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09.05.2018 22:10:00
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Fuel Tech Reports 2018 First Quarter Financial Results
Fuel Tech, Inc. (NASDAQ: FTEK), a world leader in advanced engineering solutions for the optimization of combustion systems and emissions control in utility and industrial applications, today reported financial results for the first quarter ended March 31, 2018 ("Q1 2018”).
"We are very pleased with our results for Q1 as they are in line with our expectations for the beginning of 2018,” said Vincent J. Arnone, Chairman, President, and CEO of Fuel Tech. "Significantly higher revenues reflected the impact of our successful business development in 2017 and early 2018, while lower selling, general and administrative (SG&A) expenses stemmed from our previously announced cost-containment initiatives over the past three years. We expect to realize the full year benefit of this lower cost profile in 2018.
"We remain optimistic about our performance for 2018, and continue to pursue a solid pipeline of contract opportunities, particularly in the US. We are excited about the long-term potential associated with our previously announced exclusive license agreement with NanO2 LLC ("NanO2”) to market and sell NanO2’s dissolved gas technology. This represents a new business vertical for Fuel Tech - environmental solutions focused on water.”
2018 Outlook
The Company reiterates its forecast for continuing operational improvement in 2018 when compared to 2017. This includes higher total revenues, driven primarily our Air Pollution Control ("APC”) business, profitable operations and positive cash flow generation, due in large part by a lower cost structure.
Q1 2018 Results Overview
Consolidated revenues rose 50.6% to $12.8 million from $8.5 million in Q1 2017, reflecting the timing of project execution due to the conversion of previously announced new orders during 2017 and early 2018.
Cost of sales rose to $7.8 million, or 60.7% of revenues, from $4.8 million, or 56.2% of revenues, in Q1 2017, due primarily to the conversion of previously announced new orders, project mix, and certain product demonstration expenses.
Gross margin declined to 39.3% of revenues from 43.8% in Q1 2017, due to the revenue mix between APC and FUEL CHEM, as well as certain product demonstration expenses.
SG&A expenses declined 4.5% to $4.9 million, or 38.5% of revenues, from $5.2 million, or 60.7% of revenues, in Q1 2017, driven primarily by the previously announced cost containment initiatives.
Net loss from continuing operations was $191,000, or $0.01 per diluted share, compared to a net loss from continuing operations of $1.8 million, or $0.08 per diluted share, in Q1 2017.
Net loss for the quarter was $216,000, or $0.01 per diluted share, as compared to a net loss of $2.5 million, or $0.11 per share, in Q1 2017. Net loss in Q1 2017 included a loss from discontinued operations of $730,000, or $0.03 per diluted share, reflecting losses from the Company’s Fuel Conversion segment, the operations of which were discontinued in 2017.
APC segment revenues rose by 114.5% to $8.6 million from $4.0 million in Q1 2017, driven by an improved pace of U.S. bookings during 2017 as compared to recent historical levels. APC gross margin was $3.0 million, or 34.8%, as compared to $1.5 million, or 37.5%, in Q1 2017, due to product line and geographical mix versus the prior quarter.
FUEL CHEM segment revenues decreased to $4.2 million from $4.5 million in Q1 2017, with gross margin of 48.5% as compared to 49.5% for the same period last year. We believe that full year FUEL CHEM revenues in 2018 will trend similarly to 2017.
Research and development expenses for Q1 2018 and Q1 2017 were $0.3 million, respectively, which supports our continued development of new products.
EBITDA for Q1 2018 was $31,000 as compared to an EBITDA loss of $1.9 million for Q1 2017.
At March 31, 2018, cash and cash equivalents were $12.2 million, which included restricted cash of $6.5 million. Shareholders’ equity was $34.7 million, or $1.44 per share, and the Company had zero long-term debt. Capital projects backlog was $19.7 million, as compared to $22.1 million at December 31, 2017.
