SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________
For the fiscal year ended December 31, 1994 Commission File No. 0-16452
A. P. GREEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 43-0899374
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Green Boulevard, Mexico, Missouri 65265
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 473-3626
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$1.00 par value
Preferred Share
Purchase Rights
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 ( 229.405 of this chapter) 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 ]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant: As of March 24, 1995, the market value of A. P. Green
Industries, Inc. Common Stock held by non-affiliates was approximately
$76,700,000.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: As of March 24, 1995, 4,028,532
shares of Common Stock, $1.00 par value were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference into the indicated
part of this report:
Document Part of Form 10-K
1994 Annual Report to Stockholders Parts I, II and IV
Proxy Statement for 1995 Annual Meeting of Stockholders Part III
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PART I
ITEM 1. BUSINESS
Introduction
Unless the context otherwise requires, A. P. Green Industries, Inc. and its
subsidiaries are referred to in this report collectively as "A. P. Green" or
"the Company." In most instances, information about A. P. Green's primary
businesses and reportable industry segments ("Refractory Products" and
"Industrial Lime") is presented separately.
(a) Development of Business
General. A. P. Green Industries, Inc., a Delaware corporation, was
incorporated as A. P. Green Refractories Co. in 1967. In that year, A. P. Green
Refractories Co., a Missouri corporation, was acquired by United States Gypsum
Company (now USG Corporation). The acquired company was a successor to a
business purchased by Allen P. Green in approximately 1910.
In 1987, A. P. Green Refractories Co. acquired all of the outstanding stock
of APG Lime Corp., a Delaware corporation, and shortly after such acquisition
changed its name to A. P. Green Industries, Inc. Effective February 3, 1988,
through a distribution of all the outstanding capital stock of A. P. Green
Industries, Inc. to the common stockholders of USG Corporation, A. P. Green
Industries, Inc. became an independent publicly held company.
In 1994, the Company acquired substantially all of the assets and assumed
most of the liabilities of the refractory operations of General Refractories
Company and its affiliated companies (collectively referred to as "General").
These operations include ten plants in the United States, a plant near Toronto,
Canada and 49% equity interests in two Colombian refractory companies.
The Company, headquartered in Mexico, Missouri, mines, processes,
manufactures and distributes specialty minerals and mineral-based products,
including industrial lime and refractories products in the United States and
international markets. The Company operates 21 plants in the United States,
Canada and the United Kingdom.
Lime Operations. APG Lime Corp. (APG Lime), a wholly owned subsidiary of
A. P. Green, and headquartered in Mexico, Missouri, is involved in the mining
and processing of limestone for various industrial applications, including steel
and aluminum production, pulp and paper processing, soil stabilization for road
construction and water and waste water treatment. It operates two plants, one
in Kimballton, Virginia, and one in New Braunfels, Texas. It generally serves
customers in the geographic region surrounding its plants.
Refractory Operations. Refractories are heat and atmosphere resistant
materials that provide the structure or linings for high temperature furnaces
and other vessels. In addition to being resistant to thermal stress and other
physical phenomena induced by heat, refractories are often required to provide
resistance to physical wear, thermal cycling and abrasion, as well as to provide
insulating properties.
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A. P. Green offers a broad product line, including basic and clay/alumina
refractories and ceramic fiber products. Basic refractories are predominantly
composed of magnesite ores or silica, while clay/alumina refractories are
predominantly composed of fireclays and bauxite ores. Ceramic fiber products
are lightweight refractories similar in appearance to fiberglass insulation and
are provided in many forms including bulk, blanket, folded modules and vacuum
formed shapes. All are used in a wide variety of industries, including steel,
aluminum, cement, chemicals, ceramics and glass.
Basic and clay/alumina refractories are manufactured in the form of bricks
and specialties. Bricks are shaped products formed by mechanical pressing or
die molding. Specialty products (also known as monolithics) include refractory
cements, castables, plastics and mortars. Specialized shapes to serve specific
industry needs are also custom made in five cast shops located in the United
States, Canada and the United Kingdom (U.K.).
Although the Company purchases some refractory and refractory-related
products from other manufacturers, predominantly all of the refractory products
sold by it are manufactured in its own plants. The Company and its wholly owned
subsidiaries, A. P Green Refractories Inc. and Detrick Refractory Fibers, Inc.,
manufacture refractories in 15 facilities located in the United States. The
Company's wholly owned subsidiary, A. P. Green Refractories (Canada) Ltd.,
organized in 1931, and its subsidiary, 1086215 Ontario, Inc., operates three
manufacturing facilities in Canada. The Company's wholly owned United Kingdom
subsidiary, A. P. Green Refractories Limited, acquired by a predecessor of the
Company in 1954, operates one manufacturing facility in Bromborough, England,
and its subsidiary, Liptak Bradley Limited, installs refractory products
worldwide except for North America. Significant investment has been made,
particularly in the United States plants, to improve quality, production
efficiency and environmental controls.
The Company started to withdraw from the refractory installation business
in the United States in the latter part of 1988 and completed this withdrawal by
1991. This action was taken in order to concentrate on refractory production
and sales to end users. In 1992, the Company's Canadian refractory installation
business was also sold. Sales by these subsequently discontinued refractory
installation operations in the U.S. and Canada from 1988 through 1992 were
approximately as follows (in millions of U.S. dollars). There were no U.S. or
Canadian refractory installation sales after 1992. These sales include both
material and labor.
1988 1989 1990 1991 1992
$41.8 $31.9 $13.7 $9.9 $7.8
Refractory installation services are still performed by Liptak Bradley Limited;
there are no plans to discontinue this business in the U.K.
(b) Financial Information About Industry Segments
Information regarding industry segments of A. P. Green is set forth in Note
19 of Notes to Consolidated Financial Statements which is included in A. P.
Green's 1994 Annual Report to Stockholders and incorporated herein by reference.
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(c) Narrative Description of Business
Refractory Operations. A. P. Green manufactures refractory products in its
own plants located in the United States, Canada and the United Kingdom. These
products are sold world-wide to industrial end-users and to installers of
refractories. The major end-users of the Company's refractory products and the
percentage of the Company's 1994 domestic refractory sales to such users are as
follows:
Percent of 1994
End-User Industry Category U.S. Refractory Products Sales
Iron and Steel 33%
Nonferrous Metals 14%
Cement, Lime, Gypsum, Paper,
Ceramics, Glass and Clay 13%
Chemicals and Petrochemicals 8%
Metal Castings and Fabrication 7%
Other 25%
A. P. Green is a leader in the manufacture and distribution of refractory
materials in North America and throughout the world. The product is sold
through a direct sales force, company owned distribution centers, independent
distributors, licensees and agents to a diverse cross section of basic industry.
The Company believes that success in the refractory industry is dependent, to a
large extent, upon developing new products and modifying existing products in
order to provide more value to the industries served. A. P. Green has a fully
equipped and staffed research facility that can analyze the refractory failure
mechanisms in its customers' applications in order to determine the optimum
refractory solution. Often the best solution is to use a more sophisticated
product which increases the up front costs but results in a lower life cycle
cost. The organization of research engineers, customer service engineers and
product managers have a good track record of designing optimum solutions.
Product design changes that have been introduced recently include self-leveling
castables and low-rebound gunning products that reduce installation costs, as
well as many products that have been optimized to serve specific operating
conditions. Many of the new products are based on A. P. Green's proprietary
Greenlite insulating aggregate which provides high strength in combination with
low thermal conductivities.
The Company's employee sales force is located throughout the United States
and Canada and in the Caribbean, Australia, Singapore, Germany and the United
Kingdom. Refractory products are shipped directly to customers from the
Company's plants and from a large network of distribution centers and
distribution representatives located in the United States, Canada and the United
Kingdom.
The United States sales force is divided into four geographic regions and
two industry groups. The industry groups are part of specialized sales and
marketing teams that target their efforts to specific industrial end-users such
as steel and aluminum. This has allowed the Company to provide a higher degree
of customer assistance on refractory usage and selection and has enabled sales
and marketing personnel to develop additional expertise in those end-user
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industries. This alignment has been beneficial to specific industry sales of
the Company. Starting in 1992, steps were taken to more effectively coordinate
Canadian and United States refractory sales. These steps were designed to take
advantage of a centralized marketing plan and to source products more
efficiently.
Lime Operations. APG Lime is engaged in the production of lime for
industrial applications. This process involves crushing, screening and
calcining limestone to produce high calcium quicklime and hydrate, dolomitic
quicklime and Cal-Dol lime. This processing takes place at Company-owned
facilities in New Braunfels, Texas and Kimballton, Virginia. In 1994, the
Company completed a project which increased production capacity at the New
Braunfels, Texas facility to take advantage of higher demand for quicklime used
in making precipitated calcium carbonate and other growing markets. This
project also reduced particulate air emissions and reduced the use of water.
The major end-users of the Company's lime products and the percentage of the
Company's 1994 lime sales to such users is as follows:
Percent of 1994
End-User Industry Category Lime Products Sales
Pulp and Paper Processing 36%
Steel and Aluminum 32%
Road Construction 14%
Water and Waste Water Treatment 14%
Masonry 3%
Chemical Processing 1%
Recently developed lime products include Cal-Dol lime blend; high calcium
quicklime noted for specialized sizing and chemical reactivity for use in
production of precipitated calcium carbonate by paper producers; and several
dolomitic building lime products. Due to their heavy, bulk nature, industrial
lime products cannot be shipped economically over long distances. This has
resulted in regional sales and distribution, generally within a 300-mile radius
of each facility. A. P. Green's lime facilities are well located to take
advantage of demand in the Southeastern U.S. and Texas and surrounding states.
Product distribution involves direct shipments via rail and/or truck from the
plants to the customers and customer pick-up at the plants.
Raw Materials. A. P. Green maintains programs to attempt to ensure the
availability of raw materials, including the purchase of materials for its
short-term needs and the development of long-term sources of supply. Refractory
clay and silica requirements are obtained from Company-owned deposits located in
Alabama, Arkansas, Colorado, Georgia, Idaho, Missouri, Ohio, Texas and Utah.
Proven deposits contained approximately 10,900,000 tons of clay and silica as of
December 31, 1994. Average annual mining of clay and silica during the last
five years was 260,000 tons, with 1994 at 220,000 tons. Proven reserves are
estimated to be sufficient for approximately 35 years of operations, based on
recent average annual usage. The remaining refractory raw materials
requirements are obtained from numerous suppliers. Refractory grade bauxite is
imported from China, Guyana and Brazil, and approximately 50% of the Company's
magnesite supply is obtained from China. On a long-term basis, there is an
adequate supply of materials available from these countries. There has been no
significant interruption in the availability of Chinese or Brazilian bauxite or
Chinese magnesite. There have been brief periods of limited supplies of bauxite
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from Guyana. Some alumina raw materials are available from only one or two
suppliers in the United States. Current supplies are adequate to meet A. P.
Green's planned production volume for the foreseeable future. Aluminum Company
of America is a major supplier of alumina chemicals and supplies up to 90
percent of certain chemicals used by A. P. Green.
A. P. Green's lime products require two major raw materials, high calcium
limestone and dolomitic limestone. High calcium limestone is mined and
quarried, respectively, from Company-owned deposits at the Kimballton, Virginia
and New Braunfels, Texas plants. The deposit at New Braunfels contained about
51,600,000 tons of usable reserves as of December 31, 1994. The average annual
usage of quarried limestone at New Braunfels during the five-year period ended
December 31, 1994 was 770,000 tons, with 1994 usage at 906,000 tons. Proven
reserves of limestone at this location are estimated to be sufficient for about
67 years of operations, based on recent average annual usage. Company-owned and
leased reserves at the Kimballton plant were estimated at 22,300,000 tons as of
December 31, 1994. The average annual usage of mined limestone at Kimballton
during the five-year period ended December 31, 1994 was 690,000 tons, with 1994
usage at 762,000 tons. Proven reserves of limestone at this location are
estimated to be sufficient for 32 years of operations, based on recent average
annual usage. Dolomitic limestone is purchased from outside suppliers,
primarily The Dow Chemical Company.
Energy. Natural gas used in the production of refractory products
represents approximately 60 percent of total refractory energy costs. However,
natural gas usage accounts for only approximately 4 percent of the total cost of
refractory sales. Most manufacturing plants maintain a supply of standby
energy. Electrical costs vary between operations and account for the balance of
refractory energy costs.
The primary energy source used in the production of lime products is coal,
which accounted for virtually all of the total fuel used at the Kimballton plant
and about 65 percent of the total fuel used at the New Braunfels plant during
1994. Natural gas (in lieu of coal) is the other major energy source used at
New Braunfels, accounting for approximately 35 percent of that facility's total
fuel usage in 1994. Coal for both locations and gas for New Braunfels are
readily available from numerous suppliers.
Primary energy supplies for both segments have been ample and have not been
a factor in terms of curtailed plant operations. No major shift in energy use
patterns for either segment is anticipated.
Seasonality/Cyclicality. Refractory sales are moderately seasonal and are
directly related to cyclical fluctuations in production levels and new plant
additions by refractory end-users.
Lime demand is fairly uniform except for the negative impact of adverse
weather on soil stabilization shipments. This factor is significant in Texas
and surrounding states as soil stabilization shipments for road construction
projects are somewhat depressed between November and February due to typically
rainy weather conditions.
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Both of the Company's industry segments are sensitive to cyclical
fluctuations in the iron, steel and non-ferrous metals industries. APG Lime is
also sensitive to cyclical fluctuations in the pulp and paper processing
industries.
Order Backlog. Order backlog for refractories varies by month within a
moderate range. The order backlog believed to be firm was approximately $19.0
million and $12.0 million at December 31, 1994 and 1993, respectively, requiring
ten to eleven weeks to service for 1994 as compared with eight to nine weeks for
1993. During 1993, the Company changed its method of calculating order backlog
for refractories by omitting orders from Company-owned distribution centers. It
is estimated that the impact of this change was a reduction in refractories
order backlog of approximately $2.5 million.
Lime products normally do not have any significant backlog, other than for
soil stabilization backlog related to state highway lettings, which can vary
significantly from period to period. Such backlog was approximately $1.2
million and $1.4 million at December 31, 1994 and 1993, respectively.
Competition. The refractory industry is highly competitive and demand for
refractories fluctuates with the level of activity in the basic industries.
A. P. Green is one of six major producers of domestic refractories. The Company
competes internationally with several major domestic producers and a number of
international companies. The Company intends to expand its international
refractory sales efforts. In addition, there are numerous regional domestic
refractory producers. The six major producers are believed to represent
approximately 53% of total U.S. annual refractory sales. The major areas of
competition in the refractory industry are service, price and product
performance. Due to the decline of the United States heavy manufacturing
industrial base, the refractory industry has become more price sensitive in
recent years. New product introductions are increasing to meet demands of
customer operating practices. More stringent requirements placed on product
quality are being met with improved quality control at A. P. Green manufacturing
plants to minimize deviations from refractory manufacturing standards. The U.K.
Bromborough facility and the Fulton, Missouri and Oak Hill, Ohio plants have
been ISO 9002 certified and efforts are being made for certification of the
other major U.S. plants.
The Kimballton, Virginia and New Braunfels, Texas lime plants compete with
three and four primary lime producers, respectively. Price-sensitive
competition is strong within these areas.
Capital Expenditures. A. P. Green has implemented a program of maintaining
and modernizing its facilities to improve its competitive position. In the
three years ended December 31, 1994, A. P. Green invested approximately $16.2
million for such purposes. Of those expenditures, 46% ($7.4 million) were for
refractories operations and information systems and 54% ($8.8 million) were for
improvements in lime production and environmental controls. A. P. Green
believes that these expenditures have provided it with significant cost
reductions in certain segments of its business.
Research and Development. Research activities are principally located at
Mexico, Missouri, in a well equipped facility occupying 43,924 square feet. The
major objective of the research department is to maintain A. P. Green at the
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technological forefront of the refractories industry with applied research and
development of new and improved refractory products and high-temperature
insulators.
The research department also is responsible for quality systems
implementation, raw materials management, analytical and environmental services,
and technical liaison with foreign operations. A pilot plant allows testing
during the transition of new products to the commercial stage. During 1994, the
research department was expanded with the addition of basic refractory products,
as a result of the General acquisition, and the hiring of two world renowned
PhD's.
Research and development expenditures amounted to approximately $2.5
million, $2.2 million and $2.4 million during 1994, 1993 and 1992, respectively.
Significant Customers. A. P. Green is not dependent upon any single
customer or group of customers on a regular basis, the loss of which would have
a materially adverse effect on A. P. Green. No customer accounted for more than
ten percent of A. P. Green's consolidated annual net sales in 1994, 1993 or
1992.
Employees. The average number of persons employed by A. P. Green during
1994, 1993 and 1992 was 1,656, 1,447 and 1,471, respectively. Approximately
1,040 employees are members of collective bargaining units. The represented
unions in the U.S. and Canada are: the Aluminum Brick and Glass Workers
International Union, the International Brotherhood of Teamsters, Chauffeurs,
Warehousemen and Helpers of America and the United Steel Workers of America.
The represented unions in the United Kingdom are: the Transport and General
Workers' Union, the Amalgamated Union of Engineering Workers and the Union of
Construction and Allied Trades. A 5-year collective bargaining agreement was
successfully negotiated in 1993 with the unions represented at the Mexico,
Missouri and Fulton, Missouri plants. A. P. Green considers its relations with
its employees to be good.
Environmental Matters. Laws and regulations currently in force which do or
may affect A. P. Green's domestic operations include the Federal Clean Water
Act, the Clean Air Act of 1970, the National Environmental Policy Act of 1969,
the Solid Waste Disposal Act (including the Resource Conservation and Recovery
Act of 1976), the Comprehensive Environmental Response, Compensation and
Liability Act (including the Superfund Amendments and Reauthorization Act of
1986), the Federal Surface Mining Control and Reclamation Act, the Toxic
Substances Control Act, regulations under these Acts, the environmental
protection regulations of various governmental agencies (e.g., the Bureau of
Land Management Surface Management Regulations, Forest Service Regulations,
Environment Canada Regulations and Department of Transportation Regulations) and
laws and regulations concerned with mining techniques, reclamation of mined
lands, air and water pollution and solid waste disposal.
In Europe, environmental laws and regulations currently in force which do
or may affect the Company's United Kingdom subsidiary include the Rivers
(Prevention of Pollution - Scotland) Act of 1951, the Clean Air Act of 1968, the
Control of Pollution Act of 1974 (amended in 1989), the Health and Safety at
Work Act of 1974, the EC Waste Framework Directive of 1975, the Waste Regulation
and Disposal (Authorities) Order of 1985, the Control of Substances Hazardous to
Health Regulations of 1988, the Water Act of 1989, the Environmental Protection
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Act of 1990, local authority air pollution control, German packaging regulations
and the Belgium eco-tax on waste disposal of packaging products.
From time to time, the Company experiences on-site inspections by
environmental regulatory authorities who may impose penalties or require
remedial actions. A. P. Green believes that it has substantially complied with,
and it intends in the future to so comply with, all laws and regulations
(including foreign) governing pollution control and other environmental
conditions in all material respects. Such compliance has not had, and is not
expected to have, a material adverse effect upon A. P. Green's earnings or
competitive position. Information regarding environmental and asbestos-related
legal proceedings is set forth in Note 18 of Notes to Consolidated Financial
Statements which are included in A. P. Green's 1994 Annual Report to
Stockholders and incorporated herein by reference. Capital expenditures have
been made over the last several years and are planned in 1995 to install dust
and emissions control equipment to improve the impact on the environment of
refractory and lime manufacturing operations.
Patents, Trademarks, and Licenses. All major product brand names, as well
as the "A. P. Green" name, are registered in the United States and numerous
other countries. A. P. Green currently holds 25 U.S. patents, and had two
patent applications outstanding at December 31, 1994. The expiration of these
patents will not have a significant financial impact on A. P. Green.
A. P. Green has aggressively licensed its refractory technology and formulations
to refractory producers around the world. Currently, there are 15 license
agreements with foreign companies, ten of which cover A. P. Green's full range
of refractory products and five of which are for limited product lines. License
agreements have been added in Spain, Italy, Colombia, Saudi Arabia, Chile, Korea
and the United Kingdom since 1988.
