Advanced Emissions Solutions, Inc.
Q2 2013 Earnings Call Transcript

Published: 8 Aug 2013

[Operator:]

Greetings, and welcome to the Advanced Emissions Solutions Second Quarter 2013 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Graham Mattison, Vice President of Investor Relations. Thank you. Mr. Mattison. You may begin.

[Graham O. Mattison:]

Hi, good afternoon, everybody. First, I'd like to remind you this conference call contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 and 27A of the Securities Exchange Act of 1933, which provide a Safe Harbor for statements in certain circumstances identified by words such as believe, will, hope, expect, anticipate, intend and plan, the negative expressions of these words or similar reasons. Actual results could materially different from those discussed in the forward-looking statements as a result of various factors, including factors discussed in our filings with the Securities and Exchange Commission, with particular emphasis on the section entitled Risk Factors in our Form 10-K. Listeners are cautioned not to place undue reliance on forward-looking statements and to carefully examine information that Advanced Emissions Solutions discloses publicly in its filings with the Securities and Exchange Commission or otherwise, before deciding to invest in Advanced Emissions securities. The forward-looking statements made during this conference call are presented as of today's date and disclaims any duty to update them unless otherwise required by law to do so. A recording of this call can be found in the Investor Resources section at www.advancedemissionssolutions.com. So thank you very much, everyone, for joining us for the second quarter conference today. After the market closed, we issued our earnings release and slides related to our prepared comments. A copy of the press release and the slides are available on the Investor Relations section of our website at www.advancedemissionssolutions.com. Joining us from the company today are Dr. Michael Durham, President and CEO, who'll provide an update on recent corporate developments and our future plans; and Mark McKinnies, Senior Vice President and CFO, who will discuss our 1Q performance -- our second quarter performance and financial results. We will then open up the call for any questions, and the operator will explain the process for asking questions at that time. Before I turn the call over today, I need to inform our audience that our discussion will include information involving non-GAAP financial measures, all of which are reconciled with GAAP numbers in the exhibit accompanying our press release on the Investors section of our website. In addition, some of our comments today will include forward-looking statements. Please keep in mind that our actual results could differ materially from those projected in any of our forward-looking statements. With that, I will turn it over to you, Mike.

[Michael D. Durham:]

Thank you, Graham. I will be referring to the slide presentation posted on our website this afternoon while discussing our business, starting with our commercial Emissions Control business as seen on Slide 4. The Mercury and Air Toxics Standard, or MATS, was made final on April 2012, which requires over 1,200 existing and new coal-fired electric generating plants to reduce emissions of mercury and other hazardous air pollutants. Some plants will have to be in compliance by April of 2015, while others have been given a 1-year extension and will have to meet the standard beginning in 2000 [Audio Gap] The chart in the upper left-hand corner of Slide 4 shows that the market for equipment to meet the federal MATS rule is well underway and evolving as expected. We have seen continued procurement activities for activated carbon injection, or DSI -- or ACI and DSI systems. We have taken a number of steps to prepare for this market, including our 2012 acquisition of the assets of Bulk Conveyor systems, as well as expanding our engineering capabilities and putting arrangements in place for various suppliers and component manufacturers. Since the MATS market commenced in late 2011, our companies have won or received Letters of Intent to award contract currently valued at approximately $80 million for ACI and DSI systems, and we're discussing potential projects for ACI and DSI in excess of an additional $150 million. We're very pleased with our wins today. We are ready to continue to help our customers meet the challenges of the MATS rule, and we're looking forward to winning additional ACI and DSI projects. The upper right-hand corner of Slide 4 highlights the significant increase in backlog on contracts from levels 2011 and 2012 to the backlog at $33.2 million as of June 30, 2013. I would note that there is a one large fleet order for ACI and DSI systems that is in excess of $20 million that we are not including in the backlog until signing the final contract. We were notified that they were awarded this contract in the second quarter, and we're close to finalizing the detail, scope and paperwork, expecting it to be booked in the third quarter of this year. This chart also shows the revenues are just beginning to increase from these new contracts. We expect that these revenues, which are recognized on a percentage of completion basis, to grow significantly over the next several quarters as these contracts require deliveries of most of the systems in 2014 and 2015, with some likely to slip into 2016. In addition to ACI systems, ADA also provides options for reducing mercury emissions with coal treatment technologies. For example, Clean Coal Solutions, our joint venture with NexGen Resources and an affiliate of The Goldman Sachs Group, markets 3 different technologies

