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 March 2, 1997 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)
(Area 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 March 2, 1997 -
8,657,137 shares.
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AMCAST INDUSTRIAL CORPORATION
I N D E X
PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1 - Financial Statements:
Consolidated Condensed Statements of Financial 3
Condition - March 2, 1997 and August 31, 1996
Consolidated Condensed Statements of Income - 4
for the Quarter and Six Months Ended March 2, 1997
and March 3, 1996
Consolidated Condensed Statements of Retained Earnings - 4
for the Quarter and Six Months Ended March 2, 1997
and March 3, 1996
Consolidated Condensed Statements of Cash Flows - 5
for the Six Months Ended March 2, 1997 and
March 3, 1996
Notes to Consolidated Condensed Financial Statements 6-8
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-11
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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PART I - FINANCIAL INFORMATION
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(unaudited)
March 2 August 31
ASSETS 1997 1996
- ------ ------- ---------
Current Assets
Cash and cash equivalents $ 597 $ 5,413
Accounts receivable 55,032 50,407
Inventories:
Finished products 26,002 21,049
Work-in-process 11,144 13,389
Raw materials and supplies 11,746 10,583
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48,892 45,021
Other current assets 9,230 8,380
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Total current assets 113,751 109,221
Property, Plant and Equipment 262,286 245,001
Less allowances for depreciation (114,894) (106,395)
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147,392 138,606
Other Assets 21,432 21,390
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$ 282,575 $ 269,217
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 30,933 $ 30,750
Short-term borrowings and
current portion of long-term debt 14,208 1,105
Accrued expenses, compensation and
related items and other current liabilities 16,673 19,592
--------- ---------
Total current liabilities 61,814 51,447
Long-Term Debt--less current portion 57,675 58,783
Deferred Income Taxes 13,280 12,126
Deferred Liabilities 9,076 10,697
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--8,657,137 shares
(8,618,491 at August 31, 1996) 8,657 8,618
Capital in excess of stated value 65,735 65,003
Retained earnings 66,338 62,543
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140,730 136,164
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$ 282,575 $ 269,217
========= =========
See notes to consolidated condensed financial statements.
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AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
(dollars in thousands except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
----------------------- ----------------------
March 2 March 3 March 2 March 3
1997 1996 1997 1996
--------- ---------- --------- ---------
Consolidated Condensed Statements
- ---------------------------------
of Income
- ---------
Net sales $ 91,334 $ 81,796 $ 182,123 $ 168,261
Cost of sales 75,810 65,206 147,494 134,252
--------- --------- --------- ---------
Gross profit 15,524 16,590 34,629 34,009
Selling, general and administrative
expenses 10,330 10,305 20,620 21,008
--------- --------- --------- ---------
Operating income 5,194 6,285 14,009 13,001
Equity in (loss) income of joint
venture and other income, net (840) 109 (2,117) 191
Interest expense 1,127 351 2,250 813
--------- --------- --------- ---------
Income before income taxes 3,227 6,043 9,642 12,379
Income taxes 1,146 2,126 3,423 4,407
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Net Income $ 2,081 $ 3,917 $ 6,219 $ 7,972
========= ========= ========= =========
Consolidated Condensed Statements
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of Retained Earnings
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Beginning retained earnings $ 65,502 $ 54,303 $ 62,543 $ 51,474
Net income 2,081 3,917 6,219 7,972
Dividends (1,213) (1,207) (2,421) (2,412)
Other (32) (14) (3) (35)
--------- --------- --------- ---------
Ending Retained Earnings $ 66,338 $ 56,999 $ 66,338 $ 56,999
========= ========= ========= =========
Per Share Information
- ---------------------
Net income per share $ .24 $ .46 $ .72 $ .93
========= ========= ========= =========
Dividends declared per share $ .14 $ .14 $ .28 $ .28
========= ========= ========= =========
Dividends paid per share $ .14 $ .14 $ .28 $ .28
========= ========= ========= =========
See notes to consolidated condensed financial statements
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AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Six Months Ended
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March 2 March 3
1997 1996
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Operating Activities:
Net income $ 6,219 $ 7,972
Depreciation 9,657 9,053
Deferred liabilities (467) (922)
Changes in assets and liabilities:
- Receivables (4,625) (2,389)
- Inventories (3,871) (3,297)
- Accounts payable 183 (1,404)
- Other (3,769) 313
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Net Cash Provided By Operating Activities 3,327 9,326
Investing Activities:
Additions to property, plant, and equipment (18,007) (27,518)
Contribution to joint venture (3,226) (180)
Other 2,748 (1,956)
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Net Cash Used By Investing Activities (18,485) (29,654)
Financing Activities:
Additions to long-term debt 50,000
Reduction in long-term debt (1,108) (20,904)
Short-term borrowings and current
portion of long-term debt 13,103 (560)
Dividends (2,421) (2,412)
Other 768 773
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Net Cash Provided By Financing Activities 10,342 26,897
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Net change in cash and cash equivalents (4,816) 6,569
Cash and cash equivalents at beginning of period 5,413 1,286
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Cash and Cash Equivalents at End of Period $ 597 $ 7,855
======== ========
See notes to consolidated condensed financial statements.
