1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO.2 TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: November 19, 1998 NEENAH FOUNDRY COMPANY (Exact name of registrant as it appears in its charter) Wisconsin 333-28751 39-1580331 (State or other jurisdiction of (Commission File Number)(IRS Employer ID Number) incorporation or organization) 2121 Brooks Avenue, P.O. Box 729, Neenah, Wisconsin 54957 (Address of principal executive offices) (Zip Code) (920) 725-7000 (Registrant's telephone number, including area code) None (Former name or former address if changed since last report) 2 Neenah Foundry Company (the "Company) hereby amends Item 7 of the Company's Form 8-K dated November 6, 1998 reporting the Company's acquisition of all of the issued and outstanding stock of Dalton Corporation ("Dalton") to adjust the Dalton financial statements as of July 4, 1998 and January 3, 1998 and for the six month periods ended July 4, 1998 and June 28, 1997 and the pro forma financial statements. The amended items are as follows: ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial Statements of Business Acquired - As of July 4, 1998 and January 3, 1998 and for the six month periods ended July 4, 1998 and June 28, 1997 - Condensed Consolidated Balance Sheets - Condensed Consolidated Statements of Income - Condensed Consolidated Statements of Cash Flows - Notes to Condensed Consolidated Financial Statements (b) Pro Forma Financial Information - Pro Forma Consolidated Balance Sheet as of June 30, 1998 and related notes - Pro Forma Consolidated Statement of Income for the nine months ended June 30, 1998 and related notes 3 DALTON CORPORATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JULY 4, 1998 4 DALTON CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) July 4 January 3 1998 1998(1) ----------- --------- (Unaudited) ASSETS Current assets: Cash and cash equivalents ............................. $ 226 $ 184 Accounts receivable, net .............................. 22,526 19,908 Inventories ........................................... 12,634 13,066 Other current assets .................................. 1,728 2,031 Refundable income taxes ............................... -- 219 Deferred income taxes ................................. -- 922 -------- -------- Total current assets ......................... 37,114 36,330 Property, plant and equipment ........................... 74,850 72,511 Less accumulated depreciation ........................... 41,403 37,873 -------- -------- 33,447 34,638 Other assets ............................................ 3,450 3,232 -------- -------- $ 74,011 $ 74,200 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ...................................... $ 10,308 $ 9,743 Accrued liabilities ................................... 9,559 7,648 Income taxes payable .................................. 78 -- Current portion of long-term debt ..................... 36,264 203 -------- -------- Total current liabilities .................... 56,209 17,594 Long-term debt .......................................... -- 41,238 Long-term retirement benefits and deferred compensation .......................................... 2,945 2,752 Deferred income taxes ................................... -- 1,363 -------- -------- Total liabilities ............................ 59,154 62,947 Commitments and contingencies STOCKHOLDERS' EQUITY: Common stock, no par value 8,750,000 shares authorized, 4,801,750 shares issued ........................ 350 350 Additional paid in capital ............................ 11,385 11,385 Retained earnings ..................................... 41,815 38,211 Minimum pension liability adjustment, net of tax ...... (247) (247) Treasury stock, 2,430,407 shares at cost ............. (38,446) (38,446) -------- -------- Total stockholders' equity ................... 14,857 11,253 -------- -------- $ 74,011 $ 74,200 ======== ======== See notes to condensed consolidated financial statements. (1) The balance sheet as of January 3, 1998 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. 5 DALTON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In thousands) Six Months Six Months Ended Ended July 4, 1998 June 28, 1997 ------------ ------------- Net sales ..................................... $ 100,322 $ 88,035 Cost of sales ................................. 91,514 79,302 --------- --------- Gross profit .................................. 8,808 8,733 Selling, general and administrative expenses... 3,663 3,641 --------- --------- Operating income .............................. 5,145 5,092 Net interest expense .......................... 1,883 1,300 --------- --------- Income before income taxes .................... 3,262 3,792 Provision (credit) for income taxes ........... (342) 1,164 --------- --------- Net income .................................... $ 3,604 $ 2,628 ========= ========= See notes to condensed consolidated financial statements. 6 DALTON CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Six Months Six Months Ended Ended July 4, 1998 June 28, 1997 ------------ ------------- OPERATING ACTIVITIES Net income ........................................... $ 3,604 $ 2,628 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ..................... 