<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OCTOBER 31, 1996 0-22906
------------------------------ -----------------------
For the Quarter Ended Commission File Number
ABC RAIL PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-3498749
------------------------------ -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 South Michigan Avenue, Chicago, IL 60604-2402
----------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number (312) 322-0360
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------------ ---------------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 15, 1996
---------------------------------- --------------------------------
COMMON STOCK, $.01 PAR VALUE 8,376,026 SHARES
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
-----
Part I Financial Information
Item 1 Consolidated Financial Statements
<S> <C>
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7 - 10
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11 - 15
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 16
</TABLE>
2
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of October 31, 1996 and July 31, 1996
<TABLE>
<CAPTION>
(In thousands, except share and per share data)
October 31, July 31,
ASSETS 1996 1996
- ------ ------------ --------
<S> <C> <C>
(unaudited)
CURRENT ASSETS:
Accounts receivable, less allowances of $864 and $865, respectively $ 31,458 $ 31,515
Inventories (Note 3) 40,821 39,318
Prepaid expenses and other current assets 2,806 1,810
Prepaid income taxes 3,575 3,625
-------- --------
Total current assets 78,660 76,268
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 1,605 1,605
Buildings and improvements 12,059 12,127
Machinery and equipment 74,772 73,664
Construction in progress 20,542 15,459
-------- --------
108,978 102,855
Less - Accumulated depreciation (32,137) (30,106)
-------- --------
Net property, plant and equipment 76,841 72,749
-------- --------
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 7,878 5,604
-------- --------
OTHER ASSETS - net 15,548 15,483
-------- --------
Total assets $178,927 $170,104
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Cash overdrafts $ 4,843 $ 3,907
Current maturities of long-term debt 6,986 6,942
Accounts payable 21,410 22,759
Accrued liabilities 15,757 14,798
-------- --------
Total current liabilities 48,996 48,406
-------- --------
LONG-TERM DEBT, less current maturities 55,483 49,443
-------- --------
DEFERRED INCOME TAXES 5,416 5,316
-------- --------
OTHER LONG-TERM LIABILITIES 4,264 4,265
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000 shares authorized;
no shares issued or outstanding - -
Common stock, $.01 par value; 25,000,000 shares authorized;
8,376,026 shares and 8,271,026 shares issued and outstanding
as of October 31, 1996 and July 31, 1996, respectively 84 83
Additional paid-in capital 56,865 55,251
Retained earnings 7,819 7,340
-------- --------
Total stockholders' equity 64,768 62,674
-------- --------
Total liabilities and stockholders' equity $178,927 $170,104
======== ========
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated balance sheets.
3
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data)
Three Months Ended
October 31
------------------------
1996 1995
-------- --------
<S> <C> <C>
NET SALES $55,911 $58,574
COST OF SALES 50,538 50,492
------- -------
Gross profit 5,373 8,082
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,235 2,941
------- -------
Operating income 2,138 5,141
INTEREST EXPENSE 1,275 1,369
AMORTIZATION OF DEFERRED FINANCING COSTS 53 34
------- -------
Income before income taxes 810 3,738
PROVISION FOR INCOME TAXES 331 1,530
------- -------
Net income $ 479 $ 2,208
======= =======
NET INCOME PER COMMON SHARE:
Net income $ 0.06 $ 0.27
======= =======
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,297 8,252
======= =======
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated statements.
4
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Months Ended October 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
(In thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings
------- ---------- --------
<S> <C> <C> <C>
BALANCE, July 31, 1995 $ 80 $49,671 $ 703
Net income - - 2,208
------- ------- -------
BALANCE, October 31, 1995 $ 80 $49,671 $ 2,911
======= ======= =======
BALANCE, July 31, 1996 $ 83 $55,251 $ 7,340
Net income - - 479
Exercised stock options 1 1,259 -
Income tax benefit from exercised stock options - 355 -
------- ------- -------
BALANCE, October 31, 1996 $ 84 $56,865 $ 7,819
======= ======= =======
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated statements.
5
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended October 31, 1996 and 1995
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
October 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 479 $ 2,208
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,718 2,752
Deferred income taxes 150 150
Changes in certain assets and liabilities
Accounts receivable - net 57 8,031
Inventories (1,503) (4,196)
Prepaid expenses and other current assets (996) 27
Other assets - net (717) (388)
Accounts payable and accrued liabilities (23) (4,982)
Other long-term liabilities (1) (13)
------- -------
Total adjustments (315) 1,381
------- -------
Net cash provided by operating activities 164 3,589
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,123) (2,390)
Investment in joint ventures (2,271) -
------- -------
Net cash used in investing activities (8,394) (2,390)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdrafts 936 1,678
Activity under the Credit Agreement:
Net activity under revolving line of credit 4,494 (5,351)
Repayment of acquisition facility (1,465) (1,416)
Draw on acquisition facility 1,750 -
Issuance of other long-term debt 1,878 2,632
Repayment of other long-term debt (573) (509)
Payment of deferred financing costs (50) (199)
Exercised stock options 1,260 -
------- -------
Net cash provided by financing activities 8,230 3,165
------- -------
Net change in cash - (1,966)
CASH, beginning of period - 1,966
------- -------
CASH, end of period $ - $ -
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 1,232 $ 1,170
Cash paid for income taxes, net 84 27
</TABLE>
The accompanying notes to the unaudited consolidated financial statements are an
integral part of these consolidated statements.
