Good day, and welcome to the American Electric Technologies to Report First Quarter 2015 Results and Conference Call. Today's conference is being recorded. This press conference contains forward-looking statements, as defined in Section 27A of the Securities Exchange Act of 1934, concerning anticipated future demand for our products and other future plans and objectives. While the Company believes that such forward-looking statements are based on reasonable assumption, there can be no assurance but such future revenues, profits, plans and objectives will be achieved on the scheduled or in the amounts indicated. Investors are cautioned that these forward-looking statements are not guarantees of future performance. Actual events or results may differ from the Company’s expectations, and are subject to various risks and uncertainties, including those listed in Item 1A of the Form 10-K filed with the Securities and Exchange Commission on March 30, 2015. The Company assumes no obligation to publicly update or revise its forward-looking statements, even if experience or future events make it clear that any of the projected results expressed or implied herein will not be realized. At this time, I would like to turn the conference over to Mr. Charles M. Dauber, President and CEO American Electric Technologies. Please go ahead, sir.

Thank you, Kevin. Good morning everyone. I'd like to welcome you all to American Electric Technologies' first quarter 2015 earnings call. Joining me today is our Senior Vice President and Chief Financial Officer, Andy Puhala. For our call today, I'm going to start with a review of our first quarter results and then I'll Andy walk you through some more financial details before I come back with some additional comments on our business. We'll then move to a question-and-answer session coordinated by the moderator. I'll start by saying that I am pleased to report that the Company reported consolidated revenues in the quarter of 15.3 million up 12% from 13.7 million in Q4 although down slightly compared with Q1 last year. Gross margins improved by $2.3 million in the quarter to 15% up from 0% in the fourth quarter but down slightly versus the 15.4% in Q1 of last year. Consolidated income from continuing operations was 0.3 million for Q1 which was a $2.6 million improvement over Q4 but was down versus the 0.5 million in Q1 last year. The revenue increased, gross margin increased and the consolidated income improvement were all directly related to the successful resolution of the operational execution, new product introduction issues the Company faced in both Q3 and Q4 of last year. As we said in our Q4 earnings call, the company expected to be through those issues by the end of the year which we were and that for Q1 we would be returning to more traditional gross margin levels which we have. I'm proud of the team for the hard work and improving our operational execution from the resulting financial progress for the Company. I'll now the call over to Andy for some deeper financial discussion before I come back and provide more thoughts on our markets, on our business so far in 2015.

Thanks Charles. As Charles mentioned, our consolidated revenues for the quarter were 15.3 million up 12% from Q4. Gross margins improved by 2.3 million to 15% and our consolidated income from continuing operations was 0.3 million for Q1, a 2.6 million improvement since last quarter which demonstrated the execution issues in our U.S. business are being addressed. Turning to our JV's the net equity income from our foreign joint ventures after expenses was essentially breakeven for the quarter. Our BOMAY joint venture in China had revenues of 8.8 million for the quarter up from 5.9 million in Q4 but down 10.8 million versus Q1 of last year. BOMAY is an unconsolidated investment in our 40% share of BOMAY's net equity income was 191,000 in the quarter. Due to Chinese macroeconomic issues we expect BOMAY to remain profitable but don't expect it to return to 2014 levels during the current year. Our joint venture MIEFE in Singapore lost $184,000 on 1.7 million of revenue in Q1. Our share of the loss was about $75,000 in the quarter. The Southeast Asia oil and gas market will be down in 2015 based on the drop in oil prices but we are working closely with our joint venture partners Sonepar to integrate MIEFE sales organization to build backlog and improve performance for the Company into the second half of 2015. Net income attributable to common shareholders was 0.2 million for the first quarter or $0.02 per common share compared to a loss of 2.1 million or $0.25 per common share in the fourth quarter of last year, but it was down from 0.5 million of profits and $0.09 of earnings per common share in Q1 of 2014. Moving to the balance sheet and the cash flows we ended Q1 with 2.6 million of cash…

Thanks, Andy. I'd like to now share with you all more information about our market sectors and our business. As I discussed earlier, we feel the Company has successfully turned the corner with the operational execution issues we faced in the second half of last year. I believe that at this time the Company is best positioned for growth than we've been at any time in our history. With the products, the capacity and the team that really take our Company to the next level of revenues and profits. With that said, the energy market that we participate in has continuingly experienced challenges related to drop in oil prices and I want to walk you through our market sectors and give you more color about our business. Let's start with our oil and gas market sector. In Q1, our oil and gas related business continues to be the primary revenue driver representing 75% or 11.5 million of revenue, up significantly from the 8.9 million in Q4 but down from the 13.6 million in Q1 last year. Gross margins for the oil and gas business were 14% in Q1, up from the negative 1% in Q4 but down slightly from the 15% in Q1 last year. As I've highlighted in previous calls and as is described in the Investor Relation's presentations available on our Web site, the Company operates in three distinct parts of the oil and gas sector, upstream which is the finding and the getting the oil or gas out of the ground, which includes land and offshore drilling and offshore production, midstream, oil and gas which includes pipeline and gas processing and downstream oil and gas which includes refining petrochem and L&G type applications. Another way to look at our oil and gas business is to separate our…

Thank you. [Operator instructions] We'll take our first question from Greg Ayers. Your line is now open.

