<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
/ / TRANSITION REPORT PURSUANT TO THE SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
-------------------------
Commission File Number 1-12541
Atchison Casting Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 48-1156578
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South Fourth Street, Atchison, Kansas 66002
- ----------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (913) 367-2121
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
----------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements from the past 90 days. Yes /X/. No / /.
There were 7,661,545 shares of common stock, $.01 par value per share,
outstanding on May 12, 2000.
<PAGE>
PART I
ITEM 1. Financial Statements.
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---------------- ---------------
<S> <C> <C>
ASSETS
--------------------------
CURRENT ASSETS:
Cash and cash equivalents $2,890 $4,222
Customer accounts receivable, net of allowance for 90,841 83,235
doubtful accounts of $497 and $591, respectively
Inventories 65,543 68,777
Deferred income taxes 2,737 1,988
Other current assets 26,443 18,829
---------------- ---------------
Total current assets 188,454 177,051
PROPERTY, PLANT AND EQUIPMENT, Net 153,607 150,056
INTANGIBLE ASSETS, Net 31,766 32,846
DEFERRED FINANCING COSTS, Net 900 660
OTHER ASSETS 14,251 15,153
---------------- ---------------
TOTAL $388,978 $375,766
================ ===============
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Cont'd)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---------------- ----------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $43,437 $39,452
Accrued expenses 49,403 43,130
Current maturities of long-term obligations 7,685 8,833
---------------- ----------------
Total current liabilities 100,525 91,415
LONG-TERM OBLIGATIONS 111,249 104,607
DEFERRED INCOME TAXES 9,798 17,334
OTHER LONG-TERM OBLIGATIONS 2,209 3,969
EXCESS OF FAIR VALUE OF ACQUIRED NET ASSETS 5,530 6,889
OVER COST, Net of accumulated amortization of $1,890
and $1,776, respectively
POSTRETIREMENT OBLIGATION OTHER THAN PENSION 8,921 8,278
MINORITY INTEREST IN SUBSIDIARIES 1,796 4,205
---------------- ----------------
Total liabilities 240,028 236,697
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 83 83
authorized shares; 8,284,247 and 8,259,603
shares issued, respectively
Class A common stock (non-voting), $.01 par value, - -
700,000 authorized shares; no shares issued and
outstanding
Additional paid-in capital 81,399 81,216
Retained earnings 74,612 65,011
Accumulated foreign currency translation adjustment (1,096) (1,193)
---------------- ----------------
154,998 145,117
Less shares held in treasury:
Common stock, 622,702 and 622,702 shares, respectively, at cost (6,048) (6,048)
---------------- ----------------
Total stockholders' equity 148,950 139,069
---------------- ----------------
TOTAL $388,978 $375,766
================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C>
NET SALES $124,745 $119,533 $350,149 $359,064
COST OF GOODS SOLD 111,053 101,998 308,713 308,861
---------------- --------------- ---------------- ----------------
GROSS PROFIT 13,692 17,535 41,436 50,203
OPERATING EXPENSES:
Selling, general and administrative 11,030 12,711 31,987 35,299
Amortization of intangibles (68) 234 (360) 803
Other income - - (681) -
---------------- --------------- ---------------- ----------------
Total operating expenses 10,962 12,945 30,946 36,102
---------------- --------------- ---------------- ----------------
OPERATING INCOME 2,730 4,590 10,490 14,101
INTEREST EXPENSE 2,445 2,162 6,956 6,284
MINORITY INTEREST IN NET INCOME 44 59 108 110
OF SUBSIDIARIES
---------------- --------------- ---------------- ----------------
INCOME BEFORE TAXES 241 2,369 3,426 7,707
INCOME TAXES (7,604) 1,104 (6,175) 3,397
---------------- --------------- ---------------- ----------------
NET INCOME $7,845 $1,265 $9,601 $4,310
================ =============== ================ ================
NET INCOME PER COMMON AND
EQUIVALENT SHARE:
BASIC $1.03 $0.17 $1.26 $0.55
================ =============== ================ ================
DILUTED $1.03 $0.17 $1.26 $0.55
================ =============== ================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON AND EQUIVALENT
SHARES OUTSTANDING:
BASIC 7,651,746 7,619,587 7,644,269 7,844,987
================ =============== ================ ================
DILUTED 7,651,828 7,619,587 7,648,400 7,844,987
================ =============== ================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
----------- ----------- ---------- ---------
<S> <C> <C> <C> <C>
NET INCOME $7,845 $1,265 $9,601 $4,310
OTHER COMPREHENSIVE INCOME,
BEFORE TAX:
Foreign currency translation adjustments (487) (193) 97 (586)
----------- ----------- ---------- ---------
OTHER COMPREHENSIVE INCOME,
BEFORE TAX $7,358 $1,072 $9,698 $3,724
INCOME TAX EXPENSE RELATED
TO ITEMS OF OTHER
COMPREHENSIVE INCOME - - - -
----------- ----------- ---------- ---------
OTHER COMPREHENSIVE INCOME,
NET OF TAX $7,358 $1,072 $9,698 $3,724
=========== =========== ========== =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $9,601 $4,310
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 10,672 10,421
Minority interest in net income of subsidiaries (19) 106
Loss (Gain) on disposal of capital assets 98 (185)
Gain on termination of interest rate swap agreement (681) -
Deferred income taxes (8,228) 305
Changes in assets and liabilities (exclusive of
effects of acquired companies):
Receivables (4,704) 7,396
Inventories 3,719 (2,626)
Other current assets (7,540) (6,122)
Accounts payable 2,950 2,734
Accrued expenses 5,574 (2,792)
Postretirement obligation other
than pension 643 449
Other (1,738) 1,182
---------------- ----------------
Cash provided by operating activities 10,347 15,178
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,951) (16,903)
Payment for purchase of net assets of subsidiaries,
net of cash acquired (887) (7,396)
Proceeds from sale of capital assets 267 1,662
Payment for investment in unconsolidated subsidiary - (150)
---------------- ----------------
Cash used in investing activities (15,571) (22,787)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net of costs 183 193
Payment for repurchase of common stock - (6,048)
Payment for purchase of stock in subsidiaries (2,557) (405)
Proceeds from issuance of long-term obligations 35,000 -
Payments on long-term obligations (41,069) (4,510)
Capitalized financing costs paid (525) -
Termination of interest rate swap agreement 1,238 -
Net borrowings under revolving loan notes 11,563 20,150
---------------- ----------------
Cash provided by financing activities 3,833 9,380
EFFECT OF EXCHANGE RATE ON CASH 59 (177)
---------------- ----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,332) 1,594
CASH AND CASH EQUIVALENTS, Beginning of period 4,222 9,336
---------------- ----------------
CASH AND CASH EQUIVALENTS, End of period $2,890 $10,930
================ ================
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Accounting Policies and Basis of Presentation
The unaudited consolidated financial statements should be read
in conjunction with the consolidated financial statements of
the Company for the year ended June 30, 1999, as included in
the Company's 1999 Annual Report to Stockholders.
The accompanying unaudited consolidated financial statements
include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary
for a fair presentation of financial position, results of
operations and cash flows. Results of operations for interim
periods are not necessarily indicative of results to be
expected for a full year.
Certain March 31, 1999 amounts have been reclassified to
conform with March 31, 2000 classifications.
2. Summary of Significant Accounting Policies
PRODUCT WARRANTIES - The Company provides for estimated
product warranty costs based on historical experience at the
time the product is sold and accrues for specific items at the
time their existence is known and the amounts are
determinable.
DEFERRED FINANCING COSTS - Costs incurred in connection with
obtaining or amending financing are capitalized and amortized
over the remaining term of the related debt instrument on a
method approximating the interest method.
FOREIGN CURRENCY TRANSLATION - Assets and liabilities of
foreign subsidiaries are translated into U.S. dollars at the
rate of exchange at the balance sheet date. Revenues and
expenses are translated into U.S. dollars at average monthly
exchange rates prevailing during the year. Resulting
translation adjustments are recorded in the accumulated
foreign currency translation adjustment account, which is a
component of other comprehensive income and a separate
component of stockholders' equity. Foreign currency
transaction gains and losses are included in the results of
operations as incurred.
LONG-LIVED ASSETS - The Company periodically evaluates the
carrying value of long-lived assets to be held and used,
including goodwill and other intangible assets, when events
and
<PAGE>
circumstances warrant such a review. The carrying value of
a long-lived asset is considered impaired when the anticipated
undiscounted cash flow from such asset is separately
identifiable and is less than its carrying value. In that
event, a loss is recognized based on the amount by which the
carrying value exceeds the fair market value of the long-lived
asset.
