Ladies and gentlemen, thank you for standing by and welcome to Calgon Carbon's Corporation’s Fourth Quarter 2015 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Dan Crookshank, Director of Investor Relations. Please go ahead, sir.

Thank you very much, Lori. Good morning everyone. Thank you for joining us for today's conference call. Our main speakers today are Calgon Carbon's Chairman, President and Chief Executive Officer Randy Dearth; our Senior Vice President and Chief Financial Officer Bob Fortwangler, Executive Vice President and Leader of our Core Carbon and Services Business, Jim Coccagno and Executive Vice President and Leader of our Advanced Materials Manufacturing and Equipment Business, Steve Schott. Also with us today by telephone and available for questions later on is our Executive Vice President and Chief Operating Officer, Bob O'Brien, who as previously announced will be retiring on April 1st. Before we begin, I would like to remind you that today's presentation as well as additional comments that Calgon Carbon Executives will make during the Q&A portion of this call may contain statements that are forward-looking. Forward-looking statements are subject to risks and uncertainties and Calgon Carbon's actual results may differ materially from those expressed in such forward-looking statements. A list of factors that could affect Calgon Carbon's actual results can be found in the news release that we issued earlier this morning and are discussed more fully in the reports we filed with the Securities and Exchange Commission, particularly in our last Annual Report on Form 10-K. These filings, as well as this morning's news release, can also be found on the Investor Relations page of our website. With that, I will now turn it over to Randy for his initial remarks.

Thanks, Dan, and good morning to everyone, and thank you for joining us this morning. Given our internal organization that went into effect on January 1st, let me briefly outline the flow for our remarks. After I kick it off with a few comments on our results for the quarter and the full year, we’ll then proceed to Bob Fortwangler for the fourth quarter financial review. Then we’re going to move onto Jim and Steve to discuss developments in each of their respective businesses. We’ve then going to get back to Bob to provide our outlook for the first quarter and I’ll wrap up with some thoughts on 2016 and our strategic priorities and objectives as we move forward. So let’s start with our fourth quarter results. Given the economic conditions that continue to prevail including continued slowing in the industrial production and overall global economic growth, we reported revenues of $130.9 million and a pre-depreciation and amortization gross margin of 33.6%, both in line with the expectations we provided at the end of the last quarter. In general, market conditions were soft and our powdered activated carbon revenues for Mercury removal were seasonally lower. We did see however, some pockets of strength in the fourth quarter that our team will touch on later. If we look at the full year, we faced a combination of market, regulatory and economic challenges that negatively impacted our ability to perform to our initial full year expectations. Despite these challenges, 2015 was highlighted by a number of notable achievements that we believe combines, position us to deliver on our long term priorities to generate profitable sales growth and to fully participate in new and developing markets worldwide. Let me start by briefly recapping several of the challenges. First, the stronger U.S. dollar which…

Thank you Randy, good morning everyone. Total sales for the fourth quarter of 2015 were in line with our outlook of $130.9 million. This represents a decrease of $9.7 million from last year’s fourth quarter. The strong U.S. dollar negatively impacted our sales in the current quarter by $3.9 million. Excluding the impact of translation, sales declined $5.8 million or 4%. Regarding our segments, sales in the activated carbon and service segment decreased $7.3 million to $118.9 million in the fourth quarter of 2015 compared to 2014 fourth quarter, slightly more than half of the decline or $3.7 million related to currency translation. Excluding this impact, the segment sales decreased by $3.6 million or 3%. This decline was mainly due to a non-repeating large initial municipal water fill in Asia that incurred in last year’s fourth quarter, as well as lower industrial process market sales, primarily in the Americas and Europe and lower food market and respirator product sales in the Americas. Partially offsetting this decline were higher environmental water and Environmental Air market sales in the Americas. In the equipment segment, sales decreased $2.9 million to $9.3 million in the fourth quarter of 2015 versus a comparable 2014 period primarily due to lower ballast water treatment system sales and a $600,000 impact from a cancellation of a carbon equipment contract. Sales in the consumer segment increased $400,000 to $2.7 million in the fourth quarter of 2015 as compared to last year’s fourth quarter, primarily due to higher sales of carbon cloth for both medical and defense applications. Consolidated gross profit before depreciation and amortization as a percentage of net sales was in line with our outlook at 33.6% in the fourth quarter of 2015 as compared to 35.9% in the fourth quarter of 2014. The negative impact of the…