6
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ABC Rail Products Corporation (the "Company") is a leader in the
engineering, manufacturing and marketing of replacement products and
original equipment for the freight railroad and rail transit industries.
The Company's products include specialty trackwork, such as rail crossings
and switches; mechanical products, such as rail car, locomotive and idler
wheels, mounted wheel sets and metal brake shoes; and classification yard
products and automation systems.
The accompanying unaudited consolidated financial statements include, in
the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary for a fair statement of the results of
operations and financial condition of the Company for and as of the interim
dates. Results for the interim period are not necessarily indicative of
results for the entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Company
believes that the disclosures contained herein are adequate to make the
information presented not misleading. These unaudited consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's 1996
Annual Report to Stockholders.
2. BUSINESS COMBINATIONS
Effective May 31, 1996, the Company acquired Deco Industries Inc. of
Milwaukee, Wisconsin, and selected assets of Deco Automation located in
Norristown, Pennsylvania, for a combination of common stock and cash. The
acquired companies manufacture railroad classification yard retarder
control and automation systems. Pursuant to the purchase agreement, the
prior owners will be issued additional shares of common stock if certain
earnings goals are met over the next five years. For the three months
ended October 31, 1996, the assumed issuance of such contingent shares
(along with the assumed earnings level) would be antidilutive to earnings
per share.
Effective May 31, 1996, the Company purchased its partner's interest in the
ABC Rail Cogifer Industrial joint venture partnership. The then purpose of
ABC Rail-Cogifer Industrial was to manufacture and sell trackwork from the
Cincinnati, Ohio, facility purchased by the partnership from Cogifer in
January 1994. The plant's new role within the Company will be redirected
towards both new and remanufactured track products.
Effective June 21, 1996, the Company began operating a wheel mounting,
wheel assembly and trackwork service business in Tacoma, Washington. The
Company is currently leasing the operating facility from the previous
operators with whom the Company also entered into certain employment,
consulting and non-compete agreements.
7
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for substantially all inventories.
Inventory costs include material, labor and manufacturing overhead.
Supplies and spare parts primarily consist of manufacturing supplies and
equipment replacement parts.
Inventories at October 31, 1996, and July 31, 1996, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
October 31, July 31,
1996 1996
----------- -----------
<S> <C> <C>
Raw materials $22,849 $22,886
Work in process 8,618 7,779
Finished goods 5,098 4,497
Supplies and spare parts 4,256 4,156
------- -------
$40,821 $39,318
======= =======
</TABLE>
4. DEBT
The Company's primary credit facilities include a five year credit
agreement (the "Credit Agreement") and two term loans. The Credit
Agreement includes a $15.0 million non-amortizing term loan, a $50.0
million (as amended) revolving credit line and a $17.8 million (as amended)
acquisition facility. At October 31, 1996, remaining availability under
the Credit Agreement, was $26.4 million.
Interest on all amounts borrowed under the Credit Agreement is payable
monthly, in arrears, at one of the following rates at the option of the
Company: (i) base rate (as defined) plus 0.5% to 1.5%, or (ii) LIBOR (as
defined) plus 2.0% to 3.5%. As of October 31, 1996, the weighted average
interest rate of outstanding borrowings under the Credit Agreement was
8.2%. The Company has pledged as collateral for the Credit Agreement
substantially all of its property, plant and equipment, eligible accounts
receivable and inventories, intellectual property and capital stock of its
subsidiaries.
The Credit Agreement contains various financial covenants which, among
other provisions, include prohibiting or limiting the incurrence of
additional indebtedness. The Credit Agreement alson contains certain
financial covenants (all as defined) (i) requiring the maintenance of a
minimum Fixed Charge Coverage Ratio; (ii) requiring the maintenance of a
Minimum Interest Coverage Ratio; (iii) requiring the maintenance of a
minimum Adjusted Net Worth and; (iv) limiting the incurrence of Capital
Expenditures. Due to the reduced level of earnings during the first
quarter and the additional investment in the China joint venture (as
described in Note 6), the Company was not in compliance with all of the
Credit Agreement covenants as of October 31, 1996. The Company immediately
obtained a waiver of default from its group of lenders.
8
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
On September 26, 1994, the Company entered into a five-year term loan
agreement to finance up to $9.9 million in capital expenditures for the new
wheel machining center for its Calera, Alabama, facility. A total of $9.2
million was drawn under this term loan. The Company entered into an
additional seven-year term loan agreement with the same lender on July 20,
1995, to finance up to $12.5 million of capital expenditures for the new
rail mill center located in Chicago Heights, Illinois. Through October 31,
1996, $4.5 million has been drawn under this second term loan. The term
loans are secured by the related fixed assets, bear interest at 7.0% as of
October 31, 1996 and contain identical financial covenants which require
the Company to maintain minimum levels of net worth and a minimum fixed
charge coverage ratio. The Company was in compliance with all of its
covenants under the term loans as of October 31, 1996.
