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FORM 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-898.
AMPCO-PITTSBURGH CORPORATION
Incorporated in Pennsylvania.
I.R.S. Employer Identification No. 25-1117717.
600 Grant Street, Pittsburgh, Pennsylvania 15219
Telephone Number 412/456-4400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required
to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
On August 10, 1998, 9,577,621 common shares were outstanding.
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AMPCO-PITTSBURGH CORPORATION
INDEX
Page No.
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 1998 and December 31, 1997 3
Consolidated Statements of Income -
Six Months Ended June 30, 1998 and 1997;
Three Months Ended June 30, 1998
and 1997 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1998
and 1997 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II - Other Information:
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
Exhibits
Exhibit 27
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1998 1997
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 31,029,744 $ 21,695,512
Receivables, less allowance for
doubtful accounts of $672,218 in
1998 and $629,677 in 1997 32,878,689 35,024,843
Inventories 36,348,529 35,452,494
Other 4,792,328 4,530,430
Total current assets 105,049,290 96,703,279
Property, plant and equipment,
at cost 144,035,254 139,249,677
Accumulated depreciation (70,509,278) (66,714,835)
Net property, plant and
equipment 73,525,976 72,534,842
Unexpended industrial revenue
bond proceeds 992,954 2,218,317
Prepaid pension 13,679,592 13,679,592
Other noncurrent assets 11,830,322 11,709,131
$205,078,134 $196,845,161
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 8,127,160 $ 8,638,073
Accrued payrolls and employee
benefits 8,401,893 7,747,474
Other 8,585,076 7,373,110
Total current liabilities 25,114,129 23,758,657
Employee benefit obligations 16,468,367 16,755,483
Industrial revenue bond debt 12,586,000 12,586,000
Deferred income taxes 11,699,635 11,329,110
Other noncurrent liabilities 2,787,996 3,000,124
Total liabilities 68,656,127 67,429,374
Shareholders' equity:
Preference stock - no par value;
authorized 3,000,000 shares: none
issued - -
Common stock - par value $1; authorized
20,000,000 shares; issued and
outstanding 9,577,621 in 1998
and 1997 9,577,621 9,577,621
Additional paid-in capital 102,555,980 102,555,980
Retained earnings 23,760,335 16,602,063
Accumulated other comprehensive
income 528,071 680,123
Total shareholders' equity 136,422,007 129,415,787
$205,078,134 $196,845,161
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Six Months Ended June 30, Three Months Ended June 30,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales $ 95,371,010 $ 83,925,317 $ 46,772,660 $ 43,091,163
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 64,553,691 57,549,037 31,756,046 29,688,005
Selling and administrative 13,633,703 11,849,597 6,826,824 5,929,734
Depreciation 3,851,920 3,336,127 1,932,505 1,664,923
82,039,314 72,734,761 40,515,375 37,282,662
Income from operations 13,331,696 11,190,556 6,257,285 5,808,501
Other income (expense):
Gain on sale of investments - 936,575 - 721,910
Other income (expense)-net 255,548 409,647 108,838 131,035
Income before income taxes 13,587,244 12,536,778 6,366,123 6,661,446
Income taxes 4,705,000 4,410,000 2,140,000 2,330,000
Net income $ 8,882,244 $ 8,126,778 $ 4,226,123 $ 4,331,446
Basic earnings per share $ .93 $ .85 $ .44 $ .45
Cash dividends declared
per share $ .18 $ .12 $ .09 $ .06
Weighted average number of
common shares outstanding 9,577,621 9,577,621 9,577,621 9,577,621
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended June 30,
1998 1997
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,882,244 $ 8,126,778
Adjustments to reconcile net income to net
cash flows from operating activities:
Depreciation 3,851,920 3,336,127
Gain on sale of investments - (936,575)
Deferred income taxes 735,000 89,300
Other - net 222,131 105,983
(Increase) decrease in assets:
Receivables 2,378,580 2,520,563
Inventories (979,227) (298,731)
Other assets (150,338) 79,132
Increase (decrease) in liabilities
Accounts payable (922,789) (171,973)
Accrued payrolls and employee benefits 684,287 89,990
Other liabilities 140,846 714,315
Net cash flows from operating activities 14,842,654 13,654,909
Cash flows from investing activities:
Purchases of property, plant and equipment (5,395,235) (8,004,687)
Proceeds from sales of property, plant
and equipment 397,707 -
Unexpended industrial revenue bond proceeds 1,225,363 5,640,147
Proceeds from sales of investments - 1,258,613
Net cash flows from investing activities (3,772,165) (1,105,927)
Cash flows from financing activities:
Dividends paid (1,723,971) (2,107,077)
Net cash flows from financing activities (1,723,971) (2,107,077)
Effect of exchange rate changes on cash (12,286) (143,454)
Net increase in cash 9,334,232 10,298,451
Cash at beginning of year 21,695,512 25,510,231
Cash at end of period $ 31,029,744 $ 35,808,682
Supplemental information:
Income tax payments $ 3,255,674 $ 3,397,744
Interest payments 364,856 268,623
</TABLE>
See Notes to Consolidated Financial Statements.