[Mark H. McKinnies:]

Thanks, Mike, and good afternoon, everyone. I'll also be referring to the slide deck that Mike was talking about. So turning to Slide #8. We highlight our RC segment results, which consisted the consolidation of the financial results of Clean Coal Solutions, LLC or Clean Coal. During the second quarter of 2013, we had those 9 facilities producing RC. 5 of the total were leased or sold to third-party RC investors and 4 were operated by Clean Coal and retained for its own account. The 4 operated by Clean Coal generated tax credits for ADA of approximately $3.3 million during the quarter, which we expect to offset future tax expense. As we've mentioned before, when Clean Coal operates an RC facility for its own use, it records the purchase and sale of coal at approximately $20 to $40 per ton, incurs operating expenses of approximately $3 per ton of coal treated and generates approximately $7.50 per ton in total tax benefits. Because we provide a valuation allowance for all of our deferred tax assets, our share of those tax benefits are not shown in the financial statements. When an RC facility is leased or sold to an investor, Clean Coal recognizes revenue and receives ongoing payments from the RC investor, but from that point forward, does not incur the coal purchase cost or the related operating cost. Total RC revenues were $44.2 million during the second quarter of 2013 and included revenues of $11.6 million from facilities leased or sold and $32 million in revenue from resale of coal produced by those RC facilities operated by Clean Coal. During the quarter, gross profit for the RC segment was $8 million or 18% of the RC revenues compared to $6.4 million or 13% during the second quarter of 2012. Gross profit adjusted to exclude coal sales, raw coal purchases and retained tonnage operating expenses was $12.4 million for the second quarter of 2013 versus $10.9 million for the second quarter of 2012, both amounts representing about 99% of the adjusted RC revenues for the applicable period. Please note the non-GAAP measure reconciliation comments on this slide and in the Appendix of the slide deck. Looking at the operating statistics on the lower section of Slide 8 for the second quarter of 2013. The 9 operating RC facilities produced a total of 3.8 million tons of RC. 2.6 million of these tons were produced at facilities leased or sold to third-party investors and 1.2 million tons were produced at RC facilities retained by Clean Coal for its own account, generating those tax credits for Clean Coal's owners. This compares to the total of 3.8 million tons accreted in the second quarter of 2012 and a 5.1 million tons accreted in the first quarter of 2013. The decline in tonnage produced from the first quarter of this year reflects a seasonally weaker energy demand period in the second quarter and also routine maintenance downtimes taken by the host utilities where our RC facilities operate. We expect to see higher RC production in the third quarter of this year given the strong electricity demand this summer, as well as the addition of our newest RC facility that was leased and began operating in late July and a full quarter of production from the RC facility that commenced operations in early June. Turning to Slide 9. We highlight our Emission Control, or EC, segment activities, which provide equipment, chemicals and services to help our customers meet existing and upcoming emission regulations. EC revenues in the second quarter were $12 million, which were up over 200% in the same period in 2012 due primarily to increased equipment revenues as we make progress on the contracts awarded in response to the MATS rule. EC segment gross margin of 19% was lower than the 22% from the year-ago period, primarily reflecting a different product mix in the quarter. Given our percentage of completion revenue recognition accounting and the evolving mix of jobs won and products produced, results in this segment may be somewhat lumpy when comparing quarterly periods. However, we continue to expect the medium-term gross margin of this segment to be about 20%. As of June 30, 2013, we had contracts in progress with work related to our EC segment, totaling approximately $33.2 million, up from the $32.7 million as of March 31, 2013. As Mike mentioned, there is a large contract that we expect to book in the backlog during the third quarter not including those numbers. Turning to Slide #10. We highlight our CO2 Capture segment that represents DOE and industry supported development and demonstration