Good day, ladies and gentlemen and welcome to the Second Quarter Fuel Tech Inc. Earnings Conference Call. My name is Castin, I’ll be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of the conference. (Operator Instructions)As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Tracy Krumme, Vice President of Investor Relations and Corporate Communications. Please go ahead Ma’am.

Thank you very much. Good morning, everyone and thank you for participating on today’s conference call to discuss our second quarter 2012 results. Joining me on the call this morning is Doug Bailey, Chairman, President and Chief Executive Officer; Dave Collins, Senior Vice President, Treasurer, and Chief Financial Officer and Bill Cummings, Controller. As a reminder, the matters discussed in this conference call, except for historical information, are forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from those set forth in our forward-looking statements. The factors that could cause results to differ materially are included in our filings with the SEC. The information contained in this call is accurate only as of the date discussed and investors should not assume that statements made in this call remain operative at a later date. Fuel Tech undertakes no obligation to update any information discussed in this call and as a reminder, this call is being broadcast over the Internet and can be accessed at our website www.ftek.com.With that said, I would now like to turn the call over to Dave Collins. Dave, please go ahead.

Thank you, Tracy and good morning everyone. We are thrilled with our recent International APC orders coming from both China and Chile and as a result are looking for improved revenue performance in Q3 and Q4 of this year. Through the end of the July, we have announced $50 million in new APC orders, including $16 million in China and $37 million in Chile. These orders will contribute significantly for our third and fourth quarter results. Optimism in the sluggish US domestic FUEL CHEM market and remaining regulatory uncertainty in our US domestic APC markets. We remain bullish on our domestic APC opportunities, while we await regulatory clarity. Additionally, we are waiting for natural gas pricing and electric demand in the second half of this year to provide a stimulus for our domestic fuel connectivity. I will provide some general guidance during my comments with this in understanding the impact to have in our overall business. Consolidated revenue for the June quarter and six months was $21 million and $46 million respectively, representing year-over-year increases of 10% and a 11%. Net income was breakeven for the quarter and $1.6 million or $0.07 per diluted share for the six months. Our adjusted EBITDA for the six months was $4.6 million. Our revenue growth in the current quarter and six month is due to strong APC segment revenue, which has delivered a 38% increase over the prior year for the first six months. Our air pollution control or APC segment revenue for the second quarter was $13 billion, representing an increase of $3 million or 33% over prior year. For the first six months, the APC segment revenue was $29 million, representing an increase of $8 million or 38% over the prior year. These increases resulted from order activity reported in the…

Thank you, Dave. Good morning everyone and thank you for joining us on this call this morning. As you’ve heard from Dave, we had a strong quarter in the air pollution control or APC segment, with second quarter revenues up 33% from the same period last year. This was driven by revenue recognition of our record year-end backlog that occurred as a result of the higher contract bookings predominantly SNCR orders, which replaced through the second half of the year to meet requirements for the Cross-State Air Pollution Rule or CSAPR. CSAPR was scheduled to go into effect January 1st of this year and however just days before it was to be implemented, the US Court of Appeal for the District of Columbia Circuit court issued a additional stay of the rule after industry groups, states and others argue that the EPA probably state budgets for power plant emission of NOx and SO2 and failed to provide adequate opportunity for another problem. Further arguments were heard in April and while our decision has been expected by many for sometimes and what is expected sufficient within the coming weeks if not sooner. A 2013 implementation day is perhaps the best state scenario for the EPA and other performance of the CSAPR. DC Circuit can validate the EPA decision on federal implementation plan or validate the emission set by the EPA. The compliance deadline might not take effect until 2014 or possibly later. The administrator for the EPA made us aware, has publicly said, he just can’t anticipate a lengthy delay. He maintains that CSAPR will pass legal – because the agency has fixed this problem that caused its predecessor the inter-state legal or care to be rejected. Either way clarity on CSAPR is needed, the plant operators can assemble the plant…

Thank you. (Operator Instructions) Your first question comes from John Quealy from Canaccord time at Canaccord. Please go ahead, John. John Quealy – Canaccord: Hi. Good morning everyone and congratulations on all that order cash flow, that’s pretty strong.

