Deborah Pawlowski – IR Jim Lines – President and CEO Jeff Glajch – CFO.

Paul Dircks – William Blair Paul Dircks – William Blair Dick Ryan – Dougherty & Company LLC Joe Mondillo – Sidoti & Company, LLC Jason Ursaner – CSJ Securities Jon Braatz – Kansas City Capital Tom Lewis – High Road Value Research Dick Ryan – Dougherty & Company.

Greetings and welcome to the Graham Corporation First Quarter Fiscal Year 2014 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Graham Corporation..

Thank you, Joan [ph], and good afternoon everyone. We certainly appreciate you joining us here today for the Graham Corp. first quarter fiscal 2014 conference call as [inaudible] have already noted. On the call we have Jim Lines, our President and CEO; and Jeff Glajch, our Chief Financial Officer.

We’ll have Jim and Jeff review the results of the quarter and then we will open it up for Q&A. We do have slides associated to the commentary that we’re doing here today, and if you did not get them, you can find them on the Company’s website at www.graham-mfg.com.

As you may be aware, we may make some forward-looking statements during this discussion, as well as during the Q&A. These statements apply to future events and are subject to risks and uncertainties, as well as other factors, which could cause actual results to differ materially from what is stated here today.

These risks and uncertainties and other factors are provided in the earnings release, as well as with other documents filed by the Company with the Securities and Exchange Commission. You can find these documents on the Company’s website or at www.sec.gov. So with that, I’m going to turn the call over to Jim to begin the discussion.

Jim?.

Thank you, Debby. And thank you to everyone that joined our webcast to review our first quarter fiscal 2014 results. Please refer to slide 3. Our strategy across the next expansion cycle in our markets is to double organic revenue and exceed $200 million in revenue at the next peak.

We believe our focus in the energy markets with Engineered-to-Order custom fabricated products and our commitment to the Naval Nuclear Propulsion Program will provide sufficient demand to realize this strategy.

Our plans to accomplish this include taking greater market share in global refining and chemical, petrochemical markets; extending our supply to the Naval Nuclear Propulsion Program to include equipment for submarine programs, capitalizing on what is expected to be a substantial investment in new chemical and petrochemical capacity in North America driven by a low-cost natural gas; expanding our presence in power generations markets including nuclear, geothermal, biomass, and other renewable energies; and also putting our balance sheet to work to drive both organic growth and growth from acquisitions.

Please move on to slide 4. We have solid execution in the first quarter and are off to a good start for fiscal 2014. It was a terrific effort by the whole team. First quarter sales were $28.3 million, up $5.8 million from a year earlier.

That is a 25.4% increase from last year which was driven by a strength of global refining markets and a higher level of our short cycle sales. Net income in the quarter was $3.8 million, up from $1.4 million of net income last year.

The pipeline of bidding activity remains elevated and we believe our global refining and petrochemical markets are in the early stages of recovery. $750 million to $1 billion is the range for our trailing 12-month total for bidding activity.

I continue to believe this as positive leading indicator for the direction of future orders and subsequent backlog expansion. Please refer to slide 5. Sales for the global refining market were $12.6 million in the quarter. Backlog conversion of orders for Chinese refineries drove much of the $7.4 million increase from last year.

Chemical and petrochemical market sales were just under $5 million. Power industry sales were $7.7 million. And sales for the nuclear power generation market were roughly 70% of power industry sales. 53% of sales were domestic and 47% international.

Sales to Asian end-users were 23% of quarter sales, the Middle East was 5% of total, with Canada and Latin-America making up much of the remaining international sales. I am going to pass it over to Jeff on a more detailed review of the financial results.

Jeff?.

Thank you, Jim, and good afternoon everyone. As Jim mentioned, Q1 sales were $28.3 million, up 25% versus last year’s sales of $22.5 million. Sales in the first quarter were 53% domestic and 27% international. In last year’s first quarter, the split was 56% domestic and 44% international.