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AMPCO-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Consolidated Financial Statements
The consolidated balance sheet as of June 30, 1998, the
consolidated statements of income for the six and three
month periods ended June 30, 1998 and 1997 and the
consolidated statements of cash flows for the six month
periods then ended have been prepared by the Corporation
without audit. In the opinion of management, all
adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial
position, results of operations and cash flows for the
periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction
with the consolidated financial statements and notes
thereto included in the Corporation's annual report to
shareholders for the year ended December 31, 1997. The
results of operations for the periods ended June 30,
1998 are not necessarily indicative of the operating
results for the full year.
2. Inventory
Inventories, principally valued on the LIFO method, are
comprised of the following:
<TABLE>
(in thousands)
June 30, December 31,
1998 1997
<S> <C> <C>
Raw materials $ 6,209 $ 6,214
Work-in-process 24,504 23,905
Finished goods 3,651 3,440
Supplies 1,985 1,893
$ 36,349 $ 35,452
</TABLE>
3. Comprehensive Income
The Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive
Income", effective January 1, 1998. This Statement
establishes standards for reporting and display of
comprehensive income and its components in the financial
statements. The Corporation's comprehensive income for
the six and three months ended June 30, 1998 and 1997
consisted of:
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<TABLE>
<CAPTION>
(in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1998 1997 1998 1997
Net income $8,882 $8,127 $4,226 $4,331
Foreign currency
translation (152) (1,357) 102 (455)
Unrealized holding
losses on
securities - (758) - (91)
Comprehensive
income $8,730 $6,012 $4,328 $3,785
</TABLE>
4. Basic Earnings Per Share
Basic earnings per share is computed on the basis of the
weighted number of shares of Ampco-Pittsburgh
Corporation's common stock outstanding, which has
remained unchanged at 9,577,621 shares for the periods
presented. Currently there are no potentially dilutive
securities; accordingly, basic earnings per share and
dilutive earnings per share are equivalent.
5. Recently Issued Accounting Standards
In September 1997, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131
requires certain disclosures about segment information
in interim and annual financial statements and related
information about products and services, geographic
areas and major customers. Generally, financial
information is required to be reported on the basis that
it is used internally for evaluating segment performance
and deciding how to allocate resources to segments. The
Corporation must adopt the provisions of SFAS No. 131
for its consolidated financial statements for the year
ending December 31, 1998. The adoption of SFAS No. 131
will not effect the measurement of the Corporation's
financial position, results of operations or cash flows;
the Corporation is reviewing possible changes in
disclosures that may be necessary.
In March 1998, the American Institute of Certified
Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed
or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
addresses costs incurred in connection with the
implementation of internal-use software, and specifies
the circumstances under which such costs should be
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capitalized or expensed. The Corporation will be
required to adopt SOP 98-1 in the first quarter of 1999.
Adoption of SOP 98-1 will not have a material impact on
the financial position, results of operations or cash
flows of the Corporation.
In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities".
This pronouncement requires all derivative instruments
to be reported at fair value on the balance sheet;
depending on the nature of the derivative instrument,
changes in fair value will be recognized either in net
income or as an element of comprehensive income. SFAS
No. 133 is first effective for the Corporation for the
year ending December 31, 2000. The Corporation does not
engage in significant activity with respect to
derivative instruments or hedging activities and
management does not anticipate adoption of SFAS No. 133
will have a material impact on the financial position,
results of operations or cash flows of the Corporation.
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AMPCO-PITTSBURGH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operations for the Six and Three Month Periods Ended
June 30, 1998 and 1997
Net sales for the six and three month periods of 1998 were
$95,371,000 and $46,773,000 compared to $83,925,000 and
$43,091,000 for the same periods of the prior year.
Excluding the impact of the previous year acquisitions of
F. R. Gross and Atlantic Grinding and Welding, which were
not included in the first half of 1997, overall sales
increased by 5.1% for the first half and declined by 0.8%
for the second quarter compared to the prior year. In
addition to the modest decline in shipments during the
second quarter, several operations experienced a slowdown
in orders, principally due to the turmoil in Asia and the
strength of the dollar impacting the Corporation's export
markets. The order backlog stood at $107,900,000 at June
30, 1998 compared to $115,200,000 at December 31, 1997.
The reduction in the backlog is due primarily to a decrease
in forged hardened steel roll orders from overseas
customers.
The cost of products sold relationships for the six and
three months ended June 30, 1998 were 67.7% and 67.9%,
respectively. This compares with the prior comparable
periods at 68.6% and 68.9%, respectively. A more
profitable sales mix resulted in improved ratios of cost of
products sold to sales in 1998.
