FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 0-22368
Atchison Casting Corporation
(Exact name of registrant as specified in its charter)
Kansas 48-1156578
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 South Fourth Street, Atchison, Kansas 66002
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (913)367-2121
Not Applicable
(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 period 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 .
There were 5,522,379 shares of common stock, $.01 par value per share,
outstanding on May 10, 1996.
PART I
ITEM 1. Financial Statements.
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
March 31, June 30,
1996 1995
<TABLE>
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 4,145 $ 759
Customer accounts receivable, net of
allowance for doubtful accounts of
$279 and $794, respectively 32,020 22,148
Insurance receivable - 6,137
Inventories 27,764 23,382
Deferred income taxes 2,265 2,813
Other current assets 2,299 1,357
Total current assets 68,493 56,596
PROPERTY, PLANT AND EQUIPMENT, Net 68,831 56,152
INTANGIBLE ASSETS, Net 18,715 15,245
DEFERRED CHARGES, Net 354 315
OTHER ASSETS 2,412 1,979
TOTAL $158,805 $130,287
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $11,580 $9,502
Accrued expenses 18,929 19,367
Current maturities of long-term
obligations 704 -
Total current liabilities 31,213 28,869
LONG-TERM OBLIGATIONS 51,209 34,920
DEFERRED INCOME TAXES 6,554 5,784
OTHER LONG-TERM OBLIGATIONS 1,253 1,193
EXCESS OF ACQUIRED NET ASSETS OVER COST, Net 981 1,267
POST-RETIREMENT OBLIGATION OTHER THAN PENSION 5,145 5,044
MINORITY INTEREST IN SUBSIDIARIES 648 512
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 2,000,000
authorized shares; no shares issued and
outstanding - -
Common stock, $.01 par value, 19,300,000
authorized shares; 5,558,381 and 5,520,581
shares issued and outstanding including
treasury shares, respectively 56 55
Class A common stock (non-voting), $.01 par
value, 700,000 authorized shares; no shares
issued and outstanding - -
Additional paid-in capital 42,083 41,623
Retained earnings 20,026 11,386
Minimum pension liability adjustment (385) (375)
Accumulated foreign currency translation
adjustment 22 9
61,802 52,698
Less shares held in treasury:
Common stock, 36,002 and 30,823 shares,
at cost, respectively - -
Total stockholders' equity 61,802 52,698
TOTAL $158,805 $130,287
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
<TABLE>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $52,330 $41,433 $130,000 $103,202
COST OF GOODS SOLD 44,478 33,823 111,547 85,052
GROSS PROFIT 7,852 7,610 18,453 18,150
OPERATING EXPENSES:
Selling, general and
administrative 3,848 3,447 10,911 9,190
Amortization of intangibles 387 392 1,131 1,032
Other expense (income)
(Note 4) (1) 220 (10,282) (5,275)
Total operating
expenses 4,234 4,059 1,760 4,947
OPERATING INCOME 3,618 3,551 16,693 13,203
INTEREST EXPENSE 784 648 2,056 1,597
MINORITY INTEREST IN NET
INCOME OF SUBSIDIARIES 64 96 137 174
INCOME BEFORE TAXES 2,770 2,807 14,500 11,432
INCOME TAXES 1,307 1,159 5,860 4,600
NET INCOME $1,463 $1,648 $8,640 $6,832
NET INCOME PER COMMON AND
EQUIVALENT SHARES: $0.27 $0.30 $1.57 $1.25
WEIGHTED AVERAGE NUMBER OF
COMMON AND EQUIVALENT
SHARES OUTSTANDING: 5,513,355 5,486,137 5,512,547 5,474,335
</TABLE>
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
<TABLE>
Nine Months Ended
March 31,
1996 1995
<S> <C> <C>
CASH FROM OPERATING ACTIVITIES:
Net Income $8,640 $6,832
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization 5,283 4,437
Minority interest in net income of
subsidiary 136 174
Gain on disposal of capital assets (2) -
Accretion of long-term obligations discount 131 118
Deferred income taxes 1,565 897
Changes in assets and liabilities:
Receivables (1,935) 280
Inventories (1,789) (1,827)
Other current assets (841) (162)
Accounts payable 1,611 1,887
Accrued expenses (1,709) 1,624
Post retirement obligation other
than pension 101 155
Other 3 27
Cash from operating activities 11,194 14,442
CASH FROM INVESTING ACTIVITIES:
Capital expenditures (8,892) (10,326)
Payment for purchase of net assets of
subsidiaries cash acquired of $1,778 and
$49, respectively (13,251) (13,777)
Proceeds from sale of capital assets 7 -
Assets held for resale (319) -
Cash from investing activities (22,455) (24,103)
CASH FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 461 577
Proceeds from sale of minority interest in
subsidiary - 108
Payments on long-term obligations (122) (21,026)
Borrowings on long-term obligations 14,460 11,264
Capitalized financing costs paid (150) (221)
Proceeds from issuance of long-term obligations - 20,000
Cash from financing activities 14,649 10,702
EFFECT OF EXCHANGE RATE ON CASH (2) (1)
NET INCREASE IN CASH AND CASH EQUIVALENTS $3,386 $1,040
CASH AND CASH EQUIVALENTS, Beginning of period 759 638
CASH AND CASH EQUIVALENTS, End of period $4,145 $1,678
CASH PAID DURING THE PERIOD FOR:
Interest $2,386 $1,381
Income taxes $6,661 $4,174
</TABLE>
See Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The unaudited consolidated financial statements should be read in
conjunction with the consolidated financial statements of the Company for
the year ended June 30, 1995, as included in the Company's 1995 Annual
Report to Stockholders.
