Good morning, ladies and gentlemen, and welcome to the Modine Manufacturing Company's Fourth Quarter Fiscal 2016 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 for joining us today for Modine's fourth quarter fiscal 2016 earnings call. With me today are Modine's President and CEO, Tom Burke; and Mick Lucareli, our Vice President, 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 2 is an outline for today's call. Tom and Mick will provide comments on our fourth quarter and full year results and update on our Strengthen, Diversify & Grow strategic initiative and provide a review and earnings guidance for fiscal 2017. At the end of the call, there will be a question-and-answer session. On Slide 3 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 in 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. On today's call I will discuss our fourth quarter and full year results and provide an update on the various activities taking place with regard to our Strengthen, Diversify & Grow strategic transformation. After that Mick will provide a more detailed review of our consolidated financial results and will also provide our revenue and earnings guidance for fiscal 2017. I will then provide remarks prior to opening the call for questions. From a big picture perspective, our top line saw similar trends as we witnessed during the fiscal third quarter that our strategic initiatives designed to strengthen our business help us drive excellent operating performance. Specifically sales in the fourth quarter were down little less than 3% on a constant currency basis, primarily due to continued weakness in certain markets. We had sales increases in Europe & Asia segments being offset by decreases in the Americas in Building HVAC segments. Gross margin improved by 80 basis points to 18.1%, benefiting from favorable material cost and planned operating performance savings related to procurement initiatives. Our adjusted operating income was $23.7 million, up 38% from the prior year, adjusted earnings per share were $0.36 for the quarter representing an improvement of $0.24 or three times that of the prior year. For the full year, our adjusted operating income was $63.2 million, and our adjusted earnings per share were $0.76, up 21% from the prior year. This is clear that continued cost control efforts have allowed us to deliver year-over-year earnings improvement despite lower sales for the second straight quarter. Although our topline continue to be challenged by weak conditions in several of our end markets, I am pleased that we continue to deliver on our commitments. We took several actions during the quarter to further…

Thanks Tom and good morning everyone. Please turn to Slide 12; our fourth quarter sales decreased 5% as we continue to experience foreign currency headwinds and weakness in certain end markets. The lower sales were primarily due to weakness in global off-highway markets, the North American commercial vehicle markets and commercial heating markets. Similar to last quarter, warm winter weather contributed to the sales decline in our Building HVAC segment. As Tom mentioned, sales decreased 3% on a constant currency basis excluding an unfavorable currency impact of $10 million. I am happy to report that our gross margin improved by 80 basis points to 18.1% despite the decline in sales. This improvement was driven by lower commodity prices and further operational improvements. In addition, we are beginning to realize savings from our procurement initiatives. Further we lowered costs at many of our manufacturing locations; this is the result of hard work from all of our teams, particularly those throughout Europe and North America. Please note that gross profit includes a $1.1 million environmental charge related to the manufacturing facilities as the company closed in 2012. However, this charge was backed out to arrive at adjusted operating income. Excluding this charge and $1.2 million negative foreign currency impact, our gross profit was up $1.8 million or 3% on lower sales. Moving on to SG&A, costs were lower than the prior year by $7 million or 15%. This includes a number of moving pieces; first, the prior year included a $3.2 million legal reserve in Brazil which remains on the balance sheet. Also the exchange rate impact was $1 million favorable in the quarter. Our reported SG&A number includes a $1.5 million non-cash pension settlement loss related to our lump sum payout program that was offered earlier in the year. Excluding these…

Thanks, Mick. We had some major accomplishments in fiscal 2016. We delivered 21% improvement in our full year adjusted earnings per share despite decline in sales. We announced our Strengthen, Diversify & Grow strategic framework that will help to improve our competitive position and allow us to diversify our business and reduce our exposure to the highly cyclical vehicular markets. We announced and implemented a share repurchase program that allowed us return cash to our shareholders in the second half of the year. And finally, we completed the formation of the Puxin joint venture in China, strengthening our position in that market. Although most of our accomplishments towards our Strengthen, Diversify & Grow financial targets for fiscal 2016 have been on lowering cost, there has been a lot of work going on behind the scenes in our Diversify and Grow objectives. We continue to evaluate acquisition targets and are encouraged by the number of promising opportunities that will help us grow our topline and broaden our non-vehicular Building HVAC and coils businesses. Although I don't have anything to report right now, I'm hopeful that we'll reach our targets in the near future. Looking ahead, fiscal 2017 will bring an important milestone to our company, our 100th Anniversary. We will celebrate this accomplishment by continuing to focus on what's important, strengthening our company and keeping the commitments made to our shareholders. With that, we'll take your questions.

[Operator Instructions] Our first question is from David Lyker of Baird.

Hi, good morning. This is Joe Vruwink for David.

Hi, Joe.

