FORM
1O-Q
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
[X] QUARTERLY
REPORT PURSUANT TO SECTION 13 or 15 (d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
the
quarterly period ended June 30, 2006
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
Incorporated
in Pennsylvania.
I.R.S.
Employer Identification No. 25-1117717.
600
Grant
Street, Pittsburgh, Pennsylvania 15219
Telephone
Number 412/456-4400
Indicate
by
check mark whether the registrant (1) has filed all reports required to be
filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter periods that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES
X
NO
Indicate
by
check mark whether the registrant is an accelerated filer (as defined in
Rule
12b-2 of the Exchange Act).
YES
X
NO
On
August 9,
2006, 9,837,497 common shares were outstanding.
-
1
-
AMPCO-PITTSBURGH
CORPORATION
INDEX
Part
I
- Financial Information:
|
Page
No.
|
|
|
|
|
|
Item
1
-
|
Condensed
Consolidated Financial Statements
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets -
June
30, 2006 and December 31, 2005
|
3
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations - Six and Three Months Ended
June
30, 2006 and 2005
|
4
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows -Six Months Ended June 30,
2006 and
2005
|
5
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
|
|
|
|
Item
2
-
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
|
|
|
|
|
Item
3
-
|
Quantitative
and Qualitative Disclosures about Market Risk
|
18
|
|
|
|
|
|
Item
4
-
|
Controls
and Procedures
|
18
|
|
|
|
|
Part
II
- Other Information:
|
|
|
Item
1
-
|
Legal
Proceedings
|
19
|
|
|
|
|
|
Item
1A
-
|
Risk
Factors
|
19
|
|
|
|
|
|
Item
4
-
|
Submission
of Matters to a Vote of Security Holders
|
19
|
|
|
|
|
|
Item
6
-
|
Exhibits
|
19
|
|
|
|
|
|
Signatures
|
|
21
|
|
|
|
|
|
Exhibit
Index
|
|
22
|
|
|
|
|
|
Exhibits
|
|
|
|
|
|
|
|
|
Exhibit
31.1
|
|
|
|
Exhibit
31.2
|
|
|
|
Exhibit
32.1
|
|
|
|
Exhibit
32.2
|
|
|
|
|
|
-
2
-
PART
I - FINANCIAL INFORMATION
AMPCO-PITTSBURGH
CORPORATION
CONDENSED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
9,322,923
|
|
$
7,913,504
|
|
Short-term
marketable securities
|
|
37,050,000
|
|
31,550,000
|
|
Receivables,
less allowance for
|
|
|
|
|
|
doubtful
accounts of $717,574 in
|
|
|
|
|
|
|
|
2006
and $681,316 in 2005
|
|
|
51,286,414
|
|
|
47,338,440
|
|
Inventories
|
|
|
56,029,746
|
|
|
48,535,732
|
|
Other
|
|
|
7,626,683
|
|
|
6,252,132
|
|
Total
current assets
|
|
|
161,315,766
|
|
|
141,589,808
|
|
Property,
plant and equipment, net
|
|
|
67,099,460
|
|
|
66,645,190
|
|
Prepaid
pensions
|
|
|
27,739,007
|
|
|
26,418,828
|
|
Goodwill
|
|
|
2,694,240
|
|
|
2,694,240
|
|
Other
noncurrent assets
|
|
|
4,801,168
|
|
|
4,521,072
|
|
|
|
$
|
263,649,641
|
|
$
|
241,869,138
|
|
|
|
|
|
|
|
|
|
Liabilities
and Shareholders' Equity
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
16,855,410
|
|
$
|
14,877,426
|
|
Accrued
payrolls and employee benefits
|
|
|
9,554,278
|
|
|
9,169,942
|
|
Industrial
Revenue Bond debt
|
|
|
13,311,000
|
|
|
13,311,000
|
|
Other
|
|
|
20,384,510
|
|
|
16,675,055
|
|
Total
current liabilities
|
|
|
60,105,198
|
|
|
54,033,423
|
|
Employee
benefit obligations
|
|
|
28,774,130
|
|
|
27,610,185
|
|
Deferred
income taxes
|
|
|
18,377,177
|
|
|
16,542,082
|
|
Other
noncurrent liabilities
|
|
|
3,877,752
|
|
|
2,382,185
|
|
Total
liabilities
|
|
|
111,134,257
|
|
|
100,567,875
|
|
|
|
|
|
|
|
|
|
Commitments
and contingent liabilities
|
|
|
|
|
|
|
|
(Note
6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Preference
stock - no par value;
|
|
|
|
|
|
|
|
authorized
3,000,000 shares; none
|
|
|
|
|
|
|
|
issued
|
|
|
-
|
|
|
-
|
|
Common
stock - par value $1; authorized
|
|
|
|
|
|
|
|
20,000,000
shares; issued and
|
|
|
|
|
|
|
|
outstanding 9,837,497
shares in 2006
|
|
|
|
|
|
|
|
and
9,767,497 shares in 2005
|
|
|
9,837,497
|
|
|
9,767,497
|
|
Additional
paid-in capital
|
|
|
105,428,460
|
|
|
104,425,502
|
|
Retained
earnings
|
|
|
55,455,589
|
|
|
45,293,492
|
|
Accumulated
other comprehensive loss
|
|
|
(18,206,162
|
)
|
|
(18,185,228
|
)
|
Total
shareholders' equity
|
|
|
152,515,384
|
|
|
141,301,263
|
|
|
|
$
|
263,649,641
|
|
$
|
241,869,138
|
|
|
|
|
|
|
|
|
|
See
Notes to
Condensed Consolidated Financial Statements.
