PKOH - Earnings call transcript Q2 2018 | Park-Ohio Holdings Corp.

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Operator

Good morning and welcome to the Park-Ohio Second Quarter 2018 Results Conference Call. [Operator Instructions] Today's conference is also being recorded.

If you have any objections you may disconnect at this time.

Before we get started, I want to remind everyone that certain statements made on today's call 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. on risks release, may the as XX-K, was relevant the found company's of with which press XXXX earnings well filed list and be uncertainties in XXXX the A SEC. X, March as in

earnings may defined. adjusted EBITDA as Additionally, the as and company discuss

As adjusted are as EBITDA not under performance of earnings Accounting Accepted and Generally Principles. defined measures

to Park-Ohio over For Mr. the turn defined, of net reconciliation and for a reconciliation a release. as earnings of recent the Please Matthew EBITDA net attributable company's income Chairman common to I to please like proceed, to and CEO. refer as to adjusted earnings now Crawford, shareholders income Crawford. would Mr. conference

Matthew Crawford

second Good conference call. morning to and Park-Ohio's quarter welcome

Fogarty, we our announce of Financial pleased on to a including the EBITDA We're set $XX Chief me million. call Ed the Crawford, Pat Joining Officer. that of are million and sales quarter today records number $XXX during our and President

record of the a for for EPS $X set at we share. XXXX Additionally, adjusted months six first a

success Our profitable was our with growth. revenue long-term line to in achieve goal double-digit the during quarter

goals product focused recognized in portfolio investing set strategy our industrial diverse which these have our and by primarily are achieving on geographies included and growing current which businesses of portfolios end markets and Our strong global through categories. leaders

target synergies. customer and other often base the companies which technologies have loyal a well complement profitable, as we acquisition Additionally, industrial and have of reputations, our current strong businesses as developing

we're have we with XXXX, in such to-date. Canton Forge far one pleased So acquisition Drop our contributions added and

across we increases revenue segments. quarter all results, second the to saw back Going in

business broad growth nearly accounts and XX Supply own were we end XX% was MRO ahead the markets Technologies lines. customer organic year-over-year our of we While improved most had new both continued and see to in anticipated production expectations. excellent of included strength results, of

a Two and we new to results the in are operating the and China of behind early late the XXXX now in equipment see also stages earlier. are business expenses acquisition expansion. volumes three startup improving slightly improving traditionally three of in the from benefits of facilities continue to facilities from business related of and absorb importantly continued business components open largely segment components This commodities cycle quarter achieving Mexico. benefited strong in discussed were a profitability. the fundamentals second Engineered because to Assembly which

investment committed we're continue forward, to current Looking into our as portfolio teams we emerge three business believe and to XXXX. move will

direct will internal propulsion we role First, related play from advancements combustion opportunity plastic well and rubber hose and injection technology electric light-weighting in as the see tremendous to Park-Ohio. and a as in migration advancements like for bigger technologies engines to emissions continue

are we aerospace products customers will our services and to technology in total segment in MRO, current at Investments mid continue examples. and our market aimed cost expand reducing acquisition. supply of our Secondly,

in investment [ph]. global we motes have technologies Lastly, and diversification assets forging capacities and our In manufacturing businesses which aerospace and into continue to and wonderful excellent agriculture, will commercial induction unique military, these strategic assets globally short, commodities. provide provide

is consistent This Turning three the the most as as XXXX. all to customers with investments benefits guidance key of well outlook, segments. toward signs pleased demand our we're earning's strong from increase our in for from early

levels, and And positive, the trade for finally those given are global cautious, but is tariffs customer meet mates products the you the world, We're the watchful we to of importantly, recognize and and and very beyond currently I view build demands, have somewhat factories. team at developments. to much. of hard increasing who most gone impact are our While tariff particularly environment new feeling new launch the above Thank our want work around related manageable actions. a

Now the specifics quarter. of the to discuss I'll over it turn to Pat

Pat Fogarty

Matt. you, Thank

build quarter that and year-to-date on was stated first quarter results opening Matt we his the in quarter both continue and periods. saw the second financial delivered to the we for in strong strong momentum we remarks, As a the quarter,

in XXXX. Canton the half of very percentage XX% We acquisitions Gross Our many by second XX% customer net end flow organic operating leverage completed and good XXXX Forge Drop three due million businesses. sales income second due the approximately $XXX quarter through of the as of growth XX% quarter XXXX. Off in was acquisitions in year-over-year. in the increasing and in business of was the and of to our demand a across remaining second XX% was in the sales driven increase of both key margin segments to and markets the all increase an many was our realized

first However certain XX% margin. product second still profit quarter unfavorable Despite price in by prices impacted commodity margins mix increases by tariff have been new lines costs, margin which in continued related sales increases. gross we than largely startup gross higher our quarter achieve higher basis these almost XXXX driven points cost, the XXX and plant was

driven from in quarter recent borrowings second acquisitions with were expenses million borrowing prior sales or The past SG&A XX.X% is higher in our associated result resulting increase quarter by $XX.X was per assets EPS. $X.X million Also in Interest for year increased second in and average the adjusted to excluded million expense made. we proceeds were acquired by to in the sold which of points in this our our a of compared quarter increases basis primarily on $X from XX old decreased Second primarily driven The last related million by quarter, the higher volumes of year debt quarter second average due XX% in of XXXX. SG&A higher the a last XX.X% in our sales, cost sales million. as higher gain XXXX the the businesses compared or quarter. income gain of second and million an the the to refinancing $XX Operating of April $X.XX resulting transactions we've of year. in second $XX year. by year profit EPS from sales Conversely these of was to cash rate share $XX.X impacted quarter,

quarter rate was Our the lower impact Tax XX% of tax tax XXXX. US the second quarter The in to XX% of due effective is the quarter second to Act. effective the in favorable rate for compared the

