FORM 1O-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-898.
AMPCO-PITTSBURGH CORPORATION
Incorporated in Pennsylvania.
I.R.S. Employer Identification No. 25-1117717.
600 Grant Street, Pittsburgh, Pennsylvania 15219
Telephone Number 412/456-4400
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter periods that the registrant was
required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
On August 7, 2000, 9,602,621 common shares were outstanding.
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AMPCO-PITTSBURGH CORPORATION
INDEX
Page No.
Part I - Financial Information:
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets -
June 30, 2000 and December 31, 1999 3
Consolidated Statements of Income -
Six Months Ended June 30, 2000 and 1999;
Three Months Ended June 30, 2000
and 1999 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 2000
and 1999 5
Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
Part II - Other Information:
Exhibits and Reports on Form 8-K 12
Signatures 14
Exhibits
- Exhibit 27
- 2 -
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<S> <C> <C>
June 30, December 31,
2000 1999 *
Assets
Current assets:
Cash and cash equivalents $ 17,490,728 $ 16,322,834
Receivables, less allowance for
doubtful accounts of $368,738 in
2000 and $364,138 in 1999 47,379,722 51,114,519
Inventories 47,638,388 47,281,320
Other 4,666,638 3,864,604
Total current assets 117,175,476 118,583,277
Property, plant and equipment, at cost:
Land and land improvements 5,157,369 5,269,931
Buildings 28,777,251 28,981,171
Machinery and equipment 140,203,233 134,402,869
174,137,853 168,653,971
Accumulated depreciation (83,420,668) (79,933,027)
Net property, plant and equipment 90,717,185 88,720,944
Prepaid pension 15,439,326 14,679,325
Other noncurrent assets 12,787,467 13,824,778
$236,119,454 $235,808,324
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 11,841,301 $ 14,197,817
Accrued payrolls and employee benefits 8,291,686 8,845,358
Other 14,350,750 16,433,775
Total current liabilities 34,483,737 39,476,950
Employee benefit obligations 16,574,195 16,770,655
Industrial revenue bond debt 14,661,000 14,661,000
Deferred income taxes 11,992,379 11,440,862
Other noncurrent liabilities 805,530 839,131
Total liabilities 78,516,841 83,188,598
Shareholders' equity:
Preference stock - no par value;
authorized 3,000,000 shares: none
issued - -
Common stock - par value $1; authorized
20,000,000 shares; issued and
outstanding 9,602,621 in 2000
and 9,590,121 in 1999 9,602,621 9,590,121
Additional paid-in capital 102,780,980 102,668,480
Retained earnings 46,310,787 40,034,339
Accumulated other comprehensive (loss)
income (1,091,775) 326,786
Total shareholders' equity 157,602,613 152,619,726
$236,119,454 $235,808,324
* Reclassified for comparative purposes
</TABLE>
See Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<S> <C> <C> <C> <C>
Six Months Ended June 30, Three Months Ended June 30,
2000 1999 2000 1999
Net sales $116,263,743 $ 98,291,408 $ 57,044,913 $ 48,873,902
Operating costs and expenses:
Cost of products sold
(excluding depreciation) 84,414,559 68,457,521 41,753,494 33,369,424
Selling and administrative 15,334,730 14,674,499 7,299,048 7,493,411
Depreciation 3,939,332 3,821,590 1,908,621 1,912,964
103,688,621 86,953,610 50,961,163 42,775,799
Income from operations 12,575,122 11,337,798 6,083,750 6,098,103
Other income (expense) - net (170,149) 28,040 (13,405) 126,119
Income before income taxes 12,404,973 11,365,838 6,070,345 6,224,222
Income taxes 4,208,000 3,960,000 2,038,000 2,220,000
Net income $ 8,196,973 $ 7,405,838 $ 4,032,345 $ 4,004,222
Basic and diluted earnings
per share $ 0.85 $ 0.77 $ 0.42 $ 0.42
Cash dividends declared
per share $ 0.20 $ 0.20 $ 0.10 $ 0.10
Weighted average number of
common shares outstanding 9,598,981 9,581,143 9,602,621 9,584,626
</TABLE>
See Notes to Consolidated Financial Statements
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<TABLE>
<CAPTION>
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<S> <C> <C>
Six Months Ended June 30,
2000 1999
Net cash flows provided by operating
activities $ 8,931,614 $ 10,202,234
Cash flows from investing activities:
Purchases of property, plant and
equipment (8,345,112) (5,253,909)
Proceeds from sale of business (Note 2) 1,272,882 -
Proceeds from sale of investments 1,297,248 -
Use of unexpended industrial revenue
bond proceeds - 504,625
Reimbursement of purchase price (Note 2) 298,058 -
