UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2024
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
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Pennsylvania |
25-1117717 |
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(State of Incorporation) |
(I.R.S. Employer Identification No.) |
726 Bell Avenue, Suite 301
Carnegie, Pennsylvania 15106
(Address of principal executive offices)
(412) 456-4400
(Registrant’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $1 par value |
AP |
New York Stock Exchange |
Series A Warrants to purchase shares of Common Stock |
AP WS |
NYSE American Exchange |
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Emerging growth company |
☐ |
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Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
On August 7, 2024, 20,094,289 common shares were outstanding.
AMPCO-PITTSBURGH CORPORATION
INDEX
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Page No. |
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Part I – |
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Financial Information: |
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Item 1 – |
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Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets – June 30, 2024 and December 31, 2023 |
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3 |
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Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2024 and 2023 |
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4 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) – Three and Six Months Ended June 30, 2024 and 2023
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2024 and 2023 |
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7 |
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8 |
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Item 2 – |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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22 |
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Item 3 – |
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30 |
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Item 4 – |
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30 |
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Part II – |
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Other Information: |
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Item 1 – |
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31 |
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Item 1A – |
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31 |
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Item 5 – |
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31 |
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Item 6 – |
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33 |
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34 |
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2
PART I – FINANCIAL INFORMATION
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, except par value)
|
|
June 30, 2024 |
|
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December 31, 2023 |
|
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Assets |
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Current assets: |
|
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Cash and cash equivalents |
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$ |
7,892 |
|
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$ |
7,286 |
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Trade receivables, less allowance for credit losses of $920 as of June 30, 2024 and |
|
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83,974 |
|
|
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78,939 |
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Trade receivables from related parties |
|
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4,795 |
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|
|
912 |
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Inventories |
|
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119,816 |
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|
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124,694 |
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Insurance receivable – asbestos |
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15,000 |
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15,000 |
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Contract assets |
|
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9,228 |
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4,452 |
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Other current assets |
|
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6,679 |
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|
5,370 |
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Total current assets |
|
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247,384 |
|
|
|
236,653 |
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Property, plant and equipment, net |
|
|
153,127 |
|
|
|
158,732 |
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Operating lease right-of-use assets |
|
|
4,668 |
|
|
|
4,767 |
|
Insurance receivable – asbestos, less allowance for credit losses of $708 as of |
|
|
136,050 |
|
|
|
145,245 |
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Deferred income tax assets |
|
|
3,160 |
|
|
|
3,160 |
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Intangible assets, net |
|
|
4,574 |
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|
4,947 |
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Investments in joint ventures |
|
|
2,175 |
|
|
|
2,175 |
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Prepaid pensions |
|
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5,049 |
|
|
|
4,951 |
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Other noncurrent assets |
|
|
4,619 |
|
|
|
5,024 |
|
Total assets |
|
$ |
560,806 |
|
|
$ |
565,654 |
|
Liabilities and Shareholders’ Equity |
|
|
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|
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Current liabilities: |
|
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Accounts payable |
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$ |
40,212 |
|
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$ |
36,830 |
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Accounts payable to related parties |
|
|
1,200 |
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|
|
401 |
|
Accrued payrolls and employee benefits |
|
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13,913 |
|
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|
14,703 |
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Debt – current portion |
|
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15,886 |
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|
12,271 |
|
Operating lease liabilities – current portion |
|
|
962 |
|
|
|
946 |
|
Asbestos liability – current portion |
|
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24,000 |
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|
|
24,000 |
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Other current liabilities |
|
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28,676 |
|
|
|
27,734 |
|
Total current liabilities |
|
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124,849 |
|
|
|
116,885 |
|
Employee benefit obligations |
|
|
35,810 |
|
|
|
41,684 |
|
Asbestos liability |
|
|
202,836 |
|
|
|
214,679 |
|
Long-term debt |
|
|
119,355 |
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|
|
116,382 |
|
Noncurrent operating lease liabilities |
|
|
3,706 |
|
|
|
3,822 |
|
Deferred income tax liabilities |
|
|
379 |
|
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|
543 |
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Other noncurrent liabilities |
|
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4,412 |
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|
|
88 |
|
Total liabilities |
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491,347 |
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|
494,083 |
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Commitments and contingent liabilities (Note 8) |
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Shareholders’ equity: |
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Common stock – par value $1; authorized 40,000 shares; issued and outstanding |
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19,980 |
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19,729 |
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Additional paid-in capital |
|
|
177,554 |
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|
177,196 |
|
Retained deficit |
|
|
(73,702 |
) |
|
|
(72,997 |
) |
Accumulated other comprehensive loss |
|
|
(65,783 |
) |
|
|
(62,989 |
) |
Total Ampco-Pittsburgh shareholders’ equity |
|
|
58,049 |
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60,939 |
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Noncontrolling interest |
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11,410 |
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10,632 |
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Total shareholders’ equity |
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69,459 |
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|
71,571 |
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Total liabilities and shareholders’ equity |
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$ |
560,806 |
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$ |
565,654 |
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See Notes to Condensed Consolidated Financial Statements.
3
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share amounts)
|
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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||||||||||
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales: |
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Net sales |
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$ |
107,053 |
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$ |
106,908 |
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$ |
213,030 |
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$ |
209,291 |
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Net sales to related parties |
|
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3,935 |
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|
303 |
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8,173 |
|
|
|
2,723 |
|
Total net sales |
|
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110,988 |
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|
|
107,211 |
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221,203 |
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212,014 |
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Operating costs and expenses: |
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Costs of products sold (excluding depreciation and amortization) |
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87,684 |
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85,471 |
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180,174 |
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171,843 |
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Selling and administrative |
|
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13,550 |
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14,093 |
|
|
|
26,523 |
|
|
|
26,280 |
|
Depreciation and amortization |
|
|
4,698 |
|
|
|
4,354 |
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|
|
9,368 |
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|
8,728 |
|
Loss (gain) on disposal of assets |
|
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13 |
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5 |
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|
13 |
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(118 |
) |
Total operating costs and expenses |
|
|
105,945 |
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|
103,923 |
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|
|
216,078 |
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206,733 |
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Income from operations |
|
|
5,043 |
|
|
|
3,288 |
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|
|
5,125 |
|
|
|
5,281 |
|
Other expense - net: |
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Investment-related income |
|
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8 |
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7 |
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27 |
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16 |
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Interest expense |
|
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(3,017 |
) |
|
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(2,245 |
) |
|
|
(5,774 |
) |
|
|
(4,316 |
) |
Other income – net |
|
|
1,381 |
|
|
|
98 |
|
|
|
2,285 |
|
|
|
1,465 |
|
Total other expense - net |
|
|
(1,628 |
) |
|
|
(2,140 |
) |
|
|
(3,462 |
) |
|
|
(2,835 |
) |
Income before income taxes |
|
|
3,415 |
|
|
|
1,148 |
|
|
|
1,663 |
|
|
|
2,446 |
|
Income tax provision |
|
|
(863 |
) |
|
|
(152 |
) |
|
|
(1,317 |
) |
|
|
(465 |
) |
Net income |
|
|
2,552 |
|
|
|
996 |
|
|
|
346 |
|
|
|
1,981 |
|
Less: Net income attributable to noncontrolling interest |
|
|
540 |
|
|
|
573 |
|
|
|
1,051 |
|
|
|
882 |
|
Net income (loss) attributable to Ampco-Pittsburgh |
|
$ |
2,012 |
|
|
$ |
423 |
|
|
$ |
(705 |
) |
|
$ |
1,099 |
|
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Net income (loss) per share attributable to Ampco- |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.10 |
|
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.06 |
|
Diluted |
|
$ |
0.10 |
|
|
$ |
0.02 |
|
|
$ |
(0.04 |
) |
|
$ |
0.06 |
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Weighted-average number of common shares outstanding: |
|
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|
|
|
|
|
|
|
|
|
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||||
Basic |
|
|
19,859 |
|
|
|
19,541 |
|
|
|
19,794 |
|
|
|
19,504 |
|
Diluted |
|
|
19,875 |
|
|
|
19,590 |
|
|
|
19,794 |
|
|
|
19,587 |
|
See Notes to Condensed Consolidated Financial Statements.
4
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(in thousands)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net income |
|
$ |
2,552 |
|
|
$ |
996 |
|
|
$ |
346 |
|
|
$ |
1,981 |
|
Other comprehensive (loss) income, net of income tax where applicable: |
|
|
|
|
|
|
|
|
|
|
|
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Adjustments for changes in: |
|
|
|
|
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Foreign currency translation |
|
|
(277 |
) |
|
|
(875 |
) |
|
|
(2,722 |
) |
|
|
1,037 |
|
Unrecognized employee benefit costs (including effects of foreign currency translation) |
|
|
(24 |
) |
|
|
13 |
|
|
|
69 |
|
|
|
(136 |
) |
Fair value of cash flow hedges |
|
|
158 |
|
|
|
(278 |
) |
|
|
210 |
|
|
|
(100 |
) |
Reclassification adjustments for items included in net income: |
|
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|
|
|
|
|
|
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|
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Amortization of unrecognized employee benefit costs |
|
|
(174 |
) |
|
|
(298 |
) |
|
|
(357 |
) |
|
|
(493 |
) |
Settlements of cash flow hedges |
|
|
(278 |
) |
|
|
(73 |
) |
|
|
(267 |
) |
|
|
(187 |
) |
Other comprehensive (loss) income |
|
|
(595 |
) |
|
|
(1,511 |
) |
|
|
(3,067 |
) |
|
|
121 |
|
Comprehensive income (loss) |
|
|
1,957 |
|
|
|
(515 |
) |
|
|
(2,721 |
) |
|
|
2,102 |
|
Less: Comprehensive income attributable to noncontrolling interest |
|
|
471 |
|
|
|
56 |
|
|
|
778 |
|
|
|
404 |
|
Comprehensive income (loss) attributable to Ampco-Pittsburgh |
|
$ |
1,486 |
|
|
$ |
(571 |
) |
|
$ |
(3,499 |
) |
|
$ |
1,698 |
|
See Notes to Condensed Consolidated Financial Statements.
5
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(UNAUDITED)
(in thousands)
Three Months Ended June 30, 2024 |
|
Common |
|
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Additional |
|
|
Retained |
|
|
Accumulated |
|
|
Noncontrolling |
|
|
Total |
|
||||||
Balance at April 1, 2024 |
|
$ |
19,729 |
|
|
$ |
177,542 |
|
|
$ |
(75,714 |
) |
|
$ |
(65,257 |
) |
|
$ |
10,939 |
|
|
$ |
67,239 |
|
Stock-based compensation |
|
|
|
|
|
388 |
|
|
|
|
|
|
|
|
|
|
|
|
388 |
|
||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
|
|
|
|
|
|
|
|
2,012 |
|
|
|
|
|
|
540 |
|
|
|
2,552 |
|
|||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
(526 |
) |
|
|
(69 |
) |
|
|
(595 |
) |
|||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
471 |
|
|
|
1,957 |
|
||||
Issuance of common stock excluding excess tax benefits of $0 |
|
|
251 |
|
|
|
(376 |
) |
|
|
|
|
|
|
|
|
|
|
|
(125 |
) |
|||
Balance at June 30, 2024 |
|
$ |
19,980 |
|
|
$ |
177,554 |
|
|
$ |
(73,702 |
) |
|
$ |
(65,783 |
) |
|
$ |
11,410 |
|
|
$ |
69,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Three Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at April 1, 2023 |
|
$ |
19,404 |
|
|
$ |
176,283 |
|
|
$ |
(32,393 |
) |
|
$ |
(56,819 |
) |
|
$ |
9,418 |
|
|
$ |
115,893 |
|
Stock-based compensation |
|
|
|
|
|
483 |
|
|
|
|
|
|
|
|
|
|
|
|
483 |
|
||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
|
|
|
|
|
|
|
|
423 |
|
|
|
|
|
|
573 |
|
|
|
996 |
|
|||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
(994 |
) |
|
|
(517 |
) |
|
|
(1,511 |
) |
|||
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56 |
|
|
|
(515 |
) |
||||
Issuance of common stock excluding excess tax benefits of $0 |
|
|
325 |
|
|
|
(606 |
) |
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|||
Balance at June 30, 2023 |
|
$ |
19,729 |
|
|
$ |
176,160 |
|
|
$ |
(31,970 |
) |
|
$ |
(57,813 |
) |
|
$ |
9,474 |
|
|
$ |
115,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at January 1, 2024 |
|
$ |
19,729 |
|
|
$ |
177,196 |
|
|
$ |
(72,997 |
) |
|
$ |
(62,989 |
) |
|
$ |
10,632 |
|
|
$ |
71,571 |
|
Stock-based compensation |
|
|
|
|
|
734 |
|
|
|
|
|
|
|
|
|
|
|
|
734 |
|
||||
Comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net (loss) income |
|
|
|
|
|
|
|
|
(705 |
) |
|
|
|
|
|
1,051 |
|
|
|
346 |
|
|||
Other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
(2,794 |
) |
|
|
(273 |
) |
|
|
(3,067 |
) |
|||
Comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
778 |
|
|
|
(2,721 |
) |
||||
Issuance of common stock excluding excess tax benefits of $0 |
|
|
251 |
|
|
|
(376 |
) |
|
|
|
|
|
|
|
|
|
|
|
(125 |
) |
|||
Balance at June 30, 2024 |
|
$ |
19,980 |
|
|
$ |
177,554 |
|
|
$ |
(73,702 |
) |
|
$ |
(65,783 |
) |
|
$ |
11,410 |
|
|
$ |
69,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2023: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at January 1, 2023 |
|
$ |
19,404 |
|
|
$ |
175,656 |
|
|
$ |
(33,069 |
) |
|
$ |
(58,412 |
) |
|
$ |
9,070 |
|
|
$ |
112,649 |
|
Stock-based compensation |
|
|
|
|
|
1,110 |
|
|
|
|
|
|
|
|
|
|
|
|
1,110 |
|
||||
Comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income |
|
|
|
|
|
|
|
|
1,099 |
|
|
|
|
|
|
882 |
|
|
|
1,981 |
|
|||
Other comprehensive income (loss) |
|
|
|
|
|
|
|
|
|
|
|
599 |
|
|
|
(478 |
) |
|
|
121 |
|
|||
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404 |
|
|
|
2,102 |
|
||||
Issuance of common stock excluding excess tax benefits of $0 |
|
|
325 |
|
|
|
(606 |
) |
|
|
|
|
|
|
|
|
|
|
|
(281 |
) |
|||
Balance at June 30, 2023 |
|
$ |
19,729 |
|
|
$ |
176,160 |
|
|
$ |
(31,970 |
) |
|
$ |
(57,813 |
) |
|
$ |
9,474 |
|
|
$ |
115,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
See Notes to Condensed Consolidated Financial Statements.
6
S
AMPCO-PITTSBURGH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net cash flows used in operating activities |
|
$ |
(780 |
) |
|
$ |
(7,105 |
) |
|
|
|
|
|
|
|
||
Cash flows used in investing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment |
|
|
(5,510 |
) |
|
|
(10,005 |
) |
Proceeds from government grants, used for purchase of equipment |
|
|
808 |
|
|
|
- |
|
Proceeds from sale of property, plant and equipment |
|
|
10 |
|
|
|
128 |
|
Purchases of long-term marketable securities |
|
|
(210 |
) |
|
|
(67 |
) |
Proceeds from sale of long-term marketable securities |
|
|
532 |
|
|
|
384 |
|
Net cash flows used in investing activities |
|
|
(4,370 |
) |
|
|
(9,560 |
) |
|
|
|
|
|
|
|
||
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from revolving credit facility |
|
|
16,172 |
|
|
|
20,154 |
|
Payments on revolving credit facility |
|
|
(10,276 |
) |
|
|
(9,128 |
) |
Proceeds from sale and leaseback financing arrangements |
|
|
- |
|
|
|
2,500 |
|
Payments on sale and leaseback financing arrangements |
|
|
(174 |
) |
|
|
(132 |
) |
Proceeds from equipment financing facility |
|
|
1,692 |
|
|
|
4,207 |
|
Proceeds from related-party debt |
|
|
- |
|
|
|
669 |
|
Repayment of related-party debt |
|
|
(664 |
) |
|
|
(669 |
) |
Repayments of debt |
|
|
(828 |
) |
|
|
(197 |
) |
Net cash flows provided by financing activities |
|
|
5,922 |
|
|
|
17,404 |
|
|
|
|
|
|
|
|
||
Effect of exchange rate changes on cash and cash equivalents |
|
|
(166 |
) |
|
|
1 |
|
|
|
|
|
|
|
|
||
Net increase in cash and cash equivalents |
|
|
606 |
|
|
|
740 |
|
Cash and cash equivalents at beginning of period |
|
|
7,286 |
|
|
|
8,735 |
|
Cash and cash equivalents at end of period |
|
$ |
7,892 |
|
|
$ |
9,475 |
|
|
|
|
|
|
|
|
||
Supplemental information: |
|
|
|
|
|
|
||
Income tax payments (net of refunds) |
|
$ |
1,610 |
|
|
$ |
1,478 |
|
Interest payments (net of amounts capitalized) |
|
$ |
5,024 |
|
|
$ |
3,580 |
|
|
|
|
|
|
|
|
||
Non-cash investing and financing activities: |
|
|
|
|
|
|
||
Purchases of property, plant and equipment in current liabilities |
|
$ |
1,306 |
|
|
$ |
1,899 |
|
Finance lease right-of-use assets exchanged for lease liabilities |
|
$ |
146 |
|
|
$ |
- |
|
Operating lease right-of-use assets exchanged for lease liabilities |
|
$ |
283 |
|
|
$ |
394 |
|
See Notes to Condensed Consolidated Financial Statements.
7
AMPCO-PITTSBURGH CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(in thousands, except per share amounts)
Overview of the Business
Ampco-Pittsburgh Corporation (the “Corporation”) manufactures and sells highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing (“ALP”) segment. This segment presentation is consistent with how the Corporation’s chief operating decision-maker evaluates financial performance and makes resource allocation and strategic decisions about the business (Note 18).
Note 1 – Unaudited Condensed Consolidated Financial Statements
The unaudited condensed consolidated balance sheet as of June 30, 2024 and the unaudited condensed consolidated statements of operations, comprehensive income (loss) and shareholders’ equity for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023 have been prepared by the Corporation. 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 three and six months ended June 30, 2024 are not necessarily indicative of the operating results expected for the full year.
Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Corporation’s latest Annual Report on Form 10-K.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures. The guidance requires disclosure of significant reportable segment expenses regularly provided to the chief operating decision-maker and included within each reported measure of a segment’s profit or loss. The guidance also requires disclosure of the title and position of the individual identified as the chief operating decision-maker and an explanation of how the chief operating decision-maker uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The guidance does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The guidance became effective for the Corporation’s annual period beginning January 1, 2024 and interim periods beginning January 1, 2025. The Corporation is currently evaluating the impact this new standard will have on its annual disclosures in its consolidated financial statements for the year ending December 31, 2024 and interim disclosures thereafter. It will not, however, impact the Corporation’s consolidated financial position, results of operations or cash flows.
In December 2023, the FASB issued ASU 2023-09, Income Taxes - Improvements to Income Tax Disclosures. The guidance requires annual disclosure of specific categories of information within the effective tax rate reconciliation, and income taxes paid and income tax expense disaggregated by jurisdiction. The guidance becomes effective for the Corporation’s annual period beginning January 1, 2025. Early adoption is permitted. The Corporation is currently evaluating the impact this new standard will have on its annual disclosures. It will not, however, impact the Corporation’s consolidated financial position, results of operations or cash flows.
Note 2 – Inventories
At June 30, 2024 and December 31, 2023, substantially all inventories were valued using the first-in, first-out method. Inventories were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Raw materials |
|
$ |
49,167 |
|
|
$ |
51,794 |
|
Work-in-process |
|
|
49,025 |
|
|
|
48,676 |
|
Finished goods |
|
|
14,469 |
|
|
|
17,332 |
|
Supplies |
|
|
7,155 |
|
|
|
6,892 |
|
Inventories |
|
$ |
119,816 |
|
|
$ |
124,694 |
|
8
Note 3 – Property, Plant and Equipment
Property, plant and equipment were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Land and land improvements |
|
$ |
8,877 |
|
|
$ |
9,025 |
|
Buildings and leasehold improvements |
|
|
70,595 |
|
|
|
71,063 |
|
Machinery and equipment |
|
|
376,547 |
|
|
|
366,044 |
|
Construction-in-progress |
|
|
3,393 |
|
|
|
11,514 |
|
Other |
|
|
6,342 |
|
|
|
6,965 |
|
|
|
|
465,754 |
|
|
|
464,611 |
|
Accumulated depreciation and amortization |
|
|
(312,627 |
) |
|
|
(305,879 |
) |
Property, plant and equipment, net |
|
$ |
153,127 |
|
|
$ |
158,732 |
|
Certain of the above property, plant and equipment are held as collateral including:
In 2023, Union Electric Steel Corporation (“UES”), a wholly owned subsidiary of the Corporation, completed certain leasehold improvements at the Carnegie, Pennsylvania manufacturing facility with the $2,500 of proceeds from the Disbursement Agreement (Note 6). The improvements are being amortized over the remaining lease term of 20 years.
In 2021, the Corporation began a $26,000 long-term strategic capital program to upgrade existing equipment at certain of its FCEP locations. The program was completed during the three months ended June 30, 2024. Interest capitalized for the strategic capital program totaled $16 and $341 for the three months ended June 30, 2024 and 2023, respectively, and $251 and $602 for the six months ended June 30, 2024 and 2023, respectively.
The gross value of assets under finance leases and the related accumulated amortization approximated $3,459 and $1,783, respectively, as of June 30, 2024 and $4,223 and $1,959, respectively, at December 31, 2023. Depreciation expense approximated $4,613 and $4,268, including depreciation of assets under finance leases of approximately $80 and $67, for the three months ended June 30, 2024 and 2023, respectively. Depreciation expense approximated $9,195 and $8,549, including depreciation of assets under finance leases of approximately $162 and $137, for the six months ended June 30, 2024 and 2023, respectively.
