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 30, 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)
(937) 291-7000
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(Registrant's telephone number, including area code)
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 30, 1997 -
9,193,279 shares.
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AMCAST INDUSTRIAL CORPORATION
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED NOVEMBER 30, 1997
INDEX
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PART I - FINANCIAL INFORMATION PAGE
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Item 1 - Financial Statements:
Consolidated Condensed Statements of Financial 3
Condition - November 30, 1997 and August 31, 1997
Consolidated Condensed Statements of Income - 4
for the Three Months Ended November 30, 1997
and December 1, 1996
Consolidated Condensed Statements of Retained Earnings - 4
for the Three Months Ended November 30, 1997
and December 1, 1996
Consolidated Condensed Statements of Cash Flows - 5
for the Three Months Ended November 30, 1997
and December 1, 1996
Notes to Consolidated Condensed Financial Statements 6
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 6 - Exhibits and Reports on Form 8-K 11
SIGNATURES 12
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PART I - FINANCIAL INFORMATION
AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(dollars in thousands)
(unaudited)
November 30 August 31
ASSETS 1997 1997
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Current Assets
Cash and cash equivalents $ 15,523 $ 9,608
Accounts receivable 105,261 100,589
Inventories 72,378 71,960
Other current assets 20,814 21,068
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Total current assets 213,976 203,225
Property, Plant and Equipment 367,457 357,062
Less accumulated depreciation (130,684) (121,818)
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236,773 235,244
Goodwill 36,614 36,784
Other Assets 33,206 33,665
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$ 520,569 $ 508,918
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 10,653 $ 54,038
Current portion of long-term debt 7,422 7,087
Accounts payable 77,651 79,732
Accrued expenses 32,982 36,108
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Total current liabilities 128,708 176,965
Long-Term Debt--less current portion 201,498 145,304
Deferred Income Taxes 8,972 8,400
Deferred Liabilities 20,147 20,023
Shareholders' Equity
Preferred shares, without par value:
Authorized--1,000,000 shares
Issued--None
Common shares, at stated value:
Authorized--15,000,000 shares
Issued 9,193,279 and 9,177,455
shares, respectively 9,193 9,177
Capital in excess of stated value 78,758 78,484
Foreign currency translation adjustment (57)
Retained earnings 73,350 70,565
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161,244 158,226
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$ 520,569 $ 508,918
========= =========
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
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November 30 December 1
1997 1996
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CONSOLIDATED CONDENSED STATEMENTS OF INCOME
Net sales $ 140,979 $ 90,789
Cost of sales 118,007 71,684
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Gross profit 22,972 19,105
Selling, general and administrative expenses 13,267 10,290
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Operating income 9,705 8,815
Equity in income (loss) of joint venture
and other income and expense 352 (1,277)
Interest expense 3,468 1,123
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Income before income taxes 6,589 6,415
Income taxes 2,517 2,277
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Net Income $ 4,072 $ 4,138
========= =========
CONSOLIDATED CONDENSED STATEMENTS OF
RETAINED EARNINGS
Beginning retained earnings $ 70,565 $ 62,543
Net income 4,072 4,138
Dividends (1,287) (1,208)
Other 29
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Ending Retained Earnings $ 73,350 $ 65,502
========= =========
PER SHARE INFORMATION
Net income per share $ .44 $ .48
========= =========
Dividends declared per share $ .14 $ .14
========= =========
Dividends paid per share $ .14 $ .14
========= =========
See notes to consolidated condensed financial statements.
