Good morning and welcome to the Ampco-Pittsburgh fourth 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 today’s 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 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 reply, 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 fourth quarter.

Thank you, Melanie. Good morning, everyone, and thank you for joining our call. Our earning release for the fourth quarter and full fiscal year 2017 was issued this morning and I hope you've all had a chance to read it. I will give the financial review for the quarter by taking you first through our consolidated P&L, then I'll provide more color at the segment level and then review some balance sheet and cash flow activity. Ampco's net sales for the fourth quarter of 2017 were $114.4 million. This compares the net sales for the fourth quarter of 2016 of $92.1 million. Net sales in the Forged and Cast Engineered Products segment grew nearly 30% compared to prior year, driven by higher sales of Forged Engineering products for the oil and gas industry, the full period effect of November of 2016 ASW Steel acquisition and higher sales of mill rolls. Net sales for the Air and Liquid Processing segment for the fourth quarter of 2017 gross 5% from the prior year. I'll comment more on that business segment results in just a moment. Gross profit as a percentage of net sales was 18.1% for the fourth quarter of 2017 versus 12.4% for the fourth quarter of 2016. The increase primarily reflects higher Q4, 2017 sales volumes and selling prices, plus a number of nonrecurring items last year which diluted to Q4, 2016 gross profit margin, including some inventory adjustments related to physical inventory losses reserves against certain inventory for two customers who filed bankruptcy and an unfavorable LIFO cost impact. Negatives effect in the fourth quarter gross margin for 2017 include higher raw material and operating cost including the impact of idling one of our foundries. Selling and administrative expenses were $16.9 million or 14.7% of net sales for the…

Thank you, Mike. Good morning everyone. While I'm disappointed that we are reporting an operating profit for the fourth quarter I am pleased to report that major progress in many areas continues to improve or to occur. Excluding non-recurring non-cash adjustments that arose in December, operating profit was realized for two of the three months in the quarter. the exception was the month of November during which we experienced equipment failures in three of our plants. As a result of the associated downtime revenue was pushed out of the quarter, maintenance spending was above expectation and fixed cost absorption was reduced. November was the third month in 2017 during which we experienced extraordinary equipment failures. The November problems were result and operations have been running smoothly for the last three months however I'm not satisfied that we have a sustainable corporate wide maintenance process and capability in place. Therefore, we are actively looking to upgrade our proactive methods and procedures and will add new global maintenance leadership. The maintenance issues were the only negative of the quarter. we continue to book new business in both our roll business and in our open die Forged business in fact our backlog for business for 2018 on December 31, 2017, as Mike just said is approximately 40% higher than it was at December 31, 2016. This means that our markets continue to strengthen in both of these areas. Additionally, and very importantly we achieved new production and shipment records for rolls and franc blocks in October and December. You may recall during our last call we reported a global shortage of electrodes and refractories. The lack of availability has resulted in significant cost increases to procure them. Consequently, on November 3, 2017 we announced that we were going to impose pricing surcharges for…

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Michael Gaugler of Janney. Please go ahead.

Good morning, everyone.

Good morning, Michael.

Good morning, Mike.

I got three questions John. Certainly, easy one. Wondering if you can give us just a brief overview of what you are seeing in the frac blocks as specific, is the market demand accelerating as it's flatting down?

Well, it's -- you read the reports that are published every week, it seems that United States well expansion is continuing at least by small numbers and the Canadian number of wells seems to have stabilized. There is business out there and I would say that it's continuing to grow. We continue to get more pressure to supply blocks to additional customers, there is difficult for us to do at this point, although the production records that we talk about in December and October certainly help give us confidence that we can sell more than we did at the end of the year. So, I think the short answer is that there is at least a stable level but probably it's growing a small amount.

Okay. Then on to a stickier question and I don't know if you can answer this or not. What kind of along the same lines with the national renegotiation pushing forward, if that goes importantly and you decided to move ASW operations into the U.S. Any idea of what kind of cost that could generate on your side to do something like that?

Well, I hit to same Mike, but it's, it would be sizable. The later metallurgy equipment that ASW has can be moved there’s no doubt about that, you can’t move experience, and these are this is equipment that is embedded in the ground with extensive foundations and concrete etcetera power requirements are very expensive, so it’s important for us to continue to get an exception. And as I mentioned in my comments, we are looking into proactively what type of case we can put together regardless of how the NAFTA investigations go being a U.S. company and ASW selling exclusively to a U.S. company. We hopefully that would be a way that we can accomplish that objective.

