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, 1999
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, 1999, 9,590,121 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, 1999 and December 31, 1998 3
Consolidated Statements of Income -
Six Months Ended June 30, 1999 and 1998;
Three Months Ended June 30, 1999
and 1998 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1999
and 1998 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II - Other Information:
Item 4 - Submission of Matters to a Vote
of Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 15
Exhibits
Exhibit 2
Exhibit 10 (c)
Exhibit 27
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PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 38,666,975 $ 33,107,815
Receivables, less allowance for
doubtful accounts of $912,243 in
1999 and $691,090 in 1998 36,568,200 35,017,919
Inventories 35,584,389 35,492,440
Other 4,491,396 4,076,339
Total current assets 115,310,960 107,694,513
Property, plant and equipment,
at cost 154,786,302 150,709,005
Accumulated depreciation (77,102,459) (73,932,512)
Net property, plant and equipment 77,683,843 76,776,493
Prepaid pension 14,135,544 13,885,544
Other noncurrent assets 13,146,770 13,454,580
$220,277,117 $211,811,130
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 10,674,870 $ 9,247,179
Accrued payrolls and employee
benefits 8,660,451 7,820,048
Other 10,452,478 9,355,391
Total current liabilities 29,787,799 26,422,618
Employee benefit obligations 15,691,845 16,509,026
Industrial revenue bond debt 14,661,000 12,586,000
Deferred income taxes 11,567,626 11,707,742
Other noncurrent liabilities 1,977,240 2,287,132
Total liabilities 73,685,510 69,512,518
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 9,590,121 in 1999
and 9,577,621 in 1998 9,590,121 9,577,621
Additional paid-in capital 102,668,480 102,555,980
Retained earnings 34,213,969 28,724,905
Accumulated other comprehensive
income 119,037 1,440,106
Total shareholders' equity 146,591,607 142,298,612
$220,277,117 $211,811,130
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,
1999 1998 1999 1998
Net sales $ 98,291,408 $ 95,371,010 $ 48,873,902 $ 46,772,660
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 68,457,521 64,553,691 33,369,424 31,756,046
Selling and administrative 14,674,499 13,633,703 7,493,411 6,826,824
Depreciation 3,821,590 3,851,920 1,912,964 1,932,505
86,953,610 82,039,314 42,775,799 40,515,375
Income from operations 11,337,798 13,331,696 6,098,103 6,257,285
Other income (expense)-net 28,040 255,548 126,119 108,838
Income before income taxes 11,365,838 13,587,244 6,224,222 6,366,123
Income taxes 3,960,000 4,705,000 2,220,000 2,140,000
Net income $ 7,405,838 $ 8,882,244 $ 4,004,222 $ 4,226,123
Basic and diluted earnings
per share $ 0.77 $ 0.93 $ 0.42 $ 0.44
Cash dividends declared
per share $ .20 $ .18 $ .10 $ .09
Weighted average number of
common shares outstanding 9,581,143 9,577,621 9,584,626 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,
1999 1998
Net cash flows from operating
activities 10,202,234 14,842,654
Cash flows from investing activities:
Purchases of property, plant and
equipment (5,253,909) (5,395,235)
Proceeds from sales of property, plant
and equipment - 397,707
Use of unexpended industrial revenue
bond proceeds 504,625 1,225,363
Net cash flows (used in) investing
activities (4,749,284) (3,772,165)
Cash flows from financing activities:
Proceeds from industrial revenue bonds 2,075,000 -
Proceeds from the issuance of stock 125,000 -
Dividends paid (1,915,524) (1,723,971)
Net cash flows from (used in)
financing activities 284,476 (1,723,971)
Effect of exchange rate changes on cash (178,266) (12,286)
Net increase in cash 5,559,160 9,334,232
Cash at beginning of year 33,107,815 21,695,512
Cash at end of period $ 38,666,975 $ 31,029,744
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, 1999, the
consolidated statements of income for the six and three month
periods ended June 30, 1999 and 1998 and the consolidated
statements of cash flows for the six month periods ended June
30, 1999 and 1998 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,
1998. The results of operations for the period ended June 30,
1999 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:
(in thousands)
June 30, December 31,
1999 1998
Raw materials $ 8,346 $ 6,425
Work-in-process 21,829 21,985
Finished goods 3,547 5,100
Supplies 1,862 1,982
$ 35,584 $ 35,492
3. Comprehensive Income
The Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income",
effective January 1, 1998. This Statement establishes
standards for reporting and display of comprehensive income
and its components in the financial statements. The
Corporation's comprehensive income for the six and three
months ended June 30, 1999 and 1998 consisted of:
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(in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
Net income $ 7,406 $ 8,882 $ 4,004 $ 4,226
Foreign currency
translation (1,449) (152) (382) 102
Unrealized holding
gains on securities 128 - 99 -
Comprehensive
income $ 6,085 $ 8,730 $ 3,721 $ 4,328
4. Earnings Per Share
Basic earnings per share is computed by dividing net income by
the weighted average number of common shares outstanding. In
May, 1999, 12,500 options were exercised resulting in a
weighted average number of common shares outstanding for the
six and three months ended June 30, 1999 of 9,581,143 and
9,584,626 shares, respectively. For the six and three months
ended June 30, 1998, the weighted average number of common
shares outstanding was 9,577,621 shares.
