x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 20-5657551 | |
(State or other jurisdiction of incorporation of organization) | (I.R.S. Employer Identification Number) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | Smaller reporting company | x | ||
(Do not check if a smaller reporting company) | Emerging growth company | ¨ |
Page | ||
Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 | ||
Condensed Consolidated Statements of Operations for the Three-Month Periods Ended March 31, 2017 and 2016 | ||
Condensed Consolidated Statements of Comprehensive Loss for the Three-Month Periods Ended March 31, 2017 and 2016 | ||
Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended March 31, 2017 and 2016 | ||
Notes to Condensed Consolidated Financial Statements | ||
March 31, 2017 | December 31, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 10,203 | $ | 11,826 | ||||
Restricted cash | 6,020 | 6,020 | ||||||
Marketable securities | 11 | 9 | ||||||
Accounts receivable, net of allowance for doubtful accounts of $1,581 and $1,569, respectively | 15,363 | 18,790 | ||||||
Inventories, net | 1,244 | 1,012 | ||||||
Prepaid expenses and other current assets | 2,796 | 2,891 | ||||||
Income taxes receivable | 72 | 87 | ||||||
Total current assets | 35,709 | 40,635 | ||||||
Property and equipment, net of accumulated depreciation of $24,942 and $24,542, respectively | 10,362 | 10,920 | ||||||
Goodwill | 2,116 | 2,116 | ||||||
Other intangible assets, net of accumulated amortization of $7,765 and $7,257, respectively | 3,283 | 3,451 | ||||||
Other assets | 684 | 666 | ||||||
Total assets | $ | 52,154 | $ | 57,788 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | 4,480 | 6,303 | ||||||
Accrued liabilities: | ||||||||
Employee compensation | 1,170 | 1,390 | ||||||
Other accrued liabilities | 5,169 | 6,357 | ||||||
Total current liabilities | 10,819 | 14,050 | ||||||
Other liabilities | 365 | 346 | ||||||
Total liabilities | 11,184 | 14,396 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 10) | ||||||||
Shareholders’ equity: | ||||||||
Common stock, $.01 par value, 40,000,000 shares authorized, 23,914,256 and 23,800,924 shares issued, and 23,533,883, and 23,446,035 shares outstanding, respectively | 239 | 238 | ||||||
Additional paid-in capital | 137,369 | 137,380 | ||||||
Accumulated deficit | (94,026 | ) | (91,520 | ) | ||||
Accumulated other comprehensive loss | (1,451 | ) | (1,568 | ) | ||||
Nil coupon perpetual loan notes | 76 | 76 | ||||||
Treasury stock, at cost | (1,237 | ) | (1,214 | ) | ||||
Total shareholders’ equity | 40,970 | 43,392 | ||||||
Total liabilities and shareholders’ equity | $ | 52,154 | $ | 57,788 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Revenues | $ | 8,491 | $ | 17,822 | ||||
Costs and expenses: | ||||||||
Cost of sales | 4,769 | 11,774 | ||||||
Selling, general and administrative | 5,154 | 7,162 | ||||||
Restructuring charge | 61 | 317 | ||||||
Research and development | 1,014 | 1,158 | ||||||
10,998 | 20,411 | |||||||
Operating loss | (2,507 | ) | (2,589 | ) | ||||
Interest income | 3 | 10 | ||||||
Other expense | (2 | ) | (263 | ) | ||||
Loss before income taxes | (2,506 | ) | (2,842 | ) | ||||
Income tax benefit | — | 205 | ||||||
Net loss | $ | (2,506 | ) | $ | (2,637 | ) | ||
Net loss per common share: | ||||||||
Basic | $ | (0.11 | ) | $ | (0.11 | ) | ||
Diluted | $ | (0.11 | ) | $ | (0.11 | ) | ||
Weighted-average number of common shares outstanding: | ||||||||
Basic | 23,472,000 | 23,184,000 | ||||||
Diluted | 23,472,000 | 23,184,000 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Net loss | $ | (2,506 | ) | $ | (2,637 | ) | ||
Other comprehensive income: | ||||||||
Foreign currency translation adjustments | 116 | 429 | ||||||
Unrealized gains (losses) from marketable securities, net of tax | 1 | (3 | ) | |||||
Total other comprehensive income | 117 | 426 | ||||||
Comprehensive loss | $ | (2,389 | ) | $ | (2,211 | ) |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Operating Activities | ||||||||
Net loss | $ | (2,506 | ) | $ | (2,637 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Depreciation | 405 | 486 | ||||||
Amortization | 205 | 434 | ||||||
Loss on disposal of equipment | 10 | 1 | ||||||
Provision for doubtful accounts, net of recoveries | — | (99 | ) | |||||
Deferred income taxes | — | (99 | ) | |||||
Stock-based compensation, net of forfeitures | (10 | ) | 461 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 3,525 | (3,331 | ) | |||||
Inventories | (26 | ) | 219 | |||||
Prepaid expenses, other current assets and other non-current assets | 108 | 597 | ||||||
Accounts payable | (1,848 | ) | (377 | ) | ||||
Accrued liabilities and other non-current liabilities | (1,483 | ) | (1,243 | ) | ||||
Net cash used in operating activities | (1,620 | ) | (5,588 | ) | ||||
Investing Activities | ||||||||
Purchases of property, equipment and patents | (97 | ) | (91 | ) | ||||
Proceeds from the sale of equipment | — | 1 | ||||||
Net cash used in investing activities | (97 | ) | (90 | ) | ||||
Financing Activities | ||||||||
Change in restricted cash | — | (7,020 | ) | |||||
Taxes paid on behalf of equity award participants | (23 | ) | (53 | ) | ||||
Net cash used in financing activities | (23 | ) | (7,073 | ) | ||||
Effect of exchange rate fluctuations on cash | 117 | 450 | ||||||
Net decrease in cash and cash equivalents | (1,623 | ) | (12,301 | ) | ||||
Cash and cash equivalents at beginning of period | 11,826 | 21,684 | ||||||
Cash and cash equivalents at end of period | $ | 10,203 | $ | 9,383 |
Three Months Ended | |||||||
2017 | 2016 | ||||||
Restructuring liability at January 1, | $ | 309 | $ | — | |||
Amounts expensed | 61 | 317 | |||||
Amounts paid | (184 | ) | (304 | ) | |||
Restructuring liability at March 31, | $ | 186 | $ | 13 |
Three Months Ended | |||||||
March 31, | |||||||
2017 | 2016 | ||||||
Foreign currency translation | |||||||
Balance at beginning of period | $ | (1,574 | ) | $ | (1,568 | ) | |
Other comprehensive loss: | |||||||
Foreign currency translation adjustments (1) | 116 | 429 | |||||
Balance at end of period | $ | (1,458 | ) | $ | (1,139 | ) | |
Available-for-sale marketable securities | |||||||
Balance at beginning of period | $ | 6 | $ | 12 | |||
Other comprehensive income: | |||||||
Net unrealized holding gain (loss) (2) | 1 | (3 | ) | ||||
Balance at end of period | $ | 7 | $ | 9 | |||
Total accumulated other comprehensive loss | $ | (1,451 | ) | $ | (1,130 | ) |
(1) | In all periods presented, there were no tax impacts related to rate changes and no amounts were reclassified to earnings. |
(2) | In all periods presented, there were no realized holding gains or losses and therefore no amounts were reclassified to earnings. |
