Devin Sullivan - SVP, Equity Group Vincent Arnone - President & CEO David Collins - SVP & CFO

Greetings, and welcome to the Fuel Tech Inc. 2016 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Devin Sullivan, Senior Vice President of the Equity Group. Thank you. You may begin.

Thank you Audrey. Good morning, everyone, and thank you for joining us for Fuel Tech's 2016 Fourth Quarter and Full Year Financial Results Conference Call. Yesterday after the close, we issued a copy of the press release, which is available on the company's website at ftek.com. The speakers on today's call will be Vince Arnone, President and Chief Executive Officer; and Dave Collins, Senior Vice President and Chief Financial Officer. After prepared remarks, we will open the call for questions from our analysts and investors. Before turning things over to Vince, I'd like to remind everyone that matters discussed in this 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 the company's 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 during the call remain operative at a later date. Fuel Tech undertakes no obligation to update any information discussed during this call. And as a reminder, the call is being broadcast over the Internet and can be accessed at the company's website www.ftek.com. With that said, I'd now like to turn the call over to Vince Arnone, President and CEO of Fuel Tech. Vince, please go ahead.

Thank you, Devin. Good morning, and thank you, everyone, for joining us on the call today. The year ended December 31, 2016, was the most difficult year on our recent history. Challenges associated with the pace of legislation, declining energy demand and a continuing shift in favor of low-cost natural gas from higher priced coal created an environment that led to lower revenues from both of our operating business segments, $6.5 million in non-cash and other charges, expanded losses and a year-end backlog of only $8 million. Those of you who have been following Fuel Tech for some time now know that over the last few years, we have been proactive in our approach to addressing the current operating environment and we continue to operate under two primary mandates - first, the achievement of positive cash flow and from our base business segments via leveraging our technology globally in order to maximize revenue opportunities while optimizing our rationalized SG&A infrastructure and second, continuing to invest in technologies that we believe will define our future. We have refined our operating strategy, pursued business development in new and complementary ways, dramatically cut costs and despite our difficult headwinds have maintained a strong financial position. With respect to perspective revenue, I am very pleased to say that the first quarter of 2017 was among the best quarters in our recent history for signing new contracts. Thus far in Q1, we have announced more than $17 million in new orders. Adding these contracts to our year-end backlog figure of $8 million produces a pro forma backlog as of today of greater than $25 million. Our year-to-date bookings and further expectations for 2017 suggest that our revenue for the year will be derived from all of our geographies where we do business and from many…

Thanks, Vince, and good morning, everyone. 2016 is closed and we are moving forward into 2017 with new APC bookings and optimism for additional orders. We have a full pipeline of bids and with some successful closure of a couple of larger orders expect to return the positive EBITDA in the second half of 2017. Over the past two years, we have removed over $15 million of cost from our company infrastructure while remaining focused on retaining the core capabilities and experience necessary to respond to market opportunities. We have managed our balance sheet closely and remain debt-free with a cash balance of $17.8 million. Now for a short discussion of 2016 results and some outlook comments for 2017. Revenues for the full year 2016 were down 25% from $74 million in 2015 to $55 million in 2016. This reduction in revenue was noted in both segments with our APC technology segment, revenues decreasing 22% and our FUEL CHEM segment revenues decreasing 30%. For the current quarter, we likewise reported a reduction in revenue of 47% from $18 million in 2015 to $10 million in 2016. This reduction was again noted in each segment with our APC technology segment revenues decreasing 60% and our FUEL CHEM segment revenues decreasing 20%. As Vince noted previously, we have started 2017 with the highest APC segment quarterly booking amount in the past three years. We are encouraged by this upward trend and look forward to additional order announcements in 2017. The timing of orders impacts our revenue recognition and since we carried a low backlog figure of $8 million into 2017, we expect our first two quarters to be in-line with our Q3 and Q4 2016 revenue amounts. We should see a pickup in the third and fourth quarters of '17 as the…

Thank you very much, Dave. Operator, let's now open up the call to our professional investors. Thank you.

Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of George Gaspar [ph], private investor. Please state your question.

Hello?

Hey, good morning, George.

Hello, George. This is Vince and Dave. How are you?

Good morning. I got a question on carbon development that you have going forward and R&D. Does this have implications of possibilities with what the beverage industry is needing to accomplish moving from ammonia glycol? I understand there are some rules out that there's a definite push to make a transfer and is there any application of what you're working on that would solve some of this problem? There are some concern about the carbonate coming out of the processing area that is going to require new rules to be drawn.

Thank you for the question, George. The area that you mentioned actually is not one that we're familiar with today, but that's something that we'll definitely take a look into. Our Fuel Conversion technology application, it's truly focused on creating a higher value carbon feedstock for use in a variety of manufacturing processes for industrial materials. But I do appreciate the insight and that's something that we'll take a look into.

Is your application possible in the carbon capture that seems to be being pursued more by the oil industry and exploration and development activity in the process of acquiring the oil from the production system? Or am I way out on that, too?

George, I'm not going to say that you're way out by any means. In fact, maybe you're teaching us some things at this point in time. But as we look at Fuel Conversion right now, that's not on our application for this technology either.

Okay, all right. I followed your company for a long time and I'm very impressed with your ability to consolidate your company and make transition and get in a position to really rebuild this company off of where it is now. I wish you all best possibilities of accomplishing this going forward through 2017.

George, thanks very much for your comments. We appreciate that.

At this time there are no further questions. That does conclude our question-and-answer session. So I will turn it back to management for closing comments.

I'd like to thank everyone for joining us on the call today and for being supporters of Fuel Tech. Our primary goal today is to reverse the trends of our past couple of years of recent history and to once again generate value for our many shareholders and supporters. Thanks very much for your time today and have a great day.

This concludes today's conference. Thank you for your participation, you may disconnect your lines at this time.