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 February 27, 2000 Commission File Number 1-9967
A M C A S T I N D U S T R I A L C O R P O R A T I O N
(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 February 27, 2000 -
8,883,844 shares.
AMCAST INDUSTRIAL CORPORATION
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED FEBRUARY 27, 2000
I N D E X
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Consolidated Condensed Statements of Financial 3
Condition - February 27, 2000 and August 31, 1999
Consolidated Condensed Statements of Income - 4
for the Quarter and Six Months Ended February 27, 2000
and February 28, 1999
Consolidated Condensed Statements of Retained Earnings - 4
for the Quarter and Six Months Ended February 27, 2000
and February 28, 1999
Consolidated Condensed Statements of Cash Flows - 5
for the Six Months Ended February 27, 2000
and February 28, 1999
Notes to Consolidated Condensed Financial Statements 6-10
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-15
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 16
PART II - OTHER INFORMATION
Item 5 - Submission of Matters to a Vote of Security Holders 16
Item 6 - Exhibits and Reports on Form 8-K 17
SIGNATURES 18
PART I - FINANCIAL INFORMATION
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
($ in thousands)
(unaudited)
February 27 August 31
2000 1999
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ASSETS
Current Assets
Cash and cash equivalents $ 8,840 $ 6,928
Accounts receivable 111,426 97,819
Inventories 82,744 77,166
Other current assets 19,868 21,144
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Total Current Assets 222,878 203,057
Property, Plant, and Equipment 396,187 401,012
Less accumulated depreciation (155,305) (144,254)
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240,882 256,758
Goodwill 60,452 61,261
Other Assets 20,239 12,410
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$ 544,451 $ 533,486
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 4,290 $ 4,673
Current portion of long-term debt 3,981 6,182
Accounts payable 71,723 82,396
Accrued expenses 38,072 40,851
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Total Current Liabilities 118,066 134,102
Long-Term Debt - less current portion 205,896 174,061
Deferred Income Taxes 32,473 32,775
Deferred Liabilities 20,413 21,782
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 - 9,227,600 and 9,208,529 shares,
respectively 9,228 9,209
Capital in excess of stated value 79,177 79,020
Accumulated other comprehensive income (losses) (2,963) (1,018)
Retained earnings 87,499 87,796
Cost of 343,756 and 253,609
common shares in treasury (5,338) (4,241)
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167,603 170,766
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$ 544,451 $ 533,486
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See notes to consolidated financial statements
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
($ in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
-------------------------- -------------------------
February 27 February 28 February 27 February 28
2000 1999 2000 1999
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Consolidated Condensed Statements of Income
Net sales $ 150,009 $ 141,734 $ 296,088 $ 287,758
Cost of sales 130,659 116,619 258,112 237,796
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Gross Profit 19,350 25,115 37,976 49,962
Selling, general and administrative expenses 15,006 14,096 28,609 27,773
Gain on sale of business - - - (9,023)
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Operating Income 4,344 11,019 9,367 31,212
Equity in (income) loss of joint venture
and other (income) and expense (389) 275 (637) 326
Interest expense 3,547 3,483 6,370 7,068
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Income before Income Taxes 1,186 7,261 3,634 23,818
Income taxes 466 2,759 1,428 9,287
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Net Income $ 720 $ 4,502 $ 2,206 $ 14,531
=========== =========== =========== ===========
Consolidated Condensed Statements of Retained Earnings
Beginning retained earnings $ 88,023 $ 82,328 $ 87,796 $ 73,588
Net income 720 4,502 2,206 14,531
Dividends (1,244) (1,289) (2,498) (2,578)
Stock awards - - (5) -
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Ending Retained Earnings $ 87,499 $ 85,541 $ 87,499 $ 85,541
=========== =========== =========== ===========
Basic earnings per share $ 0.08 $ 0.49 $ 0.25 $ 1.58
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Diluted earnings per share $ 0.08 $ 0.49 $ 0.25 $ 1.58
=========== =========== =========== ===========
Dividends declared per share $ 0.14 $ 0.14 $ 0.28 $ 0.28
=========== =========== =========== ===========
Dividends paid per share $ 0.14 $ 0.14 $ 0.28 $ 0.28
=========== =========== =========== ===========
See notes to consolidated financial statements.
