1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 1, 1997 Commission File Number 1-9967
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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
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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
----- -----
Number of Common Shares outstanding, no par value, as of June 1, 1997 -
8,682,412 shares.
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AMCAST INDUSTRIAL CORPORATION
I N D E X
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PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1 - Financial Statements:
Consolidated Condensed Statements of Financial 3
Condition - June 1, 1997 and August 31, 1996
Consolidated Condensed Statements of Income - 4
for the Quarter and Nine Months Ended June 1, 1997
and June 2, 1996
Consolidated Condensed Statements of Retained Earnings - 4
for the Quarter and Nine Months Ended June 1, 1997
and June 2, 1996
Consolidated Condensed Statements of Cash Flows - 5
for the Nine Months Ended June 1, 1997 and
June 2, 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 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)
June 1 August 31
ASSETS 1997 1996
- ------ ---------- ---------
Current Assets
Cash and cash equivalents $ 778 $ 5,413
Accounts receivable 57,949 50,407
Inventories:
Finished products 27,584 21,049
Work-in-process 12,691 13,389
Raw materials and supplies 12,266 10,583
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52,541 45,021
Other current assets 11,694 8,380
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Total current assets 122,962 109,221
Property, Plant and Equipment 270,353 245,001
Less allowances for depreciation (118,541) (106,395)
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151,812 138,606
Other Assets 20,629 21,390
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$ 295,403 $ 269,217
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts payable $ 38,872 $ 30,750
Short-term borrowings and
current portion of long-term debt 9,808 1,105
Accrued expenses, compensation and
related items and other current liabilities 18,334 19,592
--------- ---------
Total current liabilities 67,014 51,447
Long-Term Debt--less current portion 62,675 58,783
Deferred Income Taxes 13,280 12,126
Deferred Liabilities 8,152 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--8,682,412 shares
(8,618,491 at August 31, 1996) 8,682 8,618
Capital in excess of stated value 66,202 65,003
Retained earnings 69,398 62,543
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144,282 136,164
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$ 295,403 $ 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 Nine Months Ended
------------------------ ------------------------
June 1 June 2 June 1 June 2
1997 1996 1997 1996
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Consolidated Condensed Statements
- ---------------------------------
of Income
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Net sales $ 106,223 $ 87,566 $ 288,346 $ 255,827
Cost of sales 88,109 71,311 235,603 205,563
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Gross profit 18,114 16,255 52,743 50,264
Selling, general and administrative
expenses 10,008 10,832 30,628 31,840
--------- --------- --------- ---------
Operating income 8,106 5,423 22,115 18,424
Equity in (loss) income of joint
venture and other income, net (239) 45 (2,356) 236
Interest expense 1,311 925 3,561 1,738
--------- --------- --------- ---------
Income before income taxes 6,556 4,543 16,198 16,922
Income taxes 2,262 1,611 5,685 6,018
--------- --------- --------- ---------
Net Income $ 4,294 $ 2,932 $ 10,513 $ 10,904
========= ========= ========= =========
Consolidated Condensed Statements
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of Retained Earnings
- --------------------
Beginning retained earnings $ 66,338 $ 56,999 $ 62,543 $ 51,474
Net income 4,294 2,932 10,513 10,904
Dividends (1,216) (1,206) (3,637) (3,618)
Other (18) 2 (21) (33)
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Ending Retained Earnings $ 69,398 $ 58,727 $ 69,398 $ 58,727
========= ========= ========= =========
Per Share Information
- ---------------------
Net income per share $ .50 $ .34 $ 1.22 $ 1.27
========= ========= ========= =========
Dividends declared per share $ .14 $ .14 $ .42 $ .42
========= ========= ========= =========
Dividends paid per share $ .14 $ .14 $ .42 $ .42
========= ========= ========= =========
See notes to consolidated condensed financial statements.
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AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Nine Months Ended
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June 1 June 2
1997 1996
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Operating Activities:
Net income $ 10,513 $ 10,904
Depreciation 15,411 13,559
Deferred liabilities (1,391) (428)
Changes in assets and liabilities:
- Receivables (7,542) (5,380)
- Inventories (7,520) 1,433
- Accounts payable 8,122 (6,005)
- Other (4,572) 1,373
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Net Cash Provided By Operating Activities 13,021 15,456
Investing Activities:
Additions to property, plant, and equipment (28,022) (39,220)
Contribution to joint venture (3,226) (1,266)
Other 3,392 (3,108)
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Net Cash Used By Investing Activities (27,856) (43,594)
Financing Activities:
Additions to long-term debt 5,000 50,000
Reduction in long-term debt (1,108) (20,904)
Short-term borrowings and current
portion of long-term debt 8,703 2,440
Dividends (3,637) (3,618)
Other 1,242 768
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Net Cash Provided By Financing Activities 10,200 28,686
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Net change in cash and cash equivalents (4,635) 548
Cash and cash equivalents at beginning of period 5,413 1,286
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Cash and Cash Equivalents at End of Period $ 778 $ 1,834
========== ==========
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 $273
at June 1, 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:
June 1 August 31
1997 1996
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Assets held for sale $ 3,330 $ 3,425
Investment in joint venture 10,278 9,639
Other assets 7,021 8,326
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$20,629 $21,390
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Note E - Long-Term Debt
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The following table summarizes the Company's borrowings:
June 1 August 31
1997 1996
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Senior notes $52,625 $53,500
Lines of credit - notes payable 13,700
Industrial revenue bonds 6,158 6,388
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Total Obligations 72,483 59,888
Less short-term borrowings and current
portion of long-term debt 9,808 1,105
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$62,675 $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
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At June 1, 1997, the Company has committed to capital expenditures of $5.5
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
June 1, 1997, the Company's accrued undiscounted reserve for such contingencies
was $1.9 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 34.5% and 35.5% for the third quarter of
fiscal 1997 and 1996, and 35.1% and 35.6% for the nine 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 third quarter of 1997 and 1996, the weighted average number of common
shares used to calculate net income per share was 8,666,039 and 8,615,662, and
for the first nine months of 1997 and 1996 was 8,646,910 and 8,601,888,
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 $106.2 million for the third quarter ended June 1, 1997 increased
$18.7 million, up 21.3% from the prior year third quarter. Flow Control
Products' sales of $41.6 million were equal to the prior year. Engineered
Components' sales were $64.7 million, up $18.5 million from $46.2 million a year
earlier. For the first nine months of fiscal 1997, net sales were $288.3
million, up 12.7% from the comparable prior year period. Flow Control Products'
sales rose 2.1% to $120.3 million while Engineered Components' sales increased
21.8% to $168.1 million primarily due to higher volumes.
