Good morning, and welcome to the Park-Ohio Fourth Quarter 2013 Results Conference Call. [Operator Instructions] Today’s conference is also being recorded. If you have any objections you may disconnect at this time. And I would now like to turn the conference over to Mr. Edward Crawford, Chairman and CEO. Please proceed, Mr. Crawford.

Good morning. Scott, would you address the Safe Harbor Statement please.

Thank you, Ed. Good morning, everyone, and thank you for joining us today. If you have not received a copy of our earnings press release, you can find it on the Investor Relations section of our corporate website at pkoh.com. I want to remind everybody that certain statements we make on today’s call, both during opening remarks and during the question-and-answer session may be forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A list of relevant risks and uncertainties may be found in the earnings press release, as well as in the company’s 2011 10-K filed with the SEC on March 15, 2012. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, the company may discuss EBITDA and earnings as adjusted. EBITDA and earnings as adjusted are not measures of performance under Generally Accepted Accounting Principles. For a reconciliation of net income to EBITDA and earnings as reported to earnings as adjusted, please refer to the company’s recent earnings release. At this time I’ll turn the call back over to Ed.

Thanks, Scott. May I introduce Matt Crawford, who is President and COO of the company, and, Matt, I’d like you to run through the results for 2012 please.

Great. Thank you, and good morning. We appreciate you all joining us today. During our third quarter earnings teleconference we discussed how uncertainty had impacted our customers and that there was an overall lack of clarity into the end of year demand across most of our businesses. As it turns out, while revenue was slightly less than where we expected it to be, there was a fair amount of volatility in individual customer demands. Fortunately, our higher margin businesses performed a little better than we expected and its improved margin mix and discipline spending that contributed to a very strong finish to 2012, and in fact 2012 was a record year for revenues and net income here at Park-Ohio. Highlights of the fourth quarter financial performance included an 18% in revenues, to $275.7 million and earnings of $0.63 per diluted share. EBITDA as defined totaled $27.3 million, which was a 48% increase over EBITDA in the fourth quarter of 2011. Our fourth quarter 2011 earnings were $1.58 per diluted share, but included $11.3 million of earnings associated with the reversal of deferred tax asset valuation allowances. Excluding the earnings associated with the reversal of these valuation allowances of $0.94 in 2011 as adjusted were $0.64 per share in ‘11 are roughly flat to 2012. On a full year basis we achieved record revenues of $1,134 million, an increase of 17% year-over-year and our record reported net income increased 8% to $31.8 million in 2012 from $29.4 million in 2011. Our earnings per diluted share for 2012 were $2.62 per diluted share, and these results included the unusual settlement of litigation charge of $13 million or $0.68 per share. Our earnings per diluted share in 2011 were $2.45. Now let’s look a little more closely at our fourth quarter performance. The…

Great job, Matt. Okay, well, we've built a very solid and successful Park-Ohio in the last 20 years. In 1992 we were $60 million in sales. We just came off our $1billion plus and more important, your management team during that period has navigated a number of economic compressions, particularly the one of 2009 and 2010. Today we have 3 outstanding business silos with proven management teams. So I’d like to announce our goal based on our customers worldwide, based on our ability to touch around the world, world class manufacturing companies with service and with capital equipment and the success we are having in every and each of our units, the goal of reaching a run rate of $2 billion plus by 2017. We feel we have the team, the organization. It's taken awhile to build Park-Ohio to where we can really accelerate the growth under control. So as we talked about when we came out of the crisis in 2010, we are beginning our ascent and I think we are off to a great start. We are going to grow this company at a higher rate than anyone might expect. So we are going to be able to do that again, because of all the time and energy we have in the past placed in developing relationships around the world with our customers. We can go organically with our customers, we can add new customers and I think we have proven that we can do a terrific job of adding bolt on activities to our current silos. Thank you very much and we’ll be glad to open the phone for questions.

[Operator Instructions] Your first question comes from the line of Richard Paget with Imperial Capital.

