ATCHISON CASTING CORP, 424B1, 1997-05-23

ATCHISON CASTING CORP
424B1, 1997-05-23
IRON & STEEL FOUNDRIES

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<PAGE>
PROSPECTUS

Rule 424(b)(1)
Reg. No. 333-25157

[LOGO]

3,800,000 SHARES

ATCHISON CASTING CORPORATION

COMMON STOCK
---------

Of the 3,800,000 shares of Common Stock offered hereby, 2,029,024 are being
sold by Atchison Casting Corporation ("ACC" or the "Company") and 1,770,976 are
being sold by the Selling Stockholder named under "Selling Stockholder." The
Company will not receive any of the proceeds from the sale of shares of Common
Stock by the Selling Stockholder.

The Common Stock of the Company is traded on the New York Stock Exchange
under the symbol "FDY." The reported last sale price of the Common Stock on the
New York Stock Exchange on May 22, 1997 was $16.625 per share. See "Price Range
of Common Stock."

PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER ALL OF THE FACTORS SET FORTH IN
"RISK FACTORS" COMMENCING ON PAGE 7 OF THIS PROSPECTUS.

-------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER(2)
<S> <C> <C> <C> <C>
Per Share $15.50 $0.78 $14.72 $14.72
Total(3) $58,900,000 $2,964,000 $29,867,233 $26,068,767
</TABLE>

(1) For information regarding indemnification of the Underwriters, see
"Underwriting."

(2) Before deducting expenses payable by the Company, estimated to be
$175,000, and expenses payable by the Selling Stockholder, estimated to be
$5,000.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
570,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. See "Underwriting." If such
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $67,735,000,
$3,408,600 and $38,257,633, respectively.

------------------

The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about May
29, 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New York,
New York 10001.

SMITH BARNEY INC. GEORGE K. BAUM & COMPANY

May 22, 1997
<PAGE>
ATCHISON CASTING CORPORATION'S GROWING NETWORK OF FOUNDRIES

[PICTURE]

Atchison Casting Corporation has established itself as a leading consolidator in
the foundry
industry. ACC's growing network of foundries enables the Company to produce
castings in a
wide variety of sizes and metals for diverse applications. ACC believes that the
breadth of its
capabilities provide it with a distinct competitive advantage.

[PICTURE]
High pressure cast iron
cylinder head for a
gas compressor.
[PICTURE] [PICTURE]
12 ton stainless steel Pelton Wheel Aluminum and zinc die
produced by Canadian Steel Foundries castings (weighing several ounces
for a hydroelectric power generation to 15 pounds) made by Los Angeles
facility. Die Casting.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVERALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS
PROSPECTUS. ATCHISON CASTING CORPORATION, TOGETHER WITH ITS PREDECESSORS AND
SUBSIDIARIES, IS REFERRED TO HEREIN AS THE "COMPANY" OR "ACC." UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS ASSUMES THE UNDERWRITERS'
OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED. SEE "CAPITALIZATION," "DESCRIPTION
OF CAPITAL STOCK" AND "UNDERWRITING." REFERENCES IN THIS PROSPECTUS TO FISCAL
YEARS ARE TO THE YEAR ENDED JUNE 30 IN SUCH YEAR.

THE COMPANY

ACC manufactures highly engineered metal castings that are utilized in a
wide variety of products, such as tractor-crawlers, excavators, wheel-loaders,
gas, steam and hydroelectric turbines, pumps, valves, locomotives, subway cars,
automobiles, army tanks, navy ships, computer peripherals and consumer goods.
Having completed thirteen acquisitions since its inception in 1991, the Company
has established itself as a leading consolidator in the casting industry. As a
result of these acquisitions, the Company has the ability to produce castings
from a wide selection of materials, including carbon, low-alloy and stainless
steel, gray and ductile iron, aluminum and zinc, as well as the ability to
manufacture parts in a variety of sizes, ranging from small die cast components
for the computer industry that weigh a few ounces to large hydroelectric turbine
housings that weigh over sixty tons. Moreover, ACC has extensive tooling and
machining operations. The Company believes that its broad range of capabilities,
which addresses the needs of many different markets, provides a distinct
competitive advantage in the casting industry.

The Company was founded to pursue a strategy of growth and diversification
through acquisitions in the highly fragmented foundry industry. Following the
initial acquisition of the steel casting operations of Rockwell International in
1991, the Company has continued to acquire foundries in the U.S. and Canada. As
a result of these acquisitions, as well as internal growth, ACC's net sales have
increased from approximately $54.7 million in its first fiscal year ended June
30, 1992, to $185.1 million for the fiscal year ended June 30, 1996, resulting
in a compound annual growth rate of 36%.

Since 1991, the number of customers served by the Company has increased from
12 to more than 400, including companies such as Caterpillar, Gardner Denver,
General Motors, General Electric, Westinghouse, General Dynamics,
Ingersoll-Dresser, John Deere and Rockwell International. The Company has
received supplier excellence awards for quality from, or has been certified by,
substantially all of its principal customers. In addition to its presence in the
domestic market, a substantial amount of ACC's castings enter the international
marketplace as components in its customers' exported products.

The Company's favorable industry position is attributable to several
factors, including: (i) its use of new and advanced casting technologies; (ii)
its ability to cast substantially all types of iron and steel, as well as
aluminum and zinc; (iii) the Company's emphasis on customer service and
marketing; (iv) the limited number of foundries capable of producing steel
castings of the size and complexity produced by the Company; and (v) the
Company's position as a long-term supplier to many of its major customers.

The principal executive offices of the Company are located at 400 South
Fourth Street, Atchison, Kansas 66002-0188, and the Company's telephone number
is (913) 367-2121.

COMPANY STRATEGY

ACC is pursuing growth and diversification through a two-pronged approach
of: (i) making strategic acquisitions within the widely fragmented and
consolidating foundry industry and (ii) integrating the acquired foundries by
applying ACC's management, operational and technical expertise.

STRATEGIC ACQUISITIONS

3
<PAGE>
make subsequent acquisitions that further penetrate that market and take
advantage of the leader's technical expertise. For example, Prospect Foundry was
acquired in 1994 due to its leading position in gray and ductile iron casting
production. The subsequent acquisition of La Grange Foundry in 1995 further
enhanced ACC's position in this market.

BROADEN PRODUCT OFFERINGS AND CAPABILITIES. The Company also seeks to
acquire foundries that add a new product line or customer base that can be
leveraged throughout ACC's network of foundries. For example, the Company's
recent acquisition of LA Die Casting, a leading die caster of aluminum and zinc
components for the computer and recreation markets, provided ACC with an entry
into the aluminum and zinc die casting markets.

INTEGRATION OF ACQUIRED FOUNDRIES

STRENGTHEN MARKETING FUNCTIONS. The Company places great emphasis on
maximizing new business opportunities by strengthening marketing functions and
cross-selling across its network of foundries. Many foundries, particularly
those that operate as captive foundries or only rely on a small number of
customers, do not have strong marketing capabilities. ACC views the
industry-wide marketing weakness as an opportunity to establish a competitive
advantage. In recognizing this opportunity, the Company has strengthened the
marketing capabilities of its individual foundries, added sales people and
introduced cross-selling between foundries.

INTRODUCE ADVANCED TECHNOLOGY. The Company is systematically introducing
advanced new technologies into each of its acquired foundries to enhance their
competitive position. For example, the Company's capabilities in finite element
analysis and three dimensional solid modeling are having a beneficial impact on
casting sales and production by helping customers to design lighter and stronger
castings, shortening design cycles, lowering casting costs and, in some cases,
creating new applications. These new technologies have enhanced the Company's
ability to assist customers in the component design and engineering stages.

INCREASE CAPACITY UTILIZATION. A principal objective of the Company in
integrating and operating its foundries is to increase capacity utilization at
both its existing and newly acquired facilities. Many of the Company's foundries
at the time of their acquisition have been operating with underutilized
capacity. The Company seeks to improve capacity utilization by introducing more
effective marketing programs and applying advanced technologies as described
above.

ACHIEVE PURCHASING ECONOMIES. Once an acquisition has been completed, ACC
makes its volume purchasing programs available to the newly acquired foundry. By
jointly coordinating the purchase of raw materials, negotiation of insurance
premiums and procurement of freight services, ACC's individual foundries have,
in some cases, realized savings of 10% to 30% of these costs.

LEVERAGE MANAGEMENT EXPERTISE. The Company believes that improvements often
can be made in the way acquired foundries are managed, including the
implementation of new technologies, advanced employee training programs,
standardized budgeting processes and profit sharing programs and providing
access to capital. For example, ACC was able to significantly improve the
profitability of Canadian Steel by adding new management, entering new markets,
installing finite element solidification modeling and providing capital.

4
<PAGE>
RECENT DEVELOPMENTS

JAHN FOUNDRY ACQUISITION

ACC acquired Jahn Foundry Corp. ("Jahn Foundry") on February 14, 1997 for
approximately $6.2 million in cash. Jahn Foundry, located in Springfield,
Massachusetts, produces gray iron castings for the automotive, air conditioning
and agricultural markets. Jahn Foundry produces cast iron cylinder liners used
by General Motors in cast aluminum engine blocks for Saturn automobiles. This
represents ACC's first entry into the market for automotive castings.

BELOIT CASTING DIVISION LETTER OF INTENT

ACC signed a letter of intent on March 13, 1997 to purchase the Beloit
Castings Division ("BCD") from Beloit Corporation for a price estimated to be
approximately $9 million. Beloit Corporation, a world leader in paper-making
machinery operates BCD to make iron, steel and non-ferrous castings for use in
its paper-making machines. BCD is a group of four foundries in Beloit, Wisconsin
and South Beloit, Illinois, including two iron foundries, a steel foundry and a
non-ferrous foundry. In addition to supplying castings for Beloit Corporation,
BCD also makes castings for third parties and is well regarded for the quality
of its castings.

BCD's available capacity is approximately 17,200 tons per year of iron
castings, including both gray and ductile cast iron; 2,500 tons per year of
stainless steel castings; and 200 tons per year of non-ferrous castings.

RECENT OPERATING RESULTS

The Company has announced net sales of $66.3 million, net income of $2.9
million and earnings per common share of $0.51 for the three months ended March
31, 1997. This compares to net sales of $52.3 million, net income of $1.5
million and earnings per common share of $0.27 for the same period in 1996. For
the nine months ended March 31, 1997, the Company announced net sales of $176.9
million, net income of $6.2 million and earnings per common share of $1.11. This
compares to net sales of $130.0 million, net income of $8.6 million and earnings
per common share of $1.57 for the nine months ended March 31, 1996. Without
other income from flood insurance payments, net income was $2.3 million and
earnings per common share was $0.42 for the nine months ended March 31, 1996.
Results for the first nine months are not necessarily indicative of the expected
financial performance for the fiscal year.

THE OFFERING

<TABLE>
<S> <C>
Common Stock Offered by the
Company......................... 2,029,024 shares

Common Stock Offered by the
Selling Stockholder............. 1,770,976 shares

Common Stock to be Outstanding
after the Offering.............. 7,572,246 shares(1)

Use of Proceeds by the Company.... To reduce indebtedness incurred for industry-related
acquisitions and to fund future acquisitions. See "Use
of Proceeds."

New York Stock Exchange Symbol.... FDY
</TABLE>

- ------------

(1) Does not include 281,599 shares subject to outstanding options, of which
approximately 153,200 shares are subject to exercisable options at a
weighted average exercise price per share of $13.51.

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
---------------------------------------------------------- ---------------------
1992 1993 1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales............................. $ 54,729 $ 66,591 $ 82,519 $ 141,579 $ 185,081 $ 130,000 $ 176,933
Gross Profit.......................... 6,967 12,270 16,215 26,121 28,469 18,453 28,728
Other Income(1)....................... -- -- -- 6,370 26,957 10,282 --
Operating Income...................... 980 5,141 8,425 18,041 38,459 16,693 12,995
Interest Expense...................... 3,513 3,926 1,223 2,326 2,845 2,056 2,400
Income (Loss) Before Taxes and
Extraordinary Item.................. (2,533) 1,215 7,140 15,435 35,389 14,500 10,484
Income (Loss) Before Extraordinary
Item................................ (2,533) 1,215 4,646 9,464 21,326 8,640 6,174
Extraordinary Item, net of tax(2)..... -- -- 1,230 -- -- -- --
Net Income (Loss)..................... $ (2,533) $ 1,215 $ 3,416 $ 9,464 $ 21,326 $ 8,640 $ 6,174
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Net Income (Loss) Per Share........... $ (0.86) $ 0.40 $ 0.72 $ 1.73 $ 3.87 $ 1.57 $ 1.11
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Net Income (Loss) Per Share Excluding
Extraordinary Item and Other
Income(1)(2)........................ $ (0.86) $ 0.40 $ 0.98 $ 1.02 $ 0.92 $ 0.42 $ 1.11
---------- ---------- ---------- ---------- ---------- --------- ---------
---------- ---------- ---------- ---------- ---------- --------- ---------
Weighted Average Common Shares
Outstanding......................... 2,958,398 3,026,866 4,757,607 5,477,881 5,516,597 5,512,547 5,562,822

SUPPLEMENTAL DATA:
Depreciation and Amortization......... $ 6,521 $ 5,130 $ 4,541 $ 6,067 $ 7,411 $ 5,283 $ 6,376
Capital Expenditures(3)............... 1,920 4,841 7,524 12,837 12,740 8,892 9,594
Number of Foundries at Period End..... 1 1 3 7 9 9 13
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------------
ACTUAL AS ADJUSTED(4)
-------- ------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital.................................................. $ 40,516 $ 45,408
Total Assets..................................................... 195,532 200,424
Long-Term Obligations............................................ 53,269 28,469
Total Stockholders' Equity....................................... 80,822 110,514
</TABLE>

- ---------------

(1) Other income consists of $6.4 million, $27.0 million and $10.3 million ($3.9
million, $16.2 million and $6.3 million net of tax or $0.71, $2.95 and $1.15
per share), for fiscal 1995, fiscal 1996 and the nine months ended March 31,
1996, respectively, consisting primarily of insurance proceeds related to
the July 1993 Missouri River flood. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--General."

(2) In connection with the repayment in October 1993 of substantially all of the
Company's interest-bearing indebtedness with the net proceeds of the
Company's initial public offering of Common Stock, the Company recorded an
extraordinary charge to income in the amount of approximately $1.2 million
(net of related income tax benefit of $787,000), relating to the early
retirement of debt and the write-off of deferred financing charges.

(3) During fiscal 1994, fiscal 1995 and fiscal 1996, the Company made capital
expenditures of $4.7 million, $8.1 million and $1.8 million, respectively,
in connection with the refurbishment of The Amite Foundry and Machine Shop
("Amite"). This 282,000 square foot facility was acquired in February 1993
and had been inactive for several years.

(4) As adjusted to give effect to the sale of 2,029,024 shares of Common Stock
offered by the Company hereby, at the public offering price of $15.50 per
share, after deducting underwriting discounts, commissions and estimated
offering expenses and the application of the net proceeds therefrom, as
described in "Use of Proceeds."

6
<PAGE>
RISK FACTORS

Prospective investors should consider carefully the following risk factors,
in addition to the other information set forth or incorporated by reference in
this Prospectus, in connection with an investment in the Common Stock offered
hereby.

This Prospectus contains forward-looking statements. These statements are
subject to certain risks and uncertainties that could cause actual results to
differ materially from those anticipated in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the following risk factors.

Readers should not place undue reliance on forward-looking statements, which
reflect management's view only as of the date hereof. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect
subsequent events or circumstances. Readers should also carefully review the
information described in other documents the Company has filed with the
Commission incorporated by reference herein.

CYCLICALITY

The Company's business is subject to cyclical fluctuations based on general
economic conditions and the economic conditions of the capital goods industry in
particular. Future recessions in the market for capital goods could have a
material adverse effect on the Company's financial condition and results of
operations.

FLUCTUATIONS IN QUARTERLY RESULTS; SEASONALITY

Due to the large size of certain orders, the timing for deliveries of orders
and the number and types of castings produced, the Company's net sales and net
income may fluctuate materially from quarter to quarter. The Company's operating
results may be adversely affected in fiscal quarters immediately following the
consummation of an acquisition while the operations of the acquired business are
integrated into the operations of the Company. Successful assimilation of
acquired businesses will be dependent upon integration of the acquired
companies' operations and customers. Generally, the first fiscal quarter is
seasonally weaker than the other quarters as a result of plant shutdowns for
maintenance at most of the Company's foundries as well as at many customers'
plants.

COMPETITION

The Company faces strong competitors in most of its markets. Competitive
factors include price, delivery and quality; however, breadth of capabilities
and customer service have become increasingly important. Some of the Company's
competitors may have greater financial resources than the Company; others may
have lower costs than the Company. There can be no assurance that existing or
potential competitors will not substantially increase their resources devoted to
the development and marketing of products competitive with those of the Company.
Competitors in regions such as China, India, Mexico and Eastern Europe may have
lower costs, including labor costs, than the Company. See "Business--
Competition."

CUSTOMER CONCENTRATION

Historically, a small number of customers accounted for a substantial
percentage of the Company's net sales. In fiscal 1996, Caterpillar accounted for
13.4% of net sales. While the next nine largest customers accounted for 32.2% of
net sales in fiscal 1996, no single customer accounted for more than 7.2% of net
sales. A significant reduction of purchases by any one of these customers could
have a material adverse effect on the Company's financial condition and results
of operations.

7
<PAGE>
ACQUISITIONS

The Company's ability to significantly increase revenue and operating cash
flow over time depends in large part upon its success in acquiring foundries
upon satisfactory terms. There can be no assurance that suitable foundry
opportunities will be available or that, because of competition from other
purchasers or other reasons, the Company will be able to consummate acquisitions
on satisfactory terms or to obtain necessary acquisition financing. In addition,
acquisitions may be dilutive and may initially have an adverse effect on the
Company's operating results and financial condition while the operations of the
acquired businesses are being integrated into the Company's operations. To
successfully implement its acquisition strategy, the Company must integrate
acquired foundries with its existing operations. As the Company grows, there can
be no assurance that a large number of additional foundries can be readily
assimilated into the Company's operating structure. Inability to efficiently
integrate foundries could have a material adverse effect on the Company's
financial condition and results of operations. See "Business--Corporate
Strategy."

ENVIRONMENTAL AND REGULATORY CONCERNS

The Company is subject to numerous laws and regulations that govern
environmental issues, workplace safety, equal employment opportunities and other
aspects of the Company's business. Furthermore, many of the Company's facilities
are located in or near residential areas. The Company believes that it is in
material compliance with applicable environmental laws and regulations and is
not aware of any outstanding violations or citations with respect thereto at any
of its facilities. Nonetheless, as the Company evaluates and updates the
environmental compliance programs at foundry facilities recently acquired, the
Company may become aware of matters of non-compliance that may need to be
addressed or corrected. The Company's operations entail the risk of future
noncompliance with environmental and other government regulations. The cost of
complying with various environmental regulations is likely to increase over
time, and there can be no assurance that the cost of compliance will not have a
material adverse effect on the Company's financial condition and results of
operations. See "Business--Environmental Regulations."

DEPENDENCE ON KEY PERSONNEL

The Company has been dependent on certain key management personnel in the
past, and has relied upon a relatively small corporate staff, comprised of the
chief executive officer, the chief financial officer and other executives. The
Company's ability to implement its acquisition strategy and maintain its
competitive position will depend to some degree upon its ability to retain these
key managers and to continue to attract and retain highly qualified managerial,
manufacturing and sales and marketing personnel. There can be no assurance that
the loss of key personnel would not have a material adverse effect on the
Company's financial condition and results of operations or that the Company will
be able to recruit and retain such personnel. See "Management."

LABOR RELATIONS

Labor unions represent employees at a majority of the Company's foundries.
Although the Company believes that its labor relations are satisfactory, there
can be no assurance that a work stoppage will not occur in the future in
connection with contract negotiations or otherwise, which could have a material
adverse effect on the Company's financial condition and results of operations.
There can also be no assurance that a work stoppage at one of the Company's
major customers would not have a material adverse effect on the Company's
financial condition and results of operations. See "Business--Employee and Labor
Relations."

8
<PAGE>
PRODUCT WARRANTY AND LIABILITY CLAIMS

The Company's standard warranty and back-charge policy is to replace or
repair defective castings or to authorize the customer to perform the repair at
the Company's expense (in order to minimize freight costs and the time
associated therewith). New products are more likely to generate warranty claims
during start-up than long-established products. Historically, the costs
associated with the Company's warranty policy have not had a material effect on
its results of operations. However, the incidence of product warranty claims and
the costs associated therewith could increase as the Company expands its
customer base and introduces new products. See "Business--Product Warranty." In
addition, the Company's castings are used as components in locomotives, mass
transit systems, gas and steam turbines and other equipment. Although the
Company has not experienced any significant product liability claims, the
Company has a risk of exposure to product liability claims. Product liability
insurance is maintained, but there can be no assurance that insurance coverage
will continue to be available on terms acceptable to the Company or that such
coverage will be adequate for any liabilities that might be incurred.

CURRENCY EXCHANGE RATES

Although the Company sells its products primarily to customers in the United
States and Canada, a stronger U.S. dollar could result in greater competition
from foreign competitors and a loss of demand from the Company's customers which
export a portion of their products.

ANTI-TAKEOVER PROVISIONS

The Company's Articles of Incorporation, among other things: (i) classify
the Board of Directors into three classes, with directors of each class serving
for succeeding three-year terms; (ii) require a supermajority vote to remove
directors; (iii) require a supermajority vote to approve certain extraordinary
corporate transactions, including a merger, consolidation and sale of
substantially all of the Company's assets; and (iv) eliminate the right of the
stockholders to act by written consent without a meeting. Such provisions would
make the removal of incumbent directors more difficult and time consuming and
may have the effect of discouraging a tender offer or other takeover attempt by
a third party. See "Description of Capital Stock--Kansas Anti-Takeover Law and
Certain Charter Provisions."

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
2,029,024 shares of Common Stock offered by the Company hereby, based on the
offering price of $15.50 per share and, after deducting underwriting discounts
and estimated offering expenses payable by the Company, are estimated to be
approximately $29.7 million ($38.1 million if the Underwriters' over-allotment
option granted by the Company is exercised in full).

The Company intends to use the net proceeds to reduce the Company's
outstanding bank indebtedness previously incurred for acquisitions and the
balance, if any, will be used to fund future acquisitions. At March 31, 1997,
the Company had outstanding borrowings under its revolving bank credit facility
of approximately $24.8 million bearing interest at a weighted average annual
rate of 6.9%, all of which indebtedness matures on July 29, 2000. All of the
loan proceeds received during the last twelve months were used for acquisitions
of foundries. The repayment of such sums will not reduce the availability of
borrowings under this bank credit facility.

