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Equity Method Investments | 9 Months Ended
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Sep. 30, 2015
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investments | Equity Method Investments Clean Coal Solutions, LLC The Company's ownership interest in CCS was 42.5% as of September 30, 2015 and December 31, 2014. CCS supplies technology, equipment and technical services to cyclone-fired, pulverized coal and other boiler users, but CCS's primary purpose is to put into operation facilities that produce Refined Coal ("RC") that qualifies for tax credits available under Section 45 of the IRC ("Section 45 tax credits"). CCS 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 the VIE’s economic performance and has therefore accounted for the investment under the equity method of accounting. The Company determined the partners of CCS with voting rights had identical voting interests, equity control interests and board control interests, and therefore, concluded that the power to direct the activities that most significantly impact the VIE’s economic performance were shared. As shown in the tables below, the Company’s carrying value in CCS has been reduced to zero in all periods presented, as cumulative cash distributions from CCS have exceeded the Company's pro-rata share of cumulative earnings in CCS. If CCS subsequently reports net income, the Company will not record its pro-rata share of such net income until cumulative share of pro-rata income equals or exceeds the amount of its cumulative income recognized due to cash being distributed. Until such time, the Company will only report income from CCS to the extent of cash distributions. As such, equity income or loss reported on our income statement may differ from a mathematical calculation of net income or loss attributable to our equity interest based upon the factor of our equity interest and the net income or loss attributable to equity owners as shown on CCS’s income statement. Likewise, distributions from equity method investees are reported on our Consolidated Statements of Cash Flows as “return on investment” within Operating cash flows until such time as the carrying value in an equity method investee company is reduced to zero; thereafter, such distributions are reported as “distributions in excess of cumulative earnings” within Investing cash flows. The following tables summarize the results of operations of CCS for the three and nine months ended September 30, 2015 and 2014, respectively:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Gross profit |  | $ | 25,035 |  |  | $ | 23,075 |  |  | $ | 80,869 |  |  | $ | 60,580 |
Operating expenses |  | 5,369 |  |  | 4,856 |  |  | 17,872 |  |  | 14,275 |
Income from operations |  | 19,666 |  |  | 18,219 |  |  | 62,997 |  |  | 46,305 |
Other expenses |  | (1,464 | ) |  | (483 | ) |  | (1,794 | ) |  | (1,224 | )
Class B preferred return |  | (1,463 | ) |  | (2,176 | ) |  | (4,825 | ) |  | (6,759 | )
Loss attributable to noncontrolling interest |  | 3,698 |  |  | 4,163 |  |  | 6,811 |  |  | 7,164 |
Net income available to Class A members |  | $ | 20,437 |  |  | $ | 19,723 |  |  | $ | 63,189 |  |  | $ | 45,486 |
ADES equity earnings |  | $ | — |  |  | $ | 6,226 |  |  | $ | 4,730 |  |  | $ | 22,547 |
The difference between the Company's proportionate share of CCS' net income and the Company's earnings from its CCS equity method investment as reported on its Condensed Consolidated Statements of Operations relates to the Company receiving distributions in excess of the carrying value of the investment, and therefore recognizing such excess distributions as equity method earnings in the period the distributions occur. When CCS subsequently reports income, the Company does not record its share of such income until it equals the amount of distributions in excess of carrying value that were previously recognized in income. The following table presents the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, on a quarterly basis, for the three and nine months ended September 30, 2015 (in thousands):
Description |  | Date(s) |  | Investment balance |  | ADES equity earnings (loss) |  | Cash distributions |  | Cash distributions and equity loss in (excess) of investment balance
Beginning balance |  | 12/31/14 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (29,877 | )
ADES proportionate share of income from CCS (1) |  | First Quarter |  | 9,827 |  |  | 9,827 |  |  | — |  |  | — |
Increase of equity loss in excess of investment balance (prior to cash distributions) |  | First Quarter |  | (9,827 | ) |  | (9,827 | ) |  | — |  |  | 9,827 |
Cash distributions from CCS |  | First Quarter |  | (100 | ) |  | — |  |  | 100 |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | First Quarter |  | 100 |  |  | 100 |  |  | — |  |  | (100 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 3/31/2015 |  | — |  |  | 100 |  |  | 100 |  |  | (20,150 | )
ADES proportionate share of income from CCS (1) |  | Second Quarter |  | 7,825 |  |  | 7,825 |  |  | — |  |  | — |
Increase of equity loss in excess of investment balance (prior to cash distributions) |  | Second Quarter |  | (7,825 | ) |  | (7,825 | ) |  | — |  |  | 7,825 |
Cash distributions from CCS |  | Second Quarter |  | (4,630 | ) |  | — |  |  | 4,630 |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | Second Quarter |  | 4,630 |  |  | 4,630 |  |  | — |  |  | (4,630 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 6/30/2015 |  | — |  |  | 4,630 |  |  | 4,630 |  |  | (16,955 | )
