<PAGE>   1
                                                                    EXHIBIT 13.1


MANAGEMENT'S DISCUSSION 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. 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. 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.

ACQUISITIONS, DIVESTITURES, AND RESTRUCTURING

At the end of 1997, the Company completed a significant acquisition that impacts
the comparison of financial results between 1998 and 1997. On August 19, 1997,
the Company acquired all of the outstanding stock of Speedline S.p.A.
(Speedline), a major European manufacturer of light-alloy wheels serving the
automotive original equipment market located near Padova, Italy. Accordingly,
the acquisition was reflected in the August 31, 1997 year-end balance sheet, but
had no material effect on 1997 operating results. Operations of Speedline are
included for periods ending one month prior to the Company's fiscal period to
ensure timely preparation of the consolidated financial statements. Thus, the
consolidated financial statements for 1998 include financial results for
Speedline for the eleven-month period of September 1997 through July 1998.
Primarily as a result of the acquisition of Speedline, the percentage of the
Company's sales derived from the Engineered Components segment increased to
68.6% in 1998.

     During the third quarter of 1998, the Company completed two transactions
that had an impact on the Company's financial results as well as on the
comparison between 1998 and 1997. Effective March 30, 1998, the Company sold its
Rancho Cucamonga, California investment casting operation, Amcast Precision, for
$25,445 in cash. The transaction resulted in a pre-tax gain of $12,048. The
facility, acquired by Amcast in 1987, produces ferrous and nonferrous castings
for the aerospace industry. Sales of approximately $19,000 in 1997 were included
in the Engineered Components segment. This was the only Amcast operation
involved in the aerospace industry.

     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. The
purchase price was approximately $16,100 consisting of cash payments of $11,700
and debt assumption of $4,400. The acquisition resulted in goodwill of $6,300.
Sales of Lee Brass for the twelve months ended December 31, 1997, were
approximately $39,000. Financial results for Lee Brass are included in the Flow
Control Products segment since the date of acquisition.

     Following the acquisition of Lee Brass, the Company announced a plan to
consolidate its two brass operations and subse-


<PAGE>   2

quently ceased production at its Flagg Brass operation located in Stowe,
Pennsylvania. Expected to be completed by December 31, 1998, the consolidation
plan includes the transfer of certain product lines to Lee Brass, the sale or
closure of the Flagg Brass facility, and the termination of approximately 100
salaried and hourly personnel. In connection with the consolidation plan, during
the third quarter the Company recorded a restructuring charge of $5,800 for
facility exit costs and a charge of $2,200, included in cost of sales, primarily
for a non-cash write-down of inventory to its net realizable value. Key
components of the $5,800 restructuring charge are $4,900 for a non-cash
write-down of assets to their net realizable value, $500 for severance and other
termination benefits, and $400 for other facility closure costs. As of August
31, 1998, approximately 97 associates had been terminated and substantially all
of the severance and facility closure costs had been charged against the
liability, with the majority of the remaining costs expected to be spent by
December 31, 1998. Sales of Flagg Brass in 1997 were approximately $9,000 and
were included in the Flow Control Products segment. The Company's consolidated
financial results are not expected to be significantly affected by the closure
of Flagg Brass and the transfer of certain product lines to Lee Brass.

     During the third quarter, the Company also re-evaluated its reserves
related to several iron foundries previously closed in the 1980's and early
1990's. As a result, a $4,000 restructuring charge was recorded to cover higher
than expected medical benefits, workers compensation expenses, and legal costs
for environmental and other matters related to these previously closed
facilities.

RESULTS OF OPERATIONS

In 1998, total Company sales increased 48% to $574,414 due primarily to the
acquisitions of Speedline and Lee Brass and by growth of its aluminum components
business. By segment, Engineered Components sales increased 75% primarily due to
the inclusion of Speedline sales and the increased aluminum component sales.
Flow Control Products sales increased 11.4% due to the inclusion of Lee Brass
and increased sales of the Company's copper and brass plumbing fitting products.
In 1997, the Company experienced growth in net sales of 12.5% from $343,934 in
1996 to $387,051. By segment, 1997 Flow Control Products sales increased
slightly while Engineered Components sales increased 21.8%. Volume increases in
both segments increased total net sales by 15%; however, reduced prices
partially offset the favorable impact of the increased volume.

     Gross profit was $93,004, $69,040, and $70,696 in 1998, 1997, and 1996,
respectively. As a percentage of sales, gross profit decreased to 16.2% in 1998
from 17.8% in 1997 and 20.6% in 1996. The decrease in gross profit percentage in
1998 reflects a change in the Company's sales mix to a higher percentage of
Engineered Component product sales, which generally have lower gross margins
than Flow Control Products and, to a lesser degree, operating inefficiencies
encountered at one of the Company's automotive component plants in the first
half of the year. The gross profit percentage for 1998 was also impacted by a
one-time charge ($2,200) related to closing the Flagg Brass facility. Higher
volume provided increased gross profit in 1997 as compared to 1996; however,
this improvement was offset by new facility start-up costs, a cumulative $3,500
charge for overstated inventory, and an unfavorable sales mix.

     Selling, general, and administrative (SG&A) expenses were $57,294, $41,798,
and $43,368 in 1998, 1997, and 1996, respectively. SG&A expense increased in
1998 as a result of the inclusion of Speedline and Lee Brass. SG&A expense
decreased in 1997 compared to 1996 due to reduced commissions in the Flow
Control segment and lower administrative expenses in the Flow Control segment
and at the corporate office. As a percentage of sales, SG&A decreased to 10.0%
in 1998 from 10.8% in 1997 and 12.6% in 1996. The decrease in 1998 is primarily
due to higher sales volumes in the Engineered Components segment, which
generally has lower SG&A expenses. Higher sales volume and reduced spending
levels contributed to the decrease in 1997.

     For 1998, the Company's pre-tax share of losses from Casting Technology
Company (CTC), the Company's joint venture with Izumi Industries, was $1,000
compared with $2,416 in 1997. The 1998 results of CTC were significantly
impacted by lost sales resulting from a major General Motors work stoppage. The
launch of several new automotive products at CTC in 1997 resulted in significant
inefficiencies and high launch-related costs associated with meeting required
volumes.

     Interest expense of $15,045 in 1998 increased from $5,135
in 1997 and $2,348 in 1996. Interest expense increased in 1998 primarily due to
the cost of financing the Speedline operation, and as a result of the impact of
the General Motors work stoppage on the Company's operating income and working
capital. Interest increased in 1997 primarily due to lower interest
capitalization and, to a lesser degree, higher debt levels. There was no
interest capitalized during 1998. Capitalized interest was $145, and $2,038 in
1997 and 1996, respectively. A portion of the amounts borrowed by the Company
was used to finance plant construction and expansion and, accordingly, the
interest related to such long-term projects was capitalized.

     The effective tax rate for 1998, 1997 and 1996 was 27.0%, 35.1%, and 35.6%,
respectively. Changes in the effective tax rates primarily reflect the level of
federal and state tax credits applicable to U.S. taxes, and a one-time
adjustment of $2,562 resulting from a reduction of Italian tax rates from 53.2%
to 41.3%.


<PAGE>   3

FLOW CONTROL PRODUCTS  Net sales of the Flow Control Products segment were
$180,596 in 1998, compared with $162,150 in 1997 and $159,323 in 1996. Increased
volumes of copper and brass plumbing fittings in 1998 resulting from the Lee
Brass acquisition and higher product sales of the Company's copper and brass
fittings provided a 15.4% increase over 1997. Pricing pressures which were
largely offset by lower material costs reduced sales by 4.1%. As a result of the
higher volume, operating income increased to $27,931 in 1998, an increase of
14.7% over the $24,358 operating income achieved in 1997. Increased volumes of
copper and brass plumbing fittings in 1997 provided a 5.5% increase in net
sales. However, lower selling prices partially offset this increase as the
Company experienced competitive pricing pressures in much of the second half of
1997. As a result, the operating income of $24,358 in 1997 decreased slightly
from 1996.

