Good afternoon ladies and gentlemen and thank you for standing by. Welcome to the TechPrecision Corporation's third quarter fiscal 2013 earnings conference call. [Operator Instructions] I will now turn the conference over to our host, Mr. Jeff Stanlis with Hayden IR. Please go ahead, air.

Thank you. Welcome to everyone joining us today. On the call with us today are Jim Molinaro, TechPrecision's Chief Executive Officer and Rich Fitzgerald, Chief Financial Officer. I would like to mention this call is being simulcast on the website at www.techprecision.com along with the slide presentation. If you've not already done so, now would be a good time for you to go to the website and download the slide presentation. In addition, the presentation should be available on today's webcast. If you do not have a copy of the presentation, please email me at Jeff@haydenir.com and I will gladly send you a copy. If you'll now turn to Slide 2 before we begin, I'd like to remind our listeners that management's remarks may contain forward-looking statements, which are subject to risks and uncertainties. And management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the Safe Harbor and forward-looking statements as contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today. And therefore, we refer you to a more detailed discussion of risks and uncertainties in the company's financial filings with the SEC. In addition, projections as to the company's future performance represents management's estimate as of today, February 19, 2013. TechPrecision assumes no obligation to revise or update these forward-looking statements. With that out of the way, I'd like to turn the call over to Jim Molinaro, TechPrecision's CEO to provide opening remarks. Jim.

Thanks, Jeff. Good day everyone and thank you for joining us. Please turn to Slide 3 of the presentation. On the call today, we'll follow an agenda that will include a brief overview of our third quarter. Rich Fitzgerald will then detail our Q3 fiscal '13 financial results. I'll follow up with updates to our business outlook and strategic product updates. Please turn to Slide 4. Through 9 months, fiscal 2013 has been a year of transition in terms of the complete elimination of the solar market and significant operational improvements at our Ranor division. We have transitioned from a single subsidiary to 2 operating business units. We have transitioned from high reliance on a single industry and frankly, a single customer to a highly diversified platform for growth. And we have transitioned to a more professional proven management team at our domestic subsidiary. I'm incredibly proud of the progress we have made. However, I fully recognize that this transition has been challenging and the fruits of our labor have not yet shown up in our financial statements for a variety of reasons, both expected and not. As disclosed in our press release, on January 7th, if not for our customer requesting a change in the scope of work regarding the large scale PolySilicon chambers at our Ranor division, we would have been reporting and expected continued sequential improvements at both the top and bottom lines. This change resulted in over $2 million of production activity and revenue shifting from the third quarter into our fourth fiscal quarter, the period ending March 31st. In addition, we have invoiced this customer for approximately $480,000 in change orders and related incremental revenue, which will be recognized as the units are completed and shipped. If you account for these changes, you can begin…

Thank you, Jim. If you would, turn to Slide 5, I'll cover the operating results for Q3. For the 3 month period ended December 31, 2012, revenue was $7.3 million compared with $10.9 million in the same fiscal quarter one year ago. The primary reason for the $3.6 million or 33% year-over-year decrease in revenue as Jim mentioned earlier resulted from a customer initiated scope of work change at our Ranor division, which shifted approximately $2 million of PolySilicon production into the fourth quarter. Additionally, last year's Q3 revenue included $3.4 million of solar production completed during Q2, but that was not shipped and delivered to the customer until Q3 due to a customer delay. Year-to-date, fiscal 2013 consolidated revenue includes $2.9 million of revenue from our WCMC subsidiary in China compared with $3.2 million in revenue contribution for the comparable 9 month period last year. On a sector level, sales to alternative energy customer and commercial and industrial customers decreased by $3.9 million and $1.8 million respectively when compared to the same quarter 1 year ago. These sales declines were partially offset by revenue increases from customers in the medical and nuclear sectors of $1.8 million and $245,000 respectively. Sales to defense and aerospace customers were comparable to the prior year at $1.6 million within the quarter. From the perspective of sales mix within the third quarter, fiscal 2013, we reported revenue from alternative energy customers of $2.6 million or 35% of the total Q3, 2013 revenue. This compares with $6.4 million or 59% of total revenue reported during the comparable third quarter last year. Q3, fiscal 2013 sales to customers in the [indiscernible] were 8% of consolidated Q3, 2013 sales. While revenues to customers in the defense and aerospace sectors during the quarter totaled $1.6 million or 23%…

