<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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
(Exact name of each registrant as it appears in its charter)
Wisconsin 39-1580331
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957
(Address of principal executive offices) (Zip Code)
(920) 725-7000
(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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, Class A, $100 par value- 1,000 shares as of April 30, 2000
Common Stock, Class B, $100 par value- 0 shares as of April 30, 2000
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NEENAH FOUNDRY COMPANY
Form 10-Q Index
For the Quarter Ended March 31, 2000
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part 1. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets -- March 31, 2000 and September 30, 1999 3
Condensed consolidated statements of operations -- Three and six months ended March 31, 2000
and 1999 4
Condensed consolidated statements of cash flows -- Six months ended March 31, 2000
and 1999 5
Notes to condensed consolidated financial statements -- March 31, 2000 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of 9
Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk 12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 13
Exhibit 27. Financial Data Schedule 14
</TABLE>
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NEENAH FOUNDRY COMPANY
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31 September 30
2000 1999(1)
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................. $ 15,700 $ 17,368
Accounts receivable, net ............................... 70,462 77,696
Inventories ............................................ 70,096 56,387
Deferred income taxes .................................. 3,534 3,534
Other current assets ................................... 5,443 5,223
-------------- --------------
Total current assets ......................... 165,235 160,208
Property, plant and equipment ............................ 287,196 255,245
Less accumulated depreciation ............................ 60,124 46,441
-------------- --------------
227,072 208,804
Identifiable intangible assets, net ...................... 69,736 73,303
Goodwill, net ............................................ 191,759 190,469
Other assets ............................................. 8,461 8,918
-------------- --------------
$ 662,263 $ 641,702
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ....................................... $ 33,664 $ 31,151
Income taxes payable ................................... 501 1,129
Accrued liabilities .................................... 36,187 38,632
Current portion of long-term debt ...................... 5,565 5,334
-------------- --------------
Total current liabilities .................... 75,917 76,246
Long-term debt ........................................... 446,951 423,887
Postretirement benefit obligations ....................... 5,795 5,641
Deferred income taxes .................................... 65,121 64,237
Other liabilities ........................................ 8,230 7,941
-------------- --------------
Total liabilities ............................ 602,014 577,952
Commitments and contingencies
STOCKHOLDER'S 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 ............................. 51,317 51,317
Retained earnings ...................................... 8,832 12,333
-------------- --------------
Total stockholder's equity ................... 60,249 63,750
-------------- --------------
$ 662,263 $ 641,702
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
(1) The balance sheet as of September 30, 1999 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.
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NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales ........................................ $ 142,738 $ 136,943 $ 269,588 $ 252,207
Cost of sales .................................... 118,167 116,356 224,224 209,848
----------- ----------- ----------- -----------
Gross profit ..................................... 24,571 20,587 45,364 42,359
Selling, general and administrative expenses...... 10,434 8,629 19,863 16,889
Amortization of intangible assets ................ 2,726 2,614 5,433 6,029
----------- ----------- ----------- -----------
Total operating expenses ......................... 13,160 11,243 25,296 22,918
----------- ----------- ----------- -----------
Operating income ................................. 11,411 9,344 20,068 19,441
Net interest expense ............................. (11,803) (10,871) (23,304) (20,778)
----------- ----------- ----------- -----------
Loss before income taxes ......................... (392) (1,527) (3,236) (1,337)
Provision (credit) for income taxes .............. 518 (34) 265 515
----------- ----------- ----------- -----------
Net loss ......................................... $ (910) $ (1,493) $ (3,501) $ (1,852)
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
March, 31 March, 31
2000 1999
----------------- -----------------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................. $ (3,501) $ (1,852)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .......................... 19,553 17,609
Amortization of deferred financing costs and premium on notes 541 548
Deferred income taxes .................................. (259) 23
Changes in operating assets and liabilities ............ (3,863) (2,422)
----------------- -----------------
Net cash provided by operating
activities ......................................... 12,471 13,906
INVESTING ACTIVITIES
Purchase of property, plant and equipment .................. (14,743) (19,808)
Acquisition of Cast Alloys, Inc., net of cash acquired of $488 -- (40,824)
Acquisition of Gregg Industries, Inc., net of cash acquired of $403 (23,002) --
----------------- -----------------
Net cash used in investing
activities ......................................... (37,745) (60,632)
FINANCING ACTIVITIES
Proceeds from long-term debt ............................... 26,470 91,605
Payments on long-term debt ................................. (2,864) (31,546)
Debt issuance costs ........................................ -- (3,236)
Return of capital to parent ................................ -- (3,850)
----------------- -----------------
Net cash provided by financing
activities ......................................... 23,606 52,973
----------------- -----------------
Increase (decrease) in cash and cash equivalents ........... (1,668) 6,247
Cash and cash equivalents at beginning of period ........... 17,368 19,798
----------------- -----------------
Cash and cash equivalents at end of period ................. $ 15,700 $ 26,045
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
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NEENAH FOUNDRY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 2000
(In thousands)
NOTE 1 -- 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 and six months
ended March 31, 2000 are not necessarily indicative of the results that may be
expected for the year ending September 30, 2000. 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 year ended September
30, 1999.
