Fuel Tech, Inc. (NASDAQ: FTEK), a technology company
providing advanced engineering solutions for the optimization of
combustion systems, emissions control and water treatment in
utility and industrial applications, today reported financial
results for the first quarter ended March 31, 2019 (“Q1 2019”).
“Our Q1 2019 net loss from continuing operations of $1.3 million
included operating losses at our soon-to-be suspended Air Pollution
Control (“APC”) China operations (“Beijing Fuel Tech”) and other
charges totaling $1.2 million, as well as the unfavorable impact of
the timing of completion of current APC projects under contract,”
said Vincent J. Arnone, Chairman, President and CEO of Fuel Tech.
“With that said, we continue to pursue a promising pipeline of APC
contract opportunities, particularly in the US, and we are in
various stages of negotiation with potential clients that, in the
aggregate, represent $10-15 million of contract award opportunities
that we expect will close by late Q2 or early Q3 2019. The outlook
for FUEL CHEM® is also promising. We are scheduled to begin
installing our FUEL CHEM program on two incremental coal-fired
units at a domestic utility in May and expect to have these new
units up-and-running by the end of Q2 2019.”
The Q1 2019 net loss from continuing operations included the
following items:
- a $0.6 million severance-related
restructuring charge associated with the ongoing suspension of
Beijing Fuel Tech’s operations. Substantially all the severance
charges associated with this suspension were realized as of March
31, 2019;
- a $0.3 million operating loss at
Beijing Fuel Tech, which was exclusive of the above-referenced
restructuring charge; and
- a $0.3 million charge associated with
required incremental work for a domestic APC project
Excluding the above-referenced charges and operating losses at
Beijing Fuel Tech, Fuel Tech’s net loss from continuing operations
for Q1 2019 was $0.1 million, or $0.01 per diluted share.
“We are focusing on cash collection and project completion at
Beijing Fuel Tech,” said Mr. Arnone. “As the wind down of these
operations continues, the negative impact of Beijing Fuel Tech’s
operating losses on Fuel Tech’s overall performance will dissipate.
Excluding operating losses and charges associated with Beijing Fuel
Tech, we expect to generate operating income from continuing
operations for the full year 2019.”
Q1 2019 Consolidated Results
Overview
Consolidated revenues declined to $10.2 million from $12.8
million in Q1 2018, reflecting lower revenues at APC partially
offset by higher revenues at FUEL CHEM.
Gross margin was 39.5% of revenues compared to 39.3% of revenues
in Q1 2018. Gross margin in Q1 2019 included the $0.3 million
domestic incremental work charge; exclusive of this item, gross
margin in Q1 2019 was 42.1%.
SG&A expenses declined to $4.4 million from $4.9 million in
Q1 2018. As a percentage of revenues, SG&A totaled 43.9% of
revenues in Q1 2019 as compared to 38.5% of revenues in Q1
2018.
Net loss from continuing operations was $1.3 million, or $0.05
per diluted share, compared to net loss from continuing operations
of $0.2 million, or $0.01 per diluted share, in Q1 2018. Net loss
from continuing operations in Q1 2019 included the above-referenced
restructuring and incremental work charge, and operating losses at
Beijing Fuel Tech that, in the aggregate, totaled $1.2 million.
Research and development expenses remained stable at $0.3
million in Q1 2019 and Q1 2018.
Capital projects backlog at March 31, 2019 was $12.2 million,
$10.0 million of which was domestic.
APC segment revenues declined to $5.8 million from $8.6 million
in Q1 2018, primarily the result of a lower capital projects
backlog entering 2019 as compared to 2018. APC gross margin was
$1.9 million, or 32.8%, as compared to $3.0 million, or 34.8%, in
Q1 2018. Excluding the $0.3 million domestic incremental work
charge, APC gross margin in Q1 2019 was $2.2 million, or 37.4%.
APC results for Q1 2019 included revenues of $0.3 million from
Beijing Fuel Tech and an operating loss, including restructuring
charges, of $0.9 million. In Q1 2018, revenues from Beijing Fuel
Tech were $0.7 million and the operating loss was $0.5 million.
FUEL CHEM segment revenues rose to $4.4 million from $4.2
million in Q1 2018, reflecting favorable weather conditions and the
addition of a new coal-fired unit at an existing customer in the
midwestern US during Q3 2018, partially offset by unplanned
customer-driven outages and reductions in regional coal-fired unit
dispatch in Q1 2019. Segment gross margin was 48.4% in Q1 2019 and
48.5% in Q1 2018.
