UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
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
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Pennsylvania |
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25-1117717 |
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(State of Incorporation) |
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(I.R.S. Employer Identification No.) |
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726 Bell Avenue, Suite 301 Carnegie, Pennsylvania 15106 (Address of principal executive offices) (412) 456-4400 (Registrant’s telephone number)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Common Stock, $1 par value |
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New York Stock Exchange
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Series A Warrants to purchase shares of Common Stock |
AP WS |
NYSE American |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No ✓
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No ✓
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 ✓ 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 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, a 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.
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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✓ |
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Emerging growth company |
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ✓
The aggregate market value of the voting stock of Ampco-Pittsburgh Corporation held by non-affiliates on June 30, 2020 (based upon the closing price of the Registrant’s Common Stock on the New York Stock Exchange on that date) was approximately $16 million.
As of March 19, 2021, 18,847,828 common shares were outstanding.
Documents Incorporated by Reference: Part III of this report incorporates by reference certain information from the Proxy Statement for the 2021 Annual Meeting of Shareholders.
TABLE OF CONTENTS
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FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by us or on our behalf. Management’s Discussion and Analysis of Financial Condition and Results of Operation and other sections of this Annual Report on Form 10-K, as well as the consolidated financial statements and notes hereto, may include, but are not limited to, statements about operating performance, trends, events that we expect or anticipate will occur in the future, statements about sales and production levels, restructurings, the impact from global pandemics (including COVID-19), profitability and anticipated expenses, future proceeds from the exercise of outstanding warrants, and cash outflows. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward-looking statements” within the meaning of the Act and words such as “may,” “will”, “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “forecast” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For us, these risks and uncertainties include, but are not limited to:
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cyclical demand for products and economic downturns; |
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excess global capacity in the steel industry; |
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fluctuations of the value of the U.S. dollar relative to other currencies; |
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increases in commodity prices or shortages of key production materials; |
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consequences of global pandemics (including COVID-19); |
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changes in the existing regulatory environment; |
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new trade restrictions and regulatory burdens associated with “Brexit”; |
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inability to successfully restructure our operations; |
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limitations in availability of capital to fund our operations and strategic plan; |
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inoperability of certain equipment on which we rely; |
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work stoppage or another industrial action on the part of any of our unions; |
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liability of our subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our subsidiaries; |
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inability to satisfy the continued listing requirements of the New York Stock Exchange or NYSE American; |
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failure to maintain an effective system of internal controls; |
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potential attacks on information technology infrastructure and other cyber-based business disruptions; and |
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those discussed more fully elsewhere in this report, particularly in Item 1A, Risk Factors, in Part I of this Annual Report on Form 10-K. |
We cannot guarantee any future results, levels of activity, performance or achievements. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
GENERAL DEVELOPMENT OF BUSINESS
Ampco-Pittsburgh Corporation (the “Corporation”) was incorporated in Pennsylvania in 1929. The Corporation, individually or together with its consolidated subsidiaries, is also referred to herein as the “Registrant.” The Corporation manufactures and sells highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments, the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates the financial performance and makes resource allocation and strategic decisions about the business.
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On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus (“COVID-19”), and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, provided guidance identifying the Corporation’s domestic businesses as critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such order. Despite the designation, the Corporation has had to periodically and temporarily idle certain operations of its FCEP segment and, consequently, furlough certain of its employees in response to market conditions. To date, the Air and Liquid Processing segment has successfully mitigated the negative impact on sales and operating income resulting from the pandemic.
Also, in 2020, the Corporation completed an equity rights offering for shares of its common stock and Series A warrants to existing shareholders for net proceeds of $18.1 million. A majority of the proceeds from the equity rights offering was used to repay borrowings under the Corporation’s revolving credit facility.
NARRATIVE DESCRIPTION OF BUSINESS
Forged and Cast Engineered Products Segment
The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products. Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products (“FEP”) are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, Slovenia, and an equity interest in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
Union Electric Steel Corporation produces forged hardened steel rolls and open-die forged products. It is headquartered in Carnegie, Pennsylvania, with three manufacturing facilities in Pennsylvania and one in Indiana. The following entities are direct or indirect operating subsidiaries of Union Electric Steel Corporation:
Union Electric Steel UK Limited produces cast rolls in a variety of iron and steel qualities for hot and cold strip mills, medium/heavy section mills and plate mills. It is located in Gateshead, England.
Åkers Sweden AB produces cast rolls in a variety of iron and steel qualities for hot strip finishing mills, roughing mills, plate mills and medium/heavy section mills. It is located in Åkers Styckebruk, Sweden.
Åkers Valji Ravne d.o.o. produces forged rolls for cluster mills and Z-Hi mills, work rolls for narrow and wide strip and aluminum mills, back-up rolls for narrow strip mills, and leveling rolls and shafts. It is located in Ravne, Slovenia.
Alloys Unlimited Processing, LLC is a distributor of tool steels and alloys and carbon round bar. It is located in Austintown, Ohio.
The segment’s three joint venture companies in China include:
Shanxi Åkers TISCO Roll Co. Ltd. is a joint venture between Taiyuan Iron and Steel Co Ltd. and Åkers AB, a non-operating subsidiary of Union Electric Steel Corporation, that produces cast rolls for hot strip mills, steckel mills and medium plate mills. It is located in Taiyuan, Shanxi Province, China. Åkers AB holds a 59.88% interest in the joint venture.
Masteel Gongchang Roll Co., Ltd. is a joint venture among Union Electric Steel Corporation, Magang (Group) Holding Co., Ltd. and Jiangsu Gongchang Roll Joint-Stock Co., Ltd. that produces large forged backup rolls for hot and cold strip mills. It is located in Maanshan, Anhui Province, China. Union Electric Steel (Hong Kong) Limited, a non-operating subsidiary of Union Electric Steel Corporation, holds a 33% interest in the joint venture.
Jiangsu Gongchang Roll Joint-Stock Co., Ltd. is a joint venture that produces cast rolls for hot and cold strip mills, medium/heavy section mills and plate mills. It is located in Xinjian Town Yixing City, Jiangsu Province, China. Union Electric Steel UK Limited holds a 24.03% interest in the joint venture.
Air and Liquid Processing Segment
The Air and Liquid Processing segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. It distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada and has several major competitors.
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Aerofin Division of Air & Liquid Systems Corporation produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing, and is located in Lynchburg, Virginia.
Buffalo Air Handling Division of Air & Liquid Systems Corporation produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets, and is located in Amherst, Virginia.
Buffalo Pumps Division of Air & Liquid Systems Corporation manufactures centrifugal pumps for the fossil fueled power generation, marine defense and industrial refrigeration industries, and is located in North Tonawanda, New York.
Products
In both segments, the products are dependent on engineering, principally custom designed, and are sold to sophisticated commercial and industrial users located throughout the world. Products are delivered directly to the customer via third-party carriers or customer-arranged transportation. For additional information on the products produced and financial information about each segment, see Note 17, Revenue, and Note 24, Business Segments, to the Consolidated Financial Statements.
Raw Materials
Raw materials used in both segments are generally available from many sources and neither segment is dependent upon any single supplier for any raw material. Substantial volumes of raw materials used by each segment are subject to significant variations in price. The Corporation’s subsidiaries generally do not purchase or commit for the purchase of a major portion of raw materials significantly in advance of the time they require such materials but do make forward commitments for certain commodities (copper and aluminum). See Note 15, Derivative Instruments, to the Consolidated Financial Statements
Patents and Trademarks
While the Corporation and its subsidiaries hold certain patents, trademarks and licenses, in the opinion of the Corporation, they are not material to either segment.
Backlog
The backlog of orders at December 31, 2020, was approximately $246 million compared to a backlog of $321 million at year-end 2019. The reduction in backlog is attributable to the FCEP segment due to customers postponing order placement given the uncertainty surrounding the COVID-19 pandemic and several of the FCEP segment’s largest customers adjusting their ordering patterns. The reduction is not a reflection of any loss of market share. Approximately 8% of the backlog is expected to be released after 2021.
Competition
The Corporation faces considerable competition from a large number of companies in both segments. The Corporation believes, however, that its subsidiaries are significant participants in each of the niche markets that they serve. Competition in both segments is based on quality, service, price, and delivery.
Environmental Protection Compliance Costs
Expenditures for environmental control matters were not material to either segment in 2020 and are not expected to be material in 2021.
Employees and Human Capital Management
Employees
On December 31, 2020, the Corporation and its subsidiaries had 1,533 active employees worldwide, of which approximately 50% are employed in the United States and approximately 50% are outside the United States. Approximately one-third of the Corporation’s employees are covered by collective bargaining agreements or works councils.
Oversight
The Compensation Committee of the Board of Directors maintains oversight of the Corporation’s human capital management strategies that it may deem important to the long-term sustainability of the Corporation.
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Key Areas of Focus for the Corporation
Health and Safety – The Corporation’s health and safety program is designed around the regulations associated with the specific hazards and unique working environments of the Corporation’s manufacturing and headquarter operations. The Corporation requires all of its locations to perform regular safety audits to ensure compliance with the safety program. Leading indicators, such as reporting and training of all near-miss events, are used to identify risks for potential future incidents. Lagging indicators, such as OSHA recordable rates and lost time incidence rates, are used to measure achievement of safety metrics, both of which statistically improved in 2020 over 2019.
Diversity and Inclusion – The Corporation tracks various metrics such as turnover, absenteeism and diversity. The Corporation has developed strategies to ensure that employees of diverse backgrounds and perspectives enjoy a culture of mutual respect, inclusiveness and teamwork in an environment which values diversity.
AVAILABLE INFORMATION
The Corporation files annual, quarterly and current reports; amendments to those reports; proxy statements and other information with the Securities and Exchange Commission (“SEC”). You may access and read the Corporation’s filings without charge through the SEC’s website at www.sec.gov.
The Corporation’s internet address is www.ampcopittsburgh.com. The Corporation makes available, free of charge on its internet website, access to these reports as soon as reasonably practicable after such material is filed with, or furnished to, the SEC. The information on the Corporation’s website is not part of this Annual Report on Form 10-K.
EXECUTIVE OFFICERS
The name, age, position with the Corporation, and business experience for at least the past five years of the Executive Officers(1) of the Corporation are as follows:
J. Brett McBrayer (age 55). Mr. McBrayer has served as the Corporation’s Chief Executive Officer since July 2018. He previously served as President and Chief Executive Officer at Airtex Products and ASC Industries, a global manufacturer and distributor of automotive aftermarket and OEM fuel and water pumps, from 2012 to 2017. Airtex Products and ASC Industries, together with its parent company, UCI International LLC, and affiliated companies filed for bankruptcy protection in June 2016, successfully emerging in December 2016. Mr. McBrayer also served as Vice President and General Manager of the Alcan Cable business at Rio Tinto Alcan, as Vice President and General Manager of the Specialty Metals Division at Precision Cast Parts Corporation, and held positions of various responsibility and leadership during his 20 years with Alcoa, Inc. Mr. McBrayer received a Bachelor of Science in Industrial Engineering from the University of Tennessee and a Master of Arts in Applied Behavioral Science from Bastyr University.
Rose Hoover (age 65). Ms. Hoover has been employed by the Corporation for more than forty years. She has served as President and Chief Administrative Officer of the Corporation since August 2015.
Michael G. McAuley (age 57). Mr. McAuley has served as Senior Vice President, Chief Financial Officer and Treasurer of the Corporation since March 2018 and as Vice President, Chief Financial Officer and Treasurer since April 2016. Previously, he served as Senior Vice President and Chief Financial Officer of RTI International Metals, Inc., a producer of titanium mill products and fabricated metal components, from July 2014 to October 2015.
Samuel C. Lyon (age 52). Mr. Lyon has served as President of Union Electric Steel Corporation since February 2019. He previously served as Vice President and Group President of Performance Engineered Products at Carpenter Technology Corporation, a developer, manufacturer and distributor of stainless steels and corrosion-resistant alloys, from July 2017 to January 2019. Prior to that, he served as Vice President and General Manager of Dynamet Incorporated, the titanium business unit of Carpenter Technology, from October 2016 to June 2017, and as Chief Operating Officer of UCI-Pumps business of UCI-Fram, an OEM and after-market automotive parts supplier, from March 2013 to September 2016.
Terrence W. Kenny (age 61). Mr. Kenny has been employed by the Corporation for more than thirty-five years. He has served as President of the Air & Liquid Systems Corporation for more than ten years.
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Officers serve at the discretion of the Board of Directors of the Corporation and none of the listed individuals serves as a director of another public company. |
Our business, results of operations and financial condition, and investment in our securities are subject to a number of risks. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties we face. Our business is also subject to general risks and uncertainties that affect many other companies, including overall economic and industry conditions. The COVID-19 pandemic has led to general uncertainty and adverse changes in global economic conditions and has heightened, and in some cases manifested, certain of the risks we normally face in operating our business, including those
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disclosed herein. Additional risks and uncertainties not currently known to us or that we currently believe are not material also may impair our business, consolidated financial condition, results of operations, and the value of any investment in our securities.
Risks Related to Our Business and Industry
Cyclical demand for products and economic downturns could reduce the demand for, and sales of, our products, which could adversely affect our margins and profitability.
A significant portion of the FCEP segment’s sales consists of mill rolls to customers in the global steel and aluminum industry that can be periodically impacted by economic or cyclical downturns. Such downturns, the timing and length of which are difficult to predict, may reduce the demand for, and sales of, our forged and cast rolls both in the United States and the rest of the world. Lower demand for rolls may also adversely impact profitability as other competing roll producers lower selling prices in the marketplace in order to fill their manufacturing capacity. Cancellation of orders or deferral of delivery of rolls may occur and produce an adverse impact on financial results. In addition, sales of non-roll product, specifically open-die forged product for the oil and gas industry, are impacted by fluctuations in global energy prices.
Excess global capacity in the steel industry could lower prices for our products, which could adversely affect our sales, margins and profitability, as well as collectability of receivables and salability of in-process inventory.
The global steel manufacturing capacity continues to exceed global consumption of steel products. Such excess capacity often results in manufacturers in certain countries exporting steel at prices significantly below their home market prices (often due to local government assistance or subsidies), which leads to global market destabilization and reduced sales and profitability of some of our and our subsidiaries’ customers, which, in turn, affects our sales and profit margins, as well as collectability of receivables and salability of in-process inventory.
A reduction in the level of export sales, as well as other economic factors in foreign countries, could have an adverse impact on our financial results.
Exports are a significant proportion of our subsidiaries’ sales. Historically, changes in foreign exchange rates, particularly in respect of the U.S. dollar, British pound, Swedish krona and the euro, have impacted the export of our products and may do so again in the future. Other factors that may adversely impact export sales and operating results include political and economic instability, export controls, changes in tax laws and tariffs, and new indigenous producers in overseas markets. A reduction in the level of export sales may have an adverse impact on our financial results. In addition, changes in foreign currency exchange rates may provide foreign roll suppliers with advantages based on those lower foreign currency exchange rates and, therefore, permit them to compete in our home markets.
Fluctuation of the value of the U.S. dollar relative to other currencies could adversely affect our business, results of operations and financial condition.
Certain of our subsidiaries operate in foreign jurisdictions and, accordingly, earn revenues, pay expenses, own assets and incur liabilities in countries using currencies other than the U.S. dollar. Since our consolidated financial statements are presented in U.S. dollars, we must translate revenues and expenses into U.S. dollars at the average exchange rate during each reporting period, and assets and liabilities into U.S. dollars at the exchange rate in effect at the end of each reporting period. Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect the translated value for revenue, expenses and balance sheet items denominated in foreign currencies and could materially affect our financial results expressed in U.S. dollars.
Commodity price increases, as well as any reductions in electricity, gas supply or shortage of key production materials, could adversely impact our production, which could result in lower profitability or higher losses.
Our subsidiaries use certain commodities in the manufacture of their products. These include steel scrap, ferroalloys, energy and graphite electrodes. Any unexpected, sudden or prolonged price increase may cause a reduction in profit margins or losses where fixed-priced contracts have been accepted or increases cannot be obtained in future selling prices. In addition, there may be curtailment in electricity or gas supply which could adversely impact production. Shortage of critical materials, while driving up costs, may be of such severity as to disrupt production, all of which may impact sales and profitability. The global supply shortage of graphite electrodes used for electric arc furnace melting of our steels could materially impact results of operations should we be unable to secure sufficient supply for our production requirements.
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A work stoppage or another industrial action on the part of any of our unions could be disruptive to our operations.
Our subsidiaries have several key operations which are subject to multi-year collective bargaining agreements with their hourly work forces. While we believe we have good relations with our unions, there is the risk of industrial action or work stoppage at the expiration of an agreement if contract negotiations break down, which may disrupt manufacturing and impact results of operations.
Dependence on certain equipment may cause an interruption in our production if such equipment is out of operation for an extended period of time, which could result in lower sales and profitability.
Our subsidiaries’ principal business relies on certain unique equipment such as an electric arc furnace and a spin cast work roll machine. Although a comprehensive critical spare inventory of key components for this equipment is maintained, if any such unique equipment is out of operation for an extended period, it may result in a significant reduction in our sales and earnings.
The ultimate liability of our subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our subsidiaries could have a material adverse effect on our financial condition or liquidity in the future.
Our subsidiaries, and in some cases, we, are defendants in numerous claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our subsidiaries. Through the current year end, our insurance has covered a substantial majority of our settlement and defense costs. We believe that the estimated costs net of anticipated insurance recoveries of our pending and future asbestos legal proceedings should not have a material adverse effect on our financial condition or liquidity. However, there can be no assurance that our subsidiaries or we will not be subject to significant additional claims in the future or that our subsidiaries’ ultimate liability with respect to asbestos claims will not present significantly greater and longer lasting financial exposure than provided in our financial statements. The ultimate net liability with respect to such pending and any unasserted claims is subject to various uncertainties, including the following:
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the number of claims in the future; |
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the costs of defending and settling these claims; |
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insolvencies among our insurance carriers and the risk of future insolvencies; |
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the possibility that adverse jury verdicts could require damage payments in amounts greater than the amounts for which we have historically settled claims; |
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possible changes in the litigation environment or federal and state law governing the compensation of asbestos claimants; and |
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the risk that the bankruptcies of other asbestos defendants may increase our costs. |
Because of the uncertainties related to such claims, it is possible that the ultimate liability could have a material adverse effect on our financial condition or liquidity in the future.
A change in the existing regulatory environment could negatively affect our operations and financial performance.
We are subject to a wide variety of complex domestic and foreign laws, rules and regulations, including trade policies and tax regimes. We are affected by new laws and regulations, and changes to existing laws and regulations, including interpretations by courts and regulators, whether prompted by changes in government administrations or otherwise. These laws, regulations and policies, and changes thereto, may result in restrictions or limitations to our current operational practices and processes and product/service offerings which could negatively impact our current cost structure, revenue streams, future tax obligations, the value of our deferred income tax assets, cash flows, and overall financial position.
In 2018, the United States imposed tariffs of 25% on primary steel imports and 10% on primary aluminum imports into the United States. As consumers of steel and aluminum in some of our products, our cost base is exposed to the impact of this action, or similar actions, on our margins, and we could potentially lose market share to foreign competitors not subject to similar tariffs increases. Our financial condition, results of operations and cash flows may continue to be affected by these tariffs, or similar actions. Moreover, these new tariffs, or other changes in U.S. trade policy, have resulted in, and may continue to trigger, retaliatory actions by affected countries which could adversely impact demand for our products, as well as impact our costs, customers, suppliers and/or the U.S. economy or certain sectors thereof and, thus, may adversely impact our business.
New trade restrictions and regulatory burdens associated with “Brexit” could adversely impact our operations and financial performance.
On June 23, 2016, voters in the United Kingdom (the “U.K.”) approved a referendum to exit from the European Union (the “E.U.”), commonly known as “Brexit.” The U.K left the E.U. on January 31, 2020. The E.U. and the U.K. agreed upon the terms of an agreement which sets out the terms of the U.K.’s withdrawal from the E.U. and includes a transitional period. The transitional period
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ended December 31, 2020, without the U.K. entering into trade agreements with several of its primary trading partners, including the E.U. Since trade between the E.U. and U.K. may be subject to tariffs and other restrictions, the effects of Brexit may from time to time cause volatility in the global stock markets, currency exchange rate fluctuations, effects on cross border trade and labor, and political and regulatory uncertainty in the U.K. and across Europe generally. Given the lack of comparable precedent, it is unclear what financial, trade and legal implications of the U.K. leaving the E.U. with no trade agreements in place would have in the near- and long-term and how such withdrawal would affect our financial condition, results of operations and cash flows.
We may not be able to achieve expected benefits of restructuring our operations or consummating future divestitures of operations which become non-core to our portfolio.
We may, from time to time, divest businesses that become less of a strategic fit within our core portfolio or restructure operations to improve our operating results. Our profitability may be impacted by gains or losses on the sale or restructuring of such businesses and our level of expected cost savings from restructuring actions may not materialize. Additionally, we may be required to record asset impairment or restructuring charges related to these businesses and may in the future become responsible for liabilities which materialize post-divestiture. These issues may adversely impact our financial position, liquidity and results of operations.
We could face limitations in availability of capital to fund our strategic plans, including plant and equipment modernization. Additionally, deterioration in our credit profile or increases in interest rates could increase our costs of borrowing and further limit our access to the capital markets and commercial credit.
We are parties to a Revolving Credit and Security Agreement (as amended, the “Credit Agreement”), a senior secured asset-based revolving credit facility collateralized by a first priority perfected security interest in substantially all of our assets. The Credit Agreement provides for borrowings not to exceed $92.5 million but restricts us from incurring additional indebtedness outside of the Credit Agreement, unless otherwise approved by the banks. The Credit Agreement is subject to various affirmative and negative covenants and contains various sub-limits, including those based on type of collateral and borrowings by geographic region. If the financial covenants become difficult to meet or if our borrowing needs increase beyond the prescribed limits, our results of operations and liquidity may be materially adversely affected. In addition, changes in our credit profile could cause less favorable commercial terms for the procurement of materials required to manufacture our products, which also could have a negative impact on our results of operations and liquidity. Further, our access to public debt markets is limited based on our size, credit profile and not being a well-known seasoned issuer, which may result in limitations in availability of capital to fund our strategic plans including plant and equipment modernization.
We have significant international operations and sales, and face risks related to global health epidemics such as the coronavirus.
Outbreaks of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse effect on our business, financial condition and results of operations. For example, the outbreak of a novel strain of coronavirus resulted in significant local governmental measures being implemented to control the spread of the virus, including restrictions on manufacturing and the movement of employees in many regions of the country. The coronavirus has had a significant impact on our business and our financial results and recovery depends on future developments, which remain highly uncertain. Future pandemics may result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn, and also adversely impacting our sales and results of operations.
The COVID-19 pandemic has caused disruptions in manufacturing industries.
The COVID-19 pandemic has significantly increased economic and demand uncertainty and could cause a sustained global recession. It has impacted, and may continue to have a prolonged and severe impact on, our results of operations, financial condition and cash flows. While the U.S. Department of Homeland Security guidance has identified our domestic businesses as critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, we have had to periodically and temporarily idled certain operations of our FCEP segment and, consequently, furloughed certain of our employees in response to market conditions. Additionally, the FCEP segment has experienced, and may continue to experience, customer-requested delays of deliveries or, eventually, potential cancellation of orders and significant reductions in demand. We also may experience long-term disruptions to our operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities that are critical to our business or our supply chains. We may also incur higher write-offs of accounts receivables and impairment charges on our asset values, including property, plant and equipment and intangible assets.
The COVID-19 pandemic also could adversely affect our liquidity and ability to access the capital markets. Additionally, government stimulus programs available to us, our customers, or our suppliers, may prove to be insufficient or ineffective. Furthermore, in the event that the impact from the COVID-19 pandemic causes us to be unable to maintain a certain level of excess availability under our revolving credit facility, our availability of funds may become limited, or we may be required to renegotiate the facility on less
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favorable terms. If we are unable to access additional credit at the levels we require, or the cost of credit is greater than expected, it could materially adversely affect our results of operations, financial condition and cash flows.
Although our internal control over financial reporting has not been impacted to date, the COVID-19 pandemic could negatively affect it in the future if infections within our workforce are significant or our workforce is required to work from home on a longer term or permanent basis thereby requiring new processes, procedures, and controls to respond to changes in our business environment. We may be susceptible to increased litigation related to, among other things, the financial impacts of the pandemic on our business, our ability to meet contractual obligations due to the pandemic, employment practices or policies adopted during the health crisis, or litigation related to individuals contracting COVID-19 as result of alleged exposures on our premises.
While we have been impacted by the effect of the COVID-19 pandemic – see Part II, Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations, the full extent to which the COVID-19 pandemic will affect our operations, and the industries in which we operate, remains uncertain and will ultimately depend on future developments which cannot be predicted at this time, including, but not limited to, the duration, severity, speed and scope of the pandemic, the length of time required for demand to return and normal economic and operating conditions to resume. The impact of the COVID-19 pandemic also may have the effect of exacerbating many of the other risks described herein.
Risks Related to Ownership of Our Securities
Actions of activist shareholders with respect to us or our securities could be disruptive and potentially costly and the possibility that activist shareholders may contest, or seek changes that conflict with, our strategic direction could cause uncertainty about the strategic direction of our business.
Activist shareholders may from time to time attempt to effect changes in our strategic direction and, in furtherance thereof, may seek changes in how we are governed. While our Board of Directors and management team strive to maintain constructive, ongoing communications with all of our shareholders, including activist shareholders, and welcomes their views and opinions with the goal of working together constructively to enhance value for all shareholders, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: (i) responding to actions by activist shareholders can disrupt our operations, be costly and time-consuming, and divert the attention of our Board and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; (ii) perceived uncertainties as to our future direction may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, may result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners; and (iii) these types of actions could cause significant fluctuations in our stock price due to factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
We may not continue to satisfy the continued listing requirements of the New York Stock Exchange and NYSE American for our common stock and Series A warrants, respectively.
Our common stock is currently listed on the New York Stock Exchange and our Series A warrants are listed on NYSE American, each of which imposes both objective and subjective requirements for continued listing.
Continued listing criteria of the New York Stock Exchange applicable to our common stock include our financial condition, market capitalization and shareholders’ equity. Specifically, the New York Stock Exchange requires a company with common equity listed on its exchange to maintain average global market capitalization over a consecutive 30 trading-day period of at least $50 million or maintain shareholders’ equity of at least $50 million. Our common stock’s average-global market capitalization over the 30 trading-day period ended December 31, 2020, was $93.7 million and our total Ampco-Pittsburgh shareholders’ equity was $76.6 million as of December 31, 2020. Should we receive a notice of non-compliance, the New York Stock Exchange may allow up to an 18-month cure period if we present a plan to become compliant, with adequate strategic actions and progress reporting satisfactory to the New York Stock Exchange. If the New York Stock Exchange determines that our common stock fails to satisfy the requirements for continued listing or we continue to fail to meet listing criteria, our common stock could be de-listed from the New York Stock Exchange, which could impact potential liquidity for our shareholders.
Continued listing criteria of the NYSE American applicable to our Series A warrants include our financial condition, market capitalization and shareholders’ equity. Among other requirements, for the Series A warrants to be listed on NYSE American, there must be an aggregate of at least 50,000 Series A warrants. Satisfaction of NYSE American’s listing requirements therefore depends upon the extent to which warrant holders elect to exercise their Series A warrants. We cannot provide assurance that we will continue to meet these, or other, listing standards of NYSE American with respect to the Series A warrants. Additionally, the price of the Series A warrants may fluctuate, and liquidity may be limited. Holders of Series A warrants may be unable to resell their Series A warrants at a favorable price, or at all.
Holders of Series A warrants will have no rights as holders of common stock until they exercise their Series A warrants and acquire common stock.
8
Until holders of our Series A warrants acquire shares of common stock upon exercise of such Series A warrants, they will have no rights with respect to the shares of common stock underlying such Series A warrants. Upon exercise of the Series A warrants, the holders thereof will be entitled to exercise the rights of holders of common stock only as to matters for which the record date occurs after the warrant exercise date.
The market price of our common stock may not exceed the exercise price of the Series A warrants at such time as the holder desires to exercise such Series A warrants.
The Series A warrants are exercisable through August 1, 2025. The market price of our common stock may not exceed the exercise price of the Series A warrants at such times prior to their date of expiration that the holder desires to exercise such warrants. Any Series A warrants not exercised by their date of expiration will expire without residual value to holders.
We have not declared dividends since mid-2017 and do not expect to declare dividends in the future. Any return on the investment in our common stock may be limited to the value of our common stock.
We have not declared a cash dividend on our common stock since mid-2017 and do not anticipate doing so in the foreseeable future. The declaration and payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on investment in our securities will only occur if the value of our stock price appreciates.
Because the Series A warrants are executory contracts, they may have no value in a bankruptcy or reorganization proceeding.
In the event a bankruptcy or reorganization proceeding is commenced by or against us, a bankruptcy court may hold that any then-unexercised Series A warrants are executory contracts subject to rejection by us with the approval of a bankruptcy court. As a result, even if we have sufficient funds, holders may not be entitled to receive any consideration for their Series A warrants or may receive an amount less than they would be entitled to if they had exercised their Series A warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
General Risk Factors
Potential attacks on information technology infrastructure and other cyber-based business disruptions could have a material adverse effect on our financial condition and results of operations.
We depend on integrated information technology (“IT”) systems to conduct our business. IT systems failures, including risks associated with upgrading our systems or in successfully integrating IT and other systems to common platforms, network disruptions and breaches of data security could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information and our financial reporting. Our computer systems, including our back-up systems, could be damaged or interrupted by power outages; computer and telecommunications failures; computer viruses; internal or external security breaches; events such as fires, earthquakes, floods, tornadoes and hurricanes; and/or errors by our employees. Cyber-based risks, in particular, are evolving and include potential attacks to our IT infrastructure and to the IT infrastructure of third parties in attempts to gain unauthorized access to our confidential or other proprietary information or information relating to our employees, customers and other third parties or to seek ransom. Although we have taken steps to address these concerns, there can be no assurance that a system failure or data security breach will not have a material adverse effect on our financial condition or results of operations.
If we fail to maintain an effective system of internal control, we may not be able to accurately determine our financial results or prevent fraud. As a result, our shareholders could lose confidence in our financial results, which could harm the business and the value of our securities.
Effective internal control is necessary to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal control over financial reporting. Our internal control over financial reporting is not subject to attestation by our independent registered public accounting firm pursuant to the exemption provided to issuers that are not “large accelerated filers” or “accelerated filers” under the Dodd-Frank Act of 2010. We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes in the future. Because our internal control relies on the judgments and determinations of key personnel, the COVID-19 pandemic elevates this risk. We may in the future discover areas of our internal control that need improvement. Furthermore, to the extent our business grows, our internal control may become more complex, and we would require significantly more resources to ensure our internal control remains effective. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remediated, could reduce the market value of our securities. Additionally, the existence of any material weakness could require us to devote significant time and incur significant expense to identify and remediate any such material weaknesses and we may not be able to remediate any such material weaknesses in a timely manner.
9
Our By-laws designate the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania embracing the county in which our principal executive office is located as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, which could discourage lawsuits against us and our directors and officers.
Our By-laws provide that, unless we otherwise consent in writing, the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania embracing the county in which our principal executive office is located will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of us, (b) any action asserting a claim of breach of a fiduciary duty owed to us or our shareholders by any director or officer, officer or other employee of ours, (c) any action asserting a claim against us or against any of our directors, officers or other employees arising pursuant to any provision of the Pennsylvania Business Corporation Law of 1988 (or the PBCL) or our Articles of Incorporation or By-laws, (d) any action seeking to interpret, apply, enforce, or determine the validity of our Article of Incorporation or By-laws, or (e) any action asserting a claim against the us or any director or officer or other employee of ours governed by the internal affairs doctrine. This exclusive forum provision does not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or the Securities Act of 1933, as amended. This exclusive forum provision may limit the ability of our shareholders to bring a claim in a judicial forum that such shareholders find favorable for disputes with us or our directors or officers, which may discourage such lawsuits against us and our directors and officers. Alternatively, if a court outside of Pennsylvania were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, results of operations and financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
The Corporation has no unresolved staff comments.
The location and general character of the principal locations in each segment, all of which are owned unless otherwise noted, are listed below. In addition, the Corporation has sales offices located in several foreign countries. See Note 4, Property, Plant and Equipment, and Note 9, Debt, to the Consolidated Financial Statements for disclosure of properties held as collateral.
|
Company and Location |
|
Principal Use |
|
Approximate Square Footage |
|
Type of Construction |
|
|
|
|
|
|
|
|
|
FORGED AND CAST ENGINEERED PRODUCTS SEGMENT |
||||||
|
Union Electric Steel Corporation |
|
|
|
|
|
|
|
Route 18 Burgettstown, PA 15021*
|
|
Manufacturing facilities |
|
296,800 on 55 acres |
|
Metal and steel |
|
|
|
|
|
|
|
|
|
726 Bell Avenue Carnegie, PA 15106*
|
|
Manufacturing facilities and offices |
|
165,900 on 8.7 acres |
|
Metal and steel |
|
|
|
|
|
|
|
|
|
U.S. Highway 30 Valparaiso, IN 46383*
|
|
Manufacturing facilities |
|
88,000 on 20 acres |
|
Metal and steel |
|
|
|
|
|
|
|
|
|
1712 Greengarden Road Erie, PA 16501*
|
|
Manufacturing facilities |
|
40,000 on 1 acre |
|
Metal and steel |
|
|
|
|
|
|
|
|
|
Union Electric Steel UK Limited |
|
|
|
|
|
|
|
Coulthards Lane Gateshead, England
|
|
Manufacturing facilities and offices |
|
274,000 on 10 acres |
|
Steel framed, metal and brick |
|
|
|
|
|
|
|
|
|
Åkers Sweden AB |
|
|
|
|
|
|
|
Bruksallén 12SE-647 51 Åkers Styckebruk, Sweden
|
|
Manufacturing facilities and offices |
|
394,000 on 162 acres |
|
Steel framed, metal and brick |
|
|
|
|
|
|
|
|
10
|
Company and Location |
|
Principal Use |
|
Approximate Square Footage |
|
Type of Construction |
|
Åkers Valji Ravne d.o.o. |
|
|
|
|
|
|
|
Koroška c. 14 SI-2390 Ravne na Koroškem, Slovenia
|
|
Manufacturing facilities and offices |
|
106,000 on 2.1 acres |
|
Brick |
|
|
|
|
|
|
|
|
|
Shanxi Åkers TISCO Roll Co. Ltd. |
|
|
|
|
|
|
|
No. 2 Jian Cao Ping Taiyuan, Shanxi, China
|
|
Manufacturing facilities and offices |
|
338,000 on 14.6 acres |
|
Metal, steel and brick |
|
|
|
|
|
|
|
|
|
Alloys Unlimited and Processing, LLC |
|
|
|
|
|
|
|
3760 Oakwood Avenue Austintown, OH 44515*
|
|
Manufacturing facilities and offices |
|
69,800 on 1.5 acres |
|
Steel framed and cement block |
|
|
|
|
|
|
|
|
|
AIR AND LIQUID PROCESSING SEGMENT |
||||||
|
Air & Liquid Systems Corporation |
|
|
|
|
|
|
|
Aerofin Division 4621 Murray Place Lynchburg, VA 24506
|
|
Manufacturing facilities and offices |
|
146,000 on 15.3 acres |
|
Brick, concrete and steel |
|
|
|
|
|
|
|
|
|
Buffalo Air Handling Division |
|
|
|
|
|
|
|
Zane Snead Drive Amherst, VA 24531
|
|
Manufacturing facilities and offices |
|
89,000 on 19.5 acres |
|
Metal and steel |
|
Buffalo Pumps Division |
|
|
|
|
|
|
|
874 Oliver Street N. Tonawanda, NY 14120 |
|
Manufacturing facilities and offices |
|
94,000 on 9 acres |
|
Metal, brick and cement block |
* Facility is leased.
In 2018, Union Electric Steel Corporation completed a sale and leaseback financing transaction covering certain of its real estate assets, including its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania. Simultaneously with the sale, Union Electric Steel Corporation entered into a lease agreement pursuant to which Union Electric Steel Corporation would lease the properties from Store Capital Acquisitions, LLC, the purchaser of the properties.
Union Electric Steel Corporation subleases office space to the Corporation. The Corporation further subleases a portion of its office space to Air & Liquid Systems Corporation for use as its headquarters.
All of the owned facilities are adequate and suitable for their respective purposes.
The FCEP segment’s facilities operated within 70% to 80% of their normal capacity during 2020. The facilities of the Air and Liquid Processing segment operated within 60% to 70% of their normal capacity. 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 and, for 2020, the periodic and temporary idling of certain operations of the FCEP segment resulting from the COVID-19 pandemic. The number of work shifts is also taken into consideration. If normal capacity was not adjusted for the periodic and temporary idling of certain operations due to the COVID-19 pandemic, the FCEP segment would have operated within 60% to 70% of normal capacity.
11
LITIGATION
See Note 20, Litigation, to the Consolidated Financial Statements.
ENVIRONMENTAL
See Note 22, Environmental Matters, to the Consolidated Financial Statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
12
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The shares of common stock of Ampco-Pittsburgh Corporation are traded on the New York Stock Exchange (symbol AP). The Corporation paid cash dividends on common shares in every year since 1965 through mid-2017. In June 2017, the Corporation announced that it would suspend quarterly cash dividends, beginning with the second quarter of 2017.
In September 2020, the Corporation completed an equity rights offering, pursuant to which the Corporation offered to existing shareholders the right to purchase a unit consisting of common stock and a Series A warrant. The Series A warrants are traded on the NYSE American Exchange (symbol AP WS).
The number of registered shareholders at December 31, 2020, and 2019, equaled 376 and 375, respectively.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(in thousands, except per share amounts)
EXECUTIVE OVERVIEW
Ampco-Pittsburgh Corporation and its subsidiaries (collectively, the “Corporation”) manufacture and sell highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates financial performance and makes resource allocation and strategic decisions about the business.
The Corporation continues to focus on improving its financial strength and reducing indebtedness. In July 2020, the Corporation repaid its $4,120 Industrial Revenue Bond upon maturity. In September 2020, the Corporation completed an equity rights offering, issuing 5,507,889 shares of its common stock and 12,339,256 Series A warrants to existing shareholders for total gross proceeds of $19,279. Additional proceeds may be received from the future exercise of the Series A warrants. Each Series A warrant provides the holder with the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock, and expires on August 1, 2025. A majority of the proceeds from the equity rights offering was used to repay remaining borrowings outstanding under the Corporation’s revolving credit facility providing availability for future capital expenditures, which are necessary to accelerate restructuring efforts and further improve the long-term cost structure and profitability of the Corporation, and general corporate purposes and obligations. At December 31, 2020, the Corporation reduced its debt to $37,243, a decrease of $33,614 from its December 31, 2019, balance of $70,857.
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally.
In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, provided guidance identifying the Corporation’s domestic businesses as critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such an order. Despite the designation, the Corporation has periodically and temporarily idled certain operations of its FCEP segment and, consequently, furloughed certain of its employees in response to market conditions. It also has experienced, and may continue to experience, customer-requested delays of deliveries or, eventually, potential cancellation of orders. However, it appears that demand bottomed out during the second quarter of 2020 and volume may return to 2019 levels in the latter part of 2021, assuming no additional mass shutdowns due to COVID-19. To date, the Air and Liquid Processing segment has successfully mitigated the negative impact on sales and operating income resulting from the pandemic.
13
On March 27, 2020, former President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer-side social security payments and contributions to employee benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Similar programs have been offered in certain of the foreign jurisdictions in which the Corporation operates, including subsidies and reimbursement of certain employee-related costs. While the Corporation has taken, and intends to continue to take, advantage of various provisions of the CARES Act and other similar programs offered domestically and in foreign jurisdictions in which the Corporation operates, where possible, it is unable to determine what impact those provisions may have on its consolidated financial statements in the future.
To date, in response to the pandemic, the Corporation has:
|
|
• |
Periodically and temporarily idled certain of its forged and cast roll manufacturing facilities due to market conditions resulting in unabsorbed costs; |
|
|
• |
Furloughed employees, particularly within the FCEP segment; |
|
|
• |
Received approximately $4,200 in the form of subsidies and reimbursements for a portion of furloughed employee costs from certain foreign jurisdictions in which the Corporation operates; |
|
|
• |
Recognized approximately $1,000 of anticipated bad debts and slow-moving inventory reserves in the first quarter of 2020 for customers expected to be more severely impacted by the pandemic; |
|
|
• |
Deferred contributions to employee benefits plans until the end of 2020, and employer-side social security payments of $2,163 to the end of 2021 and 2022; and |
|
|
• |
Recognized a discrete income tax benefit of $3,502, upon enactment of the CARES Act, for the carryback of net operating losses to an earlier period, at a higher tax rate, thereby releasing a portion of the valuation allowance the Corporation had previously established against its deferred income tax assets. The carryback of net operating losses resulted in a refund of income taxes previously paid of $3,502. |
It is difficult to isolate the impact of the pandemic on the Corporation’s operating results, particularly in relation to the unabsorbed costs resulting from the periodic and temporary idling of certain of the Corporation’s forged and cast roll operations, furloughing of certain of its employees and movements in the global foreign exchange and equity markets. Additionally, the Corporation is uncertain of the full effect the pandemic will have on it for the longer term. The Corporation may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. It may also incur higher write-offs of accounts receivables and impairment charges on its asset values, including property, plant and equipment and intangible assets. The Corporation is actively monitoring, and will continue to actively monitor, the pandemic and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
Restructuring Efforts
During 2019, the Corporation undertook significant measures to return to profitability, which helped to offset some of the adverse effects stemming from the pandemic. Restructuring efforts included:
|
|
• |
Completing the sale of ASW Steel, Inc. (“ASW”), an indirect subsidiary of the Corporation, which had net losses of $9,085 in 2019 and required significant funding; |
|
|
• |
Implementing operational and efficiency improvements at its domestic forged roll facilities and commencing similar initiatives at its European cast roll operations in the second half of 2019; and |
|
|
• |
Completing selected reductions in force across the organization, which yielded an annualized savings of approximately $4,000. |
14
|
|
The Segments
The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products. Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products (“FEP”) are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, Slovenia, and an equity interest in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
Roll market conditions improved late in 2020 as steel demand and pricing began to show signs of recovering from the COVID-related downturn earlier in the year. The oil and gas market also showed signs of improvement and demand increased starting toward the end of the third quarter of 2020. The primary focus for this segment is diversification and development of its forged engineered products for use in other industries and ongoing operational and efficiency improvements at its facilities.
The Air and Liquid Processing segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada.
Aerofin’s heat exchanger business is being adversely impacted by lower business activity in the commercial and industrial OEM markets. Buffalo Air Handling’s custom air handling business is experiencing steady demand; however, competitive pricing pressures continue. Buffalo Pumps’ specialty centrifugal pumps business is benefiting from steady demand from the marine defense and fossil fueled power generation markets. The focus for this segment is to grow revenues, increase margins, strengthen engineering and manufacturing capabilities, increase manufacturing productivity and continue to improve its sales distribution network.
CONSOLIDATED RESULTS OF OPERATIONS OVERVIEW
The Corporation
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|||||||||||
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged and Cast Engineered Products |
|
|
|
|
|
$ |
237,889 |
|
|
|
72 |
% |
|
$ |
305,630 |
|
|
|
77 |
% |
|
Air and Liquid Processing |
|
|
|
|
|
|
90,655 |
|
|
|
28 |
% |
|
|
92,274 |
|
|
|
23 |
% |
|
Consolidated |
|
|
|
|
|
$ |
328,544 |
|
|
|
100 |
% |
|
$ |
397,904 |
|
|
|
100 |
% |
|
Income (Loss) from Continuing Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged and Cast Engineered Products (1) |
|
|
|
|
|
$ |
8,621 |
|
|
|
|
|
|
$ |
(6,130 |
) |
|
|
|
|
|
Air and Liquid Processing |
|
|
|
|
|
|
10,133 |
|
|
|
|
|
|
|
10,002 |
|
|
|
|
|
|
Corporate costs |
|
|
|
|
|
|
(12,308 |
) |
|
|
|
|
|
|
(14,780 |
) |
|
|
|
|
|
Consolidated |
|
|
|
|
|
$ |
6,446 |
|
|
|
|
|
|
$ |
(10,908 |
) |
|
|
|
|
|
Backlog: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged and Cast Engineered Products |
|
|
|
|
|
$ |
191,919 |
|
|
|
78 |
% |
|
$ |
270,737 |
|
|
|
84 |
% |
|
Air and Liquid Processing |
|
|
|
|
|
|
54,212 |
|
|
|
22 |
% |
|
|
50,594 |
|
|
|
16 |
% |
|
Consolidated |
|
|
|
|
|
$ |
246,131 |
|
|
|
100 |
% |
|
$ |
321,331 |
|
|
|
100 |
% |
Net sales equaled $328,544 and $397,907 for 2020 and 2019, respectively. The decrease is principally attributable to a lower volume of shipments for the FCEP segment, due to deferral of deliveries by customers in the flat-rolled steel and aluminum markets, and reduced demand for FEP. A discussion of sales by segment is included below.