ENGINEERED COMPONENTS  Net sales of the Engineered Components segment were
$393,818 in 1998 compared with $224,901 in 1997 and $184,611 in 1996. The
increase in sales was due primarily to the addition of Speedline in 1998. The
sales of aluminum brake, suspension, and chassis components and North American
aluminum wheels were running at a rate nearly 14% higher than in 1997 before the
impact of the General Motors work stoppage, which more than offset those gains
in the last quarter of 1998. Operating income increased over 100% to $19,609 in
1998 compared to the $9,531 achieved in 1997. The increase was due primarily to
Speedline and reduced start-up amortization expense. The improvement in volume
at the Company's North American automotive operations in the first nine months
of 1998 added significantly to operating income but was more than offset by the
impact of the General Motors work stoppage in the fourth quarter and a less
favorable product mix. The sales increase for 1997 resulted primarily from
higher demand for the Company's aluminum wheels, the full-year effect of the
Company's new automotive plant in Ohio, and the introduction of several new
products for automotive suspensions. Operating income of $9,531 in 1997 was
slightly higher than 1996 as new facility start-up costs partially offset the
impact of increased volume. In addition, the Company recorded a one-time
cumulative non-cash charge of $3,500 to reduce overstated inventory values at
the Company's Amcast Precision unit.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operations was $9,580, $30,675, and $33,638 in 1998, 1997,
and 1996, respectively. In each of the three years, cash was primarily provided
by net income and depreciation. During 1998, working capital, excluding
short-term and current debt, increased 26% as a result of the Lee Brass
acquisition and the Precision divestiture, coupled with the increased sales
volume and inventory build during the General Motors work stoppage. Accounts
payable increased in 1997 due to acquisition-related expenses, purchases for
expansion activities, and increased sales activity.

     Net cash used by investing activities during 1998 was $33,018, compared
with $91,954 in 1997 and $51,223 in 1996. Investing activities for 1998 include
$12,247 primarily for the Lee Brass acquisition and for 1997 include $48,486 for
the Speedline acquisition discussed above. Capital expenditures totaled $46,763,
$40,377, and $48,640, in 1998, 1997, and 1996, respectively. To support business
expansion activities, investments were made in property, plant, and equipment
and in the Company's joint venture, Casting Technology Company. At August 31,
1998, the Company had $10,938 of commitments for capital expenditures to be made
in 1999, primarily for the Engineered Components segment.

     Net cash provided by financing activities was $21,033 in 1998, as compared
with $65,474 in 1997 and $21,712 for 1996, respectively. Net cash provided by
financing activities in 1997 include $70,000 in borrowings under the Company's
new credit agreement, discussed below, primarily to finance the Speedline
acquisition. In 1996, increased borrowings were used to fund business expansion.
In 1996, the Company completed a private placement of $50,000 in senior notes
that mature in November 2005 and replaced outstanding debt by $24,321.

     During 1998, the Company replaced $46,807 of its Speedline debt with
borrowings under its $200 million revolver. On August 14, 1997, the Company
replaced its prior credit facility with a new Credit Agreement (the Agreement)
that provides for up to $200,000 in borrowings through 2002. At August 31, 1998,
the Company had unused borrowing capacity of $11,100 under the most restrictive
debt covenant of the Agreement. The Company also has lines of credit totaling
$27,000, of which $8,900 was used at August 31, 1998. In addition, Speedline has
short-term lines of credit totaling $55,900, of which $40,100 was available at
July 31, 1998.

     The ratio of long-term debt as a percent of capital increased to 57.5% at
August 31, 1998 from 47.9% at August 31, 1997. The increase reflects the
replacement of short-term debt with long-term debt at Speedline as well as
additional borrowings to support business expansion and working capital needs.
Book value per common share at August 31, 1998, was $17.47, up from $17.24 for
the prior year. One million preferred shares and 5.8 million common shares are
authorized and available for future issuance. 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. 


<PAGE>   4

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, 1998, the Company had reserves of $1,700 accrued for environmental
liabilities. The Company is of the opinion that, in light of its existing
reserves, its liability in connection with environmental proceedings should not
have a material adverse effect on its financial condition, 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

During 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share," which establishes new
standards for computing and presenting earnings per share. SFAS No. 128 requires
the Company to report both basic earnings per share, which is based on the
weighted-average number of common shares outstanding, and diluted earnings per
share, which is based on the weighted-average number of common shares
outstanding plus all potential dilutive common shares outstanding. Adoption of
the statement had no effect on the Company's results of operations, financial
position, or cash flows. However, as required, the Company restated earnings per
share for all prior periods to present diluted earnings per share. Basic
earnings per share are unchanged from previously reported earnings per share
amounts.

     In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position (SOP) No. 98-5, "Reporting on the Costs
of Start-Up Activities." SOP No. 98-5 provides guidance on the financial
reporting of start-up and organization costs and requires such costs to be
expensed as incurred, with the effect of initial adoption reported as a
cumulative effect of a change in accounting principle. The Company has adopted
SOP No. 98-5 retroactively to the first quarter of 1998 as required under the
SOP.

     The total amount of deferred start-up reported as a cumulative effect of a
change in accounting principle is $8,588. This includes the effect of the
adoption of SOP No. 98-5 by Casting Technology Company, the Company's 60% owned
joint venture with Izumi Industries. The Company's share of CTC's cumulative
effect of a change in accounting principle is $3,529. The impact of adoption of
the SOP on previously reported operating income will be to change the first
quarter 1998 results from $9,705 to $10,329, the second quarter 1998 from $8,380
to $8,760, and the third quarter 1998 from $12,608 to $12,894. Reported earnings
per diluted share will change in the first quarter of 1998 from $.44 to a loss
of $.44, in the second quarter 1998 from $.58 to $.61, and in the third quarter
of 1998 from $.58 to $.62. The impact in 1998 of adopting the SOP on
previously-reported financial results will be to increase operating income by
$1,290 and to decrease earnings per diluted share by $.81.

     New accounting standards issued that relate to financial statement
disclosure include SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," and SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS No. 130 establishes guidelines for the display of comprehensive
income, which includes those items now reported directly in equity, for
financial statement purposes. SFAS No. 131 establishes guidelines for
determining operating segments and extensive disclosure requirements of those
segments. SFAS No. 132 revises the disclosures of pension and other
postretirement benefit plans. SFAS Nos. 130 and 131 will be effective for the
Company during fiscal year 1999 and SFAS No. 132 will be effective during fiscal
year 2000. The Company has not determined the effect these new standards will
have on its financial statement disclosures.

     New accounting standards issued also include SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes a
comprehensive standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 will become effective for the Company during
fiscal year 2000. The Company has not determined the effect of this new 
standard.

YEAR 2000

The Company has designated a Year 2000 Steering Committee and a task force in
each of its operations to ensure compliance of its computer systems including
computers utilized in production, production support equipment, and plant
infrastructure systems. The Company has been working with its vendors to assess
their readiness.

     For the most part, the Company uses third-party supplied
computer programs and packages for its information technology systems. Certain
of those systems are already year 2000 compliant as supplied by the vendor.

     In the Flow Control Products segment, certain software packages had been
modified by the Company. These packages have been remediated and tested by
internal information technology professionals. The total cost of these
modifications is estimated to have cost the Company $400.

         In the Engineered Components segment, some facilities are utilizing
compliant releases of software. The Automotive group is in the process of
installing an enterprise resource planning (ERP) system as an upgrade in
functionality that will improve business processes. At the same time and without
incremental cost, the new system will address the year 2000 issue. Should the
ERP system

<PAGE>   5

not be installed and operational in sufficient time, the Company
believes that it can install compliant versions of its current software promptly
to resolve the issue at a cost that will not materially impact its results of
operations, liquidity, or financial condition.

     At the Company's Speedline unit, internal resources are presently
evaluating the compliant status of the computer systems.

     The Company's vendors are in various stages of compliance with year 2000.
The Company expects that critical vendors will be in compliance or have adequate
alternative solutions in place.

