UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2006
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number 333-28751
NEENAH FOUNDRY COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-1580331
(State or other jurisdiction of (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, former address and former
fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated flier, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated Filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
On July 31, 2006, the registrant had 1,000 shares of Common Stock, par value
$100 per share, outstanding, all of which were owned by NFC Castings, Inc., a
wholly owned subsidiary of ACP Holding Company.
NEENAH FOUNDRY COMPANY
Form 10-Q Index
For the Quarter Ended June 30, 2006
Page
----
Part I. Financial Information
Item 1. Financial Statements
Condensed consolidated balance sheets -- Neenah Foundry Company as of June 30, 2006 and September 30,
2005 3
Condensed consolidated statements of operations -- Neenah Foundry Company for the three and nine months
ended June 30, 2006 and 2005 4
Condensed consolidated statements of cash flows -- Neenah Foundry Company for the nine months
ended June 30, 2006 and 2005 5
Notes to condensed consolidated financial statements -- June 30, 2006 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
Item 4. Controls and Procedures 21
Part II. Other Information
Item 6. Exhibits 22
Signatures 23
2
NEENAH FOUNDRY COMPANY
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, September 30,
2006 2005(1)
----------- -------------
(Unaudited)
ASSETS
Current assets:
Cash................................................................ $ - $ 3,484
Accounts receivable, net............................................ 86,826 85,795
Inventories......................................................... 66,342 59,123
Deferred income taxes............................................... 3,304 3,304
Other current assets................................................ 7,299 6,897
----------- -------------
Total current assets........................................... 163,771 158,603
Property, plant and equipment......................................... 126,640 113,398
Less accumulated depreciation......................................... 31,725 22,148
----------- -------------
94,915 91,250
Deferred financing costs, net......................................... 1,819 2,192
Identifiable intangible assets, net................................... 63,853 69,192
Goodwill.............................................................. 86,699 86,699
Other assets.......................................................... 4,710 4,619
----------- -------------
$ 415,767 $ 412,555
=========== =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ................................................... $ 31,651 $ 30,305
Income taxes payable ............................................... 4,527 5,562
Accrued wages and employee benefits ................................ 12,486 16,586
Accrued interest ................................................... 243 7,134
Other accrued liabilities .......................................... 2,938 2,411
Current portion of long-term debt .................................. 43,599 33,668
----------- -------------
Total current liabilities ................... 95,444 95,666
Long-term debt ....................................................... 237,947 238,086
Deferred income taxes ................................................ 23,759 23,759
Postretirement benefit obligations ................................... 10,637 10,404
Other liabilities .................................................... 22,008 27,287
----------- -------------
Total liabilities ........................... 389,795 395,202
Commitments and contingencies
STOCKHOLDER'S EQUITY:
Common stock, par value $100 per share -- authorized, issued and
outstanding 1,000 shares............................................. 100 100
Capital in excess of par value....................................... 5,429 5,429
Retained earnings.................................................... 26,969 18,350
Accumulated other comprehensive loss................................. (6,526) (6,526)
----------- -------------
Total stockholder's equity............................. 25,972 17,353
----------- -------------
$ 415,767 $ 412,555
=========== =============
See notes to condensed consolidated financial statements.
- ----------
(1) The balance sheet as of September 30, 2005 has been derived from the
audited financial statements as of that date but does not include all of
the information and footnotes required by U.S. generally accepted
accounting principles for complete financial statements.
3
NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- ------------------------
2006 2005 2006 2005
------------ ------------ ---------- ----------
Net sales ............................................................ $ 147,724 $ 145,685 $ 399,951 $ 399,076
Cost of sales ........................................................ 117,773 114,338 329,691 328,101
------------ ------------ ---------- ----------
Gross profit ......................................................... 29,951 31,347 70,260 70,975
Selling, general and administrative expenses ......................... 8,737 8,884 25,893 25,168
Litigation settlement ................................................ - 6,500 - 6,500
Amortization of intangible assets..................................... 1,780 1,778 5,339 5,341
Loss (gain) on disposal of equipment ................................. (11) 104 (19) 103
------------ ------------ ---------- ----------
Total operating expenses.............................................. 10,506 17,266 31,213 37,112
------------ ------------ ---------- ----------
Operating income ..................................................... 19,445 14,081 39,047 33,863
Net interest expense ............................................... (8,362) (8,328) (24,910) (25,128)
------------ ------------ ---------- ----------
Income before income taxes ........................................... 11,083 5,753 14,137 8,735
Income tax provision ................................................. 4,241 2,302 5,518 3,497
------------ ------------ ---------- ----------
Net income ........................................................... $ 6,842 $ 3,451 $ 8,619 $ 5,238
============ ============ ========== ==========
See notes to condensed consolidated financial statements.
4
NEENAH FOUNDRY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended
June 30,
-------------------------
2006 2005
----------- ----------
OPERATING ACTIVITIES
Net income .......................................................... $ 8,619 $ 5,238
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .................................... 15,042 13,944
Amortization of deferred financing costs and discount on notes.... 1,561 1,573
Changes in operating assets and liabilities....................... (23,942) (5,936)
----------- ----------
Net cash provided by operating activities .................. 1,280 14,819
INVESTING ACTIVITIES
Purchase of property, plant and equipment ........................... (13,368) (11,499)
----------- ----------
Net cash used in investing activities........................ (13,368) (11,499)
FINANCING ACTIVITIES
Net change in revolver balance....................................... 9,792 732
Proceeds from long-term debt ........................................ 1,244 -
Payments on long-term debt and capital lease obligations............. (2,432) (3,901)
Debt issuance costs.................................................. - (151)
----------- ----------
Net cash provided by (used in) financing activities.......... 8,604 (3,320)
----------- ----------
Decrease in cash .................................................... (3,484) -
Cash at beginning of period ......................................... 3,484 -
----------- ----------
Cash at end of period ............................................... $ - $ -
=========== ==========
See notes to condensed consolidated financial statements.
