UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 1-898
AMPCO-PITTSBURGH CORPORATION
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Pennsylvania | 25-1117717 | ||
(State of Incorporation) | (I.R.S. Employer Identification No.) |
726 Bell Avenue, Suite 301
Carnegie, Pennsylvania 15106
(Address of principal executive offices)
(412) 456-4400
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, $1 par value | AP | New York Stock Exchange |
Series A Warrants to purchase shares of Common Stock | AP WS | NYSE American Exchange |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | ☐ | Accelerated filer | ☐ | Emerging growth company | ☐ | |
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Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
On November 2, 2021, 19,093,7829, 2022, 19,403,519 common shares were outstanding.
AMPCO-PITTSBURGH CORPORATION
INDEX
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Part I – |
| Financial Information: |
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| Item 1 – |
| Financial Statements (Unaudited) |
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| Condensed Consolidated Balance Sheets – |
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| Item 2 – |
| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3 – |
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| Item 4 – |
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Part II – |
| Other Information: |
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| Item 1 – |
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| Item 1A – |
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| Item 6 – |
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2
PART I – FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par value)
|
| September 30, 2021 |
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| December 31, 2020 |
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| September 30, 2022 |
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| December 31, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
| $ | 12,251 |
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| $ | 16,842 |
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| $ | 12,190 |
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| $ | 10,337 |
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Receivables, less allowance for doubtful accounts of $964 as of September 30, 2021 and $1,131 as of December 31, 2020 |
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| 67,388 |
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| 60,366 |
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Receivables, less allowance for doubtful accounts of $906 as of September 30, 2022, and $1,240 as of December 31, 2021 |
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| 76,341 |
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| 68,829 |
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Receivables from related parties (Note 17) |
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| 1,881 |
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| 0 |
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Inventories |
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| 82,390 |
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| 73,243 |
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| 92,511 |
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| 88,198 |
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Insurance receivable – asbestos |
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| 16,000 |
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| 16,000 |
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| 16,000 |
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| 16,000 |
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Other current assets |
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| 4,799 |
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| 5,381 |
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| 5,775 |
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| 4,933 |
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Total current assets |
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| 182,828 |
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| 171,832 |
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| 204,698 |
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| 188,297 |
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Property, plant and equipment, net |
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| 159,792 |
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| 162,098 |
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| 153,028 |
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| 158,563 |
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Operating lease right-of-use assets |
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| 4,020 |
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| 4,344 |
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| 3,547 |
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| 4,056 |
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Insurance receivable – asbestos |
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| 93,713 |
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| 101,937 |
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| 97,549 |
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| 105,297 |
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Deferred income tax assets |
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| 2,163 |
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| 2,493 |
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| 2,622 |
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| 2,176 |
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Intangible assets, net |
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| 6,437 |
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| 7,217 |
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| 4,970 |
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| 6,204 |
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Investments in joint ventures |
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| 2,175 |
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| 2,175 |
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| 2,175 |
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| 2,175 |
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Prepaid pensions |
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| 10,516 |
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| 11,963 |
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Other noncurrent assets |
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| 12,746 |
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| 11,112 |
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| 5,260 |
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| 6,901 |
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Total assets |
| $ | 463,874 |
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| $ | 463,208 |
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| $ | 484,365 |
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| $ | 485,632 |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
| $ | 38,922 |
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| $ | 26,678 |
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| $ | 37,584 |
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| $ | 43,105 |
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Accounts payable to related parties (Note 17) |
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| 891 |
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| 1,125 |
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Accrued payrolls and employee benefits |
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| 16,356 |
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| 19,304 |
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| 12,628 |
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| 15,954 |
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Debt – current portion |
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| 18,849 |
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| 12,436 |
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| 15,376 |
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| 20,007 |
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Operating lease liabilities – current portion |
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| 634 |
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| 674 |
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| 630 |
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| 641 |
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Asbestos liability – current portion |
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| 22,000 |
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| 22,000 |
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| 23,000 |
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| 23,000 |
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Other current liabilities |
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| 22,971 |
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| 24,240 |
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| 29,174 |
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| 21,210 |
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Total current liabilities |
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| 119,732 |
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| 105,332 |
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| 119,283 |
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| 125,042 |
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Employee benefit obligations |
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| 75,068 |
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| 81,832 |
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| 54,167 |
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| 62,114 |
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Asbestos liability |
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| 143,867 |
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| 158,196 |
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| 142,631 |
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| 157,314 |
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Long-term debt |
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| 29,051 |
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| 24,807 |
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| 82,914 |
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| 40,912 |
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Noncurrent operating lease liabilities |
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| 3,387 |
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| 3,670 |
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| 2,917 |
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| 3,415 |
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Deferred income tax liabilities |
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| 1,773 |
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| 1,403 |
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| 3,626 |
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| 3,858 |
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Other noncurrent liabilities |
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| 2,335 |
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| 2,969 |
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| 808 |
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| 1,171 |
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Total liabilities |
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| 375,213 |
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| 378,209 |
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| 406,346 |
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| 393,826 |
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Commitments and contingent liabilities (Note 8) |
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Shareholders’ equity: |
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Common stock – par value $1; authorized 40,000 shares; issued and outstanding 19,094 shares as of September 30, 2021 and 18,312 shares as of December 31, 2020 |
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| 19,094 |
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| 18,312 |
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Common stock – par value $1; authorized 40,000 shares; issued and outstanding 19,403 shares as of September 30, 2022, and 19,184 shares as of December 31, 2021 |
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| 19,403 |
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| 19,184 |
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Additional paid-in capital |
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| 174,026 |
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| 170,318 |
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| 175,504 |
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| 174,561 |
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Retained deficit |
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| (43,730 | ) |
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| (43,371 | ) |
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| (53,172 | ) |
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| (56,066 | ) |
Accumulated other comprehensive loss |
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| (69,698 | ) |
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| (68,695 | ) |
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| (72,324 | ) |
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| (55,106 | ) |
Total Ampco-Pittsburgh shareholders’ equity |
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| 79,692 |
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| 76,564 |
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| 69,411 |
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| 82,573 |
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Noncontrolling interest |
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| 8,969 |
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| 8,435 |
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| 8,608 |
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| 9,233 |
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Total shareholders’ equity |
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| 88,661 |
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| 84,999 |
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| 78,019 |
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| 91,806 |
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Total liabilities and shareholders’ equity |
| $ | 463,874 |
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| $ | 463,208 |
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| $ | 484,365 |
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| $ | 485,632 |
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See Notes to Condensed Consolidated Financial Statements.
3
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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| 2022 |
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| 2021 |
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| 2022 |
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| 2021 |
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Net sales: |
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Net sales |
| $ | 81,185 |
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| $ | 75,674 |
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| $ | 260,413 |
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| $ | 241,515 |
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| $ | 97,228 |
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| $ | 78,624 |
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| $ | 289,696 |
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| $ | 253,727 |
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Net sales to related parties (Note 17) |
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| 2,419 |
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| 2,561 |
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| 6,959 |
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| 6,686 |
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Total net sales |
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| 99,647 |
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| 81,185 |
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| 296,655 |
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| 260,413 |
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Operating costs and expenses: |
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Costs of products sold (excluding depreciation and amortization) |
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| 67,990 |
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| 59,461 |
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| 213,011 |
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| 189,604 |
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| 84,378 |
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| 67,990 |
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| 250,685 |
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| 213,011 |
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Selling and administrative |
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| 10,910 |
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| 11,445 |
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| 34,538 |
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| 33,474 |
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| 11,089 |
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| 10,910 |
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| 31,941 |
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| 34,538 |
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Depreciation and amortization |
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| 4,279 |
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| 4,511 |
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| 13,515 |
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| 13,863 |
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| 4,206 |
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| 4,279 |
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| 13,133 |
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| 13,515 |
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Loss on disposal of assets |
|
| 367 |
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| 79 |
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|
| 334 |
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| 131 |
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| 48 |
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| 367 |
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| 47 |
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| 334 |
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Total operating costs and expenses |
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| 83,546 |
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| 75,496 |
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| 261,398 |
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| 237,072 |
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| 99,721 |
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| 83,546 |
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| 295,806 |
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| 261,398 |
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(Loss) income from operations |
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| (2,361 | ) |
|
| 178 |
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| (985 | ) |
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| 4,443 |
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| (74 | ) |
|
| (2,361 | ) |
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| 849 |
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| (985 | ) |
Other income: |
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Other income (expense): |
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Investment-related income |
|
| 14 |
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| 1,215 |
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| 1,079 |
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| 1,327 |
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| 507 |
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| 14 |
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| 513 |
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| 1,079 |
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Interest expense |
|
| (834 | ) |
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| (1,018 | ) |
|
| (2,672 | ) |
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| (3,228 | ) |
|
| (1,486 | ) |
|
| (834 | ) |
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| (3,684 | ) |
|
| (2,672 | ) |
Other income – net |
|
| 2,006 |
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| 1,493 |
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| 4,694 |
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| 2,510 |
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| 3,174 |
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| 2,006 |
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| 7,019 |
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| 4,694 |
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Total other income |
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| 1,186 |
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| 1,690 |
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| 3,101 |
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|
| 609 |
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| 2,195 |
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| 1,186 |
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| 3,848 |
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| 3,101 |
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(Loss) income before income taxes |
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| (1,175 | ) |
|
| 1,868 |
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| 2,116 |
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| 5,052 |
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Income tax (provision) benefit |
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| (291 | ) |
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| (630 | ) |
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| (2,044 | ) |
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| 1,649 |
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Net (loss) income |
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| (1,466 | ) |
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| 1,238 |
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|
| 72 |
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| 6,701 |
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Income (loss) before income taxes |
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| 2,121 |
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| (1,175 | ) |
|
| 4,697 |
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| 2,116 |
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Income tax provision |
|
| (987 | ) |
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| (291 | ) |
|
| (1,432 | ) |
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| (2,044 | ) | ||||||||||||||||
Net income (loss) |
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| 1,134 |
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| (1,466 | ) |
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| 3,265 |
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| 72 |
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Less: Net income attributable to noncontrolling interest |
|
| 123 |
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|
| 270 |
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|
| 431 |
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|
| 923 |
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|
| 288 |
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|
| 123 |
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|
| 371 |
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|
| 431 |
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Net (loss) income attributable to Ampco-Pittsburgh |
| $ | (1,589 | ) |
| $ | 968 |
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| $ | (359 | ) |
| $ | 5,778 |
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Net income (loss) attributable to Ampco-Pittsburgh |
| $ | 846 |
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| $ | (1,589 | ) |
| $ | 2,894 |
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| $ | (359 | ) | ||||||||||||||||
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Net (loss) income per share attributable to Ampco-Pittsburgh common shareholders: |
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Net income (loss) per share attributable to Ampco- Pittsburgh common shareholders: |
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Basic |
| $ | (0.08 | ) |
| $ | 0.07 |
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| $ | (0.02 | ) |
| $ | 0.45 |
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| $ | 0.04 |
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| $ | (0.08 | ) |
| $ | 0.15 |
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| $ | (0.02 | ) |
Diluted |
| $ | (0.08 | ) |
| $ | 0.07 |
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| $ | (0.02 | ) |
| $ | 0.43 |
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| $ | 0.04 |
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| $ | (0.08 | ) |
| $ | 0.15 |
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| $ | (0.02 | ) |
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Weighted average number of common shares outstanding: |
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Basic |
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| 19,093 |
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| 13,343 |
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| 18,905 |
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| 12,915 |
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| 19,396 |
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| 19,093 |
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| 19,291 |
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| 18,905 |
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Diluted |
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| 19,093 |
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| 14,454 |
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| 18,905 |
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|
| 13,585 |
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|
| 19,522 |
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|
| 19,093 |
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| 19,473 |
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| 18,905 |
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See Notes to Condensed Consolidated Financial Statements.
4
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)LOSS
(UNAUDITED)
(in thousands)
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
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Net (loss) income |
| $ | (1,466 | ) |
| $ | 1,238 |
|
| $ | 72 |
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| $ | 6,701 |
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Other comprehensive (loss) income, net of income tax where applicable: |
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Adjustments for changes in: |
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Foreign currency translation |
|
| (2,499 | ) |
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| 4,708 |
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|
| (2,041 | ) |
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| 2,750 |
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Unrecognized employee benefit costs (including effects of foreign currency translation) |
|
| 275 |
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|
| (451 | ) |
|
| 247 |
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|
| 147 |
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Fair value of cash flow hedges |
|
| (8 | ) |
|
| 227 |
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|
| 547 |
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|
| 27 |
|
Reclassification adjustments for items included in net (loss) income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized employee benefit costs |
|
| 457 |
|
|
| 281 |
|
|
| 1,371 |
|
|
| 1,044 |
|
Settlements of cash flow hedges |
|
| (304 | ) |
|
| 10 |
|
|
| (1,024 | ) |
|
| 167 |
|
Other comprehensive (loss) income |
|
| (2,079 | ) |
|
| 4,775 |
|
|
| (900 | ) |
|
| 4,135 |
|
Comprehensive (loss) income |
|
| (3,545 | ) |
|
| 6,013 |
|
|
| (828 | ) |
|
| 10,836 |
|
Less: Comprehensive income attributable to noncontrolling interest |
|
| 124 |
|
|
| 561 |
|
|
| 534 |
|
|
| 1,114 |
|
Comprehensive (loss) income attributable to Ampco-Pittsburgh |
| $ | (3,669 | ) |
| $ | 5,452 |
|
| $ | (1,362 | ) |
| $ | 9,722 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income (loss) |
| $ | 1,134 |
|
| $ | (1,466 | ) |
| $ | 3,265 |
|
| $ | 72 |
|
Other comprehensive loss, net of income tax where applicable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments for changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
| (8,745 | ) |
|
| (2,499 | ) |
|
| (19,787 | ) |
|
| (2,041 | ) |
Unrecognized employee benefit costs (including effects of foreign currency translation) |
|
| 891 |
|
|
| 275 |
|
|
| 1,441 |
|
|
| 247 |
|
Fair value of cash flow hedges |
|
| (251 | ) |
|
| (8 | ) |
|
| (809 | ) |
|
| 547 |
|
Reclassification adjustments for items included in net income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized employee benefit costs |
|
| 281 |
|
|
| 457 |
|
|
| 833 |
|
|
| 1,371 |
|
Settlements of cash flow hedges |
|
| 367 |
|
|
| (304 | ) |
|
| 108 |
|
|
| (1,024 | ) |
Other comprehensive loss |
|
| (7,457 | ) |
|
| (2,079 | ) |
|
| (18,214 | ) |
|
| (900 | ) |
Comprehensive loss |
|
| (6,323 | ) |
|
| (3,545 | ) |
|
| (14,949 | ) |
|
| (828 | ) |
Less: Comprehensive (loss) income attributable to noncontrolling interest |
|
| (269 | ) |
|
| 124 |
|
|
| (625 | ) |
|
| 534 |
|
Comprehensive loss attributable to Ampco-Pittsburgh |
| $ | (6,054 | ) |
| $ | (3,669 | ) |
| $ | (14,324 | ) |
| $ | (1,362 | ) |
See Notes to Condensed Consolidated Financial Statements.
