-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kg91gG5xjpZYKQ5QOnuJVJu0fFbUiFt9LgnWV3QUrEKzu4fw0sAV1cf6G/Kff57H K6AD02z7OMDznTkHKicxAg== 0000950131-96-006150.txt : 19961204 0000950131-96-006150.hdr.sgml : 19961204 ACCESSION NUMBER: 0000950131-96-006150 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961203 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABC RAIL PRODUCTS CORP CENTRAL INDEX KEY: 0000913364 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 363499749 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22906 FILM NUMBER: 96675399 BUSINESS ADDRESS: STREET 1: 200 S MICHIGAN AVE STREET 2: STE 1300 CITY: CHICAGO STATE: IL ZIP: 60604-2402 BUSINESS PHONE: 3123220360 MAIL ADDRESS: STREET 1: 200 S MICHIGAN AVE STREET 2: 200 S MICHIGAN AVE CITY: CHICAGO STATE: IL ZIP: 60604 10-Q 1 FORM 10-Q DATED 10-31-96 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OCTOBER 31, 1996 0-22906 ------------------------------ ----------------------- For the Quarter Ended Commission File Number ABC RAIL PRODUCTS CORPORATION (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) 200 South Michigan Avenue, Chicago, IL 60604-2402 ---------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number (312) 322-0360 -------------- 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 ------------------ --------------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at November 15, 1996 ---------------------------------- -------------------------------- COMMON STOCK, $.01 PAR VALUE 8,376,026 SHARES ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES INDEX
Page ----- Part I Financial Information Item 1 Consolidated Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Operations 4 Consolidated Statements of Stockholders' Equity 5 Consolidated Statements of Cash Flows 6 Notes to Unaudited Consolidated Financial Statements 7 - 10 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 11 - 15 Part II Other Information Item 6 Exhibits and Reports on Form 8-K 16
2 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of October 31, 1996 and July 31, 1996
(In thousands, except share and per share data) October 31, July 31, ASSETS 1996 1996 - ------ ------------ -------- (unaudited) CURRENT ASSETS: Accounts receivable, less allowances of $864 and $865, respectively $ 31,458 $ 31,515 Inventories (Note 3) 40,821 39,318 Prepaid expenses and other current assets 2,806 1,810 Prepaid income taxes 3,575 3,625 -------- -------- Total current assets 78,660 76,268 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land 1,605 1,605 Buildings and improvements 12,059 12,127 Machinery and equipment 74,772 73,664 Construction in progress 20,542 15,459 -------- -------- 108,978 102,855 Less - Accumulated depreciation (32,137) (30,106) -------- -------- Net property, plant and equipment 76,841 72,749 -------- -------- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES 7,878 5,604 -------- -------- OTHER ASSETS - net 15,548 15,483 -------- -------- Total assets $178,927 $170,104 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Cash overdrafts $ 4,843 $ 3,907 Current maturities of long-term debt 6,986 6,942 Accounts payable 21,410 22,759 Accrued liabilities 15,757 14,798 -------- -------- Total current liabilities 48,996 48,406 -------- -------- LONG-TERM DEBT, less current maturities 55,483 49,443 -------- -------- DEFERRED INCOME TAXES 5,416 5,316 -------- -------- OTHER LONG-TERM LIABILITIES 4,264 4,265 -------- -------- 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; 8,376,026 shares and 8,271,026 shares issued and outstanding as of October 31, 1996 and July 31, 1996, respectively 84 83 Additional paid-in capital 56,865 55,251 Retained earnings 7,819 7,340 -------- -------- Total stockholders' equity 64,768 62,674 -------- -------- Total liabilities and stockholders' equity $178,927 $170,104 ======== ========
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated balance sheets. 3 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended October 31, 1996 and 1995 (Unaudited)
(In thousands, except per share data) Three Months Ended October 31 ------------------------ 1996 1995 -------- -------- NET SALES $55,911 $58,574 COST OF SALES 50,538 50,492 ------- ------- Gross profit 5,373 8,082 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,235 2,941 ------- ------- Operating income 2,138 5,141 INTEREST EXPENSE 1,275 1,369 AMORTIZATION OF DEFERRED FINANCING COSTS 53 34 ------- ------- Income before income taxes 810 3,738 PROVISION FOR INCOME TAXES 331 1,530 ------- ------- Net income $ 479 $ 2,208 ======= ======= NET INCOME PER COMMON SHARE: Net income $ 0.06 $ 0.27 ======= ======= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,297 8,252 ======= =======
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements. 4 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY For the Three Months Ended October 31, 1996 and 1995 (Unaudited)
(In thousands) Additional Common Paid-in Retained Stock Capital Earnings ------- ---------- -------- BALANCE, July 31, 1995 $ 80 $49,671 $ 703 Net income - - 2,208 ------- ------- ------- BALANCE, October 31, 1995 $ 80 $49,671 $ 2,911 ======= ======= ======= BALANCE, July 31, 1996 $ 83 $55,251 $ 7,340 Net income - - 479 Exercised stock options 1 1,259 - Income tax benefit from exercised stock options - 355 - ------- ------- ------- BALANCE, October 31, 1996 $ 84 $56,865 $ 7,819 ======= ======= =======
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements. 5 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended October 31, 1996 and 1995 (Unaudited) (In thousands)
