Good morning, ladies and gentlemen. And welcome to the Modine Manufacturing Company’s Fourth Quarter Fiscal 2014 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Kathy Powers, Vice President, Treasurer and Investor Relations.

Thank you. Thank you for joining us today for Modine’s fourth quarter fiscal 2014 earnings call. With me today are Modine’s President and CEO, Tom Burke; and Mick Lucareli, our Vice President of Finance and Chief Financial Officer. We will be using slides for today’s presentation. Those links are available through both the webcast link, as well as a PDF file posted on the Investor Relations section of our company website modine.com. Also, should you need to exit the call prior to its conclusion a replay will be available through our website beginning approximately two hours after the call concludes. On slide two is an outline for today’s call. Tom and Mick will provide comments on our fourth quarter results and provide our revenue and earnings guidance for fiscal ‘15. At the end of the call, there will be a question-and-answer session. On slide three is our notice regarding forward-looking statements. I want to remind you that this call may contain forward-looking statements as outlined in today’s earnings release, as well as with our company’s filings with the Securities and Exchange Commission. With that, it is my pleasure to turn the call over to Tom Burke.

Thank you, Kathy, and good morning, everyone. Our revenues for the fourth quarter were up 9%, the sales growth in each of our segments other than South America, where economic conditions remained somewhat challenge. Of particular note were our European region which delivered 15% year-over-year sales growth and our Building HVAC segment, which had a record heating season in North America. In addition, our Airedale subsidiary in the U.K. had a strong quarter despite the challenges of the fire that destroyed our manufacturing facility last year. We also completed the acquisition of Barkell, a manufacturer of air handling units in the U.K. We delivered adjusted earnings per share of $0.15 for the quarter, which was down $0.03 from a strong fourth quarter last year. For the full year we delivered 7% sales growth and adjusted earnings per share of $0.73, ahead of our previous guidance and up 83% in fiscal 2013. Overall, I'm pleased with our financial performance this year and in particular with our $51 million of free cash flow generation. Our balance sheet is strong and we have created a financial flexibility to execute our growth strategy. Mick will provide more details on our financial results in a few minutes, but first, I would like comment briefly on our segment results and market outlook for fiscal ’15. Turning to page six, revenue was up 4% in the North America segment, with higher sales to commercial vehicle and automotive customers, offsetting a decrease in sales to off-highway customers. Although, gross margin was up in North America year-over-year, operating profit was negatively impacted by a $2 million warranty charge related to unique matter associated with the specific product manufactured in North America for Building HVAC segment. We have identified the root cause and fully address this problem. Last month we…

Good morning. Please turn to slide 12. As Tom mentioned, we had a strong quarter with a 9% increase in sales. This includes the favorable FX and tooling impact of $5 million. As a result, our core sales were up approximately 7%. In the quarter, gross margin increased 30 basis points to 15.9%. The margin improved despite large adjustment to warranty reserves in North America and Europe. In total, we incurred approximately $4 million of additional warranty costs. I am pleased that we are able to drive year-over-year growth margin improvement in each of the four quarters. SG&A was up $9 million with several items accounting for nearly $6 million of the year-over-year change. The major items are as follows, in the fourth quarter of last year, we received an insurance rebate of $1.1 million, in payments received for testing services was $1 million higher. This quarter includes $2.4 million of higher incentive compensation. Our SG&A in the U.K. was higher by $900,000 due to the Barkell acquisition in Airedale fire related costs, last, the current quarter includes business development activities that resulted in transaction costs and professional fees of $0.5 million. Please note that we recorded $6.8 million of restructuring expenses and impairment charges. $4.4 million was tied to the consolidation of manufacturing operations in Germany and was mainly severance related. The remaining $2.4 million relates to the decision to close McHenry, Illinois manufacturing facility. You can see that we had a significant benefit in our income tax line. As a reminder in 2008, we established the valuation allowance against the U.S. deferred tax assets. In this quarter, we reversed valuation allowances based on a variety of factors, including our earnings improvements and expectation that these trends will continue. The reversal of the valuation allowance resulted in a one-time…

