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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994; or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 1-898
AMPCO-PITTSBURGH CORPORATION
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Incorporated in Pennsylvania I.R.S. Employer Identification
No. 25-1117717
600 Grant Street, Suite 4600, Pittsburgh, Pennsylvania 15219
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 412/456-4400
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common stock, $1 par value New York Stock Exchange
Philadelphia Stock Exchange
Series A Preference Stock New York Stock Exchange
Purchase Rights Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 period 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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 20, 1995, 9,577,621 common shares were outstanding. The
aggregate market value of the voting stock of Ampco-Pittsburgh Corporation held
by non-affiliates (based upon the closing price of these shares on the New York
Stock Exchange) was approximately $66 million.
DOCUMENTS INCORPORATED BY REFERENCE: Parts I, II and IV of this report
incorporate by reference certain information from the Annual Report to
Shareholders for the year ended December 31, 1994.
Exhibit Index is located on Page 26 of 50.
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PART I
ITEM 1 - BUSINESS
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(a) GENERAL DEVELOPMENT OF BUSINESS
Ampco-Pittsburgh Corporation (the "Corporation") was incorporated in
Pennsylvania in 1929. The Corporation currently operates four businesses which
manufacture engineered equipment: Buffalo Pumps, Inc. and Aerofin Corporation,
acquired in 1981, headquartered in North Tonawanda, New York and Lynchburg,
Virginia, respectively, and Union Electric Steel Corporation and New Castle
Industries, Inc., acquired in 1984, headquartered in Carnegie and New Castle,
Pennsylvania, respectively.
In 1993, Amersham International plc acquired United States Biochemical
Corporation, a small private company in which the Corporation owned a 20%
interest. As a result of that transaction, the Corporation received cash and
stock of Amersham. In 1994, the Corporation sold most of its investment in
Amersham. It also sold a portion of its investment in Northwestern Steel and
Wire Company and currently owns approximately 3.5% of that company.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The sales and operating profit of the Corporation's only segment and the
identifiable assets attributable to it for the three years ended December 31,
1994 are set forth in Note 16 (Business Segment Information) on p. 15 of the
accompanying Annual Report which is incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
The Corporation produces finned tube heat exchange coils and pumps for the
construction, electric utility, refrigeration, chemical processing and marine
defense industries, feed screws and other machine parts for the plastics
industry and forged hardened steel rolls for producers of cold rolled steel,
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aluminum and other metals. These products are heavily dependent on engineering,
principally custom designed and are sold to sophisticated commercial and
industrial users in the United States and, to a lesser extent, in foreign
countries.
No one customer's purchases were material to the Corporation. Contracts
that may be subject to renegotiation or termination are not material to the
Corporation. The Corporation's business is not seasonal but is subject to the
cyclical nature of the industries and markets served. For additional
information on the products produced and financial information about the
business, see pp. 2 through 4 and Note 16 on p. 15 of the accompanying Annual
Report which are incorporated herein by reference.
Raw Materials
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Raw materials are generally available from many sources and the Corporation
is not dependent upon any single supplier for any raw material. Certain of the
raw materials used by the Corporation have historically been subject to
variations in price. The Corporation generally does not purchase or arrange for
the purchase of raw materials significantly in advance of the time it requires
them.
Patents
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While the Corporation holds some patents, trademarks and licenses, in the
opinion of management they are not material to the Corporation's business other
than in protecting the goodwill associated with the names under which its
products are sold.
Working Capital
---------------
The Corporation maintains levels of inventory, which generally reflect its
normal requirements and are believed to reflect the practices of its
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industries. Production is generally to custom order and requires inventory
levels of raw materials or semi-finished products with only a limited level of
finished products.
Backlog
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The backlog of orders at December 31, 1994 was approximately $70,200,000
compared to a backlog of $56,300,000 at year end 1993. Most of those orders are
expected to be filled in 1995.
Competition
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The Corporation faces considerable competition from a large number of
companies. The Corporation believes, however, that it is a significant factor
in each of the principal markets which it serves.
Buffalo Pumps, Inc. produces a line of centrifugal pumps and competes with
many other producers. Aerofin Corporation produces finned tube heat exchange
coils and competes in commercial and industrial markets with a broad product
line. There are several major competitors in these markets. Union Electric
Steel Corporation is considered the largest producer of forged hardened steel
rolls in the United States. In addition to several domestic competitors,
European and Japanese manufacturers also compete in both the domestic and
foreign markets. New Castle Industries primarily produces feed screws and other
machine parts for use in the plastics industry and competes with a number of
small regional companies. Competition in all of the Corporation's businesses is
based on quality, service, price and delivery.
Research and Development
------------------------
The Corporation operates in mature industries and does not expend material
amounts for research and development. The activities that are undertaken are
primarily designed to improve existing products, reduce costs and adapt products
to specific customer requirements.
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Environmental Protection Compliance Costs
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Expenditures for environmental control matters were not material in 1994
and such expenditures in 1995 are not expected to be material. However, with
increasing regulatory activity, such expenditures may increase.
Employees
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In December, 1994, the Corporation had 955 employees, of whom 318 were
sales, executive, administrative, engineering and clerical personnel. All
production and craft employees are covered by negotiated labor agreements with
various unions.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
The Corporation's only foreign operation is a manufacturing plant located
in Belgium that principally serves the European markets. For financial
information relating to foreign and domestic operations see Note 16 (Business
Segment Information) on p. 15 of the accompanying Annual Report which is
incorporated herein by reference.
ITEM 2 - PROPERTIES
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The Corporation is in one segment that produces engineered products. The
location and general character of the principal locations, all of which are
owned, are as follows:
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<TABLE>
<CAPTION>
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ----------------------------- ----------------- -------------- ------------
<S> <C> <C> <C>
Aerofin Corporation Manufacturing 146,000 on Brick,
4621 Murray Place facilities and 15.3 acres concrete
Lynchburg, VA 24506 offices and steel
Buffalo Pumps, Inc. Manufacturing 94,000 on Brick and
874 Oliver Street facilities and 7 acres cement
N. Tonawanda, NY 14120 offices block
New Castle Industries, Inc. Manufacturing 81,600 on Sheet
1399 Countryline Road facilities and 18.5 acres metal
New Castle, PA 16102 offices
New Castle Industries, Inc. Manufacturing 31,000 Masonry
925 Industrial Street facilities 5.3 acres with steel
New Castle, PA 16102 truss roof
Union Electric Steel Corp. Manufacturing 186,000 on Steel
Route 18 plant 55 acres sided
Burgettstown, PA 15021
Union Electric Steel Corp. Manufacturing 153,000 on Steel
726 Bell Street facilities, 5 acres sided
Carnegie, PA 15106 offices and plant
Union Electric Steel Corp. Manufacturing 75,000 on Steel
U.S. Highway 30 facilities 20 acres sided
Valparaiso, IN 46383
Union Electric Steel, N.V. Manufacturing 66,000 on Concrete
Industrie Park facilities and 15 acres and steel
B-3980 Tessenderlo offices
Belgium
</TABLE>
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(1) The Corporation holds properties of discontinued operations for sale in
Monaca and Coraopolis, PA; Longview, TX; Plymouth, MI and Chicago, IL.
(2) The Corporate office space is leased as are domestic sales offices. Union
Electric Steel also leases approximately 40,000 square feet of manufacturing
space. All of the owned facilities are adequate and suitable for their
respective purposes. There were no facilities idled during 1994.
(3) The Corporation estimates that all of its facilities were operated within
75% to 95% of their normal capacity during 1994. Normal capacity is defined
as capacity under approximately normal conditions with allowances made for
unavoidable interruptions, such as lost time for repairs, maintenance,
breakdowns, set-up, failure, supply delays, labor shortages and absences,
Sundays, holidays, vacation, inventory taking, etc. The number of work
shifts are also taken into consideration.
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ITEM 3 - LEGAL PROCEEDINGS
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The Corporation has been involved in various claims and lawsuits
incidental to its business. In the opinion of management, the Corporation has
meritorious defenses in those cases and believes that, in the aggregate, any
liability will not have a material effect on the financial position of the
Corporation.
Three lawsuits were commenced in May, 1991 against the Corporation and its
subsidiary, Vulcan, Inc. ("Vulcan"), arising out of the filing of a petition
under Chapter 11 of the United States Bankruptcy Code in October, 1990 by
Valley-Vulcan Mold Company (the "Partnership"), a 50/50 partnership formed in
September, 1987 between Vulcan and Valley Mould Corporation, a subsidiary of
Microdot, Inc. Microdot and Valley are unrelated to the Corporation and were
also defendants in the lawsuits. The Partnership acquired the ingot mold
businesses of each of the partners. On June 10, 1993, Microdot also filed a
Petition under Chapter 11 of the United States Bankruptcy Code. In October,
1994, Microdot's Chapter 11 case was converted to a Chapter 7 liquidation. As
previously reported, two of those lawsuits have been settled.
Official Unsecured Creditors' Committee of Valley-Vulcan Mold Company v.
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Microdot, Inc., Valley Mould Corporation, Ampco-Pittsburgh Corporation and
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Vulcan, Inc. The plaintiff, allegedly on behalf of the debtor Partnership,
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filed this proceeding in the United States Bankruptcy Court for the
Northern District of Ohio against Microdot, Valley, Vulcan and the
Corporation, seeking to set aside the Corporation's liens on the
Partnership's assets, to hold all defendants liable for the debts of the
Partnership, and return of all money received by any of the defendants from
the Partnership and out of the proceeds of a loan to the Partnership by a
third-party lender, alleged to be at least $9.35 million. The Corporation's
liens secure a guaranty that it was required to give with respect to a
Vulcan obligation that was assumed by the Partnership, and a $500,000 loan
made to the Partnership.
The trial of this lawsuit was held the week of October 4, 1993. In April,
1994 the Court issued a judgment in favor of the Corporation. Under the
Court's decision, all claims against the Corporation were denied. All
claims against Vulcan were also denied except for its liability as a
general partner. Vulcan's only asset is its interest in the partnership
and accordingly the judgment will not have any adverse effect on the
Corporation. In May, 1994, plaintiff appealed to the United States
District Court, Northern District of Ohio, Eastern Division. Briefs have
been filed and the appellate Court has not yet rendered its decision.
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The Corporation is involved in various environmental proceedings which all
involve discontinued operations. In some of those proceedings, the Corporation
has been designated as a Potentially Responsible Party ("PRP"). However, the
Corporation believes that in most instances it is either a de minimis
participant based on information known to date and the estimated quantities of
waste at these sites and/or that it is entitled to indemnity from the successors
of the operations alleged to be involved. Based on the current estimate of
cleanup costs and proposed allocation of that cost among the various PRP groups,
for all environmental matters considered in the aggregate, the liability to the
Corporation would not be material.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matter was submitted to a vote of security holders during the fourth
quarter.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
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The information called for by this item is set forth on p. 20 of the Annual
Report to Shareholders for the year ended December 31, 1994 which is
incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
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The information called for by this item is set forth on p. 20 of the Annual
Report to Shareholders for the year ended December 31, 1994 which is
incorporated herein by reference.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
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The information called for by this item is set forth on pp. 16 through 18
of the Annual Report to Shareholders for the year ended December 31, 1994 which
are incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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The information called for by this item is set forth on pp. 5 through 15
and pp. 19 and 20 of the Annual Report to Shareholders for the year ended
December 31, 1994 which are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
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There were none.