The accompanying unaudited consolidated financial statements include all
adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair presentation of financial
position, results of operations and cash flows. Results of operations for
interim periods are not necessarily indicative of results to be expected
for a full year.
Certain March 31, 1995 amounts have been reclassified to conform with
March 31, 1996 classifications.
2. Inventories
<TABLE>
As of
____________________________
March 31, June 30,
1996 1995
(Thousands)
<S> <C> <C>
Raw materials $ 4,104 $ 2,690
Work-in-process 18,175 16,249
Finished goods 2,304 2,322
Deferred supplies 3,181 2,121
$27,764 $23,382
</TABLE>
3. Income Taxes
The provision for income taxes consisted of:
<TABLE>
Nine Months Ended
March 31,
1996 1995
(Thousands)
<S> <C> <C>
Current:
Domestic $4,563 $ 3,672
Foreign (268) 31
$4,295 $ 3,703
Deferred:
Domestic $1,565 $ 897
Foreign ---- ----
$1,565 $ 897
Total $5,860 $ 4,600
</TABLE>
4. Other Income
The Company's fiscal 1996 first nine months results included $10.6
million ($11.8 million before deduction of fees paid to consultants who
assisted in the development of the claim and amounts recovered for the
repair and replacement of property) of partial insurance payments recorded
by the Company covering the period of July 1, 1994 through December 31,
1995. The Company's fiscal 1995 first nine months results included $5.5
million of partial insurance payments received by the Company covering the
period of June 24, 1993 through June 30, 1994. These payments, by the
Company's insurance carrier, resulted from the business interruption
portion of the Company's insurance claim filed as a result of the July 1993
Missouri River flood.
5. La Grange Foundry Inc.
On December 14, 1995, the Company purchased certain assets of the La Grange,
Missouri foundry operations of Gardner Denver Machinery Inc. for $5.2
million in cash. La Grange Foundry Inc. produces gray and ductile iron
castings for the industrial compressor and pump markets, among others.
The Company financed this transaction with funds available under its
revolving credit facility.
6. The G&C Foundry Company
On March 11, 1996, the Company purchased all of the outstanding capital
stock of The G&C Foundry Company, an Ohio corporation ("G&C"), for
$9,620,257 and the assumption of $2.0 million of change of control benefits.
In addition, G&C had $524,348 of other outstanding indebtedness at closing.
G&C, located in Sandusky, Ohio, is a foundry that produces gray and ductile
iron castings, principally used in hydraulic applications. The Company
financed this transaction with funds available under its revolving credit
facility.
7. Subsequent Events
On April 11, 1996, the Company received from the Company's insurance
carrier $13.6 million ($12.6 million after deduction of fees paid to
consultants who assisted in the development of the claim) and a $7.0
million annuity payable on November 1, 1998, in final settlement of the
Company's insurance claim filed as a result of the July 1993 Missouri River
flood. This $13.6 million consisted of $695,000 ($417,000, net of related
income tax expense of $278,000) from the business interruption portion of
the Company's claim and $12.9 million under the casualty portion of the
Company's insurance claim are for repair and replacement of plant and
equipment damaged in the flood.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations:
Net sales for the third quarter of fiscal 1996 were $52.3 million,
representing an increase of $10.9 million, or 26.3%, over net sales of
$41.4 million in the third quarter of fiscal 1995. In the third quarter of
fiscal 1996, the Company's subsidiary, Empire Steel Castings, Inc. ("Empire
Steel") (acquired February 1, 1995), generated net sales of $3.6 million,
representing an increase of $2.1 million over the $1.5 million of net sales
generated by Empire Steel in the two month period in the third quarter of
fiscal 1995. The operations acquired by the Company since April 1, 1995
generated net sales of $5.9 million in the third quarter of fiscal 1996,
as follows:
FY96 Third Quarter
Operation Date Acquired Net Sales
La Grange Foundry Inc. December 14, 1995 $5.1 million
The G&C Foundry Company March 11, 1996 0.8 million
Excluding net sales generated by operations acquired since February 1, 1995,
net sales for the third quarter of fiscal 1996 were $42.8 million,
representing an increase of $2.9 million, or 7.3%, as compared to the
third quarter of fiscal 1995. This 7.3% increase in net sales was due
primarily to increases in net sales to the mining and construction, energy
and utility markets, partially offset by decreases in net sales to the
locomotive, mass transit, trucking and military markets.