-
3
-
AMPCO-PITTSBURGH
CORPORATION
CONDENSED
CONSOLIDATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
|
Six
Months Ended June 30,
|
|
Three Months Ended June
|
30,
|
|
|
2006 2005
|
|
2006 2005
|
|
Net
sales
|
$
144,344,227
|
$121,241,037
|
$ 75,454,678
|
$ 62,346,985
|
|
|
|
|
|
Operating
costs and expenses:
|
|
|
|
|
Costs
of products sold
|
|
|
|
|
(excluding
depreciation)
|
106,421,213
|
96,845,661
|
55,064,326
|
48,859,816
|
Selling
and administrative
|
17,600,359
|
14,644,439
|
9,464,464
|
7,697,261
|
Depreciation
|
3,449,091
|
3,397,118
|
1,719,819
|
1,704,272
|
Loss
(gain) on disposition
|
|
|
|
|
of
assets
|
12,147
|
(1,343)
|
8,684
|
2,822
|
Total
operating expenses
|
127,482,810
|
114,885,875
|
66,257,293
|
58,264,171
|
|
|
|
|
|
Income
from operations
|
16,861,417
|
6,355,162
|
9,197,385
|
4,082,814
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
Interest
expense
|
(328,673)
|
(246,985)
|
(175,258)
|
(142,373)
|
Other
-
net
|
1,410,052
|
(7,790)
|
620,933
|
34,865
|
|
1,081,379
|
(254,775)
|
445,675
|
(107,508)
|
|
|
|
|
|
Income
before income taxes
|
17,942,796
|
6,100,387
|
9,643,060
|
3,975,306
|
Income
tax provision
|
5,814,000
|
1,451,000
|
3,086,000
|
829,000
|
|
|
|
|
|
Net
income
|
$
12,128,796
|
$
4,649,387
|
$
6,557,060
|
$
3,146,306
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share:
|
|
|
|
|
Basic
|
|
$1.24
|
$
0.48
|
$
0.67
|
$
0.32
|
Diluted
|
|
$
1.22
|
$
0.47
|
$
0.66
|
$
0.32
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
dividends declared
|
|
|
|
|
|
per
share
|
|
$
0.20
|
$
0.20
|
$
0.10
|
$
0.10
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of
|
|
|
|
|
|
common
shares outstanding:
|
|
|
|
|
|
Basic
|
|
9,818,329
|
9,756,889
|
9,833,326
|
9,757,497
|
Diluted
|
|
9,947,489
|
9,804,380
|
9,972,833
|
9,794,432
|
|
|
|
|
|
|
See
Notes to
Condensed Consolidated Financial Statements.
-
4
-
AMPCO-PITTSBURGH
CORPORATION
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
Six
Months Ended June 30,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Net
cash flows provided by (used in)
|
|
|
|
|
|
operating
activities
|
|
$
|
11,193,819
|
|
$
|
(5,136,589
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property, plant and equipment
|
|
|
(3,348,014
|
)
|
|
(1,833,833
|
)
|
Purchases
of short-term marketable securities
|
|
|
(14,200,000
|
)
|
|
(19,000,000
|
)
|
Proceeds
from the sale of short-term
|
|
|
|
|
|
|
|
marketable
securities
|
|
|
8,700,000
|
|
|
20,700,000
|
|
Proceeds
from sale of assets
|
|
|
-
|
|
|
59,196
|
|
|
|
|
|
|
|
|
|
Net
cash flows used in investing activities
|
|
|
(8,848,014
|
)
|
|
(74,637
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
proceeds from U.K. bank overdraft facility
|
|
|
-
|
|
|
1,693,012
|
|
Proceeds
from the issuance of common stock
|
|
|
806,950
|
|
|
124,216
|
|
Dividends
paid
|
|
|
(1,959,698
|
)
|
|
(1,951,499
|
)
|
|
|
|
|
|
|
|
|
Net
cash flows used in financing activities
|
|
|
(1,152,748
|
)
|
|
(134,271
|
)
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash
|
|
|
|
|
|
|
|
and
cash equivalents
|
|
|
216,362
|
|
|
214,941
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and
|
|
|
|
|
|
|
|
cash
equivalents
|
|
|
1,409,419
|
|
|
(5,130,556
|
)
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
7,913,504
|
|
|
11,339,514
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$
|
9,322,923
|
|
$
|
6,208,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information:
|
|
|
|
|
|
|
|
Income
tax payments
|
|
$
|
2,901,265
|
|
$
|
865,536
|
|
Interest
payments
|
|
$
|
322,844
|
|
$
|
241,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See
Notes to
Condensed Consolidated Financial Statements.
-
5
-
AMPCO-PITTSBURGH
CORPORATION
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1.
|
Unaudited
Condensed Consolidated Financial
Statements
|
The
condensed
consolidated balance sheet as of June 30, 2006, the condensed consolidated
statements of operations for the six and three months ended June 30, 2006
and
2005 and the condensed consolidated statements of cash flows for the six
months
ended June 30, 2006 and 2005 have been prepared by Ampco-Pittsburgh Corporation
(the Corporation) without audit. In the opinion of management, all adjustments,
consisting of only normal and recurring adjustments necessary to present
fairly
the financial position, results of operations and cash flows for the periods
presented have been made.
The results
of operations for the six and three months ended June 30, 2006 are not
necessarily indicative of the operating results expected for the full
year.
Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted.