Three Months Ended October 31 -------------------- 1996 1995 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 479 $ 2,208 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,718 2,752 Deferred income taxes 150 150 Changes in certain assets and liabilities Accounts receivable - net 57 8,031 Inventories (1,503) (4,196) Prepaid expenses and other current assets (996) 27 Other assets - net (717) (388) Accounts payable and accrued liabilities (23) (4,982) Other long-term liabilities (1) (13) ------- ------- Total adjustments (315) 1,381 ------- ------- Net cash provided by operating activities 164 3,589 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (6,123) (2,390) Investment in joint ventures (2,271) - ------- ------- Net cash used in investing activities (8,394) (2,390) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Change in cash overdrafts 936 1,678 Activity under the Credit Agreement: Net activity under revolving line of credit 4,494 (5,351) Repayment of acquisition facility (1,465) (1,416) Draw on acquisition facility 1,750 - Issuance of other long-term debt 1,878 2,632 Repayment of other long-term debt (573) (509) Payment of deferred financing costs (50) (199) Exercised stock options 1,260 - ------- ------- Net cash provided by financing activities 8,230 3,165 ------- ------- Net change in cash - (1,966) CASH, beginning of period - 1,966 ------- ------- CASH, end of period $ - $ - ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest $ 1,232 $ 1,170 Cash paid for income taxes, net 84 27
The accompanying notes to the unaudited consolidated financial statements are an integral part of these consolidated statements. 6 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION ABC Rail Products Corporation (the "Company") is a leader in the engineering, manufacturing and marketing of replacement products and original equipment for the freight railroad and rail transit industries. The Company's products include specialty trackwork, such as rail crossings and switches; mechanical products, such as rail car, locomotive and idler wheels, mounted wheel sets and metal brake shoes; and classification yard products and automation systems. 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. 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 consolidated financial statements and notes thereto included in the Company's 1996 Annual Report to Stockholders. 2. BUSINESS COMBINATIONS Effective May 31, 1996, the Company acquired Deco Industries Inc. of Milwaukee, Wisconsin, and selected assets of Deco Automation located in Norristown, Pennsylvania, for a combination of common stock and cash. The acquired companies manufacture railroad classification yard retarder control and automation systems. Pursuant to the purchase agreement, the prior owners will be issued additional shares of common stock if certain earnings goals are met over the next five years. For the three months ended October 31, 1996, the assumed issuance of such contingent shares (along with the assumed earnings level) would be antidilutive to earnings per share. Effective May 31, 1996, the Company purchased its partner's interest in the ABC Rail Cogifer Industrial joint venture partnership. The then purpose of ABC Rail-Cogifer Industrial was to manufacture and sell trackwork from the Cincinnati, Ohio, facility purchased by the partnership from Cogifer in January 1994. The plant's new role within the Company will be redirected towards both new and remanufactured track products. Effective June 21, 1996, the Company began operating a wheel mounting, wheel assembly and trackwork service business in Tacoma, Washington. The Company is currently leasing the operating facility from the previous operators with whom the Company also entered into certain employment, consulting and non-compete agreements. 7 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 3. 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 October 31, 1996, and July 31, 1996, consisted of the following (in thousands):
October 31, July 31, 1996 1996 ----------- ----------- Raw materials $22,849 $22,886 Work in process 8,618 7,779 Finished goods 5,098 4,497 Supplies and spare parts 4,256 4,156 ------- ------- $40,821 $39,318 ======= =======
4. DEBT The Company's primary credit facilities include a five year credit agreement (the "Credit Agreement") and two term loans. The Credit Agreement includes a $15.0 million non-amortizing term loan, a $50.0 million (as amended) revolving credit line and a $17.8 million (as amended) acquisition facility. At October 31, 1996, remaining availability under the Credit Agreement, was $26.4 million. Interest on all amounts borrowed under the Credit Agreement is payable monthly, in arrears, at one of the following rates at the option of the Company: (i) base rate (as defined) plus 0.5% to 1.5%, or (ii) LIBOR (as defined) plus 2.0% to 3.5%. As of October 31, 1996, the weighted average interest rate of outstanding borrowings under the Credit Agreement was 8.2%. The Company has pledged as collateral for the Credit Agreement substantially all of its property, plant and equipment, eligible accounts receivable and inventories, intellectual property and capital stock of its subsidiaries. The Credit Agreement contains various financial covenants which, among other provisions, include prohibiting or limiting the incurrence of additional indebtedness. The Credit Agreement alson contains certain financial covenants (all as defined) (i) requiring the maintenance of a minimum Fixed Charge Coverage Ratio; (ii) requiring the maintenance of a Minimum Interest Coverage Ratio; (iii) requiring the maintenance of a minimum Adjusted Net Worth and; (iv) limiting the incurrence of Capital Expenditures. Due to the reduced level of earnings during the first quarter and the additional investment in the China joint venture (as described in Note 6), the Company was not in compliance with all of the Credit Agreement covenants as of October 31, 1996. The Company immediately obtained a waiver of default from its group of lenders. 