Net sales for the first nine months of fiscal 1996 were $130.0 million,
representing an increase of $26.8 million, or 26.0%, over net sales of
$103.2 million in the first nine months of fiscal 1995. In the first nine
months of fiscal 1996, the Company's Canadian subsidiary, Canadian Steel
Foundries Ltd. ("Canadian Steel") (acquired November 30, 1994), generated
net sales of $13.6 million, representing an increase of $8.6 million over
the $5.0 million of net sales generated by Canadian Steel in the four month
period in the first nine months of fiscal 1995. In the first nine months of
fiscal 1996, the Company's subsidiary, Kramer International, Inc. ("Kramer
International") (acquired January 3, 1995) generated net sales of $9.3
million, representing an increase of $6.6 million over the $2.7 million of
net sales generated by Kramer International in the three month period in the
first nine months of fiscal 1995. In the first nine months of fiscal 1996,
the Company's Empire Steel operation generated net sales of $9.7 million,
representing an increase of $8.2 million over the $1.5 million of net sales
generated by Empire Steel in the two month period in the first nine months
of fiscal 1995. The operations acquired by the Company since April 1, 1995
generated net sales of $6.4 million in the first nine months of fiscal 1996,
as follows:
FY 96 First Nine
Months
Operation Date Acquired Net Sales
La Grange Foundry Inc. December 14, 1995 $5.6 million
The G&C Foundry Company March 11, 1996 0.8 million
Excluding net sales generated by operations acquired since November 30, 1994,
net sales for the first nine months of fiscal 1996 were $91 million,
representing a decrease of 3.2%, as compared to the first nine months of
fiscal 1995. This 3.2% decrease in net sales was due primarily to decreases
in net sales to the locomotive, mass transit and trucking markets, partially
offset by increases in net sales to the mining and construction, energy and
utility markets. In addition, the Company recorded, in the first quarter of
fiscal 1995, a non-recurring sale to Indian Railways of $746,000.
Gross profit for the third quarter of fiscal 1996 increased by $242,000, or
3.2%, to $7.9 million, or 15.0% of net sales, compared to $7.6 million, or
18.4% of net sales, for the third quarter of fiscal 1995. Gross profit for
the first nine months of fiscal 1996 increased by $303,000, or 1.7%, to
$18.5 million, or 14.2% of net sales, compared to $18.2 million, or 17.6%
of net sales, for the first nine months of fiscal 1995. The increase in
gross profit for both periods was primarily due to increased sales volume
levels. The decrease in gross profit as a percentage of net sales for both
periods is attributable to: (i) the continuing start-up of the Company's
Amite facility in Louisiana and non-recurring costs associated with the
transfer to that facility of production from a foundry purchased in May 1995,
(ii) the completion, at Canadian Steel, of several negative margin orders
which were accepted prior to the acquisition of Canadian Steel by the
Company, (iii) a change in product mix toward product segments which have
a lower gross profit as a percentage of net sales and (iv) above average
training expense associated with the start-up of new products. The decrease
in gross profit as a percentage of net sales for the first nine months of
fiscal 1996 is also attributable to (i) higher maintenance costs associated
with deferred maintenance expense on two newly acquired foundries and
increased maintenance costs related to regularly scheduled July shutdowns at
the Company's other foundries and (ii) a non-recurring sale in the first
quarter of fiscal 1995 to Indian Railways of $746,000, which sale had a much
higher gross profit as a percentage of net sales than the Company's average.
Selling, general and administrative expenses for the third quarter of
fiscal 1996 were $3.8 million, or 7.4% of net sales, compared to $3.4
million, or 8.3% of net sales, for the third quarter of fiscal 1995. For
the first nine months of fiscal 1996, selling, general and administrative
expenses were $10.9 million, or 8.4% of net sales, compared to $9.2 million,
or 8.9% of net sales, for the first nine months of fiscal 1995. The
increase in selling, general and administrative expenses for both periods
was primarily attributable to decreased expenditures for outside professional
services.
