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									Investment Rating
                                         I. Investment Highlights
                                         Company Profile

Pricing                                  ADA-ES was established in 1996 but became its own company
Closing Price                 21.75
-Tuesday, February 21, 2006              in September, 2003 after branching off from Earth Sciences,
52-Week High                  31.38      Inc. to form ADA-ES, Inc. Headquartered in Littleton,
52-Week Low                   13.51
                                         Colorado, the company provides air pollution control systems,
                                         specialty chemicals, and consulting services to utility and
FY        EPS                   P/E      industrial customers. The company commercialized a novel,
2003      0.05                 59.17     cost-effective flue gas conditioning (FGC) technology for
2004      0.05                300.12
TTM       0.11                195.95     industries using electrostatic precipitators (ESPs) and
                                         baghouses for particle control. They have also developed and
Profitability & Effectiveness            demonstrated a new product to allow the wet handling of
ROA                            2.42%     Powder River Basin (PRB) fly ash. ADA-ES is best known for
ROE                            4.48%     their mercury control within coal-fired boilers, and they are
Profit Margin                  5.46%
Operating Margin               5.36%     involved in the development of activated carbon injection
                                         (ACI) to control mercury emissions. They expect to be a

Market Date                              market leader for mercury control because the mercury control
Market Cap.            122.02M           technology shares many similarities with their successful
Revenue                 10.02M
Price/Book (mrq)           7.82          commercial flue gas conditioning business, which is fully
Price/Sales (ttm)         11.85          patented. As of the end of 2003, ADA-ES had four operating
Div & Yield (5yr avg.)     N/A
Div. Payout Ratio          N/A           FGC units at coal-fired utilities in Iowa, Louisiana, Wisconsin,
Book Value/Share           2.62          and Oregon. Although they are a relatively new and speculative
                                         company, ADA-ES has received unprecedented support from
                                         the Department of Energy for research and development
                                         contracts due to their extensive experience with emissions
                                         control technology, specifically in mercury.

Cole Harper

ADA– ES Inc.

II.    Executive summary

       As you will see below in “Growth Dynamics,” ADA-ES is a small company with the
       potential for tremendous growth. This stock is far more speculative than any other
       energy stock we are looking at and would be a speculative move as opposed to a value
       play on the company.

                         Investment Recommendation: Strong Buy

       This stock is a BUY for the Truman Tracey Fund at or below $25-27. ADA-ES is a risky
       stock that is difficult to value, but I believe it will add quite a bit of diversification to the
       portfolio. The few analysts who do follow their stock have all rated ADA-ES as a strong
       buy as well, with no descents or even plain “buys.” There are many factors that go into
       whether or not ADA-ES will grow in the future, but for the most part, it looks to be a
       tremendous opportunity for investors willing to take the risk.

       - Government backing from the Department of Energy for research and development
       funding assistance
       - Small company with room for growth and the resources to start things in motion
       - Already has strategic relations in place to maximize business and earnings potential
       - The EPA will create clients in need in ADA-ES’ services
       - Extremely volatile (somewhat below the radar right now)
       - Difficult to estimate because of company newness and poor financial predictors
       - Relies heavily on the critical factors described below

      Critical Factors
       -   The Department of Energy (funding R&D)
       -   The Environmental Protection Agency (enforcing mercury emission regulations)
       -   Technology regarding energy sources (and if gas/oil prices continue current path)
       -   ADA-ES’ position in the mercury control and coal technology markets

III.   Growth Dynamics

       ADA-ES provides many services, products, and technologies (many of which are
       patented), but for investment purposes, we need to look at the major issues. Our portfolio
       management class has already determined that the price of natural gas/oil will continue to
       rise or at least NOT decrease and stabilize. A good move here would be to invest in an
       energy company or utilities company, which we have -- but there is another play to be
       made. As gas prices rise (not just affecting consumers with vehicles, but affecting
       massive utility plants and electric companies), the demand for an alternative and cheaper
       source of energy will grow substantially. This source already exists, is cheap, and is
       plentiful. What I’m describing is coal (read quote at end of paper). Somewhere down the
       line, we may run on uranium or hydrogen or fuel cells or whatever, but for now, coal is
       the way to go. So an investor may go after a coal stock as a play off gas, but I can “one-
       up” this move. My play is off of the coal market and involves companies that make coal-
       burning plants more efficient and more environmentally regulated. The efficiency end
       is important because it will help utilities to save money in the long term to spend money
       now to reduce overall costs. The environmental regulations are important because, if
       they don’t meet government quotas as set by the Environmental Protection Agency to
       lower mercury emissions from the coal, they will cease to exist as a company and make
       no money (and pay hefty fines). This is where ADA-ES comes in. They are the industry
       leader in coal efficiency and mercury control. They are backed by the government
       (Department of Energy) not just through contracts, but through research and development
       cost alleviations. They continually are awarded projects (along with the clients they
       attain themselves) by continually displaying successful results in their products and with
       their patented technologies. Aside from being a leader, their services are relatively
       cheap. There goal is to be a low-cost leader for the coal-burning market and utilize
       strategic relationships to gain business and contracts. The main reason I chose ADA-ES
       out of the group of companies that also control mercury is because they are a small
       company with a volatile stock that could explode at any time (in a good way). Although
       the numbers may not point to a strong buy, the general factors and external situations that
       are developing will turn ADA-ES into a high-growth company.