At
June 30,
2006 and December 31, 2005, approximately 64.8% and 64.4%, respectively,
of the
inventories were valued on the LIFO method, with the remaining inventories
being
valued on the FIFO method. Inventories were comprised of the
following:
|
|
(in
thousands)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Raw
materials
|
|
$
|
11,685
|
|
$
|
11,299
|
|
Work-in-process
|
|
|
28,416
|
|
|
25,228
|
|
Finished
goods
|
|
|
9,248
|
|
|
5,710
|
|
Supplies
|
|
|
6,681
|
|
|
6,299
|
|
|
|
$
|
56,030
|
|
$
|
48,536
|
|
3. Property,
Plant and Equipment
Property,
plant and equipment were comprised of the following:
|
|
(in
thousands)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Land
and land improvements
|
|
$
|
4,301
|
|
$
|
4,299
|
|
Buildings
|
|
|
25,253
|
|
|
25,211
|
|
Machinery
and equipment
|
|
|
141,430
|
|
|
137,458
|
|
|
|
|
170,984
|
|
|
166,968
|
|
Accumulated
depreciation
|
|
|
(103,885
|
)
|
|
(100,323
|
)
|
|
|
$
|
67,099
|
|
$
|
66,645
|
|
-
6
-
4.
|
Other
Current Liabilities
|
Other
current
liabilities were comprised of the following:
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
Customer-related
liabilities
|
|
$
|
6,313
|
|
$
|
5,338
|
|
Accrued
sales commissions
|
|
|
3,899
|
|
|
2,700
|
|
Other
|
|
|
10,173
|
|
|
8,637
|
|
|
|
$
|
20,385
|
|
$
|
16,675
|
|
Included
in
customer-related liabilities are costs expected to be incurred with respect
to
product warranties. Changes in the liability for product warranty claims
for the
six and three months ended June 30, 2006 and 2005 consisted of:
|
|
(in
thousands)
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at beginning of the period
|
|
$
|
3,786
|
|
$
|
4,150
|
|
$
|
3,870
|
|
$
|
3,904
|
|
Satisfaction
of warranty claims
|
|
|
(1,344
|
)
|
|
(1,666
|
)
|
|
(716
|
)
|
|
(944
|
)
|
Provision
for warranty claims
|
|
|
1,657
|
|
|
1,133
|
|
|
971
|
|
|
608
|
|
Other,
primarily impact from
|
|
|
|
|
|
|
|
|
|
|
|
|
|
changes
in foreign currency
|
|
|
|
|
|
|
|
|
|
|
|
|
|
exchange
rates
|
|
|
191
|
|
|
(158
|
)
|
|
165
|
|
|
(109
|
)
|
Balance
at end of the period
|
|
$
|
4,290
|
|
$
|
3,459
|
|
$
|
4,290
|
|
$
|
3,459
|
|
|
5. Pension
and Other Postretirement Benefits
|
Contributions
for the six months ended June 30, 2006 and 2005 were as follows:
|
|
(in
thousands)
|
|
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
U.S.
pension benefits plans
|
|
$
|
-
|
|
$
|
-
|
|
Foreign
pension benefits plan
|
|
$
|
277
|
|
$
|
287
|
|
Other
postretirement benefits (e.g. net payments)
|
|
$
|
365
|
|
$
|
623
|
|
U.K.
defined contribution plan
|
|
$
|
450
|
|
$
|
149
|
|
-
7
-
Net
periodic
pension and other postretirement costs include the following components for
the
six and three months ended June 30, 2006 and 2005:
|
|
(in
thousands)
|
|
|
|
U.S.
Pension Benefits
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
1,181
|
|
$
|
1,133
|
|
$
|
612
|
|
$
|
567
|
|
Interest
cost
|
|
|
3,502
|
|
|
3,368
|
|
|
1,782
|
|
|
1,684
|
|
Expected
return on plan assets
|
|
|
(6,248
|
)
|
|
(5,314
|
)
|
|
(3,126
|
)
|
|
(2,657
|
)
|
Amortization
of prior service cost
|
|
|
309
|
|
|
296
|
|
|
155
|
|
|
148
|
|
Actuarial
(gain) loss
|
|
|
(59
|
)
|
|
(68
|
)
|
|
8
|
|
|
(34
|
)
|
Net
benefit income
|
|
$
|
(1,315
|
)
|
$
|
(585
|
)
|
$
|
(569
|
)
|
$
|
(292
|
)
|
|
|
(in
thousands)
|
|
|
|
Foreign
Pension Benefits
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Interest
cost
|
|
$
|
1,093
|
|
$
|
1,104
|
|
$
|
560
|
|
$
|
544
|
|
Expected
return on plan assets
|
|
|
(1,063
|
)
|
|
(969
|
)
|
|
(544
|
)
|
|
(477
|
)
|
Actuarial
loss
|
|
|
189
|
|
|
187
|
|
|
96
|
|
|
92
|
|
Net
benefit cost
|
|
$
|
219
|
|
$
|
322
|
|
$
|
112
|
|
$
|
159
|
|
|
|
(in
thousands)
|
|
|
|
Other
Postretirement Benefits
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Service
cost
|
|
$
|
171
|
|
$
|
151
|
|
$
|
85
|
|
$
|
75
|
|
Interest
cost
|
|
|
397
|
|
|
385
|
|
|
199
|
|
|
193
|
|
Amortization
of prior service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
benefit
|
|
|
(223
|
)
|
|
(274
|
)
|
|
(111
|
)
|
|
(137
|
)
|
Actuarial
loss
|
|
|
106
|
|
|
84
|
|
|
53
|
|
|
42
|
|
Net
benefit cost
|
|
$
|
451
|
|
$
|
346
|
|
$
|
226
|
|
$
|
173
|
|
6. Commitments
and Contingent Liabilities
Outstanding
commercial letters of credit as of June 30, 2006 approximated $20,011,000,
a
major portion of which serves as collateral for the Industrial Revenue Bond
debt.
In
connection
with the sale of certain subsidiaries in 2003, the Corporation provided typical
warranties to the buyer (such as those relating to income taxes, intellectual
property, legal proceedings, product liabilities and title to property, plant
and equipment) which primarily expire with the statutes of limitations. Losses
suffered by the buyer as a result of the Corporation’s breach of warranties are
reimbursable by the Corporation up to approximately $2,000,000. No amount
has
been paid to date and based on experience while owning the subsidiaries,
the
Corporation expects that no amounts will become due.
