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 March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-898.
AMPCO-PITTSBURGH CORPORATION
Incorporated in Pennsylvania.
I.R.S. Employer Identification No. 25-1117717.
600 Grant Street, Pittsburgh, Pennsylvania 15219
Telephone Number 412/456-4400
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter periods that the registrant was required
to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
On May 17, 1999, 9,590,121 common shares were outstanding.
- 1 -
AMPCO-PITTSBURGH CORPORATION
INDEX
Page No.
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998 3
Consolidated Statements of Income -
Three Months Ended March 31, 1999
and 1998 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1999
and 1998 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II - Other Information:
Item 4 Submission of Matters to a
Vote of Security Holders 13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
Exhibits
Exhibit 27
- 2 -
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
March 31, December 31,
1999 1998
Assets
Current assets:
Cash and cash equivalents $ 36,439,097 $ 33,107,815
Receivables, less allowance for
doubtful accounts of $719,421 in
1999 and $691,090 in 1998 36,746,976 35,017,919
Inventories 34,364,559 35,492,440
Other 4,408,319 4,076,339
Total current assets 111,958,951 107,694,513
Property, plant and equipment,
at cost 152,878,986 150,709,005
Accumulated depreciation (75,419,185) (73,932,512)
Net property, plant and equipment 77,459,801 76,776,493
Prepaid pension 13,823,044 13,885,544
Other noncurrent assets 13,195,236 13,454,580
$216,437,032 $211,811,130
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 10,019,316 $ 9,247,179
Accrued payrolls and employee
benefits 7,892,279 7,820,048
Other 10,586,004 9,355,391
Total current liabilities 28,497,599 26,422,618
Employee benefit obligations 15,852,275 16,509,026
Industrial revenue bond debt 14,661,000 12,586,000
Deferred income taxes 11,612,082 11,707,742
Other noncurrent liabilities 2,109,035 2,287,132
Total liabilities 72,731,991 69,512,518
Shareholders' equity:
Preference stock - no par value;
authorized 3,000,000 shares: none
issued - -
Common stock - par value $1; authorized
20,000,000 shares; issued and
outstanding 9,577,621 in 1999
and 1998 9,577,621 9,577,621
Additional paid-in capital 102,555,980 102,555,980
Retained earnings 31,168,759 28,724,905
Accumulated other comprehensive
income 402,681 1,440,106
Total shareholders' equity 143,705,041 142,298,612
$216,437,032 $211,811,130
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<S> <C> <C>
Three Months Ended March 31,
1999 1998
Net sales $ 49,417,506 $ 48,598,350
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 35,088,097 32,797,645
Selling and administrative 7,181,088 6,806,879
Depreciation 1,908,626 1,919,415
44,177,811 41,523,939
Income from operations 5,239,695 7,074,411
Other income (expense) net (98,079) 146,711
Income before income taxes 5,141,616 7,221,122
Income taxes 1,740,000 2,565,000
Net income $ 3,401,616 $ 4,656,122
Basic and diluted earnings
per share $ .36 $ .49
Cash dividends declared per share $ .10 $ .09
Weighted average number of
common shares outstanding 9,577,621 9,577,621
</TABLE>
See Notes to Consolidated Financial Statements
- 4 -
<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended March 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,401,616 $ 4,656,122
Adjustments to reconcile net income
to net cash flows from operating
activities:
Depreciation 1,908,626 1,919,415
Deferred income taxes 184,000 373,000
Other - net 124,941 125,255
Changes in assets/liabilities:
Receivables (2,230,406) 1,278,996
Inventories 655,861 (929,390)
Other assets (436,760) (690,617)
Accounts payable 1,086,828 381,607
Accrued payrolls and employee
benefits (210,430) (433,925)
Other liabilities 662,524 2,214,414
Net cash flows from operating
activities 5,146,800 8,894,877
Cash flows from investing activities:
Purchases of property, plant and
equipment (2,961,511) (1,957,013)
Proceeds from sales of property, plant
and equipment - 371,657
Use of unexpended industrial revenue
bond proceeds 150,013 278,420
Net cash flows from investing
activities (2,811,498) (1,306,936)
Cash flows from financing activities:
Proceeds from industrial revenue
bonds 2,075,000 -
Dividends paid (957,762) (861,986)
Net cash flows from financing
activities 1,117,238 (861,986)
Effect of exchange rate changes on cash (121,258) (25,096)
Net increase in cash 3,331,282 6,700,859
Cash at beginning of year 33,107,815 21,695,512
Cash at end of period $ 36,439,097 $ 28,396,371
Supplemental information:
Income tax payments $ 734,010 $ 7,226
Interest payments 177,241 179,282
</TABLE>
See Notes to Consolidated Financial Statements.
