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Equity Method Investments | 6 Months Ended
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Jun. 30, 2017
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 June 30, 2017 and December 31, 2016. Tinuum Group supplies technology equipment and technical services to cyclone-fired and other boiler users, but Tinuum Group's primary purpose is to put into operation facilities that produce and sell RC that lower emissions and therefore qualify for tax credits available under Section 45 of the IRC ("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 June 30, |  | Six Months Ended June 30,
(in thousands) |  | 2017 |  | 2016 |  | 2017 |  | 2016
Gross profit |  | $ | 25,027 |  |  | $ | 21,154 |  |  | $ | 47,083 |  |  | $ | 47,680 |
Operating, selling, general and administrative expenses |  | 4,327 |  |  | 4,956 |  |  | 9,801 |  |  | 10,468 |
Income from operations |  | 20,700 |  |  | 16,198 |  |  | 37,282 |  |  | 37,212 |
Other expenses |  | (359 | ) |  | (3,021 | ) |  | (947 | ) |  | (4,036 | )
Class B preferred return |  | (505 | ) |  | (1,043 | ) |  | (1,142 | ) |  | (2,186 | )
Loss attributable to noncontrolling interest |  | 7,926 |  |  | 3,951 |  |  | 17,287 |  |  | 5,907 |
Net income available to Class A members |  | $ | 27,762 |  |  | $ | 16,085 |  |  | $ | 52,480 |  |  | $ | 36,897 |
ADES equity earnings from Tinuum Group |  | $ | 9,138 |  |  | $ | 12,832 |  |  | $ | 22,313 |  |  | $ | 18,275 |
As of June 30, 2017 and December 31, 2016, the amount of Tinuum Group's temporary Class B preferred equity was $11.5 million and $18.3 million, respectively. The difference between the Company's proportionate share of Tinuum Group's Net income available to Class A members (at its equity interest of 42.5%) as presented in the table below 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, as discussed below. As shown in the tables below, the Company’s carrying value in Tinuum Group was reduced to zero for the three and six months ended June 30, 2017, as cumulative cash distributions received from Tinuum Group exceeded the Company's pro-rata share of cumulative earnings in Tinuum Group. The carrying value of the Company's investment in Tinuum Group shall remain zero as long as the cumulative amount of distributions received from Tinuum Group continues to exceed the Company's cumulative pro-rata share of Tinuum Group's Net income available to Class A members. For periods during which the ending balance of the Company's investment in Tinuum Group is zero, the Company only recognizes equity earnings from Tinuum Group to the extent that cash distributions are received from Tinuum Group during the period. For periods during which the ending balance of the Company's investment is greater than zero (e.g., when the cumulative earnings in Tinuum Group exceeds cumulative cash distributions received), the Company recognizes its pro-rata share of Tinuum Group's Net income available to Class A members for the period, less any amount necessary to recover the cumulative earnings short-fall balance as of the end of the immediately preceding period. During the three and six months ended June 30, 2017, the Company's cumulative amount of distributions received from Tinuum Group exceeded the Company's cumulative pro-rata share of Tinuum Group's Net income available to Class A members. As such, the Company recognized equity earnings from Tinuum Group for the three and six months ended June 30, 2017 of $9.1 million and $22.3 million, respectively. During the three and six months ended June 30, 2016, the Company's cumulative share of pro-rata Tinuum Group income exceeded the amount of its cumulative income recognized due to cash being distributed. As such, the Company recognized equity earnings from Tinuum Group in the amount of $12.8 million and $18.3 million, respectively. As of June 30, 2017 and 2016, the Company's carrying value in Tinuum Group was zero and zero, respectively. Thus, the amount of equity earnings or loss reported on the Company's Condensed Consolidated Statement of Operations may differ from a mathematical calculation of net income or loss attributable to the equity interest based upon the factor of the equity interest and the Net income or loss attributable to Class A members as shown on Tinuum Group’s statement of