In conjunction with the purchase of its partner's interest in the ABC Rail-
Cogifer Industrial joint venture partnership, the Company assumed the joint
venture's existing $3.0 million revolving credit facility with a third
party financial institution. Borrowings under this facility are secured by
accounts receivable and inventories of ABC Rail-Cogifer Industrial and bear
interest at 8.75% as of October 31, 1996. The Company is evaluating the
option of consolidating this debt into its other existing debt. In the
interim, the Company is out of compliance with a certain financial covenant
related to this revolver. The lending institution has deferred issuance of
a waiver on the covenant pending the Company's decision regarding the
consolidation of this debt into its other existing debt. This debt matures
in April 1997.
5. COMMITMENTS AND CONTINGENCIES
In connection with its formation and the purchase of certain assets and
liabilities from the Railroad Products Group of Abex Corporation ("Abex")
in 1987, the Company obtained a comprehensive environmental indemnity from
Abex. The indemnity covers environmental conditions, whether or not then
known, in existence at the time of purchase, without dollar or time limit.
Shortly after the purchase, the Company performed surveys to assess the
environmental conditions at the time of the purchase. As a result of these
studies, the Company has undertaken environmental projects, including
underground storage tank removal, corrective action and other remedial
action as necessary. Some of these actions are ongoing and similar actions
may be necessary in the future. When Abex refused to compensate the
Company for cost incurred, the Company filed suit against Abex on November
18, 1991. In a separate lawsuit filed in October 1994, the Company also
asserts that Abex is required to indemnify the Company for the reduction in
value of one of the sold properties (a Pennsylvania manufacturing facility
formerly owned by the Company) caused by the environmental contamination at
that site. In October 1995, a judgment in the 1991 lawsuit was finalized
with the Company receiving a payment of $2.8 million from Abex. The
Company recorded the receipt of this payment as a reserve to address other
potential matters related to ongoing Abex issues. The judgment is
exclusive of indemnification for any future environmental claims. While
the Company believes the cost of environmental projects related to ongoing
Abex issues may be properly recoverable under the indemnity, the Company is
responsible for such cost irrespective of whether it receives payment under
the indemnity.
9
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. CHINA JOINT VENTURE
In May 1996, the Company entered into a joint venture agreement with
China's Ministry of Railroads to establish the Datong ABC Castings Company
Ltd. The joint venture will manufacture wheels in China primarily for the
rapidly growing Chinese railway markets. The Company's contribution of its
40% share in the joint venture will consist of technical know-how,
expertise and cash. The Company's cash infusion of approximately $9.3
million will be made over the next three to six months and is expected to
be funded from operations. Through October 31, 1996, $3.7 million ($2.1
million during the first quarter of fiscal 1997) has been contributed to
the joint venture and additional amounts have been deferred in organizing
the venture.
10
<PAGE>
ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the interim periods included in the accompanying unaudited
Consolidated Financial Statements.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THREE MONTHS ENDED OCTOBER 31,
1995
Net Sales. Net sales decreased 4.5% to $55.9 million from $58.6 million. The
decrease in sales is due primarily to a reduction in sales from specialty
trackwork, and wheels and idlers. The reduction in specialty trackwork sales is
attributable to the merger-induced slowdown of order releases from the Western
Class I railroads and the acceleration of the planned manufacturing process
changes at the Company's trackwork plants. These process upgrades require major
reconfiguring of the shop floors' layouts into cell manufacturing centers
resulting in disruptions to the normal manufacturing process flow. The normal
seasonal lull (coupled with the new orders expected now that the Union Pacific-
Southern Pacific merger is complete) made this an opportune time to absorb a
mild, short-term setback in sales in exchange for improved capacity. The
decline in sales of wheels and idlers also reflects the decision to accelerate
process improvements at the wheel foundry in Calera, Alabama. While these
foundry process improvements also resulted in production slowdowns at this
plant, when completed, the foundry will provide the quality input needed to
capitalize on the significant improvements recently instituted in the plant's
machine shop.
Gross Profit and Cost of Sales. Gross profit decreased 33.5% to $5.4 million
from $8.1 million. The $2.7 million decrease was primarily due to the sales
changes discussed above. In addition, the track and wheel plants were further
impacted by reduced output due to manufacturing improvements with virtually no
change in fixed costs during this quarter.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.3 million. The small increase in expenses
between quarters does not include any unusual items.
Operating Income. Operating income decreased 58.4% to $2.1 million from $5.1
million. The decrease resulted largely from the 33.5% ($2.7 million) decrease
in gross profit, along with the increase in selling, general and administrative
expenses ($0.3 million). In addition to the issues previously discussed, the
Company's sales and profits are typically lower during the first half of the
Company's fiscal year than during the second half of the fiscal year. See
"Seasonality."
Other. Interest expense decreased 6.9%, or $0.1 million, due primarily to
continuing repayment of the acquisition facility of the Credit Agreement and a
reduction in interest rates on a portion of the Credit Agreement debt.
11
<PAGE>
SEASONALITY
- -----------
The peak season for installation of specialty trackwork extends from March
through October, when weather conditions are generally favorable for
installation and, as a result, net sales of specialty trackwork have
historically been more concentrated in the period from January through June, a
period roughly corresponding to the second half of the Company's fiscal year.
In addition, a number of the Company's facilities close for regularly scheduled
maintenance in the late summer and late December, which tends to reduce
operating results during the first half of the Company's fiscal year. Transit
industry practice with respect to specialty trackwork generally involves the
periodic shipment of large quantities, which may be unevenly distributed
throughout the year. The Company does not expect any significant departure from
the historical demand patterns during the present fiscal year ending July 31,
1997.
