<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999.
Commission File Number 1-898
AMPCO-PITTSBURGH CORPORATION I.R.S. Employer Identification
600 Grant Street, Suite 4600, No. 25-1117717
Pittsburgh, PA 15219 State of Incorporation: Pennsylvania
412/456-4400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- --------------------------
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
--- ---
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 7, 2000, 9,602,621 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 $80 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, 1999.
<PAGE>
PART I
ITEM 1 - BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Ampco-Pittsburgh Corporation (the "Corporation") was incorporated in
Pennsylvania in 1929.
In 1999, a subsidiary of the Corporation acquired the stock of The Davy
Roll Company, a leading supplier of cast rolls to the steel and metal
industries. The Corporation believes that this acquisition will complement the
existing forged roll business. In the same transaction, the Corporation also
acquired two smaller companies: Formet Limited, an open die forging facility
which produces small forgings primarily for the oil and gas industry and Turner
Chilled Rolls Limited, which produces a variety of cast rolls for use in the
food industry.
The Corporation's businesses are classified in three segments - Forged and
Cast Rolls Segment, Air and Liquid Processing Segment and Plastics Processing
Machinery Segment.
The Registrant, individually or together with its consolidated
subsidiaries, is also referred to herein as the Corporation.
(b) FINANCIAL INFORMATION ABOUT SEGMENTS
The sales and operating profit of the Corporation's three segments and the
identifiable assets attributable to each segment for the three years ended
December 31, 1999 are set forth in Note 15 (Business Segments) on pps. 17 and 18
of the Annual Report to Shareholders for the year ended December 31, 1999 which
is incorporated herein by reference.
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(c) NARRATIVE DESCRIPTION OF BUSINESS
Forged and Cast Rolls Segment
- -----------------------------
Union Electric Steel Corporation produces forged hardened steel rolls for
the producers of steel, aluminum and other metals throughout the world. It is
headquartered in Carnegie, Pennsylvania with manufacturing facilities in
Carnegie, Burgettstown and Erie, Pennsylvania; Valparaiso, Indiana; and
Tessenderlo, Belgium. Union Electric Steel Corporation is considered the
largest producer of forged hardened steel rolls in the United States. In
addition to several domestic competitors, several major European and Japanese
manufacturers also compete in both the domestic and foreign markets.
The Davy Roll Company Limited produces cast rolls for hot and cold strip
mills, medium/heavy section mills and plate mills in a variety of iron and steel
qualities. It is headquartered in Gateshead, England with an independent
business unit in Sheffield, England. The Davy Roll Company is a major European
supplier of cast rolls to the metal working industry worldwide. It primarily
competes with one British company and several European and American companies in
both the domestic and foreign markets.
Formet Limited custom forges special stock alloys principally used in the
oil and gas, petrochemical, marine and general engineering industries. It is
located in New Castle, England and competes with several other companies.
Turner Chilled Rolls Limited is located in Ipswich, England and
manufactures high quality cast rolls used by the food and animal feed processing
industries. It also competes with several other companies.
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Air and Liquid Processing Segment
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Aerofin Corporation produces finned tube and plate finned heat exchange
coils for the commercial and industrial construction, process and utility
industries and is headquartered in Lynchburg, Virginia.
Buffalo Air Handling Company produces large standard and custom air
handling systems used in commercial and industrial buildings and is
headquartered in Amherst, Virginia.
Buffalo Pumps, Inc. manufactures a line of centrifugal pumps for the
refrigeration, power generation and marine defense industries and is
headquartered in North Tonawanda, New York.
All three of the companies in this segment compete with several major
competitors.
Plastics Processing Machinery Segment
-------------------------------------
New Castle Industries, Inc. and its subsidiaries primarily produce feed
screws, barrels and chill rolls for use principally in the plastics processing
industry and is headquartered in New Castle, Pennsylvania. The New Castle
Industries group competes with a number of small regional companies.
F. R. Gross Company, located in Stow, Ohio, manufactures heat transfer
rolls and chill rolls for use by original equipment machinery manufacturers and
processors principally serving the plastics industry but also the paper,
packaging, printing and converting industries. It also competes with a number
of small regional companies.
In all three segments, the products are dependent on engineering,
principally custom designed and are sold to sophisticated commercial and
industrial users in the United States and foreign countries.
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No one customer's purchases in any segment were material to the
Corporation. Contracts that may be subject to renegotiation or termination are
not material to the Corporation. The Corporation's businesses are not seasonal
but are subject to the cyclical nature of the industries and markets served.
For additional information on the products produced and financial
information about each segment, see pp. 3 through 7 and Note 15 on pps. 17 and
18 of the Annual Report to Shareholders for the year ended December 31, 1999,
which are incorporated herein by reference.
Raw Materials
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Raw materials used in all segments 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 a major portion of raw
materials significantly in advance of the time it requires them.
Patents
- -------
While the Corporation holds some patents, trademarks and licenses, in the
opinion of management they are not material to any segment of the Corporation's
business other than in protecting the goodwill associated with the names under
which products are sold.
Working Capital
- ---------------
Each segment of the Corporation's business maintains levels of inventory,
which generally reflect normal requirements and are believed to reflect the
practices of its industries. Production in all segments is generally to custom
order and requires inventory
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levels of raw materials or semi-finished products with only a limited level of
finished products. The Corporation extends credit terms consistent with
practices of the industries served.
Backlog
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The backlog of orders at December 31, 1999 was approximately $118,000,000
compared to a backlog of $100,000,000 at year-end 1998 that excluded The Davy
Roll Company. Most of those orders are expected to be filled in 2000.
Competition
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The Corporation faces considerable competition from a large number of
companies in each segment. The Corporation believes, however, that it is a
significant factor in each of the principal markets which it serves.
Competition in all segments is based on quality, service, price and delivery.
Research and Development
- ------------------------
As part of an overall strategy to develop new markets and maintain
leadership in each of the industry niches served, each of the Corporation's
businesses in all three segments incur expenditures for research and
development. The activities that are undertaken are designed to develop new
products, improve existing products and processes, enhance product quality,
adapt products to specific customer requirements and reduce costs. In the
aggregate, these expenditures approximate $1,500,000 per year.
Environmental Protection Compliance Costs
- -----------------------------------------
Expenditures for environmental control matters were not material to any
segment in 1999 and such expenditures are not expected to be material in 2000.
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Employees
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In December 1999, the Corporation had 1,867 active employees.
Year 2000 Impact
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See Management's Discussion and Analysis of Financial Condition and Results
of Operations on pps. 19 through 23 of the Annual Report to Shareholders for the
year ended December 31, 1999, which is incorporated herein by reference.
(d) FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
The Corporation has foreign operations in Belgium and the United Kingdom.
For financial information relating to foreign and domestic operations see Note
15 (Business Segments) on pps. 17 and 18 of the Annual Report to Shareholders
for the year ended December 31, 1999, which is incorporated herein by reference.
ITEM 2 - PROPERTIES
The location and general character of the principal locations in each of
the three segments, all of which are owned unless otherwise noted, are as
follows:
<TABLE>
<CAPTION>
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ----------- -------------- -------------- ------------
<S> <C> <C> <C>
Forged and Cast Rolls Segment
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Union Electric Steel Corp.
Route 18 Manufacturing 186,000 on Metal and
Burgettstown, PA 15021 facilities 55 acres steel
726 Bell Street Manufacturing 153,000 on Metal and
Carnegie, PA 15106 facilities and 5 acres steel
offices
U.S. Highway 30 Manufacturing 88,000 on Metal and
Valparaiso, IN 46383 facilities 20 acres steel
</TABLE>
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<TABLE>
<CAPTION>
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ----------- --------- -------------- ------------
<S> <C> <C> <C>
Forged and Cast Rolls Segment (cont')
- -------------------------------------
Union Electric Steel Corp. (cont')
1712 Greengarden Road Manufacturing 40,000* Metal and
Erie, PA 16501 facilities steel
Industrie Park Manufacturing 66,000 on Concrete,
B-3980 Tessenderlo facilities and 15 acres metal and
Belgium offices steel
The Davy Roll Company
Gateshead Division Manufacturing 274,000 on Steel framed,
Coulthards Lane facilities and 12 acres metal and
Gateshead, Tyne and War offices brick
England
Sheffield Division Manufacturing 97,000 on Steel framed,
Stevenson Road facilities and 4.8 acres* metal and
Sheffield offices brick
England
Formet Limited
Wincomblee Road Manufacturing 48,000 on Steel framed,
Low Walker facilities and 1.6 acres* metal and
New Castle-upon-Tyne offices brick
England
Turner Chilled Rolls Limited
Farthing Road Manufacturing 29,000 on Steel framed,
Ipswich facilities and 1.2 acres metal and
England offices brick
</TABLE>
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<TABLE>
<CAPTION>
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ----------- --------- -------------- ------------
<S> <C> <C> <C>
Air and Liquid Processing Segment
- ---------------------------------
Aerofin Corporation Manufacturing 146,000 on Brick,
4621 Murray Place facilities and 15.3 acres concrete
Lynchburg, VA 24506 offices and steel
Buffalo Air Handling Manufacturing 89,000 on Metal and
Company facilities and 19.5 acres steel
Zane Snead Drive offices
Amherst, VA 24531
Buffalo Pumps, Inc. Manufacturing 94,000 on Metal, brick
874 Oliver Street facilities and 7 acres and cement
N. Tonawanda, NY 14120 offices block
Plastics Processing Machinery Segment
- -------------------------------------
Atlantic Grinding &
Welding, Inc.
9 Ricker Avenue Manufacturing 19,000 on Metal and
Londonderry, NH 03053 facilities and offices 2.6 acres Steel
1950 Old Dunbar Road Manufacturing 20,000* Metal and
West Columbia, SC 29172 facilities steel
Bimex Industries, Inc. Manufacturing 33,500 on Metal and
319 Universal Street facilities and 7.8 acres steel
Wales, WI 53183 offices
F. R. Gross Co., Inc. Manufacturing 25,300 on Masonry,
1397 Commerce Drive facilities and 4.2 acres metal and
Stow, OH 44224 offices steel
New Castle Industries, Inc.
1399 Countyline Road Manufacturing 81,600 on Metal and
New Castle, PA 16102 facilities and offices 18.5 acres steel
925 Industrial Street Manufacturing 31,000 on Masonry
New Castle, PA 16102 facilities 5.3 acres with steel
truss roof
</TABLE>
________________
* Facility is leased.
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The Corporate office space is leased as are several small domestic sales
offices. All of the owned facilities are adequate and suitable for their
respective purposes. There were no facilities idled during 1999.
The Corporation estimates that all of its facilities were operated within 75%
to 95% of their normal capacity during 1999. 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.
ITEM 3 - LEGAL PROCEEDINGS
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.
A lawsuit was 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 lawsuit. The Partnership acquired the ingot mold
businesses of each of the partners. On June 10, 1993, Microdot also filed a
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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.
In the lawsuit, Official Unsecured Creditors' Committee of Valley-Vulcan
--------------------------------------------------------
Mold Company v. Microdot, Inc., Valley Mould Corporation, Ampco-Pittsburgh
- --------------------------------------------------------------------------
Corporation and Vulcan, Inc., the plaintiff, allegedly on behalf of the debtor
- ----------------------------
Partnership, filed a 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, which has no value 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. In 1998, upon stipulation of the parties,
the Court ordered this appeal transferred to the Bankruptcy Appellate Panel for
the Sixth Circuit ("BAP"). In August 1999, the BAP affirmed all of the trial
court's rulings and the plaintiff/appellant has also appealed this decision.
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The Corporation is involved in various environmental proceedings which all
involve discontinued operations. In one of those proceedings, the Corporation
has been designated as a Potentially Responsible Party ("PRP"). However, the
Corporation believes that based on information known to date 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
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
The information called for by this item is set forth on p. 23 of the Annual
Report to Shareholders for the year ended December 31, 1999 which is
incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information called for by this item is set forth on p. 23 of the Annual
Report to Shareholders for the year ended December 31, 1999, which is
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information called for by this item is set forth on pps. 19 through 23
of the Annual Report to Shareholders for the year ended December 31, 1999, which
are incorporated herein by reference.
