<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1998 Commission file number 1-9967
AMCAST INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 31-0258080
-------------------------------- ---------------------------
(State of Incorporation) (I.R.S. employer
identification no.)
7887 Washington Village Drive, Dayton, Ohio 45459
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(937) 291-7000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Shares, without par value New York Stock Exchange
Preferred Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 and 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or in information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10-K. [ ]
Aggregate market value of common shares, no par value, held by
non-affiliates of the registrant (assuming only for the purposes of this
computation that directors and officers may be affiliates) as of October 22,
1998 -- $151,430,305.
Number of common shares outstanding, no par value, as of October 22, 1998
- -- 9,206,529 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I, II and IV -- Portions of Annual Report to Shareholders for the
year ended August 31, 1998.
Part III--Portions of Proxy Statement for the Annual Meeting of
Shareholders to be held on December 17, 1998 filed November 10, 1998.
<PAGE> 2
PART I
------
ITEM 1 - BUSINESS
- -----------------
Amcast Industrial Corporation, an Ohio corporation incorporated in 1869,
and its subsidiaries (called collectively "Amcast" or the "Company") are engaged
in the business of producing fabricated metal products and cast and tubular
metal products in a variety of shapes, sizes, and metals for sale to end users
directly, through sales representatives and distributor organizations, and to
original equipment manufacturers. The Company serves three major sectors of the
economy: automotive, construction, and industrial. Manufacturing facilities are
located in five states, primarily in the Midwestern United States and in Italy.
During fiscal 1998, the Company acquired Lee Brass Company, located in
Anniston, Alabama; ceased operations at Flagg Brass, Inc., located in Stowe,
Pennsylvania; and in October 1998 completed the sale of Superior Valve Company,
located in Washington, Pennsylvania. See further discussion in "Flow Control
Products" below. On August 19, 1997, the Company acquired all of the outstanding
stock of Speedline S.p.A. and its subsidiaries ("Speedline"), a major European
manufacturer located in Italy. During fiscal 1998, Amcast sold Amcast Precision
Products Inc. in Rancho Cucamonga, California. See further discussion in
"Engineered Components" below.
The Company operates in two business segments--(1) Flow Control Products
and (2) Engineered Components. Information concerning the net sales, operating
profit, and identifiable assets of each segment, including foreign manufacturing
operations, for years 1996 through 1998 appears under "Business Segments" in the
Notes to Consolidated Financial Statements in the Company's Annual Report to
Shareholders for the year ended August 31, 1998. Such information is
incorporated herein by reference and is included as Exhibit 13.1 of this report.
Domestic export sales were $33.4 million, $30.9 million, and $25.6 million in
fiscal 1998, 1997, and 1996, respectively.
FLOW CONTROL PRODUCTS
- ---------------------
The Flow Control Products segment (Flow Control) includes the businesses
of Elkhart Products Corporation (Elkhart), Lee Brass Company, and Amcast
Industrial Ltd. Elkhart produces a complete line of wrot copper fittings for use
in residential, commercial, and industrial construction and markets brass pipe
fittings. Lee Brass manufactures cast brass products for residential,
commercial, and industrial plumbing systems as well as specific cast brass
components unique to the application of original equipment manufacturers. Amcast
Industrial Ltd. is the Canadian marketing channel for Amcast's Flow Control
segment manufacturing units.
The Company's Flow Control business is a leading supplier of copper
pipefittings for the industrial, commercial, and residential construction
markets. These products are sold through distributors and wholesalers. Shipments
are primarily made by truck from Company locations directly to customers. The
competition is comprised of a number of manufacturers of parts for air
conditioning, refrigeration, and plumbing systems. The Company believes that
competition in this segment is based on a number of factors including product
quality, service, delivery, and value.
The Company's Flow Control business is one of three major suppliers of
copper and brass fittings to the North American industrial, commercial and
residential plumbing markets. Flow Control Products sales of copper and brass
fittings amounted to $142.4 million, $125.9 million, and $123.4 million in
fiscal 1998, 1997, and 1996, respectively. Products are sold primarily through
plumbing wholesalers, retail hardware stores and home centers, and to original
equipment manufacturers and replacement parts distributors in the air
conditioning and commercial refrigeration business. Competition is based on
service levels, pricing, and breadth
2
<PAGE> 3
FLOW CONTROL PRODUCTS (cont'd)
- ---------------------
of product offering. The Company's prime competitors are Mueller Industries,
Inc., a publicly-owned company listed on the New York Stock Exchange, and NIBCO
Inc., a privately-held company headquartered in Elkhart, Indiana. Both Mueller
Industries, Inc. and NIBCO Inc. may have total financial resources greater than
the Company's.
On April 9, 1998, the Company acquired Lee Brass Company, a
privately-owned company located in Anniston, Alabama. Lee Brass is a major
manufacturer of cast brass products for residential, commercial, and industrial
plumbing systems. The purchase price was approximately $16.1 million consisting
of cash payments of $11.7 million and debt assumption of $4.4 million. Sales of
Lee Brass for the twelve months ended December 31, 1997 were approximately $39.0
million.
Following the acquisition of Lee Brass, the Company announced plans to
consolidate its Flagg Brass operations into Lee Brass and cease operations at
Flagg Brass, which is located in Stowe, Pennsylvania. Expected to be completed
by December 31, 1998, the consolidation plan includes the transfer of certain
product lines to Lee Brass, the sale or closure of the Flagg Brass facility, and
the termination of approximately 100 salaried and hourly personnel. The
Company's consolidated financial results are not expected to be significantly
affected by the closure of Flagg Brass and the transfer of certain product lines
to Lee Brass.
On October 16, 1998, the Company sold Superior Valve Company (Superior)
which is located in Washington, Pennsylvania, to Harsco Corporation. Superior
manufactures valves and accessories used in air conditioning and refrigeration
systems, and compressed gas cylinder valves for the welding, specialty,
carbonic, and medical gas industries. Superior sales in fiscal 1998 were
approximately $42.0 million.
The majority of the Flow Control business is based on customer purchase
orders for their current product requirements. Such orders are filled from
inventory positions maintained in the regional warehouse distribution network.
In certain situations, longer-term supply arrangements are in place with major
customers. Such arrangements are of the type that stipulate a certain percentage
of the customer's requirements to be delivered at a specific price over a set
period of time. Such arrangements are beneficial to the Company in that they
provide firm forecasts of demand that allow for efficient use of equipment and
manpower.
See Properties at Item 2 of this report for information on the Company's
facilities which operate in this segment.
ENGINEERED COMPONENTS
- ---------------------
The Engineered Components segment produces cast and fabricated metal
products principally for sale to original equipment manufacturers in the
transportation, construction, air conditioning, and refrigeration industries.
The Company's manufacturing processes involve the melting of raw materials for
casting into metal products having the configuration, flexibility, strength,
weight, and finish required for the customer's end use. The Company also custom
fabricates copper and aluminum tubular parts. The Company manufactures products
on a high-volume, medium-volume, and specialized basis and its metal
capabilities include aluminum, magnesium, and copper. Products manufactured by
the North American operations of this segment include aluminum castings for
suspension, air conditioning and anti-lock braking systems, master cylinders,
differential carriers, brake calipers and cast aluminum wheels for use on
automobiles and light trucks, and parts for use in heating and air conditioning
systems. Delivery is mostly by truck from Amcast locations directly to
customers.
3
<PAGE> 4
ENGINEERED COMPONENTS (cont'd)
- ------------------------------
Principal products manufactured by Speedline include aluminum wheels for
passenger cars and trucks. Speedline also manufactures aluminum and magnesium
racing wheels, aftermarket wheels, modular wheels and hubcaps. Refer to
"Acquisitions, Divestitures, and Restructurings" in the Notes to Consolidated
Financial Statements of the Company's Annual Report to Shareholders for the year
ended August 31, 1998, Exhibit 13.1 herein, for additional information related
to the Speedline acquisition.
The Company's Engineered Components segment is not solely dependent on a
single customer; however, a significant portion of the Company's Engineered
Components business is directly or indirectly dependent on the major automobile
manufacturers. The Company's net sales to various divisions of General Motors
Corporation were $150.9 million, $139.7 million, and $114.5 million for fiscal
1998, 1997, and 1996, respectively. No other customer accounted for more than
10% of consolidated sales.
The Company's Engineered Components segment is a leading supplier of
aluminum automotive components and aluminum wheels for automotive original
equipment manufacturers in North America. With the acquisition of Speedline, the
Company is also a leading supplier of light-alloy wheels for automotive original
equipment manufacturers and aftermarket applications in Europe. Competition in
the automotive components industry is global with numerous competitors. The
basis of competition is generally design and engineering capability, price,
product quality, and delivery.
There are approximately 25 competitors in the aluminum automotive
component business serving the North American market. Principal competitors
include Alcoa, CMI International Inc., A-CMI, Stahl Specialty Company, Contech,
a subsidiary of SPX Corporation, and Citation Corporation, some of which have
significantly greater financial resources than the Company.
There are approximately 18 producers of aluminum wheels which service the
North American market. The largest of these are Superior Industries
International, Inc. and Hayes Lemmerz International, Inc.. The next tier of
suppliers includes the Company, Reynolds Metals Company, Alcoa, and Enkei
America Inc. Some of the Company's competitors in the aluminum wheel business
have significantly greater financial resources than the Company.
There are approximately 15 competitors in the aluminum and magnesium
automotive wheel business serving the European market. Principal competitors
include Hayes Lemmerz International, Inc., Ronal, ATS, and Alloy Wheels
International (AWI), some of which may have significantly greater financial
resources than the Company.
The Company operates on a "blanket" order basis and generally supplies
all of the customer's annual requirements for a particular part. Customers issue
firm releases and shipping schedules each month against their blanket orders
depending on their current needs. As a result, order backlog varies from month
to month and is not considered firm beyond a 30-day period.
Effective March 30, 1998, the Company sold Amcast Precision Products Inc.
(Precision), its Rancho Cucamonga, California investment casting operation, for
$25.4 million. Precision produces ferrous and nonferrous castings for the
aerospace industry. Precision sales were approximately $19.0 million in fiscal
1997. This was Amcast's only operation in the aerospace industry.
See Properties at Item 2 of this report for information on the Company's
facilities which operate in this segment.
4
<PAGE> 5
GENERAL INFORMATION
- -------------------
Aluminum and copper, the essential raw materials to the business, are
commodity-based metals purchased from worldwide sources of supply. Supplier
selection is based upon quality, delivery, reliability, and price. Availability
of these materials is judged to be adequate. The Company does not anticipate any
material shortage that will alter production schedules during the coming year.
Aluminum and copper are basic commodities traded in international
markets. Changes in aluminum and copper costs are generally passed through to
the customer. In North America, changes in the cost of aluminum are currently
passed through to the customer based on various formulas as is the custom in the
segment of the automotive industry the Company serves. In Europe, changes in the
cost of aluminum are currently passed through to approximately one-half of the
customers based upon various formulas and through negotiated contracts with the
remaining customers. Copper cost increases and decreases are generally passed
through to the customer in the form of price changes as permitted by prevailing
market conditions. The Company is unable to project whether these costs will
increase or decrease in the future. The Company's ability to pass through any
increased costs to the customer in the future will be determined by market
conditions at that time.
Amcast owns a number of patents and patent applications relating to the
design of its products. While Amcast considers, in the aggregate, these patents
are important to operations, it believes that the successful manufacture and
sale of its products generally depend more on the Company's technological
know-how and manufacturing skills.
Capital expenditures related to compliance with federal, state, and local
environmental protection regulations for fiscal 1999 and 2000 are not expected
to be material. Management believes that operating costs related to
environmental protection will not have a materially adverse effect on future
earnings or the Company's competitive position in the industry.
Amcast employed approximately 4,500, 4,040, and 2,600 associates at
August 31, 1998, 1997, and 1996, respectively.
With the acquisition of Speedline, the percentage of the Company's
consolidated net sales derived from the automotive original equipment market has
increased. The automotive industry in general is cyclical and varies based on
the timing of consumer purchases of vehicles and overall economic strength.
Production schedules can vary significantly from quarter to quarter to meet
customer demands. The Company normally experiences reduced sales volume in the
fourth and, to a lesser degree, the first quarter due to plant closings by
original equipment manufacturers for vacations and model changeovers.
CAUTIONARY STATEMENTS UNDER THE PRIVATE SECURITIES REFORM ACT OF 1995
Certain statements in this Report, in the Company's press releases, and in oral
statements made by or with the approval of an authorized executive officer of
the Company constitute "forward-looking statements" as that term is defined
under the Private Securities Litigation Reform Act of 1995. These may include
statements projecting, forecasting or estimating Company performance and
industry trends. The achievement of the projections, forecasts, or estimates is
subject to certain risks and uncertainties. Actual results and events may differ
materially from those projected, forecasted, or estimated. Factors which may
cause actual results to differ materially from those contemplated by the
forward-looking statement, include, among others: general economic conditions
less favorable than expected, fluctuating demand in the automotive industry,
less favorable than expected growth in sales and profit margins in the Company's
product lines, increased competitive pressures in the Company's Engineered
Components and Flow Control Products segments, effectiveness of production
improvement plans, inherent uncertainties in connection with international
operations and foreign currency fluctuations and labor relations at the Company
and its customers facilities.
5
<PAGE> 6
ITEM 2 - PROPERTIES
- -------------------
The following table provides certain information relating to the Company's
principal facilities as of October 22, 1998:
<TABLE>
<CAPTION>
SQUARE
FACILITY FOOTAGE USE
- ----------------------------- ------- -----------------------------
<S> <C> <C>
Flow Control Products Segment
- -----------------------------
Elkhart, Indiana 222,000 Copper fittings manufacturing
plant, warehouse, and sales
and general offices
Fayetteville, Arkansas 107,800 Copper fittings manufacturing plant
Burlington, Ontario Canada 20,214 Distribution warehouse and
branch sales office for
Flow Control Products
Anniston, Alabama 380,200 Brass foundry, machining,
warehouse and distribution
Engineered Components Segment
- -----------------------------
Geneva, Indiana 105,748 Custom fabricated copper
and aluminum tubular
products manufacturing plant
Cedarburg, Wisconsin 133,000 High-volume, aluminum alloy
permanent-mold foundry
Richmond, Indiana 97,300 High-volume, aluminum alloy
permanent-mold foundry
Fremont, Indiana 139,788 Cast aluminum automotive wheels
plant
Gas City, Indiana 201,600 Cast aluminum automotive wheels
plant
Wapakoneta, Ohio 188,000 Cast, machined and assembled
aluminum suspension components
plant
Southfield, Michigan 8,840 Automotive component sales,
product development and
engineering center offices
Tabina S. Maria di Sala, Italy 315,586 Aluminum passenger car wheels,
aluminum and magnesium wheels
for OEM racing and aftermarket
plant
Caselle S. Maria di Sala, Italy 56,855 Light alloy wheels plant
</TABLE>
6
<PAGE> 7
ITEM 2 - PROPERTIES (cont'd)
<TABLE>
<CAPTION>
SQUARE
FACILITY FOOTAGE USE
- ----------------------------- ------- -----------------------------
<S> <C> <C>
Bolzano, Italy 196,656 Aluminum cast car wheels,
truck cast aluminum wheels
plant
Riese Pio X (TV), Italy 24,291 Aluminum passenger car wheels
plant
Corporate
- ---------
Dayton, Ohio 16,281 Executive and general offices
</TABLE>
The land and building in Burlington, Ontario, are leased under a
five-year lease expiring in 2003. The land in Richmond and Gas City, Indiana, is
leased under 99 year leases, expiring in 2091. The Corporate offices are being
leased for five years expiring in 2003. The Amcast Automotive offices in
Southfield, Michigan, are being leased for five years expiring in the year 2000,
with an option for a five year renewal. Four buildings used by Speedline S.r.l.
are leased. Two of the leased buildings are located in Tabina S. Maria di Sala,
Italy. One building of 20,688 square feet is leased until 2003 and one of 44,024
square feet is leased until 2002, with an option for a six-year renewal. The
Speedline building located in Caselle S. Maria di Sala, Italy is leased until
2001. The land and buildings in Riese Pio X are leased until 2000 and renewable
from year to year thereafter. All other properties are owned by the Company.
A portion of the land and building at Fayetteville, Arkansas, is subject
to a mortgage in favor of Bank One, Dayton, NA, to secure the payment of a
$5,050,000 bond issue dated December 1, 1991, and maturing December 1, 2004.
The Company's operating facilities are in good condition and are suitable
for the Company's purposes. Utilization of capacity is dependent upon customer
demand. During 1998, total company-wide productive capacity utilization ranged
from 71% to 95%, and averaged 85% of the Company's total capacity.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
Certain legal matters are described at "Commitments and Contingencies" in
the Notes to Consolidated Financial Statements of the Company's Annual Report to
Shareholders for the year ended August 31, 1998, Exhibit 13.1 herein.
Allied Signal, Inc. has brought a superfund private cost recovery and
contribution action against the Company in the United States District Court for
the Southern District of Ohio, Western Division, which is captioned
ALLIED-SIGNAL, INC. V. AMCAST INDUSTRIAL CORPORATION (Case No. C-3-92-013). The
action involves the Goldcamp Disposal Site in Ironton, Ohio. Allied-Signal has
taken the lead in remediating the site and has estimated that its total costs
for the remediation may reach $30 million. Allied is seeking a contribution from
the Company in an amount equal to 50% of the final remediation costs. A trial in
this proceeding was completed in February 1995, but no judgment has been
rendered. The Company believes its responsibility with respect to the Goldcamp
Site is limited, primarily due to the nature of the foundry sand waste it
disposed of at the site. The Company believes that if it has any liability at
all in regard to the Goldcamp Site, that liability would not be material to its
financial position or results of operations.
7
<PAGE> 8
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None
EXECUTIVE OFFICERS OF REGISTRANT
- --------------------------------
John H. Shuey, age 52, has been Chairman, President and Chief Executive
Officer of the Company since December 1997 and a director since March 1994. Mr.
Shuey was President and Chief Executive Officer from March 1995 to December
1997. Mr. Shuey was President and Chief Operating Officer from December 1993 to
March 1995. Mr. Shuey was Executive Vice President from February 1991 to
December 1993. Mr. Shuey is also a director of Cooper Tire & Rubber Company.
Thomas K. Walker, age 57, has been President of Amcast Automotive since
August 1995. From 1992 to 1995, Mr. Walker was President of ITT Automotive's
North American operations. Mr. Walker was also President of Allied Signal
Automotive Catalyst Co. in Tulsa, Oklahoma from 1985 to 1992.
Dennis A. Bertram, age 61, has been Senior Vice President, Amcast
Automotive and Division Manager of North American Wheel Division since September
1997. Mr. Bertram was Senior Vice President, Manufacturing Strategy from
February 1997 to August 1997. Mr. Bertram was also Senior Vice President,
Operations of Amcast Automotive from August 1995 to January 1997. From May 1992
until July 1995, he was President and General Manager of the same group.
Giovanni Scarlini, age 47, was appointed General Manager and Managing
Director of Speedline S.p.A. upon Amcast's acquisition of Speedline in August
1997. Mr. Scarlini has been with Speedline since November 1996. From 1986 to
March 1996, Mr. Scarlini occupied several management positions with CESAB, the
most recent being General Manager.
Michael N. Powell, age 51, has been President of Amcast Flow Control
Products Group, since May 1996. From April 1994 until May 1996, he was Vice
President/General Manager of Superior Valve Company. Mr. Powell was President
and Chief Operating Officer of Versa Technologies, Inc. in Racine, Wisconsin
from May 1991 to December 1993.
Douglas D. Watts, age 53, has been Vice President, Finance since August
1994. From 1987 to August 1994 Mr. Watts held various financial management
positions with General Cable Corporation, of which the most recent post was Vice
President and Controller.
Dean Meridew, age 44, has been Vice President, Amcast Europe since
September 1997. From June 1992 to September 1997, he was Division Manager for
the Company's North American wheel operations. Prior to that, Mr. Meridew was
Operations Manager and Engineering Manager within the Company's North American
wheel operations since January 1985.
Denis G. Daly, age 56, has been Vice President, General Counsel and
Secretary since January 1990. From January 1988 to December 1989, he worked in
private practice at the law firm of Thompson, Hine, and Flory.
Robert C. Collevechio, age 46, has been Vice President, Human Resources
since September 1996. From 1992 to 1996, he was Director of Human Resources for
the North American operations of Carrier Corporation.
8
<PAGE> 9
EXECUTIVE OFFICERS OF REGISTRANT (cont'd)
- -----------------------------------------
James R. Van Wert, Jr., age 40, has been Vice President, Technology since
June 1997. Prior to that, Mr. Van Wert was with the Aluminum Company of America
(ALCOA), in numerous capacities. His last position was Director of Technology,
Forging & Casting, focusing primarily on the automotive industry.
Michael R. Higgins, age 52, has been Treasurer since January 1987.
Mark D. Mishler, age 40, has been Controller since April, 1998. From
April 1995 to April 1998, he was International Controller for Witco Corporation.
From April 1991 to April 1995, he was a Divisional Controller for Siemens.
PART II
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ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
- --------------------------------------------------------------
STOCKHOLDER MATTERS
-------------------
Amcast common stock is listed on the New York Stock Exchange, ticker
symbol AIZ. As of August 31, 1998, there were 9,206,529 of the Company's common
shares outstanding, and there were approximately 6,819 shareholders of Amcast's
common stock, including shareholders of record and the Company's estimate of
beneficial holders.
<TABLE>
<CAPTION>
Range of Stock
Prices
----------------------------- Dividends
High Low Per Share
---- --- ---------
<S> <C> <C> <C>
Fiscal
- ------
1998
- ----
First Quarter $ 25 7/8 $ 22 1/2 $ .14
Second Quarter 24 7/8 20 15/16 .14
Third Quarter 22 9/16 19 5/8 .14
Fourth Quarter 21 11/16 15 1/4 .14
Fiscal
- ------
1997
- ----
First Quarter $ 25 3/4 $ 17 5/8 $ .14
Second Quarter 25 7/8 22 1/4 .14
Third Quarter 26 1/8 21 1/4 .14
Fourth Quarter 27 1/2 23 15/16 .14
</TABLE>
At "Long-Term Debt and Credit Arrangements" in the Notes to Consolidated
Financial Statements of the Company's Annual Report to Shareholders for the year
ended August 31, 1998, Exhibit 13.1 herein, is certain information concerning
provisions affecting the payment of dividends.
ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------
The information required by this item is incorporated herein by reference
to "Selected Data" of the Company's Annual Report to Shareholders for the year
ended August 31, 1998, Exhibit 13.1 herein.
9
<PAGE> 10
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The information required by this item is incorporated herein by reference
to "Management's Discussion of Financial Condition and Results of Operations" of
the Company's Annual Report to Shareholders for the year ended August 31, 1998,
Exhibit 13.1 herein.
ITEM 7a - QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
- --------------------------------------------------------------------
The Company is exposed to market risk from changes in foreign currency
exchange rates and interest rates as part of its normal operations. To manage
the volatility relating to these exposures on a consolidated basis, the Company
takes advantage of natural offsets. The Company has estimated its market risk
exposures using sensitivity analyses assuming a 10% change in market rates.
FOREIGN CURRENCY EXCHANGE RATE RISK
Due to its Foreign operations, the Company has assets, liabilities, and
cash flows in currencies other than the U.S. dollar. The Company minimizes the
impact of foreign currency exchange rate fluctuations on its Italian net
investment with debt borrowings denominated in Italian lira. Fluctuations in
foreign currency exchange rates also impact the dollar value of non-U.S. cash
flows. To illustrate the potential impact of changes in foreign currency
exchange rates on the dollar value of non-U.S. cash flows, a hypothetical 10%
change in the average exchange rate for fiscal 1998 would have changed income
before taxes by approximately $1.0 million.
The Company's Italian operations also attempt to keep asset and liability
positions that are denominated in non-functional currencies, primarily the U.S.
dollar, German marks, and French francs, in balance. During fiscal 1998, the net
exposure averaged approximately $6.0 million; a hypothetical 10% change in the
average exchange rates would change the exposure by $.6 million. The analysis
assumes a parallel shift in currency exchange rates, relative to the Italian
lira. Exchange rates rarely move in the same direction, and the assumption that
the exchange rates change in parallel may overstate the impact of the foreign
currency exchange rate fluctuations.
INTEREST RATE RISK
To manage its exposure to changes in interest rates, the Company uses
both fixed and variable rate debt. At August 31, 1998, the Company had
approximately $172.8 million of debt obligations outstanding with variable
interest rates with a weighted-average effective interest rate of 5.73%. A
hypothetical 10% change in the effective interest rate for these borrowings,
assuming debt levels as of August 31, 1998, would change interest expense by
approximately $1.0 million.
FORWARD-LOOKING STATEMENTS
The above discussion and the estimated amounts generated from the
sensitivity analyses referred to above include forward-looking statements of
market risk which assume that certain adverse market conditions may occur.
Actual future market conditions may differ materially from such assumptions;
accordingly, the forward-looking statements should not be considered projections
by the Company of future events or losses.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The information required by this item is incorporated by reference to
"Consolidated Financial Statements and Notes to Consolidated Financial
Statements", together with the report thereon of Ernst & Young LLP and
"Quarterly Financial Data (Unaudited)" of the Company's Annual Report to
Shareholders for the year ended August 31, 1998, Exhibit 13.1 herein.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
None
10
<PAGE> 11
PART III
--------
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information required by this item relating to directors and executive
officers of the Company is incorporated herein by reference to that part of the
information under "Election of Directors" on pages 2 and 3, and "Section 16(a)
Beneficial Ownership Reporting Compliance" on page 4 of the Company's Proxy
Statement for its Annual Meeting of Shareholders to be held on December 17,
1998. Certain information concerning executive officers of the Company appears
under "Executive Officers of Registrant" at Part I, pages 8 and 9, of this
Report.
