-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NHoZxwgRz3MbIeBV5H1yJ3mStBE1G3TNJsAuUe4JeCbGsZ7VrnoyRgBbLJue9m1Z jQ+7OzfEGTwpgUPh0q1HuQ== 0000950132-98-000201.txt : 19980317 0000950132-98-000201.hdr.sgml : 19980317 ACCESSION NUMBER: 0000950132-98-000201 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980313 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMPCO PITTSBURGH CORP CENTRAL INDEX KEY: 0000006176 STANDARD INDUSTRIAL CLASSIFICATION: PUMPS & PUMPING EQUIPMENT [3561] IRS NUMBER: 251117717 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00898 FILM NUMBER: 98564915 BUSINESS ADDRESS: STREET 1: 600 GRANT ST STE 4600 CITY: PITTSBURGH STATE: PA ZIP: 15219 BUSINESS PHONE: 4124564400 FORMER COMPANY: FORMER CONFORMED NAME: SCREW & BOLT CORP OF AMERICA DATE OF NAME CHANGE: 19710518 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997. Commission File Number 1-898 AMPCO-PITTSBURGH CORPORATION I.R.S. Employer Identification 600 Grant Street, Suite 4600, No. 25-1117717 Pittsburgh, PA 15219 State of Incorporation: Pennsylvania 412/456-4400 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- -------------------------- Common stock, $1 par value New York Stock Exchange Philadelphia Stock Exchange Series A Preference Stock New York Stock Exchange Purchase Rights Philadelphia Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] As of March 10, 1998, 9,577,621 common shares were outstanding. The aggregate market value of the voting stock of Ampco-Pittsburgh Corporation held by non- affiliates (based upon the closing price of these shares on the New York Stock Exchange) was approximately $133 million. DOCUMENTS INCORPORATED BY REFERENCE: Parts I, II and IV of this report incorporate by reference certain information from the Annual Report to Shareholders for the year ended December 31, 1997. PART I ITEM 1 - BUSINESS (a) GENERAL DEVELOPMENT OF BUSINESS Ampco-Pittsburgh Corporation (the "Corporation") was incorporated in Pennsylvania in 1929. The Corporation currently operates several businesses which manufacture engineered equipment. Aerofin Corporation produces finned tube heat exchange coils and is headquartered in Lynchburg, Virginia. Buffalo Air Handling Company is headquartered in Amherst, Virginia and manufactures large standard and custom air handling systems. Buffalo Pumps, Inc. manufactures centrifugal pumps and is headquartered in North Tonawanda, New York. New Castle Industries, Inc. and Bimex Industries, Inc. primarily produce feed screws, barrels and chill rolls and are headquartered in New Castle, Pennsylvania and Wales, Wisconsin, respectively. Union Electric Steel Corporation produces forged hardened steel rolls and is headquartered in Carnegie, Pennsylvania. In 1997, the Corporation purchased the assets of F. R. Gross Company, located in Stow, Ohio, a manufacturer of heat transfer rolls. Also in 1997, the Corporation purchased the assets of Atlantic Grinding and Welding, a manufacturer of feed screws with locations in New Hampshire and South Carolina. (b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The sales and operating profit of the Corporation's only segment and the identifiable assets attributable to it for the three years ended December 31, 1997 are set forth in Note 16 (Segment and Geographic Information) on pps. 16 and 17 of the accompanying Annual Report which is incorporated herein by reference. 2 (c) NARRATIVE DESCRIPTION OF BUSINESS The Corporation produces finned tube heat exchange coils, air handling systems and pumps for the construction, power generation, refrigeration, chemical processing and marine defense industries; feed screws, barrels, heat transfer rolls and chill rolls principally for the plastics processing industry and forged hardened steel rolls for producers of steel, aluminum and other metals. These products are heavily dependent on engineering, principally custom designed and are sold to sophisticated commercial and industrial users in the United States and foreign countries. No one customer's purchases were material to the Corporation. Contracts that may be subject to renegotiation or termination are not material to the Corporation. The Corporation's business is not seasonal but is subject to the cyclical nature of the industries and markets served. For additional information on the products produced and financial information about the business, see pp. 3 through 6 and Note 16 on pps. 16 and 17 of the accompanying Annual Report which are incorporated herein by reference. Raw Materials - ------------- Raw materials are generally available from many sources and the Corporation is not dependent upon any single supplier for any raw material. Certain of the raw materials used by the Corporation have historically been subject to variations in price. The Corporation generally does not purchase or arrange for the purchase of a major portion of raw materials significantly in advance of the time it requires them. 3 Patents - ------- While the Corporation holds some patents, trademarks and licenses, in the opinion of management they are not material to the Corporation's business other than in protecting the goodwill associated with the names under which its products are sold. Working Capital - --------------- The Corporation maintains levels of inventory, which generally reflect its normal requirements and are believed to reflect the practices of its industries. Production is generally to custom order and requires inventory levels of raw materials or semi-finished products with only a limited level of finished products. The Corporation extends credit terms consistent with practices of the industries served. Backlog - ------- The backlog of orders at December 31, 1997 was approximately $115,200,000 compared to a backlog of $112,300,000 at year end 1996. Most of those orders are expected to be filled in 1998. Competition - ----------- The Corporation faces considerable competition from a large number of companies. The Corporation believes, however, that it is a significant factor in each of the principal markets which it serves. Buffalo Pumps, Inc. produces a line of centrifugal pumps serving refrigeration, power generation and marine defense industries and competes with many other producers. Aerofin Corporation produces finned tube heat exchange coils used by the commercial and industrial construction, process and utility industries. Buffalo Air Handling Company produces standard and custom air handling systems used in commercial and industrial 4 buildings. Aerofin and Buffalo Air Handling have several major competitors in each of their markets. Union Electric Steel Corporation is considered the largest producer of forged hardened steel rolls in the United States, which are sold to steel and aluminum companies throughout the world. In addition to several domestic competitors, several major European and Japanese manufacturers also compete in both the domestic and foreign markets. New Castle Industries, Atlantic Grinding & Welding and Bimex Industries primarily produce feed screws, barrels, and chill rolls for use in the plastics processing industry and compete with a number of small regional companies. F. R. Gross Co. produces heat transfer rolls for the plastics, paper, packaging and printing industries and also competes with a number of small regional companies. Competition in all of the Corporation's businesses is based on quality, service, price and delivery. Research and Development - ------------------------ As part of an overall strategy to develop new markets and maintain leadership in each of the industry niches served, each of the Corporation's businesses incur expenditures for research and development. The activities that are undertaken are designed to develop new products, improve existing products and processes, enhance product quality, adapt products to specific customer requirements and reduce costs. In the aggregate, these expenditures generally do not exceed $1,000,000 per year. Environmental Protection Compliance Costs - ----------------------------------------- Expenditures for environmental control matters were not material in 1997 and such expenditures are not expected to be material in 1998. 5 Employees - --------- In December, 1997, the Corporation had 1,324 active employees, of whom 426 were sales, executive, administrative, engineering and clerical personnel. Approximately 79% of the production and craft hourly employees are covered by negotiated labor agreements with various unions. Year 2000 - --------- See Management's Discussion and Analysis of Financial Condition and Results of Operations on pps. 18 through 20 of the Annual Report to Shareholders for the year ended December 31, 1997 which is incorporated herein by reference. (d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Corporation's only foreign operation is a Union Electric Steel Corporation plant located in Belgium that manufactures forged hardened steel rolls principally for the European markets. For financial information relating to foreign and domestic operations see Note 16 (Segment and Geographic Information) on pps. 16 and 17 of the accompanying Annual Report which is incorporated herein by reference. ITEM 2 - PROPERTIES The Corporation is in one segment that produces engineered products. The location and general character of the principal locations, all of which are owned unless otherwise noted, are as follows: 6
Company and Principal Approximate Type of Location Use Square Footage Construction - ----------------------------- ----------------- -------------- --------------- Aerofin Corporation Manufacturing 146,000 on Brick, 4621 Murray Place facilities and 15.3 acres concrete Lynchburg, VA 24506 offices and steel Atlantic Grinding & Manufacturing 19,000 on Metal and Welding, Inc. facilities and 2.6 acres steel 9 Ricker Avenue offices Londonderry, NH 03053 Atlantic Grinding & Manufacturing 20,000 Metal and Welding, Inc.* facilities steel 1950 Old Dunbar Road West Columbia, SC 29172 Bimex Industries, Inc. Manufacturing 33,500 on Metal and 319 Universal Street facilities and 7.8 acres steel Wales, WI 53183 offices Buffalo Air Handling Manufacturing 89,000 on Metal and Company facilities and 19.5 acres steel Zane Snead Drive offices Amherst, VA 24531 Buffalo Pumps, Inc. Manufacturing 94,000 on Metal, brick 874 Oliver Street facilities and 7 acres and cement N. Tonawanda, NY 14120 offices block F. R. Gross Co., Inc. Manufacturing 25,300 on Masonry, 1397 Commerce Drive facilities and 4.2 acres metal and steel Stow, OH 44224 offices New Castle Industries, Inc. Manufacturing 81,600 on Metal and 1399 Countyline Road facilities and 18.5 acres steel New Castle, PA 16102 offices New Castle Industries, Inc. Manufacturing 31,000 Masonry 925 Industrial Street facilities 5.3 acres with steel New Castle, PA 16102 truss roof Union Electric Steel Corp. Manufacturing 186,000 on Metal and Route 18 facilities 55 acres steel Burgettstown, PA 15021
7
Company and Principal Approximate Type of Location Use Square Footage Construction - ----------------------------- ----------------- -------------- --------------- Union Electric Steel Corp. Manufacturing 153,000 on Metal and 726 Bell Street facilities, 5 acres steel Carnegie, PA 15106 offices and plant Union Electric Steel Corp. Manufacturing 88,000 on Metal and U.S. Highway 30 facilities 20 acres steel Valparaiso, IN 46383 Union Electric Steel Corp.* Manufacturing 40,000 Metal and 1712 Greengarden Road facilities steel Erie, PA 16501 Union Electric Steel, N.V. Manufacturing 66,000 on Concrete, Industrie Park facilities and 15 acres metal and B-3980 Tessenderlo offices steel Belgium
- ---------------- * Facility is leased. (1) The Corporation holds real estate for sale in Plymouth, MI. (2) The Corporate office space is leased as are several small domestic sales offices. All of the owned facilities are adequate and suitable for their respective purposes. There were no facilities idled during 1997. (3) The Corporation estimates that all of its facilities were operated within 75% to 95% of their normal capacity during 1997. Normal capacity is defined as capacity under approximately normal conditions with allowances made for unavoidable interruptions, such as lost time for repairs, maintenance, breakdowns, set-up, failure, supply delays, labor shortages and absences, Sundays, holidays, vacation, inventory taking, etc. The number of work shifts are also taken into consideration. ITEM 3 - LEGAL PROCEEDINGS The Corporation has been involved in various claims and lawsuits incidental to its business. In the opinion of management, the Corporation has meritorious defenses in those cases and believes that, in the aggregate, any liability will not have a material effect on the financial position of the Corporation. 