Tracy Krumme - VP, IR Jeff Lang - CEO & President Ed Prajzner - CFO & Secretary.

Brian Drab - William Blair Sean Hannon - Needham & Company Gerry Sweeney - ROTH Capital Ryan Cassil - Seaport Global Securities John Quealy - Canaccord Genuity.

Welcome to the CECO Environmental's Fourth Quarter 2015 Conference Call. [Operator Instructions]. At this time, I would like to turn the conference over to Tracy Krumme, Vice President of Investor Relations. Please go ahead..

Good morning, everyone. Thank you for joining us on CECO Environmental’s fourth quarter and full year 2015 conference call. On the call with me today are Jeff Lang, Chief Executive Officer and President and Ed Prajzner, Chief Financial Officer and Secretary.

Before we begin I would like to note that we have provided a slide presentation to help guide our discussions. This presentation can be found on today's webcast and can be downloaded from our website at http://www.cecoenviro.com. I would like to also caution investors regarding forward-looking statements.

Any statements made in today's presentation that are not based on historical facts 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, 2014.

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've reconciled the comparable GAAP and non-GAAP measures in today's press release as well as in the supplemental tables in the back of the slide deck. And now, I'd like to turn the call over to Jeff..

Thank you, Tracy. Good morning and thank you everyone for joining the CECO Environmental conference call. Given weaker market conditions and macroeconomic challenges our top line results came in slightly below expectations for the quarter. However we outperformed on the margins in the integration of the Peerless acquisition.

I want to thank our team for their hardwork throughout the year, our employees remain committed to our customers and continue delivering high quality industrial technology and energy solutions and services through our strong operating model focused on increasing margins, recurring revenues and sales excellence.

And partly through organic and inorganic investments we've taken proactive measures to grow our market share in better position at CECO, the long term growth and value creation. I will anticipate ongoing headwinds in the coming year.

We are confident that the actions we have implemented in 2015 in our broad diverse end markets, geographies and revenue streams provide us with a solid foundation to drive profitable growth through various cycles.

Let's begin with slide 4, we delivered record revenue in the fourth quarter of $104 million an increase of 37% year over year incurred by revenue from acquisitions. While organic revenues were flat in the quarter we deliver solid organic revenue growth of 3.4% for the full year as a result of sales excellence.

Bookings were a record of 100 million for the quarter, a 58% year over year increase. On an organic basis bookings were down 7% for the quarter but overall flat for the year. The Q4 four booking short fall was driven by weakness in some of our end markets including China and the domestic utilities.

In addition to several projects we’re pushed out in the quarter. That said we ended the quarter with a strong backlog of $209 million consistent with last quarter's record level. Q4 gross margin was strong at 32.5% up 270 basis points year over year.

Our gross margin improvement was due to project management excellence, price management and an increase in our aftermarket sales. Non-GAAP operating income of 11 million was up 38% year over year, EBITDA of 13 million was up 43% year over year. We delivered $0.18 in non-GAAP diluted earnings per share in Q4.

Now moving on to slide 5,we’re pleased with our expanded platform and accomplishments during 2015. We achieved several record results including $370 million in revenue, $43 million in operating income and 49 million in EBITDA and $0.97 of non-GAAP earnings per share.

We continued our strategic focus on high margin recurring aftermarket growth and became more proactive in connecting with our legacy customer base. In-line with our strong track record of acquisition integration, we're ahead of plan with a Peerless integration.

We delivered approximately $5 million of EBITDA since we closed on the acquisition in early September. That's realizing a significant improvement in the four months of 2016 under the CECO operating model. This is a major accomplishment and our entire team should feel proud of their hard work.

During the year we delivered strong balance sheet and working capital improvements, we paid down $37 million in debt in 2015 of which 20 million was paid down in the fourth quarter exclusive of new borrowings and we have $34 million in cash reserves.

Lastly we continue to invest in innovation technology and recurring revenues and most importantly talent. We made several key new hires during the year, strengthening our management team and ensuring that we have the right platforms and team in place to execute on our growth strategies and increase shareholder value.