Thanks, Rich. If everyone would please turn to Slide 8, our business outlook has been updated to reflect the recent developments and projected growth for strategic products associated with the medical, defense, and nuclear markets. Fiscal '13 is a year of transition away from the solar market and single customer dependence for the last 6 years. Fiscal 2014 is the year of growth for the products in the medical, defense, and nuclear sectors. And will be the primary drivers for the growth. In the next 2 slides, we'll provide updates to some of the strategic products associated with those markets. Please turn to Slide 9. As I mentioned earlier, in January, we announced a long-term agreement valued at $115 million over the next 5 years with our strategic medical equipment partner. This is the result of a long and successful collaboration to develop a new system to treat cancer with revolutionary proton beam radiotherapy that was recently cleared by the Food and Drug administration in June of 2012. We will be the exclusive provider of the complete product assemblies for this partner with both Ranor and WCMC participating to meet demand globally. We expect to begin shipping initial assemblies under this LTA during Q1, fiscal 2014 and continuing through Q4, fiscal 2018. The company has already successfully shipped assemblies to 5 different hospital locations prior to this agreement. Mevion Medical Systems received FDA 510 clearance for its S250 proton beam radiotherapy system in June, 2012, with expected complete first patient treatments for the end of May, 2013. Successful patient treatment is a critical milestone to continue the production ramp and potential acceleration of the strategic product. I think it's important to note that this agreement is a foundation for growth. And this agreement is designed to ramp over time. The…

Thank you Sir. We will now begin the question-and-answer session. [Operator instructions]. Our first question comes from the line of Greg Garner with Singular Research. Please go ahead.

Hi. Nice progression of revenues except for that delay of that PolySi order. If that were not delayed, any sense for what gross margin would have been in the quarter?

No, we really don’t have that Greg.

Okay. In the medical order, the backorder of the $115 million, is that - any sense for the timeframe as that executed. Is that going to be - you know, I would suspect fiscal year ’14 would be somewhat of a ramp up, and then might it get to a steady state? Is that how you see it, or do you have a sense for how the order flow might occur there?

Yes. We have things worked out with that customer with monthly bookings and monthly shipments that has planned out for quite some time. What I stated publicly a few minutes ago, is that - to give you a rough estimate, the way the agreement is written, it represents between a 40% and 50% compound annual growth-rate for the next 5 years. And, so we gave initial forecast that our medical business in fiscal 2013 was going to approach a pipeline somewhere north of $8 million. That’s up from $1 million in fiscal 2012, a little bit year-on-year change. So, based upon that, you’re looking at a 40 to 50% compound growth rate, again for the next 5 years.

So, you’re taking that from the base number of $8 million, or the base number $1 million.

Yes.

Oh, okay.

Excuse me, base of 8.

That’s good.

So, it’s a very, very - it’s a nice predictable, manageable growth for the company for both Ranor and WCMC.

Do you have any sense for how many number of systems or installation this would be from Mevion? Either on aggregate basis over a period of time, or anything, you know, per year.

Yes we do. You know, we’ve been asked to keep that confidential. If you do go to the Mevion website, what we said is we have shipped assemblies to 5hospitals, and that’s not completed units. We’ve actually shipped completed units to 3 hospitals. And you know, we start off sending the initial assemblies for the next 2, makes it 5. If you go to the Mevion website, they will show you currently the number of units they have under contract in the United States, and recently in Japan. So, [indiscernible] 3, 6, 8, 10, 11. So basically if you go to the website, they’re publically showing 11 units right now. And that’s all we can tell you. But obviously the agreement is written for more than that.

