Good morning. My name is Torika, and I will be your conference operator today. At this time, I would like to welcome everyone to the CECO Environmental Corporation Fourth Quarter and Full Year 2013 Earnings Call. [Operator Instructions] Thank you. I will now turn the call over to your host, Mr. Sharon (sic) [Shawn] Severson of Blueshirt Group, CECO Investor Relations firm. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us on CECO Environmental's conference call and webcast to discuss the financial results for the 3 months and full year ended December 31, 2013. On the call with me today are Jeff Lang, President and CEO; Neal Murphy, Chief Financial Officer; and Ed Prajzner, our incoming CFO as announced in this morning's press release. Jeff and Neal will be reviewing the quarter and full year results and will also provide an update on the company's strategy and outlook. Please note the new addition to traditional reported GAAP earnings. We provide non-GAAP financial measures in our press release today to enable better assessment of the ongoing nature of CECO's core operations. Jeff Lang's comments will primarily focus on these non-GAAP financial measures, and Neal will address differences between GAAP and non-GAAP financial measures in his remarks. Following our prepared remarks, we will open the call to questions. This call is being webcast and can be accessed at CECO's website at cecoenviro.com. The webcast will be posted on CECO's website for replay approximately 2 hours following the end of this call. The replay will stay on the site for on-demand review over the next several months. Before we begin, I would like to caution investors regarding forward-looking statements. Any statements made in today's presentation that are not based on historical fact are forward-looking statements. Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties. Actual future results may vary materially from those expressed or implied by the forward-looking statements. We encourage you to read the risks described in our SEC filings, including our Annual Report on Form 10-K for the year ended December 31, 2012. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that we make here today, whether as a result of new information, future events or otherwise. Today's presentation will also include references to certain non-GAAP financial measures. We have reconciled the comparable GAAP and non-GAAP numbers in today's press release. And with that, I'd like to turn it over, turn the call over to Jeff to begin the discussion.

Thank you, Shawn. Good morning, everyone. We appreciate your continuing interest in CECO Environmental as we continue building a premiere company. I'll provide some financial review and then Neal Murphy, our Chief Financial Officer, will discuss financial results in more detail. Also, Ed Prajzner, our new CFO, is joining us as well. I will then close with an update on the businesses and some other strategic highlights for the quarter, including the announcements of our exciting management changes. Let's begin with a few financial highlights for the quarter. Revenue in the quarter increased $34 million to almost $70 million, or 100% better than the previous year. Recent acquisitions contributed to roughly $34 million to our quarter. All acquisitions are 100% fully integrated, and we're now operating as 1 CECO team. Bookings were almost $67 million for the quarter versus $26 million in 2012, an increase of roughly 150%. Our backlog remains strong, reaching $98.5 million in the quarter, up from $60 million in 2012, and essentially flat with Q3 of $100 million. Non-GAAP gross profit in fourth quarter increased $22 million from $11 million in the prior year. We basically doubled our gross profit dollars. Non-GAAP operating income increased to $9.4 million in the quarter, up from $4.5 million in the same period in 2012. And operating margins reached 13.6%, a new high for CECO as compared to 12.8% in 2012. And we're pretty excited about the 13.6% operating margins in the quarter. We think it symbolizes the Met-Pro-CECO integration has been a success, and we're starting to see some of the benefits from that. Non-GAAP net income increased to $6.8 million in the quarter compared to $3.1 million last year, and non-GAAP net income per diluted increased to $0.26 in 2013 compared to $0.18, a 44% increase. In regards…

Great. Thank you, Jeff, and good morning everyone. As mentioned earlier, I will highlight both GAAP and non-GAAP performance for the quarter. Non-GAAP adjustments include acquisitions and integration expenses, the impact of acquisition asset valuation adjustments on the income statement, which results in higher levels of depreciation and amortization and earn-out payments to the principals awarding. The $1 million legal reserve has also been established during the quarter with regard to legacy legal matters and has been excluded in calculating non-GAAP income. Our non-GAAP financial presentation is intended to provide better trend analysis and assessment of core business performance. Let's now turn to Q4. Revenue in the quarter was $68.7 million, a $34.4 million or just over 100% improvement from the same period last year. Recent acquisitions of Adwest, Aarding and Met-Pro contributed $34.3 million of revenue for the quarter. Pro forma revenue for the third quarter, assuming Met-Pro had been acquired as of the beginning of that quarter, was $65 million. So our Q4 shows some nice quarter-over-quarter growth. Gross margin was 31.3% versus 32.6% in Q4 last year. Non-GAAP gross margin adjusted for inventory valuation and property, plant and equipment valuation cost was 32.4%, essentially flat with a very strong Q4 last year. Non-GAAP gross margin was up strongly from 30.8% in the third quarter of this year. And we expect that the upward trend that we saw in the fourth quarter will continue into 2014 as we have a full year of Met-Pro results. Selling and administrative expense, excluding deal costs, earnout, legal reserves and other non-GAAP expenses set forth in our press release today, increased $6.8 million to $13.1 million and decreased as a percentage of revenue to just under 19% compared to 19.5% last year. As Jeff mentioned earlier, this SG&A percentage reduction was achieved…