As an important part of the Company's growth strategy, the Company evaluates
on an ongoing basis potential industry-related acquisitions. While the Company
has not at the present time entered into any definitive agreement contemplating
any such acquisition, the Company is currently in various stages of negotiations
with potential acquisition candidates, including the letter of intent to
purchase BCD. See "Prospectus Summary--Recent Developments." There can be no
assurance as to whether or when any such negotiations will ultimately culminate
in a definitive agreement or, if a definitive agreement is

9
<PAGE>
reached, whether any such acquisition will ultimately be consummated. To
complete any such acquisition, the Company may be required to obtain additional
debt financing. The terms and amount of any such additional financing will
depend, among other things, upon market conditions at the time of such
financing.

The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder. See "Selling Stockholder." Pending application of the
net proceeds as described above, the Company intends to invest the net proceeds
in short-term, investment grade securities.

PRICE RANGE OF COMMON STOCK

The Common Stock was traded in the Nasdaq National Market under the symbol
"ACCX" from October 4, 1993 until December 11, 1996 when it began trading on the
New York Stock Exchange under the symbol "FDY." Prior to October 4, 1993 there
was no trading market for the Common Stock. The following table sets forth the
high and low sales prices for the shares of Common Stock on the Nasdaq National
Market and New York Stock Exchange for the periods indicated.

<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal Year ending June 30, 1995:
First Quarter........................................................................ 17 1/4 13 1/2
Second Quarter....................................................................... 17 1/4 14 11/16
Third Quarter........................................................................ 17 7/8 14 3/4
Fourth Quarter....................................................................... 17 5/8 13 7/8
Fiscal Year ending June 30, 1996:
First Quarter........................................................................ 18 1/4 14 1/8
Second Quarter....................................................................... 17 11
Third Quarter........................................................................ 13 1/4 10 3/4
Fourth Quarter....................................................................... 15 3/4 12 7/16
Fiscal Year Ending June 30, 1997:
First Quarter........................................................................ 16 1/4 13
Second Quarter....................................................................... 18 1/8 15 1/4
Third Quarter........................................................................ 20 1/2 16 3/4
Fourth Quarter (through May 22, 1997).............................................. . 19 3/8 16 5/8
</TABLE>

On May 22, 1997, the last reported sales price for the Common Stock on the
New York Stock Exchange was $16.625 per share. As of May 22, 1997, there were
over 2,200 holders of the Common Stock, including shares held in nominee or
street name by brokers.

DIVIDEND POLICY

The Company has not declared or paid cash dividends on shares of its Common
Stock. The Company does not anticipate paying any cash dividends or other
distributions on its Common Stock in the foreseeable future. The current policy
of the Company's Board of Directors is to reinvest all earnings to finance the
expansion of the Company's business. The agreements governing the Company's
credit facility and $20 million senior notes contain limitations on the
Company's ability to pay dividends. See Note 8 of Notes to Consolidated
Financial Statements.

10
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company at March
31, 1997 and as adjusted to give effect to the sale of the 2,029,024 shares of
Common Stock offered by the Company hereby (at the offering price of $15.50 per
share and after deducting underwriting discounts and commissions and estimated
offering expenses payable by the Company) and the proposed application of the
estimated net proceeds therefrom. See "Use of Proceeds." This table should be
reviewed in conjunction with the Consolidated Financial Statements and Notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-Term Debt:
Bank Credit Agreement(1)............................................................... $ 24,800 $ --
8.44% Senior Notes..................................................................... 20,000 20,000
Other Long Term Debt................................................................... 8,469 8,469
---------- -----------
Total Long Term Debt................................................................. 53,269 28,469
Stockholders' Equity:
Common Stock, $.01 par value; 19,300,000 shares authorized; 5,540,422 shares issued and
outstanding; 7,569,446 shares issued and outstanding, as adjusted(2)................. 56 76
Additional paid-in capital............................................................. 42,325 71,997
Retained Earnings...................................................................... 38,886 38,886
Minimum Pension Liability Adjustment(3)................................................ (293) (293)
Accumulated Foreign Currency Translation Adjustments................................... (152) (152)
---------- -----------
Total Stockholders' Equity........................................................... 80,822 110,514
---------- -----------
Total Capitalization................................................................. $ 134,091 $ 138,983
---------- -----------
---------- -----------
</TABLE>

- ------------

(1) The Company has amended its revolving credit facility to increase the amount
of available borrowings from $40 million to $60 million for general
corporate purposes, acquisitions and approved investments and to extend the
date of maturity from July 29, 1998 to July 29, 2000.

(2) Does not include 284,399 shares subject to outstanding options at March 31,
1997, of which approximately 156,000 shares were subject to exercisable
options at a weighted average exercise price per share of $13.51.

(3) See Note 12 of Notes to Consolidated Financial Statements.

11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table contains certain selected historical consolidated
financial information and is qualified by the more detailed Consolidated
Financial Statements and Notes thereto included and incorporated by reference
elsewhere in this Prospectus. The selected consolidated financial information
for fiscal years ended June 30, 1992, 1993, 1994, 1995 and 1996 has been derived
from audited consolidated financial statements. The selected financial
information for the nine months ended March 31, 1996 and 1997 are derived from
unaudited financial statements and, in the opinion of management, include all
adjustments consisting solely of normal recurring adjustments necessary for a
fair presentation for such periods. The information below should be read in
conjunction with Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, MARCH 31,
----------------------------------------------------- --------------------
1992 1993 1994 1995 1996 1996 1997
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net Sales................................. $ 54,729 $ 66,591 $ 82,519 $ 141,579 $ 185,081 $ 130,000 $ 176,933
Cost of Sales............................. 47,762 54,321 66,304 115,458 156,612 111,547 148,205
--------- --------- --------- --------- --------- --------- ---------
Gross Profit.......................... 6,967 12,270 16,215 26,121 28,469 18,453 28,728
Operating Expenses:
Selling, General & Administrative....... 4,844 5,986 6,581 13,058 15,459 10,911 15,230
Amortization of Intangibles............. 1,143 1,143 1,209 1,392 1,508 1,131 503
Other Income(1)......................... -- -- -- 6,370 26,957 10,282 --
--------- --------- --------- --------- --------- --------- ---------
Operating Income...................... 980 5,141 8,425 18,041 38,459 16,693 12,995
Interest Expense.......................... 3,513 3,926 1,223 2,326 2,845 2,056 2,400
Minority Interest in Net Income of
Subsidiary.............................. -- -- 62 280 225 137 111
--------- --------- --------- --------- --------- --------- ---------
Income (Loss) Before Taxes and
Extraordinary Item.................... (2,533) 1,215 7,140 15,435 35,389 14,500 10,484
Income Taxes.............................. -- -- 2,494 5,971 14,063 5,860 4,310
--------- --------- --------- --------- --------- --------- ---------
Income (Loss) Before Extraordinary
Item.................................. (2,533) 1,215 4,646 9,464 21,326 8,640 6,174
Extraordinary Item, net of tax(2)......... -- -- 1,230 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net Income (Loss)....................... $ (2,533) $ 1,215 $ 3,416 $ 9,464 $ 21,326 $ 8,640 $ 6,174
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) Per Share............... $ (0.86) $ 0.40 $ 0.72 $ 1.73 $ 3.87 $ 1.57 $ 1.11
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net Income (Loss) Per Share Excluding
Extraordinary Item and
Other Income(1)(2)...................... $ (0.86) $ 0.40 $ 0.98 $ 1.02 $ 0.92 $ 0.42 $ 1.11
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted Average Common Shares
Outstanding............................. 2,958,398 3,026,866 4,757,607 5,477,881 5,516,597 5,512,547 5,562,822
SUPPLEMENTAL DATA:
Depreciation and Amortization............. $ 6,521 $ 5,130 $ 4,541 $ 6,067 $ 7,411 $ 5,283 $ 6,376
Capital Expenditures(3)................... 1,920 4,841 7,524 12,837 12,740 8,892 9,594
Number of Foundries at Period End......... 1 1 3 7 9 9 13
BALANCE SHEET DATA (AT PERIOD END):
Working Capital........................... $ 1,337 $ 2,074 $ 19,240 $ 27,727 $ 36,419 $ 37,280 $ 40,516
Total Assets.............................. 50,022 52,004 87,217 130,287 162,184 158,805 195,532
Long-Term Obligations..................... 22,836 19,934 22,549 34,920 34,655 51,209 53,269
Total Stockholders' Equity................ 6,796 13,851 42,683 52,698 74,654 61,802 80,822
</TABLE>

- ---------------

(1) Other income consists of $6.4 million, $27.0 million and $10.3 million
($3.9 million $16.2 million and $6.3 million net of tax or $0.71, $2.95 and
$1.15 per share), for fiscal 1995, fiscal 1996 and the nine months ended
March 31, 1996, respectively, consisting primarily of insurance proceeds
related to the July 1993 Missouri River flood. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--General."

12
<PAGE>
(2) In connection with the repayment in October 1993 of substantially all of the
Company's interest-bearing indebtedness with the net proceeds of the
Company's initial public offering of Common Stock, the Company recorded an
extraordinary charge to income in the amount of approximately $1.2 million
(net of related income tax benefit of $787,000), relating to the early
retirement of debt and the write-off of deferred financing charges.

(3) During fiscal 1994, fiscal 1995 and fiscal 1996, the Company made capital
expenditures of $4.7 million, $8.1 million and $1.8 million, respectively,
in connection with the refurbishment of Amite. This 282,000 square foot
facility was acquired in February 1993 and had been inactive for several
years.

13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

The Company has pursued an active acquisition program designed to take
advantage of consolidation opportunities in the widely-fragmented foundry
industry. The Company has acquired thirteen foundries since its inception. As a
result of these completed transactions as well as internal growth, the Company's
net sales have increased from approximately $54.7 million for its fiscal year
ended June 30, 1992 to $185.1 million for the fiscal year ended June 30, 1996.

Due to the large size of certain orders, the timing for deliveries of orders
and the number and types of castings produced, the Company's net sales and net
income may fluctuate materially from quarter to quarter. Generally, the first
fiscal quarter is seasonally weaker than the other quarters as a result of plant
shutdowns for maintenance at most of the Company's foundries as well as at many
customers' plants. See "--Supplemental Quarterly Information."

During July 1993, flooding of the Missouri River halted production of the
Company's Atchison, Kansas foundry for four weeks, negatively impacting
operating results. Although the Company was able to resume production at the
Atchison facility without a significant loss of existing orders, the 1993 flood
has had a continuing negative effect on productivity and sales due to increased
equipment maintenance, production downtime and employee overtime. The Company
constructed a flood wall surrounding the Atchison facility that the Company
believes has significantly reduced the risk of future flood damage.

On April 11, 1996, the Company and its insurance carrier reached final
settlement of the Company's claim filed as a result of the flood. During fiscal
1995 and fiscal 1996, the Company recorded payments on the business interruption
portion of its insurance claim in the amount of $6.6 million and $11.1 million,
respectively, which amounts have been included in "Other Income" in the
Company's Statement of Operations. The Company also recorded, in fiscal 1996,
payments on the casualty portion of its insurance claim in the amount of $18.2
million, of which $16.2 million has been recorded as "Other Income" in the
Company's Statement of Operations. The Company also recorded $5.5 million and
$2.0 million in advances during fiscal 1995 and fiscal 1996, respectively,
against future repair expenses, which amounts have been classified as accrued
expenses on the Company's Balance Sheet. Following the flood, the Company was
unable to renew its flood insurance coverage at reasonable rates for this
facility.

RESULTS OF OPERATIONS

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and other financial information included elsewhere
in this Prospectus.

NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO NINE MONTHS ENDED MARCH 31, 1996

Net sales for the first nine months of fiscal 1997 were $176.9 million,
representing an increase of $46.9 million, or 36.1%, over net sales of $130.0
million in the first nine months of fiscal 1996. The operations acquired by the
Company since the beginning of fiscal 1996 generated net sales of $6.4 million
and $47.6 million in the first nine months of fiscal 1996 and fiscal 1997,
respectively, as follows:

<TABLE>
<CAPTION>
FY 1996 FY 1997
FIRST NINE FIRST NINE
MONTHS MONTHS
OPERATION DATE ACQUIRED NET SALES NET SALES
- --------------------------------------------------------------- ------------- --------------- ---------------
<S> <C> <C> <C>
La Grange Foundry Inc.......................................... 12/14/95 $ 5.6 million $17.5 million
The G&C Foundry Company........................................ 03/11/96 0.8 million 10.2 million
Los Angeles Die Casting Inc.................................... 10/01/96 -- 4.5 million
Canada Alloy Castings, Ltd..................................... 10/26/96 -- 4.4 million
Pennsylvania Steel Foundry & Machine Company................... 10/31/96 -- 9.3 million
Jahn Foundry Corp.............................................. 02/14/97 -- 1.7 million
</TABLE>

14
<PAGE>
Excluding net sales generated by the operations acquired in fiscal 1996 and
fiscal 1997, net sales for the first nine months of fiscal 1997 were $129.3
million, representing an increase of $5.7 million, or 4.6%, over net sales of
$123.6 million in the first nine months of fiscal 1996. This 4.6% increase in
net sales was due primarily to increases in net sales to the mining and
construction and energy markets, partially offset by decreases in net sales to
the utility, military and locomotive markets.

Gross profit for the first nine months of fiscal 1997 increased by $10.2
million, or 55.1%, to $28.7 million, or 16.2% of net sales, compared to $18.5
million, or 14.2% of net sales, for the first nine months of fiscal 1996. The
increase in gross profit is primarily attributable to the increase in net sales.
The increase in gross profit as a percentage of net sales is primarily
attributable to the inclusion in the prior year period of: (i) the completion,
at Canadian Steel Foundries, Ltd. ("Canadian Steel"), of several negative margin
orders which were accepted prior to the acquisition of Canadian Steel by the
Company; (ii) costs associated with the 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; and (iii) above
average training expenses associated with the start-up of new products.
Partially offsetting these factors were lost production and expenses associated
with the conversion from cupola to electric melting at The G&C Foundry Company
("G&C") and costs associated with the addition of iron casting capability at
Empire Steel Castings, Inc. ("Empire"). The increase in gross profit as a
percentage of net sales is also attributable to higher maintenance costs in the
first nine months of fiscal 1996 associated with deferred maintenance expense on
two newly acquired foundries and increased maintenance costs related to
regularly scheduled July shut-downs at the Company's other facilities.

For the first nine months of fiscal 1997, selling, general and
administrative expenses were $15.2 million, or 8.6% of net sales, compared to
$10.9 million or 8.4% of net sales, for the first nine months of fiscal 1996.
The increase in selling, general and administrative expense was primarily
attributable to expenses associated with the operations acquired by the Company
in fiscal 1996 and fiscal 1997. The increase in selling, general and
administrative expense as a percentage of net sales was primarily attributable
to increased expenses related to the Company's management incentive bonus plans
and increased expenses related to identifying and completing the Company's
acquisitions.

Amortization of certain intangibles for the first nine months of fiscal 1997
was $503,000, or 0.3% of net sales, as compared to $1.1 million, or 0.9% of net
sales, for the first nine months of fiscal 1996. The intangible assets consist
of goodwill recorded in connection with the acquisitions of Prospect Foundry,
Inc. ("Prospect Foundry"), Kramer International, Inc. ("Kramer"), Empire, G&C
and Los Angeles Die Casting Inc. ("LA Die Casting"). During fiscal 1996, the
intangible assets included the capitalized value of a non-compete agreement with
Rockwell International, which became fully amortized in June 1996. 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 ($6.3
million, net of related income tax expense of $4.0 million), consisting
primarily of partial payments by the Company's insurance carrier. The 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.

For the first nine months of fiscal 1997, interest expense increased to $2.4
million, or 1.4% of net sales, from $2.1 million, or 1.6% of net sales, in the
first nine months of fiscal 1996. The increase in interest expense is primarily
the result of an increase in the average amount of indebtedness outstanding. The
increase in the average amount of outstanding indebtedness is primarily a result
of the Company's acquisitions.

Income tax expense for the first nine months of fiscal 1997 has been
provided at the combined federal and state statutory rate of approximately 41%.
Income tax expense for the first nine months of fiscal 1996 has been provided at
the combined federal and state statutory rate of approximately 40%.

15
<PAGE>
As a result of the foregoing factors, net income for the first nine months
of fiscal 1997 was $6.2 million, compared to net income of $8.6 million for the
first nine months of fiscal 1996. Without other income resulting from flood
insurance payments, net income was $6.2 million for the first nine months of
fiscal 1997 compared to $2.3 million for the prior year period.

FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995

Net sales for fiscal 1996 were $185.1 million, representing an increase of
$43.5 million, or 30.7%, over net sales of $141.6 million in fiscal 1995. The
operations acquired by the Company in fiscal 1995 and fiscal 1996 generated net
sales of $16.5 million and $59.3 million, respectively, as follows:

<TABLE>
<CAPTION>
FY 1995 FY 1996
OPERATION DATE ACQUIRED NET SALES NET SALES
- ------------------------------------------------------------------ ------------- ------------- ---------------
<S> <C> <C> <C>
Canadian Steel.................................................... 11/30/94 $ 7.2 million $ 18.3 million
Kramer............................................................ 01/03/95 5.3 million 12.8 million
Empire............................................................ 02/01/95 4.0 million 13.4 million
La Grange Foundry Inc............................................. 12/14/95 -- 10.9 million
G&C............................................................... 03/11/96 -- 3.9 million
</TABLE>

Excluding net sales attributable to the operations acquired in fiscal 1995
and fiscal 1996, net sales for fiscal 1996 were $125.8 million, representing an
increase of $700,000, or 0.6%, over net sales of $125.1 million in fiscal 1995.
This 0.6% increase in net sales was due primarily to increases in net sales to
the mining and construction, energy and utility markets, offset by decreases in
net sales to the locomotive, mass transit and trucking markets. In addition, the
Company recorded, in the first quarter of fiscal 1995, a non-recurring sale of
casting technology to Indian Railways of $746,000.

Gross profit for fiscal 1996 increased by $2.3 million, or 9.0%, to $28.4
million, or 15.4% of net sales, compared to $26.1 million, or 18.4% of net sales
for fiscal 1995. The increase in gross profit was primarily due to the increase
in net sales. The decrease in gross profit as a percentage of net sales was
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 another foundry 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 products which have a lower gross profit as a percentage of net sales;
(iv) 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; (v) above
average training expenses associated with the start-up of new products; and (vi)
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 fiscal 1996 were $15.5
million, or 8.4% of net sales, as compared to $13.1 million, or 9.2% of net
sales, in fiscal 1995. The increase in selling, general and administrative
expenses was primarily attributable to expenses associated with the operations
acquired by the Company in fiscal 1995 and fiscal 1996. The decrease in selling,
general and administrative expense as a percentage of net sales was primarily
attributable to decreased expenditures for outside professional services.

Amortization of certain intangibles for fiscal 1996 was $1.5 million, or
0.8% of net sales, as compared to $1.4 million, or 1.0% of net sales, in fiscal
1995. The intangible assets consisted of the capitalized value of a non-compete
agreement with Rockwell International, which became fully amortized in June
1996, and goodwill recorded in connection with the acquisitions of Prospect
Foundry, Kramer, Empire and G&C. Partially offsetting the expense relating to
the amortization of these assets is the amortization of the excess

16
<PAGE>
of acquired net assets over cost (negative goodwill) recorded by the Company in
connection with the acquisition of Canadian Steel.

Other income for fiscal 1996 was $27.0 million ($16.2 million, net of
related income tax expense of $10.8 million), consisting primarily of insurance
payments for business interruption and property damage. The Company's insurance
claim was filed as a result of the July 1993 Missouri River flood.

Interest expense for fiscal 1996 increased to $2.8 million, or 1.5% of net
sales, from $2.3 million, or 1.6% of net sales, in fiscal 1995. The increase in
interest expense is the result of an increase in the average amount of
indebtedness outstanding. The increase in the average amount of outstanding
indebtedness is primarily a result of the Company's acquisitions.

Income tax expense for fiscal 1996 reflected the combined federal and state
statutory rate of approximately 40%. Income tax expense for fiscal 1995
reflected the combined federal and state statutory rate of approximately 39%.

As a result of the foregoing factors, net income increased by $11.8 million,
from net income of $9.5 million in fiscal 1995 to net income of $21.3 million in
fiscal 1996. Excluding other income, net income decreased from $5.6 million in
fiscal 1995 to $5.1 million in fiscal 1996.

FISCAL YEAR ENDED JUNE 30, 1995 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994

Net sales for fiscal 1995 were $141.6 million, representing an increase of
$59.1 million, or 71.6%, over net sales of $82.5 million in fiscal 1994. The
operations acquired by the Company in fiscal 1994 and fiscal 1995 generated net
sales of $8.3 million and $59.7 million, respectively, as follows:

<TABLE>
<CAPTION>
FY 1994 FY 1995
OPERATION DATE ACQUIRED NET SALES NET SALES
- ------------------------------------------------------------------ ------------- ------------- ---------------
<S> <C> <C> <C>
Prospect Foundry.................................................. 04/01/94 $ 7.0 million $ 28.8 million
Quaker Alloy, Inc................................................. 06/01/94 1.3 million 14.4 million
Canadian Steel.................................................... 11/30/94 -- 7.2 million
Kramer............................................................ 01/03/95 -- 5.3 million
Empire............................................................ 02/01/95 -- 4.0 million
</TABLE>

Excluding net sales attributable to the operations acquired in fiscal 1994
and fiscal 1995, net sales for fiscal 1995 were $81.9 million, representing an
increase of $7.7 million, or 10.4%, over net sales of $74.2 million in fiscal
1994. This 10.4% increase in net sales was due primarily to increases in net
sales to the locomotive, mass transit and mining and construction markets,
partially offset by decreases in net sales to the military markets. In addition,
the Company recorded, in the first quarter of fiscal 1995, a non-recurring sale
of casting technology to Indian Railways of $746,000.

