SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
For the quarter ended March 31, 1997 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: (573) 473-3626
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 the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: As of May 14, 1997, 8,026,158
shares of Common Stock, $1 par value, were outstanding.
Page 1 of 20
<PAGE>
A. P. GREEN INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
March 31, December 31,
1997 1996
--------- ------------
(Dollars in thousands, except per share data)
ASSETS
Current Assets
Cash and cash equivalents $ 3,323 $ 9,477
Receivables (net of allowances -
1997, $1,782; 1996, $1,701) 42,947 42,084
Reimbursement due on paid asbestos claims 678 3,898
Inventories 56,312 53,674
Deferred income tax asset 2,850 3,374
Other 6,941 7,030
------- -------
Total current assets 113,051 119,537
Property, plant and equipment, net 106,844 107,394
Projected insurance recovery on asbestos claims 118,343 110,374
Pension assets 9,061 9,044
Intangible assets, net 4,078 4,132
Other assets 4,589 4,648
------- -------
Total assets $355,966 $355,129
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 21,158 $ 20,408
Accrued expenses
Payrolls 5,599 6,267
Taxes other than on income 1,591 1,860
Insurance reserves 3,472 3,574
Other 6,369 6,528
Current maturities of long-term debt 4,145 4,168
Income taxes 1,126 1,191
------- -------
Total current liabilities 43,460 43,996
Deferred income taxes 9,459 10,228
Long-term non-pension benefits 16,832 16,583
Long-term pensions 12,726 12,449
Long-term debt 34,736 40,109
Projected asbestos claims 118,343 111,966
------- -------
Total liabilities 235,556 235,331
------- -------
Minority Interests 1,810 1,414
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: 8,978,792 in 1997
and 8,975,442 in 1996 8,979 8,975
Additional paid-in capital 68,335 68,309
Retained earnings 61,648 61,151
Less: Deferred foreign currency translation (3,186) (2,875)
Treasury stock of 953,934 shares in 1997
and 1996, at cost (9,498) (9,498)
Note receivable-ESOT (6,941) (6,941)
Minimum pension liability adjustment,
net of tax (737) (737)
------- -------
Total stockholders' equity 118,600 118,384
------- -------
Total liabilities and stockholders' equity $355,966 $355,129
======= =======
See accompanying notes to consolidated financial statements.
2
<PAGE>
A. P. GREEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three months ended
March 31,
------------------------
(Dollars in thousands, except per share data) 1997 1996
------------------------
Net sales $ 64,816 $ 64,234
Cost of sales 54,014 52,879
--------- ---------
Gross profit 10,802 11,355
Expenses and other income
Selling & administrative expenses 9,222 8,869
Interest expense 834 786
Interest income (247) (322)
Minority interest in income (loss) of partnership 4 (33)
Other income, net (66) (142)
--------- ---------
Earnings before income taxes 1,055 2,197
Income tax expense 358 786
Equity in net income of affiliates (15) (180)
Minority interest in loss of consolidated subsidiaries (99) (140)
--------- ---------
Net earnings $ 811 $ 1,731
========= =========
Net earnings per common share $ 0.10 $ 0.22
========= =========
Weighted average number of common shares 8,023,220 8,077,442
========= =========
Dividends per common share $ 0.04 $ 0.035
========= =========
See accompanying notes to consolidated financial statements.