ADES proportionate share of income from CCS (1) |  | Third Quarter |  | 8,127 |  |  | 8,127 |  |  | — |  |  | — |
Increase of equity loss in excess of investment balance (prior to cash distributions) |  | Third Quarter |  | (8,127 | ) |  | (8,127 | ) |  | — |  |  | 8,127 |
Cash distributions from CCS |  | Third Quarter |  | — |  |  | — |  |  | — |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | Third Quarter |  | — |  |  | — |  |  | — |  |  | — |
Total investment balance, equity earnings (loss) and cash distributions |  | 9/30/2015 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (8,828 | )
The following table presents the Company's investment balance, equity earnings and cash distributions in excess of the investment balance, on a quarterly basis, for the nine months ended September 30, 2014 (in thousands):
Description |  | Date(s) |  | Investment balance |  | ADES equity earnings (loss) |  | Cash distributions |  | Cash distributions and equity loss in (excess) of investment balance
Beginning balance |  | 12/31/2013 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (12,906 | )
ADES proportionate share of income from CCS (1) |  | First Quarter |  | 4,644 |  |  | 4,644 |  |  | — |  |  | — |
Recovery of cumulative distributions and equity losses in excess of investment balance |  | First Quarter |  | (4,644 | ) |  | (4,644 | ) |  | — |  |  | 4,644 |
Cash distributions from CCS |  | First Quarter |  | (6,588 | ) |  | — |  |  | 6,588 |  |  | — |
Recognition of earnings for cash distributions in excess of investment balance |  | First Quarter |  | 6,588 |  |  | 6,588 |  |  | — |  |  | (6,588 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 3/31/2014 |  | — |  |  | 6,588 |  |  | 6,588 |  |  | (14,850 | )
ADES proportionate share of income from CCS (1) |  | Second Quarter |  | 5,130 |  |  | 5,130 |  |  | — |  |  | — |
Recovery of cumulative distributions and equity losses in excess of investment balance |  | Second Quarter |  | (5,130 | ) |  | (5,130 | ) |  | — |  |  | 5,130 |
Cash distributions from CCS |  | Second Quarter |  | (9,733 | ) |  | — |  |  | 9,733 |  |  | — |
Recognition of earnings for cash distributions in excess of investment balance |  | Second Quarter |  | 9,733 |  |  | 9,733 |  |  | — |  |  | (9,733 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 6/30/2014 |  | — |  |  | 9,733 |  |  | 9,733 |  |  | (19,453 | )
ADES proportionate share of income from CCS (1) |  | Third Quarter |  | 7,805 |  |  | 7,805 |  |  | — |  |  | — |
Recovery of cumulative distributions and equity losses in excess of investment balance |  | Third Quarter |  | (7,805 | ) |  | (7,805 | ) |  | — |  |  | 7,805 |
Cash distributions from CCS |  | Third Quarter |  | (6,226 | ) |  | — |  |  | 6,226 |  |  | — |
Recognition of earnings for cash distributions in excess of investment balance |  | Third Quarter |  | 6,226 |  |  | 6,226 |  |  | — |  |  | (6,226 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 9/30/2014 |  | $ | — |  |  | $ | 6,226 |  |  | $ | 6,226 |  |  | $ | (17,874 | )
(1) The amounts of the Company's 42.5% proportionate share of net income as shown in the table above differ from mathematical calculations of the Company’s 42.5% equity interest in CCS multiplied by the amounts of Net Income available to Class A members as shown in the table above of CCS results of operations due to adjustments related to the Redeemable Class B preferred return and the elimination of CCS earnings attributable to RCM6, of which the Company owned 24.95% during the periods presented during the years ended December 31, 2015 and 2014. Clean Coal Solutions Services, LLC On January 20, 2010, the Company, together with NexGen Refined Coal, Inc. ("NexGen"), formed Clean Coal Solutions Services, LLC ("CCSS"), a Colorado limited liability company, for the purpose of operating the RC facilities leased or sold to third parties. The Company has determined that CCSS is not a VIE and has evaluated the consolidation analysis under the Voting Interest Model. The Company has a 50% voting and economic interest in CCSS, which is equivalent to the voting and economic interest of NexGen. Therefore, as the Company does not have greater than 50% of the outstanding voting shares, either directly or indirectly, it has accounted for the investment under the equity method of accounting. The following table summarizes the results of operations of CCSS:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Gross loss |  | $ | (11,616 | ) |  | $ | (5,247 | ) |  | $ | (31,511 | ) |  | $ | (14,064 | )
Operating expenses |  | 41,322 |  |  | 25,082 |  |  | 120,269 |  |  | 68,463 |
Loss from operations |  | (52,938 | ) |  | (30,329 | ) |  | (151,780 | ) |  | (82,527 | )
Other expenses |  | (7 | ) |  | (34 | ) |  | (86 | ) |  | (57 | )
Loss attributable to noncontrolling interest |  | 55,661 |  |  | 32,147 |  |  | 158,926 |  |  | 87,642 |
Net income |  | $ | 2,716 |  |  | $ | 1,784 |  |  | $ | 7,060 |  |  | $ | 5,058 |
ADES equity earnings |  | $ | 1,358 |  |  | $ | 892 |  |  | $ | 3,530 |  |  | $ | 2,529 |
