-----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, KCX8riaI5IR1FlI0dUMDXEncW0VHSn6Ee8Dg/YXgz0kEXd7V75HItK5GGp2h4pZ2 wbI8zZm3028iRYwDKuMhrA== 0001047469-99-009887.txt : 19990317 0001047469-99-009887.hdr.sgml : 19990317 ACCESSION NUMBER: 0001047469-99-009887 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990316 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABC NACO INC CENTRAL INDEX KEY: 0000913364 STANDARD INDUSTRIAL CLASSIFICATION: METAL FORGING & STAMPINGS [3460] IRS NUMBER: 363498749 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22906 FILM NUMBER: 99566018 BUSINESS ADDRESS: STREET 1: 2001 BUTTERFIELD ROAD STREET 2: SUITE 502 CITY: DOWNES GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 3123224614 MAIL ADDRESS: STREET 1: 200 S MICHIGAN AVE STREET 2: SUITE 1300 CITY: CHICAGO STATE: IL ZIP: 60604 FORMER COMPANY: FORMER CONFORMED NAME: ABC RAIL PRODUCTS CORP DATE OF NAME CHANGE: 19931014 10-Q 1 10-Q 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 ------- 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. EX-4.2 2 EXHIBIT 4.2 EXHIBIT 4.2 [SPECIMEN ABC-NACO INC. COMMON STOCK CERTIFICATE] [ABC-NACO logo] NUMBERABC-NACO INC.SHARES ABCA DELAWARE CORPORATION COMMONCOMMON CUSIP 000752 10 5 THIS CERTIFIES THAT SEE REVERSE FOR CERTAIN DEFINITIONS is the owner of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK ($.01 PAR VALUE) OF ABC-NACO INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney, upon the surrender of this certificate properly endorsed. This Certificate is not valid until countersigned by the Transfer Agent and registered by the Registrar. Witness the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. Dated /s/ John S. Lison /s/ Joseph A. Seher ------------------------- [ABC-NACO seal] ------------------------ SECRETARY CHIEF EXECUTIVE OFFICER Countersigned and Registered: AMERICAN STOCK TRANSFER & TRUST COMPANY (New York, New York) Transfer Agent and Registrar By Authorized Officer ABC-NACO INC. ABC-NACO INC. will furnish without charge to each stockholder who so requests the powers, designations, preferences, and relative, participating, optional or other special rights of each class of stock or series thereof of the Corporation, and the qualifications, limitations or restrictions of such preferences and/or rights. Such request may be made to the Corporation or the Transfer Agent. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM-- as tenants in common UNIF GIFT MIN ACT ............. Custodian........... (Cust) (Minor) TEN ENT-- as tenants by the entireties under Uniform Gifts to Minors Act JT TEN -- as joint tenants with rights of survivorship and not as tenants ................................. in common (State)
Additional abbreviations may also be used though not in the above list. TRANSFER FORM COMPLETE THIS FORM ONLY WHEN TRANSFERRING TO ANOTHER PERSON For value received _________________________________________ hereby sell assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (please typewrite name and address) Shares represented by the within Certificate and do hereby irrevocably constitute and appoint _____________________________________________ attorney to transfer the same on the books of the within-named Corporation, with full power of substitution in the premises. Dated ___________________________ SIGNATURE GUARANTEED BY SIGNATURE(S) _________________________________ NOTICE: The signature(s) to this assignment must correspond with the name as written upon the face of the certificate in every particular, without alteration or enlargement or any change whatsoever. EX-10.1 3 EXHIBIT 10.1 EXHIBIT 10.1 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is entered into as of this 19th day of February, 1999 by and among ABC Rail Products Corporation, a Delaware corporation ("ABC") and the stockholders listed on the signature page of this Agreement (each, a "Stockholder" and collectively, the "Stockholders"). WHEREAS, ABC is a party to an Agreement and Plan of Merger with NACO, Inc., a Delaware corporation ("NACO"), and ABCR Acquisition Sub, Inc., a Delaware corporation and wholly owned subsidiary of ABC ("Merger Subsidiary") dated as of September 17, 1998 and amended and restated as of December 10, 1998, as further amended as of February 16, 1999 (the "Merger Agreement"); WHEREAS, pursuant to the merger (the "Merger") contemplated by the Merger Agreement all issued and outstanding shares of common stock, par value $.01 per share, of NACO ("NACO Common Stock"), including shares beneficially owned by the Stockholders, will be converted at the Effective Time of the Merger into shares of common stock, par value $0.01 per share, of ABC ("ABC Common Stock"); WHEREAS, the parties hereto desire to make provisions for the registration of possible resales of ABC Common Stock beneficially owned immediately after the Merger by the Stockholders who otherwise are restricted by Rule 144 under the Act in their resales of ABC Common Stock; and WHEREAS, the undertakings and agreements of ABC contained herein are a material inducement to the Stockholders to consummate and effect the transactions contemplated by the Merger Agreement; NOW, THEREFORE, the parties hereto agree as follows: (a) DEFINITIONS. For purposes of this Agreement: (i) The term "Act" means the Securities Act of 1933, as heretofore or hereafter amended; (ii) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document; (iii) The term "Registrable Securities" means the shares of ABC Common Stock beneficially owned by the Stockholders immediately after the Merger, and any securities paid, issued or distributed in respect of such shares by way of stock dividend or distribution or stock split or in connection with a combination of shares, recapitalization, reorganization, merger, consolidation or otherwise. (iv) The term "Sellers" means the Stockholders who elect to join in a registration effected pursuant to this Agreement; and (v) All other capitalized terms not defined herein shall have the meanings assigned to them in the Merger Agreement. (b) DEMAND RIGHTS. (i) If ABC shall receive at any time after 180 days after the Effective Time of the Merger, a written request from Stockholders beneficially owning at least two percent (2%) of the then outstanding shares of ABC Common Stock that ABC file a registration statement under the Act for a public offering of all or a part of the Registrable Securities (which written request shall specify the aggregate number of shares of Registrable Securities requested to be registered), then ABC shall effect such registration of Registrable Securities in accordance with this Agreement; provided, however, that ABC shall not be required to take any action pursuant to this Paragraph (b) unless the requested registration relates to