Q2 2024 Ampco-Pittsburgh Corp Earnings Call

Speaker Change: Good morning everyone and welcome to the Amco Pittsburgh Corporation second quarter 2024 earnings results conference call.

Operator: 2024 Earnings Results Conference Call. All participants will be in a listen-only mode.

Unknown Executive: for 2024 Earnings Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star and then one on a telephone keypad. To withdraw your questions, you may press star and two. There's also no today's event is being recorded.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star and then one on the telephone keypad. To withdraw your question, you may press star and two.

Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Speaker Change: After today's presentation there will be an opportunity to ask questions. To ask a question please press star and then one on a telephone keypad. To withdraw your questions you may press star and two.

Operator: Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Kim Knox, Corporate Secretary. Please go ahead.

Kimberly Knox: At this time, I'd like to turn the floor over to Kim Knox, corporate secretary. Please go ahead.

Speaker Change: Please also note that today's event is being recorded.

Speaker Change: At this time, I'd like to turn the floor over to Kim Knox, Corporate Secretary. Please go ahead.

Kimberly Knox: Thank you, Jamie, and good morning to everyone joining us on today's second quarter of 2024 conference call. Joining me today are Brett McBair, 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 Dave Anderson, President of Air and Liquid Systems Corporation.

Kimberly Knox: Thank you, Jamie, and good morning to everyone joining us on today's second quarter 2024 conference call. Joining me today are 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 Dave Anderson, 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 the corporation's control.

Kim Knox: Thank you, Jamie, and good morning to everyone joining us on today's second quarter 2024 conference call.

Speaker Change: Joining me today are Brett McBrayer, our Chief Executive Officer, and Mike McAuley, Senior Vice President, Chief Financial Officer, and Treasurer.

Speaker Change: Also joining us on the call today are Sam Lyon, President of Union Electric Steel Corporation, and Dave Anderson, President of Air and Liquid Systems Corporation.

Unknown Executive: 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 the corporation's control. The corporation's actual results may differ significantly from those projected or suggested in any forward-looking statements due to various risk factors, including those discussed in the corporation's most recently filed Form 10-K and in 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.

Kimberly Knox: The Corporation's actual results may differ significantly from those projected or suggested in any forward-looking statements due to various risk factors, including those discussed in the Corporation's most recently filed Form 10-K and in 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.

Speaker Change: 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.

Speaker Change: These matters involve certain risks and uncertainties, many of which are outside the corporation's control.

Speaker Change: The corporation's actual results may differ significantly from those projected or suggested in any forward-looking statements.

Speaker Change: due to various risk factors, including those discussed in the corporation's most recently filed Form 10-K and in subsequent filings with the Securities and Exchange Commission.

Speaker Change: We do not undertake any obligation to update or otherwise release publicly any revision to our forward-looking statements.

Unknown Executive: A replay of this call will be posted on our website. To access the earnings release or the webcast replay, please consult the Investor section of our website at ampco-ph.com.

Speaker Change: A replay of this call will be posted on our website.

Kimberly Knox: To access the earnings release or the webcast replay, please consult the investor section of our website at AmpcoPGH.com. With that, I would like to now turn the call over to Brett McBrayer, Ampco-Pittsburgh CEO.

Speaker Change: To access the earnings release or the webcast replay, please consult the Investor section of our website at www.ampcopgh.com

Brett McBair: With that, I would like to now turn the call over to Brett McBair, Ampco Pittsburgh CEO. Brett.

Speaker Change: With that, I would like to now turn the call over to Brett McBrayer, AMCO Pittsburgh CEO. Brett? Thank you, Kim. Good morning and thank you for joining our call.

Brett McBair: Thank you, Kim.

Brett McBair: Good morning, and thank you for joining our call. As mentioned in our 10-Q filed yesterday in our press release, we had strong sequential earnings improvement in the second quarter of 2024. Income from operations was $5 million for the second quarter compared to $1.4 million in adjusted income from operations for the second quarter of the prior year when excluding the one-time foreign energy credit. This three-and-a-half-fold improvement reflects a full quarter of utilizing all our new equipment in our forging cast engineer product segment and record-order intake for air and liquid systems. That income for the quarter was $2 million, or 10 cents per diluted share.

Brett Mcbrayer: Thank you, Kim. Good morning, and thank you for joining our call. As mentioned in our 10-Q filed yesterday in our press release, we had strong sequential earnings improvement in the second quarter of 2024. Income from operations was $5 million for the second quarter, compared to $1.4 million in adjusted income from operations for the second quarter of the prior year when excluding the one-time foreign energy credit.

Speaker Change: As mentioned in our 10-Q filed yesterday in our press release, we had strong sequential earnings improvement in the second quarter of 2024.

Speaker Change: Income from operations was $5 million for the second quarter, compared to $1.4 million in adjusted income from operations for the second quarter of the prior year when excluding the one-time foreign energy credit.

Samuel Lyon: This three-and-a-half-fold improvement reflects a full quarter of using all our new equipment in our Forged and Cast engineered product segment and record order intake for air and liquid systems. That income for the quarter was $2 million.10 per diluted share. At this time, I'll turn the call over to Sam Lyon, President of our Forged and Cast Engineered product segment, to share more details about his group's performance in the quarter.

Speaker Change: This three-and-a-half-fold improvement reflects a full quarter of utilizing all our new equipment in our forged and cast engineered product segment and record order intake for air and liquid systems.

Sam Lyon: At this time, I'll turn the call over to Sam Lyon, President of our Forging Cast Engineer product segment to share more details about his group's performance in the quarter.

Speaker Change: That income for the quarter was $2,000,000.10 per diluted share.

Sam Lyon: At this time, I'll turn the call over to Sam Lyon, President of our Forging Cast Engineer product segment, to share more details about his group's performance in the quarter. Sam.

Sam Lyon: Thank you, Brett.

Samuel Lyon: Thank you, Brett, and good morning. In our FCEP segment, market conditions have shown signs of stabilization. The rural market remained flat in Q2 due to consistent end-customer demand.

Sam Lyon: Good morning. In our FCEP segment, market conditions have shown signs of stabilization. The rule market remained flat in Q2 due to consistent end customer demand. While stable, due to ongoing economic uncertainties and increased imports of flat-rolled steel, European steel producers continue to operate at lower utilization levels, resulting in pricing and volume pressures. Based on customer sentiment, we anticipate an improvement in order intake in the second half of the year for deliveries in 2025. Our backlog decreased by approximately 16.1 million from December 31, 2023, due to the timing of 2025 orders from some of our rule customers, which are expected in Q3.

Sam Lyon: Thank you, Brett, and good morning.

Sam Lyon: In our FCEP segment, market conditions have shown signs of stabilization.

Samuel Lyon: While stable due to ongoing economic uncertainties and increased imports of flat-rolled steel, European steel producers continue to operate at lower utilization levels, resulting in pricing and volume pressures. Based on customer sentiment, we anticipate an improvement in order intake in the second half of the year for deliveries in 2025. Our backlog decreased by approximately $16.1 million from December 31, 2023 due to the timing of 2025 orders from some of our rural customers, which are expected in Q3.

Speaker Change: The rural market remained flat in Q2 due to consistent end customer demand. While stable, due to ongoing economic uncertainties and increased imports of flat rolled steel, European steel producers continue to operate at lower utilization levels resulting in pricing and volume pressures.

Speaker Change: Based on customer sentiment, we anticipate an improvement in order intake in the second half of the year for deliveries in 2025.

Speaker Change: Our backlog decreased by approximately 16.1 million from December 31st, 2023.

Speaker Change: Due to the timing of 2025 orders from some of our rural customers, which are expected in Q3, we are optimistic about order intake for delivery in 2025 based on volumes received from several large customers to date and indications from others.

Sam Lyon: We are optimistic about order and take for delivery in 2025 based on volumes received from several large customers to date and indications from others. Primary focus remains on maintaining a position in the rule market and enhancing operational efficiencies through our recently completed capital program in the U.S. This equipment investment increases the capacity of FEP manufacturing and improves productivity and operational reliability of our forged business. For the three months ended June 30, 2024, net sales for the FCEP segment were 75.7 million, a slight decrease from 77.6 million in the same period last year. This decrease is primarily due to lower cast rule shipments offset by higher forged rule sales and improved pricing.

Samuel Lyon: We are optimistic about order intake for delivery in 2025 based on volumes received from several large customers to date and indications from others. However, our primary focus remains on maintaining our position in the rural market and enhancing operational efficiencies through our recently completed capital program in the U.S.

Speaker Change: Our primary focus remains on maintaining our position in the world market and enhancing operational efficiencies through our recently completed capital program in the U.S.

