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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
(Mark
One)
 
  [X]            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
 
                    For the fiscal year ended July 31, 1997
 
                                      OR
 
  [_]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
               SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
 
                      For the Transition period from to
 
                          COMMISSION FILE NO. 0-22906
 
                         ABC RAIL PRODUCTS CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
               DELAWARE                              36-3498749
    (STATE OR OTHER JURISDICTION OF        (I.R.S. EMPLOYER IDENTIFICATION
            INCORPORATION)                             NUMBER)
 
                           200 SOUTH MICHIGAN AVENUE
                                  SUITE 1300
                            CHICAGO, ILLINOIS 60604
                                (312) 322-0360
         (ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
 
                                     None
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
 
                         Common Stock, $.01 par value
                               (Title of class)
 
  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.   Yes [X]   No [_]
 
  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
 
  The aggregate market value of the registrant's common stock, $.01 par value,
held by nonaffiliates of the registrant as of September 30, 1997 was
$151,874,146.
 
  The number of shares of the registrant's common stock, $.01 par value,
outstanding as of September 30, 1997 was 8,954,082.
 
                     DOCUMENTS INCORPORATED BY REFERENCE:
 
  Certain sections or portions of the registrant's 1997 Annual Report to
Stockholders and of the registrant's proxy statement for the annual meeting of
stockholders to be held on November 21, 1997, described in Parts II, III, and
IV hereof are incorporated by reference in this report.
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<PAGE>
 
                                    PART I
 
ITEM 1--BUSINESS
 
GENERAL
 
  ABC Rail Products Corporation (the "Company") is a leader in the
engineering, manufacturing and marketing of replacement products and original
equipment for the freight railroad and rail transit industries. The Company's
products include specialty trackwork, such as rail crossings and switches;
mechanical products, such as railcar, locomotive and idler wheels, mounted
wheel sets and metal brake shoes; classification yard products and automation
systems; and railway signal systems installation and maintenance services. The
Company continues to operate in the composite brake shoe market through a
joint venture. See "Strategic Joint Ventures, Alliances and Acquisitions."
 
  The Company's business began in 1902 as the American Brake Shoe and Foundry
Company. In 1987, the Company was formed by management as a Delaware
corporation to acquire substantially all of the assets and certain related
liabilities of the Railroad Products Group of Abex Corporation ("Abex"), which
was then a subsidiary of IC Industries, now Whitman Corporation. In August
1989, then current management effected a leveraged recapitalization of the
Company pursuant to which dividends and special payments of approximately $20
million were paid to its stockholders. In 1991, an affiliate of Kohlberg & Co.
("Kohlberg") acquired control of the Company through the purchase of certain
stockholder interests and newly-issued common stock of the Company. In 1995,
Kohlberg sold its entire interest in the common stock of the Company.
 
  Leading Freight Railroad Market Shares. The Company has a substantial share
of all of the specialty trackwork and mechanical products markets it serves.
Based upon industry information and information gathered from its customers,
the Company believes that it has an approximately 50% share of the North
American freight specialty trackwork market, more than twice that of its next
largest competitor.
 
  Integrated Manufacturing and Engineering Capability. The Company is the only
vertically integrated specialty trackwork manufacturer in North America. It
designs, engineers and manufactures in-house a full line of specialty
trackwork products, including rail transit specialty trackwork based on
technology provided through the Company's relationship with Cogifer S.A.
("Cogifer"). See "--Cogifer Relationship" for additional information on
Cogifer. The Company maintains six specialty trackwork manufacturing
facilities located in various U.S. geographical areas. Certain specialty
trackwork components that are subject to the most concentrated pressure must
be made of special manganese steel alloys, which harden under the repeated
pressure of passing wheels. The Company is the only U.S. specialty trackwork
manufacturer that operates its own manganese steel foundry for the manufacture
of these key specialty trackwork components. This foundry enables the Company
to maintain strict quality control at all stages of the production process. In
addition, the Company is the only North American specialty trackwork
manufacturer with the in-house ability to design and craft the wooden patterns
used to produce its specialty trackwork component castings. This capability,
together with more than 80 years of specialty trackwork designs contained in
the Company's extensive computer-aided design system, gives the Company a
competitive advantage in responding to freight railroads' needs for customized
products manufactured to rigorous standards. This capability also allows the
Company to adapt to European technologies for high-speed and light rail
applications, derived through its relationship with Cogifer, to serve the
needs of rail transit customers. The Company also designs, engineers and
manufactures in-house its entire line of wheels and brake shoes and, as a
result of the wheel mounting business, reworks and distributes new and used
freight car wheel sets.
 
  Capital Investment. Over the last three fiscal years, the Company
implemented a special capital expenditure program. These expenditures are
expected to reduce costs and increase capacity in the Company's specialty
trackwork operations and to reduce costs and improve efficiencies in its wheel
operations. The special capital
 
                                       2
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expenditure program consists of: the fiscal 1995 completion of a new machining
facility at its Calera, Alabama wheel plant to reduce costs and improve
efficiencies in the production of railroad and idler wheels; the purchases of
new process equipment for its other specialty trackwork facilities to decrease
scrap rates and rework costs and ensure superior product quality; and, in late
February 1995, the purchase of a manufacturing facility in Chicago Heights,
Illinois, which will house the new state-of-the-art equipment that will
support the Company's specialty trackwork initiatives. This new facility
should be fully operational in the third quarter of fiscal 1998. The Company
expects to continue to finance these and ordinary expenditures primarily out
of free cash flow and secured borrowings.
 