     The Company believes its risk is low in the event of year 2000 issues. Its
Flow Control systems and many of its Engineered Components systems are
compliant. The Company's primary raw materials are basic commodities available
from multiple sources such as copper cathode, aluminum sows and ingots, and
brass from scrap radiators. As a result, the Company does not expect and cannot
at this time reasonably estimate a material impact due to the uncertainty of
year 2000 issues on its results of operations, liquidity, and financial
condition.

         Contingency plans if deemed necessary will be developed to address the
Company's specific risks during 1999.
<TABLE>
<CAPTION>

SELECTED DATA
($ in thousands except per share amounts)


FINANCIAL DATA                                               1998           1997            1996           1995            1994
<S>                                                       <C>            <C>             <C>            <C>           <C>       
   Net sales........................................      $ 574,414      $  387,051      $ 343,934      $  328,231    $  271,856
   Operating income.................................         37,958          27,242         27,328          26,972        23,220
   Operating income percent.........................           6.6%            7.0%           7.9%            8.2%          8.5%
   Income before income taxes and cumulative
     effect of accounting change....................         22,975          20,005         24,731          26,098        22,067
   Income before cumulative effect
     of accounting change...........................         16,765          12,983         15,926          17,171        14,454
   Net income.......................................          8,177          12,983         15,926          17,171        14,454
   Working capital..................................         86,929          26,260         57,774          47,845        48,590
   Total assets.....................................        563,450         508,918        269,217         229,367       194,161
   Long-term debt...................................        217,199         145,304         58,783          29,687        13,910
--------------------------------------------------------------------------------------------------------------------------------

PER COMMON SHARE DATA
   Income before cumulative effect
     of accounting change - basic...................      $    1.82      $     1.50      $    1.85      $     2.02    $     1.72
   Net income - basic...............................      $     .89      $     1.50      $    1.85      $     2.02    $     1.72
   Weighted-average number of common
     shares outstanding - basic (in thousands)......          9,200           8,674          8,606           8,517         8,425

   Income before cumulative effect
     of accounting change - diluted.................      $    1.81      $     1.48      $    1.84      $     2.00    $     1.69
   Net income - diluted.............................      $     .88      $     1.48      $    1.84      $     2.00    $     1.69
   Weighted-average number of common
     shares outstanding - diluted (in thousands)....          9,250           8,754          8,628           8,598         8,565


   Dividends declared...............................      $     .56      $      .56      $     .56      $      .53    $      .49
   Book value.......................................      $   17.47      $    17.24      $   15.80      $    14.52    $    13.02
---------------------------------------------------------------------------------------------------------------------------------

STATISTICAL DATA
   Current ratio....................................            1.6             1.1            2.1             1.9           2.0
   Long-term debt as a percent of capital...........          57.5%           47.9%          30.2%           19.3%         11.2%
   Number of associates ............................          4,500           4,040          2,600           2,400         2,300
---------------------------------------------------------------------------------------------------------------------------------

</TABLE>
<PAGE>   6

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. These 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 auditors 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 auditors 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/ John H. Shuey

John H. Shuey
Chairman, President and Chief Executive Officer



/s/ Douglas D. Watts

Douglas D. Watts
Vice President, Finance (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, 1998 and
1997, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended August 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

     We conducted our audits in accordance with generally
accepted auditing standards. 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, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended August 31, 1998, in conformity with generally
accepted accounting principles.


/s/ Ernst & Young LLP

                                            Dayton, Ohio
                                            October 13, 1998
<PAGE>   7
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF INCOME

($ in thousands except per share amounts)
                                                                                                 Year Ended August 31
                                                                                         1998            1997             1996
---------------------------------------------------------------------------------------------------------------------------------

<S>                                                                                   <C>             <C>              <C>      
Net sales......................................................................       $ 574,414        $ 387,051       $ 343,934
Cost of sales..................................................................         481,410          318,011         273,238
---------------------------------------------------------------------------------------------------------------------------------
                                                                   GROSS PROFIT          93,004           69,040          70,696

Selling, general and administrative expenses...................................          57,294           41,798          43,368
Restructuring charges..........................................................           9,800                -               -
Gain on sale of aerospace business.............................................         (12,048)               -               -
---------------------------------------------------------------------------------------------------------------------------------
                                                               OPERATING INCOME          37,958           27,242          27,328

Equity in loss of joint venture
     and other (income) and expense............................................             (62)           2,102             249
Interest expense...............................................................          15,045            5,135           2,348
----------------------------------------------------------------------------------------------------------------------------------
                                                 INCOME BEFORE INCOME TAXES AND
                                         CUMULATIVE EFFECT OF ACCOUNTING CHANGE          22,975           20,005          24,731

Income taxes...................................................................           6,210            7,022           8,805
----------------------------------------------------------------------------------------------------------------------------------
                                                INCOME BEFORE CUMULATIVE EFFECT
                                                           OF ACCOUNTING CHANGE          16,765           12,983          15,926

Cumulative effect of accounting change, net of tax.............................          (8,588)               -               -
----------------------------------------------------------------------------------------------------------------------------------
                                                                     NET INCOME       $   8,177       $   12,983       $  15,926
==================================================================================================================================

BASIC EARNINGS PER SHARE
Income before cumulative effect of
     accounting change.........................................................       $    1.82       $     1.50       $    1.85
Cumulative effect of accounting change.........................................            (.93)               -               -
-----------------------------------------------------------------------------------------------------------------------------------
Net income.....................................................................       $     .89       $     1.50       $    1.85
===================================================================================================================================
Diluted Earnings per Share
Income before cumulative effect of
     accounting change.........................................................       $    1.81       $     1.48       $    1.84
Cumulative effect of accounting change.........................................            (.93)               -               -
-----------------------------------------------------------------------------------------------------------------------------------
Net income ....................................................................       $     .88       $     1.48       $    1.84
===================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE>   8

<TABLE>
<CAPTION>


CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

($ in thousands)
                                                                                                                 August 31
                                                                                                           1998            1997
--------------------------------------------------------------------------------------------------------------------------------

ASSETS
CURRENT ASSETS
<S>                                                                                                    <C>            <C>       
     Cash and cash equivalents...............................................................          $   7,022      $    9,608
     Accounts receivable.....................................................................            111,066         100,589
     Inventories.............................................................................             84,255          71,960
     Other current assets....................................................................             20,308          21,068
--------------------------------------------------------------------------------------------------------------------------------
                                                                         TOTAL CURRENT ASSETS            222,651         203,225

PROPERTY, PLANT, AND EQUIPMENT
     Land....................................................................................              8,858           5,067
     Buildings...............................................................................             62,902          47,320
     Machinery and equipment.................................................................            307,849         285,115
     Construction in progress................................................................             19,269          19,560
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                         398,878         357,062
     Less accumulated depreciation...........................................................            138,761         121,818
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                         260,117         235,244

GOODWILL ....................................................................................             62,555          36,784
OTHER ASSETS ................................................................................             18,127          33,665
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                       $ 563,450      $  508,918
================================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Short-term debt.........................................................................          $  16,878      $   54,038
     Current portion of long-term debt.......................................................              6,370           7,087
     Accounts payable........................................................................             72,887          79,732
     Compensation and related items..........................................................             19,336          16,717
     Accrued expenses........................................................................             20,251          19,391
--------------------------------------------------------------------------------------------------------------------------------
                                                                    TOTAL CURRENT LIABILITIES            135,722         176,965

LONG-TERM DEBT - LESS CURRENT PORTION .......................................................            217,199         145,304
DEFERRED INCOME TAXES .......................................................................             25,164           8,400
DEFERRED LIABILITIES ........................................................................             24,551          20,023
SHAREHOLDERS' EQUITY
     Preferred shares, without par value:
         Authorized - 1,000,000 shares; Issued - None
     Common shares, at stated value
         Authorized - 15,000,000 shares
         Issued - 9,206,529 and 9,177,455 shares, respectively...............................              9,207           9,177
     Capital in excess of stated value.......................................................             78,964          78,484
     Foreign currency translation adjustment.................................................               (945)              -
     Retained earnings.......................................................................             73,588          70,565
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                         160,814         158,226
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                       $ 563,450      $  508,918
=================================================================================================================================
See notes to consolidated financial statements
</TABLE>