And so that’s the normal how this product is going to be shipped. Essentially where it sounds like 2 increments? An initial shipment and a second one, which …

Yes. We actually have - we actually ship hardware that gets built into the physical building or the vault. So, the hardware needs to be actually installed in the walls of the building while you’re building it. Then when the concrete hardens and the walls are up and there’s a roof, then we can ship the remaining parts.

Okay, so that sort of helps support the continual flow of product too?

Absolutely, yes.

Okay, interesting. In the nuclear, in the transport cask, is there any - so the first shipment occurred - I guess I’m not remembering that properly. Is the first shipment going to occur in the current quarter, the fourth quarter, is that right?

No, we publically announced the first shipment was last Friday.

Okay.

The cask and the cage, there’s 2 parts of the cask, and then there’s a transport cage, that protects you so you don’t get burnt if you touched it. And that shipped last Friday, and now we have the next 5 to build and ship.

And would the potential market here of what was it 500 or 1,000 I don’t recall exactly what it was, I thought was in that range. Would there - doesn’t it seem to be a low demand number of only 5, if this is really something that needs [indiscernible] up there?

I want you to be right. There are 2 factors on that; first we have to demonstrate with the next 5 being shipped, that we have a dependable, predictable on-time shipment for his product. It’s a critical product to ship on-time, because the end customers, you know, for example GE, they’re depending on those casks to be there to transport an isotope to a hospital to treat cancer patients. So the NRC wants to see that we are rock solid with on-time deliveries, so that we can give rock solid to the day shipments of these casks. As everybody gets more comfortable with our ability to ship on-time, to ship predictably, then this will continue. So, in the two-- that is, look, as we ship the next 5, and everybody starts to breathe that this product is ready to go, we should start seeing more incremental orders in our Q1 fiscal ’14. The reality is there’s a pent-up demand for this product. But it’s so critical because people’s lives are dependent on it being there on-time.

And how long does it take you to produce one from order?

We - it takes roughly 3 months for us to get the nuclear grade materials that we co-certify. And then it takes 3 months to finish it. So, it’s a total cycle time of 6 months.

So, - and when are you going to be court approved with your, you know, product manufacturing cycle time to have an order flow equipped?

When they see these next 5 ship on-time. So, that’s what we have to do now.

Okay, and the time-frame for the next 5 shipments is?

Are Q4 and Q1.

Oh, for just the next, okay. So the first half of calendar 2013 here?

Yes, first half of calendar 2013 they all go, yes.

Okay, so then - so would you reasonably expect - assuming that you do well there, that some orders will start coming through then in first fiscal quarter of 2014?

Yes, very much so.

Okay. And this oil market,that’s new. Can you give us a sense for, you know, what’s the typical size of an order might be? Or what are we talking about, drilling component parts or…

We’re talking about several different components and assemblies used from everywhere from the pumps to the rigs themselves. It’s a - it’s a huge market, it’s a huge customer. If you take pretty much every one of our customers and add them up together, they don’t equal the revenue of this one customer. So, we’re excited to crack it, we’re excited to ship it. And by the way, there was a typo in my scrip I was reading. We shipped the first articles that are being evaluated this quarter. This Q4 fiscal ’13 we’ve shipped [indiscernible] we didn’t ship Q3, we shipped Q4. So, huge opportunity, huge market, customer is getting comfortable with us, we’re getting comfortable with them. The big deal is, can we handle the ramp, can we handle the quality and demonstrate it repeatedly. But it’s a huge, huge, huge market, and it’s a nice market to crack. They seem to be making a lot of money on the oil /gas side of things, especially I went to the pump it was like $4.20 a gallon. So, nice to get some of that money back.

Yes. Can you tell us what the product is, what it does?

The product is used on the rig with the pumping itself. And it will be made in our CMC division, and it will be distributed with rigs and opportunities throughout the world.