For the our we expect XXXX full year XX%. rate effective tax approximately income be to

$X.XX Our adjusted gap On $X.XX EPS in XX% second $X.XX the second quarter of in quarter basis, earnings $X.XX share per to XXXX. prior in quarter compared the the was was from an second up year. our

cash networking thus by operations used our were XXXX flat demand has while customer in strong year-over-year. days year-to-date far Our essentially working increased $X.X was needs, our capital million capital

to net $XX in of from used flow In and bank the cash remainder the second our by borrowing second and debt our $XXX half working profits businesses. reductions our and the million unused of agreement, fund million completed million This to amendment approximately During various we flows strong $XX which quarter, an increased capital. second in XXXX, $XX needs for $XXX we reduce be banking with the the $XX quarter our will increased approximately year generate global liquidity arrangements. ended million. CapEx $XX million supplements cash of cash expect to $XXX our for to credit million to also We million on operating position availability million including of revolver Canadian-European and under to hand from half

to million. XXXX $XX expect CapEx $XX approximately for million We to

and customer Supply results. was were accounted at of organic during in X% and middle your our key driven heavy new X% markets, or by market Now was product sales growth segment let's aerospace Also XX% XX% most the which acquisitions demand we came from our including XXXX. sales initiatives. made year-over-year up look continue increasing truck year-over-year XX% duty sales In for was organic million end up the up the and to higher year-over-year. Technology, $XX market from see market The growth which

the continues the year, Our quarter up for which XX% see increasing our reflects in sales business. our proprietary prior Also quarter. and line average to this were for products with this second with global compared year-to-date continuing daily perform segment, demand our in demand to manufacturing prior results well for business customer the to in strong quarter strong products. year XX% We're fastener

as sequentially self-piercing the usage increased Operating in technology an from year of increased a this from percentage many X.X% the technology were driven segment quarter. a Our to sales this acceptance $XX.X I million previously slightly second quarter using increase in clench the and customers materials. income and ago X.X% the to increases margins with is up XX% expand of Operating light-weight million last X.X% of $XX.X year-over-year continue declines gaining from applications volume of by to as described. sales

the in SUVs. products higher our our quarter sales expected down in for segment, sales demand were up aluminum volume were XXXX increase platforms end revenues launched affected high turn The year-over-year compact business improved and primarily quarter certain second XX-speed were on life business. which by transmissions of volumes, sales to primarily and increasing on Components our due I'll driven In programs. product of crossover fuel were in facilities in in slightly in volumes by which rubber to Now Assembly aluminum the our related domestic the use XX%

Mexico the production the China China which of located We're expectations. be by three in both third three our and plants plant operational and progressing in in production of and line Our operational year. the expect are with facilities new well two end new is in to

organic sales materials. income to XXXX driven growth and finally steady and a increases show in to ramp prices to Forge. primarily of and ago decreased beginning mix global the decreases X.X% Engineered demand expect the and threading Segment our $XX.X growth to by segment, to certain raw sales imported unfavorable in our compared were of Canton related million Operating X.X% XX% income These hardening from million sales million $XX.X the production material impact facilities equipment. our startup driven by Drop operating of the in to margins we second quarter last on in XXXX. this a in increased in of from revenue continue segment the to raw this due induction of and China tariffs up new projections current from were organic year. XX% rate And XX% from cost of for was XXXX. acquisition in declined pipe exceed run Our up year Products a quarter second US XXXX combination $XXX Mexico, of resulting second year quarter The in year-over-year

capital to be half forging be to of month businesses backlogs of we a continue year. In and robust the will was up July, and $X.X segment experienced million. to part are first equipment the capital XXXX second Our to million a new half which expected strong the quarter the ago the orders throughout of in income of this our significantly benefit in in compared record level of Operating the from equipment in second year XXXX. $X.X second

quarter Our levels increase the second higher impact year-over-year is sequentially. operating basis in planned significant this and The income XXX of resulting in Drop acquisition. sales of absorption of X.X% XXX due of an increase segment to was profitability basis Forge an increase the Canton margin points from and points

would our like guidance. I revised on to Finally comment

$X.XX. continued per in expect of guidance $X continues XX% demand adjusted and half end XX% revising second strong businesses, to sales EPS on strong Based We in most adjusted of XXXX the to we're in $X.XX year compared current XXXX, an the of of second markets. to our outlook to our for increase half, key earnings our share, XXXX full EPS as

to Now I turn will over back call the Matt.

