<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
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SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 29, 1998 Commission File Number 1-9967
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AMCAST INDUSTRIAL CORPORATION
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(Exact name of registrant as specified in its charter)
Ohio 31-0258080
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(State of Incorporation) (I.R.S. Employer
Identification No.)
7887 Washington Village Drive, Dayton, Ohio 45459
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(Address of principal executive offices) (Zip Code)
(937) 291-7000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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Number of Common Shares outstanding, no par value, as of November 29, 1998 -
9,193,025 shares.
<PAGE> 2
AMCAST INDUSTRIAL CORPORATION
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 29, 1998
INDEX
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
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<S> <C>
Item 1 - Financial Statements:
Consolidated Condensed Statements of Financial 3
Condition - November 29, 1998 and August 31, 1998
Consolidated Condensed Statements of Income - 4
for the Three Months Ended November 29, 1998
and November 30, 1997
Consolidated Condensed Statements of Retained Earnings - 4
for the Three Months Ended November 29, 1998
and November 30, 1997
Consolidated Condensed Statements of Cash Flows - 5
for the Three Months Ended November 29, 1998 and
November 30, 1997
Notes to Consolidated Condensed Financial Statements 6-9
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
($ in thousands)
(unaudited)
<TABLE>
<CAPTION>
NOVEMBER 29 August 31
1998 1998
------------------ -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 24,283 $ 7,022
Accounts receivable 107,592 111,066
Inventories 78,765 84,255
Other current assets 21,731 20,308
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TOTAL CURRENT ASSETS 232,371 222,651
PROPERTY, PLANT, AND EQUIPMENT 390,682 398,878
Less accumulated depreciation (133,249) (138,761)
------------------ -----------------
257,433 260,117
GOODWILL 61,277 62,555
OTHER ASSETS 16,630 18,127
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$ 567,711 $ 563,450
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 19,135 $ 16,878
Current portion of long-term debt 6,214 6,370
Accounts payable 75,770 72,887
Accrued expenses 47,806 39,587
------------------ -----------------
TOTAL CURRENT LIABILITIES 148,925 135,722
LONG-TERM DEBT - LESS CURRENT PORTION 193,146 217,199
DEFERRED INCOME TAXES 22,788 25,164
DEFERRED LIABILITIES 29,656 24,551
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 shares 9,207 9,207
Capital in excess of stated value 78,964 78,964
Accumulated other comprehensive income (losses) 2,939 (945)
Cost of 13,504 common shares in treasury (242) -
Retained earnings 82,328 73,588
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173,196 160,814
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$ 567,711 $ 563,450
================== =================
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 4
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
($ in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------
NOVEMBER 29 November 30
1998 1997
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<S> <C> <C>
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Net sales $ 146,024 $ 140,979
Cost of sales 121,177 117,383
------------------- ----------------
GROSS PROFIT 24,847 23,596
Selling, general and administrative expenses 13,677 13,267
(Gain) loss on sale of business (9,023) -
------------------- ----------------
OPERATING INCOME 20,193 10,329
Equity in loss of joint venture and other (income) and expense 51 (518)
Interest expense 3,585 3,468
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INCOME BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE 16,557 7,379
Income taxes 6,528 2,819
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INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 10,029 4,560
Cumulative effect of accounting change, net of tax - (8,588)
------------------- ----------------
NET INCOME (LOSS) $ 10,029 $ (4,028)
=================== ================
CONSOLIDATED CONDENSED STATEMENTS OF RETAINED EARNINGS
Beginning retained earnings $ 73,588 $ 70,565
Net income (loss) 10,029 (4,028)
Dividends (1,289) (1,287)
------------------- ----------------
ENDING RETAINED EARNINGS $ 82,328 $ 65,250
=================== ================
BASIC EARNINGS PER SHARE
Income before cumulative effect of accounting change $ 1.09 $ 0.49
Cumulative effect of accounting change - (0.93)
------------------- ----------------
Net income (loss) $ 1.09 $ (0.44)
=================== ================
DILUTED EARNINGS PER SHARE
Income before cumulative effect of accounting change $ 1.09 $ 0.49
Cumulative effect of accounting change - (0.93)
=================== ================
Net income (loss) $ 1.09 $ (0.44)
=================== ================
Dividends declared per share $ 0.14 $ 0.14
=================== ================
Dividends paid per share $ 0.14 $ 0.14
=================== ================
</TABLE>
4
See notes to consolidated financial statements.