You talked about the 2017 goal of having the $2 billion in sales run rate by then, and given about 8% growth next year, that implies kind of a CAGR of around 12%, 13%. You mentioned that there was going to be some bolt-on acquisitions built into those assumptions. What’s kind of the breakdown between organic growth and acquired growth that you are thinking about?

Well, I’ll have Matt answer that question in detail, but keep in mind, we are looking at a 4 or 5 year period, okay. So sometimes you are going to have more acceleration in organic and occasionally in spurts the bolt-on. But Matt, why don't you get into more detail for Richard.

Important to note is that our plan over the 5-year term anticipates about 50% organic and 50% acquired growth. As it relates to our 2013 forecast, there is no expectation of any acquisitions in that number. So as you know, we always tend to have our irons in the fire as it relates to a potential bolt-on acquisition. So while we are not assured of any of them at this point, it would be not atypical for us to find an opportunity like that.

But longer term, I mean is half the growth going to eventually come from acquisitions? Is it a quarter or you will get there one way or another?

No, I think that started by saying we expect about half, of [indiscernible].

If you look out to the ’17, and that's the goal which we intent to accomplish, hopefully sooner, we are going to concentrate and we believe that got plenty of room in the growth cycle with our current customers, particularly as Asia becomes more active. Let's look at the auto industry and of course there’s more cars being made in China than North America. So obviously we are participating in that and hope to participate further. There are a lot of things that will help organically to grow the business, and the acquisitions, the bolt-ons, we don't pick the time; we pick the transactions. So when they come and we think they are great, we’ll take them. So the net result is, I think it's fair to assume that it will be 50-50 over the stretch.

Okay, and then now that you have FRS under your belt for a couple of quarters now and you have a better idea of the ramp up of some of the new business, how should we be thinking about what the longer term target margins are for assembly components?

Well, we pointed out that in our -- let me take each of the units. The FRS side of the business, we’ve talked about our ability to get in and expand the commercial hose business, not necessarily gas filler business, which is the heart and soul of that company today. We talked about that as an opportunity to grow substantially, like selling products through our supply tech distribution units. That is still a goal. We still think that there is going to be hopefully considerable revenue there over a long haul, but particularly beginning in this year. The other side, the aluminum business is again every single day, the more announcements, there's more aluminum in the cars. There’s no slowdown in it. I mean it looks like Chrysler is going to open up Jeep Liberty in China. They think that the Jeep Liberty over there is going to be equivalent to Levis in China, relative to having an American product, because the Chinese cars do not work. There is no quality, there is no control, so a buyer's choice over there is American or the European cars on the high end. So we still expect tremendous results. We’ve been talking about it for a long time, out of the general aluminum side of it, and that's clearly with getting up and getting the large volume of increased revenues into the cycle, into the plants producing revenue. You are seeing it now. You will see more of it in ’13, but you will really see it in ‘14, ‘15 and ‘16. And the question or the challenge we have is, how deep do we want to go in this business when we fill up our capacity? We’ve been talking about this for 4 years. We bought a couple of companies when things were down in the aluminum business, when no one wanted to invest in the automobile business and we increased our capacity to $250 million to $300 million. Well, we hope we are going to fill that up first, and then secondly, we’ll have to make a decision if we are going to go deeper into that business. And as far as FRS is concerned, it's still wonderful as we’ve spoken before. We already have a contract with one of the big 3 to open up FRS in China in 2015, to supply fuel filler systems, and there are a number of other platforms that we are currently in, in our silos that could be in that investment. So that particular segment has got a very, very bright future as expected, and is one where we spent a considerable amount of money, the acquisition number one, and the necessary CapEx that go into the machining business on the aluminum side. So I think selling the components is in a beautiful position and I think we are going to get results we expected in the next 2 or 3 years.

Okay, if I go way back, I think it's 2003, I mean you guys did double-digit margins in that business. Is that still attainable or should we just think high single digits when everything is firing on all cylinders?

