Ampco-Pittsburgh Corporation (NYSE: AP) reported sales from
continuing operations of $102.5 million and $210.0 million for the
three and six months ended June 30, 2019, compared to $118.4
million and $224.8 million for the three and six months ended June
30, 2018, respectively. The decline is principally attributable to
lower sales of forged engineered products to the oil and gas
industry.
Loss from continuing operations approximated $0.7 million and
$12.6 million for the three and six months ended June 30, 2019,
respectively, compared to a loss from continuing operations of $0.2
million and $2.0 million for the same periods of the prior year.
Loss from continuing operations for the current year periods
includes expense of $1.4 million associated with a British cast
roll customer who filed for bankruptcy during the quarter (“Bad
Debt Expense”). Additionally, loss from continuing operations for
the current year-to-date period includes an impairment loss
(“Impairment Charge”) of $10.1 million associated with the
anticipated divestiture of the Corporation’s Avonmore, PA cast roll
manufacturing facility (“Avonmore”) and $1.1 million in
professional fees associated with the Corporation’s overall
restructuring plan and employee severance due to a reduction in
force (“Restructuring-Related Costs”).
Excluding the Bad Debt Expense, the Impairment Charge,
Restructuring-Related Costs, and estimated temporary excess costs
of the Avonmore facility, adjusted income from continuing
operations (non-GAAP measure) was positive at $2.6 million and $3.8
million for the three and six months ended June 30, 2019,
respectively. This reflects an improvement of $1.2 million and $1.9
million, respectively, when compared to the same periods of the
prior year, calculated on the same basis. The improvement is
principally attributable to manufacturing efficiencies, higher
pricing and lower overhead costs, partially offset by lower sales
of forged engineered products to the oil and gas industry. A
reconciliation of GAAP results to these non-GAAP measures is
provided below under “Non-GAAP Financial Measures Reconciliation
Schedule.”
Commenting on the quarter’s results, Brett McBrayer,
Ampco-Pittsburgh’s Chief Executive Officer, said, “The company
delivered positive and improved adjusted operating income from
continuing operations for the quarter, compared to both Q1 and the
prior year, despite lower forged products sales, demonstrating the
initial impact of our restructuring and operational improvement
actions. We are committed to continuing to right- size our business
operations to deliver consistent increased profitability.”
Other income (expense) for the three months ended June 30, 2019,
improved compared to the same period of the prior year, primarily
due to a $1.4 million dividend received from our cast roll Chinese
joint venture during the quarter. Despite the dividend, other
income (expense) for the six months ended June 30, 2019, declined
from the prior year period which included a $2.4 million benefit
from a contractual settlement with a third party.
Net loss from continuing operations for the three and six months
ended June 30, 2019, was $0.2 million, or $0.02 per common share,
and $12.8 million, or $1.02 per common share, respectively,
including the adverse effects of the Bad Debt Expense, the
Impairment Charge, and Restructuring-Related Costs of approximately
$0.12 and $1.00 per common share, respectively. By comparison, net
loss from continuing operations for the three months ended June 30,
2018, was $1.0 million or $0.08 per common share. Net income from
continuing operations for the six months ended June 30, 2018, was
$0.5 million or $0.04 per common share.
Segment Results
Sales from continuing operations for the Forged and Cast
Engineered Products segment for the three and six months ended June
30, 2019, declined 16% and 9%, respectively, compared to the prior
year periods, due to a lower volume of sales of forged engineered
products to the oil and gas industry. Operating results from
continuing operations for the three months ended June 30, 2019,
were approximately flat with the prior year, despite the Bad Debt
Expense recorded during the quarter. Operating results from
continuing operations for the six months ended June 30, 2019,
however, were lower than the prior year period, principally due to
the Impairment Charge recorded earlier in the year. Manufacturing
efficiencies, higher pricing and lower overhead costs helped to
offset the effect of the lower volume of forged engineered product
sales.
Sales for the Air and Liquid Processing segment for the three
and six months ended June 30, 2019, were comparable to the same
periods of the prior year. Operating income for each of the current
year periods decreased, when compared to the same periods of the
prior year, principally due to change in product mix.