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AMCAST INDUSTRIAL CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
Three Months Ended
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November 30 December 1
1997 1996
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Operating Activities:
Net income $ 4,072 $ 4,138
Depreciation and amortization 8,794 5,023
Deferred liabilities 87 355
Changes in assets and liabilities:
Accounts receivables (1,787) 2,893
Inventories 988 (4,241)
Accounts payable (4,637) (1,793)
Other (3,039) 1,148
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Net Cash Provided By Operating Activities 4,478 7,523
Investing Activities:
Additions to property, plant, and equipment (6,130) (8,876)
Contributions to joint venture (2,026)
Other (57) 208
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Net Cash Used By Investing Activities (6,187) (10,694)
Financing Activities:
Additions to long-term debt 7,300
Reduction in long-term debt (1,879) (875)
Net short-term borrowings 2,873 2,500
Dividends (1,287) (1,208)
Other 233 294
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Net Cash Provided By Financing Activities 7,240 711
Effect of exchange rate changes on cash 384
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Net change in cash and cash equivalents 5,915 (2,460)
Cash and cash equivalents at beginning of period 9,608 5,413
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Cash and Cash Equivalents at End of Period $ 15,523 $ 2,953
======== ========
See notes to consolidated condensed financial statements.
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands)
(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 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 thereto for the year ended August 31, 1997 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. Certain prior year amounts have been
reclassified to conform to the current year presentation.
On August 19, 1997, the Company acquired all of the outstanding stock of
Speedline S.p.A. (Speedline), a major European manufacturer of light-alloy
wheels serving the automotive original equipment market. Accordingly, the
acquisition was reflected in the August 31, 1997 fiscal year-end balance sheet,
but had no material effect on fiscal 1997 operating results. Operations of
Speedline are included for periods ending one month prior to the Company's
fiscal quarter end in order to ensure timely preparation of the consolidated
financial statements. Thus, the consolidated financial statements for the first
quarter ended November 30, 1997 include financial results for Speedline for the
two months of September and October 1997.
Net Income Per Share
For the first quarter of 1998 and 1997, the weighted average number of common
shares used to calculate income per share was 9,184,298 and 8,624,864,
respectively.
INVENTORIES
The major components of inventories are:
November 30 August 31
1997 1997
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Finished products $ 35,426 $ 35,375
Work in process 21,313 22,968
Raw materials and supplies 22,528 20,506
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79,267 78,849
Less amount to reduce certain
inventories to LIFO value 6,889 6,889
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$ 72,378 $ 71,960
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
LONG-TERM DEBT
The following table summarizes the Company's long-term borrowings:
November 30 August 31
1997 1997
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Senior notes $ 51,750 $ 52,625
Revolving credit notes 124,669 70,000
Lines of credit 2,300
Industrial revenue bonds 6,158 6,158
Other debt 11,887 11,710
Capital leases 12,156 11,898
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208,920 152,391
Less current portion 7,422 7,087
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$201,498 $145,304
======== ========
The Company's credit agreement, which expires in 2002, enables the Company to
refinance short-term debt on a long-term basis. In December 1997, approximately
$50,000 of short-term borrowings of Speedline was replaced with long-term
borrowings under the Company's credit agreement. Accordingly, at November 30,
1997, the $50,000 of short-term debt was reclassified as long-term debt.
COMMITMENTS AND CONTINGENCIES
At November 30, 1997, the Company has committed to capital expenditures of
$8,573, 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. None of these is expected to involve material
future expense. The Company believes that none of these will have a material
adverse effect on its financial position or results of operations. 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
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AMCAST INDUSTRIAL CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(dollars in thousands)
(unaudited)
COMMITMENTS AND CONTINGENCIES (CONTINUED)
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 30, 1997, 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
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AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On August 19, 1997, the Company acquired all of the outstanding stock of
Speedline S.p.A. (Speedline), a major European manufacturer of light-alloy
wheels serving the automotive original equipment market. Accordingly, the
acquisition was reflected in the August 31, 1997 fiscal year-end balance sheet,
but had no material effect on fiscal 1997 operating results. Operations of
Speedline are included for periods ending one month prior to the Company's
fiscal quarter end in order to ensure timely preparation of the consolidated
financial statements. Thus, the consolidated financial statements for the first
quarter ended November 30, 1997 (fiscal 1998) include financial results for
Speedline for the two months of September and October 1997.
