Quarter
 
(16,788
)
 

 
16,788

 

Total investment balance, equity earnings (loss) and cash distributions
 
3/31/2019
 
$
40,211

 
$
19,767

 
$
16,788

 
$

(1) Tinuum Group adopted Accounting Standards Codification Topic ("ASC") 606 - Revenue from Contracts with Customers and ASC 842 - Leases as of January 1, 2019. As a result of Tinuum Group’s adoption of these standards, the Company recorded a cumulative adjustment of $27.4 million, net of the impact of income taxes, related to the Company's percentage of Tinuum Group's cumulative effect adjustment that increased the Company's Retained earnings as of January 1, 2019.
Tinuum Services, LLC
The Company has a 50% voting and economic interest in Tinuum Services. The Company has determined that Tinuum Services is not a VIE and has evaluated its consolidation analysis under the voting interest model. Because the Company does not own greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for its investment in Tinuum Services under the equity method of accounting. The Company’s investment in Tinuum Services as of March 31, 2020 and December 31, 2019 was $5.3 million and $6.8 million, respectively.
The following table summarizes the results of operations of Tinuum Services:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Gross loss
 
$
(22,259
)
 
$
(24,735
)
Operating, selling, general and administrative expenses
 
45,753

 
49,450

Loss from operations
 
(68,012
)
 
(74,185
)
Other expenses
 
(285
)
 
(242
)
Loss attributable to noncontrolling interest
 
71,972

 
78,270

Net income
 
$
3,675

 
$
3,843

ADES equity earnings from Tinuum Services
 
$
1,838

 
$
1,922


Included within the Consolidated Statements of Operations of Tinuum Services for the three months ended March 31, 2020 and 2019, respectively, were losses related to VIE's of Tinuum Services. These losses do not impact the Company's equity earnings from Tinuum Services as 100% of those losses are attributable to a noncontrolling interest and eliminated in the calculations of Tinuum Services' net income attributable to the Company's interest.
The following table details the components of the Company's respective equity method investments included within the Earnings from equity method investments line item on the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Earnings from Tinuum Group
 
$
6,438


$
19,767

Earnings from Tinuum Services
 
1,838


1,922

(Loss) earnings from other
 
(3
)

1

Earnings from equity method investments
 
$
8,273

 
$
21,690

The following table details the components of the cash distributions from the Company's respective equity method investments included in the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported in the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows.
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Distributions from equity method investees, return on investment
 
 
 
 
Tinuum Group
 
$
13,764

 
$
16,788

Tinuum Services
 
3,352

 
2,700

 
 
$
17,116

 
$
19,488

v3.20.1
Commitments and Contingencies
3 Months Ended
Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies
Legal Proceedings
The Company is from time to time subject to, and is presently involved in, various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of its business. Such matters are subject to many uncertainties and to outcomes, the financial impacts of which are not predictable with assurance and that may not be known for extended periods of time. The Company records a liability in its consolidated financial statements for costs related to claims, settlements, and judgments where management has assessed that a loss is probable and an amount can be reasonably estimated. There were no significant legal proceedings as of March 31, 2020.
Restricted Cash
As of March 31, 2020 and December 31, 2019, the Company had long-term restricted cash of $5.0 million and $5.0 million, respectively, which primarily consisted of minimum cash balance requirements under the Senior Term Loan.
Other Commitments and Contingencies
The Company has certain limited obligations contingent upon future events in connection with the activities of Tinuum Group. The Company, NexGen Refined Coal, LLC ("NexGen") and two entities affiliated with NexGen have provided an affiliate of the Goldman Sachs Group, Inc. with limited guaranties (the "Tinuum Group Party Guaranties") related to certain losses it may suffer as a result of inaccuracies or breach of representations and covenants. The Company also is a party to a contribution agreement with NexGen under which any party called upon to pay on a Tinuum Group Party Guaranty is entitled to receive contributions from the other party equal to 50% of the amount paid. The Company has not recorded a liability or expense provision related to this contingent obligation as it believes that it is not probable that a loss will occur with respect to Tinuum Group Party Guaranties.
v3.20.1
Income Taxes
3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
For the three months ended March 31, 2020 and 2019, the Company's income tax expense and effective tax rates based on forecasted pretax income were:
 
 
Three Months Ended March 31,
(in thousands, except for rate)
 
2020
 
2019
Income tax expense
 
$
358

 
$
1,699

Effective tax rate
 
(23
)%
 
11
%

For the three months ended March 31, 2020, the Company reported a loss before income tax of $1.5 million and income tax expense of $0.4 million which resulted in a negative effective tax rate for the quarter. Income tax expense for three months ended March 31, 2020 was due to federal and state income tax expense of $0.4 million, primarily from an increase in the valuation allowance on deferred tax assets of $0.9 million. The increase in the valuation allowance was a result of a reduction in forecasts as of March 31, 2020 of current and future years' taxable income.
The Company assesses the valuation allowance recorded against deferred tax assets at each reporting date. The determination of whether a valuation allowance for deferred tax assets is appropriate requires the evaluation of positive and negative evidence that can be objectively verified. Consideration must be given to all sources of taxable income available to realize the deferred tax asset, including, as applicable, the future reversal of existing temporary differences, future taxable income forecasts exclusive of the reversal of temporary differences and carryforwards, taxable income in carryback years and tax planning strategies. In estimating income taxes, the Company assesses the relative merits and risks of the appropriate income tax treatment of transactions taking into account statutory, judicial, and regulatory guidance.
v3.20.1
Subsequent Events
3 Months Ended
Mar. 31, 2020
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events
Unless disclosed elsewhere within the notes to the Condensed Consolidated Financial Statements, the following are the significant matters that occurred subsequent to March 31, 2020.
Paycheck Protection Program Loan
On April 20, 2020, the Company entered into a loan (the "PPP Loan") evidenced by a promissory note (the "Promissory Note"), under the Paycheck Protection Program sponsored by the U.S. Small Business Administration ("SBA") through BOK, NA dba Bank of Oklahoma ("BOK") providing for $3.3 million in proceeds, which amount was funded to the Company on April 21, 2020. The PPP Loan was made pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and is administered by the SBA.
The Promissory Note matures April 21, 2022 and provides for 18 monthly payments of principal and interest commencing on November 21, 2020. The interest rate on the PPP Loan is 1.00%. The Promissory Note is unsecured and contains customary events of default relating to, among other things, payment defaults, making materially false and misleading representations to the SBA or BOK, or breaching the terms of the PPP Loan. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company. The Promissory Note principal may be forgiven subject to the terms of the Paycheck Protection Program.
Waiver on Senior Term Loan
Pursuant to entering into the PPP Loan, on April 20, 2020, the Company and Apollo Credit Strategies Master Fund Ltd and Apollo A-N Credit Fund (Delaware) L.P. (collectively, "Apollo"), affiliates of a beneficial owner of greater than five percent of the Company's common stock, executed the First Amendment (the "First Amendment") to the Senior Term Loan, which permitted the Company to enter into the PPP Loan.
v3.20.1
Inventories, net (Tables)
3 Months Ended
Mar. 31, 2020
Inventory Disclosure [Abstract]  
Schedule of Inventory
The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of March 31, 2020 and December 31, 2019:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Product inventory
 
$
11,492

 
$
13,515

Raw material inventory
 
2,103

 
1,945

 
 
