Back to GetFilings.com
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, 1998.
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. [ ]
As of March 9, 1999, 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 $71 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, 1998.
PART I
ITEM 1 - BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
Ampco-Pittsburgh Corporation (the "Corporation") was incorporated in
Pennsylvania in 1929. In 1998, the Corporation reclassified the way it reports
its businesses into three segments:
Forged Steel Rolls Segment
- --------------------------
Union Electric Steel Corporation produces forged hardened steel rolls and
is headquartered in Carnegie, Pennsylvania.
Air and Liquid Processing Segment
- ---------------------------------
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.
Plastics Processing Machinery Segment
- -------------------------------------
New Castle Industries, Inc. and its subsidiaries primarily produce feed
screws, barrels and chill rolls and are headquartered in New Castle,
Pennsylvania. F. R. Gross Company, located in Stow, Ohio, manufactures heat
transfer rolls.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The sales and operating profit of the Corporation's three segments and the
identifiable assets attributable to each segment for the three years ended
December 31, 1998 are set forth in Note 14 (Business Segments) on pps. 17 and 18
of the Annual Report
2
to Shareholders for the year ended December 31, 1998 which is incorporated
herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
The Forged Steel Rolls segment manufactures forged hardened steel rolls for
producers of steel, aluminum and other metals. The operations comprising the
Air and Liquid Processing segment produce heat exchange coils, air handling
systems and pumps for the construction, power generation, refrigeration,
chemical processing and marine defense industries and a variety of other
industrial and commercial customers. The Plastics Processing Machinery segment
produces components including feed screws, barrels, heat transfer rolls and
chill rolls for use by original equipment machinery manufacturers and processors
principally serving the plastics industry. In all three segments, the products
are 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 in any segment were material to the
Corporation. Contracts that may be subject to renegotiation or termination are
not material to the Corporation. The Corporation's businesses are not seasonal
but are subject to the cyclical nature of the industries and markets served.
For additional information on the products produced and financial
information about each segment, see pp. 3 through 7 and Note 14 on pps. 17 and
18 of the Annual Report to Shareholder for the year ended December 31, 1998
which are incorporated herein by reference.
Raw Materials
- -------------
Raw materials used in all segments are generally available from many
sources and the Corporation is not dependent upon any single supplier for any
raw material. Certain of
3
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.
Patents
- -------
While the Corporation holds some patents, trademarks and licenses, in the
opinion of management they are not material to any segment of the Corporation's
business other than in protecting the goodwill associated with the names under
which products are sold.
Working Capital
- ---------------
Each segment of the Corporation's business maintains levels of inventory,
which generally reflect normal requirements and are believed to reflect the
practices of its industries. Production in all segments 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, 1998 was approximately $100,000,000
compared to a backlog of $115,200,000 at year end 1997. Most of those orders
are expected to be filled in 1999.
Competition
- -----------
The Corporation faces considerable competition from a large number of
companies in each segment. The Corporation believes, however, that it is a
significant factor in each of the principal markets which it serves.
Competition in all segments is based on quality, service, price and delivery.
4
Forged Steel Rolls Segment
--------------------------
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.
Air and Liquid Processing Segment
---------------------------------
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 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 buildings. Aerofin and Buffalo Air Handling
have several major competitors in each of their markets.
Plastics Processing Machinery Segment
-------------------------------------
New Castle Industries and its subsidiaries primarily produce feed screws,
barrels, and chill rolls for use principally 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, printing and
converting industries and also competes with a number of small regional
companies.
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 in all three segments incur expenditures for research and
development. The activities that are undertaken are designed to develop new
products, improve existing products and
5
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 to any
segment in 1998 and such expenditures are not expected to be material in 1999.
Employees
- ---------
In December, 1998, the Corporation had 1,332 active employees, of whom 437
were sales, executive, administrative, engineering and clerical personnel.
Approximately 66% of the production and craft hourly employees are members of
various unions.
Year 2000
- ---------
See Management's Discussion and Analysis of Financial Condition and Results
of Operations on pps. 19 through 23 of the Annual Report to Shareholders for the
year ended December 31, 1998 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 plant located in Belgium
(Union Electric Steel N.V.) that manufactures forged hardened steel rolls
principally for the European markets. For financial information relating to
foreign and domestic operations see Note 14 (Business Segments) on pps. 17 and
18 of the accompanying Annual Report which is incorporated herein by reference.
