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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.
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(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
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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.
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(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
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(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