NOTE 2 -- INVENTORIES
The components of inventories are as follows:
<TABLE>
<CAPTION>
March 31, September 30
2000 1999
----------------- -----------------
(000's omitted)
<S> <C> <C>
Raw materials................................................. $ 10,867 $ 9,702
Work in process and finished goods................... 48,358 37,654
Supplies...................................................... 10,871 9,031
----------------- -----------------
$ 70,096 $ 56,387
================= =================
</TABLE>
If the FIFO method of inventory valuation had been used on all components,
inventories would have been approximately $228 lower than reported at March 31,
2000, and $1,156 lower than reported at September 30, 1999.
NOTE 3 -- ACQUISITIONS
On December 31, 1998, the Company purchased Niemin Porter & Co. d/b/a Cast
Alloys, Inc. ("Cast Alloys"), a manufacturer of investment-cast titanium and
stainless steel golf club heads, for $40,824 in cash (including direct costs of
$1,206 and net of $488 of acquired cash). The acquisition of Cast Alloys was
financed out of a portion of the proceeds of the issuance of the Company's
11-1/8% Senior Subordinated Notes due 2007 issued on November 24, 1998.
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On November 30, 1999, the Company purchased Gregg Industries, Inc. ("Gregg"), a
manufacturer of gray and ductile iron castings, for $23,002 (including direct
costs of $735 and net of $403 of acquired cash). The acquisition of Gregg was
financed through drawings under the Company's Acquisition Loan Facility. A
purchase price adjustment of $6,500 was paid in April, 2000 based on Gregg's
operating results for the calendar year ended December 31, 1999. The purchase
price could be further adjusted based on the operating results of Gregg for the
calendar year ended December 31, 2000. The additional purchase price adjustments
are allocated to goodwill. Had the acquisition of Gregg occurred as of October
1, 1999, or October 1, 1998, there would have been no material pro forma effect
on net sales or net income for the six months ended March 31, 2000 or 1999.
The acquisitions of Cast Alloys and Gregg have been accounted for using the
purchase method of accounting and, accordingly, the purchase price has been
allocated on the basis of fair values to the underlying assets acquired and
liabilities assumed. The allocation of the purchase price paid for Gregg was
based on preliminary estimates of fair values and will be revised when final
amounts of fair values are determined. The excess of the cost of acquisitions
over the fair value of the net tangible and identifiable assets acquired has
been allocated to goodwill. The operating results of Cast Alloys and Gregg are
included in the consolidated statements of operations since the date of their
respective acquisition.
NOTE 4 -- GUARANTOR SUBSIDIARIES
Neenah Transport, Inc., Hartley Controls Corporation, Deeter Foundry, Inc.,
Mercer Forge Corporation (and its subsidiary A&M Specialties, Inc.), Dalton
Corporation (and its subsidiaries Dalton Corporation, Warsaw Manufacturing
Facility; Dalton Corporation, Kendallville Manufacturing Facility; Dalton
Corporation, Ashland Manufacturing Facility; and Dalton Corporation, Stryker
Machining Facility, Inc.), Advanced Cast Products, Inc. (and its subsidiaries
Belcher Corporation and Peerless Corporation), Niemin Porter & Co. (and its
subsidiary International Golf, S.A. de, C.V.), and Gregg Industries, Inc.
(collectively, the "Guarantor Subsidiaries") are wholly-owned subsidiaries of
Neenah Foundry Company and have fully and unconditionally guaranteed the Senior
Subordinated Notes on a joint and several basis. The Guarantor Subsidiaries
comprise all of the Company's direct and indirect domestic 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.
The following is summarized combined financial information of the Guarantor
Subsidiaries. Net sales include net sales to Neenah Foundry Company of $3,500
and $3,199 for the six months ended March 31, 2000 and 1999, respectively.
