SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Atchison Casting Corporation
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[LOGO]
ATCHISON CASTING CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held December 12, 2002
Notice is hereby given that the Annual Meeting of Stockholders of
Atchison Casting Corporation (the "Company") will be held at the offices of the
Company, 400 South Fourth Street, Atchison, Kansas, on Thursday, December 12,
2002, at 11 a.m. (Central Time) for the following purposes:
1. To elect two Class III Directors to serve for a term of three
years.
2. To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on October 21,
2002 as the record date for the determination of stockholders entitled to
receive notice of and to vote at the meeting. If you own stock in Atchison
Casting Corporation as of that date, you are cordially invited to attend the
meeting.
Your vote is important. Whether or not you plan to attend the meeting,
please sign and date the enclosed proxy and promptly return it in the envelope
provided. No postage is necessary if mailed in the United States. If you attend
the meeting, we will be glad to return your proxy so that you may vote in
person.
PLEASE RETURN YOUR PROXY - THANKS!
By Order of the Board of Directors,
/s/ Thomas K. Armstrong, Jr.
Thomas K. Armstrong, Jr.
Chairman of the Board and
Chief Executive Officer
Atchison, Kansas
November 6, 2002
ATCHISON CASTING CORPORATION
400 South Fourth Street
Atchison, Kansas 66002-0188
(913) 367-2121
PROXY STATEMENT
for
Annual Meeting of Stockholders
to be held December 12, 2002
GENERAL INFORMATION
This proxy statement is being furnished to you on or about November 6,
2002, in connection with the solicitation of proxies by the Board of Directors
of Atchison Casting Corporation, a Kansas corporation (the "Company"), for use
at the Annual Meeting of Stockholders to be held at the Company's offices, 400
South Fourth Street, Atchison, Kansas, at 11:00 a.m. (Central Time) on Thursday,
December 12, 2002. The Company will use the proxies it receives to: (i) elect
two Class III directors and (ii) to transact other business properly coming
before the Annual Meeting. In order to provide every stockholder with an
opportunity to vote on all matters scheduled to come before the Annual Meeting
and to be able to transact business at the meeting, proxies are being solicited
by the Company's Board of Directors. Upon execution and return of the enclosed
proxy, the shares represented by it will be voted by the persons designated
therein as proxies, in accordance with the stockholder's directions. You may
vote on a matter by marking the appropriate box on the proxy or, if no box is
marked for a specific matter, the shares will be voted as recommended by the
Board of Directors on that matter.
You may revoke the enclosed proxy at any time before it is voted by (i)
notifying the Secretary of the Company in writing before the Annual Meeting,
(ii) exercising a proxy of a later date and delivering such later proxy to the
Secretary of the Company prior to the Annual Meeting or (iii) attending the
Annual Meeting and voting in person. Unless the proxy is revoked or is received
in a form that renders it invalid, the shares represented by it will be voted in
accordance with the instructions contained therein.
The Company will bear the cost of solicitation of proxies, which will
be principally conducted by the use of the mails; however, certain officers and
employees of the Company may also solicit proxies by telephone, telegram or
personal interview. Such expense may also include ordinary charges and expenses
of brokerage firms and others, for forwarding soliciting material to beneficial
owners.
On October 21, 2002, the record date for determining stockholders
entitled to vote at the Annual Meeting, the Company had outstanding and entitled
to vote 7,723,031 shares of common stock, par value $.01 per share (the "Common
Stock"). Each outstanding share of Common Stock entitles the record holder to
one vote.
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, elected for terms
of three years and until their successors are elected and qualified. Two Class
III directors are to be elected at the meeting. The proxies named in the
accompanying proxy intend to vote for the election of Vladimir Rada and William
Bullard. In the event Mr. Rada or Mr. Bullard should become unavailable for
election, which is not anticipated, the proxies will be voted for such
substitute nominees as may be nominated by the Board of Directors. The nominees
for election as Class III directors who receive the greatest number of votes
cast for election of the directors at the meeting, a quorum being present, shall
be elected as directors of the Company. Abstentions, broker nonvotes and
instructions on the accompanying proxy card to withhold authority to vote for a
nominee will result in the nominee receiving fewer votes.
Information Concerning Nominees
The following table sets forth information with respect to the nominees
to the Board of Directors.
Class III - Term Expiring 2005
Principal Occupation and
Name Age Five-Year Employment History
- ---- --- ----------------------------
Vladimir Rada 48 Director since July 2002. Since December 2001, Mr.
Rada has been a charter member and partner in
SKOFORGE, s.r.o. From November 1994 to October 2001,
he served as Executive and Director of both SKODA Steel,
konsorcium and SKODA, Kovarny, Plzen, s.r.o.
William Bullard 52 Director since May 2002. Since 1986, Mr. Bullard
has been President of Silver Spring Holdings, Inc.,
a private investment bank From 1989 to 1994, he
served as Chairman, President and Chief Executive
Officer of American Mirrex Corporation.
Information Concerning Directors Continuing in Office
The following table sets forth information with respect to the
directors who are continuing in office for the respective periods and until
their successors are elected and qualified.
Class I - Term Expiring 2003
Principal Occupation and
Name Age Five-Year Employment History
- ---- --- ----------------------------
Thomas K. Armstrong 48 Chairman of the Board, President and Chief Executive
Officer since May 2002. Director since December 2001.
Chief Operating Officer - North America from
March 1999 to May 2002. From 1987 to 1999, Mr.
Armstrong served as President of Texas Steel Co.,
a subsidiary of Citation Corporation. From
1997 to 1999 he has served as President of the
Steel Founders' Society of America.
Hugh H. Aiken 58 Vice President since May 2002. Director since June
1991. Chairman of the Board, President and Chief
Executive Officer from June 1991 to May 2002.
