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, 2020 (“Q1 2020”).
“Q1 2020 results primarily reflected continued delays in closing
new Air Pollution Control (“APC”) business awards, along with lower
revenues at FUEL CHEM®,” said Vincent J. Arnone, Chairman,
President and CEO of Fuel Tech. “We are cautiously optimistic about
new APC awards this year and are in various stages of negotiations
for contracts with an aggregate total value of $10 to $15 million
that we are targeting to close by the end of the current second
quarter.
“We recently announced two FUEL CHEM® demonstration orders using
the Company’s proprietary TIFI Bio™ (Targeted In-Furnace Injection)
technology for new domestic industrial power customers utilizing
biomass as the source of fuel. Successful demonstrations at both
plants would lead to on-going commercial programs commencing in the
third quarter of 2020, with such commercial programs generating
estimated annual revenue of $500,000 to $750,000 per site when the
units at the site are operational and utilizing the technology on a
continual basis throughout the year.”
Mr. Arnone continued, “The suspension of our underperforming
China operation (“Beijing Fuel Tech”) is substantially complete. In
addition to the removal of $2.0 million of annual China operating
losses, we have collected and repatriated a total of $0.8 million
in cash as of March 31, 2020 and we expect to repatriate more funds
later in 2020. We ended the quarter with $11.1 million in cash and
cash equivalents and no debt, which we view as a significant
advantage as we weather these APC award delays.
“As previously announced, all Company Officers voluntarily
reduced their base salary by 10% effective March 1, 2020, and each
non-employee member of the Board of Directors reduced his or her
base Director Fee by 10% effective March 1, 2020 to help preserve
our cash during this challenging period.”
DGI™ Dissolved Gas
Infusion
The Company expected to commence an on-site demonstration of its
water technology at a pulp and paper facility in the Midwest early
in the second quarter of 2020. However, this demonstration has been
delayed due to the impact of COVID-19, as the site where the
demonstration is planned implemented a policy allowing only
essential operating personnel at the plant site indefinitely. We
expect this demonstration to begin shortly after the plant site
curtails its current policy, however the timing is unknown. We are
advancing conversations with several other potential customers
across a variety of industries.
Q1 2020 Consolidated Results
Overview
Consolidated revenues declined to $3.8 million from $10.2
million in Q1 2019, primarily reflecting significantly lower
revenues at APC, as well as a revenue decline at FUEL CHEM. Results
for Q1 2020 and Q1 2019 included revenues from Beijing Fuel Tech of
approximately $0.0 and $0.3 million, respectively.
Gross margin for Q1 2020 was 40.4% of revenues compared to 39.5%
of revenues in Q1 2019.
SG&A expenses declined by 12.8% to $3.9 million from $4.5
million in Q1 2019.
Net loss from continuing operations was $(2.6) million, or
$(0.10) per share, compared to net loss from continuing operations
of $(1.3) million, or $(0.05) per share. Net income (loss) from
continuing operations in Q1 2020 and Q1 2019 attributable to
Beijing Fuel Tech was $0.1 million and $(0.9) million,
respectively.
Capital projects backlog at March 31, 2020 was $9.2 million,
$8.4 million of which was domestic, compared to $9.7 million at
December 31, 2019, of which $8.6 million was domestic.
APC segment revenues declined to $1.2 million from $5.8 million
in Q1 2019, primarily the result of a lower capital projects
backlog and a delay in new contract awards. APC gross margin was
$0.4 million, or 36%, as compared to $1.9 million, or 32.8%, in Q1
2019. APC results for Q1 2020 included no revenues from Beijing
Fuel Tech and an operating loss of $(0.02) million. In Q1 2019,
revenues from Beijing Fuel Tech were $0.3 million and the operating
loss was $(0.9) million.
FUEL CHEM segment revenues were $2.6 million compared to $4.4
million in Q1 2019. This segment’s performance was impacted by
unplanned customer unit outages, warmer than usual weather, and the
continued trend towards the reduction in electricity demand from
coal-fired combustion units driven by the availability of low-cost
natural gas units in many regions of the country. Segment gross
margin was 42.4% in Q1 and 48.4% in Q1 2019.
Adjusted EBITDA loss was $(2.2) million compared to an Adjusted
EBITDA loss of $(0.9) million in Q1 2019.
Financial Condition
At March 31, 2020, total cash was $11.1 million including
restricted cash of $3.1 million, down from total cash of $13.5
million, including restricted cash of $2.6 million, at December 31,
2019. Stockholders’ equity was $23.5 million, or $0.95 per share,
and the Company had zero debt.