at least 360,000 shares of Registrable Securities. (ii) If the Sellers intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise ABC as a part of the request made pursuant to the foregoing Subparagraph (b)(i), in which event the managing underwriter shall be selected by ABC with the prior written consent of the Sellers holding a majority in number of the Registrable Securities covered by the registration request. (iii) ABC may postpone a registration requested pursuant to Subparagraph (b)(i) for a period not to exceed 90 days if, at the time ABC receives a registration request pursuant to Subparagraph (b)(i), ABC is engaged in confidential negotiations or other confidential business activities (a "Confidential Transaction"), the disclosure of which, based upon the written advice of outside counsel, would be required in the registration statement, and the Board of Directors of ABC determines in good faith that such disclosure would be materially detrimental to ABC and its stockholders or would have a material adverse effect on the Confidential Transaction. (iv) (a) ABC will not include in any demand registration pursuant to this Paragraph (b) any securities which are not Registrable Securities without the prior written consent of the Sellers holding a majority in number of the Registrable Securities covered by the registration request, subject to ABC's obligations existing at the date hereof to register additional shares of ABC Common Stock as set forth on Exhibit A hereto. 2 (b) If a demand registration pursuant to this Paragraph (b) is an underwritten offering and the managing underwriter advises ABC in writing that in its opinion the number of Registrable Securities requested to be included in such offering and, if permitted, the number of securities which are not Registrable Securities requested to be included in such offering exceed the number of securities which can be sold in an orderly manner in such offering within a price range acceptable to the Sellers holding a majority in number of Registrable Securities covered by the registration request, ABC will include in such registration, FIRST, prior to the inclusion of any securities which are not Registrable Securities, the number of Registrable Securities requested to be included which in the opinion of such underwriter can be sold in an orderly manner within the price range of such offering, pro rata (as nearly as practicable) among the Sellers on the basis of the number of Registrable Securities proposed to be sold by each such Seller; and SECOND, the number of securities which are not Registrable Securities requested to be included which in the opinion of such underwriter can be sold in an orderly manner within the price range of such offering, pro rata (as nearly as practicable) among the holders of such securities on the basis of the number of securities proposed to be sold by each such holder. (v) Upon the closing of a demand registration pursuant to this Paragraph (b), each Seller agrees not to effect any public sale or distribution of equity securities, or any securities convertible into or exchangeable or exercisable for such securities, of ABC for a period of at least 90 days after such closing. (vi) ABC agrees: (a) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the 25-day period prior to and during the 90-day period beginning on the effective date of any underwritten registration under this Paragraph (b) (except pursuant to (i) registrations on Form S-8 or any successor form, and (ii) registrations on a form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or which does not permit the inclusion of shares of persons other than ABC) unless the underwriters managing the registered public offering otherwise agree, and (b) after the date hereof not to grant, directly or indirectly, any other persons the right to request ABC to register any equity securities of ABC in excess of the number of shares equal to four percent (4%) of the then outstanding shares of ABC Common Stock. (c) PIGGYBACK RIGHTS. If ABC proposes to register shares of its Common Stock for a public offering (including an offering by stockholders other than the Sellers but excluding an offering to employees on Form S-8 or any other offering on a form which does not include 3 substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities or which does not permit the inclusion of shares of persons other than ABC), ABC shall promptly give the Stockholders written notice of such proposed registration. Upon the written request of any Stockholder given within 20 days after mailing of such notice by ABC, ABC shall, subject to the provisions of Paragraph (g) hereof, use its reasonable best efforts to register under the Act all of the Registrable Securities that any Stockholder has requested to have included. The Sellers' participation in a registration pursuant to this Paragraph (c) shall be conditioned upon the Sellers' complete and full cooperation on a timely basis with all requirements reasonably established by ABC and/or the managing underwriter in the course of such registration. (d) OBLIGATIONS OF ABC. Whenever required under this Agreement to effect the registration of any Registrable Securities, ABC shall, as expeditiously as possible: (i) Prepare and file with the Securities and Exchange Commission (the "SEC") (or any successor agency) a registration statement with respect to such Registrable Securities (provided that before filing a registration statement or prospectus or any amendments or supplements thereto, ABC will furnish on a timely basis to the counsel selected by Sellers copies of all such documents required to be filed, which documents in the case of a registration under Paragraph (b) will be subject to review by such counsel), and use its reasonable best efforts to cause such registration statement to become effective, and, upon the request of the Sellers, use its reasonable best efforts to keep such registration statement effective for up to 120 days; (ii) Prepare and file with the SEC such supplements and amendments to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement during an effective period, if requested by the Sellers, of not to exceed 120 continuous days; (iii) Furnish to the Sellers such numbers of copies of the prospectus, including a preliminary prospectus in conformity with the requirements of the Act, and such other documents as the Sellers may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; (iv) Use its reasonable best efforts to expeditiously register or qualify the Registrable Securities under such securities or Blue Sky laws of such jurisdictions within the United States as shall be appropriate or reasonably requested by the Sellers; (v) In the case of a registration under Paragraph (b), enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the shares of Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation: 4 (a) making such representations and warranties to the underwriters in form, substance and scope, reasonably satisfactory to the managing underwriter, as are customarily made by issuers to underwriters in underwritten secondary offerings; (b) obtaining opinions and updates thereof of counsel, which counsel and opinions to ABC (in form, scope and substance) shall be reasonably satisfactory to the managing underwriter, addressed to the managing underwriter covering the matters customarily covered in opinions requested in underwritten secondary offerings and such other matters as may be reasonably requested by the managing underwriter; (c) causing the underwriting agreements to set forth in full the indemnification provisions and procedures of Paragraph (j) below (or such other substantially similar provisions and procedures as the managing underwriter shall reasonably request) with respect to all parties to be indemnified pursuant to said Paragraph (j); and (d) delivering such documents and certificates as may be reasonably requested by the Sellers to evidence compliance with the provisions of this Subparagraph (d)(v) and with any customary conditions contained in the under-writing agreement or other agreement entered into by ABC; and (vi) Promptly notify each Seller at any time when a prospectus relating thereto is required to be delivered under the Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, at the request of any such Seller, ABC will promptly prepare and furnish such Seller a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) SELLER INFORMATION. It shall be a condition precedent to the obligations of ABC to take any action pursuant to this Agreement that the Sellers shall furnish to ABC such information regarding themselves, the Registrable Securities held by them, and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities. (f) EXPENSES. ABC shall pay all fees and expenses incurred in connection with any registration pursuant to this Agreement, including, without limitation, all registration, filing and qualification fees and expenses, accounting fees, fees and disbursements of counsel for ABC, printing fees, listing fees, miscellaneous travel and other out-of-pocket expenditures incurred by ABC. Sellers shall pay all fees and disbursements of counsel for Sellers and all underwriting 5 discounts and all commissions or brokerage fees applicable to the Registrable Securities sold by them and all miscellaneous travel and other out- of-pocket expenditures incurred by them. (g) UNDERWRITING REQUIREMENTS. In connection with any offering involving an underwriting of shares, ABC shall not be required under Paragraph (c) to include any of the Registrable Securities in such underwriting unless Sellers accept the terms of the underwriting as agreed upon between ABC and the underwriters selected by it, and then only in such quantity as will not, in the opinion of the underwriters, jeopardize the success of the offering by ABC. If the total number of Registrable Securities that Sellers request be included in such offering exceeds (when combined with the securities being offered by ABC and any other selling stockholders having rights to participate in such offering) the number of securities that the underwriters reasonably believe compatible with the success of the offering by ABC, then ABC shall be required to include in the offering only that number of securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering by ABC, the securities so included to be allocated pro rata (as nearly as practicable) among the Sellers and other selling stockholders on the basis of the number of securities proposed to be sold by each. (h) SUCCESSORS AND ASSIGNS. The registration rights provided by this Agreement shall be binding upon and inure to the benefit of ABC (and its successors and assigns), and the Stockholders (and any affiliates thereof to whom the Registrable Securities are transferred, sold or disposed). Except as expressly stated in the foregoing sentence, the registration rights provided by this Agreement may not be assigned by the Stockholders without the prior written consent of ABC. (i) LIMITS ON RIGHTS. The right of the Stockholders to require a registration pursuant to Paragraph (b) shall be limited to two registrations. Participation in a registration pursuant to Paragraph (c) shall be limited, as to any Stockholder, to a single registration and any Stockholder participating in a registration pursuant to Paragraph (c) shall have no right to participate in any further registration pursuant thereto unless such Stockholder was not allowed to register at least seventy-five percent (75%) of the Registrable Securities requested for inclusion in such registration due to the operation of Paragraph (g) above. The failure of the Sellers to sell all of the Registrable Securities offered in a registration effected pursuant to Paragraph (b) shall not entitle any of the Sellers to require or participate in any further registration under Paragraph (b) of ABC securities. (j) INDEMNIFICATION. (i) ABC agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers, directors, stockholders, partners and employees and each person who controls (within the meaning of the Act) such holder against all losses, claims, damages, liabilities and expenses whatsoever, as incurred, and reasonable fees and expenses of counsel incurred in investigating, preparing or defending against, or aggregate amounts paid in settlement of any litigation, action, investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon, caused by or arising out of any untrue or alleged untrue statement 6 of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to ABC by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after ABC has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, ABC will indemnify such underwriters, their officers and directors and each person who controls (within the meaning of the Act) such underwriters to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (ii) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to ABC in writing such information as ABC reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify ABC, its directors, stockholders, employees and officers and each person who controls (within the meaning of the Act) ABC against any losses, claims, damages, liabilities and expenses whatsoever, as incurred, and reasonable fees and expenses of counsel incurred in investigating, preparing or defending against, or aggregate amounts paid in settlement of any litigation, action, investigation or proceeding by any governmental agency or body, commenced or threatened, in each case whether or not a party, or any claim whatsoever based upon, caused by or arising out of any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information so furnished in writing by such holder expressly for such purpose and is reasonably relied upon in conformity with such written information. (iii) Any person entitled to indemnification hereunder will (a) give reasonably prompt written notice to the indemnifying party of any claim with respect to which he or it seeks indemnification and (b) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without his or its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. 