2
Class II - Term Expiring 2004
Principal Occupation and
Name Age Five-Year Employment History
- ---- --- ----------------------------
Michael v.B. Nagel 61 Director since May 2002. Since 2001, Mr. Nagel,
has been a partner with the Tallis Group, an
U.K.-based executive search firm. He served as
Senior Adviser to the Romanian Ministry of SME's
from 2000 to 2001. From 1997 to 1999, he was the
Managing Director of Pricewaterhouse Poland.
Stanley B. Atkins 60 Director since September 2002. Since June 2001,
Mr. Atkins has been President of Highland Sales
Group, Inc., a consulting, sales and marketing
firm. Since November 2000, he has been President
of Omega Business Development, Inc. From 1991 to
2000, Mr. Atkins was employed by Citation
Corporation and during that time he held the
following positions: Vice-President - Sales,
Vice-President - Marketing, Corporate Secretary
and Vice-President - Corporate Planning and
Development.
Committees of the Board of Directors
The standing committees of the Board of Directors are an Audit
Committee and a Compensation Committee.
The Audit Committee consists of Mr. Bullard, Mr. Nagel and Mr. Atkins.
Mr. Bullard is the Chairman of the Audit Committee. The Audit Committee serves
as an independent and objective party to monitor the Company's financial
reporting process and internal control system; reviews and appraises the audit
efforts of the Company's independent auditors and internal auditors; and
provides an open avenue of communication among the independent auditors,
financial and senior management, the internal auditors and the Board of
Directors. Each member of the Audit Committee is independent, as defined in
Sections 303.01(B)(2)(a) and (3) of the listing standards of the New York Stock
Exchange.
The Compensation Committee consists of Mr. Nagel and Mr. Bullard. Mr.
Nagel is the Chairman of the Compensation Committee. The Compensation Committee
annually reviews and makes recommendations to the Board of Directors regarding
compensation arrangements with the executive officers of the Company and reviews
and approves the procedures for administering employee benefit plans of all
types.
During the 2002 fiscal year, the Board of Directors met 7 times, the Audit
Committee met 2 times and the Compensation Committee met 2 times. During the
2002 fiscal year each Director attended all of the meetings of the Board of
Directors and the committees on which they served, that occurred after such
directors' appointment to the Board of Directors.
AUDIT COMMITTEE REPORT
On October 17, 2002, the Board of Directors of the Company amended the
Audit Committee Charter, upon the recommendation of the Audit Committee. The
Audit Committee Charter, as amended, is attached to this Proxy Statement as
Appendix A.
On April 16, 2002, the Board of Directors of the Company, upon
recommendation of the Audit Committee of the Company, adopted resolutions
dismissing Deloitte & Touche LLP as the Company's independent auditor and
engaging KPMG LLP as the new independent auditor of the Company. The reports of
Deloitte & Touche LLP on the consolidated financial statements of the Company
for the years ended June 30, 2001 and 2000 did not contain any adverse opinion
or disclaimer of opinion, nor were such reports qualified or modified as to
audit scope or accounting principles. Deloitte & Touche LLP's audit report on
the consolidated financial statements of the Company for the year ended June 30,
2001 included an explanatory paragraph concerning the Company's ability to
continue as a going concern. Deloitte & Touche LLP's audit report on the
restated consolidated financial statements of the Company for the year ended
June 30, 2000 included explanatory paragraphs emphasizing that the consolidated
financial statements had been restated and that certain debt had been classified
as current due to debt covenant violations.
3
During the years ended June 30, 2001 and 2000, and any subsequent
interim period preceding April 16, 2002, there were no disagreements between the
Company and Deloitte & Touche on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
would have caused Deloitte & Touche LLP, if not resolved to the satisfaction of
Deloitte & Touche LLP, to make a reference to the subject matter of the
disagreements in connection with its reports.
Following the completion of its audits of the consolidated financial
statements of the Company for the years ended June 30, 2001 and 2000 (as
restated), Deloitte & Touche LLP reported to, and discussed with, the Audit
Committee of the Company that certain matters that it considered to be
reportable conditions under standards established by the American Institute of
Certified Public Accountants were noted in the internal control of the Company.
According to Deloitte, these conditions related to ineffective operation of
established policies and procedures in place for the review of foundry
accounting and reporting information in the years ended June 30, 2001 and 2000,
and to ineffective monitoring of the cash reconciliation process in the year
ended June 30, 2000.
While the Company does not believe that the matters considered to be
reportable conditions by Deloitte & Touche LLP are required to be disclosed
under the rules and regulations promulgated by the Securities and Exchange
Commission, the Company has disclosed them at the request of Deloitte & Touche
LLP. The Company has authorized Deloitte & Touche LLP to respond fully to
inquiries from KPMG LLP, as the successor independent auditor of the Company,
concerning such matters.
During the years ended June 30, 2001 and 2000, and any subsequent
interim period preceding April 16, 2002, the Company did not consult with KPMG
LLP with regard to any matter concerning the application of accounting
principles to any specific transactions, either completed or proposed, the type
of audit opinion that might be rendered with respect to the Company's financial
statements, or any matter that was the subject of a disagreement or a reportable
event.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and has discussed with KPMG LLP, the
Company's independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61. In addition, the Audit Committee has
received from KPMG LLP the written disclosures and the letter required by
Independence Standards Board Standard No. 1. The Audit Committee has reviewed
the materials received from the independent auditors and has met with
representatives of KPMG LLP to discuss the auditor's independence. The Audit
Committee has considered whether the non-audit services provided by KPMG LLP to
the Company is compatible with the auditor's independence.
Based on the Audit Committee's review of the above items and the
discussions referred to above, the Audit Committee has recommended to the Board
of Directors that the audited financial statements of the Company be included in
its Annual Report on Form 10-K for the fiscal year ended June 30, 2002 for
filing with the Commission.