Net cash flows (used in) investing
activities (5,476,924) (4,749,284)
Cash flows from financing activities:
Proceeds from industrial revenue bonds - 2,075,000
Proceeds from the issuance of stock 125,000 125,000
Dividends paid (1,919,274) (1,915,524)
Net cash flows (used in) provided by
financing activities (1,794,274) 284,476
Effect of exchange rate changes on cash
and cash equivalents (492,522) (178,266)
Net increase in cash and cash
equivalents 1,167,894 5,559,160
Cash and cash equivalents at
beginning of period 16,322,834 33,107,815
Cash and cash equivalents at
end of period $ 17,490,728 $ 38,666,975
Noncash investing and financing activities: Note 2
</TABLE>
See Notes to Consolidated Financial Statements.
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AMPCO-PITTSBURGH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Consolidated Financial Statements
The consolidated balance sheet as of June 30, 2000, the
consolidated statements of income for the six and three
months ended June 30, 2000 and 1999 and the condensed
consolidated statements of cash flow for the six months
ended June 30, 2000 and 1999 have been prepared by the
Corporation without audit. In the opinion of management,
all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the financial
position, results of operations and cash flows for the
periods presented have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
condensed or omitted. These consolidated financial
statements should be read in conjunction with the
consolidated financial statements and notes thereto
included in the Corporation's annual report to
shareholders for the year ended December 31, 1999. The
results of operations for the period ended June 30, 2000
are not necessarily indicative of the operating results
for the full year.
2. Business Acquisition
On August 2, 1999, the Corporation acquired the stock of
The Davy Roll Company and two smaller companies
(collectively, Davy) for approximately $24,000,000.
During the second quarter 2000, approximately $300,000
was returned to the Corporation by the seller based on
the balance sheet of Davy as at the date of the
transaction. The consolidated financial statements
include the results of operations of Davy from its
acquisition date of August 2, 1999. The pro forma
financial information is based on the unaudited
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, 1999, are as follows (in thousands except for
per share information):
Six Months Ended
June 30, 1999
Net sales $ 123,681
Net income $ 7,863
Basic and diluted
earnings per share $ 0.82
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 if the acquisition had been consummated on
January 1, 1999 or that may be obtained in the future.
In March 2000, the Corporation sold the net assets,
excluding accounts receivables, of the small roll
division of The Davy Roll Company for approximately net
book value. A portion of the proceeds included a
$400,000 note, secured by a first priority mortgage, on
the property. The note is payable in two equal annual
installments beginning in January 2001. Interest
accrues on the outstanding balance at base rate, as
defined in the agreement, plus 1%.
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3. Inventory
At June 30, 2000 and December 31, 1999, approximately
66% and 63%, respectively, of the inventories are valued
on the LIFO method, with the remaining inventories being
valued on the FIFO method. Inventories are comprised of
the following:
(in thousands)
June 30, December 31,
2000 1999
Raw materials $ 12,528 $ 11,714
Work-in-process 26,455 26,212
Finished goods 3,914 4,084
Supplies 4,741 5,271
$ 47,638 $ 47,281
4. Comprehensive Income
The Corporation's comprehensive income for the six and
three months ended June 30, 2000 and 1999 consisted of:
(in thousands)
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
Net income $ 8,197 $ 7,406 $ 4,032 $ 4,004
Foreign currency
translation (1,333) (1,449) (564) (382)
Unrealized holding
(losses) gains on
securities (86) 128 43 99
Comprehensive income $ 6,778 $ 6,085 $ 3,511 $ 3,721
5. Stock Option Plan
In April 2000, the shareholders approved an amendment to
the 1997 Stock Option Plan increasing the aggregate
number of options available to be granted from 300,000
to 600,000. In May 2000, options for 272,500 shares of
common stock were granted at an exercise price of
$10.8125 per share which was the market price on the
date of grant.
