Fuel-Tech N.V. Reports First-Quarter Results; Revenues Advance 42%.STAMFORD Stamford, town, England Stamford, town (1991 pop. 18,127), in the Parts of Kesteven, Lincolnshire, E central England, on the Welland River. It is a market town. Products include diesel engines, electrical equipment, bricks, and tiles. , Conn. -- Fuel-Tech N.V. (Nasdaq: FTEK), a world leader in advanced engineering solutions for the optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. of combustion combustion, rapid chemical reaction of two or more substances with a characteristic liberation of heat and light; it is commonly called burning. The burning of a fuel (e.g., wood, coal, oil, or natural gas) in air is a familiar example of combustion. systems in utility and industrial applications, today reported results for the quarter ended March 31, 2006. Net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight for the first quarter increased 42% to a record $17.1 million, up $5.1 million from the comparable prior-year period. Net income totaled $1.4 million, or $0.06 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, versus $0.8 million, or $0.03 per diluted share, in the same year-ago quarter. The increases in net sales and net income were primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the air pollution control (APC (1) (American Power Conversion Corporation, West Kingston, RI, www.apcc.com) The leading manufacturer of UPS systems and surge suppressors, founded in 1981 by Rodger Dowdell, Neil Rasmussen and Emanual Landsman, three electronic power engineers who had worked at MIT. ) business, which continues to benefit from a strong backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of domestic utility orders and, to a lesser extent, from the pace at which projects are moving towards eventual completion in the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China. Quarterly gains were also realized by the fuel treatment chemicals business, although results were moderated by the high price of fuel oil and by ongoing Western coal transportation issues, which limited the need for the Company's FUEL CHEM CHEM Chemistry CHEM Chemical CHEM Chemist CHEM Chemistry Mission CHEM Centre des Hautes Études Militaires (French) CHEM Center for Healthcare Environmental Management CHEM Charge-Energy-Mass (spectrometer) (R) program at certain oil-fired adj. 1. Using oil as a fuel; as, an oil-fired furnace s>. Adj. 1. oil-fired - fueled by burning oil; "an oil-fired furnace" fueled - heated, driven, or produced by burning fuel oil-fired and coal-fired Adj. 1. coal-fired - fueled by burning coal; "a coal-fired ship" coal-burning fueled - heated, driven, or produced by burning fuel customer sites. First-quarter results include $227,000 of stock-based compensation expense, reflecting the January January: see month. 1, 2006 adoption of Statement of Financial Accounting Standards No. 123R, "Share-Based Payment." The Company is using the modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. prospective transition method, under which compensation expense is recorded using fair value estimates for both new awards and awards previously granted but not fully vested vested adj. referring to having an absolute right or title, when previously the holder of the right or title only had an expectation. Examples: after 20 years of employment Larry Loyal's pension rights are now vested. (See: vest, vested remainder) as of the adoption date. Results for the quarter also reflect the recording of nearly $1.1 million in income tax expense, virtually all of which is non-cash. John F. Norris Jr., President and Chief Executive Officer, commented, "We enjoyed a very strong start to what we anticipate will be an outstanding 2006. Pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta income, at $2.4 million or $0.10 per diluted share, nearly doubled versus a year ago and record revenues were achieved for a second consecutive quarter, attesting to the momentum building across our businesses. In particular, we continue to experience robust APC order flow from a major Southeastern south·east n. 1. Abbr. SE The direction or point on the mariner's compass halfway between due south and due east, or 135° east of due north. 2. An area or region lying in the southeast. 