Park Ohio Holdings Corp (PKOH) 2010 Q1 法說會逐字稿

Good morning, and welcome to the First Quarter 2010 Results Conference Call. (Operator instructions)

Before the Conference Call begins, please remember that the Company will be discussing some issues that are historical and some issues that are forward-looking. When the Company speaks about future results or events, there are a variety of factors that may materially change their actual results from those projected. A list of relevant factors may be found in the earnings press release, as well as in the Company's 2009 10-K filed with the SEC on March 15th, 2010.

The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Additionally, the Company may discuss EBITDA. EBITDA is not a measure of performance under generally accepted accounting principles and is considered a non-GAAP financial measure as defined by the SEC.

The Company may present EBITDA because management believes that EBITDA could be useful to investors as an indication of their ability to incur and service debt, and because EBITDA is a measure used under their credit facility to determine whether they may incur additional debt under facility. For reconciliation from income before income taxes to EBITDA, please refer to the Company's current report on Form 8-K furnished to the SEC on May 3rd, 2010.

Now the meeting will be turned over to Mr. Edward F. Crawford, Chairman and Chief Executive Officer. Gentlemen, you may begin.

Welcome, ladies and gentlemen, to Park-Ohio's first quarter 2010 review of operations. Let's begin today by introducing Matthew Crawford, the COO and President of the Company. Matthew?

Great, thank you very much.

We are pleased with our first quarter performance, which not only exceeded our internal expectations but also demonstrated improving trends in our businesses. Sales increased almost 6% versus last year, to $192 million, which is the highest quarterly revenue number since 2008. EBITDA as defined in the release reached over $13 million, an improvement of 69%; while earnings per share increased from $0.02 last year during the first quarter to $0.18 this quarter. We also continued to reduce long-term debt by decreasing our net debt position during the quarter by an additional almost $10 million.

Looking at the business units, first Supply Technologies -- Supply Technologies enjoyed an improving demand environment as sales increased by just under 14%. End markets which showed particular improvement included consumer electronics, semiconductor, automotive, agriculture and construction equipment, as well as other industrial equipment. New business opportunities also continued to be very robust.

The profitability trended meaningfully up from last year's performance of near breakeven, to an EBIT of $4.5 million and a margin of 4.8%. Our results benefitted from the significant strategic restructuring accomplished last year which rationalized underperforming customers and permanently reduced our operating footprint by over 275,000 square feet. We will continue to enjoy substantial operating leverage due to these changes as the demand trends improve.

Aluminum Products also continued to enjoy a rebounding auto supply market, as most industry analysts continue to increase 2010 OEM production expectations. Revenue increased 39% versus last year, as we expect the second quarter to enjoy similar revenue strength, augmented by new business efforts.

Profitability at the Aluminum Products segment actually transitioned from a 2009 first quarter loss to a positive EBIT performance of over $1.9 million. As discussed on several prior conference calls, General Aluminum had significant operating leverage in place. With utilization still at approximately 50%, OEM build strengthening modestly and an improved competitive landscape, we are guardedly optimistic.

Manufactured Products revenue was down 20% during the quarter versus what was a very strong first quarter of 2009. Having said that, there are signs of improvement. Specifically, our industrial equipment group is seeing improving trends in new orders for global major equipment. In fact, April bookings exceeded all of last year's second quarter.

The aftermarket is improving as well, with particular strength in the oil and gas end markets. This demand, combined with the strong quoting activity and customer interest in accelerating the delivery of their products, make us optimistic for continued improvement.

Profitability also fell from last year's EBIT level by 36%, to about $5 million, due to the revenue softness. Somewhat more indicative of the current environment, though, is the sequential profitability increase from the fourth quarter of 2009 by 66%. Despite some headwinds in the locomotive supply portion of forged and machined products, we expect this trend of improved results to continue.

Looking at the balance sheet -- as we previously discussed, we're pleased to announce that we caused debt to come down -- or net debt to come down by almost $10 million, particularly in light of the growth in our top line and the almost $4 million in cash expenses caused by the refinancing of the line of credit.