operations. Additionally, for periods during which the carrying value of the Company's investment in Tinuum Group is greater than zero, distributions from Tinuum Group are reported on the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, return on investment" within Operating cash flows. For periods during which the carrying value of the Company's investment in Tinuum Group is zero, such cash distributions are reported on the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees in excess of investment basis" within Investing cash flows. The following tables presents the Company's investment balance, equity earnings and cash distributions in excess of the investment balance for the three and six months ended June 30, 2017 and 2016 (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 |  | 12/31/2016 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (9,894 | )
ADES proportionate share of income from Tinuum Group (1) |  | First Quarter |  | 10,457 |  |  | 10,457 |  |  | — |  |  | — |
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions) |  | First Quarter |  | (9,894 | ) |  | (9,894 | ) |  | — |  |  | 9,894 |
Cash distributions from Tinuum Group |  | First Quarter |  | (13,175 | ) |  |  |  | 13,175 |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | First Quarter |  | 12,612 |  |  | 12,612 |  |  | — |  |  | (12,612 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 3/31/2017 |  | $ | — |  |  | $ | 13,175 |  |  | $ | 13,175 |  |  | $ | (12,612 | )
ADES proportionate share of income from Tinuum Group (1) |  | Second Quarter |  | $ | 11,761 |  |  | $ | 11,761 |  |  | $ | — |  |  | $ | — |
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions) |  | Second Quarter |  | (11,761 | ) |  | (11,761 | ) |  | — |  |  | 11,761 |
Cash distributions from Tinuum Group |  | Second Quarter |  | (9,138 | ) |  | — |  |  | 9,138 |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | Second Quarter |  | 9,138 |  |  | 9,138 |  |  | — |  |  | (9,138 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 6/30/2017 |  | $ | — |  |  | $ | 9,138 |  |  | $ | 9,138 |  |  | $ | (9,989 | )
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 |  | 12/31/2015 |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | (3,263 | )
ADES proportionate share of income from Tinuum Group (1) |  | First Quarter |  | 8,706 |  |  | 8,706 |  |  | — |  |  | — |
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions) |  | First Quarter |  | (3,263 | ) |  | (3,263 | ) |  | — |  |  | 3,263 |
Cash distributions from Tinuum Group |  | First Quarter |  | (3,400 | ) |  | — |  |  | 3,400 |  |  | — |
Total investment balance, equity earnings (loss) and cash distributions |  | 3/31/2016 |  | $ | 2,043 |  |  | $ | 5,443 |  |  | $ | 3,400 |  |  | $ | — |
ADES proportionate share of income from Tinuum Group (1) |  | Second Quarter |  | $ | 6,758 |  |  | $ | 6,758 |  |  | $ | — |  |  | $ | — |
Recovery of prior cash distributions in excess of investment balance (prior to cash distributions) |  | Second Quarter |  | — |  |  | — |  |  | — |  |  | — |
Cash distributions from Tinuum Group |  | Second Quarter |  | (14,875 | ) |  | — |  |  | 14,875 |  |  | — |
Adjustment for current year cash distributions in excess of investment balance |  | Second Quarter |  | 6,074 |  |  | 6,074 |  |  | — |  |  | (6,074 | )
Total investment balance, equity earnings (loss) and cash distributions |  | 6/30/2016 |  | $ | — |  |  | $ | 12,832 |  |  | $ | 14,875 |  |  | $ | (6,074 | )
(1) For the three and six months ended June 30, 2017 and 2016, the amounts of the Company's 42.5% proportionate share of Net Income available to Class A members as shown in the table above differ from mathematical calculations of the Company’s 42.5% equity interest in Tinuum Group multiplied by the amounts of Net Income available to Class A members as shown in the table above of Tinuum Group results of operations due to adjustments related to the Redeemable Class B preferred return and, for the three months ended March 31, 2016, the elimination of Tinuum Group earnings attributable to RCM6, of which the Company sold its 24.95% equity interest on March 3, 2016. Tinuum Services, LLC The Company has a 50% voting and economic interest in Tinuum Services, which is equivalent to the voting and economic interest of NexGen Refined Coal, LLC ("NexGen"). The Company has determined that Tinuum Services is not a VIE and has evaluated the 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 June 30, 2017 and December 31, 2016 was $2.7 million and $4.0 million, respectively. The following table summarizes the results of operations of Tinuum Services:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(in thousands) |  | 2017 |  | 2016 |  | 2017 |  | 2016