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ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for by this item is set forth in Note 9 (Financial
Instruments) on p. 15 and Management's Discussion and Analysis of Financial
Condition and Results of Operations on pps. 19 through 23 of the Annual Report
to Shareholders for the year ended December 31, 1999, which is incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information called for by this item is set forth on pps. 8 through 18
of the Annual Report to Shareholders for the year ended December 31, 1999, which
are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were none.
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PART III
ITEM 10 - DIRECTORS and EXECUTIVE OFFICERS
(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
- ------------------------------------------------------------------------------
Louis Berkman (age 91, Director since 1960; current term expires in 2002). 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)
Leonard M. Carroll (age 57, Director since 1996; current term expires in 2001).
He has been Managing Director of Seneca Capital Management, Inc. (a private
investment company) since June 1996. For more than five years before 1996, he
was President and Chief Operating Officer and a director of Integra Financial
Corporation (a bank holding company). (2)(3)(4)(5)
William D. Eberle (age 76, Director since 1982; current term expires in 2000).
He is a private investor and consultant and is Chairman of Manchester
Associates, Ltd. and Showscan Entertainment, Inc. He is also a director of
Mitchell Energy & Development Co., America Service Group and Konover Property
Trust. (N)(3)(4)(5)
Robert A. Paul (age 62, Director since 1970; current term expires in 2000). 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 director of National City Corporation. (N)(2)
Laurence E. Paul (age 35, Director since 1998; current term expires in 2001).
He is a Managing Director of Donaldson, Lufkin & Jenrette (Investment Banker).
From 1997 to January 2000 he was a Senior Vice President and from 1995 to 1997
he was a Vice President of that firm.
Carl H. Pforzheimer, III (age 63, Director since 1982; current term expires in
2002). For more than five years he has been Managing Partner of Carl H.
Pforzheimer & Co. (member of the New York and American Stock Exchanges). He is
also a director of U. S. Trust Corporation. (3)(4)(5)
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(a) IDENTIFICATION OF DIRECTORS (cont')
Name, Age, Tenure as a Director, Position with the Corporation (1), Principal
Occupation, Business Experience Past Five Years, and Other Directorships in
Public Companies
- -----------------------------------------------------------------------------
Ernest G. Siddons (age 66, Director since 1981; current term expires in 2001).
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. From
September 1996 to December 1997 he was President of Union Electric Steel
Corporation, a subsidiary of the Corporation. (2)
- ----------
(N) Nominee for election at the April 25, 2000 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.
(5) Member of Stock Option Committee.
(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
- ------------------------------------------------------------------------------
Rose Hoover (age 44). She is a Vice President of the Corporation since June
1999 and has been Secretary for more than five years. For more than five years
before June 1999, she was Manager of Real Property and Environmental Control.
Marliss D. Johnson (age 35). She is Vice President, Controller and Treasurer of
the Corporation since July 1999. For five years before July 1999, she was a
Senior Manager with PricewaterhouseCoopers LLP (a public accounting firm).
Terrence W. Kenny (age 40). He has been Group Vice President of the Corporation
since February 1999 and was Vice President Corporate Development & Planning from
April 1998 to February 1999. For five years prior to 1998, he was Vice
President and Treasurer of Buffalo Pumps, Inc., a subsidiary of the Corporation.
Robert F. Schultz (age 52). He has been Vice President Industrial Relations and
Senior Counsel of the Corporation for more than five years.
- ----------
(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.
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(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
(d) FAMILY RELATIONSHIPS
Louis Berkman is the father-in-law of Robert A. Paul, and grandfather of
Laurence E. Paul (son of Robert A. Paul). There are no other family
relationships among the Directors and Executive Officers.
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ITEM 11 - EXECUTIVE COMPENSATION
The following table sets forth certain information as to the total
remuneration received for the past three years by the four most highly
compensated executive officers of the Corporation, including the Chief Executive
Officer (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
Annual Compensation
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (i)
Name and Securities All Other
Principal Salary Bonus Underlying Compensation
Position Year ($) ($) Options(#)(2) ($)
- --------- ---- ------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Robert A. Paul 1999 353,250 112,500 60,000
President and Chief 1998 330,500 66,000
Executive Officer 1997 308,750 94,500
Louis Berkman 1999 353,250 112,500 60,000
Chairman of the Board 1998 330,500 66,000
and Executive Committee 1997 308,750 94,500
Ernest G. Siddons 1999 316,500 100,800 50,000
Executive Vice President 1998 296,250 59,000 450,000(1)
and Chief Operating 1997 276,875 84,750 7,172(1)
Officer
Robert F. Schultz 1999 142,000 20,000 20,000
Vice President 1998 138,250 14,500
Industrial Relations 1997 134,500 18,500
and Senior Counsel
Terrence W. Kenny 1999 110,550 25,000 12,500
Group Vice President 1998 N/A N/A
1997 N/A N/A
- ----------
</TABLE>
(1) The 1997 amount in column (i) represents the value of the term portion of a
split dollar life insurance policy. In 1998, the Salary Committee approved
the payment to Mr. Siddons of an amount equal to the cash value of that
policy. Mr. Siddons has relinquished all rights to the Policy and the
split dollar provisions have been terminated.
(2) Options granted on December 15, 1998 but were not exercisable until May
1999.
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(b) COMPENSATION PURSUANT TO PLANS
The Corporation's 1997 Stock Option Plan permits the grant of options
exercisable for shares of Common Stock to corporate officers and other key
employees of the Corporation and its subsidiaries upon such terms, including
exercise price and conditions and timing of exercise, as may be determined by
the Stock Option Committee. The Stock Option Plan authorizes the grants of
awards up to a maximum of 300,000 shares of the Corporation's Common Stock,
however, the maximum number of Shares with respect to which stock options may be
granted to any one Participant in any fiscal year may not exceed 150,000.
During the fiscal year ended December 31, 1999, no options were granted.
The Corporation has a tax qualified retirement plan (the "Plan") applicable
to the Executive Officers and other employees, to which the Corporation makes
annual contributions, as required, 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 5% owners 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 $5,577 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 (amended and restated in 1996) for all officers listed in the compensation
table, except Louis
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Berkman and Terrence W. Kenny, 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.
The following shows the estimated annual pension that would be payable,
without offset, under the Plan and the SERP, if applicable, 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 $232,875
Ernest G. Siddons $194,287 (2)
Robert F. Schultz $ 81,000
Terrence W. Kenny $ 54,083
</TABLE>
- ---------
(1) Mr. Berkman is currently receiving a pension pursuant to the Plan as
described above.
(2) Assumes employment until end of current year.
(c) COMPENSATION OF DIRECTORS
In 1999, each Director who was not employed by the Corporation received an
annual retainer of $6,000 (payable quarterly), $1,000 for each Board meeting
attended and $500 for each Committee meeting attended. Attendance can be either
in person or by telephonic
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connection. Directors do not receive a fee for either Board or Committee
meetings if they do not attend.
(d) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Berkman, Mr. Paul and Mr. Siddons 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 following a change of
control (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. Mr. Schultz and one other employee have two year contracts
providing for three times their annual compensation in the event their
employment is terminated following a change in control (including a voluntary
departure for good cause). In addition, Mr. Kenny and the remaining two Vice
Presidents have two year contracts providing for two times their annual
compensation in the event their employment is terminated following a change in
control (including a voluntary departure for good cause). All of the 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 if applicable.
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(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 1999 was comprised
of four Directors: William D. Eberle, who is Chairman of the Committee, Louis
Berkman, Leonard M. Carroll and Carl H. Pforzheimer, III.
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 had certain transactions with the Corporation
which are more fully described under Item 13 "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 of
Directors 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.
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. The Committee does not specifically link remuneration
solely to quantitative measures of performance because of the cyclical nature of
the industries and markets served
21
<PAGE>
by the Corporation. In setting compensation, the Committee also considers
various qualitative factors, including competitive compensation arrangements of
other companies within relevant industries, 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 1999, the Salary Committee reviewed and approved salary increases and
had previously approved an incentive program for 1999 covering Louis Berkman,
Robert A. Paul and Ernest G. Siddons ("participants"). Incentive payments were
to be determined, based exclusively on the Corporation's 1999 income from
operations performance as compared to the Corporation's business plan. These
payments were to be limited to 30% of base salary of participants. In 1999, the
participants earned incentives of $112,500, $112,500 and $100,800 respectively.
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
Leonard M. Carroll
William D. Eberle
Carl H. Pforzheimer, III
22
<PAGE>
(g) STOCK PERFORMANCE GRAPH
Comparative Five-Year Total Returns*
Ampco-Pittsburgh Corporation, Standard & Poors 500 and Value Line Steel
(Integrated) Index
(Performance results through 12/31/99)
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG AMPCO, S&P 500 INDEX AND STEEL (INTEGRATED) INDEX
<CAPTION>
Measurement period Steel
(Fiscal year Covered) AMPCO S&P 500 (Integrated)
- --------------------- -------- ------- -----
<S> <C> <C> <C>
Measurement PT -
12/31/94 $100 $100 $100
FYE 12/31/95 $110.04 $137.50 $ 95.5
FYE 12/31/96 $124.48 $169.47 $ 99.26
FYE 12/31/97 $208.04 $226.03 $105.13
FYE 12/31/98 $118.35 $290.22 $ 99.51
FYE 12/31/99 $113.89 $222.64 $349.08
</TABLE>
Assumes $100 invested at the close of trading on the last trading day
preceding January 1, 1995 in Ampco-Pittsburgh Corporation common stock,
Standard & Poors 500 and Steel (integrated).
*Cumulative total return assumes reinvestment of dividends.
In the above graph, the Corporation has used Value Line's Steel
(Integrated) Index 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.
23
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 7, 2000, Louis Berkman owned directly 214,888 shares of the
Common Stock of the Corporation and had the right to acquire 60,000 shares
pursuant to a stock option. As of the same date, The Louis Berkman Company, P.
O. Box 576, Steubenville, OH 43952 owned beneficially and of record 2,187,689
shares of the Common Stock of the Corporation. Louis Berkman, an officer and
director of The Louis Berkman Company, owns directly 61.94% of its common stock.
Robert A. Paul, an officer and director of The Louis Berkman Company, disclaims
beneficial ownership of the 38.06% of its common stock owned by his wife. Louis
Berkman and Robert A. 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.
In March 1998, Gabelli Funds, Inc. and affiliates, Corporate Center, Rye,
NY 10580, filed an amendment to its Schedule 13D reporting they owned 1,893,500
shares or 19.77%. In February 2000, Dimensional Fund Advisors Inc., 1299 Ocean
Avenue, Santa Monica, CA 90401 filed a 13G disclosing that as of December 31,
1999 it had sole voting and dispositive power of 819,000 shares or 8.54% (all of
which shares are held in portfolios of various investment vehicles).
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 7, 2000 information concerning
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:
24
<PAGE>
<TABLE>
<CAPTION>
Name of Amount and nature of Percent
beneficial owner beneficial ownership of class
- ---------------- -------------------- --------
<S> <C> <C>
Louis Berkman 2,463,843(1)(2) 25.7
Robert A. Paul 117,922(2)(3) 1.2
Ernest G. Siddons 51,833(4) .5
Robert F. Schultz 20,200(5) .2
Terrence W. Kenny 12,500(6) .1
Carl H. Pforzheimer, III 2,733(7)
Leonard M. Carroll 1,000 *
Laurence E. Paul 1,000 *
William D. Eberle 200 *
Directors and Executive
Officers as a group
(11 persons) 2,674,965(8) 27.9
- ----------
</TABLE>
*less than .1%
(1) Includes 214,888 shares owned directly, 60,000 shares which he has the
right to acquire within sixty days pursuant to a stock option, 2,187,689
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 2,182,989 shares
of the Corporation's Common Stock. Louis Berkman is an officer and
director of The Louis Berkman Company and owns directly 61.94% of its
common shares. Robert A. Paul, an officer and director of The Louis
Berkman Company, disclaims beneficial ownership of the 38.06% 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, 60,000 shares which he has the right
to acquire within sixty days pursuant to a stock option, 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 1,833 shares owned jointly with his wife and 50,000 shares which
he has the right to acquire within sixty days pursuant to a stock option.
25
<PAGE>
(5) Includes 200 shares owned jointly with his wife and 20,000 shares which he
has the right to acquire within sixty days pursuant to a stock option.