5
NEENAH FOUNDRY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands)
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by U.S. 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 nine months ended
June 30, 2006 are not necessarily indicative of the results that may be expected
for the year ending September 30, 2006. For further information, refer to the
consolidated financial statements and footnotes thereto included in Neenah
Foundry Company's Annual Report on Form 10-K for the year ended September 30,
2005.
NOTE 2 -- INVENTORIES
The components of inventories are as follows:
June 30, September 30,
2006 2005
------------ -------------
Raw materials ........................... $ 6,499 $ 6,905
Work in process and finished goods ...... 43,658 37,088
Supplies ................................ 16,185 15,130
------------ -------------
$ 66,342 $ 59,123
============ =============
NOTE 3 -- RECENT ACCOUNTING PRONOUNCEMENTS
On December 16, 2004, the Financial Accounting Standards Board (FASB) issued
FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision
of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement
123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,
and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the
approach in Statement 123(R) is similar to the approach described in Statement
123. However, Statement 123(R) requires all share-based payments to employees,
including grants of employee stock options, to be recognized in the income
statement based on their fair values. Pro forma disclosure is no longer an
alternative.
The Company adopted Statement 123(R) on October 1, 2005. The adoption of
Statement 123(R) did not have an impact on the Company's results of operations
or financial position as the Company has no stock-based compensation plans.
In June 2006, the Financial Accounting Standards Board (FASB) issued Financial
Interpretation No. (FIN) 48, "Accounting for Uncertainty in Income Taxes," which
clarifies the accounting for uncertainty in income taxes recognized in an
enterprise's financial statements in accordance with FASB Statement No. 109,
"Accounting for Income Taxes." The interpretation prescribes a recognition
threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. The
Company is required to adopt FIN 48 beginning in fiscal year 2008 and is
currently evaluating the impact that the adoption of FIN 48 will have on its
consolidated financial statements and notes thereto.
6
NOTE 4 -- EMPLOYEE BENEFIT PLANS
COMPONENTS OF NET PERIODIC BENEFIT COST
The Company has five defined-benefit pension plans covering the majority of its
hourly employees and also sponsors unfunded defined benefit postretirement
health care plans covering substantially all salaried and hourly employees and
their dependents. Components of net periodic benefit costs are as follows for
the three and nine months ended June 30, 2006 and 2005 (in thousands):
Pension Benefits Postretirement Benefits
--------------------------- ---------------------------
Three Months Ended June 30, Three Months Ended June 30,
--------------------------- ---------------------------
2006 2005 2006 2005
----------- ------------ ----------- ------------
Service cost $ 668 $ 535 $ 68 $ 75
Interest cost 1,051 1,066 160 137
Expected return on plan assets (1,140) (1,194) - -
Amortization of prior service credit - - (10) (6)
Recognized net actuarial loss (gain) 5 - (108) (7)
----------- ------------ ----------- ------------
Net periodic benefit cost $ 584 $ 407 $ 110 $ 199
=========== ============ =========== ============
Pension Benefits Postretirement Benefits
--------------------------- ---------------------------
Nine Months Ended June 30, Nine Months Ended June 30,
--------------------------- ---------------------------
2006 2005 2006 2005
----------- ------------ ----------- ------------
Service cost $ 2,003 $ 1,508 $ 202 $ 225
Interest cost 3,154 2,833 480 413
Expected return on plan assets (3,421) (2,993) - -
Amortization of prior service credit - - (30) (19)
Recognized net actuarial loss (gain) 16 - (322) (23)
----------- ------------ ----------- ------------
Net periodic benefit cost $ 1,752 $ 1,348 $ 330 $ 596
=========== ============ =========== ============
EMPLOYER CONTRIBUTIONS
For the nine months ended June 30, 2006, $6,900 of contributions have been made
to the defined-benefit pension plans. The Company presently anticipates making
no additional contributions to its pension plans in fiscal 2006.
7
NOTE 5 -- GUARANTOR SUBSIDIARIES
The following tables present condensed consolidating financial information as of
June 30, 2006 and September 30, 2005 and for the three and nine months ended
June 30, 2006 and 2005 for: (a) Neenah Foundry Company ("Neenah") and (b) on a
combined basis, the guarantors of the 11% Senior Secured Notes due 2010 and 13%
Senior Subordinated Notes due 2013, which include all of the wholly owned
subsidiaries of Neenah (Subsidiary Guarantors). Separate financial statements of
the Subsidiary Guarantors are not presented because the guarantors are jointly,
severally and unconditionally liable under the guarantees, and the Company
believes separate financial statements and other disclosures regarding the
Subsidiary Guarantors are not material to investors.