Please turn to slide 6, despite near term headwinds we believe many end markets remain solid and we remain confident in our long term global growth potential. Our environmental segment experienced lighter demand for industrial equipment which led to some project delays and slowness in activity and bookings.

Global refinery and petrochemical activity remained solid and bright spot for the segment. China slower growth rates provide flatness near term while long term prospects remain very solid.

Recognizing near term headwinds are mid-term expectations for the environmental segment and that it will perform at a higher level with sales estimates, growth in market share and margin expansion opportunities.

As it relates to our energy segment global natural gas power generation remain strong and midstream natural gas pipeline activity remain solid. We continue to see an attractive long term natural gas profile. As we've seen over the past year our domestic traditionally utilityco business has slowed.

Despite weaker demand for industrial process equipment, our food handling and filtration segment developed consistent solid performance even though some of their end markets slowed. Offsetting some of the market weakness was our ability to grow aftermarket revenues.

We have more work ahead of us with regard to expanding and growing our distributors within our fluid handling business and improving sales excellence within our filtration businesses. We've also enhanced leadership into this segment to support strategic growth in both the original equipment and aftermarket side of the business.

Overall our teams have been challenged to deliver more organic growth and greater sales productivity. We expect our recurring aftermarket revenues to gain momentum and we will continue to invest in this business. Our aftermarket sales strategy remains an important strategic initiative for CECO. Now turning to slide 7.

I'm pleased to report that the Peerless integration is almost complete. More than one year ahead of plan, through March 10 we've achieved $50 million of lower operational cost efficiencies. This comes just six months after the September 2015 acquisition closed and it's 18 months ahead of schedule.

Through rigorous execution and meticulous team focus we have consolidated several back office activities, streamlined division overhead, closed a large manufacturing plant and optimized manufacturing facilities by moving to more of an asset light model and streamlining operating efficiencies.

We have done so successfully in maintaining a critical focus on customers and supplier relationships, quality control and retention of key talent. We continue to look at sales lease backed opportunities with many of our unutilized assets and facilities.

Please turn to slide 8, demonstrating our strong Q4 performance at Peerless, we’re quite proud of our accomplishments in delivering operational efficiencies, improving profitability and executing understated objectives ahead of plan. In the four months of ownership Peerless contributed $5 million of EBITDA and exceeded our margin expectations.

In the fourth quarter, Peerless delivered 37% gross margin, 13% operating margin, $32 million of bookings and $28 million of revenues. This is a record profitability for Peerless, as it hadn't generated positive EBITDA in three years.

This puts their performance on track with the CECO operating metrics 18 months ahead of original expectations, most importantly we have excellent talent in key roles. We've made numerous promotions over the past six months to build a winning team and winning culture.

As demonstrated by their acceptance and acceleration of the acquisition integration we have a very motivated and talented Peerless team. We are now operating as a one CECO organization globally and I'm very proud of our teams integration work.

With the heavy lifting of integration behind us we can now focus on driving sales productivity, sales synergies and more top line growth as we look to leverage our combined $5 billion of install base and driving recurring revenue and aftermarket sales.

During our May Q1 earnings call we will provide more details around the additional operational efficiencies and we are hopeful of other opportunities. Again as few end markets exhibited challenges and slower activity, sales excellence and growing market share, are our top priorities.

This brings me to our next topic, our recurring revenues which is detailed on slide 9. Growth of our aftermarket business has been a key focus of ours for the past few years.

Given it's higher margins and larger install base and recurring revenue stream this business adds stability to our revenue base, improves profitability, enhances connectivity with our customers.

Our recurring revenue strategies and services offerings are focused on helping customers with their total cost of ownership through optimizing the availability, reliability and efficiency of engineer equipment assets, but an opportunity to leverage our install base of more than 300,000 units, our dedicated group of aftermarket specialists are focused on building stronger relationships with customers and improving connectivity.

