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Fuel Tech Reports Third Quarter 2012 Results

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

(in thousands, except share and per share data)

 
September 30,

2012

December 31,2011

(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 24,483 $ 28,229
Marketable securities 57 57
Accounts receivable, net of allowance for doubtful

accounts of $317 and $430, respectively

29,586 34,346
Inventories 957 311
Prepaid expenses and other current assets 1,522 2,026
Prepaid income taxes 1,400 1,124
Deferred income taxes   411     163  
Total current assets 58,416 66,256
 
Property and equipment, net of accumulated depreciation of $19,880 and $18,239, respectively 13,824 13,625
Goodwill 21,051 21,051
Other intangible assets, net of accumulated amortization of $4,064 and $3,385, respectively 4,990 5,442
Deferred income taxes 3,663 3,798
Other assets   2,578     2,818  
Total assets $ 104,522   $ 112,990  
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt $ 1,184 $ 1,181
Accounts payable 9,825 10,476
Accrued liabilities:
Employee compensation 3,014 4,902
Other accrued liabilities   5,147     6,071  
Total current liabilities 19,170 22,630
 
Other liabilities   952     1,347  
Total liabilities 20,122 23,977
Shareholders' equity:
Common stock, $.01 par value, 40,000,000 shares
authorized, 22,039,425 and 23,644,301 shares issued
and outstanding, respectively 221 237
Additional paid-in capital 133,137 132,350
Accumulated deficit (49,099 ) (44,031 )
Accumulated other comprehensive income 65 381
Nil coupon perpetual loan notes   76     76  
Total shareholders' equity   84,400     89,013  
Total liabilities and shareholders' equity $ 104,522   $ 112,990  
 

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

     

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012   2011 2012   2011
 
Revenues $ 24,907 $ 24,023 $ 71,030 $ 65,666
 
Costs and expenses:
Cost of sales 14,671 13,050 39,771 35,069
Selling, general and administrative 8,064 7,701 24,932 23,618
Gain on revaluation of ACT liability - - - (758 )
Research and development   569     358     2,044     1,075  
  23,304     21,109     66,747     59,004  
 
Operating income 1,603 2,914 4,283 6,662
 
Interest expense (16 ) (47 ) (90 ) (125 )
Interest income 16 14 56 19
Other expense   (27 )   (57 )   (78 )   (252 )
Income before income taxes 1,576 2,824 4,171 6,304
 
Income tax expense   (382 )   (169 )   (1,366 )   (1,880 )
 
Net income $ 1,194   $ 2,655   $ 2,805   $ 4,424  
 
Net income per common share:
Basic $ 0.05   $ 0.11   $ 0.12   $ 0.18  
Diluted $ 0.05   $ 0.11   $ 0.12   $ 0.18  
 

Weighted-average number of common shares outstanding:

Basic   22,105,000     24,322,000     22,932,000     24,269,000  
Diluted   23,022,000     24,850,000     23,749,000     24,881,000  

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(in thousands)

 

Three Months EndedSeptember 30,

Nine Months EndedSeptember 30,

2012

  2011 2012   2011
 
Net income $ 1,194 $ 2,655 $ 2,805 $ 4,424
Other comprehensive income:
Foreign currency translation adjustments (394 ) (5 ) (290 ) 94

Unrealized gains/(losses) from marketablesecurities, net of tax

11 (35 ) - 33
       
Total other comprehensive income (383 ) (40 ) (290 ) 127
       
Comprehensive income $ 811   $ 2,615   $ 2,515   $ 4,551
 

FUEL TECH, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands)

 
Nine Months Ended

September 30,

  2012       2011  
Operating Activities
Net income $ 2,805 $ 4,424
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 1,644 2,251
Amortization 680 677
Gain on equipment disposals - (2 )
Gain on revaluation of ACT liability - (758 )
Deferred income taxes (170 ) 410
Stock based compensation 844 2,197
Bad debt write-off (recovery) (113 ) 32
Changes in operating assets and liabilities:
Accounts receivable 4,890 (6,502 )
Inventories (646 ) (44 )
Prepaid expenses, other current assets and other

noncurrent assets

741 199
Accounts payable (653 ) 846
Accrued liabilities and other noncurrent liabilities   (3,488 )   (666 )
Net cash provided by operating activities 6,534 3,064
 
Investing Activities
Proceeds from the sale of equipment - 2
Purchases of property, equipment and patents   (2,071 )   (1,700 )
Net cash used in investing activities (2,071 ) (1,698 )
 
Financing Activities
Proceeds from exercise of stock options - 336
Payments to repurchase common stock (7,889 ) (3,367 )
Excess income tax benefits from exercise of stock options   -     74  
Net cash used in financing activities (7,889 ) (2,957 )
 
Effect of exchange rate fluctuations on cash   (320 )   65  
 
Net decrease in cash and cash equivalents (3,746 ) (1,526 )
 
Cash and cash equivalents at beginning of period   28,229     30,524  
 
Cash and cash equivalents at end of period $ 24,483   $ 28,998  
 
       

FUEL TECH, INC.