  Expanding Rail Transit Market Presence. The Company is also a supplier of
specialty trackwork to North American rail transit systems, which generally
conform to freight railroad standards. Historically, however, sales of
specialty trackwork to the rail transit industry have accounted for only a
small portion of the Company's specialty trackwork sales. The Company has
recognized a rising demand for rail transit specialty trackwork and has
responded by forming a dedicated rail transit marketing group and aggressively
pursuing rail transit projects throughout North America. Increasingly, North
American transit system authorities are evaluating or employing European-style
high-speed and light rail technology, particularly with respect to proposed
new systems. The Company has access to much of this technology through its
relationship with Cogifer, which the Company believes enhances its ability to
compete in the rail transit market.
 
  Strategic Joint Ventures, Alliances and Acquisitions. The Company
continually explores opportunities to enhance its technology base and
marketing and distribution capabilities. In addition, the Company seeks
acquisitions of complementary product lines, particularly those that offer
potential manufacturing or marketing synergies. On March 17, 1997, the Company
announced a joint venture agreement with Damy Cambios de Via, S.A. The joint
venture will manufacture equipment and supply services to the railroad
industry in Mexico, and will be managed by the Mexican partner. On December
17, 1996, the Company acquired American Systems Technologies, Inc. ("AST") of
Verona, Wisconsin. AST provides railway signal installation and maintenance
service to the short lines, regional, commuter and transit railroads. On June
21, 1996, the Company established a wheel mounting, wheel assembly and
trackwork service operation in Tacoma, Washington. The Company is currently
leasing the operating facility from its prior operators. On May 31, 1996, the
Company acquired Deco Industries Inc. of Milwaukee, Wisconsin and selected
assets of Deco Automation located in Norristown, Pennsylvania ("Deco"). Deco
manufactures railroad classification yard retarder control and automation
systems. In May 1996, the Company announced a joint venture agreement with
China's Ministry of Railroads to establish the Datong ABC Castings Company
Ltd. The joint venture, which will be managed locally, will manufacture wheels
in China primarily for the rapidly growing Chinese railway markets. On July
31, 1995 the Company entered into a 50/50 joint venture with Anchor Brake Shoe
Company ("Anchor"). The purpose of the joint venture is to design,
manufacture, market and sell railcar composite brake shoes. In May 1995, the
Company acquired from General Electric Railcar Wheel and Parts Service
Corporation ("GE Railcar") substantially all of the assets associated with GE
Railcar's wheel mounting business (the "Wheel Mounting Acquisition"), which is
the largest independent railcar wheel mounting operation in the United States.
The wheel mounting business remanufactures, reworks and distributes new and
used freight car wheel sets through five production facilities located
throughout the United States. The wheel mounting business serves Class I,
regional and short-line railroads, private freight car owners and new freight
car builders. The Company believes that this operation complements the
Company's existing wheel manufacturing business as a result of its similar
customer and technology base and the opportunity for vertical integration
between the two operations. Since the Company is a manufacturer of both
specialty trackwork and mechanical products, it has greater access to
railroads' engineering and purchasing departments than companies that offer
only a single product line. The Company therefore is positioned to effectively
market additional products if it were to acquire or develop new product lines.
Because the railroad supply industry is highly fragmented, with many private
companies manufacturing only single product lines and railroads exiting the
component manufacturing business, the Company believes that a variety of
acquisition opportunities exist.
 
                                       3
<PAGE>
 
PRODUCTS AND SERVICES
 
  Specialty Trackwork. The Company manufactures specialty trackwork to
customer specifications, generally for replacement of existing track, in the
case of freight railroads, or for replacement and new construction of rail
transit systems. The Company's products include track switches or turnouts,
which divert a train from one track to another; crossings, which allow one set
of railroad tracks to cross through another; switch throws, which set a track
switch in order to divert a train from one track to another; and other
trackwork products including guard rails and rail lubricators. The Company
also manufactures cast manganese steel trackwork components which are sold as
part of a track switch assembly or as replacement parts. Typically, track
switches serve to divert trains between two tracks, but the Company also
designs and manufactures more complicated track switches serving three, four
or even more route diversions to meet switching requirements in areas of high
density traffic, such as urban freight yards, passenger terminals and high
traffic industrial and port areas. In addition, the Company designs,
manufactures and installs classification yard products and automation systems.
For fiscal 1997, 1996 and 1995, sales of specialty trackwork products
accounted for approximately 49%, 49% and 57%, respectively, of the Company's
net sales.
 
  Signal Systems. The Company, upon its December 1996 acquisition of AST,
designs, assembles, installs and maintains railway signal systems. For fiscal
1997, sales of signal systems and related services accounted for 3% of the
Company's net sales.
 
  Railcar, Locomotive and Idler Wheels and Wheel Sets. The Company
manufactures 28, 33, 36 and 38-inch diameter wheels for freight railcars and
40-inch diameter wheels for diesel locomotives. These wheels are made of cast
steel. Within a particular size classification, variations exist in flange
width and bore size. The railroad industry generally considers wheels as
"stock" items for their common sizes and variations. In addition to producing
railroad wheels, the Company has been the sole-source manufacturer of cast
idler wheels for Caterpillar Inc.'s high-drive tracked equipment since 1988.
Idler wheels are secondary wheels, not connected to the equipment's power
train, which guide the treads on such tracked construction equipment as
bulldozers and backhoes. In May 1995, the Company commenced its wheel mounting
and assembly operations as a result of the Wheel Mounting Acquisition. The
wheel mounting operation, which is primarily a reconditioning service
business, remanufactures, reworks and distributes new and used freight car
wheel sets. Freight car wheel sets consist of the wheel, axle and bearing
units that are mounted to freight cars. The Company's reconditioning services
include inspection and analysis of existing wheel sets to determine necessary
replacement parts, remachining of axle units, replacement and/or remachining
of wheels, and replacement and/or reinstallation of bearings. The Company also
supplies new wheel sets using new and/or remachined parts of components. For
fiscal 1997, 1996 and 1995, sales of railcar, locomotive and idler wheels and
wheel sets accounted for approximately 43%, 46% and 36%, respectively, of the
Company's net sales.
 