The following graphs illustrate the historical results of the Company's seasonal
pattern of sales and income.
[GRAPH APPEARS HERE]
Graph showing the following data (Description of Graphs for Edgar Filing):
Quarterly Net Sales
In 1993: Q1 $31.8 million, Q2 $33.2 million, Q3 $40.5 million and Q4 $43.2
million
In 1994: Q1 $37.2 million, Q2 $40.1 million, Q3 $52.2 million and Q4 $57.7
million
In 1995: Q1 $54.6 million, Q2 $56.3 million, Q3 $62.1 million and Q4 $70.2
million
In 1996: Q1 $58.6 million, Q2 $58.5 million, Q3 $60.1 million and Q4 $63.4
million
In 1997: Q1 $55.9 million
12
<PAGE>
Graph showing the following data (Description of Graphs for Edgar Filing):
[GRAPH APPEARS HERE]
*Before Cumulative Effect of Accounting Change and Extraordinary Items
Quarterly Income / (Loss)*
In 1993: Q1 $0.1 million, Q2 $0.5 million, Q3 $1.2 million and Q4 $1.8
million
In 1994: Q1 $0.8 million, Q2 $1.3 million, Q3 $2.4 million and Q4 $2.4
million
In 1995: Q1 $2.0 million, Q2 $2.1 million, Q3 $3.8 million and Q4 $3.8
million
In 1996: Q1 $2.2 million, Q2 $2.7 million, Q3 ($2.5) million and Q4 $4.4
million
In 1997: Q1 $0.5 million
* Before cumulative effect of accounting change and extraordinary items.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
Cash generated from operations, structured borrowings and equity offerings have
been the major sources of funds for working capital, capital expenditures and
acquisitions. For the three months ended October 31, 1996 and 1995, net cash
provided by operating activities totaled $0.2 million and $3.6 million,
respectively. The decrease in operating cash flow is due primarily to the
reduction in net income between periods and the net increase in working capital
items.
Capital expenditures during the first quarter of fiscal 1997 and 1996 were $6.1
million (including $3.3 million related to the new rail mill located in Chicago
Heights, IL) and $2.4 million, respectively.
In May 1996, the Company entered into a joint venture agreement with China's
Ministry of Railroads to establish the Datong ABC Castings Company Ltd. The
joint venture will manufacture wheels in China primarily for the rapidly growing
Chinese railway markets. The Company's contribution of its 40% share in the
joint venture will consist of technical know-how, expertise and cash. The
Company's cash infusion of approximately $9.3 million will be made over the next
three to six months, and is expected to be funded from operations. Through
October 31, 1996, $3.7 million ($2.1 million during the first quarter of fiscal
1997) has been contributed to the joint venture and additional amounts have been
deferred in organizing the venture.
For the three months ended October 31, 1996 and 1995, net cash provided by
financing activities totaled $8.2 million and $3.2 million, respectively. The
increase in financing cash flows is due primarily to (a) the net draw on the
Credit Agreement to support the reduced cash from operating activities and the
increased use of cash for investing activities; (b) a draw on the acquisition
facility to finance the purchase of the Company's partner's interest in the ABC
Rail-Cogifer Industrial joint venture partnership (see Note 2 for additional
information); (c) a draw on the term loan to support the capital expenditures
for the new rail mill (see following for additional comments); and (d) proceeds
from the exercise, during the current quarter, of stock options.
On September 26, 1994, the Company entered into a five-year term loan agreement
to finance up to $9.9 million in capital expenditures for the new wheel
machining center for its Calera, Alabama facility. A total of $9.2 million was
drawn under this loan. The Company entered into an additional seven-year term
loan agreement with the same lender on July 20, 1995 to finance up to $12.5
million of capital expenditures for the new rail mill center located in Chicago
Heights, Illinois. Through October 31, 1996, $4.5 million has been drawn under
this second term loan. Both term loans contain the same financial covenants
which require the Company to maintain minimum levels of net worth and a minimum
fixed charge coverage ratio. The Company was in compliance with all of its
covenants under the term loans as of October 31, 1996.
The Credit Agreement includes a $15.0 million non-amortizing term loan, a $50.0
million (as amended) revolving credit line and a $17.8 million (as amended)
acquisition facility. At October 31, 1996, remaining availability under the
Credit Agreement was $26.4 million and the weighted average interest rate of
outstanding borrowings was 8.2%. The Credit Agreement contains customary
financial and other covenants. Due to the reduced level of earnings during the
quarter and the additional investment in the China joint venture, the Company
was not in compliance with all of the Credit Agreement covenants as of October
31, 1996. The Company immediately obtained a waiver of default from its group
of lenders.
On November 15, 1996, the Company filed a registration statement for the
potential offering, from time to time, of Subordinated Debt Securities and/or
shares of its Common Stock, par
14
<PAGE>
value $0.01, at prices and on terms to be determined when an agreement to sell
is made or at the time or times of sales, as the case may be. The Subordinated
Debt Securities and the Common Stock may be issued in one or more series or
issuances, as the case may be, and the aggregate initial offering price thereof
will not exceed $100 million. The Company expects it may issue Subordinated Debt
Securities during the second quarter of 1997 to finance the reduction of
outstanding Senior Debt.
