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What changed in AMPCO PITTSBURGH CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AMPCO PITTSBURGH CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+229 added−222 removedSource: 10-K (2024-03-25) vs 10-K (2023-03-21)

Top changes in AMPCO PITTSBURGH CORP's 2023 10-K

229 paragraphs added · 222 removed · 179 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

24 edited+1 added−3 removed17 unchanged
Biggest changeFor additional information on the products produced and financial information about each segment, see Note 17 , Revenue , and Note 24 , Business Segments , to the Consolidated Financial Statements. Raw Materials Raw materials used in both segments are generally available from many sources, and neither segment is dependent upon any single supplier for any raw material.
Biggest changeRaw Materials Raw materials used in both segments are generally available from many sources, and neither segment is dependent upon any single supplier for any raw material. Substantial volumes of raw materials used by each segment are subject to significant variations in price.
The Corporation has developed strategies to ensure that employees of diverse backgrounds and perspectives enjoy a culture of mutual respect, inclusiveness and teamwork in an environment which values diversity. AVAILABLE INFORMATION The Corporation files annual, quarterly and current reports; amendments to those reports; proxy statements; and other information with the Securities and Exchange Commission (“SEC”).
The Corporation has developed strategies to ensure employees of diverse backgrounds and perspectives enjoy a culture of mutual respect, inclusiveness and teamwork in an environment which values diversity. AVAILABLE INFORMATION The Corporation files annual, quarterly and current reports; amendments to those reports; proxy statements; and other information with the Securities and Exchange Commission (“SEC”).
The information on the Corporation’s website is not part of this Annual Report on Form 10-K. EXECUTIVE OFFICERS The name, age, position with the Corporation, and business experience for at least the past five years of the Executive Officers (1) of the Corporation are as follows: J. Brett McBrayer (age 57). Mr.
The information on the Corporation’s website is not part of this Annual Report on Form 10-K. EXECUTIVE OFFICERS The name, age, position with the Corporation, and business experience for at least the past five years of the Executive Officers (1) of the Corporation are as follows: J. Brett McBrayer (age 58). Mr.
McBrayer has served as the Corporation’s Chief Executive Officer since July 2018. He previously served as President and Chief Executive Officer at Airtex Products and ASC Industries, a global manufacturer and distributor of automotive after-market and OEM fuel and water pumps from 2012 to 2017.
McBrayer has served as Chief Executive Officer of the Corporation since July 2018. He previously served as President and Chief Executive Officer at Airtex Products and ASC Industries, a global manufacturer and distributor of automotive after-market and OEM fuel and water pumps from 2012 to 2017.
Key Areas of Focus for the Corporation Health and Safety – The Corporation’s health and safety program is designed around the regulations associated with the specific hazards and unique working environments of the Corporation’s manufacturing and headquarter operations. The Corporation requires all of its locations to perform regular safety audits to ensure compliance with the safety program.
Key Areas of Focus for the Corporation Health and Safety – The Corporation’s health and safety program is designed around the regulations associated with the specific hazards and unique working environments of the Corporation’s manufacturing operations and headquarters. The Corporation requires all of its locations to perform regular safety audits to ensure compliance with the safety program.
McBrayer received a Bachelor of Science in Industrial Engineering from the University of Tennessee and a Master of Arts in Applied Behavioral Science from Bastyr University. Michael G. McAuley (age 59). Mr.
McBrayer received a Bachelor of Science in Industrial Engineering from the University of Tennessee and a Master of Arts in Applied Behavioral Science from Bastyr University. Michael G. McAuley (age 60). Mr.
Approximately 34% of the Corporation’s employees are covered by collective bargaining agreements or agreements with works councils. Oversight The Compensation Committee of the Board of Directors maintains oversight of the Corporation’s human capital management strategies that it may deem important to the long-term sustainability of the Corporation.
Approximately 31% of the Corporation’s employees are covered by collective bargaining agreements or agreements with works councils. Oversight The Compensation Committee of the Board of Directors maintains oversight of the Corporation’s human capital management strategies it may deem important to the long-term sustainability of the Corporation.
(1) Officers serve at the discretion of the Board of Directors of the Corporation and none of the listed individuals serves as a director of another public company.
(1) Officers serve at the discretion of the Board of Directors of the Corporation and none of the listed individuals serve as a director of another public company. 4
Environmental Protection Compliance Costs Expenditures for environmental control matters were not material to either segment in 2022 and are not expected to be material in 2023. 3 Employees and Human Capital Management Employees On December 31, 2022, the Corporation and its subsidiaries had 1,565 active employees worldwide (substantially all full-time), of which approximately 54% were employed in the United States.
Environmental Protection Compliance Costs Expenditures for environmental control matters were not material to either segment in 2023 and are not expected to be material in 2024. 3 Employees and Human Capital Management Employees On December 31, 2023, the Corporation and its subsidiaries had 1,697 active employees worldwide (substantially all full-time), of which approximately 58% were employed in the United States.
He previously served as Vice President and Group President of Performance Engineered Products at Carpenter Technology Corporation, a developer, manufacturer and distributor of stainless steels and corrosion-resistant alloys from July 2017 to January 2019.
He previously served as Vice President and Group President of Performance Engineered Products at Carpenter Technology Corporation, a developer, manufacturer and distributor of stainless steels and corrosion-resistant alloys from July 2017 to January 2019. David G. Anderson (age 56). Mr.
Anhui Baochang Roll Co., Ltd., previously known as Magong Gongchang United Rollers Co., Ltd., is a joint venture among UES, Magang (Group) Holding Co., Ltd. and Jiangsu Gong-Chang Roll Co., Ltd. that produces large forged backup rolls for hot and cold strip mills. It is located in Maanshan, Anhui Province, China.
Anhui Baochang Roll Co., Ltd. is a joint venture among UES, Magang (Group) Holding Co., Ltd. and Jiangsu Gong-Chang Roll Co., Ltd. that produces large forged backup rolls for hot and cold strip mills. It is located in Maanshan, Anhui Province, China.
It is headquartered in Carnegie, Pennsylvania, with three manufacturing facilities in Pennsylvania and one in Indiana. The following entities are direct or indirect operating subsidiaries of UES: Union Electric Steel UK Limited produces cast rolls in a variety of iron and steel qualities for hot strip mills, medium/heavy section mills and plate mills.
The following entities are direct or indirect operating subsidiaries of UES: Union Electric Steel UK Limited produces cast rolls in a variety of iron and steel qualities for hot strip mills, medium/heavy section mills and plate mills.
The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment distributes a significant portion of its products through a common independent group of sales offices located throughout the United States and has several major competitors.
The segment has operations in Virginia and New York with its headquarters located in Carnegie, Pennsylvania. The segment utilizes an independent group of sales offices located throughout the United States and Canada and has several major competitors.
Substantial volumes of raw materials used by each segment are subject to significant variations in price. The Corporation’s subsidiaries generally do not purchase or commit for the purchase of a major portion of raw materials significantly in advance of the time they require such materials but periodically make forward commitments for natural gas, electricity and certain commodities (copper and aluminum).
The Corporation’s subsidiaries generally do not purchase or commit for the purchase of a major portion of raw materials significantly in advance of the time they require such materials but periodically make forward commitments for natural gas, electricity and certain commodities (copper and aluminum). See Note 15 , Derivative Instruments , to the Consolidated Financial Statements.
Backlog for the FCEP segment increased by approximately $28.8 million year over year due to the net of improved demand and sale price increases for mill rolls offset by lower FEP backlog and foreign exchange rates used to translate the backlog of the Corporation’s foreign subsidiaries into the U.S. dollar.
Backlog for the FCEP segment decreased by approximately $4.6 million year over year due to lower FEP and cast roll orders partly offset by improved demand and selling prices for mill rolls and higher foreign exchange rates used to translate the backlog of the Corporation’s foreign subsidiaries into the U.S. dollar.
McAuley has served as Senior Vice President, Chief Financial Officer and Treasurer of the Corporation since March 2018 and as Vice President, Chief Financial Officer and Treasurer since April 2016.
McAuley has served as Senior Vice President, Chief Financial Officer and Treasurer of the Corporation since March 2018 and as Vice President, Chief Financial Officer and Treasurer since April 2016. Samuel C. Lyon (age 55). Mr. Lyon has served as President of Union Electric Steel Corporation since February 2019.
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. Union Electric Steel Corporation (“UES”) produces forged hardened steel rolls and FEP.
Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and operates several sales offices located throughout the world. Union Electric Steel Corporation (“UES”) produces forged hardened steel rolls and FEP. It is headquartered in Carnegie, Pennsylvania, with three manufacturing facilities in Pennsylvania and one in Indiana.
The Corporation believes, however, that its subsidiaries are significant participants in each of the niche markets that they serve. Competition in both segments is based on quality, service, price, and delivery.
Approximately 13% of the backlog is expected to be released after 2024. Competition The Corporation faces considerable competition from a large number of companies in both segments. The Corporation believes, however, its subsidiaries are significant participants in each of the niche markets they serve. Competition in both segments is based on quality, service, price, and delivery.
For the FCEP segment, one customer accounted for 10% of its net sales in 2022, the loss of which could have a material adverse effect on the segment, and no customers exceeded 10% of its net sales in 2021. For the ALP segment, no customers exceeded 10% of its net sales in 2022 or 2021.
Products are delivered directly to the customer via third-party carriers or customer-arranged transportation. For the FCEP segment, one customer accounted for 11% and 10% of its net sales in 2023 and 2022, respectively, the loss of which could have a material adverse effect on the segment.
While the Corporation operated at normal levels in 2022, it continues to be challenged by lingering global economic effects of a post-pandemic environment and repercussions from the Russia-Ukraine conflict, including: • Periodic disruptions to the global supply chain for the Corporation, its vendors and its customers, • Global inflationary pressures, • European energy crisis, and • Delays in receiving and shipping product due to lack of transportation.
While the Corporation currently is operating at more normal levels, when compared to the operating levels during the pandemic and immediately thereafter, it continues to be challenged by lingering global economic effects of a post-pandemic environment and repercussions from the Russia-Ukraine conflict, among other events, including: • Periodic disruptions to the global supply chain for the Corporation, its vendors and its customers; • Global inflationary pressures; • Depressed business activity in Europe and Asia (specifically China); and • Global economic uncertainty.
Buffalo Air Handling Division of Air & Liquid Systems Corporation produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. It is located in Amherst, Virginia. Buffalo Pumps Division of Air & Liquid Systems Corporation manufactures centrifugal pumps for the fossil fueled power generation, marine defense and industrial refrigeration industries.
Buffalo Air Handling Division of Air & Liquid Systems Corporation produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Its primary manufacturing facility is located in Amherst, Virginia with an additional Virginian manufacturing location added in the latter part of 2023.
It is located in North Tonawanda, New York. Products In both segments, the products are dependent on engineering, principally custom designed, and are sold to sophisticated commercial and industrial users located throughout the world. Products are delivered directly to the customer via third-party carriers or customer-arranged transportation.
Buffalo Pumps Division of Air & Liquid Systems Corporation manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. It is located in North Tonawanda, New York. Products In both segments, the products are dependent on engineering, principally custom designed, and are sold to sophisticated commercial and industrial users located throughout the world.
Backlog for the ALP segment increased by approximately $47.6 million and benefited from improved order intake for each of its product lines. Approximately 6% of the backlog is expected to be released after 2023. Competition The Corporation faces considerable competition from a large number of companies in both segments.
Backlog for the ALP segment increased by approximately $14.5 million and benefited from improved order intake for each of the product lines.
See Note 15 , Derivative Instruments , to the Consolidated Financial Statements. Patents and Trademarks While the Corporation and its subsidiaries hold certain patents, trademarks and licenses, in the opinion of the Corporation, they are not material to either segment.
Patents and Trademarks While the Corporation and its subsidiaries hold certain patents, trademarks and licenses, in the opinion of the Corporation, they are not material to either segment. Backlog The backlog of orders at December 31, 2023 was approximately $378.9 million compared to a backlog of $369.0 million at year-end 2022.
Removed
Backlog The backlog of orders at December 31, 2022 was approximately $369.0 million compared to a backlog of $292.6 million at year-end 2021. Both segments contributed to the improvement in backlog.
