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Notes
To Financial Statements:
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(1) Basic earnings
per share are based upon weighted average shares outstanding for
the period. Diluted earnings per share
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assume the conversion
of outstanding rights into common stock.
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(2) Common stock
outstanding at September 28, 2014 includes 3,030,943 of Class A
shares and 1,480,751 of Class B shares.
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(3) On July 23, 2013,
a Company subsidiary sold property located in Lancaster, PA. to the
Lancaster County Solid Waste
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Authority for $1.35
million. The book value plus expenses of sale was $76 thousand,
resulting in a book gain of $1.274
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million. Some, or
all, of the gain will be tax deferred as a 1033 Exchange
transaction for Federal and State tax matters.
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(4) On June 18, 2013
the Company recorded a non-recurring expense of $5 million as a
result of a new collective bargaining
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agreement at its
subsidiary, Bryan Steam LLC in Peru, Indiana. This
non-manufacturing charge was a result of an
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agreement to withdraw
from a multi-employer pension plan which had provided a defined
benefit for these union employees.
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This decision
resulted in what's called a "withdrawal liability expense" that
accounting rules require to be expensed
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immediately
regardless of benefit period covered or period over which the
liability is actually paid. In 2014, the final
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lump-sum payment to
the Boilermakers Trust was lower than estimated resulting in a
return to income of $451 thousand.
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(5) The 2013
Mark-to-Market adjustments were a result of changes (non-cash) in
the fair value of interest rate agreements.
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These agreements are
used to exchange the interest rate stream on variable rate debt for
payments indexed to a fixed
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interest rate. These
non-operational, non-cash charges reversed themselves over the term
of the agreements.
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(6) Accounting rules
require that the funded status of pension and other postretirement
benefits be recognized as a non-cash
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asset or liability,
as the case may be, on the balance sheet. For December 31, 2013 and
2012, projected benefit
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obligations exceeded
plan assets. The resulting non-cash presentation on the balance
sheet is reflected in "Deferred
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income taxes, "Other
postretirement liabilities", and "Accumulated other comprehensive
income (loss)", a non-cash
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sub-section of
"Stockholders' Equity" (See Note 10 of the 2013 Annual Report for
more details).
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(7) In the nine
months of 2014 and 2013, the Company made voluntary pre-tax
contributions of $2.1 million and $5.5 million,
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respectively, to its
defined benefit pension plan. These payments increased the trust
assets available for benefit payments
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reducing "Other
postretirement liabilities", and did not impact the Statement of
Operations.
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(8) Unaudited
results, forward looking statements, and certain significant
estimates and risks. This note has been
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expanded to include
items discussed in detail within the Annual Report.
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Unaudited Results
and Forward Looking Statements. The accompanying unaudited
financial statements contain all
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adjustments that are
necessary for a fair presentation of results for such periods and
are consistent with policies and
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procedures employed
in the audited year-end financial statements. These consolidated
financial statement should be
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read in conjunction
with the Annual Report for the period ended December 31, 2013.
Statements other than historical
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historical facts
included or referenced in this Report are forward-looking
statements subject to certain risks, trends, and
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uncertainties that
could cause actual results to differ materially from those
projected. We undertake no duty to update
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or revise these
forward-looking statements.
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Certain
Significant Estimates and Risks. Certain estimates are
determined using historical information along with
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assumptions about
future events. Changes in assumptions for such items as warranties,
pension assumptions, medical
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cost trends,
employment demographics and legal actions, as well as changes in
actual experience, could cause these
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estimates to change.
Specific risks, such as those included below, are discussed in the
Company's Quarterly and
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Annual Reports to
provide regular knowledge of relevant matters. Estimates and
related reserves are more fully
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explained in the 2013
Annual Report.
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Retirement
Plans: The Company maintains a non-contributory defined
benefit pension plan, covering both union and non-union employees,
that has been closed to new hires for a number of years.
Benefit accrual ceased in 2009, or earlier depending on the
employee group, with the exception of a limited, closed group of
union production employees. While not 100% frozen, these
actions were taken to protect benefits for retirees and eligible
employees, and have materially reduced the growth of the pension
liability. 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 (4).
Variables such as future market conditions, investment returns, and
employee experience could affect results.
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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.
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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.
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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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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 its available insurance
policies 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.
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Litigation
Expense, Settlements, and Defense: The 2014 nine-month charges
for all uninsured litigation of every kind, was $263 thousand. That
amount included two asbestos claims, while it is rare for an
asbestos suit to not 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 nine-months were
approximately $113 thousand. Prior year's settlements and
expenses, including amounts for self-insured asbestos cases, are
disclosed in the 2013 Annual Report.
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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.
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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.
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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 2013 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.
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