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ in thousands)
(unaudited)
Six Months Ended
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February 27 February 28
2000 1999
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Operating Activities
Net income $ 2,206 $ 14,531
Depreciation and amortization 16,265 15,489
Gain on sale of business - (9,023)
Deferred liabilities (823) (1,499)
Changes in assets and liabilities:
Accounts receivable (24,056) (16,968)
Inventories (7,744) (8,176)
Other current assets 557 (2,986)
Accounts payable (7,826) 3,318
Accrued liabilities (1,313) 4,267
Other (387) 1,110
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Net Cash (Used) Provided from Operations (23,121) 63
Investing Activities
Additions to property, plant, and equipment (9,392) (19,440)
Proceeds from sale of business - 35,604
Acquisitions, net of cash acquired - (1,200)
Other (130) 581
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Net Cash (Used) Provided from Investing Activities (9,522) 15,545
Financing Activities
Additions to long-term debt 33,885 20,000
Reduction in long-term debt (8,548) (53,659)
Short-term borrowings 10,070 18,669
Dividends (2,498) (2,578)
Purchase of treasury shares (1,255) (415)
Proceeds from sale leaseback 2,877 -
Other 198 411
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Net Cash Provided (Used) by Financing Ativities 34,729 (17,572)
Effect of exchange rate changes on cash (174) 35
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Net change in cash and cash equivalents 1,912 (1,929)
Cash and cash equivalents at beginning of period 6,928 7,022
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Cash and Cash Equivalents at End of Period $ 8,840 $ 5,093
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See notes to consolidated financial statements
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, 1999 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.
Comprehensive Income
Comprehensive income includes all changes in shareholders' equity during a
period except those resulting from investments by and distributions to
shareholders. The components of comprehensive income are:
Three Months Ended Six Months Ended
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February 27 February 28 February 27 February 28
2000 1999 2000 1999
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Net income $ 720 $ 4,502 $ 2,206 $ 14,531
Foreign currency
translation
adjustments (4,267) (1,295) (1,945) 2,589
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$ (3,547) $ 3,207 $ 261 $ 17,120
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Divestitures
During the first quarter of fiscal 1999, the Company sold Superior Valve Company
for $35,604 in cash. The transaction resulted in a pre-tax gain of $9,023. The
business, acquired by Amcast in 1986, produces specialty valves and related
products for the compressed gas and commercial refrigeration markets.
Inventories
The major components of inventories are:
February 27 August 31
2000 1999
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Finished products $ 41,804 $36,979
Work in process 22,477 21,833
Raw materials and supplies 20,910 20,801
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85,191 79,613
Less amount to reduce certain
inventories to LIFO value 2,447 2,447
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$ 82,744 $77,166
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Long-Term Debt
The following table summarizes the Company's long-term borrowings:
February 27 August 31
2000 1999
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Senior notes $ 50,000 $ 50,875
Revolving credit notes 135,040 112,793
Lines of credit 10,100 -
Industrial revenue bonds 5,575 5,750
Other debt 4,343 4,014
Capital leases 4,819 6,811
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209,877 180,243
Less current portion 3,981 6,182
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$ 205,896 $ 174,061
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During the first quarter of fiscal 2000, the Company amended its credit
agreement. The amendments included changes to certain restrictive covenants
including the interest coverage and debt-to-earnings ratios. The amendments also
included increases to the applicable LIBOR margin.
Earnings Per Share
The following table reflects the calculations for basic and diluted earnings per
share for the three-and six-month periods ended February 27, 2000 and February
28, 1999, respectively.