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PART III
ITEM 10 - DIRECTORS and EXECUTIVE OFFICERS
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(a) IDENTIFICATION OF DIRECTORS
Name, Age, Tenure as a Director, Position with the Corporation (1), Principal
Occupation, Business Experience Past Five Years, and Other Directorships in
Public Companies
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Louis Berkman (age 86, Director since 1960; current term expires in 1996). He
has been Chairman of the Board of the Corporation since September 20, 1994. He
is also Chairman of the Executive Committee of the Corporation and has been for
more than five years. He is also President and a director of The Louis Berkman
Company (steel products, fabricated metal products, building and industrial
supplies). (2)(4)
Robert A. Paul (age 57, Director since 1970; current term expires in 1997). He
has been President and Chief Executive Officer of the Corporation since
September 20, 1994. For more than five years before 1994, he was President and
Chief Operating Officer of the Corporation. He is also an officer and director
of The Louis Berkman Company and a director of Integra Financial Corporation.
(2)
William D. Eberle (age 71, Director since 1982; current term expires in 1997).
He is a private investor and consultant and is Chairman of Manchester
Associates, Ltd. and Showscan, Inc. He is also a director of Mitchell Energy &
Development Co., America Service Group and Fiberboard Corporation, and was
Special Representative for Trade Negotiations with the rank of Ambassador.
(3)(4)
William P. Hackney (age 70, Director since 1979; current term expires in 1996).
For more than five years prior to 1992 he had been a partner in the law firm of
Reed Smith Shaw & McClay. As of January 1, 1992, he retired and became of
counsel to the law firm. (3)
Alvin G. Keller (age 85, Director since 1961; current term expires in 1995). He
is a private investor who, prior to his retirement, served as a Vice President
of Mellon Bank, N.A. (N)(2)(3)(4)
Carl H. Pforzheimer, III (age 58, Director since 1982; current term expires in
1996). For more than five years he has been Managing Partner of Carl H.
Pforzheimer & Co. (member of the New York and American Stock Exchanges). (3)
Ernest G. Siddons (age 61, Director since 1981; current term expires in 1995).
He has been Executive Vice President and Chief Operating Officer of the
Corporation since September 20, 1994. For more than five years before 1994, he
was Senior Vice President Finance and Treasurer of the Corporation. (N)(2)
- ---------------
(N) Nominee for election at the April 25, 1995 Annual Meeting of Shareholders.
(1) Officers serve at the discretion of the Board of Directors.
(2) Member of Executive Committee.
(3) Member of Audit Committee.
(4) Member of Salary Committee.
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Mr. Siddons is an officer of Valley-Vulcan Mold Company, a partnership that
filed for bankruptcy in October 1990. He also serves as a director and officer
of Vulcan, Inc., a wholly-owned subsidiary of the Corporation, which is a 50%
general partner in Valley-Vulcan. The other 50% general partner is unrelated to
the Corporation.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS
In addition to Louis Berkman, Robert A. Paul and Ernest G. Siddons (see
"Identification of Directors" above) the following are also Executive Officers
of the Corporation:
Name, Age, Position with the Corporation (1), Business Experience Past
Five Years
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Rose Hoover (age 39). Secretary of the Corporation since December, 1990. For
more than five years before 1990, she was a Legal Assistant for the Corporation.
Robert J. Reilly (age 38). Treasurer of the Corporation since September, 1994.
He has been Controller of the Corporation since January, 1994. For five years
before September, 1994 he was Assistant Treasurer.
Robert F. Schultz (age 47). Vice President Industrial Relations and Senior
Counsel of the Corporation since December, 1990. From January, 1987 to December
1990 he was Director of Industrial Relations.
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(1) Officers serve at the discretion of the Board of Directors and none of the
listed individuals serve as a director of a public company.
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
(d) FAMILY RELATIONSHIPS
Louis Berkman is the father-in-law of Robert A. Paul. There are no other
family relationships among the Directors and Officers.
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EXECUTIVE COMPENSATION
The following table sets forth certain information as to the total
remuneration received for the past three years by the five most highly
compensated executive officers of the Corporation, including the Chief Executive
Officer (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation
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(a) (b) (c) (d) (i)
Name and All Other
Principal Salary Bonus Compensation
Position Year ($) ($) ($)
- ------------------------- ---- ------- ------- ------------
<S> <C> <C> <C> <C>
Louis Berkman 1994 118,750 15,000
Chairman of the Board 1993 75,000 0
and Executive Committee 1992 75,000 0
Robert A. Paul 1994 236,500 15,000
President and Chief 1993 232,000 0
Executive Officer 1992 232,000 0
Marshall L. Berkman(1) 1994 187,500 0
Chairman and Chief 1993 250,000 0
Executive Officer 1992 250,000 0
Ernest G. Siddons 1994 216,750 13,500 4,359(2)
Executive Vice Pres- 1993 214,000 0 3,746(2)
ident and Chief 1992 214,000 0 3,220(2)
Operating Officer
Robert F. Schultz 1994 122,500 7,500
Vice President 1993 120,250 0
Industrial Relations 1992 113,333 0
and Senior Counsel
</TABLE>
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(1) Marshall Berkman died in September, 1994. In connection with his death, his
widow will receive pension payments of $5,506 per month and supplemental
payments totalling $183,923 from October 1994 through September 30, 1995.
(2) Value of the term portion of a split dollar life insurance policy. The
Corporation remains entitled to the cash surrender value of such policy.
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(b) COMPENSATION PURSUANT TO PLANS
The Corporation has a tax qualified retirement plan (the "Plan") applicable
to the Executive Officers, to which the Corporation makes annual contributions
in amounts determined by the Plan's actuaries. The Plan does not have an offset
for Social Security and is fully paid for by the Corporation. Under the Plan,
employees become fully vested after five years of participation and normal
retirement age under the Plan is age 65 but actuarially reduced benefits may be
available for early retirement at age 55. The benefit formula is 1.1% of the
highest consecutive five year average earnings in the final ten years, times
years of service. Federal law requires that any active employee start receiving
a pension no later than April 1 following the calendar year in which the age
70-1/2 is reached. Louis Berkman is currently receiving $3,060 a month pursuant
to the Plan. As an active employee, Mr. Berkman continues to receive credit for
additional service rendered after age 70-1/2.
The Corporation adopted a Supplemental Executive Retirement Plan (SERP) in
1988 for all officers listed in the compensation table, except Louis Berkman,
and certain key employees, covering retirement after completion of ten years of
service and attainment of age 55. The combined retirement benefit at age 65
provided by the Plan and the SERP is 50% of the highest consecutive five year
average earnings in the final ten years of service. The participants are
eligible for reduced benefits for early retirement at age 55. A benefit equal
to 50% of the benefit otherwise payable at age 65 is paid to the surviving
spouse of any participant, who has had at least five years of service,
commencing on the later of the month following the participant's death or the
month the participant would have reached age 55. In addition, there is an
offset for pensions from other companies. Certain provisions, applicable if
there is a change of control, are discussed below under Termination of
Employment and Change of Control Arrangement.
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The following shows the estimated annual pension that would be payable,
without offset, under the Plan and the SERP to the individuals named in the
compensation table assuming continued employment to retirement at age 65, but no
change in the level of compensation shown in such table:
<TABLE>
<S> <C>
Louis Berkman (1)
Robert A. Paul $125,750
Marshall L. Berkman (2)
Ernest G. Siddons $115,125
Robert F. Schultz $ 65,000
</TABLE>
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(1) Mr. Berkman is currently receiving a pension pursuant to the Plan as
described above.
(2) See Footnote (1) to Summary Compensation Table
(c) COMPENSATION OF DIRECTORS
In 1994, each Director who was not employed by the Corporation received
$2,000 for each Board meeting attended and $500 for each Committee meeting
attended. Directors received one-half of those amounts if not in attendance or
if participation was by telephonic connection.
(d) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Chairman, President, and Executive Vice President have two year
contracts (which automatically renew for one year periods unless the Corporation
chooses not to extend) providing for compensation equal to five times their
annual compensation (with a provision to gross up to cover the cost of any
federal excise tax on the benefits) in the event their employment is terminated
(including a voluntary departure for good cause) and the right to equivalent
office space and secretarial help for a period of one year after a change in
control. In addition, the remaining officer named in the compensation table and
certain key employees have two year contracts providing for three times their
annual compensation in the event their employment is
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terminated after a change in control (including a voluntary departure for good
cause). Both types of contracts provide for the continuation of employee
benefits, for three years for the three senior executives and two years for the
others, and the right to purchase the leased car used by the covered individual
at the Corporation's then book value. The same provisions concerning change in
control that apply to the contracts apply to the SERP and vest the right to that
pension arrangement. A change of control triggers the right to a lump sum
payment equal to the present value of the vested benefit under the SERP.
(e) SALARY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
A Salary Committee is appointed each year by the Board of Directors.
Committee members abstain from voting on matters which involve their own
compensation arrangements. The Salary Committee for the year 1994 was comprised
of three Directors: Louis Berkman, William D. Eberle and Alvin G. Keller.
Louis Berkman is Chairman of the Board of Directors and the Executive
Committee. He is also the President and a Director of The Louis Berkman
Company. The Corporation's President and Chief Executive Officer is also an
officer and director of The Louis Berkman Company.
The Louis Berkman Company and William D. Eberle had certain transactions
with the Corporation which are more fully described under "Certain Relationships
and Related Transactions."
(f) SALARY COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Salary Committee approves salaries for executive officers within a
range from $150,000 up to $200,000 and increases in the salary of any executive
officer, which would result in such officer earning a salary within such range.
Salaries of $200,000 per year and above must be approved by the Board
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of Directors or its Executive Committee after a recommendation by the Salary
Committee. Salaries for executive officers below the level of $150,000 are set
by the Chairman, President and Executive Vice President of the Corporation.
Bonuses are discretionary and determined in the same manner as set forth above.
All executive compensation is reviewed by the Salary Committee at intervals
ranging between twelve and twenty-four months.
The compensation of the Chief Executive Officer of the Corporation, as well
as the other applicable executive officers, is based on an analysis conducted by
the Salary Committee in 1992 and reviewed and, to the extent provided above,
approved by the Board of Directors. The Committee does not specifically link
remuneration solely to quantitative measures of performance because of the
cyclical nature of the industries and markets served by the Corporation. In
setting compensation, the Committee also considers various qualitative factors,
including competitive compensation arrangements of other companies within
relevant industries (based primarily on the 1992 analysis), individual
contributions, leadership ability and an executive officer's overall
performance. In this way, it is believed that the Corporation will attract and
retain quality management, thereby benefiting the long-term interest of
shareholders.