Added
For the ALP segment, no customers exceeded 10% of its net sales in 2023 or 2022. For additional information on the products produced and financial information about each segment, see Note 17 , Revenue , and Note 24 , Business Segments , to the Consolidated Financial Statements.
Removed
Previously, he served as Senior Vice President and Chief Financial Officer of RTI International Metals, Inc., a producer of titanium mill products and fabricated metal components from July 2014 to October 2015. Samuel C. Lyon (age 54). Mr. Lyon has served as President of Union Electric Steel Corporation since February 2019.
Removed
Prior to that, he served as Vice President and General Manager of Dynamet Incorporated, the titanium business unit of Carpenter Technology Corporation from October 2016 to June 2017, and as Chief Operating Officer of UCI-Pumps business of UCI-Fram, an OEM and after-market automotive parts supplier from March 2013 to September 2016. 4 David G. Anderson (age 55). Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

69 edited+20 added−11 removed41 unchanged
Biggest changeSuch excess capacity often results in manufacturers in certain countries exporting steel at prices significantly below their home market prices (often due to local government assistance or subsidies), which leads to global market destabilization and reduced sales and profitability of some of our customers which, in turn, affects our sales and profit margins, as well as the collectability of our receivables and the salability of our in-process inventory.
Biggest changeSuch excess capacity often results in manufacturers in certain countries exporting steel at prices significantly below their home market prices (often due to local government assistance or subsidies).
Failure to comply with material provisions or covenants in these facilities could have a material adverse effect on our liquidity, results of operations and financial condition. We may seek to renegotiate or replace a facility, or may determine not to replace a facility at all and may instead pursue other forms of liquidity.
Failure to comply with material provisions or covenants in these facilities could have a material adverse effect on our liquidity, results of operations and financial condition. We may seek to renegotiate or replace a facility or may determine not to replace a facility at all and, instead, pursue other forms of liquidity.
Furthermore, raising equity capital generally would dilute existing shareholders. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, if at all.
Furthermore, raising equity capital generally would dilute existing shareholders. If additional capital is needed, we may not be able to obtain debt or equity financing on terms acceptable to us, or at all.
Dependence on certain equipment may cause an interruption in our production if such equipment is out of operation for an extended period of time, which could result in lower sales and profitability. Our principal business relies on certain unique equipment such as an electric arc furnace and a spin cast work roll machine.
Our dependence on certain equipment may cause an interruption in our production if such equipment is out of operation for an extended period of time, which could result in lower sales and profitability. Our principal business relies on certain unique equipment such as an electric arc furnace and a spin cast work roll machine.
Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, limitations or restrictions on water use, changes from traditional fossil fuel sources to renewables, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our costs and adversely affect our operating results.
Various jurisdictions in which we do business have implemented, or in the future could implement or amend, restrictions on emissions of carbon dioxide or other greenhouse gases, 8 limitations or restrictions on water use, changes from traditional fossil fuel sources to renewables, regulations on energy management and waste management, and other climate change-based rules and regulations, which may increase our costs and adversely affect our operating results.
The credit facility is subject to various affirmative and negative covenants and contains various sub-limits, including those based on the type of collateral and borrowings by geographic region. If the financial covenants become difficult to meet or if our borrowing needs increase beyond the prescribed limits, our financial position, results of operations and liquidity may be materially adversely affected.
The revolving credit facility is subject to various affirmative and negative covenants and contains various sub-limits, including those based on the type of collateral and borrowings by geographic region. If the financial covenants become difficult to meet or if our borrowing needs increase beyond the prescribed limits, our financial position, results of operations and liquidity may be materially adversely affected.
Moreover, these new tariffs, or other changes in U.S. trade policy, have resulted in, and may continue to trigger, retaliatory actions by affected countries which could adversely impact demand for our products, as well as impact our costs, customers, suppliers, and/or the U.S. economy or certain sectors thereof and, thus, may adversely impact our business, operations and financial performance.
Moreover, these tariffs, or other changes in U.S. trade policy, have resulted in, and may continue to trigger, retaliatory actions by affected countries which could adversely impact demand for our products, as well as impact our costs, customers, suppliers, and/or the U.S. economy or certain sectors thereof and, thus, may adversely impact our business, operations and financial performance.
Lower demand for rolls may also adversely impact profitability as other competing roll producers lower selling prices in the marketplace in order to fill their manufacturing capacity. Cancellation of orders or deferral of delivery of rolls may occur and produce an adverse impact on our financial results.
Lower demand for rolls may also adversely impact profitability as other competing roll producers lower selling prices in the marketplace to fill their manufacturing capacity. Cancellation of orders or deferral of delivery of rolls may occur and produce an adverse impact on our financial results.
As a result, even if we have sufficient funds, holders may not be entitled to receive any consideration for their Series A warrants or may receive an amount less than they would be entitled to if they had exercised their Series A warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
As a result, even if we have sufficient funds, holders may not be entitled to receive any consideration for their Series A warrants or may receive an amount less than they would have been entitled to if they had exercised their Series A warrants prior to the commencement of any such bankruptcy or reorganization proceeding.
However, there can be no assurance that our subsidiaries or we will not be subject to significant additional claims in the future or that our subsidiaries’ ultimate liability with respect to asbestos claims will not present significantly greater and longer lasting financial exposure than provided in our consolidated financial statements.
However, there can be no assurance our subsidiaries or we will not be subject to significant additional claims in the future or our subsidiaries’ ultimate liability with respect to asbestos claims will not present significantly greater and longer lasting financial exposure than provided in our consolidated financial statements.
Other factors that may adversely impact our export sales and our operating results include political and economic instability, export controls, changes in tax laws and tariffs, and new indigenous producers in overseas markets. A reduction in the level of our export sales may have an adverse impact on our financial results.
Other factors that may adversely impact our export sales and our operating results include political and economic instability, export controls, changes in tax laws and tariffs, and new producers in overseas markets. A reduction in the level of our export sales may have an adverse impact on our financial results.
If we fail to achieve the expected benefits of any restructuring or realignment initiatives and improvement efforts, or if other unforeseen events occur in conjunction with such efforts, our business, results of operations and financial condition could be negatively impacted.
If we fail to achieve the expected benefits of any restructuring or realignment initiatives and improvement efforts, or if other unforeseen events occur in conjunction with such efforts, our business, results of operations, financial condition and liquidity could be negatively impacted.
Cyber-based risks, in particular, are evolving and include potential attacks to our IT infrastructure and to the IT infrastructure of third parties in attempts to gain unauthorized access to our confidential or other proprietary information or information relating to our employees, customers and other third parties or to seek ransom.
Cyber-based risks are evolving and include potential attacks to our IT infrastructure and to the IT infrastructure of third parties in attempts to gain unauthorized access to our confidential or other proprietary information or information relating to our employees, customers and other third parties, or to seek ransom.
Additional risks and uncertainties not currently known to us or that we currently believe are not material also may impair our business, financial condition, results of operations, liquidity, and the value of any investment in our securities.
Additional risks and uncertainties not currently known to us or we currently believe are not material also may impair our business, financial condition, results of operations, liquidity, and the value of any investment in our securities.
While our Board of Directors and management team strive to maintain constructive, ongoing communications with all of our shareholders, including activist shareholders, and welcome their views and opinions with the goal of working together constructively to enhance value for all shareholders, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: (i) responding to actions by activist shareholders can disrupt our operations, be costly and time-consuming and divert the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; (ii) perceived uncertainties as to our future direction may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, result in the loss of potential business opportunities and make it more difficult to attract and retain qualified personnel and business partners; and (iii) these types of actions could cause significant fluctuations in our stock price due to factors that do not necessarily reflect the underlying fundamentals and prospects of our business.
While our Board of Directors and management team strive to maintain constructive, ongoing communications with all of our shareholders, including activist shareholders, and welcome their views and opinions with the goal of working together constructively to enhance value for all shareholders, activist campaigns that contest, or conflict with, our strategic direction could have an adverse effect on us because: (i) responding to actions by activist shareholders can disrupt our operations, be costly and time-consuming and divert the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition; (ii) perceived uncertainties as to our future direction may lead to the perception of a change in the direction of the business, instability or lack of continuity which may be exploited by our competitors, cause concern to our current or potential customers, result in the loss of potential business opportunities 9 and make it more difficult to attract and retain qualified personnel and business partners; and (iii) these types of actions could cause significant fluctuations in our stock price due to factors not necessarily reflecting the underlying fundamentals and prospects of our business.
We believe that the estimated costs, net of anticipated insurance recoveries, of our pending and future asbestos legal proceedings should not have a material adverse effect on our financial condition or liquidity.
We believe the estimated costs, net of anticipated insurance recoveries, of our pending and future asbestos legal proceedings should not have a material adverse effect on our financial condition or liquidity.
If we fail to comply with the covenants contained in our revolving credit facility or our equipment financing facilities, it may adversely affect our liquidity, results of operations and financial condition.
If we fail to comply with the covenants contained in our revolving credit facility or our equipment financing facility, it may adversely affect our liquidity, results of operations and financial condition.
Upon exercise of the Series A warrants, the holders thereof will be entitled to exercise the rights of holders of our common stock only as to matters for which the record date occurs after the warrant exercise date.
Upon exercise of the Series A warrants, the holders thereof will be entitled to exercise their rights as holders of our common stock only as to matters for which the record date occurs after the warrant exercise date.
The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope and complexity of matters that we are required to control, assess and report.
The expected future increased worldwide regulatory activity relating to climate change could expand the nature, scope and complexity of matters we are required to control, assess and report.
There can be no assurance that we will fully realize the benefits of such efforts as anticipated, and we may incur additional and/or unexpected costs to realize them.
There can be no assurance we will fully realize the benefits of such efforts as anticipated, and we may incur additional and/or unexpected costs to realize them.
Until holders of our Series A warrants acquire shares of our common stock upon exercise of such Series A warrants, they will have no rights with respect to the shares of our common stock underlying such Series A warrants.
Until holders of our Series A warrants acquire shares of our common stock upon exercise of their Series A warrants, they will have no rights with respect to the shares of our common stock underlying such Series A warrants.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us, our suppliers, our customers, or our products, or if our operations are disrupted due to the physical impacts of climate change on us, our suppliers, our customers or our business, our results of operations and financial condition could be adversely impacted.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements upon us, our suppliers, our customers, or our products, or if our operations are disrupted due to the physical impacts of climate change on us, our suppliers, our customers or our business, our results of operation, financial condition and liquidity could be adversely impacted.
We may be susceptible to increased litigation related to, among other things, the financial impacts of the pandemic on our business, our ability to meet contractual obligations due to the pandemic, employment practices or policies adopted during the health crisis, or litigation related to individuals contracting any disease as a result of alleged exposures on our premises.
We may be susceptible to increased litigation related to, among other things, the financial impacts of the pandemic or geopolitical conflict on our business, our ability to meet contractual obligations due to the pandemic or geopolitical conflict, employment practices or policies adopted during the health crisis, or litigation related to individuals contracting any disease as a result of alleged exposures on our premises.
Alternatively, if a court outside of Pennsylvania with respect to Internal Governance Claims or any other state court with respect to a cause of action under the Securities Act were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations. 12 ITEM 1B.
Alternatively, if a court outside of Pennsylvania with respect to Internal Governance Claims or any other state court with respect to a cause of action under the Securities Act were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.
Because of the uncertainties related to such claims, it is possible that our ultimate liability could have a material adverse effect on our financial condition, results of operations or liquidity in the future. A change in the existing regulatory environment could negatively affect our operations and financial performance.
Because of the uncertainties related to such claims, it is possible our ultimate liability could have a material adverse effect on our financial condition, results of operations or liquidity in the future. 7 A change in the existing regulatory environment could negatively affect our operations, financial performance and liquidity.
IT systems failures, including risks associated with upgrading our systems or in successfully integrating IT and other systems to common platforms, network disruptions and breaches of data security could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information and our financial reporting.
IT systems failures, including risks associated with upgrading our systems or successfully integrating IT and other systems 10 to common platforms, network disruptions and breaches of data security could disrupt our operations by impeding our processing of transactions, our ability to protect customer or company information and our financial reporting.
In addition, sales of FEP, specifically open-die forged products for the oil and gas industry and steel distribution markets, are impacted by fluctuations in global energy prices, which also could adversely affect our margins and profitability.