Thanks and good morning. Charles, I was wondering if you could just please repeat what you said earlier about the majority of projects right now are I think it was and I didn’t I was [indiscernible] are mid and downstream gas or downstream oil, is that correct?

Yes, so, and you've seen this before right, so you remember we do the upstream which is the drilling lane and offshore, drilling and offshore production and then we do the pipelines, now that's the midstream in the gas processing, as midstream and the downstream as refining Petrochem and L&G. So if I look at our business, the majority of that business is coming from the midstream and downstream markets, for both oil and gas, but primarily it's midstream and downstream natural gas, and it's all the way downstream which is refining type stuff of oil. So we're not seeing as much drilling business as we had in the last year, because of oil prices.

Okay. And could you just repeat it again, so I can get this clear. There are two PDC projects cancelled, those are midstream oil pipeline power systems, is that correct?

We had an order for three PDC's from this one customer and they cancelled two of the three PDC is in that particular order.

And that was $2.5 million with the backlog

It was that reduction in backlog, that 2.5 million reduction in backlog, let say two-thirds of that was from those two projects and the remainder was from a we've received in order about a year ago for two drilling rigs and we delivered one and they can [indiscernible] for another drilling like power system. So, again those are both that's an upstream and midstream oil related project as we what saw the cancellations in, nothing related in natural gas, nothing related to downstream

Got it and there is the PDC some sales and that was kind of primary issue from 2014, the actual manufacturing flow of the PDCs, slower than you would wanted, would you say yes to the statement that the manufacturing which is in the slowdowns for PDCs are behind you at this time.

So, the answer is yes. We believe those issues are behind us, there was actually two issues from last quarter if you remember one was the introduction of variety of new products, which was some switch gear in the PDCs and the other was just scaling up our volumes that would be able to handle this large amounts of projects and fair low and we believe, we've solved both are the new product introduction issues, including the PDCs and the ability to handle multiple large PDC projects in fair low. So we feel really good about that going forward.

Understood and part of what you've been driving for all the last couple of years has been to increase these companies ability to execute larger ticket projects, more or larger ticket projects at larger size to through the growth at the whole scope of the company's revenue based, would you say that -- are you seeing those larger projects come on to bid for you and are you seeing success in bidding on those largest sizes -- if you look at what you've been working on say in the first quarter versus a year ago or two years ago.

So, I'll just take at the easy answer, which is if you actually go to our shop or you're going to see as multiple 80 foot long gigantic PDC is all going on at the same time, we've never had that in our entire history as the company, which is never happened, right? So those PDC is maybe anywhere between $1 million and $4 million size projects for the company traditionally have been operating at the 1 million to 2 million size. I think so, doubling size of the average selling price of these PDCs has happened that's already done. So, what the next phase is the one that actually get even more interesting, which is as we increase the capabilities of our sales team and focused on these larger projects, we're starting to bid projects that are now $5 million, $7 million, $10 million project, which maybe multiple PDCs from the same customer project, or maybe so big, that can actually do it in one PDC, they have to break up in the multiple smaller assignments and so we've starting bidding those recently, none of those were get the closed, one where the other but we're on the approve suppliers list and we're bidding them and as customer is coming to the plant and see all these giant buildings going on in parallel they feel very, very confident our ability to pull this project that so, we feel confident about that continued growth with the sales team in placed and the operational capability including the oil price as well.

[Operator Instructions] You will go next to Bill Dezellem. Your line is now open.

The backlog, I've recognized it is somewhat be but I'm curious to you view at as having seasonality in of some sort and it's -- what's the Q1 seasonality

Bill, I don't know if I have a strong view of the seasonality of the backlog. We've looked -- we didn't going back and look at backlog over the last year but I think our markets are changing quickly enough but I'm not sure I can sort of make an interpretation of historical thing, oil was at different position for backlog last year we had with two large offshore drilling projects. There is not anymore large offer for drilling projects coming through this quarter or next quarter. So, it's -- I don't think that is actually a seasonality thing, I think, we've more based on where we are with our markets and where our sales team as in customer penetration versus any seasonality thing, that being said there is probably some just market seasonality where I'd -- thing will probably cool offer with the summer time, [indiscernible] on the vacation but, then attends to take backup but I don't know by of hard trend for you on that -- I can really sort of step back and look that, sorry.

