Greetings and welcome to the CSW Industrials Inc. Fourth Quarter 2016 Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Joseph Armes, Chief Executive Officer for CSW Industrials. Thank you, Mr.Armes. You may begin.

Thank you, operator. Good morning, everyone, and welcome to CSW Industrials' fiscal fourth quarter investor call. Joining me today are Joseph Armes, Chief Operating Officer of CSW Industrials; Gregg Branning, Chief Financial Officer; and Christopher Mudd, Chief Operating Officer. If you have not received the earnings release, it is available on our website at www.cswindustrials.com. This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release. During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings release and the comments made during this call and in our Form 10-K and other filings with the SEC. We do not undertake any duty to update any forward-looking statements. This call will also include an analysis of adjusted operating income which is a non-GAAP financial measures of performance. This non-GAAP measure should be used as a supplement to and not a substitute for net income computed in accordance with GAAP. For a more complete discussion of adjusted operating income see our earnings release. And with that, I would now like to turn the call over to our Chairman and Chief Executive Officer, Joe Armes.

Thank you, Tom. Good morning, everyone, thank you for joining us on our call today. First, I'd like to remind everyone that we're on a fiscal year ending March 31. So the results released yesterday are for the fourth fiscal quarter of the year that ended March 31, 2016. We were pleased to see an improvement in our operating results following lower seasonal volumes that we reported in the third quarter. Quarterly revenue of $76.3 million and adjusted earnings per share of $0.35 were both right in line with our expectations and reflected higher seasonal demand in our HVAC end-market, continued strength and demand for our architecturally specified building products, and some signs of stabilization in energy markets. During the quarter, we continued to make incremental progress toward our long-term strategy to build our company into a leading diversified industrial supplier in the markets we serve. The quarter was highlighted to focus on integration activities and I'm pleased to report that we have identified an additional $0.5 million in annual savings as we made the decision to consolidate the specialty chemicals manufacturing at Jet-Lube, Canada, into our Whitmore manufacturing facility. These additional savings bring our total identified annual cost savings to $5.5 million, which we expect to fully realize by the end of fiscal 2017. And this is in addition to the identified procurement savings of $2 million that we had previously disclosed. While the fourth quarter was quiet on the acquisition front, we worked diligently to execute our integration plans for both Deacon and AC Leak Freeze, and I'm pleased to report that both of these acquisitions are performing well and were positive contributors to our fourth quarter results. Regarding Strathmore, volumes remain challenged due to its exposure to energy markets, but we have identified a clear path to…

Thanks, Joe. As Joe mentioned, I have had an opportunity in the past month to dig in and begin to develop a good understanding of CSW Industrials. From this initial look, I'm looking forward to help build this company from the groundwork already laid by the team. I was attracted to CSWI because of its best-in-class products and the opportunity to expand on the depth and breadth of the company as a combined entity. I view the unique business combination that resulted from the spin as a truly compelling long-term growth opportunity for all stakeholders. In the coming months, I'm excited to help build upon the success of the team, although I am mindful of the hard work still in front of us. From a financial perspective, we will be working to continue to enhance our reporting structure and systems, which will enable us to leverage stronger operating analytics internally and provide enhanced visibility through improved disclosures to the investment community. I look forward to meeting all of our key stakeholders in the next few months and sharing our progress next quarter. And now I'll turn the call over to Chris.

Thanks, Gregg. During our segment level discussion, I will be referring to our adjusted segment level results which exclude one-time acquisition costs, start-up costs following our spin from Capital Southwest, and exclude the pension gain incurred in the second quarter. So first, Industrial Products; Industrial Products fourth quarter revenue was $33.9 million, an increase of 15.6% compared to the prior year of $29.4 million. This increase in sales volumes resulted from strong customer demand for our HVAC products and also the benefit of seasonal volume as we enter the air-conditioning season in North America. This segment also benefited from strength in our architecturally-specified building products which delivered record sales and profit contributions, and this includes both Balco and Smoke Guard. At Balco, higher volume has been attributable to their successful entrance into international markets, while Smoke Guard has seen tremendous success in new product introductions, particularly in the large-screen curtains. For the full year, segment revenue increased 17% to $138.6 million. Industrial Products operating income adjusted for one-time items in the fourth quarter was $6.3 million or 18.5% of sales, compared to $5.3 million or 17.9% of sales in the prior period. The increase in income relative to the prior year was related to higher sales during the period and a favorable sales mix. For the full year, operating income increased 41.5% to $27.9 million. Next, Coatings, Sealants and Adhesives, fiscal fourth quarter 2016 revenue was $25.3 million, which was nearly double the prior year period of $13.8 million, and this is due to the acquisition of Strathmore. For the full year, revenue increased 103.4% to $106 million. Fourth quarter segment level operating income was $257,000 or 1% of sales compared to $2.4 million or 17.4% of sales in the prior year. Operating income was pressured during the period from…

Thank you, Chris. We are pleased but not satisfied with the progress we've made in fiscal 2016 during which we grew free cash flow meaningfully, and we will endeavor to do so again in fiscal 2017. We continue to believe that our broadly diversified product portfolio and end market provide a stable platform and combined with our strong balance sheet and the dry powder it provides, equips us more than adequately to execute to our long-term growth strategy. Finally, I want to acknowledge my colleagues here at CSW Industrials and thank them for their diligence, professionalism in serving our customers every day. We take seriously our responsibilities as a management team, we are resolute in our commitment to steward well the capital that you, our shareholders, have entrusted to us. Thank you for your time today and for your interest in CSW Industrials. Operator, we are now ready to take questions.