Our goal is to demonstrate value at every stage of our customer's life cycle and stay connected on an ongoing basis. During so we will ensure that we’re consultant first as well as provide pull through opportunities such as original equipment sales. In-line with our strategy of leading with services we have added new service technicians.

We will look to develop reliability driven service offerings with diagnostic tools that can minimize the customer's downtime. We will provide remote monitoring and automated analytics which will capture and analyze data, enabling us to turn unplanned repairs into planned repairs.

If you turn to slide 10 you will see that the current aftermarket revenue represents approximately 25% of our total revenues, our strategy is to continue investing and growing this business to drive that number to 30% by 2018.

We expect recurring revenue to grow at a faster pace or two times to 2.5 times that of engineered equipment growth, although recurring revenue growth is not dependent on original equipment sales. We expect strong aftermarket revenue growth this year and look forward to updating you on our progress going forward on a quarterly basis.

Turning to slide 11, our strategy remains unchanged we are focused on delivering differentiation in value to our customers through reliability, best in class technologies and flawless project execution with services. We remain focused on organic revenue growth and pursuing higher margin opportunities.

We will continue to focus on debt reduction, working capital and free cash flow conversion. Turning to slide 12, we see that occurred net debt to pro forma EBITDA ratio is 2.9 times. Through debt repayment working capital excellence and EBITDA expansion we believe we can achieve a two times leverage ratio with an 18 months to 24 months.

We paid down $20 million of debt during the fourth quarter exclusive of new borrowings with approximately 50 million from cash from operations bringing our total debt pay down to 37 million in 2015.

We are also evaluating sales leased backed opportunities as we progress through 2016 to ensure we provide shareholders optimal cash management activities. In reference to the 2016 outlook we’re seeing continued challengers with lower demand in certain end markets as well as lower blocking activities.

As we've all seen off late many peers in industrial technology companies are forecasting declining revenues, bookings and earnings. We booked $100 million of orders in Q4 and we’re disappointed with that number as some projects were delayed and in general represents a lower intake.

However, we are striving to expand upon all bookings opportunities in Q1 and throughout 2016. With that I will turn the call over to Ed to discuss our financials in more detail..

Thank you, Jeff and good morning everyone. As mentioned I will highlight in more detail both the GAAP and non-GAAP performance for the quarter and 12 month period particularly regarding our three segments.

As a reminder our non-GAAP adjustments include several items such as acquisition and integration expenses and the impact of acquisition asset valuation adjustments on the income statement including higher depreciation amortization and earn out expenses.

Our non-GAAP presentation is intended to provide better trend analysis and assessment of our core business performance. Beginning on slide 14, you will see our full year 2015 results as reported. Revenue was a record 370 million, an increase of over 40% from the 263 million in the prior year period.

And non-GAAP operating income also a record was 43.3 million an increase of 28% from the 34 million in the prior year period. Moving on to slide 15, our revenue was a record 103.9 million for the fourth quarter of 2015 , an increase of 37% year-over-year and 6% sequentially. Organic revenue was flat for the quarter.

As previously mentioned, our annual revenue was a record 370.1 million an increase of 40% over prior year. Organic revenue on a constant currency basis was up 3.4% over the prior year to-date period. Our revenue gains are being driven by a combination of organic growth and sales excellence as well as revenue from our Peerless acquisition.

On slide 16, you will see our booking and backlog trends. We are pleased with our solid level of backlog at 208.5 million as of December 31, 2015 up nearly 50% from the prior year end. We're also pleased with our 358 million of bookings for the full year 2015.

Organic bookings were down 7.5% in the quarter due to weaker market conditions but flat year over year on a full year basis. Continuing on to slide 17 our gross margins improved sequentially from 31.6% in Q3 to 32.5% in Q4.

This was due to a favorable revenue mix, project management excellence and price management, non-GAAP operating margins declined sequentially to 10.1% from 13.2%. On a full year basis non-GAAP operating margin was 11.7% down 120 basis points from the prior period.

