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 | x | Smaller reporting company | x | ||
Emerging growth company | ¨ |
Page | ||
Condensed Consolidated Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2019 and 2018 | ||
Notes to Condensed Consolidated Financial Statements | ||
September 30, 2019 | December 31, 2018 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 12,850 | $ | 12,039 | ||
Restricted cash | 988 | 6,020 | ||||
Accounts receivable, net of allowance for doubtful accounts of $1,175 and $1,411, respectively | 10,124 | 18,399 | ||||
Inventories, net | 291 | 957 | ||||
Prepaid expenses and other current assets | 1,834 | 3,184 | ||||
Income taxes receivable | 130 | 118 | ||||
Total current assets | 26,217 | 40,717 | ||||
Property and equipment, net of accumulated depreciation of $25,993 and $26,528, respectively | 5,712 | 5,976 | ||||
Goodwill | 2,116 | 2,116 | ||||
Other intangible assets, net of accumulated amortization of $6,611 and $6,608, respectively | 966 | 1,164 | ||||
Restricted cash | 1,494 | — | ||||
Right-of-use operating lease assets | 1,104 | — | ||||
Assets held for sale | — | 485 | ||||
Other assets | 270 | 1,261 | ||||
Total assets | $ | 37,879 | $ | 51,719 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable | $ | 2,618 | $ | 9,499 | ||
Accrued liabilities: | ||||||
Operating lease liabilities - current | 376 | — | ||||
Employee compensation | 661 | 1,563 | ||||
Other accrued liabilities | 2,419 | 6,099 | ||||
Total current liabilities | 6,074 | 17,161 | ||||
Operating lease liabilities - non-current | 715 | — | ||||
Deferred income taxes | 171 | 171 | ||||
Other liabilities | 278 | 335 | ||||
Total liabilities | 7,238 | 17,667 | ||||
COMMITMENTS AND CONTINGENCIES (Note 14) | ||||||
Stockholders’ equity: | ||||||
Common stock, $.01 par value, 40,000,000 shares authorized, 24,843,668 and 24,825,891 shares issued, and 24,186,824 and 24,170,585 shares outstanding, respectively | 248 | 248 | ||||
Additional paid-in capital | 139,349 | 138,992 | ||||
Accumulated deficit | (105,985 | ) | (102,495 | ) | ||
Accumulated other comprehensive loss | (1,561 | ) | (1,285 | ) | ||
Nil coupon perpetual loan notes | 76 | 76 | ||||
Treasury stock, at cost | (1,486 | ) | (1,484 | ) | ||
Total stockholders’ equity | 30,641 | 34,052 | ||||
Total liabilities and stockholders’ equity | $ | 37,879 | $ | 51,719 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Revenues | $ | 6,452 | $ | 16,070 | $ | 25,555 | $ | 40,708 | ||||
Costs and expenses: | ||||||||||||
Cost of sales | 3,563 | 10,654 | 14,754 | 26,545 | ||||||||
Selling, general and administrative | 3,822 | 4,105 | 12,735 | 13,789 | ||||||||
Restructuring charge | — | — | 625 | — | ||||||||
Research and development | 352 | 265 | 823 | 814 | ||||||||
Intangible assets abandonment | 76 | — | 127 | 317 | ||||||||
7,813 | 15,024 | 29,064 | 41,465 | |||||||||
Operating income (loss) from continuing operations | (1,361 | ) | 1,046 | (3,509 | ) | (757 | ) | |||||
Interest expense | (4 | ) | — | (8 | ) | — | ||||||
Interest income | 19 | 1 | 30 | 3 | ||||||||
Other expense | 71 | 8 | (1 | ) | (59 | ) | ||||||
Income (loss) from continuing operations before income taxes | (1,275 | ) | 1,055 | (3,488 | ) | (813 | ) | |||||
Income tax expense | (21 | ) | — | (23 | ) | (2 | ) | |||||
Net income (loss) from continuing operations | (1,296 | ) | 1,055 | (3,511 | ) | (815 | ) | |||||
Income (loss) from discontinued operations (net of income tax benefit of $0 in 2019 and 2018) | 18 | (10 | ) | (1 | ) | (109 | ) | |||||
Net income (loss) | $ | (1,278 | ) | $ | 1,045 | $ | (3,512 | ) | $ | (924 | ) | |
Net income (loss) per common share: | ||||||||||||
Basic | ||||||||||||
Continuing operations | $ | (0.05 | ) | $ | 0.04 | $ | (0.15 | ) | $ | (0.04 | ) | |
Discontinued operations | $ | — | $ | — | $ | — | $ | — | ||||
Basic net income (loss) per common share | $ | (0.05 | ) | $ | 0.04 | $ | (0.15 | ) | $ | (0.04 | ) | |
Diluted | ||||||||||||
Continuing operations | $ | (0.05 | ) | $ | 0.04 | $ | (0.15 | ) | $ | (0.04 | ) | |
Discontinued operations | $ | — | $ | — | $ | — | $ | — | ||||
Diluted net loss per common share | $ | (0.05 | ) | $ | 0.04 | $ | (0.15 | ) | $ | (0.04 | ) | |