Discontinued Operations
Discontinued operations represent the operating results of the
Corporation’s Canadian subsidiary, ASW Steel Inc. (“ASW”), which is
being held for sale. Loss from discontinued operations, net of tax,
for the three and six months ended June 30, 2019, was $3.4 million,
or $0.27 per common share, and $5.6 million, or $0.45 per common
share, respectively. This compares to a loss from discontinued
operations, net of tax, of $1.7 million, or $0.14 per common share,
and $1.8 million, or $0.14 per common share, respectively, for the
three and six months ended June 30, 2018. The higher losses are
primarily due to a reduction in sales resulting from lower demand
for ingot feedstock used in the production of forged engineered
products for the oil and gas industry and the impact of tariffs on
imports of primary steel into the United States, which were imposed
in June 2018. In May 2019, the tariffs were lifted.
Business Outlook
McBrayer concluded, “In line with our goal of right-sizing our
business and delivering consistent profitability, we currently
expect to close the sale of our Avonmore, Pennsylvania cast roll
plant around September 30, 2019, and anticipate that the
transaction should improve our results from continuing operations
by approximately $9.0 to $10.0 million per year. Following this
transaction and further improvement initiatives being implemented
in our businesses, we expect a marked improvement in our earnings
profile beginning as early as Q4 of this year.”
Teleconference Access
Ampco-Pittsburgh Corporation (NYSE: AP) will hold a conference
call on Friday, August 9, 2019, at 10:30 a.m. Eastern Time (ET) to
discuss its financial results for the second quarter ended June 30,
2019. The Corporation encourages participants to pre-register at
any time, including up to and after the call start time via this
link: http://dpregister.com/10133642. Those without
internet access or unable to pre-register should dial in at least
five minutes before the start time using:
- Participant Dial-in (Toll Free): 1-844-308-3408
- Participant International Dial-in: 1-412-317-5408
For those unable to listen to the live broadcast, a replay will
be available one hour after the event concludes on the
Corporation’s website under the Investors menu at
www.ampcopgh.com.
Non-GAAP Financial
Measures
The Corporation presents non-GAAP adjusted income from
continuing operations as a supplemental financial measure to GAAP
financial measures regarding the Corporation’s operational
performance. This non-GAAP financial measure excludes the Bad Debt
Expense, the Impairment Charge, the Restructuring-Related Costs,
and estimated excess costs associated with the Avonmore, PA
facility, which are not expected to continue after its sale. The
Corporation believes these costs and expenses are not indicative of
its core operating results. A reconciliation of this non-GAAP
financial measure to loss from continuing operations, the most
directly comparable GAAP financial measure, is provided below under
“Non-GAAP Financial Measures Reconciliation Schedule.”
The Corporation has presented adjusted income from continuing
operations because it is a key measure used by the Corporation’s
management and Board of Directors to understand and evaluate the
Corporation’s operating performance and to develop operational
goals for managing the business. Management believes this non-GAAP
financial measure provides useful information to investors and
others in understanding and evaluating the operating results of the
Corporation, enhancing the overall understanding of the
Corporation’s past performance and future prospects, and allowing
for greater transparency with respect to key financial metrics used
by management in its financial and operational decision-making.
Adjusted income from continuing operations should be used only as a
supplement to GAAP information, in conjunction with the
Corporation’s consolidated financial statements prepared in
accordance with GAAP, and should not be considered in isolation of,
or as an alternative to, measures prepared in accordance with GAAP.
There are limitations related to the use of non-GAAP adjusted
income from continuing operations rather than GAAP loss from
continuing operations. Among other things, estimated excess costs
of the Avonmore facility, which are excluded from the non-GAAP
financial measure, necessarily reflect judgments made by management
in allocating manufacturing and operating costs between the
Avonmore facility and the Corporation’s other operations and in
anticipating how the Corporation will conduct business following
the sale of the Avonmore facility.
Forward-Looking
Statements
Certain information presented in “Business Outlook” contains
forward-looking statements for purposes of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Actual results may vary significantly from the Corporation’s
expectations based on a number of risks and uncertainties,
including, but not limited to, the following: cyclical demand for
products and economic downturns may reduce demand for the
Corporation’s products; excess global capacity in the steel
industry could lower prices for the Corporation’s products;
economic or other factors may reduce the level of the Corporation’s
export sales; the Corporation’s profitability could be reduced by
increases in commodity prices or shortages of key production
materials; a work stoppage or similar industrial action could
disrupt the Corporation’s operations; currency fluctuations; and
proposed divestitures and restructuring activities of the
Corporation may generate greater expenses or losses or lower
savings than currently anticipated. 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. The Corporation cannot guarantee any
future results, levels of activity, performance or achievements.
Except as required by applicable law, the Corporation assumes no
obligation, and disclaims any obligation, to update forward-looking
statements whether as a result of new information, events or
otherwise.