Three Months Ended Six Months Ended
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February 27 February 28 February 27 February 28
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net income $ 720 $ 4,502 $ 2,206 $ 14,531
=========== =========== =========== ===========
Basic Earnings per Share:
Basic shares 8,949 9,200 8,952 9,196
=========== =========== =========== ===========
Net income $ 0.08 $ 0.49 $ 0.25 $ 1.58
=========== =========== =========== ===========
Diluted Earnings per Share:
Basic shares 8,949 9,200 8,952 9,196
Stock options 7 27 7 19
----------- ----------- ----------- -----------
Diluted shares 8,956 9,227 8,959 9,215
=========== =========== =========== ===========
Net income $ 0.08 $ 0.49 $ 0.25 $ 1.58
=========== =========== =========== =========
For each of the periods presented, there were outstanding stock options excluded
from the computation of diluted earnings per share because the options were
antidilutive.
Business Segments
Operating segments are organized internally primarily by the type of products
produced and markets served. The Company has aggregated similar operating
segments into two reportable segments: Flow Control Products and Engineered
Components. The Company evaluates segment performance and allocates resources
based on several factors, of which net sales and operating income are the
primary financial measures. At February 27, 2000 there were no significant
changes in identifiable assets of reportable segments from the amounts disclosed
at August 31, 1999, nor were there any changes in the reportable segments, or in
the measurement of segment operating results.
Operating information related to the Company's reportable segments is as
follows:
Net Sales Operating Income
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For the Three Months Ended For the Three Months Ended
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February 27 February 28 February 27 February 28
2000 1999 2000 1999
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Flow Control Products $ 36,115 $ 35,490 $ 4,766 $ 5,777
Engineered Components 113,894 106,244 2,267 7,827
Corporate - - (2,689) (2,585)
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150,009 141,734 4,344 11,019
Equity in joint venture
and other (income)expense - - (389) 275
Interest expense - - 3,547 3,483
----------- ----------- ----------- -----------
Total net sales and
income before taxes $ 150,009 $ 141,734 $ 1,186 $ 7,261
=========== =========== =========== ===========
Net Sales Operating Income
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For the Six Months Ended For the Six Months Ended
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February 27 February 28 February 27 February 28
2000 1999 2000 1999
----------- ----------- ----------- -----------
Flow Control Products $ 71,484 $ 74,706 $ 10,780 $ 11,514
Engineered Components 224,604 213,052 3,216 15,904
Corporate - - (4,629) (5,229)
-------------- ----------- ----------- -----------
296,088 287,758 9,367 22,189
Disposition of businesses - - - (9,023)
Equity in joint venture
and other (income) expense - - (637) 326
Interest expense - - 6,370 7,068
-------------- ----------- ----------- -----------
Total net sales and
income before taxes $ 296,088 $ 287,758 $ 3,634 $ 23,818
=========== =========== =========== ===========
Commitments and Contingencies
At February 27, 2000, the Company has committed to capital expenditures of
$5,648, 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 three 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
February 27, 2000, the Company's accrued undiscounted reserve for such
contingencies was $1,512.
Allied-Signal Inc. 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. The court has rendered its
decision on this case, however, the exact amount of the verdict has not yet been
determined by the court. The amount will be significantly less than the amount
sought by the plaintiff and the Company estimates its liability associated with
the action to be between $500 and $1,500. The Company believes its liability is
at the low end of this range.
AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
14
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.
Divestitures
During the first quarter of fiscal 1999, the Company sold Superior Valve Company
("Superior Valve") for $35.6 million in cash. The transaction resulted in a
pre-tax gain of $9.0 million. The business, acquired by Amcast in 1986, produces
specialty valves and related products for the compressed gas and commercial
refrigeration markets.
Results of Operations
Robust demand in the Company's end markets generated strong sales in the second
quarter of fiscal 2000. Consolidated net sales increased by 5.8% to $150.0
million compared with $141.7 million in the second quarter of fiscal 1999.
Increased sales of the Company's performance critical aluminum components and
European wheels were offset by a decline in North American wheel sales and the
loss of two customers in the Flow Control Products segment. Favorable pricing,
including product mix, and higher volumes increased consolidated sales by 9.0%,
and 1.6%, respectively. These gains were partially offset by a reduction in
sales from a weaker Italian lira. By segment, Engineered Components sales
increased by 7.2% compared with the second quarter of fiscal 1999, while Flow
Control Products sales increased by 1.8%.
