SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549
                                    FORM 10-K

           [   ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                                       OR

         [ X ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                             SECURITIES ACT OF 1934

                   FOR THE FIVE MONTHS ENDED DECEMBER 31, 1999

                        Commission file number   0-22906
                                              ----------

                                  ABC-NACO INC.
             (Exact name of registrant as specified in its charter)
     DELAWARE                                                  36-3498749
(State or other jurisdiction                               (I.R.S.Employer
      of incorporation)                                Identification Number)

2001 BUTTERFIELD ROAD
SUITE 502
DOWNERS GROVE,  ILLINOIS                                              60515
(Address of principal executive offices)                      (Zip  Code)

Registrant's  telephone  number,  including  area  code     (630)  852-1300


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.  [  X  ]

     The  aggregate  market  value  of  the  registrant's common stock, $.01 par
value,  held  by  non-affiliates  of  the registrant as of February 15, 2000 was
$122,745,103.

     The  number  of  shares  of  the registrant's common stock, $.01 par value,
outstanding  as  of  February  15,  2000  was  19,061,132.

     Portions  of  the  following  document are incorporated by reference:  1999
Notice  and Proxy Statement for the Annual Meeting of Stockholders to be held on
April  20,  2000--Part  III.


<PAGE>
                                     PART I

ITEM  1-BUSINESS

GENERAL

     ABC-NACO  Inc. (''the Company'') is one of the world's leading suppliers of
technologically  advanced products and services to the freight railroad and flow
control  industries  through  its  three  business segments: Rail Products, Rail
Services  and  Systems,  and  Flow  and Specialty Products. With four technology
centers  around  the  world  supporting its three business segments, the Company
holds  pre-eminent  market positions in the design, engineering, and manufacture
of  high  performance  freight railcar, 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.

     On February 19, 1999, ABC Rail Products Corporation (''ABC'') consummated a
merger  (''the  Merger'')  with NACO, Inc. (''NACO''), a privately held Delaware
corporation that designed, manufactured and supplied cast steel products for the
railroad  supply  and  flow  control  supply  markets.  The newly merged Company
("ABC-NACO")  is  now  positioned  to meet the growing needs of the freight rail
industry  for  suppliers that can support their expanding business requirements.

     On  September  23,  1999,  the  Company's  Board  of  Directors  adopted  a
resolution to change the Company's  fiscal year-end to December 31.  The Company
had  previously  been  operating  on a fiscal year beginning August 1 and ending
July  31.  The  primary  reason for the change was to align the Company's fiscal
year-end  with  the  calendar-year  reporting used by its major customers.  This
Form  10-K  transition report covers the five-month Transition Period, August 1,
1999,  through  December  31,  1999  (the  "Transition  Period").


MARKET  OVERVIEW  AND  INDUSTRY  DEMAND

     The  recent  Merger  created  a  powerful  railway  supply  company that is
positioned  to  respond to the favorable market trends for this industry sector.
For  the first time in history, one company can design, produce and assemble the
major  under  carriage  components  (commonly  referred  to  as  a  ''truck'' or
''bogie'')  for  freight  car  systems  and the specialty trackwork they run on.
Since  it  is  the truck that controls the ride characteristics of the rail car,
the  ability  to  study the interaction of the truck components and the track on
which  it runs is critical to the design and manufacture of proprietary products
that  improve  ride handling characteristics. The benefits to railroads, railcar
owners  and  shippers are: lower wheel wear, faster train speeds, larger hauling
capacity,  reduced  fuel consumption, less track wear, improved life cycle cost,
and reduced cargo damage. Using these proprietary design and build concepts, the
Company  has  the  ability  to deliver truck-specific applications for different
customer  needs  and  performance  situations.

     The  new  Company's  capabilities  directly  support  the  growing  trends
exhibited  by  the  Class I railroads in the United States. As a result of their
recent  mergers,  they want to reduce their invested capital. This initiative is
leading  to a decrease in direct ownership of railcars by the railroads. The new
railcar  owners  (utility  companies,  non-railroad lessors and customers of the
railroads)  are  very  interested in the net cost of ownership associated with a
railcar.  As  a  result, the Company is able to demonstrate to this new breed of
car  owner  that  its  products will reduce their maintenance cost and allow for
larger loads, thereby decreasing their effective freight cost and minimizing the
in-transit damage to their product. As a result, customers specify the Company's
products  on  new  car  builds or as retrofits to existing railcars. The Class I
railroads  are  also seeking rail supply consolidators that offer sub-assemblies
and  complete  product packages and related services. This initiative is driving
the  developing  trend  by  the  Class  I  railroads to identify outside service
providers for their non-haul activities such as wheel mounting, track panelizing
and signal and communication design, installation and maintenance. This trend is
evidenced by the Company's recent long-term contract with Union Pacific Railroad
Company (''UP'') to perform, in conjunction with Gunderson Rail Services, all of
the  freight  car  wheel  mounting and repair and wheel maintenance services for
UP's  entire  North  American  rail  system.

     Industrywide  freight car builds are forecasted to remain strong. While the
current  build levels are projected to be off the peak levels of the past couple
of  years, the estimate of 50,000-60,000 cars per year for the next two to three
years  still  represents a strong level of new car build activity. More of these
cars  will  be  built  outside  the  United  States  where the Company has major
manufacturing  facilities.  In 1999, approximately 28% of new cars were built in
Mexico  and  Canada. It is estimated that in 2000 about 49% of the railcars will
be  built  in Mexico and Canada. The Company is the only American Association of
Railroads  (''AAR'')  approved  manufacturer  with  facilities  in  all  NAFTA
countries.  That  certification  provides  the  Company  maximum  flexibility to
produce  its  products  in  its  most  cost  effective  facilities.

     Railroad  revenue  ton  miles  (a  measure  of  volume and level of hauling
activity  on  the  railroads)  continue  to increase year over year. This rather
inelastic  level  of  activity  is  a  prime  driver of approximately 50% of the
Company's  revenue  that  is  generated  by  replacement  business.

     Another  emerging  trend  is  the move by the European freight railroads to
heavier  axle  loading,  thereby  increasing  hauling  capacity  leading  to  a
corresponding  decrease  in  freight  hauling  expense.  The  Company  has  been
positioning  itself  in  Europe  for  a  number  of  years  through its European
manufacturing facilities, local sales force and region-specific product testing.


BUSINESS  STRATEGY

     The  Company's  principal  goal  has  been  to achieve continuing sales and
earnings  growth  by  capitalizing  on  and  further  developing the competitive
advantages  within  its  Business  Segments-Rail  Products,  Rail  Services  and
Systems,  and  Flow  and  Specialty  Products. The key elements of the Company's
strategy  for  achieving  this  goal  have  been  to:

(1)  Build  Upon  Its  Commitment  to  Technology  Leadership  through  ABC-NACO
     Technologies

     The  Company  believes  its commitment to technology differentiates it from
its  competitors.  In recent years, the Company has made substantial investments
in  attracting,  training  and retaining highly skilled, technical employees and
developing  highly  engineered  products, including its proprietary line of high
performance  freight  car  trucks  which  were  first  introduced in large-scale
commercial applications in the early 1990's. In October 1995, the Company formed
NACO  Technologies  (now  ABC-NACO  Technologies),  a  stand-alone  research,
development  and  product testing facility in Lombard, Illinois, as the focus of
its  ongoing technology efforts. Today, ABC-NACO Technologies employs 39 people,
including  30  design  and engineering professionals who employ state-of-the-art
computer-based  design  and  engineering  systems and three-dimensional software
modeling  to  identify,  test  and  develop  new  and  enhanced products for the
Company's  target  markets,  to  improve the Company's existing products, and to
enhance  the  Company's  manufacturing  processes.  The  Company  believes  its
commitment  to  technology  has  enabled  it  to  become a principal supplier to
customers  for  its  products  and  services.

(2)  Enhance  Existing  and  Develop  New  High Performance Proprietary Products

     The  Company's  focus  in its Business Segments has been and will remain on
the development, manufacture and sale, both domestically and internationally, of
its  wide  range of proprietary products. The Company's proprietary products are
designed  to  provide  customers  with  superior  performance  and lower overall
life-cycle  costs. For example, the Company believes that the advantages offered
by  its  portfolio  of  high  performance  freight  car truck ride quality, fuel
savings,  reduced  maintenance  costs  and longer service life will enable it to
maintain  and  strengthen its competitive position in that market. The Company's
Advanced  Vehicle  DynamicsTM design technology has contributed to the Company's
leading  North  American market position in high performance freight car trucks.
The  Company  also  has  incorporated  proprietary  patented  features  into the
manufacturing  of  freight  car truck suspension systems and proprietary coupler
products employing traditional AAR designs. The Company is expanding this design
technology to the development of higher performance freight car wheels and other
specialty  track  products.

(3)  Continue to Implement Innovative Manufacturing Process Improvements, such
     as Advanced  Precision  TechnologyTM,  Replicast  Technology,  Six
     Sigma and  ISO 9000

     The  Company  has  improved  and  intends  to  continue  to  improve  its
manufacturing processes through technological innovation. Its Advanced Precision
TechnologyTM  enables  the  Company  to  design and produce castings with a much
greater  degree  of dimensional accuracy compared with traditional manufacturing
processes.  Advanced  Precision  TechnologyTM  permits  the  Company  to produce
precisely  dimensioned  and  lighter  weight  castings  which  have  the same or
improved  strength  and  durability  as  castings  produced  with  traditional
technologies.  The  Company  has  implemented  a  ''Six Sigma'' initiative which
employs  statistical  measurement  techniques  in  all  phases  of the Company's
design, engineering, customer service and manufacturing processes. The Company's
Six Sigma initiative analyzes and statistically measures both the output and the
cost  of  the  various  processes  and procedures employed by the Company in its
day-to-day  operations.  This initiative will permit the Company to optimize the
efficiency  and  minimize the cost of each component part of its operations. The
Company  also has focused on the development of Replicast  ceramic shell casting
technology as a potentially superior alternative to sand casting, with potential
applications  across the Company's Business Segments. ABC-NACO recently launched
a  commercial  production line employing the Replicast  ceramic shell technology
to  produce  traditional  AAR  coupler  products  after  extensive  testing  and
refinement  at ABC-NACO Technologies and its Leven casting facility. The Company
believes  that  its  Replicast  technology  will  enable  it  to  increase  its
manufacturing  capacity  and produce higher quality products at lower prices and
with  reduced  turnaround times. To further support its work-flow processes, the
Company  has  achieved  ISO 9001 and 9002 certification at 22 of its facilities.
This  certification  further strengthens the Company's commitment to the quality
of  its  processes.

(4)  Focus  on  Customer  Relationships  with  Industry  Leaders

     The  Company  continually  strives  to be a primary supplier of products it
manufactures  to  customers  that  are  leaders in the railroad and flow control
industries,  principally by capitalizing on the performance and cost features of
its  products  and  services.  In  its  Flow and Specialty Products segment, the
Company  emphasizes  its ''partnership'' role in providing a broad range of high
integrity  steel  castings  for  all  aspects of the customer's operations. As a
''partner'',  the  Company  works directly with the customer to design the steel
casting,  build  the  tooling  needed  to manufacture the casting, test a sample
casting  to  ensure that it meets the customer's specifications, and manufacture
or  procure the casting for delivery to meet the customer's production schedule.
The  Company believes its partnering approach will yield further benefits as its
customers continue to consolidate and outsource non-core business activities and
reduce  the  number  of  their  outside  suppliers.

(5)  Capitalize  on  Low-Cost  and  Versatile  Manufacturing  Capabilities,
     particularly  through  the  Expansion  of  the  Sahagun  Facility

     The  Company  has  made approximately $187.7 million of capital investments
(excluding  business  acquisitions) in its manufacturing facilities and ABC-NACO
Technologies  during  the  Transition Period and for the last three fiscal years
ended  July  31, 1999. These expenditures have been made principally for product
and  process  improvements  designed  to  maximize  the ability of the Company's
geographically diverse manufacturing facilities to produce the highest volume of
''value  added''  products  at  the  lowest  possible cost. The Company recently
completed  the  expansion  of  its  Sahagun, Mexico, facility to permit the full
range  of railroad products offered (excluding locomotive frames) to be produced
at  that facility; accommodate increased production of railroad products as well
as  certain flow control products; and relocate certain locomotive production to
its Sahagun facility from its Keokuk facility in order to produce these products
using  lower  cost  methods and to increase capacity available to produce higher
margin  products  at  its  Keokuk facility. The Company believes that it has the
flexibility  to  shift  the  manufacturing  of  its  railroad products among its
facilities  in response to customer demand and cost. The Company's manufacturing
operations  in  Canada, Mexico and the United States gives it the flexibility to
shift  production  to  the  most cost effective facility; while at the same time
allowing  it  to take advantage of the growing trend of building new railcars in
Mexico  and  Canada.

(6)  Pursue  International  Growth Opportunities, especially in the Americas and
     Europe

     The  Company  believes  that  the  expansion  of  railroad  and  locomotive
suppliers  into  international  markets,  primarily  Mexico,  South  America and
Europe,  may provide significant sales growth opportunities for the Company. The
Company  is  the only producer of freight car trucks and couplers in both Canada
and  Mexico. In addition, the Company is well-positioned to benefit from new and
increased  business  in  Europe  as  a  result of its market development efforts
within  European  markets,  its  presence  in  Scotland and  in Portugal and its
supply  relationship  in  the  Czech  Republic.

(7)  Strategic  Alliances  and  Acquisitions

     The  Company  continually  explores opportunities to enhance its technology
base  and  its marketing and distribution capabilities. In addition, the Company
seeks acquisitions of complementary product lines, particularly those that offer
potential  manufacturing  or marketing synergies. Since fiscal 1995, the Company
has  acquired seven businesses and entered into three ventures which resulted in
the  Company  having  initial  or  expanded operations in the mounted wheel set,
retarders,  classification yard products and automation systems, composite brake
shoes,  railroad  signal  and communication systems, engineering and maintenance
services  businesses  and a presence in Mexico and China. Since the Company is a
manufacturer  and  provider of complimentary rail-related products and services,
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, allowing it to bundle more
and  more  related  product  sales  to  its  customers.


BUSINESS  SEGMENTS

     The  Company  conducts  its  operations through its three business segments
which  consist  of:  Rail  Products,  Rail  Services  and  Systems, and Flow and
Specialty  Products.   The  Company realigned its segments during the Transition
Period  to  better  reflect  the  organizational and marketing changes that were
enacted  within  the  Company.  The  Company's  trackwork  product  line  which
previously  had  been  reported  as  part  of  the  Rail Products segment is now
included  as  part  of  the  Rail Services and Systems segment.  The Company now
markets  its  services  for  signaling  and  trackwork products to the railroads
through  one  organization  headed  by one division president.  In addition, the
Company for strategic reasons, placed its metal brake shoe foundry into the Flow
and  Specialty  Products  segment.  The current and historical segment financial
information  has  been  restated  to  reflect  these  changes.

     Rail  Products. In its Rail Products segment, the Company designs, produces
and  assembles  the  major undercarriage components for freight car systems. The
segment  designs,  manufactures  and  supplies products that primarily relate to
freight  car  trucks,  locomotive  truck  frames  and freight car and locomotive
couplers  and  related products. A freight car truck, which consists of two side
frames  and  a  bolster,  is  part  of  the undercarriage of the freight car and
contains  the  suspension system for the freight car. Each freight car typically
consists  of  two  freight  car  trucks. The trucks hold the axles and wheels in
place and support the weight of the freight car. A locomotive truck frame is the
undercarriage  of  the  locomotive.  Each  locomotive has two truck frames which
surround  the wheels, axles and brakes and support the weight of the locomotive.

     The segment 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  and  are used in North America and International service.
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.

     The  segment  also manufactures various other freight car products that are
widely  used  in  the  railroad  industry.  The  group  is  one  of  only  four
manufacturers  of  traditional AAR design couplers (couplers are used to connect
freight  cars  with  other  freight  cars  and  locomotives),  which  employ
cross-licensed technology owned by the Company and three of its competitors. The
Company  believes  it  is one of the largest manufacturers of AAR standard ''E''
and  ''F''  freight  car  couplers  of the type used on substantially all of the
freight  cars  in North America. The Company also manufactures a line of related
freight  car  products,  including  articulated connectors, draft gear housings,
centerplates  and  draft  sills.

     For  the  Transition  Period and fiscal 1999, 1998, and 1997, Rail Products
segment  sales  accounted for approximately 56%, 55%, 46% and 48%, respectively,
of  the  Company's  sales  before  intercompany  eliminations  and  other.

     Rail  Services  and  Systems.  This  segment  includes  the  wheel mounting
operation,  which  is  primarily  a  reconditioning  service  business  that
re-manufactures,  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
replacements  parts, re-machining of axle units, replacement and/or re-machining
of  wheels,  and replacement and/or reinstallation of bearings. The Company also
supplies  new  wheel  sets.

     The  segment  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 and turnouts that divert a train from one track
to  another;  crossings  that  allow one set of railroad tracks to cross through
another;  switches  that  set a track switch in order to divert a train from one
track  to  another;  and  other  trackwork  products  including  guard rails and
retarders.  Track  switches typically serve to divert trains between two tracks.
The  Company  also  designs  and  manufactures  more  complicated track switches
serving  three or more route diversions needed to meet switching requirements in
areas  of high density traffic, such as urban freight yards, passenger terminals
and  high  traffic  industrial  and  port  areas.

     The  segment  also  designs, assembles, installs and maintains railroad and
transit  signal  systems.

     For  the  Transition  Period and fiscal 1999, 1998, and 1997, Rail Services
and  Systems  segment  sales  accounted for approximately 33%, 35%, 40% and 36%,
respectively, of the Company's sales before intercompany eliminations and other.

     Flow  and  Specialty  Products.  Flow  and  Specialty  Products  engineers,
manufactures  and  supplies  steel  and  high  alloy  valve housings and related
castings  for  manufacturers  of  industrial flow control systems for use in the
natural  gas,  pulp and paper, oil, chemical, waste control and water treatment,
and  other  manufacturing process industries. Because of the corrosive nature of
the materials transported through flow control systems in these industries, flow
control  system manufacturers generally utilize steel and high alloy castings of
the  type manufactured by the Company rather than castings made of other metals.
The  valve housings and related castings produced by the Company generally range
in size from 25 pounds to approximately 2,500 pounds and form the outer shell of
the valves used in flow control systems manufactured by the Company's customers.
The  Company  also  manufactures cast Manganese steel trackwork components which
are  sold as part of a track assembly or as replacement parts.  In addition, the
group  produces idler wheels and metal brake shoes.  Idlers are secondary wheels
that  guide  the treads on such tracked construction equipment as bulldozers and
backhoes.

     For  the  Transition  Period  and  fiscal  1999,  1998, and 1997,  Flow and
Specialty  Products  segment sales accounted for approximately 11%, 10%, 14% and
16%,  respectively,  of the Company's sales before intercompany eliminations and
other.


REGULATION

     The  AAR  promulgates  a  wide  variety of rules and regulations governing,
among  other  things,  safety  and  the  design,  performance and manufacture of
equipment  used  on  freight  cars  in  interchange service throughout the North
American  railroad  system.  The  AAR's interchange rules define all significant
physical  and dimensional elements of interchange service freight cars and their
key  components,  including  trucks, couplers and wheels. The AAR also certifies
railcar  builders  and component manufacturers that provide equipment for use in
interchange service. The AAR specifications are complex and the Company believes
that  considerable  proprietary  expertise  and  information  is  required  to
manufacture  these  products  economically.  AAR  rules  require regular quality
reviews  of  facilities  used  to  manufacture  freight  cars  and  freight  car
components.  The  effect  of  these  regulations  is  that  each manufacturer of
railroad  products,  including the Company, must maintain its certification with
the  AAR  as a freight car component manufacturer, and freight car products sold
by  that  manufacturer  must  meet  AAR  standards  and  be  manufactured  in an
AAR-certified  facility.

     Specialty  trackwork  products must conform to American Railway Engineering
Association  (''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.

     Countries  outside  of  North America also have regulatory authorities that
regulate  railroad  safety,  freight car design, and the design, performance and
manufacture  of component parts for freight cars used on their railroad systems.
In addition, certain European countries have created the Union International des
Chemins de Fer (''UIC''), whose function is to promulgate regulations for safety
matters,  including  the design and manufacture of freight car equipment used in
interchange  service  on  European railroad systems. The Company must obtain and
maintain certifications of its product offerings within the various countries in
which  it  markets  and  sells  its  products  outside  of  North  America.


SALES  AND  MARKETING

     The  Company  pursues  an  integrated  sales  and  marketing  approach that
includes  senior  management, engineering and technical professionals, and sales
representatives,  all  of whom work together to identify and respond to customer
needs  by  developing  relationships  with  customers at all levels. The Company
employs a team of sales persons to market the Company's products to existing and
potential  customers.  The Company designates one sales representative to be the
account  manager  for  each  customer  and  gives  the  representative  primary
responsibility for servicing the customer's needs. Each account manager involves
the appropriate senior management and engineering and technical professionals to
assist  in  marketing  the  Company's products, services and capabilities to the
customer.  In  addition  to  marketing  products  directly to its customers, the
Company  targets  selected  end users, such as railroads, leasing companies, and
utilities, and other owners of freight cars and locomotives to encourage them to
specify  the Company's products in their orders. The Company also works with end
users  and  owners  of freight cars and locomotives to develop products that are
customized  to  their  needs.

     The Company's engineering and technical professionals are actively involved
in  marketing  and customer service, often meeting and working with customers to
improve existing products and develop new products and applications. The Company
believes  the high level of technical assistance in product development, design,
manufacturing  and  testing  that  it  provides  to  its  customers  gives it an
advantage  over  its  competition.

     The  Company's  marketing efforts often go beyond arrangements for specific
product purchases. As part of its efforts to develop customer relationships, the
Company  works  with  many  of  its customers on a long-term basis to design and
manufacture  new  products  which  are  customized  to  their needs. The Company
believes  that these relationships provide its customers with a stable source of
supply,  improved  product  quality  and  design, and superior customer service.


CUSTOMERS

     Customers  of  the Company's Rail Products segment include all of the North
American  Class  I  railroads  and major owners, builders and lessors of freight
cars  and  locomotives  in  North America, regional and short-line railroads, as
well  as  rail  transit  systems  and European railroads. Customers for the Rail
Services  and  Systems  segment  include  the  North American Class I railroads,
regional  and  short-line  railroads,  railcar and locomotive manufacturers, and
railroad  service  companies.  Customers  of  the  Company's  Flow and Specialty
Products  segment  include manufacturers of industrial flow control systems that
are  used  in  the natural gas, pulp and paper, oil, chemical, waste control and
water  treatment  industries.  In  the Transition Period, sales to the Company's
five  largest  customers  accounted  for  43%  of  the  Company's net sales. The
Company's  largest  customers  are TrailerTrain (TTX) and Union Pacific Railroad
Company  which  accounted  for  approximately  11% and 10%, respectively, of the
Company's  net  sales  in the Transition Period. No other customer accounted for
more  than  10%  of  the  Company's  net  sales  in  the  Transition  Period.



MANUFACTURING

     The  principal  manufacturing  activities  within Rail Products include the
manufacture  of  cast steel wheels and a wide range of cast steel products.  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  techniques  as  well  as  standard gauging methods.

     Railroad  cast  steel  products are produced in one of three methods, along
with forging and fabrication, which shape metal into desired forms. Castings are
made by pouring liquid metal into a mold and allowing the metal to cool until it
solidifies.  Castings  can  offer  significant  advantages  over  forgings  and
fabrications.  A  well-designed casting can be lighter, stronger and more stress
and  corrosion  resistant than a fabricated part. Although castings and forgings
are  similar  in  several  respects,  castings are generally less expensive than
forgings.  Steel is more difficult to cast than iron, copper or aluminum because
it  melts  at higher temperatures, undergoes greater shrinkage as it solidifies,
causing  the  casting to crack or tear if the mold is not properly designed, and
is  highly  reactive  with  oxygen, causing chemical impurities to form as it is
poured  through  air  into  the  mold.

     The  Company  is  presently  implementing  a number of innovative strategic
casting  initiatives  to  be  used in conjunction with the Company's traditional
casting  methods  which  will  enable  the Company to increase its manufacturing
capacity  and  produce  higher  quality products at lower costs and with reduced
turnaround  times.  Historically,  the Company has primarily used the green sand
casting  method,  but  it also uses air-set casting and ceramic shell casting in
the  manufacture of its products. A summary description of each of these casting
methods  is  set  forth  below.

     Green  Sand  Castings.  Certain  of the Company's railroad products casting
facilities primarily use a ''green sand'' process to produce the sand molds into
which  steel  is  poured  to  make steel castings. The green sand process, which
involves  mechanically  bonding  sand  to form molds, is the lowest cost molding
process used by the Company and is used principally to produce railroad products
castings.

     Ceramic  Shell  Casting.  The Replicast  ceramic shell process involves the
manufacture and use of a lightweight, high density polystyrene replica of a cast
steel  component.  The  replicas  are  given  a  ceramic  coating  prior to high
temperature  firing  (during  which  the  polystyrene replica is vaporized). The
steel  is then poured into the ceramic shell, which produces castings that weigh
significantly less  than  those  produced  by other casting methods and requires
minimal  machining and finishing, which would otherwise add significantly to the
final  product's  total  cost. The primary benefits of ceramic shell casting, as
compared  to  traditional  casting techniques, include excellent surface finish,
consistent  repeatability, and a high degree of dimensional accuracy and reduced
post-production  machining.

     As  a  result  of the Company's developments in ceramic casting technology,
its Leven, Scotland, facility is now able to produce ceramic shell castings from
25  to  550  pounds  on  over 50 different specifications, including carbon, low
alloy  and stainless steels, and has become the sole source supplier for ceramic
shell  manufactured  couplers used on the Wabash National's RoadRailer  trailer.
In June, 1998, the Company successfully completed the first phase of its ceramic
shell  production  lines  at  the Cicero, Illinois, facility. The Company is now
using  the  Replicast  ceramic  shell  technology and is contemplating using the
ceramic  shell  casting  process  in its production of various railroad and flow
products  now  produced  by  other  casting  methods  at  its  other facilities.

     Air-set Castings. The Flow and Specialty Products segment primarily uses an
air-set  process.  In  this  molding  process,  the sand is chemically-bonded to
produce  sand  molds.  Air-set  technology  produces  castings  with  greater
dimensional  accuracy  and  a  smoother surface than does the green sand molding
process.  Through  the  air-set  process, the Company has the ability to produce
large  quantities  of  hundreds of different types of castings. In addition, the
metallurgical  laboratory  at  the  Keokuk  facility  currently  is  capable  of
formulating  over  100  different types of steel for production use. The Company
believes that the quality and process control procedures it has developed at the
Keokuk  facility  produce  castings  with  fewer  internal  defects  and greater
soundness  reliability,  making them among the most technically advanced air-set
casting  facilities  in  the  steel  casting  industry.

     The  principal manufacturing activity with Rail Services and Systems is the
manufacture  of specialty trackwork.  In the manufacture of specialty trackwork,
rail  and  various other steel products are purchased from outside suppliers and
machined,  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
forging,  shearing,  sawing,  drilling, bending, machining and assembly. Certain
cast  Manganese components are subjected to an explosion hardening process which
increases  their  useful  life.

SUPPLY  ARRANGEMENTS

     The  Company  has  historically  entered into a number of supply or product
sourcing  arrangements with non-U.S. casting facilities which enable the Company
to  satisfy  demand  for  its  products  and  thereby increase its market share,
balance  the  production  of  its  owned  casting  facilities  and gain economic
advantages  by  shifting  production  to  lower  cost,  longer lead-time casting
facilities.  The  majority  of the products purchased by the Company through its
supply  arrangements  are  completed  products.