CONDENSED CONSOLIDATING BALANCE SHEET
JUNE 30, 2006
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
ASSETS
Current assets:
Cash $ 452 $ (452) $ - $ -
Accounts receivable, net 41,698 45,128 - 86,826
Inventories 27,177 39,165 - 66,342
Deferred income taxes 4,537 (1,233) - 3,304
Other current assets 5,090 2,209 - 7,299
-----------------------------------------------------------
Total current assets 78,954 84,817 - 163,771
Investments in and advances to subsidiaries 114,939 - (114,939) -
Property, plant and equipment, net 39,598 55,317 - 94,915
Deferred financing costs and identifiable intangible assets, net 49,085 16,587 - 65,672
Goodwill 86,699 - - 86,699
Other assets 1,834 2,876 - 4,710
-----------------------------------------------------------
$ 371,109 $ 159,597 $ (114,939) $ 415,767
===========================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 8,899 $ 22,752 $ - $ 31,651
Net intercompany payable - 85,328 (85,328) -
Income taxes payable 5,209 (682) - 4,527
Accrued liabilities 6,684 8,983 - 15,667
Current portion of long-term debt 43,448 151 - 43,599
-----------------------------------------------------------
Total current liabilities 64,240 116,532 (85,328) 95,444
Long-term debt 236,838 1,109 - 237,947
Deferred income taxes 20,539 3,220 - 23,759
Postretirement benefit obligations 10,637 - - 10,637
Other liabilities 12,883 9,125 - 22,008
Stockholder's equity 25,972 29,611 (29,611) 25,972
-----------------------------------------------------------
$ 371,109 $ 159,597 $ (114,939) $ 415,767
===========================================================
8
NOTE 5 -- GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEET
SEPTEMBER 30, 2005
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
ASSETS
Current assets:
Cash $ 4,952 $ (1,468) $ - $ 3,484
Accounts receivable, net 37,085 48,710 - 85,795
Inventories 22,754 36,369 - 59,123
Deferred income taxes 4,537 (1,233) - 3,304
Other current assets 3,908 2,989 - 6,897
-----------------------------------------------------------
Total current assets 73,236 85,367 - 158,603
Investments in and advances to subsidiaries 114,430 - (114,430) -
Property, plant and equipment, net 36,519 54,731 - 91,250
Deferred financing costs and identifiable intangible assets, net 53,736 17,648 - 71,384
Goodwill, net 86,699 - - 86,699
Other assets 1,834 2,785 - 4,619
-----------------------------------------------------------
$ 366,454 $ 160,531 $ (114,430) $ 412,555
===========================================================
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 8,442 $ 21,863 $ - $ 30,305
Net intercompany payable - 81,907 (81,907) -
Income taxes payable 5,562 - - 5,562
Accrued liabilities 15,304 10,827 - 26,131
Current portion of long-term debt 33,658 10 - 33,668
-----------------------------------------------------------
Total current liabilities 62,966 114,607 (81,907) 95,666
Long-term debt 238,015 71 - 238,086
Deferred income taxes 20,539 3,220 - 23,759
Postretirement benefit obligations 10,404 - - 10,404
Other liabilities 17,177 10,110 - 27,287
Stockholder's equity 17,353 32,523 (32,523) 17,353
-----------------------------------------------------------
$ 366,454 $ 160,531 $ (114,430) $ 412,555
===========================================================
9
\
NOTE 5 -- GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2006
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
Net sales $ 72,074 $ 77,632 $ (1,982) $ 147,724
Cost of sales 50,338 69,417 (1,982) 117,773
-----------------------------------------------------------
Gross profit 21,736 8,215 - 29,951
Selling, general and administrative expenses 4,625 4,112 - 8,737
Amortization of intangible assets 1,426 354 - 1,780
Gain on disposal of equipment (11) - - (11)
-----------------------------------------------------------
Operating income 15,696 3,749 - 19,445
Net interest expense (4,477) (3,885) - (8,362)
-----------------------------------------------------------
Income (loss) before income taxes and equity in loss of
subsidiaries 11,219 (136) - 11,083
Income tax provision 4,217 24 - 4,241
-----------------------------------------------------------
7,002 (160) - 6,842
Equity in loss of subsidiaries (160) - 160 -
-----------------------------------------------------------
Net income (loss) $ 6,842 $ (160) $ 160 $ 6,842
===========================================================
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2005
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
Net sales $ 67,049 $ 80,324 $ (1,688) $ 145,685
Cost of sales 46,323 69,703 (1,688) 114,338
-----------------------------------------------------------
Gross profit 20,726 10,621 - 31,347
Selling, general and administrative expenses 4,367 4,517 - 8,884
Litigation settlement 6,500 - - 6,500
Amortization of intangible assets 1,426 352 - 1,778
Loss (gain) on disposal of equipment (14) 118 - 104
-----------------------------------------------------------
Operating income 8,447 5,634 - 14,081
Net interest expense (4,434) (3,894) - (8,328)
-----------------------------------------------------------
Income before income taxes and equity in income of subsidiaries 4,013 1,740 - 5,753
Income tax provision 1,606 696 - 2,302
-----------------------------------------------------------
2,407 1,044 - 3,451
Equity in income of subsidiaries 1,044 - (1,044) -
-----------------------------------------------------------
Net income $ 3,451 $ 1,044 $ (1,044) $ 3,451
===========================================================
10
NOTE 5 -- GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2006
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
Net sales $ 179,696 $ 225,331 $ (5,076) $ 399,951
Cost of sales 131,331 203,436 (5,076) 329,691
-----------------------------------------------------------
Gross profit 48,365 21,895 - 70,260
Selling, general and administrative expenses 13,755 12,138 - 25,893
Amortization of intangible assets 4,278 1,061 - 5,339
Loss (gain) on disposal of equipment (20) 1 - (19)
-----------------------------------------------------------
Operating income 30,352 8,695 - 39,047
Net interest expense (13,308) (11,602) - (24,910)
-----------------------------------------------------------
Income (loss) before income taxes and equity in loss of
subsidiaries 17,044 (2,907) - 14,137
Income tax provision (benefit) 6,653 (1,135) - 5,518
-----------------------------------------------------------
10,391 (1,772) - 8,619
Equity in loss of subsidiaries (1,772) - 1,772 -
-----------------------------------------------------------
Net income (loss) $ 8,619 $ (1,772) $ 1,772 $ 8,619
===========================================================
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2005
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
Net sales $ 172,570 $ 230,983 $ (4,477) $ 399,076
Cost of sales 128,961 203,617 (4,477) 328,101
-----------------------------------------------------------
Gross profit 43,609 27,366 - 70,975
Selling, general and administrative expenses 12,794 12,374 - 25,168
Litigation settlement 6,500 - - 6,500
Amortization of intangible assets 4,279 1,062 - 5,341