Thanks, Mick. Can you turn to page 18, please? I’m pleased with the results for the fourth quarter and for the fiscal year as a whole and I’m extremely pleased that we are able to generate over $50 million of free cash flow. As Mick mentioned, this number is even higher when adjusted for tax spend on restructuring. Operationally, we continue to focus on improving the production efficiency of the Origami radiator and executing the final restructuring steps in Germany. As I mentioned earlier, there will be some additional costs to complete these actions but we are confident in the end, we will reach our profitability goals. We are seeing improvements in some of our markets, mainly commercial vehicles in North America and affecting Europe for us and also in global automotive. Indian markets continue to improve and we expect this trend to continue. This was partially offset by challenges and others particular at Brazil in the global ag and mining equipment market. China volumes have held steady but we clearly see that our diversification efforts, particularly our new book of business in the automotive market will be imperative to fuel future growth. And as Mick mentioned, we expect total company revenues to improve 3% to 8% next year. Strategically speaking, we continue to be guided by our enduring goals, leading us to focus on higher revenue growth, return on capital enhancement, diversification and continuous improvement. This year, we’ve taken several significant steps toward reaching these goals, recognizing that we are on a journey. We assured, we will address any and all challenges we face, while never letting up and are maintaining our position as an innovative leader. Our innovative capabilities will ensure that we continue to provide our customers with the products and value they expect and generate returns for our shareholders in this increasingly competitive marketplace. And with that, we’d like to take your questions.

(Operator Instructions) Our first question comes from Robert Kosowsky of Sidoti. Your line is now opened.

Just had a question, I guess, first on Europe. Just curios about the cadence of the commercial vehicle sales because it seems like it was a lot stronger and the March quarter then I thought it was. I’m wondering if you are seeing a slowdown here in the June quarter as the pre-buy starts to impact results.

Yes. It’s a real mix switch that’s going on. We have much more content on Euro 6 than we had on Euro 5, so the pre-buy affect on Euro 5 gave us a boost coming through last year. But now we have a richer mix, so we are seeing overall increase in commercial vehicle sales year-over-year. But Euro 5 component is lowering, but the mix of trucks has given us the boost on an overall improvement that we see in Europe commercial trucks.

Okay. That’s helpful. And then also switching to North America, that warranty expense, you’ve included that in your, you didn’t ex that out in the adjusted EBITDA?

Yeah. The $2 million in Europe and $1.7 million in U.S. are in the numbers. There was no adjustment to back those out. We just want to point out that the conversion in the margin would have been higher in the quarter if we had those higher warranty costs.

Okay. And then the one last question, it looks like SG&A in your forecast for this year is going to be up at a higher rate of sales. And it seems to be going higher from higher growth spending and higher SAP. And I’m how long this is going to last and when do you think you can get to return of leveraging SG&A?

It’s Mick. I will take that question and then look to my boss here. No, we’ve had for probably a couple years discussions with investors and analysts. We are still well below, let’s say, pre-recession level. The company was running at a $240 million kind of annualized run rate. But at some point, we tightened down as tight as we can go and we’ve said now for a couple quarters, we see a little bit of the SG&A growth coming back from normal investments we need to do in people and for growth. Really it was -- as a percentage of sales, we really need to have happen is we need the topline to continue to move in the right direction. We’ve had a few years of little bit lower sales growth. So in dollars, SG&A will increase, but to drive it as a percentage of sales back down, we nearly need to move above this kind of $1.5 billion range.

I think Mick answered that perfectly. Clearly our order book is strong, remain strong, and you’ve got to support that with added SG&A to deliver on that and the growth resources we put into place, but we watch this very carefully and we expect that as a percent of sales we stay under control.

Okay. That’s helpful. And then finally, how much of the headwind do you see from inefficiencies this year between McHenry and Europe?

Yes. And just again, these will be and -- these will be numbers we will absorb and we will discuss in our public filings, but we estimate about $3 million in the earnings guidance we provided. And that again relates to, we have dedicated, the complexity of these two are pretty big. So you have a dedicated teams of people managing them. And then when you have obviously the wind down of a plan and wind up of a catching plan, the receiving plan, we have laboring efficiencies, scrapping efficiencies, things like that that are very hard to quantify, but they are planned for in our budgets, in our forecast. So that helps you out.

Okay. So whatever easy comparison we had in the warranties not recurring, I guess given the way this year I guess some inefficiencies from the plans right?

Yes, and our hope is obviously we work with the teams. We hope to push those -- that $3 million as low as we can, but we think it’s better to head in knowing that we’ve done enough of this that we know there will be some level of it, and then we will follow up with you to let you know how that is shaking out.

Okay. And if you look at the scope or the size of these projects, would you expect the 2015 to be the bulk of those inefficiencies that you are going to absorb and then 2015 you will see that or 2016 you will see that comparison turn more favorable?