In addition, sales of FEP, specifically open-die forged products for the oil and gas industry and steel distribution markets, are impacted by fluctuations in global energy demand, which also could adversely affect our margins and profitability.
Actions of activist shareholders with respect to us or our securities could be disruptive and potentially costly and the possibility that activist shareholders may contest, or seek changes that conflict with, our strategic direction could cause uncertainty about the strategic direction of our business.
Actions of activist shareholders with respect to us or our securities could be disruptive and potentially costly and the possibility that activist shareholders may contest, or seek changes conflicting with, our strategic direction could cause uncertainty about the strategic direction of our business.
The ultimate net liability with respect to such pending and any unasserted claims is subject to various uncertainties, including the following: • the number and nature of claims in the future; • the costs of defending and settling these claims; • insolvencies among our insurance carriers and the risk of future insolvencies; • the possibility that adverse jury verdicts could require damage payments in amounts greater than the amounts for which we have historically settled claims; • possible changes in the litigation environment or federal and state law governing the compensation of asbestos claimants; and • the risk that the bankruptcies of other asbestos defendants may increase our costs.
The ultimate net liability with respect to such pending and any unasserted claims is subject to various uncertainties including, but not limited to, the following: • the number and nature of claims in the future; • the costs of defending and settling these claims; • insolvencies among our insurance carriers and the risk of future insolvencies; • the possibility of adverse jury verdicts could require damage payments in amounts greater than the amounts for which we have historically settled claims or have provided for future claims; • possible changes in the litigation environment or federal and state law governing the compensation of asbestos claimants; and • the risk of bankruptcies of other asbestos defendants which may increase our costs.
Furthermore, in the event that the impact from a pandemic causes us to be unable to maintain a certain level of excess availability under our revolving credit facility, our availability of funds may become limited, or we may be required to renegotiate the facility on less favorable terms.
Furthermore, in the event the impact from a pandemic or geopolitical conflict causes us to be unable to maintain a certain level of excess availability under our revolving credit facility, our availability of funds may become limited, or we may be required to renegotiate the facility on less favorable terms.
The market price of our common stock may not exceed the exercise price of the Series A warrants at such times prior to their date of expiration that the holder desires to exercise such warrants. Any Series A warrants not exercised by their date of expiration will expire without residual value to the holders.
The market price of our common stock may not exceed the exercise price of the Series A warrants at such times prior to their date of expiration or when the holder desires to exercise such warrants. Any Series A warrants not exercised by their date of expiration will expire without residual value to the holders.
We believe our liquidity (including operating and other cash flows that we expect to generate and revolving credit availability) should be sufficient to meet our operating requirements as they occur; however, our ability to maintain sufficient liquidity going forward is subject to the general liquidity of and ongoing changes in the credit markets as well as general economic, financial, competitive, legislative, regulatory, and other market factors that are beyond our control.
We believe our liquidity (including operating and other cash flows that we expect to generate and revolving credit availability) should be sufficient to meet our operating cash flow requirements, debt service costs and other financial obligations as they occur; however, our ability to maintain sufficient liquidity going forward is subject to the general liquidity of, and ongoing changes, in the credit markets as well as general economic, financial, competitive, legislative, regulatory, and other market factors that are beyond our control.
The impact of a pandemic also may have the effect of exacerbating many of the other risks described herein. 8 Uncertainty related to environmental regulation and industry standards, as well as the physical risks of climate change, could impact our results of operations and financial position.
The impact of a pandemic or a geopolitical conflict also may have the effect of exacerbating many of the other risks described herein. Uncertainty related to environmental regulation and industry standards, as well as the physical risks of climate change, could impact our results of operations and financial position.
A significant portion of the FCEP segment’s sales consists of mill rolls to customers in the global steel and aluminum industry that can be periodically impacted by economic or cyclical downturns.
A significant portion of the FCEP segment’s sales consists of mill rolls to customers in the global steel and aluminum industry that may be periodically impacted by economic or cyclical downturns and other disruptions.
Further, local governmental measures may be implemented to control the spread of the virus, including restrictions on manufacturing and the movement of employees in many regions and countries, and may be significant. A pandemic may adversely affect our liquidity and our ability to access the capital markets.
Further, local governmental measures may be implemented to control the spread of viruses, including restrictions on manufacturing and the movement of employees in many regions and countries, and may be significant. A pandemic or geopolitical conflict may adversely affect our liquidity and our ability to access the capital markets.
A pandemic could negatively affect our workforce, both domestically and abroad, requiring some or all of our employees to work from home on a longer-term or permanent basis, thereby requiring new processes, procedures and controls to respond to changes in our business environment.
A pandemic or geopolitical conflict could negatively affect our workforce, both domestically and abroad, requiring some or all of our employees to work remotely on a longer-term or permanent basis, thereby requiring new processes, procedures and controls to respond to changes in our business environment.
We expect to continue to fund these capital expenditures with our equipment financing facilities. The incurrence of additional indebtedness would require that a portion of our cash flows from operations be used for the payment of interest and principal, thereby reducing our ability to use our cash flows from operations to fund working capital, other capital expenditures and acquisitions.
We expect to continue to fund these capital expenditures with our equipment financing facility. The additional indebtedness will require a portion of our cash flows from operations to be used for the payment of interest and principal, thereby reducing our ability to use our cash flows from operations to fund working capital, other capital expenditures and acquisitions.
We could face limitations in availability of capital to fund our strategic plans. Additionally, deterioration in our credit profile or increases in interest rates could increase our costs of borrowing and further limit our access to capital markets and commercial credit. We are parties to a senior secured asset-based revolving credit facility with a consortium of banks.
Additionally, deterioration in our credit profile or increases in interest rates could increase our costs of borrowing and further limit our access to capital markets and commercial credit. We are parties to a senior secured asset-based revolving credit facility with a consortium of banks.
We cannot provide assurance that we will continue to meet these, or other, listing standards of the NYSE American Exchange with respect to the Series A warrants. If we fail to meet the listing criteria, our warrants could be de-listed from the NYSE American Exchange, which could impact potential liquidity for our shareholders.
There can be no assurance we will continue to meet these, or other, listing standards of the NYSE American Exchange with respect to the Series A warrants. If we fail to meet the listing criteria, our warrants could be de-listed from the NYSE American Exchange, which could impact potential liquidity for our shareholders.
Global increases in transportation costs and more limited availability of freight carriers may impact timely delivery of supplies to our subsidiaries and product to our customers, which may be accentuated during pandemics, and may negatively impact our sales, production and profitability.
Global increases in transportation costs and more limited availability of freight carriers may impact timely delivery of supplies to our subsidiaries and product to our customers, and may negatively impact our sales, production and profitability.
As consumers of steel and aluminum in some of our products, our cost base is exposed to the impact of this action, or similar actions, which could reduce our margins, and we could potentially lose market share to foreign competitors not subject to similar tariff increases.
As consumers of steel and aluminum in some of our products, our cost base is exposed to these tariffs and could be exposed to additional tariffs, higher tariffs or similar actions in the future, which could reduce our margins, and we could potentially lose market share to foreign competitors not subject to similar tariff increases.
These laws, regulations and policies, and changes thereto, may result in restrictions or limitations to our current operational practices and processes and product/service offerings which could negatively impact our current cost structure, revenue streams, future tax obligations, the value of our deferred income tax assets, cash flows, and overall financial position. 7 In addition, our tax filings are subject to audits by tax authorities in the various jurisdictions in which we do business.
These laws, regulations and policies, and changes thereto, may result in restrictions or limitations to our current operational practices and processes and our product/service offerings which could negatively impact our current cost structure, revenue streams, future tax obligations, the value of our deferred income tax assets, cash flows, and overall financial position.
Such downturns, the timing and length of which are difficult to predict, may reduce the demand for, and sales of, our forged and cast rolls both in the United States and the rest of the world.
Such downturns and disruptions, the timing and length of which are difficult to predict, may cause demand for steel and aluminum to be lower than forecasted which may reduce the demand for, and sales of, our forged and cast rolls both in the United States and the rest of the world.
Our common stock’s average-global market capitalization over the 30 trading-day period ended December 31, 2022 was $54.6 million, and our total Ampco-Pittsburgh shareholders’ equity was $104.3 million as of December 31, 2022.
Our common stock’s average-global market capitalization over the 30 trading-day period ended December 31, 2023 was $52.6 million, and our total Ampco-Pittsburgh shareholders’ equity was $60.9 million as of December 31, 2023.
Shortage of key production materials, while driving up costs, may be of such severity as to disrupt our production, all of which may impact our sales and profitability. Geopolitical factors or wars could exacerbate these risks.
Shortage of key production materials, while driving up costs, may be of such severity as to disrupt our production, all of which may impact our sales and profitability. Geopolitical factors or wars, including the Russia-Ukraine conflict and the Red Sea crisis, could exacerbate the above risks.
These audits may result in assessments of additional taxes that are subsequently resolved with the taxing authorities or through the courts. Currently, we believe there are no outstanding assessments whose resolution would result in a material adverse financial result.
In addition, our tax filings are subject to audits by tax authorities in the various jurisdictions in which we do business. These audits may result in assessments of additional taxes that are subsequently resolved with the taxing authorities or through the courts. Currently, we believe there are no outstanding assessments whose resolution would result in a material adverse financial result.
We cannot be certain that we will be successful in maintaining adequate internal control over our financial reporting and financial processes in the future. We may in the future discover areas of our internal control that need improvement.
There can be no assurance we will be successful in maintaining adequate internal control over our financial reporting and financial processes in the future. We may in the future discover areas of our internal control needing improvement.
Further, our access to public and private debt markets is limited based on our size, credit profile and not being a well-known seasoned issuer, which may result in limitations in availability of capital to fund our strategic plans. We have entered into sale-leaseback transactions, which create the risk of loss if we default.
Further, our access to public and private capital markets is limited based on our size, credit profile and not being a well-known seasoned issuer, which may result in limitations in availability of capital to fund our strategic plans.
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.
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.
If we are unable to repay debt service costs, we may be unable to obtain alternative financing on satisfactory terms and our liquidity, results of operations and financial conditions may be adversely affected. To support our growth strategy, we have made and expect to continue to make substantial capital expenditures.
If we are unable to repay debt service costs, we may be unable to obtain alternative financing on acceptable terms, or at all, and our liquidity, results of operations and financial condition may be adversely affected. To support our growth strategy in the FCEP segment, we have made, and expect to continue to make, significant commitments for capital expenditures.
Certain of our subsidiaries operate in foreign jurisdictions and, accordingly, earn revenues, pay expenses, own assets, and incur liabilities in countries using currencies other than the U.S. dollar.
Fluctuation in the value of the U.S. dollar relative to other currencies could adversely affect our business, results of operations and financial condition. Certain of our subsidiaries operate in foreign jurisdictions and, accordingly, earn revenues, pay expenses, own assets, and incur liabilities in countries using currencies other than the U.S. dollar.
However, we cannot offer assurances that unasserted or potential future assessments would not have a material adverse effect on our financial condition or results of operations. In 2018, the United States imposed tariffs of 25% on primary steel imports and 10% on primary aluminum imports into the United States.
However, there can be no assurance that unasserted or potential future assessments would not have a material adverse effect on our financial condition, results of operations and liquidity. The United States currently imposes tariffs of 25% on primary steel imports and 10% on primary aluminum imports into the United States.
If the New York Stock Exchange determines that our common stock fails to satisfy the requirements for continued listing, or we continue to fail to meet listing criteria, our common stock could be de-listed from the New York Stock Exchange, which could impact potential liquidity for our shareholders. 10 Continued listing criteria of the NYSE American Exchange include maintaining prescribed levels of financial condition, market capitalization and shareholders’ equity.
If the New York Stock Exchange determines our common stock fails to satisfy the requirements for continued listing, or we continue to fail to meet listing criteria, our common stock could be de-listed from the New York Stock Exchange, which could impact potential liquidity for our shareholders.
If we are not able to maintain adequate liquidity, we may not be able to meet our operating cash flow requirements; debt service costs; future required contributions to our employee benefit plans (which are expected to increase in 2024/2025 primarily due to lower than expected pension asset performance in 2022); and other financial obligations. 6 Our revolving credit facility is subject to various affirmative and negative covenants and our equipment financing facilities include various affirmative covenants.
