Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2001 Commission file number 1-9967
AMCAST INDUSTRIAL CORPORATION
(Exact name of registrant as specified in its charter)
OHIO 31-0258080
-------------------- --------------------
(State of Incorporation) (I.R.S. employer identification no.)
7887 Washington Village Drive, Dayton, Ohio 45459
----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
(937) 291-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- -------------------
Common Shares, without par value New York Stock Exchange
Preferred Share Purchase Rights
Securities registered pursuant to Section 12(g) of the Act:
NONE
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 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or in information
statements incorporated by reference in Part III of this Form 10K or any
amendment to this Form 10-K.
[ X]
Aggregate market value of common shares, no par value, held by
non-affiliates of the registrant (assuming only for the purposes of this
computation that directors and officers may be affiliates) as of October 22,
2001--$46,727,205.
Number of common shares outstanding, no par value, as of October 22, 2001--
8,576,740 shares.
Documents Incorporated by Reference
Part III--Portions of Proxy Statement for the Annual Meeting of
Shareholders to be held on December 19, 2001, scheduled to be filed November 14,
2001.
Amcast Industrial Corporation
Table of Contents
Page
------
Item 1. Business 3
Item 2. Properties 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
Executive Officers of Registrant 8
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 9
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation 10
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements with Accountants 40
Item 10. Directors and Executive Officers of the Registrant 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial
Owners and Management 40
Item 13. Certain Relationships and Related Transactions 40
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 10-K 40
PART I
ITEM 1 - BUSINESS
Amcast Industrial Corporation, an Ohio corporation incorporated in 1869, and its
subsidiaries (called collectively "Amcast" or the "Company") are engaged in the
business of producing fabricated metal products and cast and tubular metal
products in a variety of shapes, sizes, and metals for sale to end users
directly, through sales representatives and distributor organizations, and to
original equipment manufacturers. The Company serves three major sectors of the
economy: automotive, construction, and industrial. Manufacturing facilities are
located in the United States of America, primarily in the Midwest, and in Italy.
During fiscal 1998, the Company acquired Lee Brass Company, located in Anniston,
Alabama; ceased operations at Flagg Brass, Inc., located in Stowe, Pennsylvania;
and during fiscal 1999, sold Superior Valve Company, located in Washington,
Pennsylvania. See further discussion in "Flow Control Products" below. During
fiscal 1997, the Company acquired all of the outstanding stock of Speedline
S.p.A. and its subsidiaries (Speedline), a major European manufacturer located
in Italy, and during fiscal 1998, sold Amcast Precision Products Inc. in Rancho
Cucamonga, California. During fiscal 2001, the Company purchased the remaining
40% share in Casting Technology Company (CTC), from Izumi Industries, LTD,
bringing total ownership to 100%. See further discussion in "Engineered
Components" below.
The Company operates in two business segments -- (1) Flow Control Products and
(2) Engineered Components. Information concerning the net sales, operating
profit, and identifiable assets of each segment and sales by product category
for years 1999 through 2001 appears under "Business Segments" in the Notes to
Consolidated Financial Statements, pages 37-38 herein. Domestic export sales
were $15.5 million, $16.1 million, and $18.0 million in fiscal 2001, 2000, and
1999, respectively.
FLOW CONTROL PRODUCTS
The Flow Control Products segment (Flow Control) includes the businesses of
Elkhart Products Corporation (Elkhart), Elkhart Industrial (Geneva), Lee Brass
Company (Lee Brass), and Amcast Industrial Ltd. Elkhart produces a complete line
of wrot copper fittings for use in residential, commercial, and industrial
construction and markets brass pipe fittings and cast and fabricated metal
products for sale to original equipment manufacturers in the transportation,
construction, air conditioning and refrigeration industries. Geneva custom
fabricates copper and aluminum tubular parts. Lee Brass manufactures cast brass
products for residential, commercial, and industrial plumbing systems as well as
specific cast brass components unique to the application of original equipment
manufacturers. Amcast Industrial Ltd. is the Canadian marketing channel for the
Company's Flow Control segment manufacturing units.
The Flow Control Products segment is a leading supplier of copper and brass
fittings for the industrial, commercial, and residential construction markets.
These products are sold through distributors and wholesalers. Shipments are
primarily made by truck from Company locations directly to customers. The
competition is comprised of a number of manufacturers of parts for air
conditioning, refrigeration, and plumbing systems. The Company believes that
competition in this segment is based on a number of factors including product
quality, service, delivery, and value.
The Flow Control Products segment is one of three major suppliers of copper
fittings to the North American industrial, commercial, and residential plumbing
markets. Products are sold primarily through plumbing wholesalers, retail
hardware stores and home centers, and to original equipment manufacturers and
replacement parts distributors in the air conditioning and commercial
refrigeration business. Competition is based on service levels, pricing, and
breadth of product offering. The Company's prime competitors are Mueller
Industries, Inc., a publicly-owned company listed on the New York Stock
Exchange, and NIBCO Inc., a privately-held company headquartered in Elkhart,
Indiana. Both Mueller Industries, Inc. and NIBCO Inc. may have greater financial
resources than the Company.
On April 9, 1998, the Company acquired Lee Brass Company, a privately-owned
company located in Anniston, Alabama. Lee Brass is a major manufacturer of cast
brass products for residential, commercial, and industrial plumbing systems.
Following the acquisition of Lee Brass, the Company consolidated its two brass
foundry operations and ceased production at its Flagg Brass plant located in
Stowe, Pennsylvania. The consolidation plan included the transfer of certain
product lines to Lee Brass, the closure of the Flagg Brass facility, and the
termination of approximately 100 salaried and hourly personnel.
On October 16, 1998, the Company sold Superior Valve Company. This business,
acquired by Amcast in 1986, produces specialty valves and related products for
the compressed gas and commercial refrigeration markets.
The majority of the Flow Control Products segment's business is based on
customer purchase orders for their current product requirements. Such orders are
filled from inventory positions maintained in the regional warehouse
distribution network. In certain situations, longer-term supply arrangements are
in place with major customers. Such arrangements are of the type that stipulate
a certain percentage of the customer's requirements to be delivered at a
specific price over a set period of time. Such arrangements are beneficial to
the Company in that they provide firm forecasts of demand that allow for
efficient use of equipment and manpower.
See Properties at Item 2 of this report for information on the Company's
facilities that operate in this segment.
ENGINEERED COMPONENTS
The Engineered Components segment produces cast and fabricated metal products
principally for sale to original equipment manufacturers and tier-one suppliers
in the automotive industry. The Company's manufacturing processes involve the
melting of raw materials for casting into metal products having the
configuration, flexibility, strength, weight, and finish required for the
customer's end use. The Company manufactures products on a high-volume and
specialized basis and its metal capabilities include aluminum and magnesium.
Products manufactured by the North American operations of this segment include
aluminum castings for suspension, air conditioning and anti-lock braking
systems, master cylinders, differential carriers, brake calipers and cast
aluminum wheels for use on automobiles and light trucks. Delivery is mostly by
truck from Amcast locations directly to customers. Principal products
manufactured by Speedline, in Italy, include aluminum wheels for passenger cars
and trucks. Speedline also manufactures aluminum and magnesium racing wheels,
aftermarket wheels, modular wheels, and hubcaps.
The Engineered Components segment is not solely dependent on a single customer;
however, a significant portion of the Engineered Components business is directly
or indirectly dependent on the automobile manufacturing industry. The Company's
net sales to various divisions of General Motors Corporation were $127.3
million, $157.1 million, and $136.5 million for fiscal 2001, 2000, and 1999,
respectively. No other customer accounted for more than 10% of consolidated
sales.
The Engineered Components segment is a leading supplier of aluminum automotive
components and aluminum wheels for automotive original equipment manufacturers
in North America and also a leading supplier of light-alloy wheels for
automotive original equipment manufacturers and aftermarket applications in
Europe. Competition in the automotive components industry is global with
numerous competitors. The basis of competition is generally design and
engineering capability, price, product quality, and delivery.
There are approximately 25 competitors in the aluminum automotive component
business serving the North American market. Principal competitors include Alcoa;
Hayes Lemmerz International, Inc.; Stahl Specialty Company, a subsidiary of the
Budd Co.; Contech, a subsidiary of SPX Corporation; and Citation Corporation;
some of which have significantly greater financial resources than the Company.
There are approximately 18 producers of aluminum wheels that service the North
American market. The largest of these are Superior Industries International,
Inc. and Hayes Lemmerz International, Inc. The next tier of suppliers includes
the Company, Alcoa, and Enkei America Inc. Some of the Company's competitors in
the aluminum wheel business have significantly greater financial resources than
the Company.
There are approximately 15 competitors in the aluminum and magnesium automotive
wheel business serving the European market. Principal competitors include Hayes
Lemmerz International, Inc., Ronal, ATS, and Alloy Wheels International (AWI),
some of which may have significantly greater financial resources than the
Company.
The Company operates on a "blanket" order basis and generally supplies all of
the customer's annual requirements for a particular part. Customers issue firm
releases and shipping schedules each month against their blanket orders
depending on their current needs. As a result, order backlog varies from month
to month and is not considered firm beyond a 30-day period.
Effective March 30, 1998, the Company sold Amcast Precision Products Inc.
(Precision), its Rancho Cucamonga, California casting operation. Precision
produced ferrous and nonferrous castings for the aerospace industry. This was
Amcast's only operation in the aerospace industry.
See Properties at Item 2 of this report for information on the Company's
facilities that operate in this segment.
GENERAL INFORMATION
Aluminum and copper, the essential raw materials to the business, are
commodity-based metals purchased from worldwide sources of supply. Supplier
selection is based upon quality, delivery, reliability, and price. Availability
of these materials is judged to be adequate. The Company does not anticipate any
material shortage that will alter production schedules during the coming year.
Aluminum and copper are basic commodities traded in international markets.
Changes in aluminum, copper, and brass costs are generally passed through to the
customer. In North America, changes in the cost of aluminum are currently passed
through to the customer based on various formulas as is the custom in the
automotive industry sector the Company serves. In Europe, changes in the cost of
aluminum are currently passed through to approximately two-thirds of the
customers based upon various formulas and through negotiated contracts with the
remaining customers. Copper and brass cost increases and decreases are generally
passed through to the customer in the form of price changes as permitted by
prevailing market conditions. The Company is unable to project whether these
costs will increase or decrease in the future. The Company's ability to pass
through any increased costs to the customer in the future will be determined by
market conditions at that time.
The Company owns a number of patents and patent applications relating to the
design of its products. While the Company considers that in the aggregate these
patents are important to operations, it believes that the successful manufacture
and sale of its products generally depend more on the Company's technological
know-how and manufacturing skills.
Capital expenditures related to compliance with federal, state, and local
environmental protection regulations for fiscal 2002 and 2003 are not expected
to be material. Management believes that operating costs related to
environmental protection will not have a materially adverse effect on future
earnings or the Company's competitive position in the industry.
The Company employed approximately 4,000, 4,530, and 4,960 associates at August
31, 2001, 2000, and 1999, respectively.
In general, sales and production in the automotive industry are cyclical and
vary based on the timing of consumer purchases of vehicles and overall economic
strength. Production schedules can vary significantly from quarter to quarter to
meet customer demands.
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.
ITEM 2 - PROPERTIES
The following table provides certain information relating to the Company's
principal facilities as of October 22, 2001:
SQUARE
FACILITY FOOTAGE USE
------------------ ------- --------------------
Flow Control Products Segment
- -----------------------------
Elkhart, Indiana 222,000 Copper fittings manufacturing plant,
warehouse, storage,sales and general
offices
Fayetteville, Arkansas 107,800 Copper fittings manufacturing plant
Burlington, Ontario, Canada 7,723 Distribution warehouse and branch
sales office for Flow Control
Products
Anniston, Alabama 425,000 Brass foundry, machining, warehouse
and distribution
Geneva, Indiana 106,153 Custom fabricated copper and
aluminum Tubular products
manufacturing plant
Engineered Components Segment
- -----------------------------
Cedarburg, Wisconsin 149,000 High-volume, aluminum alloy
permanent-mold foundry
Richmond, Indiana 97,300 High-volume, aluminum alloy
permanent-mold foundry
Franklin, Indiana 183,167 High-volume aluminum, high-pressure
squeeze casting foundry
Fremont, Indiana 144,500 Cast and machined aluminum
automotive wheel plant
Gas City, Indiana 196,000 Cast and machined aluminum
automotive wheels plant
Wapakoneta, Ohio 206,000 Cast and assembled aluminum
suspension components plant
Detroit, Michigan 34,000 Automotive prototype processing and
parts storage for the Fremont plant
and Southfield office
Southfield, Michigan 10,975 Automotive component sales, product
development, and engineering center
offices
Tabina S. Maria di Sala, Italy 257,142 Aluminum passenger car wheels,
aluminum and magnesium wheels for
OEM racing and aftermarket plant
SQUARE
FACILITY FOOTAGE USE
------------------ ------- --------------------
Caselle S. Maria di Sala, Italy 56,855 Light-alloy wheels, aluminum and
magnesium wheels for OEM racing and
aftermarket plant
Bolzano, Italy 138,244 Aluminum car wheels, truck aluminum
wheels plant
Riese Pio X (TV), Italy 24,291 Aluminum passenger car wheels plant
Corporate
- ----------
Dayton, Ohio 16,281 Executive and general offices
The land and building in Burlington, Ontario, are leased under a five-year lease
expiring in 2006. The land in Richmond and Gas City, Indiana, is leased under
99-year leases, expiring in 2091. The Corporate offices are being leased for
five years expiring in 2003. The Amcast Automotive offices in Southfield,
Michigan, are being leased for five years expiring in the year 2004, with an
option for a five-year renewal. The Amcast Automotive and Fremont plant storage
building in Detroit, Michigan is leased until 2004, with an option for a
three-year renewal. Five buildings used by Speedline S.r.l. are leased. Three of
the leased buildings are located in Tabina S. Maria di Sala, Italy. One building
of 13,002 square feet and one building of 37,221 square feet are both leased
until 2003 and the third building of 21,670 square feet is leased until 2002,
with an option for a six-year renewal. There are two additional leases for
Speedline associates parking lots renewable from year to year thereafter. The
Speedline building located in Caselle S. Maria di Sala, Italy, is leased in two
portions--one is leased until 2007 and the other is leased until 2006, with an
option for a six-year renewal. The land and buildings in Riese Pio X are leased
until 2006. The Bolzano land is leased under a 20-year lease, expiring in 2019.
All other properties are owned by the Company.
The Company's operating facilities are in good condition and are suitable for
the Company's purposes. Utilization of capacity is dependent upon customer
demand. During 2001, total company-wide productive capacity utilization ranged
from 80% to 89% and averaged 85% of the Company's total capacity.