5
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
Three Months Ended September 30, 2022 |
| Common Stock |
|
| Additional Paid-in Capital |
|
| Retained Deficit |
|
| Accumulated Other Comprehensive Loss |
|
| Noncontrolling Interest |
|
| Total |
| ||||||||||||||||||||||||||||||
Balance at July 1, 2022 |
| $ | 19,355 |
|
| $ | 174,868 |
|
| $ | (54,018 | ) |
| $ | (65,424 | ) |
| $ | 8,877 |
|
| $ | 83,658 |
| ||||||||||||||||||||||||
Stock-based compensation |
|
|
|
|
|
| 684 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 684 |
| ||||||||||||||||||||||||
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
| 846 |
|
|
|
|
|
|
| 288 |
|
|
| 1,134 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (6,900 | ) |
|
| (557 | ) |
|
| (7,457 | ) | ||||||||||||||||||||||||
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (269 | ) |
|
| (6,323 | ) | ||||||||||||||||||||||||
Shareholder exercise of warrants (Note 9) |
|
| 48 |
|
|
| (48 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0 |
| ||||||||||||||||||||||||
Issuance of common stock excluding excess tax benefits of $0 |
|
| 0 |
|
|
| 0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0 |
| ||||||||||||||||||||||||
Balance at September 30, 2022 |
| $ | 19,403 |
|
| $ | 175,504 |
|
| $ | (53,172 | ) |
| $ | (72,324 | ) |
| $ | 8,608 |
|
| $ | 78,019 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Three Months Ended September 30, 2021 |
| Common Stock |
|
| Additional Paid-in Capital |
|
| Retained Deficit |
|
| Accumulated Other Comprehensive Loss |
|
| Noncontrolling Interest |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at July 1, 2021 |
| $ | 19,076 |
|
| $ | 173,446 |
|
| $ | (42,141 | ) |
| $ | (67,618 | ) |
| $ | 8,845 |
|
| $ | 91,608 |
|
| $ | 19,076 |
|
| $ | 173,446 |
|
| $ | (42,141 | ) |
| $ | (67,618 | ) |
| $ | 8,845 |
|
| $ | 91,608 |
|
Stock-based compensation |
|
|
|
|
|
| 515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 515 |
|
|
|
|
|
|
| 515 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 515 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
| (1,589 | ) |
|
|
|
|
|
| 123 |
|
|
| (1,466 | ) |
|
|
|
|
|
|
|
|
|
| (1,589 | ) |
|
|
|
|
|
| 123 |
|
|
| (1,466 | ) |
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,080 | ) |
|
| 1 |
|
|
| (2,079 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (2,080 | ) |
|
| 1 |
|
|
| (2,079 | ) |
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 124 |
|
|
| (3,545 | ) | ||||||||||||||||||||||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 124 |
|
|
| (3,545 | ) | ||||||||||||||||||||||||
Shareholder exercise of warrants (Note 9) |
|
| 16 |
|
|
| 75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 91 |
|
|
| 16 |
|
|
| 75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 91 |
|
Issuance of common stock excluding excess tax benefits of $0 |
|
| 2 |
|
|
| (10 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
|
| 2 |
|
|
| (10 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (8 | ) |
Balance at September 30, 2021 |
| $ | 19,094 |
|
| $ | 174,026 |
|
| $ | (43,730 | ) |
| $ | (69,698 | ) |
| $ | 8,969 |
|
| $ | 88,661 |
|
| $ | 19,094 |
|
| $ | 174,026 |
|
| $ | (43,730 | ) |
| $ | (69,698 | ) |
| $ | 8,969 |
|
| $ | 88,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance at July 1, 2020 |
| $ | 12,794 |
|
| $ | 156,855 |
|
| $ | (46,531 | ) |
| $ | (69,202 | ) |
| $ | 7,269 |
|
| $ | 61,185 |
| ||||||||||||||||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance at January 1, 2022 |
| $ | 19,184 |
|
| $ | 174,561 |
|
| $ | (56,066 | ) |
| $ | (55,106 | ) |
| $ | 9,233 |
|
| $ | 91,806 |
| ||||||||||||||||||||||||
Stock-based compensation |
|
|
|
|
|
| 436 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 436 |
|
|
|
|
|
|
| 1,512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,512 |
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
| 968 |
|
|
|
|
|
|
| 270 |
|
|
| 1,238 |
|
|
|
|
|
|
|
|
|
|
| 2,894 |
|
|
|
|
|
|
| 371 |
|
|
| 3,265 |
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 4,484 |
|
|
| 291 |
|
|
| 4,775 |
| ||||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 561 |
|
|
| 6,013 |
| ||||||||||||||||||||||||
Equity rights offering (Note 9) |
|
| 5,508 |
|
|
| 12,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,150 |
| ||||||||||||||||||||||||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (17,218 | ) |
|
| (996 | ) |
|
| (18,214 | ) | ||||||||||||||||||||||||
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (625 | ) |
|
| (14,949 | ) | ||||||||||||||||||||||||
Shareholder exercise of warrants (Note 9) |
|
| 48 |
|
|
| (48 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 0 |
| ||||||||||||||||||||||||
Issuance of common stock excluding excess tax benefits of $0 |
|
| 10 |
|
|
| (20 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (10 | ) |
|
| 171 |
|
|
| (521 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (350 | ) |
Balance at September 30, 2020 |
| $ | 18,312 |
|
| $ | 169,913 |
|
| $ | (45,563 | ) |
| $ | (64,718 | ) |
| $ | 7,830 |
|
| $ | 85,774 |
| ||||||||||||||||||||||||
Balance at September 30, 2022 |
| $ | 19,403 |
|
| $ | 175,504 |
|
| $ | (53,172 | ) |
| $ | (72,324 | ) |
| $ | 8,608 |
|
| $ | 78,019 |
| ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2021 |
| $ | 18,312 |
|
| $ | 170,318 |
|
| $ | (43,371 | ) |
| $ | (68,695 | ) |
| $ | 8,435 |
|
| $ | 84,999 |
|
| $ | 18,312 |
|
| $ | 170,318 |
|
| $ | (43,371 | ) |
| $ | (68,695 | ) |
| $ | 8,435 |
|
| $ | 84,999 |
|
Stock-based compensation |
|
|
|
|
|
| 1,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,543 |
|
|
|
|
|
|
| 1,543 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,543 |
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
| (359 | ) |
|
|
|
|
|
| 431 |
|
|
| 72 |
|
|
|
|
|
|
|
|
|
|
| (359 | ) |
|
|
|
|
|
| 431 |
|
|
| 72 |
|
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,003 | ) |
|
| 103 |
|
|
| (900 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1,003 | ) |
|
| 103 |
|
|
| (900 | ) |
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 534 |
|
|
| (828 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 534 |
|
|
| (828 | ) |
Shareholder exercise of warrants (Note 9) |
|
| 575 |
|
|
| 2,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,308 |
|
|
| 575 |
|
|
| 2,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,308 |
|
Issuance of common stock excluding excess tax benefits of $0 |
|
| 207 |
|
|
| (568 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (361 | ) |
|
| 207 |
|
|
| (568 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (361 | ) |
Balance at September 30, 2021 |
| $ | 19,094 |
|
| $ | 174,026 |
|
| $ | (43,730 | ) |
| $ | (69,698 | ) |
| $ | 8,969 |
|
| $ | 88,661 |
|
| $ | 19,094 |
|
| $ | 174,026 |
|
| $ | (43,730 | ) |
| $ | (69,698 | ) |
| $ | 8,969 |
|
| $ | 88,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance at January 1, 2020 |
| $ | 12,652 |
|
| $ | 156,251 |
|
| $ | (51,341 | ) |
| $ | (68,662 | ) |
| $ | 6,716 |
|
| $ | 55,616 |
| ||||||||||||||||||||||||
Stock-based compensation |
|
|
|
|
|
| 913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 913 |
| ||||||||||||||||||||||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Net income |
|
|
|
|
|
|
|
|
|
| 5,778 |
|
|
|
|
|
|
| 923 |
|
|
| 6,701 |
| ||||||||||||||||||||||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,944 |
|
|
| 191 |
|
|
| 4,135 |
| ||||||||||||||||||||||||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,114 |
|
|
| 10,836 |
| ||||||||||||||||||||||||
Equity rights offering (Note 9) |
|
| 5,508 |
|
|
| 12,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 18,150 |
| ||||||||||||||||||||||||
Issuance of common stock excluding excess tax benefits of $0 |
|
| 152 |
|
|
| 107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 259 |
| ||||||||||||||||||||||||
Balance at September 30, 2020 |
| $ | 18,312 |
|
| $ | 169,913 |
|
| $ | (45,563 | ) |
| $ | (64,718 | ) |
| $ | 7,830 |
|
| $ | 85,774 |
|
See Notes to Condensed Consolidated Financial Statements.
6
S
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Net cash flows (used in) provided by operating activities |
| $ | (4,398 | ) |
| $ | 33,944 |
| ||||||||
Net cash flows used in operating activities |
| $ | (20,405 | ) |
| $ | (4,398 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
| (11,982 | ) |
|
| (6,015 | ) |
|
| (13,003 | ) |
|
| (11,982 | ) |
Proceeds from sale of property, plant and equipment |
|
| 249 |
|
|
| 30 |
|
|
| 3 |
|
|
| 249 |
|
Purchases of long-term marketable securities |
|
| (31 | ) |
|
| (146 | ) |
|
| (496 | ) |
|
| (31 | ) |
Proceeds from sale of long-term marketable securities |
|
| 243 |
|
|
| 349 |
|
|
| 980 |
|
|
| 243 |
|
Net cash flows used in investing activities |
|
| (11,521 | ) |
|
| (5,782 | ) |
|
| (12,516 | ) |
|
| (11,521 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of debt |
|
| (1,730 | ) |
|
| (976 | ) | ||||||||
Proceeds from revolving credit facility |
|
| 19,016 |
|
|
| 0 |
|
|
| 43,000 |
|
|
| 19,016 |
|
Payments on revolving credit facility |
|
| (8,500 | ) |
|
| (34,273 | ) |
|
| (27,283 | ) |
|
| (8,500 | ) |
Proceeds from sale and leaseback financing arrangement |
|
| 15,500 |
|
|
| 0 |
| ||||||||
Payments on sale and leaseback financing arrangements |
|
| (264 | ) |
|
| (176 | ) | ||||||||
Proceeds from equipment financing facility |
|
| 4,014 |
|
|
| 0 |
| ||||||||
Proceeds from related party debt (Note 17) |
|
| 5,776 |
|
|
| 0 |
| ||||||||
Repayments of related party debt (Note 17) |
|
| (4,251 | ) |
|
| (1,065 | ) | ||||||||
Repayments of debt |
|
| (480 | ) |
|
| (489 | ) | ||||||||
Proceeds from shareholder exercise of warrants (Note 9) |
|
| 3,308 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,308 |
|
Proceeds from equity rights offering, net of issuance costs (Note 9) |
|
| 0 |
|
|
| 18,150 |
| ||||||||
Debt issuance costs |
|
| (485 | ) |
|
| (329 | ) |
|
| (104 | ) |
|
| (485 | ) |
Net cash flows provided by (used in) financing activities |
|
| 11,609 |
|
|
| (17,428 | ) | ||||||||
Net cash flows provided by financing activities |
|
| 35,908 |
|
|
| 11,609 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
| (281 | ) |
|
| 586 |
|
|
| (1,134 | ) |
|
| (281 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
| (4,591 | ) |
|
| 11,320 |
| ||||||||
Net increase (decrease) in cash and cash equivalents |
|
| 1,853 |
|
|
| (4,591 | ) | ||||||||
Cash and cash equivalents at beginning of period |
|
| 16,842 |
|
|
| 6,960 |
|
|
| 10,337 |
|
|
| 16,842 |
|
Cash and cash equivalents at end of period |
| $ | 12,251 |
|
| $ | 18,280 |
|
| $ | 12,190 |
|
| $ | 12,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax payments |
| $ | 1,344 |
|
| $ | 1,597 |
|
| $ | 959 |
|
| $ | 1,344 |
|
Interest payments |
| $ | 1,810 |
|
| $ | 2,287 |
|
| $ | 3,896 |
|
| $ | 1,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment in current liabilities |
| $ | 1,339 |
|
| $ | 945 |
|
| $ | 1,009 |
|
| $ | 1,339 |
|
Finance lease right-of-use assets exchanged for lease liabilities |
| $ | 1,250 |
|
| $ | 423 |
|
| $ | 1,105 |
|
| $ | 1,250 |
|
Operating lease right-of-use assets exchanged for lease liabilities |
| $ | 53 |
|
| $ | 691 |
|
| $ | 191 |
|
| $ | 53 |
|
See Notes to Condensed Consolidated Financial Statements.
7
AMPCO-PITTSBURGH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except share amounts)
Overview of the Business
Ampco-Pittsburgh Corporation (the “Corporation”) manufactures and sells highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing (“ALP”) segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates financial performance and makes resource allocation and strategic decisions about the business.
The Segments
The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products.engineered products (“FEP”). Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products (“FEP”)FEP principally are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, and Slovenia and an equity interestinterests in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North American and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
The ALP segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueledfossil fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada.
COVID-19
On January 30, 2020,While the World Health Organization (“WHO”) announced a global health emergency caused by a new strainCorporation is operating at more normal levels following the emergence of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, issued guidance outlining criteria to identify domestic businesses as operating in critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such an order. The Corporation’s domestic businesses are deemed to participate in critical infrastructure industries; however, despite the designation and particularly in 2020, lingering effects continue, some of which are being exacerbated by the Corporation has had to periodically and temporarily idle certain operations of its FCEP segment and, consequently, furlough certain of its employees in response to market conditions. The pandemic has also spurredRussia-Ukraine conflict, including periodic disruptions to the global supply chain. Accordingly, the Corporation has experienced,chain, global inflationary pressures and may continue to experience, customer-requested delays of deliveries or cancellation of orders, lower order intake resulting from customers postponing projects, inability to obtain raw materials and supplies critical to the manufacturing process, delays in receiving and shipping product due to the lack of transportation, and higher cost of production and transportation.
It is difficult to isolate the impact of the pandemic on the Corporation’s operating results, particularly in relation to the unabsorbed costs resulting from the periodic and temporary idling of certain of the Corporation’s forged and cast roll operations and furloughing of employees. In addition, the Corporation is uncertain of the full effect the pandemic will have on it for the longer term since the scope and duration of the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world, hesitancy to use the vaccine and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant, will impact the stability of economic recovery and growth. The extent to which the operations of the Corporation, and the operations of its customers and vendors, may be adversely impacted by the COVID-19 pandemic will depend largely on these future developments. The Corporation may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. It may also incur higher write-offs of accounts receivables and impairment charges on its asset values, including
8
property, plant and equipment and intangible assets. The Corporation is actively monitoring, and will continue to actively monitor, the pandemic and the Russia-Ukraine conflict and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
Note 1 – Unaudited Condensed Consolidated Financial Statements
In response to the pandemic, the United States federal government enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer-side social security payments and contributions to employee benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Subsequently, on March 11, 2021, the American Rescue Plan (“ARP”) Act of 2021 was enacted into law, providing the next phase of economic relief as a result of the COVID-19 pandemic. The ARP Act, among other things, extends the provision relating to refundable payroll tax credits and deferral of contributions to employee benefit plans. Similar programs have been offered in certain of the foreign jurisdictions in which the Corporation operates, including subsidies and reimbursement of certain employee-related costs. While the Corporation has taken, and intends to continue to take, advantage of various provisions of the CARES Act, the ARP Act and other similar programs offered domestically and in foreign jurisdictions in which the Corporation operates, where possible, it is unable to determine what impact those provisions may have on its consolidated financial statements in the future.
|
|
Theunaudited condensed consolidated balance sheet as of September 30, 2021,2022, the unaudited condensed consolidated statements of operations, comprehensive income (loss)loss and shareholders’ equity for the three and nine months ended September 30, 2022, and 2021, and 2020, and the condensed consolidated statements of cash flows for the nine months ended September 30, 2021,2022, and 2020,2021, have been prepared by the Corporation without audit.Corporation. In the opinion of management, all adjustments, consisting of only normal and recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented, have been made. The results of operations for the three and nine months ended September 30, 2021,2022, are not necessarily indicative of the operating results expected for the full year.
Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted.
Recently Implemented Accounting Pronouncements
In December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, Income Taxes (Topic 740). ASU 2019-12 is intended to simplify the accounting for income taxes including removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items, such as other comprehensive income, and accounting for franchise or similar tax, and requiring an entity to reflect the effect of an enacted change in tax laws or rates in the interim period that includes the enactment date. The guidance became effective for the Corporation on January 1, 2021, and did not impact the Corporation’s consolidated financial position, operating results or liquidity.
Recently Issued Accounting Pronouncements
In August 2020,September 2022, the FASBFinancial Accounting Standards Board (the “FASB”) issued ASU 2020-06,2022-04, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per ShareLiabilities – Supplier Finance Programs, relatingwhich requires certain disclosures related to supplier finance programs including the computationnature of earnings per share for convertible instrumentsthe program, activity during the period, changes from period to period, and contracts in an entity’s own equity.potential magnitude. The guidance becomes effective for the Corporation on January 1, 2024, with early adoption of all amendments in the same period permitted.2023, including interim periods. The Corporation is currently evaluating the impact the guidance will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time for applying generally accepted accounting principles to modifications of contracts, hedging relationships and other transactions that reference LIBOR or another rate that will be discontinued by reference rate reform if certain criteria are met. The optional guidance is available as of March 12, 2020, through December 31, 2022. To date, no contracts have been required to be modified as a result of reference rate reform. The Corporation is currently evaluating the impact the guidance will have ondisclosures in its consolidated financial position, operating results and liquidity if such an event occurs in the future and the Corporation chooses to avail itself of the optional guidance.periodic filings.
In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which adds a new impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies it to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses
9
on assets that have a low risk of loss. The guidance originally became effective for the Corporation on January 1, 2020; however, since the Corporation metmeets the definition of a Smaller Reporting Company, as defined by the Securities and Exchange Commission (“SEC”), the effective date was subsequently revised to fiscal years beginning after December 15, 2022. The Corporation is currently evaluating the impact the guidance will have on its consolidated financial position and operating results. It will not, however, affect the Corporation’s liquidity.
8
Note 2 – Inventories |
|
At September 30, 2021,2022, and December 31, 2020,2021, approximately 39% and 35%, respectively, of the inventories were valued onusing the LIFO method with the remaining inventories valued onusing the FIFO method. Inventories were comprised of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Raw materials |
| $ | 21,225 |
|
| $ | 17,893 |
|
| $ | 30,720 |
|
| $ | 22,332 |
|
Work-in-process |
|
| 36,901 |
|
|
| 31,568 |
|
|
| 37,946 |
|
|
| 37,447 |
|
Finished goods |
|
| 12,480 |
|
|
| 12,466 |
|
|
| 16,591 |
|
|
| 18,093 |
|
Supplies |
|
| 11,784 |
|
|
| 11,316 |
|
|
| 7,254 |
|
|
| 10,326 |
|
Inventories |
| $ | 82,390 |
|
| $ | 73,243 |
|
| $ | 92,511 |
|
| $ | 88,198 |
|
Note 3 – Property, Plant and Equipment |
|
Property, plant and equipment were comprised of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Land and land improvements |
| $ | 10,252 |
|
| $ | 10,473 |
|
| $ | 9,687 |
|
| $ | 10,377 |
|
Buildings |
|
| 63,249 |
|
|
| 63,765 |
|
|
| 60,635 |
|
|
| 63,166 |
|
Machinery and equipment |
|
| 343,416 |
|
|
| 339,203 |
|
|
| 342,973 |
|
|
| 345,118 |
|
Construction-in-process |
|
| 10,057 |
|
|
| 4,896 |
|
|
| 16,100 |
|
|
| 11,019 |
|
Other |
|
| 6,787 |
|
|
| 6,870 |
|
|
| 6,763 |
|
|
| 6,798 |
|
|
|
| 433,761 |
|
|
| 425,207 |
|
|
| 436,158 |
|
|
| 436,478 |
|
Accumulated depreciation and amortization |
|
| (273,969 | ) |
|
| (263,109 | ) |
|
| (283,130 | ) |
|
| (277,915 | ) |
Property, plant and equipment, net |
| $ | 159,792 |
|
| $ | 162,098 |
|
| $ | 153,028 |
|
| $ | 158,563 |
|
The majority of the assets of the Corporation, except real property including the land and building of Union Electric Steel UK Limited, an indirect subsidiary of the Corporation (“UES-UK”), is pledged as collateral for the Corporation’s revolving credit facility (Note 6). Land and buildings of UES-UK, equal to $2,856$2,362 (£2,122) at September 30, 2021,2022, are held as collateral by the trustees of the UES-UK defined benefit pension plan (Note 7). Machinery and equipment purchased with proceeds from the equipment finance facility (Note 6), equal to $4,014 at September 30, 2022, are included in construction-in-process and pledged as collateral for the facility. The remaining assets, other than real property, of the Corporation are pledged as collateral for the Corporation’s revolving credit facility (Note 6).