     The  Company  currently has supply arrangements with two casting facilities
located in San Juan del Rio, Mexico; and Bohurmin, Czech Republic, which provide
it  with  additional manufacturing capacity without significant up front capital
expenditures or ongoing investment by the Company. The Company uses these supply
arrangements principally to supplement the manufacturing capacity of its casting
facilities. The supply arrangements also provide the Company with an opportunity
to  better  assess  whether a casting facility should be considered for possible
acquisition  by  the  Company.  Through  the  relationship created by the supply
arrangement, the Company gains first-hand experience in all aspects of a casting
facility's operations and is, therefore, able to make an informed judgment about
the  potential benefits of an acquisition. Two examples of this approach are the
Company's  experiences  at  the  Sahagun,  Mexico  facility  which, prior to its
purchase  by  the  Company in 1996, had supplied products to the Company under a
supply  arrangement and the Cometna facility in Lisbon, Portugal which, prior to
its  purchase by the Company in 1999, had supplied products to the Company under
a  supply  agreement.


COMPETITION

     The  Company  operates  in highly competitive markets and faces significant
competition from a limited number of established companies in the United States.
The  Company  has  historically  experienced  limited foreign competition in its
product  markets,  but  expects  to  face  increased  competition  from  foreign
suppliers  of  railroad  products  as  it expands the production and sale of its
products into other countries. Historically, the Company has experienced limited
foreign  competition  in  North America due to the specialized nature of many of
its  products,  the importance of AAR product approvals, AREA specifications and
the  cost  of  shipping.  Although  no  single company competes with the Company
across  all  of  its product lines, some of the Company's competitors are larger
and  have  greater  financial  resources  than  the  Company. Competition in the
Company's  markets is based upon product design and performance, price, quality,
on-time  delivery,  product  availability,  installation expertise, and customer
service  and  support.  The Company believes it is well positioned to compete in
all  of  its  served  markets,  due  to  its  leading  market  share,  technical
capability,  broad  manufacturing base and long-standing customer relationships.

     In  the  Rail  Products  segment,  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.  Primary competitors in the manufacture of freight car cast steel
products  are  American  Steel  Foundries  (a  division  of  Amsted  Industries
Incorporated),  Buckeye  Steel  Castings  Co. (a subsidiary of Buckeye Holdings,
Inc.) and McConway & Torley Corp. (a subsidiary of Trinity Industries Inc.). The
Company's  primary  competitor  in the manufacture of locomotive truck frames is
Atchison  Casting  Corp.  In  the  manufacture of other locomotive castings, the
Company  has  several competitors including Atchison Casting Corp., Racine Steel
Castings  and  several  smaller  foundries.

     In  the Rail Services and Systems segment, the Company, along with Progress
Rail,  operate the two largest independent freight car wheel mounting operations
in  North America.  The majority of such wheel mounting operations are currently
performed  in-house  by  Class  I  railroads,  except  for  Union Pacific, which
outsources  to  the  Company. The remaining independent wheel mounting market is
highly  fragmented.  In the served market for signal and communication services,
the Company's primary competitors are Union Switch, MEC Rail (a division of Mass
Electric  Construction  Company),  Harmon  Industries, Inc. and Safetron Systems
Corporation.  The  Company  is  the  largest manufacturer of specialty trackwork
products  in North America, serving all of the Class I railroads and a number of
regional  and  short-line  railroads.  In specialty trackwork, ABC-NACO competes
with  a  number  of  North  American  manufacturers,  including Cleveland Track,
Voest-Alpine  Nortrak  Inc.,  an affiliate of Voest-Alpine Eisenbahn Systemme AG
and  Progress  Rail, a subsidiary of Florida Progress Corporation. Most of these
companies'  manufacturing facilities are located in the eastern U.S. which gives
them  a  slight  competitive shipping advantage in the eastern U.S. markets over
the Company's Chicago Heights, Illinois, facility, which serves customers in the
eastern  U.S. In the Company's opinion, the locations of its specialty trackwork
manufacturing  facilities in Pueblo, Colorado and Superior, Wisconsin provide it
with  a competitive advantage with respect to railroads operating in the western
U.S.  and  Canada.

     In  the  Flow and Specialty Products segment, the market is fragmented, and
the  Company competes with numerous other companies that manufacture the type of
steel  and  high  alloy  valve  housings  and  related products that the Company
produces. The Company's largest competitors in this market are TIC United Corp.,
Pacific  Steel  Casting  Co., Quality Electric Steel Castings, Inc. and Citation
Corp.  The  Company  is  the  only  U.S.  manufacturer  of  metal  brake  shoes.


ORDER  BACKLOG

     The  Company's  backlog  at  any particular time is affected by a number of
factors  relating  to, among other things, the Company's production schedule and
the  time  at  which  customers  generate  purchase  orders. Specialty trackwork
deliveries  generally  require lead-times of one to three 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, see ''Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations.''  Order  backlog  for  wheels  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  backlog  was $85.1 million and
$125.3  million  as  of  December  31, 1999 and July 31, 1999, respectively. The
Company  expects  to  fill  the majority of its order backlog as of December 31,
1999  during  the  calendar  year  2000.


INTELLECTUAL  PROPERTY

     The Company relies on a combination of patents, trademark, trade secret and
other  intellectual  property  law, confidentiality and nondisclosure agreements
and other protective measures to establish and protect its proprietary rights in
its intellectual property. However, there can be no assurance that these efforts
will  be successful, or that others will not independently develop substantially
equivalent  proprietary  information  and techniques or otherwise gain access to
the  Company's  proprietary  information.  The  Company  currently holds 35 U.S.
trademarks  and  33 foreign trademarks. The Company holds 58 U.S. patents and 43
foreign  patents  and  has  applications pending for 10 U.S. patents, 41 foreign
patents,  and  4 foreign trademarks. The Company uses a cost-benefit analysis to
determine  whether  the  value  of  patent  protection  justifies the expense of
seeking  the  protection.  The  Company  believes its intellectual property is a
valuable  asset  of  its  business and will protect its intellectual property by
legal  action  in  appropriate  situations.


RAW  MATERIALS

     The  primary  raw  materials used by the Company to manufacture its various
steel  casting  products  are  scrap  steel  and  alloys  such  as  Chromium and
Manganese, electrical power, natural gas and sand. The Company purchases most of
its  raw  materials  in  bulk  from  a  small  number  of suppliers. Certain raw
materials  which  are expensive to transport, such as scrap steel, are purchased
by  the  Company  from sources which are located close to the casting facilities
where  the  materials  are  used.

     The  scrap  steel  market historically has been a relatively stable market,
with  ample  supply  and  fairly  consistent prices. Although the price of scrap
steel  can  fluctuate,  the  Company  generally  has  been  able to recover cost
increases from its customers through a scrap price surcharge which is calculated
on  a  formula  basis  and  is  standard industry practice. The Company does not
anticipate any difficulty in obtaining sufficient scrap steel and alloys for its
manufacturing  operations.

     The  Company  has  experienced  occasional difficulties with respect to its
supply  of electrical power and natural gas. The Company has interruptible power
service contracts with its electrical power suppliers, and electrical service at
some  of  its casting facilities is interrupted from time to time, which results
in  temporary  cutbacks  in  operations  at  the  affected  facilities.
     The  principal  raw materials for specialty trackwork products 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.


EMPLOYEES

     As  of  December  31, 1999, the Company had  5,946 employees, approximately
78%  of who are represented by labor unions. The Company believes that its labor
relations  are  satisfactory.

     The  Company  recently  entered  into  five-year labor agreements with Rail
Services  and  Systems  employees  in  Pueblo,  Colorado,  and  Chicago Heights,
Illinois;  a  four-year  agreement  with  Flow  and  Specialty  Products foundry
employees in Richmond, Texas; three-year agreements with Rail Products employees
in  Melrose  Park,  Illinois, Calera, Alabama and Crown Point, Indiana, Flow and
Specialty  Products  employees in Keokuk, Iowa and Baltimore, Maryland and  Rail
Services  and  Systems  employees in Verona, Wisconsin; and a one-year agreement
with  Rail  Product  employees  in  Sahagun,  Mexico.

     The  Company anticipates that it will negotiate agreements in the Year 2000
with  Rail  Services and Systems employees in Mexico City and agreements will be
negotiated with Rail Products employees in Melrose Park and Cicero, Illinois and
Sahagun,  Mexico.  These  negotiations affect approximately 31% of the Company's
employees.


ENVIRONMENTAL  MATTERS

     For  a  description  of  compliance  with  environmental  matters  and  of
litigation  related  thereto,  see  ''Part I, Item 3-Legal Proceedings'' herein.


SEGMENT  REPORTING

     Refer  to  the Company's financial statements as of December 31, 1999, July
31,  1999 and 1998, and for the Transition Period and the three years ended July
31,  1999,  1998,  and  1997  included  herein,  for  the  required  segment and
geographical  disclosures.


<PAGE>
ITEM  2-PROPERTIES

     The  Company  maintains  its  headquarters  in  Downers Grove, Illinois and
conducts  its  operations  in  24  principal  manufacturing  plants. The Company
believes  its  property  and equipment is in good condition and suitable for its
needs.  The  Company's  principal  operating  facilities  are  as  follows:
<TABLE>
<CAPTION>



                             APPROXIMATE
                             -----------
                               SQUARE
                             -----------
LOCATION(1)                    FOOTAGE    OWNED/LEASED               DESCRIPTION OF USE
---------------------------  -----------  -------------  ------------------------------------------
<S>                          <C>          <C>            <C>
Chicago Heights, Illinois        182,000  Owned          Specialty trackwork rail manufacturing
Chicago Heights, Illinois        244,000  Owned          Specialty trackwork manufacturing
Cincinnati, Ohio                 135,000  Owned (2)      Specialty trackwork manufacturing
Pueblo, Colorado                 111,000  Owned          Specialty trackwork manufacturing
Superior, Wisconsin               94,000  Owned          Specialty trackwork manufacturing
Newton, Kansas                    58,000  Leased (3)     Specialty trackwork manufacturing
Ashland, Wisconsin                57,000  Owned (3)      Specialty trackwork panelizing
Anderson, Indiana                155,000  Owned (2)      Manganese steel trackwork castings
Crown Point, Indiana              20,000  Leased         Manganese steel trackwork casting patterns
Calera, Alabama                  259,000  Owned          Cast railroad wheels
Calera, Alabama                   19,000  Owned          Cast railroad 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
Mexico City, Mexico               24,000  Leased         Railroad wheel assembly
Corsicana, Texas                  18,000  Owned          Railroad wheel assembly
San Bernardino, California        65,000  Leased         Railroad wheel assembly
Verona, Wisconsin                 13,000  Leased         Railway signal system assembly
Jacksonville, Florida             13,000  Leased         Railway signal system assembly
Cicero, Illinois                 700,000  Owned          Freight car castings
Hamilton, Ontario, Canada        425,000  Owned          Freight car and locomotive castings
Melrose Park, Illinois           240,000  Owned          Freight car and locomotive castings
Sahagun, Hidalgo, Mexico         794,500  Owned          Freight car and locomotive castings
Lisbon, Portugal                 520,000  Owned          Freight car and locomotive castings
Keokuk, Iowa                     122,000  Owned          Valve housings and related castings
Keokuk, Iowa                      30,000  Leased         Finishing plant
Keokuk, Iowa                      54,000  Leased         Pattern storage facility
Keokuk, Iowa                      15,000  Owned          General offices
Richmond, Texas                  249,000  Leased         Specialty castings and idler wheels
Lombard, Illinois                 30,000  Leased         Research & development/product engineering
Leven, Fife, Scotland            213,000  Owned          Railway and industrial castings
</TABLE>


(1)     All  locations  are  in  the  USA  unless  otherwise  indicated.

(2)     Facility  has  been  closed  and  is  being  marketed  for  sale.

(3)     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.

     All  of  the  non-real  estate  assets  located  at  the  Company's  owned
manufacturing and assembly facilities within the U.S., other than Newton, Kansas
and  Ashland,  Wisconsin,  are  pledged  as  security under the Company's senior
credit  facility.  Real  estate  assets at the Company's Ashland, Wisconsin, and
Superior,  Wisconsin,  facilities  have  been  pledged  to a third party bank as
letter  of  credit  provider  supporting  an  Industrial  Revenue Bond offering.

The  Company  has  also  pledged its real estate assets at its Hamilton, Ontario
facility  to  a  key customer under a ''payment-in-kind'' credit agreement along
with  a first priority security interest in the facility's equipment and related
motor vehicles. A second priority security interest in this facility's equipment
and  furniture  assets  was  provided  to  the  Company's senior credit facility
lenders.


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.  The Company employs responsible personnel at each facility, along
with  various  environmental engineering consultants from time to time to assist
with  ongoing  management  of  environmental,  health  and  safety requirements.

     The  Company  is also a party to various other legal proceedings arising in
the  ordinary  course  of  business,  none  of which is expected in management's
opinion,  after  consultation  with  legal  counsel,  to have a material adverse
effect,  either individually or in the aggregate, on the Company's consolidated,
financial  position  or  results  of  operations.


ITEM  4-SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY-HOLDERS

     On  November  19,  1999,  the  Company  held  the  1999  Annual  Meeting of
Shareholders.  The  following  matters  were  approved  by  shareholders:

1.)     Election  to  the  Board of Directors for a three-year term one class of
directors,  consisting  of  James  E.  Martin and Willard H. Thompson.  The vote
totals  were  as  follows:

     For                    Withheld                Abstain
     ----                    --------               -------
     16,493,519                  0                  470,958

2.)     Approval  and  adoption  of  the Company's 1999 Omnibus Stock Plan.  The
votes  cast  for,  votes  cast  against  and  abstentions  were  as  follows:

     For                    Against                 Abstain
     ---                    -------                 -------
     13,032,332           1,975,193                 380,833


3.)     Ratification  of the appointment of Arthur Andersen LLP as the Company's
independent  public  accountants.  The  votes  cast  for, votes cast against and
abstentions  were  as  follows:

     For                   Against                  Abstain
     ---                   -------                  -------
     16,950,017              4,910                    9,550



ITEM  4A-EXECUTIVE  OFFICERS  OF  THE  REGISTRANT
<TABLE>
<CAPTION>



                 NAME  AGE                          POSITION
---------------------  ---  ---------------------------------------------------------
<S>                    <C>  <C>
  Joseph A. Seher . .   55  Chief Executive Officer and Director
  Vaughn W. Makary. .   50  President and Chief Operating Officer
  John W. Waite . . .   56  Executive Vice President and Chief Administrative Officer
  J. P. Singsank. . .   53  Senior Vice President and Chief Financial Officer
  Brian L. Greenburg.   40  Vice President and Corporate Controller
  Vincent V. Rea. . .   37  Vice President and Corporate Treasurer
  Mark F. Baggio. . .   39  Vice President, General Counsel and Secretary
</TABLE>



JOSEPH  A. SEHER. Mr. Seher has served as Chief Executive Officer of the Company
since  February,  1999. Prior to the Merger, Mr. Seher served as Chairman of the
Board and Chief Executive Officer of NACO since its formation in 1987. From 1985
to  1987,  Mr.  Seher  was  Chairman of the Board and Chief Executive Officer of
National  Castings, Inc. (''NCI''), a subsidiary of NACO. From 1981 to 1985, Mr.
Seher  was  Executive  Director  of  Corporate  Development  for  Atcor, Inc., a
manufacturer  and  distributor  of  electrical,  mechanical, fire protection and
consumer  products.  Mr.  Seher  also has served as a management consultant with
A.T.  Kearney  &  Co.  and  an  instructor  at  The  Harvard  Business  School.

VAUGHN  W.  MAKARY.  Mr. Makary has served as President and Chief Operating
Officer  of the Company since February, 1999. Mr. Makary served as President and
Chief  Operating  Officer of NACO from 1988 to February, 1999, and as a director
of  NACO  from  1993  to  February,  1999.

JOHN  W.  WAITE.  Mr.  Waite  has  served  as Executive Vice President and Chief
Administrative  Officer of the Company since February, 1999. Mr. Waite served as
Executive  Vice  President  and  Chief Administrative Officer of NACO from June,
1997  to  February,  1999  and  as  a  director  of  NACO from October, 1993, to
February,  1999.  From  1989  through  June  1997,  Mr. Waite was Executive Vice
President  of  NACO.

J.  P.  SINGSANK.  Mr.  Singsank  has  served as Senior Vice President and Chief
Financial  Officer  of the Company since July, 1999. Mr. Singsank served as Vice
President of Finance and Chief Accounting Officer for the Company from February,
1999  to  July,  1999 and as Corporate Controller for ABC from 1993 to February,
1999.

BRIAN  L.  GREENBURG.  Mr.  Greenburg has served as Vice President and Corporate
Controller  of  the  Company  since February, 1999. Mr. Greenburg served as Vice
President  and  Corporate Controller of NACO from April, 1998 to February, 1999.
From  July  1997  to  April  1998,  Mr.  Greenburg  served as Vice President and
Controller-  Flow  Products  Group  of NACO. From January 1996 to June 1997, Mr.
Greenburg  served  as  Vice  President of Finance and Chief Financial Officer of
Milwaukee  Valve  Co.,  Inc.  From 1985 to April, 1995, Mr. Greenburg held other
various  financial  positions  with  NACO.

VINCENT  V. REA. Mr. Rea has served as Vice President and Corporate Treasurer of
ABC-NACO  Inc. since July, 1999. From May, 1998, through February, 1999, Mr. Rea
was  Corporate Treasurer of ABC and subsequently held the same position with the
merged  ABC-NACO  Inc.  From  1986 through April, 1998, Mr. Rea held a number of
financial  management  and  treasury  positions with both Safety-Kleen Corp. and
Motorola,  Inc.

MARK  F.  BAGGIO.  Mr.  Baggio has served as Vice President, General Counsel and
Secretary  of  the Company since July, 1999. From February, 1999, to July, 1999,
Mr.  Baggio  served  as  the  Company's  Senior  Corporate Counsel. Prior to the
Merger, Mr. Baggio was a principal in the law firm of Lison & Griffin P.C. where
he  worked from 1987 to 1998. Mr. Baggio also served as an auditor with the U.S.
General  Accounting  Office.

<PAGE>
ITEM  5-MARKET  FOR  REGISTRANT'S  COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The  common  stock  of  the  Company is traded on The Nasdaq Stock Market's
National  Market  System under the symbol ''ABCR.'' Set forth below are the high
and  low  closing  bid  prices for the Company's common stock during the periods
indicated,  as  reported  by  the  National  Market  System.

<TABLE>
<CAPTION>
                                                QUARTERS ENDED                  TWO MONTHS ENDED
                                             ------------------------------------
                                            OCT. 31   JAN.  31  APRIL 30  JULY 31   DEC. 31, 1999
                                            --------  --------  --------  --------  ----------------
Transition Period Ended December 31, 1999:
<S>                                         <C>       <C>       <C>       <C>       <C>
High . . . . . . . . . . . . . . . . . . .  $ 20.125    N/A       N/A       N/A       $ 11.437
Low. . . . . . . . . . . . . . . . . . . .  $  8.750    N/A       N/A       N/A       $  8.000
Fiscal Year Ended July 31, 1999:
High . . . . . . . . . . . . . . . . . . .  $ 17.750 $ 15.750  $ 15.500  $21.000         N/A
Low. . . . . . . . . . . . . . . . . . . .  $  8.000 $ 10.000  $ 12.000  $12.750         N/A
Fiscal Year Ended July 31, 1998:
High . . . . . . . . . . . . . . . . . . .  $ 20.875 $ 21.750  $ 19.875  $19.250         N/A
Low. . . . . . . . . . . . . . . . . . . .  $ 16.500 $ 17.000  $ 17.125  $14.250         N/A
</TABLE>

ITEM  6-SELECTED  FINANCIAL  DATA

On  February 19, 1999, the Company consummated a merger (the ''Merger'') between
a  wholly  owned subsidiary of ABC Rail Products Corporation (''ABC'') and NACO,
Inc.  (''NACO'').  As  a  result  of  the Merger, each outstanding share of NACO
common stock was converted into 8.7 shares of ABC common stock, resulting in the
issuance  of  approximately  9.4  million  shares.  The  Merger was treated as a
tax-free  reorganization for federal income tax purposes and is accounted for as
a  pooling-of-interests  transaction.  The  accompanying selected financial data
reflect  the  combined  results of ABC and NACO as if the Merger occurred on the
first  day  of  the earliest period presented and is based on the fiscal periods
described  below.

     Prior  to  the Merger, ABC's fiscal year-end was July 31, and NACO's fiscal
year-end  was  the  Sunday closest to March 31. ABC's fiscal year was adopted by
the  Company  as  the  annual  financial  reporting  period.  As permitted under
Regulation  S-X  promulgated  by  the  Securities  and  Exchange Commission, the
year-ends  of  the  two  companies  have not been conformed for periods prior to
fiscal 1999. The financial position of NACO as of June 28, 1998, March 30, 1997,
March  31,  1996, and April 2, 1995 and the results of NACO's operations for the
twelve  months  ended June 28, 1998, March 30, 1997, March 31, 1996 and April 2,
1995  are combined with ABC's financial position as of July 31, 1998, 1997, 1996
and  1995  and  the results of ABC's operations for the twelve months ended July
31,  1998,  1997,  1996  and  1995, respectively. Accordingly, revenues of $26.5
million  and  a  net loss of $0.1 million, and revenues of $70.3 million and net
income  of  $0.9 million representing NACO's results of operations for July 1998
and  the period March 31, 1997 to June 29, 1997, respectively, are excluded from
the  Company's  Consolidated  Statements  of  Operations.  As  permitted  in  a
pooling-of-interests  business  combination,  the  ABC-NACO financial statements
reflect  certain  adjustments  to  conform  the  accounting  policies  of  both
companies.

     On  September  23,  1999,  the  Company's  Board  of  Directors  adopted  a
resolution  to change the Company's fiscal year-end to December 31 from July 31.
The  principal  reason for the change was to align the Company's fiscal year-end
with  the  fiscal year-end of its major customers. The Company filed a Form 10-Q
quarterly  report  for  the  quarter  ending October 31, 1999 and this Form 10-K
transition report covers the five-month Transition Period from August 1, 1999 to
December  31,  1999.   Comparable,  unaudited  results for the five months ended
December  31,  1998  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>
<S>                                            <C>
  Net sales . . . . . . . . . . . . . . . . .  $276,366
  Gross profit. . . . . . . . . . . . . . . .    39,246
  SG&A. . . . . . . . . . . . . . . . . . . .    25,601
  Operating income. . . . . . . . . . . . . .    13,645
  Income before income taxes and cumulative
        effect of accounting change . . . . .     7,094
  Provision for income taxes. . . . . . . . .       790
  Income before cumulative effect of
      accounting change . . . . . . . . . . .     6,304
  Cumulative effect of accounting change,
      net of income taxes of $1,014 . . . . .     1,620
  Net income. . . . . . . . . . . . . . . . .  $  4,684
                                               ========
  Earnings per share, after cumulative effect
       of accounting change:
      Basic . . . . . . . . . . . . . . . . .  $   0.26
      Diluted . . . . . . . . . . . . . . . .  $   0.25
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                        FOR THE FIVE
                                                        MONTHS ENDED              FOR THE YEAR ENDED JULY 31,
                                                                        ------------------------------------------------
                                                        DEC. 31,1999    1999       1998       1997       1996       1995
---------------------------------------------------------  ---------  ---------  ---------  ---------  ---------   -----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                        <C>        <C>        <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Net sales . . . . . . . . . . . . . . . . . . . . . . . .  $239,861   $665,497   $634,921   $535,718   $519,209   $472,426
Cost of sales . . . . . . . . . . . . . . . . . . . . . .   214,833    570,523    543,310    466,757    449,918    405,557
                                                           ---------  ---------  ---------  ---------  ---------  ---------
   Gross profit . . . . . . . . . . . . . . . . . . . . .    25,028     94,974     91,611     68,961     69,291     66,869
Selling, general and administrative expenses. . . . . . .    24,962     60,225     56,282     48,649     41,743     33,087
Wilsons asset impairment charge and liquidation (gain)(1)         -          -          -     (1,430)     2,800          -
Merger and other restructuring charges(2) . . . . . . . .     1,201     21,925          -          -      3,155          -
                                                           ---------  ---------  ---------  ---------  ---------  ---------
   Operating income (loss). . . . . . . . . . . . . . . .    (1,135)    12,824     35,329     21,742     21,593     33,782
Settlement of litigation(3) . . . . . . . . . . . . . . .         -          -          -          -     (2,800)         -
Equity (income) loss of unconsolidated joint ventures . .       (29)        66     (1,616)    (1,041)       144       (393)
Interest expense. . . . . . . . . . . . . . . . . . . . .     9,398     17,782     13,862     12,620      9,526      5,624
                                                           ---------  ---------  ---------  ---------  ---------  ---------
   Income (loss) before income taxes, cumulative
     effect of accounting changes and
     extraordinary items. . . . . . . . . . . . . . . . .   (10,504)    (5,024)    23,083     10,163     14,723     28,551
Provision (benefit) for income taxes. . . . . . . . . . .    (4,979)       923      9,305      3,914      5,572      5,874
                                                           ---------  ---------  ---------  ---------  ---------  ---------
   Income (loss) before cumulative effect of
     accounting changes and extraordinary items . . . . .    (5,525)    (5,947)    13,778      6,249      9,151     22,677
Cumulative effect of accounting changes(4). . . . . . . .         -     (1,620)    (1,111)         -          -     (3,241)
Extraordinary items(5). . . . . . . . . . . . . . . . . .         -     (3,158)         -       (310)         -       (814)
                                                           ---------  ---------  ---------  ---------  ---------  ---------
   Net income (loss). . . . . . . . . . . . . . . . . . .  $ (5,525)  $(10,725)  $ 12,667   $  5,939   $  9,151   $ 18,622
                                                           =========  =========  =========  =========  =========  =========
PER SHARE DATA:
Basic:
   Income (loss) before cumulative effect of
     accounting changes and extraordinary items . . . . .  $  (0.30)  $  (0.33)  $   0.77   $   0.36   $   0.54   $   1.36
   Net income (loss). . . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.59)  $   0.71   $   0.34   $   0.54   $   1.12
   Weighted average common shares outstanding . . . . . .    18,623     18,142     17,850     17,587     16,946     16,615
Diluted:
   Income (loss) before cumulative effect of
     accounting changes and extraordinary items . . . . .  $  (0.30)  $  (0.33)  $   0.75   $   0.35   $   0.52   $   1.31
   Net income (loss). . . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.59)  $   0.69   $   0.33   $   0.52   $   1.08
   Weighted average common and equivalent
     shares outstanding . . . . . . . . . . . . . . . . .    18,623     18,142     18,474     18,139     17,576     17,283
OPERATING DATA:
Backlog(6). . . . . . . . . . . . . . . . . . . . . . . .  $ 85,114   $125,287   $155,804   $113,247   $100,250   $162,862
Depreciation and amortization . . . . . . . . . . . . . .    13,373     30,126     22,476     20,785     16,447     10,951
Capital expenditures(7) . . . . . . . . . . . . . . . . .    17,659     54,640     68,915     46,528     30,562     35,690
BALANCE SHEET DATA:
Total assets. . . . . . . . . . . . . . . . . . . . . . .  $492,471   $453,821   $423,896   $340,142   $262,568   $228,977
Total debt (including cash overdrafts). . . . . . . . . .   252,454    229,619    208,131    156,927    105,550     84,626
Stockholders' equity. . . . . . . . . . . . . . . . . . .    86,679     81,557     92,070     78,366     59,852     43,741
_
</TABLE>


(1)     The  Company  recorded  a  $2.8  million write-down in fiscal 1996 and a
liquidation  gain  of  $1.4  million  in  fiscal 1997 in connection with certain
actions  taken  with  respect  to  its  Wilsons  facility.