Loss (gain) on disposal of equipment (15) 118 - 103
-----------------------------------------------------------
Operating income 20,051 13,812 - 33,863
Net interest expense (13,354) (11,774) - (25,128)
-----------------------------------------------------------
Income before income taxes and equity in income of subsidiaries 6,697 2,038 - 8,735
Income tax provision 2,681 816 - 3,497
-----------------------------------------------------------
4,016 1,222 - 5,238
Equity in income of subsidiaries 1,222 - (1,222) -
-----------------------------------------------------------
Net income $ 5,238 $ 1,222 $ (1,222) $ 5,238
===========================================================
11
NOTE 5 -- GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2006
Subsidiary
Neenah Guarantors Eliminations Consolidated
-------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $ 8,619 $ (1,772) $ 1,772 $ 8,619
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 6,501 8,541 - 15,042
Amortization of deferred financing costs and discount on
notes 1,561 - - 1,561
Changes in operating assets and liabilities (22,796) (1,146) - (23,942)
-------------------------------------------------------------
Net cash provided by (used in) operating activities (6,115) 5,623 1,772 1,280
INVESTING ACTIVITIES
Investments in and advances to subsidiaries (509) 2,281 (1,772) -
Purchase of property, plant and equipment (5,302) (8,066) - (13,368)
-------------------------------------------------------------
Net cash used in investing activities (5,811) (5,785) (1,772) (13,368)
FINANCING ACTIVITIES
Net change in revolver balance 9,792 - - 9,792
Proceeds from long-term debt - 1,244 - 1,244
Payments on long-term debt and capital lease obligations (2,366) (66) - (2,432)
-------------------------------------------------------------
Net cash provided by financing activities 7,426 1,178 - 8,604
--------------------------------------------------------------
Increase (decrease) in cash (4,500) 1,016 - (3,484)
Cash at beginning of period 4,952 (1,468) - 3,484
-------------------------------------------------------------
Cash at end of period $ 452 $ (452) $ - $ -
=============================================================
12
NOTE 5 -- GUARANTOR SUBSIDIARIES (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30, 2005
Subsidiary
Neenah Guarantors Eliminations Consolidated
-----------------------------------------------------------
OPERATING ACTIVITIES
Net income $ 5,238 $ 1,222 $ (1,222) $ 5,238
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 6,079 7,865 - 13,944
Amortization of deferred financing costs and discount on
notes 1,573 - - 1,573
Changes in operating assets and liabilities 322 (6,258) - (5,936)
-----------------------------------------------------------
Net cash provided by operating activities 13,212 2,829 (1,222) 14,819
INVESTING ACTIVITIES
Investments in and advances to subsidiaries (7,190) 5,968 1,222 -
Purchase of property, plant and equipment (6,029) (5,470) - (11,499)
-----------------------------------------------------------
Net cash provided by (used in) investing activities (13,219) 498 1,222 (11,499)
FINANCING ACTIVITIES
Net change in revolver balance 732 - 732
Payments on long-term debt and capital lease obligations (2,366) (1,535) (3,901)
Deferred financing costs (151) - - (151)
-----------------------------------------------------------
Net cash used in financing activities (1,785) (1,535) - (3,320)
-----------------------------------------------------------
Increase (decrease) in cash (1,792) 1,792 - -
Cash at beginning of period 1,683 (1,683) - -
-----------------------------------------------------------
Cash at end of period $ (109) $ 109 $ - $ -
===========================================================
13
NOTE 6 -- SEGMENT INFORMATION
The Company has two reportable segments, Castings and Forgings. The Castings
segment manufactures and sells castings for the industrial and municipal
markets, while the Forgings segment manufactures forged components for the
industrial market. The Other segment includes machining operations and freight
hauling.
The Company evaluates performance and allocates resources based on the operating
income before depreciation and amortization charges of each segment. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies in the Company's Annual Report
on Form 10-K. Intersegment sales and transfers are recorded at cost plus a share
of operating profit. The following segment information is presented for
continuing operations:
Three months ended Nine months ended
June 30, June 30,
-------------------------- ---------------------------
2006 2005 2006 2005
----------- ---------- ----------- -----------
Revenues from continuing operations:
Castings $ 134,009 $ 132,528 $ 360,526 $ 359,162
Forgings 10,956 10,034 31,017 33,398
Other 6,011 6,036 17,070 17,306
Elimination of intersegment revenues (3,252) (2,913) (8,662) (10,790)
----------- ----------- ---------- -----------
Consolidated $ 147,724 $ 145,685 $ 399,951 $ 399,076
=========== =========== =========== ===========
Net Income
Castings $ 6,004 $ 4,373 $ 4,875 $ 3,670
Forgings (11) (18) (886) 1,292
Other 711 834 1,720 2,308
Elimination of intersegment (income) loss 138 (1,738) 2,910 (2,032)
----------- ----------- ---------- -----------
Consolidated $ 6,842 $ 3,451 $ 8,619 $ 5,238
=========== =========== =========== ===========
June 30, September 30,
2006 2005
----------- -------------
Total assets:
Castings $ 482,422 $ 475,725
Forgings 6,167 7,040
Other 17,777 13,268
Elimination of intersegment assets (90,599) (83,478)
----------- -------------
Consolidated $ 415,767 $ 412,555
=========== =============
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and other sections of this
quarterly report are "forward-looking statements" intended to qualify for the
safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. These forward-looking statements can generally be identified
as such because the context of the statement will include words such as the
Company "believes," "anticipates," "expects" or words of similar import.
Similarly, statements that describe the Company's future plans, objectives or
goals are also forward-looking statements. Such forward-looking statements are
subject to certain risks and uncertainties which may cause actual results to
differ materially from those currently anticipated. Factors that could cause the
Company's results to differ materially from current expectations include
material disruptions to the major industries served by the Company; continued
price fluctuations in the scrap metal market; developments affecting the
valuation or prospects of the casting and forging industries generally or the
Company in particular; and other factors described or referenced in the
Company's Form 10-K for the year ended September 30, 2005 or subsequent SEC
filings. The forward-looking statements made herein are made only as of the date
of this report and, unless required by law, the Company undertakes no obligation
to update such forward-looking statements to reflect subsequent events or
circumstances.