  Composition and Metal Brake Shoes. Composition and metal brake shoes bear
directly on the railroad wheel and exert friction to generate braking power.
As a result, the brake shoe and the railroad wheel, while at different rates,
are worn simultaneously. Worn brake shoes are replaced during routine
maintenance or at inspection sites located at various areas along the
railroad. Composition brake shoes are made from fibers, elastomers and various
resins and provide a higher level of friction for use with modern, low-
pressure braking systems; metal brake shoes are made from cast iron.
Composition and metal brake shoes are not interchangeable. For certain
applications, the composition shoe is superior for braking and reducing heat
buildup. Pursuant to American Association of Railroads ("AAR") regulations,
all new railcars and locomotives that will operate across different railroads
must have composition brake shoe systems. Older railcars and locomotives with
higher pressure braking systems require metal brake shoes. Metal brake shoes
also are preferable to composition brake shoes in winter weather because they
provide more effective braking in ice and snow. Although the demand for metal
brake shoes is expected to decline over time as older railcars are phased out
of railroads' fleets, they will continue to be in demand on certain trains
that do not operate in interchange. For fiscal 1997, 1996 and 1995, sales of
brake shoes accounted for approximately 5%, 5% and 7% of the Company's net
sales, respectively. Effective July 31, 1995, the Company contributed its
composition brake shoe operation into the joint venture between the Company
and Anchor. See "--Strategic Joint Ventures, Alliances and Acquisitions."
 
                                       4
<PAGE>
 
INDUSTRY STANDARDS
 
  Specialty trackwork products must conform to AREA specifications in order to
be used in the North American freight railroad system. The specifications are
complex and their application on different railroads is further specified by
each railroad's maintenance-of-way engineering practices. Given these
specifications, the Company believes considerable proprietary expertise and
information are required to manufacture these products economically.
 
  The AAR interchange rules govern all matters related to railcars which
operate among different railroads (i.e., interchange). Among other things, the
interchange rules define all significant physical and dimensional elements of
interchange service railcars and their key components, including wheels and
brake shoes. The rules also require regular quality reviews and certification
of facilities used to manufacture railcars and key railcar components.
 
  The interchange and related rules also specify financial matters related to
interchange operations, including brake shoe replacement pricing. As
locomotives and railcars move across different railroads, brake shoes (rapid
wear components) often need to be replaced. Under the interchange rules, the
railroad moving the railcar at the time must replace the worn brake shoe and
the amount that can be charged to the owner of the railcar is fixed.
Therefore, the replacing railroad will use the least expensive replacement
brake shoe available that complies with the interchange rules, which tends to
limit increases in composition brake shoe prices.
 
COGIFER RELATIONSHIP
 
  North American specialty trackwork producers historically have concentrated
on the requirements of freight customers and have tended to meet rail transit
system customer needs with adaptations of freight specialty trackwork
technology. Transit customers are increasingly evaluating and employing
products specifically designed to provide smooth, quiet service on high-speed
and light rail systems.
 
  Recognizing the importance of the growing demand for European-style high-
speed and light rail technology, in February 1992 the Company formed a long-
term relationship with Cogifer. Cogifer is the leading supplier of European-
style high-speed and light rail specialty trackwork to the world market,
including specialty trackwork for the high speed TGV (Train a Grande Vitesse)
trains in France and other parts of Europe. This relationship includes
separate agreements relating to certain existing and contemplated joint
ventures in North America, technology exchange and selected worldwide joint
venture marketing efforts.
 
  ABC Rail-Cogifer Technologies is a 50-50 joint venture partnership of the
Company and Cogifer created by a partnership agreement that expires in
February 2022 unless earlier terminated by the executive committee of the
partnership, by the sale of all or substantially all of the partnership's
assets or by the termination of the technology exchange agreement. The
partnership's purpose is to market, design, engineer and supply European-style
high-speed and light rail technology to the North American market. The
marketing activities of the Company and the partnership are coordinated by the
Company. Production is subcontracted to the most suitable joint venture
partner.
 
  The technology exchange agreement provides the Company access to Cogifer's
design concepts, expertise and information which can be applied by the Company
to the potentially large intercity "Amtrak-type" rail passenger market, the
small but developing market for high-speed freight railroad switches, and the
North American manufacturing of certain elements of European-style high-speed
and light rail specialty trackwork. Cogifer has similar access to the
Company's technology for use outside North America and other defined markets.
Certain of these exchanges may have a 2% royalty in those situations in which
the executive committee of the partnership determines that a partner has
contributed significant value. To date, no such royalty has been paid to
either party.
 
  The Company and Cogifer also have entered into a joint marketing agreement
appointing Cogifer as the Company's exclusive worldwide representative for the
sale of the Company's products, excluding sales in the U.S., Canada, Mexico
and certain other countries.
 
                                       5
<PAGE>
 
  In December 1993, the Company formed another 50-50 joint venture
partnership, ABC Rail-Cogifer Technologies (Industrial Division) ("ABC Rail-
Cogifer Industrial") with Cogifer. The partnership was to expire in December
2023 unless earlier terminated by a sale of substantially all of the
partnership's assets or by the executive committee. Effective May 31, 1996,
the Company purchased Cogifer's interest in the joint venture partnership.
 
