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 January 31, 1999
----------------
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 0-22906
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ABC-NACO INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3498749
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2001 BUTTERFIELD ROAD, SUITE 502 60515
DOWNERS GROVE, IL (Zip Code)
(Address of principal executive offices)
(630)852-1300
-------------
(Registrant's telephone number, including area code)
ABC Rail Products Corporation, 200 South Michigan Avenue, Chicago, IL 60604
---------------------------------------------------------------------------
(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 period 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
----- -----
At February 28, 1999, there were 18,356,436 shares of the registrant's common
stock outstanding.
1
ABC-NACO INC. AND SUBSIDIARIES
INDEX
Page
----
Part I Financial Information
Item 1 Unaudited Consolidated Financial Statements
Unaudited Consolidated Balance Sheets 3
Unaudited Consolidated Statements of Operations 4
Unaudited Consolidated Statements of Stockholders' Equity 5
Unaudited Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements
(Including Unaudited Consolidated Pro Forma Combined Financial
Statements and Notes Thereto) 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
Part II Other Information
Item 3 Quantitative and Qualitative Disclosures about Market Risks 21
Item 4 Submission of Matters to a Vote of Security Holders 21
Item 5 Other Information 22
Item 6 Exhibits and Reports on Form 8-K 23
2
ABC-NACO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of January 31, 1999 and July 31, 1998
Part I - Financial Information
Item 1 - Unaudited Consolidated Financial Statements
(In thousands, except share data)
January 31, July 31,
1999 1998
----------- -----------
(Unaudited)
ASSETS
CURRENT ASSETS:
Accounts receivable, less allowances of $1,406
and $1,434, respectively $ 48,153 $ 49,708
Inventories 59,829 51,973
Prepaid expenses and other current assets 5,001 1,925
Prepaid income taxes 3,689 2,833
-------- --------
Total current assets 116,672 106,439
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 2,490 1,890
Buildings and improvements 22,143 15,948
Machinery and equipment 157,729 98,621
Construction in progress 21,855 68,051
-------- --------
204,217 184,510
Less - Accumulated depreciation (52,429) (45,846)
-------- --------
Net property, plant and equipment 151,788 138,664
-------- --------
INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 15,109 15,586
-------- --------
OTHER ASSETS - net 34,526 34,652
-------- --------
Total assets $318,095 $295,341
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdrafts $ 3,614 $ 6,300
Current maturities of long-term debt 2,977 2,516
Accounts payable 36,663 24,176
Accrued liabilities 14,452 19,556
-------- --------
Total current liabilities 57,706 52,548
-------- --------
LONG-TERM DEBT, less current maturities 162,955 143,529
-------- --------
DEFERRED INCOME TAXES 8,551 7,556
-------- --------
OTHER LONG-TERM LIABILITIES 4,618 4,495
-------- --------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $1.00 par value; 1,000,000
shares authorized; no shares issued or outstanding -- --
Common stock, $.01 par value; 25,000,000 shares
authorized; 8,976,304 shares issued and
outstanding as of January 31, 1999 and July 31, 1998 90 90
Additional paid-in capital 67,798 67,798
Retained earnings 16,377 19,325
-------- --------
Total stockholders' equity 84,265 87,213
-------- --------
Total liabilities and stockholders' equity $318,095 $295,341
-------- --------
-------- --------
The accompanying notes to the unaudited consolidated financial statements are
an integral part of these consolidated balance sheets.
3
ABC-NACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended January 31, 1999 and 1998
(Unaudited)
(In thousands, except per share data)
Three Months Ended Six Months Ended
January 31, January 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
NET SALES $73,421 $70,370 $150,935 $138,255
COST OF SALES 68,511 63,044 138,077 124,137
-------- -------- -------- --------
Gross profit 4,910 7,326 12,858 14,118
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,070 4,351 9,718 7,973
-------- -------- -------- --------
Operating income(loss) (160) 2,975 3,140 6,145
EQUITY (INCOME) OF UNCONSOLIDATED JOINT VENTURES (378) (268) (553) (669)
INTEREST EXPENSE 3,388 1,110 5,629 3,295
AMORTIZATION OF DEFERRED FINANCING COSTS 181 144 354 273
-------- -------- -------- --------
Income(loss) before income taxes and
cumulative effect of accounting changes (3,351) 1,989 (2,290) 3,246
PROVISION(CREDIT) FOR INCOME TAXES (1,408) 876 (962) 1,428
-------- -------- -------- --------
Income(loss) before cumulative effect of
accounting changes (1,943) 1,113 (1,328) 1,818
CUMULATIVE EFFECT OF ACCOUNTING CHANGES, net
of income taxes of $695 and $1,014, respectively -- (1,111) (1,620) (1,111)
-------- -------- -------- --------
Net income (loss) $(1,943) $ 2 $ (2,948) $ 707
-------- -------- -------- --------
-------- -------- -------- --------
EARNINGS PER SHARE DATA
Basic:
Income(loss) before cumulative effect of
accounting changes $ (0.22) $ 0.12 $ (0.15) $ 0.20
Cumulative effect of accounting changes -- (0.12) (0.18) (0.12)
-------- -------- -------- --------
Net income(loss) $ (0.22) $ -- $ (0.33) $ 0.08
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average common shares outstanding 8,976 8,970 8,976 8,963
-------- -------- -------- --------
-------- -------- -------- --------
Diluted:
Income(loss) before cumulative effect of
accounting changes $ (0.22) $ 0.12 $ (0.15) $ 0.20
Cumulative effect of accounting changes -- (0.12) (0.18) (0.12)
-------- -------- -------- --------
Net income (loss) $ (0.22) $ -- $ (0.33) $ 0.08
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average common and equivalent
shares outstanding 8,976 9,291 8,976 9,259
-------- -------- -------- --------
-------- -------- -------- --------
The accompanying notes to the unaudited consolidated financial statements are
an integral part of these consolidated statements.
