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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Consolidated
Statements of Cash Flows
|
|
Nine months ended
September
|
|
(in thousands and
data is unaudited (see Notes))
|
|
2013
|
|
2012
|
|
Net (loss)
gain
|
|
$
(451)
|
|
$
1,132
|
|
Gain on sale of
property (3)
|
|
(1,274)
|
|
-
|
|
Non-recurring expense
(4)
|
|
5,000
|
|
-
|
|
Depreciation and
amortization
|
|
3,448
|
|
3,450
|
|
Pension and
postretirement liabilities expense
|
|
1,243
|
|
1,026
|
|
Contributions to
pension trust (7)
|
|
(5,511)
|
|
(3,350)
|
|
Other net
adjustments
|
|
119
|
|
(1,117)
|
|
Changes in operating
assets and liabilities
|
|
(18,713)
|
|
(11,643)
|
|
NET CASH USED IN
OPERATING ACTIVITIES
|
|
(16,139)
|
|
(10,502)
|
|
Net cash used in the
purchase of assets
|
|
(3,373)
|
|
(1,604)
|
|
Proceeds from sale of
property, net (3)
|
|
1,302
|
|
-
|
|
Proceeds from
borrowings
|
|
21,000
|
|
15,000
|
|
Proceeds from stock
option exercise and Treasury shares issued
|
|
338
|
|
255
|
|
Principal payments on
debt and lease obligations
|
|
(12)
|
|
(86)
|
|
Dividends
paid
|
|
(2,708)
|
|
(2,428)
|
|
INCREASE IN
CASH AND CASH EQUIVALENTS
|
|
408
|
|
635
|
|
CASH AND CASH
EQUIVALENTS AT BEGINNING OF YEAR
|
|
4,740
|
|
4,489
|
|
CASH AND CASH
EQUIVALENTS AT END OF YEAR
|
|
$
5,148
|
|
$
5,124
|
|
|
|
|
|
|
|
Notes To Financial
Statements:
|
|
(1)
|
Basic earnings per
share are based upon weighted average shares outstanding for the
period. Diluted earnings per share assume
the conversion of outstanding rights into common
stock.
|
|
(2)
|
Common stock
outstanding at September 29, 2013 includes 3,011,833 of Class A
shares and 1,493,415 of Class B shares.
|
|
(3)
|
On July 23, 2013, a
Company subsidiary sold property located in Lancaster, PA. to the
Lancaster County Solid Waste Authority
for $1.35 million. The book value plus expenses of sale was $76
thousand, resulting in a book gain of $1.274 million. Some, or all, of the gain will be tax
deferred as a 1033 Exchange transaction for Federal and State tax
matters.
|
|
(4)
|
On June 18, 2013 the
Company incurred a non-recurring expense of $5 million as a result
of a new union agreement at its
subsidiary, Bryan Steam LLC in Peru, Indiana (previously announced
on June 19th). This one-time, non-operational charge is a result of an
agreement to withdraw from a multi-employer pension plan which had
provided a defined benefit for these
union employees. This decision results in what's called a
"withdrawal liability expense" that accounting rules require to be expensed immediately regardless of
benefit period covered or period over which the liability is
actually paid.
|
|
(5)
|
Mark-to-Market
adjustments are a result of changes (non-cash) in the fair value of
interest rate agreements. These agreements are used to exchange the interest rate
stream on variable rate debt for payments indexed to a fixed
interest rate. These non-operational,
non-cash charges reverse themselves over the term of the
agreements.
|
|
(6)
|
Accounting rules
require that the funded status of pension and other postretirement
benefits be recognized as a non-cash asset or liability, as the case may be, on the
balance sheet. For December 31, 2012 and 2011, projected benefit
obligations exceeded plan assets. The
resulting non-cash presentation on the balance sheet is reflected
in "Deferred income taxes, "Other
postretirement liabilities", and "Accumulated other comprehensive
income (loss)", a non-cash sub-section of
"Stockholders' Equity" (See Note 10 of the 2012 Annual Report for
more details).
|
|
(7)
|
In the nine months of
2013 and 2012, the Company made voluntary pre-tax contributions of
$5.5 million and $3.35 million, respectively to its defined benefit pension plan.
