Ampco-Pittsburgh(AP) - 2019 Q3 - Quarterly Report

Cover Page and Company Information This section provides essential filing details, company classification, and common stock information for AMPCO-PITTSBURGH CORPORATION - AMPCO-PITTSBURGH CORPORATION filed Form 10-Q for the quarterly period ended September 30, 2019[1] - The company is classified as an accelerated filer and a smaller reporting company[2] Common Stock Information | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :------------------ | :---------------- | :---------------------------------------- | | Common Stock, $1 par value | AP | New York Stock Exchange | | On November 1, 2019, 12,642,309 common shares were outstanding. | | | Part I – Financial Information This part presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures Item 1 – Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income (loss), shareholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, discontinued operations, debt, and other financial matters for the periods ended September 30, 2019, and December 31, 2018 Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and shareholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | (in thousands, except par value) Assets | September 30, 2019 | December 31, 2018 | | :----------------------------------------------------------------------------------------------------------------------- | :------------------- | :------------------ | | Current assets: | | | | Cash and cash equivalents | $ 9,829 | $ 19,713 | | Receivables, less allowance for doubtful accounts of $2,827 in 2019 and $978 in 2018 | 77,081 | 69,448 | | Inventories | 86,976 | 94,196 | | Insurance receivable – asbestos | 17,000 | 17,000 | | Other current assets | 6,687 | 7,271 | | Current assets of discontinued operations | 0 | 20,238 | | Total current assets | 197,573 | 227,866 | | Property, plant and equipment, net | 164,579 | 185,661 | | Operating lease right-of-use assets | 5,428 | 0 | | Insurance receivable – asbestos | 124,032 | 135,508 | | Deferred income tax assets | 3,075 | 3,188 | | Intangible assets, net | 7,709 | 9,225 | | Investments in joint ventures | 2,175 | 2,175 | | Other noncurrent assets | 8,942 | 7,496 | | Total assets | $ 513,513 | $ 571,119 | | Liabilities and Shareholders' Equity | | | | Current liabilities: | | | | Accounts payable | $ 36,445 | $ 38,900 | | Accrued payrolls and employee benefits | 20,244 | 20,380 | | Debt – current portion | 20,041 | 45,728 | | Operating lease liabilities – current portion | 618 | 0 | | Asbestos liability – current portion | 24,000 | 24,000 | | Other current liabilities | 28,132 | 28,987 | | Current liabilities of discontinued operations | 0 | 9,458 | | Total current liabilities | 129,480 | 167,453 | | Employee benefit obligations | 71,162 | 72,658 | | Asbestos liability | 188,953 | 203,922 | | Deferred income tax liabilities | 609 | 164 | | Long-term debt | 55,026 | 31,881 | | Noncurrent operating lease liabilities | 4,810 | 0 | | Other noncurrent liabilities | 2,258 | 2,072 | | Total liabilities | 452,298 | 478,150 | | Shareholders' equity: | | | | Common stock – par value $1; authorized 40,000 shares in 2019 and 20,000 shares in 2018; issued and outstanding 12,642 shares in 2019 and 12,495 shares in 2018 | 12,642 | 12,495 | | Additional paid-in capital | 155,955 | 154,889 | | Retained deficit | (54,416) | (30,355) | | Accumulated other comprehensive loss | (59,127) | (49,434) | | Total Ampco-Pittsburgh shareholders' equity | 55,054 | 87,595 | | Noncontrolling interest | 6,161 | 5,374 | | Total shareholders' equity | 61,215 | 92,969 | | Total liabilities and shareholders' equity | $ 513,513 | $ 571,119 | Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss from continuing and discontinued operations over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :----------------------------------------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net sales | $ 90,872 | $ 98,824 | $ 300,885 | $ 323,610 | | Operating costs and expenses: | | | | | | Costs of products sold (excluding depreciation and amortization) | 75,475 | 82,007 | 250,232 | 268,500 | | Selling and administrative | 12,365 | 13,999 | 40,179 | 43,128 | | Depreciation and amortization | 4,502 | 5,361 | 14,411 | 16,409 | | Impairment charge | 0 | 0 | 10,082 | 0 | | (Gain) loss on disposal of assets | (130) | 304 | (67) | 386 | | Total operating expenses | 92,212 | 101,671 | 314,837 | 328,423 | | Loss from continuing operations | (1,340) | (2,847) | (13,952) | (4,813) | | Other income (expense): | | | | | | Investment-related income | 19 | 433 | 1,419 | 500 | | Interest expense | (1,541) | (1,054) | (4,035) | (2,947) | | Other – net | 2,068 | 