Good morning and welcome to the Ampco-Pittsburgh Corporation Second Quarter 2017 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [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, Vanita, and good morning to everyone joining us on today's second quarter conference call. I am joined by John Stanik, our Chief Executive Officer; and Mike McAuley, 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 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. Now let me turn this call over to Mike, who will provide an overview of the Company’s financial performance for the second quarter.

Thank you, Melanie. Good morning, everyone, and thank you for joining our call. I hope you had a chance to read our earning release issued this morning. I will focus my discussion today on our Q2 2017 results walking you through the consolidated P&L first and then providing more detail at the segment level. Then I will turn the call over to John Stanik for his comments. Ampco’s net sales for the second quarter of 2017 were $110.6 million. This compares the net sales for the second quarter of 2016 of $93.3 million. Net sales in the Forged and Cast Engineered Products segment rose 23% compared to the prior year, driven primarily by the inclusion of the acquired ASW Steel businesses. Net sales for the Air and Liquid Processing segment for the second quarter of 2017 approximated our Q2 2016 level. Selling and administrative expenses were $14.9 million or 13.5% of net sales for the second quarter of 2017, and this includes the impact from the recovery of a receivable associated with a customer bankruptcy. This compares to SG&A of $15.2 million or 16.3% of net sales for the second quarter of 2016. Depreciation and amortization expense for the second quarter of 2017 increased slightly versus prior year due to the acquisition of ASW. Loss from operations for the second quarter of 2017 was $2 million. This compares to a loss from operations in the prior year of $4.9 million, which included the Åkers acquisition-related cost and purchase accounting impacts. I’d like to bridge that further for you in my segment-level discussion momentarily. Other expense net for the second quarter of 2017 was modestly favorable versus prior year, but there were a few moving pieces here. Interest expense is up modestly on the full year effect of debt associated with…

Thank you, Mike. Good morning. I’ll begin my comments with additional explanation of our second quarter. We continue to make progress improving the financial performance of our company. In fact, I would say we are ahead of where we thought we would be at the end of the second quarter. I know that because that progress curved despite some significant negative factors. Since the fourth quarter of 2016 we’ve seen significant increases in the cost of major raw materials used in the manufacturing of Forged and Cast Engineered Products. I will give a few examples. As a result of the recovery in North American oil and gas markets and, additionally cut backs in production, molybdenum prices have risen by approximately 40% in 2017, chromium increased approximately 74% during the same period. These increases are due to the growth in production output for stainless steel in North America, and therefore increased consumption, and also to some degree the consolidation of producers. Roskill Information Services, a metals and minerals research company who provided this data predict that these raw material prices will remain strong at least through 2017. And finally scrap, which is the largest volume raw material we utilized in our melting operations, is up 83% during the same period. Comparatively, quarter-over-quarter raw material cost increases accounted for nearly $1 million in the second quarter alone versus last year. Remembering that there is approximately a six months delay in the various pricing surcharge models that are utilized to recover such cost increases from roll customers, there can be no release beginning until Q3. The fact that make matters worst, we actually paid to customers net surcharge credits in amounts approximating $200,000 during the second quarter due to raw material cost decreases that occurred in the second half of 2016. Obviously, this…

[Operator Instructions] Our first question comes from Michael Gaugler with Janney. Please go ahead.

One of follow up bit on your third quarter commentary. You kind of alluded to price increases in raw material surcharges has being a positive and then kind of backed off a little bit in terms of the July shutdowns in plants and what not, so I was just wondering are we looking for margin improvements in 3Q or are we relatively static at this point.

No, we are looking for increases, Michael. I think that the point in my comments -- I guess let me back up a step. We are very close to becoming a consistent profitable company, we believe, and I’m trying to – honestly here trying to ask our shareholders to be a little patient that we are in a tenuous situation right now where things are improving nearly in every single facet. But with the shutdowns, which typically lasts a week, we’ve not been able to catch up with all of the sales that we should have delivered in September. So our revenue was light. We believe our costs, although I haven’t seen the costs for July yet, will be inline with what we have been accruing and expecting this spend on maintenance. So I’m just trying to hedge our bets a little bit and hopefully overproduce for the third quarter. If our customers -- and this is something we always have to worry about, I’ve mentioned it many times in the past, if our customers decide to delay shipments for 3 months, 6 months, which in the past has happened a lot, then that can through our revenue projections into a less accurate position. So no, we’re till moving forward. We’re still pleased with where we are. We still very much look forward to the fourth quarter for sure in 2018, but I’m just a little bit concerned right now because we’re on this blink here, and I don’t want to indicate over expectations.

Understood. The comment you made about the total of the negative impacts in 2Q around $4.5 million was very helpful because, if you just put that back on the operating line, you guys were solidly profitable excess charges and knowing a good chunk are going to fall away. Certainly it does look good going out into late in the year and 2018. The other items I had – I know there is a jump in the equity gains line for the Chinese joint venture. There is just noticeable. I’m wondering what was behind that. Is that a new run rate or should we be looking more of that maybe towards where the things were in the first quarter.