3
<PAGE>
A. P. GREEN INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended March 31,
----------------------------
(Dollars in thousands) 1997 1996
----------------------------
Cash flows from operating activities
Net earnings $ 811 $ 1,731
Adjustments for items not requiring (providing) cash
Depreciation, depletion and amortization 2,999 2,592
Stock compensation to directors 29 28
Provision for losses on accounts receivable 195 148
Loss (gain) on sale of assets (58) 36
Equity in earnings of affiliates,
net of dividends received (15) (180)
Minority interest in losses of consolidated
subsidiaries and partnership (95) (173)
Decrease (increase) in assets
Trade receivables (1,058) (500)
Asbestos claim and fee reimbursements received 5,236 4,913
Inventories (2,639) (2,418)
Receivable and prepaid taxes 45 355
Other current assets (6) (601)
Increase (decrease) in liabilities
Accounts payable and accrued expenses (447) (3,306)
Asbestos claims paid (3,607) (4,371)
Pensions 277 118
Income taxes (65) 316
Deferred income taxes (246) 146
Long-term non-pension benefits 249 342
------ ------
Net cash provided by (used in) operating activities 1,605 (824)
------ ------
Cash flows from investing activities
Capital expenditures (1,589) (3,264)
Increase in other long-term assets (24) (272)
Decrease (increase) in pension assets (17) 99
Proceeds from sales of assets 106 26
------ ------
Net cash used in investing activities (1,524) (3,411)
------ ------
Cash flows from financing activities
Repayments of debt (6,100) (63)
Proceeds from borrowings -- 75
Dividends paid (321) (283)
Capital contributions from minority partner 490 --
Tax benefit on dividends paid to ESOT 7 7
------ ------
Net cash used in financing activities (5,924) (264)
------ ------
Effect of exchange rate changes (311) (308)
------ ------
Net decrease in cash and cash equivalents (6,154) (4,807)
Cash and cash equivalents at beginning of year 9,477 9,284
------ ------
Cash and cash equivalents at end of period $ 3,323 $ 4,477
====== ======
See accompanying notes to consolidated financial statements.
4
<PAGE>
A. P. GREEN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. MANAGEMENT'S COMMENTS REGARDING ADJUSTMENTS AND RESULTS OF
----------------------------------------------------------
OPERATIONS
----------
In the opinion of management, the accompanying consolidated financial
statements include all adjustments of a normal and recurring nature
necessary for a fair presentation of the financial position and results
of operations for the periods presented. These financial statements
should be read in conjunction with the Company's Annual Report on Form
10-K for the year ended December 31, 1996. The results for the quarter
ended March 31, 1997 are not necessarily indicative of the results
which may occur for the full year. All per share amounts have been
restated to reflect the two-for-one stock split effective September 20,
1996. Certain prior year amounts have been reclassified to conform to
the 1997 presentation.
2. RESERVES FOR PLANT CLOSINGS
---------------------------
The Company has reserves for estimated exit costs and termination
benefits in connection with the shutdown of certain facilities in the
U.S. and Canada. Three of the plants acquired in the acquisition of the
refractories business of General Refractories Company and its
affiliated companies ("General") were closed during 1994, a $3.6
million reserve for which was established at the time of acquisition
and included on the opening balance sheet. During 1995 this reserve was
increased by approximately $330,000, primarily to revise estimates of
employee termination benefits resulting from the sale of these
facilities taking longer than anticipated. A $380,000 reserve was also
established during 1995 for the closing of the Weston, Ontario plant.
Substantially all employees at these facilities (approximately 210 in
total) have been terminated and approximately $3.2 million of
termination benefits and plant closing costs have been charged against
the reserves to date. The U.S. facilities are held for sale at their
estimated net realizable value.
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<PAGE>
3. INVENTORIES
-----------
March 31, 1997 December 31, 1996
-------------- -----------------
Finished goods & work-in-process
Valued at LIFO:
FIFO cost $ 33,979 $ 31,278
Less LIFO reserve (14,472) (14,907)
------- -------
LIFO cost 19,507 16,371
Valued at FIFO 13,223 13,225
------- -------
TOTAL 32,730 29,596
------- -------
Raw materials and supplies
Valued at LIFO:
FIFO cost 17,116 17,702
Less LIFO reserve (6,275) (6,129)
------- -------
LIFO cost 10,841 11,573
Valued at FIFO 12,741 12,505
------- -------
TOTAL 23,582 24,078
------- -------
$ 56,312 $ 53,674
======= =======
4. LITIGATION
----------
Asbestos-related claims - Personal Injury
-----------------------------------------
A. P. Green is among numerous defendants in lawsuits pending as of
March 31, 1997 that seek to recover compensatory and, in many cases,
punitive damages for personal injury allegedly resulting from exposure
to asbestos-containing products.
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 numbers and types of claims brought against it.