(d) Financial Information About Foreign and Domestic Operations and Export Sales
Financial information regarding geographic segments of A. P. Green is set
forth in Note 19 of Notes to Consolidated Financial Statements which is included
in A. P. Green's 1994 Annual Report to Stockholders and incorporated herein by
reference.
ITEM 2. PROPERTIES
General
A. P. Green's principal properties are owned, except as noted, and none of
the owned properties are subject to encumbrances, except for buildings and
equipment at the Bessemer, Alabama plant used to secure the industrial
development revenue bond indebtedness at that plant. The buildings are adequate
and suitable for the purposes for which they are used, have been well
maintained, are in sound operating condition and are in regular use.
Headquarters
The headquarters of A. P. Green, which consists of 62,800 square feet of
floor space, is located in Mexico, Missouri.
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Refractory Manufacturing Facilities
The following is a description of the U.S. refractory manufacturing
facilities operated by A. P. Green. Facilities are owned unless otherwise
indicated. Plants in Hitchins, Kentucky, Troup, Texas and Warren, Ohio,
obtained in the General acquisition, are excluded:
Location and Nature Approximate Square Products
of Property Feet of Floor Space Manufactured
Bessemer, Alabama 150,300 High Alumina and
Manufacturing buildings, Fireclay Brick
rail and office
Ellisville, Mississippi 20,000 Board and Special Shape
Manufacturing and office Refractory Fiber Products
building
Fulton, Missouri 240,200 High Alumina Brick,
Manufacturing buildings, including Tar Impregnated
rail and office and Coked Brick
Gary, Indiana 98,500 Cast Shapes & Castables
Manufacturing buildings
and office
Lehi, Utah 120,000 High Alumina, Silica and
Manufacturing buildings, Basic Brick; Castables
rail and office
Little Rock, Arkansas 37,800 Calcined Refractory Clay,
Clay storage building, Refractory Clay
rotary calcining kiln,
rail and office
Mexico, Missouri 1,142,700 Fireclay, High Alumina
Manufacturing buildings, and Insulating Brick;
rail and office Zirconia Brick; Mortars,
Plastics, Castables and
Light Weight Aggregate
Middletown, Pennsylvania 165,000 Cast Shapes
Manufacturing buildings
and office
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Location and Nature Approximate Square Products
of Property Feet of Floor Space Manufactured
Minerva, Ohio 9,500 Light Weight Aggregate
Leased manufacturing and Castables
building and office
Oak Hill, Ohio 111,100 Mortars, Plastics
Manufacturing buildings, and Castables
rail and office
Pryor, Oklahoma 65,800 Industrial Ceramic
Manufacturing buildings, Fiber Insulation
rail and office
Pueblo, Colorado 1,600 Ground Calcined Flint
Manufacturing building
Rockdale, Illinois 78,000 Basic Brick
Manufacturing buildings,
rail and office
Sproul, Pennsylvania 102,100 Mortars, Plastics and
Manufacturing buildings, Castables
rail and office
Sulphur Springs, Texas 193,100 Fireclay and High
Manufacturing buildings, Alumina Brick;
rail and office Mortars, Plastics
and Castables
Mineral Properties
The refractory plants listed above utilize clay and/or silica, which A. P.
Green mines or quarries from deposits leased or owned, or purchases from various
sources. Clay and silica deposits include properties known to contain
commercially recoverable quantities based on core and/or auger drilling,
laboratory testing, surveying and mapping to determine quality. Such properties
are held outright in fee simple; under mineral deeds which convey title to all
clay or minerals with full rights of ingress, egress and mining; and under
lease. The clay reserves are located in Alabama, Arkansas, Colorado, Georgia,
Idaho, Missouri, Ohio and Texas, and a silica mine is located in Utah.
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Distribution Centers/Sales Offices
A. P. Green operates distribution centers and maintains refractory stocks
and sales offices as indicated in the listing below. All distribution centers
are on ground level and range up to approximately 22,000 square feet. With the
exception of Chicago, Illinois, Baton Rouge, Louisiana and St. Louis, Missouri,
which are owned, the distribution centers/sales office facilities are leased
under initial lease terms of one to 20 years.
Distribution Center/Sales Office Locations:
Atlanta, Georgia Knoxville, Tennessee
Baltimore, Maryland Lehi, Utah
Baton Rouge, Louisiana Los Angeles, California
Birmingham, Alabama Milwaukee, Wisconsin
Boston, Massachusetts Orange, Connecticut
Buffalo, New York Philadelphia, Pennsylvania
Charlotte, North Carolina Pittsburgh, Pennsylvania
Chicago, Illinois Portland, Oregon
Cincinnati, Ohio Roanoke, Virginia
Cleveland, Ohio Rockford, Illinois
Dallas, Texas St. Louis, Missouri
Detroit, Michigan Salt Lake City, Utah
East Moline, Illinois San Francisco, California
Evansville, Indiana Seattle, Washington
Houston, Texas Spokane, Washington
Kansas City, Missouri Tampa, Florida
Kearny, New Jersey
Lime Operations
APG Lime operates two industrial lime manufacturing plants. The facility
at Kimballton, Virginia consists of an underground mine, rail and various plant
buildings, totaling approximately 83,700 square feet of floorspace, situated on
approximately 680 owned acres. This plant primarily manufactures industrial
lime products and a small amount of soil stabilization lime. APG Lime owns one-
half of the mineral rights under national forest property adjacent to the
Kimballton plant by royalty lease from the Bureau of Land Management. Such
lease was renewed for an additional 20-year term in 1988. The royalty is 2.5
percent of the nominal value of limestone mined. The New Braunfels, Texas
facility consists of a surface mine, rail and various plant buildings, totaling
approximately 81,000 square feet of floorspace, situated on approximately 1,010
owned acres. This plant manufactures industrial lime products, soil
stabilization lime, and lime-based mortars.
Canadian Subsidiary
A. P. Green Refractories (Canada) Ltd., a wholly owned subsidiary of A. P.
Green, owns and operates a refractory manufacturing facility in Weston, Ontario.
A 73,900 square foot building is used for manufacturing and storage of
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refractory mortars, cements, castables, and plastics. In addition, raw
materials which are imported principally from A. P. Green's U.S. facilities, are
stored there. A. P. Green Refractories (Canada) Ltd. also owns 17,000 square
feet of manufacturing space at Acton, Ontario to produce crucibles used by the
precious metal assaying industry and vacuum formed fiber products. 1086215
Ontario, Inc., a wholly owned subsidiary of A. P. Green Refractories (Canada)
Ltd., owns a 170,000 square foot building in Smithville, Ontario used for
manufacturing and storage of basic brick, plastics and castables. Distribution
centers and sales offices are maintained at the following locations: Burnaby,
British Columbia; Calgary, Alberta; Edmonton, Alberta; Montreal, Quebec; Ottawa,
Ontario; Quebec City, Quebec; and Winnipeg, Manitoba. All of the facilities are
leased under initial lease terms of one to five years.
United Kingdom Subsidiaries
A. P. Green Refractories Limited, a wholly owned subsidiary of A. P. Green
Industries, Inc., leases and operates its headquarters and manufacturing
facility in Bromborough, Wirral, England. A full range of specialties,
including mortars, plastics and dense and light weight castables are
manufactured in an 76,600 square foot building at this location. Distribution
centers and sales offices are maintained in Bromborough, Sheffield and London in
England and Risca in Wales to ensure complete customer coverage in the U.K. All
of these facilities are leased under initial lease terms of one to nine hundred
ninety-nine years.
Liptak Bradley Limited, a wholly owned subsidiary of A. P. Green
Refractories Limited, operates out of the same premises in Bromborough,
providing a refractory installation service using exclusively A. P. Green
products.
ITEM 3. LEGAL PROCEEDINGS
Information regarding legal proceedings is set forth in Note 18 of Notes to
Consolidated Financial Statements which is included in A. P. Green's 1994 Annual
Report to Stockholders and incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
- 13 -
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The information set forth below the caption "Common Stock, Market Prices
and Dividends" on page 32 of A. P. Green's 1994 Annual Report to Stockholders is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL INFORMATION
The information set forth below the caption "Comparative Five-Year Summary"
on page 32 of A. P. Green's 1994 Annual Report to Stockholders is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The information set forth below the caption "Management's Discussion and
Analysis of Results of Operations and Financial Condition" on pages 13 through
16 of A. P. Green's 1994 Annual Report to Stockholders is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of A. P. Green as of December 31,
1994 and 1993 and for each of the years in the three-year period ended
December 31, 1994, and notes thereto (including the quarterly supplementary
data) and the Independent Auditors' Report appear on pages 17 through 31 of
A. P. Green's 1994 Annual Report to Stockholders and are incorporated herein by
reference. The Independent Auditors' Report for the financial statement
schedules for each of the years in the three-year period ended December 31,
1994, and the financial statement schedules required by Regulation S-X appear on
pages F-1 through F-2 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors is contained in A. P. Green's Proxy
Statement for the 1995 Annual Meeting of Stockholders under the caption "Item
1 - Election of Directors" and is incorporated herein by reference.
- 14 -
<PAGE>
The following is a list as of March 24, 1995 of the names and ages of the
executive officers of A. P. Green and all positions and offices with A. P. Green
presently held by the person named. There is no family relationship between any
of the named persons.
Name Age All Positions Held With A. P. Green
Paul F. Hummer II 53 Chairman of the Board,
President and Chief Executive Officer
Jurgen H. Abels 50 Vice President, International
Max C. Aiken 57 Executive Vice President
David G. Binder 58 Vice President and Controller
Michael B. Cooney 54 Senior Vice President, Law/Administration and
Secretary
Daniel Y. Hagan 55 Vice President, Domestic Refractory Sales
Orville Hunter, Jr. 56 Vice President, Research
Lester C. Reed 54 Vice President, Refractory Manufacturing
Gary L. Roberts 48 Vice President, Chief Financial Officer and
Treasurer
The executive officers were appointed by, and serve at the pleasure of, the
Board of Directors of A. P. Green. Except for Mr. Reed, all executive officers
have held the position listed or another executive position with A. P. Green or
an entity affiliated with A. P. Green in excess of five years. Mr. Reed has
held his present position since May 1992. Prior thereto, Mr. Reed was Director,
Refractory Production of A. P. Green from January 1990 and Vice President -
Manufacturing of the Insulation Group at Certainteed Corporation from October
1981 to January 1990.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is contained in A. P. Green's
Proxy Statement for the 1995 Annual Meeting of Stockholders under the caption
"Compensation of Executive Officers" and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is contained in A. P. Green's Proxy Statement for the 1995 Annual
Meeting of Stockholders under the captions "Voting Securities and the Principal
Holders Thereof" and "Security Ownership of Stock by Management" and is
incorporated herein by reference.
- 15 -
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements
The following Consolidated Financial Statements of A. P. Green are
contained in A. P. Green's 1994 Annual Report to Stockholders on the following
pages thereof:
Annual Report
Page Reference
Consolidated Statements of Earnings - Years Ended
December 31, 1994, 1993 and 1992 17
Consolidated Statements of Financial Position -
December 31, 1994 and 1993 18
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1994, 1993 and 1992 19
Consolidated Statements of Cash Flows - Years Ended
December 31, 1994, 1993 and 1992 20
Notes to Consolidated Financial Statements -
December 31, 1994, 1993 and 1992 21-31
Independent Auditors' Report as of December 31, 1994
and 1993 and for each of the years in the
three-year period ended December 31, 1994 31
2. Financial Statement Schedules
The following financial statement schedules of A. P. Green and the
accompanying Independent Auditors' Report are set forth on the following pages
of this Annual Report on Form 10-K:
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<PAGE>
Form 10-K
Page Reference
Independent Auditors' Report on the consolidated financial
statement schedules as of December 31, 1994 and 1993
and for each of the years in the three-year period
ended December 31, 1994. F-1
Schedule VIII Valuation and Qualifying Accounts F-2
Some schedules have been omitted because they are not applicable, are not
required or the information is included in the consolidated financial statements
or notes thereto.
3. Exhibits
Exhibit No.
3(a) Restated Certificate of Incorporation of A. P. Green is
incorporated herein by reference to Exhibit 3(a) of A. P.
Green's Annual Report on Form 10-K for the year ended December
31, 1987.
3(b) By-Laws of A. P. Green is incorporated herein by reference to
Exhibit 3(b) of A. P. Green's Annual Report on Form 10-K for the
year ended December 31, 1987.
4(a) Specimen Common Stock Certificate of A. P. Green is incorporated
herein by reference to Exhibit 4.1 of the Registration Statement
on Form 10, dated February 3, 1988.
4(b) Rights Agreement, dated as of December 22, 1987, between A. P.
Green and Harris Trust and Savings Bank, as Rights Agent, is
incorporated herein by reference to Exhibit 4.2 of the
Registration Statement on Form 10, dated February 3, 1988.
4(c) Note Purchase Agreement, dated July 28, 1994, by and between
A. P. Green and certain of its subsidiaries and the purchasers
of the unsecured notes, is incorporated herein by reference to
Exhibit 10.1 of A. P. Green's Current Report on Form 8-K dated
August 12, 1994.
10(a) A. P. Green Refractories Co. Supplemental Retirement Plan is
incorporated herein by reference to Exhibit 10.10 of the
Registration Statement on Form 10, dated February 3, 1988.
10(b) 1987 Long-Term Performance Plan of A. P. Green is incorporated
herein by reference to Exhibit 10(l) of A. P. Green's Annual
Report on Form 10-K for the year ended December 31, 1987.
- 17 -
<PAGE>
10(c) 1989 Long-Term Performance Plan of A. P. Green is incorporated
herein by reference to Exhibit 10(m) of A. P. Green's Annual
Report on Form 10-K for the year ended December 31, 1988.
10(d) A. P. Green Management Incentive Compensation Plan is
incorporated herein by reference to Exhibit 10(g) of A. P.
Green's Annual Report on Form 10-K for the year ended
December 31, 1989.
10(e) Form of Indemnification Agreement between A. P. Green and each
of its Directors and Officers is incorporated herein by
reference to Exhibit 10(m) of A. P. Green's Annual Report on
Form 10-K for the year ended December 31, 1987.
10(f) Termination Compensation Agreement, dated March 1, 1988, between
A. P. Green and Paul F. Hummer II, is incorporated herein by
reference to Exhibit 10(o) of A. P. Green's Annual Report on
Form 10-K for the year ended December 31, 1987.
10(g) Termination Compensation Agreement, dated November 16, 1988,
between A. P. Green and Michael B. Cooney, is incorporated
herein by reference to Exhibit 10(r) of A. P. Green's Annual
Report on Form 10-K for the year ended December 31, 1988.
10(h) Form of Addendum No. 1 of Termination Compensation Agreement,
dated October 19, 1989, by and between A. P. Green and Paul F.
Hummer II or Michael B. Cooney, is incorporated herein by
reference to Exhibit 10(w) of A. P. Green's Annual Report on
Form 10-K for the year ended December 31, 1989.
10(i) Form of Termination Compensation Agreement, dated October 19,
1989, between A. P. Green and Gary L. Roberts or Max C. Aiken,
is incorporated herein by reference to Exhibit 10(x) of A. P.
Green's Annual Report on Form 10-K for the year ended
December 31, 1989.
10(j) 1993 Performance Plan of A. P. Green is incorporated herein by
reference to Exhibit 10(j) of A. P. Green's Annual Report on
Form 10-K for the year ended December 31, 1993.
10(k) Asset Acquisition Agreement, dated July 11, 1994, by and among
General Refractories Company and certain of its affiliates and
A. P. Green and certain of its affiliates, is incorporated
herein by reference to Exhibit 2.1 of A. P. Green's Current
Report on Form 8-K dated August 12, 1994.
10(l) Retirement Plan for Directors, dated February 16, 1995.
- 18 -
<PAGE>
10(m) A. P. Green Industries, Inc. Supplemental Retirement Income
Plan, executed October 12, 1994, effective January 1, 1995.
13 A. P. Green's 1994 Annual Report to Stockholders.
22 Subsidiaries of A. P. Green
24 Consent of KPMG Peat Marwick
28(a) Annual Report on Form 11-K for the year ended September 30, 1994
for the A. P. Green Industries, Inc. Investment Plan (including
Exhibit thereto).
28(b) Financial Data Schedule as of December 31, 1994.
(b) Reports on Form 8-K. None.
(c) See Item 14(a) above.
(d) See Item 14(a) (2) above.
- 19 -
<PAGE>
SIGNATURES
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.
A. P. GREEN INDUSTRIES, INC.
Registrant
Dated: March 7, 1995 By: /s/ Michael B. Cooney
Michael B. Cooney, Senior Vice
President, Law/Administration and
Secretary
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 and in the capacities and on the dates indicated.
Signature Title Date
/s/ Paul F. Hummer II Chairman of the Board, March 7, 1995
Paul F. Hummer II President, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Gary L. Roberts Vice President, Chief Financial March 7, 1995
Gary L. Roberts Officer and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Jack R. Janney Director March 9, 1995
Jack R. Janney
/s/ Donald E. Lasater Director March 8, 1995
Donald E. Lasater
/s/ Daniel R. Toll Director March 9, 1995
Daniel R. Toll
/s/ William F. Morrison Director March 8, 1995
William F. Morrison
- 20 -
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
A. P. Green Industries, Inc.:
Under date of February 13, 1995, we reported on the consolidated statements of
financial position of A. P. Green Industries, Inc. and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1994, as contained in the 1994 Annual Report to
Stockholders. As discussed in Note 3 of Notes to Consolidated Financial
Statements, the Company changed its method of accounting for postretirement
benefits other than pensions and its method of accounting for income taxes in
1992 and changed its method of accounting for postemployment benefits in 1994.
These consolidated financial statements and our report thereon are incorporated
by reference in the Annual Report on Form 10-K for the year ended December 31,
1994. In connection with our audits of the aforementioned consolidated
financial statements, we also have audited the related financial statement
schedules as of December 31, 1994, 1993 and 1992 and for the years then ended.
These financial statement schedules are the responsibility of A. P. Green's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/KPMG PEAT MARWICK LLP
St. Louis, Missouri
February 13, 1995
F-1
<PAGE>
SCHEDULE VIII
A. P. GREEN INDUSTRIES, INC.
SUPPLEMENTAL INFORMATION
VALUATION AND QUALIFYING ACCOUNTS
An analysis of receivable reserves for 1992, 1993 and 1994 is as follows:
Doubtful
Accounts
(Dollars In Thousands)
Balance, December 31, 1991 $ 1,895
Additions in 1992-
Current year provision 445
Reclassification to notes receivable reserves (113)
Less - Receivables written off, net (918)
Balance, December 31, 1992 1,309
Additions in 1993 -
Current Year Provision 143
Less - Receivables written off, net (254)
Balance, December 31, 1993 1,198
Additions in 1994 -
Current Year Provision 373
Acquisition of General Refractories 1,088
Less - Receivables written off, net (667)
Balance December 31, 1994 $1,992
F-2
<PAGE>
Exhibit 10(l) to
Form 10-K
A. P. GREEN INDUSTRIES, INC.
RETIREMENT PLAN FOR DIRECTORS
A. P. GREEN INDUSTRIES, INC. (the "Company") hereby
establishes the A. P. Green Industries, Inc. Retirement Plan for
Directors effective February 16, 1995.
1. Purpose. The purpose of this Retirement Plan is to provide
retirement benefits to certain Directors of A. P. Green
Industries, Inc. who have rendered extended service as a
Director.
2. Definitions. Except where otherwise specifically provided,
the following terms shall have the following meanings for
purposes of this Plan:
(a) Company means A. P. Green Industries, Inc.
(b) Director means a member of the Board of Directors of A.
P. Green Industries, Inc.
(c) Disability means the inability of an Outside Director
to perform the regular duties of a Director, as
determined by a majority vote of the remaining Outside
Directors.
(d) Outside Director means a Director who (i) for the
entire part of a Plan Year that he is a Director is not
an employee of the Company and (ii) who is not entitled
to receive a retirement benefit under the Retirement
Plan for A. P. Green Industries, Inc. and Associated
Employers.