$
13,595

 
$
15,460


v3.20.1
Stock-Based Compensation - Summary of Non-vested Restricted Stock Activity (Details) - Restricted stock awards
3 Months Ended
Mar. 31, 2020
$ / shares
shares
Number of SAR's Outstanding and Exercisable  
Non-vested shares, Beginning balance (in shares) | shares 451,344
Granted (in shares) | shares 218,524
Vested (in shares) | shares (184,023)
Forfeited (in shares) | shares (265)
Non-vested shares, Ending balance (in shares) | shares 485,580
Units  
Non-vested shares, Weighted-Average Grant Date Fair Value, Beginning Balance (in dollars per share) | $ / shares $ 10.65
Granted, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 5.34
Vested in period, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 10.39
Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 10.84
Non-vested shares, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share) | $ / shares $ 8.36
v3.20.1
Supplemental Financial Information - Narrative (Details) - USD ($)
$ in Millions
1 Months Ended 3 Months Ended
Nov. 30, 2014
Mar. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Mine reserves, amortization period   21 years
Highview Enterprises Limited    
Schedule of Equity Method Investments [Line Items]    
Ownership interest, percent 8.00%  
Payments to acquire investments $ 2.8  
v3.20.1
Business Segment Information - Segment Operating Results (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
segment
Mar. 31, 2019
USD ($)
Segment Reporting Information [Line Items]    
Number of reportable segments | segment 2  
Revenues:    
Earnings in equity method investments $ 8,273 $ 21,690
Total revenues 12,263 19,329
Total reported revenues 12,263 19,329
Segment operating income (loss):    
Total segment operating income (8,641) (3,555)
453A interest 132 322
Decrease in inventories 1,572 3,262
Refined Coal    
Revenues:    
Earnings in equity method investments 8,273 21,690
Total revenues 3,046 4,220
Refined Coal | RMC6, LLC (RCM6)    
Segment operating income (loss):    
453A interest 100 300
Power Generation and Industrials    
Revenues:    
Earnings in equity method investments 0 0
Total revenues 8,475 14,553
Consumables    
Revenues:    
Total revenues 9,217 15,109
Consumables | Refined Coal    
Revenues:    
Total revenues 0 0
Consumables | Power Generation and Industrials    
Revenues:    
Total revenues 8,475 14,553
Operating Segments    
Revenues:    
Total reported revenues 19,794 40,463
Segment operating income (loss):    
Total segment operating income 4,283 21,771
Operating Segments | Refined Coal    
Revenues:    
Earnings in equity method investments 8,273 21,690
License royalties, related party 3,046 4,220
Total reported revenues 11,319 25,910
Segment operating income (loss):    
Total segment operating income 10,860 25,233
Operating Segments | Power Generation and Industrials    
Revenues:    
Total reported revenues 8,475 14,553
Segment operating income (loss):    
Total segment operating income (6,577) (3,462)
Severance costs 2,000 2,000
Decrease in inventories 3,400  
Operating Segments | Consumables | Power Generation and Industrials    
Revenues:    
Total revenues 8,475 14,553
Intersegment Eliminations | Refined Coal    
Revenues:    
Earnings in equity method investments (8,273) (21,690)
Corporate and Other    
Revenues:    
Total reported revenues 742 556
Segment operating income (loss):    
Total segment operating income $ (793) $ (398)
v3.20.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 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 0 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 0 (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 0
Dividends payable $ 105 $ 58
v3.20.1
Debt Obligations - Senior Term Loan (Details)
3 Months Ended
Dec. 07, 2018
USD ($)
Mar. 31, 2020
USD ($)
Dec. 31, 2019
USD ($)
Senior Term Loan      
Debt Instrument [Line Items]      
Less: net unamortized debt discount $ 2,100,000 $ 1,020,000 $ 1,200,000
Debt issuance costs $ 2,000,000 989,000 $ 1,163,000
Term 36 months    
Interest rate, stated percentage 4.75%    
Minimum cash balance required   $ 5,000,000.0  
Expected future net cash flows from refined coal business   1.75  
Maximum annual collective dividends and buybacks   $ 30,000,000.0  
Minimum requirement from future net cash flows from refined coal business   $ 100,000,000  
Senior Term Loan | Beginning on March 1, 2019      
Debt Instrument [Line Items]      
Periodic payment, principal $ 6,000,000    
Senior Term Loan | LIBOR      
Debt Instrument [Line Items]      
Basis spread on variable rate 1.50%    
ADA Carbon Solutions, LLC | Term Loan | Senior Term Loan      
Debt Instrument [Line Items]      
Proceeds from issuance of debt $ 70,000,000    
Senior Term Loan due December 2021, related party | Minimum      
Debt Instrument [Line Items]      
Percent of common stock owned 5.00%    
v3.20.1
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
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
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 (Note 8)
Stockholders’ equity:    
Preferred stock: par value of $.001 per share, 50,000,000 shares authorized, none outstanding 0 0
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
v3.20.1
Equity Method Investments - Narrative (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Schedule of Equity Method Investments [Line Items]        
Earnings from equity method investments $ 8,273 $ 21,690    
Equity method investments $ 30,312   $ 39,155  
Tinuum Group, LLC        
Schedule of Equity Method Investments [Line Items]        
Ownership interest, percent 42.50%   42.50%  
Earnings from equity method investments $ 6,438 19,767    
Equity method investments $ 24,954 40,211 $ 32,280 $ 0
Tinuum Services, LLC        
Schedule of Equity Method Investments [Line Items]        
Ownership interest, percent 50.00%      
Earnings from equity method investments $ 1,838 $ 1,922    
Equity method investments $ 5,300   $ 6,800  
Percent of losses removed from net income, attributable to noncontrolling interest 100.00%      
v3.20.1
Stock-Based Compensation - Summary of Unrecognized Compensation Cost (Details)
$ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Unrecognized Compensation Cost $ 3,487
Expected Weighted- Average Period of Recognition (in years) 2 years 3 months 15 days
Restricted stock awards  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Unrecognized Compensation Cost $ 3,178
Expected Weighted- Average Period of Recognition (in years) 2 years 2 months 23 days
Restricted stock units  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Unrecognized Compensation Cost $ 309
Expected Weighted- Average Period of Recognition (in years) 2 years 11 months 9 days
v3.20.1
Leases - Lease Liabilities (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Lease, cost    
Amortization of right-of-use assets $ 514 $ 536
Interest on lease liabilities 94 131
Operating lease cost 853 929
Short-term lease cost 282 171
Variable lease cost 93 82
Total lease cost 1,836 1,849
Operating cash flows from finance leases 94 131
Operating cash flows from operating leases 634 949
Financing cash flows from finance leases 340 344
Right-of-use assets obtained in exchange for new operating lease liabilities $ 60 $ 49
Weighted-average remaining lease term - finance leases 4 years 1 month 6 days 4 years 10 months 24 days
Weighted-average remaining lease term - operating leases 2 years 3 months 17 days 2 years 6 months
Weighted-average discount rate - finance leases 6.10% 6.10%
Weighted-average discount rate - operating leases 8.50% 8.60%
v3.20.1
Commitments and Contingencies (Details)
Mar. 31, 2020
USD ($)
entity
Dec. 31, 2019
USD ($)
Commitments and Contingencies Disclosure [Abstract]    
Restricted cash, long-term $ 5,000,000 $ 5,000,000
Tinuum Group, LLC    
Related Party Transaction [Line Items]    
Number of entities affiliated with related parties | entity 2  
Limited guarantees. percent 50.00%  
Liabilities or expense $ 0  
v3.20.1
Restructuring - Narrative (Details) - USD ($)
$ in Millions
1 Months Ended 3 Months Ended
Dec. 31, 2018
Mar. 31, 2020
Restructuring Cost and Reserve [Line Items]    
Restructuring charges   $ 0.0
Employee Severance | ADA Carbon Solutions, LLC    
Restructuring Cost and Reserve [Line Items]    
Restructuring charges $ 0.6  
v3.20.1
Leases
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Leases
Leases
As of March 31, 2020, the Company has obligations under finance and operating leases in the amounts of $6.4 million and $4.6 million, respectively. As of March 31, 2020, the Company has right of use ("ROU") assets, net of accumulated amortization, under finance leases and operating leases of $5.4 million and $4.4 million, respectively.
Finance leases
ROU assets under finance leases and finance lease liabilities are included in Property, plant and equipment and Current portion and Long-term portion of borrowings, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020. Interest expense related to finance lease liabilities and amortization of ROU assets under finance leases are included in Interest expense and Depreciation, amortization, depletion and accretion, respectively, in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2020.
Operating leases
ROU assets under operating leases and operating lease liabilities are included in Other long-term assets and Other liabilities and Other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020.
Lease expense for operating leases for the three months ended March 31, 2020 and 2019 was $1.2 million and $1.2 million, respectively, of which $1.0 million and $1.1 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.1 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations.
Lease financial information as of and for the three months ended March 31, 2020 and 2019 is provided in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Finance lease cost:
 
