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 September 30, 2000
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 November 13, 2000, 9,602,621 common shares were outstanding.
- 1 -
AMPCO-PITTSBURGH CORPORATION
INDEX
Page No.
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
September 30, 2000 and December 31, 1999 3
Consolidated Statements of Income -
Nine Months Ended September 30, 2000 and 1999;
Three Months Ended September 30, 2000
and 1999 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 2000
and 1999 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:
Signatures 14
Exhibits
- Exhibit 27
- 2 -
PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
September 30, December 31,
2000 1999*
Assets
Current assets:
Cash and cash equivalents $ 22,208,300 $ 16,322,834
Receivables, less allowance for
doubtful accounts of $439,486 in
2000 and $364,138 in 1999 43,575,119 51,114,519
Inventories 47,100,387 47,281,320
Other 3,868,391 3,864,604
Total current assets 116,752,197 118,583,277
Property, plant and equipment, at cost:
Land and land improvements 5,157,369 5,269,931
Buildings 28,787,822 28,981,171
Machinery and equipment 141,386,777 134,402,869
175,331,968 168,653,971
Accumulated depreciation (84,823,614) (79,933,027)
Net property, plant and equipment 90,508,354 88,720,944
Prepaid pension 16,566,924 14,679,325
Other noncurrent assets 12,681,551 13,824,778
$236,509,026 $235,808,324
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 11,609,901 $ 14,197,817
Accrued payrolls and employee benefits 8,097,813 8,845,358
Other 14,389,864 16,433,775
Total current liabilities 34,097,578 39,476,950
Employee benefit obligations 16,642,008 16,770,655
Industrial revenue bond debt 14,661,000 14,661,000
Deferred income taxes 11,914,015 11,440,862
Other noncurrent liabilities 663,841 839,131
Total liabilities 77,978,442 83,188,598
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 9,602,621 in 2000
and 9,590,121 in 1999 9,602,621 9,590,121
Additional paid-in capital 102,780,980 102,668,480
Retained earnings 48,650,332 40,034,339
Accumulated other comprehensive (loss)
income (2,503,349) 326,786
Total shareholders' equity 158,530,584 152,619,726
$236,509,026 $235,808,324
* Reclassified for comparative purposes
</TABLE>
See Notes to Consolidated Financial Statements.
- 3 -
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nine Months Ended Sept. 30, Three Months Ended Sept. 30,
2000 1999 2000 1999
Net sales $167,823,636 $150,188,978 $ 51,559,893 $ 51,897,570
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 121,676,337 105,818,439 37,261,778 37,360,918
Selling and administrative 22,624,016 21,882,511 7,289,286 7,208,012
Depreciation 5,715,635 5,822,313 1,776,303 2,000,723
150,015,988 133,523,263 46,327,367 46,569,653
Income from operations 17,807,648 16,665,715 5,232,526 5,327,917
Other income (expense) - net (341,868) (12,712) (171,719) (40,752)
Income before income taxes 17,465,780 16,653,003 5,060,807 5,287,165
Income taxes 5,969,000 5,780,000 1,761,000 1,820,000
Net income $ 11,496,780 $ 10,873,003 $ 3,299,807 $ 3,467,165
Basic and diluted earnings
per share $ 1.20 $ 1.13 $ 0.34 $ 0.36
Cash dividends declared
per share $ 0.30 $ 0.30 $ 0.10 $ 0.10
Weighted average number of
common shares outstanding 9,600,203 9,584,169 9,602,621 9,590,121
</TABLE>
See Notes to Consolidated Financial Statements
- 4 -
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Nine Months Ended Sept. 30,
2000 1999
Net cash flows provided by operating
activities $ 16,571,680 $ 16,925,041
Cash flows from investing activities:
Purchases of property, plant and
