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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1999
REGISTRATION NO.
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEENAH FOUNDRY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WISCONSIN 3321 39-1580331
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
2121 BROOKS AVENUE, BOX 729,
NEENAH, WISCONSIN 54927
(414) 725-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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C/O GARY W. LACHEY
VICE PRESIDENT -- FINANCE, TREASURER AND SECRETARY
2121 BROOKS AVENUE, BOX 729,
NEENAH, WISCONSIN 54927
(414) 725-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
LANCE C. BALK
KIRKLAND & ELLIS
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022-4675
TELEPHONE: (212) 446-4800
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
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Neenah Foundry Company's 11 1/8% Senior
Subordinated Notes due 2007, Series F.......... $90,045,000 $1,000 $90,045,000 $25,033.00
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Guarantees(2).................................... N/A N/A N/A N/A
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of the securities
as of February 16, 1999.
(2) The Guarantee by each of Hartley Controls Corporation; Neenah Transport,
Inc.; Deeter Foundry, Inc.; Mercer Forge Corporation; A & M Specialties,
Inc.; Advanced Cast Products, Inc.; Belcher Corporation; Peerless
Corporation; Dalton Corporation; Dalton Corporation, Facility; Dalton
Corporation, Ashland Manufacturing Facility; Dalton Corporation,
Kendallville Manufacturing Facility; Stryker Machining Facility Co. and
Niemin Porter & Co. of the payment of principal and interest on the Notes is
being registered hereby. Pursuant to Rule 457(g), no registration fee is
required with respect to the Guarantees.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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HARTLEY CONTROLS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WISCONSIN 3321 39-0842568
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
NEENAH TRANSPORT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
WISCONSIN 3321 39-1378433
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DEETER FOUNDRY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
NEBRASKA 3321 47-0355148
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
MERCER FORGE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 3321 25-1511711
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
A & M SPECIALTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
PENNSYLVANIA 3321 25-1741756
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ADVANCED CAST PRODUCTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 3321 25-1607691
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
BELCHER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 3321 52-1643193
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
PEERLESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 3321 52-1644462
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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DALTON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
INDIANA 3321 35-0259770
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DALTON CORPORATION,
WARSAW MANUFACTURING FACILITY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
INDIANA 3321 35-2054775
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DALTON CORPORATION,
ASHLAND MANUFACTURING FACILITY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 3321 34-1873079
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
DALTON CORPORATION,
KENDALLVILLE MANUFACTURING FACILITY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
INDIANA 3321 35-2054777
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
STRYKER MACHINING FACILITY CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
OHIO 3321 34-1873080
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
NIEMIN PORTER & CO.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
CALIFORNIA 3321 33-0071223
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
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PROSPECTUS
FEBRUARY [ ], 1999
NEENAH FOUNDRY COMPANY
OFFER FOR ALL OUTSTANDING 11 1/8% SERIES E SENIOR SUBORDINATED NOTES DUE 2007
IN EXCHANGE FOR 11 1/8% SERIES F SENIOR SUBORDINATED NOTES DUE 2007
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
[ ], 1999
UNLESS EXTENDED.
We will not receive any proceeds from the exchange of these notes.
THE COMPANY:
- - We manufacture a wide range of high quality ductile and gray iron castings for
the heavy municipal market and selected segments of the industrial market.
- - Neenah Foundry Company
2121 Brooks Avenue, Box 729
Neenah, Wisconsin 54957
(920) 725-7000
PROPOSED TRADING FORMAT:
- - The PORTAL market or directly with qualified buyers.
THE EXCHANGE OFFER:
- - Offer for $87,000,000 in principal amount of outstanding 11 1/8% series E
senior subordinated notes due 2007 in exchange for $87,000,000 in principal
amount of 11 1/8% series F senior subordinated notes due 2007.
- - The terms of the exchange notes are identical in all material respects to the
terms of the outstanding old notes, except for certain transfer restrictions
and registration rights pertaining to the old notes.
- - This exchange offer will expire at 5 p.m. New York City time on [ ],
1999 unless extended.
TERMS OF THE EXCHANGE NOTES:
MATURITY:
May 1, 2007
REDEMPTION:
- - We may redeem the exchange notes at any time on or after May 1, 2002.
- - Before May 1, 2000, we may, subject to certain requirements, redeem up to 40%
of the exchange notes with the proceeds of certain types of public offerings
of equity in our Company, our parent company, or the parent of our parent
company.
MANDATORY OFFER TO REPURCHASE:
- - IF WE SELL ALL OR SUBSTANTIALLY ALL OF OUR ASSETS OR EXPERIENCE SPECIFIC KINDS
OF CHANGES IN CONTROL, WE MAY BE REQUIRED TO OFFER TO REPURCHASE THE EXCHANGE
NOTES.
SECURITY:
- - The exchange notes and the guarantees by our guarantor subsidiaries are
unsecured.
GUARANTEES:
- - If we cannot make payments on the exchange notes when due, our guarantor
subsidiaries must make them instead.
RANKING:
- - These exchange notes and the subsidiary guarantees rank:
1. behind to all of our and our guarantor subsidiaries' current and future
senior indebtedness (other than trade payables);
2. equal with all of our and our guarantor subsidiaries' other current and
future senior subordinated indebtedness; and
3. ahead of all of our and our guarantor subsidiaries' other current and
future indebtedness that expressly provides that it is not senior to these
exchange notes and the subsidiary guarantees.
INTEREST:
- - Fixed annual rate of 11 1/8%.
- - Paid every six months on May 1 and November 1.
THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 11.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the exchange notes or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
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TABLE OF CONTENTS
PAGE
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Prospectus Summary.................. 1
Risk Factors........................ 11
Use of Proceeds..................... 18
Capitalization...................... 19
Selected Consolidated Financial and
Other Data........................ 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 23
Business............................ 30
Management.......................... 49
Ownership of Securities............. 53
Certain Relationships and Related
Transactions...................... 53
PAGE
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Description of Senior Bank
Facilities........................ 54
Description of Notes................ 58
Exchange Offer...................... 92
Certain United States Federal Income
Tax Considerations................ 98
Plan of Distribution................ 99
Legal Matters....................... 100
Experts............................. 100
Incorporation of Certain Documents
by Reference...................... 101
Available Information............... 102
Index to the Financial Statements of
Dalton Corporation................ F-1
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PROSPECTUS SUMMARY
On the cover page and in this summary, the words "Company," "we," "our,"
"ours," and "us" refer only to Neenah Foundry Company, Hartley Controls
Corporation and Neenah Transport, Inc. and not to any of our other subsidiaries
or to the initial purchaser. The following summary contains basic information
about this exchange offer. It probably does not contain all the information that
is important to you. For a more complete understanding of this exchange offer,
we encourage you to read this entire document and the documents we have referred
you to.
In addition, our management has estimated the market share percentages
provided in this prospectus. We believe these estimates to be reliable, but
these numbers have not been verified by an independent source.
THE COMPANY
OVERVIEW
Our Company, founded in 1872, is one of the largest manufacturers of a wide
range of high quality ductile and gray iron castings for the heavy municipal
market and selected segments of the industrial market.
We believe our Company is the largest manufacturer of heavy municipal iron
castings in the United States with approximately a 19% market share in fiscal
1998. Our broad range of heavy municipal iron castings includes manhole covers
and frames, storm sewer frames and grates, heavy duty airport castings,
specialized trench drain castings, specialty flood control castings and
ornamental tree grates. We sell these municipal castings throughout the United
States to state and local government entities, utility companies, precast
concrete manhole structure producers and contractors for both new construction
and infrastructure replacement. The municipal market generated approximately 41%
of our net sales for the year ended September 30, 1998.
We also believe we are a leading manufacturer of a wide range of complex
industrial castings, including castings for medium- and heavy-duty truck drive
line components, a broad range of castings for the farm equipment industry and
specific components for compressors used in heating, ventilation and air
conditioning systems. The industrial market generated approximately 56% of our
net sales for the year ended September 30, 1998.
In addition, we engineer, manufacture and sell customized sand control
systems and related products, which are an essential part of the casting
process, to other iron foundries. Sales of these sand control systems and
related products represented approximately 3% of our net sales for the year
ended September 30, 1998.
We currently operate two modern foundries with an annual aggregate rated
capacity of approximately 187,000 tons at a single site in Neenah, Wisconsin.
From 1985 to 1997, we invested approximately $100.0 million in our production
facilities, with approximately $73.0 million invested in a major plant
modernization program from 1985 to 1990. This plant modernization program was a
critical part of a long-term strategy to produce higher volume, value-added
castings for our existing industrial customers. We also aimed to penetrate other
selected segments of the industrial market, while preserving our position as the
leader in the heavy municipal market. This modernization program entailed the
closing of our oldest foundry, Plant 1, and the updating of our other two
foundries, Plants 2 and 3, which enabled us both to produce higher volume,
complex castings for selected industrial segments and to improve our cost
position in the heavy municipal market.
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Following the completion of the modernization program, we have steadily
decreased our production of lower margin products such as axle covers and brake
drums and increased the production of higher margin, more complex parts, such as
transmission and axle housings.
RECENT ACQUISITIONS
On March 30, 1998, we acquired the capital stock of Deeter Foundry, Inc.
("Deeter") for $24.3 million (excluding fees and expenses of $0.3 million),
consisting of $20.4 million of cash and a $3.9 million seller note. ACP Holding
Company, the parent company of our parent company, NFC Castings, Inc., issued
the $3.9 million seller note to Deeter's selling shareholders. The seller note
does not bear interest and matures on March 30, 1999. Payment of the principal
amount of the seller note is supported by a letter of credit issued under our
senior debt instruments. We financed the cash portion of the purchase price and
all fees and expenses from cash on hand.
Since 1945, Deeter has been producing gray iron castings for the heavy
municipal market. Deeter's municipal casting product line includes manhole
frames and covers, storm sewer inlet frames, grates and curbs, trench grating
and tree grates. Deeter also produces a wide variety of special application
construction castings. These products are used in waste treatment plants,
airports, telephone and electrical construction projects.
On April 3, 1998, we acquired all the capital stock of Mercer Forge
Corporation ("Mercer") for $47.0 million in cash (excluding fees and expenses of
$0.5 million). In order to finance our acquisition of Mercer, we amended and
restated our then existing credit agreement between our Company, our parent
company and our lenders. Our amended and restated credit agreement provided us
with up to $75.0 million of term loans divided into two tranches: 1) $20.0
million of tranche A term loans and 2) $55.0 million of tranche B term loans.
The $75.0 million of term loans were in addition to our existing $50.0 line of
revolving credit available. On April 3, 1998, we borrowed $55.0 million of the
tranche B loans and used $48.6 million to finance the acquisition of Mercer, to
pay fees and expenses incurred in connection with the acquisition and to pay
financing costs. The available tranche A term loans were not borrowed on April
3, 1998.
Founded in 1954, Mercer is a leading producer of complex-shaped forged
components for use in transportation, railroad, mining and heavy industrial
applications. Mercer is also a leading producer of microalloy forgings. Mercer
sells directly to original equipment manufacturers, as well as to industrial end
users.
On September 8, 1998, we acquired all the capital stock of Dalton
Corporation ("Dalton") for $102.0 million in cash (excluding fees and expenses
of $0.6 million). Dalton manufactures and sells gray iron castings for
refrigeration systems, air conditioners, heavy equipment, engines, gear boxes,
stationary transmissions, heavy duty truck transmissions and other automotive
parts.
On September 8, 1998, ACP Holding Company contributed the capital stock of
Advanced Cast Products, Inc. ("ACP") to our Company. The fair market value of
the contribution will be added to the amount of restricted payments we are
permitted to make under the Indenture listed in the Section "Description of
Notes" under the heading "Certain Covenants" and the subheading "Limitation on
Restricted Payments." In connection with the contribution, we assumed $14.9
million of indebtedness of ACP and refinanced $14.6 million of the assumed
indebtedness with borrowings under our senior bank facilities.
ACP is a leading independent manufacturer of ductile and malleable iron
castings that are produced through both traditional casting methods and through
ACP's Evapcast lost foam casting process. ACP's production capabilities also
include a range of finishing operations including austempering and machining.
ACP sells its products primarily to companies in the heavy truck, construction
equipment, railroad, mining, electrical fittings and automotive industries.
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In connection with the acquisition of Dalton and the contribution of the
capital stock of ACP, our Company, our parent company and our lenders amended
and restated our then existing credit agreement to provide us additional tranche
B term loans of up to $70.0 million and an acquisition loan facility of up to
$50.0 million. In connection with the acquisition of Dalton and the contribution
of the capital stock of ACP, we borrowed $29.0 million under the acquisition
loan facility, $20.0 million of tranche A term loans and $70.0 million of
tranche B term loans.
Currently, each of our recently acquired subsidiaries is operating as a
separate subsidiary with independent operations under the direction of the
management that was in place prior to our control. Although we currently do not
plan to integrate our operations with those of any of our recently acquired
subsidiaries, we may do so in the future. See "Risk Factors -- Integration of
the Recent Acquisitions."
We accounted for each of the Deeter, Mercer and Dalton acquisitions by
using the purchase method of accounting. We accounted for the acquisition of ACP
at historical cost in a manner similar to that in pooling of interest accounting
because our company and ACP were under common control. Accordingly, our prior
period financial statements for the period during which we and ACP were under
common ownership are restated to reflect the contribution of capital stock of
ACP to our Company.
On December 31, 1998, we acquired Niemin Porter & Co., which conducts its
business under the name Cast Alloys, Inc. ("Cast Alloys"), and its subsidiary,
International Golf, S.A. de C.V., a corporation organized under the laws of the
United Mexican States ("International Golf") for $42 million in cash, subject to
a post-closing adjustment. We financed the acquisition of Cast Alloys from a
portion of the proceeds we received from issuance of the old notes.
Cast Alloys' principal business is the manufacture of investment-cast
titanium and stainless steel golf club heads. Cast Alloys operates out of three
principal facilities in Chatsworth, California, Carlsbad, California and
Northridge, California. Cast Alloys' wholly owned subsidiary, International
Golf, operates as a cost center for Cast Alloys and is also principally involved
in the manufacture of investment-cast titanium and stainless steel golf club
heads. International Golf operates out of three facilities located in Tijuana,
Baja California, Mexico. Cast Alloys is operated as our wholly owned subsidiary
under the direction of our management.
THROUGHOUT THIS PROSPECTUS, WE REFER TO THE ACQUISITIONS DESCRIBED ABOVE AS
THE "RECENT ACQUISITIONS" AND TO THE SUBSIDIARIES AS THE "RECENTLY ACQUIRED
SUBSIDIARIES." WE REFER TO THE FACILITIES AVAILABLE UNDER OUR EXISTING AMENDED
AND RESTATED CREDIT AGREEMENT AS THE "SENIOR BANK FACILITIES." SEE "DESCRIPTION
OF THE SENIOR BANK FACILITIES."
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THE OLD NOTE OFFERING
Old Notes.................. We sold the old notes to Chase Securities Inc. on
November 24, 1998 pursuant to a purchase agreement.
The initial purchaser subsequently resold the old
notes to qualified institutional buyers pursuant to
Rule 144A under the Securities and Exchange Act.
Exchange and Registration
Rights Agreement......... As required in the purchase agreement, we and the
initial purchasers entered into a registration
rights agreement on November 24, 1998 which granted
them and any subsequent holders of the old notes
certain exchange and registration rights. The
exchange offer is intended to satisfy those
exchange and registration rights. The exchange and
registration rights we granted will terminate upon
the consummation of our exchange offer.
THE EXCHANGE OFFER
Securities Offered......... Up to $87,000,000 of 11 1/8% Series F Senior
Subordinated Notes due 2007. The terms of the
exchange notes and old notes are identical in all
material respects, except for certain transfer
restrictions and registration rights relating to
the old notes.
The Exchange Offer......... We are offering to exchange the old notes for a
like principal amount of exchange notes. Old notes
may be exchanged only in integral principal
multiples of $1,000. The issuance of the exchange
notes is intended to satisfy obligations of the
company and the guarantor subsidiaries contained in
the registration rights agreement.
Expiration Date; Withdrawal
of Tender................ Our exchange offer will expire 5:00 p.m. New York
City time, on [ , 1999], or such later
date and time as we may extend. Your tender of old
notes pursuant to our exchange offer may be
withdrawn at any time prior to the expiration date.
Any old notes not accepted by us for exchange for
any reason will be returned to you without expense
as promptly as we can after the expiration or
termination of our exchange offer.
Certain Conditions to the
Exchange Offer........... Based on an interpretation by the staff of the
Securities and Exchange Commission set forth in
no-action letters issued to third parties, we
believe that the exchange notes issued by us
pursuant to the exchange offer in exchange for the
old notes may be offered for resale, resold and
otherwise transferred by any holder thereof (other
than any such holder which is our "affiliate"
within the meaning of Rule 405 under the Securities
and Exchange Act as amended) by you without
compliance with the registration and prospectus
delivery provisions of the Securities and Exchange
Act, provided that such exchange notes are acquired
in the ordinary course of your business and that
you do not intend to participate and have no
arrangement or understanding with any person to
participate in the distribution of such exchange
notes. Our obligation to accept for exchange, or to
issue the exchange notes in exchange for, any old
notes is subject to certain custom-
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ary conditions relating to compliance with any
applicable law, or any applicable interpretation by
any staff of the Securities and Exchange
Commission, or any order of any governmental agency
or court of law. We currently expect that each of
the conditions will be satisfied and that no
waivers will be necessary. See "The Exchange
Offer -- Certain Conditions to the Exchange Offer."
Procedures for Tendering
Old Notes................ Each holder of old notes wishing to accept the
exchange offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with such old notes and any other required
documentation, to the exchange agent at the address
set forth in the section "The Exchange Offer" under
the heading "Procedures for Tendering Old Notes."
Use of Proceeds............ We will not receive any proceeds from the exchange
of notes pursuant to our exchange offer.
Exchange Agent............. United States Trust Company of New York is serving
as the exchange agent in connection with our
exchange offer.
Federal Income Tax
Consequences............. The exchange of old notes pursuant to the exchange
offer should not be a taxable event to you for
federal income tax purposes. See "Certain Federal
Income Tax Considerations."
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THE OFFERING
The terms of the exchange notes are identical in all material respects to the
terms of the old notes, except that the old notes differed with respect to
certain transfer restrictions and certain registration rights.
Issuer........................ Neenah Foundry Company
Total Amount of Notes
Offered....................... $87.0 million in principal amount of 11 1/8%
Series F Senior Subordinated Notes due 2007.
Maturity...................... May 1, 2007.
Interest...................... Annual rate -- 11 1/8%.
Payment frequency -- every six months on May 1
and November 1.
First payment -- May 1, 1999.
Optional Redemption........... On or after May 1, 2002, we may redeem some or
all of the exchange notes (and any outstanding
old notes) at any time at the redemption prices
listed in the section "Description of Notes"
under the heading "Optional Redemption."
Before May 1, 2000, we may, subject to certain
requirements, redeem up to 40% of the exchange
notes and old notes with the proceeds of
certain public offerings of equity in our
Company, our parent company, or the parent of
our parent company at the price listed in the
section "Description of Notes" under the
heading "Optional Redemption." If less than 60%
of exchange notes and old notes will remain
outstanding immediately after any such
redemption, we cannot consummate such
redemption.
Change of Control............. Before May 1, 2002, we may, upon the occurrence
of a change of control event, redeem the
exchange notes (and any outstanding old notes)
at a price listed in the section "Description
of Notes" under the heading "Change of
Control."
We may be required to offer to repurchase the
exchange notes (and such old notes) at a price
listed in the section "Description of Notes"
under the heading "Change of Control" if:
- Prior to May 1, 2002, we do not exercise our
option upon the occurrence of a change of
control event to redeem the exchange notes
(and any outstanding old notes), or
- After May 1, 2002, a change of control event
occurs.
Subsidiary Guarantees......... The exchange notes will be (as are the old
notes) fully guaranteed on an unsecured, senior
subordinated basis by each guarantor
subsidiary. Each guarantor subsidiary is our
wholly owned subsidiary and a principal
operating subsidiary. Certain of our future
domestic subsidiaries that incur indebtedness
and all future foreign subsidiaries that
guarantee the senior bank facilities will also
guarantee the exchange notes, as they
guaranteed the old notes.
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If we cannot make payments on the exchange
notes (or any old notes) when they are due, the
guarantor subsidiaries must make them instead.
The guarantor subsidiaries are also guarantors
of our senior bank facilities and are jointly
and severally liable with us on a senior basis
for such obligations.
To secure the obligations under our senior bank
facilities, we pledged the capital stock of our
Company and the guarantor subsidiaries pledged
all of their capital stock. We and the
guarantor subsidiaries also granted security
interests in, or liens on, substantially all
other tangible and intangible assets of our
Company and the guarantors subsidiaries.
Ranking of the Exchange
Notes......................... These exchange notes will be (as are the old
notes) and the subsidiary guarantees are senior
subordinated debts.
They rank behind all of our and our guarantor
subsidiaries' current and future senior
indebtedness (other than trade payables).
They rank equal with all of our and our
guarantor subsidiaries' other senior
subordinated indebtedness.
They will rank ahead of all of our and our
guarantor subsidiaries' other current and
future subordinated indebtedness, except
indebtedness that expressly provides that it is
not senior to these exchange notes and the
subsidiary guarantees.
Assuming we had completed this exchange offer
on December 31, 1998 and applied the proceeds
as intended, the exchange notes and the
subsidiary guarantees:
- would have been subordinated to $145.1
million of senior debt (excluding $4.6
million of outstanding letters of
credit);
- would have ranked equally with $195.0
million principal amount of other senior
subordinated debt; and
- would not have ranked senior to any
other debt.
Basic Covenants of the
Indenture................... We will issue the exchange notes under an
indenture with United States Trust Company of
New York, as trustee. The indenture will, among
other things, place certain limitations on our
ability, and the ability of some of our
subsidiaries, to:
- borrow money or make certain restricted
payments,
- change the nature of the business,
- pay dividends on stock or repurchase
stock and certain subordinated
obligations,
- enter into sale and lease back
transactions,
- make investments,
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- enter into transactions with affiliates,
- use assets as security in other
transactions,
- create liens, and
- sell certain assets or merge with or
into other companies.
For more details, see the section "Description
of Notes" under the heading, "Certain
Covenants" and "Merger and Consolidation."
Transfer Restrictions......... The exchange notes are new securities, and
there is currently no established market for
them. We do not intend to list the exchange
notes on any securities exchange.
The address for our Company and each of the guarantor subsidiaries is 2121
Brooks Avenue, Box 729, Neenah, Wisconsin 54927 and the telephone number is
(920) 725-7000.
RISK FACTORS
Holders of old notes should carefully consider all of the information set
forth in this prospectus.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF FACTORS THAT
YOU SHOULD CONSIDER IN CONNECTION WITH YOUR INVESTMENT IN THE EXCHANGE NOTES.
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth summary consolidated financial and other
data of (i) the Predecessor Company as of March 31, 1994, 1995, 1996 and 1997
and April 30, 1997 and for each of the years ended March 31, 1994, 1995, 1996
and 1997 and the one month period ended April 30, 1997, which have been derived
from the Predecessor Company's consolidated financial statements which have been
audited by Ernst & Young LLP, other than the consolidated balance sheets as of
March 31, 1994 and April 30, 1997, which were audited by another independent
auditor, (ii) the Company as of September 30, 1997 and 1998 and for the five
months ended September 30, 1997 and for the year ended September 30, 1998, which
have been derived from the Company's consolidated financial statements which
have been audited by Ernst & Young LLP and (iii) the Company as of December 31,
1997 and 1998 and for the three months ended December 31, 1997 and 1998 which
have been derived from the Company's unaudited interim condensed consolidated
financial statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results of operations and financial position for and as of the end of
such period. Results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year or any other future
period. The Company changed its fiscal year end to September 30 from March 31
effective September 30, 1997.
The summary financial and other data should be read in conjunction with
"Summary -- Recent Developments," "Capitalization," "Selected Consolidated
Financial and Other Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus and
the consolidated financial statements and related notes of the Company
incorporated herein by reference.
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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
PREDECESSOR COMPANY
------------------------------------------------------------- FIVE MONTHS
FISCAL YEAR ENDED MARCH 31, ONE MONTH ENDED
----------------------------------------- ENDED SEPTEMBER 30,
1994 1995 1996 1997 APRIL 30, 1997(4) 1997(5)
-------- -------- -------- -------- ----------------- -------------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales...................................... $131,982 $160,621 $166,951 $165,426 $ 17,276 $108,353
Gross profit................................... 25,451 39,640 45,320 48,690 5,925 30,909
Operating income............................... 11,837 22,967 28,337 31,143 4,173 18,357
Interest expense (income), net................. 1,043 397 (481) (1,162) (121) 9,991
Net income (loss).............................. 6,581 13,704 17,142 19,838 2,679 2,736
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents...................... $ 118 $ 238 $ 10,126 $ 22,403 $ 29,043 $ 20,346
Working capital(1)............................. 14,596 15,174 18,094 21,438 21,124 23,175
Total assets................................... 74,327 73,813 82,957 93,869 103,402 358,406
Total debt..................................... 13,325 887 241 134 128 218,413
Total stockholders' equity..................... 37,929 43,198 54,790 68,857 74,883 47,407
OTHER DATA:
EBITDA(2)...................................... $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 4,691 $ 26,056
Depreciation and amortization.................. 6,740 6,842 6,776 6,881 518 7,699
Capital expenditures........................... 4,583 3,665 7,275 4,546 190 3,081
Net cash provided by (used in):
Operating activities......................... 18,301 23,581 22,273 23,479 3,917 25,160
Investing activities......................... (4,949) (3,412) (7,299) (3,104) (191) (14,702)
Financing activities......................... (13,313) (20,049) (5,086) (8,098) 2,917 (1,656)
Cash interest expense(3)....................... 1,049 624 84 39 1 10,016
YEAR THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1998
------------- ------------ ------------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales...................................... $ 303,414 $ 57,988 $115,264
Gross profit................................... 80,963 14,645 21,119
Operating income............................... 50,006 8,965 10,097
Interest expense (income), net................. 27,203 5,840 9,907
Net income (loss).............................. 11,489 1,616 (359)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents...................... $ 19,798 $ 21,994 $ 34,683
Working capital(1)............................. 62,573 26,782 75,001
Total assets................................... 584,309 348,511 638,608
Total debt..................................... 371,871 212,389 432,271
Total stockholders' equity..................... 67,922 55,770 67,563
OTHER DATA:
EBITDA(2)...................................... $ 69,660 $ 12,766 $ 18,923
Depreciation and amortization.................. 19,654 3,801 8,826
Capital expenditures........................... 13,117 1,612 6,856
Net cash provided by (used in):
Operating activities......................... 24,236 2,473 6,780
Investing activities......................... (182,168) (1,612) (49,340)
Financing activities......................... 157,384 787 57,445
Cash interest expense(3)....................... 27,383 6,047 10,172
- ---------------
(1) Working capital represents total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding the revolving credit
facility and the current portion of long-term debt).
(2) EBITDA represents operating income plus depreciation and amortization. The
Company has included information concerning EBITDA because management
believes that EBITDA is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
or other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity. The Company understands that, while EBITDA is frequently used
by securities analysts in the evaluation of companies, EBITDA, as used
herein, is not necessarily comparable to other similarly titled captions of
other companies due to potential inconsistencies in the method of
calculation. EBITDA is not intended as an alternative to cash flow from
operating activities as a measure of liquidity, an alternative to net income
as an indicator of the Company's operating performance or an alternative to
any other measure of performance in conformity with generally accepted
accounting principles.
(3) Cash interest expense is defined as interest expense less amortization of
debt issuance cost plus amortization of premium on senior subordinated notes
issued July 1, 1997 and November 24, 1998.
(4) See "-- The Merger."
(5) The Company changed its fiscal year end to September 30 from March 31
effective September 30, 1997.
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RISK FACTORS
This Prospectus includes "forward looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act including,
in particular, the statements about the Company's plans, strategies, and
prospects under the headings "Prospectus Summary," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and "Business".
Although we believe that our plans, intentions and expectations reflected in or
suggested by such forward-looking statements are reasonable, we can give no
assurance that such plans, intentions or expectations will be achieved.
Important factors that could cause actual results to differ materially from the
forward looking statements we make in this Prospectus are set forth below and
elsewhere in this Prospectus. All forward-looking statements attributable to the
Company or persons acting on our behalf are expressly qualified in their
entirety by the following cautionary statements. As used in this section, unless
the context otherwise requires, the terms "Company," "we," "our," "ours," and
"us" refer to Neenah Foundry Company and all of its subsidiaries including the
Recently Acquired Subsidiaries.
SUBSTANTIAL LEVERAGE -- OUR SUBSTANTIAL INDEBTEDNESS COULD ADVERSELY AFFECT THE
FINANCIAL HEALTH OF OUR COMPANY AND PREVENT US FROM FULFILLING OUR OBLIGATIONS
UNDER THESE EXCHANGE NOTES. We have now and, after the offering, will continue
to have a significant amount of indebtedness. The following chart presents our
total indebtedness and our indebtedness senior to the exchange notes as of
December 31, 1998 and our ratio of earnings to fixed charges for the year ended
September 30, 1998 and the three months ended December 31, 1998:
AT DECEMBER 31, 1998
--------------------
Total indebtedness (excluding $4.6 million of outstanding
letters of credit)........................................ $432.3 million
Indebtedness senior to the exchange notes (excluding $4.6
million of outstanding letters of credit)................. $145.1 million
FOR THE YEAR ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1998
------------------ --------------------------
Ratio of earnings to fixed charges................ 1.8x 1.0x
Our substantial indebtedness could have important consequences to you. For
example, it could:
- make it more difficult for us to satisfy our obligations with respect to
these exchange notes;
- increase our vulnerability to general adverse economic and industry
conditions;
- increase our vulnerability to increases in interest rates;
- limit our ability to fund future working capital, capital expenditures,
research and development costs, acquisitions and other general corporate
requirements;
- require a substantial portion of our cash flow from operations for debt
payments, thereby reducing the availability of our cash flow to fund
working capital, capital expenditures, research and development efforts,
acquisitions and other general corporate purposes;
- limit our flexibility to plan for, or react to, changes in our business
and the industry in which we operate;
- place us at a competitive disadvantage compared to our competitors that
have less debt; and
- limit our ability to borrow additional funds.
Any of the above listed factors could materially adversely affect us. See
"Description of the Senior Bank Facilities" and "Description of Exchange Notes."
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ABILITY TO SERVICE DEBT -- TO SERVICE OUR INDEBTEDNESS, WE WILL REQUIRE A
SIGNIFICANT AMOUNT OF CASH. OUR ABILITY TO GENERATE CASH DEPENDS ON MANY FACTORS
BEYOND OUR CONTROL. Our ability to make payments on and to refinance our
indebtedness, including these exchange notes, and to fund planned capital
expenditures and research and development efforts will depend on our ability to
generate cash in the future. This, to a certain extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Based on our current level of operations, we believe our
cash flow from operations, available cash and available borrowings under our
senior bank facilities will be adequate to meet our future liquidity needs for
at least the next few years.
We cannot assure you, however, that our business will generate sufficient cash
flow from operations or that future borrowings will be available to us under our
senior bank facilities in an amount sufficient to enable us to pay our
indebtedness, including these exchange notes, or to fund our other liquidity
needs. We may need to refinance all or a portion of our indebtedness, including
these exchange notes on or before maturity. We might not be able to refinance
any of our indebtedness, including our senior bank facilities and these exchange
notes, on commercially reasonable terms or at all.
SUBORDINATION -- YOUR RIGHT TO RECEIVE PAYMENTS ON THESE EXCHANGE NOTES IS
JUNIOR TO ALL OF OUR EXISTING AND FUTURE SENIOR INDEBTEDNESS AND POSSIBLY ALL OF
OUR FUTURE BORROWINGS. FURTHER, THE GUARANTEES OF THESE EXCHANGE NOTES ARE
JUNIOR TO ALL OUR GUARANTOR SUBSIDIARIES' EXISTING AND FUTURE SENIOR
INDEBTEDNESS AND POSSIBLY TO ALL THEIR FUTURE BORROWINGS. These exchange notes
and the subsidiary guarantees rank behind all of our and our guarantor
subsidiaries' existing and future senior indebtedness and all of our and their
future borrowings, except any future indebtedness that expressly provides that
it ranks equal with, or subordinated in right of payment to, the exchange notes
and the guarantees. As a result, upon any distribution to our creditors or the
creditors of our guarantor subsidiaries in a bankruptcy or similar proceeding
relating to us or our guarantor subsidiaries, the holders of senior indebtedness
of our company and our guarantor subsidiaries will be entitled to be paid in
full in cash before any payment may be made with respect to these exchange notes
or the subsidiary guarantees.
In the event of a bankruptcy, liquidation or reorganization or similar
proceeding relating to our Company or our guarantor subsidiaries, holders of the
exchange notes will participate with all other holders of subordinated
indebtedness of our Company and our guarantor subsidiaries in the assets
remaining after we and our guarantor subsidiaries have paid all of the senior
debt. Because our senior debt must be paid first, you may receive less than
holders of senior debt in any such proceeding. In any of these cases, we and our
guarantor subsidiaries may not have sufficient funds to pay all of our
creditors, therefore, holders of exchange notes may receive ratably less than
the holders of senior debt.
RESTRICTIONS IMPOSED BY THE SENIOR BANK FACILITIES AND THE INDENTURE -- WE ARE
SUBJECT TO RESTRICTIONS CONTAINED IN OUR SENIOR BANK FACILITIES AND IN THE
INDENTURE. FAILURE TO COMPLY WITH ANY OF THE RESTRICTIONS COULD RESULT IN
ACCELERATION OF OUR DEBT. OUR SENIOR BANK FACILITIES AND THE INDENTURE RESTRICT
OUR ABILITY TO:
- incur additional indebtedness,
- pay dividends and make distributions,
- make certain investments, loans, or advances,
- incur guarantee obligations,
- prepay other indebtedness,
- create liens,
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- make acquisitions,
- change the nature of our business,
- make capital expenditures,
- enter into transactions with affiliates,
- enter into sale and leaseback transactions,
- merge or consolidate our company or any guarantors, and
- transfer and sell assets.
In addition, we must maintain minimum debt service interest ratios and maximum
leverage ratios and satisfy minimum net worth tests under our senior bank
facilities. A failure to comply with the restrictions contained in the senior
bank facilities could lead to an event of default which could result in an
acceleration of such indebtedness. Such an acceleration would also constitute an
event of default under the indenture relating to the exchange notes. See
"Description of Senior Bank Facilities."
INTEGRATION OF THE RECENT ACQUISITIONS -- THE INTEGRATION AND CONSOLIDATION OF
THE RECENTLY ACQUIRED SUBSIDIARIES AND ANY FUTURE ACQUISITIONS MAY REQUIRE
SUBSTANTIAL MANAGEMENT, FINANCIAL AND OTHER RESOURCES. THE DIVERSION OF THESE
RESOURCES AND THE INCREASED SIZE OF OUR COMPANY MAY SUBJECT US TO OPERATIONAL
RISKS. The recently acquired subsidiaries constitute our first significant
acquisitions. While we believe that our financial, management and other
resources are sufficient to accomplish any integration of the recently acquired
subsidiaries, we cannot provide any assurance that our resources will be
adequate in this regard or that any attempt to integrate the recently acquired
subsidiaries will not adversely affect the operation of our Company.
In addition, the increased size of our consolidated Company following our recent
acquisitions may pose different and greater operational challenges than we have
experienced in the past. We believe that the recently acquired subsidiaries will
enhance our competitive position and the business prospects of our consolidated
Company. However, we cannot provide any assurance that such benefits will be
realized, that the combination of our Company and the recently acquired
subsidiaries will be successful, or that management will be able to profitably
operate our consolidated Company following any integration.
We believe that there are additional opportunities for growth through the
completion of future strategic acquisitions. We engage in evaluations of
potential acquisitions and are in various stages of discussion regarding
possible acquisitions. Currently, there are no definitive agreements or letters
of intent with respect to any material acquisition. Any such future acquisitions
may result in significant transaction expenses and risks associated with
entering new markets in addition to the integration and consolidation risks
described above. We may not have sufficient management, financial and other
resources to integrate any such future acquisitions and we may be unable to
profitably operate our consolidated Company. See "Summary -- Recent
Acquisitions."
DEPENDENCE ON KEY PERSONNEL -- THE RESULTS OF OUR OPERATIONS DEPEND UPON OUR
ABILITY TO MAINTAIN CERTAIN KEY PERSONNEL AND TO RECRUIT AND RETAIN OTHER HIGHLY
QUALIFIED EMPLOYEES. Our ability to maintain our competitive position in the
future depends upon our success in maintaining certain key senior management,
including our Chairman and Chief Executive Officer, James K. Hildebrand, and
attracting and retaining other highly qualified managerial and manufacturing
personnel. Loss of key personnel and/or our failure to identity and recruit
highly qualified personnel could materially adversely affect our results of
operations. See "Management."
CONCENTRATION OF CUSTOMERS -- CERTAIN KEY CUSTOMERS ACCOUNT FOR A SIGNIFICANT
AMOUNT OF OUR NET SALES. A REDUCTION OR TERMINATION OF PURCHASES BY ANY KEY
CUSTOMER COULD ADVERSELY AFFECT OUR
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RESULTS OF OPERATIONS. The customer base of our Company and some of the
Recently Acquired Subsidiaries is concentrated. Specifically,
- Sales to the largest customer, Dana Corporation, accounted for 10% of
total net sales for the fiscal year ended September 30, 1998;
- Sales to the top three customers accounted for approximately 27% of net
sales for the fiscal year ended September 30, 1998;
A significant reduction in purchases by any of these key customers or a loss of
any of these key customers could materially adversely affect our business,
financial condition and results of operations. See "Business -- The Company
(other than the Recently Acquired Subsidiaries) -- Products, Customers and
Markets," "-- Dalton Corporation," "-- Advanced Cast Products, Inc." and
"-- Mercer Forge Company."
FINANCING CHANGE OF CONTROL OFFER -- WE MAY NOT HAVE THE ABILITY TO RAISE THE
FUNDS NECESSARY TO FINANCE THE REPURCHASE OPTION CONTAINED IN THE
INDENTURE. Upon the occurrence of certain specific kinds of change of control
events, you will have the right to require us to repurchase all or a portion of
your exchange notes. The repurchase price will be 101% of the face value of the
exchange note, plus any accrued and unpaid interest. However, it is possible
that we will not have sufficient funds at the time of the change of control
event to make the repurchases or that restrictions in our senior bank facilities
will not allow us to make such repurchases. In addition, certain important
corporate events, such as leveraged recapitalizations that would increase the
level of our indebtedness, would not constitute a "Change of Control" under the
Indenture. See "Description of the Senior Bank Facilities" and "Description of
Notes -- Change of Control."
DEPENDENCE ON INDUSTRY/CYCLICALITY -- IF CERTAIN MARKETS IN WHICH OUR CUSTOMERS
OPERATE EXPERIENCE DOWNTURNS, THEN DEMAND FOR, AND PRICES OF, OUR PRODUCTS COULD
BE REDUCED. Our Company has historically experienced moderate cyclicality in
the heavy municipal and farm equipment markets. Sales of municipal castings are
influenced by, among other things, public spending. Our industrial sales are
largely dependent on orders from original equipment manufacturers of medium-and
heavy-duty trucks and truck components and their first-tier suppliers and orders
for farm equipment. The truck market has historically been subject to
fluctuations due to general economic conditions and, in particular, the
industrial sector of the economy. There can be no assurance that the truck
market will not continue to experience fluctuations. The farm equipment market
has also experienced cyclicality. A downturn in these markets could reduce
demand for, and prices of, our products. A significant downturn in either of
these markets could materially adversely affect our Company's business,
financial condition or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
COMPETITION -- THE MARKETS WHICH WE TARGET ARE HIGHLY COMPETITIVE. WE MAY NOT BE
ABLE TO MAINTAIN OR IMPROVE OUR COMPETITIVE POSITION IN THESE MARKETS. The
markets for our Company's, Dalton's, ACP's and Deeter's products are highly
competitive. Competition is based on:
- price;
- qualify of product;
- range of capability;
- level of service; and
- reliability of delivery.