 
 
 
Amortization of right-of-use assets
 
$
514

 
$
536

Interest on lease liabilities
 
94

 
131

Operating lease cost
 
853

 
929

Short-term lease cost
 
282

 
171

Variable lease cost (1)
 
93

 
82

Total lease cost
 
$
1,836

 
$
1,849

 
 
 
 
 
Other Information:
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows from finance leases
 
$
94

 
$
131

Operating cash flows from operating leases
 
$
634

 
$
949

Financing cash flows from finance leases
 
$
340

 
$
344

Right-of-use assets obtained in exchange for new operating lease liabilities
 
$
60

 
$
49

Weighted-average remaining lease term - finance leases
 
4.1 years

 
4.9 years

Weighted-average remaining lease term - operating leases
 
2.3 years

 
2.5 years

Weighted-average discount rate - finance leases
 
6.1
%
 
6.1
%
Weighted-average discount rate - operating leases
 
8.5
%
 
8.6
%
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
Leases
Leases
As of March 31, 2020, the Company has obligations under finance and operating leases in the amounts of $6.4 million and $4.6 million, respectively. As of March 31, 2020, the Company has right of use ("ROU") assets, net of accumulated amortization, under finance leases and operating leases of $5.4 million and $4.4 million, respectively.
Finance leases
ROU assets under finance leases and finance lease liabilities are included in Property, plant and equipment and Current portion and Long-term portion of borrowings, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020. Interest expense related to finance lease liabilities and amortization of ROU assets under finance leases are included in Interest expense and Depreciation, amortization, depletion and accretion, respectively, in the Condensed Consolidated Statement of Operations for the three months ended March 31, 2020.
Operating leases
ROU assets under operating leases and operating lease liabilities are included in Other long-term assets and Other liabilities and Other long-term liabilities, respectively, in the Condensed Consolidated Balance Sheet as of March 31, 2020.
Lease expense for operating leases for the three months ended March 31, 2020 and 2019 was $1.2 million and $1.2 million, respectively, of which $1.0 million and $1.1 million, respectively, is included in Consumables - cost of revenue, exclusive of depreciation and amortization, and $0.2 million and $0.1 million, respectively, is included in General and administrative in the Condensed Consolidated Statement of Operations.
Lease financial information as of and for the three months ended March 31, 2020 and 2019 is provided in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Finance lease cost:
 
 
 
 
Amortization of right-of-use assets
 
$
514

 
$
536

Interest on lease liabilities
 
94

 
131

Operating lease cost
 
853

 
929

Short-term lease cost
 
282

 
171

Variable lease cost (1)
 
93

 
82

Total lease cost
 
$
1,836

 
$
1,849

 
 
 
 
 
Other Information:
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows from finance leases
 
$
94

 
$
131

Operating cash flows from operating leases
 
$
634

 
$
949

Financing cash flows from finance leases
 
$
340

 
$
344

Right-of-use assets obtained in exchange for new operating lease liabilities
 
$
60

 
$
49

Weighted-average remaining lease term - finance leases
 
4.1 years

 
4.9 years

Weighted-average remaining lease term - operating leases
 
2.3 years

 
2.5 years

Weighted-average discount rate - finance leases
 
6.1
%
 
6.1
%
Weighted-average discount rate - operating leases
 
8.5
%
 
8.6
%
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
v3.20.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
The Company grants equity-based awards to employees, non-employee directors, and consultants that may include, but are not limited to, RSA's, restricted stock units ("RSU's"), performance stock units ("PSU's") and stock options. Stock-based compensation expense related to manufacturing employees and administrative employees is included within the Cost of goods sold and Payroll and benefits line items, respectively, in the Condensed Consolidated Statements of Operations. Stock-based compensation expense related to non-employee directors and consultants is included within the General and administrative line item in the Condensed Consolidated Statements of Operations.
Total stock-based compensation expense for the three months ended March 31, 2020 and 2019 was as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
RSA expense
 
$
506

 
$
317

Total stock-based compensation expense
 
$
506

 
$
317


The amount of unrecognized compensation cost as of March 31, 2020, and the expected weighted-average period over which the cost will be recognized is as follows:
 
 
As of March 31, 2020
(in thousands)
 
Unrecognized Compensation Cost
 
Expected Weighted-
Average Period of
Recognition (in years)
RSA expense
 
$
3,178

 
2.23
PSU expense
 
309

 
2.94
Total unrecognized stock-based compensation expense
 
$
3,487

 
2.29

Restricted Stock
Restricted stock is typically granted with vesting terms of three years. The fair value of RSA's and RSU's is determined based on the closing price of the Company’s common stock on the authorization date of the grant multiplied by the number of shares subject to the stock award. Compensation expense for RSA's is generally recognized on a straight-line basis over the entire vesting period. Compensation expense for RSU's is generally recognized on a straight-line basis over the service period of the award.
A summary of RSA activity under the Company's various stock compensation plans for the three months ended March 31, 2020 is presented below:
 
 
Restricted Stock
 
Weighted-Average Grant Date Fair Value
Non-vested at January 1, 2020
 
451,344

 
$
10.65

Granted
 
218,524

 
$
5.34

Vested
 
(184,023
)
 
$
10.39

Forfeited
 
(265
)
 
$
10.84

Non-vested at March 31, 2020
 
485,580

 
$
8.36


Stock Options
Stock options generally vest over three years or upon satisfaction of performance-based conditions and have a contractual limit of five years from the date of grant to exercise. The fair value of stock options granted is determined on the date of grant using the Black-Scholes option pricing model and the related expense is recognized on a straight-line basis over the entire vesting period.
A summary of stock option activity for the three months ended March 31, 2020 is presented below:
 
 
Number of Options
Outstanding and
Exercisable
 
Weighted-Average
Exercise Price
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining Contractual
Term (in years)
Options outstanding, January 1, 2020
 
300,000

 
$
13.87

 
 
 

Options granted
 

 

 
 
 
 
Options exercised
 

 

 
 
 
 
Options expired / forfeited
 

 

 
 
 
 
Options outstanding, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18
Options vested and exercisable, March 31, 2020
 
300,000

 
$
13.87

 
$

 
0.18

Performance Share Units
Compensation expense is recognized for PSU awards on a straight-line basis over the applicable service period, which is generally three years, based on the estimated fair value at the date of grant using a Monte Carlo simulation model. A summary of PSU activity for the three months ended March 31, 2020 is presented below:
 
 
Units
 
Weighted-Average
Grant Date
Fair Value
 
Aggregate Intrinsic Value (in thousands)
 
Weighted-Average
Remaining
Contractual
Term (in years)
PSU's outstanding, January 1, 2020
 

 
$

 
 
 
 
Granted
 
50,127

 
6.17

 
 
 
 
Vested / Settled
 

 

 
 
 
 
Forfeited / Canceled
 

 

 
 
 
 
