SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------
For the quarter ended September 30, 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 November 14, 1997,
8,060,665 shares of Common Stock, $1 par value, were outstanding.
Page 1 of 14
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A. P. GREEN INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ADJUSTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
September 30, December 31,
1997 1996
------------- -----------
(Dollars in thousands, except per share data)
ASSETS
Current Assets
Cash and cash equivalents $ 5,539 $ 9,477
Receivables (net of allowances -
1997, $1,600; 1996, $1,701) 44,717 42,084
Reimbursement due on paid asbestos claims -- 3,898
Inventories 53,648 53,674
Deferred income tax asset 3,089 3,374
Other 6,717 7,030
------- -------
Total current assets 113,710 119,537
Property, plant and equipment, net 105,961 107,394
Projected insurance recovery on asbestos claims 82,556 110,374
Pension assets 9,180 9,044
Intangible assets, net 4,415 4,132
Other assets 4,079 4,648
------- -------
Total assets $319,901 $355,129
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 16,202 $ 20,408
Accrued expenses
Payrolls 6,689 6,267
Taxes other than on income 2,490 1,860
Insurance reserves 4,242 3,574
Other 6,473 6,528
Current maturities of long-term debt 6,599 4,168
Income taxes 1,423 1,191
------- -------
Total current liabilities 44,118 43,996
Deferred income taxes 7,863 10,228
Long-term non-pension benefits 17,568 16,583
Long-term pensions 12,287 12,449
Long-term debt 30,680 40,109
Projected asbestos claims 82,556 111,966
------- -------
Total liabilities 195,072 235,331
------- -------
Minority Interests 2,619 2,088
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: 9,014,099 in 1997
and 8,975,442 in 1996 9,014 8,975
Additional paid-in capital 68,505 68,309
Retained earnings 64,697 60,477
Less: Deferred foreign currency translation (3,448) (2,875)
Treasury stock of 953,934 shares in 1997
and 1996, at cost (9,498) (9,498)
Note receivable-ESOT (6,323) (6,941)
Minimum pension liability adjustment,
net of tax (737) (737)
------- -------
Total stockholders' equity 122,210 117,710
------- -------
Total liabilities and stockholders' equity $319,901 $355,129
======= ======
See accompanying notes to adjusted consolidated financial statements.
2
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A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three months ended
September 30,
------------------------
(Dollars in thousands, except per share data) 1997 1996
--------- ---------
Net sales $ 70,696 $ 61,948
Cost of sales 57,907 52,856
--------- ---------
Gross profit 12,789 9,092
Expenses and other income
Selling & administrative expenses 9,447 8,798
Interest expense 817 766
Interest income (232) (279)
Minority interest in loss of partnerships (124) (35)
Other income, net (83) (324)
--------- ---------
Earnings before income taxes 2,964 166
Income tax expense (benefit) 1,003 (66)
Equity in net income of affiliates (143) -
Minority interest in income of consolidated
subsidiaries 95 70
--------- ---------
Net earnings $ 2,009 $ 162
========= =========
Net earnings per common share $ 0.25 $ 0.02
========= =========
Weighted average number of common shares 8,055,114 8,021,508
========= =========
Dividends per common share $ 0.04 $ 0.04
========= =========
See accompanying notes to adjusted consolidated financial statements.
3
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Nine months ended
September 30,
------------------------
(Dollars in thousands, except per share data) 1997 1996
--------- ---------
Net sales $ 207,365 $ 195,720
Cost of sales 170,160 161,511
--------- ---------
Gross profit 37,205 34,209
Expenses and other income
Selling & administrative expenses 27,846 27,015
Interest expense 2,463 2,343
Interest income (731) (885)
Minority interest in loss of partnerships (209) (76)
Other income, net (200) (591)
--------- ---------
Earnings before income taxes 8,036 6,403
Income tax expense 2,797 2,307
Equity in net income of affiliates (174) (379)
Minority interest in income of consolidated
subsidiaries, net 250 138
--------- ---------
Net earnings $ 5,163 $ 4,337
========= =========
Net earnings per common share $ 0.64 $ 0.54
========= =========
Weighted average number of common shares 8,034,771 8,043,150
========= =========
Dividends per common share $ 0.12 $ 0.11
========= =========
See accompanying notes to adjusted consolidated financial statements.