(2)     The charge in fiscal 1996 represents non-recurring charges primarily for
the  closure  of  a manufacturing facility and the cost of certain reengineering
efforts.  The charges in fiscal 1999 and the five months ended December 31, 1999
relate to costs and restructuring actions associated with the Merger, as well as
costs  associated  with  the restructuring of certain operations within the Rail
Systems  and  Services  segment.

(3)     Represents  proceeds  from  the  settlement  of  a lawsuit against ABEX.

(4)     Represents  the  after-tax  cumulative  effect  of  accounting  changes
whereby,  in  fiscal 1995, the Company adopted new provisions for accounting for
certain  postemployment  and  postretirement  benefits  which  were  previously
accounted  for  on a cash basis; in fiscal 1998, the Company expensed previously
capitalized  business  process  reengineering  costs;  and  in  fiscal 1999, the
Company  expensed  previously  capitalized  start-up  costs.

(5)     Represents  the  after-tax effect of extraordinary charges recognized in
connection  with  the  write-off  of  unamortized deferred financing costs, make
whole  payments and termination fees related to the early extinguishment of debt
in  connection  with  the  refinancing  of  certain indebtedness in fiscal 1995,
fiscal  1997  and  fiscal  1999.

(6)     Includes only firm orders, as of the end of the fiscal period, for which
customers  have  issued  releases  for production and delivery, and excludes the
non-current  portion  of  any  long-term  supply  arrangements.

(7)     Excludes  expenditures  for  business  acquisitions.

<PAGE>
ITEM  7-MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF  OPERATIONS

     The  following  discussion  and  analysis  of  the  Company's  consolidated
financial  condition  and  consolidated  results  of operation should be read in
conjunction  with  the  Company's  Consolidated  Financial  Statements and Notes
thereto  included  elsewhere  herein.  This  discussion  contains  certain
forward-looking  statements which involve risks and uncertainties. The Company's
actual results could differ materially from the results expressed in, or implied
by,  such  statements.  See  ''Regarding  Forward-Looking  Statements.''

BASIS  OF  PRESENTATION

     On  February  19,  1999,  the Company consummated a merger (the ''Merger'')
between a wholly owned subsidiary of ABC Rail Products Corporation (''ABC'') and
NACO, Inc. (''NACO''). As a result of the Merger, each outstanding share of NACO
common stock was converted into 8.7 shares of ABC common stock, resulting in the
issuance  of  approximately  9.4  million  shares.  The  Merger was treated as a
tax-free  reorganization for federal income tax purposes and is accounted for as
a  pooling-of-interests  transaction.  The  following  discussions  reflect  the
combined  results  of ABC and NACO as if the Merger occurred on the first day of
the  earliest  period  described  and  is  based on the fiscal periods described
below.

     Prior  to  the Merger, ABC's fiscal year-end was July 31, and NACO's fiscal
year-end  was  the  Sunday closest to March 31. ABC's fiscal year was adopted by
the  Company  as  the  annual  financial  reporting  period.  As permitted under
Regulation  S-X  promulgated  by  the  Securities  and  Exchange Commission, the
year-ends  of  the  two  companies  have not been conformed for periods prior to
fiscal  1999. The financial position of NACO as of June 28, 1998 and the results
of  NACO's  operations  for  the twelve months ended June 28, 1998 and March 30,
1997  are  combined  with  ABC's  financial position as of July 31, 1998 and the
results  of ABC's operations for the twelve months ended July 31, 1998 and 1997,
respectively.  Accordingly,  revenues  of  $26.5  million and a net loss of $0.1
million,  and  revenues  of  $70.3  million  and  net  income  of  $0.9  million
representing NACO's results of operations for July 1998 and the period March 31,
1997  to  June  29,  1997,  respectively,  are  excluded  from  the  Company's
Consolidated  Statements  of  Operations. As permitted in a pooling-of-interests
business  combination,  the  ABC-NACO  financial  statements  reflect  certain
adjustments  to  conform  the  accounting  policies  of  both  companies.

     On  September  23,  1999,  the  Company's  Board  of  Directors  adopted  a
resolution  to  change  the  fiscal  year-end  to  December 31 from July 31. The
principal  reason  for  the  change was to align the Company's year-end with the
fiscal  year-end of its major customers. The Company filed a Form 10-Q quarterly
report  for  the  fiscal  quarter  ending  October  31,  1999 and this Form 10-K
transition  report covers the five-month Transition Period ("Transition Period")
from  August  1,  1999  to  December  31,  1999.

     The  Company  realigned its segments during the Transition Period to better
reflect  the  organizational  and marketing changes that were enacted within the
Company.  The  Company's  trackwork  product  line  which  previously  had  been
reported  as  part  of  the Rail Products segment is now included as part of the
Rail  Services  and  Systems  segment.  The Company now markets its services for
signaling  and  trackwork  products  to  the  railroads through one organization
headed  by  one  division  president.  In  addition,  the  Company for strategic
reasons,  placed  its  metal  brake  shoe  foundry  into  the Flow and Specialty
Products segment.  The current and historical segment financial information have
been  restated  to  reflect  these  changes.

RESULTS  OF  OPERATIONS

Consolidated  Sales  and  Gross  Profits

     The following table sets forth consolidated net sales and gross profit data
for  the  periods  indicated:

<TABLE>
<CAPTION>


                        FIVE MONTHS ENDED           YEARS ENDED JULY 31,
                                            -----------------------------
                         DECEMBER 31,1999          1999     1998     1997
---------------------  -------------------  ----------------------  -------
                                     (DOLLARS IN MILLIONS)
<S>                    <C>                  <C>                     <C>
  Net Sales . . . . .          $ 239.9            $665.5   $634.9   $535.7
  Gross Profit. . . .          $  25.0            $ 95.0   $ 91.6   $ 69.0
  % of Sales. . . . .             10.4%             14.3%    14.4%    12.9%
</TABLE>



     Net  sales decreased 13.2%  to $239.9 million in the Transition Period from
$276.4 million in the comparable period in 1998.   Sales within the Rail Systems
and  Systems  segment  decreased  17.2%  from  $103.9  million  in 1999 to $86.0
million.   This decrease was driven primarily by the weak demand for the group's
specialty  trackwork products.  Sales within the Rail Products segment decreased
6.5%  from  $155.7  million in the five months ended December 31, 1998 to $145.5
million  in  the  Transition  Period.  The  revenue drop within this segment was
primarily  attributable  to reduced demand from major rail car builders as these
customers  stopped  replenishing  inventories  of freight rail car components in
anticipation  of  the  rail  industry's  outlook  for  the  coming  year.

     In fiscal 1999, annual net sales increased 5% to $665.5 million from $634.9
million  in fiscal 1998. Fiscal 1998 net sales increased 19% from $535.7 million
in fiscal 1997. In fiscal 1999, the increase was due in part to the ongoing ramp
up  of  the  Sahagun,  Mexico,  facility  as  well  as  continued  strong market
conditions  within  the  Rail  Products  segment. These conditions were a direct
result  of  a  strong  domestic  economy  that  increased demand for freight car
components  and  locomotive truck assemblies. The increase from 1997 to 1998 was
driven  primarily  within  the  Rail  Products  and  Rail  Services  and Systems
segments,  once  again,  as  a  result  of  the  strong  overall  economy.

     Gross profit decreased to $25.0 million or 10.4% of sales in the Transition
Period  from  $39.2  million or 14.2% of sales in the comparable period in 1998.
Gross  profit  within  the  Rail Products segment decreased by $8.6 million from
$24.5  million  or  15.7% of sales in the five months ended December 31, 1998 to
$15.9  million  or  10.9%  of sales in the Transition Period.  The margin within
this  segment  was impacted by operating variances within the Company's Sahagun,
Mexico  operation  as it continued to ramp up its production during the year, as
well  as the demand issues described above related to the company's freight rail
car  components.  Gross  profit  within  the  Rail  Services and Systems segment
decreased by $3.7 million from $11.0 million or 10.6% of sales in the comparable
period  in  1998 to $7.3 million or 8.5% of sales in the Transition Period.  The
margin  decrease  within  this  segment  was attributable to weak demand for the
group's  specialty  trackwork  products.   Gross  profit  within  the  Flow  and
Specialty Products decreased by $1.9 million from $4.0 million or 11.9% of sales
in  the  five months ended December 31, 1998 to $2.1 million or 7.1% of sales in
the  Transition  Period.  The margin drop within this group was related to start
up  costs  incurred  at  the unit's Richmond, Texas facility, as well as reduced
demand  for  the  company's  specialty  rail  car  brakeshoes.

     Gross profit as a percentage of net sales decreased slightly in fiscal 1999
to  14.3%  from  14.4%  in  fiscal  1998.  However,  these  numbers  were  both
improvements  upon fiscal 1997's percentage of 12.9%. The overall improvement in
margin  from 1997, when compared to the years 1998 and 1999, was driven entirely
within  the  Rail  Products  segment  for  the  reasons  described  above.

Consolidated  SG&A  and  Operating  Income

     A  summary  of  Selling,  General  and Administrative ("SG&A") expenses and
Operating  Income  with  respective  percentages  of  sales,  for  the  periods
indicated,  follows:

<TABLE>
<CAPTION>


                      FIVE MONTHS ENDED     YEARS ENDED JULY 31,
                                            --------------------
                      DECEMBER 31, 1999     1999    1998    1997
-------------------------                  ------  ------  ------
                                  (DOLLARS IN MILLIONS)
<S>                        <C>           <C>     <C>     <C>
SG&A                       $25.0          $60.2   $56.3   $48.6
% of Sales                  10.4%           9.0%    8.9%    9.1%
Operating Income\(Loss)*   $(1.1)         $12.8   $35.3   $21.7
% of Sales                   0.5%           1.9%    5.6%    4.1%
</TABLE>


*Includes  $1.2  million  of Merger and other restructuring charges for the five
months  ended  December  31,  1999; $21.9  million  of  Merger  and  other
restructuring charges in fiscal 1999 described below; and a $1.4 million Wilsons
Liquidation  gain  in  fiscal  1997.

     Selling,  general  and  administrative  expenses  decreased by $0.6 million
during the Transition Period from the comparable period in 1998 as a result
of  merger  synergies.  Prior to the synergies, SG&A was flat as a percentage of
sales  in  fiscal  1999,  1998  and  1997.

     Operating  income  decreased to $12.8 million during fiscal 1999 from $35.3
million  in  fiscal  1998.  In  fiscal  1999, operating income was impacted by a
one-time  Merger  and  other restructuring charges of $21.9 million. Fiscal 1998
operating  income  increased  62%  from  $21.7  million  in  fiscal  1997.

     During  the  third  and  fourth  quarters of the fiscal year ended July 31,
1999,  the  Company  recorded  $16.1  million and $5.8 million, respectively, of
Merger  and  other  restructuring  charges.  During  the  Transition Period, the
Company  recorded  additional  charges of $1.2 million, including adjustments of
previously-recorded  charges  based  on  actual expenses incurred on the related
initiatives.  The  primary components of the aggregate $23.1 million of calendar
1999  charges  include: (a) $9.5 million of costs incurred as a direct result of
the  Merger  for  advisory and other professional fees, (b) the consolidation of
the  corporate activities of the merged companies into one facility, and (c) the
consolidation  of  several  manufacturing  and  assembly  operations  into fewer
facilities  to  eliminate  duplicative  functions  and  to  improve  operating
efficiencies.  The  charges  were  computed  based  on  actual  cash  payouts,
management's  estimate  of  realizable  value  of  the  affected  tangible  and
intangible  assets  and  estimated  exit  costs  including  severance  and other
employee  benefits  based  on  existing severance policies.  The Company expects
that  these  restructuring  efforts  will  result  in  reduced  operating costs,
including  lower  salary and hourly payroll costs and depreciation/amortization.

     Employee  severance  costs  included in the aggregate charge, totaling $7.9
million,  were  for 33 corporate employees, 109 salaried plant employees and 581
hourly  plant  employees.  As  of  December 31, 1999, all of these employees had
been  terminated.

     Certain  of  the  restructuring  initiatives  within  the Rail Services and
Systems  segment  were  prompted  by  the  excess  capacity  resulting  from the
operation  of  the  Company's new state-of-the-art rail mill facility in Chicago
Heights,  Illinois.  With  this  new  capacity  on  line, the Company closed its
Cincinnati,  Ohio  facility and discontinued manufacturing at its Newton, Kansas
facility  (which  also  has  a  distribution  operation)  by July 31, 1999.  The
Company  also  closed  its foundry operation in Anderson, Indiana by October 31,
1999.  The  Manganese  castings  used  in  specialty  track  products  that were
produced at Andersen are now produced at the Company's manufacturing facility in
Richmond,  Texas.  The  duplicative  leased  corporate  facility  and  another
administrative  facility  were  closed  in September 1999.  In addition to these
closures,  the  Company  has  decided  to  close an assembly facility in Verona,
Wisconsin.  This  Rail Services and Systems facility is expected to be closed by
the  end  of  2000  with  all  operations  being  transferred to another Company
location.

     Costs  associated  with  these  facility closures, excluding severance, are
$2.2  million  of  non-cash provisions for the write down of obsolete assets and
leasehold improvements and $1.4 million in cash provisions for idle facility and
property  disposal costs.  In addition to these costs, the Company incurred $2.1
million  of  cash  costs related to the transfer of Manganese castings and other
operations  into  the  Richmond facility and the relocation of previous Richmond
operations  into  another Company facility.  These costs primarily represent the
relocation of equipment and employees and the installation of the new operations
at  Richmond.


The  following  table  is a summary roll forward of the Merger and other
restructuring reserves  through  December  31,  1999  (in  thousands):


<TABLE>
<CAPTION>
                                           Aggregate                   Balance
                                             Charge    Deductions     12/31/99
                                         ----------   ----------     ---------
<S>                                           <C>          <C>         <C>
Cash provisions:
   Merger advisory and other fees. . . . . .  $ 9.5      $ (9.5)           $  -
   Employee severance. . . . . . . . . . . .    7.9        (4.5)            3.4
   Idle facility and property disposal costs    1.4        (0.6)            0.8
   Relocation of operations. . . . . . . . .    2.1        (2.1)              -
                                              -------    --------          ----
      Total cash costs . . . . . . . . . . .   20.9      $(16.7)           $4.2
                                                          =======          ====
Non-cash asset writedowns. . . . . . . . . .    2.2
                                              -------
      Total. . . . . . . . . . . . . . . . .  $23.1
                                              =======
</TABLE>

  The remaining cash costs are expected to be expended during the next twelve to
fifteen  months.

Other

     The  Company's  equity  income  from  its  investments  in  joint  ventures
decreased  from  $0.4  million  in  the  five  months ended December 31, 1998 to
break-even  during  the  Transition  Period.  Equity  income  (loss)  from
unconsolidated  joint ventures decreased to a $(0.1) million loss in fiscal 1999
from  $1.6  million  of  income  in  fiscal 1998. These decreases were primarily
attributable  to  start up costs and initial operating losses generated from the
Company's  joint venture located in China that began producing railcar wheels in
November  1998.  Fiscal  1998  equity  income from unconsolidated joint ventures
increased  55%  from  $1.0  million  in  fiscal  1997 due principally to improve
operating  results  from  the  Company's  brakeshoe  joint  venture.

     A  summary  of  total  interest cost, for the  periods indicated,  follows:

<TABLE>
<CAPTION>

                              FIVE MONTHS ENDED            YEARS ENDED JULY 31,
                                                          ---------------------
                              DECEMBER 31, 1999            1999    1998    1997
                             -------------------           ----    ----   -----
                                      (DOLLARS IN MILLIONS)
<S>                     <C>                 <C>                    <C>    <C>
Interest Expense                     $ 9.4                 $17.8   $13.9  $12.6
                                     =====                 ======  =====  =====
</TABLE>

     Interest  expense,  net  of capitalized interest, increased to $9.4 million
during the Transition Period from $7.0 million in the comparable period of 1998.
This  increase  resulted  from  higher  borrowing levels required to support the
Company's  increase  in working capital and capital spending programs.  Interest
expense,  net  of capitalized interest, increased to $17.8 million during fiscal
1999  from  $13.9  million  in  fiscal  1998  and  $12.6 million in fiscal 1997.
Capitalized  interest  associated  with  the  financing  of new capital projects
totaled $0.3 in the Transition Period, $2.4 million in fiscal 1999, $3.9 million
in  fiscal  1998  and $0.2 million in fiscal 1997. The interest cost increase in
fiscal  1999  was  primarily  attributable  to  the  financing  of the Company's
Sahagun,  Mexico,  capacity expansion project as well as the construction of the
Rail  Mill in Chicago Heights, Illinois. At December 31, 1999, approximately 31%
of  the  Company's  $252.5  million  of  debt  was  at a fixed rate of interest.

     The  Company's  effective tax rates for the Transition Period, fiscal 1999,
1998,  and  1997  were  47.4%,  18.4%,  40.3% and 38.5%, respectively. The lower
effective  tax  rate  during  fiscal  1999  primarily reflects reductions in tax
reserves  due  to  the  ultimate  realization  of  certain net operating losses.

     The  non-cash  effect of an accounting change of $2.6 million ($1.6 million
after-tax) in fiscal 1999 represents the write-off, in accordance with Statement
of  Position  98-5,  of  previously  capitalized start-up costs. In addition, 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) in fiscal 1998 to reflect the cumulative effect
of  this  accounting  change.

     On  February 19, 1999, the Company, in conjunction with the Merger, entered
into  a  new  credit  facility  with a syndicate of financial institutions. This
financing  triggered the write-off of unamortized deferred financing costs, make
whole  payments and early termination fees that resulted from the extinguishment
of  certain  pre-Merger debt. The after-tax charge recorded to account for these
items  was  $3.2  million.  The Company also recorded in fiscal 1997 a non-cash,
after-tax  charge  of $0.3 million which represents the write-off of unamortized
deferred financing costs related to previous indebtedness which was retired with
proceeds  from  the  issuance  of  the  senior  subordinated  notes.

RAIL  PRODUCTS  SEGMENT

     The  following  table  sets forth, for the periods indicated, Rail Products
segment sales before intercompany eliminations and other, gross profit, SG&A and
operating  income  data:

<TABLE>
<CAPTION>
                            FIVE MONTHS ENDED               YEARS ENDED JULY 31,
                                                        ---------------------------
                             DECEMBER 31, 1999              1999     1998      1997
---------------------  -------------------  ----------------------  ------   ------
                                     (DOLLARS IN MILLIONS)
<S>                    <C>                  <C>                     <C>      <C>
  Net Sales                        $145.5                $ 388.3    $309.8   $281.9

  Gross Profit                    $  15.9                 $ 59.0    $ 39.0   $ 26.8
  % of Net Sales                     10.9%                  15.2%     12.6%     9.5%

  SG&A                              $ 7.5                 $ 15.7    $ 12.9   $ 11.8
  % of Net Sales                      5.1%                   4.0%      4.2%     4.2%

  Operating Income                  $ 8.4                 $ 43.3    $ 26.0   $ 15.0
  % of Net Sales                      5.8%                  11.2%      8.4%     5.3%
</TABLE>

     Rail  Products  net  sales decreased 7% to $145.5 million in the Transition
Period  from $155.7 million in the comparable period of 1998.  Rail Products net
sales  increased  25%  from  $309.8  million in fiscal 1998 to $388.3 million in
fiscal  1999.  Fiscal  1998 sales increased 10% from $281.9 in 1997.   In fiscal
1999 and 1998, continued strong demand generated from new railcar and locomotive
car  builds  in  addition  to  the  continued  ramp  up  and  higher  operating
efficiencies  at  the  Company's  Sahagun,  Mexico,  facility contributed to the
strong  year  to year sales gains. The revenue drop in the Transition Period was
primarily  attributable  to reduced demand from major rail car builders as these
customers  stopped  replenishing  inventories  of freight rail car components in
anticipation  of  the  rail  industry's  outlook  for  the  coming  year.

     Gross  profit  in the Transition Period decreased 35% from $24.5 million in
the five months ended December 31, 1998 to $15.9 in the Transition Period.  Rail
Products  gross  profit  increased  51% to $59.0 million during fiscal 1999 from
$39.0 million in fiscal 1998.  Fiscal 1998 gross profit increased 46% from $26.8
million  in  fiscal  1997.  The  Transition  Period  decline was impacted by the
reduced  demand  from  rail  car  builders  that  is  described above as well as
operating variances within its Sahagun, Mexico operation as it continued to ramp
its  production  during  the  Transition  Period.  The  overall  reasons for the
improvement  and  changes in gross profit from fiscal 1997 to fiscal 1999 are as
described  in  the sales summary.  SG&A as a percentage of sales held relatively
firm  during  the  fiscal  years  1999,  1998  and  1997  at 4.0%, 4.2% and 4.2%
respectively.  During  the  Transition  Period,  SG&A  as  a percentage of sales
climbed to 5.2% which corresponded with the segment's revenue decline during the
period.


RAIL  SERVICES  AND  SYSTEMS  SEGMENT

     The  following  table  sets forth, for the periods indicated, Rail Services
and  Systems  segment  sales  before  intercompany eliminations and other, gross
profit,  SG&A  and  operating  income  data:

<TABLE>
<CAPTION>
                         FIVE MONTHS ENDED             YEARS ENDED JULY 31,
                                                      ----------------------
                         DECEMBER 31, 1999            1999    1998      1997
----------------------  -------------------  ----------------------  -------
                                     (DOLLARS IN MILLIONS)
<S>                     <C>                  <C>                     <C>
Net Sales                            $86.0         $247.5   $269.7   $207.9

Gross Profit                         $ 7.3         $ 26.0   $ 39.8   $ 31.2
% of Net Sales                         8.5%          10.5%    14.8%    15.0%

SG&A                                 $ 3.4         $ 13.2   $ 12.0   $ 10.9
% of Net Sales                         4.0%           5.3%     4.5%     5.2%

Operating Income                     $ 3.9         $ 12.8   $ 27.7   $ 20.3
% of Net Sales                         4.5%           5.2%    10.3%     9.8%
</TABLE>

     Rail  Services  and  Systems net sales decreased by 17% to $86.0 million in
the  Transition  Period  from  $103.9  million in the comparable period of 1998.
Sales  decreased  by  8% from $269.7 million in fiscal 1998 to $247.5 million in
fiscal 1999.  Fiscal 1998 sales increased 30% from $207.9 million in 1997.   The
sales  decreases in the Transition Period and fiscal year 1999 were attributable
to  a  downturn  in demand for the group's specialty trackwork products from its
peak  year  in  fiscal 1998.  The increase in fiscal 1998 sales from fiscal 1997
was  driven  by  increased  demand  for  the  Company's wheel mounting services.

     Rail Services and Systems gross profit decreased by 34%  to $7.3 million in
the Transition  Period  from  $11.0  million  in  the  comparable period of 1998
Gross profit decreased 35% from $39.8 million in fiscal 1998 to $26.0 million in
fiscal  1999.  The  gross  profit  decreases  in  these years were driven by the
downturn  in  demand  for  the  group's  trackwork products.  Fiscal 1998 margin
increased  28%  from $31.2 million in fiscal 1997.  The gross profit increase in
fiscal  1998  was  a  direct  result  of the peak year performance for trackwork
products.  SG&A  as  a percentage of sales dropped to 4.0% during the Transition
Period  as  a  result  of  calendar 1999 restructuring efforts within the group.


FLOW  AND  SPECIALTY  PRODUCTS  SEGMENT

     The  following  table  sets  forth,  for  the  periods  indicated, Flow and
Specialty  Products  segment  sales  before intercompany eliminations and other,
gross  profit,  SG&A  and  operating  income  data:

<TABLE>
<CAPTION>


            FIVE MONTHS ENDED     YEARS ENDED JULY 31,
                                ---------------------
            DECEMBER 31, 1999    1999    1998    1997
           ------------------   ------  ------  ------
                          (DOLLARS IN MILLIONS)
<S>                     <C>     <C>     <C>     <C>
Net Sales           $29.6       $74.1   $93.6   $94.2

Gross Profit        $ 2.1       $10.5   $14.7   $11.2
% of Net Sales        7.1%       14.2%   15.7%   11.9%

SG&A                  1.7       $ 4.3   $ 4.6   $ 4.3
% of Net Sales        5.7%        5.8%    4.9%    4.6%

Operating Income    $ 0.4       $ 6.2   $10.1   $ 6.9
% of Net Sales        1.4%        8.4%   10.8%    7.3%
</TABLE>


     Flow  and Specialty Products net sales decreased by 12% to $29.6 million in
the  Transition  Period  from  $33.7  million  in the comparable period of 1998.
Sales  decreased  by  21%  from $93.6 million in fiscal 1998 to $74.1 million in
fiscal  1999.  Fiscal  1997  sales  of  $94.2 million were 1% higher than fiscal
1998.   Transition Period sales were lower due to reduced demand for the group's
specialty  freight car brake shoes.  During fiscal 1999, the revenue drop within
this  segment  was  largely  related  to  the  depressed  oil  prices within the
petroleum  industry  that  severely  depressed  demand  for  valves  and  the
corresponding  valve  bodies  produced  within  the  segment.

     Flow  and  Specialty  Products  gross  profit  of  $2.1  million during the
Transition Period decreased by 48% when compared to gross profit of $4.0 million
for  the  five  months  ended  December  31, 1998.  This decrease was once again
directly  related  to  the  reduced demand for the group's specialty freight car
break  shoes.  Gross  profit  decreased 29% from $14.7 million in fiscal 1998 to
$10.5  million  in  fiscal  1999.   The overall reasons for the deterioration in
gross  profit  during  this  period  are  as described above.  Fiscal 1998 gross
profit  was  31%  higher  than  fiscal  1997.


LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company's  cash and cash equivalents were $0.3 million at December 31,
1999,  compared  to $3.2 million at July 31, 1999. In the Transition Period, the
Company utilized $11.3 million from operating activities, primarily due to lower
earnings  (after adjustments for non-cash items), increased inventory levels and
a  $5.3  million payment made in conjunction with the long-term service contract
signed  with  the  Union  Pacific  Railroad  Company.  Fiscal  1999  operating
activities  generated  $37.7  million  of  cash.

     The  Company increased its borrowings during the Transition Period by $29.4
million  on its revolving lines of credit primarily to fund the $17.7 million of
capital  expenditures,  $9.4  million  of repayments on term loans and the $11.3
million of cash utilized in operating activities.  During fiscal 1999, the $37.7
million  of  net  cash  generated  from  operating  activities  as  well  as the
additional  $19.8  net  cash provided by the Company's financing activities were
utilized  to  fund  the  $54.6  million  of  capital  expenditures.  The  most
significant  capital  expenditure during  fiscal 1999  was the completion of the
expansion  project  in  Sahagun,  Mexico.

     Consolidated net working capital decreased $8.7 million to $56.3 million at
December  31,  1999  from  $65.0  million at July 31, 1999. Consolidated current
assets  increased  $15.0  million  to  $195.2  million at December 31, 1999 from
$180.2  million  at  July  31,  1999. Consolidated current liabilities increased
$23.7 million to $138.9 million at December 31, 1999 from $115.2 million at July
31,  1999.

     On  October  29, 1999, the Company acquired all outstanding common stock of
COMETNA-Companhia  Metalurgical  Nacional,  S.A.  ("Cometna") located in Lisbon,
Portugal  for  $8.3 million of the Company's common stock.  Cometna manufactures
and  machines  products  for the freight and passenger rail industries in Europe
and  is  part  of  the  Company's  Rail  Products  segment.  The acquisition was
accounted  for  under  the  purchase  method  of  accounting.

     Immediately  after the consummation of the Merger, the Company entered into
a  new  revolving  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
provides  the  Company  with a revolving line of credit of up to $200.0 million.
The  Credit  Facility's  covenants include ratio restrictions on total leverage,
senior  leverage,  interest  coverage,  minimum  net  worth  restriction  and
restrictions  on  capital  expenditures.