PSU's outstanding, March 31, 2020
 
50,127

 
$
6.17

 
$
329

 
2.94
v3.20.1
Business Segment Information (Tables)
3 Months Ended
Mar. 31, 2020
Segment Reporting [Abstract]  
Segment Operating Results
The following table presents the Company's operating segment results for the three months ended March 31, 2020 and 2019:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Revenues:
 
 
 
 
Refined Coal:
 
 
 
 
Earnings in equity method investments
 
$
8,273

 
$
21,690

License royalties, related party
 
3,046

 
4,220

 
 
11,319

 
25,910

Power Generation and Industrials:
 
 
 
 
Consumables
 
8,475


14,553

 
 
8,475

 
14,553

Total segment reporting revenues
 
19,794

 
40,463

 
 
 
 
 
Adjustments to reconcile to reported revenues:
 
 
 
 
Earnings in equity method investments
 
(8,273
)
 
(21,690
)
Corporate and other
 
742

 
556

Total reported revenues
 
$
12,263

 
$
19,329

 
 
 
 
 
Segment operating income (loss):
 
 
 
 
Refined Coal (1)
 
$
10,860

 
$
25,233

Power Generation and Industrials (2)
 
(6,577
)
 
(3,462
)
Total segment operating income
 
$
4,283

 
$
21,771


(1) Included in RC segment operating income for the three months ended March 31, 2020 and 2019 is 453A interest expense of $0.1 million and $0.3 million, respectively.
(2) Included in PGI segment operating loss for the three months ended March 31, 2020 and 2019 was $2.0 million and $2.0 million, respectively, of depreciation, amortization, and depletion expense on mine and plant long-lived assets. Included in PGI segment operating loss for the three months ended March 31, 2019 was $3.4 million of costs recognized as a result of the step-up in inventory fair value recorded from the Carbon Solutions Acquisition.
Reconciliation of Reportable Segment Amounts to Consolidated Balances
A reconciliation of reportable segment operating income to the Company's consolidated income before income tax expense is as follows:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Total reported segment operating income
 
$
4,283

 
$
21,771

Other operating loss
 
(793
)
 
(398
)
 
 
3,490

 
21,373

Adjustments to reconcile to (loss) income before income tax expense attributable to the Company:
 
 
 
 
Corporate payroll and benefits
 
(709
)
 
(432
)
Corporate legal and professional fees
 
(1,749
)
 
(1,811
)
Corporate general and administrative
 
(1,599
)
 
(1,434
)
Corporate depreciation and amortization
 
(26
)
 
(13
)
Corporate interest (expense) income, net
 
(942
)
 
(1,582
)
(Loss) income before income tax expense
 
$
(1,535
)
 
$
16,101

Reconciliation of Assets from Segment to Consolidated
A reconciliation of reportable segment assets to the Company's consolidated assets is as follows:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Assets:
 
 
 
 
Refined Coal (1)
 
$
33,940

 
$
43,953

Power Generation and Industrials
 
78,539

 
80,912

Total segment assets
 
112,479

 
124,865

All Other and Corporate (2)
 
47,704

 
48,934

Consolidated
 
$
160,183

 
$
173,799


(1) Includes $30.3 million and $39.2 million of investments in equity method investees, respectively.
(2) Includes the Company's deferred tax assets.
v3.20.1
Stockholders' Equity (Tables)
3 Months Ended
Mar. 31, 2020
Equity [Abstract]  
Schedule of Dividends Declared
Dividends declared and paid quarterly on all outstanding shares of common stock during the three months ended March 31, 2020 and 2019 were as follows:
 
 
2020
 
2019
 
 
Per share
 
Date paid
 
Per share
 
Date paid
Dividends declared during quarter ended:
 
 
 
 
 
 
 
 
March 31
 
$
0.25

 
March 10, 2020
 
$
0.25

 
March 7, 2019
 
 
$
0.25

 
 
 
$
0.25

 
 
v3.20.1
Basis of Presentation - Additional Information (Details)
Mar. 31, 2020
debt_instrument
Tinuum Group, LLC | Customer Concentration Risk  
Concentration Risk [Line Items]  
Number of instruments held 8
Tinuum Group, LLC  
Concentration Risk [Line Items]  
Number of instruments held 20
v3.20.1
Debt Obligations (Tables)
3 Months Ended
Mar. 31, 2020
Debt Disclosure [Abstract]  
Schedule of Borrowings
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Senior Term Loan due December 2021, related party
 
$
34,000

 
$
40,000

Less: net unamortized debt issuance costs
 
(989
)
 
(1,163
)
Less: net unamortized debt discount
 
(1,020
)
 
(1,200
)
Senior Term Loan due December 2021, net
 
31,991

 
37,637

Finance lease obligations
 
6,390

 
6,729

 
 
38,381

 
44,366

Less: Current maturities
 
(24,192
)
 
(23,932
)
Total long-term debt
 
$
14,189

 
$
20,434

v3.20.1
Fair Value Measurements
3 Months Ended
Mar. 31, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements
Fair Value Measurements
Fair value of financial instruments
The carrying amounts of financial instruments, including cash, cash equivalents and restricted cash, accounts receivable, accounts payable and accrued expenses, approximate fair value due to the short maturity of these instruments. Accordingly, these instruments are not presented in the table below. The following table provides the estimated fair values of the remaining financial instruments:
 
 
As of March 31, 2020
 
As of December 31, 2019
(in thousands)
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Financial Instruments:
 
 
 
 
 
 
 
 
Highview Investment
 
$
552

 
$
552

 
$
552

 
$
552

Highview Obligation
 
$
208

 
$
208

 
$
220

 
$
220


Concentration of credit risk
The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents. The Company holds cash and cash equivalents at three financial institutions as of March 31, 2020. If an institution was unable to perform its obligations, the Company would be at risk regarding the amount of cash and investments in excess of the Federal Deposit Insurance Corporation limits (currently $250 thousand) that would be returned to the Company.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
As of March 31, 2020 and December 31, 2019, the Company had no financial instruments carried and measured at fair value on a recurring basis.
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
As disclosed in Note 2, the Company completed the Carbon Solutions Acquisition for purchase consideration of $66.5 million. The estimated fair values of the assets acquired and liabilities assumed were determined based on Level 3 inputs.
The Company has applied the measurement alternative for investments without readily determinable fair values under ASC Topic 321 - Investments in Equity Securities ("ASC 321") for the Highview Investment. Fair value measurements, if any, resulting from the Company's application of the guidance in ASC 321 represent either Level 2 or Level 3 measurements. There were no changes to the carrying value of the Highview Investment for the three months ended March 31, 2020 and 2019 as there were no indicators of impairment or observable price changes for identical or similar investments.
v3.20.1
Basis of Presentation (Tables)
3 Months Ended
Mar. 31, 2020
Accounting Policies [Abstract]  
Schedule of Earnings Per Share, Basic and Diluted
The following table sets forth the calculations of basic and diluted earnings (loss) per share:
 
 
Three Months Ended March 31,
(in thousands, except per share amounts)
 
2020
 
2019
Net (loss) income
 
$
(1,893
)
 
$
14,402

Less: Dividends and undistributed income (loss) allocated to participating securities
 
(2
)
 
20

(Loss) income attributable to common stockholders
 
$
(1,891
)
 
$
14,382

 
 
 
 
 
Basic weighted-average common shares outstanding
 
17,932

 
18,268

Add: dilutive effect of equity instruments
 

 
165

Diluted weighted-average shares outstanding
 
17,932

 
18,433

(Loss) earnings per share - basic
 
$
(0.11
)
 
$
0.79

(Loss) earnings per share - diluted
 
$
(0.11
)
 