Increased profitability combined with CapEx discipline and ongoing opportunity to support the business with lower inventories helped accomplish this important goal. Liquidity under our recently signed three-plus-year bank agreement stated around $36 million. CapEx for the quarter was under $500,000.

In closing, the first quarter gave us our first glimpse of improved business performance across all business segments. This improved-demand environment is especially welcoming as our team continues to work hard to cause fixed costs to continue to come down. Our goal during the downturn was to emerge a better business, and we believe the first quarter was the right initial step in backing that statement up.

Thank you.

Thanks, Matt.

I think we're off to a good start in the first quarter here in 2010. We're reminded of the fact that historically, the earnings of EBITDA in the Company is back end-loaded; it gets stronger as we move into the year. And the $13 million EBITDA is, again, a great start, but is a hint and not an indication of what we expect for the results for 2010.

I'll be glad to open up the lines for questions. Thank you.

(Operator instructions) Richard Paget.

Good morning, guys.

Morning, Richard. How are you today?

Hi, Richard.

I'm doing well.

So, just kind of looking at you guys' tone, and pointing out some of the areas of strength, and just looking at the results -- are you fairly optimistic that we've hit a bottom, and we are in recovery -- full-on recovery mode here? And if not, what are still the question marks out there that you guys are keeping an eye on?

Well, Richard, I don't like the concept of the bottom. But clearly, we feel we're on the ascent here, we're going in the right direction. There's nothing that we're seeing in the forward look that would change our view relative to a continually improving company throughout the year.

So does that suggest, going forward maybe, then your CapEx spend will incrementally start increasing again?

Richard, hi, it's Matt. How are you?

Good.

Not necessarily. I think there is an expectation that there could be additional modest investment. We've had this thing tightened down pretty aggressively over the last year to 18 months. Having said that, the areas of our business which historically cause the most CapEx -- most notably the Aluminum Products business -- is working at about -- as I mentioned in my comments -- at about 50% current utilization. So while I think there could be some project-specific opportunities, in general I think that we're in pretty good shape relative to not seeing any significant blocks come through our balance sheet and P&L.

Okay.

Richard, the total CapEx in the Company in the first quarter was $200,000. So going forward, obviously, we can't hold them to that level. But again, as Matt pointed out, go back just the last four or five years -- when we were spending an average of $20 million a year, it was largely all being invested in the aluminum platform and creating the capacity necessary to hopefully fill demand that we think can develop over the next year, year and a half. So without making further deep investments over in the aluminum business, Supply Tech is not a company that takes in a lot of CapEx. Capital equipment is a business that historically -- that's related to certain new and bigger projects. So I think from the CapEx viewpoint, we're still in the very solid position and expect to do what we did last year or better.

Okay. And then, just expanding on the aluminum business -- two quarters in a row of profitability, highest margin since, I think, mid-2006 -- what do you think the expectations for this business are? If I go back, it looks like you had north of 10% operating margins in 2003. I guess in '99, it was high single digits. With the structure -- with the way your business is structured now there, and the way the competitive environment has shaken out, where do you see -- I mean, what's the potential for this business at this point?

Well, the potential is clearly the revenue can increase. We are -- again, not quite -- but soon to be the benefactor of fewer people in the space and increased car sales. So as the investments have been made, as we've talked about over and over again, the investments have been made to -- it's at least a $300 million embedded platform with our facilities. And we're running at less than 50% of that particular run rate.

So I think car sales continue to improve. I was in Detroit yesterday, and pleased with some of the things I'm hearing. I think, again, we are where we hoped to have been in a market where we're an established, quality, low-cost producer. And the amount of individuals that have exited the business is [plenty]. We've talked about that. And what we've been waiting for is more car sales. And we can all be guardedly optimistic, but at least it seems to be going in that direction.

So as car fills go up, this company should increase its revenue and subsequently take advantage of all the investments we've made in the past.

Richard, this is Matt. I would -- obviously, the EBIT margins for the quarter were 5% or 6%. With the operating leverage -- there's no business we have that has more operating leverage in it than General Aluminum.

