Park Ohio Holdings Corp (PKOH) 2011 Q3 法說會逐字稿

Good morning and welcome to the third-quarter 2011 results conference call. At this time, all participants are in listen-only mode. After the presentation, the Company will conduct a question-and-answer session. Today's conference is also being recorded. If you have any objections, you may disconnect at this time.

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 2010 10-K filed with the SEC on March 9, 2011. The Company undertakes no obligation to update any forward-looking statements, whether 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 such facility. For reconciliation from income before income taxes to EBITDA, please refer to the Company's current report on Form 10-Q furnished to the SEC on August 6, 2011.

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

Good morning, ladies and gentlemen. Welcome to the third-quarter Park-Ohio operating review. I'd like to take this opportunity to turn over the meeting to Matthew Crawford, President and COO of the Company. Matthew?

Thank you very much and good morning.

By all accounts, the third quarter of 2011 was successful. Despite some concern heading into the second half of 2011 regarding macroeconomic uncertainty, our Company enjoyed strength in virtually every end market. Moreover, we now expect this demand to continue to be stable through the end of 2011.

Revenue during the third quarter was $244 million, an increase of 20% versus the same period in 2010. The increase was well balanced throughout our business units and is indicative of how well balanced, both geographically and product based, our business has become.

Earnings per share, adjusted for unusual charges in both the third quarter of 2010 and 2011, increased from $0.52 to $0.69, a 33% improvement, as many businesses benefited from the incremental volume and absorption, as well as the ongoing benefits of the restructuring which occurred during 2009 and 2010.

Park-Ohio also generated just less than $10 million during the quarter, which allowed us to reduce net long-term debt to about $277 million.

Turning to the segments, supply technology revenue increased by 20% to $125 million. While the majority of the increase is supported by ongoing improved build rates in almost all industry segments, new customer additions continue to play an important role in year-over-year results.

Additionally, we continue to be successful in pursuing our strategic initiative to grow our international presence to support the expansion plans of current customers, as well as new business opportunities. Most recently, we have meaningfully expanded our commitment to Singapore, where we see robust activity in several end markets.

Operating income improved 33% to $8.5 million, which was a margin of 6.8% on sales. This margin was a slight improvement sequentially from the second quarter. Our additional volume has helped absorb fixed costs, and our team is working very hard to increase productivity during a period of rapid growth.

Turning to aluminum, general aluminum results for the third quarter reflect lower sales due to the end of production for certain parts, as we have discussed on prior calls. New orders, which have been written, are expected to be in excess of $60 million annually for safety-critical suspension and transmission-related parts and are expected to launch in 2012 with full production volumes expected in 2013. The third-quarter results included certain startup costs related to this new business, which will continue until production begins in 2012.

On a positive note, we continued to see strength in our agricultural and truck-related casting production in the third quarter, which represents approximately 20% of the segment revenue.

Looking at manufactured products, revenue increased 39% to $88 million. Third-quarter industrial equipment bookings continue to be very robust with a year-to-date increase of -- I'm sorry, year-over-year increase of 44%.

Aftermarket also continues to be very strong, both for our induction business and our oil and gas product lines. Meanwhile, our forged business is being led by a strong resurgence in rail products, both locomotive and rail car, combined with stable demand in our commercial aerospace business.

Operating income also improved significantly, by 43%, driven by across-the-board improved utilization and excellent revenue mix relating to strength in the aftermarket. We expect continued strength in this segment, which has allowed us to invest in research and development ideas in some exciting alternative-energy projects.

CapEx during the quarter was $4.2 million. We now expect the CapEx number for the year to be $13 million.

Looking at the balance sheet, as we discussed previously, net debt was reduced by $10 million during the quarter. We expect cash performance for the rest of the year to be moderate, since our bond interest payment has now shifted to October.

In closing, we're pleased with the breadth and depth of our third-quarter results. Given these results, we expect continued strong performance in most key markets at least through the balance of the year.