I think maybe Mike and I both will have an answer to that, but let me give you less numerical answer. All three joint ventures, the one with the acquisition of Akers has just been fantastic, and we are very, very pleased about how that operation is running and is growing and we plan to and actually invest in expansions there. We are doing very well with sales throughout Southeast Asia. The other two joint ventures, one which is the 25% equity stake, that business has been profitable. It is significantly profitable this year. One of the very largest government-owned roll companies in China has temporarily idled, which has caused the shortage of rolls in China and the two joint ventures that the one we restructured that used to be with [Mass Steel] and the other one which is called Gong Chang have been picking up a lot more orders. So we believe that all three Chinese operations could actually be profitable this year, which is a huge turnaround from where those -- at least one of those businesses has been in the past. Mike, do you have anything to add?

Yes, I would say, Mike, looking at the P&L for the quarter, there’s like a $0.5 million nearly income item for the earnings in that Chinese joint venture. That happens to be the Mass Steel joint venture that we’re recording using the equity method. So the P&L results show there. We did have a onetime item in the quarter and that’s the payment for the sale of our equity and that affiliate to another Chinese roll maker, which we described an earlier calls about the restricting of Mass Steel joint venture. So we are receiving payment for that equity on an installment basis and recognizing it as we go, and we this was a quarter in which we received the second such installment.

Okay, that’s very helpful and the one just one last one for John on the oil and gas end market. Just wondering from your advantage point -- I know you said the order book’s strong, but the end market it self is in fairly steady state and you are taking share in terms of the orders and the demand, or it’s just the overall market accelerating?

Michael, pardon me, but I missed the first two words of your question. Did you say in the new oil…

In the oil and gas market?

Oh, I am sorry. Okay. Yes, I think it is stable. The oil price has been up and down during the quarter, as we all know; but based on what we are hearing, what we are reading from the energy companies, those that are planning cutbacks seems to be planning cutbacks and exploration and deep well drilling, and the fracking business is seems to be steady. We are looking at things regionally and we know that we could be growing our sales beyond the current record levels by maybe another 40% or at least 25% before the end of the year. So we like we are well positioned. We like the commercial partners that we have representing us, and we’re looking for continued strength hopefully through – at least through 2018.

The next question comes from Justin Bergner with Gabelli & Company. Please go ahead.

First question would be the customer bankruptcy recovery. Like, have you guys quantified that yet or should we thing that’s be quantified in the Q?

It will be in the queue, Justin, but I think you may remember that in the fourth quarter, I think we did disclose the amount of a reserve that we took for the bankruptcy of one of our customers for the Chapter 11 pre-petition receivable. It’s – we recovered approximately $0.92 on the dollar for that and it was $1.5 million last -- in the fourth quarter that we disclosed as the reserve.

So about $1.3 million, Justin.

Okay. Secondly, I just wanted to make sure I understood all the moving parts of this $4.5 million. I guess it seem like the largest piece was reduced operations, your Pennsylvania cast roll plant that was in excess of $2.5 million. The outsourcing of some machinist works that was – I don’t know if that was $700,000 or the $700,000 sort of included the associated volume benefit. And then what are sort of the other pieces that get me to that $4.5 million-plus of headwinds?

The raw material cost increase was about $1 million. The surcharge credits were about $200,000, and the outsource spend was around $700,000. Some of these numbers are a little conservative.

In regards to outsource spend that you would have had to spend some money if you had the internal staff or…

If we had the people here, we would have had additional staff, we would have gotten additional favorability in fixed cost absorption. But most importantly, when we outsource, we’re paying those people that we outsource the profit. And what I hate most about that situation is that’s our profits that we’re giving away, and with pricing as tight as it is, it hurts. So I think in combination, that’s pretty safe number.

Okay. And then finally, you mentioned the outlook for Q3 and sort of the uncertainty, but hopefully better results than Q2, I just want to verify you’re talking about Forged and Cast Roll profitability in Q3 versus Q2 and you were talking about it being less negative in Q3 or actually potentially positive in terms of that segment’s EBIT.

We well – I mean, we -- in terms of Q3?

Yes. I was just trying to understand if your comment was talking about the potential for that business to be positive or just the potential to have a lower loss than Q2.

In terms of this segment itself, we expect that to be profitable. Will it be profitable in combination with the Air and Liquid segment to overcome our overhead expenses, that’s the part that we are not sure of. And with respect to my comments what I am trying to do here, Justin, very candidly is maintain my credibility. So I want people to understand the moving pieces and knowing that our July revenue months was about $7 million lower than we thought it would be, we are off to a slower start. While we honestly expect a better quarter than we had in the second quarter, there are some moving pieces that historically tell us that things could be not what they are expected. So all I am trying to do here is I am not trying to see overly negative, I am not trying to give negative predictions here so that we look good in the third quarter. I am just trying to maintain credibility and not provide unreasonable expectations.

Understood. Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to John Stanik for any closing remarks.

Thank you. Hopefully my remarks illustrate that the remainder of 2017 is looking to be a continuation of a positive transitional period for Ampco-Pittsburgh. We believe that we will soon return to profitable performance and due so thereafter on a consistent basis. A stronger market should remain at continued high level of utilization of our manufacturing assets. Reinvesting the cash opportunistically which the business generates should ensure more revenue growth and growing profitability. I won’t forecast whether the third quarter will have an operating profit or not, but I think my comments demonstrate that we feel we are close even considering that slow start we talked about for July. Any quarter in the near term that provides a profit should not be a surprise, and unless market conditions change, should be an indication of sustainable growing profitability in the future for our company. Thank you for listening, and have a great remainder of your day.

This conference is now concluded. Thank you for attending today's presentation. You may now disconnect.