ITEM 3 - LEGAL PROCEEDINGS
Certain legal matters are described at "Commitments and Contingencies" in the
Notes to Consolidated Financial Statements, pages 31-32 herein.
Allied Signal, Inc. (now Honeywell International) has brought a superfund
private cost recovery and contribution action against the Company in the United
States District Court for the Southern District of Ohio, Western Division, which
is captioned Allied-Signal, Inc. V. Amcast Industrial Corporation (Case No.
C-3-92-013). The action involves the Goldcamp Disposal Site in Ironton, Ohio.
Honeywell International has taken the lead in remediating the site and has
estimated that its total costs for the remediation may reach $30 million.
Honeywell International is seeking a contribution from the Company in an amount
equal to 50% of the final remediation costs. A trial in this proceeding was
completed in February 1995. The trial court recently entered a "short form"
opinion on the merits. The Court stated that the Company is responsible for 2%
of Honeywell International's past and future clean-up costs, and that the
Company is responsible for 28% of the costs that Honeywell International
incurred to place a "cap" on the Goldcamp Disposal site. The Court also ordered
the Company to pay pre-judgment interest. Based on the Court's action, the
Company estimates that its maximum liability associated with the action is
between $0.5 million and $1.5 million. The Court has not entered a "final" order
and any final order could be subject to appeal. The Company believes its
liability is at the low end of this range.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
EXECUTIVE OFFICERS OF REGISTRANT
Byron O. Pond, age 65, has been President and Chief Executive Officer and a
director of the Company since February 2001. From 1996 to 1998, Mr. Pond served
as Arvin Industries, Inc.'s Chairman and CEO and from 1993 to 1996 as President
and CEO. He became Arvin's President and Chief Operating Officer in 1991.
Michael N. Powell, age 54, has been President of Amcast Flow Control Products
Group, since May 1996. From April 1994 until May 1996, he was Vice
President/General Manager of Superior Valve Company. Mr. Powell was President
and Chief Operating Officer of Versa Technologies, Inc. in Racine, Wisconsin,
from May 1991 to December 1993. Prior to that, he was Senior Vice President for
Mark Controls Corporation in Skokie, Illinois.
Ronald C. DiLiddo, age 56, has been President of Amcast Automotive since October
1999. From 1998 to 1999, he was General Manager of the North American Wiper
Systems and Electric Motor group of Valeo S.A. From 1996 to 1998, Mr. DiLiddo
was Vice President of Operations for ITT Industries Inc.'s automotive electrical
systems group and from 1994 to 1996, he was President and Chief Executive
Officer of Hansford Manufacturing.
Francis J. Drew, age 56, has been Vice President-Finance and Chief Financial
Officer of the Company since April 2001. From 1998 to 2001, Mr. Drew was Vice
President of The Charter Group in Grand Rapids, Michigan. Prior to that, he
served as Vice President and CFO for Benteler Automotive Corporation's
operations in the United States.
Dean Meridew, age 47, has been Vice President of North American Wheel Division
since August 1999. From August 1997 to September 1999, he was Vice President,
Amcast Europe. From June 1992 to September 1997, he was Division Manager for the
Company's North American wheel operations. Prior to that, Mr. Meridew was
Operations Manager and Engineering Manager within the Company's North American
wheel operations since January 1985.
Luciano Lenotti, age 56, has been Managing Director of Speedline since November
2000. Mr. Lenotti was General Manager at SKF Industries, a Swedish Company, from
1994 to 2000. He held the position of Vice General Manager of SKF Industries
from 1987 to 1994. From 1984 to 1987 he held the position of General Manager and
Managing Director of RFT as well as Vice General Manager from 1978 to 1983. From
1972 to 1978 he was in the Human Resources Department of SKF Industries.
Samuel T. Rees, age 55, has been Vice President, General Counsel and Secretary
of the Company since September 2001. Since October 1992, Mr. Rees has been "of
counsel" to Daar & Newman, P.C., a law firm located in Los Angeles, California.
While in private practice, Mr. Rees and his law firms have represented the
Company, primarily on litigation matters.
James R. Van Wert, Jr., age 43, has been Vice President, Technology since June
1997. Prior to that, Mr. Van Wert was with the Aluminum Company of America
(ALCOA), in numerous capacities. His last position was Director of Technology,
Forging & Casting, focusing primarily on the automotive industry.
Michael R. Higgins, age 55, has been Treasurer since January 1987.
Mark D. Mishler, age 43, has been Corporate Controller since April 1998. From
April 1995 to April 1998, he was International Controller for Witco. From April
1991 to April 1995, he was a Divisional Controller for Siemens. Mr. Mishler is a
Certified Public Accountant.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Amcast common stock is listed on the New York Stock Exchange, ticker
symbol AIZ. As of August 31, 2001, there were 8,576,740 of the Company's common
shares outstanding, and there were approximately 6,326 shareholders of Amcast's
common stock, including shareholders of record and the Company's estimate of
beneficial holders.
Range of Stock
Prices
--------------------------------- Dividends
High Low Per Share
--------- --------- ---------
Fiscal 2001
----
First Quarter $ 14 3/16 $ 7 13/16 $ 0.14
Second Quarter 13 5/16 8 3/4 0.14
Third Quarter 10 1/16 8 5/8 -
Fourth Quarter 9 1/4 8 3/16 -
Fiscal 2000
----
First Quarter $ 16 $ 12 3/8 $ 0.14
Second Quarter 17 11 3/4 0.14
Third Quarter 12 1/8 8 0.14
Fourth Quarter 12 1/8 8 3/16 0.14
Certain information concerning provisions affecting the payment of dividends is
located at "Long-Term Debt and Credit Arrangements" in the Notes to Consolidated
Financial Statements.
ITEM 6 - SELECTED DATA
($ in thousands except per share amounts)
Financial Data 2001 2000 1999 1998 1997
- -------------- --------- -------- -------- -------- --------
Net sales $ 529,373 $610,655 $588,933 $574,414 $387,051
Operating income (loss) (30,390) 21,557 46,110 37,958 27,242
Operating (loss) income percent (5.7)% 3.5% 7.8% 6.6% 7.0%
Income (loss) before income taxes and
cumulative effect of accounting change (49,566) 5,422 31,538 22,975 20,005
Income (loss) before cumulative effect
of accounting change (37,131) 3,364 19,317 16,765 12,983
Net income (loss) (37,131) 4,347 19,317 8,177 12,983
Working capital 18,688 54,993 68,955 86,929 26,260
Total assets 458,690 480,386 533,486 563,450 508,918
Long-term debt 170,296 147,273 174,061 217,199 145,304
Per Common Share Data
- --------------------- --------- -------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change - basic $ (4.38) $ 0.38 $ 2.11 $ 1.82 $ 1.50
Net income (loss) - basic $ (4.38) $ 0.49 $ 2.11 $ 0.89 $ 1.50
Weighted average number of common
shares outstanding - basic (in thousands) 8,482 8,788 9,144 9,200 8,674
Income (loss) before cumulative effect
of accounting change - diluted $ (4.38) $ 0.38 $ 2.11 $ 1.81 $ 1.48
Net income (loss) - diluted $ (4.38) $ 0.49 $ 2.11 $ 0.88 $ 1.48
Weighted average number of common
shares outstanding - diluted (in thousands) 8,482 8,792 9,162 9,250 8,754
Dividends declared $ 0.28 $ 0.56 $ 0.56 $ 0.56 $ 0.56
Book value $ 13.47 $ 18.55 $ 19.07 $ 17.47 $ 17.24
Statistical Data
- ---------------- --------- -------- -------- -------- --------
Current ratio 1.1 1.4 1.5 1.6 1.1
Long-term debt as a percent of capital 59.6% 48.6% 50.5% 57.5% 47.9%
Number of associates 4,000 4,530 4,960 4,500 4,040
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
($ in thousands except per share amounts)
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 and 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, the ability of the Company to negotiate an
extension of its waivers with its lenders, fluctuating demand in the automotive
and housing industry, less favorable than expected growth in sales and profit
margins in
the Company's product lines, price 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 availability and
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 financial statements and notes thereto.
Business Segments
Operating segments are organized internally primarily by the type of products
produced and markets served, and in accordance with SFAS No. 131, the Company
has aggregated similar operating segments into two reportable segments: Flow
Control Products and Engineered Components. The Flow Control Products segment is
a supplier of copper and brass plumbing fittings for the industrial, commercial,
and residential construction markets, and cast and fabricated metal products for
sale to original equipment manufacturers in the transportation, construction,
air conditioning, and refrigeration industries. The Engineered Components
segment is a supplier of aluminum wheels and aluminum components, primarily for
automotive original equipment manufacturers. During 2001, the Company
reevaluated the composition of the reportable segments and reclassified one
business from Engineered Components to Flow Control Products. Prior year segment
information was restated to conform to the 2001 presentation.
Acquisitions and Divestitures
During 1999 and 2001 the Company completed transactions that impact the
Company's financial results for those years and affect the comparison between
2001, 2000, and 1999. In October 1998, the Company sold Superior Valve Company
(Superior) for $35,604 in cash. The transaction resulted in a pretax gain of
$9,023. Results for 1999 included sales for Superior Valve of approximately
$4,600 in the Company's Flow Control segment.
Effective June 5, 2001, the Company purchased the remaining 40% share in CTC,
from Izumi Industries, LTD, bringing total ownership to 100%. The purchase price
was approximately $4,000 of which $2,000 is payable in annual installments over
the next five years. No goodwill was recognized from the transaction. The
financial results of CTC are included as part of the Engineered Components
segment in the consolidated financial statements since the purchase of the
remaining 40% share.
Unusual Items
In October 2000, the Company announced that it had hired financial advisors to
assist the Company in exploring strategic alternatives for maximizing
shareholder value. This process included evaluating the possible sale of the
business, various business combinations, and several break-up scenarios. During
2001, the Company incurred unusually high expenditures for legal and other
professional fees in conjunction with the strategic alternative review. After
careful consideration, in early February 2001, the Company's Board of Directors
reached a decision that, even in the currently weakened market environment, a
stronger pursuit of the Company's fundamental strategy would, over the long
term, better serve the shareholders and concluded the review of strategic
alternatives. At the same time, the Company's Board of Directors made several
senior management changes that would provide the leadership needed to move the
Company forward which resulted in additional expense for severance and related
costs.
Due to operating losses incurred during the second quarter, at March 4, 2001,
the Company was not in compliance with certain non-monetary covenants under its
credit agreement (the Revolver Agreement). This resulted in a cross violation in
the Company's Senior Note Agreement (the Senior Notes) and the Casting
Technology Credit Agreement (the CTC Agreement) of which the Company had
guaranteed $14,094. As more fully discussed under "Liquidity and Capital
Resources", the Company has entered into a new credit agreement (the Credit
Agreement), and at the same time, received waivers of the covenant violations
under the Revolver Agreement, Senior Notes, and the CTC Agreement through April
15, 2002. The Company incurred significant costs related to obtaining the Credit
Agreement and the waivers.
In the last half of fiscal 2001, the new management of the Company initiated a
strategic review of the Company in light of its weak markets and relatively poor
operating performance. As a result, management decided to dispose of certain
under-utilized machinery, tooling and equipment; to scrap certain slow moving
inventories; and to increase the allowance for doubtful and disputed
receivables. In addition to establishing reserves for these items, the unusual
items also included increases in workers compensation and certain other reserves
for previously closed facilities, increases in environmental reserves, and other
accrual adjustments. Additionally, due to past operating results at the
Company's European operations, in compliance with Statement of Financial
Accounting Standards (SFAS) No. 109., the Company increased its valuation
allowance against certain foreign net operating loss carryforwards.
These unusual items totaled $26,868 ($20,069, net of tax). In addition, the
Company's share of CTC's unusual charges prior to June 5, 2001, which are
included in Other Income and Expense, was $1,267 ($803, net of tax). Management
of the Company does not anticipate that there will be any significant additional
charges of this nature in the near future.
Results of Operations
Consolidated net sales in 2001 were $529,373, which represented a $81,282, or
13.3%, decrease from 2000. Consolidated net sales in 2000 were $610,655, which
represented a $21,722, or 3.7%, increase over 1999. The following table shows
the components of the changes in the Company's consolidated net sales.
2001 2000 1999
------ ------ ------
Volume (11.8)% 1.9 % 11.8 %
Price and product mix 0.4 % 6.5 % (3.6)%
Acquisitions and divestitures 1.3 % (0.8)% (6.0)%
Foreign currency exchange rates (3.2)% (3.9)% 3.0 %
------- ------- -------
Total Sales Growth (13.3)% 3.7 % 2.5 %
------- ------- -------
In 2001, consolidated net sales decreased to $529,373. The volume decline
experienced in 2001 reflects decreased automotive production in North America
during 2001, auto manufacturer's new model launch delays in Europe, and a
slowness in construction markets for a portion of the year. North American light
vehicle production was down 9.7% year over year while U.S. light vehicle sales
were down 3.7% during the same period. The impact of a favorable product mix,
primarily at the Company's European operations, helped negate the unfavorable
pricing that resulted from competitive market pricing issues encountered in the
Flow Control Products segment. The inclusion of CTC for the fourth quarter
increased sales while a weaker Italian lira caused a decrease in sales from the
prior year. By segment, Engineered Components sales decreased 14.5% primarily
due to low vehicle build in the Company's major North American market while Flow
Control Products sales decreased 10.1% primarily due to competitive pricing in
the Company's markets.
In 2000, consolidated net sales increased to $610,655. Volume growth in 2000
reflects increased sales of the Company's performance-critical aluminum
components and European wheels partly offset by a decline in North American
wheel sales and by lower volumes in the Flow Control Products segment. Favorable
pricing includes a better product mix, primarily at the Company's European
operations, and higher aluminum costs reflected in the sales price of automotive
products. These gains were partially offset by a reduction in sales from the
sale of Superior and by a weaker Italian lira. By segment, Engineered Components
sales increased 7.8% primarily due to volume gains related to the increased
aluminum component sales while Flow Control Products sales decreased 5.8%
primarily due to the loss of two significant customers and decreased sales from
divested operations.
Gross profit was $40,793, $78,694, and $93,025 in 2001, 2000, and 1999,
respectively. As a percentage of sales, gross profit decreased to 7.7% in 2001
from 12.9% in 2000 and 15.8% in 1999. The Company's decision to scrap certain
slow moving inventories resulted in unusual items of $5,070 for inventory
write-offs in 2001. Excluding the unusual items, the gross profit percentage was
8.7% for 2001. In the Flow Control Products segment, pricing issues were the
primary reason for the decrease in gross profit while significantly lower sales
volume and a weaker Italian lira led to the decrease in gross profit in the
Engineered Components segment. During the last half of the year, management of
the Company began to focus on reducing inventories. Even though the Company
began to
experience a drop in sales early in the year, inventory continued to rise
because production continued at plan levels, reaching a peak at midyear.