BUSINESS SEGMENT FINANCIAL DATA

(in thousands of dollars)

 
Three months ended

September 30, 2012

 

Air PollutionControl Segment

 

FUEL CHEMSegment

  Other   Total
Revenues from external customers $ 15,432 $ 9,475 $ - $ 24,907
Cost of sales   10,282     4,389     -       14,671  
Gross margin 5,150 5,086 - 10,236
Selling, general and administrative - - (8,064 ) (8,064 )
Research and development     -     -     (569 )     (569 )
Operating income (loss)     5,246     4,990     (8,633 )     1,603  
 
Three months ended

September 30, 2011

 

Air PollutionControl Segment

 

FUEL CHEMSegment

  Other   Total
Revenues from external customers $ 12,223 $ 11,800 $ - $ 24,023
Cost of sales   7,539     5,511     -       13,050  
Gross margin 4,684 6,289 - 10,973
Selling, general and administrative - - (7,701 ) (7,701 )
Research and development     -     -     (358 )     (358 )
Operating income (loss)   $ 4,684   $ 6,289   $ (8,059 )   $ 2,914  
 
Nine months ended

September 30, 2012

 

Air PollutionControl Segment

 

FUEL CHEMSegment

  Other   Total
Revenues from external customers $ 43.964 $ 27,066 $ - $ 71,030
Cost of sales   26.984     12,787     -       39,771  
Gross margin 16,980 14,279 - 31,259
Selling, general and administrative - - (24,932 ) (24,932 )
Research and development     -     -     (2,044 )     (2,044 )
Operating income (loss)   $ 16,980   $ 14,279   $ (26,976 )   $ 4,283  
 
Nine months ended

September 30, 2011

 

Air PollutionControl Segment

 

FUEL CHEMSegment

  Other   Total
Revenues from external customers $ 32,959 $ 32,707 $ - $ 65,666
Cost of sales   18,338     16,731     -       35,069  
Gross margin 14,621 15,976 - 30,597
Selling, general and administrative - - (23,618 ) (23,618 )
Gain from revaluation of contingent

performance obligation

- - 758 758
Research and development     -     -     (1,075 )     (1,075 )
Operating income (loss)   $ 14,621   $ 15,976   $ (23,935 )   $ 6,662  
 
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.

FUEL TECH, INC.

GEOGRAPHIC INFORMATION

(in thousands of dollars)

   

 

Three months ended September 30, Nine months ended September 30
2012   2011 2012   2011
Revenues:
United States $ 16,609 $ 19,121 $ 57,519 $ 54,268
Foreign   8,298   4,902   13,511   11,398
$ 24,907 $ 24,023 $ 71,030 $ 65,666
   

September 30,2012

December 31,2011

Assets:
United States $ 85,196 $ 99,601
Foreign   18,982   13,389
$ 104,178 $ 112,990
 

 

Three months ended September 30, Nine months ended September 30
2012 2011 2012 2011
Revenues:
United States $ 16,609 $ 19,121 $ 57,519 $ 54,268
Foreign   8,298   4,902   13,511   11,398
$ 24,907 $ 24,023 $ 71,030 $ 65,666
   

September 30,2012

December 31,2011

Assets:
United States $ 85,196 $ 99,601
Foreign   18,982   13,389
$ 104,178 $ 112,990

FUEL TECH, INC.

RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA

(in thousands of dollars)

 
    Nine Months Ended September 30,
2012   2011
Net income $ 2,805 $ 4,424
Interest expense 90 125
Income tax expense 1,366 1,880
Depreciation expense 1,644 2,251
Amortization expense   680   677
EBITDA 6,585 9,357
Stock compensation expense   844   2,197
ADJUSTED EBITDA $ 7,429 $ 11,554

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 and stock compensation expense. 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.

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