Note 4 – Intangible Assets
Intangible assets were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Customer relationships |
|
$ |
5,282 |
|
|
$ |
5,442 |
|
Developed technology |
|
|
3,796 |
|
|
|
3,913 |
|
Trade name |
|
|
2,125 |
|
|
|
2,219 |
|
|
|
|
11,203 |
|
|
|
11,574 |
|
Accumulated amortization |
|
|
(6,629 |
) |
|
|
(6,627 |
) |
Intangible assets, net |
|
$ |
4,574 |
|
|
$ |
4,947 |
|
9
Changes in intangible assets consisted of the following:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance at beginning of the period |
$ |
4,652 |
|
|
$ |
5,131 |
|
|
$ |
4,947 |
|
|
$ |
5,194 |
|
Amortization of intangible assets |
|
(85 |
) |
|
|
(86 |
) |
|
|
(173 |
) |
|
|
(179 |
) |
Other, primarily impact from changes in foreign currency exchange rates |
|
7 |
|
|
|
(186 |
) |
|
|
(200 |
) |
|
|
(156 |
) |
Balance at end of the period |
$ |
4,574 |
|
|
$ |
4,859 |
|
|
$ |
4,574 |
|
|
$ |
4,859 |
|
Note 5 – Other Current Liabilities
Other current liabilities were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Customer-related liabilities |
|
$ |
20,938 |
|
|
$ |
19,915 |
|
Accrued utilities |
|
|
1,620 |
|
|
|
1,880 |
|
Accrued sales commissions |
|
|
1,887 |
|
|
|
1,850 |
|
Other |
|
|
4,231 |
|
|
|
4,089 |
|
Other current liabilities |
|
$ |
28,676 |
|
|
$ |
27,734 |
|
Customer-related liabilities primarily include liabilities for product warranty claims and deposits received on future orders. The Corporation provides a limited warranty on its products, known as assurance-type warranties, and may issue credit notes or replace products free of charge for valid claims. A warranty is considered an assurance-type warranty if it provides the customer with assurance that the product will function as intended. Historically, warranty claims have been insignificant. The Corporation records a provision for estimated product warranties at the time the underlying sale is recorded. The provision is based on historical experience as a percentage of sales adjusted for probable and known claims.
Changes in the liability for product warranty claims consisted of the following:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance at beginning of the period |
$ |
5,597 |
|
|
$ |
5,450 |
|
|
$ |
5,539 |
|
|
$ |
5,193 |
|
Satisfaction of warranty claims |
|
(292 |
) |
|
|
(598 |
) |
|
|
(686 |
) |
|
|
(976 |
) |
Provision for warranty claims, net |
|
(144 |
) |
|
|
807 |
|
|
|
444 |
|
|
|
1,377 |
|
Other, primarily impact from changes in foreign currency exchange rates |
|
14 |
|
|
|
(20 |
) |
|
|
(122 |
) |
|
|
45 |
|
Balance at end of the period |
$ |
5,175 |
|
|
$ |
5,639 |
|
|
$ |
5,175 |
|
|
$ |
5,639 |
|
Customer deposits represent amounts collected from, or invoiced to, a customer in advance of revenue recognition. The liability for customer deposits is reversed when the Corporation satisfies its performance obligations and control of the inventory transfers to the customer, typically when title transfers. The majority of performance obligations related to customer deposits are expected to be satisfied in less than one year. Performance obligations related to customer deposits expected to be satisfied beyond one year have been classified as a noncurrent liability.
Changes in customer deposits consisted of the following:
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Balance at beginning of the period |
$ |
18,198 |
|
|
$ |
13,432 |
|
|
$ |
13,078 |
|
|
$ |
10,453 |
|
Satisfaction of performance obligations |
|
(4,818 |
) |
|
|
(5,319 |
) |
|
|
(7,385 |
) |
|
|
(9,580 |
) |
Receipt of additional deposits |
|
5,429 |
|
|
|
3,423 |
|
|
|
13,133 |
|
|
|
10,620 |
|
Other, primarily impact from changes in foreign currency exchange rates |
|
(2 |
) |
|
|
(30 |
) |
|
|
(19 |
) |
|
|
13 |
|
Balance at end of the period |
|
18,807 |
|
|
|
11,506 |
|
|
|
18,807 |
|
|
|
11,506 |
|
Deposits - Other noncurrent liabilities |
|
(4,213 |
) |
|
|
- |
|
|
|
(4,213 |
) |
|
|
- |
|
Deposits - Other current liabilities |
$ |
14,594 |
|
|
$ |
11,506 |
|
|
$ |
14,594 |
|
|
$ |
11,506 |
|
10
Note 6 – Debt
Borrowings were comprised of the following:
|
|
June 30, |
|
|
December 31, |
|
||
Revolving credit facility |
|
$ |
61,896 |
|
|
$ |
56,000 |
|
Sale and leaseback financing obligations |
|
|
44,982 |
|
|
|
44,488 |
|
Equipment financing facility |
|
|
17,789 |
|
|
|
16,719 |
|
Industrial Revenue Bonds |
|
|
9,191 |
|
|
|
9,191 |
|
Finance lease liabilities |
|
|
1,383 |
|
|
|
1,590 |
|
Minority shareholder loan |
|
|
- |
|
|
|
665 |
|
Outstanding borrowings |
|
|
135,241 |
|
|
|
128,653 |
|
Debt – current portion |
|
|
(15,886 |
) |
|
|
(12,271 |
) |
Long-term debt |
|
$ |
119,355 |
|
|
$ |
116,382 |
|
The current portion of debt includes primarily swing loans under the revolving credit facility and the Industrial Revenue Bonds (“IRBs”). By definition, swing loans are temporary advances under the revolving credit facility and short term in nature. Accordingly, swing loans are classified as a current liability until the amount is either repaid, as customers remit payments, or, if elected by the Corporation, refinanced as a longer-term loan under the revolving credit facility. The swing loans equaled $3,896 at June 30, 2024. No amount was outstanding as a swing loan at December 31, 2023. Although the IRBs begin to become due in 2027, the bonds can be put back to the Corporation on short notice if they are not able to be remarketed; accordingly, the IRBs are classified as a current liability, although the Corporation considers the likelihood of the bonds being put back to the Corporation to be remote.
Revolving Credit Facility
The Corporation is a party to a revolving credit security agreement with a syndicate of banks that was amended on June 29, 2021 (the “First Amended and Restated Security Agreement”), and subsequently amended on December 17, 2021 and May 26, 2022. The First Amended and Restated Security Agreement provides for a senior secured asset-based revolving credit facility of $100,000, that can be increased to $130,000 at the option of the Corporation and with the approval of the lenders, and an allowance of $20,000 for new equipment financing (see “Equipment Financing Facility” below) but, otherwise, restricts the Corporation from incurring additional indebtedness outside of the agreement, unless approved by the banks. The revolving credit facility includes sub-limits for letters of credit not to exceed $40,000 and European borrowings not to exceed $30,000, of which up to $7,500 may be allocated for Swedish borrowings. The maturity date for the revolving credit facility is June 29, 2026 and, subject to other terms and conditions of the agreement, would become due on that date.
Availability under the revolving credit facility is based on eligible accounts receivable, inventory and fixed assets. Effective July 1, 2023, the Corporation migrated London Inter-Bank Offered Rate (“LIBOR”)-based loans to Secured Overnight Financing Rate (“SOFR”)-based loans, in accordance with the provisions specified in the revolving credit facility, coinciding with the discontinuation of LIBOR. European borrowings denominated in euros, pound sterling or krona bear interest at the Successor Rate as defined in the First Amended and Restated Security Agreement, as amended. Domestic borrowings from the revolving credit facility bear interest, at the Corporation’s option, at either (i) SOFR, as adjusted, plus an applicable margin ranging between 2.00% to 2.50% based on the quarterly average excess availability or (ii) the alternate base rate plus an applicable margin ranging between 1.00% to 1.50% based on the quarterly average excess availability. As of June 30, 2024 and December 31, 2023, there were no European borrowings outstanding. Additionally, the Corporation is required to pay a commitment fee of 0.25% based on the daily unused portion of the revolving credit facility.
As of June 30, 2024, the Corporation had outstanding borrowings under the revolving credit facility of $61,896. The average interest rate approximated 8.22% for each of the three and six months ended June 30, 2024, and 7.87% and 7.78% for the three and six months ended June 30, 2023, respectively. The Corporation also utilizes a portion of the revolving credit facility for letters of credit (Note 8). As of June 30, 2024, remaining availability under the revolving credit facility approximated $20,540, net of standard availability reserves.
Borrowings outstanding under the revolving credit facility are collateralized by a first priority perfected security interest in substantially all assets of the Corporation and its subsidiaries (other than real property). Additionally, the revolving credit facility contains customary affirmative and negative covenants and limitations including, but not limited to, investments in certain of its subsidiaries, payment of dividends, incurrence of additional indebtedness and guaranties, and acquisitions and divestitures. In addition, the Corporation must maintain a certain level of excess availability or otherwise maintain a minimum fixed charge coverage ratio of not less than 1.05 to 1.00. The Corporation was in compliance with the applicable bank covenants as of June 30, 2024.
11
Sale and Leaseback Financing Obligations
In September 2018, UES completed a sale and leaseback financing transaction with Store Capital Acquisitions, LLC (“STORE”) for certain of its real property, including its manufacturing facilities in Valparaiso, Indiana and Burgettstown, Pennsylvania, and its manufacturing facility and corporate headquarters located in Carnegie, Pennsylvania (the “UES Properties”).
In August 2022, Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation, completed a sale and leaseback financing transaction with STORE for certain of its real property, including its manufacturing facilities in Lynchburg, Virginia and Amherst, Virginia. In October 2022, Air & Liquid completed a sale and leaseback financing transaction with STORE for its real property, including its manufacturing facility, located in North Tonawanda, New York (collectively with the Virginia properties, the “ALP Properties”).
In connection with the August 2022 sale and leaseback financing transaction, and as modified by the October 2022 sale and leaseback financing transaction, UES and STORE entered into a Second Amended and Restated Master Lease Agreement (the “Restated Lease”), which amended and restated the existing lease agreement between UES and STORE.
Pursuant to the Restated Lease, UES will lease the ALP Properties and the UES Properties (collectively, the “Properties”), subject to the terms and conditions of the Restated Lease, and UES will sublease the ALP Properties to Air & Liquid on the same terms as the Restated Lease. The Restated Lease provides for an initial term of 20 years; however, UES may extend the lease for the Properties for four successive periods of five years each. If fully extended, the Restated Lease would expire in August 2062. UES also has the option to repurchase the Properties, which it may, and intends to, exercise in 2032, for a price equal to the greater of (i) the Fair Market Value of the Properties, or (ii) 115% of Lessor’s Total Investment, with such terms defined in the Restated Lease.
In August 2022, in connection with the Restated Lease, UES and STORE entered into a Disbursement Agreement pursuant to which STORE agreed to provide up to $2,500 to UES towards certain leasehold improvements in the Carnegie, Pennsylvania manufacturing facility. In June 2023, UES received $2,500 of proceeds from the Disbursement Agreement. The annual payments for the Properties (the "Base Annual Rent") have been adjusted to repay the $2,500 over the balance of the initial term of the Restated Lease of 20 years. Advances under the Disbursement Agreement are secured by a first priority security interest in the leasehold improvements.
At June 30, 2024, the Base Annual Rent, including the Disbursement Agreement, is equal to $3,645, payable in equal monthly installments. Each October through 2052, the Base Annual Rent will increase by an amount equal to the lesser of 2.04% or 1.25 times the change in the consumer price index, as defined in the Restated Lease. The Base Annual Rent during the remaining ten years of the Restated Lease will be equal to the Fair Market Rent, as defined in the Restated Lease.
The Restated Lease and the Disbursement Agreement contain certain representations, warranties, covenants, obligations, conditions, indemnification provisions, and termination provisions customary for those types of agreements. The Corporation was in compliance with the applicable covenants as of June 30, 2024.
The effective interest rate approximated 8.24% for each of the three and six months ended June 30, 2024 and approximated 7.95% for each of the three and six months ended June 30, 2023, respectively.
Equipment Financing Facility
In September 2022, UES and Clarus Capital Funding I, LLC (“Clarus”) entered into a Master Loan and Security Agreement, pursuant to which UES could borrow up to $20,000 to finance certain equipment purchases associated with a capital program at certain of the Corporation’s FCEP locations. Each borrowing constitutes a secured loan transaction (each, a “Term Loan”). As amended, each Term Loan converts to a Term Note on the earlier of (i) the date in which the associated equipment is placed in service or (ii) April 30, 2024. Each Term Note has a term of 84 months in arrears fully amortizing, commencing on the date of the Term Note. The Term Loans and Term Notes are secured by a first priority security interest in and to all of UES’ rights, title and interests in the underlying equipment.
As of June 30, 2024, all Term Loans had converted to Term Notes with approximately $17,789 outstanding. At December 31, 2023, Term Notes approximated $900 and Term Loans approximated $15,819.
Interest on each Term Note accrues at an annual fixed rate ranging between 8.40% and 9.22%. The effective interest rate on the Term Notes approximated 8.65% and 8.58% for the three and six months ended June 30, 2024, respectively. As of June 30, 2024, monthly payments of principal and interest approximate $293 and continue through mid 2031.
Through June 30, 2023, interest on each Term Loan accrued at an annual fixed rate of 8%, payable monthly. Effective July 1, 2023, UES and Clarus amended the Master Loan and Security Agreement increasing the interest rate on each Term Loan from an annual fixed rate of 8% to an annual fixed rate of 10.25%.
12
Industrial Revenue Bonds (“IRBs”)
The Corporation has two IRBs outstanding: (i) $7,116 taxable IRB maturing in 2027, interest at a floating rate which averaged 8.27% and 7.81% for the three months ended June 30, 2024 and 2023, respectively, and 6.81% and 6.17% for the six months ended June 30, 2024 and 2023, respectively, and (ii) $2,075 tax-exempt IRB maturing in 2029, interest at a floating rate which averaged 6.91% and 3.77% for the three months ended June 30, 2024 and 2023, respectively and 5.31% and 3.34% for the six months ended June 30, 2024 and 2023, respectively. The IRBs are secured by letters of credit of equivalent amounts and are remarketed periodically at which time the interest rates are reset. If the IRBs are not able to be remarketed, although considered a remote possibility by the Corporation, the bondholders can seek reimbursement immediately from the letters of credit; accordingly, the IRBs are recorded as current debt on the condensed consolidated balance sheets.
Minority Shareholder Loan
Shanxi Åkers TISCO Roll Co., Ltd. (“ATR”), a 59.88% indirectly owned joint venture of UES, periodically has loans outstanding with its minority shareholder (Note 17). Amounts repaid approximated $664 (RMB 4,713) during the six months ended June 30, 2024. Amounts borrowed and repaid approximated $669 (RMB 4,600) during the six months ended June 30, 2023.
Note 7 – Pension and Other Postretirement Benefits
Contributions to the Corporation’s employee benefit plans were as follows:
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
U.S. defined benefit pension plans |
|
$ |
3,554 |
|
|
$ |
207 |
|
Foreign defined benefit pension plans |
|
$ |
176 |
|
|
$ |
260 |
|
Other postretirement benefits (e.g., net payments) |
|
$ |
182 |
|
|
$ |
224 |
|
U.K. defined contribution pension plan |
|
$ |
134 |
|
|
$ |
120 |
|
U.S. defined contribution plan |
|
$ |
1,814 |
|
|
$ |
1,350 |
|
Net periodic pension and other postretirement benefit costs included the following components:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
U.S. Defined Benefit Pension Plans |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Service cost |
|
$ |
10 |
|
|
$ |
9 |
|
|
$ |
20 |
|
|
$ |
19 |
|
Interest cost |
|
|
2,328 |
|
|
|
2,484 |
|
|
|
4,657 |
|
|
|
4,967 |
|
Expected return on plan assets |
|
|
(3,401 |
) |
|
|
(3,596 |
) |
|
|
(6,802 |
) |
|
|
(7,192 |
) |
Amortization of prior service cost |
|
|
1 |
|
|
|
1 |
|
|
|
1 |
|
|
|
3 |
|
Amortization of actuarial loss |
|
|
46 |
|
|
|
31 |
|
|
|
91 |
|
|
|
61 |
|
Net benefit income |
|
$ |
(1,016 |
) |
|
$ |
(1,071 |
) |
|
$ |
(2,033 |
) |
|
$ |
(2,142 |
) |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Foreign Defined Benefit Pension Plans |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Service cost |
|
$ |
8 |
|
|
$ |
76 |
|
|
$ |
39 |
|
|
$ |
138 |
|
Interest cost |
|
|
452 |
|
|
|
468 |
|
|
|
908 |
|
|
|
923 |
|
Expected return on plan assets |
|
|
(475 |
) |
|
|
(488 |
) |
|
|
(953 |
) |
|
|
(959 |
) |
Amortization of prior service credit |
|
|
(70 |
) |
|
|
(69 |
) |
|
|
(141 |
) |
|
|
(137 |
) |
Amortization of actuarial loss |
|
|
181 |
|
|
|
152 |
|
|
|
361 |
|
|
|
299 |
|
Net benefit expense |
|
$ |
96 |
|
|
$ |
139 |
|
|
$ |
214 |
|
|
$ |
264 |
|
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Other Postretirement Benefit Plans |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Service cost |
|
$ |
41 |
|
|
$ |
26 |
|
|
$ |
84 |
|
|
$ |
85 |
|
Interest cost |
|
|
83 |
|
|
|
140 |
|
|
|
181 |
|
|
|
195 |
|
Amortization of prior service credit |
|
|
(256 |
) |
|
|
(213 |
) |
|
|
(512 |
) |
|
|
(512 |
) |
Amortization of actuarial gain |
|
|
(76 |
) |
|
|
(167 |
) |
|
|
(157 |
) |
|
|
(161 |
) |
Net benefit income |
|
$ |
(208 |
) |
|
$ |
(214 |
) |
|
$ |
(404 |
) |
|
$ |
(393 |
) |
13
Note 8 – Commitments and Contingent Liabilities
Outstanding standby and commercial letters of credit and bank guarantees as of June 30, 2024 equaled $16,667, of which approximately one-half serves as collateral for the IRB debt. Outstanding surety bonds as of June 30, 2024 approximated $3,197 (SEK 33,900), which guarantee certain obligations under a credit insurance arrangement for certain of the Corporation’s foreign pension commitments.
At June 30, 2024, commitments for future capital expenditures approximated $3,800.
See Note 11 for derivative instruments, Note 15 for litigation and Note 16 for environmental matters.
Note 9 – Equity Rights Offering
In September 2020, the Corporation completed an equity rights offering, issuing 5,507,889 shares of its common stock and 12,339,256 Series A warrants to existing shareholders. The shares of common stock and warrants are classified as equity instruments in the condensed consolidated statements of shareholders’ equity. Each Series A warrant provides the holder with the right to purchase 0.4464 shares of common stock at an exercise price of $2.5668, or $5.75 per whole share of common stock, and expires on August 1, 2025. For the three and six months ended June 30, 2024 and 2023, respectively, the Corporation received no proceeds from shareholders from the exercise of Series A warrants. At June 30, 2024 and December 31, 2023, 10,941,869 Series A warrants were outstanding.
Note 10 – Accumulated Other Comprehensive Loss
Net change and ending balances for the various components of accumulated other comprehensive loss as of and for the six months ended June 30, 2024 and 2023 are summarized below. All amounts are net of tax where applicable.
|
|
Foreign |
|
|
Unrecognized |
|
|
Cash Flow |
|
|
Total |
|
|
Less: |
|
|
Accumulated Other |
|
||||||
Balance at January 1, 2024 |
|
$ |
(23,161 |
) |
|
$ |
(40,490 |
) |
|
$ |
186 |
|
|
$ |
(63,465 |
) |
|
$ |
(476 |
) |
|
$ |
(62,989 |
) |
Net change |
|
|
(2,722 |
) |
|
|
(288 |
) |
|
|
(57 |
) |
|
|
(3,067 |
) |
|
|
(273 |
) |
|
|
(2,794 |
) |
Balance at June 30, 2024 |
|
$ |
(25,883 |
) |
|
$ |
(40,778 |
) |
|
$ |
129 |
|
|
$ |
(66,532 |
) |
|
$ |
(749 |
) |
|
$ |
(65,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Balance at January 1, 2023 |
|
$ |
(26,170 |
) |
|
$ |
(32,623 |
) |
|
$ |
152 |
|
|
$ |
(58,641 |
) |
|
$ |
(229 |
) |
|
$ |
(58,412 |
) |
Net change |
|
|
1,037 |
|
|
|
(629 |
) |
|
|
(287 |
) |
|
|
121 |
|
|
|
(478 |
) |
|
|
599 |
|
Balance at June 30, 2023 |
|
$ |
(25,133 |
) |
|
$ |
(33,252 |
) |
|
$ |
(135 |
) |
|
$ |
(58,520 |
) |
|
$ |
(707 |
) |
|
$ |
(57,813 |
) |
The following summarizes the line items affected on the condensed consolidated statements of operations for components reclassified from accumulated other comprehensive loss. Amounts in parentheses represent credits to net income.
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Amortization of unrecognized employee benefit costs: |
|
|
|
|
|
|
|
|
|
|
|
||||
Other loss – net |
$ |
(174 |
) |
|
$ |
(265 |
) |
|
$ |
(357 |
) |
|
$ |
(447 |
) |
Income tax effect |
|
- |
|
|
|
(33 |
) |
|
|
- |
|
|
|
(46 |
) |
Net of tax |
$ |
(174 |
) |
|
$ |
(298 |
) |
|
$ |
(357 |
) |
|
$ |
(493 |
) |
Settlements of cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization (foreign currency purchase contracts) |
$ |
(8 |
) |
|
$ |
(8 |
) |
|
$ |
(14 |
) |
|
$ |
(14 |
) |
Costs of products sold (excluding depreciation and |
|
(278 |
) |
|
|
(68 |
) |
|
|
(260 |
) |
|
|
(179 |
) |
Total before income tax |
|
(286 |
) |
|
|
(76 |
) |
|
|
(274 |
) |
|
|
(193 |
) |
Income tax effect |
|
8 |
|
|
|
3 |
|
|
|
7 |
|
|
|
6 |
|
Net of tax |
$ |
(278 |
) |
|
$ |
(73 |
) |
|
$ |
(267 |
) |
|
$ |
(187 |
) |
The income tax effect associated with the various components of other comprehensive (loss) income for the three and six months ended June 30, 2024 and 2023 is summarized below. Amounts in parentheses represent credits to net income when reclassified to earnings.
14
Certain amounts have no tax effect due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdiction where the income or expense is recognized. Foreign currency translation adjustments exclude the effect of income taxes since earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time.
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income tax effect associated with changes in: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Unrecognized employee benefit costs |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Fair value of cash flow hedges |
|
|
(7 |
) |
|
|
(3 |
) |
|
|
(5 |
) |
|
|
3 |
|
Income tax effect associated with reclassification adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Amortization of unrecognized employee benefit costs |
|
|
- |
|
|
|
(33 |
) |
|
|
- |
|
|
|
(46 |
) |
Settlement of cash flow hedges |
|
|
8 |
|
|
|
3 |
|
|
|
7 |
|
|
|
6 |
|
Note 11 – Derivative Instruments
Certain divisions of the ALP segment are subject to risk from increases in the price of commodities (copper and aluminum) used in the production of inventory. To minimize this risk, futures contracts are entered into which are designated as cash flow hedges. At June 30, 2024, approximately 41%, or $2,495, of anticipated copper purchases over the next eight months and 56%, or $621, of anticipated aluminum purchases over the next six months are hedged. At June 30, 2023, approximately 50%, or $2,725, of anticipated copper purchases over the next nine months and 61%, or $695, of anticipated aluminum purchases over the next six months were hedged.