Selling and administrative expenses in 1998 increased by
$1,784,000 for the year-to-date period and $897,000 for the
second quarter, both compared to the prior year. The
increase is principally due to the inclusion of the
acquired companies in 1998. The relationships of selling
and administrative expenses to net sales for the six and
three months ended June 30, 1998 were 14.3% and 14.6%,
respectively. This compares with the prior comparable
periods at 14.1% and 13.8%, respectively.
Depreciation expense of $3,852,000 and $1,933,000 for the
six and three months ended June 30, 1998 increased
approximately 16.0% compared to the prior year due
principally to increased capital spending and the inclusion
of the acquired businesses.
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Income from operations increased 19% for the six month
period to $13,332,000 and 8% for the three month period to
$6,257,000, both compared to the prior year. These
increases are principally a result of higher sales,
including the contribution from acquired businesses, and a
product mix providing better than average profit margins.
Gains of $937,000 and $722,000 were recognized in the six
and three month periods ended June 30, 1997, respectively,
from the sale of investments.
The Corporation had net income for the six and three months
ended June 30, 1998 of $8,882,000 and $4,226,000,
respectively. This compares with net income for the prior
year comparable periods of $8,127,000 and $4,331,000,
respectively.
Liquidity and Capital Resources
Net cash flow from operating activities was positive in
1998 and 1997 at $14,825,000 and $13,655,000, respectively.
The increased cash flow in 1998 resulted primarily from a
$2,141,000 increase in income from operations partially
offset by greater working capital requirements.
Capital expenditures for 1998 totaled $5,395,000 compared
to $8,005,000 in 1997. Capital appropriations carried
forward from June 30, 1998 total $9,500,000 and unexpended
industrial revenue bond proceeds of $993,000 are available
to fund a portion of this capital program. Funds generated
internally are expected to be sufficient to finance the
balance of the capital expenditures.
Cash outflows with respect to financing activities in 1998
reflect an increase in the quarterly dividend rate to $.09
per share compared to $.06 per share in 1997. Included in
1997 is an additional prior year-end dividend of $960,000
or $.10 per share.
The Corporation maintains short-term lines of credit and a
revolving credit agreement in excess of the cash needs of
its businesses. The total available at June 30, 1998 was
$14,500,000.
With respect to environmental concerns, the Corporation has
been named a potentially responsible party at certain third
party sites. The Corporation has accrued its share of the
estimated cost of remedial actions it would likely be
required to contribute. While it is not possible to
quantify with certainty the potential cost of actions
regarding environmental matters, particularly any future
remediation and other compliance efforts, in the opinion of
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management, compliance with the present environmental
protection laws and the potential liability for all
environmental proceedings will not have a material adverse
effect on the financial condition, results of operations or
liquidity of the Corporation.
The nature and scope of the Corporation's business brings
it into regular contact with a variety of persons,
businesses and government agencies in the ordinary course
of business. Consequently, the Corporation and its
subsidiaries from time to time are named in various legal
actions. The Corporation does not anticipate that its
financial condition, results of operations or liquidity
will be materially affected by the costs of known, pending
or threatened litigation.
Impact of Year 2000
The Corporation and its subsidiaries continue their
progress in identifying, modifying and/or replacing non-
compliant business computer systems, equipment and other
devices that utilize date-oriented software or computer
chips. Replacement software, where necessary, has been
purchased and is in the process of being implemented. The
modifications being handled in-house to internally
developed systems are progressing on schedule. Management
believes, based on a current review and the ongoing effort,
that all relevant computer systems will be Year 2000
compliant by the second quarter of 1999. Management
believes that the cost of this project will not be material
to the Corporation's financial condition or results of
operations.
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PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-5.None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
AMPCO-PITTSBURGH CORPORATION
DATE: August 10, 1998 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: August 10, 1998 BY: s/Robert J. Reilly
Robert J. Reilly
Vice President - Finance
and Treasurer
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<TABLE> <S> <C>
<PAGE>
<CAPTION>
EXHIBIT 27
EXHIBIT 27
<S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 31,029,744
<SECURITIES> 0
<RECEIVABLES> 33,550,907
<ALLOWANCES> 672,218
<INVENTORY> 36,348,529
<CURRENT-ASSETS> 105,049,290
<PP&E> 144,035,254
<DEPRECIATION> 70,509,278
<TOTAL-ASSETS> 205,078,134
<CURRENT-LIABILITIES> 25,114,129
<BONDS> 12,586,000
0
0
<COMMON> 9,577,621
<OTHER-SE> 126,844,386
<TOTAL-LIABILITY-AND-EQUITY> 205,078,134
<SALES> 95,371,010
<TOTAL-REVENUES> 95,987,662
<CGS> 64,553,691
<TOTAL-COSTS> 82,039,314
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 361,104
<INCOME-PRETAX> 13,587,244
<INCOME-TAX> 4,705,000
<INCOME-CONTINUING> 8,882,244
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,882,244
<EPS-PRIMARY> .93
<EPS-DILUTED> .93
</TABLE>