4
ABC-NACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Six Months Ended January 31, 1999 and 1998
(Unaudited)
(In thousands)
Additional
Common Paid-in Retained
Stock Capital Earnings
------ ---------- --------
BALANCE, July 31, 1997 $ 90 $ 67,362 $ 13,044
Comprehensive income(loss) 707
Shares issued in business acquisition -- 436
---- -------- --------
BALANCE, January 31, 1998 $ 90 $ 67,798 $ 13,751
---- -------- --------
---- -------- --------
BALANCE, July 31, 1998 $ 90 $ 67,798 $ 19,325
Comprehensive income(loss) -- -- (2,948)
---- -------- --------
BALANCE, January 31, 1999 $ 90 $ 67,798 $ 16,377
---- -------- --------
---- -------- --------
The accompanying notes to the unaudited consolidated financial statements are
an integral part of these consolidated statements.
5
ABC-NACO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended January 31, 1999 and 1998
(Unaudited)
(In thousands)
Three Months Ended Six Months Ended
January 31, January 31,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,943) $ 2 $ (2,948) $ 707
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Cumulative effect of accounting change -- 1,111 1,620 1,111
Equity income of unconsolidated joint ventures (378) (268) (553) (669)
Depreciation and amortization 4,166 3,372 8,938 6,649
Deferred income taxes 365 31 139 331
Changes in certain assets and liabilities, net
of effect of acquired businesses:
Accounts receivable - net 8,032 (2,938) 1,555 (10,184)
Inventories (379) (4,849) (7,856) (1,579)
Prepaid expenses and other current assets (2,527) (666) (3,126) (1,709)
Other assets - net (261) (3,017) (2,050) (3,659)
Accounts payable and accrued liabilities 1,673 7,088 8,321 8,946
Other long-term liabilities (408) (67) (196) (285)
-------- -------- -------- --------
Total adjustments 10,283 (203) 6,792 (1,048)
-------- -------- -------- --------
Net cash provided by (used in) operating
activities 8,340 (201) 3,844 (341)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,460) (17,276) (20,860) (26,359)
Business acquisitions, less cash acquired -- (1,039) -- (1,039)
Investment in unconsolidated joint ventures -- (20) -- (341)
-------- -------- -------- --------
Net cash used in investing activities (8,460) (18,335) (20,860) (27,739)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Change in cash overdrafts (1,531) 1,398 (2,686) 3,494
Net activity under revolving lines of credit (684) (7,905) 18,129 2,136
Issuance of Senior Subordinated Notes -- 25,000 -- 25,000
Issuance of other long-term debt 3,000 1,516 3,000 1,516
Repayment of other long-term debt (620) (285) (1,242) (2,878)
Payment of deferred financing costs (45) (1,188) (185) (1,188)
-------- -------- -------- --------
Net cash provided by financing activities 120 18,536 17,016 28,080
-------- -------- -------- --------
Net change in cash -- -- -- --
CASH, beginning of period -- -- -- --
-------- -------- -------- --------
CASH, end of period $ -- $ -- $ -- $ --
-------- -------- -------- --------
-------- -------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 4,466 $ 2,713 $ 7,614 $ 4,411
Cash paid for income taxes, net 196 719 1,101 758
The accompanying notes to the unaudited consolidated financial statements are
an integral part of these consolidated statements.
6
ABC-NACO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ABC-NACO Inc. ("ABC-NACO"), together with its subsidiaries (the "Company"),
is the leader in the design, engineering and manufacture of
high-performance freight rail car, locomotive and passenger rail suspension
and coupler systems; wheels and mounted wheel sets; and specialty track
products. The Company also supplies freight railroad and transit signaling
systems and services, as well as highly engineered valve bodies and
components for industrial flow control systems worldwide.
The accompanying unaudited consolidated financial statements include, in
the opinion of management, all adjustments (consisting of only normal
recurring adjustments) necessary for a fair statement of the results of
operations and financial condition of the Company for and as of the interim
dates. Results for the interim period are not necessarily indicative of
results for the entire year.
The unaudited financial statements, accompanying notes (except for portions
of Note 3 and all of Note 7) and Management Discussion and Analysis present
information for ABC Rail Products Corporation ("ABC") prior to its merger
with NACO, Inc. ("NACO") on February 19, 1999.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission. The Company believes
that the disclosures contained herein are adequate to make the information
presented not misleading. These unaudited consolidated financial statements
should be read in conjunction with the information and the consolidated
financial statements and notes thereto included in the Company's 1998 Form
10-K,1998 Form 10-K/A and the Company's S-4 filed on January 21, 1999.
2. INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method for substantially all inventories.
Inventory costs include material, labor and manufacturing overhead.
Supplies and spare parts primarily consist of manufacturing supplies and
equipment replacement parts.
Inventories at January 31, 1999 and July 31, 1998, consisted of the
following (in thousands):
January 31, July 31,
1999 1998
----------- ----------
Raw materials $ 35,922 $ 34,504
Work in process and finished goods 19,505 13,367
Supplies and spare parts 4,402 4,102
-------- --------
$ 59,829 $ 51,973
-------- --------
-------- --------
7
ABC-NACO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
3. DEBT
In December, 1998, a $3.0 million IRB was issued on behalf of the Company
for its new paneling facility in Ashland, Wisconsin. The IRB's bear at an
adjustable rate of interest as determined by the Public Bond Market
Association Index. As of January 31, 1999, the adjustable interest rate on
the bonds was set at 2.8%. The bonds mature in December, 2018.