$
0.78

v3.20.1
Equity Method Investments - Rollforward of CCS Investment (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Dec. 31, 2019
Jan. 01, 2019
Dec. 31, 2018
Equity Method Investments [Roll Forward]          
Beginning balance $ 39,155        
Total investment balance, equity earnings (loss) and cash distributions 30,312        
Retained earnings 50,853   $ 57,336    
Tinuum Group, LLC          
Equity Method Investments [Roll Forward]          
Beginning balance 32,280 $ 0      
Impact of adoption of accounting standards         $ 37,232
ADES proportionate share of income from Tinuum Group 6,438 21,439      
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)   1,672      
Cash distributions from Tinuum Group 13,764 16,788      
Total investment balance, equity earnings (loss) and cash distributions 24,954 40,211      
Tinuum Group, LLC | Difference between Revenue Guidance in Effect before and after Topic 606 | ASU No. 2014-09          
Equity Method Investments [Roll Forward]          
Retained earnings       $ 27,400  
Tinuum Group, LLC | ADES equity earnings (loss)          
Equity Method Investments [Roll Forward]          
Beginning balance 0 0      
Impact of adoption of accounting standards         0
ADES proportionate share of income from Tinuum Group 6,438 21,439      
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)   1,672      
Cash distributions from Tinuum Group 0 0      
Total investment balance, equity earnings (loss) and cash distributions 6,438 19,767      
Tinuum Group, LLC | Cash distributions          
Equity Method Investments [Roll Forward]          
Beginning balance 0 0      
Impact of adoption of accounting standards         0
ADES proportionate share of income from Tinuum Group 0 0      
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)   0      
Cash distributions from Tinuum Group 13,764 16,788      
Total investment balance, equity earnings (loss) and cash distributions 13,764 16,788      
Tinuum Group, LLC | Memorandum Account: Cash distributions and equity loss in (excess) of investment balance          
Equity Method Investments [Roll Forward]          
Beginning balance 0 1,672      
Impact of adoption of accounting standards         $ 0
ADES proportionate share of income from Tinuum Group 0 0      
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions)   1,672      
Cash distributions from Tinuum Group 0 0      
Total investment balance, equity earnings (loss) and cash distributions $ 0 $ 0      
v3.20.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenues:    
Total revenues $ 12,263 $ 19,329
Operating expenses:    
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
(Loss) earnings per common share (Note 1):    
Basic (in dollars per share) $ (0.11) $ 0.79
Diluted (in dollars per share) $ (0.11) $ 0.78
Weighted-average number of common shares outstanding:    
Basic (in shares) 17,932 18,268
Diluted (in shares) 17,932 18,433
Consumables    
Revenues:    
Total revenues $ 9,217 $ 15,109
Operating expenses:    
Consumables cost of revenue, exclusive of depreciation and amortization 11,491 14,108
License royalties, related party    
Revenues:    
Total revenues $ 3,046 $ 4,220
v3.20.1
Acquisition - Allocation (Details) - ADA Carbon Solutions, LLC - USD ($)
$ in Thousands
16 Months Ended
Dec. 07, 2018
Mar. 31, 2020
Fair value of assets acquired:    
Cash $ 3,284 $ 3,284
Receivables 6,409 6,409
Inventories 22,100 21,744
Prepaid expenses and other current assets 2,992 3,053
Spare parts 3,359 3,359
Property, plant and equipment 43,033 42,656
Mine leases and development 2,500 2,700
Mine reclamation asset 0 2,402
Intangible assets 4,000 4,100
Other assets 168 168
Amount attributable to assets acquired 87,845 89,875
Fair value of liabilities assumed:    
Accounts payable 4,771 4,771
Accrued liabilities 7,354 7,608
Equipment lease liabilities 8,211 8,211
Mine reclamation liability 626 2,402
Other liabilities 437 437
Amount attributable to liabilities assumed 21,399 23,429
Adjustments    
Cash   0
Receivables   0
Inventories   (356)
Prepaid expenses and other current assets   61
Spare parts   0
Property, plant and equipment   (377)
Mine leases and development   200
Mine reclamation asset   2,402
Intangible assets   100
Other assets   0
Amount attributable to assets acquired   2,030
Accounts payable   0
Accrued liabilities   254
Equipment lease liabilities   0
Mine reclamation liability   1,776
Other liabilities   0
Amount attributable to liabilities assumed   2,030
Net assets acquired $ 66,446 66,446
Net assets acquired   0
Customer relationships    
Fair value of assets acquired:    
Intangible assets   2,200
Adjustments    
Weighted Average Useful Life (years) 5 years  
Developed technology    
Fair value of assets acquired:    
Intangible assets   1,600
Adjustments    
Weighted Average Useful Life (years) 5 years  
Trade name    
Fair value of assets acquired:    
Intangible assets   $ 300
Adjustments    
Weighted Average Useful Life (years) 2 years  
v3.20.1
Acquisition
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Acquisition
Acquisition
As described in Note 1, on the Acquisition Date, the Company completed the acquisition of Carbon Solutions (the "Carbon Solutions Acquisition") for a total purchase price of $75.0 million (the "Purchase Price"). The fair value of the purchase consideration totaled $66.5 million, less cash acquired of $3.3 million, and the assumption of debt and contractual commitments of $11.8 million. The Company also paid $4.5 million in acquisition-related costs (or transaction costs). The Company funded the cash consideration from cash on hand and the proceeds from the Term Loan and Security Agreement (the "Senior Term Loan") in the principal amount of $70.0 million, as more fully described in Note 5.
The following table summarizes the final purchase price allocation. Subsequent to the Acquisition Date, the Company completed additional analysis and adjustments were made to the preliminary purchase price allocations as noted in the table below:
Fair value of assets acquired:
 
As Originally Reported
 
Adjustments
 
As Adjusted
Cash
 
$
3,284

 
$

 
$
3,284

Receivables
 
6,409

 

 
6,409

Inventories
 
22,100

 
(356
)
 
21,744

Prepaid expenses and other current assets
 
2,992

 
61

 
3,053

Spare parts
 
3,359

 

 
3,359

Property, plant and equipment
 
43,033

 
(377
)
 
42,656

Mine leases and development
 
2,500

 
200

 
2,700

Mine reclamation asset
 

 
2,402

 
2,402

Intangible assets
 
4,000

 
100

 
4,100

Other assets
 
168

 

 
168

Amount attributable to assets acquired
 
87,845

 
2,030

 
89,875

 
 
 
 
 
 
 
Fair value of liabilities assumed:
 
 
 
 
 
 
Accounts payable
 
4,771

 

 
4,771

Accrued liabilities
 
7,354

 
254

 
7,608

Equipment lease liabilities
 
8,211

 

 
8,211

Mine reclamation liability
 
626

 
1,776

 
2,402

Other liabilities
 
437

 

 
437

Amount attributable to liabilities assumed
 
21,399

 
2,030

 
23,429

 
 
 
 
 
 
 
Net assets acquired
 
$
66,446

 
$

 
$
66,446


Adjustments to the preliminary purchase price allocation primarily related to changes in fair values assigned to property, plant and equipment, intangible assets, mine reclamation liability and the related mine reclamation asset as a result of the final valuation report from the Company's third-party valuation firm issued in May 2019. During the three months ended June 30, 2019 based on new information of facts and circumstances that existed as of the Acquisition Date, the Company revised its estimates used as of the Acquisition Date related to the net realizable value of certain finished goods inventory items as well as values assigned to certain prepaid and accrued expense items.
The following table represents the intangible assets, as adjusted for purchase price adjustments noted above, identified as part of the Carbon Solutions Acquisition:
(in thousands)
 