ITEM 11 - EXECUTIVE COMPENSATION
- --------------------------------
The information required by this item is incorporated herein by reference
to "Executive Compensation" on pages 6 through 12 of the Company's Proxy
Statement for its Annual Meeting of Shareholders to be held on December 17,
1998.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------------------------------------------------------------
MANAGEMENT
----------
The information required by this item is incorporated herein by reference
to "Security Ownership of Directors, Nominees and Officers" on page 5 and
"Security Ownership of Certain Beneficial Owners" on page 14 of the Company's
Proxy Statement for its Annual Meeting of Shareholders to be held on December
17, 1998.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required by this item is contained on pages 9 and 12 in
the Company's Proxy Statement for its Annual Meeting of Shareholders to be held
on December 17, 1998, which is incorporated herein by reference.
11
<PAGE> 12
PART IV
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ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
- --------------------------------------------------------------
ON FORM 8-K
-----------
(a) Documents filed as part of this report.
1. Financial statements:
The following financial statements of Amcast Industrial Corporation
and subsidiaries, included in the Annual Report to Shareholders for
the year ended August 31, 1998, are incorporated by reference at
Item 8 of this report.
Consolidated Statements of Income -
Years Ended August 31, 1998, 1997, and 1996.
Consolidated Statements of Financial Condition -
August 31, 1998 and 1997.
Consolidated Statements of Shareholders' Equity -
Years Ended August 31, 1998, 1997, and 1996.
Consolidated Statements of Cash Flows -
Years Ended August 31, 1998, 1997, and 1996.
Notes to Consolidated Financial Statements
Report of Independent Auditors
2. Consolidated financial statement schedule:
<TABLE>
<CAPTION>
Schedule Page Number
Number Description In This Report
-------- -------------------------------------------------- --------------
<S> <C> <C> <C>
II Valuation and Qualifying Accounts and Reserves -
August 31, 1998, 1997, and 1996 14
All other financial statement schedules are omitted because they are not applicable
or because the required information is shown in the financial statements or in the
notes thereto.
</TABLE>
3. Exhibits - See Index to Exhibits (page 15 hereof).
4. Reports on Form 8-K - During the fourth quarter ended August 31, 1998,
the Company did not file any reports on Form 8-K.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, on the 25th day of November 1998.
AMCAST INDUSTRIAL CORPORATION
(Registrant)
By /s/John H. Shuey
--------------------------------
John H. Shuey
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------ -------------------------------- -----------------
<S> <C> <C>
/s/John H. Shuey Chairman, President and
- ------------------------ Chief Executive Officer November 25, 1998
John H. Shuey Director
(Principal Executive Officer)
/s/Douglas D. Watts Vice President, Finance November 25, 1998
- ------------------------ (Principal Financial and
Douglas D. Watts Accounting Officer)
/s/Mark D. Mishler Controller November 25, 1998
- ------------------------ (Principal Accounting Officer)
Mark D. Mishler
*Leo W. Ladehoff Director November 25, 1998
*Walter E. Blankley Director November 25, 1998
*Peter H. Forster Director November 25, 1998
*Ivan W. Gorr Director November 25, 1998
*Earl T. O'Loughlin Director November 25, 1998
*William G. Roth Director November 25, 1998
*R. William Van Sant Director November 25, 1998
</TABLE>
*The undersigned John H. Shuey, by signing his name hereto, does sign and
execute this annual report on Form 10-K on behalf of each of the above-named
directors of the registrant pursuant to powers of attorney executed by each such
director and filed with the Securities and Exchange Commission as an exhibit to
this report.
By /s/John H. Shuey
-------------------------
John H. Shuey
Attorney in Fact
13
<PAGE> 14
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AMCAST INDUSTRIAL CORPORATION AND SUBSIDIARIES
($ In Thousands)
<TABLE>
<CAPTION>
Additions
-----------------------------
Balance Charged to Charged to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions End of Period
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Deducted From Asset Accounts
Reserves for unrealized
losses on properties and
other assets held for sale:
Year ended August 31, 1998 $ 2,818 $ 2,818
Year ended August 31, 1997 $ 3,071 $ (253)(1) $ 2,818
Year ended August 31, 1996 $ 3,071 $ 3,071
(1) Write off of assets against reserve.
</TABLE>
14
<PAGE> 15
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C>
3 ARTICLES OF INCORPORATION AND BY-LAWS:
3.1 Articles of Incorporation of Amcast Industrial Corporation,
incorporated by reference from Form 10-K for the year ended
August 31, 1996. I
3.2 Code of Regulations of Amcast Industrial Corporation,
incorporated by reference from Form 10-K for the year ended
August 31, 1996. I
4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES:
4.1 $200,000,000 revolving credit agreement between Amcast
Industrial Corporation and KeyBank National Association
dated August 14, 1997, incorporated by reference from Form
8-K filed September 3, 1997. I
4.2 First Amendment Agreement dated October 7, 1997, to the
$200,000,000 revolving credit agreement between Amcast
Industrial Corporation and KeyBank National Association
dated August 14, 1997. F
4.3 Second Amendment Agreement dated August 30, 1998, to the
$200,000,000 revolving credit agreement between Amcast
Industrial Corporation and KeyBank National Association
dated August 14, 1997. F
4.4 Loan Agreement between the City of Elkhart, Indiana, and
Elkhart Products Corporation, dated as of February 1, 1988,
for $2,050,000, Economic Development Revenue Refunding
Bonds, Series 1988. +
4.5 $10,000,000 Senior Note Agreement between Amcast Industrial
Corporation and Principal Mutual Life Insurance Company
dated September 1, 1989, as amended, incorporated by
reference from Form 10-K for the year ended August 31,
1996. I
4.6 Amendment Agreement, dated July 24, 1995, to the
$10,000,000 Senior Note Agreement between Amcast Industrial
Corporation and Principal Mutual Life Insurance Company,
dated September 1, 1989 - incorporated by reference from
Form 10-K for the year ended August 31, 1995. I
</TABLE>
15
<PAGE> 16
INDEX TO EXHIBITS (cont'd)
-----------------
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C>
4.7 Amendment Agreement dated as of December 31, 1997, to the
$10,000,000 Senior Note Agreement between Amcast Industrial
Corporation and Principal Mutual Life Insurance Company,
dated September 1, 1989. F
4.8 Loan Agreement by and between the City of Fayetteville,
Arkansas, and Amcast Industrial Corporation, dated as of
December 1, 1991, for $5,050,000 City of Fayetteville,
Arkansas, variable/fixed rate demand Industrial Development
Revenue Refunding Bonds, Series 1992. +
4.9 Amcast guarantee of $15,000,000 of the $25,000,000 Credit
and Intercreditor Agreement between Casting Technology
Company (a joint venture partnership between Amcast
Industrial Corporation and Izumi Industries, Ltd.) and
National Bank of Detroit and The Asahi Bank, Ltd., and a
copy of the Credit and Intercreditor Agreement, dated July
28, 1995, incorporated by reference from Form 10-K for the
year ended August 31, 1995. I
4.10 Amendment Agreement, dated January 5, 1996, to the
$25,000,000 Credit and Intercreditor Agreement between
Casting Technology Company and National Bank of Detroit and
The Asahi Bank, Ltd., dated July 28, 1995, incorporated by
reference from Form 10-K for the year ended August 31,
1996. I
4.11 Amendment Agreement, dated May 31,1996, to the $25,000,000
Credit and Intercreditor Agreement between Casting
Technology Company and National Bank of Detroit and The
Asahi Bank, Ltd., dated July 28,1995, and amended Guarantee
Agreement which increased Amcast's guarantee to $21,000,000
of the revised credit amount of $35,000,000, incorporated
by reference from Form 10-K for the year ended August 31,
1996. I
4.12 Amendment Agreement dated January 28, 1997, to the credit
and intercreditor agreement between Casting Technology
Company and National Bank of Detroit, aka NBD Bank, and the
Asahi Bank, Ltd., dated July 28, 1995, and Amended Guaranty
Agreement which increased Amcast's guarantee to $23,400,000
of the revised credit amount of $39,000,000, incorporated
by reference from Form 10-K for the year ended August 31,
1997. I
</TABLE>
16
<PAGE> 17
INDEX TO EXHIBITS (cont'd)
-----------------
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C>
4.13 Amendment Agreement dated August 3, 1998, to the credit and
intercreditor agreement between Casting Technology Company
and National Bank of Detroit, aka NBD Bank, and the Asahi
Bank, Ltd., dated July 28, 1995. F
4.14 $50,000,000 Note Agreement between Amcast Industrial
Corporation and Principal Mutual Life Insurance Company and
The Northwestern Mutual Life Insurance Company, dated
November 1, 1995, incorporated by reference from Form 10-K
for the year ended August 31,1995. I
4.15 Amendment Agreement dated December 31, 1997, to $50,000,000
Note Agreement between Amcast Industrial Corporation and
Principal Mutual Life Insurance Company, dated November 1,
1995. F
10 MATERIAL CONTRACTS:
10.1 Amcast Industrial Corporation Employee Share- builder Plan
effective August 26, 1987, incorporated by reference from
Form 10-K for the year ended August 31, 1996. I
10.2 Amcast Industrial Corporation Annual Incentive Plan
effective September 1, 1982, incorporated by reference from
Form 10-K for the year ended August 31, 1996. I
10.3 Deferred Compensation Agreement for Directors of Amcast
Industrial Corporation, incorporated by reference from Form
10-K for the year ended August 31, 1996. I
10.4 Executive Agreement between Amcast Industrial Corporation
and Leo W. Ladehoff, former Chairman of the Board and Chief
Executive Officer of the Company, dated March 3, 1995,
incorporated by reference from Form 10-Q for the quarter
ended May 28, 1995. I
10.5 Indemnification Agreement for Directors of Amcast
Industrial Corporation, effective October 30, 1987,
incorporated by reference from Form 10-K for the year ended
August 31, 1996. I
</TABLE>
17
<PAGE> 18
INDEX TO EXHIBITS (cont'd)
-----------------
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C>
10.6 First Master Benefit Trust Agreement between Amcast
Industrial Corporation and Bank One, Dayton, NA, effective
March 11, 1988, incorporated by reference from Form 10-K
for the year ended August 31, 1996. I
10.7 Amcast Industrial Corporation 1989 Stock Incentive Plan,
effective October 19, 1988, as amended, effective December
9, 1992 and as amended, effective November 1, 1996,
incorporated by reference from Form 10-Q for the quarter
ended February 28, 1994. I
10.8 Amcast Industrial Corporation 1989 Director Stock Option
Plan, effective October 19, 1988, incorporated by reference
from Form 10-K for the year ended August 31, 1996. I
10.9 Amcast Industrial Corporation Change of Control Agreements
effective September 1, 1996, incorporated by reference from
Form 10-K for the year ended August 31, 1996. I
10.10 Amcast Industrial Corporation Long-Term Incentive Plan
effective September 1, 1991, incorporated by reference from
Form 10-K for the year ended August 31, 1992, as amended
effective May 27, 1998. I
10.11 Amcast Industrial Corporation Nonqualified Supplementary
Benefit Plan, effective May 29, 1991, incorporated by
reference from Form 10-K for the year ended August 31,
1994. I
10.12 Change of Control Agreement between Amcast Industrial
Corporation and John H. Shuey, Chairman, President and
Chief Executive Officer, effective December 31, 1997. F
10.13 Share Purchase Agreement between Amcast Industrial
Corporation and Speedline International Holding B.V.,
Gerance S.A., San Marco Finanziaria S.p.A., Mr. Antonio
Zacchello, Mr. Giancarlo Zacchello, Mr. Gianni Zacchello,
Mr. Franco Zacchello and Ms. Graziella Zacchello, effective
July 18, 1997, incorporated by reference from Form 8-K
filed September 3, 1997. I
</TABLE>
18
<PAGE> 19
INDEX TO EXHIBITS (cont'd)
-----------------
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C>
13 ANNUAL REPORT TO SECURITY HOLDERS:
13.1 Amcast Industrial Corporation Annual Report to Shareholders
for year ended August 31, 1998. Those portions of the
Annual Report as are specifically referenced under Parts I,
II, and IV of this report are filed herein. F
21 SUBSIDIARIES OF THE REGISTRANT:
Amcast Industrial Corporation has twenty-six wholly-owned
subsidiaries, with the exception of Lee Brass Company, which is
96% owned by an Amcast wholly owned subsidiary, which are included
in the consolidated financial statements of the Company.
Information regarding these subsidiaries is set forth below:
<S> <C> <C>
Amcast Industrial Limited
Jurisdiction of Incorporation: Ontario, Canada
Name Under Which Business Is Done: Amcast Industrial Limited
Elkhart Products Corporation
Jurisdiction of Incorporation: Indiana
Name Under Which Business Is Done: Elkhart Products Corporation
WheelTek, Inc.
Jurisdiction of Incorporation: Indiana
Name Under Which Business Is Done: Amcast Automotive Wheel Division
Amcast Investment Services Corporation
Jurisdiction of Incorporation: Delaware
Name Under Which Business Is Done: Amcast Investment Services
Corporation
Amcast Industrial Financial Services, Inc.
Jurisdiction of Incorporation: Ohio
Name Under Which Business Is Done: Amcast Industrial
Financial Services, Inc.
Amcast Industrial Sales Corporation
Jurisdiction of Incorporation: U.S. Virgin Islands
Name Under Which Business Is Done: Amcast Industrial Sales Corporation
Amcast Automotive, Inc.
Jurisdiction of Incorporation: Michigan
Name Under Which Business Is Done: Amcast Automotive, Inc.
</TABLE>
19
<PAGE> 20
INDEX TO EXHIBITS (cont'd)
-----------------
<TABLE>
<CAPTION>
Exhibit See Key
Number Description Below
------ -------------------------------------- -----
<S> <C> <C> <C> <C>
Amcast Casting Technologies, Inc.
Jurisdiction of Incorporation: Indiana
Name Under Which Business Is Done: Amcast Casting Technologies, Inc.
Lee Brass Company
Jurisdiction of Incorporation: Delaware
Name Under Which Business is Done: Lee Brass Company
Speedline S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Speedline S.r.l.
Speedcast B.V.
Jurisdiction of Incorporation: The Netherlands
Name Under Which Business Is Done: Speedcast B.V.
Speedline Engineering S.p.A.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Speedline Engineering S.p.A.
Speedline Components S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Speedline Components S.r.l.
Speedline Competition S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Speedline Competition S.r.l.
Alustampi S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Alustampi S.r.l.
Speedline UK Limited
Jurisdiction of Incorporation: England
Name Under Which Business Is Done: Speedline UK Limited
Speedline France S.a.r.l.
Jurisdiction of Incorporation: France
Name Under Which Business Is Done: Speedline France S.a.r.l.
Fusione e Lavorazioni Technologiche S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: Fusione e Lavorazioni
Technologiche S.r.l.
LA. MEC. S.r.l.
Jurisdiction of Incorporation: Italy
Name Under Which Business Is Done: LA. MEC. S.r.l.
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C> <C> <C>
23 CONSENTS OF EXPERTS AND COUNSEL:
23.1 Consent of Ernst & Young LLP dated November 20, 1998, with
respect to the incorporation by reference of their report
dated October 13, 1998, into this Annual Report (Form
10-K), the inclusion of the financial statement schedule
listed in Item 14(a)(2) to the financial statements covered
by their report dated October 13, 1998, and material
incorporated by reference into Amcast Industrial
Corporation's Post-Effective Amendment No. 1 to
Registration Statement No. 33-2876 on Form S-8, on
Registration Statements on Form S-8 (Registration Nos.
33-18690, 33-28080, 33-28084, 33-38176, 33-61290 and
333-00133), and on Registration Statement No. 33-28075 on
Form S-3 F
24 POWER OF ATTORNEY:
24.1 Powers of attorney of persons who are indicated as having
executed this Annual Report Form 10-K on behalf of another.
F
27 FINANCIAL DATA SCHEDULE:
27.1 Article 5 of Regulation S-X Financial Data Schedule Form
10-K for the year ended August 31, 1998. F
</TABLE>
Key:
"F" Indicates document filed herewith.
"I" Indicates document incorporated from another filing.
+ Indicates that the document relates to a class of indebtedness that does
not exceed 10% of the total consolidated assets of the Company and that the
Company will furnish a copy of the document to the Commission upon its
request.
NOTE: Exhibits have been omitted from the reproduction of this Form 10-K. A copy
of the exhibits can be obtained at a reasonable copying charge by writing to
Investor Relations, Amcast Industrial Corporation, P.O. Box 98, Dayton, Ohio
45401.
21
<PAGE> 1
EXHIBIT 4.2
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement is made as of the 7th day of October,
1997, by and among AMCAST INDUSTRIAL CORPORATION, an Ohio corporation
("Borrower"), KEYBANK NATIONAL ASSOCIATION, as Agent ("Agent") and the banking
institutions named in Schedule 1 attached thereto ("Banks"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of August 14, 1997, as it may from time to time be amended,
restated or otherwise modifed, which provides, among other things, for loans and
letters of credit aggregating Two Hundred Million Dollars ($200,000,000), all
upon certain terms and conditions ("Credit Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof;
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower, Agent and the
Banks agree as follows:
1. Article I of the Credit Agreement is hereby amended to delete the
definitions of "Business Day", "Dollar Equivalent", "LIBOR", "Prime Rate Loan"
and "Proviso" in their entirety and to insert in place thereof the following:
"Business Day" shall mean a day of the year an which banks are
not required or authorized to close in Cleveland, Ohio, and, if the
applicable Business Day relates to any LIBOR Loan, on which dealings
are carried on in the London interbank eurodollar market, and, if the
applicable Business Day relates to any Eurocurrency Loan (other than a
Eurodollar Loan), on which dealings are carried on in the relevant
Eurocurrency are carried on in the applicable offshore foreign exchange
interbank market in which disbursement of or payment in such
Eurocurrency will be made or received hereunder.
"Dollar Equivalent" of a Eurocurrency Loan shall mean the
Dollar equivalent of the amount of such Eurocurrency Loan, determined
by Agent on the basis of its spot rate at approximately 11:00 A.M.
London time on the date two (2) Business Days before the date of such
Eurocurrency Loan for the purchase of the relevant Eurocurrency with
Dollars for delivery on the date of such Eurocurrency Loan; provided,
however, that, in calculating the Dollar Equivalent for purposes of
determining (a) Borrower's obligation to prepay Loans pursuant to
Section 2.7 hereof or (b) Borrower's ability to request additional
Loans or Letters of Credit pursuant to the Commitment, Agent may, in
its discretion, calculate the Dollar Equivalent of each such Loan on
any Business Day selected by Agent. Agent shall notify Borrower of the
Dollar Equivalent of each Eurocurrency Loan at the time that Dollar
Equivalent is determined.
<PAGE> 2
"LIBOR" shall mean the average (rounded upward to the nearest
1/16th of 1%) of the per annum rates at which deposits in immediately
available funds in the relevant Eurocurrency for the relevant Interest
Period or Competitive Bid Interest Period, as applicable, and in the
amount of the LIBOR Loan to be disbursed or to remain outstanding, as
the case may be, during such Interest Period or Competitive Bid
Interest Period, as applicable, are offered to the Reference Bank by
prime banks in any Eurocurrency market reasonably selected by the
Reference Bank, determined as of 11:00 A.M. London time (or as soon
thereafter as practicable), two (2) Business Days prior to the
beginning of the relevant Interest Period or Competitive Bid Interest
Period, as applicable, pertaining to a LIBOR Loan hereunder.
"Prime Rate Loan" shall mean a Loan on which Borrower shall
pay interest at a rate based on the Adjusted Prime Rate.
"Proviso" shall mean that for Borrower's fiscal quarters
ending prior to the fiscal year ending on or about August 31, 1998,
Consolidated EBITDA, as referred to in the Leverage Ratio, shall be
calculated as follows: (a) for the fiscal year ending on or about
August 31, 1997, Consolidated EBITDA shall be calculated as disclosed
in the pro forma statement provided by Borrower to Agent on or about
July 30, 1997, (b) for the fiscal quarter ending on or about November
30, 1997, Consolidated EBITDA shall be annualized by multiplying the
Consolidated EBITDA for that fiscal quarter by four (4), (c) for the
fiscal quarter ending on or about February 28, 1998, Consolidated
EBITDA shall be annualized by multiplying the Consolidated EBITDA for
that fiscal quarter and the previous fiscal quarter by two (2), and (d)
for the fiscal quarter ending on or about May 31, 1998, Consolidated
EBITDA shall be annualized by multiplying the Consolidated EBITDA for
that fiscal quarter and the two (2) previous fiscal quarters by one and
one-third (1.333).
2. Section 2.1A of the Credit Agreement is hereby amended to add the
words "(subject to changes in the Applicable LIBOR Margin)" between the words
"Period" and "on" in the third line of the third paragraph thereof.
3. Section 2.1B of the Credit Agreement is hereby amended to delete the
fourth paragraph in its entirety with the following being inserted in place
thereof:
Whenever a Letter of Credit is drawn, unless the amount drawn
is immediately reimbursed by Borrower, the amount outstanding
thereunder shall be deemed to be a Revolving Loan to Borrower subject
to the provisions and requirements of Section 2.1A and 2.2 hereof
(other than any requirement pertaining to a minimum draw amount or the
requirement set forth in Section 2.2(c) if such requirement shall be
waived by Agent) and shall be evidenced by the Revolving Credit Notes.
Each such Revolving Loan shall be deemed to be a Prime Rate Loan unless
otherwise requested by (in accordance with the notice provisions of
Section 2.2(b) hereof) and available to Borrower hereunder. Each Bank
is hereby authorized to record on its records relating to its Revolving
Credit Note such Bank's pro rata share of the amounts paid and not
reimbursed on the Letters of Credit.
2
<PAGE> 3
4. Subpart (a) of Section 2.1C of the Credit Agreement is hereby
deleted in its entirety with the following being inserted in place thereof:
(a) THE COMPETITIVE BID OPTION. Subject to the terms and
conditions of this Agreement, during the Commitment Period, Borrower
may request the Banks to make offers to make Competitive Bid Loans to
Borrower from time to time in amounts such that (i) the aggregate
amount of all Revolving Loans, Competitive Bid Loans and all issued and
outstanding Letters of Credit by all Banks at any one time outstanding
shall not exceed the Total Commitment Amount and (ii) the aggregate
amount of all Competitive Bid Loans at any one time outstanding shall
not exceed Fifty Million Dollars ($50,000,000). The Banks may, but
shall have no obligation to, make such offers and Borrower may, but
shall have no obligation to, accept any such offers in the manner set
forth in this Section 2.1C.
5. Subpart (b) of Section 2.5 of the Credit Agreement is hereby amended
to delete the word "Bank" from the second line thereof and to insert in place
thereof the word "Agent".
6. Subpart (ii) of Section 10.11.A of the Credit Agreement is hereby
deleted in its entirety with the following being inserted in place thereof:
(ii) Minimum Amount. Each such assignment shall be in a
minimum amount of the lesser of Ten Million Dollars ($10,000,000) of
the transferor's Commitment or the entire amount of the transferor's
Commitment.
7. The Credit Agreement is hereby amended by deleting Exhibit B in its
entirety and by substituting in place thereof a new Exhibit B in the form of
Exhibit B attached hereto.
8. Concurrently with the execution of this First Amendment Agreement,
Borrower shall execute and deliver to each Bank a new Competitive Bid Rate Note
dated as of August 14, 1997, and such new Competitive Bid Rate Note shall be in
the form and substance of Exhibit B attached hereto. After a Bank receives a new
Competitive Bid Rate Note, such Bank will mark its Competitive Bid Rate Note
being replaced thereby "Replaced" and return the same to Borrower;
9. The Credit Agreement is hereby amended to delete Exhibit C-3 in its
entirety and to substitute in place thereof a new Exhibit C-3 in the form of C-3
attached hereto.
10. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this First
Amendment Agreement; (b) the officials executing this First Amendment Agreement
have been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no
3
<PAGE> 4
Unmatured Event of Default or Event of Default exists under the Credit
Agreement, nor will any occur immediately after the execution and delivery of
this First Amendment Agreement or by the performance or observance of any
provision hereof; (e) neither Borrower nor any Subsidiary has any claim or
offset against, or defense or counterclaim to, any of Borrower's or any
Subsidiary's obligations or liabilities under the Credit Agreement or any
Related Writing, and Borrower and each Subsidiary hereby waives and releases
Agent and each of the Banks from any and all such claims, offsets, defenses and
counterclaims of which Borrower and any Subsidiary is aware, such waiver and
release being with full knowledge and understanding of the circumstances and
effect thereof and after having consulted legal counsel with respect thereto;
and (f) this First Amendment Agreement constitutes a valid and binding
obligation of Borrower in every respect, enforceable in accordance with its
terms.
11. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby.
12. This First Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
13. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard for principles of conflicts of
laws.
Address: 7887 Washington Village Drive AMCAST INDUSTRIAL CORPORATION
Dayton, Ohio 45459
By: /s/ John H. Shuey
---------------------------------
John H. Shuey, President and
Chief Executive Officer
Address: Key Center KEYBANK NATIONAL ASSOCIATION,
127 Public Square as Agent and as a Bank
Cleveland, OH 44114-1206
Attn. Large Corporate By: /s/ Michael J. Landini
Banking Division ---------------------------------
Michael J. Landini, Assistant
Vice President
4
<PAGE> 5
The undersigned consent to the terms hereof.