Domestic sales increased to $15 million compared with $12.6 million last year. International sales increased to $13.3 million from $10 million last year. And as Jim mentioned earlier, the Chinese refining market was strong, accounting for the entire increase of internal sales.

[Inaudible] market was strong in the quarter, this does not suggest a trend but rather it was simply the timing of projects which were converted in the quarter. Gross profit increased to $10 million from $6.2 million last year.

Part of the increase was due to the 25% sales gain and the rest of the increase in gross margin – was an increase in gross margin to 35.4% from 27.7% last year. The increase in margin was a combination of increase utilization from higher volume, an increase in short cycle sales, and a stronger pricing environment.

You may recall our gross margin in the last sequential quarter, the fourth quarter of fiscal 2013 was 34.1% and it was driven by a high level of aftermarket sales.

That did not quite repeat itself in this quarter, but rather the higher margin of larger projects resulting in gross margin that are similar actually slightly higher level despite the 9% lower sales level than the fourth quarter.

As we’ve discussed in the past, our projects have a broader ray of margins and depending at which project convert in a quarter, we can sometimes see swings in margins from quarter to quarter. This quarter represented a good mix of high margin projects.

Looking at our current backlog, we do not expect margins at this level over the remainder of the year. EBITDA margins in the quarter increased to nearly 22% up from 11.9% in last year’s first quarter.

The step up in gross margin of 770 basis points, those three quarters are the improvement and lower SG&A as the percent of sales made up the remainder of the improvement. The SG&A leverage we exhibited as we saw SG&A cost increase only 8% while our sales revenue increased 25%.

Net income increased to $3.8 million up from $1.4 million or $0.38 per share, up from $0.14 per share last year. You may recall last year, the EPS increased quite dramatically as the year continue.

By comparison, the last year’s first quarter was relatively easy given where we were, where our business was operating at this point last year, when it comes for the rest of the year we’ll [ph] get more difficult. Onto slide eight please.

We generated $2 million of operating cash flow in the first quarter, and have increased our cash and investment’s position by $1.5 million to $53.2 million. Increases in accounts receivable in Q1, temper the operating cash inflow as we completed a number of projects near the end of the quarter.

I would expect the accounts receivable to work its way down in the next quarter or two, and we should see nice operating cash flows in the near term.

As many of you are aware, we take great pride in our cash flow matrix where we have seen approximately 90% of our net income since the start of fiscal year 2006, add to our cash position or be utilized as acquisition capital. Finally, we have a clean balance sheet with no bank debt.

This allows us to focus on utilizing this cash and if necessary, our on top line [ph] line of credit for future acquisition activity as well as internal growth and investment opportunities.

Jim will complete our presentation by discussing our strong order level in the first quarter, reiterating our full year guidance, and providing some comments on our future growth opportunities..

Thank you, Jeff. Please refer to slide 10. First quarter new orders were $32.8 million, a 66% increase from the first quarter of fiscal 2013. This quarter’s orders were also up 27% sequentially from the fourth quarter of fiscal 2013.

It is important to note that while total orders in the quarter were in the arrange of what we had expected, approximately half of the orders in the quarter came during the last two weeks of June. We experienced an initial wave of orders for North America petrochemical/chemical new capacity.

Orders were secured for ethylene, fertilizer and methanol plants. These are processes where our brand is clearly strong. 87% of the new orders in the quarter were for the US market. That is disproportionate with what we expect over a longer evaluation period. However, it is indicative of the relative strength of the North American markets.

It was encouraging to have this level of bids in our $750 million to $1 billion, thrilling 12-month pipeline convert to orders. Biding activity is holding at this aggregate level, although we believe projects are moving forward toward placing orders at a more steady pace. Onto slide 11. Backlog expanded to $90.4 million as of June 30.

Backlog is evenly distributed across our two markets, 28% for refining markets, 24% for chemical/petrochemical markets, 19% for power generation and 29% for naval work along with our other markets. 70% to 75% of this backlog is projected to convert over the next 12 months, 20% to 25% between 12 and 24 months and 5% to 10% after 24 months.