equipment (10,465,217) (8,741,830)
Proceeds from sale of business
(Note 7) 1,760,613 -
Proceeds from sale of investments 1,297,248 -
Proceeds from sales of property,
plant and equipment - 401,897
Use of unexpended industrial revenue
bond proceeds - 504,625
Business acquisitions (Note 7) - (23,591,200)
Reimbursement of purchase price
(Note 7) 298,058 -
Net cash flows (used in) investing
activities (7,109,298) (31,426,508)
Cash flows from financing activities:
Proceeds from industrial revenue bonds - 2,075,000
Proceeds from the issuance of stock 125,000 125,000
Dividends paid (2,879,537) (2,874,536)
Net cash flows (used in) financing
activities (2,754,537) (674,536)
Effect of exchange rate changes on cash
and cash equivalents (822,379) (848)
Net increase (decrease) in cash and
cash equivalents 5,885,466 (15,176,851)
Cash and cash equivalents at
beginning of period 16,322,834 33,107,815
Cash and cash equivalents at
end of period $ 22,208,300 $ 17,930,964
</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 September 30, 2000, the
consolidated statements of income for the nine and three
months ended September 30, 2000 and 1999 and the condensed
consolidated statements of cash flows for the nine months
ended September 30, 2000 and 1999 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. These consolidated financial statements should 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,
1999. The results of operations for the period ended
September 30, 2000 are not necessarily indicative of the
operating results for the full year.
2. Inventory
At September 30, 2000 and December 31, 1999, approximately
67% and 63% respectively, of the inventories are valued on
the LIFO method, with the remaining inventories being valued
on the FIFO method. Inventories are comprised of the
following:
(in thousands)
September 30, December 31,
2000 1999
Raw materials $ 12,227 $ 11,714
Work-in-process 26,481 26,212
Finished goods 3,684 4,084
Supplies 4,708 5,271
$ 47,100 $ 47,281
3. Comprehensive Income
The Corporation's comprehensive income for the nine and three
months ended September 30, 2000 and 1999 consisted of:
(in thousands)
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
Net income $11,497 $10,873 $ 3,300 $ 3,467
Foreign currency
translation (2,807) 1,400 (1,474) 2,849
Unrealized holding
(losses) gains on
securities (23) (14) 63 (142)
Comprehensive income $ 8,667 $12,259 $ 1,889 $ 6,174
- 6 -
4. Stock Option Plan
In April 2000, the shareholders approved an amendment to the
1997 Stock Option Plan increasing the aggregate number of
options available to be granted from 300,000 to 600,000. In
May 2000, options for 272,500 shares of common stock were
granted at an exercise price of $10.8125 per share which was
the market price on the date of grant.
5. Earnings Per Share
Basic earnings per share is computed by dividing net income
by the weighted average number of common shares outstanding
for the period. In February 2000, 12,500 options were
exercised resulting in a weighted average number of common
shares outstanding for the nine and three months ended
September 30, 2000 of 9,600,203 and 9,602,621 shares,
respectively. The weighted average number of common shares
outstanding for the nine and three months ended September 30,
1999 equaled 9,584,169 and 9,590,121 shares, respectively.
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 9,619,477 shares
and 9,625,979 shares for the nine and three months ended
September 30, 2000, respectively, and 9,610,160 and 9,629,552
for the nine and three months ended September 30, 1999,
respectively.