Gross profit for fiscal 1995 increased by $9.9 million, or 61.1%, to $26.1
million, or 18.4% of net sales, compared to $16.2 million, or 19.7% of net
sales. The increase in gross profit was primarily due to the increase in net
sales. The decrease in gross profit as a percentage of net sales was
attributable to: (i) a change in product mix toward product segments which have
a lower gross profit as a percentage of net sales; (ii) expenses associated with
the start-up of the Company's Amite subsidiary; and (iii) higher than normal
training expenses associated with employees hired in response to the increased
production volume levels. Partially offsetting these factors was 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 fiscal 1995 were $13.1
million, or 9.2% of net sales, as compared to $6.6 million, or 8.0% of net
sales, in fiscal 1994. The increase in selling, general and administrative
expenses was primarily attributable to expenses associated with the operations
acquired by the Company since April 1, 1994. The increase in selling, general
and administrative expense as a

17
<PAGE>
percentage of net sales was primarily attributable to: (i) increased overall
expenditure levels at Amite in response to the start-up of the Amite facility;
(ii) increased expenditures for outside professional services and (iii)
increased compensation under the Company's incentive bonus plans. Selling,
general and administrative expenses as a percentage of net sales also increased
due to four weeks of the Company's first quarter of fiscal 1994 expenditures
being covered by the Company's flood insurance policies.

Amortization of certain intangibles for fiscal 1995 was $1.4 million, or
1.0% of net sales, as compared to $1.2 million, or 1.5% of net sales, in fiscal
1994. The intangible assets consist of the capitalized value of a non-compete
agreement with Rockwell International recorded in connection with the
acquisition of the Atchison/St. Joe Division and goodwill recorded in connection
with the acquisitions of Prospect Foundry, Kramer and Empire. 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 for fiscal 1995 was $6.4 million ($3.9 million, net of related
income tax expenses of $2.5 million), consisting primarily of partial payments
by the Company's insurance carrier against the business interruption portion of
the Company's insurance claim filed as a result of the July 1993 Missouri River
flood.

Interest expense for fiscal 1995 increased to $2.3 million, or 1.6% of net
sales, from $1.2 million, or 1.5% of net sales, in fiscal 1994. The increase in
interest expense is the result of an increase in the average amount of
indebtedness outstanding, partially offset by lower average interest rates on
the Company's outstanding indebtedness. The increase in the average amount of
outstanding indebtedness is primarily a result of the Company's acquisitions and
the start-up of Amite.

Income tax expense for fiscal 1995 has been provided at the combined federal
and state statutory rate of approximately 39.0%. Income tax expense for fiscal
1994 was provided at approximately a 34.9% rate based upon the taxable income of
the Company, the usage of net operating loss carryforwards and the elimination
of the valuation allowance previously established by the Company.

There were no extraordinary charges in fiscal 1995. In connection with the
repayment of indebtedness with the proceeds of the Company's initial public
offering of Common Stock, the Company recorded in fiscal 1994 an extraordinary
charge to income in the amount of approximately $1.2 million (net of related
income tax benefit of $787,000), relating to the early retirement of debt and
the write-off of deferred financing charges.

As a result of the foregoing factors, net income increased by $6.1 million,
from net income of $3.4 million in fiscal 1994 to net income of $9.5 million in
fiscal 1995. Excluding other income and extraordinary items, net income
increased from $4.6 million in fiscal 1994 to $5.6 million in fiscal 1995.

LIQUIDITY AND CAPITAL RESOURCES

The Company has historically financed operations with internally generated
funds, proceeds from the sale of senior notes and available borrowings under its
bank credit facilities. Cash provided by operating activities for the first nine
months of fiscal 1997 was $14.4 million, an increase of $3.2 million from the
first nine months of fiscal 1996. This increase was primarily attributable to
decreased working capital requirements primarily relating to reduced trade
receivable and inventory balances. Cash provided by operating activities for
fiscal 1996 was $36.6 million, an increase of $21.0 million from fiscal 1995.
This increase was primarily attributable to increases in net income and net
deferred income tax payable balances. The Company's results for fiscal 1996
included $27.3 million ($16.3 million, net of related income tax expense of
$11.0 million) of insurance payments, as described above.

Working capital was $40.5 million at March 31, 1997, as compared to $36.4
million at June 30, 1996. The increase primarily resulted from net additional
working capital of $11.1 million associated with the Company's acquisitions,
partially offset by the application of existing cash balances to outstanding
long-

18
<PAGE>
term indebtedness balances. Working capital was $36.4 million at June 30, 1996,
as compared to $27.7 million at June 30, 1995. The increase primarily resulted
from net additional working capital of $1.2 million and $2.2 million associated
with the newly acquired La Grange Foundry Inc. ("La Grange Foundry") and G&C
operations, respectively, and an increase in cash balances resulting from
insurance payments.

The Company expects to incur approximately $13.5 million of capital
expenditures during fiscal 1997 primarily related to productivity enhancing
equipment, such as new mold lines, CNC pattern-cutting machines, machine tools,
sand reclamation systems and computer hardware and software modeling systems.
During the first nine months of fiscal 1997, the Company made capital
expenditures of $9.6 million, as compared to $8.9 million for the first nine
months of fiscal 1996. Included in the first nine months of fiscal 1997 were
capital expenditures of $2.0 million at G&C, primarily relating to the
conversion from cupola to electric melting. The balance of capital expenditures
was used for routine projects at each of the Company's facilities. During fiscal
1996, the Company made capital expenditures of $12.7 million, as compared to
$12.8 million in fiscal 1995. In fiscal 1996, the Company made capital
expenditures for routine projects at each of the Company's facilities. In fiscal
1995, the Company made capital expenditures of $8.1 million at the Amite
foundry, which became operational in late October 1994. The balance of capital
expenditures during fiscal 1995 was used primarily for routine projects at the
Atchison, Kansas foundry, the St. Joseph, Missouri machine shop, Prospect
Foundry and Quaker Alloy, Inc. ("Quaker Alloy").

The Company's revolving credit facility provides for unsecured loans of up
to $40 million and matures on July 29, 1998. Loans under this revolving credit
facility will bear interest at fluctuating rates of either: (i) the bank's
corporate base rate or (ii) LIBOR plus 1.50% subject, in the case of the LIBOR
rate option, to a reduction of up to 0.50% (50 basis points) if certain
financial ratios are met. At March 31, 1997, $6.0 million was available for
borrowing under this facility. The Company recently amended its revolving credit
facility to increase the amount of the facility to $60 million and to extend the
maturity date to July 29, 2000. Loans under this revolving credit facility may
be used for general corporate purposes, acquisitions and approved investments.
The recent amendment to the revolving credit facility provides that the Company
may not make acquisitions of foundries or related businesses without the prior
written consent of the banks holding two-thirds of the loan commitments unless
either (i) after giving effect to the acquisition, the Company's ratio of
consolidated total debt to total capitalization does not exceed 40% or (ii) once
the 40% threshold has been met in that fiscal year, the total aggregate
principal amount expended for all acquisitions thereafter in that fiscal year
does not exceed 25% of stockholders' equity as of the end of the preceding
fiscal year plus 25% of net proceeds received from the issuance of additional
equity during that fiscal year.

The Company believes that its operating cash flow and amounts available for
borrowing under its bank revolving credit facility will be adequate to fund its
capital expenditure and working capital requirements for the next two years.
However, the level of capital expenditure and working capital requirements may
be greater than currently anticipated as a result of the size and timing of
future acquisitions, or as a result of unforeseen expenditures relating to
compliance with environmental laws. Acquisitions have been financed with
borrowings under the Company's bank credit facilities and occasionally with
common stock. During the first nine months of fiscal 1997, the Company purchased
LA Die Casting, Canada Alloy Castings, Ltd. ("Canada Alloy"), Pennsylvania Steel
Foundry & Machine Company ("Pennsylvania Steel") and Jahn Foundry for $8.8
million, $4.4 million, $9.0 million and $6.2 million, respectively, in each case
with funds available under ACC's revolving credit facility. The Company has
executed a letter of intent to purchase BCD. See "Prospectus Summary--Recent
Developments."

This section entitled "Liquidity and Capital Resources" contains
forward-looking statements that involve a number of risks and uncertainties.
Such forward-looking statements include statements pertaining to the adequacy of
funding for capital expenditure and working capital requirements for the next
two years. In addition to the factors discussed in "Risk Factors" above, among
the factors that could cause actual results to differ materially from such
forward-looking statements are the following: business

19
<PAGE>
conditions and the state of the general economy, particularly the capital goods
industry, the strength of the dollar, the fluctuation of interest rates and the
competitive environment in the castings industry.

INFLATION

Management believes that the Company's operations have not been adversely
affected by inflation or changing prices.

NEW ACCOUNTING STANDARDS

For a discussion of new accounting standards, see Note 1 of the Company's
Notes to Consolidated Financial Statements.

SUPPLEMENTAL QUARTERLY INFORMATION

The Company's business is characterized by large unit and dollar volume
customer orders. As a result, the Company has experienced and may continue to
experience fluctuations in its net sales and net income from quarter to quarter.
Generally, the first fiscal quarter is seasonally weaker than the other quarters
as a result of plant shutdowns for maintenance at most of the Company's
foundries as well as at many customers' plants. In addition, the Company's
operating results may be adversely affected in fiscal quarters immediately
following the consummation of an acquisition while the operations of the
acquired business are integrated into the operations of the Company.

The following table presents selected unaudited supplemental quarterly
results for fiscal 1995, fiscal 1996 and the first nine months of fiscal 1997.
<TABLE>
<CAPTION>
FISCAL 1995 FISCAL 1996
QUARTERS ENDED QUARTERS ENDED
---------------------------------- ----------------------------------
SEPT. DEC. MAR. JUN. SEPT. DEC. MAR. JUN.
------- ------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........................................... $29,345 $32,424 $41,433 $38,377 $36,987 $40,683 $52,330 $55,081
Gross Profit........................................ 5,092 5,448 7,610 7,971 5,755 4,846 7,852 10,016
Other Income (Expense)(1)........................... 2,382 3,113 (220) 1,095 9,768 513 1 16,675
Operating Income.................................... 4,341 5,311 3,551 4,838 11,811 1,264 3,618 21,766
Net Income.......................................... $ 2,314 $ 2,870 $ 1,648 $ 2,632 $ 6,845 $ 332 $ 1,463 $12,686
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Net Income Per Share................................ $ 0.42 $ 0.52 $ 0.30 $ 0.48 $ 1.24 $ 0.06 $ 0.27 $ 2.29
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------
Net Income Per Share Excluding Other Income(1)...... $ 0.16 $ 0.18 $ 0.32 $ 0.36 $ 0.15 $ 0.00 $ 0.27 $ 0.50
------- ------- ------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- ------- ------- -------

<CAPTION>
FISCAL 1997
QUARTERS ENDED
-------------------------
SEPT. DEC. MAR.
------- ------- -------
(UNAUDITED)

<S> <C> <C> <C>
Net Sales........................................... $48,998 $61,622 $66,313
Gross Profit........................................ 6,641 10,111 11,976
Other Income (Expense)(1)........................... -- -- --
Operating Income.................................... 2,238 4,963 5,794
Net Income.......................................... $ 941 $ 2,371 $ 2,862
------- ------- -------
------- ------- -------
Net Income Per Share................................ $ 0.17 $ 0.43 $ 0.51
------- ------- -------
------- ------- -------
Net Income Per Share Excluding Other Income(1)...... $ 0.17 $ 0.43 $ 0.51
------- ------- -------
------- ------- -------
</TABLE>

- -------------

(1) Other Income (Expense) consists primarily of gains recorded by the Company
from settlement of the business interruption and casualty and property
damage resulting from the July 1993 Missouri River flood. The Company's
fiscal 1995 quarters ended September, December, March and June include gains
from the these recoveries of $2.4, $3.1, $0.0 and $1.1 million,
respectively. The Company's fiscal 1996 quarters ended September, December,
March and June include gains from these recoveries of $9.9, $0.7, $0.0 and
$16.7 million, respectively.

20
<PAGE>
BUSINESS

GENERAL

The Company was founded to pursue a strategy of growth and diversification
through acquisitions in the highly fragmented foundry industry. Following the
initial acquisition of the steel casting operations of Rockwell International in
1991, the Company has continued to acquire foundries in the U.S. and Canada. As
a result of these acquisitions, as well as internal growth, ACC's net sales have
increased from approximately $54.7 million in its first fiscal year ended June
30, 1992 to $185.1 million for the fiscal year ended June 30, 1996, resulting in
a compound annual growth rate of 36%.

INDUSTRY TRENDS

The American Foundryman's Society estimates that the U.S. casting industry
had shipments of approximately $22.6 billion in 1996, of which steel castings
accounted for approximately $3.3 billion, iron castings for approximately $10.3
billion and non-ferrous castings for approximately $9.0 billion. Approximately
14.5 and 14.0 million tons of castings were shipped in 1995 and 1996,
respectively. Recent estimates forecast approximately 3% growth in shipments in
each of 1997 and 1998. The Company has been able to grow at a rate substantially
in excess of the overall industry principally as a result of its position to
benefit from key trends affecting the casting industry, including the following:

INDUSTRY CONSOLIDATION.

Although still highly fragmented, the foundry industry has consolidated from
approximately 465 steel foundries and 1,400 iron foundries in 1982 to
approximately 290 and 700 foundries, respectively, in 1995. As the industry has
consolidated, capacity utilization has increased from approximately 45% in 1982
to more than 79% in 1996. This consolidation trend has been accompanied by
increased outsourcing of casting production and OEM supplier rationalization.

21
<PAGE>
OUTSOURCING. Many OEMs are outsourcing the manufacture of cast components
to independent foundries in an effort to reduce their capital and labor
requirements and to focus on their core businesses. Management believes that
captive foundries are often underutilized, inefficiently operated and lack the
latest technology. Several of ACC's OEM customers, such as Caterpillar, General
Motors, General Electric, Rockwell International, Ingersoll-Dresser and Gardner
Denver, have closed or sold one or more of their captive foundries during the
past ten years and have outsourced the castings which they once made to
independent suppliers such as the Company. As described above, the closure of
these facilities has contributed to increased capacity utilization at the
remaining foundries.

OEM SUPPLIER RATIONALIZATION. OEMs are rationalizing their supplier base to
fewer foundries that are capable of meeting increasingly complex requirements.
For example, OEMs are asking foundries to play a larger role in the design,
engineering and development of castings. In addition, some customers have
demanded that suppliers implement new technologies, adopt quality (ISO 9000 and
QS 9000) standards and make continuous productivity improvements. As a result,
many small, privately-owned businesses have chosen to sell their foundries
because they are unwilling or unable to make investments necessary to remain
competitive. Moreover, the EPA and OSHA require compliance with increasingly
stringent environmental and governmental regulations.

NEW CASTING TECHNOLOGY

Recent advances in casting technology and pattern-making have created new
opportunities for reducing costs while increasing efficiency and product
quality. The combination of powerful, low cost computer workstations with finite
element modeling software for stress analysis and metal solidification
simulation is helping foundries and customers to design castings that are
lighter, stronger and more easily manufactured at a competitive cost.

The Company believes new casting technologies have led to growth in casting
applications by replacing forgings and fabrications. In the past, despite
lighter, stronger and more stress and corrosion resistant features of castings,
fabricated (welded) components have been used in order to reduce tooling costs
and product development lead-time. New casting technology has helped to reduce
costs and shorten lead-times and has therefore increased the relative
attractiveness of cast components. For example, these improvements allowed an
ACC customer to replace a fabricated steel boom that is used in a typical mining
vehicle with one that is cast. The cast steel boom weighs 20% less than the
fabricated component that it replaced, allowing an increase in payload, as well
as product life. Another customer replaced the combination cast/fabricated body
of a rock crusher with a one-piece casting, reducing labor for machining,
cutting and welding as a result. An example of an application in which castings
have replaced forged products is the blow-out preventer that is used to control
a well "blow-out" during drilling. These products are required to comply with
stringent safety standards because blow-out preventers must be able to contain
pressures of 15,000 pounds per-square-inch. Due to lower costs and equally
stringent safety features made possible by new casting technologies, castings
have substantially replaced forgings for blow-out preventer bodies.

COMPANY STRATEGY

ACC is pursuing growth and diversification through a two-pronged approach
of: (i) making strategic acquisitions within the widely fragmented and
consolidating foundry industry; and (ii) integrating the acquired foundries by
applying ACC's management, operational and technical expertise.

STRATEGIC ACQUISITIONS

ACQUIRE LEADERS AND BUILD CRITICAL MASS. The Company initially seeks to
acquire foundries that are considered leaders in their respective sectors. After
acquiring a leader in a new market, ACC strives to make subsequent acquisitions
that further penetrate that market and take advantage of the leader's

22
<PAGE>
technical expertise. The Atchison/St. Joe Division is a leader in the field of
large, complex steel castings. This acquisition in 1991 provided credibility for
ACC's presence in the industry and established a base for add-on acquisitions.
Following the Atchison/St. Joe Division acquisition, the Company added capacity
and strengthened its base through the add-on acquisitions of Amite in 1993 and
Canadian Steel in 1994. As an additional example, Prospect Foundry was acquired
in 1994 due to its leading position in gray and ductile iron casting production.
The subsequent acquisition of La Grange Foundry in 1995 further enhanced ACC's
position in this market.

BROADEN PRODUCT OFFERINGS AND CAPABILITIES. The Company also seeks to
acquire foundries that add a new product line or customer base that can be
leveraged throughout ACC's network of foundries. For example, prior to the
acquisition of Prospect Foundry in 1994, which expanded ACC's capabilities to
include gray and ductile iron, the Company only produced carbon and low alloy
steel castings. The acquisition of Quaker Alloy expanded ACC's stainless and
high alloy steel capabilities to include a wider range of casting sizes. The
Company also recently acquired LA Die Casting, a leading die caster of aluminum
and zinc components for the computer and recreation markets, which provides ACC
with an entry into the aluminum and zinc die casting markets.

DIVERSIFY END MARKETS. The Company attempts to lessen the cyclical exposure
at individual foundries by creating a diversified network of foundries that
serve a variety of end markets. Kramer, a supplier of pump impellers, was
acquired in 1995, expanding ACC's sales to the energy and utility sectors. The
Company believes ACC's presence in these markets somewhat offsets its exposure
to the railroad and mining and construction markets, as energy and utility
cycles do not necessarily coincide with railroad investment or mining and
construction cycles. The acquisition of Prospect Foundry diversified the end
markets served by the Company by providing access to both the agricultural
equipment and trucking industries. Two of Prospect's largest customers are John
Deere, a manufacturer of farming equipment, and Horton Industries, a producer of
fan clutches and suspension components for the trucking market. ACC recently
acquired Jahn Foundry, providing ACC with its first entry into the automotive
market.

In its pursuit of new markets, the Company conducts market studies,
evaluates the casting skills of its various foundries, selects the foundries
most capable of efficiently producing targeted new products and invites
potential customers to visit the designated foundries with the goal of being
certified and placed on the customers' approved bidder's lists. The Company has
successfully entered several new markets through this practice. For example, ACC
entered the turbine casting market in 1991 after conducting a worldwide market
study, hosting quality certification visits, quoting prices on new projects and
providing customers with prototype castings.

As part of its acquisition strategy, the Company has also purchased
non-controlling interests in other foundries, with the option to acquire control
following the initial acquisition. These foundries represent potential
opportunities for the Company to add capacity and increase market share.

23
<PAGE>
The following table presents the Company's thirteen acquisitions and their
primary strategic purpose.

<TABLE>
<CAPTION>
DATE
MANUFACTURING UNIT ACQUIRED STRATEGIC PURPOSE
- ---------------------------- --------- ------------------------------------------------------------------------
<S> <C> <C>
Atchison/St. Joe Division 06/14/91 Leader in carbon and low alloy, large, complex steel castings. Initial
platform for Company strategy.

Amite 02/19/93 Increase capacity to take on new projects with customers. Add-on to
Atchison/St. Joe.

Prospect Foundry 04/01/94 Leader in gray and ductile iron castings.

Quaker Alloy 06/01/94 Develop position in stainless and high alloy steel castings.

Canadian Steel 11/30/94 Access to hydroelectric and steel mill markets. Develop position in
large castings.

Kramer 01/03/95 Leader in castings for pump industry.

Empire 02/01/95 Build position in pump and valve markets. Add-on to Quaker Alloy.

La Grange Foundry 12/14/95 Build position in gray and ductile iron casting markets.

G&C 03/11/96 Highly regarded in fluid power market. Build position in gray and
ductile iron casting markets.

LA Die Casting 10/01/96 Leader in aluminum and zinc die casting.

Canada Alloy 10/26/96 Build position in existing markets. Smaller castings than Canadian
Steel, but similar markets and materials.

Pennsylvania Steel 10/31/96 Well regarded in turbine industry. Build position in power generation,
pump and valve markets. Add-on to Quaker Alloy and Empire.

Jahn Foundry 02/14/97 Develop position in market for automotive castings. Add-on iron foundry.
</TABLE>

INTEGRATION OF ACQUIRED FOUNDRIES

STRENGTHEN MARKETING FUNCTIONS. The Company places great emphasis on
maximizing new business opportunities by strengthening marketing functions and
cross-selling across its network of foundries. Many foundries, particularly
those that operate as captive foundries or only rely on a small number of
customers, do not have strong marketing capabilities. ACC views this
industry-wide marketing weakness as an opportunity to establish a competitive
advantage. In recognizing this opportunity, the Company has strengthened the
marketing capabilities of its individual foundries and introduced cross-selling
between foundries.

One way in which ACC builds the marketing efforts of its foundries is to
increase the number of sales personnel at both existing and acquired foundries.
In addition to sales people added through acquisitions, the Company has
incrementally increased the sales force by 40%. Another element of the Company's
marketing effort is to jointly develop castings with its customers. Joint
development projects using new technology, and the resulting increased service
and flexibility provided to customers, is an important marketing tool and has
been instrumental in receiving several new orders. For example, a joint
development project between Caterpillar and ACC led to the production of the
boom tip casting for one of Caterpillar's new hydraulic excavators.

24
<PAGE>
An increasingly important aspect of the Company's marketing strategy has
been to develop its ability to cross-sell among its foundries. In acquiring new
foundries and expanding into new markets, the Company has gained a significant
advantage over smaller competitors since its sales force is able to direct its
customers to foundries with different capabilities. This benefits ACC in that it
enables foundries to use the Atchison name and relationships to gain new
customers as well as helping customers to reduce their supplier base by
providing "one-stop" shopping. The Company facilitates cross-selling by
reinforcing the sales force's knowledge of Company-wide capabilities through
visits to individual facilities. For example, a sales person from the Atchison
foundry, which makes steel castings, recently referred a customer that needed a
mid-size iron casting for a motor housing to La Grange Foundry, which had the
necessary capabilities, subsequently resulting in a large order. Management
believes that as ACC continues to grow through acquisitions, its marketing
competitive advantage through cross-selling will also continue to grow.