Samuel Lyon: This equipment investment increases the capacity of FEP manufacturing and improves productivity and operational reliability of our forged business. For the three months ended June 30, 2024, net sales for the FCEP segment were $75.7 million, a slight decrease from $77.6 million in the same period last year. This decrease is primarily due to lower cast roll shipments offset by higher forged roll sales and improved prices. Income from operations for Q2 2024 increased to $5.4 million from $3.9 million in Q2 2023. Q2 of 2023 included a $1.9 million one-time energy credit in Europe.

Speaker Change: This equipment investment increases the capacity of FEP manufacturing and improves productivity and operational reliability of our forge business.

Speaker Change: For the three months ended June 30, 2024, net sales for the FCEP segment were $75.7 million, a slight decrease from $77.6 million in the same period last year.

Speaker Change: This decrease is primarily due to lower cast roll shipments offset by higher forged roll sales and improved pricing.

Sam Lyon: Income from operations per Q2, 2024 increased to 5.4 million from 3.9 million in Q2 of 2023. Q2 of 2023 included 1.9 million one-time energy credit in Europe. This significant performance improvement resulted from improved pricing, improved quality and productivity, and lower selling and administrative expenses. In conclusion, while 2024 presents challenges in shipment volumes and market conditions, our strategic pricing actions and operational improvements have mitigated these challenges.

Speaker Change: Income from operations for Q2 2024 increased to $5.4 million from $3.9 million in Q2 of 2023.

Samuel Lyon: This significant performance improvement resulted from improved pricing, improved quality and productivity, and lower selling and administrative expenses. In conclusion, while 2024 presents challenges in shipment volumes and market conditions, our strategic pricing actions and operational improvements have mitigated these challenges. We remain committed to maintaining market leadership and delivering value to our stakeholders. Thank you, Sam. David Anderson, President of the Air and Liquid Processing Segment, will now share more detail regarding his group's performance.

Speaker Change: Q2 of 2023 included 1.9 million one-time energy credit in Europe.

Speaker Change: This significant performance improvement resulted from improved pricing, improved quality and productivity, and lower selling and administrative expenses.

Speaker Change: In conclusion, while 2024 presents challenges in shipment volumes and market conditions, our strategic pricing actions and operational improvements have mitigated these challenges.

Sam Lyon: We remain committed to maintaining market leadership and delivering value to our stakeholders.

David Anderson: Thank you, Sam. David Anderson, President of Air and Liquid Processing Segment.

Speaker Change: We remain committed to maintaining market leadership and delivering value to our stakeholders.

David Anderson: Thank you, Sam. David Anderson, President of the Air and Liquid Processing Segment, will now share more detail regarding his group's performance. Dave.

David Anderson: Well, thank you, Brett.

David Anderson: Good morning. Air and Liquid Q2 revenue increased 19% versus prior year to achieve a record high for any quarter in Air and Liquid's history. The increase was primarily due to increased shipments of customer handling units. This increase was driven by the additional manufacturing capacity achieved by opening the new Virginia facility in mid-2023. Bookings for Q2 were also at a record high as we continue to see strong demand for our products. Backlog increased in the quarter as the result of strong bookings in the pharmaceutical and US Navy markets. Operating income for Air and Liquid increased 7% in the second quarter versus prior year, primarily due to the higher revenue.

David Anderson: Thank you, Brett. Good morning. Air and Liquid's Q2 revenue increased 19% versus the prior year to achieve a record high for any quarter in Air and Liquid's history. The increase was primarily due to increased shipments of custom air handling units. This increase was driven by the additional manufacturing capacity achieved by opening the new Virginia facility in mid 2023. Bookings for Q2 were also at a record high, as we continue to see strong demand for our products.

David Anderson: Thank you, Brett. Good morning. Air and Liquid Q2 revenue increased 19% versus prior year to achieve a record high for any quarter in Air and Liquid's history.

David Anderson: The increase was primarily due to increased shipments of custom air handling units. This increase was driven by the additional manufacturing capacity achieved by opening the new Virginia facility in mid-2023.

David Anderson: Bookings for Q2 were also at a record high as we continue to see strong demand for our products. Backlog increased in the quarter as the result of strong bookings in the pharmaceutical and U.S. Navy markets.

David Anderson: Backlog increased in the quarter as the result of strong bookings in the pharmaceutical and U.S. Navy markets. Operating income for Air and Liquid increased 7% in the second quarter versus the prior year, primarily due to higher revenue. The impact of the higher revenue was partially offset by an unfavorable product mix as we worked through some older low margin orders in our backlog. However, compared to the prior quarter, operating income increased 60% due to higher revenue and a more favorable product mix. Production equipment arrived at our Buffalo Pumps facility in Q2. This is the equipment that was purchased with funding provided by the U.S. Navy.

Aaron Liquid: Operating income for Aaron Liquid increased 7% in the second quarter versus prior year, primarily due to the higher revenue.

David Anderson: The impact from the higher revenue was partially offset by unfavorable product mix as we work through some older, low-margin orders in our backlog. Paired to the prior quarter, operating income increased 60% due to higher revenue and a more favorable product mix. The production equipment arrived at our Buffalo Pumps facility in Q2. This is the equipment that was purchased with the funding provided by the US Navy. Installation of the equipment was completed in early Q3. This equipment will raise our manufacturing capacity and increase efficiencies in the quarters ahead. Q2 saw both record bookings and record revenue as demand for our products continues to be extremely strong.

Aaron Liquid: The impact from the higher revenue was partially offset by unfavorable product mix as we worked through some older low margin orders in our backlog.

Aaron Liquid: Compared to the prior quarter, operating income increased 60% due to higher revenue and a more favorable product mix.

Aaron Liquid: Production equipment arrived at our Buffalo Pumps facility in Q2. This is the equipment that was purchased with the funding provided by the U.S. Navy.

Brett Mcbrayer: The installation of the equipment was completed in early Q3. This equipment will raise our manufacturing capacity and increase efficiencies in the quarters ahead. Q2 saw both record bookings and record revenue as demand for our products continues to be extremely strong. We continue to take steps to increase our manufacturing capacity to meet this demand. The manufacturing facility we opened last year in Virginia was the primary driver for air handling sales, being up 58% in Q2 versus the prior year.

Aaron Liquid: Installation of the equipment was completed in early Q3. This equipment will raise our manufacturing capacity and increase efficiencies in the quarters ahead.

Aaron Liquid: Q2 saw both record bookings and record revenue as demand for our products continues to be extremely strong.

David Anderson: We continue to take steps to increase our manufacturing capacity to meet this demand. The manufacturing facility we opened last year in Virginia was the primary driver for air handling sales, being up 58% in Q2 versus prior year. And the new equipment in our Buffalo facility will raise our manufacturing capabilities to meet the increasing demand from the U.S. Navy markets.

Aaron Liquid: We continue to take steps to increase our manufacturing capacity to meet this demand.

Aaron Liquid: The manufacturing facility we opened last year in Virginia was the primary driver for air handling sales, being up 58% in Q2 versus prior year.

Brett Mcbrayer: And the new equipment in our Buffalo facility will raise our manufacturing capabilities to meet the increasing demand from the U.S. Navy markets. In the quarters ahead, we expect to continue to increase our manufacturing capacity as we expect strong demand in the second half of 2024 and beyond. Thank you, David.

Aaron Liquid: and the new equipment in our Buffalo facility will raise our manufacturing capabilities to meet the increasing demand from the U.S. Navy markets.

David Anderson: In the quarters ahead, we expect to continue to increase our manufacturing capacity, as we expect strong demand in the second half of 2024 and continuing in 2025.

Aaron Liquid: In the quarters ahead, we expect to continue to increase our manufacturing capacity, as we expect strong demand in the second half of 2024 and continuing in 2025.

Michael McAuley: Now I'll turn the call over to Mike McAuley, our Chief Financial Officer, for more detail regarding our financial performance for the quarter. As indicated in our Form 10-Q filed yesterday and in our press release issued last night, Ampco's net sales for the second quarter of 2024 were $111 million, an increase of 3.5% compared to net sales for the second quarter of 2023. The air and liquid processing segment accounted for the sales growth over prior years. Forged and cast engineered product segment sales were down slightly versus prior years as higher shipment volumes of forged rolls and higher net pricing were offset by lower shipment volumes of cast rolls and FEP products.

David Anderson: Thank you, David.

Michael McAuley: Now I'll turn the call over to Mike McCulley, our Chief Financial Officer, for more detail regarding our financial performance for the quarter. Mike.

Mike Mcauley: Thank you, David. Now I'll turn the call over to Mike McAuley, our Chief Financial Officer, for more detail regarding our financial performance for the quarter. Mike.

