<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 June 30, 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 July 31, 2000
Common Stock, Class B, $100 par value- 0 shares as of July 31, 2000
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NEENAH FOUNDRY COMPANY
Form 10-Q Index
For the Quarter Ended June 30, 2000
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part 1. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets -- June 30, 2000 and September 30, 1999 3
Condensed consolidated statements of operations -- Three and nine months ended June 30, 2000
and 1999 4
Condensed consolidated statements of cash flows -- Nine months ended June 30, 2000
and 1999 5
Notes to condensed consolidated financial statements -- June 30, 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>
Page 2
<PAGE> 3
NEENAH FOUNDRY COMPANY
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30 September 30
2000 1999(1)
-------------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................ $ 10,781 $ 17,368
Accounts receivable, net ............................................................. 75,497 77,696
Inventories .......................................................................... 68,100 56,387
Deferred income taxes ................................................................ 3,799 3,534
Other current assets ................................................................. 5,395 5,223
-------- --------
Total current assets .............................................. 163,572 160,208
Property, plant and equipment .......................................................... 289,358 255,245
Less accumulated depreciation .......................................................... 61,053 46,441
-------- --------
228,305 208,804
Identifiable intangible assets, net .................................................... 67,951 73,303
Goodwill, net .......................................................................... 196,892 190,469
Other assets ........................................................................... 9,673 8,918
-------- --------
$666,393 $641,702
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ..................................................................... $ 33,867 $ 31,151
Income taxes payable ................................................................. 1,334 1,129
Accrued liabilities .................................................................. 29,390 38,632
Current portion of long-term debt .................................................... 13,803 5,334
-------- --------
Total current liabilities ......................................... 78,394 76,246
Long-term debt ......................................................................... 448,616 423,887
Postretirement benefit obligations ..................................................... 5,918 5,641
Deferred income taxes .................................................................. 64,861 64,237
Other liabilities ...................................................................... 8,317 7,941
-------- --------
Total liabilities ................................................. 606,106 577,952
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 .................................................................... 8,870 12,333
-------- --------
Total stockholder's equity ........................................ 60,287 63,750
-------- --------
$666,393 $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 Nine Months Ended
June 30, June 30,
-------------------------- ----------------------------
2000 1999 2000 1999
--------- -------- --------- ----------
<S> <C> <C> <C> <C>
Net sales .................................................. $ 144,798 $ 140,361 $ 414,386 $ 392,568
Cost of sales .............................................. 118,337 113,691 342,561 323,539
--------- --------- --------- ---------
Gross profit ............................................... 26,461 26,670 71,825 69,029
Selling, general and administrative expenses ............... 10,572 9,516 30,435 26,405
Amortization of intangible assets .......................... 2,729 2,611 8,162 8,640
--------- --------- --------- ---------
Total operating expenses ................................... 13,301 12,127 38,597 35,045
--------- --------- --------- ---------
Operating income ........................................... 13,160 14,543 33,228 33,984
Net interest expense ....................................... (12,177) (10,571) (35,481) (31,349)
--------- --------- --------- ---------
Income (loss) before income taxes .......................... 983 3,972 (2,253) 2,635
Provision for income taxes ................................. 945 2,134 1,210 2,649
--------- --------- --------- ---------
Net income (loss) .......................................... $ 38 $ 1,838 $ (3,463) $ (14)
========= ========= ========= =========
</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>
Nine Months Nine Months
Ended Ended
June 30, June 30,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ...................................................................... $ (3,463) $ (14)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization .............................................. 29,520 26,385
Amortization of deferred financing costs and premium on notes .............. 812 865
Deferred income taxes ...................................................... (784) (597)
Changes in operating assets and liabilities ................................ (13,617) (14,901)
-------- --------
Net cash provided by operating
activities ............................................................ 12,468 11,738
INVESTING ACTIVITIES
Purchase of property, plant and equipment ..................................... (13,270) (31,040)
Acquisition of Cast Alloys, Inc., net of cash acquired of $488 ................ -- (40,824)
Acquisition of Gregg Industries, Inc., net of cash acquired of $403 ........... (29,502) --
-------- --------
Net cash used in investing
activities ............................................................ (42,772) (71,864)
FINANCING ACTIVITIES
Proceeds from long-term debt .................................................. 29,750 91,605
Payments on long-term debt .................................................... (6,033) (32,628)
Debt issuance costs ........................................................... -- (3,236)
Return of capital to parent ................................................... -- (3,850)
-------- --------
Net cash provided by financing
activities ............................................................ 23,717 51,891
-------- --------
Decrease in cash and cash equivalents ......................................... (6,587) (8,235)
Cash and cash equivalents at beginning of period .............................. 17,368 19,798
-------- --------
Cash and cash equivalents at end of period .................................... $ 10,781 $ 11,563
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended June 30, 2000, the Company financed purchases of
equipment totaling $9,947 by entering into capital leases.