For the first half of fiscal 2000, consolidated net sales increased by 2.9% to
$296.1 million compared with $287.8 million in the first half of fiscal 1999.
Increased sales of the Company's performance critical aluminum components and
European wheels were offset by a decline in North American wheel sales and the
loss of two customers in the Flow Control Products segment. Favorable pricing,
including product mix, and higher volumes increased consolidated sales by 5.2%
and 3.1%, respectively. These gains were partially offset by a reduction in
sales from divested operations and a weaker Italian lira. During the first
quarter of fiscal 1999, the Company sold Superior Valve which had contributed
$4.6 million to net sales of the Flow Control Products segment prior to its
sale. By segment, Engineered Components sales increased by 5.4% compared with
the first half of fiscal 1999, while Flow Control Products sales increased by
4.3%.
Gross profit for the second quarter of fiscal 2000 decreased by 23.0% to $19.4
million, while gross profit for the first half of fiscal 2000 fell by 24.0% to
$37.8 million. As a percentage of sales, gross profit was 12.9% for the second
quarter and 12.8% for the first half of fiscal 2000 compared with 17.7% and
17.4% for the same periods of 1999. A combination of temporary internal and
external factors depressed both gross profit and operating profit, including the
inability to pass through certain material costs, the loss of two large brass
products customers, reduced volumes for certain aluminum wheel styles, and
higher than expected operating costs in the Flow Control Products segment. These
factors are discussed more fully under business segments below. These
difficulties offset operating cost improvements which took place during the
second quarter of fiscal 2000 at the Company's Ohio suspension components plant
and its wheel manufacturing operations in Indiana.
Selling, general and administrative (SG&A) expenses increased slightly in the
second quarter of fiscal 2000, but remained fairly constant as a percentage of
sales. As a percentage of sales, SG&A expense was 10.0% in the second quarter
and 9.7% for the first half of fiscal 2000 compared with 9.9% and 9.7% for the
same periods of fiscal 1999.
In early March the Company implemented an 8% salaried workforce reduction across
all its North American operations. At the same time, global restrictions were
placed on other controllable operating and administrative costs. The Company
expects the combination of the workforce and overhead spending reductions to
have a significantly favorable impact on the third and fourth quarter results.
The Company's pre-tax share of income from Casting Technology Company (CTC), the
Company's joint venture with Izumi Industries, was $0.3 million in the second
quarter of fiscal 2000 compared with a $0.3 million loss in the second quarter
of fiscal 1999. The Company's pre-tax share of income from CTC was $0.4 million
in the first half of fiscal 2000 compared with a $1.1 million loss for the same
period in fiscal 1999. CTC's results for fiscal 1999 were negatively impacted by
foreign exchange losses resulting from the strengthening of the yen versus the
US dollar, operating inefficiencies resulting from efforts to meet extremely
high customer demand early in the year, and difficulties hiring and retaining
skilled labor which led to manufacturing inefficiences and higher scrap.
Interest expense was $3.5 million in the second quarters of both fiscal 2000 and
1999 and $6.4 million and $7.1 million in the first half of fiscal 2000 and
1999, respectively.
The effective tax rate was 39.3% and 38.0% for the second quarters of fiscal
2000 and 1999, respectively, and 39.3% and 39.0% for the first half of fiscal
2000 and 1999, respectively. The lower effective tax rate for the second quarter
of fiscal 1999, as compared with the first half of fiscal 1999, results from a
permanent tax basis difference associated with the sale of Superior Valve that
increased the effective tax rate in the first quarter of fiscal 1999.
Flow Control Products Net sales for the Flow Control Products segment were $36.1
million for the second quarter of fiscal 2000 compared with $35.5 million for
the same period of fiscal 1999. A combination of favorable pricing and a
slightly unfavorable product mix increased sales by 7.0%. Partially offsetting
this increase was a 5.3% decrease in sales caused by lower volume, primarily due
to the loss of two large customers in the commercial cast product line of the
Company's Lee Brass unit. Annual sales volume for these two customers was
approximately $7.9 million. Operating income in the second quarter of fiscal
2000 was $4.8 million compared with $5.8 million for the same period of fiscal
1999. Operating income benefited from the favorable pricing, but was adversely
affected by higher manufacturing costs and selling expenses in excess of $2.0
million on a year-over-year basis. In addition, material costs increased by more
than $1.0 million due to higher copper costs and increased outside tube
purchases necessitated by unplanned downtime at the Company's tube mill in
Fayetteville, Arkansas. The lower sales volume also reduced operating income by
approximately $0.5 million.