Three Months Ended March 31, | ||||||
2017 | 2016 | |||||
Basic weighted-average shares | 23,472,000 | 23,184,000 | ||||
Conversion of unsecured loan notes | — | — | ||||
Unexercised options and unvested RSUs | — | — | ||||
Diluted weighted-average shares | 23,472,000 | 23,184,000 |
Three Months Ended March 31, | |||||||
2017 | 2016 | ||||||
Stock options and restricted stock units, net of forfeited | $ | (10 | ) | $ | 461 | ||
Tax benefit of stock-based compensation expense | — | — | |||||
After-tax effect of stock-based compensation (1) | $ | (10 | ) | $ | 461 |
• | The first type of award is based on individual performance during the respective calendar year as determined by the Committee based on performance criteria specified in the Agreement. These awards will vest over a three year period beginning on the Determination Date. We estimated the fair value of these performance-based RSU awards on the date of the Agreement using the trading price of the Company’s stock and our estimate of the probability that the specified performance criteria will be met. The fair value measurement and probability estimate will be re-measured each reporting date until the Determination Date, at which time the final award amount will be known. For these job performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award. |
• | The second type of RSU award contains a targeted number of RSUs to be granted based on the Company’s revenue growth relative to a specified peer group during a period of two calendar years. These awards vest 67% on the second anniversary of the Agreement date and 33% on the third anniversary of the Agreement date. We estimated the fair value of these performance-based RSU awards on the Agreement date using the trading price of the Company’s stock on the date of determination and our estimate of the probability that the specified performance criteria will be met. For these revenue growth performance-based awards, we amortize compensation costs over the requisite service period, adjusted for estimated forfeitures, for each separately vesting tranche of the award. |
• | The third type of RSU award contains a targeted number of RSUs to be granted based on the total shareholder return (TSR) of the Company’s common stock relative to a specified peer group during a period of two calendar years. These awards vest 67% on the second anniversary of the Agreement date and 33% on the third anniversary of the Agreement date. We estimated the fair value of these market-based RSU awards on the Agreement date using a Monte Carlo valuation methodology and amortize the fair value over the requisite service period for each separately vesting tranche of the award. The principal variable assumptions utilized in valuing these RSUs under this valuation methodology include the risk-free interest rate, stock volatility, and correlations between our stock price and the stock prices of a peer group of companies. |
Shares | Weighted Average Grant Date Fair Value | ||||||
Unvested restricted stock units at January 1, 2017 | 1,463,796 | $ | 2.82 | ||||
Granted | — | — | |||||
Forfeited | (200,000 | ) | 3.03 | ||||
Vested | (113,332 | ) | 4.28 | ||||
Unvested restricted stock units at March 31, 2017 | 1,150,464 | $ | 2.64 |
• | The Air Pollution Control technology segment includes technologies to reduce NOx emissions in flue gas from boilers, incinerators, furnaces and other stationary combustion sources. These include Low and Ultra Low NOx Burners (LNB and ULNB), Over-Fire Air (OFA) systems, NOxOUT® and HERT™ Selective Non-Catalytic Reduction (SNCR) systems, and Advanced Selective Catalytic Reduction (ASCR™) systems. Our ASCR systems include ULNB, OFA, and SNCR components, along with a downsized SCR catalyst, Ammonia Injection Grid (AIG), and Graduated Straightening Grid GSG™ systems to provide high NOx reductions at significantly lower capital and operating costs than conventional SCR systems. The NOxOUT CASCADE® and NOxOUT-SCR® processes are more basic, using just SNCR and SCR catalyst components. ULTRA™ technology creates ammonia at a plant site using safe urea for use with any SCR application. Flue Gas Conditioning systems are chemical injection systems offered in markets outside the U.S. and Canada to enhance electrostatic precipitator and fabric filter performance in controlling particulate emissions. |
• | The FUEL CHEM® technology segment, which uses chemical processes in combination with advanced CFD and CKM boiler modeling, for the control of slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in furnaces and boilers through the addition of chemicals into the furnace using TIFI® Targeted In-Furnace Injection™ technology. |
• | The Fuel Conversion segment represents a new business initiative we commenced in 2014. We acquired intellectual property rights and know-how related to the CARBONITE® fuel conversion process and technology. This process can convert coals of various grades into value-added products that are high in energy content, carbon-rich and less pollutive. This technology has a number of potential applications including certain coal replacement, electric arc furnace (EAF) reductant, ferro-alloy feedstock, absorbent and Hg reduced carbon stock. During 2015 and 2016, we have been testing and developing the engineered carbon products for specific markets. We are in the process of evaluating the commercialization of these product offerings with prospective customers and considering alternatives. We have earned no significant revenue other than for test products from perspective customers for the three-months ended March 31, 2017 and 2016. |
Three months ended March 31, 2017 | Air Pollution Control Segment | FUEL CHEM Segment | Fuel Conversion Segment | Other | Total | |||||||||||||||
Revenues from external customers | $ | 4,002 | $ | 4,489 | $ | — | $ | — | $ | 8,491 | ||||||||||
Cost of sales | (2,500 | ) | (2,269 | ) | — | — | (4,769 | ) | ||||||||||||
Gross margin | 1,502 | 2,220 | — | — | 3,722 | |||||||||||||||
Selling, general and administrative | — | — | — | (5,154 | ) | (5,154 | ) | |||||||||||||
Restructuring charge | — | (61 | ) | — | — | (61 | ) | |||||||||||||
Research and development | — | — | (730 | ) | (284 | ) | (1,014 | ) | ||||||||||||
Operating income (loss) | $ | 1,502 | $ | 2,159 | $ | (730 | ) | $ | (5,438 | ) | $ | (2,507 | ) |
Three months ended March 31, 2016 | Air Pollution Control Segment | FUEL CHEM Segment | Fuel Conversion Segment | Other | Total | |||||||||||||||
Revenues from external customers | $ | 12,990 | $ | 4,832 | $ | — | $ | — | $ | 17,822 | ||||||||||
Cost of sales | (9,319 | ) | (2,455 | ) | — | — | (11,774 | ) | ||||||||||||
Gross margin | 3,671 | 2,377 | — | — | 6,048 | |||||||||||||||