ELKHART PRODUCTS CORPORATION
WHEELTEK, INC.
AMCAST INVESTMENT SERVICES CORPORATION
AS INTERNATIONAL, INC.
By: /s/ John H. Shuey
---------------------------------
John H. Shuey, President of each
of the Companies listed above
5
<PAGE> 1
EXHIBIT 4.3
SECOND AMENDMENT AGREEMENT
This Second Amendment Agreement is made as of the 30th day of August,
1998, by and among AMCAST INDUSTRIAL CORPORATION, an Ohio corporation
("Borrower"), the banking institutions named in Schedule I to the Credit
Agreement, as hereinafter defined ("Banks"), and KEYBANK NATIONAL ASSOCIATION,
as agent for the Banks ("Agent"):
WHEREAS, Borrower, Agent and the Banks are parties to a certain Credit
Agreement dated as of August 14, 1997, as amended and as it may from time to
time be further amended, restated or otherwise modified, which provides, among
other things, for loans and letters of credit aggregating Two Hundred Million
Dollars ($200,000,000), all upon certain terms and conditions ("Credit
Agreement");
WHEREAS, Borrower, Agent and the Banks desire to amend the Credit
Agreement to modify certain provisions thereof;
WHEREAS, each term used herein shall be defined in accordance with the
Credit Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower, Agent and the
Banks agree as follows:
1. Article I of the Credit Agreement is hereby amended to add the
following definition thereto:
"SVC Sale" shall mean the proposed sale by Borrower of all of
the assets of the Superior Valve Company, a division of Borrower, to
Harsco Corporation.
2. Article I of the Credit Agreement is hereby amended to delete the
definition of "Eurocurrency" in its entirety and to insert in place thereof the
following:
"Eurocurrency" shall mean Eurodollars, Deutsche Marks, Pounds
Sterling, French Francs, Italian Lira, Swiss Francs, Belgian Francs,
the lawful currency of the European Economic and Monetary Union or any
other non-U. S. currency agreed to by Agent and the Banks.
3. The Credit Agreement is hereby amended to delete Section 5.7(b)
therefrom in its entirety and to insert in place thereof the following:
(b) LEVERAGE. Borrower shall not suffer or permit at any time
the Leverage Ratio of the Companies to exceed:
(i) 3.65 to 1.00 on the Closing Date through November 29,
1998;
(ii) (A) if the SVC Sale has occurred, (1) 3.40 to 1.00 on
November 30, 1998 through February 27, 1999, and (2) 3.25 to
1.00 on February 28, 1999 through August 30,
<PAGE> 2
1999, or (B) if the SVC Sale has not occurred, (1) 3.65 to
1.00 on November 30, 1998 through February 27, 1999, (2) 3.50
to 1.00 on February 28, 1999 through May 30, 1999, and (3)
3.35 to 1.00 on May 31, 1999 through August 30, 1999;
and (iii) 3.00 to 1.00 on August 31, 1999 and thereafter,
based upon Borrower's financial statements for the most recent fiscal
quarter and the three (3) previous fiscal quarters (on a rolling four
(4) quarter basis), subject to the Proviso.
4. The Credit Agreement is hereby amended to delete the second to the
last paragraph of Section 2.2 therefrom in its entirety and to insert in place
thereof the following:
Each request for a Loan or the issuance of a Letter of Credit
by Borrower hereunder shall be deemed to be a representation and
warranty by Borrower as of the date of such request as to the facts
specified in (c) and (d) above. At no time shall Borrower request that
LIBOR Loans and Competitive Bid Loans be outstanding for more than ten
(10) different Interest Periods and Competitive Bid Interest Periods at
any time, and, if Prime Rate Loans are outstanding, then LIBOR Loans
and Competitive Bid Loans shall be limited to nine (9) different
Interest Periods and Competitive Bid Interest Periods at any time.
5. Concurrently with the execution of this Second Amendment Agreement,
Borrower shall:
(a) pay to Agent, for the pro rata benefit of the Banks, an amendment
fee in an amount equal to twelve and one-half (12.5) basis points times the
Total Commitment Amount; and
(b) pay all legal fees and expenses of Agent in connection with this
Second Amendment Agreement.
6. Borrower hereby represents and warrants to Agent and the Banks that
(a) Borrower has the legal power and authority to execute and deliver this
Second Amendment Agreement; (b) the officials executing this Second Amendment
Agreement have been duly authorized to execute and deliver the same and bind
Borrower with respect to the provisions hereof, (c) the execution and delivery
hereof by Borrower and the performance and observance by Borrower of the
provisions hereof do not violate or conflict with the organizational agreements
of Borrower or any law applicable to Borrower or result in a breach of any
provision of or constitute a default under any other agreement, instrument or
document binding upon or enforceable against Borrower; (d) no Unmatured Event of
Default or Event of Default exists under the Credit Agreement, nor will any
occur immediately after the execution and delivery of this Second Amendment
Agreement or by the performance or observance of any provision hereof; (e)
neither Borrower nor any Subsidiary has any claim or offset against, or defense
or counterclaim to, any of Borrower's or any Subsidiary's obligations or
liabilities under the Credit Agreement or any Related Writing; and (f) this
Second
2
<PAGE> 3
Amendment Agreement constitutes a valid and binding obligation of Borrower in
every respect, enforceable in accordance with its terms.
7. Each reference that is made in the Credit Agreement or any other
writing to the Credit Agreement shall hereafter be construed as a reference to
the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit Agreement shall remain in full force and
effect and be unaffected hereby.
8. Borrower and each Subsidiary, by signing below, hereby waives and
releases Agent and each of the Banks and their respective directors, officers,
employees, attorneys, affiliates and subsidiaries from any and all such claims,
offsets, defenses and counterclaims of which Borrower and any Subsidiary is
aware, such waiver and release being with full knowledge and understanding of
the circumstances and effect thereof and after having consulted legal counsel
with respect thereto.
9. This Second Amendment Agreement may be executed in any number of
counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
10. The rights and obligations of all parties hereto shall be governed
by the laws of the State of Ohio, without regard for principles of conflicts of
laws.
[Remainder of page intentionally left blank]
3
<PAGE> 4
11. JURY TRIAL WAIVER. BORROWER, AGENT AND EACH OF THE BANKS HEREBY
WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE BANKS, OR
ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO
THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
AMCAST INDUSTRIAL CORPORATION
By: /s/ John H. Shuey
--------------------------------------
John H. Shuey, President and
Chief Executive Officer
KEYBANK NATIONAL ASSOCIATION
as Agent and as a Bank
By: /s/ Lawrence A. Mack
--------------------------------------
Lawrence A. Mack, Senior Vice
President
BANCA COMMERCIALE ITALIANA
By: /s/ D.R. Lamb
--------------------------------------
D.R. Lamb, Vice President
and /s/ Mathew V. Trujillo
--------------------------------------
Mathew V. Trujillo, Vice
President
THE BANK OF NEW YORK
By: /s/ Edward J. Dougherty III
--------------------------------------
Edward J. Dougherty III, Vice
President
US Commercial Banking
BANK ONE, NA
By: /s/ Susan M. Lipowicz
--------------------------------------
Susan M. Lipowicz, Vice President
& Portfolio Manager
4
<PAGE> 5
CREDIT AGRICOLE INDOSUEZ
(successor in interest to Caisse
Nationale de Credit Agricole)
By: /s/ David Bouhl
--------------------------------------
David Bouhl, F.V.P.
Head of Corporate Banking
Chicago
and /s/ Katherine L. Abbott
--------------------------------------
Katherine L. Abbott
First Vice President
COMERICA BANK
By: /s/ Nicholas G. Mester
--------------------------------------
Nicholas G. Mester
Account Officer
CREDITO ITALIANO SPA
By: /s/ H.P. Butler
--------------------------------------
H.P. Butler
First Vice President
and /s/ Gainfranco Bisagni
--------------------------------------
Gainfranco Bisagni
First Vice President
INSTITUTO BANCARIO SAN PAOLO DI
TORINO, SPA
By: /s/ William J. DeAngelo
--------------------------------------
William J. DeAngelo
First Vice President
and /s/ Carlo Persico
--------------------------------------
Carlo Persico
DJM
NATIONAL CITY BANK
F/k/a NATIONAL CITY BANK OF DAYTON
By: /s/ Neal Hinkel
--------------------------------------
Neal Hinkel
Vice President
NBD BANK, N.A.
By: /s/ Tim Oliver
--------------------------------------
Tim Oliver
Vice President
5
<PAGE> 6
THE SANWA BANK, LIMITED,
CHICAGO BRANCH
By:
--------------------------------------
Title:
-----------------------------------
STAR BANK, N.A.
By: /s/ Thomas D. Gibbons
--------------------------------------
Thomas D. Gibbons
Vice President
Each of the undersigned consents and agrees to and acknowledges the
terms of the foregoing Second Amendment Agreement. Each of the undersigned
further agrees that the obligations of each of the undersigned pursuant to the
Guaranty of Payment executed by each of the undersigned shall remain in full
force and effect and be unaffected hereby.
ELKHART PRODUCTS CORPORATION
WHEELTEK, INC.
AS INTERNATIONAL, INC.
By: /s/ Douglas D. Watts
--------------------------------------
Douglas D. Watts, Vice President
of each of the Companies listed
above
AMCAST INVESTMENT SERVICES
CORPORATION
By: /s/ John H. Shuey
--------------------------------------
John H. Shuey, President
6
<PAGE> 1
================================================================================
EXHIBIT 4.7
AMCAST INDUSTRIAL CORPORATION
-----------------------------------------------------------
FOURTH AMENDMENT
AND LIMITED WAIVER
Dated as of December 31, 1997
to
NOTE AGREEMENT
Dated as of September 1, 1989
-----------------------------------------------------------
Re: $10,000,000 9.0% Senior Notes,
Due September 15, 1999
================================================================================
<PAGE> 2
FOURTH AMENDMENT AND LIMITED WAIVER AGREEMENT
THIS FOURTH AMENDMENT AND LIMITED WAIVER AGREEMENT dated as of December
31, 1997 (the or this "Agreement"), to the Note Agreement dated as of September
1, 1989, is between AMCAST INDUSTRIAL CORPORATION, an Ohio corporation (the
"Company"), and Principal Mutual Life Insurance Company (the "Noteholder").
Capitalized terms used in this Agreement and not defined herein shall have the
meanings ascribed to such terms in the Note Agreement referred to below.
RECITALS:
A. The Company and the Noteholder have heretofore entered into a Note
Agreement dated as of September 1, 1989, as amended pursuant to certain
agreements dated as of January 26, 1990, October 1, 1990 and July 24, 1995 (as
so amended, the "Note Agreement"), pursuant to which the Company has heretofore
issued its 9.0% Senior Notes, due September 15, 1999, in the aggregate principal
amount of $10,000,000 (the "Notes"). The Noteholder is the holder of 100% of the
outstanding principal amount of the Notes.
B. The Company has entered into that certain Credit Agreement dated as
of August 14, 1997 (the "Credit Agreement"), with the banking institutions named
therein (the "Banks") and Keybank National Association, as Agent (the "Agent"),
pursuant to which the Banks have made available to the Company up to
$200,000,000 aggregate principal amount in revolving credit facilities, which
facilities have been guaranteed by certain Subsidiaries of the Company.
C. Concurrently with the execution and delivery of the Credit Agreement
and the guaranties of Subsidiaries given in connection therewith, and as a
condition to the necessary consent of the Noteholder to the execution and
delivery by the Company and its Subsidiaries of the same, the Company has
heretofore caused to be executed and delivered certain guaranties of
Subsidiaries in favor of the Noteholder (the "Subsidiary Guaranties")
substantially in the form delivered in favor of the Banks in connection with the
Credit Agreement.
D. The Company and the Noteholder now desire to amend the Note
Agreement in the respects, but only in the respects, hereinafter set forth in
order to reflect certain agreements between the Company and the Noteholder
arising in connection with the consummation of the Credit Agreement and the
execution and delivery of the Subsidiary Guaranties.
E. All requirements of law have been fully complied with and all other
acts and things necessary to make this Agreement a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this Agreement set forth in
Section 4.1 hereof, and in consideration of good
<PAGE> 3
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Noteholder do hereby agree as follows:
SECTION 1. AMENDMENTS.
Section 1.1 Sections 6.6 through 6.13 of the Note Agreement shall be
and are hereby deleted in their entirety and replaced with the following:
"Section 6.6. Consolidated Net Worth. The Company will at all
times keep and maintain Consolidated Net Worth at an amount not less
than (a) $90,000,000 plus (b) 25% of Consolidated Net Earnings computed
on a cumulative basis for each of the elapsed fiscal years ending
August 31, 1995 through August 31, 1997 plus (c) 50% of Consolidated
Net Earnings computed on a cumulative basis for each of the elapsed
fiscal years ending after August 31, 1997; provided that
notwithstanding that Consolidated Net Earnings for any such elapsed
fiscal year may be a deficit figure, no reductions as a result thereof
shall be made in the sum to be maintained pursuant hereto.
Section 6.7. Maintenance of Consolidated Indebtedness The
Company will not at any time permit Consolidated Indebtedness to exceed
the percentage of Consolidated Total Capitalization set forth below
during each of the periods indicated:
PERCENTAGE OF CONSOLIDATED
PERIOD TOTAL CAPITALIZATION
September 1, 1997
through August 31, 1998 65%
September 1, 1998
through August 31, 1999 63%
September 1, 1999
and thereafter 60%"
Section 6.8. Limitations on Consolidated Priority
Indebtedness (a) The Company will not, and will not permit any
Subsidiary to, create, assume or incur or in any manner be or become
liable in respect of any Consolidated Priority Indebtedness, except:
(1) Consolidated Priority Indebtedness of the Company
and its Subsidiaries outstanding as of the Closing Date and
reflected on Schedule II hereto, or any extension, renewal or
refunding of any such Consolidated Priority Indebtedness;
provided that (i) such extension, renewal or refunding of such
Consolidated Priority Indebtedness shall be without increase
in the
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<PAGE> 4
principal amount thereof at the time of such extension,
renewal or refunding, (ii) in the case of secured Consolidated
Priority Indebtedness, the related Lien shall attach solely to
the same such property, and (iii) at the time of such
extension, renewal or refunding and after giving effect
thereto and to the application of the proceeds thereof, no
Default or Event of Default would exist; and
(2) additional Consolidated Priority Indebtedness of
the Company and its Subsidiaries incurred after the Closing
Date; provided that at the time of creation, issuance,
assumption, guarantee or incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof:
(i) no Default or Event of Default would
exist; and
(ii) Consolidated Priority Indebtedness
would not exceed an amount equal to:
(A) 30% of Consolidated Net Worth in
the case of any determination made on or
prior to August 31, 1999; and
(B) 25% of Consolidated Net Worth in
the case of any determination made after
August 31, 1999."
(b) Any corporation which becomes a Subsidiary after the date
hereof shall for all purposes of this Section 6.8 be deemed to have
created, assumed or incurred at the time it becomes a Subsidiary all
Indebtedness of such corporation existing immediately after it becomes
a Subsidiary.
Section 6.9. Limitation on Liens. (a) The Company will not,
and will not permit any Subsidiary to, create or incur, or suffer to be
incurred or to exist, any Lien on its or their property or assets,
whether now owned or hereafter acquired, or upon any income or profits
therefrom, or transfer any property for the purpose of subjecting the
same to the payment of obligations in priority to the payment of its or
their general creditors, or acquire or agree to acquire, or permit any
Subsidiary to acquire, any property or assets upon conditional sales
agreements or other title retention devices, except:
(1) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment
thereof is not at the time required by Section 6.3;
(2) Liens of or resulting from any judgment or award,
the time for the appeal or petition for rehearing of which
shall not have expired, or in respect of which the Company or
a Subsidiary shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a
stay
-3-
<PAGE> 5
of execution pending such appeal or proceeding for review
shall have been secured;
(3) Liens incidental to the conduct of business or
the ownership of properties and assets (including Liens in
connection with worker's compensation, unemployment insurance
and other like laws, warehousemen's and attorneys' liens and
statutory landlords' liens) and Liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens
of like general nature, in any such case incurred in the
ordinary course of business and not in connection with the
borrowing of money, provided in each case, the obligation
secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(4) minor survey exceptions or minor encumbrances,
easements or reservations, or rights of others for
rights-of-way, utilities and other similar purposes, or zoning
or other restrictions as to the use of real properties, which
are necessary for the conduct of the activities of the Company
and its Subsidiaries or which customarily exist on properties
of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their
use in the operation of the business of the Company, and the
Company and its Subsidiaries, taken as a whole, or the value
of such properties for the purpose of such business;
(5) Liens securing Indebtedness of a Subsidiary to
the Company or to another Wholly-owned Subsidiary;
(6) Liens existing as of November 8, 1995 and
described on Annex IV hereto and any extensions, renewals or
replacements, in whole or in part, of any such Lien, provided
that (i) such extension, renewal or replacement of
Indebtedness shall be without increase in the principal amount
remaining unpaid as of the date of such extension, renewal or
replacement, (ii) such Lien shall attach solely to the same
property theretofore subject to such Lien and (iii) after
giving effect to any such extension, renewal or refunding and
to the application of the proceeds thereof, no Default or
Event of Default would exist;
(7) Liens created or incurred after November 8, 1995
given to secure the payment of the purchase price or cost of
construction of property or assets useful and intended to be
used in carrying on the business of the Company or a
Subsidiary, including Liens existing on such property or
assets at the time of acquisition thereof, whether or not such
existing Liens were given to secure the payment of the
purchase price of the property or assets to which they attach,
provided that (i) except in connection with industrial
development bond financings where applicable law shall
otherwise require, the Lien shall attach solely to the
property or assets acquired, purchased or constructed, (ii)
such Lien shall have been created or incurred within 180 days
of the date of
-4-
<PAGE> 6
acquisition or purchase or of completion of construction, as
the case may be, (iii) at the time of acquisition or purchase
or the date of completion of construction, as the case may be,
the aggregate amount remaining unpaid on all Indebtedness
secured by Liens on such property or assets, whether or not
assumed by the Company or a Subsidiary, shall not exceed fair
market value at the time of acquisition or purchase or the
date of completion of the construction of such property or
assets (as determined in good faith by the Board of Directors
of the Company) and (iv) at the time of creation, issuance,
assumption, guarantee or incurrence of the Indebtedness
relating to such Lien and after giving effect thereto and to
the application of the proceeds thereof, no Default or Event
of Default would exist;
(8) Liens affixed on real or personal property
existing (i) at the time of acquisition thereof, whether or
not the Indebtedness secured thereby is assumed by the Company
or any of its Subsidiaries, or (ii) on the property or
outstanding shares of a corporation at the time such
corporation is merged into or consolidated with the Company or
a Subsidiary or at the time of a sale, lease or other
disposition of the properties or outstanding shares or
Indebtedness of a corporation or firm as an entirety to the
Company or a Subsidiary; provided that (A) the amount of
Indebtedness secured by such Liens shall not exceed an amount
equal to the fair market value of such real or personal
property (as determined in good faith by the Board of
Directors of the Company) and (B) at the time of the creation,
issuance, assumption, guarantee or incurrence of the
Indebtedness relating to any such Lien and after giving effect
thereto and to the application of the proceeds thereof, no
Default or Event of Default would exist; and
(9) Liens created or incurred after November 8, 1995
given to secure Indebtedness of the Company or any Subsidiary
in addition to the Liens permitted by the preceding clauses
(1) through (8) hereof, provided that all Indebtedness secured
by such Liens shall have been incurred within the limitations
provided in Section 6.8(a)(2).
(b) If at any time the Company is requested by any holder of
Indebtedness of the Company or any Subsidiary to grant a Lien (other
than a Lien expressly permitted by Section 6.9(a)) on any of the
property or assets of the Company or any of its Subsidiaries as
security for the payment of such Indebtedness, then and in such event
the Company shall at least ten Business Days prior to the granting of
any such Lien so notify the holders of the Notes and, concurrently with
the granting of such Lien, the Company shall, in a manner satisfactory
to the Requisite Holders, equally and ratably secure the Notes with the
such Indebtedness under and pursuant to a mortgage, security agreement
or other agreement securing such Indebtedness and pursuant to an
intercreditor agreement to be entered into by the holder or holders of
such Indebtedness with the holders of the Notes confirming such equal
and ratable security of the such Indebtedness and the Notes, and the
Company shall furnish to the holders of the Notes on the date of the
creation or incurrence of such Lien an opinion of
-5-
<PAGE> 7
independent counsel (which independent counsel shall be satisfactory to
the Requisite Holders) to such effect and otherwise in form and
substance satisfactory to the Requisite Holders.
Section 6.10. Mergers, Consolidations and Sales of Assets: (a)
The Company will not, and will not permit any Subsidiary to,
consolidate with or be a party to a merger with any other Person, or
sell, lease or otherwise dispose of all or substantially all of its
assets; provided that:
(1) any Subsidiary may merge or consolidate with or
into the Company or any Wholly-owned Subsidiary so long as in
any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation;
(2) the Company may consolidate or merge with or into
any other corporation if (i) the corporation which results
from such consolidation or merger (the "surviving
corporation") is organized under the laws of any state of the
United States or the District of Columbia, (ii) the due and
punctual payment of the principal of and premium, if any, and
interest on all of the Notes, according to their tenor, and
the due and punctual performance and observation of all of the
covenants in the Notes and this Agreement to be performed or
observed by the Company are expressly assumed in writing by
the surviving corporation and the surviving corporation shall
furnish to the holders of the Notes an opinion of counsel
satisfactory to such holders to the effect that the instrument
of assumption has been duly authorized, executed and delivered
and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable
principles, and (iii) at the time of such consolidation or
merger and immediately after giving effect thereto, no Default
or Event of Default would exist;
(3) the Company may sell or otherwise dispose of all
or substantially all of its assets (other than stock and
Indebtedness of a Subsidiary, which may only be sold or
otherwise disposed of pursuant to Section 6.10(c)) to any
Person for consideration which represents the fair market
value of such assets (as determined in good faith by the Board
of Directors of the Company, a copy of which determination,
certified by the Secretary or an Assistant Secretary of the
Company, shall have been furnished to the holders of the
Notes) at the time of such sale or other disposition if (i)
the acquiring Person is a corporation organized under the laws
of any state of the United States or the District of Columbia,
(ii) the due and punctual payment of the principal of and
premium, if any, and interest on all the Notes, according to
their tenor, and the due and punctual performance and
observance of all of the covenants in the Notes and in this
Agreement to be performed or observed by the Company are
expressly
-6-
<PAGE> 8
assumed in writing by the acquiring corporation and the
acquiring corporation shall furnish to the holders of the
Notes an opinion of counsel satisfactory to such holders to
the effect that the instrument of assumption has been duly
authorized, executed and delivered and constitutes the legal,
valid and binding contract and agreement of such acquiring
corporation enforceable in accordance with its terms, except
as enforcement of such terms may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and
by general equitable principles, and (iii) at the time of such
sale or disposition and immediately after giving effect
thereto, no Default or Event of Default would exist.
(b) The Company will not, and will not permit any Subsidiary
to, sell, lease, transfer, abandon or otherwise dispose of assets
(except assets sold in the ordinary course of business for fair market
value and except as provided in Section 6.10(a)(3)); provided that the
foregoing restrictions do not apply to:
(1) the sale, lease, transfer or other disposition of
assets of a Subsidiary to the Company or a Wholly-owned
Subsidiary; or
(2) the sale of the Flagg Brass Division Assets; or
(3) the sale of assets for cash or other property to
a Person or Persons other than an Affiliate if all of the
following conditions are met:
(i) such assets (valued at net book value)
do not, together with all other assets of the Company
and its Subsidiaries previously disposed of during
the period from November 1, 1995 to and including the
date of the sale of such assets (other than in the
ordinary course of business), exceed 25% of
Consolidated Total Assets determined as of the end of
the immediately preceding fiscal year;
(ii) in the opinion of the Company's Board
of Directors, the sale is for fair value and is in
the best interests of the Company; and
(iii) immediately after the consummation of
the transaction and after giving effect thereto, no
Default or Event of Default would exist;
provided, however, that for purposes of the foregoing
calculation, there shall not be included any assets the
proceeds of which were or are applied within twelve months of
the date of sale of such assets to either (A) the acquisition
of, or Binding Commitment to acquire, fixed assets useful and
intended to be used in the operation of the business of the
Company and its Subsidiaries as described in Section 6.5 and
having a fair market value (as determined in good faith by the
Board of Directors of the Company) at least equal to that of
the assets so disposed of or (B) the prepayment at any
applicable prepayment premium, on a pro rata basis, of Senior
Indebtedness of the Company. It is understood and
-7-
<PAGE> 9
agreed by the Company that any such proceeds paid and applied
to the prepayment of the Notes as hereinabove provided shall
be prepaid as and to the extent provided in Section 2.2.
Computations pursuant to this Section 6.10(b) shall include
dispositions made pursuant to Section 6.10(c) and computations pursuant
to Section 6.10(c) shall include dispositions made pursuant to this
Section 6.10(b).