1,255 | 4,289 | 5,597 | | Total other income (expense) | 546 | 634 | 1,673 | 3,150 | | Loss from continuing operations before income taxes | (794) | (2,213) | (12,279) | (1,663) | | Income tax provision | (429) | (800) | (1,716) | (883) | | Net loss from continuing operations | (1,223) | (3,013) | (13,995) | (2,546) | | Loss from discontinued operations, net of tax | (3,398) | (3,443) | (9,031) | (5,221) | | Net loss | (4,621) | (6,456) | (23,026) | (7,767) | | Less: Net income attributable to noncontrolling interest | 434 | 583 | 1,035 | 1,325 | | Net loss attributable to Ampco-Pittsburgh | $ (5,055) | $ (7,039) | $ (24,061) | $ (9,092) | | Net loss from continuing operations per common share: | | | | | | Basic | $ (0.10) | $ (0.24) | $ (1.11) | $ (0.20) | | Diluted | $ (0.10) | $ (0.24) | $ (1.11) | $ (0.20) | | Loss from discontinued operations, net of tax, per common share: | | | | | | Basic | $ (0.27) | $ (0.28) | $ (0.72) | $ (0.42) | | Diluted | $ (0.27) | $ (0.28) | $ (0.72) | $ (0.42) | | Net loss per common share attributable to Ampco-Pittsburgh: | | | | | | Basic | $ (0.40) | $ (0.56) | $ (1.91) | $ (0.73) | | Diluted | $ (0.40) | $ (0.56) | $ (1.91) | $ (0.73) | | Weighted average number of common shares outstanding: | | | | | | Basic | 12,640 | 12,494 | 12,572 | 12,432 | | Diluted | 12,640 | 12,494 | 12,572 | 12,432 | Condensed Consolidated Statements of Comprehensive Income (Loss) This statement presents the net loss and other comprehensive income (loss) components, reflecting changes in equity not resulting from owner transactions Condensed Consolidated Statements of Comprehensive Income (Loss) (in thousands) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :------------------------------------------------------------------------------------------------------ | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net loss | $ (4,621) | $ (6,456) | $ (23,026) | $ (7,767) | | Other comprehensive loss, net of income tax where applicable: | | | | | | Adjustments for changes in: | | | | | | Foreign currency translation | (3,769) | (1,102) | (4,893) | (4,801) | | Unrecognized employee benefit costs (including effects of foreign currency translation) | (9,551) | 138 | (4,850) | 417 | | Fair value of cash flow hedges | (134) | (198) | (87) | (519) | | Reclassification adjustments for items included in net loss: | | | | | | Amortization of unrecognized employee benefit costs | 156 | (42) | (287) | 152 | | Realized losses (gains) from settlement of cash flow hedges | 53 | 46 | 176 | (255) | | Other comprehensive loss | (13,245) | (1,158) | (9,941) | (5,006) | | Comprehensive loss | (17,866) | (7,614) | (32,967) | (12,773) | | Less: Comprehensive income attributable to noncontrolling interest | 188 | 440 | 787 | 1,148 | | Comprehensive loss attributable to Ampco-Pittsburgh | $ (18,054) | $ (8,054) | $ (33,754) | $ (13,921) | Condensed Consolidated Statements of Shareholders' Equity This statement outlines changes in the company's equity accounts, including common stock, retained earnings, and comprehensive loss, over specific periods Condensed Consolidated Statements of Shareholders' Equity (in thousands) | For the three months ended September 30, 2019 | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total | | :-------------------------------------------- | :----------- | :------------------------- | :-------------------------- | :----------------------------------- | :---------------------- | :------ | | Balance July 1, 2019 | $ 12,624 | 155,644 | (49,361) | (46,128) | $ 5,973 | $ 78,752 | | Stock-based compensation | | 299 | | | | 299 | | Comprehensive income (loss): | | | | | | | | Net (loss) income | | | (5,055) | | 434 | (4,621) | | Other comprehensive loss | | | | (12,999) | (246) | (13,245) | | Comprehensive income (loss) | | | | | 188 | (17,866) | | Issuance of common stock excluding excess tax benefits of $0 | 18 | 12 | | | | 30 | | Balance September 30, 2019 | $ 12,642 | 155,955 | (54,416) | (59,127) | $ 6,161 | $ 61,215 | | | | | | | | | | For the three months ended September 30, 2018 | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total | | :-------------------------------------------- | :----------- | :------------------------- | :-------------------------- | :----------------------------------- | :---------------------- | :------ | | Balance July 1, 2018 | $ 12,491 | 154,185 | 36,926 | (49,203) | $ 3,528 | $ 157,927 | | Stock-based compensation | | 462 | | | | 462 | | Comprehensive income (loss): | | | | | | | | Net (loss) income | | | (7,039) | | 583 | (6,456) | | Other comprehensive loss | | | | (1,015) | (143) | (1,158) | | Comprehensive income (loss) | | | | | 440 | (7,614) | | Issuance