FORWARD-LOOKING STATEMENTS
- --------------------------
The foregoing outlook contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current expectations due to a number
of factors, including general economic conditions; competitive factors and
pricing pressures; shifts in market demand, the performance and needs of
industries served by the Company's businesses; actual future costs of operating
expenses such as rail and scrap steel, self-insurance claims and employee wages
and benefits; actual costs of continuing investments in technology; and the
risks described from time to time in the Company's SEC reports.
15
<PAGE>
Part II OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 6 - Exhibits and Reports on Form 8-K
(A) Exhibits
3.1 Certificate of Designation, Preferences and Rights of Series
A Junior Participating Preferred Stock of the Company.
3.2 Certificate of Correction of Certificate of Designation of
the Company.
4.1 Amendment No. 1, dated as of November 18, 1996 to Rights
Agreement, dated as of September 29, 1995, between the
Company and LaSalle National Trust, N.A., as Rights Agent.
27.1 Financial Data Schedule.
(B) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated October 8,
1996 to report, under Item 5 of Form 8-K, the retirement of Mr.
Ben R. Yorks, the Company's former President and Chief Operating
Officer and a Current Report on Form 8-K dated October 22, 1996
to report, under Item 5 of Form 8-K, strategic plant upgrades and
expected lower sales and substantial earnings decline for the
first quarter.
16
<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.
ABC RAIL PRODUCTS CORPORATION
/s/ D. Chisholm MacDonald
-------------------------------------------
D. Chisholm MacDonald
Senior Vice President and
Chief Financial Officer
(Duly authorized Officer and
Principal Financial and Accounting Officer)
Date: December 3, 1996
------------------------------
17
<PAGE>
Exhibit 3.1
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
OF
ABC RAIL PRODUCTS CORPORATION
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
We, Donald W. Grinter, Chairman and Chief Executive Officer, and D.
Chisholm MacDonald, Senior Vice President, Chief Financial Officer and Secretary
of ABC Rail Products Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), in
accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by the
Certificate of Incorporation, as amended, of the Corporation, the Board of
Directors on September 29, 1995 adopted the following resolution creating a
series of 100,000 shares of preferred stock designated as Series A Junior
Participating Preferred Stock:
RESOLVED, that pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of its Certificate of
Incorporation, as amended, a series of preferred stock, par value $.01 per
share, of the Corporation (such preferred stock being herein referred to as
"Preferred Stock," which term shall include any additional shares of preferred
stock of the same class heretofore or hereafter authorized to be issued by the
Corporation), consisting of 100,000 shares is hereby created, and the voting
powers, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions thereof, are as
follows:
Section 1. Designation and Amount. There shall be a series of Preferred
Stock of the Corporation which shall be designated as "Series A Junior
Participating Preferred Stock," par value $.01 per share (hereinafter called
"Series A Preferred Stock"), and the number of shares constituting such series
shall be 100,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors and by the filing of a certificate pursuant
to the provisions of the General Corporation Law of the State of Delaware
stating that such increase or reduction has been so authorized; provided,
however, that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than that of the shares then outstanding plus
the number of shares of Series A Preferred Stock issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.
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Section 2. Dividends and Distributions.
---------------------------
(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock ranking prior and superior to the shares of
Series A Preferred Stock with respect to dividends, the holders of shares of
Series A Preferred Stock shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for such purpose,
quarterly dividends payable in cash to holders of record on the last business
day of March, June, September and December in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on the
first Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends, and 100 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other distributions other than a
dividend payable in shares of Common Stock (hereinafter defined) or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock, par value $.01 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time following
September 29, 1995 (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying each such amount by a fraction the numerator of which
is the number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event. distribution on the Common Stock
(other than a dividend payable in shares of Common Stock).
(C) No dividend or distribution (other than a dividend payable in shares of
Common Stock) shall be paid or payable to the holders of shares of Common Stock
unless, prior thereto, all accrued but unpaid dividends to the date of such
dividend or distribution shall have been paid to the holders of shares of Series
A Preferred Stock.
(D) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly
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Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be no more than 30 days prior to the date fixed
for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth, each one
one-hundredth of a share of Series A Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of the stockholders of
the Corporation. In the event the Corporation shall at any time following
September 29, 1995 (i) declare any dividend on Common Stock payable in share of
Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Common Stock and any other
capital stock of the Corporation having general voting rights shall vote
together as one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) Whenever, at any time or times, dividends payable on any share or
shares of Series A Preferred Stock shall be in arrears in an amount equal
to at least six full quarterly dividends (whether or not declared and
whether or not consecutive), the holders of record of the outstanding
Preferred Stock shall have the exclusive right, voting separately as a
single class, to elect a total of two directors of the Corporation. Such
two directors shall be
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elected initially at a special meeting of stockholders of the Corporation
or at the Corporation's next annual meeting of stockholders, and
subsequently at each annual meeting of stockholders, as provided below.
The term of office of the two directors so elected shall end on the date of
the annual meeting following such election. At elections for such
directors, the holders of shares of Series A Preferred Stock shall be
entitled to case one vote for each one one-hundredth of a share of Series A
Preferred Stock held.