(c) The Company will not, and will not permit any Subsidiary
to, sell, pledge or otherwise dispose of any shares of the stock
(including as "stock" for the purposes of this Section 6.10(c) any
options or warrants to purchase stock or other Securities exchangeable
for or convertible into stock) of a Subsidiary (said stock, options,
warrants and other Securities herein called "Subsidiary Stock") or any
Indebtedness of any Subsidiary, nor will any Subsidiary issue, sell,
pledge or otherwise dispose of any shares of its own Subsidiary Stock,
provided that the foregoing restrictions do not apply to:
(1) the issue of directors' qualifying shares; or
(2) the issue of Subsidiary Stock to the Company; or
(3) the sale or other disposition at any one time to a Person
(other than directly or indirectly to an Affiliate) of the entire
investment of the Company and its other Subsidiaries in any Subsidiary
if all of the following conditions are met:
(i) such assets (valued at net book value) of such
Subsidiary do not, together with all other assets of the
Company and its Subsidiaries previously disposed of during the
period from November 1, 1995 to and including the date of the
sale of such assets (other than in the ordinary course of
business), exceed 25% of Consolidated Total Assets determined
as of the end of the immediately preceding fiscal year;
(ii) in the opinion of the Company's Board of
Directors, the sale is for fair value and is in the best
interests of the Company;
(iii) immediately after the consummation of the
transaction and after giving effect thereto, such Subsidiary
shall have no Indebtedness of or continuing investment in the
capital stock of the Company or of any Subsidiary and any such
Indebtedness or investment shall have been discharged or
acquired, as the case may be, by the Company or a Subsidiary;
and
(iv) immediately after the consummation of the
transaction and after giving effect thereto, no Default or
Event of Default would exist;
-8-
<PAGE> 10
provided, however, that for purposes of the foregoing
calculation, there shall not be included any assets the
proceeds of which were or are applied, within twelve months of
the date of sale of such assets to either (A) the acquisition
of, or Binding Commitment to acquire, fixed assets useful and
intended to be used in the operation of the business of the
Company and its Subsidiaries as described in Section 6.5 and
having a fair market value (as determined in good faith by the
Board of Directors of the Company) at least equal to that of
the assets so disposed of or (B) the prepayment at any
applicable prepayment premium, on a pro rata basis, of Senior
Indebtedness of the Company. It is understood and agreed by
the Company that any such proceeds paid and applied to the
prepayment of the Notes as hereinabove provided shall be
prepaid as and to the extent provided Section 2.2.
Computations pursuant to this Section 6.10(C) shall include
dispositions made pursuant to Section 6.10(B) and computations pursuant
to Section 6.10(B) shall include dispositions made pursuant to this
Section 6.10(C).
Section 6.11. Additional Security, Collateral and Guaranties.
(a) If at any time, pursuant to the terms and conditions of the Credit
Agreement, the Company or any existing or newly acquired or formed
Subsidiary shall pledge, grant, assign or convey to the Bank Lenders,
or any one or more of them, any security or collateral of any kind,
then the Company or such Subsidiary shall grant to the holders of the
Notes the same security or collateral so that the holders of the Notes
shall at all times be secured on an equal and pro rata basis with the
Bank Lenders, and the Company shall deliver, or shall cause to be
delivered, to the holders of the Notes (i) all such certificates,
resolutions, legal opinions and other related items in substantially
the same forms as those delivered to and accepted by the Bank Lenders
and (ii) all such amendments to this Agreement as may reasonably be
deemed necessary by the holders of the Notes in order to reflect the
existence of such additional security or collateral.
(b) If at any time, pursuant to the terms and conditions of
the Credit Agreement, any existing or newly acquired or formed
Subsidiary grants to any one or more of the Bank Lenders a guarantee of
obligations owing to such Bank Lender (whether pursuant to the Credit
Agreement or otherwise), the Company shall cause such Subsidiary to
execute and deliver to the holders of the Notes a Guaranty in
substantially the same form as the Guaranty delivered to the Bank
Lenders, or any one or more of them, and the Company shall deliver, or
shall cause to be delivered, to the holders of the Notes (i) all such
certificates, resolutions, legal opinions and other related items in
substantially the same forms as those delivered to and accepted by the
Bank Lenders and (ii) all such amendments to this Agreement as may
reasonably be deemed necessary by the holders of the Notes in order to
reflect the existence of such Guaranty of the Notes.
Section 6.12. Repurchase of Notes. Except as provided in
Section 2.2 or 2.3, neither the Company nor any Subsidiary or
Affiliate, directly or indirectly, may repurchase or make any offer to
repurchase any Notes.
-9-
<PAGE> 11
Section 6.13. Intentionally omitted."
Section 1.2. The reference to "Sections 6.11 or 6.12" contained in
Section 6.1 of the Note Agreement shall be and is hereby amended to read
"Section 6.10."
Section 1.3. The references to "Sections 6.6, 6.7, 6.8, 6.9 and 6.10"
and "Sections 6.6, 6.7, 6.8, 6.10 and 6.11" appearing in Section 6.15(c) of the
Note Agreement shall, in each case, be and are hereby amended to read "Sections
6.6 through 6.11".
Section 1.4 The reference to "Section 6.9(a)" set forth in Section 6.19
shall be and is hereby amended to read "Section 6.9(a)(i)."
Section 1.5. Subparagraph (j) of Section 7.1 of the Note Agreement
shall be and is hereby amended by deleting the period at the end thereof and
replacing it with a semicolon and by adding the word "or" thereafter.
Section 1.6. The following shall be added as a new subparagraph (k) to
Section 7.1 of the Note Agreement:
"(k) Any Subsidiary Guaranty shall cease to be in full force
and effect for any reason whatsoever, including, without limitation, a
determination by any governmental body or court that such Subsidiary
Guaranty is invalid, void or unenforceable or such Subsidiary shall
contest or deny in writing the validity or enforceability of any of its
obligations under the Subsidiary Guaranty."
Section 1.7. The following shall be added as new definitions in
alphabetical order to Section 5.1 of the Note Agreement:
"'ACT' shall mean Amcast Casting Technologies, Inc., an
Indiana corporation and Subsidiary of the Company."
"'Bank Lenders' shall mean Keybank National Association and
each other bank or financial institution which is now, or hereafter
becomes, a lender under the Credit Agreement."
"'Binding Commitment' shall mean, with respect to the
acquisition of assets to be used in the operation of the business of
the Company and its Subsidiaries as described in Section 6.5, a binding
agreement, in writing, between the Company and the seller of such
assets pursuant to which the Company agrees to purchase such assets for
a specified price and on a specified date, which date shall not be more
than 60 days following the date such agreement is entered into."
"'Business Day' shall mean any day other than a Saturday,
Sunday or other day on which banks in Dayton, Ohio or Chicago, Illinois
are required by law to close or are customarily closed."
-10-
<PAGE> 12
"'Capitalized Lease' shall mean any lease the obligation for
Rentals with respect to which is required to be capitalized on a
consolidated balance sheet of the lessee and its subsidiaries in
accordance with GAAP."
"'Capitalized Rentals' of any Person shall mean as of the date
of any determination thereof the amount at which the aggregate Rentals
due and to become due under all Capitalized Leases under which such
Person is a lessee would be reflected as a liability on a consolidated
balance sheet (or the statements of financial condition) of such
Person."
"'Consolidated Indebtedness' shall mean all Indebtedness of
the Company and its Subsidiaries, determined on a consolidated basis
eliminating intercompany items."
"'Consolidated Net Worth' shall mean, as of the date of any
determination thereof the amount of the capital stock accounts (net of
treasury stock, at cost) plus (or minus in the case of a deficit) the
surplus in retained earnings of the Company and its Subsidiaries as
determined in accordance with GAAP."
"'Consolidated Priority Indebtedness' shall mean the sum of
(a) Indebtedness of the Company secured by any Lien other than Liens
permitted by Sections 6.9(a)(1) through (8), plus (b) all Indebtedness
of the Company's Subsidiaries, provided that, for so long as the
cumulative investment of the Company and any of its Subsidiaries in ACT
and CTC, measured from the date of acquisition of ACT to the date of
any determination hereunder, does not exceed the sum of (i) $25,000,000
plus (ii) an amount equal to investments made by the Company in ACT and
CTC after February 1, 1998 which increase the Company's or ACT's
ownership interest in CTC above 60%, the Company shall be permitted to
exclude from Consolidated Priority Indebtedness an amount equal to the
lesser of (y) $15,000,000 or (z) 60% of the Indebtedness outstanding
under the CTC Revolving Credit Agreement."
"'Consolidated Total Assets' shall mean as of the date of any
determination thereof, total assets of the Company and its Subsidiaries
determined on a consolidated basis in accordance with GAAP."
"'Credit Agreement' shall mean that certain Credit Agreement
dated as of August 14, 1997, by and among the Company, the banking
institutions named therein and Keybank National Association, as Agent."
"'CTC' shall mean Casting Technologies Company, an Indiana
general partnership, the general partners of which are ACT and Izumi
Industries, Inc., a Delaware corporation."
"'CTC Revolving Credit Agreement' shall mean that certain
Revolving Credit Agreement dated July, 1995, by and between CTC, as
borrower, and NBD Bank and Asahi Bank, as lenders, as amended, modified
or supplemented from time to time."
-11-
<PAGE> 13
"'ERISA' shall mean the Employee Retirement Income Security
Act of 1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be construed
to also refer to any successor sections."
"'ERISA Affiliate' shall mean any corporation, trade or
business that is, along with the Company, a member of a controlled
group of corporations or a controlled group of trades or businesses, as
described in section 414(b) and 414(c), respectively, of the Code or
Section 4001 of ERISA."
"'Flagg Brass Division Assets' shall mean the assets of the
Company used to manufacture brass pipe fittings in the operation of the
Stanley G. Flagg Division of the Company located in Stowe,
Pennsylvania, which Division is identified in Item 2 of the Company's
August 31, 1994 Form 10-K as a discontinued operation."
"'GAAP' shall mean generally accepted accounting principles at
the time."
"'Guaranties' by any Person shall mean all obligations (other
than endorsements in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing, or
in effect guaranteeing, any Indebtedness, dividend or other obligation
of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (b) to advance or supply funds
(1) for the purchase or payment of such Indebtedness or obligation, or
(2) to maintain working capital or any balance sheet or income
statement condition or otherwise to advance or make available funds for
the purchase or payment of such Indebtedness or obligation, (c) to
lease property or to purchase Securities or other property or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of the primary obligor to make payment of the
Indebtedness or obligation, or (d) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in
respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the principal amount of
such Indebtedness for borrowed money which has been guaranteed, and a
Guaranty in respect of any other obligation or liability or any
dividend shall be deemed to be Indebtedness equal to the maximum
aggregate amount of such obligation, liability or dividend."
"'Indebtedness' of any Person shall mean and include all (a)
obligations of such Person for borrowed money or which have been
incurred in connection with the acquisition of property or assets, (b)
obligations secured by any Lien upon property or assets owned by such
Person, even though such Person has not assumed or become liable for
the payment of such obligations, (c) obligations created or arising
under any conditional sale or other title retention agreement with
respect to property acquired by such Person, notwithstanding the fact
that the rights and remedies of the seller, lender
-12-
<PAGE> 14
or lessor under such agreement in the event of default are limited to
repossession or sale of property, (d) Capitalized Rentals, (e)
Guaranties of obligations of others of the character referred to in
this definition and (f) obligations of such Person in respect of
mandatorily redeemable Preferred Stock. Indebtedness of the Company and
its Subsidiaries shall be determined on a consolidated basis after
eliminating intercompany items. In no event shall Indebtedness include
(i) Unfunded Pension Liability of the Plans of the Company and its
Subsidiaries which amount, as of August 31, 1995, is reflected on
Schedule II hereto and (ii) letters of credit given to secure statutory
worker's compensation bonds."
"'Lien' shall mean any interest in property securing an
obligation owed to, or a claim by, a Person other than the owner of the
property, whether such interest is based on the common law, statute or
contract, and including but not limited to the security interest lien
arising from a mortgage, encumbrance, pledge, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes. The
term "Lien" shall include reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases
and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back
agreements and all similar arrangements) affecting property. For the
purposes of this Agreement, the Company or a Subsidiary shall be deemed
to be the owner of any property which it has acquired or holds subject
to a conditional sale agreement, Capitalized Lease or other arrangement
pursuant to which title to the property has been retained by or vested
in some other Person for security purposes and such retention or
vesting shall constitute a Lien."
"'Plan' shall mean a "pension plan," as such term is defined
in ERISA, established or maintained by the Company or any ERISA
Affiliate or as to which the Company or any ERISA Affiliate contributed
or is a member or otherwise may have any liability."
"'Preferred Stock' shall mean, in respect of any corporation,
shares of the capital stock of such corporation that are entitled to
preference or priority over any other shares of the capital stock of
such corporation in respect of payment of dividends or distribution of
assets upon liquidation."
"'Rentals' shall mean and include as of the date of any
determination thereof all fixed payments (including as such all
payments which the lessee is obligated to make to the lessor on
termination of the lease or surrender of the property) payable by the
Company or a Subsidiary, as lessee or sublessee under a lease of real
or personal property, but shall be exclusive of any amounts required to
be paid by the Company or a Subsidiary (whether or not designated as
rents or additional rents) on account of maintenance, repairs,
insurance, taxes and similar charges. Fixed rents under any so-called
"percentage leases" shall be computed solely on the basis of the
minimum rents, if any, required to be paid by the lessee regardless of
sales volume or gross revenues."
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<PAGE> 15
"'Requisite Holders' shall mean the holders of at least
66-2/3% in aggregate principal amount of outstanding Notes."
"'Senior Indebtedness' shall mean and include the Notes and
all other outstanding Indebtedness of the Company which is not
expressed to be junior or subordinate to any other Indebtedness of the
Company."
"'Subsidiary Guaranty' shall mean those certain Guaranties of
Payment of Debt, each dated as of August 15, 1997, executed and
delivered by AS International, Inc., Elkhart Products Corporation,
Wheeltek Inc. and Amcast Investment Services Corporation in favor of
the holders of the Notes and each additional Guaranty of any Subsidiary
executed and delivered pursuant to the requirements of Section 6.11(b)
or otherwise."
"'Unfunded Pension Liability' of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year,
determined in accordance with statement of Financial Accounting
Standards No. 35, based upon the actuarial assumptions used by the
Plan's actuary in the most recent annual valuation of the Plan, exceeds
the fair market value of the assets allocable thereto, determined in
accordance with Section 412 of the Code."
Section 1.8. The definitions of the terms Capitalized Lease,
Capitalized Rentals, Consolidated Adjusted Assets, Consolidated Adjusted Net
Worth, Consolidated Current Assets, Consolidated Current Liabilities,
Consolidated Net Earnings, Guaranties, Joint Venture and Maintenance Agreement,
as such definitions appear in the Note Agreement immediately prior to the
effectiveness of this Agreement, shall be deleted in their entirety.
Section 1.9. The Note Agreement shall be and is hereby amended by
adding a new Annex IV in the form attached to this Agreements as Exhibit A.
SECTION 2. LIMITED WAIVER.
Section 2.1. By execution of this Agreement, the Noteholder hereby
waives any Default or Event of Default under Section 6.8 of the Note Agreement
(after giving effect to the amendments provided for in Section 1 of this
Agreement) caused solely by the existence of Consolidated Priority Indebtedness
consisting of Indebtedness of Speedline S.p.A. existing at the time Speedline
S.p.A. was acquired by the Company. The waiver provided for in this Section 2
shall be effective from the date hereof through and including December 31, 1997,
at which time such waiver shall terminate.
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<PAGE> 16
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Section 3.1. To induce the Noteholder to execute and deliver this
Agreement, the Company represents and warrants (which representations shall
survive the execution and delivery of this Agreement) to the Noteholder that:
(a) this Agreement has been duly authorized, executed and
delivered by it and this Agreement constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors'
rights generally;
(b) the Note Agreement, as amended by this Agreement,
constitutes the legal, valid and binding obligation, contract and
agreement of the Company enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of
this Agreement (i) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (ii) does not require the
consent or approval of any governmental or regulatory body or agency,
and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other agency
or government binding upon it, or (3) any provision of any material
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, including, without
limitation, the Credit Agreement, or (B) result in a breach or
constitute (alone or with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to
in clause (iii)(A)(3) of this Section 3.1(C), other than any violation,
breach or default which individually or in the aggregate could not
reasonably be expected to have a material adverse effect; and
(d) as of the date hereof and after giving effect to this
Agreement, no Default or Event of Default has occurred which is
continuing.
SECTION 4. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
Section 4.1. This Agreement shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:
(a) executed counterparts of this Agreement, duly executed by
the Company and the Noteholder, shall have been delivered to the
Noteholder;
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<PAGE> 17
(b) copies of the final executed form of the Credit Agreement
among the Company, the Banks and the Agent, shall have been delivered
to the Noteholder together with copies of each of the Guaranties
delivered by the Subsidiaries in connection therewith, which Credit
Agreement and Guaranties shall be in form and substance satisfactory to
the Noteholder; and
(c) the representations and warranties of the Company set
forth in Section 3 hereof are true and correct on and with respect to
the date hereof and a certificate of a Responsible Officer certifying
the same shall have been delivered to the Noteholder.
Upon receipt of all of the foregoing, this Agreement shall become effective.
Delivery of this Agreement to the Company, duly executed by the Noteholder,
shall acknowledge satisfaction of the foregoing conditions.
SECTION 5. PAYMENT OF NOTEHOLDER'S COUNSEL FEES AND EXPENSES.
Section 5.1. The Company agrees to pay upon demand, the reasonable fees
and expenses of Chapman and Cutler, counsel to the Noteholder, in connection
with the negotiation, preparation, approval, execution and delivery of this
Agreement.
SECTION 6. MISCELLANEOUS.
Section 6.1. This Agreement shall be construed in connection with and
as part of the Note Agreement, and except as modified and expressly amended by
this Agreement, all terms, conditions and covenants contained in the Note
Agreement and the Notes are hereby ratified and shall be and remain in full
force and effect.
Section 6.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Agreement may refer to the Note Agreement without making specific reference to
this Agreement but nevertheless all such references shall include this Agreement
unless the context otherwise requires.
Section 6.3. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
Section 6.4. This Agreement shall be governed by and construed in
accordance with Ohio law.
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<PAGE> 18
Section 6.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Agreement
may be executed in any number of counterparts, each executed counterpart
constituting an original, but all together only one agreement.
AMCAST INDUSTRIAL CORPORATION
By: /s/ John H. Shuey
----------------------------------
Its Chairman, President and
Chief Executive Officer
FOURTH AMENDMENT AND LIMITED WAIVER
(1989 NOTE AGREEMENT)
<PAGE> 19
Accepted and agreed to as of the date first written above:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Sarah J. Pitts
----------------------------------
Sarah J. Pitts
Its Counsel
By: /s/ Daniel J. Garrett
----------------------------------
Daniel J. Garrett
Its Assistant Director
Securities Investment
Fourth Amendment
<PAGE> 1
EXHIBIT 4.13
FOURTH AMENDMENT TO
CREDIT AND INTERCREDITOR AGREEMENT
----------------------------------
THIS FOURTH AMENDMENT TO CREDIT AND INTERCREDITOR AGREEMENT, dated as
of August 3, 1998 (this "Amendment"), among CASTING TECHNOLOGY COMPANY, an
Indiana general partnership (the "Company"), NBD BANK, N.A., a national banking
association (successor by assignment to NBD Bank, a Michigan banking
corporation) ("NBD"), and THE ASAHI BANK, LTD., a Japanese banking corporation
acting through its Chicago Branch ("Asahi") (NBD and Asahi, collectively, the
"Banks" and individually, a "Bank"), and NBD BANK, N.A., a national banking
association, as agent for the Banks (in such capacity, the "Agent").
RECITALS
--------
A. The parties hereto have entered into a Credit and Intercreditor
Agreement dated July 28, 1995 (as amended, the "Credit Agreement"), which is in
full force and effect.
B. The Company desires to amend the Credit Agreement as herein
provided, and the Banks and the Agent are willing to so amend the Credit
Agreement on the terms set forth herein.
AGREEMENT
---------
Based upon these recitals, the parties agree as follows:
1. AMENDMENT. Upon the effective date of this Amendment, the Credit
Agreement shall be amended as follows:
Section 5.2(a) of the Credit Agreement is amended by adding the
following paragraph to the end of such subsection:
Notwithstanding anything else contained in this Agreement, the
Company may incur Indebtedness to the Partners or the
Guarantors, or any of them, in aggregate principal amount not
to exceed Six Million Dollars ($6,000,000) at any one time
outstanding, and make payments of principal and interest
thereon (irrespective of the limitations contained in Section
5.2(h)), PROVIDED that, upon the occurrence and during the
continuance of any Default or Event of Default, all such
Indebtedness to the Partners or the Guarantors shall be
subordinated to all Indebtedness now or hereafter owing by the
Company to the Banks until all Indebtedness owing by the
Company to the Banks has been irrevocably paid in full.
2. REFERENCES TO CREDIT AGREEMENT. From and after the effective date of
this Amendment, references to the Credit Agreement in the Credit Agreement and
all other documents issued under or with respect thereto (as each of the
foregoing is amended hereby or pursuant hereto) shall be deemed to be references
to the Credit Agreement as amended hereby.
3. REPRESENTATIONS AND WARRANTIES. The Company represents and Warrants
to the Banks and the Agent that:
(a) (i) The execution and delivery by the Partners on behalf of
the Company and
<PAGE> 2
the performance by the Company of this Amendment and all agreements,
instruments, and documents delivered pursuant hereto by the Company have been
duly authorized by all necessary action and do not and will not violate any
provision of any law, rule, regulation, order, judgment, injunction, or award
presently in effect applying to the Company, or of the Company's charter, or
result in a breach of or constitute a default under any material agreement,
lease or instrument to which the Company is a party or by which it or its
properties may be bound or affected; (ii) no authorization, consent, approval,
license, exemption or filing of a registration with any court or governmental
department, agency or instrumentality is or will be necessary to the valid
execution, delivery or performance by the Company of this Amendment and all
agreements and documents delivered pursuant hereto; and (iii) this Amendment and
all agreements and documents delivered pursuant hereto by the Company are the
legal, valid and binding obligations of the Company, enforceable against it in
accordance with the terms thereof.
(b) After giving effect to the amendments contained herein, the
representations and warranties contained in Article IV (other than Section 4.6)
of the Credit Agreement are true and correct on and as of the effective date
hereof with the same force and effect as if made on and as of such effective
date.
(c) No Default or Event of Default has occurred and is continuing or
will exist under the Credit Agreement as of the effective date hereof.
4. MISCELLANEOUS. The terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. Except as
expressly amended hereby, the Credit Agreement and all other documents issued
under or with respect thereto are hereby ratified and confirmed by the Banks,
the Agent, and the Company and shall remain in fall force and effect, and the
Company acknowledges that it has no defense, offset or counterclaim with respect
thereto.
5. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart.
6. EXPENSES. The Company agrees to pay and save the Agent and the Banks
harmless from liability for all costs and expenses of the Agent and the Banks
arising in respect of this Amendment, including the reasonable fees and expenses
of the respective counsel to the Agent and the Banks in connection with
preparing and reviewing this Amendment and any related agreements and documents.
7. GOVERNING LAW. This Amendment is a contract made under, and shall be
governed by and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be performed entirely within such state and
without giving effect to the choice law principles of such state.
-2-
<PAGE> 3
IN WITNESS WHEREOF the parties hereto have caused this Amendment to be
duly executed and delivered as of the date first written above.
CASTING TECHNOLOGY COMPANY
By: AMCAST CASTING TECHNOLOGIES, INC.,
Its General Partner
By: /s/ John H. Shuey
--------------------------------------
John H. Shuey
Its: President
And By: IZUMI, INC.,
its General Partner
By: /s/ Tomoaki Izumi
--------------------------------------
Tomoaki Izumi
Its: Vice President & CEO
AMCAST CASTING TECHNOLOGIES, INC.,
individually
By: /s/ John H. Shuey
--------------------------------------
John H. Shuey
Its: President
IZUMI, INC.,
individually
By:
--------------------------------------
Its:
----------------------
NBD BANK, N.A., individually and as Agent
By: /s/ Edward C. Hathaway
--------------------------------------
Edward C. Hathaway
Its: First Vice President
-3-
<PAGE> 1
================================================================================
EXHIBIT 4.15
AMCAST INDUSTRIAL CORPORATION
---------------------------------------
FIRST AMENDMENT AND LIMITED WAIVER
Dated as of December 31, 1997
to
NOTE AGREEMENTS
Dated as of November 1, 1995
---------------------------------------
Re: $50,000,000 7.09% Senior Notes,
Due November 7, 2005
================================================================================
<PAGE> 2
FIRST AMENDMENT AND LIMITED WAIVER AGREEMENT
THIS FIRST AMENDMENT AND LIMITED WAIVER AGREEMENT dated as of December
31, 1997 (the or this "Agreement"), to the Note Agreements, each dated as of
November 1, 1995, is between AMCAST INDUSTRIAL CORPORATION, an Ohio corporation
(the "Company"), and each of the institutions which is a signatory to this
Agreement (collectively, the "Noteholders"). Capitalized terms used in this
Agreement and not defined herein shall have the meanings ascribed to such terms
in the Note Agreements referred to below.
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
separate and several Note Agreements, each dated as of November 1, 1995
(collectively, the "Note Agreements"), pursuant to which the Company has
heretofore issued its 7.09% Senior Notes, due November 7, 2005, in the aggregate
principal amount of $50,000,000 (the "Notes"). The Noteholders are the holders
of 100% of the outstanding principal amount of the Notes.
B. The Company has entered into that certain Credit Agreement dated as
of August 14, 1997 (the "Credit Agreement"), with the banking institutions named
therein (the "Banks") and Keybank National Association, as Agent (the "Agent"),
pursuant to which the Banks have made available to the Company up to
$200,000,000 aggregate principal amount in revolving credit facilities, which
facilities have been guaranteed by certain Subsidiaries of the Company.