The FUEL CHEM program predominantly assists coal-fired power
generation in their effort to burn lower-quality fuels more cleanly
and efficiently. As noted above, the Company is scheduled to begin
installing this program on two incremental coal-fired units at a
domestic utility in May. In addition to the normal sale of chemical
as part of the FUEL CHEM program, this project includes an order
for approximately $1.0 million for equipment and installation for
these two units which is expected to be realized as revenue in Q2
2019. It is important to note that these units are not base-loaded
units and the revenue potential on an annualized basis will be
driven by power demand and dispatch on a seasonal basis. When
operational, these new units are expected to generate historic FUEL
CHEM gross margin.
Mr. Arnone concluded, “We continue to progress in developing our
DGI™ Dissolved Gas Infusion (water) technology business and are in
discussions with multiple potential customers and we target to have
a demonstration up-and-running by the end of Q2 or early in Q3 of
this year. While we do not expect our water treatment technology
venture to have a significant impact on near-term results, we do
look forward to it being a significant contributor in future
years.”
Balance Sheet Data
At March 31, 2019, total cash was $13.2 million, including
restricted cash of $6.0 million. Stockholders’ equity was $33.0
million, or $1.37 per share, and the Company had zero debt.
Conference Call
Management will host a conference call on Tuesday, May 14, 2019
at 10:00 am ET / 9:00 am CT to discuss the results and business
activities. Interested parties may participate in the call by
dialing:
- (877) 423-9820 (Domestic)
- (201) 493-6749 (International)
The conference call will also be accessible via the Upcoming
Events section of the Company’s web site at www.ftek.com. Following
management’s opening remarks, there will be a question and answer
session. For those who cannot listen to the live broadcast, an
online replay will be available at www.ftek.com.
About Fuel Tech
Fuel Tech develops and commercializes state-of-the-art
proprietary technologies for air pollution control, process
optimization, water treatment, and advanced engineering services.
These technologies enable customers to operate in a cost-effective
and environmentally sustainable manner. Fuel Tech is a leader in
nitrogen oxide (NOx) reduction and particulate control technologies
and its solutions have been in installed on over 1,200 utility,
industrial and municipal units worldwide. The Company’s FUEL CHEM®
technology improves the efficiency, reliability, fuel flexibility,
boiler heat rate, and environmental status of combustion units by
controlling slagging, fouling, corrosion and opacity. Water
treatment technologies include DGI™ Dissolved Gas Infusion Systems
which utilize a patented nozzle to deliver supersaturated oxygen
solutions and other gas-water combinations to target process
applications or environmental issues. This infusion process has a
variety of applications in the water and wastewater industries,
including remediation, aeration, biological treatment and
wastewater odor management. Many of Fuel Tech’s products and
services rely heavily on the Company’s exceptional Computational
Fluid Dynamics modeling capabilities, which are enhanced by
internally developed, high-end visualization software. For more
information, visit Fuel Tech’s web site at www.ftek.com.
NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” as
defined in Section 21E of the Securities Exchange Act of 1934, as
amended, which are made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 and reflect
Fuel Tech’s current expectations regarding future growth, results
of operations, cash flows, performance and business prospects, and
opportunities, as well as assumptions made by, and information
currently available to, our management. Fuel Tech has tried to
identify forward-looking statements by using words such as
“anticipate,” “believe,” “plan,” “expect,” “estimate,” “intend,”
“will,” and similar expressions, but these words are not the
exclusive means of identifying forward-looking statements. These
statements are based on information currently available to Fuel
Tech and are subject to various risks, uncertainties, and other
factors, including, but not limited to, those discussed in Fuel
Tech’s Annual Report on Form 10-K in Item 1A under the caption
“Risk Factors,” and subsequent filings under the Securities
Exchange Act of 1934, as amended, which could cause Fuel Tech’s
actual growth, results of operations, financial condition, cash
flows, performance and business prospects and opportunities to
differ materially from those expressed in, or implied by, these
statements. Fuel Tech undertakes no obligation to update such
factors or to publicly announce the results of any of the
forward-looking statements contained herein to reflect future
events, developments, or changed circumstances or for any other
reason. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including those detailed in Fuel
Tech’s filings with the Securities and Exchange Commission.
