Good morning and welcome to the ADS Third Quarter Fiscal Year 2015 Financial Results Conference Call. All participants will be in listen only mode [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mr. Mike Higgins. Please go ahead.

Thank you. Good morning. With me today is Joe Chlapaty, our Chairman and CEO; and Mark Sturgeon, our CFO. On today’s call Joe will summarize our results for the third fiscal quarter, Mark will then provide detail on our financial results for the quarter and a look ahead to the full fiscal year 2015 before we open the call up to your questions. I would also like to remind you that we will discuss forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those forward-looking statements as a result of various factors including those discussed in our press release and the risk factors identified in our Form S-1 filed with the SEC. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements all of which speak only as of today. Lastly the press release we issued earlier this morning is posted on the Investor Relations section of our Web site. A copy of the release has also been included in an 8-K we submitted to the SEC. We will make a replay of this conference call available via webcast on the Company Web site. With that I’ll turn the call over to Joe Chlapaty.

Thank you, Mike, and good morning, to everyone. Welcome to ADS' third fiscal quarter 2015 earnings conference call. I'd like to thank all of you for joining us this morning. During the third quarter we generated net sales of $278 million, a 6.4% increase compared to the prior year. Our top line growth was driven by continued solid performance in our domestic construction markets for both pipe and Allied Products and improved sales from our international operations. For the third quarter we generated growth in our non-residential and residential end markets of 10.4% and 8.8% respectively. We remain encouraged by the strength we are seeing in our core domestic construction markets which we view as sustainable. Our leadership position in the markets we serve allows us to take advantage of this market recovery by driving conversion opportunities from traditional materials as well as upselling our Allied Products. Growth in non-residential and residential construction markets offset weakness in our infrastructure and agricultural markets which declined roughly 1% and 5% respectively. As we mentioned last quarter there was a delay in crop planting in the spring which pushed back the fall harvest and ultimately delayed the installation of our products in a number of projects. For two weeks in November severe cold weather conditions occurred in the Midwest and Northeast slowing shipments in all markets and ending the agricultural season in the Northern Midwest ag geographies. Weather conditions did improve in December, and as a result sales jumped sharply reflecting a number of projects coming back online. This trend continues into January where we saw strong activity and healthy orders which we expect will continue through the remainder of the fourth quarter of fiscal 2015. However given the seasonally low sales environments in our fiscal fourth quarter, we do not anticipate capturing…

Thank you, Joe. For the third quarter of fiscal 2015 we reported net sales of 278 million an increase of 6.4% or $17 million compared to the prior year period. Pipe revenue increased 6.3% or 19 million to 213 million compared to the third quarter of last year. The increase continues to be driven by domestic growth in our N-12 and our N-12 high performance product lines which offset lower pipe sale in the agricultural markets due to factors Joe mentioned earlier. We also experienced improved pipe sales in both Canada and Mexico. International net sales for the third quarter increased 5% or 14% compared to the prior year. Growth was driven by strong sales in the Canadian agricultural markets despite the negative impact of a softening Canadian dollar in the quarter. In Mexico improved public spending and positive sales momentum in our electric conduit product line continued the strengthening of our sales volume during the quarter in Mexico. Third quarter Allied product revenue increased 6.6% to 66 million with strong growth in StormTech and Nyloplast as well as other storm water management product lines. Excluding 1.8 million of Allied products sold during the third quarter of last year Allied Product sales increased nearly 6 million or 10.7% this quarter as compared to the prior year sales of continuing products. Gross profit increased 0.6% to $50 million for the third quarter of fiscal 2015. As a percentage of net sales gross profit totaled 18% compared to 19% for the third quarter of last year. Domestic margins were pressured by a 13.6% spike in raw material costs in the quarter as compared to the prior year. International margins were hurt by the sharp decline in the Canadian dollar versus the U.S. dollar and its negative impact on overall Canadian market selling…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Stephen Kim with Barclays. Please go ahead.

It’s actually John filling in for Steve. First off, I wanted to get an idea, could you maybe help to quantify the level of deferred sales in the agriculture and the infrastructure end markets due to the weather that you stated.

I would probably put that number because we’re having orders that kind of supported where we have anticipated our sales being, that number is probably today in the $20 million to $30 million range and as I think we talked earlier order volume, incoming order volume remains solid.