6
ITEM 2 - PROPERTIES
The location and general character of the principal locations in each of
the three segments, all of which are owned unless otherwise noted, are as
follows:
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ------------ -------------- --------------- ------------
Forged Steel Rolls Segment
- --------------------------
Union Electric Steel Corp.
Route 18 Manufacturing 186,000 on Metal and
Burgettstown, PA 15021 facilities 55 acres steel
726 Bell Street Manufacturing 153,000 on Metal and
Carnegie, PA 15106 facilities and 5 acres steel
offices
U.S. Highway 30 Manufacturing 88,000 on Metal and
Valparaiso, IN 46383 facilities 20 acres steel
1712 Greengarden Road Manufacturing 40,000* Metal and
Erie, PA 16501 facilities steel
Industrie Park Manufacturing 66,000 on Concrete,
B-3980 Tessenderlo facilities and 15 acres metal and
Belgium offices steel
Air and Liquid Processing Segment
- ---------------------------------
Aerofin Corporation Manufacturing 146,000 on Brick,
4621 Murray Place facilities and 15.3 acres concrete
Lynchburg, VA 24506 offices and steel
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
7
Company and Principal Approximate Type of
Location Use Square Footage Construction
- ------------ -------------- --------------- ---------------
Plastics Processing Machinery Segment
- -------------------------------------
Atlantic Grinding &
Welding, Inc.
Manufacturing 19,000 on Metal and
9 Ricker Avenue facilities and 2.6 acres Steel
Londonderry, NH 03053 offices
1950 Old Dunbar Road Manufacturing 20,000* Metal and
West Columbia, SC 29172 facilities steel
Bimex Industries, Inc. Manufacturing 33,500 on Metal and
319 Universal Street facilities and 7.8 acres steel
Wales, WI 53183 offices
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
925 Industrial Street Manufacturing 31,000 Masonry
New Castle, PA 16102 facilities 5.3 acres with steel
truss roof
- --------------
* 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 1998.
(3) The Corporation estimates that all of its facilities were operated within
75% to 95% of their normal capacity during 1998. 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.
8
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.
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
9
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 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. In 1998, upon stipulation of the parties,
the Court ordered this appeal transferred to the Bankruptcy Appellate Panel for
the Sixth Circuit ("BAP"). The BAP 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. 23 and 24 of
the Annual Report to Shareholders for the year ended December 31, 1998 which is
incorporated herein by reference.
Description of Common Stock - The Company is authorized to issue 20,000,000
shares of Common Stock, par value $1.00 per share, and 3,000,000 shares of
Preference Stock, without par value. None of the Preference Stock has been
issued but the Board of Directors of the Company may, without further approval
of shareholders of the Company, issue the Preference Stock in one or more series
with such rights, voting powers, preferences, qualifications, limitations,
restrictions, and special or related rights as the Board of Directors may
determine. Subject to the foregoing, holders of Common Stock are entitled to
receive such dividends (in cash, stock or otherwise) as may be determined by the
Board of Directors and may be legally available for that purpose and, in the
event of liquidation, to share ratably in assets available for distribution.
Subject to the voting rights, if any, of holders of Preference Stock hereafter
issued by the Company, each holder of Common Stock is entitled to one vote for
each share held of record on all matters voted on by shareholders and there are
cumulative voting rights in electing directors. At the Annual Meeting of
Shareholders, held on April 26, 1984, the Shareholders approved amendments to
the Company's Articles of Incorporation that (1) included in the Articles the
provision already in the Company's By-laws creating a classified board of three
classes, (2) permit directors to be removed by shareholder vote without cause,
but only if shareholders entitled to cast at least 75% of the votes which all
shareholders would be entitled to cast in
11
an annual election of directors shall vote for such removal (subject to
provisions to protect cumulative voting rights) and (3) increased the
shareholder vote required, from a majority vote to 75% of the votes which all
shareholders would be entitled to cast in an annual election of directors, to
amend or repeal or to adopt any provision inconsistent with the Articles or the
By-laws (whether adopted by the Board of Directors or the shareholders), unless
such amendment has been approved by at least a two-thirds vote of the whole
Board of Directors.
The holders of Common Stock have no subscription, redemption, conversion
or preemptive rights. All outstanding shares of Common Stock are fully paid and
nonassessable.
The Common Stock is listed on the New York and Philadelphia Stock
Exchanges. The Transfer Agent and Registrar for the Common Stock is ChaseMellon
Shareholder Services.
The Company furnishes its shareholders quarterly unaudited reports for the
first three fiscal quarters and annual reports containing audited financial
statements for each fiscal year.