Backlog equaled $246,131 at December 31, 2020, versus $321,331 as of December 31, 2019. Backlog represents the accumulation of firm orders on hand which: (i) are supported by evidence of a contractual arrangement, (ii) include a fixed and determinable sales price, (iii) have collectability that is reasonably assured, and (iv) as of September 30, 2020, generally are expected to ship within two
15
years from the backlog reporting date. Prior to September 30, 2020, longer-term Navy orders for the Air and Liquid Processing segment were excluded from backlog. Approximately 8% of the backlog is expected to be released after 2021. A discussion of backlog by segment is included below.
Gross margin, excluding depreciation and amortization, as a percentage of net sales was 21.6% and 18.0% for 2020 and 2019, respectively. The improvement is principally associated with the FCEP segment which benefited from the elimination of the Excess Costs of Avonmore, lower raw material costs and improved pricing and product mix. The improvement was partially offset by a lower volume of shipments of mill rolls and FEP, net unabsorbed costs due in part to the periodic and temporary idling of certain of the forged and cast roll manufacturing operations caused by the pandemic and lower business interruption insurance proceeds in 2020 than in 2019 for equipment outages that occurred in 2018 (the “Proceeds from Business Interruption Insurance Claim”). For the Air and Liquid Processing segment, costs of products sold, excluding depreciation and amortization, as a percentage of net sales was comparable between the periods.
Selling and administrative expenses totaled $45,542 (13.9% of net sales) and $53,643 (13.5% of net sales) for 2020 and 2019, respectively. The decrease of $8,101 is primarily due to the net of:
|
|
• |
Lower bad debt expense of approximately $1,229 principally due to bad debt expense of $1,366 for a cast roll customer who filed for bankruptcy in 2019 (the “Bad Debt Expense”); |
|
|
• |
Lower professional fees and employee severance costs of approximately $2,719 associated with the Corporation’s restructuring efforts, which began in the first quarter of 2019, and ongoing cost containment initiatives; |
|
|
• |
Lower employee-related costs, in part, due to reduction-in-force actions completed in 2019; |
|
|
• |
Lower commissions of approximately $1,937 primarily due to the lower volume of FEP sales; and |
|
|
• |
Elimination of selling and administrative expenses at the Avonmore Plant of approximately $704. |
Depreciation and amortization equaled $18,575 and $18,967 for 2020 and 2019, respectively. The decrease is due to the write-down of the property, plant and equipment of the Avonmore Plant to its estimated net realizable value at March 31, 2019, which eliminated future depreciation expense for the Avonmore Plant.
Impairment charge of $10,082 in 2019 represents the write-down of the Avonmore Plant to its estimated net realizable value less costs to sell (the “Impairment Charge”).
Charge for asbestos litigation of $283 in 2020 represents a charge for the potential insolvency of an asbestos-related insurance carrier (the “Asbestos-Related Charge”).
Investment-related income equaled $1,396 and $1,417 for 2020 and 2019, respectively, and represents primarily dividends received from one of the Corporation’s Chinese joint ventures.
Interest expense equaled $4,114 and $5,342 for 2020 and 2019, respectively. The decrease is principally due to lower average borrowings outstanding under the revolving credit facility in 2020 compared to 2019 and repayment of promissory notes in March 2019.
Other income – net equaled $4,972 and $6,466 for 2020 and 2019, respectively. The prior year includes a net gain of $2,304 resulting from the curtailment of the defined benefit pension and other postretirement plans of ANR and special termination benefits associated with the sale of the Avonmore Plant. The remaining fluctuation between the years is principally due to lower foreign exchange losses in the current year.
Income tax benefit (provision) equaled $470 and $(2,108) for 2020 and 2019, respectively, and includes income tax provisions associated with the Corporation’s profitable operations. An income tax benefit is not able to be recognized on losses of certain of the Corporation’s entities since the entities remain in a three-year cumulative loss position. The income tax benefit recorded in 2020 includes an income tax benefit of $3,502 due to the CARES Act, which enabled the carryback of net operating losses to an earlier period at a higher tax rate and the release of a portion of the valuation allowance previously established against the deferred income tax assets of the Corporation.
Loss from discontinued operations, net of tax for 2019 of $9,085 represents the net loss associated with ASW. The anticipated sale of ASW represented a strategic shift that would have a major favorable impact on the Corporation’s operations and financial results and, accordingly, was accounted for as a discontinued operation in accordance with the requirements of ASC 205, Presentation of Financial Statements.
16
Net income attributable to Ampco-Pittsburgh and income per common share for 2020 include an income tax benefit of $3,502, due to the enactment of the CARES Act, the Proceeds from Business Interruption Insurance Claim and the Asbestos-Related Charge, which had a combined net positive impact on income per common share of $0.28. Net loss attributable to Ampco-Pittsburgh and loss per common share for 2019 include the Impairment Charge, the Restructuring-Related Costs, the Excess Costs of Avonmore, the Bad Debt Expense, and the Proceeds from Business Interruption Insurance Claim, which had a combined negative impact on net loss from continuing operations of $16,567, or $1.32 per common share.
Non-GAAP Financial Measures
The Corporation presents below non-GAAP adjusted income from continuing operations, which is calculated as income (loss) from continuing operations, excluding the Impairment Charge, the Restructuring-Related Costs, the Excess Costs of Avonmore, the Bad Debt Expense, the Proceeds from Business Interruption Insurance Claim, and the Asbestos-Related Charge for each of the years, as applicable. This non-GAAP financial measure is not based on any standardized methodology prescribed by accounting principles generally accepted in the United States of America (“GAAP”) and may not be comparable to similarly-titled measures presented by other companies.
The Corporation presents non-GAAP adjusted income from continuing operations for each of the years because it is a key measure used by the Corporation’s management and its Board of Directors to understand and evaluate the Corporation’s operating performance and to develop operational goals for managing its business. This non-GAAP financial measure excludes significant charges or credits, that are one-time in nature, unrelated to the Corporation’s ongoing results of operations or beyond its control. Additionally, a portion of the incentive and compensation arrangements for certain employees is based on the Corporation’s business performance. The Corporation believes this non-GAAP financial measure helps identify underlying trends in its business that could otherwise be masked by the effect of the items that it excludes from adjusted income from continuing operations. In particular, the Corporation believes that the exclusion of the Impairment Charge, the Restructuring-Related Costs, the Excess Costs of Avonmore, which are not expected to continue following the sale of the Avonmore Plant, the Bad Debt Expense, the Proceeds from Business Interruption Insurance Claim, and the Asbestos-Related Charge can provide a useful measure for period-to-period comparisons of the Corporation’s core business performance. Accordingly, the Corporation believes that this non-GAAP financial measure provides useful information to investors and others in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by the Corporation in its financial and operational decision-making.
Adjusted income from continuing operations is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are limitations related to the use of adjusted income from continuing operations rather than income (loss) from continuing operations, which is the nearest GAAP equivalent. Among other things, the Excess Costs of Avonmore, which is excluded from the adjusted non-GAAP financial measure, necessarily reflects judgments made by the Corporation in allocating manufacturing and operating costs between the Avonmore Plant and its other operations and in anticipating how it will conduct business following the sale of the Avonmore Plant. There can be no assurance that additional charges similar to the Impairment Charge, the Restructuring-Related Costs, the Bad Debt Expense, the Proceeds from Business Interruption Insurance Claim, and the Asbestos-Related Charge will not occur in future periods.
The adjustments reflected in adjusted income from continuing operations are pre-tax. There is no significant tax impact associated with these adjustments due to the Corporation having a valuation allowance recorded against a substantial majority of its deferred income tax assets for the jurisdictions where the expenses are recognized.
17
The following is a reconciliation of income (loss) from continuing operations to non-GAAP adjusted income from continuing operations for 2020 and 2019, respectively:
|
|
|
2020 |
|
|
2019 |
|
||
|
Income (loss) from continuing operations, as reported (GAAP) |
|
$ |
6,446 |
|
|
$ |
(10,908 |
) |
|
Impairment Charge (1) |
|
|
0 |
|
|
|
10,082 |
|
|
Restructuring-Related Costs (2) |
|
|
0 |
|
|
|
2,350 |
|
|
Excess Costs of Avonmore (3) |
|
|
0 |
|
|
|
4,572 |
|
|
Bad Debt Expense (4) |
|
|
0 |
|
|
|
1,366 |
|
|
Proceeds from Business Interruption Insurance Claim (5) |
|
|
(769 |
) |
|
|
(1,803 |
) |
|
Asbestos-Related Charge (6) |
|
|
283 |
|
|
|
0 |
|
|
Income from continuing operations, as adjusted (Non-GAAP) |
|
$ |
5,960 |
|
|
$ |
5,659 |
|
|
|
(1) |
Represents an impairment charge recognized in the first quarter of 2019 to record the Avonmore Plant to its estimated net realizable value less costs to sell in anticipation of its sale, which was completed in September 2019. |
|
|
(2) |
Represents professional fees associated with the Corporation’s overall restructuring plan and employee severance costs due to reductions in force. |
|
|
(3) |
Represents estimated net operating costs not expected to continue after the sale of the Avonmore Plant, which was completed in September 2019. The estimated excess costs include judgments made by the Corporation in allocating manufacturing and operating costs between ANR and the Corporation’s other operations and in anticipating how it will conduct business following the sale of the Avonmore Plant. |
|
|
(4) |
Represents bad debt expense for a British cast roll customer who filed for bankruptcy in 2019. |
|
|
(5) |
Represents business interruption insurance proceeds received in 2020 and 2019 for equipment outages that occurred in 2018. |
|
|
(6) |
Represents a charge for the potential insolvency of an asbestos-related insurance carrier. |
Forged and Cast Engineered Products
|
|
|
|
|
2020 |
|
|
2019 |
|
||
|
Net sales |
|
|
|
$ |
237,889 |
|
|
$ |
305,630 |
|
|
Operating income (loss) |
|
|
|
$ |
8,621 |
|
|
$ |
(6,130 |
) |
|
Backlog |
|
|
|
$ |
191,919 |
|
|
$ |
270,737 |
|
Net sales decreased by $67,741 in 2020 from 2019 principally due to:
|
|
• |
Lower volume of shipments of mill rolls, both forged and cast, as a result of customers temporarily deferring deliveries in response to the COVID-19 pandemic, which reduced net sales by approximately $68,900; and |
|
|
• |
Lower demand for FEP due principally to the depressed oil and gas industry, which reduced net sales by approximately $8,300; offset by |
|
|
• |
More favorable pricing and product mix during the current year, which improved sales by approximately $8,300 when compared to the prior year. |
Operating results improved $14,751 in 2020 when compared to the prior year. Operating results for the prior year included:
|
|
• |
The Impairment Charge of $10,082 to write down certain assets of the Avonmore Plant to their estimated net realizable value; |
|
|
• |
The Excess Costs of Avonmore of approximately $4,572, which were eliminated in connection with the sale of Avonmore Plant; |
|
|
• |
A portion of the Restructuring-Related Costs, or $816, due to reductions in force; and |
|
|
• |
The Bad Debt Expense of $1,366 for a cast roll customer who filed for bankruptcy in 2019. |
In addition, operating results for the current year benefited from:
|
|
• |
Changes in pricing and product mix which favorably impacted earnings by approximately $3,300; |
|
|
• |
Lower raw material costs which positively impacted operating results by approximately $4,500; and |
|
|
• |
Lower selling and administrative expense of approximately $4,600 due to a lower cost structure attributable to restructuring efforts taken in the prior year and lower commissions associated with the lower volume of FEP sales. |
18
However, operating results for the current year were adversely affected by:
|
|
• |
Unabsorbed costs largely due to the periodic and temporary idling of certain facilities and furloughing employees caused by the pandemic, a portion of which was offset by subsidies and reimbursements from certain foreign jurisdictions, resulting in a net negative impact on earnings of approximately $8,900 in 2020; |
|
|
• |
Lower volume of shipments which adversely impacted operating results for the current year by approximately $5,000 when compared to the prior year; |
|
|
• |
Lower Proceeds from the Business Interruption Insurance Claim which equaled $769 in 2020 versus $1,803 in 2019, a difference of $1,034; and |
|
|
• |
Charges for anticipated bad debts and slow-moving inventory reserves of approximately $1,000 for customers expected to be more severely impacted by the pandemic. |
Changes in exchange rates for the current year, when compared to the prior year, did not have a significant impact on sales or operating results.
Backlog equaled $191,919 at December 31, 2020, compared to $270,737 at December 31, 2019. The decrease in backlog is principally due to lower backlog for forged and cast rolls as a result of customers postponing order placement given the uncertainty surrounding the pandemic. An overall increase in foreign exchange rates used to translate the backlog of the Corporation’s foreign subsidiaries into the U.S. dollar and a slightly higher backlog for FEP helped to offset the effect of the lower roll backlog when compared to the prior year. At December 31, 2020, approximately 8% of the backlog is expected to ship after 2021; however, as a result of the pandemic, customers could defer deliveries, which may result in a larger percentage of backlog being shipped after 2021.
|
|
|
|
|
2020 |
|
|
2019 |
|
||
|
Net sales |
|
|
|
$ |
90,655 |
|
|
$ |
92,274 |
|
|
Operating income |
|
|
|
$ |
10,133 |
|
|
$ |
10,002 |
|
|
Backlog |
|
|
|
$ |
54,212 |
|
|
$ |
50,594 |
|
Net sales for 2020 decreased from the prior year by $1,619 principally due to a lower volume of heat exchangers which has been adversely affected by a reduction in short-turn order intake. Sales of centrifugal pumps and air handling units for the current year were slightly better than the prior year. Operating income for 2020 benefited from product mix and savings generated from process improvements but was adversely affected by the lower volume of shipments and the Asbestos-Related Charge of $283 for the potential insolvency of an asbestos-related insurance carrier. Backlog at December 31, 2020, improved $3,618 from December 31, 2019, principally due to higher order intake for centrifugal pumps and refinement of the measurement of backlog for longer-dated Navy pump orders. At December 31, 2020, approximately 8% of the backlog is expected to ship after 2021. To date, the segment has successfully mitigated the negative impact on sales and operating income resulting from the pandemic.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flows provided by (used in) operating activities for continuing operations equaled $33,635 and $(3,294) for 2020 and 2019, respectively. The significant improvement between the years is principally due to a lower investment in trade working capital, due in part to the contraction in the business caused by the COVID-19 pandemic, and improved operating results. Although the Corporation recorded the Asbestos-Related Charge in 2020 and the Impairment Charge in 2019, the charges were non-cash charges and, accordingly, did not impact net cash flows provided by (used in) operating activities.
Deferred employer-side social security payments equaled $2,163 through December 31, 2020, which, under the current provisions of the CARES Act, will be due equally in December 2021 and December 2022. Net asbestos-related payments equaled $8,725 and $4,713 in 2020 and 2019, respectively, and are expected to approximate $6,000 in 2021. Contributions to the defined benefit pension and other postretirement benefits plans equaled $7,857 and $3,544 in 2020 and 2019, respectively. No contributions are expected to the U.S. defined benefit pension plans in 2021 due to relief provided by the American Rescue Plan Act of 2021, which was signed into law by President Biden in March 2021. Contributions to the Corporation’s remaining employee benefit plans are expected to approximate $2,234 in 2021.
Net cash flows used in investing activities for continuing operations equaled $7,929 and $2,662 for 2020 and 2019, respectively. Net cash flows used in investing activities for continuing operations for 2019 include proceeds from the sale of ASW of $4,292 and the Avonmore Plant of $3,700. Capital expenditures approximated $8,466 and $10,964 for 2020 and 2019, respectively, and are primarily for the FCEP segment. As of December 31, 2020, purchase commitments for expected future capital expenditures approximated $3,300, which are anticipated to be spent over the next 12-18 months.
19
Net cash flows used in financing activities for continuing operations equaled $17,220 and $6,617 for 2020 and 2019, respectively. During the current year, the Corporation reduced its net borrowings outstanding under its revolving credit facility by $28,273 and repaid its $4,120 Industrial Revenue Bond at maturity. A portion of the revolving credit facility repayments was from the proceeds from the equity rights offering, which was completed in September 2020. Net proceeds from the equity rights offering equaled $18,139 (total gross proceeds of $19,279 less issuance costs of $1,140). In 2019, the Corporation repaid promissory notes (and interest) equaling $26,474 with additional borrowings under its revolving credit facility. Proceeds from the sale of ASW and the Avonmore Plant in 2019 of $7,992 were used to repay a portion of the borrowings under the revolving credit facility.
The effect of exchange rate changes on cash and cash equivalents is primarily attributable to the fluctuation of the British pound and Swedish krona against the U.S. dollar.
Net cash flows used in discontinued operations for 2019 represent the cash flows of ASW.
As a result of the above, cash and cash equivalents increased by $9,882 during 2020 and ended the period at $16,842 in comparison to $6,960 at December 31, 2019. As of December 31, 2020, the majority of the Corporation’s cash and cash equivalents is held by its foreign operations. Domestic customer remittances are used to pay down borrowings under the Corporation’s revolving credit facility, resulting in minimal cash maintained by the domestic operations. Cash held by the foreign operations is considered to be permanently reinvested; accordingly, a provision for estimated local and withholding tax has not been made. If the Corporation were to remit any foreign earnings to itself or any of its U.S. entities, the estimated tax impact would be insignificant.
Funds on hand, funds generated from future operations and availability under the revolving credit facility are expected to be sufficient to finance operational and capital expenditure requirements of the Corporation. The maturity date for the revolving credit facility is May 20, 2022, and, subject to other terms and conditions of the revolving credit agreement, will become due on that date. The Corporation intends to negotiate a longer-term arrangement prior to the maturity of the revolving credit facility. As of December 31, 2020, remaining availability under the revolving credit facility approximated $48,300, net of standard availability reserves.
With respect to environmental matters, see Note 22, Environmental Matters, to the Consolidated Financial Statements. With respect to litigation, see Note 20, Litigation, to the Consolidated Financial Statements.
OFF-BALANCE SHEET ARRANGEMENTS
The Corporation’s off-balance sheet arrangements include the previously mentioned expected future capital expenditures and letters of credit unrelated to the Industrial Revenue Bonds. See Note 12, Commitments and Contingent Liabilities, to the Consolidated Financial Statements. These arrangements are not considered significant to the liquidity, capital resources, market risk, or credit risk of the Corporation.
EFFECTS OF INFLATION
While inflationary and market pressures on costs are likely to be experienced, it is anticipated that ongoing improvements in manufacturing efficiencies and cost savings efforts will mitigate the effects of inflation on the Corporation’s 2021 operating results. The ability to pass on increases in the price of commodities to the customer is contingent upon current market conditions, with the Corporation potentially having to absorb some portion or all of the increase. Product pricing for the FCEP segment’s mill roll product is reflective of current costs, with a significant portion of orders subject to a variable-index surcharge program which helps to protect the segment and its customers against the volatility in the cost of certain raw materials and natural gas. Additionally, long-term labor agreements exist at each of the key locations. Certain of these agreements will expire in 2021. As is consistent with past practice, the Corporation will negotiate with the intent to secure mutually beneficial arrangements covering multiple years. See Note 12, Commitments and Contingent Liabilities, to the Consolidated Financial Statements. Finally, commitments have been executed for certain commodities (copper and aluminum). See Note 15, Derivate Instruments, to the Consolidated Financial Statements.
APPLICATION OF CRITICAL ACCOUNTING POLICIES
The Corporation has identified critical accounting policies that are important to the presentation of its financial condition, changes in financial condition and results of operations and involve the most complex or subjective assessments. Critical accounting policies relate to assessing recoverability of property, plant and equipment and accounting for pension and other postretirement benefits, litigation and loss contingencies, and income taxes.
Property, plant and equipment is reviewed for recoverability whenever events or circumstances indicate the carrying amount of the long-lived assets may not be recoverable. If the undiscounted cash flows generated from the use and eventual disposition of the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. Estimates of future cash flows are based on expected market conditions over the remaining useful life of the primary asset(s). Accordingly, assumptions are made about pricing, volume and asset-resale values. Actual results may differ from these assumptions. At March 31, 2020, the significant change potentially brought about by COVID-19 to macroeconomic conditions and to industry and market conditions in which the FCEP segment operates, was deemed to be a triggering event under ASC 360, Property, Plant and
20
Equipment, causing the Corporation to evaluate whether the property, plant and equipment of the asset groupings within the FCEP segment was deemed to be impaired. Accordingly, as of March 31, 2020, the Corporation completed a quantitative analysis of the long-lived assets for these asset groups and determined that the assets were not impaired. The Corporation continues to evaluate the uncertainty associated with COVID-19, and, at December 31, 2020, there were no additional triggering events identified for these asset groups. Additionally, there have been no triggering events for the asset groups within the Air and Liquid Processing segment. The Corporation believes the amounts recorded in the accompanying consolidated financial statements for property, plant and equipment are recoverable and are not impaired as of December 31, 2020.
Accounting for pension and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works. To accomplish this, input from the Corporation’s actuaries is evaluated and extensive use is made of assumptions about inflation, long-term rate of return on plan assets, longevity, employee turnover and discount rates. The curtailment of the majority of the Corporation’s defined benefit pension plans and the amendment of various other postretirement benefit plans has helped to mitigate the volatility in net periodic pension and other postretirement benefit costs resulting from changes in these assumptions.
The expected long-term rate of return on plan assets is an estimate of the average rates of earnings expected to be earned on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. Since these benefits will be paid over many years, the expected long-term rate of return is reflective of current investment returns and investment returns over a longer period. Also, consideration is given to target and actual asset allocations, inflation and real risk-free return. The Corporation believes the expected long-term rate of return ranging between 6.60% and 7.25% for its domestic plans and 3.55% for its foreign plans to be reasonable. Actual returns on plan assets for 2020 approximated 12.02% for the domestic plans and 14.07% for the foreign plans. A percentage point decrease in the expected long-term rate of return would increase annual pension expense by approximately $2,350. Conversely, a percentage point increase in the expected long-term rate of return would decrease annual pension expense by approximately $2,350.
The discount rates used in determining future pension obligations and other postretirement benefits for each of the plans are based on rates of return for high-quality fixed-income investments currently available and expected to be available during the period to maturity of the pension and other postretirement benefits. High-quality fixed-income investments are defined as those investments which have received one of the two highest ratings given by a recognized rating agency with maturities of 10+ years. Assumed discount rates range between 2.50% and 2.63% for its domestic plans, 2.61% for its other postretirement benefits plans, and 1.45% for its foreign plans, at December 31, 2020. A 1/4 percentage point increase in the discount rate would decrease projected and accumulated benefit obligations by approximately $10,900. Conversely, a 1/4 percentage point decrease in the discount rate would increase projected and accumulated benefit obligations by approximately $10,900.
The Corporation believes that the amounts recorded in the accompanying consolidated financial statements related to pension and other postretirement benefits are based on assumptions that are appropriate at December 31, 2020, although actual outcomes could differ.
Litigation and loss contingency accruals are made when it is determined that it is probable that a liability has been incurred and the amount can be reasonably estimated. Specifically, the Corporation and certain of its subsidiaries are involved in various claims and lawsuits incidental to its businesses. In addition, claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). To assist the Corporation in determining whether an estimate could be made of the potential liability for pending and unasserted future claims for the Asbestos Liability along with applicable insurance coverage, and the amounts of any estimates, the Corporation hires a nationally recognized asbestos-liability expert and insurance consultant. Based on their analyses, reserves for probable and reasonably estimable costs for the Asbestos Liability, including defense costs, and receivables for the insurance recoveries that are deemed probable are established. These amounts rely on assumptions which are based on currently known facts and strategy.
In 2018, the Corporation undertook a review of the Asbestos Liability claims, defense costs and the likelihood for insurance recoveries. The Corporation extended its estimate of the Asbestos Liability, including the estimated costs of settlement and defense costs relating to pending claims and future claims projected to be filed against it through 2052, the estimated final date by which the Corporation expects to have settled all asbestos-related claims. Key variables in these assumptions, including the ability to reasonably estimate the Asbestos Liability through the expected final date by which the Corporation expects to have settled all asbestos-related claims, are summarized in Note 20, Litigation, to the Consolidated Financial Statements. Key assumptions include the number and type of new claims to be filed each year, the average cost of disposing of each new claim, average annual defense costs, and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and the Corporation’s ability to recover under its insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, the passage of state or federal tort reform legislation, and continued solvency of the insurance carriers. In 2020, the Corporation recorded an asbestos-related charge of $283 for the potential insolvency of an asbestos insurance carrier. Actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the calculations vary significantly from actual results.
21
The Corporation intends to evaluate the Asbestos Liability and related insurance receivables as well as the underlying assumptions on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance, these regular reviews may result in the incurrence of future charges or credits; however, the Corporation is currently unable to estimate such future changes. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivables could be material to its operating results for the periods in which the adjustments to the liability or receivable are recorded, and to its liquidity and consolidated financial position when such liabilities are paid.
Accounting for income taxes includes the Corporation evaluation of the underlying accounts, permanent and temporary differences, its tax filing positions and interpretations of existing tax law. A valuation allowance is recorded against deferred income tax assets to reduce them to the amount that is “more likely than not” to be realized. In doing so, assumptions are made about the future profitability of the Corporation and the nature of that profitability. Actual results may differ from these assumptions. If the Corporation determined it would not be able to realize all or part of the deferred income tax assets in the future, an adjustment to the valuation allowance would be established resulting in a charge to net income (loss). Likewise, if the Corporation determined it would be able to realize deferred income tax assets in excess of the net amount recorded, a portion of the existing valuation allowance would be released resulting in a credit to net income (loss). As of December 31, 2020, the valuation allowance approximates $42,454, reducing deferred income tax assets, net of deferred income tax liabilities, to $1,090, an amount the Corporation believes is “more likely than not” to be realized.
The Corporation does not recognize a tax benefit in the financial statements related to a tax position taken or expected to be taken in a tax return unless it is “more likely than not” that the tax authorities will sustain the tax position solely on the basis of the position’s technical merits. Consideration is primarily given to legislation and statutes, legislative intent, regulations, rulings and case law as well as their applicability to the facts and circumstances of the tax position when assessing the sustainability of the tax position. In the event a tax position no longer meets the “more likely than not” criteria, the Corporation would reverse the tax benefit by recognizing a liability and recording a charge to earnings. Conversely, if the Corporation subsequently determined that a tax position met the “more likely than not” criteria, it would recognize the tax benefit by reducing the liability and recording a credit to earnings. As of December 31, 2020, based on information known to date, the Corporation believes the amount of unrecognized tax benefits for tax positions taken or expected to be taken in a tax return which may be challenged by the tax authorities not to be significant.
See Note 21, Income Taxes, to the Consolidated Financial Statements.
RECENTLY IMPLEMENTED and ISSUED ACCOUNTING PRONOUNCEMENTS
See Note 1, Summary of Significant Accounting Policies, to the Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
December 31, |
|
|||||
|
(in thousands, except par value) |
|
2020 |
|
|
2019 |
|
||
|
Assets |
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
16,842 |
|
|
$ |
6,960 |
|
|
Receivables, less allowance for doubtful accounts of $1,131 in 2020 and $3,041 in 2019 |
|
|
60,366 |
|
|
|
81,783 |
|
|
Inventories |
|
|
73,243 |
|
|
|
82,289 |
|
|
Insurance receivable – asbestos |
|
|
16,000 |
|
|
|
16,000 |
|
|
Other current assets |
|
|
5,381 |
|
|
|
6,380 |
|
|
Total current assets |
|
|
171,832 |
|
|
|
193,412 |
|
|
Property, plant and equipment, net |
|
|
162,098 |
|
|
|
166,392 |
|
|
Operating lease right-of-use assets, net |
|
|
4,344 |
|
|
|
4,263 |
|
|
Insurance receivable – asbestos |
|
|
101,937 |
|
|
|
120,932 |
|
|
Deferred income tax assets |
|
|
2,493 |
|
|
|
2,997 |
|
|
Intangible assets, net |
|
|
7,217 |
|
|
|
7,625 |
|
|
Investments in joint ventures |
|
|
2,175 |
|
|
|
2,175 |
|
|
Other noncurrent assets |
|
|
11,112 |
|
|
|
8,764 |
|
|
Total assets |
|
$ |
463,208 |
|
|
$ |
506,560 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
26,678 |
|
|
$ |
33,271 |
|
|
Accrued payrolls and employee benefits |
|
|
19,304 |
|
|
|
22,266 |
|
|
Debt – current portion |
|
|
12,436 |
|
|
|
20,363 |
|
|
Operating lease liabilities – current portion |
|
|
674 |
|
|
|
612 |
|
|
Asbestos liability – current portion |
|
|
22,000 |
|
|
|
21,000 |
|
|
Other current liabilities |
|
|
24,240 |
|
|
|
26,720 |
|
|
Total current liabilities |
|
|
105,332 |
|
|
|
124,232 |
|
|
Employee benefit obligations |
|
|
81,832 |
|
|
|
83,936 |
|
|
Asbestos liability |
|
|
158,196 |
|
|
|
186,633 |
|
|
Long-term debt |
|
|
24,807 |
|
|
|
50,494 |
|
|
Noncurrent operating lease liabilities |
|
|
3,670 |
|
|
|
3,651 |
|
|
Deferred income tax liabilities |
|
|
1,403 |
|
|
|
543 |
|
|
Other noncurrent liabilities |
|
|
2,969 |
|
|
|
1,455 |
|
|
Total liabilities |
|
|
378,209 |
|
|
|
450,944 |
|
|
Commitments and contingent liabilities (Note 12) |
|
|
|
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
|
|
|
Common stock – par value $1; authorized 40,000 shares; issued and outstanding 18,312 shares in 2020 and 12,652 shares in 2019 |
|
|
18,312 |
|
|
|
12,652 |
|
|
Additional paid-in capital |
|
|
170,318 |
|
|
|
156,251 |
|
|
Retained deficit |
|
|
(43,371 |
) |
|
|
(51,341 |
) |
|
Accumulated other comprehensive loss |
|
|
(68,695 |
) |
|
|
(68,662 |
) |
|
Total Ampco-Pittsburgh shareholders’ equity |
|
|
76,564 |
|
|
|
48,900 |
|
|
Noncontrolling interest |
|
|
8,435 |
|
|
|
6,716 |
|
|
Total shareholders’ equity |
|
|
84,999 |
|
|
|
55,616 |
|
|
Total liabilities and shareholders’ equity |
|
$ |
463,208 |
|
|
$ |
506,560 |
|
See Notes to Consolidated Financial Statements.
23
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
For The Year Ended December 31, |
|
|||||
|
(in thousands, except per share amounts) |
|
2020 |
|
|
2019 |
|
||
|
Net sales |
|
$ |
328,544 |
|
|
$ |
397,904 |
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
Costs of products sold (excluding depreciation and amortization) |
|
|
257,513 |
|
|
|
326,157 |
|
|
Selling and administrative |
|
|
45,542 |
|
|
|
53,643 |
|
|
Depreciation and amortization |
|
|
18,575 |
|
|
|
18,967 |
|
|
Impairment charge |
|
|
0 |
|
|
|
10,082 |
|
|
Charge for asbestos litigation |
|
|
283 |
|
|
|
0 |
|
|
Loss (gain) on disposal of assets |
|
|
185 |
|
|
|
(37 |
) |
|
|
|
|
322,098 |
|
|
|
408,812 |
|
|
Income (loss) from continuing operations |
|
|
6,446 |
|
|
|
(10,908 |
) |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Investment-related income |
|
|
1,396 |
|
|
|
1,417 |
|
|
Interest expense |
|
|
(4,114 |
) |
|
|
(5,342 |
) |
|
Other – net |
|
|
4,972 |
|
|
|
6,466 |
|
|
|
|
|
2,254 |
|
|
|
2,541 |
|
|
Income (loss) from continuing operations before income taxes |
|
|
8,700 |
|
|
|
(8,367 |
) |
|
Income tax benefit (provision) |
|
|
470 |
|
|
|
(2,108 |
) |
|
Net income (loss) from continuing operations |
|
|
9,170 |
|
|
|
(10,475 |
) |
|
Loss from discontinued operations, net of tax |
|
|
0 |
|
|
|
(9,085 |
) |
|
Net income (loss) |
|
|
9,170 |
|
|
|
(19,560 |
) |
|
Less: Net income attributable to noncontrolling interest |
|
|
1,200 |
|
|
|
1,426 |
|
|
Net income (loss) attributable to Ampco-Pittsburgh |
|
$ |
7,970 |
|
|
$ |
(20,986 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations per share attributable to Ampco-Pittsburgh common shareholders: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.56 |
|
|
$ |
(0.95 |
) |
|
Diluted |
|
$ |
0.54 |
|
|
$ |
(0.95 |
) |
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax, per share attributable to Ampco-Pittsburgh common shareholders: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.00 |
|
|
$ |
(0.72 |
) |
|
Diluted |
|
$ |
0.00 |
|
|
$ |
(0.72 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Ampco-Pittsburgh common shareholders: |
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.56 |
|
|
$ |
(1.67 |
) |
|
Diluted |
|
$ |
0.54 |
|
|
$ |
(1.67 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
Basic |
|
|
14,272 |
|
|
|
12,590 |
|
|
Diluted |
|
|
14,636 |
|
|
|
12,590 |
|
See Notes to Consolidated Financial Statements.
24
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
|
|
For The Year Ended December 31, |
|
||||||
|
(in thousands) |
|
2020 |
|
|
|
2019 |
|
||
|
Net income (loss) |
|
$ |
9,170 |
|
|
|
$ |
(19,560 |
) |
|
Other comprehensive income (loss), net of income tax where applicable: |
|
|
|
|
|
|
|
|
|
|
Adjustments for changes in: |
|
|
|
|
|
|
|
|
|
|
Foreign currency translation |
|
|
6,981 |
|
|
|
|
290 |
|
|
Unrecognized employee benefit costs (including effects of foreign currency translation) |
|
|
(8,188 |
) |
|
|
|
(19,655 |
) |
|
Fair value of cash flow hedges |
|
|
390 |
|
|
|
|
97 |
|
|
Reclassification adjustments for items included in net income (loss): |
|
|
|
|
|
|
|
|
|
|
Amortization of unrecognized employee benefit costs |
|
|
1,395 |
|
|
|
|
(302 |
) |
|
Realized (gains) losses from settlement of cash flow hedges |
|
|
(92 |
) |
|
|
|
258 |
|
|
Other comprehensive income (loss) |
|
|
486 |
|
|
|
|
(19,312 |
) |
|
Comprehensive income (loss) |
|
|
9,656 |
|
|
|
|
(38,872 |
) |
|
Less: Comprehensive income attributable to noncontrolling interest |
|
|
1,719 |
|
|
|
|
1,342 |
|
|
Comprehensive income (loss) attributable to Ampco-Pittsburgh |
|
$ |
7,937 |
|
|
|
$ |
(40,214 |
) |
See Notes to Consolidated Financial Statements.
25
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
|
(in thousands) |
|
Common Stock |
|
|
Additional Paid-in Capital |
|
|
Retained Deficit |
|
|
Accumulated Other Comprehensive Loss |
|
|
Noncontrolling Interest |
|
|
Total |
|
||||||
|
Balance January 1, 2019 |
|
$ |
12,495 |
|
|
$ |
154,889 |
|
|
$ |
(30,355 |
) |
|
$ |
(49,434 |
) |
|
$ |
5,374 |
|
|
$ |
92,969 |
|
|
Stock-based compensation |
|
|
|
|
|
|
1,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,293 |
|
|
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
|
|
|
|
|
|
|
|
(20,986 |
) |
|
|
|
|
|
|
1,426 |
|
|
|
(19,560 |
) |
|
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19,228 |
) |
|
|
(84 |
) |
|
|
(19,312 |
) |
|
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,342 |
|
|
|
(38,872 |
) |
|
Issuance of common stock including excess tax benefits of $0 |
|
|
157 |
|
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226 |
|
|
Balance December 31, 2019 |
|
|
12,652 |
|
|
|
156,251 |
|
|
|
(51,341 |
) |
|
|
(68,662 |
) |
|
|
6,716 |
|
|
|
55,616 |
|
|
Stock-based compensation |
|
|
|
|
|
|
1,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,329 |
|
|
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
7,970 |
|
|
|
|
|
|
|
1,200 |
|
|
|
9,170 |
|
|
Other comprehensive (loss) income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33 |
) |
|
|
519 |
|
|
|
486 |
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,719 |
|
|
|
9,656 |
|
|
Equity rights offering (Note 13) |
|
|
5,508 |
|
|
|
12,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,139 |
|
|
Issuance of common stock including excess tax benefits of $0 |
|
|
152 |
|
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259 |
|
|
Balance December 31, 2020 |
|
$ |
18,312 |
|
|
$ |
170,318 |
|
|
$ |
(43,371 |
) |
|
$ |
(68,695 |
) |
|
$ |
8,435 |
|
|
$ |
84,999 |
|
See Notes to Consolidated Financial Statements.
26
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
For The Year Ended December 31, |
|
|||||
|
(in thousands) |
|
2020 |
|
|
2019 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
9,170 |
|
|
$ |
(19,560 |
) |
|
Loss from discontinued operations, net of tax |
|
|
0 |
|
|
|
(9,085 |
) |
|
Net income (loss) from continuing operations |
|
|
9,170 |
|
|
|
(10,475 |
) |
|
Adjustments to reconcile net income (loss) from continuing operations to net cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
18,575 |
|
|
|
18,967 |
|
|
Impairment charge |
|
|
0 |
|
|
|
10,082 |
|
|
Charge for asbestos litigation |
|
|
283 |
|
|
|
0 |
|
|
Deferred income tax expense |
|
|
958 |
|
|
|
559 |
|
|
Difference between pension and other postretirement expense and contributions |
|
|
(11,844 |
) |
|
|
(8,939 |
) |
|
Stock-based compensation |
|
|
1,329 |
|
|
|
1,422 |
|
|
Non-cash provisions – net |
|
|
2,006 |
|
|
|
1,488 |
|
|
Other – net |
|
|
413 |
|
|
|
152 |
|
|
Changes in assets/liabilities: |
|
|
|
|
|
|
|
|
|
Receivables |
|
|
20,866 |
|
|
|
(15,040 |
) |
|
Inventories |
|
|
10,219 |
|
|
|
10,797 |
|
|
Other assets, including insurance receivable – asbestos |
|
|
20,640 |
|
|
|
16,652 |
|
|
Accounts payable |
|
|
(7,778 |
) |
|
|
(5,292 |
) |
|
Accrued payrolls and employee benefits |
|
|
(2,753 |
) |
|
|
3,887 |
|
|
Other liabilities, including asbestos liability |
|
|
(28,449 |
) |
|
|
(27,554 |
) |
|
Net cash flows provided by (used in) operating activities - continuing operations |
|
|
33,635 |
|
|
|
(3,294 |
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment |
|
|
(8,466 |
) |
|
|
(10,964 |
) |
|
Proceeds from sale of property, plant and equipment |
|
|
271 |
|
|
|
67 |
|
|
Proceeds from sale of ASW |
|
|
0 |
|
|
|
4,292 |
|
|
Proceeds from sale of Avonmore Plant |
|
|
0 |
|
|
|
3,700 |
|
|
Other – net |
|
|
266 |
|
|
|
243 |
|
|
Net cash flows used in investing activities - continuing operations |
|
|
(7,929 |
) |
|
|
(2,662 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from Revolving Credit and Security Agreement |
|
|
6,000 |
|
|
|
36,136 |
|
|
Payments on Revolving Credit and Security Agreement |
|
|
(34,273 |
) |
|
|
(16,183 |
) |
|
Repayment of debt |
|
|
(6,757 |
) |
|
|
(28,226 |
) |
|
Debt issuance costs |
|
|
(329 |
) |
|
|
0 |
|
|
Proceeds from equity rights offering, net of issuance costs |
|
|
18,139 |
|
|
|
0 |
|
|
Other |
|
|
0 |
|
|
|
(7 |
) |
|
Funding of discontinued operations |
|
|
0 |
|
|
|
1,663 |
|
|
Net cash flows used in financing activities - continuing operations |
|
|
(17,220 |
) |
|
|
(6,617 |
) |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
1,396 |
|
|
|
(180 |
) |
|
Cash flows from discontinued operations: |
|
|
|
|
|
|
|
|
|
Net cash flows used in operating activities - discontinued operations |
|
|
0 |
|
|
|
(3,803 |
) |
|
Net cash flows used in investing activities - discontinued operations |
|
|
0 |
|
|
|
(158 |
) |
|
Net cash flows provided by financing activities - discontinued operations |
|
|
0 |
|
|
|
2,837 |
|
|
Net cash flows used in discontinued operations |
|
|
0 |
|
|
|
(1,124 |
) |
|
Net increase (decrease) in cash and cash equivalents |
|
|
9,882 |
|
|
|
(13,877 |
) |
|
Cash and cash equivalents at beginning of year |
|
|
6,960 |
|
|
|
20,837 |
|
|
Cash and cash equivalents at end of year |
|
$ |
16,842 |
|
|
$ |
6,960 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
|
|
Income tax payments |
|
$ |
2,174 |
|
|
$ |
1,761 |
|
|
Interest payments |
|
|
2,978 |
|
|
|
4,247 |
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment in accounts payable |
|
$ |
981 |
|
|
$ |
772 |
|
|
Finance lease right-of-use assets exchanged for lease liabilities |
|
|
430 |
|
|
|
429 |
|
|
Operating lease right-of-use assets exchanged for lease liabilities |
|
|
701 |
|
|
|
278 |
|
See Notes to Consolidated Financial Statements.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
Description of Business
Ampco-Pittsburgh Corporation and its subsidiaries (collectively, the “Corporation”) manufacture and sell highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments, the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates financial performance and makes resource allocation and strategic decisions about the business.
The Segments
The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products. Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden and Slovenia and equity interests in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North American and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
The Air and Liquid Processing segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada.
COVID-19
On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally.
In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, provided guidance identifying the Corporation’s domestic businesses as critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such an order. Despite the designation, the Corporation has periodically and temporarily idled certain operations of its FCEP segment and, consequently, furloughed certain of its employees in response to market conditions. It also has experienced, and may continue to experience, customer-requested delays of deliveries or, eventually, potential cancellation of orders. To date, the Air and Liquid Processing segment has successfully mitigated the negative impact on sales and operating income resulting from the pandemic.
On March 27, 2020, former President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer-side social security payments and contributions to employee benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Similar programs have been offered in certain of the foreign jurisdictions in which the Corporation operates, including subsidies and reimbursement of certain employee-related costs. While the Corporation has taken, and intends to continue to take, advantage of various provisions of the CARES Act and other similar programs offered domestically and in foreign jurisdictions in which the Corporation operates, where possible, it is unable to determine what impact those provisions may have on its consolidated financial statements in the future.
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To date, in response to the pandemic, the Corporation has:
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Periodically and temporarily idled certain of its forged and cast roll manufacturing facilities due to market conditions resulting in unabsorbed costs; |
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Furloughed employees, particularly within the FCEP segment; |
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Received approximately $4,200 in the form of subsidies and reimbursements for a portion of furloughed employee costs from certain foreign jurisdictions in which the Corporation operates; |
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Recognized approximately $1,000 of anticipated bad debts and slow-moving inventory reserves in the first quarter of 2020 for customers expected to be more severely impacted by the pandemic; |
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Deferred contributions to employee benefits plans until the end of 2020, and employer-side social security payments of $2,163 to the end of 2021 and 2022; and |
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Recognized a discrete income tax benefit of $3,502, upon enactment of the CARES Act, for the carryback of net operating losses to an earlier period, at a higher tax rate, thereby releasing a portion of the valuation allowance the Corporation had previously established against its deferred income tax assets. The carryback of net operating losses resulted in a refund of income taxes previously paid of $3,502. |
It is difficult to isolate the impact of the pandemic on the Corporation’s operating results, particularly in relation to the unabsorbed costs resulting from the periodic and temporary idling of certain of the Corporation’s forged and cast roll operations, furloughing of certain of its employees and movements in the global foreign exchange and equity markets. Additionally, the Corporation is uncertain of the full effect the pandemic will have on it for the longer term. The Corporation may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. It may also incur higher write-offs of accounts receivables and impairment charges on its asset values, including property, plant and equipment and intangible assets. The Corporation is actively monitoring, and will continue to actively monitor, the pandemic and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Corporation’s accounting policies conform to accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include assessing the carrying value of long-lived assets, valuing the assets and obligations related to employee benefit plans, accounting for loss contingencies associated with claims and lawsuits, and accounting for income taxes. Actual results could differ from those estimates. A summary of the significant accounting policies followed by the Corporation is presented below.
Basis of Presentation
The financial information included herein reflects the consolidated financial position of the Corporation as of December 31, 2020, and 2019, and the consolidated results of its operations and cash flows for the years then ended.