John this is Joe Chlapaty. During this whole period of October, November and December we continued to take orders in excess of shipments. So our backlog is building, that continued in January and still continues today in February. So order activity, design activity, future sales opportunity as we get into more of a normal weather pattern are very good.

I was actually muted, it's Steve Kim. So you talked about the fact that you are impacted by ag, and you sort of gave a little bit color on that. I was curious; you also mentioned I thought you said Canada ag actually was pretty decent. I was curious as to what the dynamics in Canada would be different from maybe what you saw in your U.S. agricultural markets and if you could just give a little color on that would be helpful.

I think Stephen, the markets where the harvest was delayed and what that did was it shortened the season before the ground freezes that agricultural contractors can put pipe in. What occurred in early November we lost a couple of weeks that people would be putting pipe in because the temperatures got the highest in the 20s and got down the single-digits. December it warmed up, except up in Dakota and Minnesota where literally they were done for the year. The biggest agricultural markets in Canada are in Ontario, which is basically due east of Michigan and up in Quebec, but those areas remained open. So we were picking up additional volume and compared the prior year when they froze out early, we had a longer drainage season in that particular area.

And when you talk about recovering business in the spring I would assume that if March actually turns out to be quite warm, you might actually be able to pull that back in earlier and I think you quantified that just now is about 20 million to 30 million, is that all right?

It is. Stephen, part of our problem is when you take a look at ADS's annual performance, if you go from April through October you can pretty much anticipate there is volatility in weather but it tends to balance out. The last five months of the year are so weather dependent March is a very swing month if spring breaks a little bit earlier we’ll pick up business at the end of March, if it doesn't this kind of falls into the next year but that is so difficult to predict.

The other thing Stephen we’ve been talking to people as we talked investors and to yourselves, we had anticipated that when winter occur that the markets in the south and the west and in Mexico would be stronger this year and they are, and everything else other than the situation from a top line standpoint is still as Joe articulated is still -- the trends are still exactly the same.

And this is just going to be an ongoing thing, you’re going to have this every single year I think it’s important that the people understand that. Turning to the resin costs, I was curious if you could talk a little bit about the spread there or actually the lag, I know there is lag between what you see in the spot market and when that actually impacts your margin. Can you give us a sense for how long that lag is and be a little more specific about what you’re seeing? And maybe give some numbers around the trajectory of those resin prices through the quarter and looking forward.

I’m going to have Mark to help me out here, Stephen but normally it will take us about 90 days to work through the inventory we have, so to speak in storage. Keeping in mind again that as resin has started to drop now to meaningful way of starting in December was our sales period. So you don’t work through your inventory as quickly as you would if you were talking about a reduction in April, May, June or something like that. But roughly a 30 day window will be there. So resin spike at its high point in October, and then modestly went on in November and then started to accelerate as we got into the back half of December and continues today into January. The numbers are out there, you can find -- you go to plastics and we'll talk about with base virgin material is down, we’ve had good recovery and relief with our polypropylene which is incorporated into our N-12 product line, and our StormTech product line and the price of non-virgin post consumer material also spiked in November. And I didn’t realized this what happens often times you have a tremendous amount of material comes over from China for the Christmas season toys, gadgets, whatever, at the end of the year they load up and bring back those empty containers with bales non-virgin bales and ship them back over to China, just not to go back empty. We had a spike that I didn’t anticipate it jumped up our bale price significantly for about six weeks, its right back down on a normal basis. So as we go forward not the trend the absolute cost that we’re paying today for virgin material, non-virgin material, polypropylene is down significantly from the peak in October.

And if I could just add, I think if you look at upfront what occurred is with -- we're not tied to oil, our raw materials are tied to natural gas. But the whole dramatic movement there has created a lot of turmoil in the commodity markets and unfortunately for us the near-term our price actually spiked up and it went up to record levels and then it held through a good portion of this quarter, and as Joe described since then it’s moved down significantly. Our tactics in this period was we thought the price was too high, so we bought as little as we could but we still have the inventory until we go through that we took a short-term hit to our earnings but we feel that over the next 12 months the net impact of this is if the trends continue it’s going to be very positive for us.

