Quarterly Report (10-q)

Date : 05/10/2019 @ 7:11PM
Source : Edgar (US Regulatory)
Stock : Ampco Pittsburgh Corp (AP)
Quote : 3.8898  -0.0452 (-1.15%) @ 3:54PM
Ampco Pittsburgh share price Chart

Quarterly Report (10-q)

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number 1-898

 

AMPCO-PITTSBURGH CORPORATION

 

 

 

 

Pennsylvania

25-1117717

(State of

Incorporation)

(I.R.S. Employer

Identification No.)

726 Bell Avenue, Suite 301

Carnegie, Pennsylvania 15106

(Address of principal executive offices)

(412) 456-4400

(Registrant’s telephone number)

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 periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

 

 

Large accelerated filer

Accelerated filer

Emerging growth company

 

 

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $1 par value

AP

New York Stock Exchange

On May 3, 2019, 12,513,269 common shares were outstanding.

 

 

 

 


AMPCO-PITTSBURGH CORPORATION

INDEX

 

 

 

 

 

Page No.

Part I 

 

Financial Information:

 

 

 

 

 

 

 

 

 

 

 

Item 1 

 

Financial Statements (Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets – March 31, 2019 and December 31, 2018

 

3

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations – Three Months Ended March 31, 2019 and 2018

 

4

 

 

 

 

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) – Three Months Ended March 31, 2019 and 2018

 

 

5

 

 

 

 

Condensed Consolidated Statements of Shareholders’ Equity – Three Months Ended March 31, 2019 and 2018

 

6

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows – Three Months Ended March 31, 2019 and 2018

 

7

 

 

 

 

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

 

 

 

 

Item 2 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21

 

 

 

 

 

 

 

 

 

Item 3 

 

Quantitative and Qualitative Disclosures About Market Risk

 

25

 

 

 

 

 

 

 

 

 

Item 4 

 

Controls and Procedures

 

25

 

 

 

 

 

 

 

Part II 

 

Other Information:

 

 

 

 

 

 

 

 

 

Item 1

 

Legal Proceedings

 

26

 

 

 

 

 

 

 

 

 

Item 1A 

 

Risk Factors

 

26

 

 

 

 

 

 

 

 

 

Item 6 

 

Exhibits

 

26

 

 

 

 

 

 

 

Signatures

 

27

 

 

 

 

 

 

 

 

2


PART I – FINANC IAL INFORMATION

AMPCO-PITTSBURGH CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par value)

 

 

March 31,

2019

 

 

December 31,

2018

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

10,443

 

 

$

19,713

 

Receivables, less allowance for doubtful accounts of $1,028 in 2019 and $978 in 2018

 

 

86,557

 

 

 

69,448

 

Inventories

 

 

93,433

 

 

 

94,196

 

Insurance receivable – asbestos

 

 

17,000

 

 

 

17,000

 

Other current assets

 

 

6,085

 

 

 

7,271

 

Current assets of discontinued operations

 

 

17,754

 

 

 

20,238

 

Total current assets

 

 

231,272

 

 

 

227,866

 

Property, plant and equipment, net

 

 

173,492

 

 

 

185,661

 

Operating lease right-of-use assets

 

 

5,823

 

 

 

0

 

Insurance receivable – asbestos

 

 

133,093

 

 

 

135,508

 

Deferred income tax assets

 

 

2,934

 

 

 

3,188

 

Intangible assets, net

 

 

8,527

 

 

 

9,225

 

Investments in joint ventures

 

 

2,175

 

 

 

2,175

 

Other noncurrent assets

 

 

7,935

 

 

 

7,496

 

Total assets

 

$

565,251

 

 

$

571,119

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

45,807

 

 

$

38,900

 

Accrued payrolls and employee benefits

 

 

19,031

 

 

 

20,380

 

Debt – current portion

 

 

19,256

 

 

 

45,728

 

Operating lease liabilities – current portion

 

 

518

 

 

 

0

 

Asbestos liability – current portion

 

 

24,000

 

 

 

24,000

 

Other current liabilities

 

 

29,918

 

 

 

28,987

 

Current liabilities of discontinued operations

 

 

9,786

 

 

 

9,458

 

Total current liabilities

 

 

