Atchison Casting Announces Completion of Restatement of Previously Issued Financial Statements and Other Matters

Apr 24, 2001, 01:00 ET from Atchison Casting Corporation

    ATCHISON, Kan., April 24 /PRNewswire Interactive News Release/ -- Atchison
 Casting Corporation (NYSE:   FDY) announced that it expects to file today with
 the Securities and Exchange Commission an amended annual report on Form 10-K/A
 containing restated financial results for fiscal years 1998-2000.  This filing
 brings to a conclusion the restatement of financial results for prior fiscal
 years.  The restatement reduced previously reported net income by
 $24.5 million cumulatively for the years restated, resulting in a cumulative
 earnings per share reduction of $3.23 and reducing stockholders' equity to
 $114.3 million at June 30, 2000.  The Company expects to file its quarterly
 reports for the quarters ended September 30, 2000 and December 31, 2000 as
 soon as practicable.  The Company previously announced that it had discovered
 possible accounting irregularities at three steel foundries in Pennsylvania,
 Quaker Alloy, Empire Steel and Pennsylvania Steel (collectively referred to as
 the Pennsylvania Foundry Group or PFG).  The Audit Committee of the Board of
 Directors directed an independent investigation into the accounting
 irregularities.  The Audit Committee engaged Jenner & Block, LLC to advise it
 on the conduct of the investigation, and Jenner & Block retained
 PricewaterhouseCoopers LLP as accountants to assist in the investigation.  The
 Company believes the irregularities were limited to PFG.
     As a result of that investigation, the Company has concluded that a small
 number of PFG employees violated Company policies and procedures and used
 improper accounting practices, resulting in the overstatement of revenue,
 income and assets and the understatement of liabilities and expenses.  The
 Company believes that certain of these same personnel also misappropriated
 Company funds.  The direct benefit to the former employees as a result of such
 activities is currently believed to be approximately $2.2 million.  The
 Company believes that $25.9 million ($18.2 million after tax) of the
 restatement, which relates to the accounting irregularities at PFG, primarily
 resulted from a scheme to cover-up such benefits and the actual operating
 results over four years at these three subsidiaries by manipulating many
 accounts incrementally, which increased and accumulated over time.  The
 Company intends to pursue recovery of economic losses from insurance coverage,
 income tax refunds and other responsible parties.
     The Company also announced organizational changes at PFG as a result of
 its internal investigation into accounting irregularities, the execution of
 forbearance agreements with certain of its lenders, other developments and the
 rescheduling of its annual meeting.
 
     Restated Financial Results
     The restatements resulted in changes in the following income statement
 components from amounts shown in previously reported financial statements as
 follows (all amounts are in millions, except per share data):
 
                         2000     1999     1999           1998           1997
                  2000    as     (Incr.)    as    1998     as    1997     as
                Decrease  Re-   Decrease   Re-  Decrease  Re-  Decrease   Re-
                        stated            stated         stated         stated
 
      Sales       $7.2  $461.1    ($1.8)  $477.4   $0.7 $373.1     --   $245.8
      Gross
       Profit     11.7    41.8      8.2     59.6    4.4   51.1    2.1     40.3
      Operating
       Income
       (Loss)     19.3   (18.1)     8.8     16.5    4.4   21.4    2.1     18.1
      Net Income
       (Loss)     14.1   (11.7)     6.7      3.1    2.5   10.2    1.2      8.5
      Diluted
       Earnings
       (loss) Per
       Common
       Share     $1.85  $(1.53)   $0.87    $0.39  $0.30  $1.25  $0.21    $1.46
 
     Included in the restatement for fiscal year 2000 were a $3.4 million
 ($2.1 million, net of tax) charge relating to the impairment of long-lived
 assets at Pennsylvania Steel and a $2.7 million (before and after tax) charge
 relating to impairment of goodwill at Empire Steel.
 
     Organizational Changes
     The employment of PFG's former chief financial officer was terminated on
 October 25, 2000.  Four other former PFG employees, including the president,
 vice president of operations and vice president of human resources, have also
 resigned or been terminated.
     On January 8, 2001, Ian Sadler was appointed President of the Pennsylvania
 Foundry Group.  Mr. Sadler received his masters degree in Metallurgy from
 Cambridge University in England.  He has led the turn around of two steel
 foundries:  Shenango Industries and Johnstown Corporation.  On September 18,
 2000, Duane Madrykowski was appointed the new Chief Financial Officer of the
 Pennsylvania Foundry Group, and on December 5, 2000, Allen Ebling was promoted
 to Director of Human Resources of the Pennsylvania Foundry Group.
     On March 1, 2001, the Company hired Stephen Housh as its Manager of
 Internal Audit.  Mr. Housh has experience in public accounting and has served
 as the manager of general accounting for several manufacturing companies prior
 to owning his own company.  In addition, the Company is evaluating whether to
 transition its decentralized accounting functions into a more centralized
 accounting system.
     Commenting on the restatement and Audit Committee investigation, Hugh
 Aiken, Chairman of the Board and Chief Executive Officer, stated, "The Audit
 Committee and management acted immediately to address the situation at PFG.
 The people involved in the wrongdoing are no longer with the Company, and
 steps have been taken to improve the operations of PFG.  Now that the
 restatement and Audit Committee investigation are behind us, we look forward
 to focusing all of our efforts on Atchison's business."
 