Thank you, Neal and Jeff. Good morning, everyone. I am extremely pleased to become CECO's CFO. I've been with CECO through the transformative merger with Met-Pro over the past 7 months now. And I'm very excited about the future for CECO. I look forward to working with Jeff and the leadership team and the board in the future. Thank you, Jeff, Neal?

And with that, I'd like to turn the call back to Jeff before we open it up for questions.

Thank you, Neal and Ed. We are continuing to implement our strategic initiatives and build a great foundation to create more shareholder value in the future. We have an even broader, stronger portfolio today than we did a year ago, and I'm very impressed with the integration of our recent acquisitions. We still have significant opportunity in front of us to create more shareholder value. And I want to highlight some of the key initiatives for 2014 and beyond. As we discussed in Q3, we have simplified and streamlined our organization and business into 3 core strategic technologies: one, air pollution control; two, energy; and three, fluid handling and filtration. To facilitate the new structure, we have made a number of management leadership enhancements as outlined in our press release. Ed Prajzner, Gennaro D’Alterio and Brent Becker are strong emerging talents -- strong emerging leadership talents within the CECO organization, which will be additive to our existing senior leadership team. I'm very proud of what we accomplished in 2013 that we have successfully doubled the size of our business and our profitability, but even more excited about our future over the next few years. We now have a substantial platform which should take our business to even higher levels and reach our target aspiration of $100 million in EBITDA. I would like to take a couple of minutes to outline some of the key initiatives we are focusing on and our 3-year plan to create shareholder value and then we'll open up for any questions you may have. First, operational excellence. This is a never-ending meticulous effort to enable increased margins over the next few years. We expect this will continue to drive margins growth and operational operating margins in the neighborhood of 15% and provide a structural disciplined process…

[Operator Instructions] And your first question is from Rob Stone of Cowen.

My first question, Jeff, is with respect to the operating margin goal. I think going from 13.6% to 15% in future years, do you expect that to come principally from higher gross margins or further operating synergies? And how should we think about that for this year for instance?

Well, growing operating margins is something we're all very focused on, and quite honestly, the general managers are compensated on. But the answer is the first part of that will be the OneCeco air pollution control technology growth, I think, has a lot of value creation over the next couple of years. We've got a long way to go to create -- to sell more products and to combine the solution of the various technologies. We've made a lot of headway there, but we're not even 50% of where we need to be in terms of growing the OneCeco. I do think there's a little bit of synergies left, a little bit of streamlining. But I also think we'll see some uptick in gross profit. And with the sales excellence driving global revenue, we should see a little bit of operating leverage on the P&L. So those 3 or 4 things will probably be the drivers of achieving our operating margin aspirations, Rob.

My second question is with respect to bookings and backlog. Relatively flat, Q3 versus Q4, but you mentioned trends have been improving. Can you provide any more color on how bookings are proceeding this quarter and from which industries or geographies?

We're starting the year pretty solid with bookings. We picked up some nice momentum in Q4. Q4 bookings were up, both with the acquisition bookings and legacy CECO bookings, so we're pretty pleased with Q4 bookings, and that carried forward into Q1 of this year. China, we picked up some nice bookings in China. Our parts activity and our contract services business picked up some nice business. And our quotation activities today are slightly stronger than they were in Q4. But I would say the activity is in contract services, our cyclone business in China. But I'm pretty encouraged by all segments, Rob.

And your next question comes from the line of Sean Hannan of Needham & Company.