The computation of diluted earnings per share is similar to
basic earnings per share except that the denominator is
increased to include the net additional common shares that
would have been outstanding assuming exercise of outstanding
stock options, calculated using the treasury stock method.
The weighted average number of common shares outstanding
assuming exercise of the stock options was 9,599,939 and
9,615,941, respectively, for the six and three months ended
June 30, 1999. There were no potentially dilutive securities
outstanding for the comparable 1998 periods.
5. Business Segments
The Corporation adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information" effective
with its annual report to shareholders for the year ended
December 31, 1998 which changed its previous practice of
reporting under one business segment, Engineered Equipment.
Presented below are the net sales and earnings before taxes
for the Corporation's three business segments.
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(Dollars in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
1999 1998 1999 1998
Net Sales:
Forged Steel Rolls $ 42,709 $ 44,712 $ 20,269 $ 23,120
Air and Liquid
Processing 36,041 29,739 18,915 13,663
Plastics Processing
Machinery 19,541 20,920 9,689 9,990
Total Reportable
Segments $ 98,291 $ 95,371 $ 48,873 $ 46,773
Earnings before Taxes:
Forged Steel Rolls $ 5,558 $ 8,027 $ 2,849 $ 3,918
Air and Liquid
Processing 3,834 2,394 2,186 924
Plastics Processing
Machinery 1,946 2,911 1,063 1,415
Total Reportable
Segments 11,338 13,332 6,098 6,257
Other income
(expense) - net 28 255 126 109
Total $ 11,366 $ 13,587 $ 6,224 $ 6,366
6. Subsequent Event
On August 2, 1999, the Corporation acquired the stock of The
Davy Roll Company and two smaller companies, each wholly-owned
subsidiaries of Kvaerner PLC, (combined "Davy") for
approximately U.S. $23,600,000. Davy, headquartered in
Gateshead, England with operating locations in Gateshead and
Sheffield, England, is a leading supplier of cast rolls to the
steel and metal industries and will complement the existing
Forged Steel Rolls segment. In 1998, Davy had sales of
approximately $60 million. The acquisition was financed from
available cash and cash equivalents.
7. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities". This pronouncement requires all
derivative instruments to be reported at fair value on the
balance sheet; depending on the nature of the derivative
instrument, changes in fair value will be recognized either in
net income or as an element of comprehensive income. SFAS No.
133 is first effective for the Corporation for the year ending
December 31, 2000. The Corporation does not engage in
significant activity with respect to derivative instruments or
hedging activities. Management is evaluating the impact but
does not anticipate adoption of SFAS No. 133 will have a
material impact on the financial position, results of
operations or cash flows of the Corporation.
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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, 1999 and 1998
Operations
Net Sales. Net sales for the six and three month periods of 1999
were $98,291,000 and $48,873,000, respectively, compared to
$95,371,000 and $46,773,000, respectively for the same periods of
the prior year. A discussion of the second quarter and year-to-
date sales and results for the Corporation's three segments is
included below. The order backlog at June 30, 1999 of $95,800,000
declined by 4.2% compared to $100,000,000 at December 31, 1998.
The reduction in the backlog is due primarily to a decrease in
forged hardened steel roll orders.
Cost of Products Sold. The cost of products sold, excluding
depreciation, in relationship to net sales for the six and three
months ended June 30, 1999 were 69.6% and 68.3%, respectively.
This compares with the prior comparable periods of 67.7% and
67.9%, respectively. The decrease in margins occurred principally
in the Forged Steel Rolls business.