Thank you, John. John Quealy – Canaccord: So if I can just ask for a little bit of homework help here. Once the guidance you gave a lot of detail, but I’m just trying to sum it up here in the back half of the year at least $20 million of existing backlog gets converted for APC plus we’re talking about the China deals that were announced on a quick turn basis. So is it, to think $30 million in the back half for APC just looking on your comments, versus last year.

That, their fair John and it might go bit stronger than that John Quealy – Canaccord: And then in terms of the mix of the gross margins, so China 25% to 30%, Chile you talked about on the burner side being lower in the ASCR and SNCR stuff on the higher side. But to get your full-year guidance. We’re going to walk down margin to that 30% rate by Q4, it can maybe a little bit less than that. Is that fair to make your math work?

Yeah, that’s right. John Quealy – Canaccord: Okay. And then the bigger picture stuff. First on FUEL CHEM are we pretty much for all the units that are out there that are on the margin for gas or coal, it based on your customer list have they all switched. So my point is, is it the worst we’re going to get from the FUEL CHEM run rate or how do you characterize FUEL CHEM at this point given the macro gas dynamic in coal.

That’s a good question, John. We’ve been in this environment for quite some time. And we have actually seen attrition impair what we’ve actually achieved on the growth side. So while the FUEL CHEM business is grown. It’s been offset by those plans that have reduced their loan activity shutdown switch to natural gas. And that’s gone off on for a period of time. We have tremendous appreciation by the customer base that we get with our operating in our plan today. So what the FUEL CHEM program is doing for us. So it would be my belief that we’ve seen more of flatter bottom with more loads as loads increased and is our new product offering utilized inside technology are offered in market place. I think it’s a fair comment to believe that the softening is already fixed. John Quealy – Canaccord: Okay and then final two questions, first on China, you’re focus of run up by an impressive array with all the way back three, four years ago. And just recently can you comment if you said this already I apologies but what the addressable pipeline’s there Doug. if you could, in China in terms of what you think you’re targeting.

Well, as you seen us achieved a really very good success with our own ULTRA product, there is still many of those opportunities ahead of us. It depends upon the region, depend upon the age and plant by plant. Many of these plans are adopting full blown SCR technology, which we are not a provider off. However, we have been able to provide additional products and services that address that into the market and I believe that in the month and years ahead, our advanced SCR solution will see some market acceptance, particularly because it has low capital cost. The SNCR market is not as strong for us in China and it just has to do with the preference of FBR over SNCR with respect to where starting conditions are on (inaudible). But we are as you know selling all of our technologies over there, but in particular our strongest place. John Quealy – Canaccord: And my last question. So, can you talk about M&A in strategy for a minute, if we’re talking about a bottoming in the FUEL CHEM business or something approaching bottoming, its $15million to $20 million of cash flow or EBITDA. Can you talk about what you and the Board might be considering in this environment for strategic growth or M&A in the next year and half once we get the CSAPR cleared up etcetera. Thanks guys.

