Amcast Announces Fiscal 2000 Results and Review of Strategic Alternatives
26 October 2000
Amcast Announces Fiscal 2000 Results and Review of Strategic Alternatives
DAYTON, Ohio--Oct. 26, 2000--Amcast Industrial Corporation today reported financial results for the fourth quarter and the 2000 fiscal year ended August 31, 2000 and announced that it will evaluate strategic alternatives for maximizing shareholder value.To assist in exploring strategic alternatives to maximize shareholder value, the company has hired Lehman Brothers, Inc. to act as the company's financial advisor. Commenting on this action, John H. Shuey, chairman, president, and chief executive officer stated, "Our recent stock price performance does not reflect the value of our strong franchises in the Flow Control and Engineered Components business segments and the Board of Directors believes it is in the best interest of our shareholders to evaluate all possible strategic alternatives."
Net sales for fiscal 2000 increased 3.7 percent to $610.7 million from $588.9 million in 1999. Net income was $4.3 million (49 cents per diluted share) after the cumulative effect of a non-cash accounting change compared to $19.3 million ($2.11 per diluted share) in fiscal 1999. The 1999 results reflected a $9.0 million pre-tax gain (approximately 58 cents per diluted share) on the sale of the company's valve business.
Sales for the fourth quarter of 2000 were $151.4 million, 5.6 percent higher than the $143.4 million recorded in the comparable quarter of 1999. Net income was $0.3 million (4 cents per diluted share) in the fourth quarter of fiscal 2000, compared to $1.0 million (12 cents per diluted share) in the fourth quarter of 1999.
Fourth quarter net income in 2000 was negatively impacted by sales volume, product mix and pricing issues in the company's flow control business and higher costs incurred in meeting an automotive customer's extraordinarily but temporarily high demand for suspension components on strong-selling car models.
Fourth quarter 2000 sales in the flow control segment were $38.1 million, versus $38.0 million in 1999. Operating income was $5.0 million in the fourth quarter of fiscal 2000, compared to $8.4 million a year ago. Sales volumes of copper plumbing fittings were more than 10 percent above 1999 levels in fiscal 2000's fourth quarter. At the same time, prices were down modestly for these products due to competitive conditions. The brass business sales volume was down year-over-year in the fourth quarter by more than 20 percent, although pricing remained stable. The decline in operating income was due primarily to higher raw material costs, higher operating and manufacturing expenses, and lower prices.
Fourth quarter sales of engineered components were $113.3 million compared to $105.4 million last year. Operating income in fiscal 2000's fourth quarter increased to $2.1 million from a loss of $1.3 million in the 1999 comparable period. Sales increased in all of automotive, except the European wheel business, where improved sales mix was offset by the decline in the Euro. Operating income increased as a result of higher volume, favorable product mix, and operational improvements. A partial offset resulted from the pricing formulas of certain customers of the company's European operations and the company's purchasing practices which prevented the company from reacting quickly enough to recover the rise in aluminum prices.
For the full fiscal year 2000, flow control segment sales were $147.7 million, compared to $153.9 million in 1999. Operating income for the segment was $22.2 million in the full fiscal year 2000, compared to $26.9 million in the prior year.
The lower sales resulted from the disposition of the company's valve business during the first quarter of 1999 and from a decline of more than 15 percent in brass fitting sales, the majority of which resulted from the loss of significant volume with two commercial cast products customers early in fiscal 2000. The company expects to be successful in replacing this business in 2001. The increase in copper plumbing fittings volume and price partially offset these negative influences. Operating income was lower in 2000 as a result of higher manufacturing costs, higher raw material cost, and lower brass volumes partly offset by higher copper fittings prices and volumes.
Engineered components sales increased from $435.0 million in fiscal 1999 to $463.0 million in fiscal 2000. Operating income decreased from $19.7 million to $6.7 million in the same time frame. The decline in operating income resulted primarily from unexpectedly higher spending and low yields and efficiency at the Wapakoneta, Ohio, components plant, in conjunction with the production ramp up of certain components, the impact on the company of pricing and purchasing practices which did not permit recovery of metal cost increases from certain European wheel customers, and lower volumes for certain wheels in North America. Also contributing to the decline in operating income were low productivity at the company's Bolzano, Italy, location resulting from high labor turnover and operating interference resulting from a capacity expansion. The company changed the lives of certain assets at its Speedline operations effective September 1, 1999. The effect of the change was a reduction of expense of approximately $1.5 million after tax. The company also changed its accounting for supplies and spare parts inventory in several automotive locations to a method it believes is preferable. That change resulted in a $1.0 million cumulative effect of an accounting change as of September 1, 1999.