In 1994, as a result of the sudden death of the Corporation's then Chairman
and Chief Executive Officer, the Board of Directors elected Louis Berkman as
Chairman, Robert A. Paul as President and Chief Executive Officer and Ernest G.
Siddons as Executive Vice President and Chief Operating Officer. Because of
this change in management, the Salary Committee approved increases to the named
individuals' salaries, and bonuses, consistent with the duties and
responsibilities associated with those new positions.
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This report of the Salary Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this 10-K report
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934, except to the extent that the Corporation specifically
incorporates this report and the information contained herein by reference, and
shall not otherwise be deemed filed under such Acts.
Louis Berkman
William D. Eberle
Alvin G. Keller
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(g) STOCK PERFORMANCE GRAPH
Comparative Five-Year Total Returns*
Ampco-Pittsburgh ("AP"), S&P 500, Peer Group
(Performance results through 12/31/94)
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG AP, S&P 500 INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
Measurement period S&P 500 Peer Group
(Fiscal year Covered) AP Index Index
- --------------------- --- ------- ----------
<S> <C> <C> <C>
Measurement PT-
12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 58.97 96.83 78.54
FYE 12/31/91 72.36 126.41 82.29
FYE 12/31/92 87.64 136.26 104.33
FYE 12/31/93 70.98 150.01 142.54
FYE 12/31/94 99.63 151.73 127.43
</TABLE>
Assumes $100 invested at the close of trading on the last trading day preceding
January 1 of the fifth preceding fiscal year in AP common stock, S&P 500, and
Peer Group.
*Cumulative total return assumes reinvestment of dividends.
In the above graph, the Corporation has used Value Line's Metals: Steel,
Integrated Industry for its peer comparison. The diversity of products produced
by subsidiaries of the Corporation made it difficult to match to any one
product-based peer group. The Steel Industry was chosen because it is impacted
by some of the same end markets that the Corporation ultimately serves, such as
the automotive, appliance and construction industries.
Historical stock price performance shown on the above graph is not
necessarily indicative of future price performance.
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ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 7, 1995, Louis Berkman owned directly 213,888 shares (2.23%) of
the Common Stock of the Corporation. As of the same date, The Louis Berkman
Company, P. O. Box 576, Steubenville, OH 43952 owned beneficially and of record
1,626,089 shares (16.98%) of the Common Stock of the Corporation. Louis
Berkman, an officer and director of The Louis Berkman Company, owns directly
62.90% of its common stock. Robert A. Paul, an officer and director of The
Louis Berkman Company, disclaims beneficial ownership of the 18.93% of its
common stock owned by his wife. Louis Berkman and Robert Paul are trustees of
The Louis and Sandra Berkman Foundation and disclaim beneficial ownership of the
1,266 shares of the Corporation's Common Stock held by such Foundation.
The Corporation has received two Schedules 13G filed with the Securities
and Exchange Commission disclosing that as of December 31, 1994 Norwest
Corporation, Sixth & Marquette, Minneapolis, MN 55479 (in various fiduciary and
agency capacities) owned 1,588,850 shares or 16.6% and that AT&T Master Pension
Trust, through The Northern Trust Company, as Trustee of the AT&T Master Pension
Trust, 50 LaSalle Street, Chicago, IL 60675, owned 626,000 shares or 6.54%. The
Corporation previously received a Schedule 13G disclosing that C.S. McKee & Co.,
Inc., One Gateway Center, Pittsburgh, PA 15222, owned 611,050 shares or 6.38% of
the Corporation's common stock as of December 31, 1993 and on June 7, 1989,
GAMCO Investors, Inc. and affiliates, Corporate Center at Rye, Rye, NY 10580,
filed a Schedule 13D showing they owned 1,872,875 shares or 19.55%. No further
filings have been made by C.S. McKee and Co. or GAMCO Investors, Inc.
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 7, 1995 information concerning
18
<PAGE>
the beneficial ownership of the Corporation's Common Stock by the Directors and
Named Executive Officers and all Directors and Executive Officers of the
Corporation as a group:
<TABLE>
<CAPTION>
Name of Amount and nature of Percent
beneficial owner beneficial ownership of class
- ---------------- -------------------- --------
<S> <C> <C>
Louis Berkman 1,841,243(1)(2) 19.2
Robert A. Paul 57,922(3) .6
Alvin G. Keller 9,753(4) .1
Alvin H. Pforzheimer, III 2,733(5) *
Ernest G. Siddons 1,833(6) *
William P. Hackney 433 *
William D. Eberle 200 *
Robert F. Schultz 200(6) *
Directors and Executive
Officers as a group
(10 persons) 1,913,051(7) 19.97
</TABLE>
- ---------------
*less than .1%
(1) Includes 213,888 shares owned directly, 1,626,089 shares owned by The Louis
Berkman Company and 1,266 shares held by The Louis and Sandra Berkman
Foundation of which Louis Berkman and Robert A. Paul are trustees, in which
shares Mr. Berkman disclaims beneficial ownership.
(2) The Louis Berkman Company owns beneficially and of record 1,626,089 shares
of the Corporation's Common Stock (16.98%). Louis Berkman is an officer and
director of The Louis Berkman Company and owns directly 62.90% of its common
shares. Robert A. Paul, an officer and director of The Louis Berkman
Company, disclaims beneficial ownership of the 18.93% of its common stock
owned by his wife. The number of shares shown in the table for Robert A.
Paul does not include any shares held by The Louis Berkman Company.
(3) Includes 42,889 shares owned directly and the following shares in which he
disclaims beneficial ownership: 13,767 shares owned by his wife and 1,266
shares held by The Louis and Sandra Berkman Foundation of which Robert A.
Paul and Louis Berkman are Trustees.
(4) Includes 5,333 shares owned directly, 3,000 shares owned jointly with his
wife, and 1,420 shares owned by his wife, in which shares he disclaims
beneficial ownership.
(5) Includes 1,000 shares owned directly, 1,600 shares held by a trust of which
he is a principal beneficiary, and 133 shares held by his daughter, in which
shares he disclaims beneficial ownership.
19
<PAGE>
(6) The shares are owned jointly with his wife.
(7) Excludes double counting of shares deemed to be beneficially owned by more
than one Director.
Unless otherwise indicated the individuals named have sole investment and
voting power.
(c) CHANGES IN CONTROL
The Corporation knows of no arrangements which may at a subsequent date
result in a change in control of the Corporation.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
In 1994 the Corporation bought industrial supplies from The Louis Berkman
Company in transactions in the ordinary course of business amounting to
approximately $930,000. Additionally, The Louis Berkman Company paid the
Corporation $187,500 for certain administrative services. Louis Berkman and
Robert A. Paul are officers and directors, and Louis Berkman is a shareholder,
in that company. These transactions and services were at prices generally
available from outside sources. Transactions between the parties will take
place in 1995.
In 1989, certain subsidiaries of the Corporation and Tertiary, Inc., a
corporation owned by the children of William Eberle, formed three 50/50
partnerships, to manage, develop and operate hotel properties and a subsidiary
of the Corporation also invested as a limited partner in one of the operating
partnerships. In 1992, Tertiary purchased two of the 50/50 partnerships. In
1993, Tertiary paid the remaining $100,000 from such purchase. In 1994, one of
the limited partnerships accrued a fee of $30,129 payable to William Eberle for
his guarantee of a mortgage loan. At December 31, 1994, there were
20
<PAGE>
promissory notes outstanding from certain of the partnerships to subsidiaries of
the Corporation totaling $880,000. These notes are due in 1996.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS
The consolidated financial statements, together with the report
thereon of Price Waterhouse LLP, appearing on pp. 5 through 15 of the
accompanying Annual Report are incorporated by reference in this Form 10-K
Annual Report.
21
<PAGE>
3. EXHIBITS
Exhibit No.
(3) Articles of Incorporation and By-laws
a. Restated Articles of Incorporation
Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1983
b. Amendments to Articles of Incorporation
Incorporated by reference to 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 and the Quarterly Report
on Form 10-Q for the quarter ended March 31, 1987
c. Amended and Restated By-laws
Incorporated by reference to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994
(4) Instruments defining the rights of securities holders
a. Rights Agreement between Ampco-Pittsburgh Corporation and
Mellon Bank, N.A. dated as of November 1, 1988
Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1988
b. Revolving Credit Agreement dated as of September 30, 1993
Incorporated by reference to the Quarterly Report on Form
10-Q for quarter ended September 30, 1993
(10) Material Contracts
a. 1988 Supplemental Executive Retirement Plan
Incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended September 30, 1988
22
<PAGE>
Part IV; Item 14 - EXHIBITS (cont')
Exhibit No.
(10) Material Contracts (cont')
b. Category 1 and 2 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 and the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994
c. Amendment to Category 1 Severance Agreement between Ampco-
Pittsburgh Corporation and Ernest G. Siddons
d. Guaranty of William D. and Jeffrey L. Eberle
Incorporated by reference to the Annual Report on Form 10-K
for fiscal year ended December 31, 1989
(13) Annual Report to Shareholders for the fiscal year ended December 31,
1994
(21) Significant Subsidiaries
(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed in the fourth quarter of 1994.
Note: With the exception of the Corporation's 1994 Annual Report to
Shareholders, none of the Exhibits listed in Item 14 are included with
this Form 10-K Annual Report. The Corporation will furnish copies of
Exhibits upon written request to the Secretary at the address on the
cover of the Form 10-K Annual Report accompanied by payment of $3.00
for each Exhibit requested.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)
March 23, 1995
By s/Louis Berkman
----------------------------------------
Director, Chairman of the Board -
Louis Berkman
By s/Robert A. Paul
----------------------------------------
Director, President and Chief Executive
Officer - Robert A. Paul
By s/Ernest G. Siddons
----------------------------------------
Director, Executive Vice President
and Chief Operating Officer - Ernest G.
Siddons
By s/Robert J. Reilly
----------------------------------------
Treasurer and Controller (Principal
Financial Officer) - Robert J. Reilly
24
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant, in their capacities as Directors, as of the date indicated.