contracts. Revenues during the second quarter of 2013 increased significantly to $2.7 million due to moving into the construction phase of the project. We had DOE contracts, including anticipated industry cost share, in progress totaling approximately $8.5 million as of June 30, 2013. We expect to recognize a total of approximately $5.5 million of these contracts in the remainder of 2013 and the balance next year. Turning to Slide 11. We provide a summary of our consolidated financial performance in 2013. I would like to provide additional color in some areas. Consolidated EBIT revenues and cost of goods sold in all the periods seen on this slide include the purchase and sale of coal for the retained RC facilities, which is a 0 margin pass-through. Excluding coal sale revenues, our consolidated revenues were up 84% from the same quarter last year and up 16% from the first quarter of this year. As to general and administrative expenses, which totaled $8.1 million in the quarter compared to $4 million for the same quarter in 2012 and $7.3 million in the first quarter of 2013, the increase from the first quarter of this year primarily reflects inclusion of the noncash cost for the executive long-term incentive plan awards put in place and other compensation amounts recognized during the quarter. The increase from the prior year is also due to amounts incurred by BCSI, which acquired the assets of Bulk Conveyor Specialist, Inc. in August last year; higher amounts from Clean Coal; and overall increases in overhead due to increases in our staff and expansion of our corporate facilities. Also, I'd like to point out that our income statement reflects the operating costs incurred by Clean Coal when it operates an RC facility for its own use and retains the tax credits. Year-to-date, our share of tax credits earned was more than $8.6 million. As noted before, the tax benefit from these credits is not recognized in our present financials as we record a valuation allowance for all our deferred tax assets. Below the operating income line, we report the following for the second quarter. Income of $274,000 from our equity interest in the net income of Clean Coal Solution Services, LLC, which is our 50% owned joint venture that oversees the routine operations at the RC facilities; an expense of $676,000 included in other expense related to ongoing royalties due as part of the settlement of the Norit arbitration in 2011. As shown below the income tax line is -- also shown below the income tax line is a subtraction of $3.2 million or income attributable to the non-controlling interest of Clean Coal for the quarter. For the Second quarter of 2013, our net loss was $3.2 million or $0.32 per basic and diluted share as compared to a net loss of $1.3 million or $0.13 per share for 2012. Cash flow used in operations for the quarter was $5.2 million as compared to a use of $4.4 million for the same period in 2012. Our consolidated cash position as of June 30 was $12.3 million, which does not include approximately $3 million we hold in the certificates of deposit to support Letters of Credit and more than $14 million in cash that was received by Clean Coal in late July as upfront payments for the new RC leases. The decline in our cash balance from the end of March includes an approximate $3 million cash payment made as part of our settlement with Norit and approximately $2.9 million in cash distributions made by our joint venture partners. Our liquidity position remains solid and has been bolstered by the upfront lease payments received as part of the recent RC leases. In addition, we are in discussions to secure a line of credit to be used to support working capital and a letter of credit needs for our rapidly growing Emission Control equipment business. Although our working capital deficit was $18 million, such amount includes liabilities, deposits and current deferred revenues that totaled $30.6 million has been steadily improving. Both the deposits and the current deferred revenues represent cash receipt that we generally expect to recognize as revenue in future periods. However, such amounts negatively impact our overall working capital as they are recorded as current liabilities. Long-term liabilities totaled $14.3 million, which amount also includes $11.2 million of deferred revenues. And stockholders' deficit totaled approximately $42.3 million at quarter end. With that, operator, would you please open the call for questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of Colin Rusch from Northland Capital Markets.