ITEM 6 - SELECTED FINANCIAL DATA
The information called for by this item is set forth on p. 24 of the
Annual Report to Shareholders for the year ended December 31, 1998 which is
incorporated herein by reference.
12
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. 19 through 23
of the Annual Report to Shareholders for the year ended December 31, 1998 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 9 (Financial
Instruments) on p. 15 of the Annual Report to Shareholders for the year ended
December 31, 1998 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. 8 through 18
of the Annual Report to Shareholders for the year ended December 31, 1998 which
are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On February 25, 1999, the Board of Directors, upon recommendation of the
Audit Committee, approved the dismissal of the Corporation's independent
accountants, PricewaterhouseCoopers LLP ("PwC"), and selected Deloitte & Touche
LLP ("D&T") as the independent accountants for the year 1999.
For each of the two most recent fiscal years: (a) the reports of PwC on the
Corporation's financial statements did not contain an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles; (b) there were no disagreements with PwC
on any matters of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which
13
disagreements, if not resolved to the satisfaction of PwC would have caused PwC
to make reference to the matter in connection with its report; (c) there were no
"reportable events" as defined in Item 304(a)(1)(v) of Regulation S-K; and (d)
neither the Corporation nor anyone else on its behalf consulted D&T regarding
any of the matters or events set forth in Item 304(a)(2)(i) and (ii) of
Regulation S-K.
14
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 90, 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). (N)(2)(4)
Leonard M. Carroll (age 56, Director since 1996; current term expires in 2001).
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). (2)(3)(4)(5)
William D. Eberle (age 75, Director since 1982; current term expires in 2000).
He is a private investor and consultant and is Chairman of Manchester
Associates, Ltd. and Showscan Entertainment, Inc. He is also a director of
Mitchell Energy & Development Co., America Service Group, Sirrom Capital
Corporation and Konover Property Trust. (3)(4)(5)
Robert A. Paul (age 61, 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)
Laurence E. Paul (age 34, Director since 1998; current term expires in 2001).
He has been
Senior Vice President of Donaldson, Lufkin & Jenrette (Investment Banker) since
1997. From 1995 to 1997 he was a Vice President and from 1994 to 1995 he was an
associate of that firm.
Carl H. Pforzheimer, III (age 62, 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). He is
also a director of U. S. Trust Corporation. (N)(3)(4)(5)
15
(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 65, Director since 1981; current term expires in 2001).
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. (2)
- ----------------
(N) Nominee for election at the April 27, 1999 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 Committee.
(5) Member of Stock Option Committee.
(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 43). She has been Secretary of the Corporation for more than
five years and Manager of Real Property and Environmental Control since January,
1995.
Terrence W. Kenny (age 39). He has been Group Vice President of the Corporation
since February 1999 and was Vice President Corporate Development & Planning from
April 1998 to February 1999. For five years prior to 1998, he was Vice
President and Treasurer of Buffalo Pumps, Inc.
Robert J. Reilly (age 42). 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.
Robert F. Schultz (age 51). 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.
16
(c) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES
None.
(d) FAMILY RELATIONSHIPS
Louis Berkman is the father-in-law of Robert A. Paul, and grandfather of
Laurence E. Paul (son of Robert A. Paul). There are no other family
relationships among the Directors and Officers.
(e) SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors and certain officers to file forms with the Securities
and Exchange Commission and the New York Stock Exchange to report their initial
ownership of the Corporation's Common Stock and any subsequent changes in that
ownership. The Corporation is required to disclose herein, any failure to file
such reports by the required dates.
Terrence W. Kenny was elected as an officer of the Corporation by the Board
of Directors in February, 1998. His initial filing on Form 3 under Section 16
of the Securities Exchange Act was not filed on a timely basis. Although Mr.
Kenny owned no shares of the Corporation's Common Stock, a Form 3 should have
been filed reporting his election.
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"):
17
SUMMARY COMPENSATION TABLE
Annual Compensation
- -----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (g) (i)
Name and Securities All Other
Principal Salary Bonus Underlying Compensation
Position Year ($) ($) Options ($)
- -------- ------ ------- ---------- ------------ ------------
Louis Berkman 1998 330,500 66,000 60,000
Chairman of the Board 1997 308,750 94,500
and Executive Committee 1996 290,000 67,000
Robert A. Paul 1998 330,500 66,000 60,000
President and Chief 1997 308,750 94,500
Executive Officer 1996 290,000 67,000
Ernest G. Siddons 1998 296,250 59,000 50,000 450,000(1)
Executive Vice President 1997 276,875 84,750 7,172(1)
and Chief Operating 1996 260,000 60,000 5,520(1)
Officer
Robert F. Schultz 1998 138,250 14,500 20,000
Vice President 1997 134,500 18,500
Industrial Relations 1996 130,875 16,500
and Senior Counsel
- -----------------
(1) The 1996 and 1997 amounts in column (i) represent the value of the term
portion of a split dollar life insurance policy. In 1998, the Salary
Committee approved the payment to Mr. Siddons of an amount equal to the cash
value of that policy. Mr. Siddons has relinquished all rights to the Policy
and the split dollar provisions have been terminated.