7 (iv) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and will survive the transfer of securities. ABC also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event ABC's indemnification is unavailable for any reason. Such right to contribution shall be in such proportion as is appropriate to reflect the relative fault of and benefits to ABC on the one hand and the Sellers on the other (in such proportions that the Sellers are severally, not jointly, responsible for the balance), in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits to the indemnifying party and indemnified parties shall be determined by reference to, among other things, the total proceeds received by the indemnifying party and the indemnified parties in connection with the offering to which losses, claims, damages, liabilities or expense relate. The relative fault of the indemnifying party and indemnified parties shall be determined by reference to, among other things, whether the action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or the indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The parties hereto agree that it would not be just or equitable if contribution pursuant hereto were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediate preceding paragraph. No person found guilty of any fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation. Notwithstanding the provisions of this Subparagraph (j)(iv), no Seller shall be required to contribute any amount in excess of the net amount of proceeds received by such Seller from the sale of Registrable Securities pursuant to the registration statement. (k) ENTIRE AGREEMENT; MODIFICATION; AMENDMENT. This Agreement constitutes the entire Agreement between the parties covering the subject matter hereof and supersedes all prior agreements or understandings whether written or oral. This Agreement may not be modified or amended other than in a writing signed by ABC and Stockholders holding a majority of the Registrable Securities. (l) NO INCONSISTENT AGREEMENTS. ABC will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement. (m) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. ABC will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect 8 the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement provided that this Paragraph (m) shall not apply to actions or changes with respect to ABC's business, earnings, revenues, financial conditions or prospects. (n) TERMINATION. This Agreement, other than the provisions of Paragraph (j) above, shall terminate on the sixth anniversary of the date hereof; PROVIDED, HOWEVER, that such termination shall not be effective until completion of any registration of Registrable Securities requested prior to such sixth anniversary in accordance with this Agreement; and PROVIDED FURTHER, that with respect to any Stockholder, this Agreement shall terminate on the date on which such Stockholder may sell Registrable Securities in accordance with Rule 145(d)(2) or (3) under the Act. (o) REMEDIES. Any person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of the Agreement. (p) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provisions will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (q) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. (r) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within the State, without regard to the conflicts of laws provision thereof. (s) NOTICES. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date of receipt and shall be delivered personally or mailed by registered or certified mail (postage prepaid, return receipt requested), sent by overnight courier or sent by telecopy, to the Parties at the following addresses or telecopy numbers (or at such other address or telecopy number for a Party as shall be specified by like notice): 9 (a) If to ABC: ABC Rail Products Corporation 200 South Michigan Avenue 13th Floor Chicago, IL 60604 Attention: Donald W. Ginter Telecopy No.: (312) 322-0397 (b) If to a Stockholder, at the address specified by such holder to ABC. 10 IN WITNESS WHEREOF, this Agreement has been entered into by the parties hereto as of the date first written above. ABC RAIL PRODUCTS CORPORATION By: /s/ James P. Singsank ---------------------------------------- Name: James P. Singsank Title: Assistant Secretary STOCKHOLDERS: /s/ Joseph A. Seher --------------------------------------------- Joseph A. Seher /s/ Vaughn W. Makary --------------------------------------------- Vaughn W. Makary /s/ Wayne R. Rockenbach --------------------------------------------- Wayne R. Rockenbach /s/ John W. Waite --------------------------------------------- John W. Waite /s/ John M. Lison --------------------------------------------- John M. Lison /s/ Stephen W. Becker --------------------------------------------- Stephen W. Becker /s/ John M. Giba --------------------------------------------- John M. Giba 11 /s/ Brian L. Greenburg --------------------------------------------- Brian L. Greenburg /s/ Michael B. Heisler --------------------------------------------- Michael B. Heisler /s/ Jack R. Long --------------------------------------------- Jack R. Long /s/ Wilbur G. Streams --------------------------------------------- Wilbur G. Streams /s/ Richard A. Drexler --------------------------------------------- Richard A. Drexler /s/ Daniel W. Duval --------------------------------------------- Daniel W. Duval /s/ Willard H. Thompson --------------------------------------------- Willard H. Thompson 12 EX-10.2 4 EXHIBIT 10.2 EXHIBIT 10.2 FORM OF AMENDED AND RESTATED EMPLOYMENT AGREEMENT This Agreement, dated as of the 19th day of February, 1999, is between ABC Rail Products Corporation, a Delaware corporation ("ABC"), NACO, Inc., a Delaware corporation and a wholly owned subsidiary of ABC ("NACO"), and ______________ ("Employee"). RECITALS A. The parties hereto wish to amend, restate and supersede in its entirety the Employment Agreement, dated as of the 29th day of June, 1988, between NACO and the Employee, upon the terms and subject to the conditions set forth herein. B. The Employee is a key employee of ABC and NACO. C. ABC and NACO desire to engage the Employee as