Therefore, we are revising our forecast for 2011 to $970 million in revenue, $2.50 to $2.60 in EPS, and $80 million in EBITDA. Each of those earning numbers are prior to the third-quarter impairment charge. Thank you very much.

Thank you, Matthew. I don't think I can anything to a great report, so I'm going to open up the lines for questioning.

(Operator Instructions). Ajay Kejriwal, FBR.

Good morning. Congratulations. Great quarter. On that guidance, I'm not sure I heard the free cash flow. Did you give a cash flow update?

I did say, I guess to quote, that we expect the balance of the year, the fourth quarter, to have relatively modest to flat free cash flow performance, principally because our bond payment -- our interest cycle for interest payments on the bonds has been shifted to the fourth quarter, the semiannual payments.

Got it. Good. And then, in manufactured products, what was the nature of the impairment?

The impairment was a specific plant where we had a bit of a shift in production and restructuring that, from an accounting perspective, required us to take an impairment charge. And it's specific to one individual plant and one production facility. It's still operating, but this is strictly an accounting impairment.

Got it. And then, in supply tech, maybe if you can talk about the drivers going forward. It looks like things have been very stable in terms of your daily sales for the last several months. But you have these initiatives with new customers and international plans. So, how should we be thinking about the opportunities for supply tech from here on?

I think that the change I was referencing is our customers in general, as you know, are world-class manufacturers and assemblers that often have multiple locations in multiple countries.

So the profile of our customers has decidedly shifted to international locations. We are seeing many of our customers not only shift production into Mexico, but also shifting into parts of Asia.

We are uniquely set up with our service package to make that a smooth transition. So as we see a significant shift out of Western Europe and the U.S., for example, in the IT hardware and the contract manufacturing space into Asia, and specifically into Singapore, we are able to not only help with the transition, but it gives us incremental opportunity not only as they grow their business, but also as we see other participants in that industry that are based out of that part of the world.

So that's what I'm referencing in terms of what I would call not a new growth driver, but certainly one that is moving more quickly.

We have just hired a 25-year senior executive of marketing for an international slot we have developed for supply technology. We are in conversations, again, continually around the world with our customers as they move from one location to another, and we are strengthening ourself from our ability to communicate on an ongoing basis at a broader scope.

Got it, and while we're on that topic, in the past you have talked about the logistics management software, OSCAR. So, curious if you had any updates on any strategic relationships or partnerships there.

We want to increase -- it's our goal, as you know, to increase the sales internationally with OSCAR.

It is becoming more energized by our customers opening up in all different type locations, like India and around the world. So we're looking at numerous ways to participate and grow supply technologies with OSCAR. And it might take a variety of formats, but they're all positive and they're all around following, again, world-class manufacturers around the world.

And quite frankly, Europe looks like to be a very, very important target for us. But we really wanted to be able to put a couple extra bodies in the field who really understood the international business and have been traveling around the world for 25 years.

Michael French, Morgan Joseph.

Congratulations on a strong quarter. I'd like to follow up on Singapore, for a second, on supply tech. What do you think is the total opportunity in that region that you're addressing now?

This is Matt speaking. Well, let me start by saying that the core supply tech business is a North American business.

So today, our revenue, our transactions that are abroad, both in Asia and Europe, are probably just around -- a little under 10%. So clearly, our customers, particularly our marquee customers that drive our topline, are migrating manufacturing into, particularly, Asia at a pace which would suggest that not only is that number going to grow rapidly, but that we have only scratched the surface relative to not only supporting them but supporting their contract manufacturing base or sub-supplier base.

So, I would say that not only is that -- it's an important part of our business. We have been supporting these customers in multiple parts of Asia for years. But I think that we are taking the leap relative to just sort of getting that business by default to now proactively servicing them as they accelerate their production environment to capture market share abroad, which is all incremental volume to us, and also attack new local customers.

So I think we've barely scratched the surface. And I would, candidly, be disappointed if that number didn't climb to a quarter of our business over the next few years.

And when you say a quarter, is that all international or just Singapore itself or --

No, no, no, I'm sorry. I thought I was addressing all -- sort of Europe and Asia as an opportunity for our business.