Weighted-average number of common shares outstanding: | ||||||||||||
Basic | 24,187,000 | 24,171,000 | 24,183,000 | 24,162,000 | ||||||||
Diluted | 24,187,000 | 24,588,000 | 24,183,000 | 24,162,000 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Net income (loss) | $ | (1,278 | ) | $ | 1,045 | $ | (3,512 | ) | $ | (924 | ) | |
Other comprehensive income (loss): | ||||||||||||
Foreign currency translation adjustments | (337 | ) | (263 | ) | (276 | ) | (441 | ) | ||||
Unrealized losses from marketable securities, net of tax | — | — | — | (3 | ) | |||||||
Total other comprehensive income (loss) | (337 | ) | (263 | ) | (276 | ) | (444 | ) | ||||
Comprehensive income (loss) | $ | (1,615 | ) | $ | 782 | $ | (3,788 | ) | $ | (1,368 | ) |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Nil Coupon Perpetual Loan Notes | Treasury Stock | Total | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance at December 31, 2017 | 24,133 | $ | 248 | $ | 138,760 | $ | (102,672 | ) | $ | (768 | ) | $ | 76 | $ | (1,472 | ) | $ | 34,172 | |||||||||||||
Net loss | (216 | ) | (216 | ) | |||||||||||||||||||||||||||
Foreign currency translation adjustments | 416 | 416 | |||||||||||||||||||||||||||||
Unrealized loss on marketable securities, net of tax | (1 | ) | (1 | ) | |||||||||||||||||||||||||||
Stock compensation expense | (59 | ) | (59 | ) | |||||||||||||||||||||||||||
Common shares issued upon vesting of restricted stock units | 45 | — | |||||||||||||||||||||||||||||
Treasury shares withheld | (10 | ) | (10 | ) | (10 | ) | |||||||||||||||||||||||||
Adoption of ASC 606 | 205 | 205 | |||||||||||||||||||||||||||||
Balance at March 31, 2018 | 24,168 | $ | 248 | $ | 138,701 | $ | (102,683 | ) | $ | (353 | ) | $ | 76 | $ | (1,482 | ) | $ | 34,507 | |||||||||||||
Net loss | (1,753 | ) | (1,753 | ) | |||||||||||||||||||||||||||
Foreign currency translation adjustments | (594 | ) | (594 | ) | |||||||||||||||||||||||||||
Unrealized loss on marketable securities, net of tax | (2 | ) | (2 | ) | |||||||||||||||||||||||||||
Stock compensation expense | 97 | 97 | |||||||||||||||||||||||||||||
Common shares issued upon vesting of restricted stock units | 4 | (1 | ) | (1 | ) | ||||||||||||||||||||||||||
Treasury shares withheld | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||||||
Balance at June 30, 2018 | 24,170 | $ | 248 | $ | 138,797 | $ | (104,436 | ) | $ | (949 | ) | $ | 76 | $ | (1,484 | ) | $ | 32,252 | |||||||||||||
Net loss | 1,045 | 1,045 | |||||||||||||||||||||||||||||
Foreign currency translation adjustments | (263 | ) | (263 | ) | |||||||||||||||||||||||||||
Unrealized loss on marketable securities, net of tax | — | — | |||||||||||||||||||||||||||||
Stock compensation expense | 97 | 97 | |||||||||||||||||||||||||||||
Balance at September 30, 2018 | 24,170 | $ | 248 | $ | 138,894 | $ | (103,391 | ) | $ | (1,212 | ) | $ | 76 | $ | (1,484 | ) | $ | 33,131 |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Nil Coupon Perpetual Loan Notes | Treasury Stock | Total | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||
Balance at December 31, 2018 | 24,170 | $ | 248 | $ | 138,992 | $ | (102,495 | ) | $ | (1,285 | ) | $ | 76 | $ | (1,484 | ) | $ | 34,052 | |||||||||||||
Net loss | (1,289 | ) | (1,289 | ) | |||||||||||||||||||||||||||
Foreign currency translation adjustments | 104 | 104 | |||||||||||||||||||||||||||||
Stock compensation expense | 96 | 96 | |||||||||||||||||||||||||||||
Common shares issued upon vesting of restricted stock units | 18 | — | |||||||||||||||||||||||||||||
Treasury shares withheld | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||||||
Adoption of ASC 842 | 22 | 22 | |||||||||||||||||||||||||||||
Balance at March 31, 2019 | 24,186 | $ | 248 | $ | 139,088 | $ | (103,762 | ) | $ | (1,181 | ) | $ | 76 | $ | (1,486 | ) | $ | 32,983 | |||||||||||||
Net loss | (945 | ) | (945 | ) | |||||||||||||||||||||||||||
Foreign currency translation adjustments | (43 | ) | (43 | ) | |||||||||||||||||||||||||||
Stock compensation expense | 123 | 123 | |||||||||||||||||||||||||||||
Balance at June 30, 2019 | 24,186 | $ | 248 | $ | 139,211 | $ | (104,707 | ) | $ | (1,224 | ) | $ | 76 | $ | (1,486 | ) | $ | 32,118 | |||||||||||||