     The  initial net proceeds of the Credit Facility were used to (i) refinance
existing bank debt and certain other indebtedness of the Company, (ii) refinance
substantially  all  of  NACO's outstanding debt, (iii) provide initial financing
for the Company's on-going working capital needs, and (iv) pay fees and expenses
relating  to  the  Merger  and the Credit Facility.  The early retirement of the
refinanced  debt  resulted  in a $5.2 million extraordinary charge ($3.2 million
after-tax)  representing  the non-cash write-off of related unamortized deferred
financing  costs  and prepayment penalties of $4.5 million.  The Credit Facility
employs  an  IBOR-based  variable interest rate index and assesses a spread over
the  IBOR base which is determined by a Consolidated Leverage pricing grid.  The
weighted  average  interest rate at December 31, 1999 was 8.6%.  Availability at
December  31,  1999  was  $27.5  million.

     On  March  8,  2000,  the  Company  entered  into  a  Second  Amendment and
Restatement  of  the Credit Agreement that was effective as of December 30, 1999
to  modify certain of the financial covenants in the Credit Agreement, which the
Company  otherwise  would  have  not  been in compliance with as of December 31,
1999.   The  amended covenants included the Maximum Consolidated Leverage Ratio,
Maximum  Senior  Leverage  Ratio  and  the  Minimum Interest Coverage Ratio.  In
addition, a minimum pro-forma EDITDA covenant was added to the Credit Agreement.
The  Company and its Lenders also modified other terms and conditions within the
Credit  Agreement  including the pricing grid, which is based upon the Company's
Consolidated  Leverage  Ratio.  The currently applied margin of 300 basis points
over  IBOR  is  the  maximum  IBOR  margin  provided  for by the Amendment.  The
revolving  line  of  credit  now has scheduled commitment reductions as follows:
January  1,  2001-$10 million, June 30, 2001-$5.0 million, January 1, 2002-$10.0
million,  June  30,  2002-$5.0  million  and January 1, 2003-$15.0 million.  The
total  commitment  reductions  aggregate  to  $45.0  million and will reduce the
revolving  credit commitment to a total of $155.0 million as of January 1, 2003.
With  the  Amendment, the Company was in compliance with the Credit Agreement as
of  December  31,  1999.  Based  upon  management's  forecasts for calendar year
2000,  the  Company  anticipates  being  in compliance with its Credit Agreement
covenants  at  each  quarterly  measurement point during the upcoming year.  The
Company  anticipates  being  able to operate within the reduced Credit Agreement
commitment  levels  through use of its free cash flow generated from operations,
realignment  of  the Company's capitalization components through a new universal
shelf registration,  the potential disposal of certain non-core operating assets
and  the  March 8, 2000 convertible preferred stock investment by private equity
funds  managed  by  ING  Furman  Selz  investments.

     On  October  12,  1999,  the  Company entered into an Amendment, Waiver and
Release  Agreement to the Credit Agreement to release certain collateral related
to its Mexican subsidiary and to reflect the change in the Company's fiscal year
and  reporting  periods  for  covenant  measurement  purposes.  The Company then
entered  into  two  subsequent  modifications  to the Credit Agreement that were
effective  as  of  October  29, 1999 to modify certain of the financial leverage
covenants  in  the  Credit  Agreement which the Company otherwise would not have
been  in  compliance  with  as  of  October  31,  1999.

     On  February  1, 1997, the Company completed an offering (the ''Offering'')
of  $50  million of 9 1/8% Senior Subordinated Notes (the ''9 1/8% Notes''). The
Company  used the $47.9 million of net proceeds of the Offering to repay certain
outstanding  indebtedness  under  its primary and other credit facilities. The 9
1/8% 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's subsidiaries. The 9 1/8% Notes
will  mature in 2004, unless repurchased earlier at the option of the Company at
100%  of  face  value.  The  9 1/8% Notes are subject to mandatory repurchase or
redemption  prior  to  maturity  upon  a  Change  of  Control  (as defined). The
indenture  under which the 9 1/8% Notes were issued limits the Company's ability
to  (i)  incur  additional  indebtedness,  (ii)  complete  certain  mergers,
consolidations  and  sales  of  assets,  and  (iii)  pay  dividends  or  other
distributions.  On December 23, 1997, the Company completed a second offering of
$25.0  million  of  8  3/4%  Senior  Subordinated  Notes, Series B (the ''8 3/4%
Notes'')  due  in  2004  with  similar  provisions  as  the  9  1/8%  Notes.

     The Company is also required to meet a number of financial covenants on its
9 1/8% Notes and 8 3/4% Notes including minimum interest coverage,
minimum  consolidated  net worth and maximum funded debt to capitalization.  The
interest  coverage  ratio  at  December  31,  1999  was  2.44  with  the minimum
requirement being 2.40.  The funded debt to capitalization ratio at December 31,
1999  was  74.96%  with  the maximum allowable being 75.0%.  These same leverage
covenants  need  to  be  met  at each quarter-end through the maturity dates for
these  notes.  Failure  to  meet these covenant tests would give the noteholders
the  unilateral  right  to  accelerate  the maturity of the related debt after a
requisite  cure period.  In addition, cross-default provisions do exist to the
Credit Agreement.  If the Company does not have adequate cash or is unable
to remain compliant with such financial covenants, it may be required to further
refinance  its  exising indebtedness, seek additional financing, or issue common
stock  or  other securities to raise cash to assist in financing its operations.
The  Company  has  no  current  commitments  or  arrangements for such financing
alternatives,  and  there can  be  no  assurances  that  such  financing
alternatives  will  be  available on acceptable terms, or at all.  The Company's
inability  to  make  any payments when due or to satisfy its financial covenants
under  its existing borrowing facilities could have a material adverse effect on
the  Company.

     A  new  universal  shelf registration was declared effective on October 29,
1999,  for  issuances  up  to $300 million of debt or equity securities, and the
unused  portion  of the previous universal shelf registration was de-registered.
As of December 31, 1999, no securities were issued under the new universal shelf
registration.

     On  December  23,  1997, the Company 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 2004, 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 Industrial Revenue Bonds (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 December 31, 1999, the adjustable interest rate on the
bonds  was  set  at  5.67%.  The  bonds  mature  in  December  2018.

     Debt  was 74% of total capitalization as of December 31, 1999, 74% of total
capitalization  at  July  31,  1999, and 69% of total capitalization at July 31,
1998.  The Company's objective is to reduce its total debt as a percent of total
capitalization  over  time.

     On  March 8, 2000, the Company issued 300,000 shares of Series B cumulative
convertible  preferred  stock  ($1 par value) to private equity funds managed by
ING  Furman  Selz  Investments  for  $30  million.  The preferred stock will pay
dividends at the rate of 8% per annum accrued semi-annually and paid in the form
of  common stock or cash, at the discretion of the Company.  The preferred stock
is  convertible  into common stock at the average closing price of the Company's
common  stock  for  the  thirty trading days ending February 17, 2000, which was
$9.00 per share.  The preferred stock can be converted into common shares at the
Company's  option  under  certain  conditions  at  any  time  three  years after
issuance.  The  net  proceeds  received  from  the  sale of preferred stock were
applied  to  reduce  the  outstanding indebtedness under the Company's Revolving
Credit  Facility.

     During  the  quarter  ending  January  31,  1999, the Company suspended its
previous plan to construct a plant in central Illinois to process used rail into
reusable heat-treated and head-hardened rail.  The project is being re-evaluated
in  conjunction  with  the  Merger.  The  machinery and equipment which has been
built  is being stored pending completion of a revised business plan.  The total
investment  to  date  for  this  project  is  $11.6  million.

     Capital  expenditures  from  current  operations  are  projected  to be $25
million  during  the  upcoming calendar year. The Company believes that its cash
generated  from operations for calendar year 2000 will be sufficient to fund the
cash  needs  for  working  capital  and  capital  expenditures.


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.
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
calendar  year  ending  December  31,  2000.


YEAR  2000  ISSUES

     In  addressing  the  Year  2000  ("Y2K") issues, the Company has undertaken
numerous  initiatives  during  the  past few years as described in Item 7 of the
Company's  Form  10-K for the fiscal year ended July 31, 1999.  With a few minor
exceptions,  the  Company  was  Y2K  compliant  as  of  December  31, 1999.  The
following  is  a  synopsis  of  the  results  of  specific areas that were being
addressed  as  Y2K  potential  problem  areas:

     1.     All  enterprise  systems  have  continued  to  operate  fully  since
            December  31,  1999,  including  the  February leap year  situation.

     2.     All  machinery  and  equipment  were checked and, where appropriate,
            made  compliant.  The  Company  has not  had  any  issues  since
            the  year-end  changeover.

     3.     All  vendors  and  suppliers  have  continued  to  provide  support
            according  to  plan.

     4.     All  PC's  and  network equipment, where appropriate, have been made
            compliant.  The  Company  did  not report  any  problems  since  the
            change.

     5.     All  changes  made  prior  to  December  31,  1999,  were  completed
            according  to  plan  and  within  budget  except for  one minor time
            and attendance system.  In this case, a workaround for  the  system
            was  put  in place before  year-end.  The  workaround  does  not
            pose  any  significant business  concern  or  cost  to  the  Company

     6.     No  other  business  process  problems  related to the Y2K have been
            reported  .

     The  Company  does not foresee any future concerns related to the Y2K which
could  have a material, adverse effect on the Company.  The Company's total cost
incurred  related  to  Y2K  compliance  efforts  was  immaterial.

     In  June  1998,  the  FASB issued SFAS No. 133, ''Accounting for Derivative
Instruments  and  for Hedging Activities.'' This new pronouncement requires that
certain derivative instruments be recognized in balance sheets at fair value and
for changes in fair value to be recognized in operations. Additional guidance is
also  provided  to  determine  when  hedge  accounting  treatment is appropriate
whereby hedging gains and losses are offset by losses and gains related directly
to  the  hedged  item.  While  the  standard, as amended, must be adopted in the
fiscal  year  beginning  after  June  15,  2000,  its  impact  on  the Company's
consolidated  financial statements is not expected to be material as the Company
has  not  historically  used  derivative  and  hedge  instruments.


REGARDING  FORWARD-LOOKING  STATEMENTS

     The foregoing contains forward-looking statements that are based on current
expectations  and  are  subject  to  a number of risks and uncertainties. Actual
results  could  differ  materially  from current expectations due to a number of
factors,  including general economic conditions; competitive factors and pricing
pressures;  shifts  in  market  demand;  the performance and needs of industries
served  by  the  Company's businesses; actual future costs of operating expenses
such  as  rail  and  scrap  steel,  self-insurance claims and employee wages and
benefits; actual costs of continuing investments in technology; the availability
of  capital  to finance possible acquisitions and to refinance debt; the ability
of  management  to  implement  the  Company's  long-term  business  strategy  of
acquisitions;  ''Y2K''  issues  and the risks described from time to time in the
Company's  SEC  reports.




ITEM  7A-QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     The  Company's market risk sensitive instruments do not subject the Company
to  material market risk exposures, except as such risks relate to interest rate
fluctuations.  As  of  December  31,  1999,  the  Company  has  long-term  debt
outstanding with a carrying value of $252.5 million. The estimated fair value of
this  debt  is  $237.0  million.  The  Company historically has not entered into
interest  rate protection agreements. Fixed interest rate debt outstanding as of
December  31,  1999 represents 31% of total debt, carries an average interest of
8.8% and matures as follows: $1.1 million in fiscal 2000, $0.8 million in fiscal
2001, $0.7 million in fiscal 2002, $0.7 million in fiscal 2003, $75.8 million in
fiscal 2004 and $0.1 million thereafter. Variable interest rate debt outstanding
as  of  December  31, 1999 had an average interest rate at that date of 8.6% and
matures as follows: $5.1 million in fiscal 2000, $3.2 million in fiscal 2001, $0
million  in  fiscal 2002, $162.0 million in fiscal 2003, zero in fiscal 2004 and
$3.0  million  thereafter.


<PAGE>

ITEM  8-FINANCIAL  STATEMENTS


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To  ABC-NACO  Inc.:

     We  have  audited  the accompanying consolidated balance sheets of ABC-NACO
Inc.  (a Delaware corporation) AND SUBSIDIARIES (''the Company'') as of December
31,  1999,  July  31,  1999 and 1998, and the related consolidated statements of
operations,  stockholders'  equity  and  cash  flows  for  the five months ended
December  31,  1999 and for each of the three years in the period ended July 31,
1999.  These  financial  statements  are  the  responsibility  of  the Company's
management.  Our  responsibility  is  to  express  an opinion on these financial
statements  based  on  our  audits.

We  conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts and disclosures in the financial statements. An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as well as evaluating the overall financial statement presentation.
We  believe  that  our  audits  provide  a  reasonable  basis  for  our opinion.

In  our  opinion, the financial statements referred to above, present fairly, in
all  material respects, the financial position of ABC-NACO Inc. and Subsidiaries
as  of  December  31,  1999,  July  31,  1999 and 1998, and the results of their
operations  and their cash flows for the five months ended December 31, 1999 and
for  each of the three years in the period ended July 31, 1999 in conformity
with  generally  accepted  accounting  principles.

As  explained  in  Note  2 to the consolidated financial statements, the Company
changed  its  method  of  accounting  for  business  process reengineering costs
effective  August  1,  1997,  and  its  method  of accounting for start-up costs
effective  August  1,  1998.


ARTHUR  ANDERSEN  LLP

Chicago,  Illinois
March  8,  2000

<PAGE>
<TABLE>
<CAPTION>

                                                 ABC-NACO INC.
                                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                For the Five
                                                                Months Ended
                                                                   Dec. 31,       For the Year Ended July 31,
                                                                 ------------   ------------------------------

                                                                      1999       1999       1998       1997
                                                                    ---------  ---------  ---------  ---------
                                                                        (In thousands, except per share data)
<S>                                                                 <C>        <C>        <C>        <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $239,861   $665,497   $634,921   $535,718

COST OF SALES. . . . . . . . . . . . . . . . . . . . . . . . . . .   214,833    570,523    543,310    466,757
                                                                    ---------  ---------  ---------  ---------
      Gross profit . . . . . . . . . . . . . . . . . . . . . . . .    25,028     94,974     91,611     68,961

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES . . . . . . . . . . .    24,962     60,225     56,282     48,649
WILSONS ASSET LIQUIDATION GAIN . . . . . . . . . . . . . . . . . .         -          -          -     (1,430)
MERGER AND OTHER RESTRUCTURING CHARGES . . . . . . . . . . . . . .     1,201     21,925          -          -
                                                                    ---------  ---------  ---------  ---------
      Operating income (loss). . . . . . . . . . . . . . . . . . .    (1,135)    12,824     35,329     21,742

EQUITY (INCOME) LOSS FROM UNCONSOLIDATED JOINT
   VENTURES. . . . . . . . . . . . . . . . . . . . . . . . . . . .       (29)        66     (1,616)    (1,041)

INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . . . . .     9,398     17,782     13,862     12,620
                                                                    ---------  ---------  ---------  ---------
      Income (loss) before income taxes, cumulative effect of
         accounting change and extraordinary item. . . . . . . . .   (10,504)    (5,024)    23,083     10,163

PROVISION/(CREDIT) FOR INCOME TAXES. . . . . . . . . . . . . . . .    (4,979)       923      9,305      3,914
                                                                    ---------  ---------  ---------  ---------
      Income (loss) before cumulative effect of accounting change
         and extraordinary item. . . . . . . . . . . . . . . . . .    (5,525)    (5,947)    13,778      6,249

CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
  net of income taxes of $1,014 and $695, respectively . . . . . .         -     (1,620)    (1,111)         -

EXTRAORDINARY ITEM, net of income taxes of $2,062
   and $215, respectively. . . . . . . . . . . . . . . . . . . . .         -     (3,158)         -       (310)
                                                                    ---------  ---------  ---------  ---------

NET INCOME (LOSS). . . . . . . . . . . . . . . . . . . . . . . . .  $ (5,525)  $(10,725)  $ 12,667   $  5,939
                                                                    =========  =========  =========  =========

EARNINGS (LOSS) PER SHARE:
   Basic:
      Income (loss) before cumulative effect of accounting change
         and extraordinary item . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.33)  $   0.77   $   0.36
      Cumulative effect of accounting change . . . . . . . . . . .         -      (0.09)     (0.06)         -
      Extraordinary item. . . . . . . . . . . . . . . . . . . . .         -      (0.17)         -      (0.02)
                                                                    --------   --------   --------   ---------
         Net income (loss) . . . . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.59)  $   0.71   $   0.34
                                                                    =========  =========  =========  =========
   Diluted:
      Income (loss) before cumulative effect of accounting change
         and extraordinary item . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.33)  $   0.75   $   0.35
      Cumulative effect of accounting change . . . . . . . . . . .         -      (0.09)     (0.06)         -
      Extraordinary item. . . . . . . . . . . . . . . . . . . . .         -      (0.17)         -      (0.02)
                                                                    --------   ---------  ---------  ---------
         Net income (loss) . . . . . . . . . . . . . . . . . . . .  $  (0.30)  $  (0.59)  $   0.69   $   0.33
                                                                    =========  =========  =========  =========

   The accompanying notes to financial statements are an integral part of these statements.
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                    ABC-NACO INC.
                                             CONSOLIDATED BALANCE SHEETS

                                                                                        As of
                                                                                       Dec. 31,        As of July 31,
                                                                                                 --------------------
ASSETS                                                                                  1999       1999       1998
                                                                                      ---------  ---------  ---------
                                                                                    (In thousands, except share data)
<S>                                                                                   <C>        <C>        <C>
CURRENT ASSETS:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    351   $  3,159   $    273
  Account receivable, less allowance of $1,804, $1,705 and $2,113, respectively. . .    79,617     82,995     90,252
  Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    94,132     73,633     74,521
  Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . .    12,401     11,189      4,680
  Deferred income tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .     8,680      9,226      3,435
                                                                                      ---------  ---------  ---------
    Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   195,181    180,202    173,161
                                                                                      ---------  ---------  ---------


PROPERTY, PLANT AND EQUIPMENT-net . . . . . . . . . . . . . . . . . . . . . . . . .    245,010    228,093    202,891


INVESTMENT IN UNCONSOLIDATED JOINT VENTURES. . . . . . . . . . . . . . . . . . . . .    13,886     14,490     15,586


OTHER NONCURRENT ASSETS-net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    38,394     31,036     32,258
                                                                                      ---------  ---------  ---------
  Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $492,471   $453,821   $423,896
                                                                                      =========  =========  =========


                                LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------------------
CURRENT LIABILITIES:
  Cash overdrafts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $      -   $      -   $  6,560
  Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . .     6,207      4,588     11,704
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    89,678     73,456     59,694
  Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    42,983     37,129     34,359
                                                                                      ---------  ---------  ---------
    Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . .   138,868    115,173    112,317
                                                                                      ---------  ---------  ---------


LONG-TERM DEBT, less current maturities . .  . . . . . . . . . . . . . . . . . . . .   246,247    225,031    189,867


DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     6,699     14,194     10,702


OTHER NONCURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . .    13,978     17,866     18,940


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; 19,372,242 shares,
       18,386,336 shares and 17,872,976 shares issued and outstanding, respectively.       194        184        179
  Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .    79,240     68,383     67,980
  Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     7,954     13,479     24,309
  Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . .      (709)      (489)      (398)
                                                                                      ---------  ---------  ---------
    Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . .    86,679     81,557     92,070
                                                                                      ---------  ---------  ---------
    Total liabilities and stockholders' equity . . . . . . . . . . . . . . . . . . .  $492,471   $453,821   $423,896
                                                                                      =========  =========  =========

                  The accompanying notes to financial statements are an integral part of these balance sheets.

</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                                                      ABC-NACO INC.

                                     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                             ADDITIONAL                MINIMUM     CUMULATIVE
                                                   COMMON     PAID-IN     RETAINED     PENSION     TRANSLATION
                                                   STOCK       CAPITAL    EARNINGS    LIABILITY    ADJUSTMENT     TOTAL
                                              ---------------  --------  ----------  -----------  ------------  ---------
                                                                            (IN THOUSANDS)
<S>                                           <C>              <C>       <C>         <C>          <C>           <C>
BALANCE, July 31, 1996 . . . . . . . . . . .  $           172  $ 55,389  $   4,771   $     (691)  $       211   $ 59,852
    Comprehensive income . . . . . . . . . .                -         -      5,939          691          (246)     6,384
    Shares issued in business acquisition. .                6    10,220          -            -             -     10,226
    Common stock issued. . . . . . . . . . .                1     1,496          -            -             -      1,497
    Income tax benefit from exercised stock
      options. . . . . . . . . . . . . . . .                -       407          -            -             -        407
                                              ---------------  --------  ----------  -----------  ------------  ---------
BALANCE, July 31, 1997 . . . . . . . . . . .              179    67,512     10,710            -           (35)    78,366
    Comprehensive income . . . . . . . . . .                -         -     12,667            -          (308)    12,359
    Shares issued in business acquisition. .                -       436          -            -             -        436
    Common stock issued. . . . . . . . . . .                -        32          -            -             -         32
    NACO comprehensive income (3/31/97-
      6/27/97) (Note 1). . . . . . . . . . .                -         -        932            -           (55)       877
                                              ---------------  --------  ----------  -----------  ------------  ---------
BALANCE, July 31, 1998 . . . . . . . . . . .              179    67,980     24,309            -          (398)    92,070
    Comprehensive loss . . . . . . . . . . .                -         -    (10,725)           -             8    (10,717)
    Common stock issued. . . . . . . . . . .                5       300          -            -             -        305
    Income tax benefit from exercised stock
      options. . . . . . . . . . . . . . . .                -       103          -            -             -        103
    NACO comprehensive loss (6/29/98-
      7/31/98) (Note 1). . . . . . . . . . .                -         -       (105)           -           (99)      (204)
                                              ---------------  --------  ----------  -----------  ------------  ---------
BALANCE, July 31, 1999 . . . . . . . . . . .              184    68,383     13,479            -          (489)    81,557
    Comprehensive loss . . . . . . . . . . .                -         -     (5,525)           -          (220)    (5,745)
    Common stock issued. . . . . . . . . . .                4     2,563          -            -             -      2,567
      Shares issued in business acquisition.                6     8,294          -            -             -      8,300
                                              ---------------  --------  ----------  -----------  ------------  ---------
BALANCE, December 31, 1999 . . . . . . . . .  $           194  $ 79,240  $   7,954   $        -   $      (709)  $ 86,679
                                              ===============  ========  ==========  ===========  ============  =========

                  The accompanying notes to financial statements are an integral part of these statements.

</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                                      ABC-NACO INC.
                                          CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                           For The
                                                                             Five
                                                                            Months
                                                                              Ended
                                                                            Dec.  31,    For  the  Year  Ended  July  31,
                                                                            ---------     -------------------------------
                                                                                 1999       1999       1998       1997
                                                                               ---------  ---------  ---------  ---------
<S>                                                                            <C>        <C>        <C>        <C>
                                                                                                 (In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ (5,525)  $(10,725)  $ 12,667   $  5,939
Adjustments to reconcile net income (loss) to net cash provided by operating
   activities
  Extraordinary item. . . . . . . . . . . . . . . . . . . . . . . . . . . . .         -      3,158          -        310
  Cumulative effect of accounting change. . . . . . . . . . . . . . . . . . .         -      1,620      1,111          -
  Merger and other restructuring charges. . . . . . . . . . . . . . . . . . .     1,201     21,925          -          -
  Wilsons asset liquidation gain. . . . . . . . . . . . . . . . . . . . . . .         -          -          -     (1,430)
  Equity (income) loss of unconsolidated joint ventures . . . . . . . . . . .       (29)        66     (1,616)    (1,041)
  Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . .    13,373     30,126     22,476     20,785
  Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .    (6,949)     1,289      4,972      1,574
  NACO net cash flows--3/31/97 to 6/27/97 (Note 1). . . . . . . . . . . . . .         -          -       (125)         -
  NACO net cash flows--6/28/98 to 7/31/98 (Note 1). . . . . . . . . . . . . .         -         (6)         -          -
  Changes in certain assets and liabilities, net of effect of business
     combinations
    Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .     6,478      5,577    (21,024)     2,581
    Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (19,558)     1,278     (8,344)    (9,796)
    Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . .    (1,193)    (7,468)      (790)       845
    Other noncurrent assets . . . . . . . . . . . . . . . . . . . . . . . . .    (5,599)    (3,966)    (7,719)    (2,812)
    Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . .    12,537     (4,140)    17,898        306
    Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . .    (6,057)    (1,038)    (2,221)    (1,215)
                                                                               ---------  ---------  ---------  ---------
         Net cash provided by (used in) operating activities. . . . . . . . .   (11,321)    37,696     17,285     16,046
                                                                               ---------  ---------  ---------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (17,659)   (54,640)   (68,915)   (46,528)
Proceeds from sale assets . . . . . . . . . . . . . . . . . . . . . . . . . .         -          -      1,550      1,272
Business acquisitions, less cash acquired . . . . . . . . . . . . . . . . . .        59          -     (1,376)    (5,344)
Investments in unconsolidated joint ventures. . . . . . . . . . . . . . . . .         -          -       (190)    (8,064)
Dividends from unconsolidated joint ventures. . . . . . . . . . . . . . . . .       633          -        904          -
                                                                               ---------  ---------  ---------  ---------
  Net cash used in investing activities . . . . . . . . . . . . . . . . . . .   (16,967)   (54,640)   (68,027)   (58,664)
                                                                               ---------  ---------  ---------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving lines of credit. . . . . . . . . . . . . . . .    29,377     57,395     25,606     11,935
Proceeds from sale leaseback. . . . . . . . . . . . . . . . . . . . . . . . .     5,984
Change in cash overdrafts . . . . . . . . . . . . . . . . . . . . . . . . . .         -    (10,036)       855     (1,338)
Issuance of senior subordinated notes . . . . . . . . . . . . . . . . . . . .         -          -     25,000     50,000
Borrowings of term debt . . . . . . . . . . . . . . . . . . . . . . . . . . .         -      4,576      3,473     11,678
Payment of term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (9,423)   (31,150)    (2,987)   (28,057)
Payment of financing costs. . . . . . . . . . . . . . . . . . . . . . . . . .      (458)    (1,363)    (1,282)    (2,925)
Exercised stock options . . . . . . . . . . . . . . . . . . . . . . . . . . .         -        408          -      1,497
                                                                               ---------  ---------  ---------  ---------
  Net cash provided by financing activities . . . . . . . . . . . . . . . . .    25,480     19,830     50,665     42,790
                                                                               ---------  ---------  ---------  ---------
  Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . .    (2,808)     2,886        (77)       172
CASH AND CASH EQUIVALENTS, beginning of period. . . . . . . . . . . . . . . .     3,159        273        350        178
                                                                               ---------  ---------  ---------  ---------
CASH AND CASH EQUIVALENTS, end of period. . . . . . . . . . . . . . . . . . .  $    351   $  3,159   $    273   $    350
                                                                               =========  =========  =========  =========
                  The accompanying notes to financial statements are an integral part of these statements.

</TABLE>
<PAGE>
                                  ABC-NACO INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               DECEMBER 31, 1999 AND JULY 31, 1999, 1998 AND 1997

1.  BASIS  OF  PRESENTATION  AND  OPERATIONS

     ABC-NACO  Inc.  (''the Company'') is a supplier of technologically advanced
products  and  services  to  the  freight  railroad  and flow control industries
through  its  three business segments: Rail Products, Rail Services and Systems,
and  Flow  and Specialty Products. With four technology centers around the world
supporting  its  three  business segments, the Company holds market positions in
the  design,  engineering,  and manufacture of high performance freight railcar,
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.