C. Concurrently with the execution and delivery of the Credit Agreement
and the guaranties of Subsidiaries given in connection therewith, and as a
condition to the necessary consent of the Noteholders to the execution and
delivery by the Company and its Subsidiaries of the same, the Company has
heretofore caused to be executed and delivered certain guaranties of
Subsidiaries in favor of the Noteholders (the "Subsidiary Guaranties")
substantially in the form delivered in favor of the Banks in connection with the
Credit Agreement.
D. The Company and the Noteholders now desire to amend the Note
Agreements in the respects, but only in the respects, hereinafter set forth in
order to reflect certain agreements between the Company and the Noteholders
arising in connection with the consummation of the Credit Agreement and the
execution and delivery of the Subsidiary Guaranties.
E. All requirements of law have been fully complied with and all other
acts and things necessary to make this Agreement a valid, legal and binding
instrument according to its terms for the purposes herein expressed have been
done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this Agreement set forth in Section
4.1 hereof, and in consideration of good
<PAGE> 3
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the Company and the Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
Section 1.1. Section 5.6 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"Section 5.6. Consolidated Net Worth. The Company will at all
times keep and maintain Consolidated Net Worth at an amount not less
than (a) $90,000,000 plus (b) 25% of Consolidated Net Earnings computed
on a cumulative basis for each of the elapsed fiscal years ending
August 31, 1995 through August 31, 1997 plus (c) 50% of Consolidated
Net Earnings computed on a cumulative basis for each of the elapsed
fiscal years ending after August 31, 1997; provided that
notwithstanding that Consolidated Net Earnings for any such elapsed
fiscal year may be a deficit figure, no reductions as a result thereof
shall be made in the sum to be maintained pursuant hereto."
Section 1.2. Section 5.7 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"Section 5.7. Maintenance of Consolidated Indebtedness. The
Company will not at any time permit Consolidated Indebtedness to exceed
the percentage of Consolidated Total Capitalization set forth below
during each of the periods indicated:
PERCENTAGE OF CONSOLIDATED
PERIOD TOTAL CAPITALIZATION
September 1, 1997
through August 31, 1998 65%
September 1, 1998
through August 31, 1999 63%
September 1, 1999
and thereafter 60%"
Section 1.3. Section 5.8(a)(2) of the Note Agreements shall be and is
hereby amended in its entirety to read as follows:
"(2) additional Consolidated Priority Indebtedness of the
Company and its Subsidiaries incurred after the Closing Date; provided
that at the time of creation, issuance, assumption, guarantee or
incurrence thereof and after giving effect thereto and to the
application of the proceeds thereof:
(i) no Default or Event of Default would exist; and
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<PAGE> 4
(ii) Consolidated Priority Indebtedness would not
exceed an amount equal to:
(A) 30% of Consolidated Net Worth in the
case of any determination made on or prior to August
31, 1999; and
(B) 25% of Consolidated Net Worth in the
case of any determination made after August 31,
1999."
Section 1.4. The following shall be added as a new Section 5.16 of the
Note Agreements:
"Section 5.16. Additional Security, Collateral and Guaranties.
(a) If at any time, pursuant to the terms and conditions of the Credit
Agreement, the Company or any existing or newly acquired or formed
Subsidiary shall pledge, grant, assign or convey to the Bank Lenders,
or any one or more of them, any security or collateral of any kind,
then the Company or such Subsidiary shall grant to the holders of the
Notes the same security or collateral so that the holders of the Notes
shall at all times be secured on an equal and pro rata basis with the
Bank Lenders, and the Company shall deliver, or shall cause to be
delivered, to the holders of the Notes (i) all such certificates,
resolutions, legal opinions and other related items in substantially
the same forms as those delivered to and accepted by the Bank Lenders
and (ii) all such amendments to this Agreement as may reasonably be
deemed necessary by the holders of the Notes in order to reflect the
existence of such additional security or collateral.
(b) If at any time, pursuant to the terms and conditions of
the Credit Agreement, any existing or newly acquired or formed
Subsidiary grants to any one or more of the Bank Lenders a guarantee of
obligations owing to such Bank Lender (whether pursuant to the Credit
Agreement or otherwise), the Company shall cause such Subsidiary to
execute and deliver to the holders of the Notes a Guaranty in
substantially the same form as the Guaranty delivered to the Bank
Lenders, or any one or more of them, and the Company shall deliver, or
shall cause to be delivered, to the holders of the Notes (i) all such
certificates, resolutions, legal opinions and other related items in
substantially the same forms as those delivered to and accepted by the
Bank Lenders and (ii) all such amendments to this Agreement as may
reasonably be deemed necessary by the holders of the Notes in order to
reflect the existence of such Guaranty of the Notes."
Section 1.5 Subparagraph (1) of Section 6.1 of the Note Agreements
shall be and is hereby amended by deleting the period at the end thereof and
replacing it with a semicolon and by adding the word "or" thereafter.
Section 1.6. The following shall be added as a new subparagraph (m) to
Section 6.1 of the Note Agreements:
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<PAGE> 5
"(m) Any Subsidiary Guaranty shall cease to be in
full force and effect for any reason whatsoever, including,
without limitation, a determination by any governmental body
or court that such Subsidiary Guaranty is invalid, void or
unenforceable or such Subsidiary shall contest or deny in
writing the validity or enforceability of any of its
obligations under the Subsidiary Guaranty."
Section 1.7. The following shall be added as new definitions in
alphabetical order to Section 8.1 of the Note Agreements:
"'ACT' shall mean Amcast Casting Technologies, Inc., an
Indiana corporation and Subsidiary of the Company."
"'Bank Lenders' shall mean Keybank National Association and
each other bank or financial institution which is now, or hereafter
becomes, a lender under the Credit Agreement."
"'Credit Agreement' shall mean that certain Credit Agreement
dated as of August 14, 1997, by and among the Company, the banking
institutions named therein and Keybank National Association, as Agent,
as in effect from time to time, including any extension, renewal,
refunding or replacement thereof."
"'CTC' shall mean Casting Technologies Company, an Indiana
general partnership, the general partners of which are ACT and Izumi
Industries, Inc., a Delaware corporation."
"'CTC Revolving Credit Agreement' shall mean that certain
Revolving Credit Agreement dated July, 1995, by and between CTC, as
borrower, and NBD Bank and Asahi Bank, as lenders, as amended, modified
or supplemented from time to time."
"'Preferred Stock' shall mean, in respect of any corporation,
shares of the capital stock of such corporation that are entitled to
preference or priority over any other shares of the capital stock of
such corporation in respect of payment of dividends or distribution of
assets upon liquidation."
"'Subsidiary Guaranty' shall mean those certain Guaranties of
Payment of Debt, each dated as of August 15, 1997, executed and
delivered by AS International, Inc., Elkhart Products Corporation,
Wheeltek Inc. and Amcast Investment Services Corporation in favor of
the holders of the Notes and each additional Guaranty of any Subsidiary
executed and delivered pursuant to the requirements of Section 5.16(b)
or otherwise."
Section 1.8. The definition of "Consolidated Priority Indebtedness" is
hereby deleted in its entirety and replaced with the following:
"'Consolidated Priority Indebtedness' shall mean the sum of
(a) Indebtedness of the Company secured by any Lien other than Liens
permitted by Sections 5.9(a)(1)
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<PAGE> 6
through (8), plus (b) all Indebtedness of the Company's Subsidiaries,
provided that, for so long as the cumulative investment of the Company
and any of its Subsidiaries in ACT and CTC, measured from the date of
acquisition of ACT to the date of any determination hereunder, does not
exceed the sum of (i) $25,000,000 plus (ii) an amount equal to
investments made by the Company in ACT and CTC after February 1, 1998
which increase the Company's or ACT's ownership interest in CTC above
60%, the Company shall be permitted to exclude from Consolidated
Priority Indebtedness an amount equal to the lesser of (y) $15,000,000
or (z) 60% of the Indebtedness outstanding under the CTC Revolving
Credit Agreement."
SECTION 2. LIMITED WAIVER.
Section 2.1. By execution of this Agreement, the Noteholders hereby
waive any Default or Event of Default under Section 5.8 of the Note Agreements
caused solely by the existence of Consolidated Priority Indebtedness consisting
of Indebtedness of Speedline S.p.A. which existed at the time Speedline S.p.A.
was acquired by the Company. The waiver provided for in this Section 2 shall be
effective from the date hereof through and including December 31, 1997, at which
time such waiver shall terminate.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 3.1. To induce the Noteholders to execute and deliver this
Agreement, the Company represents and warrants (which representations shall
survive the execution and delivery of this Agreement) to the Noteholders that:
(a) this Agreement has been duly authorized, executed and
delivered by it and this Agreement constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or
similar laws or equitable principles relating to or limiting creditors'
rights generally;
(b) the Note Agreements, as amended by this Agreement,
constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable against it in accordance with
their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(c) the execution, delivery and performance by the Company of
this Agreement (i) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (ii) does not require the
consent or approval of any governmental or regulatory body or agency,
and (iii) will not (A) violate (1) any provision of law, statute, rule
or regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other agency
or government binding upon it, or (3) any provision of any material
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<PAGE> 7
indenture, agreement or other instrument to which it is a party or by
which its properties or assets are or may be bound, including, without
limitation, the Credit Agreement, or (B) result in a breach or
constitute (alone or with due notice or lapse of time or both) a
default under any indenture, agreement or other instrument referred to
in clause (iii)(A)(3) of this Section 3.1(c), other than any violation,
breach or default which individually or in the aggregate could not
reasonably be expected to have a material adverse effect; and
(d) as of the date hereof and after giving effect to this
Agreement, no Default or Event of Default has occurred which is
continuing.
SECTION 4. CONDITIONS TO EFFECTIVENESS OF THIS AGREEMENT.
Section 4.1. This Agreement shall not become effective until, and shall
become effective when, each and every one of the following conditions shall have
been satisfied:
(a) executed counterparts of this Agreement, duly executed by
the Company and the holders of at least 66-2/3% of the outstanding
principal of the Notes, shall have been delivered to the Noteholders;
(b) copies of the final executed form of the Credit Agreement
among the Company, the Banks and the Agent, shall have been delivered
to the Noteholders together with copies of each of the Guaranties
delivered by the Subsidiaries in connection therewith, which Credit
Agreement and Guaranties shall be in form and substance satisfactory to
the Noteholders; and
(c) the representations and warranties of the Company set
forth in Section 3 hereof are true and correct on and with respect to
the date hereof and a certificate of a Responsible Officer certifying
the same shall have been delivered to the Noteholders.
Upon receipt of all of the foregoing, this Agreement shall become effective.
Delivery of this Agreement to the Company, duly executed by the holders of at
least 66-2/3% of the outstanding principal amount of the Notes, shall
acknowledge satisfaction of the foregoing conditions.
SECTION 5. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
Section 5.1. The Company agrees to pay upon demand, the reasonable fees
and expenses of Chapman and Cutler, counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of this
Agreement.
SECTION 6. MISCELLANEOUS.
Section 6.1. This Agreement shall be construed in connection with and
as part of each of the Note Agreements, and except as modified and expressly
amended by this
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<PAGE> 8
Agreement, all terms, conditions and covenants contained in the Note Agreements
and the Notes are hereby ratified and shall be and remain in full force and
effect.
Section 6.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Agreement may refer to the Note Agreements without making specific reference to
this Agreement but nevertheless all such references shall include this Agreement
unless the context otherwise requires.
Section 6.3. The descriptive headings of the various Sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
Section 6.4. This Agreement shall be governed by and construed in
accordance with Ohio law.
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<PAGE> 9
Section 6.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Agreement
may be executed in any number of counterparts, each executed counterpart
constituting an original, but all together only one agreement.
AMCAST INDUSTRIAL CORPORATION
By: /s/ John H. Shuey
--------------------------------------
Its Chairman, President and
Chief Executive Officer
FIRST AMENDMENT AND LIMITED WAIVER
(1995 NOTE AGREEMENTS)
<PAGE> 10
Accepted and agreed to as of the date first written above:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ Jerome R. Baier
--------------------------------------
Jerome R. Baier
Its Vice President
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Sarah J. Pitts
--------------------------------------
Sarah J. Pitts
Its Counsel
By: /s/ Daniel J. Garrett
--------------------------------------
Daniel J. Garrett
Its Assistant Director
Securities Investment
First Amendment
<PAGE> 1
EXHIBIT 10.12
CHANGE OF CONTROL AGREEMENT
This Agreement entered into this 31st day December, 1997, by and
between Amcast Industrial Corporation (the "Company") and John H. Shuey (the
"Executive").
WHEREAS, Executive has performed valuable services to Company in senior
executive positions in the past and;
WHEREAS, it is the desire of the Company to continue to retain the
services of Executive in the future as the Company's chief executive officer
and;
WHEREAS, the Company recognizes that as is the case with most publicly
held corporations, the possibility of a change in control may raise distracting
and disrupting uncertainties especially for the chief executive officer, may
create a conflict and make it difficult for Executive to give his whole-hearted
attention and devotion to the performance of his duties, and may even lead to
his departure, all to the detriment of the best interests of the Company and its
shareholders.
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that the best interests of the Company and its shareholders will be
served by assuring Executive, the protection provided by an agreement which
defines the respective rights and obligations of the Company and the Executive
in the event of termination of employment subsequent to a change in control of
the Company and to induce Executive to remain in the employ of the Company.
NOW, THEREFORE, the parties agree that this agreement sets forth the
severance benefits which the Company agrees will be provided to Executive in the
event Executive's employment with the Company [or, in the case of a transaction
described in clause (iv) of paragraph 2, with the successor to the Company (a
"Successor")] is terminated subsequent to a "change in control of the Company"
under the circumstances described below.
Except where the context otherwise indicates, the term "Company"
hereinafter includes the Company and any Successor.
1. OPERATION AND TERM OF AGREEMENT. This agreement, although
effective immediately, shall not become operative unless and
until there has been a change in control of the Company. None
of the provisions of this agreement shall be applicable to any
termination of Executive's employment, however occurring,
which is effective prior to a change in control of the
Company. This agreement shall continue until the later of
December 31, 2000 or two years after the occurrence of a
change in control of the Company, provided such change in
control occurs on or before December 31, 2000, subject to
extension beyond that date by mutual written consent. This
agreement will be reviewed with Executive between January 1,
2000 and July 31, 2000, for the purpose of determining whether
or not an extension beyond December 31, 2000 is mutually
agreeable and, if so, on what basis and for how long.
<PAGE> 2
CHANGE OF CONTROL AGREEMENT
2. CHANGE IN CONTROL. No benefits shall be payable hereunder
unless there shall have been a change in control of the
Company, as set forth below. For purposes of this agreement, a
"change in control of the Company" shall mean and be deemed to
have occurred on (i) the date upon which the Company is
provided a copy of a Schedule 13D, filed pursuant to Section
13(d) of the Securities Exchange Act of 1934 (the "1934 Act"),
indicating that a group or person, as defined in Rule 13d-3
under the 1934 Act, has become the beneficial owner of 20% or
more of the outstanding Voting Shares of the Company or the
date upon which the Company first learns that a person or
group has become the beneficial owner of 20% or more of the
outstanding Voting Shares of the Company if a Schedule 13D is
not filed; (ii) the date of a change in the composition of the
Board of Directors of the Company such that individuals who
were members of the Board of Directors on the date two years
prior to such change (or who were subsequently elected to fill
a vacancy in the Board, or were subsequently nominated for
election by the Company's shareholders, by the affirmative
vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such two year
period) no longer constitute a majority of the Board of
Directors of the Company; (iii) the date the shareholders of
the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or
consolidation which would result in the holders of the Voting
Shares of the Company outstanding immediately prior to the
merger or consolidation continuing to own immediately after
the merger or consolidation 80% or more of the Voting Shares
of the Company or the surviving entity, if the Company is not
the surviving entity in the merger or consolidation; or (iv)
the date shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all
the Company's assets. "Voting Shares" means any securities of
the Company which vote generally in the election of directors.
3. TERMINATION FOLLOWING CHANGE IN CONTROL.
(A) If any of the events described in paragraph 2
constituting a change in control of the Company shall
have occurred, then upon any subsequent termination
of Executive's employment at any time within two
years following the occurrence of such event,
Executive shall be entitled to the benefits provided
by this agreement, as set forth in paragraph 5,
unless such termination is for Cause.
(B) As used in this agreement, the term "Cause" shall
have the meaning set forth below:
(i) Cause. "Cause" shall mean (a) the willful
and continued failure by Executive to
substantially perform Executive's duties
with the Company (other than any such
failure resulting from Executive's physical
or mental illness or other physical or
mental incapacity), after a demand for
substantial
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<PAGE> 3
CHANGE OF CONTROL AGREEMENT
performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes
that Executive has not substantially performed Executive's
duties, or (b) the willful engaging by Executive in gross
misconduct which is materially and demonstrably injurious to
the Company resulting or intended to result, directly or
indirectly, in substantial personal gain or substantial
personal enrichment at the expense of the Company. For
purposes of this subparagraph, no act, or failure to act, on
Executive's part shall be considered "willful" unless done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that Executive's action or omission was in
the best interests of the Company. Notwithstanding the
foregoing, Cause shall not be deemed to exist unless and until
there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of not less
than three-fourths of the number of directors then in office
at a meeting of the Board called and held for that purpose
(after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard
before the Board), finding that in the good faith opinion of
the Board Executive is guilty of conduct set forth above in
clauses (a) or (b) of the first sentence of this subparagraph
and specifying the particulars thereof in detail.
(C) If subsequent to a change in control of the Company
Executive's employment is terminated by the Company for Cause,
the Company shall pay Executive's full salary through the Date
of Termination at Executive's annual base salary rate in
effect at the time Notice of Termination is given, and
Executive shall also receive all accrued or vested benefits of
any kind to which Executive is, or would otherwise have been,
entitled through the Date of Termination (as defined in
paragraph 4), and the Company shall thereupon have no further
obligation to Executive under this agreement.
4. NOTICE AND DATE OF TERMINATION.
(A) Any termination of Executive's employment subsequent to a
change in control of the Company shall be consummated by
written Notice of Termination given to the other party. For
purposes of this agreement, "Notice of Termination" shall mean
a notice which indicates the specific termination provision or
provisions in this agreement relied upon, if any, and sets
forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment.
(B) "Date of Termination" shall mean (i) if Executive's employment
is terminated by the Company for Cause, the date specified in
the Notice of Termination or the date on which the meeting of
the Board referred to in subparagraph 3(B)(i) is concluded,
whichever date is the later; or (ii) if Executive's employment
is
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<PAGE> 4
CHANGE OF CONTROL AGREEMENT
terminated for any other reason, the date on which Notice of
Termination is given or the effective date specified in the
Notice, whichever is later. For purposes of this agreement,
termination of Executive's employment shall be deemed to have
occurred within two years following the occurrence of a change
in control of the Company if the Date of Termination is within
such two year period.
5. COMPENSATION AND BENEFITS UPON TERMINATION.
(A) "Incentive Compensation" shall mean the annual cash payment
awarded under the Annual Incentive Program (AIP) or other plan
which replaces the AIP but not including any awards under any
stock option, stock grant, stock rights, or similar plan or
any award under any company sponsored profit sharing, pension,
401k, or similar savings plan.
(B) "Long Term Incentive Compensation" shall mean compensation
payable under the terms of the Amcast (LTIP) or any other plan
which replaced the LTIP.
(C) The compensation and benefits to be provided to Executive
pursuant to paragraph 3 of this agreement upon termination of
Executive's employment with the Company for any reason other
than Cause within two years following a change in control of
the Company include the following:
(i) Subject to the provisions of paragraph 8 hereof, the
Company shall pay to Executive as severance pay in a
lump sum in cash on the first day following the Date
of Termination, the following amounts:
(a) Executive's full salary through the Date of
Termination at Executive's annual base
salary rate in effect at the time Notice of
Termination is given; and also the amount of
Incentive Compensation and Long Term
Incentive Compensation to any completed
period or periods which has been earned by
or awarded to Executive but which has not
yet been paid to Executive.
(b) In lieu of any further salary payments to
Executive for periods subsequent to the Date
of Termination, an amount (the "Additional
Compensation Payment") equal to three
hundred percent (300%) of the sum of
Executive's annual base salary at the rate
in effect as of the Date of Termination (or,
if higher, at the rate in effect at the time
of the change in control) plus an amount
equal to three times the average annual
amount awarded to Executive as Incentive
Compensation for the two years immediately
preceding the year during which the Date of
Termination occurs (whether or not fully
paid).
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<PAGE> 5
CHANGE OF CONTROL AGREEMENT
(c) All amounts due Executive under the terms of
the LTIP as a result of a change of control.
(d) An amount in cash equal to the aggregate
spread between the exercise prices of all
options granted to Executive under the
Company's existing stock option plans or any
stock option plan adopted by the Company
subsequent to the date hereof ("Options")
which are then outstanding, whether or not
then fully exercisable, and the higher of
(a) the Fair Market Value of Common Share of
the Company ("Company Shares") on the Date
of Termination or (b) the average price per
Company Share actually paid by the acquiring
party in connection with any change in
control of the Company. As used in this
subparagraph, "Fair Market Value" shall mean
(1) in the event the Company Shares are
listed on any exchange or in the NASD
National Market System, the last sale price
on such exchange or System on the Date of
Termination (or last trading date prior
thereto) or, if there are no sales on such
date, the mean between the representative
bid and asked prices for Company Shares on
such exchange or System at the close of
business on such date or (2) in the event
that there is then no public market for the
Company Shares or that trading in the
Company Shares is sporadic and the mean
between any bid and asked prices is not
representative of fair market value, the
fair market value of the Company Shares
determined in accordance with Section
2031-2(f) of the Treasury Regulations or any
successor provision thereto. Any Option for
which payment is made as prescribed in this
subparagraph (c) shall be canceled effective
upon the making of such payment.
(e) All legal fees and expenses reasonably
incurred by Executive in good faith as a
result of such termination (including all
such fees and expenses, if any, incurred in
contesting or disputing any such termination
or in seeking to obtain or enforce any right
or benefit provided by this agreement).
(f) Interest at a rate equal to three percent
(3%) per annum plus the per annum rate
announced from time to time by the First
National Bank of Chicago as its "prime
rate", compounded daily from the due date of
any payment required to be made by the
company under any provision of the agreement
through the date such payment is actually
made.
(ii) The Company shall, at its expense, continue
to provide to Executive financial planning
and tax preparation services the same or
similar to those provided to Executive prior
to the change of control and to continue to
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<PAGE> 6
CHANGE OF CONTROL AGREEMENT
maintain in full force and effect for
Executive's continued benefit all life
insurance, medical, health, and accident
plans, programs and arrangements in which
Executive was entitled to participate at the
time of the change in control, provided that
Executive's continued participation is
possible under the terms of such plans,
programs and arrangements. In the event that
the terms of any such plan, program, or
arrangement do not permit Executive's
continued participation or that any such
plan, program or arrangement has been or is
discontinued or the benefits thereunder have
been or are materially reduced, the Company
shall arrange to provide, at its expense,
benefits to Executive which are
substantially similar to those which
Executive was entitled to receive under such
plan, program or arrangement at the time of
the change in control. The Company's
obligation under this subparagraph (ii)
shall terminate on the earliest of the
following dates: (a) the third anniversary
date of the Date of Termination, (b) the
date an essentially equivalent and no less
favorable benefit is made available to
Executive by a subsequent employer or (c)
the date that would have been Executive's
normal retirement date under the Company's
defined benefit pension plan for salaried
employees had Executives remained employed
by the Company.
(iii) In the event that because of their
relationship to Executive, members of
Executive's family or other individuals are
covered by any plan, program, or arrangement
described in subparagraph (ii) above
immediately prior to the Date of
Termination, the provisions set forth in
subparagraph (ii) shall apply equally to
require the continued coverage of such
persons; provided, however, that if under
the terms of any such plan, program or
arrangement any such person would have
ceased to be eligible for coverage during
the period in which the Company is obligated
to continue coverage for Executive, nothing
set forth herein shall obligate the Company
to continue to provide coverage for such
person beyond the date such coverage would
have ceased even if Executive had remained
an employee of the Company.
(iv) The Company shall enable Executive to
purchase the automobile, if any, which the
Company was providing for Executive's use at
the time Notice of Termination was given at
the wholesale value as set out in the latest
Black Book published by National Auto
Research Division of Hearst Business Media
Corporation, of such automobile at such
time.
(E) In the event that any payment to the Executive (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change of control or any person affiliated
with the Company or such persons) shall be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Internal
revenue Code of 1954, as amended (the
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<PAGE> 7
CHANGE OF CONTROL AGREEMENT
"Code") or any successor provision, the Company shall pay to
the Executive, prior to the date upon which the Executive is
required to pay the Excise Tax, an additional amount (the
"Gross-Up Payment"), appropriately calculated by the Company's
independent auditor, equal to the Excise Tax on such payment
and any additional federal, state, local tax and additional
Excise Tax incurred by the Executive in respect of such
Gross-Up Payment. For purposes of determining whether any
payment to the Executive is subject to the Excise Tax (i) all
payments received or to be received by the Executive in
connection with a change of control of the Company or the
termination of employment of the Executive (whether pursuant
to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any person whose action results
in a change of control or any person affiliated with the
Company or such persons) shall be treated as "parachute
payments" within the meaning of Section 280(G)(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Section 280 (G)(b)(i) shall be treated as subject to the
Excise Tax and (ii) the value of any noncash benefits on any
deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the
principles of Sections 280 (G)(d)(3) and (7) of the Code. For
purposes of determining the amount of the Gross-Up Payment,
unless the Executive notifies the Company's independent
auditor to the contrary the Executive shall be deemed to pay
federal income taxation at the maximum applicable individual
rate in the calendar year in which the Gross-Up Payment is to
be made and taxes at the maximum applicable rate in the state
and locality of the Executive's residence on the Date of
Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and
local taxes. In the event that the Excise Tax is subsequently
finally determined to be less than the amount taken into
account hereunder at the time of termination of the
Executive's employment, the Executive shall repay to the
Company at the time that the amount of such reduction in
Excise Tax is finally determined the portion of the Gross-Up
Payment attributable to such reduction plus interest on the
amount of such repayment at the then current prime rate.
