Ampco-Pittsburgh Corporation

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Ampco-Pittsburgh Corporation

600 Grant Street, Suite 4600
Pittsburgh, Pennsylvania 15219
U.S.A.
Telephone: (412) 456-4400
Fax: (412) 456-4404
Web site: http://www.ampcopgh.com

Public Company
Incorporated: 1929
Employees: 1,234
Sales: $246.9 million (2005)
Stock Exchanges: New York
Ticker Symbol: AP
NAIC: 333911 Pump and Pumping Equipment Manufacturing

Ampco-Pittsburgh Corporation is an industrial metals concern operating in two business segments, forged and cast rolls and air and liquid processing. Ampco-Pittsburgh competes in the two business segments through four main subsidiaries, Union Electric Steel Corporation, Davy Roll Company Limited, Aerofin Corporation, Buffalo Pumps, Inc., and Buffalo Air Handling Company. Union Electric ranks as the world's largest manufacturer of forged hardened steel rolls, serving steel and aluminum manufacturers from its principal operations in Pennsylvania and Indiana. Davy Roll is a manufacturer of cast rolls with manufacturing facilities based in England. On the air and liquid processing side of Ampco-Pittsburgh's business, Aerofin Corp. produces heat exchange coils for customers in the electric utility, heating, ventilation, and air conditioning (HVAC), power generation, and industrial process industries. Buffalo Air Handling manufactures custom-designed air handling systems for commercial, institutional, and industrial building markets. Buffalo Pumps produces centrifugal pumps for the defense, refrigeration, and power generation industries. Ampco-Pittsburgh's air and liquid processing operations are located in Virginia and New York.

ORIGINS

The history of Ampco-Pittsburgh involves a series of acquisitions and divestitures orchestrated by two generations of the Berkman family. Although a publicly traded company for much of its existence, the company operated with the demeanor of a private company. Its officials avoided publicity, rarely took time to talk to analysts, and, atypically for a public company, advancement through its executive ranks flowed along familial lines, with leadership of the company passing from father to son to relatives through marriage. "Ampco-Pittsburgh," Patty Tascarella wrote in the May 1, 1995 edition of the Pittsburgh Business Times, "operated as privately as a public company could," and the analysts she spoke with concurred. "It's almost as if it were private," said one analyst. "I've always wanted to ask them if it wouldn't make more sense to be private," another analyst remarked.

The patriarch of the close-knit family that ran the taciturn company was Louis Berkman, an empire builder who made a rags-to-riches rise in the business world. Berkman, raised in Steubenville, Ohio, dropped out of school at the age of 15 to help his father. It was the mid-1920s and Berkman's education had been cut short so he could drive his father's horse-drawn wagon, a wagon filled with junk that the teenage Berkman peddled along the streets of his hometown. Berkman's humble start developed into something far more impressive during his adulthood. By the 1950s, he was in a financial position that enabled him to acquire other companies. He focused his efforts on what Forbes, in its October 30, 1989 issue, described as "mundane" steel companies in the Ohio River valley. Berkman, in an acquisition campaign that stretched into the 1960s, purchased numerous companies, including Parkersburg Steel, Follansbee Steel, and Ohio River Steel, but it was his purchase of Screw and Bolt Corp. of America, a "doddering" company according to Forbes, and Wisconsin-based Ampco Metal Co. that had a direct bearing on Ampco-Pittsburgh. In 1970, he merged the two companies to form Ampco-Pittsburgh, a company whose business interests would change frequently, as Berkman and his son, Marshall, demonstrated a decided penchant for purchasing other businesses.