Amortization of certain intangibles for the third quarter of fiscal 1996
was $387,000, or 0.7% of net sales, as compared to $392,000, or 0.9% of
net sales, in the third quarter of fiscal 1995. Amortization of certain
intangibles for the first nine months of fiscal 1996 was $1.1 million, or
0.9% of net sales, as compared to $1.0 million, or 1.0% of net sales, for
the first nine months of fiscal 1995. The intangible assets consist of the
capitalized value of a non-compete agreement with Rockwell International
and goodwill recorded in connection with the acquisitions of Prospect
Foundry, Inc., Kramer International, Empire Steel and The G&C Foundry
Company ("G&C"). Partially offsetting the expense relating to the
amortization of these assets is the amortization of the excess of acquired
net assets over cost (negative goodwill) recorded by the Company in
connection with the acquisition of Canadian Steel.
Other income in the first nine months of fiscal 1996 was $10.3 million
($7.0 million, net of related income tax expense of $3.3 million),
consisting primarily of $10.6 million ($11.8 million before deduction of
fees paid to consultants who assisted in the development of the claim and
amounts recovered for the repair and replacement of property) of partial
payments by the Company's insurance carrier. Other income in the first
nine months of fiscal 1995 was $5.3 million ($3.2 million, net of related
income tax expense of $2.1 million), consisting primarily of $5.5 million
of partial payments by the Company's insurance carrier. The payments by the
Company's insurance carrier, in both periods of fiscal 1995 and fiscal 1996,
resulted from the business interruption portion of the Company's insurance
claim filed as a result of the July 1993 Missouri River Flood. Other expense
in the third quarter of fiscal 1995 was $220,000 ($134,000, net of related
income tax expense of $86,000), which consisted of expenses in connection
with the Company's legal proceedings against Dofasco, Inc.
Interest expense for the third quarter of fiscal 1996 increased to $784,000,
or 1.5% of net sales, from $648,000, or 1.6% of net sales, in the third
quarter of fiscal 1995. For the first nine months of fiscal 1996, interest
expense increased to $2.1 million, or 1.6% of net sales, from $1.6 million,
or 1.5% of net sales, in the first nine months of fiscal 1995. The
increase in interest expense for both periods is the result of an increase
in the average amount of indebtedness outstanding. The increase in average
amount of outstanding indebtedness is primarily a result of the Company's
Amite, Louisiana facility.
Income tax expense for the third quarter of fiscal 1996 has been provided
at an effective rate of 46.0%, which is higher than the federal and state
statutory rate because of the provision for tax benefits at lower effective
rates on losses at foreign subsidiaries. Losses at foreign subsidiaries
were not sufficiently large to affect the effective tax rate for the first
nine months of fiscal 1996, which was provided at a rate of approximately
40%. Income tax expense for the third quarter and first nine months of
fiscal 1995 was provided at the combined federal and state statutory rate
of approximately 40%.
As a result of the foregoing factors, net income for the third quarter of
fiscal 1996 was $1.5 million, compared to net income of $1.6 million for
the third quarter of fiscal 1995. Net income for the first nine months of
fiscal 1996 was $8.6 million, compared to net income of $6.8 million for
the first nine months of fiscal 1995.
Liquidity and Capital Resources:
Cash provided by operating activities for the first nine months of fiscal
1996 was $11.2 million, a decrease of $3.2 million from the first nine
months of fiscal 1995. This decrease was primarily attributable to
increased trade receivable balances and the payment of income taxes.
Working capital was $37.3 million at March 31, 1996, as compared to $27.7
million at June 30, 1995. The increase primarily resulted from net
additional working capital of $1.8 million and $3.4 million associated
with the newly acquired La Grange Foundry and G&C foundry operations,
respectively, and decreases in accrued expenses.
During the first nine months of fiscal 1996 the Company made capital
expenditures of $8.9 million, as compared to $10.3 million for the first
nine months of fiscal 1995. Included in the first nine months of fiscal
1996 were capital expenditures of $544,000 to acquire a production facility
previously leased by the Company's subsidiary, Prospect Foundry, Inc., and
capital expenditures of $1.1 million to acquire an inactive production/
storage facility adjacent to the Company's Canadian Steel subsidiary. The
balance of capital expenditures was used for routine projects at each of the
Company's facilities. Included in the first nine months of fiscal 1995 were
capital expenditures of $7.2 million at the Amite, Louisiana facility,
which became operational in late October 1994.
The Company's fiscal 1996 first nine month results included $10.6 million
($6.5 million, net of related income tax expense of $4.1 million) of
partial insurance payments received from the Company's insurance carrier
covering the period July 1, 1994 through December 31, 1995. The Company's
insurance claim, filed as a result of the July 1993 Missouri River flood,
consists of both a business interruption and property damage claim. These
partial payments resulted from the business interruption portion of the
Company's claim.