Since February, the Company has reduced inventory significantly; however, this
had a negative impact on gross profit due to lost absorption. Gross profit of
businesses in both segments also suffered from higher energy costs during the
winter months.
A combination of internal and external factors affected gross profit in 2000. In
the Flow Control Products segment, large volume losses associated with two
customers at Lee Brass depressed gross profit. In addition, this segment
experienced sporadic, intense price competition that prevented the Company from
passing higher copper costs on to its customers. The flow control units did
respond positively to the Company-wide cost reduction program initiated earlier
in the year that partially offset the copper cost and competitive market pricing
issues. In the Engineered Components segment, reduced sales volumes for certain
aluminum wheel styles, coupled with high associate turnover at one wheel plant
during the first half of the year, had a negative impact on gross profit. In
North America, the Company purchased tooling and reserved capacity to produce
wheels for three vehicles that experienced less than anticipated sales volume.
Also negatively impacting gross profit in 2000 was the continuation of some of
the operating issues encountered in the previous year. In the last half of 1999,
the Company experienced higher than expected costs and lower product yields due
to high turnover of skilled labor in two Indiana wheel plants and to the launch
of new suspension products at the Company's Wapakoneta, Ohio plant. The launch
proved to be very difficult and was accompanied by high labor turnover, high
scrap, low productivity, and significant costs to ensure an adequate customer
supply. In Europe, a negative currency impact, the inability to pass through
certain material costs, and a factory expansion temporarily depressed gross
profit. The cost of aluminum is a significant component of the overall cost of a
wheel. While the aluminum content of selling prices is periodically adjusted for
current market conditions, the purchasing practices and pricing formulas of
certain customers of the Company's European operations prevented the Company
from reacting quickly enough to the sharp rise in aluminum prices early in the
year. Additionally, the Company expanded and rearranged one of its Italian
plants to increase output and better balance production flow. During this time
period, this facility experienced very high labor turnover which, coupled with
the expansion process, had a negative effect on production and gross profit.
Several factors had a positive impact on gross profit in 2000. Effective
September 1, 1999, the depreciable lives of certain assets of foreign
subsidiaries were changed based upon a study performed by an independent
appraisal company. The effect of this change was a reduction of depreciation
expense of approximately $2,400. During 2000, the Company also changed its
method for accounting for supplies and spare parts inventories. The effect of
this change, which is discussed more fully on the following page, was to
increase gross profit in 2000 by approximately $400.
Selling, general, and administrative (SG&A) expenses were $71,183, $57,137, and
$55,938 in 2001, 2000, and 1999, respectively. As a percentage of sales, SG&A
expenses increased to 13.4% in 2001 compared with 9.4% in 2000 and 9.5% in 1999.
Unusual items recorded in 2001 in SG&A expense totaled $20,504. Excluding the
unusual items, SG&A expense was $50,679 or 9.6%. The decrease in SG&A expenses
for 2001 reflects a higher net pension expense benefit than in 2000, partially
due to a change in the discount rate, lower legal costs, and reduced
compensation expense due to the salaried workforce reduction that occurred in
the middle of fiscal 2000.
SG&A expense in 2000 includes a net pension expense benefit of $2,546 primarily
as a result of improvement in the defined benefit pension plan's funded status,
a one-half percentage point increase in the expected return on plan assets, and
the change to a defined benefit cash balance pension plan. Prior year SG&A
expense also includes the benefit of the reversal of a $2,226 liability
resulting from the favorable settlement of a legal claim against the Company.
Previously, the Company had recorded a liability for a legal claim asserted by
former employees at its Flagg Brass operations. Due to the terms of a settlement
reached during 2000 relative to this obligation, this liability was reversed
through a reduction in SG&A expense. SG&A expense was also favorably impacted by
the results of the Company's cost reduction program initiated at the end of its
second quarter. In early March, the Company implemented an 8% salaried workforce
reduction across all of its North American operations. At the same time, global
restrictions were placed on other controllable operating and administrative
costs. Higher commissions, legal costs, and information system expenditures
offset these reductions in SG&A expense.
Prior to acquiring the remaining 40% ownership, CTC was a joint venture and
financial results were recorded using the equity method of accounting. The
Company's pretax share of losses from CTC while a joint venture, were $3,122,
$3,528, and $1,452 in 2001, 2000, and 1999, respectively. As previously
mentioned, CTC also recorded unusual items in 2001, primarily to increase the
allowancefor doubtful and disputed receivables and to write down inventory and
tooling. Excluding these unusual items, the Company's pretax share of CTC's
losses was $1,855. While the demand and capacity issues CTC experienced in 2000
subsided in 2001, there were some carryover effects in the form of higher costs
and manufacturing inefficiencies early in the year and lower volumes later in
the year that negatively impacted the results for 2001. CTC's results for 2000
were severely impacted by a customer's
extraordinarily high, temporary demand. In the second half of 2000, particularly
the fourth quarter, CTC was pushed beyond capacity and incurred higher costs
associated with operating in excess of capacity to meet the customer's demand.
Interest expense was $17,532 in 2001, $12,929 in 2000, and $13,182 in 1999. As
further discussed under "Liquidity and Capital Resources", interest rates on the
Company's borrowings under the Prior Agreement and the Senior Notes increased in
the last half of fiscal 2001. The Company will continue with a substantial
interest burden until lower-cost financing can be put in place.
The effective tax rates for 2001, 2000, and 1999 were 25.1%, 38.0%, and 38.8%,
respectively. The effective tax rate recorded for fiscal 2001 represents an
income tax benefit, whereas the rates recorded for fiscal 2000 and 1999
represents an income tax expense. The decrease in the effective tax rate for
fiscal 2001 was caused primarily by the requirement to increase the valuation
allowance against foreign net operating losses by $3,048 due to past operating
results at the Company's European operations. As of August 31, 2001, the Company
has recorded a valuation allowance of $13,401, of which $7,155 relates to the
net operating loss carryforwards associated with the purchase of the remainging
40% share of CTC and $6,246 is associated with foreign operations. For
additional information regarding the provision for income taxes as well as the
difference between effective and statutory tax rates, see the Notes to
Consolidated Financial Statements.
During 2000, the Company implemented portions of an enterprise resource planning
(ERP) system in its automotive businesses in North America. Among other
features, this system facilitates the tracking and control of supplies and spare
parts inventories. To take advantage of the enhanced tracking and control
features of the ERP system, the Company capitalized the supplies and spare parts
inventories at three locations, whereas previously the cost of these
manufacturing supplies was expensed when purchased. Management believed this
change was preferable in that it provides for a more appropriate matching of
revenues and expenses. The total amount of inventory capitalized and reported as
a cumulative effect of a change in accounting principle, retroactive to
September 1, 1999, is $983, net of income taxes of $602. The effect of the
change in 2000 was to increase income before cumulative effect of accounting
change by $248 ($.03 per share).
Management of the Company believes the September 11 terrorist attack and the
U.S. retaliation could depress the Company's markets further; however,
management believes that economic recovery in the Company's market sector should
be no more than six to nine months away. Despite the anticipated lower level of
economic activity, the Company was awarded six new wheel programs with General
Motors in North America and its first wheel order in North America with Daimler
Chrysler. The Company has also started up new business that will equal 10% of
revenue in Europe and added several important pieces of business in suspension
components. In addition, the Company began production of front and rear knuckles
for Saab and Opel in Europe from two plants in Indiana. In fiscal 2002, the
Company will focus heavily on reducing SG&A spending overall and lowering total
labor cost.
Flow Control Products Net sales of the Flow Control Products segment were
$151,216 in 2001, compared with $168,181 in 2000 and $178,483 in 1999. The Flow
Control Products segment experienced strong competitive market pricing in 2001
that, combined with an unfavorable product mix, reduced sales by 8.8%. Lower
volume reduced sales an additional 1.3%. The Flow Control Products segment
recorded $6,229 of unusual items in 2001, primarily to scrap certain slow moving
inventories. Excluding the unusual items, Flow Control Products had operating
income of $11,700 compared with $23,663 in 2000. The impact of the competitive
pricing issues and unfavorable product mix significantly reduced operating
profit.
The decrease in 2000 is primarily due to lower sales volume of copper and brass
products associated with the loss of two customers at the Company's Lee Brass
unit and decreased sales from divested operations. Annual sales volume for the
two customers was approximately $7,900, and the Company was able to replace a
portion of those sales in 2000. The lower volumes decreased sales by 7.4%
compared with 1999. While this segment did face sporadic price competition, the
reduced volume was partially offset by overall favorable pricing that increased
sales by 1.6%. Operating income was $23,663 in 2000 compared with $31,061 in
1999. Lower volumes and higher material costs decreased operating income by 10%
each. While price competition prevented the Company from passing higher copper
costs on to customers, current pricing and favorable product mix combined to
increase operating income by 13.5%. The cost reduction program implemented in
March 2000, combined with continuous improvement activities in the plants,
helped to offset the material cost and pricing issues.
Engineered Components Net sales of the Engineered Components segment were
$378,157 in 2001, compared with $442,474 in 2000 and $410,450 in 1999. Sales
decreased by 14.5% due to a drop in volume, particularly at the
Company's North American operations where the Company is coping with a major
downturn in U.S. automotive production. The positive impact of a favorable
product mix at the Company's European operations was offset by a weaker Italian
lira in 2001 compared with 2000. The Engineered Components segment recorded
$7,768 of unusual items, primarily to dispose of certain under-utilized
machinery, tooling, and equipment and to increase the allowance for doubtful and
disputed receivables. Excluding the unusual items, Engineered Components had an
operating loss of $8,915 compared with operating income of $5,243 in 2000.
Significantly lower sales volume and inventory absorption contributed to the
operating loss in 2001.
The Company's Engineered Components product sales continued to grow in 2000, as
the global wheel business continues to expand, win new customers, and launch a
variety of new wheel styles. The aluminum components business also experienced
significant sales growth as their customers fully incorporated new products into
additional vehicle platforms. Sales volume increased 4.8% as sales of control
arms and European wheels were offset by a decline in North American wheels sales
as one customer experienced lower sales on three vehicles. 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 3.4% and
5.6%, respectively. However, a weaker Italian lira in fiscal 2000 compared with
fiscal 1999 reduced sales by 5.6%. Operating income was $5,243 in 2000 compared
with $15,566 in 1999. The two accounting changes previously discussed increased
operating income; however, several factors negatively impacted operating income
during 2000. Increased costs associated with the over-capacity volume issues
previously discussed and higher manufacturing-related spending decreased
operating income by over 20%. Material costs that could not be passed along to
customers under existing price formulas, primarily at our European operations,
further reduced operating income by 28.8%. Pricing and an unfavorable product
mix reduced operating income by 21.2%. Also contributing to the decrease in
operating income in 2000 were costs associated with high levels of employee
turnover and the difficulty of obtaining qualified labor in a
near-full-employment economy.
Liquidity and Capital Resources
Cash provided by operations in 2001 was $9,996, compared with $40,341 in 2000
and $64,770 in 1999. The non-cash benefits of depreciation, amortization, and
other non-cash charges were offset by the net loss for 2001. Early in fiscal
2001, inventory levels were increased while sales were declining. The focus of
new management of the Company has been the management of working capital by
collecting accounts receivable and reducing inventories. However, a significant
amount of cash was used to reduce accounts payable from the high level
outstanding at August 31, 2000.
Investing activities used net cash of $28,686 in 2001, compared with $25,802 in
2000 and $12,656 in 1999. Capital expenditures totaled $29,719 in 2001 and
$21,535 in 2000, compared to $47,360 expended in 1999. To support business
expansion activities in previous years, investments were made in property,
plant, and equipment and in CTC. Capital expenditures decreased significantly in
2001 and 2000 from prior levels, as the Company turned its focus from expansion
to cost reduction and improving production efficiencies. Capital expenditures in
2001 included equipment to support and produce products for new contracts that
have been awarded and to implement new information systems. At August 31, 2001,
the Company had $6,744 of commitments for capital expenditures to be made in
2002, primarily for the Engineered Components segment. In 2001, the Company also
used $674 ($2,000 less cash received) to purchase the remaining 40-percent share
in CTC from its joint venture partner Izumi Industries, LTD. The purchase price
was approximately $4,000 of which $2,000 is payable in annual installments over
the next five years. During 2000, the Company resolved several matters with the
former owners of Speedline which, among other items, resulted in a purchase by
the Company of 478,240 shares of the Company's common stock held by Speedline's
former owners and a net cash payment to the former owners of $2,500. Proceeds
from the sale of businesses provided $35,604 in 1999.
Financing activities provided $31,294 of cash in 2001 versus $18,148 and $51,466
of cash used in 2000 and 1999, respectively. Additional financing in 2001
included a net increase of $28,343 of long-term borrowings under the Company's
Revolver Agreement and $3,806 borrowed under lines of credit. Financing
activities also included $1,500 received from the sale of treasury shares and
$2,355 used for the payment of dividends. The Company did not declare dividends
in the last two quarters of 2001 and due to financial losses, it is unlikely
that the Company will be in a position to declare any future dividends for at
least the immediate future.
During 1999, the Company reduced total debt by $51,904 and further reduced
total debt by $18,728 in 2000. The debt reductions were financed in part with
the proceeds from the Superior Valve sale in 1999 and the proceeds from
sale-leaseback transactions in both 1999 and 2000. Financing activities also
included dividend payments of $5,109 and $4,851 and repurchases of the Company's
stock of $1,255 and $4,594 in 2000 and 1999, respectively.
The Company maintains a Revolver Agreement that had provided for up to $150,000
in borrowings through August 2002. Debt covenants under the Revolver Agreement
required the Company to maintain certain debt-to-earnings and interest coverage
ratios. Due to operating losses incurred during the second quarter, at March 4,
2001, the Company was not in compliance with the debt-to-earnings and interest
coverage ratios under the Revolver Agreement. This resulted in a cross violation
in the Company's Senior Note Agreement (the Senior Notes) and the CTC Credit
Agreement (the CTC Agreement) of which the Company had guaranteed $14,094 at
March 4, 2001. The lenders under the Revolver Agreement, and the CTC Agreement
have waived the financial covenant violations through April 15, 2002. The
lenders under the Senior Notes have waived the financial covenant violations
through September, 2002. The Company plans to establish new Senior Note
covenants during the first half of Fiscal 2002. The Company also has borrowings
outstanding under lines of credit totaling $14,200 with an average interest rate
of 8.5%. The Company can no longer borrow additional funds under the Revolver
Agreement or the lines of credit and the lenders now have a subordinated
security interest in the assets of the Company's U.S. subsidiaries and certain
stock of the foreign subsidiaries. Interest rates for borrowings under the
Revolver Agreement increased to prime plus 2% and the Senior Notes increased to
9.09%, plus an additional 1% for payment in kind.