If we are not able to maintain adequate liquidity, we may not be able to meet our operating cash flow requirements, debt service costs, or other financial obligations such as future required contributions to our employee benefit plans. Our revolving credit facility is subject to various affirmative and negative covenants and our equipment financing facility includes various affirmative covenants.
ITEM 1A. RIS K FACTORS Our business, financial condition, results of operations, liquidity, and the value of any investment in our securities are subject to a number of risks. The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties we face.
ITEM 1A. RIS K FACTORS Our business, financial condition, results of operations, liquidity, and the value of any investment in our securities are subject to a number of inherent risks and uncertainties.
Our subsidiaries use certain commodities in the manufacture of their products. These include steel scrap, ferroalloys and energy. Any unexpected, sudden or prolonged price increase may cause a reduction in our profit margins or losses where beneficial fixed-priced contracts do not exist, unfavorable fixed-price contracts cannot be modified or increases cannot be obtained in our selling prices.
Any unexpected, sudden or prolonged price increase may cause a reduction in our profit margins or result in losses where beneficial fixed-priced contracts do not exist, unfavorable fixed-priced contracts cannot be modified or increases cannot be obtained in our selling prices.
UES and Air & Liquid have entered into sale and leaseback financing transactions with Store Capital Acquisitions, LLC (“STORE”) relating to certain properties utilized by segments of the Corporation. Pursuant to such sale and leaseback, UES has entered into a lease with STORE, through which it will sublease properties to Air & Liquid.
We have entered into sale-leaseback transactions, which create the risk of loss if we default. UES and Air & Liquid have entered into sale and leaseback financing transactions with Store Capital Acquisitions, LLC (“STORE”) relating to certain properties utilized by the segments of the Corporation.
UNRESOLVE D STAFF COMMENTS The Corporation has no unresolved staff comments.
ITEM 1B. UNRESOLVED STAFF COMMENTS The Corporation has no unresolved staff comments.
Although we have taken steps to address these concerns, there can be no assurance that a system failure or data security breach will not have a material adverse effect on our financial condition, results of operations and liquidity. 11 Our By-laws designate the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and the federal courts as the sole and exclusive forum for claims arising under the Securities Act of 1933, as amended, which could discourage lawsuits against us and our directors and officers but may be found to be inapplicable or unenforceable.
Our By-laws designate the state and federal courts sitting in the judicial district of the Commonwealth of Pennsylvania as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and the federal courts as the sole and exclusive forum for claims arising under the Securities Act of 1933, as amended, which could discourage lawsuits against us and our directors and officers but may be found to be inapplicable or unenforceable.
Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect the translated value for revenue, expenses and balance sheet items denominated in foreign currencies and could materially affect our financial results expressed in U.S. dollars. 5 Increases in energy and commodity prices, reductions in electricity and natural gas supply or shortage of key production materials could adversely impact our production, which could result in lower profitability or higher losses.
Therefore, increases or decreases in the value of the U.S. dollar against other major currencies will affect the translated value for revenue, expenses and balance sheet items denominated in foreign currencies and could materially affect our financial results expressed in U.S. dollars.
There also may be curtailment in electricity or natural gas supply or availability of key production materials, which may be accentuated during global conflict: all of which could adversely impact our production.
There also may be curtailment in electricity or natural gas supply or availability of key production materials, which could adversely impact our production or result in lower profitability, higher losses or impairment of our long-lived assets.
Pandemics may cause disruptions to our business and the industries in which we operate. Pandemics may increase economic and demand uncertainty and could cause a sustained global recession.
For the ALP segment, no customers exceeded 10% of its net sales in 2023 or 2022. Pandemics and geopolitical conflicts may cause disruptions to our business and the industries in which we operate. Pandemics and geopolitical conflicts may increase economic and demand uncertainty and could cause a sustained global recession.
The Corporation may not realize the expected benefits from any restructuring and improvement efforts that we have taken or may take in the future. We periodically evaluate our segments and we have and continue to undertake restructuring and realignment initiatives to reduce our overall cost basis and improve efficiency.
We may not realize the expected benefits from any restructuring or realignment initiatives or improvement efforts that we have taken or may take in the future.
In addition, changes in foreign currency exchange rates may provide foreign roll suppliers with advantages based on those lower foreign currency exchange rates and, therefore, permit them to compete in our home markets. Fluctuation in the value of the U.S. dollar relative to other currencies could adversely affect our business, results of operations and financial condition.
In addition, changes in foreign currency exchange rates may provide foreign roll suppliers with advantages based on those lower foreign currency exchange rates and, therefore, permit them to compete in our home markets. We could face limitations in availability of capital to fund our strategic plans.
Increases in energy and commodity prices, and/or reductions in electricity and natural gas supply could adversely impact our production or result in lower profitability or higher losses or impairment of our long-lived assets.
Increases in energy and commodity prices, reductions in electricity and natural gas supply or shortages of key production materials could adversely impact our production, which could result in lower profitability or higher losses. Our subsidiaries use certain commodities in the manufacture of their products. These include steel scrap, ferroalloys and energy.
Any new credit agreement or these other forms of liquidity may result in higher borrowing costs and contain non-investment grade covenants that are less advantageous to us than our existing revolving credit and equipment financing facilities. Our growth strategy has required substantial capital expenditures, which have been funded by the incurrence of additional debt.
Any new credit agreement or other forms of liquidity may result in higher borrowing costs and contain non-investment grade covenants that are less favorable in comparison to our existing revolving credit and equipment financing facility, if available at all.
The credit facility provides for borrowings not to exceed $100 million and an allowance of $20 million for new capital equipment financing (which was accessed in September 2022) but otherwise restricts us from incurring additional indebtedness outside of the agreement, unless approved by the banks.
The revolving credit facility is collateralized by a first priority perfected security interest in substantially all of our assets. The revolving credit facility provides for borrowings not to exceed $100 million and otherwise restricts us from incurring additional indebtedness outside of the agreement, unless approved by the lenders party to the revolving credit facility.
Such lease entered into by UES contains certain representations, warranties, covenants, obligations, conditions, indemnification provisions and termination provisions customary for that type of agreement. If the Corporation defaults on the terms of such transaction, the Corporation could lose the properties. We need to maintain adequate liquidity to meet our operating cash flow requirements, debt service costs and other financial obligations.
The lease entered into by UES contains certain representations, warranties, covenants, obligations, conditions, indemnification provisions, and termination provisions customary for that type of agreement.
Furthermore, to the extent our business grows, our internal control may become more complex, and we would require significantly more resources to ensure our internal control remains effective. We assessed the effectiveness of internal control over financial reporting as of December 31, 2022.
Furthermore, to the extent our business grows, our internal control may become more complex, and we would require significantly more resources to ensure our internal control remains effective. If we or our independent registered public accounting firm discover a material weakness, the disclosure of that fact, even if quickly remediated, could reduce the market value of our securities.
Removed
In particular, the Russia-Ukraine conflict may intensify the inflationary effect for the cost of natural gas, electricity, raw materials and other production components which are difficult to predict given the fluidity of the military conflict, the novelty of Western sanctions against Russia and possibility of yet harsher ones.
Added
The risks and uncertainties described below are those we have identified as material as of the date of this Annual Report on Form 10-K, but they are not the only risks and uncertainties we face.
Removed
The credit facility is collateralized by a first priority perfected security interest in substantially all of our assets.
Added
This could lead to global market destabilization and reduced sales and profitability of some of our customers which, in turn, affects our sales and profit margins, as well as the collectability of our receivables and the salability of our in-process inventory.
Removed
We may experience episodic disruptions to our operations or to the operations of our customers and suppliers; global supply chain issues causing global inflationary pressures; customer-requested delays of deliveries or cancellation of orders; lower order intake resulting from customers postponing projects; the inability to obtain raw materials and supplies critical to the manufacturing process; delays in receiving and shipping product due to the lack of transportation; higher cost of production and transportation; long-term disruptions to our operations resulting from changes in government policy or guidance; quarantines of employees, customers and suppliers in areas affected by a pandemic; closures of businesses or manufacturing facilities that are critical to our business or our supply chains; and higher write-offs of accounts receivables and impairment charges on our asset values, including property, plant and equipment and intangible assets, which, individually or in the aggregate, may impact, our financial condition, results of operations and liquidity.
Added
If we are unable to fund our strategic plans, whether through cash from operations or from the capital markets, we may have to forego opportunities that would otherwise be accretive to our operating results for potentially an extended period. 5 We need to maintain adequate liquidity to meet our operating cash flow requirements, debt service costs and other financial obligations.
Removed
In making this assessment, we used the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on those criteria and our assessment, we concluded that our internal control over financial reporting was not effective as of December 31, 2022, because of the material weaknesses as described below.
Added
In particular, the Russia-Ukraine conflict has significantly increased the cost of energy for our U.K. operations. As a result, we have moved certain of our cast roll production from the U.K. to Sweden, reducing profitability of our U.K. operations but improving profitability for our Sweden operations.
Removed
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements, including footnotes to the annual or interim financial statements, will not be prevented or detected on a timely basis. 9 As of December 31, 2022, we had material weaknesses related to (i) the accounting for claims asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid (“Asbestos Liability”) and (ii) management review control activities related to the tax accounting of a non-routine transaction.
Added
We may not be able to scale our operational capacity in line with demand for our products. Demand for our products, particularly in our ALP segment, may grow at a pace that exceeds our operational capacity, including our manufacturing capabilities.
Removed
The material weakness related to the Asbestos Liability is a result of the aggregation of the following control deficiencies: insufficient design and business process controls surrounding a new asbestos claims management database, insufficient testing of data migration from the previous asbestos claims management database to the new asbestos claims management database, and inadequate information technology (“IT”) general controls which ensure the integrity of the data and processes that the new asbestos claims management system supports.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeTonawanda, NY 14120* Manufacturing facilities and offices 94,000 on 9 acres Metal, brick and cement block * Facility is leased. During 2022, Air & Liquid completed sale and leaseback financing transactions with STORE for its real property, including its manufacturing facilities, located in Lynchburg, Virginia; Amherst, Virginia and North Tonawanda, New York (collectively, the “ALP Properties”).
Biggest changeTonawanda, NY 14120* Manufacturing facilities and offices 94,000 on 9 acres Metal, brick and cement block * Facility is leased. Most of the Corporation’s domestic real property locations are subject to sale and leaseback financing transactions with STORE, including its manufacturing facilities. See Note 9 , Debt , to the Consolidated Financial Statements. UES subleases office space to the Corporation.
No. 2 Jian Cao Ping Taiyuan, Shanxi, China Manufacturing facilities and offices 338,000 on 14.6 acres Metal, steel and brick Alloys Unlimited and Processing, LLC 3760 Oakwood Avenue Austintown, OH 44515* Manufacturing facilities and offices 69,800 on 1.5 acres Steel framed and cement block 13 Company and Location Principal Use Approximate Square Footage Type of Construction AIR AND LIQUID PROCESSING SEGMENT Air & Liquid Systems Corporation Aerofin Division 4621 Murray Place Lynchburg, VA 24506* Manufacturing facilities and offices 146,000 on 15.3 acres Brick, concrete and steel Buffalo Air Handling Division Zane Snead Drive Amherst, VA 24531* Manufacturing facilities and offices 89,000 on 19.5 acres Metal and steel Buffalo Pumps Division 874 Oliver Street N.
No. 2 Jian Cao Ping Taiyuan, Shanxi, China Manufacturing facilities and offices 338,000 on 14.6 acres Metal, steel and brick Alloys Unlimited and Processing, LLC 3760 Oakwood Avenue Austintown, OH 44515* Manufacturing facilities and offices 69,800 on 1.5 acres Steel framed and cement block 13 Company and Location Principal Use Approximate Square Footage Type of Construction AIR AND LIQUID PROCESSING SEGMENT Air & Liquid Systems Corporation Aerofin Division 4621 Murray Place Lynchburg, VA 24506* Manufacturing facilities and offices 146,000 on 15.3 acres Brick, concrete and steel Buffalo Air Handling Division 467 Zane Snead Drive Amherst, VA 24531* Manufacturing facilities and offices 89,000 on 19.5 acres Metal and steel 4201 Murray Place Lynchburg, VA 24501* Manufacturing facilities and offices 69,700 on 8.6 acres Metal and cement block Buffalo Pumps Division 874 Oliver Street N.