an employee to render services to ABC and NACO and to provide for the financial security of the Employee. TERMS AND CONDITIONS For valuable consideration, the parties agree as follows: 1. DEFINITIONS. a. A "Change in Control" of NACO shall mean (i) any acquisition, beneficially or otherwise, by an "Unrelated Party" of 25% or more of the common stock of NACO issued and outstanding immediately prior to such acquisition (a series of acquisitions by an Unrelated Party shall be treated as a single acquisition to the extent the aggregate number of shares acquired in such series exceeds 25%); (ii) a voluntary or involuntary dissolution or reorganization of NACO; (iii) a change in the majority of the board of directors of NACO in connection with, or directly resulting from, a merger, sale of assets or other reorganization of NACO, an Unrelated Party tender offer or proxy contest, or the acquisition by a person or group of more than 25% of the voting power of NACO; or (iv) a sale by NACO of substantially all of its assets to another corporation which is not a wholly owned subsidiary of NACO. A change in the majority of the board of directors shall be deemed to have occurred if the persons who were directors of NACO immediately before such event or acquisition cease to constitute a majority of the board of directors of NACO or any successor to NACO. For the purpose of this subsection, an "Unrelated Party" shall mean any party or group of parties acting together, excluding, however, NACO, any trustee under any employee benefit plan maintained by NACO, and any nominee holder for securities exchange in which the common stock of NACO may be traded, if any. Notwithstanding anything contained herein to the contrary, a Change in Control shall not include the reincorporation of NACO in a state other than Delaware or the restructuring of NACO to create a holding company, provided that such restructuring does not otherwise result in Change in Control. b. "For Cause" shall mean any act of the Employee which constitutes, on the part of the Employee, common law fraud, a felony or a gross or willful breach of fiduciary duty to ABC or NACO. c. "Good Reason" shall mean (i) a reduction in the Employee's annual base salary, targeted bonus percentage or benefits; (ii) a significant reduction in the duties, authorities or responsibilities of the Employee's position; (iii) ABC's or NACO's requiring the Employee to be based at any office or location other than at which the Employee is based on the date of the Change in Control; or (iv) the termination of this Agreement or the failure to assume the terms of this Agreement, as the case may be, by ABC or NACO or any successor of ABC or NACO. 2. TERMINATION OF EMPLOYMENT. a. If ABC or NACO terminates the Employee's employment for a reason other than For Cause, the Employee shall be compensated by ABC as follows, in addition to any other payments from ABC or NACO due to the Employee: (i) Base salary as of the termination date (or prior to any reduction resulting in Good Reason for resignation) for a period of twenty-four months. (ii) Continuation of ABC's medical, dental and life insurance coverage in effect at the termination date for a period of two years or until the Employee is covered by a similar insurance plan at a new employer, if sooner. (iii) Continuation of the Employee's car lease or car allowance for a period of twenty-four months. (iv) Payment of outplacement services as selected by the Employee. (v) The prorata share, based upon the number of months employed during the fiscal year, of bonus that would have been earned by the Employee in the fiscal year that the termination occurs. b. If, within three years following a Change in Control, ABC or NACO terminates the Employee's employment for a reason other than For Cause, or if the Employee terminates his employment with ABC or NACO for Good Reason, the Employee shall be compensated as follows, in addition to any other payments from ABC or NACO due to the Employee: (i) Each of the items included above in Section 2.a. (i) - (v) inclusive. (ii) A payment equal to the larger of (i) two times the average of the bonus paid to the Employee during the prior two fiscal years; or (ii) two times the bonus the Employee would earn based upon the current salary times the targeted bonus percentage during the year in which the termination occurs. 2 c. If the payments to the Employee under this Section or combined with other payments to the Employee cause the payments to be in excess of certain limitations set forth in the Internal Revenue Code and result in the imposition of excise tax on such payments, ABC will reimburse the Employee for such excise tax plus the income and excise taxes thereon. 3. MISCELLANEOUS. a. This Agreement shall inure to the benefit of, and be enforceable by, the Employee's legal representatives, heirs and assigns. If the Employee should die while any amounts are still payable to him hereunder, all such amounts shall be paid in accordance with the terms of this Agreement to the Employee's estate. The parties have executed this Agreement and it becomes effective as of the date set forth in Recital A on the first page of this Agreement. NACO, Inc. By: /s/ John M. Lison -------------------------------------------------- John M. Lison Executive Vice President--Corporate Development and Secretary ABC RAIL PRODUCTS CORPORATION By: /s/ James P. Singsank -------------------------------------------------- James P. Singsank Corporate Controller and Assistant Secretary Employee -------------------------------------------------- 3 EX-10.3 5 EXHIBIT 10.3 FORM OF STOCK PURCHASE AGREEMENT THIS AGREEMENT, made as of the _____ day of ______ , between NACO, Inc., a Delaware corporation, having its principal place of business in Lisle, Illinois ("Corporation"), and _________, an individual, residing at ________, _________,______________, ("Stockholder"). Whereas, concurrent with the execution of this Agreement, the Corporation sold ______________ (_____________) shares of its common stock to Stockholder; Whereas, Stockholder represents to the Corporation that he has conducted a diligent investigation and has obtained all desired information and has otherwise satisfied himself with respect to the business and financial condition of the Corporation, the tax and other legal considerations relating to this transaction or to the shares of stock being purchased, the present fair market value of such shares and all other matters which Stockholder considers to be relevant in connection with this transaction. It is deemed by the parties hereto to be in the best interests of the Corporation, and all of its stockholders, to enter into this Agreement so that the number of persons owning stock in the Corporation might be limited. NOW, THEREFORE, in consideration of the premises, which are incorporated into and made an integral part of this Agreement, the issuance and sale of stock of the Corporation to the Stockholder and the mutual promises and covenants herein contained, it is hereby agreed as follows: 1. DEFINITIONS (a) "Stock" - the term "Stock" shall mean the shares of common stock of the Corporation identified herein including any securities issued in exchange therefor or received on account of any stock dividend, reclassification or recapitalization thereof. (b) "Stockholder" - the term "Stockholder" shall mean the individual stockholder executing this Agreement and the permitted assigns of such Stockholder. (c) "Employed" or "Employment" - the term "Employed" or "Employment" shall mean the actual service as an Officer, Director or other employee of the Corporation or any subsidiary or affiliate of the Corporation and its subsidiaries. 