Fuel Tech Inc. (FTEK) filed Quarterly Report for the period ended 2009-09-30.
Fuel Tech 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 and advanced engineering services. These technologies enable customers to produce both energy and processed materials in a cost-effective and environmentally sustainable manner.The Company's nitrogen oxide reduction technologies include the NOxOUT NOxOUT CASCADE NOxOUT ULTRA Rich Reagent Injection and NOxOUT-SCR processes. These technologies have established Fuel Tech as a leader in post-combustion NOx control systems with installations on worldwide where coal municipal waste biomass and other fuels are utilized. The Company's FUEL CHEM technology revolves around the unique application of chemicals to improve the efficiency and reliability of combustion units by controlling slagging fouling corrosion and opacity. Fuel Tech Inc. has a market cap of $276.6 million; its shares were traded at around $11.46 with and P/S ratio of 3.4. Fuel Tech Inc. had an annual average earning growth of 131.4% over the past 5 years.
Highlight of Business Operations:
Selling, general and administrative (SG&A) expenses for the three-month period ended September 30, 2009 were $8,000, an increase of $1,211, or 18%, versus the comparable prior year period. The increase was driven by additional sales commissions, primarily associated with record FUEL CHEM sales, of $544 as the sales commission plan became effective January 1, 2009, salaries and benefits of $496 primarily related to the October 2008 acquisition of substantially all of the assets of Tackticks and FlowTack and the January 2009 ACT Acquisition, lower than expected utilization of engineering personnel of $303, additional legal expenses of $223 for general corporate administrative matters, including contract review and intellectual property-related work, increased personnel-related costs of $162 in the Company’s Beijing office to support growth, and increased depreciation expense of $102 related to additional FUEL CHEM equipment deployed at customer sites. Partially offsetting these increases were reduced expenditures for consultants of $243, lower third-party agency commissions for APC sales of $175 related to suppressed year-to-date APC customer orders, and lower personnel recruiting costs of $124.
SG&A expenses for the nine-month period ended September 30, 2009 were $25,130, an increase of $3,949, or 19%, versus the comparable prior year period. The increase was driven by additional salaries and benefits of $2,670 primarily related to the October 2008 acquisition of substantially all of the assets of Tackticks and FlowTack and the January 2009 ACT Acquisition and a one-time employee expense of $550 related to the reduction in workforce the Company undertook during the second quarter of 2009, increased sales commissions, primarily associated with record FUEL CHEM sales, of $864 as the sales commission plan became effective January 1, 2009, increased depreciation expense of $348 related to additional FUEL CHEM equipment deployed at customer sites, increased personnel-related costs of $232 in the Company’s Beijing office to support growth, lower than expected utilization of engineering personnel of $185, increased service fees for computer modeling software of $142, additional travel costs of $128 to support international and domestic growth, and additional legal expenses of $118 for general corporate administrative matters, including contract review and intellectual property-related work. Partially offsetting these increases are reduced personnel recruiting costs of $319, lower third-party agency commissions for APC sales of $296 related to suppressed year-to-date APC customer orders, and reduced expenditures for consultants of $206.
Interest income for the three- and nine-month periods ended September 30, 2009 of $7 and $30, respectively, decreased $138, or 95%, and $580, or 95%, respectively. The primary drivers of the reduced levels if interest income for both periods are a significant reduction in cash and cash equivalents on hand due to the cash outlay for the acquisitions of substantially all of the assets of Tackticks FlowTack, and ACT, coupled with a decrease in the average return in the Company’s interest-bearing accounts in which the cash is invested.
Income tax benefit / (expense) for the three- and nine-month periods ended September 30, 2009 and 2008 were $264 and ($1,289) and $1,493 and ($2,596), respectively, reflecting the Company’s pre-tax loss and income positions, respectively.
At September 30, 2009, Fuel Tech had cash and cash equivalents, short-term investments and restricted cash on hand of $14,084 and working capital of $27,930 versus $28,149 and $44,346 at December 31, 2008, respectively. Restricted cash as of September 30, 2009 of $881 was used as collateral for pre-existing stand-by letters of credit and bank guaranties with Wachovia Bank, N.A. (Wachovia) at June 30, 2009 as that was the date the Company entered into a new revolving credit facility with JPMorgan Chase N.A. (JPM Chase). As these instruments are transferred to JPM Chase and the Wachovia instruments are retired, the cash collateral will no longer be needed and will cease to be restricted. The reduction in restricted cash from the June 30, 2009 balance of $5,525 is reflective of the transfer of most of the stand-by letters of credit and bank guaranties out of Wachovia to JPM Chase.
Operating activities provided $7,502 of cash during the nine-month period ended September 30, 2009, primarily due to the add back of non-cash items, including depreciation of $2,842, amortization of $1,082, and stock compensation expense of $4,628, an increase in accrued liabilities of $610 and decreases in asset accounts, including accounts receivable of $3,181, inventory of $517 and prepaid expenses of $907. Partially offsetting these positive cash flow items were the year-to-date net loss of $2,538, an income tax benefit of $1,613 and a decrease in accounts payable of $2,245.
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