<TABLE>
<CAPTION>
March 31, 2000 September 30, 1999
--------------- ------------------
(000's omitted) (000's omitted)
<S> <C> <C>
Current assets $ 60,689 $ 63,153
Noncurrent assets 256,235 236,185
Current liabilities 37,203 38,148
Noncurrent liabilities 32,579 30,570
<CAPTION>
Six Months Six Months
Ended Ended
March 31, 2000 March 31, 1999
-------------- --------------
(000's omitted) (000's omitted)
<S> <C> <C>
Net sales $ 184,767 $ 170,595
Gross profit 17,009 16,491
Net loss (6,883) (3,834)
</TABLE>
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NOTE 5 -- SEGMENT INFORMATION
The Company has two reportable segments, Castings and Forgings. The Castings
segment manufactures and sells castings for the industrial and municipal
markets, while the Forgings segment manufactures forged components for the
industrial market.
The Other segment includes machining operations, manufacture of foundry
equipment and freight hauling.
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
Castings $ 119,527 $ 106,787 $ 234,353 $ 205,027
Forgings 9,783 13,432 17,776 26,641
Other 18,117 21,339 26,822 29,384
Elimination of intersegment revenues (4,689) (4,615) (9,363) (8,845)
----------- ----------- ----------- -----------
Consolidated $ 142,738 $ 136,943 $ 269,588 $ 252,207
=========== =========== =========== ===========
Net income (loss):
Castings $ (1,557) $ (4,365) $ (7,736) $ (6,166)
Forgings (1,031) 92 (2,062) 227
Other (899) 71 (584) 251
Elimination of intersegment income 2,577 2,709 6,881 3,836
----------- ----------- ----------- -----------
Consolidated $ (910) $ (1,493) $ (3,501) $ (1,852)
=========== =========== =========== ===========
<CAPTION>
March 31, September 30,
2000 1999
----------- -----------
<S> <C> <C>
Identifiable Assets:
Castings $ 828,237 $ 790,527
Forgings 57,400 57,321
Other 19,823 19,127
Adjustments (243,197) (225,273)
----------- -----------
Total consolidated assets $ 662,263 $ 641,702
=========== ===========
</TABLE>
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NOTE 6 -- RESTRUCTURING CHARGE
During fiscal 1999, the Company recorded a restructuring charge of $6,713 to
close one of their manufacturing facilities. Impairment and abandonment of
assets at this facility that will no longer be used represented $6,030 of the
restructuring charge. The following is a breakdown of activity during the six
months ended March 31, 2000 of each cash component of the restructuring charge:
<TABLE>
<CAPTION>
Balance at Balance at
September 30, Cash March 31,
1999 Payments 2000
-----------------------------------
<S> <C> <C> <C>
Employee severance costs $ 328 $ 293 $ 35
Lease commitment and contractual
obligations 130 116 14
Other exit activity costs, primarily
facility closure expenses 225 155 70
-----------------------------------
$ 683 $ 564 $ 119
===================================
</TABLE>
The fair value of assets that will no longer be used was determined based on an
appraisal performed with consideration given to offers received from prospective
buyers. Employee severance costs relate to 20 salaried employees and 146
bargaining unit employees and have been communicated in writing to employees. As
of March 31, 2000, all affected salaried and bargaining unit employees have
actually been terminated and received severance benefits. It is expected that
substantially all actions related to the Company's restructuring plan will be
completed by September 30, 2000.
For the six months ended March 31, 2000 and 1999, net sales related to this
manufacturing facility were $3,711 and $8,941, respectively, and the operating
loss related to this manufacturing facility was $833 and $1,343, respectively.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this annual
report are "forward-looking statements" intended to qualify for the safe harbors
from liability established by the Private Securities Litigation Reform Act of
1995. These forward looking statements can generally be identified as such
because the context of the statement will include words such as the Company
"believes," "anticipates," "expects" or words of similar import. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks and uncertainties which are described in close proximity to such
statements and which may cause actual results to differ materially from those
currently anticipated. The forward-looking statements made herein are made only
as of the date of this report and the Company undertakes no obligation to
publicly update such forward-looking statements to reflect subsequent events or
circumstances.
The following discussions compare the results of operations of the Company for
the three and six months ended March 31, 2000, to the results of the operations
of the Company for the three and six months ended March 31, 1999.
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RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
Three Months Ended March 31, 2000 and 1999
Net sales. Net sales for the three months ended March 31, 2000 were $142,738
which are $5,795 or 4.2% higher than the quarter ended March 31, 1999. The
increase in net sales resulted from the inclusion of the operating results of
Gregg after its acquisition.