(6) Includes 12,500 shares which he has the right to acquire within sixty days
pursuant to a stock option.
(7) Includes 1,000 shares owned directly, 800 shares held by a trust of which
he is a trustee and principal beneficiary, and the following shares in
which he disclaims beneficial ownership: 133 shares held by his daughter
and 800 shares held by a trust of which he is a trustee.
(8) Includes 207,500 shares which certain officers have the right to acquire
within sixty days pursuant to stock options and 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 1999 the Corporation bought industrial supplies from The Louis Berkman
Company in transactions in the ordinary course of business amounting to
approximately $1,600,000. Additionally, The Louis Berkman Company paid the
Corporation $170,000 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 2000.
26
<PAGE>
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 reports thereon of
PricewaterhouseCoopers LLP (for the years ended December 31, 1997 and 1998) and
Deloitte & Touche LLP (for the year ended December 31, 1999) appearing on pps. 8
through 18 and p. 24 of the Annual Report to Shareholders for the year ended
December 31, 1999 are incorporated by reference in this Form 10-K Annual Report.
2. Financial Statement Schedules
The following additional financial data should be read in conjunction with the
consolidated financial statements in the accompanying Annual Report. Schedules
not included with this additional financial data have been omitted because they
are not applicable or the required information is shown in the financial
statements or notes thereto.
<TABLE>
<CAPTION>
Schedule Page
Number Number
-------- ------
<S> <C> <C>
Index to Ampco-Pittsburgh
Corporation Financial Data F-1
Report of Independent
Accountants F-2
Valuation and Qualifying
Accounts and Reserves II F-3
</TABLE>
27
<PAGE>
3. Exhibits
Exhibit No.
(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 June 30, 1997; the Annual
Report on Form 10-K for
28
<PAGE>
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
Incorporated by reference to the Proxy Statement dated March 14,
1997.
(13) Annual Report to Shareholders for the fiscal year ended December 31,
1999
(21) Significant Subsidiaries
(23) Consents of Experts
(27) Financial Data Schedule
(b) Reports on Form 8-K
-------------------
A report on Form 8-K, dated October 15, 1999 was filed in the fourth
quarter of 1999 disclosure certain financial information in connection
with the acquisition of The Davy Roll Company.
29
<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 14, 2000
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/ Marliss D. Johnson
------------------------------------------
Vice President, Controller and Treasurer
(Principal Financial Officer) -
Marliss D. Johnson
30
<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 14, 2000
By /s/ Leonard M. Carroll
-----------------------------------
Leonard M. Carroll
By /s/ William D. Eberle
------------------------------------
William D. Eberle
By /s/ Laurence E. Paul
------------------------------------
Laurence E. Paul
By /s/ Carl H. Pforzheimer, III
-----------------------------------
Carl H. Pforzheimer, III
31
<PAGE>
INDEX TO AMPCO-PITTSBURGH CORPORATION FINANCIAL DATA
----------------------------------------------------
<TABLE>
<CAPTION>
Schedule Page
Number Number
-------- ------
<S> <C> <C>
Index to Ampco-Pittsburgh Corporation Financial Data F-1
Report of Independent Accountants F-2
Valuation and Qualifying Accounts and Reserves II F-3
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Ampco-Pittsburgh Corporation:
We have audited the consolidated balance sheet of Ampco-Pittsburgh Corporation
and subsidiaries as of December 31, 1999, and the related consolidated
statements of income, shareholders' equity and cash flows for the year then
ended, and have issued our report thereon dated January 31, 2000; such financial
statements and report are included in your 1999 Annual Report to Shareholders
and are incorporated herein by reference. Our audit also included financial
statement schedule II, Valuation and Qualifying Accounts, of Ampco-Pittsburgh
Corporation and subsidiaries for the year ended December 31, 1999. The financial
statement schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audit. In our opinion, such
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 31, 2000
F-2
<PAGE>
Schedule II
- -----------
Ampco-Pittsburgh Corporation
Valuation and qualifying accounts and reserves
December 31, 1999
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
Description Balance at -------------- Additions ------------- Balance at
beginning of Charged to costs Charged to others Deductions- end of
period and expenses accounts - describe describe period
<S> <C> <C> <C> <C> <C>
Allowance for doubt- $691,090 $296,455 $112,106 (1) ($735,513) (2) $364,138
ful accounts
</TABLE>
(1) Represents allowance established for potentially uncollectible accounts in
connection with The Davy Roll Group acquisition on August 2, 1999.
(2) Represents primarily writeoff of accounts receivable customer balances.
F-3
<PAGE>
Exhibit 13
ampco pittsburgh
1999 ANNUAL REPORT
------------------------------------------------------------------------
<PAGE>
About the Cover: An artist's depiction of the critical tolerances and precision
necessary in the production of the engineered products manufactured by the
Corporation.
<PAGE>
Ampco-Pittsburgh Corporation
Financial Highights
- -------------------------------------------------------------------------------
(Dollars in thousands except per share)
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $211,827 $187,853 $173,906
- -------------------------------------------------------------------------------------------
Operating Income 22,814 23,202 21,961
- -------------------------------------------------------------------------------------------
Investment Gains net of tax -- -- 2,268
- -------------------------------------------------------------------------------------------
Net Income 15,144 15,667 16,540
- -------------------------------------------------------------------------------------------
Basic Earnings Per Share 1.58 1.64 1.73
- -------------------------------------------------------------------------------------------
Dividends Per Share 40 .37 .27
- -------------------------------------------------------------------------------------------
Shareholders' Equity $152,620 $142,299 $129,416
- -------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(Dollars in millions except per share)
[CHART APPEARS HERE] [CHART APPEARS HERE]
Operating Segments:
. Forged and Cast Rolls
. Air and Liquid Processing
. Plastics Processing Machinery
[CHART APPEARS HERE] [CHART APPEARS HERE]
1
<PAGE>
To Our Shareholders
- -------------------------------------------------------------------------------
In our report last year, we indicated that it would be difficult to
duplicate the results of the prior two years. We are pleased to report, however,
that we came very close with income for 1999 only slightly below the target
level. In addition, the Corporation consummated a significant acquisition in
August with the purchase of The Davy Roll Company, a leading United Kingdom
producer of cast rolls to complement Union Electric Steel corporation, the
world's largest producer of forged hardened steel rolls.
Sales in 1999 of $211,827,000 increased substantially compared to
$187,853,000 in 1998 in large part due to the inclusion of sales for five months
of Davy Roll. Operating income of $22,814,000 decreased by only $388,000 from
the 1998 level. A return to a more acceptable earnings performance by the Air
and Liquid Processing segment made up for the lower results of the two other
segments. The Corporation had net income of $15,144,000 or $1.58 per share in
1999, compared to $15,667,000 or $1.64 per share in the prior year.
The financial position of the Corporation remains strong, which following
the acquisition cost approximating $24,000,000, includes cash holdings of
$16,323,000. The only debt continues to be long-term industrial revenue bonds
totalling $14,661,000. Shareholders equity increased to $152,620,000 by year
end.
The Corporation continued its policy of significant investment in capital
expenditures which were close to $12,000,000 in 1999 with commitments to date
capacity but ensure that our operations are equipped to maximize manufacturing
productivity and quality so as to meet the ever increasing competitive
situations that are faced daily. Our operations continue to make research and
development a high priority. We intend to be technological leaders in each of
our niche businesses. We have made great strides in our Union Electric Steel
operation with the introduction of a new generation of forged hardened steel
work rolls which we believe have superior wear and hardenability characteristics
to those of any of its competitors.
Price compression, severe competitive pressures and unfavorable exchange
rates are problems but are facts of life that must be dealt with. We are pleased
that our backlog of orders is relatively strong. During 2000, we will complete
the integration of the newly acquired cast roll business into the Corporation
which should enhance returns on that investment. We enter the new millennium
with significant challenges but with great confidence. We will continue to seek
further growth and investment opportunities; meanwhile, the Corporation is
extremely healthy and expects to produce good earnings in the year ahead.
We appreciate the contribution and support of our employees, customers,
shareholders and suppliers. Their efforts have helped to strengthen Ampco-
Pittsburgh for the future.
March 1, 2000
/s/ Louis Berkman /s/ Robert A. Paul /s/ Ernest G. Siddons
Louis Berkman Robert A. Paul Ernest G. Siddons
Chairman of the Board President and Chief Executive Vice
Board Executive Officer President and Chief
Operating Officer
2
<PAGE>
- -------------------------------------------------------------------------------
New Acquisition
The Davy Roll Company
[GRAPHIC APPEARS HERE]
An aerial photograph of The Davy Roll Company plant located on a 12-acre site
in Gateshead, England.
On August 2, 1999, the Corporation acquired The Davy Roll Company Limited
headquartered in Gateshead in the Northeast of England. The company is a leading
manufacturer of cast iron and steel rolls primarily used by hot and cold strip
steel mills in addition to medium and heavy section and plate mills throughout
the world. With an annual capacity in excess of 20,000 tons, the Company can
produce rolls up to 55 tons in finished weight using both static and spin-cast
techniques. Davy Roll has a reputation for providing a high quality product and
service to its customers and is accredited to internationally accepted Quality
Assurance Standards. By merging the acquired business with Union Electric Steel
Corporation, the world's largest producer of forged hardened steel rolls, the
Corporation can provide its global customer base with total forged and cast
rolling mill roll requirements on a single source basis.
[GRAPHIC APPEARS HERE]
A technician ultrasonically evaluates the internal structure of a Davy cast roll
prior to shipment.
Two small businesses in England were also acquired. They are Formet Limited
which custom forges special stock alloys principally used in the oil and gas,
petrochemical, marine and general engineering industries, and Turner Chilled
Rolls Limited, a manufacturer of high quality cast rolls used by the food and
animal feed processing industries.
3
<PAGE>
Forged and Cast Rolls
- --------------------------------------------------------------------------------
Union Electric Steel/Davy Roll
The acquisition of The Davy Roll Company, a leading United Kingdom
manufacturer of cast iron and steel rolls, has created the opportunity for this
segment to service the world's largest steel and aluminum producers with total
rolling mill roll requirements on a single-source basis. Although results of the
acquisition are included for five months of 1999 and sales increased
accordingly, operating income was considerably below the last two back-to-back
record years. Despite this, income exceeded planned levels at a time when the
roll industry was suffering much larger reductions in earnings. In addition,
Union Electric Steel Corporation has increased its U.S. market share of forged
hardened steel rolls and through its research and development programs has
introduced a new generation of work rolls superior to those of any of its
competitors. The merging of the two businesses adds value to both, with the
principal synergies coming from sales and marketing as well as joint research
and development programs, the latter allowing the Corporation to provide
customers with the ideal solution for their particular application - either a
forged or a cast roll.
[GRAPHIC APPEARS HERE]
The largest of the Union Electric forged roll finishing plants located in
Carnegie, Pennsylvania.
The Corporation continued its capital expenditure program in this segment
with $7 million in 1999 and is committed to spend approximately $10 million in
2000. This includes costs to complete the major heat treatment project at Union
Electric, Carnegie and expenditures to upgrade facilities and equipment at the
Davy Roll Gateshead plant.
Towards the end of the year, the Belgian operation was restructured to
recognize changes in product finishing processes requiring a small reduction in
the workforce, causing a one-time provision of $585,000 to be made for severance
and future pension expense. The strength of the U.S. dollar against the euro is
a difficult problem for this operation, impacting the cost of purchases of
forging blanks from its U.S. parent.
[GRAPHIC APPEARS HERE]
A view of part of The Davy Roll Company cast roll plant located in Gateshead,
England.
4
<PAGE>
[GRAPHIC APPEARS HERE]
The Union Electric Steel forged roll finishing plant located in Valparaiso,
Indiana.
Coupled with pricing pressures, it will be difficult for the Belgian business to
remain profitable in the current environment. The currency difference makes
Europe a challenging market for U.S. exports in general and only a favorable
change in the dollar/euro exchange rate will provide the opportunity for forged
hardened rolls to be competitive with the European continental producers.
[GRAPHIC APPEARS HERE]
Multiple shapes and sizes of finished forged hardened steel rolls awaiting
inspection prior to shipment.