The Corporation periodically enters into purchase commitments to cover a portion of its anticipated natural gas and electricity usage. The commitments qualify as normal purchases and, accordingly, are not reflected on the condensed consolidated balance sheets. At June 30, 2024, the Corporation has purchase commitments covering approximately 4%, or $1,830, of anticipated natural gas usage through December 31, 2025 for two of its subsidiaries and approximately 10%, or $1,129, of anticipated electricity usage through December 31, 2025 for two of its subsidiaries. At June 30, 2023, the Corporation had purchase commitments covering approximately 23%, or $3,478, of anticipated natural gas usage through December 31, 2025 for two of its subsidiaries and approximately 19%, or $1,329, of anticipated electricity usage through December 31, 2025 for two of its subsidiaries. Purchases of natural gas and electricity under previously existing commitments equaled $854 and $1,833 for the three and six months ended June 30, 2024, respectively, and $904 and $1,437 for the three and six months ended June 30, 2023, respectively.
The Corporation previously entered into foreign currency purchase contracts to manage the volatility associated with euro-denominated progress payments to be made for certain machinery and equipment. Upon occurrence of an anticipated purchase and placement of the underlying fixed asset in service, the foreign currency purchase contract was settled and the change in fair value of the foreign currency purchase contract was deferred in accumulated other comprehensive loss and is being reclassified to earnings (depreciation and amortization expense) over the life of the underlying asset (approximately 15 years).
No portion of the existing cash flow hedges is considered to be ineffective, including any ineffectiveness arising from the unlikelihood of an anticipated transaction to occur. Additionally, no amounts have been excluded from assessing the effectiveness of a hedge.
The Corporation does not enter into derivative transactions for speculative purposes and, therefore, holds no derivative instruments for trading purposes.
Gain (loss) on foreign exchange transactions included in other expense – net equaled $302 and $(190) for the three and six months ended June 30, 2024, respectively, and $(1,244) and $(1,159) for the three and six months ended June 30, 2023, respectively.
The change in the fair value of the cash flow contracts is recorded as a component of accumulated other comprehensive loss. The balances as of June 30, 2024 and 2023 and the amounts recognized as and reclassified from accumulated other comprehensive loss for each of the periods are summarized below. Amounts are after tax where applicable.
15
Certain amounts recognized as comprehensive income (loss) or reclassified from accumulated other comprehensive loss have no tax effect due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdiction where the income or expense is recognized.
Three Months Ended June 30, 2024 |
|
Beginning of |
|
|
Recognized |
|
|
Reclassified |
|
|
End of |
|
||||
Foreign currency purchase contracts |
|
$ |
75 |
|
|
$ |
- |
|
|
$ |
8 |
|
|
$ |
67 |
|
Futures contracts – copper and aluminum |
|
|
174 |
|
|
|
158 |
|
|
|
270 |
|
|
|
62 |
|
|
|
$ |
249 |
|
|
$ |
158 |
|
|
$ |
278 |
|
|
$ |
129 |
|
Three Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency purchase contracts |
|
$ |
102 |
|
|
$ |
- |
|
|
$ |
8 |
|
|
$ |
94 |
|
Futures contracts – copper and aluminum |
|
|
114 |
|
|
|
(278 |
) |
|
|
65 |
|
|
|
(229 |
) |
|
|
$ |
216 |
|
|
$ |
(278 |
) |
|
$ |
73 |
|
|
$ |
(135 |
) |
Six Months Ended June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency purchase contracts |
|
$ |
81 |
|
|
$ |
- |
|
|
$ |
14 |
|
|
$ |
67 |
|
Futures contracts – copper and aluminum |
|
|
105 |
|
|
|
210 |
|
|
|
253 |
|
|
|
62 |
|
|
|
$ |
186 |
|
|
$ |
210 |
|
|
$ |
267 |
|
|
$ |
129 |
|
Six Months Ended June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency purchase contracts |
|
$ |
108 |
|
|
$ |
- |
|
|
$ |
14 |
|
|
$ |
94 |
|
Futures contracts – copper and aluminum |
|
|
44 |
|
|
|
(100 |
) |
|
|
173 |
|
|
|
(229 |
) |
|
|
$ |
152 |
|
|
$ |
(100 |
) |
|
$ |
187 |
|
|
$ |
(135 |
) |
The change in fair value reclassified or expected to be reclassified from accumulated other comprehensive loss to earnings is summarized below. All amounts are pre-tax.
|
|
Location of Gain (Loss) |
|
Estimated to |
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
|||||||||||
|
|
of Operations |
|
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|||||
Foreign currency purchase contracts |
|
Depreciation and amortization |
|
$ |
28 |
|
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
14 |
|
|
$ |
14 |
|
Futures contracts – copper and aluminum |
|
Costs of products sold |
|
$ |
62 |
|
|
$ |
278 |
|
|
$ |
68 |
|
|
$ |
260 |
|
|
$ |
179 |
|
Note 12 – Fair Value
The Corporation’s financial assets and liabilities reported at fair value in the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 were as follows:
|
|
Quoted Prices |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
As of June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other noncurrent assets |
|
$ |
3,196 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,196 |
|
As of December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Investments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other noncurrent assets |
|
$ |
3,245 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
3,245 |
|
The investments held as other noncurrent assets represent assets held in the “Rabbi” trust for the purpose of providing benefits under a non-qualified defined benefit pension plan. The fair value of the investments is based on quoted prices of the investments in active markets. The fair value of futures contracts is based on market quotations. The fair values of the debt and borrowings approximate their carrying values. Additionally, the fair values of trade receivables and accounts payable approximate their carrying values.
16
Note 13 – Net Sales and Income Before Income Taxes
Net sales and income before income taxes by geographic area for the three and six months ended June 30, 2024 and 2023 are outlined below. Approximately 95% of foreign net sales for each of the periods is attributable to the FCEP segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Net Sales |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
United States |
|
$ |
72,916 |
|
|
$ |
63,752 |
|
|
$ |
142,680 |
|
|
$ |
119,129 |
|
Foreign |
|
|
38,072 |
|
|
|
43,459 |
|
|
|
78,523 |
|
|
|
92,885 |
|
|
|
$ |
110,988 |
|
|
$ |
107,211 |
|
|
$ |
221,203 |
|
|
$ |
212,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Income Before Income Taxes |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
United States (1) |
|
$ |
1,205 |
|
|
$ |
(2,341 |
) |
|
$ |
(1,018 |
) |
|
$ |
(3,469 |
) |
Foreign |
|
|
2,210 |
|
|
|
3,489 |
|
|
|
2,681 |
|
|
|
5,915 |
|
|
|
$ |
3,415 |
|
|
$ |
1,148 |
|
|
$ |
1,663 |
|
|
$ |
2,446 |
|
Note 14 – Stock-Based Compensation
The Ampco-Pittsburgh Corporation 2016 Omnibus Incentive Plan, as amended (the “Incentive Plan”), authorizes the issuance of up to 3,700,000 shares of the Corporation’s common stock for awards under the Incentive Plan. Awards under the Incentive Plan may include incentive stock options and non-qualified stock options, stock appreciation rights, restricted shares and restricted stock units, performance awards, other stock-based awards, or short-term cash incentive awards. If any award is canceled, terminates, expires, or lapses for any reason prior to the issuance of the shares, or if the shares are issued under the Incentive Plan and thereafter are forfeited to the Corporation, the shares subject to such awards and the forfeited shares will not count against the aggregate number of shares available under the Incentive Plan. Shares tendered or withheld to pay the option exercise price or tax withholding will continue to count against the aggregate number of shares of common stock available for grant under the Incentive Plan. Any shares repurchased by the Corporation with cash proceeds from the exercise of options will not be added back to the pool of shares available for grant under the Incentive Plan.
The Incentive Plan may be administered by the Board of Directors or the Compensation Committee of the Board of Directors. The Compensation Committee has the authority to determine, within the limits of the express provisions of the Incentive Plan, the individuals to whom the awards will be granted and the nature, amount and terms of such awards.
The Incentive Plan also provides for equity-based awards during any one year to non-employee members of the Board of Directors, based on the grant date fair value, not to exceed $200. The limit does not apply to shares received by a non-employee director at his or her election in lieu of the director’s retainer for board service. The restricted stock awards vest on the one-year anniversary of the grant date.
Stock-based compensation expense, including expense associated with equity-based awards granted to non-employee members of the Board of Directors, for the three and six months ended June 30, 2024 equaled $388 and $734, respectively, and for the three and six months ended June 30, 2023, equaled $483 and $1,110, respectively. The income tax benefit recognized in the condensed consolidated statements of operations was not significant due to the Corporation having a valuation allowance recorded against its deferred income tax assets for the majority of the jurisdictions where the expense was recognized.
Note 15 – Litigation
The Corporation and its subsidiaries are involved in various claims and lawsuits incidental to their businesses from time to time and are also subject to asbestos litigation.
Asbestos Litigation
Claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (the “Asbestos Liability”). Air & Liquid, and in some cases the Corporation, are defendants (among a number of defendants, often in excess of 50 defendants) in claims filed in various state and federal courts.
17
Asbestos Claims
The following table reflects approximate information about the number of claims for Asbestos Liability against Air & Liquid and the Corporation for the six months ended June 30, 2024 and 2023 (number of claims not in thousands). The majority of the settlement and defense costs were reported and 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.
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Total claims pending at the beginning of the period |
|
|
6,310 |
|
|
|
6,259 |
|
New claims served |
|
|
636 |
|
|
|
713 |
|
Claims dismissed |
|
|
(400 |
) |
|
|
(274 |
) |
Claims settled |
|
|
(298 |
) |
|
|
(209 |
) |
Total claims pending at the end of period (1) |
|
|
6,248 |
|
|
|
6,489 |
|
Administrative closures (2) |
|
|
(3,155 |
) |
|
|
(3,057 |
) |
Total active claims at the end of the period |
|
|
3,093 |
|
|
|
3,432 |
|
Gross settlement and defense costs paid in period (in 000’s) |
|
$ |
11,843 |
|
|
$ |
10,789 |
|
Avg. gross settlement and defense costs per claim resolved (in 000’s) (3) |
|
$ |
16.97 |
|
|
$ |
22.34 |
|
Asbestos Insurance
The Corporation and Air & Liquid are parties to a series of settlement agreements (“Settlement Agreements”) with insurance carriers that have coverage obligations for the Asbestos Liability (the “Settling Insurers”). During the second quarter of 2024, the Corporation and Air & Liquid entered into a settlement agreement with a previously unsettled insurance carrier resulting in reimbursement of prior years' costs of approximately $1,756. Under the Settlement Agreements, the Settling Insurers accept financial responsibility, subject to the terms and conditions of the respective agreements, including overall coverage limits, for pending and future claims for the Asbestos Liability. The Settlement Agreements encompass the majority of insurance policies that provide coverage for claims for the Asbestos Liability.
The Settlement Agreements acknowledge Howden North America, Inc. (“Howden”) is entitled to coverage under policies covering the Asbestos Liability for claims arising out of the historical products manufactured or distributed by Buffalo Forge, a former subsidiary of the Corporation (the “Products”), which was acquired by Howden. The Settlement Agreements do not provide for any prioritization on access to the applicable policies or any sub-limits of liability as to Howden or the Corporation and Air & Liquid and, accordingly, Howden may access the coverage afforded by the Settling Insurers for any covered claim arising out of the Products. In general, access by Howden to the coverage afforded by the Settling Insurers for the Products will erode coverage under the Settlement Agreements available to the Corporation and Air & Liquid for the Asbestos Liability.
Asbestos Valuations
The Corporation, with the assistance of a nationally recognized expert in the valuation of asbestos liabilities, reviews the Asbestos Liability and the underlying assumptions on a regular basis to determine whether any adjustment to the Asbestos Liability or the underlying assumptions are necessary. When warranted, the Asbestos Liability is adjusted to consider current trends and new information that becomes available. In conjunction with the regular updates of the estimated Asbestos Liability, the Corporation also develops an estimate of defense costs expected to be incurred with settling the Asbestos Liability and probable insurance recoveries for the Asbestos Liability and defense costs.
In developing the estimate of probable defense costs, the Corporation considers several factors including, but not limited to, current and historical defense-to-indemnity cost ratios and expected defense-to-indemnity cost ratios. In developing the estimate of probable insurance recoveries, the Corporation considers the expert’s projection of settlement costs for the Asbestos Liability and management’s projection of associated defense costs. In addition, the Corporation consults with its outside legal counsel on insurance matters and a nationally recognized insurance consulting firm it retains to assist with certain policy allocation matters. The Corporation also considers a number of other factors including the Settlement Agreements in effect, policy exclusions, policy limits, policy provisions regarding coverage for defense costs, attachment points, gaps in the coverage, policy exhaustion, the nature of the underlying claims for the Asbestos Liability, estimated erosion of insurance limits on account of claims against Howden arising out of the Products, prior impairment of policies, insolvencies among certain of the insurance carriers, and creditworthiness of the remaining insurance carriers based on publicly available information.
18
Based on these factors, the Corporation estimates the probable insurance recoveries for the Asbestos Liability and defense costs for the corresponding time frame of the Asbestos Liability.
In the fourth quarter of 2023, in connection with its review of the underlying assumptions and primarily as a result of identified changes in claim data and availability of new information, the Corporation recorded an undiscounted increase to its estimated Asbestos Liability of approximately $112,640. In addition, the Corporation revised its estimated defense-to-indemnity cost ratio from 65% to 60%, which reduced the Asbestos Liability by $4,162. The following table summarizes activity relating to Asbestos Liability for the six months ended June 30, 2024 and 2023.
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Asbestos liability, beginning of the year |
|
$ |
238,679 |
|
|
$ |
153,575 |
|
Settlement and defense costs paid |
|
|
(11,843 |
) |
|
|
(10,789 |
) |
Asbestos liability, end of the period |
|
$ |
226,836 |
|
|
$ |
142,786 |
|
The increase in the asbestos-related insurance receivable associated with the increase in the estimated Asbestos Liability and a lower defense-to-indemnity ratio at December 31, 2023 approximated $67,591. The following table summarizes activity relating to insurance recoveries for the six months ended June 30, 2024 and 2023, including the $1,756 reimbursement of prior years' costs.
|
|
Six Months Ended June 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Insurance receivable – asbestos, beginning of the year |
|
$ |
160,245 |
|
|
$ |
105,434 |
|
Settlement and defense costs paid by insurance carriers |
|
|
(9,195 |
) |
|
|
(6,211 |
) |
Insurance receivable – asbestos, end of the period |
|
$ |
151,050 |
|
|
$ |
99,223 |
|
The insurance receivable does not assume any recovery from insolvent carriers. A substantial majority of the insurance recoveries deemed probable is from insurance companies rated A – (excellent) or better by A.M. Best Corporation. There can be no assurance, however, there will not be insolvencies among the relevant insurance carriers, or the assumed percentage recoveries for certain carriers will prove correct.
Asbestos Assumptions
The amounts recorded for the Asbestos Liability and insurance receivable rely on assumptions based on currently known facts and strategy. The Corporation’s actual expenses or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Corporation’s or the experts’ calculations vary significantly from actual results. Key variables in these assumptions include the forecast of the population likely to have been exposed to asbestos; the number of people likely to develop an asbestos-related disease; the estimated number of people likely to file an asbestos-related injury claim against the Corporation or its subsidiaries; an analysis of pending cases, by type of injury claimed and jurisdiction where the claim is filed; average settlement value of claims, by type of injury claimed and jurisdiction of filing; the number and nature of new claims to be filed each year; the average cost of disposing of each new claim; the average annual defense costs; compliance by relevant parties with the terms of the Settlement Agreements; and the solvency risk with respect to the relevant insurance carriers. Other factors that may affect the Asbestos Liability and ability to recover under the Corporation’s insurance policies include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation.
The Corporation intends to continue to evaluate the Asbestos Liability, related insurance receivable and the underlying assumptions on a regular basis to determine whether any adjustments to the estimates are required. Due to the uncertainties surrounding asbestos litigation and insurance recovery, these regular reviews may result in the Corporation adjusting its current reserves; however, the Corporation is currently unable to estimate such future adjustments. Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivable could be material to the operating results for the period in which the adjustments to the liability, receivable or allowance are recorded and to the Corporation’s condensed consolidated financial position, results of operations and liquidity.
Note 16 – Environmental Matters
The Corporation is currently performing certain remedial actions in connection with the sale of real estate previously owned and periodically incurs costs to maintain compliance with environmental laws and regulations. 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.
19
The undiscounted potential liability for remedial actions and environmental compliance measures approximated $100 at June 30, 2024 and December 31, 2023.
ATR periodically has loans outstanding with its minority shareholder. Interest on borrowings accrues at the three-to-five-year loan interest rate set by the People’s Bank of China, which approximated 4.35% for each of the three and six months ended June 30, 2024 and 2023, respectively. For the six months ended June 30, 2024, ATR paid $2 (RMB 17) of interest. For the six months ended June 30, 2023, ATR paid $4 (RMB 25) of interest. No interest was outstanding as of June 30, 2024 or December 31, 2023.
Loan activity for the six months ended June 30, 2024 and 2023 was as follows:
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
2024 |
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
||||
|
|
USD |
|
|
RMB |
|
|
USD |
|
|
RMB |
|
||||
Balance at beginning of the period |
|
$ |
665 |
|
|
|
4,713 |
|
|
$ |
- |
|
|
|
- |
|
Borrowings |
|
|
- |
|
|
|
- |
|
|
|
669 |
|
|
|
4,600 |
|
Repayments |
|
|
(664 |
) |
|
|
(4,713 |
) |
|
|
(669 |
) |
|
|
(4,600 |
) |
Foreign exchange |
|
|
(1 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Balance at end of the period |
|
$ |
- |
|
|
|
- |
|
|
$ |
- |
|
|
|
- |
|
ATR has sales to and purchases from ATR’s minority shareholder and its affiliates and sales to a shareholder of one of the Corporation's other joint ventures in China and its affiliates. These sales and purchases, which were in the ordinary course of business, for the three and six months ended June 30, 2024 and 2023 were as follows:
|
|
Three Months Ended June 30, |
|
|||||||||||||
|
|
2024 |
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
||||
|
|
USD |
|
|
RMB |
|
|
USD |
|
|
RMB |
|
||||
Purchases from related parties |
|
$ |
1,901 |
|
|
|
13,740 |
|
|
$ |
1,880 |
|
|
|
13,223 |
|
Sales to related parties |
|
$ |
3,935 |
|
|
|
28,505 |
|
|
$ |
303 |
|
|
|
2,342 |
|
|
|
Six Months Ended June 30, |
|
|||||||||||||
|
|
2024 |
|
|
2024 |
|
|
2023 |
|
|
2023 |
|
||||
|
|
USD |
|
|
RMB |
|
|
USD |
|
|
RMB |
|
||||
Purchases from related parties |
|
$ |
3,138 |
|
|
|
22,588 |
|
|
$ |
3,323 |
|
|
|
23,133 |
|
Sales to related parties |
|
$ |
8,173 |
|
|
|
58,824 |
|
|
$ |
2,723 |
|
|
|
18,960 |
|
Balances outstanding with ATR’s minority shareholder including its affiliates and the other joint venture's shareholder and its affiliates as of June 30, 2024 and December 31, 2023 were as follows:
|
|
June 30, 2024 |
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
|
December 31, 2023 |
|
||||
|
|
USD |
|
|
RMB |
|
|
USD |
|
|
RMB |
|
||||
Accounts receivable from related parties |
|
$ |
4,795 |
|
|
|
34,861 |
|
|
$ |
190 |
|
|
|
1,350 |
|
Accounts payable to related parties |
|
$ |
1,200 |
|
|
|
8,724 |
|
|
$ |
401 |
|
|
|
2,841 |
|
Other current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Customer deposits |
|
$ |
94 |
|
|
|
682 |
|
|
$ |
149 |
|
|
|
1,056 |
|
The manufacturing facilities of ATR are located on land leased by ATR from the other partner. The land lease commenced in 2007, the date the joint venture was formed, and continues through 2054, the expected end date of the joint venture, and includes variable lease payment provisions based on the land standard price prevailing in Taiyuan, China, where the joint venture is located. Rent paid by ATR to the other partner approximated $30 (RMB 223) for each of the three months ended June 30, 2024 and 2023 and $61 (RMB 446) for each of the six months ended June 30, 2024 and 2023, which is included in purchases from related parties.
In addition, the Corporation had sales, in the ordinary course of business, to a wholly owned subsidiary of Crawford United Corporation which, along with other affiliated persons (collectively, the “Crawford Group”), was the beneficial owner of greater than 5% of the Corporation’s stock at December 31, 2023. Pursuant to Amendment No. 5 to Schedule 13D filed by the Crawford Group with the SEC on February 20, 2024, the Crawford Group ceased to beneficially own greater than 5% of the Corporation’s stock as of February 16, 2024. The trade receivable with the Crawford Group was $722 at December 31, 2023.
20
Note 18 – Business Segments
The FCEP segment produces forged hardened steel rolls, cast rolls and forged engineered products (“FEP”). Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. FEP principally are sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, and Slovenia and equity interests in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North American and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
The ALP segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including original equipment manufacturers and commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment utilizes an independent group of sales offices located throughout the United States and Canada.
Presented below are the net sales and income before income taxes for the Corporation’s two business segments and sales by product line. When disaggregating revenue, consideration is given to information regularly reviewed by the chief operating decision-maker to evaluate the financial performance of the operating segments and make resource allocation decisions.
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
||||
Forged and Cast Engineered Products |
|
|
|
|
|
|
|
|
|
|
|
||||
Forged and cast mill rolls |
$ |
72,647 |
|
|
$ |
73,003 |
|
|
$ |
146,043 |
|
|
$ |
144,702 |
|
FEP |
|
3,066 |
|
|
|
4,578 |
|
|
|
6,859 |
|
|
|
9,677 |
|
Forged and Cast Engineered Products |
|
75,713 |
|
|
|
77,581 |
|
|
|
152,902 |
|
|
|
154,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Air and Liquid Processing |
|
|
|
|
|
|
|
|
|
|
|
||||
Air handling systems |
|
14,043 |
|
|
|
8,892 |
|
|
|
26,553 |
|
|
|
18,096 |
|
Heat exchange coils |
|
11,979 |
|
|
|
11,105 |
|
|
|
22,802 |
|
|
|
21,740 |
|
Centrifugal pumps |
|
9,253 |
|
|
|
9,633 |
|
|
|
18,946 |
|
|
|
17,799 |
|
Air and Liquid Processing |
|
35,275 |
|
|
|
29,630 |
|
|
|
68,301 |
|
|
|
57,635 |
|
Total Reportable Segments |
$ |
110,988 |
|
|
$ |
107,211 |
|
|
$ |
221,203 |
|
|
$ |
212,014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
||||
Forged and Cast Engineered Products (1) |
$ |
5,361 |
|
|
$ |
3,904 |
|
|
$ |
6,937 |
|
|
$ |
6,128 |
|
Air and Liquid Processing |
|
3,174 |
|
|
|
2,977 |
|
|
|
5,156 |
|
|
|
5,930 |
|
Total Reportable Segments |
|
8,535 |
|
|
|
6,881 |
|
|
|
12,093 |
|
|
|
12,058 |
|
Other expense, including corporate costs |
|
(5,120 |
) |
|
|
(5,733 |
) |
|
|
(10,430 |
) |
|
|
(9,612 |
) |
Total |
$ |
3,415 |
|
|
$ |
1,148 |
|
|
$ |
1,663 |
|
|
$ |
2,446 |
|
(1) Income before income taxes for Forged and Cast Engineered Products for the three and six months ended June 30, 2023 includes proceeds of approximately $1,874 for the reimbursement of past energy costs at one of the Corporation’s foreign operations by its local government. No future performance or conditions exist related to the reimbursement and, currently, no further reimbursements are expected.