<PAGE> 5
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
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NOVEMBER 29 November 30
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 10,029 $ (4,028)
Depreciation and amortization 8,228 8,170
Gain on sale of business (9,023) -
Cumulative effect of accounting change - 8,588
Deferred liabilities (2,466) 87
Changes in assets and liabilities:
Accounts receivable 2,853 (1,787)
Inventories (3,706) 988
Accounts payable 3,849 (4,637)
Other 8,114 (2,903)
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NET CASH PROVIDED BY OPERATIONS 17,878 4,478
INVESTING ACTIVITIES
Additions to property, plant, and equipment (8,896) (6,130)
Proceeds from sale of business 35,604 -
Other 19 (57)
------------------- ----------------
NET CASH PROVIDED BY (USED BY) INVESTING ACTIVITIES 26,727 (6,187)
FINANCING ACTIVITIES
Additions to long-term debt 15,000 7,300
Reduction in long-term debt (42,379) (1,879)
Short-term borrowings 1,371 2,873
Dividends (1,289) (1,287)
Purchase of treasury shares (242) -
Other - 233
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NET CASH (USED BY) PROVIDED BY FINANCING ACTIVITIES (27,539) 7,240
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Effect of exchange rate changes on cash 195 384
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Net change in cash and cash equivalents 17,261 5,915
Cash and cash equivalents at beginning of period 7,022 9,608
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,283 $ 15,523
=================== ================
</TABLE>
5
See notes to consolidated financial statements
<PAGE> 6
AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands, except per share amounts )
(unaudited)
PREPARATION OF FINANCIAL STATEMENTS
The accompanying consolidated condensed 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 financial statements using the
equity method of accounting. The consolidated condensed financial statements are
unaudited and have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required for complete annual
financial statements and should be read in conjunction with the Company's
audited consolidated financial statements and footnotes for the year ended
August 31, 1998 included in the Company's Annual Report on Form 10-K. In the
opinion of management, all adjustments, consisting of only normally recurring
accruals, necessary for a fair presentation have been included.
ACCOUNTING STANDARDS ADOPTED
Effective September 1, 1997, the Company 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 was $8,588
($.93 per share), net of tax benefits of $5,044. The Company's share of CTC's
cumulative effect of a change in accounting principle was $3,529, net of tax.
Effective September 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." The
adoption of this Statement had no effect on the Company's net income or
shareholders' equity. Comprehensive income includes all changes in shareholders'
equity during a period except those resulting from investments by and
distributions to shareholders. SFAS No. 130 requires reporting certain
transactions that result in a change in shareholders' equity, such as foreign
currency translation adjustments, to be included in other comprehensive income.
For the Company, total comprehensive income includes net income and foreign
currency translation adjustments. Total comprehensive income was $13,913 for the
three-month period ended November 29, 1998 and a loss of $4,085 for the
three-month period ended November 30, 1997.
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information", which establishes guidelines for determining operating segments
and extensive disclosure requirements of those segments, is effective for the
Company's fiscal 1999 annual financial statements, and for interim reporting
beginning in fiscal 2000. The Company has not yet determined the impact the new
Statement will have on the reported segments of the Company. The adoption of
this Statement will have no effect on the Company's consolidated results of
operations, financial position or cash flows.
6
<PAGE> 7
AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands, except per share amounts)
(unaudited)
DIVESTITURES
On October 16, 1998, the Company sold Superior Valve Company (Superior Valve)
for $35,604 in cash. The transaction resulted in a pre-tax gain of $9,023. The
facility, acquired by Amcast in 1986, produces specialty valves and related
products for the compressed gas and commercial refrigeration markets. Fiscal
1998 sales were approximately $42,000 and were included in the Company's Flow
Control segment.
