FTEK-2013.12.31-8K

Securities And Exchange Commission

Washington, D.C. 20549

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) March 10, 2014

(Exact name of registrant as specified in its charter)

Delaware 001-33059 20-5657551

(State or other jurisdiction (Commission (IRS Employer

of incorporation) File Number) Identification No.)

27601 Bella Vista Parkway

Warrenville, IL 60555-1617

(Address and telephone number of principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provision:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

On March 10, 2014, Fuel Tech, Inc. ("Fuel Tech” or the “Registrant”) issued a press release which contained, among other things, an announcement of Fuel Tech’s financial results for the fourth quarter and for the full year ended December 31, 2013. A copy of the Press Release is furnished as Exhibit 99.1 to this Form 8-K.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements of Businesses Acquired.

(b) Pro Forma Financial Information.

Exhibit No. Description

99.1 Press Release of Fuel Tech, Inc. dated March 10, 2014.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: March 10, 2014

By: /s/ David S. Collins _

Senior Vice President, Treasurer

and Chief Financial Officer

CONTACT: David S. Collins Devin Sullivan

Chief Financial Officer Senior Vice President

(630) 845-4500 The Equity Group Inc.

FUEL TECH REPORTS 2013 FOURTH QUARTER AND FULL-YEAR

WARRENVILLE, Ill., March 10, 2014 - Fuel Tech, Inc. (NASDAQ: FTEK), a world leader in advanced engineering solutions for the optimization of combustion systems and emissions control in utility and industrial applications, today reported financial results for the fourth quarter and full year ended December 31, 2013.

2013 revenues rose to a record $109.3 million from $97.6 million in 2012

International revenues increased 69% to $46.1 million in 2013, up from $27.2 million in 2012

Net income in 2013 rose to $5.1 million, or $0.23 per diluted share, from net income of $2.8 million, or $0.12 per diluted share, in 2012

Q4 2013 revenues were $24.2 million compared to $26.6 million in Q4 2012

Q4 2013 net income improved to $406,000, or $0.02 per diluted share, from a net loss of $(29,000) in Q4 2012

At December 31, 2013

Total cash and equivalents of $27.7 million, or $1.23 per diluted share

Working capital of $48.6 million

Fourth Quarter 2013 Results Overview

Consolidated revenues for the fourth quarter of 2013 were $24.2 million as compared to $26.6 million in the fourth quarter of 2012, reflecting slower U.S. activity. Operating income was $496,000 as compared to $917,000 in the year ago quarter. Net income for the fourth quarter of 2013 improved to $406,000, or $0.02 per diluted share, from a net loss of $29,000 in the comparable prior year period.

APC segment revenues in the fourth quarter of 2013 were $15.9 million as compared to $18.5 million in the fourth quarter of 2012. Segment gross margins increased to $6.2 million from $5.3 million in the fourth quarter of 2012, primarily due to margin expansion in our foreign operations.

Capital projects backlog at the APC segment stood at $22.4 million at December 31, 2013 compared

to $46.7 million at December 31, 2012. This decline was due to the work progress on our large Chile project and slower U.S. bookings in the second half of 2013. Subsequent to December 31, 2013, the APC segment was awarded contracts with an aggregate value of approximately $4.3 million.

The FUEL CHEM® segment generated revenues of $8.3 million during the fourth quarter of 2013, a slight increase from $8.1 million in the fourth quarter of 2012. Although the FUEL CHEM segment continues to operate in an environment challenged by low natural gas prices and low electricity demand, we have maintained our customer base and overall profit margin and continue to pursue growth opportunities both domestically and internationally.

Selling, general and administrative (SG&A) expenses for the fourth quarter of 2013 were $9.3 million as compared to $7.8 million in last year’s fourth quarter. The net-dollar increase in SG&A expenses is primarily attributable to an increase in employee-related costs, administrative costs related to our foreign operations, and bad debt expense, offset by a decrease in professional fees.

Fuel Tech's research and development (R&D) expenses for the fourth quarter totaled $618,000, reflecting a continuing focus on commercial applications for its technologies outside of its traditional markets, and in the development and analysis of new technologies that could represent incremental market opportunities.

Full Year Results Overview

Consolidated revenues for 2013 totaled $109.3 million, up 12% from $97.6 million last year. Operating income increased 54% to $8.0 million from $5.2 million in 2012. Net income for 2013 rose to $5.1 million, or $0.23 per diluted share, from net income of $2.8 million, or $0.12 per diluted share, in 2012.

Adjusted EBITDA in 2013 was $12.7 million, an increase of $3.1 million from Adjusted EBITDA of $9.6 million last year.