Right.

So I think it's -- I would have high expectations that as we create more throughput that we're going to see higher margins. So I think we're definitely, directionally, hoping to go north of the 5% or 6% we're at currently.

Okay. Well, I'm just trying to get a sense of -- could this be a 13%, 14% business when all things are going full-steam? Or does it -- is it still going to be kind of a high-single digit, maybe 10% tops?

I don't know that I'd be prepared to give a specific forecast on that front right now.

Okay.

And then, with SGA, you guys have done a pretty good job of taking costs out there. As we see the businesses improve, should we start to expect some incremental variable cost to kind of come back in, on an absolute basis?

I think the -- I'll answer that question two ways. I think -- strategically, I think we continue to see our fixed costs -- particularly as they relate to, really, personnel costs and so forth -- continue to stay pretty ratcheted down. We believe today, from a fixed-cost perspective, we can run the business even better than we are today. So from a strategic perspective, I would say there's not pent-up demand as it relates to the current business levels. So I don't think there's another shoe to drop there.

Now, from a tactical perspective, we have had people throughout the business who have been on short work weeks, have taken salary cuts. We're looking to get those people back to some semblance of their former compensation as the business environment improves. So I think there will be some modest increases in some of those expenses.

But from a strategic perspective, which I think is really what you're asking, we don't -- there's no pent-up SG&A demand here at the current business levels or for the foreseeable future.

Okay. So this 21, 22, maybe plus a little bit more, is kind of the range, and you don't think you'll get in the high 20s anytime soon?

Yes. I mean, we've made -- and the best example I gave in my comments is we've permanently changed the way we manage some of these businesses. So if you were to spend some time with the management team at Supply Technologies, for example, they walked away from 275,000 square feet of operating footprint permanently. It's a different business model today. And those are implied, and that square footage actual reduction includes the personnel and other SG&A that goes along with it.

So yes, I think a lot more work has been done here than just sort of bluntly forcing SG&A costs down.

Okay.

And then finally, during the quarter, there was some pretty harsh weather in the Northeast. Did that have any impact on your business at all, that might have taken a penny or two away from earnings?

No.

Okay, thanks. I'll get back in queue.

Michael Levine.

Good morning.

Hey, Michael, how are you?

Good, thank you. How are you?

Very well, thank you.

Maybe I can start with aluminum. You talked about -- I think last call, you talked about some startups you had coming on. Are they -- do you still have more business awards that are coming on -- if you can comment on the progress of those, and then maybe follow up with how additional inquiry looks going forward?

Hi, Michael, it's Matt. How are you?

Good.

Yes. As I said in my comments, we expect the second quarter not only to be strengthened, not only due to what we see as stabilizing and in some pockets increasing actual demand from the OEMs, but also new business. So we expect to benefit in the second quarter from those exact efforts.

Okay, yes. Your comment -- I wasn't sure if you were projecting kind of the same strengths or another increment, like we just -- I mean, sequentially, I think you went up 25%. Are you expecting another incremental growth, or just kind of the same strong performance in the second quarter? Or somewhere in between?

Well, I think the second quarter will be unusual, because you have some new business coming into the -- on-stream.

Okay.

And so second quarter will obviously be a strong quarter, because -- and keep in mind you have to invest in advance of getting these up and running and so forth. So I think our second quarter is going to be a real, real strong quarter --

Okay.

-- in revenue, as a comparison over quarter by quarter, is going to look very interesting and, I think, very exciting. I hate to -- maybe we won't be able to sustain that increase for the rest of the year. Okay?

Okay.

Happens to be the second quarter is going to be with a lot new things popping into the revenue side, from a standpoint of volume, particularly. Hopefully, the EBIT will follow.

Okay. Okay. So, if we think about, let's say, the first quarter -- assuming autos are stable or growing a little bit, you're kind of at a run rate that you're building on, with new stuff coming in. Is that a fair characterization?

Yes. We're beginning to utilize our capacity.

Okay. Okay, excellent.