Each of the Company, Dalton, ACP and Deeter face numerous competitors,
including:
- independent and captive domestic iron foundries;
- foreign iron foundries, including certain foundries located in India;
and
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- several large domestic foundries and manufacturers whose casting
products are made with materials other than ductile and gray iron, such
as steel or aluminum.
Industry consolidation over the past decade has resulted in significant
reduction in the number of smaller foundries and a rise in the share of
production by larger foundries. Some of these consolidated foundries have
significantly greater financial resources than any of our Company, Dalton, ACP
and Deeter. There can be no assurance that any of our Company, Dalton, ACP and
Deeter will be able to maintain or improve its competitive positions in the
markets in which it competes. See "Business -- The Company (other than the
Recently Acquired Subsidiaries) -- Competition."
Mercer competes primarily in a highly fragmented industry, which includes
several dozen other press forgers and hammer forge shops. Competition in the
foregoing industry is primarily price based, but engineering, quality and
dependability are also important, particularly with respect to building and
maintaining customer relationships. Some of Mercer's competitors have
significantly greater resources than Mercer. There can be no assurance that
Mercer will be able to maintain or improve its competitive position in the
markets in which it competes. See "Business -- Mercer Forge
Company -- Competition."
CONTROLLING SHAREHOLDERS -- THE INTERESTS OF OUR CONTROLLING SHAREHOLDERS MAY BE
IN CONFLICT WITH YOUR INTERESTS AS A HOLDER OF EXCHANGE NOTES. We are a wholly
owned subsidiary of our parent company, NFC Castings, Inc. Likewise, our parent
company is a wholly owned subsidiary of its parent company, ACP Holding Company.
ACP Holding Company is wholly owned by ACP Products, L.L.C. which in turn is
owned in part by Citicorp Venture Capital, Ltd. and certain other investors.
Therefore, Citicorp Venture Capital, Ltd. and these certain other investors
beneficially own approximately 90% of our common stock and, together with
certain members of our senior management and certain members of the senior
management of our recently acquired subsidiaries, collectively have the ability
to elect the entire board of directors and generally to control our affairs and
policies. Circumstances may occur in which the interests of Citicorp Venture
Capital, Ltd. and these certain other investors, as shareholders of our Company,
could be in conflict with the interests of the holders of the exchange notes. In
addition, Citicorp Venture Capital, Ltd. and these certain other investors may
have an interest in pursuing acquisitions, divestitures or other transactions
that, in their judgment, could enhance their equity investment, even though such
transactions might involve disproportionate risks to the holders of the exchange
notes. See "Ownership of Securities" and "Certain Relationships and Related
Transactions."
YEAR 2000 ISSUE. The "Year 2000 Issue" refers generally to the problems that
some software may have in determining the correct century for the year. For
example, software with date-sensitive
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functions that is not Year 2000 compliant may not be able to distinguish whether
"00" means 1900 or 2000, which may result in failures or the creation of
erroneous results. Currently, many computer \systems and software products are
coded to accept only two-digit entries in the date code field. These date code
fields will need to accept four digit entries to distinguish 21st century dates
from 20th century dates. As a result, many companies' software and computer
systems may need to be upgraded or replaced in order to comply with such "Year
2000" requirements. If we, or third parties with which we do business, fail to
comply with Year 2000 requirements our Company could be materially adversely
impacted.
FRAUDULENT CONVEYANCE MATTERS -- FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER
SPECIFIC CIRCUMSTANCES, TO VOID GUARANTEES, SUBORDINATE CLAIMS IN RESPECT OF THE
NOTES AND REQUIRE NOTEHOLDERS TO RETURN PAYMENTS RECEIVED FROM
GUARANTORS. Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, the guarantees of our guarantor subsidiaries could be
voided, or claims in respect of the exchange notes or the subsidiary guarantees
could be subordinated to all of our other debts or all other debts of our
guarantor subsidiaries if, among other things:
- We incurred such indebtedness with the intent of hindering, delaying or
defrauding then-existing or future creditors;
- We received less than reasonably equivalent value or fair consideration
for incurring such indebtedness and, at the time of the incurrence of
such indebtedness, we:
1. were insolvent or rendered insolvent by reason of such incurrence;
2. were engaged in a business or transaction for which the assets
remaining with our Company constituted unreasonably small capital;
or
3. intend to incur, or believed that we would incur, debts beyond our
ability to pay as they mature; or
- Any guarantor subsidiary received less than reasonably equivalent value
or fair consideration for the incurrence of such subsidiary guarantee
and, at the time it incurred the indebtedness evidenced by its
subsidiary guarantee, any guarantor subsidiary:
1. was insolvent or rendered insolvent by reason of such incurrence;
or
2. was engaged in a business or transaction for which such guarantor's
remaining assets constituted unreasonably small capital; or
3. intended to incur, or believed that it would incur, debts beyond
its ability to pay such debts as they mature.
In addition, any payment by us or that guarantor subsidiary pursuant to its
subsidiary guarantee could be voided and required to be returned to us or the
guarantor subsidiary, or to a fund for the benefit of our creditors or the
creditors of the guarantor subsidiary.
The measures of insolvency for purposes of these fraudulent transfer laws will
vary depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a guarantor subsidiary
would be considered insolvent if:
- the sum of its debts, including contingent liabilities, was greater than
the fair saleable value of all of its assets; or
- if the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on its
existing debts, including contingent liabilities, as they become
absolute and mature; or
- it could not pay its debts as they become due.
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On the basis of historical financial information, recent operating history and
other factors, we believe that we and each guarantor subsidiary, after giving
effect to its guarantee of these exchange notes, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and will
not have incurred debts beyond its ability to pay such debts as they mature.
There can be no assurance, however, as to what standard a court would apply in
making such determinations or that a court would agree with our conclusions in
this regard.
ENVIRONMENTAL MATTERS -- RISK OF ENVIRONMENTAL LIABILITY IS INHERENT IN THE
NATURE OF OUR BUSINESS AND WE MAY INCUR SIGNIFICANT COSTS TO COMPLY WITH MORE
STRINGENT ENVIRONMENTAL POLICIES. Our facilities are subject to numerous
federal, state and local laws and regulations relating to pollution and the
protection of the environment and worker health and safety, including:
- those relating to discharges to air, water and land;
- the handling and disposal of solid and hazardous waste;
- the operation of landfills; and
- the cleanup of properties affected by hazardous substances.
We do not anticipate any material adverse effect on our business, financial
condition or results of operations as a result of our efforts to comply with, or
our liabilities under, such requirements. Risk of environmental liability is
inherent in the manufacturing of casting and forging products. Changes in
environmental laws and regulations or the discovery of previously unknown
contamination or other liabilities relating to our properties and operations
could materially adversely affect our business, financial condition or results
of operations. In particular, we might incur significant capital and other costs
to comply with increasingly stringent air emission control laws and enforcement
policies. See "Business -- The Company (other than the Recently Acquired
Subsidiaries) -- Environmental Matters."
NO PRIOR MARKET FOR EXCHANGE NOTES -- YOU CANNOT BE SURE THAT AN ACTIVE TRADING
MARKET WILL DEVELOP FOR THESE EXCHANGE NOTES. Prior to this offering, there was
no public market for these exchange notes. We have been informed by the
underwriter that it intends to make a market in these exchange notes after this
offering is completed. However, the underwriter may cease its market-making at
any time. In addition, the liquidity of the trading market in these exchange
notes, and the market price quoted for these exchange notes, may be adversely
affected by changes in the overall market for high yield securities and by
changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, you cannot be sure that an
active trading market will develop for these exchange notes.
DEBT CHARACTERIZATION AND INTEREST INCOME -- IF THE EXCHANGE NOTES ARE TREATED
OTHER THAN AS INDEBTEDNESS, WE MAY LOSE OUR ENTITLEMENT TO CLAIM A DEDUCTION FOR
INTEREST PAYMENTS WE MAKE ON THE EXCHANGE NOTES. A LOSS OF THIS DEDUCTION WOULD
DECREASE OUR CASH FLOW AND CONSEQUENTLY OUR ABILITY TO MAKE PAYMENTS WITH
RESPECT TO THE EXCHANGE NOTES. For U.S. federal income tax purposes, we and
each noteholder will agree to treat each exchange note as indebtedness. If such
treatment were not respected, the exchange notes would likely be treated as
equity ownership interests in our Company. If the exchange notes are treated as
equity ownership interests, we would not be entitled to claim a deduction for
interest payable on the exchange notes. As a result, our after-tax cash flow
and, consequently, our ability to make payments with respect to the exchange
notes could be reduced. In addition, a Non-U.S. Holder (as defined in the
section headed "Certain U.S. Federal Income Tax Considerations") may be subject
to withholding on interest payments on the exchange notes.
17
23
USE OF PROCEEDS
Our Company will not receive any proceeds from this exchange offer.
18
24
CAPITALIZATION
The following table sets forth as of September 30, 1998 (i) the
consolidated historical capitalization of the Company, and (ii) the unaudited
consolidated pro forma capitalization of the Company after giving effect to the
issuance of the Notes and the application of the proceeds therefrom were
consummated on such date. This table should be read in conjunction with the
"Selected Consolidated Financial and Other Data" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations," included
elsewhere in this Prospectus and the consolidated financial statements and
related notes of the Company incorporated herein by reference.
DECEMBER 31, 1998
----------------------------
ACTUAL PRO FORMA
-------- ----------------
(DOLLARS IN THOUSANDS)
Cash and cash equivalents................................... $ 34,683 $ 34,683
======== ========
Debt:
Term Loan Facilities(1)...................................
Tranche A Loans........................................ $ 19,250 $ 19,250
Tranche B Loans........................................ 124,628 124,628
Revolving Credit Facility(2).............................. -- --
Acquisition Loan Facility(3).............................. -- --
11 1/8% Series B Senior Subordinated Notes due 2007....... 150,000 150,000
11 1/8% Series D Senior Subordinated Notes due 2007,
including unamortized premium of $2,193................ 47,193 47,193
11 1/8% Series E Senior Subordinated Notes due 2007,
including unamortized premium of $2,985 million........ 89,985 --
11 1/8% Series F Senior Subordinated Notes due 2007,
including unamortized premium of $2,985 million........ -- 89,985
Other..................................................... 1,215 1,215
-------- --------
Total debt........................................ 432,271 432,271
Stockholders' equity:
Common stock.............................................. 100 100
Additional paid-in capital................................ 55,167 55,167
Retained earnings......................................... 13,866 13,866
Pension liability adjustment.............................. (1,570) (1,570)
-------- --------
Total stockholders' equity........................ 67,563 67,563
-------- --------
Total capitalization.............................. $499,834 $499,834
======== ========
- ---------------
(1) The Term Loan Facilities consist of: (i) a Tranche A Loan Facility in an
aggregate principal amount of $19.25 million with a final maturity of
September 30, 2003 and (ii) a Tranche B Loan Facility in an aggregate
principal amount of $124.6 million with a final maturity of September 30,
2005.
(2) Total borrowings of up to $50.0 million are available under the Revolving
Credit Facility for working capital purposes and to fund certain permitted
acquisitions. The Revolving Credit Facility includes a $15 million sub-limit
for letters of credit, of which $4.6 million were outstanding as of December
31, 1998.
(3) Total borrowings of up to $50.0 million are available under the Acquisition
Loan Facility to finance certain permitted acquisitions.
19
25
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated financial and other
data of (i) the Predecessor Company as of March 31, 1994, 1995, 1996, and 1997
and April 30, 1997 and for each of the years ended March 31, 1994, 1995, 1996
and 1997 and the one month period ended April 30, 1997, which have been derived
from the Predecessor Company's consolidated financial statements which have been
audited by Ernst & Young LLP, other than the consolidated balance sheet as of
March 31, 1994 and April 30, 1997, which were audited by another independent
auditor, (ii) the Company as of September 30, 1997 and 1998 and for the five
months ended September 30, 1997 and for the year ended September 30, 1998, which
have been derived from the Company's consolidated financial statements which
have been audited by Ernst & Young LLP and (iii) the Company as of December 31,
1997 and 1998 and for the three months ended December 31, 1997 and 1998, which
have been derived from the Company's unaudited interim condensed consolidated
financial statements and include, in the opinion of management, all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the results of operations and financial position for and as of the end of
such period. Results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year or any other future
period. The Company changed its fiscal year end to September 30 from March 31
effective September 30, 1997.
The selected financial and other data should be read in conjunction with
"Summary -- Recent Developments," "Capitalization," "Summary Consolidated
Financial and Other Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this Prospectus and
the consolidated financial statements and related notes of the Company
incorporated herein by reference.
20
26
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
PREDECESSOR COMPANY
--------------------------------------------------------------
ONE MONTH FIVE MONTHS
FISCAL YEAR ENDED MARCH 31, ENDED ENDED
----------------------------------------- APRIL 30, SEPTEMBER 30,
1994 1995 1996 1997 1997(5) 1997(6)
-------- -------- -------- -------- ------------------ -----------------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Net sales.............................. $131,982 $160,621 $166,951 $165,426 $17,276 $108,353
Cost of sales.......................... 106,531 120,981 121,631 116,736 11,351 77,444
-------- -------- -------- -------- ------- --------
Gross profit........................... 25,451 39,640 45,320 48,690 5,925 30,909
Selling, general and administrative
expenses............................. 13,614 16,673 16,983 17,547 1,752 8,652
Amortization expense................... -- -- -- -- -- 3,900
-------- -------- -------- -------- ------- --------
Operating income....................... 11,837 22,967 28,337 31,143 4,173 18,357
Interest expense (income), net......... 1,043 397 (481) (1,162) (121) 9,991
-------- -------- -------- -------- ------- --------
Income before income taxes and
extraordinary item................... 10,794 22,570 28,818 32,305 4,294 8,366
Provision for income taxes............. 4,213 8,866 11,676 12,467 1,615 4,000
-------- -------- -------- -------- ------- --------
Income (loss) before extraordinary
item................................. 6,581 13,704 17,142 19,838 2,679 4,366
Extraordinary item, net of income tax
benefit.............................. -- -- -- -- -- 1,630
-------- -------- -------- -------- ------- --------
Net income (loss)...................... $ 6,581 $ 13,704 $ 17,142 $ 19,838 $ 2,679 $ 2,736
======== ======== ======== ======== ======= ========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.............. $ 118 $ 238 $ 10,126 $ 22,403 $29,043 $ 20,346
Working capital(1)..................... 14,596 15,174 18,094 21,438 21,124 23,175
Total assets........................... 74,327 73,813 82,957 93,869 103,402 358,406
Total debt............................. 13,325 887 241 134 128 218,413
Total stockholders' equity............. 37,929 43,198 54,790 68,857 74,883 47,407
OTHER DATA:
EBITDA(2).............................. $ 18,577 $ 29,809 $ 35,113 $ 38,024 $ 4,691 $ 26,056
Depreciation and amortization.......... 6,740 6,842 6,776 6,881 518 7,699
Capital expenditures................... 4,583 3,665 7,275 4,546 190 3,081
Net cash provided by (used in):
Operating activities................. 18,301 23,581 22,273 23,479 3,917 25,160
Investing activities................. (4,949) (3,412) (7,299) (3,104) (191) (14,702)
Financing activities................. (13,313) (20,049) (5,086) (8,098) 2,917 (1,656)
Cash interest expense(3)............... 1,049 624 84 39 1 10,016
Ratio of earnings to fixed
charges(4)........................... 9.5x 25.9x 70.3x 81.4x 2.5x 1.8x
YEAR THREE MONTHS THREE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1998
------------- ------------- ------------
STATEMENT OF INCOME DATA:
Net sales.............................. $303,414 $ 57,988 $115,264
Cost of sales.......................... 222,451 43,343 94,145
-------- -------- --------
Gross profit........................... 80,963 14,645 21,119
Selling, general and administrative
expenses............................. 23,230 4,268 7,607
Amortization expense................... 7,727 1,412 3,415
-------- -------- --------
Operating income....................... 50,006 8,965 10,097
Interest expense (income), net......... 27,203 5,840 9,907
-------- -------- --------
Income before income taxes and
extraordinary item................... 22,803 3,125 190
Provision for income taxes............. 10,922 1,509 549
-------- -------- --------
Income (loss) before extraordinary
item................................. 11,881 1,616 (359)
Extraordinary item, net of income tax
benefit.............................. 392 -- --
-------- -------- --------
Net income (loss)...................... $ 11,489 $ 1,616 $ (359)
======== ======== ========
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents.............. $ 19,798 $ 21,994 $ 34,683
Working capital(1)..................... 62,573 26,782 75,001
Total assets........................... 584,309 348,511 638,608
Total debt............................. 371,871 212,389 432,271
Total stockholders' equity............. 67,922 55,770 67,563
OTHER DATA:
EBITDA(2).............................. $ 69,660 $ 12,766 $ 18,923
Depreciation and amortization.......... 19,654 3,801 8,826
Capital expenditures................... 13,117 1,612 6,856
Net cash provided by (used in):
Operating activities................. 24,236 2,473 6,780
Investing activities................. (182,168) (1,612) (49,340)
Financing activities................. 157,384 787 57,445
Cash interest expense(3)............... 27,383 6,047 10,172
Ratio of earnings to fixed
charges(4)........................... 1.8x 1.5x 1.0x
See accompanying Notes to Selected Consolidated Financial and Other Data.
21
27
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(1) Working capital represents total current assets (excluding cash and cash
equivalents) less total current liabilities (excluding the revolving credit
facility and the current portion of long-term debt).
(2) EBITDA represents operating income plus depreciation and amortization. The
Company has included information concerning EBITDA because management
believes that EBITDA is generally accepted as providing useful information
regarding a company's ability to service and/or incur debt. EBITDA should
not be considered in isolation or as a substitute for net income, cash flows
or other income or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity. The Company understands that, while EBITDA is frequently used
by securities analysts in the evaluation of companies, EBITDA, as used
herein, is not necessarily comparable to other similarly titled captions of
other companies due to potential inconsistencies in the method of
calculation. EBITDA is not intended as an alternative to cash flow from
operating activities as a measure of liquidity, an alternative to net income
as an indicator of the Company's operating performance or an alternative to
any other measure of performance in conformity with generally accepted
accounting principles.
(3) Cash interest expense is defined as interest expense less amortization of
debt issuance costs plus amortization of premium on the senior subordinated
notes issued July 1, 1997 and November 24, 1998.
(4) For purposes of the computation, the ratio of earnings to fixed charges has
been calculated by dividing (i) income before income taxes and extraordinary
item plus fixed charges by (ii) fixed charges. Fixed charges are equal to
interest expense plus the portion of the rent expense estimated to represent
interest.
(5) See "Summary -- The Merger."
(6) The Company changed its fiscal year end to September 30 from March 31
effective September 30, 1997.
22
28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition and results of
operations covers periods before consummation of the Merger (as defined), the
Recent Acquisitions and the Offering. The following information should be read
in conjunction with "Selected Consolidated Financial and Other Data" and the
consolidated financial statements, in each case together with the notes thereto,
incorporated by reference in this Prospectus.
GENERAL
On April 30, 1997, pursuant to an Agreement and Plan of Reorganization (the
"Merger Agreement") with NC Merger Company ("NC Merger") and NFC Castings, Inc.
("Holdings"), Neenah Corporation (the "Predecessor Company") was acquired by
Holdings as a result of a merger of NC Merger with and into the Predecessor
Company (the "Merger"). Prior to July 1, 1997, Neenah Foundry Company was one of
three wholly owned subsidiaries of Neenah Corporation, a holding company with no
significant assets or operations other than its holdings in the common stock of
its three wholly owned subsidiaries. On July 1, 1997, Neenah Foundry Company
merged with and into Neenah Corporation and the surviving company changed its
name to Neenah Foundry Company.
The following discussion and analysis of the Company's financial condition
and results of operations addresses periods both before and after the Merger.
The Merger has had a significant impact on the Company's results of operations
and financial condition. The Merger resulted in the recording of goodwill and
identifiable intangible assets totaling $148.8 million. These amounts are being
amortized over their estimated useful lives, ranging from five months to 40
years. The Merger also resulted in a significant increase in the Company's
interest expense as a result of an increased level of indebtedness. The
following discussion compares the results of operations of the Company for the
three months ended December 31, 1998 (including the results of operations from
the date of acquisition of any Recently Acquired Subsidiary that was acquired
during such period), to the results of the operations of the Company for the
three months ended December 31, 1997.
On March 30, 1998, the Company acquired all the capital stock of Deeter for
$24.3 million, consisting of $20.4 million in cash and a $3.9 million Deeter
Seller Note. On April 3, 1998, the Company acquired all of the capital stock of
Mercer for $47.0 million in cash. In addition, on September 8, 1998, the Company
acquired all of the capital stock of Dalton for $102.0 million in cash and the
capital stock of ACP was contributed to the Company by ACP Holdings in
consideration for the assumption of $21.3 million of indebtedness, $14.9 million
of which was refinanced through borrowings under the Senior Bank Facilities. See
"Summary -- Recent Acquisitions." The discussion and analysis of financial
condition and results of operations below incorporates the results of the
Recently Acquired Subsidiaries to the extent such acquisition had been completed
during the relevant period.
The Recent Acquisitions have had a significant impact on the Company's
results of operations and financial condition. Each of the Recent Acquisitions
(other than the ACP acquisition) was accounted for using the purchase method of
accounting. These Recent Acquisitions resulted in the recording of goodwill and
identifiable intangible assets totaling $101.1 million. These amounts are being
amortized over their estimated useful lives, ranging from four months to 40
years. The Recent Acquisitions have also resulted in a significant increase in
the Company's interest expense as a result of a substantially increased level of
indebtedness incurred to finance the Recent Acquisitions.
The Company changed its fiscal year end to September 30 from March 31
effective September 30, 1997.
23
29
RESULTS OF OPERATIONS
The following table sets forth for the periods shown certain statement of
income data expressed as a percentage of net sales:
FISCAL YEAR PRO FORMA
ENDED TWELVE MONTHS FISCAL YEAR THREE MONTHS THREE MONTHS
MARCH 31, ENDED ENDED ENDED ENDED
------------- SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1996 1997 1997 1998 1997 1998
----- ----- ------------- ------------- ------------ ------------
Net sales................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............. 72.9 70.6 70.8 73.3 74.7 81.7
----- ----- ----- ----- ----- ------
Gross profit.............. 27.1 29.4 29.2 26.7 25.3 18.3
Selling, general and
administrative
expenses................ 10.1 10.6 9.3 7.7 7.4 6.6
Amortization of intangible
assets.................. -- -- 1.9 2.5 2.4 3.0
----- ----- ----- ----- ----- ------
Operating income.......... 17.0% 18.8% 18.0% 16.5% 15.5% 8.7%
===== ===== ===== ===== ===== ======
COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1998 TO THREE MONTHS ENDED
DECEMBER 31, 1997
Net sales. Net sales for the three months ended December 31, 1998 were
$115,264 which are $57,276 or 98.8% higher than the quarter ended December 31,
1997. The increase in net sales resulted from the inclusion of the operating
results of the Recently Acquired Subsidiaries, excluding ACP, after their
acquisition.
Gross profit. Gross profit for the three months ended December 31, 1998
was $21,119, an increase of $6,474, or 44.2%, as compared to the quarter ended
December 31, 1997. The increase in gross profit resulted from the inclusion of
the operating results of the Recently Acquired Subsidiaries, excluding ACP,
after their acquisition. Gross profit as a percentage of net sales decreased to
18.3% for the three months ended December 31, 1998 from 25.3% for the quarter
ended December 31, 1997. The decline in gross profit percentage is attributable
to a greater percentage of sales of lower margin industrial products in the
three months ended December 31, 1998 as compared to the three months ended
December 31, 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended December 31, 1998 were
$7,607, an increase of $3,339, or 78.2%, as compared to the $4,268 for the
quarter ended December 31, 1997. Approximately $2,800 of the increase was due to
the inclusion of the operating results of the Recently Acquired Subsidiaries,
excluding ACP, and the remainder of the increase was due to professional and
other expenses related to completed and potential acquisitions. As a percentage
of net sales, selling, general and administrative expenses decreased from 7.4%
for the quarter ended December 31, 1997 to 6.6% for the three months ended
December 31, 1998. The decrease in selling, general and administrative expenses
as a percentage of net sales was mainly due to expenses being spread over a
larger revenue base with the inclusion of the Recently Acquired Subsidiaries,
excluding ACP.
Amortization of intangible assets. Amortization of intangible assets was
$3,415 for the three months ended December 31, 1998, an increase of $2,003, or
141.9%, as compared to the $1,412 for the quarter ended December 31, 1997. The
increase is due to the increased amortization of goodwill and identifiable
intangible assets from the Recently Acquired Subsidiaries.
Operating income. Operating income was $10,097 for the three months ended
December 31, 1998, an increase of $1,132, or 12.6% from the quarter ended
December 31, 1997. The improvement in operating income was achieved for the
reasons discussed above under gross profit. As a percentage of net sales,
operating income decreased from 15.5% for the quarter ended Decem-
24
30
ber 31, 1997 to 8.8% for the three months ended December 31, 1998. The decrease
in operating income percentage was due to the factors discussed above under
gross profit, as well as increased amortization of intangible assets.
Net interest expense. Net interest expense was $9,907 for the three months
ended December 31, 1998 compared to $5,840 for the quarter ended December 31,
1997. The increased interest expense resulted from the interest on the drawings
under the Company's Senior Bank Facilities and the Senior Subordinated Notes
used to finance the purchase of the Recently Acquired Subsidiaries.
Provision for income taxes. The provision for income taxes for the three
months ended December 31, 1997 and 1998 is higher than the amount computed by
applying the statutory rate of approximately 40% to income before income taxes
mainly due to the amortization of goodwill which is not deductible for income
tax purposes.
COMPARISON OF FISCAL YEAR ENDED SEPTEMBER 30, 1998 TO PRO FORMA TWELVE MONTHS
ENDED SEPTEMBER 30, 1997
Net Sales. Net sales for the year ended September 30, 1998 were $303.4
million which was $102.1 million or 50.7% higher than the pro forma twelve
months ended September 30, 1997. The Recently Acquired Subsidiaries, excluding
ACP, accounted for an increase of $53.5 million in net sales. The inclusion of
ACP for twelve months in 1998 versus five months in 1997 accounted for an
increase of $33.7 million in net sales. Net sales of municipal castings
increased by $3.1 million or 4.2% due primarily to a strong economy in the upper
Midwest and market share gains in strategic focus areas of the East and
Southwest. Net sales of industrial castings increased by $11.7 million or 11.8%
due to the overall strength of the heavy duty truck market coupled with high
demand in the agricultural business.
Gross Profit. Gross profit for the year ended September 30, 1998 was $81.0
million, an increase of $22.2 million or 37.8%, as compared to the pro forma
twelve months ended September 30, 1997. Approximately $8.0 million of the
increase was from the inclusion of the operating results of the Recently
Acquired Subsidiaries excluding ACP after their acquisition. The inclusion of
ACP for twelve months in 1998 versus five months in 1997 accounted for an
increase of $6.4 million in gross profit. The remaining margin improvement was
due to the combined effect of spreading manufacturing overhead over a greater
volume and improved efficiency in plant operations. Gross profit as a percentage
of net sales decreased to 26.7% during the year ended September 30, 1998 from
29.2% for the pro forma twelve months ended September 30, 1997. The decline in
gross profit percentage is attributable to the mix of industrial products and
lack of seasoning from the Recently Acquired Subsidiaries excluding ACP.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the year ended September 30, 1998 were $23.2
million, an increase of $4.5 million or 24.1% over the $18.7 million for the pro
forma twelve months ended September 30, 1997. The increase in selling, general
and administrative expense was due to the inclusion of $2.7 million of expenses
from the Recently Acquired Subsidiaries, excluding ACP after their acquisition.
The inclusion of ACP for twelve months in 1998 versus five months in 1997
accounted for an increase of $3.0 million in expenses. As a percentage of net
sales, selling, general and administrative expenses decreased from 9.3% for the
pro forma twelve months ended September 30, 1997 to 7.7% for the year ended
September 30, 1998. The percentage decrease was due to expenses being spread
over a larger volume base with the inclusion of the Recently Acquired
Subsidiaries' operating results, excluding ACP.
Amortization of intangible assets. Amortization of intangible assets was
$7.7 million for the year ended September 30, 1998, an increase of $3.8 million,
or 97.4%, as compared to the $3.9 million for the pro forma twelve months ended
September 30, 1997. The increase is due to the recording of twelve months of
amortization during the period ended September 30, 1998 for the goodwill and
identifiable intangible assets arising from the Merger versus five months of
amortiza-
25
31
tion during the period ended September 30, 1997 as well as increased
amortization from goodwill and identifiable intangible assets from the Recently
Acquired Subsidiaries, excluding ACP.
Operating Income. Operating income was $50.0 million for the year ended
September 30, 1998, an increase of $13.8 million or 38.1% from the pro forma
twelve months ended September 30, 1997. The improvement in operating income was
achieved for the reasons discussed above under gross profit. As a percentage of
net sales, operating income decreased from 18.0% for the pro forma twelve months
ended September 30, 1997 to 16.5% for the year ended September 30, 1998. The
decrease in operating income percentage was due to the factors discussed above
under gross profit, as well as increased amortization of intangible assets.
Net Interest Expense. Net interest expense increased from $9.1 million for
the pro forma twelve months ended September 30, 1997 to $27.2 million for the
year ended September 30, 1998. The increased interest expense resulted from the
Company's Senior Subordinated Notes being outstanding for twelve months during
the year ended September 30, 1998 and only five months during the period ended
September 30, 1997 and the interest on the drawings under the Company's Senior
Bank Facilities to finance the Recent Acquisitions.
Provision for Income Taxes. The provision for income taxes for the year
ended September 30, 1998 is higher than the amount computed by applying the
statutory rate of approximately 40% to income before income taxes mainly due to
the amortization of goodwill which is not deductible for income tax purposes.
Extraordinary Item. During the year ended September 30, 1998, the Company
recorded an extraordinary loss of $0.4 million (which is net of an income tax
benefit of $0.3 million) for the write-off of unamortized deferred financing
costs in connection with the repayment in full of indebtedness of ACP prior to
its scheduled maturity. For the pro forma twelve months ended September 30,
1997, the Company recorded an extraordinary loss of $1.6 million (which is net
of an income tax benefit of $1.0 million) for the write-off of unamortized
deferred financing costs in connection with the repayment in full of the term
indebtedness under the Company's Senior Bank Facilities.
COMPARISON OF FISCAL YEAR ENDED MARCH 31, 1997 TO FISCAL YEAR ENDED MARCH 31,
1996
Net Sales. Net sales were $165.4 million for the year ended March 31,
1997, a decrease of $1.6 million, or 0.9%, from $167.0 million for the year
ended March 31, 1996. Net sales of industrial castings decreased $3.9 million,
or 4.2%, to $88.3 million. The decrease in industrial casting sales was
primarily the result of a decision by the Company to discontinue its production
of certain lower margin brake components, which resulted in a decrease in tons
produced compared to the year earlier period, and, to a lesser extent, reduced
demand for casting products in the medium- and heavy-duty truck market. Net
sales of municipal castings increased $1.9 million, or 2.7%, to $71.3 million,
primarily due to increased pricing. Hartley Controls net sales grew $0.4
million, or 7.4%, to $5.8 million, principally due to increased volume of
equipment sales.
Gross Profit. Gross profit was $48.7 million for the year ended March 31,
1997, an increase of $3.4 million, or 7.5%, from $45.3 million for the year
ended March 31, 1996. Gross profit as a percentage of net sales increased to
29.4% for the year ended March 31, 1997, from 27.1% for the year ended March 31,
1996. The increase in gross profit as a percentage of net sales was due mainly
to improved product mix in the industrial product line and greater overall plant
efficiency. Gross profit percentage also improved due to the continued effect of
the lightweighted municipal casting program.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $17.5 million for the year ended March 31, 1997, an
increase of $0.5 million, or 2.9%, from $17.0 million for the year ended March
31, 1996. As a percentage of net sales, selling, general and administrative
expenses increased to 10.6% for the year ended March 31, 1997, from 10.1% for
the year ended March 31, 1996. Approximately $0.2 million of the increase in
selling, general and
26
32
administrative expenses was due to a non-recurring charitable contribution and
approximately $0.9 million of the increase was due to increased compensation and
benefits to officers of the Company who resigned at Closing. Excluding the
effects of estimated nonrecurring officer compensation and benefits and the
charitable contribution, selling, general and administrative expenses, as a
percentage of net sales, decreased slightly to 8.3% for the year ended March 31,
1997, from 8.4% for the year ended March 31, 1996.
Operating Income. Operating income increased to $31.1 million for the year
ended March 31, 1997, an increase of $2.8 million or 9.9% from $28.3 million for
the year ended March 31, 1996. As a percentage of net sales, operating income
increased to 18.8% for the year ended March 31, 1997, from 17.0% for the year
ended March 31, 1996. The improvement in operating income was achieved primarily
for the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the Merger, the Company issued $150.0 million principal
amount of 11 1/8% Senior Subordinated Notes due 2007 and entered into the credit
agreement with Holdings and the lenders party thereto (the "Credit Agreement")
providing for term loans of $45.0 million and a Revolving Credit Facility of up
to $30.0 million, subject to a borrowing base formula. On July 1, 1997, the
Company issued an additional $45.0 million principal amount of 11 1/8% Senior
Subordinated Notes due 2007 and used the proceeds of $47.6 million to repay the
term loans, the accrued interest thereon and related fees and expenses. On
September 12, 1997, the Company, Holdings and the lenders party thereto amended
and restated the Credit Agreement to increase the amount available under the
Revolving Credit Facility (as defined) to $50.0 million and eliminate the
borrowing base limitations. On April 3, 1998, in connection with the acquisition
of Mercer, the Company, Holdings and the lenders party thereto amended the
Credit Agreement to provide availability of $75.0 million of term loans to the
Company (consisting of $20.0 million of Tranche A Loans and $55.0 million of
Tranche B Loans) in addition to the Company's existing $50.0 million Revolving
Credit Facility. On September 8, 1998, in connection with the acquisitions of
Dalton and ACP, the Company, Holdings and the lenders party thereto amended and
restated the Credit Agreement to provide for additional Tranche B Loans in an
aggregate principal amount of $70.0 million and an Acquisition Loan Facility in
aggregate principal amount outstanding at any one time not to exceed $50.0
million. On November 24, 1998, the Company sold $87.0 million in principal
amount (excluding $3.0 million of unamortized premium) of 11 1/8 Senior
Subordinated Notes due 2007 (the "Old Notes"). We used $29.0 million of the
proceeds to pay down the borrowings under the Acquisition Loan Facility (as
defined) and $[ ] million to acquire Cast Alloys. The remaining proceeds are to
be used for general corporate purposes.
The Company's liquidity needs will arise primarily from debt service on the
above indebtedness, working capital needs, the funding of capital expenditures
and additional acquisitions. Borrowings under the Senior Bank Facilities bear
interest at variable interest rates. The Senior Bank Facility imposes
restrictions on the Company's ability to make capital expenditures and both the
Senior Bank Facility and the indentures governing the Senior Subordinated Notes
limit the Company's ability to incur additional indebtedness. The covenants
contained in the Senior Bank Facility also, among other things, restrict the
ability of the Company and its subsidiaries to dispose of assets, incur
guarantee obligations, prepay the Senior Subordinated Notes or amend its
indentures, pay dividends, create liens on assets, enter into sale and leaseback
transactions, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, change the business conducted by the Company, make
capital expenditures or engage in certain transactions with affiliates, and
otherwise restrict corporate activities.
For the three months ended December 31, 1998 and December 31, 1997, capital
expenditures were $6,856 and $1,612, respectively. The $5,244 increase in
capital expenditures was primarily the result of planned enhancements to certain
equipment in the manufacturing area, including significant expenditures at ACP
and Deeter, which were acquired in fiscal 1998. For the fiscal years ended
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March 31, 1996 and 1997, the pro forma twelve months ended September 30, 1997
and the year ended September 30, 1998, capital expenditures were $7.3 million,
$4.5 million, $5.1 million and $13.1 million, respectively. The capital
expenditures for the year ended September 30, 1998 were primarily the result of
planned enhancements to certain equipment in the manufacturing area and include
expenditures of the Recently Acquired Subsidiaries, excluding ACP, since their
acquisition date.
The Company's principal source of cash to fund its liquidity needs will be
net cash from operating activities and borrowings under its Senior Bank
Facilities. Net cash from operating activities for the three months ended
December 31, 1998 was $6,780, an increase of $4,307 from $2,473 for the three
months ended December 31, 1997. The increase in net cash from operating
activities was primarily the result of increased cash flow from the Recently
Acquired Subsidiaries and improved control of inventory and accounts receivable
balances. Net cash from operating activities for the year ended September 30,
1998 was $24.2 million. Net cash from operating activities for the pro forma
twelve months ended September 30, 1997 was $37.4 million. The decrease resulted
from lower net income and a paydown of accounts payable and accrued liabilities
during the year ended September 30, 1998. Net cash from operating activities for
the year ended March 31, 1997 was $23.5 million, an increase of $1.2 million
from $22.3 million for the year ended March 31, 1996, primarily as a result of
an increase in net income.
The Company believes that cash generated from operations and existing
revolving lines of credit under the Senior Bank Facilities will be sufficient to
meet its normal operating requirements, including working capital needs and
interest payments on the Company's outstanding indebtedness.
Amounts under the $50.0 million Revolving Credit Facility may be used for
working capital and general corporate purposes, subject to certain limitations
under the Senior Bank Facilities. Amounts under the Acquisition Loan Facility
may be used to make acquisitions permitted under the Senior Bank Facilities. The
Company believes that such resources, together with the potential future use of
debt or equity financing, will allow the Company to pursue its strategic goal of
making selective acquisitions.
RAW MATERIALS
Although the prices of all raw materials used by the Company vary, the
fluctuations in the price of steel scrap are the most significant to the
Company. The Company has arrangements with most of its industrial customers
which require the Company to adjust industrial casting prices to reflect scrap
price fluctuations. In periods of rapidly rising or falling scrap prices, these
adjustments will lag the current scrap price because they are generally based on
average market prices for prior periods, which periods vary by customer but are
generally no longer than six months. Castings are generally sold to the heavy
municipal market on a bid basis and, after a bid is won, the price for the
municipal casting subject to the bid generally cannot be adjusted for raw
material price increases. However, in most cases the Company has been successful
in obtaining higher municipal casting unit prices in subsequent bids to
compensate for rises in scrap prices in prior periods. Rapidly fluctuating scrap
prices may have a temporary adverse or positive effect on the Company's results
of operations.
INFLATION
The Company does not believe that inflation has had a material impact on
its financial position or results of operations during the past three years.
CYCLICALITY AND SEASONALITY
The Company has historically experienced moderate cyclicality in the heavy
municipal market. Sales of municipal products are influenced by, among other
things, public spending. In the industrial market, the Company has experienced
cyclicality in sales resulting from fluctuations in the medium-
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and heavy-duty truck market and the farm equipment market, which are subject to
general economic trends.
The Company experiences seasonality in its municipal business where sales
tend to be higher during the construction season, which occurs during the warmer
months, generally the third and fourth quarters of the Company's fiscal year.
The Company maintains level production throughout the year in anticipation of
such seasonality and does not experience production volume fluctuations as a
result. The Company builds inventory in anticipation of the construction season
with such inventories reaching a peak near the end of its second quarter in
March. The Company has not historically experienced seasonality in industrial
casting sales.
