Reiterates 2018
Outlook of Increased Revenue and the Generation of
Operating Profit and Positive Cash
Flow
Q3 2018 Overview
- Revenues rose 18.6% to $16.1 million
from $13.5 million in Q3 2017
- SG&A declined 17.4% to $4.1 million
from $5.0 million in Q3 2017
- Net income from continuing operations
of $1.1 million, or $0.04 per diluted share, compared to a net loss
from continuing operations of $(0.2) million, or $(0.01) per
diluted share
- Adjusted EBITDA of $1.3 million
- At September 30, 2018:
- capital projects backlog of $21.3
million
- total cash and equivalents, including
restricted cash, of $10.7 million
- debt free
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 third quarter (“Q3 2018”) and nine months ended
September 30, 2018.
“We returned to operating profitability in Q3 2018, driven by
the impact of higher revenues and the third consecutive quarter of
lower selling, general and administrative (SG&A) expenses
resulting from our previously announced cost-containment
initiatives,” said Vincent J. Arnone, Chairman, President, and CEO
of Fuel Tech. “We generated higher revenues at our Air Pollution
Control (“APC”) and FUEL CHEM® operating segments, the former due
to the success of ongoing business development and timing of
completion of projects under contract, and the latter reflecting a
strong full quarter of operations driven by favorable
weather-related coal fired unit dispatch and the impact of
incremental business at a customer account.
“We have announced $22.3 million in new awards thus far in 2018,
and our capital projects backlog at September 30, 2018 rose by $6.9
million from June 30. We continue to pursue a promising pipeline of
additional contract opportunities, particularly in the US.”
Mr. Arnone concluded, “We have also made good progress at our
water treatment pursuits via our previously announced exclusive
license agreement with NanO2 LLC (“NanO2”). We expect to have a
mobile, demonstration scale system complete and available for use
by the end of November 2018 and have received indications of
interest from potential clients.”
2018 Outlook
The Company reiterates its forecast for continuing operational
improvement in 2018 when compared to 2017. This includes higher
total revenues, driven primarily by the APC segment, profitability
from continuing operations, and positive cash flow generation, due
in large part to a lower cost structure.
Q3 2018 Results Overview
Consolidated revenues rose 18.6% to $16.1 million from $13.5
million in Q3 2017, reflecting the timing of project execution due
to the conversion of previously announced new orders during 2017
and 2018, and higher revenues at FUEL CHEM.
Gross margin declined to 33.7% of revenues from 37.3% in Q3
2017, due to the mix between APC and FUEL CHEM revenues recognized
during the quarter. With an increase in APC revenues in Q3 2018 as
compared to Q3 2017, the overall weighted average margin on a
consolidated basis declined.
SG&A expenses declined 17.4% to $4.1 million, or 25.5% of
revenues, from $5.0 million, or 36.7% of revenues, in Q3 2017,
driven primarily by the previously announced cost containment
initiatives.
Net income from continuing operations was $1.1 million, or $0.04
per diluted share, compared to a net loss from continuing
operations of $(0.2) million, or $(0.01) per diluted share, in Q3
2017.
Net income was $1.0 million, or $0.04 per diluted share, as
compared to a net loss of $(0.4) million, or $(0.02) per diluted
share, in Q3 2017.
APC segment revenues rose by 23.7% to $10.9 million from $8.8
million in Q3 2017, driven by the conversion of new orders. APC
gross margin was $2.8 million, or 25.4%, as compared to $2.6
million, or 29.7%, in Q3 2017. The decline in gross margin in Q3
2018 was due to product line and geographical mix as compared to
the prior year’s quarter.
FUEL CHEM segment revenues rose 9.2% to $5.2 million from $4.8
million in Q3 2017, with gross margin for each period of 51%. FUEL
CHEM revenues in 2018 are expected to trend similarly to 2017.
Research and development expenses for Q3 2018 was $0.3 million
as compared to $0.2 million in Q2 2017, which supports our
continued development of new products.