Singapore, we have had a presence in Singapore for a while. Clearly, we are seeing a migration, particularly in the IT hardware and contract manufacturing space, of which the acceleration is very fast. So it would be hard for me to judge at this juncture what the opportunity is, but the types of customers that are moving there and the speed with which they're moving would suggest that it could go from a very small part of our business to being very material in a short order.

Michael, you have to think of the way we look at Singapore. We all know the population and what the world is going to look like in India and China over the next 10, 15, 20 years. And Singapore is a very, very friendly place for a Company like ours to operate out of. So we like clustering our efforts there around the current customers because they have a broad reach in that region.

Yes, that all makes a lot of sense. And another thing, just on what you mentioned in the presentation that most of the end markets had been strong, but there are a couple that weren't. So what have been the end markets that have been weak for you and you expect to continue to be weak in Q4?

Well, there are small pockets here and there. Obviously, with a business as diverse as ours, you find individual customers that are struggling for discrete reasons.

I would say the only category that's notably sequentially weakened a little bit -- there's probably two. A lot of the durable-goods guys that are tied to construction continue to struggle, number one. And I would say we have seen a little bit of a cycle in the semiconductor industry as of late, and it's softening there. But to suggest that that is really material to the overall fundamentals that are driving our business right now would be misleading.

Right, right, I agree. Thank you, gentlemen. I appreciate it. Good luck.

Larry Chlebina, Chlebina Capital Management.

I have a question on the weak leg of your three-legged stool, aluminum. Is the third quarter, is that the trough quarter?

Actually, quite frankly, I think the softening in the third quarter -- the platforms -- the industry is pretty robust now.

And we have been expecting and signaling for well over a year that the three quarters that we are going to be concerned about were going to be basically in 3, 4, and 1 and 2 of next year. And it's just -- this has hung around a little bit longer than we expected, but this is a switch from platforms.

We saw this coming. We anticipate it. All the new business being written all basically kicks off, so it's the increased revenues in that business in that particular stool, and we have a lot of confidence in that stool to be an important part of the future. We have made the investments to reflect that.

But it's going to be dicey here for the next couple quarters, and then it will start back up. But then, all the new platforms are 2012, 2013, 2014, and 2015.

I would add one comment to that because you asked about a trough. I think we are, on a relative basis, in the trough period. And in our opinion, there's not another leg down in terms of the performance of that business. It's just some volatility along the bottom until we see the incremental production.

So, what I understand that's going on in the world -- first of all, the aluminum casting capacity in the U.S. has greatly diminished since the collapse. And then, we have cafe standards that are skyrocketing, so they have to get the weight out of the vehicles. We have all the transplants that realize having a long supply chain with just-in-time isn't necessarily the best thing, so they're trying to source domestically.

I would think that people are beating your door down to try to get to your capacity. Is that fair to say?

Well, I would like to characterize it as beating the door down. But it's very robust.

Let's put it this way. The number of inquiries we're handling on a daily basis are amazing. When you're starting to quote on business that's been in Korea, you know that things are changing. All of a sudden, everyone woke up and it wasn't about the piece price, it was about the total cost of the inventories and the investments and that and turn and so forth.

And you're absolutely right. The amount of people that can make critical safety parts, or the steering knuckles and the calipers and the brake cylinders, that has been halved.

But one of the things we've been very careful about -- we have capacity, substantial capacity, literally, it could be as high as three times what our revenue is. But we're not so anxious to sell out the capacity right now. We'd like to see the market firm a little bit.

It's awful tight at 12 million cars. Everyone -- you get different views, that cars could be -- maybe one month it could be at a 10 million run rate, but the next three or four years look very exciting. We've got the capacity. We've paid for it. We've invested the CapEx in it, and quite frankly we're looking for higher margins.

The great thing about the balance of our three stools is, clearly, we have two of the companies or divisions running at a very strong rate and we're fortunate enough to be able to pick up the turn of the aluminum business.