of common stock excluding excess tax benefits of $0 | 4 | 3 | | | | 7 | | Other | | | 1 | | | 1 | | Balance September 30, 2018 | $ 12,495 | 154,650 | 29,888 | (50,218) | $ 3,968 | $ 150,783 | | | | | | | | | | For the nine months ended September 30, 2019 | Common Stock | Additional Paid-in Capital | Retained Earnings (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 | | 959 | | | | 959 | | Comprehensive income (loss): | | | | | | | | Net (loss) income | | | (24,061) | | 1,035 | (23,026) | | Other comprehensive loss | | | | (9,693) | (248) | (9,941) | | Comprehensive income (loss) | | | | | 787 | (32,967) | | Issuance of common stock excluding excess tax benefits of $0 | 147 | 107 | | | | 254 | | Balance September 30, 2019 | $ 12,642 | 155,955 | (54,416) | (59,127) | $ 6,161 | $ 61,215 | | | | | | | | | | For the nine months ended September 30, 2018 | Common Stock | Additional Paid-in Capital | Retained Earnings (Deficit) | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total | | :------------------------------------------- | :----------- | :------------------------- | :-------------------------- | :----------------------------------- | :---------------------- | :------ | | Balance January 1, 2018 | $ 12,361 | 152,992 | 38,980 | (45,392) | $ 2,820 | $ 161,761 | | Stock-based compensation | | 1,301 | | | | 1,301 | | Comprehensive income (loss): | | | | | | | | Net (loss) income | | | (9,092) | | 1,325 | (7,767) | | Other comprehensive loss | | | | (4,829) | (177) | (5,006) | | Comprehensive income (loss) | | | | | 1,148 | (12,773) | | Issuance of common stock excluding excess tax benefits of $0 | 134 | 357 | | | | 491 | | Other | | | | 3 | | 3 | | Balance September 30, 2018 | $ 12,495 | 154,650 | 29,888 | (50,218) | $ 3,968 | $ 150,783 | Condensed Consolidated Statements of Cash Flows This statement categorizes cash inflows and outflows from operating, investing, and financing activities for both continuing and discontinued operations Condensed Consolidated Statements of Cash Flows (in thousands) | | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :------------------------------------------------------------------------------------------------------ | :----------------------------------- | :----------------------------------- | | Net cash flows (used in) provided by operating activities - continuing operations | $ (8,194) | $ 1,555 | | Cash flows from investing activities: | | | | Purchases of property, plant and equipment | (7,156) | (7,215) | | Proceeds from sale of ASW (Note 2) | 4,292 | 0 | | Proceeds from sale of the Avonmore Plant (Note 2) | 3,700 | 0 | | Purchases of long-term marketable securities | (51) | (102) | | Proceeds from sale of long-term marketable securities | 241 | 247 | | Net cash flows provided by (used in) investing activities - continuing operations | 1,026 | (7,070) | | Cash flows from financing activities: | | | | Repayment of debt | (27,830) | (273) | | Proceeds from Revolving Credit and Security Agreement | 35,624 | 23,000 | | Payments on Revolving Credit and Security Agreement | (11,500) | (29,500) | | Proceeds from sale and leaseback financing arrangement | 0 | 19,000 | | Dividends paid | (7) | (35) | | Deferred financing costs | 0 | (477) | | Funding of discontinued operations | 1,663 | (10,069) | | Net cash flows (used in) provided by financing activities - continuing operations | (2,050) | 1,646 | | Effect of exchange rate changes on cash and cash equivalents | (666) | (785) | | Cash flows from discontinued operations: | | | | Net cash flows used in operating activities - discontinued operations | (3,803) | (9,749) | | Net cash flows used in investing activities - discontinued operations | (158) | (1,588) | | Net cash flows provided by financing activities - discontinued operations | 2,837 | 10,069 | | Net cash flows used in discontinued operations | (1,124) | (1,268) | | Net decrease in cash and cash equivalents | (11,008) | (5,922) | | Cash and cash equivalents at beginning of period | 20,837 | 20,700 | | Cash and cash equivalents at end of period | 9,829 | 14,778 | | Less: cash and cash equivalents of discontinued operations | 0 | (775) | | Cash and cash equivalents of continuing operations at end of period | $ 9,829 | $ 14,003 | | Supplemental information: | | | | Income tax payments | $ 1,021 | $ 1,126 | | Interest payments | $ 2,917 | $ 1,338 | | Non-cash investing and financing activities: | | | | Purchases of property, plant and equipment included in accounts payable | $ 1,022 | $ 1,161 | | Finance lease right-of-use assets exchanged for lease liabilities | $ 555 | $ 0 | Notes to Condensed Consolidated Financial Statements The notes provide critical