So I have number of questions here. I'm going to ask something quickly for Neal, as well as then for Jeff. Neal, I'm sorry, you had mentioned a few factors to consider where we should start our base line as we think about revenues for '14. Can you repeat that for us? And then, Jeff, on an aggregate level, I don't think that we saw organic growth in terms of revenues. You obviously targeted that in your key initiatives, but can you perhaps call out at a business level, what may have had organic growth in the quarter versus what contracted? And maybe additional commentary for the puts and takes of that and then I've got a follow-up to that.

Sure, go ahead Neal.

So let me start, Shawn. So the base line, if you look at our pro forma 2013 revenues carving out a noncore water treatment chemicals business that we sold at the very beginning in 2014, that the pro forma revenue would be $260 million, so that's sort of the 12 month baseline for 2013. And as I mentioned, we've got some nice momentum with just under $69 million of Q4 sales. But for modeling purposes, the $260 million is a good baseline number.

Okay, thanks. And then Jeff, I don't know if you have any comments around that organic question.

Yes, I think the Q4 was quite strong for us. We're pretty pleased with Q4. I think we have a -- we're pretty excited about 2014. But regarding the quarter, our energy sector, EFFOX and Aarding had a very good quarter. Principally, EFFOX had a record year. Our cyclone technology group, which is Fisher-Klosterman and Duall had a great quarter and a very good year, so they had a big pickup in Q4. And our parts and ducting business did quite nicely in Q4. And then China, China had a strong Q4 as well. So those are the things that, from an uptick in Q4, carried us.

Okay. And then as you identify this in the key initiatives, can you elaborate a little bit more for us for how you expect to drive your organic growth? Is this really in capturing what may materialize in broader growth within the environment or in the absence of what we should see as a broader pickup in that environment? Is there really more of a share capture and better penetration that you expect or anticipate, any color around that would be helpful?

Yes, sure. Growing our organic growth is probably our top priority. We spent a few years doing some pretty good things on the operational excellence side. Right now, sales excellence is a priority across the organization. So every sales leader, general manager and the hundreds of sales engineers we have are very focused on pulling in more business organically. We have sales dashboards set up each week to go through them, to make sure the organization is doing all they can to capture good business globally. We've added sales capacity and some sales leadership, so that's a top priority. As part of that, the part of sales excellence is this whole OneCeco Sales Initiative we launched with the acquisition of merger. We have a dozen excellent air pollution control technologies that were being sold independently over their life. Now we're bringing those together under 1 focus, 1 roof, if you will. And that's created a whole host of activity for us. As I mentioned, over the past few months, we've created well over 150 new RFQs just on that OneCeco air pollution control technology initiative. And we've closed probably a dozen or more OneCeco air pollution control projects. And this is incremental given the CECO, Met-Pro merger. So that's a very important focus in the organization and growing organically. And I could -- I can share with you some of the dashboards and some of the metrics we use if you need that.

Okay, it's something, perhaps, I can follow-up on. Last question for the moment, and I'll jump back in the queue. You had some pushes or some order delays in -- that you had talked about from your third quarter. And I also believe some of that may have happened a little bit in the fourth quarter, or at least, earlier on. Can you characterize or quantify how much of that has now been realized, now that we're kind of through 2 months of the first quarter now in '14? And what are the expectations for how some of that actually either comes through if there's anything remaining.

Yes, sure, Shawn. We had a rock solid Q4. The businesses performed very well, both in bookings and in project execution and in gross profit. And there, we did message there was 3 or 4 important jobs in Q3 that got pushed into Q4, and those took place. So we finished up Q4 quite well. We pulled in a few jobs from Q3. And now we turn the page into 2014, and we start our bookings and billings and our sales excellence. So yes, there was a few jobs that carried into Q4, but we're now finished with that. And with $100 million in backlog, we're pretty excited of getting that process at equal to or better margins than we booked it with. And we're pretty excited about our first couple of months of bookings.

[Operator Instructions] Your next question is from Gerry Sweeney of Boenning.

A couple of quick questions, specifically about the Met-Pro side, revenue coming in about $23 million. How did -- I was curious as to how you felt about that revenue? And it seems maybe flat to down a little bit. I know it sounds like you also divested of a business line in there. Curious as to how you can get some of that business jumpstarted, up and running a little bit more, any thoughts on that?

