EXHIBIT 99.1
[LOGO] ATCHISON CASTING
NEWS RELEASE
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CONTACT: Hugh Aiken
Kevin McDermed
913 367 2121
NYSE: FDY
ATCHISON CASTING ANNOUNCES COMPLETION OF
RESTATEMENT
OF PREVIOUSLY ISSUED
FINANCIAL STATEMENTS AND OTHER MATTERS
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Atchison, Kansas - April 24, 2001 - Atchison Casting Corporation (NYSE:"FDY")
announced that it expects to file today with the Securities and Exchange
Commission an amended annual report on Form 10-K/A containing restated financial
results for fiscal years 1998-2000. This filing brings to a conclusion the
restatement of financial results for prior fiscal years. The restatement reduced
previously reported net income by $24.5 million cumulatively for the years
restated, resulting in a cumulative earnings per share reduction of $3.23 and
reducing stockholders' equity to $114.3 million at June 30, 2000. The Company
expects to file its quarterly reports for the quarters ended September 30, 2000
and December 31, 2000 as soon as practicable. The Company previously announced
that it had discovered possible accounting irregularities at three steel
foundries in Pennsylvania, Quaker Alloy, Empire Steel and Pennsylvania Steel
(collectively referred to as the Pennsylvania Foundry Group or PFG). The Audit
Committee of the Board of Directors directed an independent investigation into
the accounting irregularities. The Audit Committee engaged Jenner & Block, LLC
to advise it on the conduct of the investigation, and Jenner & Block retained
PricewaterhouseCoopers LLP as accountants to assist in the investigation. The
Company believes the irregularities were limited to PFG.
As a result of that investigation, the Company has concluded that a small
number of PFG employees violated Company policies and procedures and used
improper accounting practices, resulting in the overstatement of revenue, income
and assets and the understatement of liabilities and expenses. The Company
believes that certain of these same personnel also misappropriated Company
funds. The direct benefit to the former employees as a result of such activities
is currently believed to be approximately $2.2 million. The Company believes
that $25.9 million ($18.2 million after tax) of the restatement, which relates
to the accounting irregularities at PFG, primarily resulted from a scheme to
cover-up such benefits and the actual operating results over four years at these
three subsidiaries by manipulating many accounts incrementally, which increased
and accumulated over time. The Company intends to pursue recovery of economic
losses from insurance coverage, income tax refunds and other responsible
parties.
The Company also announced organizational changes at PFG as a result of
its internal investigation into accounting irregularities, the execution of
forbearance agreements with certain of its lenders, other developments and
the rescheduling of its annual meeting.
Restated Financial Results
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The restatements resulted in changes in the following income statement
components from amounts shown in previously reported financial statements as
follows (all amounts are in millions, except per share data):
2000 1999 1999 1998 1997
2000 as (Incr.) as 1998 as 1997 as
Decrease Restated Decrease Restated Decrease Restated Decrease Restated
Sales $ 7.2 $ 461.1 ($ 1.8) $ 477.4 $ 0.7 $ 373.1 -- $ 245.8
Gross Profit 11.7 41.8 8.2 59.6 4.4 51.1 2.1 40.3
Operating Income (Loss) 19.3 (18.1) 8.8 16.5 4.4 21.4 2.1 18.1
Net Income (Loss) 14.1 (11.7) 6.7 3.1 2.5 10.2 1.2 8.5
Diluted Earnings (loss)
Per Common Share $ 1.85 $ (1.53) $ 0.87 $ 0.39 $ 0.30 $ 1.25 $ 0.21 $ 1.46
Included in the restatement for fiscal year 2000 were a $3.4 million ($2.1
million, net of tax) charge relating to the impairment of long-lived assets at
Pennsylvania Steel and a $2.7 million (before and after tax) charge relating to
impairment of goodwill at Empire Steel.
Organizational Changes
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The employment of PFG's former chief financial officer was terminated on
October 25, 2000. Four other former PFG employees, including the president, vice
president of operations and vice president of human resources, have also
resigned or been terminated.
On January 8, 2001, Ian Sadler was appointed President of the Pennsylvania
Foundry Group. Mr. Sadler received his masters degree in Metallurgy from
Cambridge University in England. He has led the turn around of two steel
foundries: Shenango Industries and Johnstown Corporation. On September 18, 2000,
Duane Madrykowski was appointed the new Chief Financial Officer of the
Pennsylvania Foundry Group, and on December 5, 2000, Allen Ebling was promoted
to Director of Human Resources of the Pennsylvania Foundry Group.