We expect our markets will continue to improve over quarterly order levels will likely fluctuate. Slide 12. Fiscal 2014 guidance is unchanged. Revenue is projected to be between $100 and $115 million, gross margin between 29% and 31%, SG&A as the percent of sales between 15% to 16%, and effective tax rate of 33% to 34%.

Searching of the orders one this [ph] this past quarter were early in the facility design phase. We don’t believe engineering by our customers is finalized. That will affect when these orders convert to revenue.

Our current estimate on timing will require us to outsource certain work to meet those scheduled commitments, potentially impacting margins as compared with margins realized this past first quarter.

We are reaffirming guidance and want to understand better the timing for executing certain first order orders along with the level of orders in the second quarter before considering adjusting full year expectations. We will be in a better position to do that in late October. Onto slide 13.

Our strategic focus is on sustainable earnings growth by taking greater market share, expanding into submarine programs and leveraging our balance sheet to drive growth. We’re also focused on reducing earnings volatility through elevating the level of less typical orders, primarily our short cycle sales and diversifying our customer base.

We’re also focused on improving operating performance. Key focus is on error elimination, process improvement and aligning processes to reduce leave time [ph]. Leveraging our existing physical planned assets and investing to improve productivity. Cash flow is a key focus area for us.

The entire team is focused on this recording process or cash flow in terms on negotiated to operations reducing leave time [ph] and working capital through to collections. Strong commitment remains focused on our customers and in developing our workforce.

Our customer is first and everything that we do, we go to extraordinary lengths to be the supplier of choice by serving customers better than any competitor.

Our employees make that happen, our management process to engage employees and creating our success by having our company be aware of employees want to build careers has magnified our success and we’ll drive it going forward. With that, operator, please open the line for questions. Thank you..

Ladies and gentlemen, we will now be conducting a question and answer session. (Operator instructions) one moment please while we poll for question. Our first question comes from the line of Paul Dircks with William Blair. Please proceed with your question..

Hey, man, congratulations on a nice quarter..

Thank you, Paul..

So just a couple of quick questions for me here. First of all obviously good to see some of the US petrochemical/chemical projects come in for you guys during the quarter. And you noted the surge of work that arrived in backlog around the same time and the advantage here [ph].

Did that surge and work all at the same time prompt the increase in the upcoming outsourced work? Or was that always part of your outlook for this fiscal year?.

Well, quite honestly the way the orders punched up at the latter half of June cause that decision to occur. Bearing in mind the level of orders is consistent with what we had expected for the quarter.

Have they flow into the business? Likely we would have expected pretty evenly throughout the quarter, we wouldn’t have had to address outsourcing as we have to at this point in time..

Okay.

Could you maybe provide a little bit more color on how exactly you are adjusting it through outsourcing? What facilities? And also maybe if there’s an expectation on your part that if this could happen in subsequent quarters?.

Well, the outsourcing outlets that we will use are the traditional North American partners that we use to help us in this regard.

So there won’t be any new suppliers or subcontractors as a part of this, so it’ll be those that we’ve used in the past where they understand our quality requirements, our execution requirements, and there’s a familiarity between us and them.

With regard to, is this part of our makeup going forward, it really had – turning down to the consequence of a burst of orders coming in in a short period of time with a similar delivery requirement that’s caused us to consider this level of stepped-up outsourcing.

Again, had it been, Paul, more uniformed flow of orders across the quarter, we wouldn’t necessarily have had this issue. But it happened to come in in a short period of time and this is how we’re addressing it..

Understood. Two more questions if I may here; one for Jim, one for Jeff.

For you, Jim, obviously, you talked positively about the North American activity ramping, could you maybe touch a little bit upon what you’re seeing in a couple of your international markets specifically in the Canadian oil sands and also in China, particularly after such a strong earnings conversion this quarter in China?.