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands except share amounts)
(unaudited)
Note A - Preparation of Financial Statements
- --------------------------------------------
The consolidated condensed financial statements include the accounts of Amcast
Industrial Corporation and subsidiaries (the Company). Intercompany transactions
have been eliminated. All adjustments, consisting of only normally recurring
accruals, necessary for a fair presentation have been included. Certain amounts
have been reclassified in the prior years' financial statements to conform to
the current year presentation.
Note B - Accounts Receivable
- ----------------------------
Accounts receivable are stated net of allowances for doubtful accounts of $276
at March 2, 1997 and $233 at August 31, 1996.
Note C - Inventories
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Certain inventories are presented net of the appropriate LIFO reserve.
Note D - Other Assets
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The major components are:
March 2 August 31
1997 1996
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Assets held for sale $ 3,336 $ 3,425
Investment in joint venture 10,622 9,639
Other assets 7,474 8,326
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$ 21,432 $ 21,390
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Note E - Long-Term Debt
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The following table summarizes the Company's borrowings:
March 2 August 31
1997 1996
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Senior notes $ 52,625 $ 53,500
Lines of credit - notes payable 13,100
Industrial revenue bonds 6,158 6,388
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Total Obligations 71,883 59,888
Less short-term borrowings and current
portion of long-term debt 14,208 1,105
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$ 57,675 $ 58,783
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands except share amounts)
(unaudited)
Note F - Commitments and Contingencies
- --------------------------------------
At March 2, 1997, the Company has committed to capital expenditures of $7.7
million, 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 a number of U.S. EPA led
multi-party sites and state environmental agency-led remediation sites. Each of
these claims involves 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. 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
March 2, 1997, the Company's accrued undiscounted reserve for such contingencies
was $2.0 million.
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
million 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.
Note G - Income Taxes
- ---------------------
The estimated effective tax rate was 35.5 percent and 35.2 percent for the
second quarter of fiscal 1997 and 1996, and 35.5 percent and 35.6 percent for
the six months of 1997 and 1996, respectively.
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands except share amounts)
(unaudited)
Note H - Net Income Per Share
- -----------------------------
For the second quarter of 1997 and 1996, the weighted average number of common
shares used to calculate net income per share was 8,650,069 and 8,614,011, and
for the first six months of 1997 and 1996 was 8,637,397 and 8,595,113,
respectively.
Note I - Costs of Goods Sold
- ----------------------------
In the second quarter of fiscal 1997, cost of goods sold was impacted by a
one-time, cumulative, non-cash charge of $3.5 million pre-tax as a consequence
of overstated inventory values at the Company's Amcast Precision unit. In
February 1997, the Company discovered erroneous entries were made over a number
of years to improperly understate cost of goods sold and overstate inventory
values. The Company can not determine the actual amount of the erroneous
entries on a year-to-year basis.