Sure. As it relates to the FUEL CHEM business, we’re rather unique in what we’re capable of doing. And so there’s much more opportunity on the organic product development side for our-chemical based solutions. There are other companies that do inject chemical in the boilers or pre-treated on the fuel. We believe that we have not only this (inaudible) capabilities, but briefly we have incredibly powerful technological know-how to further our product offerings by organically on that side. The marketplace is soft for others who are addressing that as it relates to coal and natural gas pricing. But I don’t necessarily believe that there are large M&A opportunity to FUEL CHEM, that’s a little different in the air pollution control market. And I would say that an international when for example China is large a healthy market for us. They are very well customers, attractive candidates over there. There are certainly candidates domestically in United States. But broadly speaking I would ask people look at this strategically as our working stability whether we’re objecting magnesium hydroxide or other formulation chemicals in FUEL CHEM or in the via our ammonia, we have a unique ability to deliver precisely meet our profits flourish across green lines and control exactly where they go and exactly how long they last that’s enabled us to convert the chemistry by the way of modeling technique. Our foundation technology it’s one that what we use more for FUEL CHEM. We are really in targeting chemical solution in further application. That being said, what I believe we have the opportunity to not only continue to grow our ability to execute larger and larger capital process. At the same time through product development and licensing or acquisition of related solutions begin to offer recurring revenue product services that meet break ups for our requirement. That would be a change for us first and it’s all based on the foundation of power policy technology that across both the respective. John Quealy – Canaccord: Thank you.

Thank you, your next question comes from the line of Daniel Mannes from Avondale. Please go ahead Dan. Daniel Mannes – Avondale: Thank you and good morning.

Good morning Dan. Daniel Mannes – Avondale: A couple of quick follow up question first on FUEL CHEM can you talk maybe about the pace of usage. I mean obviously we saw a significant decline in coal burn particularly in April and May. The things improved a little bit in June and now you sort of had in July and review here. Have you seen any improvement in FUEL CHEM usage given at least some stabilization of coal burn or the trend you saw maybe in the early part of Q2 is still continuing.

Hi, this is Dave. I think the trends are continuing barring a shift in pricing and utilization. So now we’re seeing a similar trend. Daniel Mannes – Avondale: So this doesn’t look like a seasonal pattern whereby in shoulder periods Q3 or Q4 may see a decline. This looks like until we see maybe a major change in the coal market, this looks like a reasonable place today.

I think longer-term it’s hard to predict where the coal market will be, certainly there’s been dynamics in the marketplace today. But whether and how long they will stay with us, that’s tough question. Daniel Mannes – Avondale: Okay. And then real quick –

Dan, this is Doug. To assume that soft natural gas, low natural gas prices are going to be here for a while. We certainly recognize that and we are doing our planning and development activities with that assumption in mind. That being said, I don’t believe that’s a say long-term kind of the – years from now. I’ve always had confidence that the domestic coal industry is one that offers the lowest cost for BPU delivery and I think we stand ready to provide solutions that make it very effective to meet the regulatory requirements on a low capital cost basis. Low capital cost solution is core part of our strategy and we think that will be very receptive to the domestic utility industry that chooses itself (inaudible). Daniel Mannes – Avondale: Got it. And real quick and Doug I think I heard in the end of your comments and I was hoping to get you to expand on this, are you fairly close to rolling out, it sounds like a new product on the FUEL CHEM side that might give you some emissions control as well or did I mishear you?

You did not mishear as we’ve been undergoing new product development activities more intensely over the last two years and as I have said previously, I intend to increase R&D spending closer to the 3% to 4% of revenues level. We’re beginning to see the fruits of that work. We do very controlled testing, we are going to validate by scale and pre-commercial scale the very result we see in our development stage activities. And we are addressing the SO2, hydrogen chloride, mercury and the suite of regulatory needs around those types of (inaudible). In doing so you just being a model we utilize technology that we’re very good at delivering, we think it’s – but very good alternative to the kind of application of technologies that create many problem for example. And as I said earlier, I think we’re probably going to validate the results that were to introduce and our first product have some fine openings. Daniel Mannes – Avondale: And would this be your fairly common injected chemically magnesium hydroxide that you use and to see here something radically new and unique.