     In  the  aggregate,  the Company operates 19 U.S manufacturing plants in 12
states;  plants  in  Sahagun,  Mexico,  Lisbon,  Portugal,  Leven,  Scotland and
Dominion,  Canada;  has  unconsolidated  joint ventures with plants in Illinois,
China  and  Mexico; and has other facilities (administrative, engineering, etc.)
in  4  states.  Approximately  78%  of  the  Company's  employees are covered by
collective  bargaining agreements. During the next year, two of these bargaining
agreements  will  expire. While management believes that its labor relations are
satisfactory,  there  can be no assurance that labor contracts which come up for
renewal  will  be  renewed  or  the  terms  under which such renewals may occur.

     The  current composition of the Company was achieved by the consummation of
a  merger  (the  ''Merger'')  on  February  19,  1999,  between  a  wholly owned
subsidiary of the Company (formerly ABC Rail Products Corporation (''ABC'')) and
NACO, Inc. (''NACO''). As a result of the Merger, each outstanding share of NACO
common stock was converted into 8.7 shares of ABC common stock, resulting in the
issuance  of  approximately  9.4  million  shares.  The  Merger was treated as a
tax-free  reorganization for federal income tax purposes and is accounted for as
a  pooling-of-interests  transaction.  The  accompanying  consolidated financial
statements  reflect  the  combined  results  of  ABC  and  NACO as if the Merger
occurred  on  the first day of the earliest period presented and is based on the
fiscal  periods  described  below.

     Prior  to  the Merger, ABC's fiscal year-end was July 31, and NACO's fiscal
year-end  was  the Sunday closest to March 31. ABC's fiscal year-end was adopted
by  the  Company  as  the  annual financial reporting period. As permitted under
Regulation  S-X  promulgated  by  the  Securities  and  Exchange Commission, the
year-ends  of  the  two  companies  have not been conformed for periods prior to
fiscal  1999. The financial position of NACO as of June 28, 1998 and the results
of  NACO's  operations  for the twelve months ended June 28, 1998, and March 30,
1997,  are  combined  with ABC's financial position as of July 31, 1998, and the
results of ABC's operations for the twelve months ended July 31, 1998, and 1997,
respectively.  Accordingly,  revenues  of  $26.5  million and a net loss of $0.1
million,  and  revenues  of  $70.3  million  and  net  income  of  $0.9  million
representing NACO's results of operations for July 1998 and the period March 31,
1997  to  June  29,  1997,  respectively,  are  excluded  from  the  Company's
Consolidated Statements of Operations. Comprehensive income (loss) for these two
NACO  periods  is  reflected  in  the  Company's  Consolidated  Statements  of
Stockholders'  Equity.

     The following table reconciles previously reported operating results of ABC
to  the  corresponding  amounts  reflected  in  the  accompanying  Statements of
Operations and include various adjustments to conform the accounting policies of
the  two  companies  (in  thousands):


<PAGE>
<TABLE>
<CAPTION>

                      PREVIOUSLY                             COMBINED
                      REPORTED                CONFORMING    (CURRENTLY
                      BY ABC        NACO       ADJUSTMENTS   REPORTED)
                    -----------  -----------  -------------  ----------
<S>                 <C>          <C>          <C>            <C>
1998
  Net sales. . . .  $   319,038  $   317,613  $     (1,730)  $  634,921
  Operating income       18,590       18,256        (1,517)      35,329
  Net income . . .        6,281        6,258           128       12,667
1997
  Net sales. . . .  $   259,190  $   277,726  $     (1,198)  $  535,718
  Operating income       12,889        9,838          (985)      21,742
  Net income . . .        3,291        2,520           128        5,939
</TABLE>

The  conforming  adjustments  included  the  following:

(a)     ABC  and  NACO  had  classified  cash  discounts  taken  by  customers
differently  in  their  respective  classified  statements  of operations. These
discounts,  which were classified in the NACO 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.

(b)     Regarding  the  method  of  original  adoption of Statement of Financial
Accounting  Standards No. 106-''Employers' Accounting for Postretirement Benefit
Obligations  Other  Than  Pensions'',  NACO  chose  the  option  of  immediate
recognition  of  the  transition  obligation  while  ABC  chose the amortization
option.  ABC-NACO  will  follow  the  immediate  recognition method which had an
impact  of  increasing  operating  income  by  $213,000  each  year  ($128,000
after-tax).

     On  September  23,  1999,  the  Company's  Board  of  Directors  adopted  a
resolution  to  change  the Company's year-end to December 31 from July 31.  The
principal  reason for the change was to align the Company's fiscal year-end with
the  fiscal  year-end  of its major customers.  This Form 10-K transition report
covers the five-month Transition Period from August 1, 1999 to December 31, 1999
("Transition  Period").  Comparable,  unaudited  results  of  operations for the
Company  for  the  five  months  ended  December  31,  1998  were as follows (in
thousands):
<TABLE>
<CAPTION>

<S>                                                                  <C>
  Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $276,366
  Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . .    39,246
  SG&A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25,601
  Operating income. . . . . . . . . . . . . . . . . . . . . . . . .    13,645
  Income before income taxes and cumulative
        effect of accounting change . . . . . . . . . . . . . . . .     7,094
  Provision for income taxes. . . . . . . . . . . . . . . . . . . .       790
  Income before cumulative effect of
      accounting change . . . . . . . . . . . . . . . . . . . . . .     6,304
  Cumulative effect of accounting change,
      net of income taxes of $1,014 . . . . . . . . . . . . . . . .     1,620
  Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . .  $  4,684
                                                                     ========
  Earnings per share, after cumulative effect of accounting change:
      Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.26
      Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.25
</TABLE>



2.  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

PRINCIPLES  OF  CONSOLIDATION

     The  Company's  consolidated financial information reflects the application
of  the  pooling-of-interests  method  of  accounting for the Merger. Under this
method  of  accounting, the recorded assets, liabilities, income and expenses of
ABC  and  NACO  are  combined  and  recorded  at  their historical cost amounts.
The  consolidated  financial  statements include the accounts of the Company and
its  wholly  owned  subsidiaries.  All significant intercompany transactions and
balances  are  eliminated in consolidation. Investments in unconsolidated 50% or
less  owned  joint  ventures  are  accounted  for  under  the  equity  method.


USE  OF  ESTIMATES

     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of  assets  and  liabilities,
disclosure  of  contingent  assets  and liabilities at the date of the financial
statements  and the reported amounts of revenues and expenses during the periods
presented.  Actual  results  could  differ  from  those  estimates.  The  most
significant  estimates  with regard to these financial statements are related to
commitments  and  contingencies  (Note  7)  and  income  taxes  (Note  12).


CASH  OVERDRAFTS

     Cash  overdrafts  represent  the aggregate amount of checks which have been
issued  and  have not yet cleared the zero-balance disbursement accounts, net of
any  cash  in  specific  depository  accounts  which will be automatically drawn
against  as  such  checks  clear  the  disbursement  accounts.  If funds are not
available  in  the  depository  accounts,  the  deficiency will be funded by the
Company's  revolving  credit  agreement.


ALLOWANCE  FOR  DOUBTFUL  ACCOUNTS

     The allowance for doubtful accounts for the Transition Period and the years
ended  July  31,  1999, 1998 and 1997 consisted of the following (in thousands):
<TABLE>
<CAPTION>


                                             DEC. 31,     JULY 31,
                                                      ----------------------
                                             1999     1999     1998     1997
                                            -------  -------  -------  -------
<S>                                         <C>      <C>      <C>      <C>
  Balance at beginning of year . . . . . .  $1,705   $2,113   $1,987   $1,974
      Provision charged to income. . . . .     260      206      815      421
      Accounts written off . . . . . . . .    (161)    (857)    (561)    (659)
      Allowance from business acquisition.       -        -        -      251
      NACO net change (3/31/97-6/27/97). .       -        -     (128)       -
      NACO net change (6/29/98-7/31/98). .       -      243        -        -
                                            -------  -------  -------  -------
  Balance at end of year . . . . . . . . .  $1,804   $1,705   $2,113   $1,987
                                            =======  =======  =======  =======
</TABLE>

INVENTORIES

     Inventories  are  stated at the lower of cost or market. Cost is determined
on  the  first-in, first-out method for substantially all inventories. Inventory
costs  include  materials,  labor  and  manufacturing  overhead.  Inventories at
December  31,  1999,  July  31,  1999  and  1998  consisted of the following (in
thousands):
<TABLE>
<CAPTION>


                                         DEC. 31,     JULY 31,
                                                   ----------------
                                           1999     1999     1998
                                          -------  -------  -------
<S>                                       <C>      <C>      <C>
      Raw materials. . . . . . . . . . .  $44,148  $31,964  $40,765
      Supplies and spare parts . . . . .    5,258    5,206    4,361
      Work in process and finished goods   44,726   36,463   29,395
                                          -------  -------  -------
          Total inventories. . . . . . .  $94,132  $73,633  $74,521
                                          =======  =======  =======
</TABLE>



PROPERTY,  PLANT  AND  EQUIPMENT

     Property,  plant  and  equipment  are  stated  at  cost,  which  for
self-constructed  assets includes interest and internal labor and overhead costs
directly  related  to  constructing  the  asset.  Property,  plant and equipment
purchased  in  connection  with  business  acquisitions have been valued at fair
market  value  at the time of the acquisition, less, if any, the allocable share
of  the  bargain purchase element inherent in the acquisitions. The Company also
capitalizes  direct  costs incurred in developing or obtaining computer software
for  internal  use  once  the  Company  determines that the new software will be
completed  and  will  fulfill  its  intended  use.  Costs incurred prior to such
determination  are  expensed  as incurred. Such capitalized costs include direct
payroll  and  related costs for personnel that worked directly on the project to
develop  or  obtain the computer software, external costs that were attributable
to the software development and interest. The software costs capitalized through
December  31,  1999  primarily  relate  to  the  development  of enterprise-wide
computer  software  systems, which will be amortized over estimated useful lives
of  five  to  ten  years.

     Major  renewals  and betterments, which extend the useful life of an asset,
are  capitalized.  Routine  maintenance  and  repairs  are expensed as incurred.
Significant  maintenance  and  repairs  expected to be incurred during scheduled
shutdowns  of  the  Company's  foundry operations are accrued during the periods
that  the  foundry  is  operational.  When  properties  are retired or otherwise
disposed  of, the related cost and accumulated depreciation are removed from the
accounts  and  any  related gain or loss is reflected in operations. The Company
periodically  reviews the carrying value of its property, plant and equipment to
determine  whether  there are indications of an impairment that would require an
adjustment  to  the  carrying  values  or  useful  lives.

     Depreciation  is computed using the straight-line method over the estimated
useful lives of the assets. Depreciation expense charged to operations was $12.1
million  for  the  Transition  Period and $27.5 million, $20.1 million and $18.5
million  for  the  years  ended  July 31, 1999, 1998 and 1997, respectively. The
estimated  useful  lives used for recognizing depreciation expense for financial
reporting  purposes  generally  are  as  follows:

<TABLE>
<CAPTION>

<S>                                 <C>
       ASSET DESCRIPTION               LIFE
----------------------------------  ----------
  Buildings and improvements . . .  7-30 years
  Machinery and equipment. . . . .  3-12 years
  Computer hardware and software .  3-10 years
  Patterns, tools, gauges and dies   3-5 years
</TABLE>

     Property,  plant  and  equipment  at  December  31, 1999, July 31,
1999 and 1998 consisted  of  the  following  (in  thousands):
<TABLE>
<CAPTION>


                                          DEC. 31,          JULY 31,
                                                    ----------------------
                                            1999        1999       1998
                                         ----------  ----------  ---------
<S>                                      <C>         <C>         <C>
  Land. . . . . . . . . . . . . . . . .  $   7,644   $   5,232   $  4,423
  Buildings and improvements. . . . . .     42,268      33,403     24,950
  Machinery and equipment . . . . . . .    267,189     248,040    165,586
  Construction in progress. . . . . . .     28,302      29,583     80,058
  Patterns, tools, gauges and dies. . .     14,610      19,650     10,497
                                         ----------  ----------  ---------
                                           360,013     335,908    285,514
  Less-Accumulated depreciation . . . .   (115,003)   (107,815)   (82,623)
                                         ----------  ----------  ---------
      Property, plant and equipment-net  $ 245,010   $ 228,093   $202,891
                                         ==========  ==========  =========
</TABLE>

     The  Company  capitalized $0.3 million, $2.4 million, $3.9 million and $0.2
million  in  interest  during the Transition Period and for the years ended July
31,  1999,  1998  and  1997,  respectively.

     The  most  significant component of construction in progress as of July 31,
1998  was a rail milling facility in Illinois which went on-line in fiscal 1999.
As  of  December  31, 1999, and July 31, 1999, the most significant component of
construction  in  progress  was  the  Company's  investment  in a rail hardening
process.   The  rail hardening project is being re-evaluated in conjunction with
the  Merger.  The  machinery  and equipment which has been built is being stored
pending completion of a revised business plan.  The total investment to date for
this  project  is  $11.6  million.

     During  the  Transition  Period, the Company sold certain productive assets
for  $5.9  million  and  leased  the  assets back under an operating lease.  The
resulting  gain of $0.4 million was deferred and will be recognized ratably over
the  six  year  life  of  the  related  lease.


OTHER  NONCURRENT  ASSETS

     Other  noncurrent  assets  at  December  31,  1999,  July 31, 1999 and 1998
consisted  of  the  following  (in  thousands):

<TABLE>
<CAPTION>


                                            DEC. 31,      JULY 31,
                                                       ---------------
                                              1999     1999     1998
                                             -------  -------  -------
<S>                                          <C>      <C>      <C>
  Deferred financing costs-net. . . . . . .  $ 3,713  $ 3,850  $ 3,977
  Patents . . . . . . . . . . . . . . . . .    2,011    2,011    2,007
  Excess costs over net assets acquired-net   20,621   18,544   20,082
  Union Pacific contract costs-net . . . .     5,159        -        -
  Prepaid pension costs and other-net . . .    6,890    6,631    6,192
                                             -------  -------  -------
      Other noncurrent assets-net . . . . .  $38,394  $31,036  $32,258
                                             =======  =======  =======
</TABLE>

     Deferred  financing costs, net of accumulated amortization of $1.6 million,
$1.4  million  and $2.2 million as of December 31, 1999, July 31, 1999 and 1998,
respectively,  represent  legal  costs and other associated costs related to the
Company's issuance of debt. Deferred financing costs are amortized over the term
of  the  related debt. Pursuant to the early retirement of certain indebtedness,
the  related  after-tax  costs of $3.2 million and $0.3 million were written-off
during  the  years  ended  July  31,  1999  and  1997,  respectively.

     The  excess  cost over net assets of acquired businesses is being amortized
on the straight-line basis over 15 to 25 years. Related amortization expense for
the  Transition  Period  was $0.4 million and for the years ended July 31, 1999,
1998  and  1997  was $1.0 million, $0.9 million, and $0.8 million, respectively.
Accumulated  amortization  as  of  December 31, 1999, July 31, 1999 and 1998 was
$3.6  million,  $3.2  million  and  $2.2 million, respectively. Should events or
circumstances occur subsequent to the acquisition of a business which bring into
question the realizable value or impairment of the related goodwill, the Company
will  evaluate  the  remaining  useful  life  and  balance  of goodwill and make
adjustments,  if  required. The Company's principal consideration in determining
impairment  include  the  strategic  benefit  to  the  Company of the particular
business  as  measured  by  undiscounted  current  and expected future operating
income  levels of that particular business and expected undiscounted future cash
flows.  Should  an  impairment  be  identified,  a loss would be reported to the
extent that the carrying value of the related goodwill exceeds the fair value of
that  goodwill  as  determined  by  valuation  techniques  available  in  the
circumstances.

     In  November,  1999,  the Company entered into a long-term supply agreement
with  the  Union Pacific Railroad ("UP") to supply and service wheelsets for its
North American operations.  A condition of the agreement required the Company to
make a $5.25 million up-front payment to the UP.  This $5.25 million payment was
deferred  by the Company and is being amortized over the 10-year agreement term.


ACCRUED  EXPENSES

     Accrued  expenses at December 31, 1999, July 31, 1999 and 1998 consisted of
the  following  (in  thousands):

<TABLE>
<CAPTION>

                                                              DEC. 31,     JULY 31,
                                                                       ---------------
                                                                1999     1999     1998
                                                               -------  -------  -------
<S>                                                            <C>      <C>      <C>
  Compensation including related benefits and taxes . . . . .  $11,433  $12,542  $15,232
  Merger and other restructuring accrual. . . . . . . . . . .    4,196    8,424        -
  Taxes, other than compensation taxes. . . . . . . . . . . .    8,236    4,272    5,353
  Insurance . . . . . . . . . . . . . . . . . . . . . . . . .    6,355    2,629    3,386
  Billings in excess of contract costs and estimated earnings       45      145    1,092
  Other . . . . . . . . . . . . . . . . . . . . . . . . . . .   12,718    9,117    9,296
                                                               -------  -------  -------
      Total accrued expenses. . . . . . . . . . . . . . . . .  $42,983  $37,129  $34,359
                                                               =======  =======  =======
</TABLE>

INCOME  TAXES

     Deferred  income  tax assets and liabilities are recorded for all temporary
differences  between  financial  and  tax  reporting  and  are  the  result  of
differences in the timing of recognition of certain income and expense items for
financial and tax reporting. The Company does not provide for U. S. income taxes
which  would  be  payable  if undistributed earnings of its foreign subsidiaries
were  remitted to the U.S. because the Company either considers such earnings to
be  invested  for an indefinite period or anticipates that if such earnings were
distributed,  the  U.S.  income  taxes  payable would be substantially offset by
foreign  tax  credits.


WORKERS'  COMPENSATION  INSURANCE

     The  Company  is  self-insured  for  a portion of its workers' compensation
claims.  The  Company  provides  for workers' compensation insurance each period
based  on  its  estimate of the total ultimate payout for all claims and related
fees.


FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

     The  carrying amounts of cash, accounts receivables, accounts payable, cash
overdrafts  and accrued expenses approximate their respective fair values due to
their short maturities.  Refer to Note 5 for disclosure regarding the fair value
of  the  Company's  long-term  debt.


FOREIGN  CURRENCY  TRANSLATION

     Where  the  local  currency  of  the  Company's foreign subsidiaries is the
functional  currency,  translation  adjustments  are  recorded  as  a  separate
component  of  Stockholders'  Equity.  All  transaction gains and losses and any
translation  adjustments  where  the  U.S. dollar is the functional currency are
recorded  in  income  as  a  component  of  selling,  general and administrative
expenses.  These  gains  (losses) were not material for the Transition Period or
for  the  years  ended  July  31,  1999,  1998  and  1997,  respectively.


REVENUE  RECOGNITION

     Revenue  is  generally  recognized at the time the goods are shipped to the
customer.  When  customers, under the terms of specific orders, request that the
Company  manufacture  and  invoice goods prior to shipment to the customers, the
Company  recognizes  revenue based on the actual completion of the manufacturing
process. These limited occurrences generally arise as a result of the customer's
manufacturing  delays,  scheduling  or  capacity  constraints or lack of storage
space and, in each instance, the customer accepts title to the goods at the date
of the Company's corresponding invoice. In each case of ''bill and hold'' sales,
the  Company ensures that the transaction complies with the seven conditions and
the  six considerations contained in AAER No. 108 of the Securities and Exchange
Commission.  Reserves for estimated sales returns and allowances are recorded as
a  reduction  of  revenues  in  the  period the related revenues are recognized.

     Certain  revenue  from  the  Company's  railway  signal  and  communication
engineering,  construction  and  maintenance  contracts  is  recognized  on  the
percentage-of-completion  method  based  on  costs incurred in relation to total
estimated  costs.  Costs  include  materials,  direct  and  allowable  labor and
overhead.  Provisions  for estimated losses on uncompleted contracts are made in
the  period in which such losses are determined. Changes in job performance, job
conditions  and  estimated  profitability  may  result in revisions to costs and
income, the effects of which are recognized in the period in which the revisions
are  determined.


RESEARCH  AND  DEVELOPMENT  EXPENSES

     Expenditures  for  research,  development  and  engineering of products and
manufacturing  processes  are  expensed  as  incurred.  Expenditures  for  the
Transition  Period  and  for  the  years ended July 31, 1999, 1998 and 1997 were
immaterial.


EARNINGS  PER  SHARE

     The  following  table reconciles the denominator used in the calculation of
basic and diluted earnings per share for the Transition Period and for the years
ending  July  31,  1999,  1998  and  1997  (in  thousands):
<TABLE>
<CAPTION>


                                                       DEC. 31,        JULY 31,
                                                               ----------------------
                                                         1999    1999    1998    1997
                                                        ------  ------  ------  ------
<S>                                                     <C>     <C>     <C>     <C>
  Basic-
  Weighted average common shares outstanding . . . . .  18,623  18,142  17,850  17,587
                                                        ======  ======  ======  ======
  Diluted-
  Weighted average common shares outstanding . . . . .  18,623  18,142  17,850  17,587
  Effect of assumed exercise of warrant. . . . . . . .       -       -     472     472
  Effect of assumed exercise of stock options. . . . .       -       -      77      75
  Effect of assumed shares issued pursuant to business
   acquisition earn-out agreements . . . . . . . . . .       -       -      75       5
                                                        ------  ------  ------  ------
      Total diluted. . . . . . . . . . . . . . . . . .  18,623  18,142  18,474  18,139
                                                        ======  ======  ======  ======
</TABLE>

     Other  common  stock  equivalents which would have increased diluted shares
(in  thousands)  by  984, 470, 350 and 291 shares for the periods ended December
31,  1999,  July 31, 1999, 1998 and 1997, respectively, were not included in the
computation  of  diluted earnings per share because the assumed exercise of such
equivalents  would  have  been  antidilutive.


NEW  ACCOUNTING  PRONOUNCEMENTS

     In November 1997, the FASB's Emerging Issues Task Force reached a consensus
that  requires  companies  to  write-off previously capitalized business process
reengeering  costs  and  expense  future  costs  as  incurred.  The  Company had
capitalized  certain  process  reengineering costs in prior years. In accordance
with  this  consensus, effective August 1, 1997, 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  April  1998,  Statement  of Position No. 98-5 was issued which requires
that  companies  write-off  defined  previously  capitalized  start-up costs and
expense  future  start-up costs as incurred. The Company had capitalized certain
start-up  costs  in  prior  periods,  including $1.5 million during fiscal 1998.
Effective August 1, 1998, the Company recorded a non-cash charge of $2.6 million
($1.6  million  after-tax)  to  reflect the cumulative effect of this accounting
change.

     In  June  1998,  the  FASB issued SFAS No. 133, ''Accounting for Derivative
Instruments  and  for Hedging Activities.'' This new pronouncement requires that
certain derivative instruments be recognized in balance sheets at fair value and
for changes in fair value to be recognized in operations. Additional guidance is
also  provided  to  determine  when  hedge  accounting  treatment is appropriate
whereby hedging gains and losses are offset by losses and gains related directly
to  the  hedged  item.  While  the  standard, as amended, must be adopted in the
fiscal  year  beginning  after  June  15,  2000,  its  impact  on  the Company's
consolidated  financial statements is not expected to be material as the Company
has  not  historically  used  derivative  and  hedge  instruments.


RECLASSIFICATIONS

     As  permitted  under  the  pooling-of-interests  method  of accounting, the
Company's  consolidated  financial  information  reflects certain adjustments to
conform  the  accounting  policies  of  both  companies.  These  adjustments
retroactively  conform,  for  all  periods presented, the accounting policies of
both  companies,  consistent with the intent to present both companies as though
they  had  always  been  combined.


3.  BUSINESS  ACQUISITIONS

     During  the Transition Period, the Company acquired  all outstanding common
stock  of  COMENTA--Companhia  Metalurgica Nacional, S.A. ("Cometna") located in
Lisbon,  Portugal  for  $8.3  million  of  the  Company's common stock.  Cometna
manufactures and machines products for the freight and passenger rail industries
in  Europe  and is part of the Company's Rail Products segment.  The acquisition
was  accounted  for  under the purchase method of accounting and no goodwill was
recorded  with  respect  to  the  transaction.

     The aggregate purchase price paid for fiscal 1998 business acquisitions was
$1.9  million,  including  22,222 shares of the Company's common stock valued at
$0.4  million.  Other  than as described below, the aggregate purchase price for
fiscal 1997 business acquisitions was $20.6 million, including 555,556 shares of
the  Company's  common stock valued at $10.2 million. Goodwill recorded from the
fiscal  1998  and  1997  acquisitions  was  $1.6  million  and  $9.3  million,
respectively.  An  additional  333,333  shares  of  the  Company's  stock  were
contingently  issuable over the three years following the respective acquisition
dates  pursuant  to certain acquisition agreements. As of December 31, 1999, the
end  of  the  contingency  period, 311,110 shares were deemed issued pursuant to
these  contingencies.  The individual and aggregate effect of these acquisitions
was  not  significant  to  the  Company's  operations.

     These  acquisitions  were  accounted  for  under  the  purchase  method  of
accounting. Accordingly, certain recorded assets and liabilities of the acquired
businesses  were  revalued to estimated fair values as of the acquisition dates.
Management  used  its  best judgment and available information in estimating the
fair  value of those assets and liabilities.  Any changes to those estimates are
not  expected  to be material.  The operating results of the acquired businesses
are  included  in  the  consolidated statements of operations from their date of
acquisition.


4.  CONTRACT  RECEIVABLES  AND  STATUS

     Contract  receivables  included  in  accounts receivable as of December 31,
1999  and  July  31,  1999  and  1998  were  as  follows  (in  thousands):
<TABLE>
<CAPTION>


                                                    DEC. 31,     JULY 31,
                                                             ----------------
                                                      1999     1999     1998
                                                     -------  -------  ------
<S>                                                  <C>      <C>      <C>
Billed . . . . . . . . . . . . . . . . . . . . . .  $ 4,525  $ 4,392  $5,572
Retainage. . . . . . . . . . . . . . . . . . . . .    1,122      751   1,180
Costs and estimated earnings in  excess of billings   10,395   10,190   2,680
                                                     -------  -------  ------
                                                     $16,042  $15,333  $9,432
                                                     =======  =======  ======
</TABLE>

A  substantial portion of the December 31, 1999 retainage receivable is expected
to  be  collected  by  December  2000.

Information  with respect to contracts in progress as of December 31, 1999, July
31,  1999  and  1998  was  as  follows  (in  thousands):
<TABLE>
<CAPTION>

                                          DEC. 31,     JULY 31,
                                                  -----------------
                                           1999     1999     1998
                                          -------  -------  -------
<S>                                       <C>      <C>      <C>
Costs incurred on uncompleted  contracts  $24,843  $20,284  $16,275
Estimated earnings . . . . . . . . . . .    5,232    4,793    8,087
                                          -------  -------  -------
                                           30,075   25,077   24,362
Less-Billings to date. . . . . . . . . .   19,725   15,032   22,774
                                          -------  -------  -------
                                          $10,350  $10,045  $ 1,588
                                          =======  =======  =======
</TABLE>


Such amounts are classified in the accompanying balance sheet as of December 31,
1999,  and  July  31,  1999  and  1998  as  follows  (in  thousands):
<TABLE>
<CAPTION>


                     DEC. 31,        JULY 31,
                                -----------------
                       1999      1999      1998
                     --------  --------  --------
<S>                  <C>       <C>       <C>
Accounts receivable  $10,395   $10,190   $ 2,680
Accrued expenses. .      (45)     (145)   (1,092)
                     --------  --------  --------
                     $10,350   $10,045   $ 1,588
                     ========  ========  ========
</TABLE>


5.  DEBT

     Debt  outstanding as of December 31, 1999, July 31, 1999 and 1998 consisted
of  the  following  (in  thousands):
<TABLE>
<CAPTION>


                                         DEC. 31,         JULY 31,
                                                     ------------------
                                          1999       1999       1998
                                        ---------  ---------  ---------
<S>                                     <C>        <C>        <C>
  Revolving Credit Facility. . . . . .  $165,471   $134,300   $      -
  Previous Revolving Credit Facilities         -          -     79,497
  9 1/8% Senior Subordinated notes . .    50,000     50,000     50,000
  8 3/4% Senior Subordinated notes . .    25,000     25,000     25,000
  11 3/4%, Senior Subordinated note. .         -          -     14,854
  Term loans . . . . . . . . . . . . .       250      8,522     21,968
  Industrial revenue bonds . . . . . .     5,805      6,285      3,354
  Other. . . . . . . . . . . . . . . .     5,928      5,512      6,898
                                        ---------  ---------  ---------
      Total debt . . . . . . . . . . .   252,454    229,619    201,571
  Less-Current maturities. . . . . . .    (6,207)    (4,588)   (11,704)
                                        ---------  ---------  ---------
      Total long-term debt . . . . . .  $246,247   $225,031   $189,867
                                        =========  =========  =========
</TABLE>

     Immediately  after the consummation of the Merger, the Company entered into
a  new  revolving  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
provides  the  Company  with a revolving line of credit of up to $200.0 million.
The  Credit  Facility's  covenants include ratio restrictions on total leverage,
senior  leverage,  interest  coverage,  minimum  net  worth  restriction  and
restrictions  on  capital  expenditures.