Consolidation
The accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries and joint ventures over which the Corporation exercises control and, when applicable, entities for which the Corporation has a controlling financial interest or is the primary beneficiary. Investments in joint ventures where the Corporation owns 20% to 50% of the voting stock and has the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the equity method of accounting. Investments in joint ventures where the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the cost method of accounting. Investments in joint ventures are reviewed for impairment whenever events or circumstances indicate the carrying amount of the investment may not be recoverable. If the estimated fair value of the investment is less than the carrying amount and such decline is determined to be “other than temporary,” then the investment may not be fully recoverable potentially resulting in a write-down of the investment value. Intercompany accounts and transactions are eliminated.
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Cash and Cash Equivalents
Securities with purchased original maturities of three months or less are considered to be cash equivalents. The Corporation maintains cash and cash equivalents at various financial institutions which may exceed federally insured amounts.
Inventories
Inventories are valued at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Cost includes the cost of raw materials, direct labor and overhead for those items manufactured but not yet sold or for which control has not yet transferred to the customer. Fixed production overhead is allocated to inventories based on normal capacity of the production facilities. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased so that inventories are not measured above cost. The amount of fixed overhead allocated to inventories is not increased as a consequence of abnormally low production or plant idling. Costs for abnormal amounts of spoilage, handling costs and freight costs are charged to expense when incurred. Cost of domestic raw materials, work-in-process and finished goods inventories is primarily determined by the last-in, first-out (LIFO) method. Cost of domestic supplies and foreign inventories is determined primarily by the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment purchased new is recorded at cost with depreciation computed using the straight-line method over the following estimated useful lives: land improvements – 15 to 20 years, buildings – 25 to 50 years and machinery and equipment – 3 to 25 years. Assets under finance leases are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Property, plant and equipment acquired as part of a business combination is recorded at its estimated fair value with depreciation computed using the straight-line method over the estimated remaining useful lives based in part on third-party valuations. Expenditures that extend economic useful lives are capitalized. Routine maintenance is charged to expense. Gains or losses are recognized on retirements or disposals. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If the undiscounted cash flows generated from the use and eventual disposition of the assets are less than their carrying value, then the asset value may not be fully recoverable potentially resulting in a write-down of the asset value. Estimates of future cash flows are based on expected market conditions over the remaining useful life of the primary asset(s). In addition, the remaining depreciation period for the impaired asset would be reassessed and, if necessary, revised. Proceeds from government grants are recorded as a reduction in the purchase price of the underlying assets and amortized against depreciation over the lives of the related assets.
Right-of-Use Assets
A right-of-use (“ROU”) asset represents the right to use an underlying asset for the term of the lease and the corresponding liability represents an obligation to make periodic payments arising from the lease. A determination of whether an arrangement includes a lease is made at the inception of the arrangement. ROU assets and liabilities are recognized on the consolidated balance sheet, at the commencement date of the lease, in an amount equal to the present value of the lease payments over the term of the lease calculated using the interest rate implicit in the lease arrangement or, if not known, the Corporation’s incremental borrowing rate. The present value of a ROU asset also includes any lease payments made prior to commencement of the lease and excludes any lease incentives received or to be received under the arrangement. The lease term includes options to extend or terminate the lease when it is reasonably certain that such options will be exercised. Operating leases that are for a period less than 12 months, inclusive of options to extend that are reasonably certain to be exercised, are classified as short-term and are not recognized on the consolidated balance sheet.
ROU assets are recorded as a noncurrent asset on the consolidated balance sheet. The corresponding liabilities are recorded as an operating lease liability, either current or noncurrent, as applicable, on the consolidated balance sheet. Operating lease costs are recognized on a straight-line basis over the lease term within costs of products sold (excluding depreciation and amortization) or selling and administrative expenses based on the use of the related ROU asset.
Intangible Assets
Intangible assets primarily consist of developed technology, customer relationships and trade name. Intangible assets with finite lives are amortized using the straight-line method over their estimated useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated. Intangible assets with indefinite lives are not amortized but reviewed for impairment at least annually, as of October 1. Additionally, intangible assets, both finite and indefinite lived, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. For finite-lived intangible assets, if the undiscounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. For indefinite-lived intangible assets, if the discounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable,
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potentially resulting in a write-down of the asset value. Also, if the estimate of an intangible asset’s remaining useful life changes, the remaining carrying value of the intangible asset will be amortized prospectively over the revised remaining useful life.
Assets of Discontinued Operations Held for Sale
Assets are classified as “held for sale” when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the assets; (ii) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (iv) the sale of the assets is probable and is expected to be completed within one year; (v) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. When all of these criteria have been met, the assets are classified as “held for sale” in the consolidated balance sheet. Assets classified as “held for sale” are reported at the lower of their carrying value or fair value less costs to sell. Depreciation of assets ceases upon designation as “held for sale”. If the “held for sale” criteria have been met and the sale represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, the assets and liabilities of the discontinued operation are classified separately as “discontinued operations” in the consolidated balance sheet and the operating results and cash flows of the discontinued operation are presented as “discontinued operations” in the consolidated statements of operations and cash flows.
Debt Issuance Costs
Debt issuance costs are amortized as interest expense over the scheduled maturity period of the debt. The costs related to a line-of-credit arrangement are amortized over the term of the arrangement, regardless of whether there are any outstanding borrowings. Unamortized debt issuance costs are either recognized as a direct deduction from the carrying amount of the related debt or, if related to a line-of-credit facility, as an other noncurrent asset on the consolidated balance sheet.
Product Warranty
A warranty that ensures basic functionality is an assurance type warranty. A warranty that goes beyond ensuring basic functionality is considered a service type warranty. The Corporation provides assurance type warranties; it does not provide service type warranties. Provisions for assurance type warranties are recognized at the time the underlying sale is recorded. The provision is based on historical experience as a percentage of sales adjusted for potential claims when a liability is probable and for known claims.
Employee Benefit Plans
Funded Status
If the fair value of the plan assets exceeds the projected benefit obligation, the over-funded projected benefit obligation is recognized as an asset (prepaid pensions within other noncurrent assets) on the consolidated balance sheet. Conversely, if the projected benefit obligation exceeds the fair value of the plan assets, the under-funded projected benefit obligation is recognized as a liability (employee benefit obligations) on the consolidated balance sheet. Gains and losses arising from the difference between actuarial assumptions and actual experience and unamortized prior service costs are recorded as a separate component of accumulated other comprehensive loss.
Net Periodic Pension and Other Postretirement Benefit Costs
Net periodic pension and other postretirement benefit costs includes service cost, interest cost, expected rate of return on the market-related value of plan assets, amortization of prior service costs, and recognized actuarial gains or losses. When actuarial gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are amortized to net periodic pension and other postretirement benefit costs over the average remaining service period of the employees expected to receive benefits under the plan or over the remaining life expectancy of the employees expected to receive benefits if “all or almost all” of the plan’s participants are inactive. When actuarial gains or losses are less than 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are included in net periodic pension and other postretirement benefit costs indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. The market-related value of plan assets is determined using a five-year moving average which recognizes gains or losses in the fair market value of assets at the rate of 20% per year.
Warrants
Accounting for warrants includes an initial assessment of whether the warrants qualify as debt or equity. The Corporation’s warrants meet the definition of equity instruments and, accordingly, are recorded within shareholders’ equity on the consolidated balance sheet. The fair value of the warrants is determined as of the measurement date. Incremental costs directly attributable to the offering of the securities are deferred and charged against the proceeds of the offering.
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Other Comprehensive Income (Loss)
Other comprehensive income (loss) includes changes in assets and liabilities from non-owner sources including foreign currency translation adjustments, unamortized prior service costs and unrecognized actuarial gains and losses associated with employee benefit plans, and changes in the fair value of derivatives designated and effective as cash flow hedges.
Certain components of other comprehensive income (loss) are presented net of income tax. Foreign currency translation adjustments exclude the effect of income tax since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
Reclassification adjustments are amounts which are realized during the year and, accordingly, are deducted from other comprehensive income (loss) in the period in which they are included in net income (loss) or when a transaction no longer qualifies as a cash flow hedge. Foreign currency translation adjustments are included in net income (loss) upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity. With respect to employee benefit plans, unamortized prior service costs are included in net income (loss), either immediately upon curtailment of the employee benefit plan or over the average remaining service period or life expectancy of the employees expected to receive benefits, and unrecognized actuarial gains and losses are included in net income (loss) indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. Changes in the fair value of derivatives are included in net income (loss) when the projected sale occurs or, if a foreign currency purchase contract, over the estimated useful life of the underlying asset.
Foreign Currency Translation
Assets and liabilities of the Corporation’s foreign operations are translated at year-end exchange rates and the statements of operations are translated at the average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive loss until the entity is sold or substantially liquidated.
Revenue Recognition
Revenue from sales is recognized when obligations under the terms of the contract with the customer are satisfied. Generally, this occurs when control of the product transfers to the customer. A contract with a customer is deemed to exist when there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured.
Persuasive evidence of an arrangement identifies the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction that creates enforceable obligations. It can be in the form of an executed purchase order from the customer, combined with an order acknowledgment from the Corporation, a sales agreement or longer-term supply agreement between the customer and the Corporation, or a similar arrangement deemed to be a normal and customary business practice for that particular customer or class of customer (collectively, a sales agreement). Sales agreements typically include a single performance obligation for the manufacturing of product which is satisfied upon transfer of control of the product to the customer.
The sales price required to be paid by the customer is fixed or determinable from the sales agreement. It is not subject to refund or adjustment, except for a variable-index surcharge provision which is known at the time of shipment and increases or decreases, as applicable, the selling price of a mill roll for corresponding changes in the published index cost of certain raw materials. The variable-index surcharge is recognized as revenue when the corresponding revenue for the inventory is recognized.
Likelihood of collectability is assessed prior to acceptance of an order. In certain circumstances, the Corporation may require a deposit from the customer, a letter of credit, or another form of assurance for payment. An allowance for doubtful accounts is maintained based on historical experience. Payment terms are standard to the industry and generally require payment 30 days after control transfers to the customer.
Transfer of control is assessed based on alternative use of the product manufactured and, under the terms of the sales agreement, an enforceable right to payment for performance to date. Transfer of control, and therefore revenue recognition, occurs when title, ownership and risk of loss pass to the customer. Typically, this occurs when the product is shipped to the customer (i.e., FOB shipping point), delivered to the customer (i.e., FOB destination), or, for foreign sales, in accordance with trading guidelines known as Incoterms. Incoterms are standard trade definitions used in international contracts and are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice. Shipping terms vary across the businesses and typically depend on the product, country of origin and type of transportation (truck or vessel). There are no customer-acceptance provisions other than, perhaps, customer inspection and testing prior to shipment. Post-shipment obligations are insignificant.
Amounts billed to the customer for shipping and handling are recorded within net sales and the related costs are recorded within costs of products sold (excluding depreciation and amortization). Amounts billed for taxes assessed by various government authorities (e.g., sales tax, value-added tax, etc.) are excluded from the determination of net income (loss) and, instead, are recorded as a liability until remitted to the government authority.
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Stock-Based Compensation
Stock-based compensation, such as stock options, restricted stock units and performance shares, is recognized over the vesting period based upon the fair value of the award at the date of grant. For stock options, the fair value is determined by the Black Scholes option pricing model and is expensed over the vesting period of three years. For restricted stock units, the fair value is equal to the closing price of the Corporation’s common stock on the New York Stock Exchange (“NYSE”) on the date of grant and is expensed over the vesting period, typically three years. For performance share awards that vest subject to a performance condition, the fair value is equal to the closing price of the Corporation’s stock on the NYSE on the date of grant. For performance share awards that vest subject to a market condition, the fair value is determined using a Monte Carlo simulation model. The fair value of performance share awards is expensed over the performance period when it is probable that the performance condition will be achieved.
Asbestos-Related Costs
The amounts recorded for asbestos-related liabilities and insurances receivables for asbestos-related matters rely on assumptions that are based on currently known facts and strategies. Asbestos-related liabilities are recognized when a liability is probable of occurrence and can be reasonably estimated. The liability includes an estimate of future claims as well as settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims over the period which such claims can be reasonably estimated. Insurance receivables for asbestos-related matters are recognized for the estimated amount of probable insurance recoveries attributable to the claims for which an asbestos-related liability has been recognized, including the portion of incurred defense costs expected to be reimbursed. Neither the asbestos-related liabilities nor the insurance receivables for asbestos-related matters are discounted to their present values due to the inability to reliably forecast the timing of future cash flows. The asbestos-related liabilities and insurance receivables for asbestos-related matters as well as the underlying assumptions are reviewed on a regular basis to determine whether any adjustments to the estimates are required. If it is determined that there is an increase in asbestos-related liabilities net of insurance recoveries, then a charge to earnings would be recorded. Similarly, if it is determined that there is a decrease in asbestos-related liabilities net of insurance recoveries, then a credit to earnings would be recorded.
Derivative Instruments
Derivative instruments which include forward exchange (for foreign currency sales and purchases) and futures contracts are recorded on the consolidated balance sheet as either an asset or a liability measured at their fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. To the extent that a derivative is designated and effective as a cash flow hedge of an exposure to future changes in value, the change in the fair value of the derivative is deferred in accumulated other comprehensive loss. Any portion considered to be ineffective, including that arising from the unlikelihood of an anticipated transaction to occur, is reported as a component of earnings (other income/expense) immediately.
Upon occurrence of the anticipated sale, the foreign currency sales contract designated and effective as a cash flow hedge is de-designated as a fair value hedge and the change in fair value previously deferred in accumulated other comprehensive loss is reclassified to earnings (net sales) with subsequent changes in fair value recorded as a component of earnings (other income/expense). Upon occurrence of the anticipated purchase, the foreign currency purchase contract is settled and the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (depreciation and amortization expense) over the life of the underlying asset. Upon settlement of a futures contract, the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (costs of products sold, excluding depreciation and amortization) when the corresponding inventory is sold and revenue is recognized. To the extent that a derivative is designated and effective as a hedge of an exposure to changes in fair value, the change in the derivative’s fair value will be offset in the consolidated statement of operations by the change in the fair value of the item being hedged and is recorded as a component of earnings (other income/expense). Cash flows associated with the derivative instruments are recorded as a component of operating activities on the consolidated statement of cash flows.
The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.
Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy of inputs is used to determine fair value measurements with three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities and are considered the most reliable evidence of fair value. Level 2 inputs are observable prices that are not quoted on active exchanges. Level 3 inputs are unobservable inputs used for measuring the fair value of assets or liabilities.
Legal Costs
Legal costs expected to be incurred in connection with loss contingencies are accrued when such costs are probable and estimable.
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Income taxes are recognized during the year in which transactions enter into the determination of financial statement income. Any taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations are accounted for as period costs. Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the book carrying amount and the tax basis of assets and liabilities including net operating loss carryforwards. A valuation allowance is provided against a deferred income tax asset when it is “more likely than not” the asset will not be realized. Similarly, if a determination is made that it is “more likely than not” the deferred income tax asset will be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded. Penalties and interest are recognized as a component of the income tax provision.
Tax benefits are recognized in the financial statements for tax positions taken or expected to be taken in a tax return when it is “more likely than not” that the tax authorities will sustain the tax position solely on the basis of the position’s technical merits. Consideration is given primarily to legislation and statutes, legislative intent, regulations, rulings and case law as well as their applicability to the facts and circumstances of the tax position when assessing the sustainability of the tax position. In the event a tax position no longer meets the “more likely than not” criteria, the tax benefit is reversed by recognizing a liability and recording a charge to earnings. Conversely, if a tax position subsequently meets the “more likely than not” criteria, a tax benefit would be recognized by reducing the liability and recording a credit to earnings.
Earnings Per Common Share
Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The computation of diluted earnings per common share is similar to basic earnings per common share except that the denominator is increased to include the dilutive effect of the net additional common shares that would have been outstanding assuming exercise of outstanding stock awards and warrants, calculated using the treasury stock method. The computation of diluted earnings per share would not assume the exercise of an outstanding stock award or warrant if the effect on earnings per common share would be antidilutive. Similarly, the computation of diluted earnings per share would not assume the exercise of outstanding stock awards and warrants if the Corporation incurred a net loss since the effect on earnings per common share would be antidilutive. The weighted average number of common shares outstanding assuming exercise of dilutive stock awards and warrants was 14,636,022 for 2020 and 12,590,230 for 2019. Weighted-average outstanding stock awards and warrants excluded from the diluted earnings per common share calculation, since the effect would have been antidilutive, were 1,809,432 for 2020 and 671,886 for 2019. With respect to amounts attributable to Ampco-Pittsburgh common shareholders, net income (loss) from continuing operations attributable to Ampco-Pittsburgh common shareholders excludes net income attributable to noncontrolling interest.
Recently Implemented Accounting Pronouncements
No significant accounting pronouncements became effective for the Corporation in 2020.
Recently Issued Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Corporation on January 1, 2024, with early adoption of all amendments in the same period permitted. The Corporation is currently evaluating the impact the guidance will have on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time for applying generally accepted accounting principles to modifications of contracts, hedging relationships, and other transactions that reference LIBOR or another rate that will be discontinued by reference rate reform if certain criteria are met. The optional guidance is available as of March 12, 2020, through December 31, 2022. To date, no contracts have been required to be modified as a result of reference rate reform. The Corporation is currently evaluating the impact the guidance will have on its financial position, operating results and liquidity if such an event occurs in the future and the Corporation chooses to avail itself to the optional guidance.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). ASU 2019-12 is intended to simplify the accounting for income taxes including removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income, the accounting for franchise or similar tax, and requiring an entity reflect the effect of an enacted change in tax laws or rates in the interim period that includes the enactment date. The guidance becomes effective for the Corporation on January 1, 2021, and is not expected to impact the Corporation’s financial position, operating results or liquidity.
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In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which adds a new impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies it to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. The guidance originally became effective for the Corporation on January 1, 2020, however, since the Corporation meets the definition of a Smaller Reporting Company, as defined by the Securities Exchange Commission, the effective date was subsequently revised to fiscal years beginning after December 15, 2022. The Corporation is currently evaluating the impact the guidance will have on its financial position and operating results. It will not, however, affect the Corporation’s liquidity.
NOTE 2 – DISCONTINUED OPERATIONS AND DISPOSITIONS:
ASW Steel Inc. (“ASW”)
On September 30, 2019, the Corporation, Ampco UES Sub, Inc., an indirect subsidiary of the Corporation, and ASW entered into a Share Purchase Agreement (the “Purchase Agreement”) with Valbruna Canada Ltd., a company organized and existing under the laws of the Province of New Brunswick, Canada (the “Purchaser”). The Purchaser acquired all issued and outstanding shares of ASW for a cash purchase price of $8,000, subject to normal and customary adjustments including a net working capital adjustment. Net proceeds received at closing, after such normal and customary adjustments including a preliminary net working capital adjustment, equaled $4,292. Subsequent post-closing adjustments were not significant. In conjunction with the sale, Union Electric Steel Corporation (“UES”), an indirect subsidiary of the Corporation, entered into a long-term supply agreement with ASW for the supply of stainless steel ingots. Purchases to date have been insignificant.
The sale of ASW represented a strategic shift that would have a major favorable impact on the Corporation’s operations and financial results. The “discontinued operations” criteria set forth in ASC 205, Presentation of Financial Statements (“ASC 205”), were met and, accordingly, the operating results and cash flows of ASW have been presented as discontinued operations in the consolidated statements of operations and cash flows for the year ended December 31, 2019.
The following table presents the major classes of ASW’s line items constituting the “loss from discontinued operations, net of tax” in the consolidated statements of operations:
|
|
|
|
Year Ended December 31, 2019 |
|
|
|
Net sales |
|
$ |
35,045 |
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
Costs of products sold (excluding depreciation and amortization) |
|
|
42,407 |
|
|
|
Selling and administrative |
|
|
1,741 |
|
|
|
Loss on disposal of assets |
|
|
55 |
|
|
Total operating expenses |
|
|
44,203 |
|
|
|
Loss from discontinued operations |
|
|
(9,158 |
) |
|
|
Other income |
|
|
73 |
|
|
|
Loss from discontinued operations before income taxes |
|
|
(9,085 |
) |
|
|
Income tax provision |
|
|
0 |
|
|
|
Loss from discontinued operations, net of tax |
|
$ |
(9,085 |
) |
|
Net sales include $4,381 of product sold by ASW to UES for the nine months ended September 30, 2019. Costs of products sold (excluding depreciation and amortization) approximated the same.
Akers National Roll Company
In March 2019, the Board of Directors of the Corporation approved a plan to sell certain assets of Akers National Roll Company (“ANR”), an indirect subsidiary of UES, located in Avonmore, Pennsylvania (the “Avonmore Plant”). In connection with the anticipated sale, the Corporation recognized an impairment charge of $10,082 in the first quarter of 2019 to record the assets at their estimated net realizable value. In May 2019, ANR entered into a definitive agreement to sell the Avonmore Plant, including its real estate and certain personal property, to an affiliate of WHEMCO, Inc. for $3,700. On September 30, 2019, following completion of customer orders in backlog, the transaction closed and all operations at ANR ceased. Although the sale of the Avonmore Plant was expected to help mitigate the excess capacity and high operating costs of the cast roll operations, thereby having a positive impact on the operating and financial results of the Corporation, the sale of the Avonmore Plant was not considered a strategic shift per the requirements of ASC 205; accordingly, the operating results and cash flows of ANR through the date of sale are included within continuing operations, versus discontinued operations, of the Corporation.
35
NOTE 3 – INVENTORIES:
|
|
|
2020 |
|
|
2019 |
|
||
|
Raw materials |
|
$ |
17,893 |
|
|
$ |
18,011 |
|
|
Work-in-progress |
|
|
31,568 |
|
|
|
35,942 |
|
|
Finished goods |
|
|
12,466 |
|
|
|
17,159 |
|
|
Supplies |
|
|
11,316 |
|
|
|
11,177 |
|
|
Inventories |
|
$ |
73,243 |
|
|
$ |
82,289 |
|
At December 31, 2020, and 2019, approximately 35% of the inventories were valued using the LIFO method. The LIFO reserve approximated $(12,256) and $(17,321) at December 31, 2020, and 2019, respectively. During each of the years, inventory quantities decreased for certain locations resulting in a liquidation of LIFO layers which were at lower costs. The effect of the liquidations was to decrease costs of products sold (excluding depreciation and amortization) by approximately $3,262 and $467 for 2020 and 2019, respectively. There was no income tax expense recognized in the consolidated statements of operations due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the income was recognized (see Note 21). Accordingly, the effect of the liquidations increased net income by approximately $3,262, or $0.23 per common share, for 2020 and reduced net loss by approximately $467, or $0.04 per common share, for 2019.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT:
|
|
|
2020 |
|
|
2019 |
|
||
|
Land and land improvements |
|
$ |
10,473 |
|
|
$ |
9,556 |
|
|
Buildings |
|
|
63,765 |
|
|
|
61,866 |
|
|
Machinery and equipment |
|
|
339,203 |
|
|
|
325,941 |
|
|
Construction-in-process |
|
|
4,896 |
|
|
|
5,251 |
|
|
Other |
|
|
6,870 |
|
|
|
6,872 |
|
|
|
|
|
425,207 |
|
|
|
409,486 |
|
|
Accumulated depreciation |
|
|
(263,109 |
) |
|
|
(243,094 |
) |
|
Property, plant and equipment, net |
|
$ |
162,098 |
|
|
$ |
166,392 |
|
The majority of the assets of the Corporation, except real property including the land and building of Union Electric Steel UK Limited, an indirect subsidiary of the Corporation (“UES-UK”), is pledged as collateral for the Corporation’s revolving credit facility (see Note 9). Land and buildings of UES-UK, equal to approximately $2,896 (£2,122) at December 31, 2020, are held as collateral by the trustees of the UES-UK defined benefit pension plan (see Note 11). The gross value of assets under finance leases and the related accumulated amortization approximated $3,430 and $1,222 as of December 31, 2020, and $3,204 and $903 as of December 31, 2019. Amortization on assets under finance leases approximated $415 for the year ended December 31, 2020.
At March 31, 2020, the significant change potentially brought about by COVID-19 to macroeconomic conditions and to industry and market conditions in which the FCEP segment operates, was deemed to be a triggering event under ASC 360, Property, Plant and Equipment, causing the Corporation to evaluate whether the property, plant and equipment of the asset groupings within the FCEP segment was deemed to be impaired. Accordingly, as of March 31, 2020, the Corporation completed a quantitative analysis of the long-lived assets for these asset groups and determined that the assets were not impaired. The Corporation continues to evaluate the uncertainty associated with COVID-19, and, at December 31, 2020, there were no additional triggering events identified for these asset groups. Additionally, there have been no triggering events for the asset groups within the Air and Liquid Processing segment.
36
NOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSETS:
The Corporation leases certain factory and office space and equipment. Additionally, the manufacturing facilities of one of our cast roll joint ventures in China are located on land leased by the joint venture from the other partner. The land lease commenced in 2007, the date the joint venture was formed, and continues through 2054, the expected end date of the joint, and includes variable lease payment provisions based on the land standard price prevailing in Taiyuan, China, where the joint venture is located.
Right-of-use assets associated with operating leases as of December 31, 2020, and 2019, were comprised of the following:
|
|
|
2020 |
|
|
2019 |
|
||
|
Land |
|
$ |
2,850 |
|
|
$ |
2,700 |
|
|
Buildings |
|
|
1,825 |
|
|
|
1,506 |
|
|
Machinery and equipment |
|
|
495 |
|
|
|
329 |
|
|
Other |
|
|
404 |
|
|
|
487 |
|
|
|
|
|
5,574 |
|
|
|
5,022 |
|
|
Accumulated amortization |
|
|
(1,230 |
) |
|
|
(759 |
) |
|
Operating lease right-of-use assets, net |
|
$ |
4,344 |
|
|
$ |
4,263 |
|
NOTE 6 – INTANGIBLE ASSETS:
|
|
|
2020 |
|
|
2019 |
|
||
|
Customer relationships |
|
$ |
6,191 |
|
|
$ |
5,995 |
|
|
Developed technology |
|
|
4,457 |
|
|
|
4,157 |
|
|
Trade name |
|
|
2,646 |
|
|
|
2,355 |
|
|
|
|
|
13,294 |
|
|
|
12,507 |
|
|
Accumulated amortization |
|
|
(6,077 |
) |
|
|
(4,882 |
) |
|
Intangible assets, net |
|
$ |
7,217 |
|
|
$ |
7,625 |
|
The trade name is an indefinite-lived asset and, accordingly, is not subject to amortization. The fluctuation between the years is due to changes in foreign currency exchange rates. The following summarizes changes in intangible assets for the years ended December 31:
|
|
|
2020 |
|
|
2019 |
|
||
|
Balance at the beginning of the year |
|
$ |
7,625 |
|
|
$ |
9,225 |
|
|
Changes in intangible assets |
|
|
0 |
|
|
|
(292 |
) |
|
Amortization of intangible assets |
|
|
(1,155 |
) |
|
|
(1,144 |
) |
|
Other, primarily impact from changes in foreign currency exchange rates |
|
|
747 |
|
|
|
(164 |
) |
|
Balance at the end of the year |
|
$ |
7,217 |
|
|
$ |
7,625 |
|
Identifiable intangible assets are reviewed for impairment whenever events or circumstances indicate that the carrying values may not be recoverable. At March 31, 2020, the uncertainty brought about by COVID-19 was considered a triggering event for the FCEP segment, causing the Corporation to evaluate whether the identifiable intangible assets of the asset groupings within the FCEP segment were deemed to be impaired. Accordingly, as of March 31, 2020, the Corporation completed a quantitative analysis and determined that the intangible assets for these asset groups were not impaired. The Corporation continues to evaluate the uncertainty associated with COVID-19, and, at December 31, 2020, there were no additional triggering events identified for these asset groups. For 2019, in connection with the anticipated sale of the Avonmore Plant, the Corporation recognized an impairment charge on the intangible assets of ANR of $292.
Identifiable intangible assets are expected to be amortized over a weighted average period of approximately 13 years or $542 for 2021, $399 for 2022, $399 for 2023, $399 for 2024, $345 for 2025 and $2,487 thereafter.
NOTE 7 – INVESTMENTS IN JOINT VENTURES:
The Corporation has interests in three joint ventures:
|
|
• |
Shanxi Åkers TISCO Roll Co., Ltd. (“ATR”) – a cast roll joint venture in China for which the Corporation accounts using the consolidated method of accounting. ATR principally manufactures and sells cast rolls for hot strip mills, steckel mills and medium plate mills. |
37
|
|
• |
Masteel Gongchang Roll Co., Ltd. (“MG”) – a forged roll joint venture in China for which the Corporation accounts using the cost method of accounting. MG principally manufactures and sells large forged backup rolls for hot and cold strip mills. |
|
|
• |
Jiangsu Gongchang Roll Joint-Stock Co., Ltd (“Gongchang”) – a cast roll joint venture in China for which the Corporation accounts using the cost method of accounting. Gongchang principally manufactures and sells cast rolls for hot and cold strip mills, medium/heavy section mills and plate mills. |
ATR
In 2007, Åkers AB, a subsidiary of UES, entered into an agreement with Taiyuan Iron & Steel Co., Ltd. (“TISCO”) to form ATR, with Åkers AB owning 59.88% and TISCO owning 40.12%. Since Åkers AB is the majority shareholder, has voting rights proportional to its ownership interest and exercises control over TISCO, Åkers AB is considered the primary beneficiary and, accordingly, accounts for its investment in ATR on the consolidated method of accounting. The net assets and net income (loss) attributable to TISCO is reflected as non-controlling interest in the accompanying consolidated financial statements.
MG
The Corporation has a 33% interest in MG which is recorded at cost, or $835. The Corporation does not participate in the management or daily operation of MG, has not guaranteed any of its obligations and has no ongoing responsibilities to it. Dividends may be declared by the Board of Directors of the joint venture after allocation of after-tax profits to various “funds” equal to the minimum amount required under Chinese law. No dividends were declared or received in 2020 or 2019.
Gongchang
The Corporation has a 24.03% interest in Gongchang which is recorded at cost, or $1,340. The Corporation does not participate in the management or daily operation of Gongchang, has not guaranteed any of its obligations and has no ongoing responsibilities to it. Dividends may be declared by the Board of Directors of the joint venture after allocation of after-tax profits to various “funds” equal to the minimum amount required under Chinese law. Dividends of $1,203 and $1,364 were declared and received in 2020 and 2019, respectively.
NOTE 8 – OTHER CURRENT LIABILITIES:
|
|
|
2020 |
|
|
2019 |
|
||
|
Customer-related liabilities |
|
$ |
16,144 |
|
|
$ |
16,194 |
|
|
Accrued interest payable |
|
|
2,131 |
|
|
|
2,225 |
|
|
Accrued sales commissions |
|
|
1,419 |
|
|
|
1,607 |
|
|
Other |
|
|
4,546 |
|
|
|
6,694 |
|
|
Other current liabilities |
|
$ |
24,240 |
|
|
$ |
26,720 |
|
Customer-related liabilities include liabilities for product warranty claims and deposits received on future orders. The following summarizes changes in the liability for product warranty claims for the years ended December 31:
|
|
|
2020 |
|
|
2019 |
|
||
|
Balance at the beginning of the year |
|
$ |
9,065 |
|
|
$ |
9,447 |
|
|
Satisfaction of warranty claims |
|
|
(3,854 |
) |
|
|
(5,467 |
) |
|
Provision for warranty claims |
|
|
2,737 |
|
|
|
5,050 |
|
|
Other, primarily impact from changes in foreign currency exchange rates |
|
|
157 |
|
|
|
35 |
|
|
Balance at the end of the year |
|
$ |
8,105 |
|
|
$ |
9,065 |
|
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 consolidated 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.
38
Changes in customer deposits consisted of the following:
|
|
2020 |
|
|
2019 |
|
||
|
Balance at the beginning of the year |
$ |
4,895 |
|
|
$ |
4,304 |
|
|
Satisfaction of performance obligations |
|
(13,915 |
) |
|
|
(11,627 |
) |
|
Receipt of additional deposits |
|
15,458 |
|
|
|
12,189 |
|
|
Other, primarily changes in foreign currency exchange rates |
|
69 |
|
|
|
29 |
|
|
Balance at the end of the year |
$ |
6,507 |
|
|
$ |
4,895 |
|
|
|
|
2020 |
|
|
2019 |
|
||
|
Revolving Credit and Security Agreement |
|
$ |
6,000 |
|
|
$ |
34,273 |
|
|
Sale and leaseback financing obligation |
|
|
19,931 |
|
|
|
19,303 |
|
|
Industrial Revenue Bonds |
|
|
9,191 |
|
|
|
13,311 |
|
|
Minority shareholder loan |
|
|
1,056 |
|
|
|
2,856 |
|
|
Finance leases |
|
|
1,065 |
|
|
|
1,114 |
|
|
Outstanding borrowings |
|
|
37,243 |
|
|
|
70,857 |
|
|
Debt – current portion |
|
|
(12,436 |
) |
|
|
(20,363 |
) |
|
Long-term debt |
|
$ |
24,807 |
|
|
$ |
50,494 |
|
Future principal payments, assuming demand loans are called in 2021, are $12,436 for 2021, $8,080 for 2022, $1,941 for 2023, $1,950 for 2024, $12,836 for 2025, and $0 thereafter.
Revolving Credit and Security Agreement
The Corporation was party to a five-year Revolving Credit and Security Agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement provided for initial borrowings not to exceed $100,000, with an option to increase the credit facility by an additional $50,000 at the request of the Corporation and with the approval of the banks. The Credit Agreement included sublimits for letters of credit not to exceed $40,000 and European borrowings not to exceed $15,000. The maturity date for the Credit Agreement was May 20, 2021, and, subject to other terms and conditions of the Credit Agreement, would become due on that date. On June 23, 2020, the Corporation and the banks amended the Credit Agreement (collectively, with the Credit Agreement, the “Amended Credit Agreement”) to, among other things, extend the maturity date to May 20, 2022. The Amended Credit Agreement provides for borrowings not to exceed $92,500 with the sublimits for letters of credit and European borrowings continuing. The reduction in the maximum borrowing capacity was, in part, due to the sales of ASW and the Avonmore Plant which eliminated collateral and enabled the reduction.
Availability under the Amended Credit Agreement is based on eligible accounts receivable, inventory and fixed assets. Amounts outstanding under the credit facility bear interest, at the Corporation’s option, at either (i) LIBOR plus an applicable margin ranging between 2.75% to 3.25% based on the quarterly average excess availability with LIBOR set at a minimum of 0.75% or (ii) the base rate plus an applicable margin ranging between 1.75% to 2.25% based on the quarterly average excess availability. Additionally, the Corporation is required to pay a commitment fee ranging between 0.25% and 0.375% based on the daily unused portion of the credit facility. As of December 31, 2020, the Corporation had outstanding borrowings under the Amended Credit Agreement of $6,000. The effective interest rate approximated 4% for 2020 and 2019. Additionally, the Corporation had utilized a portion of the credit facility for letters of credit (see Note 12). As of December 31, 2020, remaining availability under the Amended Credit Agreement approximated $48,300, net of standard availability reserves. Deferred financing fees of $329 have been incurred related to the Amended Credit Agreement and are being amortized over the remaining term of the agreement.
Borrowings outstanding under the Amended Credit Agreement are collateralized by a first priority perfected security interest in substantially all of the assets of the Corporation and its subsidiaries (other than real property). Additionally, the Amended Credit Agreement contains customary affirmative and negative covenants and limitations, including, but not limited to, investments in certain of its subsidiaries, payment of dividends, incurrence of additional indebtedness, and acquisitions and divestures. The Corporation must also maintain a certain level of excess availability. The Corporation was in compliance with the applicable bank covenants as of December 31, 2020.
39
Sale and Leaseback Financing Obligation
In September 2018, UES completed a sale and leaseback financing transaction for certain of its real property, including the land and buildings of its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania (the “Properties”). Simultaneously with the sale, UES entered into a lease agreement pursuant to which UES would lease the Properties from the buyer. The lease provides for an initial term of 20 years; however, UES may extend the lease for four successive periods of approximately five years each. If fully extended, the lease would expire in September 2058. UES also has the option to repurchase the Properties, which it may exercise, and currently intends to exercise, in 2025, for a price equal to the greater of (i) the Fair Market Value of the Properties, or (ii) 115% of Lessor’s Total Investment for the Facilities, with such terms defined in the lease agreement. Annual payments will increase each anniversary date by an amount equal to the lesser of 2% or 1.25% of the change in the consumer price index, as defined in the lease agreement. The effective interest rate approximated 7.98% and 8.21% for 2020 and 2019, respectively.
Industrial Revenue Bonds
During 2020, at maturity, the Corporation repaid its $4,120 tax-exempt Industrial Revenue Bond (“IRB”). At December 31, 2020, the Corporation had the following IRBs outstanding: (i) $7,116 taxable IRB maturing in 2027, interest at a floating rate which averaged 0.83% and 2.25% for 2020 and 2019, respectively; and (ii) $2,075 tax-exempt IRB maturing in 2029, interest at a floating rate which averaged 0.85% and 1.66% for 2020 and 2019, respectively. The IRBs are secured by letters of credit of equivalent amounts and are remarketed periodically at which time interest rates are reset. If the IRBs are not able to remarketed, although considered remote by the Corporation and its bankers, the bondholders can seek reimbursement immediately from the letters of credit which serve as collateral for the bonds. Accordingly, the IRBs are recorded as current debt.
Minority Shareholder Loan
ATR has a loan outstanding with its minority shareholder. The loan originally matured in 2008 but has been renewed continually for one-year periods. Interest does not compound and has accrued on the outstanding balance, since inception, at the three-to-five-year loan interest rate set by the People’s Bank of China in effect at the time of renewal. The loan balance approximated $1,056 (RMB 6,901) at December 31, 2020, and $2,856 (RMB 19,901) at December 31, 2019. ATR repaid $1,882 (RMB 13,000) in principal and $290 (RMB 2,000) in accrued interest in 2020 and $1,148 (RMB 8,000) in principal and $287 (RMB 2,000) in accrued interest in 2019. The interest rate for 2020 and 2019 approximated 5%. Accrued interest as of December 31, 2020, and 2019, approximated $2,117 (RMB 13,842) and $2,152 (RMB 14,999), which is recorded in other current liabilities.
Finance Leases
The Corporation leases equipment under various noncancelable lease agreements ending 2021 to 2024. Effective interest rates ranged between approximately 1% and 3% for 2020 and 2019. The weighted average remaining lease term approximated 2 years at December 31, 2020, and 3 years at December 31, 2019. Cash paid for amounts included in the measurement of finance lease liabilities totaled $570 and $203 for the year ended December 31, 2020, and 2019, respectively, of which $18 and $22 were classified as operating cash flows and $552 and $181 were classified as financing cash flows in the consolidated statement of cash flows for each of the respective years. Finance lease costs for interest on finance lease liabilities were insignificant for both years.
NOTE 10 – OPERATING LEASE LIABILITIES:
The current and noncurrent portion of the Corporation’s operating lease arrangements as of December 31, 2020, and 2019, were as follows:
|
|
|
2020 |
|
|
2019 |
|
||
|
Operating lease liabilities - current portion |
|
$ |
674 |
|
|
$ |
612 |
|
|
Noncurrent operating lease liabilities |
|
|
3,670 |
|
|
|
3,651 |
|
|
Total operating lease liabilities |
|
$ |
4,344 |
|
|
$ |
4,263 |
|
40
Future operating lease payments as of December 31, 2020, were as follows:
|
2021 |
|
$ |
690 |
|
|
2022 |
|
|
598 |
|
|
2023 |
|
|
535 |
|
|
2024 |
|
|
487 |
|
|
2025 |
|
|
291 |
|
|
2026 and thereafter |
|
|
3,910 |
|
|
Total undiscounted payments |
|
|
6,511 |
|
|
Less: amount representing interest |
|
|
(2,167 |
) |
|
Present value of net minimum lease payments |
|
$ |
4,344 |
|
At December 31, 2020, and 2019, the weighted average remaining lease term approximated 8.71 years and 8 years, respectively, and the weighted average discount rate approximated 3.95% and 3.98%, respectively.
The components of lease cost for the year ended December 31, 2020, and 2019, were as follows:
|
|
|
2020 |
|
|
2019 |
|
||
|
Short-term operating lease costs |
|
$ |
30 |
|
|
$ |
93 |
|
|
Long-term operating lease costs |
|
|
697 |
|
|
|
682 |
|
|
Total operating lease costs |
|
$ |
727 |
|
|
$ |
775 |
|
Cash paid for amounts included in the measurement of operating lease liabilities totaled $727 and $775 for the year ended December 31, 2020, and 2019, respectively, and was classified as operating cash flows in the consolidated statement of cash flows.
NOTE 11 – PENSION AND OTHER POSTRETIREMENT BENEFITS:
U.S. Pension Benefits
The Corporation has two qualified domestic defined benefit pension plans that cover substantially all of its U.S. employees. Benefit accruals and participation in the plans have been curtailed for all locations except one. The defined benefit pension plans are covered by the Employee Retirement Income Security Act of 1974 (“ERISA”); accordingly, the Corporation’s policy is to fund at least the minimum actuarially computed annual contribution required under ERISA. Minimum contributions for 2020 and 2019 approximated $5,562 and $1,257, respectively. The increase in minimum contributions in 2020 from 2019 is principally due to amortization of pension funding credit balances created in earlier years from voluntary contributions previously made and expiration of legislation which reduced funding requirements for single employer plans. No contributions are expected in 2021 due to relief provided by the American Rescue Plan Act of 2021 (“ARPA”) which was signed into law by President Biden in March 2021. The fair value of the plan assets as of December 31, 2020, and 2019, approximated $210,880 and $195,667, respectively, in comparison to accumulated benefit obligations of $264,750 and $252,808 for the same periods. Employer contributions to the defined contribution plans totaled $2,796 and $3,140 for 2020 and 2019, respectively, and are expected to approximate $2,903 in 2021.
The Corporation also maintains nonqualified defined benefit pension plans for selected executives in addition to the benefits provided under one of the Corporation’s qualified defined benefit pension plans. The objectives of the nonqualified plans are to provide supplemental retirement benefits or restore benefits lost due to limitations set by the Internal Revenue Service. The assets of the nonqualified plans are held in a grantor tax trust known as a “Rabbi” trust and are subject to claims of the Corporation’s creditors, but otherwise must be used only for purposes of providing benefits under the plans. The fair market value of the trust at December 31, 2020, and 2019, which is included in other noncurrent assets, was $4,402 and $4,183, respectively. The plan is treated as a non-funded pension plan for financial reporting purposes. Accordingly, benefit payments would represent employer contributions. Accumulated benefit obligations approximated $8,813 and $8,481 at December 31, 2020, and 2019, respectively.
Employees at one location participate in a multi-employer plan, I.A.M. National Pension Fund (employer identification number 51-6031295, plan number 002), in lieu of the Corporation’s defined benefit pension plans. A multi-employer plan generally receives contributions from two or more unrelated employers pursuant to one or more collective bargaining agreements. The assets contributed by one employer may be used to fund the benefits provided to employees of other employers in the plan because the plan assets, once contributed, are not restricted to individual employers. The latest report of summary plan information (for the 2019 plan year) provided by I.A.M. National Pension Fund indicates:
|
|
• |
Approximately 1,700 employer locations contribute to the plan; |
|
|
• |
Approximately 100,000 active employees participate in the plan; and |
41
|
|
|
|
• |
Assets of approximately $12.3 billion and a funded status of approximately 87%. |
Less than 100 of the Corporation’s employees participate in the plan and contributions are based on a rate per hour. The Corporation’s contributions to the plan were less than $250 for 2020 and 2019 and represent less than five percent of total contributions to the plan by all contributing employers. Contributions are expected to approximate $250 in 2021.
Employees of UES-UK participated in a defined benefit pension plan that was curtailed effective December 31, 2004, and replaced with a defined contribution pension plan. The plans are non-U.S. plans and therefore are not covered by ERISA. Employer contributions to the defined benefit pension plan, when necessary, are agreed to by the Trustees and UES-UK, based on U.K. regulations, with the objective of eliminating any funding deficit of the plan. Such estimated contributions are subject to change based on the future investment performance of the plan’s assets. Currently, the plan is fully funded and no contributions were required in 2020 or 2019, and none are expected for 2021. The fair value of the plan’s assets as of December 31, 2020, and 2019, approximated $66,957 (£49,056) and $57,900 (£43,913), respectively, in comparison to accumulated benefit obligations of $61,629 (£45,153) and $54,838 (£41,591) for the same periods. Contributions to the defined contribution pension plan approximated $292 and $355 in 2020 and 2019, respectively, and are expected to approximate $299 in 2021.
The Corporation has two additional foreign defined benefit pension plans, which are not funded. Accordingly, benefit payments would represent employer contributions. Projected and accumulated benefit obligations approximated $8,294 and $7,501 at December 31, 2020, and 2019, respectively.