148,316

 

 

 

167,453

 

Employee benefit obligations

 

 

66,443

 

 

 

72,658

 

Asbestos liability

 

 

201,133

 

 

 

203,922

 

Deferred income tax liabilities

 

 

256

 

 

 

164

 

Long-term debt

 

 

58,061

 

 

 

31,881

 

Noncurrent operating lease liabilities

 

 

5,305

 

 

 

0

 

Other noncurrent liabilities

 

 

2,003

 

 

 

2,072

 

Total liabilities

 

 

481,517

 

 

 

478,150

 

Commitments and contingent liabilities (Note 9)

 

 

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock – par value $1; authorized 20,000 shares; issued and

   outstanding 12,513 shares in 2019 and 12,495 shares in 2018

 

 

12,513

 

 

 

12,495

 

Additional paid-in capital

 

 

155,283

 

 

 

154,889

 

Retained deficit

 

 

(45,503

)

 

 

(30,355

)

Accumulated other comprehensive loss

 

 

(44,421

)

 

 

(49,434

)

Total Ampco-Pittsburgh shareholders’ equity

 

 

77,872

 

 

 

87,595

 

Noncontrolling interest

 

 

5,862

 

 

 

5,374

 

Total shareholders’ equity

 

 

83,734

 

 

 

92,969

 

Total liabilities and shareholders’ equity

 

$

565,251

 

 

$

571,119

 

See Notes to Condensed Consolidated Financial Statements.

 

3


AMPCO-PITTSBURGH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share amounts)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net sales

 

$

107,494

 

 

$

106,415

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Costs of products sold (excluding depreciation and amortization)

 

 

90,221

 

 

 

87,653

 

Selling and administrative

 

 

13,885

 

 

 

14,856

 

Depreciation and amortization

 

 

5,259

 

 

 

5,600

 

Impairment charge

 

 

10,082

 

 

 

0

 

Loss on disposal of assets

 

 

6

 

 

 

83

 

Total operating expenses

 

 

119,453

 

 

 

108,192

 

Loss from continuing operations

 

 

(11,959

)

 

 

(1,777

)

Other income (expense):

 

 

 

 

 

 

 

 

Investment-related income

 

 

40

 

 

 

24

 

Interest expense

 

 

(1,285

)

 

 

(873

)

Other – net

 

 

1,296

 

 

 

3,621

 

 

 

 

51

 

 

 

2,772

 

(Loss) income from continuing operations before income taxes

 

 

(11,908

)

 

 

995

 

Income tax (provision) benefit

 

 

(643

)

 

 

463

 

Net (loss) income from continuing operations

 

 

(12,551

)

 

 

1,458

 

Loss from discontinued operations, net of tax

 

 

(2,242

)

 

 

(69

)

Net (loss) income

 

 

(14,793

)

 

 

1,389

 

Less: Net income attributable to noncontrolling interest

 

 

355

 

 

 

448

 

Net (loss) income attributable to Ampco-Pittsburgh

 

$

(15,148

)

 

$

941

 

 

 

 

 

 

 

 

 

 

Net (loss) income from continuing operations per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(1.00

)

 

$

0.12

 

Diluted

 

$

(1.00

)

 

$

0.12

 

 

 

 

 

 

 

 

 

 

Loss from discontinued operations, net of tax, per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(0.18

)

 

$

(0.01

)

Diluted

 

$

(0.18

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

Net (loss) income per common share attributable to Ampco-Pittsburgh:

 

 

 

 

 

 

 

 

Basic

 

$

(1.21

)

 

$

0.08

 

Diluted

 

$

(1.21

)

 

$

0.08

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

12,497

 

 

 

12,362

 

Diluted

 

 

12,497

 

 

 

12,379

 

 

See Notes to Condensed Consolidated Financial Statements.

