Good morning, and welcome to the Ampco-Pittsburgh Fourth Quarter and Full-Year 2019 Earnings Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask question. [Operator Instructions] Please note this event is being recorded.I would now like to turn the conference over to Melanie Sprowson, Director of Investor Relations. Please go ahead.

Thank you, Andrea, and good morning to everyone joining us on today's fourth quarter and full-year 2019 conference call. I'm joined today by Brett McBrayer, our Chief Executive Officer; and Mike McAuley, Senior Vice President, Chief Financial Officer and Treasurer. Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation; and Terry Kenny, President of Air and Liquid Systems Corporation.Before we begin, I would like to remind everyone that participants on this call may make statements or comments that are forward-looking 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 discussed 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 ampcopgh.com.With that, I'll turn the call over to Brett McBrayer, Ampco-Pittsburgh's CEO.

Thank you, Melanie. Good morning, and welcome to our call. First, let me begin with a note on environment, health and safety. We have an unwavering priority to protect the health and safety of our employees as well as ensure we protect the environment and the communities where we operate.Although we are not pleased with our safety performance to-date, I am encouraged by the actions we are taking to drive improvements. Across our businesses, we have increased safety observations, leadership walks, and fatality prevention assessments to ensure we safeguard the wellbeing of our employees globally.From an environmental perspective, I am proud to report that the corporation operated our facilities incident-free. We can summarize 2019 as a year of execution. I am excited about the work accomplished as we took targeted and decisive actions to improve our performance.Our focus has been on reducing complexity in our manufacturing processes, implementing operational improvements and rightsizing the business. Defining our core businesses and required capabilities, we continue to divest non-core and excess assets. These divestitures began with Vertical Seal, our specialized parts and service provider to North American rolling mills during the second half of 2018.In the third quarter of 2019, we completed the sale of our North American cast roll operation in Avonmore, Pennsylvania. During the same period, we also completed the sale of our Canadian specialty steel business, ASW Steel. The divestitures of these assets significantly improved our cost structure without compromising our ability to serve current and future customers in our Forged and Cast Engineered Products segment and provided immediate positive improvement in operating results for our company.I am excited to announce that we are now seeing the benefit to our P&L with a return to profitability in the fourth quarter. Our performance improvement actions for our core assets began in our U.S. forging facilities during the first half of 2019, where we focused on lowering operating and overhead costs and improved efficiencies.Once we confirmed we had systems in place to sustain and improve our U.S. forging businesses, we quickly moved our efforts to our European cast roll facilities, where we launched restructuring initiatives during the second half of 2019. These efforts also focused on lowering our cost structure while improving efficiencies.Although, these initiatives were launched during the second half of the year, we have only begun to see the improvements in the fourth quarter. The full impact of these actions will be realized in 2020.I will now turn the call over to Sam Lyon, Union Electric Steel President, who will discuss in more detail some of the significant accomplishments of last year as well as some of the challenges we faced in the Forged and Cast Engineered Products segment. Sam?

Thanks, Brett. In the fourth quarter, we've continued our focus on safety, cost reductions in the U.S. and Europe, and restructuring in the UK and Sweden. Notably, our European operations turned the corner and delivered significant improvement – improved financial performance in Q4 of 2019.This improvement along with the continued strong performance from the U.S. operations allowed the segment to deliver an income from continuing operations of $4.5 million in the fourth quarter. And if we exclude the $10.1 million impairment charge associated with the sale of the Avonmore facility, $4 million for the year versus a Q4 loss of $5.2 million, and a full-year loss of $6.6 million in the prior year on the same basis.As Brett stated, from a safety perspective, we have focused on the highest-risk tasks. We increased the focused safety observations and floor leadership box. The severity of the injuries and near misses were reduced as our efforts around mobile equipment and crane safety are paying off.A bright spot was the U.S. operations in the second half of the year where our lost-time incident rate was zero. Also, our Slovenia, Austintown and Erie sites went recordable free for all of 2019.We had slightly lower sales in the segment when compared to Q4 of last year due to the drop in non-roll revenue driven by the downturn in the oil and gas industry. This was partially offset by an increase in roll volume with a stronger mix.Despite this, as stated earlier, the segment was able to deliver a significant improvement in income from continuing operations when compared to the same quarter 2018.In the quarter, we did see improved order activity from non-roll non-oil and gas customers, which is a focus of ours. For example, we expect sales from two of our larger customers that supply to…

Thanks, Sam. No area of our business was immune to our change efforts. The Air and Liquid Processing segment targeted key areas of their businesses for improvement in 2019 as well. In these businesses, the traditional product flow through our factories was redesigned to drive increased productivity, improved material utilization, and as a result improved profitability.I'll now turn the call over to Terry Kenny, Air and Liquid Processing segment President. Terry?