(F) Executive shall not be required to mitigate the amount of any
payment provided for in this agreement by seeking other
employment or otherwise; provided, however, that in the event
that Executive shall obtain other employment at any time
within three years immediately following Executive's Date of
Termination, 20% of all earnings obtained by reason of such
other employment during the three year period immediately
following Executive's Date of Termination shall be payable to
the Company in full satisfaction of any obligation Executive
has to mitigate payment made to Executive by the Company. Upon
obtaining any such other employment, Executive, within thirty
(30) days thereof, shall notify the Company in writing of such
other employment and the aggregate compensation (including
Incentive Compensation, bonuses and all other forms
-7-
<PAGE> 8
CHANGE OF CONTROL AGREEMENT
of cash and contingent remuneration) to which Executive will
be entitled. During each of the three years immediately
following Executive's Date of Termination, Executive shall
provide the Company, on or before April 15 of each year
following such year, a photostatic copy of Executive's federal
income tax return (including all schedules and exhibits
thereto), as filed with the Internal Revenue Service for the
preceding calendar year.
6. RIGHTS AS FORMER EMPLOYEE. Nothing contained in this agreement shall be
construed as preventing Executive, and shall not prevent Executive,
following any termination of Executive's employment whether pursuant to
this agreement or otherwise, from thereafter participating in any
benefit or insurance plans, programs or arrangements (including without
limitation, any retirement plans or programs) in the same manner and to
the same extent that Executive would have been entitled to participate
as a former employee of the Company had this agreement not have been
executed, except, however, Executive shall not be entitled to any
severance payments under any severance pay programs of the Company
(other than this agreement) if Executive is paid the benefits provided
for under this agreement.
7. SUCCESSORS. The Company shall require any Successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to Executive, to expressly
assume and agree to perform this agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of such succession shall be a
breach of this agreement and shall entitle Executive to compensation
from the Company in the same amount and on the same terms as Executive
would be entitled hereunder if Executive terminated Executive's
employment other than for cause, except that for purposes of
implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination.
This agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If Executive should die while any amounts would still be payable to
Executive hereunder if Executive had continued to live, all such
amounts, unless otherwise provided herein, shall be paid to such
beneficiary or beneficiaries as Executive shall have designated by
written notice delivered to the Company prior to Executive's death or,
failing such written notice, to Executive's estate.
-8-
<PAGE> 9
CHANGE OF CONTROL AGREEMENT
8. UNAUTHORIZED DISCLOSURE; INVENTIONS.
(A) During the period of Executive's employment hereunder, and for
a period of five (5) years following the termination of such
employment, Executive hereby agrees that Executive will not,
without the written consent of the Board or a person
authorized thereby, disclose to any person, other than an
employee of the Company, a person to whom disclosure is
reasonably necessary or appropriate in connection with the
performance by Executive of Executive's duties as an executive
of the Company or pursuant to any order or process of any
court or regulatory agency, any material confidential
information obtained by Executive while in the employ of the
Company with respect to any of the Company's products,
improvements, formulae, designs or styles, processes,
customers, methods of distribution or methods of manufacture;
provided, however, that confidential information shall not
include any information known generally to the public (other
than as a result of unauthorized disclosure by Executive) or
any information of a type not otherwise considered
confidential by persons engaged in the same business or a
business similar to that conducted by the Company.
(B) INVENTIONS. Any and all inventions made, developed or created
by Executive (whether at the request or suggestion of the
Company or otherwise, whether alone or in conjunction with
others, and whether during regular hours of work or otherwise)
during the period of Executive's employment by the Company,
which may be directly or indirectly useful in, or relate to,
the business of or tests being carried out by the Company or
any of its subsidiaries or affiliates, will be promptly and
fully disclosed by Executive to an appropriate executive
officer of the Company and shall be the Company's exclusive
property as against Executive, and Executive will promptly
deliver to an appropriate executive officer of the Company all
papers, drawings, models, data and other material relating to
any invention made, developed or created by Executive as
aforesaid.
Executive will, upon the Company's request and without any
payment therefor, execute any documents necessary or advisable
in the opinion of the Company's counsel to direct issuance of
patents to the Company with respect to such inventions as are
to be the Company's exclusive property as against Executive
under this subsection (b) or to vest in the Company title to
such inventions as against the Executive, the expense of
securing any patent, however, to be borne by the Company.
(C) The foregoing provision of this Section 8 shall be binding
upon the Executive's heirs, successors and legal
representatives.
-9-
<PAGE> 10
CHANGE OF CONTROL AGREEMENT
9. NOTICES. All notices required or permitted to be given under this
agreement shall be in writing and shall be mailed (postage prepaid by
either registered or certified mail) or delivered, if to the Company,
addressed to:
Amcast Industrial Corporation
7887 Washington Village Drive
Dayton, Ohio 45459
Attention: Secretary
and if to Executive, addressed to:
John H. Shuey
696 Uplands Camp Road
Dayton, Ohio 45419
Either party may change the address to which notices to such party are
to be directed by giving written notice of such change to the other
party in the manner specified in this paragraph. All notices, including
without limitation, any Notice of Termination, shall be deemed to have
been given upon the date of actual receipt of the recipient party.
10. ARBITRATION. Any dispute or controversy arising out of or relating to
this agreement shall be settled by arbitration in Dayton, Ohio, in
accordance with the rules then obtaining of the American Arbitration
Association, and judgment may be entered on the arbitrator's award in
any court having jurisdiction. The decision of such arbitrator shall be
final, binding, and not appealable.
11. MISCELLANEOUS. No provision of this agreement may be modified, waived,
or discharged unless such waiver, modification or discharge is agreed
to in writing, signed by Executive and such officer of the Company as
may be specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or of
compliance by such other party with, any condition or provision of this
agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not set forth expressly
in this agreement.
12. GOVERNING LAW. The validity, interpretation, construction and
performance of this agreement shall be governed by the laws of the
State of Ohio, without giving effect to the principles of conflicts of
law thereof.
-10-
<PAGE> 11
CHANGE OF CONTROL AGREEMENT
13. VALIDITY. The invalidity or unenforceability of any provision of this
agreement shall not affect the validity or enforceability of any other
provision, which shall remain in full force and effect.
<TABLE>
<S> <C>
EXECUTIVE AMCAST INDUSTRIAL CORPORATION
/s/ John H. Shuey By: /s/ William G. Roth
- ------------------------------ -----------------------------------
John H. Shuey William G. Roth
12/31/97 Title: Chairman, Compensation Committee
- ------------------------------ ----------------------------------
Date 12/31/97
---------------------------------
Date
</TABLE>
-11-
<PAGE> 1
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($ in thousands except per share amounts)
CAUTIONARY STATEMENTS UNDER
THE PRIVATE SECURITIES REFORM ACT OF 1995
Certain statements in this Report, in the Company's press releases, and in oral
statements made by or with the approval of an authorized executive officer of
the Company constitute "forward-looking statements" as that term is defined
under the Private Securities Litigation Reform Act of 1995. These may include
statements projecting, forecasting, or estimating Company performance and
industry trends. The achievement of the projections, forecasts or estimates is
subject to certain risks and uncertainties. Actual results and events may differ
materially from those projected, forecasted or estimated. Factors which may
cause actual results to differ materially from those contemplated by the
forward-looking statement include, among others: general economic conditions
less favorable than expected, fluctuating demand in the automotive industry,
less favorable than expected growth in sales and profit margins in the Company's
product lines, increased competitive pressures in the Company's Engineered
Components and Flow Control Products segments, effectiveness of production
improvement plans, inherent uncertainties in connection with international
operations and foreign currency fluctuations, and labor relations at the Company
and its customers. The following discussion and analysis provides information
which management believes is relevant to an understanding of the Company's
consolidated results of operations and financial condition. This discussion
should be read in conjunction with the accompanying consolidated financial
statements and notes thereto.
ACQUISITIONS, DIVESTITURES, AND RESTRUCTURING
At the end of 1997, the Company completed a significant acquisition that impacts
the comparison of financial results between 1998 and 1997. On August 19, 1997,
the Company acquired all of the outstanding stock of Speedline S.p.A.
(Speedline), a major European manufacturer of light-alloy wheels serving the
automotive original equipment market located near Padova, Italy. Accordingly,
the acquisition was reflected in the August 31, 1997 year-end balance sheet, but
had no material effect on 1997 operating results. Operations of Speedline are
included for periods ending one month prior to the Company's fiscal period to
ensure timely preparation of the consolidated financial statements. Thus, the
consolidated financial statements for 1998 include financial results for
Speedline for the eleven-month period of September 1997 through July 1998.
Primarily as a result of the acquisition of Speedline, the percentage of the
Company's sales derived from the Engineered Components segment increased to
68.6% in 1998.
During the third quarter of 1998, the Company completed two transactions
that had an impact on the Company's financial results as well as on the
comparison between 1998 and 1997. Effective March 30, 1998, the Company sold its
Rancho Cucamonga, California investment casting operation, Amcast Precision, for
$25,445 in cash. The transaction resulted in a pre-tax gain of $12,048. The
facility, acquired by Amcast in 1987, produces ferrous and nonferrous castings
for the aerospace industry. Sales of approximately $19,000 in 1997 were included
in the Engineered Components segment. This was the only Amcast operation
involved in the aerospace industry.
On April 9, 1998, the Company acquired Lee Brass Company, a privately-owned
company located in Anniston, Alabama. Lee Brass is a major manufacturer of cast
brass products for residential, commercial, and industrial plumbing systems. The
purchase price was approximately $16,100 consisting of cash payments of $11,700
and debt assumption of $4,400. The acquisition resulted in goodwill of $6,300.
Sales of Lee Brass for the twelve months ended December 31, 1997, were
approximately $39,000. Financial results for Lee Brass are included in the Flow
Control Products segment since the date of acquisition.
Following the acquisition of Lee Brass, the Company announced a plan to
consolidate its two brass operations and subse-
<PAGE> 2
quently ceased production at its Flagg Brass operation located in Stowe,
Pennsylvania. Expected to be completed by December 31, 1998, the consolidation
plan includes the transfer of certain product lines to Lee Brass, the sale or
closure of the Flagg Brass facility, and the termination of approximately 100
salaried and hourly personnel. In connection with the consolidation plan, during
the third quarter the Company recorded a restructuring charge of $5,800 for
facility exit costs and a charge of $2,200, included in cost of sales, primarily
for a non-cash write-down of inventory to its net realizable value. Key
components of the $5,800 restructuring charge are $4,900 for a non-cash
write-down of assets to their net realizable value, $500 for severance and other
termination benefits, and $400 for other facility closure costs. As of August
31, 1998, approximately 97 associates had been terminated and substantially all
of the severance and facility closure costs had been charged against the
liability, with the majority of the remaining costs expected to be spent by
December 31, 1998. Sales of Flagg Brass in 1997 were approximately $9,000 and
were included in the Flow Control Products segment. The Company's consolidated
financial results are not expected to be significantly affected by the closure
of Flagg Brass and the transfer of certain product lines to Lee Brass.
During the third quarter, the Company also re-evaluated its reserves
related to several iron foundries previously closed in the 1980's and early
1990's. As a result, a $4,000 restructuring charge was recorded to cover higher
than expected medical benefits, workers compensation expenses, and legal costs
for environmental and other matters related to these previously closed
facilities.
RESULTS OF OPERATIONS
In 1998, total Company sales increased 48% to $574,414 due primarily to the
acquisitions of Speedline and Lee Brass and by growth of its aluminum components
business. By segment, Engineered Components sales increased 75% primarily due to
the inclusion of Speedline sales and the increased aluminum component sales.
Flow Control Products sales increased 11.4% due to the inclusion of Lee Brass
and increased sales of the Company's copper and brass plumbing fitting products.
In 1997, the Company experienced growth in net sales of 12.5% from $343,934 in
1996 to $387,051. By segment, 1997 Flow Control Products sales increased
slightly while Engineered Components sales increased 21.8%. Volume increases in
both segments increased total net sales by 15%; however, reduced prices
partially offset the favorable impact of the increased volume.
Gross profit was $93,004, $69,040, and $70,696 in 1998, 1997, and 1996,
respectively. As a percentage of sales, gross profit decreased to 16.2% in 1998
from 17.8% in 1997 and 20.6% in 1996. The decrease in gross profit percentage in
1998 reflects a change in the Company's sales mix to a higher percentage of
Engineered Component product sales, which generally have lower gross margins
than Flow Control Products and, to a lesser degree, operating inefficiencies
encountered at one of the Company's automotive component plants in the first
half of the year. The gross profit percentage for 1998 was also impacted by a
one-time charge ($2,200) related to closing the Flagg Brass facility. Higher
volume provided increased gross profit in 1997 as compared to 1996; however,
this improvement was offset by new facility start-up costs, a cumulative $3,500
charge for overstated inventory, and an unfavorable sales mix.
Selling, general, and administrative (SG&A) expenses were $57,294, $41,798,
and $43,368 in 1998, 1997, and 1996, respectively. SG&A expense increased in
1998 as a result of the inclusion of Speedline and Lee Brass. SG&A expense
decreased in 1997 compared to 1996 due to reduced commissions in the Flow
Control segment and lower administrative expenses in the Flow Control segment
and at the corporate office. As a percentage of sales, SG&A decreased to 10.0%
in 1998 from 10.8% in 1997 and 12.6% in 1996. The decrease in 1998 is primarily
due to higher sales volumes in the Engineered Components segment, which
generally has lower SG&A expenses. Higher sales volume and reduced spending
levels contributed to the decrease in 1997.
For 1998, the Company's pre-tax share of losses from Casting Technology
Company (CTC), the Company's joint venture with Izumi Industries, was $1,000
compared with $2,416 in 1997. The 1998 results of CTC were significantly
impacted by lost sales resulting from a major General Motors work stoppage. The
launch of several new automotive products at CTC in 1997 resulted in significant
inefficiencies and high launch-related costs associated with meeting required
volumes.
Interest expense of $15,045 in 1998 increased from $5,135
in 1997 and $2,348 in 1996. Interest expense increased in 1998 primarily due to
the cost of financing the Speedline operation, and as a result of the impact of
the General Motors work stoppage on the Company's operating income and working
capital. Interest increased in 1997 primarily due to lower interest
capitalization and, to a lesser degree, higher debt levels. There was no
interest capitalized during 1998. Capitalized interest was $145, and $2,038 in
1997 and 1996, respectively. A portion of the amounts borrowed by the Company
was used to finance plant construction and expansion and, accordingly, the
interest related to such long-term projects was capitalized.
The effective tax rate for 1998, 1997 and 1996 was 27.0%, 35.1%, and 35.6%,
respectively. Changes in the effective tax rates primarily reflect the level of
federal and state tax credits applicable to U.S. taxes, and a one-time
adjustment of $2,562 resulting from a reduction of Italian tax rates from 53.2%
to 41.3%.
<PAGE> 3
FLOW CONTROL PRODUCTS Net sales of the Flow Control Products segment were
$180,596 in 1998, compared with $162,150 in 1997 and $159,323 in 1996. Increased
volumes of copper and brass plumbing fittings in 1998 resulting from the Lee
Brass acquisition and higher product sales of the Company's copper and brass
fittings provided a 15.4% increase over 1997. Pricing pressures which were
largely offset by lower material costs reduced sales by 4.1%. As a result of the
higher volume, operating income increased to $27,931 in 1998, an increase of
14.7% over the $24,358 operating income achieved in 1997. Increased volumes of
copper and brass plumbing fittings in 1997 provided a 5.5% increase in net
sales. However, lower selling prices partially offset this increase as the
Company experienced competitive pricing pressures in much of the second half of
1997. As a result, the operating income of $24,358 in 1997 decreased slightly
from 1996.
ENGINEERED COMPONENTS Net sales of the Engineered Components segment were
$393,818 in 1998 compared with $224,901 in 1997 and $184,611 in 1996. The
increase in sales was due primarily to the addition of Speedline in 1998. The
sales of aluminum brake, suspension, and chassis components and North American
aluminum wheels were running at a rate nearly 14% higher than in 1997 before the
impact of the General Motors work stoppage, which more than offset those gains
in the last quarter of 1998. Operating income increased over 100% to $19,609 in
1998 compared to the $9,531 achieved in 1997. The increase was due primarily to
Speedline and reduced start-up amortization expense. The improvement in volume
at the Company's North American automotive operations in the first nine months
of 1998 added significantly to operating income but was more than offset by the
impact of the General Motors work stoppage in the fourth quarter and a less
favorable product mix. The sales increase for 1997 resulted primarily from
higher demand for the Company's aluminum wheels, the full-year effect of the
Company's new automotive plant in Ohio, and the introduction of several new
products for automotive suspensions. Operating income of $9,531 in 1997 was
slightly higher than 1996 as new facility start-up costs partially offset the
impact of increased volume. In addition, the Company recorded a one-time
cumulative non-cash charge of $3,500 to reduce overstated inventory values at
the Company's Amcast Precision unit.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operations was $9,580, $30,675, and $33,638 in 1998, 1997,
and 1996, respectively. In each of the three years, cash was primarily provided
by net income and depreciation. During 1998, working capital, excluding
short-term and current debt, increased 26% as a result of the Lee Brass
acquisition and the Precision divestiture, coupled with the increased sales
volume and inventory build during the General Motors work stoppage. Accounts
payable increased in 1997 due to acquisition-related expenses, purchases for
expansion activities, and increased sales activity.
Net cash used by investing activities during 1998 was $33,018, compared
with $91,954 in 1997 and $51,223 in 1996. Investing activities for 1998 include
$12,247 primarily for the Lee Brass acquisition and for 1997 include $48,486 for
the Speedline acquisition discussed above. Capital expenditures totaled $46,763,
$40,377, and $48,640, in 1998, 1997, and 1996, respectively. To support business
expansion activities, investments were made in property, plant, and equipment
and in the Company's joint venture, Casting Technology Company. At August 31,
1998, the Company had $10,938 of commitments for capital expenditures to be made
in 1999, primarily for the Engineered Components segment.
Net cash provided by financing activities was $21,033 in 1998, as compared
with $65,474 in 1997 and $21,712 for 1996, respectively. Net cash provided by
financing activities in 1997 include $70,000 in borrowings under the Company's
new credit agreement, discussed below, primarily to finance the Speedline
acquisition. In 1996, increased borrowings were used to fund business expansion.
In 1996, the Company completed a private placement of $50,000 in senior notes
that mature in November 2005 and replaced outstanding debt by $24,321.
During 1998, the Company replaced $46,807 of its Speedline debt with
borrowings under its $200 million revolver. On August 14, 1997, the Company
replaced its prior credit facility with a new Credit Agreement (the Agreement)
that provides for up to $200,000 in borrowings through 2002. At August 31, 1998,
the Company had unused borrowing capacity of $11,100 under the most restrictive
debt covenant of the Agreement. The Company also has lines of credit totaling
$27,000, of which $8,900 was used at August 31, 1998. In addition, Speedline has
short-term lines of credit totaling $55,900, of which $40,100 was available at
July 31, 1998.
The ratio of long-term debt as a percent of capital increased to 57.5% at
August 31, 1998 from 47.9% at August 31, 1997. The increase reflects the
replacement of short-term debt with long-term debt at Speedline as well as
additional borrowings to support business expansion and working capital needs.
Book value per common share at August 31, 1998, was $17.47, up from $17.24 for
the prior year. One million preferred shares and 5.8 million common shares are
authorized and available for future issuance. Management believes the Company
has adequate financial resources to meet its future needs.
CONTINGENCIES The Company, as is normal for the industry in
which it operates, is involved in certain legal proceedings and subject to
certain claims and site investigations that arise under the environmental laws
and which have not been finally adjudicated.
<PAGE> 4
To the extent possible, with the information available, the Company regularly
evaluates its responsibility with respect to environmental proceedings. The
factors considered in this evaluation are more fully described in the
Commitments and Contingencies note to the consolidated financial statements. At
August 31, 1998, the Company had reserves of $1,700 accrued for environmental
liabilities. The Company is of the opinion that, in light of its existing
reserves, its liability in connection with environmental proceedings should not
have a material adverse effect on its financial condition, results of
operations, or cash flows. The Company is presently unaware of the existence of
any potential material environmental costs that are likely to occur in
connection with disposition of any of its property.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
During 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," which establishes new
standards for computing and presenting earnings per share. SFAS No. 128 requires
the Company to report both basic earnings per share, which is based on the
weighted-average number of common shares outstanding, and diluted earnings per
share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive common shares outstanding. Adoption of
the statement had no effect on the Company's results of operations, financial
position, or cash flows. However, as required, the Company restated earnings per
share for all prior periods to present diluted earnings per share. Basic
earnings per share are unchanged from previously reported earnings per share
amounts.
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs
of Start-Up Activities." SOP No. 98-5 provides guidance on the financial
reporting of start-up and organization costs and requires such costs to be
expensed as incurred, with the effect of initial adoption reported as a
cumulative effect of a change in accounting principle. The Company has adopted
SOP No. 98-5 retroactively to the first quarter of 1998 as required under the
SOP.
The total amount of deferred start-up reported as a cumulative effect of a
change in accounting principle is $8,588. This includes the effect of the
adoption of SOP No. 98-5 by Casting Technology Company, the Company's 60% owned
joint venture with Izumi Industries. The Company's share of CTC's cumulative
effect of a change in accounting principle is $3,529. The impact of adoption of
the SOP on previously reported operating income will be to change the first
quarter 1998 results from $9,705 to $10,329, the second quarter 1998 from $8,380
to $8,760, and the third quarter 1998 from $12,608 to $12,894. Reported earnings
per diluted share will change in the first quarter of 1998 from $.44 to a loss
of $.44, in the second quarter 1998 from $.58 to $.61, and in the third quarter
of 1998 from $.58 to $.62. The impact in 1998 of adopting the SOP on
previously-reported financial results will be to increase operating income by
$1,290 and to decrease earnings per diluted share by $.81.
New accounting standards issued that relate to financial statement
disclosure include SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," and SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS No. 130 establishes guidelines for the display of comprehensive
income, which includes those items now reported directly in equity, for
financial statement purposes. SFAS No. 131 establishes guidelines for
determining operating segments and extensive disclosure requirements of those
segments. SFAS No. 132 revises the disclosures of pension and other
postretirement benefit plans. SFAS Nos. 130 and 131 will be effective for the
Company during fiscal year 1999 and SFAS No. 132 will be effective during fiscal
year 2000. The Company has not determined the effect these new standards will
have on its financial statement disclosures.
New accounting standards issued also include SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes a
comprehensive standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 will become effective for the Company during
fiscal year 2000. The Company has not determined the effect of this new
standard.
YEAR 2000
The Company has designated a Year 2000 Steering Committee and a task force in
each of its operations to ensure compliance of its computer systems including
computers utilized in production, production support equipment, and plant
infrastructure systems. The Company has been working with its vendors to assess
their readiness.
For the most part, the Company uses third-party supplied
computer programs and packages for its information technology systems. Certain
of those systems are already year 2000 compliant as supplied by the vendor.
In the Flow Control Products segment, certain software packages had been
modified by the Company. These packages have been remediated and tested by
internal information technology professionals. The total cost of these
modifications is estimated to have cost the Company $400.
In the Engineered Components segment, some facilities are utilizing
compliant releases of software. The Automotive group is in the process of
installing an enterprise resource planning (ERP) system as an upgrade in
functionality that will improve business processes. At the same time and without
incremental cost, the new system will address the year 2000 issue. Should the
ERP system
<PAGE> 5
not be installed and operational in sufficient time, the Company
believes that it can install compliant versions of its current software promptly
to resolve the issue at a cost that will not materially impact its results of
operations, liquidity, or financial condition.
At the Company's Speedline unit, internal resources are presently
evaluating the compliant status of the computer systems.
The Company's vendors are in various stages of compliance with year 2000.
The Company expects that critical vendors will be in compliance or have adequate
alternative solutions in place.
The Company believes its risk is low in the event of year 2000 issues. Its
Flow Control systems and many of its Engineered Components systems are
compliant. The Company's primary raw materials are basic commodities available
from multiple sources such as copper cathode, aluminum sows and ingots, and
brass from scrap radiators. As a result, the Company does not expect and cannot
at this time reasonably estimate a material impact due to the uncertainty of
year 2000 issues on its results of operations, liquidity, and financial
condition.
Contingency plans if deemed necessary will be developed to address the
Company's specific risks during 1999.
