NEENAH TRANSPORT INC
10-Q/A, 1998-02-24
GLASS & GLASSWARE, PRESSED OR BLOWN
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<PAGE>   1



                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549 
   
                                   FORM 10-Q/A
    




(X)    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
       EXCHANGE ACT OF 1934
       For the period ended  December 31, 1997 

                                      OR

( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934 
      For the transition period from ____________ to ______________

Commission File Number   333-28751

                            NEENAH FOUNDRY COMPANY
                            NEENAH TRANSPORT, INC.
                         HARTLEY CONTROLS CORPORATION
         (Exact name of each registrant as it appears in its charter)

        Wisconsin                                       39-1580331
        Wisconsin                                       39-1378433
        Wisconsin                                       39-0842568
(State or other jurisdiction of                   (IRS Employer ID Number) 
incorporation or organization)


2121 Brooks Avenue,  P.O. Box 729, Neenah, Wisconsin             54957  
2121 Brooks Avenue,  P.O. Box 729, Neenah, Wisconsin             54957  
2400 Holly Road, Neenah, Wisconsin                               54956 
(Address of principal executive offices)                       (Zip Code)

                                (920) 725-7000
                                (920) 725-7000
                                (920) 734-2689
             (Registrant's telephone number, including area code)

                                     None
                   (Former name, former address and former
                  fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes   X   No 



                                    Page 1
<PAGE>   2



                            NEENAH FOUNDRY COMPANY
                               Form 10-Q Index
                   For the Quarter Ended December 31, 1997


<TABLE>
<CAPTION>
                                                                                                         Page
<S>                                                                                                      <C>  
Part 1. Financial Information
    Item 1. Financial Statements
          Condensed consolidated balance sheets -- December 31, 1997 and September 30, 1997               3
          Condensed consolidated statements of income -- Three months ended December 31, 1997;  
                   and Three months ended December 31, 1996                                               4
          Condensed consolidated statements of cash flows  -- Three months ended December 31, 1997;  
                   and Three months ended December 31, 1996                                               5
          Notes to condensed consolidated financial statements -- December 31, 1997                       6

    Item 2. Management's Discussion and Analysis of Financial Condition and Results of                    7
             Operations


Part II.  Other Information
   Item 1. Legal Proceedings                                                                              9
   Item 2. Changes in Securities                                                                          9
   Item 3. Defaults upon Senior Securities                                                                9
   Item 4. Submission of Matters to a Vote of Security Holders                                            9
   Item 5. Other Information                                                                              9
   Item 6. Exhibits and Reports on Form 8-K                                                               9

Signatures                                                                                                9

Exhibit Index                                                                                             10
</TABLE>


                                    Page 2
<PAGE>   3

                            NEENAH  FOUNDRY COMPANY
                         PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                            As of               As of
                                                         December 31        September 30
                                                            1997               1997(1)
                                                         -----------      ---------------
                                                          (Unaudited)
<S>                                                      <C>                <C>
ASSETS
Current assets:
  Cash and cash equivalents ........................     $  21,994          $  20,344  
  Accounts receivable, net .........................        22,226             29,932  
  Inventories ......................................        18,286             19,639  
  Other current assets .............................           719                318
  Deferred income taxes ............................         1,628              1,695  
                                                          --------           --------
        Total current assets .......................        64,853             71,928  

Property, plant and equipment ......................       104,841            103,710  
Less accumulated depreciation ......................         5,118              3,131  
                                                          --------           --------
                                                            99,723            100,579  
Identifiable intangible assets, net ................        34,415             35,277  
Goodwill, net ......................................       115,953            116,690  
Other assets .......................................         3,817              3,951  
                                                          --------           --------
                                                         $ 318,761          $ 328,425  
                                                          ========           ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable .................................     $   5,744          $  10,333  
  Income taxes payable .............................         3,730              4,384  
  Accrued liabilities ..............................        11,549             17,283  
  Current portion of long-term debt ................            78                 98
                                                          --------           --------
        Total current liabilities ..................        21,101             32,098  
Long-term debt .....................................       197,457            197,522  
Postretirement benefit obligations .................         4,975              4,894  
Deferred income taxes ..............................        44,452             44,519  
Other liabilities ..................................         2,151              2,172  
                                                          --------           --------
        Total liabilities ..........................       270,136            281,205  

Commitments and contingencies

STOCKHOLDERS' EQUITY:
     Preferred stock, par value $100 per share --  
          authorized 3,000 shares, no shares 
          issued or outstanding  ...................            --                 --
     Common stock, par value $100 per share --  
          authorized 11,000 shares, issued 
          and outstanding 1,000 shares .............           100                100
     Additional paid in capital ....................        44,900             44,900  
     Retained earnings .............................         3,625              2,220  
                                                          --------           --------
        Total stockholders' equity .................        48,625             47,220  
                                                          --------           --------
                                                         $ 318,761          $ 328,425  
                                                          ========           ========
</TABLE>
See notes to condensed consolidated financial statements.