 

4


AMPCO-PITTSBURGH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(UNAUDITED)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net (loss) income

 

$

(14,793

)

 

$

1,389

 

Other comprehensive income (loss), net of income tax where applicable:

 

 

 

 

 

 

 

 

Adjustments for changes in:

 

 

 

 

 

 

 

 

Foreign currency translation

 

 

449

 

 

 

2,498

 

Unrecognized employee benefit costs (including effects of foreign currency translation)

 

 

4,149

 

 

 

(413

)

Fair value of cash flow hedges

 

 

268

 

 

 

(315

)

Reclassification adjustments for items included in net (loss) income:

 

 

 

 

 

 

 

 

Amortization of unrecognized employee benefit costs

 

 

161

 

 

 

130

 

Realized losses (gains) from settlement of cash flow hedges

 

 

119

 

 

 

(209

)

Other comprehensive income

 

 

5,146

 

 

 

1,691

 

Comprehensive (loss) income

 

 

(9,647

)

 

 

3,080

 

Less: Comprehensive income attributable to noncontrolling interest

 

 

488

 

 

 

599

 

Comprehensive (loss) income attributable to Ampco-Pittsburgh

 

$

(10,135

)

 

$

2,481

 

 

See Notes to Condensed Consolidated Financial Statements.


5


AMPCO-PITTSBURGH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(UNAUDITED)

(in thousands)

 

 

 

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings (Deficit)

 

 

Accumulated

Other

Comprehensive

Loss

 

 

Noncontrolling

Interest

 

 

Total

 

Balance January 1, 2018

 

$

12,361

 

 

$

152,992

 

 

$

38,980

 

 

$

(45,392

)

 

$

2,820

 

 

$

161,761

 

Stock-based compensation

 

 

 

 

 

 

444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

444

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

941

 

 

 

 

 

 

 

448

 

 

 

1,389

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,540

 

 

 

151

 

 

 

1,691

 

Comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

599

 

 

 

3,080

 

Other

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

1

 

 

 

 

 

 

 

1

 

Balance March 31, 2018

 

$

12,362

 

 

$

153,435

 

 

$

39,921

 

 

$

(43,851

)

 

$

3,419

 

 

$

165,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance January 1, 2019

 

$

12,495

 

 

$

154,889

 

 

$

(30,355

)

 

$

(49,434

)

 

$

5,374

 

 

$

92,969

 

Stock-based compensation

 

 

 

 

 

 

340

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

340

 

Comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

 

 

 

 

 

 

 

 

 

(15,148

)

 

 

 

 

 

 

355

 

 

 

(14,793

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,013

 

 

 

133

 

 

 

5,146

 

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

488

 

 

 

(9,647

)

Issuance of common stock including excess tax

   benefits of $0

 

 

18

 

 

 

54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

72

 

Balance March 31, 2019

 

$

12,513

 

 

$

155,283

 

 

$

(45,503

)

 

$

(44,421

)

 

$

5,862

 

 

$

83,734

 

 

See Notes to Condensed Consolidated Financial Statements.

6


S

 

AMPCO-PITTSBURGH CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Net cash flows used in operating activities - continuing operations

 

$

(7,089

)

 

$

(9,600

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

 

(1,379

)

 

 

(1,453

)

Purchases of long-term marketable securities

 

 

(12

)

 

 

(89

)

Proceeds from sale of long-term marketable securities

 

 

80

 

 

 

128

 

Net cash flows used in investing activities - continuing operations

 

 

(1,311

)

 

 

(1,414

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Repayment of debt

 

 

(27,080

)

 

 

(178

)

Proceeds from Revolving Credit and Security Agreement

 

 

29,217

 

 

 

16,052

 

Payments on Revolving Credit and Security Agreement

 

 

(3,500

)

 

 

0

 

Funding of discontinued operations

 

 

573

 

 

 

(2,256

)

Net cash flows (used in) provided by financing activities - continuing operations

 

 

(790

)

 

 

13,618

 

 

 

 

 

 

 

 

 

 

Effect of exchange rate changes on cash and cash equivalents

 

 

(80

)

 

 

142

 

 

 

 

 

 

 

 

 

 

Cash flows from discontinued operations:

 

 

 

 

 

 

 

 

Net cash flows provided by (used in) operating activities - discontinued operations

 

 

108

 

 

 

(1,252

)

Net cash flows used in investing activities - discontinued operations

 

 

(264

)

 

 

(1,496

)

Net cash flows (used in) provided by financing activities - discontinued operations

 

 

(573

)

 

 

2,256

 

Net cash flows used in discontinued operations

 

 

(729

)

 

 

(492

)

 

 

 

 

