Fuel-Tech N.V. Reports Second-Quarter Results; Revenues up 60% Year-over-Year.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 June June: see month. 30, 2005. 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 second quarter increased 60% to $11.8 million, up $4.4 million from the comparable prior-year quarter. Net income totaled $3.2 million, or $0.14 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, compared with a net loss of $308,000, or ($0.02) per diluted share, in the same year-ago quarter. Net sales for the six months increased 76% to $23.8 million, up $10.3 million from the comparable year-earlier period. Net income for the six months totaled $3.9 million, or $0.17 per diluted share, compared with a net loss of $839,000, or ($0.04) per diluted share, in the same year-ago period. Net income for both the quarter and six-month period ended June 30, 2005 was favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. affected by the recording of a $2.2 million non-cash income tax benefit related to the anticipated utilization utilization, n 1. the extent to which a given group uses a particular service in a specified period. Although usually expressed as the number of services used per year per 100 or per 1000 persons eligible for the service, utilization rates may be of net operating loss carryforwards Net operating loss carryforwards Application of losses to offset earnings in future years. . Based on a review of historical taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. and future projections, the Company believes that this is prudent. Partially offsetting this tax benefit for the quarter and six-month period was income tax expense of $612,000 and $1,095,000, respectively, primarily representing deferred tax expense related to the generation of taxable income. The increase in net sales for the quarter and year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. periods is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to exceptionally strong results in the air pollution control business, which continues to benefit from an acceleration acceleration, change in the velocity of a body with respect to time. Since velocity is a vector quantity, involving both magnitude and direction, acceleration is also a vector. In order to produce an acceleration, a force must be applied to the body. of orders since the second half of 2004. Sales for the fuel treatment chemical business, at $3.8 million for the quarter and $7.5 million for the six months, were up slightly from comparable prior-year periods as 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) revenue gains were limited by the effects of demonstration programs, coal supply issues and oil prices. With respect to demonstrations, four such programs were in effect during the first six months of the year. One was on a no-cost basis at a critical coal-fired Adj. 1. coal-fired - fueled by burning coal; "a coal-fired ship" coal-burning fueled - heated, driven, or produced by burning fuel utility and the other three were on a cost-share basis, one on a coal-fired unit and two on 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 units. Assuming the Company meets the performance criteria criteria (krītēr´ē  ),n. for the three cost-share demonstrations, Fuel Tech will receive the balance of the full commercial price for these programs. Relative to coal supplies, during the first six months of the year, one critical Western-coal fired unit was significantly and unexpectedly derated for an extended period due to rail transportation constraints CONSTRAINTS - A language for solving constraints using value inference. ["CONSTRAINTS: A Language for Expressing Almost-Hierarchical Descriptions", G.J. Sussman et al, Artif Intell 14(1):1-39 (Aug 1980)]. that hampered deliveries of Powder River Basin The Powder River Basin is a region in southeast Montana and northeast Wyoming about 120 miles east to west and 200 miles north to south known for its coal deposits. It is both a topographic drainage and geologic structural basin. coals. With respect to oil pricing, the Company's oil-fired business was adversely affected by the high price of crude oil, which has reduced oil-fired electricity generation in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . Steven Ste´ven n. 1. Voice; speech; language. Ye have as merry a steven As any angel hath that is in heaven. - Chaucer. 2. An outcry; a loud call; a clamor. To set steven to make an appointment. C. Argabright, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , commented, "We are quite pleased with our strong quarterly gains in revenues and net income. Our air pollution control business continues to experience particularly robust order activity, as evidenced by a 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 approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $17 million as well as nearly $21 million in new business booked year-to-date. Our FUEL CHEM business continues to fall somewhat short of expectations, but we remain encouraged by the overall level of activity, including last week's announcement of three potential new customers, including two major domestic utilities." Mr. Argabright concluded, "Based on financial results achieved to date, coupled with our outlook for the balance of the year, we maintain our 2005 revenue outlook of $45 million to $48 million, representing a 45% to 55% increase versus 2004." 