Certain land and land improvements and buildings were included sale and leaseback financing transactions (Note 6). Title to these assets lie with the lender; however, since the transactions qualified as financing transactions, versus sales, the assets remain recorded on the Corporation’s consolidated balance sheet.
The gross value of assets under finance lease right-of-use assetsleases and the related accumulated amortization equaled $3,906approximated $4,188 and $1,164,$1,287, respectively, as of September 30, 2021,2022, and $3,430$3,882 and $1,222,$1,263, respectively, at December 31, 2020. Amortization on2021. Depreciation expense approximated $4,117 and $4,210, including depreciation of assets under finance leases equaledof approximately $77 and $124, and $107 for the three months ended September 30, 2022, and 2021, respectively. Depreciation expense approximated $12,854 and 2020,$13,071, including depreciation of assets under finance leases of approximately $337 and $342, and $245 for the nine months ended September 30, 2022, and 2021, and 2020, respectively.
Note 4 – Intangible Assets
|
|
Intangible assets were comprised of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Customer relationships |
| $ | 5,951 |
|
| $ | 6,191 |
|
| $ | 5,138 |
|
| $ | 5,850 |
|
Developed technology |
|
| 4,271 |
|
|
| 4,457 |
|
|
| 3,662 |
|
|
| 4,201 |
|
Trade name |
|
| 2,498 |
|
|
| 2,646 |
|
|
| 2,028 |
|
|
| 2,442 |
|
|
|
| 12,720 |
|
|
| 13,294 |
|
|
| 10,828 |
|
|
| 12,493 |
|
Accumulated amortization |
|
| (6,283 | ) |
|
| (6,077 | ) |
|
| (5,858 | ) |
|
| (6,289 | ) |
Intangible assets, net |
| $ | 6,437 |
|
| $ | 7,217 |
|
| $ | 4,970 |
|
| $ | 6,204 |
|
9
Changes in intangible assets consisted of the following:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Balance at beginning of the period | $ | 6,654 |
|
| $ | 7,050 |
|
| $ | 7,217 |
|
| $ | 7,625 |
| $ | 5,431 |
|
| $ | 6,654 |
|
| $ | 6,204 |
|
| $ | 7,217 |
|
Amortization of intangible assets |
| (69 | ) |
|
| (295 | ) |
|
| (444 | ) |
|
| (852 | ) |
| (89 | ) |
|
| (69 | ) |
|
| (279 | ) |
|
| (444 | ) |
Other, primarily impact from changes in foreign currency exchange rates |
| (148 | ) |
|
| 260 |
|
|
| (336 | ) |
|
| 242 |
|
| (372 | ) |
|
| (148 | ) |
|
| (955 | ) |
|
| (336 | ) |
Balance at end of the period | $ | 6,437 |
|
| $ | 7,015 |
|
| $ | 6,437 |
|
| $ | 7,015 |
| $ | 4,970 |
|
| $ | 6,437 |
|
| $ | 4,970 |
|
| $ | 6,437 |
|
Note 5 – Other Current Liabilities |
|
Other current liabilities were comprised of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Customer-related liabilities |
| $ | 12,204 |
|
| $ | 16,144 |
|
| $ | 18,245 |
|
| $ | 12,548 |
|
Accrued interest payable |
|
| 2,199 |
|
|
| 2,131 |
|
|
| 829 |
|
|
| 1,772 |
|
Accrued sales commissions |
|
| 1,934 |
|
|
| 1,419 |
|
|
| 1,683 |
|
|
| 1,864 |
|
Other |
|
| 6,634 |
|
|
| 4,546 |
|
|
| 8,417 |
|
|
| 5,026 |
|
Other current liabilities |
| $ | 22,971 |
|
| $ | 24,240 |
|
| $ | 29,174 |
|
| $ | 21,210 |
|
Included in customer-relatedCustomer-related liabilities are costs expected to be incurred with respect toprimarily include liabilities for product warrantieswarranty claims and customer deposits.deposits received on future orders. The Corporation provides a limited warranty on its products, known as assurance typeassurance-type warranties, and may issue credit notes or replace products free of charge for valid claims. A warranty is considered an assurance typeassurance-type warranty if it provides the customer with assurance that the product will function as intended. Historically, warranty claims have been insignificant. The Corporation records a provision for product warranties at the time the underlying sale is recorded. The provision is based on historical experience as a percentage of sales adjusted for potential claims when a liability is probable and for known claims.
Changes in the liability for product warranty claims consisted of the following:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Balance at beginning of the period | $ | 7,840 |
|
| $ | 8,695 |
|
| $ | 8,105 |
|
| $ | 9,065 |
| $ | 6,759 |
|
| $ | 7,840 |
|
| $ | 7,331 |
|
| $ | 8,105 |
|
Satisfaction of warranty claims |
| (923 | ) |
|
| (921 | ) |
|
| (2,668 | ) |
|
| (2,776 | ) |
| (1,100 | ) |
|
| (923 | ) |
|
| (2,226 | ) |
|
| (2,668 | ) |
Provision for warranty claims |
| 632 |
|
|
| 183 |
|
|
| 2,141 |
|
|
| 1,822 |
| |||||||||||||||
Provision for warranty claims, net |
| (22 | ) |
|
| 632 |
|
|
| 1,078 |
|
|
| 2,141 |
| |||||||||||||||
Other, primarily impact from changes in foreign currency exchange rates |
| (135 | ) |
|
| 160 |
|
|
| (164 | ) |
|
| 6 |
|
| (357 | ) |
|
| (135 | ) |
|
| (903 | ) |
|
| (164 | ) |
Balance at end of the period | $ | 7,414 |
|
| $ | 8,117 |
|
| $ | 7,414 |
|
| $ | 8,117 |
| $ | 5,280 |
|
| $ | 7,414 |
|
| $ | 5,280 |
|
| $ | 7,414 |
|
Customer deposits represent amounts collected from, or invoiced to, a customer in advance of revenue recognition and are recorded as other current liabilities on the condensed consolidated balance sheet.recognition. The liability for customer deposits is reversed when the Corporation satisfies its performance obligations and control of the inventory transfers to the customer, typically when title transfers. Performance obligations related to customer deposits are expected to be satisfied in less than one year.
Changes in customer deposits consisted of the following:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Balance at beginning of the period | $ | 6,068 |
|
| $ | 8,551 |
|
| $ | 6,507 |
|
| $ | 4,895 |
| $ | 11,626 |
|
| $ | 6,068 |
|
| $ | 4,328 |
|
| $ | 6,507 |
|
Satisfaction of performance obligations |
| (3,601 | ) |
|
| (5,276 | ) |
|
| (10,360 | ) |
|
| (12,268 | ) |
| (673 | ) |
|
| (3,601 | ) |
|
| (6,375 | ) |
|
| (10,360 | ) |
Receipt of additional deposits |
| 1,622 |
|
|
| 5,428 |
|
|
| 7,956 |
|
|
| 16,032 |
|
| 602 |
|
|
| 1,622 |
|
|
| 13,831 |
|
|
| 7,956 |
|
Other, primarily impact from changes in foreign currency exchange rates |
| (23 | ) |
|
| (21 | ) |
|
| (37 | ) |
|
| 23 |
|
| (78 | ) |
|
| (23 | ) |
|
| (307 | ) |
|
| (37 | ) |
Balance at end of the period | $ | 4,066 |
|
| $ | 8,682 |
|
| $ | 4,066 |
|
| $ | 8,682 |
| $ | 11,477 |
|
| $ | 4,066 |
|
| $ | 11,477 |
|
| $ | 4,066 |
|
10 Note 6 – Debt |
|
Borrowings consistedwere comprised of the following:
|
| September 30, 2021 |
|
| December 31, 2020 |
|
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Revolving credit facility |
| $ | 16,516 |
|
| $ | 6,000 |
|
| $ | 45,461 |
|
| $ | 29,744 |
|
Sale and leaseback financing obligation |
|
| 20,400 |
|
|
| 19,931 |
| ||||||||
Sale and leaseback financing obligations |
|
| 36,303 |
|
|
| 20,546 |
| ||||||||
Industrial Revenue Bonds |
|
| 9,191 |
|
|
| 9,191 |
|
|
| 9,191 |
|
|
| 9,191 |
|
Minority shareholder loan |
|
| 0 |
|
|
| 1,056 |
| ||||||||
Equipment financing facility |
|
| 4,014 |
|
|
| 0 |
| ||||||||
Minority shareholder loan (see Note 17) |
|
| 1,525 |
|
|
| 0 |
| ||||||||
Finance lease liabilities |
|
| 1,793 |
|
|
| 1,065 |
|
|
| 1,796 |
|
|
| 1,438 |
|
Outstanding borrowings |
|
| 47,900 |
|
|
| 37,243 |
|
|
| 98,290 |
|
|
| 60,919 |
|
Debt – current portion |
|
| (18,849 | ) |
|
| (12,436 | ) |
|
| (15,376 | ) |
|
| (20,007 | ) |
Long-term debt |
| $ | 29,051 |
|
| $ | 24,807 |
|
| $ | 82,914 |
|
| $ | 40,912 |
|
The current portion of debt includes primarily a swing loan under the revolving credit facility and the Industrial Revenue Bonds (“IRBs”). By definition, swing loans are temporary advances under the revolving credit facility and short term in nature. Accordingly, swing loans are classified as a current liability until the amount is either repaid, as customers remit payments, or, if elected by the Corporation, refinanced as a longer-term loan under the revolving credit facility. The swing loans equaled $1,461 and $8,744 at September 30, 2022, and December 31, 2021, respectively. Although the IRBs begin to become due in 2027, the bonds can be put back to the Corporation on short notice if they are not able to be remarketed, which is considered remote by the Corporation; accordingly, the IRBs are classified as a current liability.
Revolving Credit Facility
On May 20, 2016, theThe Corporation becameis a party to a Revolving Credit and Security Agreement, which had been amended periodically. On June 29, 2021, the Corporation entered into an amended and restatedrevolving credit security agreement (the “Restated Credit Agreement”) with a syndicate of banks that was amended on June 29, 2021 (the “First Amended and Restated Security Agreement”), and subsequently amended on December 17, 2021, and May 26, 2022. The First Amended and Restated Security Agreement, as subsequently amended, provides for a senior secured asset-based revolving credit facility of $100,000, whichthat can be increased up to $130,000 at the option of the Corporation and with the approval of the lenders.lenders, and an allowance of $20,000 for new equipment financing but, otherwise, restricts the Corporation from incurring additional indebtedness outside of the agreement, unless approved by the banks. The Restated Credit Agreementrevolving credit facility includes sublimitssub-limits for letters of credit not to exceed $40,000 and European borrowings not to exceed $30,000.$30,000, of which up to $7,500 may be allocated for Swedish borrowings. The maturity date for the Restated Credit Agreementrevolving credit facility is June 29, 2026, and, subject to other terms and conditions of the Restated Credit Agreement,agreement, would become due on that date.
Availability under the Restated Credit Agreementrevolving credit facility is based on eligible accounts receivable, inventory and fixed assets. Amounts outstanding underDomestic borrowings from the credit facility bear interest, at the Corporation’s option, at either (i) LIBOR plus an applicable margin ranging between 2.00% to 2.50% based on the quarterly average excess availability or (ii) the alternate base rate plus an applicable margin ranging between 1.00% to 1.50% based on the quarterly average excess availability. European borrowings denominated in euros, pound sterling or krona bear interest at the Successor Rate as defined in the First Amended and Restated Security Agreement. As of September 30, 2022, and December 31, 2021, there were no European borrowings outstanding. Additionally, the Corporation is required to pay a commitment fee of 0.25% based on the daily unused portion of the credit facility.
As of September 30, 2021,2022, the Corporation had outstanding borrowings under the Restated Credit Agreementcredit facility of $16,516.$45,461. The average interest rate was approximatelyapproximated 4% for each of the three and nine months ended September 30, 2021,2022, and 2020. Additionally, the2021. The Corporation also utilizes a portion of the credit facility for letters of credit (Note 8). As of September 30, 2021,2022, remaining availability under the Restated Credit Agreementcredit facility approximated $42,000,$35,622, net of standard availability reserves. DeferredAt September 30, 2021, deferred financing fees of $485 have beenwere incurred related to the First Amended and Restated CreditSecurity Agreement and are being amortized over the remaining term of the agreement.
Borrowings outstanding under the Restated Credit Agreementrevolving credit facility are collateralized by a first priority perfected security interest in substantially all assets of the Corporation and its subsidiaries (other than real property). Additionally, the Restated Credit Agreementrevolving credit facility contains customary affirmative and negative covenants and limitations, including, but not limited to, investments in certain of its subsidiaries, payment of dividends, incurrence of additional indebtedness and guaranties, and acquisitions and divestures. In addition, the Corporation must maintain a certain level of excess availability or otherwise maintain a minimum fixed charge coverage ratio of not less than 1.05 to 1.00. The Corporation was in compliance with the applicable bank covenants under the Restated Credit Agreement as of September 30, 2021.2022.
Sale and Leaseback Financing ObligationObligations
InOn August 30, 2022, Air & Liquid completed a sale and leaseback financing transaction with Store Capital Acquisitions, LLC (“STORE”), valued at approximately $15,500, for certain of its real property, including its manufacturing facilities in Lynchburg, Virginia and Amherst, Virginia (collectively, the “ALS Properties”). Previously, in September 2018, Union Electric Steel Corporation (“UES”), an indirect subsidiary of the Corporation, completed a sale and leaseback financing transaction with STORE for certain of its real property, including its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania (the “Properties”“UES Properties”). Simultaneously
11
In connection with the August 2022 sale and leaseback financing transaction, UES and STORE entered into aan Amended and Restated Master Lease Agreement (the “Restated Lease”), which amended and restated the existing lease agreement pursuantbetween UES and STORE. Pursuant to whichthe Restated Lease, UES leasedwill lease the ALS Properties fromand the buyer.UES Properties (collectively, the Properties), subject to the terms and conditions of the Restated Lease, and will sublease the ALS Properties to Air & Liquid on the same terms as the Restated Lease. The leaseRestated Lease provides for an initial term of 20 years; however, UES may extend the lease for the Properties for four successive periods of five years each. If fully extended, the leaseRestated Lease would expire in September 2058.August 2062. UES also has the option to repurchase the Properties, which it may, and intends to, exercise in 2025,2032, for a price equal to the greater of (i) theirthe Fair Market Value of the Properties, or (ii) 115% of Lessor’s Total Investment, for the Facilities, with such terms defined in the lease agreement. Restated Lease.
Annual payments for the Properties are equal to $2,939 (the “Base Annual Rent”), payable in equal monthly installments. On October 1, 2022, and each anniversary date through August 2052, the Base Annual Rent will increase each anniversary date by an amount equal to the lesser of 2.2% or 1.25% of the change in the consumer price index, as defined in the Restated Lease. The Base Annual Rent during the remaining ten years of the Restated Lease will be equal to the Fair Market Rent, as defined in the Restated Lease.
In connection with the execution of the Restated Lease, UES and STORE entered into a Disbursement Agreement dated August 30, 2022 (the “Disbursement Agreement”), pursuant to which STORE agreed to provide up to $2,500 to UES towards certain improvements in the Carnegie, Pennsylvania manufacturing facility. As of September 30, 2022, no amounts were outstanding under the Disbursement Agreement. The Base Annual Rent under the Restated Lease will be adjusted to repay any amounts advanced under the Disbursement Agreement, at the time of the advance, with such advances to be repaid over the initial term of the Restated Lease of 20 years. Advances under the Disbursement Agreement will be secured by the capital improvements.
The Restated Lease and the Disbursement Agreement contain certain representations, warranties, covenants, obligations, conditions, indemnification provisions and termination provisions customary for those types of agreements.
The effective interest rate approximated 8% for each of the three and nine months ended September 30, 2021,2022, and 2020.2021. Deferred financing fees of $104 were incurred related to the sale and leaseback of the ALS Properties and are being amortized over the initial term of the Restated Lease of 20 years.
See Note 19 for completion of a sale and leaseback financing transaction between Air & Liquid and STORE for certain of its real property, including its manufacturing facility in North Tonawanda, New York, in October 2022.
Industrial Revenue Bonds (“IRBs”)
The Corporation has 2two IRBs outstanding: (i) $7,116 taxable IRB maturing in 2027 and (ii) $2,075 tax-exempt IRB maturing in 2029. Interest accrues on the IRBs at a floating rate which approximated 2.4% and 1.4% for the three and nine months ended September 30, 2022, and 1% for the three and nine months ended September 30, 2021. The IRBs are secured by letters of credit of equivalent amounts and are remarketed periodically.periodically at which time the interest rates are reset. If the IRBs are not able to be remarketed, although considered a remote possibility by the Corporation, and its bankers, the bondholders can seek reimbursement immediately from the letters of credit which serve as collateral for the bonds. Accordingly,credit; accordingly, the IRBs are recorded as current debt.debt on the condensed consolidated balance sheets.
