| Business Segment Information |
Business Segment Information Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by a company's chief operating decision maker ("CODM"), or a decision making group, in deciding how to allocate resources and in assessing financial performance. As of September 30, 2016, the Company's CODM was the Company's CEO. The Company's operating and reportable segments are organized by products and services provided. During the fourth quarter of 2015, the Company realigned its operating segments into two reportable segments: (1) Refined Coal; and (2) Emissions Control. Following the realignment, the Company retroactively adjusted all segment related disclosures included within the notes to the Condensed Consolidated Financial Statements. Segments have been reorganized from prior periods due to changes within the Company's management structure and the manner in which the Company is operating the business. All prior periods have been conformed to the current year presentation. The business segment measurements provided to and evaluated by the CODM are computed in accordance with the principles listed below: | | • | The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies except as described below. |
| | • | Segment revenue includes the Company's equity method earnings and losses from the Company's equity method investments. Segment revenue also includes the Company's royalty earnings from Tinuum Group and income related to sales-type leases. |
| | • | Segment operating income (loss) includes the Company's equity method earnings and losses from the Company's equity method investments, royalty earnings from Tinuum Group (including depreciation and amortization expense) and gains related to sales of equity method investments. However, segment operating income (loss) excludes Payroll and benefits, Rent and occupancy, Legal and professional fees, and General and administrative ("Corporate general and administrative expenses") unless otherwise specifically included, as the Company does not allocate those amounts between segments. |
| | • | All items not included in operating income, except as noted below, are excluded from the RC and EC segments. |
As of September 30, 2016 and December 31, 2015, substantially all of the Company's material assets are located in the U.S. and all significant customers are either U.S. companies or the U.S. Government. The following table presents the Company's operating segment results for the three and nine months ended September 30, 2016 and 2015: | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | (in thousands) | | 2016 | | 2015 | | 2016 | | 2015 | Revenues: | | | | | | | | | Refined Coal: | | | | | | | | | Earnings (loss) in equity method investments | | $ | 10,735 |
| | $ | (41 | ) | | $ | 30,066 |
| | $ | 5,133 |
| Consulting services | | — |
| | — |
| | — |
| | 55 |
| Royalties | | 2,064 |
| | 3,273 |
| | 3,922 |
| | 7,767 |
| | | 12,799 |
| | 3,232 |
| | 33,988 |
| | 12,955 |
| Emissions Control: | | | | | | | | | Equipment sales | | 14,869 |
|
| 12,088 |
|
| 44,788 |
|
| 47,439 |
| Chemicals | | 670 |
|
| 132 |
|
| 1,717 |
|
| 749 |
| Consulting services | | 171 |
|
| 665 |
|
| 492 |
|
| 1,294 |
| | | 15,710 |
| | 12,885 |
| | 46,997 |
| | 49,482 |
| Total segment reporting revenues | | 28,509 |
| | 16,117 |
| | 80,985 |
| | 62,437 |
| Adjustments to reconcile to reported revenues: | | | | | | | | | Refined Coal: | | | | | | | | | (Earnings) loss in equity method investments | | (10,735 | ) | | 41 |
| | (30,066 | ) | | (5,133 | ) | Royalties | | (2,064 | ) | | (3,273 | ) | | (3,922 | ) | | (7,767 | ) | | | (12,799 | ) | | (3,232 | ) | | (33,988 | ) | | (12,900 | ) | Total reported revenues | | $ | 15,710 |
| | $ | 12,885 |
| | $ | 46,997 |
| | $ | 49,537 |
| | | | | | | | | | Segment operating income (loss): | | | | | | | | | Refined Coal (1) | | $ | 11,913 |
| | $ | 1,390 |
|
| $ | 33,974 |
|
| $ | 7,350 |
| Emissions Control (2) | | 2,956 |
| | (3,397 | ) | | 9,656 |
| | (8,190 | ) | Total segment operating income (loss) | | $ | 14,869 |
| | $ | (2,007 | ) | | $ | 43,630 |
| | $ | (840 | ) |
(1) Included within the RC segment operating income for the nine months ended September 30, 2016 is a $2.1 million gain on the sale of RCM6 and for the three and nine months ended September 30, 2016 and 2015, 453A interest expense of $0.9 million, $2.0 million, $1.1 million and $3.4 million, respectively, and interest expense related to the RCM6 note payable of zero, $0.6 million, $0.3 million and $1.8 million, respectively. (2) Included within the EC segment operating income for the three and nine months ended September 30, 2016 is a $0.9 million gain related to the lease termination discussed in Note 11.
A reconciliation of reportable segment amounts to the Company's consolidated balances is as follows: | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, | | Nine Months Ended September 30, | (in thousands) | | 2016 | | 2015 | | 2016 | | 2015 | Segment income (loss) | | | | | | | | | Total segment operating income (loss) | | $ | 14,869 |
| | $ | (2,007 | ) | | $ | 43,630 |
| | $ | (840 | ) | Adjustments to reconcile to net income (loss) attributable to ADES | | | | | | | | | Corporate payroll and benefits | | (2,034 | ) | | (2,367 | ) | | (7,946 | ) | | (11,992 | ) | Corporate rent and occupancy | | (306 | ) | | (202 | ) | | (807 | ) | | (503 | ) | Corporate legal and professional fees | | (1,606 | ) | | (3,150 | ) | | (6,515 | ) | | (10,514 | ) | Corporate general and administrative | | (818 | ) | | (740 | ) | | (2,965 | ) | | (2,731 | ) | Corporate depreciation and amortization | | (93 | ) | | (143 | ) | | (351 | ) | | (448 | ) | Corporate interest (expense) income, net | | (78 | ) | | 2 |
| | (2,200 | ) | | (32 | ) | Other income (expense), net | | 261 |
| | (3 | ) | | (264 | ) | | (22 | ) | Income tax expense | | (583 | ) | | (44 | ) | | (734 | ) | | (151 | ) | Net income (loss) | | $ | 9,612 |
| | $ | (8,654 | ) | | $ | 21,848 |
| | $ | (27,233 | ) |
Corporate expenses listed above include certain costs that benefit the business as a whole but are not directly related to one of the Company's segments. Such costs include, but are not limited to, accounting and human resources staff, information systems costs, legal fees, facility costs, audit fees and corporate governance expenses. Segment assets were as follows as of the dates presented: | | | | | | | | | | | | As of | (in thousands) | | September 30,
2016 | | December 31,
2015 | Refined Coal | | $ | 4,879 |
| | $ | 19,507 |
| Emissions Control | | 27,096 |
| | 31,467 |
| All Other and Corporate | | 8,568 |
| | 9,801 |
| Consolidated | | $ | 40,543 |
| | $ | 60,775 |
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