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<PAGE>
Claims activity for the Company for each of the years ended December
31, 1996, 1995 and 1994, based upon information provided by the Center,
was as follows:
-----------------------------------------------------------------------
1996 1995 1994
-----------------------------------------------------------------------
Claims pending at January 1 48,367 50,920 52,122
Claims filed 29,702 12,560 14,836
Cases settled, dismissed or
otherwise resolved (19,184) (15,113) (16,038)
------ ------ ------
Claims pending at December 31 58,885 48,367 50,920
====== ====== ======
Average settlement amount
per claim(1) $ 1,582 $ 1,778 $ 1,816
=======================================================================
(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 had not yet asserted 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 the same
time, a settlement (the Settlement) between the Members and the Class
was filed with the court. 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 through 2004
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. A five-week hearing was held to
determine the fairness of the Settlement. At the end of the hearing,
the court ruled that the Settlement was fair and enjoined Class members
from filing lawsuits in the tort system against the Members. The Center
has been processing and settling claims filed by Class members pursuant
to the Settlement since 1994. The ruling by the Eastern District Court
of Pennsylvania was appealed by certain objectors. The Third Circuit
Court of Appeals reversed the lower court, ruling that the Class should
be decertified. The Class members and settling plaintiffs applied for a
writ of certiorari to the U. S. Supreme Court which was granted. Oral
arguments were heard in February 1997, but no decision has been
rendered to date.
-7-
<PAGE>
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 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.
However, in December 1996 A. P. Green and the E. J. Bartells Company
(Bartells), a former subsidiary, reached a comprehensive settlement
with all but one of their insurance carriers. Under the terms of that
settlement agreement, the carriers have agreed to pay (subject to
applicable policy limits), on behalf of the insureds, their liabilities
arising out of asbestos personal injury claims. A. P. Green will
maintain its coverage litigation against the non-settling carrier in
the event that agreement cannot be reached with it.
Under the assumption that it receives the necessary 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 certain insurance policies insuring Bartells against
asbestos-related personal injury claims, such policies having been
issued when Bartells was owned by A. P. Green. The Company has also
reviewed the terms of the settlement agreement with its insurance
carriers. Based upon such reviews, the Company has projected its
liability for such cases and claims through 2004 to be approximately
$118.3 million and $112.0 million at March 31, 1997 and December 31,
1996, respectively, with offsetting projected insurance reimbursements
of approximately $118.3 million and $110.4 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
consolidated financial position or results of operations. Management
anticipates the Company's payments for these claims will occur over at
least seven 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 similar 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. Except for
-8-
<PAGE>
deductible amounts or retentions provided under insurance policies, no
claim for reimbursement of defense or indemnity payments has been made
against the Company or such subsidiary by any such carriers.
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 consolidated financial
position or results of operations.
There was no assumption by the Company of asbestos-related liability,
either personal injury or property damage, in connection with the
August 1994 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.
-9-
<PAGE>
A. P. GREEN INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
- ---------------------
Total sales increased 0.9% to $64.8 million for the three months ended
March 31, 1997 from $64.2 million for the comparable 1996 three-month
period. Gross profit declined 4.9% to $10.8 million from $11.4 million
for the comparable periods. The impact from the December 31, 1996
acquisition of Eastern Ridge Lime in Ripplemead, Virginia was to
increase sales by $2.1 million and gross profit by $424,000.
Refractory Products and Services
--------------------------------
Refractory products and services sales declined 1.6% to $53.5 million
for the three-month period ended March 31, 1997 from $54.4 million for
the three-month period ended March 31, 1996. United States refractory
sales declined 4.4% to $45.5 million from $47.6 million for the
comparable three-month periods. The majority of this decline was due to
lower sales of silica products from the Lehi, Utah plant, which were
high in 1996 due to capital projects at several glass and coke oven
customers. Declines in brick, specialties and ceramic fiber volumes
were partially offset by increases in precast shapes and INTOGREEN Co.
and Lanxide ThermoComposites, Inc. (LTI) products for a net volume
decline of 2.5%. Prices for INTOGREEN and LTI products and specialties
prices increased, while prices on all other U.S. refractory product
lines declined for an average price decline of 0.5% for the comparable
quarters. U.S. export sales declined 28.4% to $4.4 million from $6.2
million, primarily due to reduced sales to South America and the Middle
East. Reduced export sales from the U.S. to Mexico, the Caribbean and
Europe were offset with increased sales by the Company's subsidiaries
in those regions.