This report is submitted by the members of the Audit Committee.
William Bullard
Michael v.B. Nagel
Stanley B. Atkins
4
Audit Fees
The aggregate fees billed by Deloitte & Touche LLP, the member firms of
Deloitte Touche Tohmatsu, and their respective affiliates (collectively,
"Deloitte") for professional services rendered for the review of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 2001 and December 31, 2001 were $12,000.
The aggregate fees billed by KPMG LLP for professional services
rendered for the review of the financial statements included in the Quarterly
Report on Form 10-Q for the quarter ended March 31, 2002 and the audit of the
Company's annual consolidated financial statements for the fiscal year ended
June 30, 2002 were $430,390.
Financial Information Systems Design and Implementation Fees
There were no fees billed by Deloitte or KPMG for professional services
rendered for information technology services relating to financial information
systems design and implementation for the fiscal year ended June 30, 2002.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended June 30, 2002 were $748,498, which represents fees for tax services
and audits of certain employee benefit plans.
The aggregate fees billed by KPMG LLP for services rendered to the
Company, other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees", for the fiscal
year ended June 30, 2002 were $87,004, which represents fees for tax services.
Compensation of Directors
Non-employee directors receive a fixed fee of $8,000 each year and
$4,000 for each quarterly meeting of the Board of Directors attended, all or
part of which may be paid in cash or Common Stock, at their election. The
payment of fees in Common Stock has been suspended by the Company. In addition,
the Company reimburses directors for expenses incurred in connection with
attendance at meetings of the Board of Directors and committees thereof. Upon
their initial election, each non-employee director appointed before August 2002
was granted an option to purchase 10,000 shares of Common Stock at an exercise
price per share equal to its fair market value on the date of grant pursuant to
the Atchison Casting Non-Employee Director Option Plan. Options to purchase
shares of Company Common Stock have been granted for the full number of shares
available for issuance under the Plan and therefore, no new grants will be made
pursuant to the Plan.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended June 30, 2002, there were no interlocking
relationships between any executive officers of the Company and any entity whose
directors or executive officers serve on the Board's Compensation Committee, nor
did any current or past officers of the Company serve on the Compensation
Committee.
5
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company is
responsible for reviewing and approving policies, practices and procedures
relating to executive compensation and the establishment and administration of
employee benefit plans. The overall goal of the Compensation Committee is to
attract and retain strong management and to base incentive compensation on both
individual performance and the Company's overall success. The key elements of
the Company's executive compensation package are discussed below, and include
base salary, annual bonuses, and long-term incentives.
The Company's executive officers are compensated with base salary,
annual bonuses, incentive stock options and by the Company's normal fringe
benefits.
The base salary of most executive officers, including the chief
executive officer (the "CEO"), is determined by a subjective process of
negotiation and evaluation of performance involving the officer, the CEO and the
Compensation Committee. Mr. Armstrong does not have a written employment
agreement with the Company. As of July 1, 2002, Mr. Armstrong's base annual
salary was $220,000. Mr. Aiken, who served as CEO of the Company during fiscal
2002 through May 2002, previously had an employment agreement for his service as
CEO. As part of his transition to Vice President, in June 2002, Mr. Aiken and
the Company entered a new employment agreement with the Company, which
supersedes and replaces the prior agreement. Mr. Aiken's agreement is described
in the section entitled "Employment Contracts."
The annual bonus for executive officers for fiscal 2002 was based on
the return on net assets employed or "ROA" on a quarterly and annual basis.
Targets are set by the Board of Directors for the fiscal year ROA (fiscal 2002)
of each executive's subsidiary or operating group. In the case of the CEO and
the chief financial officer, the targets were based on consolidated earnings for
the entire Company. The amount of bonus which was to be earned if ROA (fiscal
2002) reached 100% of target was also set by the Board, and was 100% of base
salary for the CEO and 25% to 40% of base salary for other corporate officers.
For fiscal 2002, the bonus was calculated based on quarterly and annual targets.
If all of the targets are reached, the officer receives 100% of his bonus. For
any percentage of actual ROA (fiscal 2002) above the target, the amount of the
calculated bonus at 100% of the target is increased by the same percentage. A
minimum level of ROA (fiscal 2002) is also set, below which no bonus is paid. At
ROA (fiscal 2002) above the minimum threshold the bonus is pro-rated based on
the relation of actual ROA (fiscal 2002) to the target and the minimum
threshold. During fiscal 2002, bonuses to executive officers ranged from 0% to
41% of the amount of their bonus set by the Board.
The Compensation Committee may raise or lower a bonus at its
discretion, based on an individual's overall performance.
Incentive stock options are granted by the Company to eligible
employees under the Company's 1993 Incentive Stock Plan. The number of options
granted is determined by the Compensation Committee after considering subjective
criteria such as the employee's performance, the employee's value to the Company
and the use of options at other companies.
This report has been issued over the names of each member of the
Compensation Committee, Michael v.B. Nagel and William Bullard.
6
EXECUTIVE COMPENSATION
The table below sets forth information concerning the annual and
long-term compensation paid to the Chief Executive Officer and the four other
most highly paid executive officers whose compensation exceeded $100,000 during
the last fiscal year.
