Good day and welcome to the Twin Disc Incorporated Fourth Quarter Fiscal 2015 Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Stan Berger of SM Berger. Please go ahead, sir.

Thank you Angela. On behalf of the management of Twin Disc, we’re extremely pleased that you have taken the time to participate in our call. And thank you for joining us to discuss the company’s fiscal 2015 fourth quarter and full year financial results and business outlook. Before I introduce management, I would like to remind everyone that certain statements made during the course of this conference call, especially those that state management’s intention, hopes, beliefs, expectations or predictions for the future, are forward-looking statements. It is important to remember that the company’s actual results could differ materially from those projected in such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company’s Annual Report on Form 10-K, copies of which may be obtained by contacting either the company or the SEC. By now, you should have received a copy of the news release which was issued this morning before the market opened. If you have not received a copy, please call Annette Mianecki at 262-638-4000 and she will send a copy to you. Hosting the call today are John Batten, Twin Disc’s Chief Executive Officer, President and Chief Operating Officer; and Jeff Knutson, the company's Vice President of Finance, Chief Financial Officer, Treasurer, Corporate Controller and Secretary. At this time, I will turn the call over to John. John?

Thank you, Sam and good morning everyone. Welcome to our fiscal 2015 fourth quarter conference call. As usual we will begin with a short summary statement and then Jeff and I will be happy to take your questions. Looking at our fourth quarter results. Sales for the 2015 fourth quarter were $67.3 million versus $73.6 million a year ago, down about 8%. The general conditions in our geographic markets remain unchanged from the third quarter. However, with the exception of the land based transmission markets, all other sectors saw improved shipment levels from the third quarter, most notably in marine. Customers moving up shipments in advanced of our July and August shut downs can explain part of this increase and I will cover that in more detail later in the call. When we look at our broader product end markets, the growth we saw in North America was not enough to offset lower levels of activity in Asia, north of 6% negative impact of foreign currency translations. Our fourth quarter sales in our industrial markets improved by about 3% with slightly higher shipments in North America, this is versus the third quarter. Most of our North American market sectors included oil and gas, irrigation, recycling and construction relatively stable versus the third quarter, but when compared to the previous year, shipments were down about 8%. Sales into our transmission markets declined versus fiscal 2014 fourth quarter levels by about 23%, again driven by the relatively strong shipments into our North American oil and gas market at the end of fiscal 2014. Compared to the third quarter, our transmission shipments were down about 16% reflecting the slowdown in oil and gas shipments into North America and continued weakness in the Chinese markets. The one bright spot in the overall product markets…

Thank you. [Operator Instructions]. And we will take our first question from Josh Chan with Baird.

I’m sorry, sincere condolences to you John. It was enjoyable working with you and Mike for sure. And so Jeff into the questions, you talked about there is some shifting of backlog from the marine orders that were shipped in the fourth quarter. Is there a way to kind of quantify how much demand you think shift is from Q1 to Q4?

I would say yes, Josh its probably somewhere in the 3 million to 4 million range.

So yes, so meaningfully effective numbers, but it wasn’t a dramatic amount, I guess?

I would say I mean just -- and that was Josh, it’s for everyone that 3 plus million was primarily in North America, so there will be no currency translation. And Jeff the currency translation, I mean in just the fourth quarter.

On the backlog?

Yes, okay so it really, so that would have been the big impact -- we had just a jump here in the plant here in Racine after we announce the shutdown 0:11:28.1 [indiscernible] trying to get stuff before July. And by and large they were not replaced by new orders to replace that.

Right, okay and if you can kind of take a look into fiscal ‘16 and just kind of looking at your major end markets; maybe could you comment on kind of which markets you are seeing relative strength and stability and then which markets are more worried?