YEAR 2000
The Company and its subsidiaries have conducted an evaluation of the
actions necessary in order to ensure that its computer systems will be able to
function without disruption with respect to the application of dating systems in
the Year 2000. As a result of this evaluation, each company within the
consolidated entity is engaged in the process of upgrading, replacing and
testing certain of its information and other computer systems in order to
operate without disruption due to Year 2000 issues. The Company's remedial
actions are scheduled to be completed during the first quarter of 1999 and those
of its subsidiaries are anticipated to be completed prior to the third quarter
of 1999. The Company does not anticipate that the costs of its remedial actions
will be material to its results of operations and financial position and are
being expensed as incurred.
Although there can be no assurance that the remedial actions being
implemented by the Company will address every issue relating to the Year 2000
issue, the Company believes it is unlikely that any disruptions resulting from
the Year 2000 issue would have a significant impact on its overall operations.
In addition to its investigations of its own systems, the Company has begun
assessing the Year 2000 readiness of its important vendors and customers.
Management believes that all its important critical vendors and customers either
have or will have addressed any problems associated with the Year 2000 issue
such that there will be no significant deterioration in future business dealings
due to this issue.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates.
The Company does not use derivative financial instruments for speculative or
trading purposes.
Interest Rate Sensitivity. The Company's earnings are affected by changes
in short-term interest rates as a result of its borrowings under the Senior Bank
Facilities. If market interest rates for such borrowings average 1% more during
the fiscal year ended September 30, 1999 than they did during fiscal 1998, the
Company's interest expense would increase, and income before income taxes would
decrease by approximately $1.7 million. This analysis does not consider the
effects of the reduced level of overall economic activity that could exist in
such an environment. Further, in the event of a change of such magnitude,
management could take actions to further mitigate its exposure to the change.
However, due to the uncertainty of the specific action that would be taken and
their possible effects, the sensitivity analysis assumes no changes in the
Company's financial structure.
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BUSINESS
THE COMPANY (OTHER THAN THE RECENTLY ACQUIRED SUBSIDIARIES)
Overview
On April 30, 1997, pursuant to the Merger Agreement with NC Merger and
Holdings, the Predecessor Company was acquired by Holdings as a result of
the Merger. Prior to July 1, 1997, Neenah Foundry Company was one of three
wholly owned subsidiaries of Neenah Corporation, a holding company with no
significant assets or operations other than its holdings in the common
stock of its three wholly owned subsidiaries. On July 1, 1997, Neenah
Foundry Company merged with and into Neenah Corporation and the surviving
company changed its name to Neenah Foundry Company.
The Company, founded in 1872, is one of the largest manufacturers of a
wide range of high quality ductile and gray iron castings for the heavy
municipal market and selected segments of the industrial market. The
Company believes it is the largest manufacturer of heavy municipal iron
castings in the United States with approximately a 19% market share. The
Company's broad range of heavy municipal iron castings includes manhole
covers and frames, storm sewer frames and grates, heavy duty airport
castings, specialized trench drain castings, specialty flood control
castings and ornamental tree grates. These municipal castings are sold
throughout the United States to state and local government entities,
utility companies, precast concrete manhole structure producers and
contractors for both new construction and infrastructure replacement. The
municipal market generated approximately 41% of the Company's net sales for
the year ended September 30, 1998. The Company believes it is also a
leading manufacturer of a wide range of complex industrial castings,
including castings for medium- and heavy-duty truck drive line components,
a broad range of castings for the farm equipment industry and specific
components for compressors used in heating, ventilation and air
conditioning systems ("HVAC"). The industrial market generated
approximately 56% of the Company's net sales for the year ended September
30, 1998. In addition, the Company engineers, manufactures and sells
customized sand control systems and related products, which are an
essential part of the casting process, to other iron foundries. Sales of
these sand control systems and related products represented approximately
3% of the Company's net sales for the year ended September 30, 1998.
The Company currently operates two modern foundries with an annual
aggregate rated capacity of approximately 187,000 tons at a single site in
Neenah, Wisconsin. From 1985 to 1997, the Company has invested
approximately $100 million in its production facilities, with approximately
$73 million invested in a major plant modernization program from 1985 to
1990. This plant modernization program was a critical part of a long-term
strategy to produce higher volume, value-added castings for its existing
industrial customers and to penetrate other selected segments of the
industrial market, while preserving its position as the leader in the heavy
municipal market. This modernization program entailed the closing of the
Company's oldest foundry, Plant 1, and the updating of the Company's other
two foundries, Plants 2 and 3, which enabled the Company both to produce
higher volume, complex castings for selected industrial segments and to
improve the Company's cost position in the heavy municipal market.
Following completion of the modernization program, the Company has steadily
decreased its production of lower margin products such as axle covers and
brake drums and increased the production of higher margin, more complex
parts, such as transmission and axle housings.
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Products, Customers and Markets
The Company provides a variety of products to both the heavy municipal
and industrial markets. The following table sets forth certain information
regarding the end-user markets served by the Company, the products produced
by the Company, representative customers in each end-user market and the
percentage of net sales attributable to each of the Company's markets for
the fiscal year ended September 30, 1998.
PERCENTAGE OF NET
SALES(1)
------------------
REPRESENTATIVE FISCAL YEAR ENDED
MARKET END PRODUCT CUSTOMERS SEPTEMBER 30, 1998
- ----------------- ------------------------- --------------- ------------------
Heavy Municipal Standard castings State and local 40.7%
including storm and government
sanitary sewer castings, entities,
including manhole covers utility
and frames, storm sewer companies,
frames and grates; precast
Specialty castings concrete
including heavy duty structure
airport castings, producers and
specialized trench drain contractors(2)
castings, specialty flood
control castings and
ornamental tree grates
Industrial
Medium- and
Heavy-Duty
Truck Differential carriers and Rockwell 37.3%
cases, brackets, cages, International
calipers, caps, carriers, Eaton Corp.
hubs, knuckles, Dana Corp.
transmission housings,
yokes
Farm Equipment Various gear housings, John Deere 16.0%
planet carriers, axle New Holland
housings, planting and
harvesting equipment
parts, counterweights
Other
Industrial Compressor components, Aisin 6.0%
various housing and gear The Trane
cases Company
- ---------------
(1) Net sales include sales of Neenah Foundry Company only, excluding
Hartley Controls Corporation and Neenah Transport, Inc.
(2) No municipal customer represented more than 1.5% of Neenah Foundry's
net sales for the fiscal year ended September 30, 1998.
Heavy Municipal. The Company believes it is the largest manufacturer
of heavy municipal iron castings in the United States and estimates its
market share in calendar year 1998 to have been 19%. The Company's broad
heavy municipal product line consists of two general categories of
castings, "standard" and "specialty" castings. Standard castings
principally consist of storm and sanitary sewer castings which are
consistent with pre-existing dimension and strength specifications
established by local authorities. Standard castings are generally high
volume items that are routinely used in new construction and infrastructure
replacement. Specialty castings are generally lower volume, higher margin
products which include heavy-duty airport castings, trench drain castings,
flood control castings, special manhole and inlet castings and ornamental
tree grates. These specialty items are frequently selected and/or specified
from the Company's municipal product catalog and its tree grate catalog,
which together encompass over 4,400 standard and specialty patterns. For
many of these specialty
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products, the Company believes it is the only manufacturer with existing
patterns to produce such a particular casting, although a competing
manufacturer could elect to make the investment in patterns or equipment
necessary to produce such a casting.
The Company's municipal castings are sold to state and local
government entities, utility companies, pre-cast concrete manhole structure
producers and contractors for both new construction and infrastructure
replacement. The Company's 17,000 active municipal customers generally make
purchase decisions based on a number of criteria including acceptability of
the product per local specification, quality, service, price and the
customer's relationship with the foundry. Relative to customers in the
industrial market, municipal market customers are less technically
demanding and rely on published product specifications to ensure product
performance.
A key aspect of winning orders in the heavy municipal market is the
specification process in which a local authority or design engineer sets
specific criteria for the casting or castings to be used in a particular
project. Those criteria then become part of the formal plans and
specifications that will govern the acceptability of castings for a
particular project. The Company seeks to be an active participant in the
specification process. Its sales staff makes frequent calls on design
engineers as part of a continuous effort to stay abreast of current
specifications and upcoming projects. In these sales calls, the Company
seeks to create opportunities for the selection of specifications which
utilize an existing Company pattern. Although in many cases the design
engineer who sets the specification does not make the purchase decision,
when the Company's specialty product is specified it becomes more difficult
for another manufacturer to provide an alternate part which is considered
acceptable. The Company's professional sales staff and product engineering
department are highly regarded by design engineers and are frequently
consulted during the specification drafting process. The Company believes
its reputation for its product engineering support, consistent quality and
reliable service have made the Company's municipal and tree grate catalogs
two of the most frequently used specification design tools in the municipal
casting industry.
Over the past three years, the Company has begun to introduce what it
calls "lightweighted" parts to the heavy municipal market. These
lightweighted parts have been reengineered in order to reduce both their
weight and the amount of raw materials necessary for their manufacture,
while maintaining the high quality performance characteristics of the
heavier version of the casting. This improvement in the design and
manufacture of municipal castings has resulted in lower material costs and
improved margins for this product line. The Company is able to manufacture
lightweighted castings because its manufacturing processes enable it to
refine casting walls down to very narrow tolerances, many of which are
currently not achievable by the Company's competitors. While only a portion
of the municipal castings the Company sells are candidates for
lightweighting, the Company expects to continue to increase the number of
lightweighted castings which it offers for sale over the next several
years.
Industrial. The Company believes it is a leading manufacturer of a
wide range of complex industrial castings, including castings for medium-
and heavy-duty truck drive line components and farm equipment as well as
castings for specific components for compressors used in HVAC systems. The
Company's industrial castings have increased in complexity since the early
1990's and are generally produced in higher volumes than municipal
castings. Complexity in the industrial market is determined by the
intricacy of a casting's shape, the thinness of its walls and the amount of
processing by a customer required before a part is suitable for use by it.
Original equipment manufacturers ("OEMs") and their first tier suppliers
have been demanding higher complexity parts principally to reduce labor
costs in their own production processes by using fewer parts to manufacture
the same finished product or assembly and by using parts which require less
preparation before entering the production process.
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The Company's industrial castings are primarily sold to a limited
number of customers with whom the Company has established a close working
relationship. The Company has sold to certain industrial customers for over
20 years and currently has multi-year arrangements with certain of those
customers. These customers make purchasing decisions based on, among other
things, technical ability, price, service, quality assurance systems,
facility capabilities and reputation. However, as in the municipal market,
the Company's assistance in product engineering plays an important role in
winning the award of industrial castings. The average industrial casting
typically takes between 12 and 18 months to go from the design phase to
full production and has an average product life cycle of approximately 8 to
10 years. The patterns for industrial castings, unlike the patterns for
municipal castings, are owned by the Company's customers rather than the
Company, however, such industrial patterns are not readily transferrable to
other foundries without, in most cases, significant additional investment.
Although foundries, including the Company, do not design industrial
castings, a close working relationship between a foundry and the customer
during a product launch is critical to reduce potential production problems
and minimize the customer's risk of incurring lost sales or reputation
damage due to a delayed launch. Involvement by a foundry early in the
design process generally improves the likelihood that the customer will
design a casting within the manufacturing capabilities of such foundry and
also improves the likelihood that such foundry will be awarded the casting
for full production.
The Company estimates that it has historically retained approximately
90% of the castings it has been awarded throughout the product life cycle,
which is typical for the industry. The Company believes industrial
customers will continue to seek out foundries with a strong reputation for
performance who are capable of providing a cost-effective combination of
manufacturing technology and quality. The Company's strategy is to further
its relationships with existing customers by participating in the design
and production of more complex industrial castings, while seeking out
selected new customers who would value the Company's performance
reputation, technical ability and high level of quality and service.
In addition to increasing its sales to existing customers and seeking
out new customers, the Company intends to explore opportunities in
austempering and machining and assembling sub-components for specific
industrial customers. Austempering is the process of heat treating a
ductile iron casting to increase its strength, thereby increasing the
casting's ability to replace steel in additional applications. Machining
and sub-assembling are value-added processes often performed by the OEM or
third parties. Austempering, machining and sub-assembly are both processes
which generally provide higher margins and increase a customer's reliance
on the manufacturer.
Sales and Marketing
Heavy Municipal. Over its 70 years of heavy municipal market
participation, the Company has emphasized sales and marketing and believes
it has built a strong reputation for customer service. The Company believes
it is one of the leaders in United States heavy municipal casting
production and has strong name recognition. The Company has the largest
sales and marketing effort of any foundry serving the heavy municipal
market, including 51 Company employees and \24 commissioned
representatives. The dedicated sales force works out of regional sales
offices to market the Company's municipal castings to contractors and state
and local governmental entities throughout the United States. The Company
operates nine regional distribution and sales centers and has two other
sales offices in Oklahoma City, Oklahoma and Norwood, Pennsylvania. The
Company believes this regional approach enhances its knowledge of local
specifications and its position in the heavy municipal market.
Industrial. The Company employs a dedicated industrial casting sales
force of six people, five based in Neenah, Wisconsin and one based in
Mansfield, Ohio. These six people consist of three account coordinators,
who support the ongoing customer relationships and organize the
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scheduling and delivery of shipments, and three major account managers who
work with customers' engineers and procurement representatives, Company
engineers, manufacturing management and quality assurance representatives
throughout all stages of the production process to ensure that the final
product consistently meets or exceeds customer specifications. This team
approach between sales, manufacturing, marketing, engineering and quality
assurance is an integral part of the Company's marketing strategy.
Manufacturing Process
The Company operates two modern foundries with an annual rated
capacity of approximately 187,000 tons at a single location in Neenah,
Wisconsin. The Company's foundries manufacture gray and ductile iron and
cast it into intricate shapes according to customer metallurgical and
dimensional specifications. From 1985 to 1997, the Company invested
approximately $100 million in its production facilities, with approximately
$73 million invested from 1985 to 1990 in plant modernization and new
equipment. The Company also continually invests in the improvement of
process controls and product performance and believes that these
investments and its significant experience in the industry have made it one
of the most efficient manufacturers of industrial and heavy municipal
casting products. During the fiscal year ended September 30, 1998, the
Company had a combined scrap rate of 2.3%.
The casting process involves using metal, wood or urethane patterns to
make an impression of a casting product in a mold made primarily of sand.
Cores, also made primarily of sand, are used to make the internal cavities
and openings in a casting product. Once the casting impression is made in
the mold, the cores are set into the mold and the mold is closed. Molten
metal is then poured into the mold, fills the mold cavity and takes on the
shape of the desired casting product. Once the iron has solidified and
cooled, the mold is shaken from the casting and the sand is recycled. The
selection of the appropriate casting method, pattern, core making equipment
and sand and other raw materials depends on the final product and its
complexity, specifications, and function as well as intended production
volumes. Because the casting process involves many critical variables, such
as choice of raw materials, design and production of tooling, iron
chemistry and metallurgy, and core and molding sand properties, it is
important to monitor the process parameters closely to ensure dimensional
precision and metallurgical consistency. See "-- Quality Assurance."
The Company continually seeks to find ways to expand the capabilities
of existing technology to improve manufacturing processes. An example of
this expansion is the Company's integration of Disamatic molding machines
into its operations. Disamatic molding machines are considered to be among
the most efficient sand molding machines because of their ability to
produce high quality molds at high production rates. Disamatic molding
machines are used by most of the Company's direct competitors. Although the
Company was not the first foundry to acquire Disamatic molding machines, it
has significantly enhanced the equipment's range of production by combining
it with core-setting capabilities which exceed those of most foundries. To
further improve upon the productivity of the Disamatic molding machines,
the Company has recently increased the length of two of its cooling lines,
making each line among the longest lines in the world for comparable
Disamatic equipment. This extension allows the Company to run its machines
at higher production rates while providing sufficient inmold cooling time
prior to mold shakeout to facilitate the production of high quality
castings. As a result of these and other similar efforts, the Company has
been able to increase productivity as measured in the number of molds per
hour.
The Company also achieves productivity gains by improving upon the
individual steps of the casting process such as reducing the amount of time
required to make a pattern change to produce a different casting product.
The reduced time permits it to profitably produce castings in medium volume
quantities on high volume, cost-effective equipment such as the Disamatic
molding machines. Additionally, extensive effort in real time process
controls permits the
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Company to produce a consistent, dimensionally accurate casting product
which requires less time and effort in the final processing stages of
production. This accuracy contributes significantly to the Company's
manufacturing efficiency.
Manufacturing Facilities, Equipment and Properties
The Company's headquarters and two foundries are located in Neenah,
Wisconsin. The first manufacturing foundry, Plant 2, produces gray and
ductile iron castings and is equipped with one BMD air impulse molding
line, two Hydro slinger cope and drag molding units, and one 2070 Type B
Disamatic molding machine. The second manufacturing foundry, Plant 3,
produces ductile iron castings and is equipped with one 2013 Mark IV
Disamatic molding machine and one 2070 Type B Disamatic molding machine. In
July, 1995, the Company completed a program in Plant 3 to gain efficiencies
in material handling, labor utilization and molding line productivity.
Industrial and municipal castings are produced in both plants. The Company
owns seven and leases six distribution and sales centers.
Quality Assurance
Constant testing and monitoring of the manufacturing process is
important to maintain product quality. The Company has adopted
sophisticated quality assurance techniques and policies for its
manufacturing operations. During and after the casting process, the Company
performs numerous tests, including tensile, proof-load, radiography,
ultrasonic, magnetic particle and chemical analysis. The Company utilizes
statistical process controls to measure and control significant process
variables and casting dimensions. The results of this testing are
documented in metallurgical certifications which are provided with each
shipment to most industrial customers. The Company strives to maintain
systems that provide for continuous improvement of operations and
personnel, emphasize defect prevention and reduce variation and waste in
all areas.
Distribution
The Company sells a substantial amount of its municipal castings
through its network of two warehouses, nine distribution and sales centers
and two other sales offices. Industrial castings are shipped direct to
customers from the Company. For many municipal and a small portion of its
industrial customers, castings are delivered by Neenah Transport, Inc.
("Neenah Transport"), a wholly owned subsidiary of the Company, which
operates a fleet of 28 tractors and 101 trailers that deliver products
throughout the Midwest. For sales outside of the Midwest, increased
transportation costs impact the ability of the Company to compete on a cost
basis. Neenah Transport also backhauls raw materials for use by the Company
on return trips. Neenah Transport is staffed with professional drivers who
are trained in service standards and product knowledge as representatives
of the Company. To the Company's knowledge, none of the Company's major
heavy municipal competitors have a captive transportation subsidiary. The
Company believes Neenah Transport's service and drivers provide another
differentiating factor in favor of the Company.
Raw Materials
The primary raw materials used by the Company to manufacture iron
castings are steel scrap, pig iron, metallurgical coke and silica sand.
While there are multiple suppliers for each of these commodities, the
Company has sourcing arrangements with its suppliers of each of these major
raw materials, with the exception of pig iron. Due to long standing
relationships with each of its suppliers, the Company believes that it will
continue to be able to secure raw materials from its suppliers at
competitive prices. The primary energy sources for the Company's
operations, electricity and natural gas, are purchased through utilities.
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Although the prices of all raw materials used by the Company vary, the
fluctuations in the price of steel scrap are the most significant to the
Company. The Company has arrangements with most of its industrial customers
which require the Company to adjust industrial casting prices to reflect
scrap price fluctuations. In periods of rapidly rising or falling scrap
prices, these adjustments will lag the current scrap price because they are
generally based on average market prices for prior periods, which periods
vary by customer but are generally no longer than six months. Castings are
generally sold to the heavy municipal market on a bid basis and, after a
bid is won, the price for the municipal casting subject to the bid
generally cannot be adjusted for raw material price increases. However, in
most cases the Company has been successful in obtaining higher municipal
casting unit prices in subsequent bids to compensate for rises in scrap
prices in prior periods. Rapidly fluctuating scrap prices may have a
temporary adverse or positive effect on the Company's results of
operations. See "Risk Factors -- Fluctuations in Price and Supply of Raw
Materials."
Competition
The markets for the Company's products are highly competitive.
Competition is based not only on price, but also on quality of product,
range of capability, level of service and reliability of delivery. The
Company competes with numerous independent and captive foundries, as well
as with a number of foreign iron foundries, including certain foundries
located in India. The Company also competes with several large domestic
manufacturers whose products are made with materials other than ductile and
gray iron, such as steel or aluminum. The industry consolidation that has
occurred over the past 20 years has resulted in a significant reduction in
the number of smaller foundries and a rise in the share of production by
larger foundries, some of which have significantly greater financial
resources than the Company. Competition from India has had a strong
presence in the heavy municipal market and continues to be a factor,
primarily in the western and eastern coastal states, due in part to costs
associated with transportation. However, foreign companies have been, and
continue to be, subject to antidumping and counterveiling duty enforcement
litigation which the Company believes has had a negative effect on foreign
companies' ability to compete in the United States markets. There can be no
assurance that these factors will continue to mitigate the impact of
foreign competition, or that the Company will be able to maintain or
improve its competitive position in the markets in which it competes.
Backlog
The Company's industrial business generally involves supplying all or
a portion of a customer's annual requirements for a particular casting.
Industrial customers generally order castings on a monthly basis. Orders
for the heavy municipal market are generally received for specific casting
products and cover a much larger range of castings. The Company's backlog
at any given time consists only of firm industrial and municipal orders.
The Company's backlog was 18,203 tons at December 31, 1998 as compared to
18,723 tons at September 30, 1998. The decrease in backlog of approximately
3% was primarily the result of seasonal softening in the municipal segment
and a decrease in product orders for components used in agriculture. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
Hartley Controls
Hartley Controls, a wholly owned subsidiary of the Company, engineers,
manufactures and sells customized sand control systems, which are an
essential part of the casting process, to other iron foundries. The sand
molding media used in all high production iron foundries is a critical
element in determining the mold quality. Exacting and consistent control of
this sand with respect to moisture and chemical additives is an essential
element for process control, and relates directly to casting quality, scrap
rate and the ability to produce complex molds for highly
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engineered castings. Hartley Controls is a major United States supplier of
sand control systems, with over 300 installations since 1986. Hartley
Controls has made investments in process technology and has several
patented technologies related to sand systems, including the "Automatic
Moisture Controllers," the "Even-Flo Bin," the "Automatic Compactibility
Tester," the "Automatic Bond Determinator," the "Green Sand Reconditioner"
and the "Sandman." Sales of these sand systems and related products
represented approximately 3% of the Company's net sales for year ended
September 30, 1998.
In addition, Hartley Controls has recently expanded overseas and after
only three years has become a significant supplier of sand control systems
in the United Kingdom. Hartley Controls is the only manufacturer to supply
control systems in the United Kingdom for all brands of foundry sand
mixers. Hartley Controls also currently exports sand control systems to
India. Hartley Controls provides the Company access to the newest
technology in sand control as it becomes available.
Employees
As of September 30, 1998, the Company had 970 full time employees, of
whom 761 were hourly employees and 209 were salaried employees. The Local
121B of the Glass, Molders, Pottery, Plastics and Allied Workers
International Union AFL-CIO is the major bargaining agent for and
representative of 726 of the Company's hourly employees. The collective
bargaining agreement with Local 121B was reached on December 31, 1998 and
expires on December 31, 2001. The Independent Patternmakers Union of
Neenah, Wisconsin is the major bargaining agent for and representative of
35 of the Company's hourly employees. The collective bargaining agreement
with the Independent Patternmakers Union was reached on January 1, 1998 and
expires on December 31, 2000. The Company believes that it has a good
relationship with its employees.
Litigation
The Company is involved in routine litigation incidental to its
business. Such litigation is not, in the opinion of management, likely to
have a material adverse effect on the financial condition or results of
operation of the Company.
Environmental Matters
Each of the Company's and the Recently Acquired Subsidiaries'
facilities are subject to federal, state and local laws and regulations
relating to pollution and the protection of the environment and worker
health and safety, including those relating to discharges to air, water and
land, the handling and disposal of waste, the operation of landfills and
the cleanup of properties affected by hazardous substances. Such laws
include, among others, the federal Clean Air Act, the Clean Water Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA"), and the
Occupational Safety and Health Act. The Company believes that its and each
of the Recently Acquired Subsidiaries' operations are currently in
substantial compliance with applicable environmental laws and regulations
and that it has no liabilities arising under such laws and regulations,
except as would not be expected to have a material adverse effect on any of
the Company's or any of the Recently Acquired Subsidiaries' operations,
financial condition or competitive position. However, some risk of
environmental liability and other costs is inherent in the nature of each
of the Company's and the Recently Acquired Subsidiaries' businesses. Any of
the Company or the Recently Acquired Subsidiaries might in the future incur
significant costs to meet current or more stringent compliance, cleanup or
other obligations pursuant to environmental requirements. Such costs may
include expenditures related to remediation of historical releases of
hazardous substances or clean-up of physical structures upon
decommissioning.
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Under the federal Clean Air Act Amendments of 1990, the U.S.
Environmental Protection Agency ("EPA") is directed to establish maximum
achievable control technology ("MACT") standards for certain industrial
operations that are major sources of hazardous air pollutants ("HAPs"). The
iron foundry industry is not expected to be required to implement the MACT
emissions limits, control technologies or work practices until the year
2003 at the earliest. Although the Company cannot accurately estimate the
costs to comply with the MACT standard until it is issued, the MACT
standard, when implemented, and state laws governing the emission of toxic
air pollutants may require that certain of the Company's or the Recently
Acquired Subsidiaries' facilities incur significant costs for air emission
control equipment, air emission monitoring equipment or process
modifications.
DALTON CORPORATION
Overview
Dalton manufactures and sells gray iron castings for refrigeration
systems, air conditioners, heavy equipment, engines, gear boxes, stationary
transmissions, heavy duty truck transmissions and other automotive parts.
Dalton's four operating facilities have each been structured to manufacture
or machine specific components to customer specifications. Dalton
specializes in using cold box and shell core products as well as precision
high-pressure molds to manufacture gray iron castings. The majority of
Dalton's castings range in size from one pound to 700 pounds.
Products and Market Share
Dalton's revenues are generated from customers in several industries,
however, refrigeration and air conditioning represent the largest
concentration of tons shipped which management estimates is approximately
45% of tons shipped. Dalton serves primarily three markets: refrigeration
and air conditioning, automotive/truck market and heavy equipment.
Recent Financial Results
Over the past five years Dalton has experienced consistent growth in
tons of castings produced and net sales, but has generated a gradually
decreased level of net income. The decrease in net income has been caused
primarily by (i) increased interest expense due to indebtedness incurred to
finance the repurchase of shares of Dalton's capital stock from employees
when Dalton was owned by an employee stock ownership plan; (ii) increased
fixed costs resulting from increased levels of production; and (iii) losses
incurred by the Ashland facility as a result of its conversion from a
ductile to a gray iron casting facility. This conversion, which has been
completed, was undertaken due to lower than expected orders of the Ashland
facilities ductile casting products.
Customers
Dalton has over 100 customers across several industries, with four of
Dalton's largest five customers operating in the refrigeration/air
conditioning industry. Dalton's largest 10 customers accounted for
approximately 68% of Dalton's fiscal year 1998 net sales.
Raw Materials
The primary raw materials used by Dalton to manufacture iron castings
are steel scrap, pig iron, metallurgical coke and silica sand. While there
are multiple suppliers for each of these commodities, Dalton has sourcing
arrangements with its suppliers of each of these major raw materials, with
the exception of pig iron. Due to long standing relationships with each of
its suppliers, Dalton believes that it will continue to be able to secure
raw materials from its
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suppliers at competitive prices. The primary energy sources for Dalton's
operations, electricity and natural gas, are purchased through utilities.
Although the prices of all raw materials used by Dalton vary, the
fluctuations in the price of steel scrap are the most significant to
Dalton. Dalton has arrangements with most of its industrial customers which
require Dalton to adjust industrial casting prices to reflect scrap price
fluctuations. In periods of rapidly rising or falling scrap prices, these
adjustments will lag the current scrap price because they are generally
based on average market prices for prior periods, which periods vary by
customer but are generally no longer than six months. Rapidly fluctuating
scrap prices may have a temporary adverse or positive effect on the
Dalton's results of operations. See "Risk Factors -- Fluctuations in Price
and Supply of Raw Materials."
Competition
Dalton operates in the same industry as the Company and therefore
faces the same competitive environment as the company. See "-- The Company
(other than the Recently Acquired Subsidiaries) -- Competition" and "Risk
Factors -- Competition."
Manufacturing Facilities
Dalton currently operates four facilities. The main plant, located in
Warsaw, Indiana ("Warsaw") was established in 1910. Between 1992 and 1995
Dalton acquired a second plant in Kendallville, Indiana ("Kendallville")
and a third plant in Ashland, Ohio ("Ashland"). In addition, in 1997 Dalton
acquired the remaining 50 percent interest in a machining facility located
in Stryker, Ohio ("Stryker"). Dalton has established a separate
headquarters and office facility in Warsaw, Indiana.
Employees
At September 30, 1998, Dalton employed 1,638 individuals, consisting
of 1,336 hourly employees and 302 salaried and clerical employees.
Almost all of Dalton's production employees are members of either the
Steel Workers' Union or the Glass, Molders, Pottery, Plastics and Allied
Workers International Union. A collective bargaining agreement is
negotiated every three to five years. The current agreements expire as
follows: Warsaw, April 2003; Kendallville, July 25, 1999; and Ashland,
April 26, 1999. Management believes that employee relations are good.
Litigation
Dalton is involved in routine litigation incidental to its business.
Such litigation is not, in the opinion of management, likely to have a
material adverse effect on the financial condition or results of operation
of Dalton.
Environmental Matters
Dalton is subject to environmental, health and safety laws comparable
to those governing the Company. See "-- The Company (other than the
Recently Acquired Subsidiaries) -- Environmental Matters."
Status of Dalton's Air Emission Compliance In connection with
Dalton's submission of draft operating permits for air emission sources at
its facilities in Warsaw and Kendallville under Title V of the federal
Clean Air Act Amendments of 1990 ("Title V"), the Indiana Department of
Environmental Management ("IDEM") has asked Dalton to address several
issues of concern: (i) alleged exceedances of particulate and volatile
organic compound emission levels; (ii) the applicability of Prevention of
Significant Deterioration ("PSD") permit review requirements; and (iii)
alleged construction and operation of sources without the required permits.
Depending
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on the results of ongoing discussions with IDEM and the course of
developing regulations, the costs of addressing Dalton's air emission
control issues could be material.
Dalton has retained an environmental consultant to address the
concerns identified by IDEM. IDEM may require Dalton to perform tests on
various emission sources, install new or upgrade existing emission capture
or control equipment, use substitute materials or modify production rates
to reduce regulated emissions and/or perform PSD review for several
sources. IDEM could also assess penalties against Dalton for the identified
concerns, but because the concerns were voluntarily disclosed to IDEM by
Dalton in the Title V permit applications for these facilities, management
believes that any penalties assessed by IDEM will not be material.
Warsaw Monofill NOVs On May 15, 1998, IDEM issued an NOV to Dalton
regarding Dalton's operation of an authorized landfill used exclusively by
the Warsaw facility to dispose of its foundry waste (the "monofill"). IDEM
issued the NOV after Dalton notified the agency that it had disposed of
materials outside the authorized landfill area. IDEM is currently reviewing
Dalton's request to modify the landfill permit and allow the disposal of
wastes in the overfilled locations. IDEM is seeking a civil penalty of
$100,000 to $150,000 from Dalton to resolve the NOV. Dalton could be
required to relocate the overfill material to an authorized off-site
disposal location if IDEM denies the pending request for permit
modification.
ADVANCED CAST PRODUCTS, INC.
Overview
ACP is headquartered in Dublin, Ohio. ACP produces its products
through three principal facilities. The largest operation, Meadville,
manufactures ductile iron castings through both the traditional green sand
molding process and its proprietary Evapcast lost foam casting process. The
Belcher operation manufactures malleable cast iron parts primarily for the
electrical fittings industry. Finally, the Peerless operation produces
bearing adapters for use in rail cars. Peerless is one of only three U.S.
companies that manufacture railroad bearing adapters. Since 1990, ACP has
generated gradually increasing sales and operating income primarily due to
increased volume of products shipped.
Products and Processes
ACP is a leading independent manufacturer of ductile and malleable
iron castings that are produced through both traditional casting methods
and through ACP's Evapcast lost foam casting process. ACP's production
capabilities also include a range of finishing operations including
austempering and machining. ACP sells its products primarily to companies
in the heavy truck, construction equipment, railroad, mining, electrical
fittings and automotive industries.
Evapcast and CasTuf are two of ACP's proprietary casting processes.
Evapcast utilizes lost foam molding technology to produce near net-shape
castings, which allow for tighter tolerances, a smoother surface and
enhanced part complexity and require significantly less machining. CasTuf
process produces austempered ductile iron castings with superior strength
characteristics. CasTuf replaces more expensive steel castings, forgings
and fabrications, providing increased design flexibility. Management
believes that ACP is the first and only ductile foundry in the U.S. with
its own in-house austemper furnace and is one of only two ductile iron
foundries to have developed the lost-foam casting process. ACP is also a
leading provider of in-house machined castings through its expanded
machining capability, which utilizes state-of-the-art CNC machines.
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ACP's products and processes have enabled the company to develop
long-term working relationships with many key customers. This has allowed
ACP to retain existing customers, build on its customer base and obtain
favorable pricing.
Customers
ACP serves a diverse base of approximately 400 customers. Freightliner
Corporation, ACP's largest customer, accounted for more than 16% of ACP's
net sales for its fiscal year ended September 30, 1998. ACP specializes in
meeting the more difficult requirements of its largest customers such as
Caterpillar, Freightliner and Dana. ACP has been presented supplier awards
from each of these OEMs and has earned the ability to obtain new part
awards as they become available.
ACP works closely with its customers from the beginning of the design
process until the shipment of finished parts. Due to this level of customer
service along with its products and services, ACP has been able to increase
sales to existing customers as well as expand its customer base. ACP offers
its customers a package, which includes casting, austempering, machining,
painting and assembly. This combination of products and services reduces
the risk of ACP customers moving their products to other manufacturers.
ACP sells its products to customers in a wide range of industries. In
fiscal year 1997, ACP's net sales were primarily to the heavy truck,
railroad and pipe pressure fitting industries.
Raw Materials
The primary raw materials used by ACP to manufacture iron castings are
steel scrap, alloys and silica sand. While there are multiple suppliers for
each of these commodities, ACP has sourcing arrangements with its suppliers
of each of these major raw materials. Due to long standing relationships
with each of its suppliers, ACP believes that it will continue to be able
to secure raw materials from its suppliers at competitive prices. The
primary energy sources for ACP's operations, electricity and natural gas,
are purchased through utilities and competitive third party bidding.
Although the prices of all raw materials used by ACP vary over time,
the fluctuations in the price of steel scrap are the most significant to
ACP. ACP has arrangements with most of its industrial customers which allow
ACP to adjust industrial casting prices to reflect scrap price
fluctuations. See "Risk Factors -- Fluctuations in Price and Supply of Raw
Materials."
Competition
ACP operates in the same industry as the Company and therefore faces
the same competitive environment as the Company. See "-- The Company (other
than the Recently Acquired Subsidiaries) -- Competition" and "Risk
Factors -- Competition."
Manufacturing Facilities
ACP currently operates 3 facilities. Since 1989, ACP has spent over
$14.0 million on capital equipment to expand production capacity, improve
efficiency, add new production capabilities, replace equipment and improve
the quality of its products. ACP investments have included, for example,
state of the art Disamatic molding lines at both its Meadville and Belcher
facilities and computer numerical controlled ("CNC") machining centers at
Meadville. The new molding lines have increased capacity and reduced
operating costs.
In addition, new capital expenditures are underway for Meadville that
include an autopour unit for its current Disamatic line, a larger Disamatic
molding line for larger castings, a second austemper line, and additional
CNC machines. Belcher's new capital expenditures also include
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an autopour unit in addition to a heat treat furnace. Peerless is adding a
new CNC machining center.
Employees
ACP has approximately 90 salaried and approximately 370 hourly
employees represented by the United Steelworkers of America. The collective
bargaining agreement for Belcher and Meadville expires in June 1999 and in
October 1999, respectively.
Litigation
ACP is involved in routine litigation incidental to its business. Such
litigation is not, in the opinion of management, likely to have a material
adverse effect on the financial condition or results of operation of ACP.
Environmental Matters
ACP is subject to environmental, health and safety laws comparable to
those governing the Company. See "-- The Company (other than the Recently
Acquired Subsidiaries) -- Environmental Matters."
Intellectual Property
Meadville holds trademark rights on two advanced proprietary
processes, Evapcast and CasTuf. ACP's Evapcast process utilizes a lost foam
casting technique which produces near net shape castings. Evapcast
eliminates or reduces the need for coring and machining resulting in
significant cost savings to the customer. CasTuf is a process to produce a
line of austempered ductile iron castings which have superior strength
characteristics and are easier to cast than steel products, thus providing
greater design freedom. Meadville is the only ductile iron casting company
in North America with in-house austempering capabilities (CasTuf) and one
of only two independent, ductile iron foundries with lost foam technology
(EvapCast). Additionally, Meadville was one of the first foundry operations
to provide completely finished parts through an integrated machining
capability.
MERCER FORGE CORPORATION
Overview
Founded in 1954, Mercer is a leading producer of complex-shaped forged
components for use in transportation, railroad, mining and heavy industrial
applications. Mercer is also a leading producer of microalloy forgings.
Mercer sells directly to OEMs, as well as to industrial end users.
Until the mid-1980's, Mercer produced military tank parts, but
successfully converted from a defense contractor to a commercial
manufacturer and today is one of the leading suppliers to the heavy duty
truck sector. Mercer produces approximately 500 individually forged
components and has developed specialized expertise in forgings of
microalloy steel which management estimates accounts for approximately 40%
of its production.
Products and Markets
Mercer designs its products to customer specification with typical
production runs of 1,000 or more units. Mercer currently operates eight
mechanical press lines, from 1,300 tons to 4,000 tons. Mercer's principal
plant is a 130,000 square foot facility located in Mercer, Pennsylvania.
Key markets for Mercer include truck and automotive parts, railroad
equipment and general industrial machinery.
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The following is a summary of Mercer's product capabilities, broken
out by the principal customer categories it serves:
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INDUSTRY PRODUCTS
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Truck Drive Train Components; Sector Shafts; Knuckles,
Spindles; King Pins
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Automotive Transmission Gears; Hubs, Front Wheel Universal
Components; Drive Train Yokes; Spindles
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Mining Equipment Shoes; Fight Bars; Gear Blanks; Hubs; Sleeves
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Railroad Wheels; Draft Gear Components; Tank Car Valves; Piston
Carries; Articulated Car Bearings; Connecting Rods
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Off-Highway/ Agriculture Yokes; Spindles; Flanges; Gear Blanks; Hubs; Track
Links; Roller Shafts; Drive Line Components
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Industrial Gears; Bearings; Wheels; Cams
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Military Ordinance Projectile Components; Missile Components; Center
Guides; End Connectors; Tank Track Components
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The Forged Components Market
Demand for forged products for civilian application closely follows
the general business cycle and the level demand for capital goods. While
there is a consistent base level of demand for replacement parts which is
somewhat inelastic, the strongest expansions in the forging industry
coincide with periods of economic growth. With generally improved economic
conditions and a boom in the transportation sector, Mercer and most other
domestic forgers are currently experiencing growing demand for their
products.
The Forging Process -- Description and Benefits
Manufacturing Process
Forgings and casting (together with a third process, fabrication) are
the principal commercial metal working processes. In forging metal is
pressed, pounded or squeezed under great pressure, with or without the use
of heat, into parts that retain the metal's original grain flow, imparting
high strength, ductility and resistance properties.
Forging itself usually entails one of four principal process:
impression die; open die; cold; and seamless rolled ring forging. Mercer
uses impression die, open die and cold forging, but not seamless rolled
ring forging. Impression die forging, commonly referred to as "closed die"
forging, is the principal process employed by Mercer, and involves bringing
two or more dies containing "impressions" of the part shape together under
extreme pressure, causing the forging stock to undergo plastic reformation.