8 A lawsuit was commenced in May, 1991 against the Corporation and its subsidiary, Vulcan, Inc. ("Vulcan"), arising out of the filing of a petition under Chapter 11 of the United States Bankruptcy Code in October, 1990 by Valley-Vulcan Mold Company (the "Partnership"), a 50/50 partnership formed in September, 1987 between Vulcan and Valley Mould Corporation, a subsidiary of Microdot, Inc. Microdot and Valley are unrelated to the Corporation and were also defendants in the lawsuit. The Partnership acquired the ingot mold businesses of each of the partners. On June 10, 1993, Microdot also filed a Petition under Chapter 11 of the United States Bankruptcy Code. In October, 1994, Microdot's Chapter 11 case was converted to a Chapter 7 liquidation. In the lawsuit, Official Unsecured Creditors' Committee of Valley-Vulcan -------------------------------------------------------- Mold Company v. Microdot, Inc., Valley Mould Corporation, Ampco-Pittsburgh - -------------------------------------------------------------------------- Corporation and Vulcan, Inc., the plaintiff, allegedly on behalf of the debtor - ---------------------------- Partnership, filed a proceeding in the United States Bankruptcy Court for the Northern District of Ohio against Microdot, Valley, Vulcan and the Corporation, seeking to set aside the Corporation's liens on the Partnership's assets, to hold all defendants liable for the debts of the Partnership, and return of all money received by any of the defendants from the Partnership and out of the proceeds of a loan to the Partnership by a third-party lender, alleged to be at least $9.35 million. The Corporation's liens secure a guaranty that it was required to give with respect to a Vulcan obligation that was assumed by the Partnership, and a $500,000 loan made to the Partnership. The trial of this lawsuit was held the week of October 4, 1993. In April, 1994 the Court issued a judgment in favor of the Corporation. Under the Court's decision, all claims against the Corporation were denied. All claims against Vulcan were also denied except 9 for its liability as a general partner. Vulcan's only asset is its interest in the partnership, which has no value, and accordingly the judgment will not have any adverse effect on the Corporation. In May, 1994, plaintiff appealed to the United States District Court, Northern District of Ohio, Eastern Division. The appellate Court has not yet rendered its decision. The Corporation is involved in various environmental proceedings which all involve discontinued operations. In some of those proceedings, the Corporation has been designated as a Potentially Responsible Party ("PRP"). However, the Corporation believes that in most instances it is either a de minimis ---------- participant based on information known to date and the estimated quantities of waste at these sites and/or that it is entitled to indemnity from the successors of the operations alleged to be involved. Based on the current estimate of cleanup costs and proposed allocation of that cost among the various PRP groups, for all environmental matters considered in the aggregate, the liability to the Corporation would not be material. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the fourth quarter. 10 PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information called for by this item is set forth on pps. 17 and 20 of the Annual Report to Shareholders for the year ended December 31, 1997 which is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA The information called for by this item is set forth on p. 17 of the Annual Report to Shareholders for the year ended December 31, 1997 which is incorporated herein by reference. ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The information called for by this item is set forth on pps. 18 through 20 of the Annual Report to Shareholders for the year ended December 31, 1997 which are incorporated herein by reference. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information called for by this item is set forth in Note 11 (Financial Instruments) on pps. 14 and 15 of the Annual Report to Shareholders for the year ended December 31, 1997 which is incorporated herein by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information called for by this item is set forth on pps. 7 through 17 of the Annual Report to Shareholders for the year ended December 31, 1997 which are incorporated herein by reference. 11 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were none. 12 PART III ITEM 10 - DIRECTORS and EXECUTIVE OFFICERS (a) IDENTIFICATION OF DIRECTORS Name, Age, Tenure as a Director, Position with the Corporation (1), Principal Occupation, Business Experience Past Five Years, and Other Directorships in Public Companies - ------------------------------------------------------------------------------ Louis Berkman (age 89, Director since 1960; current term expires in 1999). He has been Chairman of the Board of the Corporation since September 20, 1994. He is also Chairman of the Executive Committee of the Corporation and has been for more than five years. He is also President and a director of The Louis Berkman Company (steel products, fabricated metal products, building and industrial supplies). (2)(4) Leonard M. Carroll (age 55, Director since 1996; current term expires in 1999). He has been Managing Director of Seneca Capital Management, Inc. (a private investment company) since June, 1996. For more than five years before 1996, he was President and Chief Operating Officer and a director of Integra Financial Corporation (a bank holding company). He is also a director of Quaker State Corporation. (N)(3) William D. Eberle (age 74, Director since 1982; current term expires in 2000). He is a private investor and consultant and is Chairman of Manchester Associates, Ltd. He is also a director of Mitchell Energy & Development Co., America Service Group, Barry's Jewelers, Inc., Showscan Entertainment, Inc., Sirrom Capital Corporation and FAC Realty Trust. (3)(4) Alvin G. Keller (age 88, Director since 1961; current term expires in 1998). He is a private investor who, prior to his retirement, served as a Vice President of Mellon Bank, N.A. Mr. Keller will not seek re-election in 1998. (2)(3)(4) Robert A. Paul (age 60, Director since 1970; current term expires in 2000). He has been President and Chief Executive Officer of the Corporation since September 20, 1994. For more than five years before 1994, he was President and Chief Operating Officer of the Corporation. He is also an officer and director of The Louis Berkman Company and director of National City Corporation. (2) Carl H. Pforzheimer, III (age 61, Director since 1982; current term expires in 1999). For more than five years he has been Managing Partner of Carl H. Pforzheimer & Co. (member of the New York and American Stock Exchanges). (3) 13 (a) IDENTIFICATION OF DIRECTORS (cont') Name, Age, Tenure as a Director, Position with the Corporation (1), Principal Occupation, Business Experience Past Five Years, and Other Directorships in Public Companies - ------------------------------------------------------------------------------ Ernest G. Siddons (age 64, Director since 1981; current term expires in 1998). He has been Executive Vice President and Chief Operating Officer of the Corporation since September 20, 1994. For more than five years before 1994, he was Senior Vice President Finance and Treasurer of the Corporation. From September, 1996 to December, 1997 he was President of Union Electric Steel Corporation, a subsidiary of the Corporation. (N)(2) - ---------------- (N) Nominee for election at the April 28, 1998 Annual Meeting of Shareholders. (1) Officers serve at the discretion of the Board of Directors. (2) Member of Executive Committee. (3) Member of Audit Committee. (4) Member of Salary and Stock Option Committees. (b) IDENTIFICATION OF EXECUTIVE OFFICERS In addition to Louis Berkman, Robert A. Paul and Ernest G. Siddons (see "Identification of Directors" above) the following are also Executive Officers of the Corporation: Name, Age, Position with the Corporation (1), Business Experience Past Five - --------------------------------------------------------------------------- Years - ----- Rose Hoover (age 42). She has been Secretary of the Corporation for more than five years and Manager of Real Property and Environmental Control since January, 1995. Robert J. Reilly (age 41). Vice President Finance and Treasurer of the Corporation since January, 1997. He was Treasurer of the Corporation since September, 1994 and Controller of the Corporation since January, 1994. For five years before September, 1994 he was Assistant Treasurer. Robert F. Schultz (age 50). He has been Vice President Industrial Relations and Senior Counsel of the Corporation for more than five years. - ---------------- (1) Officers serve at the discretion of the Board of Directors and none of the listed individuals serve as a director of a public company. (c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES None. 14 (d) FAMILY RELATIONSHIPS Louis Berkman is the father-in-law of Robert A. Paul. There are no other family relationships among the Directors and Officers. ITEM 11 - EXECUTIVE COMPENSATION The following table sets forth certain information as to the total remuneration received for the past three years by the four most highly compensated executive officers of the Corporation, including the Chief Executive Officer (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE Annual Compensation
- ---------------------------------------------------------------------- (a) (b) (c) (d) (i) Name and All Other Principal Salary Bonus Compensation Position Year ($) ($) ($) - -------------------------- ---- ------- ------- ------------ Louis Berkman 1997 308,750 94,500 Chairman of the Board 1996 290,000 67,000 and Executive Committee 1995 250,000 42,500 Robert A. Paul 1997 308,750 94,500 President and Chief 1996 290,000 67,000 Executive Officer 1995 250,000 42,500 Ernest G. Siddons 1997 276,875 84,750 7,172(1) Executive Vice President 1996 260,000 60,000 5,520(1) and Chief Operating 1995 225,000 38,250 5,064(1) Officer Robert F. Schultz 1997 134,500 18,500 Vice President 1996 130,875 16,500 Industrial Relations 1995 127,500 12,500 and Senior Counsel
- ----------------- (1) Value of the term portion of a split dollar life insurance policy. The Corporation remains entitled to the cash surrender value of such policy. 15 (b) COMPENSATION PURSUANT TO PLANS The Corporation has a tax qualified retirement plan (the "Plan") applicable to the Executive Officers and other employees, to which the Corporation makes annual contributions, as required, in amounts determined by the Plan's actuaries. The Plan does not have an offset for Social Security and is fully paid for by the Corporation. Under the Plan, employees become fully vested after five years of participation and normal retirement age under the Plan is age 65 but actuarially reduced benefits may be available for early retirement at age 55. The benefit formula is 1.1% of the highest consecutive five year average earnings in the final ten years, times years of service. Federal law requires that 5% owners receiving a pension no later than April 1 following the calendar year in which the age 70-1/2 is reached. Louis Berkman is currently receiving $4,435 a month pursuant to the Plan. As an active employee, Mr. Berkman continues to receive credit for additional service rendered after age 70-1/2. The Corporation adopted a Supplemental Executive Retirement Plan (SERP) in 1988 (amended and restated in 1996) for all officers listed in the compensation table, except Louis Berkman, and certain key employees, covering retirement after completion of ten years of service and attainment of age 55. The combined retirement benefit at age 65 provided by the Plan and the SERP is 50% of the highest consecutive five year average earnings in the final ten years of service. The participants are eligible for reduced benefits for early retirement at age 55. A benefit equal to 50% of the benefit otherwise payable at age 65 is paid to the surviving spouse of any participant, who has had at least five years of service, commencing on the later of the month following the participant's death or the month the participant would have reached age 55. In addition, there is an offset for 16 pensions from other companies. Certain provisions, applicable if there is a change of control, are discussed below under Termination of Employment and Change of Control Arrangement. The following shows the estimated annual pension that would be payable, without offset, under the Plan and the SERP to the individuals named in the compensation table assuming continued employment to retirement at age 65, but no change in the level of compensation shown in such table: Louis Berkman (1) Robert A. Paul $201,625 Ernest G. Siddons $163,500 Robert F. Schultz $ 76,500 - ---------------- (1) Mr. Berkman is currently receiving a pension pursuant to the Plan as described above. (c) COMPENSATION OF DIRECTORS For the first four months of 1997, each Director who was not employed by the Corporation received $2,000 for each Board meeting attended and $500 for each Committee meeting attended. Directors received one-half of those amounts if not in attendance or if participation was by telephonic connection. Effective April 1, 1997, each Director who is not employed by the Corporation receives an annual retainer of $6,000 (payable quarterly), $1,000 for each Board meeting attended and $500 for each Committee meeting attended. Attendance can be either in person or by telephonic connection. Directors do not receive a fee for either Board or Committee meetings if they do not attend. 17 (d) TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS The Chairman, President, and Executive Vice President have two year contracts (which automatically renew for one year periods unless the Corporation chooses not to extend) providing for compensation equal to five times their annual compensation (with a provision to gross up to cover the cost of any federal excise tax on the benefits) in the event their employment is terminated (including a voluntary departure for good cause) and the right to equivalent office space and secretarial help for a period of one year after a change in control. The remaining officer named in the compensation table and a certain key employee have two year contracts providing for three times their annual compensation in the event their employment is terminated after a change in control (including a voluntary departure for good cause). In addition, each of the Vice President Finance and Corporate Secretary have two year contracts providing for two times their annual compensation in the event their employment is terminated after a change in control (including a voluntary departure for good cause). All of the contracts provide for the continuation of employee benefits, for three years for the three senior executives and two years for the others, and the right to purchase the leased car used by the covered individual at the Corporation's then book value. The same provisions concerning change in control that apply to the contracts apply to the SERP and vest the right to that pension arrangement. A change of control triggers the right to a lump sum payment equal to the present value of the vested benefit under the SERP if applicable. 