Sales of the Canadian subsidiary declined 2.0% to $5.4 million for the
three months ended March 31, 1997 from $5.5 million for the comparable
1996 period. Decreases in brick and specialties volumes were partially
offset by increases in ceramic fiber, crucible and precast shape
volumes, resulting in an overall volume decline of 4.1%. Prices
increased across all product lines with the exception of precast
shapes resulting in an overall price increase of 5.2%.
The first quarter of 1996 included costs related to the final shutdown
of the Weston, Ontario plant, which was sold in December 1995, and
relocation of the related inventory and equipment. Elimination of those
costs resulted in a 7.0% improvement in Canadian gross profit in the
first quarter of 1997. As a result of the gross profit improvement, the
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<PAGE>
Canadian pre-tax loss declined to $74,000 from $181,000 for the first
quarters of 1997 and 1996, respectively.
Sales in the United Kingdom increased 5.5% to $2.2 million for the
three months ended March 31, 1997 from $2.1 million for the comparable
1996 quarter. A decline in gross profit, primarily due to increased
material costs, more than offset the sales increase, resulting in a
pre-tax loss of $31,000 in the first quarter of 1997 compared to
pre-tax earnings of $74,000 in the comparable 1996 period.
Sales at A. P. Green de Mexico for the first quarter of 1997 increased
53.0% to $2.4 million from $1.6 million for the comparable 1996 period.
Increased material and freight costs reduced the gross profit
percentage from 31.0% to 22.4%, resulting in a reduction in pre-tax
earnings to $218,000 from $227,000.
Sales at PT AP Green Indonesia were $118,000, with a pre-tax loss of
$238,000 due to start-up costs and relatively high fixed costs at the
low initial volume level. This operation is expected to be profitable
by the end of 1997. The Indonesian operation incurred a pre-tax loss of
$11,000 during the first quarter of 1996.
Refractory cost of sales as a percentage of sales increased to 83.9%
from 83.1% for the three months ended March 31, 1997 and 1996,
respectively. This increase was primarily due to unusually high natural
gas prices during the first quarter of 1997 and reduced production at
the Mexico, Missouri plant as new mixing and batching equipment was
installed in January. Partially offsetting these increased costs were
lower equipment repair and maintenance and group health insurance
costs.
Refractory operating profits declined 37.0% to $1.9 million from $3.1
million in 1997 and 1996, respectively. In addition to the reduction in
gross profit, increased research expenditures, primarily at LTI, and
increased selling and administrative costs at INTOGREEN, LTI and PT AP
Green Indonesia contributed to the reduction in operating profit.
Results from these subsidiaries should improve as they progress beyond
the start-up phase of operations.
Industrial Lime
---------------
Industrial lime sales increased 10.4% to $11.4 million for the first
quarter of 1997, including $2.1 million from the newly acquired plant
in Ripplemead, Virginia, from $9.9 million for the first quarter of
1996. Volumes at the New Braunfels, Texas plant decreased an average of
3.0%, with declines in road stabilization and building lime partially
offset with increased volume of industrial lime. Pricing was flat at
New Braunfels for the comparable quarters, with slight increases in
industrial and road stabilization prices offset by lower prices for
building lime and lime by-products. At the Kimballton, Virginia plant,
declines in quicklime and hydrate volumes was partially offset
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<PAGE>
by an improvement in Cal-Dol volume for an overall decline of 6.8%.
Average selling prices declined slightly across all product lines at
Kimballton for the first quarter of 1997 compared to the 1996 period.
Industrial lime gross profit was $2.2 million for both periods, with
the gross profit percentage declining to 19.1% of sales in 1997 from
21.8% of sales in 1996. The decline in gross profit percentage was due
to increased purchased material costs at both the Kimballton and New
Braunfels plants and increased power and processing fuel costs at
Kimballton, partially offset by reduced fuel costs at New Braunfels.