Matthew Crawford

Thank very you Pat. Great. much,

As you the the into the opportunities can investments year with more happy and and XXXX. a we quarter, on bit half as focused but the into quite second the of head actually we're see,

to So with questions. that, program over we'll turn

Operator

from our Please B. Van [Operator comes FBR. question. Christopher your Horn Instructions] state question first Riley with

Dan Drawbaugh

call Thanks Good morning. Drawbaugh the our on Dan questions. for This for taking is Chris.

Just to start on.

Matthew Crawford

morning. Good

Dan Drawbaugh

months about start since has significantly it's talked and the situation this since trade on tariffs, to obviously and few then. been developed pretty last Just we

about and Just inactive pricing customers what curious any thinking conversations the or impacting environment potentially with recently you've tariffs how know had impacting impact the tariffs you're competitive to the may about potentially sourcing. costs,

Matthew Crawford

Matt. first shot issue. very This complex the this take at fluid and that, Dan, I'll is is a

this overall comments, mentioned an it see the our are and vendors of As in but of chain shock our fair we to not position the manageable insignificant both our to quarter. on and ourselves company, the particular on We with sides viewed negotiations and there as we it not impact with fierce in the did describe relatively customers supply to issue. is as try the second absorber in context obviously

metabolize further probably is have difficult So in and I full it multiple absorbed we end think up supply to sort being what's swiftness have it candidly currently place that with the the manageable, it chain I to will supply mentioned of think be by as which of tariffs been chain. think so, the parts imposed made I

about heard in you've coming and the space the auto think particularly increased to I consumer. people pricing through talk

So again a what so little some at by be I the once headwind a there I is our will situation a be coming once could said context is fluid most of in don't many business but very the China in that, products certainly overall will are that, additional to fluid because potentially pain exactly the some bit potential obviously in terms is scope in of think for and production concern Far our cell localized pain. it tariffs us addressed of of additional of level. so related of we're being continue of and the to manageable size China business. again and world, cause really know some Having the are rubber that there additional consumption. We parts think think enacted, some East the business discussed that out I the

of the our pain manage will facilities, localized to through way it, able nature I So perhaps absorbing think production those to little way. because we continue a be the along of

think I way. metals while the if us sales you more are question. any your tariffs, more benefit equipment to direct and know suppliers I seen question. have I the business can't don't mention issue that's that it's I tie of tariff in steel some no in have interesting seeing will a would US. increase I major domestic some international would say, to actions embedded any because of indications capacity their we're evidence we But of don't robust domestic, the funnel orders very restart in question, equipment the orders today that our a from in to related Secondary there and profitable, and some specific is industry plants is,

we Dan? a that helpful all, as view So Was positive. at that

Dan Drawbaugh

all the to Yes up what color. I'm for third so half, costs thinking earnings for I thinking the startup that the so just high as cadence And been as absolutely have guidance, your impacting new startup that's forward far first $X you of in to what year. in the very at Potentially that you're and curious and helpful, the then put back mention you in quarter. curious year fourth far turn also gets the guidance annualized the to you negatively range. to you're margins the about half do thank adjusted look end into I'm cost what quarter of to end you what cost as about sales going

Pat Fogarty

that this question. take Dan Pat. I'll is

startup continue new see cost the three second We year of our to continued in half plants. in the

somewhat As in we throughout what the then to to rest need be year expect you to the mode. than of people, continue in a of hire need the build the plants, the less XXXX plants, to the and up would be real to the production optimal capacity production be will ramp drag

startup I of we've guidance. and would So cost that say will part our considered the that continue as

Matthew Crawford

unfair apply million million XX% most excess the not we're $XX now. SG&A goal reiterated to tell that Dan going some if speak of by cost. probably worth earlier think that's and But of that a business or probably you assume, in I'm million is out of not to the about rates, that turn agree in corporate our this XXXX of of going people you swag absorbing to just $XXX will with run I'm sales me. or which and that, do XX% and Pat It's right $XX

Dan Drawbaugh

Thank fair. you. that's Okay

Matthew Crawford

Again about businesses. up that's specific talking comment, spend the to just a cost, generally front relative you've to I'm these not

Dan Drawbaugh

segments of that Sure, one businesses I I you within sounds in okay engineered a that's months. those if imply the curious and pretty growth the it products would me, from you. identified you've I'm from kind are acquisitions last like don't XX% mean synergies you. Canton. XX said very you're organic in helpful. Canton But the substantial what Thank of particularly to couple obviously quarter. know how then And in misread a the done of I digesting sales last substantial was contribution know tracking

Ed Crawford

the one finally back so were that or was initiative future. patient want everyone and as thoughts. Matt's fortunate I last and were speed home starting talking we're place. the how two acquire this to of Number XXXX. like is $XX in million Crawford. further three company. won't a at the when still five been so We're four, about for started on Forge if that business, amount dollars you conference we tremendous I about the have but came clearly aerospace and is happening for our aerospace a is investment talking the that yet, ask this It singling enough that in years, investment spending deeply about we're the Ed to that's comment company We not looking plants, segment, here. it an we and see be we continually We've transmission margins call future important two same segment. and talking We XX Canton excellent like for company would in to the is at finally thing years.