3. utility alliance partner and are very active quoting new business from a wide spectrum of utility and industrial concerns, both domestically and abroad." Mr. Norris concluded, "Despite challenging first-quarter market conditions, our fuel treatment chemicals business registered a healthy 28% revenue gain versus a year ago. Equally important, we announced our first commercial FUEL CHEM order in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , which should represent an attractive and growing market for our unique mix of technologies. We are optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about our fuel treatment chemicals business for the balance of the year and fully expect to sign up new customers while further penetrating penetrating breaching the tissues of the body. existing customer accounts, as evidenced by our FUEL CHEM announcement this past week." Conference Call As a reminder, Fuel-Tech N.V will host a conference call today at 9:00 AM ET to discuss the results. The call will simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics be broadcast over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.fueltechnv.com and can be accessed on the Home page under "Quick Links." The call can also be accessed by dialing 800.573.4752 (domestic) or 617.224.4324 (international) and using the passcode "Fuel-Tech N.V." A replay of the call will be available on the website and can be accessed by dialing 888.286.8010 (domestic) or 617.801.6888 (international) and entering the passcode "41528296". The replay will be available until May 30, 2006. About Fuel-Tech N.V. Fuel-Tech N.V. 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 Process optimization is the practice of making changes or adjustments to a process, to get results. Optimization is the use of specific techniques to determine the most cost effective and efficient solution to a problem or design for a process. , and advanced engineering services. These technologies enable customers to produce both energy and processed materials in a cost-effective cost-effective, n the minimal expenditure of dollars, time, and other elements necessary to achieve the health care result deemed necessary and appropriate. and environmentally sustainable manner. The Company's nitrogen oxide Noun 1. nitrogen oxide - any of several oxides of nitrogen formed by the action of nitric acid on oxidizable materials; present in car exhausts pollutant - waste matter that contaminates the water or air or soil (NOx) reduction technologies include the NOxOUT(R), NOxOUT CASCADE(R), NOxOUT ULTRA(R), Rich Reagent reagent /re·a·gent/ (re-a´jent) a substance used to produce a chemical reaction so as to detect, measure, produce, etc., other substances. re·a·gent n. Injection (RRI RRI Radio Romania International RRI Raman Research Institute RRI Resource Renewal Institute RRI Robarts Research Institute RRI Research Reactor Institute RRI Renal Research Institute (USA) RRI Rights and Resources Initiative ) and NOxOUT-SCR(R) processes. These technologies have established Fuel Tech as a leader in post-combustion NOx control systems, with installations on over 350 units worldwide, where coal, municipal waste, biomass, and other fuels are utilized. The Company's FUEL CHEM(R) technology revolves around the unique application of chemicals to improve the efficiency and reliability of combustion units by controlling slagging, fouling Fouling refers to the accumulation and deposition of living organisms (biofouling) and certain non-living material on hard surfaces, most often in an aquatic environment. This can be the fouling of ships, pilings, and natural surfaces in the marine environment (marine fouling), , corrosion and opacity Refers to being "opaque," which means to prevent light from shining through. For example, in an image editing program, the opacity level for some function might range from completely transparent (0) to completely opaque (100). . This technology, in the form of a customizable FUEL CHEM program, has been applied to over 80 combustion units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste. Many of Fuel Tech's products and services rely heavily on the Company's exceptional Computational Fluid Dynamics Computational fluid dynamics The numerical approximation to the solution of mathematical models of fluid flow and heat transfer. Computational fluid dynamics is one of the tools (in addition to experimental and theoretical methods) available to solve modeling capabilities, which are enhanced by internally developed, high-end high-end adj. Informal 1. Appealing to sophisticated and discerning customers: a high-end department store; high-end video equipment. 2. visualization Using the computer to convert data into picture form. The most basic visualization is that of turning transaction data and summary information into charts and graphs. Visualization is used in computer-aided design (CAD) to render screen images into 3D models that can be viewed from all 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 N.V.'s web site at www.fueltechnv.com. This press release may contain statements of a forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. .