I mean, it sounds like we're being a little coy; we're not trying to be. I mean, we've got new business coming on-stream. We're very excited. The build rates look pretty good, as we sit here today. I just think that there's a lot of variables out there as it relates to what the market holds. You've got, obviously, summer shutdowns coming. You got a lot of issues that we're not prepared to actually predict.

Amongst the things we can control, which is our current business and some new business efforts -- we're feeling pretty good about it.

Yes, I was just kind of making sure that I was thinking about it correctly, maybe being a little too detailed or something. But I just wanted to feel comfortable that I'm getting the message right.

Well, I'll tell you something. I'm glad you're digging at this. And we've been disappointed in aluminum's performance for some period of time here. Okay? (inaudible) I'm the first to speak to that issue. So the caution is, in your words, I [suppose], respect, quite frankly. But I think that we're on the right track now. And volume's going up. And again, we expect to go with it. But we're surely not -- you would think that I'd be standing in here, really just stepping up and playing old [band] here, because of the first quarter here. But there's been a lot of disappointments.

But I think we're on the right track, because I think the auto industry's on the right track.

Okay. All right.

And then, Supply Technology -- was there any special -- any industry that like kind of did better, that really pushed results up? Or was it kind of across-the-board, everything doing better?

Yes, Michael, I think I mentioned in my comments some of the ones that were outliers. Yes, I mean, it was, as always, a bit of a mixed bag. Some do better than others. But unquestionably, the highlights in the quarter were specifically the -- consumer electronics and semiconductor was very strong; ag equipment and construction equipment, actually. So yes, we had some -- we certainly had some highlights.

Okay. And was there anything unusual in the quarter, unusually good? Or again, are we kind of -- if things keep going the way they are, just the sustainable kind of levels?

I think -- I would ask, certainly, Jeff to comment here. This was fairly straightforward, in terms of --

Okay.

-- in terms of, from a financial perspective, things that would have impacted the P&L.

The only thing of any unusual nature in the P&L was -- or cash flow, would've been the fees associated with refinancing. But no, this is --

Okay.

-- a very normal quarter for us.

Okay. And Manufactured Products -- I know last time you said the backlog is really increasing, inquiries increasing. But I think you said that compared to the end of '08, it's still pretty low. Could you kind of comment on how good the backlog is, and how it looks compared to the end of '08?

As you compare to the end of '08 --

And certainly not be precise, I guess versus when it was really strong.

Yes, I don't think -- we're definitely not back to those backlogs. '08 was particularly -- in some contexts, at least in this last cycle, it did seem as though the industrial equipment group acted like a late-cycle business, performing pretty strongly through the middle of last year, feeding off those strong '08 backlogs.

I would tell you that the most important piece of information, though, I think that I discussed, was that the drop-off in new equipment orders really started in earnest last April. So I think the most important data point I can give you about backlog is that April bookings were stronger than last year's entire second quarter.

Okay.

By a good measure. So I guess the point is the backlog continues to build. Year-over-year it's going to build even more aggressively during this second quarter, because of the weakness last year. So while I think it's a little bit unfair to compare it to '08 levels, I think that we're headed meaningfully in the right direction versus last year.

And just about how long before these new bookings start to flow through?

Well, we're -- I think that -- we typically say that it's six to nine months.

Yes.

So I think we're seeing that's a good timeframe to sort of think about for that weakness. Last year in the second quarter, kind of flowed through end of third quarter, fourth quarter, a little bit the beginning of the year. I think we're fighting our way through that, and I think we're starting to come out the other end.

I think the other anecdotal discussion that I mentioned, that I think is important, is certain customers last year purchased equipment, we built it for them; and they had asked us to not deliver the equipment, because they had no use for it.

And I think what's happening, Michael, which is interesting, is throughout the first quarter, our customers who we have equipment for have asked us to accelerate those deliveries, finish that equipment. Our after-market business, which was very slow last year, which is usually counter-cyclical, has picked up. So not only do I think we've got the specific evidence of some backlog building on the new equipment side, but we've got great anecdotal evidence going on in the marketplace right now.

Okay.

Mike, thanks. Thank you very much for the questions.