Thank you, Bob. Now we’ll hear from Jim to discuss operational developments in the core, carbon and service business.

Thanks, Dan. Let me start with our North American Municipal water business. Here, we had sequentially stronger fourth quarter as we expected and finished the year with sales that were just slightly below last year. We had some challenges with our expected GAC reactivation and exchange volumes in the middle of 2015 relating to the implications of wet weather conditions in the Eastern United States as well as the impact of water restrictions in the Western United States. Leading up to this as you know, we’ve had great success over the last five years at converting more and more municipalities to the use of GAC for the water treatment needs particularly as many municipalities choose GAC as their treatment method of choice or complying with Disinfection Byproduct Stage 2 Regulations. And just as you would expect they are always looking for ways to maximize the life of carbon and reduce the total cost of treatment as they would with any other resources they employ in their operations. Based on our ongoing interactions with our growing and more experienced customer base, we believe this behavior was also a factor in the lower than expected reactivation and exchange activity we experienced in 2015. In addition to the multiple benefits the GAC provide is a water treatment and protection solution. Our experience in 2015 provides us with valuable data points to use going forward to demonstrate that the total cost of a complete GAC solution including customer reactivation is even more economical than previously thought. We believe the use of this favorable information will enhance our ability to continue to convert more of the approximately 8,000 large size municipal water systems in North America to adopt the use of GAC with customer reactivation services for their water treatment needs. In 2015 we place…

Thank you, Jim. Now we’ll go to Steve for comments on developments and the advanced materials manufacturing and equipment businesses.

Thanks, Dan. Let me start with developments surrounding our powered activated and carbon products with the mercury removal market in North America. With the regulatory uncertainty regarding MATS now seemingly over the effected electric utilities are focused on compliance with MATS. In spite of the uncertainty that persisted through much of 2015 we nevertheless doubled our full year Mercury removal product sales from $28.7 million in 2014 and $58.2 million in 2015. Contributing to this growth was our ability to capture new business. We added 32 electric generating units as new customers and of our 60 plus units serve more than half of them are using our advanced generation products. As for our current estimates of the overall market size we believe that lower estimated usage rates by generating units as well as ongoing low natural gas cost will ultimately reduce the size of the addressable market through range of 290 million to 400 million pound of standard product annually, and value of this equate to $245 million to $270 million or an approximate 10% reduction from our prior estimate. Now, looking forward to 2016, we have some challenges to overcome. We recently learned that one of our largest customers that has been using one of our standard products in 2015 under a dual sourcing arrangement will shift their sourcing of these standard balanced to a competitor. This significant legacy contract exploration loss will need to fill with new business and we are well in our way to doing so. Of the volumes awarded thus far for those utilities looking to comply by the April, 2016 compliance state, we estimate winning 40% of the awarded volumes thus far. Of the remaining estimated 80 million standard point that have yet to be awarded many are represented by generating units likely used…

Thank you, Steve. Now we’ll go to Bob Fortwangler for our 2016 first quarter outlook.