The Corporation further subleases a portion of its office space to Air & Liquid for use as its headquarters. All of the owned facilities are adequate and suitable for their respective purposes. The facilities of the FCEP segment operated within 85% to 90% of their normal capacity during 2022.
The Corporation further subleases a portion of its office space to Air & Liquid for use as its headquarters. The Corporation believes all of the owned facilities are adequate and suitable for their respective purposes. The forge roll facilities of the FCEP segment operated within 75% to 85% of their normal capacity during 2023.
The facilities of the ALP segment operated within 60% to 70% of their normal capacity. Normal capacity is defined as capacity under approximately normal conditions with allowances made for unavoidable interruptions, such as lost time for repairs, maintenance, breakdowns, set-up, failure, supply delays, labor shortages and absences, Sundays, holidays, vacation, and inventory taking.
Normal capacity is defined as capacity under approximately normal conditions with allowances made for unavoidable interruptions such as lost time for repairs, maintenance, breakdowns, set-up, failure, supply delays, labor shortages and absences, Sundays, holidays, vacation, and inventory taking. The number of work shifts is also taken into consideration.
Removed
Previously, in 2018, UES completed a sale and leaseback financing transaction with 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”), and simultaneously entered into a lease agreement with STORE whereby UES would lease the properties from STORE.
Added
The cast roll facilities of the FCEP segment operated within 70% to 80% of normal operating capacity during 2023, primarily due to soft European demand. The facilities of the ALP segment operated within 70% to 80% of their normal capacity.
Removed
In connection with the sale and leaseback financing transactions in 2022, UES and STORE amended their existing lease whereby UES will lease the UES Properties and the ALP Properties with UES subleasing the ALP Properties to Air & Liquid. UES subleases office space to the Corporation.
Removed
The number of work shifts is also taken into consideration. 14

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAir & Liquid and, in some cases, the Corporation, are defendants (among a number of defendants, often in excess of 50) in cases filed in various state and federal courts. See Note 20 , Litigation , to the Consolidated Financial Statements.
Biggest changeAir & Liquid and, in some cases, the Corporation, are defendants (among a number of defendants, often in excess of 50) in cases filed in various state and federal courts. See Note 20 , Litigation , to the Consolidated Financial Statements. The Corporation believes appropriate reserves have been established.
ITEM 3. LEGAL PROCEEDINGS LITIGATION The Corporation and its subsidiaries may become involved in various claims and lawsuits incidental to their businesses. In addition, claims been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid.
ITEM 3. LEGAL PROCEEDINGS LITIGATION The Corporation and its subsidiaries may become involved in various claims and lawsuits incidental to their businesses. In addition, claims have been asserted alleging personal injury from exposure to asbestos-containing components historically used in some products manufactured by predecessors of Air & Liquid.
MINE SAFE TY DISCLOSURES Not applicable. 15 – PART II –
MINE SAFE TY DISCLOSURES Not applicable. 14 – PART II –

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

2 edited+0 added−0 removed1 unchanged
Biggest changeThe number of registered shareholders at December 31, 2022 and 2021 equaled 356 and 364, respectively. The number of registered warrant holders equaled 21 at December 31, 2022 and 2021, respectively. ITE M 6. RESERVED
Biggest changeThe number of registered shareholders at December 31, 2023 and 2022 equaled 348 and 356, respectively. The number of registered warrant holders at each of December 31, 2023 and 2022 equaled 21. ITE M 6. RESERVED
In June 2017, the Corporation announced that it would suspend quarterly cash dividends, beginning with the second quarter of 2017. The Series A warrants are traded on the NYSE American Exchange (symbol AP WS). Each warrant entitles the holder with the right to purchase 0.4464 shares of common stock of Ampco-Pittsburgh Corporation.
In June 2017, the Corporation announced it would suspend quarterly cash dividends, beginning with the second quarter of 2017. The Series A warrants are traded on the NYSE American Exchange (symbol AP WS). Each warrant entitles the holder with the right to purchase 0.4464 shares of common stock of Ampco-Pittsburgh Corporation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

77 edited+28 added−26 removed29 unchanged
Biggest changeOther income – net is comprised of the following: 2022 2021 Change Net pension and other postretirement income $ 6,552 $ 6,694 $ (142 ) Unrealized (loss) gain on Rabbi trust investments (1,144 ) 661 (1,805 ) Gain (loss) on foreign exchange transactions 2,293 (1,134 ) 3,427 Other (8 ) 81 (89 ) $ 7,693 $ 6,302 $ 1,391 Other income – net fluctuated primarily due to changes in foreign exchange gains and losses and, as a result of volatility in the financial markets during 2022, unrealized losses in the market value of the Rabbi trust investments.
Biggest changeThe increase of $3,913 is principally due to: • Full year of interest on the sale and leaseback financing transactions and the equipment financing facility completed during the second half of 2022, which increased interest expense in 2023 when compared to 2022 by approximately $2,600; • Higher average interest rates year-over-year, which increased interest expense in 2023 when compared to 2022 by approximately $1,700; and • Higher average borrowings outstanding under the revolving credit facility in 2023 when compared to 2022, which increased interest expense by approximately $600; offset by • Higher capitalization of interest costs related to the investment in capital equipment at UES of approximately $1,100. 17 Other income – net is comprised of the following: 2023 2022 Change Net pension and other postretirement income $ 5,020 $ 6,552 $ (1,532 ) (Loss) gain on foreign exchange transactions (692 ) 2,293 (2,985 ) Unrealized gain (loss) on Rabbi trust investments 273 (1,144 ) 1,417 Other (85 ) (8 ) (77 ) $ 4,516 $ 7,693 $ (3,177 ) Other income – net fluctuated primarily due to: • Lower pension and other postretirement income due to higher interest costs on employee benefit obligations as a result of higher discount rates used to measure expense in 2023 versus 2022; and • Changes in foreign exchange gains and losses; offset by • Changes in unrealized gains and losses in the market value of the Rabbi trust investments corresponding to the volatility in the financial markets.
The Corporation has presented non-GAAP adjusted (loss) 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.
The Corporation has presented non-GAAP adjusted income (loss) 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.
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 that it excludes from adjusted (loss) income from operations.
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 (loss) from operations.
Adjusted (loss) 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 (loss) income from operations rather than income (loss) from operations, which is the nearest GAAP equivalent.
Adjusted income (loss) 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 (loss) from operations rather than (loss) income from operations, which is the nearest GAAP equivalent.
If the Corporation determined it would not be able to realize all or part of the deferred income tax assets in the future, an adjustment to the valuation allowance would be established resulting in a charge to net income (loss).
If the Corporation determined it would not be able to realize all or part of the deferred income tax assets in the future, an adjustment to the valuation allowance would be established resulting in a charge to net (loss) income.
Likewise, if the Corporation determined it would be able to realize deferred income tax assets in excess of the net amount recorded, a portion of the existing valuation allowance would be released resulting in a credit to net income (loss).
Likewise, if the Corporation determined it would be able to realize deferred income tax assets in excess of the net amount recorded, a portion of the existing valuation allowance would be released resulting in a credit to net (loss) income.
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.
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 its headquarters in Carnegie, Pennsylvania.
Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot 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.
Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot strip mills, medium/heavy section mills, roughing 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.
Based on their analyses, reserves for probable and reasonably estimable costs for the Asbestos Liability, including defense costs, and receivables for the insurance recoveries that are deemed probable are established. These amounts rely on assumptions which are based on currently known facts and strategy.
Based on their analyses, reserves for probable and reasonably estimable costs for the Asbestos Liability, including defense costs, and receivables for the insurance recoveries deemed probable, are established. These amounts rely on assumptions which are based on currently known facts and strategy.
Conversely, if the Corporation subsequently determined that a tax position met the “more likely than not” criteria, it would recognize the tax benefit by reducing the liability and recording a credit to earnings.
Conversely, if the Corporation subsequently determined a tax position met the “more likely than not” criteria, it would recognize the tax benefit by reducing the liability and recording a credit to earnings.
The Corporation's tax filings are subject to audits by tax authorities in the various jurisdictions in which it does business. These audits may result in assessments of additional taxes. At December 31, 2022, based on information known to date, the Corporation believes there are no pending or outstanding assessments whose resolution would require recognition in its consolidated financial statements.
The Corporation’s tax filings are subject to audits by tax authorities in the various jurisdictions in which it does business. These audits may result in assessments of additional taxes. At December 31, 2023, based on information known to date, the Corporation believes there are no pending or outstanding assessments whose resolution would require recognition in its consolidated financial statements.
Litigation and loss contingency accruals are made when it is determined that it is probable that a liability has been incurred and the amount can be reasonably estimated. Specifically, the Corporation and certain of its subsidiaries are involved in various claims and lawsuits incidental to its businesses.
Litigation and loss contingency accruals are made when it is determined it is probable a liability has been incurred and the amount can be reasonably estimated. Specifically, the Corporation and certain of its subsidiaries are involved in various claims and lawsuits incidental to their businesses.
Accordingly, changes in the income tax provision for each period includes the effects of changes in the pre-tax income of the Corporation’s profitable operations.
Accordingly, changes in the income tax provision for each period includes the effects of changes in the pre-tax income of the Corporation’s profitable operations in each jurisdiction.
As of December 31, 2022, based on information known to date, the Corporation believes the amount of unrecognized tax benefits for tax positions taken or expected to be taken in a tax return, which may be challenged by the tax authorities, not to be significant.
As of December 31, 2023, based on information known to date, the Corporation believes the amount of unrecognized tax benefits for tax positions taken or expected to be taken in a tax return, which may be challenged by the tax authorities, not to be significant.
The Corporation believes the amounts recorded in the accompanying consolidated financial statements for property, plant and equipment are recoverable and are not impaired as of December 31, 2022. 23 Accounting for pension and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works.
The Corporation believes the amounts recorded in the accompanying consolidated financial statements for property, plant and equipment are recoverable and are not impaired as of December 31, 2023. Accounting for pension and other postretirement benefits involves estimating the cost of benefits to be provided well into the future and attributing that cost over the time period each employee works.
Accordingly, in connection with preparation of its 2023 business plan in the fourth quarter of 2022, the Corporation completed a quantitative analysis of the long-lived assets for the asset group and determined the assets were not impaired.
Accordingly, in connection with preparation of its 2024 business plan in the fourth quarter of 2023, the Corporation completed a quantitative analysis of the long-lived assets for the asset group and determined the assets were not impaired.
Conversely, a 1/4 percentage point decrease in the discount rate would increase projected and accumulated benefit obligations by approximately $5,800. The Corporation believes that the amounts recorded in the accompanying consolidated financial statements related to pension and other postretirement benefits are based on assumptions that are appropriate at December 31, 2022, although actual outcomes could differ.
Conversely, a 1/4 percentage point decrease in the discount rate would increase projected and accumulated benefit obligations by approximately $5,900. The Corporation believes that the amounts recorded in the accompanying consolidated financial statements related to pension and other postretirement benefits are based on assumptions that are appropriate at December 31, 2023, although actual outcomes could differ.
A percentage point decrease in the expected long-term rate of return would increase annual pension expense by approximately $2,600. Conversely, a percentage point increase in the expected long-term rate of return would decrease annual pension expense by approximately $2,600.
A percentage point decrease in the expected long-term rate of return would increase annual pension expense by approximately $2,300. Conversely, a percentage point increase in the expected long-term rate of return would decrease annual pension expense by approximately $2,300.
For the FCEP segment, approximately 80% of customer orders include a commodity surcharge; the ability to pass on future increases in the price of commodities for the balance of the customer orders will be negotiated on a contract-by-contract basis.
For the FCEP segment, approximately 80% of customer orders include a commodity, energy and transportation surcharge. The ability to pass on future increases in the price of commodities for the balance of the customer orders will be negotiated on a contract-by-contract basis.
Income tax provision equaled $(1,576) and $(2,305) for 2022 and 2021, respectively, and 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.
Income tax benefit (provision) equaled $1,158 and $(1,576) for 2023 and 2022, respectively, and 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.
In particular, the Corporation believes that the exclusion of the Asbestos-Related (Credit) Charge, the Change in Employee Benefit Policy, the Refund of Excess COVID-19 Subsidies, and the Reorganization-Related Costs can provide a useful measure for period-to-period comparisons of the Corporation’s 19 core business performance.