Summary Compensation Table
Long Term
Compensation
Awards
Securities
Underlying
Name and Annual Compensation Options/ All Other
Principal Position Year Salary($) Bonus($) SARs(#) Compensation($)
Thomas K. Armstrong....... 2002 $ 181,852 None 65,000 $ 8,063(1)
Chairman of the 2001 $ 180,000 None 5,000 $ 7,875
Board, President and 2000 $ 180,000 None 15,000 $ 8,438
Chief Executive
Officer
Hugh H. Aiken............. 2002 $ 277,192 None 20,000 $ 8,063(1)
Vice President(2) 2001 $ 289,000 None 20,000 $ 7,875
2000 $ 271,088 $ 32,288 20,000 $ 7,688
John R. Kujawa............ 2002 $ 156,250 $ 24,750 10,000 $ 8,063(1)
Vice President 2001 $ 150,000 $ 13,875 4,000 $ 7,875
2000 $ 150,000 $ 28,336 4,000 $ 7,100
James Stott............... 2002 $ 129,700 None 4,000 None
Vice President 2001 $ 135,408 None 2,000 $ 7,109
2000 $ 135,408 None None $ 6,094
Kevin T. McDermed......... 2002 $ 106,152 None 8,000 $ 6,342(1)
Vice President, Chief 2001 $ 107,496 None 5,000 $ 6,450
Financial Officer, 2000 $ 107,496 $ 4,703 None $ 6,450
Treasurer and Secretary
_______________________________
(1) Consists solely of Company contributions to the Company's 401(k) savings
plan for the benefit of the executive.
(2) Mr. Aiken was the Chairman of the Board, President and Chief Executive
Officer of the Company until May 2002.
7
Option/SAR Grants in Last Fiscal Year
Potential Realizable Value
At Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
--------------------------------------------------- ---------------------------
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Expiration
Name Granted(#)(1) Fiscal Year Price ($/Sh) Date 5%($) 10%($)
- ---- ------------- ----------- ------------ ----- ----- ------
Thomas K. Armstrong....... 15,000 7.48% $ 2.90 7/26/11 $27,357 $23,269
50,000 24.94% $ 0.74 5/23/12 $69,328 $58,968
Hugh H. Aiken............. 20,000 9.98% $ 2.85 6/30/11 $ 35,847 $90,843
John R. Kujawa............ 10,000 4.99% $ 2.90 7/26/11 $ 18,238 $46,219
James Stott............... 4,000 2.00% $ 2.90 7/26/11 $ 7,295 $18,487
Kevin T. McDermed......... 8,000 3.99% $ 2.90 7/26/11 $ 14,590 $36,975
(1) All options are rights to buy Common Stock of the Company. The options
granted are subject to a three-year vesting schedule commencing one
year from the date of the grant, with one-third of the grant vesting on
each of the three anniversaries from the grant date.
Aggregated Option/SAR Exercises in Last
Fiscal Year and FY-End Option/SAR Values
Number of Value of
Securities Unexercised
Underlying In-the-Money
Unexercised Options/SARs at
Options/SARs at FY-End($)
FY-End(#) Exercisable/Unexercisable
Name Exercisable/Unexercisable -------------------------
- ---- -------------------------
Thomas K. Armstrong................ 46,667/73,333 $ 0/0
Hugh H. Aiken...................... 120,000/40,000 $ 0/0
John R. Kujawa..................... 20,000/14,000 $ 0/0
James Stott........................ 15,667/5,333 $ 0/0
Kevin T. McDermed.................. 14,667/8,333 $ 0/0
Equity Compensation Plan Information
- ------------------------------ ------------------------------ ----------------------------- ------------------------
Plan category Number of securities to be Weighted average exercise Number of securities
issued upon exercise of price of outstanding options, remaining available for
outstanding options, warrants and rights future issuance
warrants and rights
- ------------------------------ ------------------------------ ----------------------------- ------------------------
Equity compensation plans 597,233 $8.52 340,361
approved by security holders
- ------------------------------ ------------------------------ ----------------------------- ------------------------
Equity compensation plans not 70,000(1) $9.96 10,000
approved by security holders
- ------------------------------ ------------------------------ ----------------------------- ------------------------
Total 667,233 $8.67 350,361
- ------------------------------ ------------------------------ ----------------------------- ------------------------
(1) Does not include shares granted to non-employee directors pursuant to their
election to receive directors' fees in Company Common Stock in lieu of
cash.
8
For a description of the equity compensation plans that have not been
approved for the Company's shareholders, please refer to the section entitled
"Director Compensation" for a discussion of the Atchison Casting Non-Employee
Director Option Plan and the unwritten plan whereby directors have previously
been able to elect to receive their fees in Company Common Stock in lieu of
cash. There are no other equity compensation plans of the Company that have not
been approved by the Company's stockholders.
Employment Contracts
In connection with Mr. Aiken's voluntary change in position with the
Company from Chairman, President and Chief Executive Officer to Vice President,
the Company and Mr. Aiken have entered into a new employment agreement effective
as of July 1, 2002. This agreement replaces and supersedes any prior employment
and change of control agreements between Mr. Aiken and the Company. The
agreement has an initial term of three years, renewable for additional one year
terms, and provides for an annual base salary of $144,500, retention payments of
$12,041.66 payable monthly for 36 months, annual incentive pay at the discretion
of the Board of Directors and stock options to purchase 20,000 shares of the
Company's Common Stock. The agreement also provides for a severance payment in
the amount of two times Mr. Aiken's annual base salary in effect as of June
2002, less the aggregate amount of retention payments paid to Mr. Aiken, in the
event of his death or disability during the initial three year term of the
agreement. If Mr. Aiken's employment with the Company is terminated for a reason
other than cause (as defined in the agreement) or death or disability during the
initial three year term of the agreement, the agreement provides for a severance
payment of three times his annual base salary in effect as of June 2002 less the
aggregate amount of retention payments paid to Mr. Aiken. After the initial
three year term of the agreement, Mr. Aiken is entitled to a severance payment
totaling three months of his annual base salary if he is terminated for any
reason other than for cause, disability or death. Additionally, the agreement
provides for a payment in the amount of three times Mr. Aiken's annual base
salary in effect as of June 2002, less the aggregate amount of retention
payments paid to Mr. Aiken, in the event of a change of control (as defined in
the agreement) of the Company during the term of the agreement.
The Board has approved an arrangement providing for a payment to Mr.