Immediately after consummation of the Merger (see Note 7), the Company
entered into a new credit facility (the "Credit Facility") with a syndicate
of financial institutions. The Credit Facility will provide the Company
with loans and other extensions of credit of up to $200 million. The
initial net proceeds of the Credit Facility were used to (1) refinance
existing bank debt and certain other indebtedness of the Company, (2)
refinance substantially all of NACO's outstanding debt, (3) provide initial
financing for the Company's on-going working capital needs, and (4) pay
fees and expenses relating to the Merger and the Credit Facility. The
Credit Facility has a LIBOR-based variable interest rate index and
presently pays a 1.5% spread over the LIBOR base rate. The Credit
Facility's covenants include ratio restrictions on total leverage, senior
leverage, interest coverage, a minimum net worth restriction and
restrictions on capital expenditures.
4. PER SHARE DATA
SFAS No. 128, "Earnings Per Share" was issued in February 1997 and adopted
by the Company in the second quarter of fiscal 1998. This new pronouncement
established revised reporting standards for earnings per share and has been
retroactively applied to all periods presented herein. Previously reported
earnings per share for each such period were not materially different than
currently reported basic and diluted earnings per share.
Common share equivalents included in the computation of diluted earnings
per share include (in thousands):
Three Months Ended Six Months Ended
January 31, January 31,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
Stock options -- 141 -- 131
Business acquisition
earn-out agreements -- 180 -- 165
5. UNCONSOLIDATED JOINT VENTURE
The Company has various unconsolidated joint ventures with ownership
interests of 40% to 50%. The most significant of these ventures is Anchor
Brake Shoe, LLC with operations in West Chicago, Illinois. Summarized
financial information for the Anchor Brake Shoe joint venture for the three
and six months ended January 31, 1999 and 1998 is as follows:
8
ABC-NACO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Three Months Ended Six Months Ended
January 31, January 31,
------------------ ------------------
1999 1998 1999 1998
------ ------ ------ ------
Net sales $4,675 $4,158 $8,938 $8,274
Gross profit 1,657 1,049 2,867 2,444
Net income 1,098 467 1,743 1,268
6. ACCOUNTING CHANGES
In April 1998, Statement of Position No. 98-5 was issued which requires
that companies write-off previously capitalized start-up costs and expense
future start-up costs as incurred. The Company had capitalized certain
start-up costs in prior periods. Effective August 1, 1998, the Company
elected early adoption of this standard and wrote-off $2.6 million ($1.6
million after-tax) of previously capitalized start-up costs.
On November 20, 1997, the FASB Emerging Issues Task Force reached a
consensus that all companies must write-off previously capitalized business
process reengineering costs and expense future costs as incurred. The
Company had capitalized certain process reengineering costs in prior fiscal
years. In accordance with this consensus, the Company recorded a non-cash
charge of $1.8 million ($1.1 million after-tax) to reflect the cumulative
effect of this accounting change.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for
fiscal years beginning after June 15, 1999. SFAS 133 requires all
derivative instruments be recorded on the balance sheet at their fair value
and that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. The Company has
not yet determined the impact that the adoption of SFAS 133 will have on
its earnings or statement of financial position. However, the Company
anticipates that, due to its limited use of derivative instruments, the
adoption of SFAS 133 will not have a significant effect on its results of
operations or its financial position.
7. SUBSEQUENT EVENT
On February 19, 1999, the shareholders of the Company approved the merger
with NACO, Inc. to create one of the largest suppliers of technologically
advanced products for the railroad industry.
9
The following unaudited pro forma financial information gives effect to
the Merger under the pooling-of-interests method of accounting, which
means that the recorded assets, liabilities, income and expenses of ABC
and NACO are combined at their historical amounts. The information
assumes the issuance of 8.7 shares of ABC-NACO common stock for each
share of NACO common stock and each NACO common stock equivalent that
was issued and outstanding at the time of the Merger. As permitted in a
pooling-of-interests business combination, the financial information
reflects certain adjustments to conform the accounting policies of both
companies, as described in Note 2 to the Unaudited Pro Forma Combined
Financial Information. These adjustments retroactively conform, for all
periods presented, the accounting policies of ABC and NACO, consistent
with the intent to present ABC and NACO as though they had always been
combined.
The financial information is presented as if the Merger had been
consummated as of August 1, 1997 for the Unaudited Pro Forma Combined
Condensed Statements of Operations and as of January 31, 1999 for the
Unaudited Pro Forma Combined Balance Sheet. ABC-NACO's fiscal year ends
July 31. Prior to the Merger, ABC's fiscal year ended on July 31 and
NACO's fiscal year ended on the Sunday closest to March 31. Thus,
certain of the quarterly periods of ABC and NACO being compared in the
following financial information do not compare the same six month
periods, as permitted under Regulation S-X promulgated by the Securities
and Exchange Commission. For purposes of presenting ABC-NACO's
financial information on a pro forma combined basis, NACO's financial
position as of January 31, 1999 and results of operations for the six
months ended January 31, 1999 and December 28, 1997 have been combined
with ABC's financial position as of January 31, 1999 and results of
operations for the six months ended January 31, 1999 and January 31,
1998, respectively.
The following financial information is being provided for illustrative
purposes only. The financial information is not necessarily indicative
of the operating results and financial position that might have been
achieved had the Merger been consummated at the beginning of the
earliest period presented, nor is it necessarily indicative of operating
results and financial position that may occur in the future. This
information also does not reflect (1) the effect of any operating income
improvements that may be achieved as a result of the Merger, or (2)
costs associated with combining the operations of ABC and NACO.