Other Postretirement Benefits
The Corporation provides a monthly reimbursement of postretirement health care benefits for up to a 6-year period principally to the bargaining groups of two subsidiaries. The plans cover participants and their spouses who retire under an existing pension plan on other than a deferred vested basis and at the time of retirement have also rendered 10 or more years of continuous service irrespective of age. Retiree life insurance is provided to substantially all retirees. The Corporation’s postretirement health care and life insurance plans are not funded or subject to any minimum regulatory funding requirements. Instead, benefit payments are made from the general assets of the Corporation at the time they are due.
Significant Activity
In 2019, the Corporation:
|
|
• |
Amended the defined benefit pension plan for the hourly employees of the Avonmore Plant to provide for an early retirement option and incentive. Participants selecting the early retirement incentive received an enhanced benefit multiplier, which increased employee benefit obligations by $472 and expense of $236. |
|
|
• |
Recognized special termination benefits expense of $3,694 and a curtailment loss of $1,641 for shutdown benefits provided by the defined benefit pension plan document covering the hourly employees of ANR and as a result of negotiations. The special termination benefits expense and curtailment loss increased employee benefit obligations by similar amounts. |
|
|
• |
Recognized a curtailment gain of $7,639, principally resulting from the accelerated amortization of prior service credits, and reduced employee benefit obligations by $478 for the other postretirement benefit plan in connection with the sale of the Avonmore Plant and the completion of manufacturing activities at ANR. |
|
|
• |
Amended retiree health benefits provided by one of its other postretirement benefit plans to a stipend and reimbursement plan reducing employee benefit obligations by $4,632 and resulting in a curtailment gain of $15. |
Actuarial losses were comprised of the following components:
|
|
|
U.S. Pension Benefits |
|
|
Foreign Pension Benefits |
|
|
Other Postretirement Benefits |
|
|||||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Changes in assumptions |
|
$ |
21,494 |
|
|
$ |
27,380 |
|
|
$ |
5,674 |
|
|
$ |
6,277 |
|
|
$ |
811 |
|
|
$ |
1,116 |
|
|
Other |
|
|
(1,851 |
) |
|
|
295 |
|
|
|
(333 |
) |
|
|
831 |
|
|
|
(85 |
) |
|
|
134 |
|
|
Total actuarial losses |
|
$ |
19,643 |
|
|
$ |
27,675 |
|
|
$ |
5,341 |
|
|
$ |
7,108 |
|
|
$ |
726 |
|
|
$ |
1,250 |
|
Changes in actuarial assumptions principally include the effect of changes in discount rates and mortality tables which are used to estimate plan liabilities. A 1/4 percentage point decrease in the discount rate would increase projected and accumulated benefit obligations by approximately $10,900. Conversely, a 1/4 percentage point increase in the discount rate would decrease projected and
42
accumulated benefit obligations by approximately $10,900. It is not possible to quantify the effects of future changes to mortality tables.
Reconciliations
The following table provides a reconciliation of projected benefit obligations (“PBO”), plan assets and the funded status of the plans for the Corporation’s defined benefit plans calculated using a measurement date as of the end of the respective years.
|
|
|
U.S. Pension Benefits(a) |
|
|
Foreign Pension Benefits(b) |
|
|
Other Postretirement Benefits |
|
|||||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Change in projected benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PBO at January 1 |
|
$ |
261,902 |
|
|
$ |
233,790 |
|
|
$ |
62,339 |
|
|
$ |
54,337 |
|
|
$ |
11,398 |
|
|
$ |
15,810 |
|
|
Service cost |
|
|
223 |
|
|
|
633 |
|
|
|
444 |
|
|
|
444 |
|
|
|
225 |
|
|
|
286 |
|
|
Interest cost |
|
|
7,175 |
|
|
|
9,018 |
|
|
|
1,058 |
|
|
|
1,399 |
|
|
|
281 |
|
|
|
390 |
|
|
Plan amendments |
|
|
0 |
|
|
|
472 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(4,632 |
) |
|
Special termination benefits |
|
|
12 |
|
|
|
3,694 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(478 |
) |
|
Plan curtailments |
|
|
0 |
|
|
|
1,458 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Foreign currency exchange rate changes |
|
|
0 |
|
|
|
0 |
|
|
|
3,209 |
|
|
|
1,586 |
|
|
|
0 |
|
|
|
0 |
|
|
Actuarial losses |
|
|
19,643 |
|
|
|
27,675 |
|
|
|
5,341 |
|
|
|
7,108 |
|
|
|
726 |
|
|
|
1,250 |
|
|
Participant contributions |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
274 |
|
|
|
99 |
|
|
Benefits paid from plan assets |
|
|
(14,776 |
) |
|
|
(14,435 |
) |
|
|
(1,796 |
) |
|
|
(1,879 |
) |
|
|
0 |
|
|
|
0 |
|
|
Benefits paid by the Corporation |
|
|
(403 |
) |
|
|
(403 |
) |
|
|
(672 |
) |
|
|
(656 |
) |
|
|
(1,494 |
) |
|
|
(1,327 |
) |
|
PBO at December 31 |
|
$ |
273,776 |
|
|
$ |
261,902 |
|
|
$ |
69,923 |
|
|
$ |
62,339 |
|
|
$ |
11,410 |
|
|
$ |
11,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in plan assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1 |
|
$ |
195,667 |
|
|
$ |
182,541 |
|
|
$ |
57,900 |
|
|
$ |
49,651 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Actual return on plan assets |
|
|
24,427 |
|
|
|
26,304 |
|
|
|
8,396 |
|
|
|
8,164 |
|
|
|
0 |
|
|
|
0 |
|
|
Foreign currency exchange rate changes |
|
|
0 |
|
|
|
0 |
|
|
|
2,457 |
|
|
|
1,964 |
|
|
|
0 |
|
|
|
0 |
|
|
Corporate contributions |
|
|
5,965 |
|
|
|
1,660 |
|
|
|
672 |
|
|
|
656 |
|
|
|
1,220 |
|
|
|
1,228 |
|
|
Participant contributions |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
274 |
|
|
|
99 |
|
|
Gross benefits paid |
|
|
(15,179 |
) |
|
|
(14,838 |
) |
|
|
(2,468 |
) |
|
|
(2,535 |
) |
|
|
(1,494 |
) |
|
|
(1,327 |
) |
|
Fair value of plan assets at December 31 |
|
$ |
210,880 |
|
|
$ |
195,667 |
|
|
$ |
66,957 |
|
|
$ |
57,900 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status of the plans: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets |
|
$ |
210,880 |
|
|
$ |
195,667 |
|
|
$ |
66,957 |
|
|
$ |
57,900 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Less benefit obligations |
|
|
273,776 |
|
|
|
261,902 |
|
|
|
69,923 |
|
|
|
62,339 |
|
|
|
11,410 |
|
|
|
11,398 |
|
|
Funded status at December 31 |
|
$ |
(62,896 |
) |
|
$ |
(66,235 |
) |
|
$ |
(2,966 |
) |
|
$ |
(4,439 |
) |
|
$ |
(11,410 |
) |
|
$ |
(11,398 |
) |
|
|
(a) |
Includes the nonqualified defined benefit pension plan. |
|
|
(b) |
Includes the overfunded U.K. defined benefit pension plan and two smaller unfunded defined benefit pension plans. |
43
|
|
The following table provides a summary of amounts recognized in the consolidated balance sheets at December 31, 2020, and 2019.
|
|
|
U.S. Pension Benefits |
|
|
Foreign Pension Benefits |
|
|
Other Postretirement Benefits |
|
|||||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Employee benefit obligations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid pensions(a) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
5,327 |
|
|
$ |
3,062 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Accrued payrolls and employee benefits(b) |
|
|
(477 |
) |
|
|
(464 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
(1,028 |
) |
|
|
(1,305 |
) |
|
Employee benefit obligations(c) |
|
|
(62,419 |
) |
|
|
(65,771 |
) |
|
|
(8,293 |
) |
|
|
(7,501 |
) |
|
|
(10,382 |
) |
|
|
(10,093 |
) |
|
Total employee benefit obligations |
|
$ |
(62,896 |
) |
|
$ |
(66,235 |
) |
|
$ |
(2,966 |
) |
|
$ |
(4,439 |
) |
|
$ |
(11,410 |
) |
|
$ |
(11,398 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss:(d) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain) |
|
$ |
63,834 |
|
|
$ |
57,883 |
|
|
$ |
18,341 |
|
|
$ |
19,673 |
|
|
$ |
324 |
|
|
$ |
(538 |
) |
|
Prior service cost (credit) |
|
|
38 |
|
|
|
79 |
|
|
|
(7,327 |
) |
|
|
(7,371 |
) |
|
|
(6,833 |
) |
|
|
(7,850 |
) |
|
Total accumulated other comprehensive loss |
|
$ |
63,872 |
|
|
$ |
57,962 |
|
|
$ |
11,014 |
|
|
$ |
12,302 |
|
|
$ |
(6,509 |
) |
|
$ |
(8,388 |
) |
|
|
(a) |
Represents the overfunded U.K. defined benefit pension plan which is recorded as a noncurrent asset in the consolidated balance sheets. |
|
|
(b) |
Recorded as a current liability in the consolidated balance sheets. |
|
|
(c) |
Recorded as a noncurrent liability in the consolidated balance sheets. |
|
|
(d) |
Amounts are pre-tax. |
As of December 31, 2020, estimated benefit payments for subsequent years are as follows:
|
|
|
U.S. Pension Benefits |
|
|
Foreign Pension Benefits |
|
|
Other Postretirement Benefits |
|
|||
|
2021 |
|
$ |
15,758 |
|
|
$ |
1,965 |
|
|
$ |
1,041 |
|
|
2022 |
|
|
15,821 |
|
|
|
2,003 |
|
|
|
1,004 |
|
|
2023 |
|
|
15,840 |
|
|
|
1,832 |
|
|
|
993 |
|
|
2024 |
|
|
15,753 |
|
|
|
2,568 |
|
|
|
989 |
|
|
2025 |
|
|
15,607 |
|
|
|
2,400 |
|
|
|
923 |
|
|
2026-2030 |
|
|
74,313 |
|
|
|
12,667 |
|
|
|
2,762 |
|
|
Total benefit payments |
|
$ |
153,092 |
|
|
$ |
23,435 |
|
|
$ |
7,712 |
|
Investment Policies and Strategies
The investment policies and strategies are determined and monitored by the Board of Directors for the U.S. pension plans and by the Trustees (as appointed by UES-UK and the employees of UES-UK) for the UES-UK pension plan, each of whom employ their own investment managers to manage the plan’s assets in accordance with the policy guidelines. The U.S defined benefit pension plans follow a glide-path strategy whereby target asset allocations are rebalanced based on projected payment obligations and the funded status of the plans. In 2020, the U.K. defined benefit pension plan adopted a liability-matching portfolio whereby a higher percentage of plan assets are invested in fixed income securities. Pension assets of the UES-UK plan are invested with the objective of the plan reaching self-sufficiency in a three-to-five-year period, without additional corporate contributions.
Attempts to minimize risk include allowing temporary changes to the allocation mix in response to market conditions, diversifying investments among asset categories (e.g., equity securities, fixed-income securities, alternative investments, cash and cash equivalents) and within these asset categories (e.g., economic sector, industry, geographic distribution, size) and consulting with independent financial and legal counsels to assure that the investments and their expected returns and risks are consistent with the goals of the Board of Directors or Trustees.
Investments in equity securities are primarily in common stocks of publicly traded U.S. and international companies across a broad spectrum of industry sectors. Investments in fixed-income securities are principally A-rated or better bonds with maturities of less than ten years, preferred stocks and convertible bonds. Investments in equity and fixed-income securities are either direct or through designated mutual funds. The Corporation believes there are no significant concentrations of risk associated with the plans’ assets. With respect to the U.S. pension plans, the following investments are prohibited unless otherwise approved by the Board of Directors: stock of the Corporation, futures and options except for hedging purposes, unregistered or restricted stock, warrants, margin trading, short-selling, real estate excluding public or real estate partnerships, and commodities including art, jewelry and gold. The UES-UK pension plan invests in specific funds. Any investments other than those specifically identified would be considered prohibited.
44
The following table summarizes target asset allocations (within +/-5% considered acceptable) and major asset categories. Certain investments are classified differently for target asset allocation purposes and external reporting purposes. The Corporation intends to continue to liquidate the alternative investments of the U.S. plans to provide additional flexibility with investment allocation.
|
|
|
U.S. Pension Benefits |
|
|
Foreign Pension Benefits |
|
||||||||||||||||||
|
|
|
Target Allocation |
|
|
Percentage of Plan Assets |
|
|
Target Allocation |
|
|
Percentage of Plan Assets |
|
||||||||||||
|
|
|
Dec. 31, 2020 |
|
|
2020 |
|
|
2019 |
|
|
Dec. 31, 2020 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Equity Securities |
|
|
54 |
% |
|
|
52 |
% |
|
|
45 |
% |
|
|
31 |
% |
|
|
34 |
% |
|
|
14 |
% |
|
Fixed-Income Securities |
|
|
43 |
% |
|
|
40 |
% |
|
|
42 |
% |
|
|
55 |
% |
|
|
48 |
% |
|
|
75 |
% |
|
Alternative Investments |
|
|
0 |
% |
|
|
5 |
% |
|
|
10 |
% |
|
|
14 |
% |
|
|
11 |
% |
|
|
11 |
% |
|
Other (primarily cash and cash equivalents) |
|
|
3 |
% |
|
|
3 |
% |
|
|
3 |
% |
|
|
0 |
% |
|
|
7 |
% |
|
|
0 |
% |
Fair Value Measurement of Plan Assets
Equity securities, exchange-traded funds (“ETFs”), mutual funds and treasury bonds are actively traded on exchanges or broker networks and price quotes for these investments are readily available. While not quoted on active exchanges, price quotes for corporate and agency bonds are readily available. Similarly, certain commingled funds are not traded publicly, but the underlying assets (such as stocks and bonds) held in the funds are traded on active markets and the prices for the underlying assets are readily observable. For securities not actively traded, the fair value may be based on third-party appraisals, discounted cash flow analysis, benchmark yields and inputs that are currently observable in markets for similar securities.
Investment Strategies
The significant investment strategies of the various funds are summarized below.
|
Fund |
Investment Strategy |
Primary Investment Objective |
|
Temporary Investment Funds |
Invests primarily in a diversified portfolio of investment grade money market instruments. |
Achieve a market level of current income while maintaining stability of principal and liquidity. |
|
Various Equity Funds |
Each fund maintains a diversified holding in common stock of applicable companies (e.g., common stock of small capitalization companies if a small-cap fund, common stock of medium capitalization companies if a mid-cap fund, common stock of foreign corporations if an international fund, etc.). |
Outperform the fund’s related index. |
|
Various Fixed Income Funds |
Invests primarily in a diversified portfolio of fixed-income securities of varying maturities or in commingled funds which invest in a diversified portfolio of fixed-income securities of varying maturities. |
To achieve a rate of return that matches or exceeds the expected growth in plan liabilities.
|
|
Alternative Investments – Managed Funds |
Invests in equities and equity-like asset classes and strategies (such as public equities, venture capital, private equity, real estate, natural resources and |
Generate a minimum annual inflation adjusted return of 5% and outperform a traditional 70/30 equities/bond portfolio. |
|
Alternative Investments –Absolute Return Funds |
Invests in a diversified portfolio of alternative investment styles and strategies approved by the Trustees of the UES-UK defined benefit pension plan. |
Generate long-term capital appreciation while maintaining a low correlation with the traditional global financial markets. |
45
Categories of Plan Assets
Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2020, are summarized below.
|
|
|
Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
$ |
6,012 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
6,012 |
|
|
Consumer staples |
|
|
2,591 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,591 |
|
|
Energy |
|
|
569 |
|
|
|
0 |
|
|
|
0 |
|
|
|
569 |
|
|
Financial |
|
|
3,199 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,199 |
|
|
Healthcare |
|
|
9,831 |
|
|
|
0 |
|
|
|
0 |
|
|
|
9,831 |
|
|
Industrials |
|
|
7,026 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,026 |
|
|
Information technology |
|
|
11,450 |
|
|
|
0 |
|
|
|
0 |
|
|
|
11,450 |
|
|
Materials |
|
|
736 |
|
|
|
0 |
|
|
|
0 |
|
|
|
736 |
|
|
Mutual funds and ETFs |
|
|
52,101 |
|
|
|
0 |
|
|
|
0 |
|
|
|
52,101 |
|
|
Real estate |
|
|
1,180 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,180 |
|
|
Telecommunications |
|
|
2,343 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,343 |
|
|
Utilities |
|
|
325 |
|
|
|
0 |
|
|
|
0 |
|
|
|
325 |
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
|
1,070 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,070 |
|
|
Consumer staples |
|
|
2,478 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,478 |
|
|
Energy |
|
|
419 |
|
|
|
0 |
|
|
|
0 |
|
|
|
419 |
|
|
Financial |
|
|
2,252 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,252 |
|
|
Healthcare |
|
|
1,107 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,107 |
|
|
Industrials |
|
|
2,113 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,113 |
|
|
Information technology |
|
|
1,743 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,743 |
|
|
Materials |
|
|
987 |
|
|
|
0 |
|
|
|
0 |
|
|
|
987 |
|
|
Total Equity Securities |
|
|
109,532 |
|
|
|
0 |
|
|
|
0 |
|
|
|
109,532 |
|
|
Fixed-Income Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
0 |
|
|
|
45,567 |
|
|
|
0 |
|
|
|
45,567 |
|
|
Treasury bonds |
|
|
24,967 |
|
|
|
0 |
|
|
|
0 |
|
|
|
24,967 |
|
|
Agency bonds |
|
|
0 |
|
|
|
624 |
|
|
|
0 |
|
|
|
624 |
|
|
Mutual funds and ETFs |
|
|
7,794 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,794 |
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
0 |
|
|
|
2,699 |
|
|
|
0 |
|
|
|
2,699 |
|
|
Total Fixed-Income Securities |
|
|
32,761 |
|
|
|
48,890 |
|
|
|
0 |
|
|
|
81,651 |
|
|
Alternative Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed funds(a) |
|
|
0 |
|
|
|
0 |
|
|
|
7,557 |
|
|
|
7,557 |
|
|
Total Alternative Investments |
|
|
0 |
|
|
|
0 |
|
|
|
7,557 |
|
|
|
7,557 |
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(b) |
|
|
12,142 |
|
|
|
0 |
|
|
|
0 |
|
|
|
12,142 |
|
|
Other(c) |
|
|
88 |
|
|
|
0 |
|
|
|
(90 |
) |
|
|
(2 |
) |
|
Total Other |
|
|
12,230 |
|
|
|
0 |
|
|
|
(90 |
) |
|
|
12,140 |
|
|
Total assets |
|
$ |
154,523 |
|
|
$ |
48,890 |
|
|
$ |
7,467 |
|
|
$ |
210,880 |
|
|
|
(a) |
Includes approximately 82.8% in alternative investments (real assets, commodities and resources, absolute return funds) and 17.2% in cash and cash equivalents. |
|
|
(c) |
Includes accrued receivables and pending broker settlements. |
46
|
|
Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2019, are summarized below.
|
|
|
Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer discretionary |
|
$ |
4,054 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
4,054 |
|
|
Consumer staples |
|
|
3,368 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,368 |
|
|
Energy |
|
|
1,405 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1,405 |
|
|
Financial |
|
|
3,612 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,612 |
|
|
Healthcare |
|
|
6,952 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,952 |
|
|
Industrials |
|
|
6,941 |
|
|
|
0 |
|
|
|
0 |
|
|
|
6,941 |
|
|
Information technology |
|
|
7,443 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,443 |
|
|
Materials |
|
|
844 |
|
|
|
0 |
|
|
|
0 |
|
|
|
844 |
|
|
Mutual funds and ETFs |
|
|
51,259 |
|
|
|
0 |
|
|
|
0 |
|
|
|
51,259 |
|
|
Real estate |
|
|
272 |
|
|
|
0 |
|
|
|
0 |
|
|
|
272 |
|
|
Telecommunications |
|
|
2,994 |
|
|
|
0 |
|
|
|
0 |
|
|
|
2,994 |
|
|
Utilities |
|
|
516 |
|
|
|
0 |
|
|
|
0 |
|
|
|
516 |
|
|
Total Equity Securities |
|
|
89,660 |
|
|
|
0 |
|
|
|
0 |
|
|
|
89,660 |
|
|
Fixed-Income Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
0 |
|
|
|
45,289 |
|
|
|
0 |
|
|
|
45,289 |
|
|
Treasury bonds |
|
|
15,751 |
|
|
|
0 |
|
|
|
0 |
|
|
|
15,751 |
|
|
Agency bonds |
|
|
0 |
|
|
|
10,752 |
|
|
|
0 |
|
|
|
10,752 |
|
|
Mutual funds and ETFs |
|
|
7,802 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,802 |
|
|
Total Fixed-Income Securities |
|
|
23,553 |
|
|
|
56,041 |
|
|
|
0 |
|
|
|
79,594 |
|
|
Alternative Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Managed funds(a) |
|
|
0 |
|
|
|
0 |
|
|
|
19,341 |
|
|
|
19,341 |
|
|
Total Alternative Investments |
|
|
0 |
|
|
|
0 |
|
|
|
19,341 |
|
|
|
19,341 |
|
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents(b) |
|
|
7,038 |
|
|
|
0 |
|
|
|
0 |
|
|
|
7,038 |
|
|
Other(c) |
|
|
100 |
|
|
|
0 |
|
|
|
(66 |
) |
|
|
34 |
|
|
Total Other |
|
|
7,138 |
|
|
|
0 |
|
|
|
(66 |
) |
|
|
7,072 |
|
|
Total assets |
|
$ |
120,351 |
|
|
$ |
56,041 |
|
|
$ |
19,275 |
|
|
$ |
195,667 |
|
|
|
(a) |
Includes approximately 81.0% in alternative investments (real assets, commodities and resources, absolute return funds) and 19.0% in cash and cash equivalents. |
|
|
(b) |
Includes investments in temporary funds. |
|
|
(c) |
Includes accrued receivables and pending broker settlements. |
47
|
|
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2020, are summarized below.
|
|
|
Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled funds (U.K.) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
2,925 |
|
|
$ |
2,925 |
|
|
Commingled funds (International) |
|
|
0 |
|
|
|
2,343 |
|
|
|
17,746 |
|
|
|
20,089 |
|
|
Total Equity Securities |
|
|
0 |
|
|
|
2,343 |
|
|
|
20,671 |
|
|
|
23,014 |
|
|
Fixed-Income Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled funds (U.K.) |
|
|
0 |
|
|
|
17,883 |
|
|
|
0 |
|
|
|
17,883 |
|
|
Commingled funds (International) |
|
|
0 |
|
|
|
14,118 |
|
|
|
0 |
|
|
|
14,118 |
|
|
Total Fixed-Income Securities |
|
|
0 |
|
|
|
32,001 |
|
|
|
0 |
|
|
|
32,001 |
|
|
Multi-Asset Commingled Funds (International) |
|
|
0 |
|
|
|
4,381 |
|
|
|
0 |
|
|
|
4,381 |
|
|
Alternative Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute return funds |
|
|
0 |
|
|
|
0 |
|
|
|
3,094 |
|
|
|
3,094 |
|
|
Cash and cash equivalents |
|
|
73 |
|
|
|
4,394 |
|
|
|
0 |
|
|
|
4,467 |
|
|
Total assets |
|
$ |
73 |
|
|
$ |
43,119 |
|
|
$ |
23,765 |
|
|
$ |
66,957 |
|
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2019, are summarized below.
|
|
|
Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Equity Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled funds (U.K.) |
|
$ |
0 |
|
|
$ |
4,874 |
|
|
$ |
0 |
|
|
$ |
4,874 |
|
|
Commingled funds (International) |
|
|
0 |
|
|
|
3,291 |
|
|
|
0 |
|
|
|
3,291 |
|
|
Total Equity Securities |
|
|
0 |
|
|
|
8,165 |
|
|
|
0 |
|
|
|
8,165 |
|
|
Fixed-Income Securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commingled funds (U.K.) |
|
|
0 |
|
|
|
43,168 |
|
|
|
0 |
|
|
|
43,168 |
|
|
Alternative Investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Absolute return funds |
|
|
0 |
|
|
|
0 |
|
|
|
6,495 |
|
|
|
6,495 |
|
|
Cash and cash equivalents |
|
|
72 |
|
|
|
0 |
|
|
|
0 |
|
|
|
72 |
|
|
Total assets |
|
$ |
72 |
|
|
$ |
51,333 |
|
|
$ |
6,495 |
|
|
$ |
57,900 |
|
The table below sets forth a summary of changes in the fair value of the Level 3 plan assets for the U.S. and foreign pension benefits plans for the year ended December 31, 2020, and 2019.
|
|
|
U.S. Pension Benefits |
|
Foreign Pension Benefits |
|
||||||||||
|
|
|
2020 |
|
|
2019 |
|
2020 |
|
|
2019 |
|
||||
|
Fair value as of January 1 |
|
$ |
19,341 |
|
|
$ |
23,673 |
|
$ |
6,495 |
|
|
$ |
7,569 |
|
|
Contributions |
|
|
0 |
|
|
|
0 |
|
|
16,418 |
|
|
|
0 |
|
|
Withdrawals |
|
|
(10,784 |
) |
|
|
(4,921 |
) |
|
(7,066 |
) |
|
|
(1,791 |
) |
|
Realized gains (losses) |
|
|
1,706 |
|
|
|
1,445 |
|
|
(197 |
) |
|
|
(701 |
) |
|
Change in net unrealized (losses) gains |
|
|
(2,706 |
) |
|
|
(856 |
) |
|
6,024 |
|
|
|
1,189 |
|
|
Other, primarily impact from changes in foreign currency exchange rates |
|
|
0 |
|
|
|
0 |
|
|
2,091 |
|
|
|
229 |
|
|
Fair value as of December 31 |
|
$ |
7,557 |
|
|
$ |
19,341 |
|
$ |
23,765 |
|
|
$ |
6,495 |
|
Net Periodic Pension and Other Postretirement Benefit Costs
The actual return on the fair value of plan assets is included in determining the funded status of the plans. In determining net periodic pension benefit costs, the expected long-term rate of return on the market-related value of plan assets is used. Differences between the actual return on plan assets and the expected long-term rate of return on plan assets are classified as part of unrecognized actuarial gains or losses and are recorded as a component of accumulated other comprehensive loss on the consolidated balance sheet. When these gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are
48
amortized to net periodic pension and other postretirement benefit costs over the average remaining service period or life expectancy of the employees expected to receive benefits under the plans. When the gains or losses are less than 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are included in net periodic pension and other postretirement benefit costs indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation.
Net periodic pension and other postretirement benefit costs include the following components for each of the years.
|
|
|
U.S. Pension Benefits |
|
|
Foreign Pension Benefits |
|
|
Other Postretirement Benefits |
|
|||||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Service cost |
|
$ |
223 |
|
|
$ |
633 |
|
|
$ |
444 |
|
|
$ |
444 |
|
|
$ |
225 |
|
|
$ |
286 |
|
|
Interest cost |
|
|
7,175 |
|
|
|
9,018 |
|
|
|
1,058 |
|
|
|
1,399 |
|
|
|
281 |
|
|
|
390 |
|
|
Expected return on plan assets |
|
|
(12,828 |
) |
|
|
(12,623 |
) |
|
|
(1,972 |
) |
|
|
(2,321 |
) |
|
|
0 |
|
|
|
0 |
|
|
Amortization of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit) |
|
|
41 |
|
|
|
64 |
|
|
|
(285 |
) |
|
|
(284 |
) |
|
|
(1,017 |
) |
|
|
(1,804 |
) |
|
Actuarial loss (gain) |
|
|
2,094 |
|
|
|
1,153 |
|
|
|
701 |
|
|
|
669 |
|
|
|
(139 |
) |
|
|
(336 |
) |
|
Effect of plan amendment |
|
|
0 |
|
|
|
236 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Special termination benefits |
|
|
12 |
|
|
|
3,694 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Curtailment loss (gain) |
|
|
0 |
|
|
|
1,641 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(7,654 |
) |
|
Total net periodic pension and other postretirement benefit costs |
|
$ |
(3,283 |
) |
|
$ |
3,816 |
|
|
$ |
(54 |
) |
|
$ |
(93 |
) |
|
$ |
(650 |
) |
|
$ |
(9,118 |
) |
Assumptions
Assumptions are reviewed on an annual basis. The expected long-term rate of return on plan assets is an estimate of average rates of earnings expected to be earned on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. Since these benefits will be paid over many years, the expected long-term rate of return is reflective of current investment returns and investment returns over a longer period. Consideration is also given to target and actual asset allocations, inflation and real risk-free return. A percentage point decrease in the expected long-term rate of return would increase annual pension expense by approximately $2,350. Conversely, a percentage point increase in the expected long-term rate of return would decrease annual pension expense by approximately $2,350. The discount rates used in determining future pension obligations and other postretirement benefits for each of the plans are based on rates of return on high-quality fixed-income investments currently available and expected to be available during the period to maturity of the pension and other postretirement benefits. High-quality fixed-income investments are defined as those investments which have received one of the two highest ratings given by a recognized rating agency with maturities of 10+ years. Assumptions about wage increases are not relevant since substantially all the benefits available under the defined benefit pension plans are either frozen or based on a multiplier, versus wages.
The discount rates used to determine the benefit obligations as of December 31, 2020, and 2019, are summarized below.
|
|
|
U.S. Pension Benefits |
|
Foreign Pension Benefits |
|
Other Postretirement Benefits |
||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Discount rate |
|
2.50-2.63% |
|
3.25-3.31% |
|
1.45% |
|
2.05% |
|
2.61% |
|
2.98-3.35% |
In addition, the assumed health care cost trend rate at December 31, 2020, for other postretirement benefits is 5.40% for 2021 gradually decreasing to 4.75% in 2025. In selecting rates for current and long-term health care assumptions, the Corporation considers known health care cost increases, the design of the benefit programs, the demographics of its active and retiree populations and expectations of inflation rates in the future.
The following assumptions were used to determine net periodic pension and other postretirement benefit costs for the year ended December 31, 2020, and 2019.
|
|
|
U.S. Pension Benefits |
|
Foreign Pension Benefits |
|
Other Postretirement Benefits |
||||||
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Discount rate |
|
3.25-3.31% |
|
3.19-4.34% |
|
2.05% |
|
3.00% |
|
2.98-3.35% |
|
2.97-4.33% |
|
Expected long-term rate of return |
|
6.60-7.25% |
|
6.60-7.25% |
|
3.55% |
|
3.55% |
|
n/a |
|
n/a |
49
NOTE 12 – COMMITMENTS AND CONTINGENT LIABILITIES:
Outstanding standby and commercial letters of credit as of December 31, 2020, approximated $14,735, the majority of which serves as collateral for the IRB debt. In addition, outstanding surety bonds guaranteeing certain obligations of the two unfunded foreign defined benefit pension plans approximated $4,000 (SEK 33,900) as of December 31, 2020.
At December 31, 2020, the Corporation had purchase commitments for expected future capital expenditures of approximately $3,300, which are anticipated to be spent over the next 12-18 months.
Approximately 36% of the Corporation’s employees are covered by collective bargaining agreements that have expiration dates ranging from March 2021 to October 2023. Collective bargaining agreements expiring in 2021 (representing approximately 65% of the covered employees) will be negotiated with the intent to secure mutually beneficial, long-term arrangements. In March 2021, the collective bargaining agreement set to expire during the month, representing 25% of the covered employees, was extended to March 2025 (see Note 25).
See Note 15 regarding derivative instruments, Note 20 regarding litigation and Note 22 for environmental matters.
NOTE 13 – EQUITY RIGHTS OFFERING:
In September 2020, the Corporation completed an equity rights offering, issuing 5,507,889 shares of its common stock and 12,339,256 Series A warrants to existing shareholders for total gross proceeds of $19,279. The shares of common stock and warrants are classified as equity instruments in the consolidated statement of shareholders’ equity. Additional proceeds may be received from the future exercise of the Series A warrants. Each Series A warrant provides the holder with the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock, and expires on August 1, 2025. All Series A warrants remain outstanding and exercisable at December 31, 2020. See Note 25, Subsequent Events, regarding the exercise of Series A warrants after December 31, 2020. Stock issuance costs equaled $1,140 and are recorded against the proceeds in additional paid in capital. A majority of the proceeds from the equity rights offering was used to repay borrowings under the Corporation’s revolving credit facility.
NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE LOSS:
Net changes and ending balances for the various components of other comprehensive income (loss) and for accumulated other comprehensive loss as of and for the year ended December 31, 2019, and 2020, are summarized below.
|
|
|
Foreign Currency Translation Adjustments |
|
|
Unrecognized Components of Employee Benefit Plans |
|
|
Derivatives |
|
|
Total Accumulated Other Comprehensive Loss |
|
|
Noncontrolling Interest |
|
|
Accumulated Other Comprehensive Loss Attributable to Ampco-Pittsburgh |
|
||||||
|
January 1, 2019 |
|
$ |
(18,642 |
) |
|
$ |
(30,902 |
) |
|
$ |
(64 |
) |
|
$ |
(49,608 |
) |
|
$ |
(174 |
) |
|
$ |
(49,434 |
) |
|
Net Change |
|
|
290 |
|
|
|
(19,957 |
) |
|
|
355 |
|
|
|
(19,312 |
) |
|
|
(84 |
) |
|
|
(19,228 |
) |
|
December 31, 2019 |
|
|
(18,352 |
) |
|
|
(50,859 |
) |
|
|
291 |
|
|
|
(68,920 |
) |
|
|
(258 |
) |
|
|
(68,662 |
) |
|
Net Change |
|
|
6,981 |
|
|
|
(6,793 |
) |
|
|
298 |
|
|
|
486 |
|
|
|
519 |
|
|
|
(33 |
) |
|
December 31, 2020 |
|
$ |
(11,371 |
) |
|
$ |
(57,652 |
) |
|
$ |
589 |
|
|
$ |
(68,434 |
) |
|
$ |
261 |
|
|
$ |
(68,695 |
) |
50
The following summarizes the line items affected on the consolidated statements of operations for components reclassified from accumulated other comprehensive loss for the year ended December 31, 2020, and 2019. Amounts in parentheses represent credits to net income (loss).
|
|
|
2020 |
|
|
2019 |
|
||
|
Amortization of unrecognized employee benefit costs: |
|
|
|
|
|
|
|
|
|
Other expense |
|
$ |
1,395 |
|
|
$ |
(302 |
) |
|
Income tax provision |
|
|
0 |
|
|
|
0 |
|
|
Net of income tax |
|
$ |
1,395 |
|
|
$ |
(302 |
) |
|
Realized (gains) losses from settlement of cash flow hedges: |
|
|
|
|
|
|
|
|
|
Depreciation and amortization (foreign currency purchase contracts) |
|
$ |
(27 |
) |
|
$ |
(27 |
) |
|
Costs of products sold (excluding depreciation and amortization) (futures contracts – copper and aluminum) |
|
|
(65 |
) |
|
|
285 |
|
|
Total before income tax |
|
|
(92 |
) |
|
|
258 |
|
|
Income tax provision |
|
|
0 |
|
|
|
0 |
|
|
Net of income tax |
|
$ |
(92 |
) |
|
$ |
258 |
|
There was no income tax expense or benefit associated with the various components of other comprehensive income (loss) for either year due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the expense is recognized. Foreign currency translation adjustments exclude the effect of income taxes since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
NOTE 15 – DERIVATIVE INSTRUMENTS:
Certain operations of the Corporation are subject to risk from exchange rate fluctuations in connection with sales in foreign currencies. To minimize this risk, foreign currency sales contracts are entered into which are designated as cash flow or fair value hedges. As of December 31, 2020, approximately $4,370 of anticipated foreign-denominated sales has been hedged which are covered by fair value contracts settling at various dates through January 2022.
Additionally, certain divisions of the Air and Liquid Processing segment are subject to risk from increases in the price of commodities (copper and aluminum) used in the production of inventory. To minimize this risk, futures contracts are entered into which are designated as cash flow hedges. At December 31, 2020, approximately 39% or $2,138 of anticipated copper purchases over the next eight months and 56% or $470 of anticipated aluminum purchases over the next six months are hedged.
The Corporation had purchases of natural gas under previously existing commitments of approximately $1,368 and $682 for one of its subsidiaries for 2020 and 2019, respectively. No purchase commitments for anticipated natural gas usage are outstanding as of December 31, 2020.
The Corporation previously entered into foreign currency purchase contracts to manage the volatility associated with euro-denominated progress payments to be made for certain machinery and equipment. As of December 31, 2010, all contracts had been settled and the underlying fixed assets were placed in service.
No portion of the existing cash flow or fair value hedges is considered to be ineffective, including any ineffectiveness arising from the unlikelihood of an anticipated transaction to occur. Additionally, no amounts have been excluded from assessing the effectiveness of a hedge. The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.
The following summarizes location and fair value of the foreign currency sales contracts recorded on the consolidated balance sheets as of December 31:
|
|
|
Location |
|
2020 |
|
|
2019 |
|
||
|
Fair value hedge contracts |
|
Other current assets |
|
$ |
1,123 |
|
|
$ |
677 |
|
|
|
|
Other noncurrent assets |
|
|
332 |
|
|
|
153 |
|
|
|
|
Other current liabilities |
|
|
12 |
|
|
|
0 |
|
|
Fair value hedged item |
|
Receivables |
|
|
(960 |
) |
|
|
(260 |
) |
|
|
|
Other current liabilities |
|
|
201 |
|
|
|
323 |
|
|
|
|
Other noncurrent liabilities |
|
|
327 |
|
|
|
95 |
|
51
The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. Amounts recognized as and reclassified from accumulated other comprehensive loss are recorded as a component of other comprehensive income (loss) and are summarized below. Amounts are after-tax, where applicable. Certain amounts recognized as or reclassified from comprehensive income (loss) for 2020 and 2019 have no tax effect due to the Corporation recording a valuation allowance against its deferred income tax assets in the related jurisdictions.
|
For the Year Ended December 31, 2020 |
|
Beginning of the Year |
|
|
Recognized |
|
|
Reclassified |
|
|
End of the Year |
|
||||
|
Foreign currency purchase contracts |
|
$ |
189 |
|
|
$ |
0 |
|
|
$ |
27 |
|
|
$ |
162 |
|
|
Future contracts – copper and aluminum |
|
|
102 |
|
|
|
390 |
|
|
|
65 |
|
|
|
427 |
|
|
Change in fair value |
|
$ |
291 |
|
|
$ |
390 |
|
|
$ |
92 |
|
|
$ |
589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency purchase contracts |
|
$ |
216 |
|
|
$ |
0 |
|
|
$ |
27 |
|
|
$ |
189 |
|
|
Future contracts – copper and aluminum |
|
|
(280 |
) |
|
|
97 |
|
|
|
(285 |
) |
|
|
102 |
|
|
Change in fair value |
|
$ |
(64 |
) |
|
$ |
97 |
|
|
$ |
(258 |
) |
|
$ |
291 |
|
The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive loss to earnings is summarized below. All amounts are pre-tax.
|
|
|
Location of Gain (Loss) |
|
Estimated to be Reclassified in the Next |
|
|
Year Ended December 31, |
|
||||||
|
|
|
in Statements of Operations |
|
12 Months |
|
|
2020 |
|
|
2019 |
|
|||
|
Foreign currency purchase contracts |
|
Depreciation and amortization |
|
$ |
27 |
|
|
$ |
27 |
|
|
$ |
27 |
|
|
Futures contracts – copper and aluminum |
|
Costs of products sold (excluding depreciation and amortization) |
|
|
427 |
|
|
|
65 |
|
|
|
(285 |
) |
Losses on foreign exchange transactions included in other expense approximated $(97) and $(1,081) for 2020 and 2019, respectively.
NOTE 16 – FAIR VALUE:
The following summarizes financial assets and liabilities reported at fair value on a recurring basis in the consolidated balance sheets at December 31:
|
2020 |
|
Quoted Prices in Active Markets for Identical Inputs (Level 1) |
|
|
Significant Other Observable Inputs (Level 2) |
|
|
Significant Unobservable Inputs (Level 3) |
|
|
Total |
|
||||
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
|
$ |
4,402 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
4,402 |
|
|
Foreign currency exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
0 |
|
|
|
(960 |
) |
|
|
0 |
|
|
|
(960 |
) |
|
Other current assets |
|
|
0 |
|
|
|
1,123 |
|
|
|
0 |
|
|
|
1,123 |
|
|
Other noncurrent assets |
|
|
0 |
|
|
|
332 |
|
|
|
0 |
|
|
|
332 |
|
|
Other current liabilities |
|
|
0 |
|
|
|
213 |
|
|
|
0 |
|
|
|
213 |
|
|
Other noncurrent liabilities |
|
|
0 |
|
|
|
327 |
|
|
|
0 |
|
|
|
327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other noncurrent assets |
|
$ |
4,183 |
|
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
4,183 |
|
|
Foreign currency exchange contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets |
|
|
0 |
|
|
|
677 |
|
|
|
0 |
|
|
|
677 |
|
|
Other noncurrent assets |
|
|
0 |
|
|
|
153 |
|
|
|
0 |
|
|
|
153 |
|
|
Other current liabilities |
|
|
0 |
|
|
|
323 |
|
|
|
0 |
|
|
|
323 |
|
|
Other noncurrent liabilities |
|
|
0 |
|
|
|
95 |
|
|
|
0 |
|
|
|
95 |
|
52
The investments held as other noncurrent assets represent assets held in the “Rabbi” trust for the purpose of providing benefits under the non-qualified defined benefit pension plan. The fair value of the investments is based on quoted prices of the investments in active markets. The fair value of foreign currency exchange contracts is determined based on the fair value of similar contracts with similar terms and remaining maturities. The fair value of futures contracts is based on market quotations. The fair values of the variable-rate IRB debt and borrowings under the Amended Credit Agreement approximate their carrying values. Additionally, the fair values of trade receivables and trade payables approximate their carrying values.
Net sales by geographic area and product line for the year ended December 31, 2020, and 2019, are outlined below. Net sales are attributed to the geographic areas based on the location of the customer. Sales to individual countries were less than 10% of consolidated net sales for each of the years.
|
|
|
Net Sales by Geographic Area |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
United States |
|
$ |
159,908 |
|
|
$ |
192,845 |
|
|
Foreign |
|
|
168,636 |
|
|
|
205,059 |
|
|
Consolidated total |
|
$ |
328,544 |
|
|
$ |
397,904 |
|
|
|
|
Net Sales by Product Line |
|
|||||
|
|
|
2020 |
|
|
2019 |
|
||
|
Forged and cast mill rolls |
|
$ |
228,219 |
|
|
$ |
286,036 |
|
|
Forged engineered products |
|
|
9,670 |
|
|
|
19,594 |
|
|
Heat exchange coils |
|
|
25,249 |
|
|
|
27,973 |
|
|
Centrifugal pumps |
|
|
36,911 |
|
|
|
36,001 |
|
|
Air handling systems |
|
|
28,495 |
|
|
|
28,300 |
|
|
Consolidated total |
|
$ |
328,544 |
|
|
$ |
397,904 |
|
NOTE 18 – STOCK-BASED COMPENSATION:
In May 2016, the shareholders of the Corporation approved the adoption of the Ampco-Pittsburgh Corporation 2016 Omnibus Incentive Plan (the “Incentive Plan”), which authorizes the issuance of up to 1,100,000 shares of the Corporation’s common stock for awards under the Incentive Plan. The Incentive Plan replaced the 2011 Omnibus Incentive Plan (the “Predecessor Plan”). No new awards will be granted under the Predecessor Plan. Any awards outstanding under the Predecessor Plan will remain subject to, and be paid under, the Predecessor Plan, and any shares subject to outstanding awards under the Predecessor Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the Incentive Plan.
Awards under the Incentive Plan may include incentive stock options and non-qualified stock options, stock appreciation rights, restricted shares and restricted stock units, performance awards, other stock-based awards or short-term cash incentive awards. If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of the shares, or if the shares are issued under the Incentive Plan and thereafter are forfeited to the Corporation, the shares subject to such awards and the forfeited shares will not count against the aggregate number of shares available under the Incentive Plan. Shares tendered or withheld to pay the option exercise price or tax withholding will continue to count against the aggregate number of shares of common stock available for grant under the Incentive Plan. Any shares repurchased by the Corporation with cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the Incentive Plan.
The Incentive Plan may be administered by the Board of Directors or the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine, within the limits of the express provisions of the Incentive Plan, the individuals to whom the awards will be granted and the nature, amount and terms of such awards. The Incentive Plan also provides for equity-based awards during any one year to non-employee members of the Board of Directors, based on the grant date fair value, not to exceed $200. The limit does not apply to shares received by a non-employee director at his or her election in lieu of all or a portion of the director’s retainer for board service. The number of shares of common stock issued to non-employee directors was 70,000 in each of 2020 and 2019.