Richard, this is Matt. We are not prepared to announce a target operating margin at this point clearly. Having said that, I think we’ve been clear in the past that we believe that operating margins in the aluminum business can reach high single digits to low double digits. The quality of earnings at FRS has continued to be excellent, even though we’ve seen some shifts in volume. So I think you are going to have to make your own estimates from that point.

Richard, the time you’re talking about, I’ve discussed this numerous times before. At one time [indiscernible] reached a 9% EBIT threshold. So can we obtain that? Hopefully that's clearly a goal, but I'm not uncomfortable with the fact that we can return to that level anyway.

Your next question comes from the line of Ajay Kejriwal with FBR.

And then maybe if I can just start on that 2017 goal, I guess it kind of helps provide a framework as to where the company is headed, and maybe walk us through the thought process behind this as to why now? Is it that you see the portfolio and cash flow is a little more stable that you can look out and plan longer term or is it that having gone through 2008 and ‘09, you are now in a position to kind of, so the worst is behind us, let's look out and plan for growth?

Ajay, this is Matt; all of the above. I think you’ve characterized how we feel very well. I think that our intrinsic cash flow now can support the kind of growth that we are talking about without adding leverage to the company, which is critical in our strategic plan to grow the business. We’ve always felt that we had good business prospects with businesses that can grow at a multiple of GDP, whether that's aluminum riding the trend of the cafe requirements or international growth, whether it's supply technologies with their opportunities to follow their customers to higher growth regions in the world. We’ve always felt good about it, but candidly we were quite careful through the recession. We are a cash flow oriented company, so we made some progressive cuts I think, maybe in the higher growth areas of the business. We are reinvesting in those areas now, whether they be in sales and marketing people, in supply tech or R&D people in our capital equipment business, and having gone through that process over the last 4 to 6 months, we feel comfortable as it relates to these organic growth goals and our expectations of what we typically see through the cycle for acquisition candidates. I think you characterized sort of our -- the feeling here very well.

And then just on the acquisitions and I know all 3 of your businesses have good organic potential, but maybe on acquisitions, are you thinking more supply tech and manufactured products. It sounds like aluminum, you still have lots of capacity and you’re ramping up on a large order there. But talk about how you are thinking about acquisitions, please.

Ajay, we do not intend to stray from our philosophy that you’ve seen us over the last several years. We believe each of our business segments have bolt-on acquisition candidates out there that are available to us. So we candidly don’t necessarily favor one over the other. I think you’ve appropriately identified our casting business and our rubber extruding business, part of FRS, as those that have some capacity we are trying to fill up. So obviously those would be candidates more likely for an internal growth capital than for acquisition. But we tend to be opportunistic and I think you can continue to expect that from us.

Excellent, and then nice to see you putting a share buyback authorization in place. How should we be thinking about this? Is this a placeholder or are buybacks going to become an increasing use of your cash flow here?

Ajay, this is Matt here. We’ve had one in place virtually all the time over the last number of years. We decided candidly to get it back out there and kind of remind everybody that we are authorized. We have had some modest activity in the buyback arena and the reality of it is, was this prompted because we don’t like our valuation? Yes maybe. I just think that we are anxious to keep that option on the table.

Excellent, and maybe one last one from me before I get back in line. So you mentioned assembly components kind of ramping up here...

Ajay, excuse me for one second. Ajay I’m sorry, let me interrupt. I want to finish that thought for a second. I don’t want you to interpret that as a shift. I guess my point is, there is not a strategic shift in direction here. The vast majority of our cash flow is earmarked for growth. So I want to make that clear, that I don’t want anyone to think the timing of this announcement would suggest otherwise.

Okay. So on assembly component you are ramping up on the aluminum business. Maybe just walk through -- I think you commented that it’s still a little bit below expectations in terms of the program launches. So is it at the customers end or is it you’re working through on the factory floor at your end to kind of meet those schedules?

Well, quite frankly it’s a combination of all. There was a design change in a pre-launch ecap system on the largest unit that roots down. The design that we set in motion to be produced at high levels was pushed back at least 4 to 5 months with the design change by the customer, but that has been resolved and we are coming on line right now. So it’s when you’re trying to bring up $125 million worth of new business in 3 plants, it’s not uncommon to run a little late, but we are meeting all of the customer’s expectations. I guess that’s the most important thing. But the plants are very, very busy.

