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 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
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(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 14
<PAGE>
A. P. GREEN INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ADJUSTED 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 2,652 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: 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 60,806 60,477
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 117,758 117,710
------- -------
Total liabilities and stockholders' equity $355,966 $355,129
======= =======
See accompanying notes to adjusted consolidated financial statements.
2
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED 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 52,742
--------- ---------
Gross profit 10,802 11,492
Expenses and other income
Selling & administrative expenses 9,222 9,006
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 income (loss) of
consolidated subsidiaries 69 (13)
--------- ---------
Net earnings $ 643 $ 1,604
========= =========
Net earnings per common share $ 0.08 $ 0.20
========= =========
Weighted average number of common shares 8,023,220 8,077,442
========= =========
Dividends per common share $ 0.04 $ 0.035
========= =========
See accompanying notes to adjusted consolidated financial statements.
3
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended
March 31,
------------------------
(Dollars in thousands) 1997 1996
---------- ----------
Cash flows from operating activities
Net earnings $ 643 $ 1,604
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 income (losses) of consolidated
subsidiaries and partnerships 73 (46)
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 adjusted consolidated financial statements.
4
<PAGE>
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
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)
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LIFO cost 19,507 16,371
Valued at FIFO 13,223 13,225
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TOTAL 32,730 29,596
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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
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TOTAL 23,582 24,078
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$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.
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<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.
5. SUBSEQUENT EVENT
----------------
The Company acquired a 51% ownership interest in Lanxide
ThermoComposites, Inc. and
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<PAGE>
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 quarters ended March 31, 1997 and 1996 was as
follows:
Three months ended
March 31,
------------------
(Dollars in thousands, except per share data) 1997 1996
------------------
Net earnings
As reported $811 $1,731
As adjusted 643 1,604
Net earnings per common share
As reported .10 .22
As adjusted .08 .20
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 ended March 31, 1997 was to increase minority interest in
income of consolidated subsidiaries by approximately $168,000 through
the elimination of the minority interest in all LTI losses for the
quarter, which reduced net income by the same amount, or $.02 per share.
The impact on the quarter ended March 31, 1996 was to increase minority
interest in income of consolidated subsidiaries and reduce net income by
approximately $127,000, or $.02 per share. In addition, on the adjusted
consolidated statements of financial position minority interests was
increased and retained earnings reduced by approximately $842,000 as of
March 31, 1997 and approximately $127,000 and $674,000 as of March 31,
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.
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<PAGE>
FINANCIAL CONDITION
- -------------------
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 (adjusted) $117,758 $115,047 $117,710
Debt to total
capitalization(1) (adjusted) 24.8% 24.4% 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 Three Months
Ended March 31, 1997, as adjusted
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<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
----------------
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<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 THREE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRELY BY
REFERENCE TO SUCH ADJUSTED REPORT.
</LEGEND>
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<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> 108,779
<TOTAL-LIABILITY-AND-EQUITY> 355,966
<SALES> 64,816
<TOTAL-REVENUES> 64,816
<CGS> 54,014
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 834
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