12Equipment Financing Facility
On September 29, 2022, UES and Clarus Capital Funding I, LLC (“Clarus”) entered into a Master Loan and Security Agreement, pursuant to which UES can borrow up to $20,000 to finance certain equipment purchases associated with the FCEP capital program, including progress payments and reimbursement of deposits made to date. Each borrowing will constitute a secured loan transaction (each, a “Term Loan”). Each Term Loan will convert to a Term Note on the earlier of (i) the date in which the associated equipment is placed in service or (ii) December 31, 2023. Each Term Note will have a term of 84 months in arrears fully amortizing and will commence on the date of the Term Note. Interest on each Term Loan will accrue at an annual fixed rate of 8%, payable monthly. Interest on each Term Note will accrue at a fixed rate to be calculated by Clarus as like-term swap rate, as reported in ICE Benchmark, or such other information service available to Clarus, for the week ending immediately prior to the commencement date for such Term Note, plus 4.5%. The Term Loans and Term Notes will be secured by a first priority security interest in and to all of UES’s rights, title and interests in the underlying equipment. At September 30, 2022, $4,014 was outstanding as Term Loans. Note 7 – Pension and Other Postretirement Benefits |
|
Contributions to the Corporation’s employee benefit plans were as follows:
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
U.S. defined benefit pension plans |
| $ | 0 |
|
| $ | 281 |
|
| $ | 236 |
|
| $ | 0 |
|
Foreign defined benefit pension plans |
|
| 483 |
|
|
| 332 |
|
|
| 388 |
|
|
| 483 |
|
Other postretirement benefits (e.g., net payments) |
|
| 469 |
|
|
| 966 |
|
|
| 359 |
|
|
| 469 |
|
U.K. defined contribution pension plan |
|
| 248 |
|
|
| 222 |
|
|
| 193 |
|
|
| 248 |
|
U.S. defined contribution plan |
|
| 2,320 |
|
|
| 2,296 |
|
|
| 2,778 |
|
|
| 2,320 |
|
12
Net periodic pension and other postretirement benefit costs included the following components:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
U.S. Defined Benefit Pension Plans |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Service cost |
| $ | 60 |
|
| $ | 37 |
|
| $ | 182 |
|
| $ | 167 |
|
| $ | 13 |
|
| $ | 60 |
|
| $ | 38 |
|
| $ | 182 |
|
Interest cost |
|
| 1,337 |
|
|
| 1,776 |
|
|
| 4,012 |
|
|
| 5,381 |
|
|
| 1,546 |
|
|
| 1,337 |
|
|
| 4,639 |
|
|
| 4,012 |
|
Expected return on plan assets |
|
| (3,248 | ) |
|
| (3,232 | ) |
|
| (9,746 | ) |
|
| (9,621 | ) |
|
| (3,302 | ) |
|
| (3,248 | ) |
|
| (9,905 | ) |
|
| (9,746 | ) |
Amortization of prior service cost |
|
| 6 |
|
|
| 10 |
|
|
| 17 |
|
|
| 31 |
|
|
| 2 |
|
|
| 6 |
|
|
| 5 |
|
|
| 17 |
|
Amortization of actuarial loss |
|
| 658 |
|
|
| 455 |
|
|
| 1,974 |
|
|
| 1,570 |
|
|
| 558 |
|
|
| 658 |
|
|
| 1,674 |
|
|
| 1,974 |
|
Net benefit income |
| $ | (1,187 | ) |
| $ | (954 | ) |
| $ | (3,561 | ) |
| $ | (2,472 | ) |
| $ | (1,183 | ) |
| $ | (1,187 | ) |
| $ | (3,549 | ) |
| $ | (3,561 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
Foreign Defined Benefit Pension Plans |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Service cost |
| $ | 111 |
|
| $ | 127 |
|
| $ | 285 |
|
| $ | 332 |
|
| $ | 85 |
|
| $ | 111 |
|
| $ | 223 |
|
| $ | 285 |
|
Interest cost |
|
| 207 |
|
|
| 265 |
|
|
| 626 |
|
|
| 781 |
|
|
| 256 |
|
|
| 207 |
|
|
| 821 |
|
|
| 626 |
|
Expected return on plan assets |
|
| (485 | ) |
|
| (496 | ) |
|
| (1,461 | ) |
|
| (1,465 | ) |
|
| (463 | ) |
|
| (485 | ) |
|
| (1,484 | ) |
|
| (1,461 | ) |
Amortization of prior service credit |
|
| (77 | ) |
|
| (72 | ) |
|
| (231 | ) |
|
| (212 | ) |
|
| (65 | ) |
|
| (77 | ) |
|
| (210 | ) |
|
| (231 | ) |
Amortization of actuarial loss |
|
| 162 |
|
|
| 177 |
|
|
| 489 |
|
|
| 522 |
|
|
| 75 |
|
|
| 162 |
|
|
| 242 |
|
|
| 489 |
|
Net benefit (income) expense |
| $ | (82 | ) |
| $ | 1 |
|
| $ | (292 | ) |
| $ | (42 | ) | ||||||||||||||||
Net benefit income |
| $ | (112 | ) |
| $ | (82 | ) |
| $ | (408 | ) |
| $ | (292 | ) |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
Other Postretirement Benefit Plans |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Service cost |
| $ | 61 |
|
| $ | 56 |
|
| $ | 183 |
|
| $ | 169 |
|
| $ | 59 |
|
| $ | 61 |
|
| $ | 176 |
|
| $ | 183 |
|
Interest cost |
|
| 45 |
|
|
| 71 |
|
|
| 136 |
|
|
| 211 |
|
|
| 55 |
|
|
| 45 |
|
|
| 165 |
|
|
| 136 |
|
Amortization of prior service credit |
|
| (258 | ) |
|
| (255 | ) |
|
| (773 | ) |
|
| (763 | ) |
|
| (299 | ) |
|
| (258 | ) |
|
| (897 | ) |
|
| (773 | ) |
Amortization of actuarial gain |
|
| (19 | ) |
|
| (34 | ) |
|
| (58 | ) |
|
| (104 | ) | ||||||||||||||||
Amortization of actuarial loss (gain) |
|
| 6 |
|
|
| (19 | ) |
|
| 19 |
|
|
| (58 | ) | ||||||||||||||||
Net benefit income |
| $ | (171 | ) |
| $ | (162 | ) |
| $ | (512 | ) |
| $ | (487 | ) |
| $ | (179 | ) |
| $ | (171 | ) |
| $ | (537 | ) |
| $ | (512 | ) |
| Note 8 – Commitments and Contingent Liabilities |
Outstanding standby and commercial letters of credit as of September 30, 2021,2022, equaled $14,126, the majority$18,664, of which approximately one-half serves as collateral for the IRB debt. Outstanding surety bonds as of September 30, 2021,2022, approximated $4,000$3,000 (SEK 33,900), which guarantee certain obligations under a credit insurance arrangement for certain of the Corporation’s foreign pension commitments.
The Corporation has undertaken a significant$27,000 capital program to upgrade existing equipment at certain of its FCEP locations whichlocations. The capital program is anticipated to occur over the next two to three years and cost approximately $25,000 to $30,000.be completed by December 31, 2023. At September 30, 2021,2022, commitments for future capital expenditures, including those associated with the FCEP capital program, approximated $20,000.$19,300.
See Note 11 for derivative instruments, Note 15 for litigation and Note 16 for environmental matters.
| Note 9 – Equity Rights Offering |
In September 2020, the Corporation completed an equity rightsequity-rights offering, issuing 5,507,889 shares of its common stock and 12,339,256 Series A warrants to existing shareholders for total gross proceeds of $19,279.shareholders. The shares of common stock and warrants are classified as equity instruments in the condensed consolidated statements of shareholders’ equity. Each Series A warrant provides the holder with the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock, and expires on August 1, 2025. Stock issuance costs equaled $1,129 throughFor the nine months ended September 30, 2020, and were recorded against the proceeds in additional paid in capital. In 2021, the Corporation received proceeds of $3,308 from shareholders who exercised 1,288,910 Series A warrants, equating to the issuance of 575,361 common shares.
In May 2022, the Corporation filed a Tender Offer and Prospectus Supplement (the “Offer”) withtheSEC pursuant to which the exercise price of each tendered Series A warrant was temporarily reduced. DuringtheOffer period, the holdersof Series A warrants were given the opportunity to exercise their Series A warrants at a temporarily reduced cash exercise price of $1.7856 per Series A warrant (or $4.00 per whole share of common stock).The Offer expired on July 15, 2022. The Corporation raised $193 in gross proceeds resulting from 108,375 Series A warrants tendered. Series A warrants that were not exercised during the Offer period reverted to their original terms including the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock. Stock issuance costs approximated $193 through September 30, 2022, and were recorded against the proceeds in additional paid in capital.
Note 10 – Accumulated Other Comprehensive Loss |
|
Net change and ending balances for the various components of accumulated other comprehensive loss as of and for the nine months ended September 30, 2021,2022, and 2020,2021, are summarized below. All amounts are net of tax where applicable.
13
|
| Foreign Currency Translation |
|
| Unrecognized Employee Benefit Costs |
|
| Cash Flow Hedges |
|
| Total Accumulated Other Comprehensive Loss |
|
| Less: Noncontrolling Interest |
|
| Accumulated Other Comprehensive Loss Attributable to Ampco-Pittsburgh |
| ||||||||||||||||||||||||||||||
Balance at January 1, 2022 |
| $ | (14,322 | ) |
| $ | (40,563 | ) |
| $ | 277 |
|
| $ | (54,608 | ) |
| $ | 498 |
|
| $ | (55,106 | ) | ||||||||||||||||||||||||
Net change |
|
| (19,787 | ) |
|
| 2,274 |
|
|
| (701 | ) |
|
| (18,214 | ) |
|
| (996 | ) |
|
| (17,218 | ) | ||||||||||||||||||||||||
Balance at September 30, 2022 |
| $ | (34,109 | ) |
| $ | (38,289 | ) |
| $ | (424 | ) |
| $ | (72,822 | ) |
| $ | (498 | ) |
| $ | (72,324 | ) | ||||||||||||||||||||||||
|
| Foreign Currency Translation |
|
| Unrecognized Employee Benefit Costs |
|
| Cash Flow Hedges |
|
| Total Accumulated Other Comprehensive Loss |
|
| Less: Noncontrolling Interest |
|
| Accumulated Other Comprehensive Loss Attributable to Ampco-Pittsburgh |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance at January 1, 2021 |
| $ | (11,371 | ) |
| $ | (57,652 | ) |
| $ | 589 |
|
| $ | (68,434 | ) |
| $ | 261 |
|
| $ | (68,695 | ) |
| $ | (11,371 | ) |
| $ | (57,652 | ) |
| $ | 589 |
|
| $ | (68,434 | ) |
| $ | 261 |
|
| $ | (68,695 | ) |
Net change |
|
| (2,041 | ) |
|
| 1,618 |
|
|
| (477 | ) |
|
| (900 | ) |
|
| 103 |
|
|
| (1,003 | ) |
|
| (2,041 | ) |
|
| 1,618 |
|
|
| (477 | ) |
|
| (900 | ) |
|
| 103 |
|
|
| (1,003 | ) |
Balance at September 30, 2021 |
| $ | (13,412 | ) |
| $ | (56,034 | ) |
| $ | 112 |
|
| $ | (69,334 | ) |
| $ | 364 |
|
| $ | (69,698 | ) |
| $ | (13,412 | ) |
| $ | (56,034 | ) |
| $ | 112 |
|
| $ | (69,334 | ) |
| $ | 364 |
|
| $ | (69,698 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
Balance at January 1, 2020 |
| $ | (18,352 | ) |
| $ | (50,859 | ) |
| $ | 291 |
|
| $ | (68,920 | ) |
| $ | (258 | ) |
| $ | (68,662 | ) | ||||||||||||||||||||||||
Net change |
|
| 2,750 |
|
|
| 1,191 |
|
|
| 194 |
|
|
| 4,135 |
|
|
| 191 |
|
|
| 3,944 |
| ||||||||||||||||||||||||
Balance at September 30, 2020 |
| $ | (15,602 | ) |
| $ | (49,668 | ) |
| $ | 485 |
|
| $ | (64,785 | ) |
| $ | (67 | ) |
| $ | (64,718 | ) |
The following summarizes the line items affected on the condensed consolidated statements of operations for components reclassified from accumulated other comprehensive loss. Amounts in parenthesis represent credits to net income.
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Amortization of unrecognized employee benefit costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income – net | $ | 277 |
|
| $ | 472 |
|
| $ | 833 |
|
| $ | 1,418 |
|
Income tax provision |
| 4 |
|
|
| (15 | ) |
|
| 0 |
|
|
| (47 | ) |
Net of tax | $ | 281 |
|
| $ | 457 |
|
| $ | 833 |
|
| $ | 1,371 |
|
Settlements of cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (foreign currency purchase contracts) | $ | (7 | ) |
| $ | (6 | ) |
| $ | (20 | ) |
| $ | (20 | ) |
Costs of products sold (excluding depreciation and amortization) (futures contracts – copper and aluminum) |
| 386 |
|
|
| (298 | ) |
|
| 132 |
|
|
| (1,004 | ) |
Total before income tax |
| 379 |
|
|
| (304 | ) |
|
| 112 |
|
|
| (1,024 | ) |
Income tax benefit |
| (12 | ) |
|
| 0 |
|
|
| (4 | ) |
|
| 0 |
|
Net of tax | $ | 367 |
|
| $ | (304 | ) |
| $ | 108 |
|
| $ | (1,024 | ) |
The income tax effect associated with the various components of other comprehensive loss for the three and nine months ended September 30, 2022, and 2021, is summarized below. Amounts in parentheses represent credits to net income (loss). Amounts are after tax where applicable.when reclassified to earnings. Certain amounts have 0no tax effect due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdiction where the income or expense is recognized. Foreign currency translation adjustments exclude the effect of income taxes since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Amortization of unrecognized employee benefit costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income – net | $ | 472 |
|
| $ | 281 |
|
| $ | 1,418 |
|
| $ | 1,044 |
|
Income tax (provision) benefit |
| (15 | ) |
|
| 0 |
|
|
| (47 | ) |
|
| 0 |
|
Net of tax | $ | 457 |
|
| $ | 281 |
|
| $ | 1,371 |
|
| $ | 1,044 |
|
Settlements of cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (foreign currency purchase contracts) | $ | (6 | ) |
| $ | (7 | ) |
| $ | (20 | ) |
| $ | (20 | ) |
Costs of products sold (excluding depreciation and amortization) (futures contracts – copper and aluminum) |
| (298 | ) |
|
| 17 |
|
|
| (1,004 | ) |
|
| 187 |
|
Total before income tax |
| (304 | ) |
|
| 10 |
|
|
| (1,024 | ) |
|
| 167 |
|
Income tax (provision) benefit |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
Net of tax | $ | (304 | ) |
| $ | 10 |
|
| $ | (1,024 | ) |
| $ | 167 |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Income tax effect associated with changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized employee benefit costs |
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 0 |
|
Fair value of cash flow hedges |
| $ | (7 | ) |
| $ | 0 |
|
| $ | (25 | ) |
| $ | 0 |
|
Income tax effect associated with reclassification adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized employee benefit costs |
| $ | 4 |
|
| $ | (15 | ) |
| $ | 0 |
|
| $ | (47 | ) |
Settlement of cash flow hedges |
| $ | (12 | ) |
| $ | 0 |
|
| $ | (4 | ) |
| $ | 0 |
|
| Note 11 – Derivative Instruments |
Certain of the Corporation’s operations are subject to risk from exchange rate fluctuations in connection with sales in foreign currencies. To minimize this risk, foreign currency sales contracts are periodically entered into which would be designated as cash flow or fair value hedges. As of September 30, 2021, 0 anticipated foreign-denominated sales have been hedged.
Additionally, certain divisions of the ALP segment are subject to risk from increases in the price of commodities (copper and aluminum) used in the production of inventory. To minimize this risk, futures contracts are entered into which are designated as cash flow hedges. At September 30, 2022, approximately 33%, or $2,196, of anticipated copper purchases over the next 10 months and 40%, or $812, of anticipated aluminum purchases over the next 10 months are hedged. At September 30, 2021, approximately 43%, or $2,593, of anticipated copper purchases over the next eight months and 56%, or $637, of anticipated aluminum purchases over the next six months were hedged.
The Corporation periodically enters into purchase commitments to cover a portion of its anticipated natural gas and electricity usage. The commitments qualify as normal purchases and, accordingly, are hedged.not reflected on the condensed consolidated balance sheets. At September 30, 2022, the Corporation has purchase commitments covering approximately 25%, or $941, of anticipated natural gas usage through December 31, 2023, for one of its subsidiaries and approximately 28%, or $1,674, of anticipated electricity usage through December 31, 2025, for two of its subsidiaries. Purchases of natural gas and electricity under previously existing commitments equaled $438 and $2,676 for the three and nine months ended September 30, 2022, respectively. There were no purchases of natural gas or electricity under previously existing commitments for the three and nine months ended September 30, 2021.
14
The Corporation previously entered into foreign currency purchase contracts to manage the volatility associated with Euro-denominatedeuro-denominated progress payments to be made for certain machinery and equipment. As of December 31, 2010, all contracts had beenwere settled, and the underlying fixed assets were placed in service. Theservice and the change in fair value of the foreign currency purchase contract at the time of settlement, is includeddeferred in accumulated other comprehensive loss and isbegan being reclassifiedamortized to earnings (depreciation and amortization expense)amortization) over the life of the underlying assets.
No portion of the existing cash flow or fair value hedges is considered to be ineffective, including any ineffectiveness arising from the unlikelihood of an anticipated transaction to occur. Additionally, no amounts have been excluded from assessing the effectiveness of a hedge.
The Corporation periodically enters into purchase commitments to cover a portion of its anticipated natural gas usage for 1 of its subsidiaries. The commitments qualify as normal purchases and, accordingly, are not reflected on the condensed consolidated balance sheet. Purchases of natural gas under previously existing commitments equaled $313 and $1,028, respectively, for the three and nine months ended September 30, 2020. There were 0 purchases of natural gas under purchase commitments for the three and nine months ended September 30, 2021, and as of September 30, 2021, 0 purchase commitments for anticipated natural gas usage are outstanding.
The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds 0no derivative instruments for trading purposes.
Gains (losses) on foreign exchange transactions included in other income – net equaled $369$1,809 and $(58)$3,368 for the three and nine months ended September 30, 2021, and 2020,2022, respectively, and $(705)$369 and $(1,156)$(705) for the three and nine months ended September 30, 2021, and 2020, respectively.