3. Inventories
<TABLE>
<CAPTION>
As of
--------------------------------
March 31, June 30,
2000 1999
---- ----
(Thousands)
<S> <C> <C>
Raw materials $ 9,826 $ 10,414
Work-in-process 37,242 41,431
Finished goods 14,303 12,736
Deferred supplies 4,172 4,196
--------- ---------
$ 65,543 $ 68,777
========= =========
</TABLE>
4. Income Taxes
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---- ----
(Thousands)
<S> <C> <C>
Current:
Domestic $ 816 $ 1,737
Foreign 1,237 1,355
-------- --------
$ 2,053 $ 3,092
Deferred:
Domestic $ (7,746) $ 131
Foreign (482) 174
-------- --------
$ (8,228) $ 305
-------- --------
Total $ (6,175) $ 3,397
======== ========
</TABLE>
The Company has recorded a $7.8 million deferred income tax
<PAGE>
benefit in fiscal 2000 with respect to the reinvestment of
certain flood insurance proceeds received in 1995 and 1996.
The Company recorded pretax gains of approximately $20.1
million in 1995 and 1996 related to insurance proceeds
resulting from flood damage to the Company's Atchison, Kansas
foundry in July 1993. For federal income tax purposes, the
Company treated the flood as an involuntary conversion event
under the Internal Revenue Code ("Code") and related Treasury
Regulations.
The Code provides generally that if certain conditions are
met, gains on insurance proceeds from an involuntary
conversion are not taxable if the proceeds are reinvested in
qualified replacement property within two years after the
close of the first taxable year in which any part of the
conversion gain is realized. The Company believed that its
treatment of certain foundry subsidiary stock acquisitions as
qualified replacement property was subject to potential
challenge by the Internal Revenue Service ("Service") in 1996
(the first year in which involuntary conversion gain was
realized for federal income tax purposes). The Company
recorded income tax expense on the insurance gains in 1996
pending review of its position by the Service or the
expiration of the statute of limitations under the Code for
the Service to assess income taxes with respect to the
Company's position.
The Company's treatment of certain foundry subsidiary stock
acquisitions as qualified replacement property creates
differing basis in the foundry subsidiary stock for financial
statement and tax purposes. These differences have not been
recognized as taxable temporary differences under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," since the subsidiary basis differences can be
permanently deferred through subsidiary mergers or tax-free
liquidations. On March 15, 2000, the statute of limitations
for the Service to assess taxes with respect to the Company's
position expired. The deferred taxes recorded in the
consolidated financial statements in prior years were no
longer required.
<PAGE>
5. Additional Cash Flow Information
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
2000 1999
---- ----
(Thousands)
<S> <C> <C>
Cash paid during the period for:
Interest $ 7,274 $ 6,677
======== ========
Income Taxes $ 1,674 $ 5,074
======== ========
</TABLE>
During the third quarter of fiscal 2000 the Company
capitalized $8,000 of interest expense related to
construction-in-progress.
6. Earnings Per Share
Following is a reconciliation of basic and diluted EPS for the
three-month and nine-month periods ended March 31, 2000 and
1999, respectively.
<PAGE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000
- -----------------------------------------
Weighted
Average Earnings
Net Income Shares Per Share
------------ ---------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to
common stockholders $ 7,845,000 7,651,746 $ 1.03
Effect of Dilutive Securities
Options 82
------------ ---------- ------
Diluted EPS $ 7,845,000 7,651,828 $ 1.03
============ ========== ======
FOR THE THREE MONTHS ENDED MARCH 31, 1999
- -----------------------------------------
Weighted
Average Earnings
Net Income Shares Per Share
------------ --------- ---------
Basic EPS
Income available to
common stockholders $ 1,265,000 7,619,587 $ 0.17
Effect of Dilutive Securities
Options -
------------ ---------- ------
Diluted EPS $ 1,265,000 7,619,587 $ 0.17
============ ========== ======
FOR THE NINE MONTHS ENDED MARCH 31, 2000
- ----------------------------------------
Weighted
Average Earnings
Net Income Shares Per Share
------------ ---------- ---------
Basic EPS
Income available to
common stockholders $ 9,601,000 7,644,269 $ 1.26
Effect of Dilutive Securities
Options 4,131
------------ ---------- ------
Diluted EPS $ 9,601,000 7,648,400 $ 1.26
============ ========== ======
FOR THE NINE MONTHS ENDED MARCH 31, 1999
- ----------------------------------------
Weighted
Average Earnings
Net Income Shares Per Share
------------ ---------- ---------
Basic EPS
Income available to
common stockholders $ 4,310,000 7,844,987 $ 0.55
Effect of Dilutive Securities
Options -
------------ ---------- ------
Diluted EPS $ 4,310,000 7,844,987 $ 0.55
============ ========== ======
</TABLE>
<PAGE>
7. Jahn Foundry Corp. Industrial Accident
An accident, involving an explosion and fire, occurred on
February 25, 1999, at Jahn, a wholly-owned subsidiary of the
Company located in Springfield, Massachusetts. Nine employees
were seriously injured and there have been three fatalities.
The damage was confined to the shell molding area and boiler
room. The other areas of the foundry are operational. Molds
are currently being produced at other foundries as well as
Jahn while the repairs are made. The new shell molding
department is scheduled to be in operation this summer.
The Company carries insurance for property and casualty
damages (over $475 million of coverage), business interruption
(approximately $115 million of coverage), general liability
($51 million of coverage) and workers' compensation (up to
full statutory liability) for itself and its subsidiaries. The
Company recorded charges of $450,000 ($750,000 before tax)
during the third quarter of fiscal 1999, primarily reflecting
the deductibles under the Company's various insurance
policies. At this time there can be no assurance that the
Company's ultimate costs and expenses resulting from the
accident will not exceed available insurance coverage by an
amount which could be material to its financial condition or
results of operations.
A civil action has been commenced in Massachusetts state court
on behalf of the estates of deceased workers, their families,
injured workers and their families, against the supplier of a
chemical compound used in Jahn's manufacturing process.
Counsel for the plaintiffs informally have indicated a desire
to explore whether any facts would support adding the Company
to that litigation as a jointly and severally liable
defendant. The supplier of the chemical compound, Borden
Chemical, Inc., filed a Third Party Complaint against Jahn in
Massachusetts State Court on February 2, 2000 seeking
indemnity for any liability it has to the plaintiffs in the
civil action. The Company's comprehensive general liability
insurance carrier has retained counsel on behalf of Jahn and
the Company and is aggressively defending Jahn in the Third
Party Complaint, as well as monitoring the situation on behalf
of the Company. It is too early to assess the potential
liability to Jahn for the Third Party Complaint and the
potential liability to the Company for any claim, which in any
event the Company would aggressively defend. Plaintiff's
counsel has informally raised the possibility of seeking to
make a double recovery under the workers' compensation policy
in force for
<PAGE>
Jahn, contending that there was willful misconduct on Jahn's
part leading to the accident. Such recovery, if pursued and
made, would be of a material nature. It is too early to
assess the potential liability for such a claim, which in any
event Jahn would aggressively defend.
The Company, its property insurance carrier and its insurance
broker dispute the amount of property insurance available for
property damages suffered in this accident. It is too early in
the process of calculating the loss to estimate the amount in
dispute. Management believes that the probability of any loss
resulting from the disputed property insurance coverage is
remote. The Company currently believes this dispute will be
resolved during fiscal 2001. If this dispute cannot be
resolved amicably, the Company would vigorously pursue its
remedies against both parties.
Following the accident, OSHA conducted an investigation of the
accident. On August 24, 1999, OSHA issued a citation
describing violations of the Occupational Safety and Health
Act of 1970, which primarily related to housekeeping,
maintenance and other specific, miscellaneous items. Neither
of the two violations specifically addressing conditions
related to the explosion and fire were classified as serious
or willful. Without admitting any wrongdoing, Jahn entered
into a settlement with OSHA that addresses the alleged work
place safety issues and agreed to pay $148,500 in fines.
8. New Accounting Pronouncements
In September 1999, the Emerging Issue Task Force (EITF) of the
American Institute of Certified Public Accountants issued EITF
99-5, "Accounting for Pre-Production Costs Related to
Long-Term Supply Arrangements". The guidance in EITF 99-5 is
effective for design and development costs incurred after
December 31, 1999. The Company has evaluated the guidance in
EITF 99-5 and has determined that the adoption of EITF 99-5
will not have a material effect on the Company's financial
position, results of operations or cash flows.
9. Sixth Amendment to the Amended and Restated Credit Agreement
and the Note Purchase Agreement
On February 15, 2000, the Company and its lenders and the
insurance company holding the Company's $20 million aggregate
principal amount of unsecured senior notes (the "Notes")
entered into the Sixth Amendments (the "Sixth
<PAGE>
Amendments") to the Credit Agreement and the Note Purchase
Agreement. Together with the GECC term loan, the Sixth
Amendments provided for the perfection of a security interest
in favor of GECC, the lenders under the Credit Agreement and
the holder of the Notes in substantially all of the Company's
assets other than real estate.
10. Seventh Amendment and Waiver to the Amended and Restated
Credit Agreement
On May 1, 2000, the Company and its lenders entered into the
Seventh Amendment and Waiver (the "Seventh Amendment") to the
Credit Agreement. The Seventh Amendment provides, among other
things, for a waiver of compliance by the Company with the
Cash Flow Leverage Ratio covenant through July 1, 2000. The
Cash Flow Leverage Ratio covenant required the Company to
maintain a ratio of total debt to earnings before interest,
taxes, depreciation and amortization of no greater than 3.2.