Okay. And then finally, I know you’re looking for, you’re hoping for some level of profitability for last year and certainly the tax reform and job the tax cut and job reform act didn’t help that out. Do you think it’s a first half 2018 event or a second half 2018 event?

I do think it’s a first half Mike will - if we were to cook all this stuff now.

Yeah.

Basically, we’re not getting enough price for what we’re doing. We’re not getting enough value for our products. It’s been a long painful process to get that price in place, the road block that we encountered last year with the sizable raw material cost increase of $4.2 million whatever the exact number was, the fact that we ideal the plant that cost does roughly another $8 million you take those two elements out and we have a pretty decent year maybe a $0.50 year and I'm really generalizing here when I make that comment. So, as these surcharge time lags expire as we get the price increase that has been negotiated months ago that began effectively on January 1, 2018 as we get more price increases for blocks because of the growing market case in that situation. We finally should be getting to numbers that our products merit. And yes, we have some other problems, we’ve got a pretty serious maintenance issue that we’ve got to resolve, but all of these things should come together, there has been so much improvement in all together areas of the running the corporation, it’s basically this one last agreement now things always happen and go bump in the night that’s the thing. But the stars are aligning at this point.

Good to hear. That’s all I've got, John. Thank you.

Thank you.

Our next question comes from John Walthausen of Walthausen & Co. Please go ahead.

Okay. I’ll try to limit myself to two questions, move in the right direction. Both about the fourth quarter, on the simpler one when I look at your notes about ASW grant $47 million in revenues for the year, but a bit less than $11 million am I looking at that the right way to say the things slowed down there and if so, so could you explain and then the second, well let’s do that question.

No, not at all I think it’s actually the opposite I think that ASW did better as the year progressed. Now we have encountered a loss of a major customer in our market for ASW who literally closed their factory that’s going to have some impact in the first quarter as we try and replace that hole that was created. But in terms of 2017 as the year progressed ASW continued to do better, and we’re quite confident that given a few months we’ll be able to fill the hole that was created in January when the one customer, I mentioned shut down. Mike, you have any?

Yeah John I’d like to say add to what John just said that ASW, we acquired the business in at the very beginning of November of last year. So, part of what I was describing in my remarks was just the full quarter or full period effect of ASW being one piece, but ASW sales have grown significantly from the timeframe when we acquired them. And another important key factor is that in addition to its trade sales of steel to customers, it’s a very valuable contributor on an inter-company basis to providing a significant load into union electric steel for the production of our Forged Engineered products primarily frac blocks and some other products so there’s a heavy internal sales not demand on that business and it’s a very important part of the supply chain we built for the oil and gas end market.

Good. That’s very helpful. I was wondering whether that wasn’t just external sales that you’re including there that’s good to hear. Second question is when I look at the fourth quarter versus the third quarter, you gained sales I think a bit more than $10 million, but only if I take out some of the extraordinary things only about a $1 million more operating income, it would strike to me that for your businesses the incremental margin should be more like a 30% type thing. So, I'm guessing part of that is the November issues that you talked about in some is the pricing the raw material versus its pricing squeeze but can you breakdown what the relative effects of those two things were in that lack of margin improvement?

Yeah, John on a sequential basis, Q4 versus Q3. First, the incremental margins aren’t quite at that level that you mentioned, number one. Number two, you’re right, the operating problems that we had especially as John indicated in his remarks that were especially evident in November cost some under-absorption much more so than in the prior quarter and that was a key factor. Raw materials just crept a bit into Q4 versus Q3, but most of the rise in the raw material effect for the full year had occurred around and kind of peaked out in Q3, there was a slight creep in Q4. So that was a part of it, but a lesser part of it.

Yeah, but if you think about -- if the cost increases formed and or so let’s assume that the run rate is around a million and then the added expenses went down with the maintenance repairs as I said in my comments we had made an operating profit for two to three months with November being the basically the sold negative factor that produced the $1.8 million operating loss.

Thank you.

[Operator Instructions] Our next question comes from Justin Bergner of Gabelli & Company. Please go ahead.

Thanks John. Thanks, Michael. First question would relate to just it’s could review again the timing of the price negotiations so what price increases are taking effect from prior negotiations what would be the next round of price increases to take effect from future negotiations, just the timing of that sort of events would be helpful?