On June 5, 2001, the Company entered into a new credit agreement (the Credit
Agreement), which provides for the ability to make new borrowings initially up
to $15,000, increasing in stages to a maximum of $35,000 based on the Company
meeting certain conditions. Borrowings are limited to specified percentages of
eligible receivables, inventories, and property and equipment. At August 31,
2001, the Company had a maximum borrowing capacity of $30,000. The Credit
Agreement matures on April 15, 2002. Among other things, the Credit Agreement
requires the Company to grant a first priority security interest in the
Company's U.S. assets including, all real property, accounts receivable,
inventory, machinery and equipment, as well as a subordinated security interest
to lenders under the Revolver Agreement and Senior Notes. Interest rates for
borrowings under the Credit Agreement are prime plus 4%.
Subsequent to August 31, 2001, the Company amended the Revolver Agreement. This
amendment extended the Revolver Agreement through September 2002 and established
new financial covenants with it's lenders in which the Company must, among other
things, maintain quarterly levels of total liabilities to tangible net worth,
free cash flow, EBITDA, and meet scheduled debt repayments. The maximum level of
total liabilities to tangible net worth is not to exceed 6.4 at December 2,
2001, 7.0 at March 3, 2002, 6.8 at June 2, 2002, and 6.5 at August 31, 2002. The
minimum level of free cash flow is to be $8,100 at December 2, 2001, $6,100 at
March 3, 2002, $20,900 at June 2, 2002, and $31,200 at August 31, 2002. In
addition, the Company must make scheduled debt reductions (which are included
with the current portion of long-term debt) of $5,000, $6,500, and $5,000 at the
end of the first, third, and fourth quarters of fiscal 2002, respectively. If
these minimum levels are not maintained, any outstanding balances become payable
upon demand by the Company's lenders. Based on the Company's forcasted ability
to comply with the revised debt covenants, it continues to classify debt as long
term. The Credit Agreement and CTC Agreement also include a subjective
acceleration clause whereby the lenders can declare an event of default upon any
material adverse change as defined by the lenders. At August 31, 2001, there
were no borrowings outstanding under the Credit Agreement and $13,356 was
outstanding under the CTC Agreement.
In order to meet the new financial covenants, the Company needs to achieve
operating results substantially consistent with its 2002 operating plan. This
plan calls for 2002 sales to be slightly higher than in 2001. The Company plans
to reduce cost of goods sold through improved plant efficiencies, decreasing
inventories, higher productivity, and lower scrap. In addition, the Company
plans to reduce selling, general and administrative expenses primarily through
reductions in personnel and employee benefit costs, and other cost savings
programs.
In consideration for the Credit Agreement and waiver of covenant violations
under the Revolver Agreement and Senior Notes, the Company granted warrants to
purchase 455,220 shares of the Company's common stock at a purchase price of
$8.80 per share. The warrants are immediately exercisable and expire June 3,
2005. If the maturity date of the Revolver Agreement is extended to September
2003, warrants for the purchase of an additional 255,000 shares will be issued.
The CTC Agreement provided for borrowings under a revolving credit facility and
a term loan. At August 31, 2001, $4,500 was outstanding on the revolver and
$8,856 was outstanding on the term loan, both with interest rates at prime plus
2%. CTC subsequently entered into a new credit facility, effective September 18,
2001, that provides for up to $15,356 in borrowings with interest rates at prime
or LIBOR plus 2.25%. The revolver portion matures September 2002 and the term
loan matures August 2003.
The Senior Notes originally required periodic principal payments beginning in
November 2002 through November 2005. The maturity date of the Senior Notes is
now November 2003. If the maturity date of the Revolver Agreement is extended to
September 2003, the principal payment under the Senior Notes that is due
November 2002, will be extended to November 2003.
The Company's foreign operations have short-term lines of credit totaling
approximately $17,274 that are subject to annual review by the lending banks.
Amounts outstanding under these lines of credit are payable on demand and total
$2,741 as of August 31, 2001.
The ratio of long-term debt as a percent of capital increased to 59.6% at August
31, 2001 from 48.6% at August 31, 2000. Book value per common share at August
31, 2001 was $13.47, down from $18.55 at August 31, 2000. One million preferred
shares and approximately 5.8 million common shares are authorized and available
for future issuance. On December 17, 1998, the Company announced a plan to
repurchase up to 750,000 of its outstanding common shares. As of August 31,
2001, 350,000 shares have been repurchased under this plan at an average cost of
$15.53 per share. The Company currently has 8,576,740 common shares outstanding.
Management believes the Company has adequate financial resources to meet its
future 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 more fully described
in the Commitments and Contingencies note to the consolidated financial
statements. At August 31, 2001, the Company had reserves of $2,855 accrued for
environmental liabilities. Based upon the contracts and agreements with regards
to two environmental matters, the Company believes it is entitled to indemnity
for remediation costs at two sites and believes it is probable that the Company
can recover a substantial portion of the costs. Accordingly, the Company has
recorded receivables of $1,115 related to anticipated recoveries from third
parties.
Allied-Signal Inc. (now Honeywell) brought an action against the Company seeking
a contribution from the Company equal to 50% of Honeywell'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.
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, results of operations, or
cash flows. The Company is presently unaware of the existence of any potential
material environmental costs that are likely to occur in connection with
disposition of any of its property.
Impact of Recently Issued Accounting Standards
New accounting standards adopted during 2001 include SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS Nos. 137
and 138, which establishes a comprehensive standard for the recognition and
measurement of derivatives and hedging activities. The new standard requires
that all derivatives be recognized as assets or liabilities in the statement of
financial position and be measured at fair value. Gains or losses resulting from
changes in fair value are required to be recognized in current earnings unless
specific hedge criteria are met. Special accounting allows for gains or losses
on qualifying derivatives to offset gains or losses on the hedged item in the
statement of income and requires formal documentation of the effectiveness of
transactions that receive hedge accounting. The adoption of this standard did
not have a material effect on the Company's consolidated results of operations,
financial position, or cash flows.
The Company also adopted the provisions of Securities and Exchange Commission
Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements. The adoption of SAB 101 did not
have a material effect on the Company's consolidated results of operations.
New accounting standards issued include SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
discontinues the use of the pooling of interest method and requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. The new standard also specifies criteria that intangible
assets acquired in a business combination must meet to be recognized apart from
goodwill. SFAS No. 142 requires that goodwill and certain intangible assets
(deemed to have indefinite lives) no longer be amortized, but instead be tested
for impairment, at least on an annual basis, and written down in the periods in
which the recorded amount is greater than the fair value. Other intangible
assets will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121. These standards only permit
prospective application; therefore, adoption of these standards will not affect
previously reported financial information. SFAS Nos. 141 and 142 will become
effective for the Company in the first quarter of fiscal 2003; however, the
Company is evaluating early adoption as of September 1, 2001.
The Company will evaluate its existing intangible assets and goodwill that were
acquired in prior business combinations and, upon adoption of the new standards,
make any necessary reclassifications in order to conform with the new criteria
for recognition apart from goodwill. If early adopted, the Company will be
required to perform initial impairment tests of goodwill and indefinite lived
intangible assets during 2002. Any impairment loss will be measured as of the
date of adoption and recognized as a cumulative effect of a change in accounting
principle as of the beginning of fiscal 2002. Because of the extensive effort
needed to comply with adopting SFAS No. 142, as of the date of this report, the
Company cannot estimate the entire impact adopting the standard will have on the
Company's consolidated results of operations, financial position, or cash flows;
however amortization expense of $ 1,354 related to goodwill would be eliminated
in 2002. The adoption of SFAS No. 141 should not have a material effect on the
Company's consolidated results of operations, financial position, or cash flows.
SFAS No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144
"Accounting for Impairment or Disposal of Long-Lived Assets" were also issued
SFAS No. 143 addresses the financial accounting and reporting for certain
obligations associated with the retirement of tangible long-lived assets and the
related retirement costs. SFAS No. 144 addresses the financial accounting and
reporting for the impairment of long-lived assets and supercedes SFAS No. 121.
Both standards will become effective for the Company in fiscal 2003. The Company
has not determined the effect of these new standards.
Market Risks
The Company is exposed to market risk from changes in foreign currency exchange
rates and interest rates as part of its normal operations. To manage the
volatility relating to these exposures on a consolidated basis, the Company
takes advantage of natural offsets. The Company has estimated its market risk
exposures using sensitivity analyses assuming a 10% change in market rates.
Foreign Currency Exchange Rate Risk Due to its foreign operations, the Company
has assets, liabilities, and cash flows in currencies other than the U.S.
dollar. The Company minimizes the impact of foreign currency exchange rate
fluctuations on its Italian net investment with debt borrowings denominated in
Italian lira. Fluctuations in foreign currency exchange rates also impact the
dollar value of non-U.S. cash flows. To illustrate the potential impact of
changes in foreign currency exchange rates on the dollar value of non-U.S. cash
flows, a hypothetical 10% change in the average exchange rates for 2001 and 2000
would change income before taxes by approximately $800 and $700, respectively.
The Company's Italian operations also attempt to balance asset and liability
positions that are denominated in non-functional currencies, primarily the U.S.
dollar, Japanese yen, and British pound sterling. During 2001 and 2000, the net
exposure averaged approximately $3,800 and $1,700, respectively. A hypothetical
10% change in the average exchange rates would change the exposure by $380 for
2001 and by $200 for 2000, respectively, and that change would be reflected in
the operating results of the Company. The analysis assumes a parallel shift in
currency exchange rates, relative to the Italian lira. Exchange rates rarely
move in the same direction, and the assumption that the exchange rates change in
parallel may overstate the impact of the foreign currency exchange rate
fluctuations. The increase in net exposure between years is primarily due to
unfavorable Italian lira exchange rates.
Interest Rate Risk To manage its exposure to changes in interest rates, the
Company uses both fixed and variable rate debt. At August 31, 2001 and 2000, the
Company had approximately $146,200 and $98,600 of debt obligations outstanding
with variable interest rates with a weighted-average effective interest rate of
8.3% and 6.6%, respectively. A hypothetical 10% change in the effective interest
rate for these borrowings, using the outstanding debt levels at August 31, 2001
and 2000, would change interest expense by approximately $1,200 and $700
respectively. The increase in interest rate exposure is primarily due to higher
effective interest rates.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Amcast Industrial Corporation Statement of Internal Control
The management of Amcast Industrial Corporation has the responsibility for
preparing the accompanying financial statements and for their integrity and
objectivity. In fulfilling this responsibility, management maintains accounting
systems and related controls. These controls provide reasonable assurance, at
appropriate costs, that assets are safeguarded against losses and that financial
records are reliable for use in preparing financial statements. The systems are
enhanced by written policies, an organizational structure providing division of
responsibilities, careful selection and training of qualified people, and a
program of financial, operational, and systems review coordinated by the
internal auditor and by management. Management recognizes its responsibility for
conducting the Company's affairs according to the highest standards of personal
and corporate conduct. This responsibility is characterized by and included in
key policy statements. Management maintains a systematic program to assess
compliance with these policies.
The Company's financial statements have been audited by Ernst & Young LLP,
independent auditors elected by the shareholders. Management has made available
to Ernst & Young LLP all the Company's financial records and related data, as
well as the minutes of shareholders' and directors' meetings. Furthermore,
management believes that all representations made to Ernst & Young LLP during
their audit were valid and appropriate.
The Audit Committee of the Board of Directors, composed solely of outside
directors, meets with the independent auditors, management, and internal
auditors periodically to review their work and ensure that they are properly
discharging their responsibilities. The independent auditors and the Company's
internal auditor have free access to this committee, without management present,
to discuss the results of their audit work and their opinion on the adequacy of
internal financial controls and the quality of financial reporting.
/s/Byron O. Pond /s/Francis J. Drew /s/Mark D. Mishler
- ---------------- ------------------ ------------------
Byron O. Pond Francis J. Drew Mark D. Mishler
President and Chief Vice President, Finance and Controller
Executive Officer Chief Financial Officer
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Amcast Industrial Corporation, Dayton, Ohio
We have audited the accompanying consolidated statements of financial condition
of Amcast Industrial Corporation and subsidiaries as of August 31, 2001 and
2000, and the related consolidated statements of income, shareholders' equity
and cash flows for each of the three years in the period ended August 31, 2001.
Our audits also included the financial statement schedule listed in the Index at
item 14 (a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Amcast Industrial
Corporation and subsidiaries at August 31, 2001 and 2000, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended August 31, 2001, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in the summary of accounting policies, in fiscal 2000 the Company
changed its method of accounting for supplies and spare parts inventory.
/s/Ernst and Young, LLP
- -----------------------
Ernst and Young, LLP
Dayton, Ohio
OCTOBER 15, 2001, except for the note entitled "Long-Term Debt and Credit
Arrangements" as to which the date is November 12, 2001.