Net loss | (1,278 | ) | (1,278 | ) | |||||||||||||||||||||||||||
Foreign currency translation adjustments | (337 | ) | (337 | ) | |||||||||||||||||||||||||||
Stock compensation expense | 138 | 138 | |||||||||||||||||||||||||||||
Balance at September 30, 2019 | 24,186 | $ | 248 | $ | 139,349 | $ | (105,985 | ) | $ | (1,561 | ) | $ | 76 | $ | (1,486 | ) | $ | 30,641 |
Nine Months Ended September 30, | ||||||
2019 | 2018 | |||||
Operating Activities | ||||||
Net loss | $ | (3,512 | ) | $ | (924 | ) |
Loss from discontinued operations | 1 | 109 | ||||
Net loss from continuing operations | (3,511 | ) | (815 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation | 644 | 502 | ||||
Amortization | 118 | 158 | ||||
Loss (gain) on disposal of equipment | 4 | (11 | ) | |||
Provision for doubtful accounts, net of recoveries | — | (62 | ) | |||
Intangible assets abandonment | 127 | 317 | ||||
Stock-based compensation, net of forfeitures | 357 | 135 | ||||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | 8,601 | (7,192 | ) | |||
Inventories | 654 | 280 | ||||
Prepaid expenses, other current assets and other non-current assets | 1,804 | 1,840 | ||||
Accounts payable | (6,812 | ) | 3,896 | |||
Accrued liabilities and other non-current liabilities | (4,306 | ) | (1,378 | ) | ||
Net cash used in operating activities - continuing operations | (2,320 | ) | (2,330 | ) | ||
Net cash used in operating activities - discontinued operations | (21 | ) | (334 | ) | ||
Net cash used in operating activities | (2,341 | ) | (2,664 | ) | ||
Investing Activities | ||||||
Purchases of equipment and patents | (431 | ) | (392 | ) | ||
Proceeds from the sale of equipment | — | 1 | ||||
Net cash used in investing activities - continuing operations | (431 | ) | (391 | ) | ||
Net cash provided by investing activities - discontinued operations (Note 4) | 505 | — | ||||
Net cash provided by (used in) investing activities | 74 | (391 | ) | |||
Financing Activities | ||||||
Taxes paid on behalf of equity award participants | (2 | ) | (12 | ) | ||
Net cash used in financing activities | (2 | ) | (12 | ) | ||
Effect of exchange rate fluctuations on cash | (458 | ) | (601 | ) | ||
Net decrease in cash, cash equivalents and restricted cash | (2,727 | ) | (3,668 | ) | ||
Cash, cash equivalents, and restricted cash at beginning of period (Note 2) | 18,059 | 14,386 | ||||
Cash, cash equivalents and restricted cash at end of period (Note 2) | $ | 15,332 | $ | 10,718 |
September 30, 2019 | December 31, 2018 | |||||
Cash and cash equivalents | $ | 12,850 | $ | 12,039 | ||
Restricted cash included in current assets | 988 | 6,020 | ||||
Restricted cash included in long-term assets | 1,494 | — | ||||
Total cash, cash equivalents, and restricted cash shown in the Consolidated Statements of Cash Flows | $ | 15,332 | $ | 18,059 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Air Pollution Control | ||||||||||||
Technology solutions | $ | 1,191 | $ | 10,202 | $ | 9,727 | $ | 25,516 | ||||
Spare parts | 299 | 334 | 832 | 863 | ||||||||
Ancillary revenue | 326 | 346 | 1,849 | 1,493 | ||||||||
Total Air Pollution Control Technology revenues | 1,816 | 10,882 | 12,408 | 27,872 | ||||||||
FUEL CHEM | ||||||||||||
FUEL CHEM technology solutions | 4,636 | 5,188 | 13,147 | 12,836 | ||||||||
Total Revenues | $ | 6,452 | $ | 16,070 | $ | 25,555 | $ | 40,708 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
United States | $ | 5,727 | $ | 11,629 | $ | 22,104 | $ | 30,701 | ||||
Foreign Revenues | ||||||||||||
South America | 282 | 278 | 474 | 904 | ||||||||
Europe | 283 | 1,907 | 1,568 | 4,935 | ||||||||
Asia | 160 | 2,256 | 1,409 | 4,168 | ||||||||
Total Foreign Revenues | 725 | 4,441 | 3,451 | 10,007 | ||||||||
Total Revenues | $ | 6,452 | $ | 16,070 | $ | 25,555 | $ | 40,708 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Products transferred at a point in time | $ | 5,261 | $ | 5,868 | $ | 15,828 | $ | 15,192 | ||||
Products and services transferred over time | 1,191 | 10,202 | 9,727 | 25,516 | ||||||||
Total Revenues | $ | 6,452 | $ | 16,070 | $ | 25,555 | $ | 40,708 |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Trade receivables | $ | 7,563 | $ | 14,261 | |||