On April 15, 2020, the Company received $1.6 million in loan
proceeds from the Paycheck Protection Program (the “PPP”),
established pursuant to the recently enacted Coronavirus Aid,
Relief, and Economic Security Act (the “CARES Act”) and
administered by the U.S. Small Business Administration (“SBA”). The
unsecured loan is evidenced by a promissory note of the Company
dated April 15, 2020 (the “Note”) in the principal amount of $1.6
million issued to BMO Harris Bank N.A. (the “Bank”), the lender,
pursuant to a loan agreement, dated April 15, 2020, between the
Company and the Bank. Under the terms of the Agreement, the Note
and the PPP Loan, interest will accrue on the outstanding principal
at the rate of 1.0% per annum. Additional information concerning
this loan is available in the Company’s Form 10-Q for the period
ended March 31, 2020.
COVID-19
Fuel Tech is a key supplier of critical infrastructure projects
and currently qualifies as an “essential business.” Our operations
remain active and we are supporting our customers during these
challenging times. The Company has developed and deployed a series
of initiatives designed to minimize disruptions to its normal
business activities and preserve its ability to execute its
objectives. We are following federal, state, and local guidelines
to ensure the safety of our employees in all facilities where we do
business, including customer sites and Company offices.
Overall, the impact of COVID-19 on our financial results for the
first quarter of 2020 was not material. However, as we have moved
into the second quarter, we are seeing the impact of COVID-19 on
our business activity. For our FUEL CHEM business segment,
operations have continued. However, the extensive economic
slow-down driven by COVID-19 has dramatically reduced electricity
demand and, as a result, energy dispatch to many power generation
units. Our FUEL CHEM revenue will deteriorate at accounts that are
not dispatched for power generation. For our APC business,
depending on the nature of a potential customer’s business and its
near-term planning requirements, we are finding that some projects
are moving forward as planned, while others are being delayed until
a later time when the economic outlook is more determinable. We are
very carefully watching the impact of COVID-19 on our financial
results and will report more on this subject in the future.
Conference Call
Management will host a conference call on Wednesday, May 13,
2020 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. 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.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands, except share and
per share data)
March 31, 2020
December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents
$
8,003
$
10,914
Restricted cash
2,771
2,080
Accounts receivable, net
5,620
6,473
Inventories, net
367
264
Prepaid expenses and other current
assets
1,729
1,879
Income taxes receivable
69
—
Total current assets
18,559
21,610
Property and equipment, net of accumulated
depreciation of $26,326 and $26,174, respectively
5,500
5,662
Goodwill
2,116
2,116
Other intangible assets, net of
accumulated amortization of $1,033 and $991, respectively
877
906
Restricted cash
362
507
Right-of-use operating lease assets
1,095
980
Other assets
412
443
Total assets
$
28,921
$
32,224
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable
$
1,793
$
2,117
Accrued liabilities:
Operating lease liabilities - current
284
300
Employee compensation
609
519
Income taxes payable
36
—
Other accrued liabilities
1,510
1,976
Total current liabilities
4,232
4,912
Operating lease liabilities -
non-current
794
680
Deferred income taxes, net
172
171
Other liabilities
270
286
Total liabilities
5,468
6,049
COMMITMENTS AND CONTINGENCIES (Note
13)
Stockholders’ equity:
Common stock, $.01 par value, 40,000,000
shares authorized, 25,404,299 and 25,053,480 shares issued, and
24,636,390 and 24,592,578 shares outstanding, respectively
254
254
Additional paid-in capital
139,641
139,560
Accumulated deficit
(112,892
)
(110,325
)
Accumulated other comprehensive loss
(2,009
)
(1,778
)
Nil coupon perpetual loan notes
76
76
Treasury stock, at cost
(1,617
)
(1,612
)
Total stockholders’ equity
23,453
26,175
Total liabilities and stockholders’
equity
$
28,921
$
32,224
