Devin Sullivan - Senior Vice President of the Equity Group Vincent Arnone - President and Chief Executive Officer David Collins - President and Chief Executive Officer.

Greetings, and welcome to the Fuel Tech Inc. Reports 2016 Third Quarter Financial Results 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.

It is now my pleasure to introduce your host Devin Sullivan, Senior Vice President of the Equity Group. Thank you Mr. Sullivan, you may begin..

Thank you Bob. Good morning, everyone, and thank you for joining us for Fuel Tech’s 2016 third quarter financial results conference call. Yesterday after the close, we issued a copy of the release, which is available on our website www.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 would like to remind everyone that matters discussed on 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 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 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 would 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. Many of the same scenes that have lingered over our core businesses during 2015 and the first half of 2016 have continued into the third quarter and will likely persist for at least a balance of this year.

Our results for the third quarter including revenues are 12.6 million, a drop from 21.7 million in last year's third quarter, predominantly due to the timing of revenue recognition on air pollution control contracts. In the U.S.

this generated nearly 80% of our Q3 revenues, demand for coal and overall energy use are both down and regulatory initiatives that could potentially accelerate APC sales remained delayed. In spite of these headwinds, our company has continued to focus on three fundamental initiatives during this period in order to reposition ourselves for the future.

First, in order to ensure that we continue to advance towards generating positive cash flow. We have aligned our organizational infrastructure and related costs with the revenue generating capability of our base business segments those being air pollution control and Fuel Chem.

As noted in our earnings press release, we recorded a charge of 1.1 million in the third quarter related to our organizational changes and I’ll talk more about our SG&A balance in a few minutes.

Second, continue to enhance a revenue generation capability of our base business segment via partnership opportunities where we bring Fuel Tech’s existing suite of products and technologies to market to partner sales channels or we bring a partner's products and technologies to market through Fuel Tech existing sales channels.

As a further example of this initiative in a press release we issued yesterday, we announced the signing of an exclusive agreement under which Fuel Tech has licensed its Recovery CHEM technology to Amazon Papyrus Chemicals Group also known and APC a leading supplier of specialty chemical to the pulp and paper industry in Asia.

And lastly, we are looking to making major investment in new products in technologies that will represent the future of Fuel Tech. Our Fuel Conversion business segment is one of these investments and we will look to be making others in the future. I'll talk a bit about that shortly.

At September 30, 2016 the Air Pollution control capital projects backlog stood at 10.5 million down slightly from 11.6 million at June 30, 2016.

In terms of our sales pipeline, we are pursuing a number of promising new projects in all geographies and are encouraged about our prospects for additional project bookings in the last two months of 2016 and the first quarter of 2017.

Today, our sales pipeline of opportunities exceeds $100 million on a global basis, which is consistent with activity levels in prior years. Year-to-date, we have announced approximately $19 million in new APC project orders, from customers in the U.S. China and Europe for ESP, SNCR, ASNCR, SCR, Combustion and ULTRA technology solutions.

Approximately 50% of these new projects awards were from customers outside of U.S. reflecting our commitment to geographic diversity. We have continued to align our cost with both our business strategy and our current operating environment.

S G&A decline by 1.3 million or 19% in Q3 2016 versus the prior year and by 3.8 million or 16% through September 30. In July 2016, we completed our work forest reduction that resulted in charges of 1.1 million in Q3, associated with the severance and benefits cost.

We expect to realize savings of approximately 5 million in 2016 versus the prior year with total estimated annualized savings realized over the past two year of approximately 8 million. We will begin to see the full benefit from these actions in the fourth quarter of this year, and our infrastructure will be better aligned with our base revenues.

These cost savings have been achieved without any impact to customer service or the ability to pursue ongoing business development activities. We continue to maintain a strong financial position with no long-term debt, our cash position in September 30, was unchanged at 19.4 million from June 30 and about 3 million higher when compared to March 31.

We are continuing to take the necessary steps to becomes cash flow positive, excluding our onetime charges in the quarter our adjusted EBITDA was just short of breakeven. Now let's review our business segment performance in more detail.