3,640 3,314 Changes in operating assets and liabilities ....... 418 1,584 ------- ------- Net cash provided by operating activities ................................... 7,662 7,526 INVESTING ACTIVITIES Purchase of property, plant and equipment ............ (2,473) (6,333) Other ................................................ 30 -- ------- ------- Net cash used in investing activities ................................... (2,443) (6,333) FINANCING ACTIVITIES Dividends paid ....................................... -- (275) Purchase of treasury stock ........................... -- (8,886) Proceeds from long-term debt ......................... -- 8,086 Payments on long-term debt ........................... (5,177) -- ------- ------- Net cash used in financing activities ................................... (5,177) (1,075) ------- ------- Increase in cash and cash equivalents ................ 42 118 Cash and cash equivalents at beginning of period...... 184 167 ------- ------- Cash and cash equivalents at end of period ........... $ 226 $ 285 ======= ======= See notes to condensed consolidated financial statements. 7 DALTON CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) July 4, 1998 and June 28, 1997 NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the six months ended July 4, 1998 and June 28, 1997 are not necessarily indicative of the results that may be expected for the period ending January 2, 1999 or January 3, 1998. For further information, refer to the Company's consolidated financial statements and footnotes thereto for the period ended January 3, 1998. NOTE 2 -- INVENTORIES The components of inventories are as follows: July 4, January 3, 1998 1998 ---------- ------------ (000's omitted) Raw materials and supplies ..................... $ 1,749 $ 1,651 In process and finished goods .................. 7,724 8,435 Factory supplies ............................... 3,161 2,980 ------- ------- Total inventories .............................. $12,634 $13,066 ======= ======= If the FIFO method of accounting had been used for all inventories, inventories would have increased by $1,292,483 at July 4, 1998 and $1,165,699 at January 3, 1998. NOTE 3 -- INCOME TAXES 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 is no longer 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, deferred income taxes and other income tax accounts of the Company have been adjusted to take into account the new tax status of the Company. 8 NEENAH FOUNDRY COMPANY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET June 30, 1998 (In thousands) Historical --------------------------------- Neenah Pro Forma Foundry Dalton ACP Adjustments Pro Forma ---------- ------ ------ ------------- ----------- ASSETS Current assets: Cash and cash equivalents ................................... $ 9,741 $ 226 $ -- $ 81 (a) $ 10,048 Accounts receivable, net .................................... 38,333 22,526 7,747 -- 68,606 Inventories ................................................. 26,686 12,634 2,496 1,268 (b) 43,084 Other current assets ........................................ 2,936 1,728 281 -- 4,945 Prepaid income taxes ........................................ 1,155 -- 438 -- 1,593 Deferred income taxes ....................................... 1,710 -- -- 2,425 (b) 4,135 --------- --------- --------- -------- --------- Total current assets ............................... 80,561 37,114 10,962 3,774 132,411 Property, plant and equipment ................................. 138,116 74,850 17,783 (38,623)(b) 192,126 Less accumulated depreciation ................................. 9,820 41,403 4,533 (41,403)(b) 14,353 --------- --------- --------- -------- --------- 128,296 33,447 13,250 2,780 177,773 Identifiable intangible assets, net ........................... 41,951 -- -- 27,919 (b) 69,870 Goodwill, net ................................................. 147,487 -- 6,254 30,185 (b) 183,926 Other assets .................................................. 3,756 3,450 784 3,279 (a) (315)(b) 1,697 (c) (652)(d) 11,999 --------- --------- --------- -------- --------- $ 402,051 $ 74,011 $ 31,250 $ 68,667 $ 575,979 ========= ========= ========= ======== ========= LIABILITIES AND SToCKHOLDERS' EQUITY Current liabilities: Accounts payable ............................................ $ 14,558 $ 10,308 $ 3,853 -- $ 28,719 Income taxes payable ........................................ -- 78 -- -- 78 Accrued liabilities ......................................... 15,601 9,559 2,856 (237)(b) 27,779 Current portion of long-term debt ........................... 827 36,264 1,746 (38,010)(a) 2,250 (a) 3,077 --------- --------- --------- -------- --------- Total current liabilities .......................... 30,986 56,209 8,455 (35,997) 59,653 Long-term debt ................................................ 251,715 -- 12,337 (12,337)(a) 116,750 (a) 368,465 Postretirement benefit obligations ............................ 