Stephen, one concern I have and I am glad you’re on the phone and perhaps we have some other analysts on. We don’t want to get tied to oil, because oil is not our feedstock it’s natural gas. And that as we were on the road show for the IPO in July, I specifically referenced our optimistic outlook for base virgin cost not because of oil but because of the natural gas phenomena in this country, natural gas now is at or below $3 million per million BTUs and the fact that there was very significant capacity additions coming on within the petrochemical complex, out in the Houston area, that is a fact. And when you read about rigs being shutdown and their cutting capital spending, not the petrochemical guys these are multibillion projects that have been permitted, they’re underway and we by the end of calendar 2015 we’ll have new capacity coming on stream and then going forward for the next three years. So the optimism that we see or saw back in July and in December for base virgin cost, I don’t feel as good about today I feel better about. And I think all which had happened with the oil drop is we’ve got some icing on the cake now.

The next question comes from the location of Rob Hampson with Deutsche Bank. Please go ahead.

I have one kind of related question, you guys just provided some really great detail about the resin cost, just kind of two quick related ones are actually. You mentioned that that’s generally down significantly since November. I guess kind of what’s the magnitude of decline? And then secondly as you think about the virgin versus the non-virgin material, right. I would imagine virgin kind of and especially the spot market drops a lot quicker, and then non-virgin kind of follows soon. What’s the lag time in that respect and how long does it take for non-virgin to decline after that? And does it usually decline just as much as the non-virgin?

Your comments there are exactly correct and how those move. At peaks and valleys which we were absolutely at a peak here the non-virgin material will lag a bit it lags at the top two percentage wise they tend to move together, actual cents per pound are different because they’re different price points. But we saw virgin material actually went up to start the quarter, and then it started down in November and its continued down December and in January and as Joe mentioned those numbers have been published in public news and from the ultimate peak they’re down about 15% at the end of January. The non-resin cost actually spiked up and stayed high until about mid-December and is now for the reasons Joe mentioned and others they have moved down very significantly along with that. So those tend to move together, the timings are little different but everything right now for the last six weeks is absolutely been moving in the right direction. And assuming that continues and goes at these levels or lower as Joe said it positions us well for the spring.

Rob, one other point there. I think kind of conservative forward looking thinking on just base virgin cost there is an anticipation of further moderation. And until I would say spring and that’s when historically you get seasonality of demand for high density tends to put kind of us for underneath there. But I believe that there is still some modest or moderate dollar movement further to go in the base virgin markets. Keeping in mind that we’ve had meaningful recovery reduction in cost in the non-virgin arena and we are expanding our efforts as we’ve talked about on the road show in the incorporation of non-virgin material content very successfully, and we’ve got capital plans and strategy in place to accelerate that.

And then on the demand side of the equation. When you look at demand trends, I guess what are your thoughts on market share in the quarter? Is there anything to believe that you've lost market share or anything like that or kind of what you’re seeing in that field in that respect?

Not at all, I’ll let Mike Higgins maybe add some color. In fact we continue to believe that our market share continues to grow. We’ve had very, very positive market place reaction this year to our high performance product line and I think after nine months sales of that product line are up very significantly. Percentage wise high double-digits.

Yes Rob, I would say that we don’t feel that there has been any type of market share erosion on our part. And just the quarter really both the agriculture and construction markets were impacted by the weather. And as Mark mentioned earlier the positive sign that we see strength in markets, continued strength in markets of areas that were hard hit by the recession Florida, other parts of the South, Southwest, California, et cetera we had strong growth in those geographies in the quarter. And those are areas that we’ve really targeted to increase our market share against the traditional materials like concrete, pipe and I think that we continue to do that.

Rob, one other thing that perhaps isn't getting discussed, any detail was that the significant improvement that we’ve experienced starting in December with our operations in Mexico where we had for several years when fighting an approval situation which we successfully re-obtained business dynamics and improvement in margins down there is getting back to some of our historical very strong level. So this bodes well as go forward and our plans in Brazil are operating at a high level of volume and capacity. We also feel that the opportunity in Canada although it may appear somewhat modest in this press release provide significant opportunity to grow our market share up there. And there are significant synergies that will benefit both companies from a production and material cost and delivery standpoint.

And did you gain any Allied products with Ideal Pipe acquisition, any additional Allied products?

This is Mark. The one the potential synergies we have is Ideal has a very solid sales and distribution base up there and we are going to provide our broad product line of Allied products across there. They do have some products lines, we currently do not sell in the U.S. and we’re going to look to leverage those products as we have with several other acquisitions. And there is upside to take some of their more pipe products and sell them in new markets in the U.S.