For the oil sands, to be candid, we secured last year two large project work orders for oil sands upgraders, the North West upgrader project and CNRL. It’s been our experience that typically Alberta only handles about one or two upgraders every 12 to 18 months, so we’re not expecting to see much upgrading activity for one or two more years.

On the oil sands extraction site where we have an opportunity – we’ve still got investment ongoing but it’s moving rather slowly. I do see the oil sands as being interesting but not as impactful as it was last year in terms of order intake.

On the China side, they have come out with their 11th 5-year plan which is to expand refining capacity quite appreciably. There are a number of projects that are going to move ahead this fiscal year where orders will be placed. That should be between two and five projects.

And in total there’s three or four times multiple of that over a five-year period, so we’re pretty excited about the direction of the China refining investment. Those are state-owned enterprises.

What we have seen in the China market is a bit of a moderating attitude for private companies that require financing, there being a little more slow to move forward, the availability of capital.

But much of our concentration had been on and will continue to be on the state-owned enterprises, Sino, PetroChina, PNOC [ph] as it relates to the refining market..

That’s fair enough [ph]..

In the Middle East, in the Middle East we’re seeing some early signs of initial bidding work, feed-type work as we would call it. And there is one project that is at the procurement stage now for the Jazan [ph] Refinery that perhaps would close over the next one or two quarters..

Okay, it’s very helpful color. I appreciate it. And if I may, Jeff, one for you.

Given the fact that the bid pipeline remains robust and that the expectations for orders to continue coming in in the next few quarters is maintained, how would you characterize your appetite right now for acquisitions? Is it an ongoing process for you guys or is it a process that perhaps you are taking a bit of a timeout until you see whether or not these orders come in, and if so, at what rate?.

Paul, our appetite for acquisition has not changed. We still have the appetite. We’d like to move forward on something if we find the right opportunity and the fact that we’ve had a step up in the recent order level does not affect that..

Fair enough. I appreciate the color. Thanks, guys..

Thanks, Paul..

Thanks, Paul..

Thank you. Our next question comes from the line of Dick Ryan with Dougherty. Please proceed with your question..

Thank you. Good afternoon, guys; good quarter.

So, Jeff, if you look at the short-cycle business that you talked about in the script, can you give us a level to quantify, how that did come in in the quarter and what impact that may have had on the gross margin?.

So, Dick, short-cycle business was probably up about 25% year-over-year compared to the same quarter last year. And so, as you know, our aftermarket business has a nice kick to it. The short-cycle business has several that are good but not as good as the aftermarket, but certainly that was a portion of our increase in margins.

But I think the bigger portion of the increase in margins was the utilization and the pricing..

Okay.

Short-cycle, their approximate range would that represents per quarter?.

That might be – the typical quarter might be 25 – maybe 30% of our business, 25% to 30% of our business, maybe a little bit more. Yeah, 25% to 30% this quarter was probably up in the high 30s..

Okay.

And, Jim, the late quarter surge, I mean, can you put your finger on anything that really drove it? I mean, was their discount pricing to get some of those projects in at the end of quarter and how has the second quarter begun from an order standpoint?.

The surge of orders did not come us incenting the customer to move in the quarter. It just seemed like it came together and there was a sense of urgency by our customers to get moving on these projects very quickly so they could lock down the suppliers they wanted for their projects.

And that’s typically the turbo machinery, turbines and compressors; and our equipment is associated with that so we’ve tend to be in that critical equipment category. So we would liken it to a strong desire to make sure they lock down the right suppliers for the projects.

And then, secondly, I think there’s a perception that the cost are beginning to step up as the supply chain tightens and they wanted to get these projects in before that happened. And then thirdly, recognizing that there are a number of computing projects, these particular customers wanted to get to the market first with their new capacity.

So those three things in combination seem to be what drove the urgency. However, with that being said, we had projected much of this work to close in the quarter, it just happen to keep pushing, pushing, pushing to the right and ultimately was closed a good portion of it in the last couple weeks of June.