INVENTORIES
The major components of inventories are:
<TABLE>
<CAPTION>
November 29 August 31
1998 1998
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<S> <C> <C>
Finished products $32,032 $37,561
Work in process 25,863 28,760
Raw materials and supplies 22,421 20,610
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80,316 86,931
Less amount to reduce certain
inventories to LIFO value 1,551 2,676
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$78,765 $84,255
======= =======
</TABLE>
LONG-TERM DEBT
The following table summarizes the Company's long-term borrowings:
<TABLE>
<CAPTION>
November 29 August 31
1998 1998
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<S> <C> <C>
Senior notes $ 50,875 $51,750
Revolving credit notes 117,847 141,092
Lines of credit 9,200 8,900
Industrial revenue bonds 5,925 5,925
Other debt 5,314 5,372
Capital leases 10,199 10,530
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199,360 223,569
Less current portion 6,214 6,370
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$193,146 $217,199
======== ========
</TABLE>
7
<PAGE> 8
AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands, except per share amounts)
(unaudited)
EARNINGS PER SHARE
In the second quarter of fiscal 1998, the Company adopted 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.
The following table reflects the calculations for basic and diluted earnings per
share for the three-month periods ended November 29, 1998 and November 30, 1997,
respectively.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
November 29 November 30
1998 1997
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<S> <C> <C>
Income before cumulative effect
of accounting change $ 10,029 $ 4,560
=========== ===========
Net income (loss) $ 10,029 $ (4,028)
=========== ===========
BASIC EARNINGS PER SHARE:
Basic shares 9,192 9,184
Income before cumulative effect
of accounting change $ 1.09 $ 0.49
=========== ===========
Net income (loss) $ 1.09 $ (0.44)
=========== ===========
DILUTED EARNINGS PER SHARE:
Basic shares 9,192 9,184
Stock options 10 82
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Diluted shares 9,202 9,266
=========== ===========
Income before cumulative effect
of accounting change $ 1.09 $ 0.49
=========== ===========
Net income (loss) $ 1.09 $ (0.44)
=========== ===========
</TABLE>
For each of the periods in fiscal 1999 and 1998, there were outstanding stock
options excluded from the computation of diluted earnings per share because the
options were antidilutive.
8
<PAGE> 9
AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
($ in thousands, except per share amounts)
(unaudited)
COMMITMENTS AND CONTINGENCIES
At November 29, 1998, the Company has committed to capital expenditures of
$16,565, 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. 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
November 29, 1998, the Company's accrued undiscounted reserve for such
contingencies was $1,800.
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.
9
<PAGE> 10
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 condensed
financial statements and notes thereto.
ACQUISITIONS AND DIVESTITURES
During the latter part of fiscal 1998 and early fiscal 1999, the Company
completed several transactions that have an impact on the comparison between the
first quarter of fiscal 1999 and the first quarter of fiscal 1998. During the
third quarter of fiscal 1998 the Company sold its Rancho Cucamonga, California
investment casting operation, Amcast Precision, a producer of ferrous and
nonferrous castings for the aerospace industry. Sales of approximately $13.1
million in fiscal 1998 were included in the Engineered Components segment.
During the third quarter of fiscal 1998, the Company also acquired Lee Brass
Company, a major manufacturer of cast brass products located in Anniston,
Alabama. Following the acquisition of Lee Brass, the Company consolidated its
two brass operations and ceased production at its Flagg Brass operation in
Stowe, Pennsylvania. Sales of Flagg Brass for the first quarter of fiscal 1998
were not material.
During the first quarter of fiscal 1999, the Company sold Superior Valve Company
for $35.6 million in cash. The transaction resulted in a pre-tax gain of $9.0
million. The facility, acquired by Amcast in 1986, produces specialty valves and
related products for the compressed gas and commercial refrigeration markets.
Fiscal 1998 sales were approximately $42.0 million and were included in the
Company's Flow Control segment.
10
<PAGE> 11
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales increased 3.6% to $146.0 million for the first quarter of fiscal 1999
as markets continued to be strong for the Company's copper and brass plumbing
fittings, aluminum automobile wheels and performance-critical aluminum
automotive components. Incremental sales from recent acquisitions more than
offset reduced sales from divestitures, and together with higher volume
increased sales by approximately 11.8%. Reduced prices and unfavorable product
mix partially offset the increased volume; however, lower material costs
softened the impact of pricing pressures within the plumbing fittings business.
By segment, Engineered Components sales increased by 2.8% compared with the
first quarter of fiscal 1998, while Flow Control Products sales increased by
5.8%.
Gross profit for the first quarter of fiscal 1999 rose 5.3% to $24.8 million. As
a percentage of sales, gross profit improved to 17.0% for the first quarter
compared with 16.7% for the same period of 1998. The increase in gross profit
percentage reflects operating efficiencies and improvements in the first quarter
of fiscal 1999, particularly at two of the Company's automotive component
plants.