(ii) Upon the vesting of such right of the holders of the Preferred
Stock, the maximum authorized number of members of the Board of Directors
shall automatically be increased by two and the two vacancies so created
shall be filled by vote of the holders of the outstanding Preferred Stock
as hereinafter set forth. A special meeting of the stockholders of the
Corporation then entitled to vote shall be called by the Chairman or the
President or the Secretary of the Corporation, if requested in writing by
the holders of record of not less than 10% of the Preferred Stock then
outstanding. At such special meeting, or, if no such special meeting shall
have been called, then at the next annual meeting of stockholders of the
Corporation, the holders of the shares of the Preferred Stock shall elect,
voting as above provided, two directors of the Corporation to fill the
aforesaid vacancies created by the automatic increase in the number of
members of the Board of Directors. The term of office of the two directors
so elected shall end on the date of the annual meeting following such
election. At any and all such meetings for such election, the holders of a
majority of the outstanding shares of the Preferred Stock shall be
necessary to constitute a quorum for such election, whether present in
person or by proxy, and such two directors shall be elected by the vote of
at least a plurality of shares held by such stockholders present or
represented at the meeting. Any director elected by holders of shares of
the Preferred Stock pursuant to this Section may be removed at any annual
or special meeting, by vote of a majority of the stockholders voting as a
class who elected such director, with or without cause. In case any
vacancy shall occur among the directors elected by the holders of the
Preferred Stock pursuant to this Section, such vacancy may be filled by the
remaining director so elected, or his successor then in office, and the
director so elected to fill such vacancy shall serve until the next meeting
of stockholders for the election of directors. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during the continuance of such period, the number of
Directors shall not be further increased or decreased except by vote of the
holders of Preferred Stock as herein provided or pursuant to the rights of
any equity securities ranking senior to or pari passu with the Series A
Preferred Stock.
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(iii) The right of the holders of the Preferred Stock, voting
separately as a class, to elect two members of the Board of Directors of
the Corporation as aforesaid shall continue until, and only until, such
time as all arrears in dividends (whether or not declared) on the Preferred
Stock shall have been paid or declared and set apart for payment, at which
time such right shall terminate, except as herein or by law expressly
provided, subject to revesting in the event of each and every subsequent
default of the character above-mentioned. Upon any termination of the
right of the holders of the shares of the Preferred Stock as a class to
vote for directors as herein provided, the term of office of all directors
then in office elected by the holders of Preferred Stock pursuant to this
Section shall terminate immediately. Whenever the term of office of the
directors elected by the holders of the Preferred Stock pursuant to this
Section shall terminate and the special voting powers vested in the holders
of the Preferred Stock pursuant to this Section shall have expired, the
maximum number of members of the Board of Directors of the Corporation
shall be such number as may be provided for in the By-laws of the
Corporation irrespective of any increase made pursuant to the provisions of
this Section.
(D) Except as set forth herein, holders of Series A Preferred Stock shall
have no special voting rights and their consent shall not be required (except to
the extent they are entitled to vote with holders of Common Stock as set forth
herein) for taking any corporate action.
Section 4. Certain Restrictions.
--------------------
(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series A Preferred Stock outstanding shall have
been paid in full, the corporation shall not:
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends no or make any other distributions on
any shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
except dividends paid ratably on the Series A Preferred Stock and all such
parity stock on which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are then
entitled;
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(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares of any stock
of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section,
purchase or otherwise acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any
voluntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock unless, prior thereto, the holders of shares of Series
A Preferred Stock shall have received $.01 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment (the "Series A Liquidation Preference"). Following
the payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of shares of Series A
Preferred Stock unless, prior thereto, the holders of shares of Common Stock
shall have received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by (ii)
100 (as
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appropriately adjusted as set forth in subparagraph C below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) (such number in clause (ii), the "Adjustment Number").
Following the payment of the full amount of the Series A Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively, holders of Series A Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio, on a
per share basis, of the Adjustment Number to 1 with respect to such Preferred
Stock and Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, which
rank on a parity with the Series A Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such parity shares in proportion
to their respective liquidation preferences.
(C) In the event the Corporation shall at any time following September 29,
1995 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding shares of Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination or other transaction in which
the shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amount set forth in the preceding sentence
with respect to the exchange or change of shares of Series A Preferred Stock
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the
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denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. Redemption. The shares of Series A Preferred Stock shall
not be redeemable by the Corporation. The preceding sentence shall not limit
the ability of the Corporation to purchase or otherwise deal in such shares of
stock to the extent permitted by law.
Section 9. Ranking. The Series A Preferred Stock shall rank junior to
all other series of the Corporation's preferred stock (whether with or without
par value) as to the payment of dividends and the distribution of assets, unless
the terms of any such series shall provide otherwise.
Section 10. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Stock, voting
separately as a class.
Section 11. Fractional Shares. Series A Preferred Stock maybe issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
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IN WITNESS WHEREOF, ABC Rail Products Corporation has caused its corporate
seal the hereunto affixed and this Certificate to be signed by Donald W.
Grinter, its Chairman and Chief Executive Officer and the same to be attested by
D. Chisholm MacDonald, its Senior Vice President, Chief Financial Officer and
Secretary, this 29th day of September, 1995.