I wanted to start on revenue guidance for the next fiscal year. If I just add up all your regional exposures and take what you assume the markets are going to do, I come out with a number that assumes industry volumes decline 2% or so in 2017. So comparing that to revenue guidance, down 1%, up 3%, that seems like a fairly wide range of what backlog might be contributing next year. Am I thinking about this right? And are there any particular regions or businesses where you might have just embedded a wider forecast at this point in the year?

Joe, its Mick. Couple of things that really impact that; one is if we look at our Building HVAC segment, as you know the -- it's a very seasonal business. This year for sure we'll be second half loaded and that's both due to recovery and data center sales and our business in the UK, also the heating season. Now with that -- this heating season as you know it's kind of a wide variance for an unknown, it really is going to be heavily dependent on the winter and the weather. Also then on the vehicular side, we've got a really good visibility to our launch activity this year, I'll let Tom comment to this, I think the wildcard for us is especially in some of the off-highway states, the market is a little volatile right now and depending on timing of launch activity and actual ramp rates and volumes, contributes to that -- wider variability in the top line.

Yes, Mick, it's a good point. We're winning significant programs and off-highway, specifically with the volume assumptions behind, so we know we have new programs that will lead to higher share if you will than we had before. The question is what rate will they take, will they assume with the market situation. And then secondly, on automotive side, as mentioned our oil cooler and oil cooler related product launches are growing extremely well with specifically in the Asia region and China, and in Europe and starting North America as well. So this content per vehicle that is increasing because of the CAFE standards and emission standards around the world is trying to give us an opportunity to actually grow share or business faster than market recovery because of our market growth, because of the added content.

I feel one -- color I guess I'd add that you asked about by segment, I commented on HVAC and the seasonality but I think we would say the strongest area than most consistent area has been automotive in Europe, the automotive seems to be stable and in good trend and in Asia as well. Clearly lots going on in Brazil and we haven't found that bottom yet and then lots of volatility going on in North America, both commercial vehicle and off-highway.

That's great color. So am I right in thinking the plus 3% revenue growth would imply everything do you know you have in the backlog that will launch this year, launches on-time as what's the OEMs are telling you. Is that the ideal plus 3% scenario?

Exactly.

Okay. If I go a little more granular and specifically on North America, that would seem to maybe be the one region where organic growth hasn't outperformed what the underlying market volumes have been, just based on our math. Is that a fair characterization or when you look at OEM build schedules in your growth. You seem to be growing pretty much in-line.

Good question. I mean clearly, as said our off-highway markets, both heavy construction, mining and Ag are under pressure. Commercial vehicle-wise we are seeing the -- what we had planned for second half recovery in the commercial vehicle market in the second half of the year is flattening out as you've projected in your numbers as well. So then offsetting -- trying to offset that is the growth in automotive business and the coils business which we have significantly. So I would say that -- Mick, what would you add to that?

Yes, I would say if we break it down on the automotive side and especially on the engine, we're clearly outpacing the marketing gaining share; even in the quarter we had a double-digit growth rate on automotive. The -- we're holding in the medium, heavy -- both the medium and heavy as you know we're very customer specific there, so we tend to move up and down with customer specific share and sale. And then, the other thing in the number and we're holding share, and we're actually still winning business. So -- but it's the entire off-highway phase and we're on most of the larger equipment. When we think of highway construction, Ag, mining, it's the larger horsepower engines and as you know Joe, those markets have been down significantly. So across the board we feel we're holding share of most of our core markets and I would say on auto, and especially on engine, we're gaining share.

That's great. And then my last question, on hybrid and electric vehicles, so a bigger piece of your presentation today -- I think a bigger piece of how investors vis-à-vis vehicular opportunity, particularly as one OEM builds 500,000 of them in the next 18 months. But can you provide just an overview of what you're doing on electric vehicle, your typical content that seem to have a $300 content figure in my head across coolers and chillers but just some additional detail there and your expectations?

Yes, we have now stated that the $300 per vehicle content was the opportunity we see, we have landed that with one customer that you referred to already on the second platform they released. Earlier we have a chiller content on that initiated our entry into that market but we won -- I announced a business win this last quarter with another electric vehicle producer, again, more of the full content that you talked about that will launch in the next fiscal year. So if you look at the trend, it went from maybe a fad to a question mark of where is this market going to the number of entrants now. I think Ford was out with a recent announcement of 40% of vehicles by 2020 will have electrification of some sort whether full electric or plug-in hybrid, and we have recording activity going on all of that. Europe is catching up as you know with a transition from a diesel kind of strategy to now really accelerating into electric, a lot of Chinese entrants that are coming on, so we feel very well positioned. Again, it's a competitive market, I mean I'm not saying that we're any major barriers to entry there, just basically having the capability of being able to tie your knowledge into their systems and bring solutions that they need. So we feel very well positioned to really capitalize on this trend.

Great. I will leave it there. Thanks, guys.

Thanks.

