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 June 30, 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 August 13, 1997, 8,059,056
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)
June 30, December 31,
1997 1996
-------- -----------
(Dollars in thousands, except per share data)
ASSETS
Current Assets
Cash and cash equivalents $ 6,129 $ 9,477
Receivables (net of allowances - --
1997, $1,732; 1996, $1,701) 43,865 42,084
Reimbursement due on paid asbestos claims -- 3,898
Inventories 55,217 53,674
Deferred income tax asset 2,685 3,374
Other 7,619 7,030
------- -------
Total current assets 115,515 119,537
Property, plant and equipment, net 106,386 107,394
Projected insurance recovery on asbestos claims 108,437 110,374
Pension assets 9,106 9,044
Intangible assets, net 4,601 4,132
Other assets 4,363 4,648
------- -------
Total assets $348,408 $355,129
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 16,798 $ 20,408
Accrued expenses
Payrolls 6,121 6,267
Taxes other than on income 1,934 1,860
Insurance reserves 4,103 3,574
Other 6,942 6,528
Current maturities of long-term debt 4,120 4,168
Income taxes 1,183 1,191
------- -------
Total current liabilities 41,201 43,996
Deferred income taxes 8,533 10,228
Long-term non-pension benefits 17,258 16,583
Long-term pensions 12,652 12,449
Long-term debt 37,710 40,109
Projected asbestos claims 108,437 111,966
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Total liabilities 225,791 235,331
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Minority Interests 2,648 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: 8,980,092 in 1997
and 8,975,442 in 1996 8,980 8,975
Additional paid-in capital 68,334 68,309
Retained earnings 63,003 60,477
Less: Deferred foreign currency translation (3,172) (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 119,969 117,710
------- -------
Total liabilities and stockholders' equity $348,408 $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 June 30,
--------------------------
(Dollars in thousands, except per share data) 1997 1996
--------- ---------
Net sales $ 71,853 $ 69,538
Cost of sales 58,239 55,913
--------- ---------
Gross profit 13,614 13,625
Expenses and other income
Selling & administrative expenses 9,176 9,211
Interest expense 812 791
Interest income (251) (285)
Minority interest in loss of partnership (89) (7)
Other income, net (50) (125)
--------- ---------
Earnings before income taxes 4,016 4,040
Income tax expense 1,435 1,588
Equity in net income of affiliates (15) (199)
Minority interest in income of consolidated
subsidiaries 85 80
--------- ---------
Net earnings $ 2,511 $ 2,571
========= =========
Net earnings per common share $ 0.31 $ 0.32
========= =========
Weighted average number of common shares 8,025,629 8,030,739
========= =========
Dividends per common share $ 0.040 $ 0.035
========= =========
See accompanying notes to adjusted consolidated financial statements.
3
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Six months ended June 30,
------------------------
(Dollars in thousands, except per share data) 1997 1996
--------- ---------
Net sales $ 136,669 $ 133,772
Cost of sales 112,253 108,655
--------- ---------
Gross profit 24,416 25,117
Expenses and other income
Selling & administrative expenses 18,398 18,217
Interest expense 1,646 1,577
Interest income (499) (606)
Minority interest in loss of partnership (85) (41)
Other income, net (116) (268)
--------- ---------
Earnings before income taxes 5,072 6,238
Income tax expense 1,793 2,374
Equity in net income of affiliates (30) (379)
Minority interest in income of consolidated
subsidiaries, net 155 68
--------- ---------
Net earnings 3,154 4,175
========= =========
Net earnings per common share $ 0.39 $ 0.52
========= =========
Weighted average number of common shares 8,024,431 8,054,090
========= =========
Dividends per common share $ 0.08 $ 0.07
========= =========
See accompanying notes to adjusted consolidated financial statements.
4
<PAGE>
A. P. GREEN INDUSTRIES, INC.
ADJUSTED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six months ended June 30,
------------------------
(Dollars in thousands) 1997 1996
---------- ----------
Cash flows from operating activities
Net earnings $ 3,154 $ 4,175
Adjustments for items not requiring (providing) cash
Depreciation, depletion and amortization 5,985 5,205
Stock compensation to directors 29 28
Provision for losses on accounts receivable 363 333
(Loss) gain on sale of assets (39) 110
Equity in earnings of affiliates,
net of dividends received (30) (191)
Minority interest in income of consolidated
subsidiaries and partnerships,net 70 27
Decrease (increase) in assets
Trade receivables (2,144) (4,234)
Asbestos claim and fee reimbursements received 15,162 5,144
Inventories (1,543) 247
Receivable and prepaid taxes 45 336
Other current assets (761) (806)
Increase (decrease) in liabilities
Accounts payable and accrued expenses (2,739) (3,123)
Asbestos claims paid (12,855) (4,968)
Pensions 203 (65)
Income taxes (9) 109
Deferred income taxes (1,006) (234)
Long-term non-pension benefits 675 575
------ ------
Net cash provided by operating activities 4,560 2,668
------ ------
Cash flows from investing activities
Capital expenditures (4,001) (7,047)
Increase in other long-term assets (467) (204)
Decrease (increase) in pension assets (62) 52
Proceeds from sales of assets 208 69
------ ------
Net cash used in investing activities (4,322) (7,130)
------ ------
Cash flows from financing activities
Repayments of debt (11,151) (107)
Proceeds from borrowings 8,000 225
Dividends paid (642) (563)
Capital contributions from minority partner 490 --
Purchase of common stock for treasury -- (480)
Tax benefit on dividends paid to ESOT 14 14
------ ------
Net cash used in financing activities (3,289) (911)
------ ------
Effect of exchange rate changes (297) (348)
------ ------
Net decrease in cash and cash equivalents (3,348) (5,721)
Cash and cash equivalents at beginning of year 9,477 9,284
------ ------
Cash and cash equivalents at end of period $ 6,129 $ 3,563
====== ======
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 six-month period ended June 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. RESERVE FOR PLANT CLOSINGS
--------------------------
The Company has a reserve 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 reserve to date. The U.S. facilities are held for sale at their
estimated net realizable value.