See notes to condensed consolidated financial statements.
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NEENAH FOUNDRY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
June 30, 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 nine months
ended June 30, 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>
June 30, September 30
2000 1999
---------- -------------
<S> <C> <C>
Raw materials ................................................................ $10,870 $ 9,702
Work in process and finished goods ........................................... 46,266 37,654
Supplies ..................................................................... 10,964 9,031
------- -------
$68,100 $56,387
======= =======
</TABLE>
If the FIFO method of inventory valuation had been used on all components,
inventories would have been approximately $180 lower than reported at June 30,
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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<PAGE> 7
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.
Additional purchase consideration of $6,500 was paid in April, 2000 based on
Gregg's operating results for the calendar year ended December 31, 1999. An
additional purchase consideration could be paid based on the operating results
of Gregg for the calendar year ended December 31, 2000. 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 three and nine
months ended June 30, 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 $5,174
and $5,409 for the nine months ended June 30, 2000 and 1999, respectively.
<TABLE>
<CAPTION>
June 30, 2000 September 30, 1999
------------- ------------------
<S> <C> <C>
Current assets $ 61,675 $ 63,153
Noncurrent assets 264,239 236,185
Current liabilities 37,501 38,148
Noncurrent liabilities 38,683 30,570
</TABLE>
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Net sales $ 281,059 $ 259,669
Gross profit 25,471 23,549
Net loss (10,795) (6,422)
</TABLE>
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<PAGE> 8
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 Nine months ended
June 30, June 30,
------------------------------ -------------------------------
2000 1999 2000 1999
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net sales to unaffiliated customers:
Castings $ 132,039 $ 131,477 $ 376,175 $ 349,936
Forgings 8,987 4,868 26,763 31,509
Other 8,293 8,623 25,332 24,789
Elimination of intersegment revenues (4,521) (4,607) (13,884) (13,666)
--------- --------- --------- ---------
Consolidated $ 144,798 $ 140,361 $ 414,386 $ 392,568
========= ========= ========= =========
Net income (loss):
Castings $ (3,015) $ 1,274 $ (11,782) $ (5,018)
Forgings (1,203) (2,167) (3,265) (1,940)
Other 141 360 588 519
Elimination of intersegment income 3,915 2,371 10,796 6,425
--------- --------- --------- ---------
Consolidated $ (162) $ 1,838 $ (3,663) $ (14)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
June 30, September 30,
2000 1999
--------- ---------------
<S> <C> <C>
Identifiable Assets:
Castings $ 837,774 $790,527
Forgings 56,807 57,321
Other 20,756 19,127
Adjustments (248,944) (225,273)
--------- ----------
Total consolidated assets $ 666,393 $641,702
========= ==========
</TABLE>
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<PAGE> 9
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 nine
months ended June 30, 2000 of each cash component of the restructuring charge:
<TABLE>
<CAPTION>
Balance at Balance at
September 30, Cash June 30,
1999 Payments 2000
----------------------------------------------------------
<S> <C> <C> <C>
Employee severance costs $ 328 $ 328 $ -
Lease commitment and contractual
obligations 130 130 -
Other exit activity costs, primarily
facility closure expenses 225 225 -
----------------------------------------------------------
$ 683 $ 683 $ -
==========================================================
</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 were communicated in writing to employees. As of
June 30, 2000, all affected salaried and bargaining unit employees have been
terminated and paid the severance benefits to which they were entitled.
For the nine months ended June 30, 2000 and 1999, net sales related to this
manufacturing facility were $3,689 and $13,166, respectively, and the operating
loss related to this manufacturing facility was $673 and $1,985, 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 nine months ended June 30, 2000, to the results of the operations
of the Company for the three and nine months ended June 30, 1999.
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<PAGE> 10
RESULTS OF OPERATIONS (dollars in thousands)
Three Months Ended June 30, 2000 and 1999
Net sales. Net sales for the three months ended June 30, 2000 were $144,798
which are $4,437 or 3.2% higher than the quarter ended June 30, 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 June 30, 2000 was $26,461,
a decrease of $209, or 0.8%, as compared to the quarter ended June 30, 1999.