[Operator Instructions]. The next question comes from Bob Wetenhall with RBC Capital Markets. Please go ahead.

I wanted to ask you guys, you had some -- you booked some mark-to-market losses on the hedges for diesel fuel and raw cost. And I was wondering if those hedges put the other way and turn into a benefit for cogs down the road at some point.

Yes, Bob this is Mark. The bulk of that is tied to diesel fuel hedges. We also have a small amount on polypropylene and as Joe mentioned on polypropylene those costs have come down dramatically we're actually locking in more now to put us in a very favorable cost standpoint going forward. On a diesel fuel hedges we’ve had a policy to try to get to close to 50% hedging that we use collars. The price of diesel when oil came down didn’t move as quickly, the index move quickly but since then the cost of our diesel fuel has dropped dramatically. And in months like this we’re closer to 50% hedge, but what that’s implying is we’re going to say what you’re seeing there, times too is what we’re actually going to save in dollars. So we’re going to have to pay 40% roughly of our savings out in these fuel hedges, but our fuel costs are going to go down if they stay at these levels significantly throughout this year.

Just wanted to ask you, I know you guys have been running the company for a couple of decades now. 2008 oil went from 140 per barrel down to $40. How did that impact the P&L and what did you see resin cost, just trying to understand what kind of accrues to Advanced Drainage and also if you have to pass some of the savings on to your customers or you can retain them?

Bob I think you have to look at the current environment a lot differently from what existed in 2008. If you remember oil -- if I am not mistaking oil in 2008 or late 2007 actually peaked at $143 a barrel and the resin cost that we were paying was really interesting just to show you the leverage the chemical companies had, natural gas per million BTUs was $15, per million BTUs. We were paying not too much differently for resin then as we were paying today and not today but in October and November if you can see. And in the interim natural gas went from $15 per million BTUs down to 3, and so the cost advantage that domestic producers had has been phenomenal. You say well what happened? Because our cost structure was so different six years ago, seven years ago the petrochemical industry shutdown a lot of capacity because they were losing money. There was a lot of consolidation within the industry, as I said just before we used to buy from Exxon, we used to buy from Mobil, we’re buying from ExxonMobil now, we used to buy from Chevron, we used to buy from Phillips, we buy from Chevron Phillips now, I think you get the pictures. So as supply was tightened and cost went down these guys had kind of, I’ll just say right out, kind of an oligopoly there to do what they wanted. What is happening is your greed is a good thing as what was his name in the movie, it brings on capacity. And with the tremendous margins that have been made in the petrochemical industry over the past several years, huge capacity additions are coming on stream. Given where resin was at even though it’s down 15 it may drop another -- whatever. What if it goes down 25%? The margins today at low cost gas even with the capacity coming on, is still a huge, huge return for the petrochemical folks. So I don’t see any deterioration in plans for that material to come on stream, we will be able to hold on to a meaningful portion of reduction. But I would be remiss to say that we’re going to penny for penny hold on to all of it, you have some markets that are more price sensitive whether it’s the ag market, the retail market through, the Home Depot and Lowe’s. But as material costs go down we will hold on to that and we will pocket a meaningful portion of the reduction.

And on our store and serve business side, we’re competing primarily with concrete pipe, and a forecast for them after several years of having very low cost and prices they have a lot of cost pressure. And as we said before we tend to price our pipes to compete with theirs, so that’s why we feel more comfortable in those markets that the impact if resin does move down significantly we will be able to hold a much bigger percentage of that, compared to '08 when just construction stopped and it was a whole different situation.

I mean the world almost came to an end seemed like in October of '08, everything stopped and everything just plunged this is a different dynamic. The other thing I'd outline keep the later, but the opportunities for synergy in terms of strategies and material formulations exist very meaningfully in Canada too, so there’s tremendous upside there as we go forward.

Let me just ask kind of don’t want to beat a dead horse into the ground. But just in terms of flow and timing standpoint, it sounds like the spike in resin was an anomaly caused by supply shortages it’s been addressed. You’ve seen a lot weaker resin prices since the second half of December and resin prices continue to move lower and markets increased its buying. And I am just trying to think about going into the calendar year as oppose to your fiscal year. How does this play through with the hedges you have in place? When do those roll off against the higher cost inventory? And when does your inventory turn is, like two months of work in progress and one month of raw material. How should we be thinking about that and when do we really start to see the benefit in the P&L of your lower input cost?

