Fuel Tech Reports Second Quarter 2013 Results

Before you go, we thought you'd like these...
Before you go close icon

Fuel Tech Reports Second Quarter 2013 Results

Q2 2013 Overview

  • Revenues rose 39.0% to $29.1 million from $20.9 million in Q2 2012
  • Gross profit was $11.9 million, or 40.8% of revenue, as compared to $9.0 million, or 43.2% of revenue, in Q2 2012
  • Net income rose to $1.2 million, or $0.05 per diluted share, from net income of $0.1 million, or $0.00 per diluted share, in Q2 2012

At June 30, 2013

  • Total cash and equivalents of $23.1 million, or $0.99 per diluted share
  • Working capital of $41.9 million
  • $0 long-term debt
  • Backlog of $45.1 million

WARRENVILLE, Ill.--(BUSINESS WIRE)-- Fuel Tech, Inc. (NAS: FTEK) , a world leader in advanced engineering solutions for the optimization of combustion systems and emissions control in utility and industrial applications, today reported unaudited results for the three and six months ended June 30, 2013.

Consolidated revenues for the second quarter of 2013 totaled $29.1 million, up 39% from the comparable prior-year quarter, driven by revenue increases in the Air Pollution Control (APC) and FUEL CHEM business segments. Operating income rose to $2.1 million from $0.2 million in the year ago quarter. Net income for the quarter increased to $1.2 million, or $0.05 per diluted share, from net income of $0.1 million, or $0.00 per diluted share, in the comparable prior year period.

Consolidated revenues for the six months ended June 30, 2013 totaled $51.6 million, up 12% from the comparable prior-year period amount of $46.1 million. Operating income decreased to $2.2 million from $2.7 million in the year ago six-month period. Net income for the six months ended June 30, 2013 decreased to $1.2 million, or $0.05 per diluted share, from net income of $1.6 million, or $0.07 per diluted share, in the comparable prior year period. Adjusted EBITDA for the six months ended June 30, 2013 was $4.2 million, a decrease of $0.4 million from Adjusted EBITDA of $4.6 million in the same period one year ago.

APC segment revenues were $20.2 million, an increase of 58% from the second quarter of 2012. APC segment revenues were $33.2 million in the first half of 2013, an increase of $4.7 million or 16% from the prior year amount of $28.5 million. Higher APC revenues for the three- and six-month periods ended June 30, 2013 were the result of progress on international and domestic APC project bookings, particularly from a large project in Chile. Segment gross margins declined to 35% from 38% in the second quarter of 2012. For the first half of 2013, segment gross margins were 35% versus 41% reported in the prior year. The decrease in margins for both the quarter and year-to-date periods are primarily due to a higher mix of lower margin international projects.

Capital projects backlog at the APC segment stood at $45.1 million at June 30, 2013, compared to $44.7 million as of March 31, 2013 and $46.7 million at December 31, 2012.

The FUEL CHEM segment generated revenues of $8.9 million during the second quarter of 2013, an increase of 9% from $8.1 million in the second quarter of 2012. Gross margin rose to 53% from 51% in the prior year period. FUEL CHEM revenues generated from coal-fired units totaled $8.3 million, a 12% increase from the same period last year, while revenues generated from non-coal-fired units was $0.6 million, which was comparable to the same period last year. Increased revenues were primarily attributable to higher levels of shipping activity at a few key existing customer accounts. Although the FUEL CHEM segment continues to operate in an environment challenged by low natural gas prices and low electricity demand, margins have remained substantially intact.

Revenues for the FUEL CHEM segment for the six-month period totaled $18.4 million, an increase of $0.8 million or 5% versus the prior year amount of $17.6 million. Six-month revenues include $17.2 million from coal-fired units, a 5% increase versus a year ago, and $1.2 million from non-coal fired units, a 6% decrease versus the year-earlier period. Segment gross margin increased to 53% in the first half of 2013 from 52% in the comparable period in 2012. The higher gross margin in 2013 is attributable to a comparatively higher margin mix of customer shipments, including the aforementioned non-recurring sale of low margin installation work recognized in the first half of 2012.