Armstrong of two times his annual salary in the event of a hostile change of
control (as defined by the Board).
Pension Benefits
The Company maintains a qualified defined benefit pension plan, the
Salaried Employees Retirement Plan of Atchison Casting Corporation (the
"Retirement Plan"), of which Mr. Aiken, Mr. Kujawa and Mr. McDermed are
participants. The estimated annual benefits payable under the Retirement Plan
payable upon retirement at various years of credited service and at different
levels of remuneration are as follows:
Remuneration Years of Credited Service at Retirement
- ------------ ----------------------------------------------------
15 20 25 30 35
-- -- -- -- --
$ 50,000 $16,520 $17,088 $17,655 $18,223 $18,791
75,000 26,520 27,713 28,905 30,098 31,291
100,000 36,520 38,338 40,155 41,973 43,791
125,000 46,520 48,963 51,405 53,848 56,291
150,000 56,520 59,588 62,655 65,723 68,791
175,000 66,520 70,213 73,905 77,598 81,291
200,000(1) 76,520 80,838 85,155 89,473 93,791
_______________________________
(1) Section 401(a)(17) of the Internal Revenue Code of 1986, as amended, and
the Omnibus Budget Reconciliation Act of 1993 limit the amount of
compensation that can be considered in computing benefits under a qualified
defined benefit pension plan. For 2002, the maximum amount of compensation
allowed for use in calculating an individual's pension benefits is
$200,000. This limit may be raised in the future by annual cost-of-living
adjustments determined by the U.S. Secretary of the Treasury.
9
The remuneration covered by the Retirement Plan is the average of the
highest five consecutive years during all years of service prior to eligibility
to receive benefits under the Retirement Plan of total cash remuneration,
including salary and bonus (both as reported in the Summary Compensation Table)
paid or accrued and payable in the year following accrual. As of the end of
fiscal 2002, Mr. Aiken and Mr. Kujawa each had thirteen years of service
credited under the Retirement Plan and Mr. McDermed had twenty years of service
credited under the Retirement Plan Benefits shown are computed as life-only
annuities beginning at age 65 and are not reduced for Social Security benefits.
PERFORMANCE OF THE COMPANY'S COMMON STOCK
The graph set forth below compares the percentage change in cumulative
stockholder return of the Company's Common Stock, from June 30, 1997 to June 28,
2002 (the last trading day prior to the Company's fiscal year end), against
certain other indices.
For the prior five years, the Company has used the cumulative return of
the Index for the New York Stock Exchange (U.S. Companies only) (the "NYSE
Index"), and an index prepared by the Center for Research in Security Prices at
the University of Chicago Graduate School of Business consisting of stocks of
U.S. companies traded on the New York Stock Exchange that transact business in
primary metals industries (S.I.C. 3300-3399) (the "NYSE Metals Industry Index")
covering the same time period.
As a result of the change in trading of the Company's Common Stock from
the New York Stock Exchange to the Over-The-Counter Bulletin Board (OTC) in June
2002, the Company has decided to change the indices identified above to the
cumulative return of the Index for the Russell 2000 (the "Russell 2000 Index"),
and an index prepared by the Center for Research in Security Prices at the
University of Chicago Graduate School of Business consisting of stocks of U.S.
companies traded on the American Stock Exchange that transact business in
primary metals industries (S.I.C. 3300-3399) (the "AMEX Metals Industry Index")
covering the same time period. In accordance with SEC regulations, both the
former and current indices are presented in the following graph this year.
10
- ---------------------------- ------------- ---------- ----------- ---------- ----------- ----------
06/30/1997 06/30/1998 06/30/1999 06/30/2000 06/29/2001 06/28/2002
------------ ---------- ---------- ---------- ---------- ----------
Atchison Casting Corporation 100.0 107.5 62.4 34.6 22.6 1.9
Russell 2000 Index 100.0 116.13 117.14 132.38 129.50 116.87
AMEX Metals Industry Index 100.0 158.5 154.5 52.4 56.9 33.5
NYSE Index 100.0 128.2 146.7 146.5 147.2 129.3
NYSE Metals Industry Index 100.0 97.5 110.2 92.9 118.2 108.2
- ---------------------------- ------------- ---------- ----------- ---------- ----------- ----------
Upon written request, we will provide any stockholder, without charge,
a list of the component issues in either of the indexes. The graph is based on
$100 invested on June 30, 1997, in the Company's Common Stock and each of the
indexes, each assuming dividend reinvestment. The historical stock price
performance shown on this graph is not necessarily indicative of future
performance.
11
CERTAIN BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table sets forth information as of October 15, 2002,
concerning the shares of Common Stock beneficially owned by (i) each person
known by the Company to be the beneficial owner of 5% or more of the Company's
outstanding Common Stock, (ii) each of the directors of the Company, (iii) each
of the executive officers of the Company named in the Summary Compensation Table
and (iv) all directors and executive officers of the Company as a group. Unless
otherwise indicated, the named beneficial owner has sole voting and investment
power over the shares listed.
Number of Shares Percentage of Common
Name of Individual or Group Beneficially Owned Stock Owned
- --------------------------- ------------------ -----------
Edmundson International, Inc. (1)..................... 925,157 12.0%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Liberty Wanger Asset Management, L.P. (2)..............543,400 7.0%
227 West Monroe Street, Suite 3000
Chicago, IL 60606
Dimensional Fund Advisors, Inc. (3)....................701,800 9.1%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Ingalls & Snyder LLC (4)...............................327,866 4.2%
61 Broadway
New York, NY 10006
Royce & Associates, Inc. (5)...........................591,800 7.7%
1414 Avenue of the Americas
New York, NY 10019
Benson Associates, LLC (6)............................499,600 6.5%
111 S.W. Fifth Avenue, Suite 2130
Portland, OR 97204
Thomas K. Armstrong(7).................................114,280 1.5%
Hugh H. Aiken (8)..................................... 532,204 6.8%
Michael v.B. Nagel (9)..................................20,130 *
William Bullard(10).....................................30,870 *
Vladimir Rada(11).......................................10,000 *
Stanley B. Atkins(12) .......................................0 0%
John R. Kujawa(13)......................................51,753 *
James Stott(14).........................................17,667 *
Kevin T. McDermed(15)...................................48,161 *
All directors and executive............................710,785 8.9%
officers as a group (10 persons)(16)
- -------------------
* Less than 1% of Common Stock outstanding.