(e) Plan Year means the period from one annual meeting of
shareholders of A. P. Green Industries, Inc. until the
next annual meeting, except that the first Plan Year
shall be the period from February 3, 1988, until May 9,
1989.
(f) Retainer means the annual fee payable to an Outside
Director without regard to attendance at meetings,
service on a committee or an election to defer receipt
of such fee.
(g) Retirement means the termination of service as a
Director by an Outside Director other than (i) because
of death, or (ii) because of or following the Outside
Director's commission of an act involving moral
turpitude, dishonesty, malfeasance in office or breach
of trust in connection with or with respect to his
office as Outside Director.
- 1 -
<PAGE>
(h) Year of Service means each Plan Year during which a
Director serves as an Outside Director. Service during
any part of a Plan Year shall be counted as a Year of
Service, but only if the Director is an Outside
Director during all of such service. If an Outside
Director dies while serving as a Director, or ceases to
be a Director because of Disability, his Years of
Service shall be determined as if he had served through
the end of his elected term. No more than ten (10)
Years of Service shall be recognized under this Plan.
For purposes of this Plan, an Outside Director who has
served continuously as such between February 3, 1988,
and February 16, 1995, shall be deemed to have ten (10)
Years of Service.
3. Eligibility. An Outside Director shall be eligible to
receive a benefit under this Plan if, after February 16,
1995, he retires as a Director and has five (5) or more
Years of Service at the time of his retirement. An Outside
Director whose service as a Director ends other than because
of Retirement or Disability will not be eligible to receive
a benefit under this Plan.
4. Benefits.
(a) Amount. The benefit paid under this Plan shall be an
annual benefit equal to the Retainer at the date of the
Outside Director's retirement, multiplied by ten
percent (10%) for each Year of Service the Outside
Director has (or is deemed to have) at the time his
service as a Director ends, with a maximum annual
benefit equal to the full amount (100%) of the Retainer
at the date of the Outside Director's retirement.
(b) Payment. Benefits payable under this Plan shall be
paid in cash in quarterly installments beginning with
the February 1, May 1, August 1 or November 1
coinciding with or next following:
(i) In the case of an Outside Director whose service
as a Director ends before age 65 on account of
Disability, the date the Outside Director's
Disability is established; or
(ii) In the case of any other Director, the later of
(A) the date the Outside Director ceases to serve
as a Director or (B) the date the Outside Director
attains age 65.
(c) Duration. Payments shall be made to an Outside
Director for 40 quarters, but if the Outside Director
dies before all such payments have been made no further
payments shall be made after the date of his death.
5. Inalienability. The rights and benefits inuring to any
Outside Director or beneficiary under this Plan may not be
assigned, alienated or anticipated.
- 2 -
<PAGE>
6. Funding. Nothing contained in this Plan and no action taken
pursuant to the provisions hereof shall create or be
construed to create a trust of any kind, or a fiduciary
relationship between the Company and any Outside Director or
any other person. Amounts due under this Plan at any time
and from time to time shall be paid from the general funds
of the Company. To the extent that any person acquires a
right to receive payments hereunder, such right shall be
that of an unsecured general creditor of the Company.
7. Amendment and Termination. The Company reserves the right
at any time to amend or revoke this plan without liability
to any Outside Director after the effective date of such
amendment or termination, provided, however, that any
benefit which has begun to be paid in accordance with the
terms of the Plan may not be reduced or eliminated.
8. No Retention Rights. Nothing in this Plan shall give any
Director the right to be retained as a Director of the
Company.
9. Withholding. All amounts otherwise payable under this Plan
shall be reduced by any amounts required to be withheld
therefrom pursuant to Federal, state or local law.
10. Construction. This Plan shall be construed in accordance
with and governed by the laws of the State of Missouri.
Words in the masculine include the feminine, and words in
the singular include the plural, as appropriate.
IN WITNESS WHEREOF, A. P. GREEN INDUSTRIES, INC. has caused
this instrument to be executed and to be attested and its
corporate seal to be affixed by its duly authorized officers this
16th day of February, 1995.
A. P. GREEN INDUSTRIES, INC.
By /s/ Gary L. Roberts
ATTEST:
By /s/ Michael B. Cooney
Secretary
- 3 -
<PAGE>
Exhibit 10(m) to
Form 10-K
A. P. GREEN INDUSTRIES,INC. SUPPLEMENTAL RETIREMENT INCOME PLAN
WHEREAS, the Employee Retirement Income Security Act of 1974
permits the establishment of a nonqualified plan which is
unfunded and is maintained "primarily for the purpose of
providing deferred compensation to a select group of management
or highly compensated employees;" and
WHEREAS, the plan attached hereto as Exhibit A is a nonqualified
plan that is (1) unfunded and (2) maintained "primarily for the
purpose of providing deferred compensation to a select group of
management or highly compensated employees" and is designed to
provide pension and other benefits that otherwise would be
provided under the Retirement Plan for A. P. Green Industries,
Inc. and Associated Employers and any other qualified defined
benefit plans maintained by A. P. Green Industries, Inc. and its
subsidiaries but for the limitation on compensation imposed by
Section 401(a)(17) of the Internal Revenue Code;
NOW, THEREFORE, by virtue of the authority delegated to the
undersigned officer of A. P. Green Industries, Inc. by resolution
of its Board of Directors, the A. P. Green Industries, Inc.
Supplemental Retirement Iincome Plan be and is established
effective January 1, 1995 in the form attached hereto as Exhibit
A.
IN WITNESS WHEREOF, A. P. Green Industries, Inc. has caused these
presents to be signed on its behalf by an officer thereunto duly
authorized this 12th day of March, 1995.
A. P. GREEN INDUSTRIES, INC.
By /s/ Gary L. Roberts
Its Vice-President - CFO - Treasurer
<PAGE>
Exhibit A
A. P. GREEN INDUSTRIES, INC. SUPPLEMENTAL RETIREMENT INCOME PLAN
<PAGE>
Table of Contents
Section Page
1 Introduction and Definitions
1.1 Plan, Company, Effective Date 1
1.2 Purpose 1
1.3 Employers 1
1.4 Plan Administration 1
1.5 Named Fiduciary 2
1.6 Eligible Spouse 2
1.7 Beneficiary 2
1.8 Actuarial Equivalent 2
2 Participation and Benefits
2.1 Eligibility 3
2.2 Amount of Supplemental Retirement Benefits 3
2.3 Form of Payment of Supplemental
Retirement Benefits 3
2.4 Time of Payment of Supplemental Retirement
Benefits 4
2.5 Early Retirement 4
2.6 Supplemental Death Benefits 4
2.7 Funding 5
2.8 Vesting 5
3 General Provisions
3.1 Employment Rights 6
3.2 Interests Not Transferable 6
3.3 Controlling Law 6
3.4 Gender and Number 6
3.5 Action by Company 6
3.6 Successor to the Company or
Any Other Employer 6
3.7 Facility of Payment 6
3.8 Claims Procedure 6
4 Amendment and Termination 8
<PAGE>
A. P. GREEN INDUSTRIES, INC. SUPPLEMENTAL RETIREMENT INCOME PLAN
SECTION 1
Introduction and Definitions
1.1 Plan, Company, Effective Date. A. P. Green Industries,
Inc. (the "company") has established the A. P. Green Industries,
Inc. Supplemental Retirement Income Plan (the "plan") effective
January 1, 1995 (the "effective date").
1.2 Purpose. The company and certain of its subsidiaries
maintain and are employers under the RETIREMENT PLAN FOR A. P.
GREEN INDUSTRIES, INC. AND ASSOCIATED EMPLOYERS (the "retirement
plan"), which is intended to meet the requirements of a
"qualified plan" under Section 401(a) of the Internal Revenue
Code. Section 401(a)(17) of the Internal Revenue Code places
limitations on the amount of compensation that may be taken into
account in determining the amount of benefits that may by paid
from a qualified plan. However, the Employee Retirement Income
Security Act of 1974 ("ERISA"), permits the payment under a
nonqualified "deferred compensation plan" of the benefits that
may not be paid under a qualified plan because of such
limitations. The purpose of this plan is to provide benefits
that may not be paid under the retirement plan and any other
qualified defined benefit plans maintained by the controlled
group of corporations of which the company is a member ("other
controlled group retirement plans") because of the limitation on
compensation imposed by Section 401(a)(17) of the Internal
Revenue Code (the "compensation limit") with respect to
participants in the retirement plan who are employed by an
employer at the time of their retirement or other termination of
employment. Benefits payable under this plan to a former
employee are referred to as "supplemental retirement benefits"
and benefits payable under this plan because of the death of an
employee or a former employee are referred to as "supplemental
death benefits."
1.3 Employers. The company and each subsidiary of the
company that is an employer under the retirement plan shall be an
"employer" under this plan unless specified to the contrary by
the company by writing filed with the committee described in
subsection 1.4.
1.4 Plan Administration. The plan is administered by the
committee (the "committee") that is responsible for
administration of the retirement plan. The committee has, to the
extent appropriate, the same powers, rights, duties and
obligations with respect to this plan. The committee shall
determine all questions arising in the administration,
interpretation and application of the plan and shall, in its sole
discretion, construe and interpret the plan, decide all questions
of eligibility and determine all claims for benefits. The
committee's decision on these matters shall be conclusive and
binding on all persons, and shall be upheld on review unless
there is no rational basis for the decision.
1
<PAGE>
1.5 Named Fiduciary. The company is the named fiduciary with
respect to the right to amend or terminate the plan. The
committee is the named fiduciary with respect to the
administration of the plan.
1.6 Eligible Spouse. The spouse of a Participant will be
considered as an eligible spouse as of any date if the spouse is
treated as the Participant's eligible spouse under the retirement
plan on the date of the Participant's death or, if earlier, on
the date the Participant's benefit begins under the retirement
plan.
1.7 Beneficiary. Each Participant shall, in accordance with
procedures established by the committee, designate a beneficiary
to receive any payments which may become payable in accordance
with the plan following the Participant's death. If no
designated beneficiary survives the Participant, death benefits,
if any, shall be paid to the Participant's surviving spouse; if
there is no spouse, to the Participant's surviving children; if
there are no children, to the Participant's surviving parents; if
there are no parents, to the Participant's surviving siblings; if
there are no siblings, to the Participant's estate.
1.8 Actuarial Equivalent. For purposes of this plan,
actuarially equivalent benefits shall be calculated on the basis
of the actuarial factors, assumptions and tables applied for that
purpose under the retirement plan.
2
<PAGE>
SECTION 2
Participation and Benefits.
2.1 Eligibility. Subject to the conditions and limitations
of the plan, each officer of an employer who is an employee of an
employer shall become a "Participant" in this plan on or after
the effective date if he is a participant in the retirement plan
and accrues benefits under the retirement plan, or under the
retirement plan and other controlled group retirement plans,
which in the aggregate, are less than the aggregate benefits he
otherwise would have accrued under the retirement plan and all
other controlled group retirement plans (prior to the termination
of any such plan or plans) if such compensation limit had not
applied. Such Participant shall be entitled to supplemental
retirement benefits under this plan as determined under
subsection 2.2 if the Participant is employed by an employer at
the time of his retirement or other termination of employment.
2.2 Amount of Supplemental Retirement Benefits. The
supplemental retirement benefits payable under this plan to a
Participant shall be actuarially equivalent to the amount by
which (1) below exceeds (2) below, where:
(1) is the aggregate benefits that would have been payable
to him, and to any other person or persons in the event
of his death while receiving benefits, under the
retirement plan and all other controlled group
retirement plans if the compensation limit had not
applied to the Participant; and
(2) is the aggregate benefits payable to him, and to any
other person or persons in the event of his death while
receiving benefits, under the retirement plans after
application of the compensation limit.
Benefits computed before and after application of the
compensation limit include any benefits that would have been
payable because of the termination of any such plan or plans.
2.3 Form of Payment of Supplemental Retirement Benefits. If
the Participant does not have an eligible spouse when payment of
his benefit begins, the supplemental retirement benefits that he
becomes entitled to receive under this plan shall be paid to him
in the form of an annuity for his lifetime with 120 months
guaranteed. If the Participant dies before receiving 120 monthly
payments, payments shall continue to his Beneficiary for the
balance of the period. If the Participant has an eligible
spouse when payment of his benefit begins, the supplemental
retirement benefits that he becomes entitled to receive under
this plan shall be paid to him in the form of an actuarially
equivalent joint and 50% survivor annuity paying an annuity for
the Participant's lifetime, with 50% of his monthly benefit
continuing for the lifetime of his surviving eligible spouse, if
any, following his death.
3
<PAGE>
2.4 Time of Payment of Supplemental Retirement Benefit.
Payment shall commence at such time after his employment with an
employer terminates as the committee determines, taking into
account the best interest of the Participant and his dependents,
subject to the following:
(a) Payment of the Participant's supplemental
retirement benefits must not commence before the
Participant's early retirement date under the
retirement plan.
(b) Payment of the Participant's supplemental
retirement benefits must commence not later than
the date payment of his retirement benefits begins
under the retirement plan.
(c) If the Participant's death occurs while employed
by an employer or if the Participant's death
occurs after he had become entitled to
supplemental retirement benefits under this plan
but before payment of such benefits has commenced,
supplemental retirement benefits shall be payable
under the plan with respect to the Participant
only if and to the extent provided in subsection
2.6.
2.5 Early Retirement. If payment of a supplemental benefit
under this plan begins before the Participant reaches age 65, it
shall be reduced for early commencement in accordance with rules
of the retirement plan that would apply to a retirement plan
benefit commencing at the same time.
2.6 Supplemental Death Benefits. Supplemental death benefits
shall be payable under the plan as follows:
(a) If a Participant's death occurs while employed by
an employer, his eligible spouse, if any, shall be
entitled to monthly supplemental death benefits
under this plan for life. The benefits shall be
actuarially equivalent to the additional monthly
preretirement survivor annuity benefits that would
have been payable to the Participant's eligible
spouse under the retirement plan and all other
controlled group retirement plans if the
compensation limit had not applied to the
Participant. Payment shall begin as of the
earliest the date the retirement survivor annuity
could commence under the retirement plan.
(b) If a Participant's death occurs after he had
retired or otherwise terminated employment and had
become entitled to supplemental retirement
benefits under this plan but before payment of
such benefits had commenced, his eligible spouse,
if any, shall be entitled to monthly supplemental
death benefits for life actuarially equivalent to
4
<PAGE>
50 percent of the additional monthly amount that
would have been payable to the Participant under
the retirement plan and all other controlled group
retirement plans in the form of a qualified joint
and survivor annuity if the compensation limit had
not applied to the Participant, determined as if
the Participant had begun receiving the
supplemental retirement benefits immediately prior
to his death.
(c) If the Participant does not have an eligible
spouse at the time of his death prior to the date
payment of his supplemental retirement benefit
begins, no supplemental death benefits shall be
payable under the plan with respect to that
Participant.
(d) If a Participant's death occurs while receiving
supplemental retirement benefits, his surviving
eligible spouse or beneficiary, as the case may
be, if any, shall be entitled to supplemental
retirement benefits, if any, payable following the
death of the Participant under subsection 2.3.
2.7 Funding. Benefits payable under this plan to a
Participant or his eligible spouse shall be paid directly by the
employers from their general assets in such proportions as the
company shall determine. The employers shall not be required to
segregate on their books or otherwise any amount to be used for
the payment of benefits under this plan.
2.8 Vesting. A Participant's right to benefits payable under
this plan shall be 100% vested and nonforfeitable upon his
completion of five years of continuous service as determined
under the retirement plan.
5
<PAGE>
SECTION 3
General Provisions
3.1 Employment Rights. Establishment of the plan shall not
be construed to give any Participant the right to be retained in
the employ of an employer or to any benefits not specifically
provided by this plan.
3.2 Interests Not Transferable. Except as to withholding of
any tax under the laws of the United States or any state or
municipality, the interest of Participants and their
beneficiaries under the plan are not subject to the claims of
their creditors and may not be voluntarily or involuntarily
transferred, assigned, alienated or encumbered.
3.3 Controlling Law. The laws of the State of Missouri shall
be controlling in all matters relating to the plan.
3.4 Gender and Number. Where the context admits, words in
the masculine gender shall include the feminine and neuter
genders, the plural shall include the singular and the singular
shall include the plural.
3.5 Action by the Company. Any action required of or
permitted by the company under the plan shall be by resolution of
its Board of Directors or by a duly authorized committee of its
Board of Directors, or by a person or persons authorized by
resolution of its Board of Directors or such committee.
3.6 Successor to the Company or Any Other Employer. The term
"company" as used in the plan shall include any successor to the
company by reason of merger, consolidation, the purchase or
transfer of all or substantially all of the company's assets, or
otherwise. The term "employer" as used in the plan with respect
to the company or any subsidiary shall include any successor to
that corporation by reason of merger, consolidation, the purchase
or transfer of all substantially all of the assets of that
corporation, or otherwise.
3.7 Facility of Payment. Any amounts payable hereunder to
any person under a legal disability or who, in the judgement of
the committee, is unable to properly manage his affairs may be
paid to the legal representative of such person or may be applied
for the benefit of such person in any manner which the committee
may select.
3.8 Claims Procedure. Any application for benefits by a
Participant, eligible spouse, or beneficiary submitted to the
committee in writing shall constitute a claim. In any instance
where such claim is denied in while or in part by the committee,
the decision of the committee shall be provided in writing to the
Participant, eligible spouse, or beneficiary setting forth the
following:
6
<PAGE>
(a) The basis for denial of the claim;
(b) The plan provision on which the denial is based;
(c) A description of any addition information required
of the Participant, eligible spouse, or
beneficiary; and
(d) An explanation of the procedures for reviewing
claims under the plan.
A Participant, eligible spouse, or beneficiary may, within 60
days after receiving notice that a claim has been denied, submit
a written request for review of the claim denial. Upon receipt
of a request for review, the committee has 60 days to review the
claim denial and issue a written explanation of its decision on
review. If special circumstances require more time for the
review, the committee will notify the Participant, eligible
spouse, or beneficiary. A written explanation of the decision on
review will be issued within 120 days after the committee
received the request for review.
7
<PAGE>
SECTION 4
Amendment and Termination
While the employers expect to continue the plan, the company must
necessarily reserve and reserves the right, by resolution of its
Board of Directors, to amend the plan from time to time or
terminate the plan at any time.
In the event of termination, the benefits accrued as of the date
of termination shall be frozen. The remaining provisions of the
plan shall continue to apply with respect to such frozen
benefits, but the amount of the benefit shall not increase, nor
shall the amount of benefit payable under this plan exceed the
amount that would have been payable had the plan remained in
effect on the earliest of the Participant's death, retirement, or
other termination of employment.
In the event of amendment, the benefits accrued under the plan as
of the effective date of any amendment will in no event be
forfeited as a result of the amendment, nor shall the terms of
the plan governing the benefits accrued as of such date be less
favorable to any Participant as the result of such amendment.
8
<PAGE>
Exhibit 13 to
Form 10-K
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net sales of $195.9 million in 1994 were 20.2% higher than the
$163.0 million in 1993, following a 3.2% decline from $168.3
million in 1992. The impact from the acquisition of the
refractories business of General Refractories Company and its
affiliated companies ("General") from August 1, 1994 through
December 31, 1994 was to increase sales by $29.7 million.
Excluding this impact, refractory sales in the U.S. and Canada
increased by $3.2 million and $1.9 million, respectively, while
sales in the United Kingdom declined $1.0 million.
The 1993 sales decrease was largely due to the sale of the
Canadian refractory installation operation during the fourth
quarter of 1992 and continuing depressed market conditions in the
United Kingdom (U.K.). The lower sales at foreign subsidiaries
were partially offset by a 12.4% increase in U.S. export sales, a
6.4% increase in sales of industrial lime products and product
sales to previous competitors in the Canadian refractory
installation business.
Gross profit increased 7.5% from $32.1 million in 1993 to $34.5
million in 1994, including $3.8 million due to the addition of
General products from August through December, 1994. This
followed a 32.5% increase in 1993 from $24.2 million in 1992.