Thank you, Brett, and good morning. Safety continues to be one of our major focuses. The Air and Liquid Processing segment ended the year with a 60% reduction in OSHA recordable accidents when compared to the prior year. In addition, I am pleased to say that the segment did not have any lost-time injuries in 2019. Each and every employee is responsible for this improvement and everyone's commitment to watch out for each other is the key to our success.Net sales for the Air and Liquid Processing segment for the fourth quarter ended December 31, 2019 increased 13% when compared to the prior year. This increase was led by improved sales of heat exchangers and custom air handling units. We built on the successes of our process improvement program during the fourth quarter. We continue to implement changes in our processes to increase productivity and improve material utilization.Fourth quarter operating income for the segment when compared to the prior year, excluding expenses related to asbestos reserve charges increased when compared to the prior year. This increase reflects the rise in net sales as well as the results of our cost savings efforts.The year-end backlog for the segment approximated $50.6 million compared to $44.4 million at December 31, 2018. Our strategic planning has focused our efforts on key markets, which has proven to be successful. We are building on our successes and look forward to continuing growth.

Thank you, Terry. With that, I'd like to hand the call over to our CFO, Mike McAuley to review our financial results in more detail. Mike?

Thank you, Brett, and good morning to everyone listening on the call today. My commentary includes the use of certain non-GAAP financial measures today. I refer you to our disclosures regarding non-GAAP financial measures and the related non-GAAP financial measures reconciliation schedule included in our Q4 2019 earnings release issued yesterday evening.I will focus my discussion on our Q4 2019 financial results. A discussion of our full-year results is included in the earnings release. As Brett indicated, Q4 2019 marked a return to profitability for Ampco-Pittsburgh. This was the first time in 16 quarters, dating back to Q4 2015 that the corporation reported a positive income from continuing operations.Ampco's net sales from continuing operations for the fourth quarter of 2019 were $97 million. This compares to net sales from continuing operations for the fourth quarter of 2018 of $95.8 million.Net sales in the Forged and Cast Engineered Products segment declined approximately 2% compared to the prior year quarter as weaker forged engineered products sales to the oil and gas industry outweighed stronger sales of mill rolls.Net sales for the Air and Liquid Processing segment for the fourth quarter of 2019 increased approximately 13% compared to the prior year period, driven primarily by higher sales of heat exchange coils. I'll cover more segment level details momentarily.Gross profit as a percentage of net sales was 21.7% for the fourth quarter of 2019 versus 13% for the fourth quarter of 2018. The improvement is primarily attributable to the Forged and Cast Engineered Products segment, which is benefiting principally from a lower cost structure due to the sale of the Avonmore facility at the end of September.Higher sales of mill rolls and improved manufacturing and operating efficiencies for the domestic forged operations, offset by lower sales of forged engineered products to the oil and…