Yeah. Typically, the contract negotiation period for the following year begins in April and ends sometime in August or early September. We’re experiencing customers wanting to negotiate for periods longer than one year, which I take as a sign that the market is stronger and they’re trying to fix their cost or beyond one year. That’s something that we’re being very careful about in this year. There is a portion however, Justin of our revenue that is not done in the way I just described and it’s more on a spot contract of basis where it’s not for the period of the year or more. I’d say that’s a relatively small a portion maybe 20% to 30% at most. But certainly, the big guys that we deal with maybe one to two exceptions for all full within that 3 or 4 months period. So, when I say that we’re going to be announcing a price increase we should be announcing that probably by a press release sometime in the next month or two.

Okay, great. That’s helpful. And then the price increases from last year’s negotiation took effects roughly around January 1

Yes.

Okay, so the pricing booked for this year is pretty much statics up for that 20% to 30%?

Yeah, except the – business is roughly a 3 or 4 months cycle, so, we’ll continue to price those, in fact that’s exclusively the case. So, it’s unlike the world business, we have opportunities to make adjustments a much more frequently there.

Okay. Switching to the raw materials, the 4 million year-on-year increase of raw material prices how does that relate to the one third, I mean does that include our exclude cost sort of recover by this surcharge mechanism.

It includes the -- it’s a gross number but if you remember from prior calls, we have a time lag of at least 6 months in our models. So, in the third quarter during my call I had mentioned, I think I did, that I mentioned that we were still paying customer credits in 2017 through the month of October for raw material cost decreases that occurred in 2015 to 2016. So, we were actually, how do I say this, actually doubling the negative impact. That’s over now, and since November we have flipped and we’re beginning to receive positive contributions related to the surcharge coverage. In fact, that we only have two-thirds of our customers now, and that’s been a progressing thing, it was less than that, prior to the end of the year. Concerning that we only have two-thirds of those customers that’s still not a good situation for us and ourselves, of course we’re trying hard to increase that number somewhere hopefully into the 80s. But to answer your question I think, it’s in positive territory and should stay there and should increase for the next few months.

Okay, that’s helpful backdrop. Just finally on the – you presented sort of a relatively sanguine case for effective U.S. tariffs on European and Asian world business, if you could just elaborate on that a bit more in sort of what’s the bare case for the effective tariffs on your international business?

There’s really only one negative potentially, forget Canada for a moment, I think that's going to be safe for a while and none of us know how long. But going back to the fact that a lot of our hot mill rolls are produced, the metal for those are produced in Europe that is the negative. So, how can this company respond competitively to eliminate the tariff in some way improve its financial performance. And the obvious answer maybe the Pennsylvania plant that's idled which we could reactivate, restart and take a bunch of new business. It would have somewhat of a negative impact on the plans in one of the plants in Europe, but it would certainly help the financial situation that we had in 2017 with respect to that plant. The problem that we have there is this really damaging union contract that's been in place since we bought the facility and the reluctance of the rank involved to adjust. So, it becomes a question of economics what can, what is the best operating scenario for the company, where can we make the most money is that with the Pennsylvania plant restarting its melting facility and producing the rolls or is it with the European facility continuing to make the metal us paying the tariff and generating operating income.

Got it. And then are you worried about decreased demand for Forged and Cast rolls from international customers if the production of steel in those international markets is affected by U.S. tariffs?

Well, roughly one-third of the rolls that are consumed in the United States come from Europe excluding us. Where they are coming from two or three countries over there, so the tariff will make it more difficult for them to be competitive. And that should be a positive for us. I would just pass a note Justin that we are not certain that the tariffs will apply to finished parts, so the roll being new is still subject to interpretation and we don’t have a final judgment yet, but if what I just said is accurate than the answer I provided on our European competitors would also not apply and the competitive situation would be pretty similar to what it is today.

Got it, so that’s very helpful, so basically you think you have a more U.S. centric footprint than the bulk of your competitive set as it relates U.S. demand.

Absolutely, we believe that we have the greatest capacity to supply in this country than our competitors.

Okay, thanks for taking all my questions.

You're welcome.

Our next question is a follow-up from John Walthausen of Walthausen & Co. Please go ahead.