21
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(in thousands, except per share amounts)
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by us or on behalf of Ampco-Pittsburgh Corporation and its subsidiaries (collectively, “we,” “us,” “our,” or the “Corporation”). Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q, as well as the condensed consolidated financial statements and notes hereto, may include, but are not limited to, statements about operating performance, trends and events we expect or anticipate will occur in the future, statements about sales and production levels, timing of orders for our products, restructurings, the impact from pandemics and geopolitical conflicts, profitability and anticipated expenses, inflation, the global supply chain, future proceeds from the exercise of outstanding warrants, and cash outflows. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward-looking statements” within the meaning of the Act and words such as “may,” “will,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “target,” “goal,” “forecast” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. 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 us, these risks and uncertainties include, but are not limited to:
We cannot guarantee any future results, levels of activity, performance or achievements. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.
22
The Business
The Corporation manufactures and sells highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the Forged and Cast Engineered Products (“FCEP”) segment and the Air and Liquid Processing (“ALP”) segment. This segment presentation is consistent with how the Corporation’s chief operating decision-maker evaluates financial performance and makes resource allocation and strategic decisions about the business.
The FCEP segment produces forged hardened steel rolls, cast rolls and forged engineered products (“FEP”). Forged hardened steel rolls are used primarily in cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot and cold strip mills, medium/heavy section mills and plate mills. FEP principally are sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, and Slovenia, and an equity interest in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.
The ALP segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including original equipment manufacturers and commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment utilizes an independent group of sales offices located throughout the United States and Canada.
Executive Overview
For the FCEP segment, the roll market in North America has been flat as a result of end customer demand; however, order intake is expected to improve in the second half of the year, for delivery in 2025. Higher pricing and increased market share, when compared to a year ago, is expected to help minimize the effect of the expected decline in the overall volume of shipments for 2024. While stable, the European steel producers are operating at lower levels when compared to pre-pandemic levels as Europe continues to experience economic uncertainty and due to the entry of low-priced product from China. In addition, increased imports of flat rolled steel has resulted in pricing and volume pressures for steel producers there. The FEP market remains challenged by increased imports and high inventory levels at bar distributors. The primary focus for this segment is to maintain a strong position in the roll market and, with the completion of the previously announced capital program, to improve operational efficiencies and reliability at its domestic forge facilities and increase capacity for the manufacturing of its FEP.
For the ALP segment, businesses are benefiting from steady demand and increased market share but are facing increasing production costs and supply chain issues as a result of the lingering effects from a post-pandemic environment. The segment has been implementing price increases for certain of its products to help mitigate these inflationary effects. The focus for this segment is to grow revenues, strengthen engineering and manufacturing capabilities to keep pace with growth opportunities and continue to improve its sales distribution network.
The Corporation is actively monitoring, and will continue to actively monitor, the lingering effects from a post-pandemic environment, geopolitical and economic conditions and other developments relevant to its business including the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.
23
Selected Financial Information
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forged and Cast Engineered Products |
|
$ |
75,713 |
|
|
$ |
77,581 |
|
|
$ |
(1,868 |
) |
|
$ |
152,902 |
|
|
$ |
154,379 |
|
|
$ |
(1,477 |
) |
Air and Liquid Processing |
|
|
35,275 |
|
|
|
29,630 |
|
|
|
5,645 |
|
|
|
68,301 |
|
|
|
57,635 |
|
|
|
10,666 |
|
Consolidated |
|
$ |
110,988 |
|
|
$ |
107,211 |
|
|
$ |
3,777 |
|
|
$ |
221,203 |
|
|
$ |
212,014 |
|
|
$ |
9,189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forged and Cast Engineered Products |
|
$ |
5,361 |
|
|
$ |
3,904 |
|
|
$ |
1,457 |
|
|
$ |
6,937 |
|
|
$ |
6,128 |
|
|
$ |
809 |
|
Air and Liquid Processing |
|
|
3,174 |
|
|
|
2,977 |
|
|
|
197 |
|
|
|
5,156 |
|
|
|
5,930 |
|
|
|
(774 |
) |
Corporate costs |
|
|
(3,492 |
) |
|
|
(3,593 |
) |
|
|
101 |
|
|
|
(6,968 |
) |
|
|
(6,777 |
) |
|
|
(191 |
) |
Consolidated |
|
$ |
5,043 |
|
|
$ |
3,288 |
|
|
$ |
1,755 |
|
|
$ |
5,125 |
|
|
$ |
5,281 |
|
|
$ |
(156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
||||||
Backlog: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forged and Cast Engineered Products |
|
|
|
|
|
|
|
|
|
|
$ |
231,450 |
|
|
$ |
247,603 |
|
|
$ |
(16,153 |
) |
|||
Air and Liquid Processing |
|
|
|
|
|
|
|
|
|
|
|
128,925 |
|
|
|
131,309 |
|
|
|
(2,384 |
) |
|||
Consolidated |
|
|
|
|
|
|
|
|
|
|
$ |
360,375 |
|
|
$ |
378,912 |
|
|
$ |
(18,537 |
) |
|||
Net sales approximated $110,988 and $107,211 for the three months ended June 30, 2024 and 2023, respectively, and $221,203 and $212,014 for the six months ended June 30, 2024 and 2023, respectively. The increase is attributable to higher sales for the ALP segment. A discussion of net sales for the Corporation’s two segments is included below.
Income from operations approximated $5,043 and $3,288 for the three months ended June 30, 2024 and 2023, respectively, and $5,125 and $5,281 for the six months ended June 30, 2024 and 2023, respectively. Included in operating income for the three and six months ended June 30, 2023 is a credit of approximately $1,874 for the reimbursement of past energy costs at one of the Corporation’s foreign operations by its local government (the “Foreign Energy Credit”). A discussion of income from operations for the Corporation’s two segments is included below.
Backlog equaled $360,375 as of June 30, 2024 versus $378,912 as of December 31, 2023. Backlog represents the accumulation of firm orders on hand which: (i) are supported by evidence of a contractual arrangement, (ii) include a fixed and determinable sales price, (iii) have reasonably assured collectability, and (iv) generally are expected to ship within two years from the backlog reporting date. Backlog at a certain date may not be a direct measure of future revenue for a particular order because price increases, negotiated subsequently to the original order, are not included in backlog until the updated contract is received from the customer and certain surcharges are not determinable until the order is complete and ready for shipment to the customer. Approximately 44% of the backlog is expected to be released after 2024. A discussion of backlog by segment is included below.
Costs of products sold, excluding depreciation and amortization, as a percentage of net sales, for the three months ended June 30, 2024 and 2023 approximated 79.0% and 79.7%, respectively, and for the six months ended June 30, 2024 and 2023 approximated 81.5% and 81.1%, respectively. For the FCEP segment, costs of products sold, excluding depreciation and amortization, for the three and six months ended June 30, 2024 and 2023 were comparable. Whereas the current year periods benefited from favorable pricing, the prior year periods benefited from the Foreign Energy Credit. For the ALP segment, costs of products sold, excluding depreciation and amortization, increased for the three and six months ended June 30, 2024, when compared to the same periods of the prior year, primarily due to an unfavorable product mix of heat exchangers, caused by the timing of shipments for several large orders, and centrifugal pumps, due to shipping older lower-margin orders.
Selling and administrative expenses for each of the three and six months periods were comparable and approximated $13,550 and $14,093 for the three months ended June 30, 2024 and 2023, respectively, and $26,523 and $26,280 for the six months ended June 30, 2024 and 2023, respectively.
Interest expense approximated $3,017 and $2,245 for the three months ended June 30, 2024 and 2023, respectively, and $5,774 and $4,316, for the six months ended June 30, 2024 and 2023, respectively. When compared to the same periods of the prior year, the increase is principally due to:
24
Other income – net is comprised of the following:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||
|
|
2024 |
|
2023 |
|
Change |
|
|
2024 |
|
2023 |
|
Change |
|
||||||
Net pension and other postretirement income |
|
$ |
1,187 |
|
$ |
1,257 |
|
$ |
(70 |
) |
|
$ |
2,366 |
|
$ |
2,513 |
|
$ |
(147 |
) |
Gain (loss) on foreign exchange transactions |
|
|
302 |
|
|
(1,244 |
) |
|
1,546 |
|
|
|
(190 |
) |
|
(1,159 |
) |
|
969 |
|
Unrealized (loss) gain on Rabbi trust investments |
|
|
(116 |
) |
|
89 |
|
|
(205 |
) |
|
|
106 |
|
|
248 |
|
|
(142 |
) |
Other |
|
|
8 |
|
|
(4 |
) |
|
12 |
|
|
|
3 |
|
|
(137 |
) |
|
140 |
|
|
|
$ |
1,381 |
|
$ |
98 |
|
$ |
1,283 |
|
|
$ |
2,285 |
|
$ |
1,465 |
|
$ |
820 |
|
Other income – net fluctuated period over period principally due to changes in foreign exchange gains and losses.
Income tax provision for each of the periods includes income taxes associated with the Corporation’s profitable operations. An income tax benefit is not able to be recognized on losses of certain of the Corporation’s entities since it is “more likely than not” the asset will not be realized. Accordingly, changes in the income tax provision for each of the periods include the effects of changes in the pre-tax income of the Corporation’s profitable operations in each jurisdiction and changes in expectations as to whether an income tax benefit will be able to be realized for the deferred income tax assets recognized.
In addition, as of December 31, 2023, as a result of the Corporation moving certain of its cast roll production from the U.K. to Sweden given the significant increases in energy costs in the U.K. due in part to Russia-Ukraine conflict, the Corporation’s U.K. operations entered into a three-year cumulative loss position resulting in a valuation allowance to be established against the net deferred income tax assets of the U.K. operations. As of June 30, 2024, the U.K. operations remain in a three-year cumulative loss position. Accordingly, the income tax provision for the three and six months ended June 30, 2024 does not include any income tax benefit for the net operating losses of the U.K. By comparison, the income tax provision for the three and six months ended June 30, 2023, which is prior to establishing the valuation allowance, includes a income tax benefit for the operating losses of the U.K.
Valuation allowances are recorded against the majority of the Corporation’s deferred income tax assets. The Corporation will maintain the valuation allowances until there is sufficient evidence to support the reversal of all or some portion of the allowances. Given the Corporation’s current earnings and anticipated future earnings in Sweden, the Corporation believes there is a reasonable possibility within the next 12 months, sufficient positive evidence may become available to allow the Corporation to conclude some portion of the valuation allowance will no longer be needed. Release of any portion of the valuation allowance would result in the recognition of deferred income tax assets on the Corporation’s condensed consolidated balance sheet and a decrease to the Corporation’s income tax expense in the period the release is recorded. The exact timing and the amount of the valuation allowance released are subject to, among many items, the level of profitability achieved. Once the valuation allowance is completely reversed, a tax provision would be recognized on future earnings.
Net income (loss) attributable to Ampco-Pittsburgh and net income (loss) per common share attributable to Ampco-Pittsburgh equaled $2,012 and $0.10 per common share and $423 and $0.02 per common share for the three months ended June 30, 2024 and 2023, respectively, and equaled $(705) and $(0.04) per common share and $1,099 and $0.06 per common share for the six months ended June 30, 2024 and 2023, respectively.
Net income attributable to Ampco-Pittsburgh and net income per common share attributable to Ampco-Pittsburgh for the three and six months ended June 30, 2023 include an after-tax benefit associated with the Foreign Energy Credit of $1,874 or $0.10 per common share.
25
Net Sales and Operating Results by Segment
Forged and Cast Engineered Products
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Forged and cast mill rolls |
|
$ |
72,647 |
|
|
$ |
73,003 |
|
|
$ |
(356 |
) |
|
$ |
146,043 |
|
|
$ |
144,702 |
|
|
$ |
1,341 |
|
FEP |
|
|
3,066 |
|
|
|
4,578 |
|
|
|
(1,512 |
) |
|
|
6,859 |
|
|
|
9,677 |
|
|
|
(2,818 |
) |
|
|
$ |
75,713 |
|
|
$ |
77,581 |
|
|
$ |
(1,868 |
) |
|
$ |
152,902 |
|
|
$ |
154,379 |
|
|
$ |
(1,477 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from Operations |
|
$ |
5,361 |
|
|
$ |
3,904 |
|
|
$ |
1,457 |
|
|
$ |
6,937 |
|
|
$ |
6,128 |
|
|
$ |
809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
||||||
Backlog |
|
|
|
|
|
|
|
|
|
|
$ |
231,450 |
|
|
$ |
247,603 |
|
|
$ |
(16,153 |
) |
|||
The change in net sales for the three and six months ended June 30, 2024, when compared to the same periods of the prior year, is primarily due to the following:
Changes in exchange rates between the periods reduced net sales slightly for the current year periods when compared to the same periods of the prior year.
Income from operations for the three and six months ended June 30, 2024 increased when compared to the three and six months ended June 30, 2023 primarily due to:
Changes in exchange rates between the periods reduced income from operations slightly for the current year periods when compared to the same periods of the prior year.
26
Backlog decreased at June 30, 2024 from December 31, 2023 by $16,153. The backlog for mill roll orders at June 30, 2024 decreased from December 31, 2023 by approximately $12,500 primarily due to timing of 2025 orders from most of the segment’s major forged roll customers which are expected in the third quarter of 2024. The backlog for FEP was comparable at June 30, 2024 and December 31, 2023. Lower foreign exchange rates used to translate the backlog of the Corporation’s foreign subsidies into the U.S. dollar decreased backlog at June 30, 2024 when compared to backlog at December 31, 2023 by approximately $3,600. At June 30, 2024, approximately 39% of backlog is expected to ship after 2024.
Air and Liquid Processing
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
2023 |
|
|
Change |
|
||||||
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Air handling systems |
|
$ |
14,043 |
|
|
$ |
8,892 |
|
|
$ |
5,151 |
|
|
$ |
26,553 |
|
|
$ |
18,096 |
|
|
$ |
8,457 |
|
Heat exchange coils |
|
|
11,979 |
|
|
|
11,105 |
|
|
|
874 |
|
|
|
22,802 |
|
|
|
21,740 |
|
|
|
1,062 |
|
Centrifugal pumps |
|
|
9,253 |
|
|
|
9,633 |
|
|
|
(380 |
) |
|
|
18,946 |
|
|
|
17,799 |
|
|
|
1,147 |
|
|
|
$ |
35,275 |
|
|
$ |
29,630 |
|
|
$ |
5,645 |
|
|
$ |
68,301 |
|
|
$ |
57,635 |
|
|
$ |
10,666 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income from Operations |
|
$ |
3,174 |
|
|
$ |
2,977 |
|
|
$ |
197 |
|
|
$ |
5,156 |
|
|
$ |
5,930 |
|
|
$ |
(774 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
Change |
|
||||||
Backlog |
|
|
|
|
|
|
|
|
|
|
$ |
128,925 |
|
|
$ |
131,309 |
|
|
$ |
(2,384 |
) |
|||
Net sales for the three and six months ended June 30, 2024 improved over the comparable prior year periods principally due to an increase in shipments of air handling systems attributable to higher order intake as a result in the segment’s expansion of its sales distribution network throughout 2023 and the additional manufacturing facility opened in the third quarter of 2023. Net sales of heat exchange coils for the three and six months ended June 30, 2024 improved when compared to net sales for the three and six months ended June 30, 2023 primarily as a result of higher net sales to original equipment manufacturers and fossil utility customers. Net sales of centrifugal pumps for the six months ended June 30, 2024 exceed the comparable prior year period due to a higher volume of shipments to commercial customers but declined for the second quarter of 2024 when compared to the second quarter of 2023 as a result of timing of shipments.
Operating income fluctuated between the periods principally due to:
Backlog at June 30, 2024 decreased from December 31, 2023 by $2,384. Backlog for air handling units decreased approximately $7,800 from December 31, 2023 due to the strong sales and lower order activity as a result of the manufacturing facilities being at capacity for the balance of 2024. Backlog for centrifugal pumps improved from December 31, 2023 by approximately $5,900 and backlog for heat exchangers was modestly lower versus December 31, 2023. At June 30, 2024, approximately 53% of backlog is expected to ship after 2024.
Non-GAAP Financial Measures
The Corporation presents non-GAAP adjusted income from operations which is calculated as income from operations excluding the Foreign Energy Credit for the three and six months ended June 30, 2023. This non-GAAP financial measure is not based on any standardized methodology prescribed by accounting principles generally accepted in the United States of America (“GAAP”) and may not be comparable to similarly titled measures presented by other companies.
The Corporation has presented non-GAAP adjusted income from 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 its business. This non-GAAP financial measure excludes significant charges or credits that are one-time charges or credits, or unrelated to the Corporation’s ongoing results of operations, or beyond its control. Additionally, a portion of the incentive and compensation arrangements for certain employees is based on the Corporation’s business performance. The Corporation believes this non-GAAP financial measure helps identify underlying trends in its business that otherwise could be masked by the effect of the items it excludes from adjusted income from operations.
27
In particular, the Corporation believes the exclusion of the Foreign Energy Credit can provide a useful measure for period-to-period comparisons of the Corporation’s core business performance. The Corporation also believes this non-GAAP financial measure provides useful information to management, shareholders and investors, and others in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by the Corporation’s management in its financial and operational decision-making.
Adjusted income from operations is not 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 adjusted income from operations rather than income from operations, which is the nearest GAAP equivalent. Among other things, there can be no assurance that additional benefits similar to the Foreign Energy Credit will not occur in future periods.
The adjustment reflected in adjusted income from operations is pre-tax. The tax impact associated with the adjustment is not significant due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdiction where the income is recognized.
The following is a reconciliation of income from operations to non-GAAP adjusted income from operations for the three and six months ended June 30, 2024 and 2023, respectively:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Income from operations, as reported (GAAP) |
|
$ |
5,043 |
|
|
$ |
3,288 |
|
|
$ |
5,125 |
|
|
$ |
5,281 |
|
Foreign Energy Credit (1) |
|
|
- |
|
|
|
(1,874 |
) |
|
|
- |
|
|
|
(1,874 |
) |
Income from operations, as adjusted (Non-GAAP) |
|
$ |
5,043 |
|
|
$ |
1,414 |
|
|
$ |
5,125 |
|
|
$ |
3,407 |
|
(1) Represents reimbursement of past energy costs at one of the Corporation’s foreign operations by its local government.
Liquidity and Capital Resources
|
|
Six Months Ended June 30, |
|
|||||||
|
|
2024 |
|
2023 |
|
Change |
|
|||
Net cash flows used in operating activities |
|
$ |
(780 |
) |
$ |
(7,105 |
) |
$ |
6,325 |
|
Net cash flows used in investing activities |
|
|
(4,370 |
) |
|
(9,560 |
) |
|
5,190 |
|
Net cash flows provided by financing activities |
|
|
5,922 |
|
|
17,404 |
|
|
(11,482 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
(166 |
) |
|
1 |
|
|
(167 |
) |
Net increase in cash and cash equivalents |
|
|
606 |
|
|
740 |
|
|
(134 |
) |
Cash and cash equivalents at beginning of period |
|
|
7,286 |
|
|
8,735 |
|
|
(1,449 |
) |
Cash and cash equivalents at end of period |
|
$ |
7,892 |
|
$ |
9,475 |
|
$ |
(1,583 |
) |
Net cash flows used in operating activities equaled $(780) and $(7,105) for the six months ended June 30, 2024 and 2023, respectively. The change in net cash flows from operating activities for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023 primarily is due to a lower investment in trade working capital. In addition, net cash flows used in operating activities includes:
Asbestos-related payments are expected to continue in the foreseeable future. The amount of asbestos-related payments and corresponding insurance recoveries is difficult to predict and can vary based on a number of factors, including changes in assumptions, as outlined in Note 15 to the condensed consolidated financial statements. Contributions to U.S. defined benefit plans for the remainder of 2024 are expected to approximate $2,700.
Net cash flows used in investing activities equaled $(4,370) and $(9,560) for the six months ended June 30, 2024 and 2023, respectively, and include capital expenditures for the FCEP segment related to the previously announced capital program undertaken to upgrade existing equipment at certain of its locations. The capital program was completed during the second quarter of 2024. In addition, a division of the ALP segment has initiated purchases of key machinery which may be able to be subsidized by various government incentives such as grants. Through June 30, 2024, the Corporation received approximately $808 in government incentives to help offset the cost of such key machinery. To date, no repayment obligations exist for any government incentives received. At June 30, 2024, commitments for future capital expenditures approximated $3,800 which is expected to be spent over the next 12-15 months.
28
Net cash flows provided by financing activities equaled $5,922 and $17,404 for the six months ended June 30, 2024 and 2023, respectively, a decrease of $11,482 primarily due to:
The effect of exchange rate changes on cash and cash equivalents is primarily attributable to the fluctuation of the British pound and Swedish krona against the U.S. dollar.
As a result of the above, cash and cash equivalents increased by $606 during 2024 and ended the period at $7,892 in comparison to $7,286 at December 31, 2023. The majority of the Corporation’s cash and cash equivalents is held by its foreign operations. Domestic customer remittances are used to pay down borrowings under the Corporation’s revolving credit facility daily, resulting in minimal cash maintained by the Corporation’s domestic operations. Cash held by the Corporation’s foreign operations is considered to be permanently re-invested; accordingly, a provision for estimated local and withholding tax has not been made. If the Corporation were to remit any foreign earnings to it or any of its U.S. entities, the estimated tax impact would be insignificant.
Funds on hand, funds generated from future operations and availability under the Corporation’s revolving credit facility are expected to be sufficient to finance the Corporation’s operational requirements and debt service costs. The maturity date for the revolving credit facility is June 29, 2026 and, subject to the other terms and conditions of the revolving credit agreement, will become due on that date. As of June 30, 2024, remaining availability under the revolving credit facility approximated $20,540, net of standard availability reserves. In addition, although the previously announced capital program undertaken to upgrade existing equipment at certain of the Corporation’s FCEP locations has been completed, subject to the approval of the lender, approximately $1,589 remains available under the Corporation's equipment finance facility to finance other capital projects of the Corporation. Since a significant portion of the Corporation’s debt includes variable rate interest, increases in the underlying benchmark rates will increase the Corporation’s debt service costs.
While the Corporation anticipates it has sufficient liquidity to finance the Corporation’s operational requirements, debt service costs and capital expenditures, it may from time to time consider alternatives, potential transactions and other strategies in an attempt to enhance its liquidity. Given such measures are forward looking, the Corporation cannot ensure it would be successful in achieving such enhancements or be able to improve its liquidity.