Capital projects backlog at September 30, 2018 was $21.3
million, $18.9 million of which was domestic.
Adjusted EBITDA for Q3 2018 was $1.3 million as compared to
Adjusted EBITDA of $9,000 for Q3 2017.
Balance Sheet Data
At September 30, 2018, cash and cash equivalents were $10.7
million, including restricted cash of $6.5 million. Shareholders’
equity was $33.3 million, or $1.38 per share, and the Company had
zero long-term debt.
Year-to-Date Results
Overview
Consolidated revenues for the first nine months of 2018 rose
28.1% to $40.1 million from $31.8 million in the comparable period
of 2017, due primarily to the reasons cited above.
SG&A expenses for the nine months ended September 30, 2018
declined 14.1% to $13.8 million from $16.0 million in the same
period last year. On a total dollar basis, SG&A for the
year-to-date period decreased by $2.2 million.
Net loss from continuing operations narrowed to $(0.8) million,
or $(0.04) per share, compared to a net loss from continuing
operations of $(7.5) million, $(0.32) per share, in the same period
last year.
Net loss for the first nine months of 2018 was $(0.9) million,
or $(0.04) per diluted share, as compared to a net loss of $(9.8)
million, or $(0.41) per diluted share, for the same period in
2017.
Adjusted EBITDA was $0.2 million as compared to an Adjusted
EBITDA loss of $(4.1) million for the comparable period in
2017.
Conference Call
Management will host a conference call on Tuesday, November 13,
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)
- (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 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)
September 30, December 31, 2018 2017
ASSETS Current assets: Cash and cash equivalents $ 4,198 $
8,366 Restricted cash 6,520 1,020 Marketable securities 3 6
Accounts receivable, net of allowance for doubtful accounts of
$1,413 and $1,545, respectively 26,437 19,690 Inventories, net 647
945 Prepaid expenses and other current assets 2,348 3,592 Income
taxes receivable 135 129 Total current assets
40,288 33,748 Property and equipment, net of accumulated
depreciation of $26,385 and $25,938, respectively 6,117 6,272
Goodwill 2,116 2,116 Other intangible assets, net of accumulated
amortization of $6,575 and $6,421, respectively 1,184 1,671
Restricted cash — 5,000 Assets held for sale 485 485 Other assets
490 1,192 Total assets $ 50,680
$ 50,484
LIABILITIES AND SHAREHOLDERS' EQUITY Current
liabilities: Accounts payable $ 12,874 $ 9,065 Accrued liabilities:
Employee compensation 1,055 1,487 Income taxes payable — 73 Other
accrued liabilities 3,125 5,098 Total current
liabilities 17,054 15,723 Other liabilities 325 420
Total liabilities 17,379 16,143
COMMITMENTS AND CONTINGENCIES (Note 12) Shareholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized,
24,825,891 and 24,777,001 shares issued, and 24,170,585, and
24,132,910 shares outstanding, respectively 248 248 Additional
paid-in capital 138,895 138,760 Accumulated deficit (103,222 )
(102,503 ) Accumulated other comprehensive loss (1,212 ) (768 ) Nil
coupon perpetual loan notes 76 76 Treasury stock, at cost (1,484 )
(1,472 ) Total shareholders’ equity 33,301
34,341 Total liabilities and shareholders’ equity $ 50,680
$ 50,484
FUEL TECH, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except share and per-share
data)
Three Months EndedSeptember 30, Nine Months EndedSeptember
30, 2018 2017 2018 2017
Revenues $
16,070 $ 13,548 $ 40,708 $ 31,780
Costs and
expenses: Cost of sales 10,654 8,498 26,545 19,383 Selling,
general and administrative 4,105 4,968 13,789 16,045 Restructuring
