Press release

Fuel Tech Reports 2019 First Quarter Financial Results

Sponsored by Businesswire

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, 2019 (“Q1 2019”).

“Our Q1 2019 net loss from continuing operations of $1.3 million
included operating losses at our soon-to-be suspended Air Pollution
Control (“APC”) China operations (“Beijing Fuel Tech”) and other charges
totaling $1.2 million, as well as the unfavorable impact of the timing
of completion of current APC projects under contract,” said Vincent J.
Arnone, Chairman, President and CEO of Fuel Tech. “With that said, we
continue to pursue a promising pipeline of APC contract opportunities,
particularly in the US, and we are in various stages of negotiation with
potential clients that, in the aggregate, represent $10-15 million of
contract award opportunities that we expect will close by late Q2 or
early Q3 2019. The outlook for FUEL CHEM® is also promising.
We are scheduled to begin installing our FUEL CHEM program on two
incremental coal-fired units at a domestic utility in May and expect to
have these new units up-and-running by the end of Q2 2019.”

The Q1 2019 net loss from continuing operations included the following

  • a $0.6 million severance-related restructuring charge associated with
    the ongoing suspension of Beijing Fuel Tech’s operations.
    Substantially all the severance charges associated with this
    suspension were realized as of March 31, 2019;
  • a $0.3 million operating loss at Beijing Fuel Tech, which was
    exclusive of the above-referenced restructuring charge; and
  • a $0.3 million charge associated with required incremental work for a
    domestic APC project

Excluding the above-referenced charges and operating losses at Beijing
Fuel Tech, Fuel Tech’s net loss from continuing operations for Q1 2019
was $0.1 million, or $0.01 per diluted share.

“We are focusing on cash collection and project completion at Beijing
Fuel Tech,” said Mr. Arnone. “As the wind down of these operations
continues, the negative impact of Beijing Fuel Tech’s operating losses
on Fuel Tech’s overall performance will dissipate. Excluding operating
losses and charges associated with Beijing Fuel Tech, we expect to
generate operating income from continuing operations for the full year

Q1 2019 Consolidated Results Overview

Consolidated revenues declined to $10.2 million from $12.8 million in Q1
2018, reflecting lower revenues at APC partially offset by higher
revenues at FUEL CHEM.

Gross margin was 39.5% of revenues compared to 39.3% of revenues in Q1
2018. Gross margin in Q1 2019 included the $0.3 million domestic
incremental work charge; exclusive of this item, gross margin in Q1 2019
was 42.1%.

SG&A expenses declined to $4.4 million from $4.9 million in Q1 2018. As
a percentage of revenues, SG&A totaled 43.9% of revenues in Q1 2019 as
compared to 38.5% of revenues in Q1 2018.

Net loss from continuing operations was $1.3 million, or $0.05 per
diluted share, compared to net loss from continuing operations of $0.2
million, or $0.01 per diluted share, in Q1 2018. Net loss from
continuing operations in Q1 2019 included the above-referenced
restructuring and incremental work charge, and operating losses at
Beijing Fuel Tech that, in the aggregate, totaled $1.2 million.

Research and development expenses remained stable at $0.3 million in Q1
2019 and Q1 2018.

Capital projects backlog at March 31, 2019 was $12.2 million, $10.0
million of which was domestic.

APC segment revenues declined to $5.8 million from $8.6 million in Q1
2018, primarily the result of a lower capital projects backlog entering
2019 as compared to 2018. APC gross margin was $1.9 million, or 32.8%,
as compared to $3.0 million, or 34.8%, in Q1 2018. Excluding the $0.3
million domestic incremental work charge, APC gross margin in Q1 2019
was $2.2 million, or 37.4%.

APC results for Q1 2019 included revenues of $0.3 million from Beijing
Fuel Tech and an operating loss, including restructuring charges, of
$0.9 million. In Q1 2018, revenues from Beijing Fuel Tech were $0.7
million and the operating loss was $0.5 million.

FUEL CHEM segment revenues rose to $4.4 million from $4.2 million in Q1
2018, reflecting favorable weather conditions and the addition of a new
coal-fired unit at an existing customer in the midwestern US during Q3
2018, partially offset by unplanned customer-driven outages and
reductions in regional coal-fired unit dispatch in Q1 2019. Segment
gross margin was 48.4% in Q1 2019 and 48.5% in Q1 2018.

The FUEL CHEM program predominantly assists coal-fired power generation
in their effort to burn lower-quality fuels more cleanly and
efficiently. As noted above, the Company is scheduled to begin
installing this program on two incremental coal-fired units at a
domestic utility in May. In addition to the normal sale of chemical as
part of the FUEL CHEM program, this project includes an order for
approximately $1.0 million for equipment and installation for these two
units which is expected to be realized as revenue in Q2 2019. It is
important to note that these units are not base-loaded units and the
revenue potential on an annualized basis will be driven by power demand
and dispatch on a seasonal basis. When operational, these new units are
expected to generate historic FUEL CHEM gross margin.

Mr. Arnone concluded, “We continue to progress in developing our DGI™
Dissolved Gas Infusion (water) technology business and are in
discussions with multiple potential customers and we target to have a
demonstration up-and-running by the end of Q2 or early in Q3 of this
year. 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.”

Balance Sheet Data

At March 31, 2019, total cash was $13.2 million, including restricted
cash of $6.0 million. Stockholders’ equity was $33.0 million, or $1.37
per share, and the Company had zero debt.