Litigation and Environmental Matters
See Note 15 and Note 16 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, 2023, remain unchanged.
Recently Issued Accounting Pronouncements
See Note 1 to the condensed consolidated financial statements.
29
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
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 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 designed to ensure information required to be disclosed by a company in the reports it files under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by an issuer in the reports it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Corporation’s management, including the principal executive officer and principal financial officer, has concluded the Corporation’s disclosure controls and procedures were effective as of June 30, 2024.
Changes in internal control. There has been no change in the Corporation’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
30
PART II – OTHER INFORMATION
AMPCO-PITTSBURGH CORPORATION
Item 1 Legal Proceedings
The information contained in Note 15 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” included under Item 1A of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023, except as to the Corporation's ability to satisfy the continued listing requirements of the New York Stock Exchange (“NYSE”) or the NYSE American Exchange.
The Corporation's common stock is currently listed on the NYSE and its Series A warrants are listed on the NYSE American Exchange, with each imposing objective and subjective requirements for continued listing. Continued listing criteria of the NYSE include maintaining prescribed levels of financial condition, market capitalization and shareholders’ equity. Specifically, a company with common equity listed on the NYSE is subject to delisting if (i) its average market capitalization over a consecutive 30 trading-day period is below $15 million, or (ii) its common stock trades at an “abnormally low” selling price or volume of trading. In either case, if not maintained by the Corporation, the NYSE will promptly suspend the Corporation's common stock from trading on the NYSE and would begin the process to delist the Corporation's common stock from the NYSE, subject to the Corporation's right to appeal under the NYSE rules.
Additionally, the NYSE requires a listed company to maintain average global market capitalization over a consecutive 30 trading-day period of at least $50 million or maintain shareholders’ equity of at least $50 million and maintain a share price of at least $1.00. If the company does not regain compliance within a cure period up to a maximum of 18 months, it will be subject to delisting. Should the Corporation receive a notice of non-compliance, the NYSE may allow up to an 18-month cure period if the Corporation presents a plan to become compliant with adequate strategic actions and progress reporting satisfactory to the NYSE. If the NYSE determines the Corporation's common stock fails to satisfy the requirements for continued listing, or the Corporation continues to fail to meet listing criteria, the Corporation's common stock could be de-listed from the NYSE, which could impact potential liquidity for the Corporation's shareholders.
Continued listing criteria of the NYSE American Exchange include maintaining prescribed levels of financial condition, market capitalization and shareholders’ equity. Among other requirements, there must be an aggregate of at least 50,000 Series A warrants. Satisfaction of the NYSE American Exchange’s listing requirements therefore depends upon the extent to which warrant holders elect to exercise their Series A warrants. There can be no assurance the Corporation will continue to meet these, or other, listing standards of the NYSE American Exchange with respect to the Series A warrants. If the Corporation fails to meet the listing criteria, the Corporation's warrants could be de-listed from the NYSE American Exchange, which could impact potential liquidity for the Corporation's shareholders.
These “Risk Factors” should be carefully considered, understanding such risk factors may not describe every risk facing the Corporation. Additional risks and uncertainties not currently known to the Corporation or that the Corporation currently deems to be immaterial could adversely affect its business, financial condition and results of operations in the future.
Items 2-4 None.
Item 5 Other Information
(a) On August 8, 2024, the Board of Directors of the Corporation approved an amendment and restatement to the change in control agreement between Samuel C. Lyon, who serves as President of Union Electric Steel Corporation (“UES”), and the Corporation (as amended and restated, the “Lyon Change in Control Agreement”). As amended and restated, the Lyon Change in Control Agreement provides, among other things, that, subject to the terms and conditions set forth in the agreement, in the event of a “Change in Control” (as such term is defined in the Lyon Change in Control Agreement) of the Corporation or UES, followed by a termination of Mr. Lyon’s employment with the Corporation within 24 months of such change in control, Mr. Lyon will be entitled to receive a severance payment in the amount equal to the sum of (i) three times the annual base salary either at the time of the change in control or at termination, whichever is higher, and (ii) three times the bonus paid for the prior year, in addition to certain other benefits.
31
The definition of “Change in Control” in the Lyon Change in Control Agreement was also amended to provide that in addition to the existing events constituting a Change in Control, a Change in Control would also be deemed to have occurred if (x) any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Corporation is or becomes the beneficial owner, directly or indirectly, of securities of UES representing fifty percent (50%) or more of the combined voting power of UES’s then outstanding securities, (y) the shareholders of UES approve a merger of, or consolidation involving, UES in which UES’s Common Stock, no par value per share, respectively, is converted into shares or securities of another corporation, or into cash or other property; or (z) the shareholders of the UES approve a plan of complete liquidation of UES or an agreement for the sale or disposition by UES of all or substantially all UES’s assets, respectively, either of which is followed by a distribution of all or substantially all of the net proceeds to the shareholders.
On August 8, 2024, the Board of Directors of the Corporation also approved an amendment and restatement to the change in control agreement between David G. Anderson, who serves as President of Air & Liquid Systems Corporation (“ALS”), and the Corporation (as amended and restated, the “Anderson Change in Control Agreement” and collectively with the Lyon Change in Control Agreement, the “Change in Control Agreements”). As amended and restated, the Anderson Change in Control Agreement provides, among other things, that, subject to the terms and conditions set forth in the agreement, in the event of a “Change in Control” (as such term is defined in the Anderson Change in Control Agreement) of the Corporation or ALS, followed by a termination of Mr. Anderson’s employment with the Corporation within 24 months of such change in control, Mr. Anderson will be entitled to receive a severance payment in the amount equal to the sum of (i) three times the annual base salary either at the time of the change in control or at termination, whichever is higher, and (ii) three times the bonus paid for the prior year, in addition to certain other benefits. The definition of “Change in Control” in the Anderson Change in Control Agreement was also amended to provide that in addition to the existing events constituting a Change in Control, a Change in Control would also be deemed to have occurred if (x) any “person” (as defined in Sections 13(d) and 14(d) of the Exchange Act) other than the Corporation is or becomes the beneficial owner, directly or indirectly, of securities of ALS representing fifty percent (50%) or more of the combined voting power of ALS’s then outstanding securities, (y) the shareholders of ALS approve a merger of, or consolidation involving, ALS in which the ALS’s Common Stock, $1.00 par value per share, respectively, is converted into shares or securities of another corporation, or into cash or other property; or (z) the shareholders of the ALS approve a plan of complete liquidation of ALS or an agreement for the sale or disposition by ALS of all or substantially all ALS’s assets, respectively, either of which is followed by a distribution of all or substantially all of the net proceeds to the shareholders.
This summary of the Change in Control Agreements do not purport to be complete and is qualified in its entirety by reference to the full text of the Change in Control Agreements, which are filed herewith as Exhibit 10.1 and 10.2, respectively, and incorporated herein by reference..
(b) None.
(c) During the three months ended June 30, 2024, no director or officer of the Corporation adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement,' with each term being defined in Item 408(a) of Regulation S-K.
32
Item 6 Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Form 10-Q.
|
|
|
|
|
(3.1) |
|
|
|
|
|
|
|
|
|
(3.2) |
|
|
|
|
|
|
|
|
|
(3.3) |
|
† |
|
|
|
|
|
|
|
(10.1) |
|
†+ |
|
|
|
|
|
|
|
(10.2) |
|
†+ |
|
|
|
|
|
|
|
(31.1) |
|
† |
|
|
|
|
|
|
|
(31.2) |
|
† |
|
|
|
|
|
|
|
(32.1) |
|
†† |
|
|
|
|
|
|
|
(32.2) |
|
†† |
|
|
|
|
|
|
|
(101.INS) |
|
* |
|
Inline XBRL Instance Document |
|
|
|
|
|
(101.SCH) |
|
** |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
|
|
(104) |
|
|
|
The cover page for the Corporation’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101. |
† |
|
|
|
Filed herewith. |
†† |
|
|
|
Furnished herewith. |
+ |
|
|
|
Management contracts, compensatory plans or arrangements required to filed as an exhibit hereto pursuant to Item 601 of Regulation S-K. |
* |
|
|
|
The instance document does not appear in the Interactive Data File because its XBRL (Extensible Business Reporting Language) tags are embedded within the Inline XBRL document. |
** |
|
|
|
Attached as Exhibit 101 to this report are the following documents formatted in Inline XBRL: (i) the Condensed Consolidated Balance Sheets at June 30, 2024 and December 31, 2023, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and 2023, (iv) the Condensed Consolidated Statements of Shareholders' Equity for the three and six months ended June 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023, and (vi) Notes to Condensed Consolidated Financial Statements. |
33
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 12, 2024 |
|
BY: |
|
/s/ J. Brett McBrayer |
|
|
|
|
J. Brett McBrayer |
|
|
|
|
Director and Chief Executive Officer |
|
|
|
|
|
DATE: August 12, 2024 |
|
BY: |
|
/s/ Michael G. McAuley |
|
|
|
|
Michael G. McAuley |
|
|
|
|
Senior Vice President, Chief Financial Officer and Treasurer |
34
Exhibit 3.3
AMPCO-PITTSBURGH CORPORATION
INCORPORATED UNDER THE LAWS OF PENNSYLVANIA
BY-LAWS
AS AMENDED AND RESTATED ON JUNE 4, 2024
Table of Contents
Article I SHAREHOLDERS |
1 |
|
Section 1. |
Annual Meeting. |
1 |
Section 2. |
Business to be Conducted at Annual Meeting. |
1 |
Section 3. |
Special Meetings. |
4 |
Section 4. |
Place of Meetings. |
4 |
Section 5. |
Notice of Meetings; Waiver. |
4 |
Section 6. |
Record Dates. |
5 |
Section 7. |
Quorum. |
5 |
Section 8. |
Voting. |
5 |
Section 9. |
Voting by Ballot. |
6 |
Section 10. |
Adjournments. |
6 |
Section 11. |
Proxies. |
6 |
Section 12. |
Organization; Procedure. |
7 |
Section 13. |
Inspectors of Election. |
7 |
Section 14. |
Voting Lists. |
7 |
Section 15. |
Participation in Meetings by Electronic Means. |
7 |
Section 16. |
No Consent of Shareholders in Lieu of Meeting. |
8 |
Article II BOARD OF DIRECTORS |
8 |
|
Section 1. |
General Powers. |
8 |
Section 2. |
Number and Terms of Office. |
8 |
Section 3. |
Vacancies. |
8 |
Section 4. |
Resignations. |
8 |
Section 5. |
Removal of Directors. |
8 |
Section 6. |
Annual Meeting. |
9 |
Section 7. |
Regular Meetings. |
9 |
Section 8. |
Special Meetings. |
9 |
Section 9. |
Quorum and Voting. |
9 |
Section 10. |
Adjournment. |
10 |
Section 11. |
Chairman of the Board of Directors. |
10 |
Section 12. |
Compensation. |
10 |
Section 13. |
Committees. |
10 |
Section 14. |
Remote Participation in Meetings. |
11 |
Section 15. |
Action Without a Meeting. |
11 |
Section 16. |
Section 16 Regulations; Manner of Acting. |
11 |
Section 17. |
Nomination of Directors. |
11 |
Section 18. |
Limit on Liability. |
16 |
Section 19. |
Director Emeritus. |
16 |
Section 20. |
Advisory Committees |
17 |
Article III OFFICERS |
17 |
|
Section 1. |
Officers. |
17 |
Section 2. |
Term. |
17 |
Section 3. |
Compensation. |
17 |
i
Section 4. |
Duties. |
17 |
Section 5. |
Removal. |
18 |
Section 6. |
Prescription of Agency Authority. |
18 |
Section 7. |
Chief Executive Officer. |
18 |
Section 8. |
President. |
18 |
Section 9. |
Vice Presidents. |
18 |
Section 10. |
Treasurer. |
19 |
Section 11. |
Secretary. |
19 |
Section 12. |
Additional Officers. |
20 |
Section 13. |
Limit on Liability |
20 |
Article IV CAPITAL STOCK |
21 |
|
Section 1. |
Certificates of Stock. |
21 |
Section 2. |
Lost, Stolen or Destroyed Certificates. |
21 |
Section 3. |
Transfer of Stock. |
21 |
Section 4. |
Registered Shareholders. |
22 |
Section 5. |
Transfer Agent and Registrar. |
22 |
Article V INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS |
22 |
|
Section 1. |
Mandatory Indemnification of Directors and Officers. |
22 |
Section 2. |
Mandatory Advancement of Expenses to Directors and Officers. |
23 |
Section 3. |
Permissive Indemnification and Advancement of Expenses. |
23 |
Section 4. |
Enforcement. |
23 |
Section 5. |
General. |
24 |
Section 6. |
Definition of Corporation. |
24 |
Section 7. |
Definition of Authorized Representative. |
24 |
Section 8. |
Savings Clause. |
25 |
Section 9. |
Insurance. |
25 |
Section 10. |
Funding to Meet Indemnification Obligations. |
25 |
Article VI GENERAL PROVISIONS |
25 |
|
Section 1. |
Fiscal Year. |
25 |
Section 2. |
Seal. |
26 |
Section 3. |
Execution of Instruments. |
26 |
Section 4. |
Deposits. |
26 |
Section 5. |
Voting as Shareholder. |
26 |
Section 6. |
Definition of Electronic Transmission. |
26 |
Section 7. |
Definition of Public Announcement. |
26 |
Article VII AMENDMENT OF BY-LAWS |
27 |
|
Article VIII EMERGENCY BY-LAWS |
27 |
|
Section 1. |
When Operative. |
27 |
Section 2. |
Meetings. |
27 |
Section 3. |
Lines of Succession. |
28 |
Section 4. |
Offices. |
28 |
Section 5. |
Liability. |
28 |
Section 6. |
Repeal or Change. |
28 |
ii
Article IX NON-APPLICABILITY OF STATUTE |
28 |
|
Article X CONSTRUCTION |
28 |
|
Article XI FORUM SELECTION |
29 |
|
Section 1. |
Exclusive Forum. |
29 |
Section 2. |
Submission to Jurisdiction. |
29 |
iii
Ampco-Pittsburgh Corporation (the “Corporation”)
Incorporated Under the Laws of Pennsylvania
BY-LAWS
As amended and restated on June 4, 2024
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting.
An annual meeting of shareholders for the election of Directors of the Corporation (each a “Director”) and the transaction of such other business as may properly come before the meeting shall be held on such date and at such time as the Board of Directors of the Corporation (the “Board of Directors”) may designate, with such time date and time being set forth in the notice of the annual meeting provided pursuant to Section 5 of this Article I. If the date fixed for an annual meeting, or for the reconvening of an adjourned annual meeting, is a legal holiday, the meeting shall be held at the same hour on the next succeeding full business day which is not a legal holiday.
Section 2. Business to be Conducted at Annual Meeting.
At an annual meeting of shareholders, only such business (other than nominations of Directors, which must be made in compliance with, and shall be exclusively governed by, Section 17 of Article II) shall be conducted as shall have been brought before the meeting (i) pursuant to the Corporation’s notice of the meeting, (ii) by or at the direction of the Board of Directors, (iii) by the chairman of the meeting, or (iv) by any shareholder of the Corporation who is a shareholder of record both at the time of giving of the notice provided for in this Section 2 and at the time of the annual meeting, who shall be entitled to vote at such meeting and who shall have complied with the notice procedures set forth in this Section 2. Clause (iv) in the immediately preceding sentence shall be the exclusive means for a shareholder to submit such business (other than matters properly brought under Rule 14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and included in the Corporation’s notice of meeting) before an annual meeting of shareholders.
For any such business to be properly brought before an annual meeting by a shareholder pursuant to this Section 2, notice in writing must be delivered or mailed by certified mail to the Secretary of the Corporation (the “Secretary”) and received at the principal offices of the Corporation not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is to be more than 30 days before or more than 60 days after such anniversary date, notice by the shareholder must be received not earlier than the 120th day prior to the date of such annual meeting and not later than the 90th day prior to the date of such annual meeting or, if the first public announcement of the date of such advanced or delayed annual meeting is less than 100 days prior to the date of such annual meeting, the tenth day following the day on which public announcement of the date of the annual meeting is first made. In no event shall any adjournment or postponement of an annual meeting or announcement thereof commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above.
Such shareholder notice shall set forth, as to each matter the shareholder proposes to bring before the annual meeting, each of the following:
(a) a brief description of the business to be brought before the annual meeting and the reasons for conducting such business at such meeting, and the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these By-Laws, the text of the proposed amendment);
(b) as to both the shareholder giving the notice and any Shareholder Associated Person on whose behalf the proposal is made:
(1) the name and address, as they appear on the Corporation’s books, of such shareholder and of each Shareholder Associated Person;
(2) the class or series and number of the Corporation’s securities which are owned, directly or indirectly, beneficially and of record by such shareholder and by each Shareholder Associated Person;
(3) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism related to any security of the Corporation or with a value derived in whole or in part from the value of any security of the Corporation, whether or not such instrument or right shall be subject to settlement in the underlying security of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such shareholder or Shareholder Associated Person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of any security of the Corporation;
(4) any hedging or other transaction or series of transactions entered into by or on behalf of, or any other agreement, arrangement, or understanding (including any borrowing or lending of shares) the effect or intent of which is to mitigate loss or manage risk or to increase or decrease the voting power of, such shareholder or Shareholder Associated Person with respect to any share of the Corporation;
(i) any proxy, contract, arrangement, understanding, or relationship pursuant to which such shareholder or Shareholder Associated Person has a right to vote any shares of any class or series of the Corporation’s capital stock;
(ii) any short interest of such shareholder or Shareholder Associated Person in any security of the Corporation (for purposes of this Section 2, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
(iii) any rights to dividends on any securities of the Corporation owned beneficially by such shareholder or Shareholder Associated Person that are separated or separable from the underlying securities of the Corporation;
(iv) any proportionate interest in shares of any class or series of the Corporation’s capital stock or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder or Shareholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner;
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(v) any performance-related fees (other than an asset-based fee) to which such shareholder or Shareholder Associated Person is entitled based on any increase or decrease in the value of securities of the Corporation or Derivative Instruments as of the date of such notice, including any such interests held by members of the immediate family of such shareholder or Shareholder Associated Person sharing the same household (which information shall be supplemented by such shareholder and Shareholder Associated Person not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date); and
(vi) any other information relating to such shareholder or Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of Directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder;
(vii) any material interest of the shareholder or Shareholder Associated Person on whose behalf the proposal is made in such business;
(viii) a description of all agreements, arrangements and understandings between such shareholder or such Shareholder Associated Person and any other person or persons (including their names) in connection with the proposal of such business;
(ix) a representation that the shareholder is a holder of record of capital stock of the Corporation, is entitled to vote at such meeting and intends to appear, in person or by proxy, at the annual meeting to propose such business; and
(x) a representation as to whether the shareholder or such Shareholder Associated Person is or intends to be part of a group that intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal and/or (B) otherwise to solicit proxies from shareholders in support of such proposal.
For purposes of these By-Laws, a “Shareholder Associated Person” of any shareholder includes (x) any person or entity controlling, directly or indirectly, or acting in concert with, the shareholder; (y) any beneficial owner of shares of the Corporation owned of record or beneficially by the shareholder; or (z) any person or entity controlling, controlled by, or under common control with any person or entity described in subsections (x) or (y).
The shareholder and any Shareholder Associated Person shall update and supplement the notice required by this Section 2 by giving notice that the information provided or required to be provided in such notice shall be true and correct (1) as of the record date for the meeting and (2) as of the date that is ten (10) business days prior to the meeting or any adjournment or recess thereof. Such updates and supplements shall be delivered or mailed by certified mail to the Secretary and received at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or recess thereof) not later than five (5) business days prior to the date for the meeting or, if practicable, any adjournment or recess thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or recessed).
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The Chairman of the Board of Directors (the “Chairman”) may, if the facts warrant, determine that any proposed business was not properly brought before the annual meeting in accordance with the provisions of this Section 2; and if the Chairman should so determine, the Chairman shall so declare to the annual meeting, and any such business shall not be transacted. A shareholder seeking to bring business before an annual meeting in accordance with the provisions of this Section 2 shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 2; provided, however, that any references in these By-Laws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the applicable requirements pursuant to this Section 2. Nothing in this Section 2 shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act. The provisions of this Section 2 shall also govern what constitutes timely notice for purposes of Rule 14a-4(c) of the Exchange Act.
Section 3. Special Meetings.
A special meeting of shareholders shall be held on such date and at such time as shall be set forth in the notice of such special meeting provided pursuant to Section 5 of this Article I. Special meetings of shareholders, other than those required by applicable law, may be called only by the Chairman or a majority of the Directors then in office. The only business to be transacted at a special meeting of shareholders shall be the business stated in the notice of such meeting. Upon the written or electronically transmitted request of the person or persons, as the case may be, who have duly called a special meeting, it shall be the duty of the Secretary to fix the date and time of the meeting, to be held not more than 60 days after the receipt of the request.
Section 4. Place of Meetings.
Each annual or special meeting of shareholders shall be held at such place, either within or without the Commonwealth of Pennsylvania, as the Board of Directors may designate, with such place being set forth in the notice of such meeting provided pursuant to Section 5 of this Article I; provided, however, if a meeting is held by means of the Internet or other electronic communications technology in a fashion pursuant to which shareholders have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders and pose questions to the directors, the meeting need not be held at a particular geographic location.
Section 5. Notice of Meetings; Waiver.
The Secretary shall mail or electronically transmit, or cause to be mailed or electronically transmitted, notice stating the place (or if held by means of the Internet or other electronic communications technology, the means of remote communications by which shareholders and proxyholders may be deemed to be present in person and vote at such meeting), date and time of each meeting of shareholders and, in the case of a special meeting, the general nature of the business to be transacted in accordance with any requirements set forth in the Pennsylvania Business Corporation Law (the “PBCL”). If such notice is mailed, it shall be deemed to have been given to a shareholder when deposited in the United States mail, postage prepaid, directed to the shareholder at the address of such shareholder as it appears on the record of shareholders of the Corporation or supplied by such shareholder to the Corporation for the purpose of notice. Notice given by electronic transmission shall be deemed given (i) if by facsimile, when directed to a number at which the shareholder has consented to receive such notice; (ii) if by electronic mail, when directed to an electronic mail address at which the shareholder consented to receive such notice; (iii) if by posting on an electronic network together with separate notice to the shareholder of such specific posting, upon the later of (A) such posting and (B) giving of such separate notice; and (iv) if by any other form of electronic transmission, when directed to the shareholder.
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No notice of any meeting of shareholders need be given to any shareholder who properly waives notice, whether before or after the meeting and whether in writing or by electronic transmission or otherwise. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in a waiver of notice. The attendance, in person or by proxy, of any shareholder at any meeting of shareholders shall constitute a proper waiver of notice of such meeting, except if the shareholder attends a meeting solely for the express purpose of objecting, prior to or at the commencement of such meeting, to the transaction of any business on the ground that the meeting is not lawfully called or convened.
Section 6. Record Dates.