Also contributing to the decline in gross profit percentage were the
relatively high operating costs and depreciation related to the newly
acquired Ripplemead plant. Significant improvements have been made at
this facility, which generated a small net profit in the first quarter,
and the impact of these improvements, coupled with increased synergies
with the Kimballton plant, should result in improved gross profit
percentages in future periods. Operating profit was also flat at $1.8
million for the comparable periods.
Expenses and Other Income
-------------------------
Selling and administrative expenses increased 4.0% to $9.2 million for
the three-month period ended March 31, 1997 from $8.9 million for the
comparable 1996 period. The increase was primarily due to LTI,
INTOGREEN and PT AP Green Indonesia as noted above, partially offset by
reduced management incentive expenses.
Interest expense increased 6.1% to $834,000 in 1997 from $786,000 in
1996 due to interest associated with borrowings against the Company's
line of credit. Daily average bank line borrowings were approximately
$4.2 million during the first quarter of 1997, primarily due to funds
borrowed in December 1996 related to the Eastern Ridge Lime
acquisition, while there were no bank line borrowings during the first
quarter of 1996. Interest income for the first quarter of 1997 was
$247,000 compared to $322,000 for the first quarter of 1996. The
reduction was due primarily to reduced funds available for investing.
Other income decreased 53.3% to $66,000 for the three months ended
March 31, 1997 from $142,000 for the comparable 1996 period, primarily
due to currency conversion losses on U.S. dollar denominated accounts
at the Canadian subsidiary during 1997 compared to a small gain in
1996, partially offset by increased royalty income.
The Company and its Canadian and U.K. subsidiaries typically transact
business in their own currencies and accordingly are not subject to
significant transaction gains and losses. A. P. Green de Mexico and PT
AP Green Indonesia transact a significant portion of their business in
U.S. dollars and, as such, use the dollar as their functional currency.
This
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<PAGE>
results in currency conversion gains and losses on Mexican peso and
Indonesian rupiah transactions, A. P. Green's portion of which was not
significant to the consolidated results.
Equity in Net Income of Affiliates
----------------------------------
The Company's share of income from its two Colombian affiliates was
$15,000 in the first quarter of 1997 compared to $180,000 for the first
quarter of 1996. The reduction was due to a recession in the Colombian
construction industry, political uncertainty and a general decline in
economic conditions in Colombia. Current projections indicate reduced
income levels will continue in the near future.
Accounting Standards Not Yet Implemented
----------------------------------------
The Company is required to implement Statement of Financial Accounting
Standards No. 128, "Earnings per Share", for the quarter and year
ending December 31, 1997. The standard requires presentation of both
basic and diluted earnings per share on the face of the consolidated
statement of earnings, using the treasury stock method to calculate the
net impact of dilutive securities. In addition, a reconciliation of
both the numerator and denominator of the two calculations is required
in the footnotes to the financial statements. Due to the relatively low
number of exercisable stock options outstanding, implementation of the
standard would not have changed earnings per share as reported herein.