Conference Call

Management will host a conference call on Tuesday, May 14, 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:

  • (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
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

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


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.


thousands, except share and per share data)



March 31,


December 31,

Current assets:
Cash and cash equivalents $ 7,135 $ 12,039
Restricted cash 6,020 6,020
Accounts receivable, net of allowance for doubtful accounts of
$1,441 and $1,411, respectively
17,787 18,399
Inventories, net 801 957
Prepaid expenses and other current assets 3,104 3,184
Income taxes receivable 131         118  
Total current assets 34,978 40,717
Property and equipment, net of accumulated depreciation of $26,758
and $26,528, respectively
6,003 5,976
Goodwill 2,116 2,116
Other intangible assets, net of accumulated amortization of $6,640
and $6,608, respectively
1,147 1,164
Right-of-use operating lease assets 1,411
Assets held for sale 413 485
Other assets 1,177         1,261  
Total assets $ 47,245         $ 51,719  
Current liabilities:
Accounts payable $ 6,339 $ 9,499
Accrued liabilities:
Operating lease liabilities – current 558
Employee compensation 1,160 1,563
Other accrued liabilities 4,900         6,099  
Total current liabilities 12,957 17,161
Operating lease liabilities – non-current 845
Deferred income taxes 173 171
Other liabilities 287         335  
Total liabilities 14,262         17,667  
Stockholders’ equity:

Common stock, $.01 par value, 40,000,000 shares authorized,
24,833,383 and 24,825,891
shares issued, and 24,186,824 and
24,170,585 shares outstanding, respectively

248 248
Additional paid-in capital 139,088 138,992
Accumulated deficit (103,762 ) (102,495 )
Accumulated other comprehensive loss (1,181 ) (1,285 )
Nil coupon perpetual loan notes 76 76
Treasury stock, at cost (1,486 )       (1,484 )
Total stockholders’ equity 32,983         34,052  
Total liabilities and stockholders’ equity $ 47,245         $ 51,719  


thousands, except share and per-share data)


Three Months Ended
March 31,

2019     2018
Revenues $ 10,155     $ 12,791
Costs and expenses:
Cost of sales 6,141 7,766
Selling, general and administrative 4,458 4,921
Restructuring charge 595
Research and development 266       288  
11,460       12,975  
Operating loss from continuing operations (1,305 ) (184 )
Interest expense (1 )
Interest income 2 2
Other expense 25       (8 )
Loss from continuing operations before income taxes (1,279 ) (190 )
Income tax expense       (1 )
Net loss from continuing operations (1,279 )     (191 )
Loss from discontinued operations (net of income tax benefit of $0
in 2019 and 2018)
(10 )     (25 )
Net loss $ (1,289 )     $ (216 )
Net loss per common share:
Continuing operations $ (0.05 )     $ (0.01 )
Discontinued operations $       $  
Basic net loss per common share $ (0.05 )     $ (0.01 )
Continuing operations $ (0.05 )     $ (0.01 )
Discontinued operations $       $  
Diluted net loss per common share $ (0.05 )     $ (0.01 )
Weighted-average number of common shares outstanding:
Basic 24,177,000     24,146,000  
Diluted 24,177,000     24,146,000  


(in thousands)

Three Months Ended
March 31,
2019     2018
Net loss $ (1,289 )     $ (216 )
Other comprehensive income (loss):
Foreign currency translation adjustments 104 415
Unrealized losses from marketable securities, net of tax       (1 )
Total other comprehensive income 104       414  
Comprehensive income (loss) $ (1,185 )     $ 198  



Three Months Ended
March 31,
2019   2018
Operating Activities  
Net loss $ (1,289 ) $ (216 )
Loss from discontinued operations 10     25  
Net loss from continuing operations (1,279 ) (191 )
Adjustments to reconcile net loss to net cash used in operating
Depreciation 244 195
Amortization 32 53
Loss on disposal of equipment 15
Provision for doubtful accounts, net of recoveries (62 )
Stock-based compensation, net of forfeitures 96 (59 )
Changes in operating assets and liabilities:
Accounts receivable 720 32
Inventories 154 (68 )
Prepaid expenses, other current assets and other non-current assets 187 113
Accounts payable (3,174 ) 186
Accrued liabilities and other non-current liabilities (1,870 )   (2,751 )
Net cash used in operating activities – continuing operations (4,890 ) (2,537 )
Net cash used in operating activities – discontinued operations (10 )   (25 )
Net cash used in operating activities (4,900 )   (2,562 )
Investing Activities
Purchases of equipment and patents (279 ) (62 )
Proceeds from the sale of equipment 55     2  
Net cash used in investing activities (224 )   (60 )
Financing Activities
Taxes paid on behalf of equity award participants (2 )   (10 )
Net cash used in financing activities (2 )   (10 )
Effect of exchange rate fluctuations on cash 222     433  
Net decrease in cash, cash equivalents and restricted cash (4,904 ) (2,199 )
Cash, cash equivalents, and restricted cash at beginning of period 18,059     14,386  
Cash, cash equivalents and restricted cash at end of period $ 13,155     $ 12,187  



Three months ended March 31, 2019

Air Pollution
Control Segment







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 )

Three months ended March 31, 2018


Air Pollution
Control Segment







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 )

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


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,

2019   2018
United States $ 8,815 $ 10,242
Foreign 1,340     2,549
$ 10,155     $ 12,791

March 31,


December 31,

United States $ 34,141 $ 36,784
Foreign 13,104     14,935
$ 47,245     $ 51,719

(in thousands)


Three Months

2019   2018
Net loss $ (1,289 )   $ (216 )
Interest income (1 ) (2 )
Income tax expense 1
Depreciation expense 244 195
Amortization expense 32     53  
EBITDA (1,014 ) 31
Stock compensation expense 96     (59 )
ADJUSTED EBITDA (918 )   (28 )

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.