Gross loss |  | $ | (17,249 | ) |  | $ | (14,473 | ) |  | $ | (30,128 | ) |  | $ | (27,098 | )
Operating, selling, general and administrative expenses |  | 37,325 |  |  | 31,128 |  |  | 71,953 |  |  | 67,390 |
Loss from operations |  | (54,574 | ) |  | (45,601 | ) |  | (102,081 | ) |  | (94,488 | )
Other income (expenses) |  | 84 |  |  | (20 | ) |  | 69 |  |  | (40 | )
Loss attributable to noncontrolling interest |  | 56,523 |  |  | 47,465 |  |  | 105,322 |  |  | 97,754 |
Net income |  | $ | 2,033 |  |  | $ | 1,844 |  |  | $ | 3,310 |  |  | $ | 3,226 |
ADES equity earnings from Tinuum Services |  | $ | 1,017 |  |  | $ | 922 |  |  | $ | 1,656 |  |  | $ | 1,613 |
Included within the Consolidated Statements of Operations of Tinuum Services for the three and six months ended June 30, 2017 and 2016, 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 removed from the net income of Tinuum Services as they are losses attributable to a noncontrolling interest. RCM6, LLC On March 3, 2016, the Company sold its 24.95% membership interest in RCM6 for a cash payment of $1.8 million and the assumption, by the buyer, of an outstanding note payable made by the Company in connection with its purchase of RCM6 membership interests from Tinuum Group. In doing so, the Company recognized a gain on the sale of $2.1 million for the six months ended June 30, 2016, which is included within the Other line item in the Condensed Consolidated Statements of Operations. As a result of the sale of its ownership interest, the Company ceased to be a member of RCM6 and, as such, is no longer subject to any quarterly capital calls and variable payments to RCM6. In addition, the Company has no future obligations related to the previously recorded note payable. However, the Company will still receive its pro-rata share of income and cash distributions through its ownership in Tinuum Group based on the RCM6 lease payments made to Tinuum Group. Prior to the sale of its ownership interest, the Company recognized equity losses related to its investment in RCM6 of $0.6 million for the three months ended March 31, 2016. The following table summarizes the results of operations of RCM6 for the three and six months ended June 30, 2016:
|  | January 1 - March 3,
(in thousands) |  | 2016
Gross loss |  | $ | (555 | )
Operating, selling, general and administrative expenses |  | 360 |
Loss from operations |  | (915 | )
Other expenses |  | (52 | )
Net loss |  | $ | (967 | )
ADES equity losses from RCM6 |  | $ | (557 | )
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 June 30, |  | Six Months Ended June 30,
(in thousands) |  | 2017 |  | 2016 |  | 2017 |  | 2016
Earnings from Tinuum Group |  | $ | 9,138 |  |  | $ | 12,832 |  |  | $ | 22,313 |  |  | $ | 18,275 |
Earnings from Tinuum Services |  | 1,017 |  |  | 922 |  |  | 1,656 |  |  | 1,613 |
Loss from RCM6 |  | — |  |  | — |  |  | — |  |  | (557 | )
Earnings from equity method investments |  | $ | 10,155 |  |  | $ | 13,754 |  |  | $ | 23,969 |  |  | $ | 19,331 |
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 on the Condensed Consolidated Statements of Cash Flows as "Distributions from equity method investees, 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 from equity method investees in excess of cumulative earnings" within Investing cash flows.
|  | Six Months Ended June 30,
(in thousands) |  | 2017 |  | 2016
Distributions from equity method investees, return on investment |  |  |  |
Tinuum Group |  | $ | — |  |  | $ | 3,400 |
Tinuum Services |  | 2,875 |  |  | 2,500 |
|  | $ | 2,875 |  |  | $ | 5,900 |
Distributions from equity method investees in excess of investment basis |  |  |  |
Tinuum Group |  | $ | 22,313 |  |  | $ | 14,875 |
|  | $ | 22,313 |  |  | $ | 14,875 |

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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 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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