Absent the waiver, the Company would not have been in
compliance with the Cash Flow Leverage Ratio.
11. Termination of Interest Rate Swap Agreement
At June 30, 1999, the Company had two interest rate swap
agreements outstanding with a combined notional amount of
$52.1 million under which the Company paid fixed rates of
interest and received floating rates of interest over the term
of the interest rate swap agreements, without the exchange of
the underlying notional amounts. The interest rate swap
agreements effectively convert a portion of the Company's
outstanding indebtedness from a floating rate obligation to a
fixed rate obligation. The fair value of the $52.1 million of
interest rate swap agreements outstanding at June 30, 1999 was
$897,000. The fair value of the interest rate swap agreements
was not recognized in the Consolidated Financial Statements at
that time since the agreements were accounted for as hedges.
Additionally, as of June 30, 1999, the Company had $696,000 of
deferred loss included in other assets. This amount related to
the termination of the Company's combined interest currency
swap (CIRCUS). The CIRCUS, which was terminated in September
1998, was originally designated as a hedge of interest rates
on the Company's term loan under its bank credit facility. The
loss deferred in September 1998 was being amortized over the
remaining term of the Company's term loan under it bank credit
facility. Amortization expense recorded in
<PAGE>
fiscal 1999 and for the six-months ended December 31, 1999
was $204,000 and $139,000, respectively. Amortization recorded
in the second quarter of fiscal 2000 was $68,000. Amortization
of the deferred loss was recorded as additional interest
expense.
On December 29, 1999, when the Company retired the term loan
under its bank credit facility, it also terminated an interest
rate swap agreement with a notional amount of $35.7 million.
This termination and the retirement of the term loan resulted
in a gain of $1.2 million, which was recorded as other income.
Additionally, the retirement of the term loan triggered the
recognition of $557,000 of loss, which represents the
remaining unamortized loss on the CIRCUS. This loss was
recorded as a reduction of other income.
At March 31, 2000, the Company has one interest rate swap
agreement outstanding with a notional amount of $15 million,
under which the Company pays a fixed rate of interest and
receives a floating rate of interest over the remaining term
of the agreement. This agreement is designated as a hedge of
the Company's revolving credit facility.
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS:
Net sales for the third quarter of fiscal 2000 were $124.7 million, representing
an increase of $5.2 million, or 4.4%, from net sales of $119.5 million in the
third quarter of fiscal 1999. The Company's Fonderie d'Autun ("Autun")
operation, acquired by the Company on February 25, 1999, generated net sales of
$3.9 million in the third quarter of fiscal 2000, compared to $1.2 million in
the third quarter of fiscal 1999.
Excluding net sales generated by Autun, net sales for the third quarter of
fiscal 2000 were $120.8 million, representing an increase of $2.5 million, or
2.1%, from net sales of $118.3 million in the third quarter of fiscal 1999. This
2.1% increase in net sales was due primarily to increases in net sales to the
steel and power generation markets, partially offset by a decrease in net sales
to the rail market.
Net sales for the first nine months of fiscal 2000 were $350.1 million,
representing a decrease of $9.0 million, or 2.5%, from net sales of $359.1
million in the first nine months of fiscal 1999. The operations acquired by the
Company in fiscal 1999 generated net sales of $16.7 million and $29.9 million in
the first nine months of fiscal 1999 and fiscal 2000, respectively, as follows:
<TABLE>
<CAPTION>
FY 99 First Nine FY 00 First Nine
Months Months
Operation Date Acquired Net Sales Net Sales
- --------- ------------- --------- ---------
<S> <C> <C> <C>
London Precision Machine & Tool Ltd. 09 / 01 / 98 $15.5 million $16.0 million
Fonderie d'Autun 02 / 25 / 99 1.2 million 13.9 million
</TABLE>
Excluding net sales generated by the operations acquired in fiscal 1999, net
sales for the first nine months of fiscal 2000 were $320.2 million, representing
a decrease of $22.2 million, or 6.5%, from net sales of $342.4 million in the
first nine months of fiscal 1999. This 6.5% decrease in net sales was due
primarily to decreases in net sales to the offshore oil and gas, mining and
steel markets, partially offset by increases in net sales to the rail and
military markets. Sheffield's net sales for the first nine months of fiscal 2000
decreased $16.7 million from net sales in the first nine months of fiscal 1999.
In addition to the weak market conditions, net sales have also been impacted by
the bankruptcy of a major customer at the Company's PrimeCast, Inc.
("PrimeCast") subsidiary. Through fiscal 2000, PrimeCast has aggressively worked
at replacing the volume lost from Beloit Corporation, which filed for bankruptcy
in June 1999. For the first nine months of fiscal 2000, PrimeCast's net sales
were $18.2 million compared to net sales of $22.4 million in the first nine
months of fiscal 1999. Of this $4.2 million decrease, $2.6 million represented
decreased net sales to Beloit Corporation.
<PAGE>
Gross profit for the third quarter of fiscal 2000 decreased by $3.8 million, or
21.7%, to $13.7 million, or 11.0% of net sales, compared to $17.5 million, or
14.7% of net sales, for the third quarter of fiscal 1999. Gross profit for the
first nine months of fiscal 2000 decreased by $8.8 million, or 17.5%, to $41.4
million, or 11.8% of net sales, compared to $50.2 million, or 14.0% of net
sales, for the first nine months of fiscal 1999. The decrease in gross profit
and gross profit as a percentage of net sales was primarily due to lower net
sales and reduced absorption of overhead at the Company's subsidiaries which
primarily serve the mining, offshore oil and gas and steel markets, and the
launching of new products to replace lost volume. The largest impact of these
weak market conditions was at Sheffield, where its gross profit for the third
quarter of fiscal 2000 decreased by $3.5 million to 5.4% of net sales, compared
to 16.5% of net sales for the third quarter of fiscal 1999. Sheffield's gross
profit for the first nine months of fiscal 2000 decreased by $6.8 million to
9.3% of net sales, compared to 14.4% of net sales for the first nine months of
fiscal 1999.
The bankruptcy of a major customer at PrimeCast and, with a lesser impact, the
loss of a major customer at Claremont Foundry, Inc. have also had a negative
effect on gross profit. Lower sales volume, coupled with the costs of developing
new customers and training employees on new work has resulted in lower gross
profits at these operations. PrimeCast's gross profit for the first nine months
decreased by $2.3 million from a gross profit of $2.0 million for the first nine
months of fiscal 1999. The Company continues to review several options to
restore profitability to these operations.
Selling, general and administrative expense ("SG&A") for the third quarter of
fiscal 2000 was $11.0 million, or 8.8% of net sales, compared to $12.7 million,
or 10.6% of net sales, in the third quarter of fiscal 1999. For the first nine
months of fiscal 2000, SG&A was $32.0 million, or 9.1% of net sales, compared to
$35.3 million, or 9.8% of net sales, for the first nine months of fiscal 1999.
The decrease in SG&A expense is primarily due to the consolidation of four
operating units into two at the Company's Sheffield subsidiary.
Other income for the first nine months of fiscal 2000 was $681,000 ($406,000
after tax). This $681,000 reflects a net gain on the termination of interest
rate swap agreements. The net gain was triggered by the Company's early
retirement of a term loan (see Footnote 11 of Notes to Consolidated Financial
Statements).
The Company has recorded intangible assets, consisting of goodwill, in
connection with certain of the Company's acquisitions. Amortization of these
assets for the third quarter of fiscal 2000 was expense of $375,000, or 0.3% of
net sales, as compared to $373,000, or 0.3% of net sales, in the third quarter
of fiscal 1999. Amortization of these assets for the first nine months of fiscal
2000 was expense of $1.1 million, or 0.3% of net sales, as compared to $1.1
million, or 0.3% of net sales, in the first nine months of fiscal 1999. The
Company has also recorded a liability, consisting of the excess of acquired net
assets over cost ("negative goodwill"), in connection with the acquisitions of
Canadian Steel Foundries Ltd. ("Canadian Steel") and Autun. The amortization of
negative goodwill was a credit to income in the third quarter of fiscal 2000 of
$443,000, or 0.4% of net sales, as compared to $139,000, or 0.1% of net sales,
in the third quarter
<PAGE>
of fiscal 1999. Amortization of negative goodwill was a credit to income in the
first nine months of fiscal 2000 of $1.5 million, or 0.4% net sales, as compared
to $256,000, or 0.2% of net sales, in the first nine months of fiscal 1999.
Interest expense for the third quarter of fiscal 2000 increased to $2.4 million,
or 1.9% of net sales, from $2.2 million or 1.8% of net sales, in the third
quarter of fiscal 1999. For the first nine months of fiscal 2000, interest
expense increased to $7.0 million, or 2.0% of net sales, from $6.3 million, or
1.8% of net sales, in the first nine months of fiscal 1999. The increase in
interest expense primarily reflects an increase in the average amount of
outstanding indebtedness.