Towards the end of the year, a technical know-how and forged hardened steel
blank supply agreement was consummated with Tata-Yodagowa Limited, a leading
producer of cast rolls in India. This partnership will aid the Corporation in
retaining market share as indigenous producers take over forged steel roll
requirements in India which until recently were supplied by foreign producers.
[GRAPHIC APPEARS HERE]
The Union Electric Steel Harmon Creek plant in Burgettstown, Pennsylvania houses
melting, forging and rough machining operations.
Going into 2000, growth in market share and strength of the domestic
economy have increased materially the Union Electric Steel order book. However,
on a consolidated basis, this is partially offset by a reduction in sales out of
Belgium. The Davy cast roll order backlog is at a slightly higher level than
prior to the acquisition.
[CHART APPEARS HERE]
5
<PAGE>
Air and Liquid Processing
- --------------------------------------------------------------------------------
[CHART APPEARS HERE]
Benefitting from strong opening order backlog, sales of the segment improved 16%
in 1999 following a modest increase in the previous year. The additional sales
volume and favorable product mix propelled the operating earnings by 77% above
1998 levels returning the segment to a more acceptable performance following two
years of disappointing results.
Aerofin
The heat exchange coil business improved for Aerofin in 1999 with sales
increasing almost twenty percent above the low levels of the previous year.
Earnings improved but not to the record levels of two and three years ago as
margins continued to be impacted by severe pricing pressures. Higher margin
nuclear coil orders increased the second half of the year results and have
improved the quality of the order backlog going into 2000. It was the middle of
1999 before the equipment was fully installed for the manufacture of plate fin
coils. This provided Aerofin the ability to offer one of the most complete lines
of heat exchange coils in the industry and will improve penetration in the
heating and air conditioning markets.
[GRAPHIC APPEARS HERE]
The Buffalo Pumps office and plant located in North Tonawanda, New York.
Buffalo Air Handling
Sales of custom air handling systems improved by almost sixteen percent for
Buffalo Air Handling, in part as a result of further penetration in construction
for the pharmaceutical and chemical processing industries. Although pricing
continues to be extremely competitive, increased sales volume, investment in the
CNC right angle shear and improved production scheduling resulted in better
than planned earnings. Order backlog going into 2000 is reasonably strong;
however, it is below the record level experienced at the end of last year.
[GRAPHIC APPEARS HERE]
The tube straightening operation of the new plate fin coil line, installed at
the Aerofin plant in Lynchburg, Virginia in 1999.
[GRAPHIC APPEARS HERE]
The new CNC right angle shear installed during 1999 at the Buffalo Air Handling
plant in Amherst, Virginia.
Buffalo Pumps
Sales of centrifugal pumps were at record levels, increasing by
approximately seven persent in 1999, producing an improved earnings performance.
Strength of the power generation market led to increased pump shipments while
marine defense and commercial refrigeration businesses remained close to prior
yera levels. The operation continued to enjoy productivity gains from the
significant investments made in CNC machinery during 1999 and the past several
years. The growth in the power generation business allows Buffalo Pumps to enter
2000 with an improved order backlog level compared to a year ago.
6
<PAGE>
Performance of the Plastics Processing Machinery segment in 1999 was
disappointing. Sales and earnings were materially lower resulting from a slow-
down in capital spending by plastic processors across the country which impacted
business with them and original equipment manufacturers. Comparative figures for
1997 include only part-year results for F.R. Gross and Atlantic Grinding, which
were acquired during that year.
[GRAPHIC APPEARS HERE]
The headquarter offices and plant of New Castle Industries in New Castle,
Pennsylvania.
[GRAPHIC APPEARS HERE]
A feed screw satellite plant in Manchester, New Hampshire which services New
Castle Industries' customers in New England.
Plastics Processing Machinery
- --------------------------------------------------------------------------------
New Castle Industries
In 1999, New Castle performed almost at par, with sales and earnings flat
with those of the prior year, but considerably below expectations. This is in
part due to reduced order intake beginning at the end of the first quarter.
Plastic processor over-capacity and industry consolidations resulted in excess
equipment, which produced a reduction in demand for repairs and replacement
machinery. The strategy of acquiring Atlantic Grinding as satellite plants in
New Hampshire and South Carolina to provide immediate and reliable service to
customers in those geographic areas is working well and has improved feed screw
operating earnings. Price and competitive pressures have been severe throughout
the year on all products; however, chill rolls in particular were impacted the
most, both in the level of sales and margins. Although New Castle goes into 2000
with a lower order backlog than at the end of last year, there are signs that
plastic processors are beginning to increase spending levels.
[GRAPHIC APPEARS HERE]
Feed screws receive final micrometer inspection prior to shipment.
F.R. Gross
As with New Castle chill rolls, the F.R. Gross heat transfer roll business
was adversely impacted in 1999 by industry conditions. Sales and earnings were
significantly lower than the prior year. Joint marketing plans with New Castle
are currently being developed in an effort to expand sales coverage for the
plastics processors and original equipment manufacturers.
[GRAPHIC APPEARS HERE]
F. R. Gross office and plant in Stow, Ohio.
[CHART APPEARS HERE]
7
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1999 1998
---- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents................................. $ 16,322,834 $ 33,107,815
Receivables, less allowance for doubtful accounts of
$364,138 in 1999 and $691,090 in 1998.................... 51,114,519 35,017,919
Inventories............................................... 47,281,320 35,492,440
Other..................................................... 3,864,604 4,076,339
---------------- -----------------
Total current assets................................. 118,583,277 107,694,513
Property, plant and equipment, at cost:
Land and land improvements................................ 5,269,931 4,790,793
Buildings................................................. 28,981,171 26,419,747
Machinery and equipment................................... 134,402,869 119,498,465
---------------- -----------------
168,653,971 150,709,005
Accumulated depreciation.................................. (79,933,027) (73,932,512)
---------------- -----------------
Net property, plant and equipment.................... 88,720,944 76,776,493
Prepaid pension........................................... 14,679,325 13,885,544
Other noncurrent assets................................... 13,824,778 13,454,580
---------------- -----------------
$ 235,808,324 $ 211,811,130
================ =================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable.......................................... $ 14,197,817 $ 9,247,179
Accrued payrolls and employee benefits.................... 9,395,336 7,820,048
Other..................................................... 16,699,277 9,355,391
---------------- -----------------
Total current liabilities.............................. 40,292,430 26,422,618
Employee benefit obligations.............................. 15,716,358 16,509,026
Industrial revenue bond debt.............................. 14,661,000 12,586,000
Deferred income taxes..................................... 11,440,862 11,707,742
Other noncurrent liabilities.............................. 1,077,948 2,287,132
---------------- -----------------
Total liabilities...................................... 83,188,598 69,512,518
Shareholders' Equity:
Preference stock--no par value; authorized 3,000,000
shares; none issued...................................... -- --
Common stock--par value $1; authorized 20,000,000
shares; issued and outstanding -- 9,590,121 shares in
1999, 9,577,621 shares in 1998........................... 9,590,121 9,577,621
Additional paid-in capital................................ 102,668,480 102,555,980
Retained earnings......................................... 40,034,339 28,724,905
Accumulated other comprehensive income.................... 326,786 1,440,106
---------------- -----------------
Total shareholders' equity............................. 152,619,726 142,298,612
---------------- -----------------
$ 235,808,324 $ 211,811,130
================ =================
</TABLE>
See Notes to Consolidated Financial Statements.
8
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
For The Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales........................................... $ 211,827,393 $ 187,853,060 $ 173,906,315
-------------- -------------- --------------
Operating costs and expenses:
Cost of products sold (excluding depreciation).... 150,570,164 129,410,176 120,075,719
Selling and administrative........................ 30,812,218 27,717,806 25,197,129
Depreciation...................................... 7,631,452 7,522,605 6,672,483
-------------- -------------- --------------
189,013,834 164,650,587 151,945,331
-------------- -------------- --------------
Income from operations.............................. 22,813,559 23,202,473 21,960,984
Other income (expense):
Gain on sale of investments....................... -- -- 3,489,228
Other (expense) income-- net...................... (123,327) 419,089 454,773
-------------- -------------- --------------
Income before income taxes.......................... 22,690,232 23,621,562 25,904,985
Income taxes........................................ 7,546,000 7,955,000 9,365,000
-------------- -------------- --------------
Net income.......................................... $ 15,144,232 $ 15,666,562 $ 16,539,985
============== ============== ==============
Basic and diluted earnings per common share......... $ 1.58 $ 1.64 $ 1.73
============== ============== ==============
Weighted average number of common shares
outstanding........................................ 9,585,657 9,577,621 9,577,621
============== ============== ==============
</TABLE>
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Common Stock Accumulated
-------------------------------- Other
Stated Additional Retained Comprehensive
Capital Paid-in Capital Earnings Income (Loss) Total
-------- --------------- -------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996.............. $ 9,577,621 $ 102,555,980 $ 2,648,036 $ 4,885,386 $ 119,667,023
-------------
Comprehensive income:
Net income 1997...................... 16,539,985 16,539,985
Other comprehensive (loss)........... (4,205,263) (4,205,263)
-------------
Comprehensive income............... 12,334,722
Cash dividends ($0.27 per share)....... (2,585,958) (2,585,958)
----------- ------------- ------------- ------------- -------------
Balance December 31, 1997.............. 9,577,621 102,555,980 16,602,063 680,123 129,415,787
-------------
Comprehensive income:
Net income 1998...................... 15,666,562 15,666,562
Other comprehensive income........... 759,983 759,983
-------------
Comprehensive income............... 16,426,545
Cash dividends ($0.37 per share)....... (3,543,720) (3,543,720)
----------- ------------- ------------- ------------- -------------
Balance December 31, 1998.............. 9,577,621 102,555,980 28,724,905 1,440,106 142,298,612
-------------
Comprehensive income:
Net income 1999...................... 15,144,232 15,144,232
Other comprehensive (loss)........... (1,113,320) (1,113,320)
-------------
Comprehensive income............... 14,030,912
Issuance of stock...................... 12,500 112,500 125,000
Cash dividends ($0.40 per share)....... (3,834,798) (3,834,798)
----------- ------------- ------------- ------------- -------------
Balance December 31, 1999.............. $ 9,590,121 $ 102,668,480 $ 40,034,339 $ 326,786 $ 152,619,726
=========== ============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
9
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For The Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income...................................................... $ 15,144,232 $ 15,666,562 $ 16,539,985
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation.................................................. 7,631,452 7,522,605 6,672,483
Gain on sale of investments................................... -- -- (3,489,228)
Deferred income taxes......................................... 576,768 1,034,000 3,565,000
Other--net.................................................... 607,561 552,874 289,206
Changes in assets/liabilities, net of effects
from business acquisitions:
Receivables................................................. (4,515,486) 617,901 (1,771,708)
Inventories................................................. (52,870) 275,366 (2,190,829)
Other assets................................................ (1,984,063) (393,334) (71,752)
Accounts payable............................................ 2,431,060 397,416 (1,018,684)
Accrued payrolls and employee benefits...................... 163,147 120,481 (212,999)
Other liabilities........................................... (34,147) (107,497) (4,158,879)
------------ ------------ ------------
Net cash flows from operating activities.......................... 19,967,654 25,686,374 14,152,595
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment...................... (11,749,326) (12,099,403) (15,164,640)
Proceeds from sales of property, plant and equipment............ 421,837 419,638 79,020
Use of unexpended industrial revenue bond proceeds.............. 503,898 1,714,419 7,548,621
Business acquisitions........................................... (24,164,884) (899,463) (11,966,579)
Proceeds from sales of investments.............................. -- -- 4,907,484
------------ ------------ ------------
Net cash flows from investing activities........................ (34,988,475) (10,864,809) (14,596,094)
------------ ------------ ------------
Cash flows from financing activities:
Dividends paid.................................................. (3,833,548) (3,447,944) (3,256,684)
Proceeds from the issuance of stock............................. 125,000 -- --
Proceeds from industrial revenue bonds.......................... 2,075,000 -- 7,116,000
Repayment of industrial revenue bonds........................... -- -- (7,116,000)
------------ ------------ ------------
Net cash flows from financing activities........................ (1,633,548) (3,447,944) (3,256,684)
------------ ------------ ------------
Effect of exchange rate changes on cash........................... (130,612) 38,682 (114,536)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents.............. (16,784,981) 11,412,303 (3,814,719)
Cash and cash equivalents at beginning of year.................... 33,107,815 21,695,512 25,510,231
------------ ------------ ------------
Cash and cash equivalents at end of year.......................... $ 16,322,834 $ 33,107,815 $ 21,695,512
============ ============ ============
Supplemental information:
Income tax payments............................................. $ 6,126,563 $ 6,282,784 $ 7,649,541
Interest payments............................................... 730,753 701,840 523,555
</TABLE>
See Notes to Consolidated Financial Statements.