During
2004,
the Davy Roll operations received $1,498,000 (£800,000) of U.K. governmental
grants toward the purchase and installation of certain
-
8
-
machinery
and
equipment. Under the agreement, the grants are repayable if certain conditions
are not met including achieving and maintaining a targeted level of employment
through March 2009.
See
Note 10
regarding litigation and Note 11 for environmental matters.
7. Comprehensive
Income (Loss)
The
Corporation's comprehensive income (loss) for the six and three months ended
June 30, 2006 and 2005 consisted of:
|
|
(in
thousands)
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
12,129
|
|
$
|
4,649
|
|
$
|
6,557
|
|
$
|
3,146
|
|
Foreign
currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
adjustments
|
|
|
2,314
|
|
|
(2,167
|
)
|
|
2,158
|
|
|
(1,553
|
)
|
Adjustment
to minimum pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
liability
|
|
|
(1,636
|
)
|
|
1,520
|
|
|
(1,399
|
)
|
|
1,084
|
|
Unrealized
holding (losses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
gains
on marketable securities
|
|
|
(97
|
)
|
|
(153
|
)
|
|
3
|
|
|
(153
|
)
|
Change
in fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of
derivatives
|
|
|
(602
|
)
|
|
2,411
|
|
|
(722
|
)
|
|
1,558
|
|
Comprehensive
income
|
|
$
|
12,108
|
|
$
|
6,260
|
|
$
|
6,597
|
|
$
|
4,082
|
|
8. Foreign
Exchange and Futures Contracts
Certain
of
the Corporation’s operations are subject to risk from exchange rate fluctuations
in connection with sales in foreign currencies. To minimize this risk, forward
foreign exchange contracts are purchased which are designated as fair value
or
cash flow hedges. As of June 30, 2006, approximately $80,149,000 of anticipated
foreign-denominated sales has been hedged with the underlying contracts settling
at various dates through March 2010. As of June 30, 2006, the fair value
of
contracts expected to settle within the next 12 months, which is recorded
in
other current liabilities, approximated $785,000 and the fair value of the
remaining contracts, which is recorded in other noncurrent liabilities,
approximated $1,941,000. The change in the fair value of the contracts
designated as cash flow hedges is recorded as a component of accumulated
other
comprehensive income (loss) and approximated $(1,497,000), net of income
taxes,
as of June 30, 2006. The change in fair value will be reclassified into earnings
when the projected sales occur with approximately $(839,000) expected to
be
released to pre-tax earnings within the next 12 months. During the six months
ended June 30, 2006 and 2005, approximately $(370,000) and $(557,000),
respectively, were released to pre-tax earnings, and during the three months
ended June 30, 2006 and 2005, approximately $(272,000) and $(170,000),
respectively, were released to pre-tax earnings.
Gains
(losses) on foreign exchange transactions approximated $645,000 and $(216,000)
for the six months ended June 30, 2006 and 2005, respectively, and $282,000
and
$(90,000) for the three months ended June 30, 2006 and 2005,
respectively.
-
9
-
In
addition,
one of the Corporation’s subsidiaries is subject to risk from increases in the
price of a commodity (copper) used in the production of inventory. To minimize
this risk, futures contracts are entered into which are designated as cash
flow
hedges. Through May 2006, futures contracts approximating copper needs on
a
rolling 12-month basis were purchased. In June 2006, due to the volatility
of
copper prices, the increased backwardation in the market, and a shortened
term
for customer acceptance of a price quote, the Corporation revised its hedge
strategy to a rolling three-month basis and cancelled various futures contracts
resulting in a termination gain of approximately $1,900,000, which will be
recorded in pre-tax earnings over the next twelve months when the projected
sales occur. The net unamortized gain is recorded as a component of accumulated
other comprehensive income (loss) and, as of June 30, 2006, approximated
$1,186,000, net of income taxes.
At
June 30,
2006, approximately 22% or $1,526,000 of anticipated commodity purchases
over
the next 12 months are hedged (approximately 87% of anticipated commodity
purchases over the next 3 months). The fair value of these contracts
approximated $(12,000). The change in the fair value of the contracts designated
as cash flow hedges is recorded as a component of accumulated other
comprehensive income (loss) and approximated $(8,000), net of income taxes,
as
of June 30, 2006. The change in the fair value will be reclassified into
earnings when the projected sales occur with approximately $(12,000) expected
to
be released to pre-tax earnings within the next 12 months. During the six
months
ended June 30, 2006 and 2005, approximately $1,091,000 and $353,000,
respectively, were released to pre-tax earnings and during the three months
ended June 30, 2006 and 2005, approximately $656,000 and $145,000, respectively,
were released to pre-tax earnings.
9. Business
Segments
Presented
below are the net sales and income before income taxes for the Corporation's
two
business segments.
|
|
(in
thousands)
|
|
|
|
Six
Months
|
|
Three
Months
|
|
|
|
Ended
June 30,
|
|
Ended
June 30,
|
|
|
|
2006
|
|
2005
|
|
2006
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
Net
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged
and Cast Rolls
|
|
$
|
100,429
|
|
$
|
83,283
|
|
$
|
53,040
|
|
$
|
41,891
|
|
Air
and
Liquid Processing
|
|
|
43,915
|
|
|
37,958
|
|
|
22,415
|
|
|
20,456
|
|
Total
Reportable Segments
|
|
$
|
144,344
|
|
$
|
121,241
|
|
$
|
75,455
|
|
$
|
62,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forged
and Cast Rolls
|
|
$
|
16,407
|
|
$
|
6,943
|
|
$
|
9,017
|
|
$
|
4,366
|
|
Air
and
Liquid Processing
|
|
|
3,079
|
|
|
1,889
|
|
|
1,700
|
|
|
938
|
|
Total
Reportable Segments
|
|
|
19,486
|
|
|
8,832
|
|
|
10,717
|
|
|
5,304
|
|
Other
expense, including
|
|
|
|
|
|
|
|
|
|
|
|
|
|
corporate
costs - net
|
|
|
(1,543
|
)
|
|
(2,732
|
)
|
|
(1,074
|
)
|
|
(1,329
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,943
|
|
$
|
6,100
|
|
$
|
9,643
|
|
$
|
3,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
10
-
Income
before
income taxes for the Forged and Cast Rolls segment for the six and three
months
ended June 30, 2005 includes $2,320,000
and $1,717,000 of proceeds from settlement of the Corporation’s 2004
flood-related business interruption insurance claim (see Note 12).