Thank you, Mike. Throughout our change process, we face many challenges, which only reinforced the need and pace of changes we made. Forged engineered products sales to the oil and gas industry as we've noted earlier were down significantly from the prior year as fracking activity declined in 2019.In addition, our royal customers faced lower order volumes as they stated that many of their customers had purchased beyond normal demand levels in 2018. High steel inventories in the General Motors strike resulted in reduced flat-rolled steel shipments in the second half of the year. Steel prices declined as end markets work through their inventories.Entering 2020, the initial insight from our customers indicates the steel markets in North America are recovering and that the market conditions for flat-rolled steel has stabilized and are improving.From the work completed in 2019, we would expect Ampco-Pittsburgh to remain profitable under normal loads. Our continuing work in 2020 should further strengthen our expectation. The developing human impact as well as the market impact of COVID-19, however, is a variable that could alter our view in projections.2019 was a year of significant progress for Ampco-Pittsburgh where we followed through on our key priorities to strengthen our businesses. In addition to executing successfully against our strategic plan, we built a strong foundation to support sustainable and profitable growth moving forward.We've entered 2020 a stronger and more streamlined company, and I am proud of what our employees have achieved. We will continue to address additional opportunities in 2020 to further consolidate our manufacturing footprint and streamline our businesses.In addition to realizing full-year effects of our restructuring activities from 2019, we are targeting stronger operating cash generation and reduction of 10% to 15% in corporate expenses for 2020, strengthening our ability to invest in capital improvements to increase productivity and improve margins.In 2020, we will remain focused on cost reduction and rightsizing our assets and resources to align better with our corporate objectives. As we look back on an eventful year for Ampco-Pittsburgh, I am confident we are on the right path for success both now during uncertain times in our markets and more so in the future as we continue to execute our strategic plan.On behalf of Ampco-Pittsburgh Corporation’s leadership team, I want to thank our employees for their focus and commitment. The results of 2019 reflect the hard work and dedication of our employees around the globe.At this time, we'll open the line for your questions.

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Marco Rodriguez of Stonegate Capital Markets. Please go ahead.

Good morning. Thank you for taking my questions. I apologize if you covered this. I was a little late on the call. But I was wondering if maybe you could talk a little bit more about your comments there you made in terms of COVID-19 and how that could potentially alter your projections? Perhaps you can just take us and walk us through how you are sort of thinking about your business in fiscal 2020 from a base case scenario, and how COVID-19 could potentially impact those expectations?

Yes. This is Brett, Marco. Thanks for the question. As I mentioned, that based on the loads that we've typically seen such as loads in 2019, we expect our business to remain profitable. That's our expectation. COVID-19 is obviously a developing issue for all of us. We are still booking orders as we speak. Orders are continuing to come in. Some of our order patterns from our customers have changed, and really, prior to, I would say, the COVID-19 event. So it's not as result of COVID-19.Some of our larger customers’ allocations, as Sam mentioned, will come in the following weeks and we'll get a better layout of what the load looks like for the year. But we have consciously been proactive about what do we need to do from a next-step perspective to ensure that we position this company for success.And so we have several identified actions that we will take based on what does or does not happen in the marketplace. We're obviously, at the same time, trying to invest in opportunities that will help us grow our topline significantly moving forward. And so we're not going to walk away from those opportunities while we are sorting out where the world is going through all of this.But I would say that I feel very confident in the team and the plans that we have in place and we will respond quickly as we will need to if something more detrimental happens in the marketplace that will require a response from this group. So hopefully, that answered your question.

Absolutely, very helpful. And then lastly here, you mentioned a focus on reducing expenses on an additional 10% to 15% in fiscal 2020, I'm assuming compared to fiscal 2019 expenses, is that above and beyond the other expense reductions you've already guided to into fiscal 2020? Or is that inclusive?

Marco, it's Mike. The 10% to 15% is a reference to our expectation for 2020 corporate costs versus 2019 to give a little bit of indication of what we've – the things that we've done that we feel that we’ve – are deliverable in 2020 from actions we've already taken. So that refers strictly to corporate costs.

Okay. I'm sorry, go ahead.

And I don't know if we've gotten into that before with the investor group that we disclosed that we have completed our 2020 planning, of course, and that's all part of that, but it's really a function of the actions that have been taken in the fourth quarter, and things will continue to – that will continue to roll out in early 2020 that we think that's a good solid number to expect if you're modeling corporate cost for 2020. And anything else that would – heard on this call would be like Sam's comments are additive to that.

Got it. So just to make sure I understood you correctly, so that that 10% to 15% reduction in corporate cost is above and beyond the cost savings that you've guided to with the Avonmore sale, the Phase I reduction, the European reduction adjustments, correct?

Correct. Yes.

Got it. Thank you.

Our next question comes from Justin Bergner of G.Research. Please go ahead.

Good morning, everyone.

Good morning.

Hi, Justin.

A couple of clarifying questions. I think a number of the numbers came at me a bit quickly, but just to start with the last question. When you're referring to corporate costs, I mean the number that we see in the P&L is sort of the reconciliation at the segment level, the other expense including corporate costs. How should we think about sort of the corporate cost number sort of in 2019 versus that line item in the P&L just to figure out what the 10% to 15% applies to in terms of the 2019 cost base?