of we're like very active in this lot traffic are area. still lot sure There's So to difficult availability. acquisitions require at of we're The them, but levels optimistic. we and

Matthew Crawford

in comments loyal performance I buying profitable and This sticky box our I with add of business that that having out business really of at but terms coming their were talked Canton I I tried about that current complementing meeting Yes, our to customer more team acquisitions. has about one stated the a the we importantly leadership my reputations framework having time only I base. the about not business. talked companies. would Drop opening remind strong acquisition, Forge. on might their talked and are people beyond goals very it. In the of historic every pleased them and in say I ticks for that's and rippled

been So both us. qualitatively and quantitatively investment good a this has for

Dan Drawbaugh

time. in appreciate get you. queue. I'll really I back all Okay, the Thank

Operator

comes question question. Our next with Sidoti Marshall state Company. & your from Please Edward

Edward Marshall

I wanted So Matthew. start assembly with components, that to

portion comments think in drag investment. discussed your of the I you from

drag mentioned to cost could And $XX think of you said you if margin of million those mix. three annualized, inflation and - right maybe those, it's had I'm $XX think wondering three I but of from that's assuming feasible now. the million I'm quantify kind to you pockets. impact

Matthew Crawford

I making I'm it's a of from going sure as make All over cost. to using my the of that, million easy the part this let remind in the million. just But understood address was people that either was all our happen, Pat are flying trying cost to that sort so isn't or I was make very current question. the me standpoint was that and or $XX toll doing that I who second let a about $XXX I comment suggesting $XX was any are by everyone, to the swag $XX XXXX plus corporate significant. thanking people initiative wasn't these a facilities to once to people just I of world a chasing of just I'm be economically suggesting new million facilities that that just building be again, to I'd remind want $XX specific estimate remising guidance and our million we're out rate sales to would specific, be so. year million at and I

Pat Fogarty

which is segment In we really primary rubber aluminum our business. business around was Ed, let fuel the that then the saw mix and your and there me It two question quarter. products there's the businesses. in answer

than showed, we margins a lower fuel quarter. see aluminum we what business revenue great are Our Their in the product. related had slightly

overall part margin of little their down despite bit So segment that performance. brought a our fantastic

expect lower on mix currently is through replaced has where fuel margins life different and our question, time. to The plants, get this been a back that at end We fully to we side the which which the of in are of of as replacing certain that in normal second the is part coming being programs view business plants margin. had launched we

throughout the increases you've side on then So commodity mix the really were seen aluminum we that's that as where finally price increasing prices in the quarter. marketplace of the saw, segment and

Now vendors. when actually we increase it a price from is from typically do our being to that get that recovery realized is lag

So the the of on then the which on as the that drag was and other wasn't part impact margin significant was tariffs. the

covers your question. that So hopefully

Edward Marshall

do I'm I'm further some a in curios say, all assembly normalized in think margin initiatives the of your where a if and curios components three EBIT you be would could about maybe if our these willing kind there's once no business you of give businesses we're dive to to us within costs, long-term be I of earnings targets. or would power sense [technical bit past been difficulty]. where for talk

Matthew Crawford

capacity briefly revenue we with believe Well much making personally margins. specific I'll jump comfortable accretive to expectation. feel will say, that that wouldn't coming in But components have discussed and I a to be powerful on we the so assembly in line online, in that initiatives and

Edward Marshall

off you talked that any that that from today? facilities, of about recognizing are million and $XXX new Okay the you

Matthew Crawford

Very small amount.

Edward Marshall

You looking that you're are the the obviously will are, you're mentioned as curious that you're as what focused that watching. in your kind or situation signs you're that, this tariffs accept said I'm from we one you of watching most company that all about and closely business a

Matthew Crawford

steel. to - is States the make steels when President or been many less that targeting specialty biggest have and he of China that Our steels targeting issue days, more have United the Canada. to regarding are unable products tariffs that has the and significant is right signing tariffs these been Europe been and special types candidly says the There regarding now correct related

are very very particular products prime the are buy in of few aluminum narrow. the Some these of suppliers we aluminum. industries days metals There

and supply very, of targeted chain he's the very very, the the our that very standards difficult meet some western industries So customers. in consolidated quality world to is

with the steel but NAFTA, we're even EU mind fronted around China negotiations perhaps certainly more negotiations or around today. watching, the the So

Edward Marshall

do. you won't until I speak [Indiscernible]. again

Ed Crawford

the No, the want company the there manufacturing the that's other that the is continue some light all. kind manufacturing are way of some particularly business around shed right. America unknowns all to on there and and companies as I issues done will and Yes, faces unknowns to American and uncertainties tariffs restructure all companies, fairly. tries our there faces

On there's the been absorption the plants other important some benefactors the the Yes, so of absorption through hand, higher start feeling economy inconvenience. the way our concerns. and is we that positive that us But side that about country at in a about strong, now is is it. all gives the there's part Yes, we side The and are negative. good other we're more itself or working with fact, a of plant, running have revenue. higher argument of to in it's this, okay rates very

have So the But margins are higher Of the plants higher the are we the tariffs revenues. log, revenues, we their course and to we higher doing willing have trade? the with issue that's did the and not better, have about offset.