Michael McAuley: It's indicated in our Form 10 queue filed yesterday and in our press release issued last night, Ampco's net sales for the second quarter of 2024 were $111 million, an increase of 3.5% compared to net sales for the second quarter of 2023. The air and liquid processing segment accounted for the sales growth over prior year. Of course, in cash engine, your product segment sales were down slightly versus prior year as higher shipping volumes of forged rolls and higher net pricing were offset by lower shipping volumes of cash rolls and FEP products. The income from operations for the second quarter of 2024 was $5 million, slightly higher than the top end of our previous guidance range.

Mike Mcauley: As indicated in our Form 10-Q filed yesterday and in our press release issued last night, Amco's net sales for the second quarter of 2024 were $111 million, an increase of 3.5% compared to net sales for the second quarter of 2023.

Speaker Change: They are a liquid processing segment accounted for the sales growth over prior year.

Speaker Change: Forged and cast engineered product segment sales were down slightly versus prior year as higher shipment volumes of forged rolls and higher net pricing were offset by lower shipment volumes of cast rolls and FEP products.

Michael McAuley: Income from operations for the second quarter of 2024 was $5 million, slightly higher than the top end of our previous guidance. The main driver for the improvement versus Q2 of 2023 was higher net roll prices. In addition, it should be noted that the prior year quarter had the benefit of a foreign energy credit of $1.9 million, so the underlying year-over-year step-up in profitability for the quarter was more sizable than the as-reported change.

Speaker Change: Income from operations for the second quarter of 2024 was $5 million, slightly higher than the top end of our previous guidance range.

Michael McAuley: The main driver for the improvement versus Q2 of 2023 was higher net roll pricing. In addition, it should be noted that the prior year quarter had the benefit of a foreign energy credit of $1.9 million. So the underlying year-over-year step up in profitability for the quarter was more sizable than the as-reported change. Corporations total selling administrative expenses were approximately 12.2% of net sales for Q2 2024 compared to 13.1% for Q2 2023. Primarily due to lower commissions and professional services and the forged in cash engineier product segment. The interest expense of $3 million for the quarter increased by $0.8 million compared to prior year.

Speaker Change: The main driver for the improvement versus Q2 of 2023 was higher net roll pricing.

Speaker Change: In addition, it should be noted that the prior year quarter had the benefit of a foreign energy credit of $1.9 million, so the underlying year-over-year step-up in profitability for the quarter was more sizable than the as-reported change.

Michael McAuley: The Corporation's total selling and administrative expenses were approximately 12.2% of net sales for Q2 2024 compared to 13.1% for Q2 2023, primarily due to lower commissions and professional services in the forged and cast engineered products. Interest expense of $3 million for the quarter increased by $0.8 million compared to the prior year, primarily due to higher equipment financing debt balances for the new machinery in the U.S. forge business, which has now been completed and converted to term notes, as well as higher average revolving credit facility borrowings to support working capital growth and Higher Average Interest Rates on our Floating Rate Instruments Due to the Interest Rate Market. Other income net improved primarily The income tax provision for Q2 2024 increased compared to the prior year, principally due to higher income of the corporation's profitable entities, which have no valuation allowances recorded against their deferred tax assets.

Speaker Change: Corporations' total selling and administrative expenses were approximately 12.2% of net sales for Q2 2024, compared to 13.1% for Q2 2023.

Speaker Change: primarily due to lower commissions and professional services in the forged and cast engineered product segment.

Speaker Change: Interest expense of $3 million for the quarter increased by $0.8 million compared to prior year, primarily due to higher equipment financing debt balance for the new machinery in the U.S. forge business, which has now been completed and converted to term notes.

Michael McAuley: Primarily due to higher equipment financing debt balance for the new machinery in the U.S. Fords business, which has now been completed and converted to term notes, as well as higher average revolving credit facility borrowings to support working capital growth. And higher average interest rates on our floating rate instruments due to interest rate market movements. Other income net improved primarily due to foreign exchange translation losses recorded in Q2 2023 versus gains recorded in Q2 2024. The income tax provision for Q2 2024 increased compared to the prior year principally due to higher income of the corporation's profitable entities, which have no valuation allowances recorded against their deferred tax assets.

Speaker Change: as well as higher average revolving credit facility borrowings to support working capital growth and higher average interest rates on our floating rate instruments due to interest rate market movements.

Speaker Change: Other income net improved primarily due to foreign exchange translation losses recorded in Q2 2023 versus gains recorded in Q2 2024.

Speaker Change: The income tax provision for Q2 2024 increased compared to the prior year principally due to higher income of the corporation's profitable entities which have no valuation allowances recorded against their deferred tax assets.

Michael McAuley: As a result, net income attributable to Ample Pittsburgh for the three months ended June 30 of 2024 was $2 million, or 10 cents per share. This compares the net income of $1 million or $2 cents per share for the quarter ended June 30, 2024.

Michael McAuley: As a result, net income attributable to Ampco-Pittsburgh for the three months ended June 30, 2024, was $2 million, or $0.10 per share. This compares with net income of $1 million, or $0.02 per share, for the quarter ended June 30, 2024. 2023, which included a $0.10 per share benefit for foreign energy. Total backlog at June 30, 2024 of $360.4 million declined approximately 5% from December 31. The Forge and Cast Engineer product segment backlog decreased from December 31st, 2023 by approximately $12.5 million due primarily to the timing of 2025 mill roll orders for large customers, as Sam described, as well as lower foreign exchange rates, which reduced the translated value of the backlog by another three and a half million dollars.

Speaker Change: As a result, net income attributable to Amco Pittsburgh for the three months ended June 30th, 2024 was two million dollars or ten cents per share.

Speaker Change: This compares the net income of $1 million, or 2 cents per share, for the quarter ended June 30, 2024.

Michael McAuley: 2023, which included $0.10 per share benefit for the foreign energy credit. Total backlog at June 30, A 2024 of $360.4 million declined approximately 5% from December 31. The foraging cast engineer product segment backlog decreased from December 31, 2023, by approximately $12.5 million, due primarily to the timing of 2025 mill-roll orders for large customers, as same described, as well as lower foreign exchange rates, which reduced the translated value of backlog by another $3.5 million. However, forcing cast backlog increased by $7.3 million compared to its backlog recorded at March 31, as roll order intake moved up in Q2.

Speaker Change: 2023, which included $0.10 per share benefit for the foreign energy credit.

Speaker Change: Total backlog at June 30, 2024 of $360.4 million declined approximately 5% from December 31.

Sam Lyon: The Forge and Cast Engineer product segment backlog decreased from December 31, 2023 by approximately $12.5 million due primarily to the timing of 2025 mill roll orders for large customers as Sam described.

Sam Lyon: as well as lower foreign exchange rates which reduce the translated value of backlog by another three and a half million dollars.

Michael McAuley: However, Forcing Cast's backlog increased by 7.3 million compared to its backlog recorded at March 31, with rule order intake moving up in Q2. The air and liquid segment backlog declined by $2.4 million from December 31st, but increased by $4.2 million from March 31st as record order intake in Q2 was partly offset by higher sales revenue, as Dave described. Net cash flows used in operating activities was $5.3 million for Q2 2024 in support of higher trade working capital, principally higher accounts receivable given the elevated sales and pension contributions. Capital expenditures for the second quarter of 2024 were $2.7 million, primarily for the Forged and Cast Engineered Products sector.

Speaker Change: However, Forst and Kast backlog increased by 7.3 million compared to its backlog recorded at March 31st, as roll order intake moved up in Q2.

Michael McAuley: The air and liquid segment backlog declined by $2.4 million from December 31, but increased by $4.2 million from March 31, as record order intake in Q2 was partly offset by higher sales revenue, as Dave described. Netcast flows used in operating activities was $5.3 million for Q2 2024 in support of higher trade working capital, principally higher accounts receivable given the elevated sales and pension contributions. Capital expenditure for the second quarter of 2024 would be $2.7 million, primarily for the foraging cast engineer product segment. We expect CapEx for the remainder of the year to be approximately stable with the Q2 run rate.

Dave Anderson: The air and liquid segment backlog declined by $2.4 million from December 31st, but increased by $4.2 million from March 31st as record order intake in Q2 was partly offset by higher sales revenue as Dave described.

Dave Anderson: Net cash flows used in operating activities was 5.3 million dollars for Q2 2024 in support of higher trade working capital, principally higher accounts receivable given the elevated sales and pension contributions.

Dave Anderson: Capital expenditures for the second quarter of 2024 were $2.7 million, primarily for the forged and cast engineered product segment. We expect CapEx for the remainder of year to be approximately stable with a Q2 run rate.

Michael McAuley: At June 30, 2024, the corporation's liquidity position included cash on hand of $7.9 million, and on drawn availability on a revolving credit facility of $20.5 million. However, as we reported in our press release such a lie 10th, the corporation's liquidity position increased since June 30th.