Income from Operations. Income from operations decreased 15% for
the six month period to $11,338,000 and 2.5% for the three month
period to $6,098,000, both compared to the prior year. This is a
result of decreased earnings from the Forged Steel Rolls and
Plastics Processing Machinery segments, offset by increased
earnings from the Air and Liquid Processing segment.
Forged Steel Rolls. Sales for the Forged Steel Rolls segment
decreased for the six and three months by 4.5% and 12.3%,
respectively, to $42,709,000 and $20,269,000, respectively. This
compares with $44,712,000 and $23,120,000 for the prior year.
The decrease in sales is attributable to lower selling prices and
reduced demand. Earnings for this segment decreased for the six
and three months by 30.8% and 27.3%,respectively, to $5,558,000
and $2,849,000 compared with $8,027,000 and $3,918,000 for the
prior year. Margins were reduced as competitive pressures in both
the domestic and export markets resulted in lower selling prices.
In addition, operating levels were reduced in the 1999 period
compared to the year ago period.
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Air and Liquid Processing. Sales for the Air and Liquid
Processing segment improved for the six and three month periods of
1999 by 21.2% and 38.4%, respectively, to $36,041,000 and
$18,915,000. This compares with $29,739,000 and $13,663,000 for
the comparable 1998 periods. Sales were higher for each of the
operations, particularly at the air handling system operations
which entered 1999 with an improved backlog level. Earnings for
this segment increased for the six and three month periods of 1999
to $3,834,000 and $2,186,000, respectively, in comparison to
$2,394,000 and $924,000 for the same periods in 1998. Improved
margins earned by the pumps operation and improved margins and
higher production volumes achieved by the air handling system
operations account for these increases.
Plastics Processing Machinery. Sales for the Plastics Processing
Machinery segment for the six and three month periods of 1999
decreased by 6.6% and 3.0%, respectively, to $19,541,000 and
$9,689,000. This compares with $20,920,000 and $9,990,000 for
1998. Earnings decreased for the six and three month periods of
1999 by 33.2% and 24.9% to $1,946,000 and $1,063,000 compared to
$2,911,000 and $1,415,000 for the comparable prior year periods.
The decline in sales and earnings occurred principally at the heat
transfer roll operation which has been impacted by reduced demand
in its markets and low backlog levels as a result of declining
orders throughout 1998 and 1999.
Other Income (Expense). Other income (expense) for the six and
three month periods of 1999 of $28,000 and $126,000, respectively,
reflects lower interest earnings on cash balances and losses on
foreign exchange transactions compared to foreign exchange gains
included in 1998's other income of $255,000 and $109,000 for the
same periods in 1998.
Net Income. As a result of all of the above, the Corporation had
net income for the six and three months of 1999 of $7,406,000 and
$4,004,000, respectively. This compares with $8,882,000 and
$4,226,000 for the 1998 comparable periods.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for 1999 at
$10,202,000 and compare with positive cash flows of $14,843,000
for 1998. The difference in cash flows between the two periods
results from a $1,994,000 decrease in income from operations in
1999 and changes in working capital requirements (principally in
accounts receivables which increased in 1999).
Net cash outflows from investing activities were $4,749,000 in
1999 and compare with cash outflows of $3,772,000 in 1998.
Capital expenditures for 1999, net of reimbursement from
previously issued industrial revenue bonds, totaled $4,749,000
compared to $4,170,000 in 1998. Capital expenditures carried
forward from June 30, 1999 total $9,450,000. Funds on-hand and
funds generated by future operations are expected to be sufficient
to finance capital expenditure requirements.
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Cash flows from financing activities in 1999 include the issuance
of $2,075,000 of tax-exempt industrial revenue bonds, the proceeds
of which were used for plant expansion and equipment at the
Corporation's heat exchange coil operation in Lynchburg, Virginia.
Cash outflows with respect to financing activities in 1999 reflect
an increase in the quarterly dividend rate to $.10 per share
compared to $.09 per share in 1998.
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, 1999 was $14,500,000.
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.
Impact of Year 2000
The Year 2000 issue is the result of computer programs that were
written using two digits rather than four to define the applicable
year. If the Corporation's computer programs or other equipment
with date-sensitive functions are not Year 2000 compliant, they
may recognize a date using "00" as the Year 1900 rather than the
Year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions
or engage in normal business activities.