18
OPTION GRANTS IN 1998
The following table shows all options to purchase the Corporation's Common
Stock granted to each of the Named Executive Officers in 1998.
Option Grants in Last Fiscal Year
- -------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
% of Total
Securities Options
Underlying Granted to Exercise Grant Date
Options Employees or Base Expiration Present
Name Granted (1) in Fiscal Year Price ($/Sh) Date (2) Value (3)
- ------------------- ----------- --------------- ------------ --------- -----------
Louis Berkman 60,000 22% $10 12/15/08 $152,400
Chairman of
the Board
Robert A. Paul 60,000 22% $10 12/15/08 $152,400
Chairman of the
Board and Chief
Executive Officer
Ernest G. Siddons 50,000 18% $10 12/15/08 $127,000
Executive Vice
President and
Chief Operating
Officer
Robert F. Schultz 20,000 7% $10 12/15/08 $ 50,800
Vice President
Industrial Relations
and Senior Counsel
- ----------------
(1) Option grants for Named Executive Officer who received grants in 1998 are
not exercisable prior to May 1, 1999, at which time they become exercisable
in full.
(2) The expiration date will occur on the sooner of the date noted and (i) 30
days following termination of employment without cause and (ii) the date of
termination of employment by the Corporation for cause or by the Named
Executive Officer for any reason other than retirement.
(3) In accordance with Securities and Exchange Commission rules, the estimated
grant date present values were determined using the Black-Scholes model.
The use of this model is not an endorsement of the model's accuracy in
valuing options. The material assumptions and adjustments incorporated in
the model include: an option life of 5 years, dividend yield of 4%,
volatility of 34.17%, and a risk free rate of return of 4.76%. The
ultimate value of the options in this table will depend on the actual
performance of the Corporation's stock and the timing of exercises.
19
(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 start 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 $5,147 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
20
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 $198,250
Ernest G. Siddons $176,500 (2)
Robert F. Schultz $ 76,375
- ----------------
(1) Mr. Berkman is currently receiving a pension pursuant to the Plan as
described above.
(2) Assumes employment until end of year.
(c) COMPENSATION OF DIRECTORS
In 1998, each Director who was not employed by the Corporation received 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.
(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
21
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, Group Vice President
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.
(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 1998 was comprised
of four Directors: William D. Eberle, who is Chairman of the Committee, Louis
Berkman, Leonard M. Carroll and Carl H. Pforzheimer, III.
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
22
President and Chief Executive Officer is also an officer and director of The
Louis Berkman Company.
The Louis Berkman Company 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 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 benefitting the long-term interest of
shareholders.
In 1998, the Salary Committee reviewed and approved salary increases and
had previously approved an incentive program for 1998 covering Louis Berkman,
Robert A. Paul and Ernest G. Siddons ("participants"). Incentive payments were
to be determined, based exclusively on the Corporation's 1998 income from
operations performance as
23
compared to the Corporation's business plan. These payments were to be limited
to 30% of base salary of participants. In 1998, the participants earned
incentives of $66,000, $66,000 and $59,000 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
Leonard M. Carroll
William D. Eberle
Carl H. Pforzheimer, III
24
(g) STOCK PERFORMANCE GRAPH
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG AMPCO, S&P 500 INDEX AND STEEL (INTEGRATED) INDEX
Ampco S&P 500 Steel (integrated)
12/31/93 $100.00 $100.00 $100.00
12/31/94 $140.35 $101.60 $104.74
12/31/95 $154.44 $139.71 $100.03
12/31/96 $174.71 $172.18 $103.96
12/31/97 $291.99 $229.65 $110.11
12/31/98 $166.10 $294.87 $104.22
Assumes $100 invested at the close of trading on the last trading day
preceding January 1, 1994 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.