SALES AND MARKETING
 
  The Company sells directly to the majority of its customers through its own
sales force, which is organized into groups that focus either on specialty
trackwork products, which includes yard retarders and automation systems,
railway signal systems installation and maintenance or railcar wheels and
wheel sets. The Company's specialty trackwork sales force covers the U.S. and
Canada on a regional basis. The Company supplements its specialty trackwork
sales efforts with the technical support of its engineering staff, which
advises on product design and cost estimation. The Company's mechanical
products sales force covers the U.S., Canada and Mexico. Certain members of
the Company's senior management also actively participate in marketing
efforts. The Company believes that these senior executives have developed
close relationships with the purchasing managers and senior management of many
of the Company's principal customers. The Company and Cogifer maintain a
separate marketing staff which targets sales to rail transit systems in North
America. The Company markets through sales representatives to its smaller
customers, such as short lines, industrial and mining market segments.
 
  The Company also markets its products internationally both directly and
through sales agents. A number of other countries have extensive freight
railroad systems patterned on AAR and AREA standards. Consequently, the
Company's products are either already suited, or are readily adaptable, to the
needs of customers in these markets. In addition, Cogifer is the Company's
exclusive representative for the purpose of selling specialty trackwork,
wheels and brake shoes in most overseas markets. The Company is also presently
exploring additional overseas sales and marketing opportunities. International
sales, however, represented less than 5% of the Company's net sales during
fiscal 1997.
 
CUSTOMERS
 
  The Company's principal specialty trackwork and yard retarder and automation
system customers are the North American Class I railroads, although the
Company also sells specialty trackwork to a number of regional and short-line
railroads as well as rail transit systems. The Company's wheel and wheel
mounting customers include the Class I railroads, regional and short-line
railroads, railcar and locomotive manufacturers and railroad service
companies. The Company's metal brake shoe customers include railroads, rail
transit systems and manufacturers of railcar and locomotive braking systems.
The Company's two largest customers are Burlington Northern Santa Fe (result
of recent merger of the Burlington Northern Railway Company and Atchison,
Topeka and Santa Fe Railway) ("Burlington Northern") and Union Pacific
Corporation (recently merged with Southern Pacific Railway), which accounted
for approximately 23% and 21%, respectively, of the Company's net sales for
fiscal 1997. No other customer accounted for more than 10% of fiscal 1997 net
sales. In fiscal 1994, the Company entered into multi-year agreements with
Burlington Northern and Union Pacific Corporation for the supply of specialty
trackwork products. The Company's five largest customers accounted for
approximately 58% of the Company's net sales during fiscal 1997.
 
MANUFACTURING
 
  In the manufacture of specialty trackwork, rail and various other steel
products purchased from outside suppliers are fabricated and bolted or welded
to cast manganese steel components in accordance with precise design
standards. Primary finished products are complete or component parts of
switches and crossings. These products are fabricated and packaged at the
plant, then shipped by rail or truck to the job site where the end user or
contractor assembles and installs them in the right-of-way. Increasingly, the
Company assembles switches and crossings at its plants and ships them in
"panelized" form to the job site where they are installed, thereby saving the
track owners the labor cost of assembling the product on site. Manufacturing
operations at the specialty trackwork plants include casting manganese steel,
forging, shearing, sawing, drilling, bending, machining and assembly. Certain
cast manganese components are subjected to an explosion hardening process
which increases their useful life.
 
                                       6
<PAGE>
 
  In the manufacture of classification yard products, rail and other steel
products purchased from outside suppliers are also bolted and welded in
accordance with design standards. The products are assembled at the plant and
then shipped by truck to the job site for installation.
 
  The cast steel wheel manufacturing process consists of the following steps.
Various grades of steel scrap are melted in electric furnaces and mixed with
certain alloys. Several chemical analyses are performed on each heat to insure
compliance with AAR specifications before the furnace is tapped. The metal is
poured into a graphite mold that has been machined for a specific wheel
design. The metal solidifies in the mold for a period of time depending on the
wheel size and weight. The wheel is then removed from the mold and placed in a
controlled cooling chamber. In accordance with AAR specifications, the wheel
surfaces are cleaned, heat treated, quenched and tempered. In the last steps
of the process, the wheel's critical surfaces are machined and inspected using
non-destructive ultrasonic and radiographic techniques as well as standard
gauging methods.
 
  The metal brake shoe manufacturing process consists primarily of melting
cast scrap with various alloys. The molten metal is poured into green sand
molds containing steel backs and reinforced with expanded wire bundles to
prevent premature cracking in service. The product solidifies in the mold and
the rough casting is cleaned and inspected to ensure dimensional and
metallurgical requirements are satisfied.
 
COMPETITION
 
  The Company is the largest manufacturer of specialty trackwork in North
America, serving all of the Class I railroads and a number of regional and
short-line railroads. In specialty trackwork, the Company competes with a
number of North American manufacturers, including Conley Frog/Switch & Forge
Co., Voest-Alpine Nortrak Inc., an affiliate of Voest-Alpine Eisenbahn
Systemme AG and Progress Rail. Most of these companies' manufacturing
facilities are located in the eastern U.S. which gives them a slight
competitive shipping advantage over the Company's Chicago Heights facility,
which serves customers in the eastern U.S. In the Company's opinion, the
locations of its specialty trackwork manufacturing facilities in Superior,
Wisconsin, Newton, Kansas, Cincinnati, Ohio and Pueblo, Colorado provide it
with a competitive advantage with respect to railroads operating in the
western U.S. and Canada.
 
