Fuel Tech, Inc. (Nasdaq: FTEK) reported reduced revenues for the quarter and nine-month period ended September 30, 2007.
Revenues for the third quarter totaled $15.2 million, down 24% from the comparable prior-year quarter. Net income was $0.9 million, or $0.04 per diluted share, compared with $2.1 million, or $0.09 per diluted share, in the same year-ago quarter.
Revenues for the first nine months were $47.7 million, down 16% from the comparable year-earlier period. Net income for the nine months totaled $2.0 million, or $0.08 per diluted share, compared with $5.4 million, or $0.22 per diluted share, in the same year-ago period.
“The effects of delayed orders are evident in our results thus far this year,” commented John F. Norris Jr., President and Chief Executive Officer. “However, an unparalleled surge in third-quarter contract announcements, coupled with the receipt of significant new business as we move through the fourth quarter, bode well for our financial performance in future periods.” Revenues for the Air Pollution Control (APC) business segment for the third quarter and the first nine months declined 39% and 37%, respectively, from comparable year-ago levels. These declines primarily reflect the timing of new orders in the United States as well as the winding down of two APC projects in the People’s Republic of China (PRC), which had contributed heavily to 2006 sales.
Mr. Norris continued, “The full spectrum of our nitrogen oxide (NOx) control technologies are in much demand domestically and internationally. In the United States, utilities are now moving aggressively to install systems that meet the new NOx emission reduction requirements of the Clean Air Interstate Rule, which commences in 2009. Internationally, our new entity, Beijing Fuel Tech Environmental Technologies Co., Ltd., is in active discussions and bids with a large number of major utilities for NOx control projects to help improve the air quality in that region. In Eastern Europe, there are opportunities to help utilities and industries meet the NOx reduction requirements associated with entering the European Union. In the third quarter alone, we booked a record $24.7 million in new business, which contributed to a Company backlog as of September 30, 2007 of approximately $28 million, equaling a record high level. Since October 1, we have signed $15.6 million in new orders, resulting in total contract awards of $51.2 million during 2007, which exceeds any prior full year in our history. We expect additional contract awards to be announced this quarter.”
The fuel treatment chemical technology segment realized a nine-month sales gain of 21% relative to the comparable year-earlier period, although a 7% quarterly sales decline was recorded versus a year ago. The reduction in third-quarter sales versus the third quarter of 2006 reflects reduced chemical requirements at several coal-fired utility units, due in part to plant outages, operational issues and reduced electrical demand. Also affecting nine-month and third-quarter results were delays in revenue generation for the eight new FUEL CHEM® programs at coal-fired utility boilers announced during the first nine months of this year, as only two of these eight were installed and pumping chemical by the end of the third quarter. Chemical injection at these units, plus a ninth unit recently announced last week, is expected to be underway during the fourth quarter.
Mr. Norris continued, “In our FUEL CHEM business, a number of coincidental, unrelated factors have resulted in delayed implementation of numerous demonstration programs, but we believe these issues are largely behind us and expect to enter 2008 with an accelerating revenue run rate. The outlook for securing our initial FUEL CHEM demonstration in the PRC is also very encouraging given the level of interest expressed by prospective customers approached by ITOCHU under our teaming agreement. Additionally, there is continued interest in other international markets, especially India and Mexico.”
The declines in quarterly and nine-month net income were due to the aforementioned reduction in revenues and to the recording of higher stock-based compensation expense which, on an after-tax basis, totaled $0.7 million and $2.4 million during the third quarter and first nine months of 2007, respectively, versus $0.2 million and $1.0 million during the comparable prior-year periods.
Mr. Norris concluded, “In light of the longer than expected delays in signing new APC orders and in implementing recently signed FUEL CHEM orders, we are adjusting our revenue guidance for the full year 2007 to a range of $76 – $79 million.”
About Fuel Tech
Fuel Tech is engaged in the worldwide development, commercialization and application of state-of-the-art proprietary technologies for air pollution control, process optimization, and advanced engineering services. These technologies enable customers to produce both energy and processed materials in a cost-effective and environmentally sustainable manner.
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