INTRODUCE ADVANCED TECHNOLOGY. As part of its acquisition strategy, the
Company is systematically introducing advanced new technologies into each of its
acquired foundries to enhance their competitive position. For example, the
Company's capabilities in finite element analysis and three dimensional solid
modeling are having a beneficial impact on sales and casting production by
helping customers to design lighter and stronger castings, shortening design
cycles, lowering casting costs and in some cases creating new applications.
These new technologies have enhanced the Company's ability to assist customers
in the component design and engineering stages. New techniques involve
computerized solid models that are used to simulate the casting process, to make
patterns and auxiliary tooling and to machine the finished castings. The Company
intends to implement this new technology in all of its foundries and, to date,
seven of ACC's foundries have implemented or are in the process of implementing
this technology.

Investments by the Company in technology improvements include: (i)
Argon-Oxygen-Decarburization ("AOD") refining, which is used to make
high-quality stainless steel; (ii) computer-controlled sand binder pumps to
improve mold quality and reduce cost; (iii) new solidification software and
hardware for better casting design and process improvement; (iv) Computer
Numerical Control ("CNC") machine tools, computer-assisted, laser measurement
devices and new cutting head designs for machine tools to improve productivity
and quality in the machining of castings; and (v) equipment for measuring the
nitrogen content of steel, which helps in casting quality improvement. ACC is
one of the few foundry companies that uses its own scanning electron microscope
to analyze inclusions in cast metal. The Company also participates in technical
projects led by the Steel Founder's Society of America and the American
Foundryman's Society, which are exploring ways to melt and cast cleaner iron and
steel, as well as U.S. government/industry specific projects to shorten and
improve the casting design cycle.

ACHIEVE PURCHASING ECONOMIES. Once an acquisition has been completed, ACC
makes its volume purchasing programs available to the newly acquired foundry.
ACC has realized meaningful cost savings by achieving purchasing efficiencies
with acquired foundries. By jointly coordinating the purchase of raw materials,
negotiation of insurance premiums and procurement of freight services, ACC's
individual foundries have, in some cases, realized savings of 10% to 30% of
these costs.

LEVERAGE MANAGEMENT EXPERTISE. The Company believes that improvements can
often be made in the way acquired foundries are managed, including the
implementation of new technologies, advanced employee training programs,
standardized budgeting processes and profit sharing programs and providing
access to capital. To this effect, ACC often enhances management teams to add
technical, marketing or production experience. For example, ACC was able to
significantly improve the profitability of Canadian Steel by adding new
management, entering new markets, installing finite element solidification
modeling

25
<PAGE>
and providing capital. As another example, under ACC ownership, La Grange
Foundry was able to negotiate a new labor agreement, create profit sharing for
all employees, broaden its customer base and install solidification modeling.

MARKETS AND PRODUCTS

MINING AND CONSTRUCTION. ACC's castings are used in tractor-crawlers,
mining trucks, excavators, drag lines, wheel-loaders, rock crushers, diesel
engines, slurry pumps, coal mining machines and ore-processing equipment. Mining
and construction equipment customers include Caterpillar, Nordberg, Rockwell
International, Gardner Denver, John Deere and Komatsu, among others.

All of the Company's major customers sell their end products to worldwide
markets, which allows ACC to participate indirectly in the growth in
construction in Asia, and in large mining projects in Indonesia, Africa and
South America. This helps reduce the Company's dependence on the domestic
capital goods spending cycle.

UTILITIES. Many of ACC's castings are used in products for the utility
industry, such as pumps, valves and gas compressors. ACC also makes steam, gas
and hydroelectric turbine castings, nuclear plant components, sewage treatment
parts and other castings for the utility industry. In addition, the Company
manufactures replacement products that are used when customers perform
refurbishments. Customers include Westinghouse, General Electric, Siemens,
Kvaerner, Goulds Pumps, and Neles-Jamesbury.

ENERGY. The Company's products for energy market include pumps, valves and
compressors for transmission and refining of petrochemicals, blow-out preventers
and mud pumps for drilling and workover of wells, lifting hooks and shackles for
offshore installation of equipment, winch components for rig positioning,
sub-sea components and other oil field castings. Shaffer, Cooper Energy, Hydril,
Solar, Nordstrom, Ingersoll-Dresser Pumps and Amclyde are among the Company's
many energy-related customers.

RAILROAD. The Company supplies cast steel undercarriages for locomotives,
among other parts, for this market. GM is the largest customer, and has
purchased locomotive castings from the Atchison/St. Joe division for over 50
years.

MILITARY. Weapons and equipment for the Army, Navy, and Coast Guard employ
many different types of castings. The Company makes components for ships, battle
tanks, howitzers and other heavy weapons. The military casting market has
declined sharply, but ACC has been able to replace this volume by targeting new
products such as turbines, compressors, pumps and valves. Customers in this
market include General Dynamics, Litton, Bath Iron Works, McDonnell Douglas, the
U.S. Army and Avondale Shipyards.

MASS TRANSIT. ACC began making undercarriages for passenger rail cars in
1992 and is now one of the main casting suppliers to the mass transit market.
The Company's castings are used on the BART system in San Francisco, METRA in
Chicago, NCTD in San Diego, MARTA in Atlanta, and in Miami and Vancouver. ACC's
La Grange Foundry recently began casting iron housings for traction motors to be
used in the refurbishment of subway cars for New York City, which is the largest
user of subway cars in North America.

FARM EQUIPMENT. ACC makes a variety of castings for farm tractors, baling
equipment, harvesters, sugar cane processors and other agricultural equipment
for customers such as John Deere, Caterpillar and New Holland.

AUTOMOTIVE. The automotive industry uses both iron and aluminum castings,
as well as aluminum die castings. ACC recently entered this market through the
purchase of Jahn Foundry in Springfield,

26
<PAGE>
Massachusetts. Jahn Foundry produces cast iron cylinder liners used by General
Motors in cast aluminum engine blocks for Saturn automobiles.

TRUCKING. The Company manufactures components used primarily on truck
engines and suspension systems, such as fan clutch components, manifolds, roll
pins and gears. Many of ACC's castings are used in aftermarket products to
achieve better fuel economy or to enhance ride characteristics. Customers
include Horton Industries, Detroit Diesel and others.

OTHER. Other markets include process equipment such as paper making
machinery, rubber mixers, plastic extruders, dough mixers, steel mill rolls,
machine tools and a variety of general industrial applications. With the
acquisition of LA Die Casting, the Company entered several new markets,
including the consumer market. LA Die Casting supplies components used to make
recreational vehicles, computer peripherals, direct satellite receivers, pool
tables and golf equipment. Customers include California Amplifier, RC Design,
Care Free of Colorado, Callaway and Printronix.

SALES AND MARKETING

New foundry technologies and the new applications resulting therefrom
require a more focused and knowledgeable sales force. The Company pursues an
integrated sales and marketing approach that includes senior management,
engineering and technical professionals, production managers and others, all of
whom work closely with customers to better understand their specific
requirements and improve casting designs and manufacturing processes. The
Company supplements its direct sales effort with participation in trade shows,
marketing videos, brochures, technical papers and customer seminars on new
casting designs.

The Company's engineering and technical professionals are actively involved
in marketing and customer service, often working with customers to improve
existing products and develop new casting products and applications. They
typically remain involved throughout the product development process, working
directly with the customer to design casting patterns, build the tooling needed
to manufacture the castings and sample the castings to ensure they meet
customers' specifications. The Company believes that the technical assistance in
product development, design, manufacturing and testing that it provides to its
customers gives it an advantage over its competition.

Customers tend to develop long-term relationships with foundries that can
provide high quality, machined castings delivered on a just-in-time basis that
do not require on-site inspection. Frequently, the Company is the only current
source for the castings that it produces. Maintaining duplicate tooling in
multiple locations is costly, so customers prefer to rely on one supplier for
each part number. Moving the tooling to another foundry is possible, however,
such a move entails considerable time and expense on the customer's part. In
addition, ACC is forming product development partnerships with a number of
customers to develop new applications for castings.

BACKLOG

The Company's backlog is based upon customer purchase orders that the
Company believes are firm and does not include purchase orders anticipated but
not yet placed. At March 31, 1997, the Company has approximately $84.0 million
of backlog, compared to backlog of approximately $71.2 million at March 31,
1996. The backlog is scheduled for delivery in fiscal 1997 except for
approximately $32.1 million, of which $31.8 million is scheduled for delivery in
fiscal 1998. The level of backlog at any particular time is not necessarily
indicative of the future operating performance of the Company. The Company
historically has not experienced cancellation of any significant portion of
customer orders.

27
<PAGE>
MANUFACTURING

CASTINGS. Casting is one of several methods, along with forging and
fabricating, which shape metal into desired forms. Castings are made by pouring
or introducing molten metal into a mold and allowing the metal to cool until it
solidifies, creating a monolithic component. Some castings, such as die
castings, are made with a permanent metal mold which can be used repeatedly.
Others, such as sand castings, are made in a sand mold which is used only once.
Forgings are made by shaping solid metal with pressure, usually in a die or with
hammers. Fabrications are made by welding together separate pieces of metal.
Castings can offer significant advantages over forgings and fabrications. A
well-designed casting can be lighter, stronger and more stress and corrosion
resistant than a fabricated part. Although castings and forgings are similar in
several respects, castings are generally less expensive than forgings.

CASTING PROCESS. The steel casting manufacturing process involves melting
steel scrap in electric arc or induction furnaces, adding alloys, pouring the
molten metal into molds made primarily of sand and removing the solidified
casting for cleaning, heat treating and quenching prior to machining the casting
to final specifications. The manufacture of a steel casting begins with the
molding process. Initially, a pattern constructed of wood, aluminum or plastic
is created to duplicate the shape of the desired casting. The pattern, which has
similar exterior dimensions to the final casting, is positioned in a flask and
foundry sand is packed tightly around it. After the sand mold hardens, the
pattern is removed. When the sand mold is closed, a cavity remains within it
shaped to the contours of the removed pattern. Before the mold is closed, sand
cores are inserted into the cavity to create internal passages within the
casting. For example, a core would be used to create the hollow interior of a
valve casing. With the cores in place, the mold is closed for pouring.

Steel scrap and alloys are melted in an electric arc furnace at
approximately 2,900 degrees Fahrenheit, and the molten metal is poured from a
ladle into molds. After pouring and cooling, the flask undergoes a "shake-out"
procedure in which the casting is removed from the flask and vibrated to remove
sand. The casting is then moved to a blasting chamber for removal of any
remaining foundry sand and scale. Next, the casting is sent to the cleaning
room, where an extensive process removes all excess metal. Cleaned castings are
put through a heat treating process, which improves properties such as hardness
and tensile strength through controlled increases and decreases in temperature.
A quench tank to reduce temperatures rapidly is also available for use in heat
treatment. The castings are shot blasted again and checked for dimensional
accuracy. Each casting undergoes a multi-stage quality control procedure before
being transported to one of the Company's or the customer's machine shops for
any required machining.

Iron castings are processed similarly in many respects to steel castings.
Melting and pouring temperatures for molten iron are approximately 2,400 degrees
Fahrenheit, and less cleaning and finishing is required for iron castings than
is typically required for steel castings. Iron and steel scrap may both be used
in making cast iron.

Die casting, as contrasted to sand casting, uses a permanent metal mold that
is reused. Melting and pouring temperatures for aluminum are less than half that
used for steel, and die castings normally require less cleaning than iron or
steel castings.

MATERIALS. Steel is more difficult to cast than iron, copper or aluminum
because it melts at higher temperatures, undergoes greater shrinkage as it
solidifies, causing the casting to crack or tear if the mold is not properly
designed, and is highly reactive with oxygen, causing chemical impurities to
form as it is poured through air into the mold. Despite these challenges, cast
steel has become a vital material due to its superior strength compared to other
ferrous metals. In addition, most of the beneficial properties of steel match or
exceed those of competing ferrous metals. The Company's first foundry, which
today forms the Atchison/St. Joe Division, produced carbon and low alloy steel
castings when it was acquired from Rockwell International in 1991. ACC added an
AOD vessel for making stainless steel in order to better supply the pump and
valve markets, which sometimes require stainless steel castings to be made from
the same patterns used for carbon steel castings. Also in 1994, ACC purchased
Quaker Alloy, which

28
<PAGE>
specialized in casting high alloy and stainless steels for valves, pumps and
other equipment. Canadian Steel and Canada Alloy also make high alloy and
stainless castings, further reinforcing ACC's market position and skill base
concerning the casting of stainless and specialty, high alloy steels.

In applications that do not require the strength, ductility and/or
weldability of steel, iron castings are generally preferred due to their lower
cost, shorter lead-times and somewhat simpler manufacturing processes. Ductile
iron is especially popular because it exhibits a good combination of the
qualities of both iron and steel. Ductile iron is stronger and more flexible
than traditional cast iron--known as gray iron-- but is easier and less
expensive to cast than steel. In 1994 ACC began making gray and ductile iron
castings when it acquired Prospect Foundry. Ductile iron is a popular new
material, whose utilization is increasing faster than either traditional gray
cast iron or cast steel. ACC's position in ductile iron increased through the
subsequent purchases of La Grange Foundry and G&C.

Aluminum castings (including die castings) generally offer lighter weight
than iron or steel, and are usually easier to cast because aluminum melts at a
lower temperature. These advantages, coupled with low prices for aluminum during
the last decade, have led to a substantial increase in the use of aluminum
castings, especially in motor vehicles. Aluminum's relative softness, lower
tensile strength and poor weldability limit its use in many applications where
iron and steel castings are currently employed. In 1996, ACC entered the
non-ferrous market with the purchase of LA Die Casting, which die casts aluminum
and zinc.

The ability to provide cast components in a broad range of materials allows
ACC to present itself as a "one-stop shop" for some customers and simplifies
purchasing for others. Since customers in general have a goal of reducing their
total number of suppliers, a broader range of materials and casting skills gives
ACC an advantage over many other foundry operations.

MACHINING. The Company machines many of its steel castings, typically to
tolerances within 30 thousandths of an inch. Some castings are machined to
tolerances of five thousandths of an inch. Machining includes drilling,
threading or cutting operations. The Company's St. Joe and Amite machine shops
have a wide variety of machine tools, including ten CNC machine tools. The
Company also machines some of its castings at Canadian Steel, Quaker Alloy,
Empire and Kramer. The ability to machine castings provides a higher value-added
product to the customer and improved quality. Casting imperfections, which are
typically located near the surface of the casting, are usually discovered during
machining and corrected before the casting is shipped to the customer.

NON-DESTRUCTIVE TESTING. Customers typically specify the physical
properties, such as hardness and strength, which their castings are to possess.
The Company determines how best to meet those specifications. Constant testing
and monitoring of the manufacturing process are necessary to maintain high
quality and to ensure the consistency of the castings. Electronic testing and
monitoring equipment for tensile, impact, radiography, ultrasonic, magnetic
particle, dye penetrant and spectrographic testing are used extensively to
analyze molten metal and test castings.

ENGINEERING AND DESIGN. The Company's process engineering department
assists the customer in designing the product and works with manufacturing
departments to determine the most cost effective way to produce the casting.
Among other computer-aided design techniques, the Company uses three-dimensional
solid modeling and solidification software. This equipment reduces the time
required to produce sample castings for customers by several weeks and improves
the casting design.

CAPACITY UTILIZATION. The following table shows the type and the
approximate amount of available capacity, in tons, for each foundry and die
caster. The actual number of tons that a foundry can produce annually is
dependent on product mix. Complicated castings, such as those used for military
applications or in steam turbines, require more time, effort and use of
facilities, than do simpler castings such as those for mining and construction
markets. Also, high alloy and stainless steel castings generally require more
processing time and use of facilities than do carbon and low alloy steel
castings.

29
<PAGE>

<TABLE>
<CAPTION>
TONS SHIPPED
ESTIMATED* ANNUAL 12 MONTHS ESTIMATED*
CAPACITY IN NET ENDED CAPACITY
MANUFACTURING UNIT METALS CAST MAJOR APPLICATIONS TONS FEB. 28, 1997 UTILIZATION
- ------------------ --------------- ------------------------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Atchison/St. Joe Carbon, low Mining and construction, rail, 29,000 25,628 88%
Division alloy and military, valve, turbine and
stainless steel compressor

Amite Carbon and low Marine, mining and construction 14,000 5,086 36%
alloy steel

Prospect Foundry Gray and Construction, agricultural, 12,500 9,862 79%
ductile iron trucking, hydraulic, power
transmission and machine tool

Quaker Alloy Carbon, low Pump and valve 6,000 2,393 40%
alloy and
stainless steel

Canadian Steel Carbon, low Hydroelectric and steel mill 6,000 3,013 50%
alloy and
stainless steel

Kramer Carbon, low Pump impellers and casings 1,000 1,101 110%
alloy and
stainless
steel, gray and
ductile iron

Empire Carbon and low Pump and valve 4,800 2,052 43%
alloy steel and
gray, ductile
and nickel
resistant iron

La Grange Foundry Gray, ductile Mining and construction and 14,800 11,022 74%
and compacted transportation
graphite iron

G&C Gray and Fluid power (hydraulic control 10,500 7,217 69%
ductile iron valves)

LA Die Casting Aluminum and Communications, recreation and 2,400 1,673 70%
zinc computer

Canada Alloy Carbon, low Power generation, pulp and 2,500 1,997 80%
alloy and paper machinery, pump and valve
stainless steel

Pennsylvania Carbon and Power generation, pump and 3,700 3,195 86%
Steel stainless steel valve

Jahn Foundry Gray iron Automotive, air conditioning 11,000 6,946 63%
and agricultural
------- ------ ---

Totals 118,200 81,185 69%
------- ------ ---
------- ------ ---
</TABLE>

- ---------------

* Estimated annual capacity is based upon management's estimate of the
applicable manufacturing unit's theoretical capacity assuming a certain
product mix and assuming such unit operated five days a week, three shifts
per day and assuming normal shutdown periods for maintenance. Actual
capacities will vary, and such variances may be material, based upon a
number of factors, including product mix and maintenance requirements.

30
<PAGE>
COMPETITION

The Company competes with a number of foundries in one or more product
lines, although none of the Company's competitors compete with it across all
product lines. The principal competitive factors in the castings market are
quality, delivery and price; however, breadth of capabilities and customer
service have become increasingly important. The Company believes that it is able
to compete successfully in its markets by: (i) offering high quality, machined
castings; (ii) working with customers to develop and design new castings; (iii)
providing reliable delivery and short lead-times; (iv) containing its
manufacturing costs, thereby pricing competitively; and (v) offering a broad
range of cast materials.

The Company believes that the market for iron and steel castings is
attractive because of a relatively favorable competitive environment, high
barriers to entry and the opportunity to form strong relationships with
customers. New domestic competitors are unlikely to enter the foundry industry
because of the high cost of new foundry construction, the need to secure
environmental approvals at a new foundry location, the technical expertise
required and the difficulty of convincing customers to switch to a new, unproven
supplier.

ACC, and the foundry industry in general, competes with manufacturers of
forgings and fabrications in some application areas. The Company believes that
the relative advantages of castings compared to forgings and fabrications,
particularly in light of new casting design technology, which reduces cost and
lead-time while improving casting quality, will lead to increased replacement of
forgings and fabrications by iron and steel castings.

RAW MATERIALS

The principal raw materials used by the Company include scrap iron and
steel, aluminum, zinc, molding sand, chemical binders and alloys, such as
manganese, nickel and chrome. The raw materials utilized by the Company are
available in adequate quantities from a variety of domestic sources. From time
to time the Company has experienced fluctuations in the price of scrap steel,
which accounts for 4% of net sales, and alloys, which account for less than 2%
of net sales. The Company has generally been able to pass on the increased costs
of raw materials and has escalation clauses for scrap with certain of its
customers. As part of its commitment to quality, the Company issues rigid
specifications for its raw materials and performs extensive inspections of
incoming raw materials.

QUALITY ASSURANCE

The Company has adopted sophisticated quality assurance techniques and
policies which govern every aspect of its operations to ensure high quality.
During and after the casting process, the Company performs many tests, including
tensile, impact, radiography, ultrasonic, magnetic particle, dye penetrant and
spectrographic tests. The Company has long utilized statistical process control
to measure and control dimensions and other process variables. Analytical
techniques such as Design of Experiments and the Taguchi Method are employed for
trouble-shooting and process optimization.

As a reflection of its commitment to quality, the Company has been certified
by, or won supplier excellence awards from, substantially all of its principal
customers. Of 600 suppliers to General Motors' Electromotive Division, the
Company was the first supplier to receive the prestigious Targets of Excellence
award. Reflecting its emphasis on quality, the Atchison/St. Joe Division was
certified to ISO 9001 in August 1995, which represents compliance with
international standards for quality assurance. Quaker Alloy, La Grange Foundry,
Canada Alloy, Pennsylvania Steel and Canadian Steel have each been certified to
ISO 9002. Other ACC foundries are preparing for ISO certification.

31
<PAGE>
EMPLOYEE AND LABOR RELATIONS

As of February 28, 1997, the Company had approximately 2,750 full-time
employees. In the last five years, the Company has had one work stoppage, which
occurred in May 1993 at the Atchison/St. Joe Division and lasted for nine days.
The Company's hourly employees are covered by collective bargaining agreements
with several unions at eleven of its locations. These agreements expire at
varying times over the next several years. The following table sets forth a
summary of the principal unions and term of each collective bargaining agreement
at the respective locations.

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
EFFECTIVE DATE OF MEMBERS (AS
MANUFACTURING UNIT NAME OF PRINCIPAL UNION DATE EXPIRATION OF 02/28/97)
- ---------------------- ---------------------------------- ------------- ------------- ------------

<S> <C> <C> <C> <C>
Atchison/St. Joe United Steelworkers of 03/04/96 05/09/99 370
America, Local 6943

Prospect Foundry Glass, Molders, Pottery, 03/18/95 06/01/99 185
Plastics & Allied Workers
International, Local 63B

Quaker Alloy United Steelworkers of 07/15/95 07/15/99 185
America, Local 7274

Canadian Steel Metallurgistes Unis 02/12/96 02/12/01 120
d'Amerique, Local 6859

Empire United Steelworkers of 03/01/97 02/28/02 120
America, Local 3178

La Grange Foundry Glass, Molders, Pottery, 12/14/95 12/16/00 245
Plastics & Allied Workers
Union, Local 143

G&C United Electrical, Radio and 03/01/97 06/30/01 115
Machine Workers of America,
Local 714

LA Die Casting United Automobile, Aircraft, 12/10/94 12/12/97 56
Agricultural Implement
Workers of America,
Local 509

Canada Alloy United Steelworkers of 04/04/97 04/03/02 75
America, Local 5699

Pennsylvania Steel United Steelworkers of 10/23/95 10/24/98 251
America, Local 6541

Jahn Foundry Glass, Molders, Pottery, 04/24/95 04/26/98 104
Plastics and Allied Workers
International, Local 97
</TABLE>

32
<PAGE>
PROPERTIES

The Company's principal facilities are listed in the accompanying table,
together with information regarding their location, size and primary function.
The foundries that are located in Atchison, Kansas, Montreal, Quebec and Amite,
Louisiana include on-site pattern shops that construct patterns used for mold
making. The two landfills are used solely by the Company and contain
non-hazardous materials only, principally foundry sand. All of the Company's
principal facilities are owned.