Let me start with revenue. We expect our first quarter revenue to decline by 3% to 6% compared to our fourth quarter result. The sequential decline primarily due to the revenue from the significant environmental remediation project we completed in Q4 which will not repeat. This is about half of the decline. We expect slowness to continue in our industrial end market. We also expect our North American municipal water business sales to be lower in line with the trend we typically see for this business as we move from the fourth quarter of one year to the first quarter of the next. And finally based on the information shared by Steve, we expect our mercury removal sales to be relatively flat with the fourth quarter. On a positive note, we do expect to see a pickup in Japan as we execute on the new carbon pellet contracts mentioned by Jim earlier. We expect currency translation will have modest negative impact of $1 million or less as we expect to continue to operate in a relatively stronger dollar environment. We expect gross margin before depreciation and amortization to be approximately 35%. We expect depreciation and amortization expense to decline sequentially by about $1 million and for our selling, general and research related operating expense to decline sequentially by approximately $0.5 million. We expect our other income and expense in interest income and expense to be slightly higher sequentially. And finally, we expect our effective income tax rate to be in the range of 33% to 34%. I’ll turn it back to Randy for some final thoughts.

Thanks Bob. So looking back we’ve accomplished much over the past three years for reducing our costs, increasing our profitability building a solid platform from which we believe we’ll be able to deliver sustain future growth. A key component of the success is been our ongoing $50 million cost improvement program. As of the end of 2015, we have captured $35 million of the savings with the final $50 million expected to be captured approximately equally over 2016 to 2017. In effecting some of these changes aimed at improving our profitability we build our working capital and allocated the use of operating cash flow and borrowing capacity to capital growth projects. In 2016, we’ll first become more focused on cash flow generation through lowering the days sales outstanding of our receivables, reducing the aggregate level of our inventories, and spending less on growth capital with the last majored near term project out there being the Neville Island project as you’ve heard before. As we noted, we expect capital spending to be increase $50 million to $60 million in 2016. In terms of what we’re focusing on this year, we expect to further optimize our business processes in the use of the assets and particularly our new SAP system and our reactivation assets. We’re going to continue diversify and grow both in terms of our product offerings as well as through continuing to increased our penetration into new and emerging end markets and geographies. In addition, we will work to meet, maintain and build on our success in the mercury removal market and continue readying our balanced water equipment business for future growth by developing additional outsourced manufacturing arrangements. In total, we expect the combination of these efforts to generate growth in earnings, enhance our return on invested capital and create…

Well, thank you very much Randy. I truly appreciate the kind words that you have just spoken. I’m proud and thankful that I’ve been able to enjoy a long career at Calgon Carbon. Over in the years, I’ve had the opportunity to work with a very large number of fine, dedicated people and I’ve appreciated their friendship, help and support. Also I want thanks to shareholders, investors and analysts. I’ve enjoyed working with you and for you. I will miss it. And now it’s a good time for me to leave, as I’m confident that current management teams and employees are well positioned to lead the company to ever greater success. I look forward to transitioning from a participant on these quarterly calls to becoming an active listener. Thank you.

Bob, let me say once again, congratulations on a fine career and we wish you well in your retirement. So operator we’re now ready to open it up for questions.

[Operator Instructions] Your first question comes from the line of Ben Kallo of Baird.

Hi. This is Dave Delahunt on for Ben. I was wondering if you could just add a little color about your current thoughts or any updates on what are you thinking about the impact of MATS regulation going forward?

This is Steve. We think that the MATS regulation will remain in effect and that utilities, as we know we’re all working to be ready for compliance from the April 16 compliance date. We remain ready to serve those utilities and/or anxious to work through the completion of the outstanding bids that we think will occur in the next month or two months?

Great. Thank you. And also any updates on potential capacity expansions in Pearl River specifically?

We’re cautiously going to be looking at our capacity around the globe and making adjustments to see fit, so more to come on that. But as part of our overall returning value to shareholders, its one aspect that we have of that, as we said very clearly through our dividend program and our stock buyback this past year we’ve given back 45.4 million. Obviously plants are part of that. And as I said in my comments acquisitions are part of that as well and we’re evaluating all of those.

Great. Thank you.

Your next question comes from the line of Gerry Sweeney of Roth Capital.

Good morning. Thank you for taking my call.