context and detail for the financial statements. Key updates include the classification of ASW Steel Inc. as a discontinued operation following its sale, the adoption of new accounting standards for derivatives and leases, and the ongoing evaluation of a new credit loss impairment model. Significant events impacting the company's financial position include the sale of ASW and the Avonmore Plant, which led to impairment charges and adjustments to pension and postretirement benefits. The notes also detail the company's debt structure, derivative instruments for risk management, revenue disaggregation by geography and product line, and extensive information on asbestos litigation liabilities and related insurance recoveries - The Corporation completed the sale of its indirect subsidiary, ASW Steel Inc. ('ASW'), on September 30, 2019, classifying its operations as discontinued[17][19][20] - New accounting guidance for Leases (ASU 2016-02) became effective January 1, 2019, resulting in the recognition of a right-of-use (ROU) asset and lease liability of $5,893 thousand[17] - The Corporation recognized an impairment charge of $10,082 thousand in Q1 2019 related to the anticipated sale of the Avonmore Plant, which closed on September 30, 2019[24] ASW Discontinued Operations Financials (in thousands) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :------------------------------------------ | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net sales | $ 9,992 | $ 14,849 | $ 35,045 | $ 51,227 | | Loss from discontinued operations, net of tax | $ (3,398) | $ (3,443) | $ (9,031) | $ (5,221) | - Total assets decreased from $571,119 thousand at December 31, 2018, to $513,513 thousand at September 30, 2019, primarily due to the reclassification of ASW assets and the sale of the Avonmore Plant[6] - Total liabilities decreased from $478,150 thousand at December 31, 2018, to $452,298 thousand at September 30, 2019, with a significant reduction in current portion of debt[6] - Net loss attributable to Ampco-Pittsburgh for the nine months ended September 30, 2019, was $(24,061) thousand, compared to $(9,092) thousand for the same period in 2018[9] - The Corporation's asbestos liability reserve at September 30, 2019, was $212,953 thousand, with a corresponding insurance receivable of $141,032 thousand, estimated through 2052[71] Net Sales by Geographic Area (in thousands) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :-------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | United States | $ 45,997 | $ 50,756 | $ 144,895 | $ 166,118 | | Foreign | 44,875 | 48,068 | 155,990 | 157,492 | | Total | $ 90,872 | $ 98,824 | $ 300,885 | $ 323,610 | Net Sales by Product Line (in thousands) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Forged and cast mill rolls | $ 63,743 | $ 64,983 | $ 214,075 | $ 207,398 | | Forged engineered products | 3,709 | 9,715 | 17,224 | 46,476 | | Heat exchange coils | 6,586 | 7,132 | 20,397 | 20,858 | | Centrifugal pumps | 9,202 | 9,790 | 27,272 | 27,554 | | Air handling systems | 7,632 | 7,204 | 21,917 | 21,324 | | Total | $ 90,872 | $ 98,824 | $ 300,885 | $ 323,610 | Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management's Discussion and Analysis (MD&A) provides an overview of the company's financial performance, focusing on continuing operations for the three and nine months ended September 30, 2019, compared to 2018. It highlights the strategic divestiture of ASW Steel Inc. and the Avonmore Plant, discussing their impact on segment results and overall financial condition. The section details changes in net sales, operating expenses, and net loss, attributing fluctuations to market conditions, restructuring efforts, and specific charges like impairment and bad debt. It also introduces non-GAAP financial measures for adjusted operating performance and assesses the company's liquidity and capital resources Forward-Looking Statements This section outlines the company's forward-looking statements and the inherent risks and uncertainties that could impact future performance - The section includes forward-looking statements under the Private Securities Litigation Reform Act of 1995, covering operating performance, sales, divestitures, restructuring, profitability, and anticipated expenses and cash outflows[80] - Key risks and uncertainties include cyclical demand, economic downturns, excess global capacity in the steel industry, commodity price increases, work stoppages, currency fluctuations, and the inability to successfully restructure operations[80] Executive Overview This overview introduces Ampco-Pittsburgh Corporation's core business of manufacturing specialty metal products and