 (1) The balance sheet as of September 30, 1997 has been derived from the
         audited financial statements as of that date but does not
         include all of the information and footnotes required by
         generally accepted accounting principles for complete financial
         statements.



                                    Page 3

<PAGE>   4

                             NEENAH FOUNDRY COMPANY

           CONDENSED  CONSOLIDATED STATEMENTS OF INCOME  (Unaudited)
                                 (In thousands)

   
<TABLE>
<CAPTION>
                                                                                       Predecessor
                                                                                       ------------
                                                                 Three Months          Three Months
                                                                     Ended                Ended
                                                                 December 31,          December 31, 
                                                                      1997                1996
                                                               ----------------        ------------
<S>                                                               <C>                   <C>                     
Net sales ................................................          $45,854             $37,815  
Cost of sales ............................................           32,771              26,990  
                                                                    -------             -------
Gross profit .............................................           13,083              10,825  
Selling, general and administrative expenses .............            3,825               4,468  
Amortization of intangible assets ........................            1,229                  --
                                                                    -------             -------
  Total operating expenses ...............................            5,054               4,468
                                                                    -------             -------
Operating income .........................................            8,029               6,357  
Net interest income (expense) ............................           (5,255)                347
                                                                    -------             -------
Income before income taxes ...............................            2,774               6,704  
Provision for income taxes ...............................            1,369               2,069  
                                                                    -------             -------
Net income ...............................................          $ 1,405             $ 4,635  
                                                                    =======             =======
</TABLE>
    

See notes to condensed consolidated financial statements.






                                    Page 4

<PAGE>   5

                             NEENAH FOUNDRY COMPANY

         CONDENSED  CONSOLIDATED STATEMENTS  OF CASH FLOWS  (Unaudited)
                                 (In thousands)

   
<TABLE>
<CAPTION>
                                                                                Predecessor
                                                                                -------------
                                                              Three Months      Three Months
                                                                  Ended           Ended
                                                               December 31,      December 31, 
                                                                  1997             1996
                                                             --------------     -------------
<S>                                                             <C>              <C>
OPERATING ACTIVITIES
Net income ..............................................        $ 1,405         $ 4,635  
Adjustments to reconcile net income to net cash
   provided by operating activities:
   Depreciation and amortization ........................          3,213           1,759  
   Amortization of deferred financing costs and
      premium on notes ..................................             80              --
   Changes in operating assets and liabilities ..........         (1,900)          2,459  
                                                                 -------         -------
        Net cash provided by operating
        activities  .....................................          2,798           8,853  

INVESTING ACTIVITIES
Purchase of property, plant and equipment ...............         (1,128)           (911)
Other ...................................................             --             (18)
                                                                 -------         -------
        Net cash used in investing
        activities ......................................         (1,128)           (929)

FINANCING ACTIVITIES
Dividends paid ..........................................             --          (2,220) 
Payments on long-term debt ..............................            (20)            (18)
                                                                 -------         -------
        Net cash used in financing
        activities ......................................            (20)         (2,238) 
                                                                 -------         -------
Increase in cash and cash equivalents ...................          1,650           5,686  
Cash and cash equivalents at beginning of period ........         20,344          18,166  
                                                                 -------         -------
Cash and cash equivalents at end of period ..............        $21,994         $23,852  
                                                                 =======         =======
</TABLE>
    

See notes to condensed consolidated financial statements.



                                    Page 5

<PAGE>   6


                             NEENAH FOUNDRY COMPANY

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

                               December 31, 1997 


Note I -- BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation  S-X.  Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
(consisting of normal and recurring adjustments) considered necessary for a
fair presentation have been included.  Operating results for the three months
ended December 31, 1997 are not necessarily indicative of the results that may
be expected for the period ending September 30, 1998.  (The Company changed
its fiscal year end to September 30 effective September 30, 1997).  For
further information, refer to the consolidated financial statements and
footnotes thereto included in Neenah Foundry Company's Annual Report on Form
10-K for the period ended September 30, 1997.  

Note 2 -- Inventories

The components of inventories are as follows:

<TABLE>
<CAPTION>
                                                          December 31             September 30
                                                             1997                   1997
                                                       ---------------         ------------------
                                                           (000's omitted)
<S>                                                     <C>                     <C>
Raw materials .................................          $ 1,927                  $ 1,688  
Work in process and finished goods.............           12,528                   13,379  
Supplies ......................................            4,684                    4,572  
                                                         -------                  -------
Inventories at FIFO cost ......................           19,139                   19,639  
Excess of FIFO cost over LIFO cost ............             (853)                      --
                                                         -------                  -------
                                                         $18,286                  $19,639  
                                                         =======                  =======
</TABLE>

At September 30, 1997, inventories at LIFO approximated FIFO cost. 