As Louis Berkman began to build Ampco-Pittsburgh, he also acquired assets through other entities. Through privately owned Louis Berkman Co., he made investments in real estate, banking, and, later, cellular telephone companies. He purchased truck cab, snowplow, and lumber companies. He acquired a majority stake in Pittsburgh Screw & Bolt Co., expanded it by adding Pilgrim Drawn Steel and Wyckoff Steel to its operations, and built a communications arm to his empire by using a 30 percent stake in Rust Craft Greeting Card Co. that he acquired in 1959. Rust Craft, which became the foundation of a major printing and broadcast business, served as the training ground for the second generation of the family. When Louis Berkman sold Rust Craft in 1979, increasing revenues 500 percent during his 20 years in control, his son Marshall and his son-in-law Robert Paul, both of whom had begun their careers at Rust Craft, took over day-to-day control of Ampco-Pittsburgh.

RESTRUCTURING

Marshall Berkman became the principal executive at Ampco-Pittsburgh in 1979, exhibiting the same proclivity to acquire as his father. Unlike his father, Marshall Berkman received a complete education, earning degrees from Harvard College, Harvard Business School, and Harvard Law School. His academic background was impeccable, but when Marshall Berkman started putting his studies to practice, the streets of Steubenville appeared to offer a more effective business primer than the halls of academia. Berkman purchased a slew of companies, spending roughly $200 million on acquisitions during his first five years in charge, but the timing of the purchases spoiled any chance of the son replicating his father's success. Most of the acquisitions were completed just as an industrial recession set in, quickly hobbling Ampco-Pittsburgh. In 1982, the company recorded its first annual loss in more than two decades, as Marshall Berkman's bold attempt at expansion and diversification showed its first sign of being an imprudent move. Over the course of the next six years, the company lost $80 million as the acquisitions were written down, offering compelling evidence to Berkman that he had erred. In 1987, he began to undo much of what he had done, embarking on a divestment program as ambitious as his ill-fated acquisition program. In the sale spree that was underway for the next several years, industrial businesses that had accounted for approximately half of the company's total revenue were sold, but again Berkman's efforts suffered from bad timing. "Unfortunately," an analyst and Ampco-Pittsburgh shareholder said in an October 30, 1989 interview with Forbes, "they bought at the top of the cycle and sold at the bottom."

KEY DATES

1970:: Louis Berkman creates Ampco-Pittsburgh through the merger of Screw and Bolt Corp. of America and Ampco Metal Co.
1979:: Louis Berkman's son, Marshall Berkman, takes control of the company and completes $200 million worth of acquisitions during the ensuing five years.
1981:: Aerofin Corp. and Buffalo Pumps, Inc. are acquired.
1984:: Union Electric Steel Corp. is acquired.
1999:: The Davy Roll Company is acquired.
2003:: Ampco-Pittsburgh sells its plastics processing machinery business.
2004:: Louis Berkman is named chairman emeritus.

Marshall Berkman's missteps in the 1980s caused a fair bit of damage, but the accordion-like expansion and contraction of the company was not fatal. Ampco-Pittsburgh exited the decade with $250 million in sales and, after vigorous restructuring efforts, it was profitable, posting approximately $9 million in net income. Moreover, much of what constituted Ampco-Pittsburgh in the 21st century arrived during the 1980s. In 1981, the company's air and liquid processing business took shape with the acquisition of Aerofin Corporation and Buffalo Pumps, Inc. Founded in 1923, Aerofin manufactured heat exchange coils and related heat transfer equipment, which were sold to HVAC, power generation, pulp and paper, and industrial process industries. Buffalo Pumps, a manufacturer of centrifugal pumps since 1887, relied primarily on sales to the defense market, but the company also served the refrigeration, paper, and lube oil markets. In 1984, as Marshall Berkman's acquisition campaign wound down, Union Electric Steel Corporation was acquired, a company that served as a pillar of Ampco-Pittsburgh's forged and cast rolls business segment. Founded in 1923, Union Electric was regarded as a world leader in the forged steel roll market.