8 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) On September 26, 1994, the Company entered into a five-year term loan agreement to finance up to $9.9 million in capital expenditures for the new wheel machining center for its Calera, Alabama, facility. A total of $9.2 million was drawn under this term loan. The Company entered into an additional seven-year term loan agreement with the same lender on July 20, 1995, to finance up to $12.5 million of capital expenditures for the new rail mill center located in Chicago Heights, Illinois. Through October 31, 1996, $4.5 million has been drawn under this second term loan. The term loans are secured by the related fixed assets, bear interest at 7.0% as of October 31, 1996 and contain identical financial covenants which require the Company to maintain minimum levels of net worth and a minimum fixed charge coverage ratio. The Company was in compliance with all of its covenants under the term loans as of October 31, 1996. In conjunction with the purchase of its partner's interest in the ABC Rail- Cogifer Industrial joint venture partnership, the Company assumed the joint venture's existing $3.0 million revolving credit facility with a third party financial institution. Borrowings under this facility are secured by accounts receivable and inventories of ABC Rail-Cogifer Industrial and bear interest at 8.75% as of October 31, 1996. The Company is evaluating the option of consolidating this debt into its other existing debt. In the interim, the Company is out of compliance with a certain financial covenant related to this revolver. The lending institution has deferred issuance of a waiver on the covenant pending the Company's decision regarding the consolidation of this debt into its other existing debt. This debt matures in April 1997. 5. COMMITMENTS AND CONTINGENCIES In connection with its formation and the purchase of certain assets and liabilities from the Railroad Products Group of Abex Corporation ("Abex") in 1987, the Company obtained a comprehensive environmental indemnity from Abex. The indemnity covers environmental conditions, whether or not then known, in existence at the time of purchase, without dollar or time limit. Shortly after the purchase, the Company performed surveys to assess the environmental conditions at the time of the purchase. As a result of these studies, the Company has undertaken environmental projects, including underground storage tank removal, corrective action and other remedial action as necessary. Some of these actions are ongoing and similar actions may be necessary in the future. When Abex refused to compensate the Company for cost incurred, the Company filed suit against Abex on November 18, 1991. In a separate lawsuit filed in October 1994, the Company also asserts that Abex is required to indemnify the Company for the reduction in value of one of the sold properties (a Pennsylvania manufacturing facility formerly owned by the Company) caused by the environmental contamination at that site. In October 1995, a judgment in the 1991 lawsuit was finalized with the Company receiving a payment of $2.8 million from Abex. The Company recorded the receipt of this payment as a reserve to address other potential matters related to ongoing Abex issues. The judgment is exclusive of indemnification for any future environmental claims. While the Company believes the cost of environmental projects related to ongoing Abex issues may be properly recoverable under the indemnity, the Company is responsible for such cost irrespective of whether it receives payment under the indemnity. 9 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. CHINA JOINT VENTURE In May 1996, the Company entered into a joint venture agreement with China's Ministry of Railroads to establish the Datong ABC Castings Company Ltd. The joint venture will manufacture wheels in China primarily for the rapidly growing Chinese railway markets. The Company's contribution of its 40% share in the joint venture will consist of technical know-how, expertise and cash. The Company's cash infusion of approximately $9.3 million will be made over the next three to six months and is expected to be funded from operations. Through October 31, 1996, $3.7 million ($2.1 million during the first quarter of fiscal 1997) has been contributed to the joint venture and additional amounts have been deferred in organizing the venture. 10 ABC RAIL PRODUCTS CORPORATION AND SUBSIDIARIES 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. RESULTS OF OPERATIONS - --------------------- THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO THREE MONTHS ENDED OCTOBER 31, 1995 Net Sales. Net sales decreased 4.5% to $55.9 million from $58.6 million. The decrease in sales is due primarily to a reduction in sales from specialty trackwork, and wheels and idlers. The reduction in specialty trackwork sales is attributable to the merger-induced slowdown of order releases from the Western Class I railroads and the acceleration of the planned manufacturing process changes at the Company's trackwork plants. These process upgrades require major reconfiguring of the shop floors' layouts into cell manufacturing centers resulting in disruptions to the normal manufacturing process flow. The normal seasonal lull (coupled with the new orders expected now that the Union Pacific- Southern Pacific merger is complete) made this an opportune time to absorb a mild, short-term setback in sales in exchange for improved capacity. The decline in sales of wheels and idlers also reflects the decision to accelerate process improvements at the wheel foundry in Calera, Alabama. While these foundry process improvements also resulted in production slowdowns at this plant, when completed, the foundry will provide the quality input needed to capitalize on the significant improvements recently instituted in the plant's machine shop. Gross Profit and Cost of Sales. Gross profit decreased 33.5% to $5.4 million from $8.1 million. The $2.7 million decrease was primarily due to the sales changes discussed above. In addition, the track and wheel plants were further impacted by reduced output due to manufacturing improvements with virtually no change in fixed costs during this quarter. Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $0.3 million. The small increase in expenses between quarters does not include any unusual items. Operating Income. Operating income decreased 58.4% to $2.1 million from $5.1 million. The decrease resulted largely from the 33.5% ($2.7 million) decrease in gross profit, along with the increase in selling, general and administrative expenses ($0.3 million). In addition to the issues previously discussed, the Company's sales and profits are typically lower during the first half of the Company's fiscal year than during the second half of the fiscal year. See "Seasonality." Other. Interest expense decreased 6.9%, or $0.1 million, due primarily to continuing repayment of the acquisition facility of the Credit Agreement and a reduction in interest rates on a portion of the Credit Agreement debt. 11 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 does not expect any significant departure from the historical demand patterns during the present fiscal year ending July 31, 1997. The following graphs illustrate the historical results of the Company's seasonal pattern of sales and income. [GRAPH APPEARS HERE] Graph showing the following data (Description of Graphs for Edgar Filing): Quarterly Net Sales In 1993: Q1 $31.8 million, Q2 $33.2 million, Q3 $40.5 million and Q4 $43.2 million In 1994: Q1 $37.2 million, Q2 $40.1 million, Q3 $52.2 million and Q4 $57.7 million In 1995: Q1 $54.6 million, Q2 $56.3 million, Q3 $62.1 million and Q4 $70.2 million In 1996: Q1 $58.6 million, Q2 $58.5 million, Q3 $60.1 million and Q4 $63.4 million In 1997: Q1 $55.9 million 12 Graph showing the following data (Description of Graphs for Edgar Filing): [GRAPH APPEARS HERE] *Before Cumulative Effect of Accounting Change and Extraordinary Items Quarterly Income / (Loss)* In 1993: Q1 $0.1 million, Q2 $0.5 million, Q3 $1.2 million and Q4 $1.8 million In 1994: Q1 $0.8 million, Q2 $1.3 million, Q3 $2.4 million and Q4 $2.4 million In 1995: Q1 $2.0 million, Q2 $2.1 million, Q3 $3.8 million and Q4 $3.8 million In 1996: Q1 $2.2 million, Q2 $2.7 million, Q3 ($2.5) million and Q4 $4.4 million In 1997: Q1 $0.5 million * Before cumulative effect of accounting change and extraordinary items. 13 LIQUIDITY AND CAPITAL RESOURCES - -------------------------------- Cash generated from operations, structured borrowings and equity offerings have been the major sources of funds for working capital, capital expenditures and acquisitions. For the three months ended October 31, 1996 and 1995, net cash provided by operating activities totaled $0.2 million and $3.6 million, respectively. The decrease in operating cash flow is due primarily to the reduction in net income between periods and the net increase in working capital items. Capital expenditures during the first quarter of fiscal 1997 and 1996 were $6.1 million (including $3.3 million related to the new rail mill located in Chicago Heights, IL) and $2.4 million, respectively. In May 1996, the Company entered into a joint venture agreement with China's Ministry of Railroads to establish the Datong ABC Castings Company Ltd. The joint venture will manufacture wheels in China primarily for the rapidly growing Chinese railway markets. The Company's contribution of its 40% share in the joint venture will consist of technical know-how, expertise and cash. The Company's cash infusion of approximately $9.3 million will be made over the next three to six months, and is expected to be funded from operations. Through October 31, 1996, $3.7 million ($2.1 million during the first quarter of fiscal 1997) has been contributed to the joint venture and additional amounts have been deferred in organizing the venture. For the three months ended October 31, 1996 and 1995, net cash provided by financing activities totaled $8.2 million and $3.2 million, respectively. The increase in financing cash flows is due primarily to (a) the net draw on the Credit Agreement to support the reduced cash from operating activities and the increased use of cash for investing activities; (b) a draw on the acquisition facility to finance the purchase of the Company's partner's interest in the ABC Rail-Cogifer Industrial joint venture partnership (see Note 2 for additional information); (c) a draw on the term loan to support the capital expenditures for the new rail mill (see following for additional comments); and (d) proceeds from the exercise, during the current quarter, of stock options. On September 26, 1994, the Company entered into a five-year term loan agreement to finance up to $9.9 million in capital expenditures for the new wheel machining center for its Calera, Alabama facility. A total of $9.2 million was drawn under this loan. The Company entered into an additional seven-year term loan agreement with the same lender on July 20, 1995 to finance up to $12.5 million of capital expenditures for the new rail mill center located in Chicago Heights, Illinois. Through October 31, 1996, $4.5 million has been drawn under this second term loan. Both term loans contain the same financial covenants which require the Company to maintain minimum levels of net worth and a minimum fixed charge coverage ratio. The Company was in compliance with all of its covenants under the term loans as of October 31, 1996. The Credit Agreement includes a $15.0 million non-amortizing term loan, a $50.0 million (as amended) revolving credit line and a $17.8 million (as amended) acquisition facility. At October 31, 1996, remaining availability under the Credit Agreement was $26.4 million and the weighted average interest rate of outstanding borrowings was 8.2%. The Credit Agreement contains customary financial and other covenants. Due to the reduced level of earnings during the quarter and the additional investment in the China joint venture, the Company was not in compliance with all of the Credit Agreement covenants as of October 31, 1996. The Company immediately obtained a waiver of default from its group of lenders. On November 15, 1996, the Company filed a registration statement for the potential offering, from time to time, of Subordinated Debt Securities and/or shares of its Common Stock, par 14 value $0.01, at prices and on terms to be determined when an agreement to sell is made or at the time or times of sales, as the case may be. The Subordinated Debt Securities and the Common Stock may be issued in one or more series or issuances, as the case may be, and the aggregate initial offering price thereof will not exceed $100 million. The Company expects it may issue Subordinated Debt Securities during the second quarter of 1997 to finance the reduction of outstanding Senior Debt. FORWARD-LOOKING STATEMENTS - -------------------------- The foregoing outlook contains forward-looking statements that are based on current expectations and are subject to a number of risks and uncertainties. Actual results could differ materially from current expectations due to a number of factors, including general economic conditions; competitive factors and pricing pressures; shifts in market demand, the performance and needs of industries served by the Company's businesses; actual future costs of operating expenses such as rail and scrap steel, self-insurance claims and employee wages and benefits; actual costs of continuing investments in technology; and the risks described from time to time in the Company's SEC reports. 