10
ABC-NACO INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JANUARY 31, 1999
(IN THOUSANDS)
Historical Pro Forma
-------------------------------------- Adjustments Pro Forma
ABC NACO (See Note 2) Combined
----------------- ----------------- ---------------- ---------------
ASSETS:
Cash and marketable securities $ 0 $ 540 $ -- $ 540
Accounts receivable, net 48,153 35,258 -- 83,411
Inventories, net 59,829 23,291 -- 83,120
Other current assets 8,690 4,922 -- 13,612
--------- --------- ---------- ---------
Total current assets 116,672 64,011 -- 180,683
Property, plant and equipment, net 151,788 68,334 -- 220,122
Investment in unconsolidated joint ventures 15,109 -- 15,109
Other assets 34,526 585 -- 35,111
--------- --------- ---------- ---------
Total assets $ 318,095 $132,930 $ -- $ 451,025
--------- --------- ---------- ---------
--------- --------- ---------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Cash overdrafts $ 3,614 $ 1,929 $ -- $ 5,543
Accounts payable 36,663 38,250 -- 74,913
Accrued liabilities 14,452 14,342 -- 28,794
Current maturities of long-term debt 2,977 8,393 -- 11,370
--------- --------- ---------- ---------
Total current liabilities 57,706 62,914 -- 120,620
Long-term debt, less current maturities 162,955 43,697 -- 206,652
Other noncurrent liabilities 13,169 13,761 1,965 (c) 28,895
Common stock 90 6 -- 96
Paid-in capital 67,798 271 -- 68,069
Retained earnings 16,377 12,784 (1,965) 27,196
Cumulative translation adjustment -- (503) -- (503)
--------- --------- ---------- ---------
Total stockholders' equity 84,265 12,558 (1,965)(c) 94,858
--------- --------- ---------- ---------
Total liabilities and
stockholders' equity $ 318,095 $132,930 $ -- $ 451,025
--------- --------- ---------- ---------
--------- --------- ---------- ---------
11
ABC-NACO INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Pro Forma
-------------------------------------- Adjustments Pro Forma
ABC NACO (See Note 2) Combined
----------------- ----------------- ---------------- ---------------
Net sales $ 150,935 $182,995 ($1,100)(b) $332,830
Cost of sales 138,077 154,761 (4,924)(a,c) 287,914
--------- --------- ------------ ---------
Gross profit 12,858 28,234 3,824 44,916
Selling, general and administrative expenses 9,718 17,643 4,824 (a) 32,185
--------- --------- ---------- ---------
Operating income 3,140 10,591 (1,000) 12,731
Equity income of unconsolidated joint ventures (553) 0 0 (553)
Interest expense 5,983 2,513 8,496
Other non-operating expense 0 1,100 (1,100)(b) 0
--------- --------- ---------- ---------
Income (loss) before taxes, cumulative
effect of accounting change (2,290) 6,978 100 4,788
Provision (benefit) for income taxes (962) 1,038 40(d) 116
--------- --------- ---------- ---------
Income (loss) before cumulative effect
of accounting change $ (1,328) $ 5,940 $ 60 $ 4,672
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Income (loss) before cumulative effect of
accounting change per share:
Basic ($0.15) $0.26
Diluted ($0.15) $0.25
Weighted average shares outstanding:
Basic 8,976 17,964
Diluted 8,976 18,526
12
ABC-NACO INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Historical Pro Forma
-------------------------------------- Adjustments Pro Forma
ABC NACO (See Note 2) Combined
----------------- ----------------- ---------------- ---------------
Net sales $ 138,255 $148,255 ($848)(b) $285,662
Cost of sales 124,137 127,650 (4,696)(a,c) 247,091
--------- --------- ----------- ---------
Gross profit 14,118 20,605 3,848 38,571
Selling, general and administrative expenses 7,973 14,477 4,596 (a) 27,046
--------- --------- ---------- ---------
Operating income 6,145 6,128 (748) 11,525
Equity income of unconsolidated joint ventures (669) 0 0 (669)
Interest expense 3,568 2,856 0 6,424
Other non-operating expense 0 848 (848)(b) 0
--------- --------- ---------- ---------
Income before taxes, cumulative effect of
accounting change 3,246 2,424 100 5,770
Provision for income taxes 1,428 1,290 40(d) 2,758
--------- --------- ---------- ---------
Income before cumulative effect of
accounting change $ 1,818 $ 1,134 $ 60 $ 3,012
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Income before cumulative effect of accounting
change per share:
Basic $0.20 $0.17
Diluted $0.20 $0.16
Weighted average shares outstanding:
Basic 8,963 17,834
Diluted 9,259 18,602
13
ABC-NACO INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
NOTE 1--BASIS OF PRESENTATION
The Unaudited Pro Forma Combined Financial Information assumes the
issuance of 8.7 shares of ABC common stock and common stock equivalents in
exchange for each outstanding share of NACO common stock and common stock
equivalent. This financial information also assumes that the Merger will be
accounted for using the pooling-of-interests method of accounting pursuant to
Opinion No. 16 of the Accounting Principles Board. The pooling-of-interests
method of accounting assumes that ABC and NACO have been merged from their
inception, and the historical financial statements for periods prior to the
consummation of the Merger are restated as though ABC and NACO have been
combined from their inception.
Pursuant to the rules and regulations promulgated by the Securities and
Exchange Commission, the Unaudited Pro Forma Combined Condensed Statements of
Operations exclude the results of operations associated with extraordinary
items and cumulative effects of accounting changes. The Unaudited Pro Forma
Combined Financial Information does not give effect to any cost savings which
may result from the integration of ABC's and NACO's operations, nor does it
include the special charges directly related to the Merger, which were
incurred to complete the Merger and which have been and will continue to be
incurred to achieve anticipated savings.
The financial information is presented as if the Merger had been
consummated as of August 1, 1997 for the Unaudited Pro Forma Combined
Condensed Statements of Operations and as of January 31, 1999 for the
Unaudited Pro Forma Combined Balance Sheet. ABC-NACO's fiscal year ends July
31. Prior to the Merger, ABC's fiscal year ended on July 31 and NACO's
fiscal year ended on the Sunday closest to March 31. Thus, certain of the
quarterly periods of ABC and NACO being compared in the financial statements
do not compare the same six month periods, as permitted under Regulation
S-X promulgated by the Securities and Exchange Commission. For purposes of
presenting ABC-NACO's financial information on a pro forma combined basis,
NACO's financial position as of January 31, 1999 and results of operations
for the six months ended January 31, 1999 and December 28, 1997 have been
combined with ABC's financial position as of January 31, 1999 and results of
operations for the six months ended January 31, 1999 and January 31, 1998,
respectively.