Conference Call
Management will host a conference call on Thursday, May 10, 2018 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) or
- (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. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to dsullivan@equityny.com. For those who cannot listen to the live broadcast, an online replay will be available at www.ftek.com.
About Fuel Tech
Fuel Tech is a leading technology company engaged in the worldwide development, commercialization and application of state-of-the-art proprietary technologies for air pollution control, process optimization, and advanced engineering services. These technologies enable customers to produce both energy and processed materials in a cost-effective and environmentally sustainable manner.
The Company’s nitrogen oxide (NOx) reduction technologies include advanced combustion modification techniques and post-combustion NOx control approaches, including NOxOUT®, HERT™, and Advanced SNCR systems, ASCR™ Advanced Selective Catalytic Reduction systems, and I-NOx® Integrated NOx Reduction Systems, which utilize various combinations of these systems, along UDI™ Urea Direct Injection system for SCR reagent supply, and the ULTRA® process for safe ammonia generation. These technologies have established Fuel Tech as a leader in NOx reduction, with installations on over 900 units worldwide.
Fuel Tech’s technologies for particulate control include Electrostatic Precipitator (ESP) products and services including complete turnkey capability for ESP retrofits, with experience on units up to 700 MW. Flue gas conditioning (FGC) systems include treatment using sulfur trioxide (SO3) and ammonia (NH3) based conditioning to improve the performance of ESPs by modifying the properties of fly ash particles. Fuel Tech’s particulate control technologies have been installed on more than 125 units worldwide.
The Company’s FUEL CHEM® technology revolves around the unique application of chemicals to improve the efficiency, reliability, fuel flexibility, boiler heat rate, and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and improving boiler operations. The Company has experience with this technology, in the form of a customizable FUEL CHEM program, on over 110 units.
Fuel Tech also provides a range of services, including boiler tuning and selective catalytic reduction (SCR) optimization services. In addition, flow corrective devices and physical and computational modeling services are available to optimize flue gas distribution and mixing in both power plant and industrial applications.
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. These capabilities, coupled with the Company’s innovative technologies and multi-disciplined team approach, enable Fuel Tech to provide practical solutions to some of our customers’ most challenging problems. 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. | ||||||||
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CONSOLIDATED BALANCE SHEETS |
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(Unaudited) |
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(in thousands, except share and per share data) |
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March 31, |
December 31, |
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| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 5,667 | $ | 8,366 | ||||
| Restricted cash | 1,520 | 1,020 | ||||||
| Marketable securities | 4 | 6 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of $1,531 and $1,545, respectively | 20,164 | 19,690 | ||||||
| Inventories, net | 1,026 | 945 | ||||||
| Prepaid expenses and other current assets | 3,548 | 3,592 | ||||||
| Income taxes receivable | 128 | 129 | ||||||
| Total current assets | 32,057 | 33,748 | ||||||
| Property and equipment, net of accumulated depreciation of $26,159 and $25,938, respectively | 6,111 | 6,272 | ||||||
| Goodwill | 2,116 | 2,116 | ||||||
| Other intangible assets, net of accumulated amortization of $1,993 and $1,939, respectively | 1,640 | 1,671 | ||||||
| Restricted cash | 5,000 | 5,000 | ||||||
| Assets held for sale | 485 | 485 | ||||||
| Other assets | 1,221 | 1,192 | ||||||
| Total assets | $ | 48,630 | $ | 50,484 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 9,430 | 9,065 | ||||||