That I can’t comment on the chemicals that we’re developing because the proprietary they differed from magnesium hydroxide, but they are specifically designed to leverage our FUEL CHEM technology, so no capital approach to providing a solution that continues and so I think we’re well poised to really build up a ridge you will, between our FUEL CHEM and our APC segment in the thinking that we’ve got a common technology and knowhow to meet regulatory emission not just an order wise solutions for controlling balance price. We need to get you think about FUEL CHEM not just a balance like technology it was introduced to address that problem and successfully applied to solve that problem. It could leave being in environment as domestic utility industry is an offering of workers demand at lower load in which those problems are not prevalent. But at given up the opportunity to develop some alternatives solution that differently didn’t set for your solution. Daniel Mannes – Avondale: And then really quick there is a follow-up, I guess a little bit on John’s question. When you discussed in organic growth, particularly as it relates to the APC segment. How do you think through the opportunities on organic growth reasonably the buyback which you’ve been fairly aggressive on number one and number two, any specific areas that you’d be looking at expanding to whether it’s geographic or in terms of product mix or pollute you’d like to work on. If you can just give us any color you thinking on inorganic side and then how it matches up with buyback activity going forward?

First of all, I think Dan that our buyback program that was stands on its own. We do generate cash flow, we stepped a level of the buybacks that take advantage of opportunities in the marketplace and to utilize the discretionary amount of our passion. As we look at acquisition opportunities. Given that we still have significant cash reserves and debt-free balance sheet, we see opportunities that enables us to consider acquisitions reach directly at your question, I think we looked stand our spring geographic market and that improvements, customer relationships that may only be those that you can serve by having a close to geographic track. There certainly are other products, technical applications that we can evaluate on a case by case basis in a term that they enhanced our portfolio. So there certainly is a technology evaluate, that it has to fit our overall strategy. Daniel Mannes – Avondale: Okay.

What we consider that we are very good at. And so I would probably say that as we grow our business internationally, we’re looking to strengthen our foothold market, not only just that give us larger opportunity more growth, it also gives us regulatory specification. We see the world continually legislating, increasingly more strength that they vary by time trend country by country that those in the US, but those are mature markets mitigated as they are continuing to evolve. But the long-term landscape for, now there is a very, very long time. Daniel Mannes – Avondale: Great. Thanks for the color.

Thank you. Your next question comes from Graham Mattison from Lazard Capital. Please go ahead Graham. Graham Mattison – Lazard Capital: Hi, good morning everyone.

Hi. Graham Mattison – Lazard Capital: Just a follow-up question on the FUEL CHEM. You mentioned the custody customer attrition during the quarter. Is any of that, I guess little more color is that just people that switching away from burning coal or it is the sense, situation where they’re finding other solutions to deal with their slagging problems or they’re just not running enough to incur to make them to make it work, to running fuel down.

Hi, Graham. This is Dave, little bit of all of that. There are some that are running gas plants and using that to generate power demand. There are some that fit probably with pricing and demand. And so they’re able to from the plants that have lower capacity. So it’s a little bit of everything that you mentioned. So – Graham Mattison – Lazard Capital: Great. And then on the expanding the use of the TIFI technology. How soon been to follow-up on Dan’s question, how soon do you expect you’d be generating revenue from that, I mean you said you’re going to have a product presume that is just a demo and you need a couple of years for that or that will be generating revenue in the near term. And then can you give a sense of how that revenue compares to the existing FUEL CHEM revenue on a per boiler basis?

Well, it’s a little premature to be specific in answering your questions. And as much as – no, we haven’t completed all of our product testing. But we’re very encouraged that what we see and I can tell you that once we’re satisfied that we’re delivering results at a commercial scale level product roll out is the relatively short time we’re rising. We think we’ve got customer relationships that will be very attracted to this type of approach. And so while I don’t think we had management have a budgetary number in our mind yet for 2013 or 14 we get close to the end of the year. We assessed what kind of performance that we see, I believe it’s going to provide growth, not only because it’s utilizing the approach we’re taking that solving a real significant need around SO2 asset gas. But I think that are getting to the details of regulation every category of pollutants might have a slightly different the plan time line. So the actual revenue growth rate will be in response with comply with those headlines. But they’re relatively near-term. So I think we feel pleased with what we have started two years ago that we’re going to be well positioned simply close. There is a another number technologies are undergoing valuation the category pollutants and I think they’re going to begin the awareness of alternatives in the upcoming year and a being indicated a prospect for funds. Graham Mattison – Lazard Capital: Okay, great. Thank you, very much.