The Compensation Committee has granted time-vesting restricted stock units (RSUs) and performance-vesting restricted stock units (PSUs) to select individuals. Each RSU represents the right to receive one share of common stock of the Corporation at a future date after the RSU has become earned and vested, subject to the terms and conditions of the RSU award agreement. The RSUs typically vest over a three-year period. The PSUs can be earned depending upon the achievement of a performance or market condition and a
53
time-vesting condition as follows: (i) achievement of a targeted return on invested capital or a basic earnings per share during the performance period beginning in the year of grant and continuing for two subsequent years; (ii) achievement of a three-year cumulative relative total shareholder return as ranked against other companies included in the Corporation’s peer group; and (iii) remaining continuously employed with the Corporation through the end of the year following three years from the date of grant. Earlier vesting of the stock units is permitted under certain conditions, such as upon a change of control of the Corporation, or as approved by the Board of Directors.
The grant date fair value for the RSUs equals the closing price of the Corporation’s common stock on the NYSE on the date of grant. The grant date fair value for PSUs subject to a market condition is determined using a Monte Carlo simulation model and the grant date fair value for PSUs that vest subject to a performance condition is equal to the closing price of the Corporation’s stock on the NYSE on the date of grant. The determination of the fair value of these awards takes into consideration the likelihood of achievement of the market or performance condition and is adjusted for subsequent changes in the estimated or actual outcome of the condition. Unrecognized compensation expense associated with the RSUs and PSUs equaled $1,519 at December 31, 2020, and is expected to be recognized over a weighted average period of approximately 2 years.
Outstanding RSUs and PSUs, which would represent non-vested awards, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
|
|
|
Number of RSUs |
|
|
Weighted Average Fair Value |
|
|
Number of PSUs |
|
|
Weighted Average Fair Value |
|
||||
|
Outstanding at January 1, 2019 |
|
|
172,705 |
|
|
$ |
11.77 |
|
|
|
126,587 |
|
|
$ |
11.19 |
|
|
Granted |
|
|
164,382 |
|
|
|
3.23 |
|
|
|
164,442 |
|
|
|
3.60 |
|
|
Converted to common stock |
|
|
(89,339 |
) |
|
|
12.03 |
|
|
|
0 |
|
|
N/A |
|
|
|
Forfeited/cancelled |
|
|
(27,897 |
) |
|
|
10.48 |
|
|
|
(76,838 |
) |
|
|
10.15 |
|
|
Outstanding at December 31, 2019 |
|
|
219,851 |
|
|
|
5.45 |
|
|
|
214,191 |
|
|
|
5.74 |
|
|
Granted |
|
|
162,503 |
|
|
|
3.22 |
|
|
|
169,178 |
|
|
|
4.19 |
|
|
Converted to common stock |
|
|
(95,391 |
) |
|
|
6.81 |
|
|
|
(5,793 |
) |
|
|
14.00 |
|
|
Forfeited/cancelled |
|
|
(8,305 |
) |
|
|
5.59 |
|
|
|
(29,380 |
) |
|
|
10.46 |
|
|
Outstanding at December 31, 2020 |
|
|
278,658 |
|
|
$ |
3.68 |
|
|
|
348,196 |
|
|
$ |
4.45 |
|
Outstanding stock options, all of which are fully vested, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
|
|
|
Number of Shares Under Options |
|
|
Weighted Average Exercise Price |
|
|
Remaining Contractual Life In Years |
|
|
Intrinsic Value |
|
||||
|
Outstanding at January 1, 2019 |
|
|
605,585 |
|
|
$ |
20.54 |
|
|
|
2.8 |
|
|
$ |
0 |
|
|
Granted |
|
|
0 |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
0 |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled |
|
|
(196,835 |
) |
|
|
18.25 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2019 |
|
|
408,750 |
|
|
|
21.64 |
|
|
|
2.1 |
|
|
|
0 |
|
|
Granted |
|
|
0 |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
0 |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
Forfeited/cancelled |
|
|
(139,500 |
) |
|
|
25.10 |
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2020 |
|
|
269,250 |
|
|
$ |
19.85 |
|
|
|
2.0 |
|
|
$ |
0 |
|
|
Exercisable at December 31, 2020 |
|
|
269,250 |
|
|
$ |
19.85 |
|
|
|
2.0 |
|
|
$ |
0 |
|
|
Vested or expected to vest at December 31, 2020 |
|
|
269,250 |
|
|
$ |
19.85 |
|
|
|
2.0 |
|
|
$ |
0 |
|
Stock-based compensation expense for all awards, including expense for shares to be issued to non-employee directors, approximated $1,329 and $1,422 for 2020 and 2019, respectively. The income tax benefit recognized in the consolidated statements of operations was not significant due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the expense was recognized (see Note 21).
54
NOTE 19 – RESEARCH AND DEVELOPMENT COSTS:
Expenditures relating to the development of new products, identification of products or process alternatives and modifications and improvements to existing products and processes are expensed as incurred. These expenses approximated $2,047 for 2020 and $2,523 for 2019.
The Corporation and its subsidiaries are involved in various claims and lawsuits incidental to their businesses and are also subject to asbestos litigation as described below.
Asbestos Litigation
Claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). Air & Liquid, and in some cases the Corporation, are defendants (among a number of defendants, often in excess of 50) in cases filed in various state and federal courts.
Asbestos Claims
The following table reflects approximate information about the claims for the Asbestos Liability against Air & Liquid and the Corporation for the year ended December 31, 2020, and 2019:
|
|
|
2020 |
|
|
2019 |
|
||
|
Total claims pending at the beginning of the period |
|
|
6,102 |
|
|
|
6,772 |
|
|
New claims served |
|
|
1,016 |
|
|
|
1,370 |
|
|
Claims dismissed |
|
|
(855 |
) |
|
|
(1,663 |
) |
|
Claims settled |
|
|
(372 |
) |
|
|
(377 |
) |
|
Total claims pending at the end of the period(1) |
|
|
5,891 |
|
|
|
6,102 |
|
|
Gross settlement and defense costs (in 000’s) |
|
$ |
27,437 |
|
|
$ |
20,289 |
|
|
Average gross settlement and defense costs per claim resolved (in 000’s) |
|
$ |
22.36 |
|
|
$ |
9.95 |
|
|
|
(1) |
Included as “open claims” are approximately 688 and 749 claims in 2020 and 2019, respectively, classified in various jurisdictions as “inactive” or transferred to a state or federal judicial panel on multi-district litigation, commonly referred to as the MDL. |
A substantial majority of the settlement and defense costs reflected in the above table was reported and paid by insurers. Because claims are often filed and can be settled or dismissed in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.
Asbestos Insurance
The Corporation and Air & Liquid are parties to a series of settlement agreements (“Settlement Agreements”) with insurers that have coverage obligations for the Asbestos Liability (the “Settling Insurers”). Under the Settlement Agreements, the Settling Insurers accept financial responsibility, subject to the terms and conditions of the respective agreements, including overall coverage limits, for pending and future claims for the Asbestos Liability. The Settlement Agreements encompass the substantial majority of insurance policies that provide coverage for claims for the Asbestos Liability.
The Settlement Agreements include acknowledgements that Howden North America, Inc. (“Howden”) is entitled to coverage under policies covering the Asbestos Liability for claims arising out of the historical products manufactured or distributed by Buffalo Forge, a former subsidiary of the Corporation (the “Products”), which was acquired by Howden. The Settlement Agreements do not provide for any prioritization on access to the applicable policies or any sublimits of liability as to Howden or the Corporation and Air & Liquid, and, accordingly, Howden may access the coverage afforded by the Settling Insurers for any covered claim arising out of the Products. In general, access by Howden to the coverage afforded by the Settling Insurers for the Products will erode coverage under the Settlement Agreements available to the Corporation and Air & Liquid for the Asbestos Liability.
Asbestos Valuations
At December 31, 2006, with the assistance of a nationally recognized expert in the valuation of asbestos liabilities, the Corporation recorded its initial reserve for the Asbestos Liability. With the assistance of the nationally recognized expert, the reserve for the Asbestos Liability had been periodically updated since that time. In 2018, the Corporation engaged Nathan Associates Inc. (“Nathan”) to update the liability valuation, and additional reserves were established by the Corporation for the Asbestos Liability claims pending or projected to be asserted through 2052, the estimated final date by which the Corporation expects to have settled all asbestos-related
55
claims. The methodology used by Nathan in its projection was substantially the same methodology employed by the previous expert and included the following factors:
|
|
• |
interpretation of a widely accepted forecast of the population likely to have been exposed to asbestos; |
|
|
• |
epidemiological studies estimating the number of people likely to develop asbestos-related diseases; |
|
|
• |
analysis of the number of people likely to file an asbestos-related injury claim against the subsidiaries and the Corporation based on such epidemiological data and relevant claims history from January 1, 2016, to August 19, 2018; |
|
|
• |
an analysis of pending cases, by type of injury claimed and jurisdiction where the claim is filed; |
|
|
• |
an analysis of claims resolution history from January 1, 2016, to August 19, 2018, to determine the average settlement value of claims, by type of injury claimed and jurisdiction of filing; and |
|
|
• |
an adjustment for inflation in the future average settlement value of claims, at an annual inflation rate based on the Congressional Budget Office’s forecast of inflation. |
Using this information, Nathan estimated the number of future claims for the Asbestos Liability that would be filed through the year 2052, as well as the settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims through 2052. This methodology has been accepted by numerous courts.
In conjunction with developing the Asbestos Liability through 2052, the Corporation also developed an estimate of probable insurance recoveries for the Asbestos Liability. In developing the estimate, the Corporation considered Nathan’s projection for settlement or indemnity costs for the Asbestos Liability and management’s projection of associated defense costs (based on the current defense to indemnity cost ratio), as well as a number of additional factors. These additional factors included the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, prior impairment of policies and gaps in the coverage, policy exhaustions, insolvencies among certain of the insurance carriers, and the nature of the underlying claims for the Asbestos Liability asserted against the subsidiaries and the Corporation as reflected in the Corporation’s asbestos claims database, as well as estimated erosion of insurance limits on account of claims against Howden arising out of the Products. In addition to consulting with the Corporation’s outside legal counsel on these insurance matters, the Corporation consulted with a nationally recognized insurance consulting firm it retained to assist the Corporation with certain policy allocation matters that also are among the several factors considered by the Corporation when analyzing potential recoveries from relevant historical insurance for the Asbestos Liability. Based upon all of the factors considered by the Corporation, and considering the Corporation’s analysis of publicly available information regarding the credit-worthiness of various insurers, the Corporation estimated the probable insurance recoveries for the Asbestos Liability and defense costs through 2052.
Based on the analysis described above, the Corporation’s reserve at December 31, 2018, for the total costs, including defense costs, for the Asbestos Liability claims pending or projected to be asserted through 2052, was $227,922. Defense costs are estimated at 80% of settlement costs. The reserve at December 31, 2020, was $180,196. The Corporation’s receivable at December 31, 2018, for insurance recoveries attributable to the claims for which the Corporation’s Asbestos Liability reserve has been established, including the portion of incurred defense costs covered by the Settlement Agreements in effect through December 31, 2018, and the probable payments and reimbursements relating to the estimated indemnity and defense costs for pending and unasserted future Asbestos Liability claims, was $152,508 ($117,937 at December 31, 2020).
The following table summarizes activity relating to insurance recoveries for the year ended December 31, 2020, and 2019.
|
|
|
2020 |
|
|
2019 |
|
||
|
Insurance receivable – asbestos, beginning of the year |
|
$ |
136,932 |
|
|
$ |
152,508 |
|
|
Settlement and defense costs paid by insurance carriers |
|
|
(18,712 |
) |
|
|
(15,576 |
) |
|
Change in estimated coverage |
|
|
(283 |
) |
|
|
0 |
|
|
Insurance receivable – asbestos, end of the year |
|
$ |
117,937 |
|
|
$ |
136,932 |
|
In 2020, the Corporation recognized a reserve equaling $283 for the potential insolvency of an insurance carrier. The balance of the insurance receivable does not assume any recovery from insolvent carriers. In addition, a substantial majority of the insurance recoveries deemed probable is from insurance companies rated A – (excellent) or better by A.M. Best Corporation. There can be no assurance, however, that there will not be further insolvencies among the relevant insurance carriers, or that the assumed percentage recoveries for certain carriers will prove correct. The difference between insurance recoveries and projected costs is not due to exhaustion of all insurance coverage for the Asbestos Liability.
The amounts recorded for the Asbestos Liability and insurance receivable rely on assumptions that are based on currently known facts and strategy. The Corporation’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Corporation’s or Nathan’s calculations vary significantly from actual results. Key variables in these
56
assumptions are identified above and include the number and type of new claims to be filed each year, the average cost of disposing of each such new claim, average annual defense costs, compliance by relevant parties with the terms of the Settlement Agreements, and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and ability to recover under the Corporation’s insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation.
The Corporation intends to evaluate the Asbestos Liability and related insurance receivable as well as the underlying assumptions on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance, these regular reviews may result in the Corporation adjusting its current reserve; however, the Corporation is currently unable to estimate such future adjustments. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivable could be material to operating results for the periods in which the adjustments to the liability or receivable are recorded, and to the Corporation’s liquidity and consolidated financial position.
Income (loss) income from continuing operations before income taxes is summarized below. Income (loss) from continuing operations before income taxes for certain foreign entities is classified differently for book reporting and income tax reporting purposes.
|
|
|
2020 |
|
|
2019 |
|
||
|
Domestic |
|
$ |
(1,587 |
) |
|
$ |
(14,335 |
) |
|
Foreign |
|
|
10,287 |
|
|
|
5,968 |
|
|
Income (loss) from continuing operations before income taxes |
|
$ |
8,700 |
|
|
$ |
(8,367 |
) |
The income tax (benefit) provision for continuing operations consisted of the following:
|
|
|
2020 |
|
|
2019 |
|
||
|
Current: |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
(3,614 |
) |
|
$ |
(118 |
) |
|
State |
|
|
107 |
|
|
|
56 |
|
|
Foreign |
|
|
2,079 |
|
|
|
1,611 |
|
|
Current income tax (benefit) provision |
|
|
(1,428 |
) |
|
|
1,549 |
|
|
Deferred: |
|
|
|
|
|
|
|
|
|
Federal |
|
|
2,485 |
|
|
|
2,244 |
|
|
State |
|
|
1,329 |
|
|
|
(217 |
) |
|
Foreign |
|
|
(178 |
) |
|
|
(422 |
) |
|
Decrease in valuation allowance |
|
|
(2,678 |
) |
|
|
(1,046 |
) |
|
Deferred income tax provision |
|
|
958 |
|
|
|
559 |
|
|
Total income tax (benefit) provision |
|
$ |
(470 |
) |
|
$ |
2,108 |
|
The income tax benefit recorded in 2020 includes a benefit of $3,502 for the carryback of net operating losses, as enabled by the CARES Act, to an earlier period, at a higher tax rate, resulting in the release of a portion of the valuation allowance previously established against the deferred income tax assets of the Corporation.
The difference between statutory U.S. federal income tax and the Corporation’s effective income tax was as follows:
|
|
|
2020 |
|
|
2019 |
|
||
|
Computed at statutory rate |
|
$ |
1,827 |
|
|
$ |
(1,757 |
) |
|
Tax differential on non-U.S. earnings |
|
|
(44 |
) |
|
|
44 |
|
|
State income taxes |
|
|
1,413 |
|
|
|
(172 |
) |
|
Meals and entertainment |
|
|
32 |
|
|
|
83 |
|
|
Alternative minimum tax credits |
|
|
0 |
|
|
|
(13 |
) |
|
GILTI inclusion |
|
|
1,586 |
|
|
|
4,859 |
|
|
Net operating loss carryback |
|
|
(3,502 |
) |
|
|
0 |
|
|
Decrease in valuation allowance |
|
|
(2,678 |
) |
|
|
(1,046 |
) |
|
Adjustments to net operating losses |
|
|
53 |
|
|
|
4 |
|
|
Other – net |
|
|
843 |
|
|
|
106 |
|
|
Total income tax provision |
|
$ |
(470 |
) |
|
$ |
2,108 |
|
57
Deferred income tax assets and liabilities as of December 31, 2020, and 2019, are summarized below. Unremitted earnings of the Corporation’s non-U.S. subsidiaries and affiliates are deemed to be permanently reinvested and, accordingly, no deferred income tax liability has been recorded. If the Corporation were to remit any foreign earnings to the U.S., the estimated tax impact would be insignificant.
|
|
|
2020 |
|
|
2019 |
|
||
|
Assets: |
|
|
|
|
|
|
|
|
|
Employment – related liabilities |
|
$ |
8,709 |
|
|
$ |
8,643 |
|
|
Pension liability – foreign |
|
|
688 |
|
|
|
958 |
|
|
Pension liability – domestic |
|
|
11,991 |
|
|
|
11,605 |
|
|
Capital loss carryforwards |
|
|
157 |
|
|
|
316 |
|
|
Asbestos-related liability |
|
|
15,521 |
|
|
|
17,963 |
|
|
Net operating loss – domestic |
|
|
8,735 |
|
|
|
8,929 |
|
|
Net operating loss – state |
|
|
4,711 |
|
|
|
4,014 |
|
|
Net operating loss – foreign |
|
|
10,940 |
|
|
|
10,256 |
|
|
Inventory related |
|
|
2,056 |
|
|
|
2,100 |
|
|
Impairment charge associated with investment in MG |
|
|
949 |
|
|
|
1,043 |
|
|
Operating lease right-of-use assets |
|
|
1,026 |
|
|
|
1,388 |
|
|
Other |
|
|
2,568 |
|
|
|
3,476 |
|
|
Gross deferred income tax assets |
|
|
68,051 |
|
|
|
70,691 |
|
|
Valuation allowance |
|
|
(42,454 |
) |
|
|
(43,671 |
) |
|
|
|
|
25,597 |
|
|
|
27,020 |
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
(22,165 |
) |
|
|
(21,741 |
) |
|
Intangible assets – finite life |
|
|
(707 |
) |
|
|
(830 |
) |
|
Intangible assets – indefinite life |
|
|
(552 |
) |
|
|
(492 |
) |
|
Operating lease liabilities |
|
|
(1,026 |
) |
|
|
(1,388 |
) |
|
Other |
|
|
(57 |
) |
|
|
(115 |
) |
|
Gross deferred income tax liabilities |
|
|
(24,507 |
) |
|
|
(24,566 |
) |
|
Net deferred income tax assets |
|
$ |
1,090 |
|
|
$ |
2,454 |
|
At December 31, 2020, the Corporation has U.S. federal net operating loss carryforwards of $41,596, which $34,862 can be carried forward indefinitely but will be limited to 80 percent of taxable income in any given year. The balance of $6,734 will begin to expire in 2035 and can be used without taxable income limitation. Additionally, at December 31, 2020, the Corporation had state net operating loss carryforwards of $71,281, which begin to expire in 2021, and foreign net operating loss carryforwards from continuing operations of $53,209 and capital loss carryforwards of $824 which do not expire.
Unrecognized tax benefits and changes in unrecognized tax benefits for the year ended December 31, 2020, and 2019, are insignificant. If the unrecognized tax benefits were recognized, the effect on the Corporation’s effective income tax rate would also be insignificant. The amount of penalties and interest recognized in the consolidated balance sheets as of December 31, 2020, and 2019, and in the consolidated statements of operations for 2020 and 2019 is insignificant.
The Corporation is subject to taxation in the United States, various states and foreign jurisdictions, and remains subject to examination by tax authorities for 2013, due to the carryback of net operating losses enabled by the CARES Act, and for tax years 2017 – 2020.
NOTE 22 – ENVIRONMENTAL MATTERS:
The Corporation is currently performing certain remedial actions in connection with the sale of real estate previously owned and periodically incurs costs to maintain compliance with environmental laws and regulations. Environmental exposures are difficult to assess and estimate for numerous reasons, including lack of reliable data, the multiplicity of possible solutions, the years of remedial and monitoring activity required, and identification of new sites. In the opinion of management, the potential liability for remedial actions and environmental compliance measures of approximately $100 at December 31, 2020, is considered adequate based on information known to date.
58
NOTE 23 – RELATED PARTIES:
ATR has a loan outstanding with its minority shareholder. The loan originally matured in 2008 but has been renewed continually for one-year periods. Interest does not compound and has accrued on the outstanding balance, since inception, at the three-to-five-year loan interest rate set by the People’s Bank of China in effect at the time of renewal. The loan balance approximated $1,056 (RMB 6,901) at December 31, 2020, and $2,856 (RMB 19,901) at December 31, 2019. During 2020, ATR repaid $1,882 (RMB 13,000) in principal and $290 (RMB 2,000) in accrued interest. The interest rate for 2020 approximated 5%, and accrued interest approximated $2,117 (RMB 13,842) and $2,152 (RMB 14,999) as of December 31, 2020, and 2019, which is recorded in other current liabilities.
Purchases from ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $7,566 (RMB 52,255) and $14,166 (RMB 97,763) in 2020 and 2019, respectively. Excluding the loan and interest outstanding, the amount payable to ATR’s minority shareholder and its affiliates approximated $344 (RMB 2,249) and $408 (RMB 2,841) at December 31, 2020, and 2019, respectively. Additionally, customer deposits from ATR’s minority shareholder and its affiliates approximated $456 (RMB 2,984) at December 31, 2020. Sales to ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $9,154 (RMB 63,222) and $11,200 (RMB 77,303) for 2020 and 2019, respectively. No amounts were due from ATR’s minority shareholder or its affiliates as of December 31, 2020, or 2019.
59
The Corporation organizes its business into two operating segments – Forged and Cast Engineered Products and Air and Liquid Processing. Summarized financial information concerning the Corporation’s reportable segments is shown in the following tables. Corporate assets included under Identifiable Assets represent primarily cash and cash equivalents and other items not allocated to reportable segments. Long-lived assets exclude deferred income tax assets. Corporate costs are comprised of operating costs of the corporate office and other costs not allocated to the segments. The accounting policies are the same as those described in Note 1, Summary of Significant Accounting Policies.
|
|
|
Net Sales(1) |
Income (Loss) from Continuing Operations Before Income Taxes |
|
||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||
|
Forged and Cast Engineered Products(2) |
|
$ |
237,889 |
|
|
$ |
305,630 |
|
|
$ |
8,621 |
|
|
$ |
(6,130 |
) |
|
Air and Liquid Processing |
|
|
90,655 |
|
|
|
92,274 |
|
|
|
10,133 |
|
|
|
10,002 |
|
|
Total Reportable Segments |
|
|
328,544 |
|
|
|
397,904 |
|
|
|
18,754 |
|
|
|
3,872 |
|
|
Corporate costs, including other income (expense)(3) |
|
0 |
|
|
0 |
|
|
|
(10,054 |
) |
|
|
(12,239 |
) |
||
|
Consolidated total |
|
$ |
328,544 |
|
|
$ |
397,904 |
|
|
$ |
8,700 |
|
|
$ |
(8,367 |
) |
|
|
|
Capital Expenditures |
Depreciation and Amortization Expense |
Identifiable Assets(4) |
|
|||||||||||||||||||
|
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
|
2020 |
|
|
2019 |
|
||||||
|
Forged and Cast Engineered Products |
|
$ |
7,972 |
|
|
$ |
10,586 |
|
|
$ |
17,583 |
|
|
$ |
17,818 |
|
|
$ |
297,552 |
|
|
$ |
325,584 |
|
|
Air and Liquid Processing |
|
|
494 |
|
|
|
378 |
|
|
|
824 |
|
|
|
963 |
|
|
|
156,322 |
|
|
|
172,992 |
|
|
Corporate |
|
|
0 |
|
|
|
0 |
|
|
|
168 |
|
|
|
186 |
|
|
|
9,334 |
|
|
|
7,984 |
|
|
Consolidated total |
|
$ |
8,466 |
|
|
$ |
10,964 |
|
|
$ |
18,575 |
|
|
$ |
18,967 |
|
|
$ |
463,208 |
|
|
$ |
506,560 |
|
|
|
|
Long-Lived Assets(5) |
|
Income (Loss) from Continuing Operations Before Income Taxes |
||||||||||||||
|
Geographic Areas: |
|
2020 |
|
|
2019 |
|
|
|
2020 |
|
|
2019 |
|
|
||||
|
United States |
|
$ |
220,372 |
|
|
$ |
235,778 |
|
|
|
$ |
(1,706 |
) |
|
$ |
(13,996 |
) |
|
|
Foreign |
|
|
68,511 |
|
|
|
74,373 |
|
|
|
|
10,406 |
|
|
|
5,629 |
|
|
|
Consolidated total |
|
$ |
288,883 |
|
|
$ |
310,151 |
|
|
|
$ |
8,700 |
|
|
$ |
(8,367 |
) |
|
|
|
(1) |
For the Forged and Cast Engineered Products segment, one customer accounted for 11% of its net sales in 2020 and 12% of its net sales for 2019. For the Air and Liquid Processing segment, no customers exceeded 10% of its net sales in 2020, and one customer accounted for 12% of its net sales in 2019. |
|
|
(2) |
Loss from continuing operations before income taxes for the Forged and Cast Engineered Products segment for 2019 includes an impairment charge of $10,082 to record the Avonmore Plant to its estimated net realizable value less costs to sell in anticipation of its sale, which was completed in September 2019. |
|
|
(3) |
Corporate costs, including other income (expense), for 2020 decreased from 2019 principally due to lower employee-related costs and professional fees and restructuring-related costs in 2019 that did not recur in 2020. |
|
|
(4) |
Identifiable assets for the Forged and Cast Engineered Products segment include investments in joint ventures of $2,175 at December 31, 2020, and 2019. The change in the identifiable assets of the Air and Liquid Processing segment relates primarily to the movement in asbestos-related insurance receivables, the balances of which equaled $117,937 and $136,932 at December 31, 2020, and 2019, respectively. |
|
|
(5) |
Foreign long-lived assets represent primarily assets of the foreign operations. Long-lived assets of the U.S. include noncurrent asbestos-related insurance receivables of $101,937 and $120,932 for 2020 and 2019, respectively. |
The following events have occurred subsequent to December 31, 2020:
|
|
• |
To date, the Corporation has received proceeds of approximately $3,050 from shareholders who exercised 1,188,231 Series A warrants, equating to an increase in the number of common shares outstanding for the Corporation of 530,422 common shares. |
|
|
• |
The collective bargaining agreement set to expire in March 2021 was successfully negotiated and subsequently extended to March 2025. |
|
|
• |
ARPA was signed into law by President Biden in March 2021, which will defer certain employer contributions otherwise due to the Corporation’s domestic defined benefit pension plans. The Corporation is currently evaluating other provisions of the relief package that may be available to it. |
60
QUARTERLY INFORMATION – UNAUDITED
Not applicable.
61
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Shareholders and the Board of Directors
Ampco-Pittsburgh Corporation
Carnegie, Pennsylvania
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Ampco-Pittsburgh Corporation and subsidiaries (the “Corporation”) as of December 31, 2020, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation at December 31, 2020, and the results of its operations and its cash flows for the year in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
These critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Asbestos Liabilities and Related Insurance Receivables
These described in Notes 1 and 19 to the Corporation’s consolidated financial statements, the Corporation has accrued asbestos liabilities of $180.2 million ($22.0 million current and $158.2 million long-term) and recorded asbestos-related insurance receivables of $117.9 million ($16.0 million current and $101.9 million noncurrent) as of December 31, 2020. These liabilities and insurance receivables relate to claims that have been asserted alleging personal injury from exposure to asbestos-containing components historically used in certain products manufactured by predecessors of the Corporation’s Air & Liquid Systems Corporation. The Corporation utilizes third-party experts to assist in developing (i) an estimate for the asbestos liability for the probable pending and future claims over the period that the Corporation believes it can reasonably estimate such claims and (ii) an estimate for the insurance receivable for the insurance proceeds expected to be received under existing policies and the related settlement agreements associated with the asbestos liabilities.
We identified the valuation of asbestos liabilities and insurance receivables as a critical audit matter. The principal considerations for our determination are: (i) the subjectivity of estimating projected claims including the period for which the Corporation can reasonably
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estimate the asbestos liabilities, (ii) the estimation process for projected settlement values of reported and unreported claims including the number of claims expected to be filed and adjudicated, the disease type, and the settlement and defense costs to estimate the asbestos liabilities, and (iii) the complexity of determining the associated insurance receivables including the estimated settlement costs for the asbestos liabilities and the associated defense costs, the continued financial solvency of the insurers, and legal interpretation of rights for recovery under the insurance policies and the related settlement agreements. Auditing these elements involved especially challenging auditor judgment due to the nature and extent of audit effort required to address these matters, including the extent of specialized skill or knowledge needed.
The primary procedures we performed to address this critical audit matter included:
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Assessing the qualifications, experience, and objectivity of the Corporation’s third-party experts; |
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Testing the underlying historical data that served as a basis for the valuation of the asbestos liabilities for completeness and accuracy through the examination of relevant source documents; |
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Testing the insurance policies for existence and coverage amounts including independent confirmation of a selection of policies and the related settlement agreements directly with insurance carriers; |
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Evaluating the ongoing financial solvency of insurance providers utilizing publicly available financial information; and |
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Utilizing personnel with specialized knowledge and skill in actuarial science to assist in: (i) evaluating the valuation methodology utilized by the Corporation to estimate the asbestos liabilities, (ii) testing the computation of the asbestos liability estimate performed by the Corporation’s third-party experts, (iii) evaluating the period utilized by the Corporation to project probable pending and future claims, and (iv) evaluating the reasonableness of certain assumptions utilized to develop the estimates for the asbestos liabilities and insurance receivables such as the estimated settlement or indemnity costs for the asbestos liabilities and the associated defense costs. |
/s/ BDO USA, LLP
We have served as the Corporation’s auditor since 2020.
Pittsburgh, Pennsylvania
March 26, 2021
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Ampco-Pittsburgh Corporation
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Ampco-Pittsburgh Corporation and subsidiaries (the “Corporation”) as of December 31, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2019 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Corporation’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Corporation is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Corporation’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 16, 2020
We began serving as the Corporation’s auditor in 1999. In 2020, we became the predecessor auditor.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Corporation did not experience any changes in, or disagreements with its accountants on, accounting and financial disclosure during the period covered.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures. An evaluation of the effectiveness of the Corporation’s disclosure controls and procedures as of the end of the period covered by this report was carried out under the supervision, and with the participation, of management, including the principal executive officer and principal financial officer. Disclosure controls and procedures are defined under Securities and Exchange Commission (“SEC”) rules as controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized and reported within required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Corporation’s management, including the principal executive officer and principal financial officer, has concluded that the Corporation’s disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2020.
Management’s Annual Report on Internal Control Over Financial Reporting. The Corporation’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a – 15(f) under the Securities Exchange Act). Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Effective internal control over financial reporting can only provide reasonable assurance that the objectives of the control process are met. Internal control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process. Therefore it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Further, the design of internal control over financial reporting includes the consideration of the benefits of each control relative to the cost of the control.
Management assessed the effectiveness of internal control over financial reporting as of December 31, 2020. In making this assessment, management used the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on those criteria and management’s assessment, management, including the principal executive officer and principal financial officer, concluded that the Corporation’s internal control over financial reporting was effective as of December 31, 2020.
Changes in Internal Control Over Financial Reporting. There were no changes in the Corporation’s internal control over financial reporting during the quarter ended December 31, 2020, that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
None
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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information about the Corporation’s directors required by Item 401 of Regulation S-K and not otherwise set forth below is contained under the caption “Proposal 1: Election of Directors” in the Corporation’s definitive Proxy Statement for the 2021 Annual Meeting of Shareholders (the “Proxy Statement”) which the Company anticipates filing with the Securities and Exchange Commission, pursuant to Regulation 14A, not later than 120 days after the end of the Corporation’s fiscal year, and is incorporated by reference. The information required by Item 401 of Regulation S-K regarding executive officers is set forth in Part I, Item 1 of this report under “Executive Officers.”
The information required by Item 405 of Regulation S-K is contained under the caption “Security Ownership of Certain Beneficial Owners and Management―Delinquent Section 16(a) Reports” of the Proxy Statement and is incorporated by reference.
The Corporation and its subsidiaries have adopted a Code of Business Conduct and Ethics that applies to all of their officers, directors and employees, as well as an additional Code of Ethics that applies to the Corporation’s Chief Executive Officer and Chief Financial Officer, which are available on the Corporation’s website at www.ampcopittsburgh.com.
The information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is contained under the captions “Corporate Governance – Director Nominating Procedures” and “Board Committees; Director Compensation – Audit Committee” of the Proxy Statement and is incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required for Item 11 is contained under the captions “Director Compensation,” “Compensation Discussion and Analysis (“CDA”),” “Summary Compensation Table,” “Outstanding Equity Awards at Fiscal Year-End,” “Retirement Benefits,” “Potential Payments upon Termination, Resignation or Change in Control,” and “Report of The Compensation Committee” of the Proxy Statement and is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
The information required by Item 201(d) of Regulation S-K relating to securities authorized for issuance under equity compensation plans is contained under the caption “Approval of The Amendment and Restatement of The 2016 Omnibus Incentive Plan (Proposal 3)―Equity Compensation Plan Table” of the Proxy Statement and is incorporated by reference.
The information required by Item 403 of Regulation S-K is contained under the caption “Security Ownership of Certain Beneficial Owners and Management” of the Proxy Statement and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by Item 404(a) of Regulation S-K is contained under the caption “Certain Relationships and Related Transactions” in the Proxy Statement and is incorporated by reference.
The information required by Item 407(a) of Regulation S-K is contained under the caption “Corporate Governance – Board Independence” of the Proxy Statement and is incorporated by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required for Item 14 is contained under the caption “Report of the Audit Committee” of the Proxy Statement and is incorporated herein.
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ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
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Financial Statements |
– Consolidated Balance Sheets
– Consolidated Statements of Operations
– Consolidated Statements of Comprehensive Income (Loss)
– Consolidated Statements of Shareholders’ Equity
– Consolidated Statements of Cash Flows
– Notes to Consolidated Financial Statements
– Report of Independent Registered Public Accounting Firm
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Financial Statement Schedules |
The financial statement schedules are not applicable to the Corporation since the Corporation meets the definition of a Smaller Reporting Company, as defined by the Securities and Exchange Commission per Rule 12b-2 of the Exchange Act.
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Index to Ampco-Pittsburgh Corporation Financial Data |
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72 |
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3. |
Exhibits |
Exhibit No.
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2.1 |
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2.2 |
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2.3 |
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2.4 |
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2.5 |
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3.1 |
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3.2 |
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3.3 |
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4.1 |
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4.2 |
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4.3 |
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4.4 |
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10.1* |
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10.2* |
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10.3* |
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10.4* |
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10.5* |
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10.6* |
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10.7* |
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10.8 |
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10.9 |
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10.10 |
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10.11 |
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10.12* |
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10.13* |
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10.14* |
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10.15* |
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10.16* |
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10.17* |
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10.18 |
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10.19 |
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10.20 |
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10.21* |
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10.22* |
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10.23* |
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10.24 |
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16.1 |
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21 |
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23.1 |
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31.1 |
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32.1 |
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32.2 |
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Interactive Data File (XBRL)
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*Designates management contract or compensatory plan or arrangement.
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Not applicable.
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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.
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March 26, 2021 |
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AMPCO-PITTSBURGH CORPORATION |
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By: |
/s/ J. Brett McBrayer |
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Name: |
J. Brett McBrayer |
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Title: |
Chief Executive Officer |
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 and in their capacities and on the dates indicated.
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SIGNATURE |
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/s/ J. Brett McBrayer |
Director and Chief Executive Officer (Principal Executive Officer) |
March 26, 2021 |
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J. Brett McBrayer |
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/s/ Michael G. McAuley |
Senior Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
March 26, 2021 |
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Michael G. McAuley |
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/s/ James J. Abel |
Director |
March 26, 2021 |
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James J. Abel |
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/s/ Terry L. Dunlap |
Director |
March 26, 2021 |
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Terry L. Dunlap |
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/s/ Elizabeth A. Fessenden |
Director |
March 26, 2021 |
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Elizabeth A. Fessenden |
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/s/ Michael I. German |
Director |
March 26, 2021 |
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Michael I. German |
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/s/ William K. Lieberman |
Director |
March 26, 2021 |
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William K. Lieberman |
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/s/ Stephen E. Paul |
Director |
March 26, 2021 |
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Stephen E. Paul |
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/s/ Carl H. Pforzheimer, III |
Director |
March 26, 2021 |
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Carl H. Pforzheimer, III |
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INDEX TO AMPCO-PITTSBURGH CORPORATION FINANCIAL DATA
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Exhibit 4.4
AMPCO-PITTSBURGH CORPORATION
DESCRIPTION OF SECURITIES
The following summary of certain provisions of the securities of Ampco-Pittsburgh Corporation ( “we,” “our” or the “Corporation”) does not purport to be complete. You should refer to our Restated Articles of Incorporation, as amended, Amended and Restated By-laws, the Warrant Agreement, dated as of September 22, 2020, by and between the Corporation and Broadridge Corporate Issuer Solutions, Inc., as warrant agent (the “Warrant Agreement”) and each of the other documents referenced herein, which are attached as exhibits to the Annual Report on Form 10-K to which this Description of Securities is part. The summary below is also qualified by reference to the provisions of the Pennsylvania Business Corporation Law of 1988, as amended (the “PBCL”), as applicable.
General
Our authorized capital stock consists of 40,000,000 shares of common stock, par value $1.00 per share, and 3,000,000 shares of preference stock, without par value, the rights and preferences of which may be established from time to time by our board of directors.
Common Stock
Each share of common stock is entitled to one vote on all matters requiring a vote of shareholders and, subject to the rights of the holders of any outstanding shares of preference stock, each shareholder is entitled to receive any dividends, in cash, stock, or otherwise, as our board of directors may declare. Pennsylvania law prohibits the payment of dividends or the repurchase of our shares if we are insolvent or unable to pay our debts as they become due in the usual course of business, or if we would become so as a result of the dividend or repurchase. In the event of our liquidation, dissolution or winding up, either voluntarily or involuntarily, subject to the rights of the holders of any outstanding shares of preference stock, holders of common stock are entitled to share pro-rata in all of our remaining assets available for distribution after providing for claims of creditors as required by the PBCL.
Holders of common stock have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The outstanding shares of common stock are fully paid and non-assessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preference stock that we may designate and issue in the future.
Under the PBCL, cumulative voting applies to the election of directors by holders of common stock (and holders of any series of preference stock that is entitled to vote in the election of directors).
Preference Stock
Under Pennsylvania law and our Restated Articles of Incorporation, our board of directors, without further action by the shareholders, is authorized to designate and issue preference stock in one or more series and to fix as to any series the annual dividend or dividend rate, the relative priority as to dividends, redemption prices, preferences on dissolution, the terms of any sinking fund, voting rights, conversion rights, if any, and any other preferences or special rights and qualifications. The board has authorized 150,000 shares of Series A Preference Stock in 1998. None of those Series A shares has been issued.
If we create one or more series of preference stock, it or they may rank senior to the common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. The authorized Series A preference stock contains such provisions. In addition, shares of preference stock may have class or series voting rights or rights to vote with the common stock, and may have more than one vote per share. Issuances of preference stock, while providing us with flexibility in connection with general corporate purposes, may, among other things, have an adverse effect on the rights of holders of common stock. We have no present plans to issue any preference stock, including any of the authorized Series A Preference Stock.
Series A Warrants
We have issued warrants to purchase common stock, which are designated as Series A warrants. These Series A warrants are separately transferable through their expiration on August 1, 2025. The Series A warrants are listed for trading on NYSE American. The common stock underlying the Series A warrants, upon issuance, is listed for trading on the NYSE under the symbol “AP.”
Exercisability. Each Series A Warrant is exercisable at any time and from time to time after the date of issuance and will expire on August 1, 2025. The Series A warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us the warrant certificate or warrant, as applicable a duly executed exercise notice and payment in full for the number of shares of common stock purchased upon such exercise, except in the case of a cashless exercise as discussed below.
Cashless Exercise. If at the time of exercise of the Series A warrants there is no effective registration statement registering, or the prospectus contained therein is not available for issuance of, the shares issuable upon exercise of the warrant, the holder may exercise the warrant on a cashless basis. When exercised on a cashless basis, a portion of the warrant is cancelled in payment of the purchase price payable in respect of the number of shares of common stock purchasable upon such exercise.
Exercise Price. Each Series A warrant represents the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668 per share (or $5.75 per whole share of common stock under the Series A warrants). In addition, the exercise price per share is subject to adjustment for stock dividends, distributions, subdivisions, combinations, reclassifications or certain similar transactions.
Transferability. Subject to applicable laws and restrictions, a holder may transfer a warrant upon surrender of the warrant to us with a completed and signed assignment in the form attached to the warrant. The transferring holder will be responsible for any tax that liability that may arise as a result of the transfer.
Rights as Shareholder. The holder of a Series A warrant, solely in such holder’s capacity as a holder of a Series A warrant, will not be entitled to vote or to any of the other rights of our shareholders.
Amendments and Waivers. The provisions of each Series A warrant may be modified or amended or the provisions thereof waived with the written consent of us and the holders of a majority of the outstanding Series A warrants.
The Series A warrants are subject to the terms of the Warrant Agreement.
Anti-Takeover Provisions
Certain provisions of our charter and by-laws could have an anti-takeover effect. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by it. They may also discourage an unsolicited takeover of our company if the board determines that the takeover is not in our best interests. These provisions could have the effect of discouraging certain attempts to acquire our company or remove incumbent management even if some or a majority of shareholders deemed such an attempt to be in their best interests.
These provisions in our charter include: (a) the classification of the board of directors into three classes; (b) a provision fixing the size of the board of directors to no more than 15 members and no fewer than five; and (c) the authority to issue additional shares of common stock or preference stock without shareholder approval.
Our charter also includes a provision requiring the affirmative vote of the holders of 75% of the voting power of the then outstanding capital stock of our company to (a) remove the entire board of directors, a class of the board of directors, or any individual member of the board of directors; provided, however that no individual director can be removed without cause (unless the entire board of directors or any class of directors is removed) in case the votes cast against such removal would be sufficient, if voted cumulatively for such director to elect him or her to the class
of directors of which he or she is a member, or (b) approve amendments to our charter, unless such amendment, repeal or provision has been approved by at least a two-thirds vote of the whole board of directors, in which event the affirmative vote of the holders of not less than a majority of the voting power of the then outstanding shares of capital stock of our company entitled to vote in an annual election of directors, voting together as a single class, will be required.
The by-laws provide that any shareholder who desires to present a nomination of person(s) for election to the board of directors or a proposal of other business at a shareholders’ meeting, or a proponent, must first provide timely written notice to our secretary. The by-laws set forth the deadlines for submitting such advance notice. the advance notice must set forth in reasonable detail (a) as to each person the shareholder proposes to nominate for election to the board, information concerning the proposed nominee, including such nominee’s consent to serve as a director if elected and other specific information called for by the by-laws, or (b) as to any other business that the shareholder proposes to bring before the meeting, a description of the substance of the proposal. The advance notice must include all such information regarding the proponent and/or nominee(s) which would have been required to be included in a proxy statement filed pursuant to the proxy rules of the SEC. The advance notice must also include a representation from the proponent that such person is a shareholder of record of our company, is entitled to vote at the shareholders’ meeting, and intends to appear in person or by proxy at the meeting to present the nomination or other proposal specified in the notice, and a description of any agreements, arrangements, or understandings between the proponent and any other person or persons (naming such persons) pursuant to which the proposal is to be made by the proponent.
PBCL Anti-Takeover Provisions
The PBCL contains a number of statutory “anti-takeover” provisions, including Subchapters E, F, G and H of Chapter 25 and Sections 2513, 2521, 2524, 2538, and 2539 of the PBCL, which apply automatically to different categories of Pennsylvania registered corporations (usually a public company) unless the corporation elects to opt-out of those provisions. We are a Pennsylvania registered corporation of the type subject to the broadest number of those provisions, and as a result, except for the provisions from which we have opted out (as noted below), we are subject to the anti-takeover provisions described below. Descriptions of the anti-takeover provisions are qualified in their entirety by reference to the PBCL.
Subchapter F (relating to business combinations) generally delays for five years and imposes conditions upon “business combinations” between an “interested shareholder” and our company. The term “business combination” is defined broadly to include various transactions between a corporation and an interested shareholder including mergers, sales or leases of specified amounts of assets, liquidations, reclassifications and issuances of specified amounts of additional shares of stock of the corporation. An “interested shareholder” is defined generally as the beneficial owner of at least 20% of a corporation’s voting shares.
Section 2513 of the PBCL authorizes the use of shareholder rights plans, or poison pills, that preclude or limit the exercise of such rights by persons making an offer to acquire a corporation’s shares.
Section 2521 of the PBCL provides that shareholders are not entitled by statute to call special meetings of the shareholders and our by-laws do not give shareholders any right to call special meetings.