Hey, Gerry.

Good morning, Gerry.

So you are looking at full year 2016 low single-digit growth. I was wondering if we could maybe go over a couple points to see how you get there. Starting with the municipal program, it sounds like there are some changes in the reactivation pattern going on. People are holding their fills longer because they are getting continued acceptable rates of cleaning out of them. How much has that changed over the last couple years, the refill patterns?

Let me start with that then I’m going to turn it over to Jim. But the good news over the past few years and you’ve heard us say repeatedly we’re getting more and more customers to convert customer reactivation in municipal space, that’s the good sign. I’m going to quote our esteemed colleague, Bob O'Brien to tell us that every time somebody decides to go reactivation, on that very day they’re probably starting to think about how they can extend their life as much as they can to save money and indeed we’re seeing some of that. On the good side, the positive of this is that where customers in the past have been reluctant because the cost to go with reactivation were now showing and we’ll be able to show them that because of the shorter cycles that indeed their cost model could be a little bit less and perhaps could switch them to reactivation.

Yes, before Jim jumps in -- maybe we can also look at -- you know maybe each client as they come on board versus longer reactivation how that changes your growth view of each client or how that kind of fits into the equation. I mean that’s really -- is the general questions how it all and you know factors out at the end.

In terms of revenue, let us say that on an annualized basis we estimate about $5 million to $6 million of revenue, we give up on the top line because as you know reactivation is sold to the customer at a discount. As we said many times, bottom line margin is fine, so you know there will be -- the more customers we convert, the customer reactivation obviously that’s our goal. We are going to see the topline be negatively affected. However, our strategy is to utilize our virgin assets as much as we can, and be able to use it for the food packed products and mercury and as well as this demand comes up around the world in some of these other geographies and the more customers we convert to customer reactivation, obviously that frees up that version capacity which is so vital for us.

And that being said, our ability to convert more customers and put more GAC on line in this market we do expect incremental growth going into 2016 despite the change in reactivation patterns.

Okay, so overall growth regardless of the reactivation patterns.

Correct.

Correct.

Okay. Then just on the industrial side, what’s the magnitude of the slowdown on that front? And is there a sort of a base business that the industrial players who are going to be there have, and then there's the variable that will go around, that can shift around with more or less economic demand? I'm just curious as to how that's going to play out.

Yes, that’s exactly correct. So there is a base business and then there is more project and say economic driven business. So, we feel we are well positioned in both to continue with the base business and capitalize on the project business when it comes. You know we hope that 2015 was a low point and we are now moving forward in 2016 like we said we do expect modest growth in that area moving forward.

Okay

And Gerry, let me just add to that. You know when you look at our customer base and we don’t split it out in terms of our industrial business, but it’s pretty big for us. You know we have chemical plants that are our customers; we have refineries that are customers and multitude of industrial folks. So if their production is down, either they are not using as much carbon in their process or the waste water streams aren’t being utilized as much and that affects the use of carbon. So we are at the mercy really of how much product is being produced by our customers.

Got it. And then finally, on the mercury, then I'll jump back in the queue. Steve, can you just -- what was the -- I missed it when you listed it off. The size of the market is down. It sounds like there's a larger switchover to natural gas. Can you go through those numbers again real quick?

Yes we said Gerry, 290 million to 400 million standard pounds that the market size of 245 million to 270 million, so down about 10% from where we were for the reasons that I and you just mentioned.

Got it. And do you see that going down with natural gas staying down. It doesn't look like it's going to get any -- it's pretty cheap, it's warm weather, we have plenty of it. What's the thought process on a go-forward basis?

Well so as we look to 2016 and 2017 I think the numbers that I just presented are what we believe is reflective. And on a long term basis it will be the issues we just discussed on this call and potentially other issues that the utilities might face. I think it’s probably too early to predict on a long term basis what will happen, but I wouldn’t see the market growing much beyond what we’ll enjoy in 2017 that being the first full year of compliance by all the utilities.