IV.   Economic and industry environment

      The economic and industry environment for the specialty chemicals industry fluctuates
      and is rather unsteady. The industry is extremely sensitive to increases in raw materials
      costs at one end of the spectrum, and at the other end is pressured by competitors to keep
      prices low. The chemicals industry accounts for about 7% of the energy consumption in
      the United States. Even with the current ever-increasing prices of gas and oil, chemical
      companies raised their prices and still saw increased demand, leading to more sales and
      higher profits. Many specialty companies target specific markets, so they are really
      affected more by declines in the market they target. The specialty chemicals industry is
      made up of such an array of companies with various missions, so some thrive during a
      particular economic environment while others struggle.

Industry’s Relation to Economy

      Product Life Cycle

      Since the industry has such a wide range of products (from actual chemicals to
      technology to performing machinery to service-based), there is no particular product life
      cycle. Typically, due to a sustained level of high competition, companies are constantly
      modifying and creating better “products.” ADA-ES consists mainly of systems and
      technology for mercury control, flue gas conditioning, baghouse performance, cyclone
      operations, slag tapping, electrostatic precipitators, fly ash, and activated carbon
      injection. Due to the high level of technicality, I will not elaborate on these products at
      this time.

      Sales Growth Potential

      As mentioned above, ADA-ES has many products, technologies, and services, many of
      which are in high demand. Mercury control technology is used by power plants,
      incinerators, and cement kilns. Baghouse products and services are used by utility
      companies to improve particulate control. Flue gas conditioning technology reduces
      capacity, yet increases power of electrostatic precipitator performance within coal-
      burning plants. The company’s various offerings are in demand because they reduce

         costs in the long term for their clients. On top of it all, ADA-ES has patented over 80%
         of their technology and products, so they won’t have to worry about sales competition
         unless another company can come up with better solutions. This will be a difficult feat
         for competitors since the Department of Energy has selected to assist in funding almost
         all ADA-ES’ research and development expenses.

         Impact of Economic Environment
         When the economy is in good shape, utility companies will be willing to spend money on
         projects in hopes to increase productivity and thus, their own profits. When the economy
         is in bad shape, utility companies will want to defray their expenses, so they will look for
         ways to become more efficient. In both cases, ADA-ES continues business as usual
         regardless of the current state of economy. Energy sources will be in high demand until
         technology comes up with an alternative. Until then, natural gas and crude oil will
         continue to decrease its world’s supply. Coal is an abundant source of energy and will
         see increased demand in the future either because of high oil prices or the departure of oil
         altogether, or both. At that time, ADA-ES will expand its business to unfathomable

Company’s Relation to Industry

ADA-ES Compared to Industry Leaders
-ADA-ES’ ranking is based the top 30 firms in the Specialty Chemicals Industry according to

            Statistic                                     Industry Leader           ADA-ES    ADA-ES Rank

            Market Capitalization                   MON                 22.13B      118.60M           36 / 51

            P/E Ratio (ttm)                         ADES                190.45            -            1 / 51

            PEG Ratio (ttm, 5 yr expected)          CSB                      8.30      N/A               N/A

            Revenue Growth (Qtrly YoY)              LPA                 9.65%        0.10%            23 / 51

            EPS Growth (Qtrly YoY)                  LYO                 6.03%        -0.02%           18 / 51

            Long-Term Growth Rate (5 yr)            FSI                 40.0%          N/A               N/A

            Return on Equity (ttm)                  BAK                31.28%        4.48%            26 / 51

            Long-Term Debt/Equity (mrq)             ISON                    8.677     0.000              N/A

            Dividend Yield (annual)                 RHA                16.20%          N/A               N/A

ADA-ES Compared to Industry Leaders and Average

                                      ADES          Pvt1           Pvt2         WGOV        Industry

        Market Cap:                     118.60M             N/A           N/A       1.10B      584.04M

        Employees:                           27       15,2071             802       3,500             775

        Qtrly Rev Growth (yoy):           9.60%             N/A           N/A       3.30%       13.20%

        Revenue (ttm):                   10.02M        4.81B1        18.30M2      834.03M      421.17M

        Gross Margin (ttm):              38.34%             N/A           N/A     25.39%        29.25%

        EBITDA (ttm):                   687.00K             N/A           N/A     101.65M       53.24M

        Oper Margins (ttm):               5.36%             N/A           N/A       8.53%        5.81%

        Net Income (ttm):               547.00K      24.50M1              N/A      56.40M        4.32M

        EPS (ttm):                        0.111             N/A           N/A       4.808         0.35

        P/E (ttm):                       190.45             N/A           N/A       19.97        18.72

        PEG (5 yr expected):                 N/A            N/A           N/A        2.54         2.07

        P/S (ttm):                        12.17             N/A           N/A        1.32         1.30

               *Pvt1 = Ebara Corporation (privately held)     *Pvt2 = Wahlco, Inc. (privately held)
               *WGOV = Woodward Governor Co.                  *Industry = Specialty Chemicals
               *1 = As of 2004                                *2 = As of 2005

      ADA-ES does not have a very large market share but still plays many crucial roles in the
      industry. Since they only have 27 employees, their value must be looked at from a
      different perspective. Their real competition comes from a variety of firms, not
      necessarily all those in the specialty chemicals industry or absent companies from other
      industries (detailed list is at end of report). The real threats to their company comes from
      various factors, such as if the government were to stop subsidizing the research and
      development efforts, if coal does not become a major energy source, or if larger chemical
      companies such as Monsanto were to enter into the direct market.