And that $125 million, is that an annual run rate in ‘14?

It’s a new business. When we made that statement, we had written $125 million, that would be all $125 million to be in ‘14 ramping up to that and then you add what the business that was there before, that’s how you get the numbers that we are talking about or dreaming about.

Your next question comes from the line of Steve Barger with KeyBanc Capital Markets

I’m sorry if I missed this, but do you expect you can join more pre cash flow in 2013 than the $26 million you posted last year?

Actually, it’s going to be close. We do have a working capital build at the end of the year as Matt mentioned. The second half of the year is going to be stronger for Park-Ohio than the first half, so we’ll have a buildup in receivables at the end of the year based on the model that we have. So it will be pretty close from the free cash flow perspective.

And Matt going back to your comments, the vast majority of cash flow is earmarked for growth. If you go through a period where the acquisitions just aren’t coming together the way you wanted, if cash starts to accumulate on the balance sheet, should we just view that as having more fire power and getting to your goal of reducing your net debt ratio?

Yes. I mean clearly we’ve generally viewed the right bolt-on transaction for Park-Ohio to be either immediately or in the near term at de-leveraging transactions. But you are right, our forecast did not incorporate any expectations of any acquisitions for 2013 at this point and so our leverage forecast on a gross and net basis for year-end was anticipated into my comments to be 3-ish and 2.5-ish

Steve, this is Eddie. Your right, I talked about operating cash flow for 2013 to be in the $60 million range. At least for the moment, until we find a better use for it, a substantial piece of that would be used to de-leverage. Steve, let me point out 2 things. I want to make sure we understand exactly how we are viewing the bolt-ons and the organic growth. The organic growth out here, there is a test in an annual basis we take, relative to the type of working capital we have to provide for an individual silo unit to take on new business. Also, on the other side when it comes to the bolt-ons, there’s a standard return that the bolt-on must meet, okay, and that’s driven by the purchase price. So the bolt-ons must really fit a very tight criteria. So we were not, just because we have $50 million on the balance sheet doing an acquisition that’s outside of the guidelines, okay. So this is not something where we are changing to grow to get to $2 billion. There’s been no change in the philosophy of how to buy companies out here and how to operate this company. So we are not going off and buying a hotel chain. We are going to stay in the things we understand. We have a proven track record of buying these bolt-ons at very attractive prices and attractive prices to me means under a multiple of 4. So things haven’t changed out there and I don’t want anybody to leave this call with stars in their eyes that we are going to try to accelerate this thing. And if we do an acquisition, it will be on our terms and if we don’t do one for 2 years, we’ll get around to doing one, but we understand where we want to go and that’s why it’s a goal.

Got it. Well, and to that point and you talked about this a little bit, but when you think about your 27 target, its assembly is going to be a big driver of all that growth as you fill the business up. Can you just talk about what you expect out of the supply technology and engineered from an organic growth standpoint, just broadly speaking?

Sure Steve, this is Matt. I think that as those of you who have followed the company, supply tech has historically been the engine for growth for Park-Ohio. We anticipate the trend to continue along with other parts of our business. The results in 2012 are a little bit misleading. New business activity continues to be active, as I mentioned recording a heck of a lot. Our initiatives, particularly in following our U.S. based customers abroad are very exciting. So the growth characteristics embedded in supply technologies are still there. We’ve talked about mid-to-high single digits. We still believe that. There was some dampening of a major market, heavy-duty truck, at the end of 2012. We did cut loose a couple of our customers that we felt not only didn’t fit our return model in the current period, but didn’t really fit our business model long term. So after getting hurt at the revenue line, as you can see it was augmented at the margin line. So that, I think I don’t want to mislead anyone into the fact that supply tech still is a multiple of GDP type grower for Park-Ohio. That was just taking a breather for a couple of different reasons. Engineered Products is a little trickier. Engineered Products is a research development driven business. It is also a business about building out geographies to attain a greater share of the aftermarket business for our massive base of induction and forging equipment that’s spread around the globe. We are currently in 12 countries and continuing to invest and look at markets like Brazil or a deeper dive into India. That is a slightly more cyclical business. But I want to stress that where we are currently is a very interesting environment. 2012 was a record year in many ways, but the key markets at that business are not strong right now. That business, the key end market is steel. Steel is very weak right now, particularly primary steel and capacity building steel, and our Asian markets are critical for that business; they’ve been weak. While I think it’s a little harder to predict sustained growth in that business, I will say that that business is not hitting on all cylinders by any stretch of the imagination and we do expect over the near term, as those markets improve, some upside.