Got it. Thanks. I’ll jump back in the queue, appreciate it.

Your next question comes from the line of Dan Mannes of Avondale Partners.

Hey good morning, everybody.

Hey Dan.

Thanks. First of all congrats to Bob, sorry this will be your last call. We’ve certainly enjoyed working together. Secondly, I wanted to go and had a couple of specific questions, one on mercury. You know Steve in your comments on the first quarter the tone was maybe a little more cautious than we anticipated. You know given the amount of business still yet to win and the likelihood that if there are wins you are probably going to see fills in the first quarter, are you leaving room depending on your win rate as you work your way through or you’re kind of already baking that in?

Yes we are baking that in. I think that you know perhaps we’ve been conservative maybe just a little Dan. I think its working to be about the same. It’s going to be $11 million to $12 million in revenue in the first quarter and we have the loss of the customer pursuant to the contract exploration that I mentioned. We have a customer who’s not insignificant with some outages at key plants that are affecting their take and the weather I think as you know has been unseasonably warm and that affects the generation. So factoring in all of those things we’re pretty confident with where we see the first quarter going.

And you are also lapping the fills from last year’s first quarter as well?

We are.

Okay. I’m just saying if compliance starts April 1, you would think that you’d be anyway, but Q2 is a slow usage period anyway. Secondly on UV, you know you mentioned the Coast Guard issue, you know I guess the question is, given your understanding of the way the Coast Guard’s treating UV, can UV meet their standard or does their standard need to change? I don’t know if you can give us a little bit more color on that?

I can. We certainly hope that their interpretation of the standard changes and that they accept the MPN method it’s proven, its commonly used, its accepted by the IMO, it’s accepted for drinking water use. It’s widely supported by our customers and the industry and it’s endorsed by global shipping organizations. So, we are going to certainly strive for recognition of the MPN method as being completely appropriate. Now that said, if we were relegated to needing to produce a different system that could comply with the test method, the Coast Guard seems to think is better, although we believe it’s not. We could do that, it would cost more, it would be bigger, it would be less efficient and it’s completely unnecessary.

Yes again to reiterate what Steve just said there, oh sorry….

No, you can -- I’d like to hear your commentary.

No, I was going to say that given to what Steve just said, there isn't a system out there that's type approved for U.S. Coast Guard. Let’s keep that in mind and the extensions are just up astonishing how large these extensions are they giving. As I mentioned in my remarks, I was in DC last week and you know talking to some conventional folks and letting them know that there is a 140 million gallons of ballast water being discharged in the U.S. ports each and every day and the coast guard is not moving ahead fast enough to get this problem solved. This is disturbing, and so I don’t -- I think we all agree that the story hasn’t been completely written yet, there is still more that it’s going to have to be worked out, but you know there’s a lot of bureaucracy that unfortunately surfacing.

And I know it’s only been a couple of months since Coast Guard made that decision, but has this impacted buying decisions. Are you seeing maybe a shift away from UV systems even for carriers just given that uncertainty or has that not changed you know the view point from potential buyers?

So on the good news front, we are still selling to U.S. customers who believe that the MPN method will be fixed and that right will prevail in this circumstance, certainly we’ve seen some delays where we thought we would have orders but they are waiting. I mean with the Coast Guard liberally granting extensions and the IMO not yet ratified there is no reason for ship owners to have to make a decision. So, I think when we look at our full year and we suggest it will be about the same, it really reflects now two years of applause in the market place as these regulations become either ratified or sorted out.

Got it. That’s good color. Thanks guys.

Sure. Thanks Dan.

The next question comes from the line of Steve Schwartz of First Analysis.

Well good morning, everyone.

Hi, Steve.

He, Steve.