Generally, each of the Corporation's subsidiaries maintains its
own data processing equipment and software. To ensure that their
operations will not be adversely impacted by Year 2000 software
failures, project teams have been formed at each subsidiary to
address Year 2000 risks. The project teams have coordinated the
identification and implementation of changes to computer hardware
and software applications to ensure availability and integrity of
the Corporation's information systems and the reliability of its
operational systems and manufacturing processes.
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Each subsidiary has reviewed its information and operational
systems and manufacturing processes to identify those products,
services or systems that are not Year 2000 compliant. As a result
of these reviews, it was determined necessary to modify or replace
certain information and operational systems so they are Year 2000
compliant. These modifications and replacements are being, and
will continue to be, made in conjunction with the Corporation's
overall systems initiatives. It is difficult to break out the
total cost of Year 2000 compliance; however, the combined cost of
such compliance, system upgrades, principally software, and
setting up a stand-alone system at a subsidiary currently
integrated into an unrelated business subsidiary system, is less
than $1,000,000. The majority of this cost is for system upgrade
and replacement software, which has been acquired and capitalized
as of December 31, 1998, and is either in operation or in the
process of being implemented. The modifications being handled in-
house to internally developed systems are progressing on schedule.
The Corporation estimates its Year 2000 efforts are 90 percent
complete and the entire project will be completed in third quarter
1999. Based on available information, the Corporation does not
believe any material exposure to significant business interruption
exists as a result of Year 2000 compliance issues. Accordingly,
the Corporation has not adopted any formal contingency plan in the
event its Year 2000 project is not completed in a timely manner.
If the Corporation's progress deviates from the anticipated
timeline, contingency plans will be developed as deemed necessary
at that time.
The Corporation also faces some risk to the extent that customers
or suppliers of products, services and systems purchased by the
Corporation do not comply with Year 2000 requirements. The
Corporation continues to evaluate the status of significant
suppliers and customers to determine the extent to which the
Corporation is vulnerable to these third parties' failure to
remediate their own Year 2000 issues. However, we believe the
breadth of the Corporation's customer base and availability of
alternative suppliers will mitigate the risks associated with
third party issues.
The descriptions herein of the elements of the Corporation's Year
2000 effort are forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Of necessity,
this effort is based on estimates and there can be no assurance
that actual results will not materially differ from expectations.
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PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-3. None
Item 4. Submission of Matters to a Vote of Security Holders
Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
Item 5. Other Information
The information related to the acquisition of The Davy
Roll Company (and two smaller companies) is set forth on
page 8 of this Form 10-Q. The Company will file financial
information required by Item 7 of the Form 8-K within 75
days from the date of acquisition.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2. Plan of Acquisition
Share Purchase Agreement dated August 2, 1999 between
Davy Metals Limited, Kvaerner PLC, Hamsard 2043 Limited
and Ampco-Pittsburgh Corporation.
3. Articles of Incorporation and By-laws
(a) Articles of Incorporation
Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended March 31,
1983; the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1984; the Quarterly
Report on Form 10-Q for the quarter ended March
31, 1985; the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1987; and the
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
(b) By-laws
Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended September 30,
1994 and the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996.
4. Instruments defining the rights of securities holders
(a) Rights Agreement between Ampco-Pittsburgh
Corporation and Chase Mellon Shareholder Services
dated as of September 28, 1998.
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Incorporated by reference to the Form 8-K Current
Report dated September 28, 1998.
(b) Revolving Credit Agreement dated as of September
30, 1998.
Incorporated by reference to the Quarterly Report
on Form 10-Q for quarter ended September 30,
1998.
10 Material Contracts
(a) 1988 Supplemental Executive Retirement Plan
Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended March 31,
1996.
(b) Severance Agreements between Ampco-Pittsburgh
Corporation and certain officers and employees of
Ampco-Pittsburgh Corporation.
Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended September 30,
1988; the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994; the Annual
Report on Form 10-K for fiscal year ended
December 31, 1994; the Quarterly Report on Form
10-Q for the quarter ended June 30, 1997; the
Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.
(c) Severance Agreement between Ampco-Pittsburgh
Corporation and Marliss D. Johnson dated July 19,
1999.
(d) 1997 Stock Option Plan
Incorporated by reference to the Proxy Statement
dated March 14, 1997.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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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, 1999 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: August 13, 1999 BY: s/Marliss D. Johnson
Marliss D. Johnson
Vice President
Controller and Treasurer
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