APC segment revenues were $72.5 million in 2013, an increase of $10.1 million or 16% from $62.4 million in 2012, due to the continued growth in our foreign operations. Segment gross margins in 2013 rose to 38% from 36% in 2012.

Revenues for the FUEL CHEM segment for 2013 totaled $36.8 million, an increase of $1.6 million or 5% from $35.2 million last year. Segment gross margin was 53%, which is consistent with 2012.

SG&A expenses totaled $36.4 million in 2013, up from $32.7 million in 2012. SG&A as a percentage of revenues was consistent in 2013 and 2012 at 33%. We will continue to monitor our SG&A costs in terms of actual dollars and as a percentage of revenue and will adjust our spending as needed to support our

R&D for 2013 totaled $2.4 million compared to $2.9 million in 2012.

Douglas G. Bailey, Chairman, President, and Chief Executive Officer, commented, “We achieved a number of significant milestones in 2013. We generated record consolidated revenues for 2013 and our annual profits increased substantially from last year, reflecting improved results in both our APC and FUEL CHEM business segments. International revenues rose for a third consecutive year and comprised 42% of total revenues in 2013, up from 28% in 2012. We continue to focus on broadening our international presence, especially in China, where 2013 revenues increased for the third consecutive year. Fuel Tech has an established presence in China. Our success at introducing emissions control solutions to Chinese power producers and industrial operators, coupled with a growing national focus on air quality issues in that country, support our confidence that our business will continue to expand in this developing market in 2014 and beyond.

“We continued to invest in and introduce new emissions control solutions that address the ongoing compliance and operating needs of our customers. We also ended the year with a balance sheet that ranks among the stronger in our history. Our sound financial position provides us with the flexibility to pursue organic and inorganic growth opportunities that will foster long-term growth and enhance shareholder value.”

Mr. Bailey concluded, “Despite our strong annual performance, APC market conditions in the United States remained sluggish as of the end of 2013. Domestic bidding activity, which has been largely driven by state consent decrees and other mandates, continues despite delayed regulatory clarity. With respect to our foreign revenue, we expect to see continued growth in China while we continue to execute our large project work in Chile. Our business development efforts continue in earnest, and we are currently pursuing a number of large project awards in the U.S. and overseas.

Management will host a conference call on Tuesday, March 11, 2014 at 9:00 AM ET to discuss the results.

(877) 280-4962 (Domestic)

(857) 244-7319 (International)

A replay of the call will be available on our website, and can be accessed by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and using the passcode “39394772.” The replay will be available through April 5, 2014.

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 (NO_x) reduction technologies include advanced combustion modification techniques - such as Low NO_x Burners and Over-Fire Air systems - and post-combustion NO_x control approaches, including NO_xOUT^®and HERT™ SNCR systems as well as systems that incorporate ASCR™ (Advanced Selective Catalytic Reduction), NO_xOUT CASCADE^®, ULTRA™ and NO_xOUT-SCR^® processes. These technologies have established Fuel Tech as a leader in NO_x reduction, with installations on over 800 units worldwide, where coal, fuel oil, natural gas, 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, reliability, fuel flexibility and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and operational issues associated with sulfur trioxide, ammonium bisulfate, particulate matter (PM_2.5), carbon dioxide and NO_x. The Company has experience with this technology, in the form of a customizable FUEL CHEM program, on over 110 combustion units burning a wide variety of fuels including coal, heavy oil, biomass, and municipal waste.

Fuel Tech also provides a range of combustion optimization services, including airflow testing, coal flow testing and boiler tuning, as well as services to help optimize selective catalytic reduction system performance, including catalyst management services and ammonia injection grid tuning. In addition, flow corrective devices and physical and computational modeling services are available to optimize flue gas distribution and mixing in both power plant and industrial applications.

Many of Fuel Tech’s products and services rely heavily on the Company’s exceptional Computational Fluid Dynamics modeling capabilities, which are enhanced by internally developed, high-end visualization 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’s web site at www.ftek.com.

This press release may contain statements of a forward-looking 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.