- 5 -
AMPCO-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Consolidated Financial Statements
The consolidated balance sheet as of March 31, 1999, the
consolidated statements of income for the three month
periods ended March 31, 1999 and 1998 and the
consolidated statements of cash flows for the three 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, 1998. The
results of operations for the period ended March 31, 1999
are not necessarily indicative of the operating results
for the full year.
2. Inventory
Inventories, principally valued on the LIFO method, are
comprised of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(in thousands)
March 31, December 31,
1999 1998
Raw materials $ 7,333 $ 6,425
Work-in-process 20,916 21,985
Finished goods 4,185 5,100
Supplies 1,931 1,982
$ 34,365 $ 35,492
</TABLE>
3. Comprehensive Income
The Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive
Income", effective January 1, 1998. This Statement
establishes standards for reporting and display of
comprehensive income and its components in the financial
statements. The Corporation's comprehensive income for
the three months ended March 31, 1999 and 1998 consisted
of:
- 6 -
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended
March 31,
<S> <C> <C>
1999 1998
Net income $ 3,402 $ 4,656
Foreign currency translation (1,067) (254)
Unrealized holding gains
on securities 29 -
Comprehensive
income $ 2,364 $ 4,402
</TABLE>
4. Earnings Per Share
Basic earnings per share is computed by dividing net
income by the weighted average number of common shares
outstanding which has remained unchanged at 9,577,621
shares for the periods presented. The computation of
diluted earnings per share is similar to basic earnings
per share except that the denominator is increased to
include the net additional common shares that would have
been outstanding assuming exercise of outstanding stock
options, calculated using the treasury stock method. The
weighted average number of common shares outstanding
assuming exercise of the stock options was 9,580,984
common shares for the quarter ended March 31, 1999.
There were no potentially dilutive securities outstanding
for the comparable 1998 period.
5. Business Segments
The Corporation adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information"
effective with its annual report to shareholders for the
year ended December 31, 1998 which changed its previous
practice of reporting under one business segment,
engineered equipment. Presented below are the net sales
and earnings before taxes for the Corporation's three
business segments.
<TABLE>
<CAPTION>
(dollars in thousands)
Three Months Ended March 31,
Earnings Before
Net Sales Taxes
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Forged Steel Rolls $22,440 $21,592 $ 2,709 $ 4,109
Air and Liquid
Processing 17,126 16,076 1,648 1,469
Plastics Processing
Machinery 9,852 10,930 883 1,496
Total Reportable
Segments 49,418 48,598 5,240 7,074
Other income
(expense) - net - - (98) 147
Total $49,418 $48,598 $ 5,142 $ 7,221
</TABLE>
- 7 -
6. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This pronouncement
requires all derivative instruments to be reported at
fair value on the balance sheet; depending on the nature
of the derivative instrument, changes in fair value will
be recognized either in net income or as an element of
comprehensive income. SFAS No. 133 is first effective
for the Corporation for the year ending December 31,
2000. The Corporation does not engage in significant
activity with respect to derivative instruments or
hedging activities. Management is evaluating the impact
but does not anticipate adoption of SFAS No. 133 will
have a material impact on the financial position, results
of operations or cash flows of the Corporation.
- 8 -
AMPCO-PITTSBURGH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operations for the Three Month Periods Ended
March 31, 1999 and 1998
Operations
Net Sales. Net sales of $49,418,000 for the first quarter
of 1999 were 1.7% higher when compared to 1998 sales of
$48,598,000. A discussion of the first quarter sales and
results for the Corporation's three segments is included
below. The order backlog at March 31, 1999 of $97,000,000
declined by 3% compared to $100,000,000 at December 31,
1998. The reduction in the backlog is due primarily to a
decrease in forged hardened steel roll orders.
Cost of Products Sold. The cost of products sold, excluding
depreciation, in relationship to net sales was 71.0% in 1999
compared to 67.5% in 1998. The decrease in margins occurred
principally in the Forged Steel Rolls business.