      Foreign Competition
      Foreign competition is unlikely because of the sensitivity of energy sources and
      otherwise between nations.

V. Company position

Market information

      Marketing fundamentals

      ADA-ES improves electric power and industrial companies through proprietary products
      and systems that mitigate environmental impact while reducing operating costs. The
      government is actually assisting them by imposing strict regulations, such as a major
      decrease in the percentage of mercury emissions from coal-burning boilers. The
      company has continuing business relationships with key power and coal companies.
      Although they are a relatively new company, ADA-ES is extremely well-known by
      utilities due to their technological development, nationwide success, and expansive
      company growth.

      Product development, R&D

      Along with their marketability, ADA-ES has created strategic relationships with
      numerous firms:
             -   NORIT is the largest of three manufacturers of PAC, which removes
                 contaminants from drinking water and beverages. ADA-ES is leading
                 them into a new market to use PAC as an effective control on mercury
                 emissions, and they will receive a 10% commission on all sales NORIT
                 makes with coal-fired plants.
             -   ALSTOM Environmental Control Systems is the largest supplier of
                 equipment to power plants in the United States. ADA-ES has formed a
                 marketing relationship with them for mercury removal at plants and other
             -   Arch Coal, Inc. is the second largest coal producer and the leading
                 producer of PRB coal. Arch Coal and ADA-ES jointly market a chemical
                 called ADA-249 to coal-burning plants. Arch Coal invested $1.13 million
                 in ADA-ES in 2003, along with various stock options.

       -    Thermo Electron Corporation is the leading supplier of continuous emission
            monitors (CEM) for the measurement of mercury in flue gas. ADA-ES came
            to an agreement with them to conduct extensive field validation on the
            product, which provides a unique opportunity to accelerate the evaluation of
            sorbent injection based mercury removal systems and concurrently
            demonstrate the suitability of Thermo’s mercury CEM.

“In order to maximize profitability, ADA-ES plans to continue to provide patented,
proprietary and non-commodity products that can be value-priced, and outsource certain
aspects of the process to minimize costs. For example, ADA-ES maintains blending
contracts, inclusive of secrecy agreements, with chemical suppliers near its major
customers, which minimizes transportation costs while assuring continuous supply.
Additionally, the Company plans to continue to leverage government R&D funding to
fuel its growth. Importantly, ADA-ES owns any technology that is developed, while the
government covers the R&D expenses and shares the marketing and commercialization
costs. ADA-ES plans to pursue additional opportunities to increase the Company’s
potential for growth in revenues and profits as the mercury market matures. One
opportunity involves participating with NORIT in expanded production of activated
carbon to meet the anticipated needs of the utility market. ADA-ES is interested in
vertically integrating its business to have an invested role in the carbon supply. The
current market for activated carbon in the US for water treatment is approximately $250
million per year. The expected market for mercury control in the power industry could
increase the demand to $1-2 billion per year. Significant investment in new activated
production facilities will have to be made to meet this market demand. The Company
views this as an opportunity to leverage its position in this emerging market and increase
its earning potential beyond the current 10% commission structure.” **

In an industry involving as much technology as ADA-ES is in, it is important they
receive funding from the government for research and development to continue to find
solutions for many source-energy related issues. The minimal costs in this area are what
allow such a small company to have such a large impact and lead the mercury control


ADA-ES appeals primarily to utilities companies but allows for firms of all sizes and
financial situations to gain something from their company, whether by preparing for
future energy regulations or just reducing costs of running the factory.

      Pricing, price stability

      As ADA-ES “wins” contracts with various companies, the government provides more
      funding for research and development. Therefore, there is an incentive to keep prices
      reasonable despite being the market leader for many high-demand technologies and
      products. Despite the pricing restraints, ADA-ES’ revenues and profits have risen
      considerably, and all the while they have created more strategic relationships with a
      diverse grouping of companies due to their “helping hand” approach.

      Threat of substitution

      ADA-ES has been very careful to protect itself since they are in a highly technological
      industry where information is crucial. They have done this by patenting almost all their
      products, formulas, and methods, and by working with the government to keep classified
      information from going public. Small, technologically-based companies can become
      obsolete if they cannot offer something to utilities firms that other companies cannot
      supply, or if they spend so much money on research and development to keep pace with
      the industry, they become insolvent. Because of ADA-ES’ position in the industry,
      particularly with mercury control technology, their biggest threat would result from the
      government’s lack of subsidies that currently allow the company to be one of the best in
      the industry.


      As discussed before, technology is the most crucial element in the industry. The
      company with the most efficient products, services, and methods will win over the most
      important clients. Until a company can come up with better technology than ADA-ES,
      they will remain on top of the industry. Since ADA-ES patents all of their discoveries
      and products, it will be extremely difficult for other firms to pass them up, particularly
      since the government assists the research and development of the company.


      Plant age

      ADA-ES utilizes relatively new plants for some of their storage and assembly of
      equipment. Most of their mass production is subcontracted out to save money on storage
      costs and otherwise.

      Economies of Scale

      Although ADA-ES would like to maximize revenue by increasing their product number
      and sales figures, their main priority is to minimize costs. With only 27 employees in the
      company, it may be a while before ADA-ES realizes economies of scale. As their
      technology and product demand grows, they will react accordingly.