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 be simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics 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 under the "Investors" subheading sub·head·ing n. See subhead. subheading Noun the heading of a subdivision of a piece of writing Noun 1. on the homepage See home page. . The call can also be accessed by dialing 800.798.2796 (domestic) or 617.614.6204 (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 using the passcode "48211327". The replay will be available until August 24, 2005. 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. The Company's NOx reduction processes, which 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 (Sequence Control Register) See program counter. (R) technologies, have established Fuel-Tech N.V. as a leader in post combustion NOx control systems, which are installed on over 340 units worldwide. New technologies that have grown out of the core NOx reduction business form the basis of the FUEL CHEM(R) business. FUEL CHEM technology centers around the unique application of chemicals to improve the performance 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). . The Company's FUEL CHEM products are being applied to over 80 combustion units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste. Both the NOx reduction and FUEL CHEM businesses 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 skills, 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. 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share data)
June 30 December 31
2005 2004
------------- -------------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 5,129 $ 6,531
Accounts receivable, net 12,708 7,358
Deferred income taxes 904 500
Prepaid expenses and other current assets 1,264 1,271
------------- -------------
Total current assets 20,005 15,660
Equipment, net of accumulated depreciation
of $7,926 and $7,209, respectively 3,131 2,863
Goodwill 2,119 2,119
Other intangible assets, net of
accumulated amortization of $1,032 and
$968, respectively 1,300 1,342
Deferred income taxes 1,896 1,144
Other assets 882 700
------------- -------------
Total assets $ 29,333 $ 23,828
============= =============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 3,933 $ 2,705
Accrued expenses 1,780 1,663
------------- -------------
Total current liabilities 5,713 4,368
Other liabilities 461 505
------------- -------------
Total liabilities 6,174 4,873
Stockholders' equity:
Common stock, par value $0.01 per share,
authorized 40,000,000 shares, 20,047,740
and 19,529,952 shares issued,
respectively 200 195
Additional paid-in capital 89,242 88,600
Accumulated deficit (66,533) (70,458)
Accumulated other comprehensive (loss)
income (32) 86
Nil coupon perpetual loan notes 282 532
------------- -------------
Total stockholders' equity 23,159 18,955
------------- -------------
Total liabilities and stockholders' equity $ 29,333 $ 23,828
============= =============
FUEL-TECH N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands of U.S. dollars, except share data)
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
----------------------- ------------------------
Net sales $ 11,780 $ 7,352 $ 23,831 $ 13,504
Costs and expenses:
Cost of sales 6,053 4,196 12,450 7,412
Selling, general and
administrative 3,753 3,151 7,809 6,328
Research and
development 326 270 660 573
----------- ----------- ----------- ------------
10,132 7,617 20,919 14,313
----------- ----------- ----------- ------------
Operating income
(loss) 1,648 (265) 2,912 (809)
Other expense (64) (43) (92) (30)
----------- ----------- ----------- ------------
Income (loss) before
taxes 1,584 (308) 2,820 (839)
Income tax benefit 1,588 - 1,105 -
----------- ----------- ----------- ------------
Net income (loss) $ 3,172 $ (308)$ 3,925 $ (839)
=========== =========== =========== ============
Net income (loss) per
Common Share:
Basic $ .16 $ (.02)$ .20 $ (.04)
=========== =========== =========== ============
Diluted $ .14 $ (.02)$ .17 $ (.04)
=========== =========== =========== ============
Average number of
Common Shares
outstanding:
Basic 19,994,000 19,512,000 19,838,000 19,508,000
=========== =========== =========== ============
Diluted 22,750,000 19,512,000 22,672,000 19,508,000
=========== =========== =========== ============
FUEL-TECH N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of U.S. dollars)
Six Months Ended
June 30
2005 2004
Operating activities ------------------------
Net cash used in
operating activities $ (622) $ (1,152)
----------- ------------
Investing activities
Purchases of equipment and patents (1,058) (1,505)
----------- ------------
Net cash used in investing activities (1,058) (1,505)
----------- ------------
Financing activities
Exercise of stock options 396 21
Net cash provided by ----------- ------------
financing activities 396 21
----------- ------------
Effect of exchange rate fluctuations on cash (118) (29)
----------- ------------
Net decrease in cash and
cash equivalents (1,402) (2,665)
Cash and cash equivalents at beginning
of period 6,531 7,812
----------- ------------
Cash and cash equivalents at
end of period $ 5,129 $ 5,147
----------- ------------
FUEL-TECH N.V.