(1) Based on a Schedule 13D Amendment No. 1 dated September 29, 2000, (a)
Edmundson International Inc., Consolidated Electrical Distributors, Inc.,
Portshire Corp., Lincolnshire Associates, Ltd. and David D. Colburn,
President of Portshire Corp., share voting and dispositive power over
40,000 of shares or approximately .5% of the outstanding shares of Common
Stock, (b) Employees' Retirement Plan of Consolidated Electrical
Distributors, Inc. and David D. Colburn, a member of the investment
committee of the Employees' Retirement Plan of Consolidated Electrical
Distributors, Inc., share voting and dispositive power over 506,512
shares or approximately 6.6% of the outstanding shares of Common Stock,
(c) Employees' Retirement Plan of Hajoca Corporation has sole voting and
dispositive power over 169,600 shares or approximately 2.2% of the
outstanding shares of Common Stock, (d) Dunton Foundries, LLC, of which
David D. Colburn is the sole manager, has sole voting and dispositive
power over 189,500 shares or approximately 2.5% of the outstanding shares
of Common Stock, (e) David D. Colburn has sole voting and dispositive
power over 23,966 shares or 0.3% of the outstanding
12
shares of Common Stock, (f) Keith W. Colburn Retirement Plan has sole
voting and dispositive power over 2,000 shares of Common Stock, and (g)
Keith W. Colburn Trust has sole voting and dispositive power over 2,000
shares of Common Stock. The reporting persons, although disclaiming
membership in a group, have nonetheless authorized Edmundson International,
Inc. to file this Amendment No. 1 to Schedule 13D as a group on behalf of
each of them.
(2) Based on a Schedule 13G Amendment No. 7 dated February 13, 2002, Liberty
Wanger Asset Management, L.P. ("WAM") is an investment adviser, which
shares voting and dispositive powers with WAM Acquisition GP, Inc., its
general partner. WAM also shares voting and dispositive powers with
certain of its clients, including Liberty Acorn Investment Trust, an
investment company that shares voting and dispositive powers over 420,000
shares or approximately 5.5% of the outstanding shares of Common Stock.
(3) Based on a Schedule 13G Amendment No. 1 dated January 30, 2002,
Dimensional Fund Advisors, Inc. ("DFA") is an investment adviser to
certain investment companies and in such role possesses sole voting and
dispositive powers over the shares; however, DFA disclaims beneficial
ownership of such shares which are owned by certain of its advisory
clients.
(4) Based on a Schedule 13G Amendment No. 8 dated December 31, 2001, Ingalls
& Snyder LLC is a broker-dealer which shares voting and dispositive
powers over 309,565 of such shares.
(5) Based on a Schedule 13G Amendment No. 1 dated February 7, 2002, Royce &
Associates, Inc. ("Royce") an investment adviser has sole voting and
dispositive power over the shares. Charles M. Royce is a controlling
person of Royce but disclaims beneficial ownership of the shares owned by
Royce.
(6) Based on a Schedule 13G dated February 13, 2002, Benson Associates, LLC
is an investment adviser, which shares voting and dispositive powers with
certain of its clients who do not beneficially own 5% of more of the
outstanding shares of Common Stock.
(7) Includes 58,334 shares subject to exercisable options and 390 shares
pursuant to the Company's 401(k) Plan.
(8) Includes 140,000 shares subject to exercisable options, 500 shares owned
by each of Mr. Aiken's three children, and 28,592 shares pursuant to the
Company's 401(k) Plan.
(9) Includes 10,000 shares subject to exercisable options, which Mr. Nagel
received pursuant to the Atchison Casting Non-Employee Director Option
Plan and 10,130 shares received in lieu of cash for directors' fees.
(10) Includes 10,000 shares subject to exercisable options, which Mr. Bullard
received pursuant to the Atchison Casting Non-Employee Director Option
Plan and 20,870 shares received in lieu of cash for directors' fees.
(11) Includes 10,000 shares subject to exercisable options, which Mr. Rada
received pursuant to the Atchison Casting Non-Employee Director Option
Plan.
(12) Stanley B. Atkins owns no shares of Common Stock and holds no shares
subject to exercisable options. (13) Includes 25,999 shares subject to
exercisable options. (14) Includes 17,667 shares subject to exercisable
options.
(15) Includes 19,001 shares subject to exercisable options and 1,804 shares
pursuant to the Company's 401(k) Plan.
(16) Includes 30,786 shares pursuant to the Company's 401(k) Plan and 291,001
shares subject to exercisable options.
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, all Section 16(a) filing requirements
applicable to its directors, executive officers and ten percent holders were
satisfied during the fiscal year ended June 30, 2002 except that Mr. Armstrong
filed a late Form 4 on July 31, 2002 with respect to an open-market purchase of
33,000 shares of Common Stock on May 31, 2002.
Other Business
As of the date of this proxy statement, management knows of no other
matters to be presented at the Annual Meeting. However, if any other matters
shall properly come before the meeting, it is the intention of the persons named
in the enclosed proxy to vote in accordance with their best judgment.