The Board of Directors may fix a date and time in accordance with the PBCL as a record date for the determination of the shareholders entitled to notice of or to vote at any meeting of shareholders, to receive payment of any dividend or distribution, to receive any allotment of rights or with respect to any change, conversion or exchange of shares. Only such shareholders as shall be shareholders of record at the close of business on the record date so fixed shall be entitled to notice of or to vote at such meeting, to receive payment of such dividend or distribution, to receive such allotment of rights or to exercise rights in respect to any change, conversion or exchange of shares, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after the record date fixed as aforesaid.
Section 7. Quorum.
Except as otherwise provided or permitted by applicable law or the Articles of Incorporation of the Corporation (as amended, the “Articles of Incorporation”), the presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on a particular matter to be acted upon shall constitute a quorum for the purpose of acting upon such matter at a meeting of shareholders. If a quorum is not present, in person or by proxy, at a meeting of shareholders, those present may adjourn from time to time to reconvene at such date, time and place as they may determine. The shareholders present at any duly organized meeting of shareholders may continue to transact business until adjournment, notwithstanding the withdrawal of sufficient shareholders to otherwise render the remaining shareholders less than a quorum.
Section 8. Voting.
Except as otherwise required by applicable law or the Articles of Incorporation, shareholders shall be entitled to one vote for each share of capital stock owned by them as reflected on the books of the Corporation and entitled to vote at the particular meeting of shareholders at which the shareholder is present, in person or by proxy. Except as otherwise required by applicable law, the Articles of Incorporation or these By-Laws, the affirmative vote of a majority of the votes cast by all shareholders entitled to vote on a particular matter (and, if any shareholders are entitled to vote thereon as a class, upon receiving the affirmative vote of a majority of the votes cast by the shareholders entitled to vote as a class) at a meeting of shareholders at which a quorum is present shall be the act of the shareholders with respect to such matter. At each meeting of shareholders at which Directors are to be elected, provided a quorum is present thereat, the Directors shall be elected by a plurality of the votes validly cast in such election. Shareholders shall be entitled to cumulative voting rights in the election of Directors to the extent permitted by the PBCL. The Chairman shall fix and announce at each meeting of shareholders the date and time of the opening and closing of the polls for each matter upon which the shareholders will act at such meeting.
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Section 9. Voting by Ballot.
No vote of the shareholders need be taken by written ballot or conducted by Inspectors of Election, unless otherwise required by applicable law. Any vote of the shareholders which need not be taken by ballot may be conducted in any manner approved by the Chairman. If authorized by the Board of Directors, a ballot may be submitted by electronic transmission, provided that any such electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder or proxyholder.
Section 10. Adjournments.
At any meeting of shareholders, only the Chairman or the holders of a majority of the voting power of the shares of capital stock entitled to vote thereat, present, in person or by proxy, shall have the power to adjourn such meeting to another date, time or place or by means of the Internet or other electronic communication technology, without notice other than announcement at the meeting of the date, time and place, if any, at which such meeting will be reconvened and the means of electronic communication technology, if any, by which shareholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting; provided, however, any notice required by applicable law shall be given. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted on the original date of the meeting.
Section 11. Proxies.
Any shareholder entitled to vote at any meeting of shareholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such shareholder by proxy. A shareholder may authorize a valid proxy in any manner permitted by applicable law, including by executing a written instrument executed by such shareholder, or by causing such shareholder’s signature to be affixed to such writing by any reasonable means, including by facsimile signature or by transmitting or authorizing an electronic transmission to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent. No such proxy shall be voted or acted upon after the expiration of three years from the date of such proxy, unless such proxy provides for a longer period. Every proxy shall be revocable at the pleasure of the shareholder executing it, unless such proxy is coupled with an interest sufficient in law to support an irrevocable power and except in any other case in which applicable law provides that such a proxy shall be irrevocable. A shareholder may revoke any proxy which is not irrevocable by giving notice of such revocation in writing or by electronic transmission to the Secretary or the designated agent of the Secretary. Proxies authorized by electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the shareholder. Any copy, facsimile telecommunication or other reliable reproduction of a writing or electronic transmission created pursuant to this Section 11 may be substituted or used in lieu of the original writing or electronic transmission, as the case may be, for any and all purposes for which the original writing or electronic transmission, as the case may be, could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or electronic transmission, as the case may be. Every proxy shall be filed with or transmitted to the Secretary or the Corporation’s designated agent.
Any shareholder directly or indirectly soliciting proxies from other shareholders must use a proxy card color other than white, which shall be reserved for exclusive use by the Corporation.
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Section 12. Organization; Procedure.
At every meeting of shareholders, the Chairman shall preside over the meeting, or, in the case of a vacancy in office or absence of the Chairman, one of the following persons present, in the order stated, shall preside: any presiding officer designated by the Board of Directors pursuant to Section 12 of Article III of these By-Laws, the Chief Executive Officer, the President, the vice presidents in their order of earliest election to that office, or a person chosen by vote of the shareholders present. The Secretary, or, in the event of his absence or disability, an Assistant Secretary, or if there no Assistant Secretary is present thereat then an appointee of the presiding officer at the meeting, shall act as secretary of the meeting. The order of business and all other matters of procedure at every meeting of shareholders shall be determined by such presiding officer.
Section 13. Inspectors of Election.
Before each meeting of shareholders, the Chairman or any officer of the Corporation designated by resolution of the Board of Directors shall appoint one or more Inspectors of Election (each an “Inspector”) for the meeting. If any of the Inspectors shall fail to attend or refuse or be unable to serve, a substitute shall be appointed by the Chairman. An Inspector may be an employee of the Corporation and shall have such duties as are provided by applicable law. Upon request by the Chairman, an Inspector shall take and sign an oath faithfully to execute the duties of an Inspector of Election with strict impartiality and according to the best of such person’s ability.
Section 14. Voting Lists.
The officer who has charge of the stock ledger of the Corporation shall prepare a complete list of the shareholders entitled to vote at a meeting of shareholders. The list shall be arranged in alphabetical order, showing the address of each shareholder and the number of shares registered in the name of each shareholder; provided, however, that, subject to applicable law, the Corporation shall not be required to include electronic mail addresses or other electronic contact information for shareholders on such list. The list shall be produced and kept open at the time and place of the meeting of shareholders and shall be subject to the inspection of any shareholder during such meeting for the purposes thereof. The Board of Directors also may elect to make the list available at such other times and by such other means as permitted by applicable law. If the Board of Directors determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to shareholders of the Corporation. If a meeting of shareholders is to be held solely by means of remote communication, then the list also shall be open to the examination of any shareholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting of shareholders. The list shall presumptively determine the identity of the shareholders entitled to vote at the meeting and the number of shares that each such shareholder may vote at the meeting.
Section 15. Participation in Meetings by Electronic Means.
The Chairman may permit, on such conditions as may be determined by him, one or more shareholders or proxyholders to participate in a meeting of shareholders, count for the purposes of determining a quorum thereat and exercise all rights and privileges to which such person or persons might be entitled were such person or persons, as the case may be, personally in attendance at such meeting (including the right to vote or to consent to or dissent from any action) by means of conference telephone or other electronic means, including the Internet. Unless the Board of Directors so permits by resolution or the Chairman so permits, no person may participate in a meeting of shareholders by means of a conference telephone or other electronic means, including the Internet.
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Section 16. No Consent of Shareholders in Lieu of Meeting.
No action, including the authorization of any business or the expression of consent or dissent to any corporate action, may be taken by the shareholders of the Corporation without a meeting, whether by written consent or otherwise, except by the unanimous consent of all holders of capital stock of the Corporation entitled to vote upon such action.
ARTICLE IIBOARD OF DIRECTORS
Section 1. General Powers.
Except as otherwise provided by applicable law, the Articles of Incorporation or these By-laws, the Board of Directors shall manage or direct the management of the property, affairs and business of the Corporation, and the Board of Directors may exercise all the powers of the Corporation. In addition to the powers and authorities expressly conferred upon it by these By-Laws, the Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by applicable law, the Articles of Incorporation or these By-Laws directed or required to be exercised or done solely by the shareholders of the Corporation.
Section 2. Number and Terms of Office.
The number of members of the Board of Directors shall be fixed in the manner specified in the Articles of Incorporation. Directors shall serve for such terms as are specified in the Articles of Incorporation. A Director shall hold office until the expiration of the term for which he was elected and until his successor shall be elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
Section 3. Vacancies.
Except as set forth in Section 5 of this Article II, vacancies in the Board of Directors, including vacancies resulting from an increase in the number of members of the Board of Directors, shall be filled in the manner specified in the Articles of Incorporation.
Section 4. Resignations.
Any Director may resign at any time by delivering a notice of resignation in writing or by electronic transmission to the Chairman, the Chief Executive Officer or the Secretary. Unless otherwise specified therein, such a resignation shall take effect upon delivery.
Section 5. Removal of Directors.
Any Director may be removed at any time by shareholder vote as specified in the Articles of Incorporation. Any vacancy in the Board of Directors caused by any such removal may be filled at such meeting by the shareholders entitled to vote for the election of the Director so removed. If such shareholders do not fill such a vacancy at such meeting, the vacancy may be filled in the manner provided in Section 3 of this Article II. The repeal of any provision of the Articles of Incorporation or these By-Laws prohibiting, or the addition of any provision to the Articles of Incorporation or these By-Laws permitting, the removal by the shareholders of the Board of Directors, a class of the Board of Directors or any one or more Directors without assigning any cause shall not apply to any incumbent Director during the balance of the term for which he was elected.
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Section 6. Annual Meeting.
An annual meeting of the Board of Directors shall be held each year as soon as practicable after the annual meeting of shareholders, at the place where such meeting of shareholders was held or on such other date and at such other time and place, either within or without the Commonwealth of Pennsylvania, as the Board of Directors may designate, for the purposes of organization, election of officers and the transaction of such other business as shall come before the meeting.
Section 7. Regular Meetings.
The Board of Directors from time to time may, by resolution, provide for the holding of regular meetings. Regular meetings of the Board of Directors may be held on such dates and at such times and places, either within or without the Commonwealth of Pennsylvania, as the Board of Directors may designate. Notice of regular meetings need not be given; provided, however, that if the Board of Directors shall fix or change the time or place of any regular meeting, notice of such action shall be given by regular mail, electronic mail or other means of electronic transmission, telephone or personal delivery to each Director who shall not have been present at the meeting at which such action was taken. Any Director who submits a waiver of notice in writing or by electronic transmission to the Secretary before or after such meeting or attends the first regular meeting after such action is taken without protesting, prior to or at the commencement of such meeting, the lack of notice to him of the prior regular meeting, shall be deemed to have waived notice of such action to the fullest extent permitted by applicable law. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in a waiver of notice.
Section 8. Special Meetings.
Special meetings of the Board of Directors may be called only by the Chairman, the Chief Executive Officer or a majority of the Directors in office, to be held on such date, at such time as will permit the giving of notice as provided in this Section 8, and at such place, either within or without the Commonwealth of Pennsylvania, as may be designated by the person or persons, as the case may be, calling the meeting, as the case may be. Any business may be acted upon at any special meeting of the Directors. The Secretary shall give, or cause to be given, notice by first-class or express mail, personal delivery, courier service, or electronic transmission, stating the place (or if held by means of the Internet or other electronic communications technology, the means of remote communications by which Directors may be deemed to be present in person at and participate in such meeting), date and time of each special meeting of the Board of Directors. Notice under this Section 8 given by electronic transmission shall be given at least 24 hours before the meeting; notice under this Section 8 given by personal delivery, courier service, or express mail shall be given at least 48 hours before the meeting; notice given under this Section 8 by first-class mail shall be given at least five (5) days before the meeting. Notice of any special meeting need not be given to any Director who attends such meeting or the first regular meeting thereafter without protesting the lack of notice to him, prior to or at the commencement of such meeting, or to any Director who submits a waiver of notice, whether before or after such meeting.
Section 9. Quorum and Voting.
The presence of a majority of Directors then in office shall constitute a quorum for the purpose of acting upon proper matters at a meeting of the Board of Directors. If a quorum is not present at a meeting of the Board of Directors, those Directors present may adjourn from time to time to reconvene at such time and place as they may determine. The Directors present at any duly organized meeting of the Board of Directors may continue to transact business until adjournment, notwithstanding the withdrawal of sufficient Directors to otherwise render the remaining Directors less than a quorum. Except as otherwise required by applicable law or the Articles of Incorporation, the vote of a majority of the Directors present at any meeting of the Board of Directors at which a quorum is present shall be the act of the Board of Directors.
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Section 10. Adjournment.
At any meeting of the Board of Directors, the Chairman or a majority of the Directors shall have the power to adjourn such meeting to another date, time or place or by means of the Internet or other electronic communication technology, without notice other than announcement at the meeting of the date, time and place, if any, at which such meeting will be reconvened and the means of electronic communication technology, if any, by which Directors may be deemed to be present and vote at such adjourned meeting.
Section 11. Chairman of the Board of Directors.
The Board of Directors may elect from among the members of the Board of Directors a Chairman. The Chairman shall preside at all meetings of the Board of Directors and otherwise shall perform such other duties as may from time to time be assigned to him by the Board of Directors. The Chairman may also be the Chief Executive Officer of the Corporation (the “Chief Executive Officer”) or be employed by the Corporation in any other capacity. In the event of the absence or disability of the Chairman, any duties assigned to the Chairman by the Board of Directors may be performed by a presiding officer chosen by a majority of the Board of Directors, and such a presiding officer may be granted the authority to take any action required or permitted to be taken by the Chairman by applicable law, the Articles of Incorporation or these By-Laws as if such presiding officer were the Chairman. All references in these By-Laws to the “Chairman” shall include such a presiding officer in the event of the absence or disability of the Chairman.
Section 12. Compensation.
Directors shall receive such compensation for their services as shall be determined by resolution of the Board of Directors. Directors shall also be reimbursed for their expenses for attending Board of Directors and committee meetings as determined from time to time by resolution of the Board of Directors.
Section 13. Committees.
The Board of Directors may, by resolution adopted by a majority of the Directors then in office, appoint such other committees as it may deem advisable, and each such committee shall have such authority and perform such duties as the Board of Directors may delegate to such committee; provided, however, that no committee appointed by the Board of Directors shall have any power or authority as to (i) the submission to shareholders of any action requiring approval of shareholders under the PBCL, (ii) the creation or filling of vacancies in the Board of Directors, (iii) the adoption, amendment or repeal of these By-laws, (iv) the amendment or repeal of any resolution of the Board of Directors that by its terms is amendable or repealable only by the Board of Directors or (v) action on matters committed by resolution of the Board of Directors exclusively to another committee of the Board of Directors or to the Board of Directors as a whole. At each meeting of the Board of Directors, all action taken by each committee since the preceding meeting of the Board of Directors shall be reported to it. Notwithstanding anything contained in this Section 13, no committee shall have any power or authority prohibited from being vested in such a committee by applicable law, the Articles of Incorporation or these By-Laws.
The term “Board of Directors” or “Board” when used in any provision of these By-laws related to the organization or procedures of or the manner of taking action by the Board of Directors, shall be construed to include and refer to any executive or other committee of the Board of Directors.
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Subject to any charter adopted by the Board with respect to a committee of the Board of Directors, any provision of these By-laws related or referring to action to be taken by the Board of Directors or the procedures required therefor shall be satisfied by the taking of corresponding action by a committee of the Board of Directors to the extent authority to take the action has been delegated to the committee pursuant to this Section 13.
Section 14. Remote Participation in Meetings.
One or more Directors may participate in a meeting of the Board of Directors or any committee thereof by means of a conference telephone or other remote communications equipment, including electronic communications equipment, by means of which all persons participating in the meeting can hear each other. If a meeting is held by means of the Internet or other electronic communications technology in a fashion pursuant to which Directors have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the Directors and converse with and pose questions to any one or more of the other Directors, the meeting need not be held at a particular geographic location.
Section 15. Action Without a Meeting.
Any action which is required or permitted to be taken at a meeting of the Board of Directors or any committee of the Board of Directors may be taken without a meeting, if, before, on, or after the effective date of the action, a consent or consents in writing or by electronic transmission, setting forth the action so taken, are signed by all of the Directors or the members of the particular committee, as the case may be, in office on the date the first consent is signed. The consent or consents must be filed with the minutes of proceedings of the Board of Directors.
Section 16. Regulations; Manner of Acting.
To the extent not inconsistent with applicable law, the Articles of Incorporation and these By-Laws, the Board of Directors may adopt such rules and regulations for conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. The Directors shall act only as a collective Board, and the individual Directors shall have no power as such.
Section 17. Nomination of Directors.
(a) Only persons who are nominated in accordance with the procedures set forth in these By-Laws shall be eligible for election as Directors. For purposes of this Section 17, a “nominee” shall include any person being considered to fill a vacancy on the Board of Directors.
(b) Nominations of persons who satisfy the eligibility requirements of subsection (d) of this Section 17 for the election of Directors may be made by the Board of Directors, by a committee appointed by the Board of Directors with authority from the Board to do so, or by any shareholder who complies with subsection (c) of this Section 17.
(c) Nominations of persons who satisfy the eligibility requirements of subsection (d) of this Section 17 for the election of Directors may be made by any person that (i) is a shareholder of record both at the time of giving of the notice provided for in this Section 17 and at the time of the annual meeting, (ii) is entitled to vote for the election of Directors at the annual meeting and (iii) complies with the notice procedures set forth in this Section 17. Nomination for the election of Directors pursuant to this subsection (c) of this Section 17 is the exclusive means for a shareholder to make nominations before a meeting of shareholders. For nominations to be properly brought before a meeting of shareholders pursuant to subsection (c) of this Section 17, such nomination (other than a nomination to fill a vacancy resulting from removal from office by a vote of the shareholders under Section D of Article Sixth of the Articles of Incorporation) may be made by a shareholder only if:
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(1) Advance written notice of a proposed nomination by a shareholder setting forth the information required under subsection (e) of this Section 17 is delivered or mailed by certified mail to the Secretary and received at the principal executive offices of the Corporation no later than (i) with respect to an election to be held at an annual meeting, 90 days prior to the anniversary of the previous year’s annual meeting of shareholders, or (ii) with respect to an election to be held at a special meeting of shareholders or at an annual meeting that is held more than 70 days prior to the anniversary of the previous year’s annual meeting, the close of business on the tenth day following the date on which notice of such meeting is first given to the shareholders by public announcement. In no event shall any adjournment or postponement of a meeting or the announcement thereof commence a new time period (or extend any time period) for the giving of a shareholder’s notice as described above;
(2) Any update or supplement to the notice delivered pursuant to Section 17(c)(1) above is delivered pursuant to the requirements of subsections (f) and (g) of this Section 17;
(3) The nominating shareholder has complied in all respects with the requirements of Section 14 of the Exchange Act, including without limitation, the requirements of Rule 14a-19 (as such rule and regulations may be amended from time to time by the Securities and Exchange Commission (the “Commission”), including any Commission staff interpretation relating thereto); and
(4) The Board of Directors or an executive officer designated thereby has determined that the shareholder has reasonably satisfied the requirements of this Section 17.
(d) To be eligible to be a nominee for election as a Director pursuant to this Section 17, the prospective nominee (whether nominated by or at the direction of the Board of Directors or by a shareholder), or someone acting on such prospective nominee’s behalf, must deliver (with respect to any nomination by a shareholder pursuant to this Section 17, in accordance with any applicable time periods prescribed for delivery of notice under this Section 17) to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request). Upon request, the prospective nominee must also provide a written representation and agreement, in the form provided by the Secretary upon written request, that such prospective nominee:
(1) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such prospective nominee, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such prospective nominee’s ability to comply, if elected as a director of the Corporation, with such prospective nominee’s fiduciary duties under applicable laws;
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(2) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein; and
(3) would be in compliance if elected as a director of the Corporation, and will comply with all applicable corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation.
(e) Each notice delivered pursuant to subsection (c)(1) of this Section 17 shall set forth:
(1) as to each person whom the shareholder proposes to nominate for election or reelection as a Director:
(i) all information relating to such person that would be required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to and in accordance with Regulation 14A under the Exchange Act (including such person’s written consent to (1) being named as a nominee in any proxy materials relating to the Corporation’s next annual meeting or special meeting, as applicable, and (2) to serving as a Director if elected); and
(ii) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such shareholder and beneficial owner on whose behalf the nomination is being made, and their respective affiliates and associates, or others acting in concert therewith, on the one hand, and each proposed nominee, and such nominees’ respective affiliates and associates, or others acting in concert therewith, on the other hand, including all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the shareholder making the nomination and any beneficial owner on whose behalf the nomination is made, or any affiliate or associate thereof or person acting in concert therewith, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant;
(2) as to the shareholder giving the notice and any Shareholder Associated Person on whose behalf the nomination is made:
(i) the name and address, as they appear on the Corporation’s books, of such shareholder, and of each Shareholder Associated Person;
(ii) the class or series and number of shares of the Corporation’s securities which are owned, directly or indirectly, beneficially and of record, by such shareholder and by each Shareholder Associated Person;
(iii) any Derivative Instrument directly or indirectly owned beneficially by such shareholder or Shareholder Associated Person and any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of any security of the Corporation;
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(iv) any hedging or other transaction or series of transactions entered into by or on behalf of, or any other agreement, arrangement, or understanding (including any borrowing or lending of shares) the effect or intent of which is to mitigate loss or manage risk or to increase or decrease the voting power of, such shareholder or Shareholder Associated Person with respect to any share of the Corporation;
(v) any proxy, contract, arrangement, understanding, or relationship pursuant to which such shareholder or Shareholder Associated Person has a right to vote any shares of any class or series of the Corporation’s capital stock;
(vi) any short interest of such shareholder or Shareholder Associated Person in any security of the Corporation (for purposes of this Section 17, a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security);
(vii) any rights to dividends on any securities of the Corporation owned beneficially by such shareholder or Shareholder Associated Person that are separated or separable from the underlying securities of the Corporation;
(viii) any proportionate interest in shares of any class or series of the Corporation’s capital stock or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such shareholder or Shareholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner;
(ix) any performance-related fees (other than an asset-based fee) to which such shareholder or beneficial owner is entitled based on any increase or decrease in the value of securities of the Corporation or Derivative Instruments, if any, as of the date of such notice, including any such interests held by members of the immediate family of such shareholder or Shareholder Associated Person sharing the same household (which information shall be supplemented by such shareholder and Shareholder Associated Person not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date);
(x) any significant equity interests or any Derivative Instruments or short interests in any principal competitor of the Corporation held by such shareholder;
(xi) any direct or indirect interest of such shareholder or any Shareholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
(xii) all information that would be required to be set forth in a Schedule 13D filed pursuant to Rule 13d-1(a) or an amendment pursuant to Rule 13d-2(a) if such a statement were required to be filed under the Exchange Act and the rules and regulations promulgated thereunder by such shareholder or beneficial owner, if any;
(xiii) in the case of a notice of nomination delivered pursuant to this Section 17, a representation that such nominating shareholder or beneficial owner, if any, intends to solicit the holders of shares representing at least 67% of the shares of Voting Stock in support of director nominees other than the Corporation’s nominees in accordance with Rule 14a-19; and
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(xiv) any other information relating to such shareholder or Shareholder Associated Person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder.