<TABLE>
<CAPTION>
SELECTED DATA
($ in thousands except per share amounts)
FINANCIAL DATA 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales........................................ $ 574,414 $ 387,051 $ 343,934 $ 328,231 $ 271,856
Operating income................................. 37,958 27,242 27,328 26,972 23,220
Operating income percent......................... 6.6% 7.0% 7.9% 8.2% 8.5%
Income before income taxes and cumulative
effect of accounting change.................... 22,975 20,005 24,731 26,098 22,067
Income before cumulative effect
of accounting change........................... 16,765 12,983 15,926 17,171 14,454
Net income....................................... 8,177 12,983 15,926 17,171 14,454
Working capital.................................. 86,929 26,260 57,774 47,845 48,590
Total assets..................................... 563,450 508,918 269,217 229,367 194,161
Long-term debt................................... 217,199 145,304 58,783 29,687 13,910
- --------------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA
Income before cumulative effect
of accounting change - basic................... $ 1.82 $ 1.50 $ 1.85 $ 2.02 $ 1.72
Net income - basic............................... $ .89 $ 1.50 $ 1.85 $ 2.02 $ 1.72
Weighted-average number of common
shares outstanding - basic (in thousands)...... 9,200 8,674 8,606 8,517 8,425
Income before cumulative effect
of accounting change - diluted................. $ 1.81 $ 1.48 $ 1.84 $ 2.00 $ 1.69
Net income - diluted............................. $ .88 $ 1.48 $ 1.84 $ 2.00 $ 1.69
Weighted-average number of common
shares outstanding - diluted (in thousands).... 9,250 8,754 8,628 8,598 8,565
Dividends declared............................... $ .56 $ .56 $ .56 $ .53 $ .49
Book value....................................... $ 17.47 $ 17.24 $ 15.80 $ 14.52 $ 13.02
- ---------------------------------------------------------------------------------------------------------------------------------
STATISTICAL DATA
Current ratio.................................... 1.6 1.1 2.1 1.9 2.0
Long-term debt as a percent of capital........... 57.5% 47.9% 30.2% 19.3% 11.2%
Number of associates ............................ 4,500 4,040 2,600 2,400 2,300
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
AMCAST INDUSTRIAL CORPORATION
STATEMENT OF INTERNAL CONTROL
The management of Amcast Industrial Corporation has the responsibility for
preparing the accompanying financial statements and for their integrity and
objectivity. In fulfilling this responsibility, management maintains accounting
systems and related controls. These controls provide reasonable assurance, at
appropriate costs, that assets are safeguarded against losses and that financial
records are reliable for use in preparing financial statements. These systems
are enhanced by written policies, an organizational structure providing division
of responsibilities, careful selection and training of qualified people, and a
program of financial, operational, and systems review coordinated by the
internal auditors and by management.
Management recognizes its responsibility for conducting the Company's
affairs according to the highest standards of personal and corporate conduct.
This responsibility is characterized by and included in key policy statements.
Management maintains a systematic program to assess compliance with these
policies.
The Company's financial statements have been audited by Ernst & Young LLP,
independent auditors elected by the shareholders. Management has made available
to Ernst & Young LLP all the Company's financial records and related data, as
well as the minutes of shareholders' and directors' meetings. Furthermore,
management believes that all representations made to Ernst & Young LLP during
their audit were valid and appropriate.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets with the independent auditors, management, and internal
auditors periodically to review their work and ensure that they are properly
discharging their responsibilities. The independent auditors and the Company's
internal auditors have free access to this committee, without management
present, to discuss the results of their audit work and their opinion on the
adequacy of internal financial controls and the quality of financial reporting.
/s/ John H. Shuey
John H. Shuey
Chairman, President and Chief Executive Officer
/s/ Douglas D. Watts
Douglas D. Watts
Vice President, Finance (Chief Financial Officer)
REPORT OF ERNST & YOUNG LLP
INDEPENDENT AUDITORS
Shareholders and Board of Directors
Amcast Industrial Corporation
Dayton, Ohio
We have audited the accompanying consolidated statements of financial condition
of Amcast Industrial Corporation and subsidiaries as of August 31, 1998 and
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended August 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Amcast
Industrial Corporation and subsidiaries at August 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Dayton, Ohio
October 13, 1998
<PAGE> 7
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands except per share amounts)
Year Ended August 31
1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales...................................................................... $ 574,414 $ 387,051 $ 343,934
Cost of sales.................................................................. 481,410 318,011 273,238
- ---------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 93,004 69,040 70,696
Selling, general and administrative expenses................................... 57,294 41,798 43,368
Restructuring charges.......................................................... 9,800 - -
Gain on sale of aerospace business............................................. (12,048) - -
- ---------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 37,958 27,242 27,328
Equity in loss of joint venture
and other (income) and expense............................................ (62) 2,102 249
Interest expense............................................................... 15,045 5,135 2,348
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 22,975 20,005 24,731
Income taxes................................................................... 6,210 7,022 8,805
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 16,765 12,983 15,926
Cumulative effect of accounting change, net of tax............................. (8,588) - -
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 8,177 $ 12,983 $ 15,926
==================================================================================================================================
BASIC EARNINGS PER SHARE
Income before cumulative effect of
accounting change......................................................... $ 1.82 $ 1.50 $ 1.85
Cumulative effect of accounting change......................................... (.93) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net income..................................................................... $ .89 $ 1.50 $ 1.85
===================================================================================================================================
Diluted Earnings per Share
Income before cumulative effect of
accounting change......................................................... $ 1.81 $ 1.48 $ 1.84
Cumulative effect of accounting change......................................... (.93) - -
- -----------------------------------------------------------------------------------------------------------------------------------
Net income .................................................................... $ .88 $ 1.48 $ 1.84
===================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
($ in thousands)
August 31
1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents............................................................... $ 7,022 $ 9,608
Accounts receivable..................................................................... 111,066 100,589
Inventories............................................................................. 84,255 71,960
Other current assets.................................................................... 20,308 21,068
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 222,651 203,225
PROPERTY, PLANT, AND EQUIPMENT
Land.................................................................................... 8,858 5,067
Buildings............................................................................... 62,902 47,320
Machinery and equipment................................................................. 307,849 285,115
Construction in progress................................................................ 19,269 19,560
- --------------------------------------------------------------------------------------------------------------------------------
398,878 357,062
Less accumulated depreciation........................................................... 138,761 121,818
- --------------------------------------------------------------------------------------------------------------------------------
260,117 235,244
GOODWILL .................................................................................... 62,555 36,784
OTHER ASSETS ................................................................................ 18,127 33,665
- --------------------------------------------------------------------------------------------------------------------------------
$ 563,450 $ 508,918
================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt......................................................................... $ 16,878 $ 54,038
Current portion of long-term debt....................................................... 6,370 7,087
Accounts payable........................................................................ 72,887 79,732
Compensation and related items.......................................................... 19,336 16,717
Accrued expenses........................................................................ 20,251 19,391
- --------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 135,722 176,965
LONG-TERM DEBT - LESS CURRENT PORTION ....................................................... 217,199 145,304
DEFERRED INCOME TAXES ....................................................................... 25,164 8,400
DEFERRED LIABILITIES ........................................................................ 24,551 20,023
SHAREHOLDERS' EQUITY
Preferred shares, without par value:
Authorized - 1,000,000 shares; Issued - None
Common shares, at stated value
Authorized - 15,000,000 shares
Issued - 9,206,529 and 9,177,455 shares, respectively............................... 9,207 9,177
Capital in excess of stated value....................................................... 78,964 78,484
Foreign currency translation adjustment................................................. (945) -
Retained earnings....................................................................... 73,588 70,565
- --------------------------------------------------------------------------------------------------------------------------------
160,814 158,226
- --------------------------------------------------------------------------------------------------------------------------------
$ 563,450 $ 508,918
=================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands except per share amounts)
Foreign
Capital in Currency
Common Excess of Translation Retained
Shares Stated Value Adjustment Earnings Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 1, 1995 .................... $ 8,556 $ 64,175 $ - $ 51,474 $ 124,205
Net income.................................. - - - 15,926 15,926
Cash dividends declared, $.56 per share..... - - - (4,824) (4,824)
Stock options exercised..................... 62 780 - - 842
Other....................................... - 48 - (33) 15
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1996 ..................... 8,618 65,003 - 62,543 136,164
Net income.................................. - - - 12,983 12,983
Stock issued for acquisition................ 478 12,022 - - 12,500
Cash dividends declared, $.56 per share..... - - - (4,922) (4,922)
Stock options exercised..................... 78 1,356 - - 1,434
Other....................................... 3 103 - (39) 67
- --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1997 ...................... 9,177 78,484 - 70,565 158,226
Net income ................................. - - - 8,177 8,177
Cash dividends declared, $.56 per share .... - - - (5,154) (5,154)
Foreign currency translation ............... - - (945) - (945)
Stock options exercised .................... 30 480 - - 510
- ---------------------------------------------------------------------------------------------------------------------------------
BALANCE AT AUGUST 31, 1998 ..................... $ 9,207 $ 78,964 $ (945) $ 73,588 $ 160,814
=================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Year Ended August 31
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................................. $ 8,177 $ 12,983 $ 15,926
Depreciation and amortization............................................... 32,113 20,463 17,428
Non-cash restructuring and inventory write-down............................. 12,000 - -
Cumulative effect of accounting change...................................... 8,588 - -
Gain on sale of aerospace business.......................................... (12,048) - -
Deferred liabilities........................................................ (1,497) (801) 2,364
Changes in assets and liabilities, net of acquisitions
Accounts receivable..................................................... (9,667) (5,203) (5,764)
Inventories............................................................. (9,122) (4,323) 4,125
Other current assets.................................................... 1,141 (2,920) (594)
Accounts payable........................................................ (11,833) 8,077 (2,897)
Accrued liabilities..................................................... (9,204) (669) 2,745
Other .................................................................. 932 3,068 305
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 9,580 30,675 33,638
INVESTING ACTIVITIES
Additions to property, plant, and equipment................................. (46,763) (40,377) (48,640)
Acquisitions, net of cash received.......................................... (12,247) (48,486) -
Contributions to joint venture............................................. - (3,226) (2,774)
Proceeds from sale of aerospace business.................................... 25,445 - -
Other assets................................................................ 547 135 191
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (33,018) (91,954) (51,223)
FINANCING ACTIVITIES
Additions to long-term debt................................................. 85,871 70,000 50,000
Reduction in long-term debt................................................. (30,216) (1,105) (20,904)
Short-term borrowings....................................................... (29,978) - (3,417)
Dividends................................................................... (5,154) (4,922) (4,824)
Other....................................................................... 510 1,501 857
- --------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 21,033 65,474 21,712
Effect of exchange rate changes on cash.......................................... (181) - -
- --------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents.......................................... (2,586) 4,195 4,127
Cash and cash equivalents at beginning of year................................... 9,608 5,413 1,286
- -----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,022 $ 9,608 $ 5,413
===================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
ACCOUNTING POLICIES
THE CONSOLIDATED FINANCIAL STATEMENTS include the accounts of Amcast Industrial
Corporation and its domestic and foreign subsidiaries (the Company).
Intercompany accounts and transactions have been eliminated. The Company's
investment in Casting Technology Company (CTC), a joint venture, is included in
the accompanying consolidated financial statements using the equity method of
accounting. Operations of the Company's European subsidiaries are included in
the consolidated financial statements for periods ending one month prior to the
Company's fiscal year-end in order to ensure timely preparation of the
consolidated financial statements. Certain prior year amounts have been
reclassified to conform to the current year presentation.
FOR FOREIGN SUBSIDIARIES, the local foreign currency is the functional
currency. Assets and liabilities are translated into U.S. dollars at the rate of
exchange existing at year-end. Translation gains and losses are included as a
component of shareholders' equity. Income statement amounts are translated at
the average monthly exchange rates. Transaction gains and losses are included in
the statement of income and were not material.
REVENUE is recognized at the time products are shipped.
CASH AND CASH EQUIVALENTS include amounts on deposit with financial
institutions and investments with original maturities of 90 days or less.
ACCOUNTS RECEIVABLE are stated net of allowances for doubtful accounts of
$264 and $346 at August 31, 1998 and 1997, respectively. The Company held notes
receivables of $3,000 and accounts receivable of $3,962 at August 31, 1998, and
accounts receivable of $1,825 at August 31, 1997, from CTC.
INVENTORIES are valued at the lower of cost or market using the last-in,
first-out (LIFO) and the first-in, first-out (FIFO) methods.
PROPERTY, PLANT, AND EQUIPMENT are stated at cost. Expenditures for
significant renewals and improvements are capitalized. Repairs and maintenance
are charged to expense as incurred. Depreciation is computed using the
straight-line method based upon the estimated useful lives of the assets as
follows: buildings - 20 to 40 years; machinery and equipment - 3 to 20 years.
GOODWILL represents the excess of the cost of businesses acquired over the
fair market value of identifiable net assets at the dates of acquisition.
Goodwill is amortized on a straight-line basis over 40 years. Accumulated
amortization of goodwill was $2,259 and $916 at August 31, 1998 and 1997,
respectively. The carrying value of goodwill is evaluated periodically in
relation to the operating performance and future undiscounted cash flows of the
underlying businesses.
DEFERRED INCOME TAXES are provided for temporary differences between
financial and tax reporting in accordance with the liability method under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes."
USE OF ESTIMATES and assumptions are made by management in the preparation
of the financial statements in conformity with generally accepted accounting
principles that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
ACCOUNTING STANDARDS ADOPTED during 1998 include SFAS No. 128, "Earnings
per Share," which establishes new standards for computing and presenting
earnings per share. SFAS No. 128 requires the Company to report both basic
earnings per share, which is based on the weighted-average number of common
shares outstanding, and diluted earnings per share, which is based on the
weighted-average number of common shares outstanding plus all potential dilutive
common shares outstanding. Earnings per share amounts for all periods are
presented, and where necessary, restated to give effect to the adoption of SFAS
No. 128.
Effective September 1, 1997, the Company also adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides
guidance on the financial reporting of start-up and organization costs and
requires such costs to be expensed as incurred. The total amount of deferred
start-up costs reported as a cumulative effect of a change in accounting
principle is $8,588, net of tax benefits of $5,044. The Company's share of CTC's
cumulative effect of a change in accounting principle is $3,529, net of tax. Pro
forma earnings per share amounts, assuming the new accounting principle is
applied retroactively, are as follows:
<TABLE>
<CAPTION>
1997 1996
BASIC EARNINGS PER SHARE:
<S> <C> <C>
Income before cumulative effect of
accounting change - as reported.... $1.50 $1.85
Income before cumulative effect of
accounting change - pro forma...... $1.52 $1.36
Net income - as reported................ $1.50 $1.85
Net income - pro forma.................. $1.52 $1.36
DILUTED EARNINGS PER SHARE:
<S> <C> <C>
Income before cumulative effect
of accounting change - as reported. $1.48 $1.84
Income before cumulative effect
of accounting change - pro forma... $1.51 $1.36
Net income - as reported................ $1.48 $1.84
Net income - pro forma.................. $1.51 $1.36
</TABLE>
<PAGE> 12
NEW ACCOUNTING STANDARDS issued that relate to financial statement disclosure
include SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," and SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS No. 130 establishes guidelines for the display of comprehensive
income, which includes those items now reported directly in equity, for
financial statement purposes. SFAS No. 131 establishes guidelines for
determining operating segments and extensive disclosure requirements of those
segments. SFAS No. 132 revises the disclosures of pension and other
postretirement benefit plans. SFAS Nos. 130 and 131 will be effective for the
Company during fiscal year 1999 and SFAS No. 132 will be effective during fiscal
year 2000. The Company has not determined the effect these new standards will
have on its financial statement disclosures.
New accounting standards issued also include SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes a
comprehensive standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 will become effective for the Company during
fiscal year 2000. The Company has not determined the effect of this new
standard.
ACQUISITIONS, DIVESTITURES, AND RESTRUCTURING
At the end of fiscal 1997 and during fiscal 1998, the Company completed
transactions that impacted the comparison between 1998 and 1997. Effective March
30, 1998, the Company sold its Rancho Cucamonga, California investment casting
operation, Amcast Precision, for $25,445 in cash. The transaction resulted in a
pre-tax gain of $12,048. The facility, acquired by Amcast in 1987, produces
ferrous and nonferrous castings for the aerospace industry. Fiscal 1997 sales
were approximately $19,000. This was the only Amcast operation involved in the
aerospace industry.
On April 9, 1998, the Company acquired Lee Brass Company, a privately-owned
company located in Anniston, Alabama. Lee Brass is a major manufacturer of cast
brass products for residential, commercial, and industrial plumbing systems. The
purchase price was approximately $16,100 consisting of cash payments of $11,700
and debt assumption of $4,400. The acquisition of Lee Brass has been accounted
for by the purchase method. Accordingly, the cost of the acquisition was
allocated on the basis of the estimated fair market value of the assets
acquired, principally inventory and property, plant, and equipment, and
liabilities assumed, resulting in goodwill of $6,300. The pro forma effect of
the acquisition on the results of operations is not presented, as it is not
material.
Following the acquisition of Lee Brass, the Company announced a plan to
consolidate its two brass operations and subsequently ceased production at its
Flagg Brass operation located in Stowe, Pennsylvania. Expected to be completed
by December 31, 1998, the consolidation plan includes the transfer of certain
product lines to Lee Brass, the sale or closure of the Flagg Brass facility, and
the termination of approximately 100 salaried and hourly personnel. In
connection with the consolidation plan, during the third quarter the Company
recorded a restructuring charge of $5,800 for facility exit costs and a charge
of $2,200, included in cost of sales, primarily for a non-cash write-down of
inventory to its net realizable value. Key components of the $5,800
restructuring charge are $4,900 for a non-cash write-down of assets to their net
realizable value, $500 for severance and other termination benefits, and $400
for other facility closure costs. As of August 31, 1998, approximately 97
associates had been terminated and substantially all of the severance and
facility closure costs had been charged against the liability, with the majority
of the remaining costs expected to be spent by December 31, 1998. During the
third quarter, the Company also re-evaluated its reserves related to several
iron factories previously closed in the 1980's and early 1990's. As a result, a
$4,000 restructuring charge was recorded to cover higher than expected medical
benefits, workers compensation expenses, and legal costs for environmental and
other matters related to these previously closed facilities.
At the end of fiscal 1997, the Company acquired all of the outstanding
stock of Speedline S.p.A. and its subsidiaries (Speedline), a major European
manufacturer of light-alloy wheels serving the automotive original equipment
market. The acquisition was reflected in the 1997 year-end balance sheet, but
had no material effect on 1997 operating results. Operating results for
Speedline are included for periods ending one month prior to the Company's
fiscal period to ensure timely preparation of the consolidated financial
statements. Thus, the financial statements for 1998 include eleven months of
results of operations for Speedline from September, 1997 through July, 1998, and
these results are shown in the Engineered Components segment. The purchase price
was approximately $130,700, consisting of cash payments of $58,000, the
assumption of $60,200 in debt, and the issuance of 478,240 shares of the
Company's common stock with a fair market value of $12,500. The purchase
agreement contains a provision to protect the seller for stock price
fluctuations. The price protection provides for the Company to pay the
difference between the $26.13 per share value of the stock issued to the seller
of Speedline at closing and the market value of any such shares sold during a
180-day period following the second anniversary of the acquisition. The
liability, if any, on the part of the Company can only be determined during the
relevant 180-day period following the second anniversary of the closing, August
19, 1999. Had the price protection been calculated based on the relevant period
during 1998 for all shares, the price protection liability would have been
$4,000. The acquisition of
<PAGE> 13
Speedline has been accounted for by the purchase method. Accordingly, the cost
of the acquisition was allocated on the basis of the estimated fair market value
of the assets acquired and liabilities assumed, resulting in goodwill of
$54,100. A summary of the purchase price allocation follows:
<TABLE>
<S> <C>
Current assets................................... $ 81,300
Property, plant, and equipment................... 82,200
Other assets..................................... 15,200
Goodwill......................................... 54,100
Current liabilities.............................. (65,800)
Capital leases................................... (11,900)
Deferred liabilities............................. (24,400)
- ----------------------------------------------------------------
$ 130,700
================================================================
</TABLE>
INVENTORIES
The major components of inventories as of August 31 are:
<TABLE>
1998 1997
<S> <C> <C>
Finished products....................... $ 37,561 $ 35,375
Work in process......................... 28,760 22,968
Raw materials and supplies.............. 20,610 20,506
- --------------------------------------------------------------
86,931 78,849
Less amount to reduce certain
inventories to LIFO value............... 2,676 6,889
- ---------------------------------------------------------------
$ 84,255 $ 71,960
===============================================================
</TABLE>
Inventories reported on the FIFO method, primarily in foreign locations, were
$32,412 and $35,788 at August 31, 1998 and 1997, respectively. The estimated
replacement cost of inventories is the amount reported before the LIFO reserve.
OTHER ASSETS
The major components of other assets as of August 31 are:
<TABLE>
1998 1997
<S> <C> <C>
Joint venture investment................ $ 3,846 $ 10,449
Assets held for sale.................... 3,189 3,313
Other................................... 11,092 19,903
- ---------------------------------------------------------------
$ 18,127 $ 33,665
===============================================================
</TABLE>
The joint venture investment represents the Company's share of Casting
Technology Company's net equity. The decrease is primarily related to the
cumulative effect adjustment resulting from the adoption of SOP 98-5 during
1998. Assets held for sale reflect the estimated realizable values of the fixed
assets of closed facilities.
LONG-TERM DEBT AND CREDIT ARRANGEMENTS
The following table summarizes the Company's long-term borrowings at August 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Senior notes............................ $ 51,750 $ 52,625
Revolving credit notes.................. 141,092 70,000
Lines of credit......................... 8,900 -
Industrial revenue bonds................ 5,925 6,158
Other debt.............................. 5,372 11,710
Capital leases.......................... 10,530 11,898
- ---------------------------------------------------------------
223,569 152,391
Less current portion.................... 6,370 7,087
- ---------------------------------------------------------------
Long-Term Debt ......................... $ 217,199 $145,304
===============================================================
</TABLE>
Senior notes consist of two agreements with interest rates of 7.09% and
9.0%. The notes call for periodic principal payments and mature November 7,
2005, and September 15, 1999, respectively.
On August 14, 1997, the Company replaced its prior credit facility with a
new Credit Agreement (the Agreement) that provides for up to $200,000 in
borrowings through August 14, 2002. At August 31, 1998, $141,092 was outstanding
under the Agreement with an interest rate of 5.86%. In addition, a commitment
fee is payable on the unused portion of the credit line. The Company also has
lines of credit totaling $27,000; at August 31, 1998, $8,900 was used.
Debt covenants require the Company to maintain certain debt-to-equity,
debt-to-earnings, and interest coverage ratios. Other provisions limit tangible
net worth and subsidiary indebtedness. At August 31, 1998, $44,300 of retained
earnings were available for the payment of dividends.
Industrial revenue bonds consist of various issues at fixed and variable
interest rates, ranging from 3.34% to 4.15%. These bonds call for periodic
principal payments through 2004. These obligations are collateralized by
property, plant, and equipment with a net book value of $793 at August 31, 1998.
The Company has guaranteed debt totaling $21,000 at August 31, 1998, for
Casting Technology Company.
Other debt consists of various mortgage loans and other loans at fixed and
variable interest rates, ranging from 3.0% to 12.58%, and requires periodic
principal payments through 2011. These obligations are secured by property,
plant, and equipment with a net book value of $10,700 at August 31, 1998.
Capitalized lease obligations provide for aggregate payments, including
interest, of approximately $3,000 annually, payable through 2002. At August 31,
1998, future minimum payments for the leases were $12,600, including $2,070
representing interest.
The carrying amounts of the Company's debt instruments approximate fair
value as defined under SFAS No. 107. Fair value is estimated based on discounted
cash flows, as well as other valuation techniques.
Long-term debt maturities for each of the next five years are $6,370 in
1999, $5,600 in 2000, $3,505 in 2001, $151,955 in 2002, and $13,277 in 2003.
The Company's foreign operations have short-term lines of credit totaling
approximately $55,900 which are subject to annual review by the lending banks.
At August 31, 1998, the average interest rate for the short-term lines of credit
was 5.12%. Amounts
<PAGE> 14
outstanding under these lines of credit are payable on demand and total $15,800
as of August 31, 1998.
There was no interest capitalized during 1998. Capitalized interest was
$145 and $2,038 in 1997 and 1996, respectively.
Interest paid was $14,823, $5,057, and $4,272 in 1998, 1997, and 1996,
respectively.
LEASES
The Company has a number of operating lease agreements primarily involving
machinery, physical distribution, and computer equipment. Certain of these
leases contain renewal or purchase options that vary by lease. These leases are
noncancelable and expire on dates through 2003.
Rent expense was $3,891, $4,978, and $4,960 for the years ended August 31,
1998, 1997, and 1996, respectively.
The following is a schedule by year of future minimum rental payments
required under the operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of August 31, 1998:
<TABLE>
<S> <C>
1999 ....................................... $1,744
2000 ....................................... 1,215
2001 ....................................... 741
2002 ....................................... 655
2003 ....................................... 389
- --------------------------------------------------------
TOTAL MINIMUM LEASE PAYMENTS ............... $ 4,744
========================================================
</TABLE>
COMMITMENTS AND CONTINGENCIES
At August 31, 1998, the Company has committed to capital expenditures of $10,938
in 1999, primarily for the Engineered Components segment.
The Company, as is normal for the industry in which it operates, is
involved in certain legal proceedings and subject to certain claims and site
investigations which arise under the environmental laws and which have not been
finally adjudicated.
The Company has been identified as a potentially responsible party by
various state agencies and by the United States Environmental Protection Agency
(U.S. EPA) under the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, for costs associated with U.S. EPA led
multi-party sites and state environmental agency-led remediation sites. The
majority of these claims involve third-party owned disposal sites for which
compensation is sought from the Company as an alleged waste generator for
recovery of past governmental costs or for future investigation or remedial
actions at the multi-party sites. There are two Company-owned properties where
state-supervised cleanups are expected. The designation as a potentially
responsible party and the assertion of such claims against the Company are made
without taking into consideration the extent of the Company's involvement with
the particular site. In each instance, claims have been asserted against a
number of other entities for the same recovery or other relief as was asserted
against the Company. These claims are in various stages of administrative or
judicial proceeding. The Company has no reason to believe that it will have to
pay a significantly disproportionate share of clean-up costs associated with any
site. To the extent possible, with the information available at the time, the
Company has evaluated its responsibility for costs and related liability with
respect to the above sites. In making such evaluation, the Company did not take
into consideration any possible cost reimbursement claims against its insurance
carriers. The Company is of the opinion that its liability with respect to those
sites should not have a material adverse effect on its financial position or
results of operations. In arriving at this conclusion, the principal factors
considered by the Company were ongoing settlement discussions with respect to
certain of the sites, the volume and relative toxicity of waste alleged to have
been disposed of by the Company at certain sites, which factors are often used
to allocate investigative and remedial costs among potentially responsible
parties, the probable costs to be paid by other potentially responsible parties,
total projected remedial costs for a site, if known, and the Company's existing
reserve to cover costs associated with unresolved environmental proceedings. At
August 31, 1998, the Company's accrued undiscounted reserve for such
contingencies was $1,700.