So we here and we have address them going about we operate that obstacles are to see, just see them. can't and the worrying to company face the sit

family that. Chinese facilities are We volume companies. be went high So out see haven't there We'll it of part and of exporting are things these goes we're between there China, to We're almost mind, manufacturing for been, of our Keep for not the not countries. growing majority, China in here one to each in it the volume, majority of the China. panicked the isolated. and we're we in how not

offsets then, this there's works we in around So not anything strategy in some our but this way our that the favor. kind knew that tariffs of about

market, because out country. affected not might are be So of we that ship for that we less the there

Unidentified Company Representative

We times believe being global helps, has a diverse in This times been diversifications. and At case. our at particular of the manufacturer. it in benefit proudly strategy our hurts it this

Edward Marshall

Makes just in the a cost, just curiosity how up. versus of any the out is nature remainder that, when this sense. one-time the ran obviously referring I [indiscernible] year. that embedded to in guess much higher I'm I catch quarter. of I'm curios carryover maybe I'm little curios the look specifically at

the also me ahead with kind was of number SG&A assuming those year, obviously then might anything and catch targets look maybe like. there out associated with the retirement, and can that up thoughts You're I'm of for help clearly a what you normalized with

Pat Fogarty

Ed Pat. this is

quarter. were there not would one-time SG&A the I significant any in So hits

you when an well in dollars SG&A think percentage increase a SG&A acquired show our We the margin look whole percentage did result sales. the as as companies sales. of at of in percentage to I as

I some basis, addition, on But In do I and in come those had was the down we that year. the a not professional fees, from one-time that say current nature. would the in in but to of at we normalized percentage increases SG&A sales you'll quarter expect think its SG&A see percentage least over course of

Edward Marshall

brought that are, of me you're like you of it's and it's last wondering, if could, talked about I'm out - was, benefits the [technical Canton with sounds it that if that, question what one one it pleased in expectations. you I then, seeing the ahead And as it. difficulty] focus Got you're how the

above that between I driving as mentioned the selling on you've you cross have if that it expectation just well. you what's cost a gave the capital two market growth, kind think is in business that businesses market, of perspective, about that synergies the is already is So it the

sense as giving what a here? a you to surprise much trying to of that's Just so

Ed Crawford

number it Well wasn't one surprise. a

here. an acquisitions you XX Okay. and as we've and XX know between This is done acquisition

the about company. is at got surprised a We to finally acquiring it so great We buy crop before, we business. We forging business. company. not twice forging we're and the not try we're all, ended So it. up this surprised We're investments, other like into we're deeply all

about we of dominant or size like forging like created the because level. base. dominant continue be to North we're a go certain prices, in the it's plan like going forging that forging fact, the and And a the and margins forging in excitement force, talking this. - force in lot about a we We're we're business, we've small-to-medium customer we to niche In talking of in and and we lot the to in a position this at there America business moved a sized

Edward Marshall

Okay, much. thanks very

Operator

comes KeyBanc question. Please Capital your Steve Markets. question next Our state Barger from with

Steve Barger

It's How see that the how have really give on focus much some longer you us investment hear good more electric the to to in themes. vehicles? sub-segment now? on right revenue exposure term the you you detail growth Can

Matthew Crawford

some add to that. happy I'm Sure. on This Matt. is color

we lot I all is understand vehicle when a what the to that for at When been the electric to talk be electrification segment Steve. hybrid that to important they propulsion, the it's time. think our mean not foresee long a that obviously of even migration about mean fastest of are of talk And cars we for engines includes I eletrified case it's fully a close years growing levels. I the have globally and different even it's some not stages. process close. about

in symbiotic cake improvements people engine eat a and now. is want and there pretty the between globally internal understood it Most So in opinion technology. their our battery to think I the relationship right commonly it's advancements combustion in and

the particularly the automotive business. a about of think meat in real at dinner think Tesla, what's coming all but so think I when on that table places in the electric water important our, There the other and there's and noise numbers that of production the So when think you cooler I in on look that, fully conversations couple well But a EOEs, roadmap that our while is at lot vehicle. is the China. you about is I as conversations hybrids

components going Which Let's automotive be related the to half kinds these less self-piercing is it aluminum our where or of of we're half revenue of system. fasteners, think little about light-weighting, roughly our regardless propulsion bit to be right? ubiquitous are whether casting positioned, maybe of

good be. that's So to place a

EOE's direct the an the I they expensive But how roadmap technology. focused combustion lifetime now internal course productive. make the on injection internal at less my come. about engine at right that for long and time [indiscernible] we think all. to the Maybe when of is is real more engine current combustion kid's won't but in engine, have to smaller, a think symbiotic Yes that's again once

well thoughtfulness technology facilities people like in material. a in but hose The of injection and expansion the future fuel people just has that's sort like rubber very I as think our enough, industry we very a Bosch, they are think Park-Ohio. is corrosive Hitachi, people and up that extruded number lastly I grew move bright would around up building which is not not can't as then plastic people I direct exciting. use, particularly our So while where just example And like [ph] because just, and think new I of grew business teen and fast we

understanding important about very of are doesn't make they think has extruded you has not environment the become important to car. become regulatory how hose and increasingly permeate that but electrification that also just as savvy So the at globally, the for

to So things such and and cooled. are batteries notably, how going most

to maybe portfolio I that electric propulsion. right a you view So of in transition has our automotive just from sense, gives a I our plus now combustion mentioned in internal which portfolio XX% that place