Relationship with Independent Accountants
The Board of Directors, on the recommendation of the Audit Committee,
has selected the firm of KPMG LLP as independent auditors to examine the
financial statements of the Company and its subsidiaries for the fiscal year
2003. Representatives of KPMG LLP will be present at the Annual Meeting, will
have an opportunity to make a statement if they so desire, and will be available
to respond to appropriate questions.
PROPOSALS OF SECURITY HOLDERS
The Company currently plans to hold the 2003 Annual Meeting in
Atchison, Kansas, on or around November 21, 2003. Pursuant to the Company's
By-Laws, stockholders desiring to bring business before the annual meeting must
provide written notice of each matter to the Company's Secretary not less than
60 days nor more than 120 days prior to the date of the annual meeting. Such
notice must contain certain information specified in the Company's By-Laws. If a
stockholder desires his or her proposal to be considered for inclusion in the
proxy statement for the 2003 annual meeting, it must be received by the
Company's Secretary no later than July 9, 2003 and must comply with the process
described in Rule 14a-8 of the Securities Exchange Act of 1934, as amended.
ATCHISON CASTING CORPORATION
/s/ Thomas K. Armstrong, Jr.
Thomas K. Armstrong, Jr.
Chairman of the Board and
Chief Executive Officer
Dated: November 6, 2002
Atchison, Kansas
14
APPENDIX A
AUDIT COMMITTEE CHARTER
I. ORGANIZATION
There shall be a committee of the Board of Directors to be known as the Audit
Committee. The Audit Committee shall consist of three or more directors, as
determined by the Board of Directors, each of whom shall have no relationship to
the Company that may interfere with the exercise of their independence from
management and the Company.
A. Definition of Independence
1. Employees. A director who is an employee (including non-employee
executive officers) of the Company or any of its affiliates may
not serve on the Audit Committee until three years following the
termination of his or her employment. In the event the employment
relationship is with a former parent or predecessor of the
Company, the director could serve on the Audit Committee after
three years following the termination of the relationship between
the Company and the former parent or predecessor;
2. Business Relationship. A director (i) who is a partner,
controlling stockholder, or executive officer of an organization
that has a business relationship with the Company, or (ii) who
has a direct business relationship with the Company (e.g., a
consultant) may serve on the Audit Committee only if the
Company's Board of Directors determines in its business judgment
that the relationship does not interfere with the director's
exercise of independent judgment or such relationship is not in
violation of any SEC regulation. In making a determination
regarding the independence of a director pursuant to this
paragraph, the Board of Directors should consider, among other
things, the materiality of the relationship to the Company, to
the director, and, if applicable, to the organization with which
the director is affiliated. "Business relationships" can include
commercial, industrial, banking, consulting, legal, accounting
and other relationships. A director can have this relationship
directly with the Company, or the director can be a partner,
officer or employee of an organization that has such a
relationship. The director may serve on the Audit Committee
without the above-referenced Board of Directors' determination
after three years following the termination of, as applicable,
either (1) the relationship between the organization with which
the director is affiliated and the Company, (2) the relationship
between the director and his or her partnership status,
stockholder interest or executive officer position, or (3) the
direct business relationship between the director and the
Company;
3. Cross Compensation Committee Link. A director who is employed as
an executive of another company where any of the Company's
executives serves on that company's compensation committee may
not serve on the Audit Committee; and
4. Immediate Family. A director who is an Immediate Family member of
an individual who is an executive officer of the Company or any
of its affiliates cannot serve on the Audit Committee until three
years following of the termination of such employment
relationship. "Immediate Family" includes a person's spouse,
parents, children, siblings, mothers-in-law and fathers-in-law,
sons and daughters-in-law, brothers and sisters-in-law, and
anyone (other than employees) who shares such person's home.
All members of the Audit Committee shall be financially literate, as such
qualification is interpreted by the Company's Board of Directors in its business
judgment, or must become financially literate within a reasonable period of time
after their appointment to the Audit Committee, and at least one member of the
Audit Committee shall be a "financial expert" (as that term is defined by SEC
regulation), as the Board of Directors interprets such qualification in its
business judgment.
The members of the Audit Committee shall be elected by the Board of Directors at
the annual meeting of the Board of Directors to serve a term of one year or
until their successors shall be duly elected and qualified. The Board of
Directors will appoint a Chair to preside at the Audit Committee meetings and
schedule meetings as appropriate.
A-1
II. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing the financial reports
and other financial information provided by the Company to any governmental body
or the public; the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board of
Directors has established; and the Company's auditing, accounting and financial
reporting processes generally. Consistent with this function, the Audit
Committee should encourage continuous improvement of, and should foster
compliance with, the Company's policies, procedures and practices at all levels.
The Audit Committee's primary duties and responsibilities are as follows:
o To serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
o To review and appraise the audit efforts of the Company's independent
auditors and internal auditing department.
o To provide an open avenue of communication among the independent auditors,
financial and senior management, the internal auditing department, and the
Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
III. MEETINGS
The Audit Committee shall meet at least two times a year and at such times as
requested by the Chair, or a Director or Officer of the Company, or by the
Company's independent auditors. The Chair of the Audit Committee shall prepare
or approve an agenda in advance of each meeting. The Chief Executive Officer,
Chief Financial Officer, Director of Internal Audit, outside legal counsel,
representative from independent auditors and other parties may be invited to all
meetings. Non-committee members may be excused from attendance at any meeting or
portion of any meeting by the Chair.
As part of its job to foster open communication, the Audit Committee may meet
at, in person or by telephone, at any time with management with, the head of the
Company's internal auditing department and the independent auditors in separate
sessions to discuss any matter that the Audit Committee or each of these groups
believes should be discussed privately. The Audit Committee shall meet at least
annually with the Company's financial management and independent auditors in
separate executive sessions. In addition, the Audit Committee or its Chair may
meet or speak with the independent auditors and management at any time to review
the Company's financial statements and significant findings based upon the
auditor's limited review procedures.