But you're right, the combination of lower capacity and high doubt if anyone in the future is ever going to go in and start back into the aluminum casting business, you know. So there are few of us now, and it's a matter of time. And we will grow this business, and it's going to be a bright future.

But all the things you talked about, we have been thinking about for three years. We were just early. We were close to being earlier; you know, we are right there at this point. In the next six months, we're going to have, hopefully, a type of experience there relative to revenues and earnings that we anticipate.

But it's not a bad place to be right now, and when you think back a year, year and a half ago, what the auto industry looked like and if we were going to be in this business, the ones that have been able to get through this crisis starting in 2008 have put themselves in a position in the auto business to be successful.

So when you look at that capacity, you guys were doing almost $170 million a year in that business before the collapse. Then you took out Ravenna Aluminum, which is doing about the same. Is that still intact? In other words, at the margins that you are after, assuming you could fill up that capacity, what kind of revenue -- you said three times, which would imply 90 (multiple speakers)

Well, let's put it this way. We have the capacity. It's somewhere between $250 million and $300 million with our existing plants.

And with the margins that you're after on the operating profit, it's not out of line to think that that could be a double-digit operating profit business?

Well, I think that back when the Company, before -- there was a decision made here when we had two plants doing $90 million with an 8.5% to 9% EBIT, and then we launched ourselves into what we thought was a strategic position -- again, early, too early. But I think you should really think of it in terms of an EBIT of more like 8% as a very solid EBIT.

And the nice thing about it is the depreciation flows that. And if you're not spending the CapEx getting ready for the next round of volume, that can create the cash flow. So it can be a pretty picture. We're working on it.

That's what we're -- I think that's a critical swing for your entire Company to really pull you to the next level. What about the slurry on demand? Is anything happening with that technology?

Well, we've advanced it as far as anyone has, in one of our plants. But quite frankly, since 2008 we have stopped experimenting and practicing and really concentrating on running it lean and mean so it maintained cash flow, which it is.

It really hasn't cost us, in a sense, dollars to get through this valley. But those programs are always first on my hit list relative to cost controls and reductions and things that we think we're very good at.

So yes, we understand it. We'll reactivate it when we get over $200 million, and we'll be the first to market with it. It's a great idea of producing aluminum castings with the quality of a permanent mold and the speed of die-casting. It's a wonderful event, and we will get there. But we're not practicing right now; we're trying to run the companies really tight.

One last question. Jeff, why are your taxes so high? Year to date, you're at 37%. You had $120 million carryforward losses. What's going on on the tax (multiple speakers)

In the tax provision on a GAAP basis, there's a provision in there for taxes that were triggered by the debt restructuring. We ended up paying taxes on the bonds we held in Europe, and that's going to be approximately $2.1 million of our provision year to date.

(Multiple speakers). So to really get to where we are at on an ongoing tax provision under the scenario where we are not providing for U.S. taxes, you would pull out the debt refinancing costs, including $2.1 million of provision, and then you would have our ongoing tax provision number.

But in the third quarter, you were about 30%. Does that flow into the third quarter or --

No, no, it doesn't flow into third quarter. But you have a provision in there for the impairment. It's in the U.S., which is -- it's zero benefit. So effectively what you have is in our tax revision in the third quarter is only for more foreign taxes.

So just so I'm clear, for future quarters, not assuming any extraordinary things, what's your carryforwards -- what would be a good rate to use for modeling purposes?

As long as we have NOL, we're going to be in the low 20s. And once we burn through the NOL and we start having to provide taxes for the U.S., we're going to be in low 30s.

Arthur Winston, Pilot Advisors.

Congratulations on a pretty good quarter, but I'm just wondering if there's anything wrong with your -- on the aluminum business and the automobile business, with the bidding on the assignments you are on, if there's anything, one or two contracts that are losing a lot of money, if there's something worth you mentioning to explain it because I know you've got all these startup costs for new assignments. What's the real deal there?

Well, I don't quite -- we really don't understand your question. I think part of it is there are no production items running through our plants that are not priced properly and not priced at a profit.