NOTE 2--ADJUSTMENTS TO CONFORM ACCOUNTING POLICIES
As permitted in a pooling-of-interests business combination, the
Unaudited Pro Forma Combined Financial Information reflects certain
adjustments to conform the accounting policies of ABC and NACO. The pro
forma adjustments are as follows:
(a) ABC and NACO classified certain types of plant and administrative costs
differently in their respective classified statements of operations. All
expenses classified in ABC's historical financial statements as a component
of cost of sales have been reclassified as selling, general and
administrative expenses in order to conform the presentation of these
expenses. These expenses were as follows (in thousands):
Six Months Ended
January 31,
----------------
1999 1998
------ ------
Administrative and accounting salaries
and related costs...............................$3,103 $3,296
Information systems costs and other............... 1,721 1,300
------ ------
$4,824 $4,596
------ ------
------ ------
14
ABC-NACO INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
(b) ABC and NACO classified cash discounts taken by customers differently in
their respective classified statements of operations. The discounts
classified in NACO's historical financial statements as a component of
other non-operating expense were reclassified as a reduction of net sales
in order to conform the presentation of discounts.
(c) Conformity in the method of original adoption of Statement of Financial
Accounting Standards No. 106--"Employers Accounting for Postretirement
Benefits Other Than Pensions." ABC chose to recognize the 1993 transition
obligation ratably over a 20-year period. NACO chose the option of
immediate recognition. ABC-NACO will follow the immediate recognition
method.
(d) Estimated provision for income taxes related to pro forma adjustments
described in (c) above are based on an assumed combined federal and
state income tax rate of approximately 40%.
As a result, these adjustments retroactively conform, for all periods
presented, the accounting policies of ABC and NACO consistent with the intent
to present ABC and NACO as though they had always been combined.
NOTE 3--MERGER-RELATED CHARGES AND POTENTIAL SAVINGS
In connection with the integration of ABC's and NACO's operations,
ABC-NACO currently expects to record special charges estimated to be between
$15 million and $20 million ($11 million and $14 million on an after-tax
basis). These special charges principally relate to debt refinancing costs
of approximately $5 million to $6 million (including prepayment penalties of
approximately $4.4 million to $5.4 million and write-off of unamortized
deferred financing costs); the direct costs of the Merger (principally
financial advisors, legal, printing and accounting costs) of approximately $7
million to $9 million; and severance and related costs to eliminate
duplicative functions and excess capacity of approximately $3 million to $5
million for salaried and hourly plant and headquarter employee terminations.
ABC-NACO expects to incur these costs within the next six to twelve months.
Substantially all of these costs, other than write-offs of deferred financing
costs, require cash outlays. ABC-NACO will report debt refinancing costs on
an after-tax basis as an extraordinary charge in the quarter ending April 30,
1999. These special charges have not been included in the Unaudited Pro Forma
Combined Condensed Statements of Operations or the Unaudited Pro Forma
Combined Balance Sheet. Management also estimates that incremental capital
expenditures of approximately $9 million over the next six to twelve months
will be necessary to implement the integration of ABC's and NACO's operations.
15
ABC-NACO INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION--(CONTINUED)
NOTE 4--NET PER SHARE DATA
The pro forma combined per share data has been computed based on the
combined historical income from continuing operations as adjusted for
retroactive changes in certain accounting methods of ABC and NACO in order to
achieve conformity. The weighted average number of shares outstanding for the
periods presented was calculated to give effect to shares assumed to be
issued under the terms of the Merger Agreement as if the Merger and the
issuance of shares of ABC common stock in the Merger had occurred at the
beginning of the periods presented. For purposes of this calculation, ABC's
weighted average common and equivalent shares outstanding were increased by
NACO's weighted average common and equivalent shares outstanding (as adjusted
by multiplying NACO's shares by 8.7, the merger exchange ratio) for
each period presented.
NOTE 5--OTHER MATTERS
During the six months ended January 31, 1999, NACO reversed a $2.4
million deferred tax liability related to a tax contingency item for which
the statute of limitations expired.
Immediately following the consummation of the Merger, ABC-NACO refinanced
its debt by entering into the Credit Facility. The Credit Facility will
provide ABC-NACO with loans and other extensions of credit of up to $200
million. The initial net proceeds of the Credit Facility were used to
(1) refinance existing bank debt and certain other indebtedness of ABC-NACO,
(2) refinance substantially all of NACO's outstanding debt, (3) provide initial
financing for ABC-NACO's on-going working capital needs, and (4) pay fees and
expenses relating to the Merger and the Credit Facility.
16
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and results of
operations during the interim periods included in the accompanying unaudited
Consolidated Financial Statements. As noted above in Note 1, the following
information relates to ABC prior to its February 19, 1999 merger with NACO.
SEASONALITY
The peak season for installation of specialty trackwork extends from March
through October, when weather conditions are generally favorable for
installation and, as a result, net sales of specialty trackwork have
historically been more concentrated in the period from January through June,
a period roughly corresponding to the second half of the Company's fiscal
year. In addition, a number of the Company's facilities close for regularly
scheduled maintenance in the late summer and late December, which tends to
reduce operating results during the first half of the Company's fiscal year.