15
The location and fair value of the foreign currency sales contracts recorded on the condensed consolidated balance sheets were as follows:
|
| Location |
| September 30, 2021 |
|
| December 31, 2020 |
| ||
Fair value hedge contracts |
| Other current assets |
| $ | 293 |
|
| $ | 1,123 |
|
|
| Other noncurrent assets |
|
| 0 |
|
|
| 332 |
|
|
| Other current liabilities |
|
| 0 |
|
|
| 12 |
|
Fair value hedged items |
| Receivables |
|
| (293 | ) |
|
| (960 | ) |
|
| Other current liabilities |
|
| 0 |
|
|
| 201 |
|
|
| Other noncurrent liabilities |
|
| 0 |
|
|
| 327 |
|
The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. The balances as of September 30, 2022, and 2021, and 2020, and the amountamounts recognized as and reclassified from accumulated other comprehensive loss for each of the periods are summarized below. Amounts are after tax where applicable. Certain amounts recognized as comprehensive income (loss) or reclassified from accumulated other comprehensive loss have no tax effect due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdiction where the income or expense is recognized.
Three Months Ended September 30, 2022 |
| Beginning of the Period |
|
| Recognized |
|
| Reclassified |
|
| End of the Period |
| ||||||||||||||||||||
Foreign currency purchase contracts |
| $ | 122 |
|
| $ | 0 |
|
| $ | 7 |
|
| $ | 115 |
| ||||||||||||||||
Futures contracts – copper and aluminum |
|
| (662 | ) |
|
| (251 | ) |
|
| (374 | ) |
|
| (539 | ) | ||||||||||||||||
|
| $ | (540 | ) |
| $ | (251 | ) |
| $ | (367 | ) |
| $ | (424 | ) | ||||||||||||||||
Three Months Ended September 30, 2021 |
| Beginning of the Period |
|
| Recognized |
|
| Reclassified |
|
| End of the Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Foreign currency purchase contracts |
| $ | 148 |
|
| $ | 0 |
|
| $ | 6 |
|
| $ | 142 |
|
| $ | 148 |
|
| $ | 0 |
|
| $ | 6 |
|
| $ | 142 |
|
Futures contracts – copper and aluminum |
|
| 276 |
|
|
| (8 | ) |
|
| 298 |
|
|
| (30 | ) |
|
| 276 |
|
|
| (8 | ) |
|
| 298 |
|
|
| (30 | ) |
|
| $ | 424 |
|
| $ | (8 | ) |
| $ | 304 |
|
| $ | 112 |
|
| $ | 424 |
|
| $ | (8 | ) |
| $ | 304 |
|
| $ | 112 |
|
Three Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Nine Months Ended September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign currency purchase contracts |
| $ | 176 |
|
| $ | 0 |
|
| $ | 7 |
|
| $ | 169 |
|
| $ | 135 |
|
| $ | 0 |
|
| $ | 20 |
|
| $ | 115 |
|
Futures contracts – copper and aluminum |
|
| 72 |
|
|
| 227 |
|
|
| (17 | ) |
|
| 316 |
|
|
| 142 |
|
|
| (809 | ) |
|
| (128 | ) |
|
| (539 | ) |
|
| $ | 248 |
|
| $ | 227 |
|
| $ | (10 | ) |
| $ | 485 |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 277 |
|
| $ | (809 | ) |
| $ | (108 | ) |
| $ | (424 | ) |
Nine Months Ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency purchase contracts |
| $ | 162 |
|
| $ | 0 |
|
| $ | 20 |
|
| $ | 142 |
|
| $ | 162 |
|
| $ | 0 |
|
| $ | 20 |
|
| $ | 142 |
|
Futures contracts – copper and aluminum |
|
| 427 |
|
|
| 547 |
|
|
| 1,004 |
|
|
| (30 | ) |
|
| 427 |
|
|
| 547 |
|
|
| 1,004 |
|
|
| (30 | ) |
|
| $ | 589 |
|
| $ | 547 |
|
| $ | 1,024 |
|
| $ | 112 |
|
| $ | 589 |
|
| $ | 547 |
|
| $ | 1,024 |
|
| $ | 112 |
|
Nine Months Ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Foreign currency purchase contracts |
| $ | 189 |
|
| $ | 0 |
|
| $ | 20 |
|
| $ | 169 |
| ||||||||||||||||
Futures contracts – copper and aluminum |
|
| 102 |
|
|
| 27 |
|
|
| (187 | ) |
|
| 316 |
| ||||||||||||||||
|
| $ | 291 |
|
| $ | 27 |
|
| $ | (167 | ) |
| $ | 485 |
|
The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive loss to earnings is summarized below. All amounts are pre-tax.
|
| Location of Gain (Loss) in Statements |
| Estimated to be Reclassified in the Next |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Location of Gain (Loss) in Statements |
| Estimated to be Reclassified in the Next Twelve Months |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| ||||||||||||||||||||||
|
| of Operations |
| 12 Months |
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| of Operations |
| 12 Months |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| ||||||||||
Foreign currency purchase contracts |
| Depreciation and amortization |
| $ | 28 |
|
| $ | 6 |
|
| $ | 7 |
|
| $ | 20 |
|
| $ | 20 |
|
| Depreciation and amortization |
| $ | 28 |
|
| $ | 7 |
|
| $ | 6 |
|
| $ | 20 |
|
| $ | 20 |
|
|
Futures contracts – copper and aluminum |
| Costs of products sold (excluding depreciation and amortization) |
| $ | (30 | ) |
| $ | 298 |
|
| $ | (17 | ) |
| $ | 1,004 |
|
| $ | (187 | ) |
| Costs of products sold (excluding depreciation and amortization) |
| $ | (557 | ) |
| $ | (386 | ) |
| $ | 298 |
|
| $ | (132 | ) |
| $ | 1,004 |
|
|
| 15 Note 12 – Fair Value |
The Corporation’s financial assets and liabilities that are reported at fair value in the condensed consolidated balance sheets as of September 30, 2021,2022, and December 31, 2020,2021, were as follows:
|
| Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
| $ | 4,618 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 4,618 |
|
Foreign currency exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 0 |
|
|
| (293 | ) |
|
| 0 |
|
|
| (293 | ) |
Other current assets |
|
| 0 |
|
|
| 293 |
|
|
| 0 |
|
|
| 293 |
|
As of December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
| $ | 4,402 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 4,402 |
|
Foreign currency exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| 0 |
|
|
| (960 | ) |
|
| 0 |
|
|
| (960 | ) |
Other current assets |
|
| 0 |
|
|
| 1,123 |
|
|
| 0 |
|
|
| 1,123 |
|
Other noncurrent assets |
|
| 0 |
|
|
| 332 |
|
|
| 0 |
|
|
| 332 |
|
Other current liabilities |
|
| 0 |
|
|
| 213 |
|
|
| 0 |
|
|
| 213 |
|
Other noncurrent liabilities |
|
| 0 |
|
|
| 327 |
|
|
| 0 |
|
|
| 327 |
|
|
| Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
| Significant Other Observable Inputs (Level 2) |
|
| Significant Unobservable Inputs (Level 3) |
|
| Total |
| ||||
As of September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
| $ | 3,276 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 3,276 |
|
As of December 31, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
| $ | 4,860 |
|
| $ | 0 |
|
| $ | 0 |
|
| $ | 4,860 |
|
The investments held as other noncurrent assets represent assets held in the “Rabbi” trust for the purpose of providing benefits under the non-qualified defined benefit pension plan. The fair value of the investments is based on quoted prices of the investments in active markets. The fair value of foreign currency exchange contracts is determined based on the fair value of similar contracts with similar terms and remaining maturities. The fair value of futures contracts is based on market quotations. The fair values of the variable-rate IRB debt and borrowings under the Restated Credit Agreement approximate their carrying values. Additionally, the fair values of trade receivables and trade payables approximate their carrying values.
| Note 13 – Net Sales and Income (Loss) |
Net sales and income (loss) income before income taxes by geographic area for the three and nine months ended September 30, 2021,2022, and 2020,2021, are outlined below. When disaggregating revenue, consideration is given to information regularly reviewed by the chief operating decision maker to evaluate the financial performance of the operating segments and make resource allocation decisions. Substantially all foreign net sales for each of the periods is attributable to the FCEP segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
Net Sales | Net Sales | 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| Net Sales | 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||
United States |
|
| $ | 44,859 |
|
| $ | 38,525 |
|
| $ | 133,233 |
|
| $ | 118,312 |
|
|
| $ | 56,535 |
|
| $ | 44,859 |
|
| $ | 164,167 |
|
| $ | 133,233 |
|
Foreign |
|
|
| 36,326 |
|
|
| 37,149 |
|
|
| 127,180 |
|
|
| 123,203 |
|
|
|
| 43,112 |
|
|
| 36,326 |
|
|
| 132,488 |
|
|
| 127,180 |
|
|
|
| $ | 81,185 |
|
| $ | 75,674 |
|
| $ | 260,413 |
|
| $ | 241,515 |
|
|
| $ | 99,647 |
|
| $ | 81,185 |
|
| $ | 296,655 |
|
| $ | 260,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
(Loss) Income Before Income Taxes |
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||||||||||||||||||
Income (Loss) Before Income Taxes |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||||||||||||||
United States (1) |
| $ | (2,201 | ) |
| $ | (331 | ) |
| $ | (3,472 | ) |
| $ | (1,762 | ) |
| $ | (1,134 | ) |
| $ | (2,201 | ) |
| $ | 437 |
|
| $ | (3,472 | ) |
Foreign |
|
| 1,026 |
|
|
| 2,199 |
|
|
| 5,588 |
|
|
| 6,814 |
|
|
| 3,255 |
|
|
| 1,026 |
|
|
| 4,260 |
|
|
| 5,588 |
|
|
| $ | (1,175 | ) |
| $ | 1,868 |
|
| $ | 2,116 |
|
| $ | 5,052 |
|
| $ | 2,121 |
|
| $ | (1,175 | ) |
| $ | 4,697 |
|
| $ | 2,116 |
|
(1) | Includes Corporate costs of |
17
Net sales by product line for the three and nine months ended September 30, 2021,2022, and 2020,2021, were as follows:
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Forged and cast mill rolls | $ | 53,778 |
|
| $ | 52,080 |
|
| $ | 177,918 |
|
| $ | 165,502 |
| $ | 66,653 |
|
| $ | 53,778 |
|
| $ | 193,946 |
|
| $ | 177,918 |
|
Forged engineered products |
| 7,401 |
|
|
| 2,419 |
|
|
| 17,640 |
|
|
| 8,221 |
| |||||||||||||||
FEP |
| 8,858 |
|
|
| 7,401 |
|
|
| 35,902 |
|
|
| 17,640 |
| |||||||||||||||
Heat exchange coils |
| 6,527 |
|
|
| 6,499 |
|
|
| 18,482 |
|
|
| 19,879 |
|
| 8,532 |
|
|
| 6,527 |
|
|
| 22,483 |
|
|
| 18,482 |
|
Air handling systems |
| 8,457 |
|
|
| 6,383 |
|
|
| 22,133 |
|
|
| 21,235 |
| |||||||||||||||
Centrifugal pumps |
| 7,096 |
|
|
| 8,580 |
|
|
| 25,138 |
|
|
| 26,888 |
|
| 7,147 |
|
|
| 7,096 |
|
|
| 22,191 |
|
|
| 25,138 |
|
Air handling systems |
| 6,383 |
|
|
| 6,096 |
|
|
| 21,235 |
|
|
| 21,025 |
| |||||||||||||||
| $ | 81,185 |
|
| $ | 75,674 |
|
| $ | 260,413 |
|
| $ | 241,515 |
| $ | 99,647 |
|
| $ | 81,185 |
|
| $ | 296,655 |
|
| $ | 260,413 |
|
| Note 14 – Stock-Based Compensation |
The Ampco-Pittsburgh Corporation 2016 Omnibus Incentive Plan, as amended (the “Incentive Plan”) originally authorized, authorizes the issuance of up to 1,100,0002,700,000 shares of the Corporation’s common stock for awards under the Incentive Plan. In May 2021, the shareholders of the Corporation approved an amendment and restatement of the Incentive Plan for an additional 1,600,000 shares that could be issued under the Incentive Plan. At that time, there were only 165,179 shares remaining to be issued under the original Incentive Plan. Awards under the Incentive Plan may include incentive stock options and non-qualified stock options, stock appreciation rights, restricted shares and restricted stock units, performance awards, other stock-based awards, or short-term cash incentive awards. If any award is canceled, terminates, expires, or lapses for any reason prior to the issuance of the shares, or if the shares are issued under the Incentive Plan and thereafter are forfeited
16
to the Corporation, the shares subject to such awards and the forfeited shares will not count against the aggregate number of shares available under the Incentive Plan. Shares tendered or withheld to pay the option exercise price or tax withholding will continue to count against the aggregate number of shares of common stock available for grant under the Incentive Plan. Any shares repurchased by the Corporation with cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the Incentive Plan.
The Incentive Plan may be administered by the Board of Directors or the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine, within the limits of the express provisions of the Incentive Plan, the individuals to whom the awards will be granted and the nature, amount and terms of such awards.
The Incentive Plan also provides for equity-based awards during any one year to non-employee members of the Board of Directors, based on the grant date fair value, not to exceed $200. The limit does not apply to shares received by a non-employee director at his or her election in lieu of all or a portion of the director’s retainer for board service.
Stock-based compensation expense, including expense associated with equity-based awards granted to non-employee members of the Board of Directors, for the three and nine months ended September 30, 2021,2022, equaled $684 and 2020, equaled $515 and $436,$1,512, respectively, and for the three and nine months ended September 30, 2021, equaled $515 and 2020, equaled $1,543, and $913, respectively. The income tax benefit recognized in the condensed consolidated statements of operations was not significant due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the majority of the jurisdictions where the expense was recognized.
| Note 15 – Litigation |
The Corporation and its subsidiaries are involved in various claims and lawsuits incidental to their businesses from time to time and are also subject to asbestos litigation as described below.
Asbestos Litigation
Claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). Air & Liquid, and in some cases the Corporation, are defendants (among a number of defendants, often in excess of 50)50 defendants) in casesclaims filed in various state and federal courts.
18
Asbestos Claims
The following table reflects approximate information about the number of claims for Asbestos Liability against Air & Liquid and the Corporation for the nine months ended September 30, 2022, and 2021 and 2020 (claims(number of claims not in thousands):
|
| Nine Months Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Total claims pending at the beginning of the period |
|
| 5,891 |
|
|
| 6,102 |
|
New claims served |
|
| 943 |
|
|
| 769 |
|
Claims dismissed |
|
| (525 | ) |
|
| (725 | ) |
Claims settled |
|
| (301 | ) |
|
| (278 | ) |
Total claims pending at the end of period (1) |
|
| 6,008 |
|
|
| 5,868 |
|
Administrative closures (2) |
|
| (2,914 | ) |
|
|
|
|
Total active claims at the end of the period (2) |
|
| 3,094 |
|
|
|
|
|
Gross settlement and defense costs paid in period (in 000’s) |
| $ | 14,329 |
|
| $ | 21,699 |
|
Avg. gross settlement and defense costs per claim resolved (in 000’s) (3) |
| $ | 17.35 |
|
| $ | 21.63 |
|
|
|
|
|
|
|
. The majority of the settlement and defense costs reflected in the above table waswere reported and paid by insurers. Because claims are often filed and can be settled or dismissed in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Total claims pending at the beginning of the period |
|
| 6,097 |
|
|
| 5,891 |
|
New claims served |
|
| 978 |
|
|
| 943 |
|
Claims dismissed |
|
| (220 | ) |
|
| (525 | ) |
Claims settled |
|
| (288 | ) |
|
| (301 | ) |
Total claims pending at the end of period (1) |
|
| 6,567 |
|
|
| 6,008 |
|
Administrative closures (2) |
|
| (2,908 | ) |
|
| (2,914 | ) |
Total active claims at the end of the period |
|
| 3,659 |
|
|
| 3,094 |
|
Gross settlement and defense costs paid in period (in 000’s) |
| $ | 14,683 |
|
| $ | 14,329 |
|
Avg. gross settlement and defense costs per claim resolved (in 000’s) (3) |
| $ | 28.90 |
|
| $ | 17.35 |
|
(1) | Included as “total claims pending” are approximately 658 and 661 claims at September 30, 2022, and 2021, respectively, classified in various jurisdictions as “inactive” or transferred to a state or federal judicial panel on multi-district litigation. |
(2) | Administrative closures include (i) those claims that were filed six or more years ago, (ii) claims that were previously classified in various jurisdictions as “inactive,” and (iii) claims that were transferred to a state or federal judicial panel on multi-district litigation. Collectively, these claims are unlikely to result in any liability to the Corporation. |
(3) | Claims resolved do not include claims that were administratively closed. |
Asbestos Insurance
The Corporation and Air & Liquid are parties to a series of settlement agreements (“Settlement Agreements”) with insurers that have coverage obligations for the Asbestos Liability (the “Settling Insurers”). Under the Settlement Agreements, the Settling Insurers accept financial responsibility, subject to the terms and conditions of the respective agreements, including overall coverage limits, for pending and future claims for the Asbestos Liability. The Settlement Agreements encompass the majority of insurance policies that provide coverage for claims for the Asbestos Liability.
17
The Settlement Agreements include acknowledgements that Howden North America, Inc. (“Howden”) is entitled to coverage under policies covering the Asbestos Liability for claims arising out of the historical products manufactured or distributed by Buffalo Forge, a former subsidiary of the Corporation (the “Products”), which was acquired by Howden. The Settlement Agreements do not provide for any prioritization on access to the applicable policies or any sublimitssub-limits of liability as to Howden or the Corporation and Air & Liquid and, accordingly, Howden may access the coverage afforded by the Settling Insurers for any covered claim arising out of the Products. In general, access by Howden to the coverage afforded by the Settling Insurers for the Products will erode coverage under the Settlement Agreements available to the Corporation and Air & Liquid for the Asbestos Liability.