What we're dealing with is, again, absorption relative to maintaining our five facilities carrying, obviously, less revenues. So it doesn't reflect anything weak in the business, it just reflects that you have an overhead that is not being absorbed because of volume. But it's not reflective of anything materially wrong with the business and wrong with the contracts.

And as you build up the revenue, as you will see, once it starts to get over 150, it turns out to be a very, very good business. Right here we struggle, but we are on the way to reaching those type of revenue estimates in 2012 in the second half. But there's nothing that reflects anything wrong with the Company.

Nothing, there's really -- everything is more or less on schedule. It's just an underabsorption of fixed costs?

I guess, yes.

One of the terrible things about a plant like the plants we have, these large plants that really can do $70 million, you're sitting there at $35 million, at 50% of capacity, you know it's coming, but you really can't let your engineers go by and you really can't let your quality people go by. You have to maintain a staff. And when you're looking and seeing not even a year from today where you'll need those people and more, and in spite of what people think, maybe there are -- I don't know why people aren't looking for jobs because we're looking for employees. But the skilled employees that can be in this type of work, that's kind of old-fashioned, and it's the type that you have to maintain it. There's no going back on the fixed cost.

And again, that's why I hope I will be very spry and dancing around my office when things perk up in the second half of 2012, 2013, and 2014. And when we are absorbed, the other side is -- it's very exciting. But it's a tough place to be in an underabsorbed plant, maintaining the capacity we have. We are maintaining the people to be a $250 million business. That's the bottom line. That's the bet we've made.

Thank you. That's a good summary. I really appreciate it, guys.

Michael Corelli, Barry Vogel & Associates.

Congratulations on another great quarter. Just a couple of questions. One, just to get -- talk about the aluminum products in a little more detail over the next few quarters. I know, obviously, it's hard to predict exactly how things will look, but it sounds like you are expecting the revenues in that business to decline in the fourth quarter versus the third?

Yes. Currently, that's what we're modeling.

So are we talking about a significant reduction? I mean, are we going down $5 million to $25 million in revenue or something like that, or is that in the realm? Or is it not quite that severe?

We don't give individual guidance on segments, but it's going to be relatively at that level, nothing significant.

And I would imagine, since you had a small profit at $30 million in revenue, that we should be looking at losses in that business in the fourth quarter?

It's going to be close to breakeven to a slight loss is what we're modeling.

And then, is that what you are modeling? And again, I know it's looking out a little bit more, for like the first half of next year, that it stays in that range?

As Ed said, it's going to start ramping up. But it's going to be at a lower level through the first quarter, and then start ramping up into the second quarter.

So you think that first quarter will look somewhat similar to fourth?

Hopefully.

Okay, and then after that, you think it progressively gets better?

That's right.

All right, and then --

Again, you get the ramp-up costs that we're spending the money now to get the revenue. And quite frankly, I think the revenue is going to get up and running. One of the companies is trying to advance the changeover of their vehicles, so it might go earlier.

But that's a pretty good feeling. I think what you see in the aluminum business now is what you're going to get for the -- until the kickoff.

And then, as far as the tax rate, just to talk about the fourth quarter for a minute, so you said low 20s area currently, until the NOL is utilized. Should we be looking at a low 20s rate in the fourth quarter?

Yes, we should.

Okay. And then, I know -- I think Jeff has said in the past that a reasonable amount of your cash is overseas. What about cash uses at this point?

For the cash we currently have?

And the cash you'll generate. Does it continue? I know you can't use all of it to pay down debt because I think a chunk is overseas. Isn't that correct?

Yes. It's unrestricted, so we can use it for whatever strategic opportunities we choose to use it for.

Do you have a priority list or thoughts about what you might do with it?

Well, nothing that we're going to talk about publicly.

So does that -- are acquisitions still something the Company is looking at, or is it something that will be more for debt-related actions? I'm assuming at this point you're not looking at share repurchase or dividends because I haven't heard that from the Company recently. But is my thought process correct?