So, this is sort of like the core metal component for the pump itself?

Yes.

Okay. And how fast - I mean, what’s the turnaround time from an order of that to production/delivery?

We think - we’re meeting now to go over final specification production unit ramps. What we can handle, what we can forge, what we can machine, our cycle time is under 3 months for a unit.

Okay. And could that at all improve, or you think that’s pretty much where…

It’s not so much the cycle time, as how many can you do at the same time, right?

I see, okay.

It’s a volume factor. So, we are sharing with the customer how many units per month we can ramp to, and grow carefully. I want to - this is a huge customer, this is a huge opportunity, it’s a huge market. I want to walk into it very well. I’d love to promise them a thousand a month, but I would just screw it up. So I want to do it in stages, make sure they’re happy, make sure we can deliver. As we gain more and more of their trust, we can gain more and more of their outsourcing.

Okay, great. Yes, it does sound like a huge opportunity here. Those pumps do get replaced on …

Frequently.

Okay.

Greg, I like consumables, so they’re a good thing.

[Operator Instruction] Our next question comes from the line of Walter Schenker with MAZ Partners.

Hi. A couple of questions largely relating to Page 8, which is: Revenue outlook market growth. I congratulate you. This is somewhat tongue-and-cheek in enhancing the slope over the years as the base gets somewhat lower for the initial year. But how do you get fiscal year ’13 ahead of fiscal year ’12, given that through 9 months you’re $4.5 million behind going into that year?

We better have one heck of a Q4.

Okay. Because if one - again, I’m not trying to give you too hard a time, just a mild one mind you. But, if one goes back to December presentation, fiscal year ’13 was going to be somewhat better than it’s going to turn out to be, and given that we are in the middle of February of fiscal year ’13, one would hope that we got a chance of getting some pretty big quarters here - quarter here. To get to that number, because it would be nice to actually make a number.

Yes, it would be. We have the backlogs, we have the orders, we have the work in process. We have to get a lot of shipments. We have to have a good Q4 with those shipments. I’m not waiting for orders. You know, we can pick up some nice change orders. We have to get these things out. So, yes the way you catch-up is to have a really, really, really good Q4.

And just 2 quick accounting type questions. $300,000 year-to-date and about half of that in the current quarter for executive search, seems like a lot of money to me. This is being spent in this country, overseas, or…

It was all for this country. It was the executive search to replace the division president at Ranor, that conducted a board search. So those were some of those fees.

Okay. And just as again one of my comments, and I look forward to seeing you next week. But, it is nice to see another area of growth in the oil service business. This can and is all being done out of China, correct?

Correct.

So this does not affect any capacity limitations which may exist domestically as some of these programs ramp up?

Correct.

Our next question comes from the line of Robert Brous with Wunderlich Securities. Please go ahead, sir.

Hi, Jim. Could you give me a breakdown of the $21.9 million backlog, what does that look like?

Well, Rich, you want to take that?

Yeah, I’ve got that here. Thanks, Robert. If you look at it, you know, we’ve got no more than - the highest component we have in there right now is just shy of 20% at $4.3 million, it’s the Defense program we’re on. We’ve got another Defense program for $3.1 million the backlog, another one for about $440,000. The medical backlog at the end of December is about $3.9 million and that’s before the - before we receive any orders under the LTA, another $500,000 from another Defense customer and then, you know, we’ve got our PolySi order in there that continues into the fourth quarter in the sort of 2-plus range. Nuclear is about $600 million and then we’ve got about $670 million over in China coming through in Q4.

So more than half of it is Defense, Robert.

And then what can I look for going forward, a rate that you’d be happy with, the run rate on SG&A?

Lower than this quarter. Rich, you want to give them that?

Yeah, we should get, you know, we’d like to get it back down into the 1.9 range and a lot of the, you know, the one-time or the non-recurring items would allow us to back it down to that and certainly we’d like to go lower than 1.9 if we can but that’s - 2.3 is higher than we would like but we’ve got a lot of episodic costs that took place with the transition here.