Dave Anderson: At June 30, 2024, the corporation's liquidity position included cash on hand of $7.9 million and undrawn availability on a revolving credit facility of $20.5 million. However, as we reported in our press release of July 10,

Dave Anderson: The corporation's liquidity position increased since June 30th.

Unknown Executive: Operator, at this time, we would now like to open the line for questions. Ladies and gentlemen, at this time, we will open the line for questions to join the question queue. You may press star, and then one using a touch on telephone. So withdraw your questions. You may press star and two. If you are using a speaker phone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster.

Operator: We expect CapEx for the remainder of the year to be approximately stable with a Q2 run rate. At June 30, 2024, the corporation's liquidity position included cash on hand of $7.9 million and undrawn availability on a revolving credit facility of $20.5 million. However, as we reported in our press release of July 10, its liquidity position increased since June. Operator, at this time, we would now like to open the line for questions.

Speaker Change: Operator, at this time we would now like to open the line for questions.

Operator: Ladies and gentlemen, at this time, we will open the line for questions. To join the question queue, you may press star and then one on a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality.

Speaker Change: Ladies and gentlemen, at this time we will open the line for questions. To join the question queue, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two.

Speaker Change: If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality.

Operator: Again, that is the star and then one to join the question queue, will pause momentarily to assemble the roster. And our first question today comes from David Wright from Henry Investment Trust. Please go ahead with your question. Good morning, everyone.

Speaker Change: again that is star and then one to join the question queue

Speaker Change: We'll pause momentarily to assemble the roster.

David Wright: And our first question today comes from David Wright from Henry Investment Trust. Please go ahead with your question.

Speaker Change: And our first question today comes from David Wright from Henry Investment Trust. Please go ahead with your question.

David Wright: Good morning, everyone. Good morning, David. Hey, Brett.

David Wright: Morning, Dave. Hey, Brett, listen. Congratulations to you and the team for a clean and solid quarter. Thank you. You mentioned, yes, and you mentioned strong sequential improvement in Q2, and it's really clear. We're halfway through the third quarter.

David Wright: Good morning, everyone.

Brett McBair: Listen. Congratulations to you and the team for a clean and solid quarter. Thank you. You mentioned, yes. And you mentioned strong sequential improvement in Q2, and it's really clear. We're halfway through the third quarter. How do you feel about this quarter and continuing? There's a good result to the second quarter.

Speaker Change: Good morning, David.

Speaker Change: Hey, Brett, listen, congratulations to you and the team for a clean and solid quarter.

David Wright: You mentioned strong sequential improvement in Q2, and it's really clear. We're halfway through the third quarter. How do you feel about this quarter and continuing?

Brett Mcbrayer: How do you feel about this quarter and continuing the good results of the second quarter? As you remember, Dave, the third quarter is a shutdown period for our European assets, and we had a smaller shutdown period at the beginning of the quarter for our U.S. operations. So it tends to be a little weaker overall, but, you know, the underlying fundamentals of the business, the efficiency improvements, we expect to continue, as we move throughout the course of the year, that will offset some of that shutdown slowdown.

Brett McBair: was you, as you remember Dave, the third quarter is a, for the forage and passenger product segment, is a shutdown period for our European assets and we had a smaller shutdown period at the beginning of the quarter for our U.S. operations. So it tends to be a little weaker overall, but the underlying fundamentals of the business, the efficiency improvements we expect to continue. As we move throughout the course of the year. The will offsets some of that shutdown slow down. It will.

Speaker Change: This is a good result of the second quarter.

Dave Anderson: As you remember, Dave...

Brett Mcbrayer: The third quarter is a for the Forge and Cast Injury product segment is a shutdown period for our European assets and we had a

Speaker Change: Smaller shutdown period at the beginning of the quarter for our U.S. operations. So it tends to be a little weaker overall, but the underlying fundamentals of the business, the efficiency improvements, we expect to continue.

Speaker Change: as we move throughout the course of the year.

Speaker Change: that will offset some of that shutdown slowdown.

David Wright: Yeah, and things are going well in here in Liquid. So, you know, this is really great results and it's nice to see a clean quarter with, you know, like no extraordinary, and if you had any extraordinary so far this quarter. No, none, none, none today. That's great.

Brett Mcbrayer: Yeah, and things are going well in Air and Liquid, so, you know, these are really great results, and it's nice to see a clean quarter with, you know, like, no extraordinary things, and have you had any extraordinary things so far this quarter? No. None today.

Speaker Change: It will.

Speaker Change: Yeah, and things are going well in Air and Liquid, so, you know, this is really great results and it's nice to see a clean quarter with, you know, like no extraordinaries, and have you had any extraordinaries so far this quarter?

Samuel Lyon: That's great. I want to ask, Sam, that's a really good result in your segment, five plus million dollars of operating income, kind of a seven percent margin. And you haven't had a quarter like that in quite a while.

Speaker Change: No, none to date.

Sam Lyon: I want to ask Sam, that's a really good result in your segment: five plus million dollars of operating income, kind of a seven percent margin. And you haven't had a quarter like that in, in, in quite a while. Was there anything extraordinary there, or is it just more reflective of where you've gotten the business to with the new equipment and the new layouts and such. It's combination, David, of the efficiency from the new equipment and then also we had a relatively strong order book in queue to run the operations at a higher utilization level. And so our results in the, in the U.S.

Speaker Change: That's great. I want to ask Sam, that's a really good result in your segment, five plus million dollars of operating income.

Speaker Change: kind of a 7% margin, and you haven't had a quarter like that in quite a while. Was there anything extraordinary there, or is it just more reflective of where you've gotten the business to with the new equipment and the new layouts and such?

Samuel Lyon: Was there anything extraordinary there, or is it just more reflective of where you've gotten the business with the new equipment and the new layouts and such? It's a combination, David, of the efficiency from the new equipment and then also, we had a... Relatively strong order book in Q2, ran the operations at a higher utilization level, and so our results in the U.S. were strong as a result of that, and also the pricing levels are better than they had been. Would you ultimately see being able to get to something better than a 7% operating margin, or is that a level that's pretty good and that you're happy with?

Sam Lyon: It's a combination, David, of the efficiency from the new equipment, and then also, we had a...

Speaker Change: Relatively strong order book in Q2, ran the operations at a higher utilization level and so our results in the U.S. were strong as a result of that.

Sam Lyon: were strong as a result of that. So, you know, just, just having, having in also the pricing levels are better than they had been in the past. Would you ultimately see being able to get to something better than a seven percent operating margin, or is that a level that's pretty good and that you're happy with? You know, as volumes would increase, then the operating margin will increase as our, in, in my side of the business, the fixed costs are relatively stable and a pretty high percentage of our total cost. So we get a lot of drop through from incremental volume.

Speaker Change: And also, the pricing levels are better than they had been in the past.

David: Would you ultimately see being able to get to something better than a seven percent operating margin or is that a level that's pretty good and that you're happy with?

Samuel Lyon: As volumes increase, then the operating margin will increase. On my side of the business, the fixed costs are... Relatively stable and a pretty high percentage of our total cost, so we get a lot of drop through from incremental volume. So I would expect, you know, as the infrastructure bill and things and steel demand go up over the next, you know, quarters and years, we anticipate, and we should see it. Hey Dave, you got your margin back this quarter, and so that's great to see.

Speaker Change: As volumes would increase, then the operating margin will increase. In my side of the business, the fixed costs are...

Speaker Change: relatively stable and a pretty high percentage of our total cost so we get a lot of drop through from incremental volume.

Sam Lyon: So I would expect great. Yeah, yeah. The infrastructure bill and things, and steel demand goes up over the next, you know, quarters and years. You know, we anticipate, and we should see the proof. Okay.

Speaker Change: So, I would expect... That's great. Yeah. You know, as the infrastructure bill and things and steel demand goes up over the next, you know, quarters and years, you know, we anticipate and we should see it improve.

David Wright: Well, great. Hey, Dave, you got your margin back this quarter, and so that's great to see. I wonder, though, how much longer it is going to take to get these older, lower margin orders to fully roll off? David, we expect the majority of that to happen in the second half of this year, and then they should be behind us. Do you have more, you know, volume-wise? Do you have more of, of, of, of, of, of that type of, of business in the second half quantity-wise or volume-wise than you did in the first half? No, it's similar.

Speaker Change: Okay, well great. Hey Dave, you got your margin back this quarter and so that's great to see. I wonder though, how much longer is it going to take to get these older lower margin orders to fully roll off?

David Anderson: I wonder though, how much longer it is going to take for these older lower margin orders to fully roll off? David, we expect the majority of that to happen in the second half of this year, and then they should be behind us. Do you have more volume-wise, do you have more of that type of business in the second half, quantity-wise or volume-wise than you did in the first half? Uh, no; it's similar. It would be similar to the first half.