Moving on to slide 18, EBITDA was 12.7 million for the fourth quarter up 43% from the prior year period. On a full year basis EBITDA was 48.9 million up 25% over the prior year period. Non-GAAP operating income was 10.5 million for the fourth quarter, up 38% from 7.6 million in the prior year period.

These improvements are attributable to organic growth coupled with operational excellence as well as our recent acquisitions. In our earnings release you will see that we recorded an intangible asset impairment charge of 3.3 million in the fourth quarter.

In conjunction with our annual assessment during the fourth quarter we recorded this noncash charge related to certain legacy business trade names in primarily the fluid handling and filtration segment.

Now moving on to our segment discussions beginning on page 19, revenue in our environmental segment was 38 million down 6% from 40.3 million in the prior year period. Bookings at 30.3 million were also down 9% over the prior year period attributable to market softness, Asia and a few project delays.

On a full year basis revenue was 162 million up 27% over the prior year period although flat organically. Bookings were 162 million for the year up 41% over the prior year and up 5% organically. Our aftermarket business continues to gain momentum.

Moving on to slide 20, revenue in our energy segment was 49 million up 145% from 20 million in the prior year period, this higher revenue was driven by 2014 acquisitions in Peerless contributing 3.5 million and 28.2 million respectively versus the prior year.

Aftermarket and retrofit opportunities continue to grow in a segment as well as global expansion. While full year revenue was up 100% due to the Peerless acquisition, organic revenue growth was strong up 11% for the year. Bookings up 128.4 million for the year were up 70% over the prior year period with organic bookings down 14% on a full year basis.

Our midstream natural gas pipeline business continues to be a solid growth opportunity. Moving on to slide 21, revenue in our fluid handling segment was 67.6 million for the year up 3% from the prior year all of this being organic growth. Bookings were also up on year over year basis to 67 million, an increase of 4.5%.

Margins have improved in a fluid handling business over the same period of last year due to continuing gains in aftermarket. Lastly on slide 22, you will see our condensed balance sheet including the inclusion of Peerless.

As Jeff mentioned earlier CECO is focused on lowering the current leverage level to a targeted net debt to EBITDA ratio of two times with an 18 to 24 months. At the end of December '15 we had net debt of 143 million comprised of gross debt of 177 million less cash and cash equivalents of 34 million.

This represents a net debt to trailing 12 month EBITDA ratio of approximately 2.9 times as of December 31, 2015. The team is diligently working on bringing this ratio down as committed and as demonstrated in the fourth quarter. This is a top priority for us and we will utilize our strong free cash flow to accomplish this objective.

We have demonstrated that we know how to deliver on such a goal as we achieved a similar plan in the period of immediately after the Met-Pro closing two years ago.

We plan to do this again with Peerless, we’re focused on further improving our working capital practices and wisely managing capital expenditures to maximize free cash flow for debt repayment. At this juncture we will now like to open the call up to your questions. Operator please open the phone lines..

[Operator Instructions]. The first question comes from Brian Drab of William Blair. Please go ahead..

I wanted to start by asking if you could give us some more guidance, some more detail around what you're expecting for 2016 and you commented on double digit growth that you're expecting in the recurring revenue piece of your business but can you give us any sense for what you're expecting for overall organic revenue growth in 2016?.

We’ve been working on that quite a bit. You know I think in reference to your points we do feel the aftermarket recurring revenue is going to be up. Having said that with the headwinds we probably think the OE side will be down. So I'm sure you probably already calculated that. In terms of the outlook we look at data points much like you do.

You know if we look back four months with the total CECO business including Peerless our run rate is in that $450 million revenue range for the past four months. It's kind of how we're thinking about that, Brian and the run rate annualized for Peerless in the 120 million range and the run rate for CECO is probably in the $330 million run rate.

So we're kind of feeling that our run rate is around 450 on revenue side and then having said that the past couple of quarters we're booking about $100 million of new orders. Obviously we like that to be a much higher number, we're working diligently on sales actual us to move that number up to a higher number that's clearly our goal.