Asbestos Valuations
At December 31, 2006, with the assistance of a nationally recognized expert in the valuation of asbestos liabilities, the Corporation recorded its initial reserve for the Asbestos Liability. WithSince then, the assistance ofCorporation and the nationally recognized expert in the reserve forvaluation of asbestos liabilities have reviewed the Asbestos Liability had been periodically updated sinceand the underlying assumptions on a regular basis to determine whether any adjustment to the Asbestos Liability or the underlying assumptions were necessary. When warranted, the Asbestos Liability was adjusted to consider the current trends and new information that time.became available and, if reasonably estimable, to extend the valuation of asbestos liabilities further into the future. In 2018, the Corporation engaged Nathan Associates Inc. (“Nathan”)valuation was extended to update the liability valuation, and additional reserves were established by the Corporation for the Asbestos Liabilityinclude claims pending or projected to be asserted through 2052, the estimated final date by which the Corporation expects to have settled all asbestos-related claims.
In conjunction with the regular updates of the estimated Asbestos Liability, the Corporation also develops an estimate of defense costs expected to be incurred with settling the Asbestos Liability and probable insurance recoveries for the Asbestos Liability and defense costs. In developing the estimate of probable defense costs, the Corporation considers several factors including, but not limited to, current and historical defense-to-indemnity cost ratios. In developing the estimate of probable insurance recoveries, the Corporation considers the expert’s projection of settlement costs for the Asbestos Liability and management’s projection of associated defense costs. In addition, the Corporation consults with its outside legal counsel on insurance matters and a nationally recognized insurance consulting firm that it retains to assist with certain policy allocation matters. The Corporation also considers a number of other factors including the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, gaps in the coverage, policy exhaustions, the nature of the underlying claims for the Asbestos Liability, estimated erosion of insurance limits on account of claims against Howden associated with the Products, prior impairment of policies, insolvencies among the insurance carriers, and creditworthiness of the remaining insurers based on publicly available information. Based on these factors, the Corporation estimates the probable insurance recoveries for the Asbestos Liability and defense costs for the corresponding timeframe of the Asbestos Liability.
In the fourth quarter of 2021, primarily as a result of identified changes in claim data and availability of new information, the Corporation engaged GNARUS Advisors LLC (“GNARUS”) to update the estimated Asbestos Liability. The methodology used by NathanGNARUS in its updated projection was substantially the same methodology employed previously, which has been accepted by the previous expertnumerous courts, and included the following factors:
| • | interpretation of a widely accepted forecast of the population likely to have been exposed to asbestos; |
| • | epidemiological studies estimating the number of people likely to develop asbestos-related diseases; |
| • | analysis of the number of people likely to file an asbestos-related injury claim against the subsidiaries and the Corporation based on such epidemiological data and relevant claims history from January 1, |
| • | an analysis of pending cases, by type of injury claimed and jurisdiction where the claim is filed; and |
| • | an analysis of claims resolution history from January 1, |
|
|
UsingBased on this information, Nathananalysis, the Corporation recorded an increase to its estimated the number of future claims for the Asbestos Liability that would be filed through the year 2052, as well as the settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims through 2052. This methodology has been accepted by numerous courts.
In conjunction with developing the Asbestos Liability through 2052, the Corporation also developed an estimate of probable insurance recoveries$23,333 for the Asbestos Liability. In developing the estimate, the Corporation considered Nathan’s projection for settlement or indemnity costs for the Asbestos Liability and management’s projection of associated defense costs, as well as a number of additional factors. These additional factors included the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, prior impairment of policies and gaps in the coverage, policy exhaustions, insolvencies among certain of the insurance carriers, and the nature of the underlying claims for the Asbestos Liability asserted against the subsidiaries and the Corporation as reflected in the Corporation’s asbestos claims database, as well as estimated erosion of insurance limits on account of claims against Howden arising out of the Products. In addition to consulting with the Corporation’s outside legal counsel on these insurance matters, the Corporation consulted with a nationally recognized insurance consulting firm it retained to assist the Corporation with certain policy allocation matters that also were among the several factors considered by the Corporation when analyzing potential recoveries from relevant historical insurance for the Asbestos Liability. Based upon all of the factors considered by the Corporation, and considering the Corporation’s analysis of publicly available information regarding the credit-worthiness of various insurers, the Corporation estimated the probable insurance recoveries for the Asbestos Liability and defense costs through 2052.
Based on the analysis described above, the Corporation’s reserve at December 31, 2018, for the total costs, including defense costs, for Asbestos Liability claims pending or projected to be asserted through 2052 bringing the Corporation’s reserve for Asbestos Liability to $180,314 at December 31, 2021. The increase was $227,922. Defense costs wereprimarily attributable to recent claim experience, including a higher expected proportion of mesothelioma claims which typically have a higher settlement value, offset by a lower defense-to-indemnity cost ratio (reduced to 70% from 80% based on experience over the past five years) and elimination of an inflationary factor based on historical experience over the past 10+ years which provided no evidence that inflationary pressures influenced settlement averages. In addition, the Corporation increased its estimated at 80% of settlement costs. The Corporation’sinsurance receivable at December 31, 2018,2021, by $16,672 for the estimated insurance recoveries attributable to the claims for which the Corporation’s Asbestos Liability reserve hashad been established includingand the portion of incurred defense costs covered by the Settlement Agreements in effect throughbringing the insurance receivable to $121,297 at December 31, 2018, and the probable payments and reimbursements2021.
18
The following table summarizes activity relating to the estimated indemnity and defense costs for pending and unasserted future Asbestos Liability claims, was $152,508. Atfor the nine months ended September 30, 2021, the Asbestos Liability was $165,867,2022, and the related receivable for insurance recoveries was $109,713.2021.
|
| Nine Months Ended September 30, |
| |||||
|
| 2022 |
|
| 2021 |
| ||
Asbestos liability, beginning of the year |
| $ | 180,314 |
|
| $ | 180,196 |
|
Settlement and defense costs paid |
|
| (14,683 | ) |
|
| (14,329 | ) |
Asbestos liability, end of the period |
| $ | 165,631 |
|
| $ | 165,867 |
|
The following table summarizes activity relating to insurance recoveries for the nine months ended September 30, 2021,2022, and 2020:2021.
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
| ||||
Insurance receivable – asbestos, beginning of the year |
| $ | 117,937 |
|
| $ | 136,932 |
|
| $ | 121,297 |
|
| $ | 117,937 |
|
Settlement and defense costs paid by insurance carriers |
|
| (8,224 | ) |
|
| (15,348 | ) |
|
| (7,748 | ) |
|
| (8,224 | ) |
Insurance receivable – asbestos, end of the period |
| $ | 109,713 |
|
| $ | 121,584 |
|
| $ | 113,549 |
|
| $ | 109,713 |
|
The balance of the insurance receivable recorded by the Corporation does not assume any recovery from insolvent carriers. In addition, aA substantial majority of the insurance recoveries deemed probable is from insurance companies rated A – (excellent) or better by
20
A.M. Best Corporation. There can be no assurance, however, that there will not be insolvencies among the relevant insurance carriers, or that the assumed percentage recoveries for certain carriers will prove correct.
The amounts recorded for the Asbestos Liability and insurance receivable rely on assumptions that are based on currently known facts and strategy. The Corporation’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Corporation’s or Nathan’sthe experts’ calculations vary significantly from actual results. Key variables in these assumptions are identified above and also include the number and typenature of new claims to be filed each year, the average cost of disposing of each such new claim, average annual defense costs, compliance by relevant parties with the terms of the Settlement Agreements, and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and ability to recover under the Corporation’s insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation.
The Corporation intends to continue to evaluate the Asbestos Liability and related insurance receivable, as well as the underlying assumptions, on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance, these regular reviews may result in the Corporation adjusting its current reserve; however, the Corporation is currently unable to estimate such future adjustments. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivable could be material to the operating results for the periods in which the adjustments to the liability or receivable are recorded and to the Corporation’s liquidity and consolidated financial position.position and liquidity.
Note 16 – Environmental Matters |
|
The Corporation is currently performing certain remedial actions in connection with the sale of real estate previously owned and periodically incurs costs to maintain compliance with environmental laws and regulations. Environmental exposures are difficult to assess and estimate for numerous reasons, including lack of reliable data, the multiplicity of possible solutions, the years of remedial and monitoring activity required, and identification of new sites. In the opinion of management, theThe undiscounted potential liability for remedial actions and environmental compliance measures of approximatelyapproximated $100 at September 30, 2022, and December 31, 2021.
Note 17 – Related Parties
Shanxi Åkers TISCO Roll Co., Ltd. (“ATR”) periodically has loans outstanding with its minority shareholder. At September 30, 2022, ATR’s outstanding loan balance with its minority shareholder approximated $1,525 (RMB 10,852). At December 31, 2021, no loans were outstanding. For the nine months ended September 30, 2022, borrowings approximated $5,776 (RMB 38,470) and repayments approximate $4,251 (RMB 27,618). For the nine months ended September 30, 2021, no additional amounts were borrowed and repayments on previously existing loans approximated $1,065 (RMB 6,901).
Interest on borrowings accrues at the three-to-five-year loan interest rate set by the People’s Bank of China, which approximated 5% for each of the three and nine months ended September 30, 2022, and 2021. For the nine months ended September 30, 2022, ATR paid $943 (RMB 6,241) of interest. For the nine months ended September 30, 2021, no interest was paid. Accrued interest approximated $696 (RMB 4,950) and $1,713 (RMB 10,901) as of September 30, 2022, and December 31, 2021, respectively, and is considered adequate basedrecorded in other current liabilities on information knownthe condensed consolidated balance sheets.
Purchases from ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $1,020 (RMB 7,539) and $6,838 (RMB 45,251) for the three and nine months ended September 30, 2022, respectively, and $2,537 (RMB 16,394) and $8,794 (RMB 56,889) for the three and nine months ended September 30, 2021, respectively. The amount payable to date.
| 19 ATR’s minority shareholder and its affiliates for purchases approximated $891 (RMB 6,337) and $1,125 (RMB 7,157) at September 30, 2022, and December 31, 2021, respectively. Sales to ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $2,419 (RMB 16,620) and $6,959 (RMB 46,049) for the three and nine months ended September 30, 2022, respectively, and $2,561 (RMB 16,553) and $6,686 (RMB 43,251) for the three and nine months ended September 30, 2021, respectively. The amount receivable from ATR’s minority shareholder and its affiliates for sales approximated $1,881 (RMB 13,387) at September 30, 2022. No amounts were receivable from ATR’s minority shareholder and its affiliates at December 31, 2021. Additionally, customer deposits received from ATR’s minority shareholder and its affiliates on future orders approximated $526 (RMB 3,746) and $616 (RMB 3,921) at September 30, 2022, and December 31, 2021, respectively, and are recorded in other current liabilities on the condensed consolidated balance sheets. Note 18 – Business Segments |
Presented below are the net sales and income (loss) income before income taxes for the Corporation’s 2two business segments:segments.
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged and Cast Engineered Products | $ | 61,179 |
|
| $ | 54,499 |
|
| $ | 195,558 |
|
| $ | 173,723 |
| $ | 75,511 |
|
| $ | 61,179 |
|
| $ | 229,848 |
|
| $ | 195,558 |
|
Air and Liquid Processing |
| 20,006 |
|
|
| 21,175 |
|
|
| 64,855 |
|
|
| 67,792 |
|
| 24,136 |
|
|
| 20,006 |
|
|
| 66,807 |
|
|
| 64,855 |
|
Total Reportable Segments | $ | 81,185 |
|
| $ | 75,674 |
|
| $ | 260,413 |
|
| $ | 241,515 |
| $ | 99,647 |
|
| $ | 81,185 |
|
| $ | 296,655 |
|
| $ | 260,413 |
|
(Loss) income before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Income (loss) before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Forged and Cast Engineered Products | $ | (2,832 | ) |
| $ | 1,301 |
|
| $ | 688 |
|
| $ | 5,434 |
| $ | (62 | ) |
| $ | (2,832 | ) |
| $ | 1,107 |
|
| $ | 688 |
|
Air and Liquid Processing |
| 2,891 |
|
|
| 2,261 |
|
|
| 7,265 |
|
|
| 7,691 |
|
| 2,917 |
|
|
| 2,891 |
|
|
| 8,177 |
|
|
| 7,265 |
|
Total Reportable Segments |
| 59 |
|
|
| 3,562 |
|
|
| 7,953 |
|
|
| 13,125 |
|
| 2,855 |
|
|
| 59 |
|
|
| 9,284 |
|
|
| 7,953 |
|
Other expense, including corporate costs |
| (1,234 | ) |
|
| (1,694 | ) |
|
| (5,837 | ) |
|
| (8,073 | ) |
| (734 | ) |
|
| (1,234 | ) |
|
| (4,587 | ) |
|
| (5,837 | ) |
Total | $ | (1,175 | ) |
| $ | 1,868 |
|
| $ | 2,116 |
|
| $ | 5,052 |
| $ | 2,121 |
|
| $ | (1,175 | ) |
| $ | 4,697 |
|
| $ | 2,116 |
|
Note 19 – Subsequent Event
On October 14, 2022, Air & Liquid completed a sale and leaseback financing transaction with STORE, valued at $4,500 for its real property, including its manufacturing facility, located in North Tonawanda, New York. Net proceeds, after transaction-related costs, approximated $4,444. In connection with the sale and leaseback financing transaction, UES and STORE amended the Restated Lease.
20
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except share and per share amounts)
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by us or on behalf of Ampco-Pittsburgh Corporation (the “Corporation”). Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q, as well as the condensed consolidated financial statements and notes thereto,hereto, may include, but are not limited to, statements about operating performance, trends and events that we expect or anticipate will occur in the future, statements about sales and production levels, restructurings, the impact from global pandemics (including COVID-19), and international conflicts, profitability and anticipated expenses, inflation, the global supply chain, future proceeds from the exercise of outstanding warrants, and cash outflows. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward-looking statements” within the meaning of the Act and words such as “may,” “will”,“will,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “forecast”“forecast,” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For us, these risks and uncertainties include, but are not limited to:
| • | economic downturns, cyclical demand for our products and |
| • | excess global capacity in the steel |
| • | fluctuations |
| • | increases in commodity prices or insufficient hedging against increases in commodity prices, reductions in electricity and natural gas supply or shortages of key production |
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| • | limitations in availability of capital to fund our |
• | inability to maintain adequate liquidity to meet our operating cash flow requirements, repay maturing debt and |
• | inability to obtain necessary capital or financing on satisfactory terms to acquire capital expenditures that may be necessary to support our growth strategy, |
| • | inoperability of certain equipment on which we |
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| • | liability of our subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our |
• | changes in the existing regulatory environment, |
• | inability to successfully restructure our operations, |
• | consequences of global pandemics (including COVID-19) and international conflicts, |
• | work stoppage or another industrial action on the part of any of our unions, |
| • | inability to satisfy the continued listing requirements of the New York Stock Exchange or the NYSE |
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| • | potential attacks on information technology infrastructure and other cyber-based business |
• | failure to maintain an effective system of internal control, and |
| • | those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by us, particularly in Item 1A, Risk Factors, in Part I of our latest Annual Report on Form 10-K for the year ended December 31, |
We cannot guarantee any future results, levels of activity, performance or achievements. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
21
The Business
TheAmpco-Pittsburgh Corporation manufactures and sellsits subsidiaries (collectively, the “Corporation”) manufacture and sell highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing (“ALP”) segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates financial performance and makes resource allocation and strategic decisions about the business.
The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products.engineered products (“FEP”). Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products (“FEP”)FEP principally are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, and Slovenia, and an equity interest in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
The ALP segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada.
COVID-19Executive Overview
On January 30, 2020,While the World Health Organization (“WHO”) announced a global health emergency caused by a new strainCorporation is operating at more normal levels following the emergence of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, issued guidance outlining criteria to identify domestic businesses as operating in critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such an order. The Corporation’s domestic businesses are deemed to participate in critical infrastructure industries; however, despite the designation and particularly in 2020, the Corporation has had to periodically and temporarily idle certain operationslingering effects continue, some of its FCEP segment and, consequently, furlough certain of its employees in response to market conditions. The pandemic has also spurred disruptions to the global supply chain. Accordingly, the Corporation has experienced, and may continue to experience, customer-requested delays of deliveries or cancellation of orders, lower order intake resulting from customers postponing projects, inability to obtain raw materials and supplies critical to the manufacturing process, delays in receiving and shipping product due to the lack of transportation, and higher cost of production and transportation.
It is difficult to isolate the impact of the pandemic on the Corporation’s operating results, particularly in relation to the unabsorbed costs resulting from the periodic and temporary idling of certain of the Corporation’s forged and cast roll operations and furloughing of employees. In addition, the Corporation is uncertain of the full effect the pandemic will have on it for the longer term since the scope and duration of the pandemic is unknown, and evolving factors such as the level and timing of the distribution of efficacious vaccines across the world, hesitancy to use the vaccine and the extent of any resurgences of the virus or emergence of new variants of the virus, such as the Delta variant, will impact the stability of economic recovery and growth. The extent to which the operations of the Corporation, and the operations of its customers and vendors, may be adversely impactedare being exacerbated by the COVID-19 pandemic will depend largely on these future developments. The Corporation may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. It may also incur higher write-offs of accounts receivables and impairment charges on its asset values, including property, plant and equipment and intangible assets. Russia-Ukraine conflict, including:
• | Periodic disruptions to the global supply chain for the Corporation and its customers, |
• | Global inflationary pressures and |
• | Delays in receiving and shipping product due to the lack of transportation. |
The Corporation is actively monitoring, and will continue to actively monitor, the pandemic and the Russia-Ukraine conflict and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
In response to the pandemic, the United States federal government enacted the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law on March 27, 2020. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer-side social security payments and contributions to employee benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Subsequently, on March 11, 2021, the American Rescue Plan (“ARP”) Act of 2021 was enacted into law, providing the next phase of economic relief as a result of the COVID-19 pandemic. The ARP Act, among other things, extends the provision relating to refundable payroll tax credits and deferral of contributions to employee benefit plans. Similar programs have been offered in certain of the foreign jurisdictions in which the Corporation operates, including subsidies and reimbursement of certain employee-related costs. While the Corporation has taken, and intends to continue to take, advantage of various provisions of the CARES Act, the ARP Act and other similar programs offered domestically and in foreign jurisdictions in which the Corporation operates, where possible, it is unable to determine what impact those provisions may have on its consolidated financial statements in the future.