FUEL TECH, INC.CONSOLIDATED BALANCE
SHEETS(Unaudited)(in thousands, except share and per share
data)
March 31,2019
December 31,2018
ASSETS Current assets: Cash and cash equivalents $
7,135 $ 12,039 Restricted cash 6,020 6,020 Accounts receivable, net
of allowance for doubtful accounts of $1,441 and $1,411,
respectively 17,787 18,399 Inventories, net 801 957 Prepaid
expenses and other current assets 3,104 3,184 Income taxes
receivable 131 118 Total current
assets 34,978 40,717 Property and equipment, net of accumulated
depreciation of $26,758 and $26,528, respectively 6,003 5,976
Goodwill 2,116 2,116 Other intangible assets, net of accumulated
amortization of $6,640 and $6,608, respectively 1,147 1,164
Right-of-use operating lease assets 1,411 — Assets held for sale
413 485 Other assets 1,177 1,261
Total assets $ 47,245 $ 51,719
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable $ 6,339 $ 9,499 Accrued liabilities: Operating
lease liabilities - current 558 — Employee compensation 1,160 1,563
Other accrued liabilities 4,900 6,099
Total current liabilities 12,957 17,161 Operating lease
liabilities - non-current 845 — Deferred income taxes 173 171 Other
liabilities 287 335 Total
liabilities 14,262 17,667
COMMITMENTS AND CONTINGENCIES Stockholders’ equity:
Common stock, $.01 par value, 40,000,000
shares authorized, 24,833,383 and 24,825,891shares issued, and
24,186,824 and 24,170,585 shares outstanding, respectively
248 248 Additional paid-in capital 139,088 138,992 Accumulated
deficit (103,762 ) (102,495 ) Accumulated other comprehensive loss
(1,181 ) (1,285 ) Nil coupon perpetual loan notes 76 76 Treasury
stock, at cost (1,486 ) (1,484 ) Total
stockholders’ equity 32,983 34,052
Total liabilities and stockholders’ equity $ 47,245
$ 51,719
FUEL TECH, INC.CONSOLIDATED
STATEMENTS OF OPERATIONS(Unaudited)(in thousands, except share and
per-share data)
Three Months EndedMarch 31,
2019 2018
Revenues $ 10,155 $
12,791
Costs and expenses: Cost of sales 6,141 7,766
Selling, general and administrative 4,458 4,921 Restructuring
charge 595 — Research and development 266 288
11,460 12,975
Operating loss
from continuing operations (1,305 ) (184 ) Interest expense (1
) — Interest income 2 2 Other expense 25 (8 )
Loss from continuing operations before income taxes (1,279 )
(190 ) Income tax expense — (1 )
Net loss
from continuing operations (1,279 ) (191 ) Loss
from discontinued operations (net of income tax benefit of $0 in
2019 and 2018) (10 ) (25 )
Net loss $ (1,289 )
$ (216 )
Net loss per common share:
Basic Continuing operations $ (0.05 ) $ (0.01
) Discontinued operations $ — $ —
Basic net loss per common share $ (0.05 ) $
(0.01 )
Diluted Continuing operations $ (0.05 )
$ (0.01 ) Discontinued operations $ — $
—
Diluted net loss per common share $ (0.05 )
$ (0.01 )
Weighted-average number of common shares
outstanding: Basic 24,177,000 24,146,000
Diluted 24,177,000 24,146,000
FUEL TECH, INC.CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(Unaudited)(in
thousands)
Three Months EndedMarch 31, 2019 2018 Net loss
$ (1,289 ) $ (216 ) Other comprehensive income
(loss): Foreign currency translation adjustments 104 415 Unrealized
losses from marketable securities, net of tax —
(1 ) Total other comprehensive income 104
414 Comprehensive income (loss) $ (1,185 )
$ 198
FUEL TECH, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(Unaudited)(in thousands)
Three Months EndedMarch 31, 2019 2018
Operating
Activities Net loss $ (1,289 ) $ (216 ) Loss from
discontinued operations 10 25 Net loss from
continuing operations (1,279 ) (191 ) Adjustments to reconcile net
loss to net cash used in operating activities: Depreciation 244 195
Amortization 32 53 Loss on disposal of equipment — 15 Provision for
doubtful accounts, net of recoveries — (62 ) Stock-based
compensation, net of forfeitures 96 (59 ) Changes in operating
assets and liabilities: Accounts receivable 720 32 Inventories 154
(68 ) Prepaid expenses, other current assets and other non-current
assets 187 113 Accounts payable (3,174 ) 186 Accrued liabilities
and other non-current liabilities (1,870 ) (2,751 ) Net cash
used in operating activities - continuing operations (4,890 )
(2,537 ) Net cash used in operating activities - discontinued
operations (10 ) (25 ) Net cash used in operating activities
(4,900 ) (2,562 )
Investing Activities Purchases of
equipment and patents (279 ) (62 ) Proceeds from the sale of
equipment 55 2 Net cash used in investing
activities (224 ) (60 )