      Geographic distribution

      As stated earlier, ADA-ES is headquartered out of Littleton, Colorado. Since the
      majority of their clients are utilities companies and plants, most of their projects are in
      industrial areas such as the Midwest and Southeast regions of the country. See below the
      illustration of ADA-ES current projects (as of September, 2005).

Production inputs (raw materials and labor)

      Discussing all the inputs to ADA-ES’ products would pull the attention away from the
      important aspects of whether or not to buy this stock. To summarize, most of their

        products and chemicals are either made by ADA-ES itself or bought from wholesalers.
        The labor is either done by the company’s employees or subcontracted to outside firms.


        Legal proceedings

        ADA-ES currently has no legal proceedings pending against it. They are, however,
        waiting to hear about pending contracts and statutes which will be decided on a federal

        Community involvement

        There is no information regarding whether or not ADA-ES is involved in the community.
        They are, however, trying to create a better physical environment for the nation through
        their anti-pollution technology and services.

Quality of management


   The following is edited from ADA-ES’ website regarding management:

   *Michael D. Durham, Ph.D., President, has a B.S. in Aerospace Engineering from
   Pennsylvania State University, an M.E. in Environmental Engineering from the University of
   Florida, a Ph.D. in Environmental Engineering from the University of Florida, and an
   M.B.A. from the University of Denver.

   *Mark H. McKinnies, CPA, Senior VP and CFO, holds a B.A. in Accounting from the
   University of Denver.

   *Jean Bustard, COO, holds a B.S. in Physics Education from Indiana University, an M.A. in
   Physics from Indiana State University, and an M.B.A. from the University of Colorado.

   *Jonathan Barr, Vice President of Sales, received a B.S. in Political Science and Business
   Administration from Wittenberg University.

   *Richard Miller, Vice President of Business Development for Utility Systems, joined ADA-ES
   in December 2005 with more than 29 years of experience in marketing and sales of major air
   pollution control equipment to the coal-fired power industry.

*Richard Schlager, Vice President Contract R&D, holds a B.S. in Mineral Engineering-
Chemistry and an M.A. in Metallurgical Engineering, both from the Colorado School of

*Greg Filippelli, P.E., Director of Emission Strategies, holds a B.S. in Environmental
Engineering Technology from Pennsylvania State University.

*Nina Bergan French, Ph.D., Director, Refined Coal Products, holds a B.S. in Mechanical
Engineering from the University of Illinois, an M.S. in Mechanical Engineering from
Stanford, and a Ph.D. in Mechanical Engineering from the University of California Davis.

   With 150 years of experience in developing and implementing pollution control
   technology for coal-burning plants, ADA-ES and its employees are recognized experts in
   the field of air pollution control.

   Achievement of past goals

   -ADA-ES was awarded their first three commercial contracts for mercury emission
   control systems in the fall of 2005, capitalizing on state regulations and development of
   new power plants
   -ADA-ES has developed patented and patent-pending technologies
   -ADA-ES is serving a leadership role by providing the Environmental Protection Agency
   (EPA) with operating results on mercury control technology to base decisions on pending
   Federal regulations; in turn, the Department of Energy assists in funding research and
   development expenses
   -ADA-ES, as of December 2005, has participated in 23 mercury control tests and
   achieved a mercury removal rate of 90%; therefore, they have been awarded additional
   projects in 2006
   -ADA-ES has strategic relationships as mentioned earlier in this report, along with close
   working relationships with the largest utilities in the United States and Canada

   Goals for future

   -Remain the industry leader with mercury control technology for years to come,
   especially since the imposing Federal mercury regulations are projected to create a
   market ranging $2 – 5 billion

      -Continue success of bid and proposal activities to gain additional commercial contracts
      -Continue to develop technology and products that utilities will employ
      -Continue to build relationships with utilities and related companies
      -Continue to receive research and development funding from the Federal Government;
      this is directly correlated with having continued success in projects and demonstrations

VI.   Financial statement analysis

Accounting procedures

      Inventory Valuation

      ADA-ES doesn’t have significant inventory information. They primarily sell their
      services to utility companies, so inventory is not a major factor. Combined with prepaid
      expenses and other current assets, the inventory account totals $274,000 – less than 2
      percent of their total assets.


      The company’s property and equipment depreciate using a straight-line method.

      Investments Valuation

      ADA-ES maintains a portfolio of investment securities of approximately $5.6 million,
      which is over a third of their total assets. $1.24 million of those investment securities are
      categorized as current assets.


      ADA-ES has approximately $155,000 of intangible assets and over $2 million worth of
      goodwill. This is a positive sign since the company is spending so much money for the
      potential to grow more in the future.

      Pension Plans

      There is no mention of this sort of information from ADA-ES’ website or any other

Financial Ratios

Comparisons to Industry Averages

ADA-ES’ overall performance has underperformed in the past, which doesn’t say a lot
for our purposes because their growth and future potential is outstanding.