Transit industry practice with respect to specialty trackwork generally
involves the periodic shipment of large quantities, which may be unevenly
distributed throughout the year. The Company, except where noted, does not
expect any significant departure from the historical demand patterns during
the present fiscal year ending July 31, 1999.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JANUARY 31, 1999 COMPARED TO THREE MONTHS ENDED
JANUARY 31, 1998
NET SALES. Net sales increased 4.3% to $73.4 million from $70.4 million. The
increase in sales is due primarily to an increase in sales in the Wheel
Manufacturing and Wheel Services Division ($8.2 million), with production up
substantially over last year at the wheel manufacturing facility, along with
increased activity in the wheel services group to support customers that
build new railcars. Offsetting this increase was a $6.8 million reduction in
sales within the Track Products Division. Track orders from two of our major
Class I Railroad customers were down significantly from the second quarter
last year. The decline in orders from one of these major customers is due to
an across-the-board reduction in orders for capital goods by that customer
that may also impact future periods.
GROSS PROFIT AND COST OF SALES. Gross profit decreased to 6.7% of revenue in
1999 from 10.4% of revenue in 1998. The decrease in the gross profit is
primarily the result of the reduction in the Track Products Division as a
result of lower sales volume and inefficiencies during the initial start-up
of production at the Company's new state-of-the-art Rail Mill, partially
offset by the improved operating results of the Wheel Division. The gross
profit margin for the Track Products Division decreased approximately 95%
(11.9 percentage points), while the gross profit margin for the Wheel
Division increased 4% (0.4 percentage points).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $0.7 million. The increase in expenses
between periods reflects additional expense required to support the Company's
new information systems (SAP's R/3 enterprise-wide software) and other
general increases.
17
OTHER. On November 20, 1997, the FASB Emerging Issues Task Force reached a
consensus that all companies must write-off previously capitalized business
process reengineering costs and expense future costs as incurred. The Company
had capitalized certain process reengineering costs in prior fiscal years. In
accordance with this consensus, the Company recorded a non-cash charge of
$1.8 million ($1.1 million after-tax) to reflect the cumulative effect of
this accounting change.
Interest expense, net of $0.9 million capitalized on the Company's major
capitalization projects, increased $2.3 million, due primarily to an overall
higher level of debt to support working capital increases and capital project
spending.
SIX MONTHS ENDED JANUARY 31, 1999 COMPARED TO SIX MONTHS ENDED JANUARY 31, 1998
NET SALES. Net sales increased 9.2% to $150.9 million from $138.3 million.
The increase in sales is due primarily to a general increase in sales in the
Wheel Services Division ($18.3 million) and the additional sales associated
with the second quarter of fiscal 1998 acquisition of United Railway Signal
Group, Inc. Offsetting this increase was a $10.6 million reduction in sales
within the Track Products Division. Track orders from two of our major Class
I Railroad customers were down significantly from the first six months of
last year. The decline in orders from one of these major customers is due to
an across-the-board reduction in orders for capital goods by that customer
that may also impact future periods.
GROSS PROFIT AND COST OF SALES. Gross profit decreased from 10.2% of revenue
in 1998 to 8.5% of revenue in 1999. The decrease in the gross profit is
primarily the result of the reduction in the Track Products Division as a
result of lower sales volume and the inefficiencies during initial start-up
of production at the Company's new state-of-the-art Rail Mill, partially
offset by the improved operating results of the Wheel Division. The gross
profit margin for the Track Products Division decreased approximately 54%
(6.6 percentage points), while the gross profit margin for the Wheel Division
increased 27% (2.2 percentage points).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $1.7 million. The increase in expenses
between periods reflects additional expense in the customer support area
(field sales and customer service) to meet the expanding needs of our
customers, the additional effort required to support the Company's new
information systems (SAP's R/3 enterprise-wide software), and other general
increases.
OTHER. The non-cash effect of an accounting change of $2.6 million ($1.6
million after-tax) in fiscal 1998 represents the write-off, in accordance
with Statement of Position 98-5, of previously capitalized start-up costs.
On November 20, 1997, the FASB Emerging Issues Task Force reached a consensus
that all companies must write-off previously capitalized business process
reengineering costs and expense future costs as incurred. The Company had
capitalized certain process reengineering costs in prior fiscal years. In
accordance with this consensus, the Company recorded a non-cash, charge of
$1.8 million ($1.1 million after-tax) to reflect the cumulative effect of
this accounting change.
Interest expense, net of $0.2 million capitalized on the Company's major
capitalization projects, increased $2.3 million, due primarily to an overall
higher level of debt to support working capital increases and capital project
spending.
18
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended January 31, 1999 and 1998, net cash provided by
(used in) operating activities totaled $3.8 million and ($0.3) million,
respectively. The increase in operating cash flow is due primarily to a net
reduction in working capital.
Capital expenditures during the first six months of fiscal 1999 and 1998 were
$20.9 million and $26.4 million, respectively. Spending during the first half
of fiscal 1999 is related primarily to cost associated with the
implementation of SAP's R/3 enterprise-wide software, a new track panel
facility in Ashland, Wisconsin, normal improvements to the Calera, Alabama
wheel plant and production equipment for a new facility to process used rail
into reusable heat-treated and head-hardened rail.
At the beginning of the second quarter of fiscal 1998, the Company acquired
United Railway Signal Group, Inc. ("URSG") headquartered in Jacksonville,
Florida for a combination of cash and the Company's common stock totaling
$1.5 million. URSG provides independent signal engineering services to the
railroad industry. As part of the purchase agreement, the prior owners will
be issued additional shares of common stock if certain earnings goals are met
over the next three years. This acquisition was accounted for under the
purchase method of accounting.
For the six months ended January 31, 1999 and 1998, net cash provided by
financing activities totaled $17.0 million and $28.1 million respectively.
On December 23, 1997, the Company (under the Registration Statement filed
with the SEC on November 15, 1996) completed an offering of $25 million 8-3/4%
Senior Subordinated Notes, Series B (the "8-3/4% Notes"). The Company
used the $24.1 million of net proceeds of this Offering to repay indebtedness
under its primary credit facility. The 8-3/4% Notes are general unsecured
obligations of the Company and are subordinated in right of payment to all
existing and future senior indebtedness of the Company and other liabilities
of the Company subsidiaries. The 8-3/4% Notes rank with the 9-1/8% Notes.