6
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3. INVENTORIES
-----------
June 30, 1997 December 31, 1996
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Finished goods & work-in-process
Valued at LIFO:
FIFO cost $ 32,721 $31,278
Less LIFO reserve (14,272) (14,907)
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LIFO cost 18,449 16,371
Valued at FIFO 13,127 13,225
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TOTAL 31,576 29,596
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Raw materials and supplies
Valued at LIFO:
FIFO cost 17,131 17,702
Less LIFO reserve (6,012) (6,129)
------- -------
LIFO cost 11,119 11,573
Valued at FIFO 12,522 12,505
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TOTAL 23,641 24,078
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$55,217 $53,674
======= =======
4. LITIGATION
----------
Asbestos-related Claims - Personal Injury
-----------------------------------------
A. P. Green is among numerous defendants in lawsuits pending as of June
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
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-----------------------------------------------------------------------
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.
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 will pursue coverage
litigation against the non-settling carrier.
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 June 30, 1997 and
December 31, 1996 were determined based upon the Settlement. However,
without the Settlement the Company can only estimate the liability and
related insurance recoveries associated with known claims.
The Company is assessing the impact of the recent Supreme Court ruling
on its projected asbestos liability and insurance recoveries. In doing
so, the Company will review its insurance policies, historical
settlement amounts and the number of cases pending against it.
Management believes the outcome of this assessment will not have an
effect on the
8
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consolidated earnings of the Company. It is anticipated that future
projections of asbestos liabilities and insurance recoveries and
related adjustments to the amounts reported in the Company's statement
of financial position will be based primarily on known claims and
cases, as unreported claims cannot be estimated with a reasonable
degree of accuracy.
Management does not anticipate that the Company will be required to
make any 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 adverse effect on the Company's consolidated financial
position or results of operations.
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
9
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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 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 six-month periods ended June 30, 1997
and 1996 was as follows:
Three months ended Six Months Ended
June 30, June 30,
(Dollars in thousands, ------------------ ----------------
except per share data) 1997 1996 1997 1996
------------------ ----------------
Net earnings
As reported $2,651 $2,837 $3,462 $4,568
As adjusted 2,511 2,571 3,154 4,175
Net earnings per common share
As reported .33 .36 .43 .57
As adjusted .31 .32 .39 .52
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 six months ended June 30, 1997 was to increase minority
interest in income of consolidated subsidiaries by approximately
$140,000 and $308,000, respectively, through the elimination of the
minority interest in all LTI losses for the quarter and six-month
period, which reduced net income by the same amounts, or $.02 and $.04
per share, respectively. The impact on the quarter and six months ended
June 30, 1996 was to increase minority interest in income of
consolidated subsidiaries by approximately $266,000 and $393,000,
respectively, which reduced net income by the same amounts, or $.04 and
$.05 per share, respectively. In addition, on the adjusted consolidated
statements of financial position minority interests was increased and
retained earnings reduced by approximately $982,000 as of June 30, 1997
and approximately $393,000 and $674,000 as of June 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)
June 30,
------------------ December 31,
1997 1996 1996
------ ------ ------------
Working capital $ 74,314 $ 79,471 $ 75,541
Current ratio 2.8:1 3.0:1 2.7:1
Total assets $348,408 $367,260 $355,129
Current maturities of
long-term debt 4,120 2,867 4,168
Long-term debt 37,710 34,341 40,109
Stockholders' equity (adjusted) 119,969 116,825 117,710
Debt to total
capitalization(1)(adjusted) 25.9% 24.2% 27.3%
(1) Calculated as total Debt (long-term debt including current maturities)
divided by total stockholders' equity plus total Debt.
12
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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 Six Months
Ended June 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
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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 SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH ADJUSTED REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,129
<SECURITIES> 0
<RECEIVABLES> 45,597
<ALLOWANCES> 1,732
<INVENTORY> 55,217
<CURRENT-ASSETS> 115,515
<PP&E> 106,386
<DEPRECIATION> 0
<TOTAL-ASSETS> 348,408
<CURRENT-LIABILITIES> 41,201
<BONDS> 41,830
0
0
<COMMON> 8,980
<OTHER-SE> 110,989
<TOTAL-LIABILITY-AND-EQUITY> 348,408
<SALES> 136,669
<TOTAL-REVENUES> 136,669
<CGS> 112,253
<TOTAL-COSTS> 112,253
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,646
<INCOME-PRETAX> 5,072
<INCOME-TAX> 1,793
<INCOME-CONTINUING> 3,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,154
<EPS-PRIMARY> .39
<EPS-DILUTED> 0
</TABLE>