Engineered Components Net sales for the Engineered Components segment were
$113.9 million for the second quarter of fiscal 2000 compared with $106.2
million for the same period of fiscal 1999. Sales increased by 4.0% due to
volume as sales of control arms and European wheels more than offset a decline
in North American wheel sales. Higher pricing, in the form of aluminum cost
pass-throughs reflected in the selling price of the Company's products, and a
favorable product mix increased sales by 2.9% and 6.6%, respectively. However, a
weaker Italian lira in the second quarter of fiscal 2000 compared with the same
period in fiscal 1999 reduced sales by 6.6%. Operating income in the second
quarter of fiscal 2000 was $2.3 million, down $5.5 million from $7.8 million in
the second quarter of 1999. The volume and mix of products sold had a favorable
impact of $1.2 million, despite a drag on results of nearly $0.9 million due to
reduced demand for certain wheel styles at a major customer. Material costs that
could not be passed along to customers in the second quarter under existing
pricing formulas, primarily at the Company's Speedline unit, reduced operating
income approximately $1.2 million. Also contributing to the decline in operating
income were operating cost increases of $4.9 million as a result of
inefficiencies in the Company's Ohio suspension components plant, one North
American wheel plant and a recently expanded factory in Italy. These operating
cost issues eased by over $1.0 million in the second quarter of fiscal 2000
compared with the first quarter of fiscal 2000, primarily at the suspension
components plant and the North American wheel plant.
Liquidity and Capital Resources
For the first half of fiscal 2000, operations used net cash of $23.1 million
compared with $0.1 million provided in the first half of fiscal 1999. Cash
provided by net income plus the non-cash benefits of depreciation totaled $18.5
million in fiscal 2000; however, a $41.6 million increase in working capital
requirements produced the negative cash flow. The working capital increase
primarily reflects an increase in accounts receivable partly due to the timing
of significant cash received from the Company's largest customer. Other
contributing factors were the rise in inventory levels to improve customer
service levels and to prepare for model changeovers, along with a reduction in
the high level of accounts payable at August 31, 1999. The Company plans to
focus on working capital management for the remainder of fiscal 2000.
Investing activities used net cash of $9.5 million in the first half of fiscal
2000 compared with $15.5 million provided in fiscal 1999. Proceeds from the sale
of Superior Valve in the first quarter of fiscal 1999 provided $35.6 million,
which primarily was used to reduce long-term debt. Capital spending totaled $9.4
million in the first half of fiscal 2000, significantly less than the $19.4
million in the first half of fiscal 1999. At February 27, 2000, the Company had
$5.6 million of commitments for additional capital expenditures, primarily for
the Engineered Components segment.
Financing activities provided $34.7 million in cash in the first half of fiscal
2000 compared with net cash used of $17.6 million in fiscal 1999. Additional
financing included $33.9 million under the Company's revolving credit agreement
which was partly used to pay down short-term borrowings made in the first
quarter of fiscal 2000. For the first half of fiscal 2000, the Company had $10.1
of net short-term borrowings and received $2.9 million from the sale-leaseback
of equipment. Financing activities also included long-term debt repayments of
$8.5 million, dividend payments of $2.5 million, and $1.3 million for
repurchases of the Company's common stock. Long-term debt was 55.1% of total
capital at February 27, 2000 and 50.5% at August 31, 1999. The Company may
borrow up to $200 million under a credit agreement that expires August 14, 2002.