In the fourth quarter, the company's share of the loss of its Casting Technology Company (CTC) joint venture widened from $0.5 million in 1999 to $2.3 million in 2000. For the full year 2000, the company's share of the loss was $3.5 million compared to $1.5 million a year earlier. 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 extraordinarily high costs associated with operating in excess of capacity to meet customer demand. At the end of the quarter, demand returned to more normal levels as the result of the phase out of one product.
Discussing the outlook for the coming year, John H. Shuey, chairman, president and chief executive officer said, "We continue to see strong demand in all of our end markets at this time although we have done our internal planning based on lower volumes. Our primary focus is on operational improvements in the coming year. New program awards and opportunities are presenting themselves for our North American and European wheel and components businesses with both OEM's and large tier-one module suppliers for the next two to four year time horizon. We believe Amcast is well positioned to win our fair share of these programs and improve utilization of our Richmond, Indiana, and Cedarburg, Wisconsin, factories in particular. Management is focussed on recovering lost brass fittings sales and reducing costs throughout the flow control business with the interest of increasing profitability even in the event of modestly lower demand."
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 and housing industries, price 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 availability and relations at the company and its customers.
STATEMENTS OF INCOME
($ in thousands except per share amounts)
Three Months Ended Year Ended
------------------- -------------------
August 31 August 31 August 31 August 31
2000 1999 2000 1999
-------- -------- -------- --------
Net sales $151,405 $143,385 $610,655 $588,933
Cost of sales 131,040 124,173 531,961 495,908
-------- -------- -------- --------
Gross Profit 20,365 19,212 78,694 93,025
Selling, general and
administrative expenses 13,458 13,803 56,416 55,938
Restructuring charges 721 - 721 -
Gain on sale of business - - - (9,023)
-------- -------- -------- --------
Operating Income 6,186 5,409 21,557 46,110
Equity in loss of joint
venture and other
(income) and expense 2,322 682 3,206 1,390
Interest expense 3,272 3,038 12,929 13,182
-------- -------- -------- --------
Income before Income Taxes
and Cumulative Effect
of Accounting Change 592 1,689 5,422 31,538
Income taxes 292 642 2,058 12,221
-------- -------- -------- --------
Income before
Cumulative Effect of
Accounting Change 300 1,047 3,364 19,317
Cumulative Effect of
Accounting Change,
net of tax - - 983 -
-------- -------- -------- --------
Net Income $ 300 $ 1,047 $ 4,347 $ 19,317
-------- -------- -------- --------
-------- -------- -------- --------
Basic Earnings per Share
Income before
cumulative effect of
accounting change $ 0.04 $ 0.12 $ 0.38 $ 2.11
Cumulative effect
of accounting change - - $0.11 -
-------- -------- -------- --------
Net income $ 0.04 $ 0.12 $ 0.49 $ 2.11
-------- -------- -------- --------
-------- -------- -------- --------
Diluted Earnings per Share
Income before cumulative
effect of
accounting change $ 0.04 $ 0.12 $ 0.38 $ 2.11
Cumulative effect
of accounting change - - $0.11 -
-------- -------- -------- --------
Net income $ 0.04 $ 0.12 $ 0.49 $ 2.11
-------- -------- -------- --------
-------- -------- -------- --------
Average number of shares
outstanding- Basic 8,406 9,019 8,788 9,144
Average number of shares
outstanding- Diluted 8,407 9,034 8,792 9,162
CONDENSED BALANCE SHEETS
($ in thousands)
August 31 August 31
2000 1999
------------ ------------
Current Assets
Cash and cash equivalents $ 3,062 $ 6,928
Accounts receivable 85,041 97,819
Inventories 77,512 77,166
Other current assets 16,304 21,144
------------ ------------
181,919 203,057
Property, Plant and Equipment 226,857 256,758
Goodwill 49,707 61,261
Other Assets 21,903 12,410
------------ ------------
$480,386 $533,486
------------ ------------
------------ ------------
Current Liabilities
Accounts payable $ 84,285 $ 82,396
Current debt 4,628 10,855
Other current liabilities 38,013 40,851
------------ ------------
126,926 134,102
Long-Term Debt 147,273 174,061
Deferred Liabilities 50,233 54,557
Shareholders' Equity 155,954 170,766
------------ ------------
$480,386 $533,486
------------ ------------
------------ ------------