Speaker Change: David, we expect the majority of that to happen in the second half of this year and then they should be behind us.

Speaker Change: Do you have more, you know, volume-wise, do you have more of that type of business in the second half quantity-wise or volume-wise than you did in the first half?

David Anderson: It would be similar to the first half. Okay, and you would be witness a little while longer, and then that goes away.

David: No, it's similar.

David: It would be similar to the first half.

David: It will be with us a little while longer and then that goes away.

David Anderson: Okay, you had super order intake in the second quarter. How has it been so far in the third quarter? Good. We're still seeing really strong markets, pharmaceutical, US Navy, as I pointed out in Q2, and those continue to look good in Q3 at this point. So we're there's a lot of good demand out there for us.

David Anderson: It'll be with us for a little while longer, and then that goes away. Okay. You had a super order intake in the second quarter. How has it been so far in the third quarter?

Speaker Change: Okay, you had super order intake in the second quarter. How has it been so far in the third quarter?

David Anderson: Good. We're still seeing really strong markets. Pharmaceuticals, U.S. Navy, as I pointed out in Q2, and those continue to look good in Q3 at this point. So we have a lot of good demand out there for us. Okay, great. Well, that's super. Two quick ones for Mike.

Speaker Change: Good. We're still seeing really strong markets. Pharmaceutical, U.S. Navy, as I pointed out in Q2, and those continue to look good in Q3 at this point.

David Wright: Okay, great. Well, that's super.

Michael McAuley: On the availability, you alluded to it in your remarks, 20.5 million on June the 30th and 27.2 million on July the 9th when you put out your guidance. That's about $6.6 million of change. Was that an actual pay down, or was it a change in the availability formula, a combination? That just seems quite a lot in a short period.

Speaker Change: So we're, there's a lot of good demand out there for us.

David Wright: Two quick ones for Mike. On the availability you alluded to it in your remarks, 20.5 million at June the 30th and 27.2 million on July the 9th when you put out your guidance. That's about 6.6 million dollars of change. Was that an actual paydown, or was it a change in the availability formula, or a combination that just seems quite a lot in a short period? Yeah, it's just movements and working capital, David, you know, receipts. Receipts have been better catching up on some past dues. And you know that that availability number is going to fluctuate over time, but you know we are we are at the moment is as our press release on July 10th indicated.

Speaker Change: Okay, great. Well, that's super. Two quick ones for Mike. On the availability, you alluded to it in your remarks.

Mike: $20.5 million at June the 30th and $27.2 million on July the 9th when you put out your guidance.

Speaker Change: That's about $6.6 million of change. Was that an actual pay down or was it change in the availability formula, a combination? That just seems quite a lot in a short period.

Michael McAuley: Yeah, it's just, it's just movements and working capital, David, you know, receipts, receipts have been better, catching up on some past dues. And, you know, that availability number is going to fluctuate over time, but... We are, at the moment, as our press release on July 10th indicated, stronger liquidity-wise than we were on June 30th, just from the flows of ins and outs of networking capital, and we continue to be that way, approximately right now. So is the availability very much different today from the July 9 number? Not very much, no.

Speaker Change: Yeah, it's just, it's just movements and working capital, David. You know, receipts, receipts have been better, catching up on some past dues.

Speaker Change: And, you know, that availability number is going to fluctuate over time.

Michael McAuley: We are bet we are stronger liquidity wise than we were at June 30th just from a, you know, the flows of ins and outs of networking capital. And we continue to be that way approximately right now. So, is the availability very much different today from the July 9 number? Not very much, no.

Speaker Change: We are at the moment, as our press release on July 10th indicated, we are stronger liquidity-wise than we were on June 30th, just from the flows of ins and outs of networking capital, and we continue to be that way approximately right now.

Speaker Change: So have is the availability very much different today from the July 9 number? Not very much. No

Michael McAuley: Okay. And then lastly, you know SG&A has gone up quite a lot over the last few years, and I just wonder if there are any opportunities to check that and maybe slow or reverse the growth? Well, this is Sam. The one thing that we have done is gone out to our Asia Network, and we have reduced the fees there, so it's not. It's not huge, but, you know, in the neighborhood of $300,000 or $400,000 a year or so.

Sam Lyon: Okay, and then lastly is you know the SG&A has kind of quite a lot over the last few years. And I just wonder, are there any opportunities to check that in and maybe slow or reverse the growth in that? Well, this is Sam. The one thing that we have done is gone out to our agent network, and we have reduced the fees there. So it's not, it's not huge, but you know, in the neighborhood of three or four hundred thousand dollars a year. So, and then you know, we're always looking at what we can do there.

Speaker Change: okay and then lastly is you know the SG&A has gone up quite a lot over the last few years and I just wonder are there any opportunities to to check that and and and maybe slow or reverse the growth in it

Speaker Change: Well, this is Sam. The one thing that we have done is gone out to our agent network and we have reduced the fees there so it's not

Samuel Lyon: And then, you know, we're always looking at... there. And in the past, you know, as our sales shift away from frack blocks to more distribution kind of bars, we don't have sales commission on that either. So that would bring that number down relative to the. And I think, David, for the air and liquid side, the investments we made in the last couple of years to strengthen our sales group have largely been done, so the only thing that really would increase is the commissions we pay if there's higher revenue for the independent rep network that we have. But our sales group is pretty strong now where we sit. Okay, well, Mike, did you have a comment on the GNA?

Speaker Change: It's not huge, but in the neighborhood of $300,000 or $400,000 a year or so, and we're always looking at what we can do there. And in the past, as our sales shift away from

Sam Lyon: And in the past, you know, as our sales shift away from track blocks to more distribution kind of bar, we don't have sales commission on that either. So that would bring that number down relative to the sales number.

Speaker Change: to more distribution kind of bar, we don't have sales commission on that either. So that would bring that number down relative to the sales number.

David Anderson: Yeah, and I think David for the air and liquid side, the investments we made in the last couple of years to strengthen our sales group. We've largely done. So the only thing that really would increase is the commissions we pay if there's higher revenue to the independent rep network that we have. But our sales group is pretty strong now where we sit.

Speaker Change: And I think, David, for the air and liquid side,

David: The investments we made in the last couple years to strengthen our sales group, we've largely done. So the only thing that really would increase is the commissions we pay if there's higher revenue to the independent rep network that we have. But our sales group is pretty strong now where we sit.

Michael McAuley: Okay, well, Mike, did you have a comment on the GNA? No, only that I was going to reiterate probably what Dave indicated that we've intentionally invested in growth in error like with and that we knew that that cost money, that cost us GNA dollars, but it's basically in place now, and it's basically there to leverage to grow the sales, grow the top line and bring more bottom line drop through going forward. So yeah, we know it's up higher, but we're part of what it takes to get the higher sales. Plus, we brought a new facility online, and there's more lease cost in the new facility, but we're loading that up as well.

David Anderson: No, only that I was going to reiterate what Dave indicated, that we've intentionally invested in growth in Aeroliquid, and we knew that that cost money, that cost SG&A dollars, but it's basically in place now, and it's basically there to leverage to grow sales, grow the top line, and bring more bottom line drops through going forward. So yeah, we know it's up higher, but we're. It's part of what it takes to get to higher sales.

David: Okay, well, Mike, did you have a comment on the GNA?

Speaker Change: No, only that I was going to reiterate probably what Dave indicated, that we've intentionally invested in growth in AeroLiquid, and we knew that that cost money, that cost SG&A dollars.

Speaker Change: but it's basically in place now and it's basically there to leverage to to grow the sales, grow the top line, and bring more, you know, bottom line drop through going forward. So yeah, we know it's up higher but, you know, we're

David Anderson: Plus, you know, we brought a new facility online, and there's more, you know, lease cost in the new facility, but, you know, we're loading that up as well. Well, listen everyone, a great report, nice and clean, and well done, and thanks for taking all my questions.

Speaker Change: It's part of what it takes to get the higher sales, plus we brought a new facility online and there's more lease cost in the new facility, but we're loading that up as well.

Unknown Executive: for 2024 Earnings Results Conference Call. All participants will be in a listen only mode. Should you need assistance, please send to a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions. To ask a question, please press star and then one on a telephone keypad to withdraw your questions you may press star and two. There's also no today's event is being recorded.

David Wright: Well, listen everyone, a great report, nice and clean and well done, and thanks for taking all my questions. Thank you David, thanks David.

Speaker Change: Well listen everyone, a great report, nice and clean, and well done, and thanks for taking all my questions.

David Wright: Thank you, David. Thank you, David. Once again, if you would like to ask a question, please press star and then 1. To withdraw your question, you may press star and 1.