Selling, general and administrative | — | — | — | (7,162 | ) | (7,162 | ) | |||||||||||||
Restructuring charge | (195 | ) | (122 | ) | — | (317 | ) | |||||||||||||
Research and development | — | — | (687 | ) | (471 | ) | (1,158 | ) | ||||||||||||
Operating income (loss) | $ | 3,476 | $ | 2,255 | $ | (687 | ) | $ | (7,633 | ) | $ | (2,589 | ) |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Revenues: | ||||||||
United States | $ | 6,734 | $ | 14,430 | ||||
Foreign | 1,757 | 3,392 | ||||||
$ | 8,491 | $ | 17,822 |
March 31, 2017 | December 31, 2016 | |||||||
Assets: | ||||||||
United States | $ | 34,483 | $ | 37,684 | ||||
Foreign | 17,671 | 20,104 | ||||||
$ | 52,154 | $ | 57,788 |
Three Months Ended March 31, | ||||||||
2017 | 2016 | |||||||
Aggregate product warranty liability at beginning of period | $ | 159 | $ | 268 | ||||
Net aggregate (benefit) related to product warranties | — | (109 | ) | |||||
Aggregate reductions for payments | — | — | ||||||
Aggregate product warranty liability at end of period | $ | 159 | $ | 159 |
a. | Exhibits (all filed herewith) | ||
31.1 | Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | ||
31.2 | Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002 | ||
32 | Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002 | ||
101.1 | INSXBRL Instance Document | ||
101.2 | SCHXBRL Taxonomy Extension Schema Document | ||
101.3 | CALXBRL Taxonomy Extension Calculation Linkbase Document | ||
101.4 | DEFXBRL Taxonomy Extension Definition Linkbase Document | ||
101.5 | LABXBRL Taxonomy Extension Label Linkbase Document | ||
101.6 | PREXBRL Taxonomy Extension Prevention Linkbase Document |
Date: May 11, 2017 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: May 11, 2017 | By: | /s/ David S. Collins |
David S. Collins | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
Date: May 11, 2017 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: May 11, 2017 | By: | /s/ David S. Collins |
David S. Collins | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
Date: May 11, 2017 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: May 11, 2017 | By: | /s/ David S. Collins |
David S. Collins | ||
Senior Vice President and Chief Financial Officer | ||
(Principal Financial Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Apr. 30, 2017 |
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | FUEL TECH, INC. | |
Document Type | 10-Q | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 23,746,847 | |
Amendment Flag | false | |
Entity Central Index Key | 0000846913 | |
Entity Filer Category | Smaller Reporting Company | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | Q1 |
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 1,581 | $ 1,569 |
Accumulated depreciation | 24,942 | 24,542 |
Accumulated amortization | $ 7,765 | $ 7,257 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock, shares issued (in shares) | 23,914,256 | 23,800,924 |
Common stock outstanding (in shares) | 23,533,883 | 23,446,035 |
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Income Statement [Abstract] | ||
Revenues | $ 8,491 | $ 17,822 |
Costs and expenses: | ||
Cost of sales | 4,769 | 11,774 |
Selling, general and administrative | 5,154 | 7,162 |
Restructuring charge | 61 | 317 |
Research and development | 1,014 | 1,158 |
Costs and expenses: | 10,998 | 20,411 |
Operating loss | (2,507) | (2,589) |
Interest income | 3 | 10 |
Other expense | (2) | (263) |
Loss before income taxes | (2,506) | (2,842) |
Income tax benefit | 0 | 205 |
Net loss | $ (2,506) | $ (2,637) |
Net loss per common share: | ||
Basic (in dollars per share) | $ (0.11) | $ (0.11) |
Diluted (in dollars per share) | $ (0.11) | $ (0.11) |
Weighted-average number of common shares outstanding: | ||
Basic (in shares) | 23,472 | 23,184 |
Diluted (in shares) | 23,472 | 23,184 |
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Statement of Comprehensive Income [Abstract] | ||
Net loss | $ (2,506) | $ (2,637) |
Other comprehensive income: | ||
Foreign currency translation adjustments | 116 | 429 |
Unrealized gains (losses) from marketable securities, net of tax | 1 | (3) |
Total other comprehensive income | 117 | 426 |
Comprehensive loss | $ (2,389) | $ (2,211) |
General |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | Organization Fuel Tech, Inc. and subsidiaries ("Fuel Tech", the "Company", "we", "us" or "our") provides advanced engineered solutions for the optimization of combustion systems in utility and industrial applications. Our primary focus is on the worldwide marketing and sale of NOx reduction technologies as well as our FUEL CHEM program. The Company’s NOx reduction technologies reduce nitrogen oxide emissions from boilers, furnaces and other stationary combustion sources. Our FUEL CHEM program is based on proprietary TIFI® Targeted In-Furnace™ Injection technology, in combination with advanced Computational Fluid Dynamics (CFD) and Chemical Kinetics Modeling (CKM) boiler modeling, in the unique application of specialty chemicals to improve the efficiency, reliability and environmental status of combustion units by controlling slagging, fouling, corrosion, opacity and other sulfur trioxide-related issues in the boiler. Our business is materially dependent on the continued existence and enforcement of air quality regulations, particularly in the United States. We have expended significant resources in the research and development of new technologies in building our proprietary portfolio of air pollution control, fuel and boiler treatment chemicals, computer modeling and advanced visualization technologies. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the statements for the periods presented. All significant intercompany transactions and balances have been eliminated. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. For further information, refer to the audited consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission. Reclassifications Certain reclassifications to prior year amounts have been made in the consolidated financial statements to conform to the current year presentation. The Company concluded that it was appropriate to separately present restructuring charges in the Consolidated Statement of Operations. Accordingly, the corresponding reclassification has been made to the Consolidated Statement of Operations for the quarter ended March 31, 2016. |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Restricted cash Restricted cash represents funds that are restricted to satisfy any amount borrowed against the Company's existing revolving credit facility (the Facility) with JPMorgan Chase Bank, N.A. The remaining balance of restricted cash totaling $6,020 will remain through the Maturity Date of the Facility. Refer to Note 8 Debt Financing for further information on the Facility. Revenue Recognition Revenues from the sales of chemical products are recorded when title transfers, either at the point of shipment or at the point of destination, depending on the contract with the customer. Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control (APC) technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. Fuel Tech’s APC contracts are typically eight to sixteen months in length. A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test. As part of most of its contractual APC project agreements, Fuel Tech will agree to customer-specific acceptance criteria that relate to the operational performance of the system that is being sold. These criteria are determined based on mathematical modeling that is performed by Fuel Tech personnel, which is based on operational inputs that are provided by the customer. The customer will warrant that these operational inputs are accurate as they are specified in the binding contractual agreement. Further, the customer is solely responsible for the accuracy of the operating condition information; typically all performance guarantees and equipment warranties granted by us are voidable if the operating condition information is inaccurate or is not met. Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting. At March 31, 2017 and December 31, 2016, unbilled receivables were approximately $3,711 and $6,755, respectively, and are included in accounts receivable on the consolidated balance sheets. Billings in excess of costs and estimated earnings on uncompleted contracts were $1,720 and $1,730, at March 31, 2017 and December 31, 2016, respectively, and are included in other accrued liabilities on the consolidated balance sheets. Fuel Tech has installed over 1,000 units with APC technology and normally provides performance guarantees to our customers based on the operating conditions for the project. As part of the project implementation process, we perform system start-up and optimization services that effectively serve as a test of actual project performance. We believe that this test, combined with the accuracy of the modeling that is performed, enables revenue to be recognized prior to the receipt of formal customer acceptance. Recently Adopted Accounting Pronouncements In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this Update simplify the income tax effects, minimum statutory tax withholding requirements and impact of forfeitures related to how share-based payments are accounted for and presented in the financial statements. ASU 2016-09 is effective for the Company beginning on January 1, 2017. The adoption of ASU 2016-09 did not have a material effect on our earnings, cash flows, or financial position. See Note 7, Stock-Based Compensation, for further discussion. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This new accounting guidance more clearly articulates the requirements for the measurement and disclosure of inventory. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. This new accounting guidance requires the measurement of inventory at lower of cost and net realizable value. The adoption of ASU 2015-11 is effective for the Company beginning on January 1, 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606). This new accounting guidance on revenue recognition provides for a single five-step model to be applied to all revenue contracts with customers. The new standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. In August 2015, the FASB approved a one-year deferral to January 1, 2018. Early adoption is permitted as of the original effective date. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The amendments in this Update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning on January 1, 2019. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 will be effective for the Company beginning on January 1, 2018. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this Update simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 will be effective for the Company beginning on January 1, 2020. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. |
Restructuring Activities |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Activities | Restructuring Activities In July 2016, the Company reduced its workforce to better align its organizational infrastructure to its revised operating plans. The Company continued to reduce its workforce during Q1 2017. The Company recorded a charge of $61 and $317 for the three-months ending March 31, 2017 and 2016, respectively, in connection with the workforce reduction. The charge consisted primarily of one-time severance payments and benefit continuation costs. The following is a reconciliation of the accrual for the workforce reduction that is included within the "Accrued Liabilities" line of the consolidated balance sheets for the three-months ending March 31, 2017 and 2016:
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Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The changes in accumulated other comprehensive loss by component were as follows:
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Treasury Stock |
3 Months Ended |
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Mar. 31, 2017 | |
Equity [Abstract] | |
Treasury Stock | Treasury Stock Common stock held in treasury totaled 374,821 and 354,889 with a cost of $1,237 and $1,214 at March 31, 2017 and December 31, 2016, respectively. These shares were withheld from employees to settle personal tax withholding obligations that arose as a result of restricted stock units that have vested in the periods presented. |
Earnings per Share |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic earnings per share excludes the dilutive effects of stock options, restricted stock units (RSUs), and the nil coupon non-redeemable convertible unsecured loan notes. Diluted earnings per share includes the dilutive effect of the nil coupon non-redeemable convertible unsecured loan notes, RSUs, and unexercised in-the-money stock options, except in periods of net loss where the effect of these instruments is anti-dilutive. Out-of-money stock options are excluded from diluted earnings per share because they are anti-dilutive. For the three months ended March 31, 2017 and 2016, basic earnings per share is equal to diluted earnings per share because all outstanding stock awards and convertible loan notes are considered anti-dilutive during periods of net loss. The following table sets forth the weighted-average shares used in calculating the earnings per share for the months ended March 31, 2017 and 2016.