| Accrued liabilities: | ||||||||
| Employee compensation | 1,518 | 1,487 | ||||||
| Income taxes payable | 52 | 73 | ||||||
| Other accrued liabilities | 2,554 | 5,098 | ||||||
| Total current liabilities | 13,554 | 15,723 | ||||||
| Other liabilities | 400 | 420 | ||||||
| Total liabilities | 13,954 | 16,143 | ||||||
| COMMITMENTS AND CONTINGENCIES (Note 12) | ||||||||
| Shareholders’ equity: | ||||||||
| Common stock, $.01 par value, 40,000,000 shares authorized, 24,821,446 and 24,777,001 shares issued, and 24,167,679, and 24,132,910 shares outstanding, respectively | 248 | 248 | ||||||
| Additional paid-in capital | 138,701 | 138,760 | ||||||
| Accumulated deficit | (102,514 | ) | (102,503 | ) | ||||
| Accumulated other comprehensive loss | (353 | ) | (768 | ) | ||||
| Nil coupon perpetual loan notes | 76 | 76 | ||||||
| Treasury stock, at cost | (1,482 | ) | (1,472 | ) | ||||
| Total shareholders’ equity | 34,676 | 34,341 | ||||||
| Total liabilities and shareholders’ equity | $ | 48,630 | $ | 50,484 | ||||
| FUEL TECH, INC. | ||||||||
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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(Unaudited) |
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(in thousands, except share and per-share data) |
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Three Months Ended |
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| 2018 | 2017 | |||||||
| Revenues | $ | 12,791 | $ | 8,491 | ||||
| Costs and expenses: | ||||||||
| Cost of sales | 7,766 | 4,769 | ||||||
| Selling, general and administrative | 4,921 | 5,154 | ||||||
| Restructuring charge | — | 61 | ||||||
| Research and development | 288 | 284 | ||||||
| 12,975 | 10,268 | |||||||
| Operating loss from continuing operations | (184 | ) | (1,777 | ) | ||||
| Interest income | 2 | 3 | ||||||
| Other expense | (8 | ) | (2 | ) | ||||
| Loss from continuing operations before income taxes | (190 | ) | (1,776 | ) | ||||
| Income tax expense | (1 | ) | — | |||||
| Net loss from continuing operations | (191 | ) | (1,776 | ) | ||||
| Loss from discontinued operations (net of income tax benefit of $0 in 2018 and 2017) | (25 | ) | (730 | ) | ||||
| Net loss | $ | (216 | ) | $ | (2,506 | ) | ||
| Net loss per common share: | ||||||||
| Basic | ||||||||
| Continuing operations | $ | (0.01 | ) | $ | (0.08 | ) | ||
| Discontinued operations | $ | — | $ | (0.03 | ) | |||
| Basic net loss per common share | $ | (0.01 | ) | $ | (0.11 | ) | ||
| Diluted | ||||||||
| Continuing operations | $ | (0.01 | ) | $ | (0.08 | ) | ||
| Discontinued operations | $ | — | $ | (0.03 | ) | |||
| Diluted net loss per common share | $ | (0.01 | ) | $ | (0.11 | ) | ||
| Weighted-average number of common shares outstanding: | ||||||||
| Basic | 24,146,000 | 23,472,000 | ||||||
| Diluted | 24,146,000 | 23,472,000 | ||||||
| FUEL TECH, INC. | ||||||||
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) |
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(Unaudited) |
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(in thousands) |
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Three Months Ended |
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| 2018 | 2017 | |||||||
| Net loss | $ | (216 | ) | $ | (2,506 | ) | ||
| Other comprehensive income: | ||||||||
| Foreign currency translation adjustments | 416 | 116 | ||||||
| Unrealized gains (losses) from marketable securities, net of tax | (1 | ) | 1 | |||||
| Total other comprehensive income | 415 | 117 | ||||||
| Comprehensive income (loss) | $ | 199 | $ | (2,389 | ) | |||
| FUEL TECH, INC. | ||||||||
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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(Unaudited) |
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(in thousands) |
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Three Months Ended |
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| 2018 | 2017 | |||||||
| Operating Activities | ||||||||
| Net loss | $ | (216 | ) | $ | (2,506 | ) | ||
| Loss from discontinued operations | 25 | 730 | ||||||
| Net loss from continuing operations | (191 | ) | (1,776 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 195 | 405 | ||||||