15 Part II OTHER INFORMATION - -------------------------------------------------------------------------------- Item 6 - Exhibits and Reports on Form 8-K (A) Exhibits 3.1 Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock of the Company. 3.2 Certificate of Correction of Certificate of Designation of the Company. 4.1 Amendment No. 1, dated as of November 18, 1996 to Rights Agreement, dated as of September 29, 1995, between the Company and LaSalle National Trust, N.A., as Rights Agent. 27.1 Financial Data Schedule. (B) Reports on Form 8-K The Company filed a Current Report on Form 8-K dated October 8, 1996 to report, under Item 5 of Form 8-K, the retirement of Mr. Ben R. Yorks, the Company's former President and Chief Operating Officer and a Current Report on Form 8-K dated October 22, 1996 to report, under Item 5 of Form 8-K, strategic plant upgrades and expected lower sales and substantial earnings decline for the first quarter. 16 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 RAIL PRODUCTS CORPORATION /s/ D. Chisholm MacDonald ------------------------------------------- D. Chisholm MacDonald Senior Vice President and Chief Financial Officer (Duly authorized Officer and Principal Financial and Accounting Officer) Date: December 3, 1996 ------------------------------ 17 EX-3.1 2 CERTIFICATE OF DESIGNATION Exhibit 3.1 CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK OF ABC RAIL PRODUCTS CORPORATION PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE We, Donald W. Grinter, Chairman and Chief Executive Officer, and D. Chisholm MacDonald, Senior Vice President, Chief Financial Officer and Secretary of ABC Rail Products Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation, as amended, of the Corporation, the Board of Directors on September 29, 1995 adopted the following resolution creating a series of 100,000 shares of preferred stock designated as Series A Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, as amended, a series of preferred stock, par value $.01 per share, of the Corporation (such preferred stock being herein referred to as "Preferred Stock," which term shall include any additional shares of preferred stock of the same class heretofore or hereafter authorized to be issued by the Corporation), consisting of 100,000 shares is hereby created, and the voting powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, are as follows: Section 1. Designation and Amount. There shall be a series of Preferred Stock of the Corporation which shall be designated as "Series A Junior Participating Preferred Stock," par value $.01 per share (hereinafter called "Series A Preferred Stock"), and the number of shares constituting such series shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction has been so authorized; provided, however, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than that of the shares then outstanding plus the number of shares of Series A Preferred Stock issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. Section 2. Dividends and Distributions. --------------------------- (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Preferred Stock with respect to dividends, the holders of shares of Series A Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for such purpose, quarterly dividends payable in cash to holders of record on the last business day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock (hereinafter defined) or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $.01 per share, of the Corporation (the "Common Stock") since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Preferred Stock. In the event the Corporation shall at any time following September 29, 1995 (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying each such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. distribution on the Common Stock (other than a dividend payable in shares of Common Stock). (C) No dividend or distribution (other than a dividend payable in shares of Common Stock) shall be paid or payable to the holders of shares of Common Stock unless, prior thereto, all accrued but unpaid dividends to the date of such dividend or distribution shall have been paid to the holders of shares of Series A Preferred Stock. (D) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly 2 Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each one one-hundredth of a share of Series A Preferred Stock shall entitle the holder thereof to one vote on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time following September 29, 1995 (i) declare any dividend on Common Stock payable in share of Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Preferred Stock and the holders of shares of Common Stock and any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) Whenever, at any time or times, dividends payable on any share or shares of Series A Preferred Stock shall be in arrears in an amount equal to at least six full quarterly dividends (whether or not declared and whether or not consecutive), the holders of record of the outstanding Preferred Stock shall have the exclusive right, voting separately as a single class, to elect a total of two directors of the Corporation. Such two directors shall be 3 elected initially at a special meeting of stockholders of the Corporation or at the