Fuel Tech had 1,792,000 and 2,070,000 weighted average equity awards outstanding at March 31, 2017 and 2016, respectively, that were not dilutive for the purposes of inclusion in the calculation of diluted earnings per share but could potentially become dilutive in future periods. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation Under our stock-based employee compensation plan, referred to as the Fuel Tech, Inc. 2014 Long-Term Incentive Plan (Incentive Plan), awards may be granted to participants in the form of Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units (“RSUs”), Performance Awards, Bonuses or other forms of share-based or non-share-based awards or combinations thereof. Participants in the Incentive Plan may be our directors, officers, employees, consultants or advisors (except consultants or advisors in capital-raising transactions) as the directors determine are key to the success of our business. There are a maximum of 4,400,676 shares that may be issued or reserved for awards to participants under the Incentive Plan. As of March 31, 2017, Fuel Tech had 1,289,670 shares available for share-based awards under the 2014 Plan. We adopted the provisions of ASU 2016-09 as of January 1, 2017. Pursuant to this adoption, we recorded any excess tax benefits within income tax expense for the quarter ended March 31, 2017, where previously these were recorded as increases or decreases to additional paid-in capital. This change has been applied prospectively effective January 1, 2017, and therefore no adjustments were made to prior periods. Given the Company has a full valuation allowance on its deferred tax assets, there were no excess tax benefits to record for the quarter ended March 31, 2017. In addition, we have continued to account for forfeitures of awards based on an estimate of the number of awards expected to be forfeited and adjusting the estimate when it is no longer probable that the employee will fulfill the service condition. In accordance with the guidance, we retrospectively reported cash paid on behalf of employees for withholding shares for tax-withholding purposes as a financing activity in the Consolidated Statement of Cash Flows. Additionally, there were no excess tax benefits for the quarter-ended March 31, 2017. Any future excess tax benefits will be classified as an operating activity, applied prospectively. The adoption of this ASU did not result in a material change in our earnings, cash flows, or financial position. Stock-based compensation is included in selling, general, and administrative costs in our Consolidated Statements of Operations. The components of stock-based compensation for the three month periods ended March 31, 2017 and 2016 were as follows:
(1) The decrease in stock-based compensation expense is due to the reversal of expense in the first quarter of 2017 associated with certain performance-based RSU grants which did not achieve specified performance criteria. Stock Options Stock options granted to employees under the Incentive Plans have a 10-year life and they vest as follows: 50% after the second anniversary of the award date, 25% after the third anniversary, and the final 25% after the fourth anniversary of the award date. Fuel Tech calculates stock compensation expense for employee option awards based on the grant date fair value of the award, less expected annual forfeitures, and recognizes expense on a straight-line basis over the four-year service period of the award. Stock options granted to members of our board of directors vest immediately. Stock compensation for these awards is based on the grant date fair value of the award and is recognized in expense immediately. Fuel Tech uses the Black-Scholes option pricing model to estimate the grant date fair value of employee stock options. The principal variable assumptions utilized in valuing options and the methodology for estimating such model inputs include: (1) risk-free interest rate – an estimate based on the yield of zero–coupon treasury securities with a maturity equal to the expected life of the option; (2) expected volatility – an estimate based on the historical volatility of Fuel Tech’s Common Stock for a period equal to the expected life of the option; and (3) expected life of the option – an estimate based on historical experience including the effect of employee terminations. There was no stock option activity for Fuel Tech’s Incentive Plans for the three months ended March 31, 2017. The Company had 1,039,750 options outstanding and exercisable with a weighted-average exercise price of $8.39 at March 31, 2017 and December 31, 2016. There is no aggregate intrinsic value for the stock options outstanding at March 31, 2017 and December 31, 2016. As of March 31, 2017, there was no unrecognized compensation cost related to non-vested stock options granted under the Incentive Plans. Restricted Stock Units Restricted stock units (RSUs) granted to employees vest over time based on continued service (typically vesting over a period between two and four years). Such time-vested RSUs are valued at the date of grant using the intrinsic value method based on the closing price of the Common Shares on the grant date. Compensation cost, adjusted for estimated forfeitures, is amortized on a straight-line basis over the requisite service period. In addition to the time vested RSUs described above, performance-based RSU agreements (the Agreements) are issued annually to our Executive Chairman; President/Chief Executive Officer; Senior Vice President, Fuel Conversion Marketing; Senior Vice President, Treasurer/Chief Financial Officer; and Senior Vice President, General Counsel and Corporate Secretary. The Agreements provide each participating executive the opportunity to earn three types of awards with each award type specifying a targeted number of RSUs that may be granted to each executive based on either the individual performance of the executive or our relative performance compared to a peer group, as determined by the award type. The Compensation Committee of our Board of Directors (the Committee) determines the extent to which, if any, RSUs will be granted based on the achievement of the applicable performance criteria specified in the Agreement. This determination will be made following the completion of the applicable performance period (each a Determination Date). Such performance based awards include the following:
At March 31, 2017, there is $1,051 of unrecognized compensation costs related to restricted stock unit awards to be recognized over a weighted average period of 1.59 years. A summary of restricted stock unit activity for the three months ended March 31, 2017 is as follows:
The fair value of restricted stock that vested during the three month period ending March 31, 2017 was $131. Deferred Directors Fees In addition to the Incentive Plans, Fuel Tech has a Deferred Compensation Plans for Directors (Deferred Plan). Under the terms of the Deferred Plan, Directors can elect to defer Directors’ fees for shares of Fuel Tech Common Stock that are issuable at a future date as defined in the agreement. In accordance with ASC 718, Fuel Tech accounts for these awards as equity awards. In the three-month periods ended March 31, 2017 and 2016, Fuel Tech recorded no stock-based compensation expense under the Deferred Plan. |
Debt Financing |
3 Months Ended |
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Mar. 31, 2017 | |
Debt Disclosure [Abstract] | |