Unknown Executive: Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two.

David: Thank you, David.

Speaker Change: Once again, if you would like to ask a question, please press star and then 1. To withdraw your questions, you may press star and 1.

John Bair: Our next question comes from John Bair from Ascend Wealth Advisors. Please go ahead with your question. Thank you. Good morning, gentlemen. Good morning. Some of my question was answered there with regards to margins. And it sounds like by the end of this year, the lower margin backlogs is going to be pretty well rolled off. Is that the way to look at it? Yes, that's correct. And it's more of the lower margin stuff being moved out first, so that sequentially the fourth quarter margins might be better than the current third quarter. Is that a way to look at it as well?

Operator: Our next question comes from John Bair from Ascend Wealth Advisors. Please go ahead with your question. Thank you. Good morning, gentlemen. Good morning.

Speaker Change: too.

Speaker Change: Our next question comes from John Fair from Ascend Wealth Advisors. Please go ahead with your question.

John Bair: Some of my question was answered there with regard to margins, and it sounds like by the end of this year, the lower margin backlogs are going to be pretty well rolled off. Is that correct? Is that the way to look at it? Yes, that's correct, and it's more of the lower-margin stuff being moved out first so that, sequentially, the fourth quarter margins might be better than the current third quarter. Is that a way to look at it as well?

Speaker Change: Thank you. Good morning, gentlemen.

Kimberly Knox: At this time, I'd like to turn the floor over to Kim Knox, Corporate Secretary. Please go ahead. Thank you, Jamie, and good morning to everyone joining us on today's second quarter of 2024 conference call. Joining me today are Brett McBair, 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 Dave Anderson, President of Air and Liquid Systems Corporation.

Speaker Change: Some of my questions was answered there with regards to margins.

John Fair: And it sounds like by the end of this year, the lower margin backlogs is going to be pretty well rolled off. Is that correct?

Speaker Change: Is that the way to look at it?

Speaker Change: yes that's correct and and it's more

Speaker Change: Of the lower margin stuff being moved out first so that sequentially the fourth quarter margins might be better than the current third quarter? Is that a way to look at it as well?

Kimberly Knox: 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 the corporation's control. The corporation's actual results may differ significantly from those projected or suggested in any forward looking statements due to various risk factors, including those discussed in the corporation's most recently filed, Form 10K, and in 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.

John Bair: No, it really depends on the timing of when the orders would be going out. It will be spread through the third and fourth quarter, along with more recent orders. So it doesn't necessarily go out in sequence to when they were booked. Okay, so it's a kind of a balanced mix. Okay, that's good.

John Bair: No, it really depends on the timing of when the orders would be going out. They'll be spread through the third and fourth quarters along with more recent orders, so it doesn't necessarily go in sequence to when they were booked.

Speaker Change: No, it really depends on the timing of when the orders would be going out. It'll be spread through the third and fourth quarter along with more recent orders. So it doesn't necessarily go out in sequence to when they were booked.

Speaker Change: Okay, so it's a kind of a balanced, mixed, okay.

John Bair: Okay, so it's a kind of balanced mix. OK. Okay, that's good. Then I'd like you to outline what your game plan is for your debt reduction going forward? Yeah, when you look at our, I mean, if you look at the 10k and you look at the debt footnote, we have a few industrial revenue bonds that have a maturity, those are lower-rate instruments, and so we prefer to keep them in rather than refinance them. We will have them maturing over the next couple of years. They come out. There's about $9 million there.

Michael McAuley: Then I'd like you, can you outline what your game plan is on your debt reduction going forward? Yeah, when you look at our, I mean, if you look at 10K and you look at the debt footnote, we have a few industrial revenue bonds that have a maturity. They're also lower rate instruments. And so we prefer to keep them in rather than refinance them, but we will have them maturing over the next couple of years. They come out. There's about $9 million there. The next opportunity is just revolving credit facility balance to support the working capital.

Speaker Change: okay that's that's good

Speaker Change: Then I'd like you, can you outline what your game plan is on your debt reduction going forward?

Speaker Change: Yeah when you look at our, I mean if you look at the 10k and you look at the debt footnote, we have a few industrial revenue bonds that have a maturity. Those are lower rate instruments and so we prefer to keep them in rather than refinance them but we

Unknown Executive: To access the earnings release or the webcast replay, please consult the Investor Section of our website at ampco-ph.com.

Speaker Change: We will have them maturing over the next couple of years. They come out. There's about nine million dollars there The next opportunity is just revolving credit facility balance to support the working capital and as our profitability

John Bair: The next opportunity is just the revolving credit facility balance to support the working capital, and as our profitability grows over time, we'll be able to finance more working capital at CapEx internally, and that should help bring that balance down. And then, does the new equipment that you've installed enable you to enter any new markets? On my side, the SAMFCP, it allows us to expand in the non-rural market but not necessarily enter any... For the stuff that we've put in, Buffalo Pumps, the new equipment, really, that's supporting the Navy.

Brett McBair: With that, I would like to now turn the call over to Brett McBair, Ampco Pittsburgh CEO, Brett. Thank you, Kim. Good morning, and thank you for joining our call. As mentioned in our 10Q filed yesterday in our press release, we had strong sequential earnings improvement in the second quarter of 2024. Income from operations was $5 million for the second quarter compared to $1.4 million in adjusted income from operations for the second quarter of the prior year when excluding the one-time foreign energy credit.

Michael McAuley: And as our profitability grows over time, we'll be able to finance more working capital and CapEx internally. And that should help bring that balance down. Okay.

Speaker Change: grows over time will be able to finance more working capital and CapEx internally and that should help bring that balance down.

Sam Lyon: And then does the new equipment that you've installed enable you to enter any new markets? On my, on my side, the same FCP allows us to expand in the non-rule market, but not necessarily entering. for the stuff that we've put in Buffalo pumps, the new equipment, really that supporting the Navy, the Navy's continuing to show more and more activity in their ship growth plans. So our focus is really supporting that. Okay, and that was going to be my next question is on the Navy business. Is that something that you foresee? It sounds like something you foresee has got a longer runway to it.

Speaker Change: Okay.

Speaker Change: And then does the new equipment that you've installed enable you to enter any new markets?

Speaker Change: On my side, SAMFCP, it allows us to expand in the non-rural market, but not necessarily enter any market.

Brett McBair: This three-and-a-half-fold improvement reflects a full quarter of utilizing all our new equipment in our forging cast engineer product segment and record-order intake for air and liquid systems. That income for the quarter was $2 million or 10 cents per deluded share.

Speaker Change: For the stuff that we've put in, Buffalo Pumps, the new equipment, really that's supporting the Navy. The Navy's continuing to show more and more activity in their ship growth plan, so our focus is really supporting that.

John Bair: The Navy's continuing to show more and more activity in their ship growth plan, so our focus is really supporting that. Okay, and that... was going to be my next question about the Navy business. Is that something that you foresee? It sounds like something you foresee has got a longer runway to it. Yes, most definitely. They have a long-term plan to increase the size of the Navy fleet. And is that focused on the subs or carriers or cruisers or what area?

Samuel Lyon: At this time, I'll turn the call over to Sam Lyon, president of our forging cast engineer product segment to share more details about his group's performance in the quarter. Thank you, Brett. Good morning. In our FCEP segment, market conditions have shown signs of stabilization. The rule market remained flat in Q2 due to consistent end customer demand. While stable, due to ongoing economic uncertainties and increased imports of flat-rolled steel, European steel producers continue to operate at lower utilization levels, resulting in pricing and volume pressures.

Speaker Change: Okay, and now...

Speaker Change: My next question is on the Navy business. Is that something that you foresee? It sounds like something you foresee has got a longer runway to it.

Sam Lyon: Yes, most definitely, they have a long-term plan to increase the size of the Navy fleet. And is that focused on the subs, or carriers, or cruisers, or what area? All over the above. In essence, they're chasing China, and China's building ships very fast. All right.

Speaker Change: Yes, most definitely. They have a long-term plan to increase the size of the Navy fleet.

Speaker Change: and is it is that focused on the subs or carriers or cruisers or what what area all all of the above okay in essence they're chasing China China's building ships very fast

John Bair: All of the above. In essence, they're chasing China, and China's building ships very fast. Okay, and any, Let's see, any, or no, are those contracts, are those orders, are those longer term, are they... In other words, do you get backlogs with them that go out two, three years, or is it a shorter time frame? If you look at the business in two pieces, the backlog related to new ship builds tends to be longer, as you just described. It can be two or three years out.

Samuel Lyon: Based on customer sentiment, we anticipate an improvement in order intake in second half of the year for deliveries in 2025. Our backlog decreased by approximately 16.1 million from December 31, 2023 due to the timing of 2025 orders from some of our rule customers which are expected in Q3. We are optimistic about order and take for delivery in 2025 based on volumes received from several large customers to date and indications from others.