Corporation's next annual meeting of stockholders, and subsequently at each annual meeting of stockholders, as provided below. The term of office of the two directors so elected shall end on the date of the annual meeting following such election. At elections for such directors, the holders of shares of Series A Preferred Stock shall be entitled to case one vote for each one one-hundredth of a share of Series A Preferred Stock held. (ii) Upon the vesting of such right of the holders of the Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of the outstanding Preferred Stock as hereinafter set forth. A special meeting of the stockholders of the Corporation then entitled to vote shall be called by the Chairman or the President or the Secretary of the Corporation, if requested in writing by the holders of record of not less than 10% of the Preferred Stock then outstanding. At such special meeting, or, if no such special meeting shall have been called, then at the next annual meeting of stockholders of the Corporation, the holders of the shares of the Preferred Stock shall elect, voting as above provided, two directors of the Corporation to fill the aforesaid vacancies created by the automatic increase in the number of members of the Board of Directors. The term of office of the two directors so elected shall end on the date of the annual meeting following such election. At any and all such meetings for such election, the holders of a majority of the outstanding shares of the Preferred Stock shall be necessary to constitute a quorum for such election, whether present in person or by proxy, and such two directors shall be elected by the vote of at least a plurality of shares held by such stockholders present or represented at the meeting. Any director elected by holders of shares of the Preferred Stock pursuant to this Section may be removed at any annual or special meeting, by vote of a majority of the stockholders voting as a class who elected such director, with or without cause. In case any vacancy shall occur among the directors elected by the holders of the Preferred Stock pursuant to this Section, such vacancy may be filled by the remaining director so elected, or his successor then in office, and the director so elected to fill such vacancy shall serve until the next meeting of stockholders for the election of directors. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be further increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Preferred Stock. 4 (iii) The right of the holders of the Preferred Stock, voting separately as a class, to elect two members of the Board of Directors of the Corporation as aforesaid shall continue until, and only until, such time as all arrears in dividends (whether or not declared) on the Preferred Stock shall have been paid or declared and set apart for payment, at which time such right shall terminate, except as herein or by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above-mentioned. Upon any termination of the right of the holders of the shares of the Preferred Stock as a class to vote for directors as herein provided, the term of office of all directors then in office elected by the holders of Preferred Stock pursuant to this Section shall terminate immediately. Whenever the term of office of the directors elected by the holders of the Preferred Stock pursuant to this Section shall terminate and the special voting powers vested in the holders of the Preferred Stock pursuant to this Section shall have expired, the maximum number of members of the Board of Directors of the Corporation shall be such number as may be provided for in the By-laws of the Corporation irrespective of any increase made pursuant to the provisions of this Section. (D) Except as set forth herein, holders of Series A Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Preferred Stock outstanding shall have been paid in full, the corporation shall not: (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock; (ii) declare or pay dividends no or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, except dividends paid ratably on the Series A Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 5 (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Preferred Stock; or (iv) purchase or otherwise acquire for consideration any shares of Series A Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary liquidation, dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Preferred Stock unless, prior thereto, the holders of shares of Series A Preferred Stock shall have received $.01 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as 6 appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Preferred Stock and Common Stock, respectively, holders of Series A Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio, on a per share basis, of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of Preferred Stock, if any, which rank on a parity with the Series A Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. (C) In the event the Corporation shall at any time following September 29, 1995 (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the 7 denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. Redemption. The shares of Series A Preferred Stock shall not be redeemable by the Corporation. The preceding sentence shall not limit the ability of the Corporation to purchase or otherwise deal in such shares of stock to the extent permitted by law. Section 9. Ranking. The Series A Preferred Stock shall rank junior to all other series of the Corporation's preferred stock (whether with or without par value) as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Preferred Stock, voting separately as a class. Section 11. Fractional Shares. Series A Preferred Stock maybe issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Preferred Stock. 