<PAGE>   9
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

($ in thousands except per share amounts)
                                                                                          Foreign
                                                                      Capital in         Currency
                                                        Common         Excess of        Translation     Retained
                                                        Shares       Stated Value       Adjustment      Earnings         Total
--------------------------------------------------------------------------------------------------------------------------------

<S>                                                  <C>                <C>             <C>          <C>              <C>       
BALANCE AT SEPTEMBER 1, 1995 ....................    $   8,556          $ 64,175        $      -     $    51,474      $  124,205

     Net income..................................           -                 -                -          15,926          15,926
     Cash dividends declared, $.56 per share.....           -                 -                -          (4,824)         (4,824)
     Stock options exercised.....................           62               780               -              -              842
     Other.......................................           -                 48               -             (33)             15
--------------------------------------------------------------------------------------------------------------------------------

BALANCE AT AUGUST 31, 1996 .....................         8,618            65,003               -          62,543         136,164

     Net income..................................           -               -                  -          12,983          12,983
     Stock issued for acquisition................          478            12,022               -              -           12,500
     Cash dividends declared, $.56 per share.....            -               -                 -          (4,922)         (4,922)
     Stock options exercised.....................           78             1,356               -              -            1,434
     Other.......................................            3               103               -             (39)             67
--------------------------------------------------------------------------------------------------------------------------------

BALANCE AT AUGUST 31, 1997 ......................        9,177            78,484               -          70,565         158,226

     Net income .................................           -                 -                -           8,177           8,177
     Cash dividends declared, $.56 per share ....           -                 -                -          (5,154)         (5,154)
     Foreign currency translation ...............           -                 -              (945)            -             (945)
     Stock options exercised ....................           30               480               -              -              510
---------------------------------------------------------------------------------------------------------------------------------

BALANCE AT AUGUST 31, 1998 .....................     $   9,207          $ 78,964        $    (945)   $    73,588      $  160,814
=================================================================================================================================
See notes to consolidated financial statements

</TABLE>

<PAGE>   10

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)
                                                                                                   Year Ended August 31
                                                                                          1998             1997            1996
<S>                                                                                   <C>            <C>              <C>
OPERATING ACTIVITIES
     Net income..................................................................     $    8,177     $    12,983      $   15,926
     Depreciation and amortization...............................................         32,113          20,463          17,428
     Non-cash restructuring and inventory write-down.............................         12,000              -                -
     Cumulative effect of accounting change......................................          8,588              -                -
     Gain on sale of aerospace business..........................................        (12,048)             -                -
     Deferred liabilities........................................................         (1,497)           (801)          2,364

     Changes in assets and liabilities, net of acquisitions
         Accounts receivable.....................................................         (9,667)         (5,203)         (5,764)
         Inventories.............................................................         (9,122)         (4,323)          4,125
         Other current assets....................................................          1,141          (2,920)           (594)
         Accounts payable........................................................        (11,833)          8,077          (2,897)
         Accrued liabilities.....................................................         (9,204)           (669)          2,745
         Other ..................................................................            932           3,068             305
--------------------------------------------------------------------------------------------------------------------------------
                                                 NET CASH PROVIDED BY OPERATIONS           9,580          30,675          33,638

INVESTING ACTIVITIES
     Additions to property, plant, and equipment.................................        (46,763)        (40,377)        (48,640)
     Acquisitions, net of cash received..........................................        (12,247)        (48,486)              -
     Contributions to joint venture.............................................               -          (3,226)         (2,774)
     Proceeds from sale of aerospace business....................................         25,445               -               -
     Other assets................................................................            547             135             191
--------------------------------------------------------------------------------------------------------------------------------
                                           NET CASH USED BY INVESTING ACTIVITIES         (33,018)        (91,954)        (51,223)

FINANCING ACTIVITIES
     Additions to long-term debt.................................................         85,871          70,000          50,000
     Reduction in long-term debt.................................................        (30,216)         (1,105)        (20,904)
     Short-term borrowings.......................................................        (29,978)              -          (3,417)
     Dividends...................................................................         (5,154)         (4,922)         (4,824)
     Other.......................................................................            510           1,501             857
--------------------------------------------------------------------------------------------------------------------------------
                                       NET CASH PROVIDED BY FINANCING ACTIVITIES          21,033          65,474          21,712


Effect of exchange rate changes on cash..........................................           (181)              -               -
--------------------------------------------------------------------------------------------------------------------------------


Net change in cash and cash equivalents..........................................         (2,586)          4,195           4,127
Cash and cash equivalents at beginning of year...................................          9,608           5,413           1,286
-----------------------------------------------------------------------------------------------------------------------------------
                                        CASH AND CASH EQUIVALENTS AT END OF YEAR      $    7,022     $     9,608      $    5,413
===================================================================================================================================
See notes to consolidated financial statements
</TABLE>
<PAGE>   11

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. The Company's
investment in Casting Technology Company (CTC), a joint venture, is included in
the accompanying consolidated financial statements using the equity method of
accounting. 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. Certain prior year amounts have been
reclassified to conform to the current year presentation.

     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. 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.

     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
$264 and $346 at August 31, 1998 and 1997, respectively. The Company held notes
receivables of $3,000 and accounts receivable of $3,962 at August 31, 1998, and
accounts receivable of $1,825 at August 31, 1997, from CTC.

     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.

     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.

     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 $2,259 and $916 at August 31, 1998 and 1997,
respectively. The carrying value of goodwill is evaluated periodically in
relation to the operating performance and future undiscounted cash flows of the
underlying businesses.

     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 generally accepted accounting
principles that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

     ACCOUNTING STANDARDS ADOPTED during 1998 include SFAS No. 128, "Earnings
per Share," which establishes new standards for computing and presenting
earnings per share. SFAS No. 128 requires the Company to report both basic
earnings per share, which is based on the weighted-average number of common
shares outstanding, and diluted earnings per share, which is based on the
weighted-average number of common shares outstanding plus all potential dilutive
common shares outstanding. Earnings per share amounts for all periods are
presented, and where necessary, restated to give effect to the adoption of SFAS
No. 128.

     Effective September 1, 1997, the Company also adopted the provisions of the
American Institute of Certified Public Accountants' Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5 provides
guidance on the financial reporting of start-up and organization costs and
requires such costs to be expensed as incurred. The total amount of deferred
start-up costs reported as a cumulative effect of a change in accounting
principle is $8,588, net of tax benefits of $5,044. The Company's share of CTC's
cumulative effect of a change in accounting principle is $3,529, net of tax. Pro
forma earnings per share amounts, assuming the new accounting principle is
applied retroactively, are as follows:
<TABLE>
<CAPTION>

                                             1997       1996
BASIC EARNINGS PER SHARE:
<S>                                          <C>        <C>   
Income before cumulative effect of
     accounting change - as reported....     $1.50      $1.85 
Income before cumulative effect of
     accounting change - pro forma......     $1.52      $1.36 
Net income - as reported................     $1.50      $1.85
Net income - pro forma..................     $1.52      $1.36

DILUTED EARNINGS PER SHARE:
<S>                                          <C>        <C>   
Income before cumulative effect
     of accounting change - as reported.     $1.48      $1.84 
Income before cumulative effect
     of accounting change - pro forma...     $1.51      $1.36 
Net income - as reported................     $1.48      $1.84
Net income - pro forma..................     $1.51      $1.36
</TABLE>
<PAGE>   12

NEW ACCOUNTING STANDARDS issued that relate to financial statement disclosure
include SFAS No. 130, "Reporting Comprehensive Income," SFAS No. 131,
"Disclosure about Segments of an Enterprise and Related Information," and SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS No. 130 establishes guidelines for the display of comprehensive
income, which includes those items now reported directly in equity, for
financial statement purposes. SFAS No. 131 establishes guidelines for
determining operating segments and extensive disclosure requirements of those
segments. SFAS No. 132 revises the disclosures of pension and other
postretirement benefit plans. SFAS Nos. 130 and 131 will be effective for the
Company during fiscal year 1999 and SFAS No. 132 will be effective during fiscal
year 2000. The Company has not determined the effect these new standards will
have on its financial statement disclosures.