     The  initial net proceeds of the Credit Facility were used to (i) refinance
existing bank debt and certain other indebtedness of the Company, (ii) refinance
substantially  all  of  NACO's outstanding debt, (iii) provide initial financing
for the Company's on-going working capital needs, and (iv) pay fees and expenses
relating  to  the  Merger  and the Credit Facility.  The early retirement of the
refinanced  debt  resulted  in a $5.2 million extraordinary charge ($3.2 million
after-tax)  representing  the non-cash write-off of related unamortized deferred
financing  costs  and prepayment penalties of $4.5 million.  The Credit Facility
employs  an  IBOR-based  variable interest rate index and assesses a spread over
the  IBOR base which is determined by a Consolidated Leverage pricing grid.  The
weighted  average  interest rate at December 31, 1999 was 8.6%.  Availability at
December  31,  1999  was  $27.5  million.

     On  March  8,  2000,  the  Company  entered  into  a  Second  Amendment and
Restatement  of  the Credit Agreement that was effective as of December 30, 1999
to  modify certain of the financial covenants in the Credit Agreement, which the
Company  otherwise  would  have  not  been in compliance with as of December 31,
1999.   The  amended covenants included the Maximum Consolidated Leverage Ratio,
Maximum  Senior  Leverage  Ratio  and  the  Minimum Interest Coverage Ratio.  In
addition, a minimum pro-forma EDITDA covenant was added to the Credit Agreement.
The  Company and its Lenders also modified other terms and conditions within the
Credit  Agreement  including the pricing grid, which is based upon the Company's
Consolidated  Leverage  Ratio.  The currently applied margin of 300 basis points
over  IBOR  is  the  maximum  IBOR  margin  provided  for by the Amendment.  The
revolving  line  of  credit  now has scheduled commitment reductions as follows:
January  1,  2001-$10 million, June 30, 2001-$5.0 million, January 1, 2002-$10.0
million,  June  30,  2002-$5.0  million  and January 1, 2003-$15.0 million.  The
total  commitment  reductions  aggregate  to  $45.0  million and will reduce the
revolving  credit commitment to a total of $155.0 million as of January 1, 2003.
With  the  Amendment, the Company was in compliance with the Credit Agreement as
of  December  31,  1999.  Based  upon  management's  forecasts for calendar year
2000,  the  Company  anticipates  being  in compliance with its Credit Agreement
covenants  at  each  quarterly  measurement point during the upcoming year.  The
Company  anticipates  being  able to operate within the reduced Credit Agreement
commitment  levels  through use of its free cash flow generated from operations,
realignment  of  the Company's capitalization components through a new universal
shelf registration,  the potential disposal of certain non-core operating assets
and  the  March 8, 2000 convertible preferred stock investment by private equity
funds  managed  by  ING  Furman  Selz  investments.

     On  October  12,  1999,  the  Company entered into an Amendment, Waiver and
Release  Agreement to the Credit Agreement to release certain collateral related
to its Mexican subsidiary and to reflect the change in the Company's fiscal year
and  reporting  periods  for  covenant  measurement  purposes.  The Company then
entered  into  two  subsequent  modifications  to the Credit Agreement that were
effective  as  of  October  29, 1999 to modify certain of the financial leverage
covenants  in  the  Credit  Agreement which the Company otherwise would not have
been  in  compliance  with  as  of  October  31,  1999.

     On  February  1, 1997, the Company completed an offering (the ''Offering'')
of  $50  million of 9 1/8% Senior Subordinated Notes (the ''9 1/8% Notes''). The
Company  used the $47.9 million of net proceeds of the Offering to repay certain
outstanding  indebtedness  under  its primary and other credit facilities. The 9
1/8% 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's subsidiaries. The 9 1/8% Notes
will  mature in 2004, unless repurchased earlier at the option of the Company at
100%  of  face  value.  The  9 1/8% Notes are subject to mandatory repurchase or
redemption  prior  to  maturity  upon  a  Change  of  Control  (as defined). The
indenture  under  which  the  9  1/8% Notes were issued limits the Company's
ability  to  (i)  incur  additional indebtedness, (ii) complete certain mergers,
consolidations  and  sales  of  assets,  and  (iii)  pay  dividends  or  other
distributions.  On December 23, 1997, the Company completed a second offering of
$25.0  million  of  8  3/4%  Senior  Subordinated  Notes, Series B (the ''8 3/4%
Notes'')  due  in  2004  with  similar  provisions  as  the  9  1/8%  Notes.

     The Company is also required to meet a number of financial covenants on its
9 1/8% Notes and 8 3/4% Notes including minimum interest coverage,
minimum  consolidated  net worth and maximum funded debt to capitalization.  The
interest  coverage  ratio  at  December  31,  1999  was  2.44  with  the minimum
requirement being 2.40.  The funded debt to capitalization ratio at December 31,
1999  was  74.96%  with  the maximum allowable being 75.0%.  These same leverage
covenants  need  to  be  met  at each quarter-end through the maturity dates for
these  notes.  Failure  to  meet these covenant tests would give the noteholders
the  unilateral  right  to  accelerate  the maturity of the related debt after a
requisite  cure  period.  In addition, cross-default  provisions do exist to the
credit Agreement.  If  the  Company  does not have adequate cash or is unable to
remain compliant with such financial covenants, it may be required to further
refinance its  existing indebtedness, seek additional financing, or issue common
stock or other  securities to raise cash  to  assist in financing its operation
The Company  has  no  current commitments  or  arrangements for  such  financing
alternatives,  and  there can  be  no  assurances  that  such  financing
alternatives  will  be  available on acceptable terms, or at all.  The Company's
inability  to  make  any payments when due or to satisfy its financial covenants
under  its existing borrowing facilities could have a material adverse effect on
the  Company.

     A  new  universal  shelf registration was declared effective on October 29,
1999,  for  issuances  up  to $300 million of debt or equity securities, and the
unused  portion  of the previous universal shelf registration was de-registered.
As of December 31, 1999, no securities were issued under the new universal shelf
registration.

     Prior  to  the  Merger,  ABC  and  NACO  had  their own primary bank credit
facilities  which  allowed  for  aggregate borrowings and outstanding letters of
credit, as amended, of up to $125 million, including a term loan portion of $8.5
million.  Revolving  credit  was  limited  by  eligible accounts receivables and
inventories.  Borrowings  were secured by substantially all U.S. assets and bore
interest  based  on  either  prime or LIBOR rates plus applicable margins. These
previous  primary  bank  credit  facilities were terminated upon the refinancing
under  the  Credit  Facility.  The  weighted average interest rate on borrowings
under  these  credit  facilities  as  of  July  31,  1998  was  8.4%.

     In December, 1998, a $3.0 million Industrial Revenue Bonds (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 December 31, 1999, the adjustable interest rate on the
bonds  was  set  at  5.67%.  The  bonds  mature  in  December  2018.

     In  March 1995, NACO issued a $15.0 million 11.75% senior subordinated note
together  with a common stock purchase warrant to a major insurance company. The
warrant agreement allowed the insurance company to purchase 54,271 common shares
of  NACO's  common  stock  at  a  price  of  $0.01 per share, subject to certain
adjustments. During fiscal 1999, the insurance company exercised its warrant for
54,271  NACO  shares  (representing  472,158  shares of the Company based on the
Merger  exchange  ratio).  The  fair  value of the warrant agreed to between the
Company  and  the  insurance  company  was  $0.2  million, which amount has been
deducted  from  the  face  value  of  the  note  and added to additional paid-in
capital.  The  fair  value  of  the  warrant was determined by averaging the net
present value of the note and the value of the NACO's equity using a multiple of
its  earnings  before  interest,  income  taxes  and depreciation, both of which
calculations  used  independent  third  party  comparables  as  benchmarks.

     Other  indebtedness  represents  notes  due  to  sellers  of  the Company's
business  acquisitions, a note due to a customer in exchange for entering into a
supply  agreement  with  that  customer  and  other  indebtedness.  The  other
indebtedness  bears interest as of December 31, 1999 at rates from 4.0% to 11.5%
and  mature  from  2000  to  2005.

     The  Company was in compliance with all of its covenants, as amended, under
its  debt  obligations  as  of  December 31, 1999. The weighted average interest
rates  on  all  debt  as of December 31, 1999, July 31, 1999 and 1998 were 8.7%,
7.6%  and  8.8%,  respectively.

     Maturities of debt as of December 31, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>

Twelve months ending December 31:
<S>                                 <C>
  2000 . . . . . . . . . . . . . .  $  6,207
  2001 . . . . . . . . . . . . . .     4,010
  2002 . . . . . . . . . . . . . .       684
  2003 . . . . . . . . . . . . . .   162,722
  2004 . . . . . . . . . . . . . .    75,765
  Thereafter . . . . . . . . . . .     3,066
                                    --------
                                    $252,454
                                   =========
</TABLE>

     The Company's carrying amount of debt, excluding the 9 1/8% Notes and the
8 3/4% Notes,  approximates the market value of such debt because the interest
rates on such  debt  are  variable  and  are  set periodically  based  on  the
current rates during  the  year. The December 31, 1999 quoted market price of
the 9 1/8% Notes and  8  3/4%  Notes was  $40.0  million  and  $19.5  million,
respectively, while the aggregate carrying  value  as  of  such  date was
$75.0 million.  The July 31, 1999 quoted market  price  of  the 9 1/8% Notes
and 8 3/4% Notes was $45.7 million and $22.3 million, respectively, and their
aggregate carrying value on such date was $75.0 million.  The  July  31,  1998
quoted market price of the 9 1/8% Notes and the 8 3/4%  Notes aggregated to
$74.6 million, while their aggregate carrying value as of  such  date  was
$75.0  million.


6.   SUPPLEMENTAL  CASH  FLOW  INFORMATION

     A  summary  of supplemental cash flow information for the Transition Period
and  for  the  years  ended July 31, 1999, 1998 and 1997 follows (in thousands):
<TABLE>
<CAPTION>

                                                       DEC. 31,         JULY 31,
                                                                -----------------------------
                                                         1999     1999      1998      1997
                                                       --------  -------  --------  ---------
<S>                                                    <C>       <C>      <C>       <C>
  Interest paid in cash . . . . . . . . . . . . . . .  $ 8,529   $20,569  $17,460   $ 11,526
  Income taxes paid in cash . . . . . . . . . . . . .       89     3,306    3,021      1,855
  Acquisitions of businesses (Note 3):
      Working capital, except cash. . . . . . . . . .   (5,928)        -     (226)      (967)
      Property, plant and equipment and acquisition-
       related costs. . . . . . . . . . . . . . . . .   18,999         -      467     15,564
      Goodwill. . . . . . . . . . . . . . . . . . . .        -         -    1,571     12,174
      Long-term liabilities assumed . . . . . . . . .   (1,949)        -        -     (6,191)
      Acquisition debt. . . . . . . . . . . . . . . .   (2,881)        -        -     (5,010)
      Stock issued. . . . . . . . . . . . . . . . . .   (8,300)        -     (436)   (10,226)
                                                       --------  -------  --------  ---------
          Net cash used (received). . . . . . . . . .  $   (59)  $     -  $ 1,376   $  5,344
                                                       ========  =======  ========  =========
</TABLE>


7.   COMMITMENTS  AND  CONTINGENCIES

     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.  The Company employs responsible personnel at each facility, along
with  various  environmental engineering consultants from time to time to assist
with  ongoing  management  of  environmental,  health  and  safety requirements.

     The  Company  obtains  performance  bonds,  sometimes  on  behalf  of  its
unconsolidated  joint  ventures,  and is party to certain other guarantees. Such
bonds  and  guarantees  aggregated  to  $11.6  million  as of December 31, 1999;
however,  the Company does not expect that any claims will be made against these
financial  instruments.  Accordingly,  the  estimated  market  value  of  such
instruments  is  not  material.

     The  Company  is also a party to various other legal proceedings arising in
the  ordinary  course  of  business,  none  of which is expected in management's
opinion,  after  consultation  with  legal  counsel,  to have a material adverse
effect,  either  individually or in the aggregate on the Company's consolidated,
financial  position  or  results  of  operations.

     The Company occupies various manufacturing, warehouse and office facilities
and  uses  certain  equipment under operating lease arrangements. Rental expense
charged  to operations for the Transition Period and the fiscal years ended July
31,  1999,  1998  and 1997 was $3.9 million, $8.3 million, $6.8 million and $5.4
million,  respectively.  At  December  31,  1999, future minimum rental payments
under  operating  leases  that  have initial or remaining terms in excess of one
year  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>

<S>                                 <C>
Twelve months ending December 31:
     2000. . . . . . . . . . . . .  $6,265
     2001. . . . . . . . . . . . .   4,223
     2002. . . . . . . . . . . . .   3,369
     2003. . . . . . . . . . . . .   2,878
     2004. . . . . . . . . . . . .   2,720
     Thereafter. . . . . . . . . .   2,626
                                    ------
                                   $22,081
                                   =======
</TABLE>


8.   RETIREMENT  PENSION  PLANS

UNITED  STATES  PLANS

     The Company maintains defined benefit pension plans covering certain hourly
employees in the United States. The plans provide benefits for certain employees
that are based on the employees' years of service and also provides benefits for
other  employees  that  are  based  on  the  employees'  years  of  service  and
compensation  upon their retirement from the Company. The plans invest primarily
in  investment  grade  corporate  bonds,  government bonds, corporate stocks and
cash.  Net  periodic pension cost for the Transition Period and the fiscal years
ended  July  31,  1999,  1998  and  1997 under the United States defined benefit
pension  plans  covering  certain  hourly  employees  included  the  following
components  (in  thousands):
<TABLE>
<CAPTION>


                                                  DEC. 31,            JULY 31,
                                                            ---------------------------
                                                   1999      1999      1998      1997
                                                 --------  --------  --------  --------
<S>                                              <C>       <C>       <C>       <C>
  Service cost. . . . . . . . . . . . . . . . .  $   568   $ 1,517   $ 1,243   $ 1,215
  Interest cost on projected benefit obligation    1,060     1,929     1,774     1,640
  Expected return on plan assets. . . . . . . .   (1,559)   (2,845)   (2,184)   (2,646)
  Amortization of prior service costs . . . . .      157       251       154     1,376
  Recognized net actuarial (gain) loss. . . . .     (104)      (97)      (36)       54
  Amortization of net transition liability. . .       25        55        56         -
  Recognized for curtailment. . . . . . . . . .      331         -         -         -
                                                 --------  --------  --------  --------
      Net periodic pension cost . . . . . . . .  $   478   $   810   $ 1,007   $ 1,639
                                                 ========  ========  ========  ========
</TABLE>

     The  Company maintains benefit plans which provide certain of its unionized
employees, their dependents and beneficiaries with postretirement medical and/or
life  insurance  benefits.  Some  of  the Company's postretirement plans are not
funded.  The  Company  has  established a Voluntary Employee Benefit Association
trust  to fund a portion of this obligation. Contributions of $0.2 million, $1.0
million,  $0.9  million  and  $1.4  million  were  made  to the trust during the
Transition  Period  and in the fiscal years ended July 31, 1999, 1998, and 1997,
respectively.  Net  periodic  postretirement  benefit expense for the Transition
Period  and  the  fiscal  years  ended July 31, 1999, 1998 and 1997 includes the
following  components  (in  thousands):

<TABLE>
<CAPTION>

                                                                 DEC. 31,          JULY 31,
                                                                         -----------------------
                                                                   1999    1999    1998    1997
                                                                  ------  ------  ------  ------
<S>                                                               <C>     <C>     <C>     <C>
  Service cost . . . . . . . . . . . . . . . . . . . . . . . . .  $ 153   $ 339   $ 213   $ 307
  Interest cost on accumulated postretirement benefit obligation    440     868     544     661
  Expected return on plan assets . . . . . . . . . . . . . . . .   (162)   (332)   (246)   (242)
  Amortization of prior service costs. . . . . . . . . . . . . .      5      11       2       -
  Recognized net actuarial (gain) loss . . . . . . . . . . . . .    (47)   (120)     77     143
                                                                  ------  ------  ------  ------
      Total postretirement benefit expense                        $ 389   $ 766   $ 590    $869
                                                                  =====  ======   ======   =====
</TABLE>

     The following table sets forth the reconciliation of the changes in benefit
obligations  and  the  changes  in  the  value of plan assets for the Transition
Period,  and  the  fiscal  years  ended July 31, 1999 and 1998 (in thousands):
<TABLE>
<CAPTION>


                                                              PENSION BENEFITS          POSTRETIREMENT BENEFITS
                                                             -----------------         -------------------------
                                                       12/31/99    7/31/99    7/31/98    12/31/99    7/31/99    7/31/98
                                                      ----------  ---------  ---------  ----------  ---------  ---------
<S>                                                   <C>         <C>        <C>        <C>         <C>        <C>
Changes in benefit obligation-
    Benefit obligation at beginning of period. . . .  $  30,450   $ 25,190   $ 22,042   $  12,327   $ 12,556   $ 12,083
    Service cost . . . . . . . . . . . . . . . . . .        568      1,517      1,243         153        339        213
    Interest cost. . . . . . . . . . . . . . . . . .      1,060      1,929      1,774         440        868        544
    Amendments . . . . . . . . . . . . . . . . . . .        846      2,361        151           -         31          -
    Actuarial (gain) loss. . . . . . . . . . . . . .     (2,205)       696      1,384         973       (898)       130
    Increase due to curtailment. . . . . . . . . . .        175          -          -           -          -          -
    Benefits paid. . . . . . . . . . . . . . . . . .       (744)    (1,243)    (1,404)       (171)      (569)      (414)
                                                      ----------  ---------  ---------  ----------  ---------  ---------
    Benefit obligation at end of period. . . . . . .     30,150     30,450     25,190      13,722     12,327     12,556
Changes in value of plan assets-
    Fair value of plan assets at beginning of period     36,735     30,500     23,616       4,197      3,327      2,465
    Actual return on plan assets . . . . . . . . . .        962      5,079      5,279         202        470        335
    Employer contributions . . . . . . . . . . . . .        510      2,399      3,009         171        969        941
    Benefits paid. . . . . . . . . . . . . . . . . .       (744)    (1,243)    (1,404)       (171)      (569)      (414)
                                                      ----------  ---------  ---------  ----------  ---------  ---------
    Fair value of plan assets at end of period . . .     37,463     36,735     30,500       4,399      4,197      3,327
Funded status-
    Funded status. . . . . . . . . . . . . . . . . .      7,314      6,285      5,310      (9,322)    (8,130)    (9,229)
    Unrecognized prior service cost. . . . . . . . .      3,839      3,757      1,647          81         85         65
    Unrecognized net actuarial gain. . . . . . . . .     (5,996)    (4,952)    (3,367)     (1,690)    (2,669)    (1,648)
    Unrecognized transition obligation . . . . . . .        144        179        234           -          -          -
                                                      ----------  ---------  ---------  ----------  ---------  ---------
    Prepaid (accrued) benefit cost . . . . . . . . .  $   5,301   $  5,269   $  3,824   $ (10,931)  $(10,714)  $(10,812)
                                                      ==========  =========  =========  ==========  =========  =========
</TABLE>

     Key  assumptions  used  in  the  calculations  above  were  as  follows:
<TABLE>
<CAPTION>


                                                     PENSION BENEFITS           POSTRETIREMENT BENEFITS
                                                     ----------------           ----------------------
                                               12/31/99   7/31/99   7/31/98   12/31/99   7/31/99   7/31/98
                                               ---------  --------  --------  ---------  --------  --------
<S>                                            <C>        <C>       <C>       <C>        <C>       <C>
  Discount rate . . . . . . . . . . . . . . .     7.750%    7.125%    7.125%     7.750%    7.125%    7.125%
  Expected long-term rate of return on assets     9.250%    9.125%    9.000%     9.250%    9.250%    9.000%
</TABLE>

     The  assumed health care cost trend rates used in measuring the accumulated
postretirement  benefit  obligations  for participants is 6.5% in the Transition
Period  declining  to  an  ultimate rate of 5.0% in year 2003.  A one percentage
point  change  in  the  assumed  health  care  cost  trend  rates would have the
following  effects  for  the  Transition  Period and as of December 31, 1999 (in
thousands):

<TABLE>
<CAPTION>

                                                         ONE PERCENTAGE POINT
                                                         INCREASE    DECREASE
                                                         ---------  ----------
<S>                                                      <C>        <C>
  Effects on total service and interest cost components  $      26  $     (23)
  Effect on postretirement benefit obligation . . . . .  $     433  $    (392)
</TABLE>


     In  addition,  the  Company maintains defined contribution plans for United
States  salaried employees and for certain hourly employees. These plans provide
for Company contributions of not less than 100% of each employee's contributions
commencing  July 1, 1999 for certain former ABC employees, and April 1, 1997 for
certain  former  NACO  employees;  and  50%  prior  thereto,  subject to certain
limitations.  The  Company's contributions were $0.4 million, $1.3 million, $1.2
million  and  $0.7  million in the Transition Period and in the years ended July
31,  1999,  1998  and 1997, respectively. In addition, the former ABC plan makes
contributions  to  the plan equal to 1% of salaried and certain hourly employees
compensation.  These  additional  contributions  were  $0.1  million  for  the
Transition  Period  and  $0.2 million for each of the years ended July 31, 1999,
1998,  and  1997,  respectively.

FOREIGN  RETIREMENT  PLANS

     The  Company  assumed  specific liabilities to make termination payments to
union  workers  and  salaried  employees at the Sahagun, Mexico facility in July
1996.  The  Company  has  chosen  to  account  for  these liabilities as if they
constituted  a  noncontributory,  unfunded,  defined  benefit  pension plan. The
following  table  summarizes  the pension plan expense for the Transition Period
and  fiscal  years  ended  July  31,  1999,  1998  and  1997  (in  thousands):

<TABLE>
<CAPTION>

                                               DEC. 31,     JULY 31,
                                                       ---------------------
                                                 1999   1999    1998   1997
                                                 -----  -----  ------  -----
<S>                                              <C>    <C>    <C>     <C>
  Service cost. . . . . . . . . . . . . . . . .  $ 119  $ 246  $ 246   $ 139
  Interest cost on projected benefit obligation    113    256    196     353
  Amortization of unrecognized (gain) loss. . .     41     47    (91)     16
                                                 -----  -----  ------  -----
      Net periodic pension cost . . . . . . . .  $ 273  $ 549  $ 351   $ 508
                                                 =====  =====  ======  =====
</TABLE>

The  following  table  sets  forth  the reconciliation of the changes in benefit
obligation  for  the  Transition Period and the fiscal years ended July 31, 1999
and  1998  (in  thousands):
<TABLE>
<CAPTION>


                                                DEC. 31,      JULY 31,
                                                          ------------------
                                                  1999      1999      1998
                                                --------  --------  --------
<S>                                             <C>       <C>       <C>
  Changes in benefit obligation-
      Benefit obligation at beginning of period $ 4,356   $ 4,197   $ 4,792
      Service cost . . . . . . . . . . . . . .      119       246       246
      Interest cost. . . . . . . . . . . . . .      113       256       196
      Actuarial loss (gain). . . . . . . . . .    1,604        47       (91)
      Benefits paid. . . . . . . . . . . . . .     (776)     (390)     (946)
                                                --------  --------  --------
      Benefit obligation at end of period. . .    5,416     4,356     4,197
      Unrecognized net actuarial loss. . . . .    3,449     1,696     1,210
                                                --------  --------  --------
      Prepaid (accrued) benefit cost . . . . .  $(1,967)  $(2,660)  $(2,987)
                                                ========  ========  ========
</TABLE>

The  acturial  loss  in  the Transition Period is primarily the result of higher
than  expected  wages and benefits from the assumptions used in the prior year's
computation.

     Key  assumptions  used  in  the  calculations  above  were  as  follows:

<TABLE>
<CAPTION>


                                                 DEC. 31,     JULY 31,
                                                         -------------
                                                   1999   1999   1998
                                                   -----  -----  -----
<S>                                                <C>    <C>    <C>
  Discount rate . . . . . . . . . . . . . . . . .   5.5%   6.5%   6.5%
  Average rate of increase in compensation levels   1.5%   1.5%   3.5%
</TABLE>

     The  Company's  Canadian  and  Scottish  subsidiaries  maintain  defined
contribution  plans for substantially all employees. The Company's contributions
to  these  plans, which vary by company and employee group, was $0.1 million for
the  Transition  Period  and  $0.3  million for each of the years ended July 31,
1999,  1998  and  1997,  respectively.

POSTEMPLOYMENT  PLANS

     The Company provides selected former hourly and salaried disabled employees
continued medical benefits until age 65 or recovered from disability and certain
other  limited  benefits  for  other  selected  former  employees.

     Net  periodic  postemployment costs for the Transition Period and the years
ended  July  31,  1999,  1998  and  1997,  included the following components (in
thousands):

<TABLE>
<CAPTION>



                                                 DEC. 31,     JULY 31,
                                                         --------------------
                                                   1999   1999   1998   1997
                                                  ------  -----  -----  -----
<S>                                               <C>     <C>    <C>    <C>
  Estimated costs for newly disabled employees .  $  33   $  80  $  80  $  80
  Interest cost on projected benefit obligation.     17     107    124    170
  Net amortization and deferral. . . . . . . . .   (590)    327    324    287
                                                  ------  -----  -----  -----
      Net periodic postemployment cost (benefit)  $(540)  $ 514  $ 528  $ 537
                                                  ======  =====  =====  =====
</TABLE>

The  net benefit in the Transition Period is due to the retiree medical benefits
that  are  no  longer  included  as part of postemployment plans.  These are now
classified  as  part  of  postretirement  plans.

     The  following  table  sets forth the funded status of the plan at December
31,  1999,  July  31,  1999  and  1998  (in  thousands):

<TABLE>
<CAPTION>


                                                          DEC. 31,     JULY 31,
                                                                   ----------------
                                                            1999    1999     1998
                                                           ------  -------  -------
<S>                                                        <C>     <C>      <C>
  Accumulated benefit obligation. . . . . . . . . . . . .  $ 387   $1,516   $1,516
  Plan assets at fair value . . . . . . . . . . . . . . .      -        -        -
                                                           ------  -------  -------
  Accumulated benefit obligation in excess of plan assets  $ 387    1,516    1,516
  Net unrecognized loss . . . . . . . . . . . . . . . . .    (11)    (563)    (259)
                                                           ------  -------  -------
      Accrued postemployment liabilities. . . . . . . . .  $ 376   $  953   $1,257
                                                           ======  =======  =======
</TABLE>

     The discount  rate used in the calculations summarized above was 7.75% for
the Transition  Period,  6.75%  in  fiscal  1999  and  7.25%  in  fiscal  1998.