Unbilled receivables | 1,589 | 5,540 | |||||
Insurance proceeds receivable (Note 14) | 1,991 | — | |||||
Other short-term receivables | 156 | 9 | |||||
Allowance for doubtful accounts | (1,175 | ) | (1,411 | ) | |||
Total accounts receivable | $ | 10,124 | $ | 18,399 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Total revenues | $ | — | $ | 1,066 | $ | 311 | $ | 2,406 | ||||
Net loss | (80 | ) | (435 | ) | (1,469 | ) | (1,588 | ) |
As of | ||||||
September 30, 2019 | December 31, 2018 | |||||
Total assets | $ | 4,308 | $ | 8,546 | ||
Total liabilities | (266 | ) | (2,953 | ) | ||
Total net assets | $ | 4,042 | $ | 5,593 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Restructuring liability at beginning of period | $ | 155 | $ | 188 | $ | 65 | $ | 391 | ||||
Amounts expensed | — | — | 625 | — | ||||||||
Amounts paid | (155 | ) | (93 | ) | (690 | ) | (296 | ) | ||||
Restructuring liability at end of period | $ | — | $ | 95 | $ | — | $ | 95 |
Three months ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Foreign currency translation | ||||||||||||
Balance at beginning of period | $ | (1,224 | ) | $ | (950 | ) | $ | (1,285 | ) | $ | (772 | ) |
Other comprehensive loss: | ||||||||||||
Foreign currency translation adjustments (1) | (337 | ) | (263 | ) | (276 | ) | (441 | ) | ||||
Balance at end of period | $ | (1,561 | ) | $ | (1,213 | ) | $ | (1,561 | ) | $ | (1,213 | ) |
Available-for-sale marketable securities | ||||||||||||
Balance at beginning of period | $ | — | $ | 1 | $ | — | $ | 4 | ||||
Other comprehensive income: | ||||||||||||
Net unrealized holding loss (2) | — | — | — | (3 | ) | |||||||
Balance at end of period | $ | — | $ | 1 | $ | — | $ | 1 | ||||
Total accumulated other comprehensive loss | $ | (1,561 | ) | $ | (1,212 | ) | $ | (1,561 | ) | $ | (1,212 | ) |
(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 September 30, | Nine Months Ended September 30, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Basic weighted-average shares | 24,187,000 | 24,171,000 | 24,183,000 | 24,162,000 | ||||
Conversion of unsecured loan notes | — | — | — | — | ||||
Unexercised options and unvested RSUs | — | 417,000 | — | — | ||||
Diluted weighted-average shares | 24,187,000 | 24,588,000 | 24,183,000 | 24,162,000 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||
Stock options and restricted stock units, net of forfeited | $ | 138 | $ | 97 | $ | 357 | $ | 135 | ||||
Tax benefit of stock-based compensation expense | — | — | — | — | ||||||||
After-tax effect of stock-based compensation | $ | 138 | $ | 97 | $ | 357 | $ | 135 |
Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||
Outstanding on January 1, 2019 | 932,500 | $ | 4.68 | ||||||
Granted | — | — | |||||||
Exercised | — | — | |||||||
Expired or forfeited | (185,000 | ) | 10.14 | ||||||
Outstanding on September 30, 2019 | 747,500 | $ | 3.33 | 4.98 | $ | 4 | |||
Exercisable on September 30, 2019 | 747,500 | $ | 3.33 | 4.98 | $ | 4 |
Shares | Weighted Average Grant Date Fair Value | ||||
Unvested restricted stock units at January 1, 2019 | 1,110,277 | $ | 1.21 | ||
Granted | 228,135 | 1.52 | |||
Forfeited | — | — | |||
Vested | (17,777 | ) | 1.59 | ||
Unvested restricted stock units at September 30, 2019 | 1,320,635 | $ | 1.26 |
• | 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. |
Three months ended September 30, 2019 | Air Pollution Control Segment | FUEL CHEM Segment | Other | Total | ||||||||
Revenues from external customers | $ | 1,816 | $ | 4,636 | $ | — | $ | 6,452 | ||||
Cost of sales | (1,197 | ) | (2,366 | ) | — | (3,563 | ) | |||||
Gross margin | 619 | 2,270 | — | 2,889 | ||||||||
Selling, general and administrative | — | — | (3,822 | ) | (3,822 | ) | ||||||
Research and development | — | — | (352 | ) | (352 | ) | ||||||
Intangible assets abandonment | — | — | (76 | ) | (76 | ) | ||||||
Operating income (loss) from continuing operations | $ | 619 | $ | 2,270 | $ | (4,250 | ) | $ | (1,361 | ) |
Three months ended September 30, 2018 | Air Pollution Control Segment | FUEL CHEM Segment | Other | Total | ||||||||
Revenues from external customers | $ | 10,882 | $ | 5,188 | $ | — | $ | 16,070 | ||||