Earnings before cumulative effect of an accounting change of $6.7
million, or $1.65 per share, in 1994 compared to $6.5 million, or
$1.62 per share, in 1993 and a loss before cumulative effect of
accounting changes of $3.2 million, or $.79 per share, in 1992.
Results of operations in 1994 included the cumulative effect of
adopting Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," which
reduced net earnings by $255,000, or $.06 per share. Results of
operations in 1992 were significantly impacted by the adoption of
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," and
No. 109, "Accounting for Income Taxes." The combined cumulative
effect of the Company's adoption of these statements was to
increase the 1992 net loss by $4.1 million, or $1.03 per share.
In addition to the cumulative effect of the adoptions, the impact
of these accounting changes on 1992 results of operations was to
increase the net loss by $128,000, or $.03 per share.
U.S. operations for 1992 also included the recognition of $2.4
million of costs related to settlement of litigation arising from
the 1986 sale by the Company of a former subsidiary. In
addition, a $4.0 million provision for estimated future asbestos
liability claims and settlement costs was recognized during 1992
based upon review of the Company's insurance policies, historical
settlement amounts, the number of pending cases and the projected
number of claims associated with a class action settlement.
Refractory Operations
Net sales from refractory operations increased 25.1% from $128.6
million in 1993 to $160.9 million in 1994, following a decline of
5.5% from $136.1 million in 1992. U.S. refractory sales
increased 25.7% from $112.8 million in 1993 to $141.7 million in
1994, of which $25.7 million was due to the General acquisition.
Excluding this acquisition impact, volumes of U.S. refractory
products increased an average of 6.9% in 1994. Prices increased
slightly over 1993 levels, with a 2.5% increase in specialties
prices partially offset by small declines in prices of brick and
ceramic fibers. U.S. earnings before income taxes and cumulative
effect of accounting changes declined 4.5% from $8.6 million in
1993 to $8.2 million in 1994, due primarily to higher raw
material, equipment maintenance and group insurance costs, higher
pension costs due to plan benefit changes, higher brick breakage
costs and a lower favorable LIFO inventory cost adjustment in
1994 compared to 1993. Also contributing to the decrease were
additional salaries and other personnel costs resulting from the
General acquisition.
U.S. refractory sales in 1993 were up slightly from the $112.3
million in 1992. Ceramic fiber volumes increased 8.5% in 1993,
with reductions in all other product lines resulting in a 1.6%
overall volume decline. Prices increased an average of 3.9%
across all product lines during 1993. U.S. pretax earnings of
$8.6 million in 1993 compared to a loss before income taxes and
cumulative effect of accounting changes of $5.3 million in 1992.
Sales at the Canadian subsidiary increased 48.8% from $12.0
million in 1993 to $17.9 million in 1994. The impact from the
General acquisition was to increase 1994 Canadian sales by $4.0
million. Excluding this impact, volumes increased across all
Canadian product lines an average of 14.6% during 1994,
reflecting increased sales to previous competitors in the
discontinued Canadian refractory installation business. Price
increases in specialties, ceramic fibers and pre-cast shapes were
partially offset by declines in brick and crucibles pricing,
resulting in an overall 1994 price increase of 7.8%. Pretax
earnings at the Canadian subsidiary increased 88.8% from $394,000
in 1993 to $744,000 in 1994, including pretax earnings of
13
<PAGE>
$200,000 from the acquired Canadian operations. This increase
reflected both the increased sales level and cost savings
resulting from the restructuring which took place during the
first quarter of 1994. Results for 1994 also included a pretax
cost of approximately $315,000 during the first quarter for the
Canadian personnel reductions made during that quarter. Absent
that adjustment, the Canadian subsidiary generated a pretax
margin of 5.9% compared to 3.3% during 1993.
Canadian sales declined 37.2% in 1993 from $19.1 million in 1992,
due primarily to the sale of the Canadian refractory installation
operation in the fourth quarter of 1992. This decrease was
partially offset by product sales to previous competitors in the
Canadian refractory installation business, with volume increases,
excluding installation sales, in all product lines except
crucibles averaging 15.3%, and price increases averaging 3.2% in
all but the pre-cast shapes and castables product lines. Despite
the lower sales, the Canadian pretax earnings of $394,000 in
1993 compared favorably to pretax losses of $298,000 in 1992.
This improvement reflected a reduction in fixed costs resulting
from the reorganization of the Canadian operations in the fourth
quarter of 1992 and a loss incurred on a large construction
project in 1992.
Sales in the U.K. declined 11.8% from $8.3 million in 1993 to
$7.3 million in 1994, following a decline of 11.7% from $9.4
million in 1992, due to continuing weakness in the U.K. economy.
Pretax earnings in the U.K. declined 16.0% from $400,000 in 1993
to $336,000 in 1994. Despite the 1993 U.K. sales decline, 1993
pretax earnings at that subsidiary increased from $376,000 in
1992.
Refractory products cost of sales as a percentage of sales
increased from 80.6% in 1993 to 82.6% in 1994, following a
decline from 86.6% in 1992. The 1994 increase was due primarily
to higher raw material costs, equipment maintenance expense and
group insurance cost. Also contributing to the increase were
higher U.S. pension costs due to plan benefit changes, a lower
favorable LIFO inventory cost adjustment in 1994 compared to 1993
and higher brick breakage costs in the U.S. during 1994 compared
to 1993. Cost of sales as a percentage of sales at the acquired
General plants also contributed to the increase, due primarily to
the maintenance costs necessary to bring these facilities up to
an appropriate state of repair, higher pension costs and a higher
percentage of lower margin sales to the steel industry.
Partially offsetting these increases were reduced utilities,
freight, casualty insurance and workers compensation insurance
costs.
The 1993 decrease in cost of sales as a percentage of sales was
due to improved production efficiencies and lower raw material,
inbound freight, brick breakage, workers' compensation and
distribution costs, partially offset by increased processing fuel
costs. Refractory operating profits increased 12.1% from $10.2
million in 1993 to $11.5 million in 1994, following a 237.6%
increase over 1992 operating profits of $3.0 million.
Industrial Lime Operations
Net sales of $35.1 million in 1994 reflect a 1.6% improvement
over 1993 sales of $34.6 million, which were up 6.4% over 1992
sales of $32.5 million. Volume increased 6.3% at the New
Braunfels, Texas plant in 1994, with increased sales to the
steel, aluminum and building lime markets partially offset by a
decline in sales of road stabilization lime. Volume declined
1.9% at the Kimballton, Virginia plant, with decreased sales of
hydrate partially offset by increases in sales of quicklime and
cal-dol. A production curtailment of several days during the
first quarter as a result of severe weather conditions also
contributed to the volume decline at the Kimballton facility. In
1993, increases in volume at both plants from the steel, paper
and road stabilization markets, partially offset by a reduction
in building lime volumes at the New Braunfels plant, resulted in
an overall volume increase of 4.9%.
Prices improved an average of 1.5% at the Kimballton plant during
1994, with increases in quicklime and cal-dol prices partially
offset by price reductions in hydrate. Prices remained steady at
the Kimballton plant during 1993 compared to 1992. New Braunfels
prices increased slightly during 1994, with increased building
and road stabilization lime prices partially offset by reduced
prices to the steel and aluminum markets. This followed price
increases averaging 3.3% during 1993.
Gross profit at the Company's industrial lime operations declined
9.9% during 1994 following a 19.9% increase in 1993, while
operating profit declined 8.6% in 1994 following a 25.6% increase
in 1993. Contributing to the 1994 declines were increased
depreciation expense due to increased capital expenditures at
both plants, higher purchased raw material costs at the New
Braunfels plant and increased group insurance costs at both
plants. Partially offsetting these increases were reduced
workers' compensation and palletizing costs at the New Braunfels
plant and lower processing fuel costs at the Kimballton plant.
The 1993 increases in both gross profit and operating profit were
primarily due to the sales increase.
14
<PAGE>
Selling and Administrative Expenses
Selling and administrative expenses increased 6.6% from $24.1
million in 1993 to $25.7 million in 1994, following a decline of
1.3% from $24.4 million in 1992. The 1994 increase was due to
increases in salaries and related costs, primarily resulting from
the addition of General sales and research personnel, and
increased legal fees primarily related to foreign trademark
renewals, partially offset by reduced management incentives. The
1993 decrease was due primarily to savings generated by 1992
personnel reductions and a decreased 1993 provision for losses on
accounts receivable, partially offset by increased management and
sales incentives. A partial recovery during 1993 of a trade
receivable previously written off also reduced expenses in
comparison to both 1994 and 1992.
Interest Expense and Income
Interest expense increased 84.0% from $1.1 million in 1993 to
$1.9 million in 1994 due to the additional debt associated with
the General acquisition. This followed a decline of 15.6% from
$1.3 million in 1992. There were no bank borrowings during 1994
or 1993, compared to daily average bank line borrowings of
approximately $4.7 million during 1992. Interest income declined
4.8% from $1.4 million in 1993 and 1992 to $1.3 million in 1994
due to interest received during 1993 in connection with partial
recovery of a trade receivable previously written off. Interest
income on time deposits increased in 1994 due to increased funds
available for investing and higher interest rates. In 1993,
higher average levels of investment compared to 1992 offset the
effect of lower interest rates.
Other Income (Net)
Other income increased 2.0% to $1.2 million in 1994, with gains
on the sale of land and a Los Angeles warehouse partially offset
by reduced royalty income and higher currency conversion losses
on U.S. dollar denominated transactions at the Canadian
subsidiary. Other income declined 14.3% in 1993 from $1.3
million in 1992 due primarily to reduced royalty income,
partially offset by reduced provisions for losses on long-term
notes receivable. The Company and its Canadian and U.K.
subsidiaries typically transact business in their own currencies
and accordingly are not subject to significant currency
conversion gains and losses.
During the third quarter of 1994, a license agreement with a
significant Mexican licensee was cancelled by mutual agreement
due to the acquisition of the licensee by a competitor of A. P.
Green. This will result in a reduction of royalty income to the
Company of approximately $400,000 on an annual basis, with a
$100,000 reduction in 1994.
Equity in Net Income of Affiliates
For the period August 1 through December 31, 1994, the Company's
share of income from two new Colombian affiliates acquired from
General was $282,000.
Financial Condition
The following balance sheet increases resulted from the General
acquisition on August 1, 1994 (in millions):
Receivables $12.3
Inventories 22.7
Deferred income tax benefit 1.1
Other current assets 0.4
-----
Total current assets 36.5
Property, plant and equipment 18.7
Long-term pension assets 0.5
Other long-term assets 5.4
-----
Total assets $61.1
=====
Accounts payable $ 8.9
Accrued payrolls 1.5
Accrued taxes other than on income 0.6
Accrued insurance 4.7
Accrued other 7.6
-----
Total current liabilities 23.3
Deferred income taxes 1.1
Long-term non-pension benefits 0.1
Long-term pensions 11.6
Notes payable 25.0
-----
Total liabilities $61.1
=====
Working capital $13.2
Accrued other primarily represents estimated environmental and
remediation costs and estimated costs to close certain plants and
terminate the affected employees. See Note 2 of notes to
consolidated financial statements for a discussion of the
estimated environmental costs. At December 31, 1994, the
majority of the affected employees (less than 300 in total) had
been terminated and the closed plants are held for sale at net
realizable value.
Working capital increased 44.5%, or $24.1 million, from $54.2
million at December 31, 1993 to $78.3 million at December 31,
1994, including the $13.2 million obtained through the General
acquisition, while the ratio of current assets to current
liabilities remained level at 1.9 to 1. Excluding the
acquisition impact, the increase in working capital was primarily
due to increases in reimbursement due on paid asbestos claims of
$5.6 million, inventories of $5.0 million, accounts receivable
of $4.5 million and closed plants' fixed assets held for sale
(included in other current assets) of $2.6 million, partially
offset by a reduction in cash and cash equivalents of $6.7
15
<PAGE>
million. The increase in reimbursement due on paid asbestos
claims was due to an increase in the number of cases settled
rather than the ageing of receivables. The increase in accounts
receivable was due to increased sales, while the increase in
inventories was due to higher sales levels anticipated in 1995.
Also contributing to the inventory change were temporary
increases in inventories of certain products manufactured by the
General plants being shut down to ensure the ability to service
customer demand during the period in which production of these
products is transferred to the remaining plants.
The $33.3 million decrease in non-current projected insurance
recovery on paid asbestos claims and the related $33.4 million
decrease in non-current projected asbestos claims were due
primarily to asbestos claim payments recovered from insurance
carriers during 1994.
Long-term debt, including current portion, at December 31, 1994
consisted of industrial development revenue bonds totaling $12.0
million, which bear interest rates ranging from 70% of prime to
8.6% and mature at various times from 1997 through 2014,
unsecured notes bearing an interest rate of 8.55% with annual
principal repayments commencing in 1996 and continuing through
2001 and a capitalized lease of $189,000 with an interest rate of
11.1%. Long-term debt increased $24.9 million from the December
31, 1993 level of $12.3 million due to the additional debt
associated with the General acquisition.
During 1994, the Company's $15 million U.S. long-term line of
credit was extended to March 1, 1996 and certain restrictive
covenants were amended and added to coincide with those reflected
in the new agreement under which the new unsecured notes payable
were issued in connection with the financing of the General
acquisition. Approximately $2.1 million of this line-of-credit
was being utilized at December 31, 1994 for outstanding letters
of credit.
Capital expenditures for 1994 totaled $6.5 million compared to
$6.2 million for 1993. Capital expenditure commitments for the
replacement, modernization and expansion of operations amounted
to $3.2 million and $5.1 million at December 31, 1994 and 1993,
respectively. Approximately $1.4 million of the 1994 commitment
and $3.8 million of the 1993 commitment was for expansion of
production capacity, increased safety and improved environmental
controls at the Lime plants. A. P. Green believes that it has
sufficient liquidity and borrowing capacity to meet both its
normal working capital requirements and its planned capital
expenditures for 1995.
The Company has investments in subsidiaries in Canada and the
U.K. Adjustments resulting from the currency translation of
these subsidiaries' financial statements are reflected as a
component of stockholders' equity and were $2.4 million and $2.3
million, respectively, at December 31, 1994 and 1993.
On November 10, 1993, A. P. Green's Board of Directors approved a
three-for-two stock split, effected in the form of a stock
dividend payable December 10, 1993 to stockholders of record on
November 26, 1993. The stock split resulted in the issuance of
1,485,891 additional shares from authorized but unissued shares.
A transfer of $1,485,891 was made from additional paid-in capital
to common stock at the stated par value. All share and per share
data have been restated to reflect this stock split.
The Board of Directors reinstated the payment of dividends in the
fourth quarter of 1993 with the declaration and payment of a
dividend of $.06 per common share. The Board of Directors
continued to declare quarterly dividends of $.06 per share
throughout 1994. The continuation of such quarterly dividends
will be evaluated by the Board of Directors from time to time in
light of A. P. Green's financial position and results of
operations.
In 1992 and 1993, the Company reported its projected asbestos
claims and projected insurance reimbursements relating to such
claims net within accrued liabilities. With the issuance of FASB
Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts," the Company determined that the amounts should be
reported gross rather than net and, as such, restated certain
amounts in the December 31, 1993 consolidated statement of
financial position and consolidated statements of cash flows for
the years ended December 31, 1992 and 1993 to be consistent with
the 1994 presentation.
Subsequent Events
On January 31, 1995, the Company formed a joint venture with
INTOCAST AG to sell and install cast monolithic ladle linings to
the steel industry in the United States, Canada and Mexico.
INTOCAST AG, based in Germany, is a world leader in the
development of cast ladle linings. Their linings result in lower
installation costs, significantly reduced disposal of used
refractory material and increased ladle availability compared to
traditional brick linings. The Company's investment in this
joint venture will not be material.
On February 16, 1995, the Board of Directors gave approval to the
establishment of a refractory manufacturing plant near Jakarta,
Indonesia. The plant will have the capacity to manufacture
25,000 metric tons of specialty refractory products per year.
The plant is expected to cost approximately $4.5 million and
could be in production by late 1995 or early 1996.
The Board of Directors also increased the quarterly dividend from
$.06 per common share to $.07 per common share, a 17% increase,
in the first quarter of 1995.
16
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
-----------------------------------
(Dollars in thousands, except per share data)
-------------------------------------------------------------------
Years ended December 31, 1994 1993 1992
-------------------------------------------------------------------
Net sales $ 195,918 $ 162,962 $ 168,309
Cost of sales 161,420 130,879 144,092
-------------------------------------------------------------------
Gross profit 34,498 32,083 24,217
Expense and other income
Selling and administrative
expense 25,707 24,125 24,435
Interest expense 1,947 1,058 1,255
Interest income (1,296) (1,361) (1,393)
Other income, net (1,155) (1,131) (1,319)
Provision for litigation and
claim settlement - - 6,427
-------------------------------------------------------------------
Earnings (loss) before
income taxes and cumulative
effect of accounting changes 9,295 9,392 (5,188)
Income tax expense (benefit) 2,904 2,895 (2,021)
Equity in net income of affiliates 282 - -
-------------------------------------------------------------------
Earnings (loss) before
cumulative effect of
accounting changes 6,673 6,497 (3,167)
Cumulative effect of accounting
changes
Income taxes - - 3,848
Postretirement benefits other
than pensions, net of tax - - (7,982)
Postemployment benefits,
net of tax (255) - -
-------------------------------------------------------------------
Net earnings (loss) $ 6,418 $ 6,497 $ (7,301)
===================================================================
Earnings (loss) per common share
before cumulative effect of
accounting changes $ 1.65 $ 1.62 $ (.79)
Cumulative effect of accounting
changes
Income taxes - - .96
Postretirement benefits other
than pensions, net of tax - - (1.99)
Postemployment benefits,
net of tax (.06) - -
-------------------------------------------------------------------
Net earnings (loss) per
common share $ 1.59 $ 1.62 $ (1.82)
Weighted average number of
common shares 4,024,812 4,010,782 4,010,782
===================================================================
See accompanying notes to consolidated financial statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands, except per share data)
------------------------------------------------------------------
December 31, 1994 1993
------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 9,637 $ 16,331
Trade receivables (net of allowances -
1994, $1,992;1993, $1,198) 43,728 26,873
Reimbursement due on paid asbestos claims 11,475 5,929
Inventories 53,452 25,735
Projected insurance recovery on
asbestos claims 35,540 35,779
Deferred income tax benefit 5,355 4,493
Other 4,965 1,811
------------------------------------------------------------------
Total current assets 164,152 116,951
Property, plant and equipment, net 95,412 81,474
Non-current projected insurance recovery
on asbestos claims 97,344 130,646
Long-term pensions 9,166 8,372
Other assets 7,048 1,871
------------------------------------------------------------------
Total assets $ 373,122 $ 339,314
==================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 22,874 $ 12,691
Accrued expenses
Payrolls 6,044 4,342
Taxes other than on income 1,961 1,161
Insurance reserves 6,995 2,951
Current portion of projected
asbestos claims 35,793 36,754
Other 10,650 4,130
Current maturities of long-term debt 139 123
Income taxes 1,384 601
------------------------------------------------------------------
Total current liabilities 85,840 62,753
Deferred income taxes 15,677 15,538
Long-term non-pension benefits 15,270 14,123
Long-term pensions 12,472 587
Long-term debt 37,023 12,160
Non-current projected asbestos claims 99,802 133,223
------------------------------------------------------------------
Total liabilities 266,084 238,384
------------------------------------------------------------------
Stockholders' equity
Preferred stock - $1 par value;
authorized: 2,000,000 shares;
issued and outstanding: none - -
Common stock - $1 par value;
authorized: 10,000,000 shares;
issued: 4,475,629 in 1994 and
4,459,129 in 1993 4,476 4,459
Additional paid-in capital 72,739 72,492
Retained earnings 49,279 43,800
Less: Deferred currency translation (2,428) (2,301)
Treasury stock of 448,347, at cost (9,003) (9,003)
Note receivable-ESOT (8,021) (8,491)
Deferred compensation-
restricted stock (4) (26)
------------------------------------------------------------------
Total stockholders' equity 107,038 100,930
------------------------------------------------------------------
Total liabilities and stockholders' equity $ 373,122 $ 339,314
==================================================================
See accompanying notes to consolidated financial statements.