These payments increased the trust assets available for benefit
payments (reducing "Other postretirement
liabilities"), and did not impact the Statement of
Operations.
|
|
(8)
|
Interim periods,
forward looking statements, and certain significant estimates and
risks. This note has been expanded to
include items discussed in detail within the Annual
Report.
|
|
|
|
|
|
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|
Interim Periods
and Forward Looking Statements. The accompanying unaudited
financial statements contain all adjustments that are necessary for a fair
presentation of the interim results, and these adjustments are
applied consistently for the
periods covered. The results
for any interim period are not necessarily indicative of results
for the full year. These consolidated financial statements
should be read in conjunction with the Annual Report for the
period ended December 31,
2012. Statements other than
historical facts included or referenced in this Report are
forward-looking statements subject
to certain risks, trends and uncertainties that could cause actual
results to differ materially from
those projected. We
undertake no duty to update or revise these forward-looking
statements.
|
|
|
|
|
|
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|
Certain
Significant Estimates and Risks. Certain estimates are determined using
historical information along with assumptions about future events. Changes in assumptions for such items
as warranties, pension assumptions, medical cost trends, employment demographics and legal
actions, as well as changes in actual experience, could cause
these estimates to
change. Specific risks, such
as those included below, are discussed in the Company's Quarterly
and Annual Reports to provide
regular knowledge of relevant matters. Estimates and related reserves are more
fully explained in the 2012 Annual
Report.
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|
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|
Retirement
Plans: The Company maintains a non-contributory defined benefit
pension plan covering substantially all employees. Steps have been
taken over the past years to protect benefits for retirees and
eligible employees. Lancaster Metal Manufacturing, a Company
subsidiary, also contributes to a separate union-sponsored
multiemployer-defined benefit pension plan that covers its
collective bargaining employees (Bryan Steam, LLC had a similar
plan but has withdrawn from the plan as noted in Note 3). Variables
such as future market conditions, investment returns, and employee
experience could affect results.
|
|
|
|
Medical Health
Coverage: The Company and its subsidiaries are
self-insured for most of the medical health insurance provided for
its employees, limiting maximum exposure per occurrence by
purchasing third-party stop-loss coverage.
|
|
|
|
Retiree Health
Benefits: The Company
pays a fixed annual amount that assists a specific group of
retirees in purchasing medical and/or prescription drug coverage
from providers. Additionally, certain employees electing early
retirement have the option of receiving access to an insured
defined benefit plan at a yearly stipulated cost or receiving a
fixed dollar amount to assist them in covering medical costs.
|
|
|
|
Insurance: The Company and its
subsidiaries maintain insurance to cover product liability, general
liability, workers' compensation, and property damage. Well-known
and reputable insurance carriers provide current coverage. All
policies and corresponding deductible levels are reviewed on an
annual basis. Third-party administrators, approved by the Company
and the insurance carriers, handle claims and attempt to resolve
them to the benefit of both the Company and its insurance carriers.
The Company reviews claims periodically in conjunction with
administrators and adjusts recorded reserves as required.