Yes. If you look – if you go – if you take our – our 10-K will be coming out shortly. And as you point out in that, it shows segment level details. And so it will show income loss from continuing operations for the Forged and Cast Engineered Products segment, for the Air and Liquid Processing segment, and then it will show a line for corporate costs.And then the total will add up to the corporation's total consolidated operating income or loss. That corporate cost line on that table is what we're talking about with respect to the 10% to 15%, and it is a piece of SG&A.

Okay. Understood. So it's the entirety of the other expense, including corporate costs line. There's not like a portion of that is irrelevant for the purposes of this calculation.

Right.

Okay.

Right. Corporate costs. It's shown on the consolidated results of operations in the 10-K when you do the segment breakout, you'll see it there.

Okay. Understood. And then just a couple of other clarifying questions. So the $600,000 in cost savings in Q4 and $2 million in 2019 was specific to the U.S. Forged and Cast Engineered Products business, and then the $3 million to $4 million of savings expected in 2020 is for the international European operations?

Yes, that's correct.

Okay. Thank you. And then I think you said in the beginning of your comments that your income from continuing operations in Forged and Cast Engineered Products was $4.5 million in the fourth quarter when you adjust out some of the one-time expenses or was that on a reported GAAP basis?

For the Forged and Cast Engineered Products segment?

Yes.

It's as reported, $4.5 million.

Okay. Thank you. And then maybe just a big picture question to wrap up. How does the sort of global shift from blast furnace steel production to minimill steel production, either advantage or disadvantage your roll business, if at all?

Well, it really doesn't affect it other than the speed – who we sell to and where the business is moving to. So as U.S. Steel, for example, was heavy in blast furnaces and now they're changing that. And that's a big customer of ours. We'll continue to support them. But companies like Steel Dynamics and Nucor are growing. And we're in virtually all of those customers. So it really doesn't change things for us.

Okay. There's not like a different sort of amount of roll needed per ton of steel depending upon whether you're looking at a blast furnace or minimill operation, just to clarify?

No, it doesn't. I mean, there's been changes in the industry years ago where you cast a thinner slab, and so you need less hot rolls, which would be the cast side of our business, but that's occurred a long time ago.

Okay. Thank you.

Our next question comes from David Wright of Henry Investment Trust. Please go ahead.

Good morning. In your budget for the year, are you planning for any debt reduction?

Well, I guess, I can give some indication. We're not giving full-year earnings guidance, but we should see. I think we’re kind of – I mean, we should see debt levels kind of staying stable, David. I mean, we're going to invest some more and I mean that could put a little pressure on the borrowings. But when we look at our 2020 outlook, there's not a heavy uptick in debt.

Nor a heavy downtick?

Right.

Okay. Do you have the operating income in Q4 for air and liquid?

Yes. As reported David, it's $2.6 million and corporate costs were $4.1 million, as reported.

$4.4 million, okay. And I want to ask about forged engineered products as a business. I mean, obviously the oil and gas has gone way, way down, but it sounds like you have other customers and you're trying to get more customers referenced in the press release and also in Sam's remarks. Is this a discrete business unit?

No. It's all part of the same business. However, we have changed our sales force and hired people specific to that industry as opposed to trying to just sell Forged Engineered Cast Products, the non-roll business on the side and we actually hired some people that are from that world, and that's why I commented on, we're seeing some additional opportunities outside of oil and gas based on that.

And do you do that out of a particular facility?

Our Burgettstown facility is where the majority of it is made if it's a stainless alloy, we buy them on the outside, but we still forge it in our Burgettstown facility. So it all comes out of there.

Okay. All right. Well, you guys continue to do what you say you're going to do and that's impressive. Thanks very much.

Thank you.

Thanks David.

Our next question is from Greg Bennett, a Private Investor. Please go ahead.

Thank you for the great quarter. I appreciate it. For this year, are there costs –additional restructuring costs that you expected? Maybe you've already mentioned that, but you mentioned in Europe, you expect $3 million to $4 million in annual savings. Is there a cost for that?