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
Year Ended August 31
------------------------
2001 2000 1999
------ ------ ------
Net sales $529,373 $610,655 $588,933
Cost of sales 488,580 531,961 495,908
-------- -------- --------
Gross Profit 40,793 78,694 93,025
Selling, general and administrative expenses 71,183 57,137 55,938
Gain on sale of businesses - - (9,023)
-------- -------- --------
Operating (Loss) Income (30,390) 21,557 46,110
Equity in loss of joint venture and other expense 1,644 3,206 1,390
Interest expense 17,532 12,929 13,182
-------- -------- --------
(Loss) Income before Income Taxes and
Cumulative Effect of Accounting Change (49,566) 5,422 31,538
Income taxes (12,435) 2,058 12,221
-------- -------- --------
(Loss) Income before Cumulative Effect
of Accounting Change (37,131) 3,364 19,317
Cumulative effect of accounting change, net of tax - 983 -
-------- -------- --------
Net (Loss) Income $(37,131) $ 4,347 $ 19,317
======== ======== ========
Basic Earnings per Share
(Loss) income before cumulative effect of
accounting change $ (4.38) $ 0.38 $ 2.11
Cumulative effect of accounting change - 0.11 -
-------- -------- --------
Net (loss) income $ (4.38) $ 0.49 $ 2.11
======== ======== ========
Diluted Earnings per Share
(Loss) income before cumulative effect of
accounting change $ (4.38) $ 0.38 $ 2.11
Cumulative effect of accounting change - 0.11 -
-------- -------- --------
Net (loss) income $ (4.38) $ 0.49 $ 2.11
======== ======== ========
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
($ in thousands)
August 31
2001 2000
ASSETS ------ ------
Current Assets
Cash and cash equivalents $ 14,981 $ 3,062
Accounts receivable 64,408 85,041
Inventories 58,193 77,512
Other current assets 13,846 16,304
-------- --------
Total Current Assets 151,428 181,919
Property, Plant, and Equipment
Land 8,816 8,383
Buildings 67,902 60,140
Machinery and equipment 342,918 315,387
Construction in progress 25,804 12,130
-------- --------
445,440 396,040
Less accumulated depreciation 203,148 169,183
-------- --------
Net Property, Plant, and Equipment 242,292 226,857
Goodwill 48,353 49,707
Other Assets 16,617 21,903
-------- --------
Total Assets $ 458,690 $ 480,386
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $ 7,311 $ 1,584
Current portion of long-term debt 21,383 3,044
Accounts payable 66,032 84,285
Compensation and related items 21,713 20,403
Accrued expenses 16,301 17,610
-------- --------
Total Current Liabilities 132,740 126,926
Long-Term Debt - less current portion 170,296 147,273
Deferred Income Taxes 15,272 31,275
Deferred Liabilities 24,870 18,958
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 shares 9,228 9,228
Capital in excess of stated value 72,419 70,981
Accumulated other comprehensive losses (5,903) (1,900)
Retained earnings 47,403 87,287
Cost of 650,860 and 821,996 common shares in treasury, respectively (7,635) (9,642)
-------- --------
Total Shareholders' Equity 115,512 155,954
-------- --------
Total Liabilities and Shareholders' Equity $ 458,690 $ 480,386
======== ========
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
($ in thousands, except per share amounts)
Accumulated
Capital in Other
Common Excess of Comprehensive Retained Treasury
Shares Stated Value Losses Earnings Stock Total
-------- -------- -------- -------- -------- --------
Balance at August 31, 1998 $ 9,207 $ 78,964 $ (945) $ 73,588 $ - $160,814
Net income - - - 19,317 - 19,317
Foreign currency translation - - 169 - - 169
Minimum pension liability,
net of tax benefit of $148 - - (242) - - (242)
--------
Total comprehensive income 19,244
Cash dividends declared, $.56 per share - - - (5,109) - (5,109)
Purchase treasury stock - - - - (4,594) (4,594)
Stock options exercised 2 34 - - - 36
Stock awards - 22 - - 353 375
-------- -------- -------- -------- -------- --------
Balance at August 31, 1999 9,209 79,020 (1,018) 87,796 (4,241) 170,766
Net income - - - 4,347 - 4,347
Foreign currency translation - - (1,124) - - (1,124)
Minimum pension liability,
net of tax benefit of $148 - - 242 - - 242
--------
Total comprehensive income 3,465
Cash dividends declared, $.56 per share - - - (4,851) - (4,851)
Price adjustment for stock
issued for acquisition - (8,196) - - - (8,196)
Purchase treasury stock - - - - (5,559) (5,559)
Stock options exercised 19 179 - - - 198
Issue treasury stock - Directors - - - - 131 131
Restricted stock awards - (22) - (5) 27 -
-------- -------- -------- -------- -------- --------
Balance at August 31, 2000 9,228 70,981 (1,900) 87,287 (9,642) 155,954
Net loss - - - (37,131) - (37,131)
Foreign currency translation - - (4,003) - - (4,003)
--------
Total comprehensive loss (41,134)
Cash dividends declared, $.28 per share - - - (2,355) - (2,355)
Sale of treasury stock - - - (380) 1,880 1,500
Issue treasury stock - Directors - - (18) 127 109
Issue stock warrants - 1,438 - - - 1,438
-------- -------- -------- -------- -------- --------
Balance at August 31, 2001 $ 9,228 $ 72,419 $ (5,903) $ 47,403 $ (7,635) $115,512
======== ======== ========= ========= ========= ==========
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Year Ended August 31,
------------------------
2001 2000 1999
------ ------ ------
Operating Activities
Net income (loss) $ (37,131) $ 4,347 $ 19,317
Depreciation and amortization 33,902 32,999 31,346
Cumulative effect of accounting change - (983) -
Issuance of stock warrants 1,438 - -
Gain on sale of businesses - - (9,023)
Loss on asset dispositions 3,995 - -
Deferred liabilities (1,328) (5,966) 4,634
Changes in assets and liabilities, net of acquisitions
Accounts receivable 17,333 (1,470) 7,581
Inventories 21,174 (3,137) (5,686)
Other current assets (11,601) 3,742 (1,421)
Accounts payable (20,783) 7,381 14,445
Accrued liabilities 3,286 (740) 2,156
Other (289) 4,168 1,421
-------- -------- --------
Net Cash Provided by Operations 9,996 40,341 64,770
Investing Activities
Additions to property, plant, and equipment (29,719) (21,535) (47,360)
Settlement related to business acquisition - (2,500) -
Acquisitions, net of cash acquired (674) - (1,200)
Proceeds from sale of businesses - - 35,604
Other 1,707 (1,767) 300
-------- -------- --------
Net Cash Used by Investing Activities (28,686) (25,802) (12,656)
Financing Activities
Additions to long-term debt 108,570 74,560 36,154
Reduction in long-term debt (80,227) (106,857) (66,993)
Short-term borrowings 3,806 13,569 (21,065)
Sale (purchase) of treasury stock 1,500 (1,255) (4,594)
Proceeds from sale leaseback - 6,488 10,105
Dividends (2,355) (4,851) (5,109)
Other - 198 36
-------- -------- --------
Net Cash Provided (Used) by Financing Activities 31,294 (18,148) (51,466)
Effect of exchange rate changes on cash (685) (257) (742)
Net change in cash and cash equivalents 11,919 (3,866) (94)
Cash and cash equivalents at beginning of year 3,062 6,928 7,022
-------- -------- --------
Cash and Cash Equivalents at End of Year $ 14,981 $ 3,062 $ 6,928
======== ======== ========
Supplemental disclosure of non-cash investing and financing activities:
Issuance of stock warrants $ (1,438) $ $
======== ======== ========
Purchase price settlement related to business acquisition:
Disposition of common stock price protection liability $ $(8,196) $
Acquisition of treasury shares (4,304)
Less reduction in original purchase price 10,000
-------- -------- --------
$ $(2,500) $
======== ======== ========
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands except per share amounts)
ACCOUNTING POLICIES
The consolidated financial statements include the accounts of Amcast Industrial
Corporation and its domestic and foreign subsidiaries (the Company).
Intercompany accounts and transactions have been eliminated. Prior to June 5,
2001, the Company's investment in Casting Technology Company (CTC), a joint
venture, was included in the accompanying consolidated financial statements
using the equity method of accounting (see Acquisitions and Divestitures). The
Company's investment in CTC was $7,266 at August 31, 2000 and was included in
Other Assets. Operations of the Company's European subsidiaries are included in
the consolidated financial statements for periods ending one month prior to the
Company's fiscal year end in order to ensure timely preparation of the
consolidated financial statements.
For foreign subsidiaries, the local foreign currency is the functional currency.
Assets and liabilities are translated into U.S. dollars at the rate of exchange
existing at year-end. Translation gains and losses are included as a component
of shareholders' equity and comprehensive income. Income statement amounts are
translated at the average monthly exchange rates. Transaction gains and losses
are included in the statement of income and were not material.
Revenue is recognized at the time products are shipped to unaffiliated
customers, legal title has passed and all significant contractual obligations of
the Company have been satisfied.
Cash and cash equivalents include amounts on deposit with financial institutions
and investments with original maturities of 90 days or less.
Accounts receivable are stated net of allowances for doubtful accounts of $2,506
and $1,711 at August 31, 2001 and 2000, respectively. The Company held accounts
receivable of $2,938 from CTC at August 31, 2000.
Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) and the first-in, first-out (FIFO) methods. During 2000, as a
result of a new enterprise resource planning (ERP) system implementation, the
Company began capitalizing the cost of supplies and spare parts inventories,
whereas previously the cost of these manufacturing supplies was expensed when
purchased. Management believed this change was preferable in that it provided
for a more appropriate matching of revenues and expenses. The total amount of
inventory capitalized and reported as a cumulative effect of a change in
accounting principle, retroactive to September 1, 1999, was $983 net of taxes of
$602. The effect of the change in 2000 was to increase income before cumulative
effect of accounting change by $248 ($0.03 per diluted share). Additional
disclosures pursuant to Accounting Principles Board Opinion No. 20, "Accounting
Changes" are not provided since supplies inventory was not monitored for
financial reporting purposes prior to the implementation of the ERP system and,
consequently, the information is not available.
Property, plant, and equipment are stated at cost. Expenditures for significant
renewals and improvements are capitalized. Repairs and maintenance are charged
to expense as incurred. Depreciation is computed using the straight-line method
based upon the estimated useful lives of the assets as follows: buildings - 20
to 40 years; machinery and equipment - 3 to 20 years. Effective September 1,
1999, the depreciable lives of certain assets of foreign subsidiaries were
changed based upon a study performed by an independent appraisal company. The
effect of this change in 2000 was a reduction of depreciation expense and a
corresponding increase in income before income taxes of approximately $2,400. As
a result, net income in 2000 increased by $1,488 ($0.17 per share).
Tooling expenditures reimbursable by the customer are capitalized and classified
as a current asset. Tooling expenditures not reimbursable by the customer are
capitalized and classified with property, plant, and equipment then charged to
expense over the estimated useful life.
Goodwill represents the excess of the cost of businesses acquired over the fair
market value of identifiable net assets at the dates of acquisition. Goodwill is
amortized on a straight-line basis over 40 years. Accumulated amortization of
goodwill was $6,401 and $5,048 at August 31, 2001 and 2000, respectively. The
carrying value of goodwill is evaluated periodically in relation to the
operating performance and future undiscounted cash flows of the underlying
businesses.
1
Deferred income taxes are provided for temporary differences between financial
and tax reporting in accordance with the liability method under the provisions
of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes."
Use of estimates and assumptions are made by management in the preparation of
the financial statements in conformity with accounting principles generally
accepted in the United States that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Earnings per common share are calculated under the provisions of SFAS No. 128,
"Earnings per Share." The calculation of basic earnings per share is based on
the weighted-average number of common shares outstanding. The calculation of
diluted earnings per share is based on the weighted-average number of common
shares outstanding plus all potential dilutive common shares outstanding.
Start-up and organization costs are accounted for under the provisions of the
American Institute of Certified Public Accountants' Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." which requires such costs
to be expensed as incurred.
Accounting standards adopted during 2001 include SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," as amended by SFAS Nos. 137 and
138, which establishes a comprehensive standard for the recognition and
measurement of derivatives and hedging activities. The new standard requires
that all derivatives be recognized as assets or liabilities in the statement of
financial position and be measured at fair value. Gains or losses resulting from
changes in fair value are required to be recognized in current earnings unless
specific hedge criteria are met. Special accounting allows for gains or losses
on qualifying derivatives to offset gains or losses on the hedged item in the
statement of income and requires formal documentation of the effectiveness of
transactions that receive hedge accounting. The adoption of this standard did
not have a material effect on the Company's consolidated results of operations,
financial position, or cash flows.
The Company also adopted the provisions of Securities and Exchange Commission
Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements," which provides guidance on the recognition, presentation, and
disclosure of revenue in financial statements. The adoption of SAB 101 did not
have a material effect on the Company's consolidated results of operations.
New accounting standards issued include SFAS No. 141, "Business Combinations"
and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141
discontinues the use of the pooling of interest method and requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. The new standard also specifies criteria that intangible
assets acquired in a business combination must meet to be recognized apart from
goodwill. SFAS No. 142 requires that goodwill and certain intangible assets
(deemed to have indefinite lives) no longer be amortized, but instead be tested
for impairment, at least on an annual basis, and written down in the periods in
which the recorded amount is greater than the fair value. Other intangible
assets will continue to be amortized over their useful lives and reviewed for
impairment in accordance with SFAS No. 121. These standards only permit
prospective application; therefore, adoption of these standards will not affect
previously reported financial information. SFAS Nos. 141 and 142 will become
effective for the Company in the first quarter of fiscal 2003; however, the
Company is evaluating early adoption as of September 1, 2001.
The Company will evaluate its existing intangible assets and goodwill that were
acquired in prior business combinations and, upon adoption of the new standards,
make any necessary reclassifications in order to conform with the new criteria
for recognition apart from goodwill. If early adopted, the Company will also be
required to perform initial impairment tests of goodwill and indefinite lived
intangible assets during fiscal 2002. Any impairment loss will be measured as of
the date of adoption and recognized as a cumulative effect of a change in
accounting principle as of the beginning of fiscal 2002. Because of the
extensive effort needed to comply with adopting SFAS No. 142, as of the date of
this report, the Company cannot estimate the entire impact adopting the standard
will have on the Company's consolidated results of operations, financial
position, or cash flows; however, amortization expense of $1,354 related to
goodwill would be eliminated in 2002, which would increase per share earnings by
$0.16. The adoption of SFAS No. 141 should not have a material effect on the
Company's consolidated results of operations, financial position, or cash flows.
SFAS No. 143, "Accounting for Asset Retirement Obligations," and SFAS No. 144,
"Accounting for Impairment or Disposal of Long-Lived Assets" were also issued.
SFAS No. 143 addresses the financial accounting and reporting for certain
obligations associated with the retirement of tangible long-lived assets and the
related retirement costs. SFAS No. 144 addresses the financial accounting and
reporting for the impairment of long-lived assets and supersedes SFAS No. 121.
Both standards will become effective for the Company in fiscal 2003. The Company
has not determined the effect of these new standards.
Certain reclassifications have been made to certain prior year amounts to
conform to the current-year presentation.
Acquisitions and Divestitures
On October 16, 1998, 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. Results for fiscal 1999
included sales of approximately $4,600 in the Company's Flow Control segment.
At the end of 1997, the Company acquired all of the outstanding stock of
Speedline S.p.A. and its subsidiaries (Speedline). The purchase agreement
contained a provision to protect the seller from stock price fluctuations.
During 2000, the Company resolved several matters with the seller which, among
other items, resulted in the purchase by the Company of 478,240 shares of the
Company's common stock held by the seller, a reduction in the purchase price
(goodwill) of $10,000 and a net cash payment to the seller of $2,500.
Effective June 5, 2001, the Company purchased the remaining 40% share in Casting
Technology Company (CTC), from Izumi Industries, LTD, bringing total ownership
to 100%. The purchase price was approximately $4,000 of which $2,000 is payable
in annual installments over the next five years. The acquisition was accounted
for by the purchase method; accordingly, the cost of the acquisition was
allocated on the basis of the estimated fair market value of the assets acquired
and liabilities assumed. No goodwill was recognized from the transaction. The
financial results of CTC have been included as part of the Engineered Components
segment in the consolidated financial statements since the purchase of the
remaining 40% share. Prior to June 5, 2001, the Company's investment in CTC was
accounted for by the equity method. Summarized financial information for the
nine months ended June 5, 2001 and the years ended August 31, 2000 and 1999 is
as follows:
2000 1999
------ ------
Current assets $ 11,651 $ 12,286
Noncurrent assets 39,145 42,537
Current liabilities 28,626 31,154
Noncurrent liabilities 10,060 19,680
Nine Months
2001 2000 1999
------ ------ ------
Net Sales $ 26,370 $ 49,517 $ 40,795
Gross profit (loss) (622) (1,034) 4,031
Pretax loss (5,198) (5,880) (2,417)
INVENTORIES
The major components of inventories as of August 31 are:
2001 2000
------ ------
Finished Products $ 30,470 $ 40,013
Work in process 13,952 23,932
Raw materials and supplies 17,468 18,661
--------- ---------
61,890 82,606
Less amount to reduce certain inventories
to LIFO value 3,697 5,094
--------- ---------
Inventories $ 58,193 $ 77,512
========= =========
Inventories of foreign locations are reported on the FIFO method and totaled
$26,634 and $30,343 at August 31, 2001 and 2000, respectively. The estimated
replacement cost of inventories is the amount reported before the LIFO reserve.