 

 

 

 

 

Net (decrease) increase in cash and cash equivalents

 

 

(9,999

)

 

 

2,254

 

Cash and cash equivalents at beginning of period

 

 

20,837

 

 

 

20,700

 

Cash and cash equivalents at end of period

 

 

10,838

 

 

 

22,954

 

Less: cash and cash equivalents of discontinued operations

 

 

(395

)

 

 

(1,552

)

Cash and cash equivalents of continuing operations at end of period

 

$

10,443

 

 

$

21,402

 

 

 

 

 

 

 

 

 

 

Supplemental information:

 

 

 

 

 

 

 

 

Income tax payments

 

$

212

 

 

$

82

 

Interest payments

 

$

370

 

 

$

240

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment included in accounts payable

 

$

780

 

 

$

737

 

Finance lease right-of-use assets exchanged for lease liabilities

 

$

453

 

 

$

0

 

 

See Notes to Condensed Consolidated Financial Statements.

 

7


AMPCO-PITTSBURGH CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(in thousands, except share amounts)

1.

Unaudited Condensed Consolidated Financial Statements

The condensed consolidated balance sheet as of March 31, 2019, and the condensed consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the three months ended March 31, 2019, and 2018, have been prepared by Ampco-Pittsburgh Corporation (the “Corporation”) without audit. In the opinion of management, all adjustments, consisting of only normal and recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented, have been made. The results of operations for the three months ended March 31, 2019, are not necessarily indicative of the operating results expected for the full year.

In October 2018, the Board of Directors of the Corporation approved a plan to sell ASW Steel Inc. (“ASW”). See Note 2. Accordingly, the Corporation has presented the assets and liabilities of ASW as of March 31, 2019, and December 31, 2018, and its operating results and cash flows for the three months ended March 31, 2019, and 2018, as discontinued operations in the accompanying financial statements. All footnotes exclude balances and activity of ASW unless otherwise noted.

Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted.

Recently Implemented Accounting Pronouncements

In August 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-12, Derivatives and Hedging , which amends and simplifies existing guidance to allow companies to present more accurately the economic effects of risk management activities in the financial statements. The amended guidance became effective for the Corporation on January 1, 2019, and did not affect the Corporation’s financial position, operating results or liquidity.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) , which requires lessees to recognize a right-of-use (“ROU”) asset and lease liability for all leases other than those with a term less than one year and to disclose key information about certain leasing arrangements. The guidance became effective for the Corporation on January 1, 2019, and was applied on a modified retrospective basis (cumulative-effect adjustment to January 1, 2019 retained earnings). An operating lease ROU asset and operating lease liability equal to the present value of lease payments of $5,893 was recorded as of January 1, 2019. There was no cumulative-effect adjustment to the Corporation’s retained earnings as of January 1, 2019, since initial direct costs were insignificant. See Note 4 and Note 7, respectively, for the finance lease ROU assets recorded within Property, Plant and Equipment and the finance lease liabilities recorded within Debt as of March 31, 2019. ASU 2016-02 also provides an election for practical expedients which permit an entity not to reassess whether any expired or existing contracts contain leases, to carry forward the existing lease classification, and not to reassess initial direct costs associated with existing leases. The Corporation applied these practical expedients as part of its adoption. The new guidance did not affect the Corporation’s operating results or liquidity.

Recently Issued Accounting Pronouncements  

There have been no recently issued accounting pronouncements applicable to the Corporation.

2 .

Discontinued Operations and Disposition

In 2016, the Corporation purchased the stock of ASW, a specialty steel producer based in Canada. The acquisition supported the Corporation’s diversification efforts in the open-die forging market. Loss of significant U.S. business due to a combination of tariffs imposed by the United States on imports of primary steel and loss of a key customer as a result of a plant closure have resulted in significant losses for the Canadian operation. In October 2018, the Board of Directors of the Corporation approved a plan to sell ASW. While the Corporation will continue to service the open-die forged products market, it will not have a dedicated supply of required specialty steel through a back-end integration of ASW. Additionally, the Corporation will no longer manufacture and supply primary specialty steels to customers in the non-roll opened and closed die forgings and rebar markets and will exit the Canadian market.