9.  STOCK  OPTION  PLANS

     The  Company  has various stock option plans which provide for the granting
of  incentive  or  nonqualified  options  to  certain  directors,  officers  and
employees  to  purchase shares of its common stock within prescribed periods, up
to 10 years, at prices equal to the fair market value on the date of grant. Such
options  vest  over  periods  up  to four years. During fiscal 1999, the Company
adopted  the 1999 Omnibus Stock Plan for which 1,500,000 shares are reserved for
issuance.  This  plan  was approved at the Annual Shareholders Meeting, November
19,  1999.  Upon the Merger, NACO's stock option plan was terminated. No options
were  outstanding  under  that  plan  on  the  Merger  date.

     Activity  during  the  Transition Period and the years ended July 31, 1999,
1998 and 1997 under the Company's stock option plans and with respect to certain
options  is  summarized  below  (in  thousands,  except  prices  and  years):


<TABLE>
<CAPTION>



                              OUTSTANDING           EXERCISABLE
                         ---------------------     ------------
                                     WEIGHTED            WEIGHTED
                                      AVERAGE             AVERAGE
                                     EXERCISE            EXERCISE
                            SHARES    PRICE       SHARES  PRICE
                         --------    --------     ------  ------
<S>                   <C>           <C>           <C>     <C>
  July 31, 1996. . .          721   $  15.42         310  $13.05
      Issued . . . .          165      17.66
      Exercised. . .         (128)     11.65
      Canceled . . .         (126)     19.04       _____   _____
                      ------------  ------------
  July 31, 1997. . .          632      16.04         387   13.98
      Issued . . . .           85      18.94
      Canceled . . .          (26)     21.01       _____   _____
                      ------------  ------------
  July 31, 1998. . .          691      16.21         514   15.30
      Issued(a). . .          525      13.32
      Exercised. . .          (30)     10.00
      Canceled . . .         (151)     18.83       _____   _____
                      ------------  ------------
  July 31, 1999. . .        1,035   $  14.54         444  $15.38
      Issued . . . .           19      10.95
      Canceled . . .          (70)     16.90       _____   _____
                           ------   --------
  December 31, 1999.          984   $  14.30         438  $15.36
                           =======  ========      ======  ======
</TABLE>

(a)     Includes  507,000  options  granted  at  $13.39 per share under the 1999
Omnibus  Stock  Plan.

<TABLE>
<CAPTION>

                                                                              DECEMBER 31, 1999
                                                     -------------------------------------------------------
                                                               OUTSTANDING                     EXERCISABLE
                                                     ---------------------------------        ------------
                                                                   WEIGHTED    WEIGHTED            WEIGHTED
                                                                    AVERAGE    AVERAGE              AVERAGE
                                                                   REMAINING   EXERCISE             EXERCISE
RANGE OF EXERCISE PRICES                              SHARES         YEARS      PRICE       SHARES   PRICE
-------------------------                            ---------      --------    ---------   -------  ------
<S>                                                            <C>                <C>           <C>       <C>
10.00-$12.00                                            233.        4.1  $      10.12       208     $10.01
12.01-$16.00                                            542         8.8  $      13.60        32     $15.68
16.01 -$21.62                                           209         4.5  $      20.79       198     $20.94
</TABLE>



     As  allowed  under  SFAS  No. 123, the Company continues to account for its
stock-based compensation plans in accordance with the prior accounting standard,
Accounting  Principles  Board  Opinion  No.  25,  under  which  it recognized no
compensation expense in the Transition Period and the years ended July 31, 1999,
1998  or  1997.  The  following  table  reflects  certain  pro  forma  earnings
information as if compensation cost had been determined on the fair valued-based
accounting  method  for options granted in the Transition Period and  the  years
ended  July  31,  1999, 1998 and 1997, and certain information regarding options
granted in such years and assumptions used in determining the fair value of such
options,  using  the  Black-Scholes options pricing model (dollars in thousands,
except  per  share).
<TABLE>
<CAPTION>


                                                      DEC. 31,                JULY 31,
                                                                  ----------------------------------
                                                      1999         1999         1998         1997
                                                   -----------  -----------  -----------  -----------
<S>                                                <C>          <C>          <C>          <C>
  Pro forma income (loss) . . . . . . . . . . . .  $   (5,550)  $  (12,016)  $   12,277   $    5,666
  Pro forma diluted income (loss) per share . . .  $    (0.30)  $    (0.66)  $     0.66   $     0.31
  Weighted average fair value of granted options.  $     6.66   $     8.28   $    10.02   $     8.51
  Assumptions-
      Weighted average risk-free interest rate. .         6.3%         5.8%         5.8%         6.3%
      Volatility. . . . . . . . . . . . . . . . .        45.9%        39.8%        32.8%        30.4%
      Expected lives. . . . . . . . . . . . . . .   8.1 years    8.1 years    6.1 years    7.2 years
      Dividend yield. . . . . . . . . . . . . . .         0.0%         0.0%         0.0%         0.0%
</TABLE>


10.   UNCONSOLIDATED  JOINT  VENTURES

     The  Company  owns  50%  of  Anchor Brake Shoe, L.L.C. (''Anchor''). Anchor
designs,  manufactures,  markets  and  sells  railcar composite brake shoes. The
Company's  investment  in  Anchor was $7.0 million as of December 31, 1999. Each
partner's  share  of the joint venture can be purchased by the other partner, at
market  value,  if  the  other partner is involved in a future change in control
situation.  Additionally,  the other partner has an option which it can exercise
as  of  April  1,  2001,  to  purchase  the  Company's  interest  in  Anchor.

     Summarized  financial  information for Anchor for the Transition Period and
for  the years ended July 31, 1999, 1998 and 1997 was as follows (in thousands):

<TABLE>
<CAPTION>


                          DEC. 31,      JULY 31,
                                   -----------------------
                           1999    1999     1998     1997
                          ------  -------  -------  -------
<S>                       <C>     <C>      <C>      <C>
  Current assets . . . .  $7,674  $ 7,267  $ 4,644  $ 5,968
  Noncurrent assets. . .   7,724    9,442    9,450    7,850

  Current liabilities. .   1,491    2,013    2,766    1,776
  Noncurrent liabilities       -        -        -    1,983

  Net sales. . . . . . .   7,194   18,781   17,917   15,329
  Gross profit . . . . .   2,052    5,910    5,643    4,411
  Net income . . . . . .     975    2,847    3,138    2,854
</TABLE>

     In  May  1996,  the  Company  entered  into  a joint venture agreement with
China's  Ministry  of Railroads to establish the Datong ABC Castings Company Ltd
(''Datong'').  The  joint venture manufactures wheels in China primarily for the
Chinese  railway  markets.  The  Company's  contribution of its 40% share in the
joint  venture ABC-NACO Inc. consists of technical know-how, expertise and cash.
The  cash  funding  was  used  to  construct a manufacturing facility, which was
operational  in  late  calendar  1998. The intangible component of the Company's
contribution  was  valued  at  $1.8  million  and  such  amount is ratably being
recognized  as  additional  equity  earnings. The Company will earn royalties on
certain  sales  from  this  venture. The Company's investment in Datong was $7.3
million  as  of  December  31,  1999.

     In  addition  to  these,  the  Company has other joint venture arrangements
which  are  not  significant to the Company's results of operations. The Company
occasionally  pays  certain  items  on  behalf  of  the  joint  ventures  and is
subsequently  reimbursed  for such payments. Also, some of the ventures purchase
materials  from  the  Company  for use in production or for direct resale. Trade
accounts receivable from these affiliates as of December 31, 1999, July 31, 1999
and  1998,  were  $1.1 million, $1.6 million and $2.3 million, respectively, and
are  included  in  accounts  receivable in the accompanying consolidated balance
sheets.  Other  amounts owed to or from these affiliates at these dates were not
material.


11.   MERGER  AND  OTHER  SPECIAL  CHARGES

     During  the  third  and  fourth  quarters of the fiscal year ended July 31,
1999,  the  Company  recorded  $16.1  million and $5.8 million, respectively, of
Merger  and  other  restructuring  charges.  During  the  Transition Period, the
Company  recorded  additional  charges of $1.2 million, including adjustments of
previously-recorded  charges  based  on  actual expenses incurred on the related
initiatives.  The  primary components of the aggregate $23.1 million of calendar
1999  charges  include: (a) $9.5 million of costs incurred as a direct result of
the  Merger  for  advisory and other professional fees, (b) the consolidation of
the  corporate activities of the merged companies into one facility, and (c) the
consolidation  of  several  manufacturing  and  assembly  operations  into fewer
facilities  to  eliminate  duplicative  functions  and  to  improve  operating
efficiencies.  The  charges  were  computed  based  on  actual  cash  payouts,
management's  estimate  of  realizable  value  of  the  affected  tangible  and
intangible  assets  and  estimated  exit  costs  including  severance  and other
employee  benefits  based  on  existing severance policies.  The Company expects
that  these  restructuring  efforts  will  result  in  reduced  operating costs,
including  lower  salary and hourly payroll costs and depreciation/amortization.


     Employee  severance  costs  included in the aggregate charge, totaling $7.9
million,  were  for 33 corporate employees, 109 salaried plant employees and 581
hourly  plant  employees.  As  of  December 31, 1999, all of these employees had
been  terminated.

     Certain  of  the  restructuring  initiatives  within  the Rail Services and
Systems  segment  were  prompted  by  the  excess  capacity  resulting  from the
operation  of  the  Company's new state-of-the-art rail mill facility in Chicago
Heights,  Illinois.  With  this  new  capacity  on  line, the Company closed its
Cincinnati,  Ohio  facility and discontinued manufacturing at its Newton, Kansas
facility  (which  also  has  a  distribution  operation)  by July 31, 1999.  The
Company  also  closed  its foundry operation in Anderson, Indiana by October 31,
1999.  The  Manganese  castings  used  in  specialty  track  products  that were
produced at Andersen are now produced at the Company's manufacturing facility in
Richmond,  Texas.  The  duplicative  leased  corporate  facility  and  another
administrative  facility  were  closed  in September 1999.  In addition to these
closures,  the  Company  has  decided  to  close an assembly facility in Verona,
Wisconsin.  This  Rail Services and Systems facility is expected to be closed by
the  end  of  2000  with  all  operations  being  transferred to another Company
location.

     Costs  associated  with  these  facility closures, excluding severance, are
$2.2  million  of  non-cash provisions for the write down of obsolete assets and
leasehold improvements and $1.4 million in cash provisions for idle facility and
property  disposal costs.  In addition to these costs, the Company incurred $2.1
million  of  cash  costs related to the transfer of Manganese castings and other
operations  into  the  Richmond facility and the relocation of previous Richmond
operations  into  another Company facility.  These costs primarily represent the
relocation of equipment and employees and the installation of the new operations
at  Richmond.

     The  following  table  is  a  summary  roll  forward  of  the  Merger  and
other restructuring  reserves  through  December  31,  1999  (in  thousands):


<TABLE>
<CAPTION>

                                              Aggregate Charge    Deductions   Balance 12/31/99
                                              -----------------  ------------  -----------------
<S>                                           <C>                <C>           <C>
Cash provisions:
   Merger advisory and other fees. . . . . .  $             9.5  $      (9.5)  $               -
   Employee severance. . . . . . . . . . . .                7.9         (4.5)                3.4
   Idle facility and property disposal costs                1.4         (0.6)                0.8
   Relocation of operations. . . . . . . . .                2.1         (2.1)                  -
                                              -----------------  ------------  -----------------
      Total cash costs . . . . . . . . . . .               20.9  $     (16.7)  $             4.2
                                                                 ============  =================
Non-cash asset writedowns. . . . . . . . . .                2.2
                                              -----------------
      Total. . . . . . . . . . . . . . . . .  $            23.1
                                              =================
</TABLE>

  The remaining cash costs are expected to be expended during the next twelve to
fifteen  months.

WILSONS  LIQUIDATION  GAIN

     During fiscal 1997, due to continued operating losses, the Company declined
to  provide  further  funding  for  a  foundry  facility  it  had  in  England
(''Wilsons'').  Pursuant  to  an earlier agreement with its creditors, receivers
were  appointed  who  ceased  the  foundry's  operations  in September 1996. The
receivers  liquidated  the  foundry's  assets using the proceeds to pay Wilsons'
liquidation  costs  with  the  remainder  being  distributed  to  its creditors,
exclusive  of  the  Company.  At  the time the foundry ceased operations and was
liquidated,  its  liabilities  exceeded its written down asset values carried in
the Company's consolidated financial statements, which resulted in a liquidation
gain  for  the Company in fiscal 1997 of $1.4 million. Prior to its liquidation,
fiscal  1997  operating  results  of  the  foundry  were  not  material.

12.  INCOME  TAXES

     Income  (loss)  before income taxes, cumulative effect of accounting change
and  extraordinary  item  consisted  of  the  following  (in  thousands):
<TABLE>
<CAPTION>


                   DEC. 31,              JULY 31,
                            ----------------------------
                   1999       1999       1998     1997
                 ---------  ---------  --------  -------
<S>              <C>        <C>        <C>       <C>
  United States  $ (8,144)  $(12,554)  $26,827   $ 8,639
  Foreign . . .    (2,360)     7,530    (3,744)    1,524
                 ---------  ---------  --------  -------
      Total . .  $(10,504)  $ (5,024)  $23,083   $10,163
                 =========  =========  ========  =======
</TABLE>

The provision (benefit) for income taxes for the Transition Period and for years
ended  July  31,  1999, 1998 and 1997 consisted of the following (in thousands):
<TABLE>
<CAPTION>


                           DEC. 31,            JULY 31,
                                    -------------------------
                            1999      1999     1998     1997
                          --------  --------  -------  -------
<S>                       <C>       <C>       <C>      <C>
  Current:
      Federal. . . . . .  $(2,064)  $ 3,262   $4,283   $2,130
      State. . . . . . .     (291)      491      680      330
      Foreign. . . . . .    1,251     1,568       63     (250)
                          --------  --------  -------  -------
          Total current.   (1,104)    5,321    5,026    2,210
                          --------  --------  -------  -------

  Deferred:
      United States. . .   (3,177)   (5,222)   4,901    1,343
      Foreign. . . . . .     (698)      824     (622)     361
                          --------  --------  -------  -------
          Total deferred   (3,875)   (4,398)   4,279    1,704
                          --------  --------  -------  -------
          Total. . . . .  $(4,979)  $   923   $9,305   $3,914
                          ========  ========  =======  =======
</TABLE>

     A reconciliation between the U. S. federal statutory rate and the Company's
effective  income  tax  rate on income before income taxes, cumulative effect of
accounting  change  and  extraordinary  item  is  as  follows:

<TABLE>
<CAPTION>


                                         DEC. 31,        JULY 31,
                                                  ---------------------
                                           1999     1999    1998   1997
                                          -------  -------  -----  -----
<S>                                       <C>      <C>      <C>    <C>
  U. S. federal statutory rate . . . . .  (34.0)%  (34.0)%  34.0%  34.0%
  State taxes, net of federal benefit. .    (4.0)     5.9    5.1    4.0
  Difference due to foreign subsidiaries   (10.7)    49.4   (0.6)     -
  Nondeductible goodwill amortization. .     1.0      7.9    1.0    1.7
  Nondeductible Merger costs . . . . . .       -     36.2      -      -
  Change in tax reserves . . . . . . . .     5.5    (49.7)   3.3    1.4
  Other. . . . . . . . . . . . . . . . .    (5.2)     2.7   (2.5)  (2.6)
                                          -------  -------  -----  -----
      Effective income tax rate. . . . .  (47.4)%    18.4%  40.3%  38.5%
                                          =======  =======  =====  =====
</TABLE>

     Deferred  tax  assets  and  liabilities  are  recorded  for  all  temporary
differences  between  financial  and  tax  reporting  and  are  the  result  of
differences in the timing of recognition of certain income and expense items for
financial  and  tax reporting. The major temporary differences that give rise to
deferred  tax  assets  and  liabilities  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>

                                           DECEMBER 31, 1999          JULY 31, 1999          JULY 31, 1998
                                           ---------------------      -------------------  ----------------------

                                            ASSETS    LIABILITIES   ASSETS    LIABILITIES   ASSETS    LIABILITIES
                                            -------  -------------  -------  -------------  -------  -------------
<S>                                         <C>      <C>            <C>      <C>            <C>      <C>
Property basis differences . . . . . . . .  $     -  $    (14,685)  $     -  $    (13,334)  $     -  $    (11,014)
Insurance reserves . . . . . . . . . . . .    2,248             -     2,791             -     2,597             -
Inventory basis differences. . . . . . . .    1,682        (1,461)      974        (1,501)      394        (1,147)
Allowance for doubtful accounts. . . . . .      770             -       607             -       683             -
Postretirement and postemployment reserves    4,322        (2,030)    4,047        (1,968)    3,981        (1,553)
Other employee benefit reserves. . . . . .      790             -       510             -       666             -
Other, net . . . . . . . . . . . . . . . .        -          (678)    3,823             -     3,512             -
                                            -------  -------------  -------  -------------  -------  -------------
      Total. . . . . . . . . . . . . . . .  $ 9,812  $    (18,854)  $12,752  $    (16,803)  $11,833  $    (13,714)
                                            =======  =============  =======  =============  =======  =============
</TABLE>

     In addition to the above deferred income taxes, the Company, as of December
31,  1999,  had  various income tax carryforwards including:  U.S. net operating
losses  of  $31.3 million which expire in 2008 to 2019, $9.4 million in Portugal
which  expire  in  2000  to  2005, $6.0 million in Scotland which can be carried
forward  indefinitely  and  $0.5  million  in  Sweden  which can also be carried
forward indefinitely.  The Company also has U.S. alternative minimum tax credits
of  $5.5  million,  which do not expire.  Similarly, the Company, as of July 31,
1999,  had  various income tax carryforwards including: U.S. foreign tax credits
of  $1.8 million; U.S. alternative minimum tax credits of $4.5 million, which do
not  expire;  and net operating losses in Scotland of $5.3 million, which do not
expire.  Similarly,  the  Company,  as  of  July 31, 1998 had various income tax
carryforwards  including:  U.S.  net  operating  losses  of  $1.3  million; U.S.
alternative  minimum  tax  credits  of $3.0 million; and net operating losses in
Scotland,  Mexico  and  Canada  of  $3.9 million, $2.3 million and $2.2 million,
respectively.  Due  to the uncertainty as to the ultimate realization of certain
credit  carryforwards,  the  Company has recorded tax reserves of $11.7 million,
$9.4  million,  and  $11.9  million  as  of December 31, 1999, July 31, 1999 and
1998,  respectively. Changes in the reserves are primarily due to additional net
operating  losses  in  foreign  jurisdictions, changes in the other deferred tax
assets  of foreign subsidiaries and ultimate realization of U.S. and foreign net
operating  losses  to  offset  taxable  income.


13.  BUSINESS  SEGMENTS  AND  SIGNIFICANT  CUSTOMERS

     The  Company  manages its operations through three reporting segments: Rail
Products,  Rail  Services  and  Systems,  and Flow and Specialty Products. These
distinct  business  units  generally  serve  separate  markets. They are managed
separately  since  each  business  requires  different technology, servicing and
marketing strategies. The following describes the types of products and services
from  which  each  segment  derives  its  revenues:

<TABLE>
<CAPTION>
<S>                            <C>
  Rail Products . . . . .   .  Freight car and locomotive castings
  Rail Services and Systems .  Wheel assembly, signal systems,  and specialty trackwork
  Flow and Specialty Products  Valve housing and related castings
</TABLE>

     The  Company  realigned its segments during the Transition Period to better
reflect  the  organizational  and marketing changes that were enacted within the
Company.  The  Company's  trackwork  product  line  which  previously  had  been
reported  as  part  of  the Rail Products segment is now included as part of the
Rail  Services  and  Systems  segment.  The Company now markets its services for
signaling  and  trackwork  products  to  the  railroads through one organization
headed  by  one  division  president.  In  addition,  the  Company for strategic
reasons,  placed  its  metal  brake  shoe  foundry  into  the Flow and Specialty
Products segment.  The current and historical segment financial information have
been  restated  to  reflect  these  changes.

     To  evaluate the performance of these segments, the Chief Executive Officer
examines  operating  income or loss before interest and income taxes, as well as
operating  cash flow. Operating cash flow is defined as operating income or loss
plus  depreciation  and  amortization. The accounting policies for the operating
segments  are  the  same  as  those  described in the summary of the significant
accounting  policies.  Intersegment  sales  and transfers are accounted for on a
cost  plus  stipulated  mark-up  which  the  Company believes approximates arm's
length  prices.

     Corporate  headquarters and ABC-NACO Technologies primarily provide support
services  to  the  operating  segments. The costs associated with these services
include interest expense, income tax expense (benefit), Merger and restructuring
charges,  research  and  development  expense,  and goodwill amortization, among
other  costs.  These  costs  are  not allocated to the segments and are included
within  ''other''  below.

     The  following  tables present a summary of operating results and assets by
segment  and  a  reconciliation  to  the  Company's  consolidated  totals  (in
thousands):

<TABLE>
<CAPTION>

                                  DEC. 31,                JULY 31,
                                             -------------------------------
  REVENUES                          1999       1999       1998       1997
-------------------------------  ----------  ---------  ---------  ---------
<S>                              <C>         <C>        <C>        <C>
  Rail Products . . . . . . . .  $ 145,457   $388,257   $309,765   $281,944
  Rail Services and Systems . .     86,045    247,451    269,691    207,881
  Flow and Specialty Products .     29,584     74,101     93,620     94,235
                                 ----------  ---------  ---------  ---------
      Total Reportable Segments    261,086    709,809    673,076    584,060
  Elimination and Other . . . .    (21,225)   (44,312)   (38,155)   (48,342)
                                 ----------  ---------  ---------  ---------
          Total . . . . . . . .  $ 239,861   $665,497   $634,921   $535,718
                                 ==========  =========  =========  =========


                                    DEC. 31,                JULY 31,
                                             -------------------------------
OPERATING INCOME (LOSS)               1999       1999       1998       1997
-------------------------------  ----------  ---------  ---------  ---------
  Rail Products . . . . . . . .  $   8,439   $ 43,287   $ 26,040   $ 15,008
  Rail Services and Systems . .      3,917     12,820     27,712     20,348
  Flow and Specialty Products .        355      6,234     10,090      6,908
                                 ----------  ---------  ---------  ---------
      Total Reportable Segments     12,711     62,341     63,842     42,264
  Elimination and Other . . . .    (13,846)   (49,517)   (28,513)   (20,522)
                                 ----------  ---------  ---------  ---------
          Total . . . . . . . .  $  (1,135)  $ 12,824   $ 35,329   $ 21,742
                                 ==========  =========  =========  =========

                                   DEC. 31,             JULY 31,
                                              ------------------------------
ASSETS                                1999       1999       1998       1997
-------------------------------  ----------  ---------  ---------  ---------
  Rail Products . . . . . . . .  $ 178,355   $174,372   $151,329   $112,896
  Rail Services and Systems . .    191,126    172,783    174,996    137,926
  Flow and Specialty Products .     31,471     25,944     27,572     29,240
                                 ----------  ---------  ---------  ---------
      Total Reportable Segments    400,952    373,099    353,897    280,062
  Other . . . . . . . . . . . .     91,519     80,722     69,999     60,080
                                 ----------  ---------  ---------  ---------
          Total . . . . . . . .  $ 492,471   $453,821   $423,896   $340,142
                                 ==========  =========  =========  =========

                                   DEC. 31,            JULY 31,
                                             -------------------------------
 DEPRECIATION AND AMORTIZATION        1999       1999       1998       1997
-------------------------------  ----------  ---------  ---------  ---------
  Rail Products . . . . . . . .  $   6,199   $ 13,821   $ 10,465   $  8,870
  Rail Services and Systems . .      3,995      9,613      6,002      6,507
  Flow and Specialty Products .      1,182      1,906      1,782      1,599
                                 ----------  ---------  ---------  ---------
      Total Reportable Segments     11,376     25,340     18,249     16,976
   Other. . . . . . . . . . . .      1,997      4,786      4,227      3,809
                                 ----------  ---------  ---------  ---------
            Total . . . . . . .  $  13,373   $ 30,126   $ 22,476   $ 20,785
                                 ==========  =========  =========  =========

                                   DEC. 31,               JULY 31,
                                             -------------------------------
CAPITAL EXPENDITURES                  1999       1999       1998       1997
-------------------------------  ----------  ---------  ---------  ---------
  Rail Products . . . . . . . .  $   8,115   $ 26,063   $ 31,484   $ 11,512
  Rail Services and Systems . .      1,870     17,377     25,320     24,313
  Flow and Specialty Products .      4,278      4,031      1,179      1,838
                                 ----------  ---------  ---------  ---------
      Total Reportable Segments     14,263     47,471     57,983     37,663
  Other . . . . . . . . . . . .      3,396      7,169     10,932      8,865
                                 ----------  ---------  ---------  ---------
            Total . . . . . . .  $  17,659   $ 54,640   $ 68,915   $ 46,528
                                 ==========  =========  =========  =========

</TABLE>
     The following table reflects revenues and long-lived assets by country.
Revenues were  attributed  to  countries  based  on  the  location  of  the
customer (in thousands):

<TABLE>
<CAPTION>
                     DEC. 31,            JULY 31,
                              ----------------------------
REVENUES             1999       1999      1998      1997
---------          ---------  --------  --------  --------
<S>                <C>        <C>       <C>       <C>
  United States .  $ 202,037  $567,956  $567,673  $466,314
  Mexico. . . . .      5,306    14,374     8,467     2,828
  Canada. . . . .     21,346    65,742    48,738    49,078
  England . . . .      2,993    12,811     7,224    13,751
  Turkey. . . . .      6,612         -         -         -
  Other . . . . .      1,567     4,614     2,819     3,747
                   ---------  --------  --------  --------
        Total . .  $ 239,861  $665,497  $634,921  $535,718
                   =========  ========  ========  ========

                      DEC. 31,           JULY 31,
                              ----------------------------
LONG-LIVED ASSETS       1999      1999      1998      1997
-----------------  ---------  --------  --------  --------
  United States .  $ 230,814  $228,500  $216,213  $171,098
  Mexico. . . . .     36,773    33,665    22,787    13,660
  Canada. . . . .      9,867     9,518     9,547     9,259
  Portugal. . . .     17,986         -         -         -
  England . . . .      1,850     1,936     2,188     2,262
                   ---------  --------  --------  --------
        Total . .  $ 297,290  $273,619  $250,735  $196,279
                   =========  ========  ========  ========
</TABLE>

    The  Company's  significant customers are Class I railroads and suppliers of
new freight cars.  One customer accounted for  11.3%,  15.7%,  13.3% and 9.0% of
consolidated  net  sales  for the Transition Period and the years ended July 31,
1999,  1998  and 1997, respectively. Another customer accounted for 10.0%, 7.0%,
10.3%  and 11.5% of consolidated net sales for the Transition Period and for the
years  ended  July  31,  1999,  1998  and 1997, respectively. Both customers are
served  by  the  Rail  Products  and  Rail  Services  and  Systems  segments.


14.  QUARTERLY  FINANCIAL  DATA  (UNAUDITED)


    Interim  data  for  the Transition Period includes net sales, gross profits
and net loss of  $144.2 million, $15.9 million and $1.9 million, respectively,
for the three  months  ended  October 31, 1999, and $95.7 million, $9.1 million
and $3.6 million, respectively, for the two months ended December 31, 1999.
Related loss per share was $0.10  and  $0.19  for  the  three and two month
periods, respectively.  The two month  period  includes  pre-tax  restructuring
charges  of  $1.2  million.