No, go ahead.

I do think at the lumpiness of the business is going to still be an issue for us. If you think about the question that Craig just ask, which is just we're going after this larger projects the timing of the orders and just things -- up and down but -- we need to go continue to book business and we're in -- we need to continue to book more

And actually on that note, can you give any broad with characterization -- are you feeling better about your market today not your positioning within but just the market space are not as good as given the energy prices.

You mean versus our last call.

Yes.

I just walked through our sectors by -- but I think I feel like better about the thrilling market just based on OTC yesterday. I don’t expect that's going to be a big source of growth rise this year but now we are forecasting that to be a down this year and I still think, we see opportunities in the -- sure this is and I think may be tiny-tiny-tiny of it better than I did a month or two ago but still significantly downwards a last year. Midstream is probably flat from where it was in -- I think downstream is probably consistent and I felt good about the midstream and downstream parts of the market, wealth is solidified or at least the last couple of weeks in other $50 range and unattractive in last week or two but I think as price is tend to stabilized people are able to move forward with projects slightly better. In general, I'm not bullish on oil related projects for the short term, I'm still bullish on the natural gas related midstream downstream and oil related downstream project. Power Gen. I think the market is consistent so I feel good about that and I talked about the Marine and Industrial markets I think, are probably flat, so more of my optimisms coming from a markets for holding and our ability to succeed in those markets versus any market growth particular a dynamite.

I think that's great, I'll take you to my next question which is the execution issues that you have in the second half of last year. Did any of those linger or bleed into the first quarter.

I would say the big project that we have that we talked about on last call are shift in Q4 and so the -- we had essentially three problem children project that I had mentioned we need to make sure, we got all that on time, we need to made to make sure it had good quality for breaking customers and we fit the bullet in Q3 and Q4 to make sure those pipelines. So, if I look at the gross margins for our business in Q3 they are almost backup to the traditional gross margin levels and I think this is project issues are behind us. That's not to say, we are not going to have continued improvement or it can cause reduction inefficiency that are gone forever. Right. But, yes I think those acquisition is usually behind us.

Great and finally you made some comments about Brazil, which are you going a bit more detail as seems as though the opportunity may be appearing larger there over the next couple of years and what you would have thought?

But the part that's interesting about Brazil is the macroeconomic is very, it's involving, it's challenging, there is a bunch of stuff going around in brazil between the government and Petrobras and the customers and so it's almost like the environment is turning around but in the mean time our sales team and our operations team in Brazil are quietly going about getting orders, breaking in to customers, working on project, getting paid for those project so we're still amount in Brazil where -- us going from zero to multimillion dollar year the share makes a difference gross limit that's a nice driver for our top line growth. So, I can't tell the size of the Brazil market right now, I can tell you the team we've got but together and the progress we making on the sale side which is obviously the front end to continuing the grow the business is making very good progress, so we are very pleased with that. So, I think they are doing the right things, I think that growth is also going to be lumpy --not lumpy it's more, I think they are going to grow when the move to the plateau and then we'll grow and so I think it's a start up, right? They are just, as they break into these accounts and getting the new project and few things that will continue to grow the share.

And your comment that you have your first business with Petrobras, Clearly, the Petrobras’ size relative to your size would imply that-- that they could do a lot of business to be relative to your revenue and rate. Talk with us little bit about how you foresee that relationship developing?

We've done work indirectly for Petrobras for years because we work for the drilling contractors that doing work for Petrobras that we weren’t unknown to them. But this isn't on the approved suppliers list for Petrobras and it built direct relationships with them. They have an awful lot of work to do, they are excited about our history, what we bring to the table, they know about our quality and there's we see lots of opportunities. This is remember -- this is the Brazil entity right now is focusing on, what we called E&I services which is electrical services, deals services, motors, generator repair; all the things that mainly to do their fleets operating. I'm not even talking about the future product opportunities which are still to be determined based on the Brazil local contempt rules and how they end up with the capital planning on the next six or twelve months. As of which we think there is very interesting opportunities for the services part of our business which are nice projects that we can continue to grow and execute those on continued growing and getting pace from that.

We'll take our next question from George Cowman. Your line is now open.

Good morning gentlemen, thanks for taking my calls. Great color on Brazil; couple of questions, you had mentioned on your last call that you're on your way to Indonesia. Could you give us a little bit more color on that smaller joint venture there? What the growth prospects are? And also talk a little bit about the situation in BOMAY, China. I think you mentioned also that -- that was expanding and last but not least the recently announced joint venture. What type of revenue opportunities you see in that field, and could that be expanded also internationally?