Because the metal flow is restricted by die containers, this process can
yield more complex shapes and closer tolerances than the "open die" forging
process. Impression die forging is used to produce products such as
military and off-highway track and drive train parts; automotive and truck
drive train and suspension parts; railroad engine, coupling and suspension
parts; military ordinance parts and other items where close tolerances are
required.
Open die forging, so called because the metal is not confined
laterally by impression dies during forging, progressively works the
starting stock into the desired shape, generally between flat faced dies.
Open die forging allows production of a broad range of shapes and sizes.
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Similar in method to impression die forging, cold forging is a process
in which a chemically-lubricated bar slug is forced into a closed die under
extreme pressure. In this way, unheated metal flows into the desired shape.
The cold forging process is best used to manufacture smaller, cylindrical
pats such as shafts, spindles and small net gears.
Once a rough forging is produced, regardless of the forging process,
it must generally still be machined. This process, known as "finishing" or
"conversion", smooths the component's exterior and mating surfaces and adds
any required specification, such as groves, threads, bolt holes and brand
name markings. The finishing process can contribute significantly to the
value of the end product, in particular in certain custom situations where
high value specialized machining is required. Machining can be performed
either in-house by the forge, by a machine shop which performs this process
exclusively or by the end-user.
An internal staff of five engineers designs products to meet customer
specifications incorporating computer assisted design (CAD) work stations
for tooling design. Because its forged products are inherently less
expensive and stronger, Mercer has been successful in replacing certain
cast parts previously supplied by third party foundries. Management
believes that Mercer is an industry leader in forging techniques using
microalloy steel which produces parts which are lighter and stronger than
those forged from conventional carbon steel.
Customers
Mercer's in-house sales organization sells direct to end users and
OEMs. A key element of Mercer's sales strategy is its ability to develop
strong customer relationships through responsive engineering capability,
dependable quality and just-in-time performance.
Raw Materials and Distribution
The principal raw materials used in Mercer's products are carbon and
microalloy steel. Mercer purchases substantially all of its carbon steel
from four principal sources. Mercer typically maintains 30 to 60 days
supply on hand. Mercer buys approximately 40,000 tons of raw steel per
year. While Mercer has never suffered an interruption of materials supply,
management believes that, in the event of any disruption from any
individual source, adequate alternative sources of supply are available
within the immediate vicinity although there can be no assurance in this
regard.
Competition
Mercer competes primarily in a highly fragmented industry which
includes several dozen other press forgers and hammer forge shops. Hammer
shops cannot typically match press forgers' high volume, single component
manufacturing, or close tolerance production. Competition in the forging
industry has also historically been determined both by product and
geography, with a large number of relatively small forgers across the
country carving out their own product and customer niches. In addition,
most end users manufacture some forgings themselves, often maintaining a
critical minimum level of production in-house and contracting out the
balance. The primary basis of competition in the forging industry is price,
but engineering, quality and dependability are also important, particularly
with respect to building and maintaining customer relationships. Some of
Mercer's competitors have significantly greater resources than Mercer.
There can be no assurance that Mercer will be able to maintain or improve
its competitive position in the markets in which it competes.
Mercer is not aware of any significant offshore competition within its
current product categories. Due to the importance of customer relationships
and engineering capabilities, most foreign producers are unable to compete.
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Manufacturing Facilities
Mercer is located in northwest Pennsylvania, about 60 miles north and
west of the Greater Pittsburgh airport. Mercer owns it principal forging
facility, which occupies a twenty-one acre site, and consists of a 130,000
square foot manufacturing facility (which was partially rebuilt and
expanded by 50,000 square feet in 1989) and an adjacent office complex.
Mercer also leases an 18,000 square foot machine shop facility located in
Sharon, Pennsylvania, approximately ten miles from Mercer's headquarters.
Mercer's main plant is able to forge complex components in runs from
500 to more than 10,000 units. Mercer manufactures approximately 500
individual products (SKUs) of which approximately half run throughout the
production year. Heating capacity is 59,000 pounds per hour through eight
induction heaters. Mercer's existing equipment can handle forging weights
from 3 to 100 pounds and forging diameters ranging from 2 1/2 inches to 13
inches. Shear/saw production can handle up to 6 inch diameter billets.
Mercer presently operates eight press lines consisting of one 4,000
ton, two 3,000 ton, two 2,000 ton and three 1,300 ton press lines. This
equipment includes two new press lines including heating equipment, trim
presses and billet loaders. The plant uses four microalloy conveyors.
Mercer is also equipped with saws and shearers to cut billets from round
and square steel bars. Mercer maintains a fully equipped quality control
facility, magniflux machine, shot cleaning equipment, complete die welding
facility and die repair machine shop.
Backlog
Forging backlog at December 31, 1998 is approximately 16.4 million,
based on firm orders from existing customers. Even though Mercer is the
sole supplier of certain specific components to several of its key
accounts, Mercer does not book backlog until customer release dates are
received. Mercer ships most orders within 30 days of manufacture.
Employees
Mercer currently has 155 full time hourly employees, all of whom are
represented by a collective bargaining agreement with United Steel Workers
of America. One such contract runs through March 31, 1999. In addition,
Mercer's machining operation has a nine year contract with the United Steel
Workers of America which expires in 2004. Management believes labor
relations are good. Mercer also occasionally utilizes an outside temporary
service in its packing operation.
Litigation
Mercer is involved in routine litigation incidental to its business.
Such litigation is not, in the opinion of management, likely to have a
material adverse effect on the financial condition or results of operation
of Mercer.
Environmental Matters
Mercer is subject to environmental, health and safety laws comparable
to those governing the Company. See "-- The Company (other than the
Recently Acquired Subsidiaries) -- Environmental Matters."
DEETER FOUNDRY, INC.
Overview
Since 1945, Deeter has been producing gray iron castings for the heavy
municipal market. Deeter's municipal casting product line includes manhole
frames and covers, storm sewer inlet
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frames, grates and curbs, trench grating and tree grates. Deeter also
produces a wide variety of special application construction castings. These
products are utilized in waste treatment plants, airports, telephone and
electrical construction projects. Deeter's centralized location in Lincoln,
Nebraska allows it to service the majority of its geographical market area
with overnight delivery. In addition, Deeter maintains 2 stockyards located
in the midwest and western U.S.
Customers
Deeter serves the same customer and market base as Neenah's heavy
municipal line. See "-- The Company (other than the Recently Acquired
Subsidiaries) -- Products, Customers and Markets."
Raw Materials
The primary raw materials used by Deeter to manufacture iron castings
are steel scrap, pig iron, metallurgical coke and silica sand. While there
are multiple suppliers for each of these commodities, Deeter has sourcing
arrangements with its suppliers of each of these major raw materials, with
the exception of pig iron. Due to long standing relationships with each of
its suppliers, Deeter believes that it will continue to be able to secure
raw materials from its suppliers at competitive prices. The primary energy
sources for Deeter's operations, electricity and natural gas, are purchased
through utilities.
Although the prices of all raw materials used by Deeter vary, the
fluctuations in the price of steel scrap are the most significant to
Deeter. Deeter builds to stock based on forecast sales during any given
period and generally does not have any long term customer contracts. As a
result, in periods of rapidly rising or falling scrap prices, prices
charged to customers will relatively quickly reflect the current scrap
price. Rapidly fluctuating scrap prices may have a temporary adverse or
positive effect on Deeter's results of operations. See "Risk Factors --
Fluctuations in Price and Supply of Raw Materials."
Competition
Deeter operates in the same industry as the Company and therefore
faces the same competitive environment as the Company. See "-- The Company
(other than the Recently Acquired Subsidiaries) -- Competition" and "Risk
Factors -- Competition."
Manufacturing Facilities
Deeter is located on an 18 acre site with 71,000 square feet of
manufacturing area. Deeter operates three green sand molding lines with a
current annual capacity of 20,000 net saleable tons. Deeter maintains
stockyards located in Denver, Colorado and their primary distribution yard
is located on site in Lincoln, Nebraska.
Employees
At September 30, 1998 Deeter had 97 full time hourly employees and 25
salaried employees. The workers are non-union and Deeter believes its
relations with its employees are good.
Litigation
Deeter is involved in routine litigation incidental to its business.
Such litigation is not, in the opinion of management, likely to have a
material adverse effect on the financial condition or results of operation
of Deeter.
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Environmental Matters
Deeter is subject to environmental, health and safety laws comparable
to those governing the Company. See "-- Company (other than the Recently
Acquired Subsidiaries) -- Environmental Matters."
On May 30, 1997, prior to the Company's acquisition of Deeter, Deeter
pleaded guilty to disposing of hazardous waste without a permit and agreed
to pay a fine of $500,000, perform (by its president, Douglas E. Deeter)
300 hours of community service and provide certain information regarding
its waste handling and disposal practices. Management believes that Deeter
has complied and that the matter will result in no further liabilities.
CAST ALLOYS, INC.
Overview
Cast Alloys' principal business is the manufacture of investment-cast
titanium and stainless steel golf club heads. Cast Alloys operates out of
three principal facilities in Chatsworth, California, Carlsbad, California
and Northridge, California. Cast Alloys' wholly owned subsidiary,
International Golf, operates as a cost center for Cast Alloys and is also
principally involved in the manufacture of investment-cast titanium and
stainless steel golf club heads. International Golf operates out of three
facilities located in Tijuana, Baja California, Mexico. Cast Alloys is
operated as our wholly owned subsidiary under the direction of our
management.
Customers
The Company presently sells almost all of its products to Callaway
Golf ("Callaway"). Sales for the trailing twelve months ended September 30,
1998 were $68.7 million, of which $63.0 million, or 91%, was sold to
Callaway. Taylor Made was second on the customer list with $2.4 million in
sales or 4%. The remaining 5% was made up of other smaller customers such
as Wilson Sporting Goods.
Raw Materials
Raw materials include titanium ingot, revert titanium, stainless steel,
and other foundry and polishing materials. The Company has contractual
arrangements for the purchase of titanium ingot from foreign sources that
cover their requirements at competitive prices.
Competition
The Company's main competitors include Coastcast Corporation
("Coastcast"), the primary supplier of clubs to Taylor Made, Sturm Ruger,
Inc. ("Ruger"), a titanium ammunition manufacturer, and Selmet, Inc.
("Selmet").
Manufacturing Facilities
Cast Alloys manufactures steel and titanium golf club heads for major
golf club manufacturers. The Company's golf clubs are produced in four
facilities. Steel clubs are cast and polished in separate facilities in
Tijuana, Mexico. In 1996 and 1997, the Company installed three "arc
melting" furnaces and four "cold wall" furnaces in its Northridge,
California foundry for the production of titanium golf club heads. "Arc
melting" furnaces have the ability to melt titanium in an ingot form while
"cold wall" furnaces have the ability to melt titanium in various forms,
such that the Company is able to recycle by melting scrap titanium pieces,
resulting in significantly lower unit production costs.
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Employees
The Company employed approximately 2,158 people as of September 30,
1998. Of these, approximately 1,960 are employed at the Company's Mexican
facilities.
Litigation
Cast Alloys is involved in routine litigation incidental to its
business. Such litigation is not, in the opinion of management, likely to
have a material adverse effect on the financial condition or results of
operation of Cast Alloys.
Environmental Matters
Cast Alloys is subject to environmental, health and safety laws
comparable to those governing the Company. See "-- The Company (other than
the Recently Acquired Subsidiaries) -- Environmental Matters."
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MANAGEMENT
The following table identifies members of the Board of Directors, key
executive officers and certain other key employees of the Company.
NAME AGE POSITION
---- --- --------
James K. Hildebrand.............. 62 Chairman of the Board and Chief Executive Officer
William M. Barrett............... 52 President
Gary W. LaChey................... 53 Vice President -- Finance, Treasurer and Secretary
Charles M. Kurtti................ 61 Vice President -- Manufacturing and Engineering
John Z. Rader.................... 50 Vice President -- Human Resources
William J. Martin................ 51 Vice President -- Hartley Controls Corporation
Timothy J. Koller................ 49 Vice President -- Construction Products, Sales,
and Engineering
Frank C. Headington.............. 49 Director -- Product Reliability
David F. Thomas.................. 49 Director
John D. Weber.................... 34 Director
Brenton F. Halsey................ 71 Director
Mr. Hildebrand is Chairman of the Board and Chief Executive Officer of the
Company. Mr. Hildebrand has been President and Chief Executive Officer of ACP
since 1988, and will continue in that position for the foreseeable future.
Previously, he served as President of the Cast Products Group of Amcast
Industrial Corp. Mr. Hildebrand is also employed by ACP Holdings. See "Certain
Relationships and Related Transactions."
Mr. Barrett is President of the Company. Mr. Barrett joined the Company in
1992 and has served as Vice President and General Manager and General Sales
Manager -- Industrial Castings. From 1985 to 1992, Mr. Barrett was the Vice
President -- Sales for Harvard Industries Cast Products Group.
Mr. LaChey is Vice President -- Finance, Treasurer and Secretary of the
Company. Mr. LaChey joined the Company in 1971, serving in a variety of
positions of increasing responsibility in the finance department.
Mr. Kurtti is Vice President -- Manufacturing and Engineering, a position
he has held since 1991. Mr. Kurtti joined the Company in 1976 as a salesman. Mr.
Kurtti has served as Director of Marketing, Director of
Purchasing -- Engineering and Director -- Manufacturing and Engineering.
Mr. Rader is Vice President -- Human Resources, a position he has held
since 1990. Mr. Rader joined the Company in 1987, serving as
Director -- Personnel until 1989 and as Director -- Human Resources until 1990.
Mr. Martin is Vice President -- Hartley Controls Corporation, a wholly
owned subsidiary of the Company, a position he has held since 1996. Previously,
Mr. Martin was Territory Sales Manager at Disamatic, Inc., a molding machine
manufacturer, from 1986 to 1996.
Mr. Koller is Vice President -- Construction Products, Sales and
Engineering for the Company. Mr. Koller joined the Company in 1978, serving in a
variety of positions of increasing responsibility in the sales and marketing
departments.
Mr. Headington is Director -- Product Reliability, a position he has held
since 1991. Mr. Headington joined the Company in 1989 as Manager -- Technical
Services, a position he held until 1991.
Mr. Thomas is a director of the Company. Mr. Thomas has been a Managing
Director of Citicorp Venture Capital, Ltd. for over five years. Mr. Thomas is a
director of Lifestyle Furnishings
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International Ltd., Galey & Lord, Inc., Anvil Knitwear, Inc., Plainwell, Inc.,
Stage Stores, Inc. and American Commercial Lines LLC.
Mr. Weber is a director of the Company. Mr. Weber has been a Vice President
at CVC since 1994. Previously, Mr. Weber worked at Putnam Investments from 1992
through 1994. Mr. Weber is a director of Anvil Knitwear, Inc., Electrocal
Designs, Inc., FFC Holding, Inc., Graphic Design Technologies, Marine Optical,
Inc., Gerber Childrenswear, Inc., Plainwell Paper Company, Sleepmaster, LLC, and
Smith Alarm.
Mr. Halsey is a director of the Company. Mr. Halsey was the founding Chief
Executive Officer and Chairman of the James River Corporation from 1969 to 1990.
He continued as Chairman until 1992 when he became Chairman Emeritus.
COMPENSATION OF DIRECTORS
Directors of the Company who are officers or employees of the Company or
its affiliates are presently not expected to receive compensation for their
services as directors. No determination has yet been made with respect to
compensation for directors of the Company who are not officers or employees of
the Company or any of its affiliates. Directors of the Company will be entitled
to reimbursement of their reasonable out-of-pocket expenses in connection with
their travel to and attendance at meetings of the board of directors or
committees thereof.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of the Company will be determined by
the Board of Directors of the Company. None of the historical benefit or
compensation plans of the Company are described herein because each were
terminated with respect to the named officers and replaced as a group by a
single compensation plan in connection with the Merger (with the exception of a
401(k) plan and a retirement plan for Mr. Kurtti). The following table sets
forth information concerning compensation received by the five most highly
compensated officers of the Company for services rendered in the fiscal year
ended September 30, 1998, the five month period ended September 30, 1997 ("FM
1997"), the one month period ended April 30, 1997 ("OM 1997") and the fiscal
year ended March 31, 1997.
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SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION -----------------------------------
FISCAL ------------------ OTHER ANNUAL OPTIONS/ LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) SARS(#) PAYOUTS COMPENSATION
- --------------------------- --------- -------- ------- --------------- --------- -------- ------------
James K. Hildebrand 1998 $120,000 $84,000 $34,107 -- -- --
Chairman of the Board FM 1997 50,000 -- 10,860
and Chief Executive OM 1997 -- -- --
Officer 1997 -- -- --
William M. Barrett 1998 $148,500 $85,575 $31,490 -- -- --
President FM 1997 55,000 -- 11,430
OM 1997 8,225 -- 1,936
1997 98,700 20,000 26,030
Gary W. LaChey 1998 $145,345 $86,980 $31,469 -- -- --
Vice President -- FM 1997 59,175 -- 10,723
Finance, Treasurer OM 1997 11,833 -- 2,081
and Secretary 1997 137,998 40,000 26,984
Charles M. Kurtti 1998 $137,500 $80,850 $34,510 -- -- --
Vice President -- FM 1997 55,000 -- 11,430
Manufacturing OM 1997 11,000 -- 2,229
and Engineering 1997 127,750 45,000 32,230
John Z. Rader 1998 $137,000 $80,850 $31,303 -- -- --
Vice President -- FM 1997 55,000 -- 11,430
Human Resources OM 1997 11,000 -- 2,229
1997 127,750 40,000 29,725
- ---------------
(1) The named officers have participated in the Company's profit sharing,
Company 401(k) contributions, and excess benefit programs. The aggregate
payments made by the Company pursuant to such programs are listed as Other
Annual Compensation.
EMPLOYMENT AGREEMENTS
Prior to the Merger, the Predecessor Company entered into a consulting
agreement with James P. Keating, Jr. a former Senior Vice President of the
Company, that provides that Mr. Keating will be available to serve as a
consultant to the Company from July 1, 1997 to June 30, 1999. The Company, ACP,
ACP Holdings and ACP Products L.L.C. entered into an executive employment and
consulting agreement with James K. Hildebrand dated as of September 15, 1998.
Such agreement provides for (i) an initial term of employment until September
30, 2001 after which, barring termination by the Company under certain
circumstances (including gross negligence, wilful misconduct and commission of
certain crimes), Mr. Hildebrand will serve as a consultant to the Company for a
period of two years with automatic renewal, subject to earlier termination
notice by either party, for successive one year periods up to an additional
three years; (ii) a minimum base salary of $500,000 and a bonus to be calculated
based on achieved EBITDA performance so long as Mr. Hildebrand is employed by
the Company; (iii) severance benefits; (iv) non-competition, non-solicitation
and confidentiality agreements; (v) an option to purchase certain common
membership units of ACP Products L.L.C.; and (vi) other terms and conditions of
Mr. Hildebrand's employment including health benefits. In addition, in
connection with the Company's acquisition of all of the capital stock of Dalton,
Dalton entered into an employment agreement with K.L. Davidson dated as of
September 8, 1998 to serve as President of Dalton. Such agreement provides for
(i) an initial one year term which shall be renewed automatically, subject to
earlier termination notice by either party, for successive one year terms until
Mr. Davidson attains the age of 65; (ii) a minimum base salary and bonus
following the end of each fiscal year so long as Dalton employs Mr. Davidson;
(iii) severance benefits; (iv) non-solicitation, non-compete and confidentiality
agreements; and (v) other terms and conditions of Mr. Davidson's employment.
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MANAGEMENT INCENTIVE PLAN
The Company provides performance-based compensation awards to executive
officers and key employees for achievement during each year as part of a bonus
plan. Such compensation awards may be a function of individual performance and
consolidated corporate results. The qualitative and quantitative criteria will
be determined from time to time by the Board of Directors of the Company.
MANAGEMENT EQUITY PARTICIPATION
In connection with the Merger, the then current Management Investors
acquired units representing membership interests in ACP Products, L.L.C., which
represent, in the aggregate, approximately a ten percent beneficial interest in
the Company (the "Purchased Interests"). In addition, in connection with certain
of the Recent Acquisitions, certain senior managers of certain of the Recently
Acquired Subsidiaries purchased common interests in ACP Products, L.L.C. The
Management Investors and certain other employees of the Company may be given the
opportunity to purchase additional Purchased Interests either in connection with
future acquisitions or otherwise.
Upon the termination of employment with the Company, an employee's
Purchased Interests will be subject to certain repurchase provisions exercisable
by ACP Products, L.L.C. or its designees. Any Purchased Interests issued in the
future are expected to be subject to rights and restrictions similar to those of
the Purchased Interests purchased in connection with the Merger. The price of
the future Purchased Interests will be established by ACP Products, L.L.C. in
consultation with the Board of Directors of the Company or a compensation
committee thereof.
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OWNERSHIP OF SECURITIES
The Company's authorized capital stock consists of 11,000 shares of common
stock, par value $100 per share (the "Common Stock"), 1,000 shares of which are
issued and outstanding and owned by Holdings and are pledged to the lenders
under the Senior Bank Facilities.
Holdings' authorized capital stock consists of 1,000 shares of Common
Stock, par value $.01 per share ("Holdings Common Stock"), of which 1,000 shares
are issued and outstanding and 44,000 shares of 12% cumulative redeemable
preferred stock, par value $.01 per share ("Holdings Preferred Stock") of which
44,000 shares are issued and outstanding.
Dividends accrue on Holdings Preferred Stock at a rate of 12% per annum and
accumulate and compound on a quarterly basis. Holdings Preferred Stock ranks
prior to the Holdings Common Stock upon liquidation and in respect of dividends
and redemption. The vote of 66% of the holders of the Holdings Preferred Stock,
voting as a separate class is required to (i) cause Holdings to direct its
subsidiaries to make distributions sufficient to enable Holdings to pay
dividends on the Holdings Preferred Stock and (ii) cause the redemption of the
Holdings Preferred Stock upon the occurrence of certain events. Except as
described in the foregoing, or as otherwise required by law, the Holdings
Preferred Stock is not entitled to the right to vote. The Holdings Preferred
Stock is subject to mandatory redemption two years after the maturity of the
Notes. Upon redemption, a holder of Holdings Preferred Stock is entitled to
receive for each share of Holdings Preferred Stock redeemed its per share
liquidation value plus accrued and unpaid dividends.
The table below sets forth certain information regarding the equity
ownership of Holdings by each person or entity who owns five percent or more of
any class of voting capital stock as of June 30, 1998.
PERCENTAGE OF PERCENTAGE OF
PREFERRED COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER STOCK STOCK
------------------------------------ ------------- -------------
ACP Holding Company(1).................................. 100% 100%
525 Metro Place North, Suite 330
Dublin, Ohio 43017
- ---------------
(1) ACP Holding Company is an affiliate of Citicorp Venture Capital, Ltd., and a
wholly-owned subsidiary of ACP Products, L.L.C. See "Certain Relationships
and Related Transactions." The Management Investors have, through an
investment in ACP Products, L.L.C., an approximately ten percent beneficial
interest in the Company. See "Management -- Management Equity
Participation."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIP WITH ACP HOLDING COMPANY
ACP Products, L.L.C. holds all of the issued and outstanding shares of
capital stock of ACP Holdings. ACP Holdings is the parent company of Holdings,
and thus indirectly owns 100% of the Common Stock of the Company. James K.
Hildebrand, who serves as the Chairman of the Board and Chief Executive Officer
of the Company, currently serves as President and Chief Executive Officer of ACP
Holdings. Mr. Hildebrand held such positions prior to the contribution of the
capital stock of ACP to the Company and received payment for such services.
SHAREHOLDER RELATIONSHIPS
The Management Investors and certain institutional investors, including
Citicorp Venture Capital, Ltd., are parties to the Fifth Amended and Restated
Limited Liability Agreement (the "L.L.C. Agreement"). The L.L.C. Agreement
contains certain provisions with respect to the beneficial equity interests and
corporate governance of the Company. The L.L.C. Agreement provides that the
Investor Group and the Management Investors, as the only members of ACP
Products, L.L.C.
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holding beneficial interests in the Company, have the right to direct all
actions taken in respect of Holdings and the Company, including, without
limitation, appointing members of the Board of Directors of the Company and of
Holdings.
CONTRIBUTION OF ACP CAPITAL STOCK
On September 8, 1998, the capital stock of ACP was contributed to the
Company by ACP Holdings. In connection with the contribution, the Company
assumed $14.9 million of indebtedness of ACP, $14.6 of which was refinanced
through borrowings of Tranche A Loans. In connection with the contribution of
the capital stock of ACP to the Company, (i) Holdings issued a $4.2 million
senior subordinated note to CVC in exchange for a $4.2 million current pay
obligation of ACP to CVC and (ii) $6.7 million of outstanding subordinated debt
of ACP to ACP Holdings and Holdings was contributed to the capital of ACP.
REGISTRATION RIGHTS AGREEMENT
The Company entered into a registration rights agreement (the "Registration
Rights Agreement") with the Investor Group and the Management Investors.
Pursuant to the terms of the Registration Rights Agreement, certain holders of
the Company's Common Stock have the right to require the Company, at the
Company's sole cost and expense and subject to certain limitations, to register
under the Securities Act or list on any recognized stock exchange all or part of
the Common Stock beneficially owned by such holders (the "Registrable
Securities"). All such holders will be entitled to participate in all
registrations by the Company or other holders, subject to certain limitations.
In connection with all such registrations, the Company agreed to indemnify all
beneficial owners of Registrable Securities against certain liabilities,
including liabilities under the Securities Act and other applicable state or
foreign securities laws. Registrations pursuant to the Registration Rights
Agreement will be made, if applicable, on the appropriate registration form and
may be underwritten registrations.
DESCRIPTION OF THE SENIOR BANK FACILITIES
The following is a summary of the material terms of the Credit Agreement,
dated April 30, 1997, as amended and restated as of September 12, 1997, April 3,
1998 and September 8, 1998, and as amended as of November 18, 1998, among the
Company, Holdings, The Chase Manhattan Bank, as administrative agent and
collateral agent (the "Agent"), and the lenders named therein (together with the
Agent, the "Lenders"). The Senior Bank Facilities consist of (i) term loan
facilities (the "Term Loan Facilities") in an aggregate principal amount of
$145.0 million, (ii) an acquisition loan facility (the "Acquisition Loan
Facility") in an aggregate principal amount of up to $50.0 million and (iii) a
revolving loan facility (the "Revolving Credit Facility") in an aggregate
principal amount of up to $50.0 million. The following summary is qualified in
its entirety by reference to the Credit Agreement, copies of which will be made
available to prospective purchasers of the Notes upon request.
On November 18, 1998 the Lenders agreed to waive certain provisions and
amend certain other provisions of the Credit Agreement. Pursuant to the amended
Credit Agreement, the Company must use the net proceeds of the Offering to
prepay borrowings under the Acquisition Loan Facility (without reducing the
commitments thereunder). Any remaining proceeds of the Offering are required to
be placed in a cash collateral account (the "Cash Collateral Account") with
Chase, as collateral agent, for the benefit of the Lenders, to finance the
Potential Acquisition or any permitted acquisition under the Credit Agreement.
To the extent that funds placed in the Cash Collateral Account are not used to
finance the Potential Acquisition or any other permitted acquisition under the
Credit Agreement by February 15, 1999, the escrowed funds must be used to prepay
borrowings pro rata under the Term Loan Facilities.
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THE FACILITIES
Term Loan Facilities. The Term Loan Facilities consist of two tranches of
term loans. The tranche A term loans (the "Tranche A Loans") were made available
on April 3, 1998 and were borrowed in a single drawing of $20.0 million on
September 8, 1998 in connection with the acquisition of Dalton and ACP. The
tranche B term loans were originally made in a single drawing of $55.0 million
on April 3, 1998, of which $55.0 million was outstanding at June 30, 1998 (the
"Initial Tranche B Loans"). On September 8, 1998, the Lenders agreed to commit
to make additional tranche B term loans in an aggregate principal amount of
$70.0 million, which was fully drawn by the Company on that date (the
"Additional Tranche B Loans" and together with the Initial Tranche B Loans, the
"Tranche B Loans"). The Tranche A Loans mature on September 30, 2003 and the
Tranche B Loans mature on September 30, 2005. Installments of the Tranche A
Loans are due in aggregate principal amounts of $0.75 million per quarter until
September 30, 1999, $1.0 million per quarter from December 31, 1999 until
September 30, 2002 and $1.25 million per quarter thereafter until maturity.
Installments of the Initial Tranche B Term Loans are due in aggregate principal
amounts of $0.25 million per quarter until September 30, 2003 and $6.25 million
per quarter thereafter until maturity. Installments of the Additional Tranche B
Loans are due in aggregate principal amounts of $8.75 million per quarter
commencing on December 31, 2003 and continuing thereafter until maturity.
Acquisition Loan Facility. The Lenders have agreed to provide loans under
the Acquisition Loan Facility ("Acquisition Loans") from time to time to the
Company in connection with permitted acquisitions under the Credit Agreement in
an aggregate principal amount at any time outstanding not to exceed $50.0
million. Prior to the Acquisition Loan Termination Date (as defined), loans
under the Acquisition Loan Facility may be paid and reborrowed. On September 8,
1998, the Company borrowed $29.0 million of Acquisition Loans in connection with
the acquisition by the Company of Dalton. The Company will prepay all amounts
outstanding under the Acquisition Loan Facility ($29.0 million) with the net
proceeds of the Offering (but the Acquisition Loan Facility commitment will not
be reduced). Future Acquisition Loans may be drawn until September 8, 2000 (the
"Acquisition Loan Termination Date") with all amounts drawn maturing on June 30,
2004. Installments of Acquisition Loans outstanding on the Acquisition Loan
Termination Date will be repaid quarterly beginning on such date until maturity.
The aggregate principal amount due quarterly on and after the Acquisition Loan
Termination Date is calculated by multiplying the principal amount outstanding
(together with accrued but unpaid interest) on the Acquisition Loan Termination
Date by 6.25%.
Revolving Credit Facility. The Revolving Credit Facility consists of a
revolving loan facility in an aggregate principal amount of $50.0 million. The
Company is entitled to draw amounts under the Revolving Credit Facility for
general corporate purposes, including permitted acquisitions. The Revolving
Credit Facility includes a $15.0 million sub-limit for letters of credit
available on same-day notice. The Revolving Credit Facility will mature on April
30, 2002.
Availability. Availability of new drawings under the Acquisition Loan
Facility and the Revolving Credit Facility is subject to various conditions
precedent typical of bank facilities of this type including, among other things,
the absence of any material adverse condition or material adverse change in or
affecting the business, property, assets, nature of assets, liabilities or
condition of the Company and no event of default having occurred and being
continuing. Acquisition Loans may be drawn until September 8, 2000 and the
Revolving Credit Facility may be borrowed, repaid and reborrowed until April 30,
2002.
INTEREST
Interest on borrowings under the Senior Bank Facilities accrues quarterly
with reference to the base rate (the "Base Rate") plus the applicable interest
margin; however the Company may elect that all or a portion of the borrowings
under the facility bear interest at the Adjusted LIBO Rate plus
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the applicable interest margin. The Base Rate is defined as the higher of (i)
the certificate of deposit rate as published by the Federal Reserve Bank of New
York, plus 1%, (ii) the Prime Rate (as defined in the Senior Bank Facilities) in
effect on such day and (iii) the federal funds rate in effect on such date, plus
1/2%. The Adjusted LIBO Rate is defined as the rate at which eurodollar
deposits for one, two, three or six months are quoted in the interbank
eurodollar market, as adjusted to reflect statutory reserve requirements to
which any lender is subject.
The Senior Bank Facilities contain provisions under which commitment fees
and interest rates are adjusted in increments based on the ratio (the "Leverage
Ratio") of consolidated net debt to consolidated EBITDA in effect from time to
time. Subject to certain exceptions, for Adjusted LIBO (a) the applicable
interest margin for Tranche A Loans, loans under the Revolving Credit Facility
and the Acquisition Loans and (b) the applicable interest margin for the Initial
Tranche B Loans and the Additional Tranche B Loans are, in the case of a
Leverage Ratio (i) greater than or equal to 4.5:1.0, 2.50% and 2.75%,
respectively, (ii) greater than or equal to 4.0:1.0 but less than 4.5:1.0, 2.25%
and 2.50%, respectively, (iii) greater than or equal to 3.5:1.0 but less than
4.0:1.0, 2.00% and 2.25%, respectively, (iv) greater than or equal to 3.0:1.0
but less than 3.5:1.0, 1.75% and 2.00%, respectively and (v) less than 3.0:1.0,
1.50% and 2.00%, respectively, with the applicable interest margin for Base Rate
loans being 1.0% less than the corresponding margin for Adjusted LIBO loans (but
not less than 0%).
Currently all outstanding Tranche A Loans bear interest at the Adjusted
LIBO Rate plus 2.50%, all outstanding Tranche B Loans bear interest at the
Adjusted LIBO Rate plus 2.75%, and all outstanding Acquisition Loans bear
interest at the Adjusted LIBO Rate plus 2.50%.
FEES
The Company has agreed to pay certain fees with respect to the Senior Bank
Facilities, including (i) fees on the unused commitments of lenders equal to
.50% on the undrawn portion of the commitments in respect of the Senior Bank
Facilities (such fees being reduced to .375% should the Leverage Ratio be less
than 3.5:1.0), (ii) letter of credit fees on the aggregate face amount of
outstanding letters of credit equal to the then applicable borrowing margin for
Adjusted LIBO loans under the Revolving Credit Facility and a issuing bank fee
for the letter of credit issuing bank; (iii) annual administration fees; and
(iv) agent, arrangement and other similar fees.
SECURITY; GUARANTEES
The obligations of the Company under the Senior Bank Facilities are
irrevocably guaranteed, jointly and severally, by Holdings and by each existing
and subsequently acquired or organized subsidiary of the Company. In addition,
the Credit Agreement and the guarantees thereunder are secured by substantially
all of the assets of Holdings, the Company and its domestic subsidiaries
(collectively, the "Collateral"), including but not limited to (i) a first
priority pledge of all the capital stock of the Company and of each existing and
subsequently acquired or organized subsidiary of the Company and (ii) a
perfected first priority security interest in, and mortgage on, substantially
all tangible and intangible assets of the Company and the guarantors (including,
but not limited to, accounts receivable, documents, inventory, equipment,
investment property, general intangibles, real property, cash and cash accounts
and proceeds of the foregoing), in each case subject to certain exceptions.
MANDATORY AND OPTIONAL PREPAYMENT.
The Term Loan Facilities and the Acquisition Loans are required to be
prepaid, subject to certain conditions and exceptions, with (i) 100% of the net
proceeds of any incurrence of indebtedness, subject to certain exceptions, by
Holdings, the Company or its subsidiaries, (ii) 100% of the net proceeds of
certain asset dispositions, (iii) 50% of excess cash flow (as such term is
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defined in the Credit Agreement) on a consolidated basis and (iv) 100% of net
proceeds from any insurance recovery events, subject to certain re-investment
rights.
Subject to certain exceptions, mandatory prepayments of debt must be made
pro rata, among the Acquisition Loan Facility and the Term Loan Facility. In the
case of an offering of qualified subordinated debt prior to September 8,
2000(including the Notes), mandatory prepayments must be made first to retire
borrowings under the Acquisition Loan Facility with the remaining proceeds of
any such offering used to retire pro rata borrowings under the Term Loan
Facility. The Senior Bank Facilities provide that the Company may prepay loans
in whole or in part without penalty, subject to minimum prepayments and
reimbursement of the lenders' breakage and redeployment costs in the case of
prepayment of Adjusted LIBO Loans.
AFFIRMATIVE, NEGATIVE AND FINANCIAL COVENANTS
The Credit Agreement contains a number of covenants that, among other
things, restrict the ability of Holdings, the Company and its subsidiaries to
dispose of assets, incur additional indebtedness, incur or guarantee
obligations, amend other debt instruments, pay dividends, create liens on
assets, make investments, loans or advances, make acquisitions, engage in
mergers or consolidations, change the business conducted by the Company and its
subsidiaries, make capital expenditures, or engage in certain transactions with
affiliates and otherwise restrict certain corporate activities. In addition, the
Credit Agreement requires the Company to comply with specified financial ratios
and tests, including a maximum leverage ratio, an interest coverage ratio and a
minimum consolidated net worth test.
EVENTS OF DEFAULT
The Senior Bank Facilities contains customary events of default, including
non-payment of principal, interest or fees, violation of covenants, inaccuracy
or representations or warranties in any material respect, cross default to
certain other indebtedness, bankruptcy, ERISA events, material judgments and
liabilities, actual or asserted invalidity of any material security interest and
change of control.
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DESCRIPTION OF NOTES
GENERAL
The form and terms of the series F senior subordinated notes due 2007 (the
"Exchange Notes") are the same as the form and terms of the Old Notes except
that (i) the Exchange Notes will have been registered under the Securities
Exchange Act of 1934, as amended (the "Securities Act") and thus will not bear
restrictive legends restricting their transfer pursuant to the Securities Act
and (ii) holders of Exchange Notes will not be entitled to rights of holders of
the Old Notes under the Registration Rights Agreement which terminate upon the
consummation of the Exchange Offer. The Old Notes have been, and the Exchange
Notes are to be, issued under an Indenture, dated as of April 30, 1997 (the
"Indenture"), among the Company, the Guarantor Subsidiaries and United States
Trust Company of New York, as Trustee (the "Trustee").
The following summary of certain provisions of the Indenture and the
Exchange Notes does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Indenture,
including the definitions of certain terms therein and those terms made a part
thereof by the Trust Indenture Act of 1939, as amended ("TIA"). Capitalized
terms used herein and not otherwise defined have the meanings set forth in the
section "-- Certain Definitions" below.
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes may be exchanged or transferred, at the office
or agency of the Company in the Borough of Manhattan, the City of New York
(which initially shall be the corporate trust office of the Trustee at 114 West
47th Street, New York, N.Y. 10036, Attn: Gerard Ganey), except that, at the
option of the Company, payment of interest may be made by check mailed to the
registered holders of the Notes at their registered addresses.
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge will be made for any registration of transfer or exchange of
Exchange Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.
TERMS OF THE NOTES
The Exchange Notes will be unsecured senior subordinated obligations of the
Company, limited to $87.0 million aggregate principal amount, and will mature on
May 1, 2007. Each Exchange Note will bear interest at a rate per annum shown on
the front cover of this Prospectus from the Issue Date or from the most recent
date to which interest has been paid or provided for, payable semiannually to
Holders of record at the close of business on the April 15 or October 15
immediately preceding the interest payment date on May 1 and November 1 of each
year, commencing May 1, 1999.
OPTIONAL REDEMPTION
Except as set forth below, the Exchange Notes will not be redeemable at the
option of the Company prior to May 1, 2002. On and after such date, the Exchange
Notes will be redeemable, at the Company's option, in whole or in part, at any
time upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to each Holder's registered address, at the following
redemption prices (expressed in percentages of principal amount), plus accrued
and unpaid interest, if any, to the redemption date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date that is on or prior to the
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date of redemption), if redeemed during the 12-month period commencing on May 1
of the years set forth below:
REDEMPTION
YEAR PRICE
---- ----------
2002........................................................ 105.5625%
2003........................................................ 103.7083%
2004........................................................ 101.8542%
2005 and thereafter......................................... 100.0000%
In addition, at any time and from time to time on or prior to May 1, 2000,
the Company may redeem in the aggregate up to 40% of the original aggregate
principal amount of the Exchange Notes with the cash proceeds to it of one or
more Public Equity Offerings following which there is a Public Market, at a
redemption price (expressed as a percentage of principal amount thereof) of
111.125% plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of Holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption); provided, however, that at least 60% of the original
aggregate principal amount of the Exchange Notes must remain outstanding after
each such redemption.