<PAGE>

     Quarterly  financial data for the years ended July 31, 1999 and 1998 are as
follows  (in  thousands):

<TABLE>
<CAPTION>
                                                                                QUARTER
                                                                 ----------------------------------------
                                                                  FIRST     SECOND     THIRD     FOURTH
                                                                 --------  --------  ---------  ---------
<S>                                                              <C>       <C>       <C>        <C>
FISCAL YEAR 1999-
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .  $169,447  $163,383  $173,625   $159,042
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . .    25,571    18,311    24,553     26,539
Income (loss) before accounting change and extraordinary
 item(a) . . . . . . . . . . . . . . . . . . . . . . . . . . .     3,740       932    (9,421)    (1,198)
Net income (loss)(b). . . . . . . . . . . . . . . . . . . . . .     2,230       932   (12,579)    (1,308)
Income (loss) before accounting change and extraordinary item
 per share-
    Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.21  $   0.05  $  (0.51)  $  (0.07)
    Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.20  $   0.05  $  (0.51)  $  (0.07)
Net income (loss) per share-
    Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.13  $   0.05  $  (0.69)  $  (0.07)
    Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.12  $   0.05  $  (0.69)  $  (0.07)
FISCAL YEAR 1998-
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . .  $138,256  $147,406  $173,919   $175,340
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . .    18,224    19,598    26,698     27,091
Income before accounting change(c). . . . . . . . . . . . . . .     1,230     1,786     5,584      5,178
Net income(d) . . . . . . . . . . . . . . . . . . . . . . . . .     1,230       675     5,584      5,178
Income before accounting change per share-
    Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.07  $   0.10  $   0.31   $   0.29
    Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.07  $   0.10  $   0.30   $   0.28
Net income per share-
    Basic . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.07  $   0.04  $   0.31   $   0.29
    Diluted . . . . . . . . . . . . . . . . . . . . . . . . . .  $   0.07  $   0.04  $   0.30   $   0.28
</TABLE>

(a)    Includes pre-tax Merger and other restructuring charges of $16.1 million
       and  $5.8  million  in  the  third  and  fourth  quarters,  respectively.

(b)    Includes  an  after-tax  cumulative  effect  of an accounting change for
       startup  costs  of  $1.6  million  in  the  first  quarter  and  an
       after-tax extraordinary  charge of $3.2 million related to the early
       retirement of certain debt  in  the  third  quarter.

(c)     Includes  $0.7  million  of  net  income from the reversal of previously
        accrued volume discounts pursuant  to  the  third quarter renegotiations
        of an existing  agreement  with  a  certain  customer.

(d)     Includes  an  after-tax  cumulative  effect  of an accounting change for
        business  process  reengineering  costs  of  $1.1 million in the second
        quarter.


15.  SUBSEQUENT  EVENTS

     On  March 8, 2000, the Company issued 300,000 shares of Series B cumulative
convertible  preferred  stock  ($1 par value) to private equity funds managed by
ING  Furman  Selz  Investments for $30 million.  The preferred stock has certain
voting  rights  and  will  pay  dividends  at  the  rate of 8% per annum accrued
semi-annually and paid in the form of common stock or cash, at the discretion of
the  Company.  The  preferred  stock  is  convertible  into  common stock at the
average  closing price of the Company's common stock for the thirty trading days
ending February 17, 2000, which was $9.00 per share.  The preferred stock can be
converted into common shares at the Company's option under certain conditions at
any time three years after issuance.  The net proceeds received from the sale of
preferred  stock  were  applied to reduce the outstanding indebtedness under the
Company's  Revolving  Credit  Facility.

     While  the conversion price may change under specific conditions, the $9.00
per  share  price  on  the date that the Company and the preferred stock holders
were  committed  to  completing  the transaction represented a discount from the
market  value  of  the  underlying  common stock on that date by an aggregate of
$11.9  million.  This discount represents the value of the beneficial conversion
feature of the preferred stock.  Accordingly, the Company initially recorded the
value of the preferred stock as $18.1 million with the $11.9 million credited to
Additional  paid-in  capital,  offset by $1.6 million in fees paid to ING Furman
Selz  Investments.  Since  the preferred stock is convertible at any time at the
holders'  option,  this discount also represents an immediate deemed dividend to
those  holders at the date of issuance.  Accordingly, upon issuance, the Company
also  recorded  a  $11.9  million  dividend  to  these  holders.


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  Transition  Period  annual  meeting of stockholders to be held on April 20,
2000  (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 of 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.

     1.
         The following financial statements and the report thereon of Arthur
         Andersen LLP are  included  in  item  8  of  this  report:

         Report  of  Independent  Public  Accountants

         Consolidated  Statements  of  Operations  for the Five Months Ended
         December 31, 1999  and  for  Years  Ended  July  31,  1999,  1998
         and  1997

         Consolidated  Balance  Sheets  as  of  December 31, 1999, July 31,
         1999 and 1998

         Consolidated  Statements  of  Stockholders'  Equity  for  the  Five
         Months Ended December  31,  1999  and  for  Years  Ended  July  31,
         1999,  1998  and  1997

         Consolidated  Statements  of  Cash  Flows for the Five Months Ended
         December 31, 1999  and  for  Years  Ended  July  31,  1999,  1998
         and  1997

         Notes  to  Consolidated  Financial  Statements

     2.  Financial  Statement  Schedules:

         All schedules are omitted since the required information 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 NO.                                                                     DESCRIPTION
-----------  ----------------------------------------------------------------------------------------------------
<C>          <S>                                                                                                   <C>
             Amended and Restated Agreement and Plan of Merger (the ''Merger Agreement'') by and among
              ABC, ABCR Acquisition Sub, Inc. and NACO, Inc. dated as of December 10, 1998
             (Incorporated by reference to Exhibit 2.1 to ABC's Registration Statement on Form S-4 (No.
        2.1     333-65517), as filed with the Securities and Exchange Commission on January 21, 1999.

             Amendment to the Merger Agreement, dated as of February 16, 1999 by and among ABC,
              ABCR Acquisition Sub, Inc. and NACO, Inc. (Incorporated by reference to Exhibit 2.2 to the
        2.2     Registrant's Current Report on Form 8-K dated February 19, 1999) (SEC File No. 0-22906).

             Restated Certificate of Incorporation, as amended (Incorporated by reference to the same
             numbered exhibit to the Registrant's Current Report on Form 8-K dated February 19, 1999)
        3.1    (SEC File No. 0-22906).

             Restated Bylaws (Incorporated by reference to the same numbered exhibit to the Registrant's
        3.2    Current Report on Form 8-K dated February 19, 1999) (SEC File No. 0-22906).

             Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred
             Stock of the Company (Incorporated by reference to Exhibit 3.1 filed with the Registrant's
              Quarterly Report on Form 10-Q for the quarter ended October 31, 1996) (SEC File No. 0-
        3.3  22906).

             Certificate of Correction of Certificate of Designation of the Company (Incorporated by
             reference to Exhibit 3.2 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
        3.4    ended October 31, 1996) (SEC File No. 0-22906).

             Certificate of Designation, Preferences and Rights of Series B Cumulative Convertible Preferred
        3.5     Stock of the Company, dated March 8, 2000.

             Specimen Common Stock Certificate (Incorporated by reference to the Registrant's Exhibit 4.2
             filed with the Quarterly Report on Form 10-Q for the quarter ended January 31, 1999) (SEC File
        4.1    No. 33-70242).

             Rights Agreement, dated as of September 29, 1995 between the Company and LaSalle National
             Trust, N.A., as Rights Agent (the ''Rights Agreement''), which includes the Form of Certificate of
              Designation, Preferences and Rights, the Form of Rights Certificate and the Summary of
             Stockholder Rights Plan (Incorporated by reference to the same numbered exhibit filed with the
        4.2    Registrant's Current Report on Form 8-K dated October 2, 1995) (SEC File No. 0-22906).

             Amendment No. 1 to the Rights Agreement Dated November 15, 1996 (Incorporated by
              reference to Exhibit 4.1 filed with the Registrant's Quarterly Report on Form 10-Q for the
        4.3    quarter ended October 31, 1996) (SEC File No. 0-22906).

             Amendment No. 2 to the Rights Agreement Dated September 17, 1998 (Incorporated by
             reference to Exhibit 4.1 filed with the Registrant's Form 8-A/A on September 24, 1998 (SEC File
        4.4    No. 0-22906).

        4.5    Amendment No. 3 to the Rights Agreement Dated March 8, 2000.

             Indenture, dated January 15, 1997, from ABC to First Trust of Illinois, National Association, as
             Trustee (Incorporated by reference to Exhibit 4.5 in the Registrant's Registration Statement on
             Form S-3 filed with the Securities and Exchange Commission on November 15, 1996) (SEC File
        4.6    No. 333-16241).

             First Supplemental Indenture to the Indenture dated January 15, 1997 between ABC and First
             Trust National Association, as Trustee (Incorporated by reference to Exhibit 4.1 in the
             Registrant's Current Report on Form 8-K filed with the Securities and Exchange Commission on
        4.7    January 17, 1997) (SEC File No. 0-22906).

             Second Supplemental Indenture to the Indenture dated as of January 15, 1997 between ABC and
             First Trust National Association, as Trustee (Incorporated by reference to the Registrant's
             Current Report on Form 8-K filed with the Securities and Exchange Commission on December
        4.8    22, 1997) (SEC File No. 0-22906).







EXHIBIT NO.                                              DESCRIPTION
             ----------------------------------------------------------------------------------------- -----------

        4.9  New Credit Agreement, dated February 19, 1999 between the Company and a syndicate of
             financial institutions (Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report
            on Form 8-K dated February 19, 1999) (SEC File No. 0-22906).

             Amendment, Waiver and Release Agreement, dated as of October 12, 1999, to Credit
             Agreement, dated as of February 19, 1999, by and among the Company and certain of its
             affiliates, and Bank of America National Association, individually and as agent for the benefit of
             the lenders under the Credit Agreement.  (Incorporated by reference to Exhibit 4.1 filed with the
       4.10    Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1999.)

             Amended and Restated Credit Agreement, entered into as of October 29, 1999, between the
             Company and certain of its affiliates and Bank of America National Association, individually
             and as agent for the benefit of the lenders under the Credit Agreement.  (Incorporated by
             reference to Exhibit 4.2 filed with the Registrant's Quarterly Report on Form 10-Q for the
       4.11    quarter ended October 31, 1999.)

             Amendment to Amended and Restated Credit Agreement, entered into as of  October 29, 1999,
             by and among the Company and certain of its affiliates, and Bank of America National
             Association, individually and as agent for the benefit of the lenders under the Credit Agreement.
             (Incorporated by reference to Exhibit 4.3 filed with the Registrant's Quarterly Report on Form
       4.12    10-Q for the quarter ended October 31, 1999.)

             Amendment, Waiver and Release Agreement, dated as of October  12, 1999, to Credit
             Agreement, dated as of February 19, 1999, by and among the Company and certain of its
             affiliates, and Bank of America national Association, individually and as agent for the benefit of
             the lenders under the Credit Agreement.  (Incorporated by reference to Exhibit 10.2 filed with
       4.13    the Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31, 1999.)

       4.14  Amended and Restated Credit Agreement, entered into as of October 29, 1999, between the
             Company and certain of its affiliates and Bank of America National Association, individually
             and as agent for the benefit of the lenders under the Credit Agreement.  (Incorporated by
             reference to Exhibit 10.3 filed with the Registrant's Quarterly Report on Form 10-Q for the
             quarter ended October 31, 1999.)

             Amendment to Amended and Restated Credit Agreement, entered into as of October 29, 1999,
              by and among the Company and certain of its affiliates, and Bank of America National
             Association, individually and as agent for the benefit of the lenders under the Credit Agreement.
              Incorporated by reference to Exhibit 10.4 filed with the Registrant's Quarterly Report on Form
       4.15    10-Q for the quarter ended October 31, 1999.)

             Second Amended and Restated Credit Agreement, entered into as of March 8, 2000, by and
             among the Company and certain of its affiliates, and Bank of America National Association,
             individually and as agent for the benefit of the lenders under the Credit Agreement.  (Filed
       4.16    herewith as Exhibit 4.16.)

             Stock Option Plan dated July 1, 1993 (Incorporated by reference to the same numbered exhibit
             filed with the Registrant's Registration Statement on Form S-1 originally filed with the
       10.1    Securities and Exchange Commission on October 12, 1993) (SEC File No. 33-70242).

             ABC Rail Corporation Master Savings Trust (Incorporated by reference to the same numbered
             exhibit filed with the Registrant's Registration Statement on Form S-1 originally filed with the
       10.2    Securities and Exchange Commission on October 12, 1993) (SEC File No.33-70242).

             ABC Rail Corporation Savings and Investment Plan, as amended and restated effective as of
             May 1, 1988 (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
       10.3    Exchange Commission on October 12, 1993) (SEC File No. 33-70242).

             1994 Director Stock Option Plan (Incorporated by reference to the same numbered Exhibit
             10.11 filed with the Registrant's Annual Report on Form 10-K for the fiscal year ended July 31,
       10.4    1994) (SEC File No. 0-22906).
             Amendment No. 1 to 1994 Director Stock Option Plan (Incorporated by reference to the same
             numbered exhibit filed with the Registrant's Annual Report on Form 10-K for the fiscal year
       10.5    ended July 31, 1996) (SEC File No. 0-22906).

             Form of option agreement evidencing options granted pursuant to the Stock Option Plan listed
             as Exhibit 10.1 above (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
       10.6    No. 0-22906).

             1994 Stock Option Plan (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
       10.7    Exchange Commission on April 13, 1994) (SEC File No. 33-77652).

             Registration Rights Agreement, dated as of February 19, 1999, by and among the Company and
              certain affiliates of NACO listed as parties thereto (Incorporated by reference to Exhibit 10.1
              filed with the Quarterly Report of Form 10-Q for the quarter ended January 31, 1999) (SEC
       10.8     File No. 0-22906).

             Form of Amended and Restated Severance Agreement, dated as of February 19, 1999, entered
             into between the Company and each of Joseph A. Seher, Vaughn W. Makary, Wayne R.
             Rockenbach and John W. Waite (Incorporated by reference to Exhibit 10.2 filed with the
             Quarterly Report of Form 10-Q for the quarter ended January 31, 1999) (SEC File No. 0-
       10.9  22906).
EXHIBIT NO.                                              DESCRIPTION
             ----------------------------------------------------------------------------------------- -----------

             Form of Stock Purchase Agreement entered into between NACO and certain of its employees
             (Incorporated by reference to Exhibit 10.3 filed with the Quarterly Report of Form 10-Q for the
      10.10     quarter ended January 31, 1999) (SEC File No. 0-22906).

             Wheelset Supply and Services Agreement, dated as of November 9, 1999, between the
             Company and Union Pacific Railroad Company (incorporated by reference to Exhibit 10.1 to
      10.11    the Company's current report on Form 8-K filed with the SEC on November 18, 1999).

      10.12    ABC-NACO Inc. 1999 Omnibus Stock Plan.

      10.13    Investors' Rights Agreement

       21.1    Subsidiaries of the Registrant.

       23.1    Consent of Independent Public Accountants of Registrant.

       24.1    Powers of Attorney.

       27.1    Financial Data Schedule.

</TABLE>

<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  March  14,  2000                                       ABC-NACO  Inc.
                                                              (Registrant)

                                                          /s/  Joseph  A.  Seher
                                                         -----------------------
                                                               Joseph  A.  Seher
                                                       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  March  14,  2000:

 /s/  J.  P.  Singsank                                 /s/  Brian  L.  Greenburg
----------------------                                 -------------------------
J.  P.  Singsank                                            Brian  L.  Greenburg
Senior  Vice  President  and                                Vice  President  and
Chief  Financial  Officer                                  Corporate  Controller
(Duly  authorized  Officer)                         (Chief  Accounting  Officer)

       *                                                     *
-------------------------------                    -----------------------------
Donald  W.  Grinter                                            Daniel  W.  Duval
Chairman  of  the  Board  and  Director                        Director


 /s/  Joseph  A.  Seher                                      *
-----------------------                           ------------------------------
Joseph  A.  Seher                                              James  E.  Martin
Chief Executive Officer and Director                           Director
(Principal  Executive  Officer)


                               *                             *
--------------------------------                    ----------------------------
George  W.  Peck  IV                                      Jean-Pierre  M.  Ergas
Director                                                  Director


                              *                              *
-------------------------------                    -----------------------------
Richard  A.  Drexler                                       Willard  H.  Thompson
Director                                                   Director


By:   /s/  J.P.  Singsank
    ---------------------
J.P.  Singsank
Attorney-in-Fact  for  the  designated
officers  and  directors  pursuant  to  powers
of  attorney  filed  as  exhibits  herewith

<PAGE>
<TABLE>
<CAPTION>

EXHIBIT  INDEX

EXHIBIT                                                                                                         LOCATION IN
NUMBER..                                  DOCUMENT DESCRIPTION                                                   DOCUMENT
--------      ------------------------------------------------------------------------------------            -------------
<S>          <C>                                                                                             <C>
         2.1  Amended and Restated Agreement and Plan of merger (the "merger.                                  Incorporated
              Agreement") by and among ABC, ABCR Acquisition Sub, Inc. and NACO, Inc.                          by reference
              dated as of December 10, 1998 (Incorporated by reference to Exhibit 2.1 to
              ABC's Registration Statement on Form S-4 (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                          Incorporated
              among ABC, ABCR Acquisition Sub, Inc. and NACO, Inc. (Incorporated by                            by reference
              reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated
              February 19, 1999) (SEC File No. 0-22906)

         3.1  Restated Certificate of Incorporation, as amended (Incorporated by reference to                  Incorporated
              the same numbered exhibit to the Registrant's Current Report on Form 8-K dated                   by reference
              February 19, 1999) (SEC File No. 0-22906)

         3.2  Restated Bylaws (Incorporated by reference to the same numbered exhibit to                       Incorporated
              the Registrant's Current Report on Form 8-K dated February 19, 1999) (SEC File                   by reference
              No.0-22906)

         3.3  Certificate of Designation, Preferences and Rights of Series A Junior                            Incorporated
              Participating Preferred Stock of the Company (Incorporated by reference to                       by reference
              Exhibit 3.1 filed with the Registrant's Quarterly Report on Form 10-Q for the
              quarter ended October 31,1996) (SEC File No. 0-22906)

         3.4  Certificate of Correction of Certificate of Designation of the Company                           Incorporated
              (Incorporated by reference to Exhibit 3.2 filed with the Registrant's Quarterly                  by reference
              Report on Form 10-Q for the quarter ended October 31, 1996) (SEC File No. 0-
              22906).

         3.5  Certificate of Designation, Preferences and Rights of Series B Cumulative                           Filed
              Convertible Preferred Stock of the Company, dated March 8, 2000                                    herewith

         4.1  Specimen Common Stock Certificate (Incorporated by reference to the                              Incorporated
              Registrant's Exhibit 4.2 filed with the Quarterly Report on Form 10-Q for the                    by reference
              quarter ended January 31, 1999) (SEC File No. 33-70242)

         4.2  Rights Agreement, dated as of September 29, 1995 between the Company and                         Incorporated
              LaSalle National Trust, N.A., as Rights Agent (the ''Rights Agreement''), which                  by reference
              includes the Form of Certificate of Designation, Preferences and Rights, the
              Form of Rights Certificate and the Summary of Stockholder Rights Plan
              (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).

         4.3  Amendment No. 1 to the Rights Agreement Dated November 15, 1996                                  Incorporated
              (Incorporated by reference to Exhibit 4.1 filed with the Registrant's Quarterly                  by reference
              Report on Form 10-Q for the quarter ended October 31, 1996) (SEC File No. 0-
              22906).

         4.4  Amendment No. 2 to the Rights Agreement Dated September 17, 1998                                 Incorporated
              Incorporated by reference to Exhibit 4.1 filed with the Registrant's Form 8-A/A                  by reference
              on September 24,1998 (SEC File No. 0-22906).

         4.5    Amendment No. 3 to the Rights Agreement Dated March 8, 2000.                                      Filed
                                                                                                                herewith

         4.6  Indenture, dated January 15, 1997, from ABC to First Trust of Illinois, National                 Incorporated
              Association, as Trustee (Incorporated by reference to Exhibit 4.5 in the                         by reference
              Registrant's Registration Statement on Form S-3 filed with the Securities and
              Exchange Commission on November 15, 1996) (SEC File No. 333-16241)

         4.7  First Supplemental Indenture to the Indenture dated January 15, 1997 between                     Incorporated
              ABC and First Trust National Association, as Trustee (Incorporated by reference to               by reference
              Exhibit 4.1 in the Registrant's Current Report on Form 8-K filed with the
              Securities and Exchange Commission on January 17, 1997) (SEC File No. 0-
              22906).

         4.8  Second Supplemental Indenture to the Indenture dated as of January 15, 1997                      Incorporated
              between ABC and First Trust National Association, as Trustee (Incorporated by                    by reference
              reference to the Registrant's Current Report on Form 8-K filed with the Securities
              and Exchange Commission on December 22, 1997) (SEC File No. 0-22906).

         4.9  New Credit Agreement, dated February 19, 1999 between the Company and a                         Incorporated
              syndicate of financial institutions (Incorporated by reference to Exhibit 4.1 to the            by reference
              Registrant's Current Report on Form 8-K dated February 19, 1999) (SEC File 4.9
              No.0-22906)


EXHIBIT                                                                                                         LOCATION IN
NUMBER..                                  DOCUMENT DESCRIPTION                                                   DOCUMENT
--------      ------------------------------------------------------------------------------------            -------------
        4.10  Amendment, Waiver and Release Agreement, dated as of October 12, 1999, to                       Incorporated
              Credit Agreement, dated as of February 19, 1999, by and among the Company                       by reference
              and certain of its affiliates, and Bank of America National Association,
              individually and as agent for the benefit of the lenders under the Credit
              Agreement.  (Incorporated by reference to Exhibit 4.1 filed with the Registrant's
              Quarterly Report on Form 10-Q for the quarter ended October 31, 1999.)

        4.11  Amended and Restated Credit Agreement, entered into as of October 29, 1999,                     Incorporated
              between the Company and certain of its affiliates and Bank of America National                  by reference
              Association, individually and as agent for the benefit of the lenders under the
              Credit Agreement.  (Incorporated by reference to Exhibit 4.2 filed with the
              Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31,
              1999.)

        4.12  Amendment to Amended and Restated Credit Agreement, entered into as of                          Incorporated
              October 29, 1999, by and among the Company and certain of its affiliates, and                   by reference
              Bank of America National Association, individually and as agent for the benefit of
              the lenders under the Credit Agreement.  (Incorporated by reference to Exhibit 4.3
              filed with the Registrant's Quarterly Report on Form 10-Q for the quarter ended
              October 31, 1999.)

        4.13  Amendment, Waiver and Release Agreement, dated as of October 12, 1999, to                        Incorporated
              Credit Agreement, dated as of February 19, 1999, by and among the Company                        by reference
              and certain of its affiliates, and Bank of America national Association,
              individually and as agent for the benefit of the lenders under the Credit
              Agreement. ( Incorporated by reference to Exhibit 10.2 filed with the Registrant's
              Quarterly Report on Form 10-Q for the quarter ended October 31, 1999.)

        4.14  Amended and Restated Credit Agreement, entered into as of October 29, 1999,                      Incorporated
              between the Company and certain of its affiliates and Bank of America National                   by reference
              Association, individually and as agent for the benefit of the lenders under the
              Credit Agreement.  (Incorporated by reference to Exhibit 10.3 filed with the
              Registrant's Quarterly Report on Form 10-Q for the quarter ended October 31,
              1999.)

        4.15  Amendment to Amended and Restated Credit Agreement, entered into as of.                          Incorporated
              October 29, 1999, by and among the Company and certain of its affiliates, and                    by reference
              Bank of America National Association, individually and as agent for the benefit
              of the lenders under the Credit Agreement.  (Incorporated by reference to Exhibit
              10.4 filed with the Registrant's Quarterly Report on Form 10-Q for the quarter
              ended October 31, 1999.)

        4.16  Second Amended and Restated Credit Agreement, entered into as of March 8,                           Filed
              2000, by and among the Company and certain of its affiliates, and Bank of                          herewith
              America National Association, individually and as agent for the benefit of the
              lenders under the Credit Agreement.

        10.1  Stock Option Plan dated July 1, 1993 (Incorporated by reference to the                           Incorporated
              same numbered exhibit filed with the Registrant's Registration Statement on                      by reference
              Form 1993) (SEC File No. 33-70242

        10.2  ABC Rail Corporation Master Savings Trust (Incorporated by reference to the                      Incorporated
              same numbered exhibit filed with the Registrant's Registration Statement on                      by reference
              Form S-1 originally filed with the Securities and Exchange Commission on
              October 12, 1993)(SEC File No. 33-70242)

        10.3  ABC Rail Corporation Savings and Investment Plan, as amended and restated                        Incorporated
              effective as of May 1, 1988 (Incorporated by reference to the same numbered                      by reference
              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)

        10.4  1994 Director Stock Option Plan (Incorporated by reference to the same                           Incorporated
              numbered Exhibit 10.11 filed with the Registrant's Annual Report on Form 10-K                    by reference
              for the fiscal year ended July 31, 1994) (SEC File No. 0-22906)

        10.5  Amendment No. 1 to 1994 Director Stock Option Plan (Incorporated by                              Incorporated
              reference to the same numbered exhibit filed with the Registrant's Annual Report                 by reference
              on Form 10-K for the fiscal year ended July 3

        10.6  Form of option agreement evidencing options granted pursuant to the Stock                        Incorporated
              Option Plan listed as Exhibit 10.1 above (Incorporated by reference to the same                  by reference
              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).

        10.7  1994 Stock Option Plan (Incorporated by reference to the same numbered exhibit                   Incorporated
              filed with the Registrant's Registration Statement on Form S-1 originally filed                  by reference
              with the Securities and Exchange Commission on April 13, 1994) (SEC File No.
              33- 77652).

        10.8  Registration Rights Agreement, dated as of February 19, 1999, by and among the                   Incorporated
              Company and certain affiliates of NACO listed as parties thereto (Incorporated                   by reference
              by reference to Exhibit 10.1 filed with the Quarterly Report of Form 10-Q for the
              quarter ended January 31, 1999) (SEC File No. 0-22906)
EXHIBIT                                                                                                         LOCATION IN
NUMBER..                                  DOCUMENT DESCRIPTION                                                   DOCUMENT
--------      ------------------------------------------------------------------------------------            -------------

        10.9  Form of Amended and Restated Severance Agreement, dated as of February 19,                       Incorporated
              1999, entered into between the Company and each of Joseph A. Seher, Vaughn                       by reference
              W. Makary, Wayne R. Rockenbach and John W. Waite (Incorporated by
              reference to Exhibit 10.2 filed with the Quarterly Report of Form 10-Q for the
              quarter ended January 31, 1999) (SEC File No. 0-22906).

       10.10  Form of Stock Purchase Agreement entered into between NACO and certain of                        Incorporated
              its employees (Incorporated by reference to Exhibit 10.3 filed with the Quarterly                by reference
              Report of Form 10-Q for the quarter ended January 31, 1999) (SEC File No. 0-
              22906).

       10.11  Wheelset Supply and Services Agreement, dated as of November 9, 1999,.                           Incorporated
              between the Company and Union Pacific Railroad Company.  (Incorporated by                        by reference
              reference to Exhibit 10.1 to the Company's current report on Form 8-K filed with
              the SEC on November 18, 1999.)

       10.12    ABC-NACO Inc. 1999 Omnibus Stock Plan.                                                             Filed
                                                                                                                  herewith

       10.13  Investors Rights Agreement by and among ABC-NACO Inc., Furman Selz..                                 Filed
              Investors II L.P., FS Employee Investors LLC, and FS Parallel Fund L.P., Dated                      herewith
              as of March 8, 2000.

        21.1  Subsidiaries of the Registrant.                                                                      Filed
                                                                                                                  herewith

        23.1    Consent of Independent Public Accountants of Registrant.                                           Filed
 .                                                                                                                 herewith


        24.1    Powers of Attorney                                                                                 Filed
                                                                                                                  herewith

        27.1    Financial Data Schedule.                                                                           Filed
                                                                                                                  herewith
</TABLE>