The Company has recorded a $7.8 million deferred income tax benefit in fiscal
2000 with respect to the reinvestment of certain flood insurance proceeds
received in 1995 and 1996. The Company recorded pretax gains of approximately
$20.1 million in 1995 and 1996 related to insurance proceeds resulting from
flood damage to the Company's Atchison, Kansas foundry in July 1993. For federal
income tax purposes, the Company treated the flood as an involuntary conversion
event under the Internal Revenue Code ("Code") and related Treasury Regulations.
The Code provides generally that if certain conditions are met, gains on
insurance proceeds from an involuntary conversion are not taxable if the
proceeds are reinvested in qualified replacement property within two years after
the close of the first taxable year in which any part of the conversion gain is
realized. The Company believed that its treatment of certain foundry subsidiary
stock acquisitions as qualified replacement property was subject to potential
challenge by the Internal Revenue Service ("Service") in 1996 (the first year in
which involuntary conversion gain was realized for federal income tax purposes).
The Company recorded income tax expense on the insurance gains in 1996 pending
review of its position by the Service or the expiration of the statute of
limitations under the Code for the Service to assess income taxes with respect
to the Company's position.
The Company's treatment of certain foundry subsidiary stock acquisitions as
qualified replacement property creates differing basis in the foundry subsidiary
stock for financial statement and tax purposes. These differences have not been
recognized as taxable temporary differences under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," since the
subsidiary basis differences can be permanently deferred through subsidiary
mergers or tax-free liquidations. On March 15, 2000, the statute of limitations
for the Service to assess taxes with respect to the Company's position expired.
The deferred taxes recorded in the consolidated financial statements in prior
years were no longer required.
Excluding this $7.8 million deferred income tax benefit, income tax expense for
the third quarter and first nine months of fiscal 2000 reflected an effective
rate of approximately 64% and 45% respectively, which are higher than the
combined federal, state and provincial statutory rate because of the provision
for tax benefits at lower effective rates on losses at certain subsidiaries.
Income tax expense for the third quarter of fiscal 1999 reflected an effective
rate of approximately 46%. Income tax expense for the first
<PAGE>
nine months of fiscal 1999 reflected an effective rate of approximately 44%.
The Company's combined effective tax rate reflects the different federal, state
and provincial statutory rates of the various jurisdictions in which the Company
operates, and the proportion of taxable income earned in each of those tax
jurisdictions.
As a result of the foregoing, net income for the third quarter of fiscal 2000
was $7.8 million compared to net income of $1.3 million for the third quarter of
fiscal 1999. Net income for the first nine months of fiscal 2000 was $9.6
million compared to net income of $4.3 million for the first nine months of
fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES:
Cash provided by operating activities for the first nine months of fiscal 2000
was $10.3 million, a decrease of $4.9 million from the first nine months of
fiscal 1999. This decrease was primarily attributable to increased working
capital requirements relating to increased accounts receivable balances.
Working capital was $87.9 million at March 31, 2000, as compared to $85.6
million at June 30, 1999. The increase primarily resulted from a reduction in
the current maturities of long-term obligations.
During the first nine months of fiscal 2000, the Company made capital
expenditures of $15.0 million, as compared to $16.9 million for the first nine
months of fiscal 1999. Included in the first nine months of fiscal 2000 were
capital expenditures of $3.6 million to rebuild the shell molding area and
boiler room damaged in the industrial accident on February 25, 1999 at Jahn
Foundry Corp. ("Jahn") (see below) and $2.4 million to expand Autun's product
line capabilities in the manufacture of gray and ductile iron castings. Included
in the first nine months of fiscal 1999 were capital expenditures of $2.1
million on upgrading the 1,500 ton forging press to 2,500 tons at Sheffield. The
balance of capital expenditures in both periods were used for routine projects
at each of the Company's facilities.
On August 12, 1998, the Company announced that its Board of Directors had
authorized a stock repurchase program of up to 1.2 million common shares of its
then outstanding 8.2 million common shares. Through February 18, 2000, the
Company had repurchased 586,700 shares at a cost of $6.0 million. On February
18, 2000, the Board of Directors terminated the stock repurchase program.
Total indebtedness of the Company at March 31, 2000 was $118.9 million, as
compared to $113.4 million at June 30, 1999. This increase of $5.5 million
primarily reflects borrowings of $1.8 million to purchase the remaining 10% of
London Precision's outstanding capital stock and to fund the Company's capital
expenditure programs. At March 31, 2000, $10.5 million was available for
borrowing under the Company's revolving credit facility.
An accident, involving an explosion and fire, occurred on February 25, 1999, at
Jahn, a wholly-owned subsidiary of the Company located in Springfield,
Massachusetts. Nine
<PAGE>
employees were seriously injured and there have been three fatalities. The
damage was confined to the shell molding area and boiler room. The other areas
of the foundry are operational. Molds are currently being produced at other
foundries as well as Jahn while the repairs are made. The new shell molding
department is scheduled to be in operation this summer.
The Company carries insurance for property and casualty damages (over $475
million of coverage), business interruption (approximately $115 million of
coverage), general liability ($51 million of coverage) and workers' compensation
(up to full statutory liability) for itself and its subsidiaries. The Company
recorded charges of $450,000 ($750,000 before tax) during the third quarter of
fiscal 1999, primarily reflecting the deductibles under the Company's various
insurance policies. At this time there can be no assurance that the Company's
ultimate costs and expenses resulting from the accident will not exceed
available insurance coverage by an amount which could be material to its
financial condition or results of operations.
A civil action has been commenced in Massachusetts state court on behalf of the
estates of deceased workers, their families, injured workers and their families,
against the supplier of a chemical compound used in Jahn's manufacturing
process. Counsel for the plaintiffs informally have indicated a desire to
explore whether any facts would support adding the Company to that litigation as
a jointly and severally liable defendant. The supplier of the chemical compound,
Borden Chemical, Inc., filed a Third Party Complaint against Jahn in
Massachusetts State Court on February 2, 2000 seeking indemnity for any
liability it has to the plaintiffs in the civil action. The Company's
comprehensive general liability insurance carrier has retained counsel on behalf
of Jahn and the Company and is aggressively defending Jahn in the Third Party
Complaint, as well as monitoring the situation on behalf of the Company. It is
too early to assess the potential liability to Jahn for the Third Party
Complaint and the potential liability to the Company for any claim, which in any
event the Company would aggressively defend. Plaintiff's counsel has informally
raised the possibility of seeking to make a double recovery under the workers'
compensation policy in force for Jahn, contending that there was willful
misconduct on Jahn's part leading to the accident. Such recovery, if pursued and
made, would be of a material nature. It is too early to assess the potential
liability for such a claim, which in any event Jahn would aggressively defend.
The Company, its property insurance carrier and its insurance broker dispute the
amount of property insurance available for property damages suffered in this
accident. It is too early in the process of calculating the loss to estimate the
amount in dispute. Management believes that the probability of any loss
resulting from the disputed property insurance coverage is remote. The Company
currently believes this dispute will be resolved during fiscal 2001. If this
dispute cannot be resolved amicably, the Company would vigorously pursue its
remedies against both parties.
Following the accident, OSHA conducted an investigation of the accident. On
August 24, 1999, OSHA issued a citation describing violations of the
Occupational Safety and Health Act of 1970, which primarily related to
housekeeping, maintenance and other specific, miscellaneous items. Neither of
the two violations specifically
<PAGE>
addressing conditions related to the explosion and fire were classified as
serious or willful. Without admitting any wrongdoing, Jahn entered into a
settlement with OSHA that addresses the alleged work place safety issues and
agreed to pay $148,500 in fines.
On August 20, 1999, the Company and its lenders entered into the Third Amendment
to the Amended and Restated Credit Agreement (the "Credit Agreement"). This
amendment provides that the Company's subsidiary, Autun, is not subject to the
provisions governing subsidiary indebtedness. It further provides that the
Company and its subsidiaries may not make any investment in Autun and the
Company must exclude Autun's results in the calculation of various financial
covenants.
On October 20, 1999, the Company and the insurance company holding the Company's
$20 million aggregate principal amount of unsecured, senior notes (the "Notes")
entered into the Fourth Amendment to the Note Purchase Agreement. This amendment
provides that the Company's subsidiary, Autun, is not subject to the provisions
governing subsidiary indebtedness. It further provides that the Company and its
subsidiaries may not make any investment in Autun and the Company must exclude
Autun's results in the calculation of various financial covenants.
On November 5, 1999, the Company and its lenders entered into the Fourth
Amendment and Waiver (the "Fourth Amendment") to the Credit Agreement. The
Fourth Amendment provided, among other things, that the Company maintain a ratio
of earnings before interest, taxes and amortization to fixed charges ("Fixed
Charge Coverage Ratio") of at least 1.10 on December 31, 1999, increasing to
1.25 on July 1, 2000, if the Company incurs at least $20 million of subordinated
debt by January 31, 2000. If the Company did not obtain a commitment for the
private placement of at least $20 million of subordinated debt by December 15,
1999, the Fourth Amendment provided that (1) the Company maintain a Fixed Charge
Coverage Ratio of at least 1.10 on December 31, 1999, increasing to 1.25 on
March 31, 2000 and 1.50 on March 31, 2001, (2) the fixed charges used in
calculating the Fixed Charge Coverage Ratio will include 15% of the aggregate
principal amount outstanding under the revolving credit facility after October
1, 1999 rather than after July 1, 2000, and (3) the Company will grant the
lenders under the Credit Agreement liens in the Company's assets by February 14,
2000. The Company was unable to obtain such a commitment by December 15, 1999.
The Fourth Amendment also provided that the Company must maintain a ratio of
consolidated total debt to total capitalization of not more than 55%. Absent the
Waiver, the Company would not have been in compliance with the Fixed Charge
Coverage Ratio.