Ed Crawford

at shot another this. take let Steve, me

see growth set You we is words with and it where the and where it. growth

we've reach. think is to for grow. consumption we be stagnant, working America how right but sales the direction and growth. the percentage going the comments people concept If consider well to diversified we about zone. there very want that in to or where future, company, America of be be and we're it committed the Euro don't And continues worldwide in going international in and stated, North the be earlier in not population We presentation think single is there with growth to consumer us is think is I As move outside great it's I every year, industrial Matthew's in to diverse to is company ourselves the a of that working growth

interested in we're in interested India, and China, interested we're in So Mexico we're Indonesia. ultimately

growth really about want when people market creating made growth to and these the called these So this China people locations you and already investments the of and and consumers We've commitment go that to to talk we're to excited about things, we've made company. why value that and Mexico. in this another is of buy market, one a is markets who biggest incredible and

think two is we're talking about in going So we're the been said for we're or the growth, growth pointed developing to continually already this years. not it out when there, growing. now. markets We think of not go this we we're the We've go we we're be markets three past, in to where of I - our we're there billion and the [indiscernible] to the $X there, going getting as in roadmap, momentum and a giving we've everyone and just started future.

Steve Barger

it sense. lot of makes think a I

is new with about this added extruded products customers you've existing fuel customers? capacity, or you for that As more growing or finding injection are internationally

Matthew Crawford

you really about I've you predicted both. right? that a it. is mean latter, we go, do like have I talked which to can expansions like before go said when great, to I about purchase It's international would we'd our But think and with order the

have we I trying national additionally quality to that We're Chinese curve some we're technology faster building will absorb up to customers car the particularly come installed them. that that benefit additional the can base those bringing Chinese regulatory are out capacity companies believe we curve think and their take companies. than

as for being which local no, and to I from companies. China think absolutely technology Company Western feel a to capacity this we an see go and purchase the order got we've sell to a So advancement that used with now the we us,

Steve Barger

investment like in other the on this the share taking up - the into long is opportunities, more business, theme. about what's [ph] you how you forging I then And the a about is it. you it Canton been leverage the rolling Can crop Got how you've just about you at customers, for be capacity time. and specific hear crop space, or global existing domestic view? strategic from [ph] do

Pat Fogarty

I'll able marketing of Many is that the in supply industries at those standpoint. not their we a we certified sales lot you Aerospace cost be and a requirements a especially this from relative to also have Pat. and to to of Canton have to customers our but forging forgings. was the be unique recognized opportunity look When acquiring between that. Drop only standpoint, take there two businesses Steve, from Forge,

not is there So do quality many the that people it at can that in do the standards required. that supply and are chain

maybe long, given companies to customer business. long-term, and a but their is We be now because that long our suppliers and us we're they confidence around so time they have for looking long-term have other with enough are didn't two quote that to us that, able in us do base opportunity they've going for investors, such we're know just new to

equals this think, where a that. one one starting of I to So is benefit there we're plus see the and case

Steve Barger

you look franchise, the or to acquisitions international to the of markets about for think you expect globally? North forged from international As you serve that America do can future grow

Pat Fogarty

that what acquire Those these across if you water, parts are don't opportunity to it, at for company the the today, us we're large businesses to of we typically America. ship opportunities we parts it. but But aspect has shipping of will be two seeing overseas, most see definitely in a strategic look a to the them do some of although there's would an doing North most we're product

Steve Barger

even recovery plays I but Got it. profitability prevent during about that profile the getting past shale mid-teens the segment Last had of over that or been with pretty and there back through the much and that ran you has to quarters. XXXX mix XXXX was different question still engineered running margin from me, [ph], a you margins know the from look when at in I the strong half structural six to change before. is that, We're the

Matthew Crawford

by I a to This is the related capacity for - those those around pipe shale, buildup days would capacity. still significant shot where Steve. their mean parts Let of our no building aggressively commenting days. those me first remiss not that Matt. the that, and days at forth, capacity China heavy many for capital I and business. equipment take be still There's were very they were out so was

clearly would some fundamental they average say time business We've so the the example, tell side that you are more I versus size the would also melting come Having unique a said, grown seen as we've was [indiscernible] I period. in that hardening So order invested side. and think shifts I for the down.

that a there compression off well some on orders. been just So has been size, of of it discussed those expansion do has just the I you little on doesn't came think of average and that order wonderfully we mean a some froth mentioned. don't the bit There I

from would would our it even and to days I that grown the our fair more that product aftermarket the and a in Having business both that, geographic is standpoint profitability best difficult say assume to business standpoint. no, it equipment So sustained and and said replicate. would those had has be of diverse a be healthier

and make to will, you're all a then. even and personnel, no was and reinvested better compressed at product hit that. money business. going starting this we so better a to we're few what cutting there look we better difficult see a key processes, as synergies we've business for at happened enhancement, the margin lot We it right see in of signs to the pretty that spots But a our just and manufacturing narrowed and was it's portfolio diversify that than improve business mistake, years after we're going today is a margin were do back So to of