     New accounting standards issued also include SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement establishes a
comprehensive standard for the recognition and measurement of derivatives and
hedging activities. SFAS No. 133 will become effective for the Company during
fiscal year 2000.  The Company has not determined the effect of this new 
standard.



ACQUISITIONS, DIVESTITURES, AND RESTRUCTURING

At the end of fiscal 1997 and during fiscal 1998, the Company completed
transactions that impacted the comparison between 1998 and 1997. Effective March
30, 1998, the Company sold its Rancho Cucamonga, California investment casting
operation, Amcast Precision, for $25,445 in cash. The transaction resulted in a
pre-tax gain of $12,048. The facility, acquired by Amcast in 1987, produces
ferrous and nonferrous castings for the aerospace industry. Fiscal 1997 sales
were approximately $19,000. This was the only Amcast operation involved in the
aerospace industry.

     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. The
purchase price was approximately $16,100 consisting of cash payments of $11,700
and debt assumption of $4,400. The acquisition of Lee Brass has been 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, principally inventory and property, plant, and equipment, and
liabilities assumed, resulting in goodwill of $6,300. The pro forma effect of
the acquisition on the results of operations is not presented, as it is not
material.

     Following the acquisition of Lee Brass, the Company announced a plan to
consolidate its two brass operations and subsequently ceased production at its
Flagg Brass operation located in Stowe, Pennsylvania. Expected to be completed
by December 31, 1998, the consolidation plan includes the transfer of certain
product lines to Lee Brass, the sale or closure of the Flagg Brass facility, and
the termination of approximately 100 salaried and hourly personnel. In
connection with the consolidation plan, during the third quarter the Company
recorded a restructuring charge of $5,800 for facility exit costs and a charge
of $2,200, included in cost of sales, primarily for a non-cash write-down of
inventory to its net realizable value. Key components of the $5,800
restructuring charge are $4,900 for a non-cash write-down of assets to their net
realizable value, $500 for severance and other termination benefits, and $400
for other facility closure costs. As of August 31, 1998, approximately 97
associates had been terminated and substantially all of the severance and
facility closure costs had been charged against the liability, with the majority
of the remaining costs expected to be spent by December 31, 1998. During the
third quarter, the Company also re-evaluated its reserves related to several
iron factories previously closed in the 1980's and early 1990's. As a result, a
$4,000 restructuring charge was recorded to cover higher than expected medical
benefits, workers compensation expenses, and legal costs for environmental and
other matters related to these previously closed facilities.

     At the end of fiscal 1997, the Company acquired all of the outstanding
stock of Speedline S.p.A. and its subsidiaries (Speedline), a major European
manufacturer of light-alloy wheels serving the automotive original equipment
market. The acquisition was reflected in the 1997 year-end balance sheet, but
had no material effect on 1997 operating results. Operating results for
Speedline are included for periods ending one month prior to the Company's
fiscal period to ensure timely preparation of the consolidated financial
statements. Thus, the financial statements for 1998 include eleven months of
results of operations for Speedline from September, 1997 through July, 1998, and
these results are shown in the Engineered Components segment. The purchase price
was approximately $130,700, consisting of cash payments of $58,000, the
assumption of $60,200 in debt, and the issuance of 478,240 shares of the
Company's common stock with a fair market value of $12,500. The purchase
agreement contains a provision to protect the seller for stock price
fluctuations. The price protection provides for the Company to pay the
difference between the $26.13 per share value of the stock issued to the seller
of Speedline at closing and the market value of any such shares sold during a
180-day period following the second anniversary of the acquisition. The
liability, if any, on the part of the Company can only be determined during the
relevant 180-day period following the second anniversary of the closing, August
19, 1999. Had the price protection been calculated based on the relevant period
during 1998 for all shares, the price protection liability would have been
$4,000. The acquisition of

<PAGE>   13


Speedline has been 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, resulting in goodwill of
$54,100. A summary of the purchase price allocation follows:

<TABLE>
<S>                                                 <C>      
Current assets...................................   $  81,300
Property, plant, and equipment...................      82,200
Other assets.....................................      15,200
Goodwill.........................................      54,100
Current liabilities..............................     (65,800)
Capital leases...................................     (11,900)
Deferred liabilities.............................     (24,400)
----------------------------------------------------------------
                                                    $ 130,700
================================================================
</TABLE>



INVENTORIES

The major components of inventories as of August 31 are:  
<TABLE>

                                             1998      1997
<S>                                        <C>      <C>     
Finished products.......................   $ 37,561 $ 35,375
Work in process.........................     28,760   22,968
Raw materials and supplies..............     20,610   20,506
--------------------------------------------------------------
                                             86,931   78,849
Less amount to reduce certain
inventories to LIFO value...............      2,676    6,889
---------------------------------------------------------------
                                           $ 84,255 $ 71,960
===============================================================
</TABLE>

Inventories reported on the FIFO method, primarily in foreign locations, were
$32,412 and $35,788 at August 31, 1998 and 1997, respectively. The estimated
replacement cost of inventories is the amount reported before the LIFO reserve.



OTHER ASSETS
The major components of other assets as of August 31 are:
<TABLE>
                                              1998      1997
<S>                                       <C>        <C>     
Joint venture investment................  $   3,846  $ 10,449
Assets held for sale....................      3,189     3,313
Other...................................     11,092    19,903
---------------------------------------------------------------
                                           $ 18,127  $ 33,665
===============================================================
</TABLE>


The joint venture investment represents the Company's share of Casting
Technology Company's net equity. The decrease is primarily related to the
cumulative effect adjustment resulting from the adoption of SOP 98-5 during
1998. Assets held for sale reflect the estimated realizable values of the fixed
assets of closed facilities.


LONG-TERM DEBT AND CREDIT ARRANGEMENTS
The following table summarizes the Company's long-term borrowings at August 31:
<TABLE>
<CAPTION>

                                              1998      1997
<S>                                       <C>        <C>     
Senior notes............................  $  51,750  $ 52,625
Revolving credit notes..................    141,092    70,000
Lines of credit.........................      8,900         -
Industrial revenue bonds................      5,925     6,158
Other debt..............................      5,372    11,710
Capital leases..........................     10,530    11,898
---------------------------------------------------------------
                                            223,569   152,391
Less current portion....................      6,370     7,087
---------------------------------------------------------------
Long-Term Debt .........................  $ 217,199  $145,304
===============================================================
</TABLE>

     Senior notes consist of two agreements with interest rates of 7.09% and
9.0%. The notes call for periodic principal payments and mature November 7,
2005, and September 15, 1999, respectively.

     On August 14, 1997, the Company replaced its prior credit facility with a
new Credit Agreement (the Agreement) that provides for up to $200,000 in
borrowings through August 14, 2002. At August 31, 1998, $141,092 was outstanding
under the Agreement with an interest rate of 5.86%. In addition, a commitment
fee is payable on the unused portion of the credit line. The Company also has
lines of credit totaling $27,000; at August 31, 1998, $8,900 was used.

     Debt covenants require the Company to maintain certain debt-to-equity,
debt-to-earnings, and interest coverage ratios. Other provisions limit tangible
net worth and subsidiary indebtedness. At August 31, 1998, $44,300 of retained
earnings were available for the payment of dividends.

     Industrial revenue bonds consist of various issues at fixed and variable
interest rates, ranging from 3.34% to 4.15%. These bonds call for periodic
principal payments through 2004. These obligations are collateralized by
property, plant, and equipment with a net book value of $793 at August 31, 1998.

     The Company has guaranteed debt totaling $21,000 at August 31, 1998, for
Casting Technology Company.

     Other debt consists of various mortgage loans and other loans at fixed and
variable interest rates, ranging from 3.0% to 12.58%, and requires periodic
principal payments through 2011. These obligations are secured by property,
plant, and equipment with a net book value of $10,700 at August 31, 1998.