In particular, the Corporation believes the exclusion of the Asbestos-Related Charge (Credit), the Asbestos-Related Proceeds, the Foreign Energy Credit, the Change in Employee Benefit Policy, and the Refund of Excess COVID-19 Subsidies can provide a useful measure for period-to-period comparisons of the Corporation’s core business performance.
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 decreased by $1,602 during 2022 and ended the period at $8,735 in comparison to $10,337 at December 31, 2021.
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 decreased by $1,449 during 2023 and ended the period at $7,286 in comparison to $8,735 at December 31, 2022.
In addition, the income tax provision for 2022 includes $165 of expense resulting from the revaluation of the deferred income tax assets of the ALP segment following new legislation enacted in 2022, which will decrease the Pennsylvania state income tax rate from 9.99% to 4.99% in 2031.
The income tax benefit (provision) includes expense of $203 and $165 for 2023 and 2022, respectively, resulting from the revaluation of the deferred income tax assets of the ALP segment following new legislation enacted in 2022, which will gradually decrease the Pennsylvania state income tax rate from 9.99% in 2022 to 4.99% in 2031.
The segment utilizes a common independent group of sales offices located throughout the United States and Canada.
The segment utilizes an independent group of sales offices located throughout the United States and Canada.
Although the Corporation recorded the Asbestos-Related (Credit) Charge in 2022 and 2021, these were non-cash (credits) charges and, accordingly, did not impact net cash flows used in operating activities. Instead, net asbestos-related payments equaled $9,126 and $9,903 in 2022 and 2021, respectively, and are expected to approximate $8,000 in 2023.
Although the Corporation recorded the Asbestos-Related Charge (Credit) in 2023 and 2022, these were non-cash charges (credits) and, accordingly, did not impact net cash flows used in operating activities. Instead, net asbestos-related payments equaled $10,592 and $9,126 in 2023 and 2022, respectively, and are expected to approximate $9,000 in 2024. Asbestos-related payments are expected to continue in the foreseeable future.
Backlog at December 31, 2022 increased $47,620 from December 31, 2021, with backlog for each product line improving as a result of record-level order intake. At December 31, 2022, approximately 12% of the backlog is expected to ship after 2023.
Backlog at December 31, 2023 increased $14,456 from December 31, 2022, with backlog for each product line improving as a result of record-level order intake. At December 31, 2023, approximately 28% of the backlog is expected to ship after 2024.
At December 31, 2022, approximately 3% of the backlog is expected to ship after 2023.
At December 31, 2023, approximately 4% of the backlog is expected to ship after 2024.
The Corporation continues to evaluate the uncertainty associated with the Russia-Ukraine conflict and, at December 31, 2022, there were no additional triggering events identified. Additionally, there have been no triggering events for the asset groups within the ALP segment.
The Corporation continues to evaluate the uncertainty associated with its U.K. operations and, at December 31, 2023, there were no additional triggering events identified. Additionally, there have been no triggering events for the asset groups within the ALP segment.
For a more thorough description of the Corporation's debt and credit documents see Note 9 , Debt , to the Consolidated Financial Statements. With respect to litigation, see Note 20 , Litigation , to the Consolidated Financial Statements. With respect to environmental matters, see Note 22 , Environmental Matters , to the Consolidated Financial Statements.
For a more thorough description of the Corporation’s debt and credit documents see Note 9 , Debt , to the Consolidated Financial Statements.
Net income attributable to Ampco-Pittsburgh and income per common share attributable to Ampco-Pittsburgh for 2022, include a net benefit of $2,727 or $0.14 per common share associated with the net benefit from the Asbestos-Related Credit, the Change in Employee Benefit Policy, the Refund of Excess COVID-19 Subsidies and the additional tax of $165 resulting from the revaluation of the deferred income tax assets of the ALP segment following new legislation enacted in 2022, which will reduce the Pennsylvania state income tax rate from 9.99% to 4.99% in 2031.
Net income attributable to Ampco-Pittsburgh and net income per common share attributable to Ampco-Pittsburgh for 2022 include a net after-tax benefit of $2,727 or $0.14 per common share associated with the Asbestos-Related Credit, the Change in Employee Benefit Policy, the Refund of Excess COVID-19 Subsidies and the additional tax of $165 resulting from the revaluation of the deferred income tax assets of the ALP segment following new legislation enacted in 2022, which will gradually reduce the Pennsylvania state income tax rate from 9.99% in 2022 to 4.99% in 2031. 18 Non-GAAP Financial Measures The Corporation presents non-GAAP adjusted income (loss) from operations, which is calculated as (loss) income from operations excluding the Asbestos-Related Charge (Credit), the Asbestos-Related Proceeds, the Foreign Energy Credit, the Change in Employee Benefit Policy, and the Refund of Excess COVID-19 Subsidies, for each of the years, as applicable.
Included in income from operations for 2022, is a: • Credit for asbestos-related costs of $2,226 representing the benefit from the change in the estimated defense-to-indemnity cost ratio from 70% to 65% based on ongoing experience and improvements in defense costs which are expected to continue (the "Asbestos-Related Credit"); 17 • Benefit of approximately $1,431 resulting from a change in how certain employees earn certain benefits (the “Change in Employee Benefit Policy”); offset by • Charge of approximately $664 for excess COVID-19 subsidies received in 2020 but returned in 2022 (“the Refund of Excess COVID-19 Subsidies”).
By comparison, included in income from operations for 2022 is a: • Credit of $2,226 representing the benefit from the change in the estimated defense-to-indemnity cost ratio from 70% to 65% (the “Asbestos-Related Credit”); and • Benefit of $1,431 resulting from a change in how certain employees earn certain benefits (the “Change in Employee Benefit Policy”); offset by 16 • Charge of $664 for excess COVID-19 subsidies received in 2020 but returned in 2022 (the “Refund of Excess COVID-19 Subsidies”).
Net income (loss) attributable to Ampco-Pittsburgh was approximately $3,416 or $0.18 per common share for 2022 and $(3,861) or $(0.20) per common share for 2021.
Net (loss) income attributable to Ampco-Pittsburgh was approximately $(39,928) or $(2.04) per common share for 2023 and $3,416 or $0.18 per common share for 2022.
Among other things, there can be no assurance that additional benefits similar to the Asbestos-Related (Credit) and the Change in Employee Benefit Policy or additional expenses similar to the Asbestos-Related Charge, the Refund of Excess COVID-19 Subsidies, and the Reorganization-Related Costs will not occur in future periods. The adjustments reflected in adjusted (loss) income from operations are pre-tax.
Among other things, there can be no assurance that additional benefits similar to the Asbestos-Related Credit, the Asbestos-Related Proceeds, the Foreign Energy Credit and the Change in Employee Benefit Policy or additional expenses similar to the Asbestos-Related Charge and the Refund of Excess COVID-19 Subsidies will not occur in future periods.
The Corporation believes the expected long-term rate of return of 6.94% for its domestic plans and 3.00% for its foreign plans to be reasonable.
The Corporation believes the expected long-term rate of return of 7.70% for its domestic plans and 4.60% for its foreign plans to be reasonable.
A discussion of income (loss) from operations for the Corporation’s two segments is included below. Corporate costs decreased in 2022, when compared to 2021, by $1,104 due to lower employee-related costs including lower incentive compensation and a portion of the benefit from the Change in Employee Benefit Policy being attributable to Corporate employees, offset by higher professional fees.
A discussion of (loss) income from operations for the Corporation’s two segments is included below. Corporate costs increased in 2023, when compared to 2022, by $1,718 due to higher employee-related costs, including long-term incentive compensation, and the prior year benefiting from a portion of the Change in Employee Benefit Policy.
APPLICATION OF CRITICAL ACCOUNTING ESTIMATES The Corporation has identified critical accounting estimates that are important to the presentation of its financial condition, changes in financial condition and results of operations and involve the most complex or subjective assessments.
See Note 12 , Commitments and Contingent Liabilities , and Note 15 , Derivative Instruments , to the Consolidated Financial Statements. APPLICATION OF CRITICAL ACCOUNTING ESTIMATES The Corporation has identified critical accounting estimates important to the presentation of its financial condition, changes in financial condition and results of operations and involve the most complex or subjective assessments.
Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivables could be material to its operating results for the periods in which the adjustments to the liability or receivable are recorded, and to its liquidity and financial position when such liabilities are paid. 24 Accounting for income taxes includes the Corporation's evaluation of the underlying accounts, permanent and temporary differences, its tax filing positions and interpretations of existing tax law.
Adjustments, if any, to the Corporation’s estimate of the Asbestos Liability and/or insurance receivables could be material to its operating results for the periods in which the adjustments to the liability or receivable are recorded, and to its liquidity and financial position when such liabilities are paid.
Backlog equaled $369,018 at December 31, 2022, versus $292,554 as of December 31, 2021.
Backlog equaled $378,912 at December 31, 2023, versus $369,018 as of December 31, 2022.
The Corporation does not recognize a tax benefit in the consolidated financial statements related to a tax position taken or expected to be taken in a tax return unless it is “more likely than not” that the tax authorities will sustain the tax position solely on the basis of the position’s technical merits.
As of December 31, 2023, the valuation allowance approximates $41,041, reducing deferred income tax assets to $3,160, an amount the Corporation believes is “more likely than not” to be realized. 24 The Corporation does not recognize a tax benefit in the consolidated financial statements related to a tax position taken or expected to be taken in a tax return unless it is “more likely than not” the tax authorities will sustain the tax position solely on the basis of the position’s technical merits.
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.
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.
Net cash flows used in investing activities primarily represented expenditures for the FCEP segment. The Corporation has undertaken a significant capital program approximating $27,000 to upgrade existing equipment at certain of its FCEP locations, which is anticipated to be substantially completed by December 31, 2023.
The Corporation has undertaken a significant capital program approximating $26,000 to upgrade existing equipment at certain of its FCEP locations, which is anticipated to be substantially completed by March 31, 2024. At December 31, 2023, commitments for future capital expenditures, including those associated with the FCEP capital program, approximated $6,000.
The ALP businesses are benefiting from steady demand, but are facing increasing production and transportation costs and supply chain issues. 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, and continue to improve its sales distribution network.
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.
Operating results decreased by $4,629 in 2022 when compared to 2021 primarily as a result of: • Higher costs of raw materials, energy and other production costs, net of improved pricing and higher variable-index surcharges, which reduced operating results in 2022 when compared to 2021 by approximately $7,800; • Changes in exchange rates used to translate operating results of the segment’s foreign subsidiaries into the U.S. dollar, which reduced operating results in 2022 when compared to 2021 by approximately $1,000; • Refund of Excess COVID-19 Subsidies of $664; • Higher losses on disposal of property, plant and equipment associated with equipment being replaced in connection with the segment's strategic capital expenditure program of $350; offset by • Higher sales volumes and changes in sales product mix, which increased operating results in 2022 when compared to 2021 by approximately $3,300; and • Lower selling and administrative costs due, in part, to the benefit from the Change in Employee Benefit Policy and lower bad debt expense, which improved operating results in 2022 when compared to 2021 by approximately $1,900.
Operating income increased by $7,136 in 2023 when compared to 2022 primarily as a result of: • Improved pricing, net of lower variable-index surcharges and fluctuations in manufacturing costs, which increased operating income by approximately $6,100; • A better product mix of sales, net of a lower volume of shipments, which improved operating income in 2023 when compared to 2022 by approximately $2,300; • Net benefit resulting from the Foreign Energy Credit in 2023 versus the Refund of Excess COVID-19 Subsidies and the Change in Employee Benefit Policy in 2022, which improved operating income in 2023 when compared to 2022 by approximately $1,800; • Lower losses on the disposal of property, plant and equipment associated with equipment being replaced in connection with the segment’s strategic capital expenditure program of approximately $800; offset by • Lower absorption resulting from the temporary and periodic idling of certain equipment to align production with customer demand, which reduced operating income in 2023 when compared to 2022 by approximately $2,900; and • Higher selling and administrative expenses, principally due to changes in employee-related costs and the prior year including a portion of the Change in Employee Benefit Policy, which decreased operating income in 2023 when compared to 2022 by approximately $1,000.
The potential significant change brought about by the Russia-Ukraine conflict resulting in the European energy crisis was deemed to be a triggering event under ASC 360, Property, Plant and Equipment , causing the Corporation to evaluate whether the property, plant and equipment of an asset group within the FCEP segment was deemed to be impaired.