[Colin W. Rusch:]

Can you discuss a little bit of guidance on how we should think about Refined Coal revenue for the third quarter? And just given typical seasonal strength with the relatively cold weather so far, how would you kind of direct us there?

[Michael D. Durham:]

I think the easiest thing to do there is look at the production during the second quarter and then look at the change. So as I mentioned, that we started up -- we monetize -- we got 2 units up and running at the end of July. So we'll have 2 months of lease payments from these 2 facilities that will add to the existing. We'll have 1 month of expense included in that, so you can make that modification. I think you see some of these numbers, if you look on Slide #5 that are there. The other part of the question about the seasonality, you're right that we do see lower coal usage in the Spring, but some of that is going to be modified because of the nature of the transactions in which there are significant fixed components of the lease payments that are not proportional to actual coal usage. So you're going to see less and less seasonality in these restructured agreements than you would've in the past year.

[Colin W. Rusch:]

Okay. Perfect. And then how many financial parties are you discussing with at present, and how many of those parties are new in the last quarter in terms of some of these agreements that you're looking at closing in the next year or so?

[Michael D. Durham:]

So we have 3 that have leased the first 7, and we are in discussions with 3 or 4 that are progressing along and maybe another 4 or 5 that are further out.

[Operator:]

Our next question comes from the line of Rob Brown from Lake Street Capital Markets.

[Robert D. Brown:]

On your M-45 facility that you're in negotiations on and kind of explained the 4 you're negotiating, but the one that you're expecting, can you give us a sense of kind of where that is and how that could develop over the rest of the year?

[Michael D. Durham:]

Well, there's actually 4 that we're in negotiations on. And what we said was we think at least one of them will close before the end of the year. And so on all 4 of those, we are in the process of exchanging documents and contracts moving forward. So we find it's kind of well down the line once we get to a point that our customer is engaging outside legal review and spending money to look at review the contracts.

[Robert D. Brown:]

Okay. Great. And is this with a new monetizer or an existing monetizer?

[Michael D. Durham:]

We -- it's both. So actually, the negotiations that we have on these is we first have to negotiate with the utility. And so we're working with the utility for these 4 specific plants. In parallel, we may be having discussions with a monetizer, of which we would have in mind a monetizer for each specific plant.

[Robert D. Brown:]

Okay. Great. And then on your M-Prove technology, you said sort of 2015 before that turns into revenue. But could you give us a sense on how that could develop in the next 12 months? Will you start to see pilot projects and initial contracts? Or is that something that you really don't see much until that deadline hits?

[Michael D. Durham:]

So look, let me tell you what's happening in the market. So right now, utilities are doing tests to figure out what they need to buy and to prepare for that 2015 market. And so we're doing a number of tests with our technology, as well as we're demonstrating it on all of our programs that use refined coal. In addition, they're buying the hardware for controlling mercury. And so most of that activity is around the activated carbon systems that we're selling, and they're also -- we're seeing some utilities that are including in that, bids for coal chemical injection systems that are capable of injecting a number of different alternative coal additives. After that equipment is in, which will be about a year from now or so, they will then look to operate those initially for a cost basis to get prepared for that rule. So what you're seeing is they're going through the process of doing the testing, they're buying the hardware, but little or no negotiation on consumables. For example, we're seeing this very large market in buying the activated carbon injection systems. But if you listen to the earnings calls from the companies that sell activated carbon, they're reporting very slow sales and discussions around sales because they expect that the utilities won't be in a position to discuss even buying activated carbon for a year or so. So we're in the same position that they're probably not going to be looking at buying any form of the consumables until a year or so after the equipment they purchased had been installed.

[Operator:]

Our next question comes from the line of Sanjay Shrestha from Lazard Capital Markets.

[Sanjay Shrestha:]

A couple of questions. First, when you sort of talk about this M-45 and the 4 facility in negotiation, expect 1 to be operating in the second half '13, so that's basically operating using the technology. Does that also mean you actually get the financial buyer and is it equal to being monetized as well? Or is it just being operating to sort of use the technology? How am I supposed to be thinking about that?

[Michael D. Durham:]

Well, those are 2 different questions, and they could either be -- our hope would be that they're both yes. But at the very least, we want to get it up operating because if we get to a point that we got the utility saying yes to the operation, we feel we need to get that up and operating. Because once we start operating at a plant, there's a good chance that, that facility will be operating for the next 8 years. If the utility gives us the go ahead and we're not in a position to start that facility up, we really take -- we really take a chance that it won't get up. And just in over the last year, we've seen delays occur because the plant gets sold, a new plant manager come in, a death of a key person in the negotiation. So we're going to -- if we get the opportunity, we're going to get it up and running and even self monetized. And we're looking at ways of minimizing how long that's going to happen. But in some cases, we are talking with the monetizer about a particular plant, but that negotiation -- the negotiation with the utility has to come to a point that we've got pretty much a deal that's pretty firm and locked up that we can then take to the monetizer, because the monetizer doesn't want to put in the effort to start having outside legal review and tell -- he knows there's a deal on the table.