So the level of orders, again, was not different than what we were anticipating and just happened to bunch up at the end of the quarter. As we move in to our second quarter and we looked at our active bids and our pipeline as a whole, we are expecting a good quarter for order intake.

However, it has not kept the pace nor did we expected to keep the pace that we saw in the last two weeks of June. That wasn’t sustainable..

Sure..

But the attitude of our customers and the people we’re talking to for this – for projects in the second quarter, we have a good level of confidence that there will be a nice level of activity this quarter, this current quarter..

Okay.

On the power generation Energy Steel, what’s currently going on there? Are you seeing any uptick in these kinds of maintenance and life extensions for the nuclear [inaudible]?.

We haven’t seen an uptick to speak of. There is still additional work to be procured for the Summer and Vogtle [ph], new power plants being built in North America. There’s additional products to be bought there that we’ve done some bidding work on. With regard to the existing utilities, we haven’t really seen any change there to their ongoing MRO.

We are beginning to have some discussions around what they’re going to implement as a fall out of Fukushima to reduce a similar type of risk happening in a US-based utility. So that should create some demand for Energy Steel or Graham’s type of products.

And on the international side, there hasn’t been much of a change from what we had been experiencing the last 12 months..

Okay, great. That’s it for me. Thanks..

You’re welcome..

Thank you. Our next question comes from the line of Joe Mondillo with Sidoti & Company, LLC. Please proceed with your question..

Hi, guys, good afternoon..

Hey, Joe..

Hi, Joe..

First question, I just want to try to understand the guidance a little bit.

So, the gross margin guidance, I can sort of understand, it seems like even though your 12 month backlog is pretty much the same at the end of March compared to the end of June, it seems like it’s right around that $65 million mark, but it seems like because of disruptive [ph] orders at the end of the quarter, it seems like it’s maybe bogging down your operations just in terms of timing at the end of the year, which is translating into the fact that you guys are in to utilize outsourcing a little bit more than usual and that’s maybe putting risk to the gross margin.

First off, if you could confirm that and if that is the case, then wouldn’t there be sort of a higher sales at the end of the year, so my question would be, why wouldn’t you increase the sales guidance?.

There are – generally, what you have said is quite accurate. We have a couple of competing aspects here; one is the impact of utilization and its effect on gross margin depending upon how these projects flow through to revenue.

One of the concerns we have, we’ve modeled backlog version over the next 12 months based on the step schedules from our customers. Would you recognize however though that certain of the orders that we did secure in this first quarter were before the EPC was even selected. They were post feed but pre EPC.

We know engineering – we believe from our experience engineering is not frozen. That’s going to result in some engineering churn on the part of Graham and the customer until the EPC settles on the final design; that will affect conversion.

So we have that counterbalancing the strong order intake and then furthermore, once we decide that it’s important to outsource the need of [inaudible] commitment, it’s hard to unwind that once we get that into the supply chain.

So we tend to have to make that decision early and structure our execution strategy for that particular order in that manner and it’s not really possible to unwind that once – we’ll practically unwind that once we get rolling on it.

Another important fact and this is more – so that comment that we just made, Joe, pertains to the latter half of the year.

As we look at the quarter we’re going into, bearing in mind what the order level was four quarters ago, which was about $20 million, at some point we have to bleed [ph] that through into revenue and that results in underutilization and we can’t necessarily shed those costs to correspond with utilization because we need those as we go into executing Q3, Q4, Q1 of ‘15 and onwards.

So we’re at this point in time where business has to be structured for growth. We have a quarter or so deal with that reflects lower order rates 12 months ago. And if you put that altogether in the mix and you have some margin compression as we go in to the latter part of this year..

Okay. So I understand the uncertainty and how the margin is going to pull out; it’s just a little early to tell. How about on the top line guidance, you didn’t change that as well. Is there may be some uncertainty in terms of the exact timing? Is that the case in point or why wouldn’t you –.