On March 1, 2001, the Company hired Stephen Housh as its Manager of
Internal Audit. Mr. Housh has experience in public accounting and has served as
the manager of general accounting for several manufacturing companies prior to
owning his own company. In addition, the Company is evaluating whether to
transition its decentralized accounting functions into a more centralized
accounting system.
Commenting on the restatement and Audit Committee investigation, Hugh
Aiken, Chairman of the Board and Chief Executive Officer, stated, "The Audit
Committee and management acted immediately to address the situation at PFG. The
people involved in the wrongdoing are no longer with the Company, and steps have
been taken to improve the operations of PFG. Now that the restatement and Audit
Committee investigation are behind us, we look forward to focusing all of our
efforts on Atchison's business."
Loan Amendments
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The Company and its lenders entered into amendment and forbearance
agreements that provide, among other things, that such lenders will continue to
forbear from exercising their rights with respect to certain existing defaults
through at least July 30, 2001. These agreements give the Company the
opportunity to renegotiate or refinance its lending arrangements, although no
assurance can be given as to whether the Company will be successful.
Other Developments
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"Backlog is growing after two very difficult years in our major markets. In
particular, orders have increased for offshore oil and gas equipment, power
generation equipment, steel making equipment and passenger rail products. Mining
equipment orders are still weak, but have stopped getting weaker and look to be
set for a rebound following the mining equipment slowdown that began in the
summer of 1998. Higher coal prices are helping here," added Mr. Aiken.
"Operations at Sheffield Forgemasters in the UK are improving, due to
investment in new equipment, strength in the offshore oil and gas industry, new
roll products to sell to the steel industry, greater penetration of the US
market, and weakening of the British pound against the dollar. Instead of the
operating losses experienced during fiscal 2000 and the first two quarters of
fiscal 2001, Sheffield is now generating an operating profit, and its backlog is
growing," continued Mr. Aiken.
ACC's Inverness Castings Group unit in Michigan is increasing production
due to the award of several new automotive projects, and expects to be running
at 100% capacity by the summer of 2001. This will mean a significant improvement
in its earnings compared to fiscal 2000 and 2001.
The new machining cell for locomotive trucks at our Atchison Steel Casting
& Machining Division (formerly Atchison/St. Joe Division) is now operating well,
after more than a year of start-up problems. This powerful and highly automated
machine tool is designed to shorten manufacturing lead time, lower cost and
improve quality. None of our competitors has such a facility for locomotive
truck machining.
At Canada Alloy Castings, orders and volume have increased, in part due to
more demand from energy related sectors such as hydro and steam powered
electricity generating equipment.
"We previously reported plans to close Pennsylvania Steel and PrimeCast, an
iron foundry in South Beloit, Illinois. These closures are now complete. This
brings to three the number of foundries that ACC has closed since November, 2000
in order to improve earnings and cash flow in the short term. Operations from
these foundries have had a significant impact on earnings, producing pre-tax
losses of $26.5 million ($12.8 million before impairment charges of $13.7
million) in fiscal 2000," said Hugh Aiken, Chairman of the Board and Chief
Executive officer.
Rescheduled Annual Meeting
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The Board of Directors has rescheduled the Annual Meeting of Stockholders
for fiscal 2000 to Friday, June 29, 2001 at 11:00 a.m., for stockholders of
record on May 18, 2001. The Company expects to mail revised proxy materials,
including the revised Annual Report to Stockholders, on or around May 25, 2001.
The amended annual report on Form 10-K/A is publicly available upon request.
ACC produces iron, steel and non-ferrous castings for a wide variety of
equipment, capital goods, and consumer markets.
This press release contains forward-looking statements that involve risks
and uncertainties. The Company's actual results could differ materially from the
expected results because of a variety of factors, including the size and timing
of future acquisitions, business conditions and the state of the general
economy, particularly the capital goods industry, the strength of the U.S.
dollar, British pound sterling and the Euro, interest rates, the Company's
ability to renegotiate or refinance its lending arrangements, utility rates, the
availability of labor, the successful conclusion of union contract negotiations,
the results of any litigation arising out of the accident at Jahn Foundry,
results of any litigation or regulatory proceedings arising from the accounting
irregularities at the Pennsylvania Foundry Group, the competitive environment in
the casting industry and changes in laws and regulations that govern the
Company's business, particularly environmental regulations.