Well, you have to remember last year, as everyone recalls, we started the year as saying we'd absolutely do no acquisitions, and we ended up -- someone gave us what I call two layup shots late in the year.

So we're never out of the market from a strategic and good acquisitions. But we're always in the position where we'll wait until something comes along that really fits well and we think we can get at the right price, quite frankly.

But again, we're running the Company with the units we have. We don't think this is over yet. The potential in supply technologies continues to grow. Manufactured products are the same. So when we look into 2012, we've got pretty good visibility, particularly on the capital equipment business, so we feel pretty good about that. And again, we don't have to do anything other than be patient.

But as far as stock buyback or dividend, I would imagine those are not ones that are on the horizon right now?

I don't think we really want to comment about that.

And then, just a question. I haven't had a chance -- obviously, you just gave guidance. I haven't had a chance to play through the numbers. But as far as supply tech and aluminum products, are you expecting seasonal declines in the fourth quarter in either or both of those businesses?

I can talk a little bit about supply tech. It's interesting. We used to see significant seasonality in that business, when it was more of a focus on traditional manufacturing guys. As that business has diversified, we've seen less of that. So I would anticipate that we, from a sort of supply tech perspective, that business is not -- you shouldn't think about seasonality in the context of supply technologies.

But you do need to model in that we are going to comp against the ACS acquisition that occurred last year. So we'll comp that in the fourth quarter.

Okay, what about manufactured products?

As I mentioned in my comments, manufactured products as it relates to both of our key businesses, our industrial equipment group and our forged group, continue to see very strong backlog.

So absent some timing related to shipments on significant products, which, candidly, can cut both ways -- often, we see a slowdown around the holidays. Often, we see a pickup related to installations that people want to do during plant shutdowns.

So once again, I think that they do service more traditional manufacturing companies. So we do tend to see, perhaps, a little bit of softness there in the fourth quarter. But it can be offset, candidly, by significant shipments out of the industrial goods business. So looking more at the fundamentals than at the seasonal effect, the growing backlogs in both businesses would bode very well for the next six to nine months.

John Baum, Park-Ohio.

Great quarter, guys. I'm going to go around the table right here. Straight to you, Jeff, I know that -- a couple housekeeping here. I know that we've danced around a little bit, but I'm trying to put pencil to paper here. Can you just blurt out what you think cash to actual cash taxes are going to be for 2011 here as opposed to working a percentage?

Sure. On the continuing business, it's going to be approximately $3 million. On the transactions, the refinancing, we (multiple speakers) will pay that approximately $2 million. A total of about $5 million.

Again, in prior conference calls, I think you've mentioned you've got -- you think you've got NOL carryforwards to cover you through 2012. Is that kind of where you are right now, or is that predicated on future business? Or how do we look for 2012?

Based on what we have today and the way the business is running, we'd be covered through 2012.

Very good. Full year, if I analyze D&A, I'm up to 14.5. Is that a good number to use, thereabouts, or what?

Yes, it's around $15 million.

15, okay, and you said full-year CapEx this year is going to be $13 million, and that's a little bit front-end loaded because you're ramping up in aluminum products. Correct?

That's correct.

And any idea for CapEx budget for 2012 right now?

No, nothing we're going to give guidance on today.

Okay, that's good. Again, great quarter. Eddie, if you could -- I know, strictly speaking, you are from out in the Detroit area. We are seeing a lot of people coming back to Detroit area, engineers, et cetera. Are you anticipating an auto pickup for the domestics that we are starting to see in metro Detroit here? Or what is your forecast looking forward there?

Well, there are a lot of services. The guide that I'm working with is, I think, universally no one sees in the last -- next three to five years a market for the light cars for under 10 million. I think everyone is fairly comfortable with 12 million, and a lot of people feel that it's a 13 million, 14 million five-year run.