So there's a couple of data points for you and then the other variable is we have roughly $210 million of backlog which we feel most of that will be converted to revenue in '16 and that's your probably $25 million to $30 million per quarter of backlog hitting the revenue.

So those are the three data points that we're looking at in creating our outlook.

Does that give you some color?.

That is a good color, Jeff. I guess if I could just try and get you to sum it up though would you say if you’ve got the strong growth in the recurring side of the business which I think is you said about 25% of sales today and OE is down that's the balance of the business.

Overall we're going to down somewhere, I mean is it 0% to 5% or more like 5% to 10% do you think organically for the overall business. I mean I don't know if you really have a sense for how much OE is going to be down..

We’re trying to calculate that. We’ve some upside opportunities for us and there's clearly some downside. You know I would say we're probably going to be in the middle of the road down on OE, so we haven't published guidance on that but I think your two data points are covering it pretty well.

Clearly, I'd like to pick up $10 million to $20 million of aftermarket and potentially the OE will be down but in essence the organic growth on the OE side will be challenging in 2016 due to the headwinds and I think you probably know that very well..

Yes. And how do you want us to think about margin? I mean maybe we can talk about operating margins since those are the numbers in your slides here for the fourth quarter is 10.1% non-GAAP operating margin.

How does that trend through the quarters for 2016, do you think and for full year 2016 are we up from that 10.1% that we had in the fourth quarter?.

We have spent a lot of work on that. Obviously operating margins and gross profit is very important to what we do. You know I'd like to think the '16 margin profile could reflect the full year 2015 margin profile and then just on a simplistic term.

I think Q1 could reflect Q4 and then as we move into the year, Q2, Q3 I would like to see some uplift on the operating margin side. In today's outlook I'm probably thinking the full year '15 fifteen margins would transfer into 2016..

Okay.

So is the feeling just sort of -- you know you're ahead of schedule on the cost cuts at Peerless, the operating environment being more challenging is offsetting some of that in the near term and when you know when the end markets pick up then you will get leverage those cost savings more in the near term, it's just sort of offsetting the tough environment?.

Well stated, correct..

Okay. And just last question I wanted to ask is, you know we talked to you quite a bit over the last few months about China and obviously the energy environment and low price of oil environment.

How has your outlook there, I mean China obviously are more concerned about -- can you can you talk a little bit more about those two end markets and how they are or have not surprised you in the last few months?.

Sure. First off we continue to invest in our business in China. CECO Asia is very important to us long term. We want to be a stronger player there, we have low market share. We have a lot invested there. We have a very good team there and my sense on 2016 in CECO Asia in total is will probably be flattish.

That's kind of how are our sales dashboard and our sales organization is kind of looking at it.

Actually our performance in Q4 was below my expectation in China so I'm not really happy about that, however the outlook we're in $60 million - $65 million range for CECO Asia and that's we're probably thinking that's going to be flat for 2016 but there's a lot of a opportunities for us there mid-term and long term and that's kind of how we're thinking about it today, Brian..

The next question comes from Sean Hannon of Needham & Company. Please go ahead..

If I can just go back into the operating margin topic again what were contributed there in terms of driving that down and the contributors say from the OpEx leverage, obviously you’re struggling in those numbers but your sales were decent, your gross margin was an uptick just trying to get a little more clarity around that..

Specifically Sean, we’re thinking the operating margin profile for a full year 2015 will carry through in 2016 obviously with a little additional revenue uptick, maybe a little uptick in the aftermarket side of the business we would like to be able to say our 2016 full year margins will be better than Q4 but is there a specific question you have there?.

Yes what I'm asking Jeff is, what are the contributors we took down operating margin from the third quarter but we ticked up our revenues, we ticked up our gross margin. Obviously it's merely an OpEx function there and just trying to get some better understanding around that..

Yes sure. As you know the Peerless team has been doing very well. There is a lot of streamlining that has been taking place a lot of the plant consolidation and all those good things to help us run a lean asset like business.