And using your word, episodic, are we past the episodic costs at this point?

Yes.

For those types of costs, severance and search, yes.

Okay. And then if you could - Jim, with regards to kind of this one-time first article prototypes, and you talk about in the press release the transitioning, isn’t that - I thought that transition was behind us or if the transition you’re seeing, does all that have a three-handle on the gross margin or are we still seeing some low margin stuff and when is that going to be behind us?

There were a couple smaller defense assemblies, you know, in - we’ll call it around the $140,000, $150,000 range which go back 2-plus years of history that will pop out, but they’re not as significant as the $3 million defense project at a loss. So there’s those in there that creep in. I think the important one is when you look at the PolySi chamber, it’s a prototype and what we’ve said is, prototypes do not have to be done at a loss and I’m going to put a new team at Ranor that will be able to build prototypes and show a profit; albeit, it might not be a three-handle, but it won’t be a negative handle. And I’m looking forward to that shipping because I believe as we’re tracking now, this prototype product by Ranor and its new team will be at a profit, which is, I think, a monumental event because Ranor has not demonstrated that historically. So you know, we won’t have a three-handle on it, but we won’t be in the red on it either and going forward it’s a very nice product.

So the PolySi will not have a three-handle on it?

Not for the first 2 that we’re building now.

And the Oil Field Services stuff you shipped in the quarter, what kind of margin did that have?

Nope, those have three handles on it.

Our next question comes from the line of Michael Potter with Monarch Capital Group. Please go ahead, sir.

I just wanted to get some clarity on a few things. Jim, I think you mentioned briefly that GT is no longer part of the backlog, or it’s nothing of any substance?

I’m sorry, you - I think you guys were both talking. What was it?

I’m sorry, there’s only about 6 figures with GT, which is a big change as Jim highlighted earlier, it’s usually a significant 7 figure or even 8 figure piece of the backlog.

So it’s somewhere between 100,000 and 999,000?

Yeah.

Okay. Well, one could be a non-significant number, an insignificant number, and one could be still significant to the backlog. Jim, you mentioned in the script, I guess we had a release. Did we get the release with regards to the Virginia Class Summary under Block 4?

Yes, the first few subs have been released. The monies have come through, or part of the monies have come through the first sub and Ranor received orders for part of the first sub under Block 4. So it’s starting to come through. Congress officially, on December 28th, said they blessed the first 2 of the subs for Block 4, although it doesn’t come through cash that way. What they bless and what they fund are 2 different things. The funding comes. So we started seeing pieces now, you know, the critical assembly pieces for the first submarine of Block 4. What I said in the script is there will probably be a sequester event which means Block 4 will be 9 submarines instead of 10 submarines, but that’s still really good for us and should be fine. The anticipation or the speculation is that all submarines are funded by June 2013.

Okay, so we received parts for - for I guess the first submarine. We didn’t get the, I guess, all the parts that we fabricated…

On the first submarine - on the first submarine we probably received about $1 million worth so far. I’m guessing between - yeah, it’s a little more than $1 million on the first one so far.

Okay. And what does each submarine represent to Ranor?

When the submarine is complete with all the assemblies, we should be seeing anywhere - and we’re working - most of my time, Michael is with these primes on the submarines because we want to increase it significantly, but right now it’s roughly about $7 million a submarine.

$7 million per submarine now, and that number has increased, you know, over the past couple of years, correct?

Yes, it used to be like $200,000.

Wow.

Three years ago it was $200,000 a submarine. So it’s gone up quite a bit, but the reason I’m spending my time on it and we’ve got our 2 biz guys going after it and meeting with the various primes is a very simple expectation. I have a very simple expectation. It’s these submarines are costing $2 billion apiece, much of it is outsourced, so I would like a bigger piece than $7 million, right, and it’s obtainable. The exciting part is the new management team at Ranor is demonstrating the ability to ship these very important, very complex proprietary assemblies on time to our customers, including the Navy, and that’s making our lives much easier to say thank you sir, maybe I have another. So that’s the mode we’re in right now, so I’m pleased Ranor is making our biz development life with Navy projects much better.