Steve Barger

Understood, you. thank

Operator

you. Thank

your with from comes & Company. Paige Gabelli Matthew question question. state next Our Please

Matthew Paige

investments? the of of at end help wanted on to facilities. cadence the comments the that just Can first Does us the understand you clarify components that I end Pat's assembly just ramp the up, year? that

Pat Fogarty

of you're referring comments to the programs? life mix, made around So I the end the

Matthew Paige

ramping new and three facilities full now mentioned production the that thought. XXXX I you was are No, up that

Pat Fogarty

at XXXX I Well will Right. $XXX that of in run rate mentioned be revenue million.

in two China in three facilities; that's and So in Mexico. one

All early of those getting either ready production. facilities of production stages or are in for

ramp in those plants. to up the steady years each of next expect we three over two So

Matthew Paige

facility? that come is have that, other incremental from or and otherwise $XXX Okay run rate million business

Pat Fogarty

incremental. The majority $XXX is of that million

Matthew Paige

finally wanted CEO's in to I you've to and wish I give any was with portfolio the that CEO. Matt, time, in longer no or you the anything talk sitting the the and congratulations Park-Ohio on you being opportunity or chair company know quite company. elected Okay for Chairman to been now but maybe you the businesses core as about see lines product some

Matthew Crawford

for you opportunity. Thank that

shareholder the Asking at repeat my lucky many discussing. appreciate and - we I careful. boss room, architects meeting of have I I so the me is that. what me of I've I'm comments made be some in got and be careful, it. old that been the the today let And I No to would one strategies of to

we business So portfolio of I I think dramatic so to not that proud expect would have, I'm the see any very change.

- there's think harm. first I saying do of it's doctor's that a the first all, So no

I can more little So that the earnings. quality from significant a largely the that, much me I focused Maybe so a think think expect past, not you than shift. different what strategic of is maybe subtly on

continue I them focus company, and opportunities. on And I portfolio think have more much think on think oriented while acquisitions growth this equally focused grown us the be to I the the think We've you're company we are on call there's businesses, we've as some I bottom, of top seeing to We a got a good are but focus the growth as opportunity on so a organic we'll can you're think bit all little highlight quickly opportunities. no little bit we have hearing you see products that with have year product with than and vision no, some the some that in do these cyclical. our needle businesses the the able on growth grow to side. X% investment really X%, some a and push I more more portfolio of But on little we a organic us past, opportunities some the today where

Matthew Paige

Best questions. for All my right, well of taking thank luck. you

Operator

state Instructions] from Marco your Stonegate question. comes question [Operator our Please Capital Markets. with Rodriguez next

Marco Rodriguez

is seeing the seeing can was that share? supply I more better from bit a coming taking a organic is customers their wondering from little there growth of growth of doing you're business about standpoint. of you technologies, you just talk most or kind you it if and an combination Are existing

Matthew Crawford

and robust we benefit is details when third the business his I quickly economy seeing you're during a When Pat, it's in chain manufacturing there when it's comments. so tax first now. strong numbers, were X.X% which diverse as No the in of is take an most the economy, market of I'll think so react seeing, it's react he they option, you environment, the see the there supply real-time whatever to economy. already supply supply will discuss above. business OEM grew in expanding benefits first can the the to did all end is our or

number ago markets that these clear is think into at one, cost and regarding leveraging adjacent robust focused customers. my on are provide for So this do very total we back moment a and ideas services lowering think to think I point. I very the a point I they

ago. So our zero We're succeeding we're years of a initiating zero aerospace business. years mid-market succeeding we're in MRO, which couple reserve was in was succeeding which couple in a the ago;

from somewhere. coming is sure that yes So

number. I proud So XX say think that when we new the of quarter we're with that in up pride signed customers

Now to are to of were thoughts? revenue them some meaningful your the Pat, what be. going they're line, but

Marco Rodriguez

No that's.

Pat Fogarty

in I markets customers in agree different grow our new a we've really XX each and penetration end our our Supply of many substantial the most of is continues markets But of them. quarter businesses list having Matt. diversified business. a Technology to by of achievement the only couple covering is so and these highlighted a

agree comments. So Matt's I with

Marco Rodriguez

three fiscal be clarification have the at plants Also capacity ramping type here I'm you in new million you three of the operating $XXX would of to will. assuming those kind a up event that's on and plants maximum second half question run Understood. XXXX. that if rate

Ed Crawford

up, XXXX we in When not a about that million talking that run about company year, run We're a about starting rates. dollars reach will into actual run talked number. might run Well following we're not number, talking it projections, the about of company, run sales. about talking of It $XXX rate we approximately but sometime rate. million. $XXX This talk we rate. give We're are is a

So way, rate plants Again its plants. on back, starting the hard it to not sales. run of saying series set is we're actual

timeline. to hard or somewhere have want sales, hard you're you move about if XXXX, If that you into sales think talk going to to out about to want in