On December 14, 1995, the Company purchased certain assets of the La Grange,
Missouri foundry operations of Gardner Denver Machinery Inc. for $5.2
million in cash. La Grange Foundry Inc. ("La Grange Foundry") produces
gray and ductile iron castings for the industrial compressor and pump
markets, among others. The Company financed this transaction with funds
available under its revolving credit facility.
On March 11, 1996, the Company purchased all of the outstanding capital
stock of G&C, an Ohio corporation, for $9,620,257 and the assumption of
$2.0 million of change of control benefits. In addition, G&C had $524,348
of other outstanding indebtedness at closing. G&C, located in Sandusky,
Ohio, is a foundry that produces gray and ductile iron castings, principally
used in hydraulic applications. The Company financed this transaction with
funds available under its revolving credit facility.
On March 8, 1996, the Company and its bank entered into the First Amendment
to the Credit Agreement providing for an increase in unsecured loans from
$20 million to $40 million and an increase in permitted subsidiary
indebtedness from $2.5 million to $5.5 million. At March 31, 1996, $8.3
million was available for borrowing under this revolving credit facility.
Loans under this revolving credit facility may be used for general corporate
purposes, acquisitions and approved investments.
On March 8, 1996, the Company and the insurance company holding the
Company's $20 million aggregate principal amount of unsecured, senior notes
entered into the First Amendment to the Note Purchase Agreement providing
for an increase in permitted subsidiary indebtedness from $2.5 million to
$5.5 million.
Total indebtedness of the Company at March 31, 1996 was $51.9 million, as
compared to $34.9 million at June 30, 1995. This increase of $17.0 million
primarily reflects indebtedness incurred of $5.3 million and $12.3 million
to finance the acquisitions of La Grange Foundry and G&C, respectively.
On April 11, 1996, the Company received from the Company's insurance carrier
$13.6 million ($12.6 million after deduction of fees paid to consultants
who assisted in the development of the claim) and a $7.0 million annuity
payable on November 1, 1998, in final settlement of the Company's insurance
claim filed as a result of the July 1993 Missouri River flood. This $13.6
million consisted of $695,000 ($417,000, net of related income tax expense
of $278,000) from the business interruption portion of the Company's and
$12.9 million under the casualty portion of the Company's claim. Payments
received under the casualty portion of the Company's insurance claim are
for repair and replacement of plant and equipment damaged in the flood.
The Company anticipates that its operating cash flow and amounts available
under its bank revolving credit facility will be adequate to fund capital
expenditures and working capital requirements for the next two years.
PART II
ITEM 1 - Legal Proceedings
NONE
ITEM 2 - Changes in Securities
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
NOT APPLICABLE
ITEM 5 - Other Information
NOT APPLICABLE
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2 Stock Purchase Agreement dated as of February 28, 1996 by and
among the stockholders of G&C, the Stockholders' Representative and
the Company (incorporated by reference to Exhibit 2 of the Company's
Current Report on Form 8-K dated March 25, 1996)
4.1 First Amendment dated as of March 8, 1996 to the Credit
Agreement dated July 29, 1994, among the Company, the Banks party
thereto and Harris Trust and Savings Bank, as Agent (incorporated by
reference to Exhibit 4.1 of the Company's Current Report on Form 8-K
dated March 25, 1996)
4.2 First Amendment dated as of March 8, 1996 to the Note Purchase
Agreement dated July 29, 1994, between the Company and Teachers
Insurance and Annuity Association of America (incorporated by
reference to Exhibit 4.2 of the Company's Current Report on Form 8-K
dated March 25, 1996)
10.1 Letter Agreement dated as of May 1, 1996 between the Company
and Hugh H. Aiken providing for certain termination and change of
control benefits.
10.2 Hugh H. Aiken Supplemental Retirement Benefit Plan.
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
A Current Report on Form 8-K dated March 25, 1996 with respect to
Items 2 and 7 relating to the acquisition of The G&C Foundry Company
was filed with the Securities and Exchange Commission by the Company.
* * * * * * * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Atchison Casting Corporation
(Registrant)
DATE: May 10, 1996 /s/ HUGH H. AIKEN
Hugh H. Aiken, Chairman of the
Board, President and Chief
Executive Officer
DATE: May 10, 1996 /s/ KEVIN T. MCDERMED
Kevin T. McDermed, Vice President,
Chief Financial Officer, Treasurer
and Secretary
EXHIBIT INDEX
Exhibit
10.1 Letter Agreement dated as of May 1, 1996 between
the Company and Hugh H. Aiken providing for
certain termination and change of control benefits.