Debt Financing | Debt Financing On May 9, 2016, the Company amended its existing U.S. Domestic credit facility with JPM Chase such that the financial covenants as set forth in the credit agreement would not be measured for the period ending as of March 31, 2016, and were removed in their entirety from the Facility. The credit availability under the Facility has been reduced from $15,000 to $7,000 with this amendment, and further, JPM Chase's then current Revolving Commitment under the Facility is now secured by cash held by the Company in a separate restricted use designated JPM Chase deposit account. The amount of credit available to the Company under the Facility was $7,000 from the date of the effective date of the amended facility through May 31, 2016, at which time the credit available to the Company under the Facility was reduced to $6,000 from June 1, 2016 through July 31, 2016, at which time the credit available to the Company under the Facility was reduced to $5,000 and will remain as such until the Maturity Date of the Facility on June 30, 2017. The Company intends to renew the U.S. Domestic credit facility at its maturity. During the entire period of the Facility the Company must maintain sufficient cash balances in a segregated deposit account equal to the amount of the Facility and will fully pledge such cash as collateral to the bank to support the credit available to the Company under the Facility. As of March 31, 2017 and December 31, 2016, there were no outstanding borrowings on the credit facility. At March 31, 2017 and December 31, 2016, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $3,185 and $3,292, respectively, under the Facility in connection with contracts in process. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. The Company pays a commitment fee of 0.25% per year on the unused portion of the revolving credit facility. At March 31, 2017 and December 31, 2016, approximately $1,815 and $1,708 was available for future borrowings under the Facility. On June 24, 2016, Beijing Fuel Tech Environmental Technologies Company, Ltd. (Beijing Fuel Tech), a wholly-owned subsidiary of Fuel Tech, entered into a new revolving credit facility (the China Facility) agreement with JPM Chase for RMB 6.5 million (approximately $943), which expires on June 23, 2017. The Company intends to renew the China Facility at its maturity. This new credit facility replaced the previous RMB 35 million facility that expired on June 24, 2016. The facility is unsecured, bears interest at a rate of 125% of the People’s Bank of China (PBOC) Base Rate, and is guaranteed by Fuel Tech. Beijing Fuel Tech can use this facility for cash advances and bank guarantees. As of March 31, 2017 and December 31, 2016, Beijing Fuel Tech had no cash borrowings under the China Facility. At March 31, 2017 and December 31, 2016, the Company had outstanding standby letters of credit and bank guarantees totaling approximately $22 and $22, respectively, on its Beijing Fuel Tech revolving credit facility in connection with contracts in process. At March 31, 2017 and December 31, 2016, approximately $921 and $914 was available for future borrowings. In the event of default on either the domestic facility or the China facility, the cross default feature in each allows the lending bank to accelerate the payments of any amounts outstanding and may, under certain circumstances, allow the bank to cancel the facility. If the Company were unable to obtain a waiver for a breach of covenant and the bank accelerated the payment of any outstanding amounts, such acceleration may cause the Company’s cash position to deteriorate or, if cash on hand were insufficient to satisfy the payment due, may require the Company to obtain alternate financing to satisfy the accelerated payment. |
Business Segment and Geographic Financial Data |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment and Geographic Financial Data | Business Segment and Geographic Financial Data Business Segment Financial Data We segregate our financial results into three reportable segments representing three broad technology segments as follows:
The “Other” classification includes those profit and loss items not allocated to either reportable segment. There are no inter-segment sales that require elimination. We evaluate performance and allocate resources based on reviewing gross margin by reportable segment. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (Note 1 in our annual report on Form 10-K). We do not review assets by reportable segment, but rather, in aggregate for the Company as a whole. Information about reporting segment net sales and gross margin are provided below:
Geographic Segment Financial Data Information concerning our operations by geographic area is provided below. Revenues are attributed to countries based on the location of the customer. Assets are those directly associated with operations of the geographic area.
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Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies | Contingencies Fuel Tech is subject to various claims and contingencies related to, among other things, workers compensation, general liability (including product liability), and lawsuits. The Company records liabilities where a contingent loss is probable and can be reasonably estimated. If the reasonable estimate of a probable loss is a range, the Company records the most probable estimate of the loss or the minimum amount when no amount within the range is a better estimate than any other amount. The Company discloses a contingent liability even if the liability is not probable or the amount is not estimable, or both, if there is a reasonable possibility that a material loss may have been incurred. During the second quarter of 2016, the Company received a notice from a contractor that performed installation work on one of the Company's APC projects regarding $3.9 million in purported expenses beyond the contractually agreed cap on expenses. The Company initiated the process, as required by the Company's contract with the subcontractor, to submit the dispute into mediation. On March 2, 2017, the Company agreed to a final settlement with the subcontractor of $1,150 and the full amount is included in the accrued liabilities line of the consolidated balance sheet as of December 31, 2016. The full amount was paid during March 2017. Fuel Tech issues a standard product warranty with the sale of its products to customers. Our recognition of warranty liability is based primarily on analyses of warranty claims experienced in the preceding years as the nature of our historical product sales for which we offer a warranty are substantially unchanged. This approach provides an aggregate warranty accrual that is historically aligned with actual warranty claims experienced. Changes in the warranty liability for the three months March 31, 2017 and 2016, are summarized below:
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Income Taxes |
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Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company’s effective tax rate is 0% and (7)% for the three-month periods ended March 31, 2017 and 2016, respectively. The Company's effective tax rate differs from the statutory federal tax rate of 34% for the three-month period ended March 31, 2017 primarily due to a full valuation allowance recorded on our United States, China and Italy deferred tax assets since we cannot anticipate when or if we will have sufficient taxable income to utilize the deferred tax assets in the future. Further, our effective tax rate differs from the statutory federal tax rate due to state taxes, differences between U.S. and foreign tax rates, foreign losses incurred with no related tax benefit, non-deductible commissions, and non-deductible meals and entertainment expenses for the three-month periods ended March 31, 2017 and 2016, respectively. Fuel Tech had no unrecognized tax benefits as of March 31, 2017 and December 31, 2016. |
Goodwill and Other Intangibles |
3 Months Ended |
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Mar. 31, 2017 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill and Other Intangibles | Goodwill and Other Intangibles Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment. Fuel Tech has two reporting units for goodwill evaluation purposes: the FUEL CHEM® technology segment and the APC technology segment. There is no goodwill associated with our APC or Fuel Conversion segments. At both March 31, 2017 and December 31, 2016, our entire goodwill balance of $2,116 was allocated to the FUEL CHEM® technology segment. Goodwill is allocated to each of our reporting units after considering the nature of the net assets giving rise to the goodwill and how each reporting unit would enjoy the benefits and synergies of the net assets acquired. There were no indications of goodwill impairment in the three months ended March 31, 2017 and 2016. Fuel Tech reviews other intangible assets, which include customer lists and relationships, covenants not to compete, patent assets, tradenames, and acquired technologies, for impairment on a recurring basis or when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. There were no indications of intangible asset impairment in the three-month periods ended March 31, 2017 and 2016. |