That’s my worry. My worry is from an experience that we’ve had with these types of orders when they’re issued this early is while the customer has given us a purchase order with a certain delivery schedule, it just doesn’t happen because engineering is not frozen.

Not that we’ve done anything incorrectly, it’s just the process design has not progressed far enough that design iterations aren’t going to occur which delays when we get those projects into production for revenue recognition.

So we have that in our mind as what is the potential outcome and we need one more quarter, Joe, to have more of an informed understanding of how this level of new orders in Q1 actually should begin to flow into revenue. So we’re being a little cautious rather than get out in front of it and hope everything goes perfectly because it never does..

Okay, very understandable.

Could you give us any insight on what the backlog looks like on how the next three quarters are going to weigh? Is it sort of a building up to the rest of the year seemingly at this point or how does that – how do you think that capes [ph] out?.

I don’t believe it’s a uniform conversion. Again, going back to what we mentioned a moment ago with regard to a softer bookings quarter one year ago, that will show up as it’s going to likely show up in our second quarter and a little bit into our third quarter.

So we would begin – we’d expect to see a ramp up as we get into – half way into our third quarter and into our fourth quarter with not a similar level of sales in our second quarter..

Okay. And then just on the gross margin that you saw in the first quarter here, I just want to make sure I understand the strength. In your prepared remarks, you said, you mentioned higher margin of larger-type projects drove the sequential improvement.

And then in the press release, you spoke about improved production cost absorption even though the volume was down from the fourth quarter.

So I’m just wondering, was there some sort of change operationally where you were able to get that cost absorption or is it more so a product mix?.

Joe, the comment about the cost absorption was not sequential quarter but rather this quarter versus the first quarter of last year..

Okay. Okay.

And then, just lastly, my last question with regards to the – I was wondering if just provide an update on the naval submarine program and the opportunity there?.

We still see that progressing well. On the last conference call I had indicated that we would expect to get an indication this fiscal year that we’ve broken into the submarine program, we’re not. We feel confident that we will and we think the timeframe is this year, that validates the strategy as reliable and it’s going to be actualized..

And would that be so by this calendar year or is in the next couple of quarter or is it by the end of next March that we should have a better idea?.

Sorry, Joe, the next couple of quarters..

Okay. All right. Great. Thanks a lot, guys..

You’re welcome..

Thank you. Our next question comes from the line of Jason Ursaner with CSJ Securities. Please proceed with your question..

Good afternoon, very nice quarter.

Just following up on the expectations for continued order intake, I understand the commentary on the last couple of weeks of June and that that portion of orders wouldn’t sustain at that level, but how much did that absorb the near-term pipeline? And as a total level for the entire quarter, why would you not expect Q2 to see sustained strengths from the petrochem market at or near the total level, not necessarily linear but as a total given the overall level of investment going on across the country?.

Sure. I may not have answered Dick’s question well. My comment was the – bearing in mind that almost half of Q1 bookings came in in the latter half of June. That did not [ph] have sustained itself going into July. That comment did not suggest we’re concerned about our – not being able to achieve a similar level of order intake in Q2 as a whole..

In the petrochem market or across all your markets?.

Across all of our markets with petrochem being strong, continuing to be strong. There’s more work in Q2 that’s expected to close. So my comment was related to the first of two – of the second half of June, order intake wasn’t carrying in to July nor did we expected to.

But the level of opportunities that we’re projecting to close in Q2 are comparable to what was realized in Q1..

Okay. And a question on the SG&A.

You talked about the pre-investments in the middle of the company in operations and engineering, do you see these as being completed at this point and how much additional headcount might you need to add as you move closer towards the middle or upper part of the cycle?.

We’ve done well to get at that during the last couple of years. We’ve added 29 people last year. Over the last two years we’ve added 45 people. As we look at our strategies for fiscal ‘14, we expect to be somewhere between 10 and 20 more people to be added to the company.

And then after that it’s hopefully is on the indirect side, less certainly more like one or two as supposed to the numbers that I’ve just sited. So there is more additions that we’re contemplating and that we plan to do in ‘14 as we clear the business up to capitalize.