Income
before
income taxes for the Air and Liquid Processing segment for the six and three
months ended June 30, 2006 and 2005 includes the majority of the legal and
case
management costs associated with personal injury claims and insurance recovery
litigation related to asbestos-containing product and indemnity payments
not
expected to be recovered from insurance carriers (see Note 10).
10. Litigation
(claims not in thousands)
The
Corporation and its subsidiaries are involved in various claims and lawsuits
incidental to their businesses. In addition, claims have been asserted alleging
personal injury from exposure to asbestos-containing components historically
used in some products of certain of the Corporation’s subsidiaries (“Asbestos
Liability”). Those subsidiaries, and in some cases the Corporation, are
defendants (among a number of defendants, typically over 50 and often over
100)
in cases filed in various state and federal courts. The following table reflects
information about these cases for the six months ended June 30,
2006:
Approximate
open claims at end of period
|
|
|
14,900
|
|
Gross
settlement and defense costs (in 000’s)
|
|
$
|
5,421
|
|
Approximate
claims settled or dismissed
|
|
|
1,462
|
|
|
|
|
|
|
Substantially
all settlement and defense costs in the above table were 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. For example, approximately
6,700
claims filed in Mississippi were dismissed in 2005 as a result of tort reform
in
that state.
Certain
of
the Corporation’s subsidiaries and the Corporation have an arrangement (the
“Coverage Arrangement”) with insurers responsible for a substantial majority of
its historical primary and some umbrella insurance coverage for Asbestos
Liability (the “Paying Insurers”). Under the Coverage Arrangement, the Paying
Insurers accept financial responsibility, subject to the limits of the policies
and based on fixed defense percentages and specified indemnity allocation
formulas, for a substantial majority of the Asbestos Liabilities. In 2006,
the
Corporation concluded an agreement bringing into the Coverage Arrangement
the
only relevant historical primary insurer who had not previously participated
in
the Coverage Arrangement.
The
Coverage
Arrangement includes an acknowledgement that Howden Buffalo, Inc. (“Howden”), is
entitled to coverage under policies covering Asbestos Liability arising out
of
the historical products manufactured or distributed by Buffalo Forge, a former
subsidiary of the Corporation (the “Products”). The Coverage Arrangement does
not provide for any prioritization on access to the applicable policies or
monetary cap other than the limits of the policies, and, accordingly, Howden
may
access the policies at any time for any covered claim arising out of a Product.
In general, access by Howden to the policies covering the Products will erode
the coverage under the
-
11
-
policies
available to the Corporation for Asbestos Liabilities alleged to arise out
of
not only the Products but also other historical products of the Corporation
and
its subsidiaries covered by the applicable policies. The Corporation is unable
at present to predict the timing or impact on available coverage of Howden’s
rights to access historical insurance coverage of the Corporation and its
subsidiaries with respect to the Products.
Based
on the
Corporation’s claims experience to date with Asbestos Liabilities, the available
insurance coverage, the identity of the subsidiaries that are named in the
cases, and the identity of the Corporation’s and its subsidiaries’ insurers, the
Corporation believes that the pending legal proceedings will not have a material
adverse effect on its consolidated financial condition or liquidity. The
outcome
of particular lawsuits, however, could be material to the consolidated results
of operations for the period in which the costs, if any, are recognized.
There
can be no assurance that certain of the Corporation’s subsidiaries or the
Corporation will not be subjected to significant additional claims in the
future
or that the subsidiaries’ ultimate liability with respect to claims for Asbestos
Liability will not present significantly greater and longer lasting financial
exposure than is represented by the pending claims. The Corporation incurred
uninsured legal costs in connection with advice on certain matters pertaining
to
these asbestos cases including insurance litigation, case management and
other
issues. Those costs amounted to approximately $304,000 and $126,000 for the
six
and three months ended June 30, 2006, respectively, in comparison to $429,000
and $236,000 for the same periods of the prior year.
The
Corporation has not accrued for settlement or defense costs for pending claims
for Asbestos Liability nor for settlement or defense costs for claims that
may
be asserted against the subsidiaries and the Corporation in the future. The
Corporation has not had sufficient information to make a reasonable estimate
of
pending
or
future claims. In order to assist the Corporation in determining whether
an
estimate can be made of the potential liability
for
pending
claims for Asbestos Liability and
for
claims for Asbestos Liability that may be asserted against the subsidiaries
and
the Corporation in the future, and the amount of any estimate, the Corporation
has retained a claim evaluation firm. After
the
evaluation firm’s analysis is completed, if a reasonable estimate can be
made
the
Corporation will accrue a liability
for pending
and future claims that may be asserted against the subsidiaries.
Any such
accrual will cover a period that will be determined after considering the
claims
analysis, and is likely to be material in amount.
The
Corporation is unable to predict when the claims analysis will be completed.