On December 21, 1999, the Company and its lenders entered into the Fifth
Amendment (The "Fifth Amendment") to the Credit Agreement. The Fifth Amendment
provided that the Company may incur up to $35 million of indebtedness from
General Electric Capital Corporation or its assignees (the "GE Financing"). In
addition, the Fifth Amendment provided that (1) the bank revolving credit
facility will be increased from $70.0 million to $80.0 million through April 30,
2000, (2) the fixed charges used in calculating the Fixed Charge Coverage Ratio
will not include 15% of the aggregate principal amount
<PAGE>
outstanding under the revolving credit facility through June 30, 2000 and (3)
the Company will grant the lenders under the Credit Agreement liens in certain
of the Company's assets.
On December 21, 1999, the Company and the insurance company holding the Notes
entered into the Fifth Amendment to the Note Purchase Agreement. This amendment
provided that the Company may incur indebtedness through the GE Financing. This
amendment further provided that (1) the Company must maintain a ratio of
consolidated total debt to total capitalization of not more than 55%, (2) the
Company maintain a Fixed Charge Coverage Ratio of at least 1.10 on December 31,
1999, increasing to 1.25 on March 31, 2000 and 1.50 on March 31, 2001 and (3)
the fixed charges used in calculating the Fixed Charge Coverage Ratio will not
include 15% of the aggregate principal amount outstanding under the revolving
credit facility through June 30, 2000.
On December 29, 1999, the Company entered into a Master Security Agreement with
General Electric Capital Corporation ("GECC") and its assigns providing for a
term loan of $35.0 million. The term loan is secured by certain of the Company's
fixed assets, real estate, equipment, furniture and fixtures located in
Atchison, Kansas and St. Joseph, Missouri, matures in December 2004, and bears
interest at a fixed rate of 9.05%. On December 29, 1999 the proceeds of the term
loan, together with borrowings under the Company's revolving credit facility,
were used to retire the $35.7 million of outstanding indebtedness under the
Company's term loan under its bank credit facility.
On February 15, 2000, the Company, its lenders and the holder of the Notes
entered into the Sixth Amendments (the "Sixth Amendments") to the Credit
Agreement and the Note Purchase Agreement. Together with the GECC term loan, the
Sixth Amendments provided for the perfection of a security interest in favor of
GECC, the lenders under the Credit Agreement and the holder of the Notes in
substantially all of the Company's assets other than real estate.
On May 1, 2000, the Company and its lenders entered into the Seventh Amendment
and Waiver (the "Seventh Amendment") to the Credit Agreement. The Seventh
Amendment provides, among other things, for a waiver of compliance by the
Company with the Cash Flow Leverage Ratio covenant through July 1, 2000. The
Cash Flow Leverage Ratio covenant requires the Company to maintain a ratio of
total debt to earnings before interest, taxes, depreciation and amortization of
no greater than 3.2. Absent the waiver, the Company would not have been in
compliance with the Cash Flow Leverage Ratio.
The Company is currently negotiating with another financial institution to
establish a new credit facility and is contemplating the issuance of senior
secured notes through a private placement, subject to market conditions. While
the Company believes that a new credit facility can be established or the
existing facility could be restructured, no assurance of completion of any of
these matters can be given. The Company believes that its operating cash flow
and amounts available for borrowing under the new credit facility when
established, the senior secured notes if issued and its existing revolving
credit facility will be adequate to fund its capital expenditure and working
capital
<PAGE>
requirements for the next 12 months. However, alternative financing arrangements
are routinely evaluated and 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.
FORWARD-LOOKING STATEMENTS
The sections entitled "Liquidity and Capital Resources" and "Year 2000 Computer
Issues" contain forward-looking statements that involve a number of risks and
uncertainties. Forward-looking statements such as "expects," "intends,"
"contemplating" and statements pertaining to the adequacy of funding for capital
expenditure and working capital requirements for the next 12 months are not
historical in nature. Among the factors that could cause actual results to
differ materially from such forward-looking statements include: the completion
of a new credit facility or restructuring of the existing credit facility, the
size and timing of future acquisitions, business conditions and the state of the
general economy, particularly the capital goods industry and the markets served
by the Company, the strength of the U.S. dollar, Canadian dollar, British pound
and the Euro, interest rates, inflation, the availability of labor, the
successful conclusion of various union contract negotiations, the results of any
litigation arising out of the accident at Jahn, the competitive environment in
the casting industry and changes in laws and regulations that govern the
Company's business, particularly environmental regulations.
<PAGE>
ITEM 3.
DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative information about market risk was addressed in Item
7A of the Company's Form 10-K for the fiscal year ended June 30, 1999.
The Company's primary interest rate exposures relate to its cash and short-term
investments, fixed and variable rate debt and interest rate swaps, which are
mainly exposed to changes in short-term interest rates (e.g. USD LIBOR). The
potential loss in fair values is based on an immediate change in the net present
values of the Company's interest rate-sensitive exposures resulting from a 10%
change in interest rates. The potential loss in cash flows and earnings is based
on the change in the net interest income/expense over a one-year period due to
an immediate 10% change in rates. A hypothetical 10% change in interest rates
would have a material impact on the Company's earnings of approximately $200,000
and $400,000 in fiscal 1999 and the first nine months of fiscal 2000,
respectively.
The Company's exposure to fluctuations in currency rates against the British
pound and Canadian dollar result from the Company's holdings in cash and
short-term investments and its utilization of foreign currency forward exchange
contracts to hedge customer receivables and firm commitments. The potential loss
in fair values is based on an immediate change in the U.S. dollar equivalent
balances of the Company's currency exposures due to a 10% shift in exchange
rates versus the British pound and Canadian dollar. The potential loss in cash
flows and earnings is based on the change in cash flow and earnings over a
one-year period resulting from an immediate 10% change in currency exchange
rates versus the British pound and Canadian dollar. Based on the Company's
holdings of financial instruments at June 30, 1999 and March 31, 2000, a
hypothetical 10% depreciation in the British pound and the Canadian dollar
versus all other currencies would have a material impact on the Company's
earnings of approximately $2.7 million and $3.3 million in fiscal 1999 and the
first nine months of fiscal 2000, respectively. The Company's analysis does not
include the offsetting impact from its underlying hedged exposures (customer
receivables and firm commitments). If the Company included these underlying
hedged exposures in its sensitivity analysis, these exposures would
substantially offset the financial impact of its foreign currency forward
exchange contracts due to changes in currency rates.
<PAGE>
PART II
ITEM 1 - Legal Proceedings
An accident, involving an explosion and fire, occurred on
February 25, 1999, at Jahn, a wholly-owned subsidiary of the
Company located in Springfield, Massachusetts. Nine employees
were seriously injured and there have been three fatalities.
The damage was confined to the shell molding area and boiler
room. The other areas of the foundry are operational. Molds
are currently being produced at other foundries as well as
Jahn while the repairs are made. The new shell molding
department is scheduled to be in operation this summer.
The Company carries insurance for property and casualty
damages (over $475 million of coverage), business interruption
(approximately $115 million of coverage), general liability
($51 million of coverage) and workers' compensation (up to
full statutory liability) for itself and its subsidiaries. The
Company recorded charges of $450,000 ($750,000 before tax)
during the third quarter of fiscal 1999, primarily reflecting
the deductibles under the Company's various insurance
policies. At this time there can be no assurance that the
Company's ultimate costs and expenses resulting from the
accident will not exceed available insurance coverage by an
amount which could be material to its financial condition or
results of operations.
A civil action has been commenced in Massachusetts state court
on behalf of the estates of deceased workers, their families,
injured workers and their families, against the supplier of a
chemical compound used in Jahn's manufacturing process.
Counsel for the plaintiffs informally have indicated a desire
to explore whether any facts would support adding the Company
to that litigation as a jointly and severally liable
defendant. The supplier of the chemical compound, Borden
Chemical, Inc., filed a Third Party Complaint against Jahn in
Massachusetts State Court on February 2, 2000 seeking
indemnity for any liability it has to the plaintiffs in the
civil action. The Company's comprehensive general liability
insurance carrier has retained counsel on behalf of Jahn and
the Company and is aggressively defending Jahn in the Third
Party Complaint, as well as monitoring the situation on behalf
of the Company. It is too early to assess the potential
liability to Jahn for the Third Party Complaint and the
potential liability to the Company for any claim, which in any
event the Company would aggressively defend. Plaintiff's
counsel has informally raised the possibility of seeking to
make a double recovery under the workers' compensation policy
in force for Jahn, contending that there was willful
misconduct on Jahn's part leading to the accident. Such
recovery, if pursued and made, would be of a material nature.