customized equipment across its two main segments - Ampco-Pittsburgh Corporation manufactures and sells highly engineered, high-performance specialty metal products and customized equipment globally[81] - The company operates in two business segments: Forged and Cast Engineered Products, and Air and Liquid Processing[81] Forged and Cast Engineered Products This segment's overview details the strategic divestiture of ASW Steel Inc. and the Avonmore Plant, along with market conditions for its forged and cast products - The sale of ASW Steel Inc. on September 30, 2019, is a strategic shift accounted for as a discontinued operation, resulting in losses of $9,031 thousand for the nine months ended September 30, 2019[82] - The segment produces forged hardened steel rolls, cast rolls, and open-die forged products, with operations in the United States, England, Sweden, Slovenia, and equity interests in three joint ventures in China[82] - The Avonmore Plant was sold on September 30, 2019, following an impairment charge of $10,082 thousand in Q1 2019, aimed at mitigating excess capacity and high operating costs in cast roll operations[83][84] - Roll market conditions in the United States and Europe have softened due to slowdowns in the automotive and industrial markets, though recent indicators suggest stabilization and improving steel prices; demand in the oil and gas market remains weak[84] Air and Liquid Processing This segment focuses on custom-engineered heat exchange coils, air handling systems, and centrifugal pumps, detailing market trends and strategic growth initiatives - This segment comprises Aerofin (custom-engineered finned tube heat exchange coils), Buffalo Air Handling (large custom-designed air handling systems), and Buffalo Pumps (centrifugal pumps)[85] - The heat exchanger business is benefiting from increased commercial market activity despite lower industrial OEM activity; custom air handling demand is steady amidst competitive pricing; specialty centrifugal pumps are negatively impacted by a decline in fossil-fueled power generation, partially offset by increased marine defense activity[85] - The segment's strategic focus is to grow revenues, increase margins, strengthen engineering and manufacturing capabilities, enhance manufacturing productivity, and continuously improve the sales distribution network[85] Consolidated Results from Continuing Operations This section analyzes the company's net sales, operating expenses, and net loss from continuing operations, highlighting factors like backlog, cost of sales, and specific charges Net Sales (in thousands) | Period | 2019 | 2018 | Change (YoY) | | :------------------------------------ | :------- | :------- | :----------- | | Three Months Ended September 30 | $90,872 | $98,824 | -8.05% | | Nine Months Ended September 30 | $300,885 | $323,610 | -7.03% | - Backlog approximated $335,119 thousand at September 30, 2019, a decrease from $343,079 thousand at December 31, 2018, and $354,225 thousand at September 30, 2018[86] - Costs of products sold as a percentage of net sales were comparable year-over-year; the Forged and Cast Engineered Products segment improved by approximately 100 basis points due to higher pricing and improved efficiencies, while the Air & Liquid Processing segment saw an increase due to changes in product mix[87] - Selling and administrative expenses decreased due to lower commissions, the sale of the Vertical Seal division, reduced employee-related costs, and lower professional fees (quarter-over-quarter), partially offset by higher year-to-date professional fees and a $1,366 thousand bad debt expense[88][89] - Depreciation and amortization decreased due to the sale of the Vertical Seal division of ANR and the cessation of depreciation at Avonmore following the write-down of assets[91] - An impairment charge of $10,082 thousand was recognized in the first quarter of 2019 for the write-down of the Avonmore Plant[92] Loss from Continuing Operations (in thousands) | Period | 2019 | 2018 | Change (YoY) | | :------------------------------------ | :--------- | :--------- | :----------- | | Three Months Ended September 30 | $ (1,340) | $ (2,847) | -52.90% | | Nine Months Ended September 30 | $ (13,952) | $ (4,813) | +189.88% | - The nine-month loss includes a $1,366 thousand bad debt expense, the $10,082 thousand impairment charge, and $1,653 thousand in restructuring-related costs[93] - Investment-related income fluctuated due to the timing and amount of a dividend received from the Chinese joint venture ($1,400 thousand in Q2 2019 vs. $400 thousand in Q3 2018)[95] - Interest expense increased due to interest on the sale and leaseback financing