10
<PAGE>
Notes to Consolidated Financial Statements
Description of Business
Ampco-Pittsburgh Corporation (the Corporation) is in three business segments
that manufacture and sell principally custom-engineered equipment. The Forged
and Cast Rolls segment consists of Union Electric Steel and its affiliates in
Belgium and England (see Note 2) which manufacture and sell forged hardened
steel rolls and cast rolls to the metals industry. The Air and Liquid Processing
segment consists of Aerofin--heat exchange coils, Buffalo Air Handling--air
handling systems, and Buffalo Pumps--centrifugal pumps, all of which sell to a
variety of commercial and industrial users. The Plastics Processing Machinery
segment consists of New Castle Industries--feed screws, barrels and chill rolls
and F. R. Gross--heat transfer rolls, both of which sell principally to the
plastics processing and machinery industry.
Note 1--Accounting Policies:
The Corporation's accounting policies conform to generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. A summary of
the significant accounting policies followed by the Corporation is presented
below. Certain amounts for preceding periods have been reclassified for
comparability with the 1999 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.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost with depreciation computed on
the straight-line method over the following estimated useful lives: land
improvements--15 to 20 years, buildings--25 to 50 years and machinery and
equipment--5 to 20 years. Expenditures that extend economic useful lives are
capitalized. Routine maintenance is charged to operating results. Gains or
losses are recognized on retirements or disposals.
Revenue Recognition
Revenue from sales is recognized when title to the product passes to the
customer.
Foreign Currency Translation
Assets and liabilities of the Corporation's foreign operations are translated at
the current year-end exchange rates and the statements of income are translated
at the average exchange rates for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a separate
component of other comprehensive income until the entity is sold or
substantially liquidated. The foreign currency translation adjustments exclude
income tax expense (benefit) since earnings of non-U.S. subsidiaries are deemed
to be reinvested for an indefinite period of time.
Financial Instruments
Gains and losses on forward exchange contracts which hedge exposures on
anticipated foreign currency commitments are deferred and recognized as
adjustments to the bases of the underlying assets. Premiums and discounts are
amortized into income over the life of the forward exchange contract.
Income Taxes
Income taxes are recognized during the year in which transactions enter into the
determination of financial statement income. Deferred tax assets and liabilities
are recognized for the future tax consequences of temporary differences between
the book carrying amounts and the tax basis of assets and liabilities.
Stock-Based Compensation
The Corporation accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." Under the intrinsic value method,
compensation expense is generally recognized only to the extent the market price
of the common stock exceeds the exercise price of the stock option at the date
of the grant.
11
<PAGE>
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding during the year. 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 9,610,265
and 9,577,990 common shares for 1999 and 1998, respectively. There were no
potentially dilutive securities outstanding for 1997.
Note 2--Acquisitions:
On August 2, 1999, the Corporation acquired the stock of The Davy Roll Company
and two smaller companies, each wholly owned subsidiaries of Kvaerner PLC,
(combined "Davy"). Davy, headquartered in Gateshead, England with operating
locations in Gateshead and Sheffield, England, is primarily a leading supplier
of cast rolls to the steel and metal industries and complements the previously
existing Forged Steel Rolls segment (which has been renamed to Forged and Cast
Rolls).
The acquisition was accounted for as a purchase transaction. The purchase price
of approximately U.S. $24,000,000 resulted in a bargain purchase (negative
goodwill) which was applied against property, plant and equipment. Adjustments
to the purchase price allocation may arise from finalizing certain purchase
accounting matters, including accounting for pensions under a defined benefit
plan (see Note 6). The consolidated financial statements include the results of
operations of Davy from its acquisition date of August 2, 1999.
The unaudited pro forma financial information is based on the financial
statements for each of the companies. The consolidated results of operations on
a pro forma basis, as though the business had been acquired as of January 1,
1998, are as follows (in thousands except for per share information):
<TABLE>
<CAPTION>
For the Year Ended
December 31,
1999 1998
---- ----
<S> <C> <C>
Net sales..................... $241,743 $252,349
Net income.................... $ 13,603 $ 17,955
Basic and diluted
earnings per share........... $ 1.42 $ 1.87
</TABLE>
The unaudited pro forma financial information is included for comparative
purposes only and is not intended to be indicative of the results that would
have occurred had the acquisition had been consummated on January 1, 1998 or
that may be obtained in the future. In particular, pro forma net income for 1999
includes approximately $1,000,000 of non-recurring expenses, net of tax.
Note 3--Inventories:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C> <C>
Raw materials................ $11,714 $ 6,425
Work-in-process.............. 26,212 21,985
Finished goods............... 4,084 5,100
Supplies..................... 5,271 1,982
------- -------
$47,281 $35,492
======= =======
</TABLE>
The carrying amount of inventories valued on the LIFO method approximates
current cost at December 31, 1999 and 1998. Approximately 63% and 80% of the
inventory was valued using the LIFO method in 1999 in 1998, respectively.
Note 4--Borrowing Arrangements:
The Corporation maintains short-term lines of credit of approximately
$10,000,000. There were no bank borrowings outstanding at either December 31,
1999 or 1998, with only minimal line of credit borrowings during each of the
years.
In 1999, a subsidiary of the Corporation issued tax-exempt Industrial Revenue
Bonds (IRBs) equaling $2,075,000 which mature in 2029. Interest is at a floating
rate that averaged 3.57% during the year. In 1996, another subsidiary of the
Corporation issued two series of tax-exempt IRBs totaling $11,236,000. Due to
anticipated capital expenditures exceeding limitations prescribed for tax-exempt
financings, one of the series for $7,116,000 was refinanced in 1997 with a
taxable issue. Principal on the tax-exempt and taxable bonds mature in 2020 and
2027, respectively. Interest on the tax-exempt bonds, including a 1987 tax-
exempt issue for $1,350,000 which is due in 2002, are at floating rates which
averaged 3.49% during the year. Interest on the taxable bonds averaged 5.30%.
The IRBs are secured by letters of credit of equivalent amounts.
The IRBs require, 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, 1999.
12
<PAGE>
Note 5--Other Current Liabilities:
<TABLE>
<CAPTION>
(in thousands)
1999 1998
---- ----
<S> <C>
Customer related liabilities...... $ 5,773 $3,147
Accrued income taxes.............. 3,740 2,603
Other............................. 7,186 3,605
------- ------
$16,699 $9,355
======= ======
</TABLE>
Note 6--Pension and Other Postretirement Benefits:
Pension Plans
The Corporation has defined benefit pension plans covering substantially all of
its employees, some of which require employee contributions. 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. Employees at certain operations have matching 401(k) retirement
savings plans in lieu of defined benefit pension programs.
Employees of Davy can become participants in newly created contributory defined
benefit plans. Until plan documents are finalized, which is expected in the
first quarter of 2000, required contributions are being made to the seller's
plans. Contributions are based on a percentage of "compensation" and amounted to
$578,000 in 1999. On completion of the plans, the actuarially determined amount
of assets and liabilities will be transferred from the seller's plans to the new
plans. These amounts are currently not finalized; however, the new plans are
expected to be fully funded.
The Corporation also maintains a nonqualified defined benefit plan to provide
supplemental retirement benefits for selected executives in addition to benefits
provided under the Corporate sponsored pension plans. The Corporation
contributed $1,000,000 in both 1999 and 1998 to a grantor tax trust known as a
"Rabbi" trust. The assets of the trust are subject to claims of the
Corporation's creditors, but otherwise must be used only for purposes of
providing benefits under the plan. The fair market value of the trust at
December 31, 1999 and 1998, which is included in other noncurrent assets, is
$3,186,000 and $2,058,000 respectively. For financial reporting purposes, the
plan is treated as a non-funded pension plan. The accumulated benefit obligation
for the plan at December 31, 1999 and 1998 was $3,797,000 and $3,517,000,
respectively.
Other Postretirement Benefits
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 benefits are provided to retirees under plans no longer being
offered by the Corporation. Retiree life insurance is provided to substantially
all retirees. Postretirement benefits with respect to health care are subject to
certain Medicare offsets.
The Corporation also provides health care and life insurance benefits to former
employees of discontinued operations. This obligation had been estimated and
provided for at the time of disposal.
The Corporation's postretirement health care and life insurance plans are
unfunded.
The following provides a reconciliation of benefit obligations, plan assets, and
funded status of the plans, excluding the Davy plans.
<TABLE>
<CAPTION>
(in thousands)
Other
Postretirement
Pension Benefits Benefits
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at January 1............ $90,788 $82,346 $ 8,899 $9,184
Service cost............................... 1,661 1,413 110 100
Interest cost.............................. 6,091 5,914 584 624
Plan amendments............................ 1,252 120 7 --
Actuarial (gain) loss...................... (9,183) 5,536 361 (243)
Participant contributions.................. -- -- 108 91
Benefits paid from plan assets............. (4,473) (4,417) -- --
Benefits paid by Corporation.............. (124) (124) (1,053) (857)
------- ------- ------- ------
Benefit obligation at December 31......... $86,012 $90,788 $ 9,016 $8,899
======= ======= ======= ======
</TABLE>
13
<PAGE>
Note 6--Pension and Other Postretirement Benefits (continued):
<TABLE>
<CAPTION>
(in thousands)
Other
Postretirement
Pension Benefits Benefits
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in plan assets:
Fair value of plan assets at January 1...... $131,541 $113,037 $ -- $ --
Actual return on plan assets................ 14,044 22,921 -- --
Corporate contribution...................... 124 124 945 766
Participant contributions................... -- -- 108 91
Gross benefits paid......................... (4,597) (4,541) (1,053) (857)
-------- -------- ------- -------
Fair value of plan assets at December 31.... $141,112 $131,541 $ 0 $ 0
======== ======== ======= =======
Funded status of the plans:................. $ 55,100 $ 40,753 $(9,016) $(8,899)
Unrecognized actuarial (gain) loss.......... (46,465) (31,572) 494 138
Unamortized prior service cost (benefit).... 2,221 1,156 (4,221) (4,843)
Unrecognized net transition obligation...... 26 32 -- --
Accrued benefit cost........................ 3,797 3,517 12,743 13,604
-------- -------- ------- -------
Prepaid benefit cost........................ $ 14,679 $ 13,886 $ -- $ --
======== ======== ======= =======
</TABLE>
Net periodic pension and other postretirement benefit costs include the
following components:
<TABLE>
<CAPTION>
(in thousands)
Other
Postretirement
Pension Benefits Benefits
1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Service cost...................................... $ 1,662 $ 1,413 $ 1,206 $ 110 $ 100 $ 90
Interest cost..................................... 6,090 5,914 5,711 584 624 697
Expected return on plan assets.................... (8,375) (7,333) (6,427) -- -- --
Amortization of prior service cost................ 188 140 132 (615) (615) (615)
Actuarial loss.................................... 160 118 76 6 4 26
------- ------- ------- ----- ----- -----
Net benefit (income) cost......................... $ (275) $ 252 $ 698 $ 85 $ 113 $ 198
======= ======= ======= ===== ===== =====
Assumptions as of December 31:
Discount rate..................................... 7.50% 6.75% 7.25% 7.50% 6.75% 7.25%
Expected long-term rate of return on plan assets.. 8.50% 8.50% 8.50% -- -- --
Rate of increases in compensation................. 3.00% 3.00% 3.00% -- -- --
</TABLE>
The assumed health care cost trend rate at December 31, 1999 is 9% for 2000,
gradually decreasing to 5.25% in 2003 and thereafter. A one percentage point
increase or decrease in the assumed health care cost trend rate would change the
postretirement benefit obligation and the annual benefit expense by
approximately $900,000 and $70,000, respectively.