Financing costs of $1.2 million were deferred in connection with the issuance
of the 8-3/4% Notes. The 8-3/4% Notes will mature in 2000, unless repurchased
earlier at the option of the Company on or after December 31, 1999 at 102% of
face value prior to December 30, 2000 or at 100% of face value thereafter.
The 8-3/4% Notes are subject to mandatory repurchase or redemption prior to
maturity upon a change of control (as defined in the Indenture). The
Indenture under which the 8-3/4% Notes were issued subjects the Company to
various financial covenants which are substantially similar to the covenants
relating to the 9-1/8% Notes.
In December, 1998, a $3.0 million IRB was issued on behalf of the Company for
the new paneling facility in Ashland, Wisconsin. The IRB's bear an adjustable
rate of interest as determined by the Public Bond Market Association. As of
January 31, 1999, the adjustable interest rate on the bonds was set at 2.8%.
The bonds mature in December 2018.
19
Immediately after consummation of the Merger (see Note 7), the Company
entered into a new credit facility (the "Credit Facility") with a syndicate
of financial institutions. The Credit Facility will provide the Company with
loans and other extensions of credit of up to $200 million. . The initial net
proceeds of the Credit Facility were used to (1) refinance existing bank debt
and certain other indebtedness of the Company, (2) refinance substantially
all of NACO's outstanding debt, (3) provide initial financing for the
Company's on-going working capital needs, and (4) pay fees and expenses
relating to the Merger and the Credit Facility. The Credit Facility has a
LIBOR-based variable interest rate index and presently pays a 1.5% spread
over the LIBOR base rate. The Credit Facility's covenants include ratio
restrictions on total leverage, senior leverage, interest coverage, a minimum
net worth restriction and restrictions on capital expenditures.
During the second quarter of fiscal 1999, the Company suspended activity on
the project to process used rail into reusable heat-treated and head-hardened
rail. The project is being re-evaluated in conjunction with the ABC-NACO
merger.
The following Year 2000 ("Y2K") discussion relates to ABC prior to the merger
with NACO. As described in detail in Item 7 of the Company's fiscal 1998 Form
10-K, the Company is actively addressing its Y2K issues. The Company remains
on target with the remediation initiatives detailed in the Form 10-K. At the
present time, management is unable to estimate the potential impact on the
Company of the possible failure of its customers and suppliers to become Y2K
compliant. If the Company's major customers and suppliers are not and do not
become Y2K compliant on a timely basis, the Company's results of operations
could be adversely affected.
REGARDING FORWARD-LOOKING STATEMENTS
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995: The statements contained in this release which are not historical
facts, such as those concerning future financial performance and growth, may
be deemed to be forward-looking statements that are subject to change based
on various factors which may be deemed to be forward-looking statements that
are subject to change based on various factors which may be beyond the
control of ABC-NACO Inc. Accordingly, actual results of the company could
differ materially from those expressed or implied in any such forward-looking
statement. Factors that could affect actual results are described more fully
in the ABC Rail Products Corporation Proxy Statement/Prospectus dated January
21, 1999, under the caption "Cautionary Statement Concerning Forward Looking
Statements."
20
Part II OTHER INFORMATION
- ------- -----------------
Item 3 - Quantitative and Qualitative Disclosures about Market Risks
ABC's market risk sensitive instruments do not subject ABC to material
market risk exposures, except as such risks related to interest rate
fluctuations. As of January 31, 1999, ABC has long-term debt
outstanding with a carrying value of $162.9 million. The estimated
fair value of this debt is $160.4 million. ABC historically has not
entered into interest rate protection agreements. Fixed interest rate
debt outstanding as of January 31, 1999 represents 47.2% of total
debt, carries an average interest of 8.9% and matures as follows:
$0.01 million in fiscal 1999, $0.05 million in fiscal 2000, $0.5
million in fiscal 2001, $0.5 million in fiscal 2002, $0.6 million in
fiscal 2003 and $76.2 million thereafter. Variable interest rate debt
outstanding as January 31, 1999 had an average interest rate at that
date of 6.9% and matures as follows: $1.3 million in fiscal 1999,
$78.3 million in fiscal 2000, $2.4 million in fiscal 2001, $2.4
million in fiscal 2002, $0.2 million in fiscal 2003 and $3.0 million
thereafter.
Item 4 - Submission of Matters to a Vote of Security Holders
On February 19, 1999, ABC held a special meeting of stockholders.
The following matters were submitted for shareholder approval:
1.) The issuance of shares pursuant to the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") dated as of
December 10, 1998, which provides for the merger of ABCR
Acquisition Sub., Inc. with and into NACO Inc. The votes cast
for, votes cast against and abstentions were as follows:
For Against Abstain
--------- ------- -------
7,329,721 4,312 10,600
2.) To amend the ABC's certificate of incorporation to provide
for a classified board of directors as provided in the merger
agreement. The votes cast for, votes cast against and abstentions
were as follows:
For Against Abstain
--------- ------- -------
6,130,603 1,212,474 10,600
3.) To amend the ABC's certificate of incorporation to change the
name of the corporation to "ABC-NACO Inc.". The votes cast for,
votes cast against and abstentions were as follows:
For Against Abstain
--------- ------- -------
7,794,016 4,542 10,050
21
4.) To consider a proposal to postpone or adjourn the Special
Meeting, if proposed by the Company's board of directors. The
votes cast for, votes cast against and abstentions were as
follows:
For Against Abstain
--------- ------- -------
4,934,499 2,421,229 360,890
Item 5 - Other Information
On February 19, 1999, the Company consummated its Merger with NACO, a
privately held Delaware corporation that designs, manufactures and
supplies highly engineered cast steel and related products for the
railroad supply and flow control supply markets. Pursuant to the
Amended and Restated Agreement and Plan of Merger, dated as of
December 10, 1998, as amended as of February 16, 1999, by and among
ABC, ABCR, a Delaware corporation and wholly owned subsidiary of ABC,
and NACO, ABCR merged with and into NACO, and NACO became a wholly
owned subsidiary of ABC. As a result of the Merger, each outstanding
share of NACO common stock was converted into 8.7 shares of ABC common
stock. ABC issued approximately 9.4 million shares of its common
stock. The Merger was treated as a tax-free reorganization for federal
income tax purposes and will be accounted for as a
pooling-of-interests transaction. In connection with the Merger, ABC
filed a certificate of amendment to its Restated Certificate of
Incorporation (1) changing its name to "ABC-NACO Inc." and (2)
providing for a classified board of directors.