     More Comparisons          ADES      Industry

     Market Cap:               118.82M    593.88M

     Employees:                    27         457

     Qtrly Rev Growth (yoy):    9.60%      13.20%

     Revenue (ttm):             10.02M    527.70M

     Gross Margin (ttm):       38.34%      28.54%

     EBITDA (ttm):             687.00K     62.93M

     Oper Margins (ttm):        5.36%       5.00%

     Net Income (ttm):         547.00K      4.32M

     EPS (ttm):                  0.111       0.33

     P/E (ttm):                 190.81      19.53

     PEG (5 yr expected):         N/A        1.94

     P/S (ttm):                  11.90       1.27

Trend Analysis

     Per Share Overview

          Date            12-mos Rolling EPS           Dividend       P/E Ratio
        09/2005                  0.11                     NA           179.09
        06/2005                  0.12                     NA           125.83
        03/2005                  0.11                     NA           217.73
        12/2004                  0.08                     NA           300.12
        09/2004                  0.11                     NA           128.18
        06/2004                  0.07                     NA           128.57
        03/2004                  0.09                     NA            92.33
        12/2003                  0.12                     NA            59.17

     Key Financial Ratios and
                                                        FYE: 12/31

               Profitability       2004                Leverage           2004
     Net Inc/Comm Equity           0.03     Total Liab/Total Assets       0.08
     Net Inc/Total Assets          0.03     Total Liab/Inv Cap            0.09
     Net Inc/Inv Cap               0.03     Total Liab/Comm Equity        0.08
     Pretax Inc/Net Sales          0.05     Interest Coverage Ratio       12.71
     Net Inc/Net Sales             0.04     Curr Debt/Equity               NA
     Cash Flow/Net Sales           0.10     LTD/Equity                     NA
     SG&A/NetSales                 0.24     Total Debt/Equity              NA
            Asset Utilization                           Liquidity
     Net Receivables Turnover      7.44     Quick Ratio                    4.06
     Inventory Turnover            77.23    Current Ratio                  4.11
     Inventory Day Sales           0.29     Net Rec/Curr Assets            0.28
     Net Sales/Work Cap            2.61     Inv/Curr Assets                0.01
     Net Sales/PP&E                18.75

     Income Statement (Millions)

                                    9/30/2005    6/30/2005   3/31/2005 12/31/2004
     Total Revenues(Net Sales)         3.12         2.47        2.17      2.26
     Cost of Goods Sold                1.87         1.55        1.27      1.50

Selling & Admin Exps                  0.69        0.63        0.55       0.61
Operating Income                      0.29        0.06        0.06       0.13
Interest Exp                          0.00        0.00        0.00       0.00
Pretax Income                         0.36        0.12        0.12       0.16
Other Income                          0.07        0.06        0.07       0.04
Net Income Bef Extraordinary ...       NA          NA          NA         NA
Net Income                            0.25        0.11        0.10       0.10

Balance Sheet (Millions)

               Assets               9/30/2005   6/30/2005   3/31/2005 12/31/2004
Cash & Short Term Investments          3.80        3.47        3.99       2.82
Receivables - Total                    2.23        1.36        1.58       1.20
Inventories - Total                    0.03        0.04        0.05       0.05
Total Current Assets                   6.31        5.08        5.79       4.27
Net Property, Plant & Equipment        0.37        0.39        0.43       0.45
Total Assets                          15.18       13.98       13.53      13.08
Accounts Payable                       1.59       0.92        0.66       0.84
Debt in Current Liabilities             NA         NA          NA         NA
Total Current Liabilities              2.10       1.16        0.90       1.04
Long-Term Debt                          NA         NA          NA         NA
Total Liabilities                      2.11       1.17        0.92       1.07
      Stockholder's Equity
Minority Interest                       NA        NA          NA         NA
Preferred Stock                         NA        NA          NA         NA
Common Stock                          13.76      13.71       13.65      13.13
Retained Earnings                     -0.71      -0.96       -1.06      -1.16
Treasury Stock                          NA        NA          NA         NA
Total Stockholders' Equity            13.06      12.80       12.60      12.01
Total Liabilities and Stockholders'
                                      15.18      13.98       13.53      13.08

Cash Flow Summary (Millions)

           Categories              9/30/2005    6/30/2005   3/31/2005 12/31/2004
Net Cash Provided by Operating
                                      0.38        0.66        -0.32      0.27
Net Cash Provided by Investing
                                      -0.27       -0.23       -0.07      0.54
Net Cash Provided by Financing
                                      0.03        0.00        0.27       0.07

Annual Summary Data (Millions)

         Year                 Sales             Net Income             EPS

                12/2003            5.86                0.41            0.12
                12/2004            8.42                0.34            0.08
            Growth Rates           43.56               -17.85         -33.33

Common Size Financial Statements

      Income Statement

                       Third Quarter Ended September 30, …
              CATEGORY              2005 (%)     2004 (%)
         Total Revenues              100.00       100.00
         Costs of Services            60.00        59.90
         Gross Profit                 40.00        41.10
         Total Other Costs/Exp.       30.56        32.40
         Income Before Taxes          11.69         7.81
         Provision for Tax Exp.       (3.72)          -
         Net Income                    7.96         7.81
         Unrealized Losses            (1.12)          -
         Comprehensive Income          6.84         7.81