Selling, general and administrative (SG&A) expenses were $9.3 million as compared to $7.9 million in last year's second quarter. As a percentage of revenues, SG&A declined to 32% from 38% in the same year-ago quarter, the result of increased revenue in the second quarter.

SG&A expenses totaled $17.8 million in the first half of 2013, versus $16.9 million in the same year-ago period, representing a two point decrease in SG&A costs as a percentage of revenue. The net-dollar increase in SG&A expenses is attributable to an increase in employee-related costs, outside service fees, stock compensation, travel costs, and administrative costs related to our foreign subsidiaries, partially offset by a decrease in bonuses, commissions and professional fees.

Research and development (R&D) expenses were $0.4 million in the second quarter versus $1.0 million in the year-ago quarter. R&D expenses moderately decreased to $1.4 million in the first half of the year versus $1.5 million in the year-ago period. The Company plans to continue its focused R&D efforts in pursuit of commercial applications for its technologies outside of its traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities.

Douglas G. Bailey, Chairman, President, and Chief Executive Officer, commented, "A combination of new international and domestic orders, and continuing backlog conversion produced solid expected results in the second quarter. International interest for our solutions is rising, and we believe that the U.S. market is firming as it acclimates to a purchasing environment currently driven largely by consent decree activity. Across markets, our proprietary emissions control solutions are being recognized for their efficacy and diverse applications. Through the first six months of 2013, we announced APC contract awards with a value of approximately $29.0 million and, subsequent to quarter end, announced additional APC orders valued at $6.4 million."

Mr. Bailey concluded, "We look to the remainder of 2013 with optimism, and continue to pursue a number of strategies utilizing our financial strength to further our growth."

Conference Call

Management will host a conference call on Thursday, August 8, 2013 at 9:00 AM ET to discuss the results

  • (866) 700-5192 (Domestic) or
  • (617) 213-8833 (International)

Passcode: FUEL TECH

A replay of the call will be available on our website, and can be accessed by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and using the passcode "43552645." The replay will be available through August 15, 2013.

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 - such as Low NOx Burners and Over-Fire Air systems - and post-combustion NOx control approaches, including NOxOUT® and HERT™ SNCR systems as well as systems that incorporate ASCR™ (Advanced Selective Catalytic Reduction), NOxOUT CASCADE®, ULTRA™ and NOxOUT-SCR® processes. These technologies have established Fuel Tech as a leader in NOx reduction, with installations on over 700 units worldwide, where coal, fuel oil, natural gas, municipal waste, biomass and other fuels are utilized.

The Company's FUEL CHEM® technology revolves around the unique application of chemicals to improve the efficiency, reliability, fuel flexibility and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and operational issues associated with sulfur trioxide, ammonium bisulfate, particulate matter (PM2.5), carbon dioxide and NOx. The Company has experience with this technology, in the form of a customizable FUEL CHEM program, on over 110 combustion units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste.

Fuel Tech also provides a range of combustion optimization services, including airflow testing, coal flow testing and boiler tuning, as well as services to help optimize selective catalytic reduction system performance, including catalyst management services and ammonia injection grid tuning. 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.

This press release may contain statements of a forward-looking nature regarding future events. These statements are only predictions and actual events may differ materially.Please refer to documents that Fuel Tech files from time to time with the Securities and Exchange Commission for a discussion of certain factors that could cause actual results to differ materially from those contained in the forward-looking statements.