In the Air Pollution control segment domestically we are still low position to take advantage of the evolving regulatory landscape. Utility MATS and boiler MATS rules, have been driving particulate mercury and HCL emissions reductions and customers continue to optimize operation of a combination of technologies.

This is creating interest for HCL control with our H clear product line for industrial units along with mercury control where our recently licensed Redox product can be apply to units with wet scrubbing technology.

ESP upgrades are being driven by maintenance requirements while ULTRA and SCRs are being deployed for new industrial projects and environmental requirements for NOx control. SNCR and SCR optimization and new system opportunities are being created with EPA’s CASPER update rule, which was published in October.

This update rule, where we will require a number of states to reduce Ozone season in that commissions by 10% to 50% over the next 18 months compared to actual 2015 Ozone season mission. We do believe that the regulatory landscape will eventually return as a key driver of our business.

As evidenced by the 2015 Ozone Regulations, which will create utility and industrial mass reduction opportunities.

That said, here on the near term, we are looking to capitalize on the increasing deployment of natural gas fired turbines being used for industrial applications and our establishing strategic business relationships with multinational industrial end users and partnering with companies that require our technology portfolio to complete the broad bit package.

In Europe, the European Union Industrial Emissions Directive, which required phased in implementation base beginning this year continue to drive compliance behavior and we believe that our internally developed advanced SNCR technology will assist power generation facilities as they seek to comply with these regulation.

Opportunities exist in the UK for the remaining coal-fired fleet and for units that are converting to biomass.

Additionally to the use of strategic partners with local presence and project execution capability, we are also continuing to strengthen business ties with local entities in Span, Turkey, Poland and the Czech Republic to take advantage of project opportunities in these geographies.

In China the introduction of more stringent NOx reduction standards for select high population areas will continue to drive revenues in the near term revenues. Today, there is a large install base of current SCR systems that will not be able to meet this new target as presently configured.

Upgrading the existing SCR systems will require a parallel upgrade to the ammonia production and delivery technology tied to those SCRs. For Fuel Tech, this presents an opportunity to convert our large install base of ULTRA systems to higher capacity systems.

Additionally, SNCR working in tandem with SCR has become an accepted technology for meeting more stringent emissions requirement. SNCR reduces the inlet NOx emission level to the SCR, which will then enable the SCR to meet the tighter emission standard.

In India back in June we announced an exclusive licensing agreement for our SNCR technology with ISGEC Heavy Engineering Limited, one of India’s leading engineering and construction companies.

This was on the heels of the Indian Central Government issuance, a regulations governing emissions requirement for coal-fired thermal power plants, which are plan to take effect starting in 2017. ISGEC will offer our SNCR solution and projects throughout India where coal remains a primary and growing source of fuel.

The Indian market will move quickly to assess the mix of pollution control technologies to be deployed to meet their regulatory needs. And it is likely that technology demonstrations will occur starting late this year and into the first half of 2017.

And over this past weekend, many of you have seen the news, were by New Delhi, closed schools and ban construction and demolition work for several days, as that city had experienced severe pollution levels in recent weeks. Our SNCR technology is a proven cost effective way to allow utility and industrial client to comply with these rules.

The agreement with ISGEC will cost effectively monetize our proven ignition control technology in the India market. We announced our first sale with ISGEC back in July, and we will report on our progress in this market on a recurring basis as we see for the development.

Now in our FUEL CHEM segment, revenues were down from the prior year as a result of reductions in coal-fired generation driven by the abundant of low price natural gas on the market price and resulting coal to gas conversion. We are pleased however that margins have remained consistent with historical performance.

Currently, there is simply less demand for our products in these traditional end-markets. In a response, we continue to pursue a variety of that to introduce our traditional chemical technology to new customers in the U.S. and overseas and we have be focusing on the expansion of our chemical technology portfolio. In the U.S.

we are seeking to help our customers adapt to the changing manner in which coal-fired units are dispatched. As coal units are required to reduce their load profiles, many of them are having difficulty running at these load levels.