6. Business Segments
Presented below are the net sales and income before taxes for
the Corporation's three business segments.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Nine Months Ended Three Months Ended
September 30, September 30,
2000 1999 2000 1999
Net Sales:
Forged and Cast Rolls $ 87,264 $ 68,297 $ 25,774 $ 25,588
Air and Liquid
Processing 55,427 54,549 18,163 18,509
Plastics Processing
Machinery 25,133 27,343 7,623 7,801
Total Reportable
Segments $167,824 $150,189 $ 51,560 $ 51,898
Income before Taxes:
Forged and Cast Rolls $ 9,635 $ 8,059 $ 2,364 $ 2,663
Air and Liquid
Processing 6,687 6,318 2,359 2,404
Plastics Processing
Machinery 1,486 2,289 510 261
Total Reportable
Segments 17,808 16,666 5,233 5,328
Other income
(expense) - net (342) (13) (172) (41)
Total $ 17,466 $ 16,653 $ 5,061 $ 5,287
</TABLE>
- 7 -
7. Business Acquisitions/Divestitures
On August 2, 1999, the Corporation acquired the stock of The
Davy Roll Company and two smaller companies (collectively,
Davy) for approximately $24,000,000. During the second
quarter 2000, approximately $300,000 was returned to the
Corporation by the seller based on the balance sheet of Davy
as at the date of the transaction. In March 2000, the
Corporation sold the net assets, excluding accounts
receivables, of the small roll division of The Davy Roll for
approximately net book value. A portion of the proceeds
included notes which were repaid early (in September 2000).
The proceeds exceeded the carrying value of the notes by
approximately $100,000; accordingly, a gain was recorded.
8. Subsequent Event
On October 27, 2000, the Corporation purchased the
outstanding stock of a company which manufactures heat
transfer rolls for approximately $1,300,000, plus the
assumption of debt. The company compliments the previously
existing Plastics Processing Machinery Segment. The
acquisition will be accounted for as a purchase transaction
in accordance with APB. No. 16, "Business Combinations".
9. 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 other comprehensive income.
As amended, SFAS No. 133 is effective for the Corporation on
January 1, 2001. Management is currently identifying and
documenting the various derivative instruments used
throughout the Corporation as well as the Corporate
accounting policy with respect to each. The Corporation,
however, does not engage in significant activity with respect
to derivative instruments or hedging activities; accordingly,
management does not anticipate adoption of SFAS No. 133 will
have a material effect on the financial condition, results of
operations or liquidity of the Corporation.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements". SAB No. 101 is
effective for the Corporation in fourth quarter 2000.
Management is evaluating the impact of SAB No. 101 but does
not anticipate its adoption will have a material effect on
the financial condition, results of operations or liquidity
of the Corporation.
- 8 -
AMPCO-PITTSBURGH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operations for the Nine and Three Months Ended September 30, 2000
and 1999
On August 2, 1999, the Corporation acquired the stock of The Davy
Roll Company and two smaller companies (Davy) and subsequently
sold the small roll division of Davy in March 2000.
Operations
Net Sales. Net sales for the nine and three months ended
September 30, 2000 were $167,824,000 and $51,560,000,
respectively, compared to $150,189,000 and $51,898,000,
respectively, for the same periods of 1999. A discussion of the
third quarter and year-to-date sales for the Corporation's three
segments is included below. Order backlogs improved to
approximately $120,500,000 at September 30, 2000 in comparison to
$118,100,000 at December 31, 1999. An increase in backlog for
the Air and Liquid Processing and the Plastics Processing
Machinery segments offset the decrease in backlog for the Forge
and Cast Rolls segment which includes a $3,000,000 reduction from
the sale of the small roll division of Davy.
Cost of Products Sold. The cost of products sold, excluding
depreciation, equaled 72.5% and 72.3%, respectively of net sales
for the nine and three months ended September 30, 2000. This
compares with the prior comparable periods of 70.5% and 72.0%,
respectively. The increase for the nine and three months ended
September 30, 2000 is due primarily to Davy which has a higher
cost of products sold. Without Davy, cost of products sold,
excluding depreciation, approximated 70.1% and 69.2% of net sales
for the nine and three months ended September 30, 2000,
respectively, in comparison to 69.6% and 69.5% of net sales for
the nine and three months ended September 30, 1999, respectively.
Income from Operations. Income from operations increased
$1,142,000 for the nine-month period ended September 30, 2000 to
$17,808,000 and decreased $95,000 for the three-month period
ended September 30, 2000 to $5,233,000, both compared to the
respective prior year periods. A discussion of the third quarter
and year-to-date results for the Corporation's three segments is
included below. Operating income for the nine and three months
ended September 30, 2000 benefited from lower pension costs of
approximately $1,350,000 and $850,000, respectively, due
principally to better than expected investment returns on plan
assets.