RECENT DEVELOPMENTS
Major Customer Declares Bankruptcy. On March 3, 2006, Dana Corporation ("Dana"),
a major customer of the Company, filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code. The total accounts
receivable owed to the Company by Dana on March 3, 2006 were approximately $4.7
million. Total payments received from Dana in the 90 days preceding the
bankruptcy filing were approximately $7.4 million. Sales to Dana accounted for
approximately 7%, 5%, 6% and 6% of the Company's net sales for the fiscal years
ended September 30, 2003, 2004, 2005 and the nine months ended June 30, 2006,
respectively. These amounts reflect the Company's transactions directly with
Dana and exclude Dana products supplied to machine shops, which are not owned by
Dana but whose business sourcing is controlled by Dana. The Company negotiated a
settlement with Dana and received partial payment of outstanding accounts
receivable owed to the Company. As of June 30, 2006, approximately $3.9 million
of the $4.7 million owed on March 3, 2006 has been collected by the Company. The
Company has reflected its estimate of the amounts that will not be collected in
the accompanying financial statements. Since the bankruptcy process is ongoing,
it is difficult to precisely calculate any losses that may result from this
process. Accordingly, actual results may differ, requiring adjustments to the
allowance. The Company continues to engage legal counsel to monitor the
proceedings and to assist in negotiations as required.
Change of Control. As previously disclosed in the Company's Current Report on
Form 8-K dated May 25, 2006 and filed on June 1, 2006, a change of control of
the Company occurred on May 25, 2006, when Tontine Capital Partners, L.P.
("Tontine") became the beneficial owner of more than a majority of the
outstanding shares, on a fully diluted basis, of our parent, ACP Holding
Company. The change of control required the Company to make the change of
control tender offers to purchase its Senior Secured Notes and Senior
Subordinated Notes discussed below under "Liquidity and Capital Resources" -
"11% Senior Secured Notes due 2010" and - "13% Senior Subordinated Notes due
2013", with Tontine, as the Company's designee, purchasing notes tendered
pursuant to the offers.
Expected Market Decline. Due to new emissions standards set to take effect on
January 1, 2007, heavy-duty truck production is expected to decline beginning
early in calendar 2007. In addition, housing starts are expected to decline in
calendar 2007, reflecting softness in the overall housing sector. As a result,
the Company expects its sales into these end-markets to decline in fiscal 2007
from fiscal 2006 levels.
15
RESULTS OF OPERATIONS (dollars in thousands)
The following discussions compare the results of operations of the Company for
the three and nine months ended June 30, 2006, to the results of the operations
of the Company for the three and nine months ended June 30, 2005.
Three Months Ended June 30, 2006 and 2005
Net sales. Net sales for the three months ended June 30, 2006 were $147,724,
which are $2,039 or 1.4% higher than the quarter ended June 30, 2005, due to
increased shipments of municipal products.
Gross profit. Gross profit for the three months ended June 30, 2006 was $29,951,
a decrease of $1,396, or 4.5%, as compared to the quarter ended June 30, 2005.
Gross profit as a percentage of net sales decreased to 20.3% for the three
months ended June 30, 2006 from 21.5% for the three months ended June 30, 2005,
primarily as a result of increased material costs and operating difficulties at
one of the Company's locations during the three months ended June 30, 2006.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the three months ended June 30, 2006 were $8,737, a
decrease of $147, or 1.7%, as compared to the $8,884 for the quarter ended June
30, 2005. Selling, general and administrative expenses as a percentage of net
sales decreased to 5.9% for the quarter ended June 30, 2006 from 6.1% for the
quarter ended June 30, 2005.
Litigation settlement. As disclosed in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2005, on August 5, 2005, the Company settled the
litigation matter with JD Holdings, LLC, regarding the proposed sale of Mercer.
The $6,500 cash payment was accrued in the quarter ended June 30, 2005.
Amortization of intangible assets. Amortization of intangible assets was $1,780
for the three months ended June 30, 2006, which is comparable to the $1,778 for
the quarter ended June 30, 2005.
Operating income. Operating income was $19,445 for the three months ended June
30, 2006, an increase of $5,364 from operating income of $14,081 for the quarter
ended June 30, 2005. As a percentage of net sales, operating income was 13.2%
for the three months ended June 30, 2006, compared to 9.7% for the three months
ended June 30, 2005. The increase in operating income was due to the accrual of
the litigation settlement in June of 2005, partially offset by the reduced gross
profit, as mentioned above.
Net interest expense. Net interest expense was $8,362 for the three months ended
June 30, 2006 compared to $8,328 for the quarter ended June 30, 2005. Interest
expense for the three months ended June 30, 2006 included amortization of bond
discount of $396 and amortization of deferred financing costs of $124.
Income tax provision. The effective tax rate for the third quarter of 2006 and
2005 was 38% and 40%, respectively. The effective tax rate for the three months
ended June 30, 2006 includes the favorable impact of the Production Activities
Deduction as permitted under the American Jobs Creation Act of 2004.
16
Nine Months Ended June 30, 2006 and 2005
Net sales. Net sales for the nine months ended June 30, 2006 were $399,951,
which are $875 or .2% higher than for the nine months ended June 30, 2005.
Increased shipments of municipal products, somewhat offset by reduced shipments
of products to the HVAC (heating, ventilation and air conditioning) market,
resulted in a slightly higher level of net sales for the nine months ended June
30, 2006 compared to the nine months ended June 30, 2005.
Gross profit. Gross profit for the nine months ended June 30, 2006 was $70,260,
a decrease of $715, or 1.0%, as compared to the nine months ended June 30, 2005.
Gross profit as a percentage of net sales was 17.6% for the nine months ended
June 30, 2006, compared to 17.8% for the nine months ended June 30, 2005. The
decrease in gross profit resulted from a slightly less favorable mix of products
sold throughout the Company during the nine months ended June 30, 2006 as
compared to the nine months ended June 30, 2005.