More specifically, there is equipment on a boiler that will impede the unit from running at lower outlet levels without a specific change in operation, the FUEL CHEM program can provide benefit in this instance.

Also we continue to see units that will focus on co-blending as a cost reduction measure, which can cost unwanted slugging and following in the boiler in our FUEL CHEM program and also assist in that. Also in the U.S.

and as further evidence of our efforts to expand our technology portfolio, 2nd August, we announced a signing of a five-year license agreement with Redox Technology Group. And Indiana based especially chemical manufacture that produces chemicals used for mercury remediation in a variety of end-markets.

Redox's solutions has developed a pended approach for the production and use of an iron sulphide base product to enhance the total mercury removable capabilities of waste flue gas desulfurization scrubber systems and sold on both utility and industrial coal fire units.

Our focus over this past couple of months has been to train our internal staff and to perform expletory sales cost with our targeted customer base. Fuel Tech will use its sales channels, business relationships and now as of chemical delivery and distribution to exclusively market of Redox solutions product.

The market drivers from mercury control are the Mercury and Air Toxic Standards also known as MATS for utility units and the boiler Maximum Achievable Control Technology also known as MACT, both of which has specific requirements from mercury emissions.

In Europe, we are excited about the opportunities to offer FUEL CHEM to the operators of biomass-fired units, and municipal solid waste units both of which are known to have severe and costly slugging and fouling issues and we are targeting to demonstrate our capabilities in 2016.

We are working with two clients right now, one an MSW operator and the other are biomass boiler with the attentive performing technology demonstration like this year or early in 2017.

On a worldwide basis, we are expanding our industrial reach into the pulp and paper industry, where FUEL CHEM can address the issue of slugging and fouling in black liquor recovery boilers. In the U.S., we have solidified a technology demonstration with a large multinational company that will commence late this month.

Additionally as I mentioned earlier, yesterday we announced the signing of an exclusive agreement under which Fuel Tech has licensed its Proprietary Recovery CHEM technology to Amazon Papyrus Chemicals group a leading supplier especially chemicals to the pulp and paper industry in Asia.

Amazon currently manufactures and sells a variety of industry specific chemicals to greater than 350 pulp and paper units on that continent. It is our goal to have successful technology demonstration in the U.S. and in Asia as quickly as possible, as stringboard towards accelerating business activity thereafter.

Research & Development has been an important factor in Fuel Tech’s growth and evolution. Our commitment to new ideas is now helping to shape our future. Before I turn things over to Dave, I want to talk about the recent developments for recently created to conversion business segment.

Our fuel conversion initiatives started late in 2014, converts low cost carbon based feedstock into high value engineered carbon products. After few years of continue with investment product testing refinement and client collaboration, I’m pleased to say that we made some solid steps toward the product commercialization.

As noted in our earnings release after evaluating numerous build strategies and potential site selection opportunities that could cost effectively support our commercial development activities.

During the third quarter, we narrowed the considered list of available industrial sites in the Central Appalachian area that are located in proximity to both desired feedstock and to our potential customers. We currently have two sites in early development where we are negotiating the terms that use for those properties.

One of the properties provides us with the tool manufacturing relationship that would expedite production of engineering covering products for testing bio specific customers. We have also open discussion with many of our equipment manufacturers and have released engineering for equipment that we planed procure in the fourth quarter.

In the remainder of 2016 we will be engaging with state economic development authorities and continuing facilitates the various alternatives sources of private financing.

Currently our work continues in refining market scenarios production plans operating and maintenance cost estimates and capital requirements to support our plan to build out schedule and we have also initiated certain necessary environmental committing work.

The needs for quality carbon feedstock in industry is significant and we remain in contact with several end users interested in testing our engineered covered carbon products on a larger scale.

Two large international companies have provided us with non-binding leathers that outlined other respective testing plants and product quantities expected to the beginning of 2017. This testing is conducted through a collaborative effort to improve product performance and strategic process as to the clients.

We continue to gain insight into our targeted markets and are finalizing the engineering basis of both of process and plant design. In closing, I ended last quarter's call with this statement. Our repositioning as a company has begun and I remain excited about our future.

