Amcast Reports Third Quarter Results
18 June 1998
Amcast Reports Third Quarter ResultsBusiness Editors
DAYTON, Ohio--June 18, 1998--Amcast Industrial Corporation today reported major increases in sales and earnings for its fiscal third quarter ended May 31. Driven by recent acquisitions and improved operating efficiencies, sales rose 50 percent over the same period last year and net income increased 25 percent. Sales of $159.3 million compare to $106.2 million a year ago. Net income was $5.4 million (58 cents basic earnings per share) versus $4.3 million (50 cents basic earnings per share) last year.
Nine-month sales of $437.2 million were 52 percent higher than sales of $288.3 million for the comparable period a year ago. Net income of $14.7 million ($1.60 basic earnings per share) for the nine-month period was 40 percent higher than net income of $10.5 million ($1.22 basic earnings per share) a year ago.
The company's European light-alloy wheel operations accounted for a substantial portion of the sharp rise in sales. The remainder came from domestic automotive production and the acquisition of Lee Brass Company, a major manufacturer of cast brass products for residential, commercial, and industrial plumbing systems. The Lee Brass purchase was completed in April.
During the quarter, Amcast also sold a west coast investment casting operation, the company's only operation which served the aerospace industry. The business had sales of about $19 million last year. A pretax gain of $12 million was recorded on the transaction.
Engineered Components third quarter sales increased to $106.6 million from $64.7 million in the same quarter last year. European demand for Amcast products is strong due to improved levels of vehicle production and increased penetration of aluminum wheels. In North America, demand for aluminum wheels and other automotive components generally was stable during the quarter, with the exception of aluminum differential carriers which were affected by a slowdown in sales of certain four-wheel drive trucks. Operating income of $7.2 million (before restructuring, asset write-downs, integration charges, and the gain on sale of the aerospace business) jumped 85 percent over operating income of $3.9 million a year ago. The gain in operating income includes contribution of the European wheel business and overall improved operating efficiency. In particular, progress was made during the quarter in resolving production difficulties at an aluminum components facility in Indiana.
Third quarter sales in the Flow Control segment increased to $52.7 million compared to $41.6 million a year earlier. Operating income of $8.3 million (before restructuring, asset write-downs, and integration charges) showed a substantial 48 percent gain over last year, when operating income was $5.6 million. The fitting and valve businesses are benefiting from the current high level of residential and commercial construction activity. During the quarter, copper and brass fittings set a three-month record for pounds shipped, and fitting and valve exports increased more than 20 percent compared to the prior year.
Following the acquisition of Lee Brass, Amcast announced consolidation of its two brass operations and subsequently ceased production at Flagg Brass. The company took a one-time charge of $8.0 million, $2.2 million of which is included in cost of sales, to cover costs associated with closing the Pennsylvania facility. The consolidation of the brass business is underway and should be fully completed by August.
During the quarter, Amcast re-evaluated the future costs for workers compensation, medical, environmental, and other matters resulting from several previously closed locations from the 1980s and early 1990s. A $4.0 million charge was subsequently provided to cover the additional expected costs.
Commenting on the results, John H. Shuey, chairman and chief executive officer, said, "We are pleased with the company's current performance, particularly with activities involving integration of our two recent acquisitions and with the improving results of a unit which has been experiencing serious production difficulties in the past few quarters.
"As we enter the fourth quarter, business conditions are generally good. Nevertheless, near-term prospects are troublesome due to the strike at General Motors. Sales to GM, our largest single customer, were about $140 million last year. To date, we have not reduced our production schedules because we have high volumes of GM products scheduled for the next 12-18 months and can use this period to build necessary inventory. We are, however, monitoring the strike closely and will be forced to slow or stop production if the strike is prolonged."
Amcast Industrial Corporation is a leading manufacturer of technology-intensive metal products. Its two business segments are brand name FLOW CONTROL PRODUCTS marketed through national distribution channels, and ENGINEERED COMPONENTS for original equipment manufacturers. The company serves the automotive, construction, and industrial sectors of the economy.
This release includes "forward-looking statements" which are subject to change based on various factors and uncertainties that may cause actual results to differ significantly from expectations. These factors include, among others: general economic conditions less favorable than expected, fluctuating demand in the automotive industry, less favorable than expected growth in sales and profit margins in the company's product lines, increased competitive pressures in the company's automotive and flow control businesses, 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.