Gross profit as a percentage of net sales decreased to 18.3% for the three
months ended June 30, 2000 from 19.0% for the quarter ended June 30, 1999. The
decrease in gross profit resulted from the depressed operating results of Cast
Alloys, which had a negative gross profit in the three months ended June 30,
2000.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended June 30, 2000 were $10,572,
an increase of $1,056, or 11.1%, as compared to the $9,516 for the quarter ended
June 30, 1999. As a percentage of net sales, selling, general and administrative
expenses increased from 6.8% for the quarter ended June 30, 1999 to 7.3% for the
three months ended June 30, 2000. A significant portion of the increase was due
to the recognition of severance benefits payable to the former CEO of the
Company. The remaining increase was due to the inclusion of the operating
results of Gregg after its acquisition.
Amortization of intangible assets. Amortization of intangible assets was $2,729
for the three months ended June 31, 2000, an increase of $118, or 4.5%, as
compared to the $2,611 for the quarter ended June 30, 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 $13,160 for the three months ended June
30, 2000, a decrease of $1,383, or 9.5%, from the quarter ended June 30, 1999.
The decrease in operating income was caused by the reasons discussed above under
gross profit, as well as by increased selling, general and administrative
expenses. As a percentage of net sales, operating income decreased from 10.4%
for the quarter ended June 30, 1999 to 9.1% for the three months ended June 30,
2000.
Net interest expense. Net interest expense was $12,177 for the three months
ended June 30, 2000 compared to $10,571 for the quarter ended June 30, 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
and interest on new capital leases.
Provision for income taxes. The provision for income taxes for the three months
ended June 30, 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.
Nine Months Ended June 30, 2000 and 1999
Net sales. Net sales for the nine months ended June 30, 2000 were $414,386 which
are $21,818 or 5.6% higher than the nine months ended June 30, 1999. The
increase in net sales resulted from the inclusion of the operating results of
Cast Alloys and Gregg after their acquisition, which offset lower sales volumes
at Dalton Corporation and Mercer Forge Corporation ("Mercer").
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<PAGE> 11
Gross profit. Gross profit for the nine months ended June 30, 2000 was $71,825,
an increase of $2,796, or 4.1%, as compared to the nine months ended June 30,
1999. The increase in gross profit resulted from the inclusion of the operating
results of Gregg after its acquisition. Gross profit as a percentage of net
sales decreased from 17.6% for the nine months ended June 30, 1999 to 17.3% for
the nine months ended June 30, 2000. The decrease in gross profit percentage is
due to the decreased gross profit at Mercer.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the nine months ended June 30, 2000 were $30,435, an
increase of $4,030, or 15.3%, as compared to the $26,405 for the nine months
ended June 30, 1999. As a percentage of net sales, selling, general and
administrative expenses increased from 6.7% for the nine months ended June 30,
1999 to 7.3% for the nine months ended June 30, 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 $8,162
for the nine months ended June 31, 2000, a decrease of $478, or 5.5%, as
compared to the $8,640 for the nine months ended June 30, 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 $33,228 for the nine months ended June
30, 2000, a decrease of $756, or 2.2%, from the nine months ended June 30, 1999.
The decrease in operating income was caused by the reduced gross profit at
Mercer and continued operating difficulties at Cast Alloys. As a percentage of
net sales, operating income decreased from 8.7% for the nine months ended June
30, 1999 to 8.0% for the nine months ended June 30, 2000.
Net interest expense. Net interest expense was $35,481 for the nine months ended
June 30, 2000 compared to $31,349 for the nine months ended June 30, 1999. The
increased interest expense resulted from 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 nine months
ended June 30, 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 June 30, 2000, there are no
borrowings outstanding on the Revolving Credit Facility and $29.1 million
principal amount outstanding on the Acquisition Loan Facility.
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.
Page 11
<PAGE> 12
For the nine months ended June 30, 2000 and June 30, 1999, capital expenditures
were $13,270 and $31,040, respectively. Additional capital expenditures of
$9,947 for the nine months ended June 30, 2000 were financed through capital
lease obligations. The decrease in capital expenditures of $7,823 was the result
of significant expenditures for specific projects at ACP and Deeter which were
incurred during the nine months ended June 30, 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 nine months ended June 30, 2000 was
$12,468, an increase of $730 from $11,738 for the nine months ended June 30,
1999. The increase in net cash from operating activities was primarily the
result of 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.
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 nine months ended June 30, 2000, the Company's interest expense would
increase, and income before income taxes would decrease by approximately $.4
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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<PAGE> 13
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: August 11, 2000 /s/ Gary LaChey
-------------------------------------------
Gary LaChey
Vice President-Finance, Secretary & Treasurer
(Principal Financial Officer and Duly
Authorized Officer)
Page 13