2. REQUIREMENT OF OFFER TO SELL BY STOCKHOLDER. Except as otherwise provided in Sections 11 and 13 hereof, if (i) the Stockholder shall cease for any reason to be actively employed by the Corporation or (ii) the Stockholder shall make any attempt to sell, pledge, donate or dispose of the stock in any manner, Stockholder agrees to immediately deliver to the Corporation a written offer (which offer shall state that it is irrevocable for a period of 30 days after receipt by the Corporation) offering to sell the Stock for the price and upon the terms set forth in this Agreement. Simultaneously with the offer, Stockholder shall deliver to the Corporation (in the event the Corporation does not then already have custody thereof) the certificates representing the Stock together with stock transfer powers duly executed in blank. The Stockholder's offer may be accepted by written notice to that effect given to the Stockholder within such 30-day period. If the Stockholder shall fail to deliver the written offer of sale as well as the stock certificates and stock transfer powers (if the Corporation does not already have custody thereof), the Corporation shall be deemed to have an exclusive assignable option to purchase the Stock at the price and on the terms set forth in this Agreement for six (6) months after the last to occur of (i) the date when such offer was required to have been delivered to the Corporation, (ii) the date upon which the Corporation was informed of the cessation of Stockholder's employment, (iii) the date upon which the Corporation was informed of an attempted disposition of the Stock by Stockholder, or (iv) the date upon which the Corporation makes demand upon the Stockholder as herein provided. This option may be exercised by the Corporation by written notice within such six-month period. 3. PRICE. The price to be paid for any Stock being sold by the Stockholder pursuant to this Agreement shall be determined as soon as practicable in the manner hereinafter provided and shall, subject to the provisions of this Section 3, be an amount (without interest) equal to the fair market value of such Stock as of the close of the last day (the "valuation date") preceding the earliest to occur of the following dates: (a) The date upon which the written offer of sale to the Corporation pursuant to Section 2 was required to be delivered to the Corporation; (b) The date upon which the Stockholder ceases to be actively employed by the Corporation; (c) The date upon which the Corporation makes written demand upon the Stockholder to offer his stock for sale to the Corporation; (d) The date upon which the Corporation exercises its option to purchase the Stockholder's stock; or (e) The date of the Stockholder's death. In no event, however, shall the price for any portion of the Stock sold pursuant to this Agreement exceed the Stockholder's cost if (i) Stockholder and the Corporation cannot agree on the fair market value of such Stock and Stockholder neglects or refuses to take any action required of Stockholder within the time prescribed or pursuant to the procedure for determination of fair market value set forth in Section 4 below; (ii) if Stockholder fails to use his best efforts (including, but not limited to, prompt execution and delivery to any appraiser of appropriate instructions to proceed with the appraisal, guarantees of expenses, releases of appraiser's liabilities to Stockholder, etc.) to cause 2 a prompt determination of fair market value to be made in the manner contemplated herein; (iii) if a determination of fair market value in accordance with the procedure set forth herein is not in fact made within six (6) months of the applicable valuation date; and (iv) with respect to the percentage of the Stock set forth below, if Stockholder's continuous employment ceased for any reason other than Stockholder's death or, at the discretion of the Corporation, Stockholder's disability during the applicable employment period set forth below:
Period of Continuous Percent of Stock To EMPLOYMENT OF STOCKHOLDER BE RESOLD AT COST -------------------------- --------------------- Less than one year 100% One year or more but less than two years 80% Two years or more but less than three years 60% Three years or more but less than four years 40% Four years or more but less than five years 20% Five years or more 0
4. APPRAISAL OF STOCK. For purposes of this Agreement, the fair market value of the Stock as of any valuation date shall be determined by agreement between the Corporation and the Stockholder. In the event the Corporation and the Stockholder cannot agree on the fair market value of such Stock within thirty (30) days of the date on which the Corporation gives written notice accepting an offer of sale or the date on which the Corporation gives notice of the election to exercise the option as provided in Section 2 hereof, then the fair market value of the Stock shall be determined by the following procedure: (a) The Stockholder and the Corporation shall promptly indicate their opinions in writing as to the fair market value of the Stock as of the applicable valuation date. (b) The Stockholder and the Corporation shall, within ten (10) days after the expiration of the 30-day period referred to above, jointly appoint a recognized investment banking firm or firm specializing in the appraisal of shares of stock of private companies to act as an appraiser hereunder. If the parties are unable to agree upon an appraisal firm, then each party shall promptly appoint a recognized firm willing to act under these provisions and the two firms so selected shall select another recognized firm which is willing and shall act as the sole appraiser. In selecting the sole appraiser, the firms appointed by Stockholder and the Corporation may consult with the parties hereto but shall be entitled to