Forged and Cast Rolls. Sales for the Forged and Cast Rolls
segment increased for the nine and three months ended September
30, 2000 by $18,967,000 and $186,000 to $87,264,000 and $25,774,000,
respectively. The increase in sales is primarily attributable to
the third quarter 1999 acquisition of Davy. Excluding Davy,
sales decreased from the comparable prior year periods by
approximately $3,826,000 and $1,794,000 for the nine and three
month periods ended September 30, 2000, respectively. The
decrease in sales for the nine months ended September 30, 2000 is
primarily due to lower overseas sales which have been impacted by
the strength of the dollar and due to a strike at one of its
forged roll finishing plants throughout the month of September,
which was subsequently settled on October 29, 2000. The decrease
in sales for the three months ended September 30, 2000 is
primarily due to the strike. Operating income
- 9 -
increased for the nine months ended September 30, 2000 by
$1,576,000 to $9,635,000 but decreased $299,000 to $2,364,000 for
the three months ended September 30, 2000. Excluding Davy,
operating income increased approximately $453,000 for the nine
months ended September 30, 2000 despite the decrease in sales due
principally to lower depreciation and favorable adjustments to
pension expense offset by the effects of the strike. Excluding
Davy, operating income decreased by $377,000 for the three months
ended September 30, 2000.
Air and Liquid Processing. For the nine months ended September
30, 2000, sales for the Air and Liquid Processing segment
increased $878,000 to $55,427,000 and earnings increased $369,000 to
$6,687,000. This compares to sales and earnings of $54,549,000 and
$6,318,000, respectively, for the nine months ended September 30, 1999.
An increase in pumps sales to the power generation industry and the
Navy account for this increase offsetting the lower sales of the
air handling system operation which benefited from a large,
highly profitable shipment of specialized air handling units
during 1999. Operating results for the three months ended
September 30, 2000, approximated those for the similar prior year
period.
Plastics Processing Machinery. Sales and earnings for the
Plastics Processing Machinery segment for the nine month period
ended September 30, 2000 decreased by $2,210,000 and $803,000 to
$25,133,000 and $1,486,000, respectively. Product mix as well as
a general slowdown in the extrusion and injection molding markets
account for this decline. In addition, year-to-date results for
1999 benefited from unusually high shipments of the machine
product line. Sales decreased by $178,000 to $7,623,000 but
earnings improved by $249,000 to $510,000 for the three months
ended September 30, 2000 due principally to product mix.
Other Income (Expense). Other income (expense) for the nine and
three months ended September 30, 2000 of $(342,000) and
$(172,000) compares to $(13,000) and $(41,000) for the comparable
periods in 1999. The increase in expense is due primarily to
losses on foreign exchange. These losses were offset by a
$100,000 gain that resulted from proceeds from the repayment of
notes received from the buyer of the small roll division
exceeding the carrying value of the notes.
Net Income. As a result of all of the above, the Corporation had
net income for the nine and three months of 2000 of $11,497,000
and $3,300,000, respectively. This compares with $10,873,000 and
$3,467,000 for the 1999 comparable periods.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for the
nine months ended September 30, 2000 at $16,572,000 in comparison
to positive cash flows of $16,925,000 for the nine months ended
September 30, 1999. The difference in cash flows between the two
periods results primarily from changes in working capital
requirements.
