Ampco-Pittsburgh Corporation — 2023 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2023; the source text does not provide separate fourth-quarter financial statements. Ampco-Pittsburgh manufactures specialty metal products and customized equipment through two segments: Forged and Cast Engineered Products (FCEP) and Air and Liquid Processing (ALP).
- FCEP produces forged and cast mill rolls and forged engineered products for steel, aluminum, oil and gas, and other industrial markets.
- ALP produces heat-exchange coils, air-handling systems, and centrifugal pumps.
- The company had 1,697 active employees at year-end, with approximately 31% covered by collective bargaining agreements or works councils.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total net sales | $422.3 million | $390.2 million | +$32.2 million |
| Gross margin, excluding depreciation and amortization | 17.7% | 15.9% | +180 basis points |
| Operating income (loss) | $(34.6) million | $2.8 million | Down $37.4 million |
| Adjusted operating income (loss) | $4.2 million | $(0.2) million | Improved |
| Net income (loss) attributable to Ampco-Pittsburgh | $(39.9) million | $3.4 million | Down $43.3 million |
| Diluted earnings per share | $(2.04) | $0.18 | Down $2.22 |
| Cash flow from operating activities | $(3.7) million | $(27.2) million | Improved $23.5 million |
| Capital expenditures | $20.4 million | $16.7 million | +$3.8 million |
| Cash and cash equivalents | $7.3 million | $8.7 million | Down $1.4 million |
Operating loss included a $40.9 million net asbestos-related charge, partly offset by a $1.9 million foreign energy reimbursement. Excluding disclosed unusual items, adjusted operating income was $4.2 million. Interest expense increased to $9.3 million from $5.4 million, primarily due to higher borrowing levels, higher interest rates, and a full year of interest on financing arrangements.
Segment performance and material changes
| Segment | 2023 sales | 2022 sales | 2023 operating result | Key change |
|---|---|---|---|---|
| FCEP | $303.8 million | $299.5 million | $7.6 million income | Higher pricing and forged-roll volume offset lower FEP and cast-roll shipments. |
| ALP | $118.6 million | $90.7 million | $(29.1) million loss | Sales rose on higher volume and pricing, but results included $40.7 million of asbestos-related expense. |
- FCEP forged and cast mill-roll sales increased $29.0 million, while forged engineered-product sales declined $24.7 million.
- ALP sales increased across heat-exchange coils, air-handling systems, and centrifugal pumps.
- Year-end backlog increased to $378.9 million from $369.0 million. ALP backlog rose $14.5 million, while FCEP backlog declined $4.6 million.
- Approximately 13% of consolidated backlog was expected to be released after 2024.
- Capacity utilization remained below normal: forged-roll facilities operated at 75% to 85%, cast-roll facilities at 70% to 80%, and ALP facilities at 70% to 80%.
- Total assets increased to $565.7 million from $502.8 million, largely reflecting higher asbestos insurance receivables and capital investment. Ampco-Pittsburgh shareholders’ equity declined to $60.9 million from $104.3 million.
Liquidity, debt, and cash flow
- Total debt was $128.7 million at December 31, 2023, compared with $105.5 million a year earlier; long-term debt was $116.4 million.
- Debt included $56.0 million drawn on a $100 million asset-based revolving facility, $44.5 million of sale-and-leaseback financing obligations, $16.7 million of equipment financing, and $9.2 million of industrial revenue bonds.
- Remaining availability under the revolving credit facility was approximately $25.1 million, and equipment-financing availability was approximately $3.3 million.
- The revolving credit facility matures June 29, 2026. The company was in compliance with applicable bank covenants at year-end.
- Projected principal payments, assuming the industrial revenue bonds are called in 2024, were $12.3 million in 2024, $2.8 million in 2025, and $59.1 million in 2026.
- The company expects available cash, operating cash flow, and revolving-credit availability to fund operations, debt service, and planned capital expenditures, but emphasizes that liquidity depends on operating performance, borrowing availability, covenant compliance, and credit-market conditions.
- The company’s approximately $26 million FCEP capital program was expected to be substantially completed by March 31, 2024; remaining capital commitments were approximately $6 million at year-end.
Outlook, commentary, risks, and unusual items
- Management expected flat-to-declining North American forged-roll demand in the first half of 2024, followed by recovery in the second half. Pricing and market-share gains are expected to mitigate the decline.
- The cast-roll market was expected to remain soft in 2024 because of European economic uncertainty, low-priced Chinese imports, and elevated customer inventories.
- FEP demand remained pressured by imports and high distributor inventories.
- ALP demand and market share were described as steady or improving, although production costs and supply-chain pressures remained elevated. The company is using price increases and additional capacity to support growth.
- The asbestos liability increased to $238.7 million from $153.6 million, while related insurance receivables increased to $160.2 million from $105.9 million. The liability and insurance recoveries depend on highly judgmental assumptions regarding claim volumes, settlement values, defense costs, policy coverage, and insurer solvency.
- Asbestos-related cash payments were $10.6 million in 2023 and were expected to approximate $9.0 million in 2024, with payments continuing for the foreseeable future.
- The company’s U.K. operations entered a three-year cumulative loss position, resulting in a new tax valuation allowance and a $316,000 tax expense. Management identified a reasonable possibility that some Swedish deferred-tax valuation allowance could be released within the next 12 months if profitability continues.
- Management evaluated U.K. long-lived assets for impairment because of continuing losses and concluded that no impairment was required at December 31, 2023.
- Material risks include cyclical steel and aluminum demand, excess global steel capacity, commodity and energy costs, foreign exchange, geopolitical disruption, customer concentration, debt and covenant requirements, sale-and-leaseback obligations, labor negotiations, asbestos litigation, environmental matters, cybersecurity, and potential exchange delisting.
- The company reported no known material cybersecurity breach. Previously reported material weaknesses related to asbestos accounting and tax accounting for a non-routine transaction were reported as remediated at year-end 2023.
Investor verification points
- Verify the sustainability of the reported $4.2 million adjusted operating profit after excluding asbestos and other unusual items.
- Review the assumptions supporting the $238.7 million asbestos liability and $160.2 million insurance receivable, including policy limits, insurer solvency, and claim trends.
- Assess 2024 liquidity against the $12.3 million current debt requirement, the $59.1 million projected 2026 principal payment, interest-rate exposure, and available borrowing capacity.
- Track execution and returns from the approximately $26 million FCEP capital program.
- Monitor ALP operating performance excluding asbestos-related items and determine whether higher volume, pricing, and capacity additions offset cost inflation.
- Evaluate the sensitivity of deferred tax assets to future profitability, particularly in Sweden and the U.K.
- Consider customer concentration in FCEP, where one customer represented 11% of segment sales in 2023, and the continuing risks from European and Chinese market weakness.