18
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
Deferred
Additional Deferred Treasury Note Compensation-
Common Paid-in Retained Currency Stock Receivable- Restricted
Stock Capital Earnings Translation At Cost ESOT Stock
<S> <C> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1991 $2,973 $74,048 $44,837 $ (502) $(9,003) $(9,314) $(274)
---------------------------------------------------------------------------------------------------------------------
Net loss before
cumulative effect of
accounting changes (3,167)
Cumulative effect of
accounting changes
Income taxes 3,848
Postretirement benefits
other than pensions,
net of tax (7,982)
Currency translation
adjustment (1,298)
Deferred compensation
earned 192
Payment on ESOT note 393
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 2,973 74,048 37,536 (1,800) (9,003) (8,921) (82)
---------------------------------------------------------------------------------------------------------------------
Net earnings 6,497
Dividends ($.06 per share) (240)
Three-for-two stock split 1,486 (1,497)
Currency translation
adjustment (501)
Deferred compensation earned 56
Payment on ESOT note 430
Excess income tax expense
related to issuance of
restricted stock (59)
Tax benefit on dividends
paid to ESOT 7
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 4,459 72,492 43,800 (2,301) (9,003) (8,491) (26)
---------------------------------------------------------------------------------------------------------------------
Net earnings before
cumulative effect of an
accounting change 6,673
Cumulative effect of an
accounting change
Postemployment benefits,
net of tax (255)
Common stock issued under
employee stock options 15 223
Common stock issued to
nonemployee directors 2 26
Dividends ($.24 per share) (967)
Currency translation
adjustment (127)
Deferred compensation earned 22
Payment on ESOT note 470
Excess income tax expense
related to issuance of
restricted stock (2)
Tax benefit on dividends
paid to ESOT 28
---------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $4,476 $72,739 $49,279 $(2,428) $(9,003) $(8,021) $ (4)
---------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to consolidated financial statements.
19
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
--------------------------------------------------------------------------------
Years ended December 31, 1994 1993 1992
--------------------------------------------------------------------------------
Cash flows from operating activities
Net earnings (loss) $ 6,418 $ 6,497 $ (7,301)
Adjustments for items not requiring
(providing) cash
Cumulative effect of accounting
changes
Income taxes - - (3,848)
Postretirement benefits other
than pensions, net of tax - - 7,982
Postemployment benefits,
net of tax 255 - -
Depreciation, depletion and
amortization 8,725 7,671 7,546
Increase in net projected asbestos
liability - - 4,000
Deferred compensation earned 22 56 192
Stock compensation to directors 28 - -
Provision for losses on accounts
receivable 373 143 445
Loss (gain) on sale of assets (403) 168 (172)
Equity in net income of affiliates (282) - -
Decrease (increase) in assets, net of
effects from purchase of General
Refractories operations
Trade receivables (4,924) (968) (52)
Asbestos claim and fee
reimbursements received 33,557 30,778 15,067
Inventories (4,968) 1,232 7,310
Receivable and prepaid taxes 509 - -
Other current assets (995) (73) 239
Increase (decrease) in liabilities, net
of effects from purchase of General
Refractories operations
Accounts payable and accrued
expenses (225) 2,309 1,252
Asbestos claims paid (39,944) (32,851) (16,719)
Pensions 206 461 (331)
Income taxes 782 275 (762)
Deferred income taxes (575) 271 (1,049)
Long-term non-pension benefits 653 565 961
--------------------------------------------------------------------------------
Net cash from (used in) operating
activities (788) 16,534 14,760
--------------------------------------------------------------------------------
Cash flows from investing activities
Capital expenditures (6,482) (6,149) (3,622)
Decrease (increase) in other long-term
assets 355 (126) 1,023
Increase in pension assets (311) (1,004) (870)
Proceeds from sales of assets 511 454 371
Payment received on ESOT note 470 430 393
Purchase of General Refractories
operations (24,497) - -
--------------------------------------------------------------------------------
Net cash used in investing activities (29,954) (6,395) (2,705)
--------------------------------------------------------------------------------
Cash flows from financing activities
Repayments of debt (122) (122) (33,190)
Proceeds from borrowings 25,000 - 23,279
Dividends paid (967) (240) -
Purchase of fractional shares in
connection with stock split - (11) -
Exercised stock options 238 - -
Tax benefit on dividends paid to ESOP 28 7 -
Tax effect on restricted stock plan (2) (59) -
--------------------------------------------------------------------------------
Net cash from (used in) financing
activities 24,175 (425) (9,911)
--------------------------------------------------------------------------------
Effect of exchange rate changes (127) (501) (1,298)
--------------------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents (6,694) 9,213 846
Cash and cash equivalents at beginning
of year 16,331 7,118 6,272
--------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 9,637 $ 16,331 $ 7,118
================================================================================
See accompanying notes to consolidated financial statements.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
Note 1: Summary of Significant Accounting Policies
Investments In Other Companies And Ventures
Equity investments of 20% to 50% are accounted for using the
equity method. This method increases or decreases the investment
through recognition of the Company's share of undistributed
earnings or losses of the investee company. Equity investments
of more than 50% in entities are consolidated for financial
reporting purposes. All intercompany balances and transactions
have been eliminated. Related party transactions are not
material.
Cash and Cash Equivalents
A. P. Green considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be
cash equivalents. Due to their short maturity, these
instruments are carried at cost which approximates fair value.
Reimbursement Due on Paid Asbestos Claims
A. P. Green typically makes expense and indemnity payments on
asbestos product claims directly to the Center for Claims
Resolution. Reimbursement due on paid asbestos claims represents
the recoverable portion of such payments previously made by the
Company.
Inventories
Predominantly all of A. P. Green's domestic inventories are
stated at the lower of cost or market, with cost being determined
using the last-in, first-out (LIFO) method. The remaining
inventories are stated at the lower of cost or market, with cost
being determined using the first-in, first-out (FIFO) or average
production cost methods. Inventories include material, labor and
applicable factory overhead costs.
Property, Plant and Equipment, Net
Property, plant and equipment, including significant renewals and
improvements, are capitalized at cost. Provisions for
depreciation are determined principally on a straight-line basis
over the expected average useful lives of composite asset groups,
which range from 3 to 50 years. Depletion is computed on a basis
calculated to allocate the cost of clay, limestone and other
applicable resources over the estimated quantities of recoverable
material.
Income Taxes
Effective January 1, 1992, A. P. Green adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," (Statement 109) and reported the cumulative effect of
that accounting change in the 1992 consolidated statement of
earnings. Statement 109 requires that deferred tax assets and
liabilities be recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in the consolidated statement of earnings
during the period that includes the date of the change.
Foreign Currency Translation
The functional currency of the Company's Canadian and United
Kingdom subsidiaries is their local currency. Adjustments
resulting from the currency translation of the subsidiaries'
financial statements are reflected as a component of
stockholders' equity.
Earnings Per Share
Earnings per common share are computed based on the weighted
average number of shares of common stock outstanding and have
been restated to reflect the three-for-two stock split effective
December 10, 1993.
Reclassification of Prior Year Amounts
Certain prior year amounts have been reclassified to conform to
the 1994 presentation. In 1992 and 1993, the Company reported
its projected asbestos claims and projected insurance
reimbursements relating to such claims net within accrued
liabilities. With the issuance of FASB Interpretation No. 39,
"Offsetting of Amounts Related to Certain Contracts," the Company
determined that the amounts should be reported gross rather than
net. As such, the consolidated statement of financial position
as of December 31, 1994 and the consolidated statement of cash
flows for the year ended December 31, 1994 reflect both the gross
projected liability for asbestos claims and gross projected
insurance recoveries related to those claims on a current and
non-current basis. The consolidated statement of financial
position as of December 31, 1993, the consolidated statements of
cash flows for the years ended December 31, 1993 and 1992 and
certain data for the years ended December 31, 1990 through 1993
in the comparative five-year summary have been restated to be
consistent with the 1994 presentation. There was no impact on
operating results of any period as a result of this "grossed-up"
presentation.
Note 2: Acquisitions
Effective August 1, 1994, the Company acquired substantially all
of the assets and assumed most of the liabilities of the
refractory operations of General Refractories Company and its
21
<PAGE>
affiliated companies (collectively referred to as "General").
These operations include ten plants in the United States, a plant
near Toronto, Canada and 49% equity interests in two Colombian
refractory companies.
Balance sheet increases resulting from this acquisition were as
follows:
-----------------------------------------------------------------
(In thousands) August 1, 1994
-----------------------------------------------------------------
Receivables $12,300
Inventories 22,700
Deferred income tax benefit 1,100
Other current assets 400
-----------------------------------------------------------------
Total current assets 36,500
Property, plant and equipment 18,700
Long-term pension assets 500
Other long-term assets 5,400
-----------------------------------------------------------------
Total assets $61,100
=================================================================
Accounts payable $ 8,900
Accrued payrolls 1,500
Accrued taxes other than on income 600
Accrued insurance 4,700
Accrued other 7,600
-----------------------------------------------------------------
Total current liabilities 23,300
Deferred income taxes 1,100
Long-term non-pension benefits 100
Long-term pensions 11,600
Notes payable 25,000
-----------------------------------------------------------------
Total liabilities $61,100
=================================================================
Working capital $13,200
=================================================================
In addition to the assumption of designated liabilities, the
Company paid at closing a cash amount of $23,450,000. The
acquisition was funded by the issuance of $25,000,000 in
principal amount of unsecured notes to a group of institutional
lenders. The acquisition was accounted for using the purchase
method, with the operating results of General included in
consolidated operating results since the date of acquisition.
No financial statements of General for periods prior to the
acquisition or pro forma financial information reflecting the
acquisition of General as of the beginning of the year have been
provided because the U.S. refractory operations of General were
not combined for financial reporting purposes for the three most
recently completed fiscal years and were not capable of being
audited for the most recently completed fiscal year. The Company
concluded, after analyzing the financial books and records of the
refractory operations of General, that there could be no
assurance that such financial statements or pro forma financial
information would accurately reflect the financial condition,
results of operations, cash flows or changes in stockholders'
equity for General's refractory operations.
In connection with the General acquisition, the Company obtained
a Phase I and II Environmental Site Assessment (ESA) in order to
determine the potential environmental impact of specific
recognized environmental conditions at each of the acquired
properties and estimate the costs for remediation. Based upon
the results of the ESA and a report and opinion provided thereon,
the Company established a $3.4 million liability for remediation
costs (in accrued other) as part of the General acquisition. The
majority of this liability relates to leakage and spills from
underground and aboveground storage tanks and drums, and action
is being taken to remediate all identified conditions, which is
expected to be completed within five years. Appropriate state
agencies have been notified of contamination where required, and
there have been no resulting actions taken or proposed by such
agencies against the Company. There was no asbestos-related
liability, either for bodily injury or property damage, assumed
in connection with the General acquisition.
Note 3: Changes in Method of Accounting
Postemployment Benefits
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits." The standard requires application
of the accrual method of accounting to all benefits provided to
former or inactive employees, their beneficiaries and covered
dependents, subsequent to their employment by the Company and
prior to retirement, rather than recognizing these expenses as
they are paid. The Company recognized the projected benefit
obligation relating to short-term and long-term disability
benefits as a cumulative effect of an accounting change, reducing
net income by $255,000, or $.06 per share. The annual
incremental expense is not expected to be material.
Effective January 1, 1992, the Company adopted the following two
Statements of Financial Accounting Standards:
Income Taxes
Statement 109 requires, among other things, use of the asset and
liability method of accounting for income taxes rather than the
deferred method previously used. The cumulative effect of this
accounting change on years prior to 1992 was a reduction in the
Company's deferred tax liability as of January 1, 1992. The
reduction resulted in a decrease in the net loss for 1992 of $3.8
million, or $.96 per share. In addition to the cumulative effect
recorded in the first quarter, the impact of the accounting
change on the year ended December 31, 1992 was to increase the
income tax benefit by approximately $100,000, or $0.03 per share.
Postretirement Benefits Other Than Pensions
Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions,"
requires the application of accrual accounting to postretirement
benefits rather than recognizing expense as claims are paid. The
22
<PAGE>
projected benefit obligation relating to prior service cost was
recognized as a cumulative effect of an accounting change as of
January 1, 1992, thus increasing the net loss for 1992 by $8.0
million, or $1.99 per share. In addition to the cumulative
effect recorded in the first quarter, the impact of the
accounting change on the year ended December 31, 1992 was to
increase the pretax loss by approximately $370,000, or $0.06 per
share after tax.
Note 4: Inventories
Inventory classifications as of December 31, 1994 and 1993 were
as
follows:
-----------------------------------------------------------------
(In thousands) 1994 1993
-----------------------------------------------------------------
Finished goods and work in process
Valued at LIFO
FIFO cost $ 36,233 $ 25,150
Less LIFO reserve (14,919) (14,003)
-----------------------------------------------------------------
LIFO cost 21,314 11,147
Valued at FIFO 9,033 3,935
-----------------------------------------------------------------
30,347 15,082
-----------------------------------------------------------------
Raw materials and supplies
Valued at LIFO
FIFO cost 20,007 11,017
Less LIFO reserve (5,875) (5,431)
-----------------------------------------------------------------
LIFO cost 14,132 5,586
Valued at FIFO 8,973 5,067
-----------------------------------------------------------------
23,105 10,653
-----------------------------------------------------------------
$ 53,452 $ 25,735
=================================================================
For the years ended December 31, 1994, 1993 and 1992, A. P. Green
experienced liquidations of LIFO inventory quantities. The
effect of these LIFO liquidations was to increase 1994 and 1993
pretax earnings by approximately $50,000 and $390,000,
respectively, and decrease the 1992 pretax loss by approximately
$280,000.
Note 5: Property, Plant and Equipment, Net
Property, plant and equipment, net, as of December 31, 1994 and
1993 was as follows:
-----------------------------------------------------------------
(In thousands) 1994 1993
-----------------------------------------------------------------
Land and mineral deposits $ 7,778 $ 5,224
Buildings and realty improvements 45,618 44,198
Machinery and equipment 128,911 110,752
Construction in progress 2,973 4,725
-----------------------------------------------------------------
185,280 164,899
Less accumulated depreciation and depletion 89,868 83,425
-----------------------------------------------------------------
$ 95,412 $ 81,474
=================================================================
Closed production facilities held for sale are included in other
current assets at estimated net realizable value of $2.6 million.
Note 6: Operating Leases
Rental payments were approximately $1.0 million in each of the
last three years. Minimum future payments under noncancellable
operating leases are $800,000 in 1995 and decline progressively
to $0 after 1999. In most cases, management expects expiring
leases will be replaced by similar leases.
Note 7: Short-Term Lines of Credit
Short-term lines of credit have been established with banks in
the United Kingdom for 50,000 and Canada for Cdn$250,000, each
of which was unused at December 31, 1994 and 1993.
Note 8: Long-Term Debt
Long-term debt as of December 31, 1994 and 1993 was as follows:
-----------------------------------------------------------------
(In thousands) 1994 1993
-----------------------------------------------------------------
Unsecured notes payable $25,000 $ -
Industrial development revenue bonds 11,973 12,030
U.S. line of credit - -
Capitalized lease obligation 189 253
-----------------------------------------------------------------
37,162 12,283
Less: Current maturities 139 123
-----------------------------------------------------------------
$37,023 $12,160
=================================================================
The capitalized lease expires in 1997 and carries an interest
rate of 11.1%. A significant portion of the industrial
development revenue bonds require the payment of interest only
until they mature in 1997 and thereafter. Interest rates range
from 70% of prime to 8.6%.
In 1994, the Company issued $25 million in principal amount of
unsecured notes to a group of institutional lenders to finance
the acquisition of General. The notes bear an 8.55% fixed rate
of interest, with semi-annual interest payments commencing
January 29, 1995. Annual principal repayments, which will be
funded out of working capital, will commence July 29, 1996 and
continue through July 29, 2001. A. P. Green is subject to
certain restrictive covenants, including levels of tangible net
worth, working capital, fixed charge coverage, permitted
encumbrances, loans from and to other institutions and restricted
payments. Management does not expect these restrictive covenants
to have a material adverse effect on A. P. Green's operations.
In 1994, the Company's $15 million U.S. long-term line of credit
was extended to March 1, 1996, and restrictive covenants were
amended or added to coincide with those reflected in the
agreement associated with the unsecured notes payable.
Borrowings under this line of credit may be made for working
23
<PAGE>
capital, acquisitions and other corporate purposes, with interest
charged at prime, which was 8.5% at December 31, 1994.
Approximately $2.1 million of standby letters of credit were
outstanding against the line at December 31, 1994, leaving an
available balance of approximately $12.9 million.
Based on the borrowing rates currently available to the Company
for debt with similar terms and average maturities, the fair
value of the industrial development revenue bonds and unsecured
notes payable would not differ materially from carrying value at
December 31, 1994. Aggregate maturities of long-term debt are
approximately $2.7 million, $3.5 million, $5.1 million and $5.1
million for 1996 through 1999, respectively. The net book value
of property, plant and equipment pledged as security or
collateral for outstanding long-term debt was approximately $2.3
million at December 31, 1994.
Note 9: Income Taxes
Income tax expense (benefit) attributable to income (loss) from
continuing operations for the years ended December 31, 1994, 1993
and 1992 consists of the following:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Current
Federal $ 2,774 $ 1,536 $ 573
State 423 367 193
Foreign 280 264 (169)
Deferred (573) 728 (2,618)
-----------------------------------------------------------------
$ 2,904 $ 2,895 $(2,021)
=================================================================
The following schedule provides a reconciliation between expected
tax at the U.S. statutory tax rate and the effective tax rate
(total provision for income taxes as a percentage of earnings
(loss) before income taxes). The primary items contributing to
the lower effective tax rate in 1994 were higher depletion at APG
Lime and a lower Foreign Sales Corporation tax rate. The primary
item contributing to the lower effective tax rate in 1993 results
from the $1.3 million transfer of land to the City of Little
Rock, Arkansas, which is tax deductible at fair value.
-----------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------
U.S. statutory rate 34.0% 34.0% (34.0)%
Transfer of appreciated land - (4.7) -
Excess tax depletion (4.2) (4.1) (7.2)
State and local income taxes, net 2.0 1.7 .3
Foreign tax rate differential .3 .1 .2
Other, net (1.8) 3.8 1.7
-----------------------------------------------------------------
Effective tax rate 30.3% 30.8% (39.0)%
=================================================================
For the years ended December 31, 1994, 1993 and 1992, deferred
income tax expense (benefit) of approximately $600,000, $700,000
and $(2.6) million, respectively, resulted from temporary
differences in the recognition of income and expense for income
tax and financial reporting purposes. The sources and tax
effects of those temporary differences consist of the following:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Accelerated tax depreciation $ (1,145) $ (951) $ (602)
Accrued liabilities and allowances 1,250 516 (639)
Allowances for asset valuation (1,346) - 24
Capital loss utilization
(carryforward) 120 45 (598)
Net operating loss utilization
(carryforward) 5 1,783 (467)
Alternative minimum tax utilization
(carryforward) 183 (409) (510)
Other, net 360 (256) 174
-----------------------------------------------------------------
Total deferred tax provision $ (573) $ 728 $(2,618)
=================================================================
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1994, 1993 and 1992 consist of the
following:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Deferred tax assets
Accrued liabilities, differences
in expense recognition $12,087 $ 9,994 $ 9,540
Alternative minimum tax
carryforwards 1,248 1,431 1,022
Inventories, overhead
capitalization differences 492 723 697
Capital loss carryforward 432 552 598
Restricted stock, differences in
compensation recognition 18 66 282
Net operating loss carryforwards 42 47 1,830
-----------------------------------------------------------------
14,319 12,813 13,969
Less valuation allowance - - -
-----------------------------------------------------------------
14,319 12,813 13,969
Deferred tax liabilities
Fixed assets, principally
depreciation method differences 17,159 17,463 18,420
Prepaid pension costs 2,728 2,793 2,592
State, local and other taxes 2,423 2,613 2,347
Inventories, differences in
LIFO methods 1,917 989 875
Asset valuation differences 415 - -
-----------------------------------------------------------------
24,642 23,858 24,234
-----------------------------------------------------------------
Net deferred tax liability $10,323 $11,045 $10,265
=================================================================
24
<PAGE>
At December 31, 1994, A. P. Green has alternative minimum tax
credit carryforwards of approximately $1.2 million which are
available to reduce future federal ordinary income taxes over an
indefinite period. Management believes it is more likely than
not that all deferred tax assets will be realized and,
accordingly, no valuation allowance is required. Tax years
subject to review by the Internal Revenue Service are 1988
through 1994. As of December 31, 1994, the Internal Revenue
Service was conducting a review of years 1988 through 1993, which
should be completed during 1995.