Notwithstanding the preceding two paragraphs, the Company will not be
permitted to redeem any Existing Notes unless, substantially concurrently with
such redemption, the Company redeems an aggregate principal amount of Exchange
Notes (rounded to the nearest integral multiple of $1000) equal to the product
of: (1) a fraction, the numerator of which is the aggregate principal amount of
Existing Notes to be so redeemed and the denominator of which is the aggregate
principal amount of Existing Notes outstanding immediately prior to such
proposed redemption and (2) the aggregate principal amount of Exchange Notes
outstanding immediately prior to such proposed redemption. Similarly, the
Company will not be permitted to redeem the Exchange Notes unless, substantially
concurrently with such redemption, the Company redeems an aggregate principal
amount of each series of Existing Notes (rounded to the nearest integral
multiple of $1,000) equal to the product of: (1) a fraction, the numerator of
which is the aggregate principal amount of Exchange Notes to be so redeemed and
the denominator of which is the aggregate principal amount of Exchange Notes
outstanding immediately prior to such proposed redemption and (2) the aggregate
principal amount of such series of Existing Notes outstanding immediately prior
to such proposed redemption.
The Exchange Notes will be subject to redemption at the option of the
Company, prior to May 1, 2002, at any time within 180 days after a Change of
Control on not less than 30 nor more than 60 days' prior notice to each Holder
of Exchange Notes to be redeemed, in amounts of $1,000 or an integral multiple
thereof, at a redemption price equal to the sum of (i) the principal amount
thereof plus (ii) accrued and unpaid interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date that is on or prior
to the date of redemption) plus (iii) the Applicable Premium. Each Holder of
Exchange Notes will also have certain rights to require the Company to purchase
such Exchange Notes upon the occurrence of a Change of Control. See "-- Change
of Control" below.
SELECTION
In the case of any partial redemption, selection of the Exchange Notes for
redemption will be made by the Trustee on a pro rata basis, by lot or by such
other method as the Trustee in its sole discretion shall deem to be fair and
appropriate, although no Exchange Note of $1,000 in original principal amount or
less will be redeemed in part. If any Exchange Note is to be redeemed in part
only, the notice of redemption relating to such Exchange Note shall state the
portion of the principal amount thereof to be redeemed. A new note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original note.
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RANKING
The indebtedness evidenced by the Exchange Notes will be unsecured Senior
Subordinated Indebtedness of the Company. The payment of the principal of,
premium (if any) and interest on the Exchange Notes is subordinate in right of
payment, as set forth in the Indenture, to all existing and future Senior
Indebtedness of the Company, will rank pari passu in right of payment with all
existing and future Senior Subordinated Indebtedness of the Company (including
the Existing Notes) and will be senior in right of payment to all existing and
future Subordinated Obligations of the Company. The Exchange Notes will also be
effectively subordinated to any Secured Indebtedness of the Company to the
extent of the value of the assets securing such indebtedness. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below is not subordinated to any
Senior Indebtedness or subject to the restrictions described herein.
The indebtedness evidenced by a Subsidiary Guaranty will be unsecured
Senior Subordinated Indebtedness of the Guarantor Subsidiary issuing such
Subsidiary Guaranty. The payment of a Subsidiary Guaranty is subordinate in
right of payment, as set forth in the Indenture, to all existing and future
Senior indebtedness of such Guarantor Subsidiary, will rank pari passu in right
of payment with the existing and future Senior Subordinated Indebtedness of such
Guarantor Subsidiary and will be senior in right of payment to all existing and
future Subordinated Obligations of such Guarantor Subsidiary. Each Subsidiary
Guaranty will also be effectively subordinated to any Secured Indebtedness of
the Guarantor Subsidiary to the extent of the value of the assets securing such
indebtedness.
As of December 31, 1998, on a pro forma basis after giving effect to the
Recent Acquisitions, the Offering and the application of the net proceeds
therefrom and assuming the proceeds of the Offering are not applied to repay
amounts outstanding under the Term Loan Facilities, the Company and the
Guarantor Subsidiaries would have had outstanding $145.1 million (excluding $4.6
million of outstanding letters of credit) of aggregate principal amount of
Senior Indebtedness (all of which is Secured Indebtedness), $195.0 million
aggregate principal amount of Senior Subordinated Indebtedness (other than the
Indebtedness represented by the Exchange Notes), and no Indebtedness that is
subordinate and junior in right of repayment to Senior Subordinated
Indebtedness. Although the Indenture contains limitations on the amount of
additional Indebtedness that the Company and its subsidiaries may incur, under
certain circumstances the amount of such Indebtedness could be substantial and,
in any case, such Indebtedness may be Senior Indebtedness of the Company or a
Guarantor Subsidiary, as the case may be. See "-- Certain
Covenants -- Limitation on Indebtedness" below.
"Senior Indebtedness" of the Company means all principal of, premium (if
any), accrued interest (including interest accruing on or after the filing of
any petition in bankruptcy or for reorganization relating to the Company whether
or not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and other amounts owing
with respect to all Indebtedness of the Company, and including all Bank
Indebtedness, whether outstanding on the Issue Date or thereafter incurred,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is expressly provided that such obligations are not
superior in right of payment to the Exchange Notes; provided, however, that
Senior Indebtedness shall not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for federal, foreign, state, local or other taxes
owed or owing by the Company, (3) any accounts payable or other liability to
trade creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness or
obligation of the Company which is subordinate or junior in any respect (other
than as a result of the Indebtedness being unsecured) to any other Indebtedness
or obligation of the Company, including any Senior Subordinated Indebtedness and
any Subordinated Obligations, (5) any obligations with respect to any Capital
Stock or (6) any Indebtedness Incurred in violation of the Indenture. "Senior
Indebtedness" of any Guarantor Subsidiary has a correlative meaning.
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Only Indebtedness of the Company or a Guarantor Subsidiary that is Senior
Indebtedness will rank senior to the Exchange Notes and the relevant Subsidiary
Guaranty in accordance with the provisions of the Indenture. The Exchange Notes
and each Subsidiary Guaranty will in all respects rank pari passu with all other
Senior Subordinated Indebtedness of the Company and the relevant Guarantor
Subsidiary, respectively (including the Existing Notes). The Company and each
Guarantor Subsidiary has agreed in the Indenture that it will not incur,
directly or indirectly, any Indebtedness which is subordinate or junior in
ranking in any respect to Senior Indebtedness unless such Indebtedness is Senior
Subordinated Indebtedness, or is expressly subordinated in right of payment to
Senior Subordinated Indebtedness. Unsecured Indebtedness of the Company or a
Guarantor Subsidiary is not deemed to be subordinated or junior to Secured
Indebtedness, as the case may be, merely because it is unsecured.
The Company may not pay principal of, or premium (if any) or interest on,
the Exchange Notes or make any deposit pursuant to the provisions described
under "-- Defeasance" below, and may not otherwise purchase, redeem or otherwise
retire any Exchange Notes other than from funds held in a defeasance trust
pursuant to the provisions described under "-- Defeasance" below (collectively,
"pay the Exchange Notes"), if (i) any Senior Indebtedness of the Company is not
paid when due or (ii) any other default on Senior Indebtedness of the Company
occurs and the maturity of such Senior Indebtedness is accelerated in accordance
with its terms unless, in either case, the default has been cured or waived and
any such acceleration has been rescinded or such Senior Indebtedness has been
paid in full. However, the Company may pay the Exchange Notes without regard to
the foregoing if the Company and the Trustee receive written notice approving
such payment from the Representative of the holders of the Senior Indebtedness
with respect to which either of the events set forth in clause (i) or (ii) of
the immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods, the
Company may not pay the Exchange Notes for a period (a "Payment Blockage
Period") commencing upon the receipt by the Trustee (with a copy to the Company)
of written notice (a "Blockage Notice") of such default from the Representative
of the holders of the Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
Notwithstanding the provisions described in the immediately preceding sentence,
unless the holders of such Designated Senior Indebtedness have, or the
Representative of such holders has, accelerated the maturity of such Designated
Senior Indebtedness, the Company may resume payments on the Exchange Notes after
the end of such Payment Blockage Period, including any missed payments. Not more
than one Blockage Notice may be given in any consecutive 360-day period,
irrespective of the number of defaults with respect to Designated Senior
Indebtedness during such period. However, if any Blockage Notice within such
360-day period is given by or on behalf of any holders of Designated Senior
Indebtedness other than the Bank Indebtedness, the Representative of the Bank
Indebtedness may give another Blockage Notice within such period. In no event,
however, may the total number of days during which any Payment Blockage Period
or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution or reorganization of or similar proceeding
relating to the Company or its property, the holders of Senior Indebtedness of
the Company will be entitled to receive payment in full of the Senior
Indebtedness of the Company before the Exchange Noteholders are entitled to
receive any payment and until the Senior Indebtedness of the Company is paid in
full, any payment or distribution to which Noteholders would be entitled but for
the subordination provisions of the
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Indenture will be made to holders of the Senior Indebtedness of the Company as
their respective interests may appear. If a payment or distribution is made to
Exchange Noteholders that due to the subordination provisions should not have
been made to them, such Exchange Noteholders are required to hold such payment
or distribution in trust for the holders of Senior Indebtedness and pay it over
to them as their respective interests may appear.
If payment of the Exchange Notes is accelerated because of an Event of
Default, the Company or the Trustee shall promptly notify the holders of the
Designated Senior Indebtedness or the Representative of such holders of the
acceleration. The Company may not pay the Exchange Notes until five Business
Days after such holders or the Representative of the holders of the Designated
Senior Indebtedness receive notice of such acceleration and, thereafter, may pay
the Notes only if the subordination provisions of the Indenture otherwise permit
payment at that time.
The terms of the subordination provisions described above with respect to
the Company's obligations under the Exchange Notes apply equally to a Guarantor
Subsidiary and the obligations of such Guarantor Subsidiary under its Subsidiary
Guaranty.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company or a Guarantor Subsidiary who
are holders of Senior Indebtedness of the Company or a Guarantor Subsidiary, as
the case may be, may recover more, ratably, than the Exchange Noteholders, and
creditors of the Company who are not holders of Senior Indebtedness of the
Company or of Senior Subordinated Indebtedness (including the Exchange Notes)
may recover less, ratably, than holders of Senior Indebtedness of the Company.
SUBSIDIARY GUARANTIES
Each of the Company's principal operating subsidiaries (the "Initial
Guarantors," and together with all future issuers of Subsidiary Guaranties, the
"Guarantor Subsidiaries") will jointly and severally as primary obligors and not
merely as sureties, irrevocably Guarantee on an unsecured senior subordinated
basis the performance and punctual payment when due, whether at Stated Maturity,
by acceleration or otherwise, of all obligations of the Company under the
Indenture and the Exchange Notes, whether for payment of principal of or
interest on the Exchange Notes, expenses, indemnification or otherwise (all such
obligations guaranteed by the Guarantor Subsidiaries being herein called the
"Guaranteed Obligations"). The Guarantor Subsidiaries will agree to pay, in
addition to the amount stated above, any and all expenses (including reasonable
counsel fees and expenses) incurred by the Trustee or the Holders in enforcing
any rights under the Subsidiary Guaranties. Each Subsidiary Guaranty will be
limited in amount to an amount not to exceed the maximum amount that can be
Guaranteed by the applicable Guarantor Subsidiary without rendering such
Subsidiary Guaranty voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally. The Company will cause (a) each Restricted Subsidiary that
is a Domestic Subsidiary which Incurs Indebtedness and (b) each Restricted
Subsidiary that is not a Domestic Subsidiary and that after the Original Issue
Date enters into a Guarantee of any of the obligations of the Company, Holdings
or any of the Company's subsidiaries pursuant to the Senior Bank Facilities to
Guarantee payment of the Exchange Notes. See "-- Certain Covenants -- Future
Guarantor Subsidiaries" below.
Each Subsidiary Guaranty is a continuing guarantee and shall (a) remain in
full force and effect until payment in full of all the Guaranteed Obligations,
(b) be binding upon each Guarantor Subsidiary and (c) enure to the benefit of
and be enforceable by the Trustee, the Holders and their successors, transferees
and assigns.
A Subsidiary Guaranty will be released upon the sale of the capital stock,
or all or substantially all of the assets, of the applicable Guarantor
Subsidiary if such sale is made in compliance with the Indenture.
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Each of the Company's Guarantor Subsidiaries have also Guaranteed or will
also Guarantee Indebtedness of the Company Incurred under the terms of the
Senior Bank Facilities and the Existing Notes.
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Exchange Notes at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of purchase (subject to the right of Holders of record on
the relevant record date to receive interest due on the relevant interest
payment date), pursuant to the offer described below and the other procedures
set forth in the Indenture; provided, however, that notwithstanding the
occurrence of a Change of Control, the Company shall not be obligated to
purchase the Exchange Notes pursuant to this covenant in the event that it has
exercised its rights to redeem all of the Exchange Notes as described under
"-- Optional Redemption":
(a) prior to the earlier to occur of the first public offering of
Voting Stock of ACP Holdings, Holdings or the Company, the Permitted
Holders cease to be entitled (by "beneficial ownership" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act) of Voting Stock, contract or
otherwise) to elect or cause the election of directors of the Company
having a majority of the total voting power of the Board of Directors of
the Company, whether as a result of issuance of securities of the Company,
any merger, consolidation, liquidation or dissolution of the Company, any
direct or indirect transfer of securities by any Permitted Holder or
otherwise (for purposes of this clause (a), the Permitted Holders shall be
deemed to beneficially own any Voting Stock of a corporation (the
"specified corporation") held by any other corporation (the "parent
corporation") so long as one or more of the Permitted Holders beneficially
own (as so defined), directly or indirectly, in the aggregate a majority of
the voting power of the Voting Stock of the parent corporation);
(b) after the first public offering of Voting Stock of ACP Holdings,
Holdings or the Company, any person or group (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more of
the Permitted Holders, is or becomes the beneficial owner (as defined in
clause (a) above), directly or indirectly, of Voting Stock that represents
more than 40% of the aggregate ordinary voting power of all classes of the
Voting Stock of ACP Holdings, Holdings or the Company voting together as a
single class, and either (x) the Permitted Holders beneficially own (as
defined in clause (a) above), directly or indirectly, in the aggregate
Voting Stock that represents a lesser percentage of the aggregate ordinary
voting power of all classes of the Voting Stock of ACP Holdings, Holdings,
or the Company as the case may be, voting together as a single class, than
such other person or group and are not entitled (by voting power, contract
or otherwise) to elect directors of ACP Holdings, Holdings or the Company
having a majority of the total voting power of the board of directors of
ACP Holdings, Holdings or the Company, as the case may be, or (y) such
other person or group is entitled to elect directors of ACP Holdings,
Holdings or the Company having a majority of the total voting power of the
board of directors of ACP Holdings, Holdings or the Company;
(c) after the first public offering of Voting Stock of ACP Holdings,
Holdings or the Company, during any period of not greater than two
consecutive years beginning after the Issue Date, individuals who at the
beginning of such period constituted the board of directors of ACP
Holdings, Holdings or the Company, as the case may be (together with any
new directors whose election by such board of directors, or whose
nomination for election by shareholders was approved by the Permitted
Holders or by such board of directors, in each case by a vote of a majority
of the directors of ACP Holdings, Holdings or the Company, as the case may
be, then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved), cease for any reason to have a majority of
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the total voting power of the board of directors of ACP Holdings, Holdings
or the Company, as the case may be; or
(d) any sale, lease, or other transfer (in one transaction or in a
series of related transactions) is made by the Company or its Restricted
Subsidiaries of all or substantially all of the consolidated assets of the
Company and its Restricted Subsidiaries to any Person.
Within 30 days following any Change of Control, the Company shall mail a
notice to each Holder with a copy to the Trustee stating, among other things:
(1) that a Change of Control has occurred and that such Holder has the right to
require the Company to purchase all or any portion of such Holder's Exchange
Notes at a purchase price in cash equal to 101% of the principal amount thereof,
plus accrued and unpaid interest, if any, to the date of repurchase (subject to
the right of Holders of record on a record date to receive interest on the
relevant interest payment date); (2) the circumstances and relevant facts and
financial information regarding such Change of Control; (3) the repurchase date
(which shall be no earlier than 30 days nor later than 60 days from the date
such notice is mailed); and (4) the instructions determined by the Company,
consistent with this covenant, that a Holder must follow in order to have its
Exchange Notes or any portion thereof purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Exchange Notes pursuant to this covenant.
To the extent that the provisions of any securities laws or regulations conflict
with provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchaser. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company or Holdings would decide to do so in the future. Subject to the
limitations discussed below, the Company could, in the future, enter into
certain transactions, including acquisitions or other recapitalizations, that
would not constitute a Change of Control under the Indenture, but that could
increase the amount of indebtedness outstanding at such time or otherwise affect
the Company's capital structure or credit ratings.
The occurrence of a Change of Control would constitute a default under the
Senior Bank Facilities. Future Senior Indebtedness of the Company may contain
prohibitions of certain events which would constitute a Change of Control or
require such Senior Indebtedness to be repurchased upon a Change of Control.
Moreover, the exercise by the Holders of their right to require the Company to
repurchase the Exchange Notes could cause a default under such Senior
Indebtedness, even if the Change of Control itself does not, due to the
financial effect of such repurchase on the Company. Finally, the Company's
ability to pay cash to the Holders upon a repurchase may be limited by the
Company's then existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any repurchases
required in connection with a Change of Control. The Company's failure to
purchase the Exchange Notes in connection with a Change of Control would result
in a default under the Indenture.
CERTAIN COVENANTS
The Indenture will contain covenants including, among others, the
following:
Limitation on Indebtedness. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness (other than pursuant to the
following paragraph (b)) unless on the date of such Incurrence the Consolidated
Coverage Ratio exceeds 2.00 to 1.
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(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness consisting of revolving credit, working capital or
letters of credit financing in an aggregate principal amount at any time
outstanding not in excess of the greater of $35.0 million and the Borrowing
Base in effect from time to time (in each case less the aggregate amount of
all repayments of principal actually made thereunder since the Original
Issue Date with Net Available Cash from Asset Dispositions pursuant to
clause (a)(iii)(A) of the covenant described under "-- Limitation on Sales
of Assets and Subsidiary Stock");
(ii) Indebtedness of the Company owing to and held by any Wholly Owned
Subsidiary or Indebtedness of a Restricted Subsidiary owing to and held by
the Company or any Wholly Owned Subsidiary; provided, however, that any
subsequent issuance or transfer of any Capital Stock or any other event
which results in any such Wholly Owned Subsidiary ceasing to be a Wholly
Owned Subsidiary or any subsequent transfer of any such Indebtedness
(except to the Company or a Wholly Owned Subsidiary) will be deemed, in
each case, to constitute the Incurrence of such Indebtedness by the issuer
thereof;
(iii) Indebtedness of the Company represented by the Notes;
(iv) any Indebtedness of the Company and its Restricted Subsidiaries
(other than the Indebtedness described in clauses (i) or (ii) above)
outstanding on the Original Issue Date and Indebtedness Incurred under
Section 4.03(a) of the Original Indenture prior to the Issue Date;
(v) Indebtedness of the Company and its Restricted Subsidiaries (A) in
respect of judgment, appeal, surety, performance and other like bonds,
bankers' acceptances and letters of credit provided by the Company and its
Restricted Subsidiaries in the ordinary course of their business and which
do not secure other Indebtedness and (B) under Commodity Agreements,
Currency Agreements and Interest Rate Agreements that are designed to
protect the Company and its Restricted Subsidiaries against fluctuations in
commodity prices (for raw materials used by them), interest rates or
currency exchange rates and not for the purposes of speculation;
(vi) Indebtedness represented by Guarantees by the Company of
Indebtedness of a Restricted Subsidiary, or in respect of letters of credit
provided by the Company to support such Indebtedness, or Guarantees by a
Restricted Subsidiary of Indebtedness of the Company or a Restricted
Subsidiary, or in respect of letters of credit provided by a Restricted
Subsidiary to support such Indebtedness; provided, however, that only
Indebtedness that is Incurred in compliance with this covenant may be
guaranteed pursuant to this clause (vi);
(vii) Purchase Money Indebtedness, industrial revenue bonds or similar
Indebtedness and Capitalized Lease Obligations of the Company and its
Restricted Subsidiaries in an aggregate principal amount at any time
outstanding not in excess of 10% of Total Assets;
(viii) Indebtedness of the Company or any Restricted Subsidiary
consisting of guarantees, indemnities or obligations in respect of purchase
price adjustments, in connection with the acquisition or disposition of any
business, assets or Subsidiary of the Company permitted under the
Indenture;
(ix) Indebtedness of the Company and its Restricted Subsidiaries, to
the extent the proceeds thereof are immediately used after the Incurrence
thereof to purchase Notes tendered in an offer to purchase made as a result
of a Change of Control;
(x) Indebtedness of the Company or a Restricted Subsidiary owed to
(including obligations in respect of letters of credit for the benefit of)
any Person in connection with liability insurance provided by such Person
to the Company or such Restricted Subsidiary, pursuant to reimbursement or
indemnification obligations to such Person, in each case Incurred in the
ordinary course of business;
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(xi) Indebtedness of the Company consisting of guarantees of up to an
aggregate principal amount of $2.0 million of borrowings by Management
Investors in connection with purchases of Voting Stock of Holdings on or
after the Original Issue Date and in accordance with "-- Limitation on
Restricted Payments;"
(xii) Indebtedness of the Company or any Restricted Subsidiary in an
aggregate principal amount at any time outstanding not in excess of $15.0
million which Indebtedness may be incurred pursuant to clause (i) above;
and
(xiii) any Refinancing Indebtedness incurred in respect of any
Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (i),
(ii), (iv), (vii), (ix) or (xiii) of this paragraph (b).
(c) Notwithstanding the foregoing, the Company may not Incur any
Indebtedness if such Indebtedness is subordinate or junior in ranking in any
respect to any Senior Indebtedness of the Company unless such Indebtedness is
Senior Subordinated Indebtedness or is expressly subordinated in right of
payment to Senior Subordinated Indebtedness of the Company. In addition, the
Company may not Incur any Secured Indebtedness which is not Senior Indebtedness
of the Company unless contemporaneously therewith effective provision is made to
secure the Exchange Notes equally and ratably with (or on a senior basis to, in
the case of Indebtedness subordinated in right of payment to the Exchange Notes)
such Secured Indebtedness for so long as such Secured Indebtedness is secured by
a Lien. A Guarantor Subsidiary may not Incur any Indebtedness if such
Indebtedness is subordinate or junior in ranking in any respect to any Senior
Indebtedness of the Guarantor Subsidiary unless such Indebtedness is Senior
Subordinated Indebtedness of such Guarantor Subsidiary or is expressly
subordinated in right of payment to Senior Subordinated Indebtedness of such
Guarantor Subsidiary. In addition, a Guarantor Subsidiary may not incur any
Secured Indebtedness which is not Senior Indebtedness of such Guarantor
Subsidiary unless contemporaneously therewith effective provision is made to
secure the Subsidiary Guaranty equally and ratably with (or on a senior basis
to, in the case of Indebtedness subordinated in right of payment to such
Subsidiary Guaranty) such Secured Indebtedness for so long as such Secured
Indebtedness is secured by a Lien.
Limitation on Restricted Payments. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to:
(i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except dividends or
distributions payable solely in its Capital Stock (other than Disqualified
Stock) and except dividends or distributions payable to the Company or
another Restricted Subsidiary (and, if such Restricted Subsidiary has
shareholders other than the Company or other Restricted Subsidiaries, to
its other shareholders on a pro rata basis or on a basis that results in
the receipt by the Company or a Restricted Subsidiary of dividends or
distributions of equal or greater value);
(ii) purchase, redeem, retire or otherwise acquire for value any
Capital Stock of the Company or any Restricted Subsidiary held by Persons
other than the Company or another Restricted Subsidiary;
(iii) purchase, repurchase, redeem, defease or otherwise acquire or
retire for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment any Subordinated Obligations (other than the
purchase, repurchase or other acquisition of Subordinated Obligations
purchased in anticipation of satisfying a sinking fund obligation,
principal installment or final maturity, in each case due within one year
of the date of acquisition); or
(iv) make any Investment (other than a Permitted Investment) in any
Person (any such dividend, distribution, purchase, redemption, repurchase,
defeasance, other acquisition, retirement, Investment or payment being
herein referred to as a "Restricted Payment") if at the time
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the Company or such Restricted Subsidiary makes such Restricted Payment:
(1) a Default will have occurred and be continuing (or would result
therefrom); (2) the Company could not Incur at least $1.00 of additional
Indebtedness under paragraph (a) of the covenant described under
"-- Limitation on Indebtedness"; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith by the
Board of Directors, whose determination will be conclusive and evidenced by
a resolution of the Board of Directors) declared or made subsequent to the
Original Issue Date would exceed the sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the Original Issue Date to the
end of the most recent fiscal quarter ending at least 45 days prior to
the date of such Restricted Payment (or, in case such Consolidated Net
Income will be a deficit, minus 100% of such deficit);
(B) 100% of the aggregate net proceeds received by the Company
(including the fair market value (as determined in good faith by the
Board of Directors, whose determination will be conclusive and evidenced
by a resolution of the Board of Directors) of property received by the
Company; provided, however, that such property is related, ancillary or
complementary to any business of the Company and the Restricted
Subsidiaries conducted on the Original Issue Date) as a capital
contribution or from the issue or sale of Capital Stock (other than
Disqualified Stock) of the Company or Holdings subsequent to the
Original Issue Date (other than an issuance or sale to a Subsidiary of
the Company or an employee stock ownership plan or other trust
established by the Company or any of its Subsidiaries to the extent the
purchase by such plan or trust is financed by Indebtedness of such plan
or trust and for which the Company or a Subsidiary is liable, directly
or indirectly, as a guarantor or otherwise (including by the making of
cash contributions to such plan or trust which are used to pay interest
or principal on such Indebtedness));
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary) of any
Indebtedness of the Company or its Restricted Subsidiaries issued
subsequent to the Original Issue Date and convertible or exchangeable
for Capital Stock (other than Disqualified Stock) of the Company (less
the amount of any cash or other property (other than such Capital Stock)
distributed by the Company or any Restricted Subsidiary upon such
conversion or exchange) (including any such exchange pursuant to the
exercise of a conversion right or privilege in connection with which
cash is paid in lieu of the issuance of fractional shares or scrip);
(D) the aggregate Net Cash Proceeds received subsequent to the
Original Issue Date by the Company or Holdings (other than from any
Restricted Subsidiary) upon the exercise of any options or warrants to
purchase Capital Stock (other than Disqualified Stock) of the Company or
Holdings; and
(E) the amount equal to the net reduction in Investments in
Unrestricted Subsidiaries resulting from (i) payments of dividends,
repayments of the principal of loans, return of capital or advances or
other transfers of assets to the Company or any Restricted Subsidiary
from Unrestricted Subsidiaries or (ii) the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investment") or the receipt of proceeds from the
sale or other disposition of any portion of any Investment in an
Unrestricted Subsidiary not to exceed, in the case of any Unrestricted
Subsidiary, the amount of Investments previously made by the Company or
any Restricted Subsidiary in such Unrestricted Subsidiary, which amount
was included in the calculation of the amount of Restricted Payments.
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(b) The provisions of the foregoing paragraph (a) will not prohibit:
(i) any purchase, redemption, retirement or other acquisition of
Capital Stock or Subordinated Obligations of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries
to the extent the purchase by such plan or trust is financed by
Indebtedness of such plan or trust and for which the Company or a
Subsidiary is liable, directly or indirectly, as a guarantor or otherwise
(including by the making of cash contributions to such plan or trust which
are used to pay interest or principal on such Indebtedness)); provided,
however, that (A) such purchase, redemption, retirement or other
acquisition will be excluded in the calculation of the amount of Restricted
Payments and (B) the Net Cash Proceeds from such sale to the extent so used
will be excluded from clause (iv)(B) of paragraph (a) above;
(ii) any purchase, defeasance, retirement, redemption or other
acquisition of (A) Subordinated Obligations of the Company made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company which is permitted to be Incurred pursuant to
paragraph (b) of the covenant described under "-- Limitation on
Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary
made by exchange for, or out of the proceeds of the substantially
concurrent sale of, Indebtedness of any Restricted Subsidiary or the
Company which is permitted to be Incurred pursuant to paragraph (b) of the
covenant described under "-- Limitation of Indebtedness"; provided,
however, that such purchase, defeasance, retirement, redemption or other
acquisition will be excluded in the calculation of the amount of Restricted
Payments;
(iii) any purchase, redemption, retirement or other acquisition of
Disqualified Stock made by exchange for, or out of the proceeds of the
substantially concurrent sale of, Disqualified Stock; provided, however,
that such purchase, redemption, retirement or other acquisition will be
excluded in the calculation of the amount of Restricted Payments;
(iv) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however,
that such purchase or redemption will be excluded in the calculation of the
amount of Restricted Payments;
(v) upon the occurrence of a Change of Control and within 60 days
after the completion of the offer to repurchase the Exchange Notes pursuant
to the covenant described under "-- Change of Control" above (including the
purchase of all Notes tendered), any purchase, defeasance, retirement,
redemption or other acquisition of Subordinated Obligations required
pursuant to the terms thereof as a result of such Change of Control;
provided, however, that such purchase, defeasance, retirement, redemption
or other acquisition will be included in the calculation of the amount of
Restricted Payments;
(vi) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with this covenant; provided, however, that such dividend will be included
in the calculation of the amount of Restricted Payments;
(vii) the repurchase, for cash or notes, of shares of, or options or
warrants to purchase shares of, or payments to Holdings to enable Holdings
to repurchase shares of, or options or warrants to purchase shares of,
Capital Stock of Holdings, the Company or any of the Subsidiaries of the
Company from present or former Management Investors in an amount not in
excess of $2.0 million in any one year and $5.0 million in the aggregate
since the Original Issue Date; provided, however, that the amount of such
repurchase will be included in the calculation of the amount of Restricted
Payments;
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(viii) payments in lieu of fractional shares in amount not in excess
of $250,000 in the aggregate since the Original Issue Date;
(ix) payments by the Company to Holdings to pay Federal, state and
local taxes to the extent such taxes are attributable to the Company and
its Restricted Subsidiaries; provided, however, that such payments will be
excluded from the calculation of the amount of Restricted Payments;
(x) loans, advances, dividends or distributions by the Company to
Holdings to pay dividends on the common stock of Holdings following a
Public Equity Offering of such stock; but only to the extent that such
loans, advances, dividends or distributions do not exceed 6% per annum of
the net proceeds received by the Company in such Public Equity Offering;
provided, however, that the amount of such loans, advances, dividends or
distributions will be included in the amount of Restricted Payments; or
(xi) in each case to the extent such payments by Holdings are
attributable to the Company and its Restricted Subsidiaries, payments by
the Company to Holdings not to exceed an amount necessary to permit
Holdings to (A) make payments in respect to its indemnification obligations
owing to directors, officers or other Persons under Holding's charter or
by-laws or pursuant to written agreements with any such Person, (B) make
payments in respect of its other operational expenses (other than taxes)
incurred in the ordinary course of business, or (C) make payments in
respect of indemnification obligations and costs and expenses incurred by
Holdings in connection with any offering of common stock of Holdings;
provided, however, that all such payments will be included in the
calculation of the amount of Restricted Payments.
Limitation on Restrictions on Distributions from Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness owed to the Company, (ii) make any loans or
advances to the Company or (iii) transfer any of its property or assets to the
Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the Original Issue Date;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness entered
into prior to the date on which such Restricted Subsidiary was acquired or
designated as a Restricted Subsidiary by the Company (other than as
consideration in, in contemplation of, or to provide all or any portion of
the funds or credit support utilized to consummate, the transaction or
series of related transactions pursuant to which such Restricted Subsidiary
became a Restricted Subsidiary or was otherwise acquired by the Company);
(3) any encumbrance or restriction pursuant to (x) an agreement
constituting Refinancing Indebtedness of Indebtedness Incurred pursuant to
an agreement referred to in clause (1) or (2) of this covenant or this
clause (3) or contained in any amendment to an agreement referred to in
clause (1) or (2) of this covenant or this clause (3) or (y) Indebtedness
Incurred pursuant to clause (i) of paragraph (b) of the covenant described
above under "-- Limitation on Indebtedness;" provided, however, that the
encumbrances and restrictions contained in (A) any such refinancing
agreement or amendment referred to in clause (x) above are, collectively,
no more restrictive in any material respect than the encumbrances and
restrictions contained in such agreements (as determined in good faith by
the Company) and (B) any instrument relating to any Indebtedness referred
to in clause (y) above, are, collectively, no more restrictive in any
material respect than the encumbrances and restrictions contained in the
Senior Bank Facilities as in effect on the Original Issue Date (as
determined in good faith by the Company);
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(4) in the case of clause (iii) above, any encumbrance or restriction
contained in security agreements or mortgages securing Indebtedness of a
Restricted Subsidiary which are not prohibited by the covenant described
under "-- Limitation on Liens" to the extent such encumbrances or
restrictions restrict the transfer of the property or assets subject to
such security agreements or mortgages;
(5) any encumbrance or restriction existing under or by reason of
applicable law;
(6) customary non-assignment provisions of any licensing agreement or
of any lease;
(7) any encumbrance or restriction contained in contracts for sales of
assets otherwise permitted by the Indenture;
(8) with respect to a Restricted Subsidiary, any encumbrance or
restriction imposed pursuant to an agreement that has been entered into for
the sale of all or substantially all of the Capital Stock of such
Restricted Subsidiary; and
(9) Purchase Money Obligations for property acquired in the ordinary
course of business that impose restrictions of the type referred to in
clause (iii) of this covenant.
Limitation on Sales of Assets and Subsidiary Stock. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless:
(i) the Company or such Restricted Subsidiary receives consideration
(including by way of relief from, or by any other Person assuming sole
responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to the fair market value, as may
be determined (and shall be determined, to the extent an Asset Disposition
(or a series of related Asset Dispositions) involves a fair market value
greater than $1.0 million) in good faith by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the Board
of Directors (including as to the value of all non-cash consideration), of
the shares and assets subject to such Asset Disposition;
(ii) in the case of an Asset Disposition (or a series of related Asset
Dispositions) having a fair market value of $1.0 million or more, at least
80% (or 100% in the case of lease payments) of the consideration thereof
received by the Company or such Restricted Subsidiary is in the form of
cash or cash equivalents; and
(iii) an amount equal to 100% of the Net Available Cash from such
Asset Disposition is applied by the Company (or such Restricted Subsidiary,
as the case may be) (A) first, to the extent the Company or such Restricted
Subsidiary elects (or is required by the terms of any Senior Indebtedness),
to prepay, repay or purchase Senior Indebtedness of the Company or a Wholly
Owned Subsidiary or, in the case of a sale by a Restricted Subsidiary which
is not a Wholly Owned Subsidiary, to prepay, repay or purchase Senior
Indebtedness of such Restricted Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 365
days after the later of the date of such Asset Disposition or the receipt
of such Net Available Cash; (B) second, to the extent of the balance of Net
Available Cash after application in accordance with clause (A), to the
extent the Company or such Restricted Subsidiary elects, to reinvest (or
enter into a binding contract to do so) in Additional Assets (including by
means of an Investment in Additional Assets by a Restricted Subsidiary with
Net Available Cash received by the Company or another Restricted
Subsidiary), within 365 days from the later of such Asset Disposition or
the receipt of such Net Available Cash; (C) third, to the extent of the
balance of Net Available Cash after application in accordance with clauses
(A) and (B), to offer to purchase Original Notes to the extent required by
the Original Indenture; (D) fourth, to the extent of the balance of Net
Available Cash after application in accordance with clauses (A), (B) and
(C), to offer to purchase the Add-on Notes to the extent required by the
Add-on Indenture and the Second Add-on Indenture; (E) fifth, to the extent
of the balance of such Net Available Cash after application in accordance
with clauses (A), (B), (C) and (D),
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to make an Offer (as defined below) to purchase Exchange Notes pursuant to
and subject to the conditions set forth in section (b) of this covenant and
(F) sixth, to the extent of the balance of such Net Available Cash after
application in accordance with clauses (A), (B), (C), (D) and (E), to fund
(to the extent consistent with any other applicable provision of the
Indenture) any corporate purpose; provided, however, that in connection
with any prepayment, repayment or purchase of Indebtedness pursuant to
clause (A) above, the Company or such Restricted Subsidiary will retire
such Indebtedness and will cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount so prepaid,
repaid or purchased. Notwithstanding the foregoing provisions of this
covenant, the Company and its Restricted Subsidiaries will not be required
to apply any Net Available Cash in accordance with this covenant except to
the extent that the aggregate Net Available Cash from all Asset
Dispositions in any year which are not applied in accordance with this
covenant exceed $5.0 million in such year.
For the purposes of clause (ii) of this covenant, the following are deemed
to be cash: (w) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition, (x) securities received
by the Company or any Restricted Subsidiary from the transferee that are
promptly converted by the Company or such Restricted Subsidiary into cash, (y)
Indebtedness of any Restricted Subsidiary that is no longer a Restricted
Subsidiary as a result of such Asset Disposition, to the extent that the Company
and each other Restricted Subsidiary is released from any Guarantee of such
Indebtedness in connection with such Asset Disposition, and (z) consideration
consisting of Indebtedness of the Company or any Restricted Subsidiary.
(b) In the event of an Asset Disposition that requires the purchase of
Exchange Notes pursuant to clause (a)(iii)(E) of this covenant, the Company will
be required to purchase Exchange Notes tendered pursuant to an offer, commenced
within 30 days following the expiration of the 365 day period referred to in
clause (a)(iii)(B) of this covenant (or, if the Company so elects, at any time
within such 365 day period), by the Company for the Exchange Notes, (the
"Offer") at a purchase price of 100% of their principal amount plus accrued and
unpaid interest, if any, to the date of purchase in accordance with the
procedures (including prorationing in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of Exchange Notes tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Exchange Notes, the Company will apply the remaining Net
Available Cash in accordance with clause (a)(iii)(F) of this covenant and upon
completion of the purchase of the Notes tendered pursuant to the Offer, the
remaining amount of Net Available Cash, if any, will be reset at zero. The
Company will not be required to make an Offer for Exchange Notes pursuant to
this covenant if the Net Available Cash available therefor (after application of
the proceeds as provided in clauses (A) and (B) of section (a)(iii) of this
covenant) is less than $5.0 million (which lesser amount will be carried forward
for purposes of determining whether an Offer is required with respect to the Net
Available Cash from any subsequent Asset Disposition).
(c) The Company will comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
Limitation on Transactions with Affiliates. (a) The Company will not, and
will not permit any Restricted Subsidiary to, directly or indirectly, enter into
or conduct any transaction (including the purchase, sale, lease or exchange of
any property or the rendering of any service) with any Affiliate of the Company
(an "Affiliate Transaction") on terms (i) that are less favorable to the Company
or such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of
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such transaction in arm's-length dealings with a Person who is not such an
Affiliate and (ii) that, in the event such Affiliate Transaction involves an
aggregate amount in excess of $1.0 million, are not in writing and have not been
approved by a majority of the members of the Board of Directors having no
material direct or indirect financial interest in or with respect to such
Affiliate Transaction. In addition, if such Affiliate Transaction involves an
amount in excess of $5.0 million, a fairness opinion must be obtained from a
nationally recognized appraisal or investment banking firm.
(b) The provisions of the foregoing paragraph (a) will not prohibit (i) any
Restricted Payment or Permitted Investment permitted to be made pursuant to the
covenant described under "-- Limitation on Restricted Payments," (ii) fees,
compensation or employee benefit arrangements paid to, and any indemnity
provided for the benefit of, directors, officers or employees of the Company,
Holdings or any Subsidiary of the Company in the ordinary course of business or
any Indebtedness permitted to be Incurred pursuant to clause (xii) of paragraph
(b) of the covenant described under "-- Limitation on Indebtedness," or any
payments in respect thereof, (iii) any issuance of securities, or other
payments, awards or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock ownership plans
approved by the Board of Directors, (iv) transactions pursuant to agreements
entered into or in effect on the Original Issue Date, including amendments
thereto entered into after the Original Issue Date, provided that the terms of
any such amendment are not, in the aggregate, less favorable to the Company or
such Restricted Subsidiary than the terms of such agreement prior to such
amendment, (v) loans or advances to employees that are Affiliates of the Company
in the ordinary course of business, but in any event not to exceed $2.0 million
in the aggregate outstanding at any one time, (vi) any transaction between the
Company and a Restricted Subsidiary or between Restricted Subsidiaries (so long
as the other stockholders of any participating Restricted Subsidiaries which are
not Wholly Owned Subsidiaries are not themselves Affiliates of the Company) or
(vii) payments with respect to Indebtedness Incurred pursuant to clause (viii)
of paragraph (b) of the covenant described under "-- Limitation on
Indebtedness."