The ongoing losses of the Corporation’s U.K. operations, a significant component of an asset group within the FCEP segment, were deemed to be a triggering event under ASC 360, Property, Plant and Equipment , causing the Corporation to evaluate whether the property, plant and equipment of the asset group was deemed to be impaired.
Availability under the Corporation’s equipment financing facility and disbursement agreement is expected to be sufficient to finance the capital program for the FCEP segment in the time frame currently anticipated. At December 31, 2022, availability under the equipment financing facility and disbursement agreements approximated $16,112.
Availability under the Corporation’s equipment financing facility is expected to be sufficient to finance the capital program for the FCEP segment in the time frame currently anticipated. At December 31, 2023, availability under the equipment financing facility approximated $3,281. Each borrowing on the equipment financing facility will constitute a secured loan transaction (each, a “Term Loan”).
EXECUTIVE OVERVIEW While the Corporation operated at normal levels in 2022, it continues to be challenged by lingering global economic effects of a post-pandemic environment and repercussions from the Russia-Ukraine conflict, including: • Periodic disruptions to the global supply chain for the Corporation, its vendors and its customers, • Global inflationary pressures, • European energy crisis, and • Delays in receiving and shipping product due to lack of transportation.
EXECUTIVE OVERVIEW While the Corporation currently is operating at more normal levels, when compared to the operating levels during the pandemic and immediately thereafter, it continues to be challenged by lingering global economic effects of a post-pandemic environment and repercussions from the Russia-Ukraine conflict, among other events, including: • Periodic disruptions to the global supply chain for the Corporation, its vendors and its customers; • Global inflationary pressures; • Depressed business activity in Europe and Asia (specifically China); and • Global economic uncertainty.
The expected long-term rate of return on plan assets is an estimate of the average rates of earnings expected to be earned on funds invested, or to be invested, to provide for the benefits included in the projected benefit obligation.
The curtailment of the majority of the Corporation’s defined benefit pension plans and the amendment of various other postretirement benefit plans has helped to mitigate the volatility in net periodic pension and other postretirement benefit costs resulting from changes in these assumptions. 23 The expected long-term rate of return on plan assets is an estimate of the average rates of earnings expected to be earned on funds invested, or to be invested, to provide for the benefits included in the projected benefit obligation.
Each borrowing on the equipment financing facility will constitute a secured loan transaction (each, a “Term Loan”). Each Term Loan will convert to a Term Note on the earlier of (i) the date in which the associated equipment is placed in service or (ii) December 29, 2023.
Each Term Loan will convert to a Term Note on the earlier of (i) the date in which the associated equipment is placed in service or (ii) March 31, 2024 (previously December 29, 2023). Each Term Note will have a term of 84 months in arrears fully 22 amortizing and will commence on the date of the Term Note.
LIQUIDITY AND CAPITAL RESOURCES 2022 2021 Change Net cash flows used in operating activities $ (27,208 ) $ (15,866 ) $ (11,342 ) Net cash flows used in investing activities (16,308 ) (14,734 ) (1,574 ) Net cash flows provided by financing activities 42,587 24,402 18,185 Effect of exchange rate changes on cash and cash equivalents (673 ) (307 ) (366 ) Net decrease in cash and cash equivalents (1,602 ) (6,505 ) 4,903 Cash and cash equivalents at beginning of period 10,337 16,842 (6,505 ) Cash and cash equivalents at end of period $ 8,735 $ 10,337 $ (1,602 ) Net cash flows used in operating activities equaled $27,208 and $15,866 for 2022 and 2021, respectively.
LIQUIDITY AND CAPITAL RESOURCES 2023 2022 Change Net cash flows used in operating activities $ (3,686 ) $ (27,208 ) $ 23,522 Net cash flows used in investing activities (19,685 ) (16,308 ) (3,377 ) Net cash flows provided by financing activities 21,688 42,587 (20,899 ) Effect of exchange rate changes on cash and cash equivalents 234 (673 ) 907 Net decrease in cash and cash equivalents (1,449 ) (1,602 ) 153 Cash and cash equivalents at beginning of period 8,735 10,337 (1,602 ) Cash and cash equivalents at end of period $ 7,286 $ 8,735 $ (1,449 ) Net cash flows used in operating activities equaled $(3,686) and $(27,208) for 2023 and 2022, respectively.
The Corporation is actively monitoring, and will continue to actively monitor, the geopolitical and economic consequence of these events and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce. 16 For the FCEP segment, the forged roll market in North America has stabilized while the cast roll market has softened due to economic uncertainty in the European markets, primarily linked to the Russia-Ukraine conflict and resulting European energy crisis.
The Corporation is actively monitoring, and will continue to actively monitor, the geopolitical and economic consequence of these events and the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce. 15 For the FCEP segment, the forged roll market in North America improved during the year driven by U.S. domestic demand and better pricing.
In addition, the prior year included the Reorganization-Related Costs of $1,600. Depreciation and amortization expense was comparable, equaling $17,408 and $17,877 for 2022 and 2021, respectively. (Credit) charge for asbestos-related costs equaled $(2,226) and $6,661 in 2022 and 2021, respectively.
In addition, the prior year benefited from the Change in Employee Benefit Policy, which reduced prior year expense by $1,020. Depreciation and amortization expense was comparable, equaling $17,674 and $17,408 for 2023 and 2022, respectively. Charge (credit) for asbestos-related costs equaled $40,696 and $(2,226) for 2023 and 2022, respectively.
In addition, in February 2023, UES announced a price increase on all new quotations and new orders for forged and cast roll products. Approximately 80% of customer orders include a commodity surcharge.
In February 2023, Union Electric Steel Corporation (“UES”), a wholly owned subsidiary of the Corporation, announced a price increase on all new quotations and orders for forged and cast roll products.
High-quality fixed-income investments are defined as those investments which have received one of the two highest ratings given by a recognized rating agency with maturities of 10+ years. With the increase in interest rates during 2022 and the resulting impact on bond yields, the discount rate rose significantly at December 31, 2022 when compared to December 31, 2021.
High-quality fixed-income investments are defined as those investments which have received one of the two highest ratings given by a recognized rating agency with maturities of 10+ years. A 1/4 percentage point increase in the discount rate would decrease projected and accumulated benefit obligations by approximately $5,900.
A valuation allowance is recorded against deferred income tax assets to reduce them to the amount that is “more likely than not” to be realized. In doing so, assumptions are made about the future profitability of the Corporation and the nature of that profitability. Actual results may differ from these assumptions.
In doing so, assumptions are made about the future profitability of the Corporation and the nature of that profitability. Actual results may differ from these assumptions.
The primary focus for this segment is to maintain a strong position in the roll market; continue diversification and development of FEP for use in other industries; improve operational efficiency at its facilities; and complete its capital equipment investment to upgrade existing equipment with a goal of reducing operating costs, improving reliability and increasing FEP capacity and capabilities.
The primary focus for this segment is to maintain a strong position in the roll market and, with its previously announced capital program to upgrade existing equipment anticipated to be substantially completed by March 31, 2024, improve operational efficiencies, reduce operating costs, improve reliability, and diversify and develop FEP for use in other industries.
In addition, in 2022, gross margin, excluding depreciation and amortization, includes a benefit from the Change in Employee Benefit Policy of $331 and, for the FCEP segment, expense associated with the Refund of Excess COVID-19 Subsidies.
Gross margin, excluding depreciation and amortization , as a percentage of net sales was 17.7% and 15.9% for 2023 and 2022, respectively, and includes the Foreign Energy Credit for 2023 and the Refund of Excess COVID-19 Subsidies and approximately $411 of the benefit from the Change in Employee Benefit Policy for 2022.
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 December 31, 2022, remaining availability under the revolving credit facility approximated $28,420, net of standard availability reserves.
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. In addition, the Corporation has Industrial Revenue Bonds (“IRB”) which begin to become due in 2027.
Net (loss) attributable to Ampco-Pittsburgh and (loss) per common share attributable to Ampco-Pittsburgh for 2021, include net expense of $8,444 or $0.45 per common share for the Asbestos-Related Charge, the Reorganization-Related Costs and additional income tax expense of $452 associated with the (i) restructuring of a foreign sales office and (ii) resulting from the revaluation of the deferred income taxes of the Corporation’s U.K. entity following new legislation enacted in 2021, which will increase the U.K. corporate tax rate from 19% to 25% in 2023.
Net loss attributable to Ampco-Pittsburgh and net loss per common share attributable to Ampco-Pittsburgh for 2023 include a net after-tax charge of $38,011 or $1.94 per common share associated with the Asbestos-Related Charge, the Asbestos-Related Proceeds, the Foreign Energy Credit, the increase in the valuation allowance for the Corporation’s U.K. operations of $316, and additional tax of $203 resulting from the revaluation of the deferred income tax assets of the ALP segment following new legislation enacted in 2022, which will gradually reduce the Pennsylvania state income tax rate from 9.99% in 2022 to 4.99% in 2031.
The change between the years is primarily attributable to the ongoing investment in trade working capital due to a higher level of business activity resulting from increased demand and, for inventories, higher costs associated with inflation and supply chain disruptions.
Investment in trade working capital stabilized in 2023, after a significant increase in 2022 in response to the higher level of business activity and higher 21 costs associated with inflation and supply chain disruptions.
While both segments contributed to the $45,269 increase in net sales, the majority of the increase is attributable to the FCEP segment which benefited from improved pricing, including a higher variable-index surcharge, and increasing demand. A discussion of sales by segment is included below. Operating income (loss) equaled $2,778 and $(4,782) for 2022 and 2021, respectively, an improvement of $7,560.
Net sales equaled $422,340 and $390,189 for 2023 and 2022, respectively. While both segments contributed to the $32,151 increase in net sales, the majority of the increase is attributable to the ALP segment. A discussion of sales by segment is included below. (Loss) income from operations equaled $(34,574) and $2,778 for 2023 and 2022, respectively.
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. 22 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.
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. As of December 31, 2023, remaining availability under the revolving credit facility approximated $25,084, net of standard availability reserves.
The following is a reconciliation of income (loss) from operations to non-GAAP adjusted (loss) income from operations for 2022 and 2021, respectively: 2022 2021 - as adjusted (1) Income (loss) from operations, as reported (GAAP) $ 2,778 $ (4,782 ) Asbestos-Related (Credit) Charge (2) (2,226 ) 6,661 Change in Employee Benefit Policy (3) (1,431 ) — Refund of Excess COVID-19 Subsidies (4) 664 — Reorganization-Related Costs (5) — 1,600 (Loss) income from operations, as adjusted (Non-GAAP) $ (215 ) $ 3,479 (1) Income (loss) from operations, as reported (GAAP) and (Loss) income from operations, as adjusted (Non-GAAP) for 2021 include inventory costs using the FIFO method of inventory valuation as more fully explained in Note 2 , Change in Method of Accounting for Inventory Valuation, to the Consolidated Financial Statements.
The following is a reconciliation of (loss) income from operations to non-GAAP adjusted income (loss) from operations for 2023 and 2022, respectively: 2023 2022 (Loss) income from operations, as reported (GAAP) $ (34,574 ) $ 2,778 Asbestos-Related Charge (Credit) (1) 40,887 (2,226 ) Asbestos-Related Proceeds (2) (191 ) - Foreign Energy Credit (3) (1,874 ) - Change in Employee Benefit Policy (4) - (1,431 ) Refund of Excess COVID-19 Subsidies (5) - 664 Income (loss) from operations, as adjusted (Non-GAAP) $ 4,248 $ (215 ) (1) For 2023, represents an increase in the estimated settlement costs of pending and future asbestos claims, net of additional insurance recoveries and a reduction in the estimated defense-to-indemnity cost ratio from 65% to 60%.
(See Note 2 , Change in Method of Accounting for Inventory Valuation , to the Consolidated Financial Statements for further information.) The Corporation 2022 2021 - as adjusted (1) Net Sales: Forged and Cast Engineered Products $ 299,484 77 % $ 260,204 75 % Air and Liquid Processing 90,705 23 % 84,716 25 % Consolidated $ 390,189 100 % $ 344,920 100 % Income (Loss) from Operations: (1) Forged and Cast Engineered Products $ 444 $ 5,073 Air and Liquid Processing (2) 13,686 2,601 Corporate costs (11,352 ) (12,456 ) Consolidated $ 2,778 $ (4,782 ) Backlog: Forged and Cast Engineered Products $ 252,165 68 % $ 223,321 76 % Air and Liquid Processing 116,853 32 % 69,233 24 % Consolidated $ 369,018 100 % $ 292,554 100 % (1) Income (loss) from operations for 2022 and 2021 includes inventory costs using the FIFO method of inventory valuation as more fully explained in Note 2 , Change in Method of Accounting for Inventory Valuation, to the Consolidated Financial Statements.
