Fair observation. A couple of points. The operating losses at ADA-CS are not a cash drain on ADA-ES. It would only be a drain on ADA-ES cash if there were a capital call of some sort on the equity holders.
As to my valuation, you are right that it "assumes" full capacity. If the plant never achieves full capacity then it would be worth less than what is in my model.
But you also can't value it on the point-in-time or spot earnings of this year or next year. Equity valuations have infinite duration and must be valued on a perpetual normal cash flow. Nameplate capacity and the resulting cash flow is the best estimate, as long as MACT for utilities is passed.
And finally, if Norit arbitration and/or dilution erodes ADA-ES' equity stake to nothing, then it is all a moot point.
The information last summer was that they had only sold 50 million of the 150 million pounds of annual capacity of activated carbon from production line #1. It will be interesting to see the operating loss and the negative cash flow sucked from ADAES from this putrid level of sales and production. Rots, no offense, but in my opinion this item is the biggest gap in your valuation model. Your model assumes 100% capacity. At 50 million pounds, they are at maybe break even, which is a long way from your $9 million in ADAES profits from $150 million in activated carbon sales. And without it, half of your models enterprise value and equity value are gone.
Between the ADACS plant losses and the SG&A cash suck, the $12 million from Calgon won't be around long enough for those shareholders hoping for a dividend to even get a whiff of it. Keep dreaming though.
i think the piece that makes it difficult is equity income of unconsolidated subs, i.e. the AC plant, which will contribute non-cash operating income losses to the bottom line.
as you have said, none of this much matters because the Norit arbitration overwhelms
Yahoo's survey of analysts projects revune of about $4.5 million and net after tax loss of $2.5 million. This said, I don't think the yahoo site is very acurate nor do I think anybody, analysts included) follow ADA very closely.
Just think about the earnings release in the morning, assume total Revenue for Q3 for will be $4.5 million ($3.1 million from refined coal). With all the legal fees for Norit and Calgon, assume net after tax income will be a loss of $1.5 million.
Its hard to rate ADA "a buy" until the Norit Arb ruling/finding comes out. Company has a lot of good things going for it, but Norit is a big black cloud with only down side potential. This said, I think ADA will move up to $10 + if the Arb. ruling is in favor of ADA.
Just my opion
the $12 million more than covers legal fees as they only sued for $8 million
Forget Calgon. It is a sideshow. The real case that matters is Norit. If the Norit scumbags are sent packing back to Holland, then this stock should fly. There's $15 per share of value - ok, maybe it's $10 - of unrecognized value here, in large part because of this Norit case (yeah, go f$%# yourself Halevay)