[Sanjay Shrestha:]

Got it. And that certainly is the right thing to do to get this M-45 going as well anyways, right. And can you again, once again, just remind us sort of because this is a technology where you also get the licensing fees. So what would be -- not only that you're getting much more tonnage from this last 13 units, but you also get even better economic value proposition for you guys. Can you just remind us again one more time as to how am I thinking about sort of the total cash coming from this remainder of the 13 units and the licensing fee and things like that?

[Michael D. Durham:]

Well, so this kind of goes back to the second technology, the original M-45. So we've licensed that and kind of the guidance we've given on that, Sanjay, is on the CyClean, we own 42% of the joint venture. So we get 42% of the economics. On the M-45 systems, we get a royalty that's off the top and then we get 42% of the rest. And so the best way to look at that is to think that we get about 50% of the economics of that instead of 42%. That being said, we're still going through the process of defining the exact chemical formula and modifying that, getting cost as we're looking at going permanent operation on these. So we'll get long-term contracts for the chemicals instead of short term, but we think there's going to be a little higher chemical costs associated. So the biggest advantage on M-45 is going to be more in the terms of the size of the plant than it is in improved economics.

[Sanjay Shrestha:]

Got it. Okay. Great. One final -- actually 2. So when I then look at the M-45, and let's say you do move forward, operating this, again, is the right thing to do to get this thing started and even if it doesn't get monetized. How do you feel about sort of the working capital requirement given that more cash will be -- your pro forma cash is obviously significantly higher than what was reported at the end of the quarter. So do you guys feel comfortable about even having to sort of basically be self-operated and not -- and comfortable with the sort of potential working capital usage related to that and things like that, right?

[Michael D. Durham:]

Well, I think where we are is we need to be flexible because an awful lot could happen. We could be very successful, and we talked about moving forward on 4 cyclones that could happen this year and do everything we can and possibly with 4 PCs. And so that could be a lot of potential operating expense. But at the same time we close 1 or 2 or 3 or 4 of those, they come in with upfront rents and they start paying out. So it's hard. I mean, that just creates a number of boxes. It's hard to say that this is going to be what our cash situation is going to look like for the rest of the year. We just need to stay flexible to be in a position that we can make the right decisions for each one of these opportunities.

[Sanjay Shrestha:]

Understood. Fair enough. Final question for you guys. So looking out to '16 where you will have a significant amount of cash coming in from all these refined coals, and we'll also be getting into the M-Prove technology to offset the MATS equipment opportunity, right. So the margin profile of that, that's really more like licensing/royalty type business, right. So whatever that top line is sort of kind of flows almost to the bottom line and that's actually a meaningful impact to earnings as well, right. Is that the right way to think about that business?

[Michael D. Durham:]

Yes. At that point, that's going to be a very comfortable situation. There's some pretty good cash flows. And so it's a matter of what do we do with that and right now, just thought everything's on the table. We're looking at opportunistically at potential acquisitions. We're developing technologies that we might have to grow the business in 2015, '16 time frame. So that's kind of wide open there.

[Operator:]

Our next question comes from the line of Kevin McKenna from Stifel, Nicolaus.

[Kevin McKenna:]

Looking at the presentation, my question is when I look at Page 5, I see that the run rate per quarter for the total partnership goes up to $83 million for the machines in place, which is roughly 22 million tons on Page 6, plus the 5 million tons that you're monetizing now and look at 21 million tons additional for CyClean and 63 million tons for the M-45-PC. That puts us well over 100 million tons. Is that what you think the market is right now?

[Michael D. Durham:]

Well, those are what we add up when we look at our expectations on where these are going to go.

[Kevin McKenna:]

And that's 4 people that you're already talking and in negotiations with to some level, correct?

[Michael D. Durham:]

Yes. So there's -- at some of these, we have pretty firm ideas on what they are. There's some uncertainty on, say, the last 8 or 9, but certainly a lot of opportunity out there around that.

[Kevin McKenna:]

All right. And my other question is on the equipment side of the business with the fabricating. What percentage win rate have you been running at this point?

[Mark H. McKinnies:]

Well, we -- our goal has been to maintain that 35% win rate, and I think we're above that.

[Operator:]

Our next question comes from the line of Greg Eisen from Singular Research.