Yes, thank you, I wanted to switch over to the new model of rolls that you introduced, and I was wondering how many rolling mills are those actually operating in now and what the expectations for the new operators of those rolls?

Well, typically most customers will go through a trial period before they commit such an important high cost of operation to something new, but we have more than a dozen mills running on those rolls already and they have only been commercialize to short period of time ago, so that tells me that there is a great interest in our claims and proving that those claims are correct which were of course convinced they are.

And those claims are basically a longer lasting primarily or is it also getting a more precise thickness?

Well, I think they are one in the same longevity without surface marks on the steel product is what the key is, but I think there are also advantages to taking the roll out of service for refinishing less frequently, so there are not only the roll lasting longer overall, but it's lasting longer from refinishing to refinishing, did you understand what I'm trying to say?

Yeah, exactly I understand precisely I group invest after all. So, how long it will take before we know whether those dozen mills that are running are getting the results that have been promised?

Well, first of all we have a bunch of data from the trials that have been ongoing, or I want to say more than a year, but it would probably I can’t really give you a good answer John, it would probably be different for customer to customer. This is the finishing end, it would depend on how what the specific customers experience was with the rolls they used previously in terms of the time between refinishing the roll. And I don’t really know off of top of my head what the longest service of those 15 or so mills is.

Okay. That’s helpful. And then in making these rolls is a complicated and absolute that it will take us a while to get us full of this to see in producing those so that we can get our cost down to where we want to or is that a correct assumption and can you put some timeframe around that?

No, I think we are pretty adapted making those rolls now, unless you’re just talking about the general issue that we’re having with maintenance. Is that what you -?

No, no, specifically just the set of learning curve and the - making product.

I think the learning curve is behind us.

Good. That answers my question. Thanks.

Our next question comes from Timothy Chatard of Quantum Capital Management. Please go ahead.

Hi. I think in prior calls there were some discussions about the effort to develop some new products within the Forged segment outside of the frac block I'm just trying to get any update there with anything?

Well, there are two areas there one is the ongoing R&D efforts to which are twin alloy efforts for Forged rolls that’s one area and those are in the backseat so to speak when compared to hot mill cast rolls. The second is the diversification into the open die Forged product area and the only thing that I can really say right now is that we continue to put more product into different industries, these are generally small numbers so we’re talking probably somewhere in the area for ’17 of less than $10 million of sales excluding blocks of course. And we expect that number to grow. We have some prospects that we may be close to announcing here within the next couple of weeks but it’s a process and it does take some time and every quarter I will continue to update that situation if we have any breakthrough orders you’ll see press releases on those that will publicize us getting into new markets et cetera.

Thanks. One question on a big picture level looking at the business broadly going back to the prior cycle, prior to financial crisis, so last time we had strong steel markets the business was operating high 20s low 30s gross margins. Obviously, the business has an approaches levels in recent years, but wondering especially with the new product introduction with VICTURA and other follow on products that might come from that. I think have been implied to be better gross margins in the existing portfolio, is there a reason structurally why this business is a 20% gross margin business today and it’s because oppose to high 20s to low 30s kind of approach those levels that you had in the past or is there any reason to change those ranges?

Not today to answer your last comment. I think that we are this business and our competitors are all struggling with a multiple year six or seven-year decline in consumption overall effect that our customer base was and financial distress during that period of time and we were compel to lower prices, and lower prices, and lower prices and more. So, we are trying to heal and recover that margin that price. I think that the companies and I eventually to say all of our competitors also have done a great job with getting blood out of the stone from the cost standpoint, but there eventually runs out that those types of methods eventually run out. So, it's going to take a little bit of time when you release a product like Victoria, we expect our margins to be beginning of cycle if you know what I mean from a new product standpoint. So, we would expect to be earning margins higher than the ones you mentioned going back to the first decade in the century, the higher than 30%, that's my aspirations for the new product. And to rollout three of those in the next 18 months and hopefully behind that Forged flow I think gives us a really strong potential for the future.

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. Just a few -- I won't repeat the comments that I provided during my presentation of course, other than to say Ampco-Pittsburgh Corporation is growing. Our bench is deepening, our strategic plan is working, our margins are increasing and it's an exciting time for the employees and the corporation. I continue to feel very good about what we've accomplished in the past three years and I look forward to this company continuing to realize its four potential with respect to sustaining growth and profitability. I would like to thank everyone for your time and wish you a great remainder of your day. Good bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.