AMPCO-PITTSBURGH
CORPORATION
FINANCIAL SUMMARY
(in thousands except per share
amounts)
Three
Months Ended June 30,
Six Months
Ended June 30,
2019
2018
2019
2018
Sales
$102,519
$118,371
$210,013
$224,786
Costs of products sold (excl. depreciation
and amortization)
84,536
98,840
174,757
186,493
Selling and administrative
13,929
14,273
27,814
29,129
Depreciation and amortization
4,650
5,448
9,909
11,048
Impairment charge
0
0
10,082
0
Loss (gain) on disposal of assets
57
(1
)
63
82
Total operating expense
103,172
118,560
222,625
226,752
Loss from continuing operations
(653
)
(189
)
(12,612
)
(1,966
)
Other income (expense) – net
1,076
(256
)
1,127
2,516
Income (loss) from continuing operations
before income taxes
423
(445
)
(11,485
)
550
Income tax provision
(644
)
(546
)
(1,287
)
(83
)
Net (loss) income from continuing
operations
(221
)
(991
)
(12,772
)
467
Loss from discontinued operations, net of
tax
(3,391
)
(1,709
)
(5,633
)
(1,778
)
Net loss
(3,612
)
(2,700
)
(18,405
)
(1,311
)
Net income attributable to noncontrolling
interest
246
294
601
742
Net loss attributable to
Ampco-Pittsburgh
$
(3,858
)
$
(2,994
)
$
(19,006
)
$
(2,053
)
Net (loss) income from continuing
operations per common share:
Basic
$
(0.02
)
$
(0.08
)
$
(1.02
)
$
0.04
Diluted
$
(0.02
)
$
(0.08
)
$
(1.02
)
$
0.04
Loss from discontinued operations, net of
tax, per common share:
Basic
$
(0.27
)
$
(0.14
)
$
(0.45
)
$
(0.14
)
Diluted
$
(0.27
)
$
(0.14
)
$
(0.45
)
$
(0.14
)
Net loss per common share attributable to
Ampco-Pittsburgh:
Basic
$
(0.31
)
$
(0.24
)
$
(1.52
)
$
(0.17
)
Diluted
$
(0.31
)
$
(0.24
)
$
(1.52
)
$
(0.17
)
Weighted-average number of common shares
outstanding:
Basic
12,576
12,439
12,537
12,401
Diluted
12,576
12,439
12,537
12,401
AMPCO-PITTSBURGH CORPORATION NON-GAAP
FINANCIAL MEASURES RECONCILIATION SCHEDULE (in thousands)
As described under “Non-GAAP Financial Measures” above, the
Corporation presents non-GAAP adjusted income from continuing
operations as a supplemental financial measure to GAAP financial
measures. The following is a reconciliation of loss from continuing
operations, the most directly comparable GAAP financial measure, to
this non-GAAP financial measure for the three and six months ended
June 30, 2019, and 2018:
Three
Months Ended June 30,
Six Months
Ended
June
30,
2019
2018
2019
2018
Loss from Continuing Operations, as
reported (GAAP)
$
(653
)
$
(189
)
$
(12,612
)
$
(1,966
)
Impairment Charge (1)
0
0
10,082
0
Restructuring-Related Costs (2)
171
0
1,092
0
Estimated excess costs of Avonmore
facility (3)
1,685
1,602
3,887
3,910
Bad Debt Expense (4)
1,366
0
1,366
0
Income from Continuing Operations, as
adjusted (Non-GAAP)
$
2,569
$
1,413
$
3,815
$
1,944
(1)
Represents an impairment charge
to record certain assets of the Avonmore facility to their
estimated net realizable value in connection with their anticipated
sale.
(2)
Represents professional fees
associated with the Corporation’s overall restructuring plan and
employee severance costs due to a reduction in force.
(3)
Represents estimated net
operating costs which are not expected to continue after the sale
of the Avonmore facility. The estimated excess costs include
judgments made by management in allocating manufacturing and
operating costs between the Avonmore facility and the Corporation’s
other operations and in anticipating how it will conduct business
following the sale of the Avonmore facility. Estimated excess costs
of the Avonmore facility will continue until the Avonmore facility
is sold and additional costs could be incurred in conjunction with
the sale.
(4)
Represents bad debt expense for a
British cast roll customer who filed for bankruptcy during the
quarter.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190809005235/en/
Michael G. McAuley Senior Vice President, Chief Financial
Officer and Treasurer (412) 429-2472
mmcauley@ampcopgh.com
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