Ampco-Pittsburgh(AP) - 2025 Q2 - Quarterly Report

Part I Item 1 – Financial Statements (Unaudited) The company reported a net loss in Q2 2025, primarily due to a UK operations exit charge, with increased assets and negative operating cash flow Condensed Consolidated Balance Sheets Key Balance Sheet Items (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $9,945 | $15,427 | | Total current assets | $251,204 | $236,787 | | Total assets | $537,153 | $530,896 | | Debt – current portion | $18,717 | $12,186 | | Asbestos liability (current + long-term) | $193,964 | $207,092 | | Long-term debt | $115,895 | $116,394 | | Total liabilities | $460,658 | $459,805 | | Total shareholders' equity | $76,495 | $71,091 | Condensed Consolidated Statements of Operations Q2 2025 vs Q2 2024 Performance (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total net sales | $113,104 | $110,988 | | (Loss) income from operations | $(3,078) | $5,043 | | Severance charge | $5,854 | $— | | Net (loss) income attributable to Ampco-Pittsburgh | $(7,335) | $2,012 | | Diluted (loss) income per share | $(0.36) | $0.10 | H1 2025 vs H1 2024 Performance (in thousands, except per share) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Total net sales | $217,369 | $221,203 | | Income from operations | $772 | $5,125 | | Severance charge | $5,854 | $— | | Net (loss) income attributable to Ampco-Pittsburgh | $(6,193) | $(705) | | Diluted (loss) income per share | $(0.31) | $(0.04) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash flows used in operating activities | $(7,614) | $(780) | | Net cash flows used in investing activities | $(3,014) | $(4,370) | | Net cash flows provided by financing activities | $4,374 | $5,922 | | Net (decrease) increase in cash | $(5,482) | $606 | | Cash at end of period | $9,945 | $7,892 | Notes to Condensed Consolidated Financial Statements Notes detail a $6.75 million UK exit charge, a new $100 million credit facility, ongoing asbestos litigation, and varied segment performance - The company is exiting its Union Electric Steel UK Limited (UES-UK) operations due to high energy costs, lower demand, and increased competition, resulting in a charge of approximately $6.75 million in Q2 2025[28][29] UK Operations Exit Costs (Q2 2025, in thousands) | Type of Cost | Amount | | :--- | :--- | | Employee-related costs (Severance) | $5,854 | | Accelerated depreciation | $654 | | Professional fees & Other | $242 | | Total Charge | $6,750 | - In June 2025, the company entered into a new Credit Agreement providing a $100 million revolving credit facility and $13.5 million in Equipment Term Notes, which were used to pay down the revolver[45][60] - As of June 30, 2025, the company has a recorded Asbestos Liability of $194.0 million and a corresponding insurance receivable of $130.1 million, with 6,172 total claims pending at the end of the period[92][99][100] Segment Operating (Loss) Income (in thousands) | Segment | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | FCEP | $(3,963) | $5,361 | $(58) | $6,937 | | ALP | $3,922 | $3,174 | $7,416 | $5,156 | Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2025 operating loss to the UK exit charge, impacting FCEP, while ALP improved, and liquidity is supported by a new credit facility Executive Overview and Results of Operations - The decision to exit the U.K. operations (UES-UK) was driven by high energy costs, lower demand, and increased competition, resulting in a pre-tax charge of approximately $6.75 million in Q2 2025[131][132] - The company received $735 thousand in Employee-Retention Credits during Q2 2025, which partially offset the U.K. exit charges[140] Consolidated Backlog (in thousands) | Segment | June 30, 2025 | December 31, 2024 | Change | | :--- | :--- | :--- | :--- | | FCEP | $212,429 | $250,530 | $(38,101) | | ALP | $138,837 | $128,354 | $10,483 | | Consolidated | $351,266 | $378,884 | $(27,618) | - The net loss for H1 2025 was $6.2 million, or $(0.31) per share, with the U.K. Exit Charge and Employee-Retention Credits having a net impact of $6.0 million, or $0.30 per share[150] Segment Analysis - Forged and Cast Engineered Products (FCEP): Operating loss for Q2 and H1 2025 was driven by the $6.75 million U.K. Exit Charge and unfavorable manufacturing absorption, with backlog decreasing by $38.1 million since year-end due to lower demand in Europe and customer order deferrals in the U.S.[155][156][157] - Air and Liquid Processing (ALP): Operating income improved in Q2 and H1 2025 due to favorable product mix, lower commission costs, and Employee-Retention Credits, with backlog increasing by $10.5 million since year-end due to strong order activity in the U.S. Navy, pharmaceutical, and nuclear markets[159] Non-GAAP Financial Measures Reconciliation to Adjusted EBITDA (Non-GAAP, in thousands) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (loss) income (GAAP) | $(6,720) | $2,552 | $(4,829) | $346 | | Adjustments | 11,283 | 7,195 | 11,675 | 9,123 | | Severance and other exit costs | 6,096 | - | 6,096 | - | | Employee-Retention Credits | (735) | - | (735) | - | | Adjusted EBITDA (Non-GAAP) | $7,983 | $10,129 | $16,775 | $15,227 | - The company presents non-GAAP adjusted EBITDA and adjusted income from operations to exclude one-time charges like the U.K. Exit Charge and benefits like the Employee-Retention Credits, which management believes helps identify underlying business trends[161][163] Liquidity and Capital Resources - Net cash used in operating activities increased to $7.6 million for H1 2025 from $0.8 million in H1 2024, primarily due to higher investment in working capital and higher net asbestos-related payments[168][170] - The company expects to pay the accrued severance costs of $5.9 million associated with the U.K. exit over the next 12-18 months[172] - As of June 30, 2025, the company had $34.2 million of remaining availability under its revolving credit facility, which is expected to be sufficient to finance operational requirements[179] Item 3 – Quantitative and Qualitative Disclosures About Market Risk The company indicated no applicable quantitative and qualitative disclosures about market risk for this period - The company has indicated that there are no applicable quantitative and qualitative disclosures about market risk for this reporting period[185] Item 4 – Controls and Procedures Management concluded the company's disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that the Corporation's disclosure controls and procedures were effective as of June 30, 2025[187] - There were no changes in the Corporation's internal control over financial reporting during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, its internal controls[188] Part II Item 1 – Legal Proceedings This section incorporates by reference Note 16 of the financial statements for details on ongoing asbestos-related legal proceedings - The report refers to Note 16 of the financial statements for details on legal proceedings, which covers the company's asbestos litigation[191] Item 1A – Risk Factors Updated risk factors include negative impacts from U.S. tariffs and potential disruptions and costs from internal corporate reorganizations - The imposition of U.S. tariffs on steel and aluminum has negatively affected and could continue to negatively affect operations by causing customer order deferrals and potentially making products less cost-competitive[193] - Internal corporate reorganizations, such as dissolving subsidiaries, could be disruptive, result in significant expense, and may fail to produce the intended benefits, potentially harming business and results[194] Item 5 – Other Information The company reported no other material information for the quarter, including no Rule 10b5-1 trading arrangement changes by directors or officers - No director or officer of the Corporation adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the second quarter of 2025[195] Item 6 – Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, the new credit agreement, and officer certifications - Key exhibits filed include the Second Amended and Restated Revolving Credit, Term Loan and Security Agreement dated June 25, 2025, and certifications from the Principal Executive Officer and Principal Financial Officer[197]