     Capitalized lease obligations provide for aggregate payments, including
interest, of approximately $3,000 annually, payable through 2002. At August 31,
1998, future minimum payments for the leases were $12,600, including $2,070
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 $6,370 in
1999, $5,600 in 2000, $3,505 in 2001, $151,955 in 2002, and $13,277 in 2003.

     The Company's foreign operations have short-term lines of credit totaling
approximately $55,900 which are subject to annual review by the lending banks.
At August 31, 1998, the average interest rate for the short-term lines of credit
was 5.12%. Amounts 

<PAGE>   14

outstanding under these lines of credit are payable on demand and total $15,800
as of August 31, 1998.

     There was no interest capitalized during 1998. Capitalized interest was
$145 and $2,038 in 1997 and 1996, respectively.
Interest paid was $14,823, $5,057, and $4,272 in 1998, 1997, and 1996,
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 2003.

     Rent expense was $3,891, $4,978, and $4,960 for the years ended August 31,
1998, 1997, and 1996, 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, 1998:
<TABLE>
<S>                                              <C>   
1999 .......................................     $1,744
2000 .......................................      1,215
2001 .......................................        741
2002 .......................................        655
2003 .......................................        389
--------------------------------------------------------
TOTAL MINIMUM LEASE PAYMENTS ...............    $ 4,744
========================================================
</TABLE>



COMMITMENTS AND CONTINGENCIES

At August 31, 1998, the Company has committed to capital expenditures of $10,938
in 1999, 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 two Company-owned properties where
state-supervised cleanups are expected. The designation as a potentially
responsible party and the assertion of such claims against the Company are made
without taking into consideration the extent of the Company's involvement with
the particular site. In each instance, claims have been asserted against a
number of other entities for the same recovery or other relief as was asserted
against the Company. These claims are in various stages of administrative or
judicial proceeding. The Company has no reason to believe that it will have to
pay a significantly disproportionate share of clean-up costs associated with any
site. To the extent possible, with the information available at the time, the
Company has evaluated its responsibility for costs and related liability with
respect to the above sites. In making such evaluation, the Company did not take
into consideration any possible cost reimbursement claims against its insurance
carriers. The Company is of the opinion that its liability with respect to those
sites should not have a material adverse effect on its financial position or
results of operations. In arriving at this conclusion, the principal factors
considered by the Company were ongoing settlement discussions with respect to
certain of the sites, the volume and relative toxicity of waste alleged to have
been disposed of by the Company at certain sites, which factors are often used
to allocate investigative and remedial costs among potentially responsible
parties, the probable costs to be paid by other potentially responsible parties,
total projected remedial costs for a site, if known, and the Company's existing
reserve to cover costs associated with unresolved environmental proceedings. At
August 31, 1998, the Company's accrued undiscounted reserve for such
contingencies was $1,700.

     Allied-Signal Inc. has brought an action against the Company seeking a
contribution from the Company equal to 50% of Allied-Signal's estimated $30,000
remediation cost in connection with a site in southern Ohio. The Company
believes its responsibility with respect to this site is very limited due to the
nature of the foundry sand waste it disposed of at the site. A trial in this
case was completed in February of 1995, but no judgment has been rendered. The
Company believes that if it has any liability at all in regard to this matter,
that liability would not be material to its financial position or results of
operations.


MAJOR CUSTOMERS AND CREDIT CONCENTRATION

The Company sells products to customers primarily in the United States and, with
the acquisition of Speedline, also sells products to original equipment
automotive manufacturers in 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, 1998, total trade receivables from the
domestic and foreign automotive industry were $77,148, and $20,381 was due from
the construction industry.

     Sales to Engineered Components' largest customer, General Motors, were
$150,897, $139,721, and $114,473 for the years ended August 31, 1998, 1997, and
1996, respectively. Trade receivables from General Motors on August 31, 1998 and
1997, were $19,538 and $16,511, respectively, and were current. No other single
customer accounted for a material portion of trade receivables.
<PAGE>   15



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 350,000 common shares of the
Company at August 31, 1998 (4.7% of plan assets) and 1997 (8.6% of plan assets).

     The Company also sponsors a deferred compensation profit sharing plan for
the benefit of substantially all domestic salaried employees. The Company
provides a 15% 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.

     The Company participates in a multiemployer plan that provides defined
benefits to certain bargaining unit employees.

     The following table sets forth the funded status and the amounts recognized
in the consolidated statements of financial condition for the Company's defined
benefit plan at August 31:
<TABLE>
<CAPTION>

                                                                                          1998           1997
Actuarial present value of benefit obligation:
<S>                                                                                  <C>              <C>       
     Vested benefit obligation..................................................     $  (95,554)      $ (86,337)
================================================================================================================================
     Accumulated benefit obligation.............................................     $  (99,248)      $ (89,410)
================================================================================================================================
Projected benefit obligation....................................................     $ (106,334)      $ (94,404)
Plan assets at fair value.......................................................        114,681          98,692
--------------------------------------------------------------------------------------------------------------------------------
Overfunded projected benefit obligation.........................................          8,347           4,288
Unrecognized net gain...........................................................        (10,580)         (5,406)
Unrecognized prior service cost.................................................          3,181           1,952
Unrecognized transition asset being recognized over a minimum of 15 years.......         (1,952)         (2,510)
--------------------------------------------------------------------------------------------------------------------------------
Net pension liability recognized in the consolidated statement of ..............
  financial condition                                                                $   (1,004)      $  (1,676)
================================================================================================================================
<CAPTION>

     A summary of the components of net periodic pension cost for the defined
benefit plan and the total amounts charged to expense for the defined
contribution and multiemployer plans follows:

                                                                                           1998            1997            1996
Defined benefit plan:
<S>                                                                                  <C>              <C>             <C>      
     Service cost of current period.............................................     $    1,680       $   1,588       $   1,603
     Interest cost on projected benefit obligation..............................          7,083           6,487           6,268
     Actual return on plan assets...............................................        (21,971)        (15,358)        (12,630)
     Net amortization and deferral..............................................         13,338           7,806           5,410
-------------------------------------------------------------------------------------------------------------------------------
     Net pension cost...........................................................            130             523             651
Defined contribution plan.......................................................            333             306             416
Multiemployer pension plan......................................................            241             241             232
-------------------------------------------------------------------------------------------------------------------------------
                  TOTAL COST ...................................................     $      704       $   1,070       $   1,299
===============================================================================================================================
Assumed rates of return:
Weighted average discount rate..................................................           7.0%            7.8%            7.5%
Rate of future compensation increase............................................           4.7%            4.7%            4.7%
Long-term return on assets:
                  Dedicated.....................................................            N/A            7.3%            7.0%
                  Nondedicated..................................................          10.0%           10.5%           10.5%
</TABLE>

     Included in deferred liabilities at August 31, 1998 and 1997 is an accrual
totaling $10,202 and $8,625, 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.
<PAGE>   16

<TABLE>
<CAPTION>

INCOME TAXES

For financial reporting purposes, income before income taxes includes the
following components:
                                                                                          1998            1997            1996
<S>                                                                                    <C>             <C>             <C>     
United States.....................................................................     $ 17,736        $ 20,005        $ 24,731
Foreign...........................................................................        5,239               -               -
-------------------------------------------------------------------------------------------------------------------------------
                                                                                       $ 22,975        $ 20,005        $ 24,731
===============================================================================================================================
The provisions for income taxes are as follows:
Currently payable
     State and local..............................................................     $    222        $     31        $    171
     Foreign......................................................................        2,232             384             507
     Federal......................................................................        5,360           4,016           2,702
-------------------------------------------------------------------------------------------------------------------------------
                                                                                          7,814           4,431           3,380
Deferred
     State and local..............................................................           (4)            367             364
     Foreign......................................................................       (2,091)              -               -
     Federal......................................................................          491           2,224           5,061
-------------------------------------------------------------------------------------------------------------------------------
                                                                                         (1,604)          2,591           5,425
-------------------------------------------------------------------------------------------------------------------------------
                                                                                       $  6,210        $  7,022        $  8,805
===============================================================================================================================