Net cash flows used in investing activities were $7,109,000 in
2000 compared to $31,427,000 in 1999. Capital expenditures for
2000 totaled $10,465,000 compared to $8,237,000 in 1999, after
consideration of reimbursement from unexpended bond proceeds from
previously issued bonds. Capital expenditures carried forward
from September 30, 2000 approximate $9,400,000. Funds on-hand,
funds generated by future operations and available lines of
credit are expected to be sufficient to finance capital
- 10 -
expenditure requirements. In August 1999, the Corporation
acquired Davy for approximately $23,600,000 which was financed
from available cash and cash equivalents. Subsequently, in the
second quarter 2000, approximately $300,000 was returned to the
Corporation by the seller based on the balance sheet of Davy as
of the date of the transaction. In March 2000, the Corporation
sold the net assets, excluding accounts receivables, of the small
roll division of Davy for approximately $1,673,000. A portion of
the proceeds included a $400,000 note which was paid in September
as well as an additional $100,000 on a long-term note originally
deemed to have no present value. Also in March 2000, the
Corporation sold the remaining discontinued operation property,
which it carried as an investment, for its carrying value of
approximately $1,300,000.
Cash used in financing activities for 2000 and 1999 includes
payment of quarterly dividends at a rate of $.10 per share. In
first quarter 1999, proceeds were received from the issuance of
tax-exempt industrial revenue bonds. In addition, proceeds were
received from the issuance of stock under the Corporation's stock
option plan in 2000 and 1999 resulting in net cash used in
financing activities of $2,755,000 for 2000 and $675,000 for
1999.
The Corporation maintains short-term lines of credit in excess of
the cash needs of its businesses. The total available at
September 30, 2000 was approximately $10,000,000.
With respect to environmental concerns, the Corporation has been
named a potentially responsible party at a third party site. The
Corporation has accrued its share of the estimated cost of
remedial actions it would likely be required to contribute.
While it is not possible to quantify with certainty the potential
cost of actions regarding environmental matters, particularly any
future remediation and other compliance efforts, in the opinion
of management, compliance with the present environmental
protection laws and the potential liability for all environmental
proceedings will not have a material adverse effect on the
financial condition, results of operations or liquidity of the
Corporation.
The nature and scope of the Corporation's business brings it into
regular contact with a variety of persons, businesses and
government agencies in the ordinary course of business.
Consequently, the Corporation and its subsidiaries from time to
time are named in various legal actions. The Corporation does
not anticipate that its financial condition, results of
operations or liquidity will be materially affected by the costs
of known, pending or threatened litigation.
Conversion to the Euro
The Corporation has identified issues that may result from
conversion to the Euro which include primarily changes to
information systems at its Belgian operation. The Corporation
does not expect the conversion to the Euro will have a material
impact on its financial condition, results of operations or
liquidity.
- 11 -
PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. Articles of Incorporation and By-laws
(a) Articles of Incorporation
Incorporated by reference to the Quarterly Report
on Form 10-Q for the quarter ended March 31,
1983; the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1984; the Quarterly
Report on Form 10-Q for the quarter ended March
31, 1985; the Quarterly Report on Form 10-Q for
the quarter ended March 31, 1987; and the
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998.
(b) By-laws
Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1994 and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996.
4. Instruments defining the rights of securities holders
(a) Rights Agreement between Ampco-Pittsburgh
Corporation and Chase Mellon Shareholder
Services dated as of September 28, 1998.
Incorporated by reference to the Form 8-K
Current Report dated September 28, 1998.
10. Material Contracts
(a) 1988 Supplemental Executive Retirement Plan
Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1996.
(b) Severance Agreements between Ampco-Pittsburgh
Corporation and certain officers and
employees of Ampco-Pittsburgh Corporation.
Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1988; the Quarterly Report on
Form 10-Q for the quarter ended September 30,
1994; the Annual Report on Form 10-K for
fiscal year ended December 31, 1994; the
Quarterly Report on Form 10-Q for the quarter
ended
- 12 -
June 30, 1997; the Annual Report on Form 10-K
for the fiscal year ended December 31, 1998;
and the Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
(c) 1997 Stock Option Plan, as amended.
Incorporated by reference to the Proxy
Statements dated March 14, 1997 and March 15,
2000.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
- 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: November 13, 2000 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: November 13, 2000 BY: s/Marliss D. Johnson
Marliss D. Johnson
Vice President
Controller and Treasurer
- 14 -