25
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 9, 1999, Louis Berkman owned directly 213,888 shares of the
Common Stock of the Corporation and had the right to acquire 60,000 shares
pursuant to a stock option. As of the same date, The Louis Berkman Company,
P. O. Box 576, Steubenville, OH 43952 owned beneficially and of record
2,166,089 shares of the Common Stock of the Corporation. Louis Berkman, an
officer and director of The Louis Berkman Company, owns directly 61.94% of its
common stock. Robert A. Paul, an officer and director of The Louis Berkman
Company, disclaims beneficial ownership of the 19.88% 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.
In March 1998, Gabelli Funds, Inc. and affiliates, Corporate Center, Rye,
NY 10580, filed an amendment to its Schedule 13D reporting they owned 1,893,500
shares or 19.77%. In February, 1999, Dimensional Fund Advisors Inc., 1299 Ocean
Avenue, Santa Monica, CA 90401 filed a 13G disclosing that as of December 31,
1998 it had sole voting and dispositive power of 778,700 shares or 8.13% (all of
which shares are held in portfolios of various investment vehicles).
26
(b) SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 9, 1999 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 2,441,243(1)(2) 25.3
Robert A. Paul 117,922(2)(3) 1.2
Ernest G. Siddons 51,833(4) .5
Robert F. Schultz 20,200(5) .2
Carl H. Pforzheimer, III 2,733(6) *
Leonard M. Carroll 1,000 *
Laurence E. Paul 1,000 *
William D. Eberle 200 *
Directors and Executive
Officers as a group
(11 persons) 2,664,865(7) 27.2
- ----------------
*less than .1%
(1) Includes 213,888 shares owned directly, 60,000 shares which he has the
right to acquire within sixty days pursuant to a stock option, 2,166,089
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 2,166,089 shares
of the Corporation's Common Stock. Louis Berkman is an officer and
director of The Louis Berkman Company and owns directly 61.94% of its
common shares. Robert A. Paul, an officer and director of The Louis
Berkman Company, disclaims beneficial ownership of the 19.88% 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.
27
(3) Includes 42,889 shares owned directly, 60,000 shares which he has the right
to acquire within sixty days pursuant to a stock option, 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 1,833 shares owned jointly with his wife and 50,000 shares which
he has the right to acquire within sixty days pursuant to a stock option.
(5) Includes 200 shares owned jointly with his wife and 20,000 shares which he
has the right to acquire within sixty days pursuant to a stock option.
(6) Includes 1,000 shares owned directly, 800 shares held by a trust of which
he is a trustee and principal beneficiary, and the following shares in
which he disclaims beneficial ownership: 133 shares held by his daughter
and 800 shares held by a trust of which he is a trustee.
(7) Includes 220,000 shares which certain officers have the right to acquire
within sixty days pursuant to stock options and 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 1998 the Corporation bought industrial supplies from The Louis Berkman
Company in transactions in the ordinary course of business amounting to
approximately $1,666,000. Additionally, The Louis Berkman Company paid the
Corporation $165,000 for certain administrative services. Louis Berkman and
Robert A. Paul are officers and
28
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 1999.
29
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
PricewaterhouseCoopers LLP, appearing on pps. 8 through 18 and p. 24 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; the Quarterly
Report on Form 10-Q for the quarter ended March 31, 1987; and the
Quarterly Report on Form 10-Q for the quarter ended September 30,
1998.
b. 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 Chase
Mellon Shareholder Services dated as of September 28, 1998.
Incorporated by reference to the Form 8-K Current Report
dated September 28, 1998.
30
3. Exhibits (cont')
- --------------------
b. Revolving Credit Agreement dated as of September 30, 1998
Incorporated by reference to the Quarterly Report on Form
10-Q for quarter ended September 30, 1998.
(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. Severance Agreement between Ampco-Pittsburgh Corporation and
Terrence W. Kenny.
d. 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, 1998
(21) Significant Subsidiaries
(27) Financial Data Schedule
31
(b) Reports on Form 8-K
-------------------
A report on Form 8-K, dated September 28, 1998, was filed in the fourth
quarter of 1998, reporting under Item 5 (Other Events) the dividend
distribution of one Right for each outstanding share of Common Stock.
32
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 16, 1999
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
33
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 16, 1999
By /s/ Leonard M. Carroll
------------------------------------------
Leonard M. Carroll
By /s/ William D. Eberle
------------------------------------------
William D. Eberle
By /s/ Laurence E. Paul
------------------------------------------
Laurence E. Paul
By /s/ Carl H. Pforzheimer, III
------------------------------------------
Carl H. Pforzheimer, III
34