Now, what we can see and what we believe as an incredibly strong opportunity possibly [ph] coming from our home court, the domestic market..

And excluding energy field, how is headcount at this point compare to sort of where it was at the last upper end of the cycle? I mean, that’s really factoring during the size of this cycle that you’ve talked about [ph]..

Sure. If we think about where our headcount was in 2009, the last peak, the trivia [ph], the core business headcount excluding energy steel is comparable to that level of headcount. Now, you need to bear in mind that we don’t have the pricing environment now that we had in 2009. So for a similar level of revenue, we’re executing a higher throughput..

Thank you. I guess, in just looking at where your headcount is in the outsourcing versus potential capacity expansion, there’s some comment in the press release that CapEx could potentially either range [ph] if market conditions warranted it.

What would the CapEx budget need to stretch there if you felt the level of orders as more to say when one want it to capture it more [ph] internally?.

We’ve noted right now $3.5 million to $4.5 million. It could be $6 million to $7 million that order of magnitude. And again, we’re making that comment because we’re still thrilled with how we see the market evolving and the opportunity setting up, that we want to capitalize on all of it.

And an investment such as what would move us from $3.5 million to $4.5 million to $6 million to $7 million, we facilitate that being able take greater share..

Got it. And just last question for me.

Can you I guess give a brief overview again of what drove the pricing environment in ‘09 and sort of where that is relative to today, and where you see it today trending given the capacity that is out there between you and your various suppliers, your various competitors?.

The pricing environment that actually was in calendar 2007 and 2008 that allowed us to realize that performance in 2009 was extraordinary. And it was driven off of so much work was coming so quickly that the supply chain couldn’t handle it. And cost got out of control through the whole supply chain.

Carbon steel jumped from over that $0.05 or $0.22 a pound, the $0.45 a pound, the $0.85 a pound when we ended the cycle. Nickel went from $5 a pound to almost $20 a pound, for our stainless steel alloys direct labor was not available, you couldn’t find a well there [ph].

They were costing a lot of money, execution, skill sets, engineering and administration skill sets weren’t available. So everything got very tight too quickly, and the pricing got out of control.

And I think to a degree that brought the early demise of that expansion cycle because the project when they were founded and when it actually had the final investment decision to made were quite a bit higher than the budget. And that became really not palatable to the end user.

So that was a very unique confluence of a number of things that came together that created an extraordinary environment for us as the supplier. And I think we did a pretty good job to understand that, and serve our customers well, and also serve ourselves well.

I think we’re not yet at that point what I would characterize as a white hot market environment. Yes, we had a burst of business. If this would take the typical expansion profile that we’ve seen or maybe one to two perhaps three years away from that..

Okay, great. I appreciate all those details. Bye..

You’re welcome..

Thank you. Our next question comes from the line of Jon Braatz with Kansas City Capital. Please proceed with your question..

Jeff and Jim [inaudible]..

Hey, Jon..

Hi, Jon..

I mean, a question from a longer term stand point. When you look at your biding activity and the projects out there, are you biding on work or seen work projects that may have, let’s say in start date, 2015? I’m trying to get a sense on the duration of sort of the orders and biding work that you’re doing..

Oh, sure, absolutely. If we look at and think about it in this context, our Greenfield Ethylene plant, new capacity. That actual start up is probably a ‘16, ‘17 start up today..

Okay..

And for our fertilizer project, ammonia, urea, that could be 30 to 36 months out. So we are getting projects that would have a commercial start up for the end user that are unlikely with new capacity, I just want to put that in context, if it’s a re-bump, that can happen in ‘15 or ‘16. If it’s new capacity, it typically start up in ‘16 or ‘17..

Okay, okay. Speaking of fertilizer, out here in the Midwest we sort of scratch our heads when we saw all of these proposed fertilizer plants, thinking the fertilizer industry would once again destroy itself. And you mentioned that you got a couple of orders from fertilizer facilities, I think some Greenfield and some expansion.