Section 2524 provides that shareholders cannot act by partial written consent unless permitted in the articles of incorporation.
Section 2538 of the PBCL generally establishes certain shareholder approval requirements with respect to specified transactions with “interested shareholders.”
Section 2539 of the PBCL prohibits a “short-form” merger of a registered corporation (which ordinarily could be done by an 80%-or-more shareholder vote of a target corporation, without further action by the target corporation’s board or other shareholders) unless the board of directors of the target corporation approves the merger.
We have elected to opt out of Subchapters E, G, and H of Chapter 25 of the PBCL. Subchapter E (relating to control transactions) would have generally provided that if any person or group acquires 20% or more of the voting power of our company, the remaining holders of voting shares may demand from such person or group the fair value of their voting shares, including a proportionate amount of any control premium. Subchapter G would have required a shareholder vote to accord voting rights to control shares acquired by a 20% shareholder in a control-share acquisition. Subchapter H would have required a person or group to disgorge to us any profits received from a sale of our equity securities within 18 months after the person or group acquired, offered to acquire or publicly disclosed an intention to acquire 20% of our voting power or publicly disclosed an intention to acquire control of us.
Under the PBCL, directors owe a fiduciary duty to our company. In discharging that duty, directors may, in considering our best interests, consider, to the extent they deem appropriate, the effects of any action upon any or all groups affected, including shareholders, employees, customers, suppliers, and creditors and upon communities in which officers or other establishments of our company are located. The board of directors need not consider the interests of any particular group affected by an action as a dominant or controlling interest. Under the PBCL, the fiduciary duty of directors does not require the board of directors to redeem or modify or render inapplicable any shareholder rights plan, to render inapplicable or make any determinations under Subchapter F or any other provision of the PBCL relating to or affecting acquisitions or proposed acquisitions of control of our company, or otherwise act solely because of the effect that such action might have upon a potential or proposed acquisition of our company or the amount that might be offered or paid to shareholders in such an acquisition.
EXHIBIT 21
Subsidiaries
|
Name |
|
Ownership |
|
Jurisdiction of Incorporation |
|
|
|
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|
|
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Air & Liquid Systems Corporation* |
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100% owned by Ampco-Pittsburgh Corporation |
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Pennsylvania |
|
|
|
|
|
|
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Ampco-Pittsburgh Securities V Investment Corporation* |
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100% owned by Ampco-Pittsburgh Securities V L.L.C. |
|
Delaware |
|
|
|
|
|
|
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Ampco-Pittsburgh Securities V L.L.C.* |
|
100% owned by Ampco-Pittsburgh Corporation |
|
Delaware |
|
|
|
|
|
|
|
Union Electric Steel Corporation* |
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100% owned by Ampco-Pittsburgh Securities V L.L.C. |
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Pennsylvania |
|
|
|
|
|
|
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Ampco UES Sub, Inc.* |
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100% owned by Union Electric Steel Corporation |
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Delaware |
|
|
|
|
|
|
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The Davy Roll Company Limited* |
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100% owned by FCEP Europe B.V. |
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England |
|
|
|
|
|
|
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Union Electric Steel UK Limited* |
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100% owned by The Davy Roll Company Limited |
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England |
|
|
|
|
|
|
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Åkers AB* |
|
100% owned by FCEP Europe B.V. |
|
Sweden |
|
|
|
|
|
|
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Åkers Sweden AB* |
|
100% owned by FCEP Europe B.V. |
|
Sweden |
|
|
|
|
|
|
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Rolls Technology Inc.* |
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100% owned by Ampco UES Sub, Inc. |
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Delaware |
|
|
|
|
|
|
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Åkers Valji Ravne d.o.o.* |
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100% owned by FCEP Europe B.V. |
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Slovenia |
|
|
|
|
|
|
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Shanxi Åkers TISCO Roll Co. Ltd.* |
|
100% owned by Åkers AB |
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China |
|
|
|
|
|
|
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Alloys Unlimited and Processing, LLC* |
|
100% owned by Union Electric Steel Corporation |
|
Pennsylvania |
|
|
|
|
|
|
The financial statements of subsidiaries marked with an (*) have been consolidated with those of the Corporation. Names of other subsidiaries have been omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ampco-Pittsburgh Corporation
Carnegie, Pennsylvania
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-222626), Form S-8 (No. 333-174269 and No. 333-211242), and Form S-1 (No. 333-239446) of Ampco-Pittsburgh Corporation of our report dated March 26, 2021, relating to the consolidated financial statements, which appears in this Annual Report on Form 10-K.
/s/ BDO USA, LLP
Pittsburgh, Pennsylvania
March 26, 2021
EXHIBIT 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ampco-Pittsburgh Corporation
Carnegie, Pennsylvania
We consent to the incorporation by reference in Registration Statement No. 333-239446 on Form S-1, Registration Statement No. 333-222626 on Form S-3 and Registration Statements Nos. 333-174269 and 333-211242 on Form S-8 of our reports dated March 16, 2020, relating to the financial statements of Ampco-Pittsburgh Corporation, appearing in this Annual Report on Form 10-K of Ampco-Pittsburgh Corporation for the year ended December 31, 2019.
/s/ Deloitte & Touche LLP
Pittsburgh, Pennsylvania
March 26, 2021
EXHIBIT 23.3
CONSENT OF NATHAN ASSOCIATES INC.
Nathan Associates Inc. (“Nathan”) consents to being named in Ampco-Pittsburgh Corporation’s Annual Report (“Form 10-K”) for the year ended December 31, 2020 in the form and context in which Nathan is named and to the incorporation by reference of the Form 10-K in Registration Statement No. 333-222626 on Form S-3, Registration Statements Nos. 333-174269 and 333-211242 on Form S-8, and Registration Statement No. 333-239446 on Form S-1.
/s/ Nathan Associates Inc.
Nathan Associates Inc.
March 26, 2021
EXHIBIT 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, J. Brett McBrayer, certify that:
|
|
1. |
I have reviewed this annual report on Form 10-K of Ampco-Pittsburgh Corporation; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
March 26, 2021 |
By: |
/s/ J. Brett McBrayer |
|
|
|
|
Director and Chief Executive Officer |
|
|
|
|
J. Brett McBrayer |
|
EXHIBIT 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael G. McAuley, certify that:
|
|
1. |
I have reviewed this annual report on Form 10-K of Ampco-Pittsburgh Corporation; |
|
|
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
|
|
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
|
|
4. |
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the registrant and have: |
|
|
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
|
|
(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
|
|
(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
|
|
5. |
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
|
|
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
|
|
(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
|
March 26, 2021 |
By: |
/s/ Michael G. McAuley |
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer |
|
|
|
Michael G. McAuley |
EXHIBIT 32.1
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Ampco-Pittsburgh Corporation (the “Company”) on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
|
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
March 26, 2021 |
By: |
/s/ J. Brett McBrayer |
|
|
|
Director and Chief Executive Officer |
|
|
|
J. Brett McBrayer |
EXHIBIT 32.2
Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Ampco-Pittsburgh Corporation (the “Company”) on Form 10-K for the period ended December 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
|
|
1. |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
2. |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
|
March 26, 2021 |
By: |
/s/ Michael G. McAuley |
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer |
|
|
|
Michael G. McAuley |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Statement Of Financial Position [Abstract] | ||
| Receivables, allowance for doubtful accounts | $ 1,131 | $ 3,041 |
| Common stock, par value | $ 1 | $ 1 |
| Common stock, shares authorized | 40,000,000 | 40,000,000 |
| Common stock, shares issued | 18,312,000 | 12,652,000 |
| Common stock, shares outstanding | 18,312,000 | 12,652,000 |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Statement Of Income And Comprehensive Income [Abstract] | ||
| Net income (loss) | $ 9,170 | $ (19,560) |
| Adjustments for changes in: | ||
| Foreign currency translation | 6,981 | 290 |
| Unrecognized employee benefit costs (including effects of foreign currency translation) | (8,188) | (19,655) |
| Fair value of cash flow hedges | 390 | 97 |
| Reclassification adjustments for items included in net income (loss): | ||
| Amortization of unrecognized employee benefit costs | 1,395 | (302) |
| Realized (gains) losses from settlement of cash flow hedges | (92) | 258 |
| Other comprehensive income (loss) | 486 | (19,312) |
| Comprehensive income (loss) | 9,656 | (38,872) |
| Less: Comprehensive income attributable to noncontrolling interest | 1,719 | 1,342 |
| Comprehensive income (loss) attributable to Ampco-Pittsburgh | $ 7,937 | $ (40,214) |
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands |
Total |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Retained Earnings (Deficit) [Member] |
Accumulated Other Comprehensive Loss [Member] |
Noncontrolling Interest [Member] |
|---|---|---|---|---|---|---|
| Beginning Balance at Dec. 31, 2018 | $ 92,969 | $ 12,495 | $ 154,889 | $ (30,355) | $ (49,434) | $ 5,374 |
| Stock-based compensation | 1,293 | 1,293 | ||||
| Comprehensive income (loss): | ||||||
| Net (loss) income | (19,560) | (20,986) | 1,426 | |||
| Other comprehensive (loss) income | (19,312) | (19,228) | (84) | |||
| Comprehensive income (loss) | (38,872) | 1,342 | ||||
| Issuance of common stock including excess tax benefits of $0 | 226 | 157 | 69 | |||
| Ending Balance at Dec. 31, 2019 | 55,616 | 12,652 | 156,251 | (51,341) | (68,662) | 6,716 |
| Stock-based compensation | 1,329 | 1,329 | ||||
| Comprehensive income (loss): | ||||||
| Net (loss) income | 9,170 | 7,970 | 1,200 | |||
| Other comprehensive (loss) income | 486 | (33) | 519 | |||
| Comprehensive income (loss) | 9,656 | 1,719 | ||||
| Equity rights offering | 18,139 | 5,508 | 12,631 | |||
| Issuance of common stock including excess tax benefits of $0 | 259 | 152 | 107 | |||
| Ending Balance at Dec. 31, 2020 | $ 84,999 | $ 18,312 | $ 170,318 | $ (43,371) | $ (68,695) | $ 8,435 |
Consolidated Statements of Shareholders' Equity (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Common Stock [Member] | ||
| Issuance of common stock tax benefits | $ 0 | $ 0 |
| Additional Paid-in Capital [Member] | ||
| Issuance of common stock tax benefits | $ 0 | $ 0 |
Description of Business |
12 Months Ended | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||
| Description of Business |
Description of Business Ampco-Pittsburgh Corporation and its subsidiaries (collectively, the “Corporation”) manufacture and sell highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments, the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing segment. This segment presentation is consistent with how the Corporation’s chief operating decision maker evaluates financial performance and makes resource allocation and strategic decisions about the business. The Segments The FCEP segment produces forged hardened steel rolls, cast rolls and open-die forged products. Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. Forged engineered products are principally sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden and Slovenia and equity interests in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North American and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world. The Air and Liquid Processing segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including OEM/commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and Canada. COVID-19 On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency caused by a new strain of the coronavirus (“COVID-19”) and advised of the risks to the international community as the virus spread globally. In March 2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid increase in exposure globally. In response, many state and local governments required the closure of various businesses. The U.S. Department of Homeland Security, however, provided guidance identifying the Corporation’s domestic businesses as critical infrastructure industries, essential to the economic prosperity, security and continuity of the United States, which provides exceptions to certain closures mandated by state and local governments and permits businesses to continue operations during such an order. Despite the designation, the Corporation has periodically and temporarily idled certain operations of its FCEP segment and, consequently, furloughed certain of its employees in response to market conditions. It also has experienced, and may continue to experience, customer-requested delays of deliveries or, eventually, potential cancellation of orders. To date, the Air and Liquid Processing segment has successfully mitigated the negative impact on sales and operating income resulting from the pandemic. On March 27, 2020, former President Trump signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES) Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferral of employer-side social security payments and contributions to employee benefit plans, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. Similar programs have been offered in certain of the foreign jurisdictions in which the Corporation operates, including subsidies and reimbursement of certain employee-related costs. While the Corporation has taken, and intends to continue to take, advantage of various provisions of the CARES Act and other similar programs offered domestically and in foreign jurisdictions in which the Corporation operates, where possible, it is unable to determine what impact those provisions may have on its consolidated financial statements in the future. To date, in response to the pandemic, the Corporation has:
It is difficult to isolate the impact of the pandemic on the Corporation’s operating results, particularly in relation to the unabsorbed costs resulting from the periodic and temporary idling of certain of the Corporation’s forged and cast roll operations, furloughing of certain of its employees and movements in the global foreign exchange and equity markets. Additionally, the Corporation is uncertain of the full effect the pandemic will have on it for the longer term. The Corporation may experience long-term disruptions to its operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by the pandemic; and closures of businesses or manufacturing facilities critical to its business or supply chains. It may also incur higher write-offs of accounts receivables and impairment charges on its asset values, including property, plant and equipment and intangible assets. The Corporation is actively monitoring, and will continue to actively monitor, the pandemic and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce. |
Summary of Significant Accounting Policies |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| Accounting Policies [Abstract] | |
| Summary of Significant Accounting Policies |
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Corporation’s accounting policies conform to accounting principles generally accepted in the United States of America. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptions include assessing the carrying value of long-lived assets, valuing the assets and obligations related to employee benefit plans, accounting for loss contingencies associated with claims and lawsuits, and accounting for income taxes. Actual results could differ from those estimates. A summary of the significant accounting policies followed by the Corporation is presented below. Basis of Presentation The financial information included herein reflects the consolidated financial position of the Corporation as of December 31, 2020, and 2019, and the consolidated results of its operations and cash flows for the years then ended. Consolidation The accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries and joint ventures over which the Corporation exercises control and, when applicable, entities for which the Corporation has a controlling financial interest or is the primary beneficiary. Investments in joint ventures where the Corporation owns 20% to 50% of the voting stock and has the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the equity method of accounting. Investments in joint ventures where the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the cost method of accounting. Investments in joint ventures are reviewed for impairment whenever events or circumstances indicate the carrying amount of the investment may not be recoverable. If the estimated fair value of the investment is less than the carrying amount and such decline is determined to be “other than temporary,” then the investment may not be fully recoverable potentially resulting in a write-down of the investment value. Intercompany accounts and transactions are eliminated. Cash and Cash Equivalents Securities with purchased original maturities of three months or less are considered to be cash equivalents. The Corporation maintains cash and cash equivalents at various financial institutions which may exceed federally insured amounts. Inventories Inventories are valued at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Cost includes the cost of raw materials, direct labor and overhead for those items manufactured but not yet sold or for which control has not yet transferred to the customer. Fixed production overhead is allocated to inventories based on normal capacity of the production facilities. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased so that inventories are not measured above cost. The amount of fixed overhead allocated to inventories is not increased as a consequence of abnormally low production or plant idling. Costs for abnormal amounts of spoilage, handling costs and freight costs are charged to expense when incurred. Cost of domestic raw materials, work-in-process and finished goods inventories is primarily determined by the last-in, first-out (LIFO) method. Cost of domestic supplies and foreign inventories is determined primarily by the first-in, first-out (FIFO) method. Property, Plant and Equipment Property, plant and equipment purchased new is recorded at cost with depreciation computed using the straight-line method over the following estimated useful lives: land improvements – 15 to 20 years, buildings – 25 to 50 years and machinery and equipment – 3 to 25 years. Assets under finance leases are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Property, plant and equipment acquired as part of a business combination is recorded at its estimated fair value with depreciation computed using the straight-line method over the estimated remaining useful lives based in part on third-party valuations. Expenditures that extend economic useful lives are capitalized. Routine maintenance is charged to expense. Gains or losses are recognized on retirements or disposals. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If the undiscounted cash flows generated from the use and eventual disposition of the assets are less than their carrying value, then the asset value may not be fully recoverable potentially resulting in a write-down of the asset value. Estimates of future cash flows are based on expected market conditions over the remaining useful life of the primary asset(s). In addition, the remaining depreciation period for the impaired asset would be reassessed and, if necessary, revised. Proceeds from government grants are recorded as a reduction in the purchase price of the underlying assets and amortized against depreciation over the lives of the related assets. Right-of-Use Assets A right-of-use (“ROU”) asset represents the right to use an underlying asset for the term of the lease and the corresponding liability represents an obligation to make periodic payments arising from the lease. A determination of whether an arrangement includes a lease is made at the inception of the arrangement. ROU assets and liabilities are recognized on the consolidated balance sheet, at the commencement date of the lease, in an amount equal to the present value of the lease payments over the term of the lease calculated using the interest rate implicit in the lease arrangement or, if not known, the Corporation’s incremental borrowing rate. The present value of a ROU asset also includes any lease payments made prior to commencement of the lease and excludes any lease incentives received or to be received under the arrangement. The lease term includes options to extend or terminate the lease when it is reasonably certain that such options will be exercised. Operating leases that are for a period less than 12 months, inclusive of options to extend that are reasonably certain to be exercised, are classified as short-term and are not recognized on the consolidated balance sheet. ROU assets are recorded as a noncurrent asset on the consolidated balance sheet. The corresponding liabilities are recorded as an operating lease liability, either current or noncurrent, as applicable, on the consolidated balance sheet. Operating lease costs are recognized on a straight-line basis over the lease term within costs of products sold (excluding depreciation and amortization) or selling and administrative expenses based on the use of the related ROU asset. Intangible Assets Intangible assets primarily consist of developed technology, customer relationships and trade name. Intangible assets with finite lives are amortized using the straight-line method over their estimated useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated. Intangible assets with indefinite lives are not amortized but reviewed for impairment at least annually, as of October 1. Additionally, intangible assets, both finite and indefinite lived, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. For finite-lived intangible assets, if the undiscounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. For indefinite-lived intangible assets, if the discounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. Also, if the estimate of an intangible asset’s remaining useful life changes, the remaining carrying value of the intangible asset will be amortized prospectively over the revised remaining useful life. Assets of Discontinued Operations Held for Sale Assets are classified as “held for sale” when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the assets; (ii) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (iv) the sale of the assets is probable and is expected to be completed within one year; (v) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. When all of these criteria have been met, the assets are classified as “held for sale” in the consolidated balance sheet. Assets classified as “held for sale” are reported at the lower of their carrying value or fair value less costs to sell. Depreciation of assets ceases upon designation as “held for sale”. If the “held for sale” criteria have been met and the sale represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, the assets and liabilities of the discontinued operation are classified separately as “discontinued operations” in the consolidated balance sheet and the operating results and cash flows of the discontinued operation are presented as “discontinued operations” in the consolidated statements of operations and cash flows. Debt Issuance Costs Debt issuance costs are amortized as interest expense over the scheduled maturity period of the debt. The costs related to a line-of-credit arrangement are amortized over the term of the arrangement, regardless of whether there are any outstanding borrowings. Unamortized debt issuance costs are either recognized as a direct deduction from the carrying amount of the related debt or, if related to a line-of-credit facility, as an other noncurrent asset on the consolidated balance sheet. Product Warranty A warranty that ensures basic functionality is an assurance type warranty. A warranty that goes beyond ensuring basic functionality is considered a service type warranty. The Corporation provides assurance type warranties; it does not provide service type warranties. Provisions for assurance type warranties are recognized at the time the underlying sale is recorded. The provision is based on historical experience as a percentage of sales adjusted for potential claims when a liability is probable and for known claims. Employee Benefit Plans Funded Status If the fair value of the plan assets exceeds the projected benefit obligation, the over-funded projected benefit obligation is recognized as an asset (prepaid pensions within other noncurrent assets) on the consolidated balance sheet. Conversely, if the projected benefit obligation exceeds the fair value of the plan assets, the under-funded projected benefit obligation is recognized as a liability (employee benefit obligations) on the consolidated balance sheet. Gains and losses arising from the difference between actuarial assumptions and actual experience and unamortized prior service costs are recorded as a separate component of accumulated other comprehensive loss. Net Periodic Pension and Other Postretirement Benefit Costs Net periodic pension and other postretirement benefit costs includes service cost, interest cost, expected rate of return on the market-related value of plan assets, amortization of prior service costs, and recognized actuarial gains or losses. When actuarial gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are amortized to net periodic pension and other postretirement benefit costs over the average remaining service period of the employees expected to receive benefits under the plan or over the remaining life expectancy of the employees expected to receive benefits if “all or almost all” of the plan’s participants are inactive. When actuarial gains or losses are less than 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are included in net periodic pension and other postretirement benefit costs indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. The market-related value of plan assets is determined using a five-year moving average which recognizes gains or losses in the fair market value of assets at the rate of 20% per year. Warrants Accounting for warrants includes an initial assessment of whether the warrants qualify as debt or equity. The Corporation’s warrants meet the definition of equity instruments and, accordingly, are recorded within shareholders’ equity on the consolidated balance sheet. The fair value of the warrants is determined as of the measurement date. Incremental costs directly attributable to the offering of the securities are deferred and charged against the proceeds of the offering. Other Comprehensive Income (Loss) Other comprehensive income (loss) includes changes in assets and liabilities from non-owner sources including foreign currency translation adjustments, unamortized prior service costs and unrecognized actuarial gains and losses associated with employee benefit plans, and changes in the fair value of derivatives designated and effective as cash flow hedges. Certain components of other comprehensive income (loss) are presented net of income tax. Foreign currency translation adjustments exclude the effect of income tax since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Reclassification adjustments are amounts which are realized during the year and, accordingly, are deducted from other comprehensive income (loss) in the period in which they are included in net income (loss) or when a transaction no longer qualifies as a cash flow hedge. Foreign currency translation adjustments are included in net income (loss) upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity. With respect to employee benefit plans, unamortized prior service costs are included in net income (loss), either immediately upon curtailment of the employee benefit plan or over the average remaining service period or life expectancy of the employees expected to receive benefits, and unrecognized actuarial gains and losses are included in net income (loss) indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. Changes in the fair value of derivatives are included in net income (loss) when the projected sale occurs or, if a foreign currency purchase contract, over the estimated useful life of the underlying asset. Foreign Currency Translation Assets and liabilities of the Corporation’s foreign operations are translated at year-end exchange rates and the statements of operations are translated at the average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive loss until the entity is sold or substantially liquidated. Revenue Recognition Revenue from sales is recognized when obligations under the terms of the contract with the customer are satisfied. Generally, this occurs when control of the product transfers to the customer. A contract with a customer is deemed to exist when there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Persuasive evidence of an arrangement identifies the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction that creates enforceable obligations. It can be in the form of an executed purchase order from the customer, combined with an order acknowledgment from the Corporation, a sales agreement or longer-term supply agreement between the customer and the Corporation, or a similar arrangement deemed to be a normal and customary business practice for that particular customer or class of customer (collectively, a sales agreement). Sales agreements typically include a single performance obligation for the manufacturing of product which is satisfied upon transfer of control of the product to the customer. The sales price required to be paid by the customer is fixed or determinable from the sales agreement. It is not subject to refund or adjustment, except for a variable-index surcharge provision which is known at the time of shipment and increases or decreases, as applicable, the selling price of a mill roll for corresponding changes in the published index cost of certain raw materials. The variable-index surcharge is recognized as revenue when the corresponding revenue for the inventory is recognized. Likelihood of collectability is assessed prior to acceptance of an order. In certain circumstances, the Corporation may require a deposit from the customer, a letter of credit, or another form of assurance for payment. An allowance for doubtful accounts is maintained based on historical experience. Payment terms are standard to the industry and generally require payment 30 days after control transfers to the customer. Transfer of control is assessed based on alternative use of the product manufactured and, under the terms of the sales agreement, an enforceable right to payment for performance to date. Transfer of control, and therefore revenue recognition, occurs when title, ownership and risk of loss pass to the customer. Typically, this occurs when the product is shipped to the customer (i.e., FOB shipping point), delivered to the customer (i.e., FOB destination), or, for foreign sales, in accordance with trading guidelines known as Incoterms. Incoterms are standard trade definitions used in international contracts and are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice. Shipping terms vary across the businesses and typically depend on the product, country of origin and type of transportation (truck or vessel). There are no customer-acceptance provisions other than, perhaps, customer inspection and testing prior to shipment. Post-shipment obligations are insignificant. Amounts billed to the customer for shipping and handling are recorded within net sales and the related costs are recorded within costs of products sold (excluding depreciation and amortization). Amounts billed for taxes assessed by various government authorities (e.g., sales tax, value-added tax, etc.) are excluded from the determination of net income (loss) and, instead, are recorded as a liability until remitted to the government authority. Stock-Based Compensation Stock-based compensation, such as stock options, restricted stock units and performance shares, is recognized over the vesting period based upon the fair value of the award at the date of grant. For stock options, the fair value is determined by the Black Scholes option pricing model and is expensed over the vesting period of three years. For restricted stock units, the fair value is equal to the closing price of the Corporation’s common stock on the New York Stock Exchange (“NYSE”) on the date of grant and is expensed over the vesting period, typically three years. For performance share awards that vest subject to a performance condition, the fair value is equal to the closing price of the Corporation’s stock on the NYSE on the date of grant. For performance share awards that vest subject to a market condition, the fair value is determined using a Monte Carlo simulation model. The fair value of performance share awards is expensed over the performance period when it is probable that the performance condition will be achieved. Asbestos-Related Costs The amounts recorded for asbestos-related liabilities and insurances receivables for asbestos-related matters rely on assumptions that are based on currently known facts and strategies. Asbestos-related liabilities are recognized when a liability is probable of occurrence and can be reasonably estimated. The liability includes an estimate of future claims as well as settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims over the period which such claims can be reasonably estimated. Insurance receivables for asbestos-related matters are recognized for the estimated amount of probable insurance recoveries attributable to the claims for which an asbestos-related liability has been recognized, including the portion of incurred defense costs expected to be reimbursed. Neither the asbestos-related liabilities nor the insurance receivables for asbestos-related matters are discounted to their present values due to the inability to reliably forecast the timing of future cash flows. The asbestos-related liabilities and insurance receivables for asbestos-related matters as well as the underlying assumptions are reviewed on a regular basis to determine whether any adjustments to the estimates are required. If it is determined that there is an increase in asbestos-related liabilities net of insurance recoveries, then a charge to earnings would be recorded. Similarly, if it is determined that there is a decrease in asbestos-related liabilities net of insurance recoveries, then a credit to earnings would be recorded. Derivative Instruments Derivative instruments which include forward exchange (for foreign currency sales and purchases) and futures contracts are recorded on the consolidated balance sheet as either an asset or a liability measured at their fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. To the extent that a derivative is designated and effective as a cash flow hedge of an exposure to future changes in value, the change in the fair value of the derivative is deferred in accumulated other comprehensive loss. Any portion considered to be ineffective, including that arising from the unlikelihood of an anticipated transaction to occur, is reported as a component of earnings (other income/expense) immediately. Upon occurrence of the anticipated sale, the foreign currency sales contract designated and effective as a cash flow hedge is de-designated as a fair value hedge and the change in fair value previously deferred in accumulated other comprehensive loss is reclassified to earnings (net sales) with subsequent changes in fair value recorded as a component of earnings (other income/expense). Upon occurrence of the anticipated purchase, the foreign currency purchase contract is settled and the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (depreciation and amortization expense) over the life of the underlying asset. Upon settlement of a futures contract, the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (costs of products sold, excluding depreciation and amortization) when the corresponding inventory is sold and revenue is recognized. To the extent that a derivative is designated and effective as a hedge of an exposure to changes in fair value, the change in the derivative’s fair value will be offset in the consolidated statement of operations by the change in the fair value of the item being hedged and is recorded as a component of earnings (other income/expense). Cash flows associated with the derivative instruments are recorded as a component of operating activities on the consolidated statement of cash flows. The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes. Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy of inputs is used to determine fair value measurements with three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities and are considered the most reliable evidence of fair value. Level 2 inputs are observable prices that are not quoted on active exchanges. Level 3 inputs are unobservable inputs used for measuring the fair value of assets or liabilities. Legal Costs Legal costs expected to be incurred in connection with loss contingencies are accrued when such costs are probable and estimable. Income Taxes Income taxes are recognized during the year in which transactions enter into the determination of financial statement income. Any taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations are accounted for as period costs. Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the book carrying amount and the tax basis of assets and liabilities including net operating loss carryforwards. A valuation allowance is provided against a deferred income tax asset when it is “more likely than not” the asset will not be realized. Similarly, if a determination is made that it is “more likely than not” the deferred income tax asset will be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded. Penalties and interest are recognized as a component of the income tax provision. Tax benefits are recognized in the financial statements for tax positions taken or expected to be taken in a tax return when it is “more likely than not” that the tax authorities will sustain the tax position solely on the basis of the position’s technical merits. Consideration is given primarily to legislation and statutes, legislative intent, regulations, rulings and case law as well as their applicability to the facts and circumstances of the tax position when assessing the sustainability of the tax position. In the event a tax position no longer meets the “more likely than not” criteria, the tax benefit is reversed by recognizing a liability and recording a charge to earnings. Conversely, if a tax position subsequently meets the “more likely than not” criteria, a tax benefit would be recognized by reducing the liability and recording a credit to earnings. Earnings Per Common Share Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The computation of diluted earnings per common share is similar to basic earnings per common share except that the denominator is increased to include the dilutive effect of the net additional common shares that would have been outstanding assuming exercise of outstanding stock awards and warrants, calculated using the treasury stock method. The computation of diluted earnings per share would not assume the exercise of an outstanding stock award or warrant if the effect on earnings per common share would be antidilutive. Similarly, the computation of diluted earnings per share would not assume the exercise of outstanding stock awards and warrants if the Corporation incurred a net loss since the effect on earnings per common share would be antidilutive. The weighted average number of common shares outstanding assuming exercise of dilutive stock awards and warrants was 14,636,022 for 2020 and 12,590,230 for 2019. Weighted-average outstanding stock awards and warrants excluded from the diluted earnings per common share calculation, since the effect would have been antidilutive, were 1,809,432 for 2020 and 671,886 for 2019. With respect to amounts attributable to Ampco-Pittsburgh common shareholders, net income (loss) from continuing operations attributable to Ampco-Pittsburgh common shareholders excludes net income attributable to noncontrolling interest. Recently Implemented Accounting Pronouncements No significant accounting pronouncements became effective for the Corporation in 2020. Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Corporation on January 1, 2024, with early adoption of all amendments in the same period permitted. The Corporation is currently evaluating the impact the guidance will have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time for applying generally accepted accounting principles to modifications of contracts, hedging relationships, and other transactions that reference LIBOR or another rate that will be discontinued by reference rate reform if certain criteria are met. The optional guidance is available as of March 12, 2020, through December 31, 2022. To date, no contracts have been required to be modified as a result of reference rate reform. The Corporation is currently evaluating the impact the guidance will have on its financial position, operating results and liquidity if such an event occurs in the future and the Corporation chooses to avail itself to the optional guidance. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). ASU 2019-12 is intended to simplify the accounting for income taxes including removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income, the accounting for franchise or similar tax, and requiring an entity reflect the effect of an enacted change in tax laws or rates in the interim period that includes the enactment date. The guidance becomes effective for the Corporation on January 1, 2021, and is not expected to impact the Corporation’s financial position, operating results or liquidity. In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which adds a new impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies it to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. The guidance originally became effective for the Corporation on January 1, 2020, however, since the Corporation meets the definition of a Smaller Reporting Company, as defined by the Securities Exchange Commission, the effective date was subsequently revised to fiscal years beginning after December 15, 2022. The Corporation is currently evaluating the impact the guidance will have on its financial position and operating results. It will not, however, affect the Corporation’s liquidity. |
Discontinued Operations and Dispositions |
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| Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations and Dispositions |
NOTE 2 – DISCONTINUED OPERATIONS AND DISPOSITIONS: ASW Steel Inc. (“ASW”) On September 30, 2019, the Corporation, Ampco UES Sub, Inc., an indirect subsidiary of the Corporation, and ASW entered into a Share Purchase Agreement (the “Purchase Agreement”) with Valbruna Canada Ltd., a company organized and existing under the laws of the Province of New Brunswick, Canada (the “Purchaser”). The Purchaser acquired all issued and outstanding shares of ASW for a cash purchase price of $8,000, subject to normal and customary adjustments including a net working capital adjustment. Net proceeds received at closing, after such normal and customary adjustments including a preliminary net working capital adjustment, equaled $4,292. Subsequent post-closing adjustments were not significant. In conjunction with the sale, Union Electric Steel Corporation (“UES”), an indirect subsidiary of the Corporation, entered into a long-term supply agreement with ASW for the supply of stainless steel ingots. Purchases to date have been insignificant. The sale of ASW represented a strategic shift that would have a major favorable impact on the Corporation’s operations and financial results. The “discontinued operations” criteria set forth in ASC 205, Presentation of Financial Statements (“ASC 205”), were met and, accordingly, the operating results and cash flows of ASW have been presented as discontinued operations in the consolidated statements of operations and cash flows for the year ended December 31, 2019. The following table presents the major classes of ASW’s line items constituting the “loss from discontinued operations, net of tax” in the consolidated statements of operations:
Net sales include $4,381 of product sold by ASW to UES for the nine months ended September 30, 2019. Costs of products sold (excluding depreciation and amortization) approximated the same. Akers National Roll Company In March 2019, the Board of Directors of the Corporation approved a plan to sell certain assets of Akers National Roll Company (“ANR”), an indirect subsidiary of UES, located in Avonmore, Pennsylvania (the “Avonmore Plant”). In connection with the anticipated sale, the Corporation recognized an impairment charge of $10,082 in the first quarter of 2019 to record the assets at their estimated net realizable value. In May 2019, ANR entered into a definitive agreement to sell the Avonmore Plant, including its real estate and certain personal property, to an affiliate of WHEMCO, Inc. for $3,700. On September 30, 2019, following completion of customer orders in backlog, the transaction closed and all operations at ANR ceased. Although the sale of the Avonmore Plant was expected to help mitigate the excess capacity and high operating costs of the cast roll operations, thereby having a positive impact on the operating and financial results of the Corporation, the sale of the Avonmore Plant was not considered a strategic shift per the requirements of ASC 205; accordingly, the operating results and cash flows of ANR through the date of sale are included within continuing operations, versus discontinued operations, of the Corporation. |
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Inventories |
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| Inventories |
NOTE 3 – INVENTORIES:
At December 31, 2020, and 2019, approximately 35% of the inventories were valued using the LIFO method. The LIFO reserve approximated $(12,256) and $(17,321) at December 31, 2020, and 2019, respectively. During each of the years, inventory quantities decreased for certain locations resulting in a liquidation of LIFO layers which were at lower costs. The effect of the liquidations was to decrease costs of products sold (excluding depreciation and amortization) by approximately $3,262 and $467 for 2020 and 2019, respectively. There was no income tax expense recognized in the consolidated statements of operations due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the income was recognized (see Note 21). Accordingly, the effect of the liquidations increased net income by approximately $3,262, or $0.23 per common share, for 2020 and reduced net loss by approximately $467, or $0.04 per common share, for 2019. |
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Property, Plant and Equipment |
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| Property Plant And Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment |
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT:
The majority of the assets of the Corporation, except real property including the land and building of Union Electric Steel UK Limited, an indirect subsidiary of the Corporation (“UES-UK”), is pledged as collateral for the Corporation’s revolving credit facility (see Note 9). Land and buildings of UES-UK, equal to approximately $2,896 (£2,122) at December 31, 2020, are held as collateral by the trustees of the UES-UK defined benefit pension plan (see Note 11). The gross value of assets under finance leases and the related accumulated amortization approximated $3,430 and $1,222 as of December 31, 2020, and $3,204 and $903 as of December 31, 2019. Amortization on assets under finance leases approximated $415 for the year ended December 31, 2020. At March 31, 2020, the significant change potentially brought about by COVID-19 to macroeconomic conditions and to industry and market conditions in which the FCEP segment operates, was deemed to be a triggering event under ASC 360, Property, Plant and Equipment, causing the Corporation to evaluate whether the property, plant and equipment of the asset groupings within the FCEP segment was deemed to be impaired. Accordingly, as of March 31, 2020, the Corporation completed a quantitative analysis of the long-lived assets for these asset groups and determined that the assets were not impaired. The Corporation continues to evaluate the uncertainty associated with COVID-19, and, at December 31, 2020, there were no additional triggering events identified for these asset groups. Additionally, there have been no triggering events for the asset groups within the Air and Liquid Processing segment. |
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Operating Lease Right of Use Assets |
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| Operating Lease Right of Use Assets |
NOTE 5 – OPERATING LEASE RIGHT-OF-USE ASSETS: The Corporation leases certain factory and office space and equipment. Additionally, the manufacturing facilities of one of our cast roll joint ventures in China are located on land leased by the joint venture from the other partner. The land lease commenced in 2007, the date the joint venture was formed, and continues through 2054, the expected end date of the joint, and includes variable lease payment provisions based on the land standard price prevailing in Taiyuan, China, where the joint venture is located. Right-of-use assets associated with operating leases as of December 31, 2020, and 2019, were comprised of the following:
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Intangible Assets |
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| Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Intangible Assets |
NOTE 6 – INTANGIBLE ASSETS:
The trade name is an indefinite-lived asset and, accordingly, is not subject to amortization. The fluctuation between the years is due to changes in foreign currency exchange rates. The following summarizes changes in intangible assets for the years ended December 31:
Identifiable intangible assets are reviewed for impairment whenever events or circumstances indicate that the carrying values may not be recoverable. At March 31, 2020, the uncertainty brought about by COVID-19 was considered a triggering event for the FCEP segment, causing the Corporation to evaluate whether the identifiable intangible assets of the asset groupings within the FCEP segment were deemed to be impaired. Accordingly, as of March 31, 2020, the Corporation completed a quantitative analysis and determined that the intangible assets for these asset groups were not impaired. The Corporation continues to evaluate the uncertainty associated with COVID-19, and, at December 31, 2020, there were no additional triggering events identified for these asset groups. For 2019, in connection with the anticipated sale of the Avonmore Plant, the Corporation recognized an impairment charge on the intangible assets of ANR of $292. Identifiable intangible assets are expected to be amortized over a weighted average period of approximately 13 years or $542 for 2021, $399 for 2022, $399 for 2023, $399 for 2024, $345 for 2025 and $2,487 thereafter. |
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Investments in Joint Ventures |
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| Equity Method Investments And Joint Ventures [Abstract] | ||||||||||
| Investments in Joint Ventures |
NOTE 7 – INVESTMENTS IN JOINT VENTURES: The Corporation has interests in three joint ventures:
ATR In 2007, Åkers AB, a subsidiary of UES, entered into an agreement with Taiyuan Iron & Steel Co., Ltd. (“TISCO”) to form ATR, with Åkers AB owning 59.88% and TISCO owning 40.12%. Since Åkers AB is the majority shareholder, has voting rights proportional to its ownership interest and exercises control over TISCO, Åkers AB is considered the primary beneficiary and, accordingly, accounts for its investment in ATR on the consolidated method of accounting. The net assets and net income (loss) attributable to TISCO is reflected as non-controlling interest in the accompanying consolidated financial statements. MG The Corporation has a 33% interest in MG which is recorded at cost, or $835. The Corporation does not participate in the management or daily operation of MG, has not guaranteed any of its obligations and has no ongoing responsibilities to it. Dividends may be declared by the Board of Directors of the joint venture after allocation of after-tax profits to various “funds” equal to the minimum amount required under Chinese law. No dividends were declared or received in 2020 or 2019. Gongchang The Corporation has a 24.03% interest in Gongchang which is recorded at cost, or $1,340. The Corporation does not participate in the management or daily operation of Gongchang, has not guaranteed any of its obligations and has no ongoing responsibilities to it. Dividends may be declared by the Board of Directors of the joint venture after allocation of after-tax profits to various “funds” equal to the minimum amount required under Chinese law. Dividends of $1,203 and $1,364 were declared and received in 2020 and 2019, respectively. |
Other Current Liabilities |
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| Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Other Current Liabilities |
NOTE 8 – OTHER CURRENT LIABILITIES:
Customer-related liabilities include liabilities for product warranty claims and deposits received on future orders. The following summarizes changes in the liability for product warranty claims for the years ended December 31:
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 consolidated 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:
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Debt |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt |
NOTE 9 – DEBT:
Future principal payments, assuming demand loans are called in 2021, are $12,436 for 2021, $8,080 for 2022, $1,941 for 2023, $1,950 for 2024, $12,836 for 2025, and $0 thereafter. Revolving Credit and Security Agreement The Corporation was party to a five-year Revolving Credit and Security Agreement (the “Credit Agreement”) with a syndicate of banks. The Credit Agreement provided for initial borrowings not to exceed $100,000, with an option to increase the credit facility by an additional $50,000 at the request of the Corporation and with the approval of the banks. The Credit Agreement included sublimits for letters of credit not to exceed $40,000 and European borrowings not to exceed $15,000. The maturity date for the Credit Agreement was May 20, 2021, and, subject to other terms and conditions of the Credit Agreement, would become due on that date. On June 23, 2020, the Corporation and the banks amended the Credit Agreement (collectively, with the Credit Agreement, the “Amended Credit Agreement”) to, among other things, extend the maturity date to May 20, 2022. The Amended Credit Agreement provides for borrowings not to exceed $92,500 with the sublimits for letters of credit and European borrowings continuing. The reduction in the maximum borrowing capacity was, in part, due to the sales of ASW and the Avonmore Plant which eliminated collateral and enabled the reduction. Availability under the Amended Credit Agreement is based on eligible accounts receivable, inventory and fixed assets. Amounts outstanding under the credit facility bear interest, at the Corporation’s option, at either (i) LIBOR plus an applicable margin ranging between 2.75% to 3.25% based on the quarterly average excess availability with LIBOR set at a minimum of 0.75% or (ii) the base rate plus an applicable margin ranging between 1.75% to 2.25% based on the quarterly average excess availability. Additionally, the Corporation is required to pay a commitment fee ranging between 0.25% and 0.375% based on the daily unused portion of the credit facility. As of December 31, 2020, the Corporation had outstanding borrowings under the Amended Credit Agreement of $6,000. The effective interest rate approximated 4% for 2020 and 2019. Additionally, the Corporation had utilized a portion of the credit facility for letters of credit (see Note 12). As of December 31, 2020, remaining availability under the Amended Credit Agreement approximated $48,300, net of standard availability reserves. Deferred financing fees of $329 have been incurred related to the Amended Credit Agreement and are being amortized over the remaining term of the agreement. Borrowings outstanding under the Amended Credit Agreement are collateralized by a first priority perfected security interest in substantially all of the assets of the Corporation and its subsidiaries (other than real property). Additionally, the Amended Credit Agreement contains customary affirmative and negative covenants and limitations, including, but not limited to, investments in certain of its subsidiaries, payment of dividends, incurrence of additional indebtedness, and acquisitions and divestures. The Corporation must also maintain a certain level of excess availability. The Corporation was in compliance with the applicable bank covenants as of December 31, 2020. Sale and Leaseback Financing Obligation In September 2018, UES completed a sale and leaseback financing transaction for certain of its real property, including the land and buildings of its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania (the “Properties”). Simultaneously with the sale, UES entered into a lease agreement pursuant to which UES would lease the Properties from the buyer. The lease provides for an initial term of 20 years; however, UES may extend the lease for four successive periods of approximately five years each. If fully extended, the lease would expire in September 2058. UES also has the option to repurchase the Properties, which it may exercise, and currently intends to exercise, in 2025, for a price equal to the greater of (i) the Fair Market Value of the Properties, or (ii) 115% of Lessor’s Total Investment for the Facilities, with such terms defined in the lease agreement. Annual payments will increase each anniversary date by an amount equal to the lesser of 2% or 1.25% of the change in the consumer price index, as defined in the lease agreement. The effective interest rate approximated 7.98% and 8.21% for 2020 and 2019, respectively. Industrial Revenue Bonds During 2020, at maturity, the Corporation repaid its $4,120 tax-exempt Industrial Revenue Bond (“IRB”). At December 31, 2020, the Corporation had the following IRBs outstanding: (i) $7,116 taxable IRB maturing in 2027, interest at a floating rate which averaged 0.83% and 2.25% for 2020 and 2019, respectively; and (ii) $2,075 tax-exempt IRB maturing in 2029, interest at a floating rate which averaged 0.85% and 1.66% for 2020 and 2019, respectively. The IRBs are secured by letters of credit of equivalent amounts and are remarketed periodically at which time interest rates are reset. If the IRBs are not able to remarketed, although considered remote by the Corporation and its bankers, the bondholders can seek reimbursement immediately from the letters of credit which serve as collateral for the bonds. Accordingly, the IRBs are recorded as current debt. Minority Shareholder Loan ATR has a loan outstanding with its minority shareholder. The loan originally matured in 2008 but has been renewed continually for one-year periods. Interest does not compound and has accrued on the outstanding balance, since inception, at the three-to-five-year loan interest rate set by the People’s Bank of China in effect at the time of renewal. The loan balance approximated $1,056 (RMB 6,901) at December 31, 2020, and $2,856 (RMB 19,901) at December 31, 2019. ATR repaid $1,882 (RMB 13,000) in principal and $290 (RMB 2,000) in accrued interest in 2020 and $1,148 (RMB 8,000) in principal and $287 (RMB 2,000) in accrued interest in 2019. The interest rate for 2020 and 2019 approximated 5%. Accrued interest as of December 31, 2020, and 2019, approximated $2,117 (RMB 13,842) and $2,152 (RMB 14,999), which is recorded in other current liabilities. Finance Leases The Corporation leases equipment under various noncancelable lease agreements ending 2021 to 2024. Effective interest rates ranged between approximately 1% and 3% for 2020 and 2019. The weighted average remaining lease term approximated 2 years at December 31, 2020, and 3 years at December 31, 2019. Cash paid for amounts included in the measurement of finance lease liabilities totaled $570 and $203 for the year ended December 31, 2020, and 2019, respectively, of which $18 and $22 were classified as operating cash flows and $552 and $181 were classified as financing cash flows in the consolidated statement of cash flows for each of the respective years. Finance lease costs for interest on finance lease liabilities were insignificant for both years. |
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Operating Lease Liabilities |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Operating Lease Liabilities |
NOTE 10 – OPERATING LEASE LIABILITIES: The current and noncurrent portion of the Corporation’s operating lease arrangements as of December 31, 2020, and 2019, were as follows:
Future operating lease payments as of December 31, 2020, were as follows:
At December 31, 2020, and 2019, the weighted average remaining lease term approximated 8.71 years and 8 years, respectively, and the weighted average discount rate approximated 3.95% and 3.98%, respectively. The components of lease cost for the year ended December 31, 2020, and 2019, were as follows:
Cash paid for amounts included in the measurement of operating lease liabilities totaled $727 and $775 for the year ended December 31, 2020, and 2019, respectively, and was classified as operating cash flows in the consolidated statement of cash flows. |
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Pension and Other Postretirement Benefits |
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| Compensation And Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pension and Other Postretirement Benefits |
NOTE 11 – PENSION AND OTHER POSTRETIREMENT BENEFITS: U.S. Pension Benefits The Corporation has two qualified domestic defined benefit pension plans that cover substantially all of its U.S. employees. Benefit accruals and participation in the plans have been curtailed for all locations except one. The defined benefit pension plans are covered by the Employee Retirement Income Security Act of 1974 (“ERISA”); accordingly, the Corporation’s policy is to fund at least the minimum actuarially computed annual contribution required under ERISA. Minimum contributions for 2020 and 2019 approximated $5,562 and $1,257, respectively. The increase in minimum contributions in 2020 from 2019 is principally due to amortization of pension funding credit balances created in earlier years from voluntary contributions previously made and expiration of legislation which reduced funding requirements for single employer plans. No contributions are expected in 2021 due to relief provided by the American Rescue Plan Act of 2021 (“ARPA”) which was signed into law by President Biden in March 2021. The fair value of the plan assets as of December 31, 2020, and 2019, approximated $210,880 and $195,667, respectively, in comparison to accumulated benefit obligations of $264,750 and $252,808 for the same periods. Employer contributions to the defined contribution plans totaled $2,796 and $3,140 for 2020 and 2019, respectively, and are expected to approximate $2,903 in 2021. The Corporation also maintains nonqualified defined benefit pension plans for selected executives in addition to the benefits provided under one of the Corporation’s qualified defined benefit pension plans. The objectives of the nonqualified plans are to provide supplemental retirement benefits or restore benefits lost due to limitations set by the Internal Revenue Service. The assets of the nonqualified plans are held in a grantor tax trust known as a “Rabbi” trust and are subject to claims of the Corporation’s creditors, but otherwise must be used only for purposes of providing benefits under the plans. The fair market value of the trust at December 31, 2020, and 2019, which is included in other noncurrent assets, was $4,402 and $4,183, respectively. The plan is treated as a non-funded pension plan for financial reporting purposes. Accordingly, benefit payments would represent employer contributions. Accumulated benefit obligations approximated $8,813 and $8,481 at December 31, 2020, and 2019, respectively. Employees at one location participate in a multi-employer plan, I.A.M. National Pension Fund (employer identification number 51-6031295, plan number 002), in lieu of the Corporation’s defined benefit pension plans. A multi-employer plan generally receives contributions from two or more unrelated employers pursuant to one or more collective bargaining agreements. The assets contributed by one employer may be used to fund the benefits provided to employees of other employers in the plan because the plan assets, once contributed, are not restricted to individual employers. The latest report of summary plan information (for the 2019 plan year) provided by I.A.M. National Pension Fund indicates:
Less than 100 of the Corporation’s employees participate in the plan and contributions are based on a rate per hour. The Corporation’s contributions to the plan were less than $250 for 2020 and 2019 and represent less than five percent of total contributions to the plan by all contributing employers. Contributions are expected to approximate $250 in 2021. Foreign Pension Benefits Employees of UES-UK participated in a defined benefit pension plan that was curtailed effective December 31, 2004, and replaced with a defined contribution pension plan. The plans are non-U.S. plans and therefore are not covered by ERISA. Employer contributions to the defined benefit pension plan, when necessary, are agreed to by the Trustees and UES-UK, based on U.K. regulations, with the objective of eliminating any funding deficit of the plan. Such estimated contributions are subject to change based on the future investment performance of the plan’s assets. Currently, the plan is fully funded and no contributions were required in 2020 or 2019, and none are expected for 2021. The fair value of the plan’s assets as of December 31, 2020, and 2019, approximated $66,957 (£49,056) and $57,900 (£43,913), respectively, in comparison to accumulated benefit obligations of $61,629 (£45,153) and $54,838 (£41,591) for the same periods. Contributions to the defined contribution pension plan approximated $292 and $355 in 2020 and 2019, respectively, and are expected to approximate $299 in 2021. The Corporation has two additional foreign defined benefit pension plans, which are not funded. Accordingly, benefit payments would represent employer contributions. Projected and accumulated benefit obligations approximated $8,294 and $7,501 at December 31, 2020, and 2019, respectively. Other Postretirement Benefits The Corporation provides a monthly reimbursement of postretirement health care benefits for up to a 6-year period principally to the bargaining groups of two subsidiaries. The plans cover participants and their spouses who retire under an existing pension plan on other than a deferred vested basis and at the time of retirement have also rendered 10 or more years of continuous service irrespective of age. Retiree life insurance is provided to substantially all retirees. The Corporation’s postretirement health care and life insurance plans are not funded or subject to any minimum regulatory funding requirements. Instead, benefit payments are made from the general assets of the Corporation at the time they are due. Significant Activity In 2019, the Corporation:
Actuarial losses were comprised of the following components:
Changes in actuarial assumptions principally include the effect of changes in discount rates and mortality tables which are used to estimate plan liabilities. A 1/4 percentage point decrease in the discount rate would increase projected and accumulated benefit obligations by approximately $10,900. Conversely, a 1/4 percentage point increase in the discount rate would decrease projected and accumulated benefit obligations by approximately $10,900. It is not possible to quantify the effects of future changes to mortality tables. Reconciliations The following table provides a reconciliation of projected benefit obligations (“PBO”), plan assets and the funded status of the plans for the Corporation’s defined benefit plans calculated using a measurement date as of the end of the respective years.