Limitation on the Sale or Issuance of Capital Stock of Restricted
Subsidiaries. The Company will not sell any shares of Capital Stock of a
Restricted Subsidiary, and will not permit any Restricted Subsidiary, directly
or indirectly, to issue or sell any shares of its Capital Stock, except (i) to
the Company or a Wholly Owned Subsidiary, (ii) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary, (iii) directors' qualifying shares or (iv)
in a Public Equity Offering as a result of or after which a Public Market
exists. The proceeds of any sale of such Capital Stock permitted by clause (ii)
must be treated as Net Available Cash from an Asset Disposition and must be
applied in accordance with the terms of the covenant described under
"-- Limitation on Sales of Assets and Subsidiary Stock."
Limitation on Liens. (a) The Company will not, and will not permit any
Guarantor Subsidiary to, directly or indirectly, create or permit to exist any
Lien (the "Initial Lien") on any of its property or assets (including Capital
Stock), whether owned on the Original Issue Date or thereafter acquired,
securing any Indebtedness other than Senior Indebtedness of the Company, in the
case of the Company, or Senior Indebtedness of a Guarantor Subsidiary, in the
case of a Guarantor Subsidiary, unless contemporaneously therewith effective
provision is made to secure the Notes and, in respect of Liens on any Guarantor
Subsidiary's property or assets, the Subsidiary Guaranty of such Guarantor
Subsidiary equally and ratably with (or on a senior basis to, in the case of
Indebtedness expressly subordinated in right of payment to the Exchange Notes
and such Subsidiary Guaranty) such obligation for so long as such obligation is
so secured. The preceding sentence will not require the Company or any
Restricted Subsidiary to equally and ratably secure the Notes if the Initial
Lien consists of Permitted Liens.
(b) Any Lien created for the benefit of the Holders of the Exchange Notes
pursuant to the foregoing paragraph (a) shall provide by its terms that such
Lien shall be automatically and unconditionally released and discharged upon the
release and discharge of the Initial Lien.
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SEC Reports. Notwithstanding that the Company may not be required to be or
remain subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the Commission, and provide the Trustee
and Noteholders and prospective Exchange Noteholders (upon request) with, the
annual reports and the information, documents and other reports which are
specified in Sections 13 and 15(d) of the Exchange Act. The Company also will
comply with the other provisions of TIA Sec. 314(a).
Future Guarantor Subsidiaries. The Company will cause (a) each Restricted
Subsidiary that is a Domestic Subsidiary which Incurs Indebtedness and (b) each
Restricted Subsidiary that is not a Domestic Subsidiary and that after the Issue
Date enters into a Guarantee of any of the obligations of the Company, Holdings
or any of the Company's Subsidiaries pursuant to the Senior Bank Facilities to
execute and deliver to the Trustee a supplemental indenture pursuant to which
such Subsidiary will Guarantee payment of the Exchange Notes; provided, however,
that such Subsidiary shall not be required to execute and deliver a supplemental
indenture pursuant to this section in the event that such Subsidiary is a party
to the Indenture or the Supplemental Indenture at the time of such Incurrence of
Indebtedness. Each Subsidiary Guaranty will be limited to an amount not to
exceed the maximum amount that can be Guaranteed by that Subsidiary without
rendering the Subsidiary Guaranty, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Limitation on Lines of Business. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business other than (i) a Related
Business and (ii) the making of Permitted Investments and the operations of any
business that is part of a Permitted Investment. Holdings will not engage in any
business other than managing its investment in the Company.
Limitation on Sale/Leaseback Transactions. The Company will not, and will
not permit any Restricted Subsidiary to, enter into any Sale/Leaseback
Transaction with respect to any property unless (i) the Company or such
Restricted Subsidiary would be entitled to Incur Indebtedness in an amount equal
to the Attributable Debt with respect to such Sale/Leaseback Transaction
pursuant to the covenant described under "-- Limitation on Indebtedness" and
(ii) the net cash proceeds received by the Company or any Restricted Subsidiary
in connection with such Sale/Leaseback Transaction are at least equal to the
fair market value (in the case of Sale/Leaseback Transactions involving amounts
in excess of $1.0 million, as determined by the Board of Directors, whose
determination will be conclusive and evidenced by a resolution of the Board of
Directors) of such property and (iii) the transfer of such property is permitted
by, and the Company applies the proceeds of such transaction in compliance with,
the covenant described under "-- Limitation on Sale of Assets and Subsidiary
Stock."
MERGER AND CONSOLIDATION
The Company will not consolidate with or merge with or into, or convey,
transfer or lease all or substantially all its assets to, any Person, unless:
(i) the resulting, surviving or transferee Person (the "Successor Company") will
be a corporation, limited liability company, limited partnership or business
trust organized and existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor Company (if not the
Company) will expressly assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the Exchange Notes and the Indenture; (ii)
immediately after giving effect to such transaction (and treating any
Indebtedness which becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) except in
the case of a merger the sole purpose of which is to change the Company's
jurisdiction of incorporation, immediately after giving effect to such
transaction, the Successor Company would be able to Incur
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an additional $1.00 of Indebtedness under paragraph (a) of the covenant
described under "-- Limitation on Indebtedness"; (iv) immediately after giving
effect to such transaction, the Successor Company will have Consolidated Net
Worth in an amount which is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction and (v) the Company will have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), any Restricted
Subsidiary may consolidate with, merge into or transfer all or part of its
properties and assets to the Company.
The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a conveyance, transfer or lease of all or
substantially all its assets will not be released from the obligation to pay the
principal of and interest on the Exchange Notes.
DEFAULTS
An Event of Default is defined in the Indenture as:
(i) a default in any payment of interest on any Exchange Note when due
(whether or not such payment is prohibited by the provisions described
under "Ranking" above), continued for 30 days;
(ii) a default in the payment of principal of any Exchange Note when
due at its Stated Maturity, upon optional redemption, upon required
repurchase, upon declaration or otherwise (whether or not such payment is
prohibited by the provisions described under "Ranking" above);
(iii) the failure by the Company to comply with its obligations under
the covenant described under "Merger and Consolidation" above;
(iv) the failure by the Company to comply for 30 days after notice
with any of its obligations under the covenants described under "Change of
Control" or "Certain Covenants" above (in each case, other than a failure
to purchase Exchange Notes);
(v) the failure by the Company or any Guarantor Subsidiary to comply
for 60 days after notice with its other agreements contained in the
Exchange Notes or the Indenture;
(vi) the failure by the Company or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
the acceleration of any such Indebtedness by the holders thereof because of
a default, if the total amount of such Indebtedness unpaid or accelerated
exceeds $5.0 million or its foreign currency equivalent (the "cross
acceleration provision");
(vii) certain events of bankruptcy, insolvency or reorganization of
the Company or a Restricted Subsidiary (the "bankruptcy provisions");
(viii) the rendering of any judgment or decree in excess of $5.0
million or its foreign currency equivalent (net of amounts paid within 30
days of any such judgment or decree under any insurance, indemnity, bond,
surety or similar instrument) against the Company or a Restricted
Subsidiary by a court or other adjudicatory authority of competent
jurisdiction for which the Company or the Restricted Subsidiary, as
applicable, is not fully insured by a third Person and (A) an enforcement
proceeding is commenced with respect to such judgment or decree or (B) such
judgment or decree remains outstanding the later of (i) the day which is
the sixtieth day after the judgment is rendered and (ii) the day on which
any right to appeal expires (the "judgment default provision"); or
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(ix) any Subsidiary Guaranty ceases to be in full force and effect
(except as contemplated by the terms thereof) or any Guarantor Subsidiary
denies or disaffirms its obligations under the Indenture or any Subsidiary
Guaranty and such Default continues for 10 days.
The foregoing will constitute Events of Default whatever the reason for any
such Event of Default and whether it is voluntary or involuntary or is effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
However, a default under clauses (iv) or (v) will not constitute an Event
of Default until the Trustee or the Holders of 25% in principal amount of the
outstanding Notes notify the Company of the default and the Company does not
cure such default within the time specified in clauses (iv) and (v) hereof after
receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Exchange Notes by notice
to the Company may declare the principal of and accrued but unpaid interest on
all the Exchange Notes to be due and payable. Upon such a declaration, such
principal and interest will be due and payable immediately. If an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of and interest on all
the Exchange Notes will become immediately due and payable without any
declaration or other act on the part of the Trustee or any Holders. Under
certain circumstances, the Holders of a majority in principal amount of the
outstanding Exchange Notes may rescind any such acceleration with respect to the
Exchange Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to enforce the right to receive payment of
principal, premium (if any) or interest when due, no Holder may pursue any
remedy with respect to the Indenture or the Exchange Notes unless (i) such
Holder has previously given the Trustee notice that an Event of Default is
continuing, (ii) Holders of at least 25% in principal amount of the outstanding
Exchange Notes have requested the Trustee to pursue the remedy, (iii) such
Holders have offered the Trustee reasonable security or indemnity against any
loss, liability or expense, (iv) the Trustee has not complied with such request
within 60 days after the receipt of the request and the offer of security or
indemnity and (v) the Holders of a majority in principal amount of the
outstanding Exchange Notes have not given the Trustee a direction inconsistent
with such request within such 60-day period. Subject to certain restrictions,
the Holders of a majority in principal amount of the outstanding Exchange Notes
are given the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or of exercising any trust or
power conferred on the Trustee. The Trustee, however, may refuse to follow any
direction that conflicts with law or the Indenture or that the Trustee
determines is unduly prejudicial to the rights of any other Holder or that would
involve the Trustee in personal liability. Prior to taking any action under the
Indenture, the Trustee will be entitled to indemnification satisfactory to it in
its sole discretion against all losses and expenses caused by taking or not
taking such action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
within the earlier of 90 days after it occurs or 30 days after it is known to a
Trust Officer or written notice of it is received by the Trustee. Except in the
case of a Default in the payment of principal of, premium (if any) or interest
on any Note, the Trustee may withhold notice if and so long as a committee of
its Trust Officers in good faith determines that withholding notice is in the
interests of the Noteholders. In addition, the Company is required to deliver to
the Trustee, within 120 days after the end of each fiscal year, a certificate
indicating whether the signers thereof know of any Default that occurred during
the previous year.
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The Company also is required to deliver to the Trustee, within 30 days after the
occurrence thereof, written notice of any event which would constitute certain
Defaults, their status and what action the Company is taking or proposes to take
in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the
consent of the Holders of a majority in principal amount of the Exchange Notes
then outstanding and any past default and its consequences or compliance with
any provisions may be waived with the consent of the Holders of a majority in
principal amount of the Exchange Notes then outstanding. However, without the
consent of each Holder of an outstanding Exchange Note affected, no amendment
may (i) reduce the amount of Exchange Notes whose Holders must consent to an
amendment or waiver, (ii) reduce the rate of or extend the time for payment of
interest on any Exchange Note, (iii) reduce the principal of or extend the
Stated Maturity of any Exchange Note, (iv) reduce the premium payable upon the
redemption of any Exchange Note or change the time at which any Exchange Note
may be redeemed as described under "Optional Redemption" above, (v) make any
Exchange Note payable in money other than that stated in the Exchange Note, (vi)
impair the right of any Holder to receive payment of principal of and interest
on such Holder's Exchange Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Exchange Notes, (vii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions or (viii) make any
change in any Subsidiary Guaranty that would adversely affect the Exchange
Noteholders.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
under the Indenture, to provide for uncertificated Exchange Notes in addition to
or in place of certificated Exchange Notes (provided that the uncertificated
Exchange Notes are issued in registered form for purposes of Section 163(f) of
the Code, or in a manner such that the uncertificated Exchange Notes are
described in Section 163(f)(2)(B) of the Code), to add further Guaranties with
respect to the Exchange Notes, to release Guarantor Subsidiaries when permitted
by the Indenture, to secure the Exchange Notes, to add to the covenants of the
Company for the benefit of the Exchange Noteholders or to surrender any right or
power conferred upon the Company, to make any change that does not adversely
affect the rights of any Holder or to comply with any requirement of the
Commission in connection with the qualification of the Indenture under the TIA.
The consent of the Exchange Noteholders is not necessary under the
Indenture to approve the particular form of any proposed amendment. It is
sufficient if such consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Exchange Noteholders a notice briefly describing such
amendment. However, the failure to give such notice to all Exchange Noteholders,
or any defect therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
An Exchange Noteholder may transfer or exchange Exchange Notes in
accordance with the Indenture. Upon any transfer or exchange, the registrar and
the Trustee may require an Exchange Noteholder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may require an
Exchange Noteholder to pay any taxes required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Exchange Note
selected for redemption or to transfer or exchange any Exchange Note for a
period of 15 days prior to a selection of Exchange Notes to be redeemed. The
Exchange Notes will be issued in registered form
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and the registered holder of an Exchange Note will be treated as the owner of
such an Exchange Note for all purposes.
DEFEASANCE
The Company at any time may terminate all its obligations under the
Exchange Notes and the Indenture ("legal defeasance"), except for certain
obligations, including those respecting the defeasance trust and obligations to
register the transfer or exchange of the Exchange Notes, to replace mutilated,
destroyed, lost or stolen Exchange Notes and to maintain a registrar and paying
agent in respect of the Exchange Notes. The Company at any time may terminate
its obligations under the covenants described under "Certain Covenants," the
operation of the cross acceleration provision, the bankruptcy default provisions
with respect to Subsidiaries and the judgment default provision described under
"Defaults" above and the limitations contained in clauses (iii) and (iv) under
"Merger and Consolidation" above ("covenant defeasance"). If the Company
exercises its legal defeasance option or its covenant defeasance option, each
Guarantor Subsidiary will be released from all of its obligations with respect
to its Subsidiary Guaranty.
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Exchange Notes may not be accelerated
because of an Event of Default with respect thereto. If the Company exercises
its covenant defeasance option, payment of the Exchange Notes may not be
accelerated because of an Event of Default specified in clause (iv), (vi), (vii)
(with respect to Restricted Subsidiaries only), (viii) (with respect to
Significant Subsidiaries only), (ix) or (x) under "Defaults" above or because of
the failure of the Company to comply with clause (iii) or (iv) under "Merger and
Consolidation" above.
Defeasance options with respect to the Exchange Notes may be exercised to
any redemption date or the applicable maturity date. In order to exercise either
defeasance option, the Company must irrevocably deposit in trust (the
"defeasance trust") with the Trustee money or U.S. Government Obligations for
the payment of principal, premium (if any) and interest on the Notes to
redemption or maturity, as the case may be, and must comply with certain other
conditions, including delivery to the Trustee of an Opinion of Counsel to the
effect that holders of the Exchange Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such deposit and defeasance
and will be subject to Federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred (and, in the case of legal defeasance only, such
Opinion of Counsel must be based on a ruling of the Internal Revenue Service or
other change in applicable Federal income tax law).
The Company will not be permitted to exercise either defeasance option
described above with respect to the Exchange Notes unless it defeases Existing
Notes equivalently and substantially simultaneously. Similarly, the Company will
not be permitted to defease Old Notes unless it defeases the Notes equivalently
and substantially simultaneously.
CONCERNING THE TRUSTEE
United States Trust Company of New York is to be the Trustee under the
Indenture and has been appointed by the Company as Registrar and Paying Agent
with regard to the Exchange Notes.
GOVERNING LAW
The Indenture provides that it and the Exchange Notes will be governed by,
and construed in accordance with, the laws of the State of New York without
giving effect to applicable principles of conflicts of law to the extent that
the application of the law of another jurisdiction would be required thereby.
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CERTAIN DEFINITIONS
"ACP Holdings" means ACP Holding Company, a Delaware corporation.
"ACP Products, L.L.C." means ACP Products, L.L.C., a Delaware limited
liability company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock), including improvements to existing assets, to
be used by the Company or a Restricted Subsidiary in a Related Business; (ii)
the Capital Stock of a Person that becomes a Restricted Subsidiary as a result
of the acquisition of such Capital Stock by the Company or another Restricted
Subsidiary; or (iii) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary; provided, however, that, in
the case of clauses (ii) and (iii), such Restricted Subsidiary is primarily
engaged in a Related Business.
"Add-on Indenture" means the indenture dated July 1, 1997 among Neenah
Corporation, the subsidiaries of the Company party thereto, and the Trustee, as
amended.
"Add-on Notes" means the Company's 11 1/8% Series C Senior Subordinated
Notes due 2007 issued under the Add-on Indenture and any of the Company's
11 1/8% Series D Senior Subordinated Notes due 2007 exchanged therefor and the
Company's 11 1/8% Series E Senior Subordinated Notes due 2007 issued under the
Second Add-on Indenture.
"Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing. For
purposes of the provisions described under "-- Certain Covenants -- Limitation
on Transactions with Affiliates" only, "Affiliate" shall also mean any
beneficial owner of shares representing 5% or more of the total voting power of
the Voting Stock (on a fully diluted basis) of the Company or of rights or
warrants to purchase such Voting Stock (whether or not currently exercisable)
and any Person who would be an Affiliate of any such beneficial owner pursuant
to the first sentence hereof.
"Applicable Premium" means, with respect to an Exchange Note, the greater
of (i) 1.0% of the then outstanding principal amount of such Exchange Note and
(ii) the excess of (A) the present value of all remaining required interest and
principal payments due on such Exchange Note, computed using a discount rate
equal to the Treasury Rate plus 75 basis points, over (B) the then outstanding
principal amount of such Exchange Note.
"Asset Disposition" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or assets (each referred to for the purposes of
this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary; (ii) a disposition of inventory, in the ordinary course of business
consistent with past practices of the Company and its Subsidiaries; (iii)
dispositions with a fair market value of less than $500,000 in the aggregate in
any fiscal year; (iv) a disposition of properties and assets that is governed by
the provisions under the first paragraph of "-- Merger and Consolidation" above;
and (v) for purposes of the provisions described under "-- Certain
Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenant described under "-- Certain
Covenants -- Limitation on Restricted Payments."
"Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at
the time of determination, the present value (discounted at the interest rate
assumed in making calculations in
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accordance with FAS 13) of the total obligations of the lessee for rental
payments during the remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been extended).
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
scheduled redemption or similar payment with respect to such Preferred Stock
multiplied by the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect
of the Senior Bank Facilities or any refinancing or replacements thereof
including principal, premium (if any), interest (including interest accruing on
or after the filing of any petition in bankruptcy or for reorganization relating
to the Company whether or not a claim for post-filing interest is allowed in
such proceeding), fees, charges, expenses, reimbursement obligations, guarantees
and all other amounts payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Borrowing Base" means, as of the date of determination, an amount equal to
the sum, without duplication, of (i) 80% of the net book value of the Company's
accounts receivable at such date and (ii) 50% of the net book value of the
Company's inventories at such date. Net book value shall be determined in
accordance with GAAP and shall be that reflected on the most recent available
balance sheet (it being understood that the accounts receivable and inventories
of an acquired business may be included if such acquisition has been completed
on or prior to the date of determination).
"Business Day" means a day other than a Saturday, Sunday or other day on
which banking institutions in New York State are authorized or required by law
to close.
"Capital Stock" of any Person means any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligations" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP. The amount of Indebtedness represented by a
Capitalized Lease Obligation shall be the capitalized amount of such obligation
determined in accordance with GAAP, and the Stated Maturity thereof shall be the
date of the last scheduled payment of rent or any other amount due under the
relevant lease.
"Citicorp" means Citicorp, a Delaware corporation.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Agreement" means one or more of the following agreements entered
into by a Person and one or more financial institutions: commodity future
contracts, forward contracts, options or other similar arrangements or
agreements designed to protect against fluctuations in the price of, or the
shortage of supply of, commodities from time to time.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters
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ending at least 45 days prior to the date of such determination to (ii)
Consolidated Interest Expense for such four fiscal quarters; provided, however,
that:
(1) if the Company or any Restricted Subsidiary has Incurred any
Indebtedness since the beginning of such period that remains outstanding on such
date of determination or if the transaction giving rise to the need to calculate
the Consolidated Coverage Ratio is an Incurrence of Indebtedness, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
effect on a pro forma basis to such Indebtedness and the application of the
proceeds thereof as if such Indebtedness had been Incurred on the first day of
such period and the discharge of any other Indebtedness repaid, repurchased,
defeased or otherwise discharged with the proceeds of such new Indebtedness as
if such discharge had occurred on the first day of such period (except that in
the case of Indebtedness to finance seasonal fluctuations in working capital
needs Incurred under a revolving credit or similar arrangement, the amount
thereof shall be deemed to be the average daily balance of such Indebtedness
during such four quarter period);
(2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have disposed of any assets constituting all or substantially
all of the assets of an operating unit of a business (a "Disposal"), (x) the
EBITDA for such period shall be reduced by an amount equal to the EBITDA (if
positive) directly attributable to the assets which are the subject of such
Disposal for such period or increased by an amount equal to the EBITDA (if
negative) directly attributable thereto for such period and (y) Consolidated
Interest Expense for such period shall be reduced by an amount equal to the
Consolidated Interest Expense directly attributable to any Indebtedness of the
Company or any Restricted Subsidiary repaid, repurchased, defeased or otherwise
discharged with respect to the Company and its continuing Restricted
Subsidiaries in connection with such Disposal for such period (or, if the
Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest
Expense for such period directly attributable to the Indebtedness of such
Restricted Subsidiary to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after such sale);
(3) if since the beginning of such period the Company or any Restricted
Subsidiary (by merger or otherwise) shall have made an Investment in any
Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or
an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of the assets of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness in connection therewith) as if such Investment or acquisition
occurred on the first day of such period; and
(4) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Disposal or any Investment or acquisition of assets that would have required an
adjustment pursuant to clause (2) or (3) above if made by the Company or a
Restricted Subsidiary during such period, EBITDA and Consolidated Interest
Expense for such period shall be calculated after giving pro forma effect
thereto as if such Disposal, Investment or acquisition of assets occurred on the
first day of such period.
For purposes of this definition, whenever pro forma effect is to be given
to an acquisition of assets, the amount of income or earnings relating thereto
and the amount of Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma calculations shall be determined
in good faith by a responsible financial or accounting Officer of the Company.
If any Indebtedness bears a floating rate of interest and is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the date of determination had been the applicable rate
for the entire period (taking into account any Interest Rate Agreement
applicable to such Indebtedness if such Interest Rate Agreement has a remaining
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term as at the date of determination in excess of 12 months). If any
Indebtedness bears, at the option of the Company or a Restricted Subsidiary, a
fixed or floating rate of interest and is being given pro forma effect, then (i)
if any interest had accrued on such Indebtedness prior to the date of
determination, the interest expense on such Indebtedness shall be computed by
applying a fixed or floating rate of interest as selected by the Company or such
Restricted Subsidiary for the interest period immediately preceding such
determination or (ii) if no interest accrued on such Indebtedness prior to the
date of determination, the interest expense on such Indebtedness shall be
computed by applying, at the option of the Company or such Restricted
Subsidiary, either a fixed or floating rate. If any Indebtedness which is being
given pro forma effect was Incurred under a revolving credit facility that was
in effect throughout the applicable period, the interest expense on such
Indebtedness shall be computed based upon the average daily balance of such
Indebtedness during the applicable period.
"Consolidated Interest Expense" means, for any period, the total
consolidated interest expense of the Company and its Restricted Subsidiaries for
such period, plus, to the extent Incurred by the Company and its Restricted
Subsidiaries in such period but not included in such interest expense, (i)
interest expense attributable to Capitalized Lease Obligations and Attributable
Debt, (ii) amortization of debt discount, (iii) capitalized interest, (iv)
noncash interest expense, (v) commissions, discounts and other fees and charges
with respect to letters of credit and bankers' acceptance financing, (vi) net
costs associated with Interest Rate Agreements, (vii) the interest portion of
any deferred payment obligation for goods or services, (viii) interest actually
paid by the Company or any Restricted Subsidiary on any Indebtedness of any
other Person that is Guaranteed by the Company or any Restricted Subsidiary,
(ix) the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust to pay
interest or fees to any Person (other than the Company or a Wholly Owned
Subsidiary) in connection with Indebtedness Incurred by such plan or trust and
(x) the earned discount or yield with respect to the sale of receivables
(without duplication of amounts included in Consolidated Net Income); but in no
event shall include (i) amortization of debt issuance costs, (ii) Preferred
Stock dividends in respect of all Preferred Stock of Subsidiaries of the Company
and Disqualified Stock of the Company held by Persons other than the Company or
a Wholly Owned Subsidiary, or (iii) interest Incurred in connection with
Investments in discontinued operations.
"Consolidated Net Income" means, for any period, the consolidated net
income (loss) of the Company and its Subsidiaries for such period; provided,
however, that there shall not be included in such Consolidated Net Income: (i)
any net income (loss) of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in clause (iv)
below, the Company's equity in the net income of any such Person for such period
shall be included in such Consolidated Net Income up to the aggregate amount of
cash actually distributed by such Person during such period to the Company or a
Restricted Subsidiary as a dividend or other distribution (subject, in the case
of a dividend or other distribution to a Restricted Subsidiary, to the
limitations contained in clause (iii) below) and (B) the Company's equity in a
net loss of any such Person (other than an Unrestricted Subsidiary) for such
period shall be included in determining such Consolidated Net Income, (ii) for
purposes of subclause (a)(3)(A) of the covenant described under "Limitation on
Restricted Payments" only, any net income (loss) of any person acquired by the
Company or a Subsidiary in a pooling of interests transaction for any period
prior to the date of such acquisition, (iii) any net income (loss) of any
Restricted Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (iv) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case of
a dividend that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such
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period shall be included in determining such Consolidated Net Income, (iv) any
gain (or loss) realized upon the sale or other disposition of any asset of the
Company or its Consolidated Subsidiaries (including pursuant to any
Sale/Leaseback Transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (or loss) realized upon the sale or
other disposition of any Capital Stock of any Person, (v) any extraordinary gain
or loss, and (vi) the cumulative effect of a change in accounting principles
after the Issue Date. Notwithstanding the foregoing, for the purpose of the
covenant described under "Certain Covenants-Limitation on Restricted Payments"
only, there shall be excluded from Consolidated Net Income any dividends,
repayments of loans or advances or other transfers of assets from Unrestricted
Subsidiaries to the Company or a Restricted Subsidiary to the extent such
dividends, repayments or transfers increase the amount of Restricted Payments
permitted under such covenant pursuant to clause (a)(3)(D) thereof.
Notwithstanding anything to the contrary in the covenant described under
"Certain Covenants -- Limitations on Restricted Payments," all amounts paid to
Holdings pursuant to clause (b)(xi)(B) of such covenant shall be deducted in
computing Consolidated Net Income.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending at least 45 days prior to the taking of any action for the
purpose of which the determination is being made, as (i) the par or stated value
of all outstanding Capital Stock of the Company plus (ii) paid-in capital or
capital surplus relating to such Capital Stock plus (iii) any retained earnings
or earned surplus less (A) any accumulated deficit and (B) any amounts
attributable to Disqualified Stock.
"Consolidated Non-Cash Charges" of any Person means, for any period, the
aggregate depreciation, amortization and other non-cash charges of such Person
and its Consolidated Subsidiaries for such period, on a Consolidated basis, as
determined in accordance with GAAP (excluding any such other non-cash charge
which consists of an accrual or reserve for cash charges for any future period).
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" will not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in an Unrestricted Subsidiary will
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means with respect to any Person any foreign exchange
contract, currency swap agreement or other similar agreement or arrangement as
to which such Person is a party or a beneficiary.
"CVC" means Citicorp Venture Capital, Ltd., a New York corporation.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness of the Company which, at the date of
determination, has an aggregate principal amount outstanding of, or under which,
at the date of determination, the holders thereof are committed to lend at least
$25.0 million and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of the Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
which by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (i) matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to ninety-one days after the
Stated Maturity of the Exchange Notes.
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Disqualified Stock shall not include any Capital Stock that is not otherwise
Disqualified Stock if by its terms the holders have the right to require the
issuer to repurchase such stock upon a Change of Control (or upon events
substantially similar to a Change of Control).
"Domestic Subsidiary" means a Subsidiary that is incorporated or organized
under the laws of the United States of America, any State thereof or the
District of Columbia.
"EBITDA" for any period means the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) income tax expense, (ii) Consolidated Interest Expense and (iii)
Consolidated Non-Cash Charges, in each case for such period. Notwithstanding the
foregoing, the provision for taxes based on the income or profits of, and the
depreciation and amortization of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute EBITDA only to the extent (and in the same
proportion) that the net income (loss) of such Subsidiary was included in
calculating Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Notes" means the Original Notes and the Add-On Notes.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Issue Date, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants, in statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person through
an agreement enforceable by or for the benefit of the holder of such
Indebtedness and any such obligation, direct or indirect, contingent or
otherwise, of such Person (i) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or other obligation of such other
Person (whether arising to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for purposes of assuring in any other manner the obligee of such
Indebtedness or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part); provided,
however, that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Commodity Agreement, Interest Rate Agreement or Currency
Agreement.
"Holder" or "Exchange Noteholder" means the Person in whose name an
Exchange Note is registered on the Registrar's books.
"Holdings" means NFC Castings, Inc., a Delaware corporation, any Person
succeeding to its ownership, and successors thereto.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; provided, however, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Restricted Subsidiary (whether by
merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred
by such person at the time it becomes a Restricted Subsidiary; provided further,
however, that in the case of a discount security, the accretion of original
issue discount on such security shall not be considered an Incurrence of
Indebtedness if (but only if) at the time of issuance of such security, the
Company elects to treat the whole face amount of such security as Incurred at
such time (and such Incurrence is then permitted in accordance with the terms of
the Indenture).
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"Indebtedness" means, with respect to any Person on any date of
determination (without duplication), (i) the principal of indebtedness of such
Person for borrowed money; (ii) the principal of obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) other
than letters of credit or similar instruments supporting Trade Payables entered
into in the ordinary course of business of such Person to the extent that such
letters of credit are not drawn upon or, if and to the extent drawn upon, such
drawing is reimbursed not later than the third business day following such
drawing; (iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which purchase
price is due more than twelve months after the date of placing such property in
service or taking delivery and title thereto or the completion of such services;
(v) all Capitalized Lease Obligations and all Attributable Debt of such Person;
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or, with
respect to any Subsidiary of the Company, any Preferred Stock (but excluding, in
each case, any accrued dividends); (vii) all Indebtedness of other Persons
secured by a Lien on any asset of such Person, whether or not such Indebtedness
is assumed by such Person; provided, however, that the amount of Indebtedness of
such Person shall be the lesser of (A) the fair market value of such asset at
such date of determination and (B) the amount of such Indebtedness of such other
Persons; (viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person; and (ix) to the extent not otherwise included in this definition,
Hedging Obligations of such Person. The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability, upon the occurrence of
the contingency giving rise to the obligation, of any contingent obligations at
such date.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance or loan
(other than advances or loans to customers or suppliers in the ordinary course
of business that are recorded as accounts receivable on the balance sheet of the
Person making such loan or advance) or other extension of credit (including by
way of Guarantee or similar arrangement) or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition of
Capital Stock, Indebtedness or other similar instruments issued by such Person.
For purposes of the definition of "Unrestricted Subsidiary" and the covenant
described under "-- Certain Covenants -- Limitation on Restricted Payments,"
only (i) "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary in an amount (if
positive) equal to (x) the Company's "Investment" in such Subsidiary at the time
of such redesignation less (y) the portion (proportionate to the Company's
equity interest in such Subsidiary) of the fair market value of the net assets
of such Subsidiary at the time of such redesignation; and (ii) any property
transferred to or from an Unrestricted Subsidiary shall be valued at its fair
market value at the time of such transfer, in each case as determined in good
faith by the Board of Directors.
"Issue Date" means the date on which the Exchange Notes are originally
issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
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"Management Investors" means the officers and employees of ACP Holdings,
ACP Products, L.L.C., Holdings, the Company or a Subsidiary of the Company who
acquire Voting Stock of ACP Holdings, ACP Products, L.L.C., Holdings or the
Company on or after the Original Issue Date.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"NC Merger" means NC Merger Company, a Wisconsin corporation.
"Neenah Merger" means the merger, consummated on April 30, 1997 of NC
Merger Company with and into the Company under the terms of the Agreement and
Plan of Reorganization (as amended) by and among Holdings, the Company and NC
Merger Company and dated November 20, 1996.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or from an escrow account or
otherwise, in each case only as and when received, but excluding any other
consideration received in the form of assumption by the acquiring person of
Indebtedness or other obligations relating to the properties or assets that are
the subject of such Asset Disposition or received in any other non-cash form)
therefrom, in each case net of (i) all legal, title and recording expenses,
commissions and other expenses (including fees and expenses of counsel and
investment bankers) incurred, and all Federal, state, provincial, foreign and
local taxes required to be paid or accrued as a liability under GAAP, as a
consequence of such Asset Disposition, (ii) all payments made on any
Indebtedness which is secured by any assets subject to such Asset Disposition,
in accordance with the terms of any Lien upon such assets, or which must by its
terms, or in order to obtain a necessary consent to such asset disposition, or
by applicable law, be repaid out of the proceeds from such Asset Disposition,
(iii) all distributions and other payments required to be made to minority
interest holders in Subsidiaries or joint ventures as a result of such Asset
Disposition and (iv) appropriate amounts to be provided by the party or parties
making such Asset Disposition as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained by the Company or any Restricted Subsidiary after such Asset
Disposition, including, without limitation, pension and other post-employment
benefit liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with such Asset
Disposition.
"Net Cash Proceeds" with respect to any issuance or sale of Capital Stock,
means the proceeds of such issuance or sale in the form of cash, including
payments in respect of deferred payment obligations when received in form of, or
stock or other assets when disposed for, cash, net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, filing and registration fees, trustee's fees,
consultant and other fees actually incurred in connection with such issuance or
sale and net of taxes paid or payable as a result thereof.
"Notes" means the Existing Notes and the Exchange Notes.
"Officer" means the Chairman of the Board, the Chief Executive Officer, the
Chief Financial Officer, the President, any Vice President, the Treasurer or the
Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Original Indenture" means the Indenture dated April 30, 1997 between NC
Merger and the Trustee, as amended.
"Original Issue Date" means the date of issuance of the Original Notes,
April 30, 1997.
"Original Notes" means the Company's 11 1/8% Senior Subordinated Notes due
2007 issued under the Original Indenture and any of the Company's 11 1/8% Series
B Senior Subordinated Notes due 2007 exchanged therefor.
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"Permitted Holders" means (i) CVC and its Affiliates and Permitted
Transferees and (ii) the Management Investors and their Permitted Transferees.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) the Company, (ii) a Restricted Subsidiary or a Person which
will, upon the making of such Investment, become a Restricted Subsidiary;
provided, however, that the primary business of such Restricted Subsidiary is a
Related Business; (iii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
provided, however, that such Person's primary business is a Related Business;
(iv) Temporary Cash Investments; (v) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms provided,
however, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (vi) payroll, travel and similar advances to cover matters that
are expected at the time of such advances ultimately to be treated as expenses
for accounting purposes and that are made in the ordinary course of business;
(vii) loans or advances to employees made in the ordinary course of business and
not exceeding $1.0 million in the aggregate outstanding at any one time; (viii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; (ix) securities received as
consideration in sales of assets made in compliance with the covenant described
under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary
Stock"; (x) other Investments, of any type, provided that the amount of such
Investments made after the Issue Date in reliance on this clause (x) and
outstanding at any time does not exceed 7.5% of Total Assets; or (xi) Guarantees
relating to Indebtedness which is permitted to be Incurred under the covenant
described under "-- Certain Covenants -- Limitation on Indebtedness."
"Permitted Liens" means with respect to any Person:
(a) Liens to secure Indebtedness permitted under the provisions
described under clause (b)(i) or (ii) under "-- Certain
Covenants -- Limitation on Indebtedness";
(b) pledges or deposits made or other Liens granted by (1) such Person
under workmen's compensation laws, unemployment insurance laws or similar
legislation, (2) in connection with bids, tenders, contracts (other than
for the payment of Indebtedness) or leases to which such Person is a party,
or (3) to secure public or statutory obligations of such Person or deposits
of cash or United States government bonds to secure surety or appeal bonds
to which such Person is a party, or deposits as security for contested
taxes or import duties or for the payment of rent, in each case Incurred in
the ordinary course of business;
(c) Liens imposed by law, such as carriers', warehousemen's,
mechanics', employees' and other like Liens, in each case for sums not yet
due or being contested in good faith by appropriate proceedings or other
Liens arising out of judgments, awards, decrees or orders of any court or
other governmental authority against such Person with respect to which such
Person shall then be proceeding with an appeal or other proceedings for
review;
(d) Liens for property taxes not yet due or payable or subject to
penalties for non-payment or which are being contested in good faith and by
appropriate proceedings;
(e) Liens in favor of issuers of surety, performance, judgment, appeal
and other like bonds or letters of credit issued pursuant to the request of
and for the account of such Person in the ordinary course of its business;
(f) minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of others for, licenses, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes,
or zoning provisions, carveouts, conditional waivers or other restrictions
as to the use of real properties or minor irregularities of title (and with
respect to leasehold
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interests, mortgages, obligations, Liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without consent of the
lessee) or Liens incidental to the conduct of the business of such Person
or to the ownership of its properties which were not Incurred in connection
with Indebtedness and which do not in the aggregate materially impair the
use of such properties in the operation of the business of such Person;
(g) Liens existing or provided for under written arrangements existing
on the Original Issue Date;
(h) Liens securing Indebtedness or other obligations of a Subsidiary
of such Person owing to such Person or a wholly owned Subsidiary of such
Person;
(i) Liens securing Hedging Obligations so long as the related
Indebtedness is, and is permitted to be under the Indenture, secured by a
Lien on the same property securing such Hedging Obligations;
(j) Liens to secure any refinancing, refunding, replacement, renewal,
repayment or extension (or successive refinancings, refundings,
replacements, renewals, repayments or extensions) as a whole, or in part,
of any Indebtedness secured by any Lien referred to in clause (g), (i),
(l), (m) or (n); provided, however, that (x) such new Lien shall be limited
to all or part of the same property that secured the original Lien (plus
improvements on such property) and (y) the Indebtedness secured by such
Lien at such time is not increased to any amount greater than the sum of
(A) the outstanding principal amount or, if greater, committed amount of
the Indebtedness described under clauses (g), (i), (l), (m) and (n) at the
time the original Lien became a Permitted Lien and (B) an amount necessary
to pay any fees and expenses, including premiums, related to such
refinancing, refunding, replacement, renewal, repayment or extension;
(k)(i) mortgages, liens, security interests, restrictions or
encumbrances that have been placed by any developer, landlord or other
third party on property over which the Company or any Restricted Subsidiary
or the Company has easement rights or on any real property leased by the
Company and subordination or similar agreements relating thereto and (ii)
any condemnation or eminent domain proceedings affecting any real property;
(l) Liens on property, assets or shares of stock of a Person at the
time such Person becomes a Subsidiary; provided, however, such Liens are
not created, Incurred or assumed by such Person in connection with, or in
contemplation of, such other Person becoming such a Subsidiary; provided
further, however, that such Liens may not extend to any other property
owned by the Company or any Restricted Subsidiary;
(m) Liens on property or assets at the time the Company or a
Restricted Subsidiary acquired the property or assets, including any
acquisition by means of a merger or consolidation with or into the Company
or a Restricted Subsidiary; provided, however, that such Liens are not
created in connection with, or in contemplation of, such acquisition;
provided further, however, that the Liens may not extend to any other
property owned by the Company or any Restricted Subsidiary; and
(n) any Lien on stock or other securities of an Unrestricted
Subsidiary that secures Indebtedness of such Unrestricted Subsidiary.