  The Company is the second largest U.S. manufacturer of freight railcar and
locomotive wheels. In the market for freight railcar and locomotive cast
wheels, the Company's primary competitor is Griffin Wheel Company, a
subsidiary of AMSTED Industries, Inc. The Company also competes with Standard
Steel, a division of Freedom Forge Corporation, which manufactures forged
wheels. As a result of the Wheel Mounting Acquisition, the Company has the
largest independent freight car wheel mounting operation in North America. The
majority of such wheel mounting operations are currently performed in-house by
Class I Railroads. The remaining independent wheel mounting market is highly
fragmented. The Company is the only U.S. manufacturer of metal brake shoes.
The Company is the largest supplier of railroad classification yard retarder
control and automation systems. In this market, the Company's primary
competitors are Union Switch & Signal and General Railway Signal. In the
signal systems market, the Company's primary competitors are KDC, Sasib
Railway GRS, Union Switch & Signal, Inc., Mass Electric, L.K. Comstock & Co.,
Inc., and Fischbach & Moore, Inc.
 
  The principal competitive factors in the specialty trackwork market are
product quality, on-time delivery, price and technical service and support.
The principal competitive factors in the mechanical products market are price
and product availability. The principal competitive factors in the wheel
mounting service market are product quality and availability. The principal
competitive factor in the signal systems market is related to being the
largest, full-service company, to include design, installation and maintenance
activity. The limited number of railroad customers, their efforts to reduce
costs, and excess industry capacity in certain of the Company's product lines
historically have limited the Company's ability to increase prices. The
Company believes it is well-positioned to compete in all of its served
markets, due to its leading market share, engineering capability, broad
manufacturing base and long-standing customer relationships. Historically, the
Company has experienced limited foreign competition due to the specialized
nature of many of its products, the importance of AAR product approvals and
AREA specifications and the cost of shipping. However, there can be no
assurance that foreign competition will not increase in the future.
 
                                       7
<PAGE>
 
ORDER BACKLOG
 
  Specialty trackwork deliveries generally require lead-times of three to six
months. Most specialty trackwork installations occur in the period from March
through October. Consequently, deliveries are somewhat seasonal, with order
backlog increasing in the spring and decreasing in the late summer. For
discussion of quarterly results of operations and working capital, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in the 1997 Annual Report to Stockholders (the "Annual
Report") and incorporated by reference in Part II, Item 7 hereof. Order
backlog for wheels and brake shoes is less meaningful because these products
have short production lead-times. All order backlog figures include only firm
orders for which customers have issued releases for production and delivery
and exclude the non-current portion of any long-term supply arrangements. The
Company's specialty trackwork and mechanical products backlog was $57.3
million and $33.0 million as of July 31, 1997 and 1996, respectively. The
Company expects to fill all of its order backlog as of July 31, 1997 during
the current fiscal year. The increase in backlog between July 31, 1997 and
July 31, 1996 is primarily related to the acquisition of AST.
 
INTELLECTUAL PROPERTY
 
  The Company holds 24 U.S. trademarks and 34 foreign trademarks. The Company
actively protects trademarks which it believes have significant goodwill
value. The Company currently holds 28 U.S. patents and 53 foreign patents and
has applications pending for 9 U.S. patents and 37 foreign patents. The
Company applies for patent protection when it believes the expense of doing so
is justified. The Company also relies on trade secrets and know-how in the
production of its specialty trackwork and mechanical products. The Company
does not believe that its intellectual property rights are critical to its
success.
 
RAW MATERIAL SUPPLIERS
 
  The principal raw materials for specialty trackwork are railroad rail and
manganese. The Company purchases rail from various rail manufacturers. In
certain instances, the Company purchases rail directly from its railroad
customers for whom specialty trackwork is being built, capitalizing on their
purchasing economies. The primary raw material for railcar and locomotive
wheels is steel scrap, a commodity material which is readily available from a
number of suppliers. The primary raw material for metal brake shoes is iron
scrap, a commodity material, which is readily available from a number of
suppliers.
 
  There are at least two suppliers for each raw material and component the
Company purchases. The Company currently purchases actively from a broad range
of suppliers. No supplier accounted for more than 10% of the Company's
purchases in fiscal 1997.
 
EMPLOYEES
 
  As of July 31, 1997, the Company had 1,600 employees, approximately 65% of
whom are represented by unions. The principal unions representing hourly
employees are the United Steelworkers of America and the United Auto Workers.
In fiscal 1995, the Company negotiated a new five-year collective bargaining
agreement at its Chicago Heights, Illinois trackwork manufacturing facility.
This contract covers approximately 13% of the Company's hourly employees. The
Company also entered into an initial three-year contract at the Newton, Kansas
facility covering approximately 5% of the Company's hourly employees. In
fiscal 1996, the Company entered into three-year contracts at the Anderson,
Indiana and Baltimore, Maryland facilities covering approximately 12% of the
Company's hourly employees. During the second half of fiscal 1996, the Company
negotiated a new three-year collective bargaining agreement at its Calera,
Alabama wheel foundry. The contract covers approximately 32% of the Company's
hourly employees. In fiscal 1998, the Company has scheduled labor negotiations
with represented employees at its Newton, Kansas and Superior, Wisconsin track
assembly plants due to the expiration of related collective bargaining
agreements in fiscal 1998, as well as an initial contract negotiation for its
AST signal installation and maintenance employees These negotiations affect
approximately 19% of its hourly employees. The Company believes that its labor
relations are good.
 
                                       8
<PAGE>
 
ENVIRONMENTAL MATTERS
 
  For a description of compliance with environmental matters and of litigation
related thereto, see "Part I, Item 3--Legal Proceedings" herein.
 