10.2 Hugh H. Aiken Supplemental Retirement Benefit Plan.
EX-27 Financial Data Schedule
EXHIBIT 10.1
May 1, 1996
Mr. Hugh H. Aiken
President and Chief Executive Officer
Atchison Casting Corporation
400 South Fourth Street
Atchison, Kansas 66002
Dear Mr. Aiken:
In view of your position as Chairman of the Board, President and Chief
Executive Officer of Atchison Casting Corporation (the "Company") and in
consideration of your services in such capacities, the Board of Directors
(the "Board") of the Company has approved the commitment by the Company to
provide you ("Employee") with certain benefits in the event your employment
is terminated for any reason other than Cause (as defined herein) or in the
event of a Change of Control (as defined herein). This letter agreement
(the "Agreement") sets forth the terms and conditions of the Company's
agreement with you concerning such benefits.
1. Certain Definitions.
1.1 Cause. "Cause" means the reasonable and good faith determination by
the Board that the Employee has (a) materially breached any of the terms
of his Employment Agreement with the Company, as amended from time to time,
or the Stock Restriction Agreement between the Employee and the Company,
as amended from time to time, (b) engaged in gross misconduct, criminal
acts or acts of moral turpitude injurious to the Company, or (c) engaged in
acts of dishonesty adversely affecting the Company.
1.2 Change of Control. A "Change of Control" shall be deemed to have
occurred at any of the following times:
(a) At the time individuals who, as of the date hereof, constitute
the Board (as of the date hereof, the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that
any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
compromising the Incumbent Board (other than an election or nomination of
an individual whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election ofthe
directors of the Company, as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) shall be, for purposes of this
subsection 1.2(a), considered as though such person were a member of the
Incumbent Board; or
(b) Upon the acquisition by any person, entity or "group" within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (excluding,
for this purpose, the Company or its affiliates, and any employee benefit
plan of the Company or its affiliates which acquires beneficial ownership
of voting securities of the Company) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more
of either the then outstanding shares of common stock of the Company or
the Combined Voting Power of the Company's then outstanding voting
securities if such person, entity or group becomes the largest
shareholder of the Company. "Combined Voting Power" means the combined
voting power of the Company's then outstanding voting securities
generally entitled to vote in the election of directors; or
(c) Upon the approval by the shareholders of the Company of a
reorganization, merger, consolidation (in each case, with respect to
which persons who were the shareholders of the Company immediately prior
to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 50% of the Combined Voting Power of the
reorganized, merged or consolidated company's then outstanding voting
securities) or a liquidation or dissolution of the Company or of the sale
of all or substantially all of the assets of the Company; or
(d) The occurrence of any other event which the Incumbent Board in its
sole discretion determines constitutes a Change of Control.
2. Termination and Change of Control Benefits. If (a) Employee's employment
with the Company as CEO is terminated by the Company for any reason other
than for Cause, Employee's death, disability or retirement, or (b) a Change
of Control occurs at a time when Employee is employed by the Company
(whether or not Employee remains employed by the Company after the Change
of Control is consummated), then the Company shall pay in a lump sum, in
cash, on the fifth business day following the date of Employee's termination
of employment or the consummationof the Change of Control, an amount equal
to three times the Employee's salary at the base rate in effect immediately
prior to that time; provided, that if, after giving effect to this Agreement,
any portion of any payments to the Employee by the Company hereunder and
pursuant to any other present of future plan, program or agreement by the
Company and any of its subsidiaries would not be deductible by the Company
for Federal income tax purposes by reason of application of Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"), then payment
of that portion to Employee shall be deferred until the earliest date upon
which payment thereof can be made to Employee without being nondeductible
pursuant to Section 7872(f)(2) of the Code, compounded semi-annually; and
provided further, that if the payment hereunder, either alone or together
with other payments which the Employee has the right to receive from the
Company, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), such payment shall be reduced to the largest amount
that the Employee may receive without imposition of the excise tax imposed
by Section 4999 of the Code.
3. Continued Employment after Change of Control. If the Employee is
requested to remain as an employee of the Company as a condition imposed
by the buying or selling shareholders in connection with a Change of
Control, the Employee agrees to remain employed by the Company for up to
one year after such Change of Control at an annual base salary in an amount
no less than the Employee's base salary in effect immediately prior to the
consummation of the Change of Control in addition to the other benefits
provided in this Agreement in connection with a Change of Control.
4. Offset for Other Arrangements. The benefits provided hereunder will be
reduced by the amount of any severance benefits to which Employee is
entitled under the Company's severance benefits policy for terminated
employees, if any, or any other agreement between the Employee and the
Company for severance benefits.
5. Notice of Termination. Any termination by the Company for Cause shall
be communicated by written notice to the Employee given by hand delivery
or by registered or certified mail, return receipt requested, postage
prepaid at Employee's address as set forth in the Company's records. Any
notice given pursuant to this paragraph 5 shall be effective the earlier of
when such notice is actually received by Employee or three days after such
notice is delivered or sent.