At
the same time that any accrual for Asbestos Liability would be made, the
Corporation would accrue a receivable for related insurance proceeds expected
to
be collected when claims are actually paid. The Corporation has retained
an
insurance evaluation firm to assist it in analyzing the subsidiaries’ and the
Corporation’s historical insurance as applied to any claims estimate. That
analysis will address, among other things, the gaps in insurance coverage
that
could result from exhaustion of insurance subject to the Coverage Arrangement
in
a policy period for which there is no excess insurance, or in a policy period
in
which an insurer that issued excess coverage is insolvent. In the case of
insurer insolvency, the subsidiaries could be required to pay amounts that
would
otherwise have been
-
12
-
paid
by the
insolvent insurer in order to access other excess coverage. The timing of
any
such payments on account of insurance exhaustions would depend upon the
magnitude and timing of future claims; the method in which losses would be
allocated to various insurance policies; how settlement and defense costs
would
be covered by the insurance policies; and the effect of various policy terms
and
limits. As a result of these gaps in coverage, it is likely that any accrual
for
pending and future Asbestos Liability claims for
the
covered period would
exceed
the accrual for related insurance
proceeds by a material amount.
11. Environmental
Matters
The
Corporation is currently performing certain remedial actions in connection
with
the sale of real estate previously owned and has been named a Potentially
Responsible Party at three third-party landfill sites. In addition, as a
result
of the 2003 sale of certain subsidiaries, the Corporation retained the liability
to remediate certain environmental contamination at two of the sold locations
and has agreed to indemnify the buyer against third-party claims arising
from
the discharge of certain contamination from one of these locations, the cost
for
which was accrued at the time of sale. 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. However, in the opinion
of
management, the potential liability for all environmental proceedings of
approximately $2,000,000 accrued at June 30, 2006 is
considered
adequate based on information known to date.
12. Flood
Damage
In
September
2004, the Carnegie, Pennsylvania plant of the Corporation’s Union Electric Steel
subsidiary was damaged by flooding as a result of the remnants of Hurricane
Ivan. Proceeds from the Corporation business interruption insurance claim
approximated $2,320,000 (of which $1,717,000 was received in the second quarter
of 2005 and $603,000 in the first quarter of 2005) and recorded as a reduction
of costs of products sold (excluding depreciation) in the accompanying 2005
condensed consolidated statements of operations.
13. Recently
Issued Accounting Pronouncements
In
November
2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151,
“Inventory Costs” which confirms that accounting for abnormal amounts of idle
facility expense, freight, handling costs, and wasted material (spoilage)
be
recognized as current period charges and that allocation of fixed production
overheads to inventories be based on normal capacity of the production
facilities. The provisions of SFAS No. 151 became effective for the Corporation
on January 1, 2006 and did not have a significant effect on its financial
condition or results of operations.
In
December
2004, the FASB issued SFAS No. 123(R), “Shared-Based Payment” which requires
companies to recognize compensation cost for stock options and other stock-based
awards based on their fair value. Companies will no longer be permitted to
follow the intrinsic value accounting method. The provisions of SFAS No.
123(R)
became effective for the Corporation on January 1, 2006. The Corporation
does
not have any remaining options
-
13
-
available
for
grant and granted options are fully vested; accordingly, the standard did
not
impact the Corporation’s financial condition or results of operations.
In
May 2005,
the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections - a
replacement of APB Opinion No. 20 and FASB Statement No. 3” which provides
guidance for the accounting and reporting of a change in accounting principle.
It also applies to changes required by a newly-issued accounting pronouncement
if that pronouncement does not provide such guidance. Previously, most changes
in accounting principles were recognized by including the cumulative effect
of
changing to the new accounting principle in net income of the period of the
change. SFAS No. 154 requires retrospective application to prior periods
and
became effective for the Corporation on January 1, 2006. Until the Corporation
makes any such changes, the standard will not impact the Corporation’s financial
condition or results of operations.
In
February
2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial
Instruments”, which provides relief from having to separately determine the fair
value of an embedded derivative that would otherwise be required to be
bifurcated from its host contract. The Corporation is currently evaluating
the
impact of SFAS No. 155, which becomes effective for the Corporation on January
1, 2007.
In
June 2006,
the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes - an interpretation of FASB Statement No. 109”, which provides guidance
for the financial statement recognition and measurement of a tax position
taken
or expected to be taken in a tax return as well as subsequent changes in
a tax
position, calculation of interest and penalties, accounting in interim periods,
disclosure, and transition. The Corporation is currently evaluating the impact
of Interpretation No. 48, which becomes effective for the Corporation on
January
1, 2007.
-
14
-
ITEM
2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Executive
Overview
The
Corporation currently operates in two business segments - the Forged and
Cast
Rolls segment and the Air and Liquid Processing segment. The Forged and Cast
Rolls segment is benefiting from an increased level of steel and aluminum
production and a worldwide shortage of forged hardened steel rolls and, to
a
lesser extent, certain cast roll products. The demand arises from the addition
of new steel plants and increased steel production, particularly in China,
India
and other parts of Asia, along with a reduction in the number of roll suppliers.
For Union Electric Steel, the shortage of global forged roll capacity, its
current order backlog, and the broad base of its customers are expected to
keep
the operations at capacity for the next several years. Demand for cast rolls
from Davy Roll is also expected to remain high. The outlook for the segment
for
the foreseeable future is good with the expectation of materially improved
sales
and income from operations in 2006.
Each
of the
businesses within the Air and Liquid Processing segment is small and provides
limited growth opportunities. The segment is focusing on returning the air
handling operation to profitability, expansion of distribution networks and
seeking additional products which will utilize excess manufacturing capacity,
expertise, and sales distribution. Additionally, it is subject to multiple
claims for personal injury alleged to result from asbestos-containing products
as many as sixty years ago. The potential long-term impact is described fully
in
Note 10 to the condensed consolidated financial statements. The outlook for
the
segment in 2006, excluding asbestos litigation-related expense, is for increased
sales with a modest improvement in income from operations.
Operations
for the Six Months Ended June 30, 2006 and 2005
Net
Sales.
Net sales
for the six months ended June 30, 2006 and 2005 were $144,344,000 and
$121,241,000, respectively, and $75,455,000 and $62,347,000, respectively,
for
the three months then ended. A discussion of sales for the Corporation’s two
segments is included below. Backlog (unfilled orders) approximated $454,208,000
and $249,534,000 at June 30, 2006 and 2005, respectively, and $312,272,000
at
December 31, 2005. Although backlog has improved for both of the segments,
the
increase is principally attributable to the Forged and Cast Rolls segment.