Yes. It’s also timing and calendar so that most of that cost will be absorbed in fiscal ’15, I mean some will trail out, but we expect the -- again we have good experience doing these teams dedicated and we should hit fiscal ’16 with the majority of that behind us.

All right. Thank you very much and good luck.

Thanks.

Thank you. Our next question comes from David Leiker of Baird. Your line is now open.

Good morning. This is Joe online for David.

Hi, Joe.

I wanted to revisit Europe and just thinking about your revenues, [CV] (ph) revenues up 25% in the market. That looks like production was about a few points. It is that type of outgrowth we should be expecting all of fiscal ’15, or is there any sort of inventory stocking on Euro 6 engines that kind of a base going forward?

This is Mick, Joe. I will give you the kind of the numerical look at and then Tom add more color to what he is hearing. But short answer is, no. We are not anticipating that level of growth. Big picture is we look at the new fiscal year. We do have a sizeable amount of truck business that is growing and that’s just from the gain, our market share again of Euro 6 vehicles. On the opposite side, we’ve got call it 10 million to 15 million of the automotive BMW going down and another 15 million of tooling. So you’ve got a 25 million to 30 million headwind on BMW and tooling revenue. On the positive you’ve got some pickup on the truck business and then that excludes anything of what’s going on with the general, obviously with the market, but we are not going to see that level of growth in Modine Europe next year from the topline.

Okay. Just from kind of a markets heath standpoint, so we heard that obviously a lot of Euro 5 deliveries taking place, less so it seems like in Q2 and then by the second half, the entire market should be Euro 6. So if you had to take a point on that guidance range for the market today, would you be skewing more towards the high end or the low end?

I would say we are right in the middle.

Okay. Safe answer.

Yes. Safe question, Joe.

Switching gears to North America, so on the flip side, 4% revenue growth this quarter versus commercial vehicle volumes that were up quite handedly Class A production, the 20% increase. And it seems like just based on what some of the off-highway customers have been saying there might have been some dealer restocking during the quarter. So any color on just the pace of revenue growth in that business?

Yes. Again it’s Mick, I will jump in on the top side and Tom can add color. We really think, I mean you know us well, but we’ve got about 18% to 20% of that business segment is Class A and we are seeing some benefit. Clearly the benefit from the market data, everybody is watching. And then we have our medium segment, but the rest of the business pretty high reliance on service, ag, and construction, and we’ve really from our side, we are not seeing the pickup in order rates in the off-highway space, specifically in the ag market. And then we do have a pretty heavy emphasis at Modine on the really big construction equipment, including mining, and we haven’t been seen a pick up on the heavy equipment.

No, well, I think, we do -- on the off-highway side, we expect maybe construction or lighter construction equipment to pick up some this year which is in there, but right now that gain in commercial truck has been offset by pretty steep decline in segments of off-highways.

Okay. Bigger picture normally around the fiscal year end you’ve provided two or three year backlog updates. Just talking to OEMs, visiting you guys, and things like CONEXPO and mid America, there definitely seems to be a greater emphasis on thermal technology now that we are done with the emission side of the equation. So emphasizing the performance of these engines that can bring in the thermal suppliers as a big piece of that. Was that -- in the background what those backlog look like as we get out of fiscal ’15 and you start to look towards ’16 and ’17 horizon?

We are very bullish on our outlook on the backlog. We gave guidance year or two ago and that guidance still kind of holds forward and consistent. So the activity on development opportunities and supporting new projects is very high. One of those things that’s challenging our SG&A as we mentioned earlier in our previous call -- previous question. So we remain very bullish on the outlook with just what you said. As the missions changes got contained, there is now big focus on fuel efficiency and that brings in more precise engine management things, challenges that require new innovations that we’re really well-positioned to deliver on it. So we look very positive with the outlook.

In the past, Joe, you know and others know, we’ve tried to calculate backlogs and net order book, to add to what Tom saying, there is some complexity we know is in there. When you have a market downturn or a shift out a delay of, let say Euro 6 production, then also those numbers move and we have to try to reconcile for all of you that we win or loss the program and the answers are normally no with the timing. But to also add color to your question, we still have, the nice thing about Modine is we have a nice view out the next few years because of the launch cycle and that order book still stays north of $200 million, which is the Tom’s point consistent with what we’ve seen in prior years.