General (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Exchange Act. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, the financial statements reflect all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the statements for the periods presented. All significant intercompany transactions and balances have been eliminated. The results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017. For further information, refer to the audited consolidated financial statements and footnotes thereto included in Fuel Tech’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the Securities and Exchange Commission. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2017 | |
Accounting Policies [Abstract] | |
Revenue Recognition Policy | Revenues from the sales of chemical products are recorded when title transfers, either at the point of shipment or at the point of destination, depending on the contract with the customer. Fuel Tech uses the percentage of completion method of accounting for equipment construction and license contracts that are sold within the Air Pollution Control (APC) technology segment. Under the percentage of completion method, revenues are recognized as work is performed based on the relationship between actual construction costs incurred and total estimated costs at completion. Construction costs include all direct costs such as materials, labor, and subcontracting costs, and indirect costs allocable to the particular contract such as indirect labor, tools and equipment, and supplies. Revisions in completion estimates and contract values are made in the period in which the facts giving rise to the revisions become known and can influence the timing of when revenues are recognized under the percentage of completion method of accounting. Such revisions have historically not had a material effect on the amount of revenue recognized. The completed contract method is used for certain contracts that are not long-term in nature or when reasonably dependable estimates of the percentage of completion cannot be made. When the completed contract method is used, revenue and costs are deferred until the contract is substantially complete, which usually occurs upon customer acceptance of the installed product. Provisions are made for estimated losses on uncompleted contracts in the period in which such losses are determined. A typical contract will have three or four critical operational measurements that, when achieved, serve as the basis for us to invoice the customer via progress billings. At a minimum, these measurements will include the generation of engineering drawings, the shipment of equipment and the completion of a system performance test. As part of most of its contractual APC project agreements, Fuel Tech will agree to customer-specific acceptance criteria that relate to the operational performance of the system that is being sold. These criteria are determined based on mathematical modeling that is performed by Fuel Tech personnel, which is based on operational inputs that are provided by the customer. The customer will warrant that these operational inputs are accurate as they are specified in the binding contractual agreement. Further, the customer is solely responsible for the accuracy of the operating condition information; typically all performance guarantees and equipment warranties granted by us are voidable if the operating condition information is inaccurate or is not met. Accounts receivable includes unbilled receivables, representing revenues recognized in excess of billings on uncompleted contracts under the percentage of completion method of accounting. |
New Accounting Pronouncements | In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this Update simplify the income tax effects, minimum statutory tax withholding requirements and impact of forfeitures related to how share-based payments are accounted for and presented in the financial statements. ASU 2016-09 is effective for the Company beginning on January 1, 2017. The adoption of ASU 2016-09 did not have a material effect on our earnings, cash flows, or financial position. See Note 7, Stock-Based Compensation, for further discussion. In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory. This new accounting guidance more clearly articulates the requirements for the measurement and disclosure of inventory. Topic 330, Inventory, currently requires an entity to measure inventory at the lower of cost or market. Market could be replacement cost, net realizable value, or net realizable value less an approximately normal profit margin. This new accounting guidance requires the measurement of inventory at lower of cost and net realizable value. The adoption of ASU 2015-11 is effective for the Company beginning on January 1, 2017 and the adoption did not have a material impact on the Company’s consolidated financial statements. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued ASU 2014-09 "Revenue from Contracts with Customers" (Topic 606). This new accounting guidance on revenue recognition provides for a single five-step model to be applied to all revenue contracts with customers. The new standard also requires additional financial statement disclosures that will enable users to understand the nature, amount, timing and uncertainty of revenue and cash flows relating to customer contracts. In August 2015, the FASB approved a one-year deferral to January 1, 2018. Early adoption is permitted as of the original effective date. The standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The amendments in this Update increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 will be effective for the Company beginning on January 1, 2019. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force). The amendments in this Update require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 will be effective for the Company beginning on January 1, 2018. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this Update simplify how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. ASU 2017-04 will be effective for the Company beginning on January 1, 2020. The Company is in the initial stages of evaluating the impact of the new standard on the accounting policies, processes, and system requirements. While the Company continues to assess the potential impacts of the new standard and anticipate this standard could have a material impact on the consolidated financial statements, the Company does not know or cannot reasonably estimate quantitative information related to the impact of the new standard on the financial statements at this time. |
Restructuring Activities (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of restructuring accrual | The following is a reconciliation of the accrual for the workforce reduction that is included within the "Accrued Liabilities" line of the consolidated balance sheets for the three-months ending March 31, 2017 and 2016:
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Accumulated Other Comprehensive Loss (Tables) |
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Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The changes in accumulated other comprehensive loss by component were as follows:
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Earnings per Share (Tables) |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the weighted-average shares used in calculating the earnings per share for the months ended March 31, 2017 and 2016.
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Stock-Based Compensation (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs | The components of stock-based compensation for the three month periods ended March 31, 2017 and 2016 were as follows:
(1) The decrease in stock-based compensation expense is due to the reversal of expense in the first quarter of 2017 associated with certain performance-based RSU grants which did not achieve specified performance criteria. |
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Schedule of Nonvested Restricted Stock Units Activity | A summary of restricted stock unit activity for the three months ended March 31, 2017 is as follows:
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Business Segment and Geographic Financial Data (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Information about reporting segment net sales and gross margin are provided below:
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Schedule of Revenue from External Customers Attributed to Foreign Countries by Geographic Area | Information concerning our operations by geographic area is provided below. Revenues are attributed to countries based on the location of the customer. Assets are those directly associated with operations of the geographic area.