NOTE 3 -- GUARANTOR SUBSIDIARIES

Neenah Transport, Inc. and Hartley Controls Corporation (the "Guarantor
Subsidiaries") are  wholly-owned subsidiaries of Neenah Foundry Company and
have fully and unconditionally guaranteed the Senior Subordinated Notes (as
defined below) on a joint and several basis. The Guarantor Subsidiaries
comprise all of the Company's direct and indirect subsidiaries. The separate
financial statements of the Guarantor Subsidiaries have not been included
herein because management has concluded that such financial statements would
not provide additional information that is material to investors.



                                    Page 6

<PAGE>   7


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

GENERAL

On April 30, 1997, pursuant to an Agreement and Plan of Reorganization with NC
Merger Company and NFC Castings, Inc., the stock of Neenah Corporation (the
"Predecessor Company") was acquired by NFC Castings, Inc. (the "Merger").  
On July 1, 1997, Neenah Foundry   Company, which was the principal operating 
subsidiary of Neenah Corporation, merged with and into Neenah Corporation and 
the surviving company changed its name to Neenah Foundry Company (the 
"Company"). 

The following discussion and analysis of the Company's financial condition and
results of operations addresses the periods both before and after the Merger.
The Merger has had a significant impact on the Company's results of operations
and financial condition.  The Merger resulted in the recording of goodwill and
identifiable intangible assets totaling approximately $148.8 million.  These
amounts are being amortized over their estimated  useful lives, ranging from
five months to 40 years.  The Merger has also resulted in a significant 
increase in the Company's interest expense.

The Merger has been accounted  for as a business combination and has resulted
in differences in the basis of certain assets and liabilities between the
Predecessor Company and the Company.   The Company changed its fiscal year end
to September 30 from March 31 effective September 30, 1997.  The following
discussions compare the results of operations of the Company for the three
months ended December 31, 1997, to the historical results of the Predecessor 
Company for the three months ended December 31, 1996. 

RESULTS OF OPERATIONS (dollars in thousands)

Net sales. Net sales for the three months ended December 31, 1997 were
$45,854 which are $8,039 or 21.3% higher than the quarter ended December 31,
1996.  Net sales of municipal castings increased by $1,006 or 6.2% due
primarily to market share gains in strategic focus areas of the Eastern and 
Southwestern United States as well as a continuation of the successful
transition to a modernized product line. Net sales of industrial castings 
increased by $7,426 or 37.7% due to the overall strength of the heavy  
duty truck market coupled with very high demand in the agricultural and HVAC
lines of business.  Net sales for Hartley Controls Corporation for the three 
months ended December 31, 1997, declined by $393 which is mostly attributable 
to a reduction in foundry expansion and lower capital spending at the major 
foundry customers that Hartley Controls Corporation services.

Gross profit. Gross profit for the  three months ended December 31, 1997 was
$13,083, an increase of $2,258, or 20.9%, as compared to the quarter ended 
December 31, 1996.   
The margin improvement was due to the combined effect of spreading manufacturing
overhead over a greater volume, improved efficiency in plant operations and,
to a lesser extent, improved pricing of industrial castings. 


                                    Page 7

<PAGE>   8


   
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended December 31, 1997 were
$3,825, a decrease of $643, or 14.4%, as compared to the $4,468 for the
quarter ended December 31, 1996. As a percentage of net sales, selling, general
and administrative expenses decreased from 11.8% for the quarter ended
December 31, 1996 to 8.3% for the three months ended December 31, 1997. The
decrease in selling, general and administrative expenses was mainly due to the
reduction in compensation for senior executives who did not remain with the
Company after the Merger.
    

   
Amortization of intangible assets.  Amortization of intangible assets of $1,229
for the three months ended December 31, 1997, results from goodwill and
identifiable intangible assets from the Merger.
    

   
Operating income. Operating income was $8,029 for the  three months ended
December 31, 1997, an increase of $1,672, or 26.3%, from the quarter ended
December 31, 1996.  As a percentage of net sales, operating income increased
from 16.8% for the quarter ended December 31, 1996 to 17.5% for the three 
months ended December 31, 1997. The improvement in  operating income was
achieved for the reasons discussed above.
    

LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)

In connection with the Merger, the Company issued $150.0 million principal
amount of 11-1/8% Senior Subordinated Notes due 2007 (the "Senior Subordinated 
Notes") and entered into a credit agreement providing for term loans of 
$45.0 million and a revolving credit facility of up to $50.0 million, as 
amended (the "Senior Bank Facility").  On July 1, 1997, the Company issued an 
additional $45.0 million principal amount of Senior Subordinated Notes and 
used the proceeds of $47.6 million to pay the term loans, the accrued interest 
thereon and related fees and expenses.