"Permitted Transferee" means (a) with respect to CVC (i) Citicorp, any
direct or indirect wholly owned subsidiary of Citicorp, and any officer,
director or employee of CVC, Citicorp or any wholly owned subsidiary of
Citicorp, (ii) any spouse or lineal descendant (including by adoption and
stepchildren) of the officers, directors and employees to in clause (a)(i) above
or (iii) any trust, corporation or partnership 100% in interest of the
beneficiaries, stockholders or partners of which consists of one or more of the
persons described in clause (a)(i) or (ii) above and (b) with
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respect to any officer or employee of ACP Products, L.L.C., ACP Holdings,
Holdings, the Company or a Subsidiary of the Company (i) any spouse or lineal
descendant (including by adoption and stepchildren) of such officer or employee
and (ii) any trust, corporation or partnership 100% in interest of the
beneficiaries, stockholders or partners of which consists of such officer or
employee, any of the persons described in clause (b)(i) above or any combination
thereof.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Public Equity Offering" means an underwritten public offering of common
stock of ACP Holdings, the Company or Holdings (or, for purposes of the covenant
described under "-- Certain Covenants -- Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries," any Restricted Subsidiary) pursuant
to an effective registration statement (other than a registration statement on
Form S-4, S-8 or any successor or similar forms) under the Securities Act
(whether alone or in conjunction with any secondary public offering); provided,
however, that if any such offering is an offering of the common stock of ACP
Holdings, only the net proceeds thereof that are contributed to the Company
shall be taken into consideration for the purposes of this definition.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of ACP Holdings, the Company or Holdings (or, for purposes of the covenant
described under "-- Certain Covenants -- Limitation on the Sale or Issuance of
Capital Stock of Restricted Subsidiaries," any Restricted Subsidiary) has been
distributed by means of an effective registration statement under the Securities
Act.
"Purchase Money Indebtedness" means Indebtedness (i) consisting of the
deferred purchase price of an asset or assets (including Capital Stock and the
assets of an ongoing business) including additions and improvements, any
conditional sale obligation, any obligation under any title retention agreement
or any other purchase money obligation, or (ii) incurred to finance the
acquisition by the Company or a Restricted Subsidiary of an asset or assets
(including Capital Stock and the assets of a Related Business) including
additions and improvements; provided in the case of clause (i) that the Average
Life of such Indebtedness is less than the anticipated useful life of assets
having an aggregate fair market value representing more than 50% of the
aggregate fair market value of all assets so acquired and that in the case of
clauses (i) and (ii) such Indebtedness is incurred within 180 days after the
acquisition by the Company or Restricted Subsidiary of such asset or assets, or
is in existence with respect to any asset or other property at the time such
asset or property is acquired.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances" and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the Original Issue Date or
Incurred in compliance with or which is permitted by the Indenture (including
Indebtedness of the Company that refinances Indebtedness of any Restricted
Subsidiary (to the extent permitted in the Indenture) and Indebtedness of any
Restricted Subsidiary that refinances Indebtedness of that or another Restricted
Subsidiary of the Company), including Indebtedness that refinances Refinancing
Indebtedness; provided, however, that (i) the Refinancing Indebtedness has a
Stated Maturity no earlier than the Stated Maturity of the Indebtedness being
refinanced, (ii) the Refinancing Indebtedness has an Average Life at the time
such Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced, (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or, if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the
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aggregate principal amount (or, if issued with original issue discount, the
aggregate accreted value) then outstanding of the Indebtedness being refinanced
plus the amount of any premium reasonably determined by the Company or such
Restricted Subsidiary, as applicable, as necessary at the time of such
refinancing to accomplish such refinancing or required pursuant to the terms
thereof, plus the amount of expenses of the Company or such Restricted
Subsidiary, as applicable, Incurred in connection with such refinancing and (iv)
if the Indebtedness being refinanced is subordinated in right of payment to the
Exchange Notes, such Refinancing Indebtedness is subordinated in right of
payment to the Exchange Notes to the extent of the Indebtedness being refinanced
provided further, however, that Refinancing Indebtedness shall not include
Indebtedness of the Company or a Restricted Subsidiary that refinances
Indebtedness of an Unrestricted Subsidiary.
"Related Business" means any business of the Company and the Restricted
Subsidiaries as conducted on the Issue Date and any business related, ancillary
or complementary thereto.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-Hill,
Inc. and its successors.
"Sale/Leaseback Transaction" means an arrangement relating to property now
owned or hereafter acquired by the Company or a Restricted Subsidiary whereby
the Company or such Restricted Subsidiary transfers such property to a Person
and the Company or such Restricted Subsidiary leases it from such Person, other
than leases between the Company and a Wholly Owned Subsidiary or between Wholly
Owned Subsidiaries.
"SEC" means the Securities and Exchange Commission.
"Second Add-on Indenture" means the indenture dated November 24, 1998 among
the Company, the subsidiaries of the Company party thereto, and the Trustee, as
amended.
"Secured Indebtedness" means any Indebtedness of the Company secured by a
Lien. "Secured Indebtedness" of any Guarantor Subsidiary has a correlative
meaning.
"Senior Bank Facilities" means the credit agreement dated as of the
Original Issue Date, as amended, waived or otherwise modified from time to time,
among Holdings, the Company, the lenders party thereto from time to time and The
Chase Manhattan Bank, a New York banking corporation, as agent (except to the
extent that any such amendment, waiver or other modification thereto would be
prohibited by the terms of the Indenture).
"Senior Subordinated Indebtedness" means the Exchange Notes, the Existing
Notes and any other Indebtedness of the Company that specifically provides that
such Indebtedness is to rank pari passu with the Exchange Notes and is not
subordinated by its terms to any Indebtedness or other obligation of the Company
which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any
Guarantor Subsidiary has a correlative meaning.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of clause (w)(1) or
(2) of Rule 1-02 under Regulation S-X promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the purchase of such
security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the Original Issue Date or thereafter Incurred) which is
expressly subordinate in right of payment to
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the Exchange Notes pursuant to a written agreement. "Subordinated Obligation" of
any Guarantor Subsidiary shall have a correlative meaning.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including partnership interests)
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, trustees or members of any other governing body
thereof is at the time owned or controlled, directly or indirectly, by (i) such
Person or (ii) one or more Subsidiaries of such Person.
"Subsidiary Guaranty" means any Guarantee of the Exchange Notes which may
from time to time be executed and delivered pursuant to the terms of the
Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in the
Indenture.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations (x) of the United States of America or any agency thereof
or obligations Guaranteed by the United States of America or any agency thereof
or (y) of any foreign country recognized by the United States of America rated
at least "A" by S&P or "A-1" by Moody's, (ii) investments in time deposit
accounts, certificates of deposit and money market deposits maturing within 365
days of the date of acquisition thereof issued by a bank or trust company which
is organized under the laws of the United States of America, any state thereof
or any foreign country recognized by the United States of America having capital
and surplus in excess of $250.0 million (or the foreign currency equivalent
thereof) and whose long-term debt is rated "A" (or such similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act), (iii) repurchase
obligations with a term of not more than 30 days for underlying securities of
the types described in clause (i) above entered into with a bank meeting the
qualifications described in clause (ii) above, (iv) investments in commercial
paper, maturing not more than 365 days after the date of acquisition, issued by
a corporation (other than an Affiliate of the Company) organized and in
existence under the laws of the United States of America or any foreign country
recognized by the United States of America with a rating at the time as of which
any investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P, (v) investments in securities with
maturities of six months or less from the date of acquisition issued or fully
guaranteed by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority thereof, and rated
at least "A" by S&P or "A" by Moody's, (vi) any money market deposit accounts
issued or offered by a domestic commercial bank or a commercial bank organized
and located in a country recognized by the United States of America, in each
case, having capital and surplus in excess of $250.0 million (or the foreign
currency equivalent thereof), or investments in money market funds complying
with the risk limiting conditions of Rule 2a-7 (or any successor rule) of the
Commission under the Investment Company Act of 1940, as amended, and (vii)
similar investments approved by the Board of Directors in the ordinary course of
business.
"Total Assets" means, at any date of determination, the total consolidated
assets of the Company and its Restricted Subsidiaries, as set forth on the
Company's then most recent consolidated balance sheet.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled by, and
published in, the most recent Federal Reserve Statistical Release H.15(519)
which has become publicly available at least two Business Days prior to the date
fixed for redemption of the Exchange Notes following a Change of Control (or, if
such Statistical Release is no longer published, any publicly available source
of similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the
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Exchange Notes; provided, however, that if the Average Life to Stated Maturity
of the Notes is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given, except that if the Average Life to Stated Maturity
of the Exchange Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"Trustee" means the party named as such in the Indenture until a successor
replaces it and, thereafter, means the successor.
"Trust Officer" means the Chairman of the Board, the President or any other
officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its
Subsidiaries owns any Capital Stock or Indebtedness of, or owns or holds any
Lien on any property of, the Company or any other Restricted Subsidiary of the
Company that is not a Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the Subsidiary to be so designated has total
Consolidated assets of $1,000 or less or (B) if such Subsidiary has Consolidated
assets greater than $1,000, then such designation would be permitted under the
covenant entitled "Limitation on Restricted Payments." The Board of Directors
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided, however, that immediately after giving effect to such designation (x)
the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of
the covenant described under "Limitation on Indebtedness" and (y) no Default
shall have occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing with the Trustee
a copy of the resolution of the Board of Directors giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital
Stock of which (other than directors' qualifying shares and, to the extent
required by local ownership laws in foreign countries, shares owned by foreign
shareholders) is owned by the Company or another Wholly Owned Subsidiary
(including shares held of record by a nominee for the benefit of the Company or
another Wholly Owned Subsidiary).
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EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal (which together constitute the
"Exchange Offer"), we will accept for exchange Old Notes which are properly
tendered and not withdrawn on or prior to the Expiration Date and not withdrawn
as permitted below. As used herein, the term "Expiration Date" means 5:00 p.m.,
New York City time, on [ ], 1999; provided, however, that if we have
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $87.0 million aggregate principal amount
of the Old Notes are outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about [ ], 1999, to all holders
of Old Notes known to us. Our obligation to accept Old Notes for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
under "-- Certain Conditions to the Exchange Offer" below.
We expressly reserve the right, at any time or from time to time, to extend
the period of time during which the Exchange Offer is open, and thereby delay
acceptance for any exchange of any Old Notes, by giving notice of such extension
to the holders thereof. During any such extension, all Old Notes previously
tendered will remain subject to the Exchange Offer and may be accepted for
exchange by our Company. Any Old Notes not accepted for exchange for any reason
will be returned without expense to the tendering holder thereof as promptly as
practicable after the expiration or termination of the Exchange Offer.
We expressly reserve the right to amend or terminate the Exchange Offer,
and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "-- Certain Conditions to the Exchange Offer." We will
give notice of any extension, amendment, non-acceptance or termination to the
holders of the Old Notes as promptly as practicable, such notice in the case of
any extension to be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to our Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by our Company will constitute a binding
agreement between the tendering holder and our Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to United States Trust Company of New
York (the "Exchange Agent") at one of the addresses set forth below under
"Exchange Agent" on or prior to the Expiration Date. In addition, either (i)
certificates for such Old Notes must be received by the Exchange Agent along
with the Letter of Transmittal or (ii) a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") of such Old Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust Company
(the "Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, must be received by the Exchange Agent prior to the
Expiration Date, or the holder must comply with the guaranteed delivery
procedures described below. THE METHOD OF DELIVERY OF OLD NOTES, LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE
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ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD NOTES SHOULD
BE SENT TO OUR COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by registered holder of the Old Notes who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm that is a member or
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program or by an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (collectively, "Eligible Institutions"). If Old
Notes are registered in the name of a person other than a signer of the Letter
of Transmittal, the Old Notes surrendered for exchange must be endorsed by or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by our Company in its sole discretion, duly
executed by, the registered holder with the signature thereon guaranteed by an
Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
our Company in its sole discretion, which determination shall be final and
binding. We reserve the absolute right to reject any and all tenders of any
particular Old Notes not properly tendered or to not accept any particular Old
Notes which acceptance might, in our judgment or that of our counsel, be
unlawful. We also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Old
Notes either before or after the Expiration Date. The interpretation of the
terms and conditions of the Exchange Offer as to any particular Old Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by our Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Old
Notes for exchange must be cured within such reasonable period of time as we
shall determine. Neither our Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification. The Exchange Offer is subject
to certain customary conditions relating to compliance with any applicable law,
or any applicable interpretation by any staff of the Commission, or any order of
any governmental agency or court of law. See "--Certain Conditions of the
Exchange Offer."
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
us, proper evidence satisfactory to us of their authority to do so must be
submitted.
By tendering, each holder will represent to us that, among other things,
the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of business of the holder and any beneficial holder, that
neither the holder nor any such beneficial holder has an arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and that neither the holder nor any such other person is our
"affiliate," as defined under Rule 405 of the Securities Act. If the holder is a
broker-dealer that receives Exchange Notes for its own account pursuant to the
Exchange Offer, it must acknowledge that it acquired the Old Notes for its own
account as the result of market-making activities or other trading activities,
and must agree that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Notes.
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ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange note having a principal amount equal to that of the
surrendered Old Notes. For purposes of the Exchange Offer, we shall be deemed to
have accepted properly tendered Old Notes for exchange when, as and if we have
given oral and written notice thereof to the Exchange Agent.
In all cases, issuance of Exchange Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
Book-Entry Confirmation of such Old Notes into the Exchange Agent's accountant
the Book-Entry Transfer Facility, a properly completed and duly executed Letter
of Transmittal and all other required documents. If any tendered Old Notes are
not accepted for any reason set forth in the terms and conditions of the
Exchange Offer or if Old Notes are submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged Old Notes will
be returned without expense to the tendering holder thereof (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book-Entry Transfer Facility to transfer such Old Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "Exchange Agent" on or prior to the Expiration
Date or the guaranteed delivery procedures described below must be complied
with.
The Exchange Agent and the Book-Entry Transfer Facility have confirmed that
the Exchange Offer is eligible for the Book-Entry Transfer Facility Automated
Tender Offer Program ("ATOP"). Accordingly, the Book-Entry Transfer Facility
participants may electronically transmit their acceptance of the Exchange Offer
by causing the Book-Entry Transfer Facility to transfer notes to the Exchange
Agent in accordance with the Book-Entry Transfer Facility's ATOP procedures for
transfer. The Book-Entry Transfer Facility will then send an Agent's Message to
the Exchange Agent.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility, received by the Exchange Agent and forming part of the
confirmation of a book-entry transfer, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering Notes which are the subject of such
book-entry confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that the Company may enforce
such agreement against such participant. In the case of an Agent's Message
relating to guaranteed delivery, the term means a message transmitted by the
Book-Entry Transfer Facility and received by the Exchange Agent, which states
that the Book-Entry Transfer Facility has received an express acknowledgment
from the participant in the Book-Entry Transfer Facility tendering Notes that
such participant has received and agrees to be bound by the Notice of Guaranteed
Delivery. Delivery of the Agent's Message by the Book-Entry Transfer Facility
will satisfy the terms of the Exchange Offer as to execution and delivery of a
Letter of Transmittal by the participant identified in the Agent's Message.
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GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes
and the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents to reach the Exchange Agent
before the Expiration Date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent receives from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by our Company (by telegram, telex,
facsimile and transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer or a confirmation of book-entry transfer of such Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation"), as the case may be, and any other documents required
by the letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent and (iii) the certificates for all physically tendered Old
Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case
may be, and all other documents required by the Letter of Transmittal are
received by the Exchange Agent within five NYSE trading days after the date of
execution of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time on the business day prior to the Expiration Date. For a
withdrawal to be effective, a written notice of withdrawal must be received by
the Exchange Agent at one of the addresses set forth below under "Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes), and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates, the withdrawing holder must
also submit the serial number of the particular certificates to be withdrawn and
a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility (including time of receipt) of such notices will
be determined by us, which determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange which are not exchanged for any reason will be returned to
the holder thereof without cost to such holder (or, in the case of Old Notes
tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book entry transfer described
above, such Old Notes will be credited to an account maintained with such Book-
Entry Transfer Facility for the Old Notes) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Old Notes may be retendered by following one of the procedures
described under "-- Procedures for Tendering Old Notes" above at any time on or
prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, we shall not be
required to accept for exchange, or to issue Exchange Notes in exchange for, any
Old Notes and may terminate or amend the Exchange Offer if at any time before
the Expiration Date, we determine that the Exchange Offer violates applicable
law, any applicable interpretation of the staff of the Commission or any order
of any governmental agency or court of competent jurisdiction.
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The foregoing conditions are for the sole benefit of our Company and may be
asserted by our Company regardless of the circumstances giving rise to any such
condition or may be waived by our Company in whole or in part at any time and
from time to time in its reasonable discretion. Our failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of such right
and each such right shall be deemed an ongoing right which may be asserted at
any time and from time to time.
In addition, we will not accept for exchange any Old Notes tendered, and no
Exchange Notes will be issued in exchange for any such Old Notes, if prior to
the Expiration Date any stop order shall be threatened or in effect with respect
to the Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939, as amended
(the "TIA"). In any such event, we are required to use every reasonable effort
to obtain the withdrawal of any stop order at the earliest possible time.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at the address set forth below. Questions and
requests for assistance, requests for additional copies of this Prospectus or of
the Letter of Transmittal and requests for Notices of Guaranteed Delivery should
be directed to the Exchange Agent addressed as follows:
By Overnight Courier and By Hand: By Registered or
by Hand after 4:30 pm United States Trust Certified Mail:
on the Expiration Date: Company of New York United States Trust
United States Trust 111 Broadway, Lower Level Company of New York
Company of New York New York, New York 10006 P.O. Box 844
770 Broadway, 13th Floor Attn: Corporate Trust Services Cooper Station
New York, New York 10003 Via Facsimile: New York, New York 10276-0844
Attn: Corporate (212) 780-0592 Attn: Corporate
Trust Services Attn: Corporate Trust Services Trust Services
Confirm by Telephone:
(800) 548-6565
DELIVERY OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.
FEES AND EXPENSES
We will not make any payments to brokers, dealers or other soliciting
acceptances of the Exchange Offer. The principal solicitation is being made by
mail; however, additional solicitations may be made in person or by telephone by
officers and employees of our Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by us. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the Old
Notes, which is the principal amount as reflected in our accounting records on
the date of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized. The expenses of the Exchange Offer will be capitalized for
accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to
pay any transfer taxes in connection therewith, except that holders who instruct
us to register Exchange Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a
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person other than the registered tendering holder will be responsible for the
payment of any applicable transfer tax thereon.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of, the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 11 1/8% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Notes do
not have any appraisal or dissenters' rights under the Delaware General
Corporation Law in connection with the Exchange Offer. In general, the Notes may
not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. To the extent that Notes
are exchanged for Exchange Notes, the market for the Notes may be adversely
affected. We do not currently anticipate that we will register the Notes under
the Securities Act. However, (i) if the Initial Purchasers so request with
respect to Notes not eligible to be exchanged for Exchange Notes in the Exchange
Offer and held by them following consummation of the Exchange Offer or (ii) if
any holder of Notes is not eligible to participate in the Exchange Offer, or, in
the case of any holder of Notes that participates in the Exchange Offer, does
not receive freely tradable Exchange Notes in exchange for Notes, we are
obligated to file a Registration Statement on the appropriate form under the
Securities Act relating to the Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, we believe that Exchange Notes
issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than (i) any such holder which
is our "affiliate" within the meaning of Rule 405 under the Securities Act or
(ii) any broker-dealer that purchases Notes from us to resell pursuant to Rule
144A or any other available exemption) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no intention, or any arrangement or understanding with any
person, to participate in the distribution of such Exchange Notes. If any holder
has any arrangement or understanding with respect to the distribution of the
Exchange Notes to be acquired pursuant to the Exchange Offer, such holder (i)
could not rely on the applicable interpretations of the staff of the Commission
and (ii) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction. A
broker-dealer who holds Old Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes. Each such broker-dealer that
acquired Exchange Notes as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. We have agreed,
pursuant to the Registration Rights Agreement and subject to certain specified
limitations therein, to register or qualify the Exchange Notes for offer or sale
under the securities or blue sky laws of such jurisdictions as any holder of the
notes reasonably requests in writing.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion (including the opinion of counsel described below)
is based upon current provisions of the Internal Revenue Code of 1986, as
amended, applicable Treasury regulations, judicial authority and administrative
rulings and practice. There can be no assurance that the Internal Revenue
Service (the "Service") will not take a contrary view, and no ruling from the
Service has been or will be sought. Legislative, judicial or administrative
changes or interpretations may be forthcoming that could alter or modify the
statements and conditions set forth herein. Any such changes or interpretations
may or may not be retroactive and could affect the tax consequences to holders.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. The Company recommends that each holder consult such
holder's own tax advisor as to the particular tax consequences of exchanging
such holder's Old Notes for Exchange Notes, including the applicability and
effect of any state, local or foreign tax laws.
Kirkland & Ellis, counsel to the Company, has advised the Company that in
its opinion, the exchange of the Old Notes for Exchange Notes pursuant to the
Exchange Offer will not be treated as an "exchange" for federal income tax
purposes because the Exchange Notes will not be considered to differ materially
in kind or extent from the Old Notes. Rather, the Exchange Notes received by a
holder will be treated as a continuation of the Old Notes in the hands of such
holder. As a result, there will be no federal income tax consequences to holders
exchanging Old Notes for Exchange Notes pursuant to the Exchange Offer.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for series E notes where such series E notes were acquired as a result
of market-making activities or other trading activities. Each of the Company and
the Guarantor Subsidiaries has agreed that, for a period of not less than 180
DAYS after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer to use in connection with any such
resale. In addition, until [ , 1999] (90 days after the date
of this Prospectus), all dealers effecting transactions in the Exchange Notes
may be required to deliver a prospectus.
Neither the Company nor the Guarantor Subsidiaries will receive any
proceeds from any sale of Exchange Notes by broker-dealers. Exchange Notes
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
With respect to resales of Exchange Notes, based on interpretations by the
staff of the Commission set forth in no-action letters issued to third parties,
the Company and the Guarantor Subsidiaries believe that a holder or other person
who receives Exchange Notes, whether or not such person is the holder (other
than a person that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) who receives Exchange Notes in exchange for Old
Notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with person to
participate, in the distribution of the Exchange Notes, will be allowed to
resell the Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires Exchange Notes in the Exchange Offer for the
purpose of distributing or participating in a distribution of the Exchange
Notes, such holder cannot rely on the position of the staff of the Commission
enunciated in such no-action letters or any similar interpretive letters, and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction and such a secondary
resale transaction should be covered by an effective registration statement
containing the selling security holder information required by Item 507 or 508,
as applicable, of Regulation S-K under the Securities Act, unless an exemption
from registration is otherwise available. Further, each broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange Notes.
The Company and each of the Guarantor Subsidiaries has agreed that, for a period
of not less than 180 DAYS from the consummation of the Exchange Offer, it will
make this Prospectus available to any broker-dealer for use in connection with
any such resale.
99
105
For a period of not less than 180 days after the Expiration Date the
Company will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company and each of the
Guarantor Subsidiaries has jointly and severally agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the series E notes) other than commissions or concessions of any
brokers or dealers and will indemnify the holders of the series E notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to issuance of the Exchange notes
offered hereby will be passed upon for the Company and the Guarantor
Subsidiaries by Kirkland & Ellis, New York, New York.
EXPERTS
The consolidated financial statements of the Company at March 31, 1996 and
1997 and at September 30, 1997 and 1998, and for the years ended March 31, 1996
and 1997, the one month ended April 30, 1997, the five months ended September
30, 1997 and for the year ended September 30, 1998, incorporated by reference in
this Prospectus and in the Registration Statement, and the financial statement
schedule incorporated by reference in the Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon incorporated by reference in this Prospectus and in the
Registration Statement, and are included herein in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Dalton Corporation (formerly known
as The Dalton Foundries, Inc.) as of January 3, 1998 and December 28, 1996 and
for each of the three fiscal years in the period ended January 3, 1998 included
in this Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of Mercer Forge Corporation and
Subsidiary as of November 30, 1997 and 1996, and for each of the years in the
two year period ended November 30, 1997, have been incorporated by reference
herein and in the registration statement in reliance upon the report of KPMG
LLP, independent auditors, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
100
106
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following portions of documents filed by the Company with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act (File No.
333-28751) are incorporated herein by reference:
(i) The consolidated financial statements, including the notes thereto
and schedules filed therewith of the Company and its predecessor company,
and the independent auditors' reports thereon, filed as part of the Annual
Report on Form 10-K for the fiscal year ended September 30, 1998;
(ii) The consolidated financial statements, including the notes
thereto, of Mercer Forge Corporation and the independent auditors' report
thereon contained in Item 7(a) "Financial Statements of Business Acquired"
and the unaudited pro forma condensed consolidated financial statements,
including the notes thereto, of the Company contained in Item 7(b) "Pro
Forma Financial Information," contained in Item 7 "Financial Statements,
Pro Forma Financial Information and Exhibits" of the Current Reports on
Form 8-K/A dated June 12, 1998 and November 5, 1998;
(iii) The consolidated financial statements, including the notes
thereto, of Dalton Corporation and the report of independent accountants
thereon contained in Item 7(a) "Financial Statements of Business Acquired"
and the unaudited pro forma condensed consolidated financial statements,
including the notes thereto, of the Company contained in Item 7(b) "Pro
Forma Financial Information," contained in Item 7 "Financial Statements,
Pro Forma Financial Information and Exhibits" of the Current Reports on
Form 8-K/A dated November 6, 1998 and November 19, 1998; and
(iv) The unaudited condensed consolidated financial statements,
including the notes thereto of the Company, filed as part of the Current
Report on Form 10-Q for the three months ended December 31, 1998.
All documents and reports filed by the Company pursuant to the Exchange Act
after the date of this Prospectus will be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the dates of filing such
documents or reports.
Any statement contained herein or in a document incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained or incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the written or oral request of any such person,
a copy of any or all of the other documents incorporated herein by reference and
not delivered herewith, except the exhibits to such documents (unless such
exhibits are specifically incorporated by reference in such documents). Requests
for such documents should be directed to the attention of the Secretary of the
Company at (920) 725-7000. The reports and other information, including the
annual, quarterly and current reports incorporated herein by reference and filed
by the Company with the Commission should also be available for inspection at
the public reference facilities of the Commission located at 450 Fifth Street,
N.W., Washington, DC 20549, and at the regional offices of the Commission
located at Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, IL
60661 and Seven World Trade Center, 13th Floor, New York, NY 10048. Copies
should be obtainable by mail, upon payment of the Commission's customary
charges, by writing to the Commission's principal office at 450 Fifth Street,
N.W., Washington, DC 20549. The Commission also maintains an internet website at
http://www.sec.gov that contains reports and other information.
101
107
AVAILABLE INFORMATION
The Company and the Guarantor Subsidiaries have filed with the Commission a
Registration Statement on Form S-4 (the "Exchange Offer Registration Statement,"
which term shall encompass all amendments, exhibits, annexes and schedules
thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Exchange Notes being offered hereby. This
Prospectus does not contain all the information set forth in the Exchange Offer
Registration Statement. For further information with respect to the Company, the
Guarantor Subsidiaries and the Exchange Offer, reference is made to the Exchange
Offer Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Exchange Offer Registration Statement,
reference is made to the exhibit for a more complete description of the document
or matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Exchange Offer Registration Statement, including
the exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Regional Offices of the Commission at Seven
World Trade Center, Suite 1300, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of such Web site is: http://www.sec.gov.
The Company is currently subject to the informational requirements of the
Securities Act, and in accordance therewith will be required to file periodic
reports and other information with the Commission. The obligation of the Company
to file periodic reports and other information with the Commission will be
suspended if the Exchange Notes are held of record by fewer than 300 holders as
of the beginning of any fiscal year of the Company other than the fiscal year in
which the Exchange Offer Registration Statement is declared effective. The
Company will nevertheless be required to continue to file reports with the
Commission if the Exchange Notes are listed on a national securities exchange.
In the event the Company ceases to be subject to the informational requirements
of the Exchange Act, the Company will be required under the Indenture to
continue to file with the Commission the annual and quarterly reports,
information, documents or other reports, including, without limitation, reports
on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the
informational requirements of the Exchange Act. Under the Indenture, the Company
shall file with the Trustee annual, quarterly and other reports after it files
such reports with the Commission. Annual reports delivered to the Trustee and
the holders of Exchange Notes will contain financial information that has been
examined and reported upon, with an opinion expressed by an independent public
accountant. The Company will also furnish such other reports as may be required
by law.
Information contained in this Prospectus contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "will," "should," or "anticipates" or the
negative thereof or other similar terminology, or by discussions of strategy.
The Company's actual results could differ materially from those anticipated by
any such forward-looking statements as a result of certain factors, including
those set forth under the "Risk Factors" beginning on page 11 and elsewhere in
this Prospectus.
------------------------
102
108
INDEX TO THE FINANCIAL STATEMENTS FOR DALTON CORPORATION
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets for January 3, 1998 and December
28, 1996.................................................. F-3
Consolidated Statements of Income for the years ended
January 3, 1998, December 28, 1996 and December 30,
1995...................................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended January 3, 1998, December 28, 1996 and
December 30, 1995......................................... F-5
Consolidated Statements of Cash Flows for the years ended
January 3, 1998, December 28, 1996 and December 30,
1995...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
F-1
109
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
Dalton Corporation
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of Dalton
Corporation (formerly known as The Dalton Foundries, Inc.) and its subsidiaries
at January 3, 1998 and December 28, 1996, and the results of their operations
and their cash flows for each of the three years in the period ended January 3,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
--------------------------------------
PricewaterhouseCoopers LLP
Indianapolis, Indiana
March 6, 1998, except as to
Note 13, which is as of September 8, 1998
F-2
110
CONSOLIDATED BALANCE SHEETS
JANUARY 3, DECEMBER 28,
1998 1996
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 184,097 $ 167,377
Accounts receivable, trade, net of allowance for doubtful
accounts of $150,000 in each year (Note 6)............. 19,907,606 19,203,346
Accounts receivable from affiliate (Note 5)............... -- 1,887,391
Income taxes receivable (Notes 1 and 7)................... 219,361 702,971
Inventories (Notes 1, 3 and 6)............................ 13,065,647 13,304,238
Prepaid expenses and other assets......................... 2,031,280 1,208,056
Current deferred taxes (Notes 1 and 7).................... 922,238 737,416
------------ ------------
Total current assets................................... 36,330,229 37,210,795
------------ ------------
Property, plant and equipment, net (Notes 1, 4 and 6)....... 34,637,663 30,592,885
Cash value of life insurance................................ 1,759,410 1,577,954
Other assets................................................ 1,473,183 1,323,636
Investment in and advances to affiliate (Note 5)............ -- 925,894
------------ ------------
Total assets........................................... $ 74,200,485 $ 71,631,164
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations and notes payable
(Notes 6 and 13)....................................... $ 202,847 $ 1,060,922
Trade accounts payable.................................... 9,742,856 7,811,748
Salaries and wages........................................ 3,481,816 3,472,222
Group medical insurance................................... 931,900 821,313
Taxes, other than income taxes............................ 605,757 480,298
Retirement benefits and deferred compensation (Note 8).... 818,103 339,596
Accrued ESOP contribution (Note 8)........................ 1,006,568 --
Other..................................................... 804,197 1,087,954
------------ ------------
Total current liabilities.............................. 17,594,044 15,074,053
============ ============
Long-term obligations and notes payable (Notes 6 and 13).... 41,238,089 27,054,830
Long-term retirement benefits and deferred compensation
(Note 8).................................................. 2,752,499 3,278,630
Long-term deferred income taxes (Notes 1 and 7)............. 1,362,753 1,233,270
Commitments and contingencies (Notes 11 and 13)
Stockholders' equity:
Common stock -- no par value, 8,750,000 shares authorized,
4,801,750 shares issued (Notes 11, 12 and 13).......... 350,000 350,000
Paid in capital........................................... 11,384,837 11,384,837
Retained earnings......................................... 38,211,260 36,449,277
Treasury stock, 2,430,407 and 1,889,573 shares at cost
(Notes 11 and 12)...................................... (38,445,695) (22,723,640)
Minimum pension liability adjustment, net of tax (Note
8)..................................................... (247,302) (470,093)
------------ ------------
Total stockholders' equity............................. 11,253,100 24,990,381
------------ ------------
Total liabilities and stockholders' equity............. $ 74,200,485 $ 71,631,164
============ ============
The accompanying notes are an integral part of this statement.
F-3
111
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED
--------------------------------------------
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
------------ ------------ ------------
Net sales.................................... $172,107,096 $154,506,085 $146,007,312
Cost of goods sold........................... 158,906,460 136,523,283 124,393,208
------------ ------------ ------------
Gross profit............................ 13,200,636 17,982,802 21,614,104
------------ ------------ ------------
Expenses:
Selling.................................... 2,745,837 2,803,663 2,137,483
General and administrative................. 3,986,329 4,403,056 4,307,217
------------ ------------ ------------
Operating profit........................ 6,468,470 10,776,083 15,169,404
Other income (expense):
Interest expense........................... (2,958,124) (1,798,819) (1,057,600)
Other income (expense), net................ (196,281) 242,474 (230,880)
------------ ------------ ------------
Pretax income from operations........... 3,314,065 9,219,738 13,880,924
Provision for income taxes................... 1,017,480 3,553,628 5,319,000
------------ ------------ ------------
Income from operations....................... 2,296,585 5,666,110 8,561,924
Equity income (loss) from Stryker (Note 5)... -- 8,099 (42,728)
------------ ------------ ------------
Net income................................... $ 2,296,585 $ 5,674,209 $ 8,519,196
------------ ------------ ------------
The accompanying notes are an integral part of this statement.
F-4
112
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NUMBER OF SHARES
----------------------------
COMMON
STOCK TREASURY COMMON PAID IN RETAINED TREASURY
OUTSTANDING STOCK STOCK CAPITAL EARNINGS STOCK
---------------- --------- -------- ----------- ----------- ------------
JANUARY 1, 1995.................... 3,582,950 1,218,800 $350,000 $10,079,926 $23,455,420 $ (5,720,129)
Net income......................... 8,519,196
Purchase of treasury stock......... (298,460) 298,460 (6,292,705)
Cash dividends of $.18 per share... (599,501)
Change in minimum pension liability
adjustment.......................
Contribution of treasury stock to
ESOP............................. 18,685 (18,685) 429,179 48,638
Reduction in loan to ESOP..........
--------- --------- -------- ----------- ----------- ------------
DECEMBER 30, 1995.................. 3,303,175 1,498,575 350,000 10,509,105 31,375,115 (11,964,196)
Net income......................... 5,674,209
Purchase of treasury stock......... (424,086) 424,086 (10,845,579)
Cash dividends of $.18 per share... (600,047)
Change in minimum pension liability
adjustment.......................
Contribution of treasury stock to
ESOP............................. 33,088 (33,088) 875,732 86,135
--------- --------- -------- ----------- ----------- ------------
DECEMBER 28, 1996.................. 2,912,177 1,889,573 350,000 11,384,837 36,449,277 (22,723,640)
Net income......................... 2,296,585
Purchase of treasury stock......... (540,834) 540,834 (15,722,055)
Cash dividends of $.20 per share... (534,602)
Change in minimum pension liability
adjustment.......................
--------- --------- -------- ----------- ----------- ------------
JANUARY 3, 1998.................... 2,371,343 2,430,407 $350,000 $11,384,837 $38,211,260 $(38,445,695)
========= ========= ======== =========== =========== ============
MINIMUM
PENSION TOTAL
LIABILITY LOAN TO STOCKHOLDERS'
ADJUSTMENT ESOP EQUITY
---------- --------- -------------
JANUARY 1, 1995.................... $(340,523) $(289,272) $27,535,422
Net income......................... 8,519,196
Purchase of treasury stock......... (6,292,705)
Cash dividends of $.18 per share... (599,501)
Change in minimum pension liability
adjustment....................... 108,087 108,087
Contribution of treasury stock to
ESOP............................. 477,817
Reduction in loan to ESOP.......... 289,272 289,272
--------- --------- -----------
DECEMBER 30, 1995.................. (232,436) -- 30,037,588
Net income......................... 5,674,209
Purchase of treasury stock......... (10,845,579)
Cash dividends of $.18 per share... (600,047)
Change in minimum pension liability
adjustment....................... (237,657) (237,657)
Contribution of treasury stock to
ESOP............................. 961,867
--------- --------- -----------
DECEMBER 28, 1996.................. (470,093) -- 24,990,381
Net income......................... 2,296,585
Purchase of treasury stock......... (15,722,055)
Cash dividends of $.20 per share... (534,602)
Change in minimum pension liability
adjustment....................... 222,791 222,791
--------- --------- -----------
JANUARY 3, 1998.................... $(247,302) $ -- $11,253,100
========= ========= ===========
The accompanying notes are an integral part of this statement.
F-5
113
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED
JANUARY 3, DECEMBER 28, DECEMBER 30,
1998 1996 1995
------------ ------------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................... $ 2,296,585 $ 5,674,209 $ 8,519,196
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation expense......................... 6,659,295 5,551,810 5,084,829
Equity (income) loss from Stryker............ -- (8,099) 42,728
Contribution of treasury stock to ESOP....... -- 961,867 477,817
Loss (gain) on disposal of property, plant
and equipment............................. 191,091 (33,049) 52,664
Change in, excluding effects of acquisitions:
Accounts receivable, trade and other...... 2,989,447 (1,947,507) (4,278,637)
Inventories............................... 571,246 (2,627,894) (8,116)
Accounts payable, trade and accrued
liabilities............................. 1,055,552 585,925 (3,688,036)
Deferred taxes............................ (339,224) 486,673 (278,696)
Other..................................... (1,138,550) (30,525) (518,271)
------------ ------------ -----------
Total adjustments......................... 9,988,857 2,939,201 (3,113,718)
------------ ------------ -----------
Net cash provided by operating activities.... 12,285,442 8,613,410 5,405,478
------------ ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment,
excluding effects of acquisitions............ (6,706,277) (6,594,714) (7,439,097)
Proceeds from sale of property, plant and
equipment.................................... 5,919 -- 8,250
Acquisition of Stryker, net of cash assumed.... (200,000) -- --
Cash assumed in acquisition of Ashland......... -- -- 44,382
------------ ------------ -----------
Net cash used in investing activities........ (6,900,358) (6,594,714) (7,386,465)
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving loan............ (131,000) 10,128,243 7,393,757
Borrowing of long-term debt.................... 11,019,293 -- 8,000,000
Repayment of long-term obligations............. -- (1,084,130) (6,262,184)
Dividends paid................................. (534,602) (600,047) (599,501)
Purchase of treasury stock..................... (15,722,055) (10,845,579) (6,292,705)
------------ ------------ -----------
Net cash (used in) provided by financing
activities................................ (5,368,364) (2,401,513) 2,239,367
------------ ------------ -----------
Increase (decrease) in cash and cash
equivalents.................................. 16,720 (382,817) 258,380
Cash and cash equivalents at beginning of
period....................................... 167,377 550,194 291,814
------------ ------------ -----------
Cash and cash equivalents at end of period..... $ 184,097 $ 167,377 $ 550,194
============ ============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest......................... $ 2,985,453 $ 1,831,683 $ 829,457
Cash paid for income taxes..................... $ 1,192,614 $ 3,005,000 $ 6,126,557
The accompanying notes are an integral part of this statement.
F-6
114
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of Dalton Corporation (formerly known as The Dalton Foundries, Inc.,
the Company or Dalton) and its wholly-owned subsidiaries, Warsaw Manufacturing
Facility (Warsaw), Kendallville Manufacturing Facility (formerly known as Newnam
Manufacturing, Inc., Kendallville), Ashland Manufacturing Facility (formerly
known as Ashland Castings Corporation, Ashland) and Stryker Machining Facility
(formerly known as Economy North, Stryker -- see Note 5). All intercompany
accounts and transactions have been eliminated.