CONSOLIDATED RESULTS OF OPERATIONS OVERVIEW The Corporation 2023 2022 Net Sales: Forged and Cast Engineered Products $ 303,761 72 % $ 299,484 77 % Air and Liquid Processing 118,579 28 % 90,705 23 % Consolidated $ 422,340 100 % $ 390,189 100 % (Loss) Income from Operations: Forged and Cast Engineered Products $ 7,580 $ 444 Air and Liquid Processing (1) (29,084 ) 13,686 Corporate costs (13,070 ) (11,352 ) Consolidated $ (34,574 ) $ 2,778 Backlog: Forged and Cast Engineered Products $ 247,603 65 % $ 252,165 68 % Air and Liquid Processing 131,309 35 % 116,853 32 % Consolidated $ 378,912 100 % $ 369,018 100 % (1) (Loss) income from operations for the ALP segment includes a charge (benefit) for asbestos-related items of $40,696 and $(2,226) in 2023 and 2022, respectively, as more fully explained in Note 20 , Litigation, to the Consolidated Financial Statements.
Net cash flows provided by financing activities increased by $18,185 in 2022 when compared to 2021 primarily due to: • Proceeds from sale and leaseback financing transactions in 2022 equaling $20,000; • Proceeds from an equipment financing facility in 2022 equaling $6,388; and • Lower principal repayments of $1,174; • Lower debt and equity issuance costs of $148; offset by • Lower net borrowings from the Corporation's revolving credit facility of $6,410; and • Lower proceeds from shareholders exercising warrants for the Corporation’s common stock of $3,115.
Net cash flows provided by financing activities equaled $21,688 and $42,587 for 2023 and 2022, respectively, a decrease of $20,899 primarily due to: • Lower net borrowings from the Corporation’s revolving credit facility of $8,412; • Lower proceeds from sale and leaseback financing arrangements of $20,000; • Lower proceeds from shareholders exercising warrants for the Corporation’s common stock of $193; offset by • Higher proceeds from the equipment financing facility of $3,943; • Proceeds from the Disbursement Agreement between UES and Store Capital Acquisitions, LLC for leasehold improvements of $2,500; • Higher net proceeds from related-party borrowings of $672; • Lower debt and equity issuance costs of $337; and • Lower debt principal payments of $254.
Although, as a result of volatility in the financial markets during the year, actual returns on plan assets approximated -20.81% for the domestic plans and -38.93% for the foreign plans for 2022; however, approximated 8.70% for the domestic plans and 10.76% for the foreign plans for 2021 and averaged 9.30% for the domestic plans and 8.76% for the foreign plans for 2017 - 2021.
Actual returns on plan assets approximated 12.41% for the domestic plans and 1.90% for the foreign plans for 2023 and, excluding 2022 due to the volatility in the financial markets during the year, 9.82% for the domestic plans and 7.62% for the foreign plans for 2017 - 2023.
Contributions to the defined benefit pension and other postretirement benefits plans equaled $2,199 and $1,658 in 2022 and 2021, respectively, and are expected to approximate $2,484 in 2023. Contributions beyond 2023 are expected to increase primarily as a result of lower than expected pension asset performance in 2022.
Contributions to the defined benefit pension and other postretirement benefits plans are expected to approximate $7,700 in 2024, primarily as a result of lower-than-expected pension asset performance in 2022, $5,500 in 2025, $4,400 in 2026, $3,600 in 2027, and $2,900 in 2028. Net cash flows used in investing activities primarily represents expenditures for the FCEP segment.
For the ALP segment, gross margin, excluding depreciation and amortization, as a percentage of net sales improved slightly as a result of a higher volume of sales, changes in product mix and savings generated from process improvements offset, in part, by higher costs.
For the FCEP segment, gross margin, excluding depreciation and amortization, improved when compared to the prior year, primarily as a result of higher pricing. For the ALP segment, gross margin, excluding depreciation and amortization, declined when compared to the prior year, primarily as a result of higher costs and an unfavorable product mix.
The credit in 2022 represents a change in the estimated defense-to-indemnity cost ratio from 70% to 65% based on ongoing experience and improvements in defense costs which are expected to continue.
The credit for 2022 represents a reduction in the estimated defense-to-indemnity cost ratio from 70% to 65% based on ongoing experience and improvements in defense costs. See Note 20 , Litigation, to the Consolidated Financial Statements. Investment-related income equaled $128 and $519 for 2023 and 2022, respectively, and represents primarily dividends received from one of the Corporation’s Chinese joint ventures.
See Note 20 , Litigation, to the Consolidated Financial Statements for further information. (2) Operating income includes inventory costs determined using the FIFO method of inventory valuation, as more fully explained in Note 2 , Change in the Method of Accounting for Inventory Valuation, to the Consolidated Financial Statements. Net sales for 2022 increased from the prior year by $5,989.
For 2022, includes the Asbestos-Related Credit of $(2,226). See Note 20 , Litigation, to the Consolidated Financial Statements for further information. Net sales for 2023 increased from the prior year by $27,874 on better pricing and a higher volume of shipments.
Approximately 6% of the backlog is expected to be released after 2023. A discussion of backlog by segment is included below. Gross margin, excluding depreciation and amortization , as a percentage of net sales was 15.9% and 19.2% for 2022 and 2021, respectively.
Approximately 13% of the backlog is expected to be released after 2024. A discussion of backlog by segment is included below.
As is consistent with past practice, the Corporation will negotiate with the intent to secure mutually beneficial arrangements covering multiple years. See Note 12 , Commitments and Contingent Liabilities , and Note 15 , Derivative Instruments , to the Consolidated Financial Statements.
The Corporation has long-term labor agreements at each of the key locations. Certain of these agreements will expire in 2024. As is consistent with past practice, the Corporation will negotiate with the intent to secure mutually beneficial arrangements covering multiple years.
Air and Liquid Processing 2022 2021 Change Net sales Heat exchange coils $ 31,395 $ 24,372 $ 7,023 Air handling systems 29,436 26,477 2,959 Centrifugal pumps 29,874 33,867 (3,993 ) $ 90,705 $ 84,716 $ 5,989 Operating income (1), (2) $ 13,686 $ 2,601 $ 11,085 Backlog $ 116,853 $ 69,233 $ 47,620 (1) Operating income for 2022 includes the Asbestos-Related Credit of $2,226 and operating income for 2021 includes the Asbestos-Related Charge of $6,661.
Air and Liquid Processing 2023 2022 Change Net sales: Heat exchange coils $ 45,258 $ 31,395 $ 13,863 Air handling systems 38,526 29,436 9,090 Centrifugal pumps 34,795 29,874 4,921 $ 118,579 $ 90,705 $ 27,874 Operating (loss) income (1) $ (29,084 ) $ 13,686 $ (42,770 ) Backlog $ 131,309 $ 116,853 $ 14,456 (1) For 2023, includes net expense of $40,696 for the Asbestos-Related Charge and the Asbestos-Related Proceeds.
EFFECTS OF INFLATION Inflationary and market pressures on costs are likely to continue to be experienced. Product pricing is reflective of current costs.
EFFECTS OF INFLATION Inflationary and market pressures on costs are likely to continue. Customer orders for the FCEP and ALP segments generally are expected to ship within two years from the backlog date, thereby mitigating the risk of inflation when compared to longer-term contracts. In addition, product pricing is reflective of current costs.
Net sales increased by $39,280 in 2022 from 2021 principally due to the net of: • Improved pricing and higher variable-index surcharges passed through to customers as a result of higher raw material, energy and transportation costs, which increased net sales in 2022 when compared to 2021 by approximately $37,500; • Higher volume of mill roll shipments primarily from improved demand, which increased net sales in 2022 when compared to 2021 by approximately $10,400; • Changes in product mix, which increased net sales in 2022 when compared to 2021 by approximately $6,400; and 20 • Higher volume of FEP as a result of increased demand from the steel distribution and oil and gas markets in early 2022, which increased net sales in 2022 when compared to 2021 by approximately $800; offset by • Changes in exchange rates used to translate net sales of the segment’s foreign subsidiaries into the U.S. dollar, which decreased net sales in 2022 when compared to 2021 by approximately $15,800.
(5) Represents excess COVID-19 subsidies received in 2020 and returned in 2022. 19 Forged and Cast Engineered Products 2023 2022 Change Net sales: Forged and cast mill rolls $ 285,577 $ 256,559 $ 29,018 FEP 18,184 42,925 (24,741 ) $ 303,761 $ 299,484 $ 4,277 Operating income $ 7,580 $ 444 $ 7,136 Backlog: Forged and cast mill rolls $ 245,063 $ 243,648 $ 1,415 FEP 2,540 8,517 (5,977 ) $ 247,603 $ 252,165 $ (4,562 ) Net sales increased by $4,277 in 2023 from 2022 principally due to the net of: • Higher volume of forged roll shipments, which increased net sales in 2023 when compared to 2022 by approximately $27,100; • Improved pricing, net of lower variable-index surcharges passed through to customers as a result of fluctuations in the price of raw material, energy and transportation cost, which increased net sales in 2023 when compared to 2022 by approximately $9,400; offset by • Lower volume of FEP shipments, which decreased net sales in 2023 when compared to 2022 by approximately $23,300; • Lower volume of cast roll shipments, which decreased sales in 2023 when compared to 2022 by approximately $6,600; and • Changes in exchange rates used to translate net sales of the segment’s foreign subsidiaries into the U.S. dollar, which decreased net sales in 2023 when compared to 2022 by approximately $2,300.
See Note 20 , Litigation, to the Consolidated Financial Statements for further information. (3) Represents a benefit resulting from a change in how certain employees earn certain benefits. (4) Represents excess COVID-19 subsidies received in 2020 and returned in 2022.
For 2022, represents a benefit from the reduction in the estimated defense-to-indemnity cost ratio from 70% to 65%. See Note 20 , Litigation, to the Consolidated Financial Statements for further information. (2) Represents proceeds received from an insolvent asbestos-related insurance carrier.
(2) For 2022, represents a credit for a change is the estimated defense-to-indemnity cost ratio from 70% to 65%. For 2021, represents a charge for changes in the estimated costs of pending and future asbestos claims, net of additional insurance recoveries through the estimated final date by which the Corporation expects to have settled all asbestos-related claims.
The charge for 2023 represents the net of: • An increase in the estimated settlement costs of pending and future asbestos claims, net of additional insurance recoveries, of $42,344 primarily as a result of recent experience and higher expected settlement values to resolve a claim; offset by • A reduction in the estimated defense-to-indemnity cost ratio from 65% to 60%, based on ongoing experience and improvements in defense costs that are expected to continue, which reduced estimated costs by approximately $1,457; and • Asbestos-Related Proceeds of $191.
To minimize the effect of future increases, the Corporation has entered into pricing for a portion of the electricity and natural gas for certain of its FCEP operating entities and has long-term labor agreements at each of the key locations. Certain of these agreements will expire in 2023.
To minimize the effect of future increases, including for customer orders without a surcharge, the FCEP segment has fixed pricing for a portion of its estimated electricity and natural gas usage. The ALP segment also has fixed pricing for a portion of its estimated commodity (copper and aluminum) usage.
Removed
The FEP market was strong in the first part of the year, as distributors began inventory re-stocking programs and as the oil and gas market demands increased on rising oil prices, but stabilized in the latter part of the year. The FCEP segment experienced higher costs for direct and indirect materials, energy and transportation in 2022.
Added
However, expectations are for flat to declining demand during the first half of 2024 with recovery in the second half of 2024. Improved pricing and increased market share will help minimize the impact of the expected decline during the first half of 2024.
Removed
Although the segment continues to be adversely impacted by escalating costs, particularly for raw and ancillary materials, energy and transportation, price increases and changes to surcharge policies announced in the fourth quarter of 2021 are absorbing a significant portion of these costs.

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