Okay, all right. So that’s good news that that I guess long hand[ph] is slowly beginning to be released?

Yeah, it will be exciting by March 1st for sure, right. No partisan issues whatsoever. We do need a Navy and we do need our submarines that are running out of fuel do need a replacement. And the other thing that was announced on December 28th is they did release the design monies for the OR program. For those not familiar with that, that’s the Ohio Class Replacement Program. Most of the Ohio is our biggest deterrent, our biggest defense and those subs are running out of fuel by 2020 and need to replace. So that’s what we’ll call our next-generation. So design monies have come through, which is promising.

Okay. But if we just go back to Block 4 and the 10 submarines within Block 4, maybe it gets cut down to 9, maybe it gets cut down to 8. If it’s 7 submarines, going 2 submarines a year, it’s a $14 million opportunity as it stands right now?

With our current content, yes.

With your current content, right.

Which I’m not happy with, so - and we’re spending a lot of time there.

Okay. One other question, with WCMC, it that continuing to show a revenue ramp from Q2 to Q3?

It’s holding - in Q2/Q3 I think it went up from like 1.1 or 1.2 to 1.4, so it’s a slight ramp. My assignment for WCMC has been, of course, breaking into the oil products and my caution has been in the Sapphire because what others announce as the big backlog when it’s all Chinese customers, they’re notorious for saying, yeah, we’re not canceling our order but we’re pushing it out 3 years and we don’t call that backlog but others are. So that’s my caution that Sapphire seems saturated and I’m hearing discussions of - that these customers want, you know, more subsidies from the Chinese government and they’re already $2 billion in debt per customer, per company. That must be nice, but I’m - I’m being cautious on Sapphire for all reasons. It’s very dependent on only one country.

And how many customers are we producing content for at WCMC?

Four - we’re currently producing for 4 customers. I don’t call the oil customer yet a customer until I see a production order.

Four customer, and that’s including our medical customer as well?

Yes.

And we have a follow-up question from the line of Robert Brous with Wunderlich Securities.

Hi, just a few follow-up questions. On the PolySilicon chambers, when you ship what is going to be the kind of the turnaround that they’re going to take to test this, try out this new chamber - this enormous chamber and come around to you inputting this kind of in the larger production?

The estimate would be about 6 to 8 months. It’s pretty quick. If you’re familiar with the chem-gas generation system we did for that one customer, you know, it’s years to get it qualified. This is much faster, it’s about 6 to 8 months. This, once it’s hooked up and all the gases are rigged up, this will - can yield product pretty quick.

And do you have a thought in what kind of market size this is or is it too soon to go there?

You know, getting a couple of these assemblies, so you know, each unit with its support equipment is roughly $4 million to $5 million a unit and it’s reasonable to assume that we would see at least 2 a year. It’s a nice business.

Okay, and on the Block 4, what’s the content? Is that just personnel hatches and supply hatches or it’s larger than that?

It’s larger and we really can’t get into the specifics of those. From an ITAR perspective, these are product assemblies and we keep them as quiet as possible.

[Operator Instructions]. Mr. Molinaro, there appears to be no questions.

Okay. Well, thank you. Let me get my wrap-up page. So anyway, I want to thank you for your time today and for your continued support of the company. I stated before, fiscal ’13 was a transition year, or is the transition year away from the solar market and one main customer for the last 6 years to a much-improved operational team at Ranor with many new and exciting products and markets for us to grow in fiscal 2014 and beyond. So thank you very much, everyone. Have a good evening and we’ll talk to you soon.

Ladies and gentlemen, this concludes our conference for today. If you’d like to listen to a replay, please dial 1-877-870-5176 or 858-384-5517 and use the access code of 4600306. Thanks for your participation, you may now disconnect.