It is too early to assess the potential liability for such a
claim, which in any event Jahn would aggressively defend.
<PAGE>
ITEM 2 - Changes in Securities and Use of Proceeds
Unregistered Securities Transactions
NOT APPLICABLE
ITEM 3 - Defaults Upon Senior Securities
NOT APPLICABLE
ITEM 4 - Submission of Matters to a Vote of Security Holders
NOT APPLICABLE
ITEM 5 - Other Information
NOT APPLICABLE
ITEM 6 - Exhibits and Reports of Form 8-K
(A) Exhibits
4.0 Long-term debt instruments of the Company in amounts
not exceeding 10% of the total assets of the Company
and its subsidiaries on a consolidated basis will be
furnished to the Commission upon request.
4.1 Sixth Amendment to the Amended and Restated Credit
Agreement dated as of February 15, 1999, among the
Company, the Banks party thereto, and Harris Trust
and Savings Bank, as Agent.
4.2 Sixth Amendment dated as of February 15, 2000 to the
Note Purchase Agreement dated July 29, 1994, between
the Company and Teachers Insurance and Annuity
Association of America
4.3 Seventh Amendment to the Amended and Restated Credit
Agreement dated as of May 1, 2000, among the Company,
the Banks party thereto, and Harris Trust and Savings
Bank, as Agent.
27 Financial Data Schedule
99 Valuation and Qualifying Accounts Schedule
<PAGE>
(B) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2000.
<PAGE>
* * * * * * * * * * * * * * * *
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ATCHISON CASTING CORPORATION
----------------------------
(Registrant)
DATE: May 12, 2000 /s/ HUGH H. AIKEN
-----------------------------------------
Hugh H. Aiken, Chairman of the
Board, President and Chief
Executive Officer
DATE: May 12, 2000 /s/ KEVIN T. MCDERMED
------------------------------------------
Kevin T. McDermed, Vice President, Chief
Financial Officer, Treasurer and Secretary
<PAGE>
EXHIBIT 4.1
<PAGE>
SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This Sixth Amendment to Amended and Restated Credit Agreement (the
"AMENDMENT") dated as of February 15, 2000 among Atchison Casting Corporation
(the "BORROWER"), the Banks, and Harris Trust and Savings Bank, as Agent;
W I T N E S S E T H:
WHEREAS, the Borrower, Guarantors, Banks and Harris Trust and Savings
Bank, as Agent, have heretofore executed and delivered an Amended and Restated
Credit Agreement dated as of April 3, 1998 (as amended through the Fifth
Amendment thereto dated as of December 21, 1999, the "CREDIT AGREEMENT"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
provided herein;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Credit Agreement shall be and hereby is amended as follows:
1. Section 3 of the Credit Agreement is hereby amended by
inserting new Sections 3.2 and 3.3 immediately following Section 3.1 as follows:
SECTION 3.2. COLLATERAL. The Obligations shall be
secured by valid, perfected and enforceable Liens on all
right, title and interest of the Borrower and each Guarantor
in all property described in the Collateral Documents.
SECTION 3.3. FURTHER ASSURANCES. The Borrower agrees
that it shall, and shall cause each Subsidiary to, from time
to time at the request of the Agent or the Required Banks,
execute and deliver such documents and do such acts and things
as the Agent or the Required Banks may reasonably request in
order to provide for or perfect or protect such Liens on the
Collateral. In the event the Borrower or any Subsidiary forms
or acquires any other Subsidiary after the date hereof, the
Borrower shall within 10 Business Days of such formation or
acquisition cause such newly formed or acquired Subsidiary, to
execute a Guaranty and any such Subsidiary to execute such
Collateral Documents as the Agent may then reasonably require,
and the Borrower shall also deliver to the Agent, or cause
such Subsidiary to deliver to the Agent, at the Borrower's
cost and expense, such other instruments, documents,
certificates and opinions reasonably required by the Agent in
connection therewith.
<PAGE>
2. Section 4 of the Credit Agreement is hereby amended by adding
thereto the following definitions in the appropriate alphabetical locations:
"CANADIAN SECURITY AGREEMENTS" means those certain Security
Agreements and Hypothecs each dated as of February 15, 2000
from each of the Foreign Guarantors to the Collateral Agent,
as the same may be amended, modified or supplemented from time
to time.
"COLLATERAL" means all properties, rights, interests and
privileges from time to time subject to the Liens granted to
the Collateral Agent, or any security trustee therefor, by the
Collateral Documents.
"COLLATERAL AGENT" means Harris Trust and Savings Bank in its
capacity as Collateral Agent under the Intercreditor Agreement
and any successor to it in such capacity.
"COLLATERAL DOCUMENTS" means the Guaranty Agreement, the
Security Agreement, the Canadian Security Agreements, the
Pledge Agreement and all other security agreements, pledge
agreements, assignments, financing statements and other
documents as shall from time to time secure or relate to the
Obligations or any part thereof.
"DOMESTIC GUARANTORS" means and includes each Guarantor
organized under the laws of a jurisdiction within the United
States of America.
"FOREIGN GUARANTORS" means and includes each Guarantor
organized under the laws of a jurisdiction outside the United
States of America.
"SECURITY AGREEMENT" means that certain Security Agreement
dated the date of this Agreement among the Borrower, the
Domestic Guarantors and the Collateral Agent, as the same may
be amended, modified, supplemented or restated from time to
time.
3. The following definitions appearing in Section 4 of the Credit
Agreement shall each be amended in their entirety and as so amended shall be
restated to read as follows:
"CREDIT DOCUMENTS" means this Agreement, the Notes, the
Collateral Documents, the Applications and the Letters of
Credit.
"INTERCREDITOR AGREEMENT" means the Intercreditor and
Collateral Agency Agreement dated as of February 15, 2000 by
and among the
<PAGE>
Collateral Agent, the Banks and Teachers Insurance and
Annuity Association of America.
4. Section 7.5 of the Credit Agreement shall be amended by adding
thereto a new sentence immediately at the end thereof which reads as follows:
"The Borrower shall in any event maintain, and cause each
Subsidiary to maintain, insurance on the Collateral to the
extent required by the Collateral Documents.
5. Section 7.9 of the Credit Agreement shall be amended by (i)
striking the period appearing at the end of Subsection (h) thereof and
substituting therefor a semi-colon followed by the word "and", and (ii) adding
thereto a new Subsection (i) which reads as follows:
(i) the Liens granted in favor of the Collateral
Agent pursuant to the Collateral Documents.
6. Section 8.1(b) of the Credit Agreement shall be amended in its
entirety and as so amended shall be restated to read as follows:
(b) default by the Borrower in the observance or
performance of any covenant set forth in Section 7.1, 7.6(h),
7.9 through 7.20 or 7.22 hereof or of any provision in any
Credit Document dealing with the remittance to the Collateral
Agent of the proceeds of Collateral or requiring the
maintenance of insurance thereon;
7. Section 11.13(ii) of the Credit Agreement is hereby amended in
its entirety and as so amended shall be restated to read as follows:
(ii) No amendment or waiver pursuant to this
Section shall, unless signed by each Bank, change the
provisions of this Section, the definition of "REQUIRED
BANKS", or any condition precedent set forth in Section 6
hereof or the provisions of Sections 8.1(f), 8.1(g) or 8.3, or
9, or release any Subsidiary from its obligations under a
Guaranty Agreement, or release all or substantially all of the
Collateral (except as otherwise provided for in the Credit
Documents), or affect the number of Banks required to take any
action hereunder.
8. The Borrower represents and warrants to each Bank and the
Agent that (a) each of the representations and warranties set forth in Section 5
of the Credit Agreement (as updated pursuant to this Amendment) is true and
correct on and as of the date of this Amendment as if made on and as of the date
hereof and as if each reference therein to the Credit Agreement referred to the
Credit Agreement as amended hereby; (b) after giving effect to this Amendment,
no Default and no Event of Default has occurred and is continuing; and (c)
without limiting the effect of the foregoing, the Borrower's execution, delivery
and performance of this Amendment
<PAGE>
have been duly authorized, and this Amendment has been executed and delivered
by duly authorized officers of the Borrower.
9. This Amendment shall become effective upon the satisfaction of
each of the following conditions precedent:
(a) the Borrower, the Required Banks, and the
Agent shall have executed and delivered this Amendment and the
Guarantors shall have executed the consent attached hereto.
(b) the Agent shall have received the Security
Agreement and Canadian Security Agreement duly executed by the
Borrower and its Subsidiaries, UCC financing statements to be
filed against the Borrower and each Subsidiary, as debtor, in
favor of the Collateral Agent, as secured party; and
(c) The Agent shall have received for the
account of the Banks such other agreements, instruments,
documents, certificates, and opinions as the Agent may
reasonably request.