6. Nonexclusivity. Nothing in this Agreement shall prevent or limit
Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company and for which Employee may otherwise qualify, nor shall anything
herein limit or otherwise affect such rights as any Employee may have under
any stock option or other agreements with the Company. Except as otherwise
expressly provided herein, amounts which are vested benefits or which
Employee is otherwise entitled to receive under any plan, policy, practice
or program of the Company at or subsequent to the termination of Employee's
employment shall be payable in accordance with such plan, policy, practice
or program.
7. Successor to Company. The Company shall require any successor or
assignee, whether direct or indirect, by purchase, merger, consolidation or
otherwise, to all or substantially all the business or assets of the
Company, expressly and unconditionally to assume and agree to perform the
Company's obligations under this Agreement, in the same manner and to the
same extent that the Company would be required to perform if no such
succession or assignment had taken place. In such event, the term
"Company," as used in this Agreement, shall mean the Company and any
successor or assignee to the business or assets which by reason hereof by
the terms and provisions of this Agreement.
8. Amendment and Termination. The Incumbent Board may from time to time
supplement, amend or terminate this Agreement or make any other provisions
which the Company may deem necessary or desirable with the written approval
of Employee. The form of any proper amendment or termination of this
Agreement shall be a written instrument signed by the Employee and a duly
authorized officer of the Company certifying that the amendment or
termination has been approved by the Incumbent Board.
9. Miscellaneous.
9.1 Employment Status. This Agreement does not constitute a contract of
employment or impose on Employee or the Company any obligation to retain
Employee as an employee, to change the status of Employee's employment or
to change the Company's policies regarding termination of employment.
9.2 No Assignment. No benefit hereunder shall be subject to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge, and
any attempt to do so shall be void.
9.3 Governing Law. This Agreement shall be governed by the laws of the
State of Kansas.
9.4 Severability. If any term, provision, covenants or restrictions of
this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or enforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated.
9.5 Withholding. The Company may withhold from any benefits payable under
this Agreement all federal, state, city or other taxes as shall be required
pursuant to any law or governmental regulation or ruling.
9.6 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
Please acknowledge your agreement to the foregoing agreement by signing the
enclosed counterpart of this letter and returning it to the Company.
Very truly yours,
ATCHISON CASTING CORPORATION
By:/s/ Kevin T. McDermed
Kevin T. McDermed, Vice President and
Chief Financial Officer
Agreed to and accepted:
/s/ Hugh H. Aiken
Hugh H. Aiken
EXHIBIT 10.2
HUGH H. AIKEN
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
Atchison Casting Corporation, a Kansas corporation (the "Corporation"),
and Hugh H. Aiken (the "Executive") hereby establish the Hugh H. Aiken
Supplemental Retirement Benefit Plan for the benefit of the Executive.
Section 1. PURPOSE
The purpose of this Plan is to provide, through an unfunded, nonqualified
arrangement, supplemental retirement benefits to the Executive, as
consideration for his services and as an incentive to retain his services,
in the form of a benefit that is equal to the excess of (a) the benefit
that would be payable to the Executive under the Atchison Retirement Plan
if his employment had started April 1, 1975 instead of April 1, 1990, over
(b) the benefit actually payable to the Executive under the Atchison
Retirement Plan.
Section 2. DEFINITIONS
Except as specifically provided herein, all terms used in this Plan shall
have the same meanings as they have under the Atchison Retirement Plan.
Section 2.01. Atchison Retirement Plan. "Atchison Retirement Plan" means
the Salaried Employees Retirement Plan of Atchison Casting Corporation as
in effect on May 1, 1996, and as amended from time to time, and any
successor defined benefit pension plan covering the Executive that is
sponsored by the Corporation and is intended to satisfy the requirements
for qualification under Code Section 401(a).
Section 2.02. Board of Directors. "Board of Directors" means the Board of
Directors of the Corporation.
Section 2.03. Committee. "Committee" means the Retirement Committee under
the Atchison Retirement Plan which shall administer this Plan, or such
other committee as may be appointed from time to time by the Board of
Directors to administer this Plan.
Section 2.04. Plan. "Plan" shall mean the "Hugh H. Aiken Supplemental
Retirement Benefit Plan" set out herein, effective May 1, 1996 and as
amended from time to time.
Section 3. BENEFITS
Section 3.01. Benefit. If the Executive terminates employment with an
Employer, as defined in the Atchison Retirement Plan, he shall be entitled
to a monthly retirement, early retirement or disability benefit, as the
case may be, payable for the Executive's lifetime, commencing as of the
date provided for similar benefits under the Atchison Retirement Plan.