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|
|
|
Warranty
Litigation, Class Action: In 2010, two of the Company's
subsidiaries were served with a class action lawsuit related
generally to boiler products manufactured and sold by a predecessor
to one of the Company's subsidiaries more than 10 years ago. This
matter has now been discontinued as a class action and the
litigation has been resolved.
|
|
|
|
General
Litigation, including Asbestos: In the normal course of
business, certain subsidiaries of the Company have been named, and
may in the future be named, as defendants in various legal actions
including claims related to property damage and/or personal injury
allegedly arising from products of the Company's subsidiaries or
their predecessors. A number of these claims allege personal injury
arising from exposure to asbestos-containing material allegedly
contained in certain boilers manufactured many years ago, or
through the installation of heating systems. The Company's
subsidiaries, directly or through insurance providers, are
vigorously defending all open asbestos cases, many of which involve
multiple claimants and many defendants, which may not be resolved
for several years. Asbestos litigation is a national issue with
thousands of companies defending claims. While the large majority
of claims have historically been resolved prior to the completion
of trial, from time to time some claims may be expected to proceed
to a potentially substantial verdict against subsidiaries of the
Company. Any such verdict would be subject to appeal, any set-off
rights and/or issues involving allocation of liability among
various defendants. For example, on July 23, 2013, a New York City
State Court jury found numerous defendant companies, including a
subsidiary of the Company, responsible for asbestos-related damages
in cases involving multiple plaintiffs. The subsidiary, whose share
of the verdict amounted to $42 million before offsets, has filed
post trial motions seeking to overturn the verdict, granting of a
new trial, and/or reduction of the verdict. The Company believes,
based upon its understanding of the insurance policies available
and discussions with legal counsel, that all pending legal actions
and claims, including asbestos, should ultimately be resolved
(whether through settlements or verdicts) within existing insurance
limits and reserves, or for amounts not material to the Company's
financial position or results of operations. However, the
resolution of litigation generally entails significant
uncertainties, and no assurance can be given as to the ultimate
outcome of litigation or its impact on the Company and its
subsidiaries. Furthermore, the Company cannot predict the extent to
which new claims will be filed in the future, although the Company
currently believes that the great preponderance of future asbestos
claims will be covered by existing insurance. There can be no
assurance that insurers will be financially able to satisfy all
pending and future claims in accordance with the applicable
insurance policies, or that any disputes regarding policy
provisions will be resolved in favor of the Company.
|
|
|
|
Litigation
Expense, Settlements, and Defense: The 2013 six-month
charges for all uninsured litigation of every kind, was $103
thousand. That amount included two asbestos claims, while it is
rare for an asbestos suit not to be covered by insurance, a few
such claims exist, depending on the alleged time period of asbestos
exposure. Expenses for legal counsel, consultants, etc., in
defending these various actions and claims for the current six
months were $117 thousand. Prior year's settlements and expenses
are disclosed in the 2012 Annual Report.
|
|
|
|
Permitting
Activities (excluding environmental): The Company's
subsidiaries are engaged in various matters with respect to
obtaining, amending or renewing permits required under various laws
and associated regulations in order to operate each of its
manufacturing facilities. Based on the information presently
available, management believes it has all necessary permits and
expects that all permit applications currently pending will be
routinely handled and approved.
|
|
|
|
Environmental
Matters: The operations of the Company's subsidiaries are
subject to a variety of Federal, State, and local environmental
laws. Among other things, these laws require the Company's
subsidiaries to obtain and comply with the terms of a number of
Federal, State and local environmental regulations and permits,
including permits governing air emissions, wastewater discharges,
and waste disposal. The Company's subsidiaries periodically need to
apply for new permits or to renew or amend existing permits in
connection with ongoing or modified operations. In addition, the
Company generally tracks and tries to anticipate any changes in
environmental laws that might relate to its ongoing operations. The
Company believes its subsidiaries are in material compliance with
all environmental laws and permits.
|
|
As with all
manufacturing operations in the United States, the Company's
subsidiaries can potentially be responsible for response actions at
disposal areas containing waste materials from their operations. In
the past five years, the Company has not received any notice that
it or its subsidiaries might be responsible for remedial clean-up
actions under government supervision. However, two pre-2008 issues
covered by insurance policies remain open as of this date and are
fully disclosed in the year-end 2012 Annual Report. While it is not
possible to be certain whether or how any new or old matters will
proceed, the Company does not presently have reason to anticipate
incurring material costs in connection with any matters.
|
|