Steve, let me point out again and give some clarity in this. We expect each silo, every business unit to meet internal goals relative to organic growth. There isn’t one where the assembly product gets a higher number. Everyone has been in and agreed they are going to meet the goals that we have set collectively to get to this number. And for the first time in the history of this company, we are having a gathering in Cleveland in April and there is 151 individuals from around the world, from every single corner that are in all our businesses. We don’t have one great business. We don’t have one great business that has 2 businesses. We have big, big customers around the world. So this company can go a lot faster than you could imagine because all of all the touch points. We don’t have to take a bigger market from someone that do our business competing with. We have markets around the world and we bring these 150 individuals here that are connected to sales, and we always share and we think about cross selling, cross selling, cross selling, same customers worldwide. But there isn’t 1 unit at Park-Ohio that is not expected to meet the goals in their particular silo to get to the $2 billion run rate. So yes, some are looking very good right now. Assembly products looks very good right now, out of the chute and there are some that are a little bit slower at developing here, but everyone will get there, and I can’t think of one company. We’ve had individual meetings and I can’t think of one company in which the goal isn’t of the executives running that company, to do their part in reaching this run rate. So I expect growth and I think we’ll get growth from everyone.

That is a really good detail. I appreciate that. Just one housekeeping question. Can you tell us how much revenue you stepped away from, from the 2 customers in supply tech?

Steve, I’d rather not be specific.

Okay, that’s great. I’ll get back in the line and see if anybody else has a question.

Steve, for what’s it worth, in a relatively flat environment the supply tech business generally follows kind of GDP. So you can like probably get a sense of it by backing into what a flat quarter would look like.

Your next question comes from the line of Jay Harris with Axiom Capital.

You got a great business plan and you seem to be implementing it quite proficiently. I have a question about heavy-duty trucks and the percentage of your business that’s exposed to that marketplace. A year ago, what would you have said or maybe even after the acquisition of Fluid Routing, what percentage of your revenues comes from those assemblies?

I’m sorry Jay. You are saying from classified to rate heavy-duty truck. Is that what you are talking about?

Yes.

Yes, I would estimate our heavy-duty truck exposure across our business to be somewhere in the neighborhood of 10% to 12%, that’s an estimate. And that tends to be obviously somewhat volatile and specifically to your question of year-over-year, heavy duty truck was very strong at the end of 2011.

Going to Class A trucks, capital spending for those trucks were, I guess the big quarterly rate last year was the June quarter. How much did your revenues decline as a result of the decline in that capital spending? And I realize that some of your customers may have been better placed and suffered less erosion in in-coming orders than others. But can you give us some insight?

Jay, I would at a high level articulate that exiting the Navistar business was wise for a number of reasons.

I’m not talking about exiting anything. I’m talking about the decline in capital spend for the trucks and how that affected fluid routing and/or supply technologies.

I think I’m trying to answer the question, so let me try again. I think our customer list in book of business happens in our opinion to be those, particularly since we left Navistar, to be those customers which have benefited on market share basis. But our performance has tracked largely what you would see in ACT and other industry information that talks about Class A build production, which talked about a significant decline in order and production activity through the third and fourth quarter. So while I think our book of business fares slightly better, I think you could assume that we followed industry trends largely.

Well, when did you exit the Navistar business?