[Greg Eisen:]

Following on with a question about the total capacity that the prior caller asked, do you still stand by the expectation that when you're done leasing up all the RC facilities that you would still retain approximately 20% of the volume capacity for self-monetization so you could take down the credits yourself?

[Michael D. Durham:]

That's the optimum schedule. If we're keeping 1 in 5 tons, then it maximizes the after-tax cash available. So right now, we are obviously well ahead of that ratio. So we would try to monetize as many as possible and then probably try to recover that towards the last few to get back to that 5 -- 4

[Greg Eisen:]

Got it. That makes sense. Moving on, going to Slide #5 in your slide deck, facility #9 was leased in late July. You showed that it wasn't operating in Q1 or Q2. Was it operating in July at all and therefore incurring expenses? And if so, could you give us some guidance as to how material that might have been during the month of July?

[Michael D. Durham:]

No. This is the unit that we couldn't start operating till we got the PSC approval, and the approval was effective like the 27th or 28th of July. And so we started up at midnight on that day. So it wasn't operated and had no expenses. And so you'll see in the third quarter that we'll have about 2 months of operation fully leased.

[Greg Eisen:]

Okay. So no self-monetization expenses on #9. #8 was self-monetized. And when I look at the decline in the expenses from Q2 to -- from Q1 to Q2, from minus $2 million to minus $1.4 million, is that simply the result of the lower capacity utilization that you discussed earlier about just being a shoulder season?

[Michael D. Durham:]

Yes. So that one was -- had the variable use, and so that carries the spring rate. So the number under the annual run rate, don't expect that in the third quarter, remember, because that's going to be probably not at that annual run rate until the beginning to the fourth quarter because what you'll see from that unit is 1 month of an expense, 2 months of leasing. So kind of a net of 1 month of -- in the green.

[Graham O. Mattison:]

And actually, Greg, this is Graham. Just to add one thing to that. Remember, in terms of the utilization, our utilization in the Refined Coal units are -- is about 99%, almost 100%. So it's a matter of when the host power plant goes down or is burning fewer tons in the period, we can only burn -- we can only treat as much as they produce. So the utilization is the host plant, not us.

[Greg Eisen:]

I get that, and that actually leads to my next question which was, there were 2 issues in the quarter. One was the seasonality due to weather, which it sounds like you're trying to smooth that out of your contracts going forward. And am I correct in understanding what you just -- what you said earlier?

[Michael D. Durham:]

Well, it's not our attempt to smooth it out. It's just the nature. If you remember, the issues that arose as the IRS was looking at the structure of tax credit-based transactions. One of the -- what they were trying to do in those transactions was to show that the producer was at risk. And one of the ways at being at risk is to have large fixed components that's independent of how much we produce. And so the current monetizer that we have requested that we restructure our contracts, which had a variable and fixed too, is primarily fixed at this point. So you're going to see a lot of flatness from here on, less seasonality.

[Greg Eisen:]

Okay. I get that. And you said that monetizer, but should I -- should we expect that, that would be for really all your monetizers given -- going forward given this is the IRS we're all dealing with?

[Michael D. Durham:]

Yes, it's the IRS. So another way of showing risk is to put a lot more money upfront. So you'll still -- you'll see some variability there because some monetizers, you notice that, for example, in the unit we closed in February paid out a very large sum up front. So that was their way of handling the risk. So as we move forward, it's going to be the comfort levels of the attorneys for the different monetizers about whether you see very large sums of prepaid rent and then larger amounts of variability in that contract or smaller upfront payments but more fixed components.

[Greg Eisen:]

Got it. Got it. And the other component of the variability of revenue in the quarter was downtime for plants in the quarter where the utility may have done maintenance and shutdown and therefore, you can't do any work for them. Could you give us some color on maybe how many of your plants may have been affected that way? Number of days, I suppose. Is that a reasonable question?

[Michael D. Durham:]

I'm not sure I have that, and that also ends up being kind of confidential on the plants. But just about everybody schedules an outage, 2- to 3-week outage in the spring or fall. In addition, there were some unplanned outages that occurred at that time, too.

[Greg Eisen:]

Okay. And I guess my last question right now is, is there anything new you could tell us about what's coming out of the IRS regarding Section 45 and what your monetizers have to comply with?