8 IN WITNESS WHEREOF, ABC Rail Products Corporation has caused its corporate seal the hereunto affixed and this Certificate to be signed by Donald W. Grinter, its Chairman and Chief Executive Officer and the same to be attested by D. Chisholm MacDonald, its Senior Vice President, Chief Financial Officer and Secretary, this 29th day of September, 1995. ABC RAIL PRODUCTS CORPORATION By: /s/ Donald W. Grinter -------------------------------------- Donald W. Grinter Chairman and Chief Executive Officer (SEAL) Attest: By: /s/ D. Chisholm MacDonald ------------------------- D. Chisholm MacDonald Senior Vice President, Chief Financial Officer and Secretary 9 EX-3.2 3 CERTIFICATE OF CORRECTION Exhibit 3.2 CERTIFICATE OF CORRECTION OF CERTIFICATE OF DESIGNATION OF ABC RAIL PRODUCTS CORPORATION Pursuant to Section 103(f) of the General Corporation Law of the State of Delaware ABC Rail Products Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, hereby certifies that the Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (the "Certificate of Designation") of the Corporation filed on September 29, 1995 with the Secretary of State of the State of Delaware contained an inaccurate record of the corporate action referred to therein. The third paragraph of the Certificate of Designation stated that: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, as amended, a series of preferred stock, par value $.01 per share, of the Corporation (such preferred stock being herein referred to as "Preferred Stock," which term shall include any additional shares of preferred stock of the same class heretofore or hereafter authorized to be issued by the Corporation), consisting of 100,000 shares is hereby created, and the voting powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, are as follows: The third paragraph of the Certificate of Designation should read in its entirety as follows: RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, as amended, a series of preferred stock, par value $1.00 per share, of the Corporation (such preferred stock being herein referred to as "Preferred Stock," which term shall include any additional shares of preferred stock of the same class heretofore or hereafter authorized to be issued by the Corporation), consisting of 100,000 shares is hereby created, and the voting powers, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, are as follows: Section 1 of the Certificate of Designation stated that: Section 1. Designation and Amount. There shall be a series of Preferred Stock of the Corporation which shall be designated as "Series A Junior Participating Preferred Stock," par value $.01 per share (hereinafter called "Series A Preferred Stock"), and the number of shares constituting such series shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction has been so authorized; provided, however, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than that of the shares then outstanding plus the number of shares of Series A Preferred Stock issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. Section 1 of the Certificate of Designation should read in its entirety as follows: Section 1. Designation and Amount. There shall be a series of Preferred Stock of the Corporation which shall be designated as "Series A Junior Participating Preferred Stock," par value $1.00 per share (hereinafter called "Series A Preferred Stock"), and the number of shares constituting such series shall be 100,000. Such number of shares may be increased or decreased by resolution of the Board of Directors and by the filing of a certificate pursuant to the provisions of the General Corporation Law of the State of Delaware stating that such increase or reduction has been so authorized; provided, however, that no decrease shall reduce the number of shares of Series A Preferred Stock to a number less than that of the shares then outstanding plus the number of shares of Series A Preferred Stock issuable upon exercise of outstanding rights, options or warrants or upon conversion of outstanding securities issued by the Corporation. IN WITNESS WHEREOF, ABC Rail Products Corporation has caused this Certificate of Correction of the Certificate of Designation to be duly executed by its Chairman of the Board and Chief Executive Officer and attested to by its Senior Vice President, Chief Financial Officer and Secretary this 15th day of November, 1996. ABC RAIL PRODUCTS CORPORATION By /s/ Donald W. Grinter ----------------------------------------- Chairman of the Board and Chief Executive Officer ATTEST: /s/ D. Chisholm MacDonald - ------------------------------------- Senior Vice President, Chief Financial Officer and Secretary EX-4.1 4 AMDT #1 TO THE RIGHTS AGREEMENT EXHIBIT 4.1 AMENDMENT NO. 1 TO THE RIGHTS AGREEMENT --------------------------------------- Amendment No. 1, dated as of November 18, 1996 (this "Amendment No. 1"), to the Rights Agreement between ABC RAIL PRODUCTS CORPORATION, a Delaware corporation (the "Company") and LA SALLE NATIONAL TRUST, N.A., a national banking association, as Rights Agent (the "Rights Agent"), dated as of September 29, 1995 (the "Rights Agreement"). W I T N E S S E T H ------------------- WHEREAS, the parties hereto have entered into the Rights Agreement; WHEREAS, the Rights Agreement contains a typographical error in that it references the par value of the preferred stock of the Company as $.01, rather than $1.00 as authorized by the Company's Amended and Restated Certificate of Incorporation; WHEREAS, pursuant to Section 27 of the Rights Agreement, without the approval of any holders of Rights Certificates, the parties to the Rights Agreement have agreed to correct provisions in the Rights Agreement that are defective by correcting such typographical error in each place in which it appears in such Rights Agreement; and WHEREAS, pursuant to Section 27 of the Rights Agreement, without the approval of any holders of Rights Certificates, the Company has deemed it necessary, appropriate and desirable, and the parties to the Rights Agreement have agreed, to amend the definition of Acquiring Person (as defined therein) in the Rights Agreement to eliminate the provision that states that an Acquiring Person shall not include any Affiliate (as defined therein) of the Company and to replace it with a provision that states that an Acquiring Person shall not include any Subsidiary (as defined therein) of the Company; NOW THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows: SECTION I. Defined Terms. Capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Rights Agreement. SECTION II. Amendments to Rights Agreement. The Rights Agreement is hereby amended as follows: 2.01. The words "Series A Junior Participating Preferred Stock, par value $.01 per share" in each and every place in which they appear in the Rights Agreement, including in Exhibits A, B and C thereto, are hereby amended by replacing such words with the words "Series A Junior Participating Preferred Stock, par value $1.00 per share". 