5,137 -- -- -- 5,137 Deferred income taxes ......................................... 54,592 -- 2,405 12,868 (b) 69,865 Other liabilities ............................................. 2,151 2,945 -- 2,892 (b) 7,988 --------- --------- --------- -------- --------- Total liabilities .................................. 344,581 59,154 23,197 84,176 511,108 Commitments and contingencies STOCKHOLDERS' EQUITY: Preferred stock, par value $100 per share -- authorized 3,000 shares, no shares issued or outstanding ................................ -- -- -- -- -- Common stock, par value $100 per share -- authorized 11,000 shares, issued and outstanding 1,000 shares ......................... 100 350 4,254 (350)(b) (4,254)(e) 100 Additional paid in capital .................................. 48,750 11,385 2,265 (11,385)(b) 4,254 (e) 55,269 Retained earnings ........................................... 8,620 41,815 1,534 (41,815)(b) (652)(d) 9,502 Treasury stock .............................................. -- (38,446) -- 38,446 (b) -- Minimum pension liability adjustment, net of tax ............ -- (247) -- 247 (b) -- --------- --------- --------- -------- --------- Total stockholders' equity ......................... 57,470 14,857 8,053 (15,509) 64,871 --------- --------- --------- -------- --------- $ 402,051 $ 74,011 $ 31,250 $ 68,667 $ 575,979 ========= ========= ========= ======== ========= See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet. 9 NEENAH FOUNDRY COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET (Dollars in thousands) (a) Adjustment to reflect the net effect on cash of the Dalton and ACP Acquisitions, as follows: Proceeds from Tranche A Term Loan $ 20,000 Proceeds from Tranche B Term Loan 70,000 Proceeds from Multi-Draw Acquisition Revolver 29,000 Less deferred financing cost (1,697) --------- 117,303 Purchase price: Acquisition of Dalton common stock $ (62,995) Fees and expenses incurred in connection with the Dalton Acquisition (601) Satisfaction of Dalton outstanding indebtedness (including $2,749 borrowed subsequent to June 30, 1998) (39,013) Satisfaction of ACP outstanding indebtedness (including $530 borrowed subsequent to June 30, 1998) (14,613) --------- (117,222) --------- $ 81 ========= (b) Adjustment to reflect the allocation of the $63,596 purchase cost of Dalton: Net assets acquired at historical cost $ 14,857 Fair value adjustments(1): Eliminate LIFO reserve 973 Inventory step-up 295 Write-up property, plant, and equipment(2) 2,780 Record intangible assets(3) 27,919 Adjustment to accrued ESOP contribution 1,006 Adjustment to pension liability (1,092) Deferred compensation (2,935) Other 51 Record deferred income taxes associated with the valuation of Dalton assets and liabilities (10,443) Cost in excess of net assets acquired - goodwill(4) 30,185 --------- $ 63,596 ========= - ------------------------ (1) For all other recorded assets and liabilities of Dalton, the historical book values were estimated to approximate their fair values at the balance sheet date. (2) The fair value of property, plant and equipment was based on an outside appraisal completed in connection with the acquisition. The write-up has been allocated to the fixed asset categories as shown below. The remaining economic useful lives used in depreciating the new basis of the depreciable fixed assets are also indicated: Remaining Economic Allocated excess Useful Life ---------------- ------------------ Land $ 183 n/a Buildings and improvements (781) 10 to 35 years Machinery and equipment 3,378 5 to 15 years 10 (3) The fair value of intangible assets was based on an outside valuation completed in connection with the Dalton Acquisition For purposes of the proforma financial information, the valuation of the intangible assets and amortization periods are shown below: Amortization Fair Value Period ----------- ---------------- Assembled workforce $ 5,522 5 years Customer list 12,341 10 years Backlog 1,239 4 months Trade name 5,053 40 years Facilities in place 3,764 40 years (4) An amortization period of 40 years will be used for goodwill because the period expected to be benefited exceeds 40 years. - ------------------------ (c) Adjustment to record the transaction costs of $1,697 (made up of financing costs). For purposes of the proforma consolidated balance sheet, the amount is shown as part of other assets and amortized over 5 years, the life of the Term Loan. (d) Adjustment to write off deferred financing costs related to outstanding indebtedness of ACP which was satisfied in connection with the ACP Acquisition. (e) Adjustment to account for the merger with ACP. 11 NEENAH FOUNDRY COMPANY UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME Nine Months Ended June 30, 1998 (In thousands) Historical for Periods Historical Prior to Acquisition(2) --------------- ------------------------------- Neenah Foundry Mercer Deeter --------------- ------------------------------- Nine Months Six Months Six Months Ended Ended Ended June 30, 1998 March 31, 1998 March 31, 1998 ------------- -------------- --------------- Net sales................................................ $ 160,441 $ 27,529 $ 5,916 Cost of sales............................................ 113,259 20,632 3,407 --------- --------- --------- Gross profit............................................. 47,182 6,897 2,509 Selling, general and administrative expenses............. 13,023 1,812 4,111 Amortization of intangible assets........................ 4,467 41 - --------- --------- --------- Total operating expenses............................... 17,490 1,853 4,111 --------- --------- --------- Operating income......................................... 29,692 5,044 (1,602) Net interest income (expense)............................ (17,512) (485) (196) --------- --------- --------- Income before income taxes............................... 12,180 4,559 (1,798) Provision for income taxes............................... 5,780 1,436 - --------- --------- --------- Net income............................................... $ 6,400 $ 3,123 $ (1,798) ========= ========= ========= Historical ----------------------------- Dalton ACP ----------- ------------ Nine Months Nine Months Ended Ended Pro Forma July 4, 1998 June 30, 1998 Adjustments Pro Forma ------------ ------------- ------------- ----------- Net sales................................................ $ 144,962 $ 40,981 $ - $ 379,829 Cost of sales............................................ 133,712 33,350 1,181 (a) 305,541 --------- --------- --------- --------- Gross profit............................................. 11,250 7,631 (1,181) 74,288 Selling, general and administrative expenses............. 5,231 3,510 (778)(a) 105 (a) 27,014 Amortization of intangible assets........................ - 528 4,564 (a) 1,027 (a) 10,627 --------- --------- --------- --------- Total operating expenses............................... 5,231 4,038 4,918 37,641 --------- --------- --------- --------- Operating income......................................... 6,019 3,593 (6,099) 36,647 Net interest income (expense)............................ (2,691) (1,723) (4,866)(b) (27,473) --------- --------- --------- --------- Income before income taxes............................... 3,328 1,870 (10,965) 9,174 Provision for income taxes............................... (322) 751 (3,975)(c) 1,653 (d) 5,323 --------- --------- --------- --------- Net income............................................... $ 3,650 $ 1,119 $ (8,643) $ 3,851 ========= ========= ========= ========= See accompanying Notes to Unaudited Pro Forma Consolidated Statements of Income. (2) Mercer Forge Corporation (Mercer) was acquired on April 3, 1998 in a transaction accounted for as a purchase. Deeter Foundry, Inc. (Deeter) was acquired on March 30, 1998 in a transaction accounted for as a purchase. 12 NEENAH FOUNDRY COMPANY NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME Nine Months Ended June 30, 1998 (Dollars in thousands) (a) The pro forma adjustments to cost of sales, selling, general and administrative expenses and amortization of intangible assets are comprised of the following: Proforma Historical Proforma Adjustment ---------- -------- ---------- Depreciation of property, plant and equipment: Cost of sales: Per the Form 8-K/A dated November 5, 1998 $ 3,888 $ 4,835 $ 947 Dalton Acquisition 8,358 8,592 234 ------- -------- ------ Total 12,246 13,427 1,181 Selling, general and administrative: Per the Form 8-K/A dated November 5, 1998 1,245 1,350 105 Amortization of identifiable intangible assets: Per the Form 8-K/A dated November 5, 1998 1,515 2,920 1,405 Dalton Acquisition 1,366 4,525 3,159 ------- -------- ------ Total 2,881 7,445 4,564 Amortization of goodwill: Per the Form 8-K/A dated November 5, 1998 985 1,446 461 Dalton Acquisition 1,170 1,736 566 ------- -------- ------ Total 2,155 3,182 1,027 Elimination of certain non-recurring expenses incurred by Deeter prior to acquisition: Per the Form 8-K/A dated November 5, 1998 - (778) (778) (b) Adjustment to record interest expense and amortization of deferred financing costs on the debt incurred to finance the Acquisitions, calculated as follows: Per the Form 8-K/A dated November 5, 1998: Tranche B Term Loan ($55,000 @ 8.25%) $ 2,269 Amortization of deferred financing costs (over 5 years) 110 Dalton Acquisition: Tranche A Term Loan ($20,000 @ 8.0625%) 1,209 Tranche B Term Loan ($70,000 @ 8.3125%) 4,364 Multi-Draw Acquisition Revolver ($29,000 @ 8.0625%) 1,754 Amortization of deferred financing costs (over 5 years) 255 Reduction in interest expense related to indebtedness satisfied in connection with the Acquisitions (5,095) ------- $ 4,866 ======= (c) Adjustment to record the tax effect on the above adjustments using the marginal effective income tax rate of 40%. All adjustments were tax-effected except for goodwill amortization. (d) Adjustment to record the tax effect of Dalton as a C-Corporation. 13 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized. NEENAH FOUNDRY COMPANY DATE: November 19, 1998 /s/ Gary LaChey ------------------------------------------ Gary LaChey Vice President-Finance, Secretary & Treasurer (Principal Financial Officer and Duly Authorized Officer)