RESULTS OF OPERATIONS
Net sales increased 55.3% to $141.0 million for the first quarter of fiscal
1998, primarily due to the acquisition of Speedline combined with strong North
American aluminum wheel demand. The inclusion of Speedline accounted for
approximately 39% of the increase in net sales, with increased volume and higher
pricing contributing 13% and 3%, respectively. The Engineered Components segment
(which includes Speedline) led the sales increase as sales doubled compared to
the first quarter ended December 1, 1996 (fiscal 1997) while Flow Control
Products sales decreased 5%.
Gross profit for the first quarter of fiscal 1998 rose 20.2% to $23.0 million
from $19.1 million in fiscal 1997, largely due to the inclusion of Speedline. As
a percentage of sales, gross profit decreased to 16.3% from 21.0%. The decrease
in gross profit percentage reflects a change in the Company's sales mix to a
higher percentage of Engineered Components product sales, including Speedline,
which generally have lower gross margins than Flow Control Products.
Selling, general and administrative (SG&A) expenses for the first quarter of
fiscal 1998 and 1997 were $13.3 million and $10.3 million, respectively, The
majority of the increase in SG&A expense results from the inclusion of
Speedline. As a percentage of sales, SG&A expense decreased to 9.4% from 11.3%,
primarily due to higher sales volumes in the Engineered Components segment,
including Speedline, which generally have lower SG&A expense.
In the first quarter of fiscal 1998, the Company's pre-tax share of income from
Casting Technology Company (CTC), the Company's joint venture with Izumi
Industries, was a small profit versus a loss of $1.3 million for the comparable
period in fiscal 1997. A near-vertical launch of several new automotive products
at CTC in fiscal 1997 resulted in significant inefficiencies and high
launch-related costs associated with meeting required volumes.
As expected, interest expense in the first quarter of fiscal 1998 increased $2.3
million over the comparable period in fiscal 1997, primarily due to increased
debt levels from the acquisition of Speedline. Higher debt levels in fiscal 1998
are principally the result of Speedline debt assumed and increased borrowings by
the Company to finance the Speedline acquisition.
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AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The effective tax rate was 38.2% and 35.5% for the first quarter of fiscal 1998
and 1997, respectively. This increase reflects the additional foreign tax
expense resulting from the Speedline acquisition. Effective for tax years
beginning on or after January 1, 1998, the Italian government instituted a
change in taxation policy that had the affect of reducing the income tax rate
from 53% to 41.25%. Deferred tax assets and liabilities related to the Speedline
acquisition were initially measured at the rates in effect at the date of
acquisition. Accounting standards require that the effect of a change in tax
rates following an acquisition be included in income for the period that the
rate change occurs. In the second quarter of fiscal 1998, the deferred tax
balances will be adjusted to reflect this revised rate, which will reduce the
foreign provision for income taxes for the quarter. The Company has not yet
determined the effect of this tax rate change on its deferred tax balances.
Results by Business Segment (unaudited)
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(dollars in thousands) Three Months Ended
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November 30 December 1
1997 1996
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Net Sales
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Flow Control Products $ 37,073 $ 38,832
Engineered Components 103,906 51,957
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$ 140,979 $ 90,789
========= =========
Income Before Income Taxes
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Flow Control Products $ 5,193 $ 6,932
Engineered Components 6,545 3,755
Corporate (2,033) (1,872)
Equity in income (loss) of joint venture
and other income and expense 352 (1,277)
Interest expense (3,468) (1,123)
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$ 6,589 $ 6,415
========= =========
Flow Control Products segment sales were $37.1 million for the first quarter of
fiscal 1998 compared to $38.8 million for the comparable period of fiscal 1997.
The decrease was primarily volume driven. Operating income was $5.2 million in
fiscal 1998 versus $6.9 million in fiscal 1997. Both sales and operating income
were down from the prior year in the Company's copper and brass fitting product
lines, due in part to a strong first quarter last year that was driven by price
increases. Demand for marine fittings also was lower than the prior year period,
resulting in lower operating income.