1 2.02 The words "'Series A Junior Participating Preferred Stock,' par value $.01 per share" in each and every place in which they appear in the Rights Agreement, including in Exhibits A, B and C thereto, are hereby amended by replacing such words with the words "'Series A Junior Participating Preferred Stock,' par value $1.00 per share". 2.03 The words "preferred stock, par value $.01 per share" in each and every place in which they appear in the Rights Agreement, including in Exhibits A, B and C thereto, are hereby amended by replacing such words with the words "preferred stock, par value $1.00 per share". 2.04 The definition of "Acquiring Person" in Section 1 of the Rights Agreement is hereby amended by amending and restating such definition in its entirety as follows: "'Acquiring Person' shall mean any Person (as such term is hereinafter defined) who or which, together with all Affiliates and Associates (as such terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or more of the Common Shares of the Company then outstanding, but shall not include the Company, any Subsidiary of the Company, any employee benefit plan of the Company or of any Subsidiary of the Company, or any person or entity for or pursuant to the terms of any such plan. Notwithstanding the foregoing, no Person shall become an 'Acquiring Person' as the result of (i) an acquisition of Common Shares by the Company which, by reducing the number of shares outstanding, increases the proportionate number of shares beneficially owned by such Person to 15% or more of the Common Shares of the Company then outstanding, or (ii) the acquisition by such Person of newly-issued Common Shares directly from the Company (it being understood that a purchase from an underwriter or other intermediary is not deemed for purposes hereof to be a purchase directly from the Company); provided, however, that if a Person shall become the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding by reason of share purchases by the Company or the receipt of newly-issued shares directly from the Company and shall, after such share purchases or direct issuance by the Company, become the Beneficial Owner of any additional Common Shares of the Company (and thereafter remains a Beneficial Owner of 15% or more of the Common Shares of the Company), then such Person shall be deemed to be an 'Acquiring Person'; provided further, however, that any transferee from such Person who becomes the Beneficial Owner of 15% or more of the Common Shares of the Company then outstanding shall nevertheless be deemed to be an 'Acquiring Person.' Notwithstanding the foregoing, if the Board of Directors of the Company determines in good faith that a Person who would otherwise be an 'Acquiring Person,' as defined pursuant to the foregoing provisions of this paragraph, has become such inadvertently, and such Person divests as promptly as practicable (and in any event within ten business days after notification by the Company) a sufficient number of Common Shares so that such Person would no longer be an Acquiring Person, as defined pursuant to the foregoing provisions of this paragraph, then such Person shall not be deemed to be an 'Acquiring Person' for any purposes of this Agreement." 2 SECTION III. Miscellaneous. 3.01. Governing Law. This Amendment No. 1 shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts to be made and performed entirely within the State of Delaware. 3.02. Counterparts. This Amendment No. 1 may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 3.03. Descriptive Headings. Descriptive headings of the several Sections of this Amendment No. 1 have been inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. 3.04. Ratification. This Amendment No. 1 is limited as specified and shall not constitute a modification, acceptance, consent or waiver of any other provision of the Rights Agreement. The Rights Agreement, including the Exhibits thereto, as hereby amended is in all respects ratified and confirmed, and all the rights and powers created thereby or thereunder shall be and remain in full force and effect. From and after the date hereof, all references in the Rights Agreement, the Exhibits thereto and all other documents related to the Rights Agreement shall be deemed to be references to the Rights Agreement after giving effect to this Amendment No. 1. 3 IN WITNESS WHEREOF, the parties have caused this Amendment No. 1 to be duly executed and attested, all as of the day and year first above written. Attest: ABC RAIL PRODUCTS CORPORATION By: /s/ Jo Ellen Woomer By: /s/ D. Chisholm MacDonald -------------------------------- -------------------------------- Name: Jo Ellen Woomer Name: D. Chisholm MacDonald Title: Executive Assistant Title: Senior Vice President & CFO Attest: LA SALLE NATIONAL TRUST, N.A., By: /s/ Diane Swanson By: /s/ Sarah H. Webb -------------------------------- -------------------------------- Name: Diane Swanson Name: Sarah H. Webb Title: Assistant Secretary Title: Group Vice President 4 EX-27.1 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED OCTOBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JUL-31-1997 AUG-01-1996 OCT-31-1996 0 0 31,458 0 40,821 78,660 108,978 32,137 178,927 48,996 55,483 84 0 0 64,684 178,927 55,911 55,911 50,538 50,538 3,235 0 1,328 810 331 479 0 0 0 479 0.06 0.06 Notes and accounts receivable - trade are reported net of allowances for doubtful accounts in the Consolidated Balance Sheets.
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