Pat Fogarty

revenue going Maybe is mentioned, Marco, let when we're that coming. we're it in get agree. run going like me to those XXXX but just rates. to XXXX see of XXXX Eddie where rate run is see some clarify, we'll I

Marco Rodriguez

underutilized? plants that still revenue the And rate, full they if at or capacity operating are

Matthew Crawford

This is Matt.

talked As be to we will customers believe I that mentioned even yet. haven't we built some extra with that successful capacity we because we

Marco Rodriguez

Got here tariff kind level NAFTA wondering scenario and on of about worst question, quick dead not high the last maybe to you, kind very can guess a just aspects. I a But understood. if from and horse talk bit of Europe. little case you on And beat

of situations that through kind help should understand of how supply Just manage quickly to customers chains with as kind pass. as of kind bit and far some the a to little will come us you can conversations move the your

Matthew Crawford

negotiations lot ongoing. discrete of trade is There a

like So comment to one on. you'd is me there a specific

Marco Rodriguez

your in you center the other and China. that, the mentioned more to questions issues going front of your tariffs and on are versus You EU to NAFTA on response one

can if So in on you maybe south, how you sort goes of I quickly, really what of if and manage wondering that be comment will how terms you that situation doing. was quickly can that

Matthew Crawford

I'll let but quick, that we're that Pat managing - comment is real ongoing.

just of it's So and not taking the as sort sitting we're though sort back hits.

there's Both addressed So chain. with the I as to on we going important earlier - view this supply customer as to discussions be and vendors. mentioned immediately both side with the and the

Pat Fogarty

when is about somewhat you mentioned tariff steel. or isolated, our the it aluminum Matt is businesses in fluid, Marco, as both you talk situation talk in about but

as as our ongoing. well we're mitigate chain and working discussions our so with supply the customers to And those efforts are

the matter. the approved of all there us situation wants, because resolve try fronts, are specialty with supplier all is impact with that supply we raw vendors, on working a customer disrupt our it's on as obviously of they're closely soon to thing last so our we is to customer chain material to As an and realize one over the this

Matthew Crawford

both into may going that half to comments, get clear in, in dollar. mentioned recognition not we the our built to every we're And our second be of as we have forecast get not that

try. that that going we're but mean not doesn't to So

Marco Rodriguez

Thanks a appreciate lot, your time.

Operator

you. Thank

comes with Gabelli from Mario Gabelli your Please and next Company. state Our question question.

Mario Gabelli

Matt delighted a past. and XX lot the we of were in that for in the answered. good pockets this been make lot questions transition comments a of and had and air map Ed, years, I've the you've

excelling at you. that, the and factory guys You've of you're have visited, overcome thank companies I've a you like so that most them knowledge

Matthew Crawford

Mario. appreciate We the you on you call. Thank getting

Mario Gabelli

in anymore Yes but for got to some strategic. the weeds, I questions - not Thanks. don't I've but get want

Matthew Crawford

Thanks Mario. your Thank for you support.

Operator

Thank you.

Our next comes question your [ph]. from with John ahead go question. Please Baun

Unidentified Analyst

XX% have you comments just would The housekeeping baked question. to great ahead certainly directed all on $X.XX, future in tax a delevering, points in you shave got to that EPS. Pat. down Great Mario's percentage that that and of and got get the XX%. that to XX% it's rate Eddie both X out to the there. worldwide What coming I I to you behind right process in, down? do at is transition is this and don't like rate to what right about? Guys, a you of now, you. know tax I chart echo, quick echo What's goal, $X.XX can getting Thanks. do seeing try - Maybe to

Pat Fogarty

John, thanks.

with line what in at we're to in work there efforts we're - going XXXX bring effective US? in we some can our to but project a are seeing XX%. tax we're We It rate. rate that which continuing the tax and effective Are would complex tax that estimating more rate ways take towards reduce it's

continue down. radar comment So want right to on, and it's try all to really that to going to on now we're I that's rate our move

Matthew Crawford

versus And domestic of John nothing, the here. mean the the us is strength benefits that's foreign one I earning. the of limitations mix in economy US

think earnings from a extent to stand US doing economy blended What benefit we the fair bit strengthening Pat a mix? we tax little is thought rate. So the than a which on and we're I

Unidentified Analyst

that leverage the points the away up in bottom Well keep got on growth the bottom line the percentage work. looking X, X line, you going again is picking with but to built we're guys half-life, get there in the built at you

guys. looking tremendous XX to I'm So the run. forward next it's been years, thanks a

have Okay great day. a

Matthew Crawford

Thanks John. appreciate Thanks it. for your We support. long-term

Operator

to further back Thank for time. There it Thanks. management at will are closing remarks. I no you. questions this turn

Matthew Crawford

again thank Well we're the quarter's excited that on look We to which and very is Thank next questions the much talk you Great. for much. us most about, forward call. future. interacting things very excellent you letting today about

Operator

This you. day. parties disconnect have a and conference. All can today's concludes Thank great

Park-Ohio (PKOH) 12 Aug 182018 Q2 Earnings call transcript