Greetings, and welcome to Twin Disc Inc. Fiscal Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Stan Berger. Thank you. You may begin.

Thank you, Doug. On behalf of the management of Twin Disc, we are 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 2023 second quarter and first half financial results and business outlook. Before introducing management, I would like to remind everyone that certain statements made during this conference call, especially those statements introductions, 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. Information concerning factors that could cause actual results to differ materially from those in the forward-looking statements are 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 the news release, which was issued this morning before the market opened. If you have not received a copy, please call our office at 262-638-4000, and we will send a release to you. Hosting the call today are John Batten, Twin Disc's Chief Executive Officer; and Jeff Knutson, the company's Vice President of Finance, Chief Financial Officer, Treasurer and Secretary. At this time, I will turn the call over to John Batten. John?

Thank you, Stan, and good morning, everyone. Welcome to our fiscal 2023 second quarter conference call. As usual, we will begin with a short summary statement, and then we'll be happy to take your questions. Given the inflationary pressures and supply constraints that we saw in the first quarter, we think our teams around the world did a very good job making improvements in almost every area to deliver a better year-over-year and sequential quarter. On the top line in holding at constant currency, sales improved almost 15%. Jeff will cover the details, but most of that growth came in North America with a very healthy improvement in oil and gas rebuild activity. Global Marine and industrial shipments also improved more than what's stated in some percentages once you take the currency into account, half of each business is produced in euros. The late summer and fall months of 2022 delivered another round of cost increases that we had to pass on with new pricing in January. That should further improve gross margins as we finish fiscal 2023. Activity in all of our markets was robust. Veth’s backlog increased nicely and they had very strong shipments in the quarter. Additionally, many of their lower margin projects have now shipped. There was a noticeable improvement quarter-over-quarter in their results. Shipments in Asia declined slightly as demand slowed during some COVID lockdowns, and we also had units waiting for control harnesses and displays. This should improve in the second half of the year. Much of our inventory increase in the quarter can be attributed to this pause in shipments, but we expect this to improve in the second half. Again, other causes increased inventory remain late deliveries on key components like gears from heat treat that keep us from shipping completed transmissions.…

Thanks, John. Good morning, everyone. I'll briefly run through the fiscal 2023 second quarter and year-to-date results. Sales of 63.4 million for the quarter, up 3.5 million or 5.8% from the prior year second quarter. The sales increase reflects improved demand in the company's global oil and gas, industrial, and marine markets. Shipments in the quarter were somewhat limited by the ongoing supply chain constraints mentioned in previous quarters, with electric components remaining the most challenging area to find reliable and predictable supply. With help from improving North American demand for pressure pumping equipment, compared to the prior year second quarter, our transmission product sales improved by 10%. Sales in Industrial products showed a slight decline of 2.5%, while marine and propulsion product sales grew by 2.7%. By region, sales in the North America were up 32%, while sales into Europe were up 3.7%. Sales into the Asia Pacific market declined by 8.3%, due primarily to a temporary pause in the shipment of certain oil and gas-related products into China. Foreign currency exchange was a net negative 5 million impact to sales in the quarter and 9.9 million for the first half. On a constant currency basis, second quarter sales increased 14.2% and 20% for the first half. The second quarter margin percent of 26.9% improved compared to the 22.5% in the prior year second quarter. This improvement in the current year is a function of improved volume, a favorable product mix, operating efficiencies and reduced inflationary impact, thanks to proactive pricing actions. For the first half, gross margin is now 25.4%, compared to 25.0% for the fiscal 2022 first half. Spending on marketing, engineering, and administrative costs for the fiscal 2023 second quarter increased 70,000 or 4.7%, compared to fiscal 2022. The increase in the quarter is primarily due…

Thanks, Jeff, and I'll take a quick moment on our outlook. Looking at the backlog and market conditions heading into the second half of the year, we think that we can have a very strong finish to fiscal 2023. As we mentioned, we had to implement another round of pricing to offset the additional increases that we saw in Q1 and Q2. Many of the bottlenecks that we have been dealing with are starting to improve. The most significant improvement has come in our electronic control supply, which covers all of our marine, [arch], and frac transmissions. Additionally, we see demand for oil and gas spare parts continuing throughout 2023. That concludes our prepared remarks. And now Jeff and I will be happy to take your questions. Doug, could you please open the line for questions?

Thank you, Doug, and thank you for joining our conference call today. We appreciate your continuing interest in Twin Disc and hope that if you do have questions that you will call either Jeff or myself, and we'll try to answer them as quickly as possible. We look forward to speaking to you again following the close of our fiscal 2023 third quarter. Doug, now I'll turn the call back to you.

Thank you. 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.