     Loan Amendments
     The Company and its lenders entered into amendment and forbearance
 agreements that provide, among other things, that such lenders will continue
 to forbear from exercising their rights with respect to certain existing
 defaults through at least July 30, 2001.  These agreements give the Company
 the opportunity to renegotiate or refinance its lending arrangements, although
 no assurance can be given as to whether the Company will be successful.
 
     Other Developments
     "Backlog is growing after two very difficult years in our major markets.
 In particular, orders have increased for offshore oil and gas equipment, power
 generation equipment, steel making equipment and passenger rail products.
 Mining equipment orders are still weak, but have stopped getting weaker and
 look to be set for a rebound following the mining equipment slowdown that
 began in the summer of 1998.  Higher coal prices are helping here," added Mr.
 Aiken.
     "Operations at Sheffield Forgemasters in the UK are improving, due to
 investment in new equipment, strength in the offshore oil and gas industry,
 new roll products to sell to the steel industry, greater penetration of the US
 market, and weakening of the British pound against the dollar.  Instead of the
 operating losses experienced during fiscal 2000 and the first two quarters of
 fiscal 2001, Sheffield is now generating an operating profit, and its backlog
 is growing," continued Mr. Aiken.
     ACC's Inverness Castings Group unit in Michigan is increasing production
 due to the award of several new automotive projects, and expects to be running
 at 100% capacity by the summer of 2001.  This will mean a significant
 improvement in its earnings compared to fiscal 2000 and 2001.
     The new machining cell for locomotive trucks at our Atchison Steel Casting
 & Machining Division (formerly Atchison/St. Joe Division) is now operating
 well, after more than a year of start-up problems.  This powerful and highly
 automated machine tool is designed to shorten manufacturing lead time, lower
 cost and improve quality.  None of our competitors has such a facility for
 locomotive truck machining.
     At Canada Alloy Castings, orders and volume have increased, in part due to
 more demand from energy related sectors such as hydro and steam powered
 electricity generating equipment.
     "We previously reported plans to close Pennsylvania Steel and PrimeCast,
 an iron foundry in South Beloit, Illinois.  These closures are now complete.
 This brings to three the number of foundries that ACC has closed since
 November, 2000 in order to improve earnings and cash flow in the short term.
 Operations from these foundries have had a significant impact on earnings,
 producing pre-tax losses of $26.5 million ($12.8 million before impairment
 charges of $13.7 million) in fiscal 2000," said Hugh Aiken, Chairman of the
 Board and Chief Executive officer.
 
     Rescheduled Annual Meeting
     The Board of Directors has rescheduled the Annual Meeting of Stockholders
 for fiscal 2000 to Friday, June 29, 2001 at 11:00 a.m., for stockholders of
 record on May 18, 2001.  The Company expects to mail revised proxy materials,
 including the revised Annual Report to Stockholders, on or around May 25,
 2001.  The amended annual report on From 10-K/A is publicly available upon
 request.
     ACC produces iron, steel and non-ferrous castings for a wide variety of
 equipment, capital goods, and consumer markets.
 
     This press release contains forward-looking statements that involve risks
 and uncertainties.  The Company's actual results could differ materially from
 the expected results because of a variety of factors, including the size and
 timing of future acquisitions, business conditions and the state of the
 general economy, particularly the capital goods industry, the strength of the
 U.S. dollar, British pound sterling and the Euro, interest rates, the
 Company's ability to renegotiate or refinance its lending arrangements,
 utility rates, the availability of labor, the successful conclusion of union
 contract negotiations, the results of any litigation arising out of the
 accident at Jahn Foundry, results of any litigation or regulatory proceedings
 arising from the accounting irregularities at the Pennsylvania Foundry Group,
 the competitive environment in the casting industry and changes in laws and
 regulations that govern the Company's business, particularly environmental
 regulations.
 