Cost of sales | (8,116 | ) | (2,538 | ) | — | (10,654 | ) | |||||
Gross margin | 2,766 | 2,650 | — | 5,416 | ||||||||
Selling, general and administrative | — | — | (4,105 | ) | (4,105 | ) | ||||||
Research and development | — | — | (265 | ) | (265 | ) | ||||||
Operating income (loss) from continuing operations | $ | 2,766 | $ | 2,650 | $ | (4,370 | ) | $ | 1,046 |
Nine months ended September 30, 2019 | Air Pollution Control Segment | FUEL CHEM Segment | Other | Total | ||||||||
Revenues from external customers | $ | 12,408 | $ | 13,147 | $ | — | $ | 25,555 | ||||
Cost of sales | (8,061 | ) | (6,693 | ) | — | (14,754 | ) | |||||
Gross margin | 4,347 | 6,454 | — | 10,801 | ||||||||
Selling, general and administrative | — | — | (12,735 | ) | (12,735 | ) | ||||||
Restructuring charge | — | — | (625 | ) | (625 | ) | ||||||
Research and development | — | — | (823 | ) | (823 | ) | ||||||
Intangible assets abandonment | (127 | ) | (127 | ) | ||||||||
Operating income (loss) from continuing operations | $ | 4,347 | $ | 6,454 | $ | (14,310 | ) | $ | (3,509 | ) |
Nine months ended September 30, 2018 | Air Pollution Control Segment | FUEL CHEM Segment | Other | Total | ||||||||
Revenues from external customers | $ | 27,872 | $ | 12,836 | $ | — | $ | 40,708 | ||||
Cost of sales | (20,040 | ) | (6,505 | ) | — | (26,545 | ) | |||||
Gross margin | 7,832 | 6,331 | — | 14,163 | ||||||||
Selling, general and administrative | — | — | (13,789 | ) | (13,789 | ) | ||||||
Research and development | — | — | (814 | ) | (814 | ) | ||||||
Intangible assets abandonment | — | — | (317 | ) | (317 | ) | ||||||
Operating income (loss) from continuing operations | $ | 7,832 | $ | 6,331 | $ | (14,920 | ) | $ | (757 | ) |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Revenues: | ||||||||
United States | 5,727 | 11,629 | 22,104 | 30,701 | ||||
Foreign | 725 | 4,441 | 3,451 | 10,007 | ||||
6,452 | 16,070 | 25,555 | 40,708 |
September 30, 2019 | December 31, 2018 | |||||
Assets: | ||||||
United States | $ | 29,437 | $ | 36,784 | ||
Foreign | 8,442 | 14,935 | ||||
$ | 37,879 | $ | 51,719 |
Balance at December 31, 2018 | Adjustments Upon Adoption of ASC 842 | Balance at January 1, 2019 | |||||||
Assets | |||||||||
Right-of-use operating lease assets | $ | — | $ | 1,592 | $ | 1,592 | |||
Liabilities | |||||||||
Other accrued liabilities | 6,099 | (22 | ) | 6,077 | |||||
Operating lease liabilities - current | — | 650 | 650 | ||||||
Operating lease liabilities - non-current | — | 942 | 942 | ||||||
Equity | |||||||||
Accumulated deficit | (102,495 | ) | 22 | (102,473 | ) |
For the Three Months ended September 30, 2019 | For the Nine Months ended September 30, 2019 | |||||
Operating lease cost | $ | 171 | $ | 514 | ||
Short-term lease cost | 1 | 135 | ||||
Total lease cost | $ | 172 | $ | 649 |
Year Ending December 31, | Operating Leases | ||
2019 (excluding the nine months ended September 30, 2019) | $ | 160 | |
2020 | 310 | ||
2021 | 218 | ||
2022 | 165 | ||
2023 | 152 | ||
Thereafter | 196 | ||
Total lease payments | $ | 1,201 | |
Less imputed interest | (110 | ) | |
Total | $ | 1,091 |
Operating lease liabilities - current | $ | 376 | |
Operating lease liabilities - non-current | 715 | ||
Total operating lease liabilities | $ | 1,091 |
For the Three Months ended September 30, 2019 | For the Nine Months ended September 30, 2019 | |||||
Cash paid for amounts included in the measurement of lease liabilities | $ | 162 | $ | 505 | ||
Leased assets obtained in exchange for operating lease liabilities | 154 | 482 |
As of | |||||||
September 30, 2019 | December 31, 2018 | ||||||
Contract liabilities (Note 3) | $ | 682 | $ | 1,234 | |||
Accrued remediation contingency (Note 14) | 760 | — | |||||
Other accrued liabilities | 977 | 4,865 | |||||
Total other accrued liabilities | $ | 2,419 | $ | 6,099 |
a. | Exhibits (all filed herewith) | |
31.1 | ||
31.2 | ||
32 | ||
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: 11/13/2019 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: 11/13/2019 | By: | /s/ James M. Pach |
James M. Pach | ||
Vice President, Treasurer and Controller | ||
(Principal Financial Officer) |
