FORM 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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
Incorporated in Pennsylvania.
I.R.S. Employer Identification No. 25-1117717.
600 Grant Street, Pittsburgh, Pennsylvania 15219
Telephone Number 412/456-4400
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 X NO
On August 13, 1997, 9,577,621 common shares were outstanding.
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AMPCO-PITTSBURGH CORPORATION
INDEX
Page No.
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 1997 and December 31, 1996 3
Consolidated Statements of Income -
Six Months Ended June 30, 1997 and 1996;
Three Months Ended June 30, 1997 and 1996 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K 11
Signatures 12
Exhibits
Exhibit 1
Exhibit 2
Exhibit 27
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PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1997 1996
Assets
Current assets:
Cash and cash equivalents $ 35,808,682 $ 25,510,231
Receivables, less allowance for
doubtful accounts of $662,254 in
1997 and $629,362 in 1996 28,865,151 32,043,626
Inventories 33,125,192 33,223,110
Investments available for sale 2,141,671 4,409,320
Deferred income taxes 2,634,642 1,901,383
Other 2,098,191 2,155,397
Total current assets 104,673,529 99,243,067
Property, plant and equipment,
at cost 125,366,874 118,463,362
Accumulated depreciation (63,902,551) (61,134,960)
Net property, plant and equipment 61,464,323 57,328,402
Unexpended industrial revenue
bond proceeds 4,126,791 9,766,938
Prepaid pension 13,794,592 13,989,592
Other noncurrent assets 7,110,692 7,842,345
$191,169,927 $188,170,344
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 8,595,397 $ 8,631,404
Accrued payrolls and employee
benefits 7,996,742 7,819,253
Other 8,685,493 9,718,430
Total current liabilities 25,277,632 26,169,087
Employee benefit obligations 16,770,539 17,122,983
Industrial revenue bond debt 12,586,000 12,586,000
Deferred income taxes 9,816,702 9,944,670
Other noncurrent liabilities 2,778,052 2,680,581
Total liabilities 67,228,925 68,503,321
Shareholders' equity:
Preference stock - no par value;
authorized 3,000,000 shares: none
issued - -
Common stock - par value $1; authorized
20,000,000 shares; issued and
outstanding 9,577,621 in 1997
and 1996 9,577,621 9,577,621
Additional paid-in capital 102,555,980 102,555,980
Retained earnings 9,625,493 2,648,036
121,759,094 114,781,637
Cumulative translation and other
adjustments 1,007,188 2,364,607
Unrealized holding gains on
securities 1,174,720 2,520,779
Total shareholders' equity 123,941,002 119,667,023
$191,169,927 $188,170,344
See Notes to Consolidated Financial Statements.
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AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30, Three Months Ended June 30,
1997 1996 1997 1996
Net sales $ 83,925,317 $ 81,865,465 $ 43,091,163 $ 40,767,130
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 57,549,037 57,905,652 29,688,005 28,524,592
Selling and administrative 11,849,597 12,087,492 5,929,734 6,112,944
Depreciation 3,336,127 3,150,481 1,664,923 1,577,523
72,734,761 73,143,625 37,282,662 36,215,059
Income from operations 11,190,556 8,721,840 5,808,501 4,552,071
Other income (expense):
Gain on sale of investments 936,575 - 721,910 -
Other income (expense)-net 409,647 186,898 131,035 108,375
Income before taxes 12,536,778 8,908,738 6,661,446 4,660,446
Provision for taxes on income 4,410,000 3,350,000 2,330,000 1,750,000
Net income $ 8,126,778 $ 5,558,738 $ 4,331,446 $ 2,910,446
Net income per common share $ .85 $ .58 $ .45 $ .30
Cash dividends declared
per share $ .12 $ .05 $ .06 $ .025
Weighted average number of
common shares outstanding 9,577,621 9,577,621 9,577,621 9,577,621
See Notes to Consolidated Financial Statements
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AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1997 1996
Cash flows from operating activities:
Net income $ 8,126,778 $ 5,558,738
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation and amortization 3,336,127 3,150,481
Gain on sale of investments (936,575) -
Deferred income taxes 89,300 3,050,000
Other - net 105,983 144,457
(Increase) decrease in assets:
Receivables 2,520,563 (3,537,316)
Inventories (298,731) (601,340)
Other assets 79,132 (358,413)
Increase (decrease) in liabilities:
Accounts payable (171,973) (367,567)
Accrued payrolls and employee benefits 89,990 181,975
Other liabilities 714,315 (1,520,539)
Net cash flows from operating
activities 13,654,909 5,700,476
Cash flows from investing activities:
Purchases of property, plant and
equipment (8,004,687) (3,816,852)
Reduction in unexpended industrial revenue
bond proceeds 5,640,147 -
Proceeds from sales of investments 1,258,613 582,122
Net cash flows from investing activities (1,105,927) (3,234,730)
Cash flows from financing activities:
Dividends paid (2,107,077) (957,763)
Net cash flows from financing activities (2,107,077) (957,763)
Effect of exchange rate changes on cash (143,454) (105,748)
Net increase in cash 10,298,451 1,402,235
Cash at beginning of year 25,510,231 15,553,263
Cash at end of period $ 35,808,682 $ 16,955,498
Supplemental information:
Income tax payments $ 3,397,744 $ 795,958
Interest payments 268,623 77,017
See Notes to Consolidated Financial Statements.