Thank you. The next question comes from Stephen Chares of Divine Capital. Please go ahead Stephen. Stephen Chares – Divine Capital: Hi, everyone.

Hi, Stephen Stephen Chares – Divine Capital: Thank you, good quarter. Quick question on SG&A in the past you’ve mentioned that scaling back SG&A expenses had a lot of leverage built into it and there was a point I think you had referenced sometime ago that we’ve given SG&A spend you could support roughly doubled sales. I think this is somewhere around mid-year last year. Could you refresh that estimate.

Yeah. Steve this is Dave, I recall the discussion of carrying $150 million or so on revenue that’s in place, we could get to. I think we’ve little bit more than that and without significant investments in SG&A. So I don’t know if that answers your question. We’ve been able to keep our spending pretty flat and as we look out for the remainder of the year, you should see those percentages drop throughout the remainder for 2012.

I think if you step back and think about it, you know as we experienced the third and fourth quarter 2011, we saw a tremendous version of order rate that we have staffed with engineers, project managers, (inaudible) people, impairment capabilities to execute those parts as they come in. It’s very difficult to anticipate that we should say and yet six months in the past might be a relatively short horizon with respect to seeing the potential for return of the stronger domestic markets that you can see what we have been able to achieve in national front. So when you think about two quarters when we plan our human resources into our organizational planning, we’re really thinking out year, year and a half and particularly thinking about whether it kinds of activities that we want to have on board and confident we are. So for example we do more combusting work will be added combustion heat, as we demonstrated there our new initiative like our ASCR and we have to place additional projects that category. We need that, we’ve always been ready because our tradition is rooted at responding to, need to (inaudible). We all await the ruling on CSPAR, it could be such that all these regulations are clarified and implementation begins in 2013 and we’re going to see similar activity in the second half of 2012 and that’s on – growing internationally. So let me steal that cyclical activity, you have the kind of load level through it and make through your human resources. As a result, you might see a little variation in SG&A revenues that I would keep a eye on the total revenue. Stephen Chares – Divine Capital: All right, thank you.

Thank you. Your next question comes from Lucas Pipes of Brean, Murray, Carret. Derek Fernandes – Brean, Murray, Carret: Hello, gentlemen. This is Derek Fernandes for Lucas pipes this morning.

Hi Derek, good morning. Derek Fernandes – Brean, Murray, Carret: Hi, I was just wondering there are so far just to clarify, there hasn’t been any meaningful response from your clients with regards to Casper or upcoming regulations that’s all kind of being held on the back burner?

Your questions was about immediate response, I wasn’t quite sure. Derek Fernandes – Brean, Murray, Carret: Sorry if I’m meaningful.

Oh, meaningful.

Many of the utilities are still looking for the clarification. Before they, but their spending plans in place, we’ve had discussions with numerous terms utilities, there are still as we’ve mentioned before, regional have drivers of same different the key drivers that we’re still seeing the demand on that side of the business, but this is a driver behind cash where I think, at this point equalize the wait, if you look at the regulation though and what the time frames are fine. But they quietly differ from this point.

Of course, there is good activity growing in the industrial marketplace, but what it has to do to respond to further impact. But generally speaking the domestic electric facility at this stage is that the wait there patiently put the impact. On top of that practically speaking, we’re only months away from the President’s election. I think a lot of people are afraid that, what will be the policy make attitudes of in the democratic versus pass over public and penetration. So one of the quotes that I thinking that as fairly that are looking at the symmetry of the booming had to be time implement, I think compared to hope and expect that, we’re going to see that judicial clarification from supposed to imply. Derek Fernandes – Brean, Murray, Carret: Okay, expert. And then I was just wondering as well about the Chilean project, do you currently have any expected range for your margins like are they to be in line with general international projects or a little bit closer to what you guys get in the U.S.