6. Earnings Per Share
Basic earnings per share is computed by dividing net
income by the weighted average number of common shares
outstanding for the period. In February 2000, 12,500
options were exercised resulting in a weighted average
number of common shares outstanding for the six and
three months ended June 30, 2000 of 9,598,981 and
9,602,621 shares, respectively. The weighted average
number of common shares outstanding for the six and
three months ended June 30, 1999 equaled 9,581,143 and
9,584,626 shares, respectively.
The computation of diluted earnings per share is similar
to basic earnings per share except that the denominator
is increased to include the net additional common shares
that would have been outstanding assuming exercise of
outstanding stock options, calculated using the treasury
stock method. The weighted average number of common
shares outstanding assuming exercise of the stock
options was 9,616,388 shares and 9,620,915 shares for
the six and three months ended June 30, 2000,
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respectively, and 9,599,939 and 9,615,941 for the six
and three months ended June 30 1999, respectively.
7. Business Segments
Presented below are the net sales and income before
taxes for the Corporation's three business segments.
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
Net Sales:
Forged and Cast Rolls $ 61,489 $ 42,709 $ 29,383 $ 20,269
Air and Liquid
Processing 37,240 36,041 18,852 18,915
Plastics Processing
Machinery 17,535 19,541 8,810 9,689
Total Reportable
Segments $116,264 $ 98,291 $ 57,045 $ 48,873
Income before Taxes:
Forged and Cast Rolls $ 7,233 $ 5,558 $ 3,488 $ 2,849
Air and Liquid
Processing 4,368 3,834 2,255 2,186
Plastics Processing
Machinery 974 1,946 341 1,063
Total Reportable
Segments 12,575 11,338 6,084 6,098
Other income
(expense) - net (170) 28 (14) 126
Total $ 12,405 $ 11,366 $ 6,070 $ 6,224
8. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". This pronouncement
requires all derivative instruments to be reported at
fair value on the balance sheet; depending on the nature
of the derivative instrument, changes in fair value will
be recognized either in net income or as an element of
other comprehensive income. As amended, SFAS No. 133 is
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 effect on the
financial condition, results of operations or liquidity
of the Corporation.
In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements". SAB No. 101 is
effective for the Corporation in fourth quarter 2000.
Management is evaluating the impact but does not
anticipate adoption of SAB No. 101 will have a material
effect on the financial condition, results of operations
or liquidity of the Corporation.
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AMPCO-PITTSBURGH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Operations for the Six and Three Months Ended June 30, 2000
and 1999
On August 2, 1999, the Corporation acquired the stock of The
Davy Roll Company and two smaller companies (Davy).
Subsequently, in March 2000, the small roll division was
sold for approximately net book value.
Operations
Net Sales. Net sales for the six and three months ended
June 30, 2000 were $116,264,000 and $57,045,000,
respectively, compared to $98,291,000 and $48,873,000,
respectively, for the same periods of 1999. A discussion of
the second quarter and year-to-date sales for the
Corporation's three segments is included below. Order
backlogs remained relatively consistent and approximated
$118,000,000 and $118,100,000 at June 30, 2000 and December
31, 1999, respectively. An increase in backlog for the Air
and Liquid Processing and the Plastics Processing Machinery
segments offset the decrease in backlog for the Forge and
Cast Rolls segment which includes a $3,000,000 reduction
from the sale of the small roll division.
Cost of Products Sold. The cost of products sold, excluding
depreciation, equaled 72.6% and 73.2%, respectively of net
sales for the six and three months ended June 30, 2000.
This compares with the prior comparable periods of 69.6% and
68.3%, respectively. The increase is due primarily to Davy
which has a higher cost of products sold. Without Davy,
cost of products sold, excluding depreciation, approximated
70.5% and 71.2%, respectively, of net sales for the six and
three months ended June 30, 2000, which is primarily
reflective of mix.