4
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended
September 30,
------------------------
(Dollars in thousands) 1997 1996
----------- -----------
Cash flows from operating activities
Net earnings $ 5,163 $ 4,337
Adjustments for items not requiring (providing) cash
Depreciation, depletion and amortization 9,014 7,902
Stock compensation to directors 39 28
Provision for losses on accounts receivable 542 511
Loss on sale of assets 42 14
Equity in earnings of affiliates,
net of dividends received (26) (95)
Minority interest in income of consolidated
subsidiaries and partnerships, net 41 62
Decrease (increase) in assets
Trade receivables (3,188) 2,834
Asbestos claim and fee reimbursements received 21,681 17,260
Inventories 26 3,340
Receivable and prepaid taxes 45 (137)
Other current assets 132 (1,626)
Increase (decrease) in liabilities
Accounts payable and accrued expenses (2,541) (5,258)
Asbestos claims paid (19,361) (18,508)
Pensions (163) (1,588)
Income taxes 232 (418)
Deferred income taxes (2,080) (527)
Long-term non-pension benefits 986 784
------ ------
Net cash provided by operating activities 10,584 8,915
------ ------
Cash flows from investing activities
Capital expenditures (6,598) (9,374)
Increase in other long-term assets (187) (454)
Increase in pension assets (136) (30)
Proceeds from sales of assets 314 389
Payment received on ESOT note 618 564
------ ------
Net cash used in investing activities (5,989) (8,905)
------ ------
Cash flows from financing activities
Repayments of debt (17,702) (2,669)
Proceeds from borrowings 10,000 325
Exercised stock options 195 --
Dividends paid (964) (884)
Capital contributions from minority partner 490 --
Purchase of common stock for treasury -- (480)
Tax benefit on dividends paid to ESOT 21 22
------ ------
Net cash used in financing activities (7,960) (3,686)
------ ------
Effect of exchange rate changes (573) (144)
------ ------
Net decrease in cash and cash equivalents (3,938) (3,820)
Cash and cash equivalents at beginning of year 9,477 9,284
------ ------
Cash and cash equivalents at end of period $ 5,539 $ 5,464
====== ======
See accompanying notes to adjusted consolidated financial statements.
5
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A. P. GREEN INDUSTRIES, INC.
NOTES TO ADJUSTED 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
and nine-month period ended September 30, 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 assets 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 the reserve was increased by
approximately $700,000 due to the closing of the Weston, Ontario Plant,
which was sold in December 1995, and revised estimates of U. S.
employee termination benefits resulting from the sale of these
facilities taking longer than anticipated. Substantially all employees
at these facilities 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, one of which was sold in October
1997 as discussed under Financial Condition.
6
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3. INVENTORIES
-----------
September 30, 1997 December 31, 1996
------------------ -----------------
Finished goods & work-in-process
Valued at LIFO:
FIFO cost $ 32,633 $31,278
Less LIFO reserve (14,300) (14,907)
------- -------
LIFO cost 18,333 16,371
Valued at FIFO 12,460 13,225
------- -------
TOTAL 30,793 29,596
------- -------
Raw materials and supplies
Valued at LIFO:
FIFO cost 16,381 17,702
Less LIFO reserve (5,914) (6,129)
------- -------
LIFO cost 10,467 11,573
Valued at FIFO 12,388 12,505
------- -------
TOTAL 22,855 24,078
------- -------
$53,648 $53,674
======= =======
4. LITIGATION
----------
Asbestos-related Claims - Personal Injury
-----------------------------------------
A. P. Green is among numerous defendants in lawsuits pending as of
September 30, 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 number and type of claims brought against it. Claims
activity for the Company for each of the years ended December 31, 1996,
1995 and 1994 was as follows:
7
<PAGE>
- --------------------------------------------------------------------------------
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 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 the same time, a
settlement (the Settlement) between the Members and the Class was filed
with the court. On June 25, 1997, after a favorable ruling in the
Federal District Court for the Eastern District of Pennsylvania and a
reversal of that ruling by the Third Circuit Court of Appeals, the
United States Supreme Court upheld the ruling of the Third Circuit. The
result of such ruling is that the class action lawsuit and the
Settlement are of no effect.
