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Article Excerpt
OPERATOR: Good day, everyone, and welcome to the ADA-ES fourth-quarter 2008 financial results conference call. At this time I would like to inform you that this conference is being recorded and that all participants are currently in a listen-only mode. This conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a Safe Harbor for such statements in certain circumstances. These statements are identified by prefatory words such as believe, will, hope, expect, anticipate, intend and plan, the negative expressions of these words or words of similar meaning.
Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors, including factors discussed in ADA-ES's filings with the US Securities and Exchange Commission, with particular emphasis on the risk factor disclosures contained in those filings. Listeners are cautioned not to place undue reliance on the forward-looking statements and to carefully examine the information ADA-ES discloses publicly in its filings with the Securities and Exchange Commission or otherwise before deciding to invest in ADA-ES's securities. The forward-looking statements made during this conference call are presented as of today's date and ADA-ES disclaims any duty to update them unless otherwise required by law to do so.
Now I would like to turn the call over to Mark McKinnies, Chief Financial Officer. Please go ahead, sir.
MARK MCKINNIES, SVP, CFO, ADA-ES, INC.: Good morning, and thank you, Regina. Good morning, everyone, and thank you for joining us for the ADA-ES fourth-quarter and year-end 2008 conference call.
First, I would like to discuss the Company's financial performance, and then our President and CEO, Mike Durham, will update you on the Company's recent corporate developments and our future plans. After that, we will open the call for your questions.
Revenues amounted to $3.3 million for the fourth quarter as compared to $4.8 million in 2007, and $16.2 million for the year as compared to $19.2 million in 2007, due largely to decreases in our Mercury Emission Control, or MEC, segment. MEC revenues declined 29% during the fourth quarter and 12% for the year due to decreased revenues from our DOE and industry-supported demonstration contracts, which contributed $1.2 million in revenues in the fourth quarter of 2008 as compared with a contribution of $1.5 million in the fourth quarter of 2007; and decreased revenues from Activated Carbon Injection Systems, which contributed $1.7 million of MEC revenues in the fourth quarter of 2008 as compared to a contribution of $2.8 million in the fourth quarter of 2007.
ACI System sales generated approximately $9.4 million in revenues for the year, approximately the same level as in 2007. We had contracts in progress at year-end for ACI Systems totaling approximately $6.9 million, of which we expect to complete and realize as much as $5.9 million in 2009 and the balance in 2010. In addition, we have commenced work on three new systems thus far in 2009, and we expect several more to be awarded.
Various consent decrees, in-place state regulations and new plants are driving the current market in this portion of our business. We believe the eventual outcome of the EPA MACT process for mercury control or legislative action will accelerate and further expand that market.
For the year, our DOE and industry demonstration contract revenues totaled $4.7 million compared to $7.2 million in 2007, as our mercury programs are phasing out. The remaining unearned amount of the DOE contracts as of December 31 was $3.4 million, of which we expect to recognize $1.9 million in 2009, which amount includes cash contributions by other industry partners, the majority of which is related to our CO2 capture work.
Government-funded work for mercury demonstration projects has been diminishing since that market has moved into a commercial phase. We expect that increased funding for CO2 control technology will continue to replace that source of revenues in the future. The recently passed stimulus package included $3.4 billion for development of clean coal technologies to provide funding for the types of projects in which we are involved.
Our gross margin for the fourth quarter was 26%, the same as the fourth quarter last year. For the year, gross margin was 33% versus 31% for 2007, due primarily to cost reductions we realized in ACA system sales.
Research and develop expense in the fourth quarter decreased $37,000 over the same period in 2007 and decreased $417,000 for the year, reflecting the scale-back in mercury-related demonstration projects. We anticipate that our future R&D expenses will grow in direct proportion to DOE-funded CO2 work we perform for the next several years.
General and administrative expenses increased by $3.4 million to $4.6 million in the fourth quarter, primarily due to increased legal fees related to our litigation efforts and significant contract negotiations in the quarter, share-based compensation and other overhead. G&A expenses increased by nearly $4 million to $9.2 million for the year due to reasons just noted for the quarter and inclusion of costs related to the development of our activated carbon production and processing facility, a portion of which is now being recognized as expense.
We also recognized a non-cash impairment charge in the fourth quarter of approximately $1.6 million, as we wrote down the goodwill that we are carrying on the balance sheet related to our flue gas conditioning business.
Our operating loss was $6.7 million for 2008 as compared to a loss of $777,000 in 2007, due in large part to costs noted above and those related to the Company's growth initiatives. In the beginning of the fourth quarter, we formed what is now known as ADA Carbon Solutions, our Activated Carbon, or AC, supply business joint venture with Energy Capital Partners and its affiliates, to continue our development and construction activities for the manufacture and supply of AC for mercury control. The assets and financial results of Carbon Solutions have been consolidated in the financial statements we are reporting for...
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