There will be Greg. In the first two quarters we're doing some other things that will generate some, but it's going to be rather modest relative to what we've seen in 2019. But yes, there's a little more coming, but it will be modest. It will be relatively small.

Okay. Thank you. And one final question. And you mentioned in the tooling industry that your sales had – new sales, I guess, have gone from $1.7 million to $5 million. Could you give more information, more color on that? What industries are you targeting? And what's the size of those markets that – if we were to look out in a year or two from now?

The size of market or the size of our portion?

Yes, I guess I'd say you went from $1.7 million to $5 million, which sounds pretty – well, it is impressive, percentage-wise. I'm just wondering how big of a – where are you targeting and what's the potential size for that?

We would be an extremely small player at that size. So less than 5%, I would say. I don't know what the size of the market is, but I do know that in my past, I worked at Carpenter. We had a distribution facility that purchased $5 million probably. Yes, $5 million a month of that kind of material. So that's just one customer. So there's a big opportunity for us there.

Can you share with us what – is there a certain industry that – I'm not familiar with Carpenter that you're targeting?

It's like for plastic injection molding a lot of it or for forging tooling for dies. So when you forge a material, you have to have a certain material to press it with. So the dies are made from this kind of material, like an example would be H13. If you look that up, or plastic injection molding for automotive dashes and any plastic part that you'd make is kind of a mold material. The significance of why I bring it up is we were primarily producing oil and gas related things. And so this is a diversification away from that.

Okay. Thank you.

Or in addition, not a way, but.

Our next question is a follow-up from David Wright of Henry Investment Trust. Please go ahead.

Thank you. Just going further on the forged engineered products, do they typically have a different margin profile than mill rolls?

It varies greatly. Right now in the short-term, as we're growing that business, and we've been successful on the roll side with some mix changes and some pricing. It's the same or probably a little less at this time.

So is this useful in just trying to pick up some extra slack in capacity at the facility?

It’s extremely useful for that as we run more full in our Burgettstown facility that certainly helps us with fixed cost absorption.

And are there any asset sales contemplated for the year?

No not at this time, David. This is Brett. We’re continuing, though, to look at where – as we continue to make improvements in the business, improving efficiencies, materialization, et cetera, it starts to create excess, if you will, capacity as we've created new capacities within our buildings.And so as we move down this path, our focus is to continue to shrink our footprint as the opportunities present themselves. But as we look at 2020 at this point in time, we're not targeting anything in particular from an asset sale perspective.

All right. So you like the footprint presently?

Well, you can always be smaller. We can always – I mean as we're looking at investments in the business, too, David. We are utilizing assets that we've had for quite some time. And quite candidly, you’ve underutilized those assets for quite a long time.And so our focus has been is let's make sure we get our value out of the assets that exist. And then as we continue to improve how can we continue to significantly alter our cost structure moving forward with these improvements and make small changes in our assets structure to allow us to remove costs from the business. And that will continue to be a focus that we go through in our strategic plan. We have certain key opportunities laid out in front of us where we know we can go further.But we’re going to go at a pace that is going to allow us to make sure we don't disrupt our customers and also make sure we don't negatively impact the improvements we've made. We've put a lot of focus on sustainability as we've made improvements in our business and making sure that, I said earlier that with each change that we've taken, we've made sure that we have processes and systems in place to help us sustain those improvements. And so we do not want to move too fast where we disrupt, I guess, the new step we've taken up in the right direction.

If we have another minute. On the last call, Sam had some comments about Europe getting better and wanting to do some work in Europe. And I don't know if you can tell us any more about how things are going in Europe presently. And if you can't, that's fine, but that would be my last question.

Yes. We've done a lot of work there in the last six months. As Mike was pointing out, and I stated, all the work on the restructuring is completed. It's just the notification periods for people as to when they're actually going to exit the business. A lot of work was done on the raw materials side, where we're aggressively looking at the charge materials. It's maybe roughly and don't write-down is a third or a little more of our costs. We have a huge opportunity there that we're exploiting. We had some quality issues in the last several years that have been resolved. So there's quite a lot of work done in the fourth quarter results, a portion of that benefit came from the UK and Sweden.

All right. Well, thank you again.

Thanks, David.

This concludes our question-and-answer session. The conference has now also concluded. Thank you for attending today's presentation and you may now disconnect.