make an independent selection of the appraiser and shall have no 3 liability to either party as a result of such selection. (c) Following its selection, the appraiser shall promptly determine the fair market value of the Stock as of the valuation date. In determining such value, the appraiser shall apply such principles of valuation as it, in its sole discretion, deems appropriate under all the circumstances. For this purpose, fair market value shall mean the price at which the Stock would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or sell, but assuming, if the Stock was purchased by such a buyer, that such a buyer would be subject to the same transfer and other restrictions which are applicable to Stockholder. (d) All costs incident to the selection of an appraiser and an appraisal hereunder, including the fees of the appraiser, shall be borne by (i) the Corporation if the difference between the fair market value determined by the appraiser and the fair market value asserted in writing by the Corporation prior to submission to the appraiser is greater than the difference between the fair market value determined by the appraiser and the fair market value asserted by the Stockholder in writing prior to submission to the appraiser, or (ii) the Stockholder if the difference between the fair market value determined by the appraiser and the fair market value asserted in writing by the Stockholder prior to submission to the appraiser is greater than the difference between the fair market value determined by the appraiser and the fair market value asserted by the Corporation in writing prior to submission to the appraiser. 5. PAYMENT. If the Stockholder and the Corporation agree on the fair market value of the Stock, the amount required to be paid for such Stock shall be paid within sixty (60) days thereafter. In the event no agreement is reached as to the fair market value of such Stock, the amount required to be paid for such Stock shall be paid sixty (60) days after the determination of its fair market value pursuant to the provisions of Section 3. 6. EFFECTING THE SALE. A sale by Stockholder hereunder shall be effected by the delivery to the Corporation of a written offer to sell the Stockholder's Stock together with certificates evidencing the Stock, duly endorsed and stamped for transfer, (unless the Corporation already has custody thereof) together with duly executed stock powers, and delivery by the Corporation to the Stockholder of written notice to the effect that the Corporation has elected to accept the Stockholder's offer of sale. In the event the option provisions of Section 2 become effective, a sale hereunder shall be effected by delivery by the Corporation to the Stockholder of a written notice during the option period to the effect that the Corporation has elected to exercise its rights thereunder. Any damages (including but not limited to lost opportunities and out-of-pocket costs such as attorneys' fees) suffered by the Corporation as the result of any delay in the delivery of any written offer, notice, stock certificate or other document required to be delivered under this Agreement shall be charged against the Stockholder and may be offset against any amount or amounts otherwise payable to the Stockholder. 7. ELECTION NOT TO PURCHASE. Subject to the terms of Section 15, in the event the Corporation elects not to accept an offer of sale by the Stockholder or not to exercise its option rights 4 as provided in Section 2 hereof, the Corporation shall then promptly deliver to the Stockholder the certificate or certificates for the Stock of the Stockholder so offered or subject to such option. 8. ACKNOWLEDGMENT OF DELIVERY. Stockholder is herewith delivering to Corporation certificates representing the Stock together with stock transfer powers subject to the terms of this Agreement. The Corporation shall have the authority to transfer such Stock in accordance with the provisions hereof. 9. RESTRICTIONS ON TRANSFER. While this Agreement is in effect, the Stockholder shall not sell, assign, encumber, pledge, or give or otherwise dispose of any of the Stock of the Corporation now, or hereafter owned by the Stockholder (except to the Corporation) without the prior written consent of the Corporation. Stockholder agrees that the Corporation shall not effect any transfer of Stock on its books except pursuant to the terms of this Agreement. The Corporation agrees not to unreasonably withhold consent to any proposed action by the Stockholder provided Stockholder shall provide the Corporation with the undertaking and agreement of any proposed transferee, in form and substance satisfactory to the Corporation's counsel, that the terms and conditions of this Agreement shall bind the transferee in the same fashion as if such transfer had not occurred. 10. CHANGE IN CAPITALIZATION. If, at any time while this Agreement shall remain in effect, the common stock of the Corporation shall be increased or changed, such increased or changed capital stock (as the case may be) shall be subject to each and all of the terms, conditions and provisions hereof. 11. PUBLIC MARKET FOR STOCK. If at any time prior to the applicable valuation date under Section 3, there shall be created a public market for the voting securities of the Corporation with the consent of the Corporation, then all the rights and obligations of the Corporation and the Stockholder hereunder, insofar as the same relate to the Stock subject to this Agreement, shall cease and terminate except that the provisions of Section 11 of this Agreement shall not apply to that percentage of the Stock which, upon the happening of certain events, the Corporation is entitled to repurchase at cost pursuant to Section 3 (iv) above. 12. LEGEND ON STOCK. The certificates representing the Stock shall bear substantially the following legend: "The shares of stock represented by this certificate are subject to the terms and conditions of a certain "Stock Purchase Agreement" entered into by and between the Corporation and the holder of this Stock, and all amendments thereof and supplements thereto, executed at any time by the parties thereto, or by their respective and successive successors in interest. Said Stock Purchase Agreement is on file with the Secretary of the Corporation, and provides that (i) the Stockholder shall not sell, assign, encumber, pledge, give or otherwise dispose of this stock except as provided therein, and (ii) the Corporation has the right to purchase this stock at the time and price specified therein. The holder hereof accepts and holds this certificate subject to and with notice of all of the terms, conditions and provisions of said Stock Purchase Agreement and agrees to be bound thereby." 