As the Settlement established a numerical cap on the number of claims
that could be processed each year during the ten years of the
Settlement and because the Settlement provided for a range of payments
for different disease categories, it was possible to estimate the
aggregate amount of liability for the Company through 2004 and related
insurance recoveries. The amounts reported for projected asbestos
claims and projected insurance recovery on asbestos claims in the
consolidated statements of financial position as of December 31, 1996
were determined based upon the Settlement.
Without the Settlement the Company can only estimate the liability and
related insurance recoveries associated with known claims. As such, the
amounts reported for projected asbestos claims and projected insurance
recovery on asbestos claims as of September 30, 1997 reflect only those
claims known to have been filed as of that date. In order to arrive at
these projected amounts, the Company also reviewed its insurance
policies and historical settlement amounts. This resulted in a
reduction in both the liability and asset of $19.4 million during the
third quarter of 1997. There was no effect on the consolidated earnings
of the Company.
Management anticipates that the Company's insurance carriers will make
all required payments for these claims. 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
8
<PAGE>
adverse effect on the Company's consolidated financial position or
results of operations.
In December 1996, the Company and a former subsidiary, The E. J.
Bartells Company, reached a comprehensive settlement agreement with all
insurance carriers except one. Under the terms of this settlement
agreement, such carriers have agreed to pay (subject to applicable
policy limits) on behalf of the insureds, liabilities arising out of
asbestos personal injury claims. The Company is pursuing its claim for
coverage against the non-settling carrier.
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. Except for
deductible amounts or retentions provided for 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 also 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.
Environmental
-------------
The EPA or other 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 which is
not expected to be material. 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>
5. SUBSEQUENT EVENT
----------------
The Company acquired a 51% ownership interest in Lanxide
ThermoComposites, Inc. and Subsidiary (LTI) on December 31, 1995, at
which date total stockholders' equity of LTI was $196,078. LTI has
incurred quarterly net losses since the acquisition. Accounting
Research Bulletin No. 51, "Consolidated Financial Statements" (ARB51),
requires that "...In the unusual case in which losses applicable to the
minority interest in a subsidiary exceed the minority interest in the
equity capital of the subsidiary, such excess and any further losses
applicable to the minority interest shall be charged against the
majority interest..." The Company did not become aware of this
requirement until recently and, as such, as been charging 49% of all
LTI losses against the minority interest.
In order to correct its prior accounting treatment, the Company has
adjusted its consolidated statements of earnings for the year ended
December 31, 1996 and the first three quarters of 1997.
The impact on the three-month and nine-month periods ended September
30, 1997 and 1996 was as follows:
Three months ended Nine Months Ended
September 30, September 30,
(Dollars in thousands, ------------------ -----------------
except per share data) 1997 1996 1997 1996
------------------ -----------------
Net earnings
As reported $2,160 $344 $5,622 $4,912
As adjusted 2,009 162 5,163 4,337
Net earnings per common share
As reported .27 .04 .70 .61
As adjusted .25 .02 .64 .54
In accordance with ARB 51, for future periods in which LTI has earnings
the Company, as majority stockholder, will be credited with 100% of
those earnings until such time as total stockholders' equity of LTI is
positive.