LONG-TERM DEBT AND CREDIT ARRANGEMENTS
The following table summarizes the Company's long-term borrowings at August 31:
2001 2000
------ ------
Senior Notes $ 50,000 $ 50,000
Revolving credit notes 114,978 77,510
Lines of credit 14,200 16,200
Other debt 11,492 3,388
Capital leases 1,009 3,219
--------- ---------
191,679 150,317
Less current portion 21,383 3,044
--------- ---------
Long-Term Debt $ 170,296 $ 147,273
========= =========
The Company maintains a credit agreement (the Revolver Agreement) that had
provided for up to $150,000 in borrowings through August 2002. Debt covenants
under the Revolver Agreement required the Company to maintain certain
debt-to-earnings and interest coverage ratios. Due to operating losses incurred
during the second quarter, at March 4, 2001, the Company was not in compliance
with the debt-to-earnings and interest coverage covenants under the Revolver
Agreement. This resulted in a cross violation in the Company's Senior Note
Agreement (the Senior Notes) and the CTC Credit Agreement (the CTC Agreement) of
which the Company had guaranteed $14,094 at March 4, 2001. The lenders under the
Revolver Agreement, and the CTC Agreement have waived the financial covenant
violations through April 15, 2002. The lenders under the Senior Notes have
waived the financial covenant violations through September, 2002. The Company
plans to establish new Senior Note covenants during the first half of Fiscal
2002. The Company also has borrowings outstanding under lines of credit totaling
$14,200 with an average interest rate of 8.5%. The Company can no longer borrow
additional funds under the Revolver Agreement or the lines of credit and the
lenders now have a subordinated security interest in the assets of the Company's
U.S. subsidiaries and certain stock of the foreign subsidiaries. Interest rates
for borrowings under the Revolver Agreement increased to prime plus 2% and the
Senior Notes increased to 9.09%, plus an additional 1% for payment in kind.
On June 5, 2001, the Company entered into a new credit agreement (the Credit
Agreement), which provides for the ability to make new borrowings initially up
to $15,000, increasing in stages to a maximum of $35,000 based on the Company
meeting certain conditions. Borrowings are limited to specified percentages of
eligible receivables, inventories, and property and equipment. At August 31,
2001, the Company had a maximum borrowing capacity of $30,000. The Credit
Agreement matures on April 15, 2002. Among other things, the Credit Agreement
requires the Company to grant a first priority security interest in the
Company's U.S. assets including, all real property, accounts receivable,
inventory, machinery and equipment, as well as a subordinated security interest
to lenders under the Revolver Agreement and Senior Notes. Interest rates for
borrowings under the Credit Agreement are prime plus 4%.
Subsequent to August 31, 2001, the Company amended the Revolver Agreement. This
amendment extended the Revolver Agreement through September 2002, and
established new financial covenants with its lenders in which the Company must,
among other things, maintain quarterly levels of total liabilities to tangible
net worth, free cash flow, EBITDA, and meet scheduled debt repayments. The
maximum level of total liabilities to tangible net worth is not to exceed 6.4 at
December 2, 2001, 7.0 at March 3, 2002, 6.8 at June 2, 2002, and 6.5 at August
31, 2002. The minimum cumulative level of free cash flow is to be $8,100 at
December 2, 2001, $6,100 at March 3, 2002, $20,900 at June 2, 2002, and $31,200
at August 31, 2002. In addition, the Company must make scheduled debt reductions
(which are included with the current portion of long-term debt) of $5,000,
$6,500, and $5,000 at the end of the first, third, and fourth quarters of fiscal
2002, respectively. If these minimum levels are not maintained, any outstanding
balances become payable upon demand by the Company's lenders. Based on the
Company's forecasted ability to comply with the revised debt covenants, it
continues to classify debt as long term. The Credit Agreement and CTC Agreement
also include a subjective acceleration clause whereby the lenders can declare an
event of default upon any material adverse change as defined by the lenders. At
August 31, 2001, there were no borrowings outstanding under the Credit Agreement
and $13,356 was outstanding under the CTC Agreement.
In order to meet the new financial covenants, the Company needs to achieve
operating results substantially consistent with its 2002 operating plan. This
plan calls for a significant increase in operating income. The Company plans to
increase gross profit through improved plant efficiencies, higher productivity,
and lower scrap. In addition, the Company plans to reduce selling, general and
administrative expenses primarily through reductions in personnel and employee
benefit costs, and other cost savings programs.
In consideration for the Credit Agreement and waiver of covenant violations
under the Revolver Agreement and Senior Notes, the Company granted warrants to
purchase 455,220 shares of the Company's common stock at a purchase price of
$8.80 per share. The warrants are immediately exercisable and expire June 3,
2005. If the maturity date of the Revolver Agreement is extended to September
2003, warrants for the purchase of an additional 255,000 shares will be issued.
The CTC Agreement provided for borrowings under a revolving credit facility and
a term loan. At August 31, 2001, $4,500 was outstanding on the revolver and
$8,856 was outstanding on the term loan, both with interest rates at prime plus
2%. CTC subsequently entered into a new credit facility, effective September 18,
2001, that provides for up to $15,356 in borrowings at interest rates at prime
or LIBOR plus 2.25%. The revolver portion matures September 2002 and the term
loan matures August 2003.
The Senior Notes originally required periodic principal payments beginning in
November 2002 through November 2005. The maturity date of the Senior Notes is
now November 2003. If the maturity date of the Revolver Agreement is extended to
September 2003, the principal payment under the Senior Notes that is due
November 2002, will be extended to November 2003.
Other debt includes the term loan under the CTC Agreement and various mortgage
loans with variable interest rates, ranging from 3.0% to 5.8% that require
periodic principal payments through 2006. The mortgage loans are secured by
property, plant, and equipment with a net book value of $13,300 at August 31,
2001.
Capitalized lease obligations are payable through 2003. At August 31, 2001,
future minimum payments for the leases were $1,143, including $134 representing
interest.
The carrying amounts of the Company's debt instruments approximate fair value as
defined under SFAS No. 107. Fair value is estimated based on discounted cash
flows, as well as other valuation techniques. Long-term debt maturities for each
of the next five years are $21,383 in 2002, $131,737 in 2003, $37,976 in 2004,
$230 in 2005, and $192 in 2006.
The Company's foreign operations have short-term lines of credit totaling
approximately $17,274 that are subject to annual review by the lending banks. At
August 31, 2001, the average interest rate for the short-term lines of credit
was 5.7%. Amounts outstanding under these lines of credit are payable on demand
and total $2,741 as of August 31, 2001.
Interest paid was $15,890, $12,945, and $13,044 in 2001, 2000, and 1999,
respectively.
LEASES
The Company has a number of operating lease agreements primarily involving
machinery, physical distribution, and computer equipment. Certain of these
leases contain renewal or purchase options that vary by lease. These leases are
noncancelable and expire on dates through 2009. During 1999 and 2000, the
Company entered into sale-leaseback transactions whereby the Company sold new
and existing manufacturing equipment and leased it back for 7 years. The
leasebacks are being accounted for as operating leases. The gains of $2,044 have
been deferred and are being amortized to income over the lease term.
Rent expense was $6,150, $5,277, and $3,215 for the years ended August 31, 2001,
2000, and 1999, respectively.
The following is a schedule by year of future minimum rental payments required
under the operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of August 31, 2001:
2002 $ 5,232
2003 5,117
2004 3,134
2005 1,200
2006 955
2007 and thereafter 385
---------
Total Minimum Lease Payments $ 16,023
=========
PENSION PLANS AND POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
Pension Plans: The Company has a noncontributory defined benefit pension plan
covering certain employees. The plan covers salaried employees and provides
pension benefits that are based on years of credited service, employee
compensation during years preceding retirement, and the primary social security
benefit. The plan also covers hourly employees and provides pension benefits of
stated amounts for each year of credited service. The Company's policy is to
fund the annual amount required by the Employee Retirement Income Security Act
of 1974. Plan assets consist of U.S. Treasury bonds and notes, U.S. governmental
agency issues, corporate bonds, and common stocks. The plan held 510,526 common
shares of the Company at August 31, 2001 (4.0% of plan assets) and 350,000
shares at August 31, 2000 (3.0% of plan assets).
In 1999, the Company amended its defined benefit pension plan with respect to
certain salaried and hourly employees by establishing a defined benefit cash
balance pension plan (the Plan). The Plan provides pension benefits that are
based on years of credited service and employee compensation during years
preceding retirement. Employees who met certain age and service requirements
remained in the defined benefit pension plan. In August 2000, the Company
amended the Plan to provide additional benefits to certain former employees.
This amendment increased the Company's obligations under the Plan by $3,945,
which will be amortized against income over approximately 17 years.
The Company also has an unfunded nonqualified supplementary benefit plan through
which the Company provides supplemental pension payments in excess of qualified
plan payments including payments in excess of limits imposed by federal tax law
and other benefits. The plan covers certain current and former officers and key
employees.
In addition, the Company participates in a multiemployer plan that provides
defined benefits to certain bargaining unit employees. The Company's
contributions to the multiemployer plan totaled $357, $344, and $293 for 2001,
2000 and 1999, respectively.
Postretirement Health and Life: The Company provides postretirement life
insurance benefits to certain employees who retired prior to July 1, 1999 and
all non-organized salaried and hourly employees who participate in the defined
benefit pension plan. The Company previously provided health insurance benefits
to designated salaried and hourly employees who participated in the defined
benefit pension plan and who retired prior to January 1, 1992. Effective July 1,
2001, the Company amended its postretirement benefit plans and terminated
postretirement health insurance for all existing retirees. This amendment
decreased the Company's postretirement obligation by $1,684, which will be
amortized into income over approximately five years. The Company funds the
postretirement benefits on a cash basis.
The following tables provide a reconciliation of the change in the benefit
obligation, the change in plan assets, and a statement of the funded status of
the plans.
Pension Benefits Postretirement Benefits
2001 2000 2001 2000
------ ------ ------ ------
Change in Benefit Obligation
Benefit obligation at beginning of year $ 96,719 $ 98,582 $ 2,858 $ 3,260
Service cost 1,430 1,555 21 22
Interest cost 7,629 6,925 221 226
Plan amendments 648 5,047 (1,684) --
Actuarial (gain) loss 7,076 (7,591) 889 (118)
Benefits paid (9,569) (7,799) (428) (532)
---------- ---------- -------- --------
Benefit obligation at end of year $ 103,933 $ 96,719 $ 1,877 $ 2,858
========== ========== ======== ========
Change in Plan Assets
Fair value of plan assets at beginning of year $ 133,167 $ 120,192 -- --
Actual return on plan assets (8,685) 20,682 -- --
Employer contribution 93 92 428 532
Benefits paid (9,569) (7,799) (428) (532)
---------- ---------- -------- --------
Fair value of plan assets at end of year $ 115,006 $ 133,167 $ -- $ --
========== ========== ======== ========
Funded Status
Funded status $ 11,073 $ 36,448 $(1,877) $(2,858)
Unrecognized net actuarial (gains) loss (10,473) (38,483) 2,100 1,266
Unrecognized prior service cost 6,287 6,038 (1,684) --
Unrecognized transition asset (279) (837) -- --
---------- ---------- -------- --------
Net asset (liability) $ 6,608 $ 3,166 $(1,461) $(1,592)
========== ========== ======== ========
Amounts recognized in Statements of Financial Condition
Prepaid (accrued) benefit cost $ 6,608 $ 3,166 $(1,461) $(1,592)
Additional minimum liability -- (723) -- --
Intangible asset -- 723 -- --
---------- ---------- -------- --------
Net amount recognized $ 6,608 $ 3,166 $(1,461) $(1,592)
========== ========== ======== ========
The assumptions used in the measurement of the Company's benefit obligation and net
periodic benefit cost were as follows:
Pension Benefits Postretirement Benefits
2001 2000 2001 2000
------ ------ ------ ------
Weighted-average assumptions
Discount rate 7.5% 8.3% 7.5% 8.3%
Expected return on plan assets 10.0% 10.5% -- --
Rate of compensation increase 4.7% 4.7% -- --
The components of net periodic benefit cost included in results of operation are as follows:
2001 2000 1999 2001 2000 1999
------ ------ ------ ------ ------ ------
Net Periodic Benefit Cost
Service cost $ 1,430 $ 1,555 $ 2,117 $ 21 $ 22 $ 50
Interest cost 7,629 6,925 7,104 221 226 262
Expected return on plan assets (11,672) (10,594) (9,088) -- -- --
Amortization of prior service cost 399 79 334 -- -- --
Recognized net actuarial (gain) loss (577) 47 39 54 60 65
Amortization of transition asset (558) (558) (558) -- -- --
Dispositions -- -- (305) -- -- (47)
Curtailment gain -- -- (1,089) -- -- (511)
-------- -------- -------- ------- ------- -------
Net periodic benefit cost (benefit) $ (3,349) $ (2,546) $(1,446) $ 296 $ 308 $(181)
======== ======== ======== ======= ======= =======
The Company also sponsors a 401(k) profit sharing plan for the benefit of
substantially all domestic salaried employees. The Company provides a 25% match
on employee contributions up to 6% of eligible compensation and a supplemental
savings match from 1% to 35% based on the Company achieving a minimum return on
shareholders' equity and subject to IRS limitations. Matching contributions made
by the Company totaled $596, $734, and $369 for 2001, 2000, and 1999,
respectively.
Included in deferred liabilities at August 31, 2001 and 2000, is an accrual
totaling $10,804 and $10,439, respectively, for termination benefits for
Speedline employees. The liability is based on the employee's length of service,
position, and remuneration, and is payable upon separation. There is no vesting
period or funding requirement associated with the liability.
COMMITMENTS AND CONTINGENCIES
At August 31, 2001, the Company has committed to capital expenditures of $6,744
in 2002, 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 or are currently underway. The
designation as a potentially responsible party and the assertion of such claims
against the Company are made without taking into consideration the nature or
extent of the Company's involvement with the particular site. In most instances,
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 August 31, 2001, the Company's
accrued undiscounted reserve for such contingencies was $2,855.
Based upon the contracts and agreements with regards to two environmental
matters, the Company believes it is entitled to indemnity for remediation costs
at two sites and believes it is probable that the Company can recover a
substantial portion of the costs. Accordingly, the Company has recorded
receivables of $1,115 related to anticipated recoveries from third parties.