Yes, thank you, I'm done.

Matt Vittorioso.

Hi, good morning.

Hi, Matt, how you doing?

Good morning, guys. This is actually [Yung Kwan] in for Matt.

Just a couple questions here on your cash flow performance, which looked pretty strong in the quarter. Could you just tell us specifically what cash from operations was this quarter?

On a GAAP basis, cash from operations?

Yes.

Was just under $14 million.

Okay. So certainly that implies some pretty strong cash flow generation here in the quarter. So would you say -- it would seem like, if you kind of do the math here, that there was some pretty good cash generation from working capital this quarter? Is that fair?

Well, obviously, because of increased sales, accounts receivable were up. That consumed a little over $15 million. But inventories were favorable, and accounts payable were favorable, offsetting that -- exceeding that, to get us to that $14 million number.

Got you.

And then, just kind of a go-forward basis here, with a pretty positive outlook from you guys, thinking about working capital for the rest of the year. Just from a high level, how should we be thinking about that? Is that going to be more of a use to kind of help facilitate some of the growth you're seeing here in the business, going forward for the balance of the year?

Well, obviously as sales volumes continue to increase, we're going to see a consumption of cash in accounts receivable. The level's going to be dictated by the level -- the volume of sale.

Yes.

Right? That's going to build back. So what we have to do, and what -- our operating company CFOs have done a very good job in the first quarter, and will continue to do a good job -- is to control the inventory and payable side of that equation. We understand that we're going to be consuming cash on receivables. We have to be very circumspect about building inventory on that side.

And what we saw in the first quarter was we've built the receivable side. We consumed inventory, generating cash. And at the same time, we were able to build accounts payable leverage. That's what we need to happen for the rest of the year.

What we anticipated for the year -- and we're a little ahead of ourselves right now -- is that we would see the use of cash from receivables. But we anticipated a decline in inventory and a re-leveraging of accounts payable, which is exactly what we saw in the first quarter.

So I think we talked about that [a year] -- we anticipated a reduction in inventory this year, for fiscal '10, and an improvement in accounts payable leverage as we consume that cash being generated by accounts receivable.

Understood.

Breakeven (inaudible) on working capital this year would be a very good thing. Because we know volumes are going to be increased.

Sure. Sure.

And then, just one other question for me -- looking at your margins today, clearly I think you guys have demonstrated the fact that there's some pretty good operating leverage here, across all three business segments. So is it kind of realistic to think about the margin performance this quarter as kind of maybe not -- a good starting point here going forward, in that you could -- assuming the top-line growth per your expectations, that we'll start to see some improvement, as we kind of progress along for the year?

Yes, Matt, this is -- or, I'm sorry, I didn't catch your first name.

Yes. Yes.

I'm sorry, what is it?

Yung.

Oh, Yung. Yung, I would say that that's a fair statement. Once again, all of our business do have operating leverage in it. Our highest-margin business, though, is our Manufactured Products segment. So I think that we have particular margin opportunity as that business improves.

Okay. I think that should cover it for me --

-- very much. We appreciate the questions.

All right.

Doug Ruth.

Good morning. Good report, Eddie.

Can you comment -- are you standing by your earning and guidance for the year?

Yes.

Okay. Is there any additional commentary on that at all?

Yes, I would only comment, Doug -- it's Matt -- that we typically have not preferred to amend our guidance after the end of the first quarter. It's just too early. We only give annual guidance, and we're going to stand by it until we have a better sense of how the year looks.

Do you -- Eddie, do you have any additional thoughts on what you are seeing in the automotive, and what you think the run rate might be?

Well, what's interesting -- I now, Doug, don't think of it in terms of run rate; I think of it in terms of how many cars they sell. I've [been down] that run rate idea. If they're making cars, and they're putting them in parking lots, that really doesn't help us. It just takes away from the sales of the future.

