# Ampco Pittsburgh Corp: Form 10-Q for the period ended Sep 30, 2024

- Company: [Ampco Pittsburgh Corp](/companies/ap.md) (CIK 6176)
- Form: 10-Q
- Filed: 2024-11-12
- Accepted by EDGAR: Nov 12, 2024, 09:09 ET
- Period: 2024-09-30
- Accession: 0000950170-24-124716
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/6176/000095017024124716/ap-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/6176/000095017024124716/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $92.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $305.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $13.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $39.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | $1.9m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | $7.0m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $636.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$2.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$2.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 19,980,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 19,857,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $10.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $8.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $11.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $238.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $547.4m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $119.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $473.7m | us-gaap:Liabilities |
| Shareholders' equity | at 2024-09-30 | $61.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 38,309 characters.

### 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:

- economic downturns, cyclical demand for our products and insufficient demand for our products;
- excess global capacity in the steel industry;
- limitations in availability of capital to fund our strategic plan;
- inability to maintain adequate liquidity to meet our operating cash flow requirements, repay maturing debt and meet other financial obligations;
- increases in commodity prices or insufficient hedging against increases in commodity prices, reductions in electricity and natural gas supply or shortages of key production materials for us or our customers;
- inoperability of certain equipment on which we rely;
- inability to obtain necessary capital or financing on satisfactory terms to support our growth strategy;
- inability to execute our capital expenditure plan;
- inability to satisfy the continued listing requirements of the New York Stock Exchange or the NYSE American Exchange;
- potential attacks on information technology infrastructure and other cyber-based business disruptions;
- liability of our subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our subsidiaries;
- changes in the existing regulatory environment;
- inability to successfully restructure our operations and/or invest in operations that will yield the best long-term value to our shareholders;
- consequences of pandemics and geopolitical conflicts;
- fluctuations in the value of the U.S. dollar relative to other currencies;
- work stoppage or another industrial action on the part of any of our unions;
- failure to maintain an effective system of internal control; and
- those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by us, particularly in Item 1A, Risk Factors, in Part I of our Annual Report on Form 10-K for the year ended December 31, 2023.

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.

### 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, 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, demand for steel in the segment’s two largest markets, North America and Europe, has been flat when compared to the prior year, resulting in customers operating with lower overall roll inventories and placing orders for new rolls on an as-needed basis. Order intake has begun to show signs of improvement with shipments expecting to increase for the segment’s cast roll facilities in early 2025 and the segment’s forge roll facilities by mid-2025. Pricing has been stable and market share has increased, compared to a year ago, which is expected to improve the segment’s overall utilization in 2025 when compared to 2024. European steel producers, however, continue to operate at lower levels compared to pre-pandemic levels as Europe continues to experience economic uncertainty. Additionally, increased entry of low-priced products from other countries has negatively impacted local demand both in Europe and the U.S. with several of the segment’s largest customers engaging in trade cases to reduce the number of imports into the U.S. The FEP market remains challenged by low activity among bar distribution customers, improved block utilization, and lower activity among the segment’s block customers. The primary focus for the FCEP segment is to maintain a strong position in the roll market and to continue to improve operational efficiency and equipment reliability resulting from the completion of the previously announced capital program.

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, repercussions from the Russia-Ukraine and Middle East conflicts and similar geopolitical matters, economic conditions, and other developments relevant to its business including the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.

### Selected Financial Information

| Net Sales: | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Forged and Cast Engineered Products | **$67,203** | $73,625 | $(6,422) | **$220,105** | $228,004 | $(7,899) |
| Air and Liquid Processing | **28,963** | 28,593 | 370 | **97,264** | 86,228 | 11,036 |
| Consolidated | **$96,166** | $102,218 | $(6,052) | **$317,369** | $314,232 | $3,137 |
| Income from Operations: |  |  |  |  |  |  |
| Forged and Cast Engineered Products | **$2,456** | $1,448 | $1,008 | **$9,393** | $7,576 | $1,817 |
| Air and Liquid Processing | **3,134** | 3,456 | (322) | **8,290** | 9,386 | (1,096) |
| Corporate costs | **(3,720)** | (3,182) | (538) | **(10,688)** | (9,959) | (729) |
| Consolidated | **$1,870** | $1,722 | $148 | **$6,995** | $7,003 | $(8) |
|  |  |  |  | **September 30, 2024** | December 31, 2023 | Change |
| Backlog: |  |  |  |  |  |  |
| Forged and Cast Engineered Products |  |  |  | **$252,138** | $247,603 | $4,535 |
| Air and Liquid Processing |  |  |  | **131,412** | 131,309 | 103 |
| Consolidated |  |  |  | **$383,550** | $378,912 | $4,638 |