Collectively, the sale of ASW represents a strategic shift that will have a major impact on the Corporation’s operations and financial results. As of December 31, 2018, the “asset held for sale” and “discontinued operations” criteria were met. Accordingly, as set forth in ASC 205, Presentation of Financial Statements , the assets and liabilities of ASW have been presented separately as assets and liabilities of discontinued operations in the accompanying condensed consolidated balance sheets as of March 31, 2019, and December 31, 2018. The assets and liabilities of ASW are classified as current because the Corporation expects to complete the sale in 2019. Additionally, the operating results and cash flows of ASW have been presented as discontinued operations, for the current and prior year period, in the accompanying condensed consolidated statements of operations and statements of cash flows. Previously, the operating results of ASW were included in the operating results of the Forged and Cast Engineered Products segment.

8


The assets and liabilities of ASW were as follows as of March 31, 201 9 , and December 3 1, 201 8 :

 

 

March 31,

2019

 

 

December 31,

2018

 

Cash and cash equivalents

 

$

395

 

 

$

1,124

 

Receivables

 

 

7,303

 

 

 

6,928

 

Inventories

 

 

11,780

 

 

 

13,764

 

Other assets

 

 

1,463

 

 

 

1,708

 

Property, plant and equipment, net

 

 

11,813

 

 

 

11,714

 

Estimated charge for impairment

 

 

(15,000

)

 

 

(15,000

)

Current assets of discontinued operations

 

$

17,754

 

 

$

20,238

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

9,123

 

 

$

8,890

 

Accrued payrolls and employee benefits

 

 

140

 

 

 

178

 

Other current liabilities

 

 

523

 

 

 

390

 

Current liabilities of discontinued operations

 

$

9,786

 

 

$

9,458

 

 

The following table presents the major classes of ASW’s line items constituting the “loss from discontinued operations, net of tax” in the condensed consolidated statements of operations for the three months ended March 31:

 

 

2019

 

 

2018

 

Net sales

 

$

15,045

 

 

$

22,334

 

Costs of products sold (excluding depreciation and amortization)

 

 

16,758

 

 

 

20,776

 

Selling and administrative

 

 

549

 

 

 

617

 

Depreciation and amortization

 

 

0

 

 

 

305

 

Gain on disposal of assets

 

 

0

 

 

 

(38

)

(Loss) income from discontinued operations

 

 

(2,262

)

 

 

674

 

Other income (expense)

 

 

20

 

 

 

(721

)

Loss from discontinued operations before income taxes

 

 

(2,242

)

 

 

(47

)

Income tax provision

 

 

0

 

 

 

(22

)

Loss from discontinued operations, net of tax

 

$

(2,242

)

 

$

(69

)

 

Net sales for the three months ended March 31, 2019, and 2018, include $3,138 and $13,672, respectively, of products sold by ASW to Union Electric Steel Corporation (“UES”), a subsidiary of the Corporation. Costs of products sold (excluding depreciation and amortization) approximated the same. In connection with the sale, the Corporation expects to enter into a long-term supply agreement for the supply of steel ingots.

Additionally, in March 2019, the Board of Directors of the Corporation approved a plan to sell certain assets of the Corporation’s Avonmore, Pennsylvania, cast roll manufacturing facility owned by Akers National Roll Company. In connection with the anticipated disposal, the Corporation recognized an impairment loss of $10,082 to record the assets to their estimated net realizable value. See Note 18.

3 .

Inventories

At March 31, 2019, and December 31, 2018, approximately 33% and 36%, respectively, of the inventories were valued on the LIFO method with the remaining inventories valued on the FIFO method. Inventories were comprised of the following:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Raw materials

 

$

20,813

 

 

$

19,615

 

Work-in-process

 

 

42,311

 

 

 

42,339

 

Finished goods

 

 

18,757

 

 

 

20,650

 

Supplies

 

 

11,552

 

 

 

11,592

 

Inventories

 

$

93,433

 

 

$

94,196

 

 

9


4 .