Income from Operations. Income from operations increased
$1,237,000 for the six-month period ended June 30, 2000 to
$12,575,000 and decreased $14,000 for the three-month period
ended June 30, 2000 to $6,084,000, both compared to the
respective prior year periods. A discussion of the second
quarter and year-to-date results for the Corporation's three
segments is included below.
Forged and Cast Rolls. Sales for the Forged and Cast Rolls
segment increased for the six and three months ended June
30, 2000 by $18,780,000 and $9,114,000 to $61,489,000 and
$29,383,000, respectively. This compares to sales of
$42,709,000 and $20,269,000 for the six and three months
ended June 30, 1999, respectively. Earnings increased for
the six and three months ended June 30, 2000 by $1,675,000
and $639,000 to $7,233,000 and $3,488,000, respectively,
compared to earnings of $5,558,000 and $2,849,000 for the
prior year respective periods. The increase in sales and
earnings is primarily attributable to the third quarter 1999
acquisition of Davy. Excluding Davy, sales for the six
months ended June 30, 2000 decreased approximately
$2,000,000 from the comparable 1999 period resulting from
lower overseas sales which have been impacted by the
strength of the dollar and increased competition and which
were only partially offset by higher domestic sales.
Operating income, excluding Davy, increased approximately
11% in the first six months of 2000 despite the decrease in
sales due principally to lower depreciation.
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Air and Liquid Processing. For the six months ended June
30, 2000, sales for the Air and Liquid Processing segment
increased $1,199,000 to $37,240,000 and earnings increased
$534,000 to $4,368,000. This compares to sales and earnings
of $36,041,000 and $3,834,000, respectively, for the six
months ended June 30, 1999. An increase in pumps sales to
the power generation industry and the Navy account for this
increase offsetting the lower sales of the air handling
system operation which benefited from a large, unique
shipment of a specialized air handling units in the second
quarter of 1999. Despite the decrease in sales of $63,000
for the three months ended June 30, 2000, in comparison to
the same period in 1999, operating income improved $69,000
as a result higher volumes and improved margins on pump
sales and improved sales of heat exchange coils.
Plastics Processing Machinery. Sales for the Plastics
Processing Machinery segment for the six and three month
periods ended June 30, 2000 decreased by $2,006,000 and
$879,000 to $17,535,000 and $8,810,000, respectively.
Earnings decreased for the six and three months ended June
30, 2000 by $972,000 and $722,000 to $974,000 and $341,000,
respectively. Product mix as well as a general slowdown in
the extrusion and injection molding markets account for this
decline. In addition, year-to-date results for 1999
benefitted from unusually high shipments of the machine
product line.
Other Income (Expense). Other income (expense) for the six
and three months ended June 30, 2000 of $(170,000) and
$(14,000) compares to $28,000 and $126,000 for the
comparable periods in 1999. The increase in expense is due
to lower interest earnings attributable to lower cash and
cash equivalent balances resulting from the third quarter
1999 acquisition of Davy. In addition, interest expense for
the six months ended June 30, 2000 was higher due to higher
interest rates and fees on industrial revenue bond debt.
Net Income. As a result of all of the above, the
Corporation had net income for the six and three months of
2000 of $8,197,000 and $4,032,000, respectively. This
compares with $7,406,000 and $4,004,000 for the 1999
comparable periods.
Liquidity and Capital Resources
Net cash flows from operating activities were positive for
the six months ended June 30, 2000 at $8,932,000 in
comparison to positive cash flows of $10,202,000 for the six
months ended June 30, 1999. The difference in cash flows
between the two periods results primarily from changes in
working capital requirements (principally accounts
receivable and accounts payable which decreased in 2000 but
increased in 1999 as well as a larger increase in
inventories in 2000 versus 1999).
Net cash flows used in investing activities were $5,477,000
in 2000 compared to $4,749,000 in 1999. Capital
expenditures for 2000 totaled $8,345,000 compared to
$4,749,000 in 1999, after consideration of reimbursement
from unexpended bond proceeds from previously issued bonds.