The following table sets forth certain information with respect to the
Company's principal facilities.

<TABLE>
<CAPTION>
FLOOR SPACE
NAME LOCATION PRINCIPAL USE IN SQ. FEET
- ------------------------------------- --------------------- ---------------------- -----------

<S> <C> <C> <C>
Corporate Office Atchison, KS Offices 3,000

Atchison Foundry Atchison, KS Steel foundry 449,703

Atchison Pattern Storage Atchison, KS Pattern storage 159,711

St. Joe Machine Shop St. Joseph, MO Machine shop 142,676

Atchison Casting Landfill Atchison, KS Landfill for foundry N/A
sand

Amite Foundry & Machine Shop Amite, LA Steel foundry and 282,000
machine shop

Prospect Foundry Minneapolis, MN Iron foundry 133,000

Quaker Alloy Myerstown, PA Steel foundry & 301,000
landfill for foundry
sand

Canadian Steel Montreal, Quebec Steel foundry 455,335

Kramer Milwaukee, WI Steel foundry 23,000

Empire Reading, PA Iron and steel foundry 177,000

La Grange Foundry La Grange, MO Iron foundry 189,000

G & C Sandusky, OH Iron foundry 80,000

LA Die Casting Los Angeles, CA Aluminum and zinc die 35,000
casting

Canada Alloy Kitchener, Ontario Steel foundry 83,000

Pennsylvania Steel Hamburg, PA Steel foundry 158,618

Jahn Foundry Springfield, MA Iron foundry 207,689
</TABLE>

33
<PAGE>
PRODUCT WARRANTY

The Company warrants that every product will meet a set of specifications,
which is mutually agreed upon with each customer. The Company's written warranty
provides for the repair or replacement of its products and excludes contingency
costs. Often, the customer is authorized to make the repair within a dollar
limit, in order to minimize freight costs and the time associated therewith.
Although the warranty period is 90 days, this time limit is not strictly
enforced if there is a defect in the casting. In fiscal 1996, warranty costs
amounted to less than one percent of the Company's net sales.

ENVIRONMENTAL REGULATIONS

Companies in the foundry industry must comply with numerous federal, state
and local (and, with respect to Canadian operations, provincial and local)
environmental laws and regulations relating to air emissions, solid waste
disposal, stormwater run-off, landfill operations, workplace safety and other
matters. The Clean Air Act, as amended, the Clean Water Act, as amended, and
similar provincial, state and local counterparts of these federal laws regulate
air and water emissions and discharges into the environment. The Resource
Conservation and Recovery Act, as amended, and the Comprehensive Environmental
Response, Compensation and Liability Act, as amended ("CERCLA"), among other
laws, address the generation, storage, treatment, transportation and disposal of
solid and hazardous waste and releases of hazardous substances into the
environment, respectively. The Company believes that it is in material
compliance with applicable environmental laws and regulations and is not aware
of any outstanding violations or citations with respect thereto at any of its
facilities.

A Phase I environmental assessment of each of the Company's facilities has
been performed, and no significant or widespread contamination has been
identified at any Company facility. A Phase I assessment includes an historical
review, a public records review, a preliminary investigation of the site and
surrounding properties and the preparation and issuance of a written report, but
it does not include soil sampling or subsurface investigations. There can be no
assurance that these Phase I assessments have identified, or could be expected
to identify, all areas of contamination. As the Company evaluates and updates
the environmental compliance programs at foundry facilities recently acquired,
the Company may become aware of matters of non-compliance that need to be
addressed or corrected. In addition, there is a risk that material adverse
conditions could have developed at the Company's facilities since such
assessments.

The chief environmental issues for the Company's foundries are air emissions
and solid waste disposal. Air emissions, primarily dust particles, are handled
by dust collection systems. The Company anticipates that it will incur
additional capital and operating costs to comply with the Clean Air Act
Amendments of 1990 and the regulations thereunder. Because the final standards
implementing the Clean Air Act Amendments have not yet been established, the
Company cannot at this time reasonably estimate the cost of compliance with
these requirements (or the timing of such costs). Such compliance costs,
however, could have a material adverse effect on the Company's results of
operations and financial condition.

The solid waste generated by the Company's foundries generally consists of
non-hazardous foundry sand that is reclaimed for reuse in the foundries until it
becomes dust. The non-hazardous foundry dust waste is then disposed of in
landfills, two of which are owned by the Company (one in Atchison County,
Kansas, and one in Myerstown, Pennsylvania). No other parties are permitted to
use the Company's landfills, which are both in material compliance with all
applicable regulations to the Company's knowledge. The Company believes that its
landfills have a remaining useful life of approximately 10 years before closure
may be required due to capacity constraints. There can be no assurance that
closure of the landfills will not be required at an earlier date due to changes
in regulatory requirements, and the costs associated with closing the Company's
landfills could be material.

While under prior ownership, Kramer was identified as a potentially
responsible party ("PRP") with respect to clean-up of a waste disposal site
located in Franklin, Wisconsin, which was used by one of

34
<PAGE>
Kramer's former subcontractors. The $6 million clean-up of this site has been
completed. Kramer's insurance carriers paid $300,000 toward clean-up. The
performing PRP has sued a group of nonperforming PRPs, including Kramer, for
contribution. ACME PRINTING INK COMPANY V. MENARD, ET AL., Case No 89-C-834
(E.D. Wis.). Because of alleged unexpected clean-up costs, the performing PRP is
demanding additional contribution from Kramer beyond the $300,000 already paid.
Management believes that the resolution of this matter will not result in a
material adverse effect on the Company's results of operations or financial
condition. To date, all litigation costs related to this matter, including
attorneys' fees, have been paid by Kramer's insurance carriers.

The Company also operates pursuant to regulations governing workplace
safety. The Company samples its interior air quality to ensure compliance with
OSHA requirements. To the Company's knowledge, it currently operates in material
compliance with all OSHA and other regulatory requirements governing workplace
safety.

The Company continues to evaluate its manufacturing processes and equipment
(including its recently acquired facilities) to ensure compliance with the
complex and constantly changing environmental laws and regulations. Although the
Company believes it is currently in material compliance with such laws and
regulations, the operation of casting manufacturing facilities entails
environmental risks, and there can be no assurance that the Company will not be
required to make substantial additional expenditures to remain in or achieve
compliance in the future.

LEGAL PROCEEDINGS

Except as otherwise provided herein, the Company is not a party to any
material legal proceedings involving claims against the Company.

35
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
directors and executive officers of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ------------------------------------ --- ----------------------------------------------------------------
<S> <C> <C>
Hugh H. Aiken....................... 53 Chairman of the Board, President, Chief Executive Officer and
Director

Charles T. Carroll.................. 47 Vice President

Edward J. Crowley................... 59 Vice President

John R. Kujawa...................... 43 Group Vice President

Donald J. Marlborough............... 61 Group Vice President

Kevin T. McDermed................... 37 Vice President, Chief Financial Officer, Treasurer and Secretary

Richard J. Sitarz................... 56 Vice President

James Stott......................... 55 Group Vice President

David L. Belluck(1)................. 35 Director

Paul C. Craig(1).................... 40 Director

John O. Whitney(2).................. 69 Director

Ray H. Witt(2)...................... 68 Director
</TABLE>

- ------------

(1) Compensation Committee Member

(2) Audit Committee Member

HUGH H. AIKEN has been the Chairman of the Board, President, Chief Executive
Officer and a Director since June 1991. From 1989 to 1991, Mr. Aiken served as
an Associate of Riverside Partners, Inc., an investment firm located in
Cambridge, Massachusetts, and from 1985 to 1989, Mr. Aiken served as General
Manager for AMP Keyboard Technologies, Inc., a manufacturer of electromechanical
assemblies located in Milford, New Hampshire. Mr. Aiken previously served as a
Director and Chief Operating Officer of COMNET Incorporated and as a Director
and Chief Executive Officer of General Computer Systems, Inc., both public
companies.

CHARLES T. CARROLL has been Vice President--G&C since September 1996 and has
additionally served as President of G&C since June 1980. He was Plant Manager of
G&C from June 1978 to June 1980. Mr. Carroll has been with G&C since 1973.

EDWARD J. CROWLEY has been Vice President--Empire since February 1995. Prior
thereto, he had served as President and Chief Executive Officer of Empire Steel
Castings, Inc. (the predecessor of Empire) since 1985.

JOHN R. KUJAWA has been Group Vice President--Atchison/St. Joe and Amite
since November 1996 and Vice President--Atchison/St. Joe from August 1994 to
November 1996. He served as Executive Vice President--Operations of the Company
from July 1993 to August 1994, Vice President--Foundry of the Company from June
1991 to July 1993, Assistant Foundry Manager of the Company from 1990 to 1991
and as Senior Process Engineer of the Company from 1989 to 1990. He served as
Operations Manager for Omaha Steel Castings, a foundry in Omaha, Nebraska from
1984 to 1989.

36
<PAGE>
DONALD J. MARLBOROUGH has been Group Vice President--Canadian Steel, La
Grange Foundry and Canada Alloy since November 1996, Vice President--Corporate
Development and Canadian Steel from December 1994 to November 1996 and Vice
President--La Grange Foundry from December 1995 to November 1996. From May 1991
to October 1994, Mr. Marlborough served as Vice President--Manufacturing and
Plant Manager for American Steel Foundries, a foundry in Chicago, Illinois, and
served as President and Director of Manufacturing for Racine Steel Castings, a
foundry in Racine, Wisconsin, from 1985 to June 1990.

KEVIN T. MCDERMED has been Vice President, Chief Financial Officer and
Treasurer of the Company since June 1991 and has served as Secretary of the
Company since May 1992. He served as the Controller of the Company from 1990 to
June 1991 and as its Finance Manager from 1986 to 1990. Mr. McDermed has been
with the Company since 1981.

RICHARD J. SITARZ has been Vice President--Prospect since September 1994 and
has served as President of Prospect Foundry since July 1992. He served as
Executive Vice President of Prospect Foundry since 1985. Mr. Sitarz has been
with Prospect Foundry since 1967.

JAMES STOTT has been Group Vice President--Empire, Kramer, Pennsylvania
Steel and Quaker Alloy since November 1996 and Vice President--Kramer from
January 1995 to November 1996. He served as President, Chief Executive Officer
and Chief Operating Officer of Kramer International, Inc. (the predecessor of
Kramer) since 1980.

DAVID L. BELLUCK has been a Director of the Company since June 1991. Since
1989, Mr. Belluck has been a Vice President of Riverside Partners, Inc. Mr.
Belluck intends to remain on the Board of Directors after this Offering.

PAUL C. CRAIG has been a Director of the Company since June 1991. Since
1988, Mr. Craig has been the President of Riverside Partners, Inc.

JOHN O. WHITNEY has been a Director of the Company since June 1994. Since
1986, Mr. Whitney has been Professor and Director, Deming Center for Quality
Management at Columbia Business School. Mr. Whitney has also written a number of
books and articles on management and business strategy, and lectures on those
subjects in the United States and abroad. Mr. Whitney previously served as
President and Director of the Pathmark Division of Supermarkets General
Corporation engaged in food distribution and retailing. Mr. Whitney currently
serves as a director of The Turner Corporation and Church and Dwight.

RAY H. WITT has been a Director of the Company since August 1993. Since
1957, Mr. Witt has been the Chief Executive Officer and Chairman of the Board of
CMI International, Inc., which owns and operates eight foundries in North
America. Mr. Witt was President of the American Foundryman's Society from 1992
to 1993.

The Company has entered into an employment agreement with Mr. Aiken that
expires in June 1998. As of December 31, 1996, the minimum annual compensation
payable to Mr. Aiken pursuant to this agreement was $200,000. At the discretion
of the Board of Directors, the minimum annual compensation may be increased
during the term of this agreement. This agreement provides for a severance
payment in the amount of one year of base salary in the event of his death or
disability and up to three years of base salary in the event he is terminated
other than for cause, disability or death. This agreement also prohibits Mr.
Aiken from competing with the Company for a period of two years following the
termination of his employment with the Company.

The Board of Directors is divided into three classes, each of whose members
serve for a staggered three-year term. The Board is comprised of one Class I
Director consisting of Mr. Aiken, two Class II Directors consisting of Messrs.
Belluck and Whitney, and two Class III Directors consisting of Messrs. Craig and
Witt. At each annual meeting of stockholders, directors will be elected for a
three-year term to succeed the directors of the same class whose terms are then
to expire. The terms of the Class I

37
<PAGE>
Directors, Class II Directors and the Class III Directors will expire upon the
election and qualification of successor directors at the annual meeting of
stockholders held following the end of fiscal years 1997, 1998 and 1999,
respectively. Officers serve at the discretion of the Board of Directors.

SELLING STOCKHOLDER

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1997 and as adjusted after giving
effect to the sale of the shares offered hereby. The Selling Stockholder has
sole voting and investment power over the shares listed.

<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
------------------------------------------------------------
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO THE OWNED AFTER THE
OFFERING OFFERING
----------------------- SHARES TO -----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT BE SOLD SHARES PERCENT
- -------------------------------------------------------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Riverside Fund I, L.P................................... 1,770,976 32.0% 1,770,976 -- --
One Exeter Plaza
699 Boylston Street
Boston, MA 02116
</TABLE>

DESCRIPTION OF CAPITAL STOCK

The total number of shares of all classes of stock which the Company has the
authority to issue is: (i) 19,300,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"); (ii) 700,000 shares of Class A Non-Voting Common
Stock, par value $.01 per share (the "Class A Common Stock"); and (iii)
2,000,000 shares of Preferred Stock, par value $.01 per share (the "Preferred
Stock"), all of which Preferred Stock is issuable in one or more series. As of
March 31, 1997, 5,540,422 shares of Common Stock were issued and outstanding
held by over 2,200 holders, including shares held in nominee or street name by
banks and brokers.

COMMON STOCK

Subject to the rights of any holders of Preferred Stock, the holders of
shares of Common Stock are entitled to share ratably with the holders of the
Class A Common Stock in such dividends as may be declared by the Board of
Directors and paid by the Company out of funds legally available therefor. The
declaration and payment of dividends on the Common Stock are subject to
restrictions by the terms of the Company's outstanding indebtedness. Holders of
Common Stock have no conversion rights, participate ratably with the holders of
Class A Common Stock in any distribution of assets to stockholders in
liquidation, after the payment in full of all preferential amounts to which
holders of preferred stock are or may be entitled, and have no redemption,
preemptive or other subscription rights. Except as may be provided by law, each
outstanding share of Common Stock is entitled to one vote on each matter on
which the stockholders of ACC are entitled to vote. All of the outstanding
shares of Common Stock are, and the shares to be sold by the Company hereunder
will be upon issuance and payment therefor, fully paid and non-assessable.

CLASS A COMMON STOCK

Except for certain limited voting rights, the shares of Class A Common Stock
are virtually identical to the shares of Common Stock. Subject to and upon
compliance with certain notice and procedural provisions of the Articles of
Incorporation, the shares of Class A Common Stock will be entitled at any time
to be converted into the same number of shares of Common Stock. As of March 31,
1997, no shares of Class A Common Stock were issued and outstanding.

38
<PAGE>
PREFERRED STOCK

The Articles of Incorporation of the Company provide that the Board of
Directors may authorize the issuance of one or more classes or series of
preferred stock having such relative rights, voting power, preferences and
restrictions as may be fixed by the Board of Directors of the Company without
further action by the stockholders of the Company, unless required by applicable
law or deemed advisable by the Board of Directors of the Company. The Preferred
Stock and the authorized but unissued shares of Common Stock could be used to
dilute the stock ownership of persons seeking to obtain control of the Company,
and thereby defeat a possible takeover attempt which, if stockholders were
offered a premium over the market value of their shares, might be viewed as
beneficial to the stockholders of the Company. As of March 31, 1997 no shares of
Preferred Stock were issued and outstanding.

KANSAS ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The Company is subject to the provisions of Sections 17-12,100 to 12,104 of
the Kansas General Corporation Code. In general, Section 17-12,101 prevents an
"interested stockholder" from engaging in a "business combination" with a Kansas
corporation for three years following the date such person became an interested
stockholder, unless: (i) prior to the date such person became an interested
stockholder, the board of directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination; (ii) upon consummation of the transaction that
resulted in the interested stockholder's becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding stock held by
directors who are also officers of the corporation and stock held by certain
employee stock plans; or (iii) on or subsequent to the date of the transaction
in which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of two-thirds of
the outstanding voting stock of the corporation not owned by the interested
stockholder.

Section 17-12,100 defines a "business combination" to include: (i) any
merger or consolidation involving the corporation and an interested stockholder;
(ii) any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving an interested stockholder; (iii) subject to
certain exceptions, any transaction which results in the issuance or transfer by
the corporation of any stock of the corporation to an interested stockholder;
(iv) any transaction involving the corporation which has the effect of
increasing the proportionate share of the stock of any class or series of the
corporation beneficially owned by the interested stockholder; or (v) the receipt
by an interested stockholder of any loans, guarantees, pledges or other
financial benefits provided by or through the corporation. In addition, Section
17-12,100 defines an "interested stockholder" as an entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

The Articles of Incorporation include certain provisions which could be
described as anti-takeover protections. The following is a summary of these
provisions.

The Articles of Incorporation provide that the Company's Board of Directors
be divided into three classes as nearly equal in number as possible with
directors in each class serving succeeding three-year terms. Classification of
the Board of Directors may have the effect of making the removal of incumbent
directors more time-consuming and difficult, and, therefore, may have the effect
of discouraging an unsolicited takeover attempt to gain control of the Board
through a proxy solicitation.

The Articles of Incorporation provide that directors may be removed only for
cause and only by the affirmative vote of either: (i) the holders of 75% or more
of the outstanding shares of capital stock of the Company entitled to vote
generally in the election of directors, voting together as a single class, cast
at a meeting of stockholders expressly called for that purpose; or (ii) 75% of
the entire Board of Directors at a

39
<PAGE>
meeting of the Board of Directors expressly called for that purpose. The
increased vote required to remove directors precludes a third party, owning less
than 75% of the voting power, from gaining control by unilaterally removing
incumbent directors and substituting its own nominees. The provision also
reduces the power of the stockholders, even those with a majority interest in
the Company, to remove incumbent directors.

The Articles of Incorporation provide that the affirmative vote of the
holders of at least 75% of the shares entitled to vote in an election of
directors would be required to amend, repeal or adopt any provision inconsistent
with the provisions of the Articles classifying the Board of Directors or
requiring an increased vote for the removal of directors.

The Articles of Incorporation provide that certain extraordinary corporate
transactions, including a merger, consolidation or transfer of substantially all
of the assets of the Company, must be approved by the affirmative vote of the
holders of 75% of the outstanding voting power of the capital stock. The
Articles of Incorporation also provide that the affirmative vote of at least 75%
of the shares entitled to vote in an election of directors would be required to
amend, repeal or adopt any provision inconsistent with this provision. This
provision may have the effect of making it more difficult for a third party to
acquire control of the Company even though such an event may be viewed as
beneficial to the stockholders. In effect, a smaller minority of stockholders
than would otherwise be the case would have the ability to veto certain
corporate transactions. To the extent that the provision would discourage tender
offers or accumulations of the Company's stock, stockholders may be deprived of
higher market prices for their stock which often prevail as a result of such
events.

The Articles of Incorporation also contain a provision specifically denying
the stockholders the right to act by written consent in lieu of a meeting of the
stockholders. The Articles also provide that the affirmative vote of at least
75% of the shares entitled to vote in an election of directors would be required
to amend, repeal or adopt any provision inconsistent with this provision. This
provision has the effect of requiring stockholder meetings to be held at which
all stockholders would have the opportunity to participate in any action
requiring a stockholder vote.

The Company expects that the Board of Directors may in the future review the
advisability of adopting other measures which may affect takeovers in the
context of applicable law and judicial decisions. The Company has no current
plans to adopt any such other measures.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Company's Common Stock is Harris
Trust and Savings Bank, Chicago, Illinois.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, the Company will have 7,572,246 shares of
Common Stock outstanding. Of these shares, all of the 3,800,000 shares sold in
this offering (and any of the up to 570,000 shares sold by the Company upon
exercise of the Underwriters' over-allotment option) will be freely tradeable by
persons other than "affiliates" of the Company without restriction under the
Securities Act. Of the 5,540,442 shares of Common Stock outstanding as of March
31, 1997, 4,992,336 shares are freely tradeable by persons other than affiliates
(which number includes the 1,770,976 shares being sold in this offering by the
Selling Stockholder) and 548,086 shares are "restricted securities" (the
"Restricted Shares") within the meaning of Rule 144 under the Securities Act and
may not be sold in the absence of registration under the Securities Act unless
an exemption from registration is available. Subject to their agreement with the
Underwriters described below, the holders of the Restricted Shares may, in
certain circumstances, be eligible to sell such shares in the public market
pursuant to Rule 144 promulgated under the Securities Act.

40
<PAGE>
In general, under Rule 144, as currently in effect, any holder of Restricted
Shares, including an affiliate of the Company (as such term is defined under
Rule 144), as to which at least one year has elapsed since the later of the date
of their acquisition from the Company or an affiliate of the Company, is
entitled to sell, within any three-month period, a number of Restricted Shares
that does not exceed the greater of: (i) 1% of the then outstanding shares, of
Common Stock (approximately 75,722 shares immediately after the completion of
this offering); or (ii) the average weekly trading volume in the Common Stock on
the New York Stock Exchange during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about the
Company. Further, a person who is not, and has not been, an affiliate of the
Company at any time during the three months preceding a sale and who holds
Restricted Shares as to which at least two years have elapsed since the later of
their acquisition from the Company or an affiliate of the Company is entitled to
sell such Restricted Shares under Rule 144(k) without regard to volume
limitations, manner of sale provisions, notice requirements or the availability
of current public information concerning the Company. Rule 144 also provides
that affiliates who are selling shares that are not Restricted Shares must
nonetheless comply with the same restrictions applicable to Restricted Shares
with the exception of the holding period requirement.