Income from Operations. Income from operations of
$5,240,000 in 1999 decreased by $1,834,000 or 26.0% compared
to $7,074,000 in 1998. This was a result of decreased
earnings from the Forged Steel Rolls and Plastics Processing
Machinery segments.
Forged Steel Rolls. Sales for the Forged Steel Rolls
segment increased by 3.9% in the first quarter to
$22,440,000 compared with $21,592,000 in the prior year. An
increase in sales to customers outside of the U.S. offset a
reduction in sales to domestic customers. The 1998 period
benefitted from certain non-recurring domestic sales related
to customers' new mill construction. Earnings for this
segment, however, decreased by 34% to $2,709,000 compared
with $4,109,000. Margins were reduced as competitive
pressures in both the domestic and export markets resulted
in lower selling prices. In addition, operating levels were
reduced in the 1999 quarter compared to the year ago period.
Air & Liquid Processing. Sales for the Air & Liquid
Processing segment improved by 6.5% to $17,126,000 in 1999
compared to $16,076,000 in 1998. Sales were higher for both
the air handling system and heat exchange coil operations
which entered 1999 with improved backlog levels. Earnings
for this segment increased by 12.2% to $1,648,000 compared
to $1,469,000.
-9 -
Plastics Processing Machinery. Sales for the Plastics
Processing Machinery segment decreased by 9.9% to $9,852,000
in 1999 compared with $10,930,000 in 1998. Earnings were
lower by 41.0% at $883,000 compared to $1,496,000 in the
prior year. The decline in sales and earnings occurred
principally at the heat transfer roll operation which has
been impacted by reduced demand in its markets and low
backlog levels as a result of declining orders throughout
1998.
Other Income (Expense). Other income (expense) of ($98,000)
in 1999 reflects lower interest earnings on cash balances
and losses on foreign exchange transactions compared to
foreign exchange gains included in 1998's other income of
$147,000.
Net Income. As a result of all of the above, the
Corporation had net income of $3,402,000 in 1999 compared to
$4,656,000 in 1998.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for
1999 at $5,147,000 and compare with positive cash flows of
$8,895,000 for 1998. The difference in cash flow between
the two periods resulted from a $1,835,000 decrease in
income from operations in 1999 and changes in working
capital requirements, principally in accounts receivables,
which increased in 1999's first quarter.
Net cash outflows from investing activities were $2,811,000
in 1999 and compare with cash outflows of $1,307,000 in
1998. Capital expenditures for 1999 totaled $2,962,000
compared to $1,957,000 in 1997. Capital expenditures
carried forward from March 31, 1999 total $11,250,000.
Funds on-hand and generated internally are expected to be
sufficient to finance capital expenditure requirements.
Cash flows from financing activities in 1999 include the
issuance of $2,075,000 of tax-exempt Industrial Revenue
Bonds, the proceeds of which were used for plant expansion
and equipment at the Corporation's heat exchange coil
operation in Lynchburg, Virginia. Cash outflows with
respect to financing activities in 1999 reflect an increase
in the quarterly dividend rate to $.10 per share compared to
$.09 per share in 1998.
The Corporation maintains short-term lines of credit and a
revolving credit agreement in excess of the cash needs of
its businesses. The total available at March 31, 1999 was
$14,500,000.
With respect to environmental concerns, the Corporation has
been named a potentially responsible party at certain third
party sites. The Corporation has accrued its share of the
- 10 -
estimated cost of remedial actions it would likely be
required to contribute. While it is not possible to
quantify with certainty the potential cost of actions
regarding environmental matters, particularly any future
remediation and other compliance efforts, in the opinion of
management, compliance with the present environmental
protection laws and the potential liability for all
environmental proceedings will not have a material adverse
effect on the financial condition, results of operations or
liquidity of the Corporation.
The nature and scope of the Corporation's business brings it
into regular contact with a variety of persons, businesses
and government agencies in the ordinary course of business.
Consequently, the Corporation and its subsidiaries from time
to time are named in various legal actions. The Corporation
does not anticipate that its financial condition, results of
operations or liquidity will be materially affected by the
costs of known, pending or threatened litigation.
Impact of Year 2000
The Year 2000 issue is the result of computer programs that
were written using two digits rather than four to define the
applicable year. If the Corporation's computer programs or
other equipment with date-sensitive functions are not Year
2000 compliant, they may recognize a date using "00" as the
Year 1900 rather than the Year 2000. This could result in a
system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary
inability to process transactions or engage in normal
business activities.