Amount
 
Weighted Average Useful Life (years)
Customer relationships
 
$
2,200

 
5
Developed technology
 
1,600

 
5
Trade name
 
300

 
2
Total intangibles acquired
 
$
4,100

 
 


v3.20.1
Leases - Narrative (Details)
ft² in Thousands, $ in Thousands
1 Months Ended 3 Months Ended
Mar. 31, 2020
USD ($)
Aug. 31, 2019
ft²
Mar. 31, 2020
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2019
USD ($)
Lessee, Lease, Description [Line Items]          
Long-term lease liabilities $ 6,390   $ 6,390   $ 6,729
Operating lease, liability 4,600   4,600    
Finance lease, right of use asset 5,400   5,400    
Operating lease, right of use asset 4,358   4,358   $ 5,073
Operating lease, expense     1,200 $ 1,200  
Amortization of right-of-use assets     514 536  
Square feet under lease | ft²   0      
Operating lease liability, adjustments $ 100        
General and Administrative Expense          
Lessee, Lease, Description [Line Items]          
Operating lease, expense     200 100  
Consumables          
Lessee, Lease, Description [Line Items]          
Operating lease, expense     $ 1,000 $ 1,100  
v3.20.1
Stock-Based Compensation - Summary of Non-vested PSUs (Details) - Performance share units
$ / shares in Units, $ in Thousands
3 Months Ended
Mar. 31, 2020
USD ($)
$ / shares
shares
Number of SAR's Outstanding and Exercisable  
Non-vested shares, Beginning balance (in shares) | shares 0
Granted (in shares) | shares 50,127
Vested / Settled (in shares) | shares 0
Forfeited/Canceled (in shares) | shares 0
Non-vested shares, Ending balance (in shares) | shares 50,127
Units  
Non-vested shares, Weighted-Average Grant Date Fair Value, Beginning Balance (in dollars per share) | $ / shares $ 0.00
Granted, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 6.17
Vested / Settled in period, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 0.00
Forfeited, Weighted-Average Grant Date Fair Value (in dollars per share) | $ / shares 0.00
Non-vested shares, Weighted-Average Grant Date Fair Value, Ending Balance (in dollars per share) | $ / shares $ 6.17
Outstanding, Aggregate Intrinsic Value | $ $ 329
Outstanding, Weighted Average Remaining Contractual Term (in years) 2 years 11 months 9 days
v3.20.1
Supplemental Financial Information - Supplemental Income Statement, Interest Expense (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]    
Interest on Senior Term Loan $ 630 $ 1,270
Debt discount and debt issuance costs 354 381
453A interest 132 322
Other 94 131
Interest expense $ 1,210 $ 2,104
v3.20.1
Restructuring
3 Months Ended
Mar. 31, 2020
Restructuring and Related Activities [Abstract]  
Restructuring
Restructuring
In December 2018, the Company recorded restructuring charges in connection with the departures of certain executives of Carbon Solutions in conjunction with the Carbon Solutions Acquisition. As part of the Carbon Solutions Acquisition, the Company also assumed a salary severance liability for an additional executive of Carbon Solutions in the amount of $0.6 million. There were no material restructuring activities during the three months ended March 31, 2020.
The following table summarizes the Company's change in restructuring accruals for the three months ended March 31, 2020:
(in thousands)
 
Employee Severance
Remaining accrual as of December 31, 2019
 
$
254

Expense provision
 

Cash payments and other
 
(122
)
Change in estimates
 
(7
)
Remaining accrual as of March 31, 2020
 
$
125


Restructuring accruals are included within the Accrued payroll and related liabilities line item in the Condensed Consolidated Balance Sheets. Restructuring expenses are included within the Payroll and benefits line item in the Condensed Consolidated Statements of Operations.
v3.20.1
Acquisition (Tables)
3 Months Ended
Mar. 31, 2020
Business Combinations [Abstract]  
Summary of Purchase Consideration and Allocation
The following table summarizes the final purchase price allocation. Subsequent to the Acquisition Date, the Company completed additional analysis and adjustments were made to the preliminary purchase price allocations as noted in the table below:
Fair value of assets acquired:
 
As Originally Reported
 
Adjustments
 
As Adjusted
Cash
 
$
3,284

 
$

 
$
3,284

Receivables
 
6,409

 

 
6,409

Inventories
 
22,100

 
(356
)
 
21,744

Prepaid expenses and other current assets
 
2,992

 
61

 
3,053

Spare parts
 
3,359

 

 
3,359

Property, plant and equipment
 
43,033

 
(377
)
 
42,656

Mine leases and development
 
2,500

 
200

 
2,700

Mine reclamation asset
 

 
2,402

 
2,402

Intangible assets
 
4,000

 
100

 
4,100

Other assets
 
168

 

 
168

Amount attributable to assets acquired
 
87,845

 
2,030

 
89,875

 
 
 
 
 
 
 
Fair value of liabilities assumed:
 
 
 
 
 
 
Accounts payable
 
4,771

 

 
4,771

Accrued liabilities
 
7,354

 
254

 
7,608

Equipment lease liabilities
 
8,211

 

 
8,211

Mine reclamation liability
 
626

 
1,776

 
2,402

Other liabilities
 
437

 

 
437

Amount attributable to liabilities assumed
 
21,399

 
2,030

 
23,429

 
 
 
 
 
 
 
Net assets acquired
 
$
66,446

 
$

 
$
66,446

Summary of Finite-Lived Intangible Assets Acquired
The following table represents the intangible assets, as adjusted for purchase price adjustments noted above, identified as part of the Carbon Solutions Acquisition:
(in thousands)
 
Amount
 
Weighted Average Useful Life (years)
Customer relationships
 
$
2,200

 
5
Developed technology
 
1,600

 
5
Trade name
 
300

 
2
Total intangibles acquired
 
$
4,100

 
 
v3.20.1
Leases (Tables)
3 Months Ended
Mar. 31, 2020
Leases [Abstract]  
Lease, Cost
Lease financial information as of and for the three months ended March 31, 2020 and 2019 is provided in the following table:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Finance lease cost:
 
 
 
 
Amortization of right-of-use assets
 
$
514

 
$
536

Interest on lease liabilities
 
94

 
131

Operating lease cost
 
853

 
929

Short-term lease cost
 
282

 
171

Variable lease cost (1)
 
93

 
82

Total lease cost
 
$
1,836

 
$
1,849

 
 
 
 
 
Other Information:
 
 
 
 
Cash paid for amounts included in the measurement of lease liabilities:
 
 
 
 
Operating cash flows from finance leases
 
$
94

 
$
131

Operating cash flows from operating leases
 
$
634

 
$
949

Financing cash flows from finance leases
 
$
340

 
$
344

Right-of-use assets obtained in exchange for new operating lease liabilities
 
$
60

 
$
49

Weighted-average remaining lease term - finance leases
 
4.1 years

 
4.9 years

Weighted-average remaining lease term - operating leases
 
2.3 years

 
2.5 years

Weighted-average discount rate - finance leases
 
6.1
%
 
6.1
%
Weighted-average discount rate - operating leases
 
8.5
%
 
8.6
%
(1) Primarily includes common area maintenance, property taxes and insurance payable to lessors.
v3.20.1
Inventories, net
3 Months Ended
Mar. 31, 2020
Inventory Disclosure [Abstract]  
Inventories, net
Inventories, net
The following table summarizes the Company's inventories recorded at the lower of average cost or net realizable value as of March 31, 2020 and December 31, 2019:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Product inventory
 
$
11,492

 
$
13,515

Raw material inventory
 
2,103

 
1,945

 
 