And I don't have all the historical data. But it seems like the inventories that are controlled will point, and the auto production is going. And there's a -- I was in Detroit yesterday -- there seems to be a new bounce there, with a step-up there, right on to all the companies, including Chrysler. So it seems that they've really got kind of an optimistic feeling. And again, I think that's phenomenal, [not only] for the car production; from the fact that things are -- these companies have narrowed their platforms, particularly Chrysler, into fewer and fewer cars. And I think there -- at least [in there] would be the weakest, apparently, financially. But they seem pretty optimistic about their survival and where they're going, with some top people yesterday.

But again, we measure things here by the cars that are selling, and it's picking up. And it's spring, and maybe that's working. But maybe people are gaining the confidence. And boy, I'll tell you something -- can you really believe it's 12 million cars plus this year, which -- all indications it is. I mean, you move that from 12 million to 14 million -- forget about the old numbers, the 17 million. It's pretty good indication, and a particularly good indication for our company. Because the one that's hurt us over the last couple years has been the aluminum business. And it's about time it comes home and really starts to pay a dividend we all expected.

Yes.

But it's all about car sales.

Okay. And what about the bids that have been out there, that you've hit out there for awhile? Are some of those things going firm now? Or what do you --

In the aluminum business?

Yes.

We had a meeting this morning. We've never seen more activity in the aluminum business, and quoting process in the aluminum business -- it's out there. There's a tremendous amount of business that -- new business to be had. The question is the level of pricing. We're going to be -- we are not going to use our embedded capacity that we've already paid for, and the Company's paid for, without the margins. And I think when you see the strength of the margins in the aluminum business, it's going to be reflective of -- we don't have to have a bigger Company; we just really run this business now for cash flow and for return.

But we're optimistic. There's one block of business that's cycling out, that we know that it'll be out of there -- it's a big piece [of] block in the business -- will be out of there in two years. And we are quite confident that we're going to be able not only to replace that with new business, but we have positioned ourselves, again, as a quality producer. We're very competitive. We've got a lot of unused capacity; we're going to use it carefully.

But it's an -- I think I indicated the last year, this is going to be a very, very important part of the story of this company in 2010, '11 and '12.

Would you expect sequential improvement in the utilization rate of the aluminum throughout the rest of the year now?

Yes, I think we will, particularly as we bring in new business or begin to see new business in the second quarter. It's got to be under -- it's going through facilities and to our equipment that have been the most dramatically underutilized.

So we can go from -- could we go from 50% to 60% utilization, something like that?

Well, clearly, we'll do that by the end of the year, but maybe sooner rather than later. But good news is coming. I know we're all worn out about General Aluminum. But --

Okay. I probably --

The believers, hopefully, will bring it home this time. But it looks very good.

It's a good report, Eddie.

And then, could you talk a little bit more about the Manufactured Products and some of the bids that are out there? And Matt had mentioned a little bit that the bookings are up in the oil and gas. Maybe, could you give us a little additional commentary on that?

Matt, why don't you address that?

Sure. Yes, other than to say -- what I mentioned, as it related to oil and gas, was that the aftermarket business was picking up. And then I noted that it picked up particularly well in the oil and gas end markets. And the aftermarket picking up is usually a good sign for the new equipment market as well. It means that the -- our embedded equipment out there -- they're running it hard, and actively, and they have to fix it. So that bodes well for the new equipment market. So that was really my commentary.

As it related to the new equipment side of the business -- yes, I mean, clearly, year-over-year, we're seeing much better booking activity than we did towards the second quarter of last year. I mean, significantly greater. So yes, people are starting to buy new equipment again.

Okay. Thank you for answering my questions. Congratulations. It's really a --

Thank you very much for being supportive.

You're welcome, Eddie.

[Michael Carelli].

Hi, good morning.

Morning.

I just had a question related to one of your debt covenants. I think it's the fixed-charge covenant, which is a 1.1 times. And I believe it's EBITDA minus CapEx minus taxes paid over interest expense plus debt repayments. The debt repayment line -- is that any debt repayment? Is that payments on the credit facility also?

It's scheduled debt repayment. So it's the amortization of the term debt.

All right. So I think it's at $10 million this year?