Consolidated Balance Sheets

(in thousands of dollars, except share and per-share data)



	December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	27,738		$	24,453
Marketable securities	30			44
Accounts receivable, net	36,974			30,169
Inventories	443			513
Prepaid expenses and other current assets	2,196			3,956
Income taxes receivable	1,407			156
Deferred income taxes	477			573
Total current assets	69,265			59,864
Property and equipment, net	13,027			13,749
Goodwill	21,051			21,051
Other intangible assets, net	4,305			4,838
Deferred income taxes	—			3,688
Other assets	2,410			2,707
Total assets	$	110,058		$	105,897
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term debt	$	1,636		$	—
Accounts payable	9,920			12,828
Accrued liabilities:
Employee compensation	4,460			3,175
Other accrued liabilities	4,630			4,943
Total current liabilities	20,646			20,946
Deferred income taxes	59			—
Other liabilities	730			715
Total liabilities	21,435			21,661

Stockholders’ equity:
Common stock, $.01 par value, 40,000,000 shares authorized, 22,701,613 and 22,111,675 shares issued, and 22,592,956 and 22,102,549 outstanding in 2013 and 2012, respectively	227			221
Additional paid-in capital	132,796			133,498
Accumulated deficit	(44,027		)	(49,128		)
Accumulated other comprehensive income (loss)	37			(392		)
Nil coupon perpetual loan notes	76			76
Treasury stock, 108,657 and 9,126 shares in 2013 and 2012, respectively, at cost	(486		)	(39		)
Total stockholders’ equity	88,623			84,236
Total liabilities and stockholders’ equity	$	110,058		$	105,897

Consolidated Statements of Operations

(in thousands of dollars, except share and per-share data)



	Three Months Ended December 31,						Twelve Months Ended December 31,
	2013			2012			2013			2012
Revenues	$	24,207		$	26,614		$	109,338		$	97,644
Costs and expenses:
Cost of sales	13,787			17,128			62,521			56,899
Selling, general and administrative	9,306			7,750			36,375			32,682
Research and development	618			819			2,442			2,863
	23,711			25,697			101,338			92,444
Operating income	496			917			8,000			5,200
Interest expense	(27		)	(3		)	(56		)	(93		)
Interest income	15			22			58			78
Other expense	154			(29		)	(137		)	(107		)
Income before income taxes	638			907			7,865			5,078
Income tax expense	(232		)	(936		)	(2,764		)	(2,302		)
Net income	$	406		$	(29	)	$	5,101		$	2,776
Net income per common share:
Basic	$	0.02		$	0.00		$	0.23		$	0.12
Diluted	$	0.02		$	0.00		$	0.23		$	0.12
Weighted-average number of common shares outstanding:
Basic	22,456,000			22,046,000			22,286,000			22,709,000
Diluted	22,932,000			22,900,000			22,579,000			23,535,000

Consolidated Statements of Comprehensive Income

(in thousands of dollars)



	For the years ended December 31,
	2013			2012			2011
Net income	$	5,101		$	2,776		$	6,148
Other comprehensive income (loss):
Foreign currency translation adjustments	438			(765		)	103
Unrealized (losses)/gains from marketable securities, net of tax	(9		)	(8		)	35
Total other comprehensive income (loss)	429			(773		)	138
Comprehensive income	$	5,530		$	2,003		$	6,286

Consolidated Statements of Cash Flows

(in thousands of dollars)



	For the years ended December 31,
	2013			2012			2011
OPERATING ACTIVITIES
Net income	$	5,101		$	2,776		$	6,148
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	2,175			2,191			2,808
Amortization	839			898			912
(Gain) loss on equipment disposals/impaired assets	—			(72		)	56
Gain on revaluation of ACT liability	—			—			(758		)
Unrealized holding loss (gain) on marketable securities	—			13			(21		)
Allowance for doubtful accounts	707			26			348
Deferred income taxes	1,252			(458		)	793
Stock compensation expense	1,798			1,306			2,810
Changes in operating assets and liabilities:
Accounts receivable	(6,970		)	4,249			(13,279		)
Inventories	77			(202		)	504
Prepaid expenses, other current assets and other noncurrent assets	2,118			(1,808		)	(723		)
Accounts payable	(2,968		)	2,327			2,914
Accrued liabilities and other noncurrent liabilities	(1,287		)	(2,579		)	2,346
Net cash provided by operating activities	2,842			8,667			4,858

INVESTING ACTIVITIES
Purchases of property, equipment and patents	(1,754		)	(2,534		)	(2,408		)
Proceeds from the sale of equipment	—			—			2
Net cash used in investing activities	(1,754		)	(2,534		)	(2,406		)