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
(in thousands)
Three Months Ended March 31,
2020
2019
Revenues
$
3,778
$
10,155
Costs and expenses:
Cost of sales
2,251
6,141
Selling, general and administrative
3,886
4,458
Restructuring charge
—
595
Research and development
324
266
6,461
11,460
Operating loss from continuing
operations
(2,683
)
(1,305
)
Interest expense
(3
)
(1
)
Interest income
11
2
Other income
226
25
Loss from continuing operations before
income taxes
(2,449
)
(1,279
)
Income tax expense
(118
)
—
Net loss from continuing
operations
(2,567
)
(1,279
)
Loss from discontinued operations (net of
income tax benefit of $0 in 2020 and 2019)
—
(10
)
Net loss
$
(2,567
)
$
(1,289
)
Net loss per common share:
Basic
Continuing operations
$
(0.10
)
$
(0.05
)
Discontinued operations
$
—
$
—
Basic net loss per common share
$
(0.10
)
$
(0.05
)
Diluted
Continuing operations
$
(0.10
)
$
(0.05
)
Discontinued operations
$
—
$
—
Diluted net loss per common
share
$
(0.10
)
$
(0.05
)
Weighted-average number of common
shares outstanding:
Basic
24,597,000
24,177,000
Diluted
24,597,000
24,177,000
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(in thousands)
Three Months Ended March 31,
2020
2019
Net loss
$
(2,567
)
$
(1,289
)
Other comprehensive income loss:
Foreign currency translation
adjustments
(231
)
104
Comprehensive loss
$
(2,798
)
$
(1,185
)
FUEL TECH, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended March 31,
2020
2019
Operating Activities
Net loss
$
(2,567
)
$
(1,289
)
Loss from discontinued operations
—
10
Net loss from continuing operations
(2,567
)
(1,279
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
163
244
Amortization
43
32
Stock-based compensation, net of
forfeitures
81
96
Changes in operating assets and
liabilities:
Accounts receivable
795
720
Inventories
(104
)
154
Prepaid expenses, other current assets and
other non-current assets
99
187
Accounts payable
(313
)
(3,174
)
Accrued liabilities and other non-current
liabilities
(102
)
(1,870
)
Net cash used in operating activities -
continuing operations
(1,905
)
(4,890
)
Net cash used in operating activities -
discontinued operations
—
(10
)
Net cash used in operating activities
(1,905
)
(4,900
)
Investing Activities
Purchases of equipment and patents
(14
)
(279
)
Proceeds from the sale of equipment
—
55
Net cash used in investing activities
(14
)
(224
)
Financing Activities
Taxes paid on behalf of equity award
participants
(5
)
(2
)
Net cash used in financing activities
(5
)
(2
)
Effect of exchange rate fluctuations on
cash
(441
)
222
Net decrease in cash, cash equivalents
and restricted cash
(2,365
)
(4,904
)
Cash, cash equivalents, and restricted
cash at beginning of period (Note 2)
13,501
18,059
Cash, cash equivalents and restricted
cash at end of period (Note 2)
$
11,136
$
13,155
FUEL TECH, INC.
BUSINESS SEGMENT FINANCIAL
DATA
(Unaudited)
(in thousands)
Three months ended March 31, 2020
Air Pollution Control Segment
FUEL CHEM Segment
Other
Total
Revenues from external customers
$
1,196
$
2,582
$
—
$
3,778
Cost of sales
(765
)
(1,486
)
—
(2,251
)
Gross margin
431
1,096
—
1,527
Selling, general and administrative
—
—
(3,886
)
(3,886
)
Research and development
—
—
(324
)
(324
)
Operating income (loss) from continuing
operations
$
431
$
1,096
$
(4,210
)
$
(2,683
)
Three months ended March 31, 2019
Air Pollution Control Segment
FUEL CHEM Segment
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
)
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 Ended March 31,
2020
2019
Revenues:
United States
3,097
8,815
Foreign
681
1,340
3,778
10,155
March 31, 2020
December 31, 2019
Assets:
United States
$
21,887
$
23,460
Foreign
7,034
8,764
$
28,921
$
32,224
FUEL TECH, INC.
RECONCILIATION OF GAAP NET LOSS
TO EBITDA AND ADJUSTED EBITDA
(Unaudited)
(in thousands)
Three Months Ended March 31,
2020
2019
Net loss
$
(2,567
)
$
(1,289
)
Interest income
(8
)
(1
)
Income tax expense
118
—
Depreciation expense
163
244
Amortization expense
43
32
EBITDA
(2,251
)
(1,014
)
Stock compensation expense
81
96
ADJUSTED EBITDA
(2,170
)
(918
)
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/20200512005929/en/
Vince Arnone President and CEO (630) 845-4500
Devin Sullivan Senior Vice President The Equity Group Inc. (212)
836-9608
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