18 (e) SALARY COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS A Salary Committee is appointed each year by the Board of Directors. Committee members abstain from voting on matters which involve their own compensation arrangements. The Salary Committee for the year 1997 was comprised of three Directors: William D. Eberle, who is Chairman of the Committee, Louis Berkman and Alvin G. Keller. Louis Berkman is Chairman of the Board of Directors and the Executive Committee. He is also the President and a Director of The Louis Berkman Company. The Corporation's President and Chief Executive Officer is also an officer and director of The Louis Berkman Company. The Louis Berkman Company and William D. Eberle had certain transactions with the Corporation which are more fully described under Item 13 "Certain Relationships and Related Transactions." (f) SALARY COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Salary Committee approves salaries for executive officers within a range from $150,000 up to $200,000 and increases in the salary of any executive officer, which would result in such officer earning a salary within such range. Salaries of $200,000 per year and above must be approved by the Board of Directors after a recommendation by the Salary Committee. Salaries for executive officers below the level of $150,000 are set by the Chairman, President and Executive Vice President of the Corporation. The compensation of the Chief Executive Officer of the Corporation, as well as the other applicable executive officers, is based on an analysis conducted by the Salary Committee. The Committee does not specifically link remuneration solely to quantitative measures of performance because of the cyclical nature of the industries and markets 19 served by the Corporation. In setting compensation, the Committee also considers various qualitative factors, including competitive compensation arrangements of other companies within relevant industries, individual contributions, leadership ability and an executive officer's overall performance. In this way, it is believed that the Corporation will attract and retain quality management, thereby benefiting the long-term interest of shareholders. In early 1997, the Salary Committee reviewed and approved salary increases and an incentive program for 1997 covering Louis Berkman, Robert A. Paul and Ernest G. Siddons ("participants"). Incentive payments were to be determined, based exclusively on the Corporation's 1997 income from operations performance as compared to the Corporation's business plan. These payments were to be limited to 30% of base salary of participants. In 1997, the Corporation exceeded the business plan and as a result the participants earned incentives of $94,500, $94,500 and $84,750 respectively. This report of the Salary Committee shall not be deemed incorporated by reference by any general statement incorporating by reference this 10-K report into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent that the Corporation specifically incorporates this report and the information contained herein by reference, and shall not otherwise be deemed filed under such Acts. Louis Berkman William D. Eberle Alvin G. Keller 20 (g) STOCK PERFORMANCE GRAPH COMPARISON OF FIVE YEAR CUMULATIVE RETURN AMONG AMPCO PITTSBURGH CORP., S&P 500 INDEX AND STEEL (INTEGRATED) INDEX
AMPCO STEEL Measurement period PITTSBURGH S&P 500 (INTEGRATED) (Fiscal year Covered) CORP. INDEX INDEX - --------------------- ---------- ------- ------------ Measurement PT - 12/31/92 $100 $100 $100 FYE 12/31/93 $80.99 $110.09 $158.51 FYE 12/31/94 $113.68 $111.85 $166.03 FYE 12/31/95 $125.09 $153.80 $158.55 FYE 12/31/96 $141.50 $189.56 $164.79 FYE 12/31/97 $236.59 $252.82 $174.55
Assumes $100 invested at the close of trading on the last trading day preceding January 1, 1993 in Ampco-Pittsburgh Corporation common stock, Standard & Poors 500 and Steel (integrated) *Cumulative total return assumes reinvestment of dividends. In the above graph, the Corporation has used Value Line's Steel (Integrated) Index for its peer comparison. The diversity of products produced by subsidiaries of the Corporation made it difficult to match to any one product-based peer group. The Steel Industry was chosen because it is impacted by some of the same end markets that the Corporation ultimately serves, such as the automotive, appliance and construction industries. Historical stock price performance shown on the above graph is not necessarily indicative of future price performance. 21 ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT (a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS As of March 10, 1998, Louis Berkman owned directly 213,888 shares (2.23%) of the Common Stock of the Corporation. As of the same date, The Louis Berkman Company, P. O. Box 576, Steubenville, OH 43952 owned beneficially and of record 2,126,089 shares (22.2%) of the Common Stock of the Corporation. Louis Berkman, an officer and director of The Louis Berkman Company, owns directly 62.90% of its common stock. Robert A. Paul, an officer and director of The Louis Berkman Company, disclaims beneficial ownership of the 18.93% of its common stock owned by his wife. Louis Berkman and Robert A. Paul are trustees of The Louis and Sandra Berkman Foundation and disclaim beneficial ownership of the 1,266 shares of the Corporation's Common Stock held by such Foundation. The Corporation has received Schedules 13G filed with the Securities and Exchange Commission disclosing that as of December 31, 1997 Dimensional Fund Advisors Inc., 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401 owned 634,800 shares or 6.63% (all of which shares are held in portfolios of various investment vehicles for qualified employee benefit plans of which Dimensional Fund Advisors serves as investment manager); and that Norwest Corporation, Sixth & Marquette, Minneapolis, MN 55479 owned 945,649 shares or 9.9% in various fiduciary and agency capacities and including 664,200 shares or 6.93% owned by ATTIMCO Long Term Investment Trust. On February 3, 1998, Gabelli Funds, Inc. and affiliates, Corporate Center, Rye, NY 10580, filed an amendment to its Schedule 13D showing they owned 1,796,200 shares or 18.75%. 22 (b) SECURITY OWNERSHIP OF MANAGEMENT The following table sets forth as of March 10, 1998 information concerning the beneficial ownership of the Corporation's Common Stock by the Directors and Named Executive Officers and all Directors and Executive Officers of the Corporation as a group:
Name of Amount and nature of Percent beneficial owner beneficial ownership of class ---------------- -------------------- -------- Louis Berkman 2,341,243(1)(2) 24.4 Robert A. Paul 57,922(2)(3) .6 Alvin G. Keller** 9,753(4) .1 Carl H. Pforzheimer, III 2,733(5) * Ernest G. Siddons 1,833(6) * Leonard M. Carroll 1,000 * William D. Eberle 200 * Robert F. Schultz 200(6) * Directors and Executive Officers as a group (10 persons) 2,413,618(7) 25.2 - ----------------
* less than .1% ** Mr. Keller will not seek re-election as a Director at the April 1998 Annual Meeting. (1) Includes 213,888 shares owned directly, 2,126,089 shares owned by The Louis Berkman Company and 1,266 shares held by The Louis and Sandra Berkman Foundation of which Louis Berkman and Robert A. Paul are trustees, in which shares Mr. Berkman disclaims beneficial ownership. (2) The Louis Berkman Company owns beneficially and of record 2,126,089 shares of the Corporation's Common Stock (22.2%). Louis Berkman is an officer and director of The Louis Berkman Company and owns directly 62.90% of its common shares. Robert A. Paul, an officer and director of The Louis Berkman Company, disclaims beneficial ownership of the 18.93% of its common stock owned by his wife. The number of shares shown in the table for Robert A. Paul does not include any shares held by The Louis Berkman Company. 23 (3) Includes 42,889 shares owned directly and the following shares in which he disclaims beneficial ownership: 13,767 shares owned by his wife and 1,266 shares held by The Louis and Sandra Berkman Foundation of which Robert A. Paul and Louis Berkman are Trustees. (4) Includes 5,333 shares owned directly, 3,000 shares owned jointly with his wife, and 1,420 shares owned by his wife, in which shares he disclaims beneficial ownership. (5) Includes 1,000 shares owned directly, 1,600 shares held by a trust of which he is a trustee and principal beneficiary, and 133 shares held by his daughter, in which shares he disclaims beneficial ownership. (6) The shares are owned jointly with his wife. (7) Excludes double counting of shares deemed to be beneficially owned by more than one Director. Unless otherwise indicated the individuals named have sole investment and voting power. (c) CHANGES IN CONTROL The Corporation knows of no arrangements which may at a subsequent date result in a change in control of the Corporation. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In 1997 the Corporation bought industrial supplies from The Louis Berkman Company in transactions in the ordinary course of business amounting to approximately $1,440,000. Additionally, The Louis Berkman Company paid the Corporation $160,000 for certain administrative services. Louis Berkman and Robert A. Paul are officers and directors, and Louis Berkman is a shareholder, in that company. These transactions and services were at prices generally available from outside sources. Transactions between the parties will take place in 1998. 24 In 1989, certain subsidiaries of the Corporation and Tertiary, Inc., a corporation owned by the children of William Eberle, formed three 50/50 partnerships, to manage, develop and operate hotel properties and a subsidiary of the Corporation also invested as a limited partner in one of the operating partnerships. In 1992, Tertiary purchased the Corporation's interest in two of the 50/50 partnerships. In 1997, Tertiary purchased the Corporation's remaining interest in the hotel partnerships by paying the Corporation $1,000,000 plus all principal and accrued interest due as of the Closing Date under outstanding Promissory Notes. 25 PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. Financial Statements The consolidated financial statements, together with the report thereon of Price Waterhouse LLP, appearing on pps. 7 through 17 of the accompanying Annual Report are incorporated by reference in this Form 10-K Annual Report. 2. Financial Statement Schedules - None 3. Exhibits Exhibit No. (3) Articles of Incorporation and By-laws a. Articles of Incorporation Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1983; the Quarterly Report on Form 10-Q for the quarter ended March 31, 1984; the Quarterly Report on Form 10-Q for the quarter ended March 31, 1985; and the Quarterly Report on Form 10-Q for the quarter ended March 31, 1987. c. By-laws Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1994 and the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (4) Instruments defining the rights of securities holders a. Rights Agreement between Ampco-Pittsburgh Corporation and Mellon Bank, N.A. dated as of November 1, 1988. Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1988. 26 3. Exhibits (cont') - -------------------- b. Revolving Credit Agreement dated as of September 30, 1993 Incorporated by reference to the Quarterly Report on Form 10-Q for quarter ended September 30, 1993 and the Quarterly Report on Form 10-Q for quarter ended September 30, 1995. (10) Material Contracts a. 1988 Supplemental Executive Retirement Plan Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. b. Severance Agreements between Ampco-Pittsburgh Corporation and certain officers and employees of Ampco-Pittsburgh Corporation. Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1988; the Quarterly Report on Form 10-Q for the quarter ended September 30, 1994, the Annual Report on Form 10-K for fiscal year ended December 31, 1994; and the Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. c. 1997 Stock Option Plan Incorporated by reference to the Proxy Statement dated March 14, 1997. (13) Annual Report to Shareholders for the fiscal year ended December 31, 1997 (21) Significant Subsidiaries (27) Financial Data Schedule 27 (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed in the fourth quarter of 1997. Note: With the exception of the Corporation's 1997 Annual Report to Shareholders, none of the Exhibits listed in Item 14 are included with this Form 10-K Annual Report. The Corporation will furnish copies of Exhibits upon written request to the Secretary at the address on the cover of the Form 10-K Annual Report accompanied by payment of $3.00 for each Exhibit requested. 28 SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AMPCO-PITTSBURGH CORPORATION (Registrant) March 11, 1998 By /s/ Louis Berkman -------------------------------------------- Director, Chairman of the Board - Louis Berkman By /s/ Robert A. Paul -------------------------------------------- Director, President and Chief Executive Officer - Robert A. Paul By /s/ Ernest G. Siddons -------------------------------------------- Director, Executive Vice President and Chief Operating Officer - Ernest G. Siddons By /s/ Robert J. Reilly -------------------------------------------- Vice President Finance and Treasurer (Principal Financial Officer) - Robert J. Reilly 29 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant, in their capacities as Directors, as of the date indicated. March 11, 1998 By /s/ Leonard M. Carroll ------------------------------------- Leonard M. Carroll By /s/ William D. Eberle ------------------------------------- William D. Eberle By /s/ Alvin G. Keller ------------------------------------- Alvin G. Keller By /s/ Carl H. Pforzheimer, III ------------------------------------- Carl H. Pforzheimer, III 30 EX-13 2 ANNUAL REPORT Exhibit 13 [LOGO OF AMPCO PITTSBURGH] 1997 ANNUAL REPORT [GRAPH DEPICTING NET SALES FROM 1994 THROUGH 1997] NET SALES dollars in millions 94 113.8 95 143.8 96 162.4 97 173.9 [GRAPH DEPICTING OPERATING INCOME FROM 1994 THROUGH 1997] OPERATING INCOME dollars in millions 94 8.4 95 14.2 96 18.1 97 22.0 [GRAPH DEPICTING BASIC EARNINGS PER SHARE FROM 1994 THROUGH 1997] BASIC EARNINGS PER SHARE dollars 94 0.84 95 0.94 96 1.29 97 1.73 FINANCIAL HIGHLIGHTS AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA
1997 1996 1995 1994 Net Sales $173,906 $162,403 $143,785 $113,836 Operating Income 21,961 18,068 14,176 8,360 Net Income 16,540 12,390 9,050 8,051 Basic Earnings Per Share 1.73 1.29 0.94 0.84 Shareholders' Equity $129,416 $119,667 $112,135 $102,971
To Our Shareholders The performance of the Corporation continues to be one of steady and significant improvement. The year 1997 was successful and included the following highlights: . Net income of $16,540,000 was the highest in our history. . Operating income improved twenty-two percent. . Acquisitions were completed, expanding our participation in the plastics processing and machinery industry. . Major capital investment continued including completion of the expansion of Union Electric Steel's facilities. OPERATIONS Union Electric Steel achieved record sales. Margins improved reflecting a more profitable product mix and efficiency gains from operating at the higher capacity levels provided by the capital investment. Although not material to the Corporation as a whole, the Asian financial crisis has begun to have some impact on Union Electric's incoming orders. However, expansion of product offerings and intensifying marketing efforts in other parts of the world should minimize the effect. Results of New Castle Industries improved in the second half of the year. New Castle strengthened its marketing and manufacturing flexibility with the addition of feed screw facilities in New Hampshire and South Carolina. Acquisition of F. R. Gross Company, a manufacturer of high performance heat transfer rolls, further expanded the Corporation's product offerings in this niche. Aerofin and Buffalo Pumps both performed well. Despite some softness in the industrial coil market, Aerofin's favorable product mix and margins resulted in near record earnings. Buffalo Pumps benefitted from strong demand for lube oil pumps from the power generation industry. Buffalo Air Handling's results were disappointing and efforts are underway to improve efficiency so as to meet the severe competitive pressures of this industry. FINANCIAL Sales in 1997 were $173,906,000 compared to $162,403,000 in 1996. Operating income improved to $21,961,000 in 1997 compared to $18,068,000 in 1996. Slightly higher volumes, a more profitable sales mix and improved margins, principally in forged hardened steel rolls, generated the higher earnings. The Corporation had net income of $16,540,000 in 1997, or $1.73 per share, compared to net income of $12,390,000 in 1996, or $1.29 per share. The remaining investments were divested at gains which added $.24 per share to 1997's net income compared to investment gains of $.05 per share included in 1996. In recognition of the improvement in earnings, the regular quarterly dividend was increased from $.06 to $.09 per share effective with the January 1998 payment. STRATEGY The Corporation today is comprised of businesses which are market leaders in each of the industry niches they serve. In order to maintain their competitive positions and seek growth, we will invest capital prudently to reduce costs, maximize quality and expand product offerings. We will also continue to look for opportunities to acquire both related products and other manufacturing niche businesses. OUTLOOK The Asian situation and the strength of the dollar will have some adverse impact on American business in general, and Ampco is unlikely to escape completely unscathed. However, plans in place together with the strength of our Corporation are such that despite these factors we will prosper and grow our businesses. We enter 1998 with high levels of backlog and expect to improve both sales and operating results. As always, we appreciate the support of our employees, customers, shareholders and suppliers. A special debt of gratitude is owed to Alvin G. Keller, who is retiring as a director after thirty-seven years of service to the Corporation. /s/ Louis Berkman Louis Berkman Chairman of the Board /s/ Robert A. Paul Robert A. Paul President and Chief Executive Officer /s/ Ernest G. Siddons Ernest G. Siddons Executive Vice President and Chief Operating Officer 2 Union Electric Steel [PHOTO OF ELECTRIC ARC FURNACE IN OPERATION] The recently upgraded electric arc furnace at the Burgettstown plant is shown pouring molten steel into a vacuum stream degassing system. [PHOTO OF HEAVY SECTION MILL ROLL] This high-strength, 30,000-lb. heavy section mill roll is highly resistant to thermal abuse and will be used for the hot rolling of steel shapes such as channels, pilings and angles. Union Electric Steel is the world's largest manufacturer of forged hardened steel rolls. It supplies ferrous and non-ferrous material finishing industries with forged hardened steel rolls used principally in the manufacture of sheet and strip products for customers in the automotive, appliance, aircraft, packaging and construction markets. An ISO 9001 registered company, Union Electric Steel has melting, forging and some machining operations at its plant in Burgettstown, Pennsylvania. Finishing is done in Valparaiso, Indiana, Tessenderlo, Belgium and the company's headquarters plant in Carnegie, Pennsylvania. Union Electric Steel also has an electroslag remelt facility in Erie, Pennsylvania. A significant capital expansion program was principally completed in 1997, resulting in increased capacity and record shipments.During the past year, Union Electric Steel launched trials of rolls, manufactured from newly developed forged material, suitable for hot rolling of ferrous products traditionally supplied by manufacturers of cast rolls. Evaluations in customers' hot strip roughing mills, hot strip finishing mills and hot section structural mills have been favorable and resulted in repeat orders. The company continues to be a recognized worldwide leader in the production of high alloy, ultra deep hardened work rolls and back-up rolls to meet the needs of the domestic and international markets. 3 Business Expansion Ampco-Pittsburgh Corporation is continuing to expand its participation in the growing plastics processing and machinery industry. During the second half of 1997, the Corporation added Atlantic Grinding & Welding and F. R. Gross Company to the New Castle Industries group of companies. This follows the acquisition of Bimex, a producer of bimetallic barrels, in 1995. The Corporation now designs, engineers and manufactures feed screws, barrels, chill rolls and heat transfer rolls. [PHOTO OF THE F.R. GROSS COMPANY OFFICES AND PLANT IN STOW, OHIO] The Corporation acquired the F. R. Gross Company in July. In operation since 1955, this Stow, Ohio, company's principal business is the design and manufacture of high performance heat transfer rolls used in the plastics, paper, packaging, printing and converting industries. Gross rolls, using the Equatherm(R) spiral, are custom designed for maximum heat transfer with minimum operating expense in the most demanding applications. In August, Atlantic Grinding & Welding, Inc. became part of New Castle Industries. Serving the plastics processing industry since 1972 from its principal feed screw manufacturing operation in New Hampshire together with a small unit in South Carolina, the company's two plants became known as Atlantic North and Atlantic South. These two locations complement and expand New Castle's capabilities, particularly in the design, building and repair of screws for the injection market. The Atlantic South business is in the process of moving to a larger, modern facility and will be fully operational in March 1998. [PHOTO OF THE ATLANTIC NORTH OPERATION IN LONDONDERRY, NEW HAMPSHIRE] [PHOTO OF ATLANTIC SOUTH'S NEW PLANT IN WEST COLUMBIA, SOUTH CAROLINA] 4 New Castle Industries . F. R. Gross Company [PHOTO OF A CNC LATHE IS MACHINING THE OUTER SHELL OF A HIGH PERFORMANCE HEAT TRANSFER ROLL AT F.R. GROSS COMPANY] [PHOTO OF A FEED SCREW ON AN AUTOMATIC PLASMA TRANSFER ARC WELDER AT ATLANTIC NORTH'S PLANT IN NEW HAMPSHIRE] [PHOTO OF COMPOUNDING MACHINE] New Castle Industries built this large compounding machine for a chemical company to extrude low density polyethylene sheets in Canada. The acquisition of Atlantic Grinding & Welding has enabled New Castle Industries to extend its marketing and service reach from its Feed Screws plant in New Castle, Pennsylvania, to New England and the southeastern states. With its Bimex Division in Wisconsin, the company offers an integrated line of injection and extrusion feed screws and bimetallic barrels for the plastics processing industry, and has become one of the largest screw and barrel manufacturers in North America. New Castle also makes hard chrome chill rolls in a wide range of finishes from mirror to matte surfaces, while its sister company, F. R. Gross, manufactures high performance heat transfer rolls, as described on page 4. Focus of the companies is to add value for customers by providing solutions to problems through engineering and design. New Castle, as illustrated in the picture below, also has the capability to engineer, build and retrofit extruders, injection molding machines and presses. 5 Buffalo Pumps . Buffalo Air Handling . Aerofin [PHOTO OF PUMP CASINGS] Double suction bronze pump casings for chilled water applications await final assembly and painting at Buffalo Pumps. Buffalo Pumps, another ISO 9001 registered company, is an industry leader in the custom design and manufacture of centrifugal pumps for applications in the marine defense, lube oil, refrigeration and power generation markets. Its plant and offices are in North Tonawanda, New York. In the second half of 1997, the company introduced its re-engineered CAN-O- MATIC(R) -R pump to the refrigeration industry. This new pump offers customers in that market a cost-efficient product with the reliability of a seal-less pump. Buffalo Air Handling, from its plant in Amherst, Virginia, manufactures large standard and custom air handling systems that control indoor air quality in buildings for a wide range of markets such as health care, education, manufacturing and commerce. To service the needs of certain segments of the air handling market, the company has developed the Buffalo Air 2000, a pre-engineered unit, which it will begin to market in 1998. [PHOTO OF AIR HANDLER] Buffalo Air Handling fabricated this custom unit for supplying conditioned air to a paint facility. [PHOTO OF COIL ASSEMBLY] This heavy duty coil assembly will be used to preheat boiler air in a refuse-fired power plant. Aerofin, located in Lynchburg, Virginia, builds spiral wound finned tube heat exchange coils for use in heating, ventilating and air conditioning systems. The company specializes in heavy duty custom applications for process heating and cooling, pulp and paper mills, air cooled process equipment, energy and solvent recovery, as well as combustion air preheat and flue gas reheat. Primary among Aerofin's activity in 1997 was the acquisition of a plate fin product line with limited manufacturing capacity. The success of this product line addition has resulted in the placement of an order for a complete state-of- the-art plate fin line to come on stream by January 1999. This will provide Aerofin with increased sales opportunities in the HVAC and industrial markets. 6 FINANCIAL REPORT TABLE OF CONTENTS
PAGE Consolidated Balance Sheets........................ 8 Consolidated Statements of Income.................. 9 Consolidated Statements of Retained Earnings (Deficit)................................ 9 Consolidated Statements of Cash Flows.............. 10 Notes to Consolidated Financial Statements......... 11 Quarterly Information.............................. 17 Five-Year Summary of Selected Financial Data....... 17 Management's Discussion and Analysis of Financial Condition and Results of Operations............... 18