$
13,595

 
$
15,460


v3.20.1
Debt Obligations - Line of Credit (Details) - USD ($)
Mar. 31, 2020
Dec. 07, 2018
Debt Instrument [Line Items]    
Line of credit $ 0  
Line of Credit    
Debt Instrument [Line Items]    
Minimum cash balance required   $ 5,000,000.0
Senior Term Loan    
Debt Instrument [Line Items]    
Face amount   $ 70,000,000.0
Minimum cash balance required $ 5,000,000.0  
v3.20.1
Equity Method Investments - Results of Operations and Summary of Distributions (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]    
ADES equity earnings $ 8,273 $ 21,690
Equity Method Investment, Financial Statement, Reported Amounts [Abstract]    
Distributions from equity method investees, return on investment 17,116 19,488
Tinuum Group, LLC    
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]    
Gross profit (loss) 5,010 41,200
Operating, selling, general and administrative expenses 12,776 6,582
Loss (income) from operations (7,766) 34,618
Other income (expenses) 3,643 51
Loss attributable to noncontrolling interest 19,271 15,776
Net income available to members 15,148 50,445
ADES equity earnings 6,438 19,767
Equity Method Investment, Financial Statement, Reported Amounts [Abstract]    
Distributions from equity method investees, return on investment 13,764 16,788
Included in investing cash flows 13,764 16,788
Tinuum Services, LLC    
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]    
Gross profit (loss) (22,259) (24,735)
Operating, selling, general and administrative expenses 45,753 49,450
Loss (income) from operations (68,012) (74,185)
Other income (expenses) (285) (242)
Loss attributable to noncontrolling interest 71,972 78,270
Net income available to members 3,675 3,843
ADES equity earnings 1,838 1,922
Equity Method Investment, Financial Statement, Reported Amounts [Abstract]    
Distributions from equity method investees, return on investment 3,352 2,700
(Loss) earnings from other    
Equity Method Investment, Summarized Financial Information, Income Statement [Abstract]    
ADES equity earnings $ (3) $ 1
v3.20.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Treasury Stock
Additional Paid-in Capital
Retained Earnings
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Cumulative effect of change in accounting principle $ 28,817       $ 28,817
Beginning Balance (in shares) at Dec. 31, 2018   22,640,677 (4,064,188)    
Beginning Balance at Dec. 31, 2018 67,947 $ 23 $ (41,740) $ 96,750 12,914
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock-based compensation (in shares)   218,465      
Stock-based compensation 317     317  
Repurchase of common shares to satisfy minimum tax withholdings (in shares)   (22,707)      
Repurchase of common shares to satisfy minimum tax withholdings (245) $ (700)   (245)  
Cash dividends declared on common stock (4,629)       (4,629)
Repurchase of common shares (in shares)     (63,876)    
Repurchase of common shares (693)   $ (693)    
Net income (loss) 14,402       14,402
Ending Balance (in shares) at Mar. 31, 2019   22,836,435 (4,128,064)    
Ending Balance at Mar. 31, 2019 105,916 $ 23 $ (42,433) 96,822 51,504
Beginning Balance (in shares) at Dec. 31, 2019   22,960,157 (4,597,533)    
Beginning Balance at Dec. 31, 2019 108,292 $ 23 $ (47,533) 98,466 57,336
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Stock-based compensation (in shares)   218,259      
Stock-based compensation 506     506  
Repurchase of common shares to satisfy minimum tax withholdings (in shares)   (64,198)      
Repurchase of common shares to satisfy minimum tax withholdings (376) $ (200)   (376)  
Cash dividends declared on common stock (4,590)       (4,590)
Repurchase of common shares (in shares)     (20,613)    
Repurchase of common shares (159)   $ (159)    
Net income (loss) (1,893)       (1,893)
Ending Balance (in shares) at Mar. 31, 2020   23,114,218 (4,618,146)    
Ending Balance at Mar. 31, 2020 $ 101,780 $ 23 $ (47,692) $ 98,596 $ 50,853
v3.20.1
Acquisition - Additional Information (Details) - ADA Carbon Solutions, LLC - USD ($)
$ in Millions
12 Months Ended
Dec. 07, 2018
Dec. 31, 2019
Business Acquisition [Line Items]    
Purchase price $ 75.0  
Consideration transferred 66.5  
Cash acquired 3.3  
Assumed debt and contractual commitments 11.8  
Acquisition related costs   $ 4.5
Senior Term Loan due December 2021, net | Term Loan    
Business Acquisition [Line Items]    
Proceeds from issuance of debt $ 70.0  
v3.20.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2020
May 01, 2020
Document and Entity Information [Abstract]    
Entity Registrant Name Advanced Emissions Solutions, Inc.  
Entity Central Index Key 0001515156  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Amendment Flag false  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Shell Company false  
Entity Current Reporting Status Yes  
Entity Common Stock, Shares Outstanding   18,493,048
v3.20.1
Supplemental Financial Information - Prepaid expenses and other assets and Other assets (Details) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
Prepaid expenses and other assets:    
Prepaid expenses $ 1,592 $ 1,708
Prepaid income taxes 4,772 4,228
Other 1,241 1,896
Other current assets 7,605 7,832
Other long-term assets, net:    
Right of use assets, operating leases, net 4,358 5,073
Spare parts, net 3,360 3,453
Mine development costs, net 7,457 7,084
Mine reclamation asset, net 2,423 2,451
Highview Investment 552 552
Other long-term assets 1,842 1,718
Total $ 19,992 $ 20,331
v3.20.1
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Income Tax Disclosure [Abstract]    
Income tax expense $ 358 $ 1,699
Effective tax rate (23.00%) 11.00%
Loss before income tax expense $ (1,535) $ 16,101
Federal and state income tax expense 400  
Increase in valuation allowance $ (900)  
v3.20.1
Revenues - Narrative (Details)
3 Months Ended
Mar. 31, 2020
USD ($)
segment
Mar. 31, 2019
USD ($)
Revenue from Contract with Customer [Abstract]    
Collection terms Credit terms are generally net 30 from the date of invoice.  
Provision for debt expense | $ $ 0 $ 0
Number of operating segments | segment 2  
v3.20.1
Stockholders' Equity - Narrative (Details) - USD ($)
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Nov. 30, 2019
Nov. 30, 2018
May 05, 2017
Class of Stock [Line Items]          
Stock repurchased $ 376,000 $ 245,000      
Maximum          
Class of Stock [Line Items]          
Requirement to own shares outstanding as percent         4.99%
Common Stock          
Class of Stock [Line Items]          
Remaining authorized amount $ 7,000,000   $ 2,900,000    
Authorized incremental amount     $ 7,100,000.0    
Stock repurchased (in shares) 20,613 63,876      
Stock repurchased $ 200,000 $ 700,000      
Common Stock | Maximum          
Class of Stock [Line Items]          
Authorized amount       $ 20,000,000.0  
v3.20.1
Stock-Based Compensation - Narrative (Details)
3 Months Ended
Mar. 31, 2020
Restricted stock awards  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Vesting period 3 years
Stock options  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Vesting period 3 years
Expected term (in years) 5 years
v3.20.1
Fair Value Measurements - Narrative (Details) - USD ($)
$ in Thousands
Dec. 07, 2018
Mar. 31, 2020
Fair Value Disclosures [Abstract]    
Time deposits, $250,000 or more   $ 250
ADA Carbon Solutions, LLC    
Business Combination, Separately Recognized Transactions [Line Items]    
Consideration transferred $ 66,500  
v3.20.1
Revenues
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Revenues
Revenues
Trade receivables represent an unconditional right to consideration in exchange for goods or services transferred to a customer. The Company invoices its customers in accordance with the terms of the contract. Credit terms are generally net 30 from the date of invoice. The timing between the satisfaction of performance obligations and when payment is due from the customer is generally not significant. The Company records allowances for doubtful trade receivables when it is probable that the balances will not be collected.
Trade receivables, net
The following table shows the components of Trade receivables, net:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Trade receivables
 
$
6,265

 
$
8,057

Less: Allowance for doubtful accounts
 
(624
)
 