ABC RAIL PRODUCTS CORPORATION
By: /s/ Donald W. Grinter
--------------------------------------
Donald W. Grinter
Chairman and Chief Executive Officer
(SEAL)
Attest:
By: /s/ D. Chisholm MacDonald
-------------------------
D. Chisholm MacDonald
Senior Vice President, Chief
Financial Officer and Secretary
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Exhibit 3.2
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF DESIGNATION
OF
ABC RAIL PRODUCTS CORPORATION
Pursuant to Section 103(f) of the
General Corporation Law of the State of Delaware
ABC Rail Products Corporation, a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
in accordance with the provisions of Section 103 thereof, hereby certifies that
the Certificate of Designation, Preferences and Rights of Series A Junior
Participating Preferred Stock (the "Certificate of Designation") of the
Corporation filed on September 29, 1995 with the Secretary of State of the State
of Delaware contained an inaccurate record of the corporate action referred to
therein.
The third paragraph of the Certificate of Designation stated that:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of preferred stock, par
value $.01 per share, of the Corporation (such preferred stock being herein
referred to as "Preferred Stock," which term shall include any additional
shares of preferred stock of the same class heretofore or hereafter
authorized to be issued by the Corporation), consisting of 100,000 shares
is hereby created, and the voting powers, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof, are as follows:
The third paragraph of the Certificate of Designation should read in
its entirety as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the Corporation in accordance with the provisions of its
Certificate of Incorporation, as amended, a series of preferred stock, par
value $1.00 per share, of the Corporation (such preferred stock being
herein referred to as "Preferred Stock," which term shall include any
additional shares
<PAGE>
of preferred stock of the same class heretofore or hereafter authorized to
be issued by the Corporation), consisting of 100,000 shares is hereby
created, and the voting powers, preferences and relative, participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereof, are as follows:
Section 1 of the Certificate of Designation stated that:
Section 1. Designation and Amount. There shall be a series of
Preferred Stock of the Corporation which shall be designated as "Series A
Junior Participating Preferred Stock," par value $.01 per share
(hereinafter called "Series A Preferred Stock"), and the number of shares
constituting such series shall be 100,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors and by the
filing of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase or
reduction has been so authorized; provided, however, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less
than that of the shares then outstanding plus the number of shares of
Series A Preferred Stock issuable upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by
the Corporation.
Section 1 of the Certificate of Designation should read in its
entirety as follows:
Section 1. Designation and Amount. There shall be a series of
Preferred Stock of the Corporation which shall be designated as "Series A
Junior Participating Preferred Stock," par value $1.00 per share
(hereinafter called "Series A Preferred Stock"), and the number of shares
constituting such series shall be 100,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors and by the
filing of a certificate pursuant to the provisions of the General
Corporation Law of the State of Delaware stating that such increase or
reduction has been so authorized; provided, however, that no decrease shall
reduce the number of shares of Series A Preferred Stock to a number less
than that of the shares then outstanding plus the number of shares of
Series A Preferred Stock issuable upon exercise of outstanding rights,
options or warrants or upon conversion of outstanding securities issued by
the Corporation.
<PAGE>
IN WITNESS WHEREOF, ABC Rail Products Corporation has caused this
Certificate of Correction of the Certificate of Designation to be duly executed
by its Chairman of the Board and Chief Executive Officer and attested to by its
Senior Vice President, Chief Financial Officer and Secretary this 15th day of
November, 1996.
ABC RAIL PRODUCTS CORPORATION
By /s/ Donald W. Grinter
-----------------------------------------
Chairman of the Board and Chief Executive
Officer
ATTEST:
/s/ D. Chisholm MacDonald
- -------------------------------------
Senior Vice President,
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT 4.1
AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT
---------------------------------------
Amendment No. 1, dated as of November 18, 1996 (this "Amendment No. 1"), to
the Rights Agreement between ABC RAIL PRODUCTS CORPORATION, a Delaware
corporation (the "Company") and LA SALLE NATIONAL TRUST, N.A., a national
banking association, as Rights Agent (the "Rights Agent"), dated as of September
29, 1995 (the "Rights Agreement").
W I T N E S S E T H
-------------------
WHEREAS, the parties hereto have entered into the Rights Agreement;
WHEREAS, the Rights Agreement contains a typographical error in that it
references the par value of the preferred stock of the Company as $.01, rather
than $1.00 as authorized by the Company's Amended and Restated Certificate of
Incorporation;
WHEREAS, pursuant to Section 27 of the Rights Agreement, without the
approval of any holders of Rights Certificates, the parties to the Rights
Agreement have agreed to correct provisions in the Rights Agreement that are
defective by correcting such typographical error in each place in which it
appears in such Rights Agreement; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, without the
approval of any holders of Rights Certificates, the Company has deemed it
necessary, appropriate and desirable, and the parties to the Rights Agreement
have agreed, to amend the definition of Acquiring Person (as defined therein) in
the Rights Agreement to eliminate the provision that states that an Acquiring
Person shall not include any Affiliate (as defined therein) of the Company and
to replace it with a provision that states that an Acquiring Person shall not
include any Subsidiary (as defined therein) of the Company;
NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
SECTION I. Defined Terms. Capitalized terms used herein and not otherwise
defined shall have the meanings given to them in the Rights Agreement.