Great. And then my last question just on the SG&A item. It looks like basically the guidance taking the Q4 spending levels and annualizing that? And obviously, within that it would seem to imply that incentive comp levels stay flat with the Q4 levels? I’m just wondering, how much was the move in the stock price during the quarter impacting that overall $2.4 million amount you touched on?

Yes. So, I mean, good questions. One on incentive comp, year-over-year this year is up. It’s going to be up in fiscal ’14, significantly as you pointed out. Fiscal ’13, there was zero incentive comp payments. The targets in fiscal ’14 were set on return on capital employed and free cash flow, as Tom walked through the numbers at the closing. It’s been a very good year. So based on the target set by our committee and the Board of Directors, fiscal ‘14 will have a higher incentive payment. And then next fiscal year, we always said into the year, we’re planning for a payment but obviously, we don't know until the year shakes out. Beyond that really the big drivers if you kind of take the midpoint to the range, there’s just a lot of moving pieces in there, where you’re looking at maybe at the midpoint like a $13 million increase in SG&A. This year we’ve had abnormally low SG&A due to the fire in the U.K. Those cost just for the non-accounting types. We obviously incur those costs but the way the insurance works is, they are offset portions of those by a receivable, insurance receivable to which really what you see is the lower cost on the Barkell, I mean, the Airedale side. Then we have Barkell. We’ve had the situation for the last couple of years if you recall. We had a problem, a few years ago with VAT in Europe. Then we had a large accrual set up to as a potential liability to settle those. The good news is the last few years we've been going and cleaning up all of those and settling them and they’ve actually been working in our favor. So we've been able to reduce that accrual and that’s up to a $3 million impact. And then the last big one is the -- the wind tunnel in Europe. The good news this year is it has been pretty heavy demand. It’s been fairly well utilized while we've been marketing it for sale. Our plan is to sell it in the new fiscal year. So we won't have those testing income. But again, we know the trend in the region there and it’s the right time to diversify on non-strategic asset and generate the cash and reduce the cost going forward. So long answer to your question but I want to touch on a few of those items that are really just things we need to kind of get level set here as we’re completing our restructuring.

Okay. Now that’s all good color. I’ll leave it there. Thanks very much.

Yes. Thanks, Joe.

Thank you. (Operator Instructions) Our next question comes from Shivangi Tipnis of Global Hunter Securities. Your line is now opened.

Thank you, guys for taking my question. I wanted to ask about the China excavation market and your concerns there. And what kind of trends are you actually seeing specific to China?

As you know, we have a heavy concentration in the China excavator market. And we’ve obviously, are looking to diversify there. But specifically, on excavators, we anticipated sales growth this year and had came out to chute strong in the calendar year, year-over-year basis. But in April, there was some comments by the government on not putting forward the stimulus package for increased infrastructure and that seem to have stymie the growth. So it’s kind of flattish right now. And our outlook for the rest of years is kind of -- that the market will remain kind of on the flat sales level. So that boost we probably might get with added infrastructure investment from the stimulus is not going to happen, that’s how we’re planning that going forward.

Okay. Thank you for the color. My other question is actually on the insurance claim. Can you just talk about exactly, how much do you actually expect in insurance proceeds in 2015 and is it like a part of your 2015 forecast as well?

Yes. So in our outlook and in our guidance, we are assuming that we’ll receive an insurance settlement, the payment for lost profit. Going through the balance sheet all in most of fiscal ’14, is a sizable amount of receivables and payables. We estimate that the total cost of this, when we finally have our new facility up and running, we will be in the $50 million range. But the big piece that we want to make sure, that all of you understand is we also get reimbursed. So those would be traditional cost of operations. We’re in a lease facility, a new facility. We have to build the new one. In addition, we get reimbursed for the lost profits, while we were shutdown. And right now, we estimate that that’s going to be in a $3 million range. So we’ll follow-up with you once we finalize that discussion with the insurance company and we receive the payment then that would be booked through SG&A and show up in income.

Okay. And so the $0.5 million of insurance that was not actually covered by the insurance, that one is not included, right?

No. Now it’s just, we had an asset on the balance sheet for construction and progress that was linked to the facility before burn down. So we needed to write that asset down. We’re actually looking at expanding before the fire happened, that’s what the $500,000 relates to.

Okay. Thank you for the color guys.

All right. Thank you.

Thank you. I’m showing no further questions at this time. I’d like to turn the conference back to Kathy Powers.

Thank you. This concludes today’s call. Thank you for joining us this morning. And thank you for your interest in Modine. Good-bye.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a wonderful day.