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Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country |
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Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability | Changes in the warranty liability for the three months March 31, 2017 and 2016, are summarized below:
|
Summary of Significant Accounting Policies (Detail) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
unit
measurement
|
Dec. 31, 2016
USD ($)
|
|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Restricted cash | $ 6,020 | $ 6,020 |
Unbilled receivables, current | 3,711 | 6,755 |
Billings in excess of cost, current | $ 1,720 | $ 1,730 |
Number of units with APC technology (in units) | unit | 1,000 | |
Minimum | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Contract term (in months) | 8 months | |
Critical operational measurements (in measurements) | measurement | 3 | |
Maximum | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Contract term (in months) | 16 months | |
Critical operational measurements (in measurements) | measurement | 4 |
Restructuring Activities (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Restructuring Reserve [Roll Forward] | ||
Restructuring liability, beginning balance | $ 309 | $ 0 |
Amounts expensed | 61 | 317 |
Amounts paid | (184) | (304) |
Restructuring liability, ending balance | $ 186 | $ 13 |
Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward] | ||
Balance at beginning of period | $ 43,392 | |
Balance at end of period | 40,970 | |
Foreign currency translation | ||
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward] | ||
Balance at beginning of period | (1,574) | $ (1,568) |
Total other comprehensive (loss) income | 116 | 429 |
Balance at end of period | (1,458) | (1,139) |
Available-for-sale marketable securities | ||
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward] | ||
Balance at beginning of period | 6 | 12 |
Other comprehensive (loss) income | 1 | (3) |
Balance at end of period | 7 | 9 |
Total accumulated other comprehensive loss | ||
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward] | ||
Balance at end of period | $ (1,451) | $ (1,130) |
Treasury Stock (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Equity [Abstract] | ||
Treasury stock (in shares) | 374,821,000 | 354,889,000 |
Cost of common stock held in treasury | $ 1,237 | $ 1,214 |
Earnings per Share (Detail) - Basic Earnings Per Share - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Earnings Per Share [Abstract] | ||
Basic weighted-average shares (in shares) | 23,472 | 23,184 |
Conversion of unsecured loan notes (in shares) | 0 | 0 |
Unexercised options and unvested RSUs (in shares) | 0 | 0 |
Diluted weighted-average shares (in shares) | 23,472 | 23,184 |
Earnings per Share (Detail) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Earnings Per Share [Abstract] | ||
Antidilutive securities excluded from computation of earnings per share (in shares) | 1,792 | 2,070 |
Stock-Based Compensation - Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Stock options and restricted stock units, net of forfeited | $ (10) | $ 461 |
Tax benefit of stock-based compensation expense | 0 | 0 |
After-tax effect of stock-based compensation (1) | $ (10) | $ 461 |
Stock-Based Compensation (Detail) - Restricted Stock Unit Activity - Restricted Stock |
3 Months Ended |
---|---|
Mar. 31, 2017
$ / shares
shares
| |
Shares (in shares) | |
Beginning balance (in shares) | shares | 1,463,796 |
Granted (in shares) | shares | 0 |
Forfeited (in shares) | shares | (200,000) |
Vested (in shares) | shares | (113,332) |
Ending balance (in shares) | shares | 1,150,464 |
Weighted Average Grant Date Fair Value (in Dollars per share) | |
Beginning balance (in dollars per share) | $ / shares | $ 2.82 |
Granted (in dollars per share) | $ / shares | 0.00 |
Forfeited (in dollars per share) | $ / shares | 3.03 |
Vested (in dollars per share) | $ / shares | 4.28 |
Ending balance (in dollars per share) | $ / shares | $ 2.64 |
Debt Financing (Detail) |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Jun. 26, 2015
CNY (¥)
|
Mar. 31, 2017
USD ($)
|
Jul. 31, 2017
USD ($)
|
Dec. 31, 2016
USD ($)
|
Jun. 24, 2016
CNY (¥)
|
Jun. 24, 2016
USD ($)
|
May 31, 2016
USD ($)
|
May 09, 2016
USD ($)
|
|
Domestic Line of Credit | ||||||||
Letters of credit, amount outstanding | $ 3,185,000 | $ 3,292,000 | ||||||
Line of credit, remaining borrowing capacity | $ 1,815,000 | 1,708,000 | ||||||
Line of credit, commitment fee percentage | 0.25% | |||||||
China Facility | ||||||||
Line of credit, maximum borrowing capacity | ¥ 35,000,000 | ¥ 6,500,000.0 | $ 943,000 | |||||
Line of credit, amount outstanding | $ 0 | |||||||
Standby Letters of Credit | ||||||||
Letters of credit, amount outstanding | 22,000 | 22,000 | ||||||
Line of credit, remaining borrowing capacity | 921,000 | $ 914,000 | ||||||
Amended Amount | ||||||||
Line of credit, maximum borrowing capacity | $ 15,000,000 | $ 6,000,000 | $ 7,000,000 | |||||
Base Rate | China Facility | ||||||||
Basis spread on variable rate (as percent) | 125.00% | |||||||
Scenario, Forecast | Amended Amount | ||||||||
Line of credit, maximum borrowing capacity | $ 5,000,000 |
Business Segment and Geographic Financial Data (Detail) |
3 Months Ended |
---|---|
Mar. 31, 2017
segment
| |
Segment Reporting [Abstract] | |
Number of reportable segments | 3 |
Business Segment and Geographic Financial Data (Detail) - Operations by Geographic Area - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Revenues: | ||
Revenues | $ 8,491 | $ 17,822 |
United States | ||
Revenues: | ||
Revenues | 6,734 | 14,430 |
Foreign | ||
Revenues: | ||
Revenues | $ 1,757 | $ 3,392 |
Business Segment and Geographic Financial Data (Detail) - Assets by Geographic Area - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
ASSETS | ||
Assets | $ 52,154 | $ 57,788 |
United States | ||
ASSETS | ||
Assets | 34,483 | 37,684 |
Foreign | ||
ASSETS | ||
Assets | $ 17,671 | $ 20,104 |
Contingencies (Detail) - Warranty Liability - USD ($) $ in Thousands |
3 Months Ended | |||
---|---|---|---|---|
Mar. 02, 2017 |
Mar. 31, 2017 |
Mar. 31, 2016 |
Jun. 30, 2016 |
|
Commitments and Contingencies Disclosure [Abstract] | ||||
Amount of alleged claim | $ 3,900 | |||
Settlement | $ 1,150 | |||
Change in Warranty Liability | ||||
Aggregate product warranty liability at beginning of period | $ 159 | $ 268 | ||
Net aggregate (benefit) related to product warranties | 0 | (109) | ||
Aggregate reductions for payments | 0 | 0 | ||
Aggregate product warranty liability at end of period | $ 159 | $ 159 |
Income Taxes (Detail) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | |||
Effective tax rate (as a percent) | 0.00% | (7.00%) | |
Federal tax rate (as a percent) | 34.00% | ||
Unrecognized tax benefits | $ 0 | $ 0 |
Goodwill and Other Intangibles (Detail) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017
USD ($)
reporting_unit
|
Dec. 31, 2016
USD ($)
|
|
Goodwill | $ | $ 2,116 | $ 2,116 |
FUEL CHEM And APC Technology Segments | ||
Number of reporting units | reporting_unit | 2 |
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