Although, there is still much work to be done, I’m proud to say that the Fuel Tech team is committed to making this a reality. And with that, I'll turn the call over to Dave for his comments. There you go Dave..

Thanks Vince and good morning, everyone, we remain focused on cash management and are watching our balance sheet movements and working capital closely as we continue to execute on business strategies that Vince outlined.

At the end of September, our balance sheet remains strong with cash of 19.3 million, working capital of 32.5 million and we remain debt free.

Consolidated revenues for the nine-months end September 30, totaled 45.6 million down 9.9 million from 55.5 million in prior year and our third quarter of 12.6 million was down 9.1 million from 21.7 million in the prior year quarter.

The decreases for both our nine-months and current quarter period to reflect decreases in both APC and FUEL CHEM revenues, resulting from a general declining coal-fired power generation, these declines has been noted in both foreign and US domestic business.

Our gross margin percentage for the nine-month period was down slightly to 37% from 39% in the prior year, for the current quarter our gross margin percentage was 42% representing an increase of 6% from the prior year. This increase was due to a higher percentage of FUEL CHEM segment business versus APC segment business in the current quarter.

Our selling, general and administrative expense for the nine-month period totaled $19.7 million, down $3.8 million from the prior year. For the current quarter, our SG&A expense totaled $5.8 million, down $1.3 million from the comparable prior year period.

During the current quarter w did recognized just over 1 million in restructuring charges, primarily represents personal related severance expense.

As Vince discussed, we're continuing to evaluate our cost structure and have taken a number of measures to reduce our spending, including a recent headcount reduction in July, which will deliver annualize cost reductions of more than 5 million. We continue to evaluate and make needed improvements as current business conditions continue to evolve.

Our research and development cost for the nine-months totaled 3.6 million, which is essentially flat with the prior year amount of 3.4 million for the current quarter our research and development totaled 1.3 million, again flat with the prior year amount of 1.5 million.

We are continuing to invest in the development of new technologies and products and expect as we continue spending in R&D through the remainder of the 2016, we continue to believe that it is a critical component of our future growth.

Our net loss for the nine-months and current quarter total 8.3 million $0.35 per diluted share and 3 million and $0.13 per diluted share respectively. Our adjusted EBITDA for the nine-months totaled a negative 4.3 million. Our APC reported nine-months revenues of 29.1 million, down slightly from the prior year total of 31 million.

For the current quarter, our APC revenues totaled 6 million down 7 million from the prior year total of 13 million. Our backlog at September 30, was $10.5million, compared to 22 million at December 31.

Our APC segment gross margins for the nine-months were flat at 28% as compared to the prior year, while our current quarter gross margins increased from 23% to 30% a 7% increase over the prior year. Our APC segment gross margin is dependent on the mix of products sold in future periods across all geographies.

Our FUEL CHEM segment reported nine-month revenues of 16.5 million, which is down 7.9 million from the prior year total of 24. Our current quarter FUEL CHEM revenue totaled 6.6 million, down 8.6 million from the prior year.

As mentioned previously these declines are associated with the general decline in coal-fired power generation and our generally tied to a specific customer account.

Our FUEL CHEM segment gross profit was consistent in both the nine-months periods and the current quarter with gross profit percentage is ranging from 52% to around 56%, we expect to see our FUEL CHEM gross margins continue to report between 48% and 52%, gross profit which is consistent with previous guidance.

Cash and equivalents at September 30, 2016 totaled 19.3 million and we remain debt free. Our working capital balance is 32.5 million, which is down 3.3 million from the prior year-end. Cash use and operating activities for the first nine-months was 2.2 million, due principally to our operating loss. With that, I would like turn the call back to Vince..

Thank you Dave. With that operator let's please open the call for questions..

Operator:.

Thank you operator, I would like to thank everyone that had the opportunity to join us on the call today. Obviously, it's a busy morning for our country, but in any event I would like to thank everyone for their interest in Fuel Tech and we appreciate your support. Thank you very much..