[Michael D. Durham:]

Well, I think the IRS is not going to put out formal guidance that there's a published document I can guide you to. But the IRS does meet with these attorneys for the various monetizers because these same situations arise in a number of other tax credit-based businesses. And so it's a matter of what they get comfortable with, and what you're seeing is a number of monetizers, a number of these transactions moving forward tells you that their attorneys are comfortable with what they've heard from the IRS and how they're structuring these deals. So I don't think you're going to see anything out of the IRS on the structure issue and -- but it seems at this point, we have 2 companies that have gone through audits on tax -- Refined Coal tax credits that were produced in 2010. That decreases the uncertainty around it. And so a lot of the delays that we saw over these last 12 to 14 months in getting these monetized, we think maybe 8 of those months were due to the uncertainty around the IRS. We think that uncertainty is no longer on the table.

[Mark H. McKinnies:]

And Greg, this is Mark. I can add, the IRS will continue to issue their private letter warnings and we, as the public, will see those, if they're not ours in particular, and we have had a couple that are on particular instances. Everyone gets to see those a few months after they're, in fact, issued to get some idea of that matters that are coming before them and how they're dealing with those. Those 2 were suspended for a time during this period of kind of uncertainty, and they've started reissuing those. So that's good news as well. So we believe that kind of time of uncertainty with the IRS that we experienced at the end of last year, the beginning of this year is really over now and not seeing that having an impact with any of our transactions moving forward.

[Operator:]

Our next question comes from the line of Ryan Alstead from RBC Capital Markets.

[Ryan Alstead:]

Mike, can you comment on the possibility of extending the Section 45 tax credits past 2021?

[Michael D. Durham:]

So we can look historically. The Section 29 tax credits for Senfields was extended, but we do not want to go in the Washington asking Congress for anything relative to an increase or decrease of taxes. So this would probably be something that we would look for to do once we get all our units up and running. We might go back to Congress and we'll then say, "Look at how well it's working. Let's see if we can get it extended."

[Operator:]

[Operator Instructions] Our next question comes from the line of Joe Scott, a private investor.

[Unknown Attendee:]

In light of the recent increase in the value of the stock, is there any expectation of a split? And if there is, how do monetizers look upon that?

[Michael D. Durham:]

Well, we have talked about during the proxy about increasing the number of treasury shares to create a net of the possibility. So all of that is possible to happen. But the issue of the monetizers, a monetizer has no say in our stock. So the monetizer only comes in, each one of these Refined Coal facilities becomes separate operating company, and they are investing in those separate entities. So they have no relationship to the buying or selling of ADA shares.

[Unknown Attendee:]

Okay. So the -- if there is a split, it's going to take place in the issuing of more stock from the treasury. Is that correct?

[Michael D. Durham:]

Yes, that's -- Joe, that's basically how it's done. So the company has now with our new reorganization in Delaware, we have a 100 million shares of authorized cap of common stock and it would come out of that authorized but unissued capital at this time. So if there was a stock split, for example, it just increase the number of shares outstanding, but really not have any other impact on the capital structure of the company.

[Unknown Attendee:]

Okay. So if there's an issuance of the stock from the treasury, then the company benefits from the money coming in from that stock to affect their working capital. Is that correct?

[Michael D. Durham:]

No. With the stock split, there's really no funds that come into the company because they're not a sale of any other stock. It's just that as a shareholder, you would have perhaps 2 or 3 shares when you might have only had 1 before. So some of the purpose of that is to improve liquidity and trading in the stock for purposes of some of those market conditions. But it doesn't impact any funds into the company.

[Unknown Attendee:]

Okay. And is there a projection for that?

[Mark H. McKinnies:]

Well, as Mike mentioned, it's something that's being discussed, and it certainly is that we've seen the improvement in the share price. It's one of those things that comes up in our board meeting and other discussions. So it's one that's in discussion.

[Operator:]

There are no further questions in the queue. I'd like to hand the call back over to management for closing comments.

[Michael D. Durham:]

All right. And we thank you for your interest in ADA and look forward for announcing coming events and activities over the next quarter.

[Mark H. McKinnies:]

Goodbye now.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.