Best wishes to you Bob on your retirement. We’re going to miss you. I guess my first question comes down to your prepared remarks around MATS. You mentioned in the 2016 market that you thought you were capturing about 40% share of what has come through, but then you made a comment about customers using chemicals for treating other pollutants. And I got the impression you were suggesting that maybe there were some people walking away from carbon. Can you clarify or add color to that for me?

Sure Steve, that’s not what I meant to imply at all. When they are treating for other acid gases and were using sodium bicarbonate trona, products of that nature, then the relative effectiveness of carbon in those environments is hindered and our advanced products were better. So certainly not walking away from carbon, hopefully just walking a lot closer to our carbon products and particularly our advance ones.

Okay, so in other words you are seeing other regulatory requirements push people towards your advanced products.

Well said, yes.

Yes, okay. And with respect to the -- this first customer in Brazil can you talk a little bit about what the application is that I presume its municipal and can you talk about you know what got you guys to close that sale. I mean was it the technology is our financial benefit, how did you gain that competitive edge?

Let me respond to that, Steve. Similar to our approach when we went into China, we have a lot of global international customers that are setting up a shop in Brazil, so our first contract actually is on the industrial side and not municipal side. This is our entrée, our strategy is to get there through these global manufacturers who know us, they know reactivation, they know our quality. And then once we get a foothold then to go after the municipal market and some of the local suite in the markets and others. You know to add to Brazil, I think we’ve said before in the call that there’s about a £90 million of market for carbon in Brazil, one that’s low quality and we believe there is a demand for the higher quality which we want to niche, find that niche and carve out for yourselves. You know in addition to that first contract, we also had 27 new first time customers, so which reinforces again the Calgon Carbon franchise, the brand and we’re very optimistic. Now unfortunately as you know the economic situation in Brazil isn’t rosy, but we’ve I’ve said before and I’ll say it again we are in this for the long haul, we’ve got a staff working, approaching these customers and I’m optimistic in the next few years that we’ll see more and more of these contracts fall into place.

Okay. That sounds good. And my last question, it’s more of just nuts and bolts around the fourth quarter. It sounds to me like you had two special items as we might consider them the 1.1 million in additional depreciation and $1.1 million tax benefit. Do I have that tally right?

Yes, this is Bob, yes you do. That is correct.

Okay, great. Thank you.

Thank you.

[Operator Instructions] Your next question comes from the line of Nick Prendergast of BB&T.

Hi, good morning. Just don't want to beat a dead horse here, but I want to make sure I am understanding the mercury commentary correctly. In the past we looked at the mercury market potentially as a $300 million opportunity. And I believe you had spoken to somewhere around a 30% market share. Now it looks like you are kind of cutting back on the total market size -- maybe call it, say, $260 million, somewhere at the midpoint there. But now it sounds like you are actually getting more than that 30% share at 40%. Is that correct, first of all?

Well that 40% was in reference strictly to the awards that we’ve been able to secure as it relates to the April 2016 compliance state and to be fair, there’s many words still out there. So I was really only touting our success initially, to this point, in respect of the April 2016 award process. Overall, we still expect to be at least 30% overall of the total market size which say in 2017 if we infact achieve that target or do better than we should be enjoying revenues that are in the neighbourhood of $75 million to $80 million.

$75 million to $80 million and you are doing $58 million right now?

That’s correct. We did $58 million last year and for the moment that’s what we see this year at least $58 million, correct.

And so the delta would be the incremental in 2016 and 2017 or it’s all in 2016?

It would be the end state that we would have, that we would enjoy for the full year 2017.

Got it, got it. 2017. Okay. So this is going to be spread out over 2016 and 2017, then. Okay. All right, fair enough. Thank you very much.

Thank you. I’ll now return the call to Dan Crookshank for any additional or closing remarks.

Thank you very much Lori. I just wanted our audience to know that we will be available for follow up calls as the day goes on. I’ll turn it back to you Lori to end the call.

Thank you. That does conclude today’s Calgon Carbon Corporation fourth quarter 2015 earnings conference call. You may now disconnect.