Net sales approximated $96,166 and $102,218 for the three months ended September 30, 2024 and 2023, respectively, and $317,369 and $314,232 for the nine months ended September 30, 2024 and 2023, respectively. The decrease for the three months ended September 30, 2024, when compared to September 30, 2023, is attributable to lower sales for the FCEP segment while the increase for the nine months ended September 30, 2024, when compared to September 30, 2023, 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 $1,870 and $1,722 for the three months ended September 30, 2024 and 2023, respectively, and $6,995 and $7,003 for the nine months ended September 30, 2024 and 2023, respectively. Included in operating income for the three and nine months ended September 30, 2023 is a credit of approximately $191 for proceeds received from an insolvent asbestos-related insurance carrier (the “Asbestos-Related Credit”) and, for the nine months ended September 30, 2023, 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 $383,550 as of September 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 71% 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 September 30, 2024 and 2023 approximated 79.4% and 82.7%, respectively, and for the nine months ended September 30, 2024 and 2023 approximated 80.8% and 81.6%, respectively, due principally to improved margins for the FCEP segment. For the ALP segment, costs of products sold, excluding depreciation and amortization, were comparable for the three months ended September 30, 2024 when compared to the same period of the prior year, but increased for the nine months ended September 30, 2024 when compared to the same period of the prior year primarily due to product mix and shipment of older lower-margin orders for centrifugal pumps.

Selling and administrative expenses approximated $13,332 and $11,821 for the three months ended September 30, 2024 and 2023, respectively, and $39,855 and $38,101 for the nine months ended September 30, 2024 and 2023, respectively. The increase in selling and administrative expenses for the current year periods is primarily due to higher employee-related costs, professional fees and an increase in exchange rates used to translate selling and administrative expenses of the Corporation’s foreign subsidiaries into the U.S. dollar.

Credit for asbestos litigation of $191 in 2023 represents a credit for proceeds received from an insolvent asbestos-related insurance carrier.

Investment-related income relates primarily to dividends from one of the Corporation’s Chinese joint ventures. In the third quarter of 2024 and 2023, the Chinese joint venture declared dividends totaling $62 and $92 for the Corporation, respectively.

Interest expense approximated $2,976 and $2,468 for the three months ended September 30, 2024 and 2023, respectively, and $8,750 and $6,784, for the nine months ended September 30, 2024 and 2023, respectively. When compared to the same periods of the prior year, the increase is principally due to:

- Higher interest on the equipment financing facility, net of capitalized interest, of approximately $279 and $894 for the three and nine months ended September 30, 2024, respectively;
- Higher average borrowings outstanding under the revolving credit facility, which increased interest expense by approximately $182 and $602 for the three and nine months ended September 30, 2024, respectively;
- Higher average interest rates for 2024 versus 2023, which increased interest expense by approximately $47 and $312 for the three and nine months ended September 30, 2024, respectively; and
- Interest on the sale and leaseback financing transactions, including interest on the proceeds received from the Disbursement Agreement in June 2023, which was comparable for the three months ended September 30, 2024 and 2023 but higher by approximately $158 for the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023.