Date: 11/13/2019 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: 11/13/2019 | By: | /s/ James M. Pach |
James M. Pach | ||
Vice President, Treasurer and Controller | ||
(Principal Financial Officer) |
Date: 11/13/2019 | By: | /s/ Vincent J. Arnone |
Vincent J. Arnone | ||
President and Chief Executive Officer | ||
(Principal Executive Officer) |
Date: 11/13/2019 | By: | /s/ James M. Pach |
James M. Pach | ||
Vice President, Treasurer and Controller | ||
(Principal Financial Officer) |
Debt Financing |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
Debt Financing | Debt Financing On June 19, 2019, the Company entered into a Cash Collateral Security agreement with BMO Harris Bank, N.A. (the BMO Harris agreement) to use for the sole purpose of issuing standby letters of credit. The BMO Harris agreement requires us to pledge as cash collateral 105% of the aggregate face amount of outstanding standby letters of credit. The Company pays 250 basis points on the face values of outstanding letters of credit. There are no financial covenants set forth in the BMO Harris agreement. At September 30, 2019, the Company had outstanding standby letters of credit totaling approximately $2,361 under the BMO Harris agreement. As of September 30, 2019, the Company held $2,482 in a separate restricted use designated BMO Harris Bank N.A. deposit account. Fuel Tech is committed to reimbursing the issuing bank for any payments made by the bank under these instruments. In connection with the transition to BMO Harris Bank N.A., the Company canceled its U.S. Domestic credit facility with JPMorgan Chase Bank, N.A. effective on September 25, 2019. |
Accumulated Other Comprehensive Loss |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
|
Summary of Significant Accounting Policies |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Restricted cash Restricted cash as of September 30, 2019 represents funds that are restricted to satisfy any amount borrowed against the Company's Cash Collateral Security agreement with BMO Harris Bank N.A. The balance of restricted cash totaling $2,482 is comprised of $988 in current assets relating to existing standby letters of credit with varying maturity dates and expire no later than September 30, 2020 and $1,494 in long-term assets will remain through the expiration dates of the underlying standby letter of credits (the latest maturity date is February 1, 2023) with BMO Harris Bank N.A. Refer to Note 10 Debt Financing for further information on the Cash Collateral Security agreement with BMO Harris Bank N.A. The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheet that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows:
Leases On January 1, 2019, we adopted ASC 842 using the modified retrospective method outlined in ASU 2018-11, “Leases (Topic 842) Targeted Improvements.” Refer to Note 12 for further details regarding the effect of adoption. We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use ("ROU") operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which we elected the practical expedient to not separate lease and non-lease components for the majority of our leases. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We also elected the practical expedient to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. |
General |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
General | 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 and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year ending December 31, 2019. 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, 2018 as filed with the Securities and Exchange Commission. |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2019 |
Oct. 31, 2019 |
|
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 | 24,186,824 | |
Amendment Flag | false | |
Entity Central Index Key | 0000846913 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus (Q1,Q2,Q3,FY) | Q3 |
Business Segment and Geographic Financial Data (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Information about reporting segment net sales and gross margin from continuing operations 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 |
|