Allied-Signal Inc. (now Honeywell International) brought an action against the
Company seeking a contribution from the Company equal to 50% of Honeywell
International'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.
In prior years, the Company had recorded a liability for a legal claim asserted
by former employees at its Flagg Brass operations. Due to the terms of a
settlement, a liability in the amount of $2,226 was reversed in 2000 through a
reduction in SG&A expense.
MAJOR CUSTOMERS AND CREDIT CONCENTRATION
The Company sells products to customers primarily in the United States and
Europe. The Company performs ongoing credit evaluations of customers, and
generally does not require collateral. Allowances are maintained for potential
credit losses and such losses have been within management's expectations. On
August 31, 2001, total trade receivables from the domestic and foreign
automotive industry were $44,082, and $13,150 was due from the construction
industry.
Sales to the Company's largest customer, General Motors, were $127,294, $157,099
and $136,469 for the years ended August 31, 2001, 2000, and 1999, respectively.
Trade receivables from General Motors on August 31, 2001 and 2000, were $5,895
and $7,845, respectively, and were current. No other single customer accounted
for a material portion of trade receivables.
PREFERRED SHARE PURCHASE RIGHTS
Under the Company's Shareholder Rights Plan, as amended on February 24, 1998,
holders of common shares have one preferred share purchase right (collectively,
the Rights) for each common share held. The Rights contain features, which,
under defined circumstances, allow holders to buy common shares at a bargain
price. The Rights are not presently exercisable and trade in tandem with the
common shares. The Rights become exercisable following the close of business on
the earlier of (i) the 20th day after a public announcement that a person or
group has acquired 15% or more of the common shares of the Company or (ii) the
date designated by the Company's board of directors. It is expected that the
Rights will begin to trade independently of the Company's common shares at that
time. Unless renewed, the Rights expire on February 23, 2008.
Income Taxes
For financial reporting purposes, income (loss) before income taxes includes the
following components:
2001 2000 1999
------ ------ ------
United States $ (41,055) $ 135 $ 23,005
Foreign (8,511) 5,287 8,533
-------- -------- --------
$ (49,566) $ 5,422 $ 31,538
======== ======== ========
The provisions (benefits) for income taxes are as follows:
Currently payable
State and local $ (20) $ 62 $ 1,002
Foreign 1,556 3,142 3,450
Federal (3,068) 61 5,499
-------- -------- --------
(1,532) 3,265 9,951
Deferred
State and local (264) 78 133
Foreign (243) (1,053) (803)
Federal (10,396) (232) 2,940
-------- -------- --------
(10,903) (1,207) 2,270
-------- -------- --------
$ (12,435) $ 2,058 $ 12,221
======== ======== =========
Reconciliation of income tax expense (benefit) computed by applying statutory
federal income tax rate to the provisions (benefits) for income taxes are as
follows:
Federal income tax expense (benefit)
at statutory rate $ (17,348) $ 1,898 $ 11,038
Federal tax credits (200) (200) (108)
State income taxes (285) 117 784
Goodwill amortization 455 507 852
Higher effective income taxes of
other countries 1,588 454 954
Foreign tax basis step-up - - (1,590)
Increase in valuation allowance 3,048 - -
Other 307 (718) 291
-------- -------- --------
$ (12,435) $ 2,058 $ 12,221
========= ======== ========
Significant components of deferred tax assets and (liabilities) are as follows:
2001 2000
------ ------
Deferred tax assets related to
Accrued compensation and related items $ 2,428 $ 3,090
Tax credit carryforwards 5,789 1,747
Net operating losses 24,221 9,179
Other 6,235 2,096
-------- --------
Subtotal deferred tax assets 38,673 16,112
Valuation allowance (13,401) (3,198)
-------- --------
Total deferred tax assets 25,272 12,914
Deferred tax liabilities related to
Depreciation (27,226) (31,954)
Other (10,732) (5,584)
-------- --------
Total deferred tax liabilities (37,958) (37,538)
-------- --------
Net deferred tax liabilities $(12,686) $(24,624)
======== ========
The Company has foreign net operating loss carryforwards totaling $27,442, of
this total, $16,601 will expire in years 2002 through 2006 and $10,841 have an
unlimited carryforward. The Company also has domestic net operating loss
carryforwards totaling $40,977, of which $20,535 relate to current year
operations and $20,442 were recorded as part of the Izumi, Inc. stock
acquisition. The domestic net operating loss carryforwards will expire in 2022.
In addition, the Company has income tax credits of $1,069 expiring in 2021 and
an alternative minimum tax credit of $4,720 that has an unlimited carryforward
period. For financial reporting purposes, a valuation allowance of $13,401 has
been recognized to offset the deferred tax assets related to those
carryforwards. Of the $13,401 valuation allowance, $7,155 relates to the net
operating loss carryforwards associated with the purchase of the remaining 40%
share in CTC and $6,246 is associated with foreign operations.
Income taxes paid by the Company totaled $1,905, $4,342, and $7,000 in 2001,
2000, and 1999, respectively.
Undistributed earnings of the Company's foreign subsidiaries are considered to
be permanently reinvested and, accordingly, no provisions for U.S. income taxes
have been provided thereon. It is not practical to determine the deferred tax
liability for temporary differences related to these undistributed earnings.
STOCK OPTIONS
The Company has two plans under which stock options for the purchase of common
shares can be granted. The 1999 Stock Incentive Plan provides for the granting
of options for the purchase of a maximum of 425,000 shares, stock appreciation
rights, performance awards, and restricted stock awards to key employees of the
Company. Options awarded under the plan may not be granted at an option price
less than the fair market value of a share on the date the option is granted,
and the maximum term of an option may not exceed ten years. All options
currently granted under the plan are exercisable one year after the date of
grant.
The 1999 Director Stock Option Plan provides for the granting of options for the
purchase of a maximum of 150,000 shares. Under the plan, each person serving as
a director of the Company on the first business day of January of each year, who
is not employed by the Company, is automatically granted options for the
purchase of 1,500 shares. All options were granted at an option price equal to
the fair market value of a share on the date of grant. Each option is
exercisable one year after the date of grant and the maximum term of an option
may not exceed ten years.
Certain options also remain outstanding and exercisable from prior stock option
plans. In addition, two executive officers received a total of 280,000 stock
options as an inducement to their employment at an average exercise price of
$8.89.
Information regarding the Company's stock option plans for the years
ended August 31, 2001, 2000, and 1999 is as follows:
2001 2000 1999
------------------ ------------------ ------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-------- ------- -------- ------- -------- -------
Outstanding at beginning of year 647,792 $18.36 668,494 $19.21 571,337 $19.94
Granted 712,834 $ 9.18 161,346 $14.18 132,657 $16.46
Exercised 0 $ 0.00 (19,071) $10.38 (2,000) $18.03
Cancelled (95,300) $14.12 (162,977) $18.63 (33,500) $20.86
-------- ------- -------- ------- -------- -------
Outstanding at end of year 1,265,326 $13.51 647,792 $18.36 668,494 $19.21
-------- ------- -------- ------- -------- -------
Options exercisable at end of year 779,015 $16.26 510,607 $19.51 535,837 $19.89
-------- ------- -------- ------- -------- -------
Weighted-average fair value of
options granted during the year $3.33 $4.81 $3.36
======= ====== ======
Information regarding options outstanding at August 31, 2001 follows:
Options Outstanding Options Exercisable
--------------------- ---------------------
Weighted Weighted- Weighted-
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Number Life Price Number Price
-------- ------- -------- -------- -------
$8.49 - $14.50 741,543 5.6 years $9.32 255,232 $ 9.74
$15.53 - $19.09 329,667 6.1 years $17.07 329,667 $17.07
$20.44 - $25.19 194,116 4.5 years $23.47 194,116 $23.47
The Company has elected to adopt the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," and continue to apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its stock option plans. Accordingly, no compensation cost has been recognized
related to the Company's stock option plans. Consistent with the provisions of
SFAS 123, had compensation cost been determined based on the fair value at the
grant date for awards in fiscal 2001, 2000, and 1999 the Company's net loss and
net loss per share would be increased for 2001 and net income and net income per
share would be reduced for 2000 and 1999 as follows:
2001 2000 1999
------ ------ ------
Proforma effect on net income $872 $ 430 $ 290
Proforma effect on net income per share
Basic $ 0.10 $ 0.05 $0.03
Diluted $ 0.10 $ 0.05 $0.03
The fair value of each option grant was estimated as of the grant date using the
Black-Scholes option-pricing model with the following assumptions:
2001 2000 1999
------ ------ ------
Expected volatility 45.0 % 46.0 % 23.0 %
Dividend yield 2.83% 4.42% 3.31%
Expected life of option in years 5.0 5.0 5.0
Risk-free interest rates 3.5%-5.8% 5.7%-6.8% 4.4%-5.6%
EARNINGS PER SHARE
The following table reflects the calculations for basic and diluted earnings per
share for the three years ended August 31:
2001 2000 1999
------ ------ ------
Income (loss)before cumulative effect
of accounting change $(37,131) $ 3,364 $ 19,317
------- ------- -------
Net (loss) income $(37,131) $ 4,347 $ 19,317
======= ======= =======
Basic Earnings per Share
Basic shares 8,482 8,788 9,144
------ ------ ------
Income (loss) before cumulative
effect of accounting change $ - $ 0.38 $ 2.11
------- ------- -------
Net (loss) income $ (4.38) $ 0.49 $ 2.11
======== ======= =======
Diluted Earnings per Share
Basic shares 8,482 8,788 9,144
Stock options - 4 18
------- ------- -------
Diluted shares 8,482 8,792 9,162
======= ======= =======
Income (loss) before cumulative
effect of accounting change $ - $ 0.38 $ 2.11
------- ------- -------
Net (loss) income $ (4.38) $ 0.49 $ 2.11
======= ======= =======
For each of the three years, 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, and in accordance with SFAS No. 131, the Company
has aggregated similar operating segments into two reportable segments: Flow
Control Products and Engineered Components. The Flow Control Products segment is
a supplier of copper and brass plumbing fittings for the industrial, commercial
and residential construction markets, and cast and fabricated metal products for
sale to original equipment manufacturers in the transportation, construction,
air conditioning and refrigeration industries. The Engineered Components segment
is a supplier of aluminum wheels and aluminum automotive components, primarily
for automotive original equipment manufacturers. During 2001, the Company
reevaluated the composition of the reportable segments and reclassified one
business from Engineered Components to Flow Control Products. Prior year segment
information was restated to conform to the 2001 presentation.
The Company evaluates segment performance and allocates resources based on
several factors, of which net sales and operating income are the primary
financial measures. The accounting policies of the reportable segments are the
same as those described in the footnote entitled "Accounting Policies" of the
Notes to the Consolidated Financial Statements. There are no intersegment sales.
Net Sales Operating Income
2001 2000 1999 2001 2000 1999
------ ------ ------ ------ ------ ------
Flow Control Products $151,216 $ 168,181 $ 178,483 $ 5,471 $ 23,663 $ 31,061
Engineered Components 378,157 442,474 410,450 (16,683) 5,243 15,566
Corporate - - - (19,178) (7,349) (9,540)
-------- -------- -------- ------- ------- -------
529,373 610,655 588,933 (30,390) 21,557 37,087
Disposition of businesses - - - - - 9,023
Equity in loss of joint
venture and other
income (expense) - - - (1,644) (3,206) (1,390)
Interest expense - - - (17,532) (12,929) (13,182)
-------- -------- -------- ------- ------- -------
Total net sales and
income before taxes $529,373 $ 610,655 $ 588,933 $(49,566) $ 5,422 $ 31,538
======== ========= ========= ========= ======= ========
Capital Expenditures Depreciation and Amortization
2001 2000 1999 2001 2000 1999
------ ------ ------ ------ ------ ------
Flow Control Products $ 10,818 $ 5,724 $ 6,867 $ 6,250 $ 6,188 $ 6,110
Engineered Components 18,897 15,729 40,198 25,288 25,754 24,230
Corporate 4 82 295 2,364 1,057 1,006
-------- -------- -------- ------- ------- -------
$ 29,719 $ 21,535 $ 47,360 $ 33,902 $ 32,999 $ 31,346
======== ======== ======== ======== ======== ========
Total Assets
2001 2000 1999
------ ------ ------
Flow Control Products $ 80,972 $ 94,408 $ 93,622
Engineered Components 293,482 305,188 349,804
Corporate 84,236 80,790 90,060
-------- -------- --------
$458,690 $ 480,386 $ 533,486
========= ========= ==========
* Income before cumulative effect of a change in accounting principle in 2000.
The Company's manufacturing operations are conducted in the United States and
Europe. Information about the Company's operations in different geographic areas
for the years ended August 31, 2001, 2000, and 1999 is shown below. Net sales
are based on the location of the customer.
2001 2000 1999
------ ------ ------
Net Sales
United States $ 354,424 $ 422,403 $ 392,960
Other Europe 73,440 92,319 107,602
Germany 69,658 76,780 70,143
Other 31,851 19,153 18,228
--------- --------- ---------
$ 529,373 $ 610,655 $ 588,933
========= ========= =========
Long-Lived Assets
United States $ 165,007 $ 146,908 $ 158,997
Europe 77,285 79,949 97,761
--------- --------- ---------
$ 242,292 $ 226,857 $ 256,758
========= ========= =========
The Company's sales by product category are as follows:
2001 2000 1999
------ ------ ------
Aluminum wheels $ 254,804 $ 289,210 $ 301,490
Brass and copper fittings 147,931 166,203 167,931
Aluminum automotive components 126,638 155,242 115,297
Valves - - 4,215
--------- --------- ---------
$ 529,373 $ 610,655 $ 588,933
========= ========= =========
QUARTERLY FINANCIAL DATA (UNAUDITED)
($ in thousands except per share data)
For the
Fiscal Quarter Year
------------------------ ----------
2001 1st 2nd 3rd 4th
- ------ ----- ----- ----- -----
Net sales $ 137,944 $ 122,966 $ 136,158 $ 132,305 $ 529,373
Gross profit $ 16,288 $ 9,968 $ 6,084 $ 8,453 $ 40,793
Net income (loss) $ 82 $ (6,737) $ (19,243) $ (11,233) $ (37,131)
Net income (loss) per share - basic $ 0.01 $ (0.80) $ (2.25) $ (1.31) $ (4.38)
Net income(loss) per share - diluted $ 0.01 $ (0.80) $ (2.25) $ (1.31) $ (4.38)
Average number of shares
outstanding - basic 8,406 8,413 8,536 8,577 8,482
Average number of shares
outstanding - diluted 8,412 8,417 8,537 8,577 8,482
For the
Fiscal Quarter Year
------------------------ ----------
2000 1st 2nd 3rd 4th
- ------ ----- ----- ----- -----
Net sales $ 146,079 $ 150,009 $ 163,162 $ 151,405 $ 610,655
Gross profit $ 18,311 $ 18,631 $ 21,387 $ 20,365 $ 78,694
Income before cumulative effect
of accounting change $ 1,295 $ 284 $ 1,485 $ 300 $ 3,364
Income per share before cumulative
effect of accounting change - basic $ 0.14 $ 0.03 $ 0.17 $ 0.04 $ 0.38
Income per share before cumulative
effect of accounting change - diluted $ 0.14 $ 0.03 $ 0.17 $ 0.04 $ 0.38
Net income $ 2,278 $ 284 $ 1,485 $ 300 $ 4,347
Net income per share - basic $ 0.25 $ 0.03 $ 0.17 $ 0.04 $ 0.49
Net income per share - diluted $ 0.25 $ 0.03 $ 0.17 $ 0.04 $ 0.49
Average number of shares
outstanding - basic 8,956 8,949 8,863 8,406 8,788
Average number of shares
outstanding - diluted 8,962 8,956 8,863 8,407 8,792
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item relating to directors and executive
officers of the Company is incorporated herein by reference to that part of the
information under "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for its Annual
Meeting of Shareholders scheduled to be held on December 19, 2001. Certain
information concerning executive officers of the Company appears under
"Executive Officers of Registrant" at Part I, page 8, of this Report.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this item is incorporated herein by reference to
"Executive Compensation" in the Company's Proxy Statement for its Annual Meeting
of Shareholders scheduled to be held on December 19, 2001.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated herein by reference to
"Security Ownership of Directors, Nominees, and Officers" and "Security
Ownership of Certain Beneficial Owners" in the Company's Proxy Statement for its
Annual Meeting of Shareholders scheduled to be held on December 19, 2001.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated herein by reference to the
Company's Proxy Statement for its Annual Meeting of Shareholders scheduled to be
held on December 19, 2001.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) Documents filed as part of this report.