I would say anything related to oil and gas is worry, and that's not just obviously pressure pumping. But we still has orders that we’ve shipped and planned orders for crew boats, the fat supply vessels, both here and North America and in Asia not as strong as a year ago, but they are still there. What’s relatively stronger are anything that push load activity, we call that brown water on the river system. That's been relatively stronger in North America and we have some push load activity in Asia. But those are kind of what I would say the strength. Overall our industrial products, the clutches and PTOs have not seen that downward pressure that marine oil & gas and land-based oil & gas have seen. So that is a positive. And then of course the aftermarket business, in general for us, for all of the businesses has stayed pretty stable. And that continues at a pretty good level. And then just quickly touch again, our efforts remain fairly stable. But it continues to be the oil & gas exposure, not just land based but kind of uncertainty and where the marine is going to go.

Okay that make sense, so in oil & gas I think some quarters this year was up and then other quarters were down. So how did oil & gas revenue finished fiscal ‘15 kind of compared to what it was a year ago?

By and large up 15%, I would say in the 15% range -- it was up, but we saw that remember fiscal 14 ended strong in oil & gas, fiscal ‘15 ended up again strong in oil & gas. So here it's tough. The comparisons in oil & gas, at the beginning of the year, they were great, a lot better than 2014. But the comparison -- that increase is along during the second half of the year.

Yes, that makes sense. And is there a maintenance level of oil & gas that we should think about even if new CapEx orders are weak? Are we sort of at this level?

I don't know how to answer that right now. We have customers that are doing maintenance. We also have customers that are probably going to be buying some fleets at auction. I don't know if any of that are selling. So it's a very uneven. And we have some customers that are looking at buying new units to work like this older units or competitor's unit. So it is a very strange time, last time when we have this down drift, everyone kind of just sat on their inventory and kept it. I think they were going to use it, and by and large they consumed a lot of their available inventory going up to last year -- no, a year ago April, and now this downward pressure has certainly caused a lot more stress in the operators and so I think some are looking to sell fleet. So I think there's going to be some opportunistic buys of fleet, but I still judge my sense -- both hearing from customers and guys out in the field that our rigs are getting used and I see that in aftermarket. So I’m more optimistic that we will continue to do well on spare parts for 8500 and 7500 just based on what I hear of what’s getting used in the field. So it's hard for me to quantify right now because the last three to four months has just been -- I can’t give you a trend in the orders but my overall sense says it is in a balanced seasonality. It's going to be okay in the spare parts area.

And we will now go to Walter Liptak with Global Hunter.

Yes, our condolences as well. I wanted to just to follow-on to that last question, I think what we saw with oil prices picking up in the last couple of months, that there were some hopes, the rig counts just bottomed and then there might be some more workout in the field. So I was wondering during the quarter if you saw any signs of hope with oil prices having picked up and then with oil prices having come down in the last month, if this kind of reduce the near term outlook?

I would say that, yes it did, I mean certainly discussions of buying a spread of whether it was 8 or 16, in the last couple of months when the oil was rebounding, those conversations and discussions with customers started to happen. And when could you deliver if we ordered. So we still could deliver in the first quarter. If someone replaced orders for units, probably even 8 to 16 probably could do. I don’t want speak for manufacturing but it will be more than 16, but less than 32. And so I don’t sense that one of those projects have been affected by this drift down. I think there were some sound economical financial reasons for them to be looking at that. If this continues on and we start drifting and drifting and drifting maybe those projects drift sideways. But I am hopeful that we’re going to get new unit orders to replace older one. Like I said, it's unbalanced where the inventory is. Some are doing much better with their access inventory versus others. Tough question to ask, but I am not totally 0:18:23.5 [indiscernible] all on that, I think there definitely some opportunities. You just have to stay close to the customers.

So you have given where the backlog is in this tough environment, the 20% cut to employment, the restructuring charge; I wonder how you came about sizing it to that level and how we should think about the savings in terms of overall profitability for the next year. If we get the savings in the next year, can you -- is there like a level of breakeven and profitability that you’re shooting for?