charge — — — 119 Research and development 265 216 814 780
Intangible assets abandonment and building impairment —
— 317 2,965 15,024
13,682 41,465 39,292
Operating income (loss) from continuing operations 1,046
(134 ) (757 ) (7,512 ) Interest income 1 2 3 8 Other expense 8
(41 ) (59 ) (45 )
Income (loss) from
continuing operations before income taxes 1,055 (173 ) (813 )
(7,549 ) Income tax (benefit) expense — (5 )
(2 ) 10
Net income (loss) from continuing
operations 1,055 (178 ) (815 )
(7,539 ) Loss from discontinued operations (net of income tax
benefit of $0 in 2018 and 2017) (10 ) (239 ) (109 )
(2,238 )
Net income (loss) $ 1,045 $
(417 ) $ (924 ) $ (9,777 )
Net income (loss) per
common share: Basic Continuing operations $ 0.04
$ (0.01 ) $ (0.04 ) $ (0.32 ) Discontinued
operations $ — $ (0.01 ) $ — $
(0.09 )
Basic net income (loss) per common share $ 0.04
$ (0.02 ) $ (0.04 ) $ (0.41 )
Diluted Continuing operations $ 0.04 $ (0.01 )
$ (0.04 ) $ (0.32 ) Discontinued operations $ —
$ (0.01 ) $ — $ (0.09 )
Diluted net income (loss) per common share $ 0.04
$ (0.02 ) $ (0.04 ) $ (0.41 )
Weighted-average number of common shares outstanding: Basic
24,171,000 24,133,000 24,162,000
23,784,000 Diluted 24,588,000
24,133,000 24,162,000 23,784,000
FUEL TECH, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
(Unaudited)
(in thousands)
Three Months EndedSeptember 30, Nine Months
EndedSeptember 30, 2018 2017 2018 2017 Net
income (loss) $ 1,045 $ (417 ) $ (924 ) $ (9,777 )
Other comprehensive income (loss): Foreign currency translation
adjustments (263 ) 190 (441 ) 686 Unrealized gains (losses) from
marketable securities, net of tax 6 (2 ) (3 )
(1 ) Total other comprehensive income (loss) (257 )
188 (444 ) 685 Comprehensive income
(loss) $ 788 $ (229 ) $ (1,368 ) $
(9,092 )
FUEL TECH, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months EndedSeptember 30,
2018
2017
Operating Activities Net loss $ (924 ) $
(9,777 ) Loss from discontinued operations 109 2,238
Net loss from continuing operations (815 ) (7,539 )
Adjustments to reconcile net income (loss) to net cash used in
operating activities: Depreciation 502 1,075 Amortization 158 161
(Gain) loss on disposal of equipment (11 ) 158 Provision for
doubtful accounts, net of recoveries (62 ) — Excess and obsolete
inventory reserve — 228 Intangible assets abandonment and building
impairment 317 2,965 Stock-based compensation, net of forfeitures
135 1,207 Changes in operating assets and liabilities: Accounts
receivable (7,192 ) (1,691 ) Inventories 280 78 Prepaid expenses,
other current assets and other non-current assets 1,840 294
Accounts payable 3,896 2,726 Accrued liabilities and other
non-current liabilities (1,378 ) (3,474 ) Net cash used in
operating activities - continuing operations (2,330 ) (3,812 ) Net
cash used in operating activities - discontinued operations (334 )
(1,723 ) Net cash used in operating activities (2,664 )
(5,535 )
Investing Activities Purchases of equipment
and patents (392 ) (511 ) Proceeds from the sale of equipment 1
1 Net cash used in investing activities (391 )
(510 )
Financing Activities Taxes paid on behalf of
equity award participants (12 ) (258 ) Net cash used in
financing activities (12 ) (258 ) Effect of exchange rate
fluctuations on cash (601 ) 607
Net decrease in
cash, cash equivalents and restricted cash (3,668 ) (5,696 )
Cash, cash equivalents, and restricted cash at beginning of period
14,386 17,846
Cash, cash equivalents and
restricted cash at end of period $ 10,718 $
12,150
FUEL TECH, INC.