SECTION II. Amendments to Rights Agreement. The Rights Agreement is hereby
amended as follows:
2.01. The words "Series A Junior Participating Preferred Stock, par value
$.01 per share" in each and every place in which they appear in the Rights
Agreement, including in Exhibits A, B and C thereto, are hereby amended by
replacing such words with the words "Series A Junior Participating Preferred
Stock, par value $1.00 per share".
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2.02 The words "'Series A Junior Participating Preferred Stock,' par
value $.01 per share" in each and every place in which they appear in the Rights
Agreement, including in Exhibits A, B and C thereto, are hereby amended by
replacing such words with the words "'Series A Junior Participating Preferred
Stock,' par value $1.00 per share".
2.03 The words "preferred stock, par value $.01 per share" in each
and every place in which they appear in the Rights Agreement, including in
Exhibits A, B and C thereto, are hereby amended by replacing such words with the
words "preferred stock, par value $1.00 per share".
2.04 The definition of "Acquiring Person" in Section 1 of the Rights
Agreement is hereby amended by amending and restating such definition in its
entirety as follows:
"'Acquiring Person' shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 15% or more
of the Common Shares of the Company then outstanding, but shall not include
the Company, any Subsidiary of the Company, any employee benefit plan of
the Company or of any Subsidiary of the Company, or any person or entity
for or pursuant to the terms of any such plan. Notwithstanding the
foregoing, no Person shall become an 'Acquiring Person' as the result of
(i) an acquisition of Common Shares by the Company which, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of
the Company then outstanding, or (ii) the acquisition by such Person of
newly-issued Common Shares directly from the Company (it being understood
that a purchase from an underwriter or other intermediary is not deemed for
purposes hereof to be a purchase directly from the Company); provided,
however, that if a Person shall become the Beneficial Owner of 15% or more
of the Common Shares of the Company then outstanding by reason of share
purchases by the Company or the receipt of newly-issued shares directly
from the Company and shall, after such share purchases or direct issuance
by the Company, become the Beneficial Owner of any additional Common Shares
of the Company (and thereafter remains a Beneficial Owner of 15% or more of
the Common Shares of the Company), then such Person shall be deemed to be
an 'Acquiring Person'; provided further, however, that any transferee from
such Person who becomes the Beneficial Owner of 15% or more of the Common
Shares of the Company then outstanding shall nevertheless be deemed to be
an 'Acquiring Person.' Notwithstanding the foregoing, if the Board of
Directors of the Company determines in good faith that a Person who would
otherwise be an 'Acquiring Person,' as defined pursuant to the foregoing
provisions of this paragraph, has become such inadvertently, and such
Person divests as promptly as practicable (and in any event within ten
business days after notification by the Company) a sufficient number of
Common Shares so that such Person would no longer be an Acquiring Person,
as defined pursuant to the foregoing provisions of this paragraph, then
such Person shall not be deemed to be an 'Acquiring Person' for any
purposes of this Agreement."
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SECTION III. Miscellaneous.
3.01. Governing Law. This Amendment No. 1 shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of the State of Delaware
applicable to contracts to be made and performed entirely within the State of
Delaware.
3.02. Counterparts. This Amendment No. 1 may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
3.03. Descriptive Headings. Descriptive headings of the several Sections
of this Amendment No. 1 have been inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
3.04. Ratification. This Amendment No. 1 is limited as specified and shall
not constitute a modification, acceptance, consent or waiver of any other
provision of the Rights Agreement. The Rights Agreement, including the Exhibits
thereto, as hereby amended is in all respects ratified and confirmed, and all
the rights and powers created thereby or thereunder shall be and remain in full
force and effect. From and after the date hereof, all references in the Rights
Agreement, the Exhibits thereto and all other documents related to the Rights
Agreement shall be deemed to be references to the Rights Agreement after giving
effect to this Amendment No. 1.
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IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly
executed and attested, all as of the day and year first above written.
Attest: ABC RAIL PRODUCTS CORPORATION
By: /s/ Jo Ellen Woomer By: /s/ D. Chisholm MacDonald
-------------------------------- --------------------------------
Name: Jo Ellen Woomer Name: D. Chisholm MacDonald
Title: Executive Assistant Title: Senior Vice President &
CFO
Attest: LA SALLE NATIONAL TRUST, N.A.,
By: /s/ Diane Swanson By: /s/ Sarah H. Webb
-------------------------------- --------------------------------
Name: Diane Swanson Name: Sarah H. Webb
Title: Assistant Secretary Title: Group Vice President
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 31,458<F1>
<ALLOWANCES> 0<F1>
<INVENTORY> 40,821
<CURRENT-ASSETS> 78,660
<PP&E> 108,978
<DEPRECIATION> 32,137
<TOTAL-ASSETS> 178,927
<CURRENT-LIABILITIES> 48,996
<BONDS> 55,483
<COMMON> 84
0
0
<OTHER-SE> 64,684
<TOTAL-LIABILITY-AND-EQUITY> 178,927
<SALES> 55,911
<TOTAL-REVENUES> 55,911
<CGS> 50,538
<TOTAL-COSTS> 50,538
<OTHER-EXPENSES> 3,235
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,328
<INCOME-PRETAX> 810
<INCOME-TAX> 331
<INCOME-CONTINUING> 479
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 479
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
<FN>
<F1> Notes and accounts receivable - trade are reported net of allowances for
doubtful accounts in the Consolidated Balance Sheets.
</FN>
</TABLE>