The following table provides a summary of amounts recognized in the consolidated balance sheets at December 31, 2020, and 2019.
As of December 31, 2020, estimated benefit payments for subsequent years are as follows:
Investment Policies and Strategies The investment policies and strategies are determined and monitored by the Board of Directors for the U.S. pension plans and by the Trustees (as appointed by UES-UK and the employees of UES-UK) for the UES-UK pension plan, each of whom employ their own investment managers to manage the plan’s assets in accordance with the policy guidelines. The U.S defined benefit pension plans follow a glide-path strategy whereby target asset allocations are rebalanced based on projected payment obligations and the funded status of the plans. In 2020, the U.K. defined benefit pension plan adopted a liability-matching portfolio whereby a higher percentage of plan assets are invested in fixed income securities. Pension assets of the UES-UK plan are invested with the objective of the plan reaching self-sufficiency in a three-to-five-year period, without additional corporate contributions. Attempts to minimize risk include allowing temporary changes to the allocation mix in response to market conditions, diversifying investments among asset categories (e.g., equity securities, fixed-income securities, alternative investments, cash and cash equivalents) and within these asset categories (e.g., economic sector, industry, geographic distribution, size) and consulting with independent financial and legal counsels to assure that the investments and their expected returns and risks are consistent with the goals of the Board of Directors or Trustees. Investments in equity securities are primarily in common stocks of publicly traded U.S. and international companies across a broad spectrum of industry sectors. Investments in fixed-income securities are principally A-rated or better bonds with maturities of less than ten years, preferred stocks and convertible bonds. Investments in equity and fixed-income securities are either direct or through designated mutual funds. The Corporation believes there are no significant concentrations of risk associated with the plans’ assets. With respect to the U.S. pension plans, the following investments are prohibited unless otherwise approved by the Board of Directors: stock of the Corporation, futures and options except for hedging purposes, unregistered or restricted stock, warrants, margin trading, short-selling, real estate excluding public or real estate partnerships, and commodities including art, jewelry and gold. The UES-UK pension plan invests in specific funds. Any investments other than those specifically identified would be considered prohibited. The following table summarizes target asset allocations (within +/-5% considered acceptable) and major asset categories. Certain investments are classified differently for target asset allocation purposes and external reporting purposes. The Corporation intends to continue to liquidate the alternative investments of the U.S. plans to provide additional flexibility with investment allocation.
Fair Value Measurement of Plan Assets Equity securities, exchange-traded funds (“ETFs”), mutual funds and treasury bonds are actively traded on exchanges or broker networks and price quotes for these investments are readily available. While not quoted on active exchanges, price quotes for corporate and agency bonds are readily available. Similarly, certain commingled funds are not traded publicly, but the underlying assets (such as stocks and bonds) held in the funds are traded on active markets and the prices for the underlying assets are readily observable. For securities not actively traded, the fair value may be based on third-party appraisals, discounted cash flow analysis, benchmark yields and inputs that are currently observable in markets for similar securities. Investment Strategies The significant investment strategies of the various funds are summarized below.
Categories of Plan Assets Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2020, are summarized below.
Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2019, are summarized below.
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2020, are summarized below.
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2019, are summarized below.
The table below sets forth a summary of changes in the fair value of the Level 3 plan assets for the U.S. and foreign pension benefits plans for the year ended December 31, 2020, and 2019.
Net Periodic Pension and Other Postretirement Benefit Costs The actual return on the fair value of plan assets is included in determining the funded status of the plans. In determining net periodic pension benefit costs, the expected long-term rate of return on the market-related value of plan assets is used. Differences between the actual return on plan assets and the expected long-term rate of return on plan assets are classified as part of unrecognized actuarial gains or losses and are recorded as a component of accumulated other comprehensive loss on the consolidated balance sheet. When these gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are amortized to net periodic pension and other postretirement benefit costs over the average remaining service period or life expectancy of the employees expected to receive benefits under the plans. When the gains or losses are less than 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are included in net periodic pension and other postretirement benefit costs indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. Net periodic pension and other postretirement benefit costs include the following components for each of the years.
Assumptions Assumptions are reviewed on an annual basis. The expected long-term rate of return on plan assets is an estimate of average rates of earnings expected to be earned on funds invested or to be invested to provide for the benefits included in the projected benefit obligation. Since these benefits will be paid over many years, the expected long-term rate of return is reflective of current investment returns and investment returns over a longer period. Consideration is also given to target and actual asset allocations, inflation and real risk-free return. A percentage point decrease in the expected long-term rate of return would increase annual pension expense by approximately $2,350. Conversely, a percentage point increase in the expected long-term rate of return would decrease annual pension expense by approximately $2,350. The discount rates used in determining future pension obligations and other postretirement benefits for each of the plans are based on rates of return on high-quality fixed-income investments currently available and expected to be available during the period to maturity of the pension and other postretirement benefits. High-quality fixed-income investments are defined as those investments which have received one of the two highest ratings given by a recognized rating agency with maturities of 10+ years. Assumptions about wage increases are not relevant since substantially all the benefits available under the defined benefit pension plans are either frozen or based on a multiplier, versus wages. The discount rates used to determine the benefit obligations as of December 31, 2020, and 2019, are summarized below.
In addition, the assumed health care cost trend rate at December 31, 2020, for other postretirement benefits is 5.40% for 2021 gradually decreasing to 4.75% in 2025. In selecting rates for current and long-term health care assumptions, the Corporation considers known health care cost increases, the design of the benefit programs, the demographics of its active and retiree populations and expectations of inflation rates in the future. The following assumptions were used to determine net periodic pension and other postretirement benefit costs for the year ended December 31, 2020, and 2019.
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Commitments and Contingent Liabilities |
12 Months Ended |
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Dec. 31, 2020 | |
| Commitments And Contingencies Disclosure [Abstract] | |
| Commitments and Contingent Liabilities |
NOTE 12 – COMMITMENTS AND CONTINGENT LIABILITIES: Outstanding standby and commercial letters of credit as of December 31, 2020, approximated $14,735, the majority of which serves as collateral for the IRB debt. In addition, outstanding surety bonds guaranteeing certain obligations of the two unfunded foreign defined benefit pension plans approximated $4,000 (SEK 33,900) as of December 31, 2020. At December 31, 2020, the Corporation had purchase commitments for expected future capital expenditures of approximately $3,300, which are anticipated to be spent over the next 12-18 months. Approximately 36% of the Corporation’s employees are covered by collective bargaining agreements that have expiration dates ranging from March 2021 to October 2023. Collective bargaining agreements expiring in 2021 (representing approximately 65% of the covered employees) will be negotiated with the intent to secure mutually beneficial, long-term arrangements. In March 2021, the collective bargaining agreement set to expire during the month, representing 25% of the covered employees, was extended to March 2025 (see Note 25). See Note 15 regarding derivative instruments, Note 20 regarding litigation and Note 22 for environmental matters. |
Equity Rights Offering |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| Warrants And Rights Note Disclosure [Abstract] | |
| Equity Rights Offering |
NOTE 13 – EQUITY RIGHTS OFFERING: In September 2020, the Corporation completed an equity rights offering, issuing 5,507,889 shares of its common stock and 12,339,256 Series A warrants to existing shareholders for total gross proceeds of $19,279. The shares of common stock and warrants are classified as equity instruments in the consolidated statement of shareholders’ equity. Additional proceeds may be received from the future exercise of the Series A warrants. Each Series A warrant provides the holder with the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock, and expires on August 1, 2025. All Series A warrants remain outstanding and exercisable at December 31, 2020. See Note 25, Subsequent Events, regarding the exercise of Series A warrants after December 31, 2020. Stock issuance costs equaled $1,140 and are recorded against the proceeds in additional paid in capital. A majority of the proceeds from the equity rights offering was used to repay borrowings under the Corporation’s revolving credit facility. |
Accumulated Other Comprehensive Loss |
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| Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Other Comprehensive Loss |
NOTE 14 – ACCUMULATED OTHER COMPREHENSIVE LOSS: Net changes and ending balances for the various components of other comprehensive income (loss) and for accumulated other comprehensive loss as of and for the year ended December 31, 2019, and 2020, are summarized below.
The following summarizes the line items affected on the consolidated statements of operations for components reclassified from accumulated other comprehensive loss for the year ended December 31, 2020, and 2019. Amounts in parentheses represent credits to net income (loss).
There was no income tax expense or benefit associated with the various components of other comprehensive income (loss) for either year due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the expense is recognized. Foreign currency translation adjustments exclude the effect of income taxes since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. |
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Derivative Instruments |
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| Derivative Instruments And Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments |
NOTE 15 – DERIVATIVE INSTRUMENTS: Certain operations of the Corporation are subject to risk from exchange rate fluctuations in connection with sales in foreign currencies. To minimize this risk, foreign currency sales contracts are entered into which are designated as cash flow or fair value hedges. As of December 31, 2020, approximately $4,370 of anticipated foreign-denominated sales has been hedged which are covered by fair value contracts settling at various dates through January 2022. Additionally, certain divisions of the Air and Liquid Processing segment are subject to risk from increases in the price of commodities (copper and aluminum) used in the production of inventory. To minimize this risk, futures contracts are entered into which are designated as cash flow hedges. At December 31, 2020, approximately 39% or $2,138 of anticipated copper purchases over the next eight months and 56% or $470 of anticipated aluminum purchases over the next six months are hedged. The Corporation had purchases of natural gas under previously existing commitments of approximately $1,368 and $682 for one of its subsidiaries for 2020 and 2019, respectively. No purchase commitments for anticipated natural gas usage are outstanding as of December 31, 2020. The Corporation previously entered into foreign currency purchase contracts to manage the volatility associated with euro-denominated progress payments to be made for certain machinery and equipment. As of December 31, 2010, all contracts had been settled and the underlying fixed assets were placed in service. No portion of the existing cash flow or fair value hedges is considered to be ineffective, including any ineffectiveness arising from the unlikelihood of an anticipated transaction to occur. Additionally, no amounts have been excluded from assessing the effectiveness of a hedge. The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes. The following summarizes location and fair value of the foreign currency sales contracts recorded on the consolidated balance sheets as of December 31:
The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. Amounts recognized as and reclassified from accumulated other comprehensive loss are recorded as a component of other comprehensive income (loss) and are summarized below. Amounts are after-tax, where applicable. Certain amounts recognized as or reclassified from comprehensive income (loss) for 2020 and 2019 have no tax effect due to the Corporation recording a valuation allowance against its deferred income tax assets in the related jurisdictions.
The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive loss to earnings is summarized below. All amounts are pre-tax.
Losses on foreign exchange transactions included in other expense approximated $(97) and $(1,081) for 2020 and 2019, respectively. |
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Fair Value |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value |
NOTE 16 – FAIR VALUE: The following summarizes financial assets and liabilities reported at fair value on a recurring basis in the consolidated balance sheets at December 31:
The investments held as other noncurrent assets represent assets held in the “Rabbi” trust for the purpose of providing benefits under the non-qualified defined benefit pension plan. The fair value of the investments is based on quoted prices of the investments in active markets. The fair value of foreign currency exchange contracts is determined based on the fair value of similar contracts with similar terms and remaining maturities. The fair value of futures contracts is based on market quotations. The fair values of the variable-rate IRB debt and borrowings under the Amended Credit Agreement approximate their carrying values. Additionally, the fair values of trade receivables and trade payables approximate their carrying values. |
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Revenue |
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| Revenue From Contract With Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue |
NOTE 17 – REVENUE: Net sales by geographic area and product line for the year ended December 31, 2020, and 2019, are outlined below. Net sales are attributed to the geographic areas based on the location of the customer. Sales to individual countries were less than 10% of consolidated net sales for each of the years.
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Stock-Based Compensation |
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| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation |
NOTE 18 – STOCK-BASED COMPENSATION: In May 2016, the shareholders of the Corporation approved the adoption of the Ampco-Pittsburgh Corporation 2016 Omnibus Incentive Plan (the “Incentive Plan”), which authorizes the issuance of up to 1,100,000 shares of the Corporation’s common stock for awards under the Incentive Plan. The Incentive Plan replaced the 2011 Omnibus Incentive Plan (the “Predecessor Plan”). No new awards will be granted under the Predecessor Plan. Any awards outstanding under the Predecessor Plan will remain subject to, and be paid under, the Predecessor Plan, and any shares subject to outstanding awards under the Predecessor Plan that subsequently expire, terminate, or are surrendered or forfeited for any reason without issuance of shares will automatically become available for issuance under the Incentive Plan. Awards under the Incentive Plan may include incentive stock options and non-qualified stock options, stock appreciation rights, restricted shares and restricted stock units, performance awards, other stock-based awards or short-term cash incentive awards. If any award is canceled, terminates, expires or lapses for any reason prior to the issuance of the shares, or if the shares are issued under the Incentive Plan and thereafter are forfeited to the Corporation, the shares subject to such awards and the forfeited shares will not count against the aggregate number of shares available under the Incentive Plan. Shares tendered or withheld to pay the option exercise price or tax withholding will continue to count against the aggregate number of shares of common stock available for grant under the Incentive Plan. Any shares repurchased by the Corporation with cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the Incentive Plan. The Incentive Plan may be administered by the Board of Directors or the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine, within the limits of the express provisions of the Incentive Plan, the individuals to whom the awards will be granted and the nature, amount and terms of such awards. The Incentive Plan also provides for equity-based awards during any one year to non-employee members of the Board of Directors, based on the grant date fair value, not to exceed $200. The limit does not apply to shares received by a non-employee director at his or her election in lieu of all or a portion of the director’s retainer for board service. The number of shares of common stock issued to non-employee directors was 70,000 in each of 2020 and 2019. The Compensation Committee has granted time-vesting restricted stock units (RSUs) and performance-vesting restricted stock units (PSUs) to select individuals. Each RSU represents the right to receive one share of common stock of the Corporation at a future date after the RSU has become earned and vested, subject to the terms and conditions of the RSU award agreement. The RSUs typically vest over a three-year period. The PSUs can be earned depending upon the achievement of a performance or market condition and a time-vesting condition as follows: (i) achievement of a targeted return on invested capital or a basic earnings per share during the performance period beginning in the year of grant and continuing for two subsequent years; (ii) achievement of a three-year cumulative relative total shareholder return as ranked against other companies included in the Corporation’s peer group; and (iii) remaining continuously employed with the Corporation through the end of the year following three years from the date of grant. Earlier vesting of the stock units is permitted under certain conditions, such as upon a change of control of the Corporation, or as approved by the Board of Directors. The grant date fair value for the RSUs equals the closing price of the Corporation’s common stock on the NYSE on the date of grant. The grant date fair value for PSUs subject to a market condition is determined using a Monte Carlo simulation model and the grant date fair value for PSUs that vest subject to a performance condition is equal to the closing price of the Corporation’s stock on the NYSE on the date of grant. The determination of the fair value of these awards takes into consideration the likelihood of achievement of the market or performance condition and is adjusted for subsequent changes in the estimated or actual outcome of the condition. Unrecognized compensation expense associated with the RSUs and PSUs equaled $1,519 at December 31, 2020, and is expected to be recognized over a weighted average period of approximately 2 years. Outstanding RSUs and PSUs, which would represent non-vested awards, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
Outstanding stock options, all of which are fully vested, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
Stock-based compensation expense for all awards, including expense for shares to be issued to non-employee directors, approximated $1,329 and $1,422 for 2020 and 2019, respectively. The income tax benefit recognized in the consolidated statements of operations was not significant due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the jurisdiction where the expense was recognized (see Note 21). |
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Research and Development Costs |
12 Months Ended |
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Dec. 31, 2020 | |
| Research And Development [Abstract] | |
| Research and Development Costs |
NOTE 19 – RESEARCH AND DEVELOPMENT COSTS: Expenditures relating to the development of new products, identification of products or process alternatives and modifications and improvements to existing products and processes are expensed as incurred. These expenses approximated $2,047 for 2020 and $2,523 for 2019. |
Litigation |
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| Litigation |
NOTE 20 – LITIGATION: The Corporation and its subsidiaries are involved in various claims and lawsuits incidental to their businesses and are also subject to asbestos litigation as described below. Asbestos Litigation Claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). Air & Liquid, and in some cases the Corporation, are defendants (among a number of defendants, often in excess of 50) in cases filed in various state and federal courts. Asbestos Claims The following table reflects approximate information about the claims for the Asbestos Liability against Air & Liquid and the Corporation for the year ended December 31, 2020, and 2019:
A substantial majority of the settlement and defense costs reflected in the above table was reported and paid by insurers. Because claims are often filed and can be settled or dismissed in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period. Asbestos Insurance The Corporation and Air & Liquid are parties to a series of settlement agreements (“Settlement Agreements”) with insurers that have coverage obligations for the Asbestos Liability (the “Settling Insurers”). Under the Settlement Agreements, the Settling Insurers accept financial responsibility, subject to the terms and conditions of the respective agreements, including overall coverage limits, for pending and future claims for the Asbestos Liability. The Settlement Agreements encompass the substantial majority of insurance policies that provide coverage for claims for the Asbestos Liability. The Settlement Agreements include acknowledgements that Howden North America, Inc. (“Howden”) is entitled to coverage under policies covering the Asbestos Liability for claims arising out of the historical products manufactured or distributed by Buffalo Forge, a former subsidiary of the Corporation (the “Products”), which was acquired by Howden. The Settlement Agreements do not provide for any prioritization on access to the applicable policies or any sublimits of liability as to Howden or the Corporation and Air & Liquid, and, accordingly, Howden may access the coverage afforded by the Settling Insurers for any covered claim arising out of the Products. In general, access by Howden to the coverage afforded by the Settling Insurers for the Products will erode coverage under the Settlement Agreements available to the Corporation and Air & Liquid for the Asbestos Liability. Asbestos Valuations At December 31, 2006, with the assistance of a nationally recognized expert in the valuation of asbestos liabilities, the Corporation recorded its initial reserve for the Asbestos Liability. With the assistance of the nationally recognized expert, the reserve for the Asbestos Liability had been periodically updated since that time. In 2018, the Corporation engaged Nathan Associates Inc. (“Nathan”) to update the liability valuation, and additional reserves were established by the Corporation for the Asbestos Liability claims pending or projected to be asserted through 2052, the estimated final date by which the Corporation expects to have settled all asbestos-related claims. The methodology used by Nathan in its projection was substantially the same methodology employed by the previous expert and included the following factors:
Using this information, Nathan estimated the number of future claims for the Asbestos Liability that would be filed through the year 2052, as well as the settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims through 2052. This methodology has been accepted by numerous courts. In conjunction with developing the Asbestos Liability through 2052, the Corporation also developed an estimate of probable insurance recoveries for the Asbestos Liability. In developing the estimate, the Corporation considered Nathan’s projection for settlement or indemnity costs for the Asbestos Liability and management’s projection of associated defense costs (based on the current defense to indemnity cost ratio), as well as a number of additional factors. These additional factors included the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, prior impairment of policies and gaps in the coverage, policy exhaustions, insolvencies among certain of the insurance carriers, and the nature of the underlying claims for the Asbestos Liability asserted against the subsidiaries and the Corporation as reflected in the Corporation’s asbestos claims database, as well as estimated erosion of insurance limits on account of claims against Howden arising out of the Products. In addition to consulting with the Corporation’s outside legal counsel on these insurance matters, the Corporation consulted with a nationally recognized insurance consulting firm it retained to assist the Corporation with certain policy allocation matters that also are among the several factors considered by the Corporation when analyzing potential recoveries from relevant historical insurance for the Asbestos Liability. Based upon all of the factors considered by the Corporation, and considering the Corporation’s analysis of publicly available information regarding the credit-worthiness of various insurers, the Corporation estimated the probable insurance recoveries for the Asbestos Liability and defense costs through 2052. Based on the analysis described above, the Corporation’s reserve at December 31, 2018, for the total costs, including defense costs, for the Asbestos Liability claims pending or projected to be asserted through 2052, was $227,922. Defense costs are estimated at 80% of settlement costs. The reserve at December 31, 2020, was $180,196. The Corporation’s receivable at December 31, 2018, for insurance recoveries attributable to the claims for which the Corporation’s Asbestos Liability reserve has been established, including the portion of incurred defense costs covered by the Settlement Agreements in effect through December 31, 2018, and the probable payments and reimbursements relating to the estimated indemnity and defense costs for pending and unasserted future Asbestos Liability claims, was $152,508 ($117,937 at December 31, 2020). The following table summarizes activity relating to insurance recoveries for the year ended December 31, 2020, and 2019.
In 2020, the Corporation recognized a reserve equaling $283 for the potential insolvency of an insurance carrier. The balance of the insurance receivable does not assume any recovery from insolvent carriers. In addition, a substantial majority of the insurance recoveries deemed probable is from insurance companies rated A – (excellent) or better by A.M. Best Corporation. There can be no assurance, however, that there will not be further insolvencies among the relevant insurance carriers, or that the assumed percentage recoveries for certain carriers will prove correct. The difference between insurance recoveries and projected costs is not due to exhaustion of all insurance coverage for the Asbestos Liability. The amounts recorded for the Asbestos Liability and insurance receivable rely on assumptions that are based on currently known facts and strategy. The Corporation’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Corporation’s or Nathan’s calculations vary significantly from actual results. Key variables in these assumptions are identified above and include the number and type of new claims to be filed each year, the average cost of disposing of each such new claim, average annual defense costs, compliance by relevant parties with the terms of the Settlement Agreements, and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and ability to recover under the Corporation’s insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation. The Corporation intends to evaluate the Asbestos Liability and related insurance receivable as well as the underlying assumptions on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance, these regular reviews may result in the Corporation adjusting its current reserve; however, the Corporation is currently unable to estimate such future adjustments. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivable could be material to operating results for the periods in which the adjustments to the liability or receivable are recorded, and to the Corporation’s liquidity and consolidated financial position. |
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Income Taxes |
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| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes |
NOTE 21 – INCOME TAXES: Income (loss) income from continuing operations before income taxes is summarized below. Income (loss) from continuing operations before income taxes for certain foreign entities is classified differently for book reporting and income tax reporting purposes.
The income tax (benefit) provision for continuing operations consisted of the following:
The income tax benefit recorded in 2020 includes a benefit of $3,502 for the carryback of net operating losses, as enabled by the CARES Act, to an earlier period, at a higher tax rate, resulting in the release of a portion of the valuation allowance previously established against the deferred income tax assets of the Corporation. The difference between statutory U.S. federal income tax and the Corporation’s effective income tax was as follows:
Deferred income tax assets and liabilities as of December 31, 2020, and 2019, are summarized below. Unremitted earnings of the Corporation’s non-U.S. subsidiaries and affiliates are deemed to be permanently reinvested and, accordingly, no deferred income tax liability has been recorded. If the Corporation were to remit any foreign earnings to the U.S., the estimated tax impact would be insignificant.
At December 31, 2020, the Corporation has U.S. federal net operating loss carryforwards of $41,596, which $34,862 can be carried forward indefinitely but will be limited to 80 percent of taxable income in any given year. The balance of $6,734 will begin to expire in 2035 and can be used without taxable income limitation. Additionally, at December 31, 2020, the Corporation had state net operating loss carryforwards of $71,281, which begin to expire in 2021, and foreign net operating loss carryforwards from continuing operations of $53,209 and capital loss carryforwards of $824 which do not expire. Unrecognized tax benefits and changes in unrecognized tax benefits for the year ended December 31, 2020, and 2019, are insignificant. If the unrecognized tax benefits were recognized, the effect on the Corporation’s effective income tax rate would also be insignificant. The amount of penalties and interest recognized in the consolidated balance sheets as of December 31, 2020, and 2019, and in the consolidated statements of operations for 2020 and 2019 is insignificant. The Corporation is subject to taxation in the United States, various states and foreign jurisdictions, and remains subject to examination by tax authorities for 2013, due to the carryback of net operating losses enabled by the CARES Act, and for tax years 2017 – 2020. |
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Environmental Matters |
12 Months Ended |
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Dec. 31, 2020 | |
| Environmental Remediation Obligations [Abstract] | |
| Environmental Matters |
NOTE 22 – ENVIRONMENTAL MATTERS: The Corporation is currently performing certain remedial actions in connection with the sale of real estate previously owned and periodically incurs costs to maintain compliance with environmental laws and regulations. Environmental exposures are difficult to assess and estimate for numerous reasons, including lack of reliable data, the multiplicity of possible solutions, the years of remedial and monitoring activity required, and identification of new sites. In the opinion of management, the potential liability for remedial actions and environmental compliance measures of approximately $100 at December 31, 2020, is considered adequate based on information known to date. |
Related Parties |
12 Months Ended |
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Dec. 31, 2020 | |
| Related Party Transactions [Abstract] | |
| Related Parties |
NOTE 23 – RELATED PARTIES: ATR has a loan outstanding with its minority shareholder. The loan originally matured in 2008 but has been renewed continually for one-year periods. Interest does not compound and has accrued on the outstanding balance, since inception, at the three-to-five-year loan interest rate set by the People’s Bank of China in effect at the time of renewal. The loan balance approximated $1,056 (RMB 6,901) at December 31, 2020, and $2,856 (RMB 19,901) at December 31, 2019. During 2020, ATR repaid $1,882 (RMB 13,000) in principal and $290 (RMB 2,000) in accrued interest. The interest rate for 2020 approximated 5%, and accrued interest approximated $2,117 (RMB 13,842) and $2,152 (RMB 14,999) as of December 31, 2020, and 2019, which is recorded in other current liabilities. Purchases from ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $7,566 (RMB 52,255) and $14,166 (RMB 97,763) in 2020 and 2019, respectively. Excluding the loan and interest outstanding, the amount payable to ATR’s minority shareholder and its affiliates approximated $344 (RMB 2,249) and $408 (RMB 2,841) at December 31, 2020, and 2019, respectively. Additionally, customer deposits from ATR’s minority shareholder and its affiliates approximated $456 (RMB 2,984) at December 31, 2020. Sales to ATR’s minority shareholder and its affiliates, which were in the ordinary course of business, approximated $9,154 (RMB 63,222) and $11,200 (RMB 77,303) for 2020 and 2019, respectively. No amounts were due from ATR’s minority shareholder or its affiliates as of December 31, 2020, or 2019. |
Business Segments |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Segments |
NOTE 24 – BUSINESS SEGMENTS: The Corporation organizes its business into two operating segments – Forged and Cast Engineered Products and Air and Liquid Processing. Summarized financial information concerning the Corporation’s reportable segments is shown in the following tables. Corporate assets included under Identifiable Assets represent primarily cash and cash equivalents and other items not allocated to reportable segments. Long-lived assets exclude deferred income tax assets. Corporate costs are comprised of operating costs of the corporate office and other costs not allocated to the segments. The accounting policies are the same as those described in Note 1, Summary of Significant Accounting Policies.