A. P. Green has not recognized a deferred tax liability for the
undistributed earnings of its wholly owned foreign subsidiaries
that arose in 1994 and prior years since the Company does not
expect those unremitted earnings to become taxable in the
foreseeable future. A deferred tax liability will be recognized,
if necessary, when the Company expects that it will recover those
undistributed earnings in a taxable manner, such as through
receipt of dividends or sale of the investments. The remittance
of foreign earnings subjected to tax at a rate greater than the
U.S. rate may create a tax asset for the Company to the extent
foreign tax credits may be generated and are able to be utilized.
As of December 31, 1994, 1993 and 1992, the undistributed
earnings of these subsidiaries were approximately $3.3 million,
$2.9 million and $2.8 million, respectively.
Note 10: Research and Development
Research and development costs are expensed as incurred and
amounted to approximately $2.5 million, $2.2 million and $2.4
million during 1994, 1993 and 1992, respectively.
Note 11: Incentive Plans
A. P. Green maintains the 1987 Long-Term Performance Plan (the
1987 Plan), the 1989 Long-Term Performance Plan (the 1989 Plan)
and the 1993 Performance Plan (the 1993 Plan). Under each of the
plans, common stock has been reserved for issuance in the form of
incentive stock options, nonqualified stock options, restricted
stock and performance shares (in accordance with the Management
Incentive Compensation Plan). Under the 1987 plan, shares are
also available for issuance in the form of stock appreciation
rights. Following is a summary by Plan of the common shares
issued and available for issuance:
-----------------------------------------------------------------
1987 1989 1993
Plan Plan Plan Total
-----------------------------------------------------------------
Common stock reserved for
issuance 195,000 195,000 225,000 615,000
Shares issued 100,500 53,621 - 154,121
Shares committed in the
form of stock options 86,250 111,000 206,250 403,500
-----------------------------------------------------------------
Remaining shares available
for grant 8,250 30,379 18,750 57,379
=================================================================
All share amounts have been restated to reflect the three-for-two
stock split effective December 10, 1993.
At December 31, 1994, restrictions had lapsed with respect to
99,000 of the shares issued as restricted stock. Restrictions
with respect to the remaining 3,000 shares are scheduled to lapse
in 1995. Compensation expense relating to the restricted stock
grants is recognized over the applicable vesting periods and the
unamortized portion of the deferred compensation related to the
restricted stock is reflected as a component of stockholders'
equity.
Stock options outstanding under each of the plans and their
respective exercise prices are summarized as follows:
-----------------------------------------------------------------
Number of Exercise Price at Which
Shares Price Exercisable
-----------------------------------------------------------------
1987 Plan 86,250 $18.33 N/A
1989 Plan 111,000 13.33 N/A
1993 Plan 41,250 12.33 $15.33
41,250 12.33 17.00
41,250 12.33 18.67
41,250 12.33 20.00
41,250 12.33 22.00
-----------------------------------------------------------------
206,250
-----------------------------------------------------------------
403,500
=================================================================
All of the options having exercise prices of $18.33 and $13.33
per share were exercisable at December 31, 1994. All of the
options having an exercise price of $12.33 become exercisable if,
prior to February 18, 1998 and for a period of 30 consecutive
trading days, the last transaction price of the common stock
equals or exceeds the price at which the options become
exercisable as outlined above. To the extent these options
become exercisable, they will remain exercisable until February
18, 2003. To the extent that all or a portion of the options do
not become exercisable due to failure to reach the designated
stock price levels, such options will become exercisable for one
day on February 19, 1998. At December 31, 1994, the options
having a price at which exercisable of $15.33, $17.00 and $18.67
per share were exercisable. None of the remaining options having
an exercise price of $12.33 per share were exercisable, as the
last transaction price of the common stock had not equalled or
exceeded $20.00 per share for 30 consecutive trading days.
Note 12: Pension Plans
A. P. Green has various pension plans covering substantially all
employees. Plan benefits are generally based on years of service
and compensation during the last years of employment. A. P.
Green's contributions are made in accordance with independent
actuarial reports. The Company contributed $578,000 to these
plans during 1994, primarily to those plans acquired from
General, whereas the Company's previously held plans required
minimal funding in 1993 and 1992. The plans' assets consist
primarily of listed common stocks and debt securities.
25
<PAGE>
Net pension (income) expense for the years ended December 31,
1994, 1993 and 1992 included the following components:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Service cost of benefits earned
during period $ 1,793 $ 1,289 $ 1,157
Interest cost on projected benefit
obligations 6,751 5,554 5,516
Actual (gain) loss on assets 1,055 (10,149) (4,743)
Net amortization and deferral (8,892) 2,754 (2,694)
-----------------------------------------------------------------
Net pension (income) expense 707 (552) (764)
Multiemployer pension expense 181 179 193
-----------------------------------------------------------------
Total pension (income) expense $ 888 $ (373) $ (571)
=================================================================
The majority of the Company's pension plans have plan assets that
exceed accumulated benefit obligations. However, of the plans
acquired from General in 1994, two of the three U.S. plans and
the Canadian hourly plan have accumulated benefit obligations
that exceed plan assets. The following table sets forth the
actuarial present value of benefit obligations and funded status
at December 31, 1994 and 1993. Plan asset values are as of
September 30, 1994 and 1993:
-------------------------------------------------------------------------------
(In thousands) 1994 1993
-------------------------------------------------------------------------------
Assets Accum. Assets Accum.
Exceed Benefits Exceed Benefits
Accum. Exceed Accum. Exceed
Benefits Assets Benefits Assets
-------------------------------------------------------------------------------
Accumulated benefit
obligations, substantially
all of which are vested $(76,994) $(23,903) $(73,788) $(463)
Effect of projected future
compensation levels (5,800) - (5,770) -
-------------------------------------------------------------------------------
Projected benefit obligations (82,794) (23,903) (79,558) (463)
Plans' assets at fair value 87,694 13,686 89,404 380
-------------------------------------------------------------------------------
Excess (deficiency) 4,900 (10,217) 9,846 (83)
Unrecognized net asset at
transition (4,073) (27) (4,720) (9)
Unrecognized net (gain) loss 2,747 (1,500) (2,442) 37
Unrecognized prior service cost 4,610 82 5,018 25
-------------------------------------------------------------------------------
Prepaid (accrued)
pension cost $ 8,184 $(11,662) $ 7,702 $ (30)
===============================================================================
U.S. Pensions
The expected long-term rate of return on plan assets was 8.5% for
1994, 1993 and 1992. A weighted average discount rate of 8.25%
was used for 1994, 7.5% was used for 1993 and 8.0% was used for
1992. A rate of increase in future compensation levels of 5.0%
for 1994, 1993 and 1992 was used in determining the actuarial
present value of projected benefit obligations on all except
hourly, collectively bargained plans.
Canadian Pensions
The expected long-term rate of return on plan assets was 8.5% for
1994, 1993 and 1992. A weighted average discount rate of 8.0%
and a 6.5% rate of increase in future compensation levels were
used for all three years.
Note 13: Long-term Non-Pension Benefits
The Company sponsors two defined benefit postretirement plans
that cover both salaried and nonsalaried employees hired prior to
January 1, 1991. One plan provides health care benefits and the
other provides life insurance benefits. The health care plan is
contributory, with retiree contributions, deductibles and benefit
levels adjusted periodically; the life insurance plan is
noncontributory. Under the terms of its health care plan, based
on anticipated increases in future health care costs, the
retirees' share of total costs will be adjusted so that the
Company's share will not increase more than 7% per annum. The
Company maintains the right to adjust benefits, deductibles,
contributions or the Company's share of increases, at its sole
discretion, at future dates.
The following table sets forth the actuarial present value of the
plans' benefit obligations at December 31, 1994 and 1993:
-----------------------------------------------------------------
(In thousands) 1994 1993
-----------------------------------------------------------------
Accumulated postretirement benefit
obligation
Retirees and beneficiaries $10,360 $11,232
Fully eligible active plan participants 1,341 1,280
Other active plan participants 1,928 2,212
-----------------------------------------------------------------
Accumulated postretirement benefit
obligation 13,629 14,724
Unrecognized net gain (loss) from past
experience different from that assumed 1,086 (601)
-----------------------------------------------------------------
Accrued postretirement benefits other
than pensions $14,715 $14,123
=================================================================
The Company's postretirement health care plan and life insurance
plan are unfunded; the accumulated postretirement benefit
obligation at December 31, 1994 and 1993 is $12.7 million and
$13.8 million, respectively, for the health care plan and
$906,000 and $915,000, respectively, for the life insurance plan.
26
<PAGE>
Net postretirement benefits cost other than pensions for the
years ended December 31, 1994, 1993 and 1992 included the
following components:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Service cost of benefits earned
during the period $ 355 $ 337 $ 294
Interest cost on accumulated
postretirement benefit obligation 1,044 1,051 1,056
Immediate recognition of
transition obligation - - 12,597
-----------------------------------------------------------------
Net postretirement benefits cost
other than pensions $ 1,399 $ 1,388 $13,947
=================================================================
For measurement purposes, a 15% annual rate of increase in the
per capita cost of covered health care benefits was assumed for
1992; the rate was assumed to decrease gradually to 6% by 2001
and remain at that level thereafter. The Company plans to limit
its portion of future cost increases for postretirement health
care to 7% per annum. Increasing the assumed health care cost
trend rates by one percentage point in each year would increase
the accumulated postretirement benefit obligation as of December
31, 1994 by 9.4%, or $1.2 million, but would not alter the
service and interest cost components of net postretirement
benefits cost other than pensions for the year then ended due to
the 7% cap on the Company's share of cost increases.
The discount rate used in determining the accumulated
postretirement benefit obligation was 8.25% at December 31, 1994,
7.5% at December 31, 1993 and 8.25% at December 31, 1992.
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting
for Postemployment Benefits." This standard requires use of the
accrual method of accounting for benefits provided to former or
inactive employees after employment but before retirement, rather
than recognizing these expenses as they are paid. The projected
benefit obligation relating to short-term and long-term
disability benefits provided by the Company to salaried employees
was recognized as a cumulative effect of an accounting change as
of January 1, 1994, reducing net income by $255,000, or $.06 per
share. The annual incremental expense for 1994 was not material
and the projected benefit obligation was $555,000 as of December
31, 1994.
Note 14: Employee Savings Plans
The Company sponsors two defined contribution employee savings
plans under Section 401(k) of the Internal Revenue Code. In one
plan, all U.S. full-time salaried employees and the hourly
employees of APG Lime Corp. and the Pryor, Oklahoma, Ellisville,
Mississippi, Middletown, Pennsylvania, Minerva, Ohio and Pueblo,
Colorado plants are eligible to participate. Participants are
entitled to contribute between 2% and 15% of compensation. The
Company makes contributions to the Employee Stock Ownership
Trust. Amounts charged against income were approximately $1.2
million, $1.4 million and $1.4 million in 1994, 1993 and 1992,
respectively.
The other plan, instituted in 1991, covers employees at certain
locations who have negotiated participation through collective
bargaining. Participants are eligible to contribute between 2%
and 15% of compensation. For some of these locations, the
Company matches 25% of the first 6% of a participant's
contribution. Amounts charged against income were approximately
$151,000, $128,000 and $110,000 in 1994, 1993 and 1992,
respectively.
Note 15: Employee Stock Ownership Trust
In 1989, A. P. Green established an Employee Stock Ownership
Trust (ESOT). All U.S. full-time salaried employees and the
hourly employees of APG Lime Corp. and the Pryor, Oklahoma,
Ellisville, Mississippi, Middletown, Pennsylvania, Minerva, Ohio
and Pueblo, Colorado plants are eligible to participate. The
ESOT purchased 402,684 previously unissued shares of A. P. Green
Common Stock. On February 1, 1990, 45,076 additional shares were
issued to the ESOT in accordance with the Stock Purchase
Agreement between LaSalle National Bank, as Trustee, and A. P.
Green. The aggregate purchase price of $10.0 million was
financed entirely by A. P. Green. To secure the financing, the
ESOT has pledged the shares to A. P. Green. A. P. Green makes
contributions to the ESOT, which are used by the Trustee to make
interest and principal payments to A. P. Green.
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Interest payments on ESOT debt $ 806 $ 847 $ 885
Principal payments 471 430 393
Less
Dividends on ESOT shares used
for debt service (104) (27) -
Forfeitures (58) - -
-----------------------------------------------------------------
Contributions to ESOT 1,115 1,250 1,278
Administrative expenses 159 127 82
-----------------------------------------------------------------
Employee savings plan cost $1,274 $1,377 $1,360
=================================================================
The loan to the ESOT is repayable in annual installments
extending through September 30, 2004. Interest is payable
semiannually at 9.5% per annum. The note receivable from the
ESOT is reflected as a reduction of stockholders' equity in the
accompanying consolidated financial statements. The Company
recognized interest income on the ESOT note of $795,000, $837,000
and $876,000 in 1994, 1993 and 1992, respectively.
27
<PAGE>
Note 16: Preferred and Common Stock
Authorized stock consists of 10,000,000 shares of common stock,
$1 par value, and 2,000,000 shares of preferred stock, $1 par
value. The preferred stock can be issued in one or more series
without stockholder approval. One Preferred Share Purchase Right
(Right) is attached to each outstanding share of common stock.
The Rights become exercisable 10 days following a public
announcement that a party acquired, or obtained the right to
acquire, beneficial ownership of 20% or more of A. P. Green's
outstanding common shares, or 10 days following commencement or
announcement of a tender offer or exchange offer for 30% or more
of A. P. Green's outstanding common shares. When exercisable,
each Right entitles the registered holder to purchase from A. P.
Green 1/10 of a share of a junior participating preferred stock,
Series A, $1 par value per share, which is substantially similar
to one common share, at a price of $45 per 1/10 of a preferred
share, subject to adjustment. If A. P. Green is involved in a
merger or business combination or if the acquiring entity engages
in "self dealing transactions" after the Rights become
exercisable, the Rights will entitle the holder to buy a number
of shares of common stock of the acquiring company or of A. P.
Green, as the case may be, having a fair market value at that
time of twice the exercise price of the Right.
On November 10, 1993 the Board of Directors approved a three-for-
two stock split, effected in the form of a stock dividend payable
December 10, 1993 to stockholders of record on November 26, 1993.
The stock split resulted in the issuance of 1,485,891 additional
shares from authorized but unissued shares. A transfer of
$1,485,891 was made from additional paid-in capital to common
stock at the stated par value. Per share amounts for all prior
periods presented have been restated to reflect the stock split.
Note 17: Supplemental Cash Flow Information
Cash payments (receipts) and selected non-cash investing and
financing activities during 1994, 1993 and 1992 were as follows:
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Income taxes paid (refunded) $2,125 $2,401 $ (635)
Interest paid 1,039 1,058 1,309
=================================================================
The income tax refund received during 1992 was largely due to
amended returns filed for 1988 and 1989 to carryback 1990 excess
foreign tax credits.
Other noncash activities during 1993 included a write-up to fair
value of land in Little Rock, Arkansas and transfer of that same
property to the City of Little Rock.
Note 18: Litigation
Asbestos-related claims - Personal Injury
A. P. Green is among numerous defendants in lawsuits pending as
of December 31, 1994 that seek to recover compensatory, and in
many cases, punitive damages for personal injury allegedly
resulting from exposure to asbestos-containing products
manufactured, sold or installed by A. P. Green.
A. P. Green is a member of the Center for Claims Resolution (the
Center), an organization of twenty companies (Members) who were
formerly distributors or manufacturers of asbestos-containing
products. The Center administers, evaluates, settles, pays and
defends all of the asbestos-related personal injury lawsuits
involving its Members. Under the terms of the Center Agreement,
each Member's portion of the liability payments and defense costs
are based upon, among other things, the number and type of claims
brought against it.
Claims activity for each of the years ended December 31, 1994 and
1993 was as follows:
-----------------------------------------------------------------
1994 1993
-----------------------------------------------------------------
Claims pending at January 1 52,122 50,007
Claims filed 14,836 26,100
Cases settled, dismissed or
otherwise resolved 16,038 23,985
-----------------------------------------------------------------
Claims pending at December 31 50,920 52,122
=================================================================
Average settlement amount per claim (1) $ 1,816 $ 1,728
=================================================================
(1) Substantially all settlements are covered by the Company's
insurance program.
On January 15, 1993, the Members were named as defendants in a
class action lawsuit brought on behalf of all persons who have
been occupationally exposed to asbestos-containing products of
the Members and who have unasserted claims for such exposure (the
Class) pursuant to Federal Rule of Civil Procedure 23(b)(3) in
the Federal District Court for the Eastern District of
Pennsylvania. At about the same time, the Center negotiated and
filed with the Court a settlement (the Settlement) between the
Members and the Class. Under the terms of the Settlement, the
Members have agreed to pay compensation to any member of the
Class who has, according to objective medical criteria, physical
impairment as a result of such exposure. Different levels of
compensation will be paid depending on the type and degree of
physical impairment. No punitive damages will be paid. The
Settlement provides, among other things, for a cap on the number
of claims to be processed each year during the next ten years and
a range of settlement values for each disease category.
Settlement values are based on historical average payments by the
Center for similar cases. Each Member will be responsible for
its percentage share of each claim payment (no joint and several
liability), such shares having been previously established.
Hearings were held to determine the fairness of the Settlement
and the court ruled that the Settlement was fair. This ruling
has been appealed by certain objectors.
In a third party action filed simultaneously with the class
action (and in parallel Alternate Dispute Resolution
proceedings), the Members have asked for a declaratory judgment
against their respective insurers that such insurers cannot use
the Settlement as a defense to their payment under applicable
28
<PAGE>
policies of insurance. The Settlement is expressly contingent
upon such declaratory relief. In addition, some Members,
including A. P. Green, have asked for a declaratory judgment
against their insurers with whom they have not reached coverage
resolutions. No decision has been rendered at this date with
respect to these issues.
Under the assumption that it receives these court approvals, the
Settlement has provided the Company with a basis for estimating
its potential liability and related insurance recovery associated
with asbestos cases. The Company has reviewed its insurance
policies, historical settlement amounts, the number of pending
cases and the projected number of claims to be filed pursuant to
the Settlement and the Company's share of amounts to be paid
thereunder. The Company has also reviewed its contractual
liability for the payment of deductibles under insurance policies
defending asbestos cases brought against a former subsidiary.
Based upon such reviews, the Company has estimated its liability
for such cases and claims to be approximately $135.6 million and
$170.0 million at December 31, 1994 and 1993, respectively, with
partially offsetting projected insurance reimbursements of
approximately $132.9 million and $166.4 million, respectively.
While management understands the inherent uncertainty in
litigation of this type and the possibility that past costs may
not be indicative of future costs, management does not believe
that these claims and cases will have any additional material
adverse effect on the Company's financial position or results of
operations. Management anticipates that payments for these
claims will occur over at least ten years and can be made from
normal operating cash sources.
In addition to asbestos-related personal injury claims asserted
against A. P. Green, a number of claims have been asserted
against Bigelow-Liptak Corporation (now known as A. P. Green
Services, Inc.), a subsidiary of the Company. These claims have
been and are currently being handled by such subsidiary's
insurance carriers. No claim for reimbursement of defense or
indemnity payments has been made against the Company or such
subsidiary by any such carriers.
The Company is contractually liable to The E. J. Bartells Company
(Bartells), a former subsidiary, for deductible amounts on
certain insurance policies insuring Bartells against asbestos-
related personal injury claims issued when it was owned by A. P.