Generally, each of the Corporation's subsidiaries maintains
its own data processing equipment and software. In order to
ensure that their operations will not be adversely impacted
by Year 2000 software failures, project teams have been
formed at each subsidiary to address Year 2000 risks. The
project teams have coordinated the identification of and
will coordinate the implementation of changes to computer
hardware and software applications to ensure availability
and integrity of the Corporation's information systems and
the reliability of its operational systems and manufacturing
processes.
Each subsidiary has reviewed its information and operational
systems and manufacturing processes in order to identify
those products, services or systems that are not Year 2000
compliant. As a result of these reviews, it has been
determined that it will be necessary to modify or replace
certain information and operational systems so they will be
Year 2000 compliant. These modifications and replacements
are being, and will continue to be, made in conjunction with
- 11 -
the Corporation's overall systems initiatives. It is
difficult to break out the total cost of Year 2000
compliance; however, the combined cost of such compliance,
system upgrades, principally software, and setting up a
stand-alone system at a subsidiary currently integrated into
an unrelated business subsidiary system, is less than
$1,000,000. The majority of this cost is for system upgrade
and replacement software, which had been acquired and
capitalized as of December 31, 1998, and is either in
operation or in the process of being implemented. The
modifications being handled in-house to internally developed
systems are progressing on schedule. The Corporation
estimates its Year 2000 efforts are eighty percent complete
and the entire project will be completed by mid-1999. Based
on available information, the Corporation does not believe
any material exposure to significant business interruption
exists as a result of Year 2000 compliance issues.
Accordingly, the Corporation has not adopted any formal
contingency plan in the event its Year 2000 project is not
completed in a timely manner. If the Corporation's progress
deviates from the anticipated timeline, contingency plans
will be developed as deemed necessary at that time.
The Corporation also faces some risk to the extent that
customers or suppliers of products, services and systems
purchased by the Corporation do not comply with Year 2000
requirements. The Corporation has initiated efforts to
evaluate the status of significant suppliers and customers
to determine the extent to which the Corporation is
vulnerable to these third parties' failure to remediate
their own Year 2000 issues. However, we believe the breadth
of the Corporation's customer base and availability of
alternative suppliers will mitigate the risks associated
with third party issues.
The descriptions herein of the elements of the Corporation's
Year 2000 effort are forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995. Of
necessity, this effort is based on estimates and there can
be no assurance that actual results will not materially
differ from expectations.
- 12 -
PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-3. None
Item 4. Submission of Matters to a Vote of Security Holders
On April 27, 1999 at the annual meeting of
shareholders, Louis Berkman and Carl H.
Pforzheimer, III were elected directors of the
Registrant:
For Withheld
Louis Berkman 7,919,791 52,379
Carl H. Pforzheimer, III 7,913,173 58,997
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K, dated February 25, 1999 was
filed reporting under Item 4, Changes in Registrant's
Certifying Accountant, the dismissal of
PricewaterhouseCoopers LLP and the appointment of
Deloitte & Touche LLP as the Corporation's
independent accountants.
- 13 -
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: May 17, 1999 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: May 17, 1999 BY: s/Robert J. Reilly
Robert J. Reilly
Vice President - Finance
and Treasurer
- 14 -
<TABLE> <S> <C>
<CAPTION>
EXHIBIT 27
EXHIBIT 27
<S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 36,439,097
<SECURITIES> 0
<RECEIVABLES> 37,466,397
<ALLOWANCES> 719,421
<INVENTORY> 34,364,559
<CURRENT-ASSETS> 111,958,951
<PP&E> 152,878,986
<DEPRECIATION> 75,419,185
<TOTAL-ASSETS> 216,437,032
<CURRENT-LIABILITIES> 28,497,599
<BONDS> 14,661,000
0
0
<COMMON> 9,577,621
<OTHER-SE> 134,127,420
<TOTAL-LIABILITY-AND-EQUITY> 216,437,032
<SALES> 49,417,506
<TOTAL-REVENUES> 49,476,950
<CGS> 35,088,097
<TOTAL-COSTS> 44,177,811
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,523
<INCOME-PRETAX> 5,141,616
<INCOME-TAX> 1,740,000
<INCOME-CONTINUING> 3,401,616
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,401,616
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