The Company and officers and directors of the Company designated by the
Representative have agreed that, for a period of 90 days from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell, or otherwise dispose of, any shares of
Common Stock of the Company or any securities convertible into, or exercisable
or exchangeable for, Common Stock of the Company (other than shares of Common
Stock issuable pursuant to Company employee and director plans).

The Company has registered under the Securities Act 300,000 shares and
400,000 shares of Common Stock reserved for issuance under the Atchison Casting
Corporation 1993 Incentive Stock Plan and 1993 Atchison Casting Corporation
Employee Stock Purchase Plan, respectively. Shares of Common Stock issued under
these plans, other than shares held by affiliates of the Company, will be
eligible for resale in the public market without restriction.

The Company has registered under the Securities Act 100,000 shares of Common
Stock reserved for issuance under the Non-Employee Director Option Plan. Shares
of Common Stock issued under this plan will be eligible for sale, subject,
generally, to compliance with Rule 144 with respect to sales while the holder is
a director.

No prediction can be made as to the effect, if any, that market sales of
shares or the availability of shares for sale will have on the market price for
the Common Stock prevailing from time to time. Nevertheless, sales of
substantial amounts of the Common Stock of the Company in the public market
after the restrictions described above lapse could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future.

41
<PAGE>
UNDERWRITING

Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company and the Selling Stockholder have agreed to
sell to such Underwriter, the number of shares of Common Stock set forth
opposite the name of such Underwriter.
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- -------------------------------------- -----------------
<S> <C>
Smith Barney Inc...................... 1,130,000
George K. Baum & Company.............. 1,130,000
Bear, Stearns & Co. Inc. ............. 80,000
Alex. Brown & Sons Incorporated....... 80,000
Cleary Gull Reiland & McDevitt
Inc. ................................. 60,000
Dillon, Read & Co. Inc. .............. 80,000
Donaldson, Lufkin & Jenrette
Securities Corporation.............. 80,000
A.G. Edwards & Sons, Inc. ............ 80,000
Equitable Securities Corporation...... 60,000
Fahnestock & Co. Inc. ................ 60,000
Hanifen, Imhoff Inc. ................. 60,000
Interstate/Johnson Lane Corporation... 60,000
C.L. King & Associates, Inc. ......... 60,000
Ladenburg, Thalmann & Co. Inc. ....... 60,000

<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- -------------------------------------- -----------------
<S> <C>
McDonald & Company Securities,
Inc. ................................. 60,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................... 80,000
Morgan Stanley & Co. Incorporated..... 80,000
PaineWebber Incorporated.............. 80,000
Pauli & Company, Incorporated......... 60,000
Raymond James & Associates, Inc. ..... 60,000
The Robinson-Humphrey Company, Inc. .. 60,000
Roney & Co. .......................... 60,000
Stephens Inc. ........................ 60,000
Stifel, Nicolaus & Company,
Incorporated.......................... 60,000
Tucker Anthony Incorporated........... 60,000
-----------------
Total............................. 3,800,000
-----------------
-----------------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares are subject to
approval of certain legal matters by Cahill Gordon & Reindel, their counsel, and
to certain other conditions. The Underwriters are obligated to take and pay for
all shares of Common Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.

The Underwriters, for whom Smith Barney Inc. and George K. Baum & Company
are acting as the Representatives, propose to offer part of the shares directly
to the public at the public offering price set forth on the cover page of this
Prospectus and part of the shares to certain dealers at a price which represents
a concession not in excess of $0.47 per share under the public offering price.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.10 per share to certain other dealers. After the initial offering
of the shares to the public, the public offering price and such concessions may
be changed by the Representatives.

The Company has granted to the Underwriters an option, exercisable for
thirty days from the date of this Prospectus, to purchase up to 570,000
additional shares of Common Stock at the price to public set forth on the cover
page of this Prospectus minus the underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with the offering of the shares offered
hereby. To the extent such option is exercised, each Underwriter will be
obligated, subject to certain conditions, to purchase approximately the same
percentage of such additional shares as the number of shares set forth opposite
each Underwriter's name in the preceding table bears to the total number of
shares listed in such table.

42
<PAGE>
The Company, the Selling Stockholder, and the Underwriters have agreed to
indemnify each other against certain liabilities, including liabilities under
the Securities Act of 1933.

In connection with this offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more shares of Common Stock than the
total amount shown on the list of Underwriters and participations which appears
above) and may effect transactions which stabilize, maintain or otherwise affect
the market price of the Common Stock at levels above those which might otherwise
prevail in the open market. Such transactions may include placing bids for the
Common Stock or effecting purchases of the Common Stock for the purpose of
pegging, fixing or maintaining the price of the Common Stock or for the purpose
of reducing a syndicate short position created in connection with the offering.
A syndicate short position may be covered by exercise of the option described
above rather than by open market purchases. In addition, the contractual
arrangements among the Underwriters include a provision whereby, if, prior to
termination of price and trading restrictions, the Representatives purchase
Common Stock in the open market for the account of the underwriting syndicate
and the securities purchased can be traced to a particular Underwriter or member
of the selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the Common Stock in question at the
cost price to the syndicate or may recover from (or decline to pay to) the
Underwriter or selling group member in question the selling concession
applicable to the securities in question. The Underwriters are not required to
engage in any of these activities and any such activities, if commenced, may be
discontinued at any time.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Blackwell Sanders Matheny Weary & Lombardi LLP of Kansas
City, Missouri. Cahill Gordon & Reindel, a partnership including a professional
corporation, New York, New York, is acting as counsel to the Underwriters in
connection with this offering.

EXPERTS

The consolidated financial statements of the Company as of June 30, 1995 and
1996 and for each of the three fiscal years in the period ended June 30, 1996
included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and is
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information filed by the Company can be inspected and copies can be made at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional offices of
the Commission: Seven World Trade Center, Suite 1300, New York, New York 10048;
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Such reports, proxy statements and other information
can also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov.

This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus omits certain of the information contained
in the Registration Statement, and reference is hereby made to

43
<PAGE>
the Registration Statement and related exhibits and schedules for further
information with respect to the Company and the Common Stock offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each such instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission pursuant to
the 1934 Act are incorporated in this Prospectus by reference:

(a) The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1996;

(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1996, December 31, 1996 and March 31, 1997.

The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been incorporated in this Prospectus by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents. Such requests should be directed to Mr. Kevin
McDermed, Vice President, Atchison Casting Corporation, 400 South Fourth Street,
Atchison, Kansas 66002, telephone number (913) 367-2121.

Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

44
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report............................................................................... F-2

Consolidated Balance Sheets--June 30, 1995 and 1996 and March 31, 1997 (unaudited)......................... F-3

Consolidated Statements of Income--Years Ended June 30, 1994, 1995 and 1996 and Nine Months Ended March 31,
1996 and 1997 (unaudited)................................................................................ F-4

Consolidated Statements of Stockholders' Equity--Years Ended June 30, 1994, 1995 and 1996 and Nine Months
Ended March 31, 1997 (unaudited)......................................................................... F-5

Consolidated Statements of Cash Flows--Years Ended June 30, 1994, 1995 and 1996 and Nine Months Ended March
31, 1996 and 1997 (unaudited)............................................................................ F-6

Notes to Consolidated Financial Statements................................................................. F-8
</TABLE>

F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT

Board of Directors of
Atchison Casting Corporation
Atchison, Kansas

We have audited the accompanying consolidated balance sheets of Atchison
Casting Corporation and subsidiaries (the "Company") as of June 30, 1995 and
1996 and the related consolidated statements of income, stockholders' equity and
cash flows for each of the three years in the period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of June 30, 1995
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended June 30, 1996 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

Kansas City, Missouri
August 16, 1996

F-2
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 1995 AND 1996 AND MARCH 31, 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
------------------
1995 1996 1997
-------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................... $ 759 $ 7,731 $ 2,444
Customer accounts receivable, net of
allowance for doubtful accounts of $794 and
$295 at June 30, 1995 and 1996, $331 at
March 31, 1997 (unaudited)................. 22,148 32,224 40,366
Insurance receivable......................... 6,137
Inventories.................................. 23,382 24,357 31,347
Deferred income taxes........................ 2,813 1,985 1,555
Other current assets......................... 1,357 1,968 2,251
-------- -------- --------------
Total current assets..................... 56,596 68,265 77,963

PROPERTY, PLANT AND EQUIPMENT, Net............. 56,152 72,160 91,023

INTANGIBLE ASSETS, Net......................... 15,245 18,441 22,108

DEFERRED CHARGES, Net.......................... 315 440 347

OTHER ASSETS................................... 1,979 2,878 4,091
-------- -------- --------------
TOTAL.......................................... $130,287 $162,184 $195,532
-------- -------- --------------
-------- -------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable............................. $ 9,502 $ 8,483 $ 11,322
Accrued expenses............................. 19,367 22,583 25,179
Current maturities of long-term
obligations................................ 780 946
-------- -------- --------------
Total current liabilities................ 28,869 31,846 37,447

LONG-TERM OBLIGATIONS.......................... 34,920 34,655 53,269

DEFERRED INCOME TAXES.......................... 5,784 12,686 14,723

OTHER LONG-TERM OBLIGATIONS.................... 1,193 1,207 1,680

EXCESS OF ACQUIRED NET ASSETS OVER COST, Net... 1,267 922 741

POSTRETIREMENT OBLIGATION OTHER THAN PENSION... 5,044 5,414 5,756

MINORITY INTEREST IN SUBSIDIARIES.............. 512 800 1,094

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; 5,489,758 and 5,528,912
shares issued and outstanding in 1995 and
1996, respectively, 5,540,422 at March 31,
1997 (unaudited)........................... 55 56 56
Class A common stock (non-voting), $.01 par
value, 700,000 authorized shares; no shares
issued and outstanding.....................
Additional paid-in capital................... 41,623 42,159 42,325
Retained earnings............................ 11,386 32,712 38,886
Minimum pension liability adjustment......... (375) (293) (293)
Accumulated foreign currency translation
adjustment................................. 9 20 (152)
Common stock held in treasury, 30,823 and
36,002 shares in 1995 and 1996,
respectively, at cost, 36,002 at March 31,
1997 (unaudited)...........................
-------- -------- --------------
Total stockholders' equity............... 52,698 74,654 80,822
-------- -------- --------------
TOTAL.......................................... $130,287 $162,184 $195,532
-------- -------- --------------
-------- -------- --------------
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND

NINE MONTHS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
---------------------------------- -------------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET SALES.................................... $ 82,519 $ 141,579 $ 185,081 $ 130,000 $ 176,933
COST OF GOODS SOLD........................... 66,304 115,458 156,612 111,547 148,205
---------- ---------- ---------- ----------- -----------
GROSS PROFIT................................. 16,215 26,121 28,469 18,453 28,728
OPERATING EXPENSES:
Selling, general and administrative........ 6,581 13,058 15,459 10,911 15,230
Amortization of intangibles................ 1,209 1,392 1,508 1,131 503
Other income............................... (6,370) (26,957) (10,282)
---------- ---------- ---------- ----------- -----------
Total operating expenses............... 7,790 8,080 (9,990) 1,760 15,733
---------- ---------- ---------- ----------- -----------
OPERATING INCOME............................. 8,425 18,041 38,459 16,693 12,995
INTEREST EXPENSE............................. 1,223 2,326 2,845 2,056 2,400
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARIES............................... 62 280 225 137 111
---------- ---------- ---------- ----------- -----------
INCOME BEFORE TAXES AND EXTRAORDINARY ITEM... 7,140 15,435 35,389 14,500 10,484
INCOME TAXES................................. 2,494 5,971 14,063 5,860 4,310
---------- ---------- ---------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM............. 4,646 9,464 21,326 8,640 6,174
EXTRAORDINARY ITEM--
Early extinguishment of debt, net of income
tax benefit of $787...................... 1,230
---------- ---------- ---------- ----------- -----------
NET INCOME................................... $ 3,416 $ 9,464 $ 21,326 $ 8,640 $ 6,174
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEM PER COMMON
AND EQUIVALENT SHARES...................... $ 0.98 $ 1.73 $ 3.87 $ 1.57 $ 1.11
EXTRAORDINARY ITEM--
Early extinguishment of debt, per common
and equivalent shares.................... 0.26
---------- ---------- ---------- ----------- -----------
NET INCOME PER COMMON AND EQUIVALENT
SHARES..................................... $ 0.72 $ 1.73 $ 3.87 $ 1.57 $ 1.11
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
WEIGHTED AVERAGE NUMBER OF COMMON AND
EQUIVALENT SHARES OUTSTANDING.............. 4,757,607 5,477,881 5,516,597 5,512,547 5,562,822
---------- ---------- ---------- ----------- -----------
---------- ---------- ---------- ----------- -----------
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND

NINE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
CLASS RETAINED MINIMUM FOREIGN
A ADDITIONAL EARNINGS PENSION CURRENCY
COMMON COMMON PAID-IN (ACCUMULATED LIABILITY TRANSLATION
STOCK STOCK CAPITAL DEFICIT) ADJUSTMENT ADJUSTMENT TOTAL
------ ------ ---------- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1993................... $25 $ 7 $15,313 $(1,494) $13,851
Issuance of 6,349 shares.............. 71 71
Issuance of 2,150,000 shares for
initial public stock offering....... 21 23,237 23,258
Issuance of 175,583 shares for
purchase of subsidiary.............. 2 2,398 2,400
Conversion of 673,653 shares of Class
A common stock to common stock...... 7 (7)
Minimum pension liability adjustment,
net of income tax benefit of $200... $(313) (313)
Net income............................ 3,416 3,416
--
------ ---------- ------------ ----- ----- -------
Balance, June 30, 1994.................. 55 41,019 1,922 (313) 42,683
Issuance of 11,754 shares............. 154 154
Issuance of 26,895 shares for purchase
of subsidiary....................... 450 450
Conversion of 19,629 shares of Class A
common stock to common stock........
Minimum pension liability adjustment,
net of income tax benefit of $38.... (62) (62)
Purchase of 30,823 nonvested shares
under Stock Restriction Agreement...
Foreign currency translation
adjustment of investment in
subsidiary.......................... $ 9 9
Net income............................ 9,464 9,464
--
------ ---------- ------------ ----- ----- -------
Balance, June 30, 1995.................. 55 41,623 11,386 (375) 9 52,698
Issuance of 34,333 shares............. 1 402 403
Exercise of stock options (10,000
shares)............................. 134 134
Minimum pension liability adjustment,
net of income tax expense of $59.... 82 82
Purchase of 5,179 nonvested shares
under Stock Restriction Agreement...
Foreign currency translation
adjustment of investment in
subsidiary.......................... 11 11
Net income............................ 21,326 21,326
--
------ ---------- ------------ ----- ----- -------
Balance June 30, 1996................... 56 42,159 32,712 (293) 20 74,654
Issuance of 7,777 shares
(unaudited)......................... 115 115
Exercise of stock options (3,733
shares) (unaudited)................. 51 51
Foreign currency translation
adjustment (unaudited).............. (172) (172)
Net income (unaudited)................ 6,174 6,174
--
------ ---------- ------------ ----- ----- -------
Balance, March 31, 1997 (unaudited)..... $56 $ $42,325 $38,886 $(293) $(152) $80,822
--
--
------ ---------- ------------ ----- ----- -------
------ ---------- ------------ ----- ----- -------
</TABLE>

See notes to financial statements.

F-5
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND

NINE MONTHS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
---------------------------- -------------------------
1994 1995 1996 1996 1997
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 3,416 $ 9,464 $ 21,326 $ 8,640 $ 6,174
Extraordinary item--early
extinguishment of debt.............. 1,230
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization....... 4,541 6,067 7,411 5,283 6,376
Minority interest in net income of
subsidiaries.................... 62 280 225 136 111
(Gain) loss on disposal of capital
assets............................ (8) (50) 8 (2) (5)
Accretion of long-term obligation
discount.......................... 156 160 161 131
Deferred income taxes............... 407 1,551 7,918 1,565 1,020
Changes in assets and liabilities:
Receivables....................... (6,472) 2,350 (8,286) (1,935) (417)
Insurance receivable.............. (6,137) 6,137
Inventories....................... (1,878) (7,168) 1,614 (1,789) 740
Other current assets.............. (261) (177) (715) (841) (53)
Accounts payable.................. 816 1,697 (1,480) 1,611 (44)
Accrued expenses.................. 473 7,344 2,073 (1,709) 148
Postretirement obligation other
than pension.................... 171 162 209 101 342
Other............................. 31 9 3 42
-------- -------- -------- ----------- -----------
Cash provided by operating
activities.................... 2,653 15,574 36,610 11,194 14,434
-------- -------- -------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................. (7,524) (12,837) (12,740) (8,892) (9,594)
Proceeds from sale of capital
assets.............................. 13 57 8 7 15
Payment for purchase of net assets of
subsidiaries, net of cash acquired
of $2, $49 and $1,778 for the years
ended June 30, 1994, 1995 and 1996,
respectively, $1,778 and $142 for
the nine months ended March 31, 1996
and 1997, respectively.............. (15,136) (13,327) (13,251) (13,251) (28,498)
Assets held for resale................ (1,566) (274) (319) 1
Other................................. (330) (730)
-------- -------- -------- ----------- -----------
Cash used in investing
activities.................... (22,647) (27,673) (26,587) (22,455) (38,806)
-------- -------- -------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Costs paid to raise capital........... (736)
Proceeds from issuance of common
stock............................... 24,065 154 537 461 166
Proceeds from sale of minority
interest in subsidiary.............. 86 84 63 183
Proceeds from issuance of long-term
obligations......................... 21,020 33,231 5,309 1,293
Payments on long-term obligations..... (22,974) (21,026) (2,646) (122) (613)
Capitalized financing costs paid...... (68) (221) (283) (150)
Net borrowings (repayments) under
revolving loan note................. (921) (6,031) 14,460 18,073
-------- -------- -------- ----------- -----------
Cash provided by (used in)
financing activities.......... 20,472 12,222 (3,051) 14,649 19,102
-------- -------- -------- ----------- -----------
</TABLE>

(Continued)

F-6
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND

NINE MONTHS ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED JUNE 30, MARCH 31,
---------------------------- -------------------------
1994 1995 1996 1996 1997
-------- -------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
EFFECT OF EXCHANGE RATE ON CASH......... $ $ (2) $ $ (2) $ (17)
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS........................... 478 121 6,972 3,386 (5,287)
CASH AND CASH EQUIVALENTS, Beginning of
period................................ 160 638 759 759 7,731
-------- -------- -------- ----------- -----------
CASH AND CASH EQUIVALENTS, End of
period................................ $ 638 $ 759 $ 7,731 $ 4,145 $ 2,444
-------- -------- -------- ----------- -----------
-------- -------- -------- ----------- -----------
CASH PAID DURING THE YEAR FOR:
Interest.............................. $ 1,009 $ 1,611 $ 2,728 $ 2,386 $ 2,817
-------- -------- -------- ----------- -----------
-------- -------- -------- ----------- -----------
Income taxes.......................... $ 457 $ 5,224 $ 6,883 $ 6,661 $ 2,794
-------- -------- -------- ----------- -----------
-------- -------- -------- ----------- -----------
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Minimum pension liability adjustment,
net of income tax benefit (expense)
of $200, $38 and $(59),
respectively, recorded to
stockholders' equity................ $ 313 $ 62 $ (82)
-------- -------- --------
-------- -------- --------
Recording of other asset related to
pension liability................... $ 198 $ (15) $ (24)
-------- -------- --------
-------- -------- --------
Unexpended bond funds................. $ 1,198 $ (473)
-------- -----------
-------- -----------
Recording of additional pension
liability........................... $ (711) $ (85) $ 175
-------- -------- --------
-------- -------- --------
Issuance of common stock in purchase
of
subsidiary.......................... $ 2,400 $ 450
-------- --------
-------- --------

(Concluded)
</TABLE>

See notes to consolidated financial statements.

F-7
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS--Atchison Casting Corporation ("ACC") was organized in
1991 for the purpose of becoming a broad based foundry company producing iron
and steel castings ranging from one pound to 120,000 pounds. A majority of the
Company's sales are to U.S. customers, however, the Company also has sales to
Canadian and other foreign customers.

PERVASIVENESS OF ESTIMATES--The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

BASIS OF PRESENTATION--The consolidated financial statements present the
financial position of the Company ("ACC") and its subsidiaries, Amite Foundry
and Machine, Inc. ("AFM"), Prospect Foundry, Inc. ("Prospect"), Quaker Alloy,
Inc. ("Quaker"), Canadian Steel Foundries, Ltd. ("CSF"), Kramer International,
Inc. ("Kramer"), Empire Steel Castings, Inc. ("Empire"), La Grange Foundry Inc.
("La Grange") and The G&C Foundry Company ("G&C"). AFM, Kramer, Empire and La
Grange are wholly owned subsidiaries. The Company owns 90.9%, 94.9%, 90.2% and
92.0% of the outstanding capital stock of Prospect, Quaker, CSF and G&C,
respectively. All significant intercompany accounts and balances have been
eliminated. Additionally, the consolidated financial statements as of and for
the nine months ended March 31, 1997 include consolidation of Los Angeles Die
Casting Inc. ("LA Die Casting"), Canada Alloy Castings, Ltd. ("Canada Alloy"),
Pennsylvania Steel Foundry & Machine Company ("Pennsylvania Steel") and Jahn
Foundry Corp. ("Jahn Foundry"). The Company owns 90.7% of the outstanding
capital stock of Los Angeles Die Casting Inc.

STATEMENT OF CASH FLOWS--For purposes of cash flow reporting, cash and cash
equivalents include cash on hand, amounts due from banks and temporary
investments with original maturities of 90 days or less at the date of purchase.

REVENUE RECOGNITION--Sales and related cost of sales are recognized upon
shipment of products. Sales and related cost of sales under long-term contracts
to commercial customers are recognized as units are delivered.

RECEIVABLES--Approximately 60%, 41% and 28% of the Company's business in
1994, 1995 and 1996, respectively, was with four major customers in the
locomotive, military and general industrial markets. As of June 30, 1995 and
1996, 31% and 24%, respectively, of accounts receivable were with these four
major customers. The Company generally does not require collateral or other
security on accounts receivable. Credit risk is controlled through credit
approvals, limits and monitoring procedures.

INVENTORY--Approximately 29% of the Company's inventory is valued at the
lower of cost, determined on the last-in, first-out ("LIFO") method, or market.
The remaining inventory is valued at the lower of cost, determined on the
first-in, first-out ("FIFO") method, or market.