Note J - Impact of Recently Issued Accounting Standard
- ------------------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted in the Company's
second quarter of fiscal year 1998. At that time, the Company will be required
to change the method currently used to compute earnings per share and to
restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be excluded. The
impact of Statement 128 on the calculation of primary and fully diluted
earnings per share is not material for the periods presented.
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AMCAST INDUSTRIAL CORPORATION
PART I - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Operating Results
- -----------------
Net sales of $91.3 million for the second quarter ended March 2, 1997 increased
$9.5 million, up 11.7 percent from the prior year second quarter. Flow Control
Products' sales increased 4.6 percent to $39.9 million and Engineered
Components' sales were $51.5 million up $7.8 million from $43.7 million a year
earlier. For the first six months of fiscal 1997, net sales were $182.1 million,
up 8.2 percent from the comparable prior year period. Flow Control Products'
sales rose 3.0 percent to $78.7 million while Engineered Components' sales
increased 12.6 percent to $103.4 million primarily due to higher volumes.
In the second quarter of fiscal 1997, cost of goods sold was impacted by a
one-time, cumulative, non-cash charge of $3.5 million pre-tax as a consequence
of overstated inventory values at the Company's Amcast Precision unit. In
February 1997, the Company discovered erroneous entries were made over a number
of years to improperly understate cost of goods sold and overstate inventory
values. The Company can not determine the actual amount of the erroneous entries
on a year-to-year basis.
Gross profit for the second quarter of fiscal 1997 and 1996 was $15.5 million
and $16.6 million, respectively. Gross profit as a percent of sales for the
second quarter of 1997 was 17.0 percent compared to 20.3 percent in 1996. These
decreases are primarily due to the $3.5 inventory write-down noted above. Gross
profit for the first six months of fiscal 1997 increased to $34.6 million from
$34.0 million due to higher sales. As a percent of sales, the year-to-date gross
profit was 19.0 percent compared to 20.2 percent for the prior year.
Selling, general and administrative expenses for the second quarter of $10.3
million were equal to the prior year second quarter. Year-to-date selling,
general and administrative expenses, as a percent of sales, were 11.3 percent,
down from 12.5 percent, due to reduced spending levels and higher sales volume.
Year-to-date operating income increased 7.8 percent to $14.0 million due to
higher sales volumes and lower selling, general and administrative expenses.
Casting Technology Company, the Company's joint venture with Izumi Industries,
continued to experience an unusually steep production ramp-up of recently
launched new products. Although reduced from first quarter levels, high launch
costs in the form of low productivity and high scrap rates had a continued
negative impact on income. The Company's equity in the joint venture's loss was
$.8 million for the quarter and $2.1 million for the first six months of fiscal
year 1997.
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AMCAST INDUSTRIAL CORPORATION
PART I - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -CONTINUED
Operating Results (continued)
- -----------------------------
For the second quarter of fiscal years 1997 and 1996, interest expense was $1.1
million and $.4 million, respectively. Interest expense increased in the second
quarter compared to the prior year as business expansion projects were placed in
service and interest costs, which were previously capitalized, are now charged
to operations. Current year-to-date interest expense is $2.3 million compared to
$.8 million in fiscal 1996. The increase is primarily due to lower interest
capitalization.
Results by Business Segment (unaudited)
- ---------------------------------------
(dollars in thousands)
Three Months Ended Six Months Ended
-------------------------------- --------------------------------
March 2 March 3 March 2 March 3
1997 1996 1997 1996
---------- --------- ---------- ---------
Net Sales
- ---------
Flow Control Products $ 39,864 $ 38,116 $ 78,696 $ 76,435
Engineered Components 51,470 43,680 103,427 91,826
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$ 91,334 $ 81,796 $ 182,123 $ 168,261
========= ========= ========= =========
Income Before Income Taxes
- --------------------------
Flow Control Products $ 6,520 $ 6,121 $ 13,452 $ 12,067
Engineered Components 344 1,709 4,099 4,327
Corporate Expense (1,670) (1,545) (3,542) (3,393)
Equity in (loss) income of joint
venture and other income, net (840) 109 (2,117) 191
Interest Expense (1,127) (351) (2,250) (813)
--------- --------- --------- ---------
$ 3,227 $ 6,043 $ 9,642 $ 12,379
========= ========= ========= =========
In the Flow Control segment, sales and operating income ($39.9 million and $6.5
million, respectively) increased 4.6 percent and 6.5 percent compared to the
same period last year primarily due to increased demand for the Company's copper
and brass fittings coupled with continued cost reductions.