Selling, general and administrative (SG&A) expenses remained constant, both in
dollar amount and as a percentage of sales. As a percentage of sales, SG&A
expense was 9.4% in the first quarter of fiscal 1999 and fiscal 1998.
The Company's pre-tax share of losses from Casting Technology Company (CTC), the
Company's joint venture with Izumi Industries, was $.8 million in the first
quarter of fiscal 1999 compared with $.2 million of income, excluding CTC's
share of the cumulative effect adjustment discussed below, in the first quarter
of fiscal 1998. CTC's results for the first quarter were impacted by foreign
exchange losses resulting from the strengthening of the yen and operating
inefficiencies resulting from efforts to meet extremely-high customer demand
after the General Motors work stoppage.
Interest expense was $3.6 million for the first quarter of fiscal 1999 compared
with $3.5 million for the first quarter of fiscal 1998.
The effective tax rate was 39.4% and 38.2% for the first quarters of fiscal 1999
and 1998, respectively. The higher effective tax rate in the first quarter of
fiscal 1999 results from a permanent tax basis difference associated with the
sale of Superior Valve.
11
<PAGE> 12
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS BY BUSINESS SEGMENT (unaudited)
($ in thousands)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------
November 29 November 30
1998 1997
------------------ ------------------
<S> <C> <C>
Net Sales
Flow Control Products $ 39,216 $ 37,073
Engineered Components 106,808 103,906
------------------ ------------------
$ 146,024 $ 140,979
================== ==================
Income before Income Taxes and
Cumulative Effect of Accounting Change
Flow Control Products $ 5,737 $ 5,193
Engineered Components 8,077 7,169
Disposition of Business (a) 9,023 -
Corporate (2,644) (2,033)
Equity in income (loss) of joint venture
and other income (expense) (51) 518
Interest expense (3,585) (3,468)
------------------ ------------------
$ 16,557 $ 7,379
================== ==================
</TABLE>
(a) Disposition of business relates to the Flow Control segment.
Net sales for the Flow Control Products segment were $39.2 million for the first
quarter of fiscal 1999 compared with $37.1 million for the same period of fiscal
1998. The increase resulted from a combination of factors including incremental
sales from Lee Brass, lower prices for copper and brass plumbing fittings that
were more than offset by increased volumes, and the reduction of sales that
resulted from the sale of Superior Valve in October. Operating income increased
over 10% due to lower material costs, manufacturing efficiency gains, and the
results of Lee Brass which were partly offset by the sale of Superior Valve.
Net sales for the Engineered Components segment were $106.8 million for the
first quarter of fiscal 1999 compared with $103.9 million in the first quarter
of fiscal 1998. The Company's aluminum components business experienced an
increase in demand after the General Motors work stoppage. As a result, sales
volume, including the effect of dispositions, increased nearly 10%; however,
lower aluminum costs reflected in the Company's pricing largely offset the sales
gain. Operating income of $8.1 million increased by 12.7% over prior year's
operating income of $7.2 million. The volume and mix of products sold were the
primary contributors to the increase in operating income.
12
<PAGE> 13
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
For the first quarter of fiscal 1999, net cash provided by operations was $17.9
million compared with $4.5 million for the first quarter of fiscal 1998. Cash
provided by net income and depreciation totaled $6.8 million for fiscal 1999,
excluding the gain on the disposition of Superior Valve and increase in deferred
liabilities. An $11.1 million decrease in working capital requirements also
contributed to the positive cash flow. Fiscal 1999's working capital decrease
primarily reflects higher payables and accrued liabilities due to increased
metal purchases to meet high customer demand and higher taxes attributed to the
gain on the disposition of Superior Valve.
Net cash provided by investing activities was $26.7 million for the first
quarter of fiscal 1999 compared with $6.2 million used in fiscal 1998. Proceeds
from the sale of Superior Valve provided $35.6 million which were primarily
used for the reduction of long-term debt. Capital spending totaled $8.9 million
in the first quarter of fiscal 1999. This compares with capital spending of
$6.1 million in the first quarter of fiscal 1998. At November 29, 1998, the
Company had $16.6 million of commitments for additional capital expenditures,
primarily for the Engineered Components segment.