PROPERTY, PLANT AND EQUIPMENT--Major renewals and betterments are
capitalized while replacements, maintenance and repairs which do not improve or
extend the life of the respective assets are charged to expense as incurred.
Upon sale or retirement of assets, the cost and related accumulated depreciation

F-8
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
applicable to such assets are removed from the accounts and any resulting gain
or loss is reflected in operations.

Property, plant and equipment is carried at cost less accumulated
depreciation. Plant and equipment is depreciated over the estimated useful lives
of the assets using the straight-line method.

INTANGIBLE ASSETS--Intangible assets acquired are being amortized over their
estimated lives using the straight-line method. The Company periodically reviews
the continuing value of intangibles to determine if there has been an
impairment. The basis of this valuation includes the continuing profitability of
the acquired operations, their expected future undiscounted cash flows, the
maintenance of a significant customer base and similar factors.

INCOME TAXES--Deferred income taxes are provided on temporary differences
between the financial statements and tax basis of the Company's assets and
liabilities in accordance with the liability method.

EARNINGS PER SHARE--Earnings per common share are based upon the weighted
average number of common and common equivalent shares outstanding.

NEW ACCOUNTING STANDARD--Effective for fiscal years beginning after December
15, 1995, Statement of Financial Accounting Standards ("SFAS") No. 121,
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO
BE DISPOSED OF, establishes accounting standards for the impairment of
long-lived assets, certain intangibles and goodwill related to those assets. The
Company does not expect the implementation of this Statement to have a material
effect on its consolidated financial statements.

Effective for fiscal years beginning after December 15, 1995, SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, will require increased disclosure of
compensation expense arising from stock compensations plans. The statement
encourages, rather than requires, companies to adopt a new method that accounts
for stock compensation awards based on their estimated fair value at the date
they are granted. Companies will be permitted, however, to continue accounting
for stock compensation under APB Opinion No. 25 which requires compensation cost
to be recognized based on the difference, if any, between the quoted market
price of the stock and the amount an employee must pay to acquire the stock. The
Company will continue to apply APB Opinion No. 25 in its consolidated financial
statements and will disclose pro forma net income and earnings per share in a
footnote to its consolidated financial statements, determined as if the new
method were applied. The impact of this Statement has not yet been completely
evaluated.

ACCRUED INSURANCE EXPENSE--Costs estimated to be incurred in the future for
employee medical benefits and casualty insurance programs resulting from claims
which have occurred are accrued currently.

In order to support claims for workman's compensation benefits, at June 30,
1996 the Company has letters of credit aggregating $3,644 and a certificate of
deposit of $175. As of March 31, 1997 the Company has letters of credit
aggregating $3,495 (unaudited) and a certificate of deposit of $200 (unaudited).

UNAUDITED INTERIM FINANCIAL INFORMATION--The unaudited interim financial
information as of March 31, 1997 and for the nine months ended March 31, 1996
and 1997 has been prepared on the same basis as the audited financial
statements. In the opinion of management, such unaudited information includes
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of

F-9
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the interim information. Operating results for the nine months ended March 31,
1997 are not necessarily indicative of the results that may be expected for the
entire year ending June 30, 1997.

2. ACQUISITIONS

On April 1, 1994, ACC acquired all of the capital stock of Prospect for
$14,000 in cash and $140 of related expenses. ACC subsequently issued 9.1% of
the acquired Prospect stock to Prospect management. The difference between the
fair market value of the minority interest, as estimated by the Company's
management, and the consideration paid by Prospect's management was not
material. Prospect, located in Minneapolis, Minnesota, produces ductile and gray
iron castings used in construction, agricultural equipment, transportation,
hydraulic and other related markets.

On June 1, 1994, ACC acquired the inventory and certain property, plant and
equipment of Quaker for $950 in cash, 175,583 shares of ACC stock, which had a
market value of $2,400, and $48 of related expenses. ACC subsequently issued
10.3% of Quaker stock to Quaker management. The difference between the fair
market value of the minority interest, as estimated by the Company's management,
and the consideration paid by Quaker's management was not material. Quaker,
located in Myerstown, Pennsylvania, serves the pump and valve industries, among
others.

On November 30, 1994, the Company purchased the assets of the Canadian Steel
Foundries Division of Hawker Siddeley Canada Inc., a publicly-traded Canadian
company, for $2,179 and $221 of related expenses, in addition to the assumption
of approximately $4,023 of liabilities. ACC subsequently issued 9.8% of CSF
stock to CSF management (unaudited). The difference between the fair market
value of the minority interest, as estimated by the Company's management, and
the consideration paid by CSF's management was not material. As the current
assets acquired exceeded the purchase price, the Company recorded negative
goodwill in the amount of $1,432 in connection with the transaction which is
being amortized over 5 years. CSF, located in Montreal, Quebec, makes steel
castings ranging in size up to 60 tons for the utility, mining and construction,
pulp and paper, energy and steel industries. The Company financed this
acquisition with internally generated funds.

On January 3, 1995, the Company purchased all of the outstanding capital
stock of Kramer for $6,754 in cash and $20 of related expenses. Contemporaneous
with the consummation of this acquisition, the Company retired $298 of Kramer's
outstanding indebtedness. Kramer, located in Milwaukee, Wisconsin, is a foundry
specializing in the casting of iron, steel and non-ferrous pump impellers,
ranging in size from one pound to 2,500 pounds. The Company financed this
transaction with funds available under its revolving credit facility.

On October 11, 1994, the Company purchased approximately 41.6% of the
outstanding shares of capital stock of Empire for $350 in cash. On February 1,
1995, the Company purchased the balance of Empire's outstanding capital stock
for $596 in cash and issued 26,895 shares of the Company's Common Stock, which
had a fair market value of $450 and $110 of related expenses. Contemporaneous
with the consummation of this acquisition, the Company retired $2,848 of
Empire's outstanding indebtedness. Empire, located in Reading, Pennsylvania, is
a foundry that produces steel castings ranging in size from one pound to five
tons for the pump and valve industries, among others. The Company financed this
transaction with funds available under its revolving credit facility.

F-10
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2. ACQUISITIONS (CONTINUED)
On December 14, 1995, the Company purchased certain assets of the La Grange,
Missouri foundry operations of Gardner Denver Machinery, Incorporated for $5,187
in cash and $103 of related expenses. La Grange 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 for $9,620 in cash, the assumption of $2,000 of change of control
benefits, the assumption of $524 of outstanding indebtedness and $119 of related
expenses. ACC subsequently issued 8% of the acquired G&C stock to G&C
management. The difference between the fair market value of the minority
interest, as estimated by the Company's management, and the consideration paid
by G&C's management was not material. 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 October 1, 1996 (unaudited), the Company purchased all of the outstanding
capital stock of LA Die Casting, a California corporation, for $8.8 million in
cash. LA Die Casting, located in Los Angeles, California, produces precision
aluminum and zinc die castings for the computer, communications and recreation
industries. ACC subsequently issued 9.3% of the acquired LA Die Casting stock to
LA Die Casting Management. The Company financed this transaction with funds
available under its revolving credit facility.

On October 26, 1996 (unaudited), the Company purchased all of the
outstanding capital stock of Canada Alloy for $4.4 million (U.S.) in cash.
Canada Alloy, located in Kitchener, Ontario, produces stainless, carbon and
alloy steel castings for a variety of markets, including power generation
equipment, pulp and paper machinery, pumps and valves. The Company financed this
transaction with funds available under its revolving credit facility.

On October 31, 1996 (unaudited), the Company purchased all of the
outstanding capital stock of Pennsylvania Steel, a Pennsylvania corporation, for
$9.0 million cash, subject to adjustment. Pennsylvania Steel, located in
Hamburg, Pennsylvania, produces carbon and stainless steel castings for the
power generation, valve, pump and other industrial equipment markets. The
Company financed this transaction with funds available under its revolving
credit facility.

On February 14, 1997, the Company purchased all of the outstanding capital
stock of Jahn Foundry, a Massachusetts corporation, for $6.2 million in cash.
Jahn Foundry, located in Springfield, Massachusetts, produces gray iron castings
for the automotive, air conditioning and agricultural markets. The Company
financed this transaction with funds available under its revolving credit
facility.

The acquisitions prior to June 30, 1996 have been accounted for by the
purchase method of accounting, and accordingly, the purchase price including the
related acquisition expenses have been allocated to the assets acquired based on
the estimated fair values at the date of the acquisitions. For the Prospect,
Kramer, Empire and G&C acquisitions, the excess of purchase price over estimated
fair values of the net assets acquired has been included in "Intangible Assets,
net" on the Consolidated Balance Sheet. For the Quaker, CSF and La Grange
acquisitions, the fair value of the net assets acquired exceeded the purchase
price. Accordingly, the excess fair value was subtracted from identifiable
long-term assets ratably based on their relative fair values as a percentage of
total long-term assets with any remaining excess

F-11
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2. ACQUISITIONS (CONTINUED)
recorded as negative goodwill and included in "Excess of Acquired Net Assets
Over Cost, net" on the Consolidated Balance Sheet.

The estimated fair values of assets and liabilities acquired in the 1994,
1995 and 1996 acquisitions, (excluding those acquired subsequent to June 30,
1996) are summarized as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Cash.................................... $ 2 $ 49 $ 1,778
Accounts receivable..................... 3,663 6,421 1,791
Inventories............................. 2,403 5,699 2,557
Property, plant and equipment........... 9,296 2,623 7,825
Intangible assets, primarily goodwill... 6,763 6,444 4,779
Other assets............................ 53 338 206
Accounts payable and accrued expenses... (2,462) (6,543) (1,529)
Deferred income taxes................... (2,180) 389 247
Other liabilities....................... (1,594) (101)
Long-term obligations................... (2,524)
------- ------- -------
17,538 13,826 15,029
Stock issued............................ (2,400) (450)
Cash acquired........................... (2) (49) (1,778)
------- ------- -------
Cash used in acquisitions............... $15,136 $13,327 $13,251
------- ------- -------
------- ------- -------
</TABLE>

The operating results of these acquisitions are included in ACC's
consolidated statements of income from the dates of acquisition (except for
those acquired subsequent to June 30, 1996). The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
made prior to June 30, 1996 had occurred at July 1, 1994, after giving effect to
certain adjustments, including amortization of goodwill, interest expense on the
acquisition debt and related income tax effects. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisitions been made as of that date or of
results which may occur in the future.

<TABLE>
<CAPTION>
YEAR ENDED JUNE
30,
------------------
1995 1996
-------- --------
THOUSANDS OF
DOLLARS, EXCEPT
PER SHARE DATA
(UNAUDITED)
<S> <C> <C>
Net sales............................... $190,108 $202,250
Net income.............................. 9,540 20,781
Net income per common and equivalent
shares................................ 1.74 3.77
</TABLE>

F-12
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

3. INVENTORIES

<TABLE>
<CAPTION>
JUNE 30,
-------------------- MARCH 31,
1995 1996 1997
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................. $ 2,690 $ 3,589 $ 5,629
Work-in-process................................ 16,249 16,677 18,607
Finished goods................................. 2,322 1,455 3,671
Deferred supplies.............................. 2,121 2,636 3,440
--------- --------- -----------
$ 23,382 $ 24,357 $ 31,347
--------- --------- -----------
--------- --------- -----------
</TABLE>

Inventories as of June 30, 1995 and 1996 would have been higher by $293 and
$642, respectively, and $792 (unaudited) at March 31, 1997, had the Company used
the first-in, first-out method of valuing those inventories that are valued
using the last-in, first-out method.

4. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
LIVES JUNE 30,
(IN -------------------- MARCH 31,
YEARS) 1995 1996 1997
--------- --------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Land.................................. $ 1,394 $ 1,822 $ 3,336
Improvements to land.................. 12-15 1,931 2,109 2,600
Buildings and improvements............ 35 7,897 14,088 21,751
Machinery and equipment............... 5-14 47,596 59,541 72,241
Automobiles and trucks................ 3 311 428 1,299
Office furniture, fixtures and
equipment........................... 5-10 1,019 1,798 2,842
Tooling and patterns.................. 1.5-6 2,046 3,186 3,372
--------- --------- -----------
62,194 82,972 107,441
Less accumulated depreciation......... 11,435 17,179 22,927
--------- --------- -----------
50,759 65,793 84,514
Construction in progress.............. 2,203 5,169 5,784
Plant under renovation................ 3,190
Unexpended bond funds................. 1,198 725
--------- --------- -----------
$ 56,152 $ 72,160 $ 91,023
--------- --------- -----------
--------- --------- -----------
</TABLE>

Depreciation expense was $2,934, $4,304 and $5,745 for the years ended June
30, 1994, 1995 and 1996, respectively, and $4,043 (unaudited) and $5,782
(unaudited) for the nine months ended March 31, 1996 and 1997, respectively.

F-13
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

5. INTANGIBLE ASSETS

<TABLE>
<CAPTION>
JUNE 30,
LIVES (IN --------------------
YEARS) 1995 1996
--------- --------- --------- MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Goodwill....................................... 25 $ 14,639 $ 19,578 $ 23,914
Noncompete agreement........................... 5 5,716
--------- --------- -----------
20,355 19,578 23,914
Less accumulated amortization.................. 5,110 1,137 1,806
--------- --------- -----------
$ 15,245 $ 18,441 $ 22,108
--------- --------- -----------
--------- --------- -----------
</TABLE>

Amortization expense was $1,448, $1,790 and $1,744 for the years ended June
30, 1994, 1995 and 1996, respectively, and $1,308 (unaudited) and $669
(unaudited) for the nine months ended March 31, 1996 and 1997, respectively.

6. DEFERRED CHARGES

<TABLE>
<CAPTION>
JUNE 30,
LIVES (IN --------------------
YEARS) 1995 1996
--------- --------- --------- MARCH 31,
1997
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Capitalized financing costs.......................... 3 to 10 $ 289 $ 572 $ 572
Organizational costs................................. 5 465
--------- --------- -----
754 572 572
Less accumulated amortization........................ 439 132 225
--------- --------- -----
$ 315 $ 440 $ 347
--------- --------- -----
--------- --------- -----
</TABLE>

Amortization of such costs was $159, $139 and $158 for the years ended June
30, 1994, 1995 and 1996, respectively, and $111 (unaudited) and $93 (unaudited)
for the nine months ended March 31, 1996 and 1997, respectively, of which $66,
$46 and $69, respectively, and $41 (unaudited) and $93 (unaudited) is included
in interest expense.

On July 29, 1994, the Company issued to an insurance company $20,000
aggregate principal of unsecured, senior notes. The notes have an average
maturity of seven years and bear interest at a fixed rate of 8.44% per year. In
conjunction with this note purchase agreement, $180 of financing costs were
capitalized and are being amortized over ten years.

Concurrently, with the sale of the senior notes the Company entered into a
credit agreement with Harris Trust and Savings Bank ("Harris") providing for
unsecured loans of up to $20,000 in a three year revolving credit facility. In
connection with this credit agreement, $41 of financing costs were capitalized
and are being amortized over three years.

On March 8, 1996, the Company and Harris entered into the First Amendment to
the Credit Agreement providing for an increase in unsecured loans from $20,000
to $40,000 and an increase in permitted subsidiary indebtedness from $2,500 to
$5,500. In connection with this amendment, $150 of

F-14
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

6. DEFERRED CHARGES (CONTINUED)
financing costs were capitalized and are being amortized over the remaining two
and one-half year term of the credit agreement.

On May 1, 1996, the Company's La Grange subsidiary entered into a Loan
Agreement with the Missouri Development Finance Board (the "Board"), providing
for a loan of $5,100 to La Grange using the proceeds of the Board's Industrial
Development Revenue Bonds, Series 1996 (La Grange Foundry Inc. Project). The
Loan Agreement terminates on November 1, 2011. In connection with this loan
agreement, $133 of financing costs were capitalized and are being amortized over
ten years.

7. ACCRUED EXPENSES

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1995 1996
--------- --------- MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Payroll, vacation and other compensation................... $ 4,132 $ 5,560 $ 5,889
Accrued pension liability.................................. 2,080 2,131 2,349
Advances from customers.................................... 7,051 1,194 1,148
Reserve for flood repairs.................................. 6,946 6,816
Reserve for workers' compensation and employee health
care..................................................... 3,142 3,128 3,879
Income taxes payable....................................... 882 535 1,000
Taxes other than income.................................... 232 385 595
Interest payable........................................... 814 800 370
Other...................................................... 1,034 1,904 3,133
--------- --------- -----------
$ 19,367 $ 22,583 $ 25,179
--------- --------- -----------
--------- --------- -----------
</TABLE>

8. LONG-TERM OBLIGATIONS

On July 29, 1994, the Company issued to an insurance company $20 million
aggregate principal amount of unsecured, senior notes. The notes have an average
maturity of seven years and bear interest at a fixed rate of 8.44% per year.

Concurrently, with the sale of the senior notes, the Company entered into a
credit agreement with Harris (the "Credit Agreement") providing for unsecured
loans of up to $20 million in a three year revolving credit facility. Loans
under the revolving credit facility will bear interest at fluctuating rates of
either (i) the bank's corporate base rate or (ii) LIBOR plus 1.75% subject, in
the case of the LIBOR rate option, to reduction of up to 0.50% (50 basis points)
if certain financial ratios are met. Loans under this revolving credit facility
may be used for general corporate purposes and approved investments. At June 30,
1995, $3.7 million was available for borrowing under this facility after
consideration of outstanding advances of $13.2 million and letters of credit of
$3.1 million.

F-15
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

8. LONG-TERM OBLIGATIONS (CONTINUED)
On March 8, 1996, the Company and Harris 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
$2,500 to $5,500.

On May 1, 1996, the Company's La Grange subsidiary entered into a Loan
Agreement with the Board, providing for a loan of $5,100 to La Grange using the
proceeds of the Board's Industrial Development Revenue Bonds, Series 1996 (La
Grange Foundry Inc. Project). Loans under the Loan Agreement will bear interest
at rates that fluctuate weekly based upon the then-prevailing market rates for
such securities. Loans under this Loan Agreement were used to finance the costs
of acquiring, and will be used to finance the costs of reconstructing, improving
and equipping certain additions and improvements to the Company's La Grange
manufacturing facilities. The Loan Agreement terminates on November 1, 2011.

On May 24, 1996, the Company entered into a new credit agreement with Harris
providing for unsecured loans of up to $40 million in a revolving credit
facility terminating on July 29, 1998. Loans under this revolving credit
facility will bear interest at fluctuating rates of either (i) the bank's
corporate base rate or (ii) LIBOR plus 1.50% subject, in the case of the LIBOR
rate option, to a reduction of up to 0.50% (50 basis points) if certain
financial ratios are met. Loans under this revolving credit facility may be used
for general corporate purposes and approved investments. At June 30, 1996, $23.7
million was available for borrowing under this facility after consideration of
outstanding advances of $7.2 million and letters of credit of $9.1 million. At
March 31, 1997, $6.0 million (unaudited) was available for borrowing under this

F-16
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

8. LONG-TERM OBLIGATIONS (CONTINUED)
facility after consideration of outstanding advances of $24.8 million
(unaudited) and letters of credit of $9.2 million (unaudited). Amounts are
outstanding as follows:

<TABLE>
<CAPTION>
JUNE 30,
--------------------
1995 1996
--------- --------- MARCH 31,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
Unsecured, senior notes with an insurance company, maturing
on July 30, 2004 and bearing interest at a fixed rate of
8.44% per year........................................... $ 20,000 $ 20,000 $ 20,000
Unsecured, revolving credit facility with Harris, maturing
on July 29, 1998, bearing interest at 9% and 8.25%,
respectively, (Prime), at March 31, 1997 $2,800 at 8.50%
(unaudited) and $22,000 at 6.6875% (unaudited)........... 13,231 7,200 24,800
Term loan between G&C and the Ohio Department of
Development, secured by certain assets of G&C, maturing
on June 1, 1999, bearing interest at 5.0%................ 95 72
Term loan between G&C and OES Capital, Incorporated
(assignee of loan agreement with Ohio Air Quality
Development Authority), secured by certain assets of G&C,
maturing on December 31, 2006, bearing interest at
6.5%..................................................... 1,707 2,910
Change of Control Benefits to be paid by G&C pursuant to
certain Employment Agreements and a Change of Control
Agreement, maturing on June 11, 1998, non interest
bearing.................................................. 1,333 1,333
Term loan between La Grange and the Missouri Development
Finance Board, secured by a letter of credit, maturing on
November 1, 2011 bearing interest at 3.69% (3.51% at
March 31, 1997 (unaudited)).............................. 5,100 5,100
Subordinated promissory note payable to Rockwell, repaid
during fiscal year 1996.................................. 1,689
--------- --------- -----------
34,920 35,435 54,215
Less current maturities.................................... 780 946
--------- --------- -----------
Total long-term obligations................................ $ 34,920 $ 34,655 $ 53,269
--------- --------- -----------
--------- --------- -----------
</TABLE>

The subordinated promissory note payable to Rockwell was discounted at 10%
from its original face of $1,850 as such note was interest free from the date of
acquisition (June 14, 1991) for five years. After

F-17
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

8. LONG-TERM OBLIGATIONS (CONTINUED)
such date, the note was to accrue interest at 10%. The discount amortization was
$145, $160 and $161 for the years ended June 30, 1994, 1995 and 1996,
respectively, and is included in interest expense.

The credit agreement with Harris and a note purchase agreement with an
insurance company limit the Company's ability to pay dividends in any fiscal
year to an amount not more than 25% of net earnings in the preceding fiscal
year.