(3) a representation that the shareholder is a holder of record of capital stock of the Corporation is entitled to vote at such meeting and intends to appear in person or by proxy at the annual meeting to propose such nomination; and
(4) a representation as to whether the shareholder or any such Shareholder Associated Person is or intends to be part of a group that intends to solicit proxies from shareholders in support of such nomination.
(f) The shareholder and any Shareholder Associated Person shall update and supplement the notice required by this Section 17 by giving notice that the information provided or required to be provided in such notice shall be true and correct (1) as of the record date for the meeting and (2) as of the date that is ten (10) business days prior to the meeting or any adjournment, postponement or recess thereof. Such updates and supplements shall be delivered or mailed by certified mail to the Secretary and received at the principal executive offices of the Corporation not later than five (5) business days after the record date for the meeting (in the case of the update and supplement required to be made as of the record date), and (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment, postponement or recess thereof) not later than five (5) business days prior to the date for the meeting or, if practicable, any adjournment, postponement or recess thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned, postponed or recessed). No such supplement or update may include any new nominees who were not named in the original notice of nomination or to be deemed to cure any defects or limit the remedies (including without limitation under these By-laws) available to the Corporation relating to any defect.
(g) In addition, the shareholder making such nomination shall promptly provide any other information reasonably requested by the Corporation, including information to determine (1) the eligibility of such proposed nominee to serve as an independent Director of the Corporation or that could be material to a reasonable shareholder’s understanding of the independence, or lack thereof, of such nominee; (2) whether the proposed nominee has any direct or indirect relationship with the Corporation other than those relationships that have been deemed categorically immaterial pursuant to the Corporation’s corporate governance guidelines or its related party transaction policy; (3) whether the proposed nominee would, by serving on the Board of Directors, violate or cause the Corporation to be in violation of these By-laws, the Articles of Incorporation, the rules and listing standards of the principal U.S. exchange upon which the common stock of the Corporation is listed or any applicable law, rule or regulation, and (4) whether the proposed nominee is or has been subject to any event specified in Item 401(f) of Regulation S-K (or successor rule) of the SEC.
(h) A shareholder who has delivered a notice of nomination pursuant to this Section 17 shall promptly certify to the Corporation in writing that it has complied with the requirements of Rule 14a-19 promulgated under the Exchange Act and deliver no later than five business days prior to the annual meeting or special meeting, as applicable, reasonable evidence that it has complied with such requirements.
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(i) Notwithstanding anything to the contrary in these By-laws, unless otherwise required by law, if any shareholder (i) provides notice pursuant to Rule 14a-19 promulgated under the Exchange Act and (ii) subsequently (A) notifies the Corporation that such shareholder no longer intends to solicit proxies in support of director nominees other than the Corporation’s director nominees in accordance with Rule 14a-19, (B) fails to comply with the requirements of Rule 14a-19 or (C) fails to provide reasonable evidence sufficient to satisfy the Corporation that such requirements have been met, such shareholder’s nomination(s) shall be deemed null and void and the Corporation shall disregard any proxies or votes solicited for any nominee proposed by such shareholder.
(j) The Chairman may, if the facts warrant, determine that any proposed nomination was not properly brought before the annual meeting in accordance with the provisions of this Section 17; and if the Chairman shall so determine, the Chairman shall so declare to the annual meeting, and any such nomination not properly brought before the annual meeting shall not be considered. A shareholder proposing a nomination for Director shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 17; provided, however, that any references in these By-Laws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the applicable requirements pursuant to this Section 17.
(k) Subject to Rules 14a-8 and 14a-19 promulgated under the Exchange Act, nothing in these By-Laws shall be construed to permit any shareholder, or give any shareholder the right to include or have disseminated or described in any proxy materials relating to the Corporation’s next annual meeting or special meeting, as applicable, any nomination of a director or directors or any other business proposal.
(l) Subject to applicable law, subsections (h), (i) and (k) of this Section 17 shall apply to annual meetings of shareholders occurring after the annual meeting of shareholders for 2023.
Section 18. Limit on Liability.
A Director shall not be personally liable for monetary damages for any action taken, or any failure to take any action in his capacity as such; provided, however, that this provision shall not eliminate or limit the liability of a director to the extent that such elimination or limitation of liability is expressly prohibited by the PBCL as in effect at the time of the alleged action or failure to take action by such Director.
Any repeal or modification of this Section 18 shall not adversely affect any right or protection existing at the time of such repeal or modification to which any Director or former Director may be entitled under this Section 18. The rights conferred by this Section 18 shall continue as to any person who has ceased to be a Director and shall inure to the benefit of the heirs of any Director or former Director and the executors and administrators of the estate of any Director or former Director.
Section 19. Director Emeritus.
The Board of Directors may, at its discretion, designate by resolution any former Director as a Director Emeritus. The designation, number and term of each Director Emeritus shall be within the sole discretion of the Board of Directors, and the Board of Directors may remove, with or without cause, a Director Emeritus at any time.
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A Director Emeritus, shall provide consulting or advisory services to the Board of Directors as requested from time to time by the Board of Directors and may be invited to attend meetings of the Board of Directors at the request of the Chairman but shall not vote, serve on any committee of the Board of Directors, be counted in determining a quorum or have any of the duties or obligations imposed on a Director or officer of the Corporation under the PBCL, the Articles of Incorporation or these By-Laws or, except as provided in the last sentence of this Section 19, otherwise be considered to be a Director or officer of the Corporation. Each Director Emeritus shall be compensated for his services and reimbursed expenses incurred as determined by the Board of Directors by resolution from time to time. A Director Emeritus shall be entitled to benefits and protections in accordance with Section 18 of this Article II and Article V of these By-Laws as if such person were deemed to be a Director or former Director of the Corporation, as the case may be.
Section 20. Advisory Committees
The Board of Directors may, at its discretion, designate by resolution one or more Advisory Committees consisting of one or more Directors Emeritus, to provide consulting or advisory services to the Board of Directors as requested from time to time by the Board of Directors. Directors Emeritus serving on an Advisory Committee shall be considered for all purposes to be governed by the terms of Section 19 of this Article II.
ARTICLE IIIOFFICERS
Section 1. Officers.
The Board of Directors at any time may elect a Chief Executive Officer, a President, one or more Vice Presidents, a Treasurer, a Secretary and such other officers as may be elected in accordance with Section 12 of this Article III. Any two or more offices may be held by the same person. No officer need be a Director of the Corporation. The officers shall be elected at the annual meeting of the Board of Directors pursuant to Section 6 of Article II.
Section 2. Term.
Unless otherwise designated by the Board of Directors, each officer shall hold office until the expiration of the term for which he was elected and until his successor shall be elected and qualified, subject, however, to prior death, resignation, retirement, disqualification or removal from office.
Section 3. Compensation.
The salaries and other compensation of all officers of the Corporation specifically identified in Section 1 of this Article III shall be fixed as determined by the Board of Directors or a committee of the Board of Directors to which the Board of Directors has delegated authority to do so; provided, however, that the salaries and other compensation of any additional officers appointed pursuant to Section 12 of this Article III also may be fixed by the Chief Executive Officer or the President of the Corporation (the “President”).
Section 4. Duties.
All officers of the Corporation shall have such authority and perform such duties as are provided in these By-laws or as otherwise may be determined by the Board of Directors or the Chairman. However, each officer shall exercise such powers and perform such duties as may be required by applicable law.
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Section 5. Removal.
Any officer may be removed, with or without cause, at any time by the Board of Directors. Any additional officers appointed pursuant to Section 12 of this Article III also may be removed, with or without cause, by the Chief Executive Officer or the President. Any officer may resign at any time by delivering a notice of resignation in writing signed by such officer or by electronic submission to the Board of Directors, the Chief Executive Officer or the President. Any officer specifically identified in Section 1 of this Article III shall also provide a copy of such a written notice of resignation to the Board of Directors in any event. Unless otherwise specified therein, any resignation by an officer shall take effect upon delivery. Any vacancy occurring in any office specified identified in Section 1 of this Article III due to the death, resignation or removal of such officer or otherwise shall be filled by the Board of Directors, and any vacancy due to the death, resignation or removal of an officer appointed pursuant to Section 12 of this Article III, or otherwise, shall be filled at the discretion of the Chief Executive Officer or President, if at all.
Section 6. Prescription of Agency Authority.
Notwithstanding any other provisions of these By-laws, the Board of Directors shall have the power from time to time by resolution to prescribe by what officers or agents of the Corporation particular documents or instruments may or shall be signed, countersigned, endorsed or executed.
Section 7. Chief Executive Officer.
The Chief Executive Officer shall have general control and supervision of the policies and operations of the Corporation subject, however, to the review and superseding action of the Board of Directors. The Chief Executive Officer shall perform all duties and have all powers as provided by applicable law, the Articles of Incorporation an these By-Laws and, subject to applicable law and the Articles of Incorporation, shall perform all such other duties and have all such other powers as the Board of Directors may from time to time prescribe and may delegate any such powers or duties to other officers of the Corporation in his discretion.
Section 8. President.
The President shall perform all duties and have all powers as may be assigned or delegated to him from time to time by the Board of Directors or the Chief Executive Officer, subject to applicable law and the Articles of Incorporation, and subject to the review and superseding action of the Board of Directors or the Chief Executive Officer. In the event of the absence or disability of the Chief Executive Officer, all duties of the Chief Executive Officer shall be performed and all powers of the Chief Executive Officer may be exercised by the President to the extent designated by the Chief Executive Officer, or, failing such a designation by the Chief Executive Officer, all such duties shall be performed and all such powers may be exercised by the President, subject in any case to review and superseding action by the Board of Directors.
Section 9. Vice Presidents.
Each Vice President of the Corporation (each a “Vice President”) shall perform all duties and have all powers as may be assigned or delegated to him from time to time by the Board of Directors, the Chief Executive Officer or the President, subject to applicable law and the Articles of Incorporation, and subject to the review and superseding action of the Board of Directors, the Chief Executive Officer or the President.
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In the event of the absence or disability of the Chief Executive Officer and/or the President, all duties of the Chief Executive Officer and/or President, as the case may be, shall be performed, and all powers of the Chief Executive Officer and/or President, as the case may be, may be exercised by such Vice President to the extent designated by the Chief Executive Officer or the President, as the case may be, or, failing such a designation, all such duties shall be performed and all such powers may be exercised by each Vice President in the order of their earliest election to that office, subject in any case to review and superseding action by the Board of Directors, the Chief Executive Officer or the President.
Section 10. Treasurer.
The Treasurer of the Corporation (the “Treasurer”) shall:
(a) have charge and supervision over and be responsible for the moneys, securities, receipts and disbursements of the Corporation, and keep or cause to be kept full and accurate records of all receipts of the Corporation;
(b) cause the moneys and other valuable effects of the Corporation to be deposited in the name and to the credit of the Corporation in such banks or trust companies or with such bankers or other depositaries as shall be selected as provided in Section 4 of Article VI;
(c) cause the moneys of the Corporation to be disbursed by checks or drafts (signed as provided in Section 3 of Article VI) upon the authorized depositaries of the Corporation and cause to be taken and preserved proper vouchers for all moneys disbursed;
(d) sign (unless an Assistant Treasurer or the Secretary or an Assistant Secretary shall have signed) certificates representing stock of the Corporation, the issuance of which shall have been authorized by the Board of Directors; and
(e) perform, in general, all duties incident to the office of treasurer and such other duties as may be specified in these By-Laws or as may be assigned to the Treasurer from time to time by the Board of Directors, the Chief Executive Officer or the President.
Section 11. Secretary.
The Secretary shall:
(a) keep or cause to be kept a record of all the proceedings of the meetings of the shareholders and of the Board of Directors in books provided for that purpose;
(1) cause all notices to be duly given in accordance with the provisions of these By-Laws and as required by law;
(2) whenever any Committee shall be appointed pursuant to a resolution of the Board of Directors, furnish a copy of such resolution to the members of such Committee;
(3) be the custodian of the records and of the seal of the Corporation and cause such seal (or a facsimile thereof) to be affixed to all certificates representing shares of the Corporation prior to the issuance thereof and to all instruments the execution of which on behalf of the Corporation under its seal shall have been duly authorized in accordance with these By-Laws, and when so affixed the Secretary may attest the same;
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(4) properly maintain and file all books, reports, statements, certificates and all other documents and records required by applicable law, the Articles of Incorporation or these By-Laws;
(5) have charge of the stock books and ledgers of the Corporation and cause the stock and transfer books to be kept in such manner as to show at any time the number of shares of stock of the Corporation of each class issued and outstanding, the names and the addresses of the holders of record of such shares, the number of shares held by each holder and the date as of which each became such holder of record;
(6) sign (unless the Treasurer or an Assistant Treasurer or Assistant Secretary of the Corporation shall have signed) certificates representing shares of the Corporation the issuance of which shall have been authorized by the Board of Directors; and
(7) perform, in general, all duties incident to the office of secretary and such other duties as may be specified in these By-Laws or as may be assigned to the Secretary from time to time by the Board of Directors, the Chief Executive Officer or the President.
Section 12. Additional Officers.
The Board of Directors, the Chief Executive Officer or the President may appoint such other officers and agents as it or he, as the case may be, may deem appropriate (including Assistant Secretaries and Assistant Treasurers), and such other officers and agents shall hold their offices for such terms and shall exercise such powers and perform such duties as may be determined from time to time by the Board of Directors, the Chief Executive Officer or the President, as the case may be. The Board of Directors from time to time may delegate to any officer or agent the power to appoint subordinate officers or agents and to prescribe their respective rights, terms of office, authorities and duties. Any such officer or agent may remove any such subordinate officer or agent appointed by him, with or without cause. Any Assistant Treasurer or Assistant Secretary of the Corporation and any other assistant to any officer shall perform such duties as are, from time to time, delegated to him by the officer to whom he is an assistant, the Board of Directors, the Chief Executive Officer or the President. At the request of the Board of Directors, the Chairman, the Chief Executive Officer or the President, any officer of the Corporation may temporarily perform the duties of Assistant Secretary or Assistant Treasurer, and when so acting shall be deemed on a temporary basis to be an Assistant Secretary or Assistant Treasurer, as the case may be, and shall have the powers of and be subject to the restrictions imposed upon that officer.
Section 13. Limit on Liability
An officer of the Corporation shall not be personally liable for monetary damages for any action taken, or any failure to take any action in his or her capacity as such; provided, however, that this provision shall not eliminate or limit the liability of an officer to the extent that such elimination or limitation of liability is expressly prohibited by the PBCL as in effect at the time of the alleged action or failure to take action by such officer; provided further, however, that this Section 13 shall only apply to officers of the Corporation after this Section 13 to these By-Laws is approved by the shareholders of the Corporation in accordance with Pennsylvania law (the “Section 1735 Shareholder Approval”).
This Section 13 shall apply to any breach of performance of duty or any failure of performance of duty by any officer of the Corporation occurring after the Section 1735 Shareholder Approval is obtained. Any repeal or modification of this Section 13 shall not adversely affect any right or protection existing at the time of such repeal or modification to which any officer or former officer of the Corporation may be entitled under this Section 13. The rights conferred by this Section 13 shall continue as to any person who has ceased to be an officer of the Corporation and shall inure to the benefit of the heirs of any officer or former officer of the Corporation and the executors and administrators of the estate of any officer or former officer of the Corporation.
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ARTICLE IVCAPITAL STOCK
Section 1. Certificates of Stock.
The shares of the capital stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares evidenced by registration in book-entry accounts. Any such resolution shall not apply to shares represented by a certificate until each certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock in the Corporation represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation, by the Chief Executive Officer, the President or a Vice President, and by the Treasurer or any Assistant Treasurer, or the Secretary or any Assistant Secretary, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Articles of Incorporation and these By-Laws.
All signatures on such certificate may be a facsimile, engraved or printed, to the extent permitted by applicable law. In case any officer, transfer agent or registrar who has signed, or whose facsimile signature has been placed upon, a certificate shall have ceased to hold such office, or to be such transfer agent or registrar, as the case may be, before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
Section 2. Lost, Stolen or Destroyed Certificates.
The Board of Directors may direct that a new certificate be issued or an appropriate book-entry be recorded in place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, upon delivery to the Board of Directors of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Board of Directors may require the owner of such lost, stolen or destroyed certificate, or his legal representative, to post with the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate or the recording of any such appropriate book-entry.
Section 3. Transfer of Stock.
Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person or persons, as the case may be, entitled thereto or record the succession, assignment or transfer by appropriate book-entry procedures, cancel the old certificate and record the transaction upon its books. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to applicable laws. Subject to the provisions of applicable law, the Articles of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation.
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Section 4. Registered Shareholders.
Prior to due surrender of shares, whether or not certificated, for registration of transfer, the Corporation may treat the registered owner thereof as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.
Section 5. Transfer Agent and Registrar.
The Board of Directors may appoint one or more transfer agents and/or one or more registrars with respect to any class or series of the Corporation’s capital stock, and may require all certificates representing shares of such class or series to bear the signature of any such transfer agents or registrars.
ARTICLE VINDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 1. Mandatory Indemnification of Directors and Officers.
The Corporation shall promptly indemnify, to the fullest extent now or hereafter permitted by applicable law, the Articles of Incorporation and this Section 1, each Director or officer (including each former Director or officer) of the Corporation (hereafter, an “indemnitee”) who was or is made a party to or a witness in, or is threatened to be made a party to or a witness in, any threatened, pending or completed action, suit, investigation, or proceeding, whether civil, criminal, administrative or investigative and whether external or internal to the Corporation (hereafter, a “proceeding”), by reason of the fact that the indemnitee is or was an authorized representative, against all expenses (including attorneys’ fees, disbursements and other charges), judgments, losses, fines (including excise taxes and penalties) and amounts paid in settlement (collectively, “Losses”) actually and reasonably incurred or suffered by the indemnitee in connection with such proceeding. Indemnification pursuant to this Section 1 shall include cases in which indemnification is permitted pursuant to the provisions of Chapter 17, Subchapter D, of the PBCL. Indemnification pursuant to this Section 1 shall be made in every case described in Section 1 hereof except:
(a) in connection with a proceeding (or any claim, issue or matter therein or any part thereof) initiated by the indemnitee, except (1) if the Board of Directors of the Corporation has approved the initiation or bringing of such claim or (2) any compulsory counterclaim, compulsory cross-claim, or required joinder made by indemnitee in a proceeding not initiated by indemnitee; or
(b) with respect to any act that is established, by a final, unappealable adjudication adverse to the indemnitee, as having been material to the cause of action so adjudicated and as having constituted either willful misconduct or recklessness; or
(c) for liability imposed in a proceeding by or for the benefit of the Corporation to recover any profit pursuant to the provisions of Section 16(b) of the Exchange Act and any rules and regulations thereunder or similar provisions of any applicable state law; provided, however, that the exclusion in this clause (c) shall not apply to expenses (including attorney’s fees, disbursements and other charges) incurred by indemnitee in such a proceeding.
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Notwithstanding the foregoing provisions of this Section 1, to the extent that an indemnitee is successful on the merits or otherwise in defense of any proceeding or any part thereof or in defense of any claim, issue or matter therein, including but not limited to obtaining a dismissal without prejudice or a settlement without admission of liability, the indemnitee shall be promptly indemnified by the Corporation against all Losses actually and reasonably incurred or suffered by the indemnitee in connection therewith.
The right of indemnification pursuant to this Section 1 is conferred in order to attract and retain the services of highly qualified Directors and officers and to encourage them to make corporate decisions without fear of strike suits and legal harassment. Indemnification pursuant to this Section 1 is therefore declared to be consistent with the fiduciary duty of the Corporation’s Board of Directors. Except as specifically provided in this Section 1, such indemnification shall be made by the Corporation without any requirement that any determination be made or any action be taken by the Board of Directors, shareholders or legal counsel of the Corporation. A failure of the Board of Directors, shareholders, or legal counsel to make a determination or take action favorable to the claim of an indemnitee for indemnification pursuant to this Section 1, or the making of a determination or taking of action adverse to such a claim, shall not preclude indemnification under this Article V or create any presumption that the indemnitee is not entitled to such indemnification.
Section 2. Mandatory Advancement of Expenses to Directors and Officers.
To the fullest extent now or hereafter permitted by applicable law, the Articles of Incorporation and these By-Laws, the Corporation shall promptly pay all expenses (including attorneys’ fees, disbursements and other charges) actually incurred by an indemnitee in defending or appearing in any proceeding described in Section 1 of this Article V in advance of the final disposition of such proceeding upon receipt of (A) an undertaking by or on behalf of the indemnitee to repay all amounts advanced if it is ultimately specifically determined by a final, unappealable adjudication that the indemnitee is not entitled to be indemnified by the Corporation and (B) an irrevocable assignment to the Corporation of all payments to which the indemnitee may be or become entitled, under any policy of insurance or otherwise, in reimbursement of any such expenses paid by the Corporation pursuant to this Section 2. Notwithstanding the foregoing, no advance payment shall be made by the Corporation pursuant to this Section 2 if the Board of Directors reasonably and promptly determines by a majority vote of the Directors then in office who are not parties to the proceeding that, based upon the facts known to the Board of Directors at the time the determination is made, the matter is of the kind described in Section 1(a) of this Article V.
Section 3. Permissive Indemnification and Advancement of Expenses.
The Corporation may, as determined by the Board of Directors from time to time:
(a) indemnify, to the fullest extent permitted by Section 1 of this Article V, any other person who was or is made a party to or required to appear in, or is threatened to be made a party to or required to appear in, or was or is otherwise involved in, any threatened, pending or completed proceeding by reason of the fact that such person is or was an authorized representative of the Corporation, both as to action in such person’s official capacity and as to action in another capacity while holding such office or position, against all Losses actually and reasonably incurred or suffered by such person in connection with such action or proceeding, with the same effect as though such person were an “indemnitee” as defined in Section 1 of this Article V; and
(b) pay expenses incurred by any such other person by reason of his participation in any such proceeding in advance of the final disposition of such proceeding upon receipt of an undertaking
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by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation and to repay all amounts advanced for which he is reimbursed under any policy of insurance or otherwise, with the same effect as though such person were an “indemnitee” as defined in Section 1 of this Article V.
Section 4. Enforcement.
If the Corporation refuses or fails to make any payment to an indemnitee required by this Article V, the indemnitee shall be promptly indemnified by the Corporation against expenses (including attorneys’ fees, disbursements and other charges) actually incurred by the indemnitee in connection with the successful establishment of such indemnitee’s right to indemnification or advancement of expenses, in whole or in part, in an action in a court of competent jurisdiction.
Section 5. General.