Really by the first of the fiscal year the hedges we had at higher levels for raw materials were all be gone and really because as Joe said January and February slower months you were exactly right. We have a couple of months worth of finished goods and about one month worth of raw material, and we will start seeing the impact of those lower prices in our earnings in the first fiscal quarter in a meaningful way.

Bob we might, if March were a warm month and the spring side really you could see a little bit there, but by April 1, like it’s like we cleansed the pipeline so to speak.

And final question for me. Versus where you were kind of December 31st in terms of profitability and the growth trajectory both because of lower resin costs on the demand side of the equation. Are you more optimistic now based on what you know or less?

More optimistic for next year. Bob, you've noticed now since the road show in July I was always confident that number one we were industrial growth company, we're a conversion story. We have a huge market position. We always felt that resin with some point was going to turn in our favor. Resin went up for two years straight month after month after month, at some point it had to break. We didn’t anticipate what has happened in terms of the magnitude of the decline. We always felt it would go down but not at the rate it does. I was very confident July 25th, I’m much more confident today.

The next question is a follow up from Stephen Kim with Barclays. Please go ahead.

I just had a quick question. You guys said that, I think when you gave your guidance if we were to adjust the top line guidance talking about. If we adjusted that for 20 million to 30 million of sort of the impact from this weather issue, it would still leave you shy of I think your prior guidance at the top end by about 20 million to 30 million. So it’s like you’re lowering the top end the revenue guidance by about 20 million to 30 million even if you would adjust it for the 20 million to 30 million headwind from the weather impact. So I want to make sure I have that right. And then I was wondering if you could talk a little bit about what that is, particularly in light of the fact that your numbers today I would think would benefit from the Canadian acquisition you just made.

Yes. In terms of the last thing you said the Canadian acquisition; we just made that right at the end of January, February and March are very slow month. Joe and I were up there on Monday I mean there is two feet of snow on first ground in Ontario and Quebec is colder and there are other operations in Manitoba, you wouldn’t want to go there, it's brutally cold. We will start seeing the impact of that really any material amount starting in April. In terms of the full year we were down in the first six months about 5% in the agricultural markets based on less summer work and a little weaker market, because the crop prices, other things that we’ve talked previously. And then in our international markets specifically in Mexico things have gotten as Joe said very busy there, but for the first several months of the year they were slower. So that’s picking up now. And we also had a currency situation in Canada where the dollars of the sales while sales were up; the weakening of the currency there on a U.S. dollar basis makes the sales look lower than they were based on the volume. So when you add all these little pieces, it’s not really on the commercial side, it’s on the big growth factors we’ve laid out to everyone of non-residential growth which is half of our growth, half of our sales residential and we’ve had a very good year on infrastructure. It’s been primarily ag and a slow start to international markets which again today have picked up quite a bit.

The next question comes from Jon Evans with JWEST LLC. Please go ahead.

Can you talk a little bit about you alluded to your Mexican plant and that basically is starting to run better et cetera, because of the currency issues there is that a big advantage? Do you ship that product back into the U.S. and because of the pace of devaluation should that have positive ramification for your growth?

No, we have four manufacturing facilities in the joint venture in Mexico and those are producing for the local market. Infrastructure spending is increasing in Mexico the government funds a lot of this and had withheld those funds for significant a lot amount of time. But again as I said we had to work through an approval situation down there. The business dynamics and the prospects for accelerated growth in sales revenue looking out the next several years there is very positive and we are currently experiencing that. Our Mexican operations had a calendar year and the December sales are very good, January sales are strong. And we look for that to continue for the foreseeable future, but there really isn’t a play there in terms of the ability to shift product back into the U.S.

This concludes our question-and-answer session. I’d now like to turn the conference back over to Mr. Joe Chalpaty for closing remarks. Please go ahead.

As we move forward, we remain focused on our strategic growth initiatives and execution in gaining market share from traditional materials and taking full advantage of recovering end markets. We are confident that we are well positioned to continue delivering above market growth, as well as operating leverage over time. We’ve been public for six months and I get all kinds of guidance, there is probably attorneys on the phone here they’re going to get mad at me. But we were said, damn you guys you’re volatile but you got to have consistency. All I can do is paraphrase Aaron Rodgers in September, and the Packers have lost the first two or three games, Aaron’s response to the public was relax, things are good. I’ll end this call with that statement.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.