Approximately $308,000,000 of the June 30, 2006 backlog is scheduled for
shipment after December 31, 2006.
Costs
of
Products Sold.
Costs of
products sold, excluding depreciation, were 73.7% and 79.9% of net sales
for the
six months ended June 30, 2006 and 2005, respectively, and 73.0% and 78.4%
of
net sales for the three months ended June 30, 2006 and 2005, respectively.
The
improvement is due primarily to better pricing and additional volume of the
Forged and Cast Rolls segment. Costs of products sold for the six and three
months ended June 30, 2005 includes proceeds of $2,320,000 and $1,717,000,
respectively, from settlement of the Corporation’s 2004 flood-related business
interruption insurance claim.
Selling
and Administrative.
The
increase in selling and administrative expenses for the six and three months
ended June 30, 2006 in comparison to the same periods of 2005 is principally
attributable to higher commission expense resulting from increases in export
sales of the Forged and Cast Rolls segment.
Income
from Operations.
Income from
operations for the six months ended June 30, 2006 and 2005 approximated
$16,861,000 and $6,355,000, respectively, and $9,197,000 and $4,083,000 for
the
three months ended June 30, 2006 and 2005, respectively. A discussion of
operating results for the Corporation’s two segments is included below.
Additionally, pension income from the Corporation’s U.S. defined benefit plan is
approximately $738,000 and $279,000 higher for the six and three months ended
June 30, 2006, respectively, against the comparable prior year periods. The
increase is attributable primarily to a higher expected return on plan assets.
Based on recent actuarial estimates, net pension income for the year is expected
to be approximately $900,000 higher in 2006 versus 2005. Income from operations
for the six and three months ended June 30, 2005 also includes proceeds of
$2,320,000 and $1,717,000, respectively, from settlement of the Corporation’s
2004 flood-related business interruption insurance claim.
Forged
and Cast Rolls.
Sales and
operating income for the six and three months ended June 30, 2006 increased
over
the same periods of the prior year due primarily to greater demand for rolls,
particularly forged, and improved margins. Backlog approximated $409,399,000
and
$217,776,000 as of June 30, 2006 and 2005, respectively, and $275,597,000
as of
December 31, 2005. The continued increase is reflective of global demand
for
products of both the U.S. and U.K. operations with capacity for certain types
of
rolls sold out through 2008. Approximately $302,000,000 of the June 30, 2006
backlog is scheduled for shipment after 2006.
Air
and
Liquid Processing.
Sales
and operating income for the six and three months ended June 30, 2006 increased
over the same periods of the prior year due principally to higher volumes
and
elimination of operating losses at the air handling business. Although
margins remain depressed, operating results improved on the higher volumes
for
this company. Earnings for the pumps business approximated those of the
prior year while operating results for the heat-exchange coil business were
negatively impacted by product mix including a higher content of original
equipment manufacturer work. Backlog approximated $44,809,000 and
$31,758,000 as of June 30, 2006 and 2005, respectively, and $36,675,000 as
of
December 31, 2005. Approximately $6,000,000 of the June 30, 2006 backlog
is scheduled for shipment after 2006.
Other
Income (Expense).
Other
income (expense) for the six months ended June 30, 2006 and 2005 approximated
$1,081,000 and $(255,000), respectively, and $446,000 and $(108,000) for
the
three months ended June 30, 2006 and 2005, respectively. The change is due
primarily to higher interest income and gains on foreign exchange transactions
in 2006 versus losses on foreign exchange transactions in 2005. Additionally,
dividends from the Chinese cast-roll joint venture company approximated $170,000
for the six months ended June 30, 2006.
Income
Taxes.
The
effective tax rate approximated 32.4% and 23.8% for the six months ended
June
30, 2006 and 2005, respectively, and 32.0% and 20.9% for the three months
ended
June 30, 2006 and 2005, respectively. The increase is primarily attributable
to
income taxes on profitability of the U.K. operations. Although the U.K.
operations were profitable in the prior year, valuation allowances previously
provided against the deferred income tax assets attributable to net operating
loss carryforwards were released as the year progressed, when the profits
were
earned, thereby offsetting any resulting
-
16
-
income
tax
expense. Additionally, as a result of favorable earnings in 2005 and the
expectation of income in future years sufficient to utilize a portion of
the
loss carryforwards, valuation allowances previously provided against deferred
income tax assets attributable to net operating loss carryforwards of the
U.K
operation were released in the fourth quarter of 2005.
Net
Income.
As a result
of the above, the Corporation’s net income for the six months ended June 30,
2006 and 2005 equaled $12,129,000 and $4,649,000, respectively, and $6,557,000
and $3,146,000, respectively, for the three months ended June 30, 2006 and
2005.
Liquidity
and Capital Resources
Net
cash
flows provided by (used in) operating activities approximated $11,194,000
and
$(5,137,000) for the six months ended June 30, 2006 and 2005, respectively.
The
improvement is attributable primarily to higher earnings.
Net
cash
flows used in investing activities were $(8,848,000) and $(75,000) for the
six
months ended June 30, 2006 and 2005, respectively. The change is attributable
to
capital expenditures and higher net purchases of short-term marketable
securities. As of June 30, 2006, future capital expenditures totaling
approximately $4,300,000 have been approved.
Net
cash
flows used in financing activities were $(1,153,000) and $(134,000) for the
six
months ended June 30, 2006 and 2005, respectively. As of June 30, 2005, Davy
Roll had borrowings under its bank overdraft facility of $1,616,000. Dividends
were paid at a rate of $0.20 per share for each of the six month periods
and
issuance of stock under the Corporation’s stock option plan provided cash of
$807,000 and $124,000 for the respective six month periods.