Well, I'll say a couple of comments, and I'm sure Neal will add in. But that was Met-Pro's best quarter of the year. We're pretty excited about how they performed. Right now, we're blending the businesses together as OneCeco. We don't talk too much about Met-Pro or Aarding because the businesses are feathered together. Some of the Met-Pro businesses are integrated with the legacy CECO businesses and so forth and so on. They're part of the sales excellence. We have a good team on the field. And we're pretty excited about what we're quoting and we're booking right now. Prior to this week, we measured all the businesses' RFQs in Q1 versus Q4 and probably 3 quarters out of -- 3 quarters of them show an uptick in RFQ activity. So we're pretty excited about 2014. And I think Met-Pro is going to be a huge part of that.

I will just add, Gerry, that it's good solid revenue, profitable revenue and really, a lot of what we call, singles and doubles. The events, the big events didn't occur, but a lot of the, just the day-to-day business was very solid.

I got it, I understand that well, okay. And then on the M&A front, any area that is going to be of particular interest of the 3 new, I guess, the APC and fluid handling, et cetera?

Gerry, we're a big believer in all 3 of those segments, the air pollution control technology, globally, the energy sector and the fluid handling. All 3 of those businesses have nice runway, excellent margin expansion capabilities. And so we're looking at all 3 of those. We have 8 or 9 -- the board has 8 or 9 strict criteria for what we acquire in terms of how it fits, the accretiveness, how we can run the business, the platform. So the pipeline is full, but we have some pretty strict requirements, but the short answer is we're very committed to all 3 sectors both organic growth, sales excellence and then bolt-on accretive acquisitions.

And your next question is from the line of Rob Crystal of Goldman Sachs.

I have 2 questions. One, I guess, I was hoping you could update us if you're ahead of target or you're above your synergy target, would be the first one. And then the second one would be, I didn't quite follow the question about the baseline revenue for 2014. Was that $260 million before organic growth and/or contraction?

Rob, we believe we're well ahead of our synergy target. Obviously, we're very streamlined and very synergy focused on all acquisitions. And we hope to pick up more throughout 2014, but the bulk of it is complete. And one of the things to remember, I know we closed on the acquisition on August 31. But in reality, when we announced the merger in April, the team spent several months preparing. So we're well ahead of the synergies. Regarding your other question, given what -- given the divestiture -- divesting of a certain business, we're coming up with a run rate of about $260 million before organic growth.

That was very helpful.

To say it differently, the -- if all the businesses had been part of CECO from January 1, and if our pristine business, which is the business, the noncore business, which we sold, had been excluded, the 2013 revenues would have been $260 million. And again, we've had a stronger second half and had a particularly strong fourth quarter.

[Operator Instructions] And your next question is from William Bremer of Maxim Group.

Maybe just give us a little bit of a recap what you're seeing globally on the political front in terms of some of the regulations that may impact your business long term?

Sure. We're seeing some very nice ministry changes in China. So we're very excited about our opportunities there. That's why we keep expanding our footprint and expanding our facility and adding products into the China market, so the China EPA ministry has enacted some significant things that will help us and help their country. We're seeing a little bit in India. Europe's always been very stringent, but I'd say Asia would be #1. And we're always excited about the continuation of the regulations here in the United States as well.

Your next question is from Rob Stone of Cowen.

Jeff, just a follow-up on your comments about recurring revenue by the third, a [indiscernible] targeting 50%. Can you say in which of the 3 segments -- the way you will report the business now, you have the most opportunity to grow, or how much recurring revenue is in the 3 segments today?

Yes, I'd say the contract services and the component parts business and the fabric -- the engineered ducting business is probably our -- principally, our highest reoccurring revenue business with the opportunity to grow. That is separate from our OEM business. So contract in our parts business is one we continue to invest in, which drives the reoccurring revenue for us and will help us achieve our 50% aspiration. And separately, we have the divisions, the OEMs that provide the parts and services for the $3 billion-plus installed base. I would say the OEM side of it is a growth opportunity for us. But I would say the parts -- the component parts and the contract services and the ducting business can grow at a faster rate. And if you blend those 2 together over the next few years, both with organic and potential inorganic activities, that's how we'll achieve our 50%. But it is an important metric for the team, and it's very important to our long-term strategy to reach that kind of reoccurring level.

I know you're not carving out Met-Pro as a standalone entity anymore, but can you say roughly how much of Met-Pro's business historically was recurring revenue?

Actually, it was pretty close to CECO's from a pure OEM parts and service perspective. They were in that 30% range. We -- CECO had the contract services and the separate component parts ducting business that provided that reoccurring revenue stream. But from an OEM basis, OEM versus aftermarket, they were roughly 70-30, not too far from the CECO model.