We certainly, we didn’t -- what's the right way and the best way to answer this. The levels that we went to was based on what we saw kind of in the next three to six months. But at a level that if the market came back, not just oil and gas, but it starting to improve, we could react quickly. So it was a balancing point and we aired probably going a little bit leaner than the conditions would indicate. So it wasn’t easy calculation, I don’t think, certainly what you’re going to see in the first quarter -- the first quarter will be by far almost challenging quarter on the top-line followed by the second quarter. And that’s just really was an indication to the backlog. But we are much closure to breakeven in the first quarter than we would have been certainly in the second quarter. So I don’t know how to calculate the best breakeven, but it brought it down significantly well.

[Operator Instructions] And we’ll take our next question from Steve McManus with Sidoti & Company LLC.

So when you mentioned the end market diversification, are there any new particular target areas or areas of focus that you guys are trying to capitalize on to offset the weakness?

Steve, I didn’t hear the first part, what you said, the end markets?

No, diversifications.

Okay. Certainly our biggest push on product development and release is going to this fiscal year and our sales guys are on the industrial markets. So finding opportunities for our clutches, whether it’s dry clutch, hand accelerated or dry clutch remote accelerated or the hydraulic clutches the HPTOs, finding new applications in just a very broad industrial markets; developing some OEMs to new types of applications whether the blast-hole whole drills or things in construction. It’s a big push to get into those markets, because we feel there are opportunities there. We can take some customers away from some other technologies or some other of our competitors. So really that’s where we’re putting our push on since. There is not a lot whole lot we can do to change to move the needle on oil and gas, the pressure pumping right now. Certainly can stay close to the customers that don’t have much inventory and are looking to replace our transmission or a competitor’s transmission; but those really the opportunities that we see and that's globally, whether North America, Europe or in Asia and South America. So that is where a lot of our push is and of course also corporate development activity. We're looking in that area as well.

And then with respect to the geographic mix, any target area there shift with respect to mix abroad?

We’re certainly remaining very cautious on Asia and China in particular. But there's still some business there. I think a lot of times we forget, and everyone forget that there is a lot of ships that are built in Southeast Asia whether that we sell them through our office in China or Singapore, out for international customers, whether they’re going to the Middle East, India, Europe or North America. So there's still a base business there. So it’s hand-to-hand combat everyday to get those orders in those sales. But finally we do things that there are growth initiatives in industrial with our products in Asia, but it's certain to focus where we can have an effect on fiscal ’16, are going to be North America and Europe for our industrial products

And then just looking at this year there was a bit of an uptick in CapEx, and projected for next year another increase. Can you just give us a bit of an idea of what the capital spending is being direct at?

It’s been a mix of some new machine tools here in North America, a piece of equipment in Belgium. But then we also had do a little bit of PP in e-maintenance. We’ve been blessed with a flat roof in the mid-West. So that's an ongoing issue here in Racine. We also had the tent to our facility in Belgium with some CapEx there on basically heating and office, just maintenance of the building in general. It was kind of, I would say the upticks versus last year. In Singapore we had to move into a bigger facility, we’ll had to, we chose to move into a bigger facility in Singapore, because the products that we were selling were getting bigger. So there were some CapEx involved and outfitting that new facility. But those were, I would say there might be some drift into some expenses in the first quarter, but certainly seeing the conditions going into ’16, we will control CapEx spending according to cash flow and debt.

And then last one for me just cutting back to the cost savings from the headcount reduction. Is that can be relatively evenly ratable across ’16, there is going to take couple of quarters where those savings really start to materialize?

Yes. The first quarter a lot of the people worked into the first quarter, at least a month. So the first quarter won’t be the true run rate. You have to see the second and the third quarter to get the true run rate of savings.

It appears there are no other questions at this time. I would like to turn the conference back over to today’s presenters for any additional or closing remarks.

Thank you, Angela. And thank you for joining our conference call today. We appreciate your continuing interest in Twin Disc and hope that we have answered all of your questions. If not, please feel free to call Jeff or myself. We look forward to speaking with you again in October, following the close of our fiscal 2016 first quarter. Angela, I’ll now turn the call back to you.

Ladies and gentlemen, this does conclude today’s conference. We thank you for your participation. You may now disconnect.