The
change in
the value of local currencies against the dollar, principally the British
pound,
impacted cash and cash equivalents by $216,000 and $215,000 for the six months
ended June 30, 2006 and 2005, respectively.
As
a result
of the above, cash and cash equivalents increased $1,410,000 in 2006 and
ended
the period at $9,323,000 in comparison to $7,914,000 at December 31, 2005.
Additionally, the Corporation had investments in short-term marketable
securities of approximately $37,050,000 at June 30, 2006 versus $31,550,000
at
December 31, 2005. Funds on hand and funds generated from future operations
are
expected to be sufficient to finance the operational and capital expenditure
requirements of the Corporation. The Corporation also maintains short-term
lines
of credit and an overdraft facility in excess of the cash needs of its
businesses. The total available at June 30, 2006 was approximately $10,000,000
(including £3,000,000 in the U.K. and €400,000 in Belgium).
Litigation
and Environmental Matters
See
Notes 10
and 11 to the condensed consolidated financial statements.
Critical
Accounting Pronouncements
The
Corporation’s critical accounting policies, as summarized in its Annual Report
on Form 10-K for the year ended December 31, 2005, remain
unchanged.
-
17
-
Recently
Issued Accounting Pronouncements
See
Note 13
to the condensed consolidated financial statements.
Forward-Looking
Statements
The
Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements made by or on behalf of the Corporation. Management’s
Discussion and Analysis of Financial Condition and Results of Operations
and
other sections of the Form 10-Q contain forward-looking statements that reflect
the Corporation’s current views with respect to future events and financial
performance.
Forward-looking
statements are identified by the use of the words “believe,” “expect,”
“anticipate,” “estimate,” “projects,” “forecasts” and other expressions that
indicate future events and trends. 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 the
Corporation, these risks and uncertainties include, but are not limited to,
those described under Item 1A, Risk Factors, of Part II of this Form 10-Q.
In
addition, there may be events in the future that the Corporation is not able
to
accurately predict or control which may cause actual results to differ
materially from expectations expressed or implied by forward-looking statements.
The Corporation undertakes no obligation to update any forward-looking
statement, whether as a result of new information, events or otherwise.
ITEM
3 -
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There
were no
material changes in the Corporation’s exposure to market risk from December 31,
2005.
ITEM
4 -
CONTROLS AND PROCEDURES
(a)
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 the 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 reports that it files under the Exchange Act are recorded,
processed, summarized and reported within the required time periods. Based
on
that evaluation, the Corporation’s management, including the principal executive
officer and principal financial officer, have concluded that the Corporation’s
disclosure controls and procedures were effective as of June 30, 2006.
(c)
Changes
in internal control over financial reporting. During the quarter ended June
30,
2006, there have been no changes in our internal control over financial
reporting that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
-
18
-
PART
II - OTHER INFORMATION
AMPCO-PITTSBURGH
CORPORATION
Item
1 Legal
Proceedings
The
information contained in Note 10 to the condensed consolidated financial
statements (Litigation) is incorporated herein by reference.
Item
1A Risk
Factors
There
are no
material changes to the Risk Factors contained in Item 1A to Part I of our
Annual Report on Form 10-K for the year ended December 31, 2005 and Item
1A to
Part II of our Quarterly Report on Form 10-Q for the quarter ended March
31,
2006.
Items
2-3 None
Item
4 Submission
of Matters to a Vote of Security Holders
On
April 26,
2006 at the annual meeting of shareholders, the
following
individuals were elected directors of the
Corporation
by the following votes:
|
|
For
|
|
Withheld
|
|
|
|
|
|
|
|
Robert
A. Paul
|
|
|
9,670,505
|
|
|
6,283
|
|
Robert
J. Appel
|
|
|
9,668,405
|
|
|
8,383
|
|
William
D. Eberle
|
|
|
9,660,607
|
|
|
16,181
|
|
Paul
A.
Gould
|
|
|
9,669,605
|
|
|
7,183
|
|
Item
5 None
Item
6 Exhibits
(3) Articles
of Incorporation and By-laws
|
(a)
|
Articles
of Incorporation
|
Incorporated
by reference to the Quarterly Reports on Form 10-Q for the quarters ended
March
31, 1983, March 31, 1984, March 31, 1985, March 31, 1987 and September 30,
1998.
(b) By-laws
Incorporated
by reference to the Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994, March 31, 1996, June 30, 2001 and June 30,
2004.
(4) Instruments
defining the rights of securities holders
|
(a)
|
Rights
Agreement between Ampco-Pittsburgh Corporation and Chase Mellon
Shareholder Services dated as of September 28,
1998.
|
Incorporated
by reference to the Form 8-K Current Report dated September 28,
1998.
-
19
-
|
(31.1)
|
Certification
of the principal executive officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
(31.2)
|
Certification
of the principal financial officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
(32.1)
|
Certification
of principal executive officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
(32.2)
|
Certification
of principal financial officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
|
|
-
20
-
SIGNATURES
Pursuant
to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly
caused this report to be signed on its behalf by the undersigned thereunto
duly
authorized.
|
|
|
AMPCO-PITTSBURGH
CORPORATION
|
|
|
|
|
|
|
|
|
DATE:
August
9, 2006
|
BY:
________________________
|
|
Robert
A. Paul
|
|
Chairman
and
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
|
|
DATE:
August
9, 2006
|
BY:
_________________________
|
|
Marliss
D. Johnson
|
|
Vice
President
|
|
Controller
and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
-
21
-
AMPCO-PITTSBURGH
CORPORATION
EXHIBIT
INDEX
Exhibit
|
(31.1)
|
Certification
of principal executive officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
(31.2)
|
Certification
of principal financial officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
Exhibit
|
(32.1)
|
Certification
of principal executive officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|
|
(32.2)
|
Certification
of principal financial officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
|
|
|