IV. RESPONSIBILITIES
To fulfill its duties and responsibilities the Audit Committee shall:
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually and
recommend any proposed changes to the Board of Directors for approval.
2. Review the Company's audited financial statements with management and
the independent auditors prior to the release of year-end earnings and
prior to filing the Company's Annual Report on Form 10-K or 10-KSB.
3. Review the Company's quarterly financial results with management and
the independent auditors prior to the release of quarterly earnings
and/or the Company's financial statement and prior to filing the
Company's Quarterly Report on Form 10-Q or 10-QSB.
4. Review, as appropriate, any other material financial information
submitted to any governmental or public body, including any
certification, report, opinion, or review rendered by the independent
auditors.
A-2
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors, as representatives of the
Company's stockholders. The Audit Committee and the Board of Directors
have the ultimate authority and responsibility to select, compensate,
evaluate the performance of and, where appropriate, replace the
independent auditors (or to nominate the independent auditors to be
proposed for stockholder approval in any proxy statement).
6. Ensure that the independent auditors submit on a periodic basis to the
Audit Committee a formal written statement delineating all
relationships between the auditor and the Company, consistent with
Independence Standards Board Standard No. 1.
7. Actively engage in dialogue with the independent auditors and legal
counsel with respect to any disclosed relationships or services that
may impact the objectivity and independence of the independent
auditors.
8. Recommend that the Board of Directors take appropriate action in
response to the independent auditors' report to satisfy itself of the
independent auditors' independence.
9. Following each audit by the independent auditors, obtain from the
independent auditors assurance that Section 10A of the Private
Securities Litigation Reform Act of 1995 has not been implicated.
10. Review and discuss with the independent auditors their audit
procedures, including the scope, fees and timing of the audit, and the
results of the annual audit examination and any accompanying
management letters, and any reports of the independent auditors with
respect to interim periods.
11. In connection with the Company's year-end financials, discuss with
financial management and the independent auditors significant issues
regarding accounting principals, practices and judgments and any items
required to be communicated by the independent auditors in accordance
with Statement on Accounting Standards No. 61.
12. In connection with the Company's interim financials, discuss with
financial management and independent auditors any significant changes
to the Company's accounting principles and any items required to be
communicated by the independent auditors in accordance with Statement
on Accounting Standards No. 71. The Chair of the Audit Committee may
represent the entire Audit Committee for purposes of the quarterly
review and communication.
13. Review and discuss with financial management and the independent
auditors: (a) any material financial or non-financial arrangements of
the Company which do not appear on the financial statements of the
Company; and (b) any transactions or courses of dealing with any party
related to the Company that are relevant to an understanding of the
Company's financial statements.
14. Review and discuss with financial management and the independent
auditors the adequacy of the Company's internal controls.
15. Review and discuss with financial management and the independent
auditors the accounting policies of the Company which may be viewed as
critical.
16. Consider and approve, if appropriate, significant changes to the
Company's auditing and accounting principles, policies and practices
as suggested by the independent auditors, financial management, or the
internal auditing department.
Improvement Process
17. Meet periodically, no less than annually, with financial management to
review the Company's major financial risk exposure and the steps
management has taken to monitor and control such exposures.
Proxy Statement
18. Prepare and approve the report of the Audit Committee required by the
rules of the SEC to be included in the Company's annual proxy
statement.
A-3
19. Oversee the publication of this Charter at least every three years in
the Company's annual proxy statement in accordance with SEC
regulations.
Miscellaneous
20. Retain, if appropriate, special legal, accounting or other consultants
to advise the Audit Committee.
21. Review with the Company's general counsel legal matters that may have
a material impact on the financial statements, the Company's
compliance policies related to financial matters and any material
reports or inquiries related to financial matters that are received
from regulators or governmental agencies.
22. Periodically conduct a self-assessment of the Audit Committee's
performance.
23. Advise the Board of Directors on the Company's policies and procedures
regarding compliance with applicable laws and regulations related to
financial matters.
24. Submit the minutes of all meetings of the Audit Committee to, and
discuss the matters discussed at each Audit Committee meeting with,
the Board of Directors, as appropriate.
25. Perform any other activities consistent with this Charter, the
Company's Bylaws and governing law, as the Audit Committee or the
Board of Directors deems necessary or appropriate.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditors. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditors or to assure compliance with
laws and regulations.
A-4
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PROXY PROXY
ATCHISON CASTING CORPORATION
400 South Fourth Street
Atchison, Kansas 66002
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints Kevin T. McDermed and Thomas K.
Armstrong, Jr., or either of them, as Proxies, each with the power to appoint
his substitute, and hereby authorizes them to represent and to vote, as
designated below, all the shares of Common Stock of Atchison Casting Corporation
the undersigned is entitled to vote at the Annual Meeting of Stockholders to be
held on December 12, 2002, or any adjournment or postponement thereof. This
proxy revokes all prior proxies given by the undersigned.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED PREPAID ENVELOPE.
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ATCHISON CASTING CORPORATION
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. |X|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ELECTION OF THE NOMINEES.
1. PROPOSAL ONE: ELECTION OF DIRECTORS --
Nominee: Vladimir Rada For Withhold For All To withhold authority to vote, mark
All All Except "For All Except" and write the
Nominee: William Bullard | | | | | | nominee's name on the line below.
__________________________________
2. In their discretion, the Proxies This Proxy, when properly executed, will
are authorized to vote upon such be voted in the manner directed herein by
other business as may properly the undersigned stockholder. If no
come before the meeting and all direction is made, this proxy will be
all matters incident to the conduct voted FOR the nominees in Proposal One.
of the meeting.
Dated:___________________________, 2002
Signature(s)___________________________
_______________________________________
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by President
or other authorized officer. If a
partnership, please sign in partnership
name by an authorized person.
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