Executive Overview
For the FCEP segment, roll market conditions are improving but remain belowhave recovered to pre-pandemic levels. Expectations are for sales orders to return to pre-pandemic levels in 2022. The FEP market is also showing signs of improvementhas strengthened with increasing demand from the steel distribution and oil and gas markets. While market conditions are improving,markets, on rising oil prices. Although the segment is experiencingcontinues to be adversely impacted by escalating costs, particularly for raw and ancillary materials, energy and transportation, and supply chain issues. The segment has recently announced price increases for its forged and cast rolls and FEP product and changes to its surcharge policy for FEP product, each effective immediately, aimed at recoveringpolicies announced in the fourth quarter of 2021 are absorbing a significant portion of the escalating costs.these costs, albeit on a lag. Approximately 75% of customer orders include a commodity surcharge. The primary focus for this segment is diversificationto maintain a strong position in the roll and development ofFEP markets, diversify and develop FEP for use in other industries, ongoing commercial actions,complete operational and efficiency improvements at its facilities, and capital equipment investment activities to upgrade existing equipment with a goal of reducing costs, improving reliability and increasing FEP capacity and capabilities.
For the ALP segment, the businesses are benefitting from steadyincreasing demand but, similarly, are facing increasing production and transportation costs and supply chain issues. The segment has been implementing price increases for certain of its products to help mitigate these inflationary effects. The focus for this segment is to grow revenues, increase margins, strengthen engineering and manufacturing capabilities increase manufacturing productivity, and continue to improve its sales distribution network.
22
Selected Financial Information
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||
|
| 2021 |
| 2020 |
| Change |
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| 2021 |
| 2020 |
| Change |
| ||||||
Net sales |
| $ | 81,185 |
| $ | 75,674 |
| $ | 5,511 |
|
| $ | 260,413 |
| $ | 241,515 |
| $ | 18,898 |
|
Costs of products sold, excluding depreciation and amortization |
|
| 67,990 |
|
| 59,461 |
|
| 8,529 |
|
|
| 213,011 |
|
| 189,604 |
|
| 23,407 |
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Percentage of net sales |
|
| 83.7 | % |
| 78.6 | % |
|
|
|
|
| 81.8 | % |
| 78.5 | % |
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Selling and administrative |
|
| 10,910 |
|
| 11,445 |
|
| (535 | ) |
|
| 34,538 |
|
| 33,474 |
|
| 1,064 |
|
Depreciation and amortization |
|
| 4,279 |
|
| 4,511 |
|
| (232 | ) |
|
| 13,515 |
|
| 13,863 |
|
| (348 | ) |
Investment-related income |
|
| 14 |
|
| 1,215 |
|
| (1,201 | ) |
|
| 1,079 |
|
| 1,327 |
|
| (248 | ) |
Interest expense |
|
| (834 | ) |
| (1,018 | ) |
| 184 |
|
|
| (2,672 | ) |
| (3,228 | ) |
| 556 |
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Other income – net |
|
| 2,006 |
|
| 1,493 |
|
| 513 |
|
|
| 4,694 |
|
| 2,510 |
|
| 2,184 |
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Income tax (provision) benefit |
|
| (291 | ) |
| (630 | ) |
| 339 |
|
|
| (2,044 | ) |
| 1,649 |
|
| (3,693 | ) |
Net (loss) income attributable to Ampco-Pittsburgh |
|
| (1,589 | ) |
| 968 |
|
| (2,557 | ) |
|
| (359 | ) |
| 5,778 |
|
| (6,137 | ) |
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|
| September 30, 2021 |
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| December 31, 2020 |
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Backlog |
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| $ | 278,263 |
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| $ | 246,131 |
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|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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| 2022 |
|
| 2021 |
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| Change |
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| 2022 |
|
| 2021 |
|
| Change |
| ||||||
Net Sales: |
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Forged and Cast Engineered Products |
| $ | 75,511 |
|
| $ | 61,179 |
|
| $ | 14,332 |
|
| $ | 229,848 |
|
| $ | 195,558 |
|
| $ | 34,290 |
|
Air and Liquid Processing |
|
| 24,136 |
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|
| 20,006 |
|
|
| 4,130 |
|
|
| 66,807 |
|
|
| 64,855 |
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|
| 1,952 |
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Consolidated |
| $ | 99,647 |
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| $ | 81,185 |
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| $ | 18,462 |
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| $ | 296,655 |
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| $ | 260,413 |
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| $ | 36,242 |
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(Loss) Income from Operations: |
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Forged and Cast Engineered Products |
| $ | (62 | ) |
| $ | (2,832 | ) |
| $ | 2,770 |
|
| $ | 1,107 |
|
| $ | 688 |
|
| $ | 419 |
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Air and Liquid Processing |
|
| 2,917 |
|
|
| 2,891 |
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|
| 26 |
|
|
| 8,177 |
|
|
| 7,265 |
|
|
| 912 |
|
Corporate costs |
|
| (2,929 | ) |
|
| (2,420 | ) |
|
| (509 | ) |
|
| (8,435 | ) |
|
| (8,938 | ) |
|
| 503 |
|
Consolidated |
| $ | (74 | ) |
| $ | (2,361 | ) |
| $ | 2,287 |
|
| $ | 849 |
|
| $ | (985 | ) |
| $ | 1,834 |
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|
| September 30, 2022 |
|
| December 31, 2021 |
|
| Change |
| |||
Backlog: |
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Forged and Cast Engineered Products |
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|
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| $ | 227,534 |
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| $ | 223,321 |
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| $ | 4,213 |
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Air and Liquid Processing |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 106,117 |
|
|
| 69,233 |
|
|
| 36,884 |
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Consolidated |
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|
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|
|
|
|
|
|
|
|
| $ | 333,651 |
|
| $ | 292,554 |
|
| $ | 41,097 |
|
Net sales approximated $99,647 and $81,185 for the current year periods increased againstthree months ended September 30, 2022, and 2021, respectively, and $296,655 and $260,413 for the comparable prior year periodsnine months ended September 30, 2022, and 2021, respectively. The increase primarily dueis attributable to higher sales for the net of:
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FCEP segment. A discussion of net sales for the Corporation’s two segments is included below.
(Loss) income from operations approximated $(74) and $(2,361) for the three months ended September 30, 2022, and 2021, respectively, and $849 and $(985) for the nine months ended September 30, 2022, and 2021, respectively. Included in (loss) income from operations for the nine months ended September 30, 2022, is a charge of approximately $664 for excess COVID-19 subsidies received in 2020 but returned in 2022 (“the Refund of Excess COVID-19 Subsidies”) and a benefit of approximately $1,431 resulting from a change in how certain employees earn certain benefits (the “Change in Employee Benefit Policy”). A discussion of (loss) income from operations for the Corporation’s two segments is included below. Corporate costs decreased for the nine months ended September 30, 2022, when compared to the nine months ended September 30, 2021, due to lower employee-related costs including lower incentive compensation and a portion of the benefit from the Change in Employee Benefit Policy being attributable to Corporate employees.
Backlog equaled $333,651 as of September 30, 2022, versus $292,554 as of December 31, 2021. Backlog represents the accumulation of firm orders on hand which: (i) are supported by evidence of a contractual arrangement, (ii) include a fixed and determinable sales price, (iii) have collectability that is reasonably assured, and (iv) generally are expected to ship within two years from the backlog reporting date. Backlog at a certain date may not be a direct measure of future revenue for a particular order because price increases, negotiated subsequently to the original order, are not included in backlog until the updated contract is received from the customer and certain surcharges are not determinable until the order is completed and ready for shipment to the customer. Approximately 60% of the backlog is expected to be released after 2022. A discussion of backlog by segment is included below.
Costs of products sold, excluding depreciation and amortization, as a percentage of net sales, increased for eachthe three months ended September 30, 2022, and 2021, approximated 84.7% and 83.7%, respectively. While gross margins were slightly better for the FCEP segment for the third quarter of the current year periods2022 when compared to the same periodsthird quarter of 2021, gross margins for the prior year primarilyALP segment were slightly less as a result of the FCEP segment which experienced higher net raw material and energy costs, higher repairs and maintenance spend associated with extended machine outages, and changes inan unfavorable product mix. Additionally, the nine-month period ended September 30, 2020, benefited from receipt of business interruption insurance proceeds of $769 for equipment outages that occurred in 2018 (the “Proceeds from Business Interruption Insurance Claim”). For the ALP segment, costsCosts of products sold, excluding depreciation and amortization, as a percentage of net sales, decreased slightly asfor the nine months ended September 30, 2022, and 2021, approximated 84.5% and 81.8%, respectively. The increase was primarily attributable to the FCEP segment which experienced higher costs, particularly for direct and indirect materials, energy and transportation when compared to the same period of the prior year. Although a resultportion of higher pricingthese costs are recovered via the variable-index surcharge, there is a lag between the time the costs are incurred and productivity improvements offset by higher costs.the time the variable-index surcharge is invoiced to the customer.
23
Selling and administrative expenses were comparable for the three months ended September 30, 2022, and 2021, decreased fromand approximated $11,089 and $10,910, respectively. Selling and administrative expenses for the comparative prior year quarter principally asnine months ended September 30, 2022, and 2021, approximated $31,941 and $34,538, respectively, a result of:decrease of $2,597. The decrease primarily is attributable to:
| • | Lower |
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Selling and administrative expenses for the nine months ended September 30, 2021, increased from the comparative prior year period principally due to:
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| • |
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Depreciation and amortization was comparable between the periods.
Investment-related income for the periods fluctuated as a result of the timing ofrelates primarily to dividends from one of the Corporation’s Chinese joint ventures. In the third quarter of 2022, the Chinese joint venture declared a dividend which equaled $504 for the Corporation. In the second quarter of 2021, the Chinese joint venture declared a dividend which equaled $1,025 for the Corporation. By comparison, the dividend was declared in the third quarter of the prior year and equaled $1,173 for the Corporation.
Interest expense decreased inapproximated $1,486 and $834 for the three months ended September 30, 2022, and 2021, respectively, and $3,684 and $2,672 for the nine months ended September 30, 2022, and 2021, respectively. The increase for each of the current year periods when compared to the same periods of the prior year is principally as a result of lowerdue to higher average borrowings outstanding under the revolving credit facility.facility and higher interest rates.
Other income – net is comprised of the following:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||
|
| 2021 |
| 2020 |
| Change |
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| 2021 |
| 2020 |
| Change |
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| 2022 |
| 2021 |
| Change |
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| 2022 |
| 2021 |
| Change |
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Net pension and other postretirement income |
| $ | 1,631 |
| $ | 1,672 |
| $ | (41 | ) |
| $ | 4,931 |
| $ | 5,015 |
| $ | (84 | ) | ||||||||||||||||||||
Gain (loss) on foreign exchange transactions |
| $ | 369 |
| $ | (58 | ) | $ | 427 |
|
| $ | (705 | ) | $ | (1,156 | ) | $ | 451 |
|
|
| 1,809 |
| 369 |
| 1,440 |
|
|
| 3,368 |
| (705 | ) |
| 4,073 |
| |||
Unrealized (loss) gain on Rabbi trust investments |
|
| (56 | ) |
| 212 |
| (268 | ) |
|
| 359 |
| (6 | ) |
| 365 |
|
|
| (276 | ) |
| (56 | ) |
| (220 | ) |
|
| (1,292 | ) |
| 359 |
| (1,651 | ) | |||
Net pension and other postretirement income |
|
| 1,672 |
| 1,335 |
| 337 |
|
|
| 5,015 |
| 3,669 |
| 1,346 |
| ||||||||||||||||||||||||
Other |
|
| 21 |
|
| 4 |
|
| 17 |
|
|
| 25 |
|
| 3 |
|
| 22 |
|
|
| 10 |
|
| 21 |
|
| (11 | ) |
|
| 12 |
|
| 25 |
|
| (13 | ) |
|
| $ | 2,006 |
| $ | 1,493 |
| $ | 513 |
|
| $ | 4,694 |
| $ | 2,510 |
| $ | 2,184 |
|
| $ | 3,174 |
| $ | 2,006 |
| $ | 1,168 |
|
| $ | 7,019 |
| $ | 4,694 |
| $ | 2,325 |
|
Other income – net fluctuated period over period due to:to changes in foreign exchange gains and losses and, as a result of recent volatility in the financial markets, unrealized losses in the market value of the Rabbi trust investments.
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Income tax (provision) benefitprovision for each of the periods includes income taxes associated with the Corporation’s profitable operations. An income tax benefit is not able to be recognized on losses of certain of the Corporation’s entities since it is “more likely than not” the asset will not be realized. Accordingly, changes in the income tax (provision) benefitprovision for each of the periods include the effects of changes in the pre-tax income of the Corporation’s profitable operations. Additionally,In addition, the income tax provision for the three and nine months ended September 30, 2022, includes expense of $316 resulting from the revaluation of certain deferred tax assets associated with the Pennsylvania tax rate change. By comparison, the income tax provision for the nine months ended September 30, 2021, includes income tax$523 of expense associated with revaluingthe (i) restructuring of a foreign sales office and (ii) revaluation of the deferred income tax assets and liabilitiestaxes of the Corporation’s U.K. entity following new legislation enacted during the year,in 2021, which will increase the U.K. corporate tax rate from 19% to 25% in 2023. By comparison,
Net income attributable to Ampco-Pittsburgh and income (loss) per common share attributable to Ampco-Pittsburgh equaled $846 and $0.04 per common share and $2,894 and $0.15 per common share for the income tax benefit for thethree and nine months ended September 30, 2020, includes a $3,502 benefit made possible by2022, respectively, and $(1,589) and $(0.08) per common share and $(359) and $(0.02) per common share for the CARES Act, which enabled the Corporation to carry back net operating losses to an earlier period, at a higher tax rate,three and to release a portion of the valuation allowance it had previously established against its deferred income tax assets.nine months ended September 30, 2021, respectively.
Net income attributable to Ampco-Pittsburgh and income per common share attributable to Ampco-Pittsburgh for the nine months ended September 30, 2020,2022, include an income taxa net benefit of $3,502, due to the enactment of the CARES Act, and the Proceeds from Business Interruption Insurance Claim, which had a combined positive impact on income$427 or $0.02 per common share for:
• | The after-tax benefit from the Change in Employee Benefit Policy of $1,407 offset by |
• | The after-tax charge associated with the Refund of Excess COVID-19 Subsidies of $664 and |
• | The revaluation of certain deferred income tax assets associated with the change in the Pennsylvania state income tax rate of $316. |
Net (loss) attributable to Ampco-Pittsburgh and (loss) per common share attributable to Ampco-Pittsburgh for the nine months ended September 30, 2021, include net expense of $0.33.
25
Backlog represents$522 or $0.03 per common share for (i) the accumulation of firm orders on hand which: (i) are supported by evidencerestructuring of a contractual arrangement,foreign sales office and (ii) include a fixed and determinable sales price and (iii) have collectability that is reasonably assured. A discussionthe revaluation of backlog forthe deferred income taxes of the Corporation’s two segments is included below.U.K. entity following new legislation enacted in 2021, which will increase the U.K. corporate tax rate from 19% to 25% in 2023.
24
Net Sales and Operating Results by Segment
Forged and Cast Engineered Products
|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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|
| 2021 |
| 2020 |
| Change |
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| 2021 |
| 2020 |
| Change |
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| 2022 |
|
| 2021 |
|
| Change |
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| 2022 |
|
| 2021 |
|
| Change |
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Net Sales: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged and cast mill rolls |
| $ | 53,778 |
| $ | 52,080 |
| $ | 1,698 |
|
| $ | 177,918 |
| $ | 165,502 |
| $ | 12,416 |
|
| $ | 66,653 |
|
| $ | 53,778 |
|
| $ | 12,875 |
|
| $ | 193,946 |
|
| $ | 177,918 |
|
| $ | 16,028 |
|
FEP |
|
| 7,401 |
|
| 2,419 |
|
| 4,982 |
|
|
| 17,640 |
|
| 8,221 |
|
| 9,419 |
|
|
| 8,858 |
|
|
| 7,401 |
|
|
| 1,457 |
|
|
| 35,902 |
|
|
| 17,640 |
|
|
| 18,262 |
|
|
| $ | 61,179 |
| $ | 54,499 |
| $ | 6,680 |
|
| $ | 195,558 |
| $ | 173,723 |
| $ | 21,835 |
|
| $ | 75,511 |
|
| $ | 61,179 |
|
| $ | 14,332 |
|
| $ | 229,848 |
|
| $ | 195,558 |
|
| $ | 34,290 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
|
(Loss) Income from Operations |
| $ | (2,832 | ) | $ | 1,301 |
| $ | (4,133 | ) |
| $ | 688 |
| $ | 5,434 |
| $ | (4,746 | ) |
| $ | (62 | ) |
| $ | (2,832 | ) |
| $ | 2,770 |
|
| $ | 1,107 |
|
| $ | 688 |
|
| $ | 419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
| September 30, 2021 |
|
| December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| Change |
| |||||||||||||||||
Backlog |
|
|
|
| $ | 219,859 |
|
|
|
|
|
|
|
| $ | 191,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 227,534 |
|
| $ | 223,321 |
|
| $ | 4,213 |
|
The increase in netNet sales increased for each of the current year periods when compared to the same periods of the prior year is principally due to the net of:to:
| • | Higher pricing and variable-index surcharges passed through to customers as a result of higher raw material, energy and transportation costs, which increased net sales by $15,400 and $42,800 for the three and nine months ended September 30, 2022, respectively, |
• | Higher volume of mill roll shipments primarily resulting from the timing of deliveries, which increased net sales by approximately $8,600 and $4,800 for the three and nine months ended September 30, 2022, respectively, |
• | Higher volume of FEP shipments as a result of increased demand from the steel distribution and oil and gas markets, which increased net sales by approximately |
|
|
|
|
| • | Changes in product mix, |
Operating results for the current year periods decreased when compared to the same periods of the prior year as a result of:
|
|
|
|
|
|
|
|
|
|
| • | Changes in exchanges rates used to translate |
Operating results for the current year periods improved when compared to the same periods of the prior year. While the segment continues to experience escalating costs for raw and ancillary materials, energy, transportation, direct labor and other items, a significant portion of these increases was recovered via the variable-index surcharge mechanism and higher pricing. The variable-index surcharge is known at the time of shipment and increases or decreases, as applicable, the selling price of the product for the corresponding changes in the published index cost of certain raw materials and energy. The variable-index surcharge is recognized as revenue when the corresponding sale of the inventory is recognized. However, since the cost of domestic raw materials, work-in-process and finished goods is primarily determined by the last-in, first-out method, the higher or lower costs of those certain raw materials and energy are recognized prior to the variable-index surcharge thus creating a lag between the time these costs are incurred and the time these costs are recovered.
