Ampco-Pittsburgh Corporation

Good morning and welcome to the AMCO Pittsburgh Corporation fourth quarter 2018 earnings results conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. Please note, this event is being recorded. I would now like to turn the conference over to Melanie Sprousen, Director of Investor Relations. Please go ahead.

Thank you, Chad, and good morning to everyone joining us on today's fourth quarter conference call. I'm joined today by Brett McBrayer, our Chief Executive Officer, and Mike McCauley, Senior Vice President, Chief Financial Officer and Treasurer. Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward-looking and and may include financial projections or other statements of the corporation's plans, objectives, expectations, or intentions. These matters involve certain risks and uncertainties, many of which are outside of the corporation's control. The corporation's actual results may differ significantly from those projected or suggested in any forward-looking statement due to a variety of factors, including those in the corporation's most recently filed Form 10-K and subsequent filings with the Securities and Exchange Commission. We do not undertake any obligation to update or otherwise release publicly any revision to our forward-looking statements. A replay of this call will be posted on our website later today and remain available for two weeks following the conclusion of the call. To access the earnings release or the webcast replay, please consult the Investors section of our website at AmcoPGH.com. With that, I'll turn the call over to Brett McBrayer, Amco Pittsburgh CEO. Brett.

Good morning and welcome to our call. I want to start with updating our investors on the actions we are taking to restructure the corporation and return it to profitability. First, in October 2018, the Board of Directors of the corporation approved a plan to sell our Canadian subsidiary, ASW Steel Incorporated. Loss of significant U.S. business due to a combination of tariffs imposed by the United States on imports of primary steel products and the loss of a key customer due to plant closure have resulted in significant losses in 2018. ASW has been accounted for as a discontinued operation in our Q4 and 2018 full-year financial statements, and we've recorded a related $15 million impairment charge to write the business down to its currently estimated fair value. Moving forward, we will continue to participate in the Ford's engineered products market yet without the risk of a back integrated asset ownership position. Second, we are pursuing additional footprint reduction actions. We will announce these forthcoming changes to our business as the actions move closer to completion. Our objective is to right-size our capacity and simplify our operating structure. Third, we have embarked on multiple cost reduction initiatives. In December, we offered an early retirement incentive to the employees of our U.S. operations. And in February this year, we completed phase one of our overhead reduction plan. This phase one action is expected to deliver roughly $2.5 million per year in pre-tax savings. Our next steps in the consolidation of our assets are expected to facilitate further overhead reductions for our businesses. And finally, We are aggressively simplifying our manufacturing flow path. This simplification will deliver a step change in operational performance and free up working capital investment. The immediate need for change has been embraced by our employees. Their skills and talents are our greatest asset. Their dedication to our success has really been incredible. We're moving forward with a speed and sense of urgency and with high expectations for our future. In 2018, we began to lay the foundation for the future of Amco Pittsburgh. 2019 is about execution. Now a review of 2018. Despite an approximate 9% increase in total revenue from continuing operations, 2018 was a challenging year for the corporation. Our forged and cast engineered product segment generated record sales through the oil and gas industry. but experienced a significant contraction in the second half of the year due to inventory corrections in the frack block supply chain. In addition, results from continuing operations in 2018 reflected several negative factors that impacted the segment, including higher costs of raw materials and other key production materials, certain equipment reliability issues resulting in shipment delays and high maintenance costs, in idle capacity of one of our casserole plants. The air and liquid processing segment performed well in 2018, increasing its revenue by approximately 2.3%. We recorded a significant asbestos charge for this segment, representing the estimated cost for pending and future asbestos litigation net of additional insurance recoveries through the anticipated date by which the corporation expects to have resolved all asbestos-related claims. The asbestos charge captures our estimated total future exposure. Other than the asbestos charge, this segment generated solid operating income performance. From a liquidity standpoint, net cash flows from operating activities of continuing operations reversed its negative trend in 2018. We also executed two key actions in 2018, including the divestiture of our vertical service business in the fourth quarter and the closing of a sale and leaseback transaction relating to a select portion of our real estate properties. These actions strengthen our liquidity and position as well to successfully pay off the promissory notes which we did earlier this month. The asset sale also marked the beginning of the process of realigning our manufacturing footprint, which as I described, is a key element of our turnaround plan. In addition to our restructuring activities, we have worked to mitigate equipment reliability issues, which adversely affected performance in the second half of 2018. With these significant items behind us, the integration of new leadership, the progression to a lean-based production system, and further restructuring initiatives currently in process, we are forming the foundation for future sustainable profitability for Amco Pittsburgh. The global short-range outlook published by the World Steel Association in October of last year indicates the demand for steel in 2019 is expected to remain positive. Our order backlog for 2019 supports this outlook. Our markets remain challenging, however, and worldwide steel demand could face an uncertain future in the current global economic environment due to growing trade tensions and unstable currency movements. Therefore, our plan is to prepare Amco Pittsburgh for sustainable future profitability in both higher and lower demand environments. I will now turn the call over to our CFO, Mike McCauley, to review our financial results for the quarter.