BUSINESS SEGMENT FINANCIAL DATA
(Unaudited)
(in thousands)
Three months ended September 30, 2018
Air PollutionControl Segment FUEL CHEMSegment Other
Total Revenues from external customers $ 10,882 $ 5,188 $ —
$ 16,070 Cost of sales (8,116 ) (2,538 ) —
(10,654 ) Gross margin 2,766 2,650 — 5,416 Selling, general
and administrative — — (4,105 ) (4,105 ) Research and development —
— (265 ) (265 ) Operating income
(loss) from continuing operations $ 2,766 $ 2,650
$ (4,370 ) $ 1,046 Three months
ended September 30, 2017 Air PollutionControl Segment
FUEL CHEMSegment Other Total Revenues from external
customers $ 8,799 $ 4,749 $ — $ 13,548 Cost of
sales (6,184 ) (2,314 ) — (8,498 )
Gross margin 2,615 2,435 — 5,050 Selling, general and
administrative — — (4,968 ) (4,968 ) Research and development —
— (216 ) (216 ) Operating income
(loss) from continuing operations $ 2,615 $ 2,435
$ (5,184 ) $ (134 ) Nine Months Ended
September 30, 2018 Air PollutionControl Segment FUEL
CHEMSegment Other Total Revenues from external
customers $ 27,872 $ 12,836 $ — $ 40,708 Cost
of sales (20,040 ) (6,505 ) — (26,545 )
Gross margin 7,832 6,331 — 14,163 Selling, general and
administrative — — (13,789 ) (13,789 ) Research and development — —
(814 ) (814 ) Intangible assets abandonment — —
(317 ) (317 ) Operating income (loss) from
continuing operations $ 7,832 $ 6,331 $
(14,920 ) $ (757 ) Nine Months Ended September 30,
2017 Air PollutionControl Segment FUEL CHEMSegment
Other Total Revenues from external customers $ 18,346
$ 13,434 $ — $ 31,780 Cost of sales (12,787 )
(6,596 ) — (19,383 ) Gross margin 5,559
6,838 — 12,397 Selling, general and administrative — — (16,045 )
(16,045 ) Restructuring charge (58 ) (61 ) — (119 ) Research and
development — — (780 ) (780 ) Building impairment — —
(2,965 ) (2,965 ) Operating income (loss) from
continuing operations $ 5,501 $ 6,777 $
(19,790 ) $ (7,512 )
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 EndedSeptember 30, Nine Months
EndedSeptember 30,
2018
2017
2018 2017 Revenues: United
States $ 11,629 $ 8,888 $ 30,701 $ 21,537 Foreign 4,441
4,660 10,007 10,243 $ 16,070
$ 13,548 $ 40,708 $
31,780 September 30,2018 December 31,2017
Assets: United States $ 34,942 $ 29,945 Foreign 15,738
20,539 $ 50,680 $ 50,484
FUEL TECH, INC.
RECONCILIATION OF GAAP NET LOSS TO EBITDA
AND ADJUSTED EBITDA
(Unaudited)
(in thousands)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30, 2018 2017 2018
2017 Net loss $ 1,045 $ (417 ) $ (924 ) $ (9,777 )
Interest income (1) (2 ) (3 ) (8 ) Income tax expense — 5 2 (10 )
Depreciation expense 147 320 502 1,075 Amortization expense 52
52 158 462 EBITDA
1,243 (42 ) (265 ) (8,258 ) Intangible assets abandonment and
building impairment — — 374 2,965 Stock compensation expense 97
51 135 1,207
ADJUSTED EBITDA 1,340 9 244
(4,086 )
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/20181112005719/en/
Fuel Tech, Inc.Jim PachPrincipal Financial Officer(630)
845-4500orThe Equity Group Inc.Devin SullivanSenior Vice
President(212) 836-9608
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