Good morning, ladies and gentlemen, and welcome to the Modine Manufacturing Company's Third Quarter Fiscal 2017 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, Investor Relations and Tax. Ma’am, go ahead.

Thank you. And thank you for joining us today for Modine's third quarter fiscal 2017 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 the 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 third quarter results and update on our Strengthen, Diversify & Grow strategic initiative including the Luvata HTS acquisition and providing update to our revenue 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 our 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 third quarter results and provide an update on our Strengthen, Diversify & Grow strategic transformation including the acquisition of Luvata HTS business. After that, Mick will provide a more detailed review of our consolidated financial results and will update our revenue and earnings guidance for fiscal 2017. I will then provide a few closing remarks prior to opening the call for questions. As you know we completed Luvata HTS acquisition on November 30. We now operating this business as our commercial and industrial solution segment. We will refer to this as CIS going forward. Completing this acquisition was a key component in achieving our objectives of our SDG strategic framework introduced over 15 months ago. In addition to completing the acquisition, we have also continued to identify savings from other components of our SDG initiative, and I will provide an update on where we stand, what is our targets in a few minutes. Moving onto our third quarter results sales were up on a constant currency basis including $35 million of sales from our CIS business in the month of December. Our non-CIS or base business was down 3% on a constant currency basis primarily due to lower sales in the Americas and Europe segments partially offset by strong sales in the Asia’s segment. Our adjusted operating income was $17.7 million up 3% from the prior year. As I mentioned in our last call, I was very disappointed with our Q2 performance due to several operating inefficiencies in the Americas and building BHVAC segments. We have fully and appropriately addressed the large majority of the issues resulting in significant improvements sequentially in the third quarter. A few remaining items have already been or will be corrected…

Thanks, Tom. Please turn to Slide 12. I’d like to start by saying I am pleased with the significant improvement over the prior quarter and effort of our employees to drive earngins which dealing with the volume challenges. As anticipated, we were able to improve earnings significantly after a difficult Q2 but not able to fully offset additional volume drops in North America, South America and heating. Beginning with the top line, our third quarter sales increased $21.1 million including $34.7 million of sales from the Luvata HTS acquisition. Excluding CIS, constant currency sales were down $9.5 million or 3% year-over-year. Reported gross profit of $58.7 million was up slightly for the quarter, however this includes a negative 2.9 million purchase accounting adjustment related to inventory. As a result, gross margin had a negative 80 basis point impact from the inventory step up estimated fair value. Excluding CIS and its adjustment, gross margin on the base business improved 30 basis points over the prior year to 18.1% and this is on lower sale. Moving on at SG&A where we are keeping a relentless focus on cost control, SG&A of 51.1 million includes two significant items worth noting. First, we incurred professional fees of $7.2 million per transaction and integration costs related to the acquisition, second, the CIS segment included $4.7 million of us SG&A. Excluding these items, core SG&A was down $4.1 million or 9% lower than the prior year. Also during the quarter, we recorded $1.6 million of restructuring expenses, these primarily relate to equipment transfers in plant consolidation in the Americas. Interest expense was up $1.8 million over the prior year primarily due to the additional acquisition related debt. Third quarter adjusted operating income of $17.7 million was up $0.5 million or 3%, and our adjusted earnings per…

Thank, Mick. And as Mick mentioned last quarter we mentioned that we expected that our second half performance would improve significantly from the first half of the year and we have delivered with our third quarter results. I am pleased with the excellent progress being made on addressing the majority of the second quarter operational issues and can confirm that we continue to remediate remaining issues that impacted our third quarter results and expected continued and sustained improvements in Q4. However, as we look forward we see continued market-driven volume challenges in the Americas building HVAC segments. In addition, we expect higher metal prices and foreign exchange will continue to pressure our earnings. I’m pleased that earnings accretion from the addition of the CIS business will offset some of the challenges and although it is still early, we are very confident this acquisition will deliver to Modine and it shareholders a value we anticipated. That being said, there’s plenty of hard work being done around this organization to build strong stronger, more diversified industrial company. We will deliver cost savings objectives of our SDG strategy and continue to benefit from our actions into the fiscal 2018 and beyond. The worker and our cost structure allow us to continue to provide our customers with superior products at competitive prices. In addition, the creation of the commercial and industrial solutions business -- the creation of the commercial and industrial solutions business build through the acquisition of Luvata HTS allows us to expand our presence in familiar markets with products and technologies are squarely in our wheelhouse. We’re actively working on the integration of this business in Modine and look forward to providing updates along the way. With that, we’ll take your questions.

[Operator Instructions] Our first question comes from Matthew Paige from Gabelli & Company. Your line is now open.