Balance Sheet

                    CATEGORY                      9/30/05 (%)   12/31/04 (%)
         Current Assets
            Cash and Cash Equivalents                16.89         16.12
            Accounts Receivable                      14.70          9.16
            Investment in Securities                  8.16          5.45
            Prepaid Expenses and Otherwise            0.01          1.89
         Total Current Assets                        41.56         32.62
         Property and Equipment                       8.90         10.28
            Acc. Deprec. and Amortization           (6.48)         (6.85)
         Net Property and Equipment                   2.41          3.43
         Goodwill                                    13.34         15.47
         Intangible Assets                            1.02          1.12
         Investment in Securities                    37.45         44.43
         Deferred Tax Benefit                         4.22          2.93
         TOTAL ASSETS                               100.00         100.0
         Current Liabilities
            Accounts Payable                         6.17           3.31
            Accrued Expenses                         4.32           3.09
            Deferred Revenues                        3.37           1.54
         Total Current Liabilities                  13.86           7.94
         Long Term Liabilities
            Deferred Compensation                    0.07           0.24

           Stockholder’s Equity
              Common Stock                                                          90.69                      100.41
              Accumulated Other Comp. Inc.                                           0.05                        0.26
              Accumulated Deficit                                                   (4.67)                     (8.85)
           Total Stockholder’s Equity                                               86.07                       91.82
           Total Liabilities and Equity                                             100.0                       100.0

Free cash flow

         FREE CASH FLOW                                        9/30/05           6/30/05            3/31/05       12/31/04
             (thousands $ )
               Net Income                                        248              107                 95                97
       Add: Depreciation Expense                                  41               40                 42                27
       Less: Capital Expenditures                                 15               11                 28                31
            Free Cash Flow                                       274              136                109                93

           Value (thousands $)

                                 150                                                           136
                                 100   93                         109
                                  Dec-04    Jan-05   Feb-05   Mar-05    Apr-05   May-05    Jun-05     Jul-05   Aug-05   Sep-05

                                                                          Free Cash Flow

VII.   Financial Forecasts

Revenue Forecasts

        There have been no sufficient revenue forecasts for ADA-ES. As far as future earnings
        are concerned, please read the section titled, “Why the varying growth rates?”

Financial Statements

        Already posted above under “Financial Ratios” section.

Projection of Future Longer-Term Earnings and Dividends Growth

            There is minimal information regarding longer-term earnings. Below is the only
            forecasting analysis I could find.

                                                                   Quarter Ending

                     Sep 2004            Dec 2004           Mar 2005              Jun 2005           Sep 2005               Dec 2005
                          NA                 -0.05                0.00                0.01                 0.03                 0.02
                         0.05                 0.02                0.02                0.02                 0.05                  NA
       GAAP($)           0.05                 0.02                0.02                0.02                 0.05                  NA
Earnings Forecast | Compare(New!)

                                                         Quarter Ending                                    Fiscal Year Ending

                                               Dec 2005                   Mar 2006                Dec 2005                   Dec 2006

 Average Estimate ($)                                      0.02                      0.03                     0.12                      0.19

 Number of Analysts                                           1                        2                          2                        2

 Low Estimate ($)                                          0.02                      0.02                     0.11                      0.16

 High Estimate ($)                                         0.02                      0.04                     0.12                      0.22

 Year-Ago EPS ($)                                          0.02                      0.02                     0.08                       NA

Forecast Revisions | Compare(New!)

                                                         Quarter Ending                                    Fiscal Year Ending

                                               Dec 2005                   Mar 2006                Dec 2005                   Dec 2006

 Current Estimate ($)                                      0.02                      0.03                     0.12                      0.19

 7 Days Ago ($)                                            0.03                      0.03                     0.12                      0.19

 30 Days Ago ($)                                           0.03                      0.04                     0.12                      0.22

 60 Days Ago ($)                                           0.03                      0.04                     0.12                      0.22

 90 Days Ago ($)                                           0.03                      0.04                     0.12                      0.22

Growth Estimates | Compare(New!)

                                     Year Ending
                                                                   Past 5 Years             Next 5 Years          Forward
                                                                    (per year)               (per year)             P/E
                         Dec 2004             Dec 2005

 ADES                          43.80%                65.20%                   0.00%                  0.00%            184.20            0.00

 Industry                       9.90%                27.00%                   8.60%                 11.90%             40.60            3.41

 S&P 500                       11.40%                7.80%                    5.90%                  0.00%             17.10            0.00

VIII. Analysis of risk


       Trading Location -                        NASDAQ
       Average volume (3 months) -                   26,269.8

Total risk

       Range -                             52-Week High 31.38
                                           52-Week Low 13.51

       Standard deviation -                  3.62
       - Calculated using daily returns from the past year.

Systematic Risk

       Correlation to market/industry

       12.3% with the S&P 500 (daily returns through the past year)

       Beta with Market



                  y = 0.6807x - 0.0006
                      R = 0.0151

              -2.500 -2.000 -1.500 -1.000 -0.500 0.000% 0.500% 1.000% 1.500% 2.000% 2.500%
                %      %      %      %      %





IX.    Fundamental valuation

       Required Rate of Return

           R(f) + Beta (Market Premium)

           .0448 +.68(.055) = 8.2%

       Valuation using various models

       Dividend Discount Model

       Not applicable because it doesn’t pay a dividend

       P/E Model

       Not a good model because there are no direct peer groups to compare with

     Model used in Warren Buffet Class
Warren Buffett Way Owners' Earnings Discount Model
assuming discount rate (k) of                                        8.22%
Owner Earnings in 2004:
Net Income                                      $        239,000.00
Depreciation                                    $        164,000.00
Amortization                                    $               -
Capital Expenditures                            $       (212,000.00)
Owner Earnings                                  $        191,000.00