Well, it's not -- won't hit that on a -- maybe on an annualized basis, it would be half of the B, which is the two-year life; and then the A is a 10-year life. So it's about $8 million.

All right. So if you make additional debt repayments on top of that, does that go against -- does that add to the denominator of that covenant?

Only if we buy back bonds.

So not if you pay down the credit facility?

Not if we pay down the credit facility or the term debt.

All right. So if you have -- you're generating cash this year, is that the plan to use that cash -- would be to pay down the term debt or the credit facility?

Well, it depends where the cash generated. If it's in the US and Canada, it will pay down the revolving credit facilities. If it's outside, if it's international, then we'd have to make a decision.

Okay. Okay, thanks a lot.

Sure. Thank you very much.

You have a follow-up question from the line of [John Baum].

Hi, guys. [A high-five] continued great report.

Thank you very much, John.

I'll be quick. Did I hear Matt say that full-year cash CapEx is going to be $5 million?

I didn't specifically comment, John, nor give guidance. I think sort of implied in my comments was that we felt that the business continued to operate not dissimilarly from last year's numbers. Obviously, a first quarter of $200,000 is well below where we'd been at just about any point in the history of this company. So I don't think that that expectation is unreasonable.

Okay. How about -- maybe to Jeff -- cash taxes, either an absolute amount projected for this year, or percentage?

Once again, our cash taxes are going to be foreign taxes. And we're looking -- on a conservative basis, we're probably looking around $4 million.

Very good.

And are you experiencing any inflationary pressures, either in the acquisition of aluminum input, or maybe when you look at the tubular goods in the -- in copper or steel, what do you see on inflation? And you got any like programs to hedge that?

John, it's Matt. I'll take that.

Well, aluminum first -- let's kind of remind everyone that aluminum's a pass-through. So we take no real raw material risk at General Aluminum. So as our single probably largest raw material input at Park-Ohio, that's a nice starting point. We're sort of hedged by our customer contract. So that's number one.

Number two, are we seeing some input pressure? Yes, I think we are. I mean, certainly, the steel markets, particularly out of Asia, have strengthened, which is a not insignificant input to our business. So we are seeing it. I don't think it is significant enough at this point to provide an impact to our forecast.

Having said that, too, from a very strategic level, I would say, increasing raw material prices don't -- they often make our competitive position even stronger, John, I'll tell you that. I think that it's an environment of declining raw materials that often makes our business challenging, particularly when we're carrying some amount of inventory.

So I think that from a pricing perspective, controllable increases over a reasonable period of time in raw material costs are a friend of this business.

Very good.

Finally, on the quoting that you've done -- the Manufactured Goods section, or Products section -- is that still -- how [will that] take you flow through the bottom [on]? You still working like three to six months? Are these longer-term (inaudible) --

No. I think it was Michael, actually, that asked the same question. And each order has its own characteristics. But I think that six months is as good a number as I can give to you on a blended basis.

Very good. Getting great reports, guys. Looking forward to good things coming up. Thank you.

Thank you very much.

Hey, John, I also want to comment. I'm going to [start all] comments sort of generally, because I've gotten this question a couple times. First quarter bookings were strong on a relative basis to last year as well. So to the extent there was a hole in new equipment bookings, it existed really the second quarter and third quarter of last year. Really, the fourth quarter of last year and the first quarter, we have seen an uptick in new equipment booking. Not to the level we saw in '08, but I think that -- I've focused, I think, on -- too much, perhaps, on the degree to which second quarter bookings will exceed last year's second quarter. But that's not to suggest that bookings in the fourth quarter and the first quarter weren't somewhat better than the real soft spot, which was the second and third quarter of last year.

So I think that's an important point. Because the hole in production that caused our results to suffer the third and early fourth quarter of last year -- that window has passed.

Thank you.

At this time, there are no further questions. Presenters, do you have any closing remarks?

Yes. Again, thank you for the continuing support from all of our stakeholders. And we look forward to continuing our process -- our progress in 2010.

Again, thank you very much for taking the time. Have a nice day.

This concludes today's First Quarter 2010 Results Conference Call. You may now disconnect.