Selling, general and administrative expenses. Selling, general and
administrative expenses for the nine months ended June 30, 2006 were $25,893, an
increase of $725, or 2.9%, as compared to the $25,168 for the nine months ended
June 30, 2005. Selling, general and administrative expenses as a percentage of
net sales were 6.5% for the nine months ended June 30, 2006, compared to 6.3%
for the nine months ended June 30, 2005. The increase in selling, general and
administrative expenses is due mainly to increased costs related to existing
health care plans and estimated bad debts.
Litigation settlement. As disclosed in our Annual Report on Form 10-K for the
fiscal year ended September 30, 2005, on August 5, 2005, the Company settled the
litigation matter with JD Holdings, LLC, regarding the proposed sale of Mercer.
The $6,500 cash payment was accrued in the quarter ended June 30, 2005.
Amortization of intangible assets. Amortization of intangible assets was $5,339
for the nine months ended June 30, 2006, which is comparable to the $5,341 for
the nine months ended June 30, 2005.
Operating income. Operating income was $39,047 for the nine months ended June
30, 2006, an increase of $5,184 from operating income of $33,863 for the nine
months ended June 30, 2005. As a percentage of net sales, operating income was
9.8% for the nine months ended June 30, 2006, compared to 8.5% for the nine
months ended June 30, 2005. The increase in operating income was due to the
accrual of the litigation settlement in June of 2005, partially offset by
decreased gross profit and increased selling, general and administrative
expenses in 2006, as mentioned above.
Net interest expense. Net interest expense was $24,910 for the nine months ended
June 30, 2006 compared to $25,128 for the nine months ended June 30, 2005.
Interest expense for the nine months ended June 30, 2006 included amortization
of bond discount of $1,188 and amortization of deferred financing costs of $373.
Income tax provision. The effective tax rate for the nine months ended June 30,
2006 and 2005 was 39% and 40%, respectively. The effective tax rate for the nine
months ended June 30, 2006 includes the impact of the Production Activities
Deduction as permitted under the American Jobs Creation Act of 2004.
17
LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands)
Credit Facility
The Company's bank Loan and Security Agreement, as amended (the "Credit
Facility"), consists of a revolving credit facility of up to $92,085 (with a
$5,000 sublimit available for letters of credit and term loans in the aggregate
original principal amount of $22,085). The Credit Facility matures on October 8,
2009, and bears interest at rates based on the lenders' Base Rate, as defined in
the Credit Facility, or an adjusted rate based on LIBOR. Availability under the
Credit Facility is based on various advance rates against the Company's accounts
receivable and inventory. Amounts under the revolving credit facility may be
borrowed, repaid and reborrowed subject to the terms of the facility. At June
30, 2006, the Company had approximately $40,300 outstanding under the revolving
credit facility, which includes $13,800 borrowed on June 30, 2006 for an
interest payment on long-term debt due July 3, 2006, and approximately $14,200
outstanding under the term loan facility. No portion of the term loan, once
repaid, may be reborrowed.
Substantially all of the Company's wholly owned subsidiaries are co-borrowers
with the Company under the Credit Facility and are jointly and severally liable
with the Company for all obligations under the Credit Facility, subject to
customary exceptions for transactions of this type. In addition, NFC Castings,
Inc. (NFC), the Company's immediate parent, and the remaining wholly owned
subsidiaries of the Company jointly and severally guarantee the Company's
obligations under the Credit Facility, subject to customary exceptions for
transactions of this type. The borrowers' and guarantors' obligations under the
Credit Facility are secured by a first priority perfected security interest,
subject to customary restrictions, in substantially all of the tangible and
intangible assets of the Company and its subsidiaries. The senior secured notes,
discussed below, and the guarantees in respect thereof, are equal in right of
payment to the Credit Facility, and the guarantees in respect thereof. The liens
in respect of the senior secured notes are junior to the liens securing the
Credit Facility and guarantees thereof.
Voluntary prepayments may be made at any time on the term loan borrowings or the
revolving borrowings upon customary prior notice. Prepayments on the term loan
borrowings may be made at any time without premium or penalty unless a
simultaneous reduction of the revolving loan commitment amount is being made or
if any such reduction of the revolving loan commitment amount has been made
previously. Reductions of the revolving loan commitment are subject to certain
premiums specified in the Credit Facility. Mandatory repayments are required
under certain circumstances, including a sale of assets or the issuance of debt
or equity.
The Credit Facility requires the Company to observe certain customary
conditions, affirmative covenants and negative covenants including financial
covenants. The Credit Facility also contains events of default customary for
these types of facilities, including, without limitation, payment defaults,
material misrepresentations, covenant defaults, bankruptcy and a change of
ownership of the Company, NFC or ACP Holding Company, NFC's immediate parent.
The Company is prohibited from paying dividends and is restricted to a maximum
yearly stock repurchase of $250.
At June 30, 2006, the Company is in compliance with existing bank covenants.
18
11% Senior Secured Notes due 2010. The Company has outstanding Senior Secured
Notes due 2010 in the principal amount of $133,130, with a coupon rate of 11%.
These notes were issued at a price which included a discount of $11,692. The
obligations under the senior secured notes are equal in right of payment to the
Credit Facility and the associated guarantees. The liens securing the senior
secured notes are junior to the liens securing the Credit Facility and
guarantees thereof. Interest on the senior secured notes is payable on a
semi-annual basis. The Company's obligations under the notes are guaranteed on a
secured basis by each of its wholly owned subsidiaries. Subject to the
restrictions in the Credit Facility, the notes are redeemable at the Company's
option in whole or in part at any time on or after September 30, 2007, with not
less than 30 days nor more than 60 days notice, at the redemption price
specified in the indenture governing the notes (105.500% of the principal amount
redeemed beginning September 30, 2007, 104.125% beginning September 30, 2008,
and 102.750% beginning September 30, 2009 and thereafter), plus accrued and
unpaid interest up to the redemption date. Since a "change of control", as
defined in the indenture governing the notes, occurred on May 25, 2006, when
Tontine acquired control, as referred to under "Recent Developments" above, the
Company was required to make an offer to purchase the secured notes at 101% of
the outstanding principal amount thereof, plus accrued and unpaid interest up to
the purchase date. The tender offer expired on July 24, 2006 with approximately
$115 of the notes being purchased by the Company's designee, Tontine. The notes
purchased by Tontine have not been retired and remain outstanding. The secured
notes contain customary covenants typical to this type of financing, such as
limitations on (1) indebtedness, (2) restricted payments (among other things,
currently limiting most dividends and similar payments by Neenah and its
subsidiaries to no more than approximately $14 million), (3) liens, (4)
distributions from restricted subsidiaries, (5) sale of assets, (6) affiliate
transactions, (7) mergers and consolidations and (8) lines of business. The
secured notes also contain customary events of default typical to this type of
financing, such as (1) failure to pay principal and/or interest when due, (2)
failure to observe covenants, (3) certain events of bankruptcy, (4) the
rendering of certain judgments or (5) the loss of any guarantee.