Let me go through a couple of things. So, if I tell I was going to Indonesia, that was a mistake. I actually went to Hong Kong but that meeting in Hong Kong was for our joint venture in Singapore. So that's probably why I got confused, whatever I said in the last call. So the Singapore joint venture which is called MIEFE. As I said in the last call, I was on my way for a board meeting. As Andy mentioned and this is held in his portion of the call, the South East Asia market is heavy-heavy oil related, that's a shipyard and things like that. That business is down, right now. If you remember the opportunity that we have us with our new -- the acquirer of our previous joint venture partner, there's a company called Sonepar and that very-very-very large electrical distributor. So our plan with Sonepar is to beef up the sales resources in the joint venture and to leverage the Sonepar reach across the entire Asia Pacific region and go get those revenues of that joint venture up and where we need to be independent again of the price of the barrel of oil. So it's extending the reach beyond Singapore and Indonesia into the rest of the region and being able to deliver growth which is what that crude drilling use to [indiscernible] despite showing some profitability. So I would just say stay tuned on the Singaporean opportunity. I think we mentioned they were about a $1.7 million in revenue and slightly below breakeven. They got to get more business in there and there fixed costs covered. So that's the Singapore, Indonesia and sorts turned out that meeting at Hong Kong. On to China, so China macroeconomic issues are going to be a…

So this market, would this be considered as retrofitting existing rigs or build into -- as a new feature into the new more efficient drilling rigs that are coming to monitor?

It's both, and so our particular existing rigs and want to reduce operating expenses, it's offered as an upgrade and we'll come in and we'll sell it, we won't stall it, we'll connect it [indiscernible]. If you're building new rig then you can actually tie that to our AC VFD systems and we'll deliver in entire integrated solution with the our product and FlexGen integrated together, all try to manage under our drill system automation, which is a very good start, people are very, very interested and we think there is a good opportunity.

Are these guys looking at Houston too or somewhere else.

They have multiple facilities one of them Houston is headquarters for this purpose in Houston, yes. It's a private company.

And they have been [indiscernible].

Several years the technology originally was deployed in the military. If you understand how the military fuel works, Saudi and Afghanistan. We may pay $3 for a gallon of diesel but for the military they've got a literally get that gallon of diesel feel to run the generators in these remote areas, whether fields or wherever, they've shift into -- it's about $100 and there is a huge cost of life many, many, many people of actually died, I think the number is 1,700 people have died delivering fuel to these army and military forces in the last several years. So this is where that technology comes from as reducing the fuel expense and reducing the risk, the soldiers, so they can focus and nothing into focus on. We're now taking at the oil and gas market.

Then maybe one last thing on the Brazil, $600,000 revenue this quarter, can you give us like a number, you've mentioned earlier could be several million, what are you guys capable of -- how many books you've on the ground in your Brazil subsidiary?

We're about some between 40 and 50 people in Brazil, it's the numbers, it's not an exact -- I don't have an exact amount of headcount. So, you have the team can support projects, it's interesting because we have both of factory, I called shop based organizations, so we get motors and generators and transformer something. And we've a different work on customer project offshore on drilling rigs and another floating production and storage upload applications. We can handle more and we obviously have the verdict skill about further, when we had that the original joint venture and we're doing those large projects, we're at $8 million a year revenue size, we had 100 people working on construction projects at any one time, we can go, get those people back when we get the business and

Okay, do you have your own shop there to manufacture or are there alternate in Houston in shift over there

So, we have two shops in Brazil that are service shops. One in Rio and one Macaé, those shops have some manufacturing capability but if it something sophisticated we're going to build it in Houston and shift -- and that has more to do with local contact requirements and where does Brazil we want buy from U.S. import duties et cetera. But the focus for that group right now is shop services and field services, including construction and then overtime adding more products to the next

Okay. So the Brazilian real currency fluctuations are not really affecting that much even though a lower real is more advantageous for you

It's a mix.

It affects us but lot of our revenues of real that nominated and we have a large account based, real as nominator. So, it's bit of natural hedge looking into that business but certainly to the extent that -- our investments are there and transactions between the U.S. and Brazil that they don’t impact.

Last question on the acquisition front, any ideas, any looking going on about maybe doing one or the other acquisition to add to the revenue side

When I'd say and that is we've talked about this for several years as we're always on to look out for acquisitions. We think that there is that now we've got the sales team in place and we've got the production capacity in place, we've got the management team in place and we think we're able to handle larger acquisition, we're very conscious of value in our market and so we -- last year we saw couple of things and we didn't like the valuations and so we didn't pursue them. I think as oil prices stay where they are and we'll start to see some interesting things pop up and so we're interested, we're malleable but we're very, very focused on making sure we get the right strategic accretive acquisition for our shareholders. So, I think that's a way I think about it.

And it appears, we have no further questions at this time.

Okay. I thank everybody for participating in the call and we'll talk to you all again soon. Thank you.