Property, Plant and Equipment

Property, plant and equipment were comprised of the following:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Land and land improvements

 

$

9,934

 

 

$

10,207

 

Buildings

 

 

62,113

 

 

 

65,425

 

Machinery and equipment

 

 

321,146

 

 

 

332,378

 

Construction-in-process

 

 

4,289

 

 

 

3,499

 

Other

 

 

6,811

 

 

 

6,813

 

 

 

 

404,293

 

 

 

418,322

 

Accumulated depreciation and amortization

 

 

(230,801

)

 

 

(232,661

)

Property, plant and equipment, net

 

$

173,492

 

 

$

185,661

 

 

The majority of the assets of the Corporation, except real property, is pledged as collateral for the Corporation’s Revolving Credit and Security Agreement (Note 7). Land and buildings of Union Electric Steel UK Limited (“UES-UK”), equal to approximately $2,733 (£2,098) at March 31, 2019, are held as collateral by the trustees of the UES-UK defined benefit pension plan (Note 8). The gross value of finance lease ROU assets and the related accumulated amortization as of March 31, 2019, approximated $3,687 and $967, respectively, and at December 31, 2018, approximated $3,716 and $1,340, respectively.

5 .

Intangible Assets

Intangible assets were comprised of the following:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Customer relationships

 

$

6,019

 

 

$

6,234

 

Developed technology

 

 

4,105

 

 

 

4,322

 

Trade name

 

 

2,371

 

 

 

2,497

 

 

 

 

12,495

 

 

 

13,053

 

Accumulated amortization

 

 

(3,968

)

 

 

(3,828

)

Intangible assets, net

 

$

8,527

 

 

$

9,225

 

The following summarizes changes in intangible assets:

 

Three Months Ended March 31,

 

 

2019

 

 

2018

 

Balance at beginning of period

$

9,225

 

 

$

11,021

 

Changes in intangible assets (Akers National Roll)

 

(292

)

 

 

0

 

Amortization of intangible assets

 

(298

)

 

 

(314

)

Other, primarily impact from changes in foreign currency exchange rates

 

(108

)

 

 

35

 

Balance at end of period

$

8,527

 

 

$

10,742

 

 

Changes during the three months ended March 31, 2019, represent an impairment charge on intangible assets of Akers National Roll Company.

6 .

Other Current Liabilities

Other current liabilities were comprised of the following:

 

 

 

March 31,

2019

 

 

December 31,

2018

 

Customer-related liabilities

 

$

15,462

 

 

$

16,439

 

Accrued interest payable

 

 

2,519

 

 

 

2,333

 

Accrued sales commissions

 

 

1,683

 

 

 

1,637

 

Other

 

 

10,254

 

 

 

8,578

 

Other current liabilities

 

$

29,918

 

 

$

28,987

 

10


 

Included in customer-related liabilities are costs expected to be incurred with respect to product warranties and customer deposits. The Corporation provides a limited warranty on its products, known as assurance type warranties, and may issue credit notes or replace products free of charge for valid claims. A warranty is considered an assurance type warranty if it provides the customer with assurance that the product will function as intended. Historically, warranty claims have been insignificant. The Corporation records a provision for product warranties at the time the underlying sale is recorded. The provision is based on historical experience as a percent of sales adjusted for potential claims when a liability is probable and for known claims.

 

Changes in the liability for product warranty claims consisted of the following:

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Balance at beginning of the period

 

$

9,447

 

 

$

11,379

 

Satisfaction of warranty claims

 

 

(1,469

)

 

 

(1,792

)

Provision for warranty claims

 

 

1,450

 

 

 

893

 

Other, primarily impact from changes in foreign currency

   exchange rates

 

 

(64

)

 

 

38

 

Balance at end of the period

 

$

9,364

 

 

$

10,518

 

 

Customer deposits represent amounts collected from, or invoiced to, a customer in advance of revenue recognition, and are recorded as an other current liability on the balance sheet. The liability for customer deposits is reversed when the Corporation satisfies its performance obligations and control of the inventory transfers to the customer, typically when title transfers. Performance obligations related to customer deposits are expected to be satisfied in less than one year.

 

Changes in customer deposits consisted of the following:

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Balance at beginning of the period

 

$

4,304

 

 

$

4,574

 

Satisfaction of performance obligations

 

 

(3,934

)

 

 

(2,512

)

Receipt of additional deposits

 

 

2,738

 

 

 

2,637

 

Other, primarily changes in foreign currency

   exchange rates

 

 

(77

)