transaction completed in September 2018, partially offset by lower interest on promissory notes repaid in March 2019[96] - Other income (expense) – net for the three and nine months ended September 30, 2019, includes a net gain of $2,304 thousand from the curtailment of defined benefit pension and other postretirement plans and special termination benefits related to the Avonmore Plant sale[97][98] - Income tax provision for Q3 2019 was $(429) thousand, compared to $(800) thousand in Q3 2018; for the nine months, it was $(1,716) thousand in 2019 vs. $(883) thousand in 2018, with no tax benefit on losses for certain entities due to their three-year cumulative loss position[99] Net sales and operating results by segment This section provides a detailed breakdown of net sales and operating income (loss) for the Forged and Cast Engineered Products and Air and Liquid Processing segments Segment Net Sales (in thousands) | Segment | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :---------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Forged and Cast Engineered Products | $ 67,452 | $ 74,698 | $ 231,299 | $ 253,874 | | Air and Liquid Processing | 23,420 | 24,126 | 69,586 | 69,736 | | Total Reportable Segments | $ 90,872 | $ 98,824 | $ 300,885 | $ 323,610 | Segment (Loss) Income from Continuing Operations Before Income Taxes (in thousands) | Segment | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :---------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Forged and Cast Engineered Products | $ (437) | $ (1,557) | $ (10,640) | $ (1,382) | | Air and Liquid Processing | 2,280 | 2,965 | 7,371 | 8,972 | | Total Reportable Segments | 1,843 | 1,408 | (3,269) | 7,590 | | Other expense, including corporate costs | (2,637) | (3,621) | (9,010) | (9,253) | | Total | $ (794) | $ (2,213) | $ (12,279) | $ (1,663) | - Forged and Cast Engineered Products sales decreased due to lower volume and weaker pricing for Forged Engineered Products (FEP) and negative foreign exchange rates; operating results improved quarter-over-quarter due to lower ANR losses and better mill roll pricing, but decreased year-to-date due to impairment, bad debt, and restructuring costs[94] - Forged and Cast Engineered Products backlog was $282,298 thousand at September 30, 2019, down from $304,790 thousand a year prior, primarily due to reduced demand for FEP and negative foreign exchange impacts[94] - Air and Liquid Processing net sales were relatively comparable year-over-year; operating income decreased by 23% (three months) and 18% (nine months) due to product mix changes, lower commercial pump shipments, and lower heat exchange coil order intake[94] - Air and Liquid Processing backlog increased to $52,821 thousand at September 30, 2019, from $44,356 thousand at December 31, 2018, mainly driven by orders for U.S. Navy shipbuilders[94] Non-GAAP Financial Measures This section presents non-GAAP adjusted financial measures, excluding specific charges, to provide a clearer view of underlying operating performance - The company presents non-GAAP adjusted (loss) income from continuing operations, excluding the Impairment Charge, Restructuring-Related Costs, estimated temporary Excess Costs of Avonmore, and Bad Debt Expense[101] - This non-GAAP measure is used by management and the Board to evaluate operating performance and develop goals, as it excludes one-time or uncontrollable charges to highlight underlying business trends[101] Reconciliation of GAAP Loss to Non-GAAP Adjusted (Loss) Income from Continuing Operations (in thousands) | | Three Months Ended September 30, 2019 | Three Months Ended September 30, 2018 | Nine Months Ended September 30, 2019 | Nine Months Ended September 30, 2018 | | :----------------------------------------------------------------- | :------------------------------------ | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Loss from continuing operations, as reported (GAAP) | $ (1,340) | $ (2,847) | $ (13,952) | $ (4,813) | | Impairment Charge (1) | 0 | 0 | 10,082 | 0 | | Restructuring-Related Costs (2) | 561 | 379 | 1,653 | 379 | | Excess Costs of Avonmore (3) | 685 | 1,750 | 4,572 | 5,660 | | Bad Debt Expense (4) | 0 | 0 | 1,366 | 0 | | (Loss) income from continuing operations, as adjusted (Non-GAAP) | $ (94) | $ (718) | $ 3,721 | $ 1,226 | Results from Discontinued Operations This section details the financial performance of discontinued operations, primarily ASW, highlighting factors contributing to its losses - Loss from discontinued operations (ASW) was higher in the current year-to-date period primarily due to lower demand for ingot feedstock and the impact of tariffs that began in September 2018[105] Liquidity