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AMPCO-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1997, the
consolidated statements of income for the six and three
month periods ended June 30, 1997 and 1996 and the
consolidated statements of cash flows for the six month
periods then ended have been prepared by the Corporation
without audit. In the opinion of management, all
adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial
position, results of operations and cash flows for the
periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction
with the consolidated financial statements and notes
thereto included in the Corporation's annual report to
shareholders for the year ended December 31, 1996. The
results of operations for the periods ended June 30,
1997 are not necessarily indicative of the operating
results for the full year.
2. Inventory
Inventories, principally valued on the LIFO method, are
comprised of the following:
June 30, December 31,
1997 1996
Raw materials $ 5,847,912 $ 6,384,104
Work-in-process 21,656,102 20,945,337
Finished goods 3,619,551 3,885,851
Supplies 2,001,627 2,007,818
$ 33,125,192 $ 33,223,110
3. Investments
In connection with the sale of investments previously
classified as available for sale, the Corporation
recognized pre-tax gains of $936,575 and $721,910 during
the six and three month periods ended June 30, 1997,
respectively.
4. Net Income Per Common Share
Net income per common share is computed on the basis of
the weighted number of shares of Ampco-Pittsburgh
Corporation's common stock outstanding, which has
remained unchanged at 9,577,621 shares for the periods
presented.
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5. Post Balance Sheet Events
Effective July 1, 1997, the Corporation acquired F. R.
Gross Co., a small manufacturer of heat transfer rolls
for the plastics, packaging, printing and other
industries. The acquisition, for approximately
$9,400,000 cash, including debt assumed and retired,
will be accounted for as a purchase transaction in the
third quarter.
Effective August 1, 1997, the Corporation acquired
Atlantic Grinding & Welding Inc. This small
manufacturer of feed screws, with operations in New
Hampshire and South Carolina, will expand New Castle
Industries' market coverage to the plastics processing
industry. The acquisition, for approximately $2,600,000
cash, including debt assumed and retired, will be
accounted for as a purchase transaction in the third
quarter.
6. Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share". SFAS
No. 128 establishes new standards for computing and
presenting earnings per share. The Company is required
to adopt the provisions of SFAS No. 128 for its
consolidated financial statements beginning with the
year ending December 31, 1997. Upon adoption, the
standard also requires the restatement of all prior
period earnings per share information presented.
In June 1997, the FASB issued SFAS No. 130, "Reporting
Comprehensive Income", and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related
Information". SFAS No. 130 establishes standards for
reporting and display of comprehensive income and its
components. The Company is required to adopt the
provisions of SFAS No. 130 beginning with its
consolidated financial statements for the three months
ending March 31, 1998. SFAS No. 131 requires certain
disclosures about segment information in interim and
annual financial statements and related information
about products and services, geographic areas and major
customers. The Company must adopt the provisions of
SFAS No. 131 for its consolidated financial statements
for the year ending December 31, 1998.
The adoptions of SFAS No. 128, SFAS No. 130, and SFAS
No. 131 are not expected to have a material effect on
the measurement of the Company's financial position,
results of operations or cash flows; the Company is
reviewing possible changes in disclosures that may be
called for.
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AMPCO-PITTSBURGH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operations for the Six and Three Month Periods Ended
June 30, 1997 and 1996
Net sales for the six and three month periods of 1997 were
$83,925,000 and $43,091,000 compared to $81,865,000 and
$40,767,000 for the same periods of the prior year.
Overall sales increased by 2.5% and 5.7% for the first half
and second quarter of 1997, respectively, as several of the
Corporation's operations experienced higher shipment levels
due to continued growth in export business and improved
economic activity in the markets served. The order backlog
stood at $107,400,000 at June 30, 1997 compared to
$114,100,000 at December 31, 1996. The decline in the
backlog is due primarily to a decrease in forged hardened
steel roll orders.