Other income – net is comprised of the following:

|  | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net pension and other postretirement income | **$1,222** | $1,257 | $(35) | **$3,588** | $3,770 | $(182) |
| (Loss) gain on foreign exchange transactions | **(1,130)** | 892 | (2,022) | **(1,320)** | (267) | (1,053) |
| Unrealized gain (loss) on Rabbi trust investments | **85** | (207) | 292 | **191** | 41 | 150 |
| Other | **34** | 17 | 17 | **37** | (120) | 157 |
|  | **$211** | $1,959 | $(1,748) | **$2,496** | $3,424 | $(928) |

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 being established against the net deferred income tax assets of the U.K. operations. As of September 30, 2024, the U.K. operations remain in a three-year cumulative loss position. Accordingly, the income tax provision for the three and nine months ended September 30, 2024 does not include any income tax benefit for the net operating losses of the U.K. operations. By comparison, the income tax provision for the three and nine months ended September 30, 2023, which is prior to establishing the valuation allowance, includes an income tax benefit for the operating losses of the U.K. operations of $636 and $1,177 for the three and nine months ended September 30, 2023, respectively.

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 (loss) income attributable to Ampco-Pittsburgh and net (loss) income per common share attributable to Ampco-Pittsburgh equaled $(1,959) and $(0.10) per common share and $809 and $0.04 per common share for the three months ended September 30, 2024 and 2023, respectively, and $(2,664) and $(0.13) per common share and $1,908 and $0.10 per common share for the nine months ended September 30, 2024 and 2023, respectively.

Net income attributable to Ampco-Pittsburgh and net income per common share attributable to Ampco-Pittsburgh for the three months ended September 30, 2023 include an after-tax benefit of $185 or $0.01 per common share associated with the Asbestos-Related Credit.

Net income attributable to Ampco-Pittsburgh and net income per common share attributable to Ampco-Pittsburgh for the nine months ended September 30, 2023 include an after-tax benefit of $2,059 or $0.11 per common share associated with the Asbestos-Related Credit and the Foreign Energy Credit.

### Net Sales and Operating Results by Segment

#### Forged and Cast Engineered Products

| Net Sales: | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Forged and cast mill rolls | **$63,833** | $68,325 | $(4,492) | **$209,876** | $213,027 | $(3,151) |
| FEP | **3,370** | 5,300 | (1,930) | **10,229** | 14,977 | (4,748) |
|  | **$67,203** | $73,625 | $(6,422) | **$220,105** | $228,004 | $(7,899) |
| Income from Operations | **$2,456** | $1,448 | $1,008 | **$9,393** | $7,576 | $1,817 |
|  |  |  |  | **September 30, 2024** | December 31, 2023 | Change |
| Backlog |  |  |  | **$252,138** | $247,603 | $4,535 |

The change in net sales for the three and nine months ended September 30, 2024, when compared to the same periods of the prior year, is primarily due to the following:

- Lower volume and changes in product mix for roll sales, which decreased net sales by approximately $4,100 and $5,900 for the three and nine months ended September 30, 2024, respectively;
- Lower volume of FEP shipments, which decreased net sales by approximately $1,800 and $3,800 for the three and nine months ended September 30, 2024, respectively; and
- Lower variable-index surcharges passed through to customers as a result of lower prices for raw material, energy and transportation, net of higher base pricing, which reduced net sales by approximately $1,400 for the three months ended September 30, 2024, reducing the year-to-date benefit of improved pricing, net of variable index surcharges, to approximately $800 for the nine months ended September 30, 2024 when compared to the same period of the prior year; offset by
- Increases in exchange rates between the periods which increased net sales by approximately $900 and $1,000 for the three and nine months ended September 30, 2024, respectively.

Income from operations for the three and nine months ended September 30, 2024 increased when compared to the three and nine months ended September 30, 2023 primarily due to:

- Benefit from improved pricing and changes in manufacturing costs, net of lower variable-index surcharges, which increased income from operations by approximately $2,000 and $6,600 for the three and nine months ended September 30, 2024, respectively, and
- Improved manufacturing absorption, net of the impact associated with a fire at one of the Corporation’s cast roll facilities in the first quarter of 2024, which increased operating income by approximately $1,900 and $400 for the three and nine months ended September 30, 2024, respectively; offset by
- Changes in selling and administrative costs associated primarily with changes in employee-related costs, which reduced income from operations by approximately $500 for the three months ended September 30, 2024, however, selling and administrative costs for the nine months ended September 30, 2024 remain below the same costs for the same period of the prior year by approximately $200;
- Lower volume of shipments, which decreased operating income by approximately $2,300 and $3,200 for the three and nine months ended September 30, 2024, respectively;
- Foreign Energy Credit of $1,874 received in the prior year which benefited operating income for the nine months ended September 30, 2023;
- Lower gains on the disposal of property, plant and equipment associated with equipment being replaced in the prior year in connection with the segment’s strategic capital expenditure program of approximately $131 for the nine months ended September 30, 2024; and
- Net increase in certain exchange rates, which increased the losses of certain of the Corporation's foreign operations and reduced income from operations by approximately $100 and $200 for the three and nine months ended September 30, 2024, respectively.