Thank you. [Operator Instructions] Our first question comes from the line of Jon Tanwanteng with CJS Securities. Please proceed with your questions.

Good morning, thanks for taking my questions.

You bet.

Can we just go back to the energy, mining, and industrial commentary; do you actually expect to see organic growth in that segment or end market in fiscal 2017?

No, we don't.

Okay, got it. And maybe help us to understand when the synergies and the cost reductions that you have laid out begin to completely offset the corporate infrastructure that you have put into place as a public company?

Hey Jon, this is Chris. So on the two different areas that we talked about, the Jet-Lube/Whitmore integration, as you might remember, the Jet-Lube Houston facility lease goes through the end of this current fiscal year. So we're starting to see some of the synergy savings already, we've already completed the transfer of all manufacturing to Whitmore, and so we've ceased manufacturing at the Houston facility, we've also ceased manufacturing in Canada. So I would say through this fiscal year we will see with each quarter, savings starting to materialize. The other area was on the procurement cost savings where we've identified a total of $2 million. We've identified about [ph] more savings and have implemented that and the rest of it we're just getting into. So by the end of this current fiscal year, we expect to be at that $5.5 million and the $2 million of procurement savings by the end of this fiscal year but it will be ramping up during the year.

Okay. Is it more of a straight line or do you think there is going to be some kind of step function when you finish that lease?

It's going to be a little bit choppy. Obviously, the -- in the case of things like the lease arrangement that we have on the facility in Houston, that doesn't go away till March 31, 2017, but overall it's going to be a little bit choppy as we go through it.

This is Gregg. Maybe some clarification, what we'll see is we'll be at that run rate savings as we exit Q4. So I don't think we'll see the full savings in the year; we'll see quite a bit of it but the key is that we'll be in a run rate position by Q4.

Okay, great, thanks. And Gregg, by the way, welcome aboard, number one.

Thank you.

Number two, could you help us understand what went into unusual tax rate in the quarter and how should we [ph] one-off items and adjustments in the future quarters?

Sure. So some of the street items that we had in the quarter, we had approximately $1.3 million related to some state tax matters associated with the spin. There was also approximately $800,000 of transaction costs that we had related to the spin and then $900,000 of acquisition-related costs that all affected our tax rate to drive the effective rate as high as it was from a GAAP perspective. We would expect that our effective tax rate would come down to a more optimized level in 2017 absent any new acquisitions. So I think this is more of an anomaly in the quarter and the year for fiscal 2016 as a result of the spin and some of the other transactions that took place. And then you asked me another question about adjusted earnings and I fail to remember exactly how you asked that.

Yes, just what other adjustments should we expect in future quarters for those integrations or anything else like that?

Certainly we're not aware of any at this point, we've not planned on any. But if they come up, we'll certainly make them aware -- make you aware of them and disclose them as such -- most adjusted earnings type items are things that you don't necessarily anticipate. That being said, the only thing I will say is that there will be some impact to our Q1 results as a result of a transition.

Okay, great, thanks. And finally just any update on the prospects or the landscape for M&A in the near future expected to pick up the pace at all?

Yes, absolutely Jon. We continue to be highly focused on accretive bolt-on acquisitions that help us to lever our distribution channels, to leverage our distribution channels effectively, and we've had great success with the Leak Freeze and the Deacon and others of that. I would say that the market is really still very frothy, we've been involved in a process very, very recently we're all still little stung by it that great business right in the middle of our fair way that we were actively pursuing and had several opportunities to raise our bid, we've raised our bid a time or two, and hopefully got to a point where we just had to say no, and that company went to another buyer. And so we're going to maintain our discipline, and we're going to continue to focus on, again, accretive bolt-on acquisitions but I would say the market is really frothy and really expensive right now, and the discipline we hope and we believe will be a reward in the long run.

I think it will be. Thanks again, guys and we look forward to having you guys at our conference in July.

Great, thanks Jon.

There are no other questions in queue. I'd like to turn the call back over to management for closing comments.

Great. Well again, once again we're very grateful for your interest and we think that 2017 will be a great year. We're really pleased to have Gregg with us and look forward to seeing or speaking to each of you again soon. Thank you for your interest. Take care.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.