In addition, operating resultsFor the three months ended September 30, 2022, the improved pricing and variable-indexed surcharge exceeded the higher raw material, energy and transportation costs by approximately $800 but, for the nine months ended September 30, 2020, included:2022, under-recovered by approximately $2,100 when compared to the same period of the prior year.
In addition, (loss) income from operations improved for each of the current year periods when compared to the same periods of the prior year due to:
| • |
|
• | Lower selling and administrative costs of approximately $700 and $2,100 for the three and nine months ended September 30, 2022, respectively, including the savings generated from the |
• | Lower losses on the sale of equipment of approximately $300 for the three and nine months ended September 30, 2022, offset by |
| • |
|
25
• | Changes in exchanges rates used to translate the operating results of the segment’s foreign subsidiaries into the U.S. dollar, which reduced operating results by approximately $360 and $620 for the three and nine months ended September 30, 2022, respectively. |
Backlog increased slightly at September 30, 2022, from December 31, 2021, by $4,213. The increase in backlog principally isof orders for rolls increased at September 30, 2022, from December 31, 2021, by approximately $31,800 due to higherimproved demand from flat-rolled steel and aluminum customers and improved pricing. The backlog of orders for forged rolls and FEP product. An overall increase indecreased at September 30, 2022, from December 31, 2021, by approximately $11,500 due to timing of receipt of new orders from customers. Lower foreign exchange rates used to translate the backlog of the Corporation’s foreign subsidiaries into the U.S. dollar also increasedreduced backlog at September 30, 2022, when compared to backlog at December 31, 2020.2021, by approximately $16,100. At September 30, 2021, the majority2022, approximately 59% of the backlog is expected to ship inafter 2022.
Air and Liquid Processing
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||||||||||||||
|
| 2021 |
| 2020 |
| Change |
|
| 2021 |
| 2020 |
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
|
| 2022 |
|
| 2021 |
|
| Change |
| ||||||||||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Centrifugal pumps |
| $ | 7,096 |
| $ | 8,580 |
| $ | (1,484 | ) |
| $ | 25,138 |
| $ | 26,888 |
| $ | (1,750 | ) | ||||||||||||||||||||||||
Heat exchange coils |
|
| 6,527 |
| 6,499 |
| 28 |
|
|
| 18,482 |
| 19,879 |
| (1,397 | ) |
| $ | 8,532 |
|
| $ | 6,527 |
|
| $ | 2,005 |
|
| $ | 22,483 |
|
| $ | 18,482 |
|
| $ | 4,001 |
| ||||
Air handling systems |
|
| 6,383 |
|
| 6,096 |
|
| 287 |
|
|
| 21,235 |
|
| 21,025 |
|
| 210 |
|
|
| 8,457 |
|
|
| 6,383 |
|
|
| 2,074 |
|
|
| 22,133 |
|
|
| 21,235 |
|
|
| 898 |
|
Centrifugal pumps |
|
| 7,147 |
|
|
| 7,096 |
|
|
| 51 |
|
|
| 22,191 |
|
|
| 25,138 |
|
|
| (2,947 | ) | ||||||||||||||||||||
|
| $ | 20,006 |
| $ | 21,175 |
| $ | (1,169 | ) |
| $ | 64,855 |
| $ | 67,792 |
| $ | (2,937 | ) |
| $ | 24,136 |
|
| $ | 20,006 |
|
| $ | 4,130 |
|
| $ | 66,807 |
|
| $ | 64,855 |
|
| $ | 1,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Operations |
| $ | 2,891 |
| $ | 2,261 |
| $ | 630 |
|
| $ | 7,265 |
| $ | 7,691 |
| $ | (426 | ) |
| $ | 2,917 |
|
| $ | 2,891 |
|
| $ | 26 |
|
| $ | 8,177 |
|
| $ | 7,265 |
|
| $ | 912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
| September 30, 2021 |
|
| December 31, 2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| September 30, 2022 |
|
| December 31, 2021 |
|
| Change |
| |||||||||||||||||
Backlog |
|
|
|
| $ | 58,404 |
|
|
|
|
|
|
|
| $ | 54,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 106,117 |
|
| $ | 69,233 |
|
| $ | 36,884 |
|
The decrease in netNet sales for the currentthree and nine months ended September 30, 2022, improved over the comparable prior year periods when comparedby $4,130 and $1,952, respectively. More specifically,
• | Sales of heat exchange coils benefited from a higher volume of shipments to commercial and industrial customers and |
• | Sales of air handling systems improved due to increased order intake, while |
• | Sales of centrifugal pumps were adversely affected by supply chain delays for purchased components and customer delays. |
Operating income benefitted from the same periods of the prior year is principally attributable to a lower level of shipments due to transportation and supply chain issues which were somewhat mitigated by improved pricing. Sales of pumps decreased due to a lower volume of shipments to the power generation industry, partiallyhigher sales but was offset by higher sales to U.S. Navy shipbuilders. Salesunfavorable product mix, particularly in the third quarter of heat exchange coils were negatively impacted primarily by a lower volume of shipments to nuclear power generation customers and,2022. Operating income for the for the nine months ended September 30, 2021,2022, includes a lower volume of business for the OEM/commercial market. Sales of air handling units were relatively comparable for each of the periods.
Operating income for the current year quarter increased when compared to the prior year quarter due to improved pricing and productivity improvements which helped to mitigate the effectsbenefit from the lower levelChange in Employee Benefit Policy of shipments and higher material costs. While also benefiting the current year-to-date operating income, the higher pricing and productivity improvements did not fully offset the impact from the lower volume of shipments.$680.
Backlog at September 30, 2021, improved2022, increased from December 31, 2020, principally2021, by $36,884 with backlog for each product line improving as a result of higher ordersrecord-level order intake. In particular, the segment received a $9,600 order for centrifugal pumps and U.S. Navy shipbuilders.a custom air handling unit project with a major healthcare provider which is expected to ship in 2023. At September 30, 2021, the majority2022, approximately 64% of the backlog is expected to ship inafter 2022.
Non-GAAP Financial Measures
The Corporation presents non-GAAP adjusted (loss) income from operations, which is calculated as (loss) income from operations excluding the Proceeds from Business Interruption Insurance Claim.Refund of Excess COVID-19 Subsidies and the Change in Employee Benefit Policy. This non-GAAP financial measure is not based on any standardized methodology prescribed by accounting principles generally accepted in the United States of America (“GAAP”) and may not be comparable to similarly-titledsimilarly titled measures presented by other companies.
The Corporation has presented non-GAAP adjusted (loss) income from operations because it is a key measure used by the Corporation’s management and Board of Directors to understand and evaluate the Corporation’s operating performance and to develop operational goals for managing its business. This non-GAAP financial measure excludes significant charges or credits, that are one-time charges or credits, unrelated to the Corporation’s ongoing results of operations or beyond its control. Additionally, a portion of the incentive and compensation arrangements for certain employees is based on the Corporation’s business performance. The Corporation believes this non-GAAP financial measure helps identify underlying trends in its business that could otherwise be masked by the effect of the items that it excludes from adjusted (loss) income from operations. The Corporation also believes this non-GAAP financial measure provides useful information to management, shareholders and investors, and others in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by the Corporation’s management in its financial and operational decision-making.
2726
Adjusted (loss) income from operations is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are limitations related to the use of adjusted (loss) income from operations rather than (loss) income from operations, which is the nearest GAAP equivalent. Among other things, there can be no assurance that additionalcharges similar to the Refund of Excess COVID-19 Subsidies and benefits similar to the Proceeds from Business Interruption Insurance ClaimChange in Employee Benefit Policy will not occur in future periods.
The adjustmentadjustments reflected in adjusted (loss) income from operations isare pre-tax. There was noThe tax impact associated with this adjustmentthe adjustments is not significant, approximately $24, due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdictionmajority of the jurisdictions where the expense and income wasare recognized.
The following is a reconciliation of (loss) income from operations to non-GAAP adjusted (loss) income from operations for the three and nine months ended September 30, 2021,2022, and 2020,2021, respectively:
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
(Loss) income from operations, as reported (GAAP) |
| $ | (2,361 | ) |
| $ | 178 |
|
| $ | (985 | ) |
| $ | 4,443 |
|
| $ | (74 | ) |
| $ | (2,361 | ) |
| $ | 849 |
|
| $ | (985 | ) |
Proceeds from Business Interruption Insurance Claim (1) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (769 | ) | ||||||||||||||||
Refund of Excess COVID-19 Subsidies (1) |
|
| 0 |
|
|
| 0 |
|
|
| 664 |
|
|
| 0 |
| ||||||||||||||||
Change in Employee Benefit Policy (2) |
|
| 0 |
|
|
| 0 |
|
|
| (1,431 | ) |
|
| 0 |
| ||||||||||||||||
(Loss) income from operations, as adjusted (Non-GAAP) |
| $ | (2,361 | ) |
| $ | 178 |
|
| $ | (985 | ) |
| $ | 3,674 |
|
| $ | (74 | ) |
| $ | (2,361 | ) |
| $ | 82 |
|
| $ | (985 | ) |
(1) | Represents |
(2) | Represents a benefit resulting from a change in how certain employees earn certain benefits. |
Liquidity and Capital Resources
|
| Nine Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||||||
|
| 2021 |
| 2020 |
| Change |
|
| 2022 |
| 2021 |
| Change |
| ||||||
Net cash flows (used in) provided by operating activities |
| $ | (4,398 | ) | $ | 33,944 |
| $ | (38,342 | ) | ||||||||||
Net cash flows used in operating activities |
| $ | (20,405 | ) | $ | (4,398 | ) | $ | (16,007 | ) | ||||||||||
Net cash flows used in investing activities |
|
| (11,521 | ) |
| (5,782 | ) |
| (5,739 | ) |
|
| (12,516 | ) |
| (11,521 | ) |
| (995 | ) |
Net cash flows provided by (used in) financing activities |
|
| 11,609 |
| (17,428 | ) |
| 29,037 |
| |||||||||||
Net cash flows provided by financing activities |
|
| 35,908 |
| 11,609 |
| 24,299 |
| ||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
|
| (281 | ) |
| 586 |
|
| (867 | ) |
|
| (1,134 | ) |
| (281 | ) |
| (853 | ) |
Net (decrease) increase in cash and cash equivalents |
|
| (4,591 | ) |
| 11,320 |
|
| (15,911 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents |
|
| 1,853 |
|
| (4,591 | ) |
| 6,444 |
| ||||||||||
Cash and cash equivalents at beginning of period |
|
| 16,842 |
|
| 6,960 |
|
| 9,882 |
|
|
| 10,337 |
|
| 16,842 |
|
| (6,505 | ) |
Cash and cash equivalents at end of period |
| $ | 12,251 |
| $ | 18,280 |
| $ | (6,029 | ) |
| $ | 12,190 |
| $ | 12,251 |
| $ | (61 | ) |
Net cash flows (used in) provided byused in operating activities fluctuatedequaled $(20,405) and $(4,398) for the nine months ended September 30, 2022, and 2021, respectively. The significant change between the periods as a result of an increaseyears primarily is due to the ongoing investment in trade working capital as the Corporation began to returndue to a higher level of business activity following the pandemic-plagued levels of the prior year.resulting from increased demand and, for inventories, higher costs associated with inflation and supply chain disruptions.
Net cash flows used in investing activities representequaled $(12,516) and $(11,521) for the nine months ended September 30, 2022, and 2021, respectively. Capital expenditures for each of the periods were relatively comparable and related primarily expenditures forto the FCEP segment. The Corporation has undertaken a significant capital program valued between $25,000 and $30,000,approximating $27,000 to upgrade existing equipment at certain of its FCEP locations, which is anticipated to occur over the next two to three years.be completed by December 31, 2023. At September 30, 2021,2022, commitments for future capital expenditures, including those associated with the FCEP capital program, approximated $20,000.$19,300.
Net cash flows provided by (used in) financing activities improvedequaled $35,908 and $11,609 for the nine months ended September 30, 2022, and 2021, respectively. The change period over period primarily is due to:
| • | Net borrowings from the Corporation’s revolving credit |
• | Proceeds from a sale and leaseback financing transaction completed in the third quarter of |
• | Proceeds from an equipment financing facility completed in the third quarter of 2022, which provided proceeds of $4,014, |
• | Net borrowings from one of the Corporation’s Chinese joint ventures from its minority shareholder of $1,525 for the nine months ended September 30, 2022, in comparison to repayments of $1,065 for the nine months ended September 30, 2021, offset by |
| • | Lower proceeds |
In 2020,The effect of exchange rate changes on cash and cash equivalents is primarily attributable to the Corporation repaid all borrowings outstanding under its revolving credit facility. A portionfluctuation of the repayment was from net proceeds from an equity rights offering completed in September 2020, which equaled $18,150. In 2021,British pound and Swedish krona against the Corporation received additional proceeds of $3,308 asU.S. dollar.
As a result of shareholders exercising warrants for the Corporation’s common stock.
As of September 30, 2021,above, cash and cash equivalents increased by $1,853 during 2022 and ended the period at $12,190 in comparison to $10,337 at December 31, 2021. The majority of the Corporation’s cash and cash equivalents is held by the Corporation’sits foreign operations. Domestic customer remittances are used to pay down borrowings under the Corporation’s revolving credit facility daily, resulting in
27
minimal cash maintained by the Corporation’s domestic operations. Cash held by the Corporation’s foreign operations is considered to be permanently reinvested;re-invested; accordingly, a provision for estimated local and withholding tax has not been made. If the Corporation were to remit any foreign earnings to it or any of its U.S. entities, the estimated tax impact would be insignificant.
Funds on hand, funds generated from future operations and availability under the Corporation’s revolving credit facility are expected to be sufficient to finance the Corporation’s operational requirements and capital expenditure requirements.debt service costs. The maturity date for the revolving credit facility is June 29, 2026, and, subject to the other terms and conditions of the revolving credit agreement, will become due on that date. While availability under the revolving credit facility also should be sufficient to fund the capital equipment investment
28
activities for the FCEP segment over the next few years, the Corporation is exploring potential financing alternatives. As of September 30, 2021,2022, remaining availability under the revolving credit facility approximated $42,000,$35,622, net of standard availability reserves.
Availability under the Corporation’s equipment financing facility and the Disbursement Agreement are expected to be sufficient to finance the capital program for the FCEP segment in the timeframe currently anticipated. At September 30, 2022, availability under the equipment financing facility and Disbursement Agreement approximated $18,500. Each borrowing on the equipment financing facility will constitute a secured loan transaction (each, a “Term Loan”). Each Term Loan will convert to a Term Note on the earlier of (i) the date in which the associated equipment is placed in service or (ii) December 31, 2023. Each Term Note will have a term of 84 months in arrears fully amortizing and will commence on the date of the Term Note. Borrowings under the Disbursement Agreement will be repaid over an initial term of 20 years – through August 2042.
Litigation and Environmental Matters
See Note 15 and Note 16 to the condensed consolidated financial statements.
Critical Accounting Pronouncements
The Corporation’s critical accounting policies, as summarized in its Annual Report on Form 10-K for the year ended December 31, 2020,2021, remain unchanged.
Recently Issued Accounting Pronouncements
See Note 1 to the condensed consolidated financial statements.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Disclosure controls and procedures. An evaluation of the effectiveness of the Corporation’s disclosure controls and procedures as of the end of the period covered by this report was carried out under the supervision, and with the participation, of management, including the principal executive officer and principal financial officer. Disclosure controls and procedures are defined under Securities and Exchange Commission (“SEC”) rules as controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Corporation’s management, including the principal executive officer and principal financial officer, has concluded that the Corporation’s disclosure controls and procedures were effective as of September 30, 2021.2022.
Changes in Internal Control. There has been no change in the Corporation’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
2928
PART II – OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Item 1 | Legal Proceedings |
The information contained in Note 15 to the condensed consolidated financial statements (Litigation) is incorporated herein by reference.
Item 1A | Risk Factors |
There are no material changes to the Risk Factors contained in Item 1A to Part I of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020.2021.
Items 2-5 | None. |
Item 6 | Exhibits |
|
|
|
|
|
|
(3.1) |
| |
|
|
|
(3.2) |
| |
|
|
|
(3.3) |
| |
| ||
(10.1) |
| |
|
|
|
(10.2) |
| |
(10.3) | ||
(10.4) | ||
|
|
|
(31.1) |
| |
|
|
|
(31.2) |
| |
|
|
|
(32.1) |
| |
|
|
|
(32.2) |
| |
|
|
|
(101.INS) |
| Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
|
|
|
(101.SCH) |
| Inline XBRL Taxonomy Extension Schema Document |
|
|
|
(101.CAL) |
| Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
(101.DEF) |
| Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
(101.LAB) |
| Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
(101.PRE) |
| Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
(104) |
| The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101. |
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| AMPCO-PITTSBURGH CORPORATION | ||
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DATE: November |
| BY: |
| /s/ J. Brett McBrayer |
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| J. Brett McBrayer |
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| Director and Chief Executive Officer |
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DATE: November |
| BY: |
| /s/ Michael G. McAuley |
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| Michael G. McAuley |
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| Senior Vice President, Chief Financial Officer and Treasurer |
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