FUEL TECH, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except share and per share data)

 
 

June 30,

 

December 31,

2013

2012

 
Assets
Current assets:
Cash and cash equivalents$23,113$24,453
Marketable securities2444
Accounts receivable, net of allowance for doubtful accounts of $610 and $460, respectively41,41830,169
Inventories719513
Prepaid expenses and other current assets1,7163,956
Prepaid income taxes1,182156
Deferred income taxes635 573 
Total current assets68,80759,864
Property and equipment, net of accumulated depreciation of $18,978 and $19,421, respectively13,81113,749
Goodwill21,05121,051
Other intangible assets, net of accumulated amortization of $4,692 and $4,270, respectively4,5744,838
Deferred income taxes2,4573,688
Other assets2,372 2,707 
Total assets$113,072 $105,897 
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt807
Accounts payable13,02612,828
Accrued liabilities:
Employee compensation3,1843,175
Other accrued liabilities9,881 4,943 
Total current liabilities26,89820,946
Other liabilities701 715 
Total liabilities27,59921,661
Shareholders' equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 22,472,238 and 22,111,675 shares issued, and 22,374,873 and 22,102,549 outstanding225221
Additional paid-in capital133,602133,498
Accumulated deficit(47,913)(49,128)
Accumulated other comprehensive loss(127)(392)
Nil coupon perpetual loan notes7676
Treasury stock, 97,365 and 9,126 shares in 2013 and 2012, respectively, at cost(390)(39)
Total shareholders' equity85,473 84,236 
Total liabilities and shareholders' equity$113,072 $105,897 
 

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(in thousands, except share and per-share data)

 
 

Three Months Ended

 

Six Months Ended

June 30,

June 30,

2013 20122013 2012
Revenues$29,092$20,911$51,576$46,123
Costs and expenses:
Cost of sales17,22711,88030,27925,100
Selling, general and administrative9,3077,87417,76516,868
Research and development430 969 1,363 1,475 
26,964 20,723 49,407 43,443 
Operating income2,1281882,1692,680
Interest expense(10)(49)(10)(74)
Interest income14402940
Other expense(129)(72)(209)(51)
Income before income taxes2,0031071,9792,595
Income tax expense(767)(39)(764)(984)
Net income$1,236 $68 $1,215 $1,611 
Net income per common share:
Basic$0.06 $0.00 $0.05 $0.07 
Diluted$0.05 $0.00 $0.05 $0.07 
Weighted-average number of common shares outstanding:
Basic22,197,000 23,107,000 22,155,000 23,349,000 
Diluted23,295,000 23,984,000 23,133,000 24,122,000 
 

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 
 

Three Months Ended

 

Six Months Ended

June 30,

June 30,

2013 20122013 2012
Net income$1,236$68$1,215$1,611
Other comprehensive income:
Foreign currency translation adjustments54070277104
Unrealized losses from marketable securities, net of tax(12)(26)(12)(11)
Total other comprehensive income528 44 265 93 
Comprehensive income$1,764 $112 $1,480 $1,704 
 
Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners

Gift Finder Promo
More to Explore
Sat, Jan 21
Set Your Location
City, State, or Zip

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 
 

Six Months Ended

June 30,

2013 2012
Operating Activities
Net income$1,215$1,611
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation1,1051,091
Amortization422451
Bad debt expense (recovery)152(6)
Deferred income taxes613(89)
Stock based compensation665372
Changes in operating assets and liabilities:
Accounts receivable(11,084)8,606
Inventories(202)(80)
Prepaid expenses, other current assets and other noncurrent assets2,584869
Accounts payable221(4,017)
Accrued liabilities and other noncurrent liabilities3,817 (3,508)
Net cash (used in) provided by operating activities(492)5,300
Investing Activities
Purchases of property, equipment and patents(1,326)(1,726)
Net cash (used in) investing activities(1,326)(1,726)
Financing Activities
Payments to repurchase common stock(7,179)
Proceeds from short-term borrowings799
Acquisition of treasury stock(351) 
Net cash provided by (used in) financing activities448(7,179)
Effect of exchange rate fluctuations on cash30 101 
Net decrease in cash and cash equivalents(1,340)(3,504