March 23, 1995
By s/William P. Hackney
----------------------------------------
William P. Hackney
By s/Alvin G. Keller
----------------------------------------
Alvin G. Keller
By s/William D. Eberle
----------------------------------------
William D. Eberle
By s/Carl H. Pforzheimer, III
----------------------------------------
Carl H. Pforzheimer, III
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Page Number
-----------
<C> <S> <C>
(3) a. Restated Articles of Incorporation *
b. Amendments to Articles of Incorporation *
c. Amended and Restated By-laws *
(4) Instruments defining the rights of securities holders
a. Rights Agreement between Ampco-Pittsburgh
Corporation and Mellon Bank, N.A. dated
as of November 1, 1988 *
b. Revolving Credit Agreement dated as of
September 30, 1993 *
(10) Material Contracts
a. 1988 Supplemental Executive Retirement Plan *
b. Category 1 and 2 Severance Agreements between
Ampco-Pittsburgh Corporation and certain
officers and employees of Ampco-Pittsburgh
Corporation *
c. Amendment to Category 1 Severance Agreement
between Ampco-Pittsburgh Corporation and
Ernest G. Siddons Page 27 of 50
d. Guaranty of William D. and Jeffrey L. Eberle *
(13) Annual Report to Shareholders for the fiscal year
ended December 31, 1994 Page 28 of 50
(21) Significant Subsidiaries Page 49 of 50
(27) Financial Data Schedule Page 50 of 50
</TABLE>
*Previously Filed and Incorporated by Reference
<PAGE>
Exhibit 10(c)
February 23, 1995
Mr. Ernest G. Siddons
102 Shannon Drive
Pittsburgh, PA 15238
Dear Ernie:
Ampco-Pittsburgh Corporation is hereby amending your Severance Agreement
dated November 1, 1988 to change any reference to your former title of Senior
Vice President and/or Chief Financial Officer to your current title of Executive
Vice President and Chief Operating Officer.
Sincerely,
AMPCO-PITTSBURGH CORPORATION
s/Robert A. Paul
- -------------------------
Robert A. Paul, President
Accepted and agreed to
this 23rd day of February, 1995.
s/Ernest G. Siddons
- -------------------------
Ernest G. Siddons
RAP/lk
<PAGE>
Exhibit 13
FINANCIAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Balance Sheets........................................ 6
Consolidated Statements of Income.................................. 7
Consolidated Statements of Retained
Earnings (Deficit)............................................... 7
Consolidated Statements of Cash Flows.............................. 8
Notes to Consolidated Financial Statements......................... 9
Management's Discussion and Analysis
of Financial Condition
and Results of Operations........................................ 16
Quarterly Information.............................................. 19
Five-Year Summary of Selected Financial Data....................... 20
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
Ampco-Pittsburgh Corporation
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and retained earnings and of cash flows
present fairly, in all material respects, the financial position of
Ampco-Pittsburgh Corporation (the Corporation) and its subsidiaries at December
31, 1994 and 1993, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the Corporation's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Note 1, in 1994 the Corporation adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in Debt
and Equity Securities" and in 1992 adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits other than Pensions" and SFAS No. 109, "Accounting
for Income Taxes."
600 Grant Street
Pittsburgh, Pennsylvania 15219
February 15, 1995
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994 1993
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................................... $ 19,328,921 $ 9,550,420
Receivables, less allowance for doubtful accounts
of $483,017 in 1994 and $281,885 in 1993......................................... 21,249,278 17,864,251
Inventories........................................................................ 30,321,705 28,173,446
Investments available for sale, at market in 1994.................................. 5,392,694 2,839,620
Other.............................................................................. 3,458,582 4,919,124
---------------- ----------------
Total current assets.......................................................... 79,751,180 63,346,861
Property, plant and equipment, at cost:
Land and land improvements......................................................... 2,935,571 2,819,119
Buildings.......................................................................... 16,987,947 16,393,260
Machinery and equipment............................................................ 81,512,560 77,722,151
---------------- ----------------
101,436,078 96,934,530
Accumulated depreciation........................................................... (51,692,129) (46,346,106)
---------------- ----------------
Net property, plant and equipment............................................. 49,743,949 50,588,424
Prepaid pension......................................................................... 14,962,827 15,201,896
Other noncurrent assets................................................................. 7,454,131 9,356,933
---------------- ----------------
$ 151,912,087 $ 138,494,114
================ ================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable................................................................... $ 5,986,001 $ 5,380,015
Accrued payrolls and employee benefits............................................. 7,420,752 7,407,877
Other.............................................................................. 6,851,736 7,775,792
---------------- ----------------
Total current liabilities..................................................... 20,258,489 20,563,684
Employee benefit obligations............................................................ 20,156,521 20,828,557
Deferred income taxes................................................................... 4,382,467 1,046,376
Other noncurrent liabilities............................................................ 4,143,726 4,905,267
---------------- ----------------
Total liabilities............................................................. 48,941,203 47,343,884
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 shares....................... 9,577,621 9,577,621
Additional paid-in capital......................................................... 102,555,980 102,555,980
Retained earnings (deficit)........................................................ (15,104,987) (22,197,466)
---------------- ----------------
97,028,614 89,936,135
Cumulative translation adjustments................................................. 2,709,881 1,214,095
Unrealized holding gains on securities............................................. 3,232,389 --
---------------- ----------------
Total shareholders' equity.................................................... 102,970,884 91,150,230
---------------- ----------------
$ 151,912,087 $ 138,494,114
================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales.......................................................... $ 113,836,181 $ 108,846,416 $ 104,308,304
---------------- ---------------- ----------------
Operating costs and expenses:
Cost of products sold (excluding depreciation)................ 82,956,858 79,410,645 73,386,538
Selling and administrative.................................... 17,268,354 18,571,174 19,861,111
Depreciation.................................................. 5,251,264 5,165,983 5,083,885
---------------- ---------------- ----------------
105,476,476 103,147,802 98,331,534
---------------- ---------------- ----------------
Income from operations............................................. 8,359,705 5,698,614 5,976,770
Other income and (expense):
Gain on sale of investments................................... 2,554,294 6,489,738 --
Interest expense.............................................. (210,356) (925,627) (2,424,063)
Other income (expense)--net................................... (511,166) (671,385) (717,673)
---------------- ---------------- ----------------
Income from continuing operations
before taxes on income and cumulative
effect of accounting changes..................................... 10,192,477 10,591,340 2,835,034
Provision (benefit) for taxes on income............................ 3,870,000 (1,380,000) (31,000)
---------------- ---------------- ----------------
Income from continuing operations before cumulative effect of
accounting changes............................................... 6,322,477 11,971,340 2,866,034
Discontinued operations:
Loss from operations, including income tax
provisions of $69,000 in 1993 and $531,000
in 1992..................................................... -- (596,306) (5,082,714)
Gain (loss) on disposal, net of an income
tax provision (benefit) of $931,000 in 1994 and
($4,600,000) in 1993........................................ 1,728,251 (15,890,990) 291,071
Cumulative effect of accounting changes:
Postretirement benefits other than pensions................... -- -- (6,638,000)
Accounting for income taxes................................... -- -- (6,200,000)
---------------- ---------------- ----------------
Net income (loss) $ 8,050,728 $ (4,515,956) $ (14,763,609)
================ ================ ================
Net income (loss) per common share:
Continuing operations......................................... $ .66 $ 1.25 $ .30
Discontinued operations....................................... .18 (1.72) (.50)
Cumulative effect of accounting changes....................... -- -- (1.34)
---------------- ---------------- ----------------
Net income (loss).................................................. $ .84 $ (.47) $ (1.54)
================ ================ ================
Weighted average number of common shares
outstanding...................................................... 9,577,621 9,577,621 9,577,621
================ ================ ================
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Retained earnings (deficit) at beginning of year.................... $ (22,197,466) $ (16,244,136) $ 1,154,429
Net income (loss)................................................... 8,050,728 (4,515,956) (14,763,609)
--------------- --------------- ---------------
(14,146,738) (20,760,092) (13,609,180)
Cash dividends declared, $.10 per share in 1994, $.15 per share in
1993 and $.275 per share in 1992.................................. (958,249) (1,437,374) (2,634,956)
--------------- --------------- ---------------
Retained earnings (deficit) at end of year.......................... $ (15,104,987) $ (22,197,466) $ (16,244,136)
================ ================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).......................................................... $ 8,050,728 $ (4,515,956) $ (14,763,609)
Adjustments to reconcile net income (loss) to net cash flows from operating
activities:
Depreciation and amortization............................................ 5,251,264 6,295,985 8,312,828
(Gain) on sale of investments............................................ (2,554,294) (6,489,738) --
(Gain) loss on disposal of discontinued operations....................... (2,659,251) 20,490,990 (291,071)
Deferred income taxes.................................................... 3,983,000 (7,500,000) 2,400,000
Cumulative effect of accounting changes.................................. -- -- 12,838,000
Other--net............................................................... 256,081 248,898 628,580
(Increase) decrease in assets:
Accounts receivable................................................... (2,977,948) 1,942,788 5,604,927
Inventories........................................................... (1,699,607) 4,564,449 1,521,115
Other assets.......................................................... 2,162,319 60,282 (1,268,204)
Increase (decrease) in liabilities:
Accounts payable...................................................... 533,954 (2,036,533) (2,044,261)
Accrued payrolls and employee benefits................................ 199,996 1,660,565 (962,113)
Other liabilities..................................................... (2,764,713) (2,491,232) (8,652,490)
-------------- --------------- ---------------
Net cash flows from operating activities................................... 7,781,529 12,230,498 3,323,702
-------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from disposals of discontinued operations......................... 3,278,070 30,668,962 3,420,676
Proceeds from sales of investments......................................... 4,309,579 6,695,418 100,000
Purchase of investments.................................................... -- -- (202,709)
Purchases of property, plant and equipment................................. (4,001,704) (2,274,217) (2,960,784)
-------------- --------------- ---------------
Net cash flows from investing activities................................... 3,585,945 35,090,163 357,183
-------------- --------------- ---------------
Cash flows from financing activities:
Repayments of notes payable to bank........................................ -- (13,000,000) (1,500,000)
Repayments of long-term debt............................................... (783,333) (26,622,869) (483,334)
Dividends paid............................................................. (958,250) (1,676,692) (2,874,770)
-------------- --------------- ---------------
Net cash flows used in financing activities................................ (1,741,583) (41,299,561) (4,858,104)
-------------- --------------- ---------------
Effect of exchange rate changes on cash......................................... 152,610 (36,752) 155,498
-------------- --------------- ---------------
Net increase (decrease) in cash and cash equivalents............................ 9,778,501 5,984,348 (1,021,721)
Cash and cash equivalents at beginning of year.................................. 9,550,420 3,566,072 4,587,793
-------------- --------------- ---------------
Cash and cash equivalents at end of year........................................ $ 19,328,921 $ 9,550,420 $ 3,566,072
============== =============== ===============
Supplemental information:
Interest payments.......................................................... $ 190,362 $ 951,495 $ 2,399,211
Income tax payments (refunds)--net......................................... 1,088,145 (120,162) 20,215
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS STATED IN THOUSANDS)
NOTE 1--ACCOUNTING POLICIES:
Ampco-Pittsburgh Corporation's accounting policies conform to generally accepted
accounting principles. A summary of the significant accounting policies followed
by the Corporation is presented below to assist the reader in evaluating the
financial statements. Certain amounts for preceding periods have been
reclassified for comparability with the 1994 presentation.
CONSOLIDATION
All subsidiaries are wholly owned and are included in the consolidated financial
statements. Intercompany accounts and transactions are eliminated.
CASH AND CASH EQUIVALENTS
Securities with purchased original maturities of three months or less are
considered to be cash equivalents. The Corporation maintains cash and cash
equivalents at various financial institutions which may exceed federally insured
amounts.