The cost of products sold relationships for the six and
three months ended June 30, 1997 were 68.6% and 68.2%,
respectively. This compares with the prior comparable
periods at 70.7% and 70.0%, respectively. A more
profitable sales mix together with increased margins
resulted in improved ratios of cost of products sold to
sales in 1997.
Selling and administrative expenses in 1997 decreased by
$238,000 or 2% for the year-to-date period and $183,000 or
3% for the second quarter, both compared to the prior year.
The decrease is principally due to lower sales commission
costs as a result of a mix change towards sales on which
no commission is payable. The relationships of selling and
administrative expenses to net sales for the six and three
months ended June 30, 1997 were 14.1% and 13.8%,
respectively. This compares with the prior comparable
periods at 14.7% and 15.0%, respectively.
Depreciation expense of $3,336,000 and $1,665,000 for the
six and three months ended June 30, 1997 increased
approximately 6% compared to the prior year due principally
to an increase in capital expenditures.
Income from operations increased 28% for both the six and
three month periods ended June 30, 1997 compared to the
comparable 1996 periods. These increases are principally a
result of improved margins, a more profitable sales mix and
slightly higher volumes.
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Gains of $937,000 and $722,000 were recognized in the six
and three month periods ended June 30, 1997, respectively,
from the sale of investments.
The Corporation had net income for the six and three months
ended June 30, 1997 of $8,127,000 and $4,331,000,
respectively. This compares with net income for the prior
year comparable periods of $5,559,000 and $2,910,000,
respectively.
Liquidity and Capital Resources
Net cash flow from operating activities was positive in
1997 and 1996 at $13,655,000 and $5,700,000, respectively.
The increased cash flow in 1997 resulted primarily from a
$2,469,000 increase in income from operations and a
decrease in working capital requirements. A reduction in
the level of accounts receivable during the 1997 period
compared to an increase in accounts receivable during the
1996 period accounted for $6,000,000 of the difference in
cash flow.
Capital expenditures for 1997 totaled $8,005,000 compared
to $3,817,000 in 1996. The Corporation anticipates capital
expenditures for 1997 to approximate $16,000,000 with the
major expenditure being for plant and equipment at Union
Electric Steel's plants to be completed by the end of the
year. Unexpended industrial revenue bond proceeds of
$9,767,000 were available to fund a portion of this capital
program and $5,640,000 of these proceeds were drawn down
during the first half of 1997. Funds generated internally
are expected to be sufficient to finance the balance of the
capital expenditures.
Cash outflows with respect to financing activities in 1997
reflect an increase in the quarterly dividend rate to $.06
per share compared to $.025 per share in 1996, and an
additional prior year-end dividend of $960,000 in 1997 or
$.10 per share, as compared to $.05 per share paid in 1996.
The Corporation maintains short-term lines of credit and a
revolving credit agreement in excess of the cash needs of
its businesses. The total available at June 30, 1997 was
$14,500,000.
Subsequent to June 30, 1997, the Corporation expended
$11,800,000 of its cash holdings to acquire two businesses
(also see Notes to Consolidated Financial Statements -
Note 5).
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With respect to environmental concerns, the Corporation has
been named a potentially responsible party at certain third
party sites. The Corporation has accrued its share of the
estimated cost of remedial actions it would likely be
required to contribute. While it is not possible to
quantify with certainty the potential cost of actions
regarding environmental matters, particularly any future
remediation and other compliance efforts, in the opinion of
management, compliance with the present environmental
protection laws and the potential liability for all
environmental proceedings will not have a material adverse
effect on the financial condition, results of operations or
liquidity of the Corporation.
The nature and scope of the Corporation's business brings
it into regular contact with a variety of persons,
businesses and government agencies in the ordinary course
of business. Consequently, the Corporation and its
subsidiaries from time to time are named in various legal
actions. The Corporation does not anticipate that its
financial condition, results of operations or liquidity
will be materially affected by the costs of known, pending
or threatened litigation.
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PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-5.None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
1. Severance Agreement dated 7/1/97 between the
Corporation and Robert J. Reilly (10)
2. Severance Agreement dated 7/1/97 between the
Corporation and Rose Hoover (10)
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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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.
AMPCO-PITTSBURGH CORPORATION
DATE: August 13, 1997 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: August 13, 1997 BY: s/Robert J. Reilly
Robert J. Reilly
Vice President - Finance
and Treasurer
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