Reconciliations of income taxes computed by applying the statutory federal
income tax rate to the provisions for income taxes are as follows:

Federal income tax at statutory rate..............................................     $  8,041        $  7,002        $  8,657
Federal tax credits...............................................................         (140)           (150)              -
State income taxes................................................................          144             259             348
Goodwill amortization.............................................................          424               -               -
Higher effective income taxes of other countries..................................          268               -               -
Change in Italian tax rates.......................................................       (2,562)              -               -
Other.............................................................................           35             (89)           (200)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                       $  6,210        $  7,022        $  8,805
===============================================================================================================================
<CAPTION>

Significant components of deferred tax assets and liabilities are as follows:
                                                                                           1998            1997
Deferred tax assets related to:
<S>                                                                                    <C>             <C>     
Accrued compensation and related items............................................     $  3,659        $  3,693
Tax credit carryforwards..........................................................        3,901           3,025
Net operating losses..............................................................        3,394           2,291
Other.............................................................................        8,552           6,651
-------------------------------------------------------------------------------------------------------------------------------
                                                                                         19,506          15,660
Valuation allowance...............................................................       (3,824)           (406)
-------------------------------------------------------------------------------------------------------------------------------
                                                                                         15,682          15,254

Deferred tax liabilities related to:
Depreciation......................................................................       33,138          13,514
Other.............................................................................        4,793           6,442
-------------------------------------------------------------------------------------------------------------------------------
                                                                                         37,931          19,956
-------------------------------------------------------------------------------------------------------------------------------
Net deferred tax liabilities......................................................     $ 22,249        $  4,702
===============================================================================================================================
</TABLE>

The Company has foreign net operating loss carryforwards totaling $9,173 that
expire in years 1999 through 2003. The Company also has U.S. income tax credits
of $1,259 that expire in years 2003 through 2013. In addition, the Company has
alternative minimum tax credits of $2,642 which have an indefinite carryforward
period. For financial reporting purposes, a valuation allowance of $3,824 has
been recognized to offset the deferred tax assets related to those
carryforwards.

     Income taxes paid by the Company totaled $5,701, $4,407, and $1,905 in
1998, 1997, and 1996, 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 practicable to determine the
deferred tax liability for temporary differences related to these undistributed
earnings.
<PAGE>   17


STOCK OPTIONS

The Company has two plans under which stock options for the purchase of common
shares may be granted. The 1989 Stock Incentive Plan provides for the granting
of options for the purchase of a maximum of 1,200,000 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 1989 Director Stock Option Plan provides for the granting of options
for the purchase of a maximum of 120,000 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 expires at the end of five
years.

     Information regarding the Company's stock option plans for the years ended
August 31, 1998, 1997, and 1996 is as follows:
<TABLE>
<CAPTION>


                                                        1998                        1997                         1996
------------------------------------------------------------------------------------------------------------------------------
                                                             WEIGHTED                    Weighted                     Weighted
                                                              AVERAGE                     Average                      Average
                                                             EXERCISE                    Exercise                     Exercise
                                               SHARES          PRICE        Shares         Price        Shares          Price
-----------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>           <C>           <C>           <C>            <C>   
Outstanding at beginning of year........       472,525        $18.96        455,822       $18.15        414,820        $17.46
Granted.................................       149,601        $27.08        135,527       $21.49        124,202        $18.14
Exercised...............................       (30,539)       $18.25        (77,606)      $18.48        (60,775)       $13.29
Cancelled...............................       (20,250)       $20.78        (41,218)      $19.18        (22,425)       $18.54
-----------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year..............       571,337        $21.06        472,525       $18.96        455,822        $18.15
==============================================================================================================================
Options exercisable at end of year......       421,736        $18.93        340,153       $17.94        338,055        $18.16
==============================================================================================================================
Weighted-average fair value of
     options granted during the year....                $4.95                       $4.63                        $3.84
==============================================================================================================================

<CAPTION>


Information regarding options outstanding at August 31, 1998, is as follows:

                                                        OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
------------------------------------------------------------------------------------------------------------------------------
                                                             WEIGHTED      WEIGHTED                                    WEIGHTED
                                                             REMAINING      AVERAGE                                     AVERAGE
                                                            CONTRACTUAL    EXERCISE                                    EXERCISE
RANGE OF  EXERCISE PRICES                      NUMBER          LIFE          PRICE                      NUMBER           PRICE
-------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>          <C>            <C>                          <C>            <C>   
$  8.50-$14.50..........................        48,539       2.5 years      $11.04                       48,539         $11.04
$ 15.81-$19.81..........................       253,719       7.3 years      $18.04                      221,219         $18.18
$ 20.44-$25.91..........................       269,079       7.2 years      $23.33                      151,978         $22.54
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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 1998, 1997, and 1996, the effect on the
Company's net income and net income per share for such years would not be
material. 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 for
all three years: expected volatility 23%; dividend yield of 2.26%; expected life
of 3.5 years; and risk-free interest rates ranging from 5.8% to 6.6%.
<PAGE>   18

EARNINGS PER SHARE

During 1998, the Company adopted the provisions of SFAS No. 128, "Earnings per
Share," which replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. The following table reflects
the calculations for basic and diluted earnings per share for the three years
ended August 31:
<TABLE>
<CAPTION>

                                    1998      1997     1996
<S>                               <C>       <C>      <C>    
Income before cumulative effect
     of accounting change.......  $ 16,765  $12,983  $15,926
--------------------------------------------------------------
Net Income......................  $  8,177  $12,983  $15,926
--------------------------------------------------------------

BASIC EARNINGS PER SHARE:
Basic shares....................     9,200    8,674    8,606
--------------------------------------------------------------
Income before cumulative effect
     of accounting change.......    $ 1.82    $1.50    $1.85
--------------------------------------------------------------
Net income......................    $  .89    $1.50    $1.85
--------------------------------------------------------------
<CAPTION>

DILUTED EARNINGS PER SHARE:
<S>                                  <C>      <C>      <C>  
Basic shares....................     9,200    8,674    8,606
Stock options...................        50       80       22
--------------------------------------------------------------
Diluted shares..................     9,250    8,754    8,628
--------------------------------------------------------------
Income before cumulative effect
     of accounting change.......    $ 1.81    $1.48    $1.84
--------------------------------------------------------------
Net income......................    $  .88    $1.48    $1.84
--------------------------------------------------------------
</TABLE>

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.



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.


POSTRETIREMENT HEALTH CARE AND
LIFE INSURANCE BENEFITS

The Company provides health care and life insurance benefits to designated
salaried and hourly employees who participate in a defined benefit pension plan
and who retired prior to January 1, 1992. The plan coordinates with Medicare and
requires employee contributions. The Company also provides similar benefits to
certain employees, represented by bargaining units, who retire before attaining
age 65 and meet certain minimum service requirements. Benefits for the
bargaining unit employees terminate when the retiree attains age 65. The Company
funds the postretirement benefits on a cash basis. 

Accumulated postretirement benefit obligation recognized in 1998 and 1997:
<TABLE>
<CAPTION>

                                           1998        1997
<S>                                      <C>         <C>    
Retirees..............................   $ 3,380     $ 4,267
Fully eligible active plan participants       98          88
Other active employees................       582         415
--------------------------------------------------------------
     .................................     4,060       4,770     
Deferred (gain) loss .................      (456)        245
--------------------------------------------------------------
                                         $ 4,516     $ 4,525
==============================================================
</TABLE>

In prior years, health care and life insurance benefits for retired employees of
closed facilities were provided for at the time the related facility was closed.
The accrued postretirement benefit obligation for these retirees at August 31,
1998 and 1997 was $1,100 and $1,200, respectively. 