Green. The Company has estimated the amounts of such deductibles
and provision for such estimate was made in the Company's 1992
financial statements.
Asbestos-related claims-Property Damage
A. P. Green is among numerous defendants in a property damage
class action suit pending in South Carolina. A. P. Green
previously has been dismissed from a number of property damage
cases and believes that it should be dismissed from the South
Carolina case based on the end uses of its products. A similar
suit pending in the State of Oregon involves a former wholly
owned subsidiary of the Company and is being defended by the
Company's insurance carrier. Based upon the Company's history in
these asbestos-related property damage claims, management does
not believe that the ultimate resolution of these matters will
have a material adverse effect on the Company's financial
position or results of operations.
There was no assumption of asbestos-related liability, either
personal injury or property damage, in connection with the
General acquisition.
Environmental
The EPA or private parties have named the Company or one of its
subsidiaries as a potentially responsible party in connection
with two superfund sites in the United States. The Company is a
de minimis party with respect to one of the sites and expects to
arrive at a settlement agreement and Consent Decree with respect
to it for an amount of not more than $10,000. With respect to
the second, involving a wholly owned subsidiary of the Company,
there does not appear to be any evidence of delivery to the site
of hazardous material by the subsidiary. An estimate has been
made of the costs to be incurred in these matters and the Company
has recorded a reserve respecting those costs.
Other
From time to time, A. P. Green is subject to claims and other
lawsuits that arise in the ordinary course of business, some of
which may seek damages in substantial amounts, including punitive
or extraordinary damages. Reserves for these claims and lawsuits
are recorded to the extent that losses are deemed probable and
are estimable. In the opinion of management, the disposition of
all current claims and lawsuits will not have a material adverse
effect on the consolidated financial position or results of
operations of A. P. Green.
Note 19: Industry and Geographic Segments
A. P. Green operates principally in two industry segments:
Industrial Lime and Refractory Products and Services. Segment
net sales include products sold and services rendered to
unaffiliated customers. Interindustry segment sales were
immaterial for the periods presented. No single customer
accounted for more than 10% of consolidated annual net sales in
any such period. Segment operating profit includes all costs and
expenses directly related to the segment involved and a
reasonable allocation of general costs and expenses which benefit
more than one segment. General corporate expenses, interest
income and interest expense are shown as separate line items in
order to arrive at consolidated earnings (loss) before income
taxes and cumulative effect of accounting changes. Corporate
identifiable assets include those assets maintained for corporate
purposes, which are not directly related to the operations of
either industry segment.
29
<PAGE>
Industry Segments
-----------------------------------------------------------------
(In thousands) 1994 1993 1992
-----------------------------------------------------------------
Net Sales
-----------------------------------------------------------------
Refractory products and services $160,934 $128,627 $136,070
Industrial lime 35,144 34,587 32,494
Intersegment eliminations (159) (252) (255)
-----------------------------------------------------------------
$195,918 $162,962 $168,309
=================================================================
Operating Profit
-----------------------------------------------------------------
Refractory products and services $ 11,463 $ 10,222 $ 3,028
Industrial lime 5,429 5,939 4,729
-----------------------------------------------------------------
16,892 16,161 7,757
-----------------------------------------------------------------
Other charges to income
General corporate expenses, net 6,946 7,072 6,656
Interest expense 1,947 1,058 1,255
Interest income (1,296) (1,361) (1,393)
Provision for litigation and
claim settlement - - 6,427
-----------------------------------------------------------------
7,597 6,769 12,945
-----------------------------------------------------------------
Earnings (loss) before
income taxes and cumulative
effect of accounting changes $ 9,295 $ 9,392 $ (5,188)
=================================================================
Identifiable Assets
-----------------------------------------------------------------
Refractory products and services $311,514 $273,061 $287,531
Industrial lime 47,995 45,827 44,200
Corporate 13,613 20,426 11,681
-----------------------------------------------------------------
$373,122 $339,314 $343,412
=================================================================
Depreciation, Depletion and Amortization
-----------------------------------------------------------------
Refractory products and services $ 4,967 $ 4,336 $ 4,286
Industrial lime 2,653 2,419 2,279
Corporate 1,105 916 981
-----------------------------------------------------------------
$ 8,725 $ 7,671 $ 7,546
=================================================================
Capital Expenditures
-----------------------------------------------------------------
Refractory products and services $ 2,154 $ 1,448 $ 2,204
Industrial lime 3,482 4,220 1,126
Corporate 846 481 292
-----------------------------------------------------------------
$ 6,482 $ 6,149 $ 3,622
=================================================================
A. P. Green's principal operations are located in the United
States, the United Kingdom and Canada. Transactions between
geographic areas are accounted for on an "arm's length" basis.
Export sales to foreign, unaffiliated customers represent less
than 10% of consolidated annual net sales.
---------------------------------------------------------
Geographic Segments
---------------------------------------------------------
(In thousands) 1994 1993 1992
---------------------------------------------------------
Net Sales
---------------------------------------------------------
United States $176,869 $147,362 $144,785
Canada 17,876 12,013 19,142
United Kingdom 7,336 8,316 9,415
Intersegment transfers (6,163) (4,729) (5,033)
---------------------------------------------------------
$195,918 $162,962 $168,309
=========================================================
Earnings (Loss) Before Income Taxes and Cumulative Effect
of Accounting Changes
---------------------------------------------------------
United States $ 8,215 $ 8,598 $ (5,266)
Canada 744 394 (298)
United Kingdom 336 400 376
---------------------------------------------------------
$ 9,295 $ 9,392 $ (5,188)
=========================================================
Identifiable Assets
---------------------------------------------------------
United States $339,380 $307,967 $319,242
Canada 15,887 7,301 8,373
United Kingdom 4,242 3,620 4,116
Corporate 13,613 20,426 11,681
---------------------------------------------------------
$373,122 $339,314 $343,412
=========================================================
30
<PAGE>
Note 20: Quarterly Financial Highlights (Unaudited)
---------------------------------------------------------------
(Dollars in thousands, First Second Third Fourth
except per share data) Quarter Quarter Quarter Quarter
---------------------------------------------------------------
1994
Net sales $37,503 $40,849 $54,255 $63,311
Gross profit 6,106 7,452 9,288 11,652
Earnings before
cumulative effect of
an accounting change 436 1,356 2,176 2,705
Cumulative effect of
an accounting change (255) - - -
Net earnings 181 1,356 2,176 2,705
Earnings per common
share before
cumulative effect of
an accounting change .11 .34 .54 .66
Cumulative effect of
an accounting change (.06) - - -
Net earnings per
common share .05 .34 .54 .66
---------------------------------------------------------------
1993
Net sales $39,505 $41,053 $40,723 $41,681
Gross profit 7,839 8,812 7,892 7,540
Net earnings 1,334 1,776 1,770 1,617
Net earnings per
common share .33 .44 .44 .41
===============================================================
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
A. P. GREEN INDUSTRIES, INC.:
We have audited the accompanying consolidated statements of
financial position of A. P. Green Industries, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of earnings, stockholders' equity, and
cash flows for each of the years in the three-year period ended
December 31, 1994. These consolidated financial statements are
the responsibility of A. P. Green's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of A. P. Green Industries, Inc. and subsidiaries as of
December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note 3 of Notes to Consolidated Financial
Statements, the Company changed its method of accounting for
postretirement benefits other than pensions and its method of
accounting for income taxes in 1992, and changed its method of
accounting for postemployment benefits in 1994.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
February 13, 1995
31
<PAGE>
COMPARATIVE FIVE-YEAR SUMMARY
(Dollars in thousands, except
per share data)
----------------------------------------------------------------------------
For years ended December 31, 1994 1993 1992 1991 1990
----------------------------------------------------------------------------
Operating Items
Net sales $195,918 $162,962 $168,309 $170,298 $186,450
Gross profit 34,498 32,083 24,217 17,762 28,179
Earnings (loss) before
income taxes and
cumulative effect of
accounting changes 9,295 9,392 (5,188) (7,833) 962
Earnings (loss) before
cumulative effect of
accounting changes 6,673 6,497 (3,167) (4,963) 108
Cumulative effect of
accounting changes,
net of tax (255) - (4,134) - -
----------------------------------------------------------------------------
Net earnings (loss) 6,418 6,497 (7,301) (4,963) 108
Per share data (1)
Earnings (loss)
before cumulative
effect of accounting
changes, net of tax $ 1.65 $ 1.62 $ (.79) $ (1.24) $ .03
Cumulative effect of
accounting changes,
net of tax (.06) - (1.03) - -
----------------------------------------------------------------------------
Net earnings (loss)
per common share 1.59 1.62 (1.82) (1.24) .03
Dividends .24 .06 - .30 .40
Financial Items
Working capital $ 78,312 $ 54,198 $ 45,714 $ 46,138 $ 53,289
Current ratio 1.9:1 1.9:1 1.8:1 2.0:1 2.4:1
Capital expenditures $ 6,482 $ 6,149 $ 3,622 $ 6,442 $ 11,414
Depreciation, depletion
and amortization 8,725 7,671 7,546 7,013 6,487
Total assets 373,122 339,314 343,412 368,468 383,343
Long-term debt 37,023 12,160 12,284 16,017 15,289
Stockholders' equity 107,038 100,930 94,751 102,765 108,634
Debt to total
capitalization (2) 25.7% 10.8% 11.6% 17.8% 16.2%
============================================================================
(1) All per share data has been restated to reflect the December 10, 1993
three-for-two stock split.
(2) Calculated as total Debt (long-term debt including current
maturities) divided by total stockholders' equity plus total Debt.
Common Stock, Market Prices and Dividends
A. P. Green Industries, Inc.'s common stock is traded in the
over-the-counter market, and its quotations are reported in the
National Market System of the National Association of Securities
Dealers Automated Quotation System (NASDAQ) under the symbol
APGI. The approximate number of stockholders of record of A. P.
Green's common stock at December 31, 1994 was 4,300.
The following table sets forth the high and low per share sale
prices as reported in the NASDAQ and dividends for each quarter
during the last two years, restated to reflect the December 10,
1993 three-for-two stock split.
1994 1993
---------------------------------------------------------------------
Cash Cash
Quarter Ended Sale Price Dividend Sale Price Dividend
High Low Declared High Low Declared
---------------------------------------------------------------------
March 31 $20.50 $16.50 $.06 $12.67 $10.17 $ -
June 30 19.50 17.25 .06 14.08 12.50 -
September 30 18.55 16.50 .06 15.83 13.33 -
December 31 20.00 17.50 .06 17.75 15.00 .06
=====================================================================
32
<PAGE>
Exhibit 22
to Annual Report
On Form 10-K
WHOLLY OWNED SUBSIDIARIES
OF
A. P. GREEN INDUSTRIES, INC.
Name Jurisdiction Incorporated
APG Foreign Sales Corporation Virgin Islands
APG Lime Corp. Delaware
A. P. Green Refractories (Canada) Ltd. Canada
1086215 Ontario Inc. Canada
A. P. Green Refractories, Inc. Delaware
A. P. Green Refractories Limited United Kingdom
Liptak Bradley Limited United Kingdom
APG Refractories Corp. Delaware
Detrick Refractory Fibers, Inc. Mississippi
Exhibit 24 to
Form 10-K
Independent Auditors' Consent
The Board of Directors and Stockholders
A. P. Green Industries, Inc.:
We consent to incorporation by reference in the registration
statement (No. 33-21012) on Form S-8 of A. P. Green Industries,
Inc. and subsidiaries of our report dated February 13, 1995,
relating to the consolidated statements of financial position of
A. P. Green Industries, Inc. and subsidiaries as of December 31,
1994 and 1993, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1994, and the
related schedule, which report appears in the December 31, 1994
annual report on Form 10-K of A. P. Green Industries, Inc.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 23, 1995
Exhibit 28(a)
to Form 10-K
FORM 11-K
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16452
A. Full title of the plan and the address of the plan if different
from that of the issuer named below:
A. P. GREEN INVESTMENT PLAN
(address same as below)
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
A. P. Green Industries, Inc.
Green Boulevard
Mexico, Missouri 65265
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Financial Statements and Schedules
September 30, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Table of Contents and Definitions
Table of Contents:
Independent Auditors' Report
Statement of Net Assets Available for Plan Benefits, September 30, 1994
Statement of Net Assets Available for Plan Benefits, September 30, 1993
Statement of Changes in Net Assets Available for Plan Benefits, Year ended
September 30, 1994
Statement of Changes in Net Assets Available for Plan Benefits, Year ended
September 30, 1993
Notes to Financial Statements, September 30, 1994 and 1993
Schedule
--------
Item 27a:
Schedule of Assets Held for Investment Purposes, September 30, 1994 1
Schedule of Assets Which Were Both Acquired and Disposed of Within
the Plan Year *
Item 27b - Schedule of Loans or Fixed Income Obligations in Default *
Item 27c - Schedule of Leases in Default or Classified as Uncollectible *
Item 27d - Schedule of (5%) Reportable Transactions, Year ended
September 30, 1994 2
Item 27e - Schedule of Non-Exempt Transactions With Parties-in-Interest *
* The Trustees have certified that there were no assets acquired and disposed of
within the year ended September 30, 1994 which require separate disclosure, no
party-in-interest transactions during the year ended September 30, 1994, and no
obligations or leases in default at September 30, 1994.
Definitions:
Plan - A.P. Green Industries, Inc. Investment Plan
Plan Administrator - The Benefits Administration Committee
Trustees - Mercantile Bank of St. Louis N.A. and LaSalle
National Trust, N.A.
ERISA - Employee Retirement Income Security Act of 1974
ESOT - Employee Stock Ownership Trust
Company - A.P. Green Industries, Inc.
<PAGE>
Independent Auditors' Report
The Employee Benefits Committee
A.P. Green Industries, Inc.
Investment Plan:
We have audited the statements of net assets available for plan benefits of the
A.P. Green Industries, Inc. Investment Plan (the Plan) as of September 30, 1994
and 1993, and the related statements of changes in net assets available for plan
benefits for the years then ended. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits 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 of 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan as
of September 30, 1994 and 1993, and the changes in net assets available for plan
benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
held for investment purposes and reportable transactions are presented for the
purpose of additionalanalysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The Fund Information in the statement
of net assets available for benefits and the statement of changes in net assets
available for benefits is presented for purposes of additional analysis rather
than to present the net assets available for plan benefits and changes in net
assets available for plan benefits of each fund. The supplemental
schedules and Fund Information have been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
such information is fairly presented in all material respects in relation to
the basic financial statements taken as a whole.
/s/ KPMG Peat Marwick LLP
November 11, 1994
<PAGE>
FINANCIAL STATEMENTS
<PAGE>
<TABLE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Statement of Net Assets Available for Plan Benefits
September 30, 1994
<CAPTION>
USG Total
Common Guaranteed Equity Balanced Loan stock Total 401(k) &
stock income index fund suspense fund 401(k) ESOT ESOT
------ ---------- ------ -------- -------- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments:
Marketable, at fair value:
Common stocks $6,273,507 - - - - - 6,273,507 7,645,209 13,918,716
Mutual funds - 13,869,098 2,038,220 1,705,427 - - 17,612,745 - 17,612,745
Insurance contracts, at
contract value - - - - - - - - -
Participant notes receivable - - - - 566,767 - 566,767 - 566,767
---------- ---------- --------- --------- ------- ----- ---------- --------- ----------
Total investments 6,273,507 13,869,098 2,038,220 1,705,427 566,767 - 24,453,019 7,645,209 32,098,228
Cash and cash equivalents (5,922) 137,336 21 - 44 4,313 135,792 149 135,941
Accrued interest and dividends
receivable 46 720 6 5 - 15 792 7 799
Contributions receivable 15,626 17,966 8,284 5,661 - - 47,537 - 47,537
---------- ---------- --------- --------- ------- ----- ---------- --------- ----------
Total assets 6,283,257 14,025,120 2,046,531 1,711,093 566,811 4,328 24,637,140 7,645,365 32,282,505
Liabilities - note payable to
A.P. Green Industries, Inc. - - - - - - - 8,020,769 8,020,769
---------- ---------- --------- --------- ------- ----- ---------- --------- ----------
Net assets available
for plan benefits $6,283,257 14,025,120 2,046,531 1,711,093 566,811 4,328 24,637,140 (375,404) 24,261,736
========== ========== ========= ========= ======= ===== ========== ========= ==========
<FN>
See accompanying notes to financial statements.
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Statement of Net Assets Available for Plan Benefits
September 30, 1993
<CAPTION>
USG Total
Common Guaranteed Equity Balanced Loan stock Total 401(k) &
stock income index fund suspense fund 401(k) ESOT ESOT
------ ---------- ------ -------- -------- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments:
Marketable, at fair value:
Common stocks $5,219,233 - - - - - 5,219,233 6,618,116 11,837,349
Mutual funds - 10,799,286 2,250,627 1,594,488 - - 14,644,401 - 14,644,401
Insurance contracts, at
contract value - 2,445,428 - - - - 2,445,428 - 2,445,428
Participant notes receivable - - - - 524,092 - 524,092 - 524,092
---------- ---------- --------- --------- ------- ------ ---------- --------- ----------
Total investments 5,219,233 13,244,714 2,250,627 1,594,488 524,092 - 22,833,154 6,618,116 29,451,270
Cash and cash equivalents 13,918 111,645 - - - 54,411 179,974 8 179,982
Accrued interest and dividends
receivable 91 107,415 11,438 3 - 118 119,065 3 119,068
Contributions receivable 14,536 16,696 7,319 5,232 - - 43,783 - 43,783
---------- ---------- --------- --------- ------- ------ ---------- --------- ----------
Total assets 5,247,778 13,480,470 2,269,384 1,599,723 524,092 54,529 23,175,976 6,618,127 29,794,103
Liabilities - note payable to
A.P. Green Industries, Inc. - - - - - - - 8,491,512 8,491,512
---------- ---------- --------- --------- ------- ----- ---------- --------- ----------
Net assets available
for plan benefits $5,247,778 13,480,470 2,269,384 1,599,723 524,092 54,529 23,175,976 (1,873,385) 21,302,591
========== ========== ========= ========= ======= ====== ========== ========= ==========
<FN>
See accompanying notes to financial statements.
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Statement of Changes in Net Assets
Available for Plan Benefits
Year ended September 30, 1994
<CAPTION>
USG Total
Common Guaranteed Equity Balanced Suspense Loan stock Total 401(k) &
stock income index fund account suspense fund 401(k) ESOT ESOT
------ ---------- ------ -------- -------- -------- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Employer contributions $ - - - - - - - - 1,114,533 1,114,533
Employee contributions 405,390 471,136 229,130 153,762 - - - 1,259,418 - 1,259,418
Interest and dividends 84,015 17,761 51,407 48,347 48,554 9 722 250,815 127,433 378,248
Realized gain (loss) 93,209 72,200 127,109 17,948 - - - 310,466 (369,890) (59,424)
Net appreciation
(depreciation) of
marketable
investments 804,737 745,487 (108,363) (81,154) - - - 1,360,707 1,018,875 2,379,582
Transfers from various
plan funds 208,527 657,230 145,461 198,578 252,833 1,811,856 - 3,274,485 88,314 3,362,799
Other miscellaneous
receipts 1,237 475 43 27 44 (10) (672) 1,144 452,476 453,620
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Total additions 1,597,115 1,964,289 444,787 337,508 301,431 1,811,855 50 6,457,035 2,431,741 8,888,776
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Deductions:
Benefits paid to
participants 50,877 - - - - 1,702,128 - 1,753,005 17,069 1,770,074
Fees and expenses (23) 2,991 27 (12,900) - - (33) (9,938) 3 (9,935)
Interest expense - - - - - - - - 806,693 806,693
Transfers to various
plan funds 510,782 1,416,648 667,613 239,038 258,712 109,727 50,284 3,252,804 109,995 3,362,799
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Total deductions 561,636 1,419,639 667,640 226,138 258,712 1,811,855 50,251 4,995,871 933,760 5,929,631
Net increase
(decrease) in net
assets available
for plan benefits 1,035,479 544,650 (222,853) 111,370 42,719 - (50,201) 1,461,164 1,497,981 2,959,145
Net assets available
for plan benefits:
Balance, beginning of
year 5,247,778 13,480,470 2,269,384 1,599,723 524,092 - 54,529 23,175,976 (1,873,385) 21,302,591
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Balance, end of year $6,283,257 14,025,120 2,046,531 1,711,093 566,811 - 4,328 24,637,140 (375,404) 24,261,736
========= ========== ========= ========= ======= ========= ====== ========== =========== ==========
<FN>
See accompanying notes to financial statements.