John Bair: Okay, and any, I don't see any. Are those contracts or those orders of those longer term, or in other words, do you get backlogs with them that go out to three years, or is it a shorter time frame? If you look at the business in two pieces, the backlog related to new ship builds tends to be longer, like you just described. It can be two or three years out. Then there's also the aftermarket, which is replacements and parts. That's shorter; that moves quicker. All right, that's pretty much all I have. Thanks very much for taking the questions.

Speaker Change: Alright.

Speaker Change: Okay, and

Speaker Change: Let's see. Now, are those contracts, are those orders, are those longer-term? In other words, do you get backlogs with them that go out two, three years, or is it a shorter time frame?

Samuel Lyon: Primary focus remains on maintaining a position in the rule market and enhancing operational efficiencies through our recently completed capital program in the U.S. This equipment investment increases the capacity of FEP manufacturing and improves productivity and operational reliability of our forged business. For the three months, ended June 30, 2024, net sales for the FCEP segment were 75.7 million, a slight decrease from 77.6 million in the same period last year. This decrease is primarily due to lower cast rule shipments offset by higher forged rule sales and improved pricing.

Speaker Change: If you look at the business in two pieces, the

Speaker Change: Backlog related to new ship builds tends to be longer like you just described it can be two or three years out Then there's also the aftermarket which is replacements and parts that's shorter that moves quicker

John Bair: Then there's also the aftermarket, which is replacements and parts. That's shorter. That moves quicker.

John Bair: Very good. All right, that's pretty much all I have. Thanks very much for taking the questions. Thank you. And ladies and gentlemen, at this time, and with no additional questions, I'd like to turn the floor back over to Brett McBriar for closing remarks. Thank you. I'm proud of the work that our team members across the globe have achieved. Despite the significant headwinds we are still experiencing in Europe, our underlying operations continue to improve.

Speaker Change: Very good. Alright, that's pretty much all I have. Thanks very much for taking the questions.

Brett McBair: And ladies and gentlemen, at this time and sharing additional questions, I'd like to turn the floor back over to Rhett McBrire for closing remarks. Thank you. I'm proud of the work that our team members across the globe have achieved. Despite significant headwinds, we're still experiencing in Europe; our underlying operations continued to improve. As our new capital assets ramp up to their full capabilities, we expect further improvements in our productivity, and are very excited about the demand and growth in the air and liquid system segment. Thank you, everyone, for joining our call this morning.

Speaker Change: And ladies and gentlemen, at this time, and showing no additional questions, I'd like to turn the floor back over to.

Samuel Lyon: Income from operations per Q2, 2024 increased to 5.4 million from 3.9 million in Q2 of 2023. Q2 of 2023 included 1.9 million one-time energy credit in Europe. This significant performance improvement resulted from improved pricing, improved quality and productivity, and lower selling and administrative expenses. In conclusion, while 2024 presents challenges in shipment volumes and market conditions, our strategic pricing actions and operational improvements have mitigated these challenges. We remain committed to maintaining market leadership and delivering value to our stakeholders.

Speaker Change: and Brett McBriar for closing remarks.

Speaker Change: Thank you. I'm proud of the work that our team members across the globe have achieved. Despite significant headwinds we are still experiencing in Europe, our underlying operations continue to improve.

Speaker Change: As our new capital assets ramp up to their full capabilities, we expect further improvements in our productivity, and very excited about the demand and growth in the air and liquid systems segment.

John Bair: As our new capital assets ramp up to their full capabilities, we expect further improvements in our productivity and are very excited about the demand and growth in the air and liquid system sector. Thank you everyone for joining our call this morning. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation.

Unknown Executive: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. Thank you for joining. You may now disconnect your line.

Speaker Change: Thank you everyone for joining our call this morning.

Unknown Executive: Thank you, Sam.

David Anderson: David Anderson, President of Air and Liquid Processing segment. Well, thank you, Brett. Good morning.

David Anderson: Air and Liquid Q2 revenue increased 19% versus prior year to achieve a record high for any quarter in Air and Liquid's history. The increase was primarily due to increased shipments of customer handling units. This increase was driven by the additional manufacturing capacity achieved by opening the new Virginia facility in mid-2023. Bookings for Q2 were also at a record high as we continue to see strong demand for our products. Backlog increased in the quarter as the result of strong bookings in the pharmaceutical and US Navy markets.

David Anderson: Operating income for Air and Liquid increased 7% in the second quarter versus prior year, primarily due to the higher revenue. The impact from the higher revenue was partially offset by unfavorable product mix as we work through some older, low margin orders in our backlog. Paired to the prior quarter, operating income increased 60% due to higher revenue and a more favorable product mix. The production equipment arrived at our Buffalo Pumps facility in Q2.

David Anderson: This is the equipment that was purchased with the funding provided by the US Navy. Installation of the equipment was completed in early Q3. This equipment will raise our manufacturing capacity and increase efficiencies in the quarters ahead. Q2 saw both record bookings and record revenue as demand for our products continues to be extremely strong. We continue to take steps to increase our manufacturing capacity to meet this demand. The manufacturing facility we opened last year in Virginia was the primary driver for air handling sales, being up 58% in Q2 versus prior year. And the new equipment in our Buffalo facility will raise our manufacturing capabilities to meet the increasing demand from the US Navy markets.

David Anderson: In the quarters ahead, we expect to continue to increase our manufacturing capacity, as we expect strong demand in the second half of 2024 and continuing in 2025.

Unknown Executive: Thank you, David.

Michael McAuley: Now I'll turn the call over to Mike McCulley, our chief financial officer for more detail regarding our financial performance for the quarter of Mike. It's indicated in our form 10 queue filed yesterday and in our press release issue last night, Ampco's net sales for the second quarter of 2024 were $111 million, an increase of 3.5% compared to net sales for the second quarter of 2023. The air and liquid processing segment accounted for the sales growth over prior year.

Michael McAuley: Of course, in cash engine, your product segment sales were down slightly versus prior year as higher shipping volumes of forged rolls and higher net pricing were offset by lower shipping volumes of cash rolls and FEP products. The income from operations for the second quarter of 2024 was $5 million, slightly higher than the top end of our previous guidance range. The main driver for the improvement versus Q2 of 2023 was higher net roll pricing.

Michael McAuley: In addition, it should be noted that the prior year quarter had the benefit of a foreign energy credit of $1.9 million. So the underlying year over year step up in profitability for the quarter was more sizable than the as reported change. Corporations total selling administrative expenses were approximately 12.2% of net sales for Q2 2024 compared to 13.1% for Q2 2023. Primarily due to lower commissions and professional services and the forged in cash engineier product segment.

Michael McAuley: The interest expense of $3 million for the quarter increased by $0.8 million compared to prior year. Primarily due to higher equipment financing debt balance for the new machinery in the U.S. Fords business which has now been completed and converted to term notes as well as higher average revolving credit facility borrowings to support working capital growth. And higher average interest rates on our floating rate instruments due to interest rate market movements. Other income net improved primarily due to foreign exchange translation losses recorded in Q2 2023 versus gains recorded in Q2 2024.

Michael McAuley: The income tax provision for Q2 2024 increased compared to the prior year principally due to higher income of the corporation's profitable entities which have no valuation allowances recorded against their deferred tax assets. As a result net income attributable to ample Pittsburgh for the three months ended June 30 of 2024 was $2 million or 10 cents per share. This compares the net income of $1 million or $2 cents per share for the quarter ended June 30, 2024.

Michael McAuley: 2023, which included $0.10 per share benefit for the foreign energy credit. Total backlog at June 30, a 2024 of $360.4 million declined approximately 5% from December 31. The foraging cast engineer product segment backlog decreased from December 31, 2023 by approximately $12.5 million, due primarily to the timing of 2025 mill-roll orders for large customers as same described, as well as lower foreign exchange rates, which reduced the translated value of backlog by another $3.5 million.

Michael McAuley: However, forcing cast backlog increased by $7.3 million compared to its backlog recorded at March 31, as roll order intake moved up in Q2. The air and liquid segment backlog declined by $2.4 million from December 31, but increased by $4.2 million from March 31, as record order intake in Q2 was partly offset by higher sales revenue as Dave described. Netcast flows used in operating activities was $5.3 million for Q2 2024 in support of higher trade working capital, principally higher accounts receivable given the elevated sales and pension contributions.

Michael McAuley: Capital expenditure for the second quarter of 2024 would $2.7 million, primarily for the foraging cast engineer product segment. We expect CapEx for remainder of year to be approximately stable with the Q2 run rate. At June 30, 2024, the corporation's liquidity position included cash on hand of $7.9 million, and on drawn availability on a revolving credit facility of $20.5 million. However, as we reported in our press release such a lie 10th, the corporation's liquidity position increased since June 30th.