10. The Borrower agrees to deliver to the Agent no later than 7
days after the date hereof the favorable written opinion of counsel to the
Borrower, in form and substance satisfactory to the Agent. Failure to deliver
such opinion by such date shall constitute an Event of Default under the Credit
Agreement.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each of which
when so executed shall be an original but all of which shall constitute one and
the same instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement and the other Credit Documents
shall remain unchanged and in full force and effect. All references to the
Credit Agreement in any document shall be deemed to be references to the Credit
Agreement as amended hereby. All capitalized terms used herein without
definition shall have the same meaning herein as they have in the Credit
Agreement. This Amendment shall be construed and governed by and in accordance
with the internal laws of the State of Illinois.
<PAGE>
Dated as of the date first above written.
ATCHISON CASTING CORPORATION
By: /s/ Kevin T. McDermed
------------------------------------------------
Title: V.P. & Treasurer
---------------------------------------------
HARRIS TRUST AND SAVINGS BANK, in its individual
capacity as a Bank and as Agent
By: /s/ Len E. Meyer
------------------------------------------------
Title: Vice President
---------------------------------------------
COMMERCE BANK, N.A.
By: /s/ Dennis R. Block
------------------------------------------------
Title: Senior Vice President
---------------------------------------------
MERCANTILE BANK
By: /s/ Barry P. Sullivan
------------------------------------------------
Title: Vice President
---------------------------------------------
KEY BANK NATIONAL ASSOCIATION
By: /s/ Daniel M. Lally
------------------------------------------------
Title: Assistant Vice President
---------------------------------------------
<PAGE>
COMERICA BANK
By: /s/ Jeffrey E. Peck
------------------------------------------------
Title: Vice President
---------------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ Troy J. Villafarro
------------------------------------------------
Title: Senior Vice President
---------------------------------------------
NATIONAL WESTMINSTER BANK PLC
Nassau Branch
By: /s/ P. Mills
------------------------------------------------
Title: Senior Corporate Manager
---------------------------------------------
New York Branch
By: /s/ P. Mills
------------------------------------------------
Title: Senior Corporate Manager
---------------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION
(successor by merger to Norwest Bank
Minnesota, N.A.)
By: /s/ R. Duncan Sinclair
------------------------------------------------
Title: Vice President
---------------------------------------------
<PAGE>
EXHIBIT 4.2
<PAGE>
SIXTH AMENDMENT TO THE NOTE PURCHASE AGREEMENT
THIS SIXTH AMENDMENT TO NOTE PURCHASE AGREEMENT (the "Sixth Amendment")
dated as of February 15, 2000 between ATCHISON CASTING CORPORATION (the
"Company") and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA (the
"Holder");
W I T N E S S E T H:
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Note Purchase Agreement dated as of July 29, 1994 (as amended by the
First Amendment, the Second Amendment, the Third Amendment, the Letter
Agreement, the Fourth Amendment and the Fifth Amendment described below, the
"Note Purchase Agreement") pursuant to which the Holder purchased $20,000,000 in
aggregate principal amount of the Company's 8.44% Senior Notes due July 29, 2004
(the "Notes"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a First Amendment to the Note Purchase Agreement dated as of March 8,
1996 (the "First Amendment"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Second Amendment to the Note Purchase Agreement dated as of May 24,
1996 (the "Second Amendment"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Third Amendment to the Note Purchase Agreement dated as of April 3,
1998 (the "Third Amendment"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Letter Agreement amending the Note Purchase Agreement dated as of
October 12, 1998 (the "Letter Agreement"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Fourth Amendment to the Note Purchase Agreement dated as of October
20, 1999 (the "Fourth Amendment"); and
WHEREAS, the Company and the Holder have heretofore executed and
delivered a Fifth Amendment to the Note Purchase Agreement dated as of December
21, 1999 (the "Fifth Amendment"); and
WHEREAS, the Company and the Holder desire to further amend the Note
Purchase Agreement as provided herein;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Note Purchase Agreement shall be and hereby is amended as follows:
<PAGE>
1. Section 3 of the Note Purchase Agreement is hereby amended by
inserting new Sections 3.8 and 3.9 immediately following Section 3.7 as follows:
3.8. COLLATERAL. The Notes shall be secured by
valid, perfected and enforceable Liens on all right, title and
interest of the Company and each Guarantor in all property
described in the Collateral Documents.
3.9. FURTHER ASSURANCES. The Company agrees that
it shall, and shall cause each Subsidiary to, from time to
time at the request of the Collateral Agent, execute and
deliver such documents and do such acts and things as the
Collateral Agent may reasonably request in order to provide
for or perfect or protect such Liens on the Collateral. In the
event the Company or any Subsidiary forms or acquires any
other Subsidiary after the date hereof, the Company shall
within 10 Business Days of such formation or acquisition cause
such newly formed or acquired Subsidiary, to execute a
Guaranty and any such Subsidiary to execute such Collateral
Documents as the Collateral Agent may then reasonably require,
and the Company shall also deliver to the Collateral Agent, or
cause such Subsidiary to deliver to the Collateral Agent, at
the Company's cost and expense, such other instruments,
documents, certificates and opinions reasonably required by
the Collateral Agent in connection therewith.
2. Section 9.1 of the Note Purchase Agreement is hereby amended
by adding thereto the following definitions in the appropriate alphabetical
locations:
"Canadian Security Agreements" means those certain Security
Agreements and Hypothecs each dated as of February 15, 2000
from each of the Foreign Guarantors to the Collateral Agent,
as the same may be amended, modified or supplemented from time
to time.
"Collateral" means all properties, rights, interests and
privileges from time to time subject to the Liens granted to
the Collateral Agent, or any security trustee therefor, by the
Collateral Documents.
"Collateral Agent" means Harris Trust and Savings Bank in its
capacity as Collateral Agent under the Intercreditor Agreement
and any successor to it in such capacity.
"Collateral Documents" means the Guaranty Agreement, the
Security Agreement, the Canadian Security Agreements, the
Pledge Agreement and all other security agreements, pledge
<PAGE>
agreements, assignments, financing statements and other
documents as shall from time to time secure or relate to the
Obligations or any part thereof.
"Domestic Guarantors" means and includes each Guarantor
organized under the laws of a jurisdiction within the United
States of America.
"Foreign Guarantors" means and includes each Guarantor
organized under the laws of a jurisdiction outside the United
States of America.
"Security Agreement" means that certain Security Agreement
dated February 15, 2000 among the Company, the Domestic
Guarantors and the Collateral Agent, as the same may be
amended, modified, supplemented or restated from time to time.
3. The following definition appearing in Section 9.1 of the Note
Purchase Agreement shall be amended in its entirety and as so amended shall be
restated to read as follows:
"Intercreditor Agreement" means the Intercreditor and
Collateral Agency Agreement dated as of February 15, 2000 by
and among the Collateral Agent, the Banks and the Holder.
4. Section 6.16 of the Note Purchase Agreement shall be amended
by adding thereto a new sentence immediately at the end thereof which reads as
follows:
"The Company shall in any event maintain, and cause each
Subsidiary to maintain, insurance on the Collateral to the
extent required by the Collateral Documents.
5. Section 6.4 of the Note Purchase Agreement shall be amended by
(i) striking the period appearing at the end of Subsection (h) thereof and
substituting therefor a semi-colon followed by the word "and", and (ii) adding
thereto a new Subsection (i) which reads as follows:
(i) the Liens granted in favor of the Collateral
Agent pursuant to the Collateral Documents.
Section 6.4 is further amended by striking the reference to "subdivisions (a)
through (h) of this Section" in the last sentence of Section 6.4 and inserting
in its place "subdivisions (a) through (i) of this Section."
6. Section 8.1(c) of the Note Purchase Agreement shall be amended
in its entirety and as so amended shall be restated to read as follows:
<PAGE>
(c) default shall be made in the due performance
or observance of any covenant, provision, agreement or
condition contained in Section 4(g) or any of Sections 6.1
through 6.9, both inclusive or any of Sections 6.13, 6.16,
6.18, 6.20 or 6.21 or of any provision in the Security
Agreement dealing with the remittance to the Collateral Agent
of the proceeds of Collateral or requiring the maintenance of
insurance thereon;
7. The Company hereby represents and warrants to the Holder that
the representations and warranties with respect to the Company contained in the
Note Purchase Agreement are true and correct in all material respects and the
Holder shall be entitled to rely on such representations and warranties as if
they were made to the Holder in this Sixth Amendment as of the date hereof.
8. This Sixth Amendment shall become effective upon the execution
and delivery of this Sixth Amendment:
This Sixth Amendment may be executed in any number of counterparts and
by different parties hereto on separate counterpart signature pages, each of
which when so executed shall be an original but all of which shall constitute
one and the same instrument. Except as specifically amended and modified hereby,
all of the terms and conditions of the Note Purchase Agreement shall remain
unchanged and in full force and effect. All references to the Note Purchase
Agreement in any document shall be deemed to be references to the Note Purchase
Agreement as amended hereby. All capitalized terms used herein without
definition shall have the same meaning herein as they have in the Note Purchase
Agreement. This Sixth Amendment shall be construed and governed by and in
accordance with the internal laws of the State of New York.
Dated as of the date first above written.