Great. And my final question is with respect to the debt you took on for the acquisition. Any update on how long you think it might take to extinguish that?

Well, I'll say we are on track for what we aspired, what we messaged in August, and potentially, before that. We'd like to be -- have a debt-to-EBITDA ratio of about 1x by the end of the year, and that's our aspiration. I think we're on track to do that.

[Operator Instructions] Your next question is from Sean Hannan of Needham & Company.

Just a follow-up on some of the key initiatives here. So China, what is your viewpoint today in terms of having the right product or offering there? How do you feel that you need to expand or build that? Is there anything you can elaborate on for that overall approach as you identify it as a key initiative?

; Sure, great question. Something we talk about frequently. First off, we sell filters, 2 types of filter technology, 2 types of cyclone technology and dampers and diverters in China. Those are our core business. And we're gearing up to sell more and more of those deeper into the China markets. What we've also done in the last quarter is we've launched the Met-Pro dust collector technology and the Met-Pro Duall scrubber technology into China, so we can sell it, market it, fabricate it and administrate it all in China. That's our primary focus. But there are a few things, there are a few things with rotary, RTO, oxidizer technologies. There are some dust collector technologies that were forming strategic alliances with a few companies. So right now, we have a few sales alliance agreements between CECO and some Chinese -- a couple of Chinese companies that will help us sell more and gain channel and gain more access to end users. We're also looking at some other damper technology to support our EFFOX business. We're looking at a host of filter technologies that we'd like to either form strategic alliances, or potentially, a small bolt on. And the more we do that with alliances and adding resources, we gained deeper access into channels. Some of the markets are wide open to us, and we're doing well. Some of the markets, we have to go through design institutes, which were slowly and surely penetrating. Those are a little bit more challenging. Those are a little more controlled industries. We keep hiring Tier 1 sales engineers and adding rep agents. But there's a host of products we'd like to add to our portfolio in China, just for the China market. But at the same time, there's a few products that -- a few world-class products Met-Pro has that are now -- we now just launched into China, so we're looking for some nice organic growth from that.

Okay, that's actually very helpful. And then last question here. We've heard a lot about the synergies that you've been reaching that we're getting as a consequence of the Met-Pro deal. You've also made some comments, Jeff, that you're well ahead on the synergy targets. Just want to see if we can get a little bit more clarification from a cost standpoint as well as from a revenue standpoint. Are there more cost synergies that may come and materialize here in '14 as a consequence? What have we realized, thus far, I know that you've commented we've exceeded that $9 million target. And then on the revenue front, is there a way we can, perhaps, elaborate on that as well? We're hearing that they're advancing. Is this, in terms of business to bid on? Is this clearly materializing in actual bookings, or are we talking about that we're actually getting some revenue contribution from that in some of the specific businesses at this point in time?

Well, first off, our aspirations for organic revenue growth are above average, that's part of our sales excellence team, that's part of our annual operating plan. So we're looking for significant growth. Secondarily, regarding the synergy piece, I would use, in your modeling, I would use 19%. I would use slightly less than 19% in your SG&A modeling for 2014. That's a good number. If you look at where the business is -- the 2 businesses were in 2012 and you calculate that, that total SG&A number, we're basically at that synergy number, if you add on the Adwest and Aarding. So I would use that 19% for modeling purposes. If we have -- there's a couple of plants -- continuing plant consolidations that will bring us a little bit of cost out in COGS, but I wouldn't put some big points on the board for that, but there is some stranded cost we'll see. We're in the process of selling 3 or 4 facilities, so there'll be some stranded operating cost with that, but not a whole lot. But we continue to meticulously look for ways of running leaner, smarter and faster because that's what our shareholders expect of us. And I think we're in real good shape now. And now the organization is focused on sales excellence and the OneCeco. I do think the OneCeco Sales Initiative for the air pollution control business is a way to drive revenue, provide a broader solution to the end users. And if we do that right, we should see a little bit of pickup in margin as we go through 2014. I hope that helps you, Shawn.

[Operator Instructions] There are no callers in queue at this time. I would now like to turn the call back to Mr. Jeff Lang for any closing remarks.

Thank you for joining our call today. We look forward to talking with you in the future. Thank you.

This concludes today's conference call. You may now disconnect.