14
<PAGE>
Note 7--Authorized and Issued Shares:
Under the Corporation's Shareholder Rights Plan, 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 $45.00 exercise price. The Rights are
exercisable only if a party acquires, or commences a tender offer to acquire,
beneficial ownership of 20% or more of the Corporation's common stock without
the approval of the independent directors on the Corporation's Board.
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 2008, for one cent per Right under certain
circumstances. At December 31, 1999, there are 3,000,000 shares of unissued
preference stock, of which 150,000 shares have been designated as Series A
Preference Stock for issuance in connection with these Rights.
Note 8--Stock Option Plan:
In 1997, the shareholders approved a stock option plan authorizing the issuance
of options to purchase up to 300,000 shares of the Corporation's common stock to
selected employees. Under the terms of the plan, options may be either incentive
or non-qualified. Options granted under the plan are subject to terms and
conditions, including exercise price and timing of exercise, as may be
determined by the Stock Option Committee of the Board of Directors.
In December 1998, options for 277,500 shares of common stock were granted at an
exercise price of $10 per share which was the market price on the date of grant.
The options vested at date of grant, became fully exercisable after May 1, 1999
and have a ten-year life. During 1999, 12,500 options were exercised resulting
in 265,000 options outstanding at December 31, 1999.
The Corporation accounts for its stock-based compensation using the intrinsic
value method prescribed by APB No. 25; accordingly, no compensation cost was
recognized. Had compensation cost been determined based on the fair value of the
option at the grant date consistent with SFAS No. 123, there would have been no
impact on net income or earnings per share in 1999 and net income and earnings
per share for 1998 would have been $15,208,000 and $1.59, respectively.
The fair value of the option, estimated on the date of grant using the Black-
Scholes option-pricing model, was $2.54 based on the following assumptions:
dividend yield of 4.0%, expected volatility of 34.2%, risk-free interest rate of
4.8% and an expected option life of 5 years.
Note 9--Financial Instruments:
Forward Foreign Exchange Contracts
Certain of the Corporation's operations are subject to risk from exchange rate
fluctuations in connection with regular inventory purchases in U.S. dollars and
sales contracts in foreign currencies. In order to minimize these risks, forward
foreign exchange contracts are purchased. At December 31, 1999, monthly forward
exchange contracts to hedge anticipated inventory purchases approximated
$5,170,000 of U.S. dollars (representing approximately 52% of anticipated
requirements). In addition, monthly forward exchange contracts to hedge
outstanding accounts receivable approximated $12,448,000 at December 31, 1999.
Fair Value of Financial Instruments
The estimated fair value of forward foreign exchange contracts, based on quoted
market prices of comparable contracts, approximates their notional principal
amount plus (minus) the unrealized deferred gain (loss).
The fair value of other financial instruments classified as current assets or
current liabilities approximates their carrying values due to the short-term
maturity of these instruments. The fair value of the floating rate IRB debt
approximates its carrying value.
15
<PAGE>
Note 10--Income Taxes:
The provision (benefit) for taxes on income consists of the following:
<TABLE>
<CAPTION>
(in thousands)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current:
Federal............... $5,010 $6,545 $4,451
State................. 358 268 720
Foreign............... 421 108 629
------ ------ ------
5,789 6,921 5,800
====== ====== ======
Deferred:
Federal............... 1,772 830 3,611
State................. 242 119 124
Foreign............... (257) 85 (170)
------ ------ ------
1,757 1,034 3,565
------ ------ ------
$7,546 $7,955 $9,365
====== ====== ======
</TABLE>
Deferred tax assets and liabilities comprise the following:
<TABLE>
<CAPTION>
(in thousands)
Assets 1999 1998
- ------ ---- ----
<S> <C> <C>
Employment-related liabilities........ $ 6,037 $ 6,005
Other................................. 4,067 4,396
-------- --------
Gross deferred tax assets............. 10,104 10,401
Valuation allowance................... -- --
-------- --------
10,104 10,401
-------- --------
Liabilities
- -----------
Depreciation........................... (13,304) (12,446)
Prepaid pension........................ (5,872) (5,528)
Foreign deferred tax................... (917) (1,175)
Other.................................. (517) --
-------- --------
Gross deferred tax liabilities......... (20,610) (19,149)
-------- --------
Net deferred tax liability............. $(10,506) $ (8,748)
======== ========
</TABLE>
The difference between the U.S. federal income tax statutory rate and the
Corporation's effective income tax rate is as follows:
<TABLE>
<CAPTION>
(Percent)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Computed at statutory rate.......... 35.0 35.0 35.0
Foreign income taxes................ 0.1 0.1 0.4
State income taxes.................. 1.7 1.1 1.8
Valuation reserve................... -- (0.6) 0.6
Other--net.......................... (3.5) (1.9) (1.6)
---- ---- ----
33.3 33.7 36.2
==== ==== ====
</TABLE>
Note 11--Other Comprehensive Income:
Other comprehensive income includes changes in net assets from non-owner sources
including, foreign currency translation adjustments, changes in the minimum
pension liability and unrealized holding gains on securities. The following
table reflects the accumulated balances of other comprehensive income:
<TABLE>
<CAPTION>
(in thousands)
Foreign Unrealized Accumulated
Currency Minimum Holding Other
Translation Pension Gains on Comprehensive
Adjustments Liability Securities Income
----------- --------- -------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1997...................... $ 2,559 $(195) $ 2,521 $ 4,885
Change during year.............................. (1,483) (201) (2,521) (4,205)
------- ----- ------- -------
Balance at December 31, 1997.................... 1,076 (396) -- 680
Change during year.............................. 881 (222) 101 760
------- ----- ------- -------
Balance at December 31, 1998.................... 1,957 (618) 101 1,440
Change during year.............................. (1,264) 18 133 (1,113)
------- ----- ------- -------
Balance at December 31, 1999.................... $ 693 $(600) $ 234 $ 327
======= ===== ======= =======
</TABLE>
The change in Unrealized Holding Gains on Securities during 1997 includes
reclassification adjustments for $1,145,000 net of tax gains realized in income
from the sale of the securities. The tax expense (benefit) associated with
changes in the Minimum Pension Liability were $(10,000), $(119,000), and
$(108,000) for 1999, 1998 and 1997, respectively. The tax
16
<PAGE>
Note 11--Other Comprehensive Income (continued):
expense (benefit) associated with changes in the Unrealized Holding Gains on
Securities were $72,000, $54,000, and $(1,357,000) for 1999, 1998 and 1997,
respectively.
Note 12--Operating Leases:
The Corporation leases certain factory and office space and certain production
machinery and computer equipment. Operating lease payments were $1,525,000 in
1999, $1,915,000 in 1998, and $1,800,000 in 1997. Operating lease payments for
subsequent years are $1,430,000 for 2000, $1,044,000 for 2001, $877,000 for
2002, $595,000 for 2003, $378,000 for 2004 and $658,000 thereafter.
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 Vulcan, 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 $2,200,000 from the estate of Valley in connection with the
Corporation's lien for the industrial revenue bond guaranty. Subsequently, the
unsecured creditors committee appealed this judgement, however, in August 1999,
the Bankruptcy Appellate Panel for the Sixth Circuit (BAP) affirmed the Court's
decision in favor of the Corporation. The unsecured creditors committee has
since appealed the BAP's decision. No reserve had been established for the
outcome of this litigation based on the Corporation's belief that it had
meritorious defenses. A bank letter of credit for the $2,200,000 received from
the estate remains posted 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 material adverse effect on the financial condition,
results of operations or liquidity of the Corporation.
Note 14--Environmental Matters:
There are various environmental proceedings that involve discontinued
operations. In one of those proceedings, the Corporation has been designated as
a potentially responsible party. The reserves for discontinued operations
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.
Note 15--Business Segments:
The Forged and Cast Rolls segment (previously known as Forged Steel Rolls)
consists of Union Electric Steel and its affiliates in Belgium and England which
manufacture and sell forged hardened steel and cast rolls to customers in the
metals industry. Rolls are used primarily in the production of strip and sheet
steel and aluminum products for the automotive, appliance, aircraft, packaging
and construction markets. The Air and Liquid Processing segment consists of
Aerofin--heat exchange coils, Buffalo Air Handling--air handling systems, and
Buffalo Pumps--centrifugal pumps, all of which sell to a variety of commercial
and industrial users. The Plastics Processing Machinery segment consists of New
Castle Industries--feed screws, barrels and chill rolls and F. R. Gross--heat
transfer rolls, both of which principally sell components to the plastics
processing and machinery industry.
The accounting policies of the reportable segments are the same as those
described in Note 1. The Corporation evaluates the performance of its operating
segments based on income from operations after allocating corporate expenses
based on a sales, property, and payroll formula.
Summarized financial information concerning the Corporation's reportable
segments is shown in the following tables. Corporate assets included under
Identifiable Assets represent cash and cash equivalents, deferred tax assets,
prepaid pension and other items not allocated to reportable segments.
17
<PAGE>
Note 15--Business Segments (continued):
<TABLE>
<CAPTION>
Net Sales Income before Taxes
(in thousands) 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Forged and Cast Rolls $104,209 $ 87,781 $ 85,215 $12,502 $15,264 $14,914
Air and Liquid Processing 71,933 62,240 59,936 7,636 4,321 5,198
Plastics Processing Machinery 35,685 37,832 28,755 2,676 3,618 1,849
-------- -------- -------- ------- ------- -------
Total Reportable Segments 211,827 187,853 173,906 22,814 23,203 21,961
Investment gains and other -- -- -- (124) 419 3,944
-------- -------- -------- ------- ------- -------
Total $211,827 $187,853 $173,906 $22,690 $23,622 $25,905
======== ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Capital Expenditures Depreciation Expense Identifiable Assets
(in thousands) 1999 1998 1997 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Forged and Cast Rolls.............. $ 6,712 $ 6,525 $12,066 $4,803 $4,957 $4,579 $126,057 $ 88,988 $ 88,929
Air and Liquid Processing.......... 3,341 3,103 2,241 1,475 1,282 1,206 42,599 39,728 37,089
Plastics Processing Machinery...... 1,669 2,441 809 1,320 1,236 829 27,558 28,225 27,397
Corporate.......................... 27 30 49 33 48 58 39,594 54,870 43,430
------- ------- ------- ------ ------ ------ -------- -------- --------
Total.............................. $11,749 $12,099 $15,165 $7,631 $7,523 $6,672 $235,808 $211,811 $196,845
======= ======= ======= ====== ====== ====== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Net Sales Identifiable Assets
(in thousands) 1999 1998 1997 1999 1998 1997
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Geographic Areas:
United States................. $137,655 $138,451 $119,830 $183,974 $192,837 $181,323
Foreign....................... 74,172 49,402 54,076 51,834 18,974 15,522
-------- -------- -------- -------- -------- --------
Total........................... $211,827 $187,853 $173,906 $235,808 $211,811 $196,845
======== ======== ======== ======== ======== ========
</TABLE>
Net sales are attributed to countries based on location of customer.
- --------------------------------------------------------------------------------
Quarterly Information--Unaudited
<TABLE>
<CAPTION>
(in thousands, except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
1999
- ----
Net sales.......................................... $49,418 $48,873 $51,898 $61,638 $211,827
Gross profit(1).................................... 14,329 15,504 14,537 16,887 61,257
Income from operations............................. 5,240 6,098 5,328 6,148 22,814
Net income......................................... 3,402 4,004 3,467 4,271 15,144
Basic and diluted earnings per share............... 0.36 0.42 0.36 0.45 1.58
1998
- ----
Net sales.......................................... $48,598 $46,773 $46,080 $46,402 $187,853
Gross profit(1).................................... 15,800 15,017 13,587 14,039 58,443
Income from operations............................. 7,074 6,257 4,781 5,090 23,202
Net income......................................... 4,656 4,226 3,273 3,512 15,667
Basic and diluted earnings per share............... 0.49 0.44 0.34 0.37 1.64
</TABLE>
Notes
1. Gross profit as used herein does not include a charge for depreciation.
18
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
On August 2, 1999, the Corporation acquired the stock of The Davy Roll Company
and two smaller companies, each wholly owned subsidiaries of Kvaerner PLC,
(combined "Davy") for approximately $24,000,000. Davy is primarily a leading
supplier of cast rolls to the steel and metal industries. The acquisition
complements the forged hardened steel roll business of the Corporation and will
allow the two companies to provide the total roll needs of the customer base
worldwide. Accordingly, the results of the Corporation include those of Davy for
the five months ended December 31, 1999. In conjunction with the acquisition,
the previously existing Forged Steel Rolls segment was renamed to Forged and
Cast Rolls. The acquisition was accounted for as a purchase transaction.