And as you know, being from Detroit, the auto companies -- Chrysler is -- what they have accomplished in such a short period of time, and it's the impact on it, and it's pretty exciting. And all the companies -- and it's a little problem that they had in Japan and so forth. And Nissan and Toyota drove a lot of people back into trying the American car. And we all know what's happened to the American car in the last three or four years. The quality and the -- they're right up against the offshore standards in quality.

So I think it will be maybe more difficult to get back that market share than they realize. And the American cars are out there, especially the smaller cars are out there, the Chevys and so forth. So I'm guardedly optimistic.

But at 12 million cars with the compression in the supply base, and they realize that they are scrambling, what you see up there is all the supply parts that were coming from offshore in places like Korea and Japan and China, everyone is looking at that a little differently. So I would imagine Detroit is buzzing relative to opportunities for engineers and every other type of person. So it could be pretty exciting. So, it's good for the American industry and it's good for America.

I know you're being choosy in exercising your capacity. But can we assume -- I know you had a big piece of business, Ford and Chrysler. But are you knocking on all the doors right now, and are the doors opening?

Yes. We are -- and quite frankly, we're trying to diversify ourselves across all the boards. And we're active, and we directly or indirectly sell GM and all the companies, Nissan, Toyota, indirectly.

But as you know, we prefer now to be a totally integrated facility, ingot key treating, machining. We are one-stop shopping at very high-quality standards, and I think the buyers are beginning to understand that one person -- you just can't ship castings from Korea and machine them in Alabama and get them up to Detroit, when we'll go right to Ohio and our four plants. It just doesn't work. We've got such an advantage, and we're going to start taking -- using that advantage going forward.

But things look pretty good for us from the auto viewpoint.

Shifting topics quickly, oil and gas, tubular goods, the natural gas, the fracking, does manufactured products -- is that kind of up their alley, so to speak? Or what do you forecast there?

Yes. We have seen, and part of the research in our industrial equipment group during the past, say, four or five quarters, has been related to some of the domestic strength in capacity building related to those finds, particularly in this part of the country here, in the sort of eastern Midwest. So we have seen some benefit from that in terms of capacity building, and we're continuing to see significant strength in our aftermarket business as we help support the increased production. So, yes, it has been good for us and continues to be good for us.

John, just to give you a little color on that, if you look back at the last 15 pipe mills built in the world, 13 of them were built outside of America, North America, and the last two are being built in North America, one in Texas.

So they're coming back here. Someone expects to use an awful lot of pipe in the future in North America. And there are two major companies betting on it, in Texas and in Ohio, that there'll be tremendous demand for that pipe. And where there is pipe, we're there. So it looks good.

Excellent. Final, Eddie, getting back to you on it, just Singapore. Is a Singapore going to be the gateway into the Far East right now?

I would bet, quite frankly, we get an awful lot of people in and out of this building now, and we're not absolutely positive yet. But it seems to me that there's a real excitement there and an openness to -- and I think companies can do business there comfortably. There's capital there. There's entrepreneurship there. It's a nice place, not that the others aren't exciting. But if you want to bet on a big global world, that might be an important place in the future.

Yes, John, this is Matthew (multiple speakers). I would tell you I would not think of it that way, per se.

Certainly, that makes sense. Singapore is an important hub. But the opportunities there are so massive, I think to suggest that any one particular location is going to dominate that region -- we are -- I mentioned Singapore today because it's kind of a third-quarter event. But we have been, as you know, extremely active in China now for several years. And have a larger presence there than we do in Singapore. And we have a toehold in India, which we expect to expand as well. So, there are going to be multiple approaches to this marketplace.

Good story, great year, and you've got some -- I think the wind is going to be at your back right now. So, we'll talk to in the fourth quarter. Thanks, guys.

At this time, there are no further questions. I would now like to (multiple speakers) the call back over to management for any closing remarks.

Again, thank you very much for joining us today. We appreciate your continuing support, and all the stakeholders at Park-Ohio, including the employees there, are pleased with what we have accomplished so far, year to date. And things, we hope, will continue to improve. But thank you for your support. Have a nice day.

Thank you. This concludes today's third-quarter 2011 results conference call. You may now disconnect.