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<PAGE>
INDUSTRY SEGMENTS
(In thousands)
Three Months Ended March 31,
----------------------------
1997 1996
----------------------------
NET SALES
Refractory products and services $ 53,497 $ 54,380
Industrial lime 11,429 9,892
Intersegment eliminations (110) (38)
-------- --------
$ 64,816 $ 64,234
======== ========
GROSS PROFIT
Refractory products and services $ 8,623 $ 9,203
Industrial lime 2,179 2,152
-------- --------
$ 10,802 $ 11,355
======== ========
GROSS PROFIT PERCENTAGE
Refractory products and services 16.1% 16.9%
Industrial lime 19.1% 21.8%
16.7% 17.7%
======== ========
OPERATING PROFIT
Refractory products and services $ 1,946 $ 3,090
Industrial lime 1,823 1,835
-------- --------
3,769 4,925
-------- --------
OTHER CHARGES TO INCOME
General corporate expenses, net 2,127 2,264
Interest expense 834 786
Interest income (247) (322)
-------- --------
Total other charges 2,714 2,728
-------- --------
EARNINGS BEFORE INCOME TAXES $ 1,055 $ 2,197
======== ========
IDENTIFIABLE ASSETS (AT PERIOD END)
Refractory products and services $ 296,729 $ 311,004
Industrial lime 59,021 47,523
Corporate 216 7,775
-------- --------
$ 355,966 $ 366,302
======== ========
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Three Months Ended March 31,
----------------------------
1997 1996
----------------------------
DEPRECIATION, DEPLETION AND AMORTIZATION
Refractory products and services $ 1,728 $ 1,637
Industrial lime 1,074 692
Corporate 197 263
-------- --------
$ 2,999 $ 2,592
======== ========
CAPITAL EXPENDITURES
Refractory products and services $ 1,099 $ 2,637
Industrial lime 347 481
Corporate 143 146
-------- --------
$ 1,589 $ 3,264
======== ========
GEOGRAPHIC SEGMENTS
(In thousands)
Three Months Ended March 31,
----------------------------
1997 1996
----------------------------
NET SALES
United States $ 56,939 $ 57,489
Canada 5,375 5,487
United Kingdom 2,210 2,094
Mexico 2,404 1,571
Far East 118 --
Intersegment transfers (primarily U.S.) (2,230) (2,407)
-------- --------
$ 64,816 $ 64,234
======== ========
EARNINGS (LOSS) BEFORE INCOME TAXES
United States $ 1,180 $ 2,088
Canada (74) (181)
United Kingdom (31) 74
Mexico 218 227
Far East (238) (11)
-------- --------
$ 1,055 $ 2,197
======== ========
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<PAGE>
Three Months Ended March 31,
----------------------------
1997 1996
----------------------------
IDENTIFIABLE ASSETS (AT PERIOD END)
United States $ 313,587 $ 328,946
Canada 16,961 17,283
United Kingdom 4,694 4,278
Mexico 6,949 5,043
Far East 7,346 2,976
Corporate 6,429 7,776
-------- --------
$ 355,966 $ 366,302
======== ========
PRICE/VOLUME SUMMARY
1997 AS COMPARED TO 1996
PERCENT INCREASE (DECREASE)
Three
Months
Ended
-----
U.S. REFRACTORY PRODUCTS SALES
Volume (2.5)%
Price (0.5)
INDUSTRIAL LIME SALES
(excluding impact of Eastern Ridge acquisition)
Volume (5.2)
Price (0.1)
-16-
<PAGE>
FINANCIAL CONDITION
- -------------------
The Company continues to maintain a strong balance sheet.
Summary Information
(Dollars in thousands)
March 31,
---------------------- December 31,
1997 1996 1996
-------- -------- --------
Working capital $ 69,591 $ 79,426 $ 75,541
Current ratio 2.6:1 3.0:1 2.7:1
Total assets $355,966 $366,302 $355,129
Current maturities of
long-term debt 4,145 2,742 4,168
Long-term debt 34,736 34,360 40,109
Stockholders' equity $118,600 $115,174 $118,384
Debt to total
capitalization(1) 24.7% 24.4% 27.2%
(1) Calculated as total Debt (long-term debt including current
maturities) divided by total stockholders' equity plus total
Debt.
Working capital declined $6.0 million from December 31, 1996 to March
31, 1997 as cash was used to repay borrowings against the U.S.
long-term line of credit. The ratio of current assets to current
liabilities decreased to 2.6 to 1 from 2.7 to 1 during the same period.
As compared to March 31, 1996 working capital was down $9.8 million,
primarily due to a $4.1 million increase in accounts payable and a $2.5
million reduction in reimbursement due on paid asbestos claims. Both of
these changes, as well as the $3.2 million reduction in reimbursement
due on paid asbestos claims since December 31, 1996, relate to asbestos
claim settlements with and reimbursements from the Company's insurance
carriers and the Center.
Also contributing to the reduction in working capital since March 31,
1996 were a $1.6 million reduction in accounts receivable due to
improved collections and a $1.7 million planned reduction in refractory
finished goods inventories. In addition, current maturities of
long-term debt increased $1.4 million, primarily due to
reclassification from long-term
-17-
<PAGE>
debt of the final payment on an industrial development revenue bond at
the Bessemer, Alabama plant which matures in December 1997.