1999 Compared to 1998
Operations
Net Sales. Net sales of $211,827,000 in 1999 increased by $23,974,000 or 12.8%
compared with sales of $187,853,000 in 1998. The increase is attributable to
the acquisition of Davy which had sales of approximately $21,000,000 for the
five-month period ended December 31, 1999. The order backlog at December 31,
1999 of approximately $118,000,000 increased by 18% compared to approximately
$100,000,000 at December 31, 1998. The increase is principally attributable to
Davy with offsetting reductions in the backlog of the Air and Liquid Processing
and the Plastics Processing Machinery segments.
Forged and Cast Rolls. In 1999, sales for the Forged and Cast Rolls segment were
$104,209,000 compared to $87,781,000 in 1998, an increase of $16,428,000 or
18.7%. The increase in sales is attributable to the acquisition of Davy which
had sales of $21,084,000 for the five-month period ended December 31, 1999,
offset by a reduction in sales for the forged steel roll operations, both
domestic and foreign. Domestic sales decreased due to non-recurring new steel
mill construction in 1998. The continued strength of the dollar against foreign
currencies negatively impacted sales in the foreign markets while pricing
pressure for both forged and cast rolls remains strong throughout the world.
Backlog for this segment was $83,412,000 at December 31, 1999 compared to
$60,744,000 at December 31, 1998.
Air and Liquid Processing. Sales for the Air and Liquid Processing segment were
$71,933,000 in 1999 in comparison to $62,240,000 in 1998, an improvement of
$9,693,000 or 15.6%. Sales increased at each of the operating locations. The
increase in sales of air handling systems and heat exchange coils is
attributable to increased construction in the chemical, pharmaceutical, hospital
and general industrial markets. In addition, strength of the power generation
industry improved demand for lube oil pumps used by gas turbine manufacturers
while continuation of previously approved shipbuilding programs resulted in
level pump sales to the Navy. Backlog for this segment reduced to $27,832,000 at
December 31, 1999 compared to $29,927,000 at December 31, 1998.
Plastics Processing Machinery. In 1999, Plastics Processing Machinery segment
sales were $35,685,000, a decrease of $2,147,000 or 5.7% compared to sales of
$37,832,000 in 1998. Sales of heat transfer rolls were impacted by depressed
pricing and reduced demand in its markets. The backlog for this segment declined
to $6,854,000 at December 31, 1999 compared to $9,225,000 at December 31, 1998.
Cost of Products Sold. The cost of products sold, excluding depreciation, in
relationship to net sales was 71.1% in 1999 compared to 68.9% in 1998. Excluding
Davy, cost of products sold, excluding depreciation, in relationship to net
sales was 69.7% for 1999.
Selling and Administrative Expense. Selling and administrative expenses totaled
$30,812,000 (14.5% of net sales) and $27,718,000 (14.8% of net sales) in 1999
and 1998, respectively. Excluding Davy, selling and administrative expenses
approximated 15.0% of net sales in 1999.
Depreciation Expense. Depreciation expense of $7,631,000 in 1999 compared to
$7,523,000 in 1998. Increase is attributable to the acquisition of Davy offset
by certain assets becoming fully depreciated in 1999.
Income From Operations. Income from operations equaled $22,814,000 in 1999.
Excluding Davy, income from operations was $21,893,000 in 1999 in comparison to
$23,202,000 in 1998. Earnings from the forged roll and plastics processing
businesses weakened during the year but were offset by improved earnings of the
Air and Liquid Processing segment. In addition, pension costs were approximately
$600,000 lower in 1999 versus 1998 due primarily to favorable performance of
pension plan assets.
Forged and Cast Rolls. Earnings for the Forged and Cast Rolls segment equaled
$12,502,000 in 1999. Excluding Davy, earnings in 1999 decreased to $11,581,000
from the historically high level of $15,264,000 in 1998. In keeping with the
roll industry
19
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
world-wide, reduced demand and lower prices in both the domestic and export
markets eroded margins. In December 1999, the Corporation restructured its
Belgian operations resulting in approximately $585,000 of severance and early
retirement expense. In addition, the strength of the dollar increased the cost
of rolls for the Belgian operation thereby negatively impacting earnings.
Air and Liquid Processing. The Air and Liquid Processing segment improved its
earnings in 1999 to $7,636,000 compared to $4,321,000 in 1998. Increased
shipments, favorable product mix at all operations and improved margins
contributed to the increased operating results.
Plastics Processing Machinery. Earnings for the Plastics Processing Machinery
segment decreased by $942,000 to $2,676,000 in 1999 from $3,618,000 in 1998.
Decrease in demand for heat transfer rolls in particular contributed to the
reduction in operating income.
Other Income (Expense). The acquisition of Davy was financed from available cash
and cash equivalents thereby resulting in lower interest earnings in 1999. In
addition, other income (expense) reflects foreign exchange losses in 1999 in
comparison to foreign exchange gains in 1998.
Income Tax Expense. Income tax expense in 1999 totaled $7,546,000 (effective tax
rate of 33.3%) in comparison to $7,955,000 (effective tax rate of 33.7%)
in 1998.
Net Income. As a result of all of the above, the Corporation had net income of
$15,144,000 in 1999 in comparison to $15,667,000 in 1998.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for 1999 at $19,968,000
compared with positive cash flows of $25,686,000 for 1998. The decrease in cash
flow between the two years resulted from an increase in accounts receivables.
Net cash outflows from investing activities were $34,988,000 in 1999 compared to
net cash outflows of $10,865,000 in 1998. The increase is attributable to the
acquisition of Davy for approximately $24,000,000. Capital expenditures for 1999
and 1998 were comparable at $11,749,000 and $12,099,000, respectively. Proceeds
from previously issued Industrial Revenue Bonds provided reimbursement of
expenditures for plant and equipment at Union Electric Steel totaling $504,000
in 1999 and $1,714,000 in 1998. As of December 31, 1999, future capital
expenditures totaling $11,332,000 have been approved. Funds generated internally
are expected to be sufficient to finance capital expenditure requirements.
Cash outflows with respect to financing activities in 1999 reflect an increase
in the quarterly dividend rate to $.10 per share compared to an average of
approximately $.09 per share in 1998, proceeds from the issuance of industrial
revenue bonds used for capital expenditures at Aerofin and proceeds from the
purchase of stock under the stock option plan.
As a result of all of the above, cash and cash equivalents decreased by
$16,785,000 in 1999 and ended the year at $16,323,000. The Corporation maintains
short-term lines of credit in excess of the cash needs of its businesses. The
total available at December 31, 1999 was $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 (see Note 14 to Consolidated Financial Statements).
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
(see Note 13 to Consolidated Financial Statements).
Impact of Year 2000
Each subsidiary had reviewed its information and operational systems and
manufacturing processes to identify those products, services or systems that
were not Year 2000 compliant. As a result of these reviews, it was determined
that it was necessary to modify or replace certain information and operational
systems so they would be Year 2000 compliant. These modifications and
replacements were made in conjunction with
20
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
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, was less than $1,000,000. The majority of this cost was for
system upgrade and replacement software, which was acquired and capitalized by
December 31, 1998. The Corporation did not experience and does not anticipate
any business interruption as a result of Year 2000 compliance issues.
Market Risk
The Corporation has evaluated its market risk exposure to fluctuations in
interest rates, commodity prices and foreign currencies and does not believe a
10% fluctuation in the above would have a material impact on its current or
prior year financial condition, results of operations or liquidity.
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
operations. The Corporation does not expect the conversion to the Euro will have
a material impact on its financial condition, results of operations or
liquidity.
Recently Issued Accounting Pronouncements
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. SFAS No. 133, as amended, is first effective for
the Corporation for the year ending December 31, 2001. 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 condition, results
of operations or liquidity of the Corporation.
1998 Compared to 1997
Operations
Net Sales. Net sales of $187,853,000 in 1998 increased by $13,947,000 or 8%
compared with sales of $173,906,000 in 1997. Approximately one-half of the
increase is attributable to the full year impact of the mid-1997 acquisitions of
F. R. Gross and Atlantic Grinding and Welding while overall sales at other
operations were higher by 4%. The order backlog at December 31, 1998 of
$100,000,000 declined by 13% 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.
Forged Steel Rolls. In 1998, sales for the Forged Steel Rolls segment were
$87,781,000 compared to $85,215,000 in 1997, an increase of 3%. Sales in 1998
benefitted from a high opening backlog of $79,600,000 and stronger sales to
domestic steel customers, in part attributable to non-recurring new steel mill
construction. However, sales outside of the U.S., accounting for approximately
44% of current year shipments, were lower in 1998 due to economic weakness in
certain markets, particularly Asia, and the negative impact of the strengthened
value of the dollar. These factors, along with a slowing of European and
domestic orders related to an increase in low priced imported steel into the
U.S., resulted in a decline in the backlog of 24% which totaled $60,800,000 at
December 31, 1998. Margins in the backlog are lower compared to a year ago, due
to reduced demand and increased competitive activity of foreign roll
manufacturers.
Air and Liquid Processing. Sales for the Air and Liquid Processing segment were
$62,240,000 in 1998, a 3.8% improvement over 1997 sales of $59,936,000. Sales
for both air handling systems and centrifugal pumps improved, however, sales of
heat exchange coils were lower in 1998. Air handling system sales benefitted
from good demand from pharmaceutical and hospital construction markets. Pump
sales to commercial customers improved on stronger activity from original
equipment manufacturers of gas turbines and refrigeration units. Pump sales to
the Navy were flat as reductions in defense spending resulted in slowing of
orders for this product line. Sales of heat exchange coils were impacted by
lower demand in both the general industrial and nuclear utility markets. In
addition, several anticipated projects from customers in the Pacific Rim were
canceled or delayed due to economic weakness in that region. Order activity for
both heat exchange coils and air handling systems improved during the second
half and the backlog for this segment at December 31,1998 was $30,000,000
compared to $23,500,000 at December 31, 1997.
Plastics Processing Machinery. Plastics Processing Machinery segment sales were
$37,832,000 in 1998, an increase of $9,077,000 or 31.6% compared to sales
21
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
of $28,755,000 in 1997. Approximately three-fourths of the increase is
attributable to the full year impact of the mid-1997 acquisitions of F.R. Gross
and Atlantic Grinding and Welding. Excluding the impact of these acquisitions,
sales at New Castle Industries increased by 8.6% in 1998 due to strong demand,
particularly in the first half of the year, from plastic processors and machine
builders. The backlog for this segment declined to $9,200,000 at December
31,1998 compared with $12,100,000 at the beginning of the year due to reduced
bookings of heat transfer rolls at F. R. Gross.
Cost of Products Sold. The cost of products sold, excluding depreciation, in
relationship to net sales was 68.9% in 1998 compared to 69.0% in 1997.
Selling and Administrative Expense. Selling and administrative expenses totaled
$27,718,000 (14.8% of net sales) and $25,197,000 (14.5% of net sales) in 1998
and 1997, respectively.
Depreciation Expense. Depreciation expense of $7,523,000 in 1998 was increased
compared to $6,672,000 in 1997 due principally to increased capital spending as
well as the inclusion of the acquired businesses for the entire year.
Income From Operations. Income from operations of $23,202,000 in 1998 increased
by $1,241,000 or 5.7% compared to $21,961,000 in 1997. Increased earnings from
the Plastics Processing Machinery segment were the principal source of the
improvement.
Forged Steel Rolls. Earnings for the Forged Steel Rolls segment improved
modestly to $15,264,000 in 1998 compared to $14,914,000 in 1997. The
historically high earnings in both years resulted in part from orders received
prior to the start of 1997 for new mill construction, as well as for the then
high production levels of the steel industry worldwide.