The amount of the benefit shall be equal to (a) minus (b), where:
(a) Is the monthly retirement, early retirement or disability benefit,
as the case may be, that would be payable to the Executive for the
Executive's lifetime commencing at the date provided for similar benefits
under the Atchison Retirement Plan, but calculated using the Executive's
Service under the Atchison Retirement Plan plus fifteen (15) years and
his Credited Service under the Atchison Retirement Plan plus fifteen (15)
years, instead of "Service" and "Credited Service" as defined in the
Atchison Retirement Plan; and
(b) Is the monthly retirement, early retirement or disability benefit, as
the case may be, actually payable to the Executive for the Executive's
lifetime under the Atchison Retirement Plan commencing at the date
provided for in the Atchison Retirement Plan.
Payment of the benefit determined under this Section may be made in any
other form of benefit that is available under the Atchison Retirement Plan
that the Executive elects as the form of payment of his benefit under the
Atchison Retirement Plan. If payment of the benefit under this Plan is made
in a form that is other than a monthly benefit for the Executive's lifetime,
the monthly benefit payable under this Plan shall be determined using the
Actuarial Equivalent factors specified in the Atchison Retirement Plan.
Section 3.02. Time and Form of Payment of Benefit. Payment of the
Executive's benefit under this Plan shall begin on the date payment begins
under the Atchison Retirement Plan. Payment under this Plan shall be made
in the same form of payment the Executive is receiving under the Atchison
Retirement Plan.
Section 3.03. Death Benefit. If a death benefit is payable under the
Atchison Retirement Plan with respect to the Executive, a death benefit
shall also be payable under this Plan. The death benefit payable under
this Plan shall be equal to (a) minus (b), where:
(a) Is the monthly death benefit that would be payable to the Executive's
beneficiary under the Atchison Retirement Plan if the Executive's monthly
benefit had been calculated under Section 3.01(a) of this Plan as of the
date of the Executive's death or, if earlier, his termination of
employment; and
(b) Is the monthly death benefit actually payable to the Executive's
beneficiary under the Atchison Retirement Plan.
Section 3.04. Time and Form of Payment of Death Benefit. Payment of the
death benefit under this Plan shall begin on the date payment begins under
the Atchison Retirement Plan. Payment under this Plan shall be made in the
same form of payment the beneficiary is receiving under the Atchison
Retirement Plan.
Section 3.05. Vesting. The Executive's benefits hereunder are 100% vested
and nonforfeitable.
Section 4. GENERAL PROVISIONS
Section 4.01. Unsecured Right. The right of the Executive, his spouse, or
beneficiary to receive any amount under this Plan shall be an unsecured
claim against the general assets of the Corporation. Neither the Executive
nor his spouse or beneficiary shall have any rights in or against any
specific assets of the Corporation. The Executive's benefits under this
Plan may not in any way be encumbered or assigned by the Executive or his
spouse or beneficiary.
Section 4.02. Amendment; Termination. This Plan may be amended or
terminated at any time only by an amendment in writing agreed to by the
Executive and the Board of Directors of the Corporation. No further
benefits shall accrue hereunder in the event of the termination of the Plan.
Section 4.03. Administration. The Committee shall administer this Plan.
The Committee shall have the same powers, rights, discretion and authority
with respect to this Plan granted to the Retirement Committee with respect
to the Atchison Retirement Plan. In addition, the Committee shall have
the sole and absolute right, power and discretion to construe and interpret
the provisions of this Plan, to decide all questions of eligibility to
participate in the Plan, to determine the amount, manner and time of payment
of any benefits to any Participant of beneficiary, to determine the right
of any person to a benefit, and to resolve all questions arising in the
administration, interpretation and application of the Plan, including
resolving any ambiguities from such administration, interpretation and
application of the Plan.
Section 4.04. Claims. The provisions of Section 11.080 of the Atchison
Retirement Plan are incorporated herein by this reference.
Section 4.05. Governing Law. Any questions arising under the Plan shall
be determined under the laws of the State of Kansas, except to the extent
superseded by Federal law.
Section 4.06. No Right to Retention. Nothing in this Plan shall give the
Executive the right to be retained in the employment of an Employer, as
defined in the Atchison Retirement Plan, or affect the right of an Employer
to dismiss the Executive.
Section 4.07. Entire Agreement. This Plan contains the entire understanding
and agreement between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of
this Plan.
IN WITNESS WHEREOF, the Corporation and the Executive have caused this Plan
to be executed as of the 1st day of May, 1996, to be effective as of
May 1, 1996.
ATCHISON CASTING CORPORATION
/s/ Hugh H. Aiken By: /s/ Kevin T. McDermed
HUGH H. AIKEN
Name: Kevin T. McDermed
Title: Vice President, Treasurer
and Secretary
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