Financing Activities Taxes
paid on behalf of equity award participants (2 ) (10 ) Net
cash used in financing activities (2 ) (10 ) Effect of
exchange rate fluctuations on cash 222 433
Net decrease in cash, cash equivalents and restricted cash
(4,904 ) (2,199 ) Cash, cash equivalents, and restricted cash at
beginning of period 18,059 14,386
Cash,
cash equivalents and restricted cash at end of period $ 13,155
$ 12,187
FUEL TECH, INC.BUSINESS SEGMENT
FINANCIAL DATA(Unaudited)(in thousands)
Three months ended March 31, 2019
Air PollutionControl Segment
FUEL CHEMSegment
Other
Total
Revenues from external customers $ 5,789 $ 4,366 $ — $ 10,155 Cost
of sales (3,889 ) (2,252 ) —
(6,141 ) Gross margin 1,900 2,114 — 4,014 Selling,
general and administrative — — (4,458 ) (4,458 ) Restructuring
charge (595 ) — — (595 ) Research and development —
— (266 ) (266 ) Operating
income (loss) from continuing operations $ 1,305
$ 2,114 $ (4,724 ) $
(1,305 )
Three months ended March 31, 2018
Air PollutionControl Segment
FUEL CHEMSegment
Other
Total
Revenues from external customers $ 8,583 $ 4,208 $ — $
12,791 Cost of sales (5,597 ) (2,169 )
— (7,766 ) Gross margin 2,986 2,039 — 5,025
Selling, general and administrative — — (4,921 ) (4,921 ) Research
and development — — (288
) (288 ) Operating income (loss) from continuing
operations $ 2,986 $ 2,039
$ (5,209 ) $ (184 )
Note: Fuel Tech is an integrated company that segregates its
financial results into three reportable segments. The Air Pollution
Control technology segment includes technologies to reduce NOx
emissions in flue gas from boilers, incinerators, furnaces and
other stationary combustion sources. The FUEL CHEM®technology
segment, which uses chemical processes in combination with advanced
CFD and CKM boiler modeling, for the control of slagging, fouling,
corrosion, opacity and other sulfur trioxide-related issues in
furnaces and boilers through the addition of chemicals into the
furnace using TIFI®Targeted In-Furnace Injection™ technology. The
“Other” classification includes those profit and loss items not
allocated by Fuel Tech to each reportable segment.
FUEL TECH, INC.GEOGRAPHIC
INFORMATION(Unaudited)(in thousands)
Information concerning Fuel Tech’s operations by geographic area
is provided below. Revenues are attributed to countries based on
the location of the customer. Assets are those directly associated
with operations of the geographic area.
Three Months EndedMarch 31,
2019 2018 Revenues: United States $ 8,815 $ 10,242
Foreign 1,340 2,549 $ 10,155 $ 12,791
March 31,2019
December 31,2018
Assets: United States $ 34,141 $ 36,784 Foreign 13,104
14,935 $ 47,245 $ 51,719
FUEL TECH, INC.RECONCILIATION OF
GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA(Unaudited)(in
thousands)
Three MonthsEnded
2019 2018 Net loss $ (1,289 ) $ (216 ) Interest
income (1 ) (2 ) Income tax expense — 1 Depreciation expense 244
195 Amortization expense 32 53 EBITDA (1,014 )
31 Stock compensation expense 96 (59 ) ADJUSTED
EBITDA (918 ) (28 )
Adjusted EBITDA
To supplement the Company's consolidated financial statements
presented in accordance with generally accepted accounting
principles in the United States (GAAP), the Company has provided an
Adjusted EBITDA disclosure as a measure of financial performance.
Adjusted EBITDA is defined as net income (loss) before interest
expense, income tax expense (benefit), depreciation expense,
amortization expense, stock compensation expense, and intangible
assets abandonment and building impairment. The Company's reference
to these non-GAAP measures should be considered in addition to
results prepared in accordance with GAAP standards, but are not a
substitute for, or superior to, GAAP results.
Adjusted EBITDA is provided to enhance investors' overall
understanding of the Company's current financial performance and
ability to generate cash flow, which we believe is a meaningful
measure for our investor and analyst communities. In many cases
non-GAAP financial measures are utilized by these individuals to
evaluate Company performance and ultimately determine a reasonable
valuation for our common stock. A reconciliation of Adjusted EBITDA
to the nearest GAAP measure of net income (loss) has been included
in the above financial table.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190513005762/en/
Jim PachPrincipal Financial Officer(630) 845-4500
Devin SullivanSenior Vice PresidentThe Equity Group Inc.(212)
836-9608
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