The amounts of long-term obligations outstanding as of June 30, 1996 mature
as follows:

<TABLE>
<S> <C>
1997............................................................... $ 780
1998............................................................... 870
1999............................................................... 10,262
2000............................................................... 3,028
2001............................................................... 3,028
Thereafter......................................................... 17,467
---------
$ 35,435
---------
---------
</TABLE>

The amounts of interest expense for the years ended June 30, 1994, 1995 and
1996 consisted of the following:

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Senior notes with an insurance company........................... $ 1,544 $ 1,688
Credit facility with Harris...................................... $ 311 576 902
Revolving loan note, including fees.............................. 46
Term loans with Heller........................................... 655
Subordinated promissory note payable to Rockwell................. 145 160 161
Amortization of deferred charges................................. 66 46 69
Other............................................................ 25
--------- --------- ---------
$ 1,223 $ 2,326 $ 2,845
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-18
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. INCOME TAXES

Income taxes for the years ended June 30, 1994, 1995 and 1996 and the nine
months ended March 31, 1996 and 1997 (unaudited) are comprised of the following:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
--------- --------- --------- NINE MONTHS ENDED MARCH
31,
------------------------
1996 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal............................ $ 1,300 $ 3,169 $ 4,972 $ 3,516 $ 2,140
State and local.................... 943 1,376 1,047 657
Foreign............................ 308 (203) (268) 493
--------- --------- --------- ----------- -----------
1,300 4,420 6,145 4,295 3,290
Deferred............................. 407 1,551 7,918 1,565 1,020
--------- --------- --------- ----------- -----------
$ 1,707 $ 5,971 $ 14,063 $ 5,860 $ 4,310
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>

Income tax expense (benefit) has been allocated as follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Income before taxes and extraordinary item...................... $ 2,494 $ 5,971 $ 14,063
Extraordinary item.............................................. (787)
--------- --------- ---------
$ 1,707 $ 5,971 $ 14,063
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Items giving rise to the provision for deferred income taxes:
Postretirement benefits....................................... $ (67) $ (187) $ (145)
Accrued liabilities........................................... 663 (56) 160
Net operating loss carryforwards.............................. 1,171 577
Pension costs................................................. (742) (20) 16
Alternative minimum tax credit carryforward................... (1,105) 1,264 724
Flood wall capitalization..................................... (465) 36
Deferred gain on flood proceeds............................... 5,898
Depreciation and amortization................................. 738 753 1,003
Inventory..................................................... (12) (231) 56
Minimum pension liability..................................... 277 33 (70)
Capital start-up costs........................................ (35)
Capital appreciation right obligation......................... 455
Valuation allowance........................................... (556)
All other..................................................... 85 (582) 240
--------- --------- ---------
$ 407 $ 1,551 $ 7,918
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-19
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. INCOME TAXES (CONTINUED)
Following is a reconciliation between the total income taxes and the amount
computed by multiplying income before income taxes by the statutory federal
income tax rate:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1994 1995 1996
-------------------- -------------------- --------------------
AMOUNT % AMOUNT % AMOUNT %
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Computed expected federal income tax
expense................................ $ 2,427 34.0 $ 5,248 34.0 $ 12,465 35.0
State income taxes, net of federal
benefit................................ 357 5.0 624 4.1 1,498 4.2
Change in valuation allowance............ (556) (7.8)
Adjustment to prior year taxes........... 200 2.8
Permanent differences.................... 30 0.4 182 1.1 337 0.9
Other.................................... 36 0.5 (83) (0.5) (237) (0.6)
--------- --- --------- --- --------- ---
$ 2,494 34.9 $ 5,971 38.7 $ 14,063 39.5
--------- --- --------- --- --------- ---
--------- --- --------- --- --------- ---
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
------------------------------------------
1996 1997
(UNAUDITED) (UNAUDITED)
-------------------- --------------------
AMOUNT % AMOUNT %
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Computed expected federal income tax expense................ $ 5,076 35.0 $ 3,670 35.0
State income taxes, net of federal benefit.................. 696 4.8 608 5.8
Permanent differences....................................... 160 1.1 94 0.9
Other....................................................... (72) (0.5) (62) (0.6)
--------- --- --------- ---
$ 5,860 40.4 $ 4,310 41.1
--------- --- --------- ---
--------- --- --------- ---
</TABLE>

F-20
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations. Deferred income taxes as of
June 30, 1995 and 1996 are comprised of the following:

<TABLE>
<CAPTION>
1995 1996
--------- ----------
<S> <C> <C>
Deferred tax assets:
Postretirement benefits............................................... $ 1,967 $ 1,988
Accrued liabilities................................................... 1,416 1,900
Net operating loss carryforwards......................................
Pension costs......................................................... 762 882
Alternative minimum tax credit carryforwards.......................... 452
Flood wall capitalization............................................. 465 429
Other................................................................. 389 520
--------- ----------
5,451 5,719
Deferred tax liabilities:
Depreciation and amortization......................................... 7,901 9,108
Deferred gain on flood proceeds....................................... 6,257
Inventory............................................................. 335 808
Minimum pension liability............................................. 310 240
Capital start-up costs................................................ 68 66
Discounted note....................................................... 46 39
Other................................................................. 81
--------- ----------
8,660 16,599
--------- ----------
(3,209) (10,880)
Allocation to minimum pension liability adjustment...................... 238 179
--------- ----------
Total................................................................... $ (2,971) $ (10,701)
--------- ----------
--------- ----------
</TABLE>

SFAS 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. As of June 30, 1996, no
allowance has been recorded.

United States income taxes have not been provided on $307 of cumulative
undistributed earnings of CSF because of the Company's intentions to reinvest
these earnings. It is not practical to determine the unrecognized deferred tax
liability that would be payable upon remittance of assets that represent those
earnings. Such taxes, if ultimately paid, may be recoverable as foreign tax
credits in the United States.

F-21
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS. The estimated fair value
amounts have been determined by the Company using available market information
and appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

CASH, ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE--The carrying amounts of
these items are a reasonable estimate of their fair value.

LONG-TERM OBLIGATIONS AND CURRENT MATURITIES OF LONG-TERM OBLIGATIONS--Based
on the borrowing rates currently available to the Company for loans with similar
terms and maturities, the fair value approximates carrying value.

11. STOCKHOLDERS' EQUITY

In connection with the acquisition of the steel castings business from
Rockwell on June 14, 1991, the Company issued common stock or conveyed purchase
rights for common stock to certain employees in accordance with various stock
restriction agreements representing 476,173 shares. All such shares became fully
vested as of June 30, 1996.

The Atchison Casting 1993 Incentive Stock Plan (the "Incentive Plan") was
adopted by the Board of Directors on August 10, 1993 and approved by the
Company's stockholders on September 27, 1993. The Incentive Plan allows the
Company to grant stock options to employees to purchase up to 300,000 shares of
common stock at prices that are not less than the fair market value at the date
of grant. The options become exercisable with respect to one-third of the shares
subject to the options each year from the date of grant and remain exercisable
for a term of not more than 10 years after the date of grant. The Incentive

F-22
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

11. STOCKHOLDERS' EQUITY (CONTINUED)
Plan provides that no options may be granted more than 10 years after the date
of approval by the stockholders. The changes in outstanding options were as
follows:

<TABLE>
<CAPTION>
SHARES PRICE RANGE
UNDER OPTION PER SHARE
------------- ------------------
<S> <C> <C>
Issued................................................... 145,300 $ 13.375
Balance, June 30, 1994..................................... 145,300 13.375
Issued................................................... 31,000 14.500 - 14.75
Surrendered.............................................. (5,900) 13.375
------------- ------------------
Balance, June 30, 1995..................................... 170,400 13.375 - 14.75
Issued................................................... 45,800 14.125
Surrendered.............................................. (4,000) 13.375
------------- ------------------
Balance, June 30, 1996..................................... 212,200 $ 13.375 - 14.75
Issued (unaudited)....................................... 33,533 15.75 - 19.125
Surrendered (unaudited).................................. (7,601) 13.375 - 14.50
Exercised (unaudited).................................... (3,733) 13.375 - 14.50
------------- ------------------
Balance, March 31, 1997 (unaudited)........................ 234,399 $ 13.375 - 19.125
------------- ------------------
------------- ------------------
Exercisable
June 30, 1996............................................ 100,600 $ 13.375 - 14.75
------------- ------------------
------------- ------------------
Exercisable
March 31, 1997 (unaudited)............................... 106,000 $ 13.375 - 14.75
------------- ------------------
------------- ------------------
</TABLE>

At June 30, 1996, options to purchase 87,800 shares were authorized but not
granted. At March 31, 1997, options to purchase 61,868 (unaudited) shares were
authorized but not granted.

The 1993 Atchison Casting Corporation Employee Stock Purchase Plan (the
"Purchase Plan") was adopted by the Board of Directors on August 10, 1993 and
approved by the Company's stockholders on September 27, 1993. An aggregate of
400,000 shares of common stock were initially made available for purchase by
employees upon the exercise of options under the Purchase Plan. On the first day
of every option period (option periods are three-month periods beginning on
January 1, April 1, July 1 or October 1 and ending on the next March 31, June
30, September 30 or December 31, respectively), each eligible employee is
granted a nontransferable option to purchase common stock from the Company on
the last day of the option period. As of the last day of an option period,
employee contributions (authorized payroll deductions and lump sum
contributions) during such option period will be used to purchase full and
partial shares of common stock. The price for stock purchased under each option
is 90% of the stock's fair market value on the first day or the last day of the
option period, whichever is lower. During the years ended June 30, 1994, 1995
and 1996, 3,868, 11,754 and 34,333 common shares, respectively, and 7,777
(unaudited) for the nine months ended March 31, 1997 were purchased by employees
under the Purchase Plan. At June 30, 1996, 350,045 shares remained available for
grant. At March 31, 1997, 342,268 (unaudited) shares remained available for
grant.

F-23
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

11. STOCKHOLDERS' EQUITY (CONTINUED)
On November 18, 1994, the Company's stockholders approved the Atchison
Casting Non-Employee Director Option Plan (the "Director Option Plan"). The
Director Option Plan provides that each non-employee director of the Company who
served in such capacity on April 15, 1994 and each non-employee director upon
election or appointment to the Board of Directors thereafter shall automatically
be granted an option to purchase 10,000 shares of the Company's common stock. No
person shall be granted more than one such option pursuant to the Director
Option Plan. An aggregate of 100,000 shares were reserved for purchase under the
plan. The price for stock purchased under the plan is the fair market value at
the date of grant. The changes in outstanding options were as follows:

<TABLE>
<CAPTION>
SHARES UNDER PRICE PER
OPTION SHARE
------------- -----------
<S> <C> <C>
Issued.............................................................. 50,000 13.375
-------------
Balance, June 30, 1995.............................................. 50,000 13.375
Exercised........................................................... (10,000) 13.375
-------------
Balance, June 30, 1996.............................................. 40,000 13.375
Balance, March 31, 1997 (unaudited)................................. 40,000 13.375
-------------
-------------
</TABLE>

Because the options granted on April 15, 1994, were subject to approval by
the stockholders, they are reflected as 1995 grants. At June 30, 1996, options
to purchase 50,000 shares were authorized but not granted.

12. PENSION PLANS

The Company sponsors separate defined benefit pension plans for certain of
its salaried and hourly employees. Employees are eligible to participate on the
date of employment with vesting after five years of service. Benefits for hourly
employees are determined based on years of credited service multiplied by a
benefit formula or unit. Benefits for salaried employees are determined based on
credited service and employee earnings.

Pension expense for the defined benefit plans is presented below.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Service costs.................................................. $ 438 $ 594 $ 717
Interest costs................................................. 1,266 1,579 1,961
Actual return on net assets.................................... (659) (1,267) (4,302)
Net deferral items............................................. (538) 20 2,559
--------- --------- ---------
$ 507 $ 926 $ 935
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-24
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

12. PENSION PLANS (CONTINUED)
The pension plans assets (primarily U. S. Government securities, common
stock and corporate bonds) are deposited with a bank. A comparison of projected
benefit obligation and plan assets at fair value as of June 30, 1995 and 1996 is
presented below:

<TABLE>
<CAPTION>
1995 1996
------------------------------ ------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS ACCUMULATED BENEFITS
BENEFITS EXCEED ASSETS BENEFITS EXCEED ASSETS
--------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation....................... $ (6,177) $ (12,858) $ (8,653) $ (15,102)
--------------- ------------- --------------- -------------
--------------- ------------- --------------- -------------
Accumulated benefit obligation.................. $ (6,769) $ (13,245) $ (9,371) $ (15,564)
--------------- ------------- --------------- -------------
--------------- ------------- --------------- -------------
Projected benefit obligation.................... $ (10,304) $ (13,245) $ (13,520) $ (15,564)
Plan assets at fair value....................... 8,246 11,992 10,829 14,506
--------------- ------------- --------------- -------------
Projected benefit obligation in excess of plan
assets........................................ (2,058) (1,253) (2,691) (1,058)
Unrecognized prior service costs................ (39) 183 129 189
Unrecognized net obligation..................... (346) 389 (384) 417
Unrecognized net loss........................... 1,709 22 2,272 (44)
Additional liability............................ (796) (732)
--------------- ------------- --------------- -------------
Accrued pension liability....................... $ (734) $ (1,455) $ (674) $ (1,228)
--------------- ------------- --------------- -------------
--------------- ------------- --------------- -------------
The actuarial valuation was prepared assuming:
Discount rate................................... 8.25% 7.25%
Expected long term rate of return on plan
assets........................................ 9.00% 9.00%
Salary increases per year....................... 5.00% 5.00%
</TABLE>

In accordance with SFAS No. 87, the Company has recorded an additional
minimum pension liability for underfunded plans of $796 and $732 at June 30,
1995 and 1996, respectively, representing the excess of unfunded accumulated
benefit obligations over previously recorded pension cost liabilities. A
corresponding amount is recognized as an intangible asset except to the extent
that these additional liabilities exceed related unrecognized prior service cost
and net transition obligation, in which case the increase in liabilities is
charged directly to stockholders' equity. For 1995, $62 of the excess minimum
pension liability resulted in a charge to equity, net of income taxes of $38.
For 1996, $82 of the excess minimum pension liability resulted in a credit to
equity, net of income taxes of $59.

In addition, the Company sponsors a defined contribution 401(k) benefit plan
covering certain of its salaried employees who have attained age 21 and have
completed one year of service. The Company matches 75% of employee contributions
up to 8% of an employee's salary. Employees vest in the Company

F-25
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

12. PENSION PLANS (CONTINUED)
matching contributions after five years. The cost of the Company's contribution
was $194, $330 and $429 for the years ended June 30, 1994, 1995 and 1996,
respectively.

The Company's subsidiary, Prospect, contributed $55, $206 and $189 for the
period April 1, 1994 (date of acquisition) to June 30, 1994, fiscal year ended
June 30, 1995 and fiscal year ended June 30, 1996, respectively, to a
multiemployer pension plan for employees covered by a collective bargaining
agreement. This plan is not administered by the Company and contributions are
determined in accordance with provisions of negotiated labor contracts.
Information with respect to the Company's proportionate share of the excess of
the actuarially computed value of vested benefits over the total of the pension
plan's net assets is not available from the plan's administrators. The
Multiemployer Pension Plan Amendments Act of 1980 (the "Act") significantly
increased the pension responsibilities of participating employers. Under the
provisions of the Act, if the plans terminate or the Company withdraws, the
Company may be subject to a substantial "withdrawal liability." As of the date
of the most current unaudited information submitted by the plan's administrators
(December 31, 1995), no withdrawal liabilities exist.

The Company also has various other profit sharing plans. Costs of such plans
charged against earnings were $403 and $878 for the years ended June 30, 1995
and 1996, respectively.

13. POSTRETIREMENT OBLIGATION OTHER THAN PENSION

The Company provides certain health care and life insurance benefits to
certain of its retired employees. SFAS No. 106, EMPLOYER'S ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS, requires the Company to accrue the
estimated cost of retiree benefit payments during the years the employee
provides services. The accumulated postretirement benefit obligation and the
accrued postretirement benefit cost as of June 30, 1995 and 1996 is as follows:

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................................ $ 664 $ 874
Fully eligible active plan participants................................. 641 864
Other active plan participants.......................................... 2,897 4,069
--------- ---------
4,202 5,807
Plan assets at fair value.................................................
--------- ---------
Accumulated postretirement benefit obligation in excess of plan assets.... 4,202 5,807
Unrecognized net loss..................................................... (399) (1,503)
Unrecognized prior service cost........................................... 1,241 1,110
--------- ---------
Accrued postretirement benefit cost....................................... $ 5,044 $ 5,414
--------- ---------
--------- ---------
</TABLE>

F-26
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

13. POSTRETIREMENT OBLIGATION OTHER THAN PENSION (CONTINUED)
Net postretirement benefit cost for the years ended June 30, 1994, 1995 and
1996 consisted of the following components:

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Service cost benefits earned during the year........................ $ 170 $ 180 $ 223
Interest cost on accumulated postretirement benefit obligation 231 281 328
Amortization of prior service cost.................................. (131) (132) (132)
Amortization of loss................................................ 7
--------- --------- ---------
$ 270 $ 329 $ 426
--------- --------- ---------
--------- --------- ---------
</TABLE>

The assumed health care cost trend rate used in measuring the accumulated
postretirement benefit obligation for pre-age 65 benefits as of June 30, 1996
was 8.9% decreasing each successive year until it reaches 5.5% in 2016, after
which it remains constant. The assumed rate used for post-age 65 benefits was
8.4% decreasing each successive year until it reaches 5.5% in 2021. A
one-percentage-point increase in the assumed health care cost trend rate for
each year would increase the accumulated postretirement benefit obligation as of
June 30, 1996 by approximately $843 (15.9%) and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for the
year then ended by approximately $118 (17.9%). The assumed discount rate used in
determining the accumulated postretirement obligation as of June 30, 1996 was
7.5%, and the assumed discount rate in determining the service cost and interest
cost for the year ended June 30, 1996 was 7.5%.

SFAS No. 112, EMPLOYERS' POSTEMPLOYMENT BENEFITS, requires employers who
provide benefits to former or inactive employees after employment but before
retirement to recognize an obligation for such benefits over the period ending
on the date an employee is fully eligible to receive benefits. The Company
adopted SFAS No. 112 in the first fiscal quarter of 1995, which did not have a
material effect on the Company's financial condition or results of operations.

14. OPERATING LEASES

The Company leases certain buildings, equipment, automobiles and trucks, all
accounted for as operating leases, on an as needed basis to fulfill general
purposes. Total rental expense was $648, $957 and $544 for the years ended June
30, 1994, 1995 and 1996, respectively, and $507 (unaudited) and $614
(unaudited), for the nine months ended March 31, 1996 and 1997, respectively.
Long-term, noncancellable

F-27
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

14. OPERATING LEASES (CONTINUED)
operating leases having an initial or remaining term in excess of one year
require minimum rental payments as follows:

15. MAJOR CUSTOMERS

The Company's operations are conducted within one business segment and
revenues attributable to foreign customers are not material. Net sales to and
customer accounts receivable from major customers are as follows:

<TABLE>
<CAPTION>
AMOUNT OF NET SALES
-------------------------------
YEAR ENDED JUNE 30,
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Customer A................................................... $ 13,114 $ 8,224 $ 6,500
Customer B................................................... 13,439 11,312 7,030
Customer C................................................... 12,292 18,611 24,822
Customer D................................................... 10,602 20,606 13,396
--------- --------- ---------
$ 49,447 $ 58,753 $ 51,748
--------- --------- ---------
--------- --------- ---------
</TABLE>

<TABLE>
<CAPTION>
CUSTOMER ACCOUNTS
RECEIVABLE
--------------------
JUNE 30,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Customer A................................................................. $ 269 $ 891
Customer B................................................................. 793 501
Customer C................................................................. 1,901 3,765
Customer D................................................................. 3,769 2,481
--------- ---------
$ 6,732 $ 7,638
--------- ---------
--------- ---------
</TABLE>

16. OTHER INCOME

Other income in fiscal 1996 includes $11,087 of payments received by the
Company from its insurance carrier in final settlement of the business
interruption portion of the Company's insurance claim. Other income also
includes $16,231 of payments received in the fourth quarter from the Company's
insurance carrier in final settlement of the casualty and property damage
portion of the Company's insurance claim.

F-28
<PAGE>
ATCHISON CASTING CORPORATION
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

YEARS ENDED JUNE 30, 1994, 1995 AND 1996 AND NINE MONTHS

ENDED MARCH 31, 1996 AND 1997 (UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

16. OTHER INCOME (CONTINUED)
The Company's claim was a result of the July 1993 Missouri River flood. As of
June 30, 1996, the Company has recorded $6,946 in reserves against future repair
expenses which have been classified as accrued expenses.

The Company's fiscal 1996 results for the first nine months included $10.6
million (unaudited) ($11.8 million (unaudited) 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. 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.

Other income in fiscal 1995 includes $6,639 in partial payments by the
Company's insurance carrier against the business interruption portion of the
Company's insurance claim, which was filed as a result of the July 1993 Missouri
River flood. Of this amount, $1,137 along with $5,000 recoverable under the
Company's casualty/damage coverage is included in insurance receivable at June
30, 1995 and was received on July 6, 1995.

During fiscal 1994, the Company was advanced $4.0 million under the casualty
portion of its insurance coverages, which was used to offset the direct expenses
of fighting the flood itself, the cost of repair and replacement of property and
equipment damaged in the flood and the construction of a flood wall. The
recovery of direct and indirect costs (primarily labor and repairs) of $2.5
million was used to reduce the incurred costs in the 1994 statement of income.

F-29
<PAGE>
TECHNOLOGY IS RESHAPING THE CASTING INDUSTRY

[PICTURE] ACC uses new technologies to produce [PICTURE]
lighter, stronger and less expensive
castings with higher quality and
shortened lead times. For example,
computer modeling enables ACC's
engineers to simulate the solidification
process to ensure internal strength,
structural soundness and efficient
utilization of materials.

ACC has strengthened customer relationships by using computerized design
technologies to assist in the development of castings, such as this boom tip
casting shown above, which is used in a hydraulic mining shovel.

[PICTURE] [PICTURE]

Solid model of a 350 megawatt steam Actual casting shown in the Pro
turbine casting shown in Engineer model, ready for shipment
Pro Engineer software. by ACC to Westinghouse.

[PICTURE] [PICTURE]

New technologies have resulted in new applications for castings. As castings
have become lighter,
stronger and less expensive, they are being used for components that were
previously fabricated
or forged. The one-piece, cast-steel, box-section boom (shown above right) is
stronger and lighter than the fabricated double steel plate arms (shown above
left) that it replaced.
<PAGE>
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NO DEALER, SALESPERSON, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT INFORMATION CONTAINED THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

--------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 9
Price Range of Common Stock.................... 10
Dividend Policy................................ 10
Capitalization................................. 11
Selected Consolidated Financial Information.... 12
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 14
Business....................................... 21
Management..................................... 36
Selling Stockholder............................ 38
Description of Capital Stock................... 38
Shares Eligible for Future Sale................ 40
Underwriting................................... 42
Legal Matters.................................. 43
Experts........................................ 43
Available Information.......................... 43
Incorporation of Certain Documents by
Reference.................................... 44
Index to Consolidated Financial Statements..... F-1
</TABLE>

3,800,000 SHARES

[LOGO]

ATCHISON CASTING
CORPORATION

COMMON STOCK

------

PROSPECTUS

MAY 22, 1997

---------

SMITH BARNEY INC.

GEORGE K. BAUM & COMPANY

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