Air and Liquid Processing. Earnings for the Air and Liquid Processing segment
declined in 1998 to $4,321,000 compared to $5,198,000 in 1997 despite a 3.8%
overall sales improvement. This decrease is due to reduced earnings from the
Aerofin heat exchange coil business as sales fell 12% in 1998. Improved results
and margins were achieved at both the air handling systems and centrifugal pump
operations which experienced stronger demand in 1998.
Plastics Processing Machinery. The Plastics Processing Machinery segment doubled
its earnings in 1998 to $3,618,000 compared with $1,849,000 in 1997. This
improvement was principally achieved at F. R. Gross which benefitted from a
strong opening backlog.
Other Income (Expense). Gains on sales of investments of $3,489,000 were
realized in 1997.
Income Tax Expense. Income tax expense in 1998 totaled $7,955,000 based on a
33.7% effective tax rate as compared to the $9,365,000 expense in 1997, based on
a 36.2% effective tax rate. The lower 1998 tax rate is attributable to modest
utilization in 1998 of capital loss carryforwards, which had been not been
anticipated, as well as lower state and foreign taxes.
Net Income. As a result of all of the above, the Corporation had net income of
$15,667,000 in 1998 compared to $16,540,000 in 1997.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for 1998 at $25,686,000
and compare with positive cash flows of $14,153,000 for 1997. The difference in
cash flow between the two years resulted from a $1,241,000 increase in income
from operations in 1998 and the negative impact on 1997 cash flow of significant
requirements for working capital.
Net cash outflows from investing activities were $10,865,000 in 1998 and compare
with cash outflows of $14,596,000 in 1997. Capital expenditures for 1998 totaled
$12,099,000 compared to $15,165,000 in 1997. Proceeds from previously issued
Industrial Revenue Bonds provided reimbursement of expenditures for plant and
equipment at Union Electric Steel totaling $1,714,000 in 1998 and $7,549,000 in
1997. As of December 31, 1998, future capital expenditures totaling $12,350,000
have been approved. Funds generated internally are expected to be sufficient to
finance capital expenditure requirements.
The net cash outflow from investing activities in 1997 included $11,967,000 for
the purchases of F. R. Gross and Atlantic Grinding and Welding. Payments of
$899,000 were made in 1998 in connection with the post-acquisition contingent
earnings arrangement as provided in the F. R. Gross Assets Purchase Agreement.
This amount has been accounted for as goodwill. In addition, the Corporation
disposed of stock and other non-operating investment interests in 1997,
receiving proceeds of $4,907,000.
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.
22
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
(continued)
The common stock quarterly dividend rate was further increased to $.10 per
share starting with the payment made in January 1999. Included in 1997 is an
additional prior year-end dividend of $958,000 or $.10 per share. Cash flows
from financing activities in 1997 include the issuance of taxable Industrial
Revenue Bonds, the proceeds of which were used to refinance a tax-exempt issue
of the same amount.
As a result of all of the above, cash and cash equivalents increased by
$11,412,000 in 1998 and ended the year at $33,108,000.
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, 1998 was $14,500,000.
- --------------------------------------------------------------------------------
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>
1999 1998
------------------------------ ----------------------------
Dividends Dividends
Quarter High Low Declared High Low Declared
- ------- ---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First $11 3/4 $ 9 3/16 $.10 $19 5/8 $14 1/2 $.09
Second 13 1/2 9 15/16 .10 18 5/8 14 5/8 .09
Third 14 1/8 12 1/8 .10 16 1/4 13 3/8 .09
Fourth 13 5/8 9 13/16 .10 14 1/2 9 7/8 .10
Year 14 1/8 9 3/16 .40 19 5/8 9 7/8 .37
</TABLE>
Five-Year Summary of Selected Financial Data
<TABLE>
<CAPTION>
Year Ended December 31,
1999(1) 1998 1997(2) 1996(2) 1995
------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Net sales........................................ $211,827,393 $187,853,060 $173,906,315 $162,402,805 $143,785,139
Income from operations........................... 22,813,559 23,202,473 21,960,984 18,068,058 14,176,001
Income from continuing operations................ 15,144,232 15,666,562 16,539,985 12,390,488 9,050,286
Total assets..................................... 235,808,324 211,811,130 196,845,161 188,170,344 171,423,690
Long-term obligations............................ 14,661,000 12,586,000 12,586,000 12,586,000 12,586,000
Shareholders' equity............................. 152,619,726 142,298,612 129,415,787 119,667,023 112,135,049
Basic and diluted earnings per share:
Income from continuing operations............... 1.58 1.64 1.73 1.29 .94
Cash dividends declared......................... 0.40 0.37 0.27 0.235 0.15
Shareholders' equity............................ 15.91 14.86 13.51 12.49 11.71
Market price at year end........................ $10.125 $10.875 $19.5625 $12.00 $10.75
Weighted average shares outstanding.............. 9,585,657 9,577,621 9,577,621 9,577,621 9,577,621
Number of shareholders........................... 1,138 1,226 1,312 1,418 1,532
Number of employees.............................. 1,886 1,350 1,340 1,225 1,204
</TABLE>
(1) Includes August 2, 1999 acquisition of Davy (see Note 2 to Consolidated
Financial Statements).
(2) Income from continuing operations for 1997 and 1996 includes investment
gains, net of tax, of $2,268,000 and $337,000, respectively.
23
<PAGE>
Reports of Independent Accountants
[LOGO OF DELOITTE & TOUCHE]
To the Board of Directors and Shareholders of
Ampco-Pittsburgh Corporation
We have audited the accompanying consolidated balance sheet of Ampco-Pittsburgh
Corporation and subsidiaries as of December 31, 1999, and the related
consolidated statements of income, shareholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such 1999 consolidated financial statements present fairly, in
all material respects, the financial position of Ampco-Pittsburgh Corporation
and subsidiaries as of December 31, 1999, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 31, 2000
[LOGO OF PricewaterhouseCoopers]
To the Board of Directors and Shareholders of
Ampco-Pittsburgh Corporation
In our opinion, the accompanying consolidated balance sheet and related
consolidated statements of income, shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Ampco-
Pittsburgh Corporation and its subsidiaries at December 31, 1998, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards generally
accepted in the United States, 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.
/s/ PricewaterhouseCoopers LLP
600 Grant Street
Pittsburgh, Pennsylvania
January 27, 1999
24
<PAGE>
Directors & Officers
Louis Berkman (1) (3)
Director
Chairman of the Board
President, The Louis Berkman Company
Robert A. Paul (1)
Director
President and Chief Executive Officer
Ernest G. Siddons (1)
Director
Executive Vice President and
Chief Operating Officer
Leonard M. Carroll (1) (2) (3) (4)
Director
Managing Director, Seneca Capital
Management, Inc.
William D. Eberle (2) (3) (4)
Director
Private Investor
Laurence E. Paul
Director
Managing Director
Donaldson, Lufkin & Jenrette
Carl H. Pforzheimer, III (2) (3) (4)
Director
Managing Partner, Carl H. Pforzheimer & Co.
Rose Hoover
Vice President and
Corporate Secretary
Dee Ann Johnson
Vice President, Controller and
Treasurer
Terrence W. Kenny
Group Vice President
Robert F. Schultz
Vice President Industrial Relations and
Senior Counsel
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Salary Committee
(4) Member of the Stock Option Committee
Operating Companies
Forged and Cast Rolls
- --------------------------------------------------------------------------------
Union Electric Steel Corporation
Carnegie, Pennsylvania
Robert G. Carothers, President
Subsidiary Companies:
Union Electric BVBA, Tessenderlo, Belgium
The Davy Roll Company, Gateshead & Sheffield, England
Formet, Newcastle, England
Turner Chilled Rolls, Ipswich, England
Plastics Processing Machinery
- --------------------------------------------------------------------------------
New Castle Industries, Inc.
New Castle, Pennsylvania
Thomas A. Doland, President
F. R. Gross Company
Stow, Ohio
David C. Bastow, President
Air and Liquid Processing
- --------------------------------------------------------------------------------
Aerofin Corporation
Lynchburg, Virginia
David L. Corell, President
Buffalo Air Handling Company
Amherst, Virginia
William R. Phelps, President
Buffalo Pumps, Inc.
North Tonawanda, New York
Charles R. Kistner, President
- --------------------------------------------------------------------------------
Annual Meeting 10K Report
The Annual Meeting of the Form 10-K available
Shareholders will be held at: without charge to
600 Grant Street shareholders upon
33rd Floor Conference Room written request to:
Pittsburgh, Pennsylvania Corporate Secretary
Tuesday, April 25, 2000 at 10:00 a.m. Ampco-Pittsburgh
Corporation
Transfer Agent 600 Grant Street
ChaseMellon Shareholder Services Pittsburgh,
One Mellon Bank Center Pennsylvania
500 Grant Street, Room 2122 15219-2700
Pittsburgh, Pennsylvania 15258-0001
www.chasemellon.com
<PAGE>
Ampco-Pittsburgh Corporation
Pittsburgh, PA 15219
<PAGE>
Exhibit 21
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
New Castle Industries, Inc. Delaware
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
Atlantic Grinding & Welding, Inc. 100% owned by
Ampco NCII Sub, Inc. Pennsylvania
Bimex Industries, Inc. 100% owned by
Ampco NCII Sub, Inc. Delaware
Buffalo Air Handling Company 100% owned by
Ampco-Pittsburgh Corporation Delaware
Buffalo Pumps, Inc. 100% owned by
Ampco-Pittsburgh Corporation Delaware
F. R. Gross Co., Inc. 100% owned by
Ampco-Pittsburgh Securities
V Corporation Pennsylvania
New Castle Industries, Inc. 100% owned by
Ampco UES Sub, Inc. Pennsylvania
</TABLE>
<PAGE>
SUBSIDIARIES (Cont')
--------------------
<TABLE>
<CAPTION>
Jurisdiction of
Name Ownership Incorporation
- ---- --------- ---------------
<S> <C> <C>
Union Electric Steel Corporation 100% owned by
Ampco-Pittsburgh Securities
V Corporation Pennsylvania
Union Electric Steel B.V.B.A. 100% owned by 1027226
Ontario Limited Belgium
Union Electric Steel (UK) Limited 100% owned by Ampco UES
Sub, Inc. England
The Davy Roll Company Limited 100% owned by Union
Electric Steel (UK) Limited England
Turner Chilled Rolls Limited 100% owned by Union
Electric Steel (UK) Limited England
Formet Limited 100% owned by Union
Electric Steel (UK) Limited England
</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.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Registration Statement on Form
S-8 for the 1997 Stock Option Plan of Ampco-Pittsburgh Corporation filed with
the Securities and Exchange Commission on March 26, 1999 of our report dated
January 31, 2000, appearing in and incorporated by reference in this Annual
Report on Form 10-K of Ampco-Pittsburgh Corporation for the year ended December
31, 1999.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 14, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 for the 1997 Stock Option Plan of Ampco-Pittsburgh
Corporation (Ampco) of our report dated January 27, 1999, which appears on page
24 of the 1999 Annual Report to the Shareholders of Ampco, which is incorporated
by reference in the Ampco Annual Report on Form 10-K for the year ended December
31, 1999.
/s/ PricewaterhouseCoopers LLP
Pittsburgh, PA
March 14, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 16,322,834
<SECURITIES> 0
<RECEIVABLES> 51,478,657
<ALLOWANCES> 364,138
<INVENTORY> 47,281,320
<CURRENT-ASSETS> 118,583,277
<PP&E> 168,653,971
<DEPRECIATION> 79,933,027
<TOTAL-ASSETS> 235,808,324
<CURRENT-LIABILITIES> 40,292,430
<BONDS> 14,661,000
0
0
<COMMON> 9,590,121
<OTHER-SE> 143,029,605
<TOTAL-LIABILITY-AND-EQUITY> 235,808,324
<SALES> 211,827,393
<TOTAL-REVENUES> 212,447,254
<CGS> 150,570,164
<TOTAL-COSTS> 189,013,834
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 743,188
<INCOME-PRETAX> 22,690,232
<INCOME-TAX> 7,546,000
<INCOME-CONTINUING> 15,144,232
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,144,232
<EPS-BASIC> 1.58
<EPS-DILUTED> 1.58
</TABLE>