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SOURCE Atchison Casting Corporation
    ATCHISON, Kan., April 24 /PRNewswire Interactive News Release/ -- Atchison
 Casting Corporation (NYSE:   FDY) announced that it expects to file today with
 the Securities and Exchange Commission an amended annual report on Form 10-K/A
 containing restated financial results for fiscal years 1998-2000.  This filing
 brings to a conclusion the restatement of financial results for prior fiscal
 years.  The restatement reduced previously reported net income by
 $24.5 million cumulatively for the years restated, resulting in a cumulative
 earnings per share reduction of $3.23 and reducing stockholders' equity to
 $114.3 million at June 30, 2000.  The Company expects to file its quarterly
 reports for the quarters ended September 30, 2000 and December 31, 2000 as
 soon as practicable.  The Company previously announced that it had discovered
 possible accounting irregularities at three steel foundries in Pennsylvania,
 Quaker Alloy, Empire Steel and Pennsylvania Steel (collectively referred to as
 the Pennsylvania Foundry Group or PFG).  The Audit Committee of the Board of
 Directors directed an independent investigation into the accounting
 irregularities.  The Audit Committee engaged Jenner & Block, LLC to advise it
 on the conduct of the investigation, and Jenner & Block retained
 PricewaterhouseCoopers LLP as accountants to assist in the investigation.  The
 Company believes the irregularities were limited to PFG.
     As a result of that investigation, the Company has concluded that a small
 number of PFG employees violated Company policies and procedures and used
 improper accounting practices, resulting in the overstatement of revenue,
 income and assets and the understatement of liabilities and expenses.  The
 Company believes that certain of these same personnel also misappropriated
 Company funds.  The direct benefit to the former employees as a result of such
 activities is currently believed to be approximately $2.2 million.  The
 Company believes that $25.9 million ($18.2 million after tax) of the
 restatement, which relates to the accounting irregularities at PFG, primarily
 resulted from a scheme to cover-up such benefits and the actual operating
 results over four years at these three subsidiaries by manipulating many
 accounts incrementally, which increased and accumulated over time.  The
 Company intends to pursue recovery of economic losses from insurance coverage,
 income tax refunds and other responsible parties.
     The Company also announced organizational changes at PFG as a result of
 its internal investigation into accounting irregularities, the execution of
 forbearance agreements with certain of its lenders, other developments and the
 rescheduling of its annual meeting.
 
     Restated Financial Results
     The restatements resulted in changes in the following income statement
 components from amounts shown in previously reported financial statements as
 follows (all amounts are in millions, except per share data):
 
                         2000     1999     1999           1998           1997
                  2000    as     (Incr.)    as    1998     as    1997     as
                Decrease  Re-   Decrease   Re-  Decrease  Re-  Decrease   Re-
                        stated            stated         stated         stated
 
      Sales       $7.2  $461.1    ($1.8)  $477.4   $0.7 $373.1     --   $245.8
      Gross
       Profit     11.7    41.8      8.2     59.6    4.4   51.1    2.1     40.3
      Operating
       Income
       (Loss)     19.3   (18.1)     8.8     16.5    4.4   21.4    2.1     18.1
      Net Income
       (Loss)     14.1   (11.7)     6.7      3.1    2.5   10.2    1.2      8.5
      Diluted
       Earnings
       (loss) Per
       Common
       Share     $1.85  $(1.53)   $0.87    $0.39  $0.30  $1.25  $0.21    $1.46
 
     Included in the restatement for fiscal year 2000 were a $3.4 million
 ($2.1 million, net of tax) charge relating to the impairment of long-lived
 assets at Pennsylvania Steel and a $2.7 million (before and after tax) charge
 relating to impairment of goodwill at Empire Steel.
 
     Organizational Changes
     The employment of PFG's former chief financial officer was terminated on
 October 25, 2000.  Four other former PFG employees, including the president,
 vice president of operations and vice president of human resources, have also
 resigned or been terminated.
     On January 8, 2001, Ian Sadler was appointed President of the Pennsylvania
 Foundry Group.  Mr. Sadler received his masters degree in Metallurgy from
 Cambridge University in England.  He has led the turn around of two steel
 foundries:  Shenango Industries and Johnstown Corporation.  On September 18,
 2000, Duane Madrykowski was appointed the new Chief Financial Officer of the
 Pennsylvania Foundry Group, and on December 5, 2000, Allen Ebling was promoted
 to Director of Human Resources of the Pennsylvania Foundry Group.
     On March 1, 2001, the Company hired Stephen Housh as its Manager of
 Internal Audit.  Mr. Housh has experience in public accounting and has served
 as the manager of general accounting for several manufacturing companies prior
 to owning his own company.  In addition, the Company is evaluating whether to
 transition its decentralized accounting functions into a more centralized
 accounting system.
     Commenting on the restatement and Audit Committee investigation, Hugh
 Aiken, Chairman of the Board and Chief Executive Officer, stated, "The Audit
 Committee and management acted immediately to address the situation at PFG.
 The people involved in the wrongdoing are no longer with the Company, and
 steps have been taken to improve the operations of PFG.  Now that the
 restatement and Audit Committee investigation are behind us, we look forward
 to focusing all of our efforts on Atchison's business."
 