1. Financial statements
The following financial statements are filed as part of this report.
See index on page 2 of this report.
Report of Independent Auditors
Consolidated Statements of Operations for the years ended August 31,
2001, 2000, and 1999.
Consolidated Statements of Financial Condition at August 31, 2001 and
2000.
Consolidated Statements of Shareholders' Equity for the years ended
August 31, 2001, 2000, and 1999.
Consolidated Statements of Cash Flows for the years ended August 31,
2001, 2000, and 1999.
Notes to Consolidated Financial Statements
2. Financial Statement Schedule
Schedule II Valuation and Qualifying Accounts for the years ended
August 31, 2001, 2000, and 1999.
All other financial statement schedules are omitted because they are
not applicable or because the required information is shown in the
the financial statements or in the notes thereto.
3. Exhibits - See Index to Exhibits (page 43 herein).
4. Reports on Form 8-K - During the fourth quarter ended August 31, 2001,
the Company did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 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, on the 12th day of November 2001.
AMCAST INDUSTRIAL CORPORATION
(Registrant)
By /s/Byron O, Pond
-------------------------------------
Byron O. Pond
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated.
Signature Title Date
- --------------------- -------------------- -------------
/s/Byron O. Pond President and
- ---------------------- Chief Executive Officer November 12, 2001
Byron O. Pond Director
(Principal Executive Officer)
/s/Francis J. Drew Vice President, Finance and November 12, 2001
- --------------------- Chief Financial Officer
Francis J. Drew (Principal Financial Officer)
/s/Mark D. Mishler Controller November 12, 2001
- --------------------- (Principal Accounting Officer
Mark D. Mishler
*James K. Baker Director November 12, 2001
*Walter E. Blankley Director November 12, 2001
*Peter H. Forster Director November 12, 2001
*Don. R. Graber Director November 12, 2001
*Leo W. Ladehoff Director November 12, 2001
*Bernard G. Rethore Director November 12, 2001
*William G. Roth Director November 12, 2001
*R. William Van Sant Director November 12, 2001
*The undersigned Byron O. Pond, by signing his name hereto, does sign and
execute this annual report on Form 10-K on behalf of each of the above-named
directors of the registrant pursuant to powers of attorney executed by each such
director and filed with the Securities and Exchange Commission as an exhibit to
this report.
By /s/Byron O. Pond
-----------------------------
Byron O. Pond
Attorney in Fact
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AMCAST INDUSTRIAL CORPORATION AND SUBSIDIARIES
($ In Thousands)
Additions
---------------------------
Balance Charged to Charged to
Beginning Costs and Other Balance at
Description of Period Expenses Accounts Deductions End of Period
- -------------------------------- ----------- ----------- ----------- ----------- -------------
Deducted From Asset Accounts
Reserves for unrealized losses on properties
and other assets held for sale:
Year ended August 31, 2001 $ - $ - $ -
Year ended August 31, 2000 $ - $ - $ -
Year ended August 31, 1999 $ 2,818 $ (2,818) (1) $ -
(1) Write off of assets against reserve.
INDEX TO EXHIBITS
Exhibit See Key
Number Description Below
ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Articles of Incorporation of Amcast Industrial Corporation, incorporated
by reference from Form 10-K for the year ended August 31, 1996. I
3.2 Code of Regulations of Amcast Industrial Corporation, incorporated
by reference from Form 10-K for the year ended August 31, 1996. I
INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS, INCLUDING INDENTURES
4.1 $200,000,000 Credit Agreement between Amcast Industrial Corporation
and KeyBank National Association dated August 14, 1997, incorporated
by reference from Form 10K filed September 3, 1997. I
4.2 First Amendment Agreement dated October 7, 1997, to the $200,000,000
Credit Agreement between Amcast Industrial Corporation and KeyBank
National Association dated August 14, 1997, incorporated by reference
From Form 10-K for the year ended August 31, 1998. I
4.3 Second Amendment Agreement dated August 30, 1998, to the $200,000,000
Credit Agreement between Amcast Industrial Corporation and KeyBank
National Association dated August 14, 1997, incorporated by reference
from Form 10-K for the year ended August 31, 1998. I
4.4 Third Amendment Agreement dated November 5, 1999, to the $200,000,000
Credit Agreement between Amcast Industrial Corporation and KeyBank
National Association dated August 14, 1997, incorporated by reference
from Form 10-Q for quarter ended November 28, 1999. I
4.5 Fourth Amendment Agreement dated November 28, 1999, to the $200,000,000
Credit Agreement between Amcast Industrial Corporation and KeyBank
National Association dated August 14, 1997, incorporated by reference
from Form 10-Q for quarter ended November 28, 1999. I
4.6 Fifth Amendment Agreement dated May 28, 2000, to the $200,000,000
(amended to $150,000,000) Credit Agreement between Amcast Industrial
Corporation and KeyBank National Association dated August 14, 1997,
incorporated by reference from Form 10-Q for quarter ended May 28, 2000. I
4.7 Sixth Amendment Agreement dated June 5, 2001, to the $200,000,000
(amended to $150,000,000) Credit Agreement between Amcast Industrial
Corporation, the banking institutions and KeyBank National Association,
as agent, dated August 14, 1997. F
4.8 Seventh Amendment Agreement dated July 23, 2001, to the $200,000,000
(amended to $150,000,000) Credit Agreement between Amcast Industrial
Corporation, the banking institutions, and KeyBank National Association,
as agent, dated August 14, 1997. F
4.9 Eighth Amendment Agreement dated August 6, 2001, to the $200,000,000
(amended to $150,000,000) Credit Agreement between Amcast Industrial
Corporation, the banking institutions, and KeyBank National Association,
as agent, dated August 14, 1997. F
4.10 Last-In-First-Out Credit Agreement dated June 5, 2001, between Amcast
Industrial Corporation, the banking institutions, and KeyBank National
Association, as agent. F
4.11 First Amendment Agreement dated July 23, 2001, to the Last-In-First-Out
Credit Agreement between Amcast Industrial Corporation, the banking
institutions, and KeyBank National Association, as agent, dated
June 5, 2001. F
4.12 Second Amendment Agreement dated August 6, 2001, to the Last-In-First-Out
Credit Agreement between Amcast Industrial Corporation, the banking
institutions, and KeyBank National Association, as agent, dated
June 5, 2001. F
4.13 Forbearance and Waiver Agreement dated June 5, 2001, between Amcast
Industrial Corporation, KeyBank National Association, LIFO agent, for
itself as agent and on behalf of the LIFO Banks, Bank One, Indiana,
National Association, for itself and as agent on behalf of the
CTC Banks, and Bank One, Indiana, National Association. F
4.14 Subordination, Waiver and Consent Agreement dated June 5, 2001, between
Amcast Industrial Corporation, KeyBank National Association, LIFO
agent, for the LIFO Banks (Senior Lenders) the Line of Credit Lenders,
the Existing Credit Agreement Agent and the Existing Credit Agreement
Banks, the Noteholders, and the Collateral Agent. F
4.15 Collateral Agency and Intercreditor Agreement dated June 5, 2001, between
KeyBank National Association, as agent for benefit of and on behalf
of the Banks, the Line of Credit Lenders, the Noteholders, and KeyBank
National Association, as Collateral Agent. F
4.16 $50,000,000 Note Agreement between Amcast Industrial Corporation and
Principal Mutual Life Insurance Company and The Northwestern Mutual
Life Insurance Company, dated November 1, 1995, incorporated by
reference from Form 10-K for the year ended August 31, 1995. I
4.17 Amendment Agreement dated December 31, 1997, to $50,000,000
Note Agreement between Amcast Industrial Corporation and Principal
Mutual Life Insurance Company, dated November 1, 1995, incorporated
by reference from Form 10-K for the year ended August 31, 1998. I
4.18 $15,356,000 Credit Agreement dated September 18, 2001, between Casting
Technology Company and Bank One, Indiana, National Association. F
4.19 Second Amended and Restated Guaranty Agreement dated September 18, 2001,
made by Amcast Industrial Corporation, in favor of Bank One, Indiana,
National Association. F
4.20 Security Agreement dated July 28, 1995, made by Casting Technology Company
in favor of Bank One, Indiana, National Association, successor by merger
to NBD Bank, a Michigan banking corporation. F
4.21 Confirmation of and Amendment to Security Agreement dated September 18, 2001,
Made by Casting Technology Company, in favor of Bank One, Indiana,
National Association. F
4.22 Collateral Assignment and Security Agreement dated July 24, 2001, between
Casting Technology Company and KeyBank, National Association, as agent
for the Banks to the Amcast Industrial Corporation Credit Agreement. F
4.23 Pledge Agreement dated July 24, 2001, between Casting Technology Company
and KeyBank, National Association, as agent for the Banks to the Amcast
Industrial Corporation Credit Agreement. F
4.24 Security Agreement dated July 24, 2001, between Casting Technology Company
and KeyBank, National Association, as agent for the Banks to the Amcast
Industrial Corporation Credit Agreement. F
4.25 Guaranty of Payment of Debt dated July 24, 2001, between Casting Technology
Company and KeyBank, National Association, as agent for the Banks to the
Amcast Industrial Corporation Credit Agreement. F
4.27 Form of Warrants granted to the Noteholders and the Banking institutions. F
MATERIAL CONTRACTS
10.1 Amcast Industrial Corporation Annual Incentive Plan, effective
September 1, 1982, incorporated by reference from Form 10-K for the
year ended August 31, 1996. I
10.2 Deferred Compensation Agreement for Directors of Amcast Industrial
Corporation, incorporated by reference from Form 10-K for the year
ended August 31, 1996. I
10.3 Amended and Restated Executive Agreement between Amcast Industrial
Corporation and Leo W. Ladehoff, dated July 10, 2000 and restated
through July 10, 2000, incorporated by reference from Form 10-Q for
the quarter ended May 28, 2000. I
10.4 Indemnification Agreement for Directors of Amcast Industrial Corporation,
effective October 30, 1987, incorporated by reference from Form 10-K
for the year ended August 31, 1996. I
10.5 Trust Agreement for the Amcast Industrial Corporation Nonqualified
Supplementary Benefit Plan and Executive Agreement with Leo W. Ladehoff
dated September 27, 2000, incorporated by reference from Form 10-K for
the year ended August 31, 2000. I
10.6 Amcast Industrial Corporation Change of Control Agreements, effective
September 7, 2000, incorporated by reference from Form 10-K for the
year ended August 31, 2000. I
10.7 Amcast Industrial Corporation Non-Qualified Supplementary Benefit Plan
Effective as of June 1, 1999, as restated through March 23, 2001. F
10.8 Amcast Industrial Corporation 1999 Director Stock Option Plan,
effective January 1, 1999, Incorporated by referenced from Form 10-K
for the year ended August 31, 1999. I
10.9 Amcast Industrial Corporation Amended and Restated Long-Term Incentive
Plan, effective May 26, 1999, incorporated by reference from Form 10-K
for the year ended August 31, 1999. I
10.10 Amcast Industrial Corporation 1999 Stock Incentive Plan adopted August 25,
1999, incorporated by reference from Form 10-K for the year ended
August 31, 1999. I
10.15 Executive Employment Agreement between Amcast Industrial Corporation
And Byron Pond, effective February 15, 2001, incorporated by reference
from Form 10Q for the quarter ended March 4, 2001. I
10.12 Consulting Agreement between Amcast Industrial Corporation and Leo W.
Ladehoff, effective February 15, 2001, incorporated by reference from
Form 10Q for the quarter ended March 4, 2001. I
INDEPENDENT AUDITOR'S PREFERABILITY LETTER CONCERNING A
CHANGE IN ACCOUNTING METHOD
18.1 Preferability letter relating to change in accounting for
capitalization of the cost of supplies and spare parts
inventories from Ernst & Young LLP dated October 19, 2000 incorporated
by reference from Form 10-K for the year ended August 31, 2000. I
SUBSIDIARIES OF THE REGISTRANT
21.1 Amcast Industrial Corporation has 18 significant wholly-owned subsidiaries,
with the exception of Lee Brass Company, which is 96% owned by an
Amcast wholly owned subsidiary, which are included in the consolidated
financial statements of the Company. F
CONSENTS OF EXPERTS AND COUNSEL
23.1 Consent of Ernst & Young LLP dated November 12, 2001, with respect to the
inclusion of their report dated October 15, 2001, except for the note
entitled "Long-Term Debt and Credit Arrangements" as to which the date
is November 12, 2001, into this Annual Report (Form 10-K). F
POWER OF ATTORNEY
24.1 Powers of attorney of persons who are indicated as having executed this
Annual Report Form 10-K on behalf of another. F
Key:
"F" Indicates document filed herewith.
"I" Indicates document incorporated from another filing.
NOTE: Exhibits have been omitted from the reproduction of this Form 10-K. A copy
of the exhibits can be obtained at a reasonable copying charge by writing to
Investor Relations, Amcast Industrial Corporation, 7887 Washington Village
Drive, Dayton, Ohio 45459