BUSINESS SEGMENT FINANCIAL DATA
(in thousands of U.S. dollars)
Three months ended Nitrogen Oxide Fuel Treatment Other Total
June 30, 2005 Reduction Chemical
------------------------ -------------- ------------- ------- --------
Net sales from external
customers $8,000 $3,779 $1 $11,780
------------------------ -------------- ------------- ------- --------
Cost of sales 4,024 1,948 81 6,053
------------------------ -------------- ------------- ------- --------
Gross margin 3,976 1,831 (80) 5,727
------------------------ -------------- ------------- ------- --------
Selling, general and
administrative - - 3,753 3,753
------------------------ -------------- ------------- ------- --------
Research and development - - 326 326
------------------------ -------------- ------------- ------- --------
Operating income (loss) $3,976 $1,831 $(4,159) $1,648
------------------------ ============== ============= ======= ========
Three months ended Nitrogen Oxide Fuel Treatment Other Total
June 30, 2004 Reduction Chemical
------------------------ -------------- ------------- -------- -------
Net sales from external
customers $3,712 $3,636 $4 $7,352
------------------------ -------------- ------------- -------- -------
Cost of sales 2,073 2,062 61 4,196
------------------------ -------------- ------------- -------- -------
Gross margin 1,639 1,574 (57) 3,156
------------------------ -------------- ------------- -------- -------
Selling, general and
administrative - - 3,151 3,151
------------------------ -------------- ------------- -------- -------
Research and development - - 270 270
------------------------ -------------- ------------- -------- -------
Operating income (loss) $1,639 $1,574 $(3,478) $(265)
------------------------ ============== ============= ======== =======
Six months ended Nitrogen Oxide Fuel Treatment Other Total
June 30, 2005 Reduction Chemical
------------------------ -------------- ------------- ------- --------
Net sales from external
customers $16,320 $7,506 $5 $23,831
------------------------ -------------- ------------- ------- --------
Cost of sales 8,316 3,956 178 12,450
------------------------ -------------- ------------- ------- --------
Gross margin 8,004 3,550 (173) 11,381
------------------------ -------------- ------------- ------- --------
Selling, general and
administrative - - 7,809 7,809
------------------------ -------------- ------------- ------- --------
Research and development - - 660 660
------------------------ -------------- ------------- ------- --------
Operating income (loss) $8,004 $3,550 $(8,642) $2,912
------------------------ ============== ============= ======= ========
Six months ended Nitrogen Oxide Fuel Treatment Other Total
June 30, 2004 Reduction Chemical
------------------------ -------------- ------------- ------- --------
Net sales from external
customers $6,154 $7,344 $6 $13,504
------------------------ -------------- ------------- ------- --------
Cost of sales 3,461 3,826 125 7,412
------------------------ -------------- ------------- ------- --------
Gross margin 2,693 3,518 (119) 6,092
------------------------ -------------- ------------- ------- --------
Selling, general and
administrative - - 6,328 6,328
------------------------ -------------- ------------- ------- --------
Research and development - - 573 573
------------------------ -------------- ------------- ------- --------
Operating income (loss) $2,693 $3,518 $(7,020) $(809)
------------------------ ============== ============= ======= ========
Note: Fuel Tech is organized into three reportable segments, two that provide advanced engineering solutions for the optimization of combustion systems in utility and industrial applications, and one that markets and sells visualization software. The segment that markets and sells visualization software was discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: effective March 1, 2005. The visualization software segment does not meet the materiality MATERIALITY. That which is important; that which is not merely of form but of substance. 2. When a bill for discovery has been filed, for example, the defendant must answer every material fact which is charged in the bill, and the test in these cases seems to test for disclosure and is aggregated in "Other" above. In addition, "Other" also includes those profit and loss items not allocated by Fuel Tech to each reportable segment.
FUEL-TECH N.V.
GEOGRAPHIC INFORMATION
(in thousands of U.S. dollars)
Three months Six months ended
ended June 30 June 30
---------------- -----------------
2005 2004 2005 2004
-------- ------- -------- --------
Revenues:
United States $9,664 $6,352 $19,715 $10,929
Foreign 2,116 1,000 4,116 2,575
-------- ------- -------- --------
$11,780 $7,352 $23,831 $13,504
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