ITEM 2--PROPERTIES
 
  The Company maintains its headquarters in Chicago, Illinois and conducts its
operations in nine principal manufacturing plants located throughout the U.S.
The Company believes its property and equipment is in good condition and
suitable for its needs. The Company has sufficient capacity to increase output
at its specialty trackwork manufacturing plants. Except for the four to five
month period following the fire in fiscal 1996, the Company's wheel foundry
has operated at full capacity since 1988. The Company's principal operating
facilities are as follows:
 
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        LOCATION            FOOTAGE   OWNED/LEASED             DESCRIPTION OF USE
        --------          ----------- ------------             ------------------
<S>                       <C>         <C>          <C>
Chicago Heights,
 Illinois...............    182,000    Owned        Specialty trackwork rail manufacturing (4)
Chicago Heights,
 Illinois...............    244,000    Owned        Specialty trackwork manufacturing
Cincinnati, Ohio........    135,000    Owned (1)    Specialty trackwork manufacturing
Pueblo, Colorado........    111,000    Owned        Specialty trackwork manufacturing
Superior, Wisconsin.....     94,000    Owned        Specialty trackwork manufacturing
Newton, Kansas..........     58,000    Leased (2)   Specialty trackwork manufacturing
Milwaukee, Wisconsin....    150,000    Leased       Specialty trackwork manufacturing
Duluth, Minnesota.......     10,000    Leased       Specialty trackwork panelizing
Anderson, Indiana.......    155,000    Owned        Manganese steel trackwork castings
Crown Point, Indiana....     20,000    Leased       Manganese steel trackwork casting patterns
Calera, Alabama.........    259,000    Owned        Cast railroad wheels and idler wheels
Calera, Alabama.........     19,000    Owned (3)    Cast railroad wheels and idler wheels
Baltimore, Maryland.....     61,000    Owned        Metal brake shoes
Kansas City, Kansas.....     36,000    Leased       Railroad wheel assembly
Lewistown, Pennsylvania.     29,000    Owned        Railroad wheel assembly
Chicago Heights,
 Illinois...............     21,000    Owned        Railroad wheel assembly
Corsicana, Texas........     18,000    Owned        Railroad wheel assembly
Riverside, California...     11,000    Leased       Railroad wheel assembly
Tacoma, Washington......     10,000    Leased       Railroad wheel assembly
Verona, Wisconsin.......     13,000    Leased       Railway signal system assembly
</TABLE>
--------
(1) Facility formerly owned by ABC Rail-Cogifer Industrial. See "--Cogifer
    Relationship."
(2) Facility is leased by the Company in connection with an industrial revenue
    bond arrangement and pursuant to a lease which grants the Company an
    option to purchase the facility for a nominal amount.
(3) This facility, which was acquired in the Wheel Mounting Acquisition, was
    not being operated by GE Railcar at the time of the acquisition. The
    Company is utilizing this facility in the production of railroad and idler
    wheels in conjunction with its other Calera facility.
(4) Expected to be fully operational in the third quarter of fiscal 1998.
 
  All of the Company's owned manufacturing and assembly facilities, other than
the Newton, Kansas and one of the Chicago Heights facilities are pledged as
security under the Company's senior credit facility. The Company has pledged
the Chicago Heights rail manufacturing facility to a third party lender which
financed the purchase of this facility.
 
                                       9
<PAGE>
 
ITEM 3--LEGAL PROCEEDINGS
 
  The Company is subject to a variety of environmental laws and regulations
governing discharges to air and water, the handling, storage and disposal of
hazardous or solid waste materials and the remediation of contamination
associated with releases of hazardous substances. Although the Company
believes it is in material compliance with all of the various regulations
applicable to its business, there can be no assurance that requirements will
not change in the future or that the Company will not incur significant cost
to comply with such requirements. In 1990, the Company established the
position of Director of Environment, Safety and Health with responsibility for
monitoring compliance with environmental, health and safety requirements. The
Director works with responsible personnel at each facility, with the Company's
environmental counsel and with environmental engineering consultants retained
to assist ongoing management of environmental, health and safety requirements.
 
  In connection with its formation and the purchase of certain assets and
liabilities from the Railroad Products Group of Abex in 1987, the Company
obtained a comprehensive environmental indemnity from Abex. The indemnity
covers environmental conditions, whether or not then known, in existence at
the time of the purchase, without dollar or time limit. Shortly after the
purchase, the Company performed surveys to assess the environmental conditions
at the time of the purchase. As a result of these studies, the Company has
undertaken environmental projects, including underground storage tank removal,
corrective action and other remedial action as necessary. Some of these
actions are ongoing and similar actions may be undertaken in the future. The
costs of all such actions had been charged to income in the period incurred.
When Abex refused to compensate the Company for costs incurred, the Company
filed suit against Abex on November 18, 1991. In a separate lawsuit filed in
October 1994, the Company also asserts that Abex is required to indemnify the
Company for the reduction in value of one of the sold properties (a
Pennsylvania manufacturing facility formerly owned by the Company) caused by
the environmental contamination at that site.
 
  In October 1995, a judgment in the 1991 lawsuit was finalized with the
Company receiving a payment of $2.8 million from Abex. The Company recorded
the receipt of this payment as a reserve to address other potential matters
related to ongoing Abex issues. The judgment is exclusive of indemnification
for any future environmental claims.
 
  The Company is also a party to various other legal proceedings arising in
the ordinary course of business, none of which is expected to have a material
adverse effect on the Company's business, financial condition or results of
operations.
 
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
 
  No matters were submitted to stockholders during the fourth quarter of the
fiscal year ended July 31, 1997.
 
