Fuel Tech, Inc. (Nasdaq: FTEK), a leader in advanced engineering solutions for the optimization of combustion systems in utility and industrial applications, reported lower results for the quarter ended March 31, 2007. Net sales totaled $16.3 million, down 5% from Q106. Net income totaled $0.8 million, or $0.03 per diluted share, versus $1.3 million, or $0.06 per diluted share, in the same year-ago quarter.
The decline in net income is attributable to several factors, including: the winding down of two air pollution control projects in the People’s Republic of China, which had been signed in 2005 and had contributed significantly to revenues in 2006; the impact on FUEL CHEM® program revenues of plant outages experienced by a significant number of utility coal-unit customers; and the recording of higher stock-based compensation expense, which increased on an after-tax basis from $227,000 in the first quarter of 2006 to $583,000 in the current quarter.
Despite the impact of unit outages, revenues for the fuel treatment chemical business segment were up 61% over 2006, reflecting the growing acceptance of the various benefits of Fuel Tech’s proprietary TIFI(TM) Targeted In-Furnace Injection(TM) technology.
“We have experienced a somewhat slower start to the year than planned,” commented John F. Norris Jr., President and CEO. “While year-to-year comparisons are quite favorable for our fuel treatment chemical business, revenue gains were nevertheless constrained by the impact of early maintenance outages at many of our customer accounts. In looking ahead, we anticipate accelerating growth in this segment as the marketplace continues to express strong interest in our TIFI technology, as evidenced by the announcement of orders for eight new FUEL CHEM programs thus far in 2007, including chemical injection on six coal-fired utility boilers in the United States and two biomass boilers in northern Italy.”
Mr. Norris continued, “With respect to our air pollution control technology segment, revenues were down from the first quarter of 2006, but not materially out of line with our internal expectations for this business segment for the first quarter of the year. We believe this business is well-positioned to capitalize on the next phase of increasingly stringent U.S. air quality standards, and interest in the Company’s broad suite of technologies, both domestically and abroad, has never been greater.
In particular, U.S. utilities are beginning to deploy systems to comply with the Clean Air Interstate Rule (CAIR), which takes effect in 2009. Follow-on regulations such as the Clean Air Mercury Rule (CAMR) and the Clean Air Visibility Rule (CAVR) offer Fuel Tech the potential for significant domestic market expansion as thousands of utility and industrial boilers will be subject to these EPA regulations. Similarly, our NOxOUT ULTRA® technology offers significant near-term opportunity to expand our market presence in the PRC, which continues to add new coal-fired electric generating capacity at a rapid pace. Longer term, the retrofit market in the PRC offers extraordinary potential for our technologies.”
He concluded, “At this time, we wish to reaffirm our earlier guidance for 2007 calling for full-year revenues to increase by some 20% – 27%, to $90 – $95 million, with gains in both technology segments.”
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