Unknown Executive: Operator at this time, we would now like to open the line for questions. Ladies and gentlemen, at this time, we will open the line for questions to join the question queue. You may press star, and then one using a touch on telephone. So withdraw your questions. You may press star and two. If you are using a speaker phone, we do ask that you please pick up your handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one to join the question queue. We'll pause momentarily to assemble the roster.

David Wright: And our first question today comes from David Wright from Henry Investment Trust. Please go ahead with your question. Good morning, everyone. Good morning, David. Hey, Brett. Listen.

David Wright: Congratulations to you and the team for a clean and solid quarter. Thank you. You mentioned, yes. And you mentioned strong sequential improvement in Q2, and it's really clear. We're halfway through the third quarter. How do you feel about this quarter and continuing?

Brett McBair: There's a good result to the second quarter, was you, as you remember Dave, the third quarter is a, for the forage and passenger product segment is a shutdown period for our European assets and we had a smaller shutdown period at the beginning of the quarter for our U.S, operations. So it tends to be a little weaker overall but the underlying fundamentals of the business, the efficiency improvements we expect to continue. As we move throughout the course of the year.

Brett McBair: The will offsets some of that shutdown slow down. It will. Yeah, and things are going well in here in liquid. So, you know, this is really great results and it's nice to see a clean quarter with, you know, like no extraordinary and if you had any extraordinary so far this quarter. No, none, none, none today. That's great.

Samuel Lyon: I want to ask Sam, that's a really good result in your segment, five plus million dollars of operating income, kind of a seven percent margin. And you haven't had a quarter like that in, in, in quite a while, was there anything extraordinary there or is it just more reflective of where you've gotten the business to with the new equipment and the new layouts and such. It's combination, David, of the efficiency from the new equipment and then also we had a relatively strong order book in queue to ran the operations at a higher utilization level. And so our results in the, in the U.S, were strong as a result of that. So, you know, just, just having, having in also the pricing levels are better than they had been in the past.

Samuel Lyon: Would you ultimately see being able to get to something better than a seven percent operating margin or is that a level that's pretty good and that you're happy with? You know, as, as volumes would increase, then the operating margin will increase as our, in, in my side of the business, the, the fixed costs are relatively stable and a pretty high percentage of our total cost. So we get a lot of drop through from incremental volume. So I would expect great. Yeah, yeah. The infrastructure bill and things and steel demand goes up over the next, you know, quarters and years. You know, we anticipate and we should see the proof.

Unknown Executive: Okay. Well, great.

David Anderson: Hey, Dave, you got your margin back this quarter and so that's great to see. I wonder though how much longer is it going to take to get these older, lower margin orders to fully roll off? David, we expect the majority of that to happen in the second half of this year and then they should be behind us.

David Anderson: Do you have more, you know, volume wise? Do you have more of, of, of, of, of, of that type of, of business in the second half quantity wise or volume wise that you did in the first half? No, it's similar. It would be similar to the first half. Okay, and you would be witness a little while longer and then that goes away.

David Anderson: Okay, you had super order intake in the second quarter. How has it been so far in the third quarter? Good. We're still seeing really strong markets, pharmaceutical, US Navy as I pointed out in Q2 and those continue to look good in Q3 at this point. So we're there's a lot of good demand out there for us. Okay, great. Well that's super.

Unknown Executive: Two quick ones for Mike.

Michael McAuley: On the availability you alluded to it in your in your in your remarks, 20.5 million at June the 30th and 27.2 million on July the 9th when you put out your your guidance. That's about 6.6 million dollars of change. Was that an actual paydown or was it change in the availability formula or combination that just seems quite a lot in a short period? Yeah, it's just it just movements and working capital, David, you know, receipts.

Michael McAuley: Receipts have been better catching up on some past dues. And you know, that that availability number is going to fluctuate over time, but you know, we are we are at the moment is as our press release on July 10th indicated. We are bet we are stronger liquidity wise than we were at June 30th just from a, you know, the flows of ins and outs of networking capital. And we continue to be that way approximately right now. So have is the availability very much different today from the July 9 number? Not very much no.

Samuel Lyon: Okay, and then lastly is you know the SG&A has kind of quite a lot over the last few years. And I just wonder are there any opportunities to to check that in and and maybe slow or reverse the growth in that? Well, this is Sam. The one thing that we have done is gone out to our agent network and we have reduced the fees there. So it's not it's not huge, but you know in the neighborhood of three or four hundred thousand dollars a year.

Samuel Lyon: So and then you know, we're always looking at what we can do there. And in the past, you know, as our sales shift away from track blocks to more distribution kind of bar, we don't have sales commission on that either. So that would bring that number down relative to the sales number. Yeah, and I think David for the air and liquid side, the investments we made in the last couple of years to strengthen our sales group.

Samuel Lyon: We've largely done. So the only thing that really would increase is the commissions we pay if there's higher revenue to the independent rep network that we have. But our sales group is pretty strong now where we sit.

Michael McAuley: Okay, well Mike, did you have a comment on the GNA? No, only that I was going to reiterate probably what Dave indicated that we've intentionally invested in growth in error like with and that we knew that that cost money, that cost us GNA dollars, but it's basically in place now, and it's basically there to leverage to to grow the sales, grow the top line and bring more bottom line drop through going forward.

Michael McAuley: So yeah, we know it's up higher, but we're part of what it takes to get the higher sales. Plus we brought a new facility online and there's more lease cost in the new facility, but we're loading that up as well.

David Wright: Well listen everyone, a great report nice and clean and well done, and thanks for taking all my questions. Thank you David, thanks David.

Unknown Executive: Once again, if you would like to ask a question, please press star and then one, to withdraw your questions, you may press star and two.

John Bair: Our next question comes from John Bair from Ascend Wealth Advisors, please go ahead with your question. Thank you, good morning gentlemen. Good morning. Some of my question was answered there with regards to margins. And it sounds like by the end of this year, the lower margin backlogs is going to be pretty well rolled off. Is that the way to look at it? Yes, that's correct. And it's more of the lower margin stuff being moved out first so that sequentially the fourth quarter margins might be better than the current third quarter.

John Bair: Is that a way to look at it as well? No, it really depends on the timing of when the orders would be going out. It will be spread through the third and fourth quarter along with more recent orders. So it doesn't necessarily go out in sequence to when they were booked. Okay, so it's a kind of a balanced mix. Okay, that's good.

Michael McAuley: Then I'd like you, can you outline what your game plan is on your debt reduction going forward? Yeah, when you look at our, I mean, if you look at 10k and you look at the debt footnote, we have a few industrial revenue bonds that have a maturity. They're also lower rate instruments. And so we prefer to keep them in rather than refinance them, but we will have them maturing over the next couple of years.

Michael McAuley: They come out. There's about $9 million there. The next opportunity is just revolving credit facility balance to support the working capital. And as our profitability grows over time, we'll be able to finance more working capital and CapEx internally. And that should help bring that balance down. Okay.

Samuel Lyon: And then does the new equipment that you've installed enable you to enter any new markets? On my, on my side, the same FCP allows us to expand in the non-rule market, but not necessarily entering, for the stuff that we've put in Buffalo pumps, the new equipment, really that supporting the Navy, the Navy's continuing to show more and more activity in their ship growth plans. So our focus is really supporting that.

Samuel Lyon: Okay, and that was going to be my next question is on the Navy business, is that something that you foresee, it sounds like something you foresee has got a longer runway to it. Yes, most definitely, they have a long term plan to increase the size of the Navy fleet. And is that focused on the subs or carriers or cruisers or what area? All over the above. In essence, they're chasing China and China's building ships very fast. All right.

Samuel Lyon: Okay, and any, I don't see any, are now are those contracts or those orders of those longer term, or in other words, do you get backlogs with them that go out to three years, or is it a shorter time frame? If you look at the business in two pieces, the backlog related to new ship builds tends to be longer like you just described, it can be two or three years out. Then there's also the aftermarket, which is replacements and parts, that's shorter, that moves quicker.

Unknown Executive: All right, that's pretty much all I have. Thanks very much for taking the questions.

Brett McBair: And ladies and gentlemen, at this time and sharing additional questions, I'd like to turn the floor back over to Rhett McBrire for closing remarks. Thank you. I'm proud of the work that our team members across the globe have achieved. Despite significant headwinds, we're still experiencing in Europe, our underlying operations continued to improve. As our new capital assets ramp up to their full capabilities, we expect further improvements in our productivity, and very excited about the demand and growth in the air and liquid system segment. Thank you, everyone, for joining our call this morning.

Unknown Executive: Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. Thank you for joining. You may now disconnect your line.