10
<PAGE>
A. P. GREEN INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The Company acquired a 51% ownership interest in Lanxide ThermoComposites, Inc.
and Subsidiary (LTI) on December 31, 1995, at which date total stockholders'
equity of LTI was $196,078. LTI has incurred quarterly net losses since the
acquisition. ARB 51 requires that "...In the unusual case in which losses
applicable to the minority interest in a subsidiary exceed the minority interest
in the equity capital of the subsidiary, such excess and any further losses
applicable to the minority interest shall be charged against the majority
interest..." The Company did not become aware of this requirement until recently
and, as such, has been charging 49% of all LTI losses against the minority
interest.
In order to correct its prior accounting treatment, the Company has adjusted its
consolidated statements of earnings for the year ended December 31, 1996 and the
first three quarters of 1997. The impact on the quarter and nine months ended
September 30, 1997 was to increase minority interest in income of consolidated
subsidiaries by approximately $151,000 and $459,000, respectively, through the
elimination of the minority interest in all LTI losses for the quarter and
nine-month period, which reduced net income by the same amounts, or $.02 and
$.06 per share, respectively. The impact on the quarter and nine months ended
September 30, 1996 was to increase minority interest in income of consolidated
subsidiaries by approximately $182,000 and $575,000, respectively, which reduced
net income by the same amounts, or $.02 and $.07 per share, respectively. In
addition, on the adjusted consolidated statements of financial position minority
interests was increased and retained earnings reduced by approximately
$1,133,000 as of September 30, 1997 and approximately $575,000 and $674,000 as
of September 30, 1996 and December 31, 1996, respectively. These adjustments are
reflected in the adjusted consolidated financial statements included herein
under Item 1., as well as wherever these items appear in or impact the
supplementary data.
In accordance with ARB 51, for future periods in which LTI has earnings the
Company, as majority stockholder, will be credited with 100% of those earnings
until such time as total stockholders' equity of LTI is positive.
11
<PAGE>
FINANCIAL CONDITION
- -------------------
Summary Information
(Dollars in thousands)
September 30,
--------------------- December 31,
1997 1996 1996
-------- -------- -----------
Working capital $ 69,592 $ 75,383 $ 75,541
Current ratio 2.6:1 3.0:1 2.7:1
Total assets $319,901 $348,147 $355,129
Current maturities of
long-term debt 6,599 2,942 4,168
Long-term debt 30,680 31,804 40,109
Stockholders' equity (adjusted) $122,210 $117,442 $117,710
Debt to total
capitalization(1)(adjusted) 23.4% 22.8% 27.3%
(1) Calculated as total Debt (long-term debt including current
maturities) divided by total stockholders' equity plus total
Debt.
12
<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 Nine Months
Ended September 30, 1997, as adjusted.
13
<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: February 2, 1998
----------------
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE A. P.
GREEN INDUSTRIES, INC. ADJUSTED QUARTERLY REPORT ON FORM 10-Q/A AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH ADJUSTED REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,539
<SECURITIES> 0
<RECEIVABLES> 46,317
<ALLOWANCES> 1,600
<INVENTORY> 53,648
<CURRENT-ASSETS> 113,710
<PP&E> 105,961
<DEPRECIATION> 0
<TOTAL-ASSETS> 319,901
<CURRENT-LIABILITIES> 44,118
<BONDS> 37,279
0
0
<COMMON> 9,014
<OTHER-SE> 113,196
<TOTAL-LIABILITY-AND-EQUITY> 319,901
<SALES> 207,365
<TOTAL-REVENUES> 207,365
<CGS> 170,160
<TOTAL-COSTS> 170,160
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,463
<INCOME-PRETAX> 8,036
<INCOME-TAX> 2,797
<INCOME-CONTINUING> 5,163
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,163
<EPS-PRIMARY> .64
<EPS-DILUTED> 0
</TABLE>