For a number of industry observers, Marshall Berkman's folly of the 1980s officially ended in 1993. That year, the last major transaction of his divestment program was completed when Ampco-Pittsburgh sold Buffalo Forge Company. According to the company's annual filing with the Securities and Exchange Commission (SEC), management looked at the divestiture as a turning point as well. In its March 1994 filing with the SEC, the company noted the sale "strengthened the corporation's financial position against economic uncertainties," freeing it to "concentrate on those companies that are better positioned to deal with both domestic and international business opportunities." Ampco-Pittsburgh was left with four principal businesses, Buffalo Pumps, Aerofin, Union Electric, and another forged cast rolls maker named New Castle Industries, Inc., which was based in New Castle, Pennsylvania. With these businesses, Marshall Berkman hoped to put the missteps of the 1980s behind him and make the 1990s a decade of unmitigated success. Tragically, he never had the opportunity to lead the restructured Ampco-Pittsburgh forward. The sale of Buffalo Forge Company marked the end of Berkman's divestment campaign and it represented the last significant deal he orchestrated on the company's behalf.

In September 1994, Marshall Berkman was aboard an airplane returning to Pittsburgh from Chicago, accompanied by Ampco-Pittsburgh's tax manager. On its approach to Pittsburgh International Airport, the airplane crashed, killing all 132 passengers aboard. As the Berkman family dealt with the loss, it was forced to address the leadership void created by Marshall Berkman's sudden death. Louis Berkman, in his mid-80s at the time, took over his late son's role as chairman. Robert Paul, Louis Berkman's son-in-law and Ampco-Pittsburgh's president, was appointed to the additional post of chief executive officer.

As Ampco-Pittsburgh pressed forward under the guidance of Berkman and Paul, the company was supported by three business segments. Its forged and cast rolls segment consisted primarily of Union Electric. Its air and liquid processing segment comprised Aerofin, Buffalo Air Handling, and Buffalo Pumps. The company's third business segment was its plastic processing machinery division, which included New Castle Industries and F.R. Gross Company, a Stow, Ohio-based producer of heat transfer rolls whose customers consisted primarily of manufacturers serving the plastics industry. Structured as such, the company proved to be a consistent money earner during the late 1990s. The company posted slightly more than $15 million in net income in 1997, 1998, and 1999, eclipsing the $200-million-in-sales mark by the end of the decade, when an important addition was made to the company's operations. In 1999, Union Electric acquired The Davy Roll Company, an England-based manufacturer of cast rolls that served the steel and metal industries. The same transaction included the purchase of Formet Limited, a producer of forgings for the oil and gas industry, and Turner Chilled Rolls Limited, a producer of cast rolls for use in the food industry. The three companies became part of Ampco-Pittsburgh's forged and cast rolls segment.

AMPCO-PITTSBURGH IN THE 21ST CENTURY

Ampco-Pittsburgh's financial health suffered as the company entered the 21st century. Recessive economic conditions in the industrial sector conspired against the company, causing profits to fall. After years of steadily posting around $15 million in net income, Ampco-Pittsburgh recorded a loss of $586,000 in 2001, followed by a profit of $2.5 million in 2002 and a loss of $2.1 million in 2003. Particularly hard hit was the company's plastics processing machinery business, which was hobbled by decreased demand and low levels of capital investment. The company responded to its difficulties by shedding its entire plastics processing machinery business in August 2003, a divestiture that stripped the company of less than 1 percent of its total revenue volume.

The sale of the company's plastics processing machinery business was the last transaction completed with Louis Berkman as chairman. In 2004, at age 96, Berkman was given the honorary title of chairman emeritus and Paul was named chairman, marking the end of Berkman's active control over the company. During this transition, the company began to exhibit the financial consistency that had characterized its performance during the late 1990s. After posting a $2.5 million loss in 2004, the company returned to the level of profitability it had become accustomed to, recording $15 million in net income in 2005. In the years ahead, financial consistency was the goal, as the low-profile public company managed its assets in forged and cast rolls and air and liquid processing.