Condensed Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Allowance for doubtful accounts | $ 1,175 | $ 1,411 |
Accumulated depreciation | 25,993 | 26,528 |
Accumulated amortization | $ 6,611 | $ 6,608 |
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) | 24,843,668 | 24,825,891 |
Common stock outstanding (in shares) | 24,186,824 | 24,170,585 |
Revenue - Additional Information (Details) unit in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | |||
---|---|---|---|---|---|
Sep. 30, 2019
USD ($)
contract
|
Sep. 30, 2018
USD ($)
|
Sep. 30, 2019
USD ($)
unit
contract
|
Sep. 30, 2018
USD ($)
|
Dec. 31, 2018
USD ($)
contract
|
|
Revenue from Contract with Customer [Abstract] | |||||
Number of units installed (over) | unit | 1 | ||||
Unbilled receivables, current | $ 1,589 | $ 1,589 | $ 5,540 | ||
Billings in excess of cost, current | 682 | 682 | $ 1,234 | ||
Revenue recognized, included in contract liability balance | $ 302 | $ 7 | $ 1,059 | $ 2,165 | |
Number of contracts identified as loss contracts | contract | 6 | 6 | 5 | ||
Provision for losses on contracts | $ 74 | $ 74 | $ 123 |
Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements | Leases On January 1, 2019, we adopted ASC 842 using the modified retrospective method outlined in ASU 2018-11, “Leases (Topic 842) Targeted Improvements.” Refer to Note 12 for further details regarding the effect of adoption. We determine if an arrangement is a lease at inception. Operating leases are included in right-of-use ("ROU") operating lease assets, operating lease liabilities - current, and operating lease liabilities - non-current on our Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which we elected the practical expedient to not separate lease and non-lease components for the majority of our leases. For certain equipment leases, such as vehicles, we account for the lease and non-lease components as a single lease component. We also elected the practical expedient to keep leases with an initial term of 12 months or less off of the consolidated balance sheet. |
Revenue Recognition | The Company recognizes revenue when control of the promised goods or services is transferred to our customers, in amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Fuel Tech’s sales of products to customers represent single performance obligations. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. We generally expense sales commissions on a ratable basis when incurred because the amortization period would have been one year or less. These costs are recorded within selling, general and administrative expenses within the Condensed Consolidated Statements of Operations. FUEL CHEM Revenues from the sale of chemical products are recognized when control transfers to customer upon shipment or delivery of the product based on the applicable shipping terms. We generally recognize revenue for these arrangements at a point in time based on our evaluation of when the customer obtains control of the promised goods or services. Air Pollution Control Technology Fuel Tech’s APC contracts are typically six to eighteen 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 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. Since control transfers over time, revenue is recognized based on the extent of progress towards completion of the single performance obligation. Fuel Tech uses the cost-to-cost input measure of progress for our contracts since it best depicts the transfer of assets to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost input measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues are recorded proportionally as costs are incurred. Costs to fulfill include all internal and external engineering costs, equipment charges, inbound and outbound freight expenses, internal and site transfer costs, installation charges, purchasing and receiving costs, inspection costs, warehousing costs, project personnel travel expenses and other direct and indirect expenses specifically identified as project- or product-line related, as appropriate (e.g. test equipment depreciation and certain insurance expenses). 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. |
Contingencies |
9 Months Ended |
---|---|
Sep. 30, 2019 | |