FUEL-TECH N.V.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share data)
March 31, December 31,
2006 2005
---------- ------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,917 $ 10,375
Short-term investments 14,000 6,000
Accounts receivable, net of allowances for
doubtful accounts of $150 and $150,
respectively 12,481 12,184
Inventories 151 358
Deferred income taxes 2,799 3,043
Prepaid expenses and other current assets 1,654 1,072
---------- ----------
Total current assets 36,002 33,032
Equipment, net of accumulated depreciation of
$8,367 and $7,900, respectively 4,297 4,045
Goodwill 2,119 2,119
Other intangible assets, net of accumulated
amortization of $1,116 and $1,087,
respectively 1,207 1,224
Deferred income taxes 1,823 1,579
Other assets 810 1,027
---------- ----------
Total assets $ 46,258 $ 43,026
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,411 $ 6,493
Accrued liabilities 4,821 6,949
---------- ----------
Total current liabilities 11,232 13,442
Other liabilities 459 448
---------- ----------
Total liabilities 11,691 13,890
Shareholders' equity:
Common stock, $.01 par value, 40,000,000 shares
authorized, 21,477,525 and 20,424,133 shares
issued, respectively 215 204
Additional paid-in capital 95,606 91,559
Accumulated deficit (61,520) (62,870)
Accumulated other comprehensive loss (16) (39)
Nil coupon perpetual loan notes 282 282
---------- ----------
Total shareholders' equity 34,567 29,136
---------- ----------
Total liabilities and shareholders' equity $ 46,258 $ 43,026
========== ==========
FUEL-TECH N.V.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands of U.S. dollars, except share data)
Three Months Ended
March 31
2006 2005
----------- -----------
Net sales $ 17,121 $ 12,051
Costs and expenses:
Cost of sales 9,056 6,397
Selling, general and administrative 5,424 4,056
Research and development 351 334
------------ ------------
14,831 10,787
------------ ------------
Operating income 2,290 1,264
Other income (expense), net 132 (28)
------------ ------------
Income before taxes 2,422 1,236
Income taxes (1,072) (483)
------------ ------------
Net income $ 1,350 $ 753
============ ============
Net income per Common Share:
Basic $ 0.07 $ 0.04
============ ============
Diluted $ 0.06 $ 0.03
============ ============
Average number of Common Shares outstanding:
Basic 20,613,000 19,683,000
============ ============
Diluted 23,708,000 22,587,000
============ ============
FUEL-TECH N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of U.S. dollars)
Three Months Ended
March 31
2006 2005
-------- -------
Operating activities
Net cash (used in) provided by operating activities $ (582) $ 424
-------- -------
Investing activities
Purchases and sales of short-term investments (8,000) -
Purchases of equipment and patents (730) (833)
-------- -------
Net cash used in investing activities (8,730) (833)
-------- -------
Financing activities
Exercise of stock options 2,763 269
Income tax benefit from exercise of stock options 1,068 -
-------- -------
Net cash provided by financing activities 3,831 269
-------- -------
Effect of exchange rate fluctuations on cash 23 (45)
-------- -------
Net decrease in cash and cash equivalents (5,458) (185)
Cash and cash equivalents at beginning of period 10,375 4,031
-------- -------
Cash and cash equivalents at end of period $ 4,917 $3,846
======== =======
FUEL-TECH N.V.
BUSINESS SEGMENT FINANCIAL DATA
(in thousands of U.S. dollars)
Nitrogen Fuel
For the three months ended Oxide Treatment
March 31, 2006 Reduction Chemicals Other Total
----------------------------------------------------------------------
Net sales from external customers $12,365 $4,756 $ - $17,121
----------------------------------------------------------------------
Cost of sales 6,888 2,118 50 9,056
----------------------------------------------------------------------
Gross margin 5,477 2,638 (50) 8,065
----------------------------------------------------------------------
Selling, general and administrative 5,424 5,424
----------------------------------------------------------------------
Research and development 351 351
----------------------------------------------------------------------
Operating income (loss) $ 5,477 $2,638 $(5,825) $ 2,290
----------------------------------====================================
Nitrogen Fuel
For the three months ended Oxide Treatment
March 31, 2005 Reduction Chemicals Other Total
----------------------------------------------------------------------
Net sales from external customers $ 8,320 $3,727 $ 4 $12,051
----------------------------------------------------------------------
Cost of sales 4,292 2,008 97 6,397
----------------------------------------------------------------------
Gross margin 4,028 1,719 (93) 5,654
----------------------------------------------------------------------
Selling, general and administrative - - 4,056 4,056
----------------------------------------------------------------------
Research and development - - 334 334
----------------------------------------------------------------------
Operating income (loss) $ 4,028 $1,719 $(4,483) $ 1,264
----------------------------------====================================
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. A third
segment that marketed and sold visualization software was discontinued
effective March 1, 2005 and does not meet the materiality test for
disclosure. Accordingly, it is aggregated in "Other" above, along with
profit and loss items not allocated by Fuel Tech to each reportable
segment.
GEOGRAPHIC INFORMATION
(in thousands of U.S. dollars)
For the three months ended
March 31
---------------------------
2006 2005
----------- ------------
Revenues:
United States $ 12,906 $ 10,051
Foreign 4,215 2,000
------------ -------------
$ 17,121 $ 12,051
============ =============
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