Hey, good morning everybody.

Good morning.

Good morning.

Just wanted to start off the first question with about the recent proposals that we’ve seen regarding tax policies, I guess given your diverse geographic end market how much benefit do you think you could even get from a lower corporate tax rate and along those lines could also speak to the impacts that you see from a potential water adjustments tax?

Yes. We’re getting a lot of questions on that and I think the short answer is we really need to wait to see how all policies shakeout before we can assess the impact to Modine. I think if there's any type of tax changed, there’s clearly going to be a short term non-cash impacted as we adjust our balance sheet, our company has a lot to adjust tax -- adjust for tax assets and liabilities. And then going forward from a cash basis, really have to assess, hopefully that will only be positive news from the cash tax basis going forward.

All right. And then, you also mentioned earlier special benefits from electric vehicles, could you speak to some of the products that serve those and how you view that potential growth in that market?

Sure. Obviously, this market is really eating up. We’ve had the initial success in North America with North American base companies providing whether we call chillers which is part of the overall system of cooling batteries in the passenger compartment, that’s expand into higher content and into other what we called powertrain cooling products with the overall system and then looking at battery plates. So that’s been our basis from the last couple of years for North America, but this is picking up globally now. So as I mentioned the Europe customers really in last year have accelerated the electrification strategies. We’re very involved in those products. So think of battery plate coolers, think of chillers have managed overall system performance and specific components have managed the overall what we call powertrain that is the balance between heating and cooling of drive train and passenger thermal management compartments. So, a lot of potential content, lot of acceleration going into this market with big -- that are going on in the world, we’re saying that they expect to see significant increase restarting in electric vehicles over the next five years.

Great. And then last one from me, this is a little housekeeping question. Do you have that share count at the end of the quarter?

Yes. I’ll grab that for you. So in the quarter, $47.3 million – at the end of the quarter a $47.3 and then in the press release is still the weighted average shares use in the quarter 48.5.

Got it. Okay. Appreciate it.

Thank you.

And our next question comes from David Liker from Baird. Your line is now open.

Good morning, everyone.

Hi, David.

Just first on CIS, I guess this is the housekeeping item to start with. Is CIS is all over Luvata in CIS and is CIS only Luvata or there are some moving pieces between the other segments?

CIS is Luvata plus the coils business that we develop, that we have established in North America, so think about that $50 million to $60 million worth of coils business in North America that we’ve had or something that is being fallen into that business as well as we speak.

But that's not in the numbers for the quarter, but I could see….

I would say it’s a big picture, that’s where we’re going, so for the quarter Mick go ahead.

Yes. Now, for the quarter and then for -- the really the plan will be for the next fiscal year, while we’re integrating Luvata, the business Tom reference will stay in the Americas section and we have plans to operationally that will be run and lead out immediately by our new leadership team at CIS. But from the accounting standpoint we’ll go through as part of our integration, how to move that from an accounting standpoint from the Americas into the CIS segment. That would probably take most of into fiscal 2018, David.

Okay. And then on the – Tom, I know you talk about the datacenter, I know you talk this a little bit, but to new frame that first in terms of size and timing and what needs to happen there on CIS or Luvata?

Okay. The impact I mentioned, the large customer…

The large datacenter customer…

Yes. So yes, there is a – we saw in due-diligence and discovered and of course confirmed that that there is a transition of product mix going on with the large customer in the datacenter market. That’s again being confirmed both internally and with the customers, they transition from one product platform to another, so its kind of – think about it as a low, okay, as I make that transition to just temporary position to a new just call it product platform, I guess the best way to call it, the significant product platform of content. But – so again everything is – we’re please with the customer relationship and the opportunity as we transition, think of it from one product platform to another there this transition phase that we’re going through and that leaves a lower margin product that’s from earlier, the product platform transition to the new ones. So that's the mix story going on. So, I can’t give you any timing focus on that, but that transition we will inform of course our shareholders and investors at [Indiscernible] but again it’s as we saw and as right as we plan for and we’ll see that transition over the next several quarters.

Okay. And then on China, the Asian business, that nice to see in those volumes up at these levels, so I’m not sure that's exciting for you folks?

Very exciting.

Yes, guys, you continue to ramp that contract that you have there. I mean you’re pushing out 30 million a quarter run rate there. How much more upside is there on the volume out of Asia?

Well, we have not hit a mature level yet, so we do have upside to where we’re running right now, and especially we’re really encouraged just to see that as we gain share in automotive side which even really targeting is that we’re seeing some strengthening in the construction business as well which is encouraging. So, all in all I’d say we feel very positive and as I mentioned we continue – expect to see double-digit growth in that segment.