ITEM 4A--EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The executive officers of the Company are as follows:
 
<TABLE>
<CAPTION>
         NAME          AGE                       POSITION
         ----          ---                       --------
 <C>                   <C> <S>
 Donald W. Grinter     60  Chairman of the Board and Chief Executive Officer
 D. Chisholm MacDonald 55  Executive Vice President--Administration and
                           Business Development,
                           Chief Financial Officer, Secretary and Director
 David G. Kleeschulte  54  Vice President, General Manager, Wheel Operations
                           and President, China Investment Corporation
 Rick Turner           43  Vice President, General Manager, Wheel Services
                           Division
 Ray M. Scanlon        57  Vice President, General Manager, Track Products Di-
                           vision
 Steven M. Yoder       40  President, General Manager, American Systems Tech-
                           nologies, Inc.
</TABLE>
 
 
                                      10
<PAGE>
 
  Donald W. Grinter. Mr. Grinter has served as the Company's Chairman of the
Board and Chief Executive Officer since December 1993. From August 1991 until
December 1993, Mr. Grinter served as the Company's President and Chief
Executive Officer and from August 1989 until August 1991, he served as the
Company's President and Chief Operating Officer. He has been a director since
August 1991. Prior to joining the Company, from June 1987 until August 1989,
Mr. Grinter was President of the Supermarket Group of Hussmann Corporation, a
subsidiary of Whitman Corporation. Mr. Grinter served as an Executive Vice
President of Abex from June 1984 until June 1987.
 
  D. Chisholm MacDonald. Mr. MacDonald has served as the Company's Executive
Vice President--Administration and Business Development since September 1997,
Chief Financial Officer since August 1987, and Secretary and director since
1991. Prior thereto, he served as Vice President and Corporate Controller of
ASEA Inc., a heavy industrial manufacturing company, in the United States from
1982 until 1987.
 
  David G. Kleeschulte. Mr. Kleeschulte has served as the Company's Vice
President, Technology and General Manager, International Business Development
since March 1994. From February 1992 to March 1994, Mr. Kleeschulte served as
the Company's Vice President-Mechanical Operations. Prior thereto, he was
plant manager of the Company's Calera, Alabama plant. Prior to the Company's
formation, Mr. Kleeschulte served as the Vice President of Engineering for
Mechanical Products of Abex.
 
  Rick Turner. Mr. Turner has served as the Company's Vice President and
General Manager, Wheel Services Division since January 1997. From January 1995
to December 1997, Mr. Turner served as the Company's Vice President of
Marketing and Sales, Mechanical Division. Prior thereto, he served as Vice
President, Sales and Marketing for Abar Ipsen Industries, a manufacturer of
heat-treating equipment, from 1991 to 1994.
 
  Ray M. Scanlon. Mr. Scanlon has served as the Company's Vice President and
General Manager, Track Products Division since April 1997. Prior thereto, he
served as Division President of The Hilen Group, Inc., a telecommunications
company, from June 1990 to January 1996.
 
  Steven M. Yoder. Mr. Yoder has served as the President and General Manager
of American Systems Technologies, Inc. since its inception in 1987.
 
  Executive officers serve at the pleasure of the Board of Directors.
 
                                    PART II
 
ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
  Information required by this item is set forth under the caption "Common
Stock Market" on page 32 of the Annual Report and is incorporated by reference
herein.
 
ITEM 6--SELECTED FINANCIAL DATA
 
  Information required by this item is set forth under the caption "Selected
Consolidated Financial and Operating Data" on page 6 of the Annual Report and
is incorporated by reference herein.
 
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 
  Information required by this item is set forth under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 7 through 13 of the Annual Report and is incorporated by
reference herein.
 
                                      11
<PAGE>
 
ITEM 8--FINANCIAL STATEMENTS
 
  Information required by this item is set forth on pages 14 through 32 of the
Annual Report and is incorporated by reference herein.
 
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
  None.
 
                                   PART III
 
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  Information regarding directors of the Company is set forth under the
caption "Election of Directors" in the Company's proxy statement related to
the 1997 annual meeting of stockholders (the "Proxy Statement") and is
incorporated herein by reference. Information regarding executive officers of
the Company is included as Item 4A of Part I hereof as permitted by the
Instructions to 401(b) of Regulation S-K. Information required by Item 405 of
Regulation S-K is set forth under the caption "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Proxy Statement and is incorporated by
reference herein.
 
ITEM 11--EXECUTIVE COMPENSATION
 
  Information required by this item is set forth under the caption "Executive
Compensation" in the Proxy Statement and, except for information under the
captions "Executive Compensation--Report on Executive Compensation" and
"Executive Compensation--Performance Graph," is incorporated by reference
herein.
 
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  Information required by this item is set forth under the caption "Stock
Ownership of Certain Beneficial Owners and Management" in the Proxy Statement
and is incorporated by reference herein.
 
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  None.
 
                                    PART IV
 
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(JDRP TO UPDATE)
 
  (a) 1.
     The following financial statements and the report thereon of Arthur
     Andersen LLP are included in the Annual Report, pages 14 through 32,
     and are incorporated herein by reference:
 
           Report of Independent Public Accountants
 
           Consolidated Statements of Operations for the Years Ended July 31,
           1997, 1996 and 1995
 
           Consolidated Balance Sheets as of July 31, 1997 and 1996
 
           Consolidated Statements of Stockholders' Equity for the Years Ended
           July 31, 1997, 1996 and 1995
 
           Consolidated Statements of Cash Flows for the Years Ended July 31,
           1997, 1996 and 1995
 
           Notes to Consolidated Financial Statements
 
 
                                      12
<PAGE>
 
    2.Financial Statement Schedules:
 
     All schedules are omitted since the required information is not
     presented or is not present in amounts sufficient to require
     submission of the schedules or because the information required is
     included in the consolidated financial statements and notes thereto.
 
