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Fuel Tech Reports 2018 Fourth Quarter and Full Year Financial ResultsFuel 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 fourth quarter ("Q4 2018") and full year ended December 31, 2018. "We ended 2018 with two of the strongest quarters in recent history," said Vincent J. Arnone, Chairman, President, and CEO of Fuel Tech. "In Q4 2018, specifically, revenues rose at our Air Pollution Control ("APC") and FUEL CHEM® segments, SG&A declined on a quarterly comparative basis for the fourth consecutive quarter, and we generated operating income from continuing operations of $0.9 million. For all of 2018, revenues increased by 25.2%, SG&A declined by 11.3% and we reported our first annual operating profit since 2013. We ended the year with over $18.0 million in total cash and are debt free. "Our consolidated financial performance in 2018 included the negative impact of our China operations ("Beijing Fuel Tech"). For the full year of 2018, Beijing Fuel Tech generated an operating loss of $1.9 million and revenues of just $3.0 million. As previously announced, we have commenced the process of suspending our operations in China and expect that this will be substantially completed by the end of Q2 2019. As we complete our planned suspension activities in 2019, the negative impact of Beijing Fuel Tech's operating losses on Fuel Tech's overall performance will dissipate." He continued, "Our APC solutions portfolio continued to demonstrate flexibility and adaptability with respect to fuel source. In 2018, approximately 60% of total APC revenue was derived from natural gas applications, up from 21% in 2017 and 4% in 2016. Our ability to apply our technology suite to natural gas-fired applications is critical for our Company, as the fuel mix for new power generation sources has shifted dramatically in favor of natural gas and away from other fossil fuels. For our FUEL CHEM business, which predominantly assists coal-fired power generation in their effort to burn lower-quality fuels more cleanly and efficiently, we had a nice improvement in revenue generation in 2018 versus 2017. Coal as a fuel source for power generation is likely to be a part of the fuel mix in the U.S. for many years to come, and we expect to maintain a consistent level of revenue contribution from this business segment in the near-term. "We continue to progress in developing our new water treatment business. We are in discussions with multiple potential customers and we target to have a demonstration up-and-running by early Q2 2019. We now have a mobile demonstration-scale system ready to be deployed and can respond rapidly to a customer request. 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." Mr. Arnone concluded, "We have successfully emerged from executing on a multi-year program of cost reduction and rationalization initiatives. The completion of the suspension of our China operation in 2019 will enable improved profitability for the Company as a whole, and for full year 2019 we expect to generate both income from continuing operations and positive cash flow for the second consecutive year. Further business development for our APC and FUEL CHEM business segments remains as priority. We are currently pursuing a pipeline of opportunities with an aggregate value of greater than $100 million that covers all fuel sources, involves the application of the entirety of our product line and serves customers in multiple geographies. We are also looking forward to our first commercial efforts in water treatment." Q4 2018 Results Overview Consolidated revenues rose 18.2% to $15.8 million from $13.4 million in Q4 2017, reflecting higher revenues at APC and FUEL CHEM. Gross margin declined to 37.3% of revenues from 42.0% in Q4 2017, due to the mix between APC and FUEL CHEM revenues recognized during the quarter. With an increase in APC revenues in Q4 2018 as compared to Q4 2017, the overall weighted average margin on a consolidated basis declined. SG&A expenses declined to $4.8 million, or 30.2% of revenues, from $4.9 million, or 36.5% of revenues, in Q4 2017. Net income from continuing operations was $0.9 million, or $0.04 per diluted share, compared to net income from continuing operations of $1.0 million, or $0.04 per diluted share, in Q4 2017. Results for Q4 2017 were revised to include an income tax benefit of $0.6 million reflecting a deferred tax liability associated with the historical goodwill of FUEL CHEM. Net income was $0.9 million, or $0.04 per diluted share, as compared to a net loss of $(0.7) million, or $(0.03) per diluted share, in Q4 2017. Results for Q4 2018 included revenues of $0.6 million from Beijing Fuel Tech as compared to $1.6 million in Q4 2017, and operating losses of $0.4 million for both Q4 2018 and Q4 2017. APC segment revenues rose by 11.4% to $10.5 million from $9.5 million in Q4 2017, driven by the conversion of new orders. APC gross margin was $3.2 million, or 30.4%, as compared to $3.8 million, or 39.9%, in Q4 2017. The decline in gross margin in Q4 2018 was due to product line and geographical mix as compared to the prior year's quarter. FUEL CHEM segment revenues rose 34.6% to $5.3 million from $3.9 million in Q4 2017, reflecting favorable weather conditions and the addition of a new coal-fired unit at an existing customer in the midwestern US during Q3 2018. Segment gross margin was 51.1% in Q4 2018 and 47.2% in Q4 2017. Research and development expenses for Q4 2018 and Q4 2017 were $0.3 million. Capital projects backlog at December 31, 2018 was $12.4 million, $11.0 million of which was domestic. Adjusted EBITDA for Q4 2018 rose to $1.2 million from Adjusted EBITDA of $0.6 million in Q4 2017. Balance Sheet Data At December 31, 2018, cash and cash equivalents were $18.1 million, including restricted cash of $6.0 million. Net cash provided by operating activities was $4.9 million, shareholders' equity was $34.1 million, or $1.38 per share, and the Company had zero debt. 2018 Annual Results Consolidated revenues for 2018 rose 25.2% to $56.5 million from $45.2 million in 2017, due primarily to the reasons cited above. Gross margin declined to 35.5% of revenues from 39.9% in 2017, due to the mix between APC and FUEL CHEM revenues recognized during the year. SG&A expenses for the year declined 11.3% to $18.6 million from $20.9 million in 2017. On a total dollar basis, SG&A for the year decreased by $2.4 million. Net income from continuing operations was $85,000, or $0.00 per share, compared to a net loss from continuing operations of $(6.5) million, $(0.28) per share, in 2017. Results for 2017 were revised to include the above-referenced income tax benefit of $0.6 million. Net loss for 2018 was $28,000, or $0.00 per diluted share, as compared to a net loss of $(10.5) million, or $(0.44) per diluted share, in 2017. Results for 2018 included revenues of $3.0 million from Beijing Fuel Tech as compared to $8.0 million in 2017, and operating losses of $1.9 million as compared to operating losses of $1.3 million in 2017. Adjusted EBITDA was $1.5 million compared to an Adjusted EBITDA loss of $(3.5) million last year. Conference Call Management will host a conference call on Friday, March 15, 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:
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.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
Note: Fuel Tech is an integrated company that segregates its financial results into two reportable segments, both providing advanced technology and engineering solutions for the optimization of combustion systems in utility and industrial applications. The "Other" classification includes those profit and loss items not allocated by Fuel Tech to each reportable segment.
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/20190314005723/en/ |
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