Several years ago. I’m really not…

The capital spending for Class A trucks in the fourth quarter were running 30% below the June quarter. Is that the appropriate ratio to put on your business?

I mean, as I pointed out, I think we might fair slightly better than the industry, but we are going to be subject to the same type of compression, yes.

The reason I ask the question is that, that capital spending is going to start, has started to come off bottom and within 5 quarters, probably we’ll be back at peak levels and I’m looking for some measure of revenue sensitivity to that kind of a development.

Revenue sensitivity to the projected earnings or…

Capital spend.

Or 2012, what impact are you trying to get out of this? What happened in ‘12 or what’s going to happen in ‘13, ‘14 and ‘15.

Well I’m trying to get some insights as to what’s going to happen in ‘13 and ‘14. Capital spending for these trucks were down very significantly and I think they are going to recover, and so I’m trying to get some idea of the revenue leverage from our recoveries.

Yes, from our perspective, I think that most of the industry shares this perspective, you are right. The order book has picked up slightly in February. There has been some increased trend in terms of the Class A order book. Having said that, we are still off a pretty low base and most people expect an extremely slow start to 2013 with a number of weeks being taken out of the main production schedules, with a slight improvement of it as the year goes on. But the most optimistic forecasters from a production standpoint expect flat as best case scenario. Most expect a year-over-year decline ‘12 to ‘13. Our business plan incorporates that thinking.

Okay, I would expect that in ‘14 we’ll get back to prior peak levels, and that’s from…

From your mouth to God’s ears.

Well, He might be listening. You mentioned, in the formal remarks you mentioned that you had acquired as a tuck-in a rubber processing operation, I think in Mexico; when was that done?

Well, we’ve been in this, but it was officially completed in…

Jay, it was December 1.

Because I can’t find a press release on it, that’s why.

It was strategically very important for a variety of reasons that I’m happy to go into. But from a math perspective added very little revenue or profitability on an immediate basis or on an acquired basis.

What did it do for you strategically?

We have a very large relationship with one of the Japanese auto companies in our rubber unit in Ohio, and that plant is beginning to reach a level where we do not have any capacity there. So we decided to, with the customer support, buy a little operation. We are talking 15 individuals just across the border, but had the type of quality background we needed and we have transferred some work there and we also planned to develop some of our more important rubber products for FSR, the new injector systems and the new power units for the top of the small engines, better known as turbo charging.

But it’s not significant today, except it’s the first time we’ve been to Mexico in operations from the standpoint of manufacturing rubber products. But we’ve been there for many years with our other unit. But I think it’s the beginning.

In our last conference call -- I’m sorry, I thought you were through. Do you have any more?

No I’m finished.

All right. On the last conference call one of the items that was listed as a reason for a sequential decline in business activity, talked so much I forgot it. Was the learning curve experience in your aluminum division as you started to process new orders for new forms, etcetera. What can you say about the production efficiencies as you’re ramping up your aluminum division at this point?

They exceed production per day and the quality per day that we expected.

Alright, and is there any likelihood of a tuck-in acquisition this year?

As Matthew I think said, we are always looking at opportunities there at [indiscernible] who is very experienced in this field for us. We are looking at numerous things, but again it’s all about price point and how well it fits. So we are as we just say, have our eye out for the opportunities.

Your next question comes from the line of Steve Barger with KeyBanc Capital Markets.

Just a quick follow-up modeling question. Can you tell me what the revenue contribution from FRS was in the quarter and can you break out for us what FRS margin was versus that of the legacy business?

Yes. We really just are reporting on a segment basis, so we don’t drill down in each one of the business units with that kind of detail, Steve.

At this time there are no further questions. Are there any closing remarks?

Yes, thank you. We at the Park-Ohio would like to thank all the stakeholders out there for giving us an opportunity to reach our goals of $2 billion plus by 2017. It will be a joint effort, but I think we have the organization and the team and the support throughout to accomplish it. Thank you very much for joining us today and look forward to seeing you in the future.

This concludes the Park-Ohio Fourth Quarter 2012 Results Conference Call. You may now disconnect.