ATCHISON CASTING CORPORATION
By: /s/ Kevin T. McDermed
Name: Kevin T. McDermed
Title: V.P. & Treasurer
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: /s/ Loren S. Archibald
Name: Loren S. Archibald
Title: Managing Director
<PAGE>
EXHIBIT 4.3
<PAGE>
SEVENTH AMENDMENT AND WAIVER TO AMENDED AND RESTATED CREDIT AGREEMENT
This Seventh Amendment and Waiver to Amended and Restated Credit
Agreement (the "AMENDMENT") dated as of May 1, 2000 among Atchison Casting
Corporation (the "BORROWER"), the Banks, and Harris Trust and Savings Bank, as
Agent;
W I T N E S S E T H:
WHEREAS, the Borrower, Guarantors, Banks and Harris Trust and Savings
Bank, as Agent, have heretofore executed and delivered an Amended and Restated
Credit Agreement dated as of April 3, 1998 (as amended through the Sixth
Amendment thereto dated as of February 15, 2000, the "CREDIT AGREEMENT"); and
WHEREAS, the parties hereto desire to amend the Credit Agreement as
provided herein;
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree that the
Credit Agreement shall be and hereby is amended as follows:
1. The definition of "DOMESTIC RATE MARGIN" appearing in Section
1.3(a) of the Credit Agreement is hereby amended in its entirety and as so
amended shall read as follows:
"DOMESTIC RATE MARGIN" means 0.75% per annum.
2. The definition of "EUROCURRENCY MARGIN" appearing in Section
1.3(b) of the Credit Agreement is hereby amended in its entirety and as so
amended shall read as follows:
"EUROCURRENCY MARGIN" means (i) 2.25% per annum to
and including May 31, 2000 and (ii) 2.50% per annum
thereafter.
3. Section 1.14 of the Credit Agreement is hereby amended by
deleting the date "APRIL 30, 2000" appearing therein and inserting in its place
the date "JUNE 30, 2000".
4. Section 7.6 of the Credit Agreement is hereby amended by:
(a) deleting the word "AND" at the end of clause (j)
thereof;
(b) adding new clause (k) reading in its entirety as
follows:
(k) COMMITMENTS. Promptly (and in any event within
three Business Days) after any Responsible Officer receives a
written commitment from any lender or lenders to advance
Funded Debt to the Borrower or any Subsidiary, a copy of such
commitment; and
(c) re-lettering clause (k) as clause (l).
<PAGE>
5. Schedules 5.2, 5.6(a) and 5.13 to the Credit Agreement are
each hereby amended in their entirety to read as Schedules 5.2, 5.6(a) and 5.13,
respectively, attached to this Amendment.
6. The Borrower has informed the Banks that the Borrower has not
been in compliance with Section 7.15(f)(i) of the Credit Agreement from time to
time after January 28, 2000. The Borrower has requested that the Banks waive
compliance by the Borrower with Section 7.15(f)(i) for the period commencing
January 28, 2000 through and including July 1, 2000. Accordingly, the Banks
hereby waive compliance with Section 7.l5(f)(i) of the Credit Agreement by the
Borrower for the period commencing on January 28, 2000 through and including
July 1, 2000.
7. The Borrower represents and warrants to each Bank and the
Agent that (a) each of the representations and warranties set forth in Section 5
of the Credit Agreement (as updated pursuant to this Amendment) is true and
correct on and as of the date of this Amendment as if made on and as of the date
hereof and as if each reference therein to the Credit Agreement referred to the
Credit Agreement as amended hereby; (b) after giving effect to this Amendment,
no Default and no Event of Default has occurred and is continuing; and (c)
without limiting the effect of the foregoing, the Borrower's execution, delivery
and performance of this Amendment have been duly authorized, and this Amendment
has been executed and delivered by duly authorized officers of the Borrower and
Guarantors.
8. This Amendment shall become effective upon the satisfaction of
each of the following conditions precedent:
(a) the Borrower, each Bank that has a Temporary
Commitment Percentage, and the Agent shall have executed and
delivered this Amendment and the Guarantors shall have
executed the consent attached hereto;
(b) the Agent shall have received confirmation
from its Canadian counsel that all steps necessary to perfect
the Collateral Agent's security interest in the Collateral
granted by the Canadian Security Agreement have been
completed;
(c) The Agent shall have received (i) for the
PRO RATA account of the Banks based upon the amount of each
Bank's Commitment (whether used or unused) on the date hereof,
a non-refundable amendment fee equal to 0.10% of the
Commitments and (ii) for its own account, a fee equal to 0.05%
of the Commitments; and
(d) The Agent shall have received for the
account of the Banks such other agreements, instruments,
documents, certificates, and opinions as the Agent may
reasonably request.
<PAGE>
If this Amendment becomes effective, the changes in the Domestic Rate
Margin and Eurocurrency Margin shall take effect with respect to any Loans and
Letters of Credit outstanding on May 1, 2000 and on each day thereafter, but any
payment of interest or fees due on or after May 1, 2000 with respect to Loans or
Letters of Credit outstanding prior thereto shall be computed on the basis of
the Domestic Rate Margin or Eurocurrency Margin, as applicable, in effect prior
to such effectiveness.
This Amendment may be executed in any number of counterparts and by
different parties hereto on separate counterpart signature pages, each of which
when so executed shall be an original but all of which shall constitute one and
the same instrument. Except as specifically amended and modified hereby, all of
the terms and conditions of the Credit Agreement and the other Credit Documents
shall remain unchanged and in full force and effect. All references to the
Credit Agreement in any document shall be deemed to be references to the Credit
Agreement as amended hereby. All capitalized terms used herein without
definition shall have the same meaning herein as they have in the Credit
Agreement. This Amendment shall be construed and governed by and in accordance
with the internal laws of the State of Illinois.
<PAGE>
Dated as of the date first above written.
ATCHISON CASTING CORPORATION
By: /s/ Kevin T. McDermed
-----------------------------------------------
Title: V.P. & Treasurer
--------------------------------------------
HARRIS TRUST AND SAVINGS BANK, in its individual
capacity as a Bank and as Agent
By: /s/ Len E. Meyer
-----------------------------------------------
Title: Vice President
--------------------------------------------
COMMERCE BANK, N.A.
By: /s/ Dennis R. Block
-----------------------------------------------
Title: Senior Vice President
--------------------------------------------
FIRSTAR BANK MIDWEST (f/k/a Mercantile Bank)
By: /s/ Barry P. Sullivan
-----------------------------------------------
Title: Vice President
-------------------------------------------
KEY BANK NATIONAL ASSOCIATION
By: /s/ Daniel M. Lally
-----------------------------------------------
Title: Assistant Vice President
-------------------------------------------
<PAGE>
COMERICA BANK
By: /s/ Jeffrey E. Peck
-----------------------------------------------
Title: Vice President
--------------------------------------------
HIBERNIA NATIONAL BANK
By: /s/ Angela Bomttey
-----------------------------------------------
Title: Vice President
--------------------------------------------
NATIONAL WESTMINSTER BANK PLC
Nassau Branch
By: /s/ P. Mills
-----------------------------------------------
Title: Senior Corporate Manager
--------------------------------------------
New York Branch
By: /s/ P. Mills
-----------------------------------------------
Title: Senior Corporate Manager
--------------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION
(successor by merger to Norwest Bank
Minnesota, N.A.)
By: /s/ R. Duncan Sinclair
-----------------------------------------------
Title: Vice President
--------------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000911115
<NAME> ATCHISON CASTING CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 2,890
<SECURITIES> 0
<RECEIVABLES> 91,338
<ALLOWANCES> 497
<INVENTORY> 65,543
<CURRENT-ASSETS> 188,454
<PP&E> 211,428
<DEPRECIATION> 57,821
<TOTAL-ASSETS> 388,978
<CURRENT-LIABILITIES> 100,525
<BONDS> 0
0
0
<COMMON> 83
<OTHER-SE> 148,867
<TOTAL-LIABILITY-AND-EQUITY> 388,978
<SALES> 350,149
<TOTAL-REVENUES> 350,149
<CGS> 308,713
<TOTAL-COSTS> 30,946
<OTHER-EXPENSES> 108
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,956
<INCOME-PRETAX> 3,426
<INCOME-TAX> (6,175)
<INCOME-CONTINUING> 9,601
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,601
<EPS-BASIC> 1.26
<EPS-DILUTED> 1.26
</TABLE>
<PAGE>
EXHIBIT 99
<PAGE>
ATCHISON CASTING CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(In Thousands)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING BALANCE COSTS AND END
OF PERIOD ACQUIRED EXPENSES DEDUCTIONS OF PERIOD
---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Accounts Receivable Allowance
Twelve Months ended June 30, 1997 $ 306 $ 39(a) $ 135 $ (99) $ 381
Twelve Months ended June 30, 1998 381 311(a) 120 (304) 508
Twelve Months ended June 30, 1999 508 21(a) 282 (220) 591
Nine Months ended March 31, 2000 591 0 277 (371) 497
</TABLE>
(a) Represents reserves recorded in connection with various acquisitions