Gross profit. Gross profit for the three months ended March 31, 2000 was
$24,571, an increase of $3,984, or 19.4%, as compared to the quarter ended March
31, 1999. The increase in gross profit resulted from the inclusion of the
operating results of Gregg after its acquisition, cost reductions at Cast Alloys
and margin improvements. These increases offset a decrease in gross profit at
Mercer due to the continuing negative effect of a strike which began in April,
1999 and was settled in July, 1999. Gross profit as a percentage of net sales
increased to 17.2% for the three months ended March 31, 2000 from 15.0% for the
quarter ended March 31, 1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended March 31, 2000 were $10,434,
an increase of $1,805, or 20.9%, as compared to the $8,629 for the quarter ended
March 31, 1999. As a percentage of net sales, selling, general and
administrative expenses increased from 6.3% for the quarter ended March 31, 1999
to 7.3% for the three months ended March 31, 2000. The increase was due to the
inclusion of the operating results of Gregg after its acquisition, restructuring
costs incurred at Cast Alloys, and increased travel and technology upgrade costs
across the Company.
Amortization of intangible assets. Amortization of intangible assets was $2,726
for the three months ended March 31, 2000, an increase of $112, or 4.3%, as
compared to the $2,614 for the quarter ended March 31, 1999. The increase is due
to the increased amortization of goodwill and identifiable intangible assets of
Cast Alloys and Gregg.
Operating income. Operating income was $11,411 for the three months ended March
31, 2000, an increase of $2,067, or 22.1%, from the quarter ended March 31,
1999. The improvement in operating income was achieved for the reasons discussed
above under gross profit, partially offset by increased selling, general and
administrative expenses. As a percentage of net sales, operating income
increased from 6.8% for the quarter ended March 31, 1999 to 8.0% for the three
months ended March 31, 2000.
Net interest expense. Net interest expense was $11,803 for the three months
ended March 31, 2000 compared to $10,871 for the quarter ended March 31, 1999.
The increased interest expense resulted mainly from the interest on the drawings
under the Company's Senior Bank Facilities used to finance the purchase of
Gregg.
Provision for income taxes. The provision for income taxes for the three months
ended March 31, 2000 and 1999 is higher than the amount computed by applying the
statutory rate of approximately 40% to income before income taxes mainly due to
the amortization of goodwill which is not deductible for income tax purposes.
Six Months Ended March 31, 2000 and 1999
Net sales. Net sales for the six months ended March 31, 2000 were $269,588 which
are $17,381 or 6.9% higher than the six months ended March 31, 1999. The
increase in net sales resulted from the inclusion of the operating results of
Cast Alloys and Gregg after their acquisition, and increased sales at Neenah,
which offset a lower sales volume at Mercer.
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Gross profit. Gross profit for the six months ended March 31, 2000 was $45,364,
an increase of $3,005, or 7.1%, as compared to the six months ended March 31,
1999. The increase in gross profit resulted from the inclusion of the operating
results of Gregg after its acquisition, cost reductions at Cast Alloys and
improved sales volume at Neenah. These increases offset a decrease in gross
profit at Mercer. Gross profit as a percentage of net sales remained at 16.8%
for the six months ended March 31, 2000 and March 31,1999.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the six months ended March 31, 2000 were $19,863, an
increase of $2,974, or 17.6%, as compared to the $16,889 for the six months
ended March 31, 1999. As a percentage of net sales, selling, general and
administrative expenses increased from 6.7% for the six months ended March 31,
1999 to 7.4% for the six months ended March 31, 2000. The increase in selling,
general and administrative expenses was mainly due to the inclusion of the
operating results of Cast Alloys and Gregg after their acquisition.
Amortization of intangible assets. Amortization of intangible assets was $5,433
for the six months ended March 31, 2000, an decrease of $596, or 9.9%, as
compared to the $6,029 for the six months ended March 31, 1999. The decrease is
due to the decreased amortization of certain identifiable intangible assets
which were fully amortized in the year ended September 30, 1999.
Operating income. Operating income was $20,068 for the six months ended March
31, 2000, an increase of $627, or 3.2%, from the six months ended March 31,
1999. The improvement in operating income was achieved for the reasons discussed
above under gross profit, partially offset by increased selling, general and
administrative expenses. As a percentage of net sales, operating income
decreased from 7.7% for the six months ended March 31, 1999 to 7.4% for the six
months ended March 31, 2000.