Have you seen any fertilizer plants that were planed being postponed, delayed or cancel or anything to that extent?.

We did. Our domain [ph] information around Agrium and Yara, Belle Plaines –.

Okay..

– we expect it to abandon their project due to cost beginning to rise, and being late to market or too much capacity coming on to the market at the same time. They felt they missed it..

Okay.

Have you seen anything like that in any of your other markets as you indicated late coming to the market? Have you seen anything like that in any of other market you served?.

In our classic petrochem, we’ve seen Genesis’s public information; Petrologistics on their propane dehydrogenation project came away from that because they were going to be late to market..

Okay. All right, thanks very much Jim..

You’re welcome..

Thank you. Our next question comes from the line of Tom Lewis with High Road Value Research. Please proceed with your question..

Hey, guys, nice job..

Thanks Tom..

Thanks Tom..

Sure. Yes, I had a really just one little question left.

And as far as the discussion of pricing as a positive factor in your gross margin, can we assume that short-cycle business or the pricing there is more dynamic, more, well, short-cycle say than in your other business? And can we infer from that that if so that you are seeing a pricing heating up on a short-cycle basis?.

We have seen pricing improve in general on the short-cycle business. A comment there though and I’ll draw the comparison to the larger project. Those prices tend to be much more predictable, less varied.

When we move over to the large project work, the fertilizer, ethylene, propane dehydrogenation, those big projects refining work, those have widely varied margins because they’re so situational to end user, competitor, EPC and there’s an OEM between us and the end user. So the margins are far more vary on the larger work.

The short-cycle work is much more predictable in its pricing at a given point in time..

And I’m assuming that’s because they tend to be more simple cotton dry project as supposed as you stay situational..

I think that’s a fair way to characterize it..

Okay. Well, that’s was more helpful than I expected. Thanks a lot guys..

You’re welcome..

Thank you. We have a follow up question from the line of Dick Ryan with Dougherty. Please proceed with your question..

Sure, thank you. So Jim, in one of those strategies to double the company on the next top cycle, you talked about share gain. Has anything like that occurred with the Q1 order patterns? And if I recall the second part, you had a pretty good batting average in the Chinese refining market.

Can you kind of refresh me what your kind of track record is there as well?.

Sure. In the China refining market, since we enter that market in 2006, prior to that we had zero market share. Of the refining work that was placed since 2006, where we nominally got 50% of it. Over the last four years, we got between 50% and 75% of it for the larger gawker systems [ph]. That was what we are focusing on.

When we go toward a discussion about domestic, petrochem, ethylene, fertilizer, methanol, domestic market expansion, we would typically expect a greater capture rate than we do on average because it’s our home turf to where our business grew up. We have an incredibly strong brand.

And we would expect to have a better real conversion rate, real capture rate than we would do on a global basis. So we’re expecting to grow and have share improvement because bear in mind, 10 years to go, for the last 10 years, probably the last 15 years, there was none of this type of work in the North American market to speak off.

So it’s a little different and very advantageous for us because of those dynamics I just said. If we think more broadly about the rest of our global markets, petrochem and refining, our share of the addressable market is probably in the 20% to 40% range depending upon which product and which end use market.

So we have some runway for taking more share there, and that’s what we plan to do..

Okay, great. Thanks..

You’re welcome..

Thank you. Ladies and gentlemen at this time, I would like to turn the floor back to management for an enclosing comments..

We thank you for your time this afternoon and your questions. We’re pretty excited about how well the first quarter results set us up for the remainder of the year along with the level of order intake in Q1. And again, the great pipeline of opportunities that we have in front of us.

We look forward to updating you on our progress of capturing more business, understanding the conversion timeline from what we booked in Q1 during our October conference call for the second quarter results. Thank you again. Have a good afternoon..

Thank you. Ladies and gentlemen, this concludes today’s teleconference. Thank you for your participation. You may disconnect your lines at this time..