Our next question is from Mike Shlisky from Seaport Global.

Hi, this is Jordan Bender in for Mike today.

Good morning.

Good morning. So your operating profit was up $6.5 million in Q4 on a declining revenues but now you are guiding to a $5 million improvement in operating profit for the entire 2017 and what kind of looks like flat revenues, I guess we're just wondering why the restructuring benefits are higher for 2017? Are you guys taking a cautious stance with your cost structure or is there something else we should know about?

Yes, this is Mick, I'll take the first and then Tom can add color. As we approach the entire strength and diversifying growth initiative, we're still targeting the $40 million to $50 million in savings. We've talked about, there is going to be a ramp, we'll start to see a portion of that in fiscal 2017. So yes, we'll see those savings. Part of this ties as well to our top line and leveraging all the costs we've taken out so how the top line comes in is an important determinant of the actual earnings because while we have the cost that we're taking out we still have to address the annual economic wage inflation, contractual price bounce, and we also are passing through in the new year a portion of these lower material prices. If you add up a lot of those just general economics in a normal year that can easily be $20 million type in annual cost increases. So Tom mentioned, we now only have to offset those but more than offset -- and then in addition, the real kicker is launching the new program and leveraging the new cost structure. Tom anything, you want to add?

No, I think you've said that well.

Okay. I guess my next question is could you give us a little more color on your efforts to expand into new end-market category. At this point we are already think, we're most likely to see win something.

I assume you're referring to the coils business?

Yes.

Okay. We have a $60 million coils business today in North America, we've been in that business for decades. The market dynamics of that market are such that we like the lower capital intensities required for that, we like the ability to leverage our cut, core competencies on heat transfer to be able to apply to that. There is some key trends going on there with conversion to aluminum products that we have a lot of knowledge in and we think we can leverage -- we've got a good manufacturing footprint structure setup now to support that with our expansion into Mexico and looking at how we can build on it globally and clearly from an inorganic standpoint. It's a very interesting area for us to consider leveraging our ability, knowledge and right to win as we refer to it to go that way. So that's a heavily focused area that we are expanding on for those reasons.

Okay.

Also just to add what Tom said, a couple of areas that are closer to us, even though our core -- we're continuing to leverage -- Tom talked quite a bit about the electric vehicles, power generation continues to be an area where we're using our building block to quote on new business. And then, there is growing power sports industry, everything from motorcycles to four wheels, off-road equipment has been a nice opportunity for us to steer as well. But I would just add those to the coils/industrial opportunity.

Alright, I appreciate that. If I could squeeze one more in here; regarding the Asia segment your incrementals were pretty great in Q4. Is this the kind of operating profit that we should expect going forward for a $23 million quarter, and could you tell us what the new product launches -- does the seasonality change it on Asia and do you have any more launches for 2017? Thank you.

Yes, now we have -- I will go through the launch activity and growth. As I mentioned, I just came back -- the leadership team just came back from a trip to Asia, specifically concentrated on our plants in China and the growth opportunities in and we can't get capacity down there fast enough quite frankly with the quote activity that we're putting in place with the quote activity that we're being phased within the win rate that we are winning. So we think we made 1.5 million oil coolers this last fiscal year that we're maturing them for the next couple of years, that's going to start approaching to 5 million unit number. So you can get a feel for what's already won and coming at us as far as new program wins. The other thing is, as I mentioned in the Asia region, specifically, their focus on emissions, strategies and kind of coming up to developed country standards as far as emission is providing a lot of opportunities for things like boosted engines, oil coolers, liquid charger coolers, EGR coolers are going to be a very key product in the future that we're seeing benefit from and that we're going to utilize this joint venture we just announced last quarter, and we're just ordered a visit that's going to provide us with a lot of opportunities for bringing new technologies to supply EGR capacity and oil cooler capacity into that as well. So we're very excited about Asia growth and China specifically for those reasons, and that's automotive and of course we have a great installed base for the off-highway market which was down but we think it's bottomed but again, anything that comes back we're going to convert real low on that. And commercial truck expansion, we want to program -- I think we announced last quarter or the quarter before JEC, again domestic customers for us are something we really think we're going to benefit from with our joint venture relationships that brings a lot of relationship improvement inside to our team in Asia. So those are the key reasons we think we're going to really see that growth.

And we don't really see anything in the way of seasonality and to the credit of the team in Asia, we have talked for quite a while on these calls about a breakeven level at $85 million and really happy that this segment on the full year earned a $1.2 million operating profit on $79 million, and they'll probably get nervous by me saying it but we do expect the margins to continue going forward. So we're expecting good things out of the Asia region in the next year.

All right, well I appreciate the color. Thank you.

I am showing no further questions at this time. I would now like to turn the conference back to Kathy Powers.

Thank you. This concludes today's call. Thank you for joining us this morning and thanks for your interest in Modine.