Net interest expense. Net interest expense was $23,304 for the six months ended
March 31, 2000 compared to $20,778 for the six months ended March 31, 1999. The
increased interest expense resulted from the interest on the drawings under the
Company's Senior Bank Facilities and the Senior Subordinated Notes used to
finance the purchase of Cast Alloys and Gregg.
Provision for income taxes. The provision for income taxes for the six months
ended March 31, 2000 and 1999 is higher than the amount computed by applying the
statutory rate of approximately 40% to income before income taxes mainly due to
the amortization of goodwill which is not deductible for income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)
The Company has outstanding $282.0 million principal of 11 1/8% Senior
Subordinated Notes due 2007 (the "Senior Subordinated Notes"). In addition, the
Company has entered into a credit agreement (the "Senior Bank Facility" or
"Credit Agreement") providing for term loans in an aggregate principal amount of
$145.0 million, a Revolving Credit Facility of up to $50.0 million and an
Acquisition Loan Facility of up to $50.0 million. At March 31, 2000, there are
no borrowings outstanding on the Revolving Credit Facility and $25.0 million
principal amount outstanding on the Acquisition Loan Facility. In April, 2000,
an additional $4.75 million was borrowed on the Acquisition Loan Facility to
finance the Gregg purchase price adjustment.
The Company's liquidity needs will arise primarily from debt service on the
above indebtedness, working capital needs and funding of capital expenditures
and additional acquisitions. Borrowings under the Senior Bank Facilities 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.
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<PAGE> 12
For the six months ended March 31, 2000 and March 31, 1999, capital expenditures
were $14,743 and $19,808, respectively. The decrease in capital expenditures of
$5,065 was the result of significant expenditures for specific projects at ACP
and Deeter which were incurred during the six months ended March 31, 1999.
The Company's principal source of cash to fund its liquidity needs will be net
cash from operating activities and borrowings under its Senior Bank Facilities.
Net cash from operating activities for the six months ended March 31, 2000 was
$12,471, an decrease of $1,435 from $13,906 for the six months ended March 31,
1999. The decrease in net cash from operating activities was primarily the
result of a larger paydown of accrued interest amounts and a buildup in
inventory balances, partially offset by improved control of accounts receivable
balances.
The Company believes that cash generated from operations and existing revolving
lines of credit under the Senior Bank Facilities will be sufficient to meet its
normal operating requirements, including working capital needs and interest
payments on the Company's outstanding indebtedness.
Year 2000 Update
Previously the Company discussed the nature and progress of its plan to become
Year 2000 ready. In late calendar 1999, the Company completed its remediation
and testing of systems. As a result of those planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and noninformation technology systems and believes those
systems successfully responded to the Year 2000 date change.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates. The
Company does not use derivative financial instruments for speculative or trading
purposes.
Interest Rate Sensitivity. The Company's earnings are affected by changes
in short-term interest rates as a result of its borrowings under the Senior Bank
Facilities. If market interest rates for such borrowings average 1% more during
the remainder of the fiscal year ended September 30, 2000 than they did during
the six months ended March 31, 2000, the Company's interest expense would
increase, and income before income taxes would decrease by approximately $.8
million. This analysis does not consider the effects of the reduced level of
overall economic activity that could exist in such an environment. Further, in
the event of a change of such magnitude, management could take actions to
further mitigate its exposure to the change. However, due to the uncertainty of
the specific actions that would be taken and their possible effects, the
sensitivity analysis assumes no changes in the Company's financial structure.
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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
None.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
NEENAH FOUNDRY COMPANY
DATE: May 12, 2000 /s/ Gary LaChey
---------------------------------------------------------
Gary LaChey
Vice President-Finance, Secretary & Treasurer
(Principal Financial Officer and Duly Authorized Officer)
Page 13
<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 SIX MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 15,700
<SECURITIES> 0
<RECEIVABLES> 71,877
<ALLOWANCES> 1,415
<INVENTORY> 70,096
<CURRENT-ASSETS> 165,235
<PP&E> 287,196
<DEPRECIATION> 60,124
<TOTAL-ASSETS> 662,263
<CURRENT-LIABILITIES> 75,917
<BONDS> 446,951
0
0
<COMMON> 100
<OTHER-SE> 60,149
<TOTAL-LIABILITY-AND-EQUITY> 662,263
<SALES> 269,588
<TOTAL-REVENUES> 269,588
<CGS> 224,224
<TOTAL-COSTS> 224,224
<OTHER-EXPENSES> 25,296
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,304
<INCOME-PRETAX> (3,236)
<INCOME-TAX> 265
<INCOME-CONTINUING> (3,501)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,501)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