Allied-Signal Inc. has brought an action against the Company seeking a
contribution from the Company equal to 50% of Allied-Signal's estimated $30,000
remediation cost in connection with a site in southern Ohio. The Company
believes its responsibility with respect to this site is very limited due to the
nature of the foundry sand waste it disposed of at the site. A trial in this
case was completed in February of 1995, but no judgment has been rendered. The
Company believes that if it has any liability at all in regard to this matter,
that liability would not be material to its financial position or results of
operations.
MAJOR CUSTOMERS AND CREDIT CONCENTRATION
The Company sells products to customers primarily in the United States and, with
the acquisition of Speedline, also sells products to original equipment
automotive manufacturers in Europe. The Company performs ongoing credit
evaluations of customers, and generally does not require collateral. Allowances
are maintained for potential credit losses and such losses have been within
management's expectations. On August 31, 1998, total trade receivables from the
domestic and foreign automotive industry were $77,148, and $20,381 was due from
the construction industry.
Sales to Engineered Components' largest customer, General Motors, were
$150,897, $139,721, and $114,473 for the years ended August 31, 1998, 1997, and
1996, respectively. Trade receivables from General Motors on August 31, 1998 and
1997, were $19,538 and $16,511, respectively, and were current. No other single
customer accounted for a material portion of trade receivables.
<PAGE> 15
PENSION PLANS
The Company has a noncontributory defined benefit pension plan covering certain
employees. The plan covers salaried employees and provides pension benefits that
are based on years of credited service, employee compensation during years
preceding retirement, and the primary social security benefit. The plan also
covers hourly employees and provides pension benefits of stated amounts for each
year of credited service. The Company's policy is to fund the annual amount
required by the Employee Retirement Income Security Act of 1974. Plan assets
consist of U.S. Treasury bonds and notes, U.S. governmental agency issues,
corporate bonds, and common stocks. The plan held 350,000 common shares of the
Company at August 31, 1998 (4.7% of plan assets) and 1997 (8.6% of plan assets).
The Company also sponsors a deferred compensation profit sharing plan for
the benefit of substantially all domestic salaried employees. The Company
provides a 15% match on employee contributions up to 6% of eligible compensation
and a supplemental savings match from 1% to 35% based on the Company achieving a
minimum return on shareholders' equity and subject to IRS limitations.
The Company participates in a multiemployer plan that provides defined
benefits to certain bargaining unit employees.
The following table sets forth the funded status and the amounts recognized
in the consolidated statements of financial condition for the Company's defined
benefit plan at August 31:
<TABLE>
<CAPTION>
1998 1997
Actuarial present value of benefit obligation:
<S> <C> <C>
Vested benefit obligation.................................................. $ (95,554) $ (86,337)
================================================================================================================================
Accumulated benefit obligation............................................. $ (99,248) $ (89,410)
================================================================================================================================
Projected benefit obligation.................................................... $ (106,334) $ (94,404)
Plan assets at fair value....................................................... 114,681 98,692
- --------------------------------------------------------------------------------------------------------------------------------
Overfunded projected benefit obligation......................................... 8,347 4,288
Unrecognized net gain........................................................... (10,580) (5,406)
Unrecognized prior service cost................................................. 3,181 1,952
Unrecognized transition asset being recognized over a minimum of 15 years....... (1,952) (2,510)
- --------------------------------------------------------------------------------------------------------------------------------
Net pension liability recognized in the consolidated statement of ..............
financial condition $ (1,004) $ (1,676)
================================================================================================================================
<CAPTION>
A summary of the components of net periodic pension cost for the defined
benefit plan and the total amounts charged to expense for the defined
contribution and multiemployer plans follows:
1998 1997 1996
Defined benefit plan:
<S> <C> <C> <C>
Service cost of current period............................................. $ 1,680 $ 1,588 $ 1,603
Interest cost on projected benefit obligation.............................. 7,083 6,487 6,268
Actual return on plan assets............................................... (21,971) (15,358) (12,630)
Net amortization and deferral.............................................. 13,338 7,806 5,410
- -------------------------------------------------------------------------------------------------------------------------------
Net pension cost........................................................... 130 523 651
Defined contribution plan....................................................... 333 306 416
Multiemployer pension plan...................................................... 241 241 232
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL COST ................................................... $ 704 $ 1,070 $ 1,299
===============================================================================================================================
Assumed rates of return:
Weighted average discount rate.................................................. 7.0% 7.8% 7.5%
Rate of future compensation increase............................................ 4.7% 4.7% 4.7%
Long-term return on assets:
Dedicated..................................................... N/A 7.3% 7.0%
Nondedicated.................................................. 10.0% 10.5% 10.5%
</TABLE>
Included in deferred liabilities at August 31, 1998 and 1997 is an accrual
totaling $10,202 and $8,625, respectively, for termination benefits for
Speedline employees. The liability is based on the employee's length of service,
position, and remuneration, and is payable upon separation. There is no vesting
period or funding requirement associated with the liability.
<PAGE> 16
<TABLE>
<CAPTION>
INCOME TAXES
For financial reporting purposes, income before income taxes includes the
following components:
1998 1997 1996
<S> <C> <C> <C>
United States..................................................................... $ 17,736 $ 20,005 $ 24,731
Foreign........................................................................... 5,239 - -
- -------------------------------------------------------------------------------------------------------------------------------
$ 22,975 $ 20,005 $ 24,731
===============================================================================================================================
The provisions for income taxes are as follows:
Currently payable
State and local.............................................................. $ 222 $ 31 $ 171
Foreign...................................................................... 2,232 384 507
Federal...................................................................... 5,360 4,016 2,702
- -------------------------------------------------------------------------------------------------------------------------------
7,814 4,431 3,380
Deferred
State and local.............................................................. (4) 367 364
Foreign...................................................................... (2,091) - -
Federal...................................................................... 491 2,224 5,061
- -------------------------------------------------------------------------------------------------------------------------------
(1,604) 2,591 5,425
- -------------------------------------------------------------------------------------------------------------------------------
$ 6,210 $ 7,022 $ 8,805
===============================================================================================================================
Reconciliations of income taxes computed by applying the statutory federal
income tax rate to the provisions for income taxes are as follows:
Federal income tax at statutory rate.............................................. $ 8,041 $ 7,002 $ 8,657
Federal tax credits............................................................... (140) (150) -
State income taxes................................................................ 144 259 348
Goodwill amortization............................................................. 424 - -
Higher effective income taxes of other countries.................................. 268 - -
Change in Italian tax rates....................................................... (2,562) - -
Other............................................................................. 35 (89) (200)
- -------------------------------------------------------------------------------------------------------------------------------
$ 6,210 $ 7,022 $ 8,805
===============================================================================================================================
<CAPTION>
Significant components of deferred tax assets and liabilities are as follows:
1998 1997
Deferred tax assets related to:
<S> <C> <C>
Accrued compensation and related items............................................ $ 3,659 $ 3,693
Tax credit carryforwards.......................................................... 3,901 3,025
Net operating losses.............................................................. 3,394 2,291
Other............................................................................. 8,552 6,651
- -------------------------------------------------------------------------------------------------------------------------------
19,506 15,660
Valuation allowance............................................................... (3,824) (406)
- -------------------------------------------------------------------------------------------------------------------------------
15,682 15,254
Deferred tax liabilities related to:
Depreciation...................................................................... 33,138 13,514
Other............................................................................. 4,793 6,442
- -------------------------------------------------------------------------------------------------------------------------------
37,931 19,956
- -------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities...................................................... $ 22,249 $ 4,702
===============================================================================================================================
</TABLE>
The Company has foreign net operating loss carryforwards totaling $9,173 that
expire in years 1999 through 2003. The Company also has U.S. income tax credits
of $1,259 that expire in years 2003 through 2013. In addition, the Company has
alternative minimum tax credits of $2,642 which have an indefinite carryforward
period. For financial reporting purposes, a valuation allowance of $3,824 has
been recognized to offset the deferred tax assets related to those
carryforwards.
Income taxes paid by the Company totaled $5,701, $4,407, and $1,905 in
1998, 1997, and 1996, respectively.
Undistributed earnings of the Company's foreign subsidiaries are considered
to be permanently reinvested and, accordingly, no provisions for U.S. income
taxes have been provided thereon. It is not practicable to determine the
deferred tax liability for temporary differences related to these undistributed
earnings.
<PAGE> 17
STOCK OPTIONS
The Company has two plans under which stock options for the purchase of common
shares may be granted. The 1989 Stock Incentive Plan provides for the granting
of options for the purchase of a maximum of 1,200,000 shares, stock appreciation
rights, performance awards, and restricted stock awards to key employees of the
Company. Options awarded under the plan may not be granted at an option price
less than the fair market value of a share on the date the option is granted,
and the maximum term of an option may not exceed ten years. All options
currently granted under the plan are exercisable one year after the date of
grant.
The 1989 Director Stock Option Plan provides for the granting of options
for the purchase of a maximum of 120,000 shares. Under the plan, each person
serving as a director of the Company on the first business day of January of
each year, who is not employed by the Company, is automatically granted options
for the purchase of 1,500 shares. All options were granted at an option price
equal to the fair market value of a share on the date of grant. Each option is
exercisable one year after the date of grant and expires at the end of five
years.
Information regarding the Company's stock option plans for the years ended
August 31, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------
WEIGHTED Weighted Weighted
AVERAGE Average Average
EXERCISE Exercise Exercise
SHARES PRICE Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year........ 472,525 $18.96 455,822 $18.15 414,820 $17.46
Granted................................. 149,601 $27.08 135,527 $21.49 124,202 $18.14
Exercised............................... (30,539) $18.25 (77,606) $18.48 (60,775) $13.29
Cancelled............................... (20,250) $20.78 (41,218) $19.18 (22,425) $18.54
- -----------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year.............. 571,337 $21.06 472,525 $18.96 455,822 $18.15
==============================================================================================================================
Options exercisable at end of year...... 421,736 $18.93 340,153 $17.94 338,055 $18.16
==============================================================================================================================
Weighted-average fair value of
options granted during the year.... $4.95 $4.63 $3.84
==============================================================================================================================
<CAPTION>
Information regarding options outstanding at August 31, 1998, is as follows:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
RANGE OF EXERCISE PRICES NUMBER LIFE PRICE NUMBER PRICE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 8.50-$14.50.......................... 48,539 2.5 years $11.04 48,539 $11.04
$ 15.81-$19.81.......................... 253,719 7.3 years $18.04 221,219 $18.18
$ 20.44-$25.91.......................... 269,079 7.2 years $23.33 151,978 $22.54
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has elected to adopt the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," and continue to apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been recognized
related to the Company's stock option plans. Consistent with the provisions of
SFAS 123, had compensation cost been determined based on the fair value at the
grant date for awards in fiscal 1998, 1997, and 1996, the effect on the
Company's net income and net income per share for such years would not be
material. The fair value of each option grant was estimated as of the grant date
using the Black-Scholes option-pricing model with the following assumptions for
all three years: expected volatility 23%; dividend yield of 2.26%; expected life
of 3.5 years; and risk-free interest rates ranging from 5.8% to 6.6%.
<PAGE> 18
EARNINGS PER SHARE
During 1998, the Company adopted the provisions of SFAS No. 128, "Earnings per
Share," which replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. The following table reflects
the calculations for basic and diluted earnings per share for the three years
ended August 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Income before cumulative effect
of accounting change....... $ 16,765 $12,983 $15,926
- --------------------------------------------------------------
Net Income...................... $ 8,177 $12,983 $15,926
- --------------------------------------------------------------
BASIC EARNINGS PER SHARE:
Basic shares.................... 9,200 8,674 8,606
- --------------------------------------------------------------
Income before cumulative effect
of accounting change....... $ 1.82 $1.50 $1.85
- --------------------------------------------------------------
Net income...................... $ .89 $1.50 $1.85
- --------------------------------------------------------------
<CAPTION>
DILUTED EARNINGS PER SHARE:
<S> <C> <C> <C>
Basic shares.................... 9,200 8,674 8,606
Stock options................... 50 80 22
- --------------------------------------------------------------
Diluted shares.................. 9,250 8,754 8,628
- --------------------------------------------------------------
Income before cumulative effect
of accounting change....... $ 1.81 $1.48 $1.84
- --------------------------------------------------------------
Net income...................... $ .88 $1.48 $1.84
- --------------------------------------------------------------
</TABLE>
For each of the three years, there were outstanding stock options excluded from
the computation of diluted earnings per share because the options were
antidilutive.
PREFERRED SHARE PURCHASE RIGHTS
Under the Company's Shareholder Rights Plan, as amended on February 24, 1998,
holders of common shares have one preferred share purchase right (collectively,
the Rights) for each common share held. The Rights contain features which, under
defined circumstances, allow holders to buy common shares at a bargain price.
The Rights are not presently exercisable and trade in tandem with the common
shares. The Rights become exercisable following the close of business on the
earlier of (i) the 20th day after a public announcement that a person or group
has acquired 15% or more of the common shares of the Company or (ii) the date
designated by the Company's board of directors. It is expected that the Rights
will begin to trade independently of the Company's common shares at that time.
Unless renewed, the Rights expire on February 23, 2008.
POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS
The Company provides health care and life insurance benefits to designated
salaried and hourly employees who participate in a defined benefit pension plan
and who retired prior to January 1, 1992. The plan coordinates with Medicare and
requires employee contributions. The Company also provides similar benefits to
certain employees, represented by bargaining units, who retire before attaining
age 65 and meet certain minimum service requirements. Benefits for the
bargaining unit employees terminate when the retiree attains age 65. The Company
funds the postretirement benefits on a cash basis.
Accumulated postretirement benefit obligation recognized in 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Retirees.............................. $ 3,380 $ 4,267
Fully eligible active plan participants 98 88
Other active employees................ 582 415
- --------------------------------------------------------------
................................. 4,060 4,770
Deferred (gain) loss ................. (456) 245
- --------------------------------------------------------------
$ 4,516 $ 4,525
==============================================================
</TABLE>
In prior years, health care and life insurance benefits for retired employees of
closed facilities were provided for at the time the related facility was closed.
The accrued postretirement benefit obligation for these retirees at August 31,
1998 and 1997 was $1,100 and $1,200, respectively.
Net periodic postretirement benefit expense for 1998, 1997, and 1996 is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Service cost.................... $ 41 $ 29 $ 28
Interest cost................... 285 336 340
Amortization of loss............ 53 - -
- --------------------------------------------------------------
$ 379 $ 365 $ 368
==============================================================
</TABLE>
The actuarial assumptions used to determine costs and benefit
obligation include a discount rate of 7% for 1998 and 7.8% for 1997. The assumed
rates of future increases in per capita cost of health care benefits (health
care trend rates) are 8% in 1998, 7% in 1999, and 6% in 2000 and thereafter.
Increasing the health care trend rate by one percentage point would increase the
accumulated postretirement benefit obligation $277 and would increase the 1998
postretirement benefit cost $21.
<PAGE> 19
BUSINESS SEGMENTS
The Company has two business segments, Flow Control Products and Engineered
Components, through which the Company serves the construction, automotive, and
industrial sectors of the economy. The Company's Flow Control Products segment
is a supplier of fittings for the industrial, commercial, and residential
construction markets, valves utilized in air conditioning and refrigeration
systems, and industrial compressed gas applications. Flow Control Products sales
of copper and brass fittings amounted to $142,424, $125,863, and $123,351 in
1998, 1997, and 1996, respectively.
The Company's Engineered Components segment is a supplier of aluminum
automotive components and aluminum wheels for automotive original equipment
manufacturers and the automotive aftermarket, cast and fabricated metal products
for sale to original equipment manufacturers in the transportation,
construction, air conditioning, and refrigeration industries. Sales of aluminum
products to the automotive industry by the Engineered Components segment
amounted to $363,903, $189,987, and $151,237 in 1998, 1997, and 1996,
respectively. Domestic consolidated export sales were $33,372, $30,907, and
$25,615 for 1998, 1997, and 1996, respectively.
<TABLE>
<CAPTION>
NET SALES INCOME BEFORE INCOME TAXES*
1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Flow Control Products.................... $180,596 $ 162,150 $159,323 $ 27,931 $ 24,358 $ 25,236
Engineered Components
United States....................... 226,049 224,901 184,611 9,708 9,531 9,323
Foreign............................. 167,769 - - 9,901 - -
- ------------------------------------------------------------------------------------------------------------------------------
393,818 224,901 184,611 19,609 9,531 9,323
Restructuring and integration charges (a) - - - (12,000) - -
Disposition of aerospace business (b) ... - - - 12,048 - -
Corporate................................ - - - (9,630) (6,647) (7,231)
Equity in loss of joint venture and
other income and expense............ - - - 62 (2,102) (249)
Interest Expense......................... - - - (15,045) (5,135) (2,348)
- ------------------------------------------------------------------------------------------------------------------------------
$574,414 $ 387,051 $ 343,934 $ 22,975 $ 20,005 $ 24,731
===============================================================================================================================
<CAPTION>
CAPITAL EXPENDITURES DEPRECIATION AND AMORTIZATION
1998 1997 1996 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Flow Control Products.................... $ 9,085 $ 6,318 $ 9,809 $ 6,114 $ 5,638 $ 5,370
Engineered Components
United States....................... 24,018 34,042 38,767 14,551 14,665 11,892
Foreign............................. 13,517 - - 9,994 - -
- ------------------------------------------------------------------------------------------------------------------------------
37,535 34,042 38,767 24,545 14,665 11,892
Corporate................................ 143 17 64 1,454 160 166
- ------------------------------------------------------------------------------------------------------------------------------
$ 46,763 $ 40,377 $ 48,640 $ 32,113 $ 20,463 $ 17,428
==============================================================================================================================
<CAPTION>
IDENTIFIABLE ASSETS
1998 1997 1996
<S> <C> <C> <C>
Flow Control Products.................... $112,874 $ 100,632 $ 94,604
Engineered Components
United States....................... 173,130 180,908 156,744
Foreign............................. 189,612 155,356 -
- -------------------------------------------------------------------------------------------------------------------
362,742 336,264 156,744
Corporate................................ 87,834 72,022 17,869
- -------------------------------------------------------------------------------------------------------------------
$563,450 $ 508,918 $ 269,217
===================================================================================================================
<FN>
* Income before cumulative effect of a change in accounting principle in 1998.
a) $10,000 of restructuring and integration charges relates to the Flow Control Products segment
(of which $2,200 is recorded in cost of sales) and $2,000 relates to prior shutdown locations.
b) Disposition of aerospace business relates to the Engineered Components segment.
</TABLE>
<PAGE> 20
QUARTERLY FINANCIAL DATA (Unaudited)
($ in thousands except per share amounts)
<TABLE>
<CAPTION>
FISCAL QUARTER FOR THE YEAR
- ---------------------------------------------------------------------------------------------------------------------------------
1998 1ST 2ND 3RD 4TH
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET SALES ................................. $ 140,979 $ 136,975 $ 159,267 $ 137,193 $ 574,414
GROSS PROFIT .............................. 23,596 22,178 26,072 21,158 93,004
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE .......... 4,560 5,609 5,684 912 16,765
INCOME PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE - BASIC . $ .49 $ .61 $ .62 $ .10 $ 1.82
INCOME PER SHARE BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE - DILUTED $ .49 $ .61 $ .61 $ .10 $ 1.81
NET INCOME (LOSS) ......................... (4,028) 5,609 5,684 912 8,177
NET INCOME (LOSS) PER SHARE - BASIC ....... $ (.44) $ .61 $ .62 $ .10 $ .89
NET INCOME (LOSS) PER SHARE - DILUTED ..... $ (.44) $ .61 $ .61 $ .10 $ .88
AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC .................. 9,184 9,202 9,206 9,207 9,200
AVERAGE NUMBER OF SHARES
OUTSTANDING - DILUTED ................ 9,266 9,262 9,248 9,223 9,250
<CAPTION>
Fiscal Quarter For the Year
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1st 2nd 3rd 4th
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 90,789 $ 91,334 $ 106,223 $ 98,705 $ 387,051
Gross profit............................... 19,105 15,524 18,114 16,297 69,040
Net income................................. 4,138 2,081 4,294 2,470 12,983
Net income per share - basic............... $ .48 $ .24 $ .50 $ .28 $ 1.50
Net income per share - diluted............. $ .48 $ .24 $ .49 $ .28 $ 1.48
Average number of shares
outstanding - basic................... 8,625 8,650 8,666 8,756 8,674
Average number of shares
outstanding - diluted................. 8,669 8,743 8,749 8,854 8,754
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net income for the first three quarters of fiscal 1998 have been restated from
the amounts previously reported in the Company's Form 10-Q's. The restated
amounts reflect the adoption of SOP 98-5 "Reporting on the Costs of Start-up
Activities" retroactive to September 1, 1997. The effect of the restatements was
to recognize the cumulative effect of this change in accounting principle in the
first quarter, which reduced net income by $8,588 ($.93 per share) and to
increase net income by $488, $330, and $320 for the first three quarters of
fiscal 1998, respectively.
Results for the third quarter of fiscal 1998 includes restructuring and
integration charges of $12,000, of which $2,200 was recorded in cost of sales.
Results for the second quarter of fiscal 1997 include a one-time, cumulative,
non-cash charge of $3,500 ($.26 per share) to cost of sales as a consequence of
overstated inventory values at the Company's aerospace casting operation.
<PAGE> 1
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Amcast Industrial Corporation and subsidiaries of our report dated October
13, 1998, included in the 1998 Annual Report to Shareholders of Amcast
Industrial Corporation.
Our audits also included the financial statement schedule of Amcast Industrial
Corporation listed in item 14(a). This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
We also consent to the incorporation by reference in Post-Effective Amendment
No. 1 to Registration Statement Number 33-2876 on Form S-8 dated November 27,
1987, in Registration Statement Number 33-18690 on Form S-8 dated December 21,
1987, in Registration Statement Number 33-28080 on Form S-8 dated April 11,
1989, in Registration Statement Number 33-28084 on Form S-8 dated April 11,
1989, in Registration Statement Number 33-38176 on Form S-8 dated December 20,
1990, in Registration Statement Number 33-28075 on Form S-3 dated April 11,
1989, in Registration Statement Number 33-61290 on Form S-8 dated April 19,
1993,and in Registration Statement Number 333-00133 on Form S-8 dated January
10, 1996, of our report dated October 13, 1998, with respect to the consolidated
financial statements incorporated herein by reference, and our report included
in the preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Amcast Industrial Corporation and
subsidiaries.
/s/ Ernst & Young LLP
- ---------------------
November 20, 1998
Dayton, Ohio
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ Walter E. Blankley
----------------------
Walter E. Blankley
<PAGE> 2
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ Peter H. Forster
--------------------
Peter H. Forster
<PAGE> 3
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ Ivan W. Gorr
----------------
Ivan W. Gorr
<PAGE> 4
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ R. William Van Sant
-----------------------
R. William Van Sant
<PAGE> 5
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ Earl T. O'Loughlin
----------------------
Earl T. O'Loughlin
<PAGE> 6
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ William G. Roth
-------------------
William G. Roth
<PAGE> 7
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of substitution
and resubstitution, to execute in his name, place, and stead, the Company's
Annual Report on Form 10-K for the year ended August 31, 1998, (including an
amendment to such report) and any and all other instruments necessary or
incidental in connection therewith, and to file the same with the Securities and
Exchange Commission. Said attorneys shall have full power and authority to do
and perform in the name and on behalf of the undersigned, in the aforesaid
capacity, every act whatsoever necessary or desirable to be done, as fully to
all intents and purposes as the undersigned might or could do in person. The
undersigned hereby ratifies and approves the acts of said attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
21st day of October, 1998.
/s/ Leo W. Ladehoff
-------------------
Leo W. Ladehoff
<PAGE> 8
POWER OF ATTORNEY
-----------------
WHEREAS, Amcast Industrial Corporation (the "Company") intends to file
with the Securities and Exchange Commission its Annual Report on Form 10-K for
the year ended August 31, 1998;
NOW, THEREFORE, the undersigned in his capacity as a director of the
Company hereby appoints John H. Shuey and Douglas D. Watts, and each of them,
his true and lawful attorneys-in-fact and agent, with full power of
substitution and resubstitution, to execute in his name, place and stead, the
Company's Annual Report on Form 10-K for the year ended August 31, 1998,
(including an amendment to such report) and any and all other instruments
necessary or incidental in connection therewith, and to file the same with the
Securities and Exchange Commission. Said attorneys shall have full power and
authority to do and perform in the name and on behalf of the undersigned, in
the aforesaid capacity, every act whatsoever necessary or desirable to be done,
as fully to all intents and purposes as the undersigned might or could do in
person. The undersigned hereby ratifies and approves the acts of said
attorneys.
IN WITNESS WHEREOF, the undersigned has executed this instrument this 21st
day of October, 1998.
/s/ James K. Baker
------------------
James K. Baker
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