(627
)
Trade receivables, net
 
$
5,641

 
$
7,430


For the three months ended March 31, 2020 and 2019, the Company recognized zero and zero of bad debt expense, respectively.
Disaggregation of Revenue and Earnings from Equity Method Investments
During the three months ended March 31, 2020 and 2019, all performance obligations related to revenues recognized were satisfied at a point in time. The Company disaggregates its revenues by major components as well as between its two reportable segments, which are further discussed in Note 13 to the Condensed Consolidated Financial Statements. The following tables disaggregate revenues by major component for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31, 2020
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
8,475

 
$

 
$
742

 
$
9,217

License royalties, related party
 

 
3,046

 

 
3,046

Revenues from customers
 
8,475

 
3,046

 
742

 
12,263

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
8,273

 

 
8,273

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
8,475

 
$
11,319

 
$
742

 
$
20,536

 
 
Three Months Ended March 31, 2019
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
14,553

 
$

 
$
556

 
$
15,109

License royalties, related party
 

 
4,220

 

 
4,220

Revenues from customers
 
14,553

 
4,220

 
556

 
19,329

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
21,690

 

 
21,690

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
14,553

 
$
25,910

 
$
556

 
$
41,019

v3.20.1
Supplemental Financial Information
3 Months Ended
Mar. 31, 2020
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]  
Supplemental Financial Information
Supplemental Financial Information
Supplemental Balance Sheet Information
The following table summarizes the components of Prepaid expenses and other assets and Other long-term assets, net as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
March 31,
2020
 
December 31,
2019
Prepaid expenses and other assets:
 
 
 
 
Prepaid expenses
 
$
1,592

 
$
1,708

Prepaid income taxes
 
4,772

 
4,228

Other
 
1,241

 
1,896

 
 
$
7,605

 
$
7,832

Other long-term assets, net:
 
 
 
 
Right of use assets, operating leases, net
 
$
4,358

 
$
5,073

Spare parts, net
 
3,360

 
3,453

Mine development costs, net
 
7,457

 
7,084

Mine reclamation asset, net
 
2,423

 
2,451

Highview Investment
 
552

 
552

Other long-term assets
 
1,842

 
1,718

 
 
$
19,992

 
$
20,331


Spare parts include critical spares required to support plant operations. Parts and supply costs are determined using the lower of cost or estimated replacement cost. Parts are recorded as maintenance expenses in the period in which they are consumed.
Mine development costs include acquisition costs, the cost of other development work and mitigation costs related to the Company's mining operations and are depleted over the estimated life of the related mine reserves, which is 21 years. The Company performs an evaluation of the recoverability of the carrying value of mine development costs to determine if facts and circumstances indicate that their carrying value may be impaired and if any adjustment is warranted. There were no indicators of impairment as of March 31, 2020. Mine reclamation asset, net represents an asset retirement obligation asset and is depreciated over the estimated life of the mine.
The Company holds a long-term investment (the "Highview Investment") in Highview Enterprises Limited ("Highview"), a London, England based developmental stage company specializing in power storage. In November 2014, the Company acquired an 8% ownership interest in the common stock of Highview for $2.8 million in cash. The Company accounts for the Highview Investment as an investment recorded at cost, less impairment, plus or minus observable changes in price for identical or similar investments of the same issuer.
The Highview Investment is evaluated for indicators of impairment such as an event or change in circumstances that may have a significant adverse effect on the fair value of the investment. There were no changes to the carrying value of the Highview Investment for the three months ended March 31, 2020 as there were no indicators of impairment or observable price changes for identical or similar investments.
The following table details the components of Other current liabilities and Other long-term liabilities as presented in the Condensed Consolidated Balance Sheets:
 
 
As of
(in thousands)
 
March 31,
2020
 
December 31,
2019
Other current liabilities:
 
 
 
 
Current portion of operating lease obligations
 
$
2,142

 
$
2,382

Accrued interest
 
298

 
213

Income and other taxes payable
 
805

 
678

Other
 
1,030

 
1,038

 
 
$
4,275

 
$
4,311

Other long-term liabilities:
 
 
 
 
Operating lease obligations, long-term
 
$
2,415

 
$
2,810

Mine reclamation liability
 
2,752

 
2,721

Other
 
71

 
229

 
 
$
5,238

 
$
5,760


Supplemental Condensed Consolidated Statements of Operations Information
The following table details the components of Interest expense in the Condensed Consolidated Statements of Operations:
 
 
Three Months Ended March 31,
(in thousands)
 
2020
 
2019
Interest on Senior Term Loan
 
$
630

 
$
1,270

Debt discount and debt issuance costs
 
354

 
381

453A interest
 
132

 
322

Other
 
94

 
131

 
 
$
1,210

 
$
2,104

v3.20.1
Basis of Presentation - Calculations of Basic and Diluted Earnings per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Accounting Policies [Abstract]    
Net (loss) income $ (1,893) $ 14,402
Less: Dividends and undistributed income (loss) allocated to participating securities (2) 20
(Loss) income attributable to common stockholders $ (1,891) $ 14,382
Basic weighted-average common shares outstanding (in shares) 17,932 18,268
Add: dilutive effect of equity instruments (in shares) 0 165
Diluted weighted-average shares outstanding (in shares) 17,932 18,433
(Loss) earnings per share - basic (in dollars per share) $ (0.11) $ 0.79
(Loss) earnings per share - diluted (in dollars per share) $ (0.11) $ 0.78
Restricted Sock and Employee Stock Options    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Total shares excluded from diluted shares outstanding (in shares) 700 300
v3.20.1
Income Taxes (Tables)
3 Months Ended
Mar. 31, 2020
Income Tax Disclosure [Abstract]  
Schedule of Income Tax Expense and Effective Tax Rates
For the three months ended March 31, 2020 and 2019, the Company's income tax expense and effective tax rates based on forecasted pretax income were:
 
 
Three Months Ended March 31,
(in thousands, except for rate)
 
2020
 
2019
Income tax expense
 
$
358

 
$
1,699

Effective tax rate
 
(23
)%
 
11
%
v3.20.1
Revenues (Tables)
3 Months Ended
Mar. 31, 2020
Revenue from Contract with Customer [Abstract]  
Schedule of Accounts Receivable
The following table shows the components of Trade receivables, net:
 
 
As of
(in thousands)
 
March 31, 2020
 
December 31, 2019
Trade receivables
 
$
6,265

 
$
8,057

Less: Allowance for doubtful accounts
 
(624
)
 
(627
)
Trade receivables, net
 
$
5,641

 
$
7,430

Schedule of Disaggregation of Revenue
The following tables disaggregate revenues by major component for the three months ended March 31, 2020 and 2019 (in thousands):
 
 
Three Months Ended March 31, 2020
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
8,475

 
$

 
$
742

 
$
9,217

License royalties, related party
 

 
3,046

 

 
3,046

Revenues from customers
 
8,475

 
3,046

 
742

 
12,263

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
8,273

 

 
8,273

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
8,475

 
$
11,319

 
$
742

 
$
20,536

 
 
Three Months Ended March 31, 2019
 
 
Segment
 
 
 
 
 
 
PGI
 
RC
 
Other
 
Total
Revenue component
 
 
 
 
 
 
 
 
Consumables
 
$
14,553

 
$

 
$
556

 
$
15,109

License royalties, related party
 

 
4,220

 

 
4,220

Revenues from customers
 
14,553

 
4,220

 
556

 
19,329

 
 
 
 
 
 
 
 
 
Earnings from equity method investments
 

 
21,690

 

 
21,690

 
 
 
 
 
 
 
 
 
Total revenues from customers and earnings from equity method investments
 
$
14,553

 
$
25,910

 
$
556

 
$
41,019