5 13. SALE OR EXCHANGE OF STOCK BY CORPORATION. If the holders of the Corporation's securities representing sixty-six and two-thirds percent (66-2/3%) or more of the votes entitled to be cast at a meeting of Stockholders thereon have voted in favor of the sale or exchange of such securities to any person, firm, association or corporation (except a conventional underwriting of such securities by an investment banking firm for sale to the public), Stockholder then shall be free to participate in such sale or exchange notwithstanding any other provisions of this Agreement if the Corporation shall send a written notice to Stockholder advising him thereof and offering to include in such sale or exchange all Stock subject hereto on the same terms as the other stock being sold or exchanged. In the event such a notice is given by Corporation to Stockholder and if Stockholder shall not, within fifteen (15) days from the delivery of such notice, deliver to the Corporation a written acceptance of such offer, the Corporation shall, for the succeeding sixty (60) days, have an exclusive assignable option to purchase such stock in the same manner and on the same terms as though Stockholder had ceased his employment with the Corporation and the Corporation had elected to purchase the Stock with a valuation date on the fifteenth (15th) day after the delivery of such notice by the Corporation to the Stockholder. 14. ASSIGNMENT OF CORPORATION'S RIGHT TO PURCHASE. Following any determination under Section 3 of the fair market value of Stock to be sold pursuant to this Agreement, the Corporation may assign its right to purchase any or all of such Stock to any person, firm or corporation and such assignee shall be entitled to purchase such Stock in accordance with the terms of this Agreement upon the payment of the purchase price. In the event the Corporation makes such an assignment, it shall immediately give written notice thereof to the Stockholder or his legal representative. 15. EXTENDED PURCHASE OPTION a) In the event the Stockholder is required to offer Stock to the Corporation pursuant to Section 2 hereof and the Corporation does not purchase all of the Stockholder's Stock subject to this Agreement, the Stockholder agrees that the Corporation shall have an irrevocable option to purchase the Stock which was subject to this Agreement for a period of five (5) years from the date the Stockholder was required, pursuant to Section 2, to offer the stock to the Corporation or until the date upon which there shall is a public market in voting securities of the Corporation with the consent of the Corporation, whichever shall first occur. The purchase price shall be the fair market value of such securities on the date the option granted under this Section 15 is exercised by the Corporation. Fair market value shall be determined in accordance with Section 4 of this Stock Purchase Agreement. The Corporation shall exercise this option in writing by notice of exercise mailed, registered or certified mail, to the Stockholder's last known address. Within 30 days of mailing the notice of exercise, the Stockholder shall deliver to the Corporation any certificates (if not already on the Corporation's possession) evidencing the shares subject to the option along with a warranty that such shares are free and clear of any liens or encumbrances whatsoever. Upon receipt of the shares, the Corporation shall pay the purchase price in cash. The option provided for in this Section 15 shall be in addition to the Corporation's other rights hereunder and shall not supersede any other provision or term of this Stock Purchase Agreement. The Stockholder further agrees that this Section 15 shall be binding upon his successors and assignees and that 6 the Certificates evidencing the Common shares subject to the Stock Purchase Agreement shall continue to bear the legend as set forth in Section 12 hereof. (b) In furtherance of this Section 15 the Stockholder agrees to deposit or permit to remain on deposit with the Corporation the original share certificates evidencing the shares subject to this Stock Purchase Agreement, along with a stock power duly endorsed in blank, and authorize the secretary of the Corporation to fulfill the obligations of the Stockholder hereunder in the event the Stockholder fails to do so. The Corporation may, at its discretion, release the share certificates to the Stockholder but such release shall not affect the rights granted hereunder. 16. NOTICES. All notices pursuant hereto shall be sent, with all charges prepaid, and addressed as follows: To Corporation: NACO, Inc. One Corporate Lakes 2525 Cabot Drive Suite 107 Lisle, IL 60532 Attention: Mr. Joseph A. Seher with a copy to: Lison & Griffin 200 West Adams Suite 2000 Chicago, IL 60606 Attention: Mr. John M. Lison To Stockholder: ------------------------- ------------------------- ------------------------- ------------------------- The address of any party hereto may be changed from time to time by notice in writing to the other party duly served in accordance with the provisions hereof. All notices sent pursuant hereto be certified mail or by telegram shall, if sent from any point within the United States, be deemed to be delivered within seventy-two (72) hours after they are sent. 17. SUCCESSORS AND ASSIGNS. All of the terms, conditions, benefits and obligations in this Agreement shall be binding upon and running in favor of the parties hereto, their heirs, executors, 7 administrators, successors and assigns. 18. GOVERNING LAW. This Agreement shall be construed under and enforced in accordance with the laws of the State of Illinois. 19. DUPLICATE ORIGINALS. This Agreement may be signed separately by the parties hereto upon separate copies and all of such copies shall together constitute a single Agreement. 20. SECTION HEADINGS. The Section headings contained in this Agreement are inserted for reference purposes only and shall not affect the meaning or interpretation of this Agreement. IN WITNESS WHEREOF, the stockholder hereto has executed this Agreement as an individual party and the Corporation has caused this Agreement to be executed by its duly authorized officer, all as of the day and year first above written. NACO, Inc. Stockholder By: ____________________________ __________________________________ 8 EX-27.1 6 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD ENDED JANUARY 31, 1999. 1,000 6-MOS JUL-31-1999 AUG-01-1998 JAN-31-1999 0 0 48,153 0 59,829 116,672 204,217 52,429 318,095 57,706 162,955 0 0 90 84,175 318,095 150,935 150,935 138,077 138,077 9,165 0 5,983 (2,290) (962) (1,328) 0 0 (1,620) (2,948) (.33) (.33) Notes and accounts receivable-trade are reported net of allowances for doubtful accounts in the Consolidated Balance Sheets.
-----END PRIVACY-ENHANCED MESSAGE-----