Backlog increased at September 30, 2024 from December 31, 2023 by $4,535 due to an increase in backlog for mill roll orders of approximately $3,800 and higher exchange rates used to translate the backlog of the Corporation’s foreign subsidies into the U.S. dollar which increased backlog by approximately $770. The backlog for FEP was comparable at September 30, 2024 and December 31, 2023. At September 30, 2024, approximately 68% of backlog is expected to ship after 2024.

#### Air and Liquid Processing

| Net Sales: | Three Months Ended September 30, 2024 | 2023 | Change | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Air handling systems | **$8,853** | $9,357 | $(504) | **$35,406** | $27,453 | $7,953 |
| Heat exchange coils | **10,824** | 10,068 | 756 | **33,626** | 31,808 | 1,818 |
| Centrifugal pumps | **9,286** | 9,168 | 118 | **28,232** | 26,967 | 1,265 |
|  | **$28,963** | $28,593 | $370 | **$97,264** | $86,228 | $11,036 |
| Income from Operations | **$3,134** | $3,456 | $(322) | **$8,290** | $9,386 | $(1,096) |
|  |  |  |  | **September 30, 2024** | December 31, 2023 | Change |
| Backlog |  |  |  | **$131,412** | $131,309 | $103 |

Net sales for the three and nine months ended September 30, 2024 improved over the comparable prior year periods. Net sales of air handling units for the third quarter of 2024 were slightly less than net sales for the comparable prior year period primarily due to timing of shipments and associated revenue recognition. Net sales of air handling systems for the nine months ended September 30, 2024 exceeded the comparable prior year period due to higher order intake as a result of 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 nine months ended September 30, 2024 improved when compared to net sales for the three and nine months ended September 30, 2023 primarily as a result of higher net sales to original equipment manufacturers and power generation customers. Net sales of centrifugal pumps for the three and nine months ended September 30, 2024 exceeded the comparable prior year periods principally due to a higher volume of shipments to commercial customers.

Operating income decreased for each of the current year periods, when compared to the same periods of the prior year, principally due to:

- Higher selling and administrative costs of approximately $300 and $1,300 for the three and nine months ended September 30, 2024, respectively, primarily as a result of higher commissions associated primarily with the increase in sales and employee-related costs including costs associated with expansion of the segment’s sales distribution network;
- Asbestos-Related Credit of $191 received in the prior year which benefited operating income for the three and nine months ended September 30, 2023;
- Full-year lease costs associated with the additional manufacturing facility which reduced operating income by approximately $100 for the nine months ended September 30, 2024; and
- Higher depreciation costs of approximately $100 for the three and nine months ended September 30, 2024 associated with the capital investment at the additional manufacturing facility; offset by
- Higher volume of shipments, net of changes in product mix and manufacturing costs, which increased operating income by approximately $300 and $600 for the three and nine months ended September 30, 2024; respectively.

Backlog at September 30, 2024 and December 31, 2023 was comparable. Backlog for centrifugal pumps improved from year-end 2023 by approximately $4,600 due to improved order intake while backlog for air handling units decreased from year-end 2023 by approximately $4,600 due to the strong sales and lower order activity as a result of the manufacturing facilities being at capacity. Backlog for heat exchangers at September 30, 2024 was modestly higher versus December 31, 2023. At September 30, 2024, approximately 77% 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 Asbestos-Related Credit for the three and nine months ended September 30, 2023 and the Foreign Energy Credit for the nine months ended September 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. In particular, the Corporation believes the exclusion of the Asbestos-Related Credit and 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 Asbestos-Related Credit and the Foreign Energy Credit will not occur in future periods.