Prior to January 2, 1998, the Company was majority owned by an employee
stock ownership plan (ESOP, see Note 8), with 4.8% of the shares held outside of
the ESOP, primarily by certain key executives and officers of the Company.
Effective January 2, 1998, the Company repurchased all shares held outside of
the ESOP at the market value of the Company's stock as of December 28, 1996
(Note 8), for a total purchase price of $3,492,935. As a result, effective
January 3, 1998 the Company is 100% owned by the ESOP.
DESCRIPTION OF BUSINESS. The Company manufactures and sells grey iron
castings, primarily to the refrigeration, heavy equipment and automotive
industries. The Company operates foundries in Warsaw and Kendallville, Indiana
and Ashland, Ohio and a machining facility in Stryker, Ohio. The Company has no
foreign operations and direct export sales are not significant.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
FISCAL YEAR. The Company's fiscal year ends on the Saturday nearest
December 31. Included in these financial statements are the fiscal years ended
January 3, 1998 (1997 -- 53 weeks), December 28, 1996 (1996 -- 52 weeks), and
December 30, 1995 (1995 -- 52 weeks).
CASH FLOWS. For purposes of the Statement of Cash Flows, the Company
considers all highly liquid instruments with a maturity of three months or less
at date of purchase to be cash and cash equivalents.
INVENTORIES. Inventories are stated at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for approximately 67%
of the Company's inventories. Inventories not valued on LIFO are valued on the
first-in, first-out (FIFO) method.
REVENUE RECOGNITION. Revenues from product sales are recognized at the
time of shipment to the customer.
PROPERTY, PLANT AND EQUIPMENT. Properties are stated at cost. Maintenance
and minor repairs are expensed as incurred. Depreciation for financial reporting
purposes is determined using the straight-line method over the estimated useful
lives of the assets. The estimated lives are 7 to 8 years for land improvements,
7 to 20 years for buildings and improvements, and 2 to 10 years for machinery
and equipment. When property is retired from service or otherwise disposed of,
the cost and related amount of accumulated depreciation are eliminated from the
asset and reserve accounts, with the resulting gain or loss recognized in
income.
INCOME TAXES. The Company records income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes". Deferred income taxes reflect the net tax effects of temporary
differences between the financial reporting carrying values of assets and
liabilities and the income tax carrying amounts.
F-7
115
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS. The fair value of all financial
instruments where the face value differs from the fair value are estimated based
upon the use of current rates available for similar financial instruments. If
fair value accounting had been used at January 3, 1998 instead of the historic
basis of accounting used in the financial statements, long-term debt would be
reduced from the reported level by approximately $600,000.
2. ACQUISITION OF ASHLAND MANUFACTURING FACILITY
On July 1, 1995 the net assets of Ashland were acquired by Dalton. At the
time of the acquisition, the fair value of the assets exceeded the fair value of
the liabilities by $1,887,000. The basis of long-term assets, primarily
machinery and equipment, was reduced by this excess. The purchase agreement
requires that Dalton pay the seller, as purchase price consideration, the lesser
of 50% of Ashland's cumulative net income earned through December 31, 2001 or
$7,000,000. Dalton has made no payments to the seller since the date of
acquisition.
This transaction was recorded as a purchase of assets in accordance with
Accounting Principles Board Opinion No. 16 (APB 16), "Business Combinations".
The results of Ashland subsequent to July 1, 1995 have been included in these
financial statements. These results reflect cumulative net losses of $7,724,338.
3. INVENTORIES
Inventories consist of the following:
JANUARY 3, DECEMBER 28,
1998 1996
----------- ------------
Raw materials and supplies............................. $ 1,651,054 $ 1,342,007
In process and finished goods.......................... 8,434,856 8,754,406
Factory supplies....................................... 2,979,737 3,207,825
----------- -----------
Total inventories............................ $13,065,647 $13,304,238
=========== ===========
If the FIFO method of accounting had been used for all inventories,
inventories would have increased by $1,165,699 at January 3, 1998 and $542,909
at December 28, 1996.
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
JANUARY 3, DECEMBER 28,
1998 1996
----------- ------------
Land and improvements.................................. $ 1,777,812 $ 1,709,710
Buildings and improvements............................. 10,157,540 7,813,421
Machinery and equipment................................ 59,361,016 51,947,021
----------- -----------
71,296,368 61,470,152
Accumulated depreciation............................... (37,874,273) (32,244,594)
----------- -----------
33,422,095 29,225,558
Construction in progress............................... 1,215,568 1,367,327
----------- -----------
Net property, plant and equipment...................... $34,637,663 $30,592,885
----------- -----------
F-8
116
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. STRYKER MACHINING FACILITY
Prior to January 2, 1997, the Company owned a 50% interest in Stryker.
Stryker machines castings produced by Kendallville and sells the finished
castings primarily within the automotive industry. This investment was accounted
for using the equity method of accounting.
Effective January 2, 1997, the Company purchased from its joint venture
partner the remaining 50% interest in Stryker, for a purchase price of
$1,000,000, $200,000 payable in cash and the balance in the form of an
interest-free installment note payable in equal annual payments over a five year
period. Based upon its non-cash nature, the installment note payable has not
been reflected within the Statements of Cash Flows. The net present value of the
purchase price approximated the book value of the remaining 50% interest. This
transaction was accounted for as a purchase transaction in accordance with APB
16.
Sales of castings to Stryker were $5,503,725 in 1996 and $5,584,428 in
1995. Management fees charged to Stryker were $12,000 in 1996 and 1995. All such
amounts in 1997 have been eliminated as the results of Stryker have been
consolidated with the Company subsequent to the purchase of the remaining 50%
ownership interest.
A summary of Stryker's financial information for 1996 and 1995 is as
follows:
DECEMBER 31,
------------------------
1996 1995
---------- ----------
Cash...................................................... $ 57,588 $ 98,573
Trade accounts receivable................................. 1,223,954 1,108,272
Inventories............................................... 332,655 294,074
Other assets.............................................. 188,245 75,033
Property and equipment, net............................... 4,228,721 4,694,814
---------- ----------
Total assets......................................... $6,031,163 $6,270,766
========== ==========
Accounts payable to Kendallville.......................... $1,887,391 $1,512,952
Advances payable to Kendallville.......................... 31,583 31,583
Other current liabilities................................. 785,735 807,372
Long-term obligations..................................... 1,537,832 2,146,435
Stockholders' equity...................................... 1,788,622 1,772,424
---------- ----------
Total liabilities and stockholders' equity........... $6,031,163 $6,270,766
========== ==========
FOR THE YEAR ENDED
DECEMBER 31,
------------------------
1996 1995
---------- ----------
Net sales................................................. $9,191,675 $9,004,353
========== ==========
Net income (loss)......................................... $ 16,197 $ (85,455)
========== ==========
F-9
117
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM OBLIGATIONS AND NOTES PAYABLE
Long-term obligations and notes payable consist of the following:
JANUARY 3, DECEMBER 28,
1998 1996
----------- ------------
Revolving and reducing line of credit.................. $20,000,000 $ 7,000,000
Revolving line of credit............................... 20,691,000 20,822,000
Capital lease obligations, 10%......................... 2,847 60,922
Borrowings against cash value of insurance policies,
5%................................................... 232,830 232,830
Notes payable.......................................... 514,259 --
----------- -----------
Total obligations and notes payable.................... 41,440,936 28,115,752
Amounts due within one year............................ (202,847) (1,060,922)
----------- -----------
Long-term obligations and notes payable................ $41,238,089 $27,054,830
=========== ===========
The Company negotiated a number of modifications to its two primary
outstanding debt obligations during the course of fiscal 1997. The commitment
under the revolving and reducing line of credit was increased to $20,000,000,
payable in annual installments beginning in May 1999, with a balloon payment in
May 2002. The first annual installment due in May 1999 is $2,000,000, with
annual installments due in May 2000 and 2001 of $2,670,000. The facility bears
interest at a fixed rate of 8.56% for its entire term, with interest payable
monthly.
The commitment under the revolving line of credit was increased to
$25,000,000 during the year. Interest on amounts outstanding under the facility
are charged at a rate which floats with LIBOR and the Company's Tangible Net
Worth Ratio, as defined in the loan agreement, and is payable monthly. The
interest rate approximated 9.465% as of January 3, 1998. The revolving line of
credit expires in May 1999, with a one-year renewal option if the Company
maintains compliance with terms of the agreement and certain covenants. Amounts
available under the revolving line of credit are also subject to a borrowing
base computation based upon receivable and inventory balances. As of January 3,
1998, the borrowing base computation indicated available borrowings under the
facility of $22,740,000.
Each of the above debt obligations are secured by substantially all of the
assets of the Company, including accounts receivable, inventories and property,
plant and equipment. The obligations are jointly and severally guaranteed by the
Company and all its subsidiaries. The Company is subject to certain covenants in
relation to the above debt obligations, including the maintenance of a minimum
level of Tangible Net Worth, a maximum ratio of Total Liabilities to Tangible
Net Worth, and a minimum Debt Service ratio as defined in the loan agreements.
As of January 3, 1998, the Company was not in compliance with certain of these
covenants, which could effectively result in the obligations being callable on
demand. See Note 13 for subsequent actions taken by the lenders with respect to
such non-compliance.
The outstanding notes payable of $514,259 at January 3, 1998 represents the
present value of the remaining installments due in relation to the acquisition
of Stryker (Note 5). Annual equal installments are due under the interest-free
note through 2001.
F-10
118
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled payments under the Company's debt agreements as of January 3,
1998 are as follows:
1998.......................................... $ 202,847
1999.......................................... 22,841,996
2000.......................................... 2,833,263
2001.......................................... 2,670,000
2002.......................................... 12,660,000
Thereafter.................................... 232,830
-----------
Total......................................... $41,440,936
===========
7. INCOME TAXES
At January 3, 1998, deferred tax assets consist primarily of temporary
differences associated with accruals such as pensions, deferred compensation
liabilities, self-insurance reserves, employee benefits and environmental
accruals, along with state operating loss carryforwards at Ashland. Deferred tax
liabilities relate to temporary differences primarily associated with property,
plant and equipment due to accelerated methods of depreciation for tax purposes.
Components of the net deferred tax liability are as follows:
JANUARY 3, DECEMBER 28,
1998 1996
------------ ------------
Deferred tax assets................................... $ 4,045,405 $ 3,349,762
Deferred tax liabilities.............................. (3,862,059) (3,428,116)
------------ ------------
183,346 (78,354)
Valuation allowances.................................. (623,861) (417,500)
------------ ------------
Net deferred tax liability............................ $ (440,515) $ (495,854)
============ ============
A full valuation allowance has been recorded at January 3, 1998 and
December 28, 1996 relating to the net state deferred tax assets at Ashland,
including operating loss carryforwards. An operating loss carryforward of
$14,115,000 is available for Ohio State tax purposes, with expiration dates in
2010 through 2012.
The provision for income taxes consists of the following:
1997 1996 1995
---------- ---------- ----------
Current income taxes:
Federal.................................. $1,235,179 $1,797,665 $4,481,000
State.................................... 241,486 1,141,322 1,175,000
---------- ---------- ----------
Total current.............................. 1,476,665 2,938,987 5,656,000
Deferred income taxes:
Federal.................................. (394,379) 649,655 (303,000)
State.................................... (64,806) (35,014) (34,000)
---------- ---------- ----------
Total deferred............................. (459,185) 614,641 (337,000)
---------- ---------- ----------
Total provision for income taxes........... $1,017,480 $3,553,628 $5,319,000
---------- ---------- ----------
F-11
119
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the statutory Federal income tax rate to the effective
income tax rate for each fiscal year is as follows:
1997 1996 1995
---- ---- ----
Federal income tax at statutory rate........................ 34.0% 34.0% 34.0%
State income tax, net of Federal benefit.................... 3.5 7.9 5.4
ESOP dividend............................................... (5.5) (2.2) (1.5)
Other....................................................... (1.3) (1.2) 0.4
---- ---- ----
Effective income tax rate................................... 30.7% 38.5% 38.3%
On March 2, 1998, the Company filed an election to be treated as an
S-Corporation for income tax purposes effective January 4, 1998. As a result of
this election, the Company will no longer be subject to Federal and state income
taxes, other than potential taxes resulting from the disposal of assets within a
ten-year period of the election or non-income based taxes. With this change in
tax status, the deferred tax accounts and other income tax accounts of the
Company will be adjusted in fiscal 1998 to take into account the new tax status
of the Company, subject to the maintenance of certain tax liabilities associated
with potential taxes due upon the disposition of assets subsequent to the
effective date of the S-Corporation election.
8. RETIREMENT BENEFITS AND DEFERRED COMPENSATION
Accrued retirement benefits and deferred compensation consist of the
following:
JANUARY 3, DECEMBER 28,
1998 1996
---------- ------------
Defined benefit plan..................................... $1,578,197 $1,922,806
Supplemental benefits.................................... 1,800,826 1,518,194
Defined contribution plans............................... 126,550 103,329
Multi-employer plan...................................... 45,390 36,376
Other.................................................... 19,639 37,521
---------- ----------
3,570,602 3,618,226
Amounts to be paid within one year....................... (818,103) (339,596)
---------- ----------
Long-term retirement benefits and
deferred compensation.................................. $2,752,499 $3,278,630
========== ==========
DEFINED BENEFIT PLAN. Substantially all of the Company's employees in the
Warsaw bargaining units are covered by a non-contributory defined benefit
pension plan. The plan provides benefits of stated amounts for each year of
service.
The Company's pension expense was determined in accordance with SFAS No.
87, "Employers' Accounting for Pensions". The discount rate used was 7.25% for
all fiscal years. The assumed long-term rate of return on assets was 7.50% for
all fiscal years.
F-12
120
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Net pension expense consists of the following for each fiscal year:
1997 1996 1995
--------- --------- ---------
Service cost -- benefits earned during the
period..................................... $ 389,411 $ 363,655 $ 313,182
Interest on projected benefit obligation..... 501,806 430,603 394,839
Amortization of transition liability......... 26,437 26,437 26,437
Amortization of prior service cost........... 23,251 23,251 23,251
Actual return on plan assets................. (820,660) (418,620) (664,568)
Unrecognized net gain........................ 427,313 78,565 387,168
--------- --------- ---------
Net pension expense.......................... $ 547,558 $ 503,891 $ 480,309
========= ========= =========
The funded status of the Company's defined benefit pension plan and the net
accrued pension liability recognized in the Company's consolidated Balance Sheet
consists of the following:
1997 1996
---------- ----------
Actuarial present value of benefit obligations:
Vested.................................................. $7,272,722 $6,544,105
Nonvested............................................... 457,705 519,208
---------- ----------
Projected benefit obligation.............................. 7,730,427 7,063,313
Plan assets at fair value................................. 6,152,230 5,140,507
---------- ----------
Projected benefit obligation in excess of plan assets..... 1,578,197 1,922,806
Unrecognized prior service cost........................... (209,263) (232,514)
Unrecognized net liability at January 4, 1987 being
recognized over 15 years................................ (105,760) (132,197)
Unrecognized net gains.................................... (380,463) (723,215)
Recorded additional minimum liability..................... 695,486 1,087,926
---------- ----------
Accrued pension liability................................. $1,578,197 $1,922,806
========== ==========
The Company has recognized the amount of the projected benefit obligation
in excess of plan assets as a liability in its financial statements. An
intangible asset of $315,023 and $364,711 was recorded at January 3, 1998 and
December 28, 1996 with the remaining $380,463 and $723,215 of the minimum
liability recorded as a reduction of stockholders' equity, net of tax.
SUPPLEMENTAL BENEFITS. The Company provides supplemental retirement
benefits and death benefits for certain executives. As a method of funding a
portion of the benefits under this plan, the Company purchased and is the
beneficiary of life insurance policies with a cash value of $1,759,410 and a
face value of $3,246,392 at January 3, 1998. Provisions for these benefits are
charged to operations over the employees' expected terms of employment. Expense
of the plan, net of the increase in cash value of life insurance policies, was
$244,431 in 1997, $286,577 in 1996, and $253,763 in 1995.
DEFINED CONTRIBUTION PLANS. The Company maintains defined contribution
plans for substantially all non-union employees and Ashland union employees.
Participants may contribute up to 10% of their compensation on a pretax basis.
The Company may make contributions to the plans at its discretion. The expense
associated with these plans was $126,550 in 1997, $103,329 in 1996, and $82,643
in 1995. Warsaw also has a defined contribution plan for the union employees.
Participants may contribute up to 15% of their compensation on a pretax basis
and an additional 10% on a posttax basis. The Company does not make
contributions to the Plan.
F-13
121
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MULTI-EMPLOYER PLAN. Substantially all of Kendallville's hourly employees
are covered by a union-sponsored multi-employer defined benefit pension plan. As
long as the Company remains a participant in this plan, its obligation is
satisfied by its defined contributions. Information is not available for the
union-sponsored plan to permit Kendallville to determine its share of any
unfunded vested benefits. Contributions to the Plan are established under a
collective bargaining agreement and charges to operations related to this plan
totaled $477,106 in 1997, $451,678 in 1996, and $391,623 in 1995.
EMPLOYEE STOCK OWNERSHIP PLAN. All employees of the Corporate location and
all non-union employees of the Company's Warsaw operation and Kendallville
operation participate in the ESOP. Effective January 1, 1996, all non-union
employees of the Ashland operation began participating in the ESOP. Effective
January 1, 1997, all employees of the Stryker facility also began participating
in the ESOP. The amount of the Company's annual contribution to the ESOP is at
the discretion of the Board of Directors. The total contribution is allocated to
participants based upon participant compensation. There is no outstanding debt
under the ESOP and all shares have been released and allocated. Historically,
the Company has funded a portion of its annual ESOP contribution with Company
stock. The market value of the Company's stock, as determined by an independent
appraiser, was $29.07 per share at December 28, 1996. There has been no updated
appraisal of stock value as of January 3, 1998. During 1997 the Company funded
its entire ESOP contribution with a cash contribution and in 1995 the
contribution was partially funded by cash. The Company's ESOP contributions for
each fiscal year were as follows:
1997 1996 1995
---------- -------- --------
Contribution based on compensation............. $1,006,568 $961,867 $847,308
========== ======== ========
9. SIGNIFICANT CUSTOMERS
The Company sells its products primarily to large industrial companies.
During each fiscal year, two customers individually comprised more than 10% of
sales. One customer comprised 17% of sales in 1997, and 20% of sales in 1996 and
1995, while the other customer comprised 12% of sales in 1997 and 1996, and 15%
of sales in 1995. At January 3, 1998 these two customers and one additional
customer collectively comprised 27% of trade accounts receivable. The Company
generally does not require collateral as a basis for granting credit.
10. LEASES
The Company maintains several operating leases with terms in excess of one
year. Minimum payments are approximately $320,000 in 1998, $200,000 in 1999 and
are approximately $100,000 in each of the three years subsequent to 1999. Lease
expense in fiscal 1997 was approximately $675,000 and was minimal in the other
two fiscal years.
11. COMMITMENTS AND CONTINGENCIES
STOCK REPURCHASE OBLIGATION. When employees leave the Company they are
required to put, and the Company is obligated to purchase, all of their Dalton
common shares at an appraised price. The repurchase of these shares is generally
paid in equal annual installments over a five year period as allowed under the
ESOP. The Company is obligated to purchase approximately $23,560,770 of Company
stock from employees who have terminated or retired prior to January 3, 1998.
There has been no appraisal update for the 1997 year-end, therefore, this amount
is based upon the appraised price of the stock as of December 28, 1996, and is
subject to change based upon future appraised values.
F-14
122
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Repurchase commitments over the next five years, based upon the December
28, 1996 stock valuation, are as follows:
1998............................................ $6,268,384
1999............................................ $6,051,822
2000............................................ $6,051,822
2001............................................ $3,769,942
2002............................................ $1,418,800
See Note 13 for subsequent events impacting the stock repurchase
obligation.
MEDICAL BENEFITS AND WORKERS' COMPENSATION. The Company is essentially
self-insured with respect to medical benefits and maintains excess insurance
coverage to limit its exposure. The Company is also self-insured for workers'
compensation exposures at the Warsaw operation and maintains excess insurance
coverage limiting its exposure to no more than $275,000 per accident. The
Company pays all Warsaw claims below the insured level. The Company charges the
expected ultimate costs of self-insured claims to income in the period the
accident or illness occurs. At January 3, 1998 the Company had accrued
$1,391,000 for reported and unreported medical and workers' compensation claims.
Actual costs may be different than this estimate.
ENVIRONMENTAL. The Company has been identified by the United States
Environmental Protection Agency (EPA) as a Potentially Responsible Party (PRP)
under Superfund legislation because industrial wastes were allegedly sent to two
hazardous waste sites (Wayne Reclamation Superfund site and Lakeland Superfund
site). Dalton has entered into a consent decree filed with the U.S. District
Court for the Wayne Reclamation Superfund site. All involved parties have
accepted the consent decree, and it is pending approval by the court. Dalton is
one of 16 defendants at the Lakeland Superfund site. Dalton has been previously
dismissed from the PRP list at this site; however, during 1997, the plaintiffs
appealed the dismissal previously entered in Dalton's favor. During February
1998, the Company reached an agreement with the EPA to settle its obligation for
the Lakeland Superfund site. The amount owed under the terms of the settlement
approximates the accrued amount recorded at January 3, 1998.
The Company is also in the process of closing an on-site surface
impoundment. The amount accrued relative to this closure represents the
estimated total clean up, monitoring and administrative costs associated with
this closure. This project has been substantially completed as of January 3,
1998. The Company also operates an operating landfill at which on-going
environmental monitoring costs will be incurred.
Total accruals for environmental liabilities are $150,370 at January 3,
1998.
12. COMMON STOCK SPLIT
Effective August 1, 1996, the Board of Directors approved an increase in
the number of authorized common shares to 8,750,000 and simultaneously declared
a five-for-one stock split on the Company's common stock. All share and per
share data included in this report reflect this stock split.
13. SUBSEQUENT EVENTS
On July 28, 1998, the Company had a fire at the Warsaw operation. There is
no current estimate of damages, however, the Company is fully insured for
property damage subject to a minimal deductible of $25,000. There were no
reported personal injuries and the Company did not suffer significant business
interruption as a result of the fire.
F-15
123
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
On August 7, 1998, the Company entered into an agreement to sell all its
operations to Neenah Foundry Company (Neenah) for a purchase price of
$102,000,000, less amounts due under outstanding debt agreements and subject to
certain other adjustments. The agreement was subject to shareholder and
regulatory approval, which was received, and the transaction closed September 8,
1998. With consummation of the transaction, the ESOP was terminated, pending
approval from the Internal Revenue Service, and all shares were acquired.
Furthermore, certain "change in control" provisions of select benefit agreements
may be activated as a result of the transaction.
Effective August 14, 1998, the Company's primary lenders formally waived
their rights with respect to certain covenant violations to accelerate payment
of amounts outstanding under the bank term loan and the revolving loan through
May 31, 1999, the scheduled expiration date of the revolving loan agreement.
Based upon the waiver of compliance, the amounts outstanding under these loan
agreements were classified as long-term within the Balance Sheet. With
consummation of the sale transaction to Neenah on September 8, 1998, all
outstanding debt obligations were paid in full from the sale proceeds.
F-16
124
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL OR
BUY ANY SHARES IN ANY JURISDICTION WHERE IT IS UNLAWFUL. THE INFORMATION IN THIS
PROSPECTUS IS CURRENT AS OF , 1999.
------------------------
TABLE OF CONTENTS
Prospectus Summary................... 1
Risk Factors......................... 11
Use of Proceeds...................... 18
Capitalization....................... 19
Selected Consolidated Financial and
Other Data......................... 20
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................. 30
Management........................... 49
Ownership of Securities.............. 53
Certain Relationships and Related
Transactions....................... 53
Description of Senior Bank
Facilities......................... 54
Description of Notes................. 58
Exchange Offer....................... 92
Certain United States Federal Income
Tax Considerations................. 98
Plan of Distribution................. 99
Legal Matters........................ 100
Experts.............................. 100
Incorporation of Certain Documents by
Reference.......................... 101
Available Information................ 102
Index to the Financial Statements of
Dalton Corporation................. F-1
UNTIL , 1999 ([ ] DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES, WHETHER OR NOT PARTICIPATING
IN THIS EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$87,000,000
11 1/8% SENIOR SUBORDINATED NOTES
DUE 2007
[NEENAH CORPORATION LOGO]
------------------------
PROSPECTUS
------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
125
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 180.0850 to 180.0859 of the Wisconsin Statutes require a
corporation to indemnify any director or officer who is a party to any
threatened, pending or completed civil, criminal, administrative or
investigative action, suit, arbitration or other proceeding, whether formal or
informal, which involves foreign, federal, state or local law and which is
brought by or in the right of the corporation or by any other person. A
corporation's obligation to indemnify any such person includes the obligation to
pay any judgment, settlement, penalty, assessment, forfeiture or fine, including
any excise tax assessed with respect to an employee benefit plan, and all
reasonable expenses including fees, costs, charges, disbursements, attorney's
and other expenses except in those cases in which liability was incurred as a
result of the breach or failure to perform a duty which the director or officer
owes to the corporation and the breach or failure to perform constitutes: (i) a
willful failure to deal fairly with the corporation or its shareholders in
connection with a matter in which the director or officer has a material
conflict of interest; (ii) a violation of criminal law, unless the person has
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful; (iii) a transaction from which the person
derived an improper personal profit; or (iv) willful misconduct.
Unless otherwise provided in a corporation's articles of incorporation or
by-laws or by written agreement, an officer or director seeking indemnification
is entitled to indemnification if approved in any of the following manners: (i)
by majority vote of a disinterested quorum of the board of directors, or if such
quorum of disinterested directors cannot be obtained, by a majority vote of a
committee or two or more disinterested directors; (ii) by independent legal
counsel; (iii) by a panel of three arbitrators; (iv) by affirmative vote of
shareholders; (v) by a court; or (vi) with respect to any additional right to
indemnification granted by any other method permitted in Section 180.0859 of the
Wisconsin Statutes.
Reasonable expenses incurred by a director or officer who is a party to a
proceeding may be reimbursed by a corporation at such time as the director or
officer furnishes to the corporation written affirmation of his good faith
belief that he has not breached or failed to perform his duties and a written
undertaking to repay any amounts advanced if it is determined that
indemnification by the corporation is not required.
The indemnification provisions of Sections 180.0850 to 180.0859 are not
exclusive. A corporation may expand an officer's or director's right to
indemnification (i) in its articles of incorporation or by-laws; (ii) by written
agreement, (iii) by resolution of its board of directors; or (iv) by resolution
of a majority of all of the corporation's voting shares then issued and
outstanding.
As permitted by Section 180.0859, the Registrant has adopted
indemnification provisions in its By-Laws which closely track the statutory
indemnification provisions with certain exceptions. In particular, Article VIII
of the Registrant's By-Laws provides that payment or reimbursement of expenses,
subject to certain limitations, will be mandatory rather than permissive.
The Registrant maintains and has in effect insurance policies covering all
of their respective directors and officers against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
See Exhibit Index
(b) Financial Statement Schedules.
II-1
126
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering; and
(4) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(5) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described under
Item 20 or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
127
The undersigned registrant hereby undertakes that:
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date
of the registration statement through the date of responding to the
request.
(9) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-3
128
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
NEENAH FOUNDRY COMPANY
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitutes, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive
- --------------------------------------------- Officer (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and
- --------------------------------------------- Engineering
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------
Brenton S. Halsey
II-4
129
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
Hartley Controls Corporation
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief Executive
Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute, may do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and Secretary
- --------------------------------------------- (principal financial officer and accounting officer)
Gary W. LaChey
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------
Brenton S. Halsey
II-5
130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
NEENAH TRANSPORT, INC.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-6
131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
DEETER FOUNDRY, INC.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-7
132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
MERCER FORGE CORPORATION
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and
Chief Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999:
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and
- --------------------------------------------------- Chief Executive Officer
James K. Hildebrand (principal executive officer)
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M.KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-8
133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
A & M SPECIALTIES, INC.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary
Gary W. LaChey (principal financial officer and accounting
officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-9
134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
ADVANCED CAST PRODUCTS, INC.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-10
135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
BELCHER CORPORATION
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-11
136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
PEERLESS CORPORATION
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-12
137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
DALTON CORPORATION
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer
James K. Hildebrand (principal executive officer)
/s/ WILLIAM M. BARRETT President
- -----------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- ----------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and
- ----------------------------------------------------- Engineering
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- -----------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- -----------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- -----------------------------------------------------
Brenton S. Halsey
II-13
138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
DALTON CORPORATION,
WARSAW MANUFACTURING FACILITY
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-14
139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
DALTON CORPORATION,
ASHLAND MANUFACTURING FACILITY
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-15
140
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
DALTON CORPORATION,
KENDALLVILLE MANUFACTURING FACILITY
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-16
141
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
STRYKER MACHINING FACILITY CO.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer
Gary W. LaChey and accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-17
142
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Neenah,
State of Wisconsin, on February 16, 1999.
NIEMIN PORTER & CO.
By: /s/ JAMES K. HILDEBRAND
------------------------------------
Name: James K. Hildebrand
Title: Chairman and Chief
Executive Officer
POWER OF ATTORNEY
The undersigned hereby severally constitute and appoint Gary W. LaChey for
the undersigned in any and all capacities, with the power of substitution, to
sign any amendment to this Registration Statement, and to file the same with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney on Form S-4 has been signed by the
following persons in the capacities and on February 16, 1999.
SIGNATURE CAPACITY
--------- --------
/s/ JAMES K. HILDEBRAND Chairman of the Board and Chief Executive Officer
- --------------------------------------------------- (principal executive officer)
James K. Hildebrand
/s/ WILLIAM M. BARRETT President
- ---------------------------------------------------
William M. Barrett
/s/ GARY W. LACHEY Vice President -- Finance, Treasurer and
- --------------------------------------------------- Secretary (principal financial officer and
Gary W. LaChey accounting officer)
/s/ CHARLES M. KURTTI Vice President -- Manufacturing and Engineering
- ---------------------------------------------------
Charles M. Kurtti
/s/ DAVID F. THOMAS Director
- ---------------------------------------------------
David F. Thomas
/s/ JOHN D. WEBER Director
- ---------------------------------------------------
John D. Weber
/s/ BRENTON S. HALSEY Director
- ---------------------------------------------------
Brenton S. Halsey
II-18
143
EXHIBIT INDEX
EXHIBITS
- --------
2.1 Agreement and Plan of Reorganization, dated November 20,
1996, by and among NFC Castings, Inc., NC Merger Company and
Neenah Corporation.**
2.2 First Amendment to Agreement and Plan of Reorganization,
dated as of January 13, 1997, by and among NFC Castings,
Inc., NC Merger Company and Neenah Corporation.**
2.3 Second Amendment to Agreement and Plan of Reorganization,
dated as of February 21, 1997, by and among NFC Castings,
Inc., NC Merger Company and Neenah Corporation.**
2.4 Third Amendment to Agreement and Plan of Reorganization,
dated as of April 3, 1997, by and among NFC Castings, Inc.,
NC Merger Corporation.**
2.5 Merger Agreement, made as of July 1, 1997, by and between
Neenah Corporation and Neenah Foundry Company.**
2.6 Stock Purchase Agreement for the acquisition of Deeter
Foundry, Inc. dated as of March 26, 1998 by and among Neenah
Foundry Company and the Selling Shareholders of Deeter
Foundry, Inc. (incorporated by reference to the Company's
Form 10-Q for the period ended March 31, 1998 filed on May
14, 1998.)
2.7 Stock Purchase Agreement for the acquisition of Mercer dated
as of April 3, 1998 by and among Neenah Foundry Company,
Mercer Forge Corporation and the Selling Shareholders of
Mercer (incorporated by reference to the Company's Form 8-K
filed on April 14, 1998.)
2.8 Stock Purchase Agreement for the acquisition of Dalton dated
as of August 7, 1998 by and among Neenah Foundry Company,
Dalton Corporation and the Dalton Corporation Employee Stock
Ownership Plan and Trust (incorporated by reference to the
Company's Form 8-K filed on September 21, 1998.)
2.9 Stock Purchase Agreement dated as of December 3, 1998 among
Niemin Porter & Co. d/b/a Cast Alloys, Inc., the Sellers as
defined therein and Neenah Foundry Company.*
2.10 First Amendment to the Stock Purchase Agreement dated
December 30, 1998 among Niemin Porter & Co. d/b/a Cast
Alloys, Inc., the Sellers as defined therein and Neenah
Foundry Company.*
3.1 Restated Articles of Incorporation of Neenah Foundry
Company.**
3.2 By-laws of Neenah Foundry Company.**
3.3 (Intentionally omitted.)
3.4 (Intentionally omitted.)
3.5 Restated Articles of Incorporation of Hartley Controls
Corporation.**
3.6 By-laws of Hartley Controls Corporation.**
3.7 Restated Articles of Incorporation of Neenah Transport,
Inc.**
3.8 By-laws of Neenah Transport, Inc.**
4.1 Indenture dated as of April 30, 1997 among NC Merger Company
and United States Trust Company of New York.**
4.2 Purchase Agreement dated as of April 23, 1997 among NC
Merger Company, Chase Securities Inc. and Morgan Stanley &
Co. Incorporated.**
4.3 Exchange and Registration Rights Agreement dated as of April
30, 1997 among Neenah Corporation, Neenah Foundry Company,
Hartley Controls Corporation and Neenah Transport, Inc. and
Chase Securities, Inc.**
4.4 First Supplemental Indenture, dated as of April 30, 1997
among Neenah Corporation, Neenah Foundry Company, Neenah
Transport, Inc. and Hartley Controls Corporation and United
States Trust Company of New York.**
144
EXHIBITS
- --------
4.5 Letter Agreement, dated as of April 30, 1997 among Neenah
Corporation, Neenah Foundry Company, Hartley Controls
Corporation and Neenah Transport, Inc. and Chase Securities
Inc. and Morgan Stanley & Co. Incorporated.**
4.6 Form of Global Note relating to the Indenture dated as of
April 23, 1997.**
4.7 Indenture dated as of July 1, 1997 among Neenah Corporation,
Neenah Foundry Company, Neenah Transport, Inc., Hartley
Controls Corporation and United States Trust Company of New
York.**
4.8 Purchase Agreement dated as of June 26, 1997 among Neenah
Corporation, Neenah Foundry Company, Hartley Controls
Corporation, Neenah Transport, Inc. and Chase Securities
Inc.**
4.9 Exchange and Registration Rights Agreement dated as of July
1, 1997 by and between Neenah Corporation, Neenah Foundry
Company, Hartley Controls Corporation, Neenah Transport,
Inc. and Chase Securities, Inc.**
4.10 Form of Global Note related to the Indenture dated as of
July 1, 1997.**
4.11 Indenture dated as of November 24, 1998 among Neenah Foundry
Company, Neenah Transport, Inc., Hartley Controls
Corporation, the Guarantors and United States Trust Company
of New York.*
5.1 Opinion and Consent of Kirkland & Ellis.*
8.1 Opinion of Kirkland & Ellis as to federal income tax
consequences.*
10.1 Master Lease Agreement between Neenah Foundry Company and
Bank One Leasing Corporation dated December 14, 1992.**
10.2 Agreement between Neenah Foundry Company and Rockwell
International Corporation effective April 1, 1995.**
10.3 Letter Agreement between Neenah Foundry Company and Eaton
Corporation dated April 4, 1996.**
10.4 (Internationally omitted).
10.5 1996-1998 Collective Bargaining Agreement between Neenah
Foundry Company and Local 121B Glass, Molders, Pottery,
Plastics and Allied Workers International Union
AFL-CIO-CLC.**
10.6 1998-2000 Collective Bargaining Agreement between Neenah
Foundry Company and The Independent Patternmakers Union of
Neenah, Wisconsin.***
10.7 Credit Agreement dated as of April 30, 1997 as Amended and
Restated as of September 12, 1997, as of April 3, 1998, and
as of September 8, 1998 by and among Neenah Foundry Company,
NFC Castings, Inc., the Chase Manhattan Bank as
Administrative Agent, Chase Securities, Inc. as Arranger and
the other Lenders from time to time party thereto
(incorporated by reference to the Company's Form 8-K filed
on September 21, 1998)
10.8 Employment Agreement dated September 9, 1994 between the
Neenah Corporation, Neenah Foundry Company, Harley Controls
Corporation, Neenah Transport, Inc. and James P. Keating,
Jr.**
10.9 Consulting Agreement dated September 9, 1994 between the
Neenah Foundry Company and the Guarantors and James P.
Keating, Jr.**
10.10 First Amendment to Employment Agreement, dated September 9,
1994, between Neenah Foundry Company, Neenah Corporation,
Hartley Controls Corporation and James P. Keating, Jr.**
10.11 Pledge Agreement dated as of April 30, 1997, among NC Merger
Company, a Wisconsin Corporation, NFC Castings, Inc., a
Delaware Corporation.**
145
EXHIBITS
- --------
10.12 Subsidiary Guarantee Agreement dated as of April 30, 1997,
among each of the subsidiaries listed of NC Merger Company,
a Wisconsin corporation, and The Chase Manhattan Bank, a New
York banking corporation, as collateral agent for the
secured parties.**
10.13 Parent Guarantee Agreement dated as of April 30, 1997,
between NFC Castings, Inc., a Delaware corporation and The
Chase Manhattan Bank, a New York banking corporation, as
collateral agent for the secured parties.**
10.14 Security Agreement dated as of April 30, 1997, among NC
Merger Company, a Wisconsin corporation, each subsidiary of
the borrower and The Chase Manhattan Bank, a New York
banking corporation, as collateral agent for the secured
parties.**
10.15 Form of Mortgage.**
10.16 Amendment No. 1, Consent and Waiver, dated as of November
18, 1998, to the Credit Agreement dated as of April 30, 1997
as Amended and Restated as of September 12, 1997, as of
April 3, 1998, and as of September 8, 1998 by and among
Neenah Foundry Company, NFC Castings, Inc., the Lenders from
time to time party thereto, and the Chase Manhattan Bank.***
10.17 Cash Collateral Account Agreement dated as of November 24,
1998, between Neenah Foundry Company and the Chase Manhattan
Bank.***
10.18 Executive Employment and Consulting Agreement dated
September 15, 1998 by and among Neenah Foundry Co., Advanced
Cast Products, Inc., ACP Holding Co., ACP Products, LLC and
James K. Hildebrand.***
10.19 Dalton Corporation, K.L. Davidson Employment Agreement dated
September 8, 1998.***
10.20 Purchase Agreement dated November 19, 1998 among Neenah
Foundry Company, Neenah Transport, Inc., Hartley Controls
Corporation, the Guarantors and the Initial Purchasers.*
10.21 Exchange and Registration Rights Agreement dated November
24, 1998 among Neenah Foundry Company Neenah Transport,
Inc., Hartley Controls Corporation, the Guarantors and the
Initial Purchasers.*
12.1 Computation of Ratio of Earnings to Fixed Charges.*
21.1 Subsidiaries of the Registrant.*
23.1 Consent of Ernst & Young LLP.*
23.2 Consent of PricewaterhouseCoopers LLP.*
23.3 Consent of KPMG LLP.*
23.4 Consent of Kirkland & Ellis (included in exhibit 5.1).*
24.1 Powers of Attorney (included in signature pages).*
25.1 Statement of Eligibility of Trustee on Form T-1.*
27.1 Financial Data Schedule.***
27.2 Financial Data Schedule (Incorporated by Reference to the
Company's Form 10-Q for the period ended December 31, 1998
filed on February 11, 1999).
146
EXHIBITS
- --------
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
- ---------------
* Filed herewith.
** Incorporated by reference to the Company's Form S-4 (Registration No.
333-28751) which became effective August 29, 1997.
*** Incorporated by reference to the Company's Form 10-K (Registration No.
332-28751) which was filed December 23, 1998.