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Subsequent Events |
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Dec. 31, 2020 | ||||||||||
| Subsequent Events [Abstract] | ||||||||||
| Subsequent Events |
NOTE 25 – SUBSEQUENT EVENTS: The following events have occurred subsequent to December 31, 2020:
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Summary of Significant Accounting Policies (Policies) |
12 Months Ended |
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Dec. 31, 2020 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation |
Basis of Presentation The financial information included herein reflects the consolidated financial position of the Corporation as of December 31, 2020, and 2019, and the consolidated results of its operations and cash flows for the years then ended. |
| Consolidation |
Consolidation The accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of all majority-owned subsidiaries and joint ventures over which the Corporation exercises control and, when applicable, entities for which the Corporation has a controlling financial interest or is the primary beneficiary. Investments in joint ventures where the Corporation owns 20% to 50% of the voting stock and has the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the equity method of accounting. Investments in joint ventures where the Corporation does not have the ability to exercise significant influence over the operating and financial policies of the joint venture are accounted for using the cost method of accounting. Investments in joint ventures are reviewed for impairment whenever events or circumstances indicate the carrying amount of the investment may not be recoverable. If the estimated fair value of the investment is less than the carrying amount and such decline is determined to be “other than temporary,” then the investment may not be fully recoverable potentially resulting in a write-down of the investment value. Intercompany accounts and transactions are eliminated. |
| Cash and Cash Equivalents |
Cash and Cash Equivalents Securities with purchased original maturities of three months or less are considered to be cash equivalents. The Corporation maintains cash and cash equivalents at various financial institutions which may exceed federally insured amounts. |
| Inventories |
Inventories Inventories are valued at the lower of cost and net realizable value, which is defined as the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation. Cost includes the cost of raw materials, direct labor and overhead for those items manufactured but not yet sold or for which control has not yet transferred to the customer. Fixed production overhead is allocated to inventories based on normal capacity of the production facilities. In periods of abnormally high production, the amount of fixed overhead allocated to each unit of production is decreased so that inventories are not measured above cost. The amount of fixed overhead allocated to inventories is not increased as a consequence of abnormally low production or plant idling. Costs for abnormal amounts of spoilage, handling costs and freight costs are charged to expense when incurred. Cost of domestic raw materials, work-in-process and finished goods inventories is primarily determined by the last-in, first-out (LIFO) method. Cost of domestic supplies and foreign inventories is determined primarily by the first-in, first-out (FIFO) method. |
| Property, Plant and Equipment |
Property, Plant and Equipment Property, plant and equipment purchased new is recorded at cost with depreciation computed using the straight-line method over the following estimated useful lives: land improvements – 15 to 20 years, buildings – 25 to 50 years and machinery and equipment – 3 to 25 years. Assets under finance leases are depreciated on a straight-line basis over the shorter of the estimated useful life of the asset or the lease term. Property, plant and equipment acquired as part of a business combination is recorded at its estimated fair value with depreciation computed using the straight-line method over the estimated remaining useful lives based in part on third-party valuations. Expenditures that extend economic useful lives are capitalized. Routine maintenance is charged to expense. Gains or losses are recognized on retirements or disposals. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. If the undiscounted cash flows generated from the use and eventual disposition of the assets are less than their carrying value, then the asset value may not be fully recoverable potentially resulting in a write-down of the asset value. Estimates of future cash flows are based on expected market conditions over the remaining useful life of the primary asset(s). In addition, the remaining depreciation period for the impaired asset would be reassessed and, if necessary, revised. Proceeds from government grants are recorded as a reduction in the purchase price of the underlying assets and amortized against depreciation over the lives of the related assets. |
| Right-of-Use Assets |
Right-of-Use Assets A right-of-use (“ROU”) asset represents the right to use an underlying asset for the term of the lease and the corresponding liability represents an obligation to make periodic payments arising from the lease. A determination of whether an arrangement includes a lease is made at the inception of the arrangement. ROU assets and liabilities are recognized on the consolidated balance sheet, at the commencement date of the lease, in an amount equal to the present value of the lease payments over the term of the lease calculated using the interest rate implicit in the lease arrangement or, if not known, the Corporation’s incremental borrowing rate. The present value of a ROU asset also includes any lease payments made prior to commencement of the lease and excludes any lease incentives received or to be received under the arrangement. The lease term includes options to extend or terminate the lease when it is reasonably certain that such options will be exercised. Operating leases that are for a period less than 12 months, inclusive of options to extend that are reasonably certain to be exercised, are classified as short-term and are not recognized on the consolidated balance sheet. ROU assets are recorded as a noncurrent asset on the consolidated balance sheet. The corresponding liabilities are recorded as an operating lease liability, either current or noncurrent, as applicable, on the consolidated balance sheet. Operating lease costs are recognized on a straight-line basis over the lease term within costs of products sold (excluding depreciation and amortization) or selling and administrative expenses based on the use of the related ROU asset. |
| Intangible Assets |
Intangible Assets Intangible assets primarily consist of developed technology, customer relationships and trade name. Intangible assets with finite lives are amortized using the straight-line method over their estimated useful life, which is determined by identifying the period over which most of the cash flows are expected to be generated. Intangible assets with indefinite lives are not amortized but reviewed for impairment at least annually, as of October 1. Additionally, intangible assets, both finite and indefinite lived, are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. For finite-lived intangible assets, if the undiscounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. For indefinite-lived intangible assets, if the discounted cash flows attributable to the assets are less than their carrying value, then the asset value may not be fully recoverable, potentially resulting in a write-down of the asset value. Also, if the estimate of an intangible asset’s remaining useful life changes, the remaining carrying value of the intangible asset will be amortized prospectively over the revised remaining useful life. |
| Assets of Discontinued Operations Held for Sale |
Assets of Discontinued Operations Held for Sale Assets are classified as “held for sale” when all of the following criteria for a plan of sale have been met: (i) management, having the authority to approve the action, commits to a plan to sell the assets; (ii) the assets are available for immediate sale, in their present condition, subject only to terms that are usual and customary for sales of such assets; (iii) an active program to locate a buyer and other actions required to complete the plan to sell the assets have been initiated; (iv) the sale of the assets is probable and is expected to be completed within one year; (v) the assets are being actively marketed for a price that is reasonable in relation to their current fair value; and (vi) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. When all of these criteria have been met, the assets are classified as “held for sale” in the consolidated balance sheet. Assets classified as “held for sale” are reported at the lower of their carrying value or fair value less costs to sell. Depreciation of assets ceases upon designation as “held for sale”. If the “held for sale” criteria have been met and the sale represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results, the assets and liabilities of the discontinued operation are classified separately as “discontinued operations” in the consolidated balance sheet and the operating results and cash flows of the discontinued operation are presented as “discontinued operations” in the consolidated statements of operations and cash flows. |
| Debt Issuance Costs |
Debt Issuance Costs Debt issuance costs are amortized as interest expense over the scheduled maturity period of the debt. The costs related to a line-of-credit arrangement are amortized over the term of the arrangement, regardless of whether there are any outstanding borrowings. Unamortized debt issuance costs are either recognized as a direct deduction from the carrying amount of the related debt or, if related to a line-of-credit facility, as an other noncurrent asset on the consolidated balance sheet. |
| Product Warranty |
Product Warranty A warranty that ensures basic functionality is an assurance type warranty. A warranty that goes beyond ensuring basic functionality is considered a service type warranty. The Corporation provides assurance type warranties; it does not provide service type warranties. Provisions for assurance type warranties are recognized at the time the underlying sale is recorded. The provision is based on historical experience as a percentage of sales adjusted for potential claims when a liability is probable and for known claims. |
| Employee Benefit Plans |
Employee Benefit Plans Funded Status If the fair value of the plan assets exceeds the projected benefit obligation, the over-funded projected benefit obligation is recognized as an asset (prepaid pensions within other noncurrent assets) on the consolidated balance sheet. Conversely, if the projected benefit obligation exceeds the fair value of the plan assets, the under-funded projected benefit obligation is recognized as a liability (employee benefit obligations) on the consolidated balance sheet. Gains and losses arising from the difference between actuarial assumptions and actual experience and unamortized prior service costs are recorded as a separate component of accumulated other comprehensive loss. Net Periodic Pension and Other Postretirement Benefit Costs Net periodic pension and other postretirement benefit costs includes service cost, interest cost, expected rate of return on the market-related value of plan assets, amortization of prior service costs, and recognized actuarial gains or losses. When actuarial gains or losses exceed 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are amortized to net periodic pension and other postretirement benefit costs over the average remaining service period of the employees expected to receive benefits under the plan or over the remaining life expectancy of the employees expected to receive benefits if “all or almost all” of the plan’s participants are inactive. When actuarial gains or losses are less than 10% of the greater of the projected benefit obligation or the market-related value of plan assets, they are included in net periodic pension and other postretirement benefit costs indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. The market-related value of plan assets is determined using a five-year moving average which recognizes gains or losses in the fair market value of assets at the rate of 20% per year. |
| Warrants |
Warrants Accounting for warrants includes an initial assessment of whether the warrants qualify as debt or equity. The Corporation’s warrants meet the definition of equity instruments and, accordingly, are recorded within shareholders’ equity on the consolidated balance sheet. The fair value of the warrants is determined as of the measurement date. Incremental costs directly attributable to the offering of the securities are deferred and charged against the proceeds of the offering. |
| Other Comprehensive Income (Loss) |
Other Comprehensive Income (Loss) Other comprehensive income (loss) includes changes in assets and liabilities from non-owner sources including foreign currency translation adjustments, unamortized prior service costs and unrecognized actuarial gains and losses associated with employee benefit plans, and changes in the fair value of derivatives designated and effective as cash flow hedges. Certain components of other comprehensive income (loss) are presented net of income tax. Foreign currency translation adjustments exclude the effect of income tax since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time. Reclassification adjustments are amounts which are realized during the year and, accordingly, are deducted from other comprehensive income (loss) in the period in which they are included in net income (loss) or when a transaction no longer qualifies as a cash flow hedge. Foreign currency translation adjustments are included in net income (loss) upon sale or upon complete or substantially complete liquidation of an investment in a foreign entity. With respect to employee benefit plans, unamortized prior service costs are included in net income (loss), either immediately upon curtailment of the employee benefit plan or over the average remaining service period or life expectancy of the employees expected to receive benefits, and unrecognized actuarial gains and losses are included in net income (loss) indirectly as a result of lower/higher interest costs arising from a decrease/increase in the projected benefit obligation. Changes in the fair value of derivatives are included in net income (loss) when the projected sale occurs or, if a foreign currency purchase contract, over the estimated useful life of the underlying asset. |
| Foreign Currency Translation |
Foreign Currency Translation Assets and liabilities of the Corporation’s foreign operations are translated at year-end exchange rates and the statements of operations are translated at the average exchange rates for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive loss until the entity is sold or substantially liquidated. |
| Revenue Recognition |
Revenue Recognition Revenue from sales is recognized when obligations under the terms of the contract with the customer are satisfied. Generally, this occurs when control of the product transfers to the customer. A contract with a customer is deemed to exist when there is persuasive evidence of an arrangement, the sales price is fixed or determinable and collectability is reasonably assured. Persuasive evidence of an arrangement identifies the final understanding between the parties as to the specific nature and terms of the agreed-upon transaction that creates enforceable obligations. It can be in the form of an executed purchase order from the customer, combined with an order acknowledgment from the Corporation, a sales agreement or longer-term supply agreement between the customer and the Corporation, or a similar arrangement deemed to be a normal and customary business practice for that particular customer or class of customer (collectively, a sales agreement). Sales agreements typically include a single performance obligation for the manufacturing of product which is satisfied upon transfer of control of the product to the customer. The sales price required to be paid by the customer is fixed or determinable from the sales agreement. It is not subject to refund or adjustment, except for a variable-index surcharge provision which is known at the time of shipment and increases or decreases, as applicable, the selling price of a mill roll for corresponding changes in the published index cost of certain raw materials. The variable-index surcharge is recognized as revenue when the corresponding revenue for the inventory is recognized. Likelihood of collectability is assessed prior to acceptance of an order. In certain circumstances, the Corporation may require a deposit from the customer, a letter of credit, or another form of assurance for payment. An allowance for doubtful accounts is maintained based on historical experience. Payment terms are standard to the industry and generally require payment 30 days after control transfers to the customer. Transfer of control is assessed based on alternative use of the product manufactured and, under the terms of the sales agreement, an enforceable right to payment for performance to date. Transfer of control, and therefore revenue recognition, occurs when title, ownership and risk of loss pass to the customer. Typically, this occurs when the product is shipped to the customer (i.e., FOB shipping point), delivered to the customer (i.e., FOB destination), or, for foreign sales, in accordance with trading guidelines known as Incoterms. Incoterms are standard trade definitions used in international contracts and are developed, maintained and promoted by the ICC Commission on Commercial Law and Practice. Shipping terms vary across the businesses and typically depend on the product, country of origin and type of transportation (truck or vessel). There are no customer-acceptance provisions other than, perhaps, customer inspection and testing prior to shipment. Post-shipment obligations are insignificant. Amounts billed to the customer for shipping and handling are recorded within net sales and the related costs are recorded within costs of products sold (excluding depreciation and amortization). Amounts billed for taxes assessed by various government authorities (e.g., sales tax, value-added tax, etc.) are excluded from the determination of net income (loss) and, instead, are recorded as a liability until remitted to the government authority. |
| Stock-Based Compensation |
Stock-Based Compensation Stock-based compensation, such as stock options, restricted stock units and performance shares, is recognized over the vesting period based upon the fair value of the award at the date of grant. For stock options, the fair value is determined by the Black Scholes option pricing model and is expensed over the vesting period of three years. For restricted stock units, the fair value is equal to the closing price of the Corporation’s common stock on the New York Stock Exchange (“NYSE”) on the date of grant and is expensed over the vesting period, typically three years. For performance share awards that vest subject to a performance condition, the fair value is equal to the closing price of the Corporation’s stock on the NYSE on the date of grant. For performance share awards that vest subject to a market condition, the fair value is determined using a Monte Carlo simulation model. The fair value of performance share awards is expensed over the performance period when it is probable that the performance condition will be achieved. Asbestos-Related Costs The amounts recorded for asbestos-related liabilities and insurances receivables for asbestos-related matters rely on assumptions that are based on currently known facts and strategies. Asbestos-related liabilities are recognized when a liability is probable of occurrence and can be reasonably estimated. The liability includes an estimate of future claims as well as settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims over the period which such claims can be reasonably estimated. Insurance receivables for asbestos-related matters are recognized for the estimated amount of probable insurance recoveries attributable to the claims for which an asbestos-related liability has been recognized, including the portion of incurred defense costs expected to be reimbursed. Neither the asbestos-related liabilities nor the insurance receivables for asbestos-related matters are discounted to their present values due to the inability to reliably forecast the timing of future cash flows. The asbestos-related liabilities and insurance receivables for asbestos-related matters as well as the underlying assumptions are reviewed on a regular basis to determine whether any adjustments to the estimates are required. If it is determined that there is an increase in asbestos-related liabilities net of insurance recoveries, then a charge to earnings would be recorded. Similarly, if it is determined that there is a decrease in asbestos-related liabilities net of insurance recoveries, then a credit to earnings would be recorded. |
| Asbestos-Related Costs |
Asbestos-Related Costs The amounts recorded for asbestos-related liabilities and insurances receivables for asbestos-related matters rely on assumptions that are based on currently known facts and strategies. Asbestos-related liabilities are recognized when a liability is probable of occurrence and can be reasonably estimated. The liability includes an estimate of future claims as well as settlement or indemnity costs that would be incurred to resolve both pending and future unasserted claims over the period which such claims can be reasonably estimated. Insurance receivables for asbestos-related matters are recognized for the estimated amount of probable insurance recoveries attributable to the claims for which an asbestos-related liability has been recognized, including the portion of incurred defense costs expected to be reimbursed. Neither the asbestos-related liabilities nor the insurance receivables for asbestos-related matters are discounted to their present values due to the inability to reliably forecast the timing of future cash flows. The asbestos-related liabilities and insurance receivables for asbestos-related matters as well as the underlying assumptions are reviewed on a regular basis to determine whether any adjustments to the estimates are required. If it is determined that there is an increase in asbestos-related liabilities net of insurance recoveries, then a charge to earnings would be recorded. Similarly, if it is determined that there is a decrease in asbestos-related liabilities net of insurance recoveries, then a credit to earnings would be recorded. |
| Derivative Instruments |
Derivative Instruments Derivative instruments which include forward exchange (for foreign currency sales and purchases) and futures contracts are recorded on the consolidated balance sheet as either an asset or a liability measured at their fair value. The accounting for changes in the fair value of a derivative depends on the use of the derivative. To the extent that a derivative is designated and effective as a cash flow hedge of an exposure to future changes in value, the change in the fair value of the derivative is deferred in accumulated other comprehensive loss. Any portion considered to be ineffective, including that arising from the unlikelihood of an anticipated transaction to occur, is reported as a component of earnings (other income/expense) immediately. Upon occurrence of the anticipated sale, the foreign currency sales contract designated and effective as a cash flow hedge is de-designated as a fair value hedge and the change in fair value previously deferred in accumulated other comprehensive loss is reclassified to earnings (net sales) with subsequent changes in fair value recorded as a component of earnings (other income/expense). Upon occurrence of the anticipated purchase, the foreign currency purchase contract is settled and the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (depreciation and amortization expense) over the life of the underlying asset. Upon settlement of a futures contract, the change in fair value deferred in accumulated other comprehensive loss is reclassified to earnings (costs of products sold, excluding depreciation and amortization) when the corresponding inventory is sold and revenue is recognized. To the extent that a derivative is designated and effective as a hedge of an exposure to changes in fair value, the change in the derivative’s fair value will be offset in the consolidated statement of operations by the change in the fair value of the item being hedged and is recorded as a component of earnings (other income/expense). Cash flows associated with the derivative instruments are recorded as a component of operating activities on the consolidated statement of cash flows. The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes. |
| Fair Value |
Fair Value Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. A hierarchy of inputs is used to determine fair value measurements with three levels. Level 1 inputs are quoted prices in active markets for identical assets or liabilities and are considered the most reliable evidence of fair value. Level 2 inputs are observable prices that are not quoted on active exchanges. Level 3 inputs are unobservable inputs used for measuring the fair value of assets or liabilities. |
| Legal Costs |
Legal Costs Legal costs expected to be incurred in connection with loss contingencies are accrued when such costs are probable and estimable. |
| Income Taxes |
Income Taxes Income taxes are recognized during the year in which transactions enter into the determination of financial statement income. Any taxes on foreign income in excess of a deemed return on tangible assets of foreign corporations are accounted for as period costs. Deferred income tax assets and liabilities are recognized for the future tax consequences of temporary differences between the book carrying amount and the tax basis of assets and liabilities including net operating loss carryforwards. A valuation allowance is provided against a deferred income tax asset when it is “more likely than not” the asset will not be realized. Similarly, if a determination is made that it is “more likely than not” the deferred income tax asset will be realized, the related valuation allowance would be reduced and a benefit to earnings would be recorded. Penalties and interest are recognized as a component of the income tax provision. Tax benefits are recognized in the financial statements for tax positions taken or expected to be taken in a tax return when it is “more likely than not” that the tax authorities will sustain the tax position solely on the basis of the position’s technical merits. Consideration is given primarily to legislation and statutes, legislative intent, regulations, rulings and case law as well as their applicability to the facts and circumstances of the tax position when assessing the sustainability of the tax position. In the event a tax position no longer meets the “more likely than not” criteria, the tax benefit is reversed by recognizing a liability and recording a charge to earnings. Conversely, if a tax position subsequently meets the “more likely than not” criteria, a tax benefit would be recognized by reducing the liability and recording a credit to earnings. |
| Earnings Per Common Share |
Earnings Per Common Share Basic earnings per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The computation of diluted earnings per common share is similar to basic earnings per common share except that the denominator is increased to include the dilutive effect of the net additional common shares that would have been outstanding assuming exercise of outstanding stock awards and warrants, calculated using the treasury stock method. The computation of diluted earnings per share would not assume the exercise of an outstanding stock award or warrant if the effect on earnings per common share would be antidilutive. Similarly, the computation of diluted earnings per share would not assume the exercise of outstanding stock awards and warrants if the Corporation incurred a net loss since the effect on earnings per common share would be antidilutive. The weighted average number of common shares outstanding assuming exercise of dilutive stock awards and warrants was 14,636,022 for 2020 and 12,590,230 for 2019. Weighted-average outstanding stock awards and warrants excluded from the diluted earnings per common share calculation, since the effect would have been antidilutive, were 1,809,432 for 2020 and 671,886 for 2019. With respect to amounts attributable to Ampco-Pittsburgh common shareholders, net income (loss) from continuing operations attributable to Ampco-Pittsburgh common shareholders excludes net income attributable to noncontrolling interest. |
| Recently Implemented Accounting Pronouncements |
Recently Implemented Accounting Pronouncements No significant accounting pronouncements became effective for the Corporation in 2020. |
| Recently Issued Accounting Pronouncements |
Recently Issued Accounting Pronouncements In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. ASU 2020-06 requires entities to provide expanded disclosures about the terms and features of convertible instruments and amends certain guidance in ASC 260, Earnings per Share, relating to the computation of earnings per share for convertible instruments and contracts in an entity’s own equity. The guidance becomes effective for the Corporation on January 1, 2024, with early adoption of all amendments in the same period permitted. The Corporation is currently evaluating the impact the guidance will have on its consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional guidance for a limited period of time for applying generally accepted accounting principles to modifications of contracts, hedging relationships, and other transactions that reference LIBOR or another rate that will be discontinued by reference rate reform if certain criteria are met. The optional guidance is available as of March 12, 2020, through December 31, 2022. To date, no contracts have been required to be modified as a result of reference rate reform. The Corporation is currently evaluating the impact the guidance will have on its financial position, operating results and liquidity if such an event occurs in the future and the Corporation chooses to avail itself to the optional guidance. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740). ASU 2019-12 is intended to simplify the accounting for income taxes including removing the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items such as other comprehensive income, the accounting for franchise or similar tax, and requiring an entity reflect the effect of an enacted change in tax laws or rates in the interim period that includes the enactment date. The guidance becomes effective for the Corporation on January 1, 2021, and is not expected to impact the Corporation’s financial position, operating results or liquidity. In September 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which adds a new impairment model, known as the current expected credit loss (“CECL”) model, that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance for its estimate of expected credit losses and applies it to most debt instruments, trade receivables, lease receivables, financial guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment losses and entities will need to measure expected credit losses on assets that have a low risk of loss. The guidance originally became effective for the Corporation on January 1, 2020, however, since the Corporation meets the definition of a Smaller Reporting Company, as defined by the Securities Exchange Commission, the effective date was subsequently revised to fiscal years beginning after December 15, 2022. The Corporation is currently evaluating the impact the guidance will have on its financial position and operating results. It will not, however, affect the Corporation’s liquidity. |
Discontinued Operations and Dispositions (Tables) |
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| Discontinued Operations And Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Major Classes of ASW's Loss from Discontinued Operations, Net of Tax in the Consolidated Statements of Operations |
The following table presents the major classes of ASW’s line items constituting the “loss from discontinued operations, net of tax” in the consolidated statements of operations:
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Inventories (Tables) |
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| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventories |
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Property, Plant and Equipment (Tables) |
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| Property Plant And Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property, Plant and Equipment |
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Operating Lease Right of Use Assets (Tables) |
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| Operating Lease Right Of Use Asset [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Right-of-Use Assets Associated with Operating Leases |
Right-of-use assets associated with operating leases as of December 31, 2020, and 2019, were comprised of the following:
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Intangible Assets (Tables) |
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| Goodwill And Intangible Assets Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets |
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| Summary of Changes in Intangible Assets | The following summarizes changes in intangible assets for the years ended December 31:
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Other Current Liabilities (Tables) |
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| Other Liabilities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Other Current Liabilities |
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| Schedule of Changes in Liability for Product Warranty Claims | The following summarizes changes in the liability for product warranty claims for the years ended December 31:
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| Schedule of Changes in Customer Deposits | Changes in customer deposits consisted of the following:
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Debt (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Outstanding Borrowings |
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Operating Lease Liabilities (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Current and Non Current Portion of Operating Lease Arrangements |
The current and noncurrent portion of the Corporation’s operating lease arrangements as of December 31, 2020, and 2019, were as follows:
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| Summary of Future Operating Lease Payments |
Future operating lease payments as of December 31, 2020, were as follows:
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| Components of Lease Cost |
The components of lease cost for the year ended December 31, 2020, and 2019, were as follows:
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Pension and Other Postretirement Benefits (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Compensation And Retirement Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Components of Actuarial Losses (Gains) |
Actuarial losses were comprised of the following components:
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| Reconciliation of Projected Benefit Obligations (PBO), Plan Assets, the Funded Status of the Plans and the Amounts Recognized in the Consolidated Balance Sheets |
The following table provides a reconciliation of projected benefit obligations (“PBO”), plan assets and the funded status of the plans for the Corporation’s defined benefit plans calculated using a measurement date as of the end of the respective years.
The following table provides a summary of amounts recognized in the consolidated balance sheets at December 31, 2020, and 2019.
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| Schedule of Estimated Benefit Payments |
As of December 31, 2020, estimated benefit payments for subsequent years are as follows:
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| Summary of Target Asset Allocations and Major Asset Categories |
The following table summarizes target asset allocations (within +/-5% considered acceptable) and major asset categories. Certain investments are classified differently for target asset allocation purposes and external reporting purposes. The Corporation intends to continue to liquidate the alternative investments of the U.S. plans to provide additional flexibility with investment allocation.
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| Asset Categories Based on the Nature and Risks of the Plans Assets |
Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2020, are summarized below.
Asset categories based on the nature and risks of the U.S. pension benefit plans’ assets as of December 31, 2019, are summarized below.
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2020, are summarized below.
Asset categories based on the nature and risks of the foreign pension benefit plan’s assets as of December 31, 2019, are summarized below.
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| Summary of Changes in the Fair Value of the Level 3 Plan Assets for U.S. and Foreign Pension Plans |
The table below sets forth a summary of changes in the fair value of the Level 3 plan assets for the U.S. and foreign pension benefits plans for the year ended December 31, 2020, and 2019.
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| Net Periodic Pension and Other Postretirement Benefit Costs |
Net periodic pension and other postretirement benefit costs include the following components for each of the years.
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| Discount Rates Used to Determine the Benefit Obligations |
The discount rates used to determine the benefit obligations as of December 31, 2020, and 2019, are summarized below.
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| Assumptions Regarding Net Periodic Pension and Other Postretirement Benefit Costs |
The following assumptions were used to determine net periodic pension and other postretirement benefit costs for the year ended December 31, 2020, and 2019.
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Accumulated Other Comprehensive Loss (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Changes and Ending Balances for Various Components of Other Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss |
Net changes and ending balances for the various components of other comprehensive income (loss) and for accumulated other comprehensive loss as of and for the year ended December 31, 2019, and 2020, are summarized below.
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| Line Items Affected on Consolidated Statements of Operations for Components Reclassified from Accumulated Other Comprehensive Loss |
The following summarizes the line items affected on the consolidated statements of operations for components reclassified from accumulated other comprehensive loss for the year ended December 31, 2020, and 2019. Amounts in parentheses represent credits to net income (loss).
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Derivative Instruments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Location and Fair Value of Foreign Currency Sales Contracts Recorded on Consolidated Balance Sheets |
The following summarizes location and fair value of the foreign currency sales contracts recorded on the consolidated balance sheets as of December 31:
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| Summary of Amount Recognized as and Reclassified from Accumulated Other Comprehensive Income (Loss) |
The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. Amounts recognized as and reclassified from accumulated other comprehensive loss are recorded as a component of other comprehensive income (loss) and are summarized below. Amounts are after-tax, where applicable. Certain amounts recognized as or reclassified from comprehensive income (loss) for 2020 and 2019 have no tax effect due to the Corporation recording a valuation allowance against its deferred income tax assets in the related jurisdictions.
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| Summary of Change in Fair Value Reclassified or Expected to be Reclassified from Accumulated Other Comprehensive Loss to Earnings |
The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive loss to earnings is summarized below. All amounts are pre-tax.
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Fair Value (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value of Financial Assets and Liabilities |
The following summarizes financial assets and liabilities reported at fair value on a recurring basis in the consolidated balance sheets at December 31:
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Revenue (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue From Contract With Customer [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Sales |
Net sales by geographic area and product line for the year ended December 31, 2020, and 2019, are outlined below. Net sales are attributed to the geographic areas based on the location of the customer. Sales to individual countries were less than 10% of consolidated net sales for each of the years.
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Stock-Based Compensation (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Outstanding Restricted Stock Units ("RSU") and Performance Share Awards ("PSU") |
Outstanding RSUs and PSUs, which would represent non-vested awards, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
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| Summary of Outstanding Stock Options |
Outstanding stock options, all of which are fully vested, as of December 31, 2020, and 2019, and activity for the years then ended, are as follows:
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Litigation (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Text Block [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Loss Contingencies by Contingency |
The following table reflects approximate information about the claims for the Asbestos Liability against Air & Liquid and the Corporation for the year ended December 31, 2020, and 2019:
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| Summary of Activity in Asbestos Insurance Recoveries |
The following table summarizes activity relating to insurance recoveries for the year ended December 31, 2020, and 2019.
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Income Taxes (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (Loss) Before Income Taxes |
Income (loss) income from continuing operations before income taxes is summarized below. Income (loss) from continuing operations before income taxes for certain foreign entities is classified differently for book reporting and income tax reporting purposes.
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| Income Tax Provision for Continuing Operations |
The income tax (benefit) provision for continuing operations consisted of the following:
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| Difference Between Statutory U.S. Federal Income Tax and the Corporation's Effective Income Tax |
The difference between statutory U.S. federal income tax and the Corporation’s effective income tax was as follows:
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| Deferred Income Tax Assets and Liabilities | Deferred income tax assets and liabilities as of December 31, 2020, and 2019, are summarized below.
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Business Segments (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Segment Net Sales and Income (Loss) from Continuing Operations Before Income Taxes | The accounting policies are the same as those described in Note 1, Summary of Significant Accounting Policies.
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Description of Business - Additional Information (Detail) $ in Thousands |
3 Months Ended | 12 Months Ended |
|---|---|---|
|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2020
USD ($)
Segment
Company
|
|
| Schedule Of Description Of Business [Line Items] | ||
| Number of business segments | Segment | 2 | |
| COVID-19 [Member] | ||
| Schedule Of Description Of Business [Line Items] | ||
| Received from form of subsidies and reimbursements | $ 4,200 | |
| Anticipated bad debts and slow-moving inventory reserves | $ 1,000 | |
| Deferred payments for employer-side social security in 2021 | 2,163 | |
| Deferred payments for employer-side social security in 2022 | 2,163 | |
| Income tax benefit enactment of net operating loss related to CARES Act | 3,502 | |
| Carryback of net operating losses resulted in refund of income taxes | $ 3,502 | |
| Chinese Joint Venture Company [Member] | ||
| Schedule Of Description Of Business [Line Items] | ||
| Equity interest in number of joint venture | Company | 3 |
Discontinued Operations and Dispositions - Summary of Major Classes of ASW's Loss from Discontinued Operations, Net of Tax in the Consolidated Statements of Operations (Detail) - ASW Steel Inc [Member] $ in Thousands |
12 Months Ended |
|---|---|
|
Dec. 31, 2019
USD ($)
| |
| Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items] | |
| Net sales | $ 35,045 |
| Costs of products sold (excluding depreciation and amortization) | 42,407 |
| Selling and administrative | 1,741 |
| Loss on disposal of assets | 55 |
| Total operating expenses | 44,203 |
| Loss from discontinued operations | (9,158) |
| Other income | 73 |
| Loss from discontinued operations before income taxes | (9,085) |
| Income tax provision | 0 |
| Loss from discontinued operations, net of tax | $ (9,085) |
Inventories - Schedule of Inventories (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials | $ 17,893 | $ 18,011 |
| Work-in-progress | 31,568 | 35,942 |
| Finished goods | 12,466 | 17,159 |
| Supplies | 11,316 | 11,177 |
| Inventories | $ 73,243 | $ 82,289 |
Inventories - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Inventory Disclosure [Abstract] | ||
| Percentage of inventories valued on the LIFO method | 35.00% | 35.00% |
| The LIFO reserve approximated | $ (12,256) | $ (17,321) |
| Income tax expense recognized related to liquidation | 0 | 0 |
| Decrease in costs of products sold | 3,262 | 467 |
| Net income (loss) | $ 3,262 | $ (467) |
| Common per share | $ 0.23 | $ 0.04 |
Property, Plant and Equipment - Schedule of Property, Plant and Equipment (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | $ 425,207 | $ 409,486 |
| Accumulated depreciation | (263,109) | (243,094) |
| Property, plant and equipment, net | 162,098 | 166,392 |
| Land and Land Improvements [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 10,473 | 9,556 |
| Buildings [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 63,765 | 61,866 |
| Machinery and Equipment [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 339,203 | 325,941 |
| Construction-in-Process [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | 4,896 | 5,251 |
| Other [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Property, plant and equipment, Gross | $ 6,870 | $ 6,872 |
Property, Plant and Equipment - Additional Information (Detail) £ in Thousands, $ in Thousands |
12 Months Ended | ||
|---|---|---|---|
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
GBP (£)
|
Dec. 31, 2019
USD ($)
|
|
| Property Plant And Equipment [Line Items] | |||
| Finance lease assets gross value | $ 3,430 | $ 3,204 | |
| Finance lease, lease related accumulated amortization | 1,222 | $ 903 | |
| Amortization on assets under finance leases | 415 | ||
| Union Electric Steel UK Limited [Member] | |||
| Property Plant And Equipment [Line Items] | |||
| Land and buildings held as collateral | $ 2,896 | £ 2,122 |
Operating Lease Right-of-Use Assets - Schedule of Right-of-Use Assets Associated with Operating Leases (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Property Plant And Equipment [Line Items] | ||
| Operating lease right-of-use asset, gross | $ 5,574 | $ 5,022 |
| Accumulated amortization | (1,230) | (759) |
| Operating lease right-of-use assets, net | 4,344 | 4,263 |
| Land [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Operating lease right-of-use asset, gross | 2,850 | 2,700 |
| Buildings [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Operating lease right-of-use asset, gross | 1,825 | 1,506 |
| Machinery and Equipment [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Operating lease right-of-use asset, gross | 495 | 329 |
| Other [Member] | ||
| Property Plant And Equipment [Line Items] | ||
| Operating lease right-of-use asset, gross | $ 404 | $ 487 |
Intangible Assets - Schedule of Intangible Assets (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
|---|---|---|---|
| Finite and Indefinite Lived Intangible Assets [Line Items] | |||
| Intangible assets, Trade name | $ 2,646 | $ 2,355 | |
| Intangible assets, gross | 13,294 | 12,507 | |
| Accumulated amortization | (6,077) | (4,882) | |
| Intangible assets, net | 7,217 | 7,625 | $ 9,225 |
| Customer Relationships [Member] | |||
| Finite and Indefinite Lived Intangible Assets [Line Items] | |||
| Intangible assets, gross | 6,191 | 5,995 | |
| Developed Technology [Member] | |||
| Finite and Indefinite Lived Intangible Assets [Line Items] | |||
| Intangible assets, gross | $ 4,457 | $ 4,157 |
Intangible Assets - Summary of Changes in Intangible Assets (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Intangible Assets Net Excluding Goodwill [Abstract] | ||
| Balance at the beginning of the year | $ 7,625 | $ 9,225 |
| Changes in intangible assets | 0 | (292) |
| Amortization of intangible assets | (1,155) | (1,144) |
| Other, primarily impact from changes in foreign currency exchange rates | 747 | (164) |
| Balance at the end of the year | $ 7,217 | $ 7,625 |
Intangible Assets - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Finite and Indefinite Lived Intangible Assets [Line Items] | ||
| Identifiable intangible assets, weighted average amortization period | 13 years | |
| Identifiable intangible assets expected amortization in 2021 | $ 542 | |
| Identifiable intangible assets expected amortization in 2022 | 399 | |
| Identifiable intangible assets expected amortization in 2023 | 399 | |
| Identifiable intangible assets expected amortization in 2024 | 399 | |
| Identifiable intangible assets expected amortization in 2025 | 345 | |
| Identifiable intangible assets expected amortization, thereafter | $ 2,487 | |
| Akers National Roll Company [Member] | ||
| Finite and Indefinite Lived Intangible Assets [Line Items] | ||
| Impairment charge on intangible assets recognized | $ 292 | |
Investments in Joint Ventures - Additional Information (Detail) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| MG [Member] | ||
| Schedule of Investments [Line Items] | ||
| Percentage of ownership | 33.00% | |
| Recorded cost | $ 835,000 | |
| Dividends declared | $ 0 | $ 0 |
| Gongchang [Member] | ||
| Schedule of Investments [Line Items] | ||
| Percentage of ownership | 24.03% | |
| Recorded cost | $ 1,340,000 | |
| Dividends declared | $ 1,203,000 | $ 1,364,000 |
| ATR [Member] | Akers AB [Member] | ||
| Schedule of Investments [Line Items] | ||
| Ownership interest percentage | 59.88% | |
| ATR [Member] | TISCO [Member] | ||
| Schedule of Investments [Line Items] | ||
| Ownership interest by minority holder | 40.12% | |
Other Current Liabilities - Schedule of Other Current Liabilities (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Other Liabilities Disclosure [Abstract] | ||
| Customer-related liabilities | $ 16,144 | $ 16,194 |
| Accrued interest payable | 2,131 | 2,225 |
| Accrued sales commissions | 1,419 | 1,607 |
| Other | 4,546 | 6,694 |
| Other current liabilities | $ 24,240 | $ 26,720 |
Other Current Liabilities - Schedule of Changes in Liability for Product Warranty Claims (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Other Liabilities Disclosure [Abstract] | ||
| Balance at the beginning of the year | $ 9,065 | $ 9,447 |
| Satisfaction of warranty claims | (3,854) | (5,467) |
| Provision for warranty claims | 2,737 | 5,050 |
| Other, primarily impact from changes in foreign currency exchange rates | 157 | 35 |
| Balance at the end of the year | $ 8,105 | $ 9,065 |
Other Current Liabilities - Additional Information (Detail) |
12 Months Ended |
|---|---|
Dec. 31, 2020 | |
| Maximum [Member] | |
| Other Liabilities Disclosure [Line Items] | |
| Performance obligation related to customer deposits expected satisfaction period | 1 year |
Other Current Liabilities - Schedule of Change in Customer Deposits (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Contract With Customer Liability [Abstract] | ||
| Balance at the beginning of the year | $ 4,895 | $ 4,304 |
| Satisfaction of performance obligations | (13,915) | (11,627) |
| Receipt of additional deposits | 15,458 | 12,189 |
| Other, primarily changes in foreign currency exchange rates | 69 | 29 |
| Balance at the end of the year | $ 6,507 | $ 4,895 |
Debt - Schedule of Outstanding Borrowings (Detail) ¥ in Thousands, $ in Thousands |
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
|---|---|---|---|---|
| Debt Instrument [Line Items] | ||||
| Sale and leaseback financing obligation | $ 19,931 | $ 19,303 | ||
| Finance leases | 1,065 | 1,114 | ||
| Outstanding borrowings | 37,243 | 70,857 | ||
| Debt – current portion | (12,436) | (20,363) | ||
| Long-term debt | 24,807 | 50,494 | ||
| Revolving Credit and Security Agreement [Member] | ||||
| Debt Instrument [Line Items] | ||||
| Long term debt | 6,000 | 34,273 | ||
| Industrial Revenue Bonds [Member] | ||||
| Debt Instrument [Line Items] | ||||
| Long term debt | 9,191 | 13,311 | ||
| Minority Shareholder Loan [Member] | ||||
| Debt Instrument [Line Items] | ||||
| Long term debt | $ 1,056 | ¥ 6,901 | $ 2,856 | ¥ 19,901 |
Operating Lease Liabilities - Summary of Current and Non Current Portion of Operating Lease Arrangements (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Leases [Abstract] | ||
| Operating lease liabilities - current portion | $ 674 | $ 612 |
| Noncurrent operating lease liabilities | 3,670 | 3,651 |
| Total operating lease liabilities | $ 4,344 | $ 4,263 |
Operating Lease Liabilities - Summary of Future Operating Lease Payments (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Leases [Abstract] | ||
| 2021 | $ 690 | |
| 2022 | 598 | |
| 2023 | 535 | |
| 2024 | 487 | |
| 2025 | 291 | |
| 2026 and thereafter | 3,910 | |
| Total undiscounted payments | 6,511 | |
| Less: amount representing interest | (2,167) | |
| Present value of net minimum lease payments | $ 4,344 | $ 4,263 |
Operating Lease Liabilities - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Leases [Abstract] | ||
| Operating lease, weighted average remaining lease term | 8 years 8 months 15 days | 8 years |
| Operating lease, weighted average discount rate | 3.95% | 3.98% |
| Operating lease liabilities | $ 727 | $ 775 |
Operating Lease Liabilities - Components of Lease Cost (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Leases [Abstract] | ||
| Short-term operating lease costs | $ 30 | $ 93 |
| Long-term operating lease costs | 697 | 682 |
| Total operating lease costs | $ 727 | $ 775 |
Pension and Other Postretirement Benefits - Components of Actuarial Losses (Gains) (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Defined Benefit Pension Plan [Member] | U.S. [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Changes in assumptions | $ 21,494 | $ 27,380 |
| Other | (1,851) | 295 |
| Total actuarial losses | 19,643 | 27,675 |
| Defined Benefit Pension Plan [Member] | Foreign Pension Benefits [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Changes in assumptions | 5,674 | 6,277 |
| Other | (333) | 831 |
| Total actuarial losses | 5,341 | 7,108 |
| Other Postretirement Benefit Plans [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Changes in assumptions | 811 | 1,116 |
| Other | (85) | 134 |
| Total actuarial losses | $ 726 | $ 1,250 |
Pension and Other Postretirement Benefits - Schedule of Accumulated Other Comprehensive Loss (Detail) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Defined Benefit Pension Plan [Member] | U.S. [Member] | ||
| Accumulated other comprehensive loss: | ||
| Net actuarial loss (gain) | $ 63,834 | $ 57,883 |
| Prior service cost (credit) | 38 | 79 |
| Total accumulated other comprehensive loss | 63,872 | 57,962 |
| Defined Benefit Pension Plan [Member] | Foreign Pension Benefits [Member] | ||
| Accumulated other comprehensive loss: | ||
| Net actuarial loss (gain) | 18,341 | 19,673 |
| Prior service cost (credit) | (7,327) | (7,371) |
| Total accumulated other comprehensive loss | 11,014 | 12,302 |
| Other Postretirement Benefit Plans [Member] | ||
| Accumulated other comprehensive loss: | ||
| Net actuarial loss (gain) | 324 | (538) |
| Prior service cost (credit) | (6,833) | (7,850) |
| Total accumulated other comprehensive loss | $ (6,509) | $ (8,388) |
Pension and Other Postretirement Benefits - Schedule of Estimated Benefit Payments (Detail) $ in Thousands |
Dec. 31, 2020
USD ($)
|
|---|---|
| Defined Benefit Pension Plan [Member] | U.S. [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2021 | $ 15,758 |
| 2022 | 15,821 |
| 2023 | 15,840 |
| 2024 | 15,753 |
| 2025 | 15,607 |
| 2026-2030 | 74,313 |
| Total benefit payments | 153,092 |
| Defined Benefit Pension Plan [Member] | Foreign Pension Benefits [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2021 | 1,965 |
| 2022 | 2,003 |
| 2023 | 1,832 |
| 2024 | 2,568 |
| 2025 | 2,400 |
| 2026-2030 | 12,667 |
| Total benefit payments | 23,435 |
| Other Postretirement Benefit Plans [Member] | |
| Defined Benefit Plan Disclosure [Line Items] | |
| 2021 | 1,041 |
| 2022 | 1,004 |
| 2023 | 993 |
| 2024 | 989 |
| 2025 | 923 |
| 2026-2030 | 2,762 |
| Total benefit payments | $ 7,712 |
Pension and Other Postretirement Benefits - Asset Categories Based on the Nature and Risks of the Plan Assets (Parenthetical) (Detail) - Defined Benefit Pension Plan [Member] - U.S. [Member] |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Alternative Investments, Managed Funds [Member] | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Target Allocation | 82.80% | 81.00% |
| Alternative Investments, Cash and Cash Equivalents [Member] | ||
| Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items] | ||
| Target Allocation | 17.20% | 19.00% |
Pension and Other Postretirement Benefits - Discount Rates Used to Determine the Benefit Obligations (Detail) |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Defined Benefit Pension Plan [Member] | Foreign Pension Benefits [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 1.45% | 2.05% |
| Other Postretirement Benefit Plans [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 2.61% | |
| Minimum [Member] | Defined Benefit Pension Plan [Member] | U.S. [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 2.50% | 3.25% |
| Minimum [Member] | Other Postretirement Benefit Plans [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 2.98% | |
| Maximum [Member] | Defined Benefit Pension Plan [Member] | U.S. [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 2.63% | 3.31% |
| Maximum [Member] | Other Postretirement Benefit Plans [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Discount rate | 3.35% |
Equity Rights Offering - Additional Information (Detail) $ / shares in Units, $ in Thousands |
1 Months Ended |
|---|---|
|
Sep. 30, 2020
USD ($)
$ / shares
shares
| |
| Class Of Warrant Or Right [Line Items] | |
| Proceeds from issuance of common stock and warrants | $ | $ 19,279 |
| Stock issuance costs | $ | $ 1,140 |
| Common Stock [Member] | |
| Class Of Warrant Or Right [Line Items] | |
| Common stock issued | 5,507,889 |
| Series A Warrants [Member] | |
| Class Of Warrant Or Right [Line Items] | |
| Warrants to purchase common stock | 12,339,256 |
| Exercise price per warrants | $ / shares | $ 2.5668 |
| Class of warrant or right, exercisable date | Dec. 31, 2020 |
| Series A Warrants [Member] | Common Stock [Member] | |
| Class Of Warrant Or Right [Line Items] | |
| Number of shares can purchase for each warrant | 0.4464 |
| Exercise price per share of warrants | $ / shares | $ 5.75 |
| Class of warrant or right, expiration date | Aug. 01, 2025 |
Accumulated Other Comprehensive Loss - Additional Information (Detail) $ in Thousands |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
USD ($)
| |
| Valuation Allowance Against Gross Deferred Income Tax Assets [Member] | |
| Accumulated Other Comprehensive Income (Loss) [Line Items] | |
| Income tax benefit for certain items | $ 0 |
Derivative Instruments - Location and Fair Value of Foreign Currency Sales Contracts Recorded on Consolidated Balance Sheets (Detail) - Foreign Currency Sales Contracts [Member] - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Receivables [Member] | ||
| Derivative [Line Items] | ||
| Fair value hedged item | $ (960) | $ (260) |
| Other Current Assets [Member] | ||
| Derivative [Line Items] | ||
| Fair value hedge contracts | 1,123 | 677 |
| Other Noncurrent Assets [Member] | ||
| Derivative [Line Items] | ||
| Fair value hedge contracts | 332 | 153 |
| Other Current Liabilities [Member] | ||
| Derivative [Line Items] | ||
| Fair value hedge contracts | 12 | 0 |
| Fair value hedged item | 201 | 323 |
| Other Noncurrent Liabilities [Member] | ||
| Derivative [Line Items] | ||
| Fair value hedged item | $ 327 | $ 95 |
Derivative Instruments - Summary of Amount Recognized as and Reclassified from Accumulated Other Comprehensive Income (Loss) (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Derivative [Line Items] | ||
| Beginning of the Year | $ 291 | $ (64) |
| Recognized | 390 | 97 |
| Reclassified | 92 | (258) |
| End of the Year | 589 | 291 |
| Foreign Currency Purchase Contracts [Member] | ||
| Derivative [Line Items] | ||
| Beginning of the Year | 189 | 216 |
| Recognized | 0 | 0 |
| Reclassified | 27 | 27 |
| End of the Year | 162 | 189 |
| Futures Contracts - Copper and Aluminum [Member] | ||
| Derivative [Line Items] | ||
| Beginning of the Year | 102 | (280) |
| Recognized | 390 | 97 |
| Reclassified | 65 | (285) |
| End of the Year | $ 427 | $ 102 |
Revenue - Additional Information (Detail) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Sales Revenue, Net [Member] | Individual Countries [Member] | Maximum [Member] | ||
| Revenue from External Customer [Line Items] | ||
| Net sales | 10.00% | 10.00% |
Revenue - Net Sales (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | $ 328,544 | $ 397,904 |
| Forged and Cast Mill Rolls [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 228,219 | 286,036 |
| Forged Engineered Products [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 9,670 | 19,594 |
| Heat Exchange Coils [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 25,249 | 27,973 |
| Centrifugal Pumps [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 36,911 | 36,001 |
| Air Handling Systems [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 28,495 | 28,300 |
| U.S. [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | 159,908 | 192,845 |
| Foreign [Member] | ||
| Disaggregation Of Revenue [Line Items] | ||
| Net sales | $ 168,636 | $ 205,059 |
Research and Development Costs - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Research And Development [Abstract] | ||
| Expenses relating to product development | $ 2,047 | $ 2,523 |
Litigation - Schedule of Loss Contingencies by Contingency (Detail) - Asbestos Claims [Member] |
12 Months Ended | |
|---|---|---|
|
Dec. 31, 2020
USD ($)
Claim
|
Dec. 31, 2019
USD ($)
Claim
|
|
| Loss Contingencies [Line Items] | ||
| Total claims pending at the beginning of the period | 6,102 | 6,772 |
| New claims served | 1,016 | 1,370 |
| Claims dismissed | (855) | (1,663) |
| Claims settled | (372) | (377) |
| Total claims pending at the end of the period | 5,891 | 6,102 |
| Gross settlement and defense costs | $ | $ 27,437,000 | $ 20,289,000 |
| Average gross settlement and defense costs per claim resolved | $ | $ 22,360 | $ 9,950 |
Litigation - Schedule of Loss Contingencies by Contingency (Parenthetical) (Detail) - Claim |
Dec. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|
| Commitments And Contingencies Disclosure [Abstract] | ||
| Number of claims inactive or transferred to MDL panel | 688 | 749 |
Litigation - Additional Information (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2018 |
|
| Commitments And Contingencies Disclosure [Abstract] | ||
| Reserves for total costs for asbestos liability claims pending or projected | $ 180,196 | $ 227,922 |
| Percentage of defense costs estimated of settlement costs | 80.00% | |
| Insurance recoveries receivable | $ 117,937 | $ 152,508 |
| Equalization reserve | $ 283 |
Litigation - Summary of Activity in Asbestos Insurance Recoveries (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Loss Contingencies [Line Items] | ||
| Insurance receivable - asbestos, beginning of the year | $ 152,508 | |
| Insurance receivable - asbestos, end of the year | $ 117,937 | |
| Asbestos Claims [Member] | ||
| Loss Contingencies [Line Items] | ||
| Insurance receivable - asbestos, beginning of the year | 136,932 | 152,508 |
| Settlement and defense costs paid by insurance carriers | (18,712) | (15,576) |
| Change in estimated coverage | (283) | 0 |
| Insurance receivable - asbestos, end of the year | $ 117,937 | $ 136,932 |
Income Taxes - Income (Loss) Before Income Taxes (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Income Tax Disclosure [Abstract] | ||
| Domestic | $ (1,587) | $ (14,335) |
| Foreign | 10,287 | 5,968 |
| Income (loss) from continuing operations before income taxes | $ 8,700 | $ (8,367) |
Income Taxes - Income Tax Provision for Continuing Operations (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Current: | ||
| Federal | $ (3,614) | $ (118) |
| State | 107 | 56 |
| Foreign | 2,079 | 1,611 |
| Current income tax (benefit) provision | (1,428) | 1,549 |
| Deferred: | ||
| Federal | 2,485 | 2,244 |
| State | 1,329 | (217) |
| Foreign | (178) | (422) |
| Decrease in valuation allowance | (2,678) | (1,046) |
| Deferred income tax provision | 958 | 559 |
| Total income tax (benefit) provision | $ (470) | $ 2,108 |
Income Taxes - Difference Between Statutory U.S. Federal Income Tax and the Corporation's Effective Income Tax (Detail) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
| Income Tax Disclosure [Abstract] | ||
| Computed at statutory rate | $ 1,827 | $ (1,757) |
| Tax differential on non-U.S. earnings | (44) | 44 |
| State income taxes | 1,413 | (172) |
| Meals and entertainment | 32 | 83 |
| Alternative minimum tax credits | 0 | (13) |
| GILTI inclusion | 1,586 | 4,859 |
| Net operating loss carryback | (3,502) | 0 |
| Decrease in valuation allowance | (2,678) | (1,046) |
| Adjustments to net operating losses | 53 | 4 |
| Other – net | 843 | 106 |
| Total income tax (benefit) provision | $ (470) | $ 2,108 |
Environmental Matters - Additional Information (Detail) $ in Thousands |
Dec. 31, 2020
USD ($)
|
|---|---|
| Environmental Remediation Obligations [Abstract] | |
| Potential liability for all environmental compliance | $ 100 |
Related Parties - Additional Information (Detail) ¥ in Thousands |
12 Months Ended | |||||
|---|---|---|---|---|---|---|
|
Dec. 31, 2020
USD ($)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
USD ($)
|
Dec. 31, 2019
CNY (¥)
|
Dec. 31, 2020
CNY (¥)
|
Dec. 31, 2019
CNY (¥)
|
|
| Related Party Transaction [Line Items] | ||||||
| Debt, interest rate | 7.98% | 8.21% | 7.98% | 8.21% | ||
| Accrued interest | $ 2,131,000 | $ 2,225,000 | ||||
| ATR [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Purchases | 7,566,000 | ¥ 52,255 | 14,166,000 | ¥ 97,763 | ||
| LB Co paid Corporation for administrative services | 344,000 | ¥ 2,249 | 408,000 | 2,841 | ||
| Customer deposits | 456,000 | ¥ 2,984 | ||||
| Loan outstanding | $ 1,056,000 | 2,856,000 | ¥ 6,901 | ¥ 19,901 | ||
| Debt, interest rate | 5.00% | 5.00% | ||||
| Accrued interest | $ 2,117,000 | 2,152,000 | ¥ 13,842 | ¥ 14,999 | ||
| Debt, maturity date | 2008 | 2008 | ||||
| Debt, renewal period | 1 year | 1 year | ||||
| Sales | $ 9,154,000 | ¥ 63,222 | 11,200,000 | ¥ 77,303 | ||
| Due from related parties | 0 | $ 0 | ||||
| Repayment, principal amount | 1,882,000 | 13,000 | ||||
| Accrued interest paid | $ 290,000 | ¥ 2,000 | ||||
| ATR [Member] | Minimum [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Interest accrual period | 3 years | 3 years | ||||
| ATR [Member] | Maximum [Member] | ||||||
| Related Party Transaction [Line Items] | ||||||
| Interest accrual period | 5 years | 5 years | ||||
Business Segments - Additional Information (Detail) |
12 Months Ended |
|---|---|
|
Dec. 31, 2020
Segment
| |
| Segment Reporting [Abstract] | |
| Number of reportable business segments | 2 |
Subsequent Events - Additional Information (Detail) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | |
|---|---|---|---|
Mar. 26, 2021 |
Mar. 26, 2021 |
Sep. 30, 2020 |
|
| Series A Warrants [Member] | |||
| Subsequent Event [Line Items] | |||
| Warrants to purchase common stock | 12,339,256 | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Collective bargaining agreement expiration, month and year | 2021-03 | ||
| Collective bargaining agreement extended expiration, month and year | 2025-03 | ||
| Subsequent Event [Member] | Series A Warrants [Member] | |||
| Subsequent Event [Line Items] | |||
| Proceeds from warrant exercise | $ 3,050 | ||
| Number of warrants exercised | 1,188,231 | 1,188,231 | |
| Subsequent Event [Member] | Series A Warrants [Member] | Common Stock [Member] | |||
| Subsequent Event [Line Items] | |||
| Warrants to purchase common stock | 530,422 | 530,422 |