Projected insurance recovery on asbestos claims increased $8.0 million
while projected asbestos claims increased $6.4 million, both as a
result of revised estimates based upon information provided by the
Center, net of payments received from insurance carriers during the
quarter. The net projected asbestos liability included in the Company's
consolidated statement of financial position has been reduced to zero
as of March 31, 1997 as a result of final settlements with the
Company's insurance carriers. Future payments of asbestos claims will
be made directly to the Center by insurance carriers.
Long-term debt decreased $5.3 million from December 31, 1996 to March
31, 1997 due to $6.0 million in repayments against the U.S. long-term
line of credit. These repayments were partially offset by a $700,000
ten-year capital lease on a warehouse in Houston, Texas, which bears an
interest rate of 10.9% and expires December 1, 2006.
Capital expenditures for the first quarter of 1997 totaled $1.6 million
compared to $3.3 million during the first quarter of 1996, with capital
expenditures for the refractories business decreasing approximately
$1.5 million. This reduction was primarily due to completion of both
the new plant in Indonesia and the expansion of the Smithville, Ontario
plant during 1996.
Subsequent Event
----------------
In May 1997, the Company's $30.0 million U.S. long-term line of credit
was extended to May 2, 1999. At the same time, certain restrictive
covenants associated with the Company's U.S. long-term line of credit
and the unsecured notes payable were amended effective January 1, 1997
to terms more favorable to the Company. Approximately $2.7 million of
this line of credit was being utilized at March 31, 1997 for
outstanding letters of credit and $3.0 million in borrowings remained
outstanding, leaving an available balance of approximately $24.3
million.
-18-
<PAGE>
A. P. GREEN INDUSTRIES, INC.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
Exhibit No.
27 Financial Data Schedule as of and for the Three Months
Ended March 31, 1997
(b) Reports on Form 8-K: On January 13, 1997 the Company filed
Form 8-K to report, under Item 2, the acquisition of
substantially all of the assets and assumption of certain
liabilities of the operations of Eastern Ridge Lime, L.P.
("Eastern Ridge"). Pursuant to Item 7(a)(4) of Form 8-K, on
March 17, 1997 the Company filed Form 8-K/A to include, under
Item 7, the following historical and pro forma financial
statements:
(a) Historical Financial Statements of Eastern Ridge
Balance sheets, statements of operations, statements of cash
flows and statements of partnership equity (deficit), notes
thereto and independent auditors' report as of and for the
years ended December 31, 1995 and 1994.
Unaudited balance sheet as of September 30, 1996 and unaudited
statements of operations and statements of cash flows for the
nine months ended September 30, 1996 and 1995.
(b) Pro Forma Financial Information
Pro forma combined statement of financial position and pro
forma combined statement of earnings as of and for the
nine-month period ended September 30, 1996 and pro forma
combined statement of earnings for the year ended December 31,
1995, unaudited and with notes thereto.
-19-
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
A. P. Green Industries, Inc.
(Registrant)
By:/s/ Gary L. Roberts
--------------------------
Gary L. Roberts
Vice President, Chief Financial
Officer and Treasurer
Date: May 14, 1997
------------
-20-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
A.P. GREEN INDUSTRIES, INC. QUARTERLY REPORT ON FORM 10-Q AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRELY BY
REFERENCE TO SUCH REPORT
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,323
<SECURITIES> 0
<RECEIVABLES> 44,729
<ALLOWANCES> 1,782
<INVENTORY> 56,312
<CURRENT-ASSETS> 113,051
<PP&E> 106,844
<DEPRECIATION> 0
<TOTAL-ASSETS> 355,966
<CURRENT-LIABILITIES> 43,460
<BONDS> 38,881
0
0
<COMMON> 8,979
<OTHER-SE> 109,621
<TOTAL-LIABILITY-AND-EQUITY> 355,966
<SALES> 64,816
<TOTAL-REVENUES> 64,816
<CGS> 54,014
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 834
<INCOME-PRETAX> 1,055
<INCOME-TAX> 358
<INCOME-CONTINUING> 811
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