Yeah. That job is a brilliant job within selling six burners, and typically our burner margins set between 20%, 25% range. So from a guidance that if you are asking for modeling perspective, I would try to use probably 20% for that. Derek Fernandes – Brean, Murray, Carret: Okay. Thanks.

Also something to know about big projects. So that, magnitude in that project worth about three times the size of our similar last largest project of our engineering services that Fuel Tech typically provide that our – at our standard margin well above 40% also inside the proof of work and project, so that magnitude is the purchase of equipment and material which has a markup on that model. That being said, we don’t incur personnel expense other than just ranging for the German activity, that installation work provided by contractors and builders like with the Fuel Tech so depending upon the line item and the budget the actual furnace. In a competitive bid situations that is same for a number of other transport bidder and the end product is with the competitive market place. Derek Fernandes – Brean, Murray, Carret: All right, thank you very much.

Thank you. Your next question, it comes from (inaudible) from a Private Investor. Please go ahead.

Yes. Thank you. That was an impressive quarter. Congratulations on all those orders. I know you mentioned about research and development, that is a key item and on growing growth of the company. But could you just expand a little bit more on how you see R&D developing and your patents and proprietary expertise and how that is protected?

Sure. We’ll, first of all – the company success has been traditionally rooted and its ability to innovate new processes products that are offered – that offered intellectual property protection. You can see that in our FUEL CHEM business where we have relatively little competition and we have the strength of those patents to last that’s the number of years in future, and that’s the our area, many of those patents have matured. So some of the things we do are to renew and invent encompasses the technology that we have that are being an exploration or new competition some of what we’re doing is to fill up completely new chemical solutions. That never been followed before, I’m a great believer that if you want to build a valuable company. It’s rooted in fact you come to invest in this kind of development activity. I think that if something we’ve got a little away from that, we re-introduce that and we organized that around a new part of the team that to perfect skills largely taking all of our opportunities putting them to this as Project Management program which get reviewed regularly by executive management and the technical staff of the company, they get priories and there’s a view both for what we’ve achieved, probably we’ve technical such as what it’s most needed by the marketplace. If the marketing side, is drives our priority and we’ve got customers who have – sometime they’ve been asking us to something – with all the other than not. We’ve used to be primarily are control company. We are change we are going to be a multi-pollutant clean efficient energy solution provider founded on the ability to analyze complex – plan, so the complex chemical reactions question that enables us to fire that technology. Build everything on our strong modeling abilities both using complication with dynamics chemical kinetic marble and providing tailored and doing that we’ve additionally very rapidly. That’s our strength. That’s what we’re really good at. So look for us to roll our solution as these regulations require customer to purchased them and look for that to be attractive solutions that meet or exceed the regulatory requirement. But do so at lower capital costs then what others, might otherwise require are much lower operating problems in cost with other often unpaid. That what’s I think we’re good at.

Fine. Thank you, sir. As an investor, I am encouraged by your comments. Thank you, very much.

Thank you. Thank you for your question.

Thank you. (Operator Instruction) we have no question queuing. So for I’d like to turn the call over to Doug Bailey for closing remarks.

Sure. Thank you, operator. Thanks everybody. I appreciate all your questions. We look ahead to the balance of the year. We’re very optimistic at what kind of year we’re going to have that will be an increase over last year. Certainly, there is a lot of uncertainty in a year like this, but I think we’ve got an excellent organization that’s finding tremendous opportunity and I think it’s evident by what we’re delivering in our backlog and our development programs that we discussed with you this morning. It’s a great company. It’s a great talk on. We thank you for the investment in Fuel Tech and appreciate all your questions this morning. Thank you very much. Bye for now.

Thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Thanks for joining and have a good day.