Some of that has not been -- those decisions have been made, those costs have been taken out, they're now working their way through the P&L. So in Q4 we still had some of those costs baked into the business.

Going into Q1 some of those cost out and manufacturing improvements are now falling into the P&L but that's kind of why we had little bit lower operating margin in Q4 because our SG&A, OpEx to your point was around 22% and as you know our model is usually around 18%.

So I do see that coming down a little bit in Q1 and Q2 maybe a point a point or two throughout the year. .

Okay.

And can you talk a little bit [indiscernible] margin since acquiring where you feel those businesses are today particularly as we think about a challenged China environment?.

Sure. Actually John Lee's [ph] performance on revenue and gross profit in 2015 were principally where we thought they'd be. So their revenue and gross profit was very solid and the outlook for the gross profit profile shouldn't change.

John Lee gross profit profile is always been slightly below the CECO gross profit level but they have a lower operating footprint which helps the operating margins get closer to what CECO has aspired to. So they're on track. Number two, the EMTROL [ph] fuel business, we’re extremely pleased with that FCC refinery business, it's growing.

They had a good bookings and revenue year. On the gross profit side they probably were a little bit lower than we expected on the gross profit on OI [ph] side but they clearly made it up on the bookings and revenue side.

This year the EMTROL [ph] refinery cycle and the vision and goal is to continue their number one market share globally while boasting boosting their gross profit so that's clearly that rolls up one of the environmental technology sector that clearly has an opportunity to improve gross profit and operating income to better levels in 2016.

So they were slightly below our expectations in 2015..

Okay. And then last question here.

Is there any reason obviously environment kind of side and in environment it feels quite challenged, flattish, is there any reason to think about whether there could be some of those projects that have been pushed that they pick or other types of projects on the horizon that could provide an up catalyst for your folks during the course of the year that you’re monitoring or is this lot of this really just a matter of, hey we need to keep our head down, we need to execute in terms of the top line, we just have to wait and see..

There is probably the entire organization is very focused on bookings intake, the sales dashboards, sales excellence, the entire organization, senior leaders, general managers, we recognize we need to bring in more in-take of business number one. Number two, there are some upsides.

You know the natural gas [indiscernible] business is growing and expanding we want to capture more share in that business. The refinery cycle and activity is very solid. We want to bring in more business there. I'd like to see, China's been a little muted, we're expecting more growth there so probably not so much in the Asian arena.

Some of the midstream pipeline business is still solid. We'd like to carve out more share there, there are some very nice projects there.

And then the catalyst on an aftermarket recurring revenue is probably in the top one or two for us to drive top line and margin so we have an excellent team, we have an excellent leader running that business and we probably invested a couple of dozen additional aftermarket sales specialists in the past couple years to drive that.

So probably aftermarket recurring revenue would be the biggest answer to your question..

The next question comes from Gerry Sweeney of ROTH Capital. Please go ahead..

When you talk to your customers what are they saying out in the market, what kind of detail are they giving you in terms of their order patterns or expectations on a go forward basis? And obviously we've seen a shift over the last couple of months, when did you really start to see that shift as well?.

Q4, Q4 is when we started to feel the shift. I thought our dashboards all summer Q2 and Q3 our sales dashboards which we monitor every week. We’re solid and still growing. Probably Q4 was the first time we're seeing the sales dashboards come down a little bit.

We're seeing some of the orders we were counting on in Q4 being delayed a little bit in a few of our businesses so clearly we were expecting another $10 million or $15 million of bookings in Q4 particularly the senior leaders and I we missed that. So those were pushed out.

Some were delayed a couple of those we’re still trying to pull in Q1 that are still funded and we're still wanting to book those but we measure the dashboard, the sales dashboard metrics every week is it growing as we close orders or as orders are on hold, are we adding more quotation activity to the dashboard that's pretty much the metric and that reflects how customers are thinking.

But Q4 clearly Q4 we started to see -- we started to feel the slowdown..