Gross profit for the third quarter of fiscal 1997 and 1996 was $18.1 million and
$16.3 million, respectively. Gross profit as a percent of sales for the third
quarter of 1997 was 17.1% compared to 18.6% in 1996. Gross profit for the first
nine months of fiscal 1997 increased to $52.8 million from $50.3 million due to
higher sales. As a percent of sales, the year-to-date gross profit was 18.3%
compared to 19.6% for the prior year. This decrease is primarily due to a $3.5
inventory write-down at the Company's Amcast Precision unit in the second
quarter.
Selling, general and administrative expenses for the third quarter of $10.0
million were down $.8 million from the prior year third quarter. Year-to-date
selling, general and administrative expenses, as a percent of sales, were 10.6%,
down from 12.4%, due to reduced spending levels and higher sales volume.
Operating income increased $2.7 million to $8.1 million in the third quarter due
to higher sales. Third quarter operating income in 1996 was negatively impacted
by a work stoppage at an automotive customer. Year-to-date operating income
increased 20.0% to $22.1 million due to higher sales volumes and lower selling,
general and administrative expenses.
The equity in the loss of the Company's joint venture with Izumi Industries,
Casting Technology Company was reduced to $0.2 million in the third quarter as
product launch costs experienced earlier in 1997 were reduced through improved
productivity and cost reductions.
For the third quarter of fiscal years 1997 and 1996, interest expense was $1.3
million and $.9 million, respectively. Interest expense increased in the third
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 $3.6 million compared to
$1.7 million in fiscal 1996. The increase is primarily due to lower interest
capitalization.
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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)
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(dollars in thousands)
Three Months Ended Nine Months Ended
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June 1 June 2 June 1 June 2
1997 1996 1997 1996
--------- --------- --------- ---------
Net Sales
- ---------
Flow Control Products $ 41,570 $ 41,371 $ 120,266 $ 117,806
Engineered Components 64,653 46,195 168,080 138,021
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$ 106,223 $ 87,566 $ 288,346 $ 255,827
========= ========= ========= =========
Income Before Income Taxes
- --------------------------
Flow Control Products $ 5,619 $ 6,031 $ 19,071 $ 18,098
Engineered Components 3,917 1,439 8,016 5,766
Corporate Expense (1,430) (2,047) (4,972) (5,440)
Equity in (loss) income of joint
venture and other income, net (239) 45 (2,356) 236
Interest Expense (1,311) (925) (3,561) (1,738)
--------- --------- --------- ---------
$ 6,556 $ 4,543 $ 16,198 $ 16,922
========= ========= ========= =========
Sales in the Flow Control segment were $41.6 million in the third quarter of
1997 compared to $41.4 million a year earlier while operating income eased to
$5.6 million compared to $6.0 million in the third quarter of 1996. Changes in
product mix coupled with lower prices for copper reflected in product selling
prices, and softness in selected markets were the primary causes of the
reduction in operating income.
Sales in the Engineered Components segment increased from $46.2 million in the
third quarter of 1996 to $64.7 million in the current quarter, while operating
income rose from $1.4 million to $3.9 million. Sales volumes of aluminum wheels,
brake, chassis, and suspension components all increased, resulting in improved
operating income. The third quarter of 1996 was negatively impacted by an
eighteen day work stoppage by the Company's largest customer, General Motors.
Capital Resources and Liquidity
- -------------------------------
For the first half of fiscal 1997, net cash provided by operations was $13.0
million compared to cash provided by operations of $15.5 million for the first
nine 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 $11.5
million and $8.6 million, respectively.
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AMCAST INDUSTRIAL CORPORATION
PART I - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS -CONTINUED
Capital Resources and Liquidity (continued)
- -------------------------------------------
Capital expenditures were $28.0 million and $39.2 million for the nine-month
period of fiscal 1997 and 1996, respectively. At June 1, 1997, the Company had
$5.5 million of commitments for additional capital expenditures, primarily for
the Engineered Components segment.
Long-term debt was 30.3% of total capital at June 1, 1997, and 30.2% at August
31, 1996. The current portion of debt increased $8.7 million at June 1, 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 June 1, 1997, $5.0 million was outstanding under the
Revolving Credit Agreement and $8.7 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 June 1, 1997, the Company had accrued reserves of $1.9
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 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
June 1, 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: July 14, 1997 By: /s/J. H. Shuey
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John H. Shuey
President and Chief Executive Officer,
Director
(Principal Executive Officer)
Date: July 14, 1997 By: /s/D. D. Watts
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Douglas D. Watts
Vice President, Finance
(Principal Financial Officer)
Date: July 14, 1997 By /s/W. L. Bown
----------------------------------
William L. Bown
Vice President and Controller
(Principal Accounting Officer)
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