Each Director or officer of the Corporation shall be deemed to act in such capacity in reliance upon such rights of indemnification and advancement of expenses as are provided in this Article V. The rights of indemnification and advancement of expenses provided by this Article V shall not be deemed exclusive of any other rights to which any person seeking indemnification or advancement of expenses may be entitled under any bylaws, agreement, vote of shareholders or disinterested Directors, statute or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office or position, and shall continue as to a person who has ceased to be an authorized representative of the Corporation and shall inure to the benefit of the heirs and personal representatives of such person. Indemnification and advancement of expenses under this Article V shall be provided whether or not the indemnified liability arises or arose from any threatened, pending or completed action by or in the right of the Corporation. Any repeal or modification of this Article V shall not adversely affect any right or protection existing at the time of such repeal or modification to which any person may be entitled under this Article V.
Section 6. Definition of Corporation.
For the purposes of this Article V, references to the “Corporation” shall include all constituent corporations absorbed in a consolidation, merger or division, as well as the surviving or new corporations surviving or resulting therefrom, so that (i) any person who is or was an authorized representative of a constituent, surviving or new corporation shall stand in the same position under the provisions of this Article V with respect to the surviving or new corporation as such person would if such person had served the surviving or new corporation in the same capacity and (ii) any person who is or was an authorized representative of the Corporation shall stand in the same position under the provisions of this Article V with respect to the surviving or new corporation as such person would with respect to the Corporation if its separate existence had continued.
Section 7. Definition of Authorized Representative.
For the purposes of this Article V, the term “authorized representative” shall mean, and the indemnification provisions of this Article V shall be deemed to apply to, a Director, officer, employee or agent of the Corporation or of any subsidiary (including any former subsidiary) of the Corporation, or a trustee, custodian, administrator, committeeman or fiduciary of any employee benefit plan (including former employee benefit plan) established and maintained by the Corporation or by any direct or indirect subsidiary (including any former subsidiary) of the Corporation, or a person serving another corporation, partnership, joint venture, trust or other enterprise in any of the foregoing capacities at the request of the Corporation.
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Section 8. Savings Clause.
If a court of competent jurisdiction determines that any provision of this Article V requires the Corporation to take an action that would violate applicable law, such provision shall be limited or modified in its application to such action to the minimum extent necessary to avoid such violation of law, and, as so limited or modified, such provision and the balance of this Article V shall be enforceable in accordance with their terms to the fullest extent permitted by applicable law, including but not limited to the PBCL. Without limiting the generality of the foregoing, if some or all of the indemnification provided for in this Article V is unavailable for any reason in respect of any liability or portion thereof, the Corporation shall contribute to the liabilities to which the indemnitee may be subject in such proportion as is appropriate to reflect the intent of this Article V, in proportion to the relative benefits received by the Corporation (including any subsidiary or former subsidiary of the Corporation) and all other officers, directors, and employees of the Corporation (or of any subsidiary or former subsidiary of the Corporation or other relevant enterprise described in Section 7 of this Article V) who are or would be jointly liable with the indemnitee, on the one hand, and by the indemnitee, on the other hand, and, to the extent required to conform to law, as further adjusted by reference to the relative fault of the Corporation (including any subsidiary or former subsidiary of the Corporation) and all other officers, directors, and employees of the Corporation (or of any subsidiary or former subsidiary of the Corporation or other relevant enterprise described in Section 7 of this Article V), on the one hand, and of the indemnitee, on the other hand.
Section 9. Insurance.
The Corporation may purchase and maintain insurance on behalf of any person who is or was a Director or officer of the Corporation, or is or was an authorized representative of the Corporation, against any liability asserted against or incurred by such person in any such capacity, or arising out of the status of such person as such, whether or not the Corporation would have the power to indemnify such person against such liability under the provisions of this Article V.
Section 10. Funding to Meet Indemnification Obligations.
The Board of Directors, without approval of the shareholders of the Corporation, shall have the power to borrow money on behalf of the Corporation, including the power to pledge the assets of the Corporation, from time to time to discharge the Corporation’s obligations with respect to indemnification, the advancement and reimbursement of expenses and the purchase and maintenance of insurance referred to in this Article V. The Corporation may, in lieu of or in addition to the purchase and maintenance of insurance referred to in Section 9 of this Article V, establish and maintain a fund of any nature or otherwise secure or insure in any manner its indemnification obligations, whether arising under or pursuant to this Article V or otherwise.
ARTICLE VIGENERAL PROVISIONS
Section 1. Fiscal Year.
The fiscal year of the Corporation shall be the calendar year unless otherwise designated by the Board of Directors.
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Section 2. Seal.
The seal of the Corporation shall be circular in form and shall contain the name of the Corporation and its state of incorporation around the border, or the seal may be in such other form as the Board of Directors shall determine from time to time by resolution.
Section 3. Execution of Instruments.
Each of the Chief Executive Officer, the President, any Vice President, the Secretary and the Treasurer may enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Each of the Board of Directors, the Chief Executive Officer and the President may authorize any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization may be general or limited to specific contracts or instruments. All checks, drafts, or demands for money and notes of the Corporation shall be executed by such officer or agent of the Corporation, and in such manner, as the Board of Directors, the Chief Executive Officer or the President from time to time may determine.
Section 4. Deposits.
Any funds of the Corporation may be deposited from time to time in such banks, trust companies or other depositaries as may be determined by the Board of Directors, the Chief Executive Officer, the President, the Treasurer or such other officer or agent as may be authorized by the Board of Directors, the Chief Executive Officer, the President or the Treasurer to make such determination.
Section 5. Voting as Shareholder.
Unless otherwise determined by resolution of the Board of Directors, each of the Chief Executive Officer, the President and any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of shareholders, unitholders, members, partners or other equity owners of any corporation, limited liability company, partnership or other legal entity in which the Corporation may hold stock or other ownership interests, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock or other ownership interest. Such officers acting on behalf of the Corporation shall have full power and authority to execute any instrument expressing consent to or dissent from any action of any such corporation, limited liability company, partnership or other legal entity without a meeting. The Board of Directors by resolution from time to time may confer such power and authority upon any other person.
Section 6. Definition of Electronic Transmission.
For purposes of these By-Laws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
Section 7. Definition of Public Announcement.
For purposes of these By-Laws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, PR Newswire, Associated Press or a comparable news service, or in a document publicly filed or furnished by the Corporation with the Commission pursuant to Section 13, 14 or 15(b) of the Exchange Act, and the meaning of the term “group” shall be within the meaning ascribed to such term under Section 13 of the Exchange Act.
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ARTICLE VIIAMENDMENT OF BY-LAWS
These By-laws may be altered or amended as provided in the Articles of Incorporation.
ARTICLE VIIIEMERGENCY BY-LAWS
Section 1. When Operative.
The emergency By-laws provided by the following sections shall be operative during any emergency resulting from warlike damage or an attack on the United States or any nuclear or atomic disaster, notwithstanding any different provision in the preceding Articles of the By-laws, the Articles of Incorporation or the PBCL. To the extent not inconsistent with the emergency By-laws, the By-laws provided in the preceding Articles shall remain in effect during such emergency and upon the termination of such emergency the emergency By-laws shall cease to be operative unless and until another such emergency shall occur.
Section 2. Meetings.
During any emergency contemplated by Section 1 of this Article VIII:
(a) Any meeting of the Board of Directors may be called by any Director. Whenever any officer of the Corporation who is not a Director has reason to believe that no Director is available to participate in a meeting, such officer may call a meeting to be held under the provisions of this Section 2.
(b) Notice of each meeting called under the provisions of this Section 2 shall be given by the person calling the meeting or at his request by any officer of the Corporation. The notice shall specify the time and the place of the meeting, which shall be the head office of the Corporation, if feasible, and otherwise any other place, within or without the Commonwealth of Pennsylvania, specified in the notice. Notice need be given only to such of the Directors as it may be feasible to reach at the time and may be given by such means as may be feasible at the time, including publication or radio. If given by mail, messenger; telephone, electronic transmission, or telegram, the notice shall be addressed to the Director at his residence, personal or business electronic mail address, business address, or such other place as the person giving the notice shall deem suitable.
In the case of meetings called by an officer who is not a Director, notice shall also be given similarly, to the extent feasible, to the persons named on the list referred to in part (iii) of this Section 2. Notice shall be given at least two (2) days before the meeting if feasible in the judgment of the person giving the notice, and otherwise the meeting may be held on any shorter notice he shall deem suitable.
(c) At any meeting called under the provisions of this Section 2, the Director or Directors present shall constitute a quorum for the transaction of business. If no Director attends a meeting called by an officer who is not a Director and if there are present at least three (3) of the persons named on a numbered list of personnel approved by the Board of Directors before the emergency, those present (but not more than the nine (9) appearing highest in priority on such list) shall be deemed Directors for such meeting and shall constitute a quorum for the transaction of business.
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Section 3. Lines of Succession.
The Board of Directors, during as well as before any emergency contemplated by Section 1 of this Article VIII, may provide, and from time to time modify, lines of succession in the event that during such an emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties.
Section 4. Offices.
The Board of Directors, during as well as before any emergency contemplated by Section 1 of this Article VIII, may, effective upon the occurrence of such emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers so to do.
Section 5. Liability.
No officer, Director or employee acting in accordance with these emergency By-laws shall be liable to the Corporation or any shareholder thereof, except for willful misconduct.
Section 6. Repeal or Change.
The emergency By-laws shall be subject to repeal or change by action of the Board of Directors or by action of the shareholders, except that no such repeal or change shall modify the provisions of Section 5 of this Article VIII with regard to, action or inaction prior to the time of such repeal or change.
ARTICLE IXNON-APPLICABILITY OF STATUTE
Subchapter E of Chapter 25 of the PBCL (formerly known as Section 910 of the PBCL of 1933, as amended) shall not be applicable to the Corporation. (This By-law provision was adopted by action of the Board of Directors on February 28, 1984 and may not be rescinded except by an amendment to the Articles of Incorporation.)
Subchapters G and H of Chapter 25 of the PBCL shall not be applicable to the Corporation. (This By-law provision was adopted by action of the Board of Directors on July 20, 1990.)
ARTICLE XCONSTRUCTION
In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of applicable law or the Articles of Incorporation as in effect from time to time, the provisions of applicable law or the Articles of Incorporation, as the case may be, shall be controlling. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the PBCL shall govern the construction of these By-Laws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, the term “person” includes a natural person, a corporation or any other entity of any type, and the masculine gender includes the feminine gender. All restrictions, limitations, requirements and other provisions of these By-Laws shall be construed, insofar as possible, as supplemental and additional to all provisions of law applicable to the subject matter thereof and shall be fully complied with in addition to the said provisions of law unless such compliance shall be illegal. Any Article, section, subsection, subdivision, sentence, clause or phrase of these By-Laws which upon being construed in the manner provided in this Article X shall be contrary to or inconsistent with any applicable law shall not apply so long as said provisions of law shall remain in effect, but such result shall not affect the validity or applicability of any other portions of these By-Laws, it being hereby declared that these By-Laws would have been adopted and each article, section, subsection, subdivision, sentence, clause or phrase thereof, irrespective of the fact that any one or more articles, sections, subsections, subdivisions, sentences, clauses or phrases is or are illegal.
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All references in these By-Laws to any statute, law, regulation or rule also shall include any successor statute, law, regulation or rule, as the case may be. All references to Articles and Sections refer to Articles and Sections of these By-Laws. The headings and subheadings in these By-Laws are for convenience only; they do not form a part of these By-Laws and shall not affect the interpretation of these By-Laws. Whenever the words “including,” “include” or “includes” are used in these By-Laws, they should be interpreted in a non-exclusive manner as though the words “without limitation” immediately followed the same.
ARTICLE XIFORUM SELECTION
Section 1. Exclusive Forum.
(a) Unless the Corporation consents in writing to the selection of an alternative forum, the state court of the Commonwealth of Pennsylvania in and for Allegheny County, the Court of Common Pleas, shall be the sole and exclusive forum, to the fullest extent permitted by law, for (a) any derivative action or proceeding brought on behalf of the Corporation; (b) any action asserting a claim of a breach of fiduciary duty owed to the Corporation or to the Corporation’s shareholders by any director, officer, or other employee of the Corporation; (c) any action asserting a claim against the Corporation, or against any director, officer, or other employee of the Corporation, arising pursuant to any provision of the Pennsylvania Associations Code, 15 Pa. C. S., the Articles of Incorporation, or these By-laws, in each case, as amended; (d) any action seeking to interpret, apply, enforce, or determine the validity of the Articles of Incorporation or these By-Laws; or (e) any action asserting a claim against the Corporation, or any director, officer, or other employee of the Corporation, governed by the internal affairs doctrine. If a court of competent jurisdiction finally determines that a shareholder has breached the provisions of this Section 1, then the Corporation shall be entitled to recover its reasonable legal fees and costs in addition to any and all other rights and remedies that may exist at law or in equity.
(b) Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest in any securities of the Corporation shall be deemed to have notice of and consented to this Section 1(b) of this Article XI.
Section 2. Submission to Jurisdiction.
Without limiting the effect of 15 Pa. C. S. § 1505, any person or entity purchasing or otherwise acquiring any interest in shares of the Corporation shall be deemed, to the fullest extent permitted by law, to be a “shareholder” for purposes of Section 1 of this Article XI and to have notice of and consented to the provisions of this Article XI. Any shareholder who initiates an action or proceeding of the type described in parts (a) through (e) of Section 1(a) of this Article XI or initiating an action or proceeding of the type described in Section 1(b) of this Article XI in a court other than a court specified in the corresponding subsection of Section 1 of this Article XI (a “Foreign Action”) shall be deemed to have consented to (i) the personal jurisdiction of the courts specified in the corresponding subsection of Section 1 in an action or proceeding brought in any of those courts against the shareholder to enforce Section 1 of this Article XI (an “Enforcement Action”) and (ii) having service of process in an Enforcement Action made upon the shareholder by United States mail addressed to the shareholder at the shareholder’s address as it appears on the records of the Corporation or upon the shareholder’s counsel in the Foreign Action by United States mail addressed to such counsel.
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Exhibit 10.1
726 Bell Avenue, Suite 301
Carnegie, PA 15106
August 8, 2024
Mr. Samuel C. Lyon
Union Electric Steel Corporation 726 Bell Avenue, Suite 101
Carnegie, PA 15106
Dear Sam:
This Agreement (this “Agreement”) amends your agreement with Ampco-Pittsburgh Corporation (the “Corporation”) and Union Electric Steel Corporation ("UES"), dated as of March 6, 2019 (the “Original Effective Date”), to modify Sections 2 and 3.
The Corporation and UES recognize your experience and potential contribution to the success of UES and the Corporation and desire to assure UES of your continued employment. In this connection, the Board of Directors of the Corporation (the "Board") and the Board of Directors of UES (the "UES Board") recognize that, the possibility of a change in control may exist and that such possibility, and the uncertainty that it may raise among the Corporation's and UES' management, may result in the departure or distraction of management personnel to the detriment of UES, the Corporation and the Corporation's shareholders.
The Board and the UES Board have each determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's and UES' management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of UES, the Corporation and UES each agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with UES is terminated subsequent to a "Change in Control" (as defined in Section 2 hereof) under the circumstances described below.
For purposes of this Agreement, a "Potential Change in Control" shall be deemed to have occurred if (i) the Corporation or UES enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, (ii) any person (including the Corporation and UES) publicly announces an intention to take or to consider taking actions, which if consummated would constitute a Change in Control, or (iii) either the Board or the UES Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Corporation has occurred.
For purposes of this Section 4(c), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of UES and the Corporation.
The foregoing notwithstanding, you shall notify the Corporation within 90 days of the initial existence of a particular condition described above in this Section 4(d), and the Corporation shall have 30 days from such notice completely to remedy such particular condition so that you are in the same position as if the condition had never occurred. If the Corporation timely and completely remedies the condition as required above, then the particular occurrence of the particular condition for which you gave notice shall no longer constitute Good Reason. If the Corporation does not timely and completely remedy the particular occurrence of the particular condition for which you gave notice, you shall be deemed to terminate employment for Good Reason on the 31st day following your notice to the Corporation.
(50%) or more of the combined voting power of the then outstanding voting stock of the Corporation, or any entity that beneficially owns, directly or indirectly, forty percent (40%) or more (but less than fifty percent (50%) of the combined voting power of the then outstanding voting stock of the Corporation if such entity (or affiliated persons or entities) has at least one representative on the Board of Directors of the Corporation.
(24) months after the Change in Control, unless such termination is (i) by UES for Cause, (ii) because of your death or Disability, or (iii) by you other than for Good Reason, you shall be entitled to the following benefits (the "Severance Payments"):
after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if you received all of the Payments. UES shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the determination. All determinations required to be made under this Section 5(e), including whether and when an adjustment to any Payments is required and, if applicable, which Payments are to be so adjusted, shall be made by an accounting firm selected by the Corporation (the "Accounting Firm") which shall provide detailed supporting calculations both to UES and to you within fifteen (15) business days of the receipt of notice from you that there has been a Payment, or such earlier time as is requested by UES. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, you shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by UES. If the Accounting Firm determines that no Excise Tax is payable by you, it shall furnish you with a written opinion that failure to report the Excise Tax on your applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon UES and you.
provisions of Section 5(d); provided, however, that if the amounts of such payments cannot be finally determined on or before such day, UES shall pay to you on such day an estimate as determined in good faith by UES of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined, but in no event later than the thirtieth day after the date of such termination. Such payments will be made in all events within 2-1/2 months following the calendar year in which such termination of employment occurred. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by UES to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(generally 18 months), or any other legally mandated and applicable federal, state, or local coverage period for benefits provided to terminated employees under the health care plan. For purposes of this Agreement, (1) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and (2)
"COBRA Continuation Period" shall mean the continuation period for medical and dental insurance to be provided under the terms of this Agreement which shall commence on the first day of the calendar month following the month in which the date of your termination falls and generally shall continue for an 18 month period.
exchange for another benefit. Notwithstanding the foregoing, no reimbursement will be provided for any expense incurred following the thirty-six month period of benefit continuation or for any expense which relates to coverage after such date.
* * *
If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter, which will then constitute our agreement on this subject.
Sincerely,
AMPCO-PITTSBURGH CORPORATION
By: /s/ J. Brett McBrayer
Name: J. Brett McBrayer
Title: Chief Executive Officer
UNION ELECTRIC STEEL CORPORATION
By: /s/ Michael McAuley
Name: Michael McAuley
Title: Vice President and Treasurer
Accepted and Agreed to this 8th day of August, 2024.
/s/ Samuel C. Lyon
Samuel C. Lyon
Exhibit 10.2
726 Bell Avenue/Suite 301/P.O. Box 457
Carnegie, PA 15106
412/456-4400
August 8, 2024
Mr. David Anderson
Air & Liquid Systems Corporation 726 Bell Avenue, Suite 302
Carnegie, PA 15106
Dear Dave:
This Agreement (this “Agreement”) amends your agreement with Ampco-Pittsburgh Corporation (the “Corporation”) and Air & Liquid Systems Corporation (“Air & Liquid Systems”) dated January 1, 2022 (the “Original Effective Date”), to modify Section 2.
Ampco-Pittsburgh Corporation (the “Corporation”) and Air & Liquid Systems recognize your experience and potential contribution to the success of Air & Liquid Systems and the Corporation and desire to assure Air & Liquid Systems of your continued employment. In this connection, the Board of Directors of the Corporation (the “Board”) and the Board of Directors of Air & Liquid Systems (the “A&L Board”) recognize that the possibility of a change in control may exist and that such possibility, and the uncertainty that it may raise among the Corporation's and Air & Liquid Systems’ management, may result in the departure or distraction of management personnel to the detriment of Air & Liquid Systems, the Corporation and the Corporation’s stockholders.
The Board and the A&L Board have each determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation's and Air & Liquid Systems’ management, including you, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a change in control of the Corporation or Air & Liquid Systems.
In order to induce you to remain in the employ of Air & Liquid Systems, the Corporation and Air & Liquid Systems each agrees that you shall receive the severance benefits set forth in this letter agreement ("Agreement") in the event your employment with Air & Liquid Systems is
terminated subsequent to a "Change in Control" (as defined in Section 2 hereof) under the circumstances described below.
For purposes of this Agreement, a "Potential Change in Control" shall be deemed to have occurred if (i) the Corporation or Air & Liquid Systems enters into an agreement, the consummation of which would result in the occurrence of a Change in Control, (ii) any person (including the Corporation and Air & Liquid Systems) publicly announces an intention to take or to consider taking actions, which if consummated would constitute a Change in Control, or (iii) either the Board or the A&L Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control of the Corporation has occurred.
(iii) by you other than for Good Reason.
For purposes of this Section 4(c), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of Air & Liquid Systems and the Corporation.
The foregoing notwithstanding, you shall notify the Corporation within 90 days of the initial existence of a particular condition described above in this Section 4(d), and the Corporation shall have 30 days from such notice completely to remedy such particular condition so that you are in the same position as if the condition had never occurred. If the Corporation timely and completely remedies the condition as required above, then the particular occurrence of the particular condition for which you gave notice shall no longer constitute Good Reason. If the Corporation does not timely and completely remedy the particular occurrence of the particular condition for which you gave notice, you shall be deemed to terminate employment for Good Reason on the 31st day following your notice to the Corporation.
determined, but in no event later than the thirtieth day after the date of such termination. Such payments will be made in all events within 2-1/2 months following the calendar year in which such termination of employment occurred. If the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by Air & Liquid Systems to you payable on the fifth day after demand by the Corporation (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
(2) "COBRA Continuation Period" shall mean the continuation period for medical and dental insurance to be provided under the terms of this Agreement which
shall commence on the first day of the calendar month following the month in which the date of your termination falls and generally shall continue for an 18 month period.
expense incurred in one taxable year will affect the amount available in another taxable year; and (4) the right to this reimbursement is not subject to liquidation or exchange for another benefit. Notwithstanding the foregoing, no reimbursement will be provided for any expense incurred following the thirty-six month period of benefit continuation or for any expense which relates to coverage after such date.
extent that the Corporation would be required to perform if no such succession had taken place. Failure of the Corporation to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle you to compensation from the Corporation in the same amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed to be the date of termination of your employment.
you.
* * *
If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter, which will then constitute our agreement on this subject.
Sincerely,
AMPCO-PITTSBURGH CORPORATION
By:_/s/ J. Brett McBrayer
Name: J. Brett McBrayer
Title: Chief Executive Officer
By: /s/ J.Brett McBrayer
Name: J. Brett McBrayer
Title: Chairman
Accepted and Agreed to
this 8th day of August, 2024.
/s/ David Anderson
David Anderson
Exhibit 31.1
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, J. Brett McBrayer, certify that:
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/s/ J. Brett McBrayer |
J. Brett McBrayer |
Director and Chief Executive Officer |
August 12, 2024 |
Exhibit 31.2
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Michael G. McAuley, certify that:
|
/s/ Michael G. McAuley |
Michael G. McAuley |
Senior Vice President, Chief Financial Officer and Treasurer |
August 12, 2024 |
|
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ampco-Pittsburgh Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
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/s/ J. Brett McBrayer |
J. Brett McBrayer |
Director and Chief Executive Officer |
August 12, 2024 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Ampco-Pittsburgh Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:
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/s/ Michael G. McAuley |
Michael G. McAuley |
|
Senior Vice President, Chief Financial Officer and Treasurer |
August 12, 2024 |