     Loan Amendments
     The Company and its lenders entered into amendment and forbearance
 agreements that provide, among other things, that such lenders will continue
 to forbear from exercising their rights with respect to certain existing
 defaults through at least July 30, 2001.  These agreements give the Company
 the opportunity to renegotiate or refinance its lending arrangements, although
 no assurance can be given as to whether the Company will be successful.
 
     Other Developments
     "Backlog is growing after two very difficult years in our major markets.
 In particular, orders have increased for offshore oil and gas equipment, power
 generation equipment, steel making equipment and passenger rail products.
 Mining equipment orders are still weak, but have stopped getting weaker and
 look to be set for a rebound following the mining equipment slowdown that
 began in the summer of 1998.  Higher coal prices are helping here," added Mr.
 Aiken.
     "Operations at Sheffield Forgemasters in the UK are improving, due to
 investment in new equipment, strength in the offshore oil and gas industry,
 new roll products to sell to the steel industry, greater penetration of the US
 market, and weakening of the British pound against the dollar.  Instead of the
 operating losses experienced during fiscal 2000 and the first two quarters of
 fiscal 2001, Sheffield is now generating an operating profit, and its backlog
 is growing," continued Mr. Aiken.
     ACC's Inverness Castings Group unit in Michigan is increasing production
 due to the award of several new automotive projects, and expects to be running
 at 100% capacity by the summer of 2001.  This will mean a significant
 improvement in its earnings compared to fiscal 2000 and 2001.
     The new machining cell for locomotive trucks at our Atchison Steel Casting
 & Machining Division (formerly Atchison/St. Joe Division) is now operating
 well, after more than a year of start-up problems.  This powerful and highly
 automated machine tool is designed to shorten manufacturing lead time, lower
 cost and improve quality.  None of our competitors has such a facility for
 locomotive truck machining.
     At Canada Alloy Castings, orders and volume have increased, in part due to
 more demand from energy related sectors such as hydro and steam powered
 electricity generating equipment.
     "We previously reported plans to close Pennsylvania Steel and PrimeCast,
 an iron foundry in South Beloit, Illinois.  These closures are now complete.
 This brings to three the number of foundries that ACC has closed since
 November, 2000 in order to improve earnings and cash flow in the short term.
 Operations from these foundries have had a significant impact on earnings,
 producing pre-tax losses of $26.5 million ($12.8 million before impairment
 charges of $13.7 million) in fiscal 2000," said Hugh Aiken, Chairman of the
 Board and Chief Executive officer.
 
     Rescheduled Annual Meeting
     The Board of Directors has rescheduled the Annual Meeting of Stockholders
 for fiscal 2000 to Friday, June 29, 2001 at 11:00 a.m., for stockholders of
 record on May 18, 2001.  The Company expects to mail revised proxy materials,
 including the revised Annual Report to Stockholders, on or around May 25,
 2001.  The amended annual report on From 10-K/A is publicly available upon
 request.
     ACC produces iron, steel and non-ferrous castings for a wide variety of
 equipment, capital goods, and consumer markets.
 
     This press release contains forward-looking statements that involve risks
 and uncertainties.  The Company's actual results could differ materially from
 the expected results because of a variety of factors, including the size and
 timing of future acquisitions, business conditions and the state of the
 general economy, particularly the capital goods industry, the strength of the
 U.S. dollar, British pound sterling and the Euro, interest rates, the
 Company's ability to renegotiate or refinance its lending arrangements,
 utility rates, the availability of labor, the successful conclusion of union
 contract negotiations, the results of any litigation arising out of the
 accident at Jahn Foundry, results of any litigation or regulatory proceedings
 arising from the accounting irregularities at the Pennsylvania Foundry Group,
 the competitive environment in the casting industry and changes in laws and
 regulations that govern the Company's business, particularly environmental
 regulations.
 
                     MAKE YOUR OPINION COUNT -  Click Here
                http://tbutton.prnewswire.com/prn/11690X51647282
 
 SOURCE  Atchison Casting Corporation