13% Senior Subordinated Notes due 2013. The Company has outstanding Senior
Subordinated Notes due 2013 in the principal amount of $100,000, with a coupon
rate of 13%. The obligations under the senior subordinated notes are senior to
the Company's subordinated unsecured indebtedness, if any, and are subordinate
to the Credit Facility and the senior secured notes. Interest on the senior
subordinated notes is payable on a semi-annual basis. Not less than five percent
of the interest on the senior subordinated notes will be paid in cash and up to
8% interest may be paid-in-kind. The Company's obligations under the notes are
guaranteed on an unsecured basis by each of its wholly owned subsidiaries.
Subject to the restrictions in the Credit Facility, the notes are redeemable at
our option in whole or in part at any time, with not less than 30 days nor more
than 60 days notice, at the redemption price specified in the indenture
governing the notes (currently 101% of the principal amount redeemed and 100%
beginning September 30, 2006 and thereafter), plus accrued and unpaid interest
up to the redemption date. Since a "change of control", as defined in the
indenture governing the notes, occurred on May 25, 2006, when Tontine acquired
control, as referred to under "Recent Developments" above, the Company was
required to make an offer to purchase the subordinated notes at 101% of the
outstanding principal amount thereof, plus accrued and unpaid interest up to the
purchase date. The original tender offer expired on July 24, 2006 with $41,662
of the notes being purchased by the Company's designee, Tontine. The notes
purchased by Tontine have not been retired and remain outstanding. Following the
commencement of the original offer, some concerns were raised regarding whether
the timing of the original offer complied with the timing requirements under the
indenture. Although the Company believes that the timing of the original offer
was proper under the circumstances, to avoid any doubt regarding performance of
its obligations under the indenture, on July 25, 2006, the Company commenced a
subsequent offering period for the subordinated notes, which expires on August
28, 2006. Any subordinated notes tendered during the subsequent offering period
also will be purchased by Tontine, as the Company's designee, and will remain
outstanding. The subordinated notes contain customary covenants typical to this
type of financing, such as limitations on (1) indebtedness, (2) restricted
payments (among other things, currently limiting most dividends and similar
payments by Neenah and its subsidiaries to no more than approximately $14
million), (3) liens, (4) distributions from restricted subsidiaries, (5) sale of
assets, (6) affiliate transactions, (7) mergers and consolidations and (8) lines
of business. The subordinated notes also contain customary events of default
typical to this type of financing, such as, (1) failure to pay principal and/or
interest when due, (2) failure to observe covenants, (3) certain events of
bankruptcy, (4) the rendering of certain judgments or (5) the loss of any
guarantee.
For the nine months ended June 30, 2006 and June 30, 2005, capital expenditures
were $13,368 and $11,499, respectively. Both periods represent a level of
capital expenditures necessary to maintain equipment and facilities. Capital
spending for the nine months ended June 30, 2006 includes $564 for MACT (Maximum
Achievable Control Technology) compliance at Neenah and Dalton.
The Company's principal source of cash to fund its liquidity needs is net cash
from operating activities and borrowings under the revolving credit facility.
The Company had remaining availability of $37,595 under the revolving credit
facility at June 30, 2006. Net cash provided by operating activities for the
nine months ended June 30, 2006 was $1,280, a decrease of $13,539 from cash
provided by operating activities for the nine months ended June 30, 2005 of
$14,819. The decrease in net cash provided by operating activities was due to
increases in inventory balances, payment of $4,300 of additional income taxes
and $3,200 of additional pension contributions during the nine months ended June
30, 2006.
19
Future Capital Needs. The Company is significantly leveraged and its ability to
meet debt obligations will depend upon future operating performance which will
be affected by many factors, some of which are beyond the Company's control. The
Company is proceeding with a major capital project to replace an existing
molding line that will enhance efficiency, increase capacity and provide
expanded molding capabilities. Based on the Company's current level of
operations, the Company anticipates that its operating cash flows and available
credit facilities will be sufficient to fund anticipated operational
investments, including working capital and capital expenditure needs (including
the first phase of the planned capital project to replace an existing molding
line), for at least the next twelve months. If, however, the Company is unable
to service its debt requirements as they become due or is unable to maintain
ongoing compliance with restrictive covenants, the Company may be forced to
adopt alternative strategies that may include reducing or delaying capital
expenditures, selling assets, restructuring or refinancing indebtedness or
seeking additional equity capital. There can be no assurances that any of these
strategies could be effected on satisfactory terms, if at all.
The Company has from time to time explored refinancing alternatives and
continues to review its capital structure, but it has made no decisions to enter
into any particular refinancing or restructuring transactions.
Adjusted EBITDA. Our borrowing arrangement contains certain financial covenants
which are tied to ratios based on Adjusted EBITDA. Adjusted EBITDA is defined in
the Company's Credit Facility as "EBITDA" and is generally calculated as the sum
of net income (excluding non-recurring non-cash charges and certain one-time
cash charges), income taxes, interest expense, and depreciation and
amortization. Adjusted EBITDA is presented herein because it is a material
component of the covenants contained within the Company's Credit Facility.