Capital expenditures carried forward from June 30, 2000
approximate $8,800,000. Funds on-hand, funds generated by
future operations and available lines of credit are expected
to be sufficient to finance capital expenditure
requirements. In March 2000, the Corporation sold the net
assets, excluding accounts receivables, of the small roll
division of
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Davy for approximately $1,673,000. A portion of the
proceeds includes a $400,000 note which is payable in two
equal annual installments beginning January 2001. Interest
accrues on the outstanding balance at base rate, as defined
in the agreement, plus 1%. Also in March 2000, the
Corporation sold the remaining discontinued operation
property, which it carried as an investment, for its
carrying value of approximately $1,300,000.
Cash used in financing activities for 2000 and 1999 includes
payment of quarterly dividends at a rate of $.10 per share.
In first quarter 1999, proceeds were received from the
issuance of tax-exempt industrial revenue bonds. In
addition, proceeds were received from the issuance of stock
under the Corporation's stock option plan in 2000 and 1999
resulting in net cash used in financing activities of
$(1,794,000) for 2000 and cash provided by financing
activities of $284,000 for 1999.
The Corporation maintains short-term lines of credit in
excess of the cash needs of its businesses. The total
available at June 30, 2000 was approximately $10,000,000.
With respect to environmental concerns, the Corporation has
been named a potentially responsible party at a third party
site. The Corporation has accrued its share of the estimated
cost of remedial actions it would likely be required to
contribute. While it is not possible to quantify with
certainty the potential cost of actions regarding
environmental matters, particularly any future remediation
and other compliance efforts, in the opinion of management,
compliance with the present environmental protection laws
and the potential liability for all environmental
proceedings will not have a material adverse effect on the
financial condition, results of operations or liquidity of
the Corporation.
The nature and scope of the Corporation's business brings it
into regular contact with a variety of persons, businesses
and government agencies in the ordinary course of business.
Consequently, the Corporation and its subsidiaries from time
to time are named in various legal actions. The Corporation
does not anticipate that its financial condition, results of
operations or liquidity will be materially affected by the
costs of known, pending or threatened litigation.
Conversion to the Euro
The Corporation has identified issues that may result from
conversion to the Euro which include primarily changes to
information systems at its Belgian operation. The
Corporation does not expect the conversion to the Euro will
have a material impact on its financial condition, results
of operations or liquidity.
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PART II - OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Items 1-3. None
Item 4. Submission of Matters to a Vote of Security Holders
On April 5, 2000 at the annual meeting of
shareholders, Robert A. Paul and William D. Eberle
were elected directors of the Registrant by the
following votes:
For Withheld
Robert A. Paul 6,734,739 1,828,132
William D. Eberle 6,708,992 1,853,879
The shareholders also approved an amendment of the
1997 Stock Option Plan to increase the aggregate
number of shares with respect to which Awards may be
granted from 300,000 to 600,000 by the following
votes:
5,786,286 (For); 2,557,893 (Against); 218,691 (Abstain)
Item 5. None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3. Articles of Incorporation and By-laws
(a) Articles of Incorporation
Incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1983; the Quarterly Report on Form
10-Q for the quarter ended March 31, 1984;
the Quarterly Report on Form 10-Q for the
quarter ended March 31, 1985; the Quarterly
Report on Form 10-Q for the quarter ended
March 31, 1987; and the Quarterly Report on
Form 10-Q for the quarter ended September
30, 1998.
(b) By-laws
Incorporated by reference to the
Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and the
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996.
4.Instruments defining the rights of securities holders
(a) Rights Agreement between Ampco-
Pittsburgh Corporation and Chase Mellon
Shareholder Services dated as of
September 28, 1998.
- 12 -
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 the fiscal year
ended December 31, 1998; and the
Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999.
(c) 1997 Stock Option Plan, as amended.
Incorporated by reference to the Proxy
Statements dated March 14, 1997 and
March 15, 2000.
27. Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
AMPCO-PITTSBURGH CORPORATION
DATE: August 7, 2000 BY: s/Robert A. Paul
Robert A. Paul
President and
Chief Executive Officer
DATE: August 7, 2000 BY: s/Marliss D. Johnson
Marliss D. Johnson
Vice President
Controller and Treasurer
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