Yes. And if we look at what the mix of that revenue is today between the automotive and the construction side, what would you think it is?

Yes. It’s approaching 50% automotive now, where it used be about 80% construction, so it's about a 50/50 automotive, 35% construction, probably then the rest commercial vehicle.

Okay, great. And then what about the profitability there, a nice margins there. What’s your longer-term target, so what you think that’s up little bit?

Yes. It’s been a wild data and I’m not sure we’d I’d see a day where we talk about a quarter where Asia had the highest operating margin of all of our segments. I think from here on now its going to be – I think its really going to be – we’re going to reach a normalization year, I think in the 17% to 18% tight gross margin, SG&A has been tightly managed, so more inflationary levels. So, I think from here it’s all going to be about a volume story with fairly stable margins.

Okay. And then one last item on China, what the tax there on the automotive side and some free [ph] activity in December, I know that folks are just coming it back from the New Year's, but do you have any sense of what the bill rates are you currently running as we settle into the new taxes regime there?

It don’t. I don’t have that, but we can get back on that [Indiscernible].

No one seems to have it. Okay. Thanks.

Thank you, David.

[Operator Instructions] Next question comes from Mike Shlisky from Seaport Global. Your line is now open.

Hey, guys, good morning.

Good morning.

Hi, Mike.

I wanted to touch on the few things here. First on Luvata and CIS, the annual interest expense of $14 million to $15 million you put in your slides and comments, does that assume no repayment from today onward, and can you maybe comment for us a little bit on the cadence of when some of the debt might be paid down either in Calendar 2017 or in fiscal 2018?

Yes. So that is full year annualized interest rate, interest payment, Mike assuming that that debt does stay on for the full year. Really its fairly we’ve model there and looking at even though we’re in a planning as fairly evenly spread quarter-to-quarter, partly depend on our final cash flows next year, that will be the main driver of it. We do have plans to pay down the debt. So I think we’d like to say the $14 million to $15 million is worth case, but I can't comment on the opportunity for us to go lower until we really complete our plan and the timing of cash flow.

Okay. All right. Got it. And also wanted to ask about your outlook for North America both heavy-duty and medium-duty, is it fair to say on heavy duty that perhaps the worst part of it as far as declines year-over-year could be in your fiscal fourth quarter or the calendar first quarter here. And might not be quite as negative as we go through fiscal 2018?

We certainly hope its not. That’s fore sure, but yes, its been a really drop last two quarters means on Q3 and what we anticipate this quarter, is that when even out more that would be great.

We’re not so far, Mike, we’re not just to ask to that looking at it really any differently than other market data sources if they are correct and that there is a stabilization or even start to improve in the second half of calendar 2017, to your question that could be good for us as we come out at 2017 and even though our Q4 which would be early 2018 obviously.

Okay. Got it. And then kind of following up on that question on medium-duty, I see outlook here is little about decline of 5% in calendar 2017, but some of the forecasters are saying, up 5% or 6% on the positive side. So I was just wondering what you’re seeing differently between the big forecasters and what your business is?

Well, I just really anticipate obviously with the planning process of 2018. We will look at that going forward and in the next quarter we can give higher outlook. But right now that’s kind of what are -- we’ve kind of triangulated with the information both from the external sources and internally what our people are thinking. So, it has not been affected as much clearly. We have a proposition on medium duty, and that's we feel great about that, so we’ll get back to you next quarter when we see that outlook going forward.

Okay. And one last one from me. I just want to clarify. Do you say that mix is going to be a benefit for you in calendar 2017 in Europe, as we saw the business in fiscal 2017?

Yes. The mix of commercial truck volume going down, you’re talking about.

It sounds to me as you were just kind of just talking your overall margin mix with exiting some stuff in calendar 2016 and improve your outlook for margins in Europe in Calendar 2017, is that what you were referring to, I just want to clarify?

Yes. I believe as Tom was describing as we will continue is what you have seen in the last few quarters as we continue to launch the automotive engine program, that’s offsetting the – has been offsetting the wind-down of the commercial vehicle radiator program, we would expect that to be a positive mix shift.

Okay. I think that clears it up. Thank you very much guys.

At this time, I’m showing no further questions. I would now like to turn the conference back to Kathy Powers.

Yeah, this Mick. One comment Kathy before I turn it back. Here just wanted to correct on the first question on the shares outstanding as of December 31, $50.1 million and then as of March 31, 2016 $47.4 million. So March 31, 2016 $47.4 and December 31, 2016 $50.1 million. Thank you.

All right. Thank you Mick. This concludes today’s call. Thank you for joining us this morning and thanks again for your interest in Modine.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now all disconnect. Everyone have a great day.