FINANCING ACTIVITIES
Net proceeds (payments) of short-term debt	1,614			(1,187		)	(1,162		)
Proceeds from exercises of stock options	811			—			376
Excess tax benefit from exercises of stock options	67			—			77
Repurchases of common stock	—			(7,889		)	(4,111		)
Treasury shares withheld	(447		)	(39		)	—
Net cash provided by (used in) financing activities	2,045			(9,115		)	(4,820		)
Effect of exchange rate fluctuations on cash	152			(794		)	73
Net increase (decrease) in cash and cash equivalents	3,285			(3,776		)	(2,295		)
Cash and cash equivalents at beginning of year	24,453			28,229			30,524
Cash and cash equivalents at end of year	$	27,738		$	24,453		$	28,229

Supplemental Cash Flow Information:
Non-cash activities:
Decrease in contingent consideration payable	$	—		$	—		$	(758	)
Cash paid for:
Interest	$	56		$	93		$	148
Income taxes paid	$	2,901		$	2,043		$	5,187

BUSINESS SEGMENT FINANCIAL DATA



For the three months ended December 31, 2013	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	15,946		$	8,261		$	—		$	24,207
Cost of sales	(9,754		)	(4,033		)	—			(13,787		)
Gross margin	6,192			4,228			—			10,420
Selling, general and administrative	—			—			(9,306		)	(9,306		)
Research and development	—			—			(618		)	(618		)
Operating income	$	6,192		$	4,228		$	(9,924	)	$	496



For the three months ended December 31, 2012	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	18,477		$	8,137		$	—		$	26,614
Cost of sales	(13,162		)	(3,966		)	—			(17,128		)
Gross margin	5,315			4,171			—			9,486
Selling, general and administrative	—			—			(7,750		)	(7,750		)
Research and development	—			—			(819		)	(819		)
Operating income	$	5,315		$	4,171		$	(8,569	)	$	917



For the twelve months ended December 31, 2013	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	72,552		$	36,786		$	—		$	109,338
Cost of sales	(45,138		)	(17,383		)	—			(62,521		)
Gross margin	27,414			19,403			—			46,817
Selling, general and administrative	—			—			(36,375		)	(36,375		)
Research and development	—			—			(2,442		)	(2,442		)
Operating income	$	27,414		$	19,403		$	(38,817	)	$	8,000



For the twelve months ended December 31, 2012	Air Pollution Control Segment			FUEL CHEM Segment			Other			Total
Revenues from external customers	$	62,441		$	35,203		$	—		$	97,644
Cost of sales	(40,146		)	(16,753		)	—			(56,899		)
Gross margin	22,295			18,450			—			40,745
Selling, general and administrative	—			—			(32,682		)	(32,682		)
Research and development	—			—			(2,863		)	(2,863		)
Operating income	$	22,295		$	18,450		$	(35,545	)	$	5,200

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. The “Other” classification includes those profit and loss items not allocated by Fuel Tech to each reportable

GEOGRAPHIC INFORMATION



For the years ended December 31,	2013		2012		2011
Revenues:
United States	$	63,275	$	70,425	$	76,077
Foreign	46,063		27,219		17,591
	$	109,338	$	97,644	$	93,668



As of December 31,	2013		2012
Assets:
United States	$	83,464	$	86,466
Foreign	26,594		19,431
	$	110,058	$	105,897

RECONCILIATION OF GAAP NET INCOME TO EBITDA AND ADJUSTED EBITDA



	Three Months Ended December 31,					Twelve Months Ended December 31,
	2013		2012			2013		2012
Net income	$	406	$	(29	)	$	5,101	$	2,776
Interest expense	27		3			56		93
Income tax expense	232		936			2,764		2,302
Depreciation expense	513		547			2,175		2,191
Amortization expense	202		218			839		898
EBITDA	1,380		1,675			10,935		8,260
Stock compensation expense	591		462			1,798		1,306
ADJUSTED EBITDA	$	1,971	$	2,137		$	12,733	$	9,566

To supplement the Company's consolidated financial statements presented in accordance with generally accepted accounting principles in the United States (GAAP), the Company has provided an Adjusted EBITDA disclosure as a measure of financial performance. Adjusted EBITDA is defined as net income (loss) before interest expense, income tax expense (benefit), depreciation expense, amortization expense and stock compensation expense. The Company's reference to these non-GAAP measures should be considered in addition to results prepared in accordance with GAAP standards, but are not a substitute for, or superior to, GAAP results.

Adjusted EBITDA is provided to enhance investors' overall understanding of the Company's current financial performance and ability to generate cash flow, which we believe is a meaningful measure for our investor and analyst communities. In many cases non-GAAP financial measures are utilized by these individuals to evaluate Company performance and ultimately determine a reasonable valuation for our common stock. A reconciliation of Adjusted EBITDA to the nearest GAAP measure of net income (loss) has been included in the financial table above.


•	Passcode: FUEL TECH