Engineered Components segment sales for the first quarter of fiscal 1998
increased to $103.9 million compared to $52.0 million in the first quarter of
fiscal 1997. The doubling of sales for this segment reflects the incremental
sales contributed by Speedline as well as a 25% increase in sales from increased
volume. Demand for aluminum wheels in North America was particularly strong,
with significant increases coming from Japanese automakers. Operating income was
$6.5 million in
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AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
fiscal 1998 compared to $3.8 million in fiscal 1997, due to the incremental
contribution of Speedline. Results at Speedline met expectations as market
demand, coupled with market share gains, resulted in improved capacity
utilization and operating profits.
LIQUIDITY AND CAPITAL RESOURCES
In the first quarter of fiscal 1998, net cash provided by operations was $4.5
million compared to $7.5 million for the first quarter of fiscal 1997. In both
fiscal 1998 and 1997, cash provided by net income and depreciation was
partially offset by an increase in working capital requirements of $8.5 million
and $2.0 million, respectively. Fiscal 1998's working capital increase reflects
the reduction of liabilities as cash was used for payment of acquisition
related expenses.
Net cash used by investing activities decreased to $6.2 million in the first
quarter of fiscal 1998 versus $10.7 used in fiscal 1997. Significant investments
were made in CTC during fiscal 1997 to support business expansion activities.
Capital spending also declined, as capital expenditures were $6.1 million and
$8.9 million for the first quarter of fiscal 1998 and 1997, respectively. At
November 30, 1997, the Company had $8.6 million of commitments for additional
capital expenditures, primarily for the Engineered Components segment.
Net cash provided by financing activities totaled $7.2 million for the first
quarter of fiscal 1998 compared with $.7 million for fiscal 1997. Additional
borrowings in fiscal 1998 included $7.3 million under the Company's credit
agreement and lines of credit and $2.9 million in net short-term borrowings.
Financing activities also included long-term debt repayments of $1.9 million.
Long-term debt was 55.5% of total capital at November 30, 1997 and 47.9% at
August 31, 1997. The Company's credit agreement, which expires in 2002, enables
the Company to refinance short-term debt on a long-term basis. In December
1997, approximately $50 million of short-term borrowings of Speedline was
replaced with long-term borrowings under the Company's credit agreement.
Accordingly, at November 30, 1997, the $50 million of short-term debt was
reclassified as long-term debt.
The Company may borrow up to $200 million under a credit agreement that expires
August 14, 2002. At November 30, 1997, the Company had unused borrowing
capacity of $51.7 million, under its most restrictive debt covenant. In
addition, the Company maintains bank lines of credit under which it may borrow
up to $20 million. At November 30, 1997, $124.7 million, which includes the $50
million reclassification, was outstanding under the credit agreement and
$2.3 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.
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AMCAST INDUSTRIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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 30, 1997, 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.
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 automotive and
flow control segments, 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.
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AMCAST INDUSTRIAL CORPORATION
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
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Refer to Item 3, Part I of Form 10-K for the fiscal year ended August 31, 1997.
Item 6 - Exhibits and Reports on Form 8-K
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a) Exhibits
Exhibit 27 - Financial Data Schedule *
* Schedule submitted in electronic format only.
b) Reports on Form 8-K:
A Current Report on Form 8-K with an event date of August 19, 1997 was filed by
the Company on September 3, 1997 to report the acquisition of Speedline S.p.A.,
a major European manufacturer of light-alloy wheels serving the automotive
original equipment market. On October 13, 1997, the Company filed an Amendment
to the Report on Form 8-K mentioned above to provide the required audited
financial statements and pro forma financial information of the Company.
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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
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(Registrant Company)
Date: January 14, 1998 By: /s/ J. H. Shuey
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John H. Shuey
President and Chief Executive Officer,
Chairman of the Board
(Principal Executive Officer)
Date: January 14, 1998 By: /s/ D. D. Watts
---------------- -------------------------
Douglas D. Watts
Vice President, Finance
(Principal Financial and Accounting Officer)
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