The Company's liquidity needs will arise primarily from debt service on the
above indebtedness, working capital needs and funding of capital expenditures.
Borrowings under the revolving credit facility bear interest at variable
interest rates.  The Senior Bank Facility imposes restrictions on the Company's
ability to make capital expenditures and both the Senior Bank Facility and the
indentures governing the Senior Subordinated Notes limit the Company's ability
to incur additional indebtedness. The covenants contained in the Senior Bank
Facility also, among other things, restrict the ability of the Company and its
subsidiaries to dispose of assets, incur guarantee obligations, prepay the
Senior Subordinated Notes or amend the indentures, pay dividends, create
liens on assets, enter into sale and leaseback transactions, make 
investments, loans or advances, make acquisitions, engage in mergers or
consolidations, change the business conducted by the Company, make capital
expenditures or engage in certain transactions with affiliates, and
otherwise restrict corporate activities. 

For the three months ended December 31, 1997 and December 31, 1996, capital
expenditures were $1,128 and $911, respectively. The $217 increase in capital
expenditures was primarily the result of planned enhancements to certain
equipment in the manufacturing area.

The Company's principal source of cash to fund its liquidity needs will be net
cash from operating activities and borrowings under its revolving credit
facility. Net cash from operating activities for the three months ended
December 31, 1997 was $2,798, a decrease of $6,055 from $8,853 for the three 
months ended December 31, 1996. The decrease in net cash from operating
activities was primarily a result of a decrease in net income and interest
payments made in October 1997 on the Company's outstanding indebtedness.

The Company believes that cash generated from operations and existing revolving
lines of credit under the  Senior Bank Facility will be sufficient to meet its
normal operating requirements, including interest payments on the Company's
outstanding indebtedness.



                                    Page 8

<PAGE>   9




                             NEENAH FOUNDRY COMPANY
                          PART II.  OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS
      None.

Item 2. CHANGES IN SECURITIES
      None.

Item 3. DEFAULTS UPON SENIOR SECURITIES
      None.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
      None.

Item 5. OTHER INFORMATION
      None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

     Exhibit 27 -    Financial Data Schedule

(b)  Reports on Form 8-K

     The Company did not  file any reports on Form 8-K during the
     quarter ended  December 31, 1997. 


                                   SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrants have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                NEENAH FOUNDRY COMPANY


   
DATE:    February 19, 1998      /s/ Gary LaChey
                                ------------------------------------------------
                                Gary LaChey
                                Vice President-Finance, Secretary & Treasurer 
                                (Principal Financial Officer and Duly Authorized
                                Officer)

                                NEENAH TRANSPORT, INC. 


DATE:    February 19, 1998      /s/ Gary LaChey
                                ------------------------------------------------
                                Gary LaChey
                                Vice President-Finance, Secretary & Treasurer 
                                (Principal Financial Officer and Duly Authorized
                                Officer)

                                HARTLEY CONTROLS CORPORATION


DATE:    February 19, 1998      /s/ Gary LaChey
                                ------------------------------------------------
                                Gary LaChey
                                Vice President-Finance, Secretary & Treasurer 
                                (Principal Financial Officer and Duly Authorized
                                Officer)
    


                                    Page 9

<PAGE>   10




                                EXHIBIT INDEX



Exhibit No.                                    Description

    27                                         Financial Data Schedule











<TABLE> <S> <C>

<ARTICLE> 5 
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF NEENAH FOUNDRY COMPANY AS OF AND
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0001040599
<NAME> NEENAH FOUNDRY COMPANY
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          SEP-30-1998
<PERIOD-START>                             OCT-01-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                          21,994
<SECURITIES>                                         0
<RECEIVABLES>                                   22,636
<ALLOWANCES>                                       410
<INVENTORY>                                     18,286
<CURRENT-ASSETS>                                64,853
<PP&E>                                         104,841
<DEPRECIATION>                                   5,118
<TOTAL-ASSETS>                                 318,761
<CURRENT-LIABILITIES>                           21,101
<BONDS>                                        197,457
                                0
                                          0
<COMMON>                                           100
<OTHER-SE>                                      48,525
<TOTAL-LIABILITY-AND-EQUITY>                   318,761
<SALES>                                         45,854
<TOTAL-REVENUES>                                45,854
<CGS>                                           32,771
<TOTAL-COSTS>                                   32,771
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             (5,255)
<INCOME-PRETAX>                                  2,774
<INCOME-TAX>                                     1,369
<INCOME-CONTINUING>                              1,405
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     1,405
<EPS-PRIMARY>                                        0
<EPS-DILUTED>                                        0
        

</TABLE>


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