During the first quarter of fiscal 2000, the Company amended its credit
agreement. These amendments included changes to certain restrictive covenants
including the interest coverage and debt-to-earnings ratios. The amendments also
included increases to the applicable LIBOR margin. At February 27, 2000, $ 135.0
million was outstanding under the credit agreement, and $ 10.1 million was
outstanding under available lines of credit. At February 27, 2000, the Company
had unused borrowing capacity of $2.3 million under its most restrictive debt
covenant. Speedline also has short-term lines of credit totaling $27.5 million,
of which $23.2 million was available at January 31, 2000. The Company considers
these external sources of funds, together with funds expected to be generated
from operations, to be adequate to meet operating needs.
Year 2000
During 1999, the Company 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. During 1999, the Company also worked with its
vendors to assess their readiness. The Company engaged an independent third
party to evaluate its year 2000 remediation and preparedness at selected
locations in the fourth quarter of fiscal 1999. The Company's year 2000
preparedness team continued to audit all locations in the first quarter of 2000
to ensure the recommendations had been followed.
The Company's remediation program was executed primarily by internal resources.
The Company estimates that it spent between $1.3 million and $1.5 million for
its year 2000 remediation program. For the most part, the Company uses
third-party supplied computer programs and packages for its information
technology systems. Certain of those systems were already year 2000 compliant as
supplied by the vendor. In the Flow Control Products segment, certain software
packages had been modified by the Company. As of January 1, 2000 all Flow
Control systems were year 2000 compliant. In the Engineered Components segment,
some facilities were utilizing compliant releases of software. The North
American automotive group is also in the process of installing an enterprise
resource planning (ERP) system as an upgrade in functionality that will also
improve business processes. The ERP system also remediated year 2000 issues with
the systems formerly used in certain plants. The entire project is expected to
take approximately three years to complete. Cost of the project is estimated to
be between $5.0 million and $6.0 million for hardware and software including
training and installation. The costs have been funded through internal cash
flow. At the Company's Speedline unit, internal resources evaluated the
compliant status of the computer systems and made any necessary upgrades and/or
replacements to ensure year 2000 preparedness. As of January 1, 2000 all
Engineered Components systems were year 2000 ready.
The Company has not experienced any significant year 2000 related complications
regarding any of its critical vendors or major customers. Overall, any issues
experienced to date as a result of year 2000 issues have been insignificant and
have had no material impact on the Company's consolidated results of operations,
financial position or cash flows.
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 February 27, 2000, the Company had reserves of $1.5
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.
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, 1999.
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
a) The annual meeting of shareholders of Amcast Industrial Corporation was
held on December 15, 1999.
b) At the annual meeting, shareholders voted on and approved three proposals.
Those proposals are stated below, together with information concerning the
votes cast.
1. Election of three directors to serve for a term of three years.
Directors elected were James K. Baker, Earl T. O'Loughlin, and R. William
Van Sant.
James K. Earl T. R. William
Baker O'Loughlin Van Sant
--------- ------------ ----------
Shares For 7,402,733 7,400,177 7,411,741
Shares Withheld 94,706 97,262 85,698
Total 7,497,439 7,497,439 7,497,439
Directors continuing in office until the 2000 annual meeting include Peter
H. Forster, Bernard G.Rethore and Leo W. Ladehoff.Directors continuing in
office until the 2001 annual meeting include Walter E. Blankley, William
G. Roth and John H. Shuey.
2. Ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending August 31, 2000.
Shares For 7,011,922
Shares Against 431,172
Shares Abstain 54,345
Total 7,497,439
3. Adoption of the 1999 Stock Incentive Plan
Shares For 7,431,982
Shares Against 41,148
Shares Abstain 24,309
Total 7,497,439
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit 27.1 - Financial Data Schedule for the six-month period ended February
27, 2000. *
* 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
February 27, 2000
S I G N A T U R E S
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: April 11, 2000 By: /s/J. H. Shuey
-----------------------------
John H. Shuey
Chairman, President and
Chief Executive Officer
(Principal Executive Officer)
Date: April 11, 2000 By: /s/D. D. Watts
-----------------------------
Douglas D. Watts
Vice President, Finance
(Principal Financial Officer)
Date: April 11, 2000 By: /s/M.D. Mishler
-----------------------------
Mark D. Mishler
Corporate Controller
(Principal Accounting Officer)