    3.Exhibits
 
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                         DOCUMENT DESCRIPTION
      -------                        --------------------
     <C>       <S>
       3.1     Restated Certificate of Incorporation of the Company (2)
       3.2     Bylaws of the Company (3)
       4.1     Form of certificate representing shares of Common Stock of the
               Company (1)
       4.2     Rights Agreement, dated as of September 29, 1995 between the
               Company and LaSalle National Trust, N.A., as Rights Agent, which
               includes the Form of Certificate of Designation, Preferences and
               Rights, the form of Rights Certificate and the Summary of Stock-
               holder Rights Plan (5)
      10.1     Registration Rights Agreement, dated as of August 28, 1991,
               among the Company, KARC and the Management Investors named
               therein (1)
      10.2     Second Amended and Restated Loan and Security Agreement, dated
               as of January 3, 1997, among the Company, ABC Deco Inc. and
               American Systems Technologies, Inc., as borrowers, the financial
               institutions named therein, as lenders, and American National
               Bank and Trust Company of Chicago, as agent, and Amendment No. 1
               thereto dated as of August 8, 1997
     *10.3     Stock Option Plan dated July 1, 1993 (1)
      10.4     Lease, entered into March 10, 1993, between the Company and Mil-
               ton M. Siegel Company (1)
      10.5     Intentionally omitted
     *10.6     ABC Rail Corporation Master Savings Trust (1)
     *10.7     ABC Rail Corporation Savings and Investment Plan, as amended and
               restated effective as of May 1, 1988 (1)
      10.8     Partnership Agreement, dated as of February 21, 1992, by and be-
               tween ABC Rail French Holdings, Inc. and Cogifer Americas, Inc.
               (1)
      10.9     Commercial Representation Agreement, dated February 21, 1992,
               between the Company and Cogifer Industries of Croissy-sur-Sein,
               France and certain of its affiliates (1)
      10.10    Agreement, dated February 21, 1992, by and between the Company
               and Cogifer Industries (1)
      10.11    Lease, dated March 1, 1994, by and between the City of Newton,
               Kansas and the Company (2)
     *10.12    1994 Director Stock Option Plan (3)
     *10.13    Amendment No. 1 to 1994 Director Stock Option Plan (6)
     *10.14    Form of option agreement evidencing options granted to Donald W.
               Grinter (72,000 shares), D. Chisholm MacDonald (40,000 shares),
               David G. Kleeschulte (40,000 shares), and Eugene Ziemba (60,000
               shares) pursuant to the Stock Option Plan listed as Exhibit 10.3
               above (3)
</TABLE>
 
                                      13
<PAGE>
 
<TABLE>
<CAPTION>
      EXHIBIT
      NUMBER                         DOCUMENT DESCRIPTION
      -------                        --------------------
     <C>       <S>
      10.15    Asset Purchase Agreement dated April 3, 1995, between the Com-
               pany and General Electric Railcar Wheel and Parts Service Corpo-
               ration (4)
     *10.16    1994 Stock Option Plan (2)
     *10.17    Agreement and General Release dated as of October 2, 1996 be-
               tween Ben R. Yorks and the Company (6)
      13.1     Portions of 1997 Annual Report to Stockholders that are incorpo-
               rated herein by reference
      21.1     Subsidiaries of the Company (2)
      23.1     Consent of Independent Public Accountants
      24.1     Powers of Attorney
      27.1     Financial Data Schedule
</TABLE>
 
  The Company is the guarantor of industrial revenue bonds issued by the City
of Newton, Kansas, in a principal amount which does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. The Company
agrees to furnish a copy of the guaranty agreement to the Securities and
Exchange Commission upon its request.
--------
*  Management contract or compensation plan or arrangement.
(1) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Registration Statement on Form S-1 originally filed with the
    Securities and Exchange Commission on October 12, 1993 (SEC File No. 33-
    70242).
(2) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Registration Statement on Form S-1 originally filed with the
    Securities and Exchange Commission on April 13, 1994 (SEC File No. 33-
    77652).
(3) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Annual Report on Form 10-K for the fiscal year ended July 31,
    1994 (SEC File No. 0-22906).
(4) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Current Report on Form 8-K dated May 15, 1995 (SEC File No. 0-
    22906).
(5) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Current Report on Form 8-K dated October 2, 1995 (SEC File No.
    0-22906).
(6) Incorporated by reference to the same numbered exhibit filed with the
    Registrant's Annual Report on Form 10-K for the fiscal year ended July 31,
    1996 (SEC File No. 0-22906)
 
  (b) Reports on Form 8-K:
 
  None.
 
                                       14
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
 
Dated October 24, 1997
                                          ABC Rail Products Corporation
                                          (Registrant)
 
                                                 /s/ Donald W. Grinter
                                          -------------------------------------
                                                     Donald W. Grinter
                                                 Chairman of the Board and
                                                  Chief Executive Officer
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON OCTOBER 24, 1997:
 
 
 
 
      /s/ Donald W. Grinter                                 *
_____________________________________     _____________________________________
          Donald W. Grinter                          Donald R. Gant
Chief Executive Officer and Director                    Director
    (Principal Executive Officer)
 
 
                                                            *
                  *                       _____________________________________
_____________________________________                James E. Martin
         Clarence E. Johnson                            Director
              Director
 
 
                                                            *
                  *                       _____________________________________
_____________________________________             Jean-Pierre M. Ergas
          George W. Peck IV                             Director
              Director
 
                  *
_____________________________________
            Norman Doerr
              Director
 
  *The undersigned by signing his name hereunto has hereby signed this report
on behalf of the undersigned in the capacities mentioned and the above-named
officers and directors, on October 24, 1997, pursuant to a power of attorney
executed on behalf of each such director and officer and filed with the
Securities and Exchange Commission as Exhibit 24.1 to this report.
 
     /s/ D. Chisholm MacDonald
By: _________________________________
         D. Chisholm MacDonald
      Executive Vice President--
      Administration and Business
             Development,
  Chief Financial Officer, Secretary
             and Director
       (Principal Financial and
          Accounting Officer)
 
                                      15