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Statement of Changes in Net Assets
Available for Plan Benefits
Year ended September 30, 1993
<CAPTION>
USG Total
Common Guaranteed Equity Balanced Suspense Loan stock Total 401(k) &
stock income index fund account suspense fund 401(k) ESOT ESOT
------ ---------- ------ -------- -------- -------- ----- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Employer contributions $ - - - - - - - - 1,269,900 1,269,900
Employee contributions 383,113 514,470 171,995 122,951 - - - 1,192,529 - 1,192,529
Interest and dividends 829 571,289 48,815 75,174 53,504 - 1,532 751,143 75 751,218
Realized gain (loss) (42,162) 16,006 39,114 174,864 - - - 187,822 (398,481) (210,659)
Net appreciation
(depreciation) of
marketable
investments 1,824,299 394,905 118,024 (103,230) - - - 2,233,998 2,352,342 4,586,340
Transfers from various
plan funds 103,832 244,358 544,761 258,681 247,358 1,665,691 - 3,064,681 - 3,064,681
Other miscellaneous
receipts 40 30 11 6 (85) 1,188 - 1,190 313,890 315,080
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Total additions 2,269,951 1,741,058 922,720 528,446 300,777 1,666,879 1,532 7,431,363 3,537,726 10,969,089
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Deductions:
Benefits paid to
participants 42,741 - - - - 1,594,559 - 1,637,300 3,341 1,640,641
Fees and expenses 2,868 12,645 109 (5,643) 8 - (65) 9,922 - 9,922
Interest expense - - - - - - - - 847,534 847,534
Transfers to various
plan funds 434,300 1,984,655 222,716 13,902 289,286 72,320 8,544 3,025,723 46,336 3,072,059
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Total deductions 479,909 1,997,300 222,825 8,259 289,294 1,666,879 8,479 4,672,945 897,211 5,570,156
Net increase
(decrease) in net
assets available
for plan benefits 1,790,042 (256,242) 699,895 520,187 11,483 - (6,947) 2,758,418 2,640,515 5,398,933
Net assets available for
plan benefits:
Balance, beginning of
year 3,457,736 13,736,712 1,569,489 1,079,536 512,609 - 61,476 20,417,558 (4,513,900) 15,903,658
--------- ---------- --------- --------- ------- --------- ------ ---------- ----------- ----------
Balance, end of year $5,247,778 13,480,470 2,269,384 1,599,723 524,092 - 54,529 23,175,976 (1,873,385) 21,302,591
========= ========== ========= ========= ======= ========= ====== ========== =========== ==========
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
September 30, 1994 and 1993
1) Summary of Significant Accounting Policies
(a) Description of the Plan
The Plan was created October 1, 1987 through an amendment to the USG
Corporation Investment Plan for Salaried Employees (USG Plan). This amendment
transferred the portion of the USG Plan assets that applied to the Company and
its subsidiaries into a separate defined contribution plan. During 1989, the
nonunion hourly employees of the Company's New Braunfels and Kimballton plants
became eligible to participate in the Plan. During fiscal year 1991, the
nonunion hourly employees of the Company's Ellisville and Pryor plants became
eligible to participate in the Plan. Effective October 1, 1994, 125 salaried
and nonunion hourly employees of A.P. Green Refractories, Inc. became eligible
to participate in the Plan.
The Plan's 401(k) funds are administered under the terms of a trust
agreement with Mercantile Bank of St. Louis N.A. The trust agreement provides,
among other things, that the Trustee shall keep account of all investments,
receipts and disbursements, and other transactions and shall provide annually a
report setting forth such transactions and the status of the funds at the end
of the period.
On October 1, 1989, the Plan was amended to incorporate the
establishment of an ESOT feature which is held in trust at LaSalle National
Trust, N.A. In conjunction with this amendment, the Company extended a loan
to the ESOT to provide for the purchase of 447,760 shares of previously
unissued Company common stock at an aggregate purchase price of $10 million.
The loan is repayable in 15 annual installments from September 30, 1990
through September 30, 2004 and is collateralized by the shares held in the
ESOT. Interest is payable semiannually at 9.5%. The Company will make
contributions in cash to the ESOT which, when aggregated with the ESOT's
dividends and income, equal the amounts necessary to enable the ESOT to make
its regularly scheduled payments of interest and principal due on its term
loan.
Employee contributions are invested by the Trustees in one of four
funds:
(a) common stock of the Company (Common Stock Fund); (b) group annuity contracts
maintained by The Travelers Insurance Co. and a fixed rate mutual fund
maintained by Mercantile Bank of St. Louis N.A. (Guaranteed Income Fund);
(c) an equity index fund which provides investment results that are designed to
correspond to the performance of publicly traded common stocks, as represented
by the Standard & Poor's 500 Composite Stock Price Index (Equity Index Fund);
or (d) debt and a cash equivalent mutual funds portfolios managed by Mercantile
Bank of St. Louis N.A. (Balanced Fund). The Plan also has a Loan Suspense
Fund which allows participating employees to borrow money in the form of
interest-bearing promissory notes from the investment plan to be repaid over a
period not to exceed five years for general loans or ten years for mortgage
loans. Funds invested in the USG Stock Fund represent unvested Company
contributions of former participants. Such funds will be reallocated to
continuing plan participants at a later date, as defined in the Plan.
<PAGE>
2
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
Participant withdrawals are paid from the Suspense Account, which
receives cash from the various funds as payments are approved. The funds are
invested in money market accounts until disbursement.
Participants may elect to have their contributions invested 100% in
any one fund or 50%-50% between any two funds. Participants can also change
their investment election and previous accumulated balances each quarter. To
change their investment option, transfer their prior accumulated account to
another investment option, increase or decrease the percent of contributions,
or make requests for withdrawals, participants are required to provide a 15-day
advance notice prior to the end of any quarter. Company contributions are
invested only in Company stock. If the Trustees are unable to invest any
contributions immediately, the money is temporarily invested in collective
investment funds and any earnings of the fund are credited to the participants'
accounts. Employees no longer eligible under the Plan are allowed to close
their investment plan account and withdraw their funds as provided by law.
The Plan was amended after the end of the plan year to offer
participants a choice of ten investment funds and no limit as to the number of
funds which a participant may elect. Also, the investment plan will be valued
on a daily basis versus quarterly valuations.
At September 30, 1994, there were 636 employees participating in one
or more of the following plan funds:
Number of
Fund participants
---- ------------
Common Stock Fund 268
Guaranteed Income Fund 335
Equity Index Fund 138
Balanced Fund 100
ESOP 586
(b) Basis of Presentation
The accompanying financial statements of the Plan have been prepared
on the accrual basis of accounting and present the net assets available for
plan benefits and changes in those net assets.
(c) Investments
Marketable investments are stated at fair value. The fair value of
marketable investments is based on quotations obtained from national securities
exchanges. Money market fund investments, not readily marketable or negotiable,
are stated at cost, which approximates fair value.
During 1994 and 1993, the Plan held assets that are in the form of
unallocated group annuity contracts managed by the Trustees on behalf of the
Plan. These assets were presented at contract value. Contract value represents
contributions made under the contract, plus interest at the rate specified in
the contract, less benefits paid to participants and expenses. All group
annuity contracts were divested during 1994.
<PAGE>
3
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
Participant notes receivable are stated at their unpaid balance, which
in the opinion of the Plan Administrator approximates fair market value for
such investments. Interest paid by participants during the plan year on
these balances ranged from 7.63% to 12.00%.
Securities transactions are recognized on the trade date (the date the
order to buy or sell is executed). Dividend income is recorded on the ex
dividend date.
There were 784,153 and 780,486 shares of Company common stock at September 30,
1994 and 1993, respectively, held by the Plan.
(d) Costs of Plan Administration
Trustee fees for the 401(k) plan are paid by the Company and trustee
fees for the ESOT are paid by the Plan, unless plan assets are not readily
available, whereas they are paid by the Company.
(e) Prior Year Financial Statements
Certain prior year balances have been reclassified to conform to
current year presentation. The number of shares of Company stock held by the
Plan have been restated for the effect of a three-for-two stock split effective
December 10, 1993.
(2) Summary of Significant Plan Provisions
The Plan is a defined contribution plan sponsored by the Company and
certain wholly owned subsidiaries and is subject to the provisions of ERISA.
The Plan is structured to incorporate the provisions available under Section
401(k) of the Internal Revenue Code, which allows member and sponsor
contributions to be excluded from federal and state income taxation within
certain prescribed limits.
(a) Contributions
Company contributions to the Plan are made within the ESOT. A.P. Green
Industries, Inc. common stock will be released from the ESOT and allocated to
the accounts of participants in the manner set forth in the Plan. As of
September 30, 1994, 147,724 shares are allocable or have been allocated to
current and former participant accounts. Company contributions are also made
to fund interest and principal payments, if necessary. All Company
contributions are made conditional upon their deductibility for federal
income tax purposes.
(b) Participant Accounts
Mercantile Bank of St. Louis (Mercantile) maintains the following
accounts for each participant: (1) elective and voluntary contributions made
prior to April 1, 1988,(2) elective and voluntary contributions made under the
USG Plan prior to January 1, 1987, (3) elective and voluntary contributions
subsequent to April 1, 1988, (4) Company cash contributions, and (5) Company
stock contributions. In addition, Mercantile shall maintain subaccounts
representing earnings (i.e., income, losses, appreciation, and depreciation)
attributable to each respective account discussed above, by participant.
Company contributions, plan earnings, and forfeitures are allocated to the
participant accounts on a pro rata basis.
<PAGE>
4
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
Participants are at all times vested in the portion of their accounts
attributable to their elective and voluntary contributions. For the portion of
their accounts attributable to Company contributions, participants are fully
vested after five years of continuous service.
(c) Payment of Benefits
Under the terms of the Plan, participants retiring or becoming totally
disabled become fully vested and are eligible to receive the entire balance in
all of the accounts maintained for such participant by the Trustees.
Participants terminating employment prior to retirement receive their
contributions and the earnings on such contributions, and that portion of the
sponsor's account and earnings of such account which is vested. In the event
of death, the balances in the participant accounts are fully vested and
payable to the designated beneficiary.
Distributions under the Plan are payable in a lump sum or in periodic
installments.
(3) Summary of Net Assets Available for Plan Benefits
Net assets available for plan benefits are as follows:
1994 1993
---- ----
Net assets currently payable for plan benefits $ 307,658 432,778
Net assets available for plan benefits 23,954,078 20,869,813
---------- ----------
Total $ 24,261,736 21,302,591
========== ==========
For regulatory reporting under Form 5500, benefit claims currently
payable of $307,658 and $432,778 at September 30, 1994 and 1993, respectively,
are categorized as a liability with a corresponding reduction of net assets
available for plan benefits.
(4) Distribution on Termination of the Plan
The Company reserves the right to terminate the Plan at any time subject
to the Plan's provisions. In the event of any termination of the Plan, the
account balances of all affected participants shall become nonforfeitable.
All unallocated Company shares shall be distributed to the participants
according to their pro rata share of plan assets.
(5) Federal Income Taxes
The Internal Revenue Service issued its latest determination letter on
February 27, 1989, which stated that the Plan qualified under the applicable
provisions of the Internal Revenue Code and, therefore, is exempt from federal
income taxes. The Plan has been amended subsequent to fiscal 1989. The
amended plan instruments have not been submitted to the Internal Revenue
Service for a determination that they continue to meet the requirements to
qualify for exemption from federal income tax. However, in the opinion of
the Plan Administrator and the Plan's counsel, the Plan and trust instruments
either (1) continue to satisfy the qualification requirements for tax
exemption under the applicable provisions of the Internal Revenue Code, or
(2) can be further amended, retroactively, to continue their tax-qualified
status without interruption since the date of the last determination letter.
<PAGE>
5
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
(6) Employee Stock Ownership Trust
As previously stated, Company contributions to the Plan are made within
the ESOT. As the Plan makes each scheduled payment of principal, an appropriate
percentage of the Company's common stock is allocated to eligible participant
accounts, as defined in the agreement. Allocated shares become fully vested
once the participant completes five years of continuous service subsequent to
becoming a participant of the Plan. The ESOT fund is comprised of the
following:
- The accounts of employees with vested rights in allocated stock
(allocated), and
- Stock not yet allocated to employees (unallocated).
The ESOT's investment in the Company's common stock at September 30,
1994 and 1993 is presented in the following table:
1994 1993
-------------------- ----------------------
Allocable Allocable
and/or Unallo- and/or Unallo-
allocated cated allocated cated
--------- ------- ----------- -------
Company Common stock:
Number of shares 130,680 300,036 106,321 330,039
Cost $2,918,790 6,700,804 2,420,425 7,370,871
Market 2,319,570 5,325,639 1,612,546 5,005,570
========= ========= ========= =========
The number of shares held by the ESOT have been adjusted for the effect
of a three-for-two stock split effective December 10, 1993.
(7) Investments
Investments of the Plan are comprised of the following:
1994 1993
---- ----
Investments at fair value based
on current market value:
A. P. Green common stock $ 13,918,716 11,837,349
Vanguard Index Trust 500 Beneficial
Interest - Open End Fund 2,038,220 2,250,627
Other 566,767 524,092
---------- ----------
16,523,703 14,612,068
---------- ----------
Investments at fair market value based
on price furnished by Mercantile:
Mercantile Collective GIC Fund 13,869,098 10,799,286
Arch Fund Balanced Portfolio Trust
issue 90022955 1,705,427 1,594,488
---------- ----------
15,574,525 12,393,774
---------- ----------
Investments at contract value:
The Travelers Insurance Company,
8.75%, due October 17, 1993 - 2,445,428
---------- ----------
Total investments $ 32,098,228 29,451,270
========== ==========
<PAGE>
6
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Notes to Financial Statements
Investments which represent 5% or more of the Plan's net assets are
separately identified.
The net change in fair value of investments for the year ended September
30, 1994:
Investments at fair value based on current market value:
Common stock $1,546,931
Mutual funds 18,746
Investments at fair market value based on
price furnished by Mercantile -
Mutual funds 754,481
---------
$ 2,320,158
=========
<PAGE>
Schedule 1
----------
A.P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Item 27(a) - Schedule of Assets Held for
Investment Purposes
September 30, 1994
Par value
or number Fair
of shares Description of investment Cost value
--------- ------------------------- ---- -----
Common stock:
430,716* A.P. Green Industries, Inc. $ 9,619,594 7,645,209
353,437* A.P. Green Industries, Inc. 5,082,933 6,273,507
--------- ---------- ----------
784,153 14,702,527 13,918,716
Mutual funds:
1,092,978 Mercantile Collective GIC Fund 12,559,632 13,869,098
Vanguard Index Trust 500 Beneficial
46,727 Interest - Open End Fund 1,705,910 2,038,220
Arch Fund Balanced Portfolio Trust
174,558 issue 90022955 1,735,287 1,705,427
--------- ---------- ----------
1,314,263 Total mutual funds 16,000,829 17,612,745
========= ========== ==========
Participant notes receivable 566,767 566,767
---------- ----------
$ 31,270,123 32,098,228
========== ==========
* Represents investments with a related party.
See accompanying independent auditors' report.
<PAGE>
<TABLE>
Schedule 2
----------
A. P. GREEN INDUSTRIES, INC.
INVESTMENT PLAN
Item 27(d) - Schedule of (5%) Reportable Transactions
Year ended September 30, 1994
<CAPTION>
Description of transaction Total dollar
-------------------------- value of
payments
--------
<S> <C>
Principal and interest payments on notes
payable to the Company** $ 1,277,437
=========
<CAPTION>
Total Current
dollar Total value on
value of dollar value Cost of transaction Gain/
Identity purchases of sales asset date (loss)
-------- --------- -------- ----- ---- ------
<S> <C> <C> <C> <C> <C>
Single transaction greater than 5%:
The Travelers Insurance Co. - issue 90020773;
14808; 8.75%; October 18, 1993 $ - 2,561,711 2,561,711 2,561,711 -
Mercantile Arch Collective GIC Fund - issue
90022149 2,190,631 - 2,190,631 2,190,631 -
Arch Fund Inc. Balanced Portfolio Trust -
issue 90022955 2,561,711 - 2,561,711 2,561,711 -
Arch Fund Inc. Balanced Portfolio Trust -
issue 90022955 - 2,190,640 2,190,640 2,190,640 -
Series of transactions greater than 5%:
The Travelers Insurance Co. - issue 90020773;
14808; 8.75%; October 18, 1993* 119,549 - 119,549 119,549 -
The Travelers Insurance Co. - issue 90020773;
14808; 8.75%; October 18, 1993* - 2,564,976 2,564,976 2,564,976 -
Mercantile Arch Collective GIC Fund -
issue 90022149* 3,176,319 - 3,176,319 3,176,319 -
Mercantile Arch Collective GIC Fund -
issue 90022149* - 924,196 851,996 924,196 72,200
Arch Fund Inc. Balanced Portfolio Trust -
issue 90022955* 6,703,778 - 6,703,778 6,703,778 -
Arch Fund Inc. Balanced Portfolio Trust -
issue 90022955* - 13,445,870 13,445,870 13,445,870 -
========= ========== ========== ========== ======
<FN>
* Series of transactions total also includes single transactions detailed above.
** Represents transactions with a related party.
See accompanying independent auditors report.
</TABLE>
<PAGE>
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act
of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
A. P. Green Investment Plan
March 7, 1995 By: /s/ Gary L. Roberts
-------------------------
Gary L. Roberts, Benefits
Administration Committee:
Vice President, Chief
Financial Officer and
Treasurer of A. P. Green
Industries, Inc.
EXHIBIT INDEX
Exhibit No. Exhibit
---------- --------
24 Consent of Independent Accountants
<PAGE>
Exhibit 24 to
Form 11-K
Independent Auditors' Consent
The Employee Benefits Committee
A. P. Green Industries, Inc.:
We consent to incorporation by reference in the registration
statement (No. 33-21012) on Form S-8 of A. P. Green Industries,
Inc. of our report dated November 11, 1994, relating to the
statements of net assets available for plan benefits of A. P.
Green Industries, Inc. Investment Plan as of September 30, 1994,
and 1993, and the related statements of changes in net assets
available for plan benefits for each of the years in the three-
year period ended September 30, 1994, which report appears in the
1994 Annual Report on Form 11-K of A. P. Green Industries, Inc.
Investment Plan.
/s/ KPMG Peat Marwick LLP
St. Louis, Missouri
March 23, 1995
[ARTICLE] 5
[LEGEND]
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM A.P. GREEN
INDUSTRIES, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1994
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
[/LEGEND]
[MULTIPLIER] 1,000
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] DEC-31-1994
[CASH] 9,637
[SECURITIES] 0
[RECEIVABLES] 45,720
[ALLOWANCES] 1,992
[INVENTORY] 53,452
[CURRENT-ASSETS] 164,152
[PP&E] 185,280
[DEPRECIATION] 89,868
[TOTAL-ASSETS] 373,122
[CURRENT-LIABILITIES] 85,840
[BONDS] 37,162
[COMMON] 4,476
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[OTHER-SE] 102,562
[TOTAL-LIABILITY-AND-EQUITY] 373,122
[SALES] 195,918
[TOTAL-REVENUES] 195,918
[CGS] 161,420
[TOTAL-COSTS] 161,420
[OTHER-EXPENSES] 25,707
[LOSS-PROVISION] 373
[INTEREST-EXPENSE] 1,947
[INCOME-PRETAX] 9,295
[INCOME-TAX] 2,904
[INCOME-CONTINUING] 6,673
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] (255)
[NET-INCOME] 6,418
[EPS-PRIMARY] 1.59
[EPS-DILUTED] 0
</TABLE>