REPORT OF INDEPENDENT ACCOUNTANTS PRICE WATERHOUSE LLP To the Board of Directors and Shareholders of Ampco-Pittsburgh Corporation In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of retained earnings and of cash flows present fairly, in all material respects, the financial position of Ampco-Pittsburgh Corporation and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Corporation's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. 600 Grant Street Pittsburgh, Pennsylvania 15219 January 28, 1998 7 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 1996 ---- ---- Assets Current assets: Cash and cash equivalents...................... $ 21,695,512 $ 25,510,231 Receivables, less allowance for doubtful accounts of $629,677 in 1997 and $629,362 in 1996......... 35,024,843 32,043,626 Inventories.................................... 35,452,494 33,223,110 Investments available for sale................. -- 4,409,320 Other.......................................... 4,530,430 4,056,780 ------------ ------------ Total current assets......................... 96,703,279 99,243,067 Property, plant and equipment, at cost: Land and land improvements..................... 4,825,973 4,381,980 Buildings...................................... 25,424,177 20,480,294 Machinery and equipment........................ 108,999,527 93,601,088 ------------ ------------ 139,249,677 118,463,362 Accumulated depreciation....................... (66,714,835) (61,134,960) ------------ ------------ Net property, plant and equipment............ 72,534,842 57,328,402 Unexpended industrial revenue bond proceeds...... 2,218,317 9,766,938 Prepaid pension.................................. 13,679,592 13,989,592 Other noncurrent assets.......................... 11,709,131 7,842,345 ------------ ------------ $196,845,161 $188,170,344 ============ ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable............................... $ 8,638,073 $ 8,631,404 Accrued payrolls and employee benefits......... 7,747,474 7,819,253 Other.......................................... 7,373,110 9,718,430 ------------ ------------ Total current liabilities.................... 23,758,657 26,169,087 Employee benefit obligations..................... 16,755,483 17,122,983 Industrial revenue bond debt..................... 12,586,000 12,586,000 Deferred income taxes............................ 11,329,110 9,944,670 Other noncurrent liabilities..................... 3,000,124 2,680,581 ------------ ------------ Total liabilities............................ 67,429,374 68,503,321 Shareholders' Equity: Preference stock--no par value; authorized 3,000,000 shares; none issued................................... -- -- Common stock--par value $1; authorized 20,000,000 shares; issued and outstanding 9,577,621 shares....... 9,577,621 9,577,621 Additional paid-in capital..................... 102,555,980 102,555,980 Retained earnings.............................. 16,602,063 2,648,036 ------------ ------------ 128,735,664 114,781,637 Cumulative translation adjustments............. 1,076,141 2,559,222 Minimum pension liability adjustment........... (396,018) (194,615) Unrealized holding gains on securities......... -- 2,520,779 ------------ ------------ Total shareholders' equity................... 129,415,787 119,667,023 ------------ ------------ $196,845,161 $188,170,344 ============ ============
See Notes to Consolidated Financial Statements. 8 CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995 ---- ---- ---- Net sales........................... $173,906,315 $162,402,805 $143,785,139 ------------ ------------ ------------ Operating costs and expenses: Cost of products sold (excluding depreciation).................... 120,075,719 113,933,520 103,103,255 Selling and administrative........ 25,197,129 24,248,794 20,822,760 Depreciation...................... 6,672,483 6,152,433 5,683,123 ------------ ------------ ------------ 151,945,331 144,334,747 129,609,138 ------------ ------------ ------------ Income from operations.............. 21,960,984 18,068,058 14,176,001 Other income (expense): Gain on sale of investments....... 3,489,228 518,589 -- Other income (expense)--net....... 454,773 183,841 (200,715) ------------ ------------ ------------ Income before income taxes.......... 25,904,985 18,770,488 13,975,286 Income taxes........................ 9,365,000 6,380,000 4,925,000 ------------ ------------ ------------ Net income.......................... $ 16,539,985 $ 12,390,488 $ 9,050,286 ============ ============ ============ Basic earnings per share............ $ 1.73 $ 1.29 $ .94 ============ ============ ============ Weighted average number of common shares outstanding................. 9,577,621 9,577,621 9,577,621 ============ ============ ============
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995 ---- ---- ---- Retained earnings (deficit) at beginning of year.................. $ 2,648,036 $(7,491,711) $(15,104,987) Net income.......................... 16,539,985 12,390,488 9,050,286 ----------- ----------- ------------ 19,188,021 4,898,777 (6,054,701) Cash dividends declared, $.27 per share in 1997, $.235 per share in 1996 and $.15 per share in 1995.................. (2,585,958) (2,250,741) (1,437,010) ----------- ----------- ------------ Retained earnings (deficit) at end of year............................ $16,602,063 $ 2,648,036 $ (7,491,711) =========== =========== ============
See Notes to Consolidated Financial Statements. 9 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997 1996 1995 ---- ---- ---- Cash flows from operating activities: Net income......................... $ 16,539,985 $ 12,390,488 $ 9,050,286 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation..................... 6,672,483 6,152,433 5,683,123 Gain on sale of investments...... (3,489,228) (518,589) -- Deferred income taxes............ 3,565,000 3,787,000 3,328,000 Other--net....................... 289,206 649,415 324,772 Changes in assets/liabilities, net of effects from business acquisitions: Receivables.................... (1,771,708) (4,096,165) 6,147 Inventories.................... (2,190,829) (13,434) (808,997) Other assets................... (71,752) 1,258,330 1,621,250 Accounts payable............... (1,018,684) 607,939 137,821 Accrued payrolls and employee benefits...................... (212,999) 159,337 (161,635) Other liabilities.............. (4,158,879) (2,533,659) (1,537,846) ------------ ------------ ------------ Net cash flows from operating activities........................ 14,152,595 17,843,095 17,642,921 ------------ ------------ ------------ Cash flows from investing activities: Purchases of property, plant and equipment......................... (15,085,620) (8,901,966) (4,636,779) Unexpended industrial revenue bond proceeds.......................... 7,548,621 (9,766,938) -- Business acquisitions.............. (11,966,579) -- (16,000,000) Proceeds from sales of investments. 4,907,484 1,101,939 -- ------------ ------------ ------------ Net cash flows from investing activities........................ (14,596,094) (17,566,965) (20,636,779) ------------ ------------ ------------ Cash flows from financing activities: Dividends paid..................... (3,256,684) (1,436,643) (958,250) Proceeds from industrial revenue bonds............................. 7,116,000 11,236,000 -- Repayment of industrial revenue bonds............................. (7,116,000) -- -- ------------ ------------ ------------ Net cash flows from financing activities........................ (3,256,684) 9,799,357 (958,250) Effect of exchange rate changes on cash................................ (114,536) (118,519) 176,450 ------------ ------------ ------------ Net increase (decrease) in cash...... (3,814,719) 9,956,968 (3,775,658) Cash and cash equivalents at beginning of year................... 25,510,231 15,553,263 19,328,921 ------------ ------------ ------------ Cash and cash equivalents at end of year................................ $ 21,695,512 $ 25,510,231 $ 15,553,263 ============ ============ ============ Supplemental information: Income tax payments................ $ 7,649,541 $ 3,298,598 $ 538,734 Interest payments.................. 523,555 287,887 197,897
See Notes to Consolidated Financial Statements. 10 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DESCRIPTION OF BUSINESS Ampco-Pittsburgh Corporation is in one business segment that manufactures and sells principally custom engineered equipment. The Corporation's operating businesses, major products and principal markets are: Union Electric Steel-- forged hardened steel rolls for steel and aluminum producers; New Castle Industries-- feed screws, barrels and chill rolls and F. R. Gross--heat transfer rolls, both of which sell principally to the plastics processing and machinery industry; Aerofin--finned tube heat exchange coils, Buffalo Air Handling--air handling systems, and Buffalo Pumps--centrifugal pumps, all of which sell to a variety of commercial and industrial users. Based on sales, Union Electric Steel is the largest company with most of the other operating units approximately equal to each other. NOTE 1--ACCOUNTING POLICIES: Ampco-Pittsburgh Corporation's accounting policies conform to generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A summary of the significant accounting policies followed by the Corporation is presented below to assist the reader in evaluating the financial statements. Certain amounts for preceding periods have been reclassified for comparibility with the 1997 presentation. CONSOLIDATION All subsidiaries are wholly owned and are included in the consolidated financial statements. Intercompany accounts and transactions are eliminated. CASH AND CASH EQUIVALENTS Securities with purchased original maturities of three months or less are considered to be cash equivalents. The Corporation maintains cash and cash equivalents at various financial institutions which may exceed federally insured amounts. INVENTORIES Inventories are valued at cost, which is lower than market. Cost of domestic raw materials, work-in-process and finished goods inventories is determined by the last-in, first-out (LIFO) method. Cost of domestic supplies and foreign inventories is determined by the first-in, first-out method. INVESTMENTS AVAILABLE FOR SALE Investments classified as available for sale are reported at market value, with the unrealized gains and losses, net of tax, reported as a separate component of shareholders' equity. Realized gains and losses on sales of investments and declines in value judged to be other than temporary are included in operating results. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost with depreciation computed on the straight-line method over the following estimated useful lives: land improvements--15 to 20 years, buildings--25 to 45 years and machinery and equipment--5 to 20 years. Expenditures that extend economic useful lives are capitalized. Routine maintenance is charged to operating results. Gains or losses are recognized on retirements or disposals. FOREIGN CURRENCY TRANSLATION Assets and liabilities of the Corporation's foreign operations are translated at the current year-end exchange rate and the statements of income are translated at the average exchange rate for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of shareholders' equity until the entity is sold or substantially liquidated. INCOME TAXES Income taxes are recognized during the year in which transactions enter into the determination of financial statement income. Deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. EARNINGS PER SHARE Effective for the year ended December 31, 1997, the Corporation adopted the method for computing and presenting earnings per share in accordance with Statement of Financial Accounting Standards No. 128, "Earnings per Share". Basic earnings per share is computed on the basis of the weighted average number of shares of stock outstanding. Currently there are no potentially dilutive securities; accordingly, basic earnings per share and dilutive earnings per share are equivalent. NOTE 2--ACQUISITIONS: Effective July 1, 1997, the Corporation acquired F. R. Gross Company, a small Ohio manufacturer, for approximately $9,400,000 cash, including debt assumed and retired. The acquisition was accounted for 11 NOTE 2--ACQUISITIONS (CONTINUED): as a purchase; accordingly, the purchase price was allocated to the net assets acquired based upon their estimated fair market values. The excess of the purchase price over the estimated fair value of the tangible net assets acquired amounted to approximately $4,500,000, which has been accounted for as goodwill and is being amortized over thirty years using the straight-line method. Effective August 1, 1997, the Corporation purchased Atlantic Grinding & Welding, Inc. for approximately $2,600,000 cash, including debt assumed and retired. This small manufacturer of feed screws, with operations in New Hampshire and South Carolina, will expand New Castle Industries' market coverage to the plastics processing and machinery industry. The Asset Purchase Agreements for F. R. Gross and Atlantic Grinding & Welding provide for additional payments to the former owners contingent on future earnings. Any additional payments made will be accounted for as goodwill and amortized over the remaining life of the original goodwill. In May, 1995, the Corporation acquired Buffalo Air Handling Company for $12,200,000 in cash and in October, 1995, Bimex Corporation was acquired for $3,800,000 in cash. Both acquisitions were accounted for as purchase transactions. For Buffalo Air Handling Company, the excess of the purchase price over the estimated fair value of the tangible net assets acquired amounted to approximately $3,500,000 which has been accounted for as goodwill and is being amortized over thirty years using the straight-line method. NOTE 3--INVESTMENTS: In connection with the sale of its remaining investments, including the stock holdings of Northwestern Steel and Wire Company previously classified as available for sale, the Corporation recognized pre-tax gains of $3,489,000 in 1997 and $519,000 in 1996. NOTE 4--INVENTORIES:
(in thousands) 1997 1996 ------- ------- Raw materials................................................... $ 6,214 $ 6,384 Work-in-process................................................. 23,905 20,945 Finished goods.................................................. 3,440 3,886 Supplies........................................................ 1,893 2,008 ------- ------- $35,452 $33,223 ======= =======
The carrying amount of inventories valued on the LIFO method approximates current cost at December 31, 1997 and 1996. Approximately 87% of the inventory was valued using the LIFO method in 1997 and 85% in 1996. NOTE 5--BORROWING ARRANGEMENTS: The Corporation maintains a revolving credit agreement (RCA) which provides for a bank commitment of up to $7,500,000 expiring in September 1998. In addition, the Corporation maintains short-term lines of credit of approximately $7,000,000. There were no bank borrowings outstanding at either December 31, 1997 or 1996, with only minimal line of credit borrowings during each of the years. The Corporation's RCA requires, among other things, the maintenance of certain financial covenants including minimum net worth and ratios of interest coverage and debt to equity. The Corporation is in compliance with the applicable bank covenants as of December 31, 1997. In 1996, the Corporation issued two series of tax-exempt Industrial Revenue Bonds totalling $11,236,000; due to anticipated capital expenditures exceeding limitations prescribed for tax-exempt financings, one of the series for $7,116,000 was refinanced in 1997 with a taxable issue. The presently unexpended proceeds of the remaining tax-exempt series are presented as a noncurrent asset on the balance sheet. As required by the Trust Indenture Agreement, these funds have been invested in liquid, highly rated securities, and are carried at cost which approximates market. Principal on the tax-exempt and taxable bonds matures in 2020 and 2027, respectively. Interest on the tax- exempt bonds, including a 1987 tax-exempt issue for $1,350,000 which is due in 2002, are at floating rates which averaged 3.9% during the year. Interest on the taxable bonds from their issuance in November 1997 averaged 5.8%. NOTE 6--OPERATING LEASES: The Corporation leases office space and certain production machinery and computer equipment. Operating lease payments were $1,800,000 in 1997, $1,745,000 in 1996 and $1,885,000 in 1995. Operating lease payments for subsequent years are as follows: 1998 $1,872,000 2001 $ 721,000 1999 1,209,000 2002 699,000 2000 1,095,000 Thereafter 1,229,000
NOTE 7--EMPLOYEE PENSION PLANS: The Corporation has noncontributory defined benefit pension plans covering substantially all of its employees. Generally, the benefits are based on years of service multiplied by either a fixed amount or a 12 NOTE 7--EMPLOYEE PENSION PLANS (CONTINUED): percentage of compensation. For its pension plans covered by the Employee Retirement Income Security Act of 1974 (ERISA), the Corporation's policy is to fund at least the minimum actuarially computed annual contribution required under ERISA. The net pension cost for the Corporate-sponsored pension plans consists of the following components:
(in thousands) 1997 1996 1995 ---- ---- ---- Service cost....................................... $ 1,206 $ 1,143 $ 889 Interest cost on projected benefit obligation...... 5,712 5,214 5,125 Return on plan assets.............................. (25,324) (12,111) (5,337) Net amortization and deferral...................... 19,105 6,385 274 -------- -------- ------- Net pension cost................................... $ 699 $ 631 $ 951 ======== ======== =======
The reconciliation of the funded status for the pension plan in which assets exceed the projected benefit obligation is as follows:
(in thousands) 1997 1996 ---- ---- Actuarial present value of: Vested benefit obligation.................................. $ 71,299 $64,981 ======== ======= Accumulated benefit obligation............................. $ 75,523 $68,319 ======== ======= Projected benefit obligation............................... $ 78,881 $72,337 Plan assets at fair value.................................... 113,037 91,850 -------- ------- Plan assets in excess of projected benefit obligation........ 34,156 19,513 Unrecognized gain............................................ (20,476) (5,523) -------- ------- Prepaid pension.............................................. $ 13,680 $13,990 ======== =======
Assumptions used for the Corporation's defined benefit plans for each of the three years ended December 31, 1997 include:
1997 1996 1995 ---- ---- ---- Discount rate at year end for projected benefit obligation.... 7.25% 7.75% 7.25% Expected long-term rate of return on assets................... 8.5% 8.5% 8.5% Rate of increases in compensation............................. 3.0% 3.0% 3.0%
The pension plans' assets principally comprise:
(Percent) 1997 1996 ---- ---- Preferred and common stocks......................................... 72.3 72.1 Industrial and financial obligations................................ 22.1 23.4 United States government obligations................................ 3.7 2.9 Miscellaneous and temporary investments............................. 1.9 1.6 ----- ----- 100.0 100.0 ===== =====
The Corporation maintains a nonqualified defined benefit plan to provide supplemental retirement benefits for selected executives in addition to benefits provided under the Corporate-sponsored pension plans. In December 1997, $1,000,000 was contributed to a grantor tax trust known as a "Rabbi" trust, which is included in other noncurrent assets. The assets of the trust are subject to claims of the Corporation's creditors but otherwise must be used only for purposes of providing benefits under the plan. For financial reporting purposes, the plan is treated as a non-funded pension plan, the reconciliation of which is as follows:
(in thousands) 1997 1996 ---- ---- Actuarial present value of: Vested benefit obligation.................................. $ 2,804 $ 2,367 ======= ======= Accumulated benefit obligation............................. $ 2,969 $ 2,488 ======= ======= Projected benefit obligation............................... $ 3,465 $ 2,754 Unrecognized future compensation increases................... (496) (266) ------- ------- Accrued pension cost included in employee benefit obligations................................................. $ 2,969 $ 2,488 ======= =======
NOTE 8--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The Corporation provides postretirement health care benefits principally to the bargaining groups of one subsidiary (the Plan). The Plan covers participants and their spouses and/or dependents who retire under the existing pension plan on other than a deferred vested basis and at the time of retirement have also rendered 15 or more years of continuous service irrespective of age. Other health care benefits are provided to retirees under plans no longer being offered by the Corporation. Retiree life insurance is provided to substantially all retirees. Postretirement benefits with respect to health care are subject to certain Medicare offsets. During 1994 the Corporation amended its primary postretirement health benefit plans to provide for a cost-sharing method for current and future retirees. The 13 NOTE 8--POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED): amendments, along with changes in inflation, discount rate and mortality assumptions used in calculating the accumulated postretirement benefit obligation (APBO), resulted in an unrecognized gain of $4,976,000 which is being amortized on a straight-line basis over the average remaining employee service period as a reduction in postretirement benefit expense beginning in 1995. The Corporation also provides health care and life insurance benefits to some former employees of discontinued operations. This obligation had been estimated at the time of disposal and was included as a component of the liability for discontinued operations. The Corporation's postretirement health care and life insurance plans are unfunded. The Corporation's APBO for continuing and discontinued businesses consists of the following:
(in thousands) 1997 1996 ---- ---- APBO attributable to: Current retirees............................................. $ 6,939 $ 7,162 Fully eligible active plan participants...................... 184 162 Other plan participants...................................... 2,061 1,796 ------- ------- Total APBO..................................................... 9,184 9,120 Unrecognized gain.............................................. 5,073 5,699 ------- ------- Accrued retiree benefits....................................... $14,257 $14,819 ======= =======
The net postretirement benefit cost consists of the following components:
(in thousands) 1997 1996 1995 ----- ----- ----- Service cost............................................... $ 90 $ 85 $ 130 Interest on APBO........................................... 697 651 922 Amortization of unrecognized gain.......................... (589) (594) (408) ----- ----- ----- Net postretirement benefit cost...................................................... $ 198 $ 142 $ 644 ===== ===== =====
The following assumptions were utilized for measurement purposes of the APBO:
1997 1996 ---- ---- Medical inflation rate............................................. 6.5% 7.5% Gradual reduction to the year 2001 and to remain level thereafter...................................................... 5.0% 5.5% Discount rate...................................................... 7.25% 7.75%
A 1% change in the medical inflation rate would impact the APBO and the annual benefit expense by approximately $700,000 and $70,000. NOTE 9--AUTHORIZED AND ISSUED SHARES: Each outstanding share of common stock carries one Preference Share Purchase Right (a Right). The Rights are designed to assure that all shareholders receive equal treatment in the event of a potential acquisition of the Corporation or a change in control. Under certain circumstances, each Right entitles the shareholder to buy 1/100 of a share of Series A Preference Stock at a $36.00 exercise price. The Rights are exercisable only if a party acquires beneficial ownership of 20% or more (or offers to acquire 30% or more) of the Corporation's common stock. After the Rights become exercisable, if anyone acquires 30% or more of the Corporation's stock or assets, merges into the Corporation or engages in certain other transactions, each Right may be used to purchase shares of the Corporation's common stock (or, under certain conditions, the acquirer's common stock) worth twice the exercise price. The Corporation may redeem the Rights, which expire in November 1998, for five cents per Right under certain circumstances. At December 31, 1997, there are 3,000,000 shares of unissued preference stock, of which 100,000 shares have been designated as Series A Preference Stock for issuance in connection with these Rights. NOTE 10--STOCK OPTION PLAN: In 1997, the shareholders approved a stock option plan authorizing the issuance of options for 300,000 shares of common stock to selected employees. Under the terms of the plan, options may be either incentive or non-qualified. Options granted under the plan are subject to terms, including exercise price and conditions and timing of exercise, determined by the Salary Committee of the Board of Directors. There were no options granted under the plan during 1997. NOTE 11--FINANCIAL INSTRUMENTS: FORWARD FOREIGN EXCHANGE CONTRACTS The Corporation's Belgian operation is subject to risk from exchange rate fluctuations in connection with its regular purchases in U.S. dollars of semi- finished and finished roll products from its U.S. parent. In order to minimize this risk, forward foreign exchange contracts are purchased as hedges of these anticipated purchase transactions. At December 31, 1997, the Belgian operation had monthly forward exchange contracts through 1999 to purchase an aggregate of $9,600,000 of U.S. dollars, representing approximately forty percent 14 NOTE 11--FINANCIAL INSTRUMENTS (CONTINUED): of anticipated requirements. Gains and losses on forward exchange contracts which hedge exposures on anticipated foreign currency commitments are deferred and recognized as adjustments to the bases of the inventory acquired. The deferred unrealized gain on forward exchange contracts at December 31, 1997 was $1,100,000. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of forward foreign exchange contracts, based on quoted market prices of comparable contracts, approximates their notional principal amount plus the unrealized deferred gain. The fair value of other financial instruments classified as current assets or current liabilities approximates their carrying values due to the short-term maturities of these instruments. The fair value of the floating rate industrial revenue bond debt approximates its carrying value. NOTE 12--INCOME TAXES: Income taxes consisted of:
(in thousands) 1997 1996 1995 ---- ---- ---- Current: Federal............................................... $4,451 $2,014 $1,030 State................................................. 720 600 540 Foreign............................................... 629 (21) 27 ------ ------ ------ 5,800 2,593 1,597 ------ ------ ------ Deferred: Federal............................................... 3,611 3,854 3,444 State................................................. 124 72 (242) Foreign............................................... (170) (139) 126 ------ ------ ------ 3,565 3,787 3,328 ------ ------ ------ $9,365 $6,380 $4,925 ====== ====== ======
Deferred tax assets and liabilities comprise the following:
(in thousands) ASSETS 1997 1996 - ------ ---- ---- Employment-related liabilities............................. $ 5,840 $ 5,984 Capital loss carryforward.................................. 11,923 13,139 Other...................................................... 4,301 5,033 -------- -------- Gross deferred tax assets.................................. 22,064 24,156 Valuation allowance........................................ (11,923) (12,173) -------- -------- 10,141 11,983 -------- -------- LIABILITIES - ----------- Depreciation............................................... (11,831) (11,610) Prepaid pension............................................ (5,472) (5,596) Foreign deferred tax....................................... (1,090) (1,260) -------- -------- Gross deferred tax liabilities............................. (18,393) (18,466) -------- -------- Net deferred tax liability................................. $ (8,252) $ (6,483) ======== ========
For federal income tax purposes, the Corporation has an unused capital loss carryforward at December 31, 1997 of $34,067,000 which expires in 1998. The Corporation has recorded a valuation allowance with respect to the future tax benefit of the capital loss carryforward reflected as a deferred tax asset due to the uncertainty of its ultimate realization. The deferred income taxes included in other current assets on the balance sheet for 1996 have been reduced by $1,455,000 for the tax effect related to the unrealized holding gains of the Corporation's investments available for sale. The difference between the U.S. federal income tax statutory rate and the Corporation's effective income tax rate is as follows:
(Percent) 1997 1996 1995 ---- ---- ---- Computed at statutory rate.................................... 35.0 35.0 35.0 Foreign income taxes.......................................... 0.4 (0.1) 0.2 State income taxes............................................ 1.8 2.1 0.8 Valuation reserve............................................. .6 (1.0) (4.7) Adjustment to prior year tax accruals......................... -- -- 2.1 Other--net.................................................... (1.6) (2.0) 1.8 ---- ---- ---- 36.2 34.0 35.2 ==== ==== ====
The 1995 effective tax rate was decreased due to a revision of the valuation reserve, as the Corporation expected to realize a future benefit for investment tax credit carryforwards, that had previously been expected to expire unutilized. Such benefits were realized in 1996. NOTE 13--FOREIGN CURRENCY TRANSLATION ADJUSTMENTS: Cumulative translation adjustments included as a component of shareholders' equity are as follows:
(in thousands) INCREASE (DECREASE) ---------- December 31, 1994 ............................................... $ 2,710 1995 translation adjustment.................................... 787 ------- December 31, 1995................................................ 3,497 1996 translation adjustment.................................... (938) ------- December 31, 1996................................................ 2,559 1997 translation adjustment.................................... (1,483) ------- December 31, 1997................................................ $ 1,076 =======
15 NOTE 14--LITIGATION: The Corporation's subsidiary, Vulcan Inc. (Vulcan), is a 50% general partner in Valley-Vulcan Mold Company (Valley), a partnership, which filed under Chapter 11 of the U.S. Bankruptcy Code in 1990. Valley, in connection with its formation, assumed certain obligations of each of the partners, including Vulcan's obligation to pay an industrial revenue bond. A portion of the latter obligation, however, had been paid by the Corporation pursuant to a guaranty given at the time of Valley's formation, which guaranty was secured by all of Valley's assets. In 1991, the unsecured creditors committee brought an adversary proceeding against the Corporation and its subsidiary, as well as others, seeking to set aside the Corporation's liens, to hold the Corporation and Vulcan liable for debts of Valley, and for return of certain funds received in connection with Valley's formation. In April 1994, the Bankruptcy Court issued a favorable judgment denying all claims against the Corporation. In addition, the Court permitted the Corporation to recover $2,200,000 from the estate of Valley in connection with the Corporation's lien for the industrial revenue bond guarantee. No reserve had been established for the outcome of this litigation based on the Corporation's belief that it had meritorious defenses. The plaintiff in the case, the unsecured creditors committee of Valley, has filed a notice of appeal from the Court's decision. The Corporation has posted a bank letter of credit for $2,200,000 pending the outcome of the appeal. In addition to the litigation noted above, the Corporation is from time to time subject to routine litigation incidental to its business. The Corporation believes that the results of the above noted litigation and other pending legal proceedings will not have a material adverse effect on the Corporation's financial condition, results of operations or liquidity. NOTE 15--ENVIRONMENTAL MATTERS: There are various environmental proceedings which involve discontinued operations. In some of those proceedings, the Corporation has been designated as a potentially responsible party. The reserves for discontinued operations include an accrual for costs of likely remedial actions. Environmental exposures are difficult to assess and estimate for numerous reasons including the lack of reliable data, the number of potentially responsible parties and their financial capabilities, the multiplicity of possible solutions, the years of remedial and monitoring activity required, and the identification of new sites. While it is not possible to quantify with certainty the environmental exposure, in the opinion of management, the potential liability for all environmental proceedings, based on information known to date and the estimated quantities of waste at these sites, will not have a material adverse effect on the financial condition, results of operations or liquidity of the Corporation. NOTE 16--SEGMENT AND GEOGRAPHIC INFORMATION: The Corporation is in one business segment that manufactures and sells engineered products. Included in the segment information are U.S. operations and one non-U.S. operation which is a wholly-owned subsidiary in Belgium.
(in thousands) U.S. Non U.S. Total operations operations ----- ---------- ---------- 1997 - ---- Net sales*....................................... $173,906 $165,190 $23,386 Identifiable assets.............................. 196,845 181,323 15,522 Capital expenditures............................. 15,086 14,749 337 Depreciation..................................... 6,672 6,271 401 Contributions to operating income................ 21,961 20,287 1,674 1996 - ---- Net sales*....................................... $162,403 $153,064 $19,439 Identifiable assets.............................. 188,170 173,061 15,109 Capital expenditures............................. 8,902 8,620 282 Depreciation..................................... 6,152 5,679 473 Contributions to operating income................ 18,068 17,411 657 1995 - ---- Net sales*....................................... $143,785 $133,210 $18,658 Identifiable assets.............................. 171,424 155,259 16,165 Capital expenditures............................. 4,637 4,184 453 Depreciation..................................... 5,683 5,208 475 Contributions to operating income................ 14,176 13,775 401
*Total net sales exclude intercompany sales of: $14,670 in 1997, $10,100 in 1996 and $8,083 in 1995 Net sales from U.S. operations, excluding those to a subsidiary company, include export sales of $36,997,000 in 1997, $37,795,000 in 1996 and $29,422,000 in 1995. Included in identifiable assets of U.S. operations are amounts attributable to either investments or discontinued operations of $1,350,000 in 1997, $7,792,000 in 1996 and $11,551,000 in 1995. In September 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 requires certain disclosures about 16 NOTE 16--SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED): segment information in interim and annual financial statements and related information about products and services, geographic areas and major customers. Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. The Corporation must adopt the provisions of SFAS No. 131 for its consolidated financial statements for the year ending December 31, 1998. The adoption of SFAS No. 131 will not effect the measurement of the Corporation's financial position, results of operations or cash flows; the Corporation is reviewing possible changes in disclosures that may be necessary. QUARTERLY INFORMATION--UNAUDITED
(in thousands, except per share data) FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER YEAR ------- ------- ------- ------- ---- 1997 - ---- Net sales............................. $40,834 $43,091 $41,628 $48,353 $173,906 Gross profit(1)....................... 12,973 13,403 12,795 14,660 53,831 Income from operations................ 5,382 5,808 4,770 6,001 21,961 Net income(2)......................... 3,795 4,332 4,550 3,863 16,540 Basic earnings per share.............. .40 .45 .48 .40 1.73 1996 - ---- Net sales............................. $41,099 $40,767 $38,497 $42,040 $162,403 Gross profit(1)....................... 11,717 12,243 10,974 13,535 48,469 Income from operations................ 4,170 4,552 3,771 5,575 18,068 Net income(3)......................... 2,648 2,910 2,369 4,463 12,390 Basic earnings per share.............. .28 .30 .25 .47 1.29
NOTES 1. Gross profit as used herein does not include a charge for depreciation. 2. Included in net income for 1997 are gains on sales of investments, net of deferred taxes, of $140, $469 and $1,659 in the first, second and third quarters, respectively. 3. Included in net income in the fourth quarter of 1996 is a gain on sale of an investment of $485. - -------------------------------------------------------------------------------- FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
YEAR ENDED DECEMBER 31, 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Net sales............... $173,906,315 $162,402,805 $143,785,139 $113,836,181 $108,846,416 Income from operations.. 21,960,984 18,068,058 14,176,001 8,359,705 5,698,614 Income from continuing operations............. 16,539,985 12,390,488 9,050,286 6,322,477 11,971,340 Discontinued operations. -- -- -- 1,728,251 (16,487,296) Net income (loss)....... 16,539,985 12,390,488 9,050,286 8,050,728 (4,515,956) Total assets............ 196,845,161 188,170,344 171,423,690 151,912,087 138,494,114 Shareholders' equity.... 129,415,787 119,667,023 112,135,049 102,970,884 91,150,230 Per common share: Income from continuing operations............. 1.73 1.29 .94 .66 1.25 Discontinued operations. -- -- -- .18 (1.72) Net income (loss)....... 1.73 1.29 .94 .84 (.47) Cash dividends declared. .27 .235 .15 .10 .15 Shareholders' equity.... 13.51 12.49 11.71 10.75 9.52 Market price at year end.................... $19.5625 $12.00 $10.75 $9.875 $7.125 Weighted average shares outstanding and at year end.................... 9,577,621 9,577,621 9,577,621 9,577,621 9,577,621 Number of shareholders.. 1,312 1,418 1,532 1,654 1,738 Number of employees..... 1,340 1,225 1,204 955 949
17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1997 COMPARED TO 1996 OPERATIONS Net sales of $173,906,000 in 1997 were increased by $11,503,000 or 7.1% compared with sales of $162,403,000 in 1996. Approximately one-half of this increase is attributed to the 1997 acquisitions of F. R. Gross and Atlantic Grinding & Welding while overall sales at other operations were higher by 3.5%. Most of the Corporation's operations experienced higher shipment levels due primarily to improved economic activity in domestic markets along with slower growth in markets outside of the U.S. The order backlog at December 31, 1997 of $115,200,000 compares with $112,300,000 at December 31, 1996. The acquired businesses contributed $5,000,000 to the backlog while the remaining operations declined slightly. This decline is in part due to a slowing of forged steel roll orders from customers in Asia and the Pacific Rim, partially offset by strong bookings for domestic mills and the plastics processing and machinery industry. The cost of products sold, excluding depreciation, in relationship to net sales was 69.0% in 1997 compared to 70.2% in 1996. A more profitable sales mix together with increased margins, principally in forged steel rolls, resulted in an improved ratio of cost of products sold to sales in 1997. Selling and administrative expenses increased by $948,000 in 1997 due to the impact of the businesses acquired during the year. The relationship of selling and administrative expenses to net sales declined to 14.5% in 1997 compared to 14.9% in 1996. Depreciation expense of $6,672,000 in 1997 compares with $6,152,000 in 1996. The increase is attributable to high capital expenditure levels in both years and the impact of the acquisitions. As a result of improved margins, a more profitable sales mix and slightly higher volumes, income from operations increased 21.5% for 1997 to $21,961,000 compared to $18,068,000 in 1996. Gains on sales of investments of $3,489,000 were realized in 1997 compared with $519,000 in 1996. Other income (expense) net was $455,000 in 1997 as compared to $184,000 in 1996. The previous year included losses on disposals of equipment and lower foreign exchange transaction gains. As a result of all of the above, the Corporation had net income of $16,540,000 in 1997 compared to $12,390,000 in 1996. LIQUIDITY AND CAPITAL RESOURCES Net cash flows from operating activities were positive for 1997 at $14,153,000 and compare with positive cash flows of $17,843,000 for 1996. While income from operations increased by $3,893,000 in 1997, operating cash flows declined primarily due to an increase in working capital requirements and a full year of federal income tax payments following utilization of tax loss carryforwards in mid-1996. Net cash outflows from investing activities were $14,596,000 in 1997 and compare with cash outflows of $17,567,000 in 1996. Capital expenditures for 1997 totaled $15,086,000 compared to $8,902,000 in 1996. The major expenditure in 1997 was for plant and equipment at Union Electric Steel. Unexpended industrial revenue bond proceeds of $9,767,000 were available to fund a portion of this capital program and $7,549,000 of these proceeds were drawn down during 1997. The remaining proceeds of $2,218,000 will be available to finance a portion of Union Electric Steel's capital program, which along with other approved appropriations carried forward into 1998 total $7,000,000. Funds generated internally are expected to be sufficient to finance the balance of the capital expenditures. The net cash outflow from investing activities in 1997 includes $11,967,000 for the purchases of F. R. Gross and Atlantic Grinding & Welding. The Corporation disposed of all of its stock and other investment interests, including its stock holdings in Northwestern Steel and Wire Company, receiving proceeds of $4,907,000 in 1997 and $1,102,000 in 1996. Cash outflows with respect to financing activities in 1997 reflect an increase in the quarterly dividend rate to $.06 per share compared to $.025 per share in 1996, and an additional prior year-end dividend of $960,000 in 1997 or $.10 per share, as compared to $.05 per share paid in 1996. The regular quarterly dividend rate was increased from $.06 per share to $.09 per share effective with the January 31, 1998 payment. Cash flows from financing activities in 1997 include the issuance of taxable Industrial Revenue Bonds, the proceeds of which were used to refinance a tax-exempt issue of the same amount. Cash flows in 1996 include receipt of $11,236,000 from the issuance of tax-exempt Industrial Revenue Bonds. As a result of all of the above, cash and cash equivalents decreased by $3,815,000 in 1997 and ended the year at $21,696,000. 18 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) The Corporation maintains short-term lines of credit and a revolving credit agreement in excess of the cash needs of its businesses. The total available at December 31, 1997 was $14,500,000. With respect to environmental concerns, the Corporation has been named a potentially responsible party at certain sites. The Corporation has accrued its share of the estimated cost of remedial actions it would likely be required to contribute. While it is not possible to quantify with certainty the potential of actions regarding environmental matters, particularly any future remediation and other compliance efforts, in the opinion of management, compliance with the present environmental protection laws and the potential liability for all environmental proceedings will not have a material adverse effect on the financial condition, results of operations or liquidity of the Corporation (also see Notes to Consolidated Financial Statements-- Note 15). The nature and scope of the Corporation's business brings it into regular contact with a variety of persons, businesses and government agencies in the ordinary course of business. Consequently, the Corporation and its subsidiaries from time to time are named in various legal actions. The Corporation does not anticipate that its financial condition, results of operations or liquidity will be materially affected by the costs of known, pending or threatened litigation (also see Notes to Consolidated Financial Statements--Note 14). IMPACT OF YEAR 2000 The Corporation and its subsidiaries are taking actions to provide that their computer systems are capable of processing for the periods the year 2000 and beyond. The year 2000 issue and related costs are not expected to have a material impact on the operations of the Corporation. CHANGES IN ACCOUNTING DISCLOSURE REQUIREMENTS In September 1997, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components. Comprehensive income includes changes in shareholders' equity, such as the foreign currency translation adjustments described in Notes to Consolidated Financial Statements--Note 13, which are not reflected in the Corporation's income statement. The Corporation is required to adopt the provisions of SFAS No. 130 beginning with its consolidated financial statements for the three months ending March 31, 1998. The adoption of SFAS No. 130 will not effect the measurement of the Corporation's financial position, results of operations or cash flows. The Corporation is reviewing possible changes in presentations that may be necessary. For discussion with respect to the FASB's recently issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information"; see Notes to Consolidated Financial Statements--Note 16. 1996 COMPARED TO 1995 OPERATIONS Net sales were increased in 1996 to $162,403,000 compared with sales of $143,785,000 in 1995. Approximately $10,500,000 of this increase is attributed to the impact of including the sales of the previous year acquisitions of Buffalo Air Handling and Bimex Industries for the full year 1996. Excluding the impact of the 1995 acquisitions, sales increased by $8,100,000, or 6%, as most of the Corporation's operations experienced higher shipment levels due to continued growth in export business and improved economic activity in the markets served. Sales at New Castle Industries, a component supplier to the plastics processing and machinery industry, were decreased in 1996 reflecting a downturn in activity in that market. During 1996, the order backlog increased by $15,500,000, or 16%, to $112,300,000 at December 31, 1996. The growth in the backlog is due to an increase in forged steel roll orders. The cost of products sold, excluding depreciation, in relationship to net sales was 70.2% in 1996 compared to 71.7% in 1995. The margin improvement in 1996 resulted from improved pricing and more favorable product mix. Selling and administrative expenses increased by $3,426,000 in 1996. Excluding the impact of the acquisitions, these costs increased by $1,700,000, or 9% for the year. This increase is principally due to increased commission costs on higher sales and a mix change towards sales on which commission is payable. The relationship of selling and administrative expenses to net sales was 14.9% in 1996 and 14.5% in 1995. Depreciation expense of $6,152,000 in 1996 compares with $5,683,000 in 1995. The increase is attributable to 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) the higher capital expenditure levels in 1996 and the full period impact of the acquisitions. As a result of the improved levels of sales, margin improvement and ongoing overhead cost control, income from operations increased 27% for 1996 to $18,068,000 compared to $14,176,000 in 1995. Gains on sales of investments of $519,000 were realized in 1996. Other income (expense)--net was $184,000 in 1996 as compared to $(201,000) in 1995. The improvement principally reflects a reduced charge in 1996 for the accretion, from present values, on long-term reserves. As a result of all of the above, the Corporation had net income of $12,390,000 in 1996 compared to $9,050,000 in 1995. STATEMENT OF CASH FLOW Net cash flows from operating activities were positive for 1996 at $17,843,000 and compare with positive cash flows of $17,643,000 for 1995. While income from operations increased by $3,892,000 in 1996, an increase in working capital requirements, principally an accounts receivable increase of $4,096,000, limited the improvement in operating cash flows. Net cash outflows from investing activities were $17,567,000 in 1996 and compare with cash outflows of $20,637,000 in 1995. Capital expenditures for 1996 totaled $8,902,000 compared to $4,637,000 in 1995. During 1996, the Corporation completed the sale of two series of tax-exempt, long-term Industrial Revenue Bonds totalling $11,236,000. At December 31, 1996, $9,767,000 of these funds are unspent, and have been temporarily invested to be drawn down as expenditures are made for expansion and equipment at Union Electric Steel's Pennsylvania facilities. Funds generated internally will be sufficient to finance the balance of the expansion program. During 1996, the Corporation sold shares of two investments, realizing proceeds of $1,102,000 and gains of $519,000. Net cash outflows from investing activities in 1995 included $16,000,000 for the acquisitions of Buffalo Air Handling and Bimex. Cash flows from financing activities include the Industrial Revenue Bonds issued in 1996, dividend payments of $958,000 in both 1996 and 1995, and in 1996, payment of an additional prior year-end dividend of $479,000, or $.05 per share. As a result of all of the above, cash and cash equivalents increased by $9,957,000 in 1996 and ended the year at $25,510,000. - -------------------------------------------------------------------------------- COMMON STOCK INFORMATION The shares of common stock of Ampco-Pittsburgh Corporation are traded on the New York Stock Exchange and on the Philadelphia Stock Exchange (symbol AP). Cash dividends have been paid on common shares in every year since 1965.
1997 1996 -------------------------- ------------------------ DIVIDENDS Dividends QUARTER HIGH LOW DECLARED High Low Declared - ------- ---- --- --------- ---- --- --------- First $13 7/8 $11 1/8 $.06 $13 1/4 $10 $.025 Second 15 1/8 11 1/2 .06 13 5/8 11 3/8 .025 Third 19 5/16 14 5/8 .06 12 3/8 10 1/4 .025 Fourth 20 5/8 17 1/2 .09 14 11 1/2 .16* Year 20 5/8 11 1/8 .27 14 10 .235*
* Includes an additional year-end dividend of $.10 per share in 1996. 20 Directors & Officers Louis Berkman (1) (3) Alvin G. Keller (1) (2) (3) Director Director Chairman of the Board Private Investor President, The Louis Berkman Company Robert A. Paul (1) Carl H. Pforzheimer, III (2) Director Director President and Chief Executive Officer Managing Partner, Carl H. Pforzheimer & Co. Ernest G. Siddons (1) Robert J. Reilly Director Vice President Finance and Executive Vice President and Treasurer Chief Operating Officer Leonard M. Carroll (2) Robert F. Schultz Director Vice President Industrial Relations and Managing Director, Seneca Capital Senior Counsel Management, Inc. William D. Eberle (2) (3) Rose Hoover Director Corporate Secretary Private Investor (1) Member of the Executive Committee (2) Member of the Audit Committee (3) Member of the Salary and Stock Option Committees Operating Companies Union Electric Steel Corporation Buffalo Pumps, Inc. Carnegie, Pennsylvania North Tonawanda, New York Robert G. Carothers, President Charles R. Kistner, President New Castle Industries, Inc. Buffalo Air Handling Company New Castle, Pennsylvania Amherst, Virginia James D. Frankland, President William R. Phelps, President F.R. Gross Company Aerofin Corporation Stow, Ohio Lynchburg, Virginia David C. Bastow, President David L. Corell, President Annual Meeting Independent Accountants The Annual Meeting of Price Waterhouse LLP the Shareholders will Pittsburgh, Pennsylvania be held at: The USX Tower Employment Policy 33rd Floor Conference Room The Corporation is an equal Pittsburgh, Pennsylvania opportunity employer. Tuesday, April 28, 1998 at 10:00 a.m. 10K Report Form 10-K is available without charge to shareholders upon written request to: Corporate Secretary Ampco-Pittsburgh Corporation 600 Grant Street, Suite 4600 Pittsburgh, Pennsylvania 15219-2700 AMPCO-PITTSBURGH CORPORATION Pittsburgh, PA 15219 EX-21 3 SUBSIDIARIES OF THE COMPANY Exhibit 21 SUBSIDIARIES ------------ Jurisdiction of Name Ownership Incorporation - ---- --------- ------------- 1027226 Ontario Ltd. 100% owned by Aerofin Corporation Canada AP Venture Corp. III 100% owned by Ampco-Pittsburgh Corporation Delaware Aerofin Corporation 100% owned by Ampco-Pittsburgh Securities V Corporation New York Ampco NCII Sub, Inc. 100% owned by New Castle Industries, Inc. Delaware Ampco-Pittsburgh Securities 100% owned by III Corporation Ampco-Pittsburgh Corporation Delaware Ampco-Pittsburgh Securities 100% owned by V Corporation Ampco-Pittsburgh Corporation Delaware Ampco UES Sub, Inc. 100% owned by Union Electric Steel Corporation Delaware Atlantic Grinding & 100% owned by Welding, Inc. Ampco NCII Sub, Inc. Pennsylvania Bimex Industries, Inc. 100% owned by Ampco NCII Sub, Inc. Delaware Buffalo Air Handling Company 100% owned by Ampco-Pittsburgh Corporation Delaware Buffalo Pumps, Inc. 100% owned by Ampco-Pittsburgh Corporation Delaware F. R. Gross Co., Inc. 100% owned by Ampco-Pittsburgh Securities V Corporation Pennsylvania New Castle Industries, Inc. 100% owned by Ampco UES Sub, Inc. Pennsylvania Exhibit 21 (Cont') SUBSIDIARIES (Cont') -------------------- Jurisdiction of Name Ownership Incorporation - ---- --------- ------------- Union Electric Steel 100% owned by Corporation Ampco-Pittsburgh Securities V Corporation Pennsylvania Union Electric Steel N.V. 100% owned by 1027226 Ontario Limited Belgium The financial statements of all subsidiaries have been consolidated with those of the Corporation. Names of other subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary. EX-27 4 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1997 DEC-31-1997 21,695,512 0 35,654,520 629,677 35,452,494 96,703,279 139,249,677 66,714,835 196,845,161 23,758,657 12,586,000 0 0 9,577,621 119,838,166 196,845,161 173,906,315 175,054,221 120,075,719 151,945,331 0 0 693,133 25,904,985 9,365,000 16,539,985 0 0 0 16,539,985 1.73 1.73
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