Included within the Consolidated Statement of Operations of CCSS for the three and nine months ended September 30, 2015 and 2014, respectively, were losses related to VIE's of CCSS. These losses do not impact the Company's equity earnings from CCSS as 100% of those losses are removed from the net income of CCSS as they are losses attributable to a noncontrolling interest. The Company’s investment in CCSS as of September 30, 2015 and December 31, 2014 was $5.2 million and $4.1 million, respectively. RCM6, LLC On February 10, 2014, the Company purchased a 24.95% membership interest in RCM6, LLC ("RCM6"), which owns a single RC facility that produces RC that qualifies for Section 45 tax credits, from CCS through an up-front payment of $2.4 million and an initial note payable to CCS of $13.3 million. Due to the payment terms of the note purchase agreement, the note payable is periodically negatively amortizing and the note payable balance as of September 30, 2015 and December 31, 2014 were $14.4 million and $14.2 million, respectively. In addition to the up front and subsequent note payments, the Company is also subject to quarterly capital calls and variable payments based upon differences in originally forecasted RC production as of the purchase date and actual quarterly production. The following table contains the capital calls and variable payments made by the Company related to its investment in RCM6 during the three and nine months ended September 30, 2015 and 2014, respectively:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Capital calls and variable payments |  | $ | 850 |  |  | $ | 1,353 |  |  | $ | 1,080 |  |  | $ | 2,736 |
RCM6 has been determined to be a VIE, however, during the periods presented, the Company did not have the power to direct the activities that most significantly impacted the variable interest entity’s economic performance and has therefore accounted for the investment under the equity method of accounting. As of September 30, 2015 and December 31, 2014, the Company’s ownership in RCM6 was 24.95%. The Company’s investment in RCM6 as of September 30, 2015 and December 31, 2014 was $13.4 million and $15.4 million, respectively. On March 3, 2016, the Company sold its 24.95% membership interest in RCM6 as further described in Note 12. The following table summarizes the assets, liabilities and results of operations of RCM6:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Gross loss |  | $ | (2,896 | ) |  | $ | (3,326 | ) |  | $ | (4,876 | ) |  | $ | (5,298 | )
Operating expenses |  | 590 |  |  | 581 |  |  | 1,567 |  |  | 1,447 |
Loss from operations |  | (3,486 | ) |  | (3,907 | ) |  | (6,443 | ) |  | (6,745 | )
Other expenses |  | (220 | ) |  | (265 | ) |  | (382 | ) |  | (434 | )
Net loss |  | $ | (3,706 | ) |  | $ | (4,172 | ) |  | $ | (6,825 | ) |  | $ | (7,179 | )
ADES equity losses |  | $ | (1,399 | ) |  | $ | (1,515 | ) |  | $ | (3,127 | ) |  | $ | (3,057 | )
The purchase of RCM6 resulted in the Company recording a basis difference related to property, plant and equipment and identifiable intangible assets. The difference between the Company's proportionate share of RCM6' net loss and the Company's equity losses noted above is due to depreciation and amortization related to the basis difference allocated to property, plant and equipment and identifiable intangible assets upon the purchase of RCM6. During the three and nine months ended September 30, 2015 and 2014, the Company adjusted its equity method earnings in RCM6 by $0.5 million and $0.5 million and $1.4 million and $1.3 million, respectively, due to this basis difference. On March 3, 2016, the Company sold its entire ownership interest in RCM6. The Company received a cash payment of $1.8 million related to the sale and has no future obligations related to the previously recorded note payable. The following table details the components of the Company's respective equity method investments included within the Earnings (loss) from equity method investments line item on the Condensed Consolidated Statements of Operations:
|  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014 |  | 2015 |  | 2014
Earnings from CCS |  | $ | — |  |  | $ | 6,226 |  |  | $ | 4,730 |  |  | $ | 22,547 |
Earnings from CCSS |  | 1,358 |  |  | 892 |  |  | 3,530 |  |  | 2,529 |
Loss from RCM6 |  | (1,399 | ) |  | (1,515 | ) |  | (3,127 | ) |  | (3,057 | )
Earnings from equity method investments |  | $ | (41 | ) |  | $ | 5,603 |  |  | $ | 5,133 |  |  | $ | 22,019 |
The following table details the components of the cash distributions from the Company's respective equity method investments included within the Condensed Consolidated Statements of Cash Flows. Distributions from equity method investees are reported on our Condensed Consolidated Statements of Cash Flows as “return on investment” within Operating cash flows until such time as the carrying value in an equity method investee company is reduced to zero; thereafter, such distributions are reported as “distributions in excess of cumulative earnings” within Investing cash flows.
|  | Nine Months Ended September 30,
(in thousands) |  | 2015 |  | 2014
Distributions from equity method investees, return on investment |  |  |  |
CCSS |  | $ | 2,519 |  |  | $ | 1,259 |
|  | $ | 2,519 |  |  | $ | 1,259 |
Distributions from equity method investees in excess of investment basis |  |  |  |
CCS |  | $ | 4,730 |  |  | $ | 22,547 |
|  | $ | 4,730 |  |  | $ | 22,547 |

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=49116238&loc=d3e32847-111569 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=49116238&loc=d3e32787-111569 + Details
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