Net periodic postretirement benefit expense for 1998, 1997, and 1996 is as
follows:

<TABLE>
<CAPTION>

                                      1998     1997     1996
<S>                                  <C>      <C>      <C>  
Service cost....................     $  41    $  29    $  28
Interest cost...................       285      336      340
Amortization of loss............        53     -           -
--------------------------------------------------------------
                                     $ 379    $ 365    $ 368
==============================================================
</TABLE>

The actuarial assumptions used to determine costs and benefit
obligation include a discount rate of 7% for 1998 and 7.8% for 1997. The assumed
rates of future increases in per capita cost of health care benefits (health
care trend rates) are 8% in 1998, 7% in 1999, and 6% in 2000 and thereafter.
Increasing the health care trend rate by one percentage point would increase the
accumulated postretirement benefit obligation $277 and would increase the 1998
postretirement benefit cost $21.
<PAGE>   19

BUSINESS SEGMENTS

The Company has two business segments, Flow Control Products and Engineered
Components, through which the Company serves the construction, automotive, and
industrial sectors of the economy. The Company's Flow Control Products segment
is a supplier of fittings for the industrial, commercial, and residential
construction markets, valves utilized in air conditioning and refrigeration
systems, and industrial compressed gas applications. Flow Control Products sales
of copper and brass fittings amounted to $142,424, $125,863, and $123,351 in
1998, 1997, and 1996, respectively.

         The Company's Engineered Components segment is a supplier of aluminum
automotive components and aluminum wheels for automotive original equipment
manufacturers and the automotive aftermarket, cast and fabricated metal products
for sale to original equipment manufacturers in the transportation,
construction, air conditioning, and refrigeration industries. Sales of aluminum
products to the automotive industry by the Engineered Components segment
amounted to $363,903, $189,987, and $151,237 in 1998, 1997, and 1996,
respectively. Domestic consolidated export sales were $33,372, $30,907, and
$25,615 for 1998, 1997, and 1996, respectively.
<TABLE>
<CAPTION>



                                                             NET SALES                         INCOME BEFORE INCOME TAXES*
                                                 1998          1997          1996           1998          1997           1996
<S>                                           <C>           <C>            <C>           <C>           <C>            <C>     
Flow Control Products....................     $180,596      $ 162,150      $159,323      $ 27,931      $ 24,358       $ 25,236
Engineered Components
     United States.......................      226,049        224,901       184,611         9,708         9,531          9,323
     Foreign.............................      167,769              -             -         9,901             -              -
------------------------------------------------------------------------------------------------------------------------------
                                               393,818        224,901       184,611        19,609         9,531          9,323
Restructuring and integration charges (a)            -              -             -       (12,000)            -              -
Disposition of aerospace business (b) ...            -              -             -        12,048             -              -
Corporate................................            -              -             -        (9,630)       (6,647)        (7,231)
Equity in loss of joint venture and
     other income and expense............            -              -             -            62        (2,102)          (249)
Interest Expense.........................            -              -             -       (15,045)       (5,135)        (2,348)
------------------------------------------------------------------------------------------------------------------------------
                                              $574,414      $ 387,051     $ 343,934      $ 22,975      $ 20,005       $ 24,731
===============================================================================================================================
<CAPTION>

                                                       CAPITAL EXPENDITURES                  DEPRECIATION AND AMORTIZATION
                                                 1998           1997          1996          1998          1997           1996
<S>                                           <C>           <C>           <C>            <C>           <C>            <C>     
Flow Control Products....................     $  9,085      $   6,318     $   9,809      $  6,114      $  5,638       $  5,370
Engineered Components
     United States.......................       24,018         34,042        38,767        14,551        14,665         11,892
     Foreign.............................       13,517              -             -         9,994             -              -
------------------------------------------------------------------------------------------------------------------------------
                                                37,535         34,042        38,767        24,545        14,665         11,892
Corporate................................          143             17            64         1,454           160            166
------------------------------------------------------------------------------------------------------------------------------
                                              $ 46,763      $  40,377     $  48,640      $ 32,113      $ 20,463       $ 17,428
==============================================================================================================================


<CAPTION>

                                                       IDENTIFIABLE ASSETS
                                                1998            1997          1996
<S>                                           <C>           <C>           <C>      
Flow Control Products....................     $112,874      $ 100,632     $  94,604
Engineered Components
     United States.......................      173,130        180,908       156,744
     Foreign.............................      189,612        155,356             -
-------------------------------------------------------------------------------------------------------------------
                                               362,742        336,264       156,744
Corporate................................       87,834         72,022        17,869
-------------------------------------------------------------------------------------------------------------------
                                              $563,450      $ 508,918     $ 269,217
===================================================================================================================

<FN>

*    Income before cumulative effect of a change in accounting principle in 1998.
a)   $10,000 of restructuring and integration charges relates to the Flow Control Products segment
     (of which $2,200 is recorded in cost of sales) and $2,000 relates to prior shutdown locations.
b)   Disposition of aerospace business relates to the Engineered Components segment.
</TABLE>
<PAGE>   20


QUARTERLY FINANCIAL DATA (Unaudited)

($ in thousands except per share amounts)
<TABLE>
<CAPTION>

                                                                       FISCAL QUARTER                                FOR THE YEAR
---------------------------------------------------------------------------------------------------------------------------------
1998                                               1ST               2ND             3RD                4TH
---------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>               <C>               <C>                <C>       
NET SALES .................................    $  140,979       $  136,975        $  159,267        $  137,193         $  574,414
GROSS PROFIT ..............................        23,596           22,178            26,072            21,158             93,004
INCOME BEFORE CUMULATIVE
     EFFECT OF ACCOUNTING CHANGE ..........         4,560            5,609             5,684               912             16,765
INCOME PER SHARE BEFORE CUMULATIVE
     EFFECT OF  ACCOUNTING CHANGE - BASIC .    $      .49       $      .61        $      .62        $      .10         $     1.82
INCOME PER SHARE BEFORE CUMULATIVE
     EFFECT OF ACCOUNTING CHANGE - DILUTED     $      .49       $      .61        $      .61        $      .10         $     1.81
NET INCOME (LOSS) .........................        (4,028)           5,609             5,684               912              8,177
NET INCOME (LOSS) PER SHARE - BASIC .......    $     (.44)      $      .61        $      .62        $      .10         $      .89
NET INCOME (LOSS) PER SHARE - DILUTED .....    $     (.44)      $      .61        $      .61        $      .10         $      .88
AVERAGE NUMBER OF SHARES
     OUTSTANDING - BASIC ..................         9,184            9,202             9,206             9,207              9,200
AVERAGE NUMBER OF SHARES
     OUTSTANDING - DILUTED ................         9,266            9,262             9,248             9,223              9,250
<CAPTION>


                                                                       Fiscal Quarter                                For the Year
---------------------------------------------------------------------------------------------------------------------------------
1997                                               1st               2nd             3rd                4th
---------------------------------------------------------------------------------------------------------------------------------

<S>                                            <C>              <C>               <C>               <C>                <C>       
Net sales..................................    $   90,789       $   91,334        $  106,223        $   98,705         $  387,051
Gross profit...............................        19,105           15,524            18,114            16,297             69,040
Net income.................................         4,138            2,081             4,294             2,470             12,983
Net income per share - basic...............    $      .48       $      .24        $      .50        $      .28         $     1.50
Net income per share - diluted.............    $      .48       $      .24        $      .49        $      .28         $     1.48
Average number of shares
     outstanding - basic...................         8,625            8,650             8,666             8,756              8,674
Average number of shares
     outstanding - diluted.................         8,669            8,743             8,749             8,854              8,754
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>


Net income for the first three quarters of fiscal 1998 have been restated from
the amounts previously reported in the Company's Form 10-Q's. The restated
amounts reflect the adoption of SOP 98-5 "Reporting on the Costs of Start-up
Activities" retroactive to September 1, 1997. The effect of the restatements was
to recognize the cumulative effect of this change in accounting principle in the
first quarter, which reduced net income by $8,588 ($.93 per share) and to
increase net income by $488, $330, and $320 for the first three quarters of
fiscal 1998, respectively.

Results for the third quarter of fiscal 1998 includes restructuring and
integration charges of $12,000, of which $2,200 was recorded in cost of sales.

Results for the second quarter of fiscal 1997 include a one-time, cumulative,
non-cash charge of $3,500 ($.26 per share) to cost of sales as a consequence of
overstated inventory values at the Company's aerospace casting operation.