Immediately after consummation of the Merger, the Company entered into
a new credit facility (the "Credit Facility") with a syndicate of
financial institutions in which Bank of America National Trust &
Savings Association acted as the Agent and Letter of Credit Issuing
Lender and Bank of America Canada acted as the Canadian Revolving
Lender. The Credit Facility will provide the Company with loans and
other extensions of credit of up to $200 million. The initial net
proceeds of the Credit Facility were used to (1) refinance existing
bank debt and certain other indebtedness of the Company, (2) refinance
substantially all of NACO's outstanding debt, (3) provide initial
financing for the Company's on-going working capital needs, and (4)
pay fees and expenses relating to the Merger and the Credit Facility.
On March 4, 1999, the Company issued a press release reporting (1)
ABC's earnings and, on a pro forma combined basis, ABC-NACO's
earnings, for the three months and the six months ended January 31,
1999 and 1998, and (2) certain initiatives that the Company will be
undertaking within its track products group to reduce manufacturing
costs and increase profitability.
22
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
December 10, 1998 (the "Merger Agreement"), by and among ABC,
ABCR Acquisition Sub, Inc. and NACO (incorporated herein by
reference to Exhibit 2.1 to ABC's Registration Statement on
Form S-4 (Reg. No. 333-65517), as filed with the Securities
and Exchange Commission on January 21, 1999).
2.2 Amendment to the Merger Agreement, dated as of February 16,
1999, by and among ABC, ABCR, ABCR Acquisition Sub, Inc. and
NACO (incorporated by reference by Exhibit 2.2 to ABC-NACO's
Current Report on Form 8-K dated February 19, 1999 (the
"Form 8-K")).
3.1 Restated Certificate of Incorporation, as amended (incorporated
by reference to Exhibit 3.1 to the Form 8-K).
3.2 Restated By-Laws (incorporated by reference to Exhibit 3.2 to
the Form 8-K).
4.1 Credit Agreement, dated as of February 19, 1999, among
ABC-NACO, ABC-NACO de Mexico, S.A. de C.V., Dominion Castings
Limited, Bank of America Canada (as Canadian Revolving Lender),
Bank of America National Trust and Savings Association (as Agent
and Letter of Credit Issuing Lender), and the other financial
institutions party thereto (incorporated by reference to
Exhibit 4.1 to the Form 8-K).
4.2 Specimen Common Stock Certificate.
10.1 Registration Rights Agreement, dated as of February 19, 1999, by
and among ABC and certain affiliates of NACO listed as parties
thereto.
10.2 Form of Amended and Restated Employment Agreement, dated as of
February 19, 1999, entered into between ABC and each of Joseph A.
Seher, Vaughn W. Makary, Wayne R. Rockenbach and John W. Waite.
10.3 Form of Stock Purchase Agreement entered into between NACO and
certain of its employees.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
ABC-NACO filed a Form 8-K on March 5, 1999 to announce the
consummation of the merger with NACO, Inc. (pursuant to the
merger agreement dated as of December 10, 1998, as amended as of
February 16, 1999), the changing of ABC's name to ABC-NACO Inc.
and providing for a classified board of directors. The Form 8-K
also describes the new credit facility.
23
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.
ABC-NACO INC.
By: /s/ J. P. Singsank
---------------------------
J. P. Singsank
Vice President - Finance
(Principal Financial and Accounting
Officer)
Date: March 16, 1999
24
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
December 10, 1998 (the "Merger Agreement"), by and among ABC, ABCR
Acquisition Sub, Inc. and NACO (incorporated herein by reference to
Exhibit 2.1 to ABC's Registration Statement on Form S-4 (Reg. No.
333-65517), as filed with the Securities and Exchange Commission on
January 21, 1999).
2.2 Amendment to the Merger Agreement, dated as of February 16, 1999,
by and among ABC, ABCR, ABCR Acquisition Sub, Inc. and NACO
(incorporated by reference to Exhibit 2.2 to ABC-NACO's Current
Report on Form 8-K dated February 19, 1999 (the "Form 8-K")).
3.1 Restated Certificate of Incorporation, as amended (incorporated by
reference to Exhibit 3.1 to the Form 8-K).
3.2 Restated By-Laws (incorporated by reference to Exhibit 3.2 to the
Form 8-K).
4.1 Credit Agreement, dated as of February 19, 1999, among ABC-NACO,
ABC-NACO de Mexico, S.A. de C.V., Dominion Castings Limited, Bank
of America Canada (as Canadian Revolving Lender), Bank of America
National Trust and Savings Association (as Agent and Letter of
Credit Issuing Lender), and the other financial institutions party
thereto (incorporated by reference to Exhibit 4.1 to the Form 8-K).
4.2 Specimen Common Stock Certificate.
10.1 Registration Rights Agreement, dated as of February 19, 1999, by
and among ABC and certain affiliates of NACO listed as parties
thereto.
10.2 Form of Amended and Restated Employment Agreement, dated as of
February 19, 1999, entered into between ABC and each of Joseph A.
Seher, Vaughn W. Makary, Wayne R. Rockenbach and John W. Waite.
10.3 Form of Stock Purchase Agreement entered into between NACO and
certain of its employees.
27.1 Financial Data Schedule.