Okay. And then China was expected -- if we revert back to this [indiscernible] last year, I mean you had some pretty good expectations for China.

What's the difference between -- we will say this time last year the summer and now in terms of how much China was going to be projected to be into your P&L?.

China's bookings intake was below our expectation and that transfers into revenue and operating income deliverables.

So we felt the slowdown probably as you did throughout 2015 but we've been in China for 11 years and we've added a couple of very nice businesses including the ones off late that we've been talking about and we have an excellent team, excellent portfolio ,excellent end market strategy.

The intake of business has slowed for the full year 2015 and in talking with our sales leaders every week we're seeing 2016 potentially being relatively flat to 2015. So that's pretty much the long and short of it.

It's not one or two sectors it's pretty much across the board there's been a slower buildup of dashboard or slower buildup of our pipeline and clearly that slower closing of orders. So that's kind of how we’re thinking about that Gerry..

And then just one another quick question, what's the margin profile of the aftermarket business?.

It's significantly higher than the OE piece. As you know you know you follow very good industrial technology companies and it could be north of 50%. We have aspirations for gross profit. You know clearly we’re large OEM technology provider and we want to be able to have proprietary products and a strong aftermarket service business to aid.

Take great care of our customers assets long term and at the same time drive a higher gross profit profile. Probably don't want to publish too much of those numbers because that's public data but clearly it's significantly higher than any OE side, Gerry..

The next question comes from Ryan Cassil of Seaport Global Securities. Please go ahead..

You guys have jointly rolling into the organic comp now, can you give us a sense of what those organic bookings trends were and John Lee [ph] exiting the year here in the fourth quarter..

For Asia, Asia was flat in 2015 however John Lee's [ph] business was right on track with their 2014 acquisition and pro forma outlook.

Are you looking for a revenue number for John Lee?.

I was looking for the bookings for John Lee, so the exit rate..

Probably in the $25 million a year booking rate plus or minus 10%..

And then with respect to Peerless the gross margins in the 37% range is well above what that business was doing not long ago, can you give us a little more color into what specifically drove that expansion so fast, was it headcount sourcing, any color there would be great..

Sure, I mean if you look at the deck Ryan, I mean that's a very good question we have kind of laid that out in the deck. There's a host of things in the deck that kind of explain that. But, first off that the team on the field right now in Peerless in running the business and it's fully integrated with the CECO doing an excellent job.

We have a very strong team on the ground. Principally, we have applied the CECO operating model to less internal manufacturing. So we closed a very large plant that was very large very, very cost heavy, very inefficient and we closed it and we shifted the work to four or five strategic manufacturing partners into the Denton, Texas facility.

So A, our internal plans are running more efficient. We no longer have to incur the excess of cost in low gross profit from that large inefficient plant. So that demonstrated a lot of gross profit expansion right away. We clearly merged the CECO and Dallas main offices and did some streamlining and that was cost out.

We reset division overhead and division OPSEC [ph] targets with all the divisions to a very CECO standardization, SG&A as a percent of revenue, manpower hit resources relating to revenues. So we kind of shifted to a very productivity focused business model and very similar to CECO.

So the team has done a really good job with the gross profit management. The team running the business is very talented and they're doing everything they can to drive margins.

We've developed the pressure products group developed an excellent project management tracker for every drop now is managed precisely for cost and gross profit and everything is looked at in a very meticulous way. There was an inordinate amount of IT spend so we trim that back.

But Ryan if you look at page 8 you know those things that we've message are everything that we've delivered on in the past six months and so we're in a really good place with Peerless. Now we want to grow the business..

Let me just clarify, this is Ed here just one clarification on the Peerless margins, as Jeff said we’re very pleased with the performance and the extraordinary uplift they've had their, the 37% you see in Q4 for them it is still early, only four months in.

So we’re not expecting that 37 to continue at that pace, you will see some modulation of that going into '16, so yes that number was very high, that’s what our expectation would be going forward for full year '16 for Peerless..