| Amortization | 53 | 54 | ||||||
| Loss on disposal of equipment | 15 | 10 | ||||||
| Provision for doubtful accounts, net of recoveries | (62 | ) | — | |||||
| Stock-based compensation, net of forfeitures | (59 | ) | (10 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | 32 | 3,525 | ||||||
| Inventories | (68 | ) | (26 | ) | ||||
| Prepaid expenses, other current assets and other non-current assets | 113 | 108 | ||||||
| Accounts payable | 186 | (1,848 | ) | |||||
| Accrued liabilities and other non-current liabilities | (2,750 | ) | (1,483 | ) | ||||
| Net cash used in operating activities - continuing operations | (2,536 | ) | (1,041 | ) | ||||
| Net cash used in operating activities - discontinued operations | (25 | ) | (579 | ) | ||||
| Net cash used in operating activities | (2,561 | ) | (1,620 | ) | ||||
| Investing Activities | ||||||||
| Purchases of equipment and patents | (62 | ) | (97 | ) | ||||
| Proceeds from the sale of equipment | 2 | — | ||||||
| Net cash used in investing activities | (60 | ) | (97 | ) | ||||
| Financing Activities | ||||||||
| Taxes paid on behalf of equity award participants | (11 | ) | (23 | ) | ||||
| Net cash used in financing activities | (11 | ) | (23 | ) | ||||
| Effect of exchange rate fluctuations on cash | 433 | 117 | ||||||
| Net decrease in cash, cash equivalents and restricted cash | (2,199 | ) | (1,623 | ) | ||||
| Cash, cash equivalents, and restricted cash at beginning of period | 14,386 | 17,846 | ||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 12,187 | $ | 16,223 | ||||
| FUEL TECH, INC. | ||||||||||||||||
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BUSINESS SEGMENT FINANCIAL DATA |
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(Unaudited) |
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(in thousands) |
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| Three months ended March 31, 2018 |
Air Pollution |
FUEL CHEM |
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 | ) | ||||||
| Three months ended March 31, 2017 |
Air Pollution |
FUEL CHEM |
Other | Total | ||||||||||||
| Revenues from external customers | $ | 4,002 | $ | 4,489 | $ | — | $ | 8,491 | ||||||||
| Cost of sales | (2,500 | ) | (2,269 | ) | — | (4,769 | ) | |||||||||
| Gross margin | 1,502 | 2,220 | — | 3,722 | ||||||||||||
| Selling, general and administrative | — | — | (5,154 | ) | (5,154 | ) | ||||||||||
| Restructuring charge | — | (61 | ) | — | (61 | ) | ||||||||||
| Research and development | — | — | (284 | ) | (284 | ) | ||||||||||
| Operating income (loss) from continuing operations | $ | 1,502 | $ | 2,159 | $ | (5,438 | ) | $ | (1,777 | ) | ||||||
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.
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Three Months Ended March 31, |
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| 2018 | 2017 | ||||||
| Revenues: | |||||||
| United States | $ | 10,242 | $ | 6,734 | |||
| Foreign | 2,549 | 1,757 | |||||
| $ | 12,791 | $ | 8,491 | ||||
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March 31, |
December 31, 2017 |
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| Assets: | |||||||
| United States | $ | 29,699 | $ | 29,945 | |||
| Foreign | 18,931 | 20,539 | |||||
| $ | 48,630 | $ | 50,484 | ||||
| FUEL TECH, INC. | ||||||||
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RECONCILIATION OF GAAP NET LOSS TO EBITDA AND ADJUSTED EBITDA |
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(Unaudited) |
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(in thousands) |
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| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
| Net loss | $ | (216 | ) | $ | (2,506 | ) | ||
| Interest income | (2 | ) | (3 | ) | ||||
| Income tax expense | 1 | — | ||||||
| Depreciation expense | 195 | 405 | ||||||
| Amortization expense | 53 | 205 | ||||||
| EBITDA | 31 | (1,899 | ) | |||||
| Stock compensation expense | (59 | ) | (10 | ) | ||||
| ADJUSTED EBITDA | (28 | ) | (1,909 | ) | ||||
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 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/20180509006428/en/
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