and Capital Resources This section assesses the company's cash flows from operating, investing, and financing activities, along with its cash position and available credit - Net cash flows from operating activities for continuing operations fluctuated due to additional investment in trade working capital, including increased accounts receivable, reduced inventory, and decreased accounts payable[106] - Net cash flows from investing activities for continuing operations included proceeds of $4,292 thousand from the sale of ASW and $3,700 thousand from the sale of the Avonmore Plant[107] - Net cash flows from financing activities fluctuated as a result of debt repayment ($26,474 thousand for promissory notes), revolving credit facility activity, and the 2018 sale and leaseback transaction ($19,000 thousand)[107] - Cash and cash equivalents decreased by $9,884 thousand in 2019, ending at $9,829 thousand, with the majority held by foreign operations; remaining availability under the revolving credit facility was approximately $21,000 thousand[107] Litigation and Environmental Matters This section directs readers to the detailed disclosures on legal proceedings and environmental issues within the financial statement notes - Refer to Notes 15 and 16 to the condensed consolidated financial statements for detailed information on litigation and environmental matters[108] Critical Accounting Pronouncements This section confirms that the company's critical accounting policies remain consistent with those outlined in its previous annual report - The Corporation's critical accounting policies remain unchanged from its Annual Report on Form 10-K for the year ended December 31, 2018[109] Recently Issued Accounting Pronouncements This section refers to Note 1 of the financial statements for details on recently adopted or issued accounting standards - Refer to Note 1 to the condensed consolidated financial statements for information on recently issued accounting pronouncements[110] Item 3 – Quantitative and Qualitative Disclosures About Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the reporting period - This item is not applicable for the current reporting period[111] Item 4 – Controls and Procedures The company's management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective as of September 30, 2019. No material changes in internal control over financial reporting were identified during the last fiscal quarter - The Corporation's disclosure controls and procedures were evaluated and deemed effective as of September 30, 2019[112] - No material changes in internal control over financial reporting were identified during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[112] Part II – Other Information This part includes disclosures on legal proceedings, risk factors, and a comprehensive list of exhibits filed with the report Item 1 Legal Proceedings This section incorporates by reference the detailed information on legal proceedings, including asbestos litigation, provided in Note 15 to the condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 15 to the condensed consolidated financial statements[114] Item 1A Risk Factors This section states that there are no material changes to the risk factors previously disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2018 - No material changes to the Risk Factors contained in Item 1A of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2018[115] Item 6 Exhibits This section lists the exhibits filed with the Form 10-Q, including the Purchase Agreement for ASW Steel Inc., a Consent, Release and Amendment related to the credit agreement, and certifications from the Principal Executive and Financial Officers List of Exhibits | Exhibit | Description | | :------ | :---------- | | (2.1) | Purchase Agreement, dated September 30, 2019, by and among Ampco UES Sub, Inc., ASW Steel Inc., Valbruna Canada Ltd. and Ampco-Pittsburgh Corporation. | | (10.1) | Consent, Release and Amendment, dated September 30, 2019, by and among Ampco-Pittsburgh Corporation and PNC Bank, National Association, as administrative agent, and certain borrowers, guarantors and the other agents party thereto. | | (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. | | (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. | | (101) | Interactive Data File (XBRL). | Signatures This section provides the official signatures of the principal executive and financial officers, certifying the accuracy of the report - The report is signed by J. Brett McBrayer, Director and Chief Executive Officer, and Michael G. McAuley, Senior Vice President, Chief Financial Officer and Treasurer, on November 8, 2019[117]