                                        2004                2005                  2006
Prior Year Owner Earnings          $   191,000.0        $  273,130.0         $   450,664.5
First Stage Growth Rate (add)          43.0%               65.0%                100.0%
Owner Earnings                      $ 273,130.0         $ 450,664.5          $   901,329.0
Discounted Value per annum           $273,130.0          $416,433.7            $769,605.7

          2007                       2008                2009                2010
      $ 901,329.0               $ 2,703,987.0        $ 4,326,379.2       $ 6,056,930.9
         200.0%                     60.0%               40.0%               10.0%
      $ 2,703,987.0             $ 4,326,379.2        $ 6,056,930.9       $ 6,662,624.0
      $2,133,447.7              $3,154,238.0         $4,080,514.9        $4,147,631.1

        2011               2012            2013

$6,662,624.0    $ 7,328,886.4      $8,061,775.0
      10.0%              10.0%           10.0%

$7,328,886.4    $ 8,061,775.0      $8,867,952.5
$4,215,851.3       $4,285,193.5    $4,355,676.2

 Sum of present value of owner earnings           $27,831,722.2

 Residual Value
 Owner Earnings in year 10                   8,867,952.5
 Second Stage Growth Rate (g) (add)                        5.00%
 Owner Earnings in year 11                   9,311,350.1
 Capitalization rate (k-g)                              3.22%
 Value at end of year 10                     289,172,364.18

 Present Value of Residual                    $131,244,613.93
 Intrinsic Value of Company                   $159,076,336.13

 Shares outstanding assuming dilution                  4998000
 Intrinsic Value per share                               $31.83

*Note: I will display two other “pessimistic” valuations utilizing the Buffet model during
my presentation*

Why the varying growth rates?

2006 will have significant growth for ADA-ES because their business is expanding
technologically as well as geographically, so I felt a 100% growth rate would be suitable
here. By 2007 (to 40%) and 2008 (to 75%), all coal-burning factories must lower
mercury emissions released from the burning of coal, according to the Environmental
Protection Agency. This will triple or even quadruple (or more) ADA-ES’ business
prospects. On top of the mercury emissions, utilities will also request ADA-ES’ services
because they help make factories more efficient, so that the utilities can actually save
money in the long run by purchasing their services. Therefore, I decided to be
conservative and choose a high growth rate in 2007 and a medium growth rate from that
in 2008. The 40% growth rate in 2009 is due to the laggards in the industry that the EPA
has had to enforce and awarded contracts to ADA-ES. The 10% growth rate from 2010
forward reflects not only the mercury emissions and utility efficiencies, but also the
promising factor that oil/natural gas will be all but endangered as a world resource. Coal
is cheap, and the planet, to say the least, has an almost exponential amount of it. Another
factor I looked at in determining the growth rate is the government’s involvement in
ADA-ES, specifically. The Department of Energy has chosen them to assist in funding
all research and development expenditures. This will allow ADA-ES to continually grow

and expand their technological capabilities, while continuing to patent successful
products and technologies.

X. Other Considerations
Other Analyst Following, Institutional Following, and Recommendations


Mean Recommendation (this week):                                                                                 1.0

Mean Recommendation (last week):                                                                                 1.0

Change:                                                                                                          0.0

Industry Mean:

Sector Mean:

S&P 500 Mean:                                                                                                    2.47

* (Strong Buy) 1.0 - 5.0 (Strong Sell)

                                                      Compare to Industry


Mean Target:                                                                                 26.00

Median Target:                                                                               26.00

High Target:                                                                                 26.00

Low Target:                                                                                  26.00

No. of Brokers:                                                                              1

                                              Data provided by Thomson/First Call


    Date                           Research Firm                            Action                   From               To

21-Dec-05 Adams Harkness                                                    Initiated                                   Buy


                                   Current Month          Last Month               Two Months Ago           Three Months Ago

Strong Buy                               2                     2                         1                         1

Buy                                      0                     0                         0                         0

Hold                                     0                     0                         0                         0

Sell                                     0                     0                         0                         0

Strong Sell                              0                     0                         0                         0

      *John S. Quealy from Canaccord Adams and Dr. William Burns, CFA from
      Johnson Rice and Company, L.L.C are the only analysts who religiously follow
      ADA-ES in research.
      *Analyst recommendations on have rated ADA-ES as a ten,
      meaning a very strong buy.
                  % Owned     Shares Bought in         Shares Sold in Last
                  By          Last 90 Days             90 Days
  Insiders as     10.49%      0 (b/c nothing has       3,390
  of 12/31/05                 been reported)
  Institutional 26.90%        687,062                  127,295

XI. Conclusions
Analytical Conclusions
      ADA-ES is rated a strong buy by everyone and anyone who researches it. They
      are a small company with extremely high growth potential, and a means to
      achieve their goals. The Department of Energy assists their research and
      development funding, and the Environmental Protection Agency is essentially
      creating hundreds of leads for ADA-ES to do business with. In addition, all
      plants require increasing of their overall efficiency, and ADA-ES provides
      services for that as well. The oil/natural gas situation is creating a sellers’ market
      for coal, and coal-burning plants need companies like ADA-ES if they are to
      capitalize on revenues of their own.