Net cash used by financing activities totaled $27.5 million for the first
quarter of fiscal 1999 compared with net cash provided by financing activities
of $7.2 million for fiscal 1998. Additional borrowings in fiscal 1999 included
$15.0 million under the Company's revolving credit agreement and $1.4 million in
net short-term borrowings. Financing activities also included long-term debt
repayments of $42.4 million, financed in part with the proceeds from the
Superior Valve disposition, and dividend payments of $1.3 million. Long-term
debt was 55.8% of total capital at November 29, 1998 and 59.9% at August 31,
1998. The Company may borrow up to $200 million under a credit agreement that
expires August 14, 2002. At November 29, 1998, the Company had unused borrowing
capacity of $34.5 million, under its most restrictive debt covenant. In
addition, the Company maintains bank lines of credit under which it may borrow
up to $27 million. At November 29, 1998, $117.8 million was outstanding under
the credit agreement and $9.2 million was outstanding under available bank
lines of credit. The Company considers these external sources of funds,
together with funds generated from operations, to be adequate to meet operating
needs.
On December 17, 1998 the Company announced a plan to repurchase up to 750,000 of
its outstanding common shares. The Company currently has 9,193,025 common shares
outstanding.
ACCOUNTING STANDARDS ADOPTED
Effective September 1, 1997, the Company 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 was $8,588
($.93 per share), net of tax benefits of $5,044. The Company's share of CTC's
13
<PAGE> 14
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
cumulative effect of a change in accounting principle was $3,529, net of tax.
Effective September 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income." The
adoption of this Statement had no impact on the Company's net income or
shareholders' equity. Comprehensive income includes all changes in shareholders'
equity during a period except those resulting from investments by and
distributions to shareholders. SFAS No. 130 requires reporting certain
transactions that result in a change in shareholders equity, such as foreign
currency translation adjustments, to be included in other comprehensive income.
For the Company, total comprehensive income includes net income and foreign
currency translation adjustments. Total comprehensive income was $13,913 for the
three-month period ended November 29, 1998 and a loss of $4,085 for the
three-month period ended November 30, 1997.
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information", which establishes guidelines for determining operating segments
and extensive disclosure requirements of those segments, is effective for the
Company's fiscal 1999 annual financial statements, and for interim reporting
beginning in fiscal 2000. The Company has not yet determined the impact the new
Statement will have on the reported segments of the Company. The adoption of
this Statement will have no effect on the Company's consolidated results of
operations, financial position or cash flows.
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 $.4 million.
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 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.
14
<PAGE> 15
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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.
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. 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 condensed
financial statements. At November 29, 1998, the Company had reserves of $1.8
million 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
or results of operation. The Company is presently unaware of the existence of
any potential material environmental costs that are likely to occur in
connection with the disposition of any of its property.
EURO-CURRENCY
The Single European Currency (Euro) was introduced on January 1, 1999 with
complete transition to this new currency required by January 2002. The Euro is a
common currency that has been adopted as the national currency by participating
member countries of the European Union. The Company's customers in Europe
presently can choose to be invoiced in Euro's and the Company is prepared to
respond to all such requests. The Company expects to continue to make changes in
its internal systems to accommodate doing business in the Euro. The Company is
currently evaluating the economic and operational impact of the Euro conversion
but does not expect it to have a material effect on its financial condition or
results of operations.
15
<PAGE> 16
AMCAST INDUSTRIAL CORPORATION
Item 3 Quantitative and Qualitative 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. There have been no
material changes in the Company's exposure to these items since the Company's
disclosure in Item 7A, Part II of Form 10-K for the year ended August 31, 1998.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits
Exhibit 27.1 - Financial Data Schedule for the three-month period ended
November 29, 1998.*
* Schedule submitted in electronic format only
b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during
the quarter ended November 29, 1998.
<PAGE> 17
AMCAST INDUSTRIAL CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMCAST INDUSTRIAL CORPORATION
-----------------------------
(Registrant Company)
Date: January 13, 1999 By: /s/J. H. Shuey
----------------- --------------------------
John H. Shuey
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: January 13, 1999 By: /s/D. D. Watts
---------------- --------------------------
Douglas D. Watts
Vice President, Finance
(Principal Financial Officer)
Date: January 13, 1999 By: /s/M.D. Mishler
---------------- ---------------------------
Mark D. Mishler
Corporate Controller
(Principal Accounting Officer)
17
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