Engineered Component's sales were $51.5 million up $7.8 million from $43.7
million a year earlier. The sales increases were primarily in the Company's
automotive products reflecting strong demand for aluminum wheels, suspension,
and brake and chassis components.
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AMCAST INDUSTRIAL CORPORATION
PART I - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -CONTINUED
Results by Business Segment (unaudited) (continued)
- ---------------------------------------------------
The increased volume and plant utilization contributed to improvements in
automotive's earnings, although launch-related costs continued to impact the new
Wapakoneta, Ohio, facility. Overall, the segment reported operating income of
$.3 million after giving effect to the $3.5 million write-down at Amcast
Precision compared to $1.7 million earned in the second quarter last year.
Capital Resources and Liquidity
- -------------------------------
For the first half of fiscal 1997, net cash provided by operations was $3.3
million compared to cash provided by operations of $9.3 million for the first
six months of fiscal 1996. In both 1997 and 1996, cash provided by net income
and depreciation was partially offset by an increase in working capital of $12.1
million and $6.8 million, respectively.
Capital expenditures were $18.0 million and $27.5 million for the six-month
period of fiscal 1997 and 1996, respectively. At March 2, 1997, the Company had
$7.7 million of commitments for additional capital expenditures, primarily for
the Engineered Components segment.
Long-term debt was 29.1 percent of total capital at March 2, 1997, and 30.2
percent at August 31, 1996. The current portion of debt increased $13.1 million
at March 2, 1997 due to borrowings against short-term credit lines to partially
finance the increase in working capital.
The Company may borrow up to $60 million under a Revolving Credit Agreement
which expires April 1, 2000. In addition, the Company maintains bank lines of
credit of $25 million. At March 2, 1997, there were no borrowings under the
Revolving Credit Agreement and $13.1 million was outstanding under the 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.
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 described in detail
in the Commitments and Contingencies note to the consolidated condensed
financial statements. At March 2, 1997, the Company had accrued reserves of $2.0
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.
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AMCAST INDUSTRIAL CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
- --------------------------
Refer to Item 3, Part I of Form 10-K for the fiscal year ended August 31, 1996.
Item 4 - Submission of Matters to a Vote of Security Holders
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a) The annual meeting of shareholders of Amcast Industrial Corporation was
held on December 17, 1996.
b) At the annual meeting, shareholders voted on and approved two 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'Laughlin and R.
William Van Sant.
James K. Earl T. R. William
Baker O'Laughlin Van Sant
-------------------- ----------------------- -----------------------
Shares For 7,478,638 7,478,538 7,482,238
Shares Withheld 19,896 19,996 16,296
Total 7,498,534 7,498,534 7,498,534
2. Ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the fiscal year ending August 31, 1997.
Shares For 7,473,543
Shares Against 11,254
Shares Abstain 13,737
Total 7,498,534
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter ended
March 2, 1997.
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AMCAST INDUSTRIAL CORPORATION
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
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(Registrant Company)
Date: April 14, 1997 By: /s/J. H. Shuey
-----------------------------------
John H. Shuey
President and Chief Executive Officer,
Director
(Principal Executive Officer)
Date: April 14, 1997 By: /s/D. D. Watts
-----------------------------------
Douglas D. Watts
Vice President, Finance
(Principal Financial Officer)
Date: April 14, 1997 By /s/W. L. Bown
------------------------------------
William L. Bown
Vice President and Controller
(Principal Accounting Officer)
13