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. From time to time we are involved in litigation with respect to matters arising from the ordinary conduct of our business. In the opinion of management, based upon presently available information, either adequate provision for anticipated costs have been accrued or the ultimate anticipated costs will not materially affect our consolidated financial position, results of operations, or cash flows. We do not believe we have any pending loss contingencies that are probable or reasonably possible of having a material impact on our consolidated financial position, results of operations or cash flows. During the fourth quarter of 2018, the Company was notified of certain non-conformance issues with a U.S. customer associated with equipment that requires remedy under the warranty provision of the contract. The Company is in the process of remedying the non-conformance issues. During the first quarter of 2019, the Company filed a notice of claim with our insurance carrier and received a confirmation of insurance coverage. As a result, the company recorded $973 as expected insurance proceeds from our insurance carrier and $1,223 (including the insurance policy deductible of $250) as an accrued liability associated with the remedy of the non-conformance issues identified with our customer for the three months ended March 31, 2019. During the second quarter of 2019, we revised our claim estimate with our insurance carrier and recorded an additional $1,005 as expected insurance proceeds from our insurance carrier and an additional $1,005 as an accrued liability associated with the completion of the non-conformance issues for the three months ended June 30, 2019. As of September 30, 2019, we have total receivables from the insurance carrier of $1,991 in the accounts receivable line of the Consolidated Balance Sheets and a total accrued liability associated with the completion of the non-conformance issues of $760 in the other accrued liabilities line of the Consolidated Balance Sheets. The Company recorded the amount due from our insurance carrier as our insurance coverage and the terms are not in dispute and the claim submitted is consistent with the terms of insurance coverage provided. The Company currently has $500 of accounts receivable which is past due associated with this project. Upon satisfactory completion of non-conformance issues identified with the customer, the Company expects to collect the remaining accounts receivable due from the customer. 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. There was no change in the warranty liability balance during the nine months ended September 30, 2019 and 2018. The warranty liability balance was $159 at September 30, 2019 and 2018. |
Treasury Stock (Details) - USD ($) $ in Thousands |
Sep. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Equity [Abstract] | ||
Treasury stock (in shares) | 656,844,000 | 655,306,000 |
Cost of common stock held in treasury | $ 1,486 | $ 1,484 |
Accrued Liabilities (Details) - USD ($) |
Sep. 30, 2019 |
Mar. 31, 2019 |
Jan. 01, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Payables and Accruals [Abstract] | ||||
Contract liabilities (Note 3) | $ 682,000 | $ 1,234,000 | ||
Accrued remediation contingency (Note 14) | 760,000 | $ 1,223,000 | 0 | |
Other accrued liabilities | 977,000 | 4,865,000 | ||
Total other accrued liabilities | $ 2,419,000 | $ 6,077,000 | $ 6,099,000 |
Leases - Lease Cost (Details) $ in Thousands |
3 Months Ended | 9 Months Ended |
---|---|---|
Sep. 30, 2019
USD ($)
|
Sep. 30, 2019
USD ($)
lease_arrangement
|
|
Lessee, Lease, Description [Line Items] | ||
Number of lease arrangements | lease_arrangement | 9 | |
Operating lease cost | $ 171 | $ 514 |
Short-term lease cost | 1 | 135 |
Total lease cost | $ 172 | $ 649 |
Weighted average remaining lease term | 4 years 4 months | 4 years 4 months |
Weighted average discount rate | 3.52% | 3.52% |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Term of lease | 1 year | 1 year |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Term of lease | 6 years | 6 years |
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