The adjustments reflected in adjusted income from operations are pre-tax. The tax impact associated with these adjustments is not significant due to the Corporation having a valuation allowance recorded against the deferred income tax assets for the jurisdictions 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 nine months ended September 30, 2024 and 2023, respectively:

|  | Three Months Ended September 30, 2024 | 2023 | Nine Months Ended September 30, 2024 | 2023 |
| --- | ---: | ---: | ---: | ---: |
| Income from operations, as reported (GAAP) | **$1,870** | $1,722 | **$6,995** | $7,003 |
| Asbestos-Related Credit (1) | **-** | (191) | **-** | (191) |
| Foreign Energy Credit (2) | **-** | - | **-** | (1,874) |
| Income from operations, as adjusted (Non-GAAP) | **$1,870** | $1,531 | **$6,995** | $4,938 |

*(1) Represents proceeds received from an insolvent asbestos-related insurance carrier.*

*(2) Represents reimbursement of past energy costs at one of the Corporation’s foreign operations by its local government.*

### Liquidity and Capital Resources

|  | Nine Months Ended September 30, 2024 | 2023 | Change |
| --- | ---: | ---: | ---: |
| Net cash flows provided by (used in) operating activities | **$10,576** | $(10,327) | $20,903 |
| Net cash flows used in investing activities | **(6,657)** | (13,515) | 6,858 |
| Net cash flows provided by financing activities | **557** | 21,323 | (20,766) |
| Effect of exchange rate changes on cash and cash equivalents | **82** | (146) | 228 |
| Net increase (decrease) in cash and cash equivalents | **4,558** | (2,665) | 7,223 |
| Cash and cash equivalents at beginning of period | **7,286** | 8,735 | (1,449) |
| Cash and cash equivalents at end of period | **$11,844** | $6,070 | $5,774 |

29

Net cash flows provided by (used in) operating activities equaled $10,576 and $(10,327) for the nine months ended September 30, 2024 and 2023, respectively. The change in net cash flows provided by operating activities for the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 primarily is due to a lower investment in trade working capital. In addition, net cash flows provided by (used in) operating activities includes:

- Reimbursement of prior years’ asbestos-related settlement costs of approximately $1,756 as a result of the Corporation and Air & Liquid entering into a settlement agreement with a previously unsettled insurance carrier during the second quarter of 2024;
- Higher contributions to U.S. defined benefit pension plans of approximately $4,434 for the nine months ended September 30, 2024 in comparison to the nine months ended September 30, 2023; and
- Proceeds from the Foreign Energy Credit of approximately $1,874 received in the second quarter of 2023.

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.

Net cash flows used in investing activities equaled $(6,657) and $(13,515) for the nine months ended September 30, 2024 and 2023, respectively, and include primarily 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 September 30, 2024, the Corporation received approximately $1,300 in government incentives to help offset the cost of such key machinery. To date, no repayment obligations exist for any government incentives received. At September 30, 2024, commitments for future capital expenditures approximated $6,000 which is expected to be spent over the next 12-18 months.

Net cash flows provided by financing activities equaled $557 and $21,323 for the nine months ended September 30, 2024 and 2023, respectively, a decrease of $20,766 primarily due to:

- Lower net borrowings from the Corporation’s revolving credit facility of $11,288;
- Lower proceeds from the equipment financing facility of $5,130;
- Lower proceeds from sale and leaseback financing arrangements of $2,500;
- Higher principal payments of $1,181 primarily due to the commencement of payments on the equipment financing Term Notes; and
- Changes in borrowings and repayment of related-party debt, which reduced net cash flows provided by financing activities by $667.

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 $4,558 during 2024 and ended the period at $11,844 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 September 30, 2024, remaining availability under the revolving credit facility approximated $20,507, 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 Policies

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.

## Controls and procedures

As filed, 1,825 characters.

*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 September 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.

## Risk factors

As filed, 3,389 characters.

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.

Filed Nov 12, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-124716. Last ingested by Listed: Oct 24, 2026, 14:51 ET. No prices; not investment advice.