      ADA-ES has only been publicly traded for 30 months, so they are an extremely
      volatile stock. Their current earnings do not justify their current stock price.
      Everything with this stock relies on the future – the EPA regulations, the oil
      market occurrences, and developments for alternative sources of energy. If
      anything goes awry with these factors, the stock price may not skyrocket to its
      current potential. This is a risky stock if there ever was one to buy. If they do not

       grow at the rates listed earlier in the Warren Buffet Model, this stock will not
       meet optimistic expectations.

Critical Issues
       Again, the critical issues are ADA-ES’ competitors, the energy market, the EPA,
       the Department of Energy funding for research and development, and ADA-ES
       remaining a coal technological leader.

Investment Recommendation
       You miss 100% of the shots you don’t take. This one is either going to be a slam
       dunk or a disastrous rejection. I’ve never dunked a basketball before. Come to
       think of it…. I’ve never dunked anything before. I would like to dunk this stock
       and get the University some serious dough. I rate this a BOOM-SHACKA-

Additional Information: Clinchers
    March 15, 2005
        • Federal Rule to cap and reduce mercury emissions known as the Clean Air
           Mercury Rule
        • Rule says utility emissions of mercury must be reduced from 48 tons to 35
           (27% decrease) by 2008 for Phase 1
        • Phase 2 will be decreasing that amount to just 15 tons by 2018 (a total
           decrease of approximately 70%)
        • New plants must meet stricter regulations

    Quote from Jim Jubak regarding coal, Money Markets Editor,

              -   “I have seen the fuel of the future. It's not natural gas. That was the
                  fuel of the future in 2000. It's not uranium. That might be the fuel of
                  the future in 2015, if the new generation of nuclear plants turns out to
                  be as good -- once someone builds one and operates it for a while -- as
                  their proponents hope. It's not solar or wind or fuel cells, either. But
                  they could give nuclear a run for its money by 2015 -- if government
                  subsidies produce enough of a market to drive costs down further.
                  Nope. The fuel of the future is coal. For the next five years anyway.
                  My prediction is based on nothing more or less grand than this: Coal is
                  cheap, and the coal supply is stable.”

 Quote from Jim Kramer regarding coal, Mad Money Multi-Millionaire,
         - “Coal is hot, getting hotter. I need you in coal," said Jim Cramer on his
            "Mad Money" TV show. “I am a fan of coal because as the prices of
            natural gas and oil increase, coal, a cheaper alternative for electricity
            production, takes market share. Most coal stocks, however, are not
            good investments because they either have primarily high-sulfur coal,
            have sold too much future coal production at current prices (which
            won't allow them to profit as much as the price of coal increases), or
            they don't have large enough reserves.”

 The Department of Energy assists in funding for numerous companies that
  perform duties in the best interest of the nation. As far as my research can tell,
  the DOE does not give money to competitors of ADA-ES; however, they do assist
  in research efforts for the good of the country and share that information with
  those companies who can implement the mercury-reducing procedures. The
  following is quoted from the ADA-ES website.

           -   “What are the advantages of government funded R&D?
               * R&D revenues replace R&D expenses
               * Funding helps cover overhead expenses
               * ADA-ES owns any technology that is developed
               * Programs require working directly with power-generating customers
               * $2B will be available for clean coal technology over the next ten

           -   “Why is ADA-ES so successful with obtaining funding?
               ADA-ES has successfully competed for government R&D funds for
               nearly 25 years. During this time, we have been awarded over 50
               contracts exceeding $40 million in value. In fact, ADA-ES was
               founded to commercialize a DOE funded technology. Our success at
               taking a technology from concept to R&D to providing reliable
               commercial full-scale systems distinguishes ADA-ES from most other
               R&D contractors.”

 Detailed competition is as follows:

           -   Southern Company (SO) is an electric company that is a utility
               industry leader. Although their main priorities are separate from that
               of ADA-ES, they do spend money on R&D for mercury control
               technology and test advanced mercury control technology. I would
               rate their threat level as low to medium in competition with ADA-ES.
                    Financials….Price= 33.96; Div=1.49; Cap=25.18B;
                       P/E=15.88; EPS=2.14;1 yr. target=34.63

-   McDermott International (MDR) provides engineering, procurement,
    and services to their customers. They have three segments to the firm,
    one of which is government operations. In this segment, they provide
    equipment that can help lower mercury emissions. I would rate their
    threat level as medium in competition with ADA-ES because they
    could provide major equipment that ADA-ES would otherwise just
    improve or upgrade.
         Financials….Price=51; No Div; Cap=3.61B; P/E=17.84;
            EPS=2.86; 1 yr. target=56.50

-   Woodward Governor Company (WGOV) provides energy control
    systems and components for aircraft and industrial engines and
    turbines worldwide. I would rate their threat level is low in
    competition with ADA-ES because their main focus is on aircraft
    engines and turbines.
         Financials….Price=32.56; Div=.40; Cap=1.12B; P/E=20.31;
           EPS=1.60; 1 yr. target=32.33

-   Consol Energy Inc. (CNX) is divided into two units. Their coal unit
    engages in the mining, preparation, and marketing of stream coal.
    They are not competing with ADA-ES, but they are competing with
    companies that ADA-ES has strategic relationships with, and they
    have strong growth potential.
        Financials….Price=64.90; Div=.56; Cap=6B; P/E=10.37;
            EPS=6.26; 1 yr. target=87.45


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