Thank you. That’s exactly correct, Ed. I would say going forward the CECO Peerless business would be operating at similar operating metrics going forward..

And you mentioned some facility closures and you guys have plans to potentially sell some of those underutilized assets or do lease backs.

Could you give us a sense of what the net proceeds could be at this point and where you guys are with some of those conversations?.

I would like to say that answer for after Q1 Ryan, but there are a few facilities that we have up for sale. There is one on the CECO side and there is one on the Peerless side.

They are facilities that we’re trying to develop a sale lease back strategy but as you know those take a lot of time, so potentially in the second half of this year we could pick up some cash from sale lease back but I would like to hold that off a little bit till we get through the quarter and have a little more feel for those numbers but it could be $5 million to $10 million but that’s all second half activity.

If we’re able to implement the sale lease back to meet our financial requirements..

The next question comes from John Quealy of Canaccord Genuity. Please go ahead..

I'm sorry I missed this but in terms of expectations in '16 on debt repayment and cash flow what did you guys talk about if anything?.

We did not cover that earlier but we definitely had that as a key focus, we did talk about -- we maintained our goal of lowering leverage ratio over the next 12 months and 24 months. So we'll be using all of our excess free cash flow to service debt to get it back down to 2:0 ratio no later than 24 months from now hopefully a little bit sooner.

So we're still on course on what our aggressive pay down of the debt..

And Jeff, just to back up at the highest level. So a lot of these end markets are out of your control and you can't push sales into them even if you wanted to.

So when you think about running the business in '16 are you going to be more focused on the rev growth side or continuing the good work you've done on EBIT and expansion and things like that, what's really going to drive you this year?.

Well you know clearly the organization is focused on revenue growth, operating income growth and working capital improvement those are the three pillars of how our goals are set or annual operating plans are set and the team is focused on those three.

Clearly you know I've got a really good feeling for how the margins are set and now we process work at healthy margin. So that's always something you have to pay a lot of attention to when we do that on a weekly cadence.

But I'd say bringing in more business, you know capturing more of that natural gas powered business we have an excellent energy team bringing in more of the total downstream natural gas power business, I think we have an opportunity now with our -- since our portfolio is broader and stronger and the OEM's view us as a bigger player.

I'd like to gain more share in the midstream pipeline business. We have a good team on the ground, a great product.

We got to figure out a way to grow market share with that business and continue our focus on becoming a [indiscernible] leader in the refinery and in the industrial markets and I also think we have a very good industrial technology portfolio in place and a team on the ground so I'm expecting that business to perform at a higher level given the team and the talent and the resources so my expectations would be for that group to perform at a higher level.

So I would say sales excellence, you know building the pipeline and closing orders would be our top priority and continuing the normal CECO margin expansion initiatives..

[Operator Instructions]. Next question comes from John Sullivan of Alston Capital Management [ph]. Please go ahead..

I have more of a big picture question here because I think this is likely what's leading to the large discount in the stock that I see.

It's been a couple of busy years during our ownership with respect to acquisitions and building the business to kind of get you guys where you are today which has led to significant integration expenses and a large difference between GAAP and non-GAAP results.

It sounds like you guys are now more focused on the repayment of debt and all those things now. Are we -- I would say done with the acquisitions but maybe done with the larger acquisitions. So we could now focus on more kind of narrowing the GAAP, reporting clean results and generating clean free cash flow..

I would say the answer to your question is yes. That's exactly what we're trying to do, we're trying to continue improving organic growth. Clearly, improving margins, we have a very good portfolio and excellent team so we want to deliver better results each quarter.

And pay down the debt as Ed said in his opening remarks we want to get down to a leverage ratio you know net debt to EBITDA, so that's very important to get that down to an easier level. But principally what you’re saying is correct that’s what we're focused on in the next couple of years..

This concludes the question and answer session. I would like to turn the conference back over to Jeff Lang for any closing remarks..

Good morning and thank you very much for joining our call. We will talk again after Q1. Thank you..