Non-compliance with the covenants could result in the requirement to immediately
repay all amounts outstanding under the Credit Facility which could have a
material adverse effect on our results of operations, financial position and
cash flow. Management also believes that certain investors use information
concerning Adjusted EBITDA as a measure of a company's performance and ability
to service its debt. Adjusted EBITDA should not be considered a substitute for,
or more meaningful than, income from operations, net income, cash flows or other
measures of financial performance prepared in accordance with accounting
principles generally accepted in the United States. Adjusted EBITDA, as
presented by the Company, may not be comparable to similarly titled measures
reported by other companies.
A reconciliation of Adjusted EBITDA for the three and nine months ended June 30,
2006, compared to the three and nine months ended June 30, 2005, is provided
below (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------- ----------------------------
2006 2005 2006 2005
------------ ------------ ------------ -------------
Net income................................ $ 6,842 $ 3,451 $ 8,619 $ 5,238
Income tax provision.... ................. 4,241 2,302 5,518 3,497
Net interest expense ..................... 8,362 8,328 24,910 25,128
Depreciation and amortization ............ 5,035 4,645 15,042 13,944
Loss (gain) on disposal of equipment ..... (11) 104 (19) 103
Litigation settlement * .................. - 6,500 - 6,500
Gregg write-off of lease deposits ........ - (39) - 65
------------ ------------ ------------ ------------
Adjusted EBITDA (as defined above) $ 24,469 $ 25,291 $ 54,070 $ 54,475
============ ============ ============ ============
- ----------
* Effective December 9, 2005, the Credit Facility was amended to allow the
$6.5 million settlement in connection with the Mercer litigation to be
added back in the calculation of Adjusted EBITDA.
20
CONTRACTUAL OBLIGATIONS
There have been no material changes to our contractual obligations outside the
ordinary course of our business from those disclosed in our Annual Report on
Form 10-K for the fiscal year ended September 30, 2005.
OFF-BALANCE SHEET ARRANGEMENTS
None.
CRITICAL ACCOUNTING ESTIMATES
There have been no changes in critical accounting estimates from those disclosed
in our Annual Report on Form 10-K for the fiscal year ended September 30, 2005.
Item 3. 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. Although the senior secured notes and senior
subordinated notes are subject to fixed interest rates, the Company's earnings
are affected by changes in short-term interest rates as a result of its
borrowings under the Credit Facility. If market interest rates for such
borrowings change by 1% during the remainder of the fiscal year ending September
30, 2006, the Company's interest expense would increase or decrease by
approximately $130. This analysis does not consider the effects of changes in
the level of overall economic activity that could occur due to interest rate
changes. Further, in the event of an upward change of such magnitude, management
could take actions to further mitigate its exposure to the change. However, due
to the uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analysis assumes no changes in the Company's
financial structure.
Item 4. CONTROLS AND PROCEDURES
Disclosure Control and Procedures. The Company's management, with the
participation of the Company's Chief Executive Officer and the Chief Financial
Officer, have evaluated the effectiveness of the Company's disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the
period covered by this report. Based upon such evaluation, the Chief Executive
Officer and the Chief Financial Officer have concluded that, as of the end of
such period, the Company's disclosure controls and procedures are effective in
recording, processing, summarizing and reporting, on a timely basis, information
required to be disclosed by the Company in the reports that the Company files or
submits under the Exchange Act.
Internal Control Over Financial Reporting. There have not been any changes in
the Company's internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal
quarter to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
21
NEENAH FOUNDRY COMPANY
PART II. OTHER INFORMATION
Item 6. EXHIBITS
(a) Exhibits
EXHIBIT NO. DESCRIPTION INCORPORATED HEREIN BY REFERENCE TO FILED HEREWITH
- ----------- ------------------------------------------------- ----------------------------------- --------------
3.1 Bylaws of ACP Holding Company X
4.1 Supplemental Indenture, dated as of May 23, 2006, Exhibit 4.1 to the Registrant's
to the Indenture dated October 8, 2003, for the Form 8-K dated May 19, 2006
13% Senior Subordinated Notes due 2013, among
Neenah Foundry Company, the guarantors named
therein, and the Bank of New York, as Trustee
4.2 Supplemental Indenture, dated as of May 23, 2006, Exhibit 4.2 to the Registrant's
to the Indenture dated October 8, 2003, for the Form 8-K dated May 19, 2006
11% Senior Secured Notes due 2010, among Neenah
Foundry Company, the guarantors named therein,
and the Bank of New York, as Trustee
10.1 Amendment No. 3 to Loan and Security Agreement, Exhibit 10.1 to the Registrant's
dated as of May 19, 2006, by and among Neensh Form 8-K dated May 19, 2006
Foundry Company, its subsidiaries party thereto,
the various lenders party thereto and Fleet
Capital Corporation, as agent
10.2 Letter Agreement, dated May 18, 2006 Exhibit 10.2 to the Registrant's
Form 8-K dated May 19, 2006
31.1 Certification of Chief Executive Officer pursuant X
to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
31.2 Certification of Chief Financial Officer pursuant X
to Rule 13a-14(a) or Rule 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
32.1 Chief Executive and Chief Financial Officers' X
certification pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.1 Securities Purchase Agreement, dated as of Exhibit 99.1 to the Registrant's
May 19, 2006 Form 8-K dated May 19, 2006
99.2 Stock Purchase Agreement, dated as of Exhibit 99.2 to the Registrant's
May 19, 2006 Form 8-K dated May 19, 2006
99.3 Transfer Notice, dated as of May 19, 2006 Exhibit 99.3 to the Registrant's
Form 8-K dated May 19, 2006
99.4 Response Letter, dated May 22, 2006 Exhibit 99.4 to the Registrant's
Form 8-K dated May 19, 2006
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEENAH FOUNDRY COMPANY
DATE: August 11, 2006 /s/ Gary W. LaChey
-------------------------------------
Gary W. LaChey
Corporate Vice President - Finance
(Principal Financial Officer and Duly
Authorized Officer)
23