INVENTORIES
Inventories are valued at cost, which is lower than market. Cost of domestic raw
materials, work-in-process and finished goods inventories is determined by the
last-in, first-out (LIFO) method. Cost of domestic supplies and foreign
inventories is determined by the first-in, first-out method.
INVESTMENTS AVAILABLE FOR SALE
Effective January 1, 1994 the Corporation adopted the method of accounting for
investments in accordance with Statement of Financial Accounting Standards
(SFAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities." Investments classified as available for sale are reported at market
value, with the unrealized gains and losses, net of tax, reported as a separate
component of shareholders' equity. Realized gains and losses on sales of
investments and declines in value judged to be other than temporary are included
in operating results.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost with depreciation computed on
the straight-line method over the estimated useful lives of the asset groups.
Expenditures that extend economic useful lives are capitalized. Gains or losses
are recognized on retirements or disposals. Routine maintenance is charged to
operating results.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the Corporation's foreign operations are translated at
the current year-end exchange rate and the statements of income are translated
at the average exchange rate for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a separate
component of shareholders' equity until the entity is sold or substantially
liquidated.
POSTRETIREMENT BENEFITS
Effective January 1, 1992, the Corporation changed the method of accounting for
postretirement benefits for its continuing operations in accordance with SFAS
No. 106, "Accounting for Postretirement Benefits Other than Pensions." This
standard requires that the expected cost of retiree health and life insurance
benefits be charged to expense during the years in which the employees render
service rather than the Corporation's past practice of recognizing these costs
on a cash basis. See Note 8 regarding the impact of adoption.
TAXES ON INCOME
Effective January 1, 1992, the Corporation adopted the method of accounting for
income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes."
SFAS No. 109 changed the criteria for measuring the provision for income taxes
and recording deferred tax assets and liabilities on the consolidated balance
sheet. See Note 11 regarding the impact of adoption.
EARNINGS PER SHARE
Net income per common share is computed on the basis of a weighted average
number of shares of stock outstanding during each period.
NOTE 2--DISCONTINUED OPERATIONS:
NORTHWESTERN STEEL AND WIRE COMPANY (NORTHWESTERN)
In 1992, the Corporation announced its intention to dispose of its interest in
Northwestern, and, consequently, excluded the gains on the disposition of the
interest from the Corporation's income from continuing operations for the
periods presented.
The Corporation sold portions of its interest in 1992, 1993 and 1994, resulting
in gains of $2,791, $351 and $1,728 (net of deferred taxes of $931 in 1994).
Beginning in 1994, the remaining interest held by the Corporation has been
reclassified as "available for sale" in accordance with SFAS No. 115 and
reported at fair value, with the unrealized gain of $3,232, net of a deferred
tax charge of $1,740, included in shareholders' equity. The Corporation intends
to sell its remaining 862,831 Northwestern shares in an orderly manner,
depending on market conditions.
<PAGE>
NOTE 2--DISCONTINUED OPERATIONS
(CONTINUED)
AIR HANDLING OPERATIONS
On May 6, 1993, the Corporation sold its Buffalo Forge air handling operations
in the United States, Canada, and Mexico (BFC) to Howden Group, PLC for a cash
purchase price of $34,250. The transaction resulted in a pre-tax loss of
$15,491.
The net sales of BFC were $32,993 for the short period ended May 6, 1993 and
$86,035 for 1992. The net sales and related cost and expenses were excluded from
the Corporation's income from continuing operations for the periods presented.
GENERAL
Included on the Corporation's balance sheet are liabilities of $12,646
associated with businesses sold or discontinued in previous years. These
reserves are primarily for retiree health benefits, workers' compensation claims
and costs of holding and preparing non-operating plant properties for sale.
Payment in respect of retiree benefits and workers' compensation is expected to
be made over an extended number of years. The non-operating plant sites held for
sale are carried at estimated net realizable value, the combined amount of which
is immaterial. In connection with its periodic evaluation of these liabilities,
the Corporation increased its loss provision relating to previously discontinued
businesses by $5,000 in 1993. In 1992, a gain of $2,791 from the sale of
Northwestern shares was credited to discontinued operations but was partially
offset by a loss provision of $2,500.
NOTE 3--INVESTMENTS:
On April 2, 1993, Amersham International PLC (Amersham) acquired the
Corporation's interest in United States Biochemical Corporation which was
accounted for by the equity method of accounting. The proceeds to the
Corporation were comprised of cash of $6,500 and 212,861 common shares of
Amersham valued at $2,300 and a contingent purchase price which was not assigned
a value. The Corporation recorded a gain of $6,490 with respect to this
transaction in 1993.
In January 1994, the Corporation received a payment of $1,598 from Amersham,
composed of cash of $814 and 52,466 shares of Amersham valued at $784 in
satisfaction of the above mentioned contingent purchase price. As no value was
assigned previously to the contingent purchase price, the settlement was
recorded as a gain in 1994.
During 1994, the Corporation sold 228,601 shares of its holdings in Amersham,
realizing proceeds of $3,496 and a pre-tax gain of $956. The Corporation has
remaining 36,726 shares of Amersham which are restricted from sale until May
1996.
NOTE 4--INVENTORIES:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Raw materials.......................... $ 5,017 $ 4,541
Work-in-process........................ 18,287 16,081
Finished goods......................... 5,026 5,614
Supplies............................... 1,992 1,937
---------- ----------
$ 30,322 $ 28,173
========== ==========
</TABLE>
Inventories valued on the LIFO method are approximately the same as current cost
at December 31, 1994 and 1993. Approximately 85% of the inventory was valued
using the LIFO method in 1994 and 83% in 1993.
NOTE 5--BORROWING ARRANGEMENTS:
The Corporation maintains a revolving credit agreement (RCA) which provides for
a four year bank commitment of up to $15,000 expiring in September 1997. In
addition, the Corporation maintains short-term lines of credit of approximately
$7,000. There were no bank borrowings outstanding at either December 31, 1994 or
1993, with only minimal line of credit borrowings during 1994.
The Corporation's RCA requires, among other things, the maintenance of certain
financial covenants including minimum net worth and ratios of interest coverage
and debt to equity. The Corporation is in compliance with the applicable bank
covenants as of December 31, 1994.
At December 31, 1994 the Corporation has outstanding one industrial development
revenue bond issue with a single principal payment of $1,350 due in 2002. The
industrial development authority retains a security interest relating to the
assets funded by the bonds.
NOTE 6--OPERATING LEASES:
The Corporation leases office space and certain production machinery and
computer equipment. Operating lease payments were $1,818 in 1994, $1,721 in 1993
and $948 in 1992. Operating lease payments for subsequent years are as follows:
<TABLE>
<S> <C> <C> <C>
1995 $1,878 1998 $ 980
1996 1,593 1999 337
1997 1,492 Thereafter 1,161
</TABLE>
NOTE 7--EMPLOYEE PENSION PLANS:
The Corporation has noncontributory defined benefit pension plans covering
substantially all of its employees. Generally, the benefits are based on years
of service multiplied by either a fixed amount or a percentage of compensation.
For its pension plans covered by the Employee Retirement Income Security Act of
1974 (ERISA), the Corporation's policy is to fund at least the minimum
actuarially computed annual contribution required under ERISA.
<PAGE>
NOTE 7--EMPLOYEE PENSION PLANS
(CONTINUED)
The net pension cost for the Corporate-sponsored pension plans consists of the
following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost................. $ 890 $ 1,042 $ 1,399
Interest cost on
projected benefit
obligation................. 4,579 5,620 7,815
Return on plan assets........ (2,141) (6,772) (9,082)
Net amortization and
deferral................... (2,834) 418 122
--------- --------- ---------
Net pension cost............. $ 494 $ 308 $ 254
========= ========= =========
</TABLE>
The reconciliation of the funded status, for pension plans in which assets
exceed the projected benefit obligation, is as follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation......... $ 52,658 $ 55,021
========== ==========
Accumulated benefit
obligation...................... $ 54,800 $ 57,228
========== ==========
Projected benefit
obligation...................... $ 58,178 $ 60,347
Plan assets at fair value.............. 67,883 69,132
---------- ----------
Plan assets in excess of
projected benefit obligation......... 9,705 8,785
Unrecognized loss...................... 5,258 6,417
---------- ----------
Prepaid pension........................ $ 14,963 $ 15,202
========== ==========
</TABLE>
Assumptions used for the Corporation's defined benefit plans for the three years
ended December 31, 1994 include:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate for
projected benefit
obligation........................ 8.5% 7.5% 9.0%
Expected long-term rate of return on
assets............................ 9.0% 9.0% 10.0%
Rate of increases in
compensation...................... 4.0% 3.0% 4.5%
</TABLE>
Pension expense is expected to increase by $500 in 1995 reflecting, in part, a
reduction in the expected long-term rate of return on assets to 8.5%.
The pension plans assets principally comprise:
<TABLE>
<CAPTION>
(Percent)
1994 1993
---- ----
<S> <C> <C>
United States government obligations......... 6.6 7.2
Industrial and financial obligations......... 22.6 23.2
Preferred and common stocks.................. 69.4 67.5
Miscellaneous and temporary
investments................................ 1.4 2.1
--------- ---------
100.0 100.0
========= =========
</TABLE>
The 1993 sale of BFC included the transfer of pension assets of $36,298 and
caused an increase in the prepaid pension of $2,600 due to the settlement and
curtailment of employee pension obligations.
The reconciliation of the funded status for a supplemental executive retirement
pension plan, in which the projected benefit obligation exceeds assets, is as
follows:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation............ $ 2,051 $ 2,041
========= =========
Accumulated benefit
obligation......................... $ 2,114 $ 2,158
========= =========
Projected benefit obligation......... $ 2,329 $ 2,447
Plan assets............................... 0 0
--------- ---------
Projected benefit obligation in excess of
plan assets............................. 2,329 2,447
Unrecognized loss......................... (215) (289)
--------- ---------
Accrued pension cost included in employee
benefit obligations..................... $ 2,114 $ 2,158
========= =========
</TABLE>
NOTE 8--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Corporation provides postretirement health care benefits principally to the
bargaining groups of one subsidiary (the Plan). The Plan covers participants and
their spouses and/or dependents who retire under the existing pension plan on
other than a deferred vested basis and at the time of retirement have also
rendered 15 or more years of continuous service irrespective of age. Other
health care and life insurance benefits are provided to retirees under other
plans no longer being offered by the Corporation. Retiree life insurance is
still being provided to substantially all retirees. Postretirement benefits with
respect to health care are subject to certain Medicare offsets.
During 1994 the Corporation amended its primary postretirement health benefit
plans to provide for a cost-sharing method for current and future retirees. The
amendments, along with changes in inflation, discount rate and mortality
assumptions used in calculating the accumulated postretirement benefit
obligation (APBO),
<PAGE>
NOTE 8--POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS (CONTINUED)
resulted in an unrecognized gain of $4,976 which will be amortized on a
straight-line basis over the average remaining employee service period as a
reduction in postretirement benefit expense beginning in 1995.
The Corporation also provides benefits to former employees of discontinued
operations. This obligation had been estimated at the time of disposal and was
included as a component of the liability for discontinued operations. See Note
2--Discontinued Operations.
The Corporation adopted SFAS No. 106 effective
January 1, 1992, and recorded the cumulative effect of the accounting change as
a one-time, non-cash charge against earnings of $6,638, or $.69 per share, which
was net of a tax benefit of $3,800. This cumulative adjustment represented the
after tax discounted present value of future retiree health and life insurance
benefits attributed to employees' service rendered prior to that date.
The Corporation's postretirement health care and life insurance plans are
unfunded.
The Corporation's APBO for continuing and discontinued businesses consists of
the following:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
APBO attributable to:
Current retirees.................. $ 8,488 $ 10,752
Fully eligible active plan
participants.................... 172 1,368
Other plan participants........... 2,467 4,605
---------- ----------
Total APBO............................. 11,127 16,725
Unrecognized gain (loss)............... 4,976 (867)
---------- ----------
Accrued retiree benefits............... $ 16,103 $ 15,858
========== ==========
</TABLE>
Accrued retiree benefits are principally classified in employee benefit
obligations.
The net postretirement benefit cost consists of the following components:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Immediate recognition of
transition obligation....... $ -- $ -- $ 10,438
Service cost.................. 293 245 259
Interest on APBO.............. 1,164 1,264 1,405
--------- --------- ----------
Net postretirement benefit
cost........................ $ 1,457 $ 1,509 $ 12,102
========= ========= ==========
</TABLE>
The following assumptions were utilized for measurement purposes of the APBO:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Medical inflation rate..................... 11.0% 13.0%
Gradual reduction to the year 2001 and
to remain level thereafter.......... 6.5% 5.5%
Discount rate.............................. 8.5% 7.5%
</TABLE>
The net postretirement benefit cost is expected to decrease by $800 in 1995 due
to the impact of the 1994 plan amendments and assumption changes.
A 1% change in the medical inflation rate would impact the APBO and the annual
benefit expense by approximately $1,600 and $200.
NOTE 9--AUTHORIZED AND ISSUED SHARES:
Each outstanding share of common stock carries one Preference Share Purchase
Right (a Right). The Rights are designed to assure that all shareholders receive
equal treatment in the event of a potential acquisition of the Corporation or a
change in control. Under certain circumstances, each Right entitles the
shareholder to buy 1/100 of a share of Series A Preference Stock at a $36.00
exercise price. The Rights are exercisable only if a party acquires beneficial
ownership of 20% or more (or offers to acquire 30% or more) of the Corporation's
common stock.
After the Rights become exercisable, if anyone acquires 30% or more of the
Corporation's stock or assets, merges into the Corporation or engages in certain
other transactions, each Right may be used to purchase shares of the
Corporation's common stock (or, under certain conditions, the acquirer's common
stock) worth twice the exercise price. The Corporation may redeem the Rights,
which expire in November 1998, for five cents per Right under certain
circumstances. At December 31, 1994, there are 3,000,000 shares of unissued
preference stock, of which 100,000 shares have been designated as Series A
Preference Stock for issuance in connection with these Rights.
NOTE 10--FINANCIAL INSTRUMENTS:
FORWARD FOREIGN EXCHANGE CONTRACTS
The Corporation's Belgian operation is subject to risk from exchange rate
fluctuations in connection with its regular purchases in dollars of in-process
materials from its U.S. parent. In order to minimize this risk, forward foreign
exchange contracts are purchased as hedges of these anticipated purchase
transactions. At December 31, 1994, the Belgian operation had monthly forward
exchange contracts through 1996 to purchase an aggregate of $7,200 of U.S.
dollars, representing approximately sixty percent of anticipated requirements.
Gains and losses on forward exchange contracts which hedge exposures on
anticipated foreign currency commitments are deferred and recognized as
adjustments
<PAGE>
NOTE 10--FINANCIAL INSTRUMENTS
(CONTINUED)
to the bases of the inventory acquired. The unrealized loss on forward exchange
contracts which was deferred at December 31, 1994 was $565.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Corporation owns shares of Northwestern which are carried at market value as
investments available for sale on the balance sheet (see Note 2). In addition,
the Corporation's shares of Amersham, which are restricted from sale until May
1996, are carried at cost of $550, which approximates their market value (see
Note 3).
The estimated fair value of forward foreign exchange contracts, based on quoted
market prices of comparable contracts, approximates their notional principal
amount less the unrealized deferred loss.
The fair value of other financial instruments classified as current assets or
current liabilities approximates their carrying values due to the short-term
maturities of these instruments.
NOTE 11--TAXES ON INCOME:
As indicated in Note 1, the Corporation adopted SFAS No. 109 effective January
1, 1992 and recorded the accounting change as a one-time non-cash charge of
$6,200.
The (benefit) or provision for taxes on income from continuing operations
consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal.................... $ 354 $ 946 $ (358)
State and local............ 380 425 155
Foreign.................... 84 149 172
--------- --------- ---------
818 1,520 (31)
Deferred federal................ 3,052 (2,900) --
--------- --------- ---------
$ 3,870 $ (1,380) $ (31)
========= ========= =========
</TABLE>
The total (benefit) or provision for taxes on income, including the effect of
accounting changes in 1992, consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current:
Federal................... $ 354 $ 946 $ (358)
State and local........... 380 425 155
Foreign................... 84 218 703
--------- --------- ---------
818 1,589 500
Deferred federal............... 3,983 (7,500) 2,400
--------- --------- ---------
$ 4,801 $ (5,911) $ 2,900
========= ========= =========
</TABLE>
The deferred federal tax benefit of $2,900 recorded in 1993 in continuing
operations resulted from an adjustment to the beginning of the year valuation
allowance because of a change in judgment, principally with regard to the
Corporation's ability to realize certain capital gains in the future. These
factors also led management to conclude that a portion of the income tax
benefits attributed to the loss on the sale of BFC in 1993 should be recognized.
Such benefits were recorded in the loss on disposal of discontinued operations.
Deferred tax assets and liabilities comprise the following:
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Net operating loss
carryforward........................ $ 4,610 $ 6,099
Employment-related liabilities........ 5,715 5,846
Capital loss carryforward............. 15,464 9,962
Discontinued operations accrual....... 5,186 6,801
Tax credits carryforward.............. 2,658 2,571
Other................................. 927 673
---------- ----------
Gross deferred tax assets............. 34,560 31,952
Valuation allowance................... (15,208) (6,909)
---------- ----------
19,352 25,043
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Depreciation.......................... (12,601) (13,956)
Prepaid pension....................... (6,052) (6,631)
Foreign deferred tax.................. (1,273) (1,046)
---------- ----------
Gross deferred tax liabilities........ (19,926) (21,633)
---------- ----------
Net deferred tax asset
(liability)......................... $ (574) $ 3,410
========== ==========
</TABLE>
The Corporation has recorded a valuation allowance with respect to the future
tax benefits of the capital loss and tax credit carryforwards reflected as
deferred tax assets due to the uncertainty of their ultimate realization. The
net increase in the valuation allowance in 1994 reflects changes in the deferred
tax assets, including an increase in the available capital loss carryforward to
reflect the final tax return treatment of the 1993 sale of BFC and a decrease in
the estimated capital gains expected to be realized in the future.
Included in the balance sheet at December 31, 1994 for deferred taxes is $2,068
in other current assets, net of a $1,740 deferred tax charge related to an
investment valuation (see Note 2), and a noncurrent liability of $4,382. The net
deferred tax asset for 1993 is principally classified in other current assets.
<PAGE>
NOTE 11--TAXES ON INCOME
(CONTINUED)
For federal income tax purposes, the Corporation has the following unused
carryforwards at December 31, 1994:
<TABLE>
<CAPTION>
EXPIRATION
TYPE AMOUNT DATES
- ---- ------ -----
<S> <C> <C>
Regular tax net operating
loss.............................. $ 13,172 2002-2007
Alternative minimum tax net
operating loss.................... 9,829 2002-2007
Capital loss........................ 44,183 1998
Investment tax credit............... 1,478 1996-2000
Alternative minimum tax
credit............................ 1,171 unlimited
</TABLE>
The income from continuing operations before income taxes and cumulative effect
of accounting changes was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
U.S. operations.............. $ 10,057 $ 10,680 $ 2,057
Foreign operations........... 135 (89) 778
---------- ---------- ---------
$ 10,192 $ 10,591 $ 2,835
========== ========== =========
</TABLE>
The difference between the U.S. federal income tax statutory rate and the
Corporation's effective income tax rate on continuing operations is as follows:
<TABLE>
<CAPTION>
(Percent)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Computed at statutory rate........... 35.0 35.0 34.0
Foreign income taxes................. 0.8 1.4 8.7
Benefit from operating
loss carryforward.................. (16.3) -- (34.0)
Federal tax benefit.................. -- -- (15.3)
State income taxes................... 2.4 4.0 5.5
Valuation reserve.................... 13.7 (63.2) --
Other--net........................... 2.4 9.8 --
--------- --------- ---------
38.0 (13.0) (1.1)
========= ========= =========
</TABLE>
The 1994 effective tax rate was reduced to reflect a change in net operating
loss carryforwards as a result of the final tax return treatment of the 1993
sale of BFC. Further, the effective tax rate was increased due to a revision of
the valuation reserve concerning the Corporation's ability to realize certain
capital gains in the future.
The deviation in tax provision from the statutory rate in 1993 was due
principally to the use of operating and capital loss carryforwards against the
1993 income from continuing operations. In addition, a tax benefit related to
other loss and credit carryforwards was recognized because of a change in
judgment, principally with regard to the Corporation's ability to realize
certain capital gains in the future.
NOTE 12--FOREIGN CURRENCY TRANSLATION ADJUSTMENTS:
Cumulative translation adjustments included as a component of shareholders'
equity are as follows:
<TABLE>
<CAPTION>
INCREASE
(DECREASE)
----------
<S> <C>
December 31, 1991............................... $ 251
1992 translation adjustment................ (1,832)
-------------
December 31, 1992............................... (1,581)
Sale of discontinued businesses............ (4,372)
1993 translation adjustment................ (1,361)
-------------
December 31, 1993............................... 1,430
1994 translation adjustment................ 1,280
-------------
DECEMBER 31, 1994............................... $ 2,710
=============
</TABLE>
NOTE 13--LITIGATION:
The Corporation's subsidiary, Vulcan Inc. (Vulcan), is a 50% general partner in
Valley-Vulcan Mold Company (Valley), a partnership, which filed under Chapter 11
of the U.S. Bankruptcy Code in 1990. Valley, in connection with its formation,
assumed certain obligations of each of the partners, including Vulcan's
obligation to pay an industrial revenue bond. A portion of the latter
obligation, however, had been paid by the Corporation pursuant to a guaranty
given at the time of Valley's formation, which guaranty was secured by all of
Valley's assets. In 1991, the unsecured creditors committee brought an adversary
proceeding against the Corporation and its subsidiary, as well as others,
seeking to set aside the Corporation's liens, to hold the Corporation and Vulcan
liable for debts of Valley, and for return of certain funds received in
connection with Valley's formation. In April 1994, the Bankruptcy Court issued a
favorable judgment denying all claims against the Corporation. In addition, the
Court permitted the Corporation to recover $2,200 from the estate of Valley in
connection with the Corporation's lien for the industrial revenue bond
guarantee. No reserve had been established for the outcome of this litigation
based on the Corporation's belief that it had meritorious defenses. The
plaintiff in the case, the unsecured creditors committee of Valley, has filed a
notice of appeal from the Court's decision. The Corporation has posted a bank
letter of credit for $2,200 pending the outcome of the appeal.
In addition to the litigation noted above, the Corporation is from time to time
subject to routine litigation incidental to its business. The Corporation
believes that the results of the above noted litigation and other pending legal
proceedings will not have a materially adverse effect on the Corporation's
financial condition or results of operation.
<PAGE>
NOTE 14--ENVIRONMENTAL MATTERS:
There are various environmental proceedings which involve discontinued
operations. In some of those proceedings, the Corporation has been designated as
a potentially responsible party. The reserves for discontinued operations (see
Note 2) include an accrual for costs of likely remedial actions.
Environmental exposures are difficult to assess and estimate for numerous
reasons including the lack of reliable data, the number of potentially
responsible parties and their financial capabilities, the multiplicity of
possible solutions, the years of remedial and monitoring activity required, and
the identification of new sites. While it is not possible to quantify with
certainty the environmental exposure, in the opinion of management, the
potential liability for all environmental proceedings, based on information
known to date and the estimated quantities of waste at these sites, will not
have a material adverse effect on the financial condition, results of operations
or liquidity of the Corporation.
The Corporation has various discontinued operation plant sites which are held
for sale. As part of the reserves for discontinued operations (see Note 2), an
estimated liability of $1,200 is included for anticipated site restoration
costs. The majority of these costs are expected to be expended within the next
three years.
NOTE 15--RELATED PARTY TRANSACTIONS:
In the ordinary course of business, the Corporation purchased industrial
supplies from, and was paid for administrative services by, The Louis Berkman
Company in the total of $1,118 in 1994, $926 in 1993 and $590 in 1992. Louis
Berkman and Robert A. Paul are officers and directors, and Louis Berkman is a
shareholder, in that company. Transactions between the parties will take place
in 1995.
NOTE 16--BUSINESS SEGMENT INFORMATION:
The Corporation is in one business segment that manufactures and sells
engineered products. Operating companies include Union Electric Steel
Corporation, Aerofin Corporation, Buffalo Pumps, Inc. and New Castle Industries,
Inc. Included in the segment information are U.S. operations and one non-U.S.
operation which is a wholly-owned subsidiary in Belgium. The following table has
been adjusted to include continuing operations only with the exception of
identifiable assets in 1992 which include BFC (see Note 2).
<TABLE>
<CAPTION>
U.S. Non-U.S.
Total operations operations
----- ---------- ----------
<S> <C> <C> <C>
1994
- ----
Net sales*............... $ 113,836 $ 104,109 $ 15,647
Identifiable assets...... 151,912 137,797 14,115
Capital expenditures..... 4,002 3,539 463
Depreciation............. 5,251 4,836 415
Contributions to
operating income....... 8,360 7,794 566
1993
- ----
Net sales*............... $ 108,846 $ 101,281 $ 13,321
Identifiable assets...... 138,494 125,896 12,598
Capital expenditures..... 1,840 1,631 209
Depreciation............. 5,166 4,775 391
Contributions to
operating income....... 5,699 5,524 175
1992
- ----
Net sales*............... $ 104,308 $ 92,575 $ 17,781
Identifiable assets...... 193,292 161,716 31,576
Capital expenditures..... 2,207 1,210 997
Depreciation............. 5,084 4,641 443
Contributions to
operating income....... 5,977 4,755 1,222
</TABLE>
*Total net sales exclude intercompany sales of: $5,920 in 1994, $5,756 in 1993
and $6,048 in 1992.
Net sales from U.S. operations, excluding those to a subsidiary company, include
export sales of $17,687 in 1994, $12,481 in 1993 and $11,000 in 1992. Included
in identifiable assets of U.S. operations are amounts attributable to either
investments or discontinued operations of $10,591 in 1994, $10,112 in 1993 and
$10,787 in 1992. The Corporation entered into operating leases for certain
domestic production machinery with a total value of $2,800 in 1993 and $2,900 in
1992.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1994 COMPARED TO 1993
OPERATIONS
Net sales for 1994 of $113,836,000 compare with $108,846,000 for 1993. The 4.6%
increase is a result of a modest improvement in each of the markets served by
the Corporation. Higher shipment levels of forged steel rolls to foreign markets
accounted for most of the increase in sales. Sales of Aerofin heat exchange
coils were slightly improved in 1994 despite the impact of an extended strike.
The order backlog at December 31, 1994 of $70,200,000 is $13,900,000 higher than
at the end of the prior year. Management believes that the increase is partly
due to earlier placement of orders by customers as well as improvements in the
level of business activity.
Although margins improved modestly in 1994, cost of sales was adversely impacted
by strike related expenses and subcontracting costs at Aerofin. As a result, the
cost of products sold, excluding depreciation, in relationship to net sales was
73.0% in both 1994 and 1993. By year-end, Aerofin had returned to pre-strike
levels of production and efficiency.
Selling and administrative expenses in 1994 declined by $1,303,000 or 7.0%
compared to 1993 due to staff and expense reductions.
Depreciation expense of $5,251,000 in 1994 compares with $5,166,000 in 1993.
Income from operations improved to $8,360,000 in 1994 compared to $5,699,000 in
1993. The increase of $2,661,000 was due to the higher sales volume and lower
selling and administrative expenses, offset partially by lower earnings at
Aerofin.
For a discussion on the gain on sale of investments, see Notes to Consolidated
Financial Statements--Note 3.
Interest expense was $210,000 in 1994 compared with $926,000 in 1993. The lower
expense resulted from the prepayment of all bank debt in the second quarter of
1993 following the sale of the air handling group (AHG).
Other income (expense)--net was $(511,000) in 1994 as compared to $(671,000) in
1993. Included are charges in both years of $(1,000,000) for the accretion, from
present values, on long-term discontinued business reserves. Also reflected are
interest earnings which were higher in 1994 due to an increase in invested cash
balances.
For a discussion concer ning the benefit for taxes on income recorded in 1993,
see Notes to Consolidated Financial Statements--Note 11.
Discontinued operations in 1994 includes an after tax gain of $1,728,000 on the
partial sale of Northwestern Steel and Wire shares. The $16,487,000 loss in 1993
includes the operating results and sale of BFC, and an addition to the
discontinued business reserves, offset by a tax benefit.
As a result of all of the above, the Corporation had net income of $8,051,000 in
1994 compared with a net loss of $(4,516,000) in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows from operating activities were positive for 1994 at $7,782,000
and compare with positive cash flows of $12,230,000 for 1993. Net cash outflow
for working capital changes and payments associated with discontinued operations
was $4,546,000 in 1994 compared to net cash inflows of $3,700,000 for 1993. The
1994 net cash outflow reflects increased investment in receivables and inventory
at December 31 compared to 1993 as a result of higher sales and backlog levels.
The 1993 net cash inflow included a reduction in working capital for BFC prior
to sale. Net cash flow from operating activities in 1994 includes a recovery of
$2,200,000 from the Chapter 11 estate of Valley-Vulcan Mold Company in
connection with the Corporation's lien in respect of a previously paid
industrial revenue bond guarantee (see Notes to Consolidated Financial
Statements--Note 13).
The net cash flows from investing activities in 1994 of $3,586,000 includes
proceeds from the sale of Amersham and Northwestern shares and the contingent
purchase price receipt from Amersham, partially offset by purchases of
equipment. The 1993 comparative amount of $35,090,000 included proceeds from the
sales of BFC and U.S. Biochemical.
Cash outflows with respect to financing activities of $1,742,000 in 1994 and
$41,300,000 in 1993 include the payment of IRB debt and dividends, and, in 1993,
the prepayment of bank debt.
As a result of all of the above, cash and cash equivalents increased by
$9,779,000 in 1994 and total $19,329,000 at the end of the year.
Capital expenditures for 1994 totalled $4,002,000 compared with $2,274,000 for
1993. The 1993 capital expenditures include payments with respect to BFC of
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
$434,000. Also in 1993, the Corporation entered into an operating lease for
certain production machinery with a total value of $2,800,000. Depreciation
expense for continuing operations was $5,251,000 for 1994 and $5,166,000 for
1993. Capital appropriations carried forward from 1994, which principally
comprise normal replacements, upkeep of assets and improvements, total
$2,160,000.
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
December 31, 1994 was $22,000,000 (see Notes to Consolidated Financial
Statements--Note 5).
At December 31, 1994, the Corporation owned 862,831 shares of Northwestern which
had a market value of $5,393,000. The Corporation intends to sell its shares in
Northwestern in an orderly manner, depending on market conditions. The
Corporation also owned 36,726 shares of Amersham, with a market value of
approximately $500,000, which are restricted from sale until May 1996.
With respect to environmental concerns, the Corporation has been named a
potentially responsible party at certain sites. The Corporation has accrued for
costs of remedial actions it would likely be required to take. In addition, the
Corporation has provided for environmental clean-up costs related to preparing
its discontinued business facilities for sale. While it is not possible to
quantify with certainty the potential 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 (also see Notes to Consolidated Financial
Statements--Note 14).
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 or results of operations will be
materially affected by the costs of known, pending or threatened litigation
(also see Notes to Consolidated Financial Statements--Note 13).
1993 COMPARED TO 1992
OPERATIONS
In 1993, the Corporation sold its Buffalo Forge air handling operations (BFC) to
Howden Group, PLC (see Notes to Consolidated Financial Statements--Note 2). The
operating results were restated to reflect continuing operations.
Net sales for 1993 of $108,846,000 compare with $104,308,000 for 1992. Sales of
domestic operations increased 10.0%. However, shipments of the Corporation's
Belgian roll-making operation were $4,460,000 lower than in the prior year
reflecting weaker economic conditions in Europe. The order backlog at December
31, 1993 of $56,300,000 is $8,400,000 lower than at the end of the prior year.
Management believes that the reduction principally reflects shorter lead-time
ordering patterns of customers.
The cost of products sold, excluding depreciation, in relationship to net sales
was 73.0% in 1993 and 70.4% in 1992. The increase in 1993 was in part due to
reduced margins as a result of continuing competitive pricing pressures. In
addition, planned inventory reductions resulted in lower production levels and
the consequential lower fixed cost absorption.
Selling and administrative expenses were 6.5% lower in 1993. Selling expenses in
particular benefitted from elimination of charges for services previously
provided by BFC. This was in part offset by an increase in the Corporation's
volume of sales subject to commission. Administration expenses were lower as a
result of increased fee income received for services provided by the Corporation
to others.
Depreciation expense of $5,166,000 in 1993 compares with $5,084,000 in 1992.
Due to the above, income from operations was $5,699,000 in 1993 and $5,977,000
in 1992. The reduction in income from operations for 1993 occurred even though
sales increased for the period due principally to the increase in the product
cost relationship to sales discussed above and lower earnings from the Belgian
roll-making operation.
For a discussion of the gain on sale of U.S. Biochemical in 1993, see Notes to
Consolidated Financial Statements--Note 3.
Interest expense was $926,000 in 1993 compared with $2,424,000 in 1992. The
reduction in 1993 was due principally to the use of proceeds from dispositions
to prepay bank debt.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Other income (expense)--net was $(671,000) in 1993 as compared with $(718,000)
in 1992. Included in other income (expense)--net are charges of $(1,000,000) in
1993 and $(800,000) in 1992 for the accretion, from present values, on long-term
discontinued business reserves. Also reflected in 1993 are interest earnings
from invested cash balances.
For a discussion concerning the benefit for taxes on income in 1993, see Notes
to Consolidated Financial Statements--Note 11.
For a discussion regarding discontinued operations, see Notes to Consolidated
Financial Statements--Note 2.
For a discussion with respect to the cumulative effect of accounting changes,
see Notes to Consolidated Financial Statements--Notes 1, 8 and 11.
As a result of all of the above, the Corporation had a net loss of $4,516,000 in
1993 compared with a net loss of $14,764,000 in 1992.
STATEMENT OF CASH FLOW
The Corporation received $34,250,000 and $6,500,000 cash, respectively, from the
sale of BFC and its investment in U.S. Biochemical (see Notes to Consolidated
Financial Statements--Notes 2 and 3). The sale of BFC was a stock transaction
which included cash balances of businesses sold of $3,981,000, resulting in net
cash to the Corporation of $30,269,000. The proceeds were principally applied to
prepay bank debt.
Net cash flows from operating activities were positive for 1993 at $12,230,000
and compare with positive cash flows of $3,324,000 for 1992. Included in 1993
were cash inflows from working capital changes net of payments associated with
discontinued operations of $3,700,000 compared with a net cash outflow of
$5,800,000 in 1992.
The net cash flows from investing activities of $35,090,000 in 1993 were due to
sale of BFC and U.S. Biochemical, previously discussed, partially offset by
purchases of equipment.
Cash outflows with respect to financing activities of $41,300,000 reflect the
application of proceeds from the BFC and U.S. Biochemical transactions to the
prepayment of bank debt and dividends.
As a result of all of the above, cash and cash equivalents increased by
$5,984,000 in 1993.
Capital expenditures for 1993 totaled $2,274,000 compared with $2,961,000 for
1992. The capital expenditures include payments with respect to BFC of $434,000
in 1993 and $754,000 in 1992. The Corporation entered into operating leases for
certain production machinery with a total value of $2,800,000 in 1993 and
$2,900,000 in 1992. Depreciation expense for continuing operations was
$5,166,000 for 1993 and $5,084,000 for 1992.
<PAGE>
QUARTERLY INFORMATION--UNAUDITED
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
1994
- ----
Net sales..................................... $ 27,105,976 $ 29,732,613 $ 27,589,907 $ 29,407,685 $ 113,836,181
Gross profit (1).............................. 7,277,426 7,693,744 7,612,290 8,295,863 30,879,323
Income from operations........................ 1,583,493 2,174,383 1,732,165 2,869,664 8,359,705
Income from continuing
operations (2).............................. 1,850,807 1,739,904 1,132,438 1,599,328 6,322,477
Discontinued operations (3)................... 1,728,251 -- -- -- 1,728,251
Net income (loss)............................. 3,579,058 1,739,904 1,132,438 1,599,328 8,050,728
Per common share:
Continuing operations....................... .19 .18 .12 .17 .66
Discontinued operations..................... .18 -- -- -- .18
Net income (loss)........................... .37 .18 .12 .17 .84
1993
- ----
Net sales..................................... $ 28,836,338 $ 29,385,361 $ 23,699,768 $ 26,924,949 $ 108,846,416
Gross profit (1).............................. 7,206,774 7,787,799 6,488,391 7,952,807 29,435,771
Income from operations........................ 761,884 1,807,980 1,104,346 2,024,404 5,698,614
Income from continuing
operations (4).............................. 37,833 7,660,062 903,553 3,369,892 11,971,340
Discontinued operations (5)................... 184,027 (16,271,323) -- (400,000) (16,487,296)
Net income (loss)............................. 221,860 (8,611,261) 903,553 2,969,892 (4,515,956)
Per common share:
Continuing operations....................... -- .80 .09 .35 1.25
Discontinued operations..................... .02 (1.70) -- (.04) (1.72)
Net income (loss)........................... .02 (.90) .09 .31 (.47)
</TABLE>
NOTES
1. Gross profit as used herein does not include a charge for depreciation.
2. Continuing operations in 1994 include gains on sales of investments, net of
deferred taxes, of $1,038,000, $475,000 and $147,000 in the first,
second and third quarters, respectively.
3. Included in discontinued operations in the first quarter of 1994 is a gain
from the sale of part of the Corporation's interest in Northwestern Steel and
Wire Company.
4. Continuing operations in 1993 include a gain from the sale of an investment
of $6,490,000 in the second quarter and a tax benefit of $1,720,000 in the
fourth quarter.
5. Discontinued operations in 1993 include a loss on disposal of the
Corporation's air handling operations of $15,491,000 in the second quarter.
The fourth quarter of 1993 included an increase in reserves
for previous disposals of $5,000,000 offset by $4,600,000 of tax benefits
associated with 1993 losses from discontinued operations.
<PAGE>
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................ $ 113,836,181 $ 108,846,416 $ 104,308,304 $ 113,298,563 $ 113,524,833
Income from operations................... 8,359,705 5,698,614 5,976,770 9,798,965 11,010,137
Income (loss) from continuing
operations............................. 6,322,477 11,971,340 2,866,034 903,664 (9,210,678)
Discontinued operations.................. 1,728,251 (16,487,296) (4,791,643) (14,571,452) 6,125,830
Cumulative effect of accounting
changes................................ -- -- (12,838,000) -- --
Extraordinary tax credit................. -- -- -- -- 3,590,000
Net income (loss)........................ 8,050,728 (4,515,956) (14,763,609) (13,667,788) 505,152
Total assets............................. 151,912,087 138,494,114 193,291,690 209,978,401 229,039,942
Shareholders' equity..................... 102,970,884 91,150,230 94,308,590 113,539,315 129,709,308
Per common share:
Income (loss) from continuing
operations.......................... .66 1.25 .30 .09 (.96)
Discontinued operations................ .18 (1.72) (.50) (1.52) .64
Cumulative effect of
accounting changes.................. -- -- (1.34) -- --
Extraordinary tax credit............... -- -- -- -- .37
Net income (loss)...................... .84 (.47) (1.54) (1.43) .05
Cash dividends......................... .10 .15 .275 .30 .30
Shareholders' equity................... 10.75 9.52 9.85 11.85 13.54
Market price at year end............... $ 9.875 $ 7.125 $ 9.00 $ 7.75 $ 6.50
Weighted average shares
outstanding and at year end............ 9,577,621 9,577,621 9,577,621 9,577,621 9,577,621
Number of shareholders................... 1,654 1,738 1,873 1,976 2,056
Number of employees...................... 955 949 1,950 2,068 2,131
</TABLE>
COMMON STOCK INFORMATION
The shares of common stock of Ampco-Pittsburgh Corporation are traded on the New
York Stock Exchange and on the Philadelphia Stock Exchange (symbol AP). Cash
dividends have been paid on common shares in every year since 1965.
<TABLE>
<CAPTION>
1994 1993
------------------------------- -------------------------------
DIVIDENDS Dividends
QUARTER HIGH LOW DECLARED High Low Declared
- ------- ---- ---- --------- ---- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
First $ 9 3/4 $ 7 $ .025 $ 10 1/4 $ 6 3/4 $ .050
Second 9 1/8 7 .025 8 1/4 6 1/4 .050
Third 9 1/8 6 1/8 .025 7 3/4 6 1/2 .025
Fourth 9 7/8 6 3/4 .025 7 3/8 6 1/2 .025
Year 9 7/8 6 1/8 .100 10 1/4 6 1/4 .150
</TABLE>
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction of
Name Ownership Incorporation
- ---- --------- ---------------
<S> <C> <C>
1027226 Ontario Ltd. 100% owned by
Aerofin Corporation Canada
AP Venture Corp. III 100% owned by
Ampco-Pittsburgh Corporation Delaware
Aerofin Corporation 100% owned by
Ampco-Pittsburgh Securities
V Corporation New York
Ampco NCII Sub, Inc. 100% owned by Delaware
New Castle Industries, Inc.
Ampco-Pittsburgh Securities 100% owned by
III Corporation Ampco-Pittsburgh Corporation Delaware
Ampco-Pittsburgh Securities 100% owned by
V Corporation Ampco-Pittsburgh Corporation Delaware
Ampco UES Sub, Inc. 100% owned by
Union Electric Steel
Corporation Delaware
Buffalo Pumps, Inc. 100% owned by
Ampco-Pittsburgh Corporation Delaware
New Castle Industries, Inc. 100% owned by
Ampco UES Sub, Inc. Pennsylvania
Union Electric Steel 100% owned by
Corporation Ampco-Pittsburgh Securities
V Corporation Pennsylvania
Union Electric Steel N.V. 100% owned by 1027226
Ontario Limited Belgium
</TABLE>
The financial statements of all subsidiaries have been consolidated with
those of the Corporation. Names of other subsidiaries have been omitted
because, considered in the aggregate as a single subsidiary, they would not
constitute a significant subsidiary.
Exhibit 21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 19,328,921
<SECURITIES> 5,392,694
<RECEIVABLES> 21,732,295
<ALLOWANCES> 483,017
<INVENTORY> 30,321,705
<CURRENT-ASSETS> 79,751,180
<PP&E> 101,436,078
<DEPRECIATION> 51,692,129
<TOTAL-ASSETS> 151,912,087
<CURRENT-LIABILITIES> 20,258,489
<BONDS> 1,350,000
<COMMON> 9,577,621
0
0
<OTHER-SE> 93,393,263
<TOTAL-LIABILITY-AND-EQUITY> 151,912,087
<SALES> 113,836,181
<TOTAL-REVENUES> 113,836,181
<CGS> 82,956,858
<TOTAL-COSTS> 105,476,476
<OTHER-EXPENSES> 511,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 210,356
<INCOME-